Category Archives: Ventures Quarterly

Ventures Update June 2015

695 Riverview Drive

I am currently reading the book Multi-Family Millions, and it is transforming the way we look at our property. The author, David Lindahl, has been successful on a larger scale in exactly the type of property that 695 Riverview is. He calls what we are doing—creating value by turning over to higher quality tenants and higher rent—“repositioning.” Important note: Zell did not recommend this book to me. I discovered it, and read it first, and I deserve all the credit for any positive outcome that comes from it! Click the book below to link to it on Amazon.

Reading the book after having owned the property for almost 2 years highlights our successes and mistakes from the past and enables us to make better decisions in the future. For example, the book points out that multi-family commercial properties generally make more money than their smaller residential counterparts. I ran the numbers before we bought and that is exactly why we chose it. The numbers are far better than smaller properties in terms of cash flow. Despite the issues we have had, we have never had fewer than 6 tenants at a time paying rent and that money has been crucial. Bottom line, we bought a great property with a lot of potential and the book reinforces that fact.

Conversely, we made some big mistakes. First, we tried to self-manage the property. It was way too much for one person to properly handle without being fully-committed. The book adamantly advocates hiring a property manager. He is right, and it took us 8 months to learn that the hard way. The book also says to hire a good property manager and lays out exactly what to look for, how to hire, and how to ensure results.

The second mistake that we made was to delay resurfacing the parking lot because it costs a lot of money. The book recommends to start by fixing the exterior in order to change the perception of the building within the local community. It is absolutely worth the money in order to attract better tenants. We have learned that from our 2 worst tenants—who we evicted—and who each cost us a lot of money. We are getting resurfacing estimates as we speak and the job should be done by the end of July.

With the amount we plan to spend on improvements this year, it now appears that we may not be profitable in 2015. A lot of the maintenance that we have completed until now has been backed-up maintenance that was deferred by the previous owner, and we have moved on to improvement projects. The increased value of the property due to the improvements and rent increase is easily making up for the few thousand dollars that we are in the red in terms of actual cash flow.

Gluten-Free Bread

Gluten-free bread from Shiloh’s Five Loaves is now being marketed as “Simple Kneads.” Tristaun and Devaunt in Raleigh are rapidly transitioning from the “stand-up” phase to the “distribution and profitability” phase. The new website speaks for itself. Click on the picture to visit it:

Click the picture for the Simple Kneads Website.
Click the picture for the Simple Kneads Website.

Kineomen

Devaunt and Nick have been busy networking in the Raleigh area and sifting through opportunities to find the next Kineomen investment (Simple Kneads gluten-free bread being Kineomen’s first investment). Devaunt has focused primarily on Simple Kneads, while Nick has taken on some clients as a business consultant. I am still a relatively small investor working to develop ideas that I could take on as my own project.

Coconut Wine (Vino de Coco)

When I originally invested in Vino de Coco, I hoped that I would eventually get a chance to learn more about the business and gain experience from them as a start-up. I finally got a chance to meet Tim Bowles, the Vino de Coco co-founder who was our contact for the investment. His stories are fascinating. I decided to keep my investment with them and consider a future partnership.

Click the picture for the website.
Click the picture for the website.

Ventures Update April 2015

695 Riverview Drive

Summary: 9-unit apartment building near Columbus, Ohio and Ohio State’s  campus that I bought with my brother, Thad in July 2013. As of 1 April 2015, it is managed by North Point Asset Management.

Recent

  • Management: switched property manager from Renting Ohio to North Point Asset Management (NPAM). So far, NPAM is doing well. However, Renting Ohio seemed great in the first several months, so I will reserve my evaluation for now.
  • I left this review on Renting Ohio’s business Facebook page. Look for my name under 2 star reviews. Or download here. I made the review extra negative to get his attention so that he would send documents I needed for my taxes. It is truthful and accurate. He ended up helping with the turnover as much as he was able.
  • Switched from a dumpster in the front yard to much more sightly–and less expensive–bins for trash removal.
2015 04 15 Riverview from Front no Dumpster
April 2015 photo of the building. The dumpster is gone, and there are bins under the archway, but we haven’t yet planted grass where the dumpster was.

2014 Summary, and 2015 Projection

  • 2014 Profit and Loss pdf.
  • Rounded off to the nearest $500, we show a loss of $13,500.
  • Almost $9,000 of expense is depreciation of the building. The accountant currently handles the depreciation schedule. For a rough calculation of cash flow: ($13,500) + $9,000 in depreciation = ($4,500). Bottom line, negative cash flow!
  • There are 3 key items that we expect to be different in 2015, in our favor, that will improve the bottom line:
    • 1. from January 2014 to April 2014, we did not have a professional property manager and basically were not marketing at all. We had 3 empty units. At $500 per month per unit, for 4 months, that is $6,000 worth of vacancy. They were filled within 6 weeks of hiring a manager in April. If just 2 of the three were occupied, that’s a $4,000 improvement for 2015.
    • 2. In January of 2014, we had a pipe freeze and burst in a vacant unit. It wasn’t discovered until the manager (Thad) entered the unit to install a space heater. He was too late; the pipe had burst 30 minutes prior. The water to the building had to be shut off, and the unit had to be gutted carpet to drywall. This cost about $2,000 and was totally preventable.
    • 3. We spent $3,500 in October to an electrician to make the building compliant with its aluminum wiring. This was a one-time cost to improve a problem that existed when we purchased the property. It can be easily prevented in the future by hiring a competent electrician and ensuring that he knows about aluminum wiring and installs appropriate equipment. Aluminum compatible fixtures are only slightly more expensive.
  • A reasonable expectation for 2015 cash flow is: ($4,500) + $4,000 (improved occupancy) + $2,000 (no frozen burst pipe) + $3,500 (no expensive electrician bill) = $5,000 positive cash flow for the year.
  • There are some items I didn’t list that are negative, but they are roughly equal to the unlisted that are positive. The 3 items I listed are by far the largest.

