Irregular Property 2017 Investor Letter
Irregular Property is seeking investors and landlord partners.
What’s On Deck:
- 3 Opportunities are coming up.
- 1500 St Philip St (1500P)
- 2544 Dumaine St (2544D)
- 2549 Dumaine St (BigRed)
- 1 investing partner at 1 property
- 1 project manager
- A rolodex of contractors
The Results So Far:
- Average Rent Yield = 21.8%.
- Average Cash IRR = 14.6%.
- IRR on Renovations = 25%.
- We don’t track appreciation.
- Tables and graphs below … gray squares are not available to invest.
Our Operating Philosophy:
- Buy fixer-uppers and renovate them
- Buy stuff in either bad neighborhoods or the burbs
- Convert them to either affordable housing or, Airbnb
- Be smarter, faster, and more systematic than the competition
- Offer a quality product at a great price
- Treat tenants, staff, and partners with respect
Our Investing Philosophy:
- We invest counter-cyclically and double down when the trend turns in our favor.
- We have a minimum investment horizon of 12.5 years, target of 25 years.
- We don’t try to pick the “up and coming” neighborhood.
- Rent checks are king.
- Flipping houses is for gamblers.
- Reinvestment is better than buying.
- If we have positive free cash flow (cash flow — reinvestment) in year 1, we failed.
Our Partnership Philosophy:
- Everyone is equal.
- No GP’s and LP’s, no special shares, none of that crap.
- Everyone contributes their ideas and expertise.
Communication and Distribution of Proceeds:
- No distribution checks for the first 6 months.
- After we “figure out what we got”, we set a monthly distribution level.
- We update this level every 6 months.
- Updates occur:
* Quarterly — just a quick email
* Biannually — consolidated income statement
* Annually — an annual report and a master list of every transaction
What Happens If Things Go Bad:
- We all lose money.
- We account for economic risk by running a “worst case scenario”:
* >$15,000 cost overrun on the renovations.
* Airbnb gets outlawed.
* We achieve 40th percentile rents - 15%.
- All the projects still return mid-single-digit cash flow.
- But: man plans, and God laughs.
* Sometimes the house is worse than we thought, and this costs money.
* Sometimes we are victims of crime, and this costs money.
* Sometimes we get psycho tenants, and this costs money.
- You should expect 1–2 years of negative returns some time in the 1st 5 years.
- As for hurricanes and such, we have insurance for that.
Pics of Past Work (before’s and after’s):
- Here is a dropbox folder full of pictures of the new opportunities.
- Here is a Google Spreadsheet with details on all our projects.
- If you are interested, contact me and I’ll walk you through them.