Feature
by Matthew Sheridan & Emily Landes
Real-estate agents Bonnie Spindler and Allison Chapleau have a combined 20 years’ experience in the residential and commercial real-estate markets. Spindler works for Zephyr Real Estate and is one of the top residential realtors in San Francisco. Chapleau is one of the only women making large commercial deals at Marcus & Millichap. Both of them recently sat down with SFAM Editor Matthew Sheridan and Managing Editor Emily Landes for a wide-ranging discussion about rising rents, the inherent risks of being a realtor and the effect of discount brokerages on the industry.
Q: How did you get started in real estate?
Allison Chapleau: I started about five years ago as an assistant at Marcus & Millichap, doing research, rentals and sales for another agent there. I went out on my own about four years ago. I always knew I wanted to do real estate, but I sold a few homes and knew I wasn’t much of a “hand-holding” person. My degree is in finance and I wanted to sell commercial property that was investment driven. I wanted to sell and invest in commercial property. It’s great—you can own a property, your tenants will pay it off and in 30 years you own it outright. Either way, you just can’t lose, unless you have really long-term rent-controlled tenants.
Bonnie Spindler: When I was 23, I came into my boss’s office—I was a young advertising account exec at the time—and he looked very concerned. He said, “Oh, I’m really worried about my sister. She’s 30 and she doesn’t have anything. She’s a flight attendant, and she has jewelry and clothes, but she’s not married”—which was, of course, a sin at that time—“and she doesn’t have any stocks, a house or anything.” And I said, “Really? Huh.” And I went out that weekend and bought a house! I didn’t have any money, so I basically put the down payment on my credit card. At the time, interest rates were 18% and I still made money on it. I put an in-law in the basement, which paid the mortgage, and then the house was worth more because I fixed it up. I took $30,000 out in the first year and bought two more, and then I fixed those up, took the money out of those and bought four more. Then I was rolling.
My job moved me over and over again to different cities, so I decided to leave advertising and went back to school. After I came out of school, I had a hard time finding another job. It was also the bottom of the real-estate market and everyone was like, “Oh, you seem to be good at this ‘flipping’ thing. Why don’t you become a realtor?” And I was like, “Oh god, I couldn’t become a realtor,” because I had fired six agents in the process of trying to buy a house. But eventually I decided there has to be one good one, so I got my real-estate license. That was 15 years ago and the rest is history.
Q: Do you still flip houses?
BS: One a year. And I’m also a landlord.
Q: In your experience, do most real-estate agents also own property?
BS: No, most real-estate agents don’t even own their own homes, which is really frightening. It’s just hypocrisy, I think.
AC: Yeah, you can’t sell and not own. I became twice as good as a result of owning property. I had zero dollars to my name when I closed my first deal. I had a client who said, “If you get me this deal, I’ll sell you that deal.” It ended up that he didn’t buy his deal, but he still sold me my deal and he gave me all the money necessary to make it work. I was able to keep it for a year, and then flipped it and moved on to the next deal. Going through the whole process has given me a lot of compassion for the people going through it, and the decisions that get wrapped up in it. It made me sit back and say, “I understand.” So it’s a shame when people are in real estate, but they don’t own, especially when they are really pushy on the market, yet they’re not pushy enough to get into it themselves. When looking for a new agent, ask them about their real-estate holdings and experience. It’s one thing if they’re young and just starting out, but I think anything you want, you can have and if anyone wants a house, you can make it happen, if you make the right choices and sacrifices. But I was very blessed that my first opportunity did very well and I was able to carry on.
BS: You took big risks in the beginning and the big thing that keeps people from doing that is fear. You didn’t know what you were doing and you did it anyway. A lot of people wouldn’t do that.
AC: I credit a lot of that with being so young. I had just turned 22, moved up here from Southern California and didn’t know anyone. So, to me, there was really nothing to lose. I’ve always had the mindset that, well, if I lose, okay. I’ve always had that go-for-it mentality.
Q: Do you have to be a risk taker to be a realtor?
BS: Absolutely. First of all, you have to be willing to put yourself out there. It’s also a really difficult job to do well. You are starting your own business and most people try to do it all on their own. So they are doing advertising, marketing, sales, accounting and bookkeeping, all while managing their lives as well. You have to understand contract law, negotiations, psychology, architecture and construction. All of these things make a difference in your business. Very few people will take a job where you aren’t going to get a pay check in the first six months, and you’re going to work 80-hour weeks and invest a lot of money into it with no guarantee of ever being paid back. That’s pretty much a blind leap of faith. A lot of people live paycheck to paycheck and can’t afford to take that risk.
AC: One thing I hear a lot is, “Oh, you’re a real-estate agent. You must make a ton of money.” Well, I may make some great commissions, but I put in a lot of time where I don’t make any money. I’ll go six to nine months before I have a deal close. I had an escrow that went 17 months.
BS: I had one that took five years!
