Does size really matter?
Posted on November 16, 2007 - Filed Under Personal |
"This feels small" I said to myself, sitting on the front porch.
The first renovation, I remember well. It was larger than life. Scared out of my mind. A large chunk of real estate balanced on my shoulders. Would I succeed? Would I be able to pull this off? Many nights I remember waking up thinking "What in the world have I done!?!"
It was fun. It was huge.
The second renovation is nearing completion. It was fun, interesting, learned a lot.
But even with two properties, this somehow feels small to me. The thrill of being scared, of being a failure, was gone.
Friend: Hey Cliff, what did you do today?
Clifford: Oh, you know. I tied my shoes, rehabbed a house, paid the electric bill . . . you know, the usual stuff.
A thought ran through my head, "Am I only to rehab duplexes for the next five or ten years?"
The next day, the Real Estate Agent stopped by to view the progress. A conversation was launched as far as possibilities for the next step.
Two ideas:
- Rent both units, go homeless again, find another house to rehab.
- Sell the units, walk away with nearly 30% ROI
I told the Real Estate Agent I wanted big project. Something that would scare the H-E Double Hockey Sticks out of me. Armed with a good contractor, one can do almost anything. So what is bigger than just rehabbing houses?
Small apartment complexes? Like 8 or 16 unit places?
This may require some thought.
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Green Light on January 14th, 2008
Behind the wheel of my car, I starred at the green arrow lighting up the black sky.
With a bang on August 21st, 2006
Cookie Monster was standing in my house, looking at my pictures in my living room.
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5 Responses to “Does size really matter?”
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If you rent out both units will you be break even cashflow?
Sticking to a formula that you’re comfortable with isn’t bad either. If you can rehab and rent out one or two duplexes in Cali a year, you’ll be sitting pretty in 5 years. (as long as they cashflow or at least breakeven)
Kenric, the cost overrun puts this question in jeopardy. Before we were certain it would at least break even. Now, not so much. We’re looking into doing a refi, seeing if the costs can be reduced a few hundred dollars per month. Then there might be a chance. But I do understand what you’re saying. In five years, things will look dramatically different than today.
Ha! A real estate adrenaline junkie… I can *so* relate
If I could make a 30 percent ROI or accept break-even cash flow in a declining market, I wouldn’t even consider keeping the property. I would finish the punch list ASAP and sign that listing agreement.
This is not the time to buy and hold. You can rehab five properties in the five years it will take the market to drop and recover. Buy to hold when you can get a decent return from the cash flow from day one.
What does your mentor suggest?
Connie, Thrill-seeking by investing in real estate? Interesting concept!
AI, my mentor actually spoke about taking the 30% ROI and running. According to him, and he’s right, people get greedy and try to hold out for more only to loose it. The opportunity, however, hasn’t come up yet for me to go over the numbers with him. But very very soon.