Ntellivest

Financial guidance for financial independence

Content, resources and services to help people make smarter decisions with their money in route towards financial independence (FI). Intelligent portfolio and real estate investing. Simplified financial guidance and protections.

My Real Estate Investment Performance (2018)

I began acquiring physical real estate as an investment vehicle in early 2016. The focus has always been on properties that have the potential to generate positive cash flow. The goal is to create a reliable income stream that will improve my financial security and put boosters on my path to financial independence. Monitoring and measuring this journey allows me to know whether my efforts have been successful and worth continuing.

Curious to how things are going? Read on to see how my portfolio has measured up through the end of 2018.

Real Estate Performance.png

To start, here is an overview of how the performance numbers are being tallied:

  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 for the acquisition of each property. Appreciation, principal pay-down, and tax benefits are not a part of this 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 semi-annually (this used to be quarterly). Anything more is 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) = 9.5%
2017 Best Performer = 24.2%
2017 Worst Performer = -8.7%

2018 Cash on Cash Return (Combined) = 10.1%
2018 Best Performer = 33.8%
2018 Worst Performer = -11.3%


A detail of performance through the end of 2018 can be found by clicking the box below. Feel free to download this same Excel template to help track your own real estate investments.


OBSERVATIONS:

  • Total cash flow for the year came in at $24,512. This equates to an annual return of 10.1% based on the overall outlay of $243,474 to buy the 9 properties. My objective going into real estate investing was to achieve a 10% cash on cash return (or greater) so this is nearly right on the nose.

  • After 3 years in, the combined portfolio has generated nearly $75k in free cash flow which results in a cumulative return of 33.2%, or a little over 11% annually. That first year of lower property management fees provided a slight boost to the year 1 figures.

  • Properties 1 and 9 had a 2018 they are glad to put in the rear-view. Other than a major repair (sewage line issue) in the first quarter of the year, property 1 has been rock solid overall so this down year causes me no concern. Property 9 is another issue entirely as it has been a problem child since acquisition. Though the home now has a stable tenant with a 2-year lease in place, I believe the location/neighborhood will prove to be a perpetual headwind. I simply didn’t do enough research on the surrounding area before going in (lesson learned!). Once spring arrives and a couple of last repairs are handled, I will be looking to sell this investment.

  • On the flip side of the above, properties 2, 7 and 8 had phenomenal years. Combined, they generated over $20k in cash flow which accounts for nearly 85% of the yearly total! This proves the power of diversification in allocating risk/returns across multiple properties. If I only held properties 1 and 9, I would likely be turned off to real estate investing at this point in time.

  • Although not measured by the cash flow performance of this report, it is worth noting that the combined property values have appreciated by around $90k and loan balances have also been paid down by just over $30k since acquisition. These figures have provided a boost to the net worth statement which is a nice side win.

Property 7 had a blowout year!

Property 7 had a blowout year!

As a whole, the combined real estate portfolio has been meeting my investment objectives but I also realize there is room for improvement. I continue to learn and sharpen my real estate savvy as I go, but it is not lost on me that this will be an ever evolving journey. Very much a positive is the fact that this is a journey I do enjoy. Therefore, I carry forward :)

Heading into 2019, I look to both trim from and add to the portfolio. One primary goal I have is to acquire my first multi-unit property. It should prove to be a fun and productive year so feel free to keep following along if you’re interested to see how things pan out!


Want to start your own path into real estate investing but don’t know where to begin? Feel free to book an appointment where we can review your financial picture and create a personalized road map to get you started!