Originally posted by nationwidepi:
Originally posted by Taz:
The thing is, somehow, some way you must be accounting for what you are going to have to spend in the future if your intent is to hold for the long term. If you have enough properties, your pooling of these reserves performs much like an insurance pool. Something may happen and you may have to replace something earlier than anticipated but over the long haul, by setting aside the amounts you project, you build up enough reserves to keep your business running smoothly when major repairs/replacements are needed.
I hate to beat on this dead horse, but that is why the business model is so important.
This is true Taz. An expense is an expense, capital or operating, but that does not mean that it MUST come from the cash flow in all business models. Regardless, while I think business models are important, for the sake of this thread, they are irrelevant. We were only looking to compile the data I mentioned previously and business models or $100 per door cash flow does not matter FOR THIS EXPERIMENT ONLY. (Not yelling at you Taz, just preventing a few words in my post from being minipulated)
Every expense either comes from the cash flow while you are holding the property or from the cash flow when you sell. No matter how you look at it, an investment is just a series of cash flows into and out of your pocket. Come on, nationwidepi, this is basic financial stuff every investor should know.
From your post here, I get the impression you offset some of these expenses with profits when you sell. Which a discussion of your business model would confirm or deny. But, for discussion purposes here, I am going to presume that is what you do.
Okay, fine. That is just another way of accounting for the same items I do. Which means it comes down to semantics and a shell game with expense buckets.
For example, suppose we each buy the exact same identical in every way investment property. We both pay $100k, we hold it for 24 months, do $15K in repairs/rehabs/whatever just before we sell and sell for $150K. Over those 24 months we collect 48K in rent. I set aside the $15K from rents while I am collecting them and you don't.
At the end, we net the same amount of money over the life of the investment, its just you "get" $15K more in rent than me, but $15K less from the sale proceeds than I do. It ends up a wash and our expense ratios are the same.
If you reduce any real estate investment to a series of cash flows in and out, it is very easy to do an apples to apples comparison. It is also very easy to pick out the great investments from the so-so ones and the ones that will drive you into bankruptcy.
BTW, it appears you are asking for a census of properties with line item expenses for each, I have no intention of doing that and would discourage anyone from posting that type of data in a place like this.
