Have spent the past few months mostly focused on securing a pool of capital for us to invest during 2019. As you probably know, I’m getting better at fund-raising, but it’s not my favorite part of the business.
Anyway, now that I have capital to deploy, have turned my attention back to finding interesting properties in which to invest. But what, exactly, does that entail?
Well, besides waiting for one of the brokers with whom we’ve done a ton of business to bring us something tasty off-market, it’s mainly about scouring the public listings, looking for something that’s been overlooked.
But I don’t look at listings in the same way that normal buyers do. I don’t care about the existing cap rate or GRM, because we’re in the business of radically changing the buildings we buy. And I ignore price per unit, because it’s a pretty stupid way to look at apartment buildings (why would you use a number that treats studios the same as three beds?).
Instead, I’m looking closely at the buildings themselves and asking myself three simple, related questions:
- What can this building become?
- What rents will the renovated building generate? and
- How much will it cost to make the existing building into the new building?
Obviously, you could spend hours and hours doing this exercise for deals where the numbers will never make sense. So, in real life, I basically pattern-match; in other words, I look for deals that look very much like the 80 or so deals that have worked out well for us in the past.
And, when I find one, I pounce.