[00:03:01] John Blatchford: Actually, my grandma was an entrepreneur. She owned a nursing home that she basically started herself and it became family business with my aunts. I think it was in the, in my jeans, if not maybe directly from my parents or immediate family. So yeah, it was a great childhood. And then I went to undergrad in Binghamton SUNY Binghamton under grad school in Cincinnati.

[00:03:19] John Blatchford: And really the first sort of like side hustle business, we started a company in Binghamton my senior year. That was, the idea was basically to sell textbooks on online or sell textbooks on campus. Quarter ends, you have all these books, you could just directly sell it to someone else. So I’m sure that exists now, but I actually think the idea was pretty good, but we didn’t know what we were doing.

[00:03:39] John Blatchford: And the website, it was great, but after maybe a year all moved up. 

[00:03:44] Patrick Donley: And what was that called? Text link. That was the business, 

[00:03:46] John Blatchford: yeah. Yeah. So we all kind of scripted together, worked summers got a website bill and it was a great website. You could just search by the I S B N, you know, now 15 years ago and find any book.

[00:03:57] John Blatchford: So yeah, it was cool. It was fun. [00:04:00] And you made a little money doing it, didn’t you? Now we, I mean, we have to, we launched a website. I don’t even, I think maybe we got to like five users. I think some people started using it, but we all moved to separate cities. And then 

[00:04:13] Patrick Donley: you were a swimmer at University of Binghamton 

[00:04:15] John Blatchford: too, is that right?

[00:04:17] John Blatchford: Yeah, swim my whole life. I saw when I was seven and yeah, I had some high school records until some jerk broke them. Then, sorry, at Bingham 10, it was part of my whole life. And then 

[00:04:28] Patrick Donley: what, what did you end up studying at Binghamton? Did you have a clear career path that you wanted to pursue, or was real estate kind of always lurking in the background as a idea that you wanted to end up doing?

[00:04:40] John Blatchford: I think in, in high school I took a architectural drafting class and that got in my mind that I wanted to be an architect. And there’s always something there of like, I like buildings and cities and I didn’t really know what that would look like, so I wanted to be an architect. Eventually, I supplied a bunch places, business engineering, pharmacy, architecture.

[00:04:59] John Blatchford: But I got into the [00:05:00] engineering school at Bingham Tent, so that’s, that’s what I did and eventually did industrial engineering, industrial and systems, you, that ideal job is probably like logistics for Amazon or something. So yeah, that was the path. But then pretty soon after I graduated, I went to get an MBA because I thought, I don’t think I want to be an engineer.

[00:05:15] John Blatchford: Thought I wanted to get more in the business world. 

[00:05:18] Patrick Donley: Did you work right out of undergrad? Did you get a take a job or did you go right directly to 

[00:05:23] John Blatchford: go get an mba? Yeah, I had internships. I mean, I worked at Restaurant the summers and then I got an internship at Im dm, but pretty much as soon as I graduated, you know, took the summer and then went right to grad school.

[00:05:35] John Blatchford: And 

[00:05:35] Patrick Donley: you ended up at the University of Cincinnati, which is where you’re at now. What was that MBA program like? Was it useful to what you’re 

[00:05:41] John Blatchford: doing now? Yes, two year program. And I think the best part, and probably, you know, college in general is the connections you’re making. Met a lot of really great people that I’m still friends with, including from around the world.

[00:05:54] John Blatchford: It opened up my mind there. Met a lot of people from India and Europe and China, Taiwan. So yeah. But the program was [00:06:00] good. I think it was kind of general, I guess as an MBA program is, you know, learning, accounting and finance and frankly, Excel ended up being quite useful and they actually had a real estate focus and I thought that meant selling single family homes, becoming real estate agent.

[00:06:16] John Blatchford: So I didn’t do that and I focused on information systems. I thought I would have a more like tax software startup path. 

[00:06:23] Patrick Donley: Going into the MBA program, were you pretty clear that you wanted to do something entrepreneurial or did you think you’d pursue more of a corporate path? I think 

[00:06:32] John Blatchford: it was mixed. You know why?

[00:06:33] John Blatchford: I had already technically started a company, but I think I was interested in, I started a program, I had an internship in grad school and I learned a basics building website, and so I thought I would go more to that Path Tech company. Yeah, maybe eventually start my own company, but I, I think my, my idea at that time was to work in like a startup environment.

[00:06:54] John Blatchford: You 

[00:06:55] Patrick Donley: graduated from the MBA program, what year would that have been? Yeah, 2012. [00:07:00] 2012. And then you worked a little bit after that before starting your company, Kunst, which we’re going to get into, what was your first job right, outta the 

[00:07:09] John Blatchford: b a program? It was a very small software company based in Germany, and then Cincinnati was like their US headquarters.

[00:07:16] John Blatchford: You know, it was a strong German presence to Cincinnati Chamber of Commerce. There’s maybe seven of us in the Cincinnati office. And it was manufacturing software, so we would connect to you know, c c machine could tell you when it written down. So yeah, I worked there for two years. Part of that was really amazing.

[00:07:32] John Blatchford: Got to travel all around the world and I haven’t paid for about a company and all that good stuff. You know, learned a lot and yeah, learned a lot in project management. Probably a year into working there. Bought, started looking at our first property and bought it for maybe like 18 months from there, you know, at the time it was just going to be a side thing.

[00:07:50] John Blatchford: I just, again, liked buildings, architecture, all that. And so started on the real estate path, I guess. Tell more about that. 

[00:07:58] Patrick Donley: Tell us about the building you bought, how much it [00:08:00] cost. The area that you’re in is very interesting. Can you describe 

[00:08:03] John Blatchford: that a little bit more? You’re familiar with, with, you know, over thery, but I guess for anybody that’s not, it’s this kind of beautiful historic district in downtown Cincinnati.

[00:08:12] John Blatchford: It’s one of the largest historic districts in the country, as, you know, hundreds of contributing buildings. So it’s sway. You can imagine what this beautiful old kind of like human scale neighborhood to be. And so I, I started discovering it in grad school, but really once I graduated, I moved down there.

[00:08:27] John Blatchford: You know, the weekend I moved in was this great like music festival and just surrounded by musical, historic village, like, oh my god, this. Yeah, I just kind of fell in love with the neighborhood and the people there and came across the first building, which at that time, 20 13, 14, kind of a little bit after the, you know, rate reception and the arch of over the iron like property was still very cheap.

[00:08:45] John Blatchford: So yeah, it’s a $5,000 building, kind of this beautiful corner building and, and what is still kind of a tough area and Over-the-Rhine, but just knew that yeah, I could kind of figure that out. And, and we did three units I was totally bombed out with, and no ru, no windows, nothing. So [00:09:00] we bought it for 5,000.

[00:09:01] John Blatchford: Invested. Yeah, about a hundred, about 230,000. So how 

[00:09:07] Patrick Donley: many square feet was that? It was three units. Were you living in Over-the-Rhine at that time or were you, was it just like an area you loved and kind of on a lark you decided to spend what, $5,000 on this building? Like what’s the worst case scenario?

[00:09:20] Patrick Donley: Right? Like 

how 

[00:09:20] John Blatchford: bad could it be? I mean, basically. Yeah, I can figure this out. I can. We actually raised money on that first project. I had saved some, but you know, we needed to raise an additional like $50,000, which, you know, was a lost, that was end up being like 12 people, average $5,000 investment, like 500 up to like 20,000 and yeah, so I lived inOver-the-Rhine.

[00:09:41] John Blatchford: The building was like fairly close, so a lot of days, first year I was working full-time, so, you know, after working on the weekends we’d just go there and, you know, we were general contractors, we were kind of hiring everybody. We had some help friends of mine that I had done a bit of construction and yeah, basically a year into it kind of quit my job and started doing that full-time.

[00:09:59] John Blatchford: So it [00:10:00] was most days just, you know, walking or driving up to the building, you know, working all day and then going home. What 

[00:10:05] Patrick Donley: was it that you first got the real estate bug, what was it that attracted you to real estate? 

[00:10:10] John Blatchford: I think to start it was much more romantic. Just like this is a beautiful building, it’s 150 years old and hasn’t been lived in for 30 plus years, 50 years at that point.

