February 10, 2016admilnComments 0
In my last letter, I referenced the fairy tale, the Three Little Pigs and equated a downturn to a big bad wolf at your door. During the last two recessions, I have been the little pig in the brick house while many of my cohorts have seen their properties fall into disrepair and often times get taken back by the bank. The financial effects along with the emotional suffering can be devastating.
The purpose of my splash of cold water is not to dissuade you from future investments or scare you into selling but to share a reminder that we are in a cyclical and not a secular business. Much of the preparation is mental so that you don’t get “auction fever” and lose focus on the big picture.
During the go-go days of 2005-2007, many in real estate used phrases like “new paradigm” and a supply and demand problem which can’t be resolved for at least a decade. This was justification for buying properties whose cap rates were lower than the borrowing rate which is called “negative leverage.” These signs caused me to halt my buying and even do some profit taking by selling a few of my buildings.
Thus far in this cycle, I’m only seeing negative leverage in A properties in A areas but am still buying when I see a deal that fits my criteria (obviously not A properties in A locations).
I want to share some strategies in building the brick house during the boom times so that you prepare for your success. The goal is to continue managing on during a bust cycle and still have the ability to make purchases as that timing of the market is almost always the best time.
The longer the boom cycle goes, the more probable the end is near. Be ready and plan for your success! You’ll be happy you did.
February 10, 2016admilnComments 0
As much as I would like to only spend time with those in the real estate industry, my circle of friends and those with whom I network spans almost every industry and includes people living around the world. In the apartment world, we are enjoying boom times almost everywhere around the globe. Rents are rising, interest rates are at or near historic lows and values are nice and high.
With everything going so right, what could go wrong?
As a survivor of two previous bust cycles, it is nice to sit with my team members who have been in this business for only the last few years. I regale them in stories of “staying alive in 1995” when we wondered if the glut of vacant units would someday be rented so that we could get back to single digit vacancy rates.
The foundation of what we do is based on a growing economy with steady employment and rising incomes. When the downturn comes, it feels like ice melting under your feet. Fighting for each and every resident, both to keep the current ones happy but to bring in new ones.
For you veterans of the industry, you’ll remember giving away televisions, cruises, months of free rent and baking Otis Spunkmeyer cookies just to get people in the door. Times I hate to remember but insist we don’t forget. In the past, things were good until they weren’t although those owners who didn’t lever up too high with debt and get out over their skis had a far better chance of surviving.
What will end the boom and start the cycle the other way? In other words, what is the Black Swan event?
Why does the US equities lose 400 points when China has a bad day in their stock market? Why is cheap of extremely cheap oil bad for the US economy when it seems that far more American industries would benefit as opposed to energy companies who get crushed by it? What has changed in Greece and the other PIIGS (Portugal, Ireland, Italy, Greece and Spain) who were struggling? While the media is focused on immigration in those countries, their underlying issues almost surely remain.
At some point, the Black Swan will rear her unwanted head and Mother Market will turn on us. The best way to survive is to prepare for it in advance. While I hate to start the new year as the little pig (of the Three Little Pigs) who built the brick house but there is enough going on in the world right now that it seems like an opportune time to reminisce about times which weren’t so sunny.
As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.” In the February reporter, I will discuss things to do to get the jump on the inevitable cycle change.
December 8, 2015admilnComments 0
As I write this month’s article, I do it from a part of the globe which is not ravaged by war or under siege. My family and I enjoy great health and access to fine doctors when needed. We have a roof over our heads and a refrigerator full of food. To boot, I have chosen an industry which is currently booming which is good for my personal cash flow as well as my personal financial statement.
With these blessings, one would think that I walk on sunshine every day without a care in the world. Even though I choose to believe that one dictates his/her own attitude, I still deal with the many frustrations which all in apartment ownership and management are used to and I sometimes get distracted from being as positive as I could and should be.
My best decisions in all facets of business and life are made when I lift myself out of any negative emotion. If you think about the decisions you made when you were upset, you’ll find that many did not work out well for the other party which then almost always has negative repercussions for you.
Whenever I’ve made the conscious decision to recognize when I’m not in a good frame of mind and to take some time to think about positive things in my life, I’ve gotten far better results.
