Ep 16: REI MBA - How to Effectively Scale with Rentals in the Allentown, PA Market
On this episode, Syed Hasan joins us for an interview where he provides some detailed insight and knowledge as an active investor within the Allentown, PA market. You will want to hear Syed's story on how he and his partner are building an impressive rental portfolio in today's market and how they go about finding and evaluating deals.
Syed Hasan is a partner at Ideal Management Group, a RE investment firm located in Allentown PA. Ideal Management Group focuses on opportunistic multifamily and single family purchases in center city Allentown, Pennsylvania. Syed has been investing in the Lehigh Valley market for the past 3 years. He has an entrepreneurial background with experience in commercial real estate and various other businesses. He has a Masters in Real Estate Development from NYU and has been investing in Real Estate for 10 years.
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Interview Transcripts
Jeremy Moyer: Hello, welcome back to Real Estate Investor MBA for another great interview that be have lined up for you today. My name is Jeremy Moyer, and I'm one of your hosts. I am flying solo today as my co-host Tejas Gosai is not able to be here. Please check our website out at RealEstateInvestorMBA.com where we have all interviews in video, audio and written transcription formats. We are also available on several podcast platform such as iTunes, Stitcher, Spotify, Google Podcast and TuneIN. Please subscribe and download all the past episodes to listen to them. A lot of great content has been shared by prior guest. If you think we're providing value, please give us a 5-star review, leave us some feedback. In doing so more people will be able to find us and listen to the insight from our interviewed guests. Now for the show today. I'm excited to announce our guest Syed Hasan. Syed is a partner at ideal Management Group, a Real Estate Investment firm located in Allentown, Pennsylvania. Ideal has focused on opportunistic multifamily and single-family purchases in center city Allentown. Syed has been investing in the Lehigh Valley Market for the past three years. He has an entrepreneurial background with experience in commercial real estate and various other businesses. He has a master's degree in Real Estate Development for NYU and has been investing in the real estate for last 10 years. Syed, thank you for your time this afternoon.
Syed Hasan: No problem Jeremy. Thank you for having me.
Jeremy Moyer: Absolutely. Can you tell our listeners a little bit more about yourself and also like with your background in entrepreneurial background in real estate? You know, how did you end up choosing Center City downtown is one of your markets to invest in?
Syed Hasan: Those are actually....those are probably two questions. I could take about 25 minutes to answer... But my entrepreneurial background...my father was always in different businesses....from anything from a travel agency in the 90s to a tattoo parlor on Saint Mark's that he still owns today. I'm kind of like Tejas's background. You know, we were brought up in business. So I, back in 2011 when I graduated college, I tried a lot of different businesses. I owned a Verizon store, but my main business has been contract manufacturing. So we do a lot of manufacturing in China and other countries for companies and kind of make their product for them. And we're like, we're kind of like their initial distributor. So what most people don't realize when products coming to this country, they usually come in through a distributor or a or importer, and the Importer sells to a larger distribution network or a retailer. So I'm basically that guy. And then Center City Allentown... It's actually a funny story because I....while I was working in commercial real estate... You know, my long-term goal is always to be an owner, as most Brokers have that you know that dream. And you know, I tried to do it while I was working full-time at a very time intensive brokerage to say the least in Manhattan, and I just couldn't find anything. I was going to Newark. I was going to Patterson. I was going to every Market that was relatively close to me. You know, I couldn't afford downtown Manhattan. But you know, so I was looking everywhere else. And funny enough, you know, a friend of mine actually sent me a portfolio in Allentown and I was just like what the hell is Allentown? Like, I don't even know what it is. And you know, we took a drive out there. We took a look at the portfolio. Liked the area. You know, people are telling me Allentown's real rough. It's a war zone. It's this and that and you know, I was doing business in Newark and Patterson and I was like guys you don't know what rough is if you're telling me that Allentown Center City is rough. You know, we have very different perspectives of rough. You know, I grew up in Jamaica Queens like we have very different ideas of what rough is. So, you know, I came in here. We bought our first portfolio back in early 2018 and you know kind of hit the ground running from there. You know, people always talk about like that snowball effect and I wouldn't think I would be where I am today three years ago, but it's true. That first deal takes forever. It is a pain. Getting it financed was one of the worst experiences of my life. But you know after that it gets....thankfully it gets a lot easier.
Jeremy Moyer: I absolutely agree. It took, from my experience, the first property always it took the longest, and then it just seemed like you just said then it's like oh this is easy.
