Rain’s coming

Yesterday’s LA Times had a pretty strongly-worded article warning about this winter’s El Nino, which is shaping up to be a once-in-a-generation weather event.

Why am I writing about this now, during the summer, on a real estate blog?

Because now would be a good time to replace worn-out roofs on your buildings.

Once the rain really starts to come, it’s difficult to work, plus there will be tons and tons of demand for roofers’ services. You can imagine what that will do to pricing.

We replace the roofs on all of the buildings we renovate. But we usually do so in the middle of the project. This year, I think we’ll try to front-load them, so that we’re less vulnerable when the late-Fall rain comes.

 

An interesting deal we won’t win

I got a call about an interesting building in Highland Park a few weeks ago.

Ordinarily, these are the types of calls I love… an interesting deal, a broker with whom I’ve done plenty of business, etc.

But this one is almost definitely not happening, and here’s why: Because it’s a bankruptcy sale conducted under the auspices of the court, there is no “inside edge” available.

It’s a straight auction, in which whomever is willing to pay the most wins, with no regard for actual ability / willingness to close, etc.

So, we’re bidding against everyone who ever read an article touting Highland Park as the next Silver Lake. And, because there are plenty of dentists who can come up with a few million bucks, it’s very unlikely we’ve going to get the deal.

There are three reasons main someone might outbid me on a deal like this:

  1. Underestimating the costs of the rehab;
  2. Over-estimating the rents (or, the rents achievable at a specific renovation level); or
  3. Willingness to accept a lower return.

I’m obviously fine with #3. The other two irritate me, because, while it’s always nice to see a competitor screw up, there’s no way for me or my investors to profit from it.

Here we go again

We recently started work on another project, this one an eight unit deal in East Hollywood, right near some other projects we’ve done.

It’s an interesting project: The front four units are going to be huge 3 beds and the back four (which were built later) will be reasonable sized 1/1s. We’ve got some parking and outdoor space.

My guess is that the units are going to end up being really amazing.
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