I'll Partner with You, Where to Find Investors / Partners, and More (Office Hours)
This episode of Office Hours dives into getting started in commercial real estate in 2024, where to find investors, and more.
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Key Takeaways:
Tyler recommends taking 30 days off work each year from December 15 to January 15 as it is typically the slowest time for commercial real estate.
He provides advice on getting started in commercial real estate in Nashville in 2024, recommending learning as much as possible, networking, and potentially partnering on a first deal.
Tyler discusses some of the challenges he faced with a hard money loan for a house flip where the borrower filed for bankruptcy.
He recommends bringing 25-30% of the purchase price as a down payment for a commercial property acquisition and discusses strategies for raising funds from investors.
Tyler outlines some of his goals for 2022 which include producing educational content, releasing new courses, and bringing a commercial real estate networking group to Nashville.
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.
Episode Transcript:
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This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls. Learn how to confidently buy your first commercial property today at www dot c r e launch pro.com.
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Welcome back to the commercial real estate investor podcast live from the combo group studios. I'm excited to be back with you all. It has been about five weeks since I had been in the studio, which is a week longer than I was really anticipating. But we had some we had some bad weather here in Nashville, as I'm sure some of you have heard into the country has been getting rocked. And I live up on top of a ridge because Nashville is very hilly and could not get down my driveway. So we were literally trapped up there and extended my sabbatical a week longer, which isn't the worst thing in the world. But you know, after 30 days of being off, and resting, recuperating, thinking through things, I was ready to get back into the office. So yesterday was great. It was my first day back and had a lot to catch up on. But I felt so energized and ready to get back to it. You know, when when I left you all back in December, which was the last episode of office hours that we recorded. I was going on my sabbatical. It's the second year that I've done that. And every year I take 30 days off from December 15 through January 15. And you know, a lot of people think, how do you? How are you able to do that? You know, how do you just take off 30 days? Well, one, I've got a phenomenal team that helps run things when I'm not there. And two, it's by far the slowest time in real estate and especially commercial real estate throughout the year. I mean, December 15 through January 15, nobody's really doing all that much. Most of the brokers are taking off for you know, family vacations celebrating the holidays. And most investors and companies that we represent that we are working with, you know, at the end of the year, they're trying to wrap things up, they want to spend time with family, at the beginning of the year, they're still planning for what they're going to do for the year. So it actually works out pretty well. Typically the normal week, I have about four to 500 emails. And coming back just to show you how how slow it actually was. Over the five week period had about 451 emails. So caught up on about 100 Yesterday, I've got another 200 I'm trying to knock out today. We'll see how it goes. Mr. is saying hey, hey, Mister, welcome to the show. appreciate you guys joining me live. Don't forget office hours every Tuesday at 8:30am Central Standard Time, I get asked a lot about just random questions about commercial real estate. Of course, I do have a coaching and consulting service. But if you ever want free advice on a project, or you just have a quick question that you would like to ask on commercial real estate, this is the form for that. So of course this is going out live and the podcast will not live. Of course this is going out on the podcast as well. But if you'd like to join me live here on YouTube, you're more than welcome to jump in and ask anything you want and get advice. Jennifer saying oh, well, I'm also in Nashville. What is your suggestion for getting started investing in commercial real estate in Nashville in 2024? Hey, Jennifer, thanks for joining us. Yeah, the past week has been wild. I mean, I got to the office yesterday. And it hadn't snowed for seven or eight days. But it got down to negative one, which for Nashville is unbelievably cold. And they just couldn't clear all the roads. I mean, a lot of the roads are still pretty bad. So it's, it's been tough to really travel throughout the city. But generally what I would say, you know, the best number one is just learn everything that you can about commercial real estate, right? Knowledge is power when it comes to this, this industry. And the more you know, the better will be for you to find deals to understand what is the deal, to understand how to structure deals, we've got all of those videos here on the YouTube channel for you to go and learn everything you can. And it's all out there. And it's free. I think now we're closing in on like 450 videos on this channel. So tons of content out there for you to go and learn how to do commercial real estate. Second step is to start networking. I think that the more people that you know, that are actually doing what you want to do, the better you're going to be right you're the sum of the five people that you surround yourself with, isn't that what JLD says on Entrepreneur on Fire, you know, you're the sum