California’s housing landscape is ever evolving, meaning the rules and regulations that support a healthy housing market need to be constantly re-assessed. In 2020, the biggest obstacle confronting housing is the current inventory shortage, especially in the low tier where first-time homebuyers typically break into the market. The change on the table: adapting density and permitting rules to cure the shortage.

For example, consider California’s most populous city, Los Angeles. From the 1940s through 1990, development was fairly mixed, consisting mainly of SFRs and smaller multi-family dwellings. The direction of development was outward, creating today’s sprawling city (and infamous traffic problems).

But the past two-to-three decades have seen very little growth. Since the city has reached its horizontal limits, the only way to grow is up. Thus, the little growth that has occurred has been in the form of occasional large multi-family developments, according to a recent Zillow analysis. That being said, Los Angeles’ housing situation has remained largely the same in recent years, with very little growth.

During the 2000s, for every one new construction unit built in Los Angeles County, the population grew by two individuals. Considering the average household size fluctuates around 2-3 people, this rate of construction is fairly appropriate for a healthy housing market.

But in the years that followed, from 2010-2017, the average annual ratio was over twice that. For every new construction unit started annually, the population grew by 4.1 individuals in Los Angeles, according to the U.S. Census Bureau.

As a city stretches its boundaries further and further, problems get bigger. These include more traffic, longer commutes to city centers and more pollution. In Los Angeles and other large metros, the construction shortfall has led to record-high rents — the average Los Angeles renter is forced to spend 46% of their income on rents in 2019 — and record levels of homelessness.

Since metro areas can’t continue to build out indefinitely, increasing density is the only way to ensure the housing stock keeps up with a metro’s growing population.

Yes, in my backyard

Laws allowing for greater density have been slow to take hold here in California and across the U.S. That’s mainly due to vocal not-in-my-backyard (NIMBY) advocates who don’t want to see their “neighborhood character” jeopardized with an influx of residents.

These barriers to density are in fact barriers to economic growth and a more stable housing market. When NIMBYs win, it places real estate professionals in the position where they need to compete for a handful of listings in a given neighborhood, even when demand is high.

In turn, homebuyers are forced to either pay high market value or abandon the search in their desired neighborhoods. Sellers are hesitant to place their homes on the market for fear of being unable to find suitable replacement property in their neighborhood or budget, keeping inventory further in check.

The solution is so simple: more housing! first Tuesday has long advocated for increased density in desirable areas that are:

• close to jobs, which means shorter commutes; and

• near public transit, to relieve parking requirements which take up precious land.

The good news is that legislators are aware of the issue, and the solutions. Several new laws have been passed since 2018 aimed at increasing the housing stock, especially of low- and mid-tier homes. But more help is needed at the grassroots level. The loud voice of NIMBYs needs to be countered by reasonable calls for density in California’s urban cores. As real estate professionals, you are ideally placed to both see the problem and voice the solution.

A capitalization rate, or cap rate, is used by real estate investors to evaluate an investment property and show its potential rate of return, helping decide if they should purchase the property. The cap rate formula is cap rate = net operating income/current property value. A good cap rate is typically higher than 4 percent.

What a Cap Rate Is & How It Works

A cap rate is a formula that investors often use as a tool to evaluate a real estate investment based off of a one-year period. It should be used to help determine if the property is a good deal. Instead of solely using the cap rate to determine if you should buy an investment property, we recommend using it as one of a few different evaluation tools.

The cap rate is calculated based on annual returns. This means that if a property performed well or poorly for one year, this shows up in the cap rate calculation. It also means that an investor isn’t getting an overview of the property for the past several years. It’s important to keep in mind that the cap rate shows the rate of return over one year, so if the property had prior years of poor performance, the cap rate might be deceiving in that is only shows one positive year of returns. It’s just something to keep in mind as you analyze the investment property further.

The cap rate is generally used by long-term investors that are purchasing residential or commercial rental property. Fx and flippers do not use it because they don’t intend to rent out the property. Cap rates should be compared to similar properties in the same asset class.

