The Market

The Market
By: Nicholas A. Dunlap, CPM


People are always asking me what I think about the market. And if you follow my blog, you will know that I think there are some great opportunities available in the market at present. You can acquire distressed office properties in primary markets such as Orange & Los Angeles counties for a fraction of what they sold for 4 years ago or you can look outside Southern California in areas with room for growth, like the Austin, Dallas or Las Vegas multifamily markets. By room for growth, I am talking population, employment and ultimately rent growth, which ties into my point on the other market so relevant to our business as property owners and operators: the rental market.

As for current trends, we have continued to see occupancy and rental rates increase. Existing and market rates have continued their uptick as consumers remain priced out of for-sale housing. Orange County has seen steady demand for B & C grade multifamily housing, whose rates have not been hit as hard as Class A product. Although market rental rates had gradually increased over the past 1.5 to 2 years, 2011 was the first year in the past 3.5 years that we raised rents on existing residents. The one bedroom apartment is again becoming favorable as younger renters and those who had previously doubled up with family members continue to move out on their own. Thus, as vacancy rates continue to decline, we should also see a correlation between less move-out or turnover and a decrease in maintenance expenses.

While 2011 saw modest yet very welcome increases of 2% to 5%, we are hopeful that 2012 will see a strong 3.5% to 5% increase in rental rates across the board. Since we have already started to play "catch up" on the time lost following the economic collapse and the recession of 2007-2009, but it will take strong job and wage growth for us to continue the progress necessary to restore certainty and confidence to our economy. Of course, in states like California, it will also take strong political leadership and guidance to restore some stability and confidence to a place that has done so much to shoe businesses away. Will we see the lost jobs return to California? Or will they be outsourced or relocated to Arizona, Nevada, Texas or...India?

Politics aside, the demand for apartments remains strong and looks to continue well on through 2013, especially in Southern California.

The Contrarian With Cash Is King

The Contrarian With Cash Is King
By: Nicholas A. Dunlap, CPM


It's always a great time to own property. Especially now and in Orange County, California. Of course, there are other markets across the US that boast better investment opportunities and growth potential, like Austin, Dallas & Las Vegas to name a few, but some feel that Austin is in it's own bubble and Las Vegas (hard as it is to believe) still has more room to drop. Dallas? Big things expected in 2012 and I'm obviously not talking about the Cowboys.

Consider the fundamentals on the acquisition side for a moment:
- Going in financing available in the mid 4% to low 5% range (better rates for the short term, of course).
- Distressed opportunities in the office & multifamily sectors in most markets (albeit, with heavy competition and possibly not the "distressed deal" you were looking for).
- Market rents increasing, existing rents increasing (in some markets/product types) and occupancy increasing.

And for sellers we are seeing: declining capitalization rates and rising per unit and per square foot pricing in most markets. But with the strengthening fundamentals, who would want to sell? The answer: Someone who is sophisticated enough to realize that the market they are cashing out of is likely not where they should re-park their equity. Orange or Los Angeles County sellers of multifamily should be looking at the distressed office opportunities in the same areas or the multifamily opportunities in Austin, Dallas & Las Vegas.

Of course, if you own property and you are not happy with your portfolio's performance, you should probably shop around for a new management company. There are too many opportunities right now to be burdened with a lazy management company who cannot respond to the economic conditions facing our country. We have and our occupancy is through the roof. We have eight buildings at 100% occupancy and nearly a dozen more with less than 4% vacancy.

The opportunities are out there and there is a ton of money on the sidelines. For contrarians like myself, the time to buy is when nobody else is and that means...NOW.

Real Estate As Your Muse

Real Estate as Your Muse , Part I


If you enjoy reading books about life or business, or perhaps how you can streamline your business and improve your quality of life, then perhaps you are familiar with Tim Ferriss. Tim is the author of the NY Times, WSJ & Business Week #1 Best Seller “The Four Hour Work Week”. The book, which I highly recommend, discusses the ways that business owners or operators can relieve themselves of the minutiae and monotony of the miniscule, day-to-day operations of their businesses and actually enjoy life. A crazy concept, I know.

Tim is an Angel investor and actively invests and encourages readers to invest and/or build online businesses that are easily operated within our new global economy. This business or venture is known as a “Muse”. What occurred to me as I was reading the book is that as the owner/operator of commercial real estate, we streamline the investment process for our clients in a way that enables real estate to be their muse. What’s more, these clients then receive the additional benefits of owning real estate, benefits that would not apply to someone operating an online shop or marketplace.

Whether you are a lone investor looking just for a professional management company, or an investor looking to partner in a real estate syndication venture, there is great opportunity for cash flow, tax shelter, equity buildup and a hedge against inflation. With the right systems in place, you can be cruising the Mediterranean, reviewing financial information via email or portal and having your periodic income directly deposited into the bank account of your choice.

Now, that’s my idea of a global economy. Stay tuned for future blog posts on this most interesting topic.

You can learn more about Tim by clicking here: http://www.fourhourworkweek.com/blog/

Real Estate is Still the Darling

Real Estate is Still the Darling
By: Nicholas A. Dunlap


Touted by many financial publications as a "quarter to forget", the Stock Market has continued it's downward, depressing trend. All the talk of Greece, the Eurozone and bailouts and these dark undertones are starting to resonate in our own American Economy with our increasing unemployment figures, new consumer credit crunch, and of course: our lack of leadership through such bleak times. And yet, those of us who own and operate investment real estate have not been busier or better in recent years. At our firm, we had our best Summer since 2007. We saw rent increases at most B properties in B or better areas and have seen our occupancy continue to trend higher. That said, it is no wonder that this week the Wall Street Journal and Money Magazine both began to hype up the REIT or Real Estate Investment Trust. In fact, WSJ published an article today titled "REITs, Don't Fail Me Know", virtually acknowledging the hold of Real Estate through REITs as one of the superior investments available in the marketplace today.

Why wouldn't it be? Interest rates are low, rental income rates are on the rise and there are still a number of distressed opportunities available in the marketplace. Sophisticated investors are killing it in this "perfect storm" of sorts. My opinion? Don't go for the REIT, align yourself with a fund or syndication sponsor and identify the opportunities that best suit you. Not only is the time right, you can achieve the four benefits of owning commercial real estate.