Gluten-Free Bread

2014 09 Shilohs Five Loaves

Shiloh’s Five Loaves is a gluten-free bread company based in Raleigh, North Carolina. Devaunt LeClaire of Kineomen is the business brains behind the operation while his brother is the baker.

  • As of early April, Tristaun was busy in the newly-leased building with the newly-installed equipment doing test runs baking bread while Devaunt was out coordinating sales. Busy, and progressing close to on schedule! New picture next time…

Kineomen

I became a Kineomen investor in November 2014. Shiloh’s Five Loaves is Kineomen’s primary investment project currently. Kineomen recently proposed a real estate business in Ohio and I am considering a small project this fall to test the viability and get the ball rolling.

Coconut Wine (Vino de Coco)

Coconut wine based in the Philippines. Click the picture for Vino de Coco's website.
Coconut wine based in the Philippines. Click the picture for Vino de Coco’s website.
  • Click on the picture for Vino de Coco’s website.
  • No real update. Seeking repayment of loan. Plan to make a full attempt at repayment this summer.

Ventures Update January 2015

695 Riverview Drive

Summary: 9-unit apartment building near Columbus, Ohio and Ohio State’s  campus that I bought with my brother, Thad. It is managed by Renting Ohio since April 2014.

Recent Updates

  • In October, electrician John Kelly completed all electrical work required for compliance with the aluminum wiring in the building. It was expensive–about $4600–but had to be done and now it can easily and effectively be maintained by hiring electricians qualified to work with aluminum.
  • Switched from a dumpster in the front yard to much more sightly–and less expensive–bins for trash removal.
  • For the months May-December that Renting Ohio has been managing the property, we averaged 13% vacancy. This counts for 2 months of unpaid rent as vacancy. This tenant is being evicted.
  • December 2014 was the first month with no unscheduled maintenance fees.
  • With two new leases signed, we stand to be fully occupied 1 February!

Gluten-Free Bread

2014 09 Shilohs Five Loaves

Shiloh’s Five Loaves is a gluten-free bread company based in Raleigh, North Carolina. Devaunt LeClaire of Kineomen is the business brains behind the operation while his brother is the baker.

  • On schedule to deliver its first loaves of bread to Raleigh-area stores in February!

Kineomen

I became a Kineomen investor in November. Shiloh’s Five Loaves is Kineomen’s only investment project to date. More to follow.

Coconut Wine (Vino de Coco)

Coconut wine based in the Philippines. Click the picture for Vino de Coco's website.
Coconut wine based in the Philippines. Click the picture for Vino de Coco’s website.
  • No update. The company is doing well (I think), but not pushing information to investors. Seeking repayment of loan.

 

Ventures Update September 2014

695 Riverview Drive

Summary: 9-unit apartment building near Columbus, Ohio and Ohio State’s  campus that I bought with my brother, Thad. It is managed by Renting Ohio since April 2014.

Profitable? Yes. August 2014 was a profitable month and “normal” enough to be repeated and sustained. I populated the spreadsheet that I use to evaluate properties with the numbers from August. Accounting for 11% vacancy, the expected cash flow is $255 / month. Maintenance and improvements have cost a lot, but are starting to taper off. Rent is steadily increasing with the market and with the improving condition of the building.

Riverview Cash Flow Aug 2014
Riverview Cash Flow Spreadsheet

Recent Updates

  • Hired electrician to ensure safety of aluminum wiring. (~$1500)
  • Switched from a dumpster in the front yard to much more sightly–and less expensive–bins for trash removal.
  • Met the owner of 675 Riverview, a neighboring building with the exact same layout. Shared contact info, ideas, and got some tips. In August, he resurfaced his parking lot, painted lines, and it looks great, but costs $7500 to have done.
  • Installed a bike rack with brother’s help. ($150)
  • Touched up the paint on the white trim on the front.
  • Determined that the dilapidated fence is the neighbor’s fence, not ours.
The dumpster was an absolute eyesore and had to go.
The dumpster was an absolute eyesore and had to go.

Gluten-Free Bread

2014 09 Shilohs Five Loaves

Shiloh’s Five Loaves is a gluten-free bread company based in Raleigh, North Carolina. For more information, I can put you in touch with co-founder, Devaunt LeClaire. The investment window is open until 31 October 2014.

Coconut Wine (Vino de Coco)

Coconut wine based in the Philippines. Click the picture for Vino de Coco's website.
Coconut wine based in the Philippines. Click the picture for Vino de Coco’s website.

I lent money to this company in October 2011 with a friend. We have yet to be repaid, but the company is doing well as far as we can tell. They are currently seeking investors. I do not plan on investing further.

Stock Market

I sold all my stocks in December 2013 have been in cash since. After reading How to Make Money in Stocks by William O’Neill of Investor’s Business Daily, I determined that if I were able to make money in stocks, it would always be a gamble and it takes a lot of time just like any other investment. I decided I want to invest in things I am familiar with personally.