Don't Become a Property Hoarder or a Door Counter
Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votesDon't Become a Property Hoarder or a Door Counter
Most Popular Reply
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
1yYour goals change. In the beginning, it's all about buying more deals with not much capital and frankly, maybe that's not the worst thing, because you learn a lot. Probably even more from the bad deals..
Long term you are better off with better real estate. Financially, but also mentally. Fortunately, I was thinning my herd back in I think 2014 or so by getting rid of a few (experimental) investments in cheaper neighborhoods. They were not terrible, some people would call them C minus, and it wasn't even that much about financial considerations at the time (appreciation was not a thing back then in Milwaukee) but just not what I wanted to own or manage, so I sold them to them tenants - after quite a bit of financial coaching to get them to qualify for a loan.
My standard advice is always to buy the best quality property you can afford. Cheap properties in Milwaukee are fools gold (especially for OOS investors, people literally will scoff at a rough listing and then someone will say: eh, someone from CA will buy it..) The problem is these homes are 60-120 years old and because of the low value neighborhoods, nobody has ever made any capital improvements beyond duct tape. You can kick the can down the road only so long, at some point capex exceeds cash flow.
Also, stay away from weird properties. Don't buy a 2br/1ba without a basement and no garage on a corner lot next to the scrap yard, just because it's cheap and the seller is motivated. That will be you one day.
Your future self will thank you (in 10 years).
40 Replies
- Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes1y
Quote from @Chris Seveney:
Quote from @Jonathan Greene:
I have been seeing this a lot lately: people who hold on to underperforming properties because they add to their door count or to their self-worth as real estate investors. If you don't like buying hoarders' houses, don't be a property hoarder. A property hoarder keeps properties just to keep them. See the old mom-and-pop investors in their sixties that you are trying to buy off-market properties from.
This is like people who buy for cash flow but don't realize that with the best cash flow comes capital expenditures and tenant issues. You can't have your cake and eat it too. Appreciation is great, but not when all of that appreciation is eaten by the repairs you aren't doing. It's ok to sell properties. It's ok to sell properties at a loss (you get the downpayment back to repurpose into something better).
If you have four or more properties, this is what I would do (I just posted part of this as an answer to someone and thought it would make a good post):
1. Rank them from best to worst in cash flow
2. Rank them from best to worst in how much you like them
*3. Rank them from best to worst in management cost
*4. Rank them from closest to farthest in proximity
5. Rank them from worst to best in capital expenditures expected
*optional, not always necessary
Add those numbers together for each property. The lowest number is your best property, and the highest number is your worst property. Sell your worst property first. Then, take that money and repurpose it into something better.
Door culture is crazy. If you own ten doors and six aren't cash-flowing, why do you want to hold on to them if there isn't overwhelming appreciation coming? Don't be a property hoarder.
Are you guys doing this or seeing this? Who wants to sell their worst-performing property and turn it into a better asset?
Agree. The moment you get to a point where you are willing to let go of a property the better off you are. I have three right now that its time to get rid of as they do not fit our model nor do I want to take the time to continue to manage these (even with a PM). These are good cash flowing properties but for where I am at they are too much of a headache compared to the cost they bring in compared to my other assets.
All of us who buy off-market or have know we don't want to end up like the mom and pop landlords we buy from - tired, annoyed, giving up on the property and tenants. I think we also have to remember that we pass this to our kids and decide if our kids are going to want doors or quality assets that run themselves. No headaches. From all the heirs I have talked to after a death, eighty percent are more annoyed they have to deal with this than excited to be passed a piece of real estate.
- Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes1y
Quote from @JD Martin:
Everyone that has more than 1 or 2 properties should have some kind of basic spreadsheet that demonstrates how much that property is bringing in after all your fixed costs are accounted for, at a minimum - PITI, lawn care, HOA fees, etc. And if all houses have not been fully rehabbed (we do fulls on every buy), some expected number for capital expenses should be included in that (IE if you have 3 years left on your roof you need to be deducting $X from that figure, repeat ad nauseum for all major capex). My spreadsheet also includes FMV of every property so I can monitor appreciation, year over year comparison of tax & insurance increases, current rent & last increase & last amount, etc. I don't number my properties (I don't own anything anymore I don't want to keep) but I do keep tabs on my net profit independent of income taxes on each unit because if a unit starts to slip I need to know if it can be salvaged (have I been consistent with rent increases? Are costs increasing faster than profits?) or if it needs to hit the block.
So yeah, what you said more or less. I'm not a huge fan of constant buying and selling - it's just too much damned work at this point in life - but for sure I would jettison anything that wasn't making an acceptable profit, and if you have any RE you should know this number. Bragging about doors is just stroking the ego; I couldn't care less that a lot of people on here have more "doors" than me. I know that my *least profitable* "door" right now nets $518.51 every month (I just checked), and that's a number I'm satisfied with relative to the amount of work I'd have to do to improve it, and I'd hazard most people who are door collectors aren't making anywhere near that kind of money on probably their best units.
Everyone should shoot for their worst door over $500/month, that is awesome. You had some other great points in there too. I track the values of my properties every month just to see where they are trending. There is cash flow, appreciation, annoyance, management, and proximity to factor in over time, and as I said to Chris, the asset(s) that our kids can handle and the ones they can't. It's silly that there are still door collectors, but it's because they just want to hear yes.
- Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes1y
Quote from @John Morgan:
I've only been investing in RE for 10 years and have 29 SFR. But from my limited time in the game, I've found that my complete lemons are cash cows a few years later as market rent comes up well and my cap ex fixes a few years ago have paid off. These old houses built 70-90 years ago seem to never break once I work out all the kinks. So I'm glad I didn't sell my 5-10 worst homes that seemed to have issues the first few years. They're now my best ones. So from my experience, I'm planning on keeping all the houses that I've had a lot of cap ex on. And maybe look into selling the ones that almost never break, because I know they are due to start falling apart. lol. But owning 29 houses seems to be an easy number to self manage so I think I'll hold off on buying anymore and keep it simple with what I have.
This makes sense, too. The adage is buy real estate and wait, so if you wait long enough, it should work out. I think anything held over ten years for the most part, if bought even decently, should turn around, but too few investors are an top of their declining investments. 29 separate doors is a lot to manage. Seems like you have done a good job.
- Member since 2024 · 13 posts · 7 votes1y
Quote from @Jonathan Greene:
I have been seeing this a lot lately: people who hold on to underperforming properties because they add to their door count or to their self-worth as real estate investors. If you don't like buying hoarders' houses, don't be a property hoarder. A property hoarder keeps properties just to keep them. See the old mom-and-pop investors in their sixties that you are trying to buy off-market properties from.
This is like people who buy for cash flow but don't realize that with the best cash flow comes capital expenditures and tenant issues. You can't have your cake and eat it too. Appreciation is great, but not when all of that appreciation is eaten by the repairs you aren't doing. It's ok to sell properties. It's ok to sell properties at a loss (you get the downpayment back to repurpose into something better).
If you have four or more properties, this is what I would do (I just posted part of this as an answer to someone and thought it would make a good post):
1. Rank them from best to worst in cash flow
2. Rank them from best to worst in how much you like them
*3. Rank them from best to worst in management cost
*4. Rank them from closest to farthest in proximity
5. Rank them from worst to best in capital expenditures expected
*optional, not always necessary
Add those numbers together for each property. The lowest number is your best property, and the highest number is your worst property. Sell your worst property first. Then, take that money and repurpose it into something better.
Door culture is crazy. If you own ten doors and six aren't cash-flowing, why do you want to hold on to them if there isn't overwhelming appreciation coming? Don't be a property hoarder.
Are you guys doing this or seeing this? Who wants to sell their worst-performing property and turn it into a better asset?
