How to Buy and Manage Hundreds of Millions in Real Estate - Moses Kagan
Feb 28, 2025
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Join Moses Kagan, a savvy real estate investor in Los Angeles managing hundreds of millions, as he shares his journey from a challenging first deal to insights on finding tenants. He dives into the math of acquisitions and the delicate balance between using personal vs. others' capital. Moses also offers lessons learned from family influences in real estate, discusses the hurdles posed by high interest rates, and critiques urban parking regulations, advocating for better city designs. His stories provide a fascinating glimpse into the complexities of real estate investment.
Moses Kagan's journey into real estate began with a family-backed purchase of a distressed 16-unit building, emphasizing the importance of seizing unique opportunities in challenging markets.
Understanding financial strategies, such as loan-to-value ratios and managing debt service coverage, is crucial for navigating the fluctuating lending landscape in Los Angeles real estate.
Effective tenant management, including partnerships with local nonprofits, can help quickly fill vacancies and avoid cultural clashes while maintaining a positive tenant community in rental properties.
Deep dives
Building a Real Estate Portfolio
A substantial real estate portfolio, valued at around $200 million, has been developed in Los Angeles since 2012, encompassing approximately 1,100 units across 140 to 145 buildings. This portfolio includes both owned units and those managed for third-party owners, showcasing a significant growth in the property management business. The individual behind this portfolio emphasizes humility, stating that while their operation may be small compared to larger firms, it was built from the ground up. This journey into real estate investment is intended to inform people about the intricacies of purchasing multi-family properties and creating their investment portfolios.
Learning from the First Deal
The first real estate purchase was a 16-unit building bought with family funds, specifically derived from the sale of a great-grandfather's property. Initially, the intention was to buy a duplex for personal use, but the high prices led to a different opportunity arising from a distressed sale of a renovated building facing financial issues. The family was able to acquire the property at a reasonable price through careful consideration and significant financial backing that included a conservative lending strategy, allowing them to survive market downturns during the financial crisis. This experience provided lessons in real estate investing, particularly regarding financial strategy and the importance of being cautious yet opportunistic in the marketplace.
Understanding Real Estate Financing
Real estate financing norms, particularly concerning loan-to-value (LTV) ratios and debt service coverage ratios (DSCR), are vital for investors to comprehend. In Los Angeles, traditional lending for commercial properties typically caps the LTV at around 75%, but rising interest rates have diminished the available financing amounts, reducing LTV figures to about 65%. Investors should account for their income and expenses, ensuring that they can cover their debts as interest rates fluctuate. This financial insight highlights the balancing act between borrowing and profitability, particularly in a changing economic environment.
Tenanting Challenges
Acquiring a building with 16 vacant units presents unique tenanting challenges, particularly the need to fill these vacancies quickly to meet mortgage payments. The management company struggled initially with marketing the apartments at desired rent levels, prompting collaboration with a local nonprofit to fill several units quickly under a master lease arrangement. However, this strategy introduced cultural clashes among tenants and required careful tenant selection to maintain a positive living environment. Ultimately, this experience taught valuable lessons in property management, tenant dynamics, and the impact of social programs on rental properties.
The Importance of Creative Solutions
Navigating the complexities of the Los Angeles real estate market often requires innovative solutions, especially when facing zoning and building regulations. A specific deal highlighted the need to remedy an illegal garage extension, compromising parking plans necessary for development. By approaching the neighbor and negotiating a minor modification to their property, the team was able to adhere to regulatory requirements and proceed with construction. Such creative problem-solving is critical for developers, showcasing the need for adaptability and resourcefulness when encountering unexpected challenges in real estate projects.
Today I speak with Moses Kagan, a real estate investor and operator in Los Angeles. Moses goes over some specific real estate deals he's done, including how he got started with a rundown, half-renovated apartment building in east Los Angeles. Moses manages hundreds of millions in real estate and has the battle scars to prove it.