[00:10:21] John Blatchford: So it just was cool and it was interesting and basically my wife now, and I just loved it. And so we were working there every day and it was just kind of a beautiful thing. And I, you know, I didn’t think that much. I mean, I, I knew Excel, I took finance classes. I, I knew enough to like run the numbers, but it was just probably 8% just the like romantic.

[00:10:39] John Blatchford: I think this is cool copy. Was it an all brick building then? All brick building, three stories, kind of the original, all of our buildings basically masonry, exterior, you know, old gruff, wood joice, and then wood flowing on top and we restored into the units. It’s the original floors and a bunch. We kept a lot of the [00:11:00] original windows, original doors, original corns, which, you know, I basically painted on a GE lift and it turned out great.

[00:11:06] John Blatchford: I think we, you know, I sometimes look back, I’m like, how did we do such a nice job on the first. So were 

[00:11:12] Patrick Donley: you doing like your own demo? Were you, you sounded like you were subbing out a lot of the work, but were you doing as much of of it as you can? Were you like refinishing your own hardwood floors? Were you repairing masonry, anything like that?

[00:11:24] John Blatchford: Yes. Electric, plumbing, h c, the roof, you know, that was all subbed out and then we hired people kind of here and there as we didn’t have the money. We were just, were interested in to do the work. We would do it. We did like all the cabinets, encounters, we restored the floors. I mean I, yeah, I mean me, I’m saying like, and my wife and, and then we hired basically like three laborers.

[00:11:47] John Blatchford: It was kind of just the crew of us there. Every day I get self done. 

[00:11:50] Patrick Donley: What was it that allowed you to quit your job? Had you saved up a bunch at that point from your work or what was it that gave you the confidence to leave your W-2job [00:12:00] to pursue this? Because it was just one building at that point. Right.

[00:12:03] Patrick Donley: I’m just kind of interested about the thought process of how you decided to leave your W two. 

[00:12:09] John Blatchford: Yeah, it didn’t really make sense. And looking back, I’m not sure I would do it the same way. Yeah, I was basically like 25 and I had some savings, but basically put it all into this building. So like financially it wasn’t a smart thing.

[00:12:21] John Blatchford: I think I was annoyed enough with the job that I wanted to quit and I was as interested enough as I could be in the real estate that I was like, okay, this makes sense. Like I’ll just do this full-time. But it wasn’t very like wise, okay, I have savings and I’ve done five buildings and now I’m ready to, it’s like I just like, I don’t want to work here anymore and I want to do the building should work out in the end.

[00:12:39] John Blatchford: But wasn’t like that well thought out, I’d say. 

[00:12:43] Patrick Donley: Were you married at the time or was, did that 

[00:12:45] John Blatchford: come later? No, that was, yeah, we basically, we like buying the building and us starting dating was like basically the same kind. That’s very cool. And that 

[00:12:55] Patrick Donley: can make or break a relationship. Doing a project like that is taxing.

[00:12:59] Patrick Donley: It’s a little [00:13:00] strenuous and stressful for sure. My wife and I are renovating a building together right now and. It’s had some challenges. So how did that go for you and your, your now wife? 

[00:13:10] John Blatchford: I think we look back on that time in a really positive light. Plenty of nights where we’re just like drinking beer, music and just like working out the buildings or at the building.

[00:13:21] John Blatchford: So yeah, I think it’s good, you know, now, like that learns a lot to lessons over time of like maybe not to work with partner. I have some professional separation, but yeah, for certainly in that time in that building, like it didn’t my race. Is she 

[00:13:34] Patrick Donley: still involved with the real estate that you’re doing now or has she, has she moved on to do 

[00:13:38] John Blatchford: other things?

[00:13:40] John Blatchford: Yeah, so you know, I did maybe our first like four historic task credit applications and she has done now like 30 since then. You know, including for other developers. She’s kind of taken over that part of the business. She’s a historian, so you know, has her own independent work. She’s a publish, but so still a bit of her time is working in with goods, but less now.[00:14:00] 

[00:14:00] Patrick Donley: Early on, were you doing a lot of reading about real estate listening to podcasts to get inspiration? Were you doing things to kind of further your knowledge and education about how to do this project? 

[00:14:11] John Blatchford: Yeah, I think a lot of it at the beginning was more on the construction side and lucky to know a lot of good people in Cincinnati that were, were willing to help and were very helpful.

[00:14:20] John Blatchford: Small general contractors, friends that were doing similar work. And I think that was a lot of the early learnings. You know, how do you set up contracts, lean waivers, you know, who should I call for this? And then just like education by fire, I think, you know, asking all the dumb questions. I mean, probably in 2012 I didn’t know anything behind the drop, like in an apartment or, you know, like didn’t know anything.

[00:14:43] John Blatchford: So that was the main learning. I think just, just learning a lot about construction was sort of mentors around me and then some research online podcasts and stuff like that. But I think it’s been a lot more education like by pain and, and from people around me. It’s probably the best 

[00:14:56] Patrick Donley: way. How did you find that general contractor to do the work?[00:15:00] 

[00:15:00] Patrick Donley: Did you hire a general contractor or were you functioning as your own GC for that first building? 

[00:15:05] John Blatchford: A friend of mine, he, he has an now with’s, maybe like a 10 person sort of construction company in Cincinnati, you know, same Asian. He is been on maybe like a somewhat path, but, so the idea was like we would partner on it.

[00:15:18] John Blatchford: He would have some small equity, he would be like the GC or more like advisory GC where I would be doing most of it and he would help. So that was really useful. And then kind of as I quit my job, like took over more of that where he was like consulting, I would say. And, and we were technically the GC and hired, you know, a couple guys from Craigslist and just figured it out.

[00:15:37] Patrick Donley: And then at what point did you get turned onto historic tax credits and pursuing? 

[00:15:43] John Blatchford: So really from the first building, I think a friend of mine mentioned there’s these star tax credits. And so I, you know, researched and went down the rabbit hold bit and found a consultant. And I was like, yeah, what, what does it look like to hire you to do these tax credits?

[00:15:55] John Blatchford: And he said, you know, gave us fees and then sent me like PDFs, like this is what I would produce. And [00:16:00] there was, you know, like a 10 page pdf and I was like, oh, I think I could just do this. I don’t, maybe I don’t need to pay this guy. So basically I just did the first one. Fortunately it wasn’t that competitive at that time and we won tax credit on the first one.

[00:16:12] John Blatchford: But like anything from doing one probably then knew more than, you know, 80% of people then did the second one and just has not become like expertise, but really just figured out. Did you 

[00:16:22] Patrick Donley: know like when you bought the $5,000 building that it would be a candidate for a historic tax credit? 

[00:16:29] John Blatchford: We probably would’ve done the building anyways.

[00:16:30] John Blatchford: That first. I think I kind of figured out through the process of like, oh yeah, I knew it was historic and maybe that was an historic district, but figured out kind of through the process of like, okay, there’s these tax Chris, and it would qualify. Like, okay, I think that would make it financially better.

[00:16:44] John Blatchford: So yeah, it wasn’t like, wasn’t part of the plan. Maybe initially 

[00:16:48] Patrick Donley: explain to our listeners, we’ve got mostly like, kind of beginning intermediate investors exactly how a historic tax credit works and what the benefits 

[00:16:56] John Blatchford: are. It’s effectively the, the government trying to [00:17:00] incentivize a very high level of historic preservation.

[00:17:03] John Blatchford: You know, I think coming out of the fifties, sixties, seventies, you know, governments realize we should preserve some things. You know, there is value in that. There is, you know, character and, and all this stuff that’s important about historic reservations. So basically, you know, say it’s a million dollars of construction, the state of Ohio will give you 25% credit and the federal revenue 20% credit.

[00:17:23] John Blatchford: So combined, say 45%, something like $450,000 on a million dollar project. And that really is like a deduction of the taxes you would have to pay. You know, there’s different ways to basically turn that into money. You can sell the credits to people in Ohio, that credit is refundable, so if you can’t use it that the capor actually pay you that money.

[00:17:42] John Blatchford: But yeah, so it ends up being like a, something 30 to 45% kind of discount on your construction. So with 

[00:17:48] Patrick Donley: the state, I was listening to your interview with Chris Powers that you did, and does the state actually send you a check for the amount of the 25% directly, like at tax time or at, you [00:18:00] know, shortly after tax time?

