Hustle and Flow
Hustle and Flow
Hustle and Flow is one of my favorite movies of recent years. DJ, the film’s main character, is a charismatic and charming young man who also happens to be, well, a pimp. And he’s not proud of it, but it’s how he makes ends meet in Memphis, Tennessee as he seeks to get his rap career off the ground. He becomes a fan favorite because of his pointed lyrics, detailing the struggles of everyday life. Who knew that a fictional movie based on a pimp from Tennessee would offer such strong parallels to a real estate investor active in today’s market.
You see, one of DJ’s two biggest songs in the movie starts with the lyrics, “you know it’s hard out here for a pimp, trying to make this money for the rent, for the Cadillacs and gas money spent”. Having written 5 offers to purchase properties in the SFR or 2-4 space in the past month and having missed out on each one, I have recently found myself with a dilemma similar to DJ. It’s hard out here for a prospective real estate investor!
Case in point, we looked at a property in Whittier last weekend. The property was listed at $615k which was more than $100k above the most relevant comp. And of course, that property happened to be in a more desirable location with superior curb appeal, a better unit mix and greater rental income. This property was a two-on-a-lot consisting of two, three bedroom – one bath units. We were the first offer in. We came in at $599k ($75k above recent comps) and were the only offer. After the listing broker pushed the boundaries of ethics and held our offer instead of present immediately as was promised, we were informed that there were now three offers on the table. One was at list price and the other above. So, instead of overpay and risk the property not appraising (highly likely), we were forced to move on.
In many ways, today’s So Cal real estate market is like 2005 all over again. That is, buyers are frenzied and moving quickly. After losing out on one, two, three or maybe even more properties (like us), a buyers mentality often changes. That is, they make decisions based on emotion and not on dollars and sense.
In a changing market like today, it is important not just to underwrite and understand the financial impact of your purchase price, but to understand current market activity to understand what is going on in order to ensure that you do not overpay.
But that’s not us! We will continue to scour the market, looking for opportunity and writing offers on each and every property that fits our needs.
Until then…Whoop That Trick!