Syed Hasan: Exactly.
Jeremy Moyer: I guess in the three years that you've been buying here, what are you, what are you up to, your portfolio in the Allentown area?
Syed Hasan: So as of today, I have 41 units, but we just set the last legs of getting an appraisal. Appraisals right now are becoming a huge sticking point right now. They're just not coming in. People aren't even giving beds. So it's been a major issue. But, you know, we're under contract for another 19 units. We have a 9-unit that should have closed a week and a half ago, but we're still waiting on the appraisal. So soon enough we will be, before the end of the year, will be at about 60 to 65 units.
Jeremy Moyer: Okay, all in Allentown proper, not Bethlehem or Easton?
Syed Hasan: All Center City Allentown.
Jeremy Moyer: That's amazing. That's great. Congratulations.
Syed Hasan: Thank you.
Jeremy Moyer: When starting out, other than the...you mentioned the financing was a pain, but what were some of the other big challenges that you had to, I guess work through? Just trying to think of different things that you can tell new investors as they're you know, trying to find that first property
or that second or third. What were some of the challenges that you had to work through?
Syed Hasan: Well, so even before Allentown, my main issue was finding a market that I really believed in. You know, like I just didn't know where. You know, if you kind of look...if you're a New Yorker, you know, you're looking and I truly believe this always look somewhere you can drive to. So if you're looking within a like a three-hour radius, I mean there's a lot of options, you know, there's Philly (PA), there's Camden (NJ), there's parts of Connecticut. You know Long Island (NY). You kind of look at each area and you're wondering why do these places exist? Right? Like what do they have to offer? You know, what's the pros and cons of each market? And you know, Connecticut is good in some parts. Philly is great. I love Philly. I think that actually would be my next market. But Allentown, you know just strategically made sense. You know, it's right there. If you look at where your packages are coming from and flying into, they're flying into Easton. You know, so that's kind of why you know, I picked Allentown. And you know, everyone has their own math. You know, everyone kind of looks at what drives an area. What I tell people is you can find a great return technically anywhere right, and you can find some tiny 5,000 square foot...sorry 5,000 people towns anywhere in this country and invest....and get a great return technically. I don't believe in those markets personally because I don't know if they'll be there in 10 years. You know, I'm looking at this as a 20-year hold, as a 30 year hold. So you have to believe that this town will exist. And arguably when I was researching Allentown, it's already been through some of the worst that it could go through and or just Lehigh Valley in general, right? Like Bethlehem Steel goes out; like a lot of bad things have already happened and they're back. And I truly believe it's because... the same reason why people say New York might be dead right now. When you have a mass concentration of people, even if a couple people leave, the town is still going to be there. You know, I'm not saying rents are going to keep going up but people are still going to live there and people are still going to be there because normally people don't like to move out of the area that they were, you know, grew up in or whatever the case may be. So that's why you know, the hardest thing for beginning investors I think is picking an area, you know, and then kind of narrowing down. Okay, where do I want to buy within this area? And then kind of dealing with that "analysis paralysis" right that everyone talks about. Because you know, you analyze a lot of deals and there's nothing really wrong with that. I mean listen, I analyze deals...10 a day probably. And you don't win much and you put out bids and that's just the name of the game. But you know, the good thing is once you start doing it more often, you kind of know what you're looking for and everyone's different, you know. People are buying buildings for prices that I think are crazy. But you know, it's always everyone's money cost is different. Everyone's kind of "Outlook" is a little bit different and you know, that's okay.
Jeremy Moyer: That's a great perspective. I agree with you the...and you kind of touched a little bit on like some mindset right there in that answer, which a lot of our other investors, they highlight that as a...something that they needed to get right first before really see their businesses take off. So from a....let's talk about maybe like a deal that went bad or didn't go in a direction that you thought it was going to go after you bought it. Like what were some learning lessons that you have internalized, that you experienced, that you're like, 'I'm never going to do that again'? 'This is you know, this is what I'm putting into place to fix that so that doesn't happen.'
Syed Hasan: Yeah. So one of the things is been...I mean so many things have gone wrong. But all in relatively non-costly ways I'd say. And you....listen every Market is different. But I also invest in Long Island. I invest a little bit in north New Jersey. Every Market is different. You have to learn every Market. You know for someone learning a new area, I would say you're going to go through a lot of growing pains with your employees that I did. You know, my handyman were a problem. You know finding, you know, third-party vendors were hard. It takes time, you know. I had one for example during COVID probably right before COVID started. I had a one-bedroom open up it was...it needed carpet, some flooring, some paint. I think it needed cabinets and that's it. Okay. This should have taken him a week and a half. That, part of it was COVID, but it still took them like four months.
