Re: How is SO CA apartment market? - Posted by Rick, the Probate Guy
Posted by Rick, the Probate Guy on April 26, 2008 at 19:13:34:
Candidly, I’m not buying units at this time, and here’s why:
If I had any left, I’d sell every one that I had that wasn’t going to be a long time keeper because cap rates are outrageously high. Apartments have never been my specialty, either, so I’ve tended to go into them with partners who are either more knowledegable or enthusiastic about the project, the upside, etc.
I’ve done pretty well with the handful that I’ve been in, but can’t chalk it up to anything that I did, other than write the check.
You’re absolutely right about the cash flow in most of the current offerings. Way, way too low, or none at all for some time. If I’m going to gamble on cash flow starting a few years down the road, there better be a no brainer pot of gold at the end of the rainbow and I haven’t seen one like that in years.
I’m of the opinion that it’s way too early to work apartment deals, unless you’re really just buying the note, or fixing a problem that you have an inside perspective on. Retail deals are way too expensive. Wholesale deals are way too rare.
This might be a very good time to bone up on your research and develop a good plan for when the time is right. I think that the timing will be more obvious if and when the SoCal economy for the working man really starts tanking. I’m watching for signs that people with jobs in trades, manufacturing, and service sectors move out of state resulting in some hardship to the apartment owning community. It may not happen, either, but that’s what it may take.
I’ve had units in downtown Long Beach, Newport/Costa Mesa, and Fullerton, to think of a few (and not too many more, either). I haven’t seen signs that any of these communities’ economies have been hurt (yet).
Watch for signs that loans for units become next to impossible, or some other sign that indicates that sector is hurting. Now is just too soon.
It may easily take a few years for the good ol’ bad times to return for apartments. In the meantime, mark out your geo market(s) and neighborhoods and be ready to execute when the timing is right.