As we settle into 2022, I want to share my goals with everyone. This year, my goals are all about growth and improvement—from growing my portfolio, to launching new companies, and even improving my fitness. Last year, we started putting the pieces together to expand on the things we were doing well, and this year we’re ready to take it to the next level.
Look for these goals and much more in The 2022 Guide to Colorado Real Estate Investing Strategies coming out in the near future.
- Listen to the podcast “#347: 2022 Goal Setting with Chris” on the Denver 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.
Reviewing Last Year’s Goals
Add Two More Properties to My Portfolio
Last year, my goal was to buy two rental properties, assuming they would both be residential properties. In July of 2021, I bought a three bedroom/one bathroom house with a two bedroom/one bathroom ADU. The numbers are solid, and I like that I was able to get a single-family home that cashflows. I put 15% down, since my focus right now is on high leverage. Although it costs more a month and has PMI, it still makes sense.
The table below compares down payments of 15% vs 20% vs 25%. The purchase price was $475,000. The cash flow and returns are based on full underwriting, including property management fee and monthly reserves.
|15% down||20% down||25% down|
|Total Cash Investment||$89,421||$110,440||$132,290|
|Cash flow (annual)||($89)||$3,382||$5,379|
|1st Year Total Return||39.3%||34.8%||30.4%|
On paper, I was fine losing $89/yr but keeping $40,000 more cash in the bank (compared to the 25% down), while earning a higher return on my money. In reality, the property at 15% down is performing better because rents came in higher than estimated. It’s positive cash flowing. Plus, the 5% appreciation rate assumption was very conservative compared to the reality of the market.
The second property I bought was more unexpected—an office building downtown. You may remember or attended the 2021 Guide to Colorado Real Estate Investing Strategies book launch party last year in Terrance’s office. This building is right next door. The reason I bought it is because Kaufman Hagan Commercial Real Estate was starting up, along with the new media company expansion, and we needed more office space.
This was a great opportunity since downtown offices are not trading hot right now, especially in downtown Denver. This was a chance to get a turnkey office that had previously been owned by an architectural firm that did a great job remodeling it. I bought it for $2.6M, and it appraised for $3.1M.
Cost Segregation Study for Significant Tax Savings
I did a cost segregation study for my four rental properties and found it’s a good way to front-load tax depreciation benefits. Instead of having to spread depreciation evenly over the next 27.5 years for most properties, it’s possible to take parts of the building and property and front-load them to get a huge tax write off on year one.
What Cost Segregation Looks Like
To put it in perspective: the house I bought with the ADU was $400K. It cost $2500 to do the study, but it front-loaded about $80-90K in benefits. Multiply that across the tax bracket and it can mean significant tax savings.
The table below gives a breakdown of how cost segregation front-loaded depreciation. Each study cost $2,500.
Table: Cost Segregation Property Breakdown
|House w/ ADU||Aurora Condo||Fourplex*|
|Land Improvements (15yr)||$42,327||$0 (I don’t own the land)||$59,669|
|Personal Property (5yr)||$47,251||$44,070||$110,667|
|TOTAL Segregated costs||$89,579||44,070||$170,166|
With the current tax rules, bonus depreciation is currently 100%, which means that the total segregated costs can be front-loaded and used in one year. The amounts are raw dollar depreciation and need to be multiplied by your tax bracket to estimate the savings. For example, $89,578 * 35% = $31,352 in potential tax savings. That’s huge!
*The fourplex was purchased in 2019 via a 1031 exchange. It’s important to note that I did the cost segregation two years after the property was purchased. Since it was a 1031 exchange, I had a lower basis.
Long-Term Affects of Cost Segregation
Front-loading the depreciation means that I’ll have less depreciation in future years. The table below compares future annual depreciation write off between doing a cost segregation study and not doing one. How much future tax benefit will I lose?
