Finding Tenants, Starting in Brokerage, and More (Office Hours)

This episode of Office Hours dives into strategies for finding tenants for commercial properties, such as leveraging a professional leasing team. It also covers ways to find off-market deals through commercial real estate brokers and tips for breaking into the brokerage industry. Additional topics include getting estimates for flex space projects, evaluating mixed-use developments, and networking opportunities through commercial real estate mastermind groups, and more.

Get commercial real estate coaching, courses, and community to jumpstart your investment journey over at CRE Launch Pro: www.crelaunchpro.com

Key Takeaways:

• Leasing commercial properties can be challenging for beginners but there are strategies like hiring a professional leasing team or directly marketing to potential tenants.

• It's important to have a clear buyer profile with specifics like location, size, age of building, etc. when working with commercial brokers to find off-market deals.

• Getting initial estimates from contractors can help evaluate the viability of flex space/mixed-use development projects before committing to full construction plans.

• Events like mastermind groups are valuable for networking and learning best practices from other experienced commercial real estate investors.

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:

0:07

Welcome back to the commercial real estate investor podcast live from stove Vermont. I'm up here for a mastermind event, but didn't want to miss our office hours live stream if possible. So I was able to make sure that we had good enough internet to get to it. But I'm up here for a mastermind event. I'm a member of go abundance, which if you're not familiar, is a men's mastermind group. A lot of the members are in real estate multifamily, and some are in commercial a lot through syndication. So it's a, it's a great time for me to get up here and network with other people that are in the industry, and learn their best practices. I get asked all the time. If I know of any commercial real estate masterminds that are out there, and I, I usually don't, and this is about as close as I can get. Because there are actually other people that are syndicating doing high level real estate. And like I said, it's just a great way to learn from other people what they're doing, what is working, what is not so that you don't necessarily have to be the one to put your hand on the stove, highly recommend joining groups like that. Whether you can join something like abundance, or, you know, join a local real estate investors meet up and learn best practices. This is another episode of our office hours. So if you have any questions on commercial real estate, that is what we are here for today. I want to hear your questions. You know, what's, what are you struggling with right now? What can I help you with, you know, when it comes to getting your first property or buying your next property, maybe you're struggling with some underwriting, and we want to talk through that. Let's dive into it. Next week, wanted to give you all a heads up actually one of my coaching clients, Alec is going to be jumping on with us. And we're going to be walking through and evaluating a deal with him. So he'll be going live with me, we'll be talking through the deal showing you all some, hopefully some photos, surveys, etc. On the project to talk through what the highest and best use for it might be. So if you ever have a project that you're working on, and maybe you can't afford coaching or you can't afford, you know, one on one phone calls with me, that is what this is for. That's what office hours is for it is the the free coaching that I'm able to give. So have a couple of topics want to talk about today. You know, over the past week, it's been good, really just working on getting the brokers at my brokers team at the cobble group, everything that they need to kick the year off to a great start. They've already closed a handful of deals, which is really exciting because as you all know, I was out on sabbatical until basically the 21st 22nd because of the snowstorms that were in Nashville supposed to be back in the 15th. But they kept rocking and rolling without me, which is always fun to see. Let's see escaping the neon saying good morning, Tyler. Thanks for doing the office hours. absolutely happy to do it. Love. Love you all jumping in and making this conversation. Shane is saying thanks for taking the time to make these calls. Happy to do it. What's your all's questions? And you know what? See how I can help you guys get started in commercial real estate. One thing I wanted to talk about this morning is leasing. I get that question all the time. When it comes to you know, buying commercial property, especially on the beginner side, like how do I how do I find tenants? You know, a lot of people get scared of buying their first commercial property because they they might be able to find a good deal, write it all the numbers pencil, they might be able to pull all of the cash together to do it. With the one thing that scares them is often how am I going to find a tenant that is actually going to take this property. Residential is pretty straightforward multifamily is pretty straightforward. You just do it on, you know apartments.com or Craigslist or Zillow, you'll typically find a tenant pretty quickly. And you know, that's definitely a con in the commercial real estate world, it is a little more difficult to find tenants. But I would argue that the pro is that you're typically going to have better profit margins, right, especially if you're going with more of a triple net lease structure, because the tenants will be paying for their pro rata share of the property taxes, the common area maintenance and the property insurance, which as a residential or multifamily landlord, you are having to cover that yourself. So it's often kind of worth waiting to find the right tenant and commercial. The other thing is too is a lot of commercial tenants will end up signing long term leases. You know, we've got three 510 plus year leases in some cases with annual rental increases in the lease. So even though I'm not having to renew the lease every year, the rental rate will continue to go up three to 5% per year. And you can kind of set it and forget it. Right The thing that I never really We like about single family, or multifamily is that those leases tend to turn over every year. Right? And you may have some tenants that want to stay for a long time. That's that's, you know, that happens, right? I mean, I've got buddies that have had tenants that have stayed in their properties for four or five years. They just they love the house, they wanted to keep renewing, and they renewed every year. Well, that's a question you got to worry about every year. And I just prefer not to do that. So let's talk about finding tenants for commercial properties. I mean, hands down, the best way for you to go out and do it, especially if you're first getting started is to find the right leasing team that can handle the property for you. There's multiple reasons for that, one, they are already actively out in the market. So chances are good that they already know the tenants that are looking for properties like yours, too, they're gonna be doing everything else we're going to talk about today. So you might as well let them do it. And you don't have to pay them until they actually get you a successful lease fully executed, you know, rent, first month's rent paid security deposit paid. So you're not having to come out of pocket too much, in order to pay their fees, typically in the four to 6% of the gross lease amount range. The other thing is they understand the market and they know how to negotiate these deals. So chances are pretty good that if you have the right leasing team, you will actually be able to negotiate a better deal than you probably could on your own. Just because of some little nuance, right? I mean, they may know that, you know, tenants are willing to pay $2 a square foot extra because you painted the outside of the space. And while that might end up being a wash over the five year term, because of the amount of money you have to spend on, you know, painting the building, it actually increases the value of the property. So there's little things like that, that a really good leasing team can help you with, it makes a world of difference when you're working with professionals like that.

