All Forum Posts by: John Lenhart

@Kole Kingslien personally, I don't like the deal, especially for your first deal because ultimately, I think it is overleveraged. The cash flow is lousy and DSCR is not very strong either. You are buying at approx. a 5.5 CAP, which is a CAP rate I would buy a Class A type property or NNN commercial property. Now, I do not know the area, if it is college property or not, but if I were looking at a traditional 4 family investment with upside of $100 per unit per month, I know to get there, I will have to invest in some improvements or will likely have some turnover early on in the process. Even with no improvements, turnover costs money.

This will likely mean a number of months of negative cash flow in order to accomplish your goals of getting it up to speed. I suspect you probably do not have the cash for this contingency since you are only putting 5% down and will have PMI. If that is not the case, why not put more money down to improve the cash flow and get rid of the PMI? At least this will help your monthly cash flow and keep you from coming out of pocket to cover expenses and repairs.

Now the one question I do have is whether you are going to live in one of the units? If so, while I still do not find it a great deal, I can understand it better.  

Now I do not know your strategy and long term goals on this investment so I cant really comment on that, however, if it were me, I would not do this deal and would push for something with a better return. If I were to do the deal, I would put more money down on the property (at least 20%) to improve your cash flow and get rid of PMI. I have concern that if I am paying PMI, I will not have the funds available to properly execute a plan to improve rents and bring the building to market rates because after all, things always cost a bit more than you think on your first deal.

Deer Park, Montfort Heights, Harrison, Hamilton, Fairfield are some outside the box locations.

Caleb - it is a give and take. When I practiced law, I would not charge for those types of email. It is just customer service and marketing and relationship building. While your engagement letter is probably very open ended, it is up to the attorney to use reasonable discretion to bill you for what is appropriate. If it is a one or two line response, many attorneys will let it go because it is almost not worth the effort to bill you a .1 for it. If it requires a lot of thought then they will definitely bill for it.  You can also question and dispute any charges you do not feel are appropriate and most attorneys will back down. Attorney's are loathe to send bills to collections because it can sully their reputation so they are often willing to work out any dispute you may have over the bill. For most attorneys, it is about the long term relationship and they are willing to overlook a small fee dispute to keep a good relationship. 

I would write your attorney back and be polite. If he does not understand the difference of what is truly a billable email and non-billable I would dispute that charge and find yourself a new attorney because he probably is not looking out for your best interest long term. I am also a huge proponent of negotiating flat fee arrangements with attorney's I work with for transactional work. For transactional work, you should be able to find someone who will give you a flat fee.

@David Hayes I am happy to recommend a few local commercial lenders in the Cincinnati area if you are interested.

Check your state laws first before doing anything

@Jake Walroth the thing with mariemont is that you are getting a 70 year old building with a boiler system most likely. You typically get a or b class tenant who want to live in a charming neighborhood. Therefore the price is a bit challenging. I would want an 8 cap min for a solid investment given the building is old and more expensive to upkeep, but it is likely the prices will not be that competitive in that neighborhood. You have a lot of doctors and lawyers who buy places for tax loss in thAt area so prices may be a little high. 

@Jake Walroth your question is a bit vague, it depends on what type of property you were actually buying. For example, the Merrimont inn is going to trade at a much different cap rate than  The office space immediately behind it. And that will train in a different Then the chipotle down the street or the laundromat in Fairfax. The industrial property in Fairfax trades had a different rate than the retail and MarieMont. Without more specifics it's kind a hard to place an appropriate cap rate on the property

Brian, this is a tough question to answer without ubderstanding your background. Have you done development before? Do you know anything about the storage business and how to operate it or how management works? 

The cost of land is only one component to development, does the market bear $60 per unit or will it go up to $100 per unit or less? These are some key questions that would need to be answered. 

Might I suggest looking into Scott Meyers trainings because he really understands the development side of things and can at least help answer some of your questions and point you in the right direction. I like him because he not only teaches but is also actively doing his own development deals on a regular basis, so he is the trusted expert in this arena

I like closing between the 5 and 15th of the month. This way the rents are in and we get larger pro-rations and less money to bring to closing. Also, it helps with the transition to new management giving tenants time to adjust their mailing addresses.

@Steve B. Piercing the corp veil is irrelevant when it is your personal property. If someone gets injured and you are there or it is because of a defect you created on the property, you are personally liable corp veil or not. The reason to do this (and again, I would not necessarily do an LLC in this structure) is to create privacy and put the asset in a trust on behalf of a beneficiary or multiple beneficiaries. A lot of attorneys and doctors will hold property like this with their children or wife as the beneficiary in case of a mal-practice claim. That would be the benefit.