By The Time You Hear The Sirens

By The Time You Hear The Sirens

By: Nicholas A. Dunlap, CPM

No offense to the economists, but I am firm believer in the idea that by the time you hear the sirens, its already too late. And so is becoming the case with great opportunities to buy or invest in Southern California and many other real estate markets nationwide. Simply put, cash heavy investors are looking for places to park their money. And whether you are looking at single family residences or multifamily housing, you have likely been beat to the punch by someone with more cash, less financing and as a result, a decrease in the corresponding escrow period. Whether the seller is a private property owner or a financial institution, this equates to quicker money in their pocket and with lower likelihood of a hiccup in the transaction.

The best advice? Study the comps, talk to the dealmakers and respond quickly to any and all opportunities that fit your investment criteria. While you will likely miss out the first time around, identifying the subtle nuances within the marketplace will help you recognize true value when it comes your way. Then, you realize success and become a positive statistic. That is, before the economists can identify it.

Browse through some recent articles in the news also about these topics:

WSJ: http://online.wsj.com/article/SB10001424052748703905404576164720668195108.html?mod=WSJ_hpp_sections_realestate

LA TIMES:

http://www.latimes.com/business/la-fi-cash-only-20110301,0,5886560.story

OC Register:

http://jan.ocregister.com/2011/02/28/55533/55533/

Home Depot As An Economic Indicator

Home Depot As An Economic Indicator
By: Nicholas A. Dunlap, CPM


Home Depot reported that its profits rose over 72% in the 4th Quarter of 2010. This significant increase means more than just padding to Home Depot’s bottom line. Historically, Home Depots profits have shown increased activity in the rehab and upgrade of residential properties, construction of newer properties and shown that more homes are selling and thus requiring upgrades or personalization. Essentially, people are starting to believe again. People once again have the money to spend on their homes, illustrating the increase in consumer confidence that has been published in recent studies by the Commerce Department (showing we have reached 3 year highs). All of this activity has been helped by low mortgage rates and flat if not slightly declining home values in some areas.

What To Look For

What To Look For

By: Nicholas A. Dunlap, CPM

One of the questions I get asked the most with regard to investing in real estate is: what rate of return do you look for in order to proceed with an acquisition? The answer, though complex in nature, is quite simple. You see, Real Estate requires more physical work than other assets such as stocks or bonds. With that, it is only right that you earn more than you would by either keeping your money in the bank, purchasing stock in a company or investing in bonds. But just how much and what to look for? Although those questions will be answered differently by individual investors, consider the following.

A high interest earning savings account will bring you about a 1% annual return on the amount you keep in the account. Stocks will carve out a sawtooth pattern that you hope will end up higher than you purchased your shares for so that you can sell for a gain. Bonds will remain somewhat less rousing but should stay steady nonetheless. Now, time for real estate. Aside from the four benefits, you will want to identify investment opportunities in markets with strong fundamentals and growth potential. While primary So. Cal markets such as Los Angeles and Orange Counties present better opportunities in the SFR, 2 to 4 unit market, it is important to evaluate the real estate market as a whole and answer this question for yourself: what returns are you looking for? No expert can answer this question for you.

If you are a looking for an introduction to commercial real estate investment, click here to buy my book “The Four Benefits: Commercial Real Estate Investing & You”http://www.blurb.com/bookstore/category/Business

Due Diligence. Done.

Due Diligence. Done.
By: Nicholas A. Dunlap, CPM


The title should read “Smart”, not “Rich”. Of course, the smart are not always rich and the rich are not always smart. This in response to the Wall Street Journal article headline reading “Rich Investors Trust Bankers More Than Press”. While reporters are writers or journalists, Bankers work in the finance industry and as such have experience with trends and details on an hourly, daily, weekly, yearly basis from a hands-on perspective. The press on the other hand, simply writes about these trends and documents them from an armchair quarterback’s point of view. Ask yourself: would you ask a writer to help you diversify your investment portfolio? Probably not.

Key here is the fact that investors are looking to professionals for counsel, as opposed to doing their own research. This is astonishing on many levels, specifically given the fiscal performance of the stock market and the performance of most mutual funds going back 5 to 10 years. People are not looking to do their own research, they want a professional to locate, identify and present them with an opportunity. While I can understand the need for convenience, I do not understand the lack of self-educating.

Read, study and then read and study more. It is imperative that investors educate themselves on trends and processes relative to the investments they make from the management strategies to the operational platform of the investment vehicle. Due diligence is necessary whether you are investing in Stocks, Bonds or Real Estate.

Read the original article here: http://blogs.wsj.com/wealth/2011/02/15/rich-investors-trust-bankers-more-than-the-press/#

When Investing, It’s Better to Waste Your Time Than Waste Your Money

When Investing, It’s Better to Waste Your Time Than Waste Your Money By: Nicholas A. Dunlap, CPM

Underwriting a potential investment takes time, attention to detail, research and expertise. With that, we look at two potential investment opportunities available: one in Texas, the other in Southern California. Essentially it takes the same amount of work to build each cash flow model, evaluate and compare the analysis, and yet we arrive at two drastically different outcomes. Reason being: the old adage, tired as it might be, is true. In Real Estate, it’s about location, location, location.

However, location doesn’t necessarily guarantee you a greater return on your money. Sometimes, you put $1.7 million dollars down on an apartment building and earn 0.7% on your investment. Yeah, that makes great sense. Cough up close to $2 million dollars to earn 0.7%. If this appeals to you, be advised, you have more money than brains. And while you’re at it, take a look at the bridge for sale in Brooklyn.

