Posts tagged Real Estate Market
Making Money in Housing – CNBC.com
Aug 31st
Making Money in Housing – CNBC.com.
Following is a 7 minute video that was aired the 24th of August on CNBC with Hessam Nadji of Marcus & Millichap Advisory Services, and Alex Goldfarb of Sandler O’Neaill & Partners.
The subject of the interview is how to make money in the housing sector right now
Here are some key points.
- Apartments leading recovery by demand, followed by industrial properties
- The Commercial Real Estate sector usually trails the economy by 6 months and Multi-Family is usually the first to recover (which is starting to happen) due to there short terms leases. The meaning is that since the apartment leases are usually a year or less they can be adjusted upward as the market or that segment improves.
- Starting to see multi-family REITS doing better. Raising there rents on average of 5% over the last 12 months.
- Home ownership is going down which is good for rentals.
- Some people are realizing that owning homes is very expensive and only having to write one check for their rent is attractive.
They also talked briefly about the fact that institutional investors are looking at core trophy properties and locations. They are much more conservative and are betting that once a recovery happens that there will be above average rent growth due to the supply constrained markets they are in and the lack of multi-family construction that has been done.
I know many of you probably wonder why a company (institutional/REIT) would buy buildings at 5 CAP rates and it is a good question. What you need to consider though is they are usually more conservative and they are comparing these investments to T Bills which are giving almost no returns.
Private investors are looking at non core properties B & C. This is what most of us will buy.
Personally I am thinking that it is time to start considering Apartments again (remember I am more of an apartment investor than houses but it is the houses where we are making the returns right now because there are not many attractive apartment deals we are finding).
I don’t believe in just jumping right (back) in. I like to wait until there is some type of pricing trend because right now there is not enough sales in San Diego to be able to accurately price apartment buildings.
It’s also good to watch other people work out the kinks and really study the market/niche you are going into. Knowing the market (your niche) better than your competition is how you create opportunities for yourself. For example if you know rents can be 20% higher than your competition because you know that segment better you have the advantage of making better choices.
Where is the best place to buy Apartment buildings?
May 16th
Ok here is a poll I set up to ask people where you thought the best place to invest in Multi-Family Real Estate including what class, size and a few other simple questions.
I created this using google forms. If you are not using google docs and the other free google products like sites, calendar etc. you should check it out. I created the “project 36″ website in a matter of minutes using google sites and use google enterprise apps for our business.
So with that being said I am embedding the survey so please take it or if it does not let you take it please let me know. (give it a few seconds to load)
30 Day Property Flipping Challenge half way there
May 14th
OK I am halfway through with a personal challenge of mine. Buy 3 properties by June 1st and since starting this blog post/newsletter it looks like I have my first acceptance 5/14 which we will close and start construction 5/18 and try to put it back on the market within 2 weeks if everything goes according to plan (never does).
All of my hard work over the last couple weeks has really been paying off. I am getting calls each day from Realtors or Wholesalers who understand what I do to present with opportunities because they know if they bring me a deal I not only will buy through them I will sell through them. I have also been helping some agents who are new to working with investors to show them how to find deals that can be flipped in this ultra competitive market.
As a former Commercial Realtor who now focuses on Syndicating partnerships I am using the same marketing techniques that created a successful business for me in that field by tweaking the business model towards building relationships with Agents or people looking to passively invest through our firm and making them my customers instead of buyers and sellers.
I know that the best deals usually come through agents and most times if it is a great deal they call a client who they can represent and I want to be that person. My business model involves buying as a principal through anyone who brings me the deal and selling it through them on the exit.
The skills I learned being a Commercial Realtor has been in large part the key to my success. As an agent who works with investors I was exposed to the business models that worked for buying properties. I don’t believe there is anyone who is better than an agent at finding deals because that’s all you do throughout your career. You are exposed to the best business models and can leverage that knowledge to become very wealthy.You look at deals and you represent buyers and sellers and you see what works and what doesn’t.
As a matter of fact I am using that marketing right now to let Realtors know I am a buyer and am looking for Real Estate.
I am continually being asked about “What is the best way to become an investor in real estate?” and my answer
Phase 1 – save up enough money for 6-12 months living expenses, go out and get your Real Estate license
Phase 2 – Work under a successful Realtor who’s focus is on the niche you are interested in owning one day.
Phase 3 – Work you ass off and find as many investors to find deals for and pay attention to the successful ones.
Phase 4 – Start finding investors that will allow you to put in some or all of your commission on the deals you find and ask to participate as much as possible even if you aren’t getting paid for that portion. This is an investment in yourself and like all good investments you will be rewarded heavily in the future.
Phase 5 – Build relationships with clients and earn there trust. These clients and your friends and family will most likely be your money source for your future deals.
Phase 6Â – Work your but off to learn the business by working for successful investors finding them deals.
Phase 7 – Transition out of the brokerage business to focus full time on your investments if this is what you enjoy doing. This is the phase I am in but you may find out that being an investor is not always fun and may decide that you like being a Realtor instead.
