6 questions with investor and broker Juan Huizar
Juan Huizar’s first job in real estate — running errands for a local investor — wasn’t supposed to last past his senior year of college. In fact, he had a job lined up with a top accounting firm after graduation.
Then the investor, Mark Malan, who Huizar still considers a mentor today, offered to teach Huizar how to invest if he stuck around.
Huizar admired how Malan used real estate to generate wealth.
“Growing up in poverty, working in the fields, I had this desire — I didn’t want to be poor anymore,” says Huizar, whose family immigrated to California’s Central Valley from Zacatecas, Mexico, when he was 4.
In the years since, Huizar built a portfolio of apartment buildings, condos and houses and started Sage Real Estate, a brokerage in Long Beach, Calif., that specializes in fourplexes. He also created a YouTube channel where he and his team members share market updates and advice.
Huizar spoke with Story about his career in real estate, creative ways to add value to multifamily properties, and why he only invests in Southern California.
Story: What’s something you learned from working with your mentor, Mark?
JH: He was a commercial appraiser, so he taught me that if you can bring in more income, you raise the value of a property significantly. What the investor is buying is the stream of income.
A lot of one-bedroom and two-bedroom rentals in Long Beach have a big, formal dining room that’s underutilized. Mark taught me you can convert that dining area no one’s using anymore into a legal bedroom. And it’s not that hard to stand up some walls and a closet. You go from a one-bathroom that’s only going to rent for so much to a two-bedroom.
Some units also had bathrooms that were very long. We’d come in and slice the bathroom in half. The plumbing is already there, and now you have two bathrooms. Another thing we’d do is add in-unit laundry.
It’s always looking at the property and asking, “How can we make it better?” In doing so we bring in more income, and more income raises the value.
Story: Where do you see opportunities for investors in Southern California?
JH: People say they don’t want to buy in Southern California because it’s too expensive. Are you crazy? I only want to buy in Southern California because it’s expensive and there’s so much demand; it’s one place that’s going to continue to appreciate.
Here’s what I know now: Cash flow is not king; appreciation is king. I have clients who say, “I want about $500 a month in cash flow.” That’s $6,000 at the end of the year. For the most part, that’s not going to make a big dent in your life. But they don’t want to buy properties that are going to break even. Historically, appreciation in California is about 6.3%. So if you bought a million-dollar fourplex, you’re talking about $63,000 you could have made in equity. $63,000 in equity or $6,000 in cash flow, I know what I want.
First we build the appreciation, then the income comes. Every building I’ve had for a few years, now the cash flow is there, but you have to take that initial risk.
Story: What’s your favorite tip for cutting operational costs at a property?
JH: You can self-manage your properties. I self-manage, and I see what it does from a net worth perspective. I used to complain if a tenant was bugging me. Then I realized, “Wait, they’ve called me once in three months.” I should be glad it’s the one time I get to work on management, rather than paying a manager. I now have no problem with tenants reaching out to me. I know it doesn’t take a lot of time, and I have the stomach for it.
Story: As a broker, why specialize in fourplexes?
JH: I didn’t want to sell houses and I knew it would be hard to compete with the commercial brokerages on bigger properties. I looked at how many fourplexes there were in Long Beach, how many sell per year and the turnover rate. I realized no one was paying attention to the fourplex market.
Most of my market updates on YouTube are fourplex-based, and the market loves the data I give them because no one else is tracking it that closely. Finding a niche made a difference, because when I came in, I had investment experience but I didn’t have as much brokerage experience.
Story: What inspired you to get on YouTube and share your insights?
JH: At first, I didn’t want to be on camera. The day we were scheduled for filming, I’d hope the videographer was stuck in traffic and would cancel. Now, three years into this, the number of positive comments, the clients I’ve gotten out of it, the investors we’ve helped — I love that.
Story: Do you have a go-to strategy for finding properties?
JH: If I’m an investor and I really want to buy in one area, I’d send property owners monthly letters saying I’m interested in buying your building. I know it works because I do monthly postcards. We try to make it easy and say, “Text the word fourplex to this number.” Once I got a letter with no return address, no phone number, saying, “I keep getting your letters. I am interested in selling and I hope to be in touch with you soon. You’ve made your presence known.” About a month later, the owner finally called me, and I’ve been able to help him on multiple properties.
By Lauren Zumbach from Story by J.P. Morgan