Alex Kingman is a multifamily real estate investor and syndicator at KGI Capital. KGI Capital focuses on partnering with passive investors to invest in value-add and distressed apartment buildings in the midwest and southeast. In this episode, Alex talks about her move from single family to multifamily investments, why KGI decided to take their investments out of the state of California, and the details behind their most recent 72-unit multifamily deal.
Alex Kingman | Real Estate Background
- Multifamily real estate investor and syndicator at KGI Capital
- 5 properties with a total of 80 residential units
- Based in: San Francisco Bay Area, CA
- Say hi to her at:
- Best Ever Book: The 10X Rule by Grant Cardone
- Greatest Lesson: Things start to fall into place when you get in the zone, so focus on the things that get you there, and you'll see results.
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Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and I'm here with Alex Kingman. Alex is joining us from the San Francisco Bay Area. Her company is KGI Capital. They are real estate syndicators who invest in distressed and heavy value-add multifamily properties in the Southeast and Midwest. Currently, they have 80 residential units in five properties. Alex, can you tell us a little bit about your background and what you're currently focused on?
Alex Kingman: Hi. So I am currently focused on distressed properties. We focus on these properties in the Midwest and Southeast, and we started about five years ago; we started out actually with a house hack, and grew from there. We started in our local area, so that was in Hollister, California... And once we did the house-hack, we realized how much we enjoyed real estate investing. But we wanted to go elsewhere, where we could get better cash flow, and returns and just have fewer headaches. When you look at California, it's not necessarily the most investor friendly, so we decided move out of state and we started to do one to four-unit distressed properties out there. And then we moved into the multifamily space after that. So now that's where we are, and we're very focused on the same type of properties being distressed, but just with larger numbers.
Slocomb Reed: Gotcha. So 80 doors in five properties is an average of 16 units per property. How does that actually break down?
Alex Kingman: It's a good question. It doesn't break down quite like that. We have a couple of single family properties, we have a fourplex, a duplex, and then we have our most recent acquisition, which is a 72-unit property. So most of our units are in that multifamily property.
Slocomb Reed: Gotcha. That makes a lot more sense. I want to talk about that 72 unit, of course, but you started with two single families, a duplex and a fourplex; remote, distressed properties. Where are they?
Alex Kingman: We have properties in Jacksonville, Florida, and Northern Indiana. So South Bend, Indiana, where Notre Dame College is. And then the duplexes here in California. That was the house hack duplex. So we moved around a little bit, and we have different properties in different markets, and those markets have different benefits to them. So the Northern Indiana market is a lot more cashflow-based, whereas the Florida market we like for the cash flow, but also a lot of appreciation.
Slocomb Reed: And you were local to those markets when you bought those properties?
Alex Kingman: No, we've always been here in California. So we started with the duplex here in California, and then we just went out of state just to invest in those properties, but we actually have not lived there ever, or anything like that.
Slocomb Reed: Gotcha. And all four of those properties -- well, sorry, the two single families and the fourplex in Jacksonville and South Bend, you bought them all distressed and you did like the classic [unintelligible 00:04:07.13] get your contractor's and everything?
Alex Kingman: Yeah, two of those we did were distressed. The first one that we did out of state was the fourplex. So that one was in Jacksonville, Florida, and we did about a $130,000 rehab on it. My partner is a general contractor here in the area, so he has that experience, and be basically managed the rehab portion from afar, and we focus on just getting that done. And there was a lot of learning involved with that, but it was really awesome, and now it's doing really well.
And the other single family property was also distressed, kind of a heavy value-add property, and that one was much smaller of a rehab compared to the fourplex, but it was something that we were able to do much quicker, because we had the experience by then.
And then the other single family property actually wasn't really distressed, it didn't really need a lot of work, just a couple of repairs to get it up and running and get it rented; that one, we actually did a joint venture on. So it was slightly different, in that the person that we did the joint venture with wanted to be focused on cash flow, and not so much capturing that additional value in the deal. So we wanted to align his interests with our own; ours was to join forces with him to be able to buy this property, and his was to have passive cash flow. So that was more of a straight buy and hold. Not our usual, but it was a good deal as well.
