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If you’re thinking about getting into or out of a multifamily property and are curious about the best strategies, tune in to this episode and hear what René Nelson of Pacwest Commercial Real Estate and Bob Nelson of Pacwest Real Estate Investments have to say about multi-family property investment benefits.
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I’m René Nelson, CCIM with Pacwest Commercial Real Estate Investments.
I’m Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments. Both companies are named Pacwest, but they’re two different firms. You are Pacwest Commercial, I’m Pacwest Real Estate Investments. What do you specialize in?
René Nelson: I specialize in multifamily as well as single tenant triple net opportunities where people just receive passive income in the mail.
Bob Nelson: You’re really well connected nationally with the bigger brokerage houses that on occasion will have a corner on that type of inventory. We do act as a team on occasion. We act separately on occasion. It depends on your situation. We have the capacity to pull in the talent to get the job done.
Defensive Real Estate Investment Strategizing
René Nelson: So, Bob, one thing I’d like to talk about is kind of a defensive strategy. I have a lot of multifamily owners that are thinking about getting out of their multifamily portfolio and they’re thinking, “How do I do that?” When they come to meet with me, one thing that I always start to look at is, “Well, where’s your rents in comparison to competing properties?” So, let’s talk about those strategies that we talk to multifamily owners about.
Bob Nelson: Well, it’s interesting because frequently they have enjoyed over the last three or four years, rents that have increased potentially 40%, sometimes even higher than that, and it’s like, “Gee, my bottom line is getting larger and larger, which is exactly what I want. That’s increasing cash flow.” They also sense that there may be a top to that, that things have gone up about as far as they’re going to go up, and why don’t we harvest out of this one, go into either a different property or more of what we have, better utilizing our equity, increasing our rate of return, making a more safe situation?
But for those who are thinking along the lines of creating greater safety, I would call it defensive real estate investment strategizing. How do you keep what you have yet risk enough to be able to reasonably expect a higher return? How do we do that safely? That’s exactly what we do.
We anticipate where you’re going, the capacity you would have, the benefits that you’re after, and how to then utilize those benefits. Now, when I say benefits, it’s the equity in your property, it’s the cash that you have, etcetera. Your net worth. How do we optimize your position in order to satisfy the benefits that you’re after from the next investment holding period?
René Nelson: Absolutely. One thing that I see for a lot of my clients is they’re trying to figure that exit strategy and what the timing on that looks like.
Investment “Food Groups” – What Type of Investment to Go Into Next
René Nelson: Absolutely. Then one thing that we look at is what food group, is what Bob and I call it, is what would you like to go into? Do you want to go into something more passive real estate? Where you just get a check in the mail?
Bob Nelson: No management, etcetera.
René Nelson: Do you want to go into more units, newer units?
Bob Nelson: We refer to units as apartment complexes.
René Nelson: Or do you want to go into a value-add situation, especially for a multifamily complex or an apartment complex? There are some value-add plays where maybe you’re buying a 1960 or a 1970 apartment complex and it hasn’t been updated. You can go in and add what, about $4,000 to $5,000, typically, per unit if you’re going to do maybe new floor coverings, new kitchens, and then increase your rents. It just depends on what market you’re in and where their rents are at currently in the market. But that’s what a value-add opportunity is.
Bob Nelson: But we really need to study that first in order to evaluate. There are some properties where you really shouldn’t put a great amount of money, just simply keep it up to speed. Not necessarily give it a huge renovation or a face lift.
There are some properties that are perfectly good as they are and that may optimize the cash flow. Other instances people say, “Hey, I want to give it a real jolt. I want to give it a complete face lift.” Do keep in mind you don’t want to become all of a sudden, the best thing in a ho-hum neighborhood because if you’re thinking in terms of quality of tenant, and if you’re thinking in terms of maybe reselling, the neighborhood has the capacity to either benefit you substantially or hold you back. These are all things that we think about in the process. We have the capacity to do rent analysis and so forth that are pretty helpful.
René Nelson: Absolutely. In the next video let’s talk about how someone would take their current portfolio of an apartment complex and how they would harvest equity and move that into more units.
Bob Nelson: Okay. Makes sense.
There are plenty of benefits to be had in multifamily property investments, so if you’re in the market to buy or sell, contact an expert like René Nelson at Pacwest Commercial Real Estate Investment for the best advice! 541-912-6583
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