As a test, next time you are in a bad mood and draft an e-mail or e-mail response which feels angry and/or harsh (I call them “flame mails”), complete it and just before hitting the send button, STOP. Save the e-mail as a draft and leave it unsent until the next day. Whenever I have done this, my feelings were different the next day and often times dramatically so. I almost always redraft the e-mail or simply delete it. It is amazing how perspective changes with a mood.
Recently I was traveling back to Los Angeles from Hartford, Ct through Philadelphia. As a frequent flier, I tried to check in for my son, one of my best friends and for me but was unable to do so. When we got to the airport, we were told that our seats for the flight from Philly to Los Angeles had be given away and we were on stand-by on an overbooked flight. Things didn’t look good and the person working the counter for the airline wouldn’t care that I was the CEO of a large management company and syndication firm. I was just a stranger who had one of the many problems she was going to have to deal with during her shift.
Even though I was furious that our seats which were bought a couple of months prior along with our upgrades had simply been given to other people, I immediately checked my attitude as sugar will go further than vinegar. I saw that she didn’t have any solutions so I politely asked if her supervisor would come and assist.
Once her supervisor came and took over, I smiled and told her how much I appreciate her assisting me. I also asked her if I could call her by her first name which was Vanessa and introduced myself when she said, “yes.” My 15 year old son rolled his eyes as he thinks I am a schmoozer and he is right.
In a calm voice and coherent manner, explained our situation along with our goal of getting home on the flight which were originally booked. Vanessa listened intently and took notes before telling us that she would work on it but that we needed to get to our flight to Philadelphia which was now boarding.
As I emerged from the TSA screening, I heard my name being called by Vanessa who was running through the terminal to catch us. She said that while she couldn’t get my seats back, she was able to get seat assignments for all three of us so that we had certainty of returning that evening. As she handed me our tickets, I thanked her for her efforts and felt grateful that she took up my charge to get me home.
While obstacles beyond our control appear before us on a daily basis if not hourly on many days, the only thing in our power is how we deal with them. The very best at solving these situations consistently are usually the most successful in their careers and personal lives. Had I gotten irate with Vanessa and the ticket agent, my anecdote might have included an overnight stop in Philadelphia and a red eye home.
We have many blessings in our life. When we recognize them and the people who make our existence more pleasant, good things happen. Happiness isn’t an accident, it is a frame of mind!
November 2, 2015admilnComments 0
All Real Estate is Local
We are in the stage of the real estate cycle where frustration begins driving ideas or in other words, desperation becomes the mother of invention. While I have purchased properties in 3 continents around the world, my home turf is Southern California.
I’ve learned many lessons from watching my competitors over the years. As California real estate heats up and prices push yields down, everything within a several hour flight looks cheap, particularly Las Vegas and Phoenix (cities within an hour flight away). In the early and mid 2000’s, I traveled extensively around the western United States looking for that panacea market where I could deploy capital at a better cash on cash return than I could get at home. When meeting with brokers in these markets, there was almost a giddiness when I said I was from Los Angeles and I was immediately presented many properties which were available to purchase.
On the surface, the deals in Las Vegas, Phoenix, Albuquerque, Salt Lake City, Denver, Austin, etc… looked quite cheap when using metrics like cost per door and cost per square foot. Thankfully, I’m a numbers wonk and enjoy analyzing new markets ad nausea before risking my capital (which happens prior to ever introducing to investors). What I found was a completely new set of dynamics which had to be understood to fully grasping the potential of any of these cities. Furthermore, there were plenty of local investors who knew the market far better than me.
Like in your backyard, there are paths of progress, job drivers, government intervention (positive and negative), new developments coming and local bugaboos which are musts to know when picking your first deal to purchase. I found the only way to truly get to know the city and its submarkets was to spend time on the ground meeting people, eating in local eateries and walking properties.
I mention this experience because I’m being encouraged to become an explorer like Juan Ponce de Leon who was looking for the Fountain of Youth when he found what is now Florida. The Fountain of Yield is a better description today and may be out there but when risk adjusted against all factors, it isn’t likely to be as juicy as hoped.
The best opportunities are usually those in which the market cycle is different than your own. For example, during the mid-2000’s, Austin, Texas and Denver, Colorado were suffering economic downturns because their respective tech industries were hurting. At the same time, major markets in California were booming. After much deliberation, I chose to purchase properties in Austin and have done quite well because of it. Again, the driver for me was a market in economic turmoil which I believed would rebound. It should be noted that I spent considerable time on the ground in Austin and Denver before deciding to pull the trigger. As a gauge, I can drive around Austin without my GPS and do just fine.
