All Forum Posts by: Adam Craig

I am finally aggressively looking into asset protection with my portfolio continuing to grow and being sued once.

Does anyone have experience with a series LLC? I spoke with Royal Legal Solutions which specializes in setting these up for investors. It comes at a fairly hefty fee so I just want to make sure it will be worth the investment.

Has anyone gone down this route for asset protection?

I do not want to separate my 40+ properties into individual LLCs and I also like the idea of my assets being hard to find so this seemed appealing 

Quote from @George Azita:

One last thought! I've went to Columbus Ohio two times in the past year to look at both single-family homes and multi-units.  Members have been claiming that Columbus is a hot market for more than a year and I never saw one property with good numbers. If anyone has a property that is hot I would like to see those numbers and how you came up with them.

Thank you!

Great insight George ! I think you might be a rare breed liking to deal with law suits! I have also been through 1 lawsuit and it was a very stressful 2 year period. Had we gone to court we likely would have won, but we settled and the settlement actually made me come out ahead ( I wont go into details ) but I did not enjoy preparing hundreds of documents over those 2 years when I should be working on my business. 

My dream is never to be sitting on the beach, retirement is not a goal of mine I would be too bored I work all the time and enjoy it. But I do have a dream of dealing with parts of my business that will help it grow - new deals, networking, website/social media growth, branding, systems. All those things do not get enough of my attention because I am dealing with day to day tenant related issues - leases, repairs, turnovers ect...

Also, I am wondering if you being in LA makes "acceptable pay" different. I have a whole slew of contractors that work for me between 20-30 an hour. I know that amount goes know where in LA but in the Midwest it can get you by. The PM I would hire would be part time and remote since i only have 60 doors. I assume 20 hours a week or less and then mileage credits - I would not be hiring an employee in the same capacity you explained.

I hope you are wrong because when I look at some of my peers or guys who are larger then I, I see on their websites they have acquisitions manager, property manager, fund raising outreach ect...  This is where I want to be someday, overseeing a team of people instead of tenants.

Quote from @George Azita:

Quote from @Adam Craig:

I am relatively new to commercial real estate with 4 buildings under my belt in 3 years. So I am learning as I go and would love you to critique what I am about to say.

In my 8 years of residential single family rentals I had 3 different property managers early on and non of them did a good job, at all. At some point around 2018, my involvement in my real estate business went from part time to nearly full time. I do not have a day job, just another business I own and I split my time up rough 80/20 (real estate/other).

This is when I decided to ditch my PM and self manage (with my wifes help). Since then, I am getting much higher rents, filling units quicker, and tenants are getting work orders resolved faster and for less. Not to mention saving 30-40k a year in fees. My goal is not to self manage much longer since I am approaching 65 doors. I want to bring on a part time employee to work in house as the PM in addition to other tasks. Not only to save money, but to have better control over things unlike when I hired out property management companies and I was just a drop in the bucket.

So far, I have taken this same approach to commercial real estate. I see SO many vacant units in and around my buildings that stay vacant, but we are able to fill our spaces up much quicker. The only thing I can think of is that I work much harder at finding tenants then a PM with dozens and dozens of properties. Know one is going to care about my properties/tenants the same way I do and I understand that. And for me to pay them a hefty fee to do a lesser job does not sit well with me. I feel I can train a part time employee who can nearly work from home to do a better job for less in the near future.

Thoughts on this?

 65 unit ain't nothing to self-manage and if you hire an in-house employee then you have to manage and pay the employee more than you paid a PM. So, what is the difference?

We own many times more than 65 units. They are is several different states and we self-manage every unit. We went many years without a PM and did very well. A few years ago, we hire a PM for our rentals in Las Vegas and we lost a lot of money and the strange thing is we spent more time and had more aggravation dealing with the problems with the PM. It was easier and more-profitable to do our own management.

I find that the problem most self-managers have is they do not have good systems in place, no good set of policies and guidelines to adhere to and no good philosophies. While I find that most landlords hate being landlords and they hate dealing with their tenants with a passion, we actually enjoy dealing with out tenant's complaints and issues because we have policies and guidelines that we follow and we understand that dealing with tenants is exactly the same as every other business has to deal with their client's and customer's complaints and issues like the airlines and restaurants have to deal with the surge in anger and physical abuse, or like employers have to deal with employee issues and lawsuits.

There is nothing better than being 100% hands-on and have 100% control of every penny spent. 

Good to know someone who has scaled and has properties all over the country is self managing :)

I do not feel the in house employee would cost anywhere near as much as a PM company since I can set the salary and not fork over an entire months rent for new leases plus 6-10% of the rent. I can train someone to do things how I want and have much better control. I also plan to outsource more day to day tasks to this employee as he/she learns. 

My wife handles the leasing stuff and I handle the turnover/work order items. My long term vision in real estate is not me answering tenant phone calls and emails about repairs and headaches. I have been doing it for 5+ years and I do enjoy getting to know some tenants. But I would much prefer dealing with high level items as I scale. 

So is my vision of "getting out of the weeds" unrealistic? 

I am relatively new to commercial real estate with 4 buildings under my belt in 3 years. So I am learning as I go and would love you to critique what I am about to say.

In my 8 years of residential single family rentals I had 3 different property managers early on and non of them did a good job, at all. At some point around 2018, my involvement in my real estate business went from part time to nearly full time. I do not have a day job, just another business I own and I split my time up rough 80/20 (real estate/other).

