Where our deals come from

Spent some time this morning looking back at all the deals we’ve done to see if I could learn anything about how we have historically sourced.

Here are the numbers:

Total deals done (as a buyer myself or as part of our fee-for-service business): 81

Of the total, number that were brokered: 74

Total number of different agents representing those sellers: 65

Agents who sold us three deals: 1

Agents who sold us two deals: 6

The above is a pretty surprising result, right?

While there are extraordinarily active agents working in our markets, almost all of our deals were done with agents who only ever sold us that one deal.

If I wanted to do a ton of work, I could look up each of those agents on the MLS to see how many deals they’ve done. I suspect I’d find that the vast majority of them very rarely sell apartment buildings.

What does this mean for our deal sourcing efforts? Well, it turns out that we should probably not spend our time focusing on the most active agents in our markets. They get tons of listings, but, because they’re sophisticated, their deals end up selling at prices we would not pay.

Instead, we need to figure out how best to reach those one-off agents, the ones who only get an apartment deal once in a blue moon. That’s where the bargains are.

A difference between brokers and principals

Got a phone call today from a great pair of brokers with whom I have long-standing, mutually-profitable relationships.

They were calling to congratulate me on closing our most recent deal.

On the call, I told them again how much I appreciate their continued help (particularly on this deal, which got a little hairy).

But also I had to tell them I did not share their excitement about the closing.


Well, for a broker, the deal is done when the deal closes. At that point, the broker’s job is done and he (rightfully!) gets paid.

But, for the principal, particularly if the business model is value-add (eg where there’s a lot of work to be done to the asset), closing is just the start.

Now comes the hard 12-18 months, during which we try to take this broken-down, old building and make it beautiful again.

Wish us luck!

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. But that doesn’t mean that everything is selling at list price.

Often, we see transactions closing at meaningful discounts to list. By meaningful, I don’t mean $10-20k off. I mean off by hundreds of thousands of dollars, enough to materially improve the deal for the buyer.

In general, the way this happens is that someone jumps on the initial listing, offering to pay full price. Then, he gets into contract, inspects, and tries to renegotiate the deal. Often, the seller tells the buyer to take a hike. But, sometimes, the seller is so worn down by the process that he agrees to accept a huge price chip.

So, this tactic definitely works. But I can’t use it.


We participate in auctions all the time. We want the brokers who run those auctions to know, with 100% certainty, that the price we offer is the price at which we’ll close. That way, when they’re looking at a bunch of offers in the same range, they can in good conscience push their clients to accept ours.

So, we can’t chip price, ever.

This strategy definitely hurts us in this part of the market cycle. But (i) I prefer to conduct my business in an honorable way; and (ii) even if I didn’t care about honor, I’d still be 100% confident that, over an entire career, behaving honorably will mean we’ll get to do more and better deals than if we acted like jerks.

Trusting the process

One of my agents called me yesterday to see if I had any ideas to help her. She’s got a great client who has been making strong offers on single family homes and getting outbid. Everyone is frustrated.

As it happens, my parents are in the market for a home on the Eastside (working with another of my agents), so I am aware of how hot the market is right now.

While I was able to share a few, minor ideas for improving the way my agent’s offers are written, the truth is that, in a hot market like this, you just need to have discipline and patience.

By discipline, I mean: The ability to calmly evaluate what a particular property is worth to you and avoid being sucked into offering more.

And by patience, I mean: The ability to keep evaluating deals and making reasonable offers until one hits.

As long as you continue making sane offers, you will eventually win one of these auctions at a price with which you can live. Just don’t give up.

Beware fake Adaptive ads on Craigslist

Recently, we’ve had a little burst of scammers copying our rental ads and using them to rip people off.

I suppose on some level, this is flattering… they probably feel like the pics of our units will get people fired up enough to wire money to Nigeria or where-ever the hell the scammer live.

But I’m obviously outraged. We’ve worked so hard to build a brand that stands for high quality apartments and good customer service. And some nitwit is out there using our name and pictures to rip people off.

Whoever it is is pretty brilliant: He’s using our stuff, but quoting rents much lower than we charge, thereby causing a frenzy of people interested (we know, because some of them call us!).

So, if you see an ad using our pictures and name and quoting a ridiculously low price get in touch with us and confirm before wiring anyone any money.