Cashflow… a new addiction.

I recently got hooked (ok, not quite as hooked as the person who introduced me to it) on the computer game “Cashflow.” Designed by Robert Kiyosaki (well known author of “Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and Middle Class Do Not!“), it’s an interactive game that teaches the value of passive income.

As the game teaches, without passive income, we keep working for paychecks, paying bills, working for paychecks, paying bills, working for paychecks, paying bills. (e.g. the rat race). Passive income, which you get by having your money work for you (investing carefully in real estate, stocks, businesses) gets you out of the “rat race” and into the “fast track,” where you are able to live the life of a wealthy person, until finally winning the game by having enough money to purchase your “dream.”

The first few times I played the game, I didn’t do so well.. Partly my unfamiliarity with the game (I didn’t realize that the bank loans were interest only, at 120% !!!!), and partly my unfamiliarity with the stock market. After a few turns, though, I got the hang of it and was doing fairly well (despite being downsized multiple times. According to the game, though, if you’ve invested well, and are earning enough passive income, getting laid off shouldn’t matter much).

All of this to say that the game was very informative, thought-provoking and educational. And it actually got me to sit down and work out what all of my actual costs were on my duplex, and figure out what I was paying in rent these days (I did this at the beginning, when I first bought the duplex, but taxes have since gone up, insurance has gone down, and I’ve raised the rent a bit).

So, if I add up mortgage, (Including my HELOC, which I’ve refinanced to a low interest rate balance transfer on a credit card), taxes, insurance, and water bill it works out like this:

1295 Mortgage
166 HELOC (on a 2.99% credit card)
200 Property Taxes
60 Insurance
80 Water Bill
1800 Total Expenses (not including repairs)
-930 rental income (for the upstairs)
870 for my rent.

Which sounds reasonable; after all, while the upper and lower floors both have the same square footage (and I find mine to be a bit nicer in layout), the upstairs is a three bedroom, and the downstairs (my unit) is a two bedroom. I’m sure that I could rent my unit for $870 (especially after I remodel the bathroom, which has been on my list for a while).

However, in order to actually have a positive cashflow, and extra money to keep up with maintenance and repairs, I should really be charging more rent, if I can get it. If I could raise the upstairs by $100 and the downstairs by $75 (making it $1030 and $955), that would give me $175/month in cashflow.

Funny, a week or so ago I was blogging about how glad I was that I signed my tenants in for another year on their current lease, at the same rate. I wish I had raised it a bit! I couldn’t raise it $100 on them, but I could have probably swung $20. That’s only a 2% increase, after all.

Paying down the principal on that HELOC turned credit card balance will help too, but I’m not sure that paying down the balance quickly is worth giving up having that cash on hand…
The cashflow game has gotten me thinking much more strategically about my duplex and its associated finances… it’s also gotten me more interested in seeing about making a lowball offer on the duplex next door that’s (still) for sale….

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