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How to measure the success level of your real estate portfolio

System - Thursday, May 20, 2021

In some of our recent blog posts, we covered ways to help ensure that a real estate portfolio is growing. The proven strategies we discussed in depth are as follows:

  • Get in the game
  • The concept of leverage
  • Work smarter instead of harder
  • Find properties before they are listed on the local Multiple Listing Service (MLS)
  • The tried and true method of cold calling
  • Rental properties equal cash flow
  • Recognize and protect your most valuable asset
  • Know when to walk away and have the courage to do so

Please feel free to search out these previous blog posts to learn more about those methods, and please do not forget that Hampton property management companies can be a fantastic resource for you as a real estate investor. In this blog post, we are going to discuss some ways that you can measure how well the strategies and methodology you are applying to your portfolio are performing. With just a bit of basic analysis, you can determine where your portfolio stands today and, additionally, which of the above approaches might need more focus and attention in order to achieve success.

Calculate your net cash flow

Although this is a core accounting principle, the more your asset base grows, the more complex (and important) this calculation becomes. Net cash flow is derived by taking the total income and deducting out all of the expenses. Don’t forget to subtract items such as utility costs, HOA dues, property management fees and payroll (if you have staff). It is beneficial to figure out your net cash flow on both a per property basis and for your portfolio as a whole. Some costs incurred might apply to the entire portfolio but can be equally distributed among the different properties for the purpose of determining cash flows on each individual property. The goal is for all of your assets to be generating a positive cash flow. However, it is imperative not to forget that, in a lot of cases, even an asset that is cash flowing negatively can bring value. This is due to the benefit of things like appreciation and future improvements that can be made to the property. It is also essential to work up a detailed plan on how to deal with the properties that have a negative cash flow. The sooner you can turn them into profit-generating assets, the better off your portfolio will be. If there doesn’t seem to be a good strategy for moving forward, it might be time to think about finding the most profitable way to remove the negative cash flowing assets from your balance sheet.

Analyze your cash on cash return

Once you have figured out your net cash flow, you can use it to determine your return on investment. Simply divide the net cash flow by the initial investment. It is smart to calculate this for both your complete portfolio and also on a per property basis. This will show you how properties are performing over time. It can also be informative to compare and contrast your results with other properties nearby to see how your portfolio ranks. Doing this will provide additional insight on whether or not certain improvements would enhance how your portfolio is performing from a return standpoint. Lastly, knowing your cash on cash return can help identify any properties that consistently under perform. If you need to sell any of them due to their lack of return, this calculation can help you determine which properties should be moved first.

Appreciation analysis

The principal reason real estate is considered such a smart place to invest is that most real estate assets will appreciate over time. You should compare the appreciation of your assets with other properties in the local area. If your assets are appreciating at the same rate as other properties nearby, you are doing well. If you are exceeding the local average when it comes to increased value, then your portfolio is doing even better.

It is a great idea to surround yourself with like-minded and successful individuals. Association with these types of people will give you a far greater chance to achieve your goals. Relationships with real estate agents, lenders, appraisers, and Seacoast property management professionals are all potentially very lucrative. Please don’t hesitate to contact PMI Green Rock with any questions or for assistance with any Seacoast property management needs.


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