Slocomb Reed: Gotcha. You jumped from duplex to fourplex to a couple of single families, and then almost 20x-ed your property size into a 72 unit. Where is that, and when did you buy it?
Alex Kingman: That was our goal. It was right after we read the 10x rule by Grant Cardone, so we were getting pretty fired up... This 72 unit property is in Oklahoma City metro area. So it's in a really, really good area; it's about 20 minutes from the downtown, and it is another distressed property that we're currently working on. We bought it in September of last year, so about 2022, and that one we did in a syndication model.
Slocomb Reed: So you bought it about six months ago. When you say distressed or value-add, specific to the 72 unit, what did that mean when you bought it?
Alex Kingman: This property, it's a very heavy lift, and it's very focused on a lot of CapEx improvements to get it to the point where we can be charging market rent, and bring it to what the value of the property could be. So there's a lot of potential for this property, but it needs a lot of work to get to that point. So with a heavy value-add or distressed property there's a lot of upfront capital that you have to raise in addition to the purchase price and all the other costs that go along with that, so that you can get started right away on fixing it up and improving it, so that you can receive the profits that you project.
So for this property, we focused on a couple different things; we replaced the management that was in place when we originally purchased the property...
Slocomb Reed: What was occupancy like when you bought it?
Alex Kingman: Occupancy when we bought it was 78%.
Slocomb Reed: Is that a physical or economic?
Alex Kingman: I think it was economic; I'd have to go back and check to make sure, but I think it was economic. So it was low compared to what a lot of investors in multifamily are comfortable with purchasing, especially if they're not looking at value-add properties, and things like that; or heavy value add-properties usually they're looking at higher numbers in that, and better rates... But we just saw a lot of opportunity in this particular location that it was in, and also the competition around this property, the other properties that were similar, were in similar shape. But there was one property that had been updated and had basically had their value-add completed, and was performing really, really well. So we saw that we could capitalize on that as well and come in and be one of the best options in the market for tenants, the nicest option, and receive really good rents for the asset class. I guess I should say the nicest option for a class B type of property. So we're basically bringing it from a Class C to a class B.
Slocomb Reed: Gotcha. Alex, at the time of the recording you've had about six months since you acquired the property. Tell us about the progress that you've made and what is left to do.
Alex Kingman: It's been a really good journey. We've been staying on track, on budget with everything, with all of our projections that we originally projected. So so far, our first objective, of course, was to get the new management in place, and bring somebody onto the site that could be there every business day, during business hours. The old management wasn't there during business hours every day, so there were a lot of issues with vacancy and those things coming up, because the tenants didn't have as good of access to a property manager, and no one was on-site to just make sure things were going smoothly. So we brought in someone that was on site all the time, during business hours at least, and that has dramatically improved, one, the quality of life for the tenants, they're really a lot happier with that, and then it has also just improved getting work orders done, and things like that. So that was the first thing that we did immediately. After that, we started renovating interiors of units.
There were a lot of units that were down just because they didn't have properly-working AC units, or the boiler was out, or something like that where it was just some type of CapEx item needed to be replaced in order to get it to a point where it'd be livable... So we immediately started on those units.
So as of last month, we had 19 units that were completed with the interior renovation side of things, and they look significantly nicer, and they're renting for market rate, and the tenants are very happy with that. In addition, we're going to start in the next month or so doing the exterior rehab portion of the building.
Some of the exterior things that we've done so far are we replaced the windows in all of the units; we're also going to be working on some more exterior improvements in the future, in the next month or so. So that includes improving the outside appeal and look of the property; it has a very '70s look, because that's when it was built... So we're going to be fixing that, and redoing all of the siding to make it more updated and look more desirable to a tenant for today's times.
Slocomb Reed: I want to transition the conversation, but first, I do want to ask, as a deep value-add or distressed investor myself, why is it that you chose to renovate downed units first, and then do your exterior CapEx?
