Creating Consistent Deal Flow of Commercial Properties (Investors Round Table)
Struggling to build a steady pipeline of commercial real estate deals? Today, we're diving into proven sources, lead generation tactics, evaluation processes, and tools we use to keep our pipelines overflowing with profitable opportunities. You’ll learn insider strategies to transform your deal flow and invest in more properties from this panel of experts dedicated to finding hidden gems.
Brian Adams, Excelsior Capital
Dave Codrea, Greenleaf Property Management
Logan Freeman, FTW Investments
Get commercial real estate coaching, courses, and community to jumpstart your investment journey over at CRE Launch Pro: www.crelaunchpro.com
Key Takeaways:
Having a systematic approach to building and maintaining relationships with brokers, property owners, and other industry professionals to generate deal flow
Developing clear investment criteria focused on factors like location, demographics, property condition, to efficiently filter through deals
Using technology like Google Maps, Placer AI, and virtual assistants to help analyze deals at scale, but still validating data through on-the-ground research
Focusing on consistency by pursuing smaller, lower-risk deals rather than only swinging for "elephants" which are high risk and infrequent
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 today we are diving in this episode of the commercial real estate investor podcast is brought to you
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I am getting some audio feedback. Let me figure this out real quick. Sorry, guys.
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All right, there we go.
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Sorry about that. So today we're diving into creating a deal flow of commercial real estate properties. So as a commercial real estate investor, one of the biggest things that you have to have going for your business is consistent deal flow, you gotta be getting enough property sit your way, so that you can review enough of them to find the right deal, right. Because if you're just buying any deal that comes your way, you're probably not buying the best opportunities, you're probably not buying the best deals, and you're probably not gonna get the best return. So having a pipeline where you have too many deals to choose from, gives you a lot of good opportunity. So we're gonna be diving into, you know, our sources for how we go out and build this pipeline, tips and tricks and all that kind of stuff. So, Dave, Logan, what's going on? Guys, appreciate you joining us today, Brian will not be here, as he is out of the office. But guys, what are your main sources for filling up that pipeline? I mean, Dave, I'll kick it over to you first, how are you making sure that you have consistent deal flow?
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Goes back to just kind of what timeframe you're in of how you're doing. And right now, the majority of my deal flow is coming from lots of different broker contacts that we have that we've built, that took years to build, though, so they didn't just show up overnight.
1:59
A lot of long term relationships. So but when I was starting out day one, it was like, How can we go find an opportunity to solve a problem, and that was everything from expired listings, where it's like, look, something didn't happen here or a deal fell through or a loan was expiring, or some kind of issue where we could step in, and, and hopefully be someone that provided a solution for either the seller or the broker that was involved at the time. And then prove yourself once it's like you get your foot in the door, and you got to, you got to keep proving yourself because kind of memories are a little fickle. And you've got to always be on top of your game performing and trying to maintain those relationships long term. And ultimately, that gets you to, you know, a book of business of relationship pipeline that can build deals long term, versus how did you just get that first one?
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Yeah, that's right. Well, good. What about you
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tried to take a three pronged approach to building deal flow, which, frankly, is the lifeblood of your business. And
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the best way that I found to be successful on this is simply with with with what Dave was saying, but is networking. So emphasizing the importance of building and maintaining relationships with industry professionals, such as brokers, developers, other investors, I mean, even local business owners, you know, there's networking events, industry conferences, there's online platforms that you can be engaged with. Now, this takes a what I'll call kind of a robust follow up approach. And, Tyler, you do a really good job of this, you know, if you're interested in brokerage, or investing or development, you have a newsletter for each one of those things, and folks can interact with you through those mediums. But for me, I think that the low hanging fruit was the networking piece, because, you know, I always say that opportunities don't just float out in thin air, they're always connected and attached to some body, right? So the other one that I will say, on this front is reading the Local Business Journal, and just seeing who's moving and who's growing and what transactions are happening. So then there's the more quantitative approach of market analysis and research, which is diving into market reports and trends and economic forecasts to identify, you know, potential growth areas, right, and then understanding how that is impacted in your own your own market. And then you have the really low hanging fruit, which is the online listings and databases, right. So that's LoopNet. That's the MLS that's used to be, you know, Craigslist, believe it or not, I have done deals off of Craigslist. You know, your local classifieds, ads, right. You know, there's an area that I like to do business in called Martin city and Kansas City, they have the Martin city telegraph. And you can kind of read that and see who's moving and shaking in the network of that area. I would say that all of those things combined need to be funneled into a systematic process and approach that my friend
