Investment Directions for 2010

The excerpt below is from a post to the Berkeley Investors Group — join us on line at http://www.BerkeleyInvestorsGroup.com.

As we approach the final hour of 2009, we’re scheduling the first Berkeley Investors Group lunch of the New Year. Has anyone mentioned that 2010 is going to be an *amazing* year, both personally and financially, for each of us? At the January 21st meeting of the Berkeley Investors Group, we’ll look at how to take the opportunities that are coming:

(find Lunch time and place below these discussion points)

Example Opportunities coming…now:

Investments outside the US are becoming popular. Just one case of this is the change to my son’s administered 529 plan: they’ve increased the international portion from 20% to 30%. That’s big for an institutional investor. Investors large and small are looking outside the US. We’ve purchased land in a development which is still selling on a quiet coast near my favorite vacation area, Puerto Vallarta.

Corporate acquisitions heat up. There is a range from big to small here, too, as the large players begin consolidating in earnest in 2010, and those of us nibbling at the small startup opportunities (Angel Investment) see a run for good deals as well. I’ve seen several enticing opportunities recently, culminating in a current offering by nationally recognized green countertop maker, Vetrazzo (you can Google it).

Did anyone mention commodities? I personally have a significant commodity portfolio. Why? Well, there are the inflationary predictions, and then there is the return of production (already well-afoot in China) consuming resources. If you add to this factors such as the IEA prediction that oil production will peak as soon as 2020 (that’s right, peak oil, in 10 years, predicted by the *authoritative* body, not the lunatic fringe), you have a strong case for some commodities doing quite well.

Isn’t the Berkeley Investors Group a local real estate investment group? Right. With fellow BIG member Daniel Andrzejek, Sage Property Solutions has placed an offer on a six-unit building in Berkeley that has a few tenant and regulatory issues. Not so bad for us locals but apparently too much for the East Coast-based lender to deal. We expect to make over 100% profit in one year on this deal after the lender takes the property REO and our agent, Grant Chappell, takes over as seller’s agent. A double-end deal for Grant and 2x return for us. All real estate agents in BIG please take note how Sage Property Solutions supports local brokers!

353 Grand Ave. Remember this property from prior group discussions and on-site visits? We’ve continued to monitor it and have two updates: one, Rawley Nielson continues to work directly with Benyam Mulugeta in hopes of becoming the seller’s agent on the deal when Mr. Mulugeta gets it out of bankruptcy. And Ken Miller has steadily worked with Sterling Bank, the 1st lender, to negotiate a purchase of the loan. Two ways to approach the deal, yet it remains in bankruptcy, with neither the lender nor the owner ready to negotiate realistic terms. We’ll wait until they are and take it when someone’s ready to hand it over!

1176 University. This was a prime acquisition target of Sage Property Solutions a few months back. It is exactly the type of property we have capitalized successfully for owners the past eleven years. We saw the owners had lowered the price from over $3M to $2.65M. Our assessment, if you recall, was that the property could move at $2.3M, and at that price we could manage it for over 10% cash-on-cash return to owners. It happened. The property was purchased for exactly $2.3M, and someone has a cash cow now. Do you wish it was you? Congratulations to Eli Davidson for closing this deal. Wish we had managed to line up purchasers to be able to capitalize this one!

Finally, a current opportunity we observe. I’ve been down with a number of people to look at 1425 Harrison St. in Oakland. This is another property by the same motivated seller that let 1176 University go for a song. My suggestion is that we get a little coir together and bring them an offer: the property was at over $5.5M, was lowered to $5.25M, and my gut feeling is it could move for $4.35M. Shall we wait this one out on the sidelines? Someone’s going to get this beautiful, 1920s historic property in great condition (just a bit under-managed, in need of cosmetic attention, and a candidate for utility cost reductions). How does 10% cash-on-cash day one plus 2X return on the short end of 2-5 years sound, if things remain stable, or better if they improve? Have I mentioned that multi-unit residential has remained the shining star of real estate throughout the recession?

Attached are several documents, including details of the 1425 Harrison deal, description of the type of deals I look for, and a history of past and present deals I have done. Please send this type of information on yourself to the group as well, so we can get to know each other better.

We’ll see you in January for a BIG start to the new year! Let’s overwhelm La Mediterranee with our numbers this time, and then take high cash flow multi-units in Berkeley and Oakland by storm!

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Lunch Thursday, January 21 at 12:00noon.

–this one is close to the freeway for those of you out-of-towners!–

La Mediterranee
2936 College Ave.
Berkeley, CA

Chicken Cilicia, Grecian Spinach and Feta, Pomegranate Chicken and Lule Kebob, Hummus, Baba Ghanoush, Tabuleh, Armenian Potato Salad, Dolmas, Levant Sandwiches.

Cost is $15.95 per person plus tax and tip, so count on bringing a $20 bill (cash please) to cover lunch with an icy cold class of recession-approved water.

Put it on your calendar.
Seeking Purchase Opportunities