Alex Kingman: We chose to do it that way because the exterior renovations were going to take a certain amount of time, and in that area it tends to have snow and other unpleasant weather during the winter, which would have slowed things down and caused issues with that portion of the rehab. So we felt that it would be best to wait until that portion of the year has passed, so that we can start on those things.
Additionally, looking at it from a bottom line prospective, if we can turn some of those units and get those interiors done, we can get some of those units up and running, and improve that occupancy and the NOI of the property sooner. Usually, our main goal is to get that going faster, and then continue with the rehab that we need to complete.
Slocomb Reed: So seasonality and the weather and the changing of the seasons it sounds like had a lot to do with it, that you wanted your labor focused on the indoors while it was cold outside, effectively. And now that it's warming up again, you can get back to doing that exterior work.
Alex Kingman: Yeah, exactly.
Slocomb Reed: That makes a lot of sense, all things considered. And I think it's really helpful for our listeners to hear you say that, Alex, because where I was going with my question was - I'm going to be crass, because I can't think of a better way to put it. Do you decide to renovate the units while the building looks ugly and you can't push rents, so that you can get your economic occupancy up, but at the lower rents? Or do you go ahead and do the exterior CapEx, make the building such that it is a nicer place to live, that commands higher market rents, raise rents on your current tenants, and then turn your focus to the apartments? Well, the winter has something to say about that. There's only so much landscaping you can do when there's snow on the ground.
So I can sit in the hypothetical world as long as I want, but then I eventually have to come to grips with the fact that it's December and January, and there's only so much that you can do; so it makes a lot of sense.
Alex Kingman: Yeah, I agree. I also think that it can depend a bit on the class of property that you are renovating, to a degree. Obviously, if it's looking really terrible, then you probably should see what you can do about making it look nicer ASAP. But when you're looking at a Class C property that you're bringing to a Class B, versus a Class B to Class A, there can be a little bit of, I guess, the differentiator between the type of tenant and what they're looking for. Maybe they're looking more for affordability when they're at a Class C, or Class B; maybe they're more working class. Versus Class A, they're looking for probably a lot more of the best and the nicest amenities and those kinds of things right away. So sometimes it can make sense to start with the interior, and then make the outside look nice a little bit later, at least from that perspective. But I do agree with you on that. It's nice to be able to have the whole package look nice by the time you are able to present it to new residents.
Slocomb Reed: Alex, the Best Ever listeners are very familiar with the value-add apartment business plan, where you're buying a property that has some cashflow currently, but gives you the opportunity to drive up the NOI, increasing income, reducing expenses, what have you... And the types of returns that are available in a five-year hold period, IRR in the teens, somewhere a preferred cash on cash return, that can ideally start day one, because you have some cash flows in place. I imagine that was not the way that you pitched this property in Oklahoma City. Let me say, I'm on Team Alex Kingman here; my first really commercial multifamily I bought at 38% economic occupancy, so I understand how much appreciation can be forced, and what that does to an asset over time, especially your cash flow, assuming that you can buy it at the appropriate discount. I need to ask two questions in tandem here, Alex - what is it that attracts you to these properties that have a heavier lift, and frankly, higher risk up front? And then what is it that compels your investors to invest in a property like this, as opposed to a more stable, "lower risk" value-add indication?
Alex Kingman: That's a great question, because there are a lot of investors who are focused on less heavy lifts, and there are good reasons for doing it that way. And there are good reasons for investing in heavy lifts as well. We really like heavy lift properties and distressed properties because that is where we have always been able to provide the most value for ourselves and also for our investors. That's where we have experience; even our very first property, the duplex house hack, we did a pretty extensive rehab on, and we've always been focused on those types of properties.
So that's where our area of expertise lies, nd that's what we enjoy. We like finding those ugly properties, and that's what gets us excited... So we like to follow that and focus on what we really are the best at.