The capitalization rate is the ratio of net operating income to property asset value. The cap rate doesn’t take into account your mortgage payments or the costs associated with purchasing the property like lender fees and closing costs. That’s why, along with the cap rate, you should look at the overall financial picture of the investment property including its return on investment (ROI), cash flow and what comparable properties are selling and renting for.

Why a Cap Rate Is Important

A cap rate is an important tool for investors because it helps them evaluate real estate based on its current value and its net operating income (NOI). It gives them an initial yield on an investment property. An investor can look at a rising cap rate for a property and see that there’s a rise in income relative to its price. In contrast, a fall in cap rate generally indicates that there is lower rental income compared to its price. They can look at the cap rate before deciding if the property is worth buying or not.

When to Use the Cap Rate

You should use the cap rate as a way to evaluate a real estate investment. It’s typically used prior to purchasing a property but can also be used once you already own the property and before you put the property on the market to sell it.

The capitalization rate is a tool to help you evaluate a property and should be used by investors in addition to other tools. Typically, a buy and hold investor will use the cap rate as well as landlords and commercial investors. It makes sense to use the cap rate on residential and commercial properties that are currently rented.

The cap rate can be used for:

• Single-family investment properties

• Condo and townhome rental properties

• Commercial real estate investments

• Multifamily rental properties

• Apartment buildings

• Landlords who want to evaluate a property they already own and may consider selling

When Not to Use the Cap Rate

There are certainly many scenarios when using the cap rate formula is appropriate. However, there are times when using the capitalization rate doesn’t make much sense. You shouldn’t use the cap rate if you’re a fix and flipper or if you’re buying a vacant property.

Typically, you shouldn’t use the cap rate for the following scenarios:

• Fix and flip: Fix-and-flip investors purchase real estate with the intention to rehab it and sell it quickly for a profit, so they don’t use the capitalization rate to determine if the property is a good investment. They’re not interested in the rental income because their exit strategy is selling the property and not renting it out.

• Purchasing land: When evaluating land, an investor doesn’t usually use the capitalization rate because the land typically is vacant and, therefore, doesn’t have any rental income so the NOI can’t be calculated. Instead, the investor should research the land thoroughly, including its current and allowed zoning, which is important if you want to resell the land. You should also research the utility accessibility and do a survey of the land, so you know what you’re buying. For more information on how to buy and evaluate land, read our in-depth guide on how to buy land.

• Purchasing a vacant or unoccupied property: The cap rate formula depends on NOI, so it generally shouldn’t be used if the property is vacant because it doesn’t have any rental income to take into account. Although some investors use projected rental income, it’s not very common because it may be inaccurate, and it’s difficult to estimate expenses on a vacant property.

• Purchasing a vacation rental property: Although a vacation rental property is rented and will have NOI and operating expenses, it skews the results of the capitalization rate formula because it’s not rented year round. Part of the year, the owner will use the property as a vacation home, so a cap rate doesn’t give the property an accurate representation of value.

• Short-term rental property: Similar to a vacation rental property, a property that offers short-term rentals also skews the cap rate because the rental terms are generally for days or weeks and a cap rate is calculated annually.

Cap Rate Formula

Cap Rate = Net Operating Income / Current Property Value

The cap rate formula is the net operating income divided by the property value.

The cap rate formula is calculated on an annual basis. Keep in mind that investors sometimes calculate this differently. The capitalization rate formula can be calculated with or without the occupancy rate, but it’s more accurate using the occupancy rate if you know what that number is.

First, let’s discuss how to figure out the NOI. This is relatively simple to figure out by subtracting the operating expenses from the gross rental income. Next, you need to figure out what the property value is. This is not necessarily the same as the purchase price of the property. For more information on terms used in the cap rate formula, review the key terms section below.

If you decide to incorporate the occupancy rate into your cap rate formula, then you would take the gross rental income, multiply it by the occupancy rate and then subtract your operating expenses.

What Is a Good Cap Rate?

Generally speaking, a cap rate that falls between 4 percent and 10 percent is typical and considered to be a good cap rate. However, it does depend on the demand, the available inventory in the area and the specific type of property. What is a good cap rate can be subjective and various real estate investors with dissimilar investing strategies look at it differently.

