Rental Property Portfolio ABCs Part 1

The ABC's of Rental Property Portfolios:
Turning Money Losers into Money Makers

by Julie Broad

ABC of Rental Property Portfolios

Ever sit down and look at what you own in your rental property portfolio today? Even if you only have two properties and one of them is your own home. Do you ever sit down and think about what you've got and whether those assets are moving you closer or further from your goals?

Dave does this on a regular basis. I call it 'dances with spreadsheets' as he reviews the cash flow and the values on each of the properties we own. I do it in a less formal way but I still look at what we own and think about whether each asset is properly performing it's role in our greater plan.

It was during one of my informal reviews that I realized one the properties we've held for five years is not doing it's job. It's not generating positive cash flow and it's not part of a greater plan to redevelop. It's just making us money through the mortgage pay down and it's slightly increased value.

We bought it by refinancing another property so we have been more forgiving of it. I mean, it didn't cost us any money out of our own pocket and it's still building our wealth at a steady pace so it hasn't been a bad purchase.

BUT this particular property hovers around neutral cash flow on a monthly basis which really means it is costing us money each year because any additional repairs (like the painting we will have to do when the tenants move out or the fence we have to repair because it's falling apart) come out of our pocket.

Spending a bit of money here and there on this place didn't bother me in the past because I had a great paying job. The repairs were a tax write off, and the tenants were paying down my mortgage so I was still ahead. This property hadn't cost us a single penny to buy and we've probably only put $5,000 into the property over the five years we've owned it, so we're still making a great profit on this property. And, it's in a great area that makes it easy to rent out. I was holding it for the long term so I didn't really worry about it too much as long as it was rented. But, times have changed and we live off the money we make from our rental properties so cash flow is far more important to me today.