Table: Annual Depreciation Difference between 27.5 yr vs Cost Segregation
|House w/ ADU||Aurora Condo||Fourplex|
|Annual depreciation, w/o cost seg. study||$14,684||$7,527||$26,005|
|Annual depreciation, w/ cost seg. study||$11,423||$5,924||$19,812|
Do I care about the lower depreciation difference in year 5? Year 10? Year 24? No, I don’t. I’d rather have the depreciation today in a large chunk, rather than smaller amounts in future dollars. I want those dollars today to invest.
This is a powerful strategy that many investors use. However, I’m not a tax expert, so make sure you research the topic and talk with your CPA and other team members to figure out the details. At time of writing, I’m starting my taxes and having all sorts of interesting discussions with my CPA.
For more education, check out the Multifamily Mentor shows with Yonah Weiss of Madison Specs that has a lot more information on all of these details. I’m really impressed with the process and liked the numbers, so I plan on doing more while it still makes sense.
Limited Partner Investments
Last year, I did my first investment as a Limited Partner (LP). Basically, I wrote a check into someone else’s fund—in this case Terrance Doyle’s fund. Investing as an LP is a very common strategy but new to me. Rather than use non-retirement funds, I invested through my solo 401K. I’m not a fan of buying directly owned real estate through retirement accounts (the loan terms aren’t great!). Investing as an LP through a retirement account fits my strategy well.
Goals for 2022
Max out HSA: As I’ve said before, I’m a big fan of Health Savings Accounts (HSAs), and I’m going to invest in that for a variety of reasons.
Buy Two More Rentals: I also want to acquire two more rentals to add to my portfolio. When buying the next rental property, I’m adjusting my expectations for a lower cap rate and lower cash flow. With inflation picking up and prices and rents still surging, my plan is to ride the wave of growth.
After the success of my first office building, I want to buy one for Envision Advisors in the next year or two. My goal is to get another cool building like our Curtis St property.
LP Investing: Invest in another deal with my retirement account. I really enjoyed how passive it is and the fact that it’s an alternative investment to the stock market.
Because a lot of my resources are going into business expansion, achieving all those investment goals will be a stretch.
Moving on from investing to professional and business goals, I have big things planned for 2022. Building businesses is where I spend the majority of my time and energy—it’s something I love doing. Every year, I look for more ways to align all of my businesses with my goals, interests, and strengths, while also making sure they also align with my team members’ and clients’ interests.
This past year, the recurring realization I had is my desire to keep learning and teaching. Through the podcast and YouTube videos, I’ve had the great privilege of interviewing people from all walks of life, backgrounds, and investing strategies. Taking all of that knowledge—the market, interest rates, investments—and distilling it in a way that other people can understand is rewarding. I want to keep doing more of that.
Starting a Media Company
One big move is separating out all of the media assets into a new media company—Curtis St Media. I’m very excited about this because it allows the rest of the team and me to learn and teach more, and it gives us the ability to scale and improve our processes. It’s got huge potential, and it’s a lot of fun.
I can’t believe I’m writing this, but a second studio is currently being built out! The current studio is great, but flexibility in recording is needed. Be on the lookout for another studio tour!
Rebranding the Website and Podcast
Another big goal for this year is to rebrand the Denver Investment Real Estate (DIRE) brand, including books, the podcast, and the website. It aligns with the above goals of providing more value and education to the Colorado investing community. We are improving and upping that game, creating better content and building a robust community around investing in Colorado. Essentially, this is a full rebuild of pretty much everything.
Quarter 2 is the launch goal.
Continued Growth of Envision Advisors
Part of the reason for rebranding DIRE is to clear up messaging between all the educational content and the brokerage services from Envision Advisors. I’ve spoken with many investors who have listened to the podcast, but didn’t realize that Envision Advisors could help with investing via brokerage services. D’oh!
The last year of growth with Envision Advisors has been a blast. We’ve grown tremendously and helped many investors take the next step in reaching their investing goals. Thank you to all of our clients!