For example, a 4 percent cap rate may be the norm in high-demand areas such as in and around large metropolitan areas and high-cost areas like Southern California and New York City. In contrast, a lower-demand area like a rural neighborhood or an up-and-coming neighborhood that is in the process of gentrification, you may see a cap rate of 10 percent or higher.

Typically, buyers want a high cap rate, meaning the purchase price is relatively low in comparison to the NOI. However, a higher cap rate typically means more risk and a lower cap rate represents lower risk. A property with a high cap rate may be located in an area where there isn’t much opportunity for increasing the rent rates or where property appreciation isn’t on a scale with other areas. An investor needs to weigh the risks and determine an appropriate cap rate for their investment goals.

A property with a high cap rate may not take into account the occupancy rate, it may use expected rents and not current rents or it may be in an area where there isn’t much demand for investment properties. Conversely, a property with a low cap rate may be in an expensive area, near downtown and may be considered more desirable and have more demand for that type of property. Keep in mind that you should check how the cap rate was derived so you understand the full financial picture of the real estate investment.

Keep in mind that you should compare apples to apples when deciding if a property has a good cap rate. This means that cap rates should be compared among the same types of properties in similar areas. A multifamily investment property will generally have a much lower cap rate than a commercial building with retail tenants. This makes a multifamily property a lower risk and potentially lower reward investment. This is because people always need somewhere to live and, if the economy takes a turn for the worse, retail tenants are less likely to pay than multifamily tenants.

“The idea of “good” or “bad” cap rates are in the eye of the beholder — the higher the cap rate, usually the higher the risk. In our target markets and asset class, we are seeing cap rates between 5 percent and 6 percent that, when leveraged conservatively, can create cash-on-cash returns of 8 percent to 9 percent 

Factors That Affect Cap Rate

A good or bad cap rate can be perceived differently by different investors. Varying cap rates are seen among categories and types of residential and commercial real estate. However, there are a few factors that affect the cap rate like property location and demand in the area.

Factors that typically affect cap rate include:

• Location: Property location drives demand and dives the local economy; generally, a more desirable location means a higher fair market value of a property and higher rents, so typically the cap rate remains unchanged

• Asset class: This is the type of property such as multifamily, apartment building, industrial or commercial property and typically residential properties have lower cap rates than commercial properties because commercial properties tend to have higher rents

• Available inventory: This is how many properties are available in the area and, typically, the lower the inventory, the higher the demand, which tends to lead to properties with lower cap rates

• Interest rates: Rising rates typically mean a fall in property values; when rates rise, debts typically rise which decreases net cash flow; this means that rising rates can lead to lower cap rates

“Cap rates have seen downward compression since the Great Recession as U.S. Treasuries have remained steady and the interest rate environment has remained low. That being said, the inverse relationship between cap rates and interest rates will begin to reveal itself as the Federal Reserve moves toward gradually increasing rates.” —

Key Terms Related to Cap Rate

To understand what a cap rate is and how it works, you first need to understand a few key terms. These terms will help you figure out the cap rate formula, understand why a cap rate is important and evaluate the property.

The key terms used when discussing cap rate are:

• Gross rental income: The total amount collected in rent and any related rental property income before any expenses are deducted; you can include rent for parking and other factors

• Net operating income (NOI): This is the annual income generated by an income-producing property after deducting all operating expenses

• Operating expenses: Expenses needed to operate the property which includes property taxes, rental property insurance, management fees, repairs, maintenance and miscellaneous things like accounting and legal fees

• Occupancy rate: The ratio of rented space to the total amount of available space and is typically used in multi-unit properties

• Property value: The current fair market value of a piece of real estate; this is not the purchase price
  

Additional Ways to Evaluate Investment Property

There are several other ways to evaluate an investment property besides using the cap rate formula. We recommend using two to three methods when evaluating investment property. This gives you a more well-rounded view of the property and whether or not it has the potential to be a good investment. If the property isn’t rented, needs to be rehabbed or you don’t know the market rents, then you may want to use an additional evaluation tool.

