Real Estate Report – December 2016 and 2017 Forecast

HAPPY NEW YEAR! Team CF wishes you and your family great prosperity and health through frugal living and good investing.

Now, on to business. In this case the business or Real Estate. We will first look at the month of December 2016 to see what happened with our properties, next we will take a short look at the forecast for 2017 and expected developments regarding income and expenses.

December 2016 – Real Estate Report

December was fortunately unexciting (mostly). All properties were rented out and all rents were received on time, distribution is as follows:

Expenses this month were higher due to the interest payment on a personal family loan (as of 2017 this will be paid monthly). Other expenses such as mortgage costs and property management fees were normal. We had some negative expenses (i.e. a refund) on the insurance side. This was the result of a new assessment on the value of one of our properties. No maintenance costs for this month, but we had the heating systems serviced for two units. Bills are expected for January and will come in higher than planned due to placement of carbon monoxide sensors (€35 each) and issues with fine-tuning during boiler maintenance…..small setback.

At the end of the day, December and 2016 as a whole looked like this:

For 2016 we had about €9400 income, €6400 expenses and a net profit of €3000. Not bad for a year in which we really got going on the real estate side.

2017 Forecast

For 2017 the forecast is as follows:

  • €35.000 rental income (don’t expect empty units this year, buy you never know!)
  • €19.000 expenses (includes €9000 for large scale external maintenance for two units)
  • €16.000 net income = about 7% net yield (before taxes)

The large maintenance for the two units was expected and we have been saving up for it as well. These two units are old (1910-ish) and the outside paint work will be removed and replaced with stucco. This way the units will have lower maintenance going forward (no more masonry or paint work required in the next 10-20 year, depending on the quality of work). Windows frames will also be repainted. After this final large reno work, these two units are in tip-top conditions and should need very little work over the next decades.

We also found that the moisture issues (migrating through the outside wall), as discovered in one of the new units last year, is worse then expected. We are getting a contractor in next week to have a look. We have made some reservations for this one too. But this is the large unknown for 2017.

Stay tuned!

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12 comments

    1. The moisture fix is pretty straight foreward, will saw in the wall and place a lead strip with epoxy. It just takes time, saw rental costs and some digging efforts. Will get it fixed!

  1. Very nice result, especially considering you did not take appreciation into account. On average, the appreciation might boost it significantly over the long term. Do you have an idea of average appreciation over the last decades for the type of rentals you have?

    1. It should certainly help in the long run. But I have to admit that we did not look at what appreciation does for these types of rentals. Two of them could be compared to regular houses, so those would follows the average housing appreciation in their local area. The other four are harder to judge as the property is an a-typical one. To be brutally honest, we are not really worried and currently don’t really care either.
      Cheers!

    1. The amount of work is actually not too bad, most months there is very little to do but watch the money come in. It does require some thoughts and efforts for maintenance/renovation works. But I like doing/managing this, so it is not bothering me at all (it actually makes me happy, go figure).
      As for the return, risk is everywhere, and when you leverage your assets, return on investment in real estate can blow most stock market increases out of the water. But agreed, in this case there is also a significant downward potential. Doing your homework is key.

    1. Considering we are focussing on cash-flow only, we do not incorporate appreciation as part of the yield. This just might be a nice bonus in 40 years from now when we don’t want to deal with tenants anymore 😉
      Good luck with your rental journey. Curious to know how it goes.

  2. Hi Cheesy, happy New Year to you guys!
    This is a nice rental portfolio, I’m also looking at the market to invest in our first rental.
    May I ask if these units are all located near you or you diversified in different cities?

    1. Hey RR,
      They are situated in two different locations (it’s a duplex and a quadplex). But I’m not sure if this is always handy for overall management/maintenance. If we would buy more, they will be located at either one of these two towns.
      Happy new year and happy house hunting!

    1. Hey AT, it does look very promising. But it remains only a forecast! You never know what happens during the year (maintenance and tenant wise). But we are optimistic for 2017.

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