All Forum Posts by: Phil Christian

The local brokerage community. 

Why would you try and convince someone who let a house in Yorba Linda sit vacant for 8 years the benefits of owning a rental property 1,000 miles away from where they live? 

Not a good idea. 

If it's in East Lake or has RV parking let me know. 

Well, are you a "multi-family" renovator or just a contractor?  Have you performed a value add program to a 25, 50, 100, 300, 800 unit project?  You've never heard of it because you don't do it. 

Here is SoCal we have ~325 units + exterior remodels to the tune of ~$13,000,000+....  Our GC is essentially our unofficial partner as the relationship is good.  Value-Add multi-family is hand-to-mouth.   All of our subs are paid deposits of 50%.  You wan't them to show up and work you better grease the wheels.

@Barry Collier I haven't seen a lender not require Replacement Reserves on a 14 unit type deal. Typical we see $200-$350 per unit. This said, I still wouldn't ever code a capital expense right below R&M. 

CAP X is below the line... it's not an operating expense and you shouldn't treat it as such. If you want to get more specific you can do the following:

If you put the cap x before NOI you just devalued your asset by $180,000 at a 5.75% cap.

There is also the issue with the REITS and institutional operators with funds having too much capital and no where to place.... A few local trades in SoCal have had 20-30 offers with some of the offers coming from groups that typically do not chase those particular deals. i.e., REIT chasing a value-add deal that is already trading for a big #. $60-$130M deals being underwritten for mid 4% Caps.

Correction or "something" here soon.... construction pricing on institutional deals in SoCal that are in the pipeline have gone through the roof. Institutional deals that were underwritten at a 5.5-5.75% CAP are being built at a stabilized 5% CAP and the 5% is being underwritten with today in pre-construction and construction time frames.

I buy non-institutional assets in the 10-75 units under the radar of institutional capital but compete with the family offices and private operators. Pricing per unit saw a huge jump 2016-2017 by ~$50,000+ a unit. At that time, rents jumped as well and we were able to stabilize at CAP rates we wanted. We are in escrow on a few deals and have lowered are stabilized yield expectations this summer.

This being said, we are still buying and finding deals we like, passing on deals we don't and watching "others" buy those same deals we passed on. 

Bump for interest.  I have 10,000 square feet of dead outdoor space I'd love to put mini pods on.  This said, I would want to go a simple and/or modular route to avoid heavy construction /  permitting.  Looking for something metal and plug and play.