Results for ‘Real Estate Math’ category

Some mildly annoying numbers

Just finishing a 4plex in a really cool, up-and-coming neighborhood that we renovated on behalf of an outside investor. Was reviewing the original pro forma and revising in light of what I believe the rents will be… and got an annoying surprise. Based on the original pro forma, this was not a deal that we

A minor epiphany about valuations for larger buildings

Just had a minor epiphany while walking over to the office from breakfast that I thought I’d share with you. It’s kind of embarrassing, in a “slap-myself-in-the-head-for-not-recognizing-this-earlier” kind of way, but I’m all about honesty on this blog, so here goes… Regular readers know I spend a lot of time thinking about the components of value.

Silver Lake rents and operating margins

Spent some time this morning looking at rents in Silver Lake. When we started in this business back in 2008, a really nice 1 bed in Silver Lake was around $1500. Today, a similar apartment goes for $2200-2300. That’s an increase of ~50% in eight years… or around 5-5.5% / year (inclusive of compounding). But that’s

Why developers prefer to build luxury apartments

Here’s a question that’s been popping up all over the place: Why do developers only build apartments for the rich? The answer, as with most things in our business, is in the math. Imagine you can buy enough land to build 10 units for $1MM, or $100,000 per unit. Let’s say you have two options:

Uh-oh… they’re baaaa-aaaccckkkk

We’ve now reached the point in the cycle where brokers describe their over-priced apartment deals as “condo conversion opportunities”. Why would a broker do this? Well, if your client demands a price so high that no buyer could actually achieve any kind of yield on their investment, you don’t really have many options. But, in all

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