All Forum Posts by: David S.

@Guillaume Carre. I am also thinking of adding an ADU and would be grateful if you can PM me with your architect that has ADU experience.

While rates are still relatively low, I do not think it is a bad idea if you are prepared to hold for the long term (at least 5 years) and are careful in screening tenants. Or maybe you can get some like minded friends to join in on a co-investment with you.

@Kelly A. What % increase would bring the tenant to market?

Depending on that, I might consider a couple of options. 1) bring the rent to market but suggest to the tenant that you would consider rolling back after the outcome of the Prop 10 vote. 2) Just do the 5% if you think that although the City of Oakland will have the power to implement vacancy control, they may take time to decide how to change any existing rent control system in place.

Bear in mind, I am just thinking out loud...I do not know Oakland but also am thinking there may be opportunities for buyers being created because of this Prop 10 uncertainty. 

Although I agree vacancy control would be very negative for landlords, I have to believe the authorities would try and act rationally if they don't want development to come to a screeching halt and turn us current landlords into slum landlords.  

Do you belong to the East Bay Rental Housing Association? Maybe they can offer some insight to help with your decision.

@Ben Leybovich. Thanks for the article. I don't really plan on waiting but agree with @Ivan Barratt that one should be focusing on higher quality (B class) lower leveraged deals. This is because in part,  most of the C deals i have seen involve debt of 75% of Purchase Price + reno costs with a refy in year 2 or 3 while the B class properties are able to command 10 year fixed rate debt. At this stage of the cycle, it would seem more prudent to go with lower leveraged scenarios that do not involve any short term refy or execution risk.

I will continue to look at deals until I find one I am comfortable with. I also think that, assuming a good deal can be found, investing in one syndication a year is a good strategy to diversify by time or dollar cost average if you will.

I am considering investing as an LP investor in a syndication where due to recent changes in law regarding depreciation will result in substantial (almost half of the investment) taxable loss in year 1. I understand this loss can be used to offset other forms of passive income. I own and  self manage a couple of small apartment buildings. Since this does not take up a lot of my time, can the income from this be considered passive?

I have been presented with an opportunity to invest in 2 syndications: 1) a 500 unit Garden Style (advertised as Class B) apartment community located in the Peachtree Corners neighborhood (around Hwy 140 and 141) of Norcross Georgia and 2) a 200 unit (what looks to be Class C) apartment community at Hillandale Drive near I-10 in Lithonia, GA 30058. Both of them are offered as value-add plays based on a light reno which is supposed to result in rent increases of $115 to $150 per unit.

I have my own thoughts on where I want to be in terms of property quality but I wanted to see if any investors local to the area or knowledgeable about the area could offer any opinion on what class these two neighborhoods/areas are and which of them would be more resilient in an economic downturn.

@Kira Golden. Always interested in syndicators that survived the last great recession. What lessons did you learn?

 I agree we need to be in solid markets based on fundamental and not speculation. My concern is almost all investors know the same thing and are competing so fiercely resulting in very few good deals.

Which brings me to  @Ivan Barratt. Can you elaborate on what you mean by "there WILL be day of reckoning in C properties"?

I have been presented with an opportunity to invest in 2 syndications: 1) a 500 unit Garden Style (advertised as Class B) apartment community located in the Peachtree Corners neighborhood (around Hwy 140 and 141) of Norcross Georgia and 2) a 200 unit (what looks to be Class C) apartment community at Hillandale Drive near I-10 in Lithonia, GA 30058. Both of them are offered as value-add plays based on a light reno which is supposed to result in rent increases of $115 to $150 per unit.

I have my own thoughts on where I want to be in terms of property quality but I wanted to see if any investors local to the area or knowledgeable about the area could offer any opinion on what class these two neighborhoods/areas are and which of them would be more resilient in an economic downturn.

@Wes Blackwell. Great article!

@Paul Choi. Thanks for sharing your insights on mom and pop owned multi-res which affords opportunity for buying value adds in downtown Stockton.

Question for both of you and anyone else investing in those areas...

How did you take pending Prop 10 to repeal Costa Hawkins into account in your decision to invest in Stockton or Sacramento?  With rents rising as rapidly as they have in both Sacramento and Stockton, there must be some displacement going on (especially at the lower income levels) and maybe calls for rent control in those areas?

@Ivan Barratt. you said above that "At the top (where we are today) I'd rather acquire a B+/A- asset with an 7-8% yield and a long (15 (agency) to 35 (HUD) year) fixed rate debt instrument."

What is your rationale for this?, given that there seems to have been a lot of new supply that has come on and which has resulted in many having to offer significant rent concessions?

Most of the syndications I have reviewed recently involve upgrading C class buildings so they can raise rents and therefore values to generate good returns. Many seem to have extensive experience in creating value out of C class buildings. On the other hand, I wonder if due to all the media surrounding  A class buildings, whether if C class is the place to be if everyone is moving down to chase apparent, potentially  higher returns...So that maybe there is more competition for C class buildings than there may be for A class buildings.

I am sure there are good sponsors for all class of properties in any part of the RE cycle. I guess i am trying to decide for myself what kind of multi-res syndication i should invest at at this stage of the cycle, a C class property with great value add potential or an A class building that may be selling at a discount if that makes sense.