All Forum Posts by: Johnny Kang

@Karen P.

Karen, just out of curiosity, what type of construction was the building you bought? The 5 unit I'm looking at is frame, and like you mentioned will need a large infusion of capital, since all the siding has to be re-done, along with all the interior work that it needs. I'm not afraid of it too much because I've done renovation work on a frame house where we had to replace siding for 1/2 the house and 1 of the walls had to be demolished and replaced. Granted, this 5 unit will be a much larger project, but the size & cost of the project is what's making my other partners a little apprehensive about this property. 

Purchase price $250,000 and based on my initial estimate, renovation cost will be an additional $250,000; $500,000 total. Like I mentioned earlier in this post, even at $500,000 all in, my DSCR is at 2.1, cashflowing $346/door after the renovation. (I've done extensive market research, re-ran my #s multiple times, and just spoke to a friend who lives 30 minutes from the area and she confirmed it's a good area with a strong rental market.) Even if I were to be a little more conservative and let's say DSCR is at 1.75 cashflowing $300/door, do you think spending the same amount of money to rehab as the purchase price is too much? (this is if we decide to buy the building vacant so the rehab won't take as long, versus renovating unit by unit). And if you think putting in $250,000 upfront to rehab is too costly, would you say renovating unit by unit using the cashflow from the property would be a better way to go, financially?

Johnny

@Gino Barbaro

Thank you Gino; will keep that in mind. ~Johnny

@Karen P.

Thank you for sharing your experience. I'll be going to PA next week to look at the subject property, along with some others that have potential. :)

@Wade Sikkink

2-3 years; that's longer than I would've expected for a 14 unit building... you got me thinking... I'm guessing it took 2 years to get to where you're at with the building because you were renovating as the units became vacant, correct? One thought my partner had was to have the seller deliver it vacant so we can renovate quickly, especially now that spring is right around the corner. I'm not too concerned about being able to rent the units out quickly once it's renovated. Property sits between 2 sizable cities in PA with plenty of jobs, and I'm seeing 2 bedrooms being listed for $1500~$1600/mth fully renovated. I know you have to shave off $100~$150/mth off the listed rents to get closer to actual rents. And these units are all 3 bedrooms. Based on the #s I ran, even if I only got $1200/unit for these 3 bedroom units, my DSCR is at 2.1, cashflowing $346/door. I'll have to decide whether to renovate as units become vacant, or buy the property vacant...

Thank you for sharing your experience. 

@Wade Sikkink

Yes, I spoke to 2 attorneys in the area today, and will decide how to proceed with their help. 

By the way, what's managing a 14 unit like? What would you say were the top 3~4 challenges you had to deal with in stabilizing that property? Or, if leasing up wasn't that difficult, what were some other challenges you dealt with or are dealing with currently that I should be aware of?

@Les Jean-Pierre

No, it's in PA. (sorry forgot to mention that). 

I looked up the owner using county records, and he owns 3 other properties in the area. They were all bought at the height of the market from 2006 thru 2008 and all are in need of full renovation. Apparently he has everything listed for sale. So just by looking at when he bought them, the price he bought it for and what it's listed for now and the condition every property is in tells me a lot about how he operated. 

@Anthony Chara

Yes, I was just doing that before I read your reply. I spoke to @Chris L.earlier today as you suggested. Talked about the best way to exit after hard money term ends. 

Thank you again for taking the time to give feed back and advice. :)

@Anthony Chara

Yes, I'll have to reach out to @Chris L. to see if he can do better than the hard money lender I know. 

94 units! I have to get to that level as soon as I can. I've done flips, but this will be my first buy & hold and want to learn all aspects of rental property investing before scaling. 

Any word of advice on repositioning the property after closing on it, raising rents on existing tenants? (renovation will start from the out side, then unit by unit as they move).

@Account Closed

There are some REIA groups I'm part of on Meetup.com. Have not gone to their meetings yet, since I'm flipping in NY, and the rental property we're looking to buy is in PA. I'll go when I'm out there looking at properties in the next 2 weeks. Thanks for the input!

If I'm buying a muti-family (5-10 units), what are the step by step process in repositioning a property so the rents are up to market rates? There's a property I've been looking at which needs a lot of work. Can I, as the new owner, raise rents on tenants with no leases immediately and ask them to leave (or evict) if they're not willing to pay the increased rate?