Los Angeles Apartment Investing: 30–40% Price Drops & the Next Multifamily Gold Rush

Brent Sprenkle (00:00)
A lot of people have been wanting to sell and now they’re gonna have to capitulate. And a lot of people wanted to buy, and they’re gonna see that we’ve reached rock bottom prices, they’re gonna feel comfortable investing. So those two things are about to hit. Usually in any given market, you have a lot of sellers and no buyers, or a lot of buyers and no sellers. We’re about to hit equilibrium where you have a ton of people who want to transact on both ends, and that’s

Issa Hanna (00:22)
Yeah.

Brent Sprenkle (00:23)
where the money is. That’s coming soon.

Issa Hanna (01:58)
Welcome back to another episode of the Real Estate Pro Show. I’m your host, Issa Hanna, and today I have Brent Sprenkle with me here to share his knowledge in a unique facet of real estate that he’s very knowledgeable in. Brent, welcome to my show.

Brent Sprenkle (02:10)
Hey, so great to be here.

Issa Hanna (02:12)
So happy to have you. I interview a lot of investors. I interview a lot of brokers. Like you said, you’re wearing two hats, but not much are into the strictly apartment aspect of it. And then you’re in one of the highest price markets or the highest price market in the country, which is SoCal. So for people at home, can you kind of give the two hats that you wear and what you’re doing?

Brent Sprenkle (02:31)
Well, I started out about twenty-five years ago simply as new to the business apartment broker. Or previous to that I was an aerospace engineer when I worked I worked on satellites, oddly enough. So transitioned straight from that into selling apartment buildings strictly on commission. And did that a hundred percent was my focus for the first probably ten years. And then I started dabbling with investing and buying a building here and there on my own.

And just sort of learned from the best. I had all these clients that were rags-to-riches stories that bought buildings when they were janitors or school teachers or in college. And I thought, if these guys can do it, maybe I should be doing this. I can’t do brokerage forever, or I could, but I could get just very bored at it. So what else can I do? So I still do probably 90% of my business is still just doing apartment brokerage.

But about 10% of it is buying and managing my own portfolio of apartments here in Southern California. So that’s been the last 25 years of my career. That one hat of doing brokerage, helping clients buy and sell apartment buildings here in SoCal. And the other hat of it is just managing my own portfolio of apartment buildings.

Issa Hanna (03:41)
I love that. And as a real estate agent, you start like that, right? You start with the brokerage, you start doing deals with clients, and light goes off in your head and like, maybe I should build my portfolio for the future. And then we all get into the real estate investing. The thing I love about you is and you’re in a high price market, so your assets are worth a lot of money, and then you’re in the apartment brokerage type. So a lot of people get into single families, you went straight to the top with your knowledge. So I love that. Thanks. And then you also even wrote a book about this. So can you tell us about the book?

Brent Sprenkle (04:14)
Here it is, Billion Dollar Portfolio. It was basically a story of the tales of all my insanely successful clients. So people would come to me and be like, hey, this one guy that you do business with, like, hey, the guy owns like 5,000 apartments. I heard he’s self-made. How did he get started? But like, this guy was from India and he came over here to get his master’s degree and became an on-site manager and then he bought a building for nothing down, and then this, that, this, that, and just tell the stories of how all these people did what they did. And after a while, you just have all these stories in your mind from all your clients. And the book was just a whole entire book about how dozens of clients of mine came from nothing and now have these massive portfolios of not only apartment buildings, but also shopping centers, office buildings, things of that nature. So it’s just a kind of a summary of the last twenty-five years of my life and all the amazing things that clients of mine have done. And also I put some tidbits in there from my own successes and things that I did also to grow my own portfolio.

