Ntellivest

Financial planning for financial independence

Content, resources, and services to help people make intelligent decisions with their money in route towards financial freedom

My Real Estate Investment Performance (Q3 2017)

In an effort to keep tabs of performance, I've been tracking my rental property cash flows since I started making purchases early last year.  Here is where things stand through the third quarter of 2017.  Feel free to take a look under the hood.

Facebook_Sample v2 (25).png

To refresh, here are the assumptions I am using for the calculations:

  1. I am only looking at cash on cash returns.  These are simple percentage returns (non-annualized) based off of the total net cash flow received versus the total out-of-pocket cash amount put down at the acquisition of each property.  Appreciation, principal pay-down, and tax benefits are not a part of the calculated return.
  2. Cash flows and returns are separated by calendar year.  This will help spot trends in performance over time.
  3. Cash flows and returns are updated quarterly.  Anything more would be overkill when it comes to a long-term investment like real estate.


HERE ARE THE HEADLINE NUMBERS:

2016 Cash on Cash Return (Combined) = 13.6%
2016 Best Performer = 24.1%
2016 Worst Performer = -2.1%

2017 Cash on Cash Return (Combined) = 9.7%
2017 Best Performer = 22.6%
2017 Worst Performer = -0.7%


OBSERVATIONS:

Property 8 lookin' great

  • Total cash flow for the 3rd quarter came in at $5,414, which is about half of what was registered for the 2nd quarter.  Not great, but also not shabby.  There were a couple of reasons for this dip (will touch on that below), one of which was unexpected.  To me, this proves the diversification benefits of owning multiple properties (in much the same way diversification is important for portfolio investing), as cash flow did not dip into negative territory despite the rather unexpected setback.
  • Maybe the biggest news for Q3 is the addition of another property!  This is number 9 of the portfolio, which I picked up in a neighborhood on the outskirts of Detroit through a company called Morris Invest.  I will be sure to keep you in the loop on how this property and company work out.  Right now it is too new to properly evaluate.  Stay tuned.
  • I had 2 vacancies take place during the quarter (Properties 2 and 5).  I was aware of Property 2, but Property 5 took me by surprise.  In addition, this tenant left more wear and tear than normal.  Property 2 was leased quickly as there was time to prep for the departure, but Property 5 is still in process.  Here's hoping for a quick turnaround.
  • A tree removal on Property 3 ended up costing roughly $2k during the quarter.  If not for this, the property would be near the top of the 2017 performers.  The tenants are solid here, so I expect a good bounce back as we roll into 2018.

Overall, Q3 proved to be a bit lackluster, as I was hoping to have surpassed a 10% 2017 cash on cash return by this point in time.  However, I do take some solace in something not noted within these calculations:  property appreciation.  Property values in the Cleveland area have risen roughly 15% over the past year, which has helped the majority of my portfolio.  Although my focus is on cash flow for financial freedom, this is definitely a nice little side win!

Please check back after the end of the year for another update.