2 years in, Growing Pains! What's the Strategy?

Question

My Fiancé and I will be wrapping up our 2nd year of investing part time in the next couple of months. And it seems to be getting less clear on where to head. Maybe you guys can help!

In the past two years we have completed over a dozen flips, We are holding 20 rental units self managed and 2 self managed Air BnBs. Yes we tried everything, and Yes I know now that wasn't the best play haha. We are both 28 years old with zero experience prior to getting involved, she works for the business now and I work Blue Collar in the trades. But as of the last 6 or so months I seem to be losing direction. Where to go from here, how do we truly grow. We haven't found that one thing that has really worked great to catch a ride on the momentum. Flips have done good not great, Air Bnbs are going good not great, and rentals all were brrrr'd perfectly but like most cash flow just enough to pay the bills and cover expenses. I feel a loss of direction and that makes it really hard for me to focus and build.

Do we keep at building a portfolio of small multi family (very abundant in my market, very rare to find anything above a triplex for sale), with plans of selling the portfolio and 1031'ing into larger properties? Do we focus on flipping, (currently we have actually been trying to do this, but we physically can't find enough contractors in our smaller market <100K population to do that much work). Do we branch out of our area and try to do bigger deals now? These are just ideas I have been asking myself.

I think if I could just pinpoint a direction I am confident in, it would make things so much easier to focus and really strive toward. When looking at deals, learning, getting better and thinking smarter as an investor. Right now it feels like we are aimlessly investing, and it makes it hard to see the end goal and even harder to see how to get there.

I know there's a lot of details missing to actually give an accurate answer. But would love to hear some of your Advice and / or Experience anyone has had as they've gone down this investing journey! Thank You!

Jonathan Greene · Answer

First of all, great job. You guys have taken massive action in two years and you should be proud of that. A lot of people get here and are looking to get bigger, but I think your pause is because you accumulated too much, too soon. It's a good pause.

This is what I would do if I were you:

1. Rank every property you own from best to worst in cash flow

2. Rank every property you own from best to worst in how much you like it

3. Rank every property you own from worst to best in expected capital expenditures

4. Add those numbers together for each property

5. Keep the top half to start

6. Examine the bottom half from every angle - how much you can make, what else you can get for your money (don't worry about how much you make on these, they are time suck and the lower half of your portfolio)

That's a good place to start. You probably have good relationships locally so I would first think maybe upgrading to more units (if you like landlording and management) by selling the duds and then consider what you want to get into. You got the experience, now you can choose something.

Alecia Loveless · Answer

@Luke Tetreault I like Jonathan Greenes advice to rank your properties and then figure out what makes the most sense.

That being said real estate investing is typically a long game and with just 2 years under your belt you’ve just started.

Most of my units only cash flow a little bit but because I bought smart and have renovated wisely there’s not much maintenance and very little time-suck for me.

I won’t try to tell you what to do other than if there’s certain properties that just consume way more energy you might consider 1031ing them into slightly larger properties where you could get better economies of scale for your time and expenses.

The one thing I will say is that in reading a lot and watching a lot of podcasts the one thing a lot of the more prominent investors who have 500 plus units say is that the one thing they regret is the deals they flipped early for cheap profit or the deals that they sold and did not keep. I have heard this 7-10 times and Brandon Turner has said he regrets not keeping more of his early deals. And he’s involved in over 13,000 units now.

Caleb Brown · Answer

Well done! 2 years you guys have done a lot of damage. Keep in mind the start is slow, you won't see these great strides at the beginning. It takes time for things to grow and develop.

I like Jonathan's idea of trimming down properties. If you grew fast and there are ones you want to sell, get rid of them. You guys know how to make money and find deals so there will be more to come. Once you trim it down to the better properties you can be pickier on deals in the future. I would decide on what strategy you like more. Do you want to build a business around flips, BRRRs, STR's? Once you figure out what strategy work backwards. Have a $$ goal in mind, work backwards on what's needed to get there. If you need to expand into another area make those relationships. If you need to pay for marketing to find off market deals yourself do that. You guys are smart but you feel like you accomplished what you had in mind and now need a goal/plan for what's next.

Dan M. · Answer

@Luke Tetreault I think it comes down to what are your goals? Do you want to earn x thousand a month? Do you want to have airbnbs all over the country and travel between each of them and living an adventurous life? Do you want to self manage? Where do you see yourself in 10 years? How much risk do you (not) want to take?

Once you clarify where you are and where you wan to be the answer should be self evident to you. The quick short answer in my opinion is this: If you want growth stick to the small multis that you know and once the mortgages are paid off retire fully. Your young, you have time on your side. Don't over leverage and carry reserves. Survive for a decade and watch your net worth grow tremendously. Best of luck.

Timothy Franklin · Answer

@Luke Tetreault I am new myself and working currently to get to that point, but what I intend to do at your point is to JV on deals or offer PML for high turnover deals (EMD/ Double close). I've been studying for a while and see investing as a cycle, times of high activity (chasing the deal) and times of latency (allowing the deal to mature). By lending money on quick turnover deals and running JV's I should be able to fill some of the latency period with needle moving activity. Just my opinion but I think 2 years is too soon to consider exiting deals (minimal appreciation and less than optimal use of depreciation).

You've proven that you can manage the dealflow you are handling so it makes sense to me that you leverage those skills to help others with their deal flow. You might know someone in your network that is starting out, or who is exiting a latency period that could use your skills. That could be what you need.

Luke Tetreault · Answer

Thank You, Alecia. I agree with this as well. It's definitely not my end goal to keep flipping the way I am now. I already have some regret with a couple I have sold!

Luke Tetreault · Answer

Thank You Jonathan, and Thank You for the advice! I think you are right in this.

2 years in, Growing Pains! What's the Strategy?

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