As promised in the post on our Real Estate investments, we will be posting monthly “Real Estate Reports” going forward which will be showing all the good, the bad and the ugly. Considering this is the first post, we will have to provide you guys and gals with a bit of an explanation on the numbers.
To understand the numbers, you got to keep the following in mind:
- We purchased our last three rental units in one purchase back in July, it took a bit of time to get things organized and we also had friends stay in the units for a bit in August.
- The commercial workshop was already rented out in July, pretty much as soon as we moved in.
- Next, we successfully found tenants whom moved in both in early and mid-September in the two vacant. We paid a fair amount of commission for this service by the property management firm we hired, but in return can add these investments in Box 3 for tax purposes (for us is a far more financially efficient setup than self-management, which has to be reported in Box 1).
- We had very little expenses to date, other than some minor paint work, clean-up work and an initial assessment to be able to determine the appropriate monthly rental fees. More expenses will come in December and early next year once the boilers are serviced and mechanical ventilation is installed in both units. Some repairs are required for the roof of the workshop and painting is required at a few spots, all to be carried out next year too.
- During the time the units were empty, we had to pay for the hook-ups for water, gas and electricity.
- Insurance fees are normally paid every quarter, but due to some updates and re-assessment of the property values, we had several extra expenses and also some refunds from the insurance company.
- We also liquidated our real estate business, which we held for a while when we were living abroad. This allowed for some tax advantages, but considering we are now living in the Netherlands again, this benefit disappeared and it made financial sense to move the properties to us privately and in Box 3 for tax purposes (instead of Box 2). You therefore see a jump in income from October to November, this is solely due to the two extra units providing income directly to us, rather then to the business.
As of November we thus have the maximum rental income possible for the 5 units.
This first plot provides and overview of the expenses, rental incomes (gross) and net rental income since July of this year. The negative net incomes in July and August are a result of the costs for the mortgage, utilities, insurance and rental price assessments, while not having any rental income at that time. Please do note that we book the rental income/expenses for the month they apply, just to keep the numbers stable (payment/transfer dates often shift around month end).
A more detailed breakdown of the rental income (gross) in November is provided here:
All costs incurred in November are shown here:
Note that all these incomes and expenses do not include any reservations for future large maintenance such as kitchen replacements, bathroom remodels, etc. These will ultimately show up as very large expenses and could easily wipe out rental income for several months.
Do you have rental units, if so, how did they do this month?