Some additional ways to evaluate investment property include:

• Comparable properties: Look at what other comparable properties have sold and rented for in the past three to six months; comparables should be the same type of property, have similar amenities and be similar in size

• Per-unit price: This compares the per unit price of an investment property

• Cash flow: Evaluate the property’s potential cash flow by checking to see if the expected monthly rent will cover your costs including mortgage payment, taxes, insurance, utilities and homeowners’ association fees

• Gross rental yield: This number can be found by dividing the annual rent collected by the total property cost and then multiplying by 100; the total property cost includes the purchase price, closing costs and any renovation costs

• The 1 percent rule: The gross monthly income should be a minimum of 1 percent of the purchase price; some investors use the 2 percent rule, depending on the property type and location; if the property’s gross monthly income is 1 percent or more of the purchases price, it’s usually cash flow positive

• Return on investment (ROI): Typically, 10 percent or more is a good ROI for a real estate investment; you can figure out your ROI on an investment property by calculating your annual return and dividing that by your total cash investment; you figure out your annual return by subtracting your expenses from your total rental income

The Bottom Line

Investors use a cap rate as a tool to help them evaluate a piece of real estate based off of the NOI and current fair market value. The cap rate formula is used to show the potential rate of return on a real estate investment. A good cap rate in real estate varies but is generally 4 percent to 10 percent or higher.

Through this Coronavirus pandemic, I have been noticing something strange happening to the Real Estate market concerning Cap Rates. If you remember I posted 2 papers on Cap Rates late last year. It is the way to value an Apartment Building.

The way to value an Apartment Building is to take the Net Operating Income, cash flow, and divide it by the Cap Rate, a value used to price a property based on the Net Operating Income, the neighborhood and the amenities of the property. The lower the Cap Rate, the higher the price of the property and the higher the Cap Rate, the lower the price of the property. For example, a property with a Net Operating Income of $200,000 and a Cap Rate of 5% values the property at $4 million where a property with the same Net Operating Income and a Cap Rate of 3.5% values the property at approximately $5.7 million.

I have seen, in the past week or so, the Cap Rates go from 3% or 4% to 5% and higher, I even saw a Cap Rate of 7%. Which means that the value and cost of the properties are going down. This is in a market where interest rates are at almost an all-time low and where single-family home prices are going up.

So, the moral of this piece is that Apartment Buildings are a very good investment now. I don't know if this has to do with the Coronavirus or just a market adjustment. I thought that when the Cap Rates were in the 3% range that Apartment Buildings were overpriced and I suggested to my investor clients to purchase land and build their own Apartment Buildings. But now with prices so low, if you can find a property with the right Cap Rate, it is better to purchase an Apartment Building than to build one.

BECOMING A LANDLORD IS NOT AS EASY AS IT SEEMS. IT’S THE SAME THING AS RUNNING ANY BUSINESS. YOU HAVE TO HAVE KNOWLEDGE OF THE INDUSTRY, THE RIGHT PROFESSIONAL TEAM, AND PATIENCE, LOTS AND LOTS OF PATIENCE.

If you’ve been watching reruns of HGTV’s “Income Property” and wondering if it’s time to buy a rental property and become a landlord, you’re not alone.

Between our slow-growth economy, historically low interest rates and the mood of millennials to rent instead of own, income property has been on an uptick since the Great Recession.

In fact, real estate is now Americans’ favorite long-term investment, according to a recent Bankrate study. The popularity of real estate is at its highest point since Bankrate started the survey seven years ago.

Should you take the plunge on a rental property? Experts offer a qualified yes, provided you do your homework first. Here are 10 things to consider before diving into income property.

1. It’s not as easy as it looks.

Forget the TV sitcom stereotypes of clueless landlords. To make the most of income property requires an accountant’s eye for detail, a lawyer’s grasp of landlord-tenant laws, a fortune teller’s foresight and, should you choose to manage your rental property yourself, a landlord’s firm but friendly disposition.

“Where people who want to become landlords fall short is, they don’t realize how much work goes into it,” says Diana George, founder of Vault Realty Group, now part of Century 21.

So before you leap in, you’ll want to consider whether you have the time and skill to put into managing a rental. While rental property is considered a passive investment, that doesn’t mean you’re fully passive in managing it.

2. Success requires a long-term outlook.

Jeremy Kisner, a senior wealth adviser at Surevest Wealth Management in Phoenix, Ariz., owns two Las Vegas rentals. The unit he’s held for 13 years has had two tenants and low maintenance, while the other has had three tenants in four years—the last one a costly eviction.

