Door count is a terrible metric. Please stop using it.

[Dave Meyer]

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. 

[Joe S.]

Quote from @Tony Stephan:

In any business QUALITY beats QUANTITY every day...My wife and I own 220 units and our focus is the BEST assets, not the most!

You could not miss an opportunity I see. Lol.

[JD Martin]

Quote from @V.G Jason:

Quote from @Dave Meyer:

@V.G Jason not sure I understand your post. Yes, I work for BiggerPockets but I am an individual with my own opinions.  As a veteran of these forums, I assumed you know that BP employees are free to post their own thoughts, as I’ve done here. If you look at the history of my posts, blogs, and media content, you’d see I’ve never advocated for quantity over quality. 

 

You haven't advocated for quantity-- I get that, but you've advocated for things that are usually not quality per se. You're a cash flow investor, through and through. That's usually high cap rates and let's go find where those are today, and then ask yourself are those quality investments.

Not to say cash flow investing can't be a quality investment, but it's rarer and rarer. You're the one to preach Cheyenne WY, Rochester NY, you're not promoting the real quality areas.

There's a few of us on this board a year + that have preached quality. The shift is growing. BP loves to take material from their boards and act like it's theirs. 

To contribute to this thread though-- I whole heartedly agree. It's all about quality. The average BPer needs to scale up  to 6-8 houses then sell 1, refi 1 down to 4-6 houses over 7-15 years and be debt free. That is achievable for the average $80k BPer over that time period. Just no one has that patience. And the priority is 1-2 cities for those 3-4 houses each, and get high quality area. Not Detroit, Cleveland, or some of the cities you've suggested. 

 This is too simplistic. To suggest there aren't quality assets in those cities you mentioned I would virtually guarantee is faulty, as everywhere has something of value. It's also possible to have cash flow and quality properties; that is perhaps a little more difficult now, but not impossible. 

[Nate Marshall]

Quote from @Ed O.:

I don't like doors as a metric but appreciate it when a newb starts using the terms in excess as it tells me they've started in the last 2 years or have 1 or 2 "doors" without me having to ask. 

 I think I have 11 doors in my primary residence. I will start counting them. LOL 

[Marcus Auerbach]

Quality over quantity, absolutely! Door count does not say much about the financial performance of a portfolio. As a stand-alone metric, it is basically a measurement of how much management headaches you have.

However, I think for new investors, it is has importance at first. You go from 4 to 8 to 16 doors etc. and you develop systems based on door count. It is also a measure of experience when you speak with lenders and other investors. But you get to the point where you realize more doors means first of all more headaches.

As your portfolio grows you start seeing patterns and you ask yourself questions like: how do I grow my net worth, how do I acquire more cash flow and more (quality) debt, how do I grow my revenue without growing my expenses (my property management team).

Door count is a REI phenomenon. And yes, it is often a vanity metric.

Think about stocks. Nobody would ask you how many shares you have in your stock portfolio (especially if it's all penny stocks..) - the two obvious metrics are total portfolio value and annual ROI.

I have been investing in Milwaukee for 15 years now, a market known for cheap cash flow properties (and yes, they are fool's gold) and I basically buy the highest property quality that I can get to at least break even in year one.

[Jill F.]

@Dave Meyer You asked to be convinced, so here goes:

Discussing investments on a per unit(door) basis makes sense to me in many situations (particularly when you are talking about the business of managing properties).  What else could you use? number of tax parcels, number of physical buildings? Number of tenants?  I really don't think most people looking at door count are looking at it in isolation. Door count really isn't a (financial) metric, it's a way of categorizing your investment. Discussions about investing usually include a variety of metrics which might be viewed at the portfolio level and then further broken down by city, neighborhood level and per unit(door) level. We analyze our investment performance cocr, roi, roe, noi across our portfolio but also by neighborhood, property and unit--  all of these views are useful in different ways and all of these metrics require context. The fact that you might look at your investments on a per door basis certainly doesn't preclude you from looking at other views or using a variety of metrics and it doesn't imply that you are priortizing this particular view over all others. Of course I know that when I talk to a Cali investor that his/her 10 door portfolio may very well have a higher market value than my 60 unit Ohio portfolio. I also know that I'm likely to see more tenant issues with 60 doors than a 10 door Cali investor. I also know that a Cali investor may very well have a much more difficult time when they run into a bad tenant apple. Discussing a real estate investment on a per unit basis can be a useful way to look at important metrics but it needs context.

Did I convince you?

[Nicholas L.]

@Marcus Auerbach

exactly what I was going to say.  someone with 12 'doors' probably has more experience than someone with 2 doors.  probably!  

but as @Russell Brazil pointed out, having 10 doors free and clear in an A area is better than having 50 and overleveraged in a C- area.