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and maybe you guys know, Bo Berry, but he wrote a book called multifamily brokers who dominate. And he lays out a very systematic approach to building these relationships, and then continuing to follow up with those folks. But that's kind of my three pronged approach. I mean, there's no silver bullet, it's all what Ben Horowitz in the hard things about hard things called lead bullets, right, you know, you're just getting out there, and you're pounding the pavement. And, you know, that is been our Mo and how we've been able to build some, some deal flow, once you get to the point of doing some projects, and people know who you are, then you're going to start to attract those to you, right. And that's kind of where Dave is now, right. It's like, you know, use a known entity in the market, if it's a certain type of deal, somebody's going to reach out to Dave and that's great. But there also might be deals a Dave wants to go prospect himself. And so that means getting in the car, driving to it, taking note of hey, you know, I saw that 15 windows needed to be replaced, the trash was a little bit, you know, overflown, and the landscaping can be updated, and just taking those notes, and then using that as research to be able to reach out to property owners, instead of just saying, Hey, I'm a broker or I'm a investor, I'd like to buy your property, you start with, Hey, we own some property in the area or looking to purchase some properties in the area. Here's some you know, I secret shop to your apartment complex or your commercial real estate building the other day, and I've got some insight that I'd like to share with you. I think that owner takes that call instead of hey, I just want to buy your, you know, your widget that you have. Yeah, I think I think building that personal brand. In asset types or areas, geographic locations, whatever you decide to do is is incredibly important, right? Because I came across a multifamily deal here in Nashville. I don't really do multifamily. But I know both of you guys do. So I called both of y'all about that deal. And it's not a deal that we're taking to market. It's just one that we're probably going to get done. Because we know that we've got guys right here in our network that do those kinds of projects. And, you know, I know a lot of people love to discount the online platforms, you can find good deals there, right? I mean, it's very tough, you're gonna have to really sift through a lot of absolute junk. And, you know, people who think that cap rates are based on gross revenues instead of net revenues, but it is what it is. But I've found some really good deals there. I've also found some pretty decent deals just by sending letters. You know, that's one thing that a lot of people don't do is send letters to commercial property owners, because it's so commonplace in residential. I just stole that from residential wholesalers. Right, we can almost 99 times out of 100, you can find the mailing address of the property, right? I mean, it at least in Nashville, we've got everybody's mailing address, but you can always find a phone number or figure out who it is. And you'd be amazed at how often those letters get open. It's it's a pretty nice tactic to use, how much time you guys committing each week, to actually going out and building this pipeline? What did it look like when you first started? And what does it look like today? Because obviously, once you've been in it for five plus years, people start to bring you deals, things change a little bit. But Logan, we'll start with you. Yeah, I would say when I was first starting, this is all I did, right? I mean, I was just prospecting either from a, Hey, I had a buyer that was looking for a property or I knew what I was looking for. And so I was out prospecting. So what does that mean? Well, I was getting in my Chevy Malibu at the time and driving all around the city, and just walking properties, you know, taking notes and figuring out Oh, I like that project, but not that one, and writing down addresses and then figuring out, okay, who owns this, this property. And that's a whole different ballgame to kind of get involved in, right. But like, that's, there's, there's resources that you can, when I was first doing this, they weren't as robust as they are now. But I definitely utilize online resources to find who the property owners are. And so now, I would say it's anywhere between 15 to 20 hours a week, but we have a team that's doing this right, I have an acquisitions team, a brokerage team, so it's not necessarily me out there, you know, pounding the pavement anymore, but that work is still being done. But when I was first getting started, I mean, if I didn't have a deal, or if I couldn't bring value from some other aspect, which I didn't, it was finding the deal. And so that's what I spent 90% of my time on, was was finding these properties for people. Yeah, like that. Because when you're first getting started, the majority of the value that you can actually bring to the table is by just finding a great deal, right? You can go find guys that, you know, bring you in as a minority partner and their deal or their general partnership, or whatever it is, as long as you find a really good deal. There's typically people that are willing to kind of bring you in and do that deal with you. Dave, what about you?
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Pretty, pretty similar to Logan, right there. I mean, out of the gates, it's everything is just finding the deal. How do you find something that works that you can actually execute on that's a real opportunity that will actually be sold to you that you can actually buy that you can get financing for all that stuff? And I think now you know, I as well we have a team of people that are looking at that
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At every single day trying to find opportunities, so we've got five people total that are that are always out there every day talking to brokers looking for just by side opportunities. So that's a lot of time every week, if you add that up between a couple of people always out there and even myself, you know, driving around looking for stuff is still one of the most interesting things I think I can be doing. It's, it's not always the absolute highest and best use of time. But it keeps you in touch with what's going on in the markets you want to invest in, you get to see all the activity that's going on. And man, just using Google Maps and save a couple locations, and always like, follow through and see how you're going.
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You know, I think that's invaluable. And we found a ton of deals by just driving around looking at our properties and looking at the neighbor's properties. So I think you're always doing it. I don't know if there's any like, Ah, I hit a point where I no longer look for deals like I don't think that ever happens. So
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yeah, I mean, it's, it's, it's a never ending game. You always gotta be fun. The next the next big deal. And, you know, what do you guys think is is probably like the highest potential, but maybe the most overlooked form of prospecting when it comes to real estate?
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Dave Okay, good to you. Yeah, I think it's, I think it's just knowing your neighbors.
