Irregular Property 2017 Investor Letter

Irregular Capital HQ

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)

The Team:

  • Me
  • 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):

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