AC: Yeah, they are long deals. And then I hear people say, “No one should make that amount for what you do.” Not all real-estate agents make a ton of money. We really work for what we do and we pay for advertising, business expenses, the car—all these expenses add up. On the other hand, I could go pretty much anywhere I want now and make a six-figure salary just working at a desk, but I wouldn’t be happy. I think the real key to being successful in real estate is having a passion for it. If you don’t own real estate, it’s hard for me to believe you have a passion for real estate. The two need to go together
BS: I read a magazine article after the dot-com bust where a woman was saying she had tried for months to get a job, so now she was going to try real estate. “I hit bottom, I might as well try real estate.” That’s who I want for my agent—the woman who can’t think of anything better to do!
AC: There are also so many ethical things that come up. You don’t want to hire someone who’s just barely hanging on. If you have a real-estate agent who needs the money, I think the chance of the realtor doing anything to make that deal is scary. Nothing can go wrong with full disclosure. I sleep really well every night. I don’t have any concerns about what I’ve said or done. And I’m willing to admit when I’m wrong.
Q: What are some examples of morally ambiguous things you’ve seen other realtors do?
BS: Stuff happens all the time where you just can’t believe it. I’ll send a buyer over to check out a place and the seller’s agent tells the buyer that they don’t have to work with me so that the other agent can get the deal. Sleazy things happen every day and it just blows me away.
Q: Have discount or online brokers had any effect?
BS: It’s pushing the residential market down. For a long time, 6% commission really was the standard and the new average is probably closer to 5.25%. But those brokers really don’t know what they are doing; they’re really not trained very well. It’s difficult being in a transaction with one of these people because they are incompetent. You have to do all their work for them, too, because they are so misrepresenting the deal that you get scared for yourself as well. That being said, the best thing that can happen is you just play everything straight up and then when one of your buyers goes to another agent they say, “You’re in good hands. She’s honest. Everything’s going to be okay.” I recently had a buyer who went to three or four different agents and was told that about me. That’s just so great to hear.
Especially as the market gets tighter, and there are too many agents right now, people will get hungrier and hungrier. You know, 10% of the agents close 90% of the deals. Somebody’s hungry and it ain’t me! So, as things get tighter you’ll see a lot of unscrupulous behavior, but I think you just have to go with what you know is right and you’re protected.
Q: How do you see the market changing in the next year?
AC: I’d say the investment market is different from residential, because the investment market has the rents and they are going up huge. I think we’re anticipating up to 30% rental growth in the next year. We’ll see stability in our pricing, but I don’t think the day is coming where people will pay 14 times gross for a building in the Marina or 14 times gross for a building in the Western Addition. It will be neighborhood by neighborhood and income by income.
What’s going to be great for me on the investment side is that tenancy-in-common (TIC) deals have slowed down because the homebuyers are really affected by interest rates. So, these 5-6-unit buildings that were being looked at as TIC deals are now back to being apartment deals. Apartment deals don’t sell at 20 times the income; it doesn’t make any sense. So, I think we’ll start to see a more investment-driven market start to make sense. And rents will keep things very stable for us. We’re back at the dot-com level for rents and we’re on the way up. So, that’s very exciting. Investors are happy that there are lines out the door again. It’s good news for a lot of people. Rent-controlled units are going to hold their place, but eventually people turn and apartment building owners are happy.
BS: It was harder to sell a building when rents had been going down for five years and you’re replacing tenants for less money.
AC: The only thing that kept it going was interest rates. That’s why we saw appreciation. Apartment buildings were never appreciating assets; they were always based off the income.
BS: Interest rates propped up everything. That’s what fueled the last five years. As I look at the numbers across the residential market, the sales volume this summer was the same as last summer, but what’s different is that the inventory is up. I think part of that is because the media and everybody are saying, “It’s crashing! It’s crashing! It’s crashing!” So everybody who was remotely interested in selling their property put it on the market because if they’re selling it now they’re going to get as much as they will for quite awhile because the market is supposed to go down. So, you have this huge influx of inventory and people are just trying to bail. There’s a TIC buyer who has three or four of his projects on the market right now. He had bought them, cleared them and was going to renovate them. He saw the top of the market and he’s throwing all of these empty, haggard buildings on the market and trying to bail on them.
The buildings that are really nice and well done are still getting multiple offers and going over. The buildings that probably would’ve sold when the inventory matched the number of buyers are sitting longer. People are saying it’s a buyer’s market. I think we’re in transition. I started in 1992 and it slid all the way to 1996. I bought all the way through the slide and I still made money on it. It’s all about planning your fall. Do you roll or do you splat?
Q: In this transitioning market, do you still think TICs are a good investment?
AC: A TIC can still be a good deal, as long as it’s the right deal.
BS: For first-time homebuyers, it’s still the easiest, least-expensive way to get someone who doesn’t have a lot of income into the San Francisco real-estate market.
AC: Especially with the individualized loans they have now. It’s almost like a condo.
Q: Have you seen an impact on the rental market because of TICs?
AC: I think there’s a minimal impact.
