Profitability Reality

[Aaron Vergason]

I have been in a bit of a funk over recently. I currently buy and hold.  I have 23 doors all of which cash flow on paper, but don't in reality. I have a budget spreadsheet that I update each year based on previous year averages, and every year different issues pop up that cause me to spend my profits making the expenses instead.

The first year I was the landlord at 22 and people didn't take me seriously, so I got taken advantage of by listening to every non paying tenant issue (flat tires, grandmas sick, have to water the dog, etc. ) The second year I had a property manager who was both stealing from me and renting to drug dealers. That helped hurt my year end. The third year I hired another manager who had an actual PM company and he got zero out of 8 places rented in 6 months. The fourth year we got all our taxes current and paid off the operating credit card which helped us get through the tough times. Now this year we are steady, but still not hitting what I expect. 

Have any other BP buy and hold members felt this way, what did you do to get more profitable, how long did it take to get profitable? My rent roll is $180,000 at 100% occupied, but my average is 85% occ. for one reason or another.

[David Faulkner]

At least it sounds like all your stuff is local, so that is one thing you did right. I agree with others that it is time to roll your sleeves up and take control of your business. Fire your property manager if you haven't already and manage them yourself. There will be a learning curve there and you will make mistakes that will cost you some money, but should not be as much as your current manager is costing you. Then, once you've mastered that, and stabilized your portfolio to cash flow positive again, you can choose to outsource that function intelligently since you'll know what good management looks like, but the more likely outcome is that it will make more sense to continue doing it yourself. In this process you may also discover that some of your units are going to be money losers for you over the long haul ... I wouldn't necessarily jump straight to that conclusion, but keep your mind open to the possibility and once you reach that conclusion then the best course of action will be to sell it. If this happens, then at least you will learn what NOT to buy in the future.

One more bit of advise, and be warned this may sound harsh but I say it because I think it is what you need to hear: stop blindly believing and following everything you read or hear on BP (or anywhere else). There are a lot of people with alterior motives of stuff to sell you, many that have no idea what they are talking about though they love to pretend, and many that give advice that may be appropriate for them and their market but don't apply to you and yours (real estate investing is local and personalized). There is still value to reading and listing here, just do so with a healthy skepticism and rather than try to copy what they do try to understand the reasoning and governing dynamics behind it so that you can apply a similar thought process and come up with your own way that is custom built for you and your market.