Another tale of caution is to think, “apartment yield isn’t enticing so I’ll look at another asset class” as the answer to spike investment yield. Again, during the mid-2000’s, I was growing frustrated and thought “I should look at self-storage investment as that looks better” and quite frankly easier which is the classic grass is greener under someone else’s feet. One of my close friends who lives on my street has made a lot of money investing in self storage so I asked him if I could come by with a bottle of wine. He quickly agreed and said he has something he wanted to run by me as well.
When we got together, I asked him about how life was going in his world. He quickly shared that he was totally frustrated because people were bidding the price up for self storage to a level which didn’t allow for good investments. I laughed and said that I was thinking about jumping in and he said that he was exchanging money into an apartment building and needed my advice. My world looked far easier than his. We enjoyed the wine and realized that our own frustration was making each other’s investment class look better than our own. Ignorance can be blissful!
While I have invested in office, retail and farm land, it has been few and far between my apartment deals. I am a believer in staying in your lane and if you want to stray, thoroughly educate yourself. There are experienced people in all asset classes and markets and I’ve found that if you ask for a call or a meeting, folks are happy to share their thoughts. People all over the world love to talk about themselves and what they do so take advantage.
During boom times like we are in right now in most parts of the United States, it is natural to look for alternative locations and investments. If you decide to explore, become a local and educate yourself.
March 29, 2015admilnComments 2
All of the states in the US are broke! While some may look better than others, when pension obligations are included, there are none in the black. Two states that are in awful financial condition are California and Nevada. Beneath the states are counties and cities and nearly all are suffering from expenses that exceed the money they currently collect. Unlike the federal government that can issue sovereign debt and print money, the states, counties and cities are not allowed to run a deficit.
How do struggling state, county and city budgets affect you as an apartment owner? Simple, you are a target for fees and taxes which will come directly off of your bottom line.
The worst example was recently exposed in Bell, California. The city raised fees on property tax bills to fund egregious salaries to municipal employees. In this case, the state has stepped in and is authorizing refunds to about 4,000 property owners.
Currently in Long Beach, California, the Firefighters Association is negotiating with the city trying to fend off cuts to the Fire Department budget. In response, the Firefighters Association has proposed a new annual assessment of $20 per unit on rental properties. The Fire Department stated that the State of California mandates apartments and hotels be inspected annually and that they may recoup their expenses via a fee. According to research done by the Apartment Association of Southern Cities (of which I am a board member), the Fire Department has been doing inspections for 20 years without a charge. These inspections have and will be only of the common areas and not the interior of the units.
This is not an attack on the fine services provided, day in and day out, by firefighters in Long Beach and around the country. It is an example of shrinking public revenues and the battle to find new sources of funding.
I anticipate that more cities will follow the example of Sacramento, Los Angeles, Berkeley and Santa Monica which charge annual fees on a per unit basis. Likewise some fire departments already charge similar fees to the ones that Long Beach is proposing.
New regulations can also add to your expenses. The Environmental Protection Agency has issued new requirements for lead-based paint in the Renovation, Repair and Painting Rule (RRP) that directly affects all rental properties. As of April 22nd of this year, all workers (including the landlord) who work on properties built before 1978 must be aware, give notification and be certified or risk a fine as high as $37,500 PER VIOLATION, PER DAY. Following this law will add costs in training, certification and oversight, but not following it can be excruciatingly painful. For more information on the RRP Rule, please refer to: www.epa.gov/lead/pubs/sbcomplianceguide.pdf.
Given that most rental property owners are feeling the pain of the recession, can these new fees, taxes and regulations be avoided? In many cases it will be extremely difficult. Being aware is vitally important. For instance, the late fees for not registering for a business license (nearly all cities require rental property owners have one) can double the original fee in some cities. In the City of Los Angeles, a tenant being evicted can have the case against them thrown out if the landlord has not registered with the Rent Stabilization Board and paid the annual fee for the unit.
