The Case For California Multifamily, With Joshua Farahi

California boasts many real estate markets with attractive job outlooks and population. Still, opinion is divided on California when it comes to multifamily investment. Balancing opportunity while navigating a state that can present developers and operators challenges is critical.

Joshua Farahi, Partner with Greenbridge Investment Partners, joins the show to discuss the multifamily real estate landscape in California, and why he’s bullish on its future.

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Episode Highlights

  • Why Greenbridge Investment Partners decided to enter the multifamily market in California.
  • What passive investors hesitant about deals involving California real estate should consider.
  • Why common criticisms about California markets including high taxes, regulations unfriendly to landlords, and out-migration don’t paint a full picture of California’s opportunities.
  • How housing shortages Continue to shape California, and if the housing supply/demand gap will ever be closed
  • What areas of California, specifically in Southern California are ripe with value-add opportunity due to population migration.
  • Why the 3 multifamily properties acquired by Greenbridge in the San Fernando Valley were overlooked by other investors?
  • Strategies for making properties “best in class” after acquisition.
  • Why it’s important to understand a specific multifamily property’s community before ever moving forward with a deal.
  • What’s next for Greenbridge and the multifamily market in California.

Featured On This Episode

Today’s Guest: Joshua Farahi, Greenbridge Investment Partners

About The Multifamily Investor Podcast

The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses passive investment offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.

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Show Transcript

Scott Hawksworth: Hello, welcome to the Multifamily Investor Podcast I’m your host Scott Hawksworth. And today, I am joined by Josh Farahi, who is a partner with Green Bridge Investment Partners and he’s gonna be joining me on the show too. We’ll talk multifamily specifically in California and in the San Fernando valley and the exciting things going on over there with green bridge so Josh welcome to the show.

Joshua Farahi: Thank you, thanks for having me appreciate it.

Scott Hawksworth: Absolutely, thank you for being here to kick things off, you know Green Bridge Investment Partners has a tremendous amount of experience. With commercial real estate projects in California and you recently decided to enter the multifamily market and I get this right, it was a press release that came out in May, talking about you guys entering the multifamily market in the San Fernando Valley. It was three San Fernando Valley acquisitions, why did you decide to enter the multifamily market there.

Joshua Farahi: Yeah that’s a good question I look we Green Bridge, you know originally our DNA was really value at office medical office and some service retail really believed in that. Since 2012 we built a large portfolio of not only in southern California, but throughout the west coast and in the puget sound area in Washington state and.

A few years ago pre pandemic, you know I sat down with my partners, I said look we’ve done within well on the wind has been behind us and we need some diversity, I think, into other asset classes within the commercial real estate landscape. And I think multifamily offers us some good diversity number one so that’s the first kind of impetus to having that conversation, and you know we have a housing shortage across country.

it’s particularly exacerbated here in Southern California. I think rents at the time, I thought rents would continue to rise at a steady pace and so cow and and frankly most major metros but let’s start by picking off some small deals here let’s stick to our core DNA, which is value add and so. That was in December of 2019 so timing was perfect. And I say that as a joke. And and, of course. You know, few months after you know we got into our first deal under contract, it was a small 20 unit deal in beverly hills.

And about like a month into that you know escrow period the pandemic it and, fortunately, we had a good counterparty they’re like look let’s just pause this and wait and so. I had the entire kind of pandemic time to reassess whether this was still a good idea, and what was happening, and of course we were. Dealing with whatever you operator was dealing with time was making sure our tenants were were in place, and then the relief, we could give them to make sure that our long term goals can be satisfied and so i’m coming back from the pandemic, I still believed in it, I believed in it even more.

You know, there was some some political challenges here and we can probably touch on that later, but I still believed that into our thesis that rents were going to go up, we have a housing crisis and and so kyle and so.

That was really the the reason we did it was for diversity and because I truly believe and i’m bullish on the multifamily asset class in commercial real estate. Especially given where we are, or where we were at that time in the cycle, I thought we were maturing and it seemed that you know multifamily has a reputation for being a little bit safer on efficient in the value add spectrum than maybe office, which is more spec and we tell certainly.

And we’re not really industrial an industrial focus group not yet, perhaps in the future, but. So I thought it was it was a it was a safe haven for us kind of to in that part of the cycle, so that that was the real kind of arc of how this all happened.