of the five people you spend the most time with. So if you start spending more time with people that are investing in commercial real estate, not only are you going to learn from them, but you'll get the opportunity to potentially partner with them. And I think that that is the best way to first get started, especially if you don't have an unlimited amount of capital, especially if you know banks are gonna look at your track record and say, Oh yeah, but you haven't done a commercial real estate Good deal before, having a partner that has all of that makes a night and day difference. When I first got started. My first development project I was 23, or 24 was a 42 unit townhome development, new construction completely ground up. There's probably about a five or $6 million project, no way could I've ever qualified for that on my own. But I worked for a developer at the time. And I knew exactly what their BuyBox was. This was back when I was a the in house leasing agent for a development company here in Nashville. And I went out, found this property and pitched it to him. And I said, Hey, here's a really good deal. I'd like to partner with you on it, and see what we can do. And so I ended up getting 10% profit share on that deal. I didn't have to sign on the debt. I didn't have to know any of the vendors, they pretty much brought in the bank, they brought in the money and connected me with all the vendors and I served as the project manager. That was my role. And my first project was being the sweat equity role being on site every other day, and pulling everything together. And you know, a lot of newcomers to commercial real estate think, Oh, 10 percents not that much. It's not really worth it. It is, it's really tough for somebody that's putting all the capital up and signing on the debt, to justify really giving you any more unless it's just an outstanding home run of a deal. And you've got some sort of leverage on it, right? Like you've got it under contract, you've got multiple people going for it. 10% is great. Especially if you're not risking your money. You're not risking your balance sheet by signing on the debt. And the biggest thing, yeah, the cash is great. But on your first project, the biggest thing is the track record and the experience, because that will help you bring in the next partnership group or get the next deal. So highly recommend going and doing that. That is by far the best way to do it. Nashville is going to do really well in commercial real estate in 2024. I think that we're going to experience some economic turmoil. I think the entire country is but commercial real estate is an asset class. If you buy right, you can do very well in it in both good and bad economic times. Let's see Realty growth think we know all about the weather up here in Minnesota. Welcome back. Yeah, I mean, when I talk about Nashville's woes when it comes to weather, and then you jump in from Minnesota, I mean, yeah, it's not going to compare. I mean, I've heard that y'all are getting like a foot of snow at a time. I think I was talking to some partners of mine out of Milwaukee, Wisconsin, they said they got 11 to 12 inches of snow twice already this year. Which is way too cold for me. And it's gotten down to like negative 26. I can't do that. I love the cold but GS negative 26 and vstr Z, hope you've been well good morning from Houston, Texas, Justin, just appreciate you jumping in man good to hear from you. Hope everything is well and Houston and hopefully not as cold as it is up here. Brian Kelly, good morning from Connecticut. I work in commercial insurance sales, and I'm looking to grow some allies in the commercial real estate industry, what are some of the best ways to network and connect? So first off, join the Urban Land Institute. I am a huge cheerleader for that group. I think that what you ally does is phenomenal for the industry. It connects all sorts of different professions. And they are also pushing a lot of thought provoking thought leading content out there through their meetups through their conferences. I mean, they're, they're the commercial real estate leader. And so in most markets, the top developers, the top engineers, architects, contractors, I mean, you name it, they're all involved in this group, because it's a phenomenal way to get out there and learn, but also to network with the top dogs in the industry. So join you alive, get on the membership team, if you can check people in at the at the front booth and handout name tags, that's a great way to get to know everybody. You could also look up some other real estate investing groups that are in your area, I joined the real estate investors of Nashville, gosh, I mean years ago, coming up on probably close to 10 years ago now. And ended up serving as a board member there. And I taught classes on commercial real estate. And that really helped me get my base when I was first starting out. You know, I I ended up getting the majority of my investors from that group on my first real estate syndication deal. So don't go join these groups and just start, you know, pandering and marketing to everybody. Go in there and actually build genuine relationships and the business will come. I mean, commercial real estate, just like many other professional services, businesses is all about the relationship. So just be intentional about it. And then also think about you know, what do you enjoy doing? Is it golfing? Are you a member at a country club, you know, go spend time doing those things, meet the other people that enjoy doing those things, because then it's going to be very easy for you to go through that process and Let's be with them. Realty growth sent a sent a frozen face emoji. Yeah, I can't even imagine glad I'm not in Minnesota.