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There's tremendous value. And if you if you own a deal, or you own anything, even if it's a house, you own one house, go talk to all the neighbors. So few people actually like talk to the people that are right around them. Just from that they'll know, Hey, you are a guy that was looking for investment opportunities, you're in real estate, they come across something they're gonna call you. So you just stay front and center and look at all your look at all your neighboring properties. And we've gotten tremendous deals just from knowing who is our who's our neighbor, and having relationships with them over the years. Yeah, I think right now my, yeah, I'm doing that right now in my personal house, right? Like, I've got 10 acres, I want to buy, you know, another 10 or 20. And so I'm just sending letters to all of my neighbors letting them know like, Hey, if you ever want to sell call me, I won't use a realtor, you don't have to pay any fees, I'll probably pay you three to 5% over appraisal, just because it's worth that much more to me. Give me a call. Yeah, you're the best buyer for a neighboring property. I think almost in all cases, if you own a piece of real estate, you're probably the best buyer for the for the deal. That's right next to you. Yeah, I can put a grave. Logan, what about you? You know, I think that the lowest hanging fruit is, and I'm going to go back to networking, but is just getting out to these local events that you can get on meetup.com and see who's meeting about real estate. And usually, you're going to want to spend the time with the organizers, because the organizers are going to know, everybody that's coming to the event. And they may not be pushing any type of you know, you know, sales pitch, but they are having that organization in that meeting for a reason, because they are there to find clients, right? I mean, that's just what it is. And so if you show up to that, then you can start to see who the players are that have, you know, opportunities. And the other part of that it Tyler, that you mentioned, was the low hanging fruit of LoopNet and CoreXY and the MLS but yeah, you might not find a deal that's listed on there. But those brokers are the ones who have the listings. So you can at least start there to say, okay, these three to five people in this industry, what I'm looking for are the ones who I need to be talking with and building relationships with. And so, you know, that's a another part of, I think prospecting is not just getting out and looking at properties, but seeing who's active in the marketplace, and then figuring out a way to build a relationship with that person, which I've got a lot of different, you know, insight on how to do that as well, since we work on a lot of those types of transactions. But at the end of the day, what Dave said is spot on, you need to tell people, what you're looking for, and get out there and put yourself out there because you're not going to unfortunately, not going to find a lot of really good deals typically, in today's fiercely competitive marketplace. And I think it's been like that for the last 10 to 12 years behind the computer screen. You know, you got to get on the phone, you have to start talking to people and figuring out who's got what because most it's probably the same in your guys's markets as well, most of the deals that are getting done from an investment standpoint aren't always the ones that are being marketed. They're the ones that aren't being marketed, but, you know, are being out there in the pocket listings. And or somebody might just say, Yeah, you know, I'm interested in selling, I got a couple emails, and I just had, I know, Tyler a bunch of follow up, but I just had our third baby a couple days ago. So I have been a little bit busy. So I was digging through my email this afternoon. And I was like, man, there's three emails in here from people who are interested in selling but you know, don't necessarily want to go list. Okay, well, that's a great opportunity for me to connect the dots for some people. Yeah, congrats. By the way. I know we've talked about that on a side note, but that's really exciting, because we had no idea that you
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We're even expecting your third baby.
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She wasn't supposed to be here. And she came early. So yeah, like texting Logan, like, Hey, did you get that deal? He's like, I just had a baby.
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So I, when I was first getting started in commercial real estate, this was as a broker, I mean, because you know, building a pipeline there, it's just as important if you're trying to sell deals. You know, I found that, you know, I'd get into a point where I had two to three really big deals I was working on, get those across the finish line, and then look back at my desk and be like, Oh, no, I don't have anything else to work on.
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Because I hadn't been building my pipeline. While I was working on deals. It's so very easy to get distracted and say, Oh, I don't have to worry about prospecting right now, because I've got two big deals. But as soon as those deals are done, you're in trouble. I mean, what? What are some common, some other common mistakes you guys see, you know, newer investors make or maybe mistakes that you made yourself with regards to your pipeline when you were first getting started? Logan, okay, good to you first. Yeah, you know, I think that that's the easiest one to get a hold of is, you've got these and I look at sales pipeline. Let's throw deer and antelope in there. Let's throw rabbits in there. And elephants, okay. And so what Tyler is talking about is focusing on the the elephant type of deals. Well, if you throw an elephant deal in your pipeline, guess what can't get through, you can't get rabbits through and you can't get antelope and deers through. And those are your moneymakers. Your elephants are your big fish, right? The ones if you land, you know you're going to be eating for a long time. That's fantastic, right. And so you always need to be thinking through having an elephant, a lot of deer and some rabbits, you know, moving in there. And as you grow as an investor, you stop doing those rabbit deals, and you start focusing more on those deer and antelope deals and you hopefully land and elephant and you're always doing, you're doing projects, and your pipeline never gets too, too small or too thin. And so that's the biggest, I think, issue that I see, for beginners getting into this business, they see one deal, somebody answers a phone, and then they're hot on the trot for that for forever, right? Until they can't get a hold of that person six months down the road, and they've not done anything else. So I think having a systematic approach saying okay, my KPIs or my key performance indicators, indicate that I need to evaluate 1000 deals out of those 1000 deals, I'm going to actually underwrite 200 of those out of those 200 100, maybe pass through the the next kind of test. And out of that 100 That's what I'm going to focus on reaching out to and trying to build that relationship with more cohesively. And that's kind of the way that we think about this. And I also will say that, you know, that's on the, you know, direct outreach standpoint, you have to do the same thing with brokers, because I think the most successful investors, pay brokers and are really good friends with brokers. And, you know, at the end of the day, you may have five offers for a property, but the folks who are probably going to win that deal are the ones who have transacted with or have a relationship with the broker. And so the earlier that you can get started with that, I think the better and, you know, you will find really good brokers and you will also find folks that are daisy chain artists, and daisy chain artists are