Lower Your Risk – Buy More Properties!

Lower Your Risk – Buy More Properties!

2 min read
Ken Corsini

Ken Corsini is a seasoned real estate investor and business owner based in Woodstock, Georgia. Ken is best known for his role on HGTV’s hit show “Flip or Flop Atlanta,” and has flipped over 800 houses in Metro Atlanta since 2005.

With over 15 years of experience in the real estate industry, Ken has expanded his original flipping business into multiple independent real estate businesses, including Red Barn Real Estate, with over 180 agents in Metro Atlanta across four offices; Red Barn Construction, a custom home-building company specializing in modern farmhouses across North Atlanta; Red Barn Renovations, a full-service renovation company; Black Oak Mortgage, a direct lending company based in Woodstock, Georgia; and InvestorSumo, a technology company focusing on CRM and data needs for real estate investors.

Having been involved in thousands of transactions and having owned over 800 houses, multiple commercial and multifamily properties, and more, Ken brings a wealth of knowledge and experience to the BiggerPockets community. He has authored over 100 blogs and currently hosts the “Best Deal Ever Show” on the BiggerPockets YouTube channel. He is also the host of the popular Deal Farm Podcast.

Ken is currently writing a book in conjunction with BiggerPockets called “Profit Like the Pros,” scheduled for release in Fall 2020.

He and his wife also run Roc.Star Kids, a non-profit organization focused on the needs of children and families in the fight against childhood cancer. For more information on this very personal cause, check out their story here.

In addition to HGTV and HGTV Magazine, Ken has been featured on The Today Show, People Magazine, The LA Times, Think Realty Magazine (cover), TV Insider, In Touch Weekly, Life and Style Magazine, The Wrap, The Atlanta Journal Constitution, UGA Today, US Chamber of Commerce, PopSugar, Entertainment Magazine, and a number of local periodicals.

Ken has a Business Degree from the University of Georgia and a Masters Degree in Building Construction from Georgia Tech.

Ken is currently licensed as a general contractor (commercial) in the state of Georgia.

Instagram @kencorsini
Twitter @kencorsini

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Today I met with a friend of mine who shared his experiences over the last 4 years with his only rental property. He purchased a property with no money down (when that was still possible) with the intention of renting it and collecting positive cash flow over the next several years. Unfortunately, he’s had a string of bad luck with tenants as well as unforeseen repairs, vacancy and maintenance.  While any savvy investor knows to budget for these types of expenses, there are just going to be those properties where you can throw those numbers out the window.

While it would be nice to try to point fingers at certain people or circumstances, sometimes a property just doesn’t pan out anywhere near the way you had planned for it to. As was the case with my friend, he’s been through 4 different tenants in 4 years with a fair amount of vacancy in between. As experienced investors will tell you, the more times you have to turn a house for a new tenant, the more expenses you rack up as a result of the mess the previous tenant left behind. Add to this a busted main water line, a roof leak, HVAC maintenance, vandalism, etc. it all starts to chip away at any return you may have hoped for (as well as your resolve to stay invested).

Welcome to real estate investing.  No matter how many rosy books you read or seminars you attend, there are always going to be challenges in your investing career.  Don’t get me wrong, I’m definitely not attempting to talk anybody out of real estate investing …. But I do think it’s important to educate folks on the risks associated with owning rental properties.

Spreading the Risk

The problem many folks run into when it comes to buying investment property is that the projections they had planned for on paper may not flesh out when there is only one property in the portfolio. Most investors have an expense factor that considers certain variables such as vacancy, maintenance, turnover, etc. Though, if you’re only 2 years into a single property, the chances of those projections being anywhere near reality are probably fairly slim. Why? Because, you simply don’t have a large enough data set to accurately predict those types of variables.

However, an investor that has owned 10 properties over the last 8 years probably has a much better chance of predicting and achieving the variable costs across his or her portfolio. When you own multiple properties, it’s much easier to absorb problem houses across the entire portfolio as there are going to be offsetting properties in the portfolio that perform at a much higher level than the others. When you measure the entire portfolio over several years, you begin to average out the vacancy, maintenance, and turnover variables. As you add new houses to the portfolio, it becomes much easier to achieve the yields you had planned on because it’s a lot less likely that one or two underperforming properties are going to drag down the overall performance.

Regardless, I know the frustration of starting out your investing career with an underperforming property. It’s difficult to want to buy more after feeling the pain of unmet expectations or even lost money. However, at the end of the day, investors that are making smart buying decisions have a much better chance of being successful when taking an approach that involves spreading the risk across multiple properties.

I’d be interested in hearing from some of you on this topic. How many investors started out with a difficult property but eventually acquired more properties that enabled your overall portfolio to perform as projected?