Anyway, catching up over over the last month. I mean, when I, when we left it off, I was talking to you all about our team sales meetings that we have started, I've got a pretty wild incentive package for our brokers this year. So really excited to see where, what they do with that, and where they take it. It's always fun when you're paying sales reps to make money, right? Like you're bonusing them for making money. I mean, that's, that's the best way to incentivize sales reps, commission based people want to make more money, they they're incentivized by that and driven. And so it's, it's been fun working through that with them, we're actually gonna be starting a new, I guess, episode on this podcast, where I will be giving you a monthly report on the companies. I'm a little bit nervous about doing that. I've never done anything like that before. But I wanted to have the extreme accountability of holding me on my brokerage team, on our property management team, and on our development team accountable. And I also figured it'd be good for you all to see kind of the behind the scenes what we're doing. If you're out there looking to do these things yourself, you know, if you want to start an investment company, or you want to start a brokerage, you want to get started as a property manager, we'll be talking all about the behind the scenes. So I'm looking forward to those reports, we did pull the trigger on the new book. So we are in the midst of that process right now, really excited for the format, it's going to be very unlike any other commercial real estate book out there. And it might end up being a companion book to a much longer book, which I've been writing for going on for years. Now. If you are ever interested in writing a book, there are a couple of different ways you can go about doing it. I mean, one, of course, you could just sit down and start writing. I did that on my first one. And it was a year long process of like weekly work. And gosh, is it exhausting? Worth it, though, right. I mean, I released my first book when I was 25, or 26. And it's one of the best things ever did for me my business and business development, right. It's a it's the best business card you could ever hand to somebody. But my second book, I decided I'm going to write it blog post by blog post. So we started in 2020, writing blog posts on different aspects of commercial real estate, which has also helped our business. I mean, if you go search industrial real estate on Google or flex space, you know, items like that, typically we're on the top page. So that helps drive a lot of business to the company. Meanwhile, I'm going to take all that content and turn it into a book. So there's so many different industries, so many different aspects of commercial real estate that you could be doing that on to build your brand to build your business and to also become a thought leader, right, release it out there as a as a bucket. It's actually not all that complicated, which is really fun. Another thing that I'm going to be focusing on more this year, we did it some last year is become a GP advisor. Right, I've spent the last I guess, since 2019, through 2022, because we didn't actually end up raising any capital or doing any deals and 23. syndicating deals, right, raising capital running my own projects. And that's great. And we'll probably continue to do that for quite some time. But I'm more interested now, in coming in on your deals coming in as the GP advisor, bringing that commercial real estate experience to the table and helping you with your projects. So if you're interested in bringing somebody with some expertise to the table, that will help you get your loan that will help you raise capital from investors that can help with marketing, because hey, we throw out videos on YouTube about all of our projects. And that's actually one of the better ways that we've found to market our spaces both to other brokers who could bring us tenants or brokers that could bring us buyers, or people that are just interested in investing with us. It's been a lot of fun. One of the things I've had to deal with, I don't know if you guys have ever went hard money before I did it for the first time this past year, back in June. And what are July What a mess that has been. Next time I will probably invest with some buddies of mine that do it for a living, right because I you know, I had to touch the stove. I had to learn the hard way went some money to a contractor to do a house flip. And you know, I went into it with eyes wide open. I know how the process works and you've got to be prepared to foreclose and take the property back if they miss payments. Well, this this contractor came to me told me he was filing bankruptcy. I said Okay, well let's go