Rick M. Bean

I am a huge proponent of specialization.  I focus on Portland multifamily assets ranging from 8 to 80 units.  Have I worked on leasing, single family homes, larger commercial properties or deals in other states?  Sure!  Probably will again, too!  But I feel that Robert Redford got it right when he said to Paul Newman:  "Keep thinkin' Butch...and go with what you're good at!"  We owe a debt of gratitude to our Doctors.  Not just because they keep us healthy, but also because they are models of specialization.  There's so much to know that docs have to specialize in order to be competent at a high importance service.

I was reminded of this recently when an investor told me that one of his partners was insisting that his nephew get the listing on a Portland 10-plex.  I'm not a great loser, but I know in life if you don't strike out occaisionaly you're not getting enough trips to the batters box.  What I find amazing is that the nephew has no business experience, no real estate experience, no relevant sphere of influence...but he did get his license last month and some new cards.

Be aware that in Portland there are many multifamily commercial brokers that haven't sold an asset yet this year.  To move product requires knowing Cap Rate trends...but I jokingly suggest this respective agent thinks a Cap Rate is the maximum value an adjustable mortgage can reset to.  He does not have an awareness of full recourse clauses, understand terms such as: "jointly and severally" has no idea of the minimum hold time for capital gains versus ordinary gains or that a reverse exchange is not a football play.  In short, this new agent is exposing his relatives to huge risks and not delivering all of the available upside.  Vegas odds are he is a matter of months from being mentioned in the paper, and not as "the recent winner of..."  Once again...the case is made for specialization!

When you're ready to work with and investment specialist...contact Rick Bean at 503.577.1034 or rick@rosecitycre.com.

While we focus on NOI and Cap Rates when buying apartment investment properties...we still pay close attention to curb appeal...that's part of what attracts potential tenants. With that in mind, when preparing to sell a multifamily property we want the grounds to look the best they can without breaking the maintenance budget.  If you can't afford to do everything, do everything you can.

 PHASE ONE:  Before listing a multifamily property take a walk around it with a different focus. Try to looking at it as you would a plane when you board. The psychology of safety is that when things look messy, ill planned or in disrepair, we perceive that higher risks are present.   To ease traveler's fears airlines strive to have passengers enter a clean and neat plane.  The multifamily analog is we stripe the parking lot so it looks sharp, prune tall bushes....particularly those near buildings.  Mowing the lawn is a must. Adding colorful flowers to the landscaping is a good idea. 

Create scenes, viewpoints that best displays the pluses of the property.  The marketing photos and videos will use those to attract attention to the property.  The financials will be what ultimately sell an investor...but the marketing images increase the odds of a buyer taking the time to look close enough to view the financials.

PHASE TWO:   The first items that any investor or buyer's broker will ask for is a Rent Roll and Profit and Loss Statement.  Those need to be  current and readily available upon request in electronic format.  In this climate actual results must be delivered.  Proformas..."the art of the possible" are acceptable...but only if real numbers are shown as well.  That may be enough information for a potential buyer to submit a Letter of Intent (LOI), but that is only the tip of the research iceberg.  In order to be ready to go to market, Sellers need to have the entire Due Diligence Package complete and ready for submission to the Buyer.   Imagine that you are an interested investor that requests a complete package...only to be told that will be sent in a few days or weeks. 

The best time to forward information requested in the initial interest phase is immediately.  Delays create the impression of increased risk...higher perceived risk inherently reduces perceived value.  Contrastingly, Sellers and Seller's agents that anticipate questions and answer them in advance of their being asked create trust and value.

In my next article I'll discuss everything that belongs in competent Due Diligence Packages...and how that package will vary based on the size of property.

Free Offer:  I will give you up to two hours of my time without cost or obligation.  That includes reviewing wealth building strategies, tax deferral opportunities, disposition/acquisition tactics, equity analysis, etc. 

The fine print:  You pay for the coffee.  Contact me at: 503.577.1034 or rick@rosecitycre.com.

Where else in the business world do you see someone paid $38,000 running an asset valued at $30,000,000?
Are you losing potential profits due to an inadequately trained staff?  Multifamily Property Managers (PMs) and Leasing Agents (LAs) must be thoroughly trained in a number of areas before they can effectively run an asset.  More often than not we ask these folks to work pretty hard for darn little money...must we also withhold the tools and training necessary for them to be successful?

Remember that in a 7-cap market every  buck of Net Operating Income (NOI) translates into $14.29 of value at the time of sale...and all properties are always for sale...at a price.  Having a happy crew is nice...having a well trained group is a must.