Issa Hanna (06:08)
I love that. And when you deal with a lot of clients and you’re successful and you have a lot of clients and a lot of deals under your belt, you do have a lot of clients that are success stories. So the fact that you wrote a book about it, so smart, definitely probably very inspirational and got a lot of knowledge in that book. So Billion Dollar Portfolio, you guys. Make sure you check out Brent’s book because I bet it’s loaded with knowledge and inspiration. And then with that, one of the strengths, we talked about one of the strengths that you bring to the table is you have, and I’ve touched on it a little bit, such an extensive knowledge of apartment brokerages, of how this whole system works. So and I know twenty-five years of doing it, you accumulated all this knowledge, but I want to get your origin story. So you were an aerospace engineer. What made you like, hey, maybe I should get into real estate?

Brent Sprenkle (07:06)
It’s kind of the traditional story of you’re 25 years old, you get laid off, and you’re like, now what? Like I want to be successful, I wanna be entrepreneurial, I’m interested in investing, but where do I get started? And a friend of mine owned a couple small apartment buildings, and he’s like, you should just go become an apartment building broker because there’s no barrier to entry.

A lot of these guys I deal with are complete idiots and have no basic common sense and can’t do any math. And you have an engineering background, you’re good with math, you have pretty good people skills, and I bet you could be decent at sales. So he encouraged me to try it. And that time, just opened up the newspaper and there were ads for commercial real estate brokers. And you basically show up and they’re like, do you have a driver’s license? Do you have a phone? Can you go buy a computer if you don’t have one?

And we need to get a real estate license. And that was basically that was it. And like here’s a desk and here’s a telephone, like pick up the phone, call people. So there was no barrier to entry, but there’s no salary, you eat what you kill. And if you don’t make it, well. So like you sit down at a desk, you’re twenty-six years old and you’re scared to death, and you just have a list of people that own apartment buildings and you’re just dialing for dollars. You’re just pounding the phone, and I just came to the conclusion that I didn’t really have great interpersonal skills because I mean I spent the last three years of my life as an engineer, right? But I was good with math. I could hustle. I had a great work ethic. And if I got to know the people and knew what I was doing, I could win some business. So I just grinded. I was like the number one caller in the office for like five years in a row. I’d made a list of how many calls I made, how many meetings I went on, how many opinion of values, basically appraisals I did for clients on their properties. And after a while, clients would start giving you business. I mean, they weren’t, their prospects at that point, would start giving you an opportunity. So I, as 26, 27 years old and bringing in all this business, and all these people that were 35, 45 were like, how’s this guy doing it? It was just hard work. There was no secret sauce.

I would wake up at six in the morning, leave the house at six fifteen, be in the office at six forty-five, be working on my database, trying to figure out who owned what, and making phone calls, going on meetings, doing opinion values, appraisals for clients, and just trying to win business. It was that easy. But it was incredibly stressful because 26 years old, you literally have no money coming in.

You’re flat broke, you’re watching all your friends going out and having a nice life, going to bars, going to dinner, dating, doing all these things I could not afford to do because I was flat broke. So that was sort of the challenge. And that was two years of just pushing that boulder up the mountain. And you get that boulder to the top of the mountain, and then it’s rolling down on its own once it gets up the top. So that’s my analogy for you, and how you make it in a business like this. Is it easy? Absolutely not.

Do a lot of people fail? Probably 90% of the people that start fail. But like anything else, if you create a formula and you’re committed to it, you can be successful at pretty much anything. So that was a simple formula that I followed. And then I just watched all these clients buying apartment buildings and doing well with them. And I was initially scared to do it. I’m not sure why, but it just seemed so intimidating. But I thought about it, financially they might have less money than I have liquid right now. And I know how to get a loan. I know who to hire for property management. I like I know who to use. So why shouldn’t I jump in? So maybe on like the sixth year in the business, seventh year in the business, after I bought a house and did some other investing, I started buying buildings on my own and then realized that I could easily buy a building, renovate it, clean it up, refinance it, go buy another building, add some money that I made from brokerage, and then just keep doing that over and over again. And after a period of time, I was buying one or two buildings a year, all on my own with no investors. And it’s a simple formula. Now things show up like financial crisis in 2008, COVID, interest rates moving now, which is what made our business very challenging lately. But even throughout all these times, there’s always opportunities. And I think we’re at a pivotal point in the market right now where I think there’s gonna be some tremendous opportunities. They’re already happening. I think the next two, three years is gonna be an absolutely amazing time to be an investor in apartment buildings, especially in Southern California. So

Issa Hanna (12:37)
Yeah. Yeah, and we touched on that in our conversation earlier. Right now, the prices in SoCal are record lows. I mean, you told me a five million dollar price difference in a property just in a few years. So can you touch on that and give our viewers a little bit about that?

