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.]

I have read through the majority of the replies, mostly in detail. lol 
A lot of good responses even some of the responses that were different from one another had some legitimate perspective.

At the end of the day, a person has to do what works for them. Someone without a good paying source of income doesn’t have the resources to pump into a negative producing asset even if it is going up in value. While door count alone is not the answer and many times some investors are simply part of a team of investors where all the investors count ( the same) doors and claim them personally. Also, many times people overlook the fact the single-family residence is not the same as an apartment unit count…
Also, a couple of posters pointed out that they are capable of managing C&D properties. That would obviously make a difference.  

[James Hamling]

@Dave Meyer I am 100% with-ya on this, although I think we have to consider the underlying reason why so many go to this pointless useless metric of door count, and I believe it's peoples obsession with over simplification into a singularity. 

Take your pick; door count, 1% rule, COC, there is a laundry list of these I have seen over the decades that each held there time in the sun as "the" metric everyone yapped on, obsessed over and singularly utilized as if it actually meant something.

For some reason there is this obsession with finding "A" metric, a 1-thing to use, look at, talk about, and that will mean the everything. People are crazed addicts for a single metric weight. 

I think the only way to get people off door-count is via replacing it with another singularity metric to obsess over, in essence swapping out 1 addiction for another. 

I applaud your efforts, although I have a feeling it's akin to herding cat's.... 

[Mark Cruse]

Quote from @Sam Yin:

Quote from @Alan Asriants:

Quote from @Mark Cruse:

Quote from @Alan Asriants:

Quote from @Mark Cruse:

Quote from @Alan Asriants:

Quote from @Stuart Udis:

I am happy to see this subject is being discussed and particularly hope those just getting started take the time to read the different viewpoints. Unfortunately cash flow and unit count are the two metrics most are taught to chase which leads to buying in the lowest barrier markets lacking any fundamentals that are indicative of creating any true net worth or gains (with limited exceptions). From my observations its usually the individuals offering mentorship or coaching who teach this because its the easiest way to show success and justify their fees despite the students winding up with lousy assets. 

Many also promote their unit count to  raise capital from inexperienced real estate investors who don't know any better and equate unit count to success and track record. How many syndicators or GP's  "manage", "control" or "oversee" hundreds or thousands of units, but don't OWN their portfolios? I believe the worst representation I came across was an investor in my market, Philadelphia who purportedly owned hundreds of units but all I could find were a few small 3-6 unit multi-family buildings. It turned out he was also involved  in a storage unit building with small 3'x5' lockers renting for $100/m.... and those were included in his "unit" count. 

 Exactly. Having 20 units in a D class area where have of the properties are falling apart and the value of the combined portfolio is 1M is not as impressive as 4 units in a solid A class area that have plenty of potential of improving in value and provide solid and stable returns. 

 Not that literal but I get what you are saying over all. The class A will give you a lot less headaches and there are great opportunities and probability for appreciation. However, there are people who can operate in the class D arena so I wouldnt dismiss it. If I had the choice in the two id have to do a serious assessment of both. So much goes into it. I really didnt know you could get 20 units for a million anywhere but oh well. What if gentrification hits that 20 unit? What if I can add so much value I can pushed that cash flow to over $500 a door? The amount of leveraging can be astronomical where I can add higher classes to diversify the portfolio. If you know how to operate in the lower level, depending on the scenario you can come out ahead. I get it in theory though and most cannot effectively operate effectively on the other levels. 

What if you win the lottery? I don't invest in real estate based on what ifs. 

Class A is what it is for a reason just like Class D is. 

 It appears you didnt grasp my point. I dont invest in what ifs either unless I have evaluated the situation. Since I can operate in any class it would be intelligent for me to assess them both as opposed to declaring Id rather have 4 than 20. The 20 could be a much more profitable and professional acquisition. I provided scenarios where one would clearly out perform the other and if you are an experienced investor who knows how to buy and operate, you will be ahead. 

 I guess that is the main difference. I cannot operate in D class. It would be pretty black and white for me in terms of 4 units in Class A or 20 units in Class D.

Of course if we started to blur the lines and look at similar classes of RE, then it would need to be an analysis. I am always more keen on finding deals with some sort of value add, so likely this is all speculation. Its hard to make a clear point when you expand things further and add in other variables.  

My point was that you mentioned - what if gentrification hits the area. Again, this is like playing the lottery. A lot has to go right for gentrification of that scale to take place. I don't think its fair to bring up a what if, if you don't invest in what ifs.

Just like most things in life, if you know, you know... And it's hard to convince people otherwise.

