Door or NOI? How are you analyzing?

Question

Hi BP,

I see a lot of individuals lately just talking about "doors."  How many doors do you have ? It's almost as bad as the "how much do you bench bro," at the gym. . . . . .

Isn't the purpose of real estate investing to reach financial freedom, or at least another way of being secure ?  That being said, if so , why are people so fixated on the "doors" conversation?  Lets start looking at NOI!

NOI will be what allows you to retire early, go on that vacation, have extra $$$ to put in your favorite sons (everyone knows there is always a favorite) piggy bank.

Whether your goals is to pay off those properties completely or have debt, shouldn't long term it be based on NOI?

So lets hear it BP.... Doors or NOI? How are you investing?

Evan Polaski · Answer

@Cassidy Burns and to further the discussion, cash flow doesn't necessarily account for correct reserves or management and leasing commissions, if I self manage.  So while I may not have this expense, I have to work, thereby not creating financial freedom.

I think doors, like most metrics, is a quick assessment that gives a partial picture, but still a picture nonetheless.

To me, I would really like to hear, what returns are you achieving consistently.  $100,000 per year of free cashflow is great, unless had to invest $10,000,000 to get there.

At the end of the day, the door count, income you make, or % return you are achieving is all like the "how much do you bench" question.  It is to compare to others.  This is only natural, and there is valuable info that can be derived from their experiences, but in and of itself this info tends to do more harm than good, when simply benchmarking others.

Cassidy Burns · Answer

Hey @Paul Shannon , yes cash flow as well, if you have debt.  NOI if you have $0 in debt on the property is your cash flow

Paul Shannon · Answer

You're right, the number of "doors" doesn't matter.  NOI does matter, but if the purpose of real estate is to attain financial freedom as you state, the real metric is cash flow.  NOI doesn't take into account debt payments, tax write-offs, or cap ex.  Cash flow.

Aaron K. · Answer

You are right, but people are much more hesitant to list their income on a public forum than doors, I make an effort not to post either publicly.