I just received the latest monthly update for my investment in the apartment complex in Houston. Believe it or not, occupancy has increased AGAIN and is now at 97%. This is phenomenal and beyond my expectations. It surely cannot be maintained!
Total revenue has increased to over $195,000 last month, which is the highest revenue figure yet. As mentioned last month, rent concessions are down, which resulted in rental income increasing by about $7,000.
Some areas still ran over budget - admin expenses and landscaping. The increase in admin costs was due to one time charges for setting up check scanning direct deposit services. Landscaping was higher due to seasonal planting. Apartment turnover costs increased (but were still under budget) due to the increase in occupancy.
Net income for the property for the month was almost $25,000. A very nice month indeed!
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Wednesday, November 19, 2008
Monday, November 10, 2008
This Is Why I Want Passive Income
A week ago today, I was laid off from my day job of over 3 years. No warning, of course. I did survive two previous rounds of layoffs, so I suppose I can't ask that my luck hold out much longer. I did get a decent severance package and I already have a couple of interviews lined up. However, I don't like the idea that my income can be taken away at a moment's notice. Hence, my quest to get multiple streams of passive income.
Luckily, another opportunity came my way not long after I was laid off - call this one Hard Money #6. This is another mortgage lending deal that will earn me a 10% ROI. The property is in Livermore, California and was bought at auction by an investor who owns 10 properties in the area and knows the location well. He's already rehabbed 12 houses this year and netted about $500K of profits. His purchase price was $272K. The mortgage, of which I am a partial investor, is for $210K. The lender was owed $488K. Current market value of the property is about $350K. A conservative estimate would be the low $300Ks. So using a conservative value of $300K, we're at a 70% loan to value ratio. The property is a 3 bed / 2 bath, 1,125 square foot house built in 1955. The mortgage is interest only for 1 year with a ballon payment of the entire principle due at the end of the term. We expect the loan will be paid off via refininacing or a sale in 6 months.
I'm not going to replace my day job with income from this loan, but it is nice to have some extra funds coming in. And it's nice to know I have some options out there for generating income.
On another note, I'm starting to see more professional investors return to buying properties at auction lately. Maybe things are going to be turning around soon for real estate.
Luckily, another opportunity came my way not long after I was laid off - call this one Hard Money #6. This is another mortgage lending deal that will earn me a 10% ROI. The property is in Livermore, California and was bought at auction by an investor who owns 10 properties in the area and knows the location well. He's already rehabbed 12 houses this year and netted about $500K of profits. His purchase price was $272K. The mortgage, of which I am a partial investor, is for $210K. The lender was owed $488K. Current market value of the property is about $350K. A conservative estimate would be the low $300Ks. So using a conservative value of $300K, we're at a 70% loan to value ratio. The property is a 3 bed / 2 bath, 1,125 square foot house built in 1955. The mortgage is interest only for 1 year with a ballon payment of the entire principle due at the end of the term. We expect the loan will be paid off via refininacing or a sale in 6 months.
I'm not going to replace my day job with income from this loan, but it is nice to have some extra funds coming in. And it's nice to know I have some options out there for generating income.
On another note, I'm starting to see more professional investors return to buying properties at auction lately. Maybe things are going to be turning around soon for real estate.
Wednesday, October 22, 2008
Multi #1 Monthly Update
The monthly update for the Houston apartment complex arrived today. Things continue to go well. Occupancy has increased to 96%, making this the fourth straight month of increases. Occupancy has gone up every month since we took over the property and I don't expect it to rise any further.
The damage caused by Hurricane Ike came in at around $25,000, which is less than the insurance deductible, so we will not be making an insurance claim. Payments will be made from regular operating funds.
This report is the first one to include comparisons between budgeted numbers and actual numbers. Nothing shady was going on prior to this. It's just that when initially taking over a property, there are lots of one-time expenses and utility deposits that have to be made, so the numbers for the first couple months do not accurately reflect the normal day-to-day operational costs. Even so, there are still some numbers that are out of whack this month due to some errors. The local water company had our billing start date 22 days later than it should have been, so we had almost an additional full month of water and sewer charges. There was also a procedural issue with the payment of leasing commissions going back to when we took over the property, so this month also saw four months worth of commissions paid out, increasing the payroll number. Even with these charges, the property cashflowed a positive $14,000 in September. Adjusting for the errors, the cashflow was almost $22,000.
As for the budget vs. actual comparison of monthly numbers, things look pretty good. Gross rent was right on target, We are under budget in four areas: Loss / Gain to Lease ($383 under), Vacancy ($784 under), Bad Debit ($1,318 under), and Employee Apartments ($200 under). We were over budget on Rent Concessions ($4,867 over), and the previously mentioned utility and payroll areas. Overall, the property was $1,508 over budget for the month of September, meaning it turned a $1,508 smaller profit than budgeted. Rent concessions, as mentioned last month, were high, but they were cut back during the month and the decrease won't be seen until next month's numbers. It also is looking like next month's revenue numbers will be $6,000 higher than this month, which will increase the profit.
I continue to be happy with the performance of this investment!
The damage caused by Hurricane Ike came in at around $25,000, which is less than the insurance deductible, so we will not be making an insurance claim. Payments will be made from regular operating funds.
This report is the first one to include comparisons between budgeted numbers and actual numbers. Nothing shady was going on prior to this. It's just that when initially taking over a property, there are lots of one-time expenses and utility deposits that have to be made, so the numbers for the first couple months do not accurately reflect the normal day-to-day operational costs. Even so, there are still some numbers that are out of whack this month due to some errors. The local water company had our billing start date 22 days later than it should have been, so we had almost an additional full month of water and sewer charges. There was also a procedural issue with the payment of leasing commissions going back to when we took over the property, so this month also saw four months worth of commissions paid out, increasing the payroll number. Even with these charges, the property cashflowed a positive $14,000 in September. Adjusting for the errors, the cashflow was almost $22,000.
As for the budget vs. actual comparison of monthly numbers, things look pretty good. Gross rent was right on target, We are under budget in four areas: Loss / Gain to Lease ($383 under), Vacancy ($784 under), Bad Debit ($1,318 under), and Employee Apartments ($200 under). We were over budget on Rent Concessions ($4,867 over), and the previously mentioned utility and payroll areas. Overall, the property was $1,508 over budget for the month of September, meaning it turned a $1,508 smaller profit than budgeted. Rent concessions, as mentioned last month, were high, but they were cut back during the month and the decrease won't be seen until next month's numbers. It also is looking like next month's revenue numbers will be $6,000 higher than this month, which will increase the profit.
I continue to be happy with the performance of this investment!
Tuesday, October 21, 2008
Hard Money #3 Finished
As expected, my hard money loan #3 was paid off today. The funds were wired by the escrow company today and my check will be in the mail tomorrow. The investment only lasted three months and I got the promised 10% annualized ROI. I'm on the lookout for the next investment now.
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