If you work with investors
So if you are a Realtor or wholesaler give me a call if you find a great deal.
Here are a few reason why you may want to consider working together.
•   I need to buy 3 properties by June 1st
•   I make quick decisions and know what I want – Anything in San Diego $300,000 or less that we can re sell for a profit. I also understand 99% of the deals don’t work but I also know I am successfully finding ones that do work through realtors like yourself who know a particular market and a good deal when it hits the market.
•   I value your advice and feedback but I am not going to blame you if the numbers don’t work out the way you thought on the back end. I am a big boy and if I make a decision to buy it is because I believe in the numbers also. It doesn’t mean I don’t make mistakes it means that I have done enough of these deals that I know mistakes happen and its part of the business.
•   I have access to the MLS and the Sentry system. That means you never have to drive me around or do a bunch of homework for me. I am capable of doing it myself, the best use of your time is to find deals we can work on together and then find more.
•   Quick decisions, no financing contingencies, I can close as quick as needed. As an example to make a deal work this week I offered a 4 day escrow and waived my physical inspection upon acceptance.
•   My company has a general contractor’s license so we understand what’s needed and are capable of just about anything.
•   If I buy through you I sell through you
•   I am open to other possibilities but can’t make as quick of decisions if it is something new to me. On the other hand this is a fast changing market and I need to be open to other opportunities.
Statistics on how people are flipping properties in southern california
May 14th
Here is some slides that I was given permission to use from The Norris Group from the presentation that was put on this week.
I thought it was very interesting to see how there clients were successfully buying and flipping deals in Southern California.
US Real Estate Home prices adjusted for inflation plotted as a roller coaster
Mar 28th
I was using stumbleupon which is a really cool site which as they claim “Discover the Best of the Web in less time” is true.
Here is how the site describes itself
StumbleUpon helps you discover and share great websites. As you click
Stumble!, we deliver high-quality pages matched to your personal preferences. These pages have been explicitly recommended by your friends or one of 8 million+ other websurfers with interests similar to you. Rating these sites you like (
) automatically shares them with like-minded people – and helps you discover great sites your friends recommend.
Anyways it is a great tool to search the web for great content and is where I ran across this interesting video that plots the housing market since 1890 from a roller-coasters perspective. Don’t miss the end.
Experts: Troubled Asset Cycling May Speed Up
Mar 23rd
Amid reminders from real estate researcher Foresight Analytics that billions of dollars in real estate may go back to lenders this year, panelists at an Urban Land Institute meeting in San Francisco shared glimpses of how the real estate is trickling out. Titled “Asset Advisory, Receivership and Workout Strategies Emerging in the Downturn,” the panel revealed to more than 150 attendees that relationships and experience are key to stepping into the deal-flow.
“First and foremost, owners of troubled assets are seeking operating partners, advisors and receivers who really know the real estate, and can move quickly,” said Jerry Hunt, managing partner of Quattro Realty Advisors. Panelists agreed that there are many qualified firms, and bankers are turning to people they feel they can trust.
And where are all the asset-sales that were predicted? “Banks don’t want to sell in bulk portfolios because of the tremendous discount, whereas individual note-sales attain higher values,” said Curtis Chinn, formerly of Central Pacific Bank and now SVP of special assets for East West Bank, who characterized his comments as industry-perspective and not that of a particular bank. He said that while sales are increasing, banks have commitments to their own shareholders and are maximizing their position, following an FDIC road-map in October that enables more patient loan workouts.
But the rising tide of defaulting assets may speed the process, noted Steve Duffy, managing director of Moss Adams Capital. Unwilling owners of troubled real estate can only handle so much, and will face capital-structure issues and staff-capacity issues, he said.
“At the end of the day, lenders have to make an assessment: Are we better off if we take control of this asset or not?” he said. “To the extent that stakeholders can see a meaningful gap between the borrower’s restructuring plan and forced liquidation, it will point toward a restructuring alternative with the borrower. To the extent that there is not a meaningful gap, it will point to recycling of the asset,” he added, which is often a sale to a best-offer in reasonable time.
“Every significant real estate recession has followed with a great period of opportunity, and many believe the current recession will lead to one of the greatest wealth building opportunities of the current generation,” said real estate receiver Tony Theophilos, a partner at Starr Finley attorneys.
{I like that paragraph and believe that – cg}
“This real estate cycle is different than prior ones for three reasons: the speed of information, the complexity of the lender groups, and the large number of qualified investors today given the rise of opportunistic-investing of the early 90s,” said Duffy. “There is a tremendous amount of money present and waiting that was not in the last two commercial real estate cycles.”
According to Matt Anderson, a partner at Foresight Analytics, “There is more optimism at present that prices are rebounding, but it is really too early to say since increases of recent months are based on thin trading volume.
Experts: Troubled Asset Cycling May Speed Up. Click here for full article
So what steps can I take to minimize the risks right now of owning Apartment buildings in San Diego?
