Real Estate Report – July 2018

This Real Estate Report – July 2018 edition is a catch up from the last few months. Regular readers will know that we were travelling through Europe. If  you are new (or interested), you can check the various travel posts here, here and here. In the mean time the real estate has been steadily going forwards, not including the expensive renovations.

Real Estate Report – July 2018

Rental Income

Our rental income for July 2018 increased from previous months due to a new tenant (with a higher rental rate) and a rental increase for one unit. We are now at a total income of €3.764.92

The monthly income distribution is provided below:

Real Estate Report - July 2018 Income

Real Estate Report – July 2018 Income

Rental Expenses

The expenses for July 2018 were extremely high and consisted of the following:

  • Outside renovations of two units;
  • Insurance;
  • Mortgage and loan payments; and,
  • Management fees (including new tenant selection).

Now, should we incorporate these large scale renovations as an expense or investment? The properties have increase in value as a result. For now we have included them in the expenses, just to show what it can do to the cash-flow. We previously estimated that we still should just be positive with cash-flow on a yearly basis. This is still correct, albeit barely.

The expenses for the month are as follows:

Real Estate Report - July 2018 Expenses

Real Estate Report – July 2018 Expenses

Real Estate Report – Overview

The net rental and loan income for July was -€12.306. The net cash-flow was even lower at -€13.362. As noted earlier, we have a mortgage and we provided a private real estate investment loan that does not pay out the monthly interest (hence a lower net cash-flow). We will get this interest income once the loan matures in late 2020.

If you take the about €14.000 renovation costs out of the equation, we are still doing pretty good. Both in terms of income and cash-flow. The new tenant is initially somewhat expensive due to the property management fees.

Total net YTD income is €3.723, net cash-flow is -€3.653.

Real Estate Report - July 2018 Overview

Real Estate Report – July 2018 Overview

Real Estate Report – Forecast

We are working to sell one property to family. This should hopefully be completed by September. For now, financing options are being evaluated. The assessment for the mortgage is already done. Once the property is sold, we will have to reinvest the money. We did however not get a lot of love from the twitter crowd as to reinvest into real estate:

We will however most likely reinvest into real estate, but via a loan. We need to keep the funds relatively liquid in the coming years as we have mortgage refinancing coming up in 2020. Buying new physical real estate might not be the best move at this stage.

Also, renovations will still continue in August/September, as new windows will be installed. More expenses to come! Albeit not as much as we already made a deposit to pay for the materials.

 

 

How did you do in July?

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12 comments

  1. Hi Team CF!

    I stumbled over your blog, very interesting read! I just recently got intrigued by the FIRE concept. As I realized my well paid job won’t last forever, and even if my employer wants it to last, I don’t want to work my buttocks off until I’m 70. (I’m in my late 30s now).

    My strategy since I was a contractor a couple of years ago is to invest 500 euro’s Per month in index funds (Robein, formerly Ohpen) making 9% a year for the last 7 years.

    Now to real estate:-) I bought a buy to let appartment last year. I raised my mortgage on my own house (to LTV of 65%) in order to pay the appartment in cash. That’s wise for one appartment because of the 2,3% interest rate and hence extremely good yield that I make on renting it out.

    I’m now bidding on a property with 4 rather small appartments in it, which makes it easier to maintain. I don’t want to pledge my house further, hence I’m going for a real estate investment mortgage. That will cost me 3,5% interest. Which is still ok. Part of the loan will be repaid in 10 years in a lineair way. After that the free cashflow is substantial. After ten years I could live FI in a cheap country. After 20 years (and repaying my own mortgage) I could be FI in NL, if I scale back a bit on my fixed costs. Or I buy another one in a couple of years…

      1. It’s all rather new. It sounds under control. It still feels slightly different:-) But your blog and others help tremendously!

      2. Glad to read that, yes the emotional side of things takes time. Took us a couple of years to feel comfortable with the whole journey to FIRE and the investment risks associated with it. But time is definitely on your side here 🙂

  2. You contract out or do the renovations yourself? I’m taking on more and more reno’s these days myself, really a great skill to have if you’re managing a few properties.

    1. These major renovations I’m not touching, has to be done right the first time around. But I’m definitely improving my DIY skills. Been painting, fixing driveways, fixing gutters, placing insulation inside, adding sound proofing & fixing bathrooms taps. Slowly but surely improving! Got a couple more things on the to do list 🙂

  3. We also had some renovation bills to pay in July. It’s a mixed feeling. Less cash but home renovations inching towards completion and since it is something I want to have finished before FIRE it definitely is a step in the right direction (also being glad that after 8 years of living here we will finally be able to use the entire house and not just parts while other parts are being renovated, living between boxes does start to loose it charm after a while …).

  4. I’m not an accountant, so I tend to make things up as I go along, but in my book the renovation is an expense, for sure. But that expense ought to deplete a reserve fund of sorts, and increase the capital value of the property, so in balance sheets terms, the net effect shouldn’t really be all that much. Or am I missing something?

    1. Probably should ask my accountant (aka Mrs CF)…. Have not done that yet 🙂 But I think you are right, albeit you usually don’t get all your money back on a property with “regular” maintenance items, for which this was partially the case (the insulation added value, the stucco was mere outside maintenance).

    1. Well July was a major “loser” when you look at the graph, is going to take many months to compensate. However, there is a nice uptick in the Cheesy Index I can tell you 🙂

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