In March, I had to fix a small water damage in the ceiling on the second floor of the house. The heavy snowfall during the winter caused a part of the roof to leak and the water ruined the interior part of the ceiling in the child’s bedroom.

I called up my usual contractor to check up on an estimate for repair. He quoted $150 on the phone, but after he looked at the damage in person, he said that the price would be $500. My real estate property manager had recommended another guy, and his price was $200. Since I am on a tight budget, I hired the cheaper guy.

Last month, the roof repair cost $350 and this month the ceiling repair cost $200, for a total of $550. Repair costs add up quick.

Monthly Income and Expenses for March 2010 [PDF link]

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Roof Repair

My real estate property manager, Earl called and reported that there was a small leak on the roof of my house. He said that Philadelphia had tons of snow and the amount of snow caused a lot of roofs to leak. He told me that the problem should be addressed as soon as possible before more rain or snow comes.

I told him to get some quotes for different roofers. He called me back and said that he check with several roofers. He recommended a roofer that lives a few doors down by him. He said that he had hired him and he did a great job on his roof.

As for the price, he claimed he checked with several roofers and they charged $500 – 600, but the roofer he recommended charged $450. He said that he negotiated the price with him and brought it down to $350. Another $350 out of my pockets. So I gave him the green signal to go with the roofer he recommended.

Water Bills

The water bills are in my name. Usually I would pay the water bills first and then send copies of the bill to the tenant. The tenant had not been proactively paying the water bills. They sent me a few checks and the amounts are different from the amounts due on the bills. I had no idea where they would come up with the numbers.

I create a spreadsheet that detailed the water bill charges and the amounts that they had paid. The total water bill charges came out to $589.69 and the total amount I had received from them was $283.00. The difference was $306.69. I sent them a copy of the spreadsheet and copies of all the water bills.

Billing Date    Water Bill Charges
7/15/2009    71.99
8/18/2009    75.32
9/16/2009    80.09
10/16/2009    80.09
11/17/2009    75.32
12/15/2009    70.55
1/15/2010    70.55
2/16/2010    65.78
Total     $589.69

Date    Tenant Paid Amount
10/16/2009    102.00
10/16/2009    40.00
12/17/2009    81.00
2/1/2010    60.00
Total     $283.00

NET     $(306.69)

Overcharge from Property Manager

My property manager, Earl charges a percentage of the rent for his services. He would usually deduct the amount from the rent check and send me another check, less his fees. The monthly rent is $900 and the property management fee is 6%, which comes out to $54.

For this month, my tenant had also made an check of $60 for water payment. So the total amount paid to me was $960. Earl had taken a 6% cut of the entire amount of $960, instead of only the rent amount of $900. In other words, he had charged a fee on the water bill, which he should not have done. He had charged a total of $57.60, an overcharge of $3.60. Granted the overcharge was small, but I was not happy with the sneaky tactics.

I called and told him that I had noticed an extra charge on his services for the same rent amount. And I said that we had agreed that the property management fee is a percentage of the rent check, excluding the water payments. He said yes. When I told him that he had overcharged me on the fees, he said that he was human and he would make mistakes too. He asked if it was only a few dollars. I said yes and then I said that I would let it go.

Monthly Income and Expenses for February 2010


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In January, I did not receive any calls from my property manager, Earl. This is usually a good sign. The rent check came in the beginning of the month and the rest of the month was quiet. I wish for more of these months.

Rental Property Report for January 2010

Fortunately, after many struggles, I got rid of the bad tenants by the end of March. The house was in a terrible condition. The carpets were ruined, the walls had holes in them, the windows were smashed, and the doors were dented. And that was only half the story.

I had spent most of April and May to fix up the house and hired contractors for the job. The repairs put a big dent on my wallet, but it had to be done. When the repairs were almost finished, I hired my real estate agent and had him put the house back on the market for rent.

