How Much Do Landlords Make a Year? | Our Rental Numbers
How much do landlords make a year is a tough question to answer.
But believe it or not people are asking it all over the internet! In this blog post you’ll come to see that it’s nearly impossible to answer the question “how much do landlords make a year!” It’s just too general of a question.
So what I’m going to do for you in this post is give you the nitty gritty details of what we currently make on the rental apartment above our two car garage (and I think you’ll be surprised by the number!) I hope diving deep into the numbers will help people realize that “landlords” can make $300 a month to $300,000 a month!
I truly believe how much a landlord makes is directly related how much effort they put into landlording. Which is the really cool part about this income stream of ours… it’s limitless! And passive to boot!
Here are our real life numbers for the current rental property above our garage. (And I’ll do my best to answer how much do landlords make a year.)
When we purchase property we always expect there to be some repairs which will immediately deduct from the bottom line. But when we purchased Main Street House we weren’t expecting the apartment above the garage to need as much as we put into it! I think you’re going to be shocked how much money we put into that teeny tiny apartment before we could even think about renting it out.
I’ll cut straight to the chase. The apartment renovation wound up costing us over $12,200!
Yes, you read that right, over twelve thousand dollars for a ONE bedroom ONE bathroom apartment. That number was quadruple our original budget!! Yes, we over-improved (what else is knew) but we also ran into more issues than we could have ever anticipated (like a leak in the main sewer line!) But the bright side is that we know everything is done right and is brand new!
Fingers crossed nothing needs fixing for a good long time.
Here’s a breakdown of the apartment remodel costs:
- $3500 Plumber
- $1300 Electrician
- $700 Insulation & Drywall
- $1000 Cabinets
- $215 Counters
- $1700 Appliances (including washer/dryer)
- $2500 Flooring & Tile (I installed the vinyl plank flooring myself in two days and it was super easy!)
- $500 Paint, Caulk, Blinds, Spackle, etc.
- $800 New Roof (material cost only, we did it ourselves!)
Before we even rented out the apartment we were $12,200 in the hole! What a way to start!
But on the flip side we wound up getting $250 more each month in rent than we had expected! We estimated we’d make $600-$650 but rented it out for $850!! (And it’s under 500 square feet!) So our over improving paid off!
We Have to Deduct for Expenses
I know most of you are now calculating what $850 x 12 months is – it’s $10,200 for those that don’t feel like swiping their phones open for the calculator function – and some of you might be thinking that’s what we make per year on the rental. But you are totally wrong.
This is where the question how much do landlords make a year gets complicated.
All landlords have different expenses and some years a landlord can be in the negative due to a huge expense like a new roof while another year they may pocket almost every cent of rent.
For us, because of our $12,200 upfront investment in flipping the apartment, we won’t technically be making a profit until our 20th month of renting out the apartment – that’s if we keep the rent where it’s at (hint, we aren’t.) Isn’t that insane!?! But we’re on our 10th month so we’re halfway there!!!
That’s because in addition to the renovation costs we had up front, we also have monthly, quarterly and yearly expenses. To make things simpler, I will break down each cost by month even if we pay it quarterly or yearly.
- Real Estate Taxes: $110
- Insurance: $40
- Sewer/Trash: $35
- Misc Items: $10
So now we take the total $195 in monthly fees and subtract it from $850 rental income each month for a total of $655. So I guess you can technically say we make $655 a month or $7,860 per year.
But wait!!! Don’t forget the government wants their cut! So I also have to put away $150 per month for tax time!! So that leaves us with a total of $505 a month or $6,060 per year.
But there’s more… Out of that $505 a month I put away about $200 each month for more renovations – because believe it or not, the apartment still needs new windows and a new front door! And we don’t plan to stop this monthly saving any time soon because you just never know what kind of expenses can pop up and we’d like to have a stash of cash on hand for those times of need.
With that being said we’re technically at a profit of $305 per month (ya know, money we can actually use) or $3,660 per year.
Landlording is definitely a get-rich-slow tactic but well worth it in the long run when you can sit back and collect on passive income. I know I could ever take a totally hands off approach with our rental business but if you want to literally sit back and do nothing but collect, make sure to budget between 8%-12% for management fees as well!
So How Much do Landlords Make a Year?
The answer is it totally varies from year to year, from landlord to landlord and it can be a side business making only $4,000 per year or a full time job making $10,000+ a month.
I know that doesn’t totally answer the question how much do landlords make a year but it shows how much we as landlords make off of one tiny rental unit above our garage.
What’s in Our Landlording Future?
The plan is to rent the house out within 3-5 years so that this single property will net us even more money! And once we finish the attic into a master suite -making it a 4 bedroom 2 bathroom home – not only will we get more in rent but our home will be worth more – ka ching!!
Can you say sweat equity? We certainly can! (Sweat equity. See?)
Since we have no mortgage on our home we’ll eventually tap into the home’s value so we can purchase more investments.
So let me get this straight. Right now we have no mortgage and we are collecting rent. We are also adding tens of thousands of dollars of sweat equity as we renovate our little fixer upper – of which we can eventually use to finance other investment projects of which will generate profit.
Sounds like the dream – only it’s our real life and I pinch myself every morning (and then write in my gratitude journal.)
So what’s in our landlording future? I truly believe a mixture of buy and hold investing and flipping houses is the key to our success and early semi-retirement (because let’s face it, I’ll never fully retire! I love what I do way too much! )