Scott Hawksworth: Absolutely and it’s interesting how you know you sort of had that time during the pandemic to really say okay is is this Is this something we want to go into, and then it was a resounding yes, and that makes sense to me, obviously I host a show about. multifamily investing so I believe in it specifically you know I want to talk about California, because When you look around the various markets and I have conversations with folks all over the multifamily world sometimes you get pushback.

From folks and particularly investors on California there’s concerns of you know well why California it’s you know. Maybe it’s unfriendly to landlords maybe there’s other issues, what have you and maybe some investors are like yeah it’s not as it’s not as sexy, so to speak, as maybe some other markets.

So Josh What would you say to an investor who’s maybe hesitant about California itself, what does California have going for it from the multifamily standpoint that maybe some folks overlook.

Joshua Farahi: First, so, first I want to acknowledge the issues that investors bring up because they’re not wrong right, so I think there is political and risk here, I think it is not landlord friendly at times. I acknowledge all those things i’d be foolish not to the way we look at it, is that the pros outweigh the cons in a major way and and and we’ll start just with a simple supply demand issue we have in southern California, which is much more it’s exacerbated far greater than anywhere else in the country, and I say anywhere else I don’t know if that’s an exact fact but it’s definitely one of one of the most housing.

We have a one of the biggest housing prices in the country right and so people a can’t find homes and are forced to rent and and then there’s an affordability issue here. And so it’s always nice to be on the right side of the demand and supply curve right, and so, first and foremost fundamentally speaking. It’s it’s going to rise rents you’re always going to have a renter base there to take your product vacancies are always going to be tight.

And so fundamentally speaking it’s a good place to to invest on the multifamily. But also keep in mind southern California, you know we have 13 million folks living in MSA here we have several industries that support. This 13 million people right we have bio science life sciences manufacturing retail travel, of course, you have Hollywood and several others that i’m.

Leaving the list is long and so you know, we have the biggest port in in one of the biggest ports in long beach. Here, so we have a robust economy here that that that has to support several industries and so your your housing base and your red base is is very strong workforce housing, which is something we focus on a lot.

You know, as always you’re always going to have people that need to work in southern California, and so you can get distracted a little bit from all the fundamental support and economic support here by some of that headline political stuff that’s out there. And and and lose focus on the fundamentals here now you do need to be careful that our cities here that can disrupt a business strategy on value add.

On on on turning units, you know the the you know, there was a moratorium on rent increases here that we’re dealing with. It’s hard to evict tenants all those things exist, and you have to acknowledge that you can’t ignore them but we’re in the business of investing in the long run. And you know cities like la or Los Angeles, that that have that support economically and fundamentally are hard to ignore and so we’re willing to take on on those risks that do exist to invest here.

Scott Hawksworth: Absolutely what I guess, could you speak to maybe how you guys go about navigating maybe some of the political challenges or pushback you might have that that can often come up in California, whether there’s you know, environmental or parking concerns or. Sure, all sorts of regulations and things that can can happen, and a lot of folks kind of point to California. Right oh yeah that’s happening.

Joshua Farahi: yeah well number one Los Angeles, is not a homogenous city right when you have a 13 million people living in MSA. Every part of La has a different character and they have a different city council, they have different political views of the population. And so, depending on what your business strategy is whether you’re doing a value ideal where you need to turn tenants quickly whether you have time to turn tenants, you need to know.

We need to know what cities and neighborhoods are going to be friendly to what you’re trying to accomplish and you know if if if, for example, if you’re investing on the beach cities you’re going to have an environmental, may have some environmental challenges, because the coastal cities have our on the ocean, and those are some things you need to consider if you’re in downtown la.

You have you know different neighborhoods have different crime issues you have to deal with if you’re inland and the San Fernando Valley. You know you’re you’re dealing with you’re dealing with a lot of new developers that are that are coming in with new products, so you have to be careful what your value adding existing product into because you’re competing with new stuff so it’s just about market intelligence and understanding.

Each each you know neighborhood and city Pasadena and South Pasadena very different from Santa Monica Beverly Hills and Long Beach is different than the San Fernando valley and so. You really just have to have a knowledge of the city, the character and what and how and how different things are going to apply to your business strategy depending on where you’re at. Really, the most important thing to understand is that this is a tenant friendly state.

