Today’s show is actually a snippet of our Portfolio Analysis Mastermind, which we launched in early January 2022. We started this Mastermind with one goal: helping investors around Colorado figure out what to do with their portfolio. By analyzing a real portfolio, investors can see they have a wealth of options for optimizing their own properties.
- Listen to the podcast “#348: Portfolio Analysis Mastermind: Analyzing Ben Einspahr’s House Hack Portfolio” 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.
Why Should I Analyze My Portfolio?
We put out a lot of education on how to analyze and buy a property, but what happens after five to eight years? The deal you bought nine years ago, especially with crazy appreciation and rent growth, isn’t the same deal. So, what do you do with the property—pay it off, refinance, trade up via 1031 exchange, or nothing? It’s a nuanced topic with multiple options.
The Mastermind was created to solve this problem. It gives investors a clear picture of what they need to do.
Analyzing Ben’s Portfolio
In this snippet, we look at Ben Einspahr’s portfolio. He has a couple of house hacks in the Denver area, and a Nomad property in Nebraska. It’s a good portfolio, and it’s representative of a lot of our clients. We analyzed the portfolio using our Propertyllama software and discussed it with our panel of experts.
Altogether, Ben’s current portfolio is worth nearly $1.4M. With 73% Loan to Value (LTV), he’s getting greater returns through higher leverage.
Property #1: Single Family Residence with ADU
This is a breakdown Ben’s Arvada property that has a 3 bedroom/2 bathroom main house and 1 bedroom/1 bathroom Accessory Dwelling Unit (ADU) over the garage. He currently rents out the main house as a long-term rental and the ADU as a short-term rental.
Ben’s using a combination of online resources to conservatively estimate the current value of this property. Because he was able to put down just 5% on this property, he’s getting a return of over 200%! Since these numbers are so solid, we recommend he keeps the property as is.
Property #2: New Build Townhome with MIL Suite
This is Ben’s current residence in Wheat Ridge, CO. He lives on the second and third levels with his wife and daughter, and they rent out the first floor Mother-In-Law (MIL) suite as a short-term rental. Although the cashflow is negative, he’s only paying $1K a month to live in a brand new home.
Property #3: Out of State Single Family Residence
This is the first property Ben bought, located in Omaha, NE. He’s currently self-managing it and has had the same renters the past few years. While he could pay for property management, that would drop his 4.1% cap rate by 0.5-0.8%, below our recommended cutoff of 4%. Combined with a relatively low LTV of 58%, these borderline metrics make us peel back the onion for deeper analysis.
This is the time for Ben to ask himself some questions: does he want to continue managing an out of state property? Does he plan on regularly visiting or using the property, or will it be a burden to travel to it?
When clients have a property they plan on using or want to visit, it’s usually worth holding onto. However, if you’re not using the property and the market isn’t 10xing its value, it’s good to look at other options.
Option: 1031 Exchange into a Colorado Springs Townhome
Ben could sell his Omaha property and buy a comparable townhome in Colorado Springs. This property would be much closer and easier to manage.
If he were to utilize a 1031 exchange, he would have a similarly performing asset much closer to home. It would be easier to manage the property and stay abreast of local issues that could affect his rental, such as ballot measures on how many unrelated people can live in one property.
Get Your Own Portfolio Analysis
Ben’s portfolio analysis shows that even within one portfolio, there are different options. Some of his properties are performing well and don’t need to be touched, while others could be optimized for better long-term returns and fewer headaches down the road.
If you have questions about your portfolio, fill out our investment consultation form to get in touch with Chelsea or me. We’ll plug your portfolio into the software and walk you through your options.