91.1 F
San Fernando
Thursday, Mar 28, 2024

Now Is The Time for Small Time Investors to Act

A couple months back I wrote about how real estate pros in the greater San Fernando Valley believe 2010 is the year that all of the supposed “money sitting on the sidelines” will start flowing back into the market. Brokers and other professionals predicted investors, potential investors and owner-users will tire of waiting for the market to hit bottom and start acquiring commercial properties sooner rather than later. Granted, we’re only a couple months into 2010 and a lot can, and most likely will, change over the next 10 months. But I’m hearing grumblings that the predicted end to fence sitting hasn’t quite hit yet. Some properties are only getting activity once they’ve hit the market as an REO. And judging by some of the other deals I’ve been tracking, the grumblings seem to be spot on. Significant industrial and office sale and lease transactions in the Valley are few and far between. A lot of the sales action, thus far, seems to be in the multi-family sector. So in an effort to at least keep the smaller deals coming, and give a dose of inspiration to would-be investors and owner/users still sitting on the sidelines, I recently spoke with Grant Cardone, a real estate investor, sales expert, author and motivational speaker of sorts. He said right now, not two or four months from now, is the time for small guys to jump in. It’s a critical window where a well-placed investment can turn into a fortune in the future. But, small time investors and owner/users need to toss out the old “get rich quick” mentality. “It’s a moment for the guys who’ve always wanted to be in real estate to go to family and friends and do it,” said Cardone, adding there’s very little new construction going on right now and there will be a shortage of certain types of commercial properties in the future. Multi-family is a great place for the small guy to start, because everybody needs a place to live. And with home foreclosure rates still being in the scary zone, demand for rentals should continue to rise. Cardone makes the point that many people have bought into the myth that buying a home, the one that you live in, is an investment. “Single family has never been an investment,” he said. “It’s a myth perpetuated on the middle class.” The point is to put your money into something that makes you money. It’s probably best for new real estate investors to skip the REO sales. The properties are often problematic and the newbie is going to be competing with a lot of other investors who can easily outbid them. Cardone recommends singling out a property with a great location and cash flow and proactively approaching the current owner and letting them know you are a serious buyer. If you can only raise a small amount of cash, leverage it and start by investing in a four-plex. After getting the hang of managing that property and making a profit, you can move onto larger properties. The more units you own, the less vacancies will be a major blow to your profit. “This is not an overnight deal and about flipping,” said Cardone. “It’s about hard work, picking the right spots, focusing and duplicating. Start as big as you can and hire a broker.” Small time investors can expect positive cash flow in the first month, but should expect to spend three to five years with a property, he added. The real estate bubble was caused by a lot of people going in for a quick fix, and some got their heads handed to them. “Real estate was not the problem,” said Cardone, “it was people’s motivation.” Another opportunity is purchasing office space in the 4,000 to 5,000 category, because bigger investors often overlook these properties. With many people losing jobs at larger companies, there’s going to be a push in the future for people running their own small businesses, said Cardone. However, with credit markets still tight and many property owners holding on as long as they can, all of Cardone’s statements should not lead small time investors to think buying right now is easy. “Anybody looking to buy needs to fine tune their sales skills,” he said. “Go out and talk to the banks and sellers.” And do your homework. NoHo Multi-Family Deals A 44-unit apartment community called Simpson Avenue Apartments recently sold for $5.8 million or $131,818 per unit, according to CoStar. The 60,750 square foot complex, located at 7526 Simpson Ave. in North Hollywood was 80.4 percent improved and sits on a 28,009 square foot lot. Melinda Russell of Hendricks & Partners represented the buyer, 8353 Cedros Partners, and seller, 7526 Simpson Avenue Apartments. CBRE Capital Markets Inc. provided $4.32 million in financing. The complex was built in 1990. J&B Asset Management purchased the Terraces at Toluca for $6.41 million, or approx. $200,312 per unit, in a 1031 exchange, according to CoStar Group. The two-story, 32-unit, 37,446 square foot apartment complex is located at 10834 Blix St. in North Hollywood. Latitude Management Real Estate Investors was the seller. Dean Zander of Hendricks & Partners was the only broker involved in the transaction. Staff Reporter Eric Billinngsley can be reached at (818) 316-3124 or at [email protected].

Featured Articles

Related Articles