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My Real Estate Investment Performance (Q4 2017)

*** Updated 1/18/18 ***

In an effort to keep tabs of performance, I've been tracking my rental property cash flows since I started making purchases in early 2016.  Here is where things stand through the end of 2017.  Feel free to take a peek at the numbers.

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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 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) = 9.5%
2017 Best Performer = 24.2%
2017 Worst Performer = -8.7%


OBSERVATIONS:

  • Total cash flow for the 4th quarter of 2017 came in an abysmal -$255, which places this as the worst quarter of cash flow performance so far (bummer).
  • Total cash flow for the year came in at $23,242, which equates to a 9.5% cash on cash return from my original investment(s).  Decent, but not great.
  • The primary reason for the dip in performance during the quarter is due to a tenant moving out of Property 5, only to leave the place a mess and in need of multiple repairs (beyond normal wear and tear).  Although the tenant was billed (and is still in process of collections), I needed to front a hefty repair tab of $3,612 to get the property back in good shape for leasing.
  • Also contributing to lackluster performance is the fact that the inherited tenant in my latest acquisition (Property 9) has turned out to be a problem by perpetually missing rent payments.  Although the property manager has worked hard to try and rectify the situation, it looks as though an eviction is imminent (and necessary).  We waited until after the holidays, but my patience has reached it's limit.  After this tenant is out, we are going to ensure a better screen is put in place to help prevent this situation from occurring again.
  • Admittedly, I had some concerns about buying in the sub-$50k space (Property 9).  Although cash flow numbers can look appetizing, this is also a market where tenant quality can really decline (which has proven true).  I am hopeful this situation turns around quickly from here, but if not, I am fully prepared to cut my losses and move on.
 This inherited tenant (at Property 9) apparently doesn't think they need to pay rent

This inherited tenant (at Property 9) apparently doesn't think they need to pay rent

Overall, 2017 proved to not be as lucrative as I had hoped.  A 10%+ cash on cash return is my target, so the 9.5% result is a bit of a disappointment.  And although these property values appreciated (not measured in these calculations) by roughly 10% throughout the year, cash flow will always be my primary objective.  The best I can do is learn from 2017 and make enhancements to better the odds of cash flow success in 2018.  For me, this will include a more scrutinized approach with my property managers to help ensure quality tenants are placed.  Vacancy and neglect have proven to be the biggest opponents.

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