How My Views on Commercial Real Estate Are Changing
By: Blake Imperl
As I am approaching the end of my first month as an intern at Gabhart Investments, I’d like to reflect on what I’ve learned, and what has changed thus far.
What I’ve Been Doing
Over the past few weeks, I have been spending a lot of time reading the material Curtis has provided me on Property Valuation & Investment Analysis. Although it is mainly an overview of the subject, it has proved to be some highly valuable content. This material essentially picked up where I left off in my Real Estate Investment Analysis class that I took last semester at San Diego State. I have been brushing up on subjects like tax benefits, 1031 exchanges, expenses, leverage, returns, evaluating cash flow, and much more. I still have a great deal of learning to do on these subjects, but it is exciting to see how what I’ve learned in the classroom correlates to real world applications. It is my intention to continue to read up on these subjects and ask as many questions as I can.
I’ve also been observing how Curtis and his team assemble marketing packages for commercial properties they are listing. I was doing things similar to this at my last internship at Realty National, so I’ve enjoyed seeing how this translates in the commercial arena
Commercial Real Estate Blog Posts
Another task I have taken on is the editing of Curtis’s blog posts. My first edit was a post on property walkthroughs. One tremendous benefit of doing this has been the information I’m learning is sticking much deeper than if I just glanced over it. It’s proved to be a great learning tool for me and I’ve even taken on the task of researching some of the topics I was curious about. Writing has always been a passion of mine, so getting the opportunity to revise and write some stuff has been great. I’m excited that I will get to continue to edit blog posts during my time here.
This past week I had a great learning opportunity with Curtis to do a walkthrough of a 13-unit apartment building in Fallbrook. I was able to learn about some of the things you should be looking for in a property, both on the interior and exterior. This was a neat real life application after reading Curtis’s article on property walkthroughs. This is certainly the kind of stuff you’d never learn in a class room.
13-Unit Apartment Building In Fallbrook
La Jolla Multi-Family Building
Another property we looked at was a 5 unit multi-family building in La Jolla. This was a very intriguing property because it had great bones, was less than a block to the beach and offered several routes for renovation. When walking the property, we looked at things like the condition of the floors, the bathrooms, kitchens, balconies, electrical, etc… It was far from move-in-ready, however, at the right price this could prove to be a great deal.
Curtis and Abe inspecting the condition of the upstairs balcony
the interior of the detached studio
Co-Star Lunch & Learns
In addition to the property walkthrough, I’ve also attended two Co-Star lunch and learns with Curtis and his assistant Dianne. The one that stood out to me was on the housing forecast over the next few years in San Diego County. I enjoyed this meeting because this is a real problem we will be tasked with fixing over the next decade. This past semester in my investment analysis class I did a great deal of research on this subject, so it was neat to hear the industry take on the issue.
Lastly, I have very much enjoyed the opportunity to pick Curtis’s brain. He’s always offering me valuable tips and knowledge about real estate and just life in general. Whether it be tips on client relations, listing properties, or even just financial management, I’ve been trying to act like a sponge of knowledge. He’s always honest about things and I respect that.
My views on real estate are growing stronger than ever and I’m excited all the learning opportunities that lie ahead. I am finding that the San Diego Commercial Real Estate Market contains more possibilities than I ever could have expected. Stay posted for my final update in August!
In a bit,
Intern, Gabhart Investments
So a little bit about me; hmmmm where to start? Well first let me make it known I have no, prior real estate experience. Prior to moving down to San Diego, I studied International Business at Pepperdine University and then went into wine sales. I was involved in a small family winery in the heart of the very beautiful wine country of Paso Robles, CA. I decided I had drunk enough wine and moved down to San Diego with my best friend to start my MBA studies at USD (University of San Diego). However, that path quickly changed, and I found myself of a path of real estate. I added an additional year to my MBA studies by enrolling in a Real Estate Master’s Program (MSRE) at USD. It was at the beginning of the program in which I took and interview for the only non-paid internship position offered (all other internships were paid). That was on 9/22/10
1. Why did you choose to intern with Gabhart Investments?
It was very simple for me to choose to intern with Gabhart Investments (GI) as this internship was more encompassing than the others which I interviewed. I liked that Curtis’s business model allowed for a hands on approach involving every stage of flipping a property. I knew I wanted to learn several aspects about how flipping properties, from how to acquire to how to sell. Other internships however were more focused and would have been for too narrow in what could be absorbed and learned. Finally it was the reading of Curtis’s and Nick’s blogs and bios which sold me on joining Curtis’s team. I felt I would be a good fit after getting to know both Curtis and Nick a little better.
