End of Year, Back of Envelope Accounting

The Partner just sent me this spreadsheet that is almost a back of envelope worksheet.  I know we have been horrible about setting up our accounting.  That is one of the things that we are going to be talking about and dealing with when they come into town next week.  We need to develop the business side of our REI.  We were so focused on acquisition that we failed to take the right steps in doing things the right way.

Here’s what it looks like:

MonthRentmgmt feeRepairsappliancescarpet clrepairsElectricTrashwaterleasing feeHVACIncomeHoldingTo Owner
5/31/2012152512269.481333.52500833.52
12-Jun152512220060196.79946.211006.21
12-Jul1550124366.46182.4332.87159.75209.451350-874.96-830
12-Aug195016042.361825-77.36
12-Sep157580337.96348.7538.42436.1414-80.23
12-Oct145025.57157.71551.4715.32
12-Nov135028626.2543.95493.85
12-Dec50026.18473.82
1142589469.48904.4260727.97191.6317.461740.9414317502930.1750001009.73

$3k cash-flow for 7 months of ownership.  I guess it’s a lot better than I was expecting to see out of that property this year.  Of course, you can see a bunch of problems going on here:

  • Even with the property fully rented for one month we collected $1950, instead of the $2050 it should’ve been.
  • $800 this year more in Water Costs!  Yikes, we need to get that fixed!
  • $905 this year in new appliances!
  • $725 in Move-out costs/cleaning costs
  • $3175 in HVAC costs
  • $4175 in Vacancy costs

We can see the opportunity in this property, when we remove the things that are going to be ongoing costs or go into reserves for when it does occur, Appliances and Move-Out Costs, we are left with almost $5000 left on the table that is attributed to bad management (Water and Vacancy Costs)  Then the Capital Cost of replacing the HVAC unit is a once in 10year cost (we hope!) so it shouldn’t be a recurring cost adding another $3200 in profit.  For a grand total of $8200!  Hopefully we re-coup these costs next year.

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