After Six Months….

After owning real estate for about 6 months now, I’ve come to learn a few things and I wanted to share some thoughts with you:

Turtle speed.
With two rental properties, my monthly cash flow has been around $365 each month. That’s a 9% return on my investment which is a pretty good return. While a good return, this low amount of cash flow is teaching me that I need to continue spending time researching markets/properties and continue purchasing and investing in real estate. It also teaches me that staying in the single-family market is probably not a good idea. I need to grow and get into small multi-family units and also into larger apartment buildings. That’s probably the best way to “speed” things up and get larger amounts of monthly cash flow.

More isn’t better, it’s a must.
Owning two properties is great, but it’s not enough. There are a few reasons for that:

1. The returns from two properties don’t meet my goals. My goal is to be able to retire early thanks to passive income from real estate. The cash flow from two properties (even after the mortgages are paid) is not enough to achieve that goal.
2. While my properties are doing well so far (I haven’t had any problems with tenants or maintenance), in the future I will have expenses (maintenance, vacancy, etc.). If one of my two houses is vacant I’ll be at 50% vacancy which is very high and it will take a big bite out of my earnings. On the other hand, if I have ten units and two of them are vacant, my vacancy drops to 20% and the income from the other eight units will cover for the low performing units.

Staying focused.
I learned that staying focused on real estate investing isn’t easy! With a full-time job it’s not easy getting home after a long day and researching markets, networking, dealing with banks, title companies, etc. Furthermore, this isn’t something that can be done quickly. I don’t have the capital to buy 20 properties at this time; that will take several years, if not a decade. Because of this, I need to make sure I’m in the real estate game every day for the years to come. So, how can I stay focused? Well, there are a few things that help:

1. Love it. I like real estate, which helps. More than that, I love the idea of early retirement. I love talking about it. I love sharing with others that there are possibilities beyond the 9-5 if they start thinking out-0f-the-box.
2. Thinking about my “why.” I have a goal which is why I got into real estate. Whenever I feel like I don’t have energy, I just think about my “why,” or open this post (definitely helps to write it down!).

Looking at the future.
Last year I had a return of over 14% on my investment. Looking to the future, I can see that if both of my tenants leave at the end of their lease (August and December 2015), my returns are going to take a big hit since I’ll need to pay for getting the house ready for a new tenant and also for finding a new tenant. On the other hand, if I have 50 units and a handful of them leave each year, the hit on my total return will not hurt as much. This is, of course, the recurring theme: growth is the only way to achieve my goals!