I spent a little time today working on my 2008 taxes. OK, I admit that I've procrastinated a little in getting them done. Anyway, something really impressed me as I was working on one of my rental property businesses. This particular business has about 10 rentals in it and I was entering the data into Quickbooks Pro. As I entered all the income and expense data, it became rapidly apparent that my expenses for this business were very low. I had very low maintenance; hardly any vacancies; no lawsuits; no legal expenses; no evictions; etc. Although I haven't quite completed entering the data and I don't have the exact numbers yet, I'll certainly have expenses WELL below 50% of the gross rents.
The big question is what does that tell us? Am I a genius at the rental property business? Have I discovered some secret to success? Am I smarter than other landlords? Do I live in the best rental market on the planet? The answer is that this data tells me NOTHING! It's completely insignificant and irrelevant. I'm not a genius. I haven't discovered the secret to success. I'm not smarter than other successful landlords. I don't live in the best rental market on the planet.
A sample size of 10 rentals over one year is statistically insignificant. The data tells me absolutely nothing about my long term operating expenses. It doesn't even tell me about the operating expenses in my local area over the past year. Trying to conclude anything from this data would be foolish at best and financial suicide at worst (if I were to assume those expenses were correct for the purpose of evaluating future deals).
Once I finish the taxes on all my companies and print out the financial reports, I'll post the results on my blog. We'll see if there is any useful information that can be derived from my several dozen rentals.
One of the things that is significant is the paydown of principal over time. As I was entering the data this morning, I noticed that I'm paying down about $1,000 per month on principal on one of the loans. Picking up $12,000 per year in equity on just that one loan is significant! I'm looking forward to seeing what the principal paydown is on all my loans! I can't eat that equity, but it sure does feel good to watch it build up.
After doing the paperwork, I felt like getting out of the house, so I went down to the Pink Elephant to do some painting. I actually got quite a lot done in a short period of time.
Michael Rossi's Blog
The purpose of this blog is to give you a look at the daily life of a rental property owner. It's not all sitting on a yacht like you see on the TV Infomercials!
Visit our Website at: www.1MinuteToRentalPropertyRiches.com
Tuesday, August 11, 2009
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