Back to my point, and that is: why do it? Any decent bank can beat that with a Money Market or Interest Earning Savings Account at a whopping 1%. So what to do? Don’t look in Southern California. Look to invest in emerging markets with strong fundamentals. Invest in bourgeoning areas like Phoenix, Las Vegas & Dallas. With the exception of Dallas, properties in these areas soared almost overnight in value and then deflated even quicker. Now, with attractive pricing, many of these same properties are being placed back in play, ripe for the picking. Of course, Texas did much better over the past decade than either of the other areas mentioned. In fact, we are looking at a potential acquisition right now in Texas with a guaranteed 8% Cash on Cash Return and short term potential to increase cash flow another 5-8% on top of that.

8% on your money? Can your bank top that? Can your mutual fund? The answer is no to both. The idea behind investing is to put your money to work for you. Therefore, you want to place it wisely and generate the greatest possible return for yourself. Investing in an asset class like Real Estate that requires more activity should generate greater returns. It's commonsensical: more work, more risk, greater reward.

Do your homework and position yourself to succeed in today’s market. As you look around and see nobody else is buying, you know you are doing something right.

From "Extend & Pretend" to "Re-fi & Buy"

From “Extend & Pretend” to “Re-fi & Buy”
By: Nicholas A. Dunlap, CPM


If late 2009 through 2010 marked the “Extend & Pretend” era of commercial real estate financing, then 2011 marks the dawning of a new era. As I see it, 2011 marks the beginning of the “Re-fi & Buy” era of commercial real estate. Veteran CRE owners and operators are utilizing low interest rates and equity buildup to acquire additional properties (at significant discounts), while locking in low rate, long term financing both on the acquisition and debt repositioning side of the transaction.

Not only do favorable rates help generate competition amongst investors in terms of price, financing and escrow terms, it further decreases the already minimal response time to acquire discounted assets in select primary markets. Align yourself with astute, like-minded investors to maximize your returns.


Scenario:

Currently, 10 year rates are in the 5.85% range. Say you own a 16 unit building in Orange that you bought for $100K per door in 1998. All two bedrooms with garages, today that property is worth approximately $160K per door. Based on the purchase/market price, that is almost $1,000,000 in untapped equity. Barring any necessary capital improvement projects and assuming a solid in-place cash flow, you can pull out equity to acquire additional investments and still cash flow.

If this is you, we should talk!

I can help you increase your portfolio to include pride of ownership, positive cash flow group real estate investments. Email me at: ndunlap@dpgre.com .

Or, if you are a looking for an introduction to commercial real estate investment, click here to buy my book “The Four Benefits: Commercial Real Estate Investing & You” http://www.blurb.com/bookstore/category/Business

The Seven for 2011

The following text is taken from an article I wrote for both Apartment News Magazine February 2011 & the forthcoming Institute of Real Estate Management Los Angeles Digital Magazine-1st Quarter 2011. Continue reading below...


The Seven For 2011
By: Nicholas A. Dunlap, CPM

2011 is upon us and for property owners, it’s back to business as usual. As symptoms of the recession continue to taper off, owner/operators of multifamily housing will realize the opportunity to restore order or income to their bottom line. Part of restoring this order will require an active, hands on approach to both the asset and property sides of management. Doing so will not only prove profitable, but help to streamline operations as well. While we certainly need job growth to succeed, fears of a double-dip recession have subsided in most economic outlooks. Consider the following seven points as the “Seven for 2011”. Seven things for you to do in 2011 to ensure your continued success in the ownership and management of your income property.

Re-finance- With record low rates and great terms, now is an excellent opportunity to reposition the debt on your property. Lock in low rates for the longterm and improve your cash flow instantly.

Increase Rents- That’s right, it’s time to increase your market rents and consider raising those who moved in with move-in specials. Also, it is important to understand where you fit within your marketplace. If you are the only one still using concessions or specials to bring in prospective tenants, you may want to consider abandoning your strategy.

Create Ancillary Income- Pursue and establish partnerships with third-party service and utility providers to generate up front bonuses as well as residual income on an ongoing basis. Laundry companies have done this for years, but you will be amazed when you see what Cable, Telephone, Internet, Renter’s Insurance and other such service providers can offer. Depending on the size of your properties, you may want to consider Vending Machines as well.

Exhaust Your Freesources (Free Resources)- Monitor your advertising expenses and ask yourself “Are my paid ads truly attracting qualified prospects who ultimately lease?” In conducting a similar audit, we found that Craigslist had generated over 75% of our leases, with the other 25% coming from resident referral and walkup or drive by traffic. Our prospects were not coming from paid advertising.

Streamline Your Operations- Credit cards, online rent payment and application process, bookkeeping technologies; now is the time to modernize. Speed up processes, free up resources and become more efficient. What you spend on materials, you will recuperate in labor over time.

Invest & Expand- Whether acquiring a property on your own or participating with likeminded investors in a private-placement syndication, do not miss this opportunity to buy. There may not be great financial returns available in Southern California, but broadening your horizons and partnering with others to invest out of state yields tremendous potential. 10% immediate cash flow is available in select, primary Southwestern US markets.

Sell the Dog- Not Fido of course, but the figurative “dog” of your portfolio. You know, the underperforming, lackluster play that never quite performed how you wanted it to. With interest rates low and capitalization rates declining, adjust your expectations and call your Broker. Well-priced assets are generating multiple offers in most cases as there is pent-up demand to own multi-family property in Southern California.

Whether you choose to do one, none or all of the aforementioned items is entirely your decision. Certainly you will agree that it is important to implement the “smarter, not harder” philosophy when managing your property or portfolio. Having emerged from one of the most bleak fiscal periods our Country has known, consider today the best day in recent years to make an active attempt to make your life easier. Why not make yourself more money while you are at it?