Our agents have got pretty busy helping people buy apartment buildings, so I have been spending more time than usual advising on deals. One of the issues that keeps popping up is around inspections. As a buyer, it is imperative you personally inspect each and every unit in any building you intend to purchase. After … Continue reading “Remember to do this before inspecting a property”
Category: Due Diligence
What you could learn from a wild-catter
Recently, I’ve found myself repeating the same piece of advice over and over, so I’m going to share it here. The context is as follows: Someone comes to me for help in optimizing her real estate business. He wants to figure out how to generate more revenue per deal or how to do more deals in … Continue reading “What you could learn from a wild-catter”
Welcome to the week of short posts
We got a deal that I think I really like over the weekend. However, the diligence period is only three days. There’s an unbelievable amount to cover in these three days: Physical inspections Reviewing leases, estoppels, rent roll, etc. Reviewing the permit records Compiling a construction budget for the rehab Confirming our pro forma rents … Continue reading “Welcome to the week of short posts”
How we forecast the rents
One of our key advantages in this business is our ability to accurately forecast rents for renovated units. We’ve previously discussed the importance of this skill: It’s understanding the rents that allows you to properly underwrite deals. We are able to do such accurate forecasting because we are constantly leasing renovated units in the neighborhoods … Continue reading “How we forecast the rents”
Introduction to Phase 1 environmental reports
Some of the money we’re deploying on behalf of an investor right now comes out of a 1031 exchange. For those who don’t know, a 1031 is a way to avoid paying capital gains on sale of an investment property by immediately purchasing another property with your sale proceeds. Arranging a 1031 exchange requires the help … Continue reading “Introduction to Phase 1 environmental reports”
Why we avoid pre-1920s buildings
I love buildings built in the 1920s, but I rarely buy buildings built before that. Why? It has to do with how the buildings were built. By the 1920s, Los Angeles construction practices were not that different from today’s. Layouts, door width, ceiling height, spacing between studs, size of lumber used – all are quite similar to … Continue reading “Why we avoid pre-1920s buildings”
All about earthquake shut-off valves in Los Angeles
Was at an inspection yesterday and got an interesting question from the listing broker, which I think deserves an answer here. The building in question, which was built in the late 1980s, had one earthquake shut-off valve installed on each bank of gas meters. For those who don’t know, an earthquake shut-off valve is a … Continue reading “All about earthquake shut-off valves in Los Angeles”
Dealing with contingency removal anxiety
Yesterday, we removed contingencies on the second deal for Adaptive Realty Fund 3. No matter how many times I do this, I still get a major hit of anxiety during the days leading up to the contingency removal. I obsessively check and re-check the diligence. I harass the contractors about their bids (Is this included? … Continue reading “Dealing with contingency removal anxiety”
When to order the appraisal
Recently, the question of when to order the appraisal has caused problems for us on two deals, so I thought I would address it here. Just so everyone is clear on what we’re talking about: When you use a loan to buy a building, the bank requires an appraisal be conducted. Depending on the size … Continue reading “When to order the appraisal”
Concentration vs. diversification
One of the interesting issues with managing other people’s money is having to decide how exactly to allocate that money among projects. At any given fund size, you need to decide whether you should do a small number of big deals or a large number of small deals. All the theory points toward diversifying. After … Continue reading “Concentration vs. diversification”