[00:18:01] Patrick Donley: Is that how that 

[00:18:01] John Blatchford: works? Yeah, I mean, the first project, you know, we finish ended off paperwork and then, and that was the 

[00:18:08] Patrick Donley: $5,000 place that you bought, that was your first tax credit project, right? Yeah. 

Yep. 

[00:18:13] John Blatchford: I think the, the credit was 35,000. It was just direct deposit, like any, I guess, tax refund. I, you know, put in my bank information and then one day I looked in like, oh, that’s, And then the 

[00:18:24] Patrick Donley: federal is 20%.

[00:18:26] Patrick Donley: And that is a deduction from your, how does that work? Because that’s not a direct deposit into your bank account. Correct. 

[00:18:35] John Blatchford: Yeah, so it’s basically, you know, you have a $200,000 credit. So if your income qualified and you had a $20,000 tax bill one year, you could just use a 20,000 of that credit instead.

[00:18:48] John Blatchford: And so you pay basically no tax? You know, it depends on the investor. It depends if you can use it on the first projects. And even now, like I, I can’t personally use not that much credit tax liability, but you know, investors can often use them or you can [00:19:00] just sell them to somebody that doesn’t even in the project, that could use the credit.

[00:19:03] John Blatchford: And that’s how we do it now. 

[00:19:05] Patrick Donley: So you’re selling that credit to other investors that need to offset their income. Is that how that works? Yeah, exactly. And is there a secondary marketplace? How do you get connected with people that want to buy the tax 

[00:19:19] John Blatchford: credits? There are some like lenders that can understand it the best.

[00:19:25] John Blatchford: There’s, so there isn’t like a good secondary market. I think there probably could be is for a lot of these tax credits, you know, there’s new markets and low income housing and all this stuff which trade, but it’s very kind of opaque and hard to find. And the best way I’ve found is through like CPAs, tax people that have clients that can use them because they can help facilitate the, the sale and also can like, understand it and explain it.

[00:19:45] John Blatchford: That’s how I found, but you know, you could sell it to someone, you know, you could do whatever, but, and there are, there are syndicators people who do this as a job and then when 

[00:19:53] Patrick Donley: you sell them, you don’t get a dollar for a dollar. Are you selling it, you know, as a percentage of that tax credit? Like a little bit, I don’t know, 80 or [00:20:00] 90% of of the what the tax 

[00:20:01] John Blatchford: credit is worth.

[00:20:03] John Blatchford: Yeah. They’re going to price in both like when they will get the tax benefit and also maybe the risk of project because their risk of buying the credit is project never gets done or you screwed up and you don’t get tax credit. So they’re going to buy it at some rate that, you know, they would a fair return.

[00:20:18] John Blatchford: So anywhere from maybe like 65 cents to 85 cents, something like that. 

[00:20:23] Patrick Donley: Do you ever sell the credit before, like way before the project is finished? Like, will somebody take a risk on that or is that, do they want to see it pretty far along in terms of completion to know that like, yeah, this thing’s going to finish and I don’t think I have too much risk here.

[00:20:38] John Blatchford: Yeah, I mean, you, you can sell it pretty early, even as part of, it’s like your initial equity or capital in the project. You know, they’re not going to put in all the money up front. So you might have an agreement to buy them, but only 25% of the money is in upfront, 25% at on drywall, complete 25%. You know, something like, you know, their actual payer is going to be mostly to sort of make a risk.

[00:21:00] Patrick Donley: So I want to talk about at what point did you form your company, which is it’s Kunst. Tell us what that word means and how you ended up, at what stage did you form the company? 

[00:21:11] John Blatchford: Yeah, so we walked the first building end of 13, working on it for a year, and then basically I quit my job and I was like, okay. I think to actually build a company around this like 20 14, 15 horn, the lc actually made it a company.

[00:21:25] John Blatchford: So yeah, Kunst is, it’s a German where just means ours. The idea we’re in Over-the-Rhine, which was a very German neighborhood. That was the main motivation. It was, you know, a short name domain, PS IUs was available. 

[00:21:36] Patrick Donley: When you structure the company, did you have in mind how, what kind of projects you were going to do?

[00:21:40] Patrick Donley: Did you know you were going to continue to do these, you know, historic tax credits and Over-the-Rhine or did you have any other kind of vision for the 

[00:21:47] John Blatchford: company? The idea, which has kind of come to be as just more of what we had already done, so, you know, finished that one building. It went reasonably well, first one, and then basically that first building maybe raised [00:22:00] $60,000.

[00:22:00] John Blatchford: And then we did kind of two buildings at once and raised maybe $200,000, but the same exact thing, like a quarter mile away. So historic tax credits. Circum vision, same thing. And that’s what we’ve done on every building, I think informing the company. The idea was we’re just going to keep doing this and, you know, do as much as we can in Cincinnati.

[00:22:19] John Blatchford: And maybe at some point, you know, the model works in other cities. Tell us about 

[00:22:23] Patrick Donley: Cincinnati. What, what is that market like? How do you like working there? Do you ever, I mean, you mentioned maybe expanding to other cities, what cities would also interest you? 

[00:22:32] John Blatchford: I mean, Cincinnati, I had never heard of it before.

[00:22:35] John Blatchford: I went to grad school there, you know, went to University of Cincinnati. I was there for two years and I guess I would say fell in love with the place for anybody that hasn’t been, it’s, it’s certainly worth, you know, at least a long weekend. So yeah, it’s, it’s really beautiful historic city. It probably has the same environment many people have been to, like Savannah or Charleston, where it’s just like so much dense, historic architecture.

[00:22:58] John Blatchford: And, but then on top of that, you know, it has [00:23:00] very great restaurants, has symphony in the opera. Major league sports team, dominant league, soccer team, like you know, everything. I think you want sort of an urban environment and maybe at half the cost that you could find in, in the coast. So it’s just a really compelling place I think for that reason.

[00:23:14] John Blatchford: And yeah, I mean it has made it a good place to do, to do real estate and it’s not a blooming market. We’re not relying on this major influx and capret compression and all this crazy stuff. But’s sort of like, eh, stables, good employers downtown p and g is there, Kroger’s there and it’s a big place and I think in the recession it’s probably fine and then the boom times it’s basically stable.

[00:23:33] John Blatchford: I think that’s kind of the pitch. But yeah, I think there’s other markets like that. I think, you know, Pittsburgh is probably a bit ahead. Nashville the same, but yeah, Louis Bowl, Cland, even Detroit, I think there’s a lot of development in there. St. Louis, I think a lot of like cities in the Midwest. 

[00:23:48] Patrick Donley: I mentioned I’m in Columbus and I, I live in German Village, which is obviously a German influenced and it sounds like over the Rh is as well, very heavily German influenced town.

[00:23:59] Patrick Donley: Why [00:24:00] was that? How did that develop historically? 

[00:24:02] John Blatchford: I think, you know, like now there’s sort of chain migration. It starts with a small group of people and then once enough people go, you know that you can get a job. You know that largely, you can still speak in German. I think there were 20 German language newspapers in Cincinnati.

[00:24:15] John Blatchford: You know, like a Chinatown or like anything. Now you can go and it can be a version of where you came from and you can get jobs and you know, have a place. I think the power grew in Cincinnati and, and all the architecture remains. Yeah, same obviously at German Village too. Let people do that. Yeah, I love it.

The 

[00:24:31] Patrick Donley: exposed brick and the original hardwood floors. It’s really hard to beat that. Is that something you initially fell in love with and your future projects? You always try to find those kinds of, of homes and apartment 

[00:24:43] John Blatchford: projects to buy? Yeah, I mean the first one, you know, it was in very bad shape, but two of the floors we held the original floors, so it’s 150 year old.

[00:24:52] John Blatchford: Solid hardwood would be quite expensive to do now and it was just already there so we just had to sand and we finish it. I think [00:25:00] that’s maybe a theme in all these buildings where it could seem really annoying and difficult and it’s old and why would you keep the old thing like, don’t even want the new and is new just better.