When it comes to investors, typically, it comes down to what their capital goals are and what their goals are with their investing. So a lot of times when we are talking to investors or potential investors, we're asking them upfront, "What's your why for investing? Why are you looking at these kinds of properties? Are these the right properties for your goals? What are your financial goals with your investing capital?" Because typically, if you are looking at heavy value-add properties like this, it's because you're trying to grow your wealth quickly, versus having consistent, monthly or quarterly cash flow. And that's a big difference, and it can make a big difference in the way that you are investing, really.
So if your goal is to have consistent cash flow to live on every single month, then probably a class A, or very light value-add type property would be a better option for those types of investors that are looking to meet those goals. But with a property like this, sometimes we actually get even a lot of younger investors, because they're looking to grow their wealth quickly, and they're not necessarily looking for a consistent paycheck yet on their wealth. A lot of times they'll put their capital into deals like this, and then take those profits and continue to grow them quickly, so that they can then eventually put those profits into cash-flowing assets at that point.
So a lot of times we see that the goals of the investors make a huge difference on what it is that they're specifically focused on. Sometimes they want a little bit of both, or some diversification, they want cashflow on some deals and more of an appreciation play on others... So it can really be beneficial to consider what your goals are, and then how you're looking to get there, and how each different strategy that's out there can help you get to those goals.
Slocomb Reed: That makes a lot of sense. Alex, are you ready for the best ever lightning round?
Alex Kingman: I'm ready.
Slocomb Reed: What is the best ever book you recently read?
Alex Kingman: I would say I did just read read the 10x Rule by Grant Cardone, and it always does get me pretty fired up and excited for what's next in my life.
Slocomb Reed: What is your best ever way to give back?
Alex Kingman: I really enjoy helping others and teaching them things that have had a huge impact in my own life, whether that's in health and wellness, or in investing; those are usually my two top areas that I like to help people with, and help others improve on in their own lives.
Slocomb Reed: [unintelligible 00:20:46.27] Alex and let's stick with the 72 unit that you've been working with for the last six months... What is the biggest mistake you've made thus far and the best ever lesson that has resulted from it?
Alex Kingman: Specifically on the 72-unit?
Slocomb Reed: Yes.
Alex Kingman: I can think of mistakes on our smaller properties, for sure. The 72-unit, I think the biggest mistake that we've made on that property... So far, everything has gone pretty smoothly on that property. But I'd say personally, the biggest mistake from our company's point of view would be we had a pretty small investor base to start. So it took longer than we originally expected to to raise the capital for the deal. It's a great deal, but it just took a little bit longer, because we had only a couple hundred investors who were looking at the deal.
So I'd say it was a good learning curve for us to learn how to grow our investor base, and to be able to learn how to provide more value to potential investors as well.
Slocomb Reed: On that note, Alex, what is your best ever advice?
Alex Kingman: My best ever advice actually is a little bit more of a life advice lesson. I think there are a lot of people who listen to this podcast who are actively in the real estate space and actively hustling out there... And when I think about everybody in the space, I know that everyone's working really, really hard, myself included. So the thing that I've found that's been the most beneficial to me in my life is to keep a good amount of time to spend just with myself, and time to relax and rejuvenate, so that I can come back and hit it just as hard the next day.
I guess what I'm saying is that when you're in your flow zone, and you're in the zone where you know you're doing your best, that's when you're going to have the best results; that's when things are gonna start coming together for you a lot more, and that is when you're most likely to have luck as well. So if you're focusing on the things that put you into that space, mentally, physically, emotionally, then you're going to see those results come a lot better, your life and work will probably feel a lot more like it's flowing well, and you're going to enjoy it a lot more as well. So that's what I've experienced, and that would be what I hope others can experience as well.
Slocomb Reed: Last question, where can people get in touch with you?
Alex Kingman: I'm on most social media platforms. But if anyone would like to reach out to me directly or anything, you can just go to my website. That's probably the best place, at investwithkgi.com.
Slocomb Reed: Those links are in the show notes. Alex, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show, leave us a five star review and share this episode with a friend you know we can add value to through our conversation today. Thank you, and have a best ever day.
Alex Kingman: Thanks.
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