Poof - 2 years of cashflow on 3 houses gone in one day!

[Owen Dashner]

Attention skeptical wannabe landlords who think there is NO WAY rental property expenses run 40-50% of income, or that rent minus PITI = cashflow. This post is for you:

I always dread the first few hot days of summer.  I just know my phone is going to start ringing and my checking account balance is going to get smaller.  Within about 2 hours yesterday, I received calls from tenants at 3 separate houses saying their central air conditioning was not working.  They were all older A/C units, and I was limping along hoping to get another year of life out of them. 

After sending my HVAC guy out on the service calls, he calls me at 8 pm to let me know that all 3 units are shot, and that he didn't think it was a good idea to dump any more money into them.  I take a deep breath and ask the question, "How much?".  He tells me that the replacement cost would be $2,700 per unit, or $8,100 total.

Ouch.  This is a major reason that most newbies do not last in this business.  In just one day, 2+ years of $100/door cashflow was effectively wiped out on 3 separate houses.  This is why it is SO IMPORTANT to allocate your income for inevitable expenses and repairs.

While it really sucks to have all these hit in a short period of time, if you are properly capitalized with an adequate maintenance account, these types of expenses can be absorbed as a cost of doing business.  And remember- just because you have gone a couple years without any major expenses, all that means is that you are all the more likely to experience those expenses in the near future.  

What about you?  Does your business have enough in reserves to withstand the A/C unit trifecta in one day?  I know mine sure didn't when I first started buying rentals...

[Max T.]

Thank you for sharing your experience. I'd like to add something about those good years with low expenses: take that large(r) bank account balance as motivation to ask yourself "what preventative maintenance should I do with this money? What systems are old and on their way out?"