My real estate agent found new tenants that would move in by June. There were still reports of broken stuff in the house, and I had to pay for the repairs. To minimize my time dealing with the house, I had hired my real estate agent as my rental property manager. His job was to deal with the tenants and any issues that they might have.

Things looked a little brighter as the year progressed. The new tenants had been paying on time and there had been less reports of broken stuff in the house. The drama had subsided and my monthly expenses for the house were stable again.

It would take some time before I could recoup all of the money spent for repairs, but as long as I could continue to collect my rent and minimize my expenses, things should look better going forward.

RENTAL PROPERTY INCOME AND EXPENSES

In the first five months of the year, I received no rent payments from my tenants.  Furthermore, I had to pay for damages and repairs for the house after they had left. I had loss of income opportunity and loss of savings at the same time. Fortunately, the numbers started to look better at the end of the year, but it was still not pretty.

Total Income: $6,300
Total Expenses $13,330.69

Net: - $7,030.69

Click below for the detailed report.
Annual Rental Property Income and Expenses Report for Year 2009 – PDF

PROPERTY VALUE

Property Value Estimate: $117,315

This property value is estimated by Mint.com. I highly doubt that I could sell the house for this amount. Two of my friends have tried to sell their house for $110,00 near my neighborhood for the house. They had no luck. They had to lower their selling price and still did not receive any serious bids. The real estate market in Philadelphia had been very slow and it would take some time to recover.

MORTGAGE LOAN

The mortgage loan was initially borrowed from CountryWide, but now the loan belongs to Bank of America, after they have acquired CountryWide.

As you can see, I still have a long way to go before I finish paying off the contractual remaining term, almost another 26 years, unless I make additional payments on top of my regular mortgage payments. My friend, who had bought a property in Philadelphia, had been putting his yearly bonus money in the principal payments. He had cut the remaining term of his loan to half the term.

I thought that I could do better with the additional money I could used to pay off the principal. That meant putting the money in the stock market and trying to get a higher return. Unfortunately, there was a risk to that, and the risk came to me when I lost money in the stock market. Paying off the principal was a safer route.

THOUGHTS AND PLANS

When I first purchased the house, I thought I would hold on to the property forever. It would be an income-generating vehicle, after the mortgage has been paid off. However, real life experiences have caused me to rethink about this plan. The problem is not the drop in the house value, but rather, the hassles of being a landlord. The nightmares for a landlord are bad tenants and house repairs. I have my fair share of both experiences.

Should I sell the house? That has come to my mind in the past, but after playing with the numbers, I realize that the loss would be too big for me at this time. I have decided to hold on to the property, for now.

If you are interested in learning more about real estate or owning a rental property, please check out the rental property section.

Are you a rental property owner or landlord? Share your experience with us in the comments section.

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Below is a snapshot of the rental income and fees since the new tenants have signed the lease in June 2009, until the end of November. I have included my monthly expenses such as insurance, taxes and interest on the mortgage, as suggested by Boston Renter. The net has finally turned positive in the report for this month, but this is not an accurate account for the year, because I have not included all the repair fees that I had paid before the tenant moved in.

Click here for the PDF file

Please note that PDF file does not include the principal payments on the mortgage, travel expenses, and all the water fees, which are still pending payment from the tenant.

In the next update, I will post an annual report that will include the income and expenses for all the months in the year. I will also include the renovation expenses to get a better overall picture.

Read more:
Rental Property Update November 2009

October was a quiet month, so there is nothing to report about my tenants in the month of October.

Below is a snapshot of the rental income and fees since the new tenants have signed the lease in June 2009. Boston Renter suggested to add in my monthly expenses such as insurance, taxes and interest on the mortgage to see the true cash flow. I have added those numbers in this post. The net has been in the negative territory for some time, but appears to be growing out of it. See it for yourself.