ahead and, you know, since you're missing payments, will will sign a deed in lieu of foreclosure, you'll just hand me the property will walk away and you know, no harm, no foul. He ended up saying okay, I'll sign them but get to the You finish line to sign it. And he says, You know what, actually, I don't want to sign this go ahead with the foreclosure. Well, that's a much more burdensome process. I've already spent money on the legal fees to get the deed in lieu of foreclosure drafted. I say, okay, not very happy about that. But we'll go through the foreclosure. Before we could finalize the foreclosure, he filed for bankruptcy, which froze the foreclosure. So now I'm having to meet with the trustee that has been assigned by the state for this account to see if we can get a continuance for us to move forward with the foreclosure has been a fun process, I'm still looking forward to getting the house back. And in renovating it, and going through that process, doing a very high end house flip. I think that that'll be something that we always do on the side moving forward, I don't see why not, you know, we've got a very good model, it is profitable. And it's not going to take up a significant amount of time, because I've already got a team that's built to help me with all these much larger projects. So looking forward to that, but it is wild. I mean, if you've never been through bankruptcy, they have the first meeting after somebody files their bankruptcy petition. It's called the meeting of the creditors. And I got on the call about an hour early and listen to some other people that are going through their cases. Each case was like five minutes long, right? They would jump on the phone, the trustee would say is your information correct? Are these all of your assets? Do you have any other debts are outstanding? Are there any other creditors that we need to add to the list? No. Okay, good luck. That's it five minutes, you're done. And they move forward with the bankruptcy. My call with our debtor ended up going an hour and 15, which is almost unheard of, in the world of bankruptcies. Because this contractor ended up having six creditors, including myself on the call, no one else had any creditors. And he stole money from all of them. He was taking deposits. And, you know, sometimes in the 20 to $100,000 range deposit, some people were paying 100% of the project upfront, which I would never do. And he would take the cash, demo the property and disappear and change his phone number, he closed down his company. I mean, he was just stealing money, and now he's trying to bankrupt out of stealing money from people. So of course, you know, it got heated on the phone, and it went for a long time. So that was that was very interesting. You know, I don't always like being a part of the drama. But fortunately, you know, I'm a secured creditor in this case, doesn't really matter to me as much. But it's been interesting going through the process, because I've just never seen this. Joe is saying, Would you go in on a deal as a GC or a pm? I mean, it depends, right? I mean, if you've got your general contractor's license, then I would, I would see if you could come in as the general contractor, you know, typically, like when I'm doing my own deals, I don't allow a vendor, such as a general contractor and architect and engineer to earn their fees as a general partner, right? And I mean that in like, Okay, well, you're gonna charge me a 10% markup for profit, we'll just give you you know, 5% of the general partnership and call it even or whatever that ends up being, right. I mean, there's, that depends on how big the project is, and you got to really dive into the numbers. I prefer that they buy him as a partner, and then they earn market rate fees for their services. Because if they get hit by a bus or something happens, then I'm gonna have to go out and hire somebody else to finish that job, which means I'm going to have to pay market rate. So I don't want to underwrite a deal. And think that, you know, I'm getting a really good deal on general contracting, and then turns out something happens, we have to fire them off job, whatever it is, and have to hire somebody else. And now we're losing money. And you still have a partner that is basically doing nothing in the deal. So you got to be very careful with that. But I mean, my first project I was a project manager, I think that it's a it's a great way to come in you learn a lot you make good real good relationships with all of the vendors right I mean, I was the one dealing with the plumber, the electricians, the framers the sight word, guys, man, I was out there every other day. So I had all those guys in my back pocket had good relationships with them to move on to my next project.
