Seeking advice for improving returns on my portfolio of 8 units

[Matt Leber]

Hello BP. I have been thinking about how I can improve my rental property portfolio consisting of 8 unit streams. I have been tracking returns on my properties with a spreadsheet I created for myself, and I have identified that 4 of the 8 units I own have been consistently underperforming the rest of the portfolio for 3 years now. I am tracking my returns based on cash flow numbers only (for conservatism reasons - I look at appreciation as icing on the cake).

A little background:

The underperforming units are all part of a small multifamily compound in a lower income neighborhood that I purchased in 2018 that looked great “on paper” but after tracking their performance for a few years, experienced less than expected returns due to one issue or another that has cropped up (more capex up front, tenant that I couldn’t evict for 10 months through covid, multiple vacancies causing turnover costs). They are older units (1960) so I will likely see other capex items sooner rather than later if I kept them for 30+ years. They have very little appreciation potential, which I don’t mind if cash flowing well. These properties have strengths of being very low mortgage cost, room to grow rents over time (they are almost 2% rule), and in a affordable rental class that seems to have a major shortage in today’s world. They still make enough cash flow to allow me to hold them if I choose.

So my questions are for experienced investors who do this sort of purge analysis on their rentals, how long do you typically give underperforming properties a chance to meet potential? Is my 3 year “leash” too short sighted if I decided to cut bait and 1031 exchange into something else newer build in a better neighborhood?

I see both pros and cons to keeping the properties in my portfolio, and I always envisioned keeping everything for 30 plus years, but I am now wondering if I should tweak my expectations. Thanks for your opinions and advice!

[Joe Villeneuve]

The duplexes are failures on epic proportion,  Get rid of them ASAP...sooner if possible.  They have absolutely no value, except in the equity which is useless to you...unless you sell.  So SELLLLLLL!!!!!!  EVery month your duplexes gain equity, and lose cash from negative cash flow (yes, $100/month is negative cf...just waiting to happen), they are losing money for you....big time.

Repeat after me.  "Sell, Sell, Sell, Sell,Sell,Sell,....SELLLLLLLL!!!!!!!