Download – PDF file

Rent Payments
$900 Jun 2009
$900 Jul 2009
$900 Aug 2009
$900 Sep 2009
$900 Oct 2009
Total: $4,500

Fees
Real Estate Agent Service Fee for Finding Tenant $900 (one month’s rent)
Property Management – Service Fee: $0 Jun 2009 (first month free)
Property Management – Service Fee: $63 (7%) Jul 2009
Property Management – Service Fee: $63 (7%) Aug 2009
Property Management – Service Fee: $63 (7%) Sep 2009
Property Management – Service Fee: $54 (6%) Oct 2009
Total: $1,143

Repairs
Bathroom pipes check-up $30 Oct 2009

Mortgage Interest
$517.96 Jun 2009
$517.27 Jul 2009
$516.57 Aug 2009
$515.87 Sep 2009
$515.16 Oct 2009
Total: $2,582.83

Fire Insurance (All State) (paid $407.20 in Oct 2008 for one year)
$33.93 Jun 2009
$33.93 Jul 2009
$33.93 Aug 2009
$33.93 Sep 2009
Total: $135.72

Liability Insurance (All State) (paid $160 in Oct 2008 for one year)
$13.33 Jun 2009
$13.33 Jul 2009
$13.33 Aug 2009
$13.33 Sep 2009
Total: $53.32

Landlord Insurance (All State) (paid $573.74 in Oct 2009 for one year)
This new insurance includes Fire & Liability Insurance
$47.81 Oct 2009
Total: $47.81

Property Taxes
$112.58 Jun 2009
$112.58 Jul 2009
$112.58 Aug 2009
$112.58 Sep 2009
$112.58 Oct 2009
Total: $562.9

Net: $-55.58

In September, I received a call from my property manager, Earl about a flooding problem in the house. The tenant’s daughter took a bath on the second floor and water leaked down to the first floor.

I called my contactor to look at the issue. He was the guy I usually called and had helped me with the last flood. The contractor went to the house a few days later. He filled the tub with water to simulate a bath but no water leaked. I guess it was good news to know that it didn’t happen again.

The contractor tried to charge me $50 for his time. The flooding would not have been a problem if he had fixed it on the last job. I told him that I would give him $30 for his time and I said that I would call him if the flooding issue happened again. He said it $30 was better than nothing.

Below is a snapshot of the rental income and fees since the new tenants have signed the lease in June 2009. Boston renter suggested to add in my monthly expenses such as insurance, taxes and interest on the mortgage to see the true cash flow. I have added those numbers in this post. The net is not so pretty. See for yourself.

Rent Payments
$900 Jun 2009
$900 Jul 2009
$900 Aug 2009
$900 Sep 2009
Total: $3,600

Fees
Real Estate Agent Service Fee for Finding Tenant $900 (one month’s rent)
Property Management – Service Fee: $0 Jun 2009 (first month free)
Property Management – Service Fee: $63 (7%) Jul 2009
Property Management – Service Fee: $63 (7%) Aug 2009
Property Management – Service Fee: $63 (7%) Sep 2009
Total: $1,089

Mortgage Interest
$517.96 Jun 2009
$517.27 Jul 2009
$516.57 Aug 2009
$515.87 Sep 2009
Total: $2,067.67

Fire Insurance (All State) (paid $407.20 in Oct 2008 for one year)
$33.93 Jun 2009
$33.93 Jul 2009
$33.93 Aug 2009
$33.93 Sep 2009
Total: $135.72

Liability Insurance (All State) (paid $160 in Oct 2008 for one year)
$13.33 Jun 2009
$13.33 Jul 2009
$13.33 Aug 2009
$13.33 Sep 2009
Total: $53.32

Property Taxes
$112.58 Jun 2009
$112.58 Jul 2009
$112.58 Aug 2009
$112.58 Sep 2009
Total: $450.32

Net: $-196.03

Read more:
Rental Property Update November 2009
Rental Property Update September 2009

August was another quiet month from my tenants. My property manager, Earl collected the rent payment and mailed me a check for the rent minus his service charge.

