Here’s How Much Cash Flow Emil Generated From $44,788 in Rental Income in 2020
In this episode we run through Emil's year end financial report and see how his 3 property portfolio performed last year. Emil's Blog: https://emilshour.com/blog/ --- Transcript Tom: Greetings, and welcome to The Remote Real Estate Investor. On this weekend wisdom, we're putting a meal on the hot seat. He just finished an exercise of looking at his year in financials and we're gonna ask him about how his portfolio did. Alright, let's do it. Emil, end of year, how'd you do? Emil: Yeah, so I run a personal blog where I talk about real estate investing and stuff. And at the end of it every year, I do like a full rental income report where I look at how much money came in how much money went out. So how much do we make at the end of the year. And so this is our 2020 rental income report. So total, we had we ended the year with four properties, six doors total, so three single family rentals, and one triplex and our gross rent was 44,788. But that's just gross rent. So let's dive into all the other numbers. So operating expenses, which is things like I put property tax insurance, any owner paid utilities, property management, hoa, repair, maintenance, all that stuff goes into my operating expenses that came in at 17,464. And then my mortgage payments total on those properties came out to 17, zero to 117 $1,000 21. And so my cash flow, so 44,788 minus my expenses and debt payments, our year end profit came out to 10,300. And, and a couple quick things to note on that we had a property that we sold about midway through the year. So we had another single family rental that we sold in May. And then the triplex we bought at the end of November. So the triplex really didn't have much in terms of cash flow. Actually, it had negative because we had to come in and make some repairs right away. So that's basically on like three and a half properties that we made last year. And last year was a pretty no big expenses, no turns. So this was a pretty good year for us to have $10,000 in cash flow on basically three and a half properties. Michael: That's amazing. Just one thing I want to point out to everybody listening is you said your operating expenses were like 17,000. And your gross cash flow was roughly 44,000. Right? Emil: A gross rent 44,000. Yep, yep. Michael: So if we take 17,000 divided by 44,000, to determine what your expense ratio is, you're down to like 38 and a half percent, which is pretty stellar. When most people we talk about that 50% rule, we throw away 50% of the expense, excuse me throw away 50% of the income just to expenses before the mortgage, you cut that down by 11 12%. so nicely done. And that's awesome. Emil: Well, thank you. But it's not really me. We've talked about this offline. I think real estate is a lumpy business. Some years you'll do well another year, you could have to replace an HVAC and have two turns and then you're having a not so great year. So 2020 was a smoother year for us. And that's why the ratio is good. The 50% if you probably look at a lifetime, you know, maybe you own a property for 10 years. I bet you that 50% is much closer. Tom: Peanut Butter bread. Michael: Do you guys know what Maltomeal is? Just real quick side tangent. Emil: Maltomeal? Michael: molto meal. It's like, like Quaker Oats kind of like oatmeal. But I think for more older people, I used to eat it all the time as a kid and my dad like you have to pour it in with hot water. And if you don't like stir it, it gets really lumpy. And so anytime It was like, really lumpy, I just think of like, eating maltomeal meals a kid and my dad made that was gross. Alright, thanks for coming on that ride with me guys. Emil: And then you found $20 Michael: Yeah, it was great. And then I took the gross multi meal wasn't such a big deal. So that 10,000 in cash flow. Can you share with us how that represents a cash on cash return metric for you? Emil: Yes. So if I'm looking at just last year, it's a across my portfolio to 7.7% cash on cash. And the reason it's seems low for that good cash flow is that triplex I bought I'm looking at my total cash invested was $47,000. So that was basically $47,000 at the end of the year with no cash flow. So that's gonna bring my my cash on cash average down. Michael: So if you got rid of that, yeah, that's gonna skyrocket. Emil: Okay, so if we take out the triplex from the cash invested and just look at the three single families as a 17% cash on cash return, Michael: WOOOH yeah, buddy, yeah, yeah, that's awesome. Emil: Yeah, so Goodyear and Goodyear won't always look like that. But Goodyear? Michael: No, of course not. What is your triplex projected to perform and if everything goes according to plan? What type of cash on cash? Are you expecting to expect? Tom: Great question Michael. Emil: Yeah, on the pro forma once we get rents up to where we want them to be where we think market value is it'll probably be in nine to 10% on pro forma. MIcheal: Okay, awesome. You'll be sitting in the double digits likely from a portfolio cash flow perspective. Emil: Yeah, depending on the year again, I don't want