Pay attention to what is happening at your city hall and state capitol. Consider joining an apartment association (there are many) as most will keep you informed and lobby on your behalf. Also, connect with fellow owners of rental properties in your area and create your own mini-association. You’ll often find that many fellow property owners hold elective public office and are sympathetic to your concerns.
Watching the various governmental budget solutions and regulations will assist you in maintaining your bottom line.
November 11, 2013admilnComments 1
Before I leave for work every day, I read the Los Angeles Times, Wall Street Journal, and Financial Times, along with my local paper. As I keep seeing the economy’s “recovery” heavily covered in the headlines, I note many retail and office vacancies all around Southern California. These vacancies in particular cause concern, since those spaces used to employ people, and many of those folks used to be renters. The juxtaposition, between what I read and what I am seeing is striking.
For example, the graph in Figure 1 from the National Real Estate Investor, the headline read “The 10-year Treasury yield climbed more than 10 basis points for accelerating economic growth.” I studied the chart and thought back to April of 2010 when the yield was 50 basis points higher and remembered Mr. Bernanke calling for more quantitative easing, because the economy was stalling, and he wanted interest rates to remain low. Now, because investors are selling, or not purchasing, U.S. Treasuries, it is assumed that it is because of their confidence in economic growth.
10 year U.S. Treasury Yields
When bond yields rose precipitously in Portugal, Ireland, Greece, and Spain, the news was greeted as a lack of investor confidence, or the glass being half empty and leaking fast. In the U.S., that same yield spike is being reported as the glass being half filled en route to running over. Is Figure 1 really good news when higher borrowing costs put pressure on an already weak real estate market?
As a fellow owner of apartments and offices, I wanted to share what I am seeing as far as performance at my buildings in Southern California. Since I’ve owned many of my properties for over 10 years, I’ve gotten a good feel for their usual profitability, which is primarily driven by vacancy and delinquency rates, respectively. This year has been extremely challenging as I’ve seen rents drop to varying degrees on all of them. I’ve also seen both vacancies and delinquencies rise with an overall increase in turnovers. On top of that, I’ve had to offer concessions (lowered or free rent) to entice new residents to move to many of my properties.
A case in point is a 25-unit building in Inglewood that I bought in 1998. For several years, the property collected over 99% of gross potential rents, meaning that it lost less than 1% from both vacancies and delinquencies combined for the year. In November 2010, there were 2 evictions in process, with one vacancy sitting for nearly 60 days. The evictions were both caused by job losses, including a now-former professor at UCLA, who refused to move since she “had nowhere else to go.” The vacancy was created because that resident (who had lived there for over 10 years) took advantage of the low interest rates, 40% decline in real estate prices, and bought a house. The year 2010 will be the toughest economically for that property since we purchased it.
Some positive news from December was that the Bureau of Labor Statistics released unemployment data. While 21 states and the District of Columbia saw unemployment-rate increases, 15 states experienced declines, and 14 states posted no change. Hopefully we are seeing a plateau with decreases in unemployment in our future. In Figure 2, we see that Nevada had its first decline in unemployment in October 2010 before bumping up slightly in November. Prior to that, the last drop was in December of 2005.
At the same time, California’s unemployment remained the same for the last 4 months at 12.4%. While these statistics, in and of themselves, don’t immediately show that occupancy percentages should increase, it does say that employment is not in freefall right now as it was.
While I’m certainly hopeful that the U.S. and respective state economies are preparing to turn a corner, a “jobless recovery” is simply an oxymoron. I watch the positive reporting in the media and note the struggles of day-to-day management at properties all over the place. The mixed messages blare; however, I believe the bottom line and not the hype. We will certainly recover, but as anyone who is operating rental properties knows, it is likely not imminent.
November 11, 2013admilnComments 0
“You don’t have to be bright to be wealthy as long as you choose to invest in real estate.” Yes, I have heard that quote and other disparaging remarks about how easy it is to become wealthy if you just buy and own properties. While I know many people who are indeed wealthy (most don’t consider themselves so) because of rental property ownership, I know more people who have had terrible experiences in property investment. In other words, if it was simple, everyone would have done it and everyone would be wealthy.
