Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: David Klein

David Klein has started 1 posts and replied 10 times.

Post: First Successful Exit!!!

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

@Account Closed so I’ll put it this way, the effects of Covid are too early to tell. 1 in 4 Americans are out of work and  market  rents as well as  lending institutions are very likely to be effected if the extra stimulus slows or all 40 million dont go back to work in the next few weeks which is unlikely... at the very least it would have been much harder to sell the property post Covid as almost every agent I speak with tells me transactions have slowed dramatically 

Post: First Successful Exit!!!

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

@Account Closed so I’ll put it this way, the effects of Covid are too early to tell. 1 in 4 Americans are out of work and  market  rents as well as  lending institutions are very likely to be effected if the extra stimulus slows or all 40 million dont go back to work in the next few weeks which is unlikely... at the very least it would have been much harder to sell the property post Covid as almost every agent I speak with tells me transactions have slowed dramatically 

Post: First Successful Exit!!!

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

@David Smith I used a mortgage and had to put 30% down due to the condition of the building when it was purchased

Post: First Successful Exit!!!

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

@ Evan Polaski I definitely am!

I’ve got another multi unit in philly where I’m from and my search is pretty national in scope but now I know Cincinnati much better so I’d be a fool not to keep looking in that metro

Post: First Successful Exit!!!

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

This post is a little overdue as this pesky pandemic has made life somewhat hectic lately but I thought I'd like to share my first successful exit as an investor. In October of 2018, with the help of some investors, I purchased a 16 unit apartment building in the Westwood area of Cincinnati for 520k. The property was owned at the time by 5 partners who from what I understood had no legal operating agreement in place as to who had the legal right to make decisions on behalf of the LLC, causing some in fighting between the partners. The guy who lived locally and who was doing work on the property was a middle school teacher trying to get into real estate on the weekends and from what I heard was in over his head. The property consisted of 13 2-bedroom units and 3 3-bedroom units and was 75% occupied when we bought it. The current property management company was getting an average of 575 a door for the 2br and 775 a door for the 3br. The value creation strategy was pretty straightforward. It was a C class property consisting of half market rate tenants and half Section 8 tenants with the Section 8 rents at the time being significantly higher than what we could get from market rents. It seemed the current property management company didn't like dealing with Section 8 tenants, so they chose only to accept 1 and 2 bedroom vouchers so as to have physically less people in the units to deal with. That meant however that they were leaving significant rent on the table. There was quite a bit of deferred maintenance on the property and the parking lot had to be re-paved but nothing too intense had to be repaired or replaced.

After we purchased the property and put a new PM in, the first thing we did was make a call the local housing authority in charge of section 8 and seek rental increases for the few subsidized tenants we already had. Immediately we were approved for rental increases on 2br units from 575 to 775, and for 3br units the rents went from 775 to 975. This increased NOI about 10k from the get-go. Over the next few months, we leased up all vacant units and made tenants aware of the rental increases. Some stayed, most of them left and we were able to turn their units, many of which hadn't been upgraded in years. Once the spring rolled around, we repaved the parking lot and while it didn't add value in the sense of NOI, the property looked much more presentable to the next buyer as a result.

I told my investors from the start we were going to acquire the property, fix it up, and sell it rather quickly to maximize their return. We just happened to sell this property in the middle of February at a time when I believe there were something like 6 Covid cases in the US. I take absolutely no credit for the timing but will take the good luck when I can get it as I’m sure many of us have been on the bad side of market timing in our lives. We learn things on every deal we do, but one huge takeaway in this type of deal is when you try to sell a property that doesn’t have a clean operating statement (mostly because you’ve spent the last few months dumping money into it to fix it up) it is going to be much harder to find a lender who is willing to play ball so you’ll likely have to take a lower price. Make sure you take this into your underwriting when you are trying to project your total return, especially if you have investors in the deal with you. We only held the deal for about 16 months and nearly doubled our initial capital infusion… not bad for a first exit. On to finding the next, much larger deal and hopefully achieving even better outcomes this time. Happy hunting everyone!!

Acquisition Price: 520k                                Sale Price: 785k

Effective Income: 96,528                                 Effective Income: 140,400

NOI: 42,374 NOI: 71,471

Total Capital infusion: 180k                             Total Proceeds: 346,341

                                                                      Total Profit: 166, 341

Post: MF Investment Durations

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

@Ed Matthews I'm probably strange in that I try to keep my value add investments 1-3 years. I look for an opportunity and then complete acquisition, rehab, and resell it as quickly as possible for much of the same reasons mentioned above (higher IRR, quicker redeployment of capital). It really all boils down to what your strategy is and what exactly you are trying to accomplish. I want very high double digit returns and the ability to then go after larger deals, also nothing makes your investors happier than exceeded expectations or even met expectations with shorter timeframe. Just my two cents

Post: Relocated to Cincinnati to Ramp Up Investing

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

@Kyle Neff Even though I’m based out of Philadelphia I’m investing in Cincinnati and own some multi family there. It’s a great under the radar market in my opinion. Feel free to reach out

Post: 1031 exchanging and have to identify a property

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

@Maya Shirvani

I’m actually in the middle of selling a 16 unit I own and doing a 1031 into a much bigger property. The strategy I employed on the 16 unit is the same I intend to employ on the next property and it echoes what some of the other members have said, buy a value add deal in a B/C area and increase the value thru capital/ management improvements. The deal we are currently selling is cash flowing around 25% so there’s a ton of equity at this point... just going to do the same thing on the next one hopefully. Hope that helps

Dave

Post: Thoughts on No-Show Offers

David KleinPosted
  • Investor
  • Philadelphia, PA
  • Posts 11
  • Votes 9

@Laura P.

Totally makes sense, if you are buying a commercial multifamily (5+ units) then you are buying a financial asset. Therefore first and foremost the numbers have to make sense, and unless you have a background in handyman/contractor type work you’re going to have someone else do the physical inspection of the property and tell you what needs to be fixed. I think people get wayyyyy too fixed on this whole “go kick the tires” thing. Demographic information for the area can tell you much of what you need to know about the local economy. The inspector will tell you physically what must be done. What you need to do is run your numbers and see if this deal makes sense. Cause if it doesn’t what’s the point of seeing the property. And if you do get it under contract and don’t like it then you can back out during the initial due diligence period. Hope that helps

Dave

For me this answer really boils down to 1. What is your strategy and targeted returns and 2. How confident are you based on your skills knowledge and experience that you can hit those goals. If your loans are 5-6% and you intend to invest in stabilized SFRs with 8-10% that might be too risky a spread for you. On the other hand if you intend to do a deal with a targeted 20+% return than you've got plenty of margin for error. Hope that helps