In this winter edition of Anno Darwinii, I’ll show the income from our real estate portfolio for the last year, plus give a quick update on the status of our most recent deals.
On the West Coast, the holiday season is tiptoeing along in between waves of the Covid pandemic. My family has been happily enjoying Thanksgiving, cooler nights, and foggy SoCal mornings. I’ve been also feeling grateful for our good fortune.
- The chance to help people
- A reliable source of income
- Respect and prestige
In the last few years, it’s also allowed me to invest aggressively into stocks and real estate.
On the topic of real estate, let’s get on with the update. This is an edition of Anno Darwinii, the official report on the growth of my real estate empire that I publish every few months. This is Anno Darwinii 2.5, which means it’s been two and a half years since our first real estate purchase.
Today, I’m going to highlight some of the numbers, because they’re starting to get big.
In the last year, the gross revenue from our rental portfolio totalled $127,108.
Here’s an actual screenshot of our recent income report from Stessa:
This represents income from 10-12 units, depending on the month. Specifically, the income is coming from:
- Two single family homes
- Four duplexes
- 1-2 apartment units
All of these units are being rented on a long term basis, except for half of a duplex, which is being rented as a mid term furnished rental (month to month).
In terms of profit, our real estate business is not netting any profits at the moment. All of the income went to these expenses (among others):
- Reinvestment into our other units under renovation
- Mortgage payments, tax, and insurance
- Repair and maintenance
- Property management
- Legal fees
Thus, on paper, our real estate business is operating at a loss. We would have profits if we stopped expanding our portfolio, but we’re in a growth stage right now. So all of our real estate income gets pumped straight back into the empire.
Indy Apartment Building #1
This is an 8 unit apartment building that we purchased in January 2021 for $431,000. It was in horrible shape when we bought it, so we budgeted $285,000 to fix it up. We also hoped to use that pot of money to add two more units to the basement, making it a 10 unit building.
Alas, not everything goes according to plan. The renovation took months longer than expected, and we are just now putting the finishing touches on the first two floors of the building. The good news is that the units look really fantastic. There’s a lot of interest in the finished units and they’re already starting to get leased out.
The basement is another matter entirely. We spent a total of $300,000 to finish just the first 8 units, and are looking at another $100,000 to finish the basement. It’s not entirely clear to us that it’s worth the money. For now, we are collecting some more quotes before we decide on the best plan of action.
Here are some before and after pictures:
Video walkthrough of finished unit
Indy Apartment Building #2
This is a 7 unit apartment building that we purchased in mid 2021. It’s a building that probably used to be one big house, that’s been chopped up into 7 small and strangely laid out units.
It’s a good example of the pitfalls of long distance real estate investing, since a lot of the strange features only became clear when my wife visited the building after purchase. Prior to the purchase, I relied on the walkthroughs from my realtor and project manager. They haven’t steered me wrong before, but I fear we may have missed the mark on this one.
So far we’ve done some minor updates to the units, but there is overall pretty low interest in the units.
Our plan moving forward will include some mix of these options:
- Updating all dated appliances
- Adding granite countertops to all kitchens
- Converting some of the units to Airbnb
- Adding a washer/dryer to the basement
While it’s easy to get frustrated at this purchase, my wife and I are seeing it more as a puzzle that we need to solve, instead of a bad deal.
The empty lot
We are also spending a little bit of time thinking about the beautiful empty lot next door. I’ve always been interested in ground up development, and this might be an option for us to dip our toes into this type of real estate investment.
Some options we’ve considered for the lot:
- Sell the lot by itself
- Build a single family home plus ADU and rent both
- Build a quad-plex and rent it long or short term
- Build a duplex and rent it long or short term
The Vacation Rental
This home has been taking up the majority of our attention these days.
Since we purchased our vacation home in Palm Springs, it’s been one challenge after another. First, we couldn’t find a pool builder who’d commit to building a pool earlier than spring 2022. Next, we spent literally months before finalizing a renovation plan for the interior.
We had to come to grips with the fact that renovation in California is much more expensive than renovation in Indianapolis. We’ll likely be spending about $300-350k to renovate the house and finish the backyard. This is a good example of the crazy difference in costs you can see between a high cost of living area and a lower cost of living area.
Here’s a short list of the major surprises that led to cost overruns:
- No insulation in the walls
- Not one, but two sewer lines
- Septic tank buried in the backyard
Here are a few pictures of the renovation:
Here’s some time lapse photos of our pool install in the backyard:
As our portfolio has grown, it’s become too big to neatly summarize in one post. I doubt anyone’s even reading at this point. (If you are, please drop a comment down below!)
From now on, my Anno Darwinii posts will give a high-level overview of our portfolio’s changes and income. In addition to this, though, I’ll be doing short weekly updates on my real estate and business portfolios in a new series called “Building the Darwinian Empire.”
Have a great week!
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