Had someone yesterday email me asking why I think people are paying insane prices for Los Angeles apartment buildings. By insane, I mean 15-19x annual rents. At those prices, there’s basically no cashflow; in fact, at the upper end of the range, it’s likely you’ll pay to own the asset each month (instead of the … Continue reading “Why people pay high prices”
Category: Buying
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. … Continue reading “A minor epiphany about valuations for larger buildings”
Thinking about the components of value
Lately, have been thinking about what we mean when we say, for example, that we’re earning a 7% unlevered return on a property. The math is pretty obvious: Say we invest $2MM in a property between acquisition and renovation (assume this is cash and that there is no mortgage). If we generate $140k / year … Continue reading “Thinking about the components of value”
What we talk about when we talk about appreciation
Have been doing some thinking about appreciation and how it affects our business. First, what is appreciation? It is the tendency, over time, of the price of real estate (in Los Angeles, anyway) to increase. A bit of clarification: Obviously, there is no guarantee that real estate will increase in price over any particular time … Continue reading “What we talk about when we talk about appreciation”
A savvy deal I couldn’t do
Just got a flyer from a reasonably active local broker announcing a deal he closed with the following characteristics: In Westlake, a rapidly improving neighborhood situation between Koreantown and Downtown 10 units totaling 9,800 sq ft 15,000+ sq ft lot R4 zoning $1.8MM price The flyer didn’t specify the rents, but, as I recall, the … Continue reading “A savvy deal I couldn’t do”
Losing a good deal to make a better track record
Am looking at a deal now that has an interesting problem: While ZIMAS and the county both show 12 units, the certificate of occupancy shows 11 units. The building only has 11 parking spaces, so it was pretty clearly built as 11, with the final unit added at some point along the way, most likely illegally. … Continue reading “Losing a good deal to make a better track record”
Letting a pitch go by
When someone joins Adaptive, one of the things I tell her is that she should not worry too much about making a mistake. The reasons are that (i) we can fix pretty much any mistake, so long as we know about it*; and (ii) Jon and I make bigger mistakes than any of our employees … Continue reading “Letting a pitch go by”
Bad news about open ceilings in LA apartments
Have some bad news for those of you who love vaulted ceilings in apartments… they’re almost always illegal in LA. First, what do I mean by vaulted ceilings? They’re the ones where you can look up and see the structure of the roof. Here’s an example: Beautiful, right? So, why should that be illegal? Two reasons: … Continue reading “Bad news about open ceilings in LA apartments”
Found another good one
Is it really hard to find deals right now? Yes, it is. The market for income property continues to be very hot. And yet we just went into contract on a 12 unit with optimally-sized units and parking in a good location for ~$200 / sq ft. That’s a good deal now, but it also … Continue reading “Found another good one”
4443 Willow Brook is for sale (again)
Don’t get excited. I’m not breaking my prohibition against selling any more properties. 4443 Willow Brook is a 10 unit complex Jon and I renovated in 2010-11 via our old entity, Better Dwellings. We sold it in 2012 for $2.1MM, which was around 10x the rent. Whoops. We made a bunch of money on the … Continue reading “4443 Willow Brook is for sale (again)”