somebody who takes somebody else's deal. packages up, adds a fee on top of that already layered in fee has no relationship with the actual owner and says I can get you information on this deal. Well, guess what, Mr. or Mrs. Daisy daisy chain, I can sign a CA as well. And so like that's, that's not brokerage, that's not adding value that's just trying to, you know, uncover some, you know, hidden gems there, that's not going to build goodwill. So, you know, I think that's the part of the business that you always have to be doing. But also, you can't stop. You know, like, right now, I think people are thinking they're a little beaten down, right, like people are kind of like a little pessimistic, right. I mean, I don't know, if I can get lending, I don't know, if I can find equity. I don't know, if I can make this deal work. You know, all those different things. But if you pull back during these periods of times, trying to get it spun back up, is really difficult. Think about like a metaphor of the water pump, right? The Well, you know, you pumping, you're pumping, you're pumping, and you finally get that thing to start, you know, filling up your bucket of water, and it took forever to get the water up there. And if you stop, you'd have to re pump that that well, you know, 100 times just to get it back going. It's the same thing with your deal flow. Right? If you just stop and you stop talking to brokers, you stop reaching out to folks, you you may miss an opportunity that's flowing through, because I will tell you, there's been many times where, you know, we've been evaluating a deal two or three months ago. It's like, Man, that's a real good acquisition target for us. But you know, right now, it's not going to make sense for us at that price. And 90 days later, that thing comes back around. We've already underwritten it, we've already talked to lenders about it. We've already got some equity teed up for that thing, and we're ready to
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to move in something has changed with the seller, in their own circumstances, that predicates a deal to being done. And so those are all things that I've found to be extremely successful, and is not easy to do, because it's easy to really get beaten down, and, you know, have a lot of deals that aren't working, and you're just kind of get demoralized. But the more that you can do on that front, the better you will be, and always keep a positive attitude, too, because I've, I've talked with a lot of guys and gals that, you know, are very transactional when it comes to this stuff. And, you know, if you're very transactional, like, don't send me another deal like this, it's like, okay, somebody sent me that deal. Over the weekend, I sent message back and say, Hey, that's not what I'm looking for. But let me dive into it just a little bit more, I might have some people to connect you with nothing needed for my end. But you know, if you guys make a deal, that's fantastic. You know, something along those lines, it's just so much nicer. And we'll bring you more of those opportunities. Because what we're trying to do here, as investors is position ourselves as a magnet, and a lead magnet to attract these things to us. So at some point, you don't have to be always forcefully out there putting action in right. And so that's where you want to try to get to, does that take five years? Does it take 10 years? Does it take three years? I don't know. You know, it depends on how much action you actually take. But if you get that water pump, pumping water in that bucket filling up, don't turn it off, because the moment you do is a moment that deals probably start getting done, and nobody can time that market very well. Yeah, no add to, you know, filling. Well, not filling the pipeline, but But giving feedback to people that bring you deals instead of just, you know, like you said, just say, yeah, don't Don't ever bring me something like this, or just never responding, like give some feedback. Why does the deal not work for you? Let's hear that because it helps maintain the conversation. And it'll help that broker or that other, you know, wholesaler or investor or whatever it is better fine tune what they are going to bring you. Because you know, I'll say on the brokerage side, like when we get investors on our list that we think a deal is perfect for and we send it over to them. And we either never get a response, never get any feedback, or they just have a you know, this isn't a fit for us. Well, why? Because Because based on what you told us, it checks all of your boxes helped me understand why this is not a fit for you so that I can find you something that is a better fit. It's just going to bring you better deals in the long run. Dave, what about you?
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I think just showing like, these are the things that you're going to buy, like, what can you actually get done? Or what can you, you know, what are you performing on? And that way, you can show that to other groups or anyone buy side sell side brokers? Good luck, you know, we're buying these types of deals, these are a few of the past transaction we've done. And it validates that, you know, not only is it of the brokers interest to share the deal with you, like, Hey, you got to, if it fits the box, you'll you'll bring it home, you'll close it. So that's, you know, but to Logan's point to like not trying to go out to these elephant deals all the time. I'm sure they sound awesome. They're like a logistical nightmare. We try and just avoid them. We've only done like two or three, actually, like, what I would say are bigger deals there. You know, this is not what we go for. We just try and get the run of the mill, get on base, hit good returns, and, and keep that volume going to chose we can close deals it puts us out there in the market. I think that's more valuable than just swinging for the fences on everything. Yeah, it's maintaining consistency, right? You can only close an elephant every few years. Right? So if that's all you're focused on, then the market is going to forget about you. And you know, we've gotten what I would consider two elephants across the finish line. And they were amazing deals, but man did they absolutely, like physically and emotionally drain me just because of the amount of work that had to go into pulling that together. But you know, at the same time, very few of those deals ever close. Right? There's always something that comes up. I mean, you know, there was a deal not too long ago I saw in East Nashville, it was listed for 35 or 50 million, something like that. And never closed never sold when under contract a few times. But once you get to deals that are that size, you know, I mean, and that's that's not a huge multifamily asset, right, that's a commercial asset. So it's a little bit different than you know, say $75 million multifamily deal.
24:26
There's just there's got to be hair on it. There's gonna be egos involved and there's some people that don't you know that for whatever reason, even though they get paid to close a deal will not close the deal. I'm looking at you other brokers.
24:38
Because man, I've never had somebody take a deal as often as brokers on the sell side.
24:44
Which is always mind boggling to me. It's like did you get paid a commission when this closes? What are you? What are you doing? But you know, you guys have been very successful at creating these really intense pipelines. Right, you get a lot of deal flow. I mean, Logan, like you said, you came back and you had three kids
25:00
Enjoy opportunities. I mean, how to filter through all of that, to you know what, to not spend 20 hours a week just looking at total garbage deals. What is your like back of napkin approach to saying like, Yeah, this is worth spending a little bit more headspace on or not? And then how do you filter through what is a good opportunity? Once you kind of get to that point, Dave, we'll start with you.
