[Note: To follow is an excerpt of an interview with Walter Helm, Managing Director of Sperry Van Ness in Sacramento, California. To listen to, or download the show archive MP3, go to www.IncomePropertyInvestmentTalk.com.]
Mosca: What is the Sperry Van Ness difference?
Helm: Sperry Van Ness was founded 20 years ago on a premise that the general commercial brokerage market and the way brokerage was done was not to the best interest of the sellers. The normal way of brokering a property is a commercial firm would take a listing and try to sell it in-house.
We are the only national company to put a property on the market and make it available to all brokers, to all buyers within a week of having the property listed and to every possible buyer. The significant difference is that we allow the other brokers to bring their buyers in and we give them full access to all the information and we also pay them half of the commission. Nobody else does this.
Mosca: What are some of the resources and data that you use to analyze and market a commercial property?
Helm: We use institutional services that most institutional investors use. They keep an update on the market on a monthly basis, give us national trends and compile statistics for us. We're out in the market ourselves. We talk to sellers and buyers and management companies but we can't cover the market as well as these services can. It's a valuable resource and we share it with our clients.
Mosca: On this show, we feel multifamily investments can be recession proof if bought in the right market at the right time. What are tips you can share with investors who are thinking about multifamily investing as their property type of choice?
Helm: I can't agree with you more on having multifamily being the very best investment. Location, location, location is the key. I want to get a little more specific on that and talk about two clients that I have that have gotten caught in a location problem.
Not having specific local knowledge, they subscribed to a service that told them that a certain city was going to be a very good investment when in fact that city was a good investment if you picked the right area in that city. All cities have good and bad areas; all cities have areas that are growing faster than others. Both of these clients ended up purchasing their property on their own without having any reliable, local assistance. One of them is losing the property; the other one is losing half of their investment.
Mosca: While we are a country of "do-it-yourselfers," Walter do you agree that investors should seek the help of professionals and build relationships with them in order to be successful, like a property manager?
Helm: Property management is second to location and it's a very close second. It can make or break your property. You can have two properties side-by-side, if one's managed properly, it can do terrific. If you have a lousy management company, it can go downhill very, very quickly. When you invest in out-of-state areas it is critical to have a management company that you have some clout with.
Mosca: Can you name three things an investor should look for in a property manager?
Helm: One is references. The second is to talk to their clients. The third is to make sure they get a good incentive. Ask them what they want and then add a bonus on top of that. You better believe they are going to pay attention to your property and make sure that your property outperforms anything else.
Mosca: TICs or Tenant in Common investments typically perform well and allow accredited investors the ability to purchase larger and more expensive properties with other investors that can offer better returns, better cost efficiencies and better property management. What are some of the other benefits of TIC ownership?
Helm: I recommend to clients who are managing small apartments and are tired of the management, to go into a TIC investment. There is only one TIC provider I can recommend and that is RealSource. RealSource goes out and looks at properties, does analysis, has the right location, but most importantly, just like when you have a property manager that you've incentivized, they, too, invest in the TIC.
There are other TIC providers out there that have given the industry a terrible name, where the company that is sponsoring the TIC will purchase the property for 10 million, then flip it, sell it to their own TIC for 11 million. RealSource does not do that. They spend a lot of time and effort finding the right property at the right location and when they buy it, they get a carried interest and sell the property only by a majority interest of the partners or investors. I know of only one other TIC that I can recommend and it's a Sperry Van Ness TIC.