[00:25:08] John Blatchford: And I think, you know, oftentimes it is, I think insulation and soundproofing and so many things that we’ve invented. I mean our life’s better, but but I think a lot of the original stuff is quite good. It’s all good with trees that very expensive now it’s a custom decorative plaster mulling. It’s a ivory handle on the door.

[00:25:25] John Blatchford: Yeah. You can’t re 

[00:25:26] Patrick Donley: recreate the soul of old stuff. I had Eric Weatherholtz on the show, I don’t know, two or three weeks ago, and he was talking about the Easton, which is a project in Columbus and it’s a great outdoor development, you know, really well done. But it doesn’t compare it to like the history and the tradition that is in German village and the old brick homes and the brick roads.

[00:25:45] Patrick Donley: Like you just cannot recreate that with new as hard as you try. 

[00:25:50] John Blatchford: And I think, you know, that does come through with, with renters. You know, a way to drive returns and to do well in real estate is grace. How is differentiated? That’s nice. That’s high quality and I think that’s [00:26:00] already just there with an old building, I just kind of need to bring it back to life.

[00:26:03] John Blatchford: So you don’t have to be that really. You just sort of have to give a little care to what was there. 

[00:26:09] Patrick Donley: In doing my research for the interview, I saw that you also published a magazine called Kost. Talk about that. What was the inspiration to do that? 

[00:26:17] John Blatchford: Yeah, so we in my words and I, we got a grant to do Konz Magazine and I think it was a mix at the time.

[00:26:23] John Blatchford: I don’t know if I thought it would be like good marketing or just a cool Lakeside project, but we created two issues. We’re just trying to tell a story of other people doing things like us renovating and adding over thery people, building and creating the artists. So it was, yeah, it was more like a side passion project when we sold them and we maybe broke even on it.

[00:26:45] John Blatchford: And you would 

[00:26:45] Patrick Donley: focus on like local developers or guys like you doing similar projects strictly and 

[00:26:50] John Blatchford: over the run. Yeah, pretty much just over either downtown we did a craftsmanship issue, but you know, the craftsmanship won. We went out to Indiana [00:27:00] guy who was doing all this custom mill work. He had like 300, you know, knives for different mold trims and all his stuff.

[00:27:05] John Blatchford: And so we photographed his shop, you know, with a big photographer. And so it was, it was stuff like that. Just trying to tell the story of people. Yeah, I cared about what they were doing, things I wanted to go 

[00:27:15] Patrick Donley: back to that first project, once you completed it, how long did the, did it take to complete it?

[00:27:20] Patrick Donley: Because it’s a pretty big project to do a renovation like you’re doing. How long did that take, and then what was the next step in terms of renting them? Did you move in? What happened 

[00:27:30] John Blatchford: next? It was about 18 months from purchase to occupancy, so we created the three apartments. We got the tax credits. It was called property tax abatement.

[00:27:41] John Blatchford: There was never an idea. We thought maybe to live there, but it was, wasn’t really in mine. But good friends of ours lived there. Which, you know, potentially was challenging at first. Went out in the winter and also that, you know, we thought the project was done. We said, yeah, you can move in and, you know, I forget.

[00:27:56] John Blatchford: And they were living with it random said, ah, actually it’s February and I got pushed back a few [00:28:00] months and until June or so. Yeah. So the idea with that building and really with all of our buildings, like we’re going to rent it out, I don’t know, forever, but if at some point it makes up, the facilitated price is good, depend on our situation, our, the investors, like we’ll sell.

[00:28:13] John Blatchford: Yeah, we owned that building once, was done for three years and then sold it. 

[00:28:19] Patrick Donley: So how does that work with the, both the historic tax credit and you mentioned the tax abatement. Does that transfer to do, does the new owner benefit from 

[00:28:27] John Blatchford: those at all or? No, the tax payment does transfer property, tax payment.

[00:28:32] John Blatchford: The cash credits typically do not. So after occupancy kind gets the owner locked in, can’t sell it, in, can’t, you know, sell the building with the credits. So, They say like subject to a capture. So the federal credit, technically they could come and sold it in year three and the credit slash for five years.

[00:28:48] John Blatchford: They could take two years of those credits. So in that case, I think we probably had a year left on the federal credit, but we haven’t used all of it anyways. And so probably matter. So 

[00:28:57] Patrick Donley: the next project I wanted to hear [00:29:00] how you structure, do you structure each project as an individual, L L C with your limited partners?

[00:29:06] Patrick Donley: How do you do that? Is each one a separate project or do you have like a fund that you’re doing for the 

[00:29:12] John Blatchford: first like six years it was, you know, the syndication model. Each one is a separate building, separate L l c, separate investor group, like equity split to use all that. So each building was like really independent, which I think is good, you know, to be siloed, but also it does great complexity.

[00:29:29] John Blatchford: So that’s, that’s what we did basically for the first five years. And so yeah, for the second project it was really like two buildings at once that were right next to each other. And those are two separate S three separate investment groups. So 

[00:29:41] Patrick Donley: you were doing the project management, whatever you want to call it, you’re doing the, the leasing, the managing the project itself or leasing them and you’re also doing the accounting side of it.

[00:29:52] Patrick Donley: Did that get too complicated at, at some point? Do you manage all of that in-house or do you have any third parties that come in to 

[00:29:58] John Blatchford: help you with that? [00:30:00] Yeah, so I think a key lesson has been, you know, I think it’s attractive to be scrappy and I think that’s really important. And you know, I did all the bookkeeping and we were the GC doing a lot of labor.

[00:30:10] John Blatchford: We were the property manager papers, five years of the business. And I think that can seem interesting and maybe you can clear from that and may, hey, someone that’s overpaid like all, you know, all this stuff. But you know, ultimately, like it doesn’t make sense to be doing the accounting taxes, but there are people that do that.

[00:30:27] John Blatchford: They’re highly optimized to do it and it’s worth it to pay them. The same thing with property management. You’ll be lucky if you can build one business, well certainly can build like more business as well at once. So over time kind of, you know, learned from that and, and have done less in the last, so right now I’d say we’re truly like developer tax credits and general contractor.

[00:30:47] John Blatchford: What’s an average day 

[00:30:48] Patrick Donley: look like for you? Right now? 

[00:30:50] John Blatchford: Probably like 50%. I would say. Financial, including like investors, current investors, enter new investors, you know, the opportunities [00:31:00] are compliance, potentially selling tax credits, financing. So I think that’s a lot of it. And 25% might be like, let’s say development, which permitting design architects and everything basically from purchase until nc.

[00:31:12] John Blatchford: And then 25% is probably construction, you know, we’re the gc, we do instruction, so just like monitoring that. But you know, mostly Gmail, Excel, those. My two, I guess I saw that you’re into notion as well. Yeah, that’s been a lifesaver. We, we use it for invoicing and it’s like absolutely fantastic for that purpose, strictly for invoicing.

[00:31:37] John Blatchford: Yeah, we use it for everything. I mean, we now it’s sort of like our wiki, our internal wi piece. You know, in the ideal case, any, any function that we’re doing, we will have a place in there. You know, if I would send you an email and say, Hey Patrick, can you, you know, pay our accounting bill this month or pay our, you know, tax bill after it’s number 3.2 in our wiki and just luck.

[00:31:55] John Blatchford: You watch a video, a loo video and, and knew know how to do it even if you had never done it before. [00:32:00] That’s how we try to use it as like a wiki resource where we store our information, e n numbers, kind of stuff like that, and that accounts playable and our daily construction ports as well. 

[00:32:09] Patrick Donley: And then what’s the company look like right now in terms of employees?

[00:32:13] Patrick Donley: How, how many employees do you have helping you 

[00:32:15] John Blatchford: do all of this? So there’s me, you know, my wife who is partnering the business works on a tax credit, and then we have a director of construction project major and superintendent that’s kind of our construction team of three people. And we have like an accountant keeping all the books.

[00:32:31] John Blatchford: And then we have like part-time finance guy who’s working on the loans and. Tax credits, opportunity zone, all that. So that’s kind of our, you know, internal team. And then, you know, of course work with lawyers and at accounts and all that. What’s the 

[00:32:45] Patrick Donley: competition like for historic tax credits? Are there a limited amount that are granted per year?