Jeremy Moyer: Wow.
Syed Hasan: And I lost rent for four months. You know and fine, 2 months of that was COVID reasons. That happens, you can't control that. But the other two months I was just like, I've lost more money you know by giving it to this guy just because he's relatively inexpensive and I would have went with someone else you can do it all 'soup to nuts'. You know, so.
Jeremy Moyer: Opportunity costs.
Syed Hasan: Yeah. So now I, you know, use a another GC a lot of times when I need something done quick, you know and for bigger projects. Just because you pay for it one way or another. Either in lost time or in the price you're paying right? So, you know, you'd rather have it rented out quicker.
Jeremy Moyer: Cost is relative, right?
Syed Hasan: Yeah, exactly. And then the other thing I would say is your assumptions. You know, you don't, you know, most people want to talk about assumptions all the time when they're analyzing deals. And the problem with those assumptions, you know, your little Excel sheet is only as good as your assumptions and your assumptions only get better with experience. So, you know when I first came in, I was like oh this is what it's going to cost me "X" per unit for maintenance and CapEx. And then it was like 50% more than that, you know. And I don't like the fact that people are like, oh let's do 10% of this and 5% of this or even a straight number, because to be honest with you everyone's you know, cost of maintenance and CapEx is different. I'm...we are also a flipper over here in New York. So our materials cost are relatively cheaper than what most new guys would pay, you know coming into you know, renovating a unit. So you can't compare my costs to yours and you can't go by percentages ever because you know... Let's say an $800 apartment, you know, that's 10%... $80, you know month isn't going to cover, you know. So, you know, let's say you have...like with this previous hurricane, we had multiple roofs, you know start leaking water. We had one full replacement. So that whole building technically isn't making money this year. You know, and so these are some of the numbers we've adjusted, you know in terms of our analysis of the properties and thankfully we got these properties for so cheap that you're still cash flowing. But that's why I'm very happy on some properties that I've seen transact at very high prices, I'm like, oh I should have just, maybe I should have pushed it a little bit higher. But then I'm looking at my numbers for my assumptions in terms of you know, my CapEx, my maintenance, and I'm like 'No', like I would have been losing money if this is what happened in that building. Right. You know because you just can't afford to pay that. Right.
Jeremy Moyer: And then at some point you kind of have to start looking at it from like a portfolio level when you, right, with that number of properties?
Syed Hasan: Yeah. So now I look at it a portfolio level, and I actually do tell most people, being a landlord of one building is one of the worst things you can do. It is a horrible idea. I hate it. I learned the rental business from my father and he had one rental in Deer Park, Long Island. And it's just a pain because you know, you have and one house. Investing in single family houses....I don't think people realize the CapEx that's required and the maintenance that's required on a single family just because it's triple the square footage. It's just simple math. It's going to cost you more. But it was a pain for that. You know, my father when I was getting into rentals was like, are you sure you want to do that? You know and then you know now he's like, yeah, that's a great idea. But you know, it's a lot better when you have, you know, 40 tenants and you know one doesn't pay whatever, can deal with that. When you have one and one doesn't pay you got some issues. It's the same reason why I don't buy in Bethlehem. I don't buy in Easton. And it's not only do I believe in Center City, but you know, I need a mass concentration in one area first and then I can look like later to the other areas. You know, I'm trying to get to a couple hundred units in Center City first and then I can bother with South Side, Bethlehem and Easton.
Jeremy Moyer: That makes sense. Okay, so do you have...do you manage the properties yourself or do you have a company?
Syed Hasan: Yes.
Jeremy Moyer: You do. Okay. So you kind of touched, based upon that answer, the the analysis by paralysis I think was the prior answer you mentioned. For new investors that are...they're just creating those spreadsheets, they're creating their 'buy box', they're creating their criteria and they're going off of what they might want to achieve and they have that goal in mind. With the market the way it is right now like is the advice just go buy something or is it you know you put that underwriting criteria in place and just stick to it or...? It's a tough market right now, especially for a new investor not really understanding some of the after, what happens after you buy the property.