@Alan Asriants I feel you have not/will not try lower quality and will focus on higher quality assets. That's cool and it is good strategy. Keeping your buy box black and white is commendable. But I feel you may have missed out on some positive qualities of lower class areas and higher door counts.

@Mark Cruse I totally understand your philosophy. I agree with your evaluation of quality, quantity, and potential of greater gains by leveraging management experience to maximize profit on greater door count. I am not only convinced, but I KNOW the outcome is astronomically greater if you can operate well.

I have operated in both A, B, C, and D areas. I can tell you that there is more value to C and D areas than you think. It is directly tied to cash flow, which is what the end goal for most of us. I would like to believe that I am not a collector of properties, so having a few trophy class A properties will not do it for me. Appreciation in class A is not going to put food on the table right away. The lower cost to entry in C and D areas can jump strat your journey with higher door count and better leverage. If management skills were equal, you would build value much quicker in a class C and D area because you are able to force appreciate more units for trade into more or better quality quicker.

For reference, without going into exact door count, I traded a few A and B assets for C and D assets to expand door count. It allowed enough cash flow to take on more risks and expand even further. I now have mostly B and C assets, with a light sprinkle of C- and may be a D, that I recently acquired in an area that will surely gentrify quickly. Its an additional influence that will more than likely multiply it's value, above and beyond what I can do with management experience. The move from A and B to C and D using leverage to expand door count allow for FI from a six figure job and six figure pension in just a couple of years. And as Mark stated, you can bring that higher door count in the lower class area from $100 to $500 a month cash flow with the right management systems. 

I'm a father of 3 young kids, and I did not make that decision lightly. But the stability from door count gave me the confidence to make that move. It's not as management intensive as many would make it out to be. It got me to the point where I could take risks in other people's start up ventures, think about a second home, dabble in outside of apartments and into strip malls, etc... It does require some management/operation skills to achieve that level of passivity. When I look back at the time freedom I have gained from leaving the workforce, I keep on kicking myself in the butt for not figuring it out a few decades earlier. Because had I focused solely on quality and closed my buy box in a black and white fashion, I would probably still be forced to keep working even after 10 years of investing. And forget about syndications... With the amount of income from working, I would still be working if I went in to syndications and those door counts are meaningless.

This is a healthy exercise. Discussing door count as a conversation piece has opened the door to much more nuances that is very educational. I hope that people who are following the thread get a good taste of operators from both sides.  Thanks @Dave Meyer for rehashing this conversation piece.

 Nailed it. 

Drops Mic

This says it all for me!!!!!

[Todd Dexheimer]

I agree with what you're saying, but as others have mentioned, it still matters. What I wish people would stop saying is, I own 1,000 doors, when they actually own 5% of 1,000. 

I met a group a few years back that owned 2,000 units. They brought a deal to Endurus to partner with them. After talking with them, I found out that they needed us for our experience, liquidity and net worth. When I asked how much liquidity and net worth they had, they said less than $100k liquid and less than $1mm net worth. How do you own 2,000 units and not have well over a $1mm net worth? The only answer is that you own a fraction of the units. 

[Stetson Oates]

Quote from @Todd Dexheimer:

I agree with what you're saying, but as others have mentioned, it still matters. What I wish people would stop saying is, I own 1,000 doors, when they actually own 5% of 1,000. 

I met a group a few years back that owned 2,000 units. They brought a deal to Endurus to partner with them. After talking with them, I found out that they needed us for our experience, liquidity and net worth. When I asked how much liquidity and net worth they had, they said less than $100k liquid and less than $1mm net worth. How do you own 2,000 units and not have well over a $1mm net worth? The only answer is that you own a fraction of the units. 

It’s the same thing as owning Apple stock and saying you “own Apple.”  At the very least, it’s misleading. 

[James Hamling]

Quote from @Todd Dexheimer:

I agree with what you're saying, but as others have mentioned, it still matters. What I wish people would stop saying is, I own 1,000 doors, when they actually own 5% of 1,000. 

I met a group a few years back that owned 2,000 units. They brought a deal to Endurus to partner with them. After talking with them, I found out that they needed us for our experience, liquidity and net worth. When I asked how much liquidity and net worth they had, they said less than $100k liquid and less than $1mm net worth. How do you own 2,000 units and not have well over a $1mm net worth? The only answer is that you own a fraction of the units. 

Wait.... So, I've been doing it wrong this whole time...... 

So I shouldn't say I'm an investor in Realty Income Corp., no, I should be saying I "own" approx. 15,450 commercial unit's on NNN lease and have a ~46 billion value as of now......

