Because I try to treat my property investment as a business – I do a cost inventory every July. The most important factor for a business’s sustainability is cash flow. The income for property is pretty easy but the expenses are many. Ultimately, I want my portfolio to be paid with OPM (other people’s money) and dealt with OTT(other people’s time), so it truly is a business not a job.
Below is the profit and loss of one of my properties:
Rent – vacancy is the biggest enemy – strive for 100% occupancy
Interest – a whopping $17.. I don’t know how that happened, but all income is better off leaning against debt
Sales – no sales income this year
Management – 100% taxable deduction and a must if you want your portfolio to run when you’re not in the country – OPT (I don’t charge myself this one).
Insurance – General Insurance including Public Liability and some contents. I do not use landlord insurance because across the portfolio I prefer to self-insure then pay seven premiums.
Interest – biggest expense but the price you pay for OPM and allows you maximum leverage of your money.
Rates – these government expenses keep going up and much faster than inflation.
Land tax – the most painful of taxes, not as painful as stamp duty, but close!
Repairs – necessary and this property had its exterior painted as it hadn’t any love for 10 years.
Maintenance – not too many expenses here, the AC went last year.
Water and sewerage – another expense that needs provision, will always be in the owner’s name not the tenants. Water can be forwarded to your tenant if water compliant, but the infrastructure charges remain the responsibility of the owner.
After all the sums including $23,561 for a repaint – this property was in the red with a negative - $1,371. Interest was the biggest killer, then the painting, rates and then land tax. But according to the latest appraisal it has appreciated from $1,150,000 to $1,500,000 in 2 years and 10 months. Or 8.1% annualised.
So, I guess I’ll wear the pain of land tax and hold for another year. There should be some depreciation back on that painting too.