Mario is saying what's the best way to learn commercial real estate 101 YouTube YouTube University. Welcome to the right channel. And we've got over like I said earlier over, closing in on 450 videos now in commercial real estate, a whole bunch on how to get started as beginner as well as the podcast. I mean, we've we're closing in close to 200 or more episodes on the podcast now. And there's some good books out there as well. Their names aren't coming to the top of my mind right now. But if you search like commercial real estate books cobble which is my last name, I've got a blog post on the 10 best Commercial Real Estate books. And those are great places to get started. Because they will give you the foundation that you need. So I would say learn everything you can for free at first, right? Get that foundation. So you've got YouTube podcast books, I mean, obviously, you're gonna have to pay for books, and then look at finding a mentor or coach or a business partner, or a job, right? I mean, that is hands down. That's the way that I learned that is hands down. The best way to work. Commercial real estate is from the inside. You get paid to learn, basically, right? It's the exact opposite of college, which is why I love it so much. Yeah, maybe you're not going to make $100,000 your first year. But the amount of knowledge that you're getting is worth worth more than that, in my opinion, because in the long run, that knowledge just compounds your your skills and compounds your income. So more than worth it. Brian Kelly's saying thanks, Tyler, I'll definitely check out UI awesome. Highly recommend you ally, great, great program. Delta's saying noticed a lot of self storage for sale, any thoughts? So I have mixed thoughts on self storage. One, I will love it. Right. I love it as an asset class, I think that, you know, it's the easiest for a multifamily investor or residential investor to transition into commercial, because it's very similar, right, you could have 50 100 200 self storage units on a single piece of property. And it operates very similar similarly to multifamily, you'll have no monthly recurring revenue, and it has none of the cons of multifamily. For the most part, you don't have to worry about tenants calling you on a Friday night with a broken toilet, I mean, they're gonna pay you 50 to 150, you know, 200 bucks, give or take a month, they're going to drop their stuff off, and they're going to forget about it. And they're going to leave it there for a very long time, my mom has had a self storage unit for coming on, like four or five years now. And you know, she's always talking about how she needs to get over there and clean it out. But it's a lot of work, what are you going to do with all that stuff you already got used to not having it, it doesn't fit in your new place, or whatever. So it takes a lot of time to actually just go through it. And you know, when you're writing a check for 150 bucks a month, is it really worth even going over there and dealing with? So definitely something to think about. But the problem, the things that I don't like about self storage is that, you know, when I first got started back in 2013, and this makes me feel like I'm a boomer like a real, like, I'm just really old, I'm used to seeing things in a different way. Self Storage was like 15 to 20% cap rates, nobody wanted self storage, you could get really good returns on it, if you were willing to put up with it. And over the last few years, it has just skyrocketed in popularity, which means that cap rates have compressed, and they're very expensive now, and the returns are lower, right? I mean, we're talking about 5% cap rates, sometimes, you know, maybe up to 678 percent, but they've gotten low, especially on the higher end ones, man, climate control is a totally different beast than your regular self storage. But, you know, to me, it's all about the value. And if I was able to find a self storage deal that was at an 8% cap rate or higher, with a good story to tell as to why it should stay full or it's you know, 93% occupied, and it's been historically over 90% For the last five years, then yeah, I'd be willing to pay an 8% cap rate for that. I'm not really willing to go any lower, I just don't think that it's worth the same cap rate as stabilized retail or stabilized multifamily. So that's the problem that I see in self storage is is people just want too much for the units. Let's see here. The Naked I hope I'm saying that right? I'm sorry, the naked saying good morning. I'm interested in buying a mixed commercial property in Orlando, Florida. I'm not sure how to approach this situation, do I need a huge capital? Do I need a lot of capital to start this project? So it depends on how big the commercial property is. I typically recommend being prepared to bring 25% of