Brent Sprenkle (12:55)
It’s a combination of a variety of things. I mean, the first is that the rental market in Los Angeles, rents are down between ten and thirty percent everywhere. Okay. That’s the first thing. Vacancies are up. I mean, buildings were pretty much full a couple of years ago. Now they’re three percent, five percent, ten percent vacant, especially studio apartments. Those have gotten crushed. Interest rates, no one needs to discuss that much beyond the fact that they’re literally double what they were a couple of years ago.

And there’s no end in sight to them coming down. We’re actually thinking they’re probably going to be a little bit higher this time next year. So it makes it a little bit frightening to be an investor thinking you’re buying a building in a high interest rate market where there’s no relief in sight. And then we’ve had legislative problems. We have this new thing called the Mansion Tax, which literally is a five percent or six percent tax on anything in Los Angeles City that’s over five million dollars. It’s not just houses, it’s anything. You could be selling a warehouse, an apartment building, a vacant piece of land, everything gets taxed. They snuck it in through the vote calling it a tax on mansions, but it’s everything. So that has decimated our market. Nobody wants to build. So we’re going to see almost no new construction apartment buildings come online anytime soon. And we’re going to wind up in even a bigger housing crisis than we’re already in. So what we’re going to do is we’re going to wind up seeing rents continue to, once they flatten out, which probably has already happened, we’re going to see rents at some point start to go back up. At some point, the economy is going to correct. And combined with a better economy and a lack of new construction, no new units coming online, we’re going to see rent lease rates go back up again in the near future. And maybe with some interest rates going down, it can become very, very interesting to buy. But even if you buy something now, you’re buying literally at 30 to 40% off what it was at the top of the market.

So just on arbitrage, it’s a great long-term investment. And whether or not you can make cash flow over the next couple of years is a different story with what’s happened with A interest rates, insurance, repairs, all your other operational costs have gone up, utilities, everything’s gone up twenty-five to fifty percent. But anyone that’s an experienced investor is aware that the cost to own any form of real estate right now is way higher than what it was two years, let alone 10 years ago.

Issa Hanna (15:16)
100%. But that can be a huge opportunity. And I wanted to backtrack just a little bit because it popped into my mind and I wanted to make a point. People that are good at math, like you, you’re right. So people that are a math guy, numbers guys, think analytically like an engineer would. They do super well in our field because especially in investing, underwriting is ninety percent of the battle before you buy the house. You’re gonna underwrite that file. You’re gonna look at it. So if you have somebody even on the brokerage side, if you have somebody who can represent a buyer and bring them these numbers to them, here’s how much you’re gonna make, here’s the projected numbers, whatever, it goes such a long way, you guys. And then when you have the experience that Brent does in his field, like he says, so self-correcting and all that stuff, he’s seen it all. He’s been through the crash. He’s been through COVID, he’s been through the law changes in the Obama days in two thousand ten, and he knows to keep an eye out on legislation. So for you investors out there, legislation is key, especially in these big states that do these sweeping type of new laws because it could affect your bottom line. So man, I just wanted to pull a little bit of knowledge and highlight what you were saying because you’re just everything coming out is just golden knowledge for the viewers and I love it. Thank you, yes, sir. I want to kind of get now something that we all experience, right? All investors have it. The real estate nightmare. So give me one of your real estate nightmares for the viewers.

