Do you have any interests in businesses outside of real estate? If so, what are they? You don’t have to disclose names. I am more so interested in the industries and the reasons why those particular industries or businesses.
Not really, it’s all real estate. I keep my liquidity in Vanguard and Fidelity S&P 500 index funds (very low fees). I own a smidgen of venture funds and hedge funds but mostly because they are run by friends. I am on the board of a small ($50M) real estate opportunistic fund but that is just because it lets me look at non-multifamily real estate and hang out with friends at board meetings. I do serve on the Board of Advisors for the Columbia Journalism Review in NYC which faces fascinating challenges of adapting its distribution model to the digital age.
When did you feel comfortable relinquishing the right for another person to sign checks?
For an owner of a business to give up check signing authority you’ve got to have a strong Financial Plan and good Internal Controls. Separate out the functions of 1) authorizing an expenditure and the issuing of payment 2) actually cutting the check and reconciling the books/checking account 3) signing the check. I kept the company books on QuickBooks, signing all checks until we were past several thousand apartments and several dozen employees. There is a cautionary saying among auditors that “Only the folks you trust steal from a business because they are the only ones who get the opportunity.”
Do you have a preference when it comes to an apartment class? Why or why not? If you do prefer a class, which one?
There are many ways to classify apartments; A, B, C, and D is one with A’s being 10 years or less in age, B’s being 11 to 30 years old, C’s over 30 years old, and D’s where you do not go collecting rent by yourself. Obviously quality of maintenance matters and rehab and renovation can lower effective age. Generally I prefer A’s and B’s; I’d rather make 10% of $1,000 a month than 10% of $500 a month.
If an investor is going to refinance a property with traditional financing, how long does a property have to be owned before it can be refinanced?
Lenders want good historical data but length of current ownership is generally not a factor as long as owner is experienced or has hired good professional management. Many lenders reserve the right to approve the management company, looking for experienced, professional operators. Most existing financing requires lender approval to be assumed and a 1% fee is not uncommon, most noncommercial bank real estate financing (GSE, conduit) is fixed and VERY expensive to repay. Life and pension companies usually keep loans on their books and may be more flexible.
Do you own any businesses outside of real estate?
No. It took me long enough to learn this business, not really motivated to undergo the learning curve in a different industry. Plus real estate investment, development, and being Chair of a property management company absorbs all my energy.
As always, I share what I most want/need to learn. – Nathan S. Collier