Episode One: Executing on a Real Estate Strategy

The month of June continues its rapid recovery for our local South Bay housing market.

It is truly a stunning 180 degree turn from April and May, which had some of the ugliest data one can see in terms of listings, pending sales, and closed sales.

This buyer desire for a home, personal space, and a backyard amidst the pandemic are very real. All-time low interest rates, confidence in markets, and worries of the Coronavirus subsiding are all contributing to a pendulum swinging back to a bullish home market.

I love the real numbers and we cannot wait to share the June numbers later next week when we close out the quarter.

A Live Series Starts Now

For this week’s blog and over the next few months, I am going to share some insight into how you can form a real estate thesis, plan, and how to execute on everything…by watching me.

This is going to be a “live series” as I am going to take you alongside my personal deals happening at this very moment and show you how they play out. Essentially, you will see how I form, and formed, my thesis, set-up a plan, and then work to execute on that plan based on what works for my personal goals.

There will be “wins,” and there will be “losses.”

So, you will see all the good and all the bad.

Throughout the series, I will also update you on past deals and share relevant blog posts from years prior that will help you fully understand my moves and the motives behind each play.

You may agree or disagree with my approach.

But keep in mind, there is no right or wrong answer because every real estate move depends on unique factors faced by ever person.

My reasoning for this “live series” is to serve as a transparent, and relatable, case study for you to learn. I find as employees, new investors, and others follow our deals real-time on the inside here at Manhattan Pacific, they become more educated and confident in their real estate pursuits.

This series will not be completely chronological, but we will get there, and it will all make sense very quickly after a couple of “episodes.”

I think it will be fun to share, and hopefully it will be valuable to you as well.

If it can advance your real estate knowledge and help with your real estate portfolio, then that is awesome.

So, here we go…

Ugly Data and Reopening Optimism

From an active, pending, and closed homes sales perspective in the South Bay (and throughout greater L.A. and the state of California), the numbers from April and May were some of the worst we have seen for our residential real estate markets.

At the same time, we were witnessing the stock market’s meteoric recovery run through April and May (after falling precipitously in February and March), government and Federal Reserve stimulus support, and incredible optimism.

As the Coronavirus ravaged markets, the real estate market shaped into a place with low inventory, all-time low interest rates, and surging confidence and optimism in the stock market.

If you were going to test the selling waters, coming into June seemed like a great contrarian time to try. But keep in mind, test and only if you did NOT need to sell.

In the last month, I was advising clients to prepare their homes for sale, reserve a week or so in a Terranea Casita, and put their home up for sale at an appropriate price. Give it a shot and see if there are buyers who want space and have fewer options than before.

For the optimistic reasons stated above, there was a potential window to make a fair deal despite the turmoil, and get a deal done as the virus subsided. Making a fair deal would help take risk off the table in the chance that re-infection occurs and markets fall again, in the small chance that it could happen down the road.

The worst case scenario? If your home did not sell, you could move right back in and what for a better time.

To be clear, this was for Sellers that would like to sell but did not need to.

Unfortunately in my May conversations, no one took me up on the advice…

That said, I know it is not easy in the face of a shut down and civil unrest to put your home out there.

Believing in Your Advice

First and foremost, I always tell clients that I advise them just as if I were in their shoes.

So, this is where the series begins.

I too, was involved in a real estate property that we would love to sell at a fair price based on past sales, but did not need to sell if it did not work out.

It is much easier to sell income property (rather than a home) because inherently you can continue to receive rents during the time a property is on the market and life does not change much.

If you get the price you want on an income property, then that is awesome!

If you do not get the price, you can keep the property and continue receiving your cash flow.

On May 22^nd, I had discussions among our investors regarding a sale of a duplex in a portfolio of five properties.

After an hour and a half call, we agreed to list the property in principle. And, after the very strong Memorial Day holiday market action on the more affordable end (see last week’s blog here), we began preparing the property for sale.

The plan was to list the first week of June, but with everything happening in the world and the unrest after the murder of George Floyd and looting that previous week, we delayed the listing. Shortly after the unrest settled, on June 11^th, the property went live on the MLS.

Executing on Thesis and Making a Deal

For reference, I will give the context of that decision, the property, and the investor motivations in the next episode, which will be in about two weeks.

For now, I want to get the story started ASAP for you to see the “live” part of the deal.

In the coming months, you will see the fully developed strategy, which was be developed over time and continues to evolve.

This whole “live series” is a part of a larger extended strategy that we are working towards, but this is the starting point to make the rest come to play for you as a reader.

In each of the following blog posts, the story will develop, and it will all make sense. For now, below is the information for the duplex being listed.

The property for sale is located at:

• 844 W. 55^th Street, Los Angeles, CA 90037
  • Duplex, 8 bed, 4 bath, 2,422 sq. ft., 5,120 sq. ft. lot
  • Built brand new in 2009, offering a current Cap Rate of 5%

Upon listing, the property received two full priced, financed offers and an all-cash offer at a $20,000 discount to the asking price.

With a 20-day escrow and 10-day inspection contingency, the choice was made to take a discount for the speedy cash offer to avoid volatility and re-infection virus risks to the economy.

No offer is guaranteed, even all-cash offers on income properties, but achieving a great price and moving to sell in fewer than three weeks was a nice proposition.

So, we will see what happens…

A Long Way to Go and What’s Next

No escrow is ever easy. Things can change in an instant.

In two weeks, you will hear how the deal is going. Can the all-cash offer deliver or will they back out?

Furthermore, in the coming blogs, I am going to dive into the basis for why we are selling and the plan ahead to give you more context. A few items that will be covered…

1. What I sold last year and why.
2. The mechanics of the portfolio and why the property is being sold.
3. Discuss ADUs again…part of additional thesis and planning.
4. Dive into the thought process of how to form your thesis and execute on short-term and long-term strategies. It can be different for everyone.

Conclusion

I know this post is a little different than most, but I promise to add more information and value in two weeks so you can see it all come together.

From there, as I said, I hope it becomes a running series that teach you how to make thoughtful real estate decisions.

This will materialize over time so thanks for joining me on this journey. I am excited to have you along for the ride.

In the meantime, for next weeks post, I will be sharing South Bay June data.

It is the end of quarter two, so those numbers are going very important!

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