Investment Property Balance Sheet – 2014 Edition

5 Aug

With a third property recently under our belt, it’s a good time to update our balance sheet. If you’re curious how the numbers have changed over time, you can reference earlier versions reflecting one and two duplexes.

Duplex #1

  • Total cost: $181,350, latest comp $232,000 (Mar 2014)
  • Down Payment: $45,350 (25%)
  • Mortgage: originally $136,000, currently $130,247
  • Estimated Equity: $101,753

Duplex #2

  • Total cost: $144,000, latest comp $157,000 (Mar 2014)
  • Down Payment: $36,000 (25%)
  • Mortgage: originally $108,000, currently $101,708
  • Estimated Equity: $55,292

Duplex #3

  • Total cost: $201,000, latest comp $190,000 (Apr 2014)
  • Down Payment: $61,500 (30%)
  • Mortgage: originally $139,500
  • Estimated Equity: $50,500
Revenue Duplex #1 Duplex #2 Duplex #3 Monthly Total
Unit A $995 $950 $850  
Unit B $1,095 $895 $850  
Less Vacancy $46 $59 $53  
Total Income $2,044 $1,786 $1,647 $5,477
Principle & Interest $699 $531 $738 $1,968
Taxes $346 $310 $355 $1,011
Insurance $64 $72 $69 $205
$150 $150 $150 $450
Carpet Fund $13 $26 $26 $65
HOA $50 $0 $0 $50
Property Mgmt (10%) $204 $179 $165 $548
Leasing & Releasing (30%-60%) $82 $71 $79 $232
Total Expenses $1,608 $1,339 $1,582 $4,529
Cash Flow $436 $447 $65 $948

Notable changes:

  • Additional Duplex – our newly-acquired tenants are currently $200/mo. under market rent. Both sides increase to $1,050/mo. in September, which will get property #3’s cash flow in line with our other two duplexes. Surprisingly, both sides are expected to renew at the higher rate. Sweeeeet.
  • Moved Vacancies to Income – I decided vacancies were better reflected as a reduction of income, rather than an expense. I’ll assume 1 unit from each property will be vacant once a year. Best guess: property #1 will probably be vacant for 2 weeks, the others for 3 weeks.
  • Repairs – easily the least predictable line item – some months and years will simply be luckier than others. I was expecting two costlier-than-average “first time” vacancies in duplex #3, but with both tenants staying I think an average of $150/mo. per property is as good a guess as any.
  • Carpet Fund – during our last make ready, the largest expense was replacing the carpet for $800 – a necessary evil. To better cash flow that in the future, I created a new “variable expense” that assumes a 5 year (optimistic?) carpet lifespan.
  • HOA Windfall – it had been about a year since we purchased property #2, and I realized we’d never been billed for our HOA dues. Turns out this is actually paid by the tenants via the municipal utility district. Score!
  • Hired Property Management Company – the expense of hiring a property management company was steep, but rent increases have gone a long way to off-set that additional cost. There’s no temptation to save money by self-managing again; as far as we’re concerned this is simply a cost of doing business. I am looking forward to seeing total cash flow slowly increase from this point on.
  • Added Renewal & Listing Fees – using the vacancy assumptions above, I budgeted one renewal fee (30%) and one releasing fee (60%) per year, per property. Between lost income, make ready repairs, and releasing fees – it really does highlight how much a single vacancy can take a bite out of cash flow. Setting this aside as another variable expense should help level out these inevitable hits.
  • Removed Income Tax Savings – now that I have 2 full-years of Schedule Es to compare against (see 2012 and 2013), I determined we were still over-estimating the amount of income taxes we need to set aside (thank you depreciation!). I expect another tax loss in 2014, so I’ll discontinue this line item moving forward.

I’m pretty pleased to see that nothing seems to be going completely going off the rails.  🙂 The rest of this year will be focused on shoring up our savings, and I’ve got a few pet projects in mind depending on my level of motivation. I’d like to explore umbrella insurance, streamline my make ready process, do a better job at reporting on equity in addition to cash flow.

Want to be notified of new posts?

Join 186 other subscribers

2 Responses to “Investment Property Balance Sheet – 2014 Edition”


  1. 2015 Real Estate Resolutions | Rental Realities - December 29, 2014

    […] Extra to Mortgage #2 – we anticipate a good bit of discretionary cash flow that can be applied to our pre-payment efforts. Averaged across the year, that $833/mo. will save […]

  2. Equity & Cash Flow Statement - 2015 Edition | Rental Realities - June 23, 2015

    […] Cash Flow – Last year I predicted our cash flow to slowly increase past our typical $400/property/mo. average because I […]

Leave a Reply