Earlier this year, we officially formed a leadership team to continue scaling and improving the organization. The book Traction: Get A Grip On Your Business is the blueprint we’re working from. Many people I respect have implemented it into their business. A good recipe for success is to follow what other successful people have done.
Over the years, our team has put a lot of time and energy into helping investors and clients get the full value out of their portfolios. With the Propertyllama software, users can easily figure out how to optimize their portfolio. We’re currently in the final beta to make sure it does everything it needs to in order for investors to make informed decisions.
We recently had over 100 people in our Portfolio Analysis Mastermind and are getting great feedback. We’re energized to build a fantastic tool and platform. Our ultimate goal is to build it into a dream toolkit for investors.
Making Kaufman Hagan a Success
Another professional goal for this year is to keep growing Kaufman Hagan Commercial Real Estate. I partnered in this brokerage that launched in November 2021. Things are already clicking, the team is gelling, and everything is coming together. Their primary focus is on commercial multi family properties.
My plan is to take the marketing platform we already have and apply it to a commercial brokerage. I want to do things differently, and it excites me to bring value to the commercial marketplace. So far, we’ve done a couple of “internet marketing 101” advertising techniques for properties and the feedback we’re getting is positive. This is the tip of the iceberg, but we’re already seeing great results and I’m excited to keep growing in this area.
Expanding the Multifamily Mentors Show
Thirteen days ago from writing this, we recorded the final episode for season two of the Multifamily Mentors show with BiggerPockets. This show has been a wild ride this past year but a tremendous experience. From meeting all these different people from around the country and picking their brains, to seeing the massive distribution that made us up our own game. I learned so much and have a whole new type of energy and excitement for this show.
We’re currently working on bigger and better plans for season three and beyond. We’re excited to grow that and see where it takes us.
Fitness goals are something I talk about every year so that it stays a top priority for me. I did a lot of online marketing in the health and wellness space before getting into real estate, so this already aligns with my interests. At the end of the day, being wealthy and accomplished on paper without the health to enjoy it isn’t true success.
Fitness and Health
Last year, two interesting things happened: I got Covid, which caused me to lose my sense of taste and smell, and I got a new trainer who focuses on mobility. While my sense of taste and smell returned, nine months later, they still aren’t back to normal. It’s been an interesting shift in my ability to eat and enjoy food. It threw me in a funk for a bit, but then I looked for the silver lining and started eating really clean. I ended up losing 20lbs. I didn’t realize I’d put on that much weight, but I’m excited that it’s gone. While I call her a trainer, her specialty is a combination of different disciplines, and she helped me work through various injuries so I can move properly again.
I’m turning 40 in 2 months, but I feel like I’m turning 30. I’m excited to go into my 40s feeling this way, so my goal for this year is to be able to do a handstand pushup again. I could do this when I was 19, but in the intervening years I had shoulder surgery, broke my foot, had kids, and put on a few pounds (to name a few things!) Being able to do this again would be a huge accomplishment.
Regular Date Nights
Another personal goal is to get back to having regular date nights with my wife. We’d been in a good rhythm, but then Covid hit, the daycare kept closing, our kids were sick, and it screwed up our plans. We’re getting back on track now, so I’m very excited to prioritize this time with her.
Wealth Creation for Team Members
It’s impossible to deliver great value to clients without great team members. As the companies continue to grow, I want to create big picture wealth creation opportunities for our staff. As the pie gets bigger, everyone should reap the benefits. It’s in the very early stages, but it’s the direction we’re moving in. I want to help them grow and have their own roadmaps with unique opportunities.
If anyone has experience structuring something like this for their own team, I’d love to talk to you and pick your brain.
Keep Working Harder, Then Smarter. Then: Repeat, Repeat, Repeat
I’m ending this chapter the same as previous years, with the reminder to work harder AND THEN smarter, and just keep repeating. There is no better recipe for growing and getting things done:
- Working harder leads to results, data, and opportunities to improve and start working smarter.
- I’m adding this in here as a reminder to myself to keep grinding, because that is what leads to results. Period.