Is there such a thing as growing too fast?

Question

My husband and I have aquired 7 doors in 15 months. I'm under contract again.  We stack all the cash flow and reinvest... Is this how it goes? We initially thought 1-2 doors a year..but it's been possible to do more, so we're going for it. Are we moving to fast?

Michael S. · Answer

Only if you are overleveraged or do not have adequate cash reserves for your growing number of properties.

Here's a scenario - you have 2 properties that are vacant for 2 months;  during that 2 months, you have to replace 2 HVAC units unexpectedly.  Can you handle these financial hits ok and move forward?  If the answer is yes, then I think your pace of acquisition is fine.  If this scenario would have you maxing out your credit cards or scrambling for cash, you need to slow down and build your reserves/financial fallback position further.

Before you think this scenario is not realistic, it happened to us in 2020 - we had 2 vacancies for 2 months for different reasons, and 2 HVACs completely went out and were not salvageable on other properties during that time period.  These were all SFHs for reference.  We were fine, because we had adequate reserves available during this period.

Steve Vaughan · Answer

Not if you're buying below market value in good areas with reasonable levels of long-term debt and they cash-flow.

Congrats! Share some numbers!