Brent Sprenkle (16:50)
I just wrapped one up. I bought a little apartment. Actually, the first apartment building I bought was a little eight-unit in Hollywood. And things are going well. And maybe 2018, we had a roof leak. One of the tenants, instead of calling us, they called the County of Los Angeles Health Department and reported a roof leak. We’re like, why didn’t they just call us? Well, we went out there and they were not being cooperative. So we called the roofer who like two years prior did a maintenance job on the roof. And he went up and he tried to repair the roof. Again, a tenant wouldn’t cooperate, but the roofer thought he did a good job, would fix the problem. It rains again and a tenant had a leak in the same spot. It turns out the roofer didn’t fix the problem because a tenant wouldn’t let him in to show him where the leak was from.

So at this point, we just decide we should probably put a new roof on the property. I was a little bit nervous about it because it was wintertime. And in wintertime in Los Angeles is when it rains. It doesn’t rain from like March all the way till like November. And here it is November, and we’re like, we should probably re-roof the property just to get this over with. So call a roofer, the roofer starts on the job, calls the city to come out and inspect it before he puts the final layer of roof on. A colossal like hundred-year rainstorm comes out of nowhere. Literally before we get the roof on because we’re waiting on the city. This giant rainstorm hits. The roofer tried to put tarps up. The rain just blew right through the tarps. The entire building got flooded. All but like two units got really heavily water damaged. We go out there, we try to make repairs and relocate the tenants and they’re all under rent control and they all had very low rents. They thought that we were trying to illegally kick them out. They called an attorney. It was on the news. We got sued for, I think, like $10 million. It was this massive lawsuit. It took eight years to settle it. It literally just settled two months ago for like two and a half million dollars.

All because the roofer couldn’t get the job done before a rainstorm hit. So that is my nightmare story. But on a positive note, the insurance paid everything. I had an insurance policy, I had an umbrella policy, and the property management company had a policy that paid for everything. So it was a nightmare because I got stuck in this massive lawsuit with these tenants suing me personally.

But the insurance took care of it. So that is my nightmare story. And of the 25 years I’ve been in this business, of the 20 years I’ve owned apartment buildings, that is the only problem I’ve really truly had. So I think that’s pretty good, especially when it cost me zero dollars at the end of the day. I still have that building, it’s doing just fine. And these things are going to come up. People that are stock investors, they see a stock go from a hundred bucks to zero when a company goes out of business. I still own this apartment building. It still has equity. It’s gone up probably three hundred percent in value since I bought it.

You can live through everything. It’s why you have insurance.

Issa Hanna (20:04)
Hundred percent. The insurance, it goes a long way. You had a real estate nightmare that could have went crazy. It cost you zero dollars out of your pocket. Probably a big headache, but you got through it. And what I always say is you never lose, you always learn when you go through stuff like that. So now, God forbid this happens again, the process to get through it for the next time. So

Brent Sprenkle (20:26)
Well, I mean, if I was to get sued now, I’d be like, great, call my insurance company, whatever. I would be annoyed, but it wouldn’t bother me. When that happened, I didn’t sleep for like six months. I’m worried that they’re gonna come, they’re gonna ruin me, they’re gonna take my house. All these things you’re freaked out about. And you look back and say, why was I so worried about that? Why did that bother me so much? It’s like anything else. You live through it, it makes you stronger, and then you’re like, meh, whatever. So

Issa Hanna (20:53)
I know. Yeah. Exactly. Exactly.

Brent Sprenkle (20:55)
When it’s when you’re in the middle of it and it’s new, you’re so scared.

Issa Hanna (20:58)
A hundred percent. And as a fellow investor, I’ve been right there. Maybe not such a huge PR nightmare like that. That was a pretty good one you gave us. I ask all my guests that.

Brent Sprenkle (21:11)
Yeah, I think they sued me for like I think it was six million dollars personally. Settled

Issa Hanna (21:16)
I know you’re—

Brent Sprenkle (21:17)
for two and a half, the insurance paid the whole thing. But all because of the roofer, and it’s like I hired the roofer, I pulled a permit, I did everything a responsible landlord is supposed to do.

Issa Hanna (21:29)
Definitely.

Brent Sprenkle (21:30)
Still happens.

So the worst case scenario can happen, but you’ll get through it. I’ve had incredibly successful clients own thousands of units that started out back thirty years ago getting foreclosed on, losing everything that they bought. And then they bounce back and now they’re amazingly successful and they get through some awful times.

