Earnings from Rental Properties: My Numbers Revealed

Have you ever wondered how much money you can really make from rental properties? The reality is often much different than the flashy promises made by late-night TV gurus or the pessimistic views of naysayers. Understanding the nuances of rental income can empower you to make informed decisions about your financial future. In this article, I'm going to share my personal rental property numbers, providing a transparent look at both the income and the time invested in managing these assets.

My goal is to create a realistic perspective on what it means to earn from rental properties and to help you understand the potential benefits and challenges. I will provide you with insights based on my experiences, shedding light on the true nature of rental property investments.

Why I Share My Rental Property Numbers

Transparency is a cornerstone of my approach to real estate investing. Here are a few reasons why I choose to share my numbers:

• To address misconceptions about the realities of being a landlord, such as the notion that you'll be constantly fixing things at all hours.
• To debunk the myth that rental properties will make you a millionaire overnight.
• To hold myself accountable for my investment strategies.
• To foster open discussions around money, making it less of a taboo subject.
• To provide a clear picture of the time and income involved in rental property investments.

How Is This Helpful?

Before publishing my income reports, I critically evaluate whether they will genuinely assist my readers. Here’s what I aim to achieve with these reports:

• Help you make informed decisions about pursuing rental property investments.
• Shift perspectives away from extreme viewpoints, offering a balanced view of potential returns and responsibilities.
• Reveal the various expenses that accompany rental income, emphasizing that gross income isn't the whole story.
• Dispel the myth that you need to be handy or involved in day-to-day operations to succeed in real estate.
• Contextualize income in terms of time invested, reinforcing the idea that passive income should ideally allow you more free time.
• Provide consistent data over time to illustrate the fluctuations that can occur in rental income.

Quick Background

For those who are new to my story, I’m Paula, a 32-year-old real estate investor based in Las Vegas. I own seven rental units across five properties in Atlanta. When I first entered this market, I made the common mistake of managing everything myself, which turned my investment into a job. Recognizing this, I shifted my focus to building efficient systems and outsourcing tasks, allowing me to enjoy the benefits of my investments without dedicating excessive time to them.

November Income: $10,732.51

In November, my total gross revenue amounted to $10,732.51 after property management fees were deducted. Here’s a breakdown of that income:

• Triplex:
  • Unit #1: $2,750
  • Unit #2: $1,490
  • Unit #3: $1,295
• House #2: $850.50
• House #3: $1,273
• House #4: $1,500
• House #5: $1,574 (includes deferred income from the previous month)
• Ridiculously Tiny Interest Payment from Bank: $0.01

Total Income: $10,732.51

While this figure looks impressive, it’s important to remember that income is merely one piece of the puzzle. Expenses and time invested are equally crucial factors to consider.

Time Investment: 2 Hours, 30 Minutes

In November, I dedicated a total of just two hours and thirty minutes to managing my rental properties. Here’s how that time was distributed:

• Triplex: 1 hour 30 minutes
• House #2: Nothing
• House #3: Nothing
• House #4: Nothing
• House #5: 1 hour

The following details capture the essence of my time investment:

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Triplex:

Last month, I faced a recurring issue with a squirrel in the attic. I hired a pest control company to handle the problem. Unfortunately, their first attempt didn’t resolve the issue, leading me to coordinate between the tenant and the pest control team for additional visits. Eventually, I decided to put the tenant in direct contact with the pest control team.

Lesson: Always seek opportunities to streamline your involvement and avoid becoming a bottleneck.

In addition, I received a message from a tenant about a glass shower door that had come off its tracks. Fortunately, a neighbor offered to fix it, which took just 15 minutes.

Total time spent on the Triplex: 1 hour

Houses #2, #3, and #4:

Zero time spent. That’s the beauty of passive income.

House #5:

I received an email from my property manager indicating that the refrigerator had broken again. After discussing it, we decided to replace it rather than repair it. I instructed the tenant to measure the refrigerator space, ordered a new appliance online, and arranged for delivery.

Lesson: Sometimes, it’s more efficient to accept a slightly higher cost for the sake of time.

Total time spent on House #5: 1 hour

In total, my time investment for the month was just 2 hours and 30 minutes. Not bad, right?

Cash in My Pocket: $2,209.39

While the gross revenue of $10,732 is notable, the important figure is my actual cash flow, which amounted to $2,209.39 for November. Here’s how I arrived at that number:

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• Mortgages: $3,524.03
  • This includes principal, interest, taxes, and insurance (PITI). While the principal contributes to my net worth, the other components are pure expenses.
• Legal and Accountant Fees: $2,023.75
  • This includes a $623.75 fee for legal advice on structuring my business and $1,400 for my CPA to manage taxes.
• Property Improvements: $1,195.34
  • Included here is $612.27 for the new refrigerator and $583.07 for reimbursement of a stove purchased previously.
• Insurance: $903
  • This is the annual insurance bill for one of the properties owned outright.
• Routine Maintenance: $874.00
  • This includes $850 spent on pest control and $24 for lawn mowing.

Total Expenses: $8,523.12

Cash Flow: $2,209.39

It’s noteworthy to mention that my cash flow can vary significantly from month to month. Last month, I earned $6,102.84, so this month’s figures represent a notable decrease of about $4,000. This volatility is a normal part of the rental property business.

Look at Time, Not Just Money

While my income reports may not showcase millions, they illustrate the concept of passive income effectively. Earning $2,209 in a month with only 2.5 hours of work amounts to an impressive hourly rate of $883.75.

This contrast between investment income and traditional wage earnings highlights the potential for financial freedom. Many people express their desire to move away from trading time for money, yet few have a clear plan for how to make that transition.

The journey to building a successful rental property portfolio requires upfront investment in time and effort, but the long-term rewards can be substantial. By sharing my experiences, I hope to inspire you to explore the possibilities of real estate investing.

How Much Did Your Properties Cost?

To provide comprehensive insights, let’s discuss the cost of my properties. Here’s an overview:

Over the past five years, I've gained approximately $245,000 in additional equity, averaging about $50,000 per year. However, the essence of these investments lies not just in equity growth but in consistent cash flow.

How Do You Find These Types of Returns?

Finding profitable properties is a skill honed over years of experience. The process involves extensive research and networking. Here’s how I’ve navigated the market:

• Invested countless hours learning through trial and error.
• Conducted thorough research on potential properties, narrowing hundreds of listings down to a select few for in-person visits.
• Submitted offers on multiple properties and engaged with inspectors to ensure sound purchases.
• Acquired properties significantly below market value, including foreclosures and short sales.

Building equity and ensuring positive cash flow requires strategy and patience. Every property I purchased involved numerous behind-the-scenes negotiations and careful considerations.

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The key takeaway is that success in real estate isn’t just about knowing how to manage properties; it’s about making informed decisions about which properties to acquire. The right investments can lead to long-term financial stability and the ability to generate passive income.

For those interested in diving deeper into real estate investing, consider signing up for the free VIP List to stay updated on valuable resources and insights.

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