Real Estate Investing
Real estate development, acquisition, rehabilitation, and management is a core part of our DNA. We see real estate as more than land and buildings. Real estate plays an important role in all of our strategic and business planning as it is vital that we get the right real estate scenario when making long term decisions. Whether we buy, lease, or build to suit, is a function of the activity and objectives of each scenario. We have a background in real estate development and have systems in place that guide our decisions when it comes to property ownership and management. We are always seeking opportunities in the real estate market and are excited to view potential transactions and speak with possible partners in the space who fit our vision and goals as it pertains to real estate.
Our Approach to Real Estate
As an asset class, real Estate can be an excellent investment offering stability, cash flow, and tax benefits. However, if done incorrectly real estate ownership can turn into a tremendous liability with ongoing issues regarding property tax payments, maintenance, and repairs. Finding the right situation takes careful planning, negotiation and knowledge of local markets. The right real estate deal also involves the ability to easily manage the property and its unique features. The location will also dictate what types of potential tenants the property might attract. Using our three-prong approach for analysis, we might consider many potential properties before finalizing one transaction. Ultimately what guides our decision for real estate investing revolves around a long-term vision for the property with potential for growth. At Taurino Capital our system for analyzing real estate investments centers around the basic financial models for cash flow and appreciation, as well as taking into consideration the following:
LOCATION
While many characteristics of a property can be changed, once purchased, location is a fixed feature. The right location is a function of the use of a property. For example, what might be considered desirable for single family residential applications will be different than an industrial property. When we analyze property location we use a funnel system that starts with a regional analysis of a property that then drills down to the local address and its surroundings. Depending upon the property use we look at accessibility to traffic and freeways. We also look at what other companies have decided to locate into the area which can speak volumes as to the demographics of an area. We also want to know what other properties are planning on being developed nearby. Ultimately, at Taurino Capital we consider a basic question: if we needed to exit a property who else might need to own in the given location?
TERMS
The terms negotiated at the beginning of a transaction will dictate the profitability of a real estate investment long term. Purchase price, terms of debt, length of repayment, management, property covenants, and tenancy can all play a part in whether a real estate investment is profitable. Ultimately, good terms on a property will allow for break-even or positive cash flow. While negative cash flow is sometimes necessary in the short term, in the longer term it can become problematic. When debt financing is involved, it is necessary to get the best terms possible by negotiating the interest rate, length of loan, points, fees, and other financing terms. In some instances, the best terms can come from a seller. For example, when a seller is willing to carry debt on a property at terms that minimize or defer immediate payments. When taking over a new property there are oftentimes upfront costs associated and the costs can be mitigated when a property seller becomes part of the equation. At Taurino Capital we have approached real estate acquisition from multiple angles and it is as much an art as it is science.
EXPANDABILITY
If the location and terms are acceptable, redevelopment and rehabilitation of a property can be an exciting and rewarding experience. Beyond market appreciation, having a vision that maximizes a property’s potential is ultimately how substantial equity is generated in the real estate sector. While property “flipping” has become a buzz phrase due to many reality TV offerings, real estate ownership is typically best approached with a multi-year time horizon. While many grand plans and visions of the future are fun to ponder, the reality of property improvements are tempered by the realities of time and costs involved. As an investor we seek to maximize our cost:benefit ratio by looking at those improvements that are simple yet impactful. We also seek to make improvements that are considered sustainable with the latest in building materials available. For example, in recent years we have become proponents of concrete alternatives that involve recycled plastic. Whatever the vision, we always calculate in a waste factor when looking at bottom line costs. While paper planning can be thorough, the reality is that those plans can be derailed which translates into increased costs.
PROPERTY MANAGEMENT
Property Management is another important area that must be taken into account. While doing “the deal” and property development is exciting, long term value can only be achieved with good property management. Dealing with accounting, tenant issues, property repairs, and maintenance are all part of the equation of successfully managing real estate. We approach property management with the same ideology as we do private equity; with an eye on profits and talented people. At Taurino Capital we take property management very serious as experience has taught us that it is better to stay on top of property management issues as opposed to playing catch up. While this approach might be a little more expensive in the short term, the long term profit potential of a property more than makes up for this.
Interested in working with Taurino?
We are ready to invest our capital with companies whose vision and goals are aligned with our own. Contact us to see if we match up.