How Much My Rental Property Made in 2020
It’s under $500 and why that’s okay
There are a lot of anecdotal stories on Medium about Real Estate. As we go into 2021, I thought I would share real numbers on how much I made (and lost) on my rental property last year.
Let’s start with a little background. This house was never supposed to be a rental property, it’s just something I fell into after buying, living there myself, and ultimately deciding it was not for me. Thus I became a landlord and found all of the stress and benefits that go with that title.
Let’s get into a full income assessment for the property in 2020.
Maintenance
My rental property is relatively new and generally has very low repair costs. However, all of the appliances are about 8 years old and in 2020 the dishwasher broke and had to be replaced. There were also minor maintenance calls for the furnace and the hot water heater, which made the total for this category the highest in the time I have owned the property:
$698.97
Utilities
Most utilities are paid by the tenant, however, I continued to pay the flat monthly trash and sewer payments and any utilities while the property was empty. That brings my total to:
$466.36
Property Insurance
Landlord Insurance is relatively inexpensive and is protection for unforeseen circumstances like theft, fire, and other disasters. My costs were:
$583.60
Property Taxes
My taxes were up from 2019, but still luckily very low compared to other areas:
$1109.28
Mortgage Interest
Once again, this cost is relatively low thanks in part to my low-interest rate. Since I was around the halfway mark of my mortgage, very little of my monthly payment went towards interest. In 2020, my mortgage interest costs were:
$1820.42
Mortgage Principle
Most of my mortgage payment went towards paying down the principal and building equity in the property. In 2020, I paid down my principal by:
$7698.17
Property Management
Since I live several states away from my property, I pay a property manager to help me with leasing the property, collecting rent, and making repairs. In 2020, I paid my property manager:
$1046.70
Revenue
My property had two sources of revenue in 2020 — rent from the current tenant and damages paid out by a previous tenant totaling:
$13,644.54
So if you are following along with the math, you’ll notice my expenses almost equal my revenue. For a rental property, it’s a far from ideal situation.
But it worked out.
In 2020, I paid down my mortgage principal by $7698.17. While this isn’t money I can spend on my own living expenses, it is taxable income and contributing to my net worth.
At the end of the year, I was able to sell the property and capture all of that equity paid by my tenants over the years. I had to put some of my own money into the property over the years to pay the mortgage when it was empty and pay maintenance items, but overall what I made when I sold the property was a huge return on the money I spent.
I was also able to take my equity from the sale and invest in a new rental property that I will be managing myself.
If I had kept this property, I would do the following to make it a more ideal, cash-flowing investment:
- Refinance from my 15-year mortgage to a 30-year. This would cut my mortgage payment in more than half and allow me to have reserves for maintenance, vacancy, and some cash flow.
- Pass the trash and sewer charges onto the tenant. In most cases, tenants pay all utilities and this would be an easy, flat fee to pass on.
- Negotiate my property management fees down or find a new manager. When the property was occupied, my former manager did very little besides collect the rent every month and mail me a check.
At the end of the day, I decided to sell and cash out to take the real estate knowledge I have gained and invest in a new property.
