2014: My Year in review

2014 has been a pretty incredible year for me in terms of Real Estate.  I couldn't have accomplished any of this without the help from BiggerPockets.  It has been an absolute godsend: forum posts, blogs, podcasts, and new colleagues to name a few.

I set a goal to acquire 2-5 properties in 2014.  After I hit two, both of them 4-plexes in St. Louis, I had depleted my "investment" funds and did not want to tap into my "reserve" fund.  I believe having a fund to capture capital expenses, unexpected maintenance items, and vacancies is absolutely essential.  Though sometimes I feel the extra cash is burning a whole in my pockets by not working for me, it does allow me to sleep easier at night.  I feel as if a lot of investors only consider maintenance items on a year by year basis and don't take into account for the law of averages.  That's what makes the 50% rule so awesome.  On average, your expenses will generally be 50% of your gross income over time.  You need to keep your reserves in good years where expenses are lower than 50% to help in the bad years when expenses run over 50%.  It comes down to Murphy's Law: Anything that can go wrong, will go wrong.  When that happens, I plan to be ready.

So, with that rant out of the way, lets look at the numbers for 2014.

Total Properties: 5

Properties acquired: 2 4-plexes

Purchase Price: $125k

Down Payments: $39k

Actual Repair Costs: Expended $18.5k

Expected Additional Repair Costs: $20k

After Repair Value (ARV): $200 - 220k

Purchased: 18 - 25% below ARV (goal is 70%)

Gross Potential Income: $40.8k

Cash Flow: $1100/mo

CoCR: 17%

Actual Total Income: $28.8k

Vacancies: 1 property vacant for 4 months; cost: $2.5k

Cash Flow: exceedingly negative :/.  The addition of the two new properties should bring my total cash flow into the green by a large margin when they have been stabilized.  This will be the first time in the seven years that I've been in real estate.  Thanks again BP!

Equity: ~$150k

The good: met my goal of acquiring at least 2 properties this year for 8 units.  This took me from 3 to 11 units or an approximate increase by 4!  If I keep this rate up, things will be looking great in 10 years.  My projected annual income when all properties are stable/rented is right at $84.5k.

The bad: My property in Ohio, which operates at a negative cash flow, had a lease expire in September.  It has been vacant ever since even though it shows great.  I think the biggest problem is my property manager advertises via the newspaper.  Old school is not necessarily good.  Since I am deployed, I haven't been able to use postlets.com which requires a phone call verification :/  I will start an aggressive craigslist campaign now that I have pictures from the PM.

Lesson Learned for the year: Have all your leases renew in the spring/summer to avoid lengthy vacancy periods.

Lets make 2015 even better!