Thanks for sharing your insight. I'm fairly new to this real estate biz. With the help of other experienced folks here I'm starting to have a better understanding that "the way to succeeding in this game doesn't necessarily mean you have to hold ALL the pieces" Knowing when to let go is part of it too.
- 1yStephen KeigheryBusiness MemberRental Property Investor · New Orleans, LA · Member since 2018 · 716 posts · 555 votes
Couldn't agree more. My goal used to be to get to 100 properties but I realized that was the wrong goal. I am now focused on ROI, Cash Flow and Equity.
Home Buyer Louisiana4.855 Reviews - Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes1y
Quote from @Stephen Keighery:
Couldn't agree more. My goal used to be to get to 100 properties but I realized that was the wrong goal. I am now focused on ROI, Cash Flow and Equity.
Imagine how annoying it would be to manage 100 single-family homes. Even if you didn't manage them, your management payments would be astronomical because it would be unlikely they are all in the same area.
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes1y
I just did this exercise - I liked ranking them so I could look at the big picture. I dislike the door count as a metric also. My RE journey over 2 years ago was to acquire lots of doors and I've completely changed my strategy. I actually sold a Class C a few months ago - I saw the writing on the wall after one Class C, very likely no capital gains after all my passive losses. No more inexpensive Class C properties OOS for me.
I had a couple of people suggest to me to sell my appreciating Bay Area SFH so I could acquire more "doors" and theoretically "cash flow" more with OOS properties. Going into the unknown and buying multiple SFHs/duplexes or an apartment complex OOS and my property taxes will skyrocket (property tax is reasonable thanks to Proposition 13 in CA). Raising the rent and value add on my higher quality properties will get me more net rental income than continuing to buy.
Happy New Year!
- Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes1y
Quote from @Becca F.:
I just did this exercise - I liked ranking them so I could look at the big picture. I dislike the door count as a metric also. My RE journey over 2 years ago was to acquire lots of doors and I've completely changed my strategy. I actually sold a Class C a few months ago - I saw the writing on the wall after one Class C, very likely no capital gains after all my passive losses. No more inexpensive Class C properties OOS for me.
I had a couple of people suggest to me to sell my appreciating Bay Area SFH so I could acquire more "doors" and theoretically "cash flow" more with OOS properties. Going into the unknown and buying multiple SFHs/duplexes or an apartment complex OOS and my property taxes will skyrocket (property tax is reasonable thanks to Proposition 13 in CA). Raising the rent and value add on my higher quality properties will get me more net rental income than continuing to buy.
Happy New Year!
Love to see this. We need to keep on people that door culture is a killer long-term. More doors, more headaches, especially when you are in the mode of just getting more and not more good doors. Happy new year!
- Member since 2024 · 98 posts · 23 votes1yDoes size of mortgage paydown become a factor here? Like I can do a BRRR on 600k property with no cash-flow or a 150k property with $300 monthly cash-flow, but do not have the same investment vehicle, and it is the same cash that is doing both, as for the 600k purchase I'd be using the same 100k towards hard money loan.
Quote from @James Hamling:
@Jonathan Greene to piggy-back on what your laying down here:
I believe a core component of the "problem" is a gross over & mis use of "Cash-flow".
If everyone would simply eradicate that from there vocabulary and replace it with "Realized PERFORMANCE". Than maybe with adjusting the vocabulary to REALIZED performance and UNREALIZED performance, we can start correcting understandings.
There is realized gains & profits, and UN-realized gains and profits. As well as UN-realized expenses. And YES, far FAR too often I am seeing people stack up UN-realized expenses at a compounding rate, to give selves a false sense of "profit" on whatever monthly/quarterly capital there moving around.
Remove "Cash-flow" from the vocabulary.