And I think especially for your first one, you know, hire a professional, let them let them kind of walk you through the process. So you can learn it from their perspective, make sure that you have weekly or every other week check ins with them. It's not the same as in residential, where you can expect some sort of major updates every week, sometimes it takes a little time. But it's important to look at absorption rates in your market. So ask your brokers that How long do you think it's going to take a tenant to sign a lease on this space? Do you have absorption rates for similar product in this market, they should be able to tell you, you know, hey, it, you know, on average, in this market, for a space like this, it typically takes around three to six months for us to find a tenant that you know you're going to be happy with. Of course, they know how to check in all of their financials and all of the right things to do to make sure that you're getting a good tenant. So how do you find a good leasing team? Well, there's a couple of different ways one, drive the neighborhood within which your property is located. And look at who has for lease signs on commercial buildings, it may seem a little funny to go out and hire somebody to rent your you know, to lease your building, that is also got a building listed right down the street. But the thing is, they're gonna be getting calls on that property, they probably already have a list of people that have called on that property where that building didn't work for them. So chances are, they could just sit down, start calling all of those tenants back and saying, Hey, I've got a new property listed right down the street that actually checks all your boxes come take a look at it. That's pretty good. They also are familiar with the neighborhood. They know most of the businesses in that area because they've been working in that area. And so it actually makes it a lot easier. That's why like when I started my commercial real estate brokerage, we focused on East Nashville, we didn't focus on an asset type. You know, it wasn't like Office or retail or industrial. We went for anything within East Nashville. And we were very, very conscientious to get to know almost every single business in the neighborhood. And that made leasing substantially easier, because we just created a list of every single business we had ever talked to that was interested in leasing in East Nashville. So every time we got a new listing, they got an email blast, they got a phone call. And it typically allowed us to get these leases signed much faster than than his average in the market. The other thing that you could do is sit down and put a list together of what you believe are going to be the ideal businesses for your space. And of course, if you want to know how to do that, we can talk about that as well. But let's say you're looking in the area, and you notice that there's no coffee shops, right and you think that your space is perfect for a coffee shop. I would make a list of every coffee shop within a 30 mile radius and go drop in, call them leave flyers at the at the cafe or coffee shop and send them emails go onto their website. Do some direct outreach as an owner Those are some times the best deals that you can ever get. Because there are plenty of businesses that are out there that are not necessarily actively looking for space. But if the right opportunity came their way, they would absolutely sign a lease, I actually got a couple of buddies that own a coffee shop in Nashville. And that's how they've done a couple of their expansion opportunities. Somebody approached them and said, Hey, we think you would be a perfect fit for our shopping center, or our hotel or, you know, whatever it was, here's why, you know, we would love to walk you through the space and they went, took a look and ended up doing one of those deals. So it happens more often than you think a lot of business owners are constantly thinking about what that next step is, and it allows you to really negotiate good terms that work for both of you. So that's, that's one way to do it. Of course, I love sending out mailers, you can typically go get what's called a NAICS code. In a i c s code, you may have to pay for these lists. But that's a federally designated code for specific businesses. So you could actually go in to the next code, and pull every single coffee shop under their code within the state of Tennessee. And you'll get their information, you'll be able to send them letters and start, you know, Target, like target marketing them that way. Of course, you do advertisements as well. I have not found Facebook ads to be all that great for this. But Facebook marketplace can sometimes be pretty surprising, you'll probably get a fair amount of garbage tenants out of that it depends on what kind of, you know, business you're trying to lead to. But you can get some pretty good leads that way and Facebook marketplace is free. So there's a few ways to do it. The one thing I would say is just don't let the leasing side of things intimidate you from getting started in commercial real estate. Because it's it's not as difficult as it seems I know it's new, it's foreign. It's not a process that you've gone through before. So it may seem a little weird, or strange, or just a big unknown for your deal. But it's it's really not as difficult as a lot of people make it out to be. Alright, let's see Shana saying I have a subjective question. I've reached out to a few brokers locally. And I'm being told that the property types I'm looking for right, right now are not really viable in the market. Industrial warehousing. So, Shane, a little bit more about what you're looking for. When it comes to industrial warehousing. Are you looking to buy? I mean, I would assume you're looking to buy. Let's talk about, you know, the price per square foot that you're looking for the type of buildings you're looking for, if you can drop that in the comments tent. Okay, so 10,000 to 30,000 square feet. And are you looking for buildings that have tenants in place already? Or are you looking okay, $200 per square foot? I mean, it's a pretty good price for a rehab, so are they just saying that there's nothing available right now like that price? That size? Range? Sure. That's pretty common. That price per square foot that works. There's just nothing available right now. Yep. Okay, saying correct. So, I would say if you're if you're talking to brokers that are saying, oh, yeah, that's that's not really available, but they're not saying but here's how we will approach this deal. Won't go you know, start targeting every building that's 10 to 30,000 square feet. That's off market with mailers, door knocking and cold calls. They're probably not the right brokerage team to be working with. Yeah, he's saying they have too many clients looking for the same can't help me look. Okay, so that's that's not an uncommon problem. A lot of people getting started in commercial real estate and, and even if you're, you know, established in commercial real estate, but you're moving into a new market where you don't have pre existing relationships. Excuse me, that's a pretty common common issue. So let's talk about it. I would call multiple brokerage firms. And I'm biased of course, because I own a boutique commercial real estate brokerage, but I would call the boutique commercial real estate brokerages in your market go for the smaller teams, they you know, not the not the national groups, the smart teams tend to be a little bit hungrier, they'll make a higher commission split on every deal that they do. So every deal is worth is more worth than working on, then you will typically find with a broker at a national firm. And I would tell you know, kind of just talked through with them of like, hey, look, you know, if you guys can help me find a deal off market, I mean, here's, here's a good buyer. I've got the cash. I've already talked to the bank. Let me you can't really get pre approvals and commercial real estate but you can get your lender on board with you know, kind of what you're looking for. And tell them like guys, you know, I want you to find me a deal off market, you know, 10 to 30,000 feet, they should be able to go into the tax records, pull every industrial zone building between 10,000 30,000 square feet and start hitting them up with mailers, cold calls and door knocking. Don't be afraid to go to younger brokers, when it comes to this, they may not be as experienced when it comes to commercial real estate overall, but they can. There, they need the deal, right? They would love to work on an assignment like this. And it's probably going to be one of the only deals that they're actually working on, especially of that size. Right? Because if you're talking about $200, a square foot at 30,000 square feet, I mean, that's a pretty big number. What does that 6 million? So I mean, that's, that's worth working on. So, you know, I would tell, I would just have those frank conversations with brokers, make sure that you're working with the right team, as far as, okay, so Shane, saying, I was a little concerned about stepping on toes going to too many firms and burning my reputation. So when you're first getting started, I would talk to every single commercial real estate broker in your market, tell them what you're looking for. And you don't necessarily need to sign an exclusive right off the bat. But treat them as interviews, right?

