All Forum Posts by: David Ribardo

Hello @Amish J Patel! I have been working the Lehigh Valley market full time since 2017. 

Regarding the class B property and closer to turnkey - over the years my experience has confirmed that this is a great place for most investors to start. When I launched my business, I was looking for "value add" opportunities. I started off by buying seven low end units that had amazing projections. As I started working on them, at one point I had five units vacant and was paying bills every month for renovations. These low end properties turned out to be filled with headaches and costly work. Of the clients I've worked with who bought one property and decided real estate investing was not for them, almost all of them followed this pattern.

My recommendation for new investors: Look for something that does not require extensive renovations, and does not have tenants locked in at below-market rents for an extended time. This will allow you to have it turning a profit for you quickly. It will give a consistent moderate return, and get you looking for the next purchase on a much shorter timeframe.

Alan brings up a good point on the diligence required for single-family conversions. We have had consistently good management experiences with our purpose built multifamily properties. The 1900s construction SFHs can be hit or miss, and it is important to find one that has a good structure and has been upgraded to a modern plumbing, electrical, and roofing system.

@Matthew Posteraro I wouldn't necessarily say that it is a way to make them more hands-off by scaling up to larger properties. I have owned several single family homes as rentals in my own name, my first LLC holds mostly 2-4 unit small multifamily properties, while my most recent LLC has all 5+ units. I've used a third party management company for all of them, and have not seen any appreciable difference as far as how passive they are. I have found that the "value add" opportunities, with rent increases, renovations, zoning conversions, and other work needed, absolutely do take up more of your time compared to a more turnkey property - even with third party management overseeing the process.

Our clients have used 1031 exchanges very effectively when they have a property that turns out to not be the right fit for them. We've sold off some of the smaller, lower end properties, and redeployed that capital into something that is a little higher end experience. I view it as a tool in a toolbox to help you "trim the fat" off the bottom of your portfolio, so you can keep growing with new acquisitions. 

@Matthew Posteraro That's a solid plan. It seems like you have some very solid goals of multiple income streams, and a well calibrated risk tolerance. 

As a new investor, I made the common mistake of being too aggressive, starting with seven distressed units all at once. Shortly after they all became vacant, I had to do the renovation work myself because of the lack of cash flow, and it took years to dig myself out of that hole. I wish that I had prioritized having a nicer property, as opposed to one that looked great on paper but needed a ton of work. Our team works throughout the Lehigh Valley, and in our investor neighborhoods the average home is 100+ years old. It is important to find something that was properly maintained, with modern plumbing, electrical and roofing. There are lots of lemons in the various center city areas. 

A 20% down payment will allow you to have a positive cash flow, even using conservative projections and a property management company. Since it sounds like you have strong W2 income and would probably be okay paying the mortgage sometimes, I'd even explore a 5-10% down payment option. This would likely kill any cash flow for a first duplex purchase, but allow you to purchase a second one much more quickly.

We have seen strong appreciation and rent growth through this market. Because of this, most of our clients refinance their properties somewhere between year 2-4, using the funds to buy another property. Lately we have been selling off the smaller properties in the portfolio, rolling those into bigger or nicer units with a 1031 exchange.

@Christopher Morris, it sounds like you have a pretty solid read on things here. I've got a portfolio throughout the Lehigh Valley and would be happy to answer any questions you have about the area. 

I personally look at job growth, appreciation, and overall return on investment projections. Big companies expanding in the area means employment and a strong tenant pool and high occupancy rates. Historical property data makes it easy to pull the numbers and see how investment property values are growing. I've enjoyed some pretty massive appreciation over the past years around here. For example, when I first started in 2018, I was buying duplexes for $75k each. Now they are going for $275k! Overall, though the cash flow in my market may be lower, the strong appreciation has made for a higher total ROI and I've continued to buy here.

Hello and welcome to the forums! If you have any questions about the market, strategies, or need to get connected with any resources, please let me know!

@Ryan Klein welcome to the community! @Justin Brown runs a great investment community and I'll second his advice. Go to his meetup, if you can!

The market is tight right now, with higher interest rates, limited inventory, and high purchase prices making acquisitions challenging. A few years ago we had plenty of these BRRRR deals on the MLS. Now, I have had most success with off-market opportunities.

As a new investor, focus on building your team. Be patient, and set reasonable expectations. If you try to swing for the fences with an aggressive BRRRR strategy, you may find it frustrating. If your goal is to get in the game, have a profitable investment, and build a team to set you up for future growth- the Allentown market will treat you well, even in its current state.

Hello, and welcome to the forums!! 

As an agent, I can't give you any advice... but I can put you in touch with the attorney our team works with to help our clients with this decision. Shoot me a message and I'll put you in touch.

I started off in the exact same way, with my first personal residence becoming a rental. I kept in my own name for ten years, and am now finally selling it. As my portfolio grew, having one in my own name never felt like a major liability or administrative headache.

My first Lehigh Valley property was a three unit, purchased with a partnership under our own names. We chose this since back then we were able to get some better financing terms. As our business grew, we started an LLC and transferred the property in. That triggered us having to pay transfer taxes, as the state treats an LLC as a disregarded entity, even if it contains the same members.

Most of our clients invest using an LLC as their preferred corporate structure. Some of our more active investors use S-Corps, and a few are buying in their own name or with trusts. A brief phone call with an attorney will help you decide on the right fit for your situation.

Hello! Welcome to the forums. Though inventory has gotten tight, the numbers still work here in the Lehigh Valley market. This past month has brought quite a few good deals to the table.

Five years is quite a bit of time to be learning, I'm sure that has set you up for success. What is the biggest barrier to closing on your first deal that you see? 

Hello Jiwon, welcome to the forums. I have quite a few successful clients that are in the NJ/NYC area and invest in the Allentown market. I'm also an out of state investor myself, with experience in Georgia, Louisiana, New Jersey, and North Carolina. 

Allentown is a high-demand market. It has had strong appreciation, excellent job growth and we maintain a large pool of tenants. It's also extremely competitive, with limited on-market opportunities. I chose this location to personally live and work in. I've also spent some time around the NEPA / Wilkes Barre & Scranton areas. Overall those have lower purchase prices that can look attractive. However, it costs the same amount for a hot water heater there as it does in the Lehigh Valley... so assuming maintenance costs are fixed, you will need significantly more units to achieve the same passive income goal. 

Please let me know if you have any more specific questions and I'd be happy to provide you with the data!

Hi @David Pagan, welcome to the forums!

Allentown is my home turf. The Lehigh Valley (Allentown, Bethlehem, and Easton) areas is incredibly investor friendly. The cities are easy to work with, though Eason can be a bit... detail oriented, when it comes to their inspections. There are opportunities in each of the main urban areas that range from low-end row home rentals to high end luxury flips. There are very few HOAs to contend with. The biggest problem you will have is the competition. The investor market here bottomed out after the 2008 crash, but led by downtown revitalization efforts and strong demand from NJ/NYC investors, purchase prices keep going up and inventory remains at all time low levels.

I've taken a look at expanding into other geographic areas. Harrisburg is too far for me to be interested in the drive out there, but too short to make it worth hopping in my plane for the flight. I spent a good deal of time around the Scranton area. Purchase prices are significantly lower, but so are rents. With comparatively much less growth, I'd need a portfolio that was more than double the size to hit my goals. I like a smaller, easier to manage portfolio for the same amount of profits. Reading is similar. The Poconos is another decent market, but it is largely reactive to the demand coming from NYC and North Jersey. The AirBNB market there has been saturated in recent years, and there are big differences from one HOA to another.

Hope this helps!