Peter Lohmann's Podcast
00:20:02 · Peter Lohmann, Bri Leichliter
[00:20:02] S1: I was just gonna ask [00:20:03] S0: you about that. [00:20:03] S1: Were the... Because I know you were on Buildium. [00:20:06] S0: I was on Buildium. Yep. Buildium. So my tech stack looked a little bit like this. Buildium, PropertyMeld, LeadSimple were my my main ones, and obviously, we communicated through Slack. So the... Those were, you know, the main things. RentEngine, we use for leasing. And the buyer had completely different systems. So they had AppFolio. They ran their maintenance through AppFolio. They used TurboTenant. So that transition, we could have done a little bit differently. In hindsight, it's 2020, things that I would do differently if if we were gonna do it again. We made the transition systematically on 11/01. So that was, you know, three weeks of us getting stuff into AppFolio, notifying tenants, getting all the owners set up, you know, that was a huge undertaking to transition all the systems. And then transitioning the maintenance team, there was, you know, training that was needed there, all of all of that. So that was a lot, and I would do that completely differently if I was doing it over. But, I mean, we survived it, and it was fine. It was just stressful. Though? [00:21:17] S1: Because it seems like it's just gonna be a pain no matter what.
00:21:19 · Bri Leichliter
[00:21:19] S0: It is a pain no matter what, but I I do think when you have staff that's transitioning to new bosses that also need to learn new systems. So this wasn't sell, and then they had their own team who already knew AppFolio and already knew all of those systems. This was my team, part of my team, not all of my team transitioned, but part of my team transitioned and had to learn that new system in almost no time, really. Like, it was plug and play. You start today, and you have to know how to use the system today. And that's not realistic. And that was, like, the communicate... How we communicate it changed. You know, we're used to communicating on LeadSimple shared inbox. How they... How the buyer communicated was completely different. So the people part of that and the the training the people and now having to do all of your processes completely differently than what you've you're... You've been doing, that was the hardest part. I think it was the hardest on the people. So if I was gonna do it differently, what I would have done is say, let's do the first ninety days where you keep everything the same, get your people up to speed and trained on the new system, have a plan to then kind of off board from one system onboard to the other. And I think, you know, that would have maybe helped with the transition itself versus, like, there being three weeks of, hey. No one really knows a whole lot. Now we're transitioning staff, and we're learning all new systems, and all the tenants and owners are also transitioning systems. So, you know, staff's learning, owners are learning, tenants are learning. So that that would have been......
00:23:11 · Peter Lohmann
[00:23:11] S1: Was tough. I mean, you had a buyer Yeah. Who wasn't as larger or experienced as some other buyers. And so Mhmm. You were having to help a lot. The staff, you know, was having to learn everything new. I think, you know, there are... There's advantages and disadvantages to selling to some of the big boys. You know, one of the advantages is they've done this 25 times, and so they have a process they're gonna run. And they're they're highly invested in making sure that every single owner, tenant, team member, all, you know, i's are dotted and t's are crossed. So in terms of the structure of the deal, like, did you get a big wire in your account the day you closed? Did you carry a note? Did they use, you know, Live Oak Bank or something to finance this deal? Like, how did that work?
00:23:59 · Bri Leichliter, Peter Lohmann
[00:23:59] S0: Yeah. So we ended up doing an installment sale. So there's four total payments in our contract. And the first two payments are essentially based on the initial number at closing, so the door count at closing. Mhmm. One of the things that I did in my contract, we had, like, a closing door count, and then we had what we call transitional units where the properties were already listed for sale. They were kind of a short term, you know, we knew they were gonna drop off. So we structured that slightly differently because, obviously, you know, from a buyer's perspective, if those properties weren't gonna stick around, then he didn't wanna pay for them the same the same amount as the other doors. Right? Yeah. So logically, makes complete sense. So I actually did a lot of work with my CPA on how I wanted to structure from a tax perspective. So what we ended up doing is we we did not collect anything at closing with the first installment payment happening this calendar year because we were so close to the end of the year. So, you know, that's that's more of a tax planning. Everyone's situation is going to be a little bit different in that regard. And essentially, Because, [00:25:21] S1: you know, presumably, your income was gonna drop for 2026. So getting that installment payment into this calendar year, I mean, you could have saved tens of thousands of dollars in income tax Mhmm. By having the sale take place technically or you get paid or however it works, you know, in Yeah. In the next calendar year.
00:25:21 · Peter Lohmann, Bri Leichliter
[00:25:21] S1: you know, presumably, your income was gonna drop for 2026. So getting that installment payment into this calendar year, I mean, you could have saved tens of thousands of dollars in income tax Mhmm. By having the sale take place technically or you get paid or however it works, you know, in Yeah. In the next calendar year. [00:25:43] S0: Right. Yeah. So the first two payments are based on that initial door count. So we split it up, the larger payment being the first one and then the second payment, and that happened in January, and then the second payment at the end of the quarter. There is no... In our arrangement, there's no clawback clause, but there is a true up period. So if if... At this point, the door count has not dropped significantly that, you know, the the buyer would be in trouble or they would need to execute on the clawback anyway. But the second and third payments are based on a true up. So running the numbers to see what the door counts are from a retention standpoint, and then there's a dollar value assigned to each of those. With my final payment be... The true up being at the one year mark, but the final payment being released in 2027, again, for tax purposes. [00:26:37] S1: Yep. [00:26:38] S0: So I kinda structured how I wanted the payments based on my tax largely in part of my tax strategy. Yeah.
00:26:38 · Bri Leichliter, Peter Lohmann
[00:26:38] S0: So I kinda structured how I wanted the payments based on my tax largely in part of my tax strategy. Yeah. [00:26:47] S1: Yeah. That sounds great. Now how has the churn been, meaning the churn of your portfolio, like owners who didn't transition or or who decided to sell or switch management shortly after the transition. What did you sort of model out or expect in terms of that... In terms of, like, percentage there, and how is it actually gone? [00:27:08] S0: Honestly, I wasn't sure how it would go at all. And part of the reason being is, one, I've never done the sale... This type of sale before, so I have no experience on, you know, my own personal experience. Obviously, I knew that there was gonna be some churn. But also, you know, the... From the buyer's perspective, they had never done an acquisition before of this nature. Now they had done other brokerage acquisitions, so they did have experience in buying businesses, which is great. But I was expecting there to be some. I had no real indication of how significant it would be. I will say that from client transitional perspective, when we announced it to clients, we were very strategic in having a united front on how we [00:27:58] S1: Mhmm. [00:27:58] S0: Addressed it. And I also... I didn't stay on from a payroll perspective. A lot of people do that at acquisition. Like, they'll keep the owner on for a period of time. I am on in a project manager capacity to finalize some renovation projects, but I'm not on as a payroll employee. [00:28:20] S1: Got it.