He’s taking the same advice he gives his clients.

“The way that people get in trouble with almost all investments is, they just don’t hold onto things long enough,” he says. “With rentals, if you break even on a cash-flow basis, that’s actually not too bad because you’re paying down the principal and building equity that way. Then, you hopefully also see some appreciation.”

So if you’re looking to make money in real estate, you’ll want to think long term. As you pay down or eliminate principal over the years, you should be able to grow your cash flow.

3. It’s easy (and costly) to break the law.

State landlord-tenant laws can act like an open manhole cover for rental owners who ignore them, according to Kathy Hertzog, owner of Erie, Pa.-based Landlord Association.

Case in point is tenant security deposits. It’s not as simple as collecting and holding the money.

“There is definitely bookkeeping involved. You need to have that account for each tenant and keep that money in that account and save it,” Hertzog says. “Security deposit laws govern how much time you have to return a security deposit when tenancy ends, less any expenses for cleaning and repair, all of which have to be itemized.

“In some states, if you don’t turn that in, the tenant can go after the landlord for double their security deposit for failing to return it within the specified time period,” she says.

Of course, this is only one aspect of the laws surrounding rental property, and there are many others that landlords must know in order to avoid running afoul of them. You’ll want to be familiar with rules around eviction, fair housing and other regulatory requirements.

4. Make sure you’re landlord material.

If you purchase a rental property, should you be your own landlord or fork over 6 – 10 percent of your rental income to a management service? While there’s no right answer for everyone, George and Kisner prefer to subcontract the work.

“They do the background check on your tenant, make sure they sign the lease and pay their rent on time,” George says. “That frees you up to manage your money, not your property and tenants.”

Hertzog says that there’s a potentially steep downside to being your own landlord.

“If you get too close to your tenants and the tenants have financial problems, you can find yourself stuck because you don’t want to evict them,” she says. “You have to be very professional about it, because if somebody doesn’t pay their rent, they’re stealing from you.”

On top of this issue, are you comfortable making the executive decisions that must be made in managing a property? Will you repair or end up replacing that failing air conditioner or leaky dishwasher? You’ll need to make the call as to what is the best course of action.

5. Analyze whether buying or financing is better.

While some financial pundits insist you should never buy a rental unless you can pay cash for it, Surevest Wealth’s Kisner begs to differ.

“Leverage (that is, a mortgage) typically magnifies returns, on both the upside and downside,” he says.

For example, imagine a rental property purchased for $100,000 in cash. The house yields a rent of $12,000 annually and is taxed at $1,000. With a depreciation schedule of 27.5 years and an income tax rate of 20 percent, an investor would earn just over $9,500 in cash annually. So the investor’s annual cash return is about 9.5 percent. Not bad.

Here’s how the investor using leverage performed, assuming the same house. This investor has a mortgage for 80 percent of the house, which compounds at 4 percent. After subtracting the operating expenses as well as additional interest expenses, this investor earns almost $5,580 in cash annually. With $20,000 invested, the investor’s annual cash return is about 27.9 percent.

In fact, the situation for the leveraged owner is actually a little bit better than these numbers suggest. That’s because part of the rent goes to pay down the mortgage’s principal. So while the investor couldn’t pocket the cash flow because it was used to pay the loan, the investor still profited (and paid tax) on that money.

That’s the power of leverage to swing an investor’s return.

George concurs: “I definitely agree with going conventional (mortgage). It’s a really good way to maximize your dollars.”

6. Budget for the unexpected.

Failure to plan for the myriad expenses of owning a rental can become a fast track to disaster.

“As a landlord, you want to save about 20 percent to 30 percent of your rental income for upkeep, maintenance and emergencies,” says Hertzog of the Landlord Association.

“You want to make sure you’re not just living off that,” she says, “because then when something big happens, you won’t have any money to fix it, and now you’re stuck because you’re a landlord with a property that needs to be repaired quickly, and you don’t have that money.”

Kisner couldn’t agree more: “It’s been my experience that you always underestimate all the different expenses that have a way of coming up and always overestimate just how positive the cash flow is going to be,” he says.