And and and really you don’t want to be cavalier when you’re buying an older building for us to supplies, when you want to buy an older building. How you’re going to remove your tenants, in a way that’s that that helps those tenants find new housing and respect the tendency that exists, and if you can. If you can reproach your your your inherited tenants, so what we try to do, for example, is by building and many of these buildings are rent control room and southern California if it’s you know before 1978 I believe and so.

And, and so you, you know you have to you have to pay tenants, if you want to relocate them. And you know that there’s an art to that it’s not it’s not simply going writing writing checks and asking people to leave ASAP you’ve got to sit down with your tenants. We have a team here that’s just dedicated to just tenant relations where we sit down with times we say look, this is what we’re buying right, this is why we bought it, this is our plan.

How can we make this easier on you, you don’t have to leave, but if we could find a mutually agreeable price and timeline. Maybe it’s beneficial for you to leave and so it’s if you treat your tents, with respect, follow the rules that the State and this and the cities have laid down with you and you have a little bit of. You know, a class that you can get it done.

And so it’s just a matter of understanding the rules and the regulations and the character of what you’re buying what I like to do when I when we buy a building is you know I like to ask the seller is, if I can speak to a few tenants. Not in anything particular about what we’re strategy is or something and I just like to learn the character of the building. Because sometimes you will find that a building, although.

You know when you’re underwriting it lines up perfectly if you can buy out the tenants, or if you can roll units that make sense, but then. When you interview some of these tenants, you know they’re giving you the feeling of oh i’ve lived here for 30 years and my neighbor my sister and that’s my cousin who lives across the hall or or so on and so forth it’s like well I don’t want to disrupt that ecosystem. Number one number two. This made me too much of a challenge so again just adjusting your due diligence understanding the local communities and rules is is critical.

Scott Hawksworth: I mean, I think you make so many fantastic points there and and really if you boil it all down, it is about understanding, you know what the asset is the Community there and then whatever you know regulations, there might be whatever. You know the temperature may be for relocation, what have you building that in right and baking that in and then have you found to like even within California that. You know there’s there’s opportunities, where you just say nope this doesn’t work for us and we’re going to walk away and try to find something else.

Joshua Farahi: yeah I mean there’s certain cities that I just won’t do evaluate and I don’t want to indict.

Certain cities oh crap publicly but.

they’re difficult to work with, even if you have a willing tenant if they don’t make it easier on you and so there’s certain communities here that aren’t.

You know they’re not friendly towards developers coming in early developers, like us, and buying a building don’t have a 50s and 60s and bringing it back to life they they’re just not friendly and so there’s a few of those that we just don’t deal with.

And sometimes during underwriting when we tour property and we meet somebody stands sure will say look, you know this doesn’t work for us and said, this is not the character of this building is not is not what we want to talk it’s not gonna work.

Scott Hawksworth: Sure sure that makes sense, I want to circle back to the housing shortage, because you were making the point of how you know acutely that housing shortage is felt.

In California and southern California and there’s always the Stat I like to cite was from a nar report that said that there’s an under building gap of 5.5 to 6.8 million housing units i’ve got this on my screen since 2001 so that means that this housing shortage is is slated to continue.

One should passive multifamily investors really view that as a tailwind when considering multifamily investing anywhere in certainly in California and do you see this housing shortage in California specifically getting worse before it gets better.

Joshua Farahi: Right so to answer your first question a passive investor shouldn’t apply a housing shortage metric as a green light to invest anywhere.

Okay, because I think.

That means different different things in different markets right number one there’s other things you got to look at you know what industries are supporting the employee employer employee base there.

You know how’s the affordability metrics into from you know if you go to a small town you’re paying 1000 bucks a month in rent.

But you can buy a home and pay 1500 to 1800 dollars a month and mortgage.

You know that that that gap between those two numbers is not significant enough for you to feel like Oh, what is the housing shortage, you know will be fine so.

there’s a lot of things you got to look at so from across the nation greenlight we have a housing shortage let’s just by family i’m not for that.

Right, I think you got to look at market.

Specifically, make sure that certain markets are being supported by industry, you believe in, especially if you’re going into smaller towns or cities and so that’s critical.

great things about about la and southern California is we have so much industry here that you know there’s there’s a lot of diversity amongst employers.