[00:32:50] John Blatchford: The, I would say for the properties, you know, are we competing to buy properties? I think yes, but it’s much less competitive because it’s whole buildings, it’s restoration. You have a historic [00:33:00] conservation board that’s going to oversee your project, you know, it’s going to have an opinion on what you do on the exterior.

[00:33:05] John Blatchford: There’s a lot of like headaches that don’t exist in a lot of real estate. So I think that is, you know, potentially you can get past that, like to our advantage where it’s just a bit less competitive to buy. And then the credits themselves, you know, the federal credit is not competitive and so typically if you apply, you’ll get them if you really qualifies and you do the right work.

[00:33:24] John Blatchford: The state credit is competitive in Ohio and so there’s, you know, a certain pool of money and all the projects in Ohio competing, you know, are competing projects in Columbus and Cleveland and everywhere else. And basically apply twice a year. And each of those rounds is competitive with all the other projects applying at the same time.

[00:33:38] Patrick Donley: Now, are you doing the application after you’ve made the purchase of the building? Would that, like, if you don’t get the tax credit, is it going to, it’s obviously going to affect your numbers. Does that happen ever where you ju you’ve bought the building, you’ve done the, you’ve done the application, but you aren’t given the tax credit?

[00:33:56] John Blatchford: Yeah, there is some risk there. Buy the building, don’t get the tax credits, [00:34:00] then, you know, what would you do eventually you have to sell the building. So we, fortunately we’ve gotten the credits on every project. I would say it’s near a hundred percent chance we’ll get them eventually. Maybe you have to apply twice.

[00:34:12] John Blatchford: Worst case, maybe three times. But there is that risk. But yeah, so you basically have to give the credit before you start construction. So we wouldn’t, you know, we wouldn’t start on a project, invest a ton of money, be halfway through construction, and then find out we, we can’t give the credits. Like that would never happen.

[00:34:26] John Blatchford: But you know, it’s possible. So you 

[00:34:29] Patrick Donley: granted the credit. Prior to even doing any demo or anything on the building. 

[00:34:35] John Blatchford: Yeah. And you actually have to be, and they want to make sure that you haven’t torn out the beautiful medallion plaster ceiling and then applied for credits afterwards. So they, they don’t want you to do anything until you apply.

[00:34:46] John Blatchford: Now 

[00:34:46] Patrick Donley: do they walk the project with you to take a look at it or are you just sending photos in? Or how does that application process work for 

[00:34:53] John Blatchford: you? The whole thing is just photo based. So you take tons of photos and then you have like a photo key, so you know, they know [00:35:00] where they’re in the building and what they’re looking at.

[00:35:02] John Blatchford: So they, they sit in Columbus. They have the, you know, the right, I think the common spec project at any time. But, you know, they have so many projects that we probably had like four site events, you know, seven years. And what’s it 

[00:35:14] Patrick Donley: like working with the Overthe Rhine, the historic 

[00:35:16] John Blatchford: association? You know, in Cincinnati they have this historic conservation board, which, you know, this, they kind of govern Over-the-Rhine.

[00:35:25] John Blatchford: They govern any like register historic building in Cincinnati. And in my experience, like third grade because they’re headed by a person who knows what they’re doing. So they kind of have like a single point person that’s going to review the project, they’re going to review everything and have a somewhat impartial opinion.

[00:35:41] John Blatchford: And then the board, like by statute, is made up of like a developer, a finance person, a historian, you know, they have like the qualifications for, I think the five people on the board. They come at it from all angles and they end up, I think, being pretty fair. Just for my 

[00:35:56] Patrick Donley: own selfish reasons. I want to know, like I’m in German Village and I also, I [00:36:00] don’t know if you’re familiar with Franklinton, which is in another historic area that’s getting fixed up outside of Columbus.

[00:36:06] Patrick Donley: How do I find out if something is available for a tax credit or, or if it’s not. Like German Village is obviously a historic district, but I don’t know if my house is available for that. I’ve got an office building that I’m working on. I don’t, I’m not sure if that’s available for a tax credit. How do I 

[00:36:21] John Blatchford: find that out?

[00:36:22] John Blatchford: Yeah, I think the best way is probably, you know, either the, if you have this like historic conservation board, like a local governing body that deals with historic, ask them, or like a nonprofit like in Cincinnati have Cincinnati Preservation Association and they, they would be a good resource. But basically it’s like, you know, there’s a national historic district, there’s a map for that.

[00:36:41] John Blatchford: I think German villages as well. And you know, as long as your building is within that and it qualifies, you know, there’s like, there are ways you could probably go figure it out, do research and libraries. But I think the exist would be local conservation board or historic group. 

[00:36:57] Patrick Donley: And in general you’ve got to apply for the [00:37:00] credit before you began any kind of work.

[00:37:02] Patrick Donley: Correct. 

[00:37:03] John Blatchford: And yeah. And even be awarded the credit before you do anything. Are there 

[00:37:08] Patrick Donley: oftentimes that you’ve seen people do work on a building that they would’ve been eligible for a tax credit but they don’t apply for it and they miss out on whatever, 20 or to 45% of, of a credit on the project. Does that happen often?

[00:37:22] Patrick Donley: Yeah, 

[00:37:22] John Blatchford: I think it probably happens all the time and over thery. And is that just because they don’t 

[00:37:26] Patrick Donley: want to mess with it? 

[00:37:28] John Blatchford: Yeah, don’t know about it. Don’t want to mess with it, which I can get. I mean, there is an efficiency of just doing the project, kind of getting it done, not dealing with all this stuff. So I definitely get that.

[00:37:36] John Blatchford: But I, I imagine it’s more like lack of knowledge or they don’t know it’s a bill war or the benefit of it. Because I’m sure of all the bes renovated, dumped Ryan the last 20 years maybe 25% of them got in tax food. So it’s, I think the most even though they could, my 

[00:37:50] Patrick Donley: favorite beer is Rhinegeist and that the building is in Over-the-Rhine.

[00:37:54] Patrick Donley: Was that a project that was a historic tax credit project? 

[00:37:57] John Blatchford: I don’t think they did. I know that they started with a lease and so, you know, they didn’t own the building. I think they were just doing like the leaseholder improvements, putting all the tanks and everything in there. And then they bought the building like year four of operation.

[00:38:11] John Blatchford: So I imagine that even if they had known about the credits, it probably wouldn’t have quite worked, like how they did it. But yeah, it’s a great historic innovation. 

[00:38:20] Patrick Donley: It’s a great area. So you did that first project. How many have you done to date? It sounded like quite a few at this point. 

[00:38:27] John Blatchford: We’ve completed and sold four, four buildings, like 20 units.

[00:38:32] John Blatchford: We, we have three that are under construction, that are about 40 events. And then we have two probably upcoming, that would be about 30. So, you know, we’re only at like hundred units total, so it’s quite small. And how do you decide 

[00:38:45] Patrick Donley: whether to keep or to, to sell a project once it’s finished? 

[00:38:50] John Blatchford: I think, you know, maybe something we’ll talk about is like, what’s a controversial thing?

[00:38:54] John Blatchford: I, I think real estate operators want to have the idea of like, I’m a long-term owner, I’m going to own this property [00:39:00] forever. It’s like a multi-generational thing and that’s great. But like selling real estate is also very great. I think if you’re a real estate investor, if you already have a lot of capital, yes.

[00:39:10] John Blatchford: Investing in real estate forever makes sense. If you’re an operator and you relatively don’t have, you know, that much capital. I think selling makes sense. I’d become much more like interested, I would say generally in selling. And, you know, put it on the market, see what the price is, see what the returns would be.

[00:39:24] John Blatchford: You’re not a for seller. Your debt doesn’t requirement, you’re not in strain, but if someone makes a great offer and you make a lot of money on it, then sell and build a business. And you’ve done that in 

[00:39:36] Patrick Donley: three cases, is 

[00:39:36] John Blatchford: that what I’ve heard? Yeah. And we’re, we’re selling another building now, so that would be the fourth.

[00:39:42] John Blatchford: And then do you do 

[00:39:43] Patrick Donley: a 10 31 exchange at that point, or are you using the funds as operating funds to do more, more projects? How do, how do you, what do you do at 

[00:39:51] John Blatchford: that point? Yeah, I mean, pretty much the money has gone then into following projects, you know, trying to build up some skill that way as well. [00:40:00] So you don’t really 

[00:40:01] Patrick Donley: have an exit strategy for each project.

