All Forum Posts by: Mark McGlothlin

Joe, the thread has drifted a bit here of late. Both of my kids were involved with investing at age 15 - as their dad I and some of my partners served as mentors for them. It was a very useful experience for them and they are both active investors now and are involved in running their own businesses as well.

You've been given some great advice here - but finding someone to mentor you is perhaps the most important. You need to bring something to the table to encourage a mentor to work with you, but it's a great way to learn.

Don't let folks who emphasize negative stuff be a distraction - adults as I'm sure you've noticed tend to do that quite a bit.

Michael,

You're instinctive response to buy is a good one - it shows you're thinking like an investor.

A quick comment on the Case-Schiller Index data, with an interesting illustration.

The Case-Schiller Index (CSI) as you know is actually made up of three sets of data, a 10-city composite, a 20-city composite, and a much larger one. Their monthly data releases (like today's) are based on the 10 and 20 city composites. The CSI is oft criticized as its coverage scope is quite narrow, and the media typically assumes that the CSI data represents the entire housing market.

Here's an example of why that's not true. We've been researching Houston for an article we're writing. I and a couple of my team were on the phone with brokers in Houston most of the day yesterday.

Averaging the broker reported single family median price from yesterday, including July data, we were told the median Houston home price has risen to $174,900. If that is accurate, then the median price has risen an average of 7.5% annually over the past three years, and is up 15.2% 2007-2008 so far. Impressive.

One of the most trusted sources for real estate data in Texas is Texas A&M's Center for Real Estate Research. They report that Houston's median home price was $151,400 as of June. If that is accurate, then Houston's median home price has risen an average of 2.3% annually over the past three years, and is only down 0.2% 07-08.

My point - while the CSI data is elegantly constructed, it is indeed very limited in scope and does not represent what's happening in all markets. Given information we were provided yesterday (over thirty brokers) - Houston is looking far better than any market in the CSI data released today. Taking a macro-view of real estate is a dangerous exercise for investors - you have to drill down market by market to have things make sense, and to find the real treasures out there today.

BTW - I've enjoyed your even hand as a moderater, you obviously have good experience and insights to share. Keep up the good work.

Mark

Clark - I agree with Dan, pending your strategy you can make things happen in most any state these days. What you more likely really need to be thinking about is what markets do you want to deploy your investment assets in?

There is a huge difference of opportunity in different markets around the country, and different markets favor different asset types at this point in time (ie -single family, multifamily, etc.). It's clearly not all doom and gloom out there.

Damien, glad you agree about the book. I happened to be looking for a copy of it for a friend and noted a bunch of used copies on B&N's website this past weekend. For five bucks or less it's a genuine bargain.

Tim and Jon - good to see some true "investor" thinking manifested in your posts - the next few years are going to present some amazing opportunities for those willing to do their market homework and stick to solid fundamentals. You can't let the media's "The Sky is Falling" mindset impact your thinking.

Roger,

Think twice about Syracuse! There are dozens of markets with more potential (unless you have some other compelling reason to be there!) You had mentioned TX earlier - we track single and multifamily markets around the country - Texas has some really fundamentally sound markets (Houston, DFW, Austin, SA and several other really more interesting secondaries) to consider.

Good luck!

n57h - Here's another spin on your question. I run a market data analysis company for investors, and we track a great deal of multifamily information including cap rates in a number of markets.

In our database, the average multifamily cap rate for Class A properties is 5.5, Class B 6.6, and Class C 7.5. The range is impressive though - for Class A properties the range is from a low of 3 to a high of 7.8. You'll need to drill down into your markets of interest to find the real numbers.

Make sure you're calculating and using caps based on actual data and not proforma.

Finally, a great book written by a former bank financial analyst that will help with the evaluation of MF projects is "The Complete Guide to Buying and Selling Apartment Buildings" by Steve Berges. He has a great, long chapter in there on financial analysis, and while you won't have your MBA when you're done reading this one, you'll understand the basic metrics.

Have fun- Mark

I'd have to agree with what Clay said about Marco - he's a master marketer. He is very innovative, and has a great perspective on the round robin acution tool to move properties. Clay's also right about the tall cotton yet to come in on the luxury side - we're multifamily investors ourselves but have a capital partner who is doing very well in Jackson Hole and Big Sky with luxury options.

Jon, good call on the equity split. We've done that twice in the past and, with all issues on paper, it's a good call as long as the project is solid.

AD - I've been traveling for a few days and haven't been on the site - so I'm a bit late...

There's a lot of great information out there to assess markets by - here's a great one to think about - population growth in the later half of the decade as compared to the first as evidence of a market that has (for whatever reason) grown rapidly and created a strong demand for housing.

Probably the other key factor is job growth, particularly in today's economic times, it's critical to driving housing demand; the Bureau of Labor Statistics is the place to find data to compare city to city and state to state.

My team posts free state by state rankings of employment growth and unemployment (6 month rolling averages) on our free data page of our website - the six month rolling averages tend to dampen out the anomalies that creep into the data.

Have fun looking around - there are some markets out there today with astoundingly good fundamentals despite the doom and gloom you hear about daily in the news.