Rental Real Estate

Currently I own a three-bedroom, three-and-a-half bathroom townhouse. This is very much an unintentional rental! After many years of being unable to refinance, I was finally able to do so in March of 2013. This saved me over $350 per month!

Prior to refinancing, make sure you have a good grasp of your credit score. Having good credit is a top priority for me, and as a result I use Credit Karma to monitor my credit for free. No monthly commitment, no credit card charges, no cancellation madness. Just monthly credit score updates for free.

While the townhouse is not pictured, it is very similar to the image below.

03-29-13 Real Estate - Refinancing My Rental Property

The rental property looks something like this…

Below are the financials of my rental property, which include a monthly allowance for repairs and maintenance expenses. Not too long ago I raised the rent by a small amount on my existing tenant, leading me to wonder when the right time to raise the rent might be.

Townhouse Rental Financials

  
Income
Totals
Monthly Rent Income
$1,400.00
Less: Management Fees
$(140.00)
Net Rental Income
$1,260.00
Expenses
Mortgage (P&I)
$1,049.63
Escrow (Taxes, Insurance, and PMI)
$305.64
Homeowner's Association
$120.00
Repairs/Maintenance Allowance
$100.00
Total Expenses
$1,575.27
Net Income (Deficit)
$(315.27)

With monthly principal repayments in excess of $300, this property is close to break-even. If I were to factor in the tax benefits I currently receive from owning this property the scale dips a bit further into the positive direction. Not near as nice as being cash flow positive however.

 

Comments

  1. You are right about the numbers being close. Is the property value more than the loan balance? If the property keeps going up in value and the neighborhood draws in higher paying buyers, the rent might follow. The rental numbers around here in New Orleans are about .90-1.00 per square foot for 1000-1500 sf. However, as the house increases in size, the rent seems to be harder to get. The sweet spot is around 1500sf. For about $1300-$1500. I happen to know a bunch of people who own tons of property and some have 2000 sf houses in great neighborhoods that do not bring more than the $1500. Also, the more bedrooms- the better. I have a small 4 bedroom that gets $200.00 more than the bigger 3 bedroom. I have a hard time raising rent because I would rather get the money than possibly get nothing of a bigger sum. So I can’t offer too much as far as rent hikes. I now ask for way more in the beginning because all the applicants around here want to bargain for the price. I have to be way high to begin with so I can get the numbers I want. Win some/lose some that way because the high numbers scare a ton away.

    Good luck,

    Robert the DividendDreamer

    • Seems like you are doing well given your portfolio of properties. I hope you are able to add a property or two to help boost your income and help accelerate your path towards financial independence.

  2. I’m planning on raising the rent as the contact ran out with the ex owner. Hopefully, it will go well. I think I can do this because my property is in the prime area and rent is 500-1000$ surrounding property.

    • If you can raise rents significantly, than by all means give them a boost. My challenge is the market won’t support a rent level $300 higher than it is now. I am still looking forward to dumping this property when the numbers make sense. I’d rather own real estate that matches desire to generate cash flow.

      Thanks for the comments and best of luck on raising the rent.

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