BS: There just aren’t that many conversions. The last number I heard was 3,000 units waiting to be converted. That’s not a lot of inventory. We should be building 5,000 new units a year and we’re building about 1,000. So, really, the problem is not TIC conversions. The problem is that we’re not building enough new inventory. We need more building, but right now the entitlements and insurance costs in the city make it too onerous.
Q: Allison, you work largely with commercial properties. Why do you think there are so few women on the commercial side?
AC: When I went to interview at Marcus & Millichap, they asked me how I felt about being a woman in commercial real estate and I said, “Well, I really wanted to surf when I was younger and I didn’t really think about being a girl who wanted to surf. So, I didn’t think about being a girl when I wanted to do commercial real estate. I just thought: this is what I want to do.”
Working with clients, I have no problem. It’s working with other agents. I started a nonprofit called the San Francisco Real-Estate Exchange—which now has 1,500 commercial real-estate professionals in the city and we started with 60—and my real goal was to meet other women and network. You see a lot of women on the commercial side in banking, but not in sales. I have a new female assistant and one other colleague who is a woman; it’s fantastic. The more women who get involved, the more there will be. And there’s no reason that this business couldn’t be 50-50, women and men.
Q: So, why hasn’t that happened yet?
AC: It just takes time. It’s happening. I interview women all the time; I’m the official woman at Marcus & Millichap. I’m the only woman in an office of 85 people. To me, that’s no problem, but it’s really hard working with guy brokers sometimes. A guy will come up to you and say, “Dude! You look fat!” And I’m like, “Okay, I’m going to go cry now.” They just pick on each other so horribly. So, at first I was like, “Just don’t talk to me.” But then I realized that when boys harass each other it’s a sign that they like each other. With girls, it’s like, “Oh I love your outfit.” It’s totally different talk. But for me, I’ve never seen much of a difference between being a man and a woman at the end of the day. I don’t do what I do because I’m a girl.
Q: Bonnie, do you have any insights about why more women have been drawn to residential real estate?
BS: Historically, if you go back to the 1950s and 1960s, women were “allowed” to sell real estate. In residential—especially in the Midwest where it’s not quite as grueling as an urban environment—women could sell part time. They could have kids, a flexible schedule and all the things that we like about being a real-estate agent. And now it’s more women than men in residential real estate. In the big urban environments, it’s impossible to be a part-time agent and make money at it. You have to be an 80-hour-a-week agent to make money. But there are many places in the United States where you can still be a part-time agent and be a mom and be on the PTA and bring in a little extra income. I think a lot of those agents got started because someone told them, “Oh, you’re so good at decorating. Why don’t you sell our house for us?” So they went out and got their license and got started.
Also, there’s no glass ceiling. If you work hard, you can make a lot of money and there’s nobody telling you that you can’t have a raise or compete. You are in control of your own success.
Q: What are some of the challenges of being a real-estate agent in the Bay Area?
BS: I think its way easier being an agent here.
AC: Yeah, I don’t think there’s any downside: more transaction volume, higher prices and interesting properties.
BS: It’s a tiny area so you don’t have to commute that far.
AC: I thought about transferring to Southern California when I first started. But I don’t want to sit on the 405 and I don’t want to sell a box. I want to sell 8-units in the Marina. You are selling beautiful things with a lot of history.
BS: It’s the difference between working for a computer magazine and a fashion magazine.
Q: What’s the secret to being a successful agent?
BS: You have to motivate yourself to get out of bed in the morning and show up and actually do everything you need to do. There are probably a lot of people who have the innate ability, but you have to be an entrepreneur and motivate yourself to complete your to-do list.
Q: What’s the most interesting transaction you’ve had recently?
BS: I sold Synergy School a mortuary to put their school in. It used to be in a Victorian in Alamo Square and we looked all over the city for a new location. The new building is beautiful and David Gast was the architect on it. He did a great job. But it was the weirdest fit.
AC: The hardest deal I did was this land deal in Weed, California, near Mount Shasta. I got the listing from a referral. The appraisal said it was worth $1 million. I said, “No way, it’s worth $2 million.” We ended up selling it for $2 million. It took a year and a half to close and they’re putting 108 condos on it.
Q: What advice would you give those worried about a bursting housing bubble?
BS: First of all, there is no bubble. Second, if you love your home, stay in your home. I wouldn’t let what’s going on in the real-estate market change what house you’re living in. It’s primarily the place you reside and secondarily an investment.
AC: I don’t think we’re going to necessarily go down, but we could remain even because rents are going to go up in proportion to interest rates and cap rates will not compress. Will the commercial end pop? No way. For housing, people are in for a serious wake-up call. If people haven’t taken an opportunity to fix their mortgage, fix it now. We’re still low.
BS: I keep telling people that 9% is normal and we’re at 6.5% now. But, it’s hard to make people think from a long-term perspective.
The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of SFAA or San Francisco Apartment Magazine. Matthew Sheridan is the editor of San Francisco Apartment Magazine and Rental Housing and Emily Landes is the managing editor. Copyright © 2006 by the San Francisco Apartment Magazine. All rights reserved.