My First Profit and Loss Statement

On Tuesday night I was somewhat bored at the shipping depot. I decided to start running numbers to see how much money I spend versus how much I make, kinda like a make-shift profit/loss statement.

A Mathematical Shame

I did really quick math on the left and, when I saw that $-611 monthly net, I went crazy. I started to panic and wonder just how the fuck was I gonna make it in this business when I’m operating at a loss without these jobs?! Were all the naysayers right?! Is it simply not worth it to get into the world of real estate and rentals? After a few minutes of panicking, I calmed myself and re-calculated everything with the numbers on the right. I got myself down to $-270 monthly income, which was still too much. My main expense is my food intake, which has me spending a crazy $700 a month, or $23 a day. Is it any wonder how I gained 25 in 6 months now? Building the basement apartment and having an actual kitchen will reduce this cost, as I should only be spending a max of $300 a month on food. And I really mean a MAX of $300. Other than that, the rest of the adjustable expenses I’ll take care of before I’m retired, as my back taxes and car payments should be paid off by that time. I also realized that I have to start raising rents this year.

Tom ($515) and Chucky ($435) don’t pay enough at property Charlie, so I’ll raise their rents by $25 each. I took a $25 hit when I rented the upstairs of property Beta out to Knick. I warned Carver that the rent will most likely go up as a result and he said he understands this. Let’s see if he sings the same song when I raise the rents by $50 there. I’ll give him the option of taking the $50 hit by himself or splitting it between he and Knick. I’m also raising the rent of Belle and Sebastian of property Alpha. I like those guys, but they’ve been paying $850 for a three bedroom utilities included apartment for over a year now. It’s time for reality to set in a bit when I raise their rent by $25. And finally, it’s time to finally install programmable thermostats at properties Alpha and Charlie. As the only two properties that I py National Grid on, I should have never left the full control of the thermostat to the tenants. I’ve been meaning to change this but my laziness was a big factor. Well, after running those numbers, it’s safe to assume that the laziness in that department is over.

So, all in all, it looks like I’m still on the right track. One has to remember that, while I pull in $1416 in net profit from the properties, I’m taxed based on the combination of the $1416 AND the $2400 I make at the jobs. If I quit both of those jobs today, I wouldn’t be taxed nearly as much, and may actually get money back when I do my taxes. That made me feel better. The numbers I did Tuesday night served as a wake up call. Not a wakeup call to get out of the business, but rather a wakeup call to improve my economic situation. These are the numbers that my accountant Ross should be helping me with, but he’d probably charge me to do what I can do while getting paid at the shipping depot. He really is inept, but his uselessness is forcing me to do things on my own and I like that. Apart from the panic at the start, running numbers was actually fun. I like taking an honest look at my profits and expenses, and it fits the organization theme that 2014 has been about. I’m looking forward to doing this every quarter, and I hope I can learn to do this in a better format so it’ll be easier to read on this (or the next) blog.

P.S.: Reading back that section on raising the rents made me smile. I keep rents low because I like the challenge of making profits off lower-priced rents. Having less always motivates me to make more out of it. Real estate is one of the very few business where, if my adjustable expenses are high, you can raise my adjustable INCOME (rents) to offset while I lower the expenses. I can imagine sending my boss a letter saying:

"Hey, I just got a bill. Due to my new expenses, you'll have to start paying me more money. Thanks."

Only in real estate. I love this business…