Taking the plunge
Small-scale real estate investors find success rehabbing bargains in marginal neighborhoods
While parts of Nob Hill, Downtown and Old Town have drawn strong interest from investors looking for residential and commercial real estate, some brokers say it’s actually in some of the city’s marginal neighborhoods where small investors are seeing potential and where prices are staggeringly cheaper.
Whether it’s a small office building that has clearly seen better days or a down-at-the-heels fourplex in need of a lot of TLC, these new owners are taking the plunge — finding properties to purchase, growing their net worth as owner-occupants and in some cases as landlords.
“People are seeing opportunities here (for investment) around the main arteries, and many are the regular Joe types,” said Todd Clarke, an expert in the local apartmentinvestment scene through his business, New Mexico Apartment Advisors. By purchasing a duplex, triplex, or fourplex, investors have the ability to put a roof over their own heads, generate monthly income and build their net worth.
When he works with clients, he said he runs them through a twohour tutorial with spreadsheets that detail the investment upside and downside on a potential duplex, “so people will know what they’re getting into.”
“They (many times a husband and wife) started out small, and moved up the ladder into more and larger properties,” he said.
Bargains still exist, Clarke said, but they aren’t falling from the trees. Choosing his words carefully, he said they are usually in “difficult neighborhoods” light-years away from being gentrified. “The best deals now are in the $140,000 to $160,000 range,” Clarke said.
Nicer properties draw plenty of interest. He said he is expecting at least 25 potential buyers to show up for a duplex he has listed on Madison near Lomas NE, and that competition could “take the price over $250,000.”
Ambitions pay off
Clarke said a good example of a small-scale apartment investor getting his start is Will McMullen, an Albuquerque firefighter. “He fits the profile of someone who already has a good job, the mental resiliency and the physical energy” to step in and do a lot of the grunt work that’s involved in multifamily real estate.
Clarke said firefighters, police officers and nurses are good candidates for residential real estate investing. “Frequently, they work three days on and have four days off, so they have these stretches of time” to devote to their other ventures.
McMullen is in his early 30s, married to a schoolteacher and is the father of a 19-month-old son. He said his portfolio is pretty humble at the moment, but he has ambitions to add more properties and eventually branch into mixed-use development.
Since 2014, he has acquired 16 units, all in fourplexes, in Southeast Albuquerque’s International Zone. “I purposely bought distressed, bankowned properties,” McMullen said.
The Eldorado High School graduate said he started out with private loans, drawing upon the investment circle he established through his previous business activity as a music and event promoter while still in college. “Once I had built up my cash flow and equity position — mainly through my own renovations — I switched to conventional bank loans” and paid off the backers, he said.
“We completely gutted them” McMullen said, sweeping an arm over his domain of 1960s-era, brick courtyard-style apartments. He renovated them unit by unit with the help of his father, David McMullen, a retiree who has a construction background.
While his family’s financial future is important, McMullen also sees an opportunity “for conscientious landlording” in southeast Albuquerque. If more got into the game, “a few good property owners” could make a big difference in distressed neighborhoods, slowly redeveloping them in an effort to reduce crime and build community, McMullen said. But he cautions investors to brace for the ups and downs. “Just collecting the rent is a fairy tale,” he said. “You have to have enough in reserves to carry you” when there are vacancies, or a refrigerator or water tank conks out.
While he’s had a few “bad apples” as tenants, McMullen said he looks for hard-working families and individuals who want a decent place to live, not the next hip place. His goal is to have long term renters to help stabilize property values and build safe communities for their families.
“Southeast is a good place to cut your teeth ... that’s for sure,” he said with a grin.
Commercial options
Upgrading formerly rundown — or vacant — commercial properties is
also an option for small investors.
In 2009, John Bishop and his wife, Jacqui Van Horn, purchased a building at 630 Manzano NE, Suites A & B. The couple formerly ran their businesses at a leased space, which was costing them $30,000 a year. Anne Apicella, a senior associate broker with Colliers International, suggested that their businesses were stable and profitable enough to think about investing long-term in a commercial property, which would insulate them from future rent hikes and build a real estate portfolio.
Bishop said the couple pulled money out of their home to buy and rebuild the Manzano space. Bishop’s first action was very satisfying: He removed the ugly bars from the doors and windows.
Bishop’s business, Action Disability Representatives, now occupies four offices where staffers advocate for people seeking Social Security disability benefits. The Parent Infant Study Center, one of Jacqui’s businesses, uses one office. And a nonprofit, the New Mexico Association of Infant Mental Health, is a paying tenant. One vacant office is currently for lease.
“When we bought in 2009, there were many vacant buildings in the neighborhood, said Bishop. “Now all of those buildings are occupied, and we have medical facilities on three sides. While I have not checked property values recently, I think it is likely that our property’s value has appreciated significantly during the last eight years.”
Apicella has helped other clients make the transition from renters to property owners. She had an office building listed for sale on the 5100 block of Copper NE with a lot of issues. “One of the worst was the homeless camp that I had to clean up before every showing to prospective buyers,” Apicella said.
The property was purchased a year ago by a young couple who live in the general area and now have their offices there.
“The husband is an attorney, and his wife is a paralegal. They saw the potential and have invested over $100,000 in remodeling it — and it shows,” Apicella said. “They have been thanked by many of the neighbors for the work they have done to improve the area.”
It is one of several upgrades that have helped the neighborhood, said Apicella, who currently has a small Class C Nob Hill office building for sale at 126 Quincy NE for $130,000.
She also pointed to the folks who “transformed” the old Red Cross building at 142 Monroe NE into the Kadampa Meditation Center, and to a South Valley day-care operator took over a closed day-care center at 128 Jackson NE, quickly growing the new location to a business serving over 60 children.
Growing an empire
Growing their own commercial real estate empire while leasing to fledging business owners is the approach taken by the Albuquerque owners-founders of the FreeRange co-working spaces. Dentists by day, Joe Pitluck and Huan Yang started buying commercial real estate a few years ago to in order to generate passive income to help support their family.
“My wife (Huan) made me get a broker’s license,” said Pitluck, who eventually acquired properties on Central Avenue, at Washington and Lead SE and in the Northeast Heights at Tramway and Candelaria. The co-working concept clicked when the couple lost a potential
tenant, a charter school, at the Central Avenue location. All three of their commercial properties have been transformed into FreeRange spaces where clients pay $99 to work at any available desk. Rents go up for a designated desk and semiprivate work space. Co-working aims to combine the independence of freelancing with the structure and community of an office space.
“Many are solopreneurs, and 60 percent are female,” Pitluck said of the tenant mix. “They are great places to work, learn and socialize.” Pitluck books guest speakers and offers special events so co-workers can network with other business professionals. He said he’s looking to expand the FreeRange concept to other parts of the state in the next year.