For These Homeowners, More Is More

Francisco Estrada for The Wall Street Journal

Bob Sage has a dream—and a strategy for achieving it. He wants a $7 million to $10 million condo with unobstructed ocean views in Ward Village, a multiuse development under construction in Honolulu, Hawaii. To get there, he’s buying five units from the project’s developer.

Mr. Sage just closed on and moved into a $2 million, 1,334-square-foot, three-bedroom. He’s also in contract for four other units, which won’t be completed for another two years. Three of them are studio apartments, for which he paid roughly $500,000 apiece and which he will rent out. The fifth property is a $2.4 million, 1,600-square foot penthouse he will eventually move into.

“I have a lot of risk tolerance and faith,” said Mr. Sage, the 54-year-old owner of a commercial cleaning company.

This 20,000-square-foot-home was built by Craig Ramsey, a 72-year-old technology entrepreneur, on two lots he purchased and combined at Maravilla Los Cabos, a new development in Baja California, Mexico. He also purchased a penthouse condominium at the same development.

Francisco Estrada for The Wall Street Journal

Mr. Sage represents a little-known phenomenon in the real estate world–the bulk buyer. In luxury markets from Hawaii to Manhattan, these intrepid investors pool risk into one building or development, rather than spread it across diverse properties. Some bulk buyers are driven by business reasons and aim to either create rental income or build equity. Others simply want enough units so they can house their extended families, plus friends, if they want to come and visit.

The bulk buyers interviewed for this story said they do not rent out their property short term via sites like Airbnb or HomeAway. Instead, they lease properties long term if they are not using them, they said.

According to an analysis by PropertyShark, a real-estate data provider, 211 individuals in New York City own between three and 10 units in a single building; in Chicago, 342 owners do and in Los Angeles, 181 owners do. PropertyShark found that many bulk buyers register their properties in the name of a limited liability company. In New York City, twice as many LLCs as individuals own three to 10 units in a building.

Mr. Ramsey with his fiancée, Kelly Dove, on the patio of their Marvilla home.

Francisco Estrada for The Wall Street Journal

PropertyShark didn’t look at owners with more than 10 units in a building, nor did it analyze whether the same person who registered some properties in their own name also owned properties in the name of an LLC.

The bulk buying strategy requires absolute faith in the market potential of one area as well as in the property’s management team. Bulk buyers say they get to know their target properties so well, they know when to jump on for-sale units and sense when to sell.

Neil Johnson, managing director of Ohana Real Estate Investors, a developer of luxury resorts in California, Mexico and Park City, Utah, said most of the company’s portfolio has at least one family that owns three units. Mr. Johnson says he will sometimes offer a 15% to 20% discount off list pricing for the bulk buyer.

The Azzurra building in Marina del Rey, California.

Jennifer Roberts for The Wall Street Journal

“I like the idea of telling people, ‘we have people who have multiple buys in the building,’” Mr. Johnson said.

Those buyers, however, take on huge risks when they concentrate their investment dollars. Some wealth managers hate the idea.

Ross Gerber, president of Gerber Kawasaki Wealth Management in Santa Monica, Calif., says many of his clients are wealthy real-estate developers who invest large proportions of their portfolios in real estate. But even they wouldn’t risk buying multiple condos in one development—unless they owned the whole building, he said. Condos come with risks including maintenance and construction issues, close-quarters neighbors, and troublesome renters, Mr. Gerber said. If a fire, earthquake or economic downturn hits the development, the bulk buyer can be financially devastated, he said.

“I’m against owning five units in a building you don’t own. It’s not smart,” said Mr. Gerber.

But Steve Dudash, president of IHT, a Chicago wealth management firm, says he has used the strategy himself. Between 2009 and 2011, amid a sharp downturn in prices, Mr. Dudash bought several properties, including four condo units in one building. He rents them all out. He took on 15-year mortgages, so renters would pay off the mortgages and then he could assess whether to sell the units.

Vlada Makhlay sits outside the Azzurra building in Marina del Rey, California, where she has purchased four units, and her son has purchased one.

Jennifer Roberts for The Wall Street Journal

“It may sound dumb, but location is everything,” said Mr. Dudash. If the location and price of entry is right, bulk buying can represent a solid long-term plan, he said.

James Morgan, 41, an associate broker with Compass, and his husband Marlon Young, 62, a family business consultant, purchased five condominiums at 25 Central Park West in Manhattan. They bought one in 1996 and one a year later. In 2003, they paid $815,000 for a 944-square-foot unit, which they sold a year later. In 2004, they paid $1.15 for another condo; in 2012, they bought a 1,686-square-foot unit for $4.75 million.

Mr. Morgan says that they knew the building so well, they were able to tell when a good deal came on the market, knew how to renovate the units to appeal to high-end renters, and knew when to hold or sell. They currently rent out all the units–two of which they combined–and live in another unit they own at the Soori Highline in West Chelsea (for which Mr. Morgan is the director of sales).

Mr. Sage is also comfortable with concentrating his financial investment in one place.

“If I spread out the investment, I would have to do a lot more research.” However, having grown up in the area, Mr. Sage says he knows the neighborhood well. “I’ve had decades to think about it,” he said.

Mr. Sage and his wife, Gik, 44, plan to build up equity in their condo, sell it, move into the penthouse, and then continue buying bigger and nicer condos—building up equity in each, and then selling—until they can afford their dream home in Ward Village.

Vlada Makhlay, originally from Russia, also decided to keep her eggs in one basket. She learned about the Azzurra, a luxury high-rise building in the Marina del Rey neighborhood of Los Angeles, and met a real-estate agent, Ryan Sokolowski of Coastal Luxe Living/Compass, who helped her find a rental there in 2013.

“She loved the place, the view, the people, and was amazed by the building,” said her son, Timofey Makhlay, who helps her manage her real-estate investments.

Later that year, she bought a two-bedroom, three-bathroom unit in the Azzurra for $910,000. (She sold it in 2016.) Mr. Sokolowski also assisted her in purchasing two two-bedroom, three-bathroom units, one for $1.24 million and one for $995,000. She also bought a fourth unit, a three-bedroom, for $1.68 million, in which she lives.

In 2017, Mr. Makhlay came into some family money and decided to invest it in real estate. Guess where? Mr. Makhlay now owns a one-bedroom two-bathroom unit in the Azzurra, for which he paid $870,000 and which he rents out for $4,500 a month, he said.

Bob and Gik Sage in their condo in Ward Village, a 60-acre master plan developed by the Howard Hughes Corporation.

Olivier Koning for The Wall Street Journal

Craig Ramsey, of San Francisco, became a bulk buyer at Maravilla Los Cabos, an Ohana development that launched in 2014 in Baja California. Mr. Ramsey, a 72-year-old technology executive and entrepreneur, bought a 10,000-square-foot penthouse condo at Maravilla for $8 million. He also bought and combined two 1/2-acre lots—for $14 million—and built a $15 million home. The house has two “great rooms,” complete with living and dining areas and full kitchens, so that adults and children can each have their own wings of the house, Mr. Ramsey said. Soon to be married, Mr. Ramsey expects that his new wife, his daughter and son–and all the in-laws and grandchildren–will be frequent visitors.

Mr. Ramsey said he doesn’t worry about concentrating too much money in the development.

“At some point, my children and grandchildren may profit on it financially. But most important, we’ll profit together by enjoying it,” he said

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