How do you measure your Real Estate business?

[GarthChapman]

I`d love to hear what others are using to measure the performance of their Real Estate businesses. And to start the list off here are some key measures we use (these are intended to be the figures for one`s entire portfolio). Look forward to your ideas.

1) Total cash invested – in $ - how much of your cash is invested in your Real Estate business, including borrowed funds not connected to revenue properties (ie HELOC on your personal residence)

2) Monthly Cashflow - in $ (after all expenses and allowances, such as Vacancy, Maintenance)

3) Overall ROI - in $ and % (on cash invested total)

4) Overall Yield - in % (Annual Rent over Book Value (aka Capital Cost))

5) LTV – in % (Total Borrowed over current market value of all properties)

6) Equity - in $ (total market values less total Book Value (aka Capital Cost))

7) Overall DCR (using the standard CIBC calculations)

8) Occupancy - in % (what % of total units are rented)

9) Monthly overhead - in $ - as in the cost of running your Real Estate business (key question: does your cashflow cover all this and then some?)

 

[Thomas Beyer]

QUOTE (GarthChapman @ Aug 20 2008, 11:26 AM) I`d love to hear what others are using to measure the performance of their Real Estate businesses. And to start the list off here are some key measures we use (these are intended to be the figures for one`s entire portfolio). Look forward to your ideas.

1) Total cash invested – in $ - how much of your cash is invested in your Real Estate business, including borrowed funds not connected to revenue properties (ie HELOC on your personal residence)

2) Monthly Cashflow - in $ (after all expenses and allowances, such as Vacancy, Maintenance)

3) Overall ROI - in $ and % (on cash invested total)

4) Overall Yield - in % (Annual Rent over Book Value (aka Capital Cost))

5) LTV – in % (Total Borrowed over current market value of all properties)

6) Equity - in $ (total market values less total Book Value (aka Capital Cost))

7) Overall DCR (using the standard CIBC calculations)

8) Occupancy - in % (what % of total units are rented)

9) Monthly overhead - in $ - as in the cost of running your Real Estate business (key question: does your cashflow cover all this and then some?)
10) overall asset value

11) # of units/doors under management

12) # of investors

13) $s invested by these investors

14) % of repeat investors

15) % of referrals (i.e. new investors but connected through life somehow to existing investors0

16) happiness indicator: how happy with life am I ?

17) # of days off / year

 

[Anonymous]

Hi Garth,

Good post! I include monitoring how well the boxes in my personal life are getting ticked, eg: reducing the number of hours spent working, creating comfort in my home, charitable work, travel, etc. After all, serving these causes is the reason my real estate business exists in the first place. Most importantly, "Am I still having fun?!!" (Yes, I am!)

Another measure for me is "How well am I doing at simplifying my business?" I spent several years building it up and now I am paring it down. I am stepping out of some partnerships and now own more houses on my own. For example, having 100% of 10 houses is simpler than having 50% of 20 houses.

Since I do my own management I also strive to reduce the PITA factor (pain in the...). I am thinning out the houses that are fussier to maintain and am keeping/buying houses that will require the least maintenance over the coming years. I also like to keep my houses geographically close to me for ease of management. I am letting go of houses that are farthest from home and I am buying/keeping ones that are closer to me. (They of course still have to meet all the usual criteria of a good investment property.)

My above comments depict how I want my real estete portfolio to integrate with my semi-retirement. I am 47 and semi-retired a year ago, thanks to real estate.

Catherine Brooker
Edmonton

 

[Thomas Beyer]

QUOTE (cbrooker @ Aug 21 2008, 04:43 PM) ....

Since I do my own management I also strive to reduce the PITA factor (pain in the...). I am thinning out the houses that are fussier to maintain and am keeping/buying houses that will require the least maintenance over the coming years. I also like to keep my houses geographically close to me for ease of management. I am letting go of houses that are farthest from home and I am buying/keeping ones that are closer to me. (They of course still have to meet all the usual criteria of a good investment property.)

...
I also keep a "pain index" of assets that we/I own .. so YES .. get rid of properties that cause a lot of headaches .. i.e. the metric to add might be

18) hours per $s earned .. including "worrying" / thinking / fussing / not enjoying yourself due to "issues" .. i.e. lower is better

I have sold many multi-family assets off, mainly in class C locations, with vacancies, collection issues, .. even though they were profitable and appreciating .. in fact any asset sold in the last 3-4 years is worth more today .. but my life is better today !