Use Realized and Unrealized PERFORMANCE in place of such.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Isadore Nelson:
Does size of mortgage paydown become a factor here? Like I can do a BRRR on 600k property with no cash-flow or a 150k property with $300 monthly cash-flow, but do not have the same investment vehicle, and it is the same cash that is doing both, as for the 600k purchase I'd be using the same 100k towards hard money loan.Quote from @James Hamling:
@Jonathan Greene to piggy-back on what your laying down here:
I believe a core component of the "problem" is a gross over & mis use of "Cash-flow".
If everyone would simply eradicate that from there vocabulary and replace it with "Realized PERFORMANCE". Than maybe with adjusting the vocabulary to REALIZED performance and UNREALIZED performance, we can start correcting understandings.
There is realized gains & profits, and UN-realized gains and profits. As well as UN-realized expenses. And YES, far FAR too often I am seeing people stack up UN-realized expenses at a compounding rate, to give selves a false sense of "profit" on whatever monthly/quarterly capital there moving around.
Remove "Cash-flow" from the vocabulary.
Use Realized and Unrealized PERFORMANCE in place of such.
Look, I am rather regimented when it comes to hard money; that a HML should ONLY ever be used for short term transactional purposes.
That means knowing NOT hoping for the exit from HML.
Strategies that use hope, is how people get burned, bad.
I see it somewhat regular of people who got into a "deal" with HML, to do a Brrr and now it's half done reno and there desperately trying to sell it as-is to bail them out.
And then I look like the bad guy bringing $0.65 to the dollar for an out for them, because there too blinded to realize the other options are more like $0.45 on the dollar.
It happens, a fair bit. And most don't survive it.
My opinion is follow DSCR standards. Because you gotta have multiple exit strategies.
If a "deal" only has 1 profitable exit strategy, it isn't a "deal", it's a bull-trap.
- Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes1y
Quote from @James Hamling:
Quote from @Isadore Nelson:
Does size of mortgage paydown become a factor here? Like I can do a BRRR on 600k property with no cash-flow or a 150k property with $300 monthly cash-flow, but do not have the same investment vehicle, and it is the same cash that is doing both, as for the 600k purchase I'd be using the same 100k towards hard money loan.Quote from @James Hamling:
@Jonathan Greene to piggy-back on what your laying down here:
I believe a core component of the "problem" is a gross over & mis use of "Cash-flow".
If everyone would simply eradicate that from there vocabulary and replace it with "Realized PERFORMANCE". Than maybe with adjusting the vocabulary to REALIZED performance and UNREALIZED performance, we can start correcting understandings.
There is realized gains & profits, and UN-realized gains and profits. As well as UN-realized expenses. And YES, far FAR too often I am seeing people stack up UN-realized expenses at a compounding rate, to give selves a false sense of "profit" on whatever monthly/quarterly capital there moving around.
Remove "Cash-flow" from the vocabulary.
Use Realized and Unrealized PERFORMANCE in place of such.
Look, I am rather regimented when it comes to hard money; that a HML should ONLY ever be used for short term transactional purposes.
That means knowing NOT hoping for the exit from HML.
Strategies that use hope, is how people get burned, bad.
I see it somewhat regular of people who got into a "deal" with HML, to do a Brrr and now it's half done reno and there desperately trying to sell it as-is to bail them out.
And then I look like the bad guy bringing $0.65 to the dollar for an out for them, because there too blinded to realize the other options are more like $0.45 on the dollar.
It happens, a fair bit. And most don't survive it.
My opinion is follow DSCR standards. Because you gotta have multiple exit strategies.
If a "deal" only has 1 profitable exit strategy, it isn't a "deal", it's a bull-trap.
This is a great response. Hard money is for quick flips, the quicker the flipper. You are betting too much on the refinance portion if you try to BRRRR with hard money. What if rates go up or your appraisal value goes down because you do a trash reno? The same could happen on a flip, but you have to sell the flip at some price.