And there’s always going to be a workforce housing need here and I hate using the word always and never, but I can almost assure you that there will always be a horse horse here that needs housing.

don’t have enough enough homes and.

To answer your second question about is it going to get worse for it’s going to get better.

In southern California, I would say it’s going to get worse before it gets worse.

yeah it’s it’s it’s a rough out here for for for the workforce employees trying to find homes it’s just we just don’t have enough apartments we don’t have enough condos we don’t have enough homes.

And the way that the city in general, not just city of La but all the other municipalities here it’s not developer friendly in the sense that it’s not easy for someone to a find a piece of land.

To build anything on, but once they do it’s not so easy just to put something up right there’s.

For better for worse and i’m not making a judgment here on whether we should have.

Housing true you know for the poor or taxes for the homeless dollar those things are necessary but, but it is just when you factor that into your underwriting.

And some of the restrictions, you have here as a ground up developer it’s it’s hard to build buildings.

Add to that that that with the inflationary environment we’re in and construction costs it just doesn’t pencil in certain places right and so.

To the government to the to the State governments credit and city governments credit they’ve come out with rams to put more developers in a position by by state.

By state helping them out of the city helping them out with tax credits, or what have you but it’s not enough, and so we were going to be in a housing prices here for the foreseeable future.

I don’t see anything out there, that is really going to relieve that pressure from my firm in Los Angeles and southern California standpoint.

And so yeah I don’t think it’s going to get better.

But that again in and of itself is not enough for passive investors to come, invest in California.

Right just say okay any project in California.

Great right yeah no.

This is a very city by city neighborhood by neighborhood.

municipality or or major metro and so you really have to rely on the right sponsors.

When you’re investing as a passive investor make sure the track record is there, make sure they understand the market there and.

Make sure they’ve done deals in that market, ideally, they have bought and sold or bought and refinance a few deals in the market, so you know it’s a good place to invest, I think I think California is getting a little bit of a bad rap but some of its deserves you know.

Scott Hawksworth: yeah it’s it’s a mix and and I think the to really put a fine point on it, what you’re saying is is hey these these factors exist.

But if you can find a sponsor with that track record and they’re smart about navigating whatever the landscape is in whatever municipality their their asset is or they’re looking at, you know that is where maybe the.

that’s maybe part of the secret sauce of success in multifamily in California right.

Joshua Farahi: yeah absolutely yeah I think yeah hit the nail on the head.

Scott Hawksworth: we’ve been talking a lot about the landscape here and I always love to just talk about trends in general, is there a trend that you’ve seen when you’re looking at multifamily in California that we haven’t yet covered that is kind of maybe interesting or something worth noting.

Joshua Farahi: yeah I mean I mean there are trends, like every other market I don’t know how interesting they may or may not be the folks who don’t live here but.

You know, as as housing so so West Los Angeles is is you know what the city is of will say beverly hills Santa Monica.

so on and so forth, so there’s a little pocket here in the West Los Angeles, and so what we’ve noticed, and this is really just the benefit of working with an operator or someone who.

who invest where they live or invest in markets, they know deeply and so what we’ve seen is is the housing market and that’s, this is a West Los Angeles, is a well to do kind of higher.

Economic pocket right, and so what happens is is what’s happened post pandemic is the downtown pandemic downtown Los Angeles was really the hip cool place for for for for young renters and and workforce housing housing folks to rent and downtown was kind of going through a renaissance.

You know, still had issues, but it was it was improving since since really 1999 2000 it’s really truly improved downtown la la is not like other downtown and other cities different here but.

What we’ve noticed is post pandemic downtown has taken a few steps back that over built.

In downtown in downtown is not in vogue.

anymore for a rental perspective, what that’s done is pushed more more folks into the West la area.

And and and made living here more expensive, and so what that does is it pushes the fringe renters to other markets in the San Fernando Valley.

into long beach into you know we have you know culver city here and so rents in those markets now we’re going up as folks are kind of leaving downtown la.

From a renting perspective there’s a crime has gone up unfortunately the homeless issue has gone up and that’s a lot downtown has felt that I think the most.

