Since we’re getting ready to start making goals for 2022, now is a good time for an update on where I am with the goals I wrote for the 2021 Guide to Colorado Real Estate Investing Strategies. It’s fun to think about all of the things it would be cool to do in a year, and then look back at the end of it and see where I landed.
While I had specific goals laid out for this year, I also got some curveballs that caused me to alter my plans slightly.
- Listen to the podcast “#52: 2021 Goals Status Check with Jenny” on the Colorado Springs Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
Dealing with the Curveballs First
Earlier this year, Chris and I did an episode titled Deal Analysis: Return on Equity on a 3 bed 1 bath Single Family Rental in Colorado Springs using our Return on Equity calculator to analyze one of my properties. We looked at my options for keeping it as is, refinancing, or selling. At the time, I said I would keep it as is unless there was tenant turnover. As luck would have it, that tenant did end up moving; fortunately, I had a roadmap of what to do perfectly laid out.
I decided that doing a rehab and refinancing would make the most sense financially. During the rehab, I fantasized about selling the property multiple times, since it was in worse condition than I remembered and needed a lot of work. Luckily, my husband talked some sense into me and we saw the project through. The home needed an updated bathroom and kitchen, new floor and paint, plumbing, and a complete yard overhaul. I made sure not to over-improve the property by looking at the house in the context of the neighborhood. Since I’m not going to single-handedly change the neighborhood, I followed the market trends. My contractors did an amazing job, and the house is now in great shape.
In all, I spent $32K on everything. I didn’t create a budget beforehand because the renovations had to get done regardless of cost. I’d been hoping to spend $20K, but that wasn’t even close. My assumption was that the house would appraise at $280K once it was fixed up, but to my surprise the appraisal came in at $295K. I was able to get a 3.625% interest rate with a cash out refinance, which is a really good rate for an investment property. I was extra excited about this because it was the first loan I got by myself after quitting my W2 job and not relying on my husband’s W2 to get approved. Self-employed people will understand how great it feels to be respected by a lender.
I expected to list this house for $1450 a month, but I was able to rent it out at $1625. I was hesitant to try for that rate at first, but the market showed that that was reasonable for a 3 bed 1 bath 1 car garage single family home. The demand for the property was so high I had to turn off the ad after a couple of days and got it rented within a week.
Now, I have a $100 better spread than I started with, and I walked away with $82K in cash, net of closing costs from the refi. After taking out closing costs and paying myself back for renovations, I netted $50K and am getting much more in rent.
I didn’t expect to do anything with this property this year, but life happens and I needed to deal with it. This became an opportunity to come away with a nest egg I can use to reinvest. Real estate varies from other investments because you have the opportunity to add value to your investment yourself. By fixing up this property and doing the refi, I came away with more than I started with, which helped me with some of my other goals.
Goal 1: I do not want to own an empire
This is still accurate. I closed on property number nine in January, a townhouse I’m very pleased with. I planned on paying off one home this year, but I ended up paying off two and doing a cash out refi on another one. Even though mathematically it would have made more sense to use that money to buy something more valuable, my goal is to own a handful of well performing properties.
I’m starting to feel that I’m at the point where I’m very happy with what we have. Since we generally keep tenanted properties at the same rates, it was nice to be able to get substantial bumps with tenant turnover this summer. We’ve gotten into a good groove, but I would like to get to ten properties because that feels like a nice number for me. My plan is to go with what I know and look for a single-family rental. The only difference between that and my previous properties will be looking for something turnkey.
Goal 2: Make sure I don’t overextend myself
This goal applies to both my time and energy as well as finances. I was tested when I bought a dog of a property earlier this year that was filled with flooding and sewer issues. After spending a small car’s worth of money to fix the sewer—twice—my husband I decided to sell it. When I think about all of my other properties, I feel happy, but when I thought about that one, it felt like a dark cloud. Even though it doesn’t quantify on the spreadsheet, it felt heavy and became a mental burden. We realized the stress of worrying about it wasn’t worth it, so we sold it and were able to make a small profit off of it. The mantra in real estate is to hold onto the property for the long term, but sometimes you need to find the balance between the spreadsheet and your feelings.
When people hear that I paid off two properties, they may wonder why I did a cash out refi on another, but this was the right choice given the circumstances. Looking at the overall equity position of my portfolio, the low interest rate environment, and the “high” (low 4s) interest rate on the refi property, I decided not to overleverage my portfolio. Instead, I cherry picked and moved in a good direction debt-wise.
Time is where I’m a little guilty of overextending myself. This summer I renovated two properties, and between managing the rehab and doing some of the demo myself, I probably spent too much time on them. This was another case where real life got in the way of my plans—for one of my renovations, I had to either rip up the carpet myself or call everyone to reschedule the work, creating a ripple effect I didn’t want. I may have personally spent too much time on these projects, but that saved future headaches.
Goal 3: Ensure adequate cash reserves for all aspects of life
My husband and I used to have more involved conversations about our expenses, but now we talk more about big picture projects. Because of where we are in our investing career, those day-to-day expenses don’t have as big an impact as they did in the beginning. As we focus on wealth creation, high level plans like renovations are what make the major difference.
Goal 4: Leave my W2 job to become a full-time real estate agent
Looking back on it now, this was both the best and the scariest move I could make. Between buying a new house and leaving my career of ten years, I was nervous about this move. But real estate is what I’m passionate about, and even though last year was a little slow going, that’s to be expected when you start in a new field and are self-employed. I didn’t expect to make an income last year, and anything I did make was the cherry on top.
Leah has been an amazing addition to the team, and we were able to hit the ground running in January. I’m excited about what we’re building in the Springs, and appreciate everything Chris has created that allowed me to have this opportunity. Even though it wasn’t in the book for 2021, we’ve started expanding down to Pueblo. For next year, I’m looking forward to taking off the training wheels and moving into that area at full force.
Create your own goals
We publish this book every year and have an open invitation for anyone who invests here or lives here to contribute. To write your own chapter, reach out to us and we’ll send you the very basic writing guidelines. The due date is sometime in January.
If you are a “brand new investor” who thinks they don’t have anything to contribute, you’re wrong. This is a great opportunity to write down your goals and hold yourself accountable. We’re all at different points in our investing journey, so don’t be shy about your perceived value add—write your chapter and achieve your goals!
For information on how to get started investing in Colorado Springs, check out our free 2021 Colorado Springs Real Estate Investing Guide.
You can also check out our real estate investing toolkit which has free investment property spreadsheets you can download to analyze rental properties.