Moving the Portfolio Onward and Upward

[Travis Cooke]

Hi All!  I understand that every investor's journey is specific and unique based upon individual needs and objectives; with that being said - I also believe there are (as with most industries) best practices alongside ill-advised practices that are generally common to all.

Back in Feb., after a year+ of reading this and that, my wife and I jumped into the REI game. We both have a history of investing in the public markets (stock, bond, options, commodities) but were new to direct REI. We transferred some assets and dove in with the purchase of two duplexes in Dayton, OH. The transaction certainly had bumps (boy did we learn a lot - we are much stronger for the next go around), but in the end, we feel that we got a decent deal for a first time around transaction, i.e. decent neighborhood, purchased roughly 15% below as-is appraised values, existing PM and tenants in-place made it easier for us noobs. We have since re-roofed the properties and fixed a few other residual issues from before our ownership - thus far, nothing that wasn't known before the acquisition. We have also been able to increase revenue a bit via new tenancy and increased rents. While our objective with these first two properties is long-term cash flow and not short-term appreciation, it is still exciting to me to look back at the purchase appraisal and run the Income Approach formula with the new gross rents.

I suspect that many new REIs can get stuck at this point. There is very much a feeling of "Okay, so what next..." As of now, the duplexes 'feel stable(ish)'. We have a few bruises under our belts from the first go around but overall feel more experienced and prepared for the next one - woe unto the next REA, lender, and insurance agent we work with - I have a whole list of questions for transaction #2 ready to go. :) (Mostly Joking...). Over the past 6+ months of our REI activities we feel that we've learned a ton but realize there is still sooooo much more learning to come. At this point, in alignment with the vision of building our portfolio brick-by-brick and keeping our eyes on the future not the present , we believe that we are ready to move onto our next acquisition. We have no cash-flow needs from our investments (portfolio or real estate) to support our daily lives so that provides us with a lot of flexibility but we don't think that gives us a license to be reckless. Our hope is that our REI activities, alongside our other investment activities, will be available to provide consistent income 3,949 days from now. Until then, the intention is to manage it well and let it grow unmolested by our daily lives.

So onto my actual questions and thoughts. How did y'all REI veterans feel after 6 months of experience? In general, do y'all feel that the only way to learn more is to keep diving in or do you believe it is wise to take significant breathers in between purchases when starting out? Is the 'What next' feeling something that y'all have experienced and had to just push through or are we unique in this? I imagine some of y'all are running transactions concurrently and constantly at this point, but think back to those first few transactions when it was all still new and all of your REI wisdom was yet to come. For example, we have not yet gone through an eviction or experienced the consequences of an unscrupulous vendor (although admittedly our PM and contractor aren't my favorite vendors ever); would y'all typically advise that we wait around for some of these experiences to rack up first before swimming in deeper water?

Just looking for opinion and thoughts. I fully understand that our journey is our own and that every REI's experiences are going to be different based upon a million different factors.

As always, I thank y'all for any conveyed wisdom and I sincerely appreciate all of y'all for your participation in these forums - I have found them invaluable.

~ Travis