In a recent email to investors in Adaptive Realty Fund 4, I wrote: “In our business, there are three types of variables (of varying degrees of magnitude): Things we can’t control… Things we can control… Things over which we have some, but not total, control…” Spent the rest of the letter discussing the most important … Continue reading “The most important variable”
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Down on emotional support animals
In today’s edition of Property Management Chronicles: Had two tenants in a unit They applied with no pets Decent-to-good credit, real jobs, etc. After approving them, they showed us paperwork for their three emotional support pitbulls No wanting to get in a huge fight, we let them in For the entire length of their tenancy, … Continue reading “Down on emotional support animals”
Leadership failure
One of the worst things about running a small company is having to let people go. When you hire someone, you’re entering into an exchange, where he gives you his best effort during the most productive hours of his day, for an indefinite period, and you give him money to support himself. It’s awful for … Continue reading “Leadership failure”
How rising construction costs impact affordability
Everyone knows LA is in a housing crisis and everyone is talking about up-zoning as a potential fix. But, recently, a big part of the problem is that construction costs are skyrocketing… and that’s what I want to discuss today. What’s going on? The wipeout of 2007-9 crushed a lot of subcontractors (plumbers, framers, roofers, … Continue reading “How rising construction costs impact affordability”
Why are there vacant buildings for sale?
Lately, have seen a bunch of vacant apartment buildings come on the market for sale. Normal investors don’t buy vacant buildings, because banks generally won’t lend on them. So, these vacant buildings are being marketed to cash buyers who would presumably renovate and re-tenant them. Since a sale strategy that dramatically limits the pool of … Continue reading “Why are there vacant buildings for sale?”
Let’s behave ourselves
Have been stewing over the behavior of a few of our competitors, who skirt city law in order to drive up the returns they earn on deals. All businesses are subject to some level of government regulation. For a variety of reasons, including the fact that the assets are immovable, the ownership of rental housing … Continue reading “Let’s behave ourselves”
Long term holds
Why do real estate private equity investors sell assets? After all, most private owners of real estate generating really nice cashflow hold forever. And selling forces you to either re-place the capital via a 1031 exchange under duress (eg with a short window) or to pay huge tax bills. So, again, why do the smartest … Continue reading “Long term holds”
How increasing replacement costs imply a widening investment moat
Experienced real estate investors know to keep an eye on replacement cost when considering rehab deals. The idea is to try to ensure your property will have a cost advantage vs. its neighbors. The thought process is pretty simple: When considering doing a project, you want to look at what it would cost a competitor … Continue reading “How increasing replacement costs imply a widening investment moat”
Unsolicited advice for owners of non-RSO buildings
Owners of non-rent stabilized apartment buildings in Los Angeles with rents below market (eg most of them) ought to be considering their options in light of the likely repeal of Costa-Hawkins. Two obvious courses of action: Sell now, while the market continues to (mistakenly, in my view) place a premium on non-RSO buildings; or Immediately … Continue reading “Unsolicited advice for owners of non-RSO buildings”
A good podcast
Have been spending my morning commute listening to a podcast I think you guys would love. It’s call The Private Equity Funcast. The hosts are two of the partners in a new private equity shop in Chicago called Parker Gale. They have a small (for private equity!) fund of about $200MM which they’re using to … Continue reading “A good podcast”