Issa Hanna (21:52)
Hundred percent. And the beautiful thing about our game is like you said, that asset is still yours once you get through it, you repair it, still belongs to you. It’s still gonna appreciate over time, all real estate does. So definitely a lot more bright sides to that nightmare than the dark side. So I love that story. Definitely gonna be a memorable one for the show, probably the best one we’ve had on the show so far. I want to shift gears a little bit and five years down the line, right?

So I’ll look you up, Brent, five years down the line. What am I gonna see? Apartment brokerage, or are you just strictly gonna be investing?

Brent Sprenkle (22:32)
Probably say I’ll be the tail end of my career as an apartment broker. I mean, I’ve already been doing this for twenty-five years. What’s another five years? I mean, I could easily do that, right? I’m sure I will have bought another five or ten apartment buildings in the next five years for myself because stuff comes up and you can’t say no, right? Like a deal junkie.

It’s like, ooh, I like this deal. I’ll find a way to make this work. Maybe I’ll start doing syndications. I’ve thought about that. Lots of people have approached me about putting investor funds together and buying buildings with other people.

Issa Hanna (23:03)
I don’t know.

Brent Sprenkle (23:04)
I’m at a great point in my life now where I am open to new opportunities and I am passionate about multifamily. I don’t know how passionate I am about the city of Los Angeles anymore, though. It’s gotten very, very difficult and very risky.

But I’ve done a lot of business in San Diego and I love it. Orange County could be good. Inland Empire, we’re doing business out there right now, and that’s Riverside and San Bernardino and all the counties to the east of Los Angeles. High growth market, great job growth out there. So there’s opportunities everywhere that are no more than a one or two hour drive from where I live, which is right by the beach here in Los Angeles and Manhattan Beach. So there’s tremendous opportunities out there still.

And like I said, I think we’re going into a probably an unprecedented buying opportunity over the next year or two. And I just think it’s a great time to be positioned to go out and take advantage of it.

Issa Hanna (23:58)
One hundred percent. And I’ve interviewed a few people in actually the Inland Empire area and things are booming down there in San Bernardino, Riverside. So I can definitely relate and guys at home, you California guys, if you’re just sitting down and you only invest in LA or whatever, make sure to look like Brent said, two, three hours outside because you might find some really, really good deals that can build your legacy and build your wealth, generational wealth even more. Brent, I want to get your advice now for our new guys, right? So I have a lot of new guys that come on here, new investors, new realtors, loan officers, whatever it is. The one common denominator across all these fields is our business depends on growing your networks, establishing relationships. So for the new guys out there that are struggling to do that, what advice would you have for them on getting the ball rolling?

Brent Sprenkle (24:52)
Depends on what business you’re in specifically. If you’re in investing, you need to find people who are willing to go up with good to go in with you and give you some equity, 50 grand, 100 grand, whatever it is, just to get you started. You don’t need a ton of people. If you find a building for let’s just say 500,000, the down payment’s 150,000, you got to find three people with 50 grand. So you’re gonna have to build your network of qualified investors. That’s a tough thing to do.

But it’s not that hard. Everyone knows a couple of people out there that have money and want to invest. It’s like, would they rather go buy 50 grand of bonds or stocks or an apartment building in an upcoming market? A lot of people need diversification. These people would never buy apartment buildings on their own and go buy a REIT stock or something like that. So there are people out there, you just got to ask the right questions. And then you need to develop a great network of brokers to work with because they’re the ones that are going to find you the deals. And those are the people that you need.

If you are a broker and you’re trying to get started in the brokerage business, which is what I did back when I was 26 years old, you gotta just grind it out. There’s no simple solution. It is just hard work. You just are gonna need to become very dedicated to your craft, very regimented.

