I used to think that they were trying to make me mad…
Now when I look back, I realize that they were just trying to help me.
I used to have conversations with people who were investing in real estate. These people were business owners and more experienced at investing in real estate than I was at the time.
I would ask them which cities they were purchasing properties in. They would tell me right away. It almost felt like they were showing off. It felt like they knew something that the rest of the world did not know. Now when I look back, I think they did know more than the average Joe.
After they told me where they were investing, I now felt that it was my turn. On almost every occasion, as soon I would tell them where I was investing, I would get the same reaction…
It felt like they were disappointed!
The first few times I was confused by their feelings of disappointment, but as time went on my feeling changed.
I would no longer be confused, rather, I would get mad.
As soon as I told these experienced investors where I was investing, they would all pretty much tell me the same thing.
And this was….“Focus on location.”
None of these people ever directly came out and said, “Your City is not a good one, buy properties elsewhere”. Rather, I would be told that, “The City probably won’t appreciate at the same levels when compared to other cities.
The cities that they were comparing things to were of course, the cities they they were investing in.
To date, I have invested in 3 different Cities. 2 of these Cities have been outstanding. The appreciation of the properties has been very good and the tenant profile has been reliable and low maintenance.
One of the cities however, has posed many challenges. In this city, I have dealt with numerous repairs and maintenance of properties, little to no appreciation over the past 3 years, dealt with one eviction and have had challenges finding quality tenants for a vacant property.
It took me about 3 years to realize that what some of these critical real estate investors were saying to me was true. What they were saying was the city that I was investing in was… ‘No Good’.
So now, I have started the process of selling the properties that I have in this city. I have one listed for sale, and based on the success or failure of the sale, will probably look at selling another 2 properties that I own in this city.
An experienced investor once told me that you have to sell your ‘dog properties’. What he meant by this was the following:
If a property is not performing to your standards, you have to sell it and reinvest your money somewhere else.
For instance, if the property is not producing your desired cash flow, coupled with the fact that the property is not appreciating at a good level, you must consider selling it.
It never helps when you are incurring high repairs and maintenance costs on the property along with dealing with non paying tenants.
I used to think that during these tough times one should hang on and not give up.
What I have learned is that you get to a breaking point. If you have properties that are not performing, some event in your life triggers you to take action.
Once you are triggered to take action, you can finally get rid of some properties that have not been performing to your standard.
At the end of the day, if you can maintain properties in your portfolio that are low maintenance, produce cash flow and have good appreciation, this is the best situation that you can have.
In summary, we all get to a point in time where we realize that we have to get rid of under performing properties. If we hold on to these and never get rid of them, they will burn you out, and the probability would remain high that you would throw in the towel altogether as a real estate investor.
Be smart, and get rid of your garbage properties.
Until next time…
Neil.