@V.G Jason 100%.  you should give a name to what you just said - portfolio management?  portfolio refinement?  David Greene has talked about this a little bit when he says 'portfolio architecture' but he's talking about the composition of a portfolio so slightly different.  you're talking about advancing and building wealth.

@Dave Meyer good thread.  i've been dollar cost averaging into VNQ for a while.  how many doors do i count that at?  =)

[Theresa Harris]

There are problems with any metric, if you want info you have to ask questions to understand what the numbers really mean-Russell gave a great example.  What if a person used cash to buy a place or had a larger down payment or has owned the place for 20 years and the mortgage is paid off?  

At the end of the day, it doesn't really matter to anyone but the owner.  If they are happy and the numbers work for them, that is what it is important.

[Nicholas L.]

@Jill F.

along your line of thinking - talking about your door count is a way of alluding to the value of your assets.  at a meetup you might have a name tag and you wouldn't put your asset value or net worth on it - but to your point, if I know you have 10 'doors' in LA, or 60 in Akron, and you tell me your rough leverage, i can guess at your asset value.  interesting!

[Billy Daniel]

100% this!  I've always hated hearing people justify their experience with door count.  Owning 100 doors is great, but is your cash flow $5/door or $500?  Are your 100 doors falling apart or are you getting ridiculously good appreciation?  

[Sam Yin]

@Mike Dymski

I strongly agree with your statement.

There are those that are vain, and it doesn't matter what metric is used, they will make it a vanity point. There are those that are not vain, and the same applies. I feel it's inappropriate to get anymore specifics, because then THAT would be vain/smug.

Example, for those that really want to judge or compare or even just converse with others beyond door count to get an understanding of their portfolio... Is it better to say "I have 50 doors" or "I cash flow $50k every month"? Where do we draw the line? I NEVER bring it up, ever. But if asked, I just say I have a few properties. If pressed, I'll say somewhere between 50-100. Only when I'm with someone who I have vetted and we are diving into details for our mutual benefits do I begin to reveal other numbers. I'm not comfortable telling people it's 8 figures or what ever... Because that not proper.

Depending on the environment, I might just say "I have a few apartments that have big loans on it. I'm about 65% levered and my margins are around 30%." Those that understand it will understand will respond appropriately and those that don't will show right away.

[V.G Jason]

Quote from @JD Martin:

Quote from @V.G Jason:

Quote from @Dave Meyer:

@V.G Jason not sure I understand your post. Yes, I work for BiggerPockets but I am an individual with my own opinions.  As a veteran of these forums, I assumed you know that BP employees are free to post their own thoughts, as I’ve done here. If you look at the history of my posts, blogs, and media content, you’d see I’ve never advocated for quantity over quality. 

 

You haven't advocated for quantity-- I get that, but you've advocated for things that are usually not quality per se. You're a cash flow investor, through and through. That's usually high cap rates and let's go find where those are today, and then ask yourself are those quality investments.

Not to say cash flow investing can't be a quality investment, but it's rarer and rarer. You're the one to preach Cheyenne WY, Rochester NY, you're not promoting the real quality areas.

There's a few of us on this board a year + that have preached quality. The shift is growing. BP loves to take material from their boards and act like it's theirs. 

To contribute to this thread though-- I whole heartedly agree. It's all about quality. The average BPer needs to scale up  to 6-8 houses then sell 1, refi 1 down to 4-6 houses over 7-15 years and be debt free. That is achievable for the average $80k BPer over that time period. Just no one has that patience. And the priority is 1-2 cities for those 3-4 houses each, and get high quality area. Not Detroit, Cleveland, or some of the cities you've suggested. 

 This is too simplistic. To suggest there aren't quality assets in those cities you mentioned I would virtually guarantee is faulty, as everywhere has something of value. It's also possible to have cash flow and quality properties; that is perhaps a little more difficult now, but not impossible. 

 Of course it's simplistic, that doesn't mean it's wrong. It is true there are quality assets in those **** cities, there's also **** assets in quality cities. That's a simplistic statement, too. It's correct though. It's akin to me saying the higher the yield, the higher the risk for any note buyer-- it's simplistic. It's all correct though, I'm sure Norada folks wish folks said that earlier though. It's just coming with this message after seeing him video about CF, and only CF, is just amusing. 

Doesn't refute the fact he's a CF-only proponent, but now saying quality over quantity? Where you been? We've been saying that on here forever. Glad folks are realizing this though.