Certainly we all have here, unfortunately, but, but that has happened, and as folks kind of shift back into the West la area, the other markets surrounding westerly are benefiting greatly and and are ripe for value at investments and so that’s what we see in the San Fernando Valley.

The San Fernando valley is kind of, on the other side of the hill of West la and.

The first markets that you get when you when you go into that valley is studio city and Sherman oaks and and co, which are all really good markets.

But what’s happening there now is renters from this side are going their cost of living is slightly lower on that side.

But you have all the perks and benefits that you would on the West side of La and then what that’s doing is pushing those renters into the same deeper into the San Fernando Valley, which was previously kind of a lower income.

landscape there, which is now completely changing.

And so understanding those nuances and seeing where the rental markets are going and the trends is is critical.

But you know we live and breathe it here and so that’s that’s what we see happening and and.

that’s why we think San Fernando we’re very bullish on San Fernando valley we’re very bullish on long beach culver city has already gone through a renaissance here, so to say you’re bullish on over cities like we’re $1 short in a day late there but kind of Renaissance, but.

You know silicon beach now chain here in La where there’s a lot of tech happening by the beach and it’s all pushing renters out into markets that traditionally wouldn’t go to those are the markets were focused on because they’re ripe for growth.

And so we’re investing aggressively there.

Scott Hawksworth: Absolutely I love it and I actually want to dive in a bit too, you know you you’ve spoken a lot about just the various markets within.

You know, southern California there, but then, when you go and you look at the specific assets in those markets and i’ve got a quote from your press release.

You know these three multifamily properties in the San Fernando valley and.

You said green bridge specializes in identifying properties that are ripe for significant profit potential, but often overlooked by other owners and investors, why do you think these specific properties that you acquired were overlooked.

Joshua Farahi: yeah so few reasons number one kind of what I just touched on premium the previous question, which was the markets that are next up for growth.

Scott Hawksworth: Right so just missing that that I guess that trend.

Joshua Farahi: Right right and so right now, if you look at like van eyes and some of the deeper valley cities if you’re an institutional investor right which is some of the folks we compete with.

They they don’t have the boots on the ground.

That we did, which is why, having a medium sized operator like we are.

who live in their market that they.

Scott Hawksworth: know it live and breathe it.

Joshua Farahi: that’s right it’s critical because I see things and our team here sees things that the big the big reads and the big groups that come and big block invest don’t see so that was kind of what I was alluding to there.

And so you know you get to a point when you’re when you’re investing with like the black rocks and other household names out there that they’re there they’re just so big that they that they don’t have.

The ability in boots on the ground to see what some of the local operators see so that’s kind of the benefit of working with a group, like ours, and some of our peers out there.

So that’s what I meant when I said that that they don’t see it now others smaller investors, the mom and pop investor.

You know they sometimes don’t want to take the risk associated with going to a market that may have a bad rap and they don’t understand that the fundamentals are behind them.

And so they’ll miss out on it and so we’re kind of in a sweet spot where and again some of this is block.

With that granular that you have to get in there and understand that in the markets that are gentrifying like van eyes and some of the other other other markets were invested in.

There the characters different street by street because it’s in the path of growth it’s gentrifying it’s not there yet, and so you really have to be careful, where you put where you, you know you know where you plant your flag.

Scott Hawksworth: Right right, and I think that’s such a good point about you know finding that sort of pocket where you know overlooked by you know the institutional side.

But then maybe the mom and pop investors aren’t they’re not willing to take on that risk or they’re not maybe the the the project is just a little too unwieldy for them in their with their scale right.

Joshua Farahi: yeah that’s absolutely right and and you know it’s a whole ecosystem that you have to have when you’re evaluating investing right it’s not just about finding a good best when you got to have the team that can execute a business plan.

And even before you have to have the right under writing skills to to not over promise yourself what you think you can achieve.

And then you have to have the lending relationships for each product and each product and each project has a different character and will need a different type of lender to come in and see what you see, so you have to have the entire ecosystem, to invest.

At a scale that we’re at not not that we’re doing thousands of units, we just started we’re hoping to get to 1000 units over the next few years, but.

My point is that, if you’re if you’re going to do more than a handful of deals a year, you have to have different relationships with lenders different relationship with contractors different relationship.

