November, 2022

Does email reach you? Here I am, sending emails out to everyone but I’ll be the first to acknowledge that not everyone prefers emails, or even reads them. My kids are in their 20’s and do read their emails but don’t usually use them for most communications like I do. In fact, they treat emails like a letter that says “Official Business”.

If nothing else, I am all about watching, listening, and learning, and clearly different people have different communication preferences. So I am starting to use them more. LinkedIn is like the Grand Daddy of business communications, but younger professionals have jumped on board. Facebook was for “kids”, then us boomers, but now more recently for professional social interaction.

Instagram? Not just vacation and cat pictures any more. The reason I know this? Because I join a lot of webinars and presentations from people who are killing it on Instagram. They have thousands of followers, and they turn them into professional engagements, whether they are selling something or looking for investors.

Twitter and Tik Tok are even more examples.

I won’t be sitting content with my website. I need to reach people where they are to help as many people interested in the awesome opportunities in multifamily real estate as possible. I’m learning and taking action to get engaged in these platforms because I don’t need any more convincing.

And if you want to be more active in multifamily, as either an active or a passive investor, you should too.

Oklahoma City, OK – First, some sour grapes. I’m from Seattle. In 1967 Seattle gave birth to an NBA basketball team, the Supersonics. Twelve short years later the Supersonics delivered an NBA championship to Seattle. Then in 2008 new ownership moved the team to OKC and renamed them to the Thunder. Boooo! Okay I’m over it now, and have been excited about many supersonic qualities found in OKC.

And have made OKC one of my target markets because both cash flow and appreciation can be found here. I have bought properties in coastal states, and absolutely love them, but everyone else does too so demand is high, margins low. OKC is a recession resistant market with strong demand, great growth and cash flow opportunities.

Start with what it is not: an oil city. You don’t want to invest in a boom and bust-prone city? Oil and gas has for the last 75 years been the dominant industry in Oklahoma in general. However, the number of active rigs is down 40 percent from earlier highs according to the Federal Reserve, but gas production is at all time highs. This is attributed to productivity gains, but what it means for investors is that the industry is not as dependent on manpower. Future declines in oil and gas prices won’t mean an exodus of jobs, as it has in the past.

What does OKC offer? A lower cost of living, a high livability rating, strong jobs growth, owner-friendly regulation, and some exceptionally desirable industries. Such as Biotech. In a city of 687,000, Biotech accounts for 50,000 jobs and $6B contribution to the local economy according to Aerospace? 290 different companies, 43,000 jobs, $11B contribution. Who doesn’t want those industries.

A few other notable stats. Eighth largest city by land – bigger than LA, Chicago, and Houston – and 20th largest by population. Last 12 months, year-over-year job growth of nearly 4%, which is tremendous.

Rent growth? says it is now the fastest growing rent in the U.S, 24.1% over the last year. Clearly this level of rent growth drives new development and new apartment complexes will be absorbing much of that demand in the near future, and if you’re planning on renovating, good luck finding contractors in this busy market.

For the long haul, this is an emerging growth market. A Moody’s Analyst said “Oklahoma City is well on its way to being upgraded to an emerging market in Q1 2023.” Not all sub-markets around OKC are the same, as is the case with any large metro, so learn it, talk to brokers, make friends with locals. Be sure you’re buying in the right areas.

A few key provisions for your Purchase & Sale Agreement
If you have bought properties, you know how critical it is to get your PSA right, and if you haven’t, undoubtedly it makes you nervous thinking about this agreement. I want to share a few things that I have found to be critical for a PSA. This isn’t a complete list but can be considered things to also think about.

You have heard that you need to get an attorney involved. For buying multifamily real estate, this is an absolute requirement, no exceptions. Doesn’t matter if you are buying in-state and the MLS has a standard agreement. Read it and have an attorney read it. I have never found a “standard” agreement to have everything I needed in it. They can all be revised through addendums and cross-outs.

If you don’t have a PSA that you have used in prior deals and the broker or seller offer you theirs, it may be okay but again always have your attorney review it.

