Perspectives from the Real Estate Forum: Brian Janak
On November 18, over 150 people packed into the Colombe d’Or ballroom for the Montrose Management District’s Real Estate Forum, featuring talks by real estate experts Brian Janak, Ryan Epstein, and John Walsh about the prospects for development in Montrose in the coming years. All this week we have run excerpts from the speakers’ talks. Today, we finish up with Brian Janak’s. Brian’s real estate firm, Inner Loop West, specializes in multifamily apartment property transactions of $3 million or less—typical of the majority of properties in the Montrose District.
“Montrose sells itself. It’s unique because not only does it have 12 percent of its 1,300 or so acres devoted to multifamily housing, it has six historic districts created by the city of Houston. I don’t know if this was the city’s intention, but I can’t find a single homebuilder who wants to buy a multifamily property in a historical district, so these current multifamily properties will essentially never go away. You can’t replace them with another multifamily unit—you have to put up single-family homes that are consistent with the historical guidelines, so these multifamily properties are going to be around for a while.
On the other hand, there is an attrition rate here in Montrose that is pretty high. In a normal year, the loss of stock is roughly 3 percent, and that’s tripled in Montrose in the last few years. The newer construction is basically going to go after the young professionals and the empty nesters. The layer beneath that is not the blue collar workers—they’ve been squeezed out—it’s the “grey collar.” You have internet-savvy millennials who make $75,000 a year, and they want to live close-in for the lifestyle, not necessarily because they work in Greenway or Downtown, but because this is where the best restaurants are, this is where the best entertainment is.
The fundamentals are very strong. I have yet to see any concessions on these vintage properties like you see in other parts of houston—no one’s offering a month of free rent or anything like that. I would say the apartments here are about 99 percent occupied, and rents have been rising since about 2009. I think you’re going to see the effective rental rates peak.
It’s going to be a good time for anyone who owns property currently. that doesn’t mean that prices are so high that you can’t make it work [to buy a property]. I’ve seen guys pay top dollar for well-located properties, come in and put in everything it needs to get to the next level, but purposefully reposition the asset where rents will be 20 or 25 percent under the Class A properties owned and the rest rented out. I think that’s a good strategy.
If you’re looking to buy properties, exercise the banking relationships you have. Use leverage—interest rates are low. Have the goal of owning multiple properties in a particular area, because then you’ll see some synergy. You’ll know the area better, you can raise rents easier, and you can also scale your operations. Finally, think about the long term. There are trophy properties in areas that might seem risky today, but 10 years from now you’ll be glad you have it. And when you’re ready to sell it, please call me!”