The Complete Guide to Buying and Selling Apartment Buildings PDF
Preview The Complete Guide to Buying and Selling Apartment Buildings
11761_Berges_ffirs_3p.s.qxd 10/28/04 10:22AM Pagei THE COMPLETE GUIDE TO BUYING AND SELLING APARTMENT BUILDINGS 11761_Berges_ffirs_3p.s.qxd 10/28/04 10:22AM Pageii 11761_Berges_ffirs_3p.s.qxd 10/28/04 10:22AM Pageiii The Complete Guide to Buying and Selling Apartment Buildings Second Edition STEVE BERGES John Wiley & Sons, Inc. 11761_Berges_ffirs_3p.s.qxd 10/28/04 10:22AM Pageiv Copyright © 2005 by Steve Berges. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. The publisher is not engaged in rendering professional services, and you should consult a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.Wiley.com. Library of Congress Cataloging-in-Publication Data: Berges, Steve, 1959– The complete guide to buying and selling apartment buildings / Steve Berges. p. cm. Includes index. ISBN 0-471-68405-8 (pbk.) 1. Apartment houses—United States. 2. Real estate investment—United States. 3. Apartmetn houses— Purchasing—United States. 4. Residential real estate—Purchasing—United States. I. Title: Guide to buying and selling apartment buildings. II. Title: Buying and selling apartment buildings. III. Title. HD259.B47 2004 333.33'8—dc22 2004042246 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 11761_Berges_ffirs_3p.s.qxd 10/28/04 10:22AM Pagev D E D I C A T I O N It has been said that behind every good man is a good woman. This state- ment holds true for me, except that in my case, there have been two good women. This book is dedicated to the two women who have had a most profound influence on my life. They are my mother, Eleanor May Miller Berges, and my wife, Nancy Anne Thompson Berges. In memory of my mother, thank you for your kind words of encourage- ment throughout my childhood years. I will always remember your exam- ple of dedication and perseverance to attain your goals. It was you who convinced me of my self-worth, and it was you who taught me to believe in myself. Your example will forever live in my heart. Tomy beloved wife, thank you for your continued support over the years. While my mother laid down the torch of life, you have picked it up in her stead. You are now the driving force in my life. It is you who carries on her tradition of love, confidence, and inspiration. It is you who gives me strength when I need it most. Of all the things God created, truly you are the most beautiful. v 11761_Berges_ffirs_3p.s.qxd 10/28/04 10:22AM Pagevi 11761_Berges_ffirs_3p.s.qxd 10/28/04 10:22AM Pagevii A C K N O W L E D G M E N T I wish to express my sincere thanks to my wife, Nancy, for her editorial support during the production of this manuscript. Her wisdom and insight have contributed significantly to the successful completion of this book. vii 11761_Berges_ffirs_3p.s.qxd 10/28/04 10:22AM Pageviii 11761_Berges_ftoc_3p.s.qxd 10/28/04 10:23AM Pageix C O N T E N T S CHAPTER 1 Introduction to Multifamily Ownership 1 Introduction 1 Holistic Approach 2 Background 4 Market Outlook 6 Regional Trends 9 CHAPTER 2 Advantages of Multifamily Ownership 13 Time and Efficiency 14 Market Liquidity 15 Transaction Costs 16 Concentration of Units 17 Management and Labor Considerations 17 Tax and Record Keeping Considerations 18 Divestiture of Property 18 CHAPTER 3 Bridging the Gap 21 Strategies 22 Leverage—The OPM Principle 23 Clearly Defined Objectives 24 Maslow’s Hierarchy of Needs 27 Conquering Your Fears 29 CHAPTER 4 The Value-Play Strategy 35 Buy and Hold versus Buy and Sell 36 Ten Ways to Create Value 39 Diamonds in the Rough 47 How to Tell a Diamond from a Lump of Coal 61 CHAPTER 5 Establishing Your Niche and Locating Properties 69 Establishing Your Niche 70 Availability of Resources 70 Property Size 71 Property Age 74 Holding Period 79 ix
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