Adjusting My Investment Strategy
This year has been a bit different from previous years. I have generally slowed down a bit on real estate in order to diversify my business investments. I started an e-commerce business and have hired a few virtual assistants. That has been going pretty well and has taken up a large portion of my time away from real estate.
Despite doing less deals this year, I did want to highlight a few themes that I have followed that have paid off tremendously. Both of them seem obvious, but in practice are not followed by a lot of people (including myself!). Just like anything worth while, it is important to constantly assess and adjust in order to get to where you want to go.
Liquidate Weaker Assets
Recently, I liquidated my portfolio in Texas that consisted of two duplexes and a single family home. They cash flowed very well, but the tenant base was poor quality and the long term prospect of the area and lack of a team I could rely on led me to sell them while the going was good. I think it is easy for investors to just want to maximize return and that can lead to sliding too far down into the lower end of the C class areas (or below) to chase those more risky returns. As my portfolio grows and as we continue to be in this bubble-like environment, I’ve been trying to reduce risk through asset quality.
I’ve also shifted my mindset a bit in that I felt like I was getting too caught up in the “how many units do you have?” question. My overall goal is to obtain financial freedom not have the most units under management. This has mentally given me the freedom to allow myself to decrease my total units owned at the times where it has been the best move for my overall path towards my financial independence goals.
Cash on Cash return reported by my favorite RE accounting tool, Stessa
All that being said, we still did pretty well on the investment overall despite that part of the portfolio consisting of “lower quality” properties. See below for the stats.
The numbers:
Purchase: 220k
Sale: 245k
Trailing 12 returns CoC: 30% (not including sale)
Units: 5
Holding time: 1.5 years
Quality Over Quantity
This year, I only added a single purchase to my portfolio. However, it is in the best location and has the most units of any of my properties so far. I’ll have a follow up post on the full details there, but we were able to execute a full BRRRR (Buy, Renovate, Rent, Refi, Repeat) that will cash flow nicely going forward. The value add equity that we received from this project outweighed some previous years when I was doing 3-4 property renovations in a year. It has been a realization for me to really focus on quality over quantity.
Going forward, I have 2 properties under contract that we’ll close on in January 2022. We’ll be hitting the ground running as we start the new year. I’m excited to see what we’ll accomplish in this next year!