Well wha-da-ya-know, using that liar-logic "shazam" I'm a billionaire, lmao! 

[Adam Michael Andrews]

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. 

Can’t spend doors. That’s why I use financial metrics. As far as doors go, my sister has all you beat with her dollhouse collection.

[Rich Davis]

"Doors" is a function of class. Investing $1M in Boston vs. Toledo will result in a vastly different door count but may get the same IRR. Doors has no value.

Doors is however, a valid metric for a PM.

[Marcus Auerbach]

Quote from @Dave Meyer:

Quote from @V.G Jason:

Quote from @Steve K.:

 @V.G Jason I feel like we’re in the same team here! Not sure where the cashflow pusher narrative is coming from but I’m definitely aligned with your thinking. I’ve been trying to kill the 1% rule for years and absolutely do not believe cashflow is the be-all end-all of metrics. Check this out! If you’re pushing for quality too, I’m on the same page. 

Dave, I always felt that the original founder Josh Dorkin has pushed the cashflow narrative based on his own personal experience. I forgot the details, but I seem to recall he got burnt by an appreciation play. So he wanted people to not fall into the same trap, but BP nation took it and ran with it, which amplified the message. 

It did not help that we had a period (2010-2016 ish) that was just cash-flow and BRRRR heaven and a lot of young investors actually succeded building a cash flow portfolio out of nothing and then quit their W2, traveled the world and YouTube about it, which became an expectation for a lot of noobs until today. And then we got into STR..

I think the 1% thing is still viable to eyeball residential investments, even though I feel that 0.8% or so works better for me (as we buy typically above median price in Milwaukee). REI is primarily to grow equity, if someone is looking for mostly cash flow I would start or buy a business, much better geared for cash flow.

[Justin R.]

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. 

 Congratulations on 2,000 doors!

All joking aside I think door count is a fine metric. I view this metric inverse to most investors. To me its simply the numerator of an equation. If two people have the same NOI after debt service, but one has fewer doors, that model is most likely more efficient.

A few years ago I had several more "doors" than I do today, but my ROI has increased due to re-focus and efficiencies.

[Engelo Rumora]

Quote from @Todd Dexheimer:

I agree with what you're saying, but as others have mentioned, it still matters. What I wish people would stop saying is, I own 1,000 doors, when they actually own 5% of 1,000. 

I met a group a few years back that owned 2,000 units. They brought a deal to Endurus to partner with them. After talking with them, I found out that they needed us for our experience, liquidity and net worth. When I asked how much liquidity and net worth they had, they said less than $100k liquid and less than $1mm net worth. How do you own 2,000 units and not have well over a $1mm net worth? The only answer is that you own a fraction of the units. 

100% agreed.

It's like saying "I own Apple"

1 stock tho haha

[Engelo Rumora]

Quote from @Stetson Oates:

Quote from @Todd Dexheimer:

I agree with what you're saying, but as others have mentioned, it still matters. What I wish people would stop saying is, I own 1,000 doors, when they actually own 5% of 1,000. 

I met a group a few years back that owned 2,000 units. They brought a deal to Endurus to partner with them. After talking with them, I found out that they needed us for our experience, liquidity and net worth. When I asked how much liquidity and net worth they had, they said less than $100k liquid and less than $1mm net worth. How do you own 2,000 units and not have well over a $1mm net worth? The only answer is that you own a fraction of the units. 

It’s the same thing as owning Apple stock and saying you “own Apple.”  At the very least, it’s misleading. 

Just saw your comment after I posted the same thing haha

[Engelo Rumora]

Quote from @Rich Davis:

"Doors" is a function of class. Investing $1M in Boston vs. Toledo will result in a vastly different door count but may get the same IRR. Doors has no value.

Doors is however, a valid metric for a PM.

Yep, door count per unit in PM is vital.

Granted, if you manage 100 doors with only 2 owners.

It's almost worthless due to risk.

Much better managing 100 doors with 100 different owners for example.

[John McKee]

Door count is an important metric.  As a buyer or syndicator investor it's important to understand how much value you can squeeze out of each door.  If I can take over a property I need to do some quick math on how much I can make per each door even if it's simply raising the rent by $100 before any work needs to be done.  If I am a passive investor I still want to know this info as I would want to know that they have the experience of managing 1000 doors etc.  The most important reason is the scale, so yes maybe the syndicator present returns are lousy but the exit strategy can be a windfall due the size/scale of the project.  It HAS to be in the PM.