By Alex Moran, Founder – Pacific Listings
The idea of “greed” is almost always viewed as something negative. I have always believed that a little bit of well-intentioned greed can do a lot of good for a lot of people. In the 1987 film “Wall Street,” Michael Douglas’s character Gordon Gekko gives a speech to a room full of a struggling corporation’s shareholders that later became known as the “Greed is good” scene. Douglas’s role as ultra-wealthy corporate raider Gordon Gekko won him the Academy Award for Best Actor, and the character’s position on greed being a needed part of successful business operation always resonated with me. In that scene, Gordon Gekko says the following: “Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”
I had a mentor early in my real estate career that also embraced a form of the “Greed is good” ideology. At that time, I was working at a mid-sized commercial real estate brokerage firm, and my boss would often tell me not to waste my time talking with property owners that had no greed left in them. His position was that only owners that are “greedy” are eager to improve the performance of their real estate investments and only they would ever actually buy or sell a property or try something new. I am now five years into my real estate career, and I am constantly amazed at how little greed I see among property owners in the Greater Los Angeles area. Complacency and skepticism is usually what I see where I wish I saw more enthusiastic greed. Keep in mind that I am from the school of thought that intelligent/well-intentioned “greed” can create jobs, improve profits, increase property values, and have a myriad of benefits for the entire community if embraced by property owners.
Most Los Angeles-area apartment building owners are several years or even decades removed from the time when they invested huge amounts of time, money, and energy toward making their properties perform at their optimal level. Too many experienced owners that have long owned several paid-off properties no longer have much motivation to invest in extensive renovations, market vacancies aggressively, or maximize profits by any means necessary. Many of the owners I meet are almost indifferent when they have vacancies that linger for several months, and they don’t seem to care that they are probably not renting out their units for top dollar. Over the years, I have had countless apartment building owners tell me that it makes no difference to them that our company could easily rent their vacancy for them for $100 more per month than they are asking. I will always remind those owners that an extra $100 per month in rent is an extra $1,200 per year. Also, the rent of just one unit at a property being rented for an extra $100 per month increases the value of a property significantly from a purely Gross Rent Multiplier (GRM) perspective in the following ways: GRM of 13, an increased valuation of $15,600 per $100 monthly rent increase; GRM of 14, an increased valuation of $16,800 per $100 rent increase, and so on. Unfortunately, this knowledge rarely does anything to stimulate the now dormant greed inside too many property owners who in years past would have jumped at any intelligent opportunity to improve the value of their real estate investments.
My hope is that more property owners will think back and remember the time when the optimal performance of their properties was their primary concern. You may no longer be interested in handling all of the work yourself, but countless qualified professionals are eager to do the work for you. A quality property management company can do wonders for your properties’ performance. A talented and properly motivated on-site manager can whip your property into shape. A skilled contractor can transform a neglected property into the most sought after building on the block. An exceptional leasing company can bring you excellent tenants paying higher rents than you thought were possible. The partnerships with such professionals are only “costs” if they don’t prove profitable eventually. If you team up with the right people, you are investing intelligently and coming out ahead.
If it has been years since you tried something new with your properties, make this the year that you explore a partnership with a real estate professional who is eager to work with you.
Greed can most definitely be good. Your previous desire to earn enough money to purchase properties and then your efforts to make them as profitable as possible is likely the reason you are financially secure today. Embrace the greed that once motivated you to financial success, and reach out to those of us that want to be your ally. Together we can accomplish great things.
Pacific Listings provides full service leasing assistance to Los Angeles area apartment building owners. Their pay for performance leasing model ensures that property owners only pay when the leasing results are to their liking. For more information call Pacific Listings at (323) 303 3565 or visit their website www.PacificListings.com