Hey, here's what I'm looking for, you know, one, is that possible in this market, too? If you know, if I were to pick you as my exclusive commercial real estate broker to help me find this, what would your process be? How would you go about finding me those deals and ask it that way? Right, because then they're gonna say, okay, this person is willing to sign an exclusive representation with me, to allow me to go put in all the work that I need to, and there could be future potential with this client. So this is a relationship that I want to work on and go find these deals. The thing is, the right commercial real estate broker is going to want to do that anyway. Right. Because just by having you as a client that wants to look at these deals, they have an excuse to call every single one of these buildings in their market, whether it's going to be a fit for you or not, you know, might be a 15,000 square foot fully leased building that they end up calling on. But they might be able to list that and sell it on, you know, a cap rate basis, right, but it gives them an end with the sellers to say, Hey, I've got a buyer that is actively looking for these deals are you looking to sell. So I wouldn't be concerned about stepping on any toes when you're first getting started. You want to get to know brokers, right? And it never hurts to have every broker in the market know exactly what you're looking for, though, at some point, I would consider if somebody's willing to put all of that work in on the front end to help you find a deal signing an exclusive representation. Deal with them. Let's see. Andrew Choi is saying is there a way to value of land? Yeah, absolutely. I mean, valuing raw land is relatively easy. Typically, you can just go into the tax records, and look at comparable properties. You know, if you're looking at like a five acre site, I would typically go and pool anything within you know, it depends on your market, right? I mean, a one mile radius may be plenty, but he might need to go to a 10 mile radius. Look at anything that's that's between, you know, three and seven acres that has a similar zoning within that, you know, one to 10 mile radius, and figure out what the price per acre is for those properties. And you just apply that price per acre to your land. And that's how you'll be able to sorry, guys, I'm using my voice to determine the price per acre of land that you're looking at.