7. Remember to renew your leases.

If mom-and-pop landlords have one glaring blind spot, it’s the failure to renew tenant leases in a timely manner, according to George.

“You’d be surprised how many landlords don’t renew their leases every year, so they’re letting their tenants go on month-to-month leases,” she says. “What’s wrong with that? What’s wrong is, their whole thinking is that ‘Now, if I want to get my tenant out, I can’t because now they’re not strapped to a lease.'”

“Also, they can’t raise rent,” says George. “The only way you can change rent is if you have them sign a form changing the lease every year. That’s how you keep your tenants in check. When you let it slide like that, it can be really difficult to get your tenants back on track,” George says.

Depending on the state, landlords can give notice of eviction for a specified period. In California, where George is based, the state allows landlords to give 60 days’ notice for tenants who have lived in the property for more than a year (or 30 days for less than a year), though the situation may be different in rent-controlled cities. The landlord might also offer a new lease contract at the same time.

8. It’s all about location, location, location—sort of.

That old REALTOR® mantra about the importance of location takes an interesting turn when applied to income property.

“The best locations with the most appreciation are where you’ll potentially have the worst cash flow with a rental,” Kisner says.

Why? Investors can earn a return in two ways: cash flow and appreciation. In some areas, investors may want higher cash flow in order to compensate them for slower appreciation. But if investors expect an area to appreciate substantially, they may be willing to forgo some of the cash flow in order to enjoy that appreciation. The result: house appreciation outstrips the growth in rents, and houses appreciate while yielding relatively low cash flow.

“As a result, the property has to appreciate more in order to compete as an investment with properties in less desirable areas,” Kisner says.

His solution: Err on the side of appreciation. That’s what he’s doing with his two rentals, which, in a good month, barely break even. “But if I hold them until I turn (age) 60 when they’re paid off, even after property taxes and insurance, I’ll double my Social Security income,” he says.

9. Want long-term tenants? Consider Section 8.

Sudden tenant vacancy is the bane of every rental owner.

“Each month that a rental stands vacant, you’re having to pay mortgage, utilities and maintenance out of your pocket, so turnaround is one of the things you need to address really quickly,” Hertzog says.

One popular solution? Give Section 8 renters a try.

Section 8, aka the Department of Housing and Urban Development’s Housing Choice Voucher Program, typically caps the rent for low-income Americans who qualify at 30 percent of their adjusted monthly income. While some landlords are skeptical of the paperwork and potential upkeep problems presented by some Section 8 renters, Hertzog views Section 8 tenants favorably.

“Older populations and persons with disabilities are usually excellent tenants. They take excellent care of the property because this is their home. This is where they want to be. Plus, if they don’t pay their rent or ruin your home, they risk losing their Section 8 voucher,” she says.

10. Don’t forget rental property at tax time.

There’s a singular ray of sunshine that beams down upon income property owners each spring as they hunker down with their accountant to prepare their federal income tax return.

“When you have your own home, you can write off the interest and that’s about it,” George says.

“But when you own an investment property, your Schedule E tax form enables you to write off nearly everything under the sun, from painting the home to changing the light bulbs.

“So, even though you have rental income to report, you can show less income than you’re actually collecting and write off your mortgage payment and interest while building equity at the same time,” George says.

It’s that powerful combination of tax benefits and investing returns that helps keep investors interested in rental properties.

Bottom Line

Rental property can be an excellent investment if you approach it in a business-like way. But you’ll want to understand (as much as possible) what you’re getting into before you lay down your money. While the appeal of generating a passive monthly income with real estate is high, it’s important to remember that it often requires a lot of work to keep that income flowing.

The last thing you should realize, now that this article opened your eyes, is that I will hire an excellent management team to run the building for you.  They will keep the building rented, keep everything in working order, deal with the tenants and run the day to day operations of the business, and it is a business and never forget that.  The most important thing is the bottom line.  But you are the owner and you have to be involved in the total decision-making process.  You are doing this to make profits.  But, the major advantage of owning an apartment building is that the property will appreciate giving you added income that a retail store or an accounting practice does not do for you.  If you choose the right location, and how many times have you heard the expression, “The most important thing in Real Estate are Location, Location and Location”, the value of the building will increase as the neighborhood matures and as you raise the rents.  You don’t get that anywhere else and it is probably the biggest reason to invest in multifamily real estate or apartment buildings.

