Business guy wanting to diversify.

3 Replies

Greetings Bigger Pockets Forum! It is awesome to be here. 

I am Kyle from the Houston area. I am Kak on The Fastlane Forum for those of you that are members there as well. I may actually know several of you. I own several businesses, from the chemical industry to govtech and consumer products. I also run an incubator program to help entrepreneurs start, organize, capitalize and grow their companies. 

To date, my liquid net worth is largely self invested in the stock market. That said, I am looking to diversify.

Why: We are at peak markets and though I believe we are in pretty good shape as far as the economy is concerned, these are uncharted territories. With emerging political headwinds, I am getting more defensive and I want to get into some real estate as well. Starting with a few hundred grand and eventually making up half or more of my portfolio with real estate.

My experience: One of my business partners/investors and good friend is a real estate guy. He owns about “500 doors” in Houston, mostly multi-family. (Hope I am getting the lingo right.) He invites me to ride along when he is in his 1031 exchange and looking to acquire new properties. He explains the process and has been an incredible resource for me. Have I bought anything of notoriety yet? No, but it is time.

My skills: I am actually very handy and can lead a crew on light rehabs from kitchen to floors and bathrooms. I am great at controlling costs. Roofing, HVAC and foundations are the only things I can think of that are totally out of my wheelhouse. So it stands to reason that more margin can be found if I get my hands dirty. Wider margins also decrease my chances of screwing up. I also have access to that friend for wise counsel. So, I really don’t feel like I am taking a leap of faith. 

My initial plan: Hit the wholesale lists for solidly middle class homes in the 150-200k ARV range... Hoping to find deals that don't require roof, HVAC or foundation work... Or are priced accordingly once I have some go-to folks for those. Pay cash to close quickly and not have to cut hard money in. Do a tasteful, yet cost conscious rehab of kitchen, floors, and bathroom. New appliances. Then rent the home out. After I rent the home out, I want to refi what I can out of the home leaving some monthly cashflow and recouping some or all of my initial investment. Basically, the plan is mostly sweat equity down after each deal gets put on cruise control.

I will keep doing that as long as I can find numbers that work. Over time, I will let that portfolio grow and eventually sell the homes to roll into a multi-family investment and begin the lifetime of 1031 trade ups and double downs. I have considered multi-family development too. 

It is fantastic to be here among a great community of folks involved in the business of real estate. I look forward to investing some time here. 

@Kyle K. , "Trade up and Double down" . I like that turn of phrase. The model you're wanting to pursue is everywhere on these forums as the BRRRR model. You can search for that and find a lot of info. It stands for Buy rehab rent refi and repeat - exactly where you're heading.

From the 1031 perspective I simply add another "R" - Re-evaluate to see if it's time to sell.  And when it is you sell and 1031 and trade up and double down.

Great plan

@Kyle K. welcome Kyle! Based on your background in light construction/rehab and having liquid capital at the ready, I don’t think you’ll have any trouble partnering with someone until you get a feel for the game! Be wary of the people who call themselves wholesalers.

If you can sponge onto a deal your friend does, who has 500 doors, then that's gold and go for it.  I'm in a position like him and am asked if I'll bring someone along for a deal.  Normally their contribution is just to cut a check for 1/2 the downpyament, so I pass.  But if you can get into MF by getting in on a deal with someone with experience, that's gold level 5000 way to learn.

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