All right, Bindy. College graduate, minimal capital looking for work in commercial real estate field, licensed already thinking about getting commercial real estate sales job to breach the industry. I think getting started as a commercial real estate broker, if you can get a junior rep job with a either a boutique or national firm, be a great way to break into it. You know, don't be afraid to go for an internship. I know you're a college graduate, but commercial real estate brokerages are notoriously tough to get a foot in the door. So I would say anything you can do to start building a relationship and get that first job once you once you actually have a job and commercial real estate. And you have kind of a track record of working on these deals. It's a lot easier for you to move up in the industry or to get the next you know, gig if you really want to move on. So I would say, you know, if you've got your license, go for brokerage. I mean, that is the that's what I did, right? I mean, I was I dropped out of college after my freshman year, move back, got my real estate license and got a job but leasing properties. And you could take the route that I did I mean, I worked for a boutique development firm that had a portfolio of real estate, right so it wasn't as a commercial real estate brokerage, but they owned you know, a bunch of properties that they wanted somebody in house to So we focus on those. So I was commissioned only, and they had nothing to lose, right, they'd been working with national firms for a while, and nobody was getting any leases signed, because they felt like they weren't getting enough attention. So I mean, that could be your pitch to some local developers, or investors that might have a portfolio of properties is like, hey, look, I want to come be your in house guy, I will spend the first year two years whatever it is solely focusing on your assets, so that we can get them leased up, you know, get them, you know, running shipshape. And then I'll start taking on some third party work, but I'll always continue to keep your portfolio as my anchor. A lot of developers, you know, might actually like that, because it means you'll probably be in the office with them just about every day, which means that they can, you know, talk to you about what they want to see what they need, they can easily get reporting from you see the activity that you're doing, and you'll also be able to learn from them. So there's a couple of approaches for you there. Looks like second channel, we had another question on how do I break into Siri with no experience, kind of going back to like what I said earlier, I mean, getting your real estate license is a great way to start. Anything you can do to learn about the industry will give you a major leg up. And I would make sure to highlight that somehow in your resume, or your job application. The biggest issue that a lot of commercial real estate brokerages have with hiring new agents is that the learning curve is so steep, it can be really tough to deal with new agents. Because it just it takes three to five years, even if you know you're doing to really start closing a lot of deals, right. And it's because of the learning curve. So anything that you can do any you know, if you can watch all of the YouTube videos on commercial real estate, listen to every podcast on commercial real estate, read as many books as you can, maybe start taking some CCI M classes or taking some sort of commercial real estate investing courses, something like that, to help you understand how the market works a little bit better. And then highlight that in your education. Like, look, yes, I have no experience in commercial real estate. But I already know how commercial real estate works because of XY and Z. And I would love to, you know, further discuss this with you. Once they sit down and start asking you questions. What is triple net mean? How would you go about finding a tenant? You know, what do you think your day to day would look like? You'll have really good answers for all of those. And even though you're new, they know that they're not going to have to completely start from ground zero with your education, which makes it a lot easier on them. Because a lot of commercial real estate brokers are running at 100 miles an hour. There's a lot of big deals that they got to focus on. And they would love to have Junior agents, right? Because there's plenty of deals that that you know, I used to get back when I was brokering you know, there would be like 1000 2000 square feet that are smaller deals, but they would still be 250 to $500,000 deals, that you know, you don't really want to turn away because that's good money. But at the same time, I'm gonna go focus on you know, $18 million dollar deal that I'm working on for a client, I can't really spend time on a $300,000 deal. And those are great ways for junior brokers to learn. So a senior broker will typically just hand those deals to their junior and let them kind of run with it. So that'd be a good way to do it. Escaping the onset of just one of those out there. I'm a new agent for months working on creative ways to get customers would you ever want to collab with a new agent on YouTube? I want to document the