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Watching and Tracking as Both an Owner and Investor
Akey takeaway offered in last month’s article on “Ways to Cope with No Clear Direction” (Apartment News, September 2020) was the importance of watching and tracking.
Owners, for the most part, tend to know the cash flow generated by their properties. However, just looking at the monthly totals is only part of the picture. What lies behind the totals and how those numbers are trending may be more critical.
A true understanding of what is happening and the ability to make changes that might improve future outcomes requires digging into the details, both in terms of rents collected and expenses. A reduction in cash flow may not just be the result of delinquent rents; it may be a combination of several different factors from both sides of the equation. At the same time, owners also need to put on their investor hats and look at the real estate market. Now the focus is
BY SONYA LOERA
upon ROI (Return on Investment), which involves knowing the current market value of each property owned.
Some might say, “Why bother? I’ve owned this property for 20 years and I don’t plan on selling.” That may be true, but what if something happens and there is a change in personal circumstances?
Someone who has been watching and tracking the market on an ongoing
Watching — continued on page 24
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basis is much better prepared to evaluate options. Even more importantly, staying current reduces the need to get up to speed at a time when stress levels are probably already high.
So, what is happening in the real estate market?
National or, even, regional reports do not provide the type of information that is truly useful. Nor do residential resale prices serve as an appropriate guide.
The same can be said for comparably scaled properties in different socioeconomic neighborhoods or locations. Prices in Long Beach differ from those in Anaheim. However, for the purposes of this article, I wanted to provide an example with some broad-based insights, so I am taking a look at fourunit property sales in Orange County.
To provide a short-term trending perspective, I ran the same Multiple Listing Service report at the end of July and again at the end of August. Although not definitively a trend, it is interesting to note that in just a 30-day window, active listings dropped by 16% from 67 active listings down to 56.
That downward movement in inventory was reinforced by a nearly doubling of properties under contract (i.e. from 10 properties back in late-July to 19 properties in late-August). The fact that the number of listings sold in the last 180 days (6 months), remained somewhat steady (47 and 51), indicates that there may be a further tightening in the market ahead.
So, what do these numbers really tell us? First, there is no apparent rush to market. In fact, the number of available properties offered for sale has dropped, yet there seems to remain a significant level of demand.
It is important to note that prices have dropped, as well. But, again, the decreases have not been by huge percentages. And, as we all know, a lack of competition tends to drive prices back up or, as more likely, de-accelerate any further decreases.
So where do you go from here?
If you do not already have a reliable means of watching and tracking prices of comparable properties, find a way to get this information. An excellent resource is a real estate agent who not only specializes in multi-family investment properties, but one who knows and understands the dynamics of the locations where your properties are located.
You also should be looking at options — not necessarily to be exercised in the immediate future, but just so you have familiarity and some ideas should the need arise.
About the Author: Sonya Loera joined WR Gorman & Associate in 2013. With a background in accounting she serves as not only a real estate agent and officer manager, but also as a transaction coordinator and property manager.
Founded in 1972 by William (Bill) R. Gorman, this Brea, California-based firm focuses on personalized wealth building through real estate. With a client-first philosophy, the firm serves as an expert resource for informed decision-making and transitioning that creates sustainable legacies for investors and their heirs.
SEPTEMBER 2020 MID-MONTH SNAPSHOT
SEPTEMBER 2020 MID-MONTH SNAPSHOT RENT COLLECTIONS SEPTEMBER 2020 MID-MONTH SNAPSHOT MULTIFAMILY SOCAL SURVEY RENT COLLECTIONS SEPTEMBER 2020 MID-MONTH SNAPSHOT RENT COLLECTIONS MULTIFAMILY SOCAL SURVEY MULTIFAMILY SOCAL SURVEY DAN BLACKWELL & TEAM RENT COLLECTIONS DAN BLACKWELL & TEAM MULTIFAMILY SOCAL SURVEY DAN BLACKWELL & TEAM DAN BLACKWELL & TEAM Responses were collected from 26 owners and include approximately 23,000 units located primarily in Orange County, and bordering regions of Los Angeles County. Responses were collected from 26 owners and include approximately 23,000 units located primarily in Orange County, and bordering Responses were collected from 26 owners and include approximately 23,000 units located primarily in Orange County, and bordering regions of Los Angeles County. The dataset primarily includes Class B & C properties ranging in size from 5- to 10-unit, up through 100+ units. The median for all properties in survey is approximately 42 units. Responses were collected from 26 owners and include approximately 23,000 units located primarily in Orange County, and bordering regions of Los Angeles County. The dataset primarily includes Class B & C properties ranging in size from 5- to 10-unit, up through 100+ units. The median for all The dataset primarily includes Class B & C properties ranging in size from 5- to 10-unit, up through 100+ units. The median for all properties in survey is approximately 42 units. Our mid-September survey results are summarized as follows: regions of Los Angeles County. The dataset primarily includes Class B & C properties ranging in size from 5- to 10-unit, up through 100+ units. The median for all properties in survey is approximately 42 units. properties in survey is approximately 42 units. Our mid-September survey results are summarized as follows:
5.8% Our mid-September survey results are summarized as follows: Our mid-September survey results are summarized as follows: 5.8%
5.8% 5.8%
94.2%
94.2% 94.2%
3.6% 3.6% 94.2% vacancy rate as of mid-September 3.6% vacancy rate vacancy rate as of mid-September as of mid-September
3.6%
vacancy rate as of mid-September
Collected Delinquent/Outstanding
Collected Delinquent/Outstanding Collected Delinquent/Outstanding WWW.MULTIFAMILYSOCAL.COM WWW.MULTIFAMILYSOCAL.COM Apartment News Collected Delinquent/Outstanding WWW.MULTIFAMILYSOCAL.COM www.aaoc.com October 2020
