Building your portfolio w/out experience in the industry.

[Heyward Lovett]

1. Total gut renovation project-Brooklyn, NY 

2. Investment opportunity-West Palm Beach

I've spoken w/countless investors about investing in my deals and running into the same issue. What's your experience? How do I safeguard my investments? I feel like the deals that I've analyzed are never enough to get investors excited enough to move beyond the focus on experience. My target markets are NYC, Hampton Roads, VA and the Palm Beach areas of Florida. Here are a few recent deals I've analyzed in Brooklyn, NY and West Palm Beach, FL. Please critique these deals and give me some feedback. If you have advice on how to get over the lack of experience component that would be greatly appreciated. And finally, if either (or both) of the attached deals fit your investment strategies and you'd like to know more about the properties please let me know what time works best for you to hop on a call to see if we could get the deal done. Thanks in advance. Heyward

[Tchaka Owen]

@Heyward Lovett - your experience (or lack thereof) matters. There are a lot of things in rehabbing that you simply don't know; that said, don't let it deter you. We all start somewhere. Here's my input on each project:

Crooklyn: that's home for you and your knowledge of the area is a tremendous asset. 

1. Is $2m fair market for that home, given that it needs to be gutted? A good friend owns a similar home on Ellery(?) and the going value of homes is in the $1.5-$1.7m range. I don't know the location of this home, be sure you're not overpaying.

2. I realize that in NYC, people squeeze into small places so this next comment might not ring as true: I would avoid a multi-unit that has 3 1BRs and 3 efficiencies. A 1BR limits the size family living there so if a couple decides to have kids, they'll move before long. Any family with kids will not consider your place. Is that the best use of the house or are you cutting it up in bits in an attempt to maximize income?

3. Though not a tremendous concern, your closing costs will be closer to $20,000. Not $3500. 

WPB: much more palatable rehab, but you're in NY.

1. How do you know the purchase price is competitive? 

2. Do you intend to move down to Florida to oversee the rehab?

3. You mention "triplex" and allude to a main house + 2 units (this makes sense). However, your numbers have income from a main house ($1600) and 3 units ($550+$550+$700). Is this a "quad" or is income $2850/mo?

4. Your other numbers need massaging too. Closing costs will be closer to $8000 or $9000; ARV cannot be $179.9k, otherwise drop this deal immediately. You should be able to find management for 8%.

Although it would be nice to work on a place in your town, I don't like that deal one bit. You're relying on appreciation of the property and hoping all goes well so as to cover the monthly payment(s). Some investors go with that strategy, I don't. Many old school don't either.

The WPB deal is smaller and the property will easily provide positive cash flow. Not only that, I do not believe the rehab will cost $30k. You'll probably get it done for $18-20k. Here's the catch: you need to move down while the work is going on to keep an eye on it. If you're not willing to do that, you might want to skip this. I do have experience in South Florida including WPB....efficiency increases dramatically under the gaze of an owner's eyes.