With with a whole entire ecosystem in place and so sometimes a mom and pop folks either don’t have the wherewithal or want or need to do that and so that’s how we kind of fly above them and then we fly below the institutionalized so it’s kind of a sweet spot for us.

Scott Hawksworth: Right right, and you know part of this, and even stated on your website about you know, identifying these types of properties and then you know, making them best in class.

Could you speak a bit too, you know what what goes into that what’s the strategy there, for you know now you’ve acquired one of these assets and you’re going to say okay now we’re going to make it best in class how what’s the where’s the rubber meet the road there.

Joshua Farahi: yeah so so what I what we don’t like to do is do light value add deals not there’s anything wrong with like value.

that’s that’s that could be someone sweet spot and good for them and we’re not against it, but I want to find a building whether it’s an office building or a multifamily building or retail Center, then we can go in, maybe over improve the building slightly.

Scott Hawksworth: Because we.

Joshua Farahi: feel we’re in the path of growth okay that doesn’t mean we’re going to go to a workforce housing market and then put in the spend a million dollars a unit there and build taj mahal.

What we’re trying to do is.

Find buildings that are worth the investment and the toll that it takes to actually redevelop something right because, like value add is it’s almost it’s almost doing 90% of the.

Of the work we feel if you would have just went 10% longer you could have been one of the best buildings on the block and and, unlike value at also the margins are a bit thinner and so.

So let me give you an example, we bought before we bought these three buildings in the San Fernando Valley, we bought we bought a 23 unit building, also in the San Fernando valley last April of 21.

We knew that because we saw some developments in the areas of ground up stuff that’s really nice.

We knew that this was in the path of growth, there were some homes that were built behind our project that sold for a price that was you know record setting for that marketplace and so all the signs with it.

I originally came out with my budget and and we were happy with it, and I said guys let’s let’s let’s make these a little bit nicer.

I think, by the time we’re done with this project there’s going to be this is going to be a whole different story that building will be completed this building what we completed across the street.

And I think less will improve let’s not under right to the events that I think will improve let’s keep ourselves honest with underwrite to what we think is achievable today.

let’s spend a few more bucks on the building and make it really nice and sure enough that can be a little bit dangerous, so I don’t recommend.

Scott Hawksworth: Always all right there’s a there’s a little risk there for sure.

Joshua Farahi: there’s yeah there’s a little risk there for.

Sure, but.

Again we look for we’re super picky about what we buy and I want to have the ability to overbuild just just a tiny bit in a in a in a growth market.

to benefit and Rebecca and Sure enough, we underwrote, for example on two bedrooms in that marketplace to 2300.

And we’re going to we just completed the project, more or less and we’re going out at 2800 a month on those because the street has changed completely and frankly rents in La.

In that market have have have jumped in the last 18 months and so i’m sure it was, we had a little bit of wind behind her back you kind of need that sometimes when you’re doing value ideally.

You want to make sure that if if the growth doesn’t happen you’re still okay.

Right, you want to make sure that if you’re spending a few more bucks and overbuilding a little bit that that you’re still going to land on your feet, if what happened, what you think happens it doesn’t happen, but sure enough it happen and we’re in a good place on that deal so.

Again, another one of the reasons I think southern California and California investing can have the benefit is that you know I don’t.

Look, anything can happen, and what you don’t know you don’t know is the scary part right but I don’t foresee a situation where rents over the long term, medium term on in California and La go down.

Right and so that’s that gives me a lot of confidence as a as a sponsor an investor to say look guys if we get our underwriting right we’re honest to ourselves we’re likely going to going to make money it’s just how much can we make, and how much of the trends are going to help us.

Scott Hawksworth: So when you’re when you’re approaching this and you’re saying you know hey maybe let’s spend a few more box let’s do this, then I kind of just look out at the landscape right now.

we’ve had.

Ongoing supply chain challenges materials costs.

Right nation all of that, how is that current landscape impacted this kind of strategy and has it been has it changed any of your your strategy, there really.

Joshua Farahi: Right so that’s a good point and it has affected us.

Obviously, rising construction costs and other other inputs have affected us what we’ve been fortunate with is is at the same time that that’s happening.

rental rates in California and southern California, especially have gone up in the La times put an article out.