[V.G Jason]

Quote from @Jill F.:

@Dave Meyer You asked to be convinced, so here goes:

Discussing investments on a per unit(door) basis makes sense to me in many situations (particularly when you are talking about the business of managing properties).  What else could you use? number of tax parcels, number of physical buildings? Number of tenants?  I really don't think most people looking at door count are looking at it in isolation. Door count really isn't a (financial) metric, it's a way of categorizing your investment. Discussions about investing usually include a variety of metrics which might be viewed at the portfolio level and then further broken down by city, neighborhood level and per unit(door) level. We analyze our investment performance cocr, roi, roe, noi across our portfolio but also by neighborhood, property and unit--  all of these views are useful in different ways and all of these metrics require context. The fact that you might look at your investments on a per door basis certainly doesn't preclude you from looking at other views or using a variety of metrics and it doesn't imply that you are priortizing this particular view over all others. Of course I know that when I talk to a Cali investor that his/her 10 door portfolio may very well have a higher market value than my 60 unit Ohio portfolio. I also know that I'm likely to see more tenant issues with 60 doors than a 10 door Cali investor. I also know that a Cali investor may very well have a much more difficult time when they run into a bad tenant apple. Discussing a real estate investment on a per unit basis can be a useful way to look at important metrics but it needs context.

Did I convince you?

 If anything, it just convinced me that the per door metric is even worse. It literally will widen the quality:quantity ratio and given funds are always finite, the opportunity cost should always be factored with quality in mind. 

[V.G Jason]

Quote from @Tony Stephan:

Quote from @V.G Jason:

Quote from @Dave Meyer:

@V.G Jason not sure I understand your post. Yes, I work for BiggerPockets but I am an individual with my own opinions.  As a veteran of these forums, I assumed you know that BP employees are free to post their own thoughts, as I’ve done here. If you look at the history of my posts, blogs, and media content, you’d see I’ve never advocated for quantity over quality. 

 

You haven't advocated for quantity-- I get that, but you've advocated for things that are usually not quality per se. You're a cash flow investor, through and through. That's usually high cap rates and let's go find where those are today, and then ask yourself are those quality investments.

Not to say cash flow investing can't be a quality investment, but it's rarer and rarer. You're the one to preach Cheyenne WY, Rochester NY, you're not promoting the real quality areas.

There's a few of us on this board a year + that have preached quality. The shift is growing. BP loves to take material from their boards and act like it's theirs. 

To contribute to this thread though-- I whole heartedly agree. It's all about quality. The average BPer needs to scale up  to 6-8 houses then sell 1, refi 1 down to 4-6 houses over 7-15 years and be debt free. That is achievable for the average $80k BPer over that time period. Just no one has that patience. And the priority is 1-2 cities for those 3-4 houses each, and get high quality area. Not Detroit, Cleveland, or some of the cities you've suggested. 

 We own 220+ units in Metro-Detroit...Don't hate on it!

 Good for you. I'd take 50 quality SFRs over all that trash.

[JD Martin]

Quote from @V.G Jason:

Quote from @JD Martin:

Quote from @V.G Jason:

Quote from @Dave Meyer:

@V.G Jason not sure I understand your post. Yes, I work for BiggerPockets but I am an individual with my own opinions.  As a veteran of these forums, I assumed you know that BP employees are free to post their own thoughts, as I’ve done here. If you look at the history of my posts, blogs, and media content, you’d see I’ve never advocated for quantity over quality. 

 

You haven't advocated for quantity-- I get that, but you've advocated for things that are usually not quality per se. You're a cash flow investor, through and through. That's usually high cap rates and let's go find where those are today, and then ask yourself are those quality investments.

Not to say cash flow investing can't be a quality investment, but it's rarer and rarer. You're the one to preach Cheyenne WY, Rochester NY, you're not promoting the real quality areas.

There's a few of us on this board a year + that have preached quality. The shift is growing. BP loves to take material from their boards and act like it's theirs. 

To contribute to this thread though-- I whole heartedly agree. It's all about quality. The average BPer needs to scale up  to 6-8 houses then sell 1, refi 1 down to 4-6 houses over 7-15 years and be debt free. That is achievable for the average $80k BPer over that time period. Just no one has that patience. And the priority is 1-2 cities for those 3-4 houses each, and get high quality area. Not Detroit, Cleveland, or some of the cities you've suggested. 

 This is too simplistic. To suggest there aren't quality assets in those cities you mentioned I would virtually guarantee is faulty, as everywhere has something of value. It's also possible to have cash flow and quality properties; that is perhaps a little more difficult now, but not impossible. 

 Of course it's simplistic, that doesn't mean it's wrong. It is true there are quality assets in those **** cities, there's also **** assets in quality cities. That's a simplistic statement, too. It's correct though. It's akin to me saying the higher the yield, the higher the risk for any note buyer-- it's simplistic. It's all correct though, I'm sure Norada folks wish folks said that earlier though. It's just coming with this message after seeing him video about CF, and only CF, is just amusing. 

Doesn't refute the fact he's a CF-only proponent, but now saying quality over quantity? Where you been? We've been saying that on here forever. Glad folks are realizing this though.