Syed Hasan: Yeah. So I will say...my partner always says is, it's very easy to buy right. Once you bought...you can spend all the money you have in the world, right? Like it's very easy to buy. So right now I actually tell people all the time that come to me for advice on flipping on buy and holds. It’s a very hard time to kind of enter the market. You know, we have in most markets that's not New York City, a COVID bump. You know prices are higher than ever. I tell everyone we're in like a weird limbo in the market that I've only seen back in 2014. In 2014, we had the same thing happen...was that prices were at all-time highs, and buyers are just like wait, maybe we should wait. You know, like prices seem too high, it's going to come down. And then you have you know, the sellers being like like of course, my thing is worth X, you know. Like it was you know, X minus 20% a year ago, but not it's worth this. So and right now you have the issues that sellers see that there's no supply in the market and they think they can bump it up even further. But then you have major issues in the purchasing, in that these properties won't appraise for those numbers. And multiple properties haven't that I know of that have transacted. But the good thing is rents have been increasing so much that it's kind of unfathomable to me. You know, like I had a four bedroom, 1 bathroom house rent out for $1,250. My neighbor had his rent out for $1,400 in Center City Allentown. And I don't think his rent is really like sustainable. Mine is just a little bit more than what Market used to be, but rents are going up. Now, I do think that's because of COVID. There's no rents, you know rentals on the market right now just because there is no eviction going on. Everyone's just staying put, no one's moving. So I think that will change. I think prices will come down. We are all paying more than what we used to. I...my first portfolio, I bought it $42,000 a unit. Now my latest building that I'm buying is that $60,000 a unit. Obviously a substantial increase. But you know some of this stuff that's listed for $70...$80,000 a unit for a three unit. They never transact, you know, and that's what makes me feel better sometimes because I'm like am I messing up here? You know, and they don't usually transact, and you know, a lot of people look at the very high comps, the $95,000 a unit, a $100,000 a unit and think that's their building and like, oh I can get it to that. But unfortunately, I know some of the sellers of those buildings, and they've gut renovated those buildings and got high rents in place. So you can't compare that to a value-add building, you know. So for most new people what I would say is, it depends how you're buying the property. You know, if you're liking a true investor like me, you start up a company, you're putting 25% down on Commercial debt, you're, you know, you're going that route to actually build a company. You just need to keep you know, chugging along, pushing for deals. And if your Excel sheet is, you think is right, then stick to it. Now if you're a you know a house hacker or if you know just buying...your goal is never to have 200 units or 400 units. Your goals to have 10. You know, then you have a time, you know cost of capital, right? You know, you're like, okay like time is actually costing me more because they also have access to a much cheaper debt than I do. Right so we can go get something for 5% down, 10% down, you know. So for them if they buy a three unit, or four unit, they live in one of the units or not, you know, they've...it's a different math for them. Exactly because for them if they buy a seven cap or seven and a half cap and are borrowing at 3% you know, that's okay, the spread is there. You know for me if I'm borrowing a 4.25%, you know, I need to buy at 8.5% (cap) then or 8.25%, you know. So it depends who you're buyer is so. You know, and I do think right now we are in a weird lull in the market, you know transaction volumes down. So you're kind of seeing it, we're at that stalemate. You know, and you will see some stuff transact and you know you usually at all times, even when the market like plummets what you always see is price per square foot actually go up for certain deals. And the reason why you see that is there's a flight to Quality. And people will still buy good buildings for a premium because you got to remember people also have to decide...have to do something with their money, you know. And doing nothing is also a decision, you know. So if you have money sitting around, you also have to make that decision. "Hey, where do I put it?"
Jeremy Moyer: I love that, that's great. "Doing nothing is also a decision." That's very true. The opportunity cost right? Of doing nothing. That's awesome. So just going in a little different direction. Can you just kind of give the listeners an idea of some recent deals that you've done? Like, you know, where did you find it? Was it listed? Was it off Market? You know, what did you buy it for, how much you rehabbed it for? What are you renting it for? Just kind of get ideas for the numbers.
