Was listening to a podcaster bemoan the failure of the Small Lot Subdivision Ordinance to deliver affordable housing in LA. There’s a lot of noise around this issue, because the homes that have been built under the ordinance have ended up being pretty expensive. Have two, distinct points to make about this issue: It is … Continue reading “Fixing the small lot ordinance”
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Imagining a cashflow monster
Regular readers know I’m an avid follower of Berkshire Hathaway, Warren Buffett’s company. One interesting thing about BH is that Buffett never issues dividends. His argument is that he can find better uses for cash the company generates than the investors could on their own (particularly given that dividends are subject to taxes at the … Continue reading “Imagining a cashflow monster”
On competing with cowboys
Yesterday, while perusing the MLS, I came across a renovated duplex for sale in a neighborhood we like. Curious about the renovations, I checked the LADBS website to review the permits pulled. Of course, there were no permits on file for the rehab. This infuriated me. Why? Well, these units are going to compete for … Continue reading “On competing with cowboys”
Thinking through investing in a hot market
As we look at making deals late in this expansion phase, I have been doing a lot of thinking about what, exactly, we risk by buying high. After all, we are (effectively) permanent holders, so it’s not exactly clear why we should care about prices going down after we acquire an asset. But I am … Continue reading “Thinking through investing in a hot market”
Another successful Adaptive deal
We just closed on the refinancing of an 11 unit apartment building. We bought the building two years ago for $2.65MM, then spent another $900k renovating it, bringing the total investment to ~$3.55MM. Our net loan proceeds on the refi are $3.54MM and we’ve accumulated ~$250k in cash from operations since lease-up. So, today we’re … Continue reading “Another successful Adaptive deal”
Navigating a hot market by raising cheaper capital
Two days ago, I wrote about how hot the apartment market has got and promised to talk about how we, and others, are navigating it. Yesterday, I discussed a tactic that kind of works right now, though we can’t use it. Today I want to talk about another way to approach this hot market: By … Continue reading “Navigating a hot market by raising cheaper capital”
An effective tactic we just can’t use
Yesterday, I noted that pricing for apartment buildings in LA has become detached from the underlying cashflows the buildings can generate. But some deals are still getting done at (semi-)reasonable prices and I want to discuss how, and why it’s a problem for me. Right now, listing brokers and sellers are pricing properties very aggressively. … Continue reading “An effective tactic we just can’t use”
Buyers beware
The math underlying the apartment repositioning business is simple: It comes down to the relationship between the price at which we can buy buildings and the rent we can achieve for renovated units. Because we started doing this pretty much at the bottom of the last recession, for our entire career, both prices and rents … Continue reading “Buyers beware”
Why I’m starting up again
Have been wrestling with the question of whether or not to continue blogging. The downside is obvious: We have tons of copycats / competitors who read this site to glean information about where we buy, how we renovate, etc. The more competitors, the more prices for deals are bid up, and the fewer deals make … Continue reading “Why I’m starting up again”
Will the glut downtown affect Adaptive?
…and we’re back. Have been getting a lot of questions re the high apartment vacancy rate in DTLA (about which Curbed wrote the other day). Here’s the situation: As usual for this stage of the cycle, developers have overbuilt downtown (they always do this, because DTLA is one of the few neighborhoods in which it is … Continue reading “Will the glut downtown affect Adaptive?”