A: Most of our team leaders are also real estate investors. Most of them have been landlords for 20 years. We know the good and the bad from personal experience. We understand the truth and we know how to explain it. In the last decade, we have closed more income property escrows than any single competitor. Most investors buy apartments, and we have closed as many San Diego County apartment escrows as firms number two and three combined.
A: A great broker will do a thorough analysis of the facts to ensure that you receive full value. When we study the reports of the closed transactions, we find that the people who sell too low are those who did not use an investment specialist to represent them.
At ACI, we study what the market place has done and what your competitors are trying to do, as we advise you on your property’s value. You will see what similar sized properties in the same neighborhood have sold for within the last year. For apartments, we typically prepare a report that shows from six to 12 sales with key information items: price per unit, gross rent multiplier, cost per square foot, and the cap rate for properties above $500,000. Then, we calculate the value the same way a bank appraiser would view the property. However, this is only half of the story.
The other half is what realistic sellers are asking for similar property. You learn what your competitors are asking, and see how your property would rank in comparison. Together, we decide what price your property should be listed for. Our success ratio is higher than the county average because we tell you the truth before we start marketing. Some brokers will list the building for a high price and then come back and “beat up the owner on price” after a month. We treat you the way we want to be treated — as an informed adult. Much of our business comes from referrals because we help our clients sell at fair prices.
A: COMPS Inc. reported that we closed more than 20% of the apartment transactions in 1999, and that trend has held true over the last 20 years. We have represented the buyer or seller of apartments in about 2,000 transactions, which seems to be more than double the number of transactions of the next most active firm.
A: Some of our competitors have a written policy maximizing commission inside the brokerage firm. Our approach is different. When you hire us to sell your property, we have a fiduciary responsibility to sell your property for as much money as possible, as soon as possible. We know that exposing your building to 5,000 agents and thousands of principals through the investment Multiple Listing Service and the Internet will give you more chances than to show it to only a few hundred agents — or fewer.
A: You have a huge impact on the timing. When our clients are motivated and are willing to show it in price and terms, we have had accepted offers within a week. Other clients hope to find a fool with money. Those owners may never sell.
In most cases it will take from one to three months to generate and negotiate an acceptable offer. Generally it takes about two weeks for the buyer to inspect the property, review the paperwork, and waive all the contingencies other than financing. The loan process typically takes about six weeks. In other words, closing escrow may be two months after there is an agreement on price and terms.
In some cases the first buyer to put the property under contract may not close. Sometimes they don’t like what they see on the inside or the lender does not provide a loan as big as the buyer hoped for.
A: If you think that rents will increase and values will increase, then you will benefit more by owning a larger building than a smaller property. Many of our clients also trade into newer properties or more affluent areas. Some investors prefer to shift into properties that are easier to manage. When we talk with you personally, we can help you determine which goals are most important to you.
A: We have helped many clients do tax-deferred exchanges. Most of the team leaders have used this process on their own personal accounts. Furthermore, some of us have lectured about this process.
Tax-deferred exchanges are one of the most powerful tools available to real estate investors. It is like getting an interest-free loan from the government. We have helped people move equity from houses, land, and apartments into apartments, commercial, and triple net properties. There is no good reason to pay taxes early.
A: Contact us. After you provide some basic information, we can provide you with a well-educated estimate of what the market will pay.
A: Generally, make it the most appealing property possible: touch up the paint, freshen the landscaping, and move rents to market value. A used car that has been detailed brings more than the same vehicle that has been driven through the desert and sold without even being washed. We have given speeches and written articles on this question. Contact us and we will look at your property and give you customized counsel.
A: For most transactions of five or more units, you can obtain a 75% loan-to-value. If the property is one of the 10 most expensive zip codes, the lender may require a down payment of 30% – 40%.
The lender will loan a higher dollar amount in the more affluent areas than in the average location but the property must still service the debt. In the more expensive areas, investors might pay nine to eleven times the annual rent. In most parts of the county, properties can be bought from six to eight times the annual rents. The lenders say that you can pay a lot more for a great location, however, the cash flow alone does not justify the price in the glamorous zip codes.
A: Most prudent buyers use these experts. You will look carefully at the property and so will your agent. Most buyers are not construction experts, nor are most brokers. Paying a few hundred dollars on a $500,000 purchase seems like sensible insurance. When someone buys a used car, they probably have a mechanic check it out before releasing all the cash.
A: When you buy a house from the seller, the resident, who is the seller, has a strong incentive for you to get full information. The resident wants to get your money.
Apartment dwellers have no incentive to let strangers into their homes. The renter is inconvenienced by a stranger coming in and receives no benefit from that invasion of privacy. The industry recognizes that serious investors need to see the inside of the units. Yet sellers know that most people who write offers will not pay what the seller wants. The solution is to write an offer with the understanding that if the property does not show well on the inside, the investor can cancel the transaction.
When you inspect the property you are looking for surprises. You want to ensure that the exterior matches the interior. If the outside is run down, you can expect there will be some deferred maintenance on the inside. You can not expect perfection. The units won’t be model homes. That is why this process is called due diligence. You are diligently checking the assumptions and assertions made.
A: Each investor will select the neighborhood that makes the most sense for them. Once we know more about you, we can help you determine which may be the best fit for you. A great neighborhood is NOT automatically the best investment, regardless of the price. Sometimes more challenged zip codes can be the superior investment, at the right price, for investors who understand the residents and consequences.
A: No investor has money to waste. No one plans on paying too much. Of course, you want to be careful with your money. And guess what? The seller is not a rich fool. The reason that you need a great broker is to increase your chances of success.
Part of what makes this arena so interesting is the motivated people who want to improve their position. When we meet we can talk more about how to minimize your risk and increase the likelihood that you will be among those fortunate enough to close an escrow.
A: The lenders will not make a loan unless they are confident that an ordinary investor will have positive cash flow. If you buy in less-expensive areas you have a lower dollar loan per unit. The income will support the lower loan.
If you select one of the fancier neighborhoods, you will pay much more for the units there. The lender will loan more dollars, but at a smaller percentage of the purchase.
No matter where you buy, the bank will only loan enough so that the property will generate enough money to make the payments and generate positive cash-flow.
A: More expensive units tend to require a larger down payment. In almost every case, your cash flow is likely to be superior to the dividends that you would receive on Standard & Poore’s 500 index fund. Your cash flow may be from two to four times as good as the cash flow that would come from stock dividends. With income property you will have tax shelter, which is not available from stocks.
In most cases the increase in value is even more important than the annual cash flow.
A: Email us, call us, write us, or send a carrier pigeon. We are paid to serve you. Contact us and we will try to give you enough good information to move forward. Feel free to browse the site, check out details on our listings, or skim through our team members. We look forward to helping you build wealth in the very near future.
Call us today at (619) 299-3000.