Picking the Path

There are many real estate strategies- the game is finding the one that most closely aligns with you and what you're trying to accomplish.

Each outlet has its perks and drawbacks. Accordingly, flippers operate differently than those who buy and hold.

One of the best ways to generate positive outcomes is by ensuring the development strategy meshes with the overarching thesis.

We buy 4-25~ unit apartment buildings in walkable urban cores, renovate them well, and hold them for a long time.

Why?

-Longer Runway- we seek out supply constrained markets where it's incredibly difficult (if not impossible) to build any more of these properties and intend to compound growth over decades.

-Control- we don't want the outcome of any project to be predicated on what somebody else would pay for it (can't predict what the market will look like a year from now). Instead, we focus on digging out and maintaining yields that we're comfortable receiving over many years.

-Operations- we know the the internal workings of each building, being that we've likely done extensive renovations to it- positioning us well as long-term operators.

-Longevity- we hope to create a generational portfolio of properties (with like minded partners) in great locations- hard to do if you're selling good assets every few years.

How We Like To Operate

Many of the problems (often misunderstandings) we encounter can often be mitigated with complete transparency.

With this idea, also comes a process in how to best convey your information.

In the real estate world, construction can be one of biggest culprits for creating issues.

Every contractor/architect operates differently, lots of money can be involved, there are countless outlets to place blame ranging from manufacturers to the delivery teams.

Tons of gray areas, you need to remove as many of them out of the equation as possible.

For us- that means we pay for material costs and process payments upon the (verified) completion of work.

It's one of the first things mentioned if it's a new relationship and something we're certain to include in all agreements.

If they can't adopt this model, they likely won't be a good fit for us. 

Why?

When we veer away from our standardized process- the more we open ourselves up to unknowns.

Cut out those what if's by being transparent about your process.

This applies to operations as well.

We distribute property operating reports, bank statements, and bulleted thoughts about performance on a monthly basis.

This process allows everyone to see what we made (or lost) that month, property updates, and the actual dollar amounts in the accounts.

Same page.

If you're not hitting your projections, you can't hide.

If you are, great, that was the plan.

Regardless of performance, it's crucial that everybody is well informed about what could go well, what could go terribly wrong, and how you're working to avoid the landmines that exist within the latter.

Avoid surprises with complete transparency.

Creating the Foundation

I got started by taking out an FHA loan for a duplex in a transitioning neighborhood right outside the French Quarter of New Orleans.

This deal was the most nerve-wracking as it was the first time I executed a real estate investment alone.

There was no team at that time- it was me crawling under the house alongside the inspectors hoping to validate some of my underwriting, introducing myself to insurance brokers to shop around policies, sourcing contractors through referrals, tee'ing up final repairs in advance of hopefully sourcing a great tenant, and actively managing it over the course of the next year.

I executed on the business plan and the property has continued to perform very strongly over the last 2.5 years. We beat projections partially because my underwriting was influenced (and still is) by the anxiety of somebody who personally felt the downside risk.

A small duplex like this isn't a newsworthy event but allowed me to cultivate a process and establish a team that would allow us to take on bigger deals.

From that time, I was able to bring in a partner and we acquired a larger, commercially zoned duplex a short distance away in another neighborhood I had developed in for years (my prior job). Extensive renovations were needed and we quickly leveraged the contacts/processes we made during the first purchase to ensure a quality product.

We had a good property manager that we'd taken reps with, a fleet of great contractors, quick moving attorneys that understood how we operate, and an insurance broker that would fight for us.

Same process: underwrite conservatively, triple check all applications, execute quality renovations on time, source good people for the nice unit you just completed, and then steward it well.

Exact steps but applied to a larger project that required more touch points.

Our third purchase was the largest at the time- a historic 4 unit apartment complex. We went back and forth with the ownership for many months before moving forward with the acquisition. We hit our projections on this deal, another notch in the belt and hopefully another step forward.

A few months after this purchase, we identified another 4 unit apartment complex less than a mile away and in a much more established corridor.

This due-diligence process presented countless firsts. The house was essentially unsellable because it didn't have its own sewer line, had active termites, football sized holes in the siding, angry tenants, you name it.

With the help of our team, we found solutions for each major issue and had firm estimates well before the end of our inspection period. We leveraged these and acquired the property.

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As we scale into larger unit counts and new markets today, I'll always recognize that these smaller deals ultimately allowed us to prove our process and get started.