You’re gonna have to forget about leisurely waking up and having coffee and rolling into the office at 9:30. Like you need to be there at 7, 7:30, working on your database, working on your business plan, making calls, going out and meeting people. It is not easy. We have new business brokers come into our office and I let them know what my expectations are. And a lot of people just don’t want to do it. It’s just not easy, especially I think the not stereotype, but the newer generation isn’t used to working quite as hard as the older. I mean, I know that every generation says the new generation is lazy compared to us, but there’s not that many people now that are willing to just grind and grind and face rejection of a sales job. So that is the tenacity that is needed for this business. But if you’re willing to do it, there’s an unlimited potential to make a ton of money in any given market because there’s gonna be a lot of transactions in the next couple of years.

A lot of people have been wanting to sell and now they’re gonna have to capitulate. And a lot of people wanted to buy, and they’re gonna see that we’ve reached rock bottom prices, they’re gonna feel comfortable investing. So those two things are about to hit. Usually in any given market, you have a lot of sellers and no buyers, or a lot of buyers and no sellers. We’re about to hit equilibrium where you have a ton of people who want to transact on both ends, and that’s

Issa Hanna (27:28)
Yeah.

Brent Sprenkle (27:29)
where the money is. That’s coming soon.

Issa Hanna (27:32)
Yes. That’s the gold brick road as as they say, right?

Brent Sprenkle (27:35)
Call that the gold rush. I used to work at another brokerage company and the guy that owned the company, his name was Don Hendricks. He referred to that as the gold rush. He’s like, “There’s gonna be another gold rush. It could be three to five years. We have to wait, but it’s gonna be we’re all gonna retire rich.” That’s coming. And I don’t know when it’s gonna be, but I feel really good it’s gonna come up in the next couple of years.

Issa Hanna (27:57)
Percent. And you new guys take heed, you’re not gonna get any clients sitting at home making Facebooks, right? You gotta hit that ground running. You got to go out there and like Brent said, grind. I mean there’s no secret sauce like Brent said to this game and this is coming from two guys who were successful in the brokerage field in real estate. I mean you just gotta get out there, grind, be knowledgeable and hold yourself to the utmost integrity and make sure you’re doing the best for your clients, you’ll be successful. The ninety percent failure rate are people that either gave up because the grind was too hard or were commission chasers, check chasers. Those guys don’t do well in our business. So

Brent Sprenkle (28:37)
Yeah, very few of those people who had the tenacity to make it. It wasn’t even their skill, their street smarts. They just didn’t have the tenacity and the work ethic to hang in there. It’s not easy.

Issa Hanna (28:49)
Exactly. I know you’ve all seen that meme on Facebook where there’s two guys and they’re digging away and one guy decided to turn around and walk away and he was this close to touching the gold. The other guy kept going and he was sitting in the pot of gold. So literally that meme, that analogy, is what the real estate business is. That’s how you become successful. I love that Brent. You’re dropping so much knowledge on people. And now for my viewers at home who are like, ears perking up, like I want that guy to represent me out in SoCal. Where could they get a hold of you?

Brent Sprenkle (29:21)
They can call me, they can email me, phone number 310-621-8221. They can email me. It’s my last name followed by apartments at gmail, so Sprenkle, which is S-P-R-E-N-K-L-E, apartments with an S at the end at gmail.com ([email protected]).

Issa Hanna (29:45)
Guys at home watching this, if you guys are in SoCal and you guys do want to get into the multifamily, into the apartment building investing, make sure to get in contact with Brent because he’s one of the most knowledgeable guys in all of SoCal about this. Don Hendricks, who we mentioned before, never met him personally. I see his name everywhere in California. So this is a guy to deal with when you’re buying buildings.

Brent, I’d like to thank you so much for coming on the show. I’m all out of time today, but I enjoyed our conversation so much. I’d like to extend a personal invitation for you to come back on the show at a later date.

Brent Sprenkle (30:23)
Wonderful and I’d love to do that.

Issa Hanna (30:24)
I would love to have you and to my viewers at home. If you guys enjoyed my conversation with Brent, want to see more like it, make sure to hit like and subscribe. I talk to people every day that can bring us different knowledge on every facet of the real estate industry. Until next time, the real estate pros are out.

Brent Sprenkle (30:39)
Thank you.