I received a letter from my property insurance company, All State to renew the terms for another fiscal year. The premium for another year is $412.31. I thought I should try to see if I can get a cheaper premium plan, so I called All State. I asked about choosing a higher deductible, from $500 to $1000. The All State representative mentioned a new insurance plan is in the works. It will combine the benefits of CPL and fire, and it will be called the Landlord Policy. Unfortunately she could not get a quote from their system at the time and asked me to call back next time. All State said that they would mail me some information about the new plan. I decided to wait for it.

Below is a snapshot of the rental income and fees since the new tenants have signed the lease in June 2009. Boston renter suggested to add in my monthly expenses such as insurance, taxes and interest on the mortgage to see the true cash flow. I have added those numbers in this post. The net is not so pretty. See for yourself.

Rent Payments
$900 June 2009
$900 July 2009
$900 August 2009
Total: $2,700

Fees
Real Estate Agent Service Fee for Finding Tenant $900 (one month’s rent)
Property Management – Service Fee: $0 June (first month free)
Property Management – Service Fee: $63 (7%) July 2009
Property Management – Service Fee: $63 (7%) August 2009
Total: $1,026

Mortgage Interest
$517.96 June 2009
$517.27 July 2009
$516.57 August 2009
Total: $1,551.80

Fire Insurance (All State) (paid $407.20 in Oct 2008 for one year)
$33.93 June 2009
$33.93 July 2009
$33.93 August 2009
Total: $101.79

Liability Insurance (All State) (paid $160 in Oct 2008 for one year)
$13.33 June 2009
$13.33 July 2009
$13.33 August 2009
Total: $39.99

Property Taxes
$112.58 June 2009
$112.58 July 2009
$112.58 August 2009
Total: $337.74

Net: $-357.32

Read more:
Rental Property Update October 2009
Rental Property Update August 2009

In July the tenant paid rent on time. My property manager, Earl collected the rent payment and mailed me a check minus the service charges.  Except for one small issue, it was a quiet month.

Earl called me at the end of July and told that there was the problem with the Central Air Conditioning Unit. He recommended someone to fix the problem. It cost $95 and the problem was resolved. Earl paid for the bill and he would deduct it off my next month’s rent payment.

As long as things move along smoothly, I may eventually make up the losses incurred from my previous tenant. It would take some time, but hopefully this the beginning of a good income stream.

Below is a snapshot of rental income and rental fees since the new tenants have signed the lease.

Rent Payments
$900 June
$900 July
Total: $1,800

Fees
Real Estate Agent Service Fee for Finding Tenant $900 (one month’s rent)
Property Management – Service Fee: $0 June (first month free)
Property Management – Service Fee: $63 (7%) July
Total: $963

Net: $837

Note: All the expenses have not been included in this. Please see more recent posts to get a more accurate picture of the entire cash flow.

Read more:
Rental Property Update September 2009
Rental Property Update July 2009

June was one of the quietest months in a long time for the rental property. There was not many activities going on in the house. The tenant had paid the monthly rent of $900 in advance and everything seemed fine so far.

After my bad experience with the last tenant, I finally decided to hire Earl as my property manager. The property manager will add an extra layer between the tenant and myself, and it will help me free up my time. He will be in charge of collecting the rent, handling phone calls, dealing with tenant issues, etc. Earl charges a 7% service fee, which will be deducted from the monthly rent that he collects. The 7% service fee seems to be in the recent range, some property managers charge as  high as 10%.  Earl lives very close to my rental property, so can he walk over to the house if necessary. Earl has been my real estate agent for a few years now, and I have found him to be helpful, so I think it would be worth the service.

Monthly Rental Property Income and Expenses

Monthly Rent: $900
Property Management – Service Fee: 7% ($63)
Net Rent: $837

Read more:
Rental Property Update August 2009
Rental Property Update June 2009