MacFarlane Real Estate, Inc.

In college at UC Davis, I began to get interested in investing and making money.  I read books about the stock market and specifically became fascinated with Warren Buffet and Berkshire Hathaway.  I admired Buffet’s basic approach to investing.  He looked at the underlying numbers of a company, not the glamour of the hottest new tech stock.  Buffet never cared what the next guy would pay for a company.  Buffet looked to make money on the cash flow.  Well…   Apply that principle to real estate.

If an investor looks purely at the numbers (Rental Income Verses Expenses) of an investment property, apartment buildings in low-income areas are shining jewels!  That’s right!  The money is in the hood!  Haven’t you heard of “slumlords” making tons of money?  Well, I don’t suggest being a slumlord.  But, I do suggest looking at the numbers of a low income apartment building in comparison to other investments. 

Let’s look at three scenarios; a single family home, a Class A 4-Plex, and a 14 Unit Apartment Complex in a low income area.  All three properties are worth $1,000,000.  A single family home worth $1,000,000 is likely to rent for about $3,500.  4 Units in a nice area of Pasadena are likely to rent for about $1,600 each, for a total of $6,400 of income.  A unit in a low-income area is likely to rent for about $900 per unit, with 14 units… there is a total income of $12,600.  

It is definitely more work to manage a 14 unit low-income apartment building than a 4 unit class A apartment.  Turn that work over to a professional management company for 6% of gross rents!  As an investor, you probably don’t want to manage any apartment building, class A or low-income.

What would Warren Buffet do with $1,000,000?  I think he would prefer low-income apartments! 

Let me preempt some of the normal resistance to low-income apartments. 

“Low Income tenants are harder on apartment units.”  Thats true!  However, less expensive maintenance and repairs are acceptable in low income apartment buildings.  The expense is only slightly higher in a low income apartment building. 

“I will have more evictions and turn-over.”  Go Section 8.  Have the government pay the rent and the tenants will practically never leave.  Little evictions and little turn-over.  In fact, the class A  apartment has turn-over because people end up buying houses, students graduate, etc… 

“I invest in commercial properties with business as tenants because they are professional and take care of my property.”  Businesses are failing.  The vacancy factor is sky high.  Businesses are not paying their rent on their office/retail space.  However, the owners are doing everything they can to pay for their home!  

Apartment deals start at about $500,000, making the investment accessible to many!  MacFarlane Real Estate, Inc. is finding investment properties that are great deals.  If you would like a complimentary property search, just call!  We are attorney-brokers that provide legal review and brokerage for the same brokerage commission.  Buy an apartment through us and you get the first year management for free!

May an attorney who is also licensed as a real estate broker act in both capacities on behalf of a client in connection with the purchase of real property in California? The California State Bar said “yes” in a State Bar Ethics Opinion in 1982 (Formal Opinion No. 1982-69). Professional responsibility is not taken lightly by the California State Bar.  In this interesting opinion, the Standing Committee on Professional Responsibility and Conduct discusses the issues of an attorney’s duty of confidentiality, duty of loyalty, fee arrangements and advertising.

The Opinion establishes and demands a high level of ethical standards for a California attorney carrying out the dual role of attorney-broker.

Negotiating properties is more than just buying, selling or leasing bricks and mortar.  One must consider, for instance, the ability of a property to produce cash flow, and that ability is tied into a bundle of legal rights.  Analysis of the legal documents is crucial to discovering the underlying flow of income.  All too often, prospective buyers and sellers are caught up in today’s brokers’ marketing campaigns.

Attorney-Brokerage provides the unique blend of legal and real estate knowledge as one integrated service.  During the sale or purchase of a multi-family or commercial property, countless issues will arise.  With the fusion of legal services and brokerage services all under one roof, an attorney-brokerage firm is able to provide the appropriate guidance on, among other things, negotiating finance terms, locating adequate title and property insurance, contract/lease interpretation and tax planning as it relates to the subject transaction.  This added layer of security ensures the protection and maximization of the client’s investment.

Under the attorney-brokerage structure, in most cases, the clients receive brokerage services with legal oversight for one fee–the basic real estate commission.