Syed Hasan: Sure. So people always tell (ask) me how I source. Now I tell them I don't know where my next deal is going to come from, but I know it's going to come. So even in just Allentown I have gotten deals from wholesalers, from Agents, from the MLS, from 'for sale by owner' on Zillow, from every which way you can imagine. You just have to be active, you know, and that's the most important thing in the market. You just have to be active and you'll get a deal. Like I truly believe that, but you have to put the time in. So I mean, I've had a variety of deals. The funniest deal and what I mean by being active and it's actually not a huge deal, was a small purchase. I bought a small, small deal on Oak Street in a horrible little alley in Allentown. I was actually at the building department paying fines and fees and whatever else, and this is what I mean by being active. If I had a PM, I wouldn't be doing this and I would have never gotten this deal. I see a owner, you know yelling at the building department, you know and arguing with them and them telling them they don't have funds to help him and whatever the else may be. So I was like, okay, let me tell my partner, go over here and wait, I'm going to talk to this guy. So I talked to him and I'm like, hey you like you're having issues here, like what's wrong, you know and let me see if I can help you out, or maybe I'll buy it. So I approached him. You know, we're talking and what happens is, his tenant was stealing electricity from PPL. They liked mess with the meter. So what PPL does that is they take off the meter. And then now the building has no electricity. So then the building department condemned the building because you can't have no electricity and no running heat in the winter. Right? So this guy's just like crap. I don't know what to do. I don't know what to do. He doesn't have the money to kind of fix it himself. It was thousands of dollars electrical work. So, you know, we right there and then, we were like, okay we'll buy the property from you. What do you owe on it? How much do you want? Let's talk and let's go over there and see it. So we go over there. We walk the property. Pretty decent condition. We end up buying it a month and a half later in cash. We put in about $10,000. It appraised for $75,000. We got all our money back and we got a rent it out for $1,225.
Jeremy Moyer: What did you buy for?
Syed Hasan: $41,000.
Jeremy Moyer: That's awesome.
Syed Hasan: So we got our $51,000 back. We got it rented...we're cash flowing about $360 bucks a month on it. You know, it was a home run deal, you know, and we did it in under six months. So we didn't even have to do the deal with seasoning on that one because like....I didn't mention it before but always build a relationship with your bankers and you know, all the rules are guidelines, you know, and you can usually if you're doing a lot of business with them, work with them and they're there to lend and help you out as well.
Jeremy Moyer: Do you use banks in the area here or is it...?
Syed Hasan: Yeah. I use both. So I do use you know, local banks. I also use some North New Jersey Banks as well. But my local bank is actually First Keystone. They're great to work with. I use Mike Santiago over there and he's great. But like I said, it's a relationship business and you got to know him. I speak to Mike every day. So, you know, that's very important.
Jeremy Moyer: Right. So...do most of your deals, I do agree with you on that, the banker conversations and relationships the... For, I guess is that just an example of the type of deal that you try to buy, like try to cash out everything on a refi? Are you able to achieve that majority of the time?
Syed Hasan: Um, well so that one was actually... So that property was actually our first single family and the only reason we bought it was because we were just like wow, this is cheap. Like let's go, you know. After that we ended up buying two more singles. One for $50k, one for $44k. Both are rented now for $1,250. So, you know, it's like a 3% return, you know a rent to purchase price ratio, right? We don't look to take out all our money on all our deals. We do on certain properties, you know. On the singles we do, because we're usually buying those in full cash, you know, because it's such a low purchase price. We're not going to deal with getting a bank involved and all that. It's just a hassle. On the bigger stuff we do try to get out... What we try to get out is max our Equity, right? So like we do try to get a hundred percent of that out. Most of the time it does work. Sometimes it doesn't. But if we believe in the property or the area, you know, we'll do that. We're about to buy another property right now. It's only, it's a smaller building. It's two units, but we don't think it will, you know will be able to get all our money out. But you know, we'll have relatively little money in and it's a long-term hold so we're okay with that. So it really depends on the deal. On some of the larger deals, it's actually a lot easier to get your money out. Because you know on a 5, 6, 7 unit you're only going by income approach and since you're pushing the income up so much high, they usually do appraise. So you kind of get lucky in that sense. The three units are a little harder right? Because you're going to do both. You're going to do a sales approach and an income approach and the sales approach is actually what's hurting you. These things don't sell that high usually. So it really depends on the specific deal. But I'm...me and my partner very risk-averse. So, you know, we try not to....we never take out full leverage and you know, we don't do really mind leaving money in deals. And we actually do a lot of our purchases in cash. So out of the first 41 units only 18 of them have debt on them. All the rest... Now 19 have debt on them. So, you know, we buy a lot of stuff in cash because people don't realize how much money you save by buying in cash. You know, you're not paying for appraisals twice, you're not, you know, paying a lot of these fees twice, you know. And then people forget there's a prepayment penalty usually for most banks. So, you know you save money that way, and you save a significant sum, so it becomes easier later to do that cash out refi and take out all your money. So really just depends on the deal. But yeah, we do focus on... Everyone wants to get most of their money back so you can buy more deals.