25:22
And you got to have your five, six key bullet points in whatever asset class it is that you're willing to move on. And no, as long as it hits that you're, you're ready to go forwards. That's got it that's kind of narrowed down like 80 90% of the of the deals, you look at Logan, you said like, Hey, if you're looking at 1000 deals, we want to see that get down to just out of the gates get down to that 200 range from like a to five or six main main points. And when I say that, I mean right now we're buying,
25:52
mostly kind of like vacant, warehouses, the flex type stuff. So we want to know construction, we want to know footprint size, we want to know ceiling height, we want to roll up doors, we want to know power. So it's like we get those things, we can narrow it down from 1000 to 200, pretty quickly, and you're gonna go look at 200 deals, get that into the 100 range, and maybe you can close 10 of them. And that's really the metrics on that as long as we know, our five to six key points. They haven't changed for as decade for us across all the different asset classes we've looked at, but just know, yeah, we're gonna look at 1000 deals, we're gonna get 10. Look, you think it's pretty similar numbers? You're thinking? Absolutely. Absolutely. And I think that the one of the most common mistakes and deal pipeline efforts is a lack of focus. Like when you especially when you're getting started, it's like, oh, you know, here's a multifamily deal in a sub market that I typically wouldn't, you know, go to, but man, it got sent to me, and it's off market. So let me spend a bunch of time on that deal. And they totally forget their investment criteria. Right. And so I think that that's the easiest way, like Dave said is, you know, we have published on our website, our investment criteria, you know, if it's a retail shopping center, I need to have 20 25,000 cars per day, right? I need to have these other different metrics that we're, we're kind of evaluating, and I think that's really easy to kind of get into,
27:14
you know, hey, I'm busy, but not really being productive kind of mindset is you're looking at a lot of these deals. Now, that can also be really beneficial when you're first getting started, right? Because if you don't know what that criteria is, you have to develop those. And you can only develop those by either, you know, working with somebody who's done a lot of projects before, or knowing what you don't want to do anymore. And I think that's a crucial component of this. And so, but then you have to pair that alongside also, what's the reality of closing? So you may have a, you know, a deal that fits all of the buckets from, you know, the criteria standpoint, but then you're like, oh, but, you know, the price is this, the financing is this, and, you know, I instead of spending my team's 10 to 15 hours on this, it's like, hey, we will give you, you know, if you are in this range, we will move forward to the next step. But if not, then go find somebody else who would would pay that price. So, I see a lot of people, you know, underwriting deals, because a broker will say, Oh, well, you know, it's market pricing, you know, give me what you think you can pay for? No, I think that if you're an investor, you need to get a hard number, even if it's a whisper price to say, you know, am I even in the range, because I have spent a week on a deal before with our team that we loved. And then we get to Investment Committee, and we finally get the price. And we're like $4 million off on a $10 million purchase, like, we're not even close. And it's like, okay, that's maybe beneficial for understanding where the market is. But man, what if we just got that number, you know, day one, or day two, or day three, and just stopped, stopped underwriting this thing, because when we get it through it, and first underwriting, then it's like, alright, well, now we need to actually go see the property. And we have to spend time getting in a vehicle and taking construction people out there and just walking the property. And so that's, that's a really easy mistake, I think lack of focus early on, can really hinder that. Now, if your goal is to just learn, then that's a great process to go through, right. And that's, that's fantastic for you to get some reps underneath your belt. But if you're a seasoned investor, or you've done some deals, and you have the, you know, the squirrel syndrome, where you're always just kind of looking out the window, waiting for something to be dropped in front of you. That's probably not going to yield too many results. Yeah, that's what I teach my coaching clients whenever we're going through the process, if they're more in the beginner stage, it's like, underwrite a deal a day for 30 days. Yeah, because after that, you will be able to look at something and within five minutes know if it's worth spending any time on, right. So front load that effort, get the rep sense that you actually understand how to even look at a deal because that's
30:00
That's the biggest point. You guys both mentioned a couple of things that your your you know what your deal points are? Could you share a few more of those? Like, what are the specific deal points that y'all like to look for so that somebody listening can kind of start to understand what they should be putting together?
30:16
Yeah, certainly, you know, it varies. There's all sorts of different asset classes out there, you could be looking at, but for a little bit, we were looking for Net Lease deals or thinking we want to single location, right, we want an operator, that's a growing franchise, we don't want to individual we want a growing franchise brand that has over 1000 stores, we want to see a short term lease so we can look at short term meaning less than two years, meaning we can then go renegotiate that lease for a longer term lease, and that's where we're going to create value. So immediately, you start saying, like just those three points. And you've weeded out a lot of a lot of what the net lease tenants are, they're out there, right, just just having a growing brand and having over 1000 units, like you're talking a big, you got a big business you're dealing with already so that, you know, those are three that we were looking at pretty heavily when we look at the net lease space, is making sure we're maintaining that.
