Quarter 2 - 2019 - Rental Property Report

Q2 2019 - Rental Property Report

If you need basic information regarding this report, make sure to check out my post on this property and everything associated with the raw data numbers. This report only covers the Q2 numbers in summary form. You can access that post by clicking here.

In these reports, I am going to share with you some high-level numbers as well as what my thoughts are for any given period of time. These are actual results, not theoretical. Each report will consist of TWO sets of numbers. The first set of numbers are the TAX numbers. The tax numbers consist of actual write-offs and net income after considering the tax code. This is important because taxes will be based on this number. The second set of numbers are the CASH FLOW numbers. These numbers are what is left in my account after I’ve paid everything related to the rental property.

These two numbers are important because the tax numbers will tell you how much in income taxes you’ll have to pay and the cash flow numbers are what goes in your pocket at the end of the day. You want your tax number as low as it can, but the cash flow number as high as you can.

So let’s dive in:

Time Period: Quarter 1 - April 1st, 2019 - June 30th, 2019

TAX NUMBERS

Total Revenue: $2,250.00
Interest Revenue: $7.90
Depreciation Expense: $(722.58)
Interest Expense (Mortgage): $(837.67)
Property Management Fee: $(225.00)
Lawn Care: $(120.00)
Home Insurance: $(756.00)
Property Taxes (2nd Half): $(807.99)
Net Loss: $(1,211.34)

CASH FLOW NUMBERS

Total Revenue: $2,250.00
Interest Revenue: $7.90
Mortgage Payments: $(1,913.58)
Property Management Fee: $(225.00)
Lawn Care: $(120.00)
Cash Flow Positive: $(0.68)

Saving Account Balances

Repair Fund: $2,089.07 ($1,950 in CDs and $139.07 in Savings)
No Renter Fund: $1,102.91 ($750 in CDs and $349.84 in Savings)
Mortgage Excess Account: $1,802.73 (Excess just in case)

Personal Funds Invested

Funds added: $1,772.36 (Q2) & $2,286.98 (YTD) (Purpose - Repair Funds and No Renter Funds)

Commentary

As compared to Q1, this quarter is one of the worst quarters because of many different factors including:

  • 2nd Half Property Taxes were paid in April

  • Home Owners Insurance was paid in May

  • The Spring and Summer are here and that means yard maintenance starts ($60 Per Month)

Because of all of this, I am showing a loss of $1,211.34. That’s about what I expected. This property will go positive probably in Q4, but maybe not until Q1 of next year due to PMI, higher commission for my property manager (she gets 50% of July’s rent for the renewal) and yard maintenance in Q3 and 1st half of property taxes due in Q4.

But remember, I knew all of this going in because this was my home prior to me moving out. I bought the home to live in not to rent out. When I left Kansas I decided I was going to keep the home and fund it properly.

For those that don’t understand why I show a -$1,211 in tax losses and only -$0.68 loss in cash outflow let me try to explain that here:

Tax loss is calculated based on when expenses are actually paid and when the expense is incurred. When you look in Q2, you’ll notice things like property taxes and home insurance. Those two were paid in Q2, therefore, they show up in Q2 tax loss (that’s when they were paid by the mortgage company). However, I didn’t pay for those out of pocket because those amounts are being paid into an escrow each month via my mortgage payment. So effectively, when you look at the cash flows each month a portion of the property taxes and home owner’s insurance are included in the cash outflow. So although there is a $1,200 difference, it is a timing difference. When I pay my mortgage company a portion of the home insurance, I don’t write it off my tax expense, but $65 is going towards the home insurance. That $65 will come out of the cash outflow, but not the tax income/loss until the mortgage company pays my taxes.

I know it is kind of confusing, but hopefully, it makes sense. Due to timing differences, we have a lag on the expenses being booked.

YTD Numbers:

Tax Loss - $(745.46)
Cash In-Flows - $117.89

As you can see we still have a positive cash flows even though we have a tax loss. This is primarily due to those once a year expenses that incurred during the first half of the year. It should decrease over the next few quarters assuming I have no huge issues with the home.

Summary

This is isn’t the greatest of rental property numbers. Frankly, it stinks, but if you don’t do it and start learning from it, you’ll never know how it goes. I am in a position where I can actually fund this project as well as build two safety funds: (1) miss mortgage payment fund and (2) repairs fund - it’s already at $2,000, I’m trying to get it to $10,000 - $15,000 to be on the safe side for this property, until then, I just have to put my head down and keep saving.

Until Q3, see you later.

Check out my investment challenges by clicking here.