All Forum Posts by: John Lenhart

I have a number of 4 family units in Cincinnati through the years. Some have a 5th unit build into it others have had basements partially built out but zoning would not allow them to add the 5th unit. We never built it out because the ROI would not justify it and zoning would not allow it. However, that does not mean you cant just do it and pray zoning never finds out. Most of the 5th units that have been added, were before zoning and building codes cracked down on this practice.

I can tell you, to get zoning approval, you will need to make sure the windows are appropriately sized to permit proper ingress and egress and that you have appropriate off street parking for the unit. Typically one spot per bedroom is what the zoning officer told me at one time.

If you are ever looking for more 4 plexes in Cincy, PM me. We are gradually selling ours to move into larger commercial properties.

Make an example of a couple of tenants. Evict a few of the worst culprits.

Always charge late fees. I can deal with a certain % of late payments if they pay late fees. This can be a few thousand dollars a year on a 150 unit property.

offer online payment in Spanish. This will at least save mail time.

We do offer self addressed envelopes when they move in as well. Those are helpful.

If you have an onsite manager, offer a drop box at the leasing office.

Also, have text messaging software to send link to pay rent online if they are late.

We have looked into switching from Buildium to Appfolio. Would love to hear the experiences. I understand switching is always a pain, but it does seem that Appfolio has better functionality. Can anyone speak to this?

@Account Closed - I have been to some of Scott's events. He does a very good job working with people at all levels of investing and he is an expert on the changes in the marketplace. If you are looking to start out, I would recommend his training academy for beginners. There is a ton of good information there and he also offers you the tool kit to get your investing off the ground.

  @christopher erwin    We have 3 facilities in ohio and are underwriting a fourth right now. They each have their own unique operating characteristics and turning each around presented different challenges. I am happy to connect with you to give you specific insight if you like.

Here are a few key things I would focus on when looking at your facility. 

1) what are the town demographics? How many people in a 3-5 mile radius and what is the avg income I. The area. For example, one of our facilities is in a pretty affluent area and we have one In a lower income area. They operate very differently. The affluent area has much higher rents and much lower delinquency and less cash payments (making remote management easier). The other facility is going to run a higher delinquency rate and relies on a lot of cash payers. It has more auctions and a bit more heavy lifting

2) know your states lien laws. In Ohio for example, you can conduct an auction by sending out a first class later to the delinquent tenant and advertising on your website. Auction fees are very affordable. In California, fhe process is a lot more time consuming and expensive. Each state has their own lien rules so make sure you know the process well

3) is your competition in the area small independent operators or REITS? If your closest competitor is a REIT, that is a good thing. It shows they believe in the market and can make a good return there plus, they set the market rates. It lets you bump your rents to slightly below their rents and that becomes the market rent. Look at the per sq ft rate of the occupied u it in your facility and what the immediate market is and you can see how much you can realistic push rents

4) make sure you get a cloud based property management system which allows for online rentals and mobile phone access.  The easier people can rent and pay their bill, the easier it will be to collect. 

5) how is the facility constructed? What size is it? Steel frame and aluminum or cinder block construction is preferred. Stay away from wood frame construction. They trade much lower and you run the risk of termites or bugs getting in the way. 

6) what are your opportunities for ancillary income. All of our facilities sell locks. Some run trucks which helps justify the onsight manager pay. One of our places has a robust box sale business while others do not. Location determines this.

If you are looking into specific questions such as cap rates and operational issues I am happy to speak to and give you any insight you may want. Please PM me and we can tal

@Melissa Gittens, we were where you were 2 years ago and made the jump from 50-140 units. We really liked Appfolio but in the end went with Buildium because the price was a little less and even though Appfolio is a better product overall in my opinion, I felt Buildium was a good first step from going from Exel sheets to an actual system.  

I would really never invest in a 2-4 building out of my local market, just my 2 cents. Too difficult to manage and finding a PM company to specialize in this type of asset and give you the attention you want is hard in a 2-4 unit building. Go big and scale. You could find a 40 unit building or larger for $2 million in the area with 25% down and It will be easier to get better management in place.

If you are planning a 1031, start looking for a new property now, it gives you the most time to find what you are looking for. Know how long it will reasonably take to sell and this gives you your timeline for your 1031.

When we have done them, the very latest we start looking for replacement property is when we have it under contract. This gives us at least 30 days prior to close plus and additional 45 days after close to find a new property for your trade. Then you will have up to 180 days from the close of your property to close on the new one.  The QI will typically charge 1500 -2000 for this type of transaction.

If you find a replacement property before you sell your existing property or even get it under contract, and can't delay the closing, you can do a reverse 1031 exchange. This is considerably more expensive to do as the QI needs to hold the replacement property until you close on the sale of your existing property. Even though this costs a lot more, depending on your tax basis, it could still have significant advantages.

I get calls all the time from people who have the lists. I am never interested. Most of the time, I screen out calls because they are from stock pushers. There are occasional real estate deals that come that way. I have never done a deal off a cold call and think most investors would probably be the same way.

@Oren K. Call Terry Ohnmeis with Cushman and Wakefield. He specializes in retail leasing in the Northern Cincinnati market.