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Ralph Giannella Explains Why Modernizing Older Apartment Buildings is an Investing Goldmine
With so much chaos and change happening in the economy, there aren’t many safe bets for investors who want to protect their principle and generate worthwhile Return on Investment. However, according to acclaimed real estate entrepreneur, San Diego-based Ralph Giannella, there is one type of investment that continues to shine, and is poised to become even more profitable: redeveloping and modernizing older apartment buildings.
“Most people are familiar with house flipping, the business of buying, renovating and re-selling older houses.” commented Ralph Giannella, one of the nation’s leading authorities on buying and modernizing residential real estate. “However, an even larger opportunity exists to buy and modernize entire apartment buildings and re-rent at much higher rental rates, this is a massive opportunity to generate significant profits.”
Indeed, across Southern California in counties such as San Diego and Los Angeles, there are numerous older apartment buildings that were built in the 1950s, 1960s and 1970s, that are outdated and need a new life. Many are located in premium, highly desirable neighborhoods. The problem is that because of their age, these buildings lack the attributes and amenities that today’s sophisticated renters want and expect, such as electric panel upgrades, smart home automation, state-of-the-art kitchens with stainless steel appliances and quartz countertops, energy efficient LED lighting, dual pane windows, high-end fixtures, in-unit washers and dryers, air conditioning and the list of modern features and amenities goes on.
“Most of these older apartment buildings are fundamentally in good condition, but there is an enormous demand and an extreme shortage of like-new modernized apartments in the best parts of town. In San Diego, the beach towns of Pacific Beach, Point Loma and others are filled with small apartment buildings that are in average to good condition. However, if you are a renter who wants a newer or modernized apartment in these areas, they just don’t exist.” commented Ralph Giannella, who has been a significant figure in the modernization of older residential real estate in Southern California for the past 25 years. Since 1995 he has bought, developed, and sold over $800,000,000 of real estate, including large scale apartment buildings, multi-million dollar luxury houses and has remodeled and modernized over 2,000 apartment units.
While obviously the idea of generating significant — if not in some cases enormous — profits is welcome news to investors, this isn’t the only reason why modernizing older apartment buildings make sense. There is also a much more personal and human angle to the story.
“Many people who want to live in elegant, stylish and modern apartments are forced to move away from the communities they love, and where they have roots,” commented Ralph Giannella. “Investors who create inventory by modernizing old apartment buildings are solving a very important social problem.”
Speaking of social problems, no discussion of housing would be complete without reference to the most important issue of the year, and possibly the decade, generation or maybe even century: the coronavirus pandemic.
The Impact of the Pandemic
“In today’s COVID environment, living habits have changed,” commented Ralph Giannella. “Many people would rather live in a small modernized boutique building with, say,12 apartments where they have direct access to their apartment, and don’t have to deal with hundreds of other tenants as is the case in larger apartment buildings or high rises. Many people are no longer comfortable parking in an underground parking garage, and then getting into an elevator shoulder to shoulder with strangers, getting out on the 7th floor and walking down four-foot wide crowded hallways. This was the norm pre-COVID, but things are changing now. On top of this, almost all older apartment buildings have common laundry rooms. Even pre-COVID we found that having an in-unit washer and dryer is the number one amenity that is important to renters. Today, it is even more important.
Another factor that makes the opportunity for investors and entrepreneurs even greater, is that many of the people who own older buildings are individuals and couples in their 70s and 80s who are now open to selling.
“I am buying buildings today that I would have loved to buy and modernize 15 years ago, but the property owner at that time wasn’t old enough yet and wasn’t ready to sell,” claims Ralph Giannella, who recently announced that he will be spearheading the rehabilitation and modernization of an apartment building located at 2121 Thomas Avenue in San Diego. “But, today, those same owners are looking to upgrade their inventory of investment properties or reposition their estate plan. The stars are aligned, there is a convergence of an enormous inventory of older apartment buildings that need a new life converging with a population of older owners who are now ready to sell. Buy for X, Remodel for Y, Sell for Z and make a profit. It’s an incredible business model”.
A business model that has traditionally been reserved for larger institutional investment firms or professional private equity groups. However, later this year, Giannella’s firm will be launching its initial Investment Opportunity Fund that will allow smaller private investors to participate as well.
Black Iron Development Inc.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes
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