31:13
But you're looking, yeah, I'll throw a couple more in there. I think that the vintage of the property, now that I have owned a lot of class C multifamily assets is extremely important. And it's important, because of the last conversation that we had in regards to insurance, construction costs and wage increases that we have seen. Inflation has really impacted that side of the value add components. So vintage is extremely important. Location. So when you think about demographics, we're looking at median household income, we're looking at the school districts around that area and seeing on greater schools.org. What do they rate it? You know, is there any new development going on around the area? What's the crime look like? Right, so what if it is high crime? Is it petty theft? Or is it violent crimes? Right? I mean, that's going to impact any type of leasing activity that you want to, you know, procure for your property. And then other than that, then it's just local market knowledge of knowing where development patterns and and or people want to live, are located. Right. So that's, so geographic location, median household income is extremely important. Schools, I think are important. I've had investors tell me that, you know, if, if a Starbucks is more than two miles away, they're not doing that deal. Right. So I mean, you know, you can think about a Starbucks or maybe even a Walmart or something like that some big retailer, they've probably done some really good research on where they should be. Now, that's just, that's just a back of the envelope indicator, because those retailers also have, you know, they have in the drive to open more locations, right. So they make, they may actually serve a different demographic than what you are looking to serve. But those are some easy ones to kind of think through on the retail strip center side traffic counts is extremely important for us. Is it hard to get to meaning? Do I have to go around and do a u turn to find this shopping center? Or is it actually on the way to work? And on the way back? And is there easy access and visibility? Is there a massive out parcel building that's, you know, completely blocking the visibility to the retail shopping center? What's the closest grocery store? What are the is it a destination? Location, destination locations are okay, for people's homes? And for multifamily, potentially, but not really for retail? You really need to have high traffic counts and visibility for those things. So like Dave mentioned, I think that it's it's different for each asset class. And then I'll throw industrial in there because we, we also own industrial, where's the highway access? You know, how easy is it to get large semi trucks in and out of that building? What's the road look like? You know, I mean, those are all things, what's the parking ratio? Those are all components to that. But if somebody sends me a project and says, Hey, I'd like for you to take a look at this. The first question I'm going to ask is, Okay, what's your relationship to the property owner? And do you have a price range? And has that been anchored somewhere? Because those two things really easily for the assets that we're looking at in the different markets? I can kind of gauge, you know, does this person actually have control of this deal? Do they have a relationship with them? And or is there a price expectation, you know, from 2020, when the Green Street property price index was at the highest peak that we've seen in the last 15 years? Or is it reset, and why are they selling? That's another really important piece of the component because if you start to hear well, you know, they're getting older, their heirs don't want the property. Those are really, you know, emotional and tangible things that can really help drive a transaction. If it's somebody that just says, Well, you know, they're
35:00
are getting rid of these types of assets, and they're kind of seeing what the market would would, you know, would beg for their property, then, yeah, that's fine. But I'm not probably going to be the buyer for you on that on that transaction. So and you'll develop those as you go along in your in your deal finding process, but I think vintage geographic location, demographics are all really important from the get go. Yeah, I mean, that's the beauty of picking this site criteria, right, you can kind of pick whatever you want, whatever you feel comfortable with, you can hone it in over time, as you get more experience. And you can get really specific with it. I mean, we used to work with a brand that would only go within half a mile, a mile, but ideally, half a mile from a Chick fil A, because Chick fil A had, you know, their their demographic research, they know if a Chick fil A is going to open up in this area, it's because it checks all of the boxes for that target customer. And so they say, Well, why reinvent the wheel, we're just gonna follow Chick fil A around, you know, there's, there's retailers that target target for that, right? They'll follow target around and just go wherever the next targets going. So makes things pretty easy.
36:11
So dig on that Tyler that I think is really interesting is okay, so new retail corridors develop, they got the grocery anchored shopping center, and then they'll Outparcels get started, right. But then you see slim chickens, raising Cain, KFC, and Chick fil A, all within, you know, 500 yards of each other. And people just can't wrap their minds around it until I tell them that chicken is a $5 trillion industry, right? It's like, each person has their own chicken place that they want to go to. Right? It doesn't matter that it's right next to Chick fil A now, Chick fil A being obviously the leader in that space. But like, you know, that's that's always kind of interesting to me is when people like I just can't I can't understand that. Well, if you're driving a family of three around retail corridor, I would like to say we can go to Wendy's Chipotle, Jimmy John's Chipotle, raising canes, slim chickens, pick which one you want, right. So that's, that's a really important point to know, as an investor is that just because there might be a competitor near you, does not mean it's not a good location. If those traffic counts, and the retail corridor is strong, it's a big industry that you're trying to just capture a small kind of component of. And that's really important when you're looking at comparable rent, sales, rents and sales on the multifamily and the retail side, I think those are really important. Now we're getting a little bit more, I think, in depth on that stuff. But those are just things to keep in mind, as you're looking for deals, just because there's a competitor next door doesn't mean it's not a good location. It just have to tie to your business strategy. You know, your business strategy might be buy and hold and not do anything and might be a turnaround, you might be trying to return it something. So it's like, exactly what what are you willing to say, Hey, if you, whoever you tell him that, you know, this is what you do, like, if you hit these four or five, six points, that's going to motivate me and I'm going to then I'm going to go out and acquire that thing. So your points got to match up with what you're going to, you know, willing to be able to do then another one we look at too, is just population growth. So we want to areas that are growing, makes it easier. You could be someone that can invest in areas that are not growing. But it's easier if that is growing?
38:23
Yeah, you don't want to be the guy that was buying Detroit back in 2009. Because it still has not recovered. Right. I mean, you can get really good at you know, I get I get pitched deals in Memphis, Tennessee all the time, because it's like three hours away from me. And I'm like, oh, but you can get a really good deal. You get a 15 to 20% cap rate? Well, yeah, I mean, I could if I'm able to collect the rent, like it's not just because it's a 15 to 20% cap rate doesn't mean that it's a good market.
38:50
How has technology impacted the way that you guys look at these deals, because, you know, we've all been in this for a little while. And when I first got started, you know, used to go to a site to do business through CCI. And that was pretty much the only demographics access that I had, because everything was so expensive, and everything's hidden behind paywalls and whatever. But, you know, it's, it's gotten a lot easier. I mean, you know, just with the advent of AI, and obviously, AI has probably been around a lot longer than just the past year, it was just what we're starting to see on the consumer facing world. What are you guys using in the tech space to kind of help facilitate your deal pipelines and also review some of these deals. Dave?
39:34
I feel like technology has just made it all more expensive.
