All Forum Posts by: Nathan Currier-Groh

Quote from @Gregory Wilson:

No matter what you put in the lease, if you know people are living in the space you have to comply with the City and Ohio landlord laws.

If you are permitting mixed use, I would start with a residential lease tailored to the City of Cincinnati and add the permissions and restrictions on commercial use.

I think you're addressing the case where I rent as an office and then they start living there. I see how that could be a problem. My current residential lease prohibits commercial use and complies with City and Ohio laws.

The plan is for the building to be mixed-use comprising of commercial and residential. But, each leased space would be solely commercial or solely a dwelling.

Zoning Urban Mix. The current uses are: Production Industry - Artisan, Office, Office, 1br Apartment, vacant apartment, and a couple spaces that are not used by tenants.

Thanks for the feedback.

Quote from @Carl Stenberg:

I recommend you get a good RE attorney to take a look at the lease, perhaps a bit expensive upfront but could save you some headaches down the line. 

I have obtained a copy of a commercial lease and I'm going to review with my lawyer.
I've also reviewed the zoning to get a better sense of the potential uses. A mixed-use building with an Urban Mix zoning is not easily summarized. But, it does appear that all of the current uses are permitted. It's just the paperwork I need to tighten up. I wonder if other mixed-use landlords have clauses in leases that address the mixed nature. Something in the residential lease about the commercial tenants and vice versa. Or a way of prioritizing one or the other in disputes.

Thanks for the feedback everyone.

Quote from @Gregory Wilson:

Yea, that area of Northside is just not quite there yet. That is in the City of Cincinnati so you have to comply with Cincinnati ordinances as well as Ohio landlord tenant law. I am not aware that a tenant can waive any of those. Your actual knowledge that they are living there is probably enough to hang you. You should get legal or at least property manager advice so if something bad happens it will not be a colossal problem.

The zoning of CN-P includes live work and some commercial uses.

I'd walk over to 305 Central Ave and talk to a zoning plan reviewer. Just don't explain what the current situation is.

Thanks for the reply Gregory. This property is the one in Camp Washington and it is zoned Urban Mix. The non-residential tenants are not living there. They're the type of tenant I'm trying to get. But since I'm used to residential leases I was looking for tips and advice on making leases for the non-residential types. 

I'm wondering what lease clauses people are using for like remote-workers wanting their own office, or artists renting an apartment but not living there, or an online shop that just needs space for storage and a computer.

It is time to ask for some help making a new strategy for my mixed-use property.

Background:
I have a mixed use multi-family building in a commercial district zoned as Urban Mix. I've owned it for 7 years and it has not gone well with the residential units. I operate another business out of the ground floor storefront. There are four apartments on the upper floors.

The neighborhood is 10 years into the early-artist phase and shows signs of other development activity happening, but is still has a lot of drug and prostitution activity. The people willing to live there have made horrible tenants. Because of this I have rented two of the apartments to people using them as office/meeting space. They have been good as tenants, but I'm charging well below market with the agreement that the units are as-is and non-residential.

The building is partially renovated, partially demo'd, has ancient plumbing and electrical. New roof.

Questions and Concerns:
The non-residential lease I had them sign was just a modified residential lease. I'm looking for feedback on what distinctions need to be in a lease like this. They are basically renting an apartment with a kitchen and bathroom, but I am telling them they are not allowed to live there. I also put in exclusions for the water heater and furnace so that they are responsible for those.

What type of language will make the AS-IS language stick and make it very clear that they are required to maintain the heating and water systems?

What requirements am I opening myself up to if the units are being used as offices or group meeting spaces?

More generally, what is an overall strategy for a building on a commercial street with a storefront and multiple apartments?

Thank you for any feedback or answers.

Timeline would be 1 year. Acquisition date, 6 months of work and leasing, 6 months on the vine for the lender, refinance, pay the investor.

The property this is based on is under contract now. An offer went in same day. I'd still like feedback on how this could play out on my next deal.

I started by reading this, 
https://www.biggerpockets.com/blog/structure-private-loans-interview

There are so many ways to finance a deal. I'm trying to step up in scale so I'd like to buy more property than I can on my own. I'm targeting a 12-unit building and I have two properties under my belt.

One is a 4-plex. The other is mixed use storefront with apartments above - two suites + 4 apartments. The third property I would like to acquire is a 12-unit apartment building. My goal would be to buy and hold. 

Some assumptions:
Purchase price $300,000 - Renovations 40,000 - ARV 510,000 - GR 95,000 - NOI 55,000

So, is this a viable structure? Get an investor for the full amount and pay them fixed interest of 10% lump sum. They get protections with the mortgage and the money goes into escrow. I complete the renovations and bring it up to full occupancy, let it season for 6 months. Then my commercial lender refinances for $375,000 (75% LTV based on 12% cap rate). $375,000 goes back to the investor. And then... I own the property with a $375,000 mortgage.

I'm looking for any feedback. Broad strokes do I have the general idea? Is this a good deal for the investor? me? I'm just trying to keep my momentum and you great people are part of that.

#cincinnati

Update: 

Waiting on the appraisal. Expecting $160,000 - $200,000, which would meet the target for the cash out @ 75% LTV.

15-year @ 4.75%

.25% loan origination

I'm assuming that they would do 75% LTV and I would need a valuation of ~$155,000

Do they do their own appraisal of the 4-plex or should I seek out my own?

Would that be done using comparable sales or based on cash flow?

How much do you need to rehab the mix-use property?

I think $15,000 so let's call it $20,000

What are the rates you currently have on each A,B,C?

A Primary Residence 3.875% 30 year fixed

B 4-Unit 4.625% 30 year fixed

C Mixed-Use 4.5% recently increased to 5.125% (3-year treasury index + 3.5%) 15 year

C is bringing how much in net rents?

$125 Now, -$875 during renovation, $1325 After

B is bringing how much in net rents?

$1225 before setting aside capex

I'll try to provide the numbers you may need to help, but if I didn't just ask. This is not my strongest area in REI. I'd like a little more background knowledge before I talk to the bank.

Property loan information:

1. Personal residence, 30 yr fixed, principle owed $120k, value $200-300k, 
2. 4-plex, 30 yr fixed, principle owed $68k, value $140k, down payment was $25k, Lender A
3. Mixed use 2 commercial suites, 4 apartments, 30 yr variable, principle owed $57k, value $140k, down payment was $15k, Lender B

Goal:

• Finish the rehab on three of the rental units in the mixed use building. $15k
• Invest in another property. $25k

Some of my ideas about this:

• I don't really want to refinance my personal residence because our family budgeting is tight and not intermingled with the business numbers. It is on the table because it might be the best or only option.
• The 4-plex is the most stable, 2 updated units at market rate, 2 units with long-term tenants below market. Gross rent $2350.
• The mixed use is the one that needs work and probably not an option on this cycle. Refinancing this one after the rehab will be a strategy for the future.
• I have about $5000 cash-on-hand.

I was thinking of taking the 4-plex loan to Lender B, which is a local bank, and asking them to refinance the 4-plex.

Thanks for the help BP!

#cincinnati #multifamily