the purchase price as a down payment. Depending on the the condition of the property, you're probably going to have to bring some more because you might need to do you know some renovations, right, which means you may want to bring 30% It just depends today with where the interest rate environment is, with how uneasy a lot of lenders and investors are. I'm looking at deals saying let's bring 30 to 35% down, it's a bigger left, we're gonna get lower cash and cash returns. But we're paying for stability. I was joking with Brandon Turner from bigger pockets the other day. You know we're talking about like the older that we get the more attractive 5050 loan to values become to us. Alright, it's funny like when I was first getting started, it's like how can I get 100% loan How can I get a 95% loan which almost never happens? Commercial Real Estate unless you're doing seller financing, but you know now, now that you have, we've got cash, we've got assets, we've got things that we want to protect, it's like if 50% 40%. You know, downpayment doesn't sound that bad, because it makes sure that you're going to be safe, you can weather downturns, you've got lower monthly payments, which means you can cashflow a little bit more, yes, your cash on cash return is going to be lower. But you also have to factor in the security that you get by having a 5050 loan, most banks are not going to foreclose on them, because they're in a very good position. You know, I mean, 2008 being the exception, banks were closing on good deals left and right. But it puts you in a much more secure position. Whereas you know, if you are at 20% loan to value and you lose a tenant, and you have a floating rate, which I never recommend, then your debt service coverage ratio could get out of whack, you could get below 1.2 times, which means the bank says hey, you need to pay down the debt enough to get above a 1.2 times debt service coverage ratio, or we're going to take the property back. They don't care. They're very risk averse. They do not like dealing with anything that could be, you know, a potential hazard. And they will cut it off. But so I think that I mean, that's what I recommend 25 to 30% down. So if it's a million dollars, you need to be able to bring 250 to $300,000 down that doesn't have to be your own cash. You could bring some investors, you know, friends and family. I mean, I look at every property as a business venture, right? It's just like Shark Tank, you know, go out, talk to friends and family raise, you know, 1020 $50,000 at a time from different people. And see how many people you can get to come in with you and and buy the property. It's almost always worth it. I'll say that. Hunters saying looking to get into the wreck, Phil market love the show, brother, Hunter, what's going on, man, appreciate you joining live hunters, an old friend of mine from high school. And rockville is a mythical town in which I would also love to invest. Hope you're doing well, man. Let's catch up soon. But yeah, I mean, that's that's pretty much it for our office hours this week. But really wanted to jump on and you know, of course, catch up with everybody and, and answer your questions, anything that you had and kind of show you where we're going this year, I'm really excited for the content that we're going to be producing. We're looking at bringing CCC to Nashville. I'm in talks with that group right now to a big commercial real estate networking group based out of Atlanta, and they're in multiple cities. And I went down to one of their events. Gosh, I guess it was last summer. And I was blown away. I mean, they had over 150 people there, it was an incredible turnout. And they're all you know, the top cream of the crop, commercial real estate people. So excited to be doing that here. I'm gonna be focusing more on business development. This year, we're gonna be producing a ton of content, we're gonna be releasing a couple more courses. So stay tuned, there's gonna be a whole lot of commercial real estate, videos, podcasts, whatever you want to learn. It'll be coming your way. If you ever if there's ever a piece of content that you cannot find, feel free to drop me a comment on the videos, let me know you know, hey, you haven't talked about x? Do you think that you could do a video on that? I typically will do videos based on those comments. So interact with me, let me know how things are going. And I will see you guys next week. This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls. Learn how to confidently buy your first commercial property today at www dot c r e launch pro.com
Each week, I'm going live at 8:30am CST for my "office hours" to answer your questions about commercial real estate on the show. Let's hear what you'd like to know when it comes to brokerage, investment, and development!