If I have one skill above all others which has helped me in life, it is that I enjoy listening and learning from people. My favorite stories are of failures as I have found that the most successful people have failed the most but kept going. Michael Jordan, arguably the world’s greatest basketball player said, “I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”
Early on I figured that if I could learn from someone else’s mistake, I could learn invaluable lessons on the cheap. To this day, I enjoy sharing real estate and business war stories. Not surprisingly, I didn’t avoid every land mine just from listening and learning and have made my share of mistakes. Since many people were generous with their advice when I was starting out, I am always happy to share and still quick to close my mouth and listen as I never stop learning.
The 3 lessons I will be sharing come from my own experience along with things which I’ve learned from others.
I’m confident that if you follow those three important lessons, you will be successful in your quest for successful apartment ownership and potentially great wealth!
November 7, 2013admilnComments 1
On Sunday, June 28th, 1914, Archduke Ferdinand was shot and killed in Sarajevo. That assassination sparked a chain of events that directly lead to the “war to end all wars,” a description for World War I. Clearly very few people anticipated that the many treaties between countries would eventually plunge much of the world into war and cost millions of people their lives. It is always so much easier looking at history and giving 20/20 hindsight commentary as opposed to looking out in front of the ship to predict where we are going.
Similarly, a few of us saw the housing bubble as unsustainable and publicly predicted a crash. I knew it would end badly but foreseeing the exact timing and trigger is almost impossible. Therefore, I made my financial bets on the trends that seemed obvious.
A slide from the author’s presentation on September 20, 2006
The housing bubble was caused by rampant speculation and lenders willing to finance anyone with loans larger than the value of the properties at rates that were artificially low. In other words, the math did not work and greed replaced rational thought on all levels (government, lenders, builders, investors).
I confess that the government’s reaction to the housing and subsequent economic crash took me by surprise. Historically, our regulators have forced companies into insolvency and let the market clean the carcasses. In this downturn, new phraseology was born, “too big to fail” and “quantative easing.” The housing crisis did not go to the depths that it would have had the market been left untethered.
Dear reader, before you shoot me an e-mail or letter complaining about my supposed political stance, I am not advocating or criticizing the policies of the past or the present. I am looking at the facts as I see them and am gazing out at the horizon ahead of us so that I may predict the most likely scenarios. This allows me to gauge my investment decisions accordingly.
How many times have you heard someone say that if they could go back in time, they would pick the winning lotto ticket and be set for life? With proper foresight, some of those numbers ahead of us might reveal themselves.
Focusing on the United States for a moment, sovereign debt was expanded to soften the blow, particularly for banks and Wall Street investors. Austerity isn’t punishment and instead is a consequence since the almost $17 trillion borrowed is actual and not notional debt. While I wish this were a bill that would never need to be paid and was of no consequence, I am planning for that Archduke Ferdinand moment and the likely ramifications.
I can’t predict in what form or when the camel backbreaking straw will come but let’s look at some likely outcomes:
Since almost none of the talking heads who are arguing about the economic events of the day have correctly predicted anything previously, I would encourage you to picture the world in the lens of the outcomes I just listed. While it may be emotionally painful, it is vital that you see an apartment purchase in this light so that you avoid real financial discomfort.
As stated in recent articles, there are attractive apartment opportunities out there and as someone who has several offers pending right now, I wish you happy hunting!
November 7, 2013admilnComments 0
Unbelievable #1: A nation and a couple of its banks are about to default on their obligations and are in need of a bailout so the solution is to take up to 60% of individual depositors’ money? I can not even label it a tax as the banks / nation simply plundered the money from those who had trusted them with their money. Oh and to boot, all accounts are frozen to stop the sure run on their banks so each depositor’s withdrawals are capped at 300 Euros per day.
Clearly the EU did not want to set a precedent in bailing out the banks in Cyprus without a concession even though they are large holders of Greek bonds which did not go bust because of a bailout. Presumably the thinking is that France, Spain, Italy, etc… were watching and would also want to be bailed out without any concession.
Can you imagine how you would feel if your bank accounts were frozen and raided? What precedent does that set for savers in any country around the world?
Unbelievable #2: Your tenant fails to pay their rent and among your options is to serve a 10 day notice for “failure to vacate.” If the resident wants to fight it in court, they must post the entire amount of rent owed. Should the resident not leave in that 10 day period, a prosecuting attorney will take up the case and may charge them with a misdemeanor.
The long arm of the law is now on the side of the landlord at least in Arkansas. Given the games people play to delay evictions in many states, I think it fair to say that this would be a welcome tool for property owners everywhere. Human Rights Watch labeled this law “abusive.”
