All Forum Posts by: Steve Olafson

I just sold about 75 units and bought a strip center.  Still have 75 units left.  I had over 900 units at one time but lost a ****-load of them during the downturn.  Phoenix was hit very hard. 

It took about three years to build back to where I am now. 

I originally started with a four-plex and built to 900 units in ten years.

My goals now are to just follow the market trends and buy/sell accordingly.  I have enough money to get by and don't have lofty goals anymore.

I am a net seller of apartments right now.  In my location the prices are ahead of fundamentals.  Buyers are paying proforma prices.  Even "fixers" are selling at high prices on a cost per unit basis. 

I am currently trading into retail that still seems to have some upside.

Typically the upside in a building comes from renovating/upgrading, doing a great job of managing occupancy, and keeping expenses in check. 

Properties with large vacancy issues are probably not going to be cashflowing.  They are unlikely to be able to by purchased on any type of a decent cap rate.  These types of deals usually go on a price per unit with your projections determining what they will be operate at once you are finished fixing the issues.

Lots of red flags. 

Are your numbers based on proforma or actual income and expenses?

You will need money for the deferred maintenance issues.

I want locations that people want to be.  This might be worth more negotiations if this property can be made into something desirable.  If not, you will always be stuck with less than desirable tenants.

Anything can be frustrating if you let it.  It is all about your perceptions.  Just enjoy the process.

Be aware of the fact that you expenses could be higher than you expect.  That positive cashflow projection can easily turn into a negative nightmare.  Once a negative starts and you don't have the cash to rectify, the situation can turn into a vortex with a flushing sound.

I am in agreement with Matt on the one bedrooms.  I have a lot of experience with apartments and have historically wanted unit mixes that were higher in 2br's than 1's.  Now I think differently.  I want the one bedroom communities in nicer locations.  I have one resident that has been in his apartment for 30 years and one for over 25 years.  I tend to get a lot of singles or couples that want the strong locations but can't/don't want to pay a lot of rent. 

I personally prefer locations that have a very diverse economic profile. The best renters are going to be professionals that are early in their careers.

That does not mean that there is anything wrong with where you are looking. There are many strategies and investors can be successful in many directions.

I also like to find lower end or neglected properties in good locations. Features such as w/d hookups, private yards, and single story add stronger rental demand.

You should be very careful in your evaluations of how much money a property can make. They are usually advertised with numbers that are not realistic. There are many expenses that are omitted from the seller's advertised proforma. Management costs, administration, repair expenses, advertising, permits and other fees are often understated or omitted from the information.

The only way is to determine the rentability by using comps. This means actually visiting some of the comparable local properties and finding out what their rent numbers are. You can then try to extrapolate where these units are in comparison. Renters are picky as they should be. They want the best place to live for the money that they are going to spend.

The low cap rates today are the result of low interest rates and demand. It may work for you if you can find a good deal and lock in your low interest rate for a long period.

It will have an affect on your long term hold because cap rates are likely to go up with interest rates. This is okay as long as rents are increasing as well.

I like to find properties that need work either physically or financially. This allows me to add value.