All Forum Posts by: Giovanni Isaksen

@MARK MONTANO you may be in luck with your housing market study in Great Falls, the City as part of the process of lining up HUD money had an RFP for exactly what you're looking for and the deadline was yesterday. Talk about timing! Now who knows if or how many proposals they received but according to the RFP the selection would be made by March 20 and the study completion date is to be May 8th. So hopefully in a couple months the data will be available and since it's a public project it should be available to the public. I would check in with Jolene Wetterau, CDBG/HOME Administrator, [email protected]. to find out more. The RFP is here:

www.wccapa.org/wp-content/uploads/2015/02/Great-Falls-market-study-RFP-2015-Final.pdf

@MARK MONTANO great question. Beyond the national providers Portland is blessed with three great local sources of apartment data, Portland State's real estate school, Multifamily NW and Barry & Associates. The Barrys are apartment appraisers and thier Barry Report tracks supply, permits, construction and sales. Multifamily NW is the area's largest association of apartment owners and operators who twice a year survey their members on vacancy, rents and expenses. PSU publishes a quarterly report on the Portland area real estate market that includes a section on multifamily.

Because Great Falls is a relatively small market finding a commercial provider of apartment data with great coverage is probably unlikely but you could check with Axiometrics who include Great Falls on their list of markets covered. For local data I would check with the landlords association, although MLA doesn't seem to provide data someone there should know what's available. I would also check with the colleges and universities in MT to see if any have a real estate department.

Outside of that you could hire a consultant like me or do it yourself. Not to talk myself out of a job this is what I'd do:

Get the demographic data from census.gov; population & population growth, employment and job growth, housing types and numbers.

Check to see what data HUD has on housing

Cross check the above with the MT Dept. of Comerce and other state agencies

With the size of the market in hand I would check the major (and any local) apartment ILSs apartments.com, forrent.com, Craigslist, etc. to get a sense of the tightness of the market.

Then once you gotten the lay of the land, next survey the people on the front lines;

Commercial brokers

Property Management Cos

Appraisers

Title companies

City planning/building department

All the MLA members and apartment owners in town that you can track down

Then of course you have to assemble it into something useful. It's probably a week or two of full time work but on a DIY basis you could chip away at it. Buy a coffee or a beer for each of the players in town, one a day or one a week depending on how flexible your time is. But I would get what data you can online first so that you can tell when someone's view is out of line with reality.

Good hunting-

Yes @Tyson Cross and if people aren't willing to overpay in PDX right now you won't get a commission! The smart money there is selling but who are they selling to? People willing to overpay because they're afraid of missing out. These buyers have to accept (or will discover) lower or non-existent cash flow in the hope rents will continue to rise in the face of all the new supply coming online: 

When all those shiny new properties start competing for tenants something will have to give and it will be rents, even if occupancy holds initially. What's going to happen to those who bought projecting straightline 4% rent growth will not be much different than those who bought projecting unsustainable IRRs @Denise Evans. And if interest/cap rates rise?

Not saying that you can't buy something now there and have it work out because who knows how long things can stay overvalued (And if you're a long term holder buying with low leverage you'll do fine after a cycle or two). But we do know some things and one of them is that real estate is cyclical. While we don't know when cycles turn in real time, especially at the tops, we do know that when new construction gets going we're about midway through the expansion phase [My additions in orange, the circle highlights the classic Buy At The Top area]. 

Portland definitely got there two years ago when new construction rose to levels not seen since the bubble and now since 1990:

Not picking on anyone or Portland, in fact we like PDX as a long term apartment market (As you can tell I follow it closely). But there's a time to buy, a time to build and a time to sell; given the evidence how much of who's money do you want to bet that we're still in the first part?

@Denise Evans  Great explanation of pro formas but I have to disagree with this part: "the buyer is not buying yesterday's revenue stream, it is buying tomorrow's revenue stream. The price should be based on tomorrow's revenue stream, as long as it is realistic and not pie in the sky."

Yes I am, I'm paying you for the value you have created so far on the property, not the value I'll be creating after I buy it. Otherwise someone could price their run down old motel like it was the Trump Tower because it could be built on that property. I know brokers make that pitch all the time but believe me JV equity like pensions, REITs and other pros don't buy that way and neither should anyone.

One other point about buying on proforma; I know eight years ago was a long time ago (and they say real estate people only have five year memories) but if you remember back to those golden days of yesteryear lots of people were buying (and lending) based on proforma numbers and those deals made ripe pickings as REO product after the collapse.

@Chirag Parikh I would be up front with the guy and tell him you'd like to get in the apartment business and wanted to ask his advice on  a few things about getting started. Once you're sitting down with the guy ask him how he started out and hang on while the stories unfold. When he slows down ask him what he'd do if he was starting out today. I don't know a real estate person on earth that doesn't like to tell stories about their experiences.

Was just having lunch today with an older gentleman looking for help raising equity on a 150 unit development deal. He had approached me and I didn't know much about him so I asked him how he got started in the biz and off he went telling me about his interesting journey through the CRE world... and I got to eat my lunch uninterrupted while he talked. And now here I am, telling you the story ;)

Good hunting-

@Jay C.  Never worked for a bank but it's funny you mention WAMU. In 2012 I was in a meeting with a bunch of senior Wells Fargo bankers who were still moaning about all the business they lost to WAMU and I just about fell over. You know they blew up and went broke, right? I asked- it didn't seem to console them though.

I wouldn't worry about Dodd-Frank; Jamie, Lloyd and their employees in Congress are busy gutting it as we speak. That is unless you were hoping it would protect Main St. from having to bail out Wall St. again but if anyone in the government was serious about protecting taxpayers they would have brought back Glass-Steagall.

Yes @Jay C. those poor, unsophisticated kind hearted bankers swindled once a again by unscrupulous borrowers.

@Ben Leybovich  @Joel Owens To clarify I'm not saying become a property manager, I'm saying own a property management company. I'm as allergic to landlording and prop mgt as anyone (having started out there) and thank the heavens that there are people who will do it well and don't charge your fist born kid.

Ben if you do pick up Catherine's palace make sure the note is denominated in rubles-

Would also love to hear your AZ story.

@Ben Leybovich, was in a meeting last spring with a developer from San Francisco who said real estate has 10 year cycles and for six of those it's great to build apartments, for two of those it's great to build condos and for the other two you should play golf... Maybe it's time for a little golf?

The business opportunity in multifamily right now is property management. All this money is buying apartments at razor thing margins and the difference between success and failure for those deals is going to come from how well they're operated. A good local company can operate circles around most national prop. mgt. firms for non-institutional properties. If you can build a strong local presence in your market you won't get rich but you won't be bored, and you'll be adding the final piece that most successful multifamily operators discover is necessary; in-house property management.

Good hunting-

@Travis D.  while typically management companies will quote a 4 or 5% fee based on collected rents, by the time you add in all their other fees, charges and costs you end up at 9 or 10% and so we figure ten percent in our proformas.

Likewise with repairs and maintenance we typically figure 10% for starters but search hard to find actual submarket costs per unit for similar buildings. If there's a local landlords association they typically have a handle on those but if not we really try to get that info from local property managers. One thing to beware of in ballparking maint. & repairs is if the rents are below market it will throw the percent off. Likewise if you are maintaining a building for a long term hold versus a quick turn, repairs and maintenance (and capex) will be higher than what many people report.

Good hunting-