No, neither of these unbelievables are April Fools jokes; they are indeed real.
As I always enjoy meeting with economists who see the world differently than I do, I recently met with a fine writer and economist named Liaquat Ahamed whose book Lords of Finance won the Pulitzer Prize for History in 2010. The book discusses the personal histories of the four heads of the Central Banks of the United States, Great Britain, France, and Germany and their efforts to steer the world economy from the period during the First World War until the Great Depression. The book also discusses at length the career of the British economist John Maynard Keynes who criticized many of the policies of the heads of the Central Banks during this time.
Left to Right: Mr. Ahamed, James B. Rosenwald and your author
Mr. Ahamed is an economist and is a hedge fund manager, a Brookings Institution trustee and graduate of both Harvard and Cambridge. He shared his thoughts on the parallels between the financial crisis of 2008 and the Great Depression.
In short, Mr. Ahamed admired how after the 2008 financial crisis, the United States pumped liquidity into the system and raised the currency supply. He was far less concerned with Debt to GDP and gave an example of England in the early 1800’s who successfully paid off a national debt that was 300% to GDP. Unfortunately, when I asked for any other example in history where a nation was able to recover after borrowing so much, he didn’t have one.
While I respect Mr. Ahamed’s Keynesian point of view and am hopeful that “the next big thing” as he put it (which drives an economy) is centered in the United States, I remain comfortable hedging inflation with commercial real estate. I expect more crisis’s in Europe as the “can kicking” slowly comes home to roost along with continued Quantitative Easing in the US.
While Mr. Ahamed didn’t offer any investment tips, my next big thing is more properties. Last month I closed 2 commercial purchases and have one more apartment building in escrow so I’m betting my money on real estate. That said, given my concerns about our economy, two of the three properties were purchased without any bank debt since I want to be careful about any future shocks.
November 7, 2013admilnComments 0
After determining that the United States was the best place in the world to invest my money, I began a search for my first acquisitions of 2013. In February, I received a call from a broker who said there was a 12 unit building for sale in a “C” area of Orange County, California. The property had been purchased in 2004 for $1,780,000 and the owner was suffering from some serious health problems. His family decided to dump the building and because of the operational issues (5 current evictions), there was no way to finance the purchase.
To boot, the roof and decks were shot and in need of replacement and there was a shrine at the corner of the property for a gang member who was shot and killed nearby. The price was over $500,000 less than it sold for 9 years ago (not the peak of the market) at $1,275,000.
The author in front of a shrine to a gang member who was killed in a nearby shooting
The sellers wanted to unload right away and we were able to buy the property because we could close the purchase in 14 days. We made an “all cash offer” which was very attractive since there were no hurdles from a bank and they had far more certainty that by choosing us, they had a done deal.
While this building is certainly not for everyone given the difficulties with cleaning up the management and dealing with the local gangs, there is a tremendous amount of upside when the property is put back on track. In fact, we should be able to refinance it and take a large percentage of our cash off the table in about 1 year (for the best rates, most lenders want the deal to “season” and be owned for 12 months before loaning to a formerly troubled asset).
In the Inland Empire of California, many would be buyers are making offer after offer (all at full price or higher) to buy homes but are being continually rejected. The reason they are losing out is because they are competing with investor groups who are buying “all cash” and can close quickly. A lot of these deals are in need of repairs so there is upside for a buyer who can rehab the property in a cost effective way.
If you are like me and want to buy distressed assets, my suggestion is to line up cash prior to making an offer on a property for sale. If you do not have the funds available, some banks will allow you to cross collateralize (pledge other assets) for a line of credit and there are hard money lenders who have money at the ready albeit at rates usually above 10%. Lastly, you can find some partners who share your appetite for this type of risk / reward investing.
Currently I have two “all cash deals” in escrow and have cash ready along with partners who want to participate. By choosing this option instead of borrowing the money myself, I am sharing the profits and the risks with others instead of keeping it all for myself.
Given the strength of the rental market in certain areas around the country, properties are trading at seemingly low cap rates so I favor the deals with hair and in need repositioning. If you have the appetite and team to turn lemons into lemonade, I have found this type of investing to be very rewarding. My advice is to have your money lined up before the opportunity comes knocking since cash is king.