Jeremy Moyer: Absolutely. Keep turning it, right?
Syed Hasan: Yeah, exactly.
Jeremy Moyer: So if the...you touched based upon the cash...is that your own cash, is that OPM, other people's money that you're borrowing, is...how you structure that?
Syed Hasan: Almost all of it is our own funds. We do take some funds from people on depending on the investment, but we try not to. Me and my partner do not actually give anyone Equity. So my, our company is only me and him. We refuse to give equity and we've had many approaches in our business to get OPM but more on the LP side, right. So they want to be the LP. They want to get, you know, a windfall and all that. We were refuse just plain and simply. The main reason being is you end up making... Sure you make double the money they will make but you're doing five times the work, you know, and that's the hard part right? Like we did that. We had some investors that offered a lot of money to us and we did the math out to like, hey, we would need to own like a 1,000 units...
Jeremy Moyer: Wow.
Syed Hasan: ...to make double the money of us owning 200 units, you know. And don't get me wrong, it's still more money, but you know, I'm not too greedy, you know. So it's like I have a number that I want to hit you know, but I don't want to answer to anyone else in terms of equity, you know. So what we structure on certain deals, if we need the cash, is debt-based, you know, debt based structure. So, you know, they'll take a 95% you know lien on the property, you know. And we're already buying it under market usually so they're in a safe position. We're in a safe position, but it's short-term. It's usually for a year or less and we're going to cash out and get their money back out. There happy, we're happy. And a lot of our investors and what I tell people who want to you know, raise money eventually is first of all, go within your own networks, you know. It's always the the best and easiest and next go for the working professionals, right? You know, the doctor, lawyer, accountant. They don't have time for this, you know. They're making money in what they do, you know. It's very hard to get money from a business owner because they're like ehh, well, I'll do it myself, right? You know, so you have to kind of focus on those people because you're actually bringing a value add to them to you know. They're...you're doing them a service, you're doing yourself a service, you know, it's a symbiotic relationship there. So those are kind of the people you should always focus on. Because they're they have high net worth, they have good income. And they're kind of you know, okay with that because you're still giving them more money than what the stock market usually returns, you know. So, you know and it's just a diversification of their assets as well.
Jeremy Moyer: Makes total sense. Have you had a raise any capital, debt structure, since COVID?
Syed Hasan: No, I haven't.
Jeremy Moyer: Okay, I was just curious how those conversations went with risk mitigation and whatnot. So going to, when you're looking at evaluating a building like what, you named a few metrics that you look at. Like what kind of a quick sniff test on, like this makes sense to look into further and then like those next level of due diligence tactics?
Syed Hasan: So the first thing I do is just a simple price per unit.
Jeremy Moyer: Okay.
Syed Hasan: You know and you can only do that if you know a market very well.
Jeremy Moyer: Yep.
Syed Hasan: So and by market, I mean like a zip code. So, like I only look at 18102, right? So if I see something listed for $85,000 a unit, $90,000 a unit, already off the top, I know I'm not buying it.
Jeremy Moyer: Exactly.
Syed Hasan: Right? Like it's just not going to happen. Even if it's a good deal. Even if it's a good...it's an 8 cap and you know, I can make money on it. I can't cash out on that deal. I'm...what's it going to appraise for a $90k a unit maybe? Like I'm...there's no value add there, you know the values already done. So, you know, I used to work in New York City commercial real estate and you know, there's a value-add product and then there's finished product. There's finished product buyers and there's value added product buyers, right? I'm never in the finished product buyer, you know. And that's okay. For us to do value-add, there needs to be finished product buyers
Jeremy Moyer: Sure. Absolutely.
