Repairs are killing me!

[Elijah White]

Hello all, 

I have two rental properties in Wichita, KS; both are single family homes that should cash flow around $250 per month but the repairs and fixes that I have had to do over the past six months (and especially the last month) have just been destroying my cash flow. A few months ago I had to have a tree cut down at one property, which cost $1050, then this month I have had a frozen pipe at one house, a clogged main sewer line at the other, a broken refrigerator and an electrical issue. In total, I am looking at ~$750 in repairs this month alone!! Is this just part of the growing pains and part of the learning process to become a real estate investor or am I doing something wrong? Should I never buy houses that are built before 1970 again? Both of these houses were built in the 1950's and I wonder if maybe that is part of the issue.

Thanks in advance for any advice!

[Tina Tsysh]

In your property's cash flow analysis you should always include some expenses to go towards vacancy, repairs and maintenance. Even though you won't have those cash outflows every month, you should always account for them. Are your total repairs for the year exceed the cash flow you are getting? If so, you might want to do some rehab work and raise rents to get higher cash flows or if you are in the minus for the year on cash flow, you might want to consider selling your properties or doing a 1031 exchange. 

However, remember that with real estate there are a lot more perks than cash flow. There is appreciation, tax deductions, and principal reduction. You have to factor in those benefits as well. Even if you are breaking even on a property in terms of cash flow, you are getting so many additional benefits that in a few years you will become cash flow positive.