[00:40:03] Patrick Donley: It kind of just kind of depends how things unfold and how they develop. If you get a good offer, maybe you’ll consider selling it. Otherwise, just consider renting the 

[00:40:11] John Blatchford: units. Yeah, we have long-term debt and the tax credits will typically require own the billings gravity. Least five years now we’ve been doing a bit of opportunities on investing.

[00:40:20] John Blatchford: So that would typically, you know, want to own the buildings for 10 plus years. So we have some, like, you know, we’re pretty long, longer term oriented in general, but if it makes sense to sell, well we would sell. And then 

[00:40:31] Patrick Donley: do the LPs, do they get much say in that or is that your decision as a general partner?

[00:40:36] Patrick Donley: H how does that work? 

[00:40:39] John Blatchford: It’s been a mix over time. Some projects I would say I don’t have that much control. Like I, you know, like legally no control to helping buildings and so then it’s kind of totally up to the LPs. I think on other ones, even if I have the control, you know, I certainly wouldn’t sell it or investors didn’t want to or if we couldn’t set up some 10 31 exchange, like you said, or opportunity then.

[00:40:56] John Blatchford: So, yeah, I think it’s more like, do we all agree on this? [00:41:00] 

[00:41:00] Patrick Donley: I want to talk about raising capital, how you talked about cobbling together. You know, the money for the first project, have those investors stuck with you? Have you sought out new investors? What’s it been like raising capital for these projects?

[00:41:14] John Blatchford: Yeah, so in the first building, all those investors are still invested with us. So now almost 10 years probably. So that’s been good. And then, yeah, kind of always like an expanding group, larger capital allowance, you know, start with maybe like local business people, people that have been successful. And then, I mean, frankly through Twitter and networking, have kind of expanded that to New York, west Coast.

[00:41:36] John Blatchford: People who have sold company, people who do really well in, in tech or you know, the company, IPOing, something like that. Yeah, the Drew has expanded. I think we have, you know, lifetime, maybe 50 investors. An average investment is probably $200,000, something like that. And how 

[00:41:52] Patrick Donley: has Twitter affected your business?

[00:41:54] John Blatchford: You know, at the kind of start of covid, I was like, I just kept hearing, I think in podcasts [00:42:00] and you know, online whatever, people like, yeah, Twitter is such a powerful force. It’s helped my business, whatever. So I was like, okay, I’m just, I’m just going to post every day. I don’t really have an idea of what this will do, but that’s my commitment.

[00:42:09] John Blatchford: I’m just going to post every day and see what happens. So yeah, it’s been pretty crazy. I think relative to Black Mine Network, network, I could create otherwise the will in my world without Twitter. Like it’s absolutely life-changing. Probably the only reason maybe, you know, about me and yeah, crazy. You just get exposed to people building really big businesses that actually message them or they see you and it just builds with trust.

[00:42:31] John Blatchford: Yeah, it’s, it’s a pretty amazing thing. Do you also 

[00:42:33] Patrick Donley: use it as a venue for learning? Do you learn a lot from real estate Twitter? Yeah, 

[00:42:38] John Blatchford: absolutely. I think I in general try to follow like a small group that thinks highly valuable. As much as I love Twitter, I try not to, you know, be too much on it, I guess.

[00:42:48] John Blatchford: But yeah, there are some really fascinating people. I mean, just the basics of like, What’s a fair fee structure? What’s a fair like split with investors? I mean, if I had known some of that stuff, you know, three years earlier, it [00:43:00] would’ve probably changed my life, my business. And it’s stuff that’s just there for free and all these years of experience and mistakes that people have made.

[00:43:06] John Blatchford: So it’s, it’s really volatile things. So yeah, I, I’ve gained a lot and I still gain a lot and people will post stuff on there that I should have known, you know, unlived, your doc, yield on cost, like a pretty basic sort of real estate metric. I probably first learned like two years, like, oh yeah, that makes sense.

[00:43:21] John Blatchford: Can you 

[00:43:21] Patrick Donley: explain what that is for our listeners that don’t 

[00:43:23] John Blatchford: know what it is? Yeah, basically, so, you know, there’s like a cap rate that’s like basically the same thing. You have your total cost into a project if it cost a million dollars and then you have like your net operating income that comes from that project, which is basically like cash that’s going to come out of it, excluding your loan and like cap hooks, managers and stuff.

[00:43:41] John Blatchford: So, it’s basically a way of like figuring out the multiple building. And so, you know, the higher the cap rate, the better. When the market’s very loppy, you know, 4% cap rate and means you’re buying it at like a, you know, 25 times multiple and it’s net operating income. Yeah, higher cap rate technically is better, but you know, the idea of like, okay, you have this, a total investment [00:44:00] in, you’re going to have this sort of like singular number that’s going to somewhat determine if it’s a good investment or not.

[00:44:04] John Blatchford: That’s basically like your un review on cost is like same thing as, as they blast the Capri, the data project is done. Do you have any other 

[00:44:11] Patrick Donley: metrics that you look at before when you go into a project to determine if it’s a go or no go decision on, on buying it? 

[00:44:19] John Blatchford: Yeah. I think that’s the main one is sort of like green light, red light and, but there’s other like sanity checks, you know, like what percentage of your rents comes as your net operating income.

[00:44:29] John Blatchford: You know, if that number’s too high, if you have 90% of your net operating income against your, your rents, then that probably your expenses are too low. Even though you’re missing something, you’re, you’re not properly guessing the. What copy taxes are we paying? So, so that like what’s that percentage? I think for us it’s you know, in the range of like 25, 30%, like our expenses of our, our rent.

[00:44:48] John Blatchford: So it’s more like sandy checks like that, you know, debt service coverage. I think that’s very critical. I think people get interested in like loan, the cost loan, the value. All that’s important, but it’s sort of the main thing is like can you make [00:45:00] your lawn payment even if your rats drop. So I think that’s important, you know, and we do look at long-term returns.

[00:45:06] John Blatchford: I think it’s always hard to guess like what’s the building going to sell for in year five? What’s your interest rate in year seven? Like all that stuff is, everyone is guessing, but we do project it out like five or 10 years and just see like what the annual term could be as well. 

[00:45:18] Patrick Donley: Moses Kagan had this post a while back about just advice that you or he or Eric Weatherholtz or Sean Sweeney would give to somebody just starting in real estate.

[00:45:28] Patrick Donley: For somebody that is interested in doing what you’re doing, doing historic renovations, using historic tax credits, what’s the best advice you have for them on how to get started doing something like that? 

[00:45:40] John Blatchford: The advice, we’re probably starting any business is like you do kind of just have to start. I don’t think you, that has to be very large.

[00:45:47] John Blatchford: You don’t have to raise a million dollars out of a gate if you have a duplex, if you buy a condo, if you own a single unit, like okay, what does it look like to redo the kitchen? So I think you can do like a very simple version of whatever it is you want to do and [00:46:00] just get started. So I think that’s good.

[00:46:02] John Blatchford: And then, you know, I think one mistake I’ve made, and I see, I still see maybe online, is like the idea you don’t need cs. You can just have it all in the equity, have some split with your investors and that’s the way you stay totally align. And that’s just like absolutely wrong. You know, there’s no comfy on earth that was built without revenue, that was built without employees, that was built without money coming in the door.

[00:46:24] John Blatchford: And it’s actually very bad for your investors if you don’t have that. Talk 

[00:46:27] Patrick Donley: about that, did you, you said you made a mistake. What was the mistake that you made Exactly. I 

[00:46:32] John Blatchford: mean, frankly I didn’t even know if there was such thing as a developer fee until probably two or three years ago. Like, what does a developer do?

[00:46:38] John Blatchford: And I’m like, yeah, e, everything that happens, putting the entire project together, hiring the architects, working with them, like billions and billions of value created basically just by developers. But I think the mistake is like early on I was like, we don’t need cs. I’ll get it in the project. It’ll come into, same happens as the investors.