Syed Hasan: So I first right off the top, price per unit is relatively easy one to kind of do. Then the next one I look at is the unit breakdown and the square footage. So for example, you know you list up with 3-unit for $225k, but is it a 1,800 square foot 3-unit or a 3,000 square foot 3 unit, right? So if it's $70,000 a unit but its 3,000 square feet or you know, very large, okay, I'll take another look at it. But if I see you know right off...you can go in the County Assessment, it's 1,800 / 1,900 square feet, I don't care where it is 18102, I'm not paying $240k for it because it's never going out cash flow the way I want it. So that's you know, the the first two things I'll kind of look at. Then after that, you know look at, and I tell this to everyone. The only things you need to see in a building really is the basement and the roof, right? So figure out the utility breakdown. I love when Brokers and wholesalers actually know that already. Tell me what the utilities are, how it's broken down. And then I'll run through a quick Excel sheet. My Excel sheet is a one-pager. You know, it's very simple. I'm just listing out my income, my expenses, you know what my cost of capital is and what am I returning per unit and a percentage basis, you know on existing and then on my Cash out refinance. So, you know, I want to be at least, you know, $225 to $250 plus and I want to be you know initially...
Jeremy Moyer: Per unit?
Syed Hasan: Yeah, per unit at the minimum. And depends on the building though, like on a single fam, $300 plus. Definitely. You know on larger buildings, you know in the low to mid twos and if I can get to $200 and above when I cash out all my equity and I turned the building and raise rents and everything, perfect. You know, so that's kind of my metric. But you know, one of the most important things I think is, for me at least, is can I cash out refi this? What will it appraised at and you know, will I be able to take out my money? Because if I can't take out my money and my money just stuck, well, then it's a different calculation. You know and I might buy the building because I believe in the area. Or you know, you give me a building on Walnut or on Hamilton right downtown, maybe I'd buy it, you know. But if it's you know a tertiary area, you know, it's you know up near 22, maybe I won't you know. So really depends on the location as well. That's when all the other variables kind of come into account.
Jeremy Moyer: That's great. It's not...I like what just said. You have your criteria, but it's not, if it's just a little bit outside of this box, it's not going to happen. Like there's other variables that can impact.
Syed Hasan: Yeah 100%.
Jeremy Moyer: Makes sense. So what themed opportunities you know that you might see or even....no one has a crystal ball so predicting, but over the next five years or what not, do you see just maybe a little bit of a bump at some point over the next couple of years and that continue climbing? Like kind of what type of product? Is it that small multifamily maybe up to like 20 - 40 unit that's available here in the Allentown area or even maybe surrounding areas, once you build up to those certain level. What do you kind of see and what do you, what do you think might play out?
Syed Hasan: In terms of local market or area or just realistic?
Jeremy Moyer: Yeah local market with real estate.
Syed Hasan: So I mean the local market I think... one of the biggest opportunities is its geographical location, right? You know, I personally just because everyone's going remote and COVID and all this, I don't think people are just going to be working from home, you know forever, you know, and people are going to move out to the middle of Arkansas and cheap places and that's not going to happen, right? What people forget is all the markets that are booming right now are all suburbs of major cities.
Jeremy Moyer: Very true.
Syed Hasan: Like Long Island is prices are going insane; Westchester, North New Jersey, Lehigh Valley. They're all going insane. But they're all near major cities, right? We've kind of lost that, that people just want to you know, be really far from work and all this. Because the pre- COVID only 5% of U.S. employees were full-time work from home, you know. So post-COVID, will that change? Sure. Do I believe you know, a Facebook when they say everyone's going...50% of people are going remote? No. Because then after they do that, they go lease 800,000 square feet in New York City at the new building that they're building right near Penn Station. So it's like their actions speak differently than what they're saying, you know. So what I think will happen is, you know, people will be working from home more you know, and I do agree with that. I don't think people need to be in the office five days a week, six days a week. Like I don't think that's reasonable, you know. If it goes to, you know, two, three days in the office, I think that's something reasonable. For you know the Lehigh Valley, I think since it's so close to Philadelphia and North New Jersey and New York City, you know, you're going to have Amazon growing there. You're going to have a lot of e-commerce growing here. And you know, you can just see it by the Trucking in the area, right? So I think that's going to be one of the key factors of Lehigh Valley's growth. And you know any jobs that kind of get, you know not removed from New York City or North New Jersey.... You know, what I personally don't understand is like North New Jersey is very expensive, right? Like relatively. New York City at least has a reason to be that expensive. It's Manhattan, right? Like, okay, like I'm in a location right? Like the amount of people I see, you know walking down any street in Manhattan right