journey. Yeah, sure. We'd be happy to do it. Maybe we could get you in for a live stream. And we could do you know, like my first six months as a commercial real estate broker. like it'd be cool for everybody to hear from somebody you know how you got into it. What your first 30 days looked like what you're working on now. So yeah, escaping the neon shoot me a DM on Instagram at commercial in Nashville. And let's talk about it. See, we can do Shane saying is the exclusive only for the current property being sought? Yes. So so this is going back earlier to working with commercial real estate brokers exclusively? Yes, you could call that out. And the exclusive representation agreement that they are exclusively representing you on the search for 10 to 30,000 square foot industrial buildings in Nashville, Tennessee. Right. So I mean, you can get kind of as specific as you want with those. Frank Right. Good morning. Morning, Frank. You mentioned focusing on the ESG niche in a previous video having LEED and well AP, I'm looking to get into the commercial space. Do you have any insight on trends and projects in the ESG niche? So Frank, I am not as good on ESG as I want to be. So it's something that I'm working on. It's a relatively relatively new but I would say it's relatively new trend in the commercial real estate world. And it's also kind of one of those things that like ESG is almost reserved for the biggest development firms out there or the bigger As the bigger projects because it's, it's often cost prohibitive on smaller scale deals. And typically I'm doing more neighborhood smaller scale commercial, we do have a couple of other larger projects. But those are those are kind of the exception. So I would say, if you want any insight on trends and projects, they're going on an ESG, check out the Urban Land Institute, Uli, I think their websites uli.org. They are big on ESG. They're tracking a lot of ESG projects. And they write a lot of articles on trends in the industry when it comes to them. So I would I would definitely dig into you, Eli. He's looking for insight and SE. So yeah, I mean, you could you could actually switch it up by region, and go through and look at articles, videos, they have conferences on it. And some of them I would imagine are also virtual, so it'd be a great thing to check out. Richard cards are saying, if I may chime in as a boutique broker, it would definitely help if Shane has some criteria, aside from the $200 per square foot, and 10,000 plus square footage, especially geographical. Yeah, absolutely. I'm sure. I'm sure Shane has some some restrictions like that. But yeah, when you're, when you're going and pitching to commercial real estate brokers, you really want to have a very specific Buy Box. Because if you come to me and you say I'll buy anything between 10,000 to 30,000 square feet, like as a broker, I go, Okay, that's great. You know, I'll put your name down. But if you come to me, and you say, I want to buy between 10,030 1000 square feet, you know, within these three zip codes, on a major corridor, that you're I mean, you're probably not going to find an industrial building like that on a major corridor, but bear with me, you know, that, you know, has been built since the 1980s. And his single story, and I'm like, Man, that's really, really specific. This, this guy clearly knows what he's looking for, and has probably done this before. And it's gonna make my search that much easier, so that if I do find a building, chances are good, it's probably gonna check off all Shane's boxes. Ben said, I interned with one locally last summer, but I don't want to live at home want to get out of my hometown city? Well, I mean, that's great. It sounds like you've already got some experience in commercial real estate on your resume, I would just start sending out that resume to whatever cities you want to go to, it's going to be tough. Because you know, a lot of commercial real estate brokerages don't necessarily want to hire somebody that's not local. Because obviously, a fair amount of what you're going to be doing is hyper localized. But it's not impossible. It's certainly feasible for you to go about doing that, I would just start doing everything you can to build relationships with these firms. Maybe start following some of the brokers on Instagram, or Twitter, and LinkedIn, and actually interacting with them posting other things, leaving good insights, asking good questions, they'll start to notice you. And then you can kind of start building a relationship with them from there. His name is saying, what's up, Tyler, we're going to build flexspaces, my investment group, how do we go about getting the right estimates from vendors for the project? So we can see if it's viable or not? That's a great question. So the tough part is you've got to have a full set of plans pulled together, like very detailed in order for a contractor to get you the right number. What you could do, if you don't want to, you know, just put a full set of plans together for a project you don't even know if it's viable yet, is start talking to contractors and ask them, you know, hey, we're looking at building some flex buildings. Are you doing any of those? Great, okay. Yes, you are,

