The Cash Flow Rentals Hustle Report #2 (QTR 2 2015)

Hey fellow hustlers!

Happy 4th of July! We’re super excited to share report #2 with you. As vulnerable and potentially embarrassing it is opening everything up and showing you what we’re doing, we’re super  thankful that you – our advisors, role models, and support system are there for us to help us make decisions and avoid potentially costly mistakes.

Now on to the report!

Executive Summary:
Cash Flow Rentals, LLC’s focus is on generating residual passive income (rather than appreciation) for it’s owners (Diego and Pascal) through any means of real estate.

 

Key Performance Indicators
Q1 2015
Q2 2015
Q3 2015
Q4 2015
MRR Goal
$2,500
$5,000
$7,500
$10,000
AVG MRR
$200
$2,940
AVG MRE
~~~
$1,176
AVG Monthly Cash-On-Cash Return
~~~
2.68%
AVG Occupancy
~~~
85.6%

Financials:

Below is a photo of what our financials look like but to take a better look you can see them here:
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Overview:
  • You’ll notice that we added a new metric to our KPI dashboard which is occupancy. How we calculate that is by adding together the amount we’ve collected in rent over the quarter divided by the total rent we should have collected in that quarter, and then we divide that sum by the number of months in that quarter (which is 3 for you non-math/common sense folk).
  • We’ve had a few issues with Cozy, our rent collection management system but we’ve ironed out most of the problems. Essentially instead of adding 4 tenants under 1 property to collect rent (which is how cozy is designed), we’ve had to create a separate “property” in the cozy system to collect rent from each tenant to make it easier. Initially, tenants became confused about the rent amounts because the rent was setup as $2600 collected per house and they thought it was setup to collect that entire amount from them rather than just pay their portion.
  • Other than the hiccup of not being able to fill the room that doesn’t have a bathroom on the same floor (covered in the lessons learned section), we’ve been able to fill out each room within the first month of closing on each property.
  • We’ve had a tenant ask us if they could pay cash or check instead of using our automated system and we decided to make every tenant pay the same way to streamline our operations. Cozy pulls straight from their bank account and insures that there are no late payments. We’ve decided not to bend over backwards in this scenario for our tenants – it would just cause too much hassle.
  • We had quite a bit of interest of some of you wanting to invest with us and with some people we got as far as negotiating contracts but we recently found two brokers willing to give us a few more mortgages based on our properties’ cashflows so we’ve decided to hold off on the co-investor route. That being said if you know a broker, if you could introduce them to us (Pascal specifically) we’d super appreciate that – we’re always looking for who ever can give us the best rate!!
 
Lessons learned:
  • Quick note here: When you write these out they seem like no brainers but I guess these are things you don’t think about as a rookie. Diego and I like to think about it as… Move fast and breaks things. They’ll make good stories later.
  • Although we’ve been able to fill all 8 rooms, we’ve found that it’s difficult for us to rent out a room (even at a lower price point) if the room does not have a full bathroom on the same floor (we’ve thought about adding a bathroom but for now we’ve decided to lower our bedroom rate by $100/mo to fill the room. We now have a new requirement when purchasing a home which is: all rooms must have a full bathroom on the same floor.
  • We haven’t had anything concrete in our leases concerning if lawns are to be taken care of by the tenants or us and we also didn’t talk about anything concerning utilities.  We’ve decided to put the utilities in our names in case the tenants move out to remove the hassle of making sure everything still runs properly if and when they leave. This is now being implemented into our leases as we move onto acquiring our next property.
  • In order to fill one of our rooms, we decided (after talking with 2 friends of ours who rent out their houses the same way we do) to allow someone to take a room in a month to month lease. Although it allowed us to fill one room much quicker, that tenant is already moving out because of a change of plans. We’ve decided to require a minimum of 6 months if we absolutely feel like we need to fill the room a little more quickly moving forward (all 7 other rooms are on  12 month leases).
Feedback from the last report:
  • A question that came up last time was around zoning or how many unrelated people are we legally allowed to have live in one house. Shout out to mark Ferguson for pointing this out to us. We double checked and we allowed to have up to 4 unrelated people living in the same house within the Pflugerville area.
  • We’ve had mixed feedback about our LLC structure since our last report. Some people have mentioned we need a separate LLC for each property and some have mentioned that our first five properties in one LLC should be fine. I’ve done some research and I’m definitely open to hearing more if you have a particular opinion about it. Shout out to Dave Codrea for bringing this to our attention.
  • We’ve also been asked about how we are accounting for taxes and insurance. Those pieces are baked into monthly mortgage payment (sweet deal if you ask me).
  • Thanks to Peter Stanton and Rick Bosl, we’re now looking into breaking our payments on our mortgage payments into principle and interest. I have rough amortization tables from our brokers but having the real numbers will help with figuring out our IRR (Internal Rare of Return) and for accounting purposes.
Pascal & Diego:
  • Pascal – I’m about to take a trip and working on the road as a digital nomad to the middle east and Asia for at least the next 5 months including Dubai, Abu Dabi, Bali, Singapore, Vietnam, Japan and many more. My second annual event for the Elevate mastermind is happening in the Bahamas in the next 3 weeks which I’m super excited about along with attending Gobundance and my 3rd Unleash the Power Within. On the passive income front I’m cashflowing $1,400 from two properties and my plan is to have 5 by the end of the year. I’m continuing growing my Facebook and Google advertising business and I’ve started a new passion/contribution project that I’m calling The Holy Grail Project that i’d love to get your feedback on.
  • Diego –  I’m working on my exit strategy from General Motors to do real estate full time. I will be teaming up with Victor Nino to streamline and systemize the business so that we can take on more business and help more families. I’m stoked to mastermind at the next Gobundance event in Colorado and attending my second Unleash The Power Within in Chicago. I will have a monthly cashflow of $2000 starting August and my personal expenses are less than $2000 since I live for free.
 
Photos:
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Always Hustling,
Pascal &  Diego

 

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PPS – Please send us a reply and let us know what you liked about this email update or potential concerns you have for us being in our position. It’s because of the feedback from these emails that we’ve already avoided a few obstacles! Plus we love hearing from you (so don’t be shy)!