Rental Property Investor 路 Phoenix/Lima, Arizona/OH 路 Member since 2012 路 4k+ posts 路 4k+ votes
I am excited to announce the addition of Ridgepoint Apartments to our Phoenix portfolio. This is a wonderful, mid-80'es construction 164-unit. Original interiors will be upgraded, and the asset will be re-positioned. Yardi currently rates this location and improvements both as B-. Personally, I think as it sits, this is a Class C. When we are done with the re-positioning in 24 months, this will be a Class B, with Class A finishing surfaces. We anticipate being able to improve revenue by + or - $300 per door...huge value-add.
Huge thanks to my partner, @Sam Grooms for all of the work he continues to do. Huge admiration and gratitude to our entire team, and all of the folks who believe in our vision!
Ridgepoint, true to form, was yet again closed in under 45 days. This is our 3rd acquisition in 10 months, totaling $40M by purchase price. We are incredibly bullish on Phoenix for years to come!
Meeting our regional at the asset this morning - the work begins!
Feel free to reach out with questions, guys. I will lay out more of the details on the blog in coming weeks, but we can dig in here as well.
@Ben Leybovich Great Job!! This looks like a awesome portfolio addition! A $300/door increase across 164 doors sounds like the deal of a century. Can鈥檛 wait to hear what you end up doing with it!
Corey, it sounds like all of our deals. In Phoenix there is no such thing as physical vacancy because there is so much population growth. For this reason, even the mismanaged assets are operating at market occupancy. This means that in order to achieve value-add we have to actually bump revenues by means other than filling vacant units - we have to do the heavy lifting. And since the market is operating at such low vacancy that cannot be sustainable indefinitely, we have to actually penalize our underwriting. Plus or minus $300 per door revenue bump is what it takes to buy in Phoenix. If we can't pencil that, we don't buy.
@Ben Leybovich congrats! I am bullish as well for the future of Phoenix. We have lots of indicators in our corner right now that we are going to continue to thrive as one of the top growing cities in the nation.
Real Estate Agent 路 North Myrtle Beach, SC 路 Member since 2018 路 110 posts 路 99 votes
7y
@Ben Leybovich this is awesome! You're an inspiration to all of us just starting out. What are some key indicators that you look for/see that make Phoenix so hot right now? (Sorry if it has been asked before!)
@Ben Leybovich this is awesome! You're an inspiration to all of us just starting out. What are some key indicators that you look for/see that make Phoenix so hot right now? (Sorry if it has been asked before!)
Population growth. Job growth. Income growth. The fact that we are next to CA helps. Rent growth is second highest in the nation, behind Vegas, but our GDP is much more diversified at this time. Construction costs being up helps as well.
Looking for similar deals but not to 164 units yet maybe 20 to 30 units
Congratulations Ben
Were can find potential equity partners
Banks that will lend are there exceptions like 15% down. Do you need 6 months reserve etc
Is it better to get a property with tenants already. Done enough smaller deals looking to scale up any advice would be appreciated.
Damian, equity partners is a function of your network. In other words, how many of the people in you telephone directory can you call and propose a partnership? How many of them would have the financial means to stroke a check for $50,000? This is where you start - your immediate circle of influence. If you can't get people there, you will have a very difficult time.
In regards to the down-payment, you will need about 25%. As to reserves, you better have a lot more than just 6 months, which would include interest reserves, working capital, and CapEx.
Finally, if there are no tenants in the property, there is no income. If there's no income, you'll have an impossible task attracting equity and debt. Makes sense?
Developer 路 Marlton, NJ 路 Member since 2019 路 44 posts 路 8 votes
7y
Thank you for your insight
I have a potential to get some equity partners just need to shape the right deal. I have an associate that has done well with the hotel sector and maybe able to access him and others.
Has of a potential deal i agree i would be better getting a property for a repurpose/renovate as opposed to empty.
Do you suggest an auction or listed property. Any places one should look will be sure to hear podcast
I have a potential to get some equity partners just need to shape the right deal. I have an associate that has done well with the hotel sector and maybe able to access him and others.
Has of a potential deal i agree i would be better getting a property for a repurpose/renovate as opposed to empty.
Do you suggest an auction or listed property. Any places one should look will be sure to hear podcast
Damian, you get the property in whatever way works for you. It's a challenging market, so whatever work...
Rental Property Investor 路 Las Vegas, NV 路 Member since 2019 路 5 posts 路 2 votes
7y
@Ben Leybovich Congratulations on the close; I actually have a house close by ASU West and I've driven by Ridgepoint several times.
Currently I'm physically in Las Vegas with a full time job in the aerospace industry that I enjoy, but consider Phoenix "home" and have been researching both markets. There is only 1 aerospace company in Las Vegas and should I leave this company, Phoenix is most likely where I'd end up due to Northrop Grumman and several others being in town.
I'd ideally like to do multifamily and house hack in either market, but so far most of those locations are in war-zones but it seems that some of these war-zones are slowly gentrifying.
Do you have any advice on warzone investing and making sure I don't "overimprove" a house in a warzone area?
@Ben Leybovich Congratulations on the close; I actually have a house close by ASU West and I've driven by Ridgepoint several times.
Currently I'm physically in Las Vegas with a full time job in the aerospace industry that I enjoy, but consider Phoenix "home" and have been researching both markets. There is only 1 aerospace company in Las Vegas and should I leave this company, Phoenix is most likely where I'd end up due to Northrop Grumman and several others being in town.
I'd ideally like to do multifamily and house hack in either market, but so far most of those locations are in war-zones but it seems that some of these war-zones are slowly gentrifying.
Do you have any advice on warzone investing and making sure I don't "overimprove" a house in a warzone area?
Thanks !
I do not invest in war zones. I invest in transitional areas that are on the upswing. That's the first point.
Secondly, you are right to point out the aerospace industry. This is something people miss about Phoenix - very well diversified GDP, a lot of which is high tech.
Finally, funny you should mention house hacking. I house hack a very nice home in Chandler, about 10 minutes from Intel. I have a nice house with a Casita. I've written a book about this, which you can find on Amazon. I've also published articles about it here. These houses are plentiful in Phoenix, not so in Vegas.
Real Estate Agent 路 Scottsdale, AZ 路 Member since 2018 路 412 posts 路 366 votes
7y
To support @Ben Leybovich's assessment of the Phoenix market, this article came out today hailing Phoenix as one of the top markets for real estate investors:
Good stuff...thx for sharing. What ballpark cash-on-cash, IRR and hold period are you currently estimating?
Frank, our preferred exit is 3-5 years, however, we always underwrite a 10-year hold period as well. On a 5-year hold the target multiple to partners is 2x with an IRR of 18%. On a 10-year the target multiple to partners is about 2.7x, with an IRR of about 14.5%. The COC targets are about 19.3% on a 5-year and 16.6% on a 10-year.
These are typical targets for us, plus or minus. I feel that this is where we need to be to attract partner equity.
Specialist 路 Fairfield, CT 路 Member since 2019 路 36 posts 路 51 votes
7y
Congrats on the fantastic acquisition and thanks for posting about it. I'm a big believer in dog/pet amenities, so it's good to see you adding the dog park. When I started in the business no landlords would take dogs, now everyone has a dog and they treat dogs better than other people. Keeping up with this trend makes your property a lot more attractive over the next 5 years.
Congrats on the fantastic acquisition and thanks for posting about it. I'm a big believer in dog/pet amenities, so it's good to see you adding the dog park. When I started in the business no landlords would take dogs, now everyone has a dog and they treat dogs better than other people. Keeping up with this trend makes your property a lot more attractive over the next 5 years.