Category: How to

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”

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”

What is the difference between “price” and “value”?

Answered this question on Quora yesterday and thought it would be interesting to re-post here: The key to understanding “value” is to separate it from “price”. “Price” is the amount of a given currency at which a buyer is willing to buy or a seller is willing to sell (sometimes, those numbers overlap, in which … Continue reading “What is the difference between “price” and “value”?”

The forecast on our latest deal

As the economy has continued to improve, both nationally and here in LA, it has become harder and harder to find deals worth doing. That said, it’s definitely not impossible. Today, we are closing on a deal with the following characteristics: Currently a vacant triplex Paying $220 / sq ft Suitable for conversion into a … Continue reading “The forecast on our latest deal”

Regulatory insanity

Sometimes people wonder why rent is so high in Los Angeles. Here’s a perfect example. We’re adding four units to a duplex we bought in Highland Park. Because LA has decided to go down the path of “low impact development”, this is what we’re confronted with (again, on a six unit project!): “First they have … Continue reading “Regulatory insanity”

When liquidity dries up for supposedly liquid funds

When people invest with us, I always warn them not to expect their money back at any particular time. Why? Because real estate is a fundamentally illiquid asset (eg it takes a long time to sell). As long as you’re not a forced seller, you’l probably do very well… but you can get killed if … Continue reading “When liquidity dries up for supposedly liquid funds”

Pro tip: Don’t move the mailbox

When you renovate an apartment building, you may be tempted to move and/or replace the mailbox. Don’t. Why? When you install a new mailbox for an apartment building, it comes unlocked. The USPS needs to install a master lock so that the mail-carrier can access the slots. But, due to budget cuts, the USPS is down to … Continue reading “Pro tip: Don’t move the mailbox”

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”