can I come out and take a look at some of the projects that you guys have going on? Typically, contractors are going to be okay with that, right? They see that as a relatively easy way to show you how good their product is, how their job sites work, and what they have going on what their expertise, what their skills are. And you can kind of see like, okay, yeah, this is very similar to the building that I want to build, what is, you know, a ballpark price per square foot to build this type of product? And I always say, and look, I know, it's ballpark, I'm not going to hold you to it, this is not a bad. I just want to know, a general range for my underwriting. So when we're looking at deals, I know, okay, we're gonna be, you know, somewhere between 150 and $175, a square foot, right, or, you know, 150 and $200 foot, whatever that is, knowing that there's so many little nuances that could go into each individual building, and site that could change that price, right? I mean, you might have to excavate a lot of rock on a site, whereas they weren't doing it on the other one, so your prices will be a little bit higher. But that can start to help you get an idea of what that might look like, at least so that you can start underwriting it. Let's say kW saying good morning, Tyler. I watched your videos on the wash. Would you have considered mixed use the wash first storey office residential above if site restrictions weren't an issue, or on a larger parcel? Yeah, absolutely. I mean, we actually had that ability. We could have done, I think three storeys on that property. But it just wasn't worth the headache to us, because we didn't have any parking. Right. And although there is no parking required, there is a parking requirement by the market. Right. So if we had a bunch of apartments there with, you know, a restaurant, and parking is getting taken on the street by, you know, tenants in the restaurant, and the residents in the apartment don't have parking, it wouldn't be an ideal living situation for a while they would get frustrated not being able to park close to their you know, apartment, especially if you've got like groceries or something like that, right? So, yes, like on round, you know, on the wash 2.0, which we have never been able to actually make work, which is funny. I mean, we've looked at so many sites, I can't make a pencil anywhere else. We we have considered going to and three storey and doing something like that. I think anything mixed use, no matter how big or small it is, is a great move is a great way to diversify your investment. It's a great way to diversify the tenants coming to the building. And you know, restaurants love to lease spaces where they know, you know, there's a bunch of built in customers right upstairs. So we love that. So there you have it for this week's office hours. Thank you all for joining me live love the questions, keep them coming. Next week, we're going to be going live with Alec diving into a project that he's working on. So you guys will get to see how I evaluate deals. And if you have a deal that you want evaluated or you want something that you want to, you know, go live with me. Or you could just send me you know, PDFs or surveys or whatever for me to kind of share on the screen and walk through. Happy to do it but love to do it. And we will see you all next week. y'all enjoy it.