Think-Realty-Magazine-April-2018

HOUSING NEWS REPORT

ATTOM DATA SOLUTIONS

presented themselves both on market and off. During that 58-year period we acquired properties in 15 states and 27 metropolitan areas. While the real estate business is one where you make your profit when you buy not when you sell, we make two mistakes; we did not buy enough and in many cases sold too soon. When asked how I have acquired my wealth through real estate and how it was done, my answer is very simple. I made every mistake you could possibly make, tried to do it only once and lived a long time. Therefore if you want to get rich in real estate you simply make a lot of mistakes and live a long time. That also reminds me of the real estate joke where developers were having a big conference and were complaining how difficult it was to find good opportunities to invest and develop. Finally in the back of the room one developer said “oh I’ve found the great place; everything I am buying is increasing in value and we are doing very well.” A friend asks “where is it?” He said “do you think we are going to tell you?” MACRO: TAXES AND SCHOOLS I am not able to predict where the next opportunity will be but I am going to share with you some of the strategies and experiences we have had on this long road to real estate success. Our past includes 1920s high-rise bank buildings in downtown Los Angeles, office buildings and high-rise apartments in Atlanta Georgia, industrial shopping centers, apartments and a MHP in Central Ohio, industrial and agriculture in the San Joaquin Valley and projects in Albuquerque and Dallas and many other locations. As a result we have learned that taxes have a high impact on economic development — both personal and

business.W If you look at a state’s overall tax picture and business incentives, you can often predict in what direction the area is going. Next would be schools. These are both macro factors in that they affect somewhat of a larger area. MICRO EVEN MORE IMPORTANT Most importantly in making a decision on a particular acquisition is the micro factors. If you are looking at an apartment these include such things as school system ratings, poverty ratio, the age of the property, maintenance efficiencies, occupancy and the conditions of cars in the parking lot. The next opportunity may be within your own backyard or that may be the worst place to invest. Obviously the data and knowledge about the market may be easier to acquire close to home but we have found that the one constant is change. While your neighborhood is improving or declining, other locations are improving or declining and so on. With retail there is a different set factors such as how many cars per day go by the property and co-tenancy. Multi-family may be on a very busy street but with appropriate sound barriers and construction can be very successful. A shopping center without traffic seldom succeeds. There are numerous tests that can be undertaken with in-house underwriting — namely population trends and activities based on bank deposits, employment, post office receipts and activities etc. The key statistics with respect to property ratio, schools, residential and many other of these indicators are readily available on the internet for free. Underwriting also has to be done on-site regarding the condition of

the building, quality of tenancy and operating efficiencies. If you are looking at a project and have not found anything wrong, you simple have not looked far enough. REDUCE INEFFICIENCIES Real estate is finding problems and determining whether or not you can solve them. Some of the best opportunities can be low cap rate properties that are inefficiently operated and where there is opportunity to value-add, which can bring the income above the existing cap rate. We have found that in purchasing property in the neighborhoods that we want and meeting our goals of positive leverage we need a 5 percent to 5.5 percent cap rate today. However if there is an opportunity to upgrade units that will bring substantial rent increases, our return can reach 15 percent to 25 percent and sometimes higher. We can bring the ASTHE INTERNET HASBEENMASSIVELY TRANSFORMATIVE TOOURECONOMY, INDUSTRIES, AND HUMANBEHAVIOR, IT ISHARDTOHAVE CONFIDENCETHAT HISTORICALCAUSE-AND- AFFECTRELATIONSHIPS CONTINUEATTHE SAMEWEIGHT. “

Finding the Next Reno

MY TAKE ARTICLE BY ATTOM DATA SOLUTIONS.

by Sam Freshman, Chairman, Standard Management Company

tandard Management Company has been praised and congratulated by its investors for acquiring a substantial amount of property in Reno, Nevada, shortly before the Tesla announcement in September 2014 that they would be building a Gigafactory in the area that is projected to provide 6,500 new jobs to the region. This was at a time when most real estate professionals had discounted Tesla’s pre-development activities in S

Reno believing that they only put pressure on Texas and California to make more concessions and encourage the company to locate in those states. Being perfectly honest that was our conclusion as well. However in doing our homework in preparation for deciding on these purchases we determined that Amazon and Apple had already made major commitments to Reno and that the city had many basic advantages, probably the most important being

Nevada’s low tax rate and general business incentives. There was a trend of Bay Area high tech of relocating some of their facilities from Northern California to Reno. BUYMORE, SELL SLOWER We were able to apply our 58-year history of real estate investing and lending to make decisions in favor of a number of acquisitions that

THOMAS PAULSON FOUNDER, INFLECTION CAPITAL MANAGEMENT

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