now is still more than I see in any, you know smaller city in America, right? So it's still going to be something but you know, and I've had a lot of tenants also come from North New Jersey. It's like hey, they're paying double the rent. They're off. Their businesses are probably paying double the rent. You know, if you're in an office based in New Jersey or even a little bit west, why not move to the Lehigh Valley right now or even if you were working in Manhattan, you can commute two days a week, you know into the city if you need to. You know, so I only see good things for the Valley and especially Allentown. I think, you know Allentown I focused on because I've seen it gentrified, you know. It definitely has a lot of working-class people. But you know, I see their incomes, you know when they're coming in now and it's higher than ever. Like they're making decent money, they're able to pay higher rents and it's interesting to see local Allentown residents getting kind of gentrified out right because you know other people are moving in and I think that will continue for better or worse. And you know people like to be near a big city, you know, they want the restaurants, they want the art, they want, you know, all that a city has to offer and I think Allentown will be part of that as the biggest city in the Lehigh Valley, you know. So I think really only good things. And honestly real estate wise what people forget to look at, is not what price is...how they're tracking. Track how rents are tracking right? Like in overall trends, that's what pushes value, right? So people look at like New York City office like why is it gotten so expensive? Why is it why are these buildings with hundreds of millions of dollars? Well, that's because look at where office, suburban office rental rates were 20 years ago and look where city, you know office rates were 20 years ago and it's a you know, massive difference in the two. So people always forget it's you know, the rent is what pushes value right? So, you know if rents are going up, you know, it's a very good thing for the market and I do think there will be a bump. I think there has to be you know. We've been on a good run, you know. Yeah to say the least but you know, I don't think it'll be a horrible thing. I think it'll be a good thing, a reawakening for the market and for the investors. I think, you know, the last five, six years has been a big push, you know by the Grant Cardone's of the world and the Clayton Morris's and you know, all these guys that kind of are pushing it to everyone, you know, and it's not a bad thing. I do think, unfortunately, some people will get burned in their purchases, and I've seen it, but they'll learn you know, and you know, hopefully they come back you know and can participate in the good parts of real estate. You just have to be very disciplined and you know kind of go from there. But I do think we'll have a bump. Maybe, I don't have a crystal ball, but maybe a year from now maybe six months from now. What I tell people is like I'm not a genius. I don't know where prices are going. But if you invest long-term, it doesn't matter.
Jeremy Moyer: There you go.
Syed Hasan: Right? Like me personally, I don't care what my buildings are worth in 20 years - 25 years. Because at that point, the buildings are paid off, their generating rent. You know and people don't realize that even if you sell your property for the same price, you purchased it at, you know, you still made, like depending on the building, 8 - 10 percent on your money, probably. You know, so if that's your worst case, okay, that's fine. You know. I think what people really should focus on, is more maintaining your building. Don't let your building go to disrepair because that's when you lose money in real estate.
Jeremy Moyer: That's great perspective. That's awesome, man. Thank you so much.
Syed Hasan: No problem.
Jeremy Moyer: So this is the last question and it's the same for everybody that we have on that's local. So what's your favorite restaurant here in the Lehigh Valley?
Syed Hasan: So this something as a New Yorker I've struggled with....to the food. I've been very disappointed to say the least but the one shinning, you know, the light at the end of the tunnel has been Hummus House.
Jeremy Moyer: Hummus House....okay.
Syed Hasan: Yeah, that place is amazing. I would put it up against any of the spots I go to in New York City and it's....I'm very disappointing when they're always closed on Mondays.
Jeremy Moyer: You know, it's so funny. We had another guest on earlier, this like a couple months ago. He actually...he used to live in New York and work in New York. Now, he's here local in Bethlehem, but that was one of his. He gave two answers and that was one of his answers. That's amazing.
Syed Hasan: If you have a list, just sent it my way and I'll start go trying them all.
Jeremy Moyer: There you go. So in closing Syed, how can listeners learn more about like what you're doing following on social media, how can they get in touch with you if you want to provide any information?
Syed Hasan: Sure. They can all just kind of shoot me an e-mail. I'm not big on social media but just shoot me an email. My email you have it, is s.hasan546@gmail.com. I'm always happy to help any newbies that are starting out.
Jeremy Moyer: Sounds great. We will also put that in the show notes when we transcribe everything. Syed, thank you so much for your time today. Again to our listeners, if you see us providing value, please leave us a 5-star rating on iTunes. Also providing any feedback that you like about the show. Everyone, this is Syed Hasan with ideal Management Group. I'm Jeremy Moyer with the Real Estate Investor MBA. Take care.
Syed Hasan: Thanks.
Jeremy Moyer: Thank you.
