The 51-unit building, completed in 2014, was the first apartment project from a developer who usually built single-family homes, and it showed. From the moment you walked in, you could tell it had been built with care and with quality materials that most apartment buildings in the area don’t have.
The owner came to us through a referral and asked three brokers for an opinion of value. It was 2022 and the market was hot, but even so, our number came in about 15% higher than the other two.
He called us directly. He told us we came highly recommended, that everyone he’d asked about our track record had good things to say, and that he was a real seller who wanted to close before the end of the year. Then he asked the question that mattered: why was our number so much higher, and were we still confident in it?
We were glad he asked, because it gave us the chance to walk him through exactly how we got there.
First, the rents. The building sat close to a major hospital, and we believed the current rents were below what the units could command. We backed that up with a detailed rent survey showing that units of this size with in-unit washers and dryers were rare in the neighborhood and could earn an 8% to 10% premium.
Second, the taxes. We’d seen this play out with half a dozen other properties. A newer building with a relatively low land value and high-value improvements can create meaningful depreciation benefits for the right buyer. To show what that could look like, we brought in a cost segregation firm to run the numbers.
Put together, the building offered a buyer real rent upside and a strong tax advantage, and that’s what justified the price. We told the owner we were confident we’d land within 3% of our list price.
That’s exactly where it closed. The buyer, a Valley-based owner with about 2,800 units, told us the tax benefits were a big reason they chose this building over others on the market.
Transaction Snapshot
- Asset: 51-unit apartment building, built 2014
- Market: Panorama City, San Fernando Valley
- Circumstance: Owner comparing three broker valuations
- Our Valuation: ~15% above the other two brokers
- Strategy: Rent survey and cost segregation analysis
- Outcome: Closed within 3% of list price, 2022
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