39:38
Do everything you couldn't do before. I think the basics though, you know, just having Google Maps and satellite images helps a ton. You can learn so much from just you know, where the asset is and what it looks like. But then you've got all the other stuff if you're going further up like costar and then you start using location data like place or AI
40:00
In this kind of stuff for foot traffic, cellphone information, you know, you can spend a lot of money going down the rabbit hole is is, so where you're getting your data from. But also you've got to be able to have a source that provides you at that point you're willing to act upon. And I think all of those are helpful in building your case. So instead of looking at 1000, how can you look at 2000 deals in qualified 2000 deals with a couple of data points that you can easily have access to. So even though I, you know, I kind of they're a little expensive, sometimes, you know, you're gonna spend a couple 1000 bucks a month on data sources that hopefully make you twice as productive and finding out those your high level 1000 2000 How many deals can you you get through your filters on an annual basis? Yeah, you got to be really careful with that. I mean, you know, back in the day, we used to use costar for everything. And you just kind of put up with it, right, because it was the only data source out there. But we were spinning easily 2000 bucks a month on that, and they still had incorrect data. And man, it was the most frustrating thing in the world.
41:07
For the audience listening, they all know, you know, I am not a fan of costar and we'll never give them another dollar. But you know, there's there's great sources out there. Now, where like pacer AI, I mean, that just came out not too long ago, and it's already completely changing. Like I think all my brokers are using it. You know, I mean, it's it's pretty amazing technology. But you know, it doesn't necessarily give you an advantage. If everyone has the same information, you know, place your AI being being very available, it's almost like, Hey, you can just ask your broker to, hey, give me this information, you might not have to pay for that. That subscription in the short term, if you got a
41:48
better way to better way to get it. So I don't know necessarily like if one of those is giving any kind of like big competitive advantage, or as a hey, I have this point, and no one else has this. So then I can go see what's happening. I think that's the value of just building your own database and making sure that you're touching, you know, it's I mean, that's the Yeah, the broker and me saying that, but making sure you're touching base with all those, those sellers or property owners, because that's something that nobody else could have, if you go out and build it properly. I started looking, I'm interested to hear what you think. But I still think networking is still Yeah, you know, networking in your relationships and being able to prove you can execute.
42:24
I still think that trumps just the technology for sourcing the deal.
42:29
Well, first off, we'll start with getting around paywalls. And this is a hack for all the listeners out there. 12 foot, so one, two, ft.io 12 foot.io. You go to their website, you put in the link to that website, you can get around the paywalls. And there you go. So there's a free hack for you guys life hack, using technology. Not necessarily. Yeah, not necessarily, you know, building your deal flow, but you're not gonna be able to log into costar with that. But it will help you with that, you know, article that somebody posts on LinkedIn that you can't get access to that you want to read. So there we go. And in regards to technology, I think that
43:16
I think that we use quite a few different tools. And you need to be careful, because yes, you can, you can become a Mr. R for other, you know, tech companies, right, so your monthly recurring revenue that's going out the door can quickly, you know, be more than what you bring in the door with all these platforms. That being said, I think that understanding if you are looking at multiple markets, it's really important to understand this data, if you are starting out and you're evaluating the deals in your own market, you should be able to know and find quickly, household income and different demographics, get in the car and go check it out, you know, go at high traffic times low traffic times, you know, camp out at nine o'clock in the evening and see what's going on, right? Like you're gonna be able to do that. But if you have a broader acquisition strategy, and you're, you're, you know, obviously, looking into multiple markets, then having this data is extremely important. But I will say there's a lot of free data out there now. GPT is an interesting tool that I have used quite a bit in regards to writing and asking questions to and our friend rod Santa Massimo has a lot of free trainings on how to use chat GPT in regards to, you know, doing market analysis, believe it or not, and that's really interesting, right? So I will get a deal sent over to me pop it in there and say, Hey, tell me, you know, Jack GPT tell me why I shouldn't do this deal. And you know, kind of pops out all the reasons. And then I say okay, now pitch me on why I should do this deal. And then I asked would you do the deal, you know, have some fun with it. Right? It's kind of interesting. Like it's kind of cool to see what it spits out. But technology that we use on a regular basis. You
45:00
I've found that there is a really nice way to systemize analyzing deals meaning, what is the work that can be delegated within analyzing deals? Well, that is, you know, taking roles and demographic data that's widely available and inputting it into your underwriting model. So we work with a company that has virtual assistants based in the United States for real estate, and they focus on underwriting our deals. And so I will get the complete package sent over to them. I've trained their team on how to input it into our data source or our underwriting model, and what metrics I want to be researched on a different tab, whether that be demographics, traffic counts, or different components of that. And they do the comparable sales and rental analysis, at least the first shot for me, so they're pulling all that information from the sources that I pay for into one place, which allows me or my analysts to dive in really quickly, and say, Yes, we would like to continue underwriting this deal or no way, there's, there's no chance that we're, we're gonna, we're gonna purchase this deal for these reasons. And that has allowed us to evaluate way more opportunities than, you know, having to sit here and do that internally, on a regular basis. It's pretty robust. And so I have found that to be extremely helpful. That's, that's the technology. And then we track all of this on a project management software just called Monday. So it integrates into email and different sources. So I can see when the virtual assistant team is where they're at in the process of underwriting the deal. You know, they go in and they update where they're at. And so I know when that deal is going to come back to us, and we need to be ready to evaluate it so we don't miss out on an opportunity. So we use that we use a lot of we do use costar, we have yardie matrix on the multifamily side,
46:56