Riverstone Property Management is notable for their meteoric rise in market share.  That's largely due to shrewd acquisitions of competitors, but there's much more to their success than that.   They are an industry leader in employee training and employee retention by design. They feel that focusing resources on these two items delivers a better value to their owner/clients, and retaining the best employees help retain clients.  Every Riverstoner (an unfortunate nickname...but that's the one they chose) has training in non discrimination laws, company values, how they are to treat residents, how to do market research, safety, reducing liability, etc.  Hours and hours of training, with a mentor.  Each leasing agent works from day one on developing their "kit."  The kit is a mobile office with calculator, tape measure, lists of amenities, competitive information, local attractions, great area restaurants, ATMs, dry cleaners and churches.  In short, leasing agents are prepared for every question and have resources in hand (that they have personally developed) to resolve a host of housing related challenges.  After four months a Riverstoner may have more valuable industry specific knowledge than many of their competitors gather in a decade.

"I have a smaller property, so I can't afford training"

The smaller your staff...the more important that each one be trained because they don't have as many co-workers to back them up.  In the case of a single employee on site, it is imperative to have training programs.  Remember that not all training is expensive.  Grace Hill www.GraceHill.com is the industry standard for excellence, offering both affordable and free courses.  They also have apartment news updates, on line webinars and flexible plans permitting you to custom tailor your training program.  They offer a great variety of products free, hoping multifamily professionals will also subscribe to their paid products.  Riddle me this:  With all the poorly trained Leasing Agents out there...why isn't every single property using Grace Hill or one of their imitators?

Note:  I am not affiliated with Riverstone Property Management, nor Grace Hill Training.  I am not compensated in any way for promoting them...I'm just an ardent supporter of the way they go to market, and their approach to taking care of their clients.

Are you ready for a client centric multifamily broker?  Please call me at 503.577.1034.

Grace Hill does it again!  One of the challenges of multifamily management is creating knowledgeable and professional employees.  Each month Grace Hill offers free training as a partial solution to the problem.  They also offer additional training on a variety of multifamily topics at affordable prices.  This month Kate Good & Jennifer Stamp will be presenting information on marketing, advertising and promotions.  I feel that apartment owners should change their "I can't afford training" refrain to: "I can't afford not to train!"  Why would anyone let someone be in charge of a multimillion dollar asset and deny them the resources to perform their job with excellence?
DATE/TIME: Wednesday, 6/17/09 @ 4pm ET, 3pm CT, 2pm MT, 1pm PT
SESSION DESCRIPTION: No need to rack your brain over advertising and promotions any longer.  Sign up for this exceptional chat experience and let these marketing gurus lead the way to unique and original campaigns that will certainly bring customers running through your doors.  Flex your marketing muscles and RSVP now!

COST: Spherexx.com and Video Rental Services have made this chat available to you at no cost.  Thanks for their sponsorship!

RSVP: Visit them at www.gracehill.com and look for the details of this event on their home page.  Click the RSVP link to sign up and receive Chat Event Instructions.  Then, log into Grace Hill about 10 minutes prior to the event and click on the Chat Room link, under the chat description, to be delivered to the Chat Room. 

*Please note that space is limited to 350 attendees in our chat room.  Be sure to login to the chat room 10-15 minutes prior to the event. 

I've fielded several inquiries lately about just what an Accredited Investor is.  In most cases this has been in conjunction with Tenancy In Common sponsorship.   Below I've summarized the criteria for determining whether or not someone qualifies as an Accredited Investor.  It's important to remember that working with AI's may facilitate the formation of a TIC that is exempt from registering as a security.  This should only be done with the assistance of an attorney.  The attorney chosen should be a real estate specialist. 

Accredited Investor Criteria:

Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements.  The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as "accredited investors."
The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:
1. a bank, insurance company, registered investment company, business development company, or small business investment company;
2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
3. a charitable organization, corporation, or partnership with assets exceeding $5 million;
4. a director, executive officer, or general partner of the company selling the securities;
5. a business in which all the equity owners are accredited investors;
6. a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase;
7. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
8. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

Some hold members of an investment group such as the Northwest Real Estate Investors Association(NWREIA) to be tantamount to AI's...confirm this with your attorney.  You don't want to violate SEC Rules.  Think of them as being like the IRS...without as good of sense of humor.  Contact me if you would like additional information at: 503.577.1034 or rick@rosecitycre.com.