Feb 11th
A question was poised on www.sdcia.com that I thought would be a good one to address . The question was what steps can I take to minimize my risk of buying and owning apartment buildings right now?
That was a good question and one I had not been thinking about as much lately because of all the buying and flipping of properties I was doing. Until I had a bunch of rentals I needed to get occupied so I didn’t have a huge vacancy rate.
Well here is what I am doing to keep my properties operating effectively.
- Tenant retention
- You’ve heard the old saying in business it’s easier to keep a client than to get a new one. Well your tenants are your clients and unless your grossly under rented you need to retain as high a percentage of possible of your current apartment tenants.
- Keep a reminder in your calendar 60 days before there lease expiration so you can talk to them about renewing. If they are going to move it’s best to find out as soon as possible and also a good idea to find out why. Try to keep them.
- Either have a nicer product or better rents.
- Improvements
- Spend money on items that may cause emergency calls first or are unsafe. These issues will happen and if possible deal with them on your own time rather than them dictate to you. It also saves a lot of money and aggravation not to get calls at midnight.
- When making improvements to the units some of the best bang for your buck is to
- Paint the unit.
- I like to make sure the texture looks good (does not have to be perfect just not patches everywhere) and then paint the place in a two tone color. A wall color and white for the ceiling. This will initially cost more but once it is complete you will rarely ever have to paint the ceiling. You also want to paint the base, case, and doors a nice white color in semi gloss. The more you can make the place feel like a home rather than an apartment the better rents and retention you will get.
- Interior doors & hardware
- Flooring
- I like to use as much tile and or laminate (the stuff that looks like wood) as possible. It costs a little more the first time but lasts 5 times as much as carpet and you will probably get about 5% more in rent.
- Paint the unit.
- Improvements
- You’ve heard the old saying in business it’s easier to keep a client than to get a new one. Well your tenants are your clients and unless your grossly under rented you need to retain as high a percentage of possible of your current apartment tenants.
- Get ahead of the game
- If you have vacancies coming up get on it quick and return calls immediately.
- Track the market
- Do rent surveys & talk to other apartment owners of similar buildings in the are where you own property (send me an email if you want a how to do rent survey report & spreadsheet). This is also a great way of finding properties for sale. make sure to give everyone you talk to your information and let them know that if they ever think about selling give you a call.
- HAVE GOOD SYSTEMS IN PLACE
- We automate as many of the processes as possible by having good checklists of activities we do repetitively. Instruction sets are created on each item to make sure that we do it correctly and consistently, it’s hard to figure out what is and is not working if you don’t do things consistently so you can track them. It makes it so much easier to improve upon what we are doing. In addition it allows me to more easily hire people and get them up to speed quickly or if I lose someone I know how to do that task and I am not held hostage or overly dependent on any one person.
- Here is a quick example of a sample turnover procedures.
- Once someone gives us notice to vacate (here is a sample of one of our move out inspection flow charts)
For example we have our systems for
-
-
- Pre-marketing,
- Final walk through (see sample flow chart of walkthroug, letters to go out to tenant with instructions on ours and there responsibilities)
- Once it is vacant
- (i.e. walk through checklists for repairs, vendor coordination, property showing, applications etc.)
- A few things we do to make it more efficient
- Use an electronic Realtor (sentry) lock box. This device allows my assistant to generate up to 10 random codes daily from the office. When someone calls my google voice number I get a text with the voice message which I forward to her which goes in our database, she calls gets the rest of there contact info including an email. We then send the prospect an email with instructions on how to get to the property, how to enter and THERE OWN code which we inform them to not give out to anyone because it is tracked (see sample form letter we EMAIL to prospects). We are then able to log on to see who and when looked at the property so we can follow up to see if they are ready to fill out an application and why or why not. Also now that we have there email address if they decide not to rent with us now we can update them in the future about upcoming vacancies 6 ,12,18,24Â months from now when they may be thinking of moving again.
Viewing instructions for our units
- If they want to fill out an application we use my smart move/transunion credit/criminal check which they do online and either pay for or they give us the cashiers check and we then pay for (I like this way better because they are more committed after giving us the credit check fee) which we get a copy and so does the prospect. With this service I do not have to collect social security codes and worry about certain compliance issues. In additiona it also speeds up the process. We then get a approve or disapprove based on our criteria and can then make a decision.
- Once an application is accepted we send them an approval letter/email/phone call and let them know they will shortly receive a lease package via email for electronic signature using a service called docusign which is legally binding.
- my assistant puts together the resident package which includes some of these items
- lease agreement
- resident welcome manual which spells out the rules in detail and what is expected from all parties
- non smoking/drug addendum
- maintenance addendum (look on blog for sample)
- etc.
- All of these are put into docusign for email/electronic email distribution. An email get’s sent out via email which is signed by both parties (legally binding) and no paper has to be printed. The fully executed copy goes in there file which is on our computer server for any reference in the future.
- A few things we do to make it more efficient
-
Hopefully this can give you some ideas on better ways to operate your apartments which will reduce your risk. As always feel free to give me a call or drop me an email to discuss further.