[00:46:53] John Blatchford: But yeah, with that like wasn’t able to hire a construction project manager. I did the accounting and the tax suits. Like [00:47:00] we just didn’t have the right free structure at the beginning. And then I think it definitely, yeah, has heard us. So would you say 

[00:47:06] Patrick Donley: just slowed down the growth that you could have had?

[00:47:09] Patrick Donley: Yeah. Yeah. Made it more complicated kind of a burden for you to handle all of it? 

[00:47:15] John Blatchford: Yeah. And if the projects take longer because you don’t have the right people, I mean that’s also fbu and for the investors and you’re much better off collecting fair fees and getting a project done in 14 months rather than not and getting it done in 20 months.

[00:47:25] John Blatchford: Yeah. People would be upset. Hurts the returns and so yeah, just charge trip fees and hire big people. As far as 

[00:47:32] Patrick Donley: advice you would recommend doing what you, you did, like buy a five or, I mean, I don’t know if these are available anymore, you know, a five or $10,000 project and just learned by doing. 

[00:47:44] John Blatchford: Yeah, and I, it, I think a lesson both directions is like a 20 unit building is not that much harder than a three building, a hundred unit building.

[00:47:51] John Blatchford: It’s not that much harder than one building. Like, you know, there are new challenges, but yo, you would learn a ton by building a guest house [00:48:00] onto your house and renting it out on Airbnb. Buy a downtown condo that you’re going to use, but you know, you’re going to fix up the kitchen, you’re going to paint and you’re going to rent it out, or your kids can use it in their town.

[00:48:09] John Blatchford: Like whatever the smallest version is. You know, spend $10,000, spend $20,000, like whatever you can do and just like start. And it’s a great way to see if you like it or not. Yeah. And maybe from that one you’re like, oh, this is terrible and you haven’t lost that much money. You have this thing that you could easily sell.

[00:48:24] John Blatchford: You know, you’re not, you don’t have to go like full bore and try to raise $500,000. And yeah, you could, but you don’t have to. It’s kind of a low-cost 

[00:48:32] Patrick Donley: experiment. I wanted to segue into talking about Pickleball. I know that you were a college swimmer, but now you really got into Pickleball. You started a meetup group in Cincinnati, I believe.

[00:48:42] Patrick Donley: It has what, like 750 members. How’d you get into Pickleball? Initially 

[00:48:47] John Blatchford: in July, friend of mine from Austin, they basically introduced me. I’d never heard of it before and he had been telling me about it for a bit. Because in Austin that’s where all the cool things are. So yeah, we played over 4th of July and it was just, I think the, I magical thing about, its like, [00:49:00] it was just so obvious, like, oh yeah, I get this.

[00:49:02] John Blatchford: Like it was fun the first time. It was the right amount of sort of like, yeah, maybe a, I don’t know if I mentioned, but I did actually move to New York City a year and a half ago. You know, often commuting back to Cincinnati. I’m still have our team there and still buying stuff there, but so yeah, we’re playing a lot of Pickleball in New York.

[00:49:16] John Blatchford: Started to meet 

[00:49:16] Patrick Donley: up and it’s great. I didn’t realize you’re living in New York City. How often are you going back to Cincinnati? Pretty much. It’s like 

[00:49:23] John Blatchford: once a month. You know, we have, you know, three people there and they’re onsite every day. We have daily reports, you know, you definitely need to be onsite every day for construction.

[00:49:32] John Blatchford: But but yeah, I go back like once a month. I 

[00:49:35] Patrick Donley: don’t know if you’ve heard about this thing it’s called, it’s called the Ace Pickleball Club, and it’s modeled after top golf. I don’t know if you’ve looked into that. Yeah, I, I started like doing some preliminary research on the franchise fee and it just seems really cool.

[00:49:47] Patrick Donley: Like just Pickleball is awesome. You know, you combine it with good food and drinks. It could be a pretty good business model. 

[00:49:53] John Blatchford: Yeah. You know, of course you’re thinking of like the real estate side of it, same as I am, of like, what does that look like? You have this [00:50:00] activity that’s very popular. What’s sort of the real estate angle of that?

[00:50:03] John Blatchford: I think there can be a lot of versions. There’s like a, you know, more suburban 20 quarts restaurant bar, all that. And then I think there’s, I think there’s just going to be a lot of different models, clubs, and, you know, pro. 

[00:50:15] Patrick Donley: I even saw an article today on my Google feed about Pickleball courts and like not abandoned malls, but malls that are not doing too well.

[00:50:21] Patrick Donley: They’ll put the, the Pickleball courts like in the corridor of, of a, of a mall, which is kind of cool. 

[00:50:27] John Blatchford: I mean, you got space, you ever want to play this? Not a lot of place playing, so, yeah, it’s pretty wild. Yeah. You know, who 

[00:50:33] Patrick Donley: knows? Yeah. I mean, it’s a fastest growing sport in the US or I guess in the, I dunno if in the world or what, but it’s, it’s absolutely growing by leaps and bounds.

[00:50:41] Patrick Donley: I wanted to ask about your why. Why, what’s your why that keeps you going when the grind of real estate starts to wear on you, the, the projects you’re doing? I’ve done some to that degree, not to the degree that you’re doing them, but they, they can be rough, they can be a, they can be a tough long slog.

[00:50:58] Patrick Donley: What’s your why and what are [00:51:00] some ways you do to kind of 

[00:51:01] John Blatchford: like recharge? I think in its best days, you know, real estate is like unambiguous, that it’s important and that it’s interesting. There’s lots of businesses where on down day, like, is this even important? Like, I have this app with like photos sending, cause I don’t even care.

[00:51:16] John Blatchford: But like, you know, creating homes, creating places where people work in restaurants, like where people spend their lives is sort of like unambiguously. I think that’s like, yeah, like a source of motivation even on in the down days. So yeah, I think, I mean real estate’s always going to be part of my life, I think.

[00:51:29] John Blatchford: No, I am interested in starting businesses, different kinds of businesses. My, there’s lots of different path to take, but I, you know, I just think you a physical space where people are like joyful. You know, that’s like a very worthy way to spend away. So yeah, probably that’s kind of what keep me on. 

[00:51:43] Patrick Donley: And then where do you see your company, Kunst, going in the next 5, 10, 15 years?

[00:51:48] Patrick Donley: What, what would you like to see develop? 

[00:51:51] John Blatchford: So, I think it’s an interesting time in the market. You know, I think obviously like debt inequity end up more expensive. I think people are probably a little more wary to invest. You know, we have our current projects, we’ll [00:52:00] probably buy. One or two projects soon and focus on getting those done, doing well on those for the next year, and then seeing what it looks like after that and seeing where the market is, if it’s maybe raising a, a larger fund.

[00:52:13] John Blatchford: You know, I think that could be interesting. We’re on pause for a little bit, I’m not sure. But, you know, there’s a lot of opportunity. I, I do think in almost every market in the US and maybe beyond that, like historic buildings, historic preservation, you know, we were talking the office conversion, office residential you know, I think it’s a, it’s a niche of real estate that’s like quite painful.

[00:52:31] John Blatchford: And so I think there’s a lot of opportunity there. And 

[00:52:34] Patrick Donley: what you’re doing with the historic tax credits, would that skill and ability would transfer to any city? Correct. I mean, the, the process is the same whether you’re in Cincinnati or Pittsburgh or 

[00:52:44] John Blatchford: Tampa or whatever. I mean, the federal program is, you know, in the entire country.

[00:52:48] John Blatchford: And then each state or most states have their own state program. So yeah, it applies everywhere. And it’s, it’s like anything, didn’t intend this to be the business, but that’s just become our expertise. We’ve probably done. [00:53:00] More projects, more tires per projects than, I don’t know, maybe owners in Ohio. So yeah, we have the expertise and I think it works a lot of places.

[00:53:07] Patrick Donley: If somebody wanted to learn more about historic tax credits, is there a good source you could point them towards a website or podcast or anything that is out there? 

[00:53:16] John Blatchford: Yeah, people ask and there aren’t a lot, you know, I think maybe I should have done more like writing or creating resources, and maybe I still should.

