Strategy

How it is done

RCA focuses on the Southern California and Phoenix, Arizona market place. The focus is strictly on B and C assets in these geographic markets. A assets are newer projects with very high rents, often in mainly urban core areas renting to millennials. The majority of purchases are class C buildings owned long term by mom and pop type individuals. These ’50s, ’60s, ’70s, and 80’s projects are very well located as the original developers had their pick of the prime locations.

Additionally density of units back then was very low, and these projects have a lot of open space with pleasant landscaping. Unlike multi-story concrete jungles built today. Also, earlier construction featured much more extensive units with more oversized bedrooms, etc. Again unlike micro units being built today. The common denominator of all assets of this type purchased today by RCA is that nothing has been done to them since they were made. Thus an upscale renovation of these assets creates an arguably more appealing environment than even a new project for a family with children. RCA focuses on acquiring well-located Class C assets and transforms them into class B assets through extensive exterior and interior renovations.

(Class B and C differ in that C tenants can barely make rent each month, i.e., no margin for error. Class B, on the other hand, are lifelong renters. Still, they have significant discretionary income and appreciate a newly renovated complex. They will pay significantly higher rent for this lifestyle upgrade) The Key to the Class B & C assets in these Calif. Coastal markets are the barriers to entry.

First, rents would have to increase 300% to justify new construction; second, homeowners in these markets do not want more apts in their neighborhood; lastly, there is almost zero land anywhere in these dense coastal markets zoned for multi-family construction. In Gordon’s opinion, these smaller existing apt complexes are irreplaceable assets. All complexes’ are 100% full except for turnover, and in the future, the majority of the increase in population will be living in apts, not purchasing homes.

Acquisition

An old saying in the real estate business is “YOU MAKE MONEY ON THE BUY” There is a lot of truth to this. Today the for-sale market in multi-family is very competitive, often with multiple offers on every deal. Gordon and RCA have developed a solid reputation as buyers who perform and do not needlessly renegotiate contracts. The untold truth about the multi-family for sale market is that the brokers control who gets the deal. RCA has a sterling reputation as a no-nonsense repeat buyer in this space. Brokers only want to seal the deal once, and above all, they want a buyer who will close escrow with the least amount of drama. Fully 50% of the contracts sold today are sold “off market” as the real estate jargon goes. (an off-market deal is a deal that is not formally listed with a brokerage firm, but the owner is selling the property to the first broker who brings him an offer he likes); This is where Gordon and RCA’S reputation and contacts MAKE MONEY ON THE BUY! If you are a buyer, off-market deals are what you want to look at. Very few other buyers know about the deal, and this lack of competition translates into a better price for the buyer. Taking this even a step further to get an edge on the competition, Gordon and RCA often write non-contingent offers, and day one passes thru large sums of money to the sellers. Here Gordon and RCA take 100% of the risk as they put up 100% of the money given to the seller. This strategy has enabled Gordon and RCA to purchase multi-family assets at significantly below market prices consistently.