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My Real Estate Investment Performance (Q1 2018)

In an effort to keep tabs of performance, I've been tracking my rental property cash flows since I started acquiring properties in early 2016.  Here is where things stand through the first quarter of 2018.  Feel free to jump in and take a look at the numbers.

Real Estate Performance.png

As a refresher, here are the assumptions being used in 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 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 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) = 9.5%
2017 Best Performer = 24.2%
2017 Worst Performer = -8.7%

2018 Cash on Cash Return (Combined) = 0.4%
2018 Best Performer = 11.4%
2018 Worst Performer = -24.9%


OBSERVATIONS:

  • Total cash flow through the 1st quarter of the year has been lackluster, coming in at $990.  This is disappointing but I am confident the numbers will significantly improve as the year goes forward.
  • Property 1 had a sewage line burst in February which resulted in a pricey mess.  The total repair tab was $7,650, which results in it being ranked as the worst performer so far this year.  Thankfully, I keep a healthy cash reserve on hand for events such as this (and you should too) so my team was able to handle in short order.  Obviously I am not happy this occurred, but this is a solid property with stable tenants so it poses me no ongoing concerns.
  • Property 5 has been vacant for the first quarter of the year, also contributing to the performance drag.  A new tenant has moved in as of April 1, so it's performance should rebound for the remainder of the year.
  • Contributing to the upside, Property 7 was the beneficiary of back rent received.  This was owed by a tenant who vacated the property prior to their lease expiration in 2017.  This was a nice win.  I'm hoping the same will be accomplished for expenses owed by the former tenant at Property 5.
  • The perpetual problem tenant at Property 9 is finally going to be off of the premises this month.  My property manager is currently screening new tenants, so we hope to finally see some consistency from the home going forward.  Once stabilized, I am strongly considering selling the property in favor of a better market.
 Property 2 has proven to be a solid contributor, and a mainstay in the portfolio going forward

Property 2 has proven to be a solid contributor, and a mainstay in the portfolio going forward

Being almost 3 years into this real estate investing journey, it's now getting to the point where I can truly evaluate how my portfolio is performing.  At the end of 2018, I plan to take an analytical view of each property in an effort to trim fat (sell) where needed.  With potential proceeds in hand, I can start adding pieces back into the portfolio in areas where I am more confident performance will be steady over the long-term.

Like any adventure you take in life, you have to learn and improve as you go.  This one has been no different for me.  I've learned that markets, demographics and price points really do matter.  Solid, quality properties in stable areas attract solid, stable tenants.  It's not simply all about the numbers.  Although returns can look good on paper (especially in that sub $50k market), the aesthetics of a property and fundamentals of a neighborhood are just as important to long-term investing success.

The 1st quarter breakdown can be found by clicking the box below.  Note that the tracking spreadsheet has received a much-needed facelift!  Feel free to download this same template to help track your own real estate investments.

Please check back after the end of the second quarter for another update!