Before sending anything to your attorney, you need to be clear about separating the business issues from the legal issues. You decide the business issues. Make those decisions before you send it to your attorney. These are things like due diligence periods and earnest money deposits.

Be sure your attorney knows to ensure your protection. For example, you may need to terminate the agreement, so be absolutely sure of the deposit you’re getting back, and that criteria. “Ask me how I know”, as Rod Khleif says. Your attorney needs to be a bona fide real estate attorney, experienced in creating and revising PSA’s.

What to include, here are a few things.

Service contract terminations – if there is a cost to terminating a service contract, such as Cable, who pays for it. In your due diligence you might find a term contract for cable, HVAC maintenance, etc., and an obligation to pay through the end of the term. Whether you’re the buyer or the seller, it needs to be clear who pays if the buyer doesn’t want it continued.

Leases available as pdf documents, if you’re the buyer. If the seller has them all on paper, it’s very difficult and time consuming for you to sit in their office, read every one, and determine all of the details you need from the leases, such as move-in date, security deposit, pet fee, lease end date, provision to switch to month-to-month at lease end, move-out notice due, etc. It takes time to audit these leases and sitting in their office reading paper leases is not the place to do it. Require them to scan them in if they need to.

Contract extensions – regardless of how long you make your contract, it is always a good chance the contract may need to be extended. If you’re getting to the end of the contract period and you realize you can’t close by that date, you need to extend it. Sometimes the other party is completely amenable but other times they may squeeze you. If it is the buyer needing to extend, the seller will likely require an additional deposit. Maybe a big one. If it is the seller, the buyer might incur costs from the lender having to rerun all of their closing costs calculations. Put in your PSA a provision something favorable to you. If you’re the buyer, have it say you can extend the PSA for 30 days with no additional cost or deposit. Or two 30-day extensions for no cost. The seller may push back but wouldn’t you prefer to have this negotiation before the PSA is signed rather than when you’re desperate?

Occupancy guarantees if you’re the buyer. Drops in occupancy during the contract period are not that uncommon. If it’s important to you, there can be a provision that compensates you if occupancy drops below a threshold. Be clear about how it is calculated, such as one month’s rent or three month’s rent for each vacant unit below that threshold, and be clear about how this is to be determined. Have a provision that they deliver a signed rent roll, say three days prior to closing.

Financial due diligence – in recent years, to get a deal you might have needed to waive most of this provision. Maybe even put hard money down early in the process. Today is different, don’t do that any more. Get a reasonable time period in place to ensure you have a committed lender. Not just a term sheet but full approval inside the financial due diligence time period.

Right to Assign – you can put your own name on the initial PSA and then prior to closing, assign it to your LLC. This is common.

Continuation of lease-ups or renovations – as a buyer, decide if you want the seller to keep re-leasing vacant units during the contract period. Most likely they will want to do that but there is the risk that they place anyone with a pulse, just so they can keep occupancy numbers up. You might require the right to approve new tenants, or require a specific renter qualification criteria, or might allow them to place new tenants up to 15 days prior to closing. This provision is common.

Same with renovations. Clearly they need to fix broken things but if your intent as a buyer is to do the renovations yourself, you risk the seller doing subpar work. Decide if you want them to continue or not and put that in the PSA.

Certainly lots of other provisions are required, but these are a few that I’ve found to be important in a PSA. Get your attorney’s advice and take their recommendations for changes that more fully protect you and your interests.

Who We Are

Cardinal Oak Investments acquires, improves, and manages under-valued commercial apartments. We buy B and C class properties of around 100 units in the Southeast and Midwest. We look for properties whose amenities, aesthetics, and appeal have fallen into obsolescence, whose care reflects tired management, and whose location is where a stable workforce wants to live.

And we partner with like-minded investors looking for stable assets that produce good cash flow and strong appreciation.

Founded and managed by John Todderud, Cardinal Oak Investments has acquired properties on both coasts and in between creating annual double-digit returns.

For more information, schedule time with me or contact us.

Please note: Past performance is no indication of future performance.