Rental Property Income

By | September 13, 2017

The focus of this blog is on the dividend growth investment strategy I am pursuing with regards to my dividend portfolio. I generally write about potential recent stock purchases, and how my investments have impacted my portfolio. While I love the DGI strategy and am committed to its long term success, I realize that there are more than one ways to make money. In fact, real estate investing is an excellent way to invest money and earn a decent return. This post is on my first rental property income received from my real estate investing, since moving out of my home.

Rental Property Income

Having moved out of my house, the property management company I hired was finally able to secure my first tenant.  I initially didn’t want a pet in the house, but I was afraid of a longer vacancy and so I allowed the tenant to have a small sized pet. So, it turns out that the new tenant has a pet, but was also able to move in at the beginning of September. Well, I received my monthly statement from my property manager which comes at around the mid-month mark. And, it shows that after all the expenses and fees, I earned a whopping $193.60 for the month. This wasn’t profit, but the total amount.

Now, I know it gets better. But the expenses and fees for this first month was kind of ridiculous. They include a $155 charge for lawn maintenance.  I’ve never paid that much while I was living in the property. Of course, there is the property manager’s finder’s fee which is half of the first month’s rent and which is so annoying. There are other fees/expenses as well, which I don’t feel like getting into. Still, I got back $193.60 from a source other than my salary. Plus, I expect next month that the income will be enough to cover the mortgage and the property management monthly fee, leaving about $250 in “profit.” But to be clear, that $250 does not cover repairs or vacancies, etc. It only represents the difference between rental income and payments to both the mortgage company and the property management company for their fees.

How to Save Rental Property Income?

I’ve decided that I’m going to save the $250 I get per month into a separate account. What’s interesting is that I contacted my bank and asked how much interest I am getting in that savings account. The answer was 0.03%. Thanks Chase. Wow! However, although I’m not earning money (in terms of interest from the bank), I do think that having your funds in a separate account that’s easily accessible is a good thing.

The goal is that should there need to be repairs on the house or cover vacancies, I will be able to use that money. In the beginning, I might have to fund some of those costs out of my own pocket. But, I’m trying to get to the point where the house can pay for itself, so to speak. That is, the ‘profit’ I am making is enough to cover the expenses and pay me rental income that truly represents a profit.

Conclusion

So far, I think I’m off to a good start. I would love nothing more than to diversify my sources of income so that by the time I retire, I will have multiple streams of passive income. Investing in real estate is a viable source of income, as long as the numbers make sense and you’re up for the challenge.

Let me know what you think by commenting below.

 

 

16 thoughts on “Rental Property Income

  1. singledadmoney

    I’ve also been thinking of rental property income, but I’m not currently in a position to do anything but think about it. There’s a blog, cashflowdiaries, that is an interesting read. He loves rental income and his numbers are pretty awesome. He gives good advice on purchasing and handling the property management companies, and also lays out the money he puts aside for each property. Check it out.

    Brian
    singledadmoney recently posted…HOLY CRAP – It’s Happened Again – My SECOND DividendMy Profile

    Reply
    1. Dividend Portfolio Post author

      Will do. And hopefully one day you will be able to do more than think about it.

      Reply
    1. Dividend Portfolio Post author

      Yea, they might as well make it 0%. It’s so ridiculous.

      Reply
  2. Dan

    Hey bro, awesome post! Take it from someone who’s been in the rental game for awhile now – that first month is almost always negative cash flow. But you can recoup it pretty quickly? How long of a lease did you secure? Are you counting PITI in your ‘profit’ estimate? How old is the home? Great work again and keep it up! I agree that having multiple sources is better than one!

    Passive Income Dude

    Reply
    1. Dividend Portfolio Post author

      Yea. I’m counting PITI in my profit statement. I was trying to say that, but now I know the acronym. Ha! That’s how new I am. So, the $250 I get is after PITI and the monthly fee to the property manager is taken out. Home was built in 2007, so not too old. It’s a fairly nice 3 bedroom, 2 bathroom house with open floor plan. The only thing I hate is the home association fee, which is $150 a year.

      Reply
    1. Dividend Portfolio Post author

      That was the cost while the property was vacant. I’m guessing it was so high because it had been a while that the lawn was cared for. It normally costs about $40 to take care of. However, now that there is a tenant, it’s the tenants responsible to take Care of the lawn and so future costs will be $0 unless there is a vacancy.

      Reply
    1. Dividend Portfolio Post author

      Yea, especially since I’m overseas. It would have been a nightmare trying to manage the property myself.

      Reply
  3. Mr. ATM

    Hi DP,

    Glad things are turning out well for you and your real estate (rental) is giving you positive cash flow. Though, it seems the property management is taking a fairly large chunk. I have yet to hear anyone say good things about their property management company.

    Diversification of income comes with its own diversification of worries and problems. That’s why I don’t focus on diversification outside of stock market. Stock market by itself gives me sufficient diversification across many sectors including real estate that I don’t see the point of buying a rental property.

    Take care

    Reply
    1. Dividend Portfolio Post author

      Thanks Mr. ATM. Real estate is definitely not for everyone. And, it can definitely turn into a nightmare if you’re not careful. But, I do like the diversification, not just from stocks, but from sources of income. But that’s why it’s called personal finance. It’s personal, so what works for some may not work for others. What’s important though is that we’re paying attention and being conscientious with our money. As always, thanks for commenting.

      Reply
  4. Dividend Daze

    Nice to hear you got a tenant and are diversifying your sources of income. I hear real estate is huge among a few of our peers and can generate some big numbers for building wealth. Smart to set it aside since you will have to use it for potential repairs, but also you will still be taxed on that money as income. First month probably isn’t standard since there are so many fees. You should be able to make up for that in a few months and start actually turning a nice profit if everything goes smoothly. Congrats again!
    Dividend Daze recently posted…Dividend Update – August 2017My Profile

    Reply
    1. Dividend Portfolio Post author

      Appreciate Div Daze and that’s what I’m hoping for. But that is why I’m saving so I have a little bit to help when things don’t go as planned.

      Reply
  5. DividendSolutions

    Hey DP,

    it’s always good to have different sources of income. And with your rental property you’ll have a reliable income. Sometimes it’s hassle with the tenants and repairs, but if well managed it can go up in value terms too. I thought about real estate, but right now the market in Germany is so hot that i doesn’t make sense in my opinion. Maybe later.

    Keep it up!
    DividendSolutions

    Reply
    1. Dividend Portfolio Post author

      Hey DS. I agree that real estate can be a very good investment. I’m really hoping it works out even with the hassle of dealing with the property manager, etc. thanks for commenting as always.

      Reply

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