My Year 2016 in Review

[Harry Zhou]

My Year 2015 in review HERE

Background: busy software engineer in SF bay area. 

Strategy 2016: Cautiously buy out of state properties, accumulate cashflow for my balance sheet (to qualify bigger loans).

Started 2016:

• 6 (all out of state) rental properties.
• Holding cash/stocks for out of state investments.

Today:

• Raised rent on 3 properties.
• Added 3 more rental properties, all in Indiana
  • Purchased 2 properties from whole sellers and remotely rehabbed.
  • Used a new loan to purchase one higher priced and newer property (remotely rehab). After rehab it was October, I experienced the longest 3-month vacancy in my investment.
• The Athens GA property continued to be troublesome. We had a 2.5-month vacancy. Refer to my last year's review for the seller.
• Connected with some experienced sf bay area investors who own properties with 6000/mo rent income. They really changed my perspective about cashflow. What if I only own 3 or 4 of these kind of properties free and clear? Isn't that a better way of retirement than owning 50 properties out-of-state?
• One of the tenants sneaked a big dog into one property and made a lot of damages. My PM did a great job handling the eviction and repairs.
• Holding 9 properties at the end of the year.

2017 Goal:
Apparently I didn't finish my 2016 goal of purchasing 4+ more SFH. Only did 3, but I am OK with that. Since deals are harder to find, I've started looking into commercial properties.

Another goal of 2016 was to close a 3plex at the start of the year. At the end I backed out of that opportunity because of continuous delay in rehab. And I believe another BPer picked it up. I am happy with that decision looking back now.

• Slow down and accumulate cash reserve. Stick with my numbers for new purchase, especially for cash flows. Getting ready for a downturn or at least a slow down in 2018. Indy market has become very expensive compared to 2015 when I started investing there. The local bay area market is still red hot and even more unaffordable.
• Diversify investments in bay area and out-of-state. 
• Explore further areas from bay area (e.g., Sacramento) for cash flow opportunities. 

[Account Closed]

Harry,

Sounds like some wise investors, and I'm glad they changed your perspective about cashflow. As Bob Bowling used to say "faux cashflow." My partner has a rental in Palo Alto that rents for $9,800/month. You get a totally different set of tenants in the high end market. No need to worry about them damaging your property. 

I agree with owning better asset class. Less doors with higher rent and better quality tenant. I had over 30 doors here in the Bay Area, and I've been slowly selling some off in 2015 and 2016. Will sell a couple more in 2017. Slowly getting out of Class C and keeping Class B properties. Raise liquidity and get ready for the next opportunity. 

Doing value-add deals locally allows you to reuse your capital. If you use your money to buy OOS properties, how do you plan on jumping on local deals when the opportunity presents itself? Would you rather buy a property with $100k build-in equity or a property that produces $500/month of cash-flow? 

My goal is to take it easy in 2017. Sell off some assets and pay-off our home. 

Good luck in 2017.