it to this is like this is what you should expect every year when you have a portfolio. It's like this is what a Good year on a small portfolio can look like three three properties is nothing. So I mean, you think about like, where a lot of people have 50 plus units like, that's where I'm really interested to see what is this thing look like? Michael: Yeah, but don't sell yourself short. I don't think three properties is nothing I think three properties is a huge deal. And so I think people who are just starting out look at three and think Holy crap, that's light years away for me. So you just happened to start that journey? A little bit sooner than that. I think you're selling yourself mega short. Nicely done. Emil: You're right. I shouldn't belittle three. I remember when I was at 0, 3 seemed like a lot. So thank you for calling me out. You're right. It's just like, I think with any business as you start growing it you just look at the next goalposts. Michael: Right. You're growing into it. Emil: Right. But you're right, you're right when you're at 03 seems like a lot. So I won't belittle that Michael: Tom beat up Emil a little bit. Give ask him some tough questions. Tom: I know. Come on. Take the gloves off, Tom. All right. So Emil, what are you gonna do at that 10K. Emil: Okay. So for me, it just sits we've talked about in previous episodes, for me just sits in my real estate checking account, and anything over a certain threshold that I think will cover any major expenses that could happen. That just goes back into reinvested into new acquisitions. We haven't touched a single penny of cash flow since we started our portfolio. Tom: Awesome. Long term greedy. Is those new acquisitions continuing down multifamily line? Emil: Yeah. Tom: What are you thinking about for your next acquisition? Emil: I'm probably next going into the five plus unit multifamily. I want to test that out. So going into the commercial multifamily. I was talking to my wife about this this morning. I don't know if it's the property we bought, or if you know, it's a very old property built in like 1908. But every single month, there seems to be way more expenses than with my single family. I don't know if that's just a, you know, classy multifamily. That's just how it goes. You know, people talk about that. And so we're experiencing it. But I want to probably look at a full year and see what does that look like even with the increased expenses? Is the cash flow still better than some of the other places I'm seeing? It's also just, you know, for me the size of portfolio I want to get to, it's just harder doing a lot of single family people do it and they do it? Well, but yeah, I'm gonna keep messing up multifamily, probably for the foreseeable future. Michael: Hey, Emil, pop shot, multifamily question for you. Unit 2 has a furnace down, you can repair fe hardbox, replace over 1800. What do you do Emil: Depends on how old it is. If it's 15, 20 years, I know that thing is just gonna, I've experienced this in my own, like, we bought a home and the entire HVAC system was like 15, 20 years old. And so we kept putting money into fixing it, and it would break in six months. And I wish I had just replaced the thing. So depends on how old it is. If it's 15, 20, and it's past its useful life, I will probably replace it unless the tenant is like, I don't know, if they're way under market and we're waiting to get a new tenant into like, fix a lot of things. Maybe I'll just do it on a turn or something. Michael: Sure. Cool. Reason asked. I just got a text. It's from this furnace from 1994. So I think it's a replacement for the good call. Emil: Yeah, I think it's time man. We sunk like $1,000 into fixing our h back and it was 6K to replace it. I wish I had just used that 1K to replace it. Yep. Cuz fixing an old thing. It's once it's replaced money down the drain. Basically, just kick the can down the road. So replace it. Michael: Yep. Okay, I think that's what we're gonna do. Emil: Do it. Tom: Awesome, guys, any final weekend, wisdom thoughts. Nah, Thanks so much for sharing. This is really great insight. And you just use Excel to track all this? Emil: I do. But I'm probably going to be switching things over to stessa which is like the QuickBooks of rental properties. Probably going to move these things in a stessa because it's becoming a nightmare to manage in a spreadsheet. Michael: Mkes sense. Oh, this is great, man. Appreciate you being so vulnerable with us. Emil: Yeah, happy to this is the good stuff. You know, I think this is what people want to see like, okay, we can talk about performance and stuff. But how do portfolios actually perform and I always wanted to know when I was getting into investing, so it's always nice to see when people just share the numbers. Michael: Yeah, getting into the guts. No this has been great. Tom: Awesome, everybody. Well, hope you enjoyed this episode. And thanks again to Emil for land lifting up the rug for us. If you enjoy the podcast, we'd love it. If you guys would subscribe. Leave us a rating wherever you listen your podcast and as always, happy investing. Michael: Happy investing.