I have 3 rental properties in Missouri that were all purchased in 2020. All three together my monthly cash flow is around $800-1000. Every time I get a couple grand built up I end up paying some big expense on one of the properties so it does not feel like I am getting ahead to be able to buy another property. With it only being a year since purchasing all properties I don’t have much more equity in properties to hack into so I’m feeling stuck. Any ideas or do I just be patient and let the course run?
@Hunter Sandoval , is the $800-1000/m cashflow the difference between your rent and PITI, or are you accounting for maintenance, vacancy, and CapEx reserves also? It sounds like you're getting surprised by unexpected expenses, but you're always going to have some type of repair expenses, you just need to budget for them and anticipate them. It could be that you're seeing large repair expenses occur all at once, so it's very well that the higher dollar items are hitting all at the same time, so those could level out over future years.
You're doing fine....a lot of people would love to have 3 rental properties... :-)
Just wait. Can you raise your rents at all?
Generally you are going to have a higher spend on maintenance the first year or two until things get stable. Sounds like you might be going through that.
Question. Did you know about the repair needs when you bought the properties but decided not to do them upfront and wait to complete them with rent money? Or are they 100% surprises? If the former then you are right on track. If the later then you are learning what to better look for when you buy a rental and do your diligence and cost estimates.
Either way, you are not under water by the sounds of it just getting things stabilized and that is not unheard of when buying homes. Sometimes it can take a bit.
@Hunter Sandoval I know the feeling. It’s really frustrating. You’ll have these ups and downs. You aren’t paying any taxes on the money, you are getting principal pay down, appreciation, and the opportunity to write off other expenses. You’ll be just fine.
@Hunter Sandoval - I can relate, I bought 2 3 families in 2020-2021 and a syndication and I'm flush outta cash (other than my reserves). I feel the same urge to want to buy more property but am limited by my own funds. If you feel stuck and truly want to move your portfolio forward at warp speeds, consider partnering or jving with someone on a deal. You might be able to find some solid deals and partner with someone who brings the downpayment. Either that or focus on saving towards your next property. Unfortunately, getting wealthy in real estate is a slow game if you do it alone.
IMO, if the properties are paying your note and all expenses, the first year especially but even up to 18-24 months in, without any additional money out of your pocket, that's a win. A lot depends on property type (multi-fam, SFR, 1-bed, 2-bed, 3-bed etc.) location, property class (1930s or older like many in south city or relatively new?).
If it's a newer property and it's sucking up all your revenue, especially with basic expenses like utilities, basic maintenance, etc. then maybe revisit your math and see if you calculated a reasonable buffer or if you were too aggressive. If it's an older property that had deferred maintenance, it can Hoover cash for multiple years before stabilizing. (Ask me how I know!)
As Kris said with ne properties you have a period of time when you have littler repairs that seem to pop up. The same will happen when you have new tenants. While you may not seem like you are getting ahead in terms of your bank account, they are paying down the mortgage.
@Hunter Sandoval there's always a risk/reward trade-off of over rehabbing investment properties vs. renting them out ASAP. There's pros and cons to each strategy.
If you spend more money and time on the rehab up front you should expect lower ongoing maintenance. The downside is you're spending money and time...
If you decide to rent ASAP before making a ton of repairs then you spend less money up front and begin collecting rental income sooner. The downside is you will spend more in ongoing maintenance.
Just give it time to level off and you should be in good shape. I would adjust your future analyses to account for higher maintenance or capex.
How old are the homes and how well were they maintained before you owned them?