All Forum Posts by: Austin Mudd

I am focused more so alongside the West LA markets surround the 10 FWY, so I can speak to those markets.

Generally, if you're looking for maximum appreciation from apartment properties in LA, you need to create value. This is usually from a combination of adding value by renovating the property and also from turning units over to market rent that were previously below market value (if you so happen to have units turn during your ownership).

For example, if you had a 1BR rented at $1,800 in Santa Monica and turned the unit over to market rent at $2,600, that $800 difference in rent equates to $9,600 more annual rent, or at a 5% cap rate, $192,000 of value. Imagine for example you spent $40k on renovations as well.

There's also the option of buying in areas with long term tailwinds pushing the market ahead. For example, Culver City is booming right now, so you can look further east to capture this growth at lower pricing. 

Times have changed my friend. Banks have adopted more conservative underwriting standards. You might get better loan terms at smaller lending institutions. 

Almost certainly. The probability is much higher than real estate prices decline in the next few years than prices rising. Of course, real estate operates on a micro basis and thus, good deals can be found at any time depending on your strategy, ability to grow income, and your risk/reward appetite. But IMO, if I had tons of cash in the bank that I was comfortable sitting on, I'd wait.

Most of my career has been in institutional CRE space so I have a different perspective :)

@Adam Tahir definitely build relationships with brokers and agents in your target market. Consider paying for data platforms like CoStar or Property Radar if you would like to keep tabs on who the most active buyers are... you could reach out to those companies to become an investor.

Also check out www.adventuresincre.com, this is a great resource for learning how to model. 

@Adam Tahir Check out this report done by the Milken Institute of the Best Performing Cities of 2020

Rather than getting bogged than and repeating work another team has done, try to reference these types of reports to frame your target markets.

I'll copy paste a comment i made re: this -

My opinion is that the market will face major headwinds starting 2020Q4

My (probably incorrect) predictions:

• 2nd wave of the virus hits beginning in Q3 (this is a near consensus view among the medical community). My base case assumption is that there will be no vaccine until 2021Q2
• Unemployment doesn't improve in time the 2nd wave hits and remains over 10%... consumption erodes (70% of GDP is consumption spending)
• Corporate defaults lead to further economic weakening
  
• Commercial real estate (office/retail/hospitality) suffers as borrowers can't refinance or sell at their expectations
• Class-A multifamily suffers in markets with a lot of supply. Airbnb owners are forced to rent their listings long term, causing rent growth to decline.
• Class B/C multifamily suffers as well once unemployment benefits run their course. Those doing value-add deals can't achieve their proforma rents. Those levered at 75-80%+ get crushed, especially those without stringent renter qualifications.
• Mortgage lenders tighten their lending qualifications, leading to a slow down in SFR sales. SFR price growth falls and starts to decline as borrowers cannot obtain mortgages and unemployment forces people to dial their spending back.

I don't know why people are so bullish. I think if you are a seller, you need to get out NOW before the chaos truly begins. Remember, most of the deaths from the 1918 flu came in the 2nd wave. Considering how sick and tired everyone was of the restrictions set forth for public safety during the 1st wave, I assume people are going to take the 2nd wave less seriously and the repercussions will be greater.

You won't see the real impact to real estate for another 6-12 months.

My opinion is that the market will face major headwinds starting 2020Q4

My (probably incorrect) predictions:

• 2nd wave of the virus hits beginning in Q3 (this is a near consensus view among the medical community). My base case assumption is that there will be no vaccine until 2021Q2
• Unemployment doesn't improve in time the 2nd wave hits and remains over 10%... consumption erodes (70% of GDP is consumption spending)
• Corporate defaults lead to further economic weakening
  
• Commercial real estate (office/retail/hospitality) suffers as borrowers can't refinance or sell at their expectations
• Class-A multifamily suffers in markets with a lot of supply. Airbnb owners are forced to rent their listings long term, causing rent growth to decline.
• Class B/C multifamily suffers as well once unemployment benefits run their course. Those doing value-add deals can't achieve their proforma rents. Those levered at 75-80%+ get crushed, especially those without stringent renter qualifications.
• Mortgage lenders tighten their lending qualifications, leading to a slow down in SFR sales. SFR price growth falls and starts to decline as borrowers cannot obtain mortgages and unemployment forces people to dial their spending back.

I don't know why people are so bullish. I think if you are a seller, you need to get out NOW before the chaos truly begins. Remember, most of the deaths from the 1918 flu came in the 2nd wave. Considering how sick and tired everyone was of the restrictions set forth for public safety during the 1st wave, I assume people are going to take the 2nd wave less seriously and the repercussions will be greater.

Would you mind sharing some deal points? What's the business plan? Going in cap-rate, unit basis, etc.? How have collections been on this property in April/June?