2. How did you hear about the internship?
The internship was an opportunity presented to us through our program director for the MSRE program at USD. She simply emailed the description and contact information. I then reviewed the web site, made an appointment for an interview, and the rest is history.
3. Why would you work for free?
The fact that this internship was unpaid wasn’t really an issue for me. I figured going in that any internship would be unpaid. If I landed an internship with pay, then it would have been an added bonus. However this dilemma did present itself. GI was the only internship not offering any sort of compensation. My dilemma was to take an internship with Pacifica Company, which was paid, or interning with GII.
I chose GII because I figured the value of what I could offer, and receive, was greater with GI without compensation, than that of Pacifica Company. What could be taken away from working and learning from Curtis seemed much more practical and something which could be readily applied.
4. What are you trying to accomplish?
I am trying to accomplish several things while interning with GI. First and foremost is to learn as much as possible about how Curtis does business. By working side by side and going to the different properties and being involved at all the different stages, I will be able to determine if this is a field of real estate which I will pursue. If this is something I find I want to pursue further beyond this internship, then I will also need to land a position either here with GI or with similar firm here in San Diego.
5. What were your views and perceptions before you started? Are they different today from 30 days ago?
In as little as just 30 days my views have changed dramatically. Prior to starting with GI, my perceptions were that flipping houses was relatively easy and that raising the capital would be the only thing holding me back from being able to do this on my own. I figured it couldn’t be that hard to by a property, hire a general contractor to fix it up, and then sell it. I wish I still believed it is all just that easy.
All ready through working with Curtis, I have a new respect for being able to be successful through flipping houses.
6. What tasks have you worked on so far?
As mentioned in the previous answer, I addressed just how my perceptions have changed in the first 30 days. So far I have only worked on the beginning of the process, acquiring the properties. Primarily I have worked on comps for the most part. This is searching MLS and other websites to find similar properties and estimate what the property would sell for once rehabbed. We find the comps in order to run our proformas to determine whether a given deal would produce the necessary returns for our investors.
7. What have you learned? Is there anything in particular that stands out?
SO far I have learned how to run comps and proformas. I look forward to the coming months as more properties are acquired and learning how to rehab the properties.
What stands out so far is how to run comps when there aren’t many similar properties in a close area to the subject property. This means how to use properties that may not be identical and how to adjust the value of such. For example if I am running a 3/2, I could use a 3/3 comp and figure that extra bath adds about $15,000 to the comp, or I need to subtract that amount from this comp to be comparable to my subject property. This could be a bath, bedroom, garage, etc.
I am also starting to learn how to deal with realtors and how to get them on our team so that they can bring us deals to buy. Curtis is great at this, because he develops a sort of loyalty with each individual agent. When an agent brings us deal, say they are representing a seller of a distressed property, Curtis will have them represent us as buyers and Curtis also promises to re-list the property with the same agent when it is time to sell. This is a great incentive for realtors to bring us deals, as they make commissions on several ends of the deal. Usually at least 2-3 times during the process, which means 2 -3 times they receive commissions.
8. What is the most important thing you have learned so far and why?
BY far the most important thing I have learned so far is hat speed is critical in this business. Curtis takes a red-light/green-light approach. Basically this means trying to find out quickly why a deal won’t work. This is a crucial skill to have and to be able to determine if a deal is worth pursuing very quickly.
Perfect example is the property we picked up on Coronado. Curtis received and email from another individual who flips houses in North County and had a property in OB on Coronado. We received the info about 10:00am. We quickly got onto MLS and searched any comps to come up with a value for what we could offer for the property. It is important to look at comps on MLS because from the comps we can roughly estimate what the property would sell for once rehabbed. If we can determine that the sell price wouldn’t return the IRR for the property we can just cross it off now, before wasting time driving the property
We quickly determined that the property, based on the comps and given rehab estimates would work for us. It was now time to drive the property and comps. Once we get to a property we can get a better feel for what rehab will be needed and more importantly, how much money is needed for rehab costs. While we were at the Coronado property we talked to the neighbor who informed us that other flippers were looking at the property just a few hours before us. We quickly drove the comps, returned to the office and were running proformas and coming up with the best strategy to acquire this property. Our first negotiations began around 2:30. Not sure what time the deal was agreed upon, by the next day when I arrived Curtis already had an agreement to purchase the property.
Because how lucrative these deals can be, speed is crucial. Had we not moved so fast on Coronado, another flipper would have picked it up. On Coronado, the property was purchased for $320,000 and with-in two days we may have it sold for $400,000 (net to us) with no work needed. $80,000 for moving quickly isn’t a bad pay day for a few hours worth of work.
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