Tweeners

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In basketball, a tweener is a player who’s between positions, like a slow, 6’6″ forward with a strong post game. He’s too strong for small forwards and too quick for power forwards. But, he’s also too slow to guard small forwards and too short to post-up power forwards. There’s value there, but it comes with significant drawbacks.

Today, I was talking to a guy who brings me off-market deals about an absolutely enormous fourplex in East Hollywood at a $150 / sq ft and a GRM of like 12. I found myself trying to explain to him why the deal didn’t make sense to me. I couldn’t find the exact word for the property. It’s only now that I realize it was a tweener.

Why is it a tweener?

Well, at $150 / sq ft in that area, it’s a little too expensive to flip. I’d  spend $1MM to buy and rehab it and then sell it for $1.2MM gross. There’s not enough margin there to make it interesting for my fund.

At 12x the annual rent, it’s not really a great buy and hold deal either. I’m too lazy to do the math right now (it’s almost bedtime and we have an early doctor’s appointment to check on the bun Lucy has in the oven). But, my guess is that we’d be looking at something like a 5% / year cash on cash return. Not bad if you like the property, there’s upside in the rents and you think the area is going to improve, but not worth running around raising money to buy.

So, I’m not buying it. I keep looking at the numbers and thinking it’s interesting. But at the end of the day, it’s a tweener. It’s not posting up Gasol and it certainly can’t run with Kobe.

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