[00:53:24] John Blatchford: But yeah, you mentioned the interview with Chris Powers. I hate to, you know, plug me out to think, but basically me just talking for an hour of time credits, I think, you know, obviously this, this interview will be like a good resource. So I think those are good. And then, you know, each state has their own website and I find the state websites are much better, better website is at our website, it’s not that useful, but the, 

[00:53:42] Patrick Donley: the state of Ohio, like you could figure out all the guidelines and just how the program works in 

[00:53:46] John Blatchford: general.

[00:53:47] John Blatchford: Yeah, and I would say like the people in the state, at least in Ohio, like they want you to get the credits. The whole point of the program is to renovate these buildings. Well, Like me, if you didn’t know what you were doing on the first [00:54:00] application, like they’re very helpful. You know, there’s no mistake that would be disastrous.

[00:54:03] John Blatchford: Like they’ll just kind of walk you through it and there’s revisions and amendments and all that stuff. So they’re very helpful. Well that’s great. 

[00:54:09] Patrick Donley: I’ve always kind of dreaded going to the city for plan approval and that kind of stuff, but it sounds like uh, you’ve had a pretty good experience, 

[00:54:16] John Blatchford: so that’s awesome.

[00:54:17] John Blatchford: Yeah, I know even the city, I mean, you know, the building department, I think it’s not the case in all municipalities, but in Cincinnati they want projects to happen. Their whole purpose is that, you know, development is happening and we’ve had plenty of times of just like reaching out directly to the head of the building department and he’s like, yeah, I’ll take the call.

[00:54:32] John Blatchford: You meet with them for 40 minutes to go through the issue and you know, get resolved. Really helpful. And you 

[00:54:37] Patrick Donley: can make a phone call like that and figure out the answers to your questions. I wanted to jump into a quick fire round here before we wrap up and I’ve got three or four questions Yeah. That I wanted to put you in the hot seat on.

[00:54:48] Patrick Donley: So first one is your favorite Twitter account. 

[00:54:51] John Blatchford: So I don’t know if you follow Bobby. He’s like the Bill James with the architecture report plants. Bobby Fian, I just had him on. Oh yeah. Yeah. He’s great. It is so bizarre for me. He seems to understand like how much money is generated in the floor plans, the unit size, the bedroom size, the number of bedrooms, like all, all that goes into creating a space.

[00:55:10] John Blatchford: Like that’s actually where most of the money is. And like it’s very, it’s not taken that seriously I think in general. So I think it’s cool that he like takes it as seriously and, and has like a very approach to it. Yeah, he basically 

[00:55:23] Patrick Donley: said like, floor plans are almost like an afterthought for a lot of developers, which seems crazy to me.

[00:55:28] Patrick Donley: And what he’s doing is just like mapping, creating this proprietary database of all the floor plans that he can gather and figuring out how to maximize what works and what doesn’t to maximize rent. 

[00:55:41] John Blatchford: And it can be small, pretty lowcost things. Yeah. I think for most people it’s like you have a 600 square foot one bedroom, and that’s like where the mat stopped.

[00:55:48] John Blatchford: But you know, the difference between whatever, a 12 foot wide living room and a 14 foot wide living room might be 80 bucks a month in rent, and that’s like hundreds of thousands of dollars in real estate value. 

[00:55:57] Patrick Donley: Yeah. You, you should check out his his episode should [00:56:00] come out I think next week. So if you get the time, check it out.

[00:56:02] Patrick Donley: I think it was a really good one. He’s super smart guy. Like really fascinating to talk to. Second one, most impactful book. I 

[00:56:09] John Blatchford: think there’s two, I read less sort of business books now. I just get a little too bored, I think. But how to win Friends and Influence People, you know, it’s classic. Better read Think Wis or two years ago.

[00:56:18] John Blatchford: That’s really good. Just basically how to work with people and, and not be a jerk, I think. But yeah, I mostly read more fiction scifi like that and so I like wore the worlds like, you know, 1890s scifi. 

[00:56:31] Patrick Donley: Very cool. So who the author is who, who is that? That’s, oh, H.G. Wells. H.G. Wells, that’s right. We mentioned controversial opinion that you have.

[00:56:40] Patrick Donley: Do you have any other controversial opinions about real estate that others may not share? Yes. I 

[00:56:45] John Blatchford: think my one like selling can be good. You know, don’t let people tell you otherwise. Yeah. I think fair fees, I think that’s not controversial, but I do think there’s a, a weird belief of like the operator, you know, charting too much fees and you know, yeah, probably, actually I [00:57:00] would say like my strong belief in historic preservation is pretty counter, I think, to most in a way that I don’t quite understand.

[00:57:07] John Blatchford: I think to me it’s pretty obvious of like if you were walking through Paris, I think 92% of people would be like, this is so cool. They don’t quite understand why, and they don’t realize that like, you know, not only this because of like, let’s say militant historic preservation. I’m not an absolutist. I think there’s plenty of buildings that can and could be poured down and redeveloped and all that, but in general, like I’m very far on the side of crow preservation 

[00:57:30] Patrick Donley: And we’re lucky that the tax code actually incentivizes it to some degree.

[00:57:34] John Blatchford: Yeah, and I think it’s like the perfect kind of sort of government intervention. They’re not going to overregulate and say, Hey, in this area you need to keep, you know, make out a lawn that you have to keep all the original windows like that insane. But if they’re going to incentivize it, they’re going to provide this tax break if you kind of do this above and beyond.

[00:57:49] John Blatchford: Historic preservation I think is like the perfect sort of government intervention. 

[00:57:54] Patrick Donley: Fourth question is, I mentioned, I’m renovating this, it’s an office building that we started [00:58:00] peeling back the drywall and realized we had a ton of exposed brick walls in this building. Yeah. And brick’s pretty, it’s in pretty good shape.

[00:58:06] Patrick Donley: Mortar needs some work. How do I match up mortar, the new mortar to match up the old stuff that’s over a hundred years old? I cannot get that now. I don’t know how to do that. 

[00:58:15] John Blatchford: Yeah, some have a few ideas. The one is like, on the first building, we have the same exact problem and we were taking tax historic after it very seriously, and you have to match the mortar.

[00:58:24] John Blatchford: And so we tried all this different stuff, custom mortar, custom mixes. We ended up working as like, we used like a wet toothbrush and we just kind of were wiping the brick and then the mortar. And so it kind of was just like a mortar that was closed. But then once you kind of edged it and brought the brick color into it, it looked really good.

[00:58:39] John Blatchford: That might not work really at a scale, but wet toothbrush, brick mortar, that kind of worked. But yeah, there are companies that do custom mortar. There’s a company of England that we use where you send them a sample and then they send you back the exact mortar color. That can be quite expensive, but that would probably like the proper way to do it.

[00:58:56] John Blatchford: And then the final way, which I’ve only recently discovered is [00:59:00] like an acid wash, where you’re going to do like a mortar, kind of as close as possible, brick as close as possible if you’re repairing that. But then you’re doing like an acid wash that kind of like blends. 

[00:59:10] Patrick Donley: That’s what we do, like a muriatic acid wash.

[00:59:13] Patrick Donley: It’s not fun to do, but it, it’s I mean the brick looks amazing afterwards. It’s well worth it. Do you ever paint brick or is that like just a sin to you? 

[00:59:24] John Blatchford: I like it personally, but historics, you know, the historic views typically don’t like it and so we, we’ve done facades and that ends up looking really nice.

[00:59:33] Patrick Donley: Cool. John, this has been a lot of fun. I really appreciate your time today. For our listeners that want to learn more about you or to reach out to you, what’s the best way for them to do that? 

[00:59:43] John Blatchford: Twitter’s probably the best. @JohnJBlatchford I think on Twitter. And yeah, I mean, I think I’ve responded to every we’ve ever got and you know, I try to be helpful with people and I’m grateful for people that have been helpful to me.

[00:59:54] John Blatchford: And so if I can help anyone or find any sort of guidance, I’m happy to. So yeah, I think Twitter’s the best way. 

[01:00:01] Patrick Donley: Okay, cool. John, thanks so much for your time today. I really appreciate it. 

[01:00:04] John Blatchford: Thanks, Patrick. Appreciate it. 

[01:00:06] Patrick Donley: Okay folks, that’s all I had for today’s episode. I hope you enjoyed the show, and I’ll see you back here real soon.

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