- Rental Property Investor · NJ · Member since 2020 · 56 posts · 53 votes1y
This is a great post. Curious though @Jonathan Greene , at what point in your property ownership cycle should one of your assets qualify to be evaluated/ranked like this? Point being that property you acquire 1-2 years ago is likely to be subject to deferred maintenance and capex, so their "long term" performance in rankings 1), 3) might skew poorly in year 1-2 but may pickup after you've found and fixed all the hidden issues.
I know if i did this exercise across my portfolio, the recently acquired ones wouldn't be fairly "stacked" because of all the year 1-2 cost build up from what the seller deferred, but have good chances at being future performers in years 3-5.
Maybe that's why you have 2) and 5) but curious your general thoughts here are for evaluating this. - Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes1y
Quote from @Lloyd Preece:
This is a great post. Curious though @Jonathan Greene , at what point in your property ownership cycle should one of your assets qualify to be evaluated/ranked like this? Point being that property you acquire 1-2 years ago is likely to be subject to deferred maintenance and capex, so their "long term" performance in rankings 1), 3) might skew poorly in year 1-2 but may pickup after you've found and fixed all the hidden issues.
I know if i did this exercise across my portfolio, the recently acquired ones wouldn't be fairly "stacked" because of all the year 1-2 cost build up from what the seller deferred, but have good chances at being future performers in years 3-5.
Maybe that's why you have 2) and 5) but curious your general thoughts here are for evaluating this.Yeah, the cap ex is only one of five factors. When you take all five together they should paint a picture, but I also mentioned your gut is important (not your emotions). I think they should all be constantly on a sheet moving around. Like when a tenant is a disaster, you are going to move that one down in some spots.
- 1yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesTremendous response.
Quote from @James Hamling:
Quote from @Isadore Nelson:
Does size of mortgage paydown become a factor here? Like I can do a BRRR on 600k property with no cash-flow or a 150k property with $300 monthly cash-flow, but do not have the same investment vehicle, and it is the same cash that is doing both, as for the 600k purchase I'd be using the same 100k towards hard money loan.Quote from @James Hamling:
@Jonathan Greene to piggy-back on what your laying down here:
I believe a core component of the "problem" is a gross over & mis use of "Cash-flow".
If everyone would simply eradicate that from there vocabulary and replace it with "Realized PERFORMANCE". Than maybe with adjusting the vocabulary to REALIZED performance and UNREALIZED performance, we can start correcting understandings.
There is realized gains & profits, and UN-realized gains and profits. As well as UN-realized expenses. And YES, far FAR too often I am seeing people stack up UN-realized expenses at a compounding rate, to give selves a false sense of "profit" on whatever monthly/quarterly capital there moving around.
Remove "Cash-flow" from the vocabulary.
Use Realized and Unrealized PERFORMANCE in place of such.
Look, I am rather regimented when it comes to hard money; that a HML should ONLY ever be used for short term transactional purposes.
That means knowing NOT hoping for the exit from HML.
Strategies that use hope, is how people get burned, bad.
I see it somewhat regular of people who got into a "deal" with HML, to do a Brrr and now it's half done reno and there desperately trying to sell it as-is to bail them out.
And then I look like the bad guy bringing $0.65 to the dollar for an out for them, because there too blinded to realize the other options are more like $0.45 on the dollar.
It happens, a fair bit. And most don't survive it.
My opinion is follow DSCR standards. Because you gotta have multiple exit strategies.
If a "deal" only has 1 profitable exit strategy, it isn't a "deal", it's a bull-trap.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Stephen Keighery:
Couldn't agree more. My goal used to be to get to 100 properties but I realized that was the wrong goal. I am now focused on ROI, Cash Flow and Equity.
I at one time thought 500 SFRs would be great.. I got to 300 and realized this is way to much capital tied up for far to little return and work involved.. Better to have half a dozen high end paid for props that take very little work and not so much drama.. NO debt NO debt NO debt on rentals is the way to go as you mature in age as an investors.
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