and then chat GPT as well and place her.i.ia Or I place her.io. Great. They're awesome, too. I mean, that data is so robust that you can get from that on the commercial side. And that's really interesting, because it will tell you to the how many customers are coming, you know, how many? How many visits are they getting on a regular basis. Now, like Tyler said, all of that is a first start, and you need to validate that information. The Russians call it Dover, UA, non poverty, which means trust, but verify. And the only reason I know that is because I read a book, and I'm not condoning, you know, speaking Russian, and I probably butchered that. But at the end of the day, trust, but verify, right, like you need to verify that information that is coming into, you know, your underwriting models, if you're going to seriously make a financial decision based on that other technology that I like to use. I love Google Maps, we're in Google Maps a lot looking at, you know, streets and, you know, seeing where the left Laplace pictures look like and, and things like that. And then you know, I like to use technology called my cell phone. And I will call people around, you know, if they have comparable sales in the marketing package, guess what I'm going to call those, you know, apartment complexes, how many deals were bought? Let's just call it on the apartment side, from comparable sales that people did not call those comparable, apartment communities and say, are you really getting nine or like I'm a prospective tenant here or resident? And I'd like to know what it costs for a two bedroom, one bath? You know, the data is not perfect. I mean, even Jay Parsons with real page would say, you know, the data that you're seeing is the data that they're asking, those are asking rents, but what are the actual rents? Right, you know, and where, what timeline, do those lag on, that's really going to impact the ability to, you know, change or implement a business plan. And so I call a lot of people, and if there's a deal outside of my market, the first thing I'm calling is somebody I know there to say, What's this area like? And would you do an opportunity, would you would you buy an opportunity in this area. And that's extremely important as well, there's that anecdotal evidence and information is sometimes really important. And I think that's really crucial to finding these, these, these nuggets that are not necessarily in all of the information that we receive, but is kind of the qualitative information that you can get on a project or an area. So those are really kind of important pieces to that puzzle. But, you know, if you're trying to figure out how to do more analysis, there's an easy way to do that. And it's to, you know, send information over to somebody who's trained on your underwriting, and you know, the hourly wages for these things are just incredible. And you can get a deal sent back to you that's got, you know, might take us six hours, put all that information in, and you wake up and it's in your inbox and now you get to evaluate it in your underwriting model. Like how valuable is that? So that's pretty cool. from a technology standpoint, on
50:00
On the underwriting side, yeah, George Powell is saying thanks for the hack on on 12 foot, I'm definitely gonna be using that because there's way too many newspapers now that have paywalls. It's like, you can't even read the articles just dark. Are you guys making money off the ads? I don't get what's going on here.
50:16
You know what, when it comes to calling the comparables Do not underestimate that. When we were developing a multifamily apartment complex, we were trying to figure out, we didn't have any parking requirements, we were trying to figure out how much parking do we actually need. Because a lot of people will say, Oh, you need 1.3 to 1.5, you know, parking spaces per apartment unit, depending on the types of units that you have. And so we're like, man, it'd be such a waste to have one and a half parking spaces for this project, because we'll have to really build out a big parking deck. So we went in and started calling all the apartment complexes that were comparable, closer to the urban core, and asking them what their parking ratios were. And how full does it actually get? I get the most full you've ever seen it how full is it?
51:01
Almost all of them had a 1.3 to 1.5 parking ratio. And the most full they ever got was like 70 to 80% full. So we ended up just backing in from there and saying, Okay, well, if it's 70 to 80%, let's go 75%. And let's just go with the bare minimum parking that we think we can get away with. And we never would have been able to do that how we now just picked up the phone and called to see what that would look like. So guys, we're coming up on the hour, any parting advice for you know, somebody that's new. That's that's probably looking to build a robust pipeline. Logan, I'll start it off with you. And we'll end with Dave Yeah, I've got one real quick. So to make this really easy for you when you are talking with brokers, because I believe that that's a fantastic place to start, when you're looking at getting deal flow is create a one pager that has deals that I do look like this deals that I don't do look like this, and go find some deals in that market that have been listed in the last six months, and pull pictures and show why you did not go forward with that project, or why you did you can even put one on there that you did, you know project if you have completed one successfully, why you did that opportunity. That's That's tip number one have that while you're reaching out to people can be a one pager could be a two pager, whatever it is, that way people can get an idea and create your investment criteria, put it on there. And then when somebody does sends you a deal, you can't do this with every single deal, you might be able to now because there's not that much deal flow out there. But you know, when the deal flow does start back up, it's hard to underwrite every single opportunity and give feedback unless you have one of those systems that I just mentioned early on. But you can give feedback. And by the way that I've seen this done a guy by the name of Mason fiasco day, and he when he was looking at buying in Kansas City, when we sent him a project, you know, three days later, we would get a screenshare of him going through his underwriting and talking through why or why not the deal worked for him. And it was a loom video, L O M, loom, it screenshare it just record your screen, you can just talk it takes 30 seconds to 45 seconds, not to type out a whole email and you know, make it a big deal. Just record yourself, send that back to the broker. And that's a really quick way to give feedback on why it does or does not work for you do those two things consistently, and persistently and deal flow will start to really be attracted to you. That's great. I love I love loom video. I mean, we use that for a lot of our internal training videos for the team, because it's just so easy to use. Dave, what about you, man
53:39
sort of mirrors that a little bit there. But just like clear communication and being patient, you got to you got to be telling people what you're doing. You got to act on it. And then you've got to be patient, it takes time, you can't just go out and build a relationship in a day. So it's going to take time, and to have a real you know, actual good relationship and be able to source stuff. So be patient, know where your objectives are and, and just have some clear communication and act on what you say you're gonna do. Great. Well, gentlemen, thanks for joining me today to the audience. We do these investor roundtables about every two weeks December is going to be a little bit different just because of the holidays, obviously. So if you're watching on YouTube, Like and subscribe so that you don't miss this when we go live, you can jump in and ask your own questions. If you're listening on the podcast, please rate and review. I hear that that helps with the Apple podcast algorithm. And we will see y'all in the next one. 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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