Nowhere is getting your ducks in a row more important than in apartment building investing. See this quick MFE Mag article for tips from seasoned pros: Diligence Gut Check
The article covers topics like these:
This article argues that the crisis of 2007–2008 happened because of an explosive combination of agency problems, moral hazard, and “scientism”—the illusion that ostensibly scientific techniques would manage risks and predict rare events in spite of the stark empirical and theoretical realities that suggested otherwise.
Conclusion: “The captain goes down with the ship; every captain and every ship.” Nobody should be in a position to Continue reading Black Swan Taleb: bad math and the misundersting of risk caused the financial meltdown
… your advisor works for a vampire squid or is paid on commission. Click here to see the article from Time/Moneyland
For extra credit see: Why Wall Street Hates the Lazy Portfolios Strategy
“America’s investors have been ripped off as massively as a bank being held up by a guy with a gun and a mask,” former Securities and Exchange Commission Chairman Arthur Levitt warned in an article in Fortune magazine a decade ago. That same year in his classic “Take On The Street,” Levitt lambasted the fund industry as “a culture that thrives on hype … withholds important information,” a “cutthroat business” that “misleads investors.” Today, it’s worse.
In “The Market for Financial Advice: An Audit Study” The authors share their findings that financial advisors who are paid on commission may color their recommendations to increase their compensation to the detriment of their clients. This is something that lead to the creation of the field of financial planning, that I played a small part of back in the eighties.
The original idea was that financial planners would be represent the client’s interests in executing a financial plan designed to achieve the client’s goals such as retirement, educating children, reducing taxes and preserving their estate for heirs and charitable beneficiaries. This was in opposition to the typical situation where a person seeking to secure their financial future was subjected to Continue reading Kind of a No Duh, but study shows that commissioned ‘advisors’ may give self-interested ‘advice’.
European debt-crisis issues are lessons for the US. They belong in the political debate. Both political parties are responsible for our growing debt issues. Bush ran up huge deficits. Obama continued them. Each party blames the other. See the whole post here: Back from Paris
Especially pay attention to item #4. that begins: Private holders of Greek debt had several years to get out…
For extra credit from ‘The Only Thing New In History’ department: Yet another sovereign debt crisis If that link no longer works use this one to see the PDF.
The bullet points:
*Referencing Rogoff & Reinhart’s work in “This Time Is Different”. See ‘Whodunit’ in the column to the right for this essential book.
Great MFE article on apartment building investment niche strategies from teams who battle the big guys and win. Five different teams and strategies are profiled and they all have something to teach but I wanted to highlight one company whose strategy is very similar to ours. Here’s my exec sum in bluue:
LumaCorp. quietly owns and operates a 4,800-unit portfolio of 1980s, Class B properties managed to meet the needs of working-class renters.
These [renters] historically can’t buy a house, but they still want clean, quality, safe housing. We think it’s a much bigger slice of the market than other renter demographics.
Rent growth can be modest, but that’s OK. One of the advantages of owning property in small tertiary markets is that they are less active [in terms of new construction and competition, the rent growth is more predictable.
LumaCorp. begins with old-fashioned real estate research, looking for distressed or underperforming working-class properties with potential. “We make money by fixing problems.”
But the firm isn’t interested in just any Class B property with deferred maintenance and an attractive price.
We’re very picky about the properties we acquire
We know our market very well, and we know what works in terms of floor plans, unit mix, and architectural designs.
We pick a property with good bones, and then we invest the money to bring it up to our standards.
LumaCorp. runs some of the tighter costs, yet when you drive up to the property, it always looks terrific. Some multifamily firms spend lots of money, and their properties still look tired.
Only a few properties will make the cut for the LumaCorp. treatment. “We might look at 100 packages. Out of that, we’ll find 20 worth looking at, and 10 will get offers. One might get done,” says Kelly, who made “a couple dozen offers” in 2011 and got one—Bardin Oaks in Arlington, Texas.
See the whole MFE Mag article here: Niche Guys Win
San Diego-based Pathfinder Partners LLC has acquired the View at Redondo, a 78-unit apartment property in Federal Way, south of Seattle. The apartment complex, built on a …. [Cut to the chase]
“We believe there are opportunities throughout the major markets in the western United States to invest capital in high-quality projects with distressed or fatigued ownership that will result in significant returns,” Lorne Polger, senior managing director of Pathfinder Partners, tells MHN. “To that end, Pathfinder focuses on smaller apartment building investment, sized below the radar of the largest institutional buyers.”
The company’s strategy, Polger adds, is to buy the loan on a small property that needs finishing, has a large vacancy, or is beset by other issues. “These are typically transactions that need to be concluded very quickly, on an all-cash basis,” he says. “We have a track record of closing this type of deal in 15 to 20 days, and frequently get the call when a financial institution is seeking to conclude a challenging deal quickly.”
A very good strategy indeed.
Is Apartment Building Investment in the up cycle in your market? Job growth is the most important leading indicator of the market cycle. Check out the cool interactive map through Q4 2011 from The Atlantic here: MetroMonitor Economic Performance Maps
3-4% 10yr bridge money for apartment building investment and rehab “coming out of the woodwork”. See the whole article here: Capital Streams Grow for Rehab
For more on the Seattle area apartment building investment climate see the Seattle Times article here: Apartment rents likely to keep rising through 2012
Hat tip: Paul McFadden
