75 Clients Through Portfolio Analysis! What We Learned (and Changed)
Back in November of 2020, Envision Advisors launched the Portfolio Analysis division. Since then, we have had advising sessions with over 75 clients. The Portfolio Analysis process is the point in the investment journey where we help our clients organize, track and optimize their portfolio.

As we continue to meet with clients and refine our process, we have made some updates to the spreadsheet. Let’s take a look at how the portfolio analysis process works and review some of the updates!

Three Learning Options!
  1. Listen to the podcast “#268: 75 Clients Through Portfolio Analysis! What We Learned (and Changed)” on the Denver Real Estate Investing Podcast
  2. Watch the YouTube video (at the bottom.)
  3. Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.

Portfolio Analysis of Your Real Estate Investments

When we begin our first advising session with a client, we ask them to share the “stats” or data points of their investment. That includes the purchase price, closing and repair costs along with the income and operating expenses.  We then collect information about their cash position and put it all together to create their long-term investment plan. This plan is where investors organize their investments and view them side-by-side. The side-by-side concept allows investors to think about their investments like a team as opposed to individual performers.  

Refining the Process – Updating the Spreadsheet

After a few meetings, we started to hear some patterns emerging and common questions. This led us to start making some upgrades to the spreadsheet.

  • The first upgrade was simply inserting an actuals column next to the goal column to allow people to benchmark their current performance against the goal.  Seems simple, yet it was a missing piece in our plan. 
  • Next, we started adding some rows.  These rows included the investor’s current real estate valuation as compared to the purchase price used to show how much the collective portfolio has been appreciating. The current value of the real estate investments are updated each time we review a portfolio.  
real estate portfolio analysis spreadsheet

Buckets of Investor’s Cash Position

Other updates to the spreadsheet include parsing out an investor’s cash position into three separate buckets.  One bucket is their cash on hand to invest. The second are the cash reserves for each investment and the third is how much additional cash savings an investor should set aside to grow the portfolio.  This is a feature that our clients really enjoy seeing! Compartmentalizing cash provides some organization around their financial life as well as sets them up for success!

buckets of real estate investors cash position

Should I Paydown the Principal?

After tightening up these features, we started to grow the part of the process that addresses how to shorten the timeline to reach the investment goals.  We were starting to get the question about whether or not to paydown principal. It’s a great question and one many of our clients contemplate. 

Principle Paydown Strategy

Here is how we approach the principal paydown question and formulate a strategy.  Many people know that the standard mortgage usually runs for 30 years. However, if an investor has a desire to shorten that time, we start looking at a principal paydown strategy.  

Essentially, what we do is find a way to spread out principal paydown over multiple investments by identifying the sweet spot in paying down principal to get to the 20-year note.  Here is an example of what that looks like:

How much extra should you pay to shorten a 30 year mortage to a 20 year?

investment property paydown strategy

Answer: pay an extra $200/month to shorten a $100,000 mortgage from 30 years to 20 years.

In the above diagram, we take a look at extra payments on $100,000 of debt in increments of $100. Looking at this chart, it highlights that just $200 extra principal payment per month each month for the life of the loan will reduce the note for 11 years and 2 months and reduce interest by $19,104 (when using a 3% interest rate).  From our point of view, this is a great place to land for added principal payments. At this sweet spot in principal reduction, you reduce the note to less than 20 years and save a substantial amount of interest. If you can do this for all investments, you now reduce the total timeline to 20 years.

Future Updates

So far we have taken a look at some updates to the portfolio analysis process.  Now, as we forge forward, we are working on some future updates to the portfolio analysis process that include some new ways to analyze properties and some targeted approaches to anticipating rents and vacancies.  

SWOT Analysis of Rental Property

The first new service we are providing is a Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis that takes a look at an investment property from a different angle. The SWOT approach is what I consider to be a softer view of the real estate investment. It’s not just the financial data of the investment but rather hones in on things that the property has to offer. In addition, the SWOT takes into account what is going on around the property in terms of neighborhood features, benefits and growth. The SWOT analysis assigns values to the other important variables associated with the property. It then averages them to provide a value of its strength and opportunities as well as things that may threaten the long-term viability of the investment.  It’s a unique and interesting view that allows us to have our perceptions meet reality as to what is going on with the investment. It’s another great way to optimize the portfolio!

Rental Property SWOT Analysis
Rental Property SWOT Analysis

Micro Neighborhood Analysis

Our second major undertaking is a targeted approach at analyzing rents and vacancies. To do this, we are drawing lines throughout the Denver-metro, cutting the city and its surrounding locations into smaller squares. These boundaries are determined by factors separating one street from another that we believe set rents and valuations.  Sometimes they are determined by main thoroughfares like a main arterial (think Colfax or Broadway in Denver) that cut through a neighborhood or sometimes they are cut by retail locations, employment hubs, access to public transportation or set by census tracts.  We will explain more about how this will work as we roll out these assessments but they are going to be a targeted approach to analyzing income throughout the region.  The final product presented to a client or prospective client we be in the form of a one-sheet that defines a neighborhood and includes the most common rents in the area as well as summarizes the comprehensive plans for each location.  It’s an exciting project!

More to Come

The portfolio analysis process continues to grow, change, expand and take on a life of it’s own. The iterations of the process are based on our client’s needs, the current market environment and the best ways to organize, track and optimize a portfolio.  The spreadsheet that summarizes an investor’s properties will be something that tells the story of their portfolio on paper. This is a document that can be used for banks to underwrite loans and for estate planners to understand the portfolio of assets. It’s some powerful information all housed in one secure location.

Our Portfolio Analysis is currently free and only available to our clients. If you’re interested in becoming a client to access our Portfolio Analysis services, then schedule your investment consultation.

Lastly ~ if you happen to be a skilled computer programmer and love investing, we are in need of some help to get our spreadsheet web enabled so clients can access their information securely.  Please reach out to me or Chris if interested at [email protected] or [email protected]  This is a compensated position.

YouTube Video: 75 Clients Through Portfolio Analysis! What We Learned (and Changed)

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Rental Property Spreadsheet • House Hacking Spreadsheet BRRRR Calculator Spreadsheet • Fix and Flip Deal Analyzer Investing Maps • Rehab Pricing Estimator
Chelsea Scott
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