Hello all, 

I have two rental properties in Wichita, KS; both are single family homes that should cash flow around $250 per month but the repairs and fixes that I have had to do over the past six months (and especially the last month) have just been destroying my cash flow. A few months ago I had to have a tree cut down at one property, which cost $1050, then this month I have had a frozen pipe at one house, a clogged main sewer line at the other, a broken refrigerator and an electrical issue. In total, I am looking at ~$750 in repairs this month alone!! Is this just part of the growing pains and part of the learning process to become a real estate investor or am I doing something wrong? Should I never buy houses that are built before 1970 again? Both of these houses were built in the 1950's and I wonder if maybe that is part of the issue.

Thanks in advance for any advice!

The age probably has something to do with it. Probably some deferred maintenance by a seller who knew he was selling and wouldn’t get more money if he fixed the problems first. People are buying those homes to live and so they’re paying the same repairs and they aren’t able to deduct them from their taxes like you will. 

Hopefully the bleeding stops soon. At least it appears you bought near where you live so you should know the neighborhoods and likely expenses. (As opposed to someone from an area where everything is much newer and we don’t deal with weather.)

Keep track of your expenses and watch to see if hopefully they don’t decline after 6-12 months of ownership. 

In your property's cash flow analysis you should always include some expenses to go towards vacancy, repairs and maintenance. Even though you won't have those cash outflows every month, you should always account for them. Are your total repairs for the year exceed the cash flow you are getting? If so, you might want to do some rehab work and raise rents to get higher cash flows or if you are in the minus for the year on cash flow, you might want to consider selling your properties or doing a 1031 exchange. 

However, remember that with real estate there are a lot more perks than cash flow. There is appreciation, tax deductions, and principal reduction. You have to factor in those benefits as well. Even if you are breaking even on a property in terms of cash flow, you are getting so many additional benefits that in a few years you will become cash flow positive.

Bumps in the road my friend. Do you think the properties will be worth more money in 5, 10 years? Will rents go up as well? If you feel like that's the case and you can find a way to handle these bumps in the road, then ride it out!

In my experience these things come in waves, I had to replace a ac on one property and then a water line at another the next month which wiped about 1/3 of my cash flow for the year.  Stuff like this happens and the older the house you buy the more you should prepare for capex.  It's part of the business however you will also have years where you sit on the couch, everyone pays on time and you have no vacancy or repairs.  Make sure you have a strong reserve fund and stay on top of it, you build it up for emergencies but when one comes you need to build it back.  Also be sure you are shopping around 1050 for a single tree sounds absurd.  

@Elijah White

Keep charging ahead man. Don’t let this slow you down. If anything, let it stoke your fire! When you have 200 units and your a wise old investor, you’ll look back with nostalgia at the days when you were just getting started. I’m just getting started myself. There are hard days, there are bad months, but I’ll power through. And so will you!

@Elijah White

This is why I don’t count too much on cash flow in my properties that are NOT short term rentals. I look more for appreciation, tax deductions, tax deferrals etc. I know this doesn’t work for everyone as some people need the cash flow, but you may shift your strategy in any future rentals you purchase. If I cash flow, great, if I don’t then as long as all my other targets are being met then I’m all good!

There good advice already given in this thread so I won’t offer much more than looking at it more than just a cash flow perspective.

Originally posted by @Elijah White :

Hello all, 

I have two rental properties in Wichita, KS; both are single family homes that should cash flow around $250 per month but the repairs and fixes that I have had to do over the past six months (and especially the last month) have just been destroying my cash flow. A few months ago I had to have a tree cut down at one property, which cost $1050, then this month I have had a frozen pipe at one house, a clogged main sewer line at the other, a broken refrigerator and an electrical issue. In total, I am looking at ~$750 in repairs this month alone!! Is this just part of the growing pains and part of the learning process to become a real estate investor or am I doing something wrong? Should I never buy houses that are built before 1970 again? Both of these houses were built in the 1950's and I wonder if maybe that is part of the issue.

Thanks in advance for any advice!

 I might recommend a 1031 exchange into a newer class of property. You will still make out really well it sounds like. You could keep looking on your area or look at KC (I am partial to it) for a bit more appreciation. How that helps!

Repairs are the nature of the beast. A newer home will also need repairs eventually as well dont let it fool you!