Real Estate Rookie Podcast Summary

Episode Title: Why We Regret Buying (So Many) Rental Properties
Release Date: February 12, 2025
Hosts: Ashley Kerr & Tony J. Robinson
Produced by: BiggerPockets

Introduction

In this insightful episode of the Real Estate Rookie podcast, hosts Ashley Kerr and Tony J. Robinson delve into their personal experiences and lessons learned from rapidly scaling their rental property portfolios. Titled "Why We Regret Buying (So Many) Rental Properties," the episode serves as a cautionary tale for novice real estate investors aiming to grow their holdings too quickly without adequate preparation.

The Journey of Scaling Rental Properties

Rapid Growth and Initial Success

Ashley and Tony begin by sharing their initial forays into real estate investing, highlighting a period of exponential growth fueled by favorable market conditions and strategic acquisitions.

• Tony J. Robinson recounts his journey: “We started buying long-term rentals in 2019. In my first year, we closed on four long-term rentals and transitioned to short-term rentals in 2020, scaling up to fifteen properties by the end of 2021” (05:26).

• Ashley Kerr mirrors this trajectory, noting a significant acceleration post-2017 after engaging with the BiggerPockets community: “After 2017, I just really started to accumulate properties. I also got my first portfolio deal, which included 12 units at once” (04:07).

Challenges Faced and Breaking Point

Overemphasis on Acquisition Over Management

The hosts reveal that their aggressive acquisition strategy led to neglect in crucial areas such as property operations and asset management.

• Ashley Kerr explains her oversight: “I worried about how to find the deal, how to finance the deal, how to close on the deal... I just got into the groove where I was spending no time on the actual operations of the property” (11:19).

• Tony J. Robinson echoes similar sentiments, emphasizing the importance of aligning operational capacity with acquisition pace: “Your rate of optimization, your pace of optimization has to match your pace of acquisition” (22:19).

Reaching the Breaking Point

Both hosts describe moments when the sheer volume of properties became unmanageable, leading to operational inefficiencies and financial strain.

• Ashley Kerr: “I felt like I was not liquid. I was so strapped for actual cash because I was mismanaging the operations... I ended up selling a duplex to gain breathing room” (11:19).

• Tony J. Robinson: Shares a significant financial setback: “We had to put $200,000 into a failed flip because the market shifted... We knew we should diversify, but our desire to keep growing led to that decision” (24:04).

Implementing Systems and Processes

Developing Standard Operating Procedures (SOPs)

Realizing the need for better management, Ashley and Tony discuss the critical steps they took to streamline their operations through SOPs.

• Ashley Kerr: “The first thing was like learning what's an SOP... documenting what I was doing so that I can get some help or so I'm not using so much brain power” (17:12).

• Tony J. Robinson: Highlights the importance of documentation: “As you're scaling up your portfolio, a lot of it is tribal knowledge... documenting provides clarity for you and anyone else that may need to do it” (19:57).

Leveraging Technology and Team Members

They underscore the role of technology and team building in managing multiple properties effectively.

• Tony J. Robinson: Discusses tools like Loom and ChatGPT for creating and maintaining SOPs: “Loom is like a screen recording tool where it records your screen, records your voice... it made it even easier to keep” (21:11).

• Ashley Kerr: Emphasizes the benefits of hiring virtual assistants and building a reliable team: “We ended up using virtual assistants and building out team members... automation and templates can make your life so much easier” (15:11).

Financial Impact and Regrets

Missed Opportunities and Financial Strain

The rapid scaling strategy not only led to operational challenges but also resulted in significant financial repercussions.

• Tony J. Robinson: Shares a costly mistake from a failed flip: “We bought a property in late 2022, intended to flip it. The resale market shifted, and we had to either sell at a loss or refinance, costing us around $200,000” (24:04).

• Ashley Kerr: Reflects on opportunity costs: “I missed out on the best interest rates in 2021 because I was too focused on building systems. I didn't refinance anything to get lower rates” (25:55).

Long-Term Financial Lessons

Both hosts discuss the importance of sustainable growth and the benefits of a long-term investment approach.

• Ashley Kerr: “Properties I bought 10 years ago are cash flowing so much more because of the increase in rents... it wasn't that much cash flow at the time, but now it’s significantly better” (25:55).

• Tony J. Robinson: Advises focusing on generating the most revenue with the least amount of work: “Focus on your net worth, focus on your cash flow... playing for the long game ensures you're making the right decisions for your portfolio” (29:40).

Lessons Learned and Advice for Rookies

Scaling at the Right Pace

The primary takeaway from Ashley and Tony is the importance of balancing acquisition speed with operational capacity.

• Tony J. Robinson: “Don't scale just for the sake of scaling. Your pace of optimization has to match your pace of acquisition” (22:19).

• Ashley Kerr: “We regret not building out an actual system and process for how to manage the property... it became so time-consuming when you have multiple properties” (16:46).

Prioritizing Systems and Team Building

Implementing robust systems and building a dependable team early on can prevent many of the challenges associated with rapid scaling.

• Tony J. Robinson: “Having SOPs documented provides clarity and confidence in what you're doing” (19:57).

• Ashley Kerr: “Automating processes and using virtual assistants can make managing multiple properties much easier” (15:11).

Focusing on Long-Term Value Over Quantity

Rather than accumulating numerous properties, emphasizing the efficiency and profitability of existing units can lead to greater long-term success.

• Tony J. Robinson: “Sometimes, less units and more efficiency lead to greater profitability” (29:40).

• Ashley Kerr: “Long-term buy-and-hold strategies have proven more beneficial as properties appreciate and cash flow improves over time” (25:55).

Conclusion

Ashley Kerr and Tony J. Robinson candidly share their regrets about rapidly scaling their rental property portfolios without adequate systems and team support. Their experiences underscore the importance of sustainable growth, meticulous property management, and the strategic use of technology and personnel. For rookie investors, their story serves as a valuable lesson: prioritize building robust operational frameworks and focus on long-term profitability over sheer property count to achieve lasting success in real estate investing.

Notable Quotes:

• Tony J. Robinson (05:26): “Our portfolio scaled up to fifteen properties by the end of 2021, but that growth was too fast to manage effectively.”

• Ashley Kerr (11:19): “I felt like I was not liquid... I ended up selling a duplex to gain breathing room.”

• Tony J. Robinson (19:57): “Documenting provides clarity for you and anyone else that may need to do it.”

• Ashley Kerr (25:55): “I missed out on the best interest rates in 2021 because I was too focused on building systems.”

This summary captures the key points, discussions, insights, and conclusions from the episode, providing a comprehensive overview for those who haven't listened.