This is when I decided to ditch my PM and self manage (with my wifes help). Since then, I am getting much higher rents, filling units quicker, and tenants are getting work orders resolved faster and for less. Not to mention saving 30-40k a year in fees. My goal is not to self manage much longer since I am approaching 65 doors. I want to bring on a part time employee to work in house as the PM in addition to other tasks. Not only to save money, but to have better control over things unlike when I hired out property management companies and I was just a drop in the bucket.

So far, I have taken this same approach to commercial real estate. I see SO many vacant units in and around my buildings that stay vacant, but we are able to fill our spaces up much quicker. The only thing I can think of is that I work much harder at finding tenants then a PM with dozens and dozens of properties. Know one is going to care about my properties/tenants the same way I do and I understand that. And for me to pay them a hefty fee to do a lesser job does not sit well with me. I feel I can train a part time employee who can nearly work from home to do a better job for less in the near future.

Thoughts on this?

Quote from @Joel Owens:

Just like residential do not take the first tenant that comes along just to generate cash flow. In commercial you need to be selective. I would rather wait 6 months to 1 year for the right tenant to go in then have a mediocre one that may or may not make it and the cash flow in the beginning is now wiped out and then some by having to redo all of this stuff and pay costs again to land another tenant.

It's just like residential. If a good tenant stays and pays you tend to make money. If your investment property becomes a revolving door for tenants that did not work out the odds are high you lose money over time.

Landing a commercial tenant can be a full time job. I put in the cost of a commercial leasing brokers services when I buy property as a cost of doing business. I do not have time to chase after good tenants and have discussion after discussion to reel them in and go through microscopic steps to a signed lease. That is what the leasing broker is paid to do the heavy lifting part of that. Their job is too perform a void analysis and see what highest and best use is for the space and WHO is expanding in the area for additional locations or opening up first locations in that state.  

Great insight. I am relatively new to commercial real estate with 4 buildings under my belt in 3 years. So I am learning as I go and would love you to critique what I am about to say.

In my 8 years of residential single family rentals I had 3 different property managers early on and non of them did a good job, at all. At some point around 2018, my involvement in my real estate business went from part time to nearly full time. I do not have a day job, just another business I own and I split my time up rough 80/20 (real estate/other).

This is when I decided to ditch my PM and self manage (with my wifes help). Since then, I am getting much higher rents, filling units quicker, and tenants are getting work orders resolved faster and for less. Not to mention saving 30-40k a year in fees. My goal is not to self manage much longer since I am approaching 65 doors. I want to bring on a part time employee to work in house as the PM in addition to other tasks. Not only to save money, but to have better control over things unlike when I hired out property management companies and I was just a drop in the bucket.

So far, I have taken this same approach to commercial real estate. I see SO many vacant units around my buildings that stay vacant, but we are able to fill our spaces up much quicker. The only thing I can think of is that I work much harder at finding tenants then a PM with dozens and dozens of properties. Know one is going to care about my properties/tenants the same way I do and I understand that. And for me to pay them a hefty fee to do a lesser job does not sit well with me. I feel I can train a part time employee who can nearly work from home to do a better job for less in the near future.

Thoughts on this?

I recently purchased a 3 story commercial building right in a downtown area. The city is looking to attract a restaurant/brewery to the first level of this building and I am trying to accommodate because they gave me a 30K rehab grant for the building. 

I was thinking of direct mailing or somehow marketing to all the restaurant owners within a certain radius in hope they will want to move locations or expand in addition to our regular marketing of the building.

What is the best way to achieve this?

Tuesday I am looking at a Church that has been for sale 3 years but they did a price drop asking 210K for 5000 sq/ft. The location is prime - in the middle of a really desirable neighborhood just outside a bar/restaurant trendy downtown area.

My first instinct was to buy it then lease to a day care or even center. The issue is it has residential zoning, so aside from converting it to residential, I would most likely only be able to lease it back to another church.

As anyone leased to a church? Is the demand there? For office/flex space in this area its $1.20 a sq/ft. Not sure how much different a church rate would be.

I just really like the building and location so not needing home run type numbers.

Originally posted by @Jade S.:

Yup...we require a deposit equivalent to one month of the rent the tenant will pay during the *last* year of a lease term (unless it’s a one year term only).  The risk has been pretty low for sure, but you never know.

Thanks Jade - Can you elaborate on this. So they dont pay until some time during the final year for security?

The reason I asked the questions was because a prospective tenant did not like having to come up with $900 x 2 for the deposit even though we offer 1 month free and I told her next payment would not be do for 2 months.

This is rare, usually we don't receive this resistance but it made me think it might be a lot for smaller/newer businesses to dish out.

Do you require full security deposit for small office space?

We have about 8000 sq ft of office divided into 6 units with units ranging from 700 sq/ft to 2000 sq/ft.

The space we have is completely remodeled and move in ready. Is it necessary to require security deposit equal to 1 month rent for office? I can see how it makes sense on our residential properties but I am wondering about reducing it on the idea that not much damage other then some paint touch ups .

Originally posted by @Scott Wolf:

@Adam Craig, what types of commercial property, and what loan amount are you looking for typically?

I have done 5 so far - all office/retail mix.

Recent sizes have been between 20-30K sq ft. 

Total funds between rehab and purchase have been around 500K on most of the deals but I anticipate this going higher soon as I grow. ARV on my most 2 recent buildings were 990K and 1.4million so I am usually borrowing 50% ARV.