 I must not be in tune to what you are talking about as far as Dave goes. 

[Sam Yin]

@Theresa Harris

You said it best. It doesn't matter. If the owner is good with it, stay with it. Don't let people undermine your efforts and your methodology. Be comfortable with you and be open to other strategies.

There are so many paths to REI and wealth, but there are also so many different individual circumstances that they cannot all fit into the same hole.

Great discussion. So many different ways and so many different settings for how a door count discussion and lead. It will depend on whose asking. But let's keep it a great discussion and not a personal insult to those that do not agree with a perspective. It's just a perspective.

[Dan H.]

Quote from @John Mason:

4 or 5 good quality 350 k SFH in a good prime location with thriving industry , booming population and good schools ..that would be quality door count

Very market specific. A quality SFH in my market is $1m+. There is no livable SFH on the MLS in my market at $350k. I have seen some small units at $500k, but they are rare in decent areas and non existent in the desirable areas.

So unit count in my market results in a very different valuation than Midwest markets.   

Best wishes

[John Mason]

@Dan H   True I meant Tampa Bay specifically

[Jill F.]

@V.G Jason

I do not look at Door count as a financial metric. You must st have misunderstood what I wrote. . Door count is a useful way to make quick comparisons between assets within a familiar market. Door count has no bearing on the cost, value, or cash flow of an asset.

[Carlos Ptriawan]

Quote from @Dave Meyer:

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. 

 Same like AUM too or when realtor says their firm managed 5 billion transaction lol

[Ross Paller]

Own (or Control) more stuff that puts money in your pocket today or in the future. Who cares what method you use to track it.

All of the KPIs are a vanity metric until you get so big that you actually need to analyze data. #blackrock

I suspect that doesn’t apply to any of us.

The metric is me vs yesterday me.

The variables are skills, confidence, and love of the game.

[Sam Yin]

Quote from @Ross Paller:

Own (or Control) more stuff that puts money in your pocket today or in the future. Who cares what method you use to track it.

All of the KPIs are a vanity metric until you get so big that you actually need to analyze data. #blackrock

I suspect that doesn’t apply to any of us.

The metric is me vs yesterday me.

The variables are skills, confidence, and love of the game.

 Best post on this thread!!! Hands down. You put into words what I could not.

DITTO!

[V.G Jason]

Quote from @Jill F.:

@V.G Jason

I do not look at Door count as a financial metric. You must st have misunderstood what I wrote. . Door count is a useful way to make quick comparisons between assets within a familiar market. Door count has no bearing on the cost, value, or cash flow of an asset.

Quick comparison between assets, but I can't use it as a financial metric. I am confused.

[John Morgan]

It’s a way for people to flex. And it’s annoying. Door counts mean nothing to me.

[Peter Tverdov]

Quote from @Russell Brazil:

Met a guy at BPCon one year who was bragging a bit about his door count.  He had about 100. He asked me how many doors I had. It was probably in the 15 range or something like that. He said, don't worry you'll get to where I am some day.

I asked him what his average value per door was and what that added up to in assets under management. It was $50k and $5,000,000. He asked me the same. Mine was $750k per door at about $11 million AUM.  His smugness disappeared really quickly.

 Basically this. I know people with hundreds of units but they're not the actual owner, they're a GP and when you break down the actual equity they have its similar to people with a dozen homes. Quality over quantity. 

[Dave Meyer]

@V.G Jason Your characterization of me is odd, in that it’s entirely wrong. Where are you getting this idea that I’m a pure cashflow investor from? Read my books, blog posts, watch my YouTube videos, listen to the hundreds of podcasts I host.  I consistently advocate for a balanced approach to investing, and that’s what I do myself.

I recently held an entire workshop on my concept of ‘total return investing.’ I put out this YouTube video recently that a good summary of my philosophy.  There’s a new downloadable calculator I made in the resource center that helps you evaluate the return generated by amortization, taxes, appreciation, and value add. I wrote a 400 page book proving a framework for matching investing styles to personal goals, rather than using a single metric for investing. Do I personally buy cashflow negative rentals? No. Do I post lists of markets where you can best find cashflow? Yes! Some people do prioritize cashflow and my job as the VP of Market Intelligence means I analyze all types of markets and characterize them. Doesn’t mean I invest in them myself or advocate that everyone invests in these markets. They’re meant to point people to markets that may align with their strategy. I also put out lists of markets that are the most affordable, and have the best market appreciation. Does that mean I am also an affordability investor through and through? 

The reality is I've always advocated for looking at returns holistically and NOT focusing on COCR. Im not sure how you could possibly characterize me as a ‘cashflow investor through and though' if you actually looked at the library of my content. May want to double check you're taking about the right guy here.