Maybe I could provide you offline and you can you can post it or link to it on your site that that rents are up like 20 something percent over the last two years since filming from a renter perspective.

yeah NUTS right, and so the rent increase has superseded, the increase in our inputs, which is lucky it’s not that’s not by design we didn’t know that the pandemic was going to cause this kind of inflation.

We knew that something was going to happen, we were conservative and underwriting but we were lucky that there was an offset on rents.

But there’s a point in which.

You could get into a situation where inflation continues and rents kind of flattened out here, can I don’t see a real scenario where we can start to come back in any long term medium term trend.

But he may have you take a breather on rent increases and inputs go up and sure you can you can get her.

You know that’s why it’s important to to buy the right project with the right basis to insulate you from as much risk, as you can, which is why we’re not volume buyers right I don’t go out and buy 20 buildings at a time 10 gallons at a time.

What we really pride ourselves in is finding the right deals at the right basis, to help us whether some sort of storm that’s inevitably going to come.

And that kind of keeps us out of trouble, but also keeps us from doing a lot of deals.

Scott Hawksworth: Right, you know, but I think that that is a strategy that has been tried and true in terms of success and I think the ability to say no, is fantastic.

The ability to say nope not this one be picky find the right fit and and that will help insulate you against you know the other factors that happened when you know, inflation is is through the roof or or what have you.

Joshua Farahi: Right sure that listen, we may be in a situation where CAP rates.

have to start going up right.

I think I think you know so to your point it’s a tried and true kind of Defense mechanism from from getting into too much trouble is just buying the right deals at the right places, and being in the right neighborhood so it’s it’s critical.

No one knows what’s going to happen, but we like to buy right which keeps us from buying a lot, unfortunately I love doing deals but.

You know I I underwrite hundreds and hundreds of deals in southern California, you know, every year, so it just it’s just and we end up doing five.

Right so it’s just one of those things that you learn as you gain a little experience that.

You know you can’t rely on on the window be your your back and everything to be great can rely on you know the 10 year treasury, to be a one and a half percent.

CAP rates in the twos and threes and here on some of the really good product out here that’s not gonna last forever and So how do we continue to do what we do.

But not rely on those on those things, and the answer to that is just to be super super picky on what you buy.

Scott Hawksworth: Well, to that end, as we’re looking towards the future, which I like to do, often at the end of these great discussions.

what’s next or green bridge any projects or or anything else on the horizon for you all that that you’re excited about that you can share.

Joshua Farahi: Her yeah I can we, we are always doing some interesting things one project that’s really kind of related to our discussion for today.

We own an office building that we purchased was an excess land South Pasadena and we went in and entitled a large senior housing.

Project behind it with on the access lance was kind of a covered land play for us, we love pastor Dino we love South Pasadena Those are two really good markets and.

We are entitlements are you know we’re working with the city to make some changes but it’s going to be a fairly large project when done and we’re hoping to break ground on that sometime next year.

Hopefully construction costs will have come out it’ll fit by the time. and give us a little help but we’re that’s a really large exciting project for us and.

I can’t really share the details with you, not because i’m trying to be secretive just because we haven’t finalized but it’s going to be hundreds of units it’s not just like a 50 unit or 40 minutes it’s a big big projects and we’re we’re looking forward to it.

Scott Hawksworth: that’s very exciting and I gotta say as a college football fan I love Pasadena.

Joshua Farahi: yeah that’s where did you go where did you go to school.

Scott Hawksworth: Ohio State. So i’ve had the fortune of going to a rose bowl there and it was incredible so.

Joshua Farahi: The rose bowl is great.

Scott Hawksworth: yeah exactly well josh I want to thank you so much for joining me on the show today really breaking down what it takes to really have success.

In California and southern California when it comes to multifamily and the exciting things that that green bridge is doing, and if folks want to find out more they want to connect where can they do that, where, should they go.

Joshua Farahi: Well, we have a website and groombridge corp COM also i’m on linkedin i’m pretty responsive and I let some folks.

say you could find your.

Body yeah that’s exactly right.

So just you know look up my name joshua for it and linkedin and we can connect or just go to our website and all of that information is there.

Scott Hawksworth: Absolutely, and will of course have links to all of that, in our show notes on multifamily investor calm josh thanks again so much appreciate it.

Joshua Farahi: yeah that was great Thank you.