Year-End Property Portfolio Update
I try to update the spreadsheet I use to track all of my real estate investments twice a year… in June and December.
This month’s update is timely, as, as I’ve mentioned, I closed on the sale of a property in Portugal in November.
I can now formally calculate my IRR on the investment.
For most entries in my spreadsheet, this twice-a-year update is about paper profits (or losses). I revise current values based on relevant market data. It amounts to guesses. Sometimes those paper profits turn out to be nothing more than wishful thinking.
With a stock, it’s easy to know what the current value is. Stocks sell daily through an auction house… on a stock exchange. Updating real estate values is more of an art.
In places like Paris, where I own two properties, tracking appreciation (up or down) is a little more scientific thanks to the statistics on the Paris notaire’s website. This site reports on prices per square meter by arrondissement and even by subsections of each arrondissement. The most current information is no more than six months old—though, in a market that can move as rapidly as Paris can, this still can mean discrepancies in value estimations.
How can you know with certainty what a property is worth?
By selling it. Someone has to agree to buy it at a price… and pay you that amount. Then that is what that property is worth at that time.
That’s not a realistic approach, of course, as most property investments are long term and some you could hold for decades.
What Is The Best Way To Track The Value Of Your Real Estate Portfolio?
So, thinking practically, how can you track the value of your portfolio?
In markets that don’t have easy sales statistics to reference (which is most of the world outside the United States and France), many investors look at listing prices for properties in the same neighborhood or even the same building.
My update this month for the property I hold in Colombia, for example, is based on the listing prices of two apartments currently for sale in the same building.
I’m using those listing prices as reference points, but I don’t put much credence in them. I’ll update again when they sell if I can find out the actual sales price in either case.
List prices are the price the seller hopes to achieve. Depending on market dynamics, specific property details, and the seller’s motivation, actual sales prices can be as much as 25% less than list…
Or they can be greater than list if the market is frothy.
It’s the wish list pricing that many real estate pundits use when talking about what a great deal they got. They reference their actual purchase price (not the price a property was listed at when they bought) and compare it to current listing prices of properties next door.
Then they say, “You could have made up to XX% if you bought when I did…”
I have one of those properties right now, as well. Something I bought years ago that I have currently listed for sale for about 150% of what I paid for it. I set the listing price based on local real estate agent recommendations. I could say I’ve made 150% on this investment, but I haven’t… and I don’t really think I will.
My best guess is the property may sell for about what I paid for it… if it sells at all.
I try not to reference paper profits. Still, twice a year, I go through the exercise of doing just that. I just don’t let myself get excited about any paper gains… reminding myself a big percentage in a spreadsheet cell is not the same as money in my bank account.
That’s why I appreciate times like this month, when I’m able to actually update an investment value.
The returns on the Portugal property I sold in November aren’t paper. They are real.
That property appreciated 126% in less than four years.
Even after selling expense, closing costs (another pesky thing that many people ignore when talking about return on investment), and capital gains taxes (something nobody likes to talk about but that can’t be avoided in most cases), my actual net gain was almost 100%.
As my general goal for any real estate investment is to double my money in three to five years (not easy these days), I can call this one a win.