1. SHOULD YOU OWN APARTMENTS?
The PROs and Cons so you can decide

2. Topics for presentation
Who is this guy? (My Story)
WHY I started
The obstacles I faced
Apartments vs. SFRs
Most common Fears, Objections, Challenges
How to determine a “good” investment with true upside
How do I evaluate?
How do you find these opportunities?
Overview of Sacramento Apartment market

3. Who is this guy? Bay Area Native Son of Mexican immigrants
Family owned Roofing Company for over 30 years
Parents purchased distressed SFRs, Apartments, Industrial
I grew up collecting Rent, cleaning out units, doing rehabs
Played Soccer at UCD
Acquisitions for Developer institutional apartments, retail, and industrial
PCG started during the Great Recession
2015 Acquired 1st Investment property

4. WHY I started? The Stress of earning a living (chasing)
Tired of being at the mercy of clients
I desired Cash-Flow
Wealthy make the majority of their income on Cash-Flow not Earned
I’ve witnessed really dumb people become wealthy in real estate
Condemned 26 units
Bank-Owned

5. BEFORE…

6. Almost Done…

7. What obstacles did I overcome?
Condemned
Out of State
Financing - 8 Banks “No”
Overbids by contractors
The unknown items i.e. plumbing & electrical
Getting Back on Budget
Property Management

8. Apartments vs. SFRs Your Choice at end of day
Too many chasing SFRs minimizing the profits
SFRs rarely Net Income
The “unknown” keeps investors away
Long-Term Cash-Flow
Upside in rent increases
Economies of Scale
One location
Higher Value-Add margins
Multiple Exit Strategies

9. BUT……..Common Fears or Objections
“I Don’t have the Money”
Too many units in one location
The costs of improvements are high
There’s so many expenses
What if I have vacancy and can’t fill?
How will I manage this many units?
I have to pay for a property manager!
One bad tenant can ruin my property
Financing is hard to obtain
The banks just take your property whenever they want

10. Is this a “Good” Investment?
What’s your criteria?
What is the rental upside?
Rent Survey
How will you increase rent?
How much deferred if any?
How’s the location + market?
What are the actual operating expenses?
What can you do to reduce expenses?
Is it being properly managed?
Can you get all of your money out of it?

11. How do I calculate value?
Determine what is the Actual Rent Collected
Subtract from all operating expenses (Remember New Property Tax Basis and Your Insurance Cost)
Rent minus Operating Expenses = Net Operating Income
Determine Cap Rate or Return (Market or Your Criteria)
Divide the NOI by the Cap Rate = Value
*Then subtract out any Deferred or Improvements to obtain “As Is” Value

12. Example Annual Rent Collected = $100,000
Operating Expenses = ($45,000)
NOI => ($100,000 - $45,000) = $55,000
Market Cap Rate +/- 6%
Divide $55,000 by 6% = $916,667
Let’s say $50K in Deferred
$916,667 - $50,000
“As Is” Value = +/- $866,667

13. Where are the Opportunities?
Owner’s that are “asleep at the wheel”
Absentee owners
Retirement and getting tired of changing toilets
Kids inherit property and can’t agree
Properties with deferred maintenance / code violations
High owner expenses
Poorly managed properties
Ask yourself “How can I add value”
*Seller Carry Financing to avoid Capital Gains

14. The Sacramento Apartment Market