CREATIVITY IN MULTIFAMILY HOUSING IN A DIVORCE SITUATION...

CREATIVITY IN MULTIFAMILY HOUSING IN A DIVORCE SITUATION...

AND A WHOLE LOT MORE…

?It’s Saturday late in the morning and I was looking back on some of the articles that I’ve written and posted to Facebook and LinkedIn over the years and I just started to add to this article and it made a drastic left turn and went in a totally different direction than it went before or that it was intended to go.?But that’s how my mind works and that’s how creativity works in business and in life.

?In my past life as a Certified Public Accountant prior to becoming a Commercial Realtor, I did a lot of forensic accounting. The word "forensic" literally means "having to do with the courts". I was involved as a forensic accountant in numerous divorce cases. Unfortunately, divorce is a way of life in these times, and if you deal in Multifamily Housing, you are going to come across this situation more than once in your career. As a forensic accountant, I came across this situation numerous times.

?As a Commercial Realtor in a divorce situation, we are called upon to help the attorney and our clients divide up the multifamily housing properties so it is fair to both parties and so that our client gets what they can more easily manage and what is right for them in this economic situation.

Many years ago, and I do have many years of great experience doing this, I was called by a dear friend who was a divorce attorney who asked me if I knew how to value a medical practice. My answer was not now but I will tomorrow. That afternoon and the following morning I did research and learned how to value a medical practice and I called my friend back and we started to work on a very complicated divorce case. As it turned out the valuation of the medical practice was a small part of the divorce case and the marital assets.

?The doctor had amassed equity, in the early 1970s, of $7 million of Multifamily Housing units. There were about 21 different properties. There was $14 million in market value of property and $7 million of mortgages leaving another $7 million of net Multifamily Apartment value. That was HUGE in those days. The first thing I did was to hire the best appraisal firm to value all of the properties. Their report on the market value was like a textbook and I used it as such to learn all I could about multifamily housing.?Now seems like a good time to remind you that I was also a University Professor for 6 ? years.?Then my job got complicated. I had to analyze all of the properties, very few of which were single-family residences or two to four-unit buildings all the way up to 70- or 80-unit buildings.

?I prepared a spreadsheet determining the cash flow and value of each property and divided up the properties and the other marital assets giving each person an equal amount of value. The doctor has ample income from his medical practice and did not need as much cash flow as his wife, our client.?So, the assets were divided by giving the wife enough cash flow and the assets that were somewhat smaller and more manageable.?I also looked at the income tax benefits of each property and tried to divide that up evenly as well.?I was following the California Community Divorce Laws. I also divided the properties based on the experience and expertise of the individuals. The doctor, having been very experienced in acquiring real estate, was given the larger properties as he would be able to sell and trade the properties if he wanted to restructure his portfolio. And the wife, my client, was given the smaller properties as they would be easier to liquidate and trade if she wanted to restructure her portfolio.

?I got quite an education in multifamily housing working on this project that I thought was going to be the valuation of a medical practice.?The other day I wrote an article about being CREATIVE in what you do and you will come up with unique solutions to your problems and you will learn soooo much more.?In 1972 I knew very little about multifamily housing and real estate in general but I have a strange background for a commercial realtor, I was a practicing Certified Public Accountant for over 50 years before getting into real estate.?So, I look at an apartment building, and office building, self-storage facilities and other real estate as a business as well as real estate and I take a two pronged approach to valuing them.?First, I value them as a business and then I value them as real estate and I look for the consistencies and inconsistencies to come up with a combined valuation for the property.

?I also learn as much as I can about the industries in order to help put together a well-rounded business and real estate investment portfolio together to meet my clients’ needs, wants, and desires.?And, I just love how I bring in information from all of my articles to make a point, YOU HAVE TO LISTEN TO YOUR CLIENT, or else you will NEVER be able them to meet their goals.

?Look at all of the things I just talked about that I have previously written about because business, like LIFE is really, REALLY complicated and making the right decisions involves gathering all of the pertinent information, analyzing it all, and weighing the positives and the negatives and then hope, I SAID HOPE, that you just made the right decision.?And this whole story started with the valuation of a medical practice, can you believe that???