Results for ‘Real Estate Math’ category

How to value a vacant building

A friend of mine from college called me late last week with an interesting problem: He wanted to know how to value a vacant building he was considering buying. There are two good ways to think about this problem: The first might be thought of as “price per pound“, where we are looking at the

Why every last dollar of rent matters

Sometimes people question why it’s so important to get that last dollar of rent. On a $2800 apartment, does an extra $100/month matter? After all, $100 is only 3.6% of $2800… no a big deal, right? Wrong. Here’s how we think about rent in our business: All buildings are worth some multiple of their total

How low interest rates are changing the multifamily market

Had a quick conversation with a loan broker last night about the loans available on 5+ unit apartment buildings right now. You can now get a 5 year fixed, non-recourse bank loan for 3.62% interest. Let’s take a look at what that means by using the example of a 5% cap deal, which is a

The $100,000 eviction

I got a call from a regular reader the other day about his building in Los Angeles. I’m going to share his story and I hope he won’t mind. This guy has several great, normal tenants and one low-paying, rent controlled tenant who has a kid with pretentions to gang-bangerness. The kid has done all

How one little equation perpetuates slum conditions

Dave C commented on yesterday’s post asking, in effect, what can be done about a rent control building which is deteriorating. The short answer is: nothing. The reason is one little equation. If you’re the owner of a rent-controlled building with below-market tenants in Los Angeles, your tenants are never leaving. You can’t raise the

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