First, let me introduce myself. My name is Paul Levine and I am a licensed realtor in the State of California. Before become a realtor, I was a practicing Certified Public Accountant for over 50 years. I did not just do income tax returns and general ledgers. No, I was intricately involved in the sale of two of my accounting clients to publicly held corporations, one of them being E I DuPont. I was a forensic accountant and did business valuations and testified in court as an expert witness and negotiated many settlements where we did not have to go to court. I was also an Associate Professor of Accounting at California State University – Los Angeles for 6 ½ years. I am probably the most qualified realtor in the State of California.

When I started out in my Real Estate career I bought and sold single family residences for my clients and I did that very well. The last two sales that I had took two days and one day to sell after the property was listed. But, to be honest, I was very bored. Just like in my accounting career I needed to do something different. I was then approached by a past accounting client to sell a property in the San Fernando Valley. It was a 20,000 square foot parcel with a house on it and 5 retail stores. I put a team together and we explored several options. One was to improve the existing buildings on the property, a second was to build 60 condominiums and the third was to build a 60-unit apartment building. As a Certified Public Accountant, I helped many of my clients purchase and sell property and even helped one or two build property. So, I had experience in this field.

So, now I have other realtors, engineers, builders, attorneys and others who I put together as my team and we build apartment buildings for qualified investors. We find the land, do the drawings and permits, build the building and then decide whether to sell it, hold on to it and operate it, do a Section 1031 Exchange as provided for in the Internal Revenue Code, build it in an Opportunity Zone or do something totally different depending on the needs and wants of the investor.

The investor, THE CLIENT, is the most important person in this transaction and everything revolves around what his needs are. I also, using the skills I learned as a Certified Public Accountant, I make sure the investor comes out of this transaction financially healthy. I take that responsibility very seriously.

And, why should an investor build an apartment building and not buy an existing one. For example, assume that the land costs $3 million and the construction costs are $17 million. Upon completion, a total of 3 years in Southern California, the total cost is $20 million and the value of the building is about $24 million. I just created $4 million of wealth for the investor and you did not pay a profit to the seller. This building will generate a healthy Net Operating Income (cash flow) and the tax benefits will generate deductions, such as depreciation, that will offset other taxable income. Yes, that is a simplistic example but this activity will be considered an active activity for tax purposes allowing you to deduct any losses against other income.

Now, all of this seems wonderful and it is. There is a demand for multifamily housing in Southern California. If you build in an affluent area and put in the appropriate amenities in the apartments the rent per apartment could be between $3,000 and $6,000 per month. I have done the research and the numbers are real. All of you receiving this letter already have apartment buildings and you can see the logic in my explanation.

If any of this interests you, you can reach me at (818) 298 – 4000 or you can send an email to me at PLevineRealtor@gmail.com. I have a detailed package that I can give to you or send to you that will explain all of the above in greater detail. Believe me, you have never met anyone like me before.

Best regards,

Paul Levine, Realtor

I wanted to let everyone know that I have expertise in the area of Multifamily Housing as well as a myriad of other topics due to the fact that I was a practicing CPA for over 50 years and I was an Associate Professor of Accounting at California State University - Los Angeles for 6 1/2 years before becoming a Commercial Realtor specializing in Multifamily Housing. Having been a teacher for so long I am extremely comfortable in front of groups of virtually any size. I can give technical seminars or give my audience an overview of various topics that I have written about on Facebook and Linkedin. I am very informative, educated, humorous, and entertaining. I make sure that I get the audience involved in the discussion so my talks are very interactive and lively.

My name is PAUL LEVINE and I can be reached just about anytime at (818) 298 - 4000 or at "PLevineRealtor@gmail.com". I am located in the greater Los Angeles area but for larger groups, I am willing to travel anywhere in the United States. My target audiences are potential investors, individuals who already own Multifamily Housing, Realtors who want to get into the Multifamily Housing market, and anyone who would like to learn about Multifamily Housing.