Door count is the worst (commonly discussed) metric in the real estate investing community. Why does everyone use it? Can we all decide to collectively kill it? Or are there some of you out there that stand by door count being a useful barometer of success? Honestly, I'd love to hear the argument for why this metric is useful, cause I can't think of one -- so please reply back here.

Here's my argument. Door count is what many in the analytics world would call a 'vanity metric.' It's something that looks important and fancy, but doesn't actually tell you anything about business performance. Sound familiar? It's because door count is a useless metric, it exists to pump up the ego of the investor, and nothing more. Here's why:

1. Door count tells you exactly nothing about the quality of a portfolio. As an example, let's say Jane T. Investor has 12 doors, and she leads with that when networking. Well 12 doors sounds solid, but how are they performing? Are they cash flowing? Do they require enormous amounts of time and maintenance? Are the returns as good as what other investors in your market/asset class are generating? I know people with huge door counts who lose money every month. What good is a 'door' if it doesn't generate returns? Tell me how efficiently your deals generate returns, and then I'll be impressed.

2. Prioritizing door count makes you focus on the wrong thing. If I wanted to get 100 doors in the next few years, I bet I could -- but you can bet many of those deals would be thin. Shouldn't we be prioritizing quality over quantity? If I could choose between earning $5,000/month from 10 doors, or from 5 doors, I would pick 5 doors all day long! Good metrics push you towards good decision making, and door count does the opposite. For a lot of people getting lots of doors would be detrimental to their strategy!

3. Don't even get me started on passive investor door counts. They're absurd. I invest in multifamily syndications as well as residential properties. On the passive side of my portfolio, I am in syndications that collectively own over 2,000 units. Does that mean I own 2,000 units? Of course not, claiming so would be ridiculous (don't tell people on Instagram, though). If I own 1% of those syndications, does thatmean I own 20 units? I have no idea, nor do I care. Why on earth do I care what % of the doors I own? I care about actual measurements of returns like CoCR, AAROI, and IRR to determine if my portfolio is doing well.

There's my argument -- but I want to be proven wrong. Someone explain to me why this metric is useful.

Dave Meyer

Podcast Guest on Show #186