CRE Investing Tips: From Off-Market Finds to Offer Negotiations (Office Hours)
This episode of Office Hours provides project updates on Salt Ranch hotel development, details on plans for a new commercial real estate mastermind program, and answers questions on various CRE investing strategies and deal structures.
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Key Takeaways:
Provided updates on several real estate projects including a hotel development and challenges with permitting.
Discussed plans to launch a commercial real estate mastermind program and is seeking input on how to make it successful.
Also mentioned writing a second and third book and is building a book launch team.
In answering questions, provided advice on strategies for finding off-market deals, making offers, and networking through organizations.
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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Welcome back to the commercial real estate investor podcast live from the cobble group studios for another episode of office hours. This is a series that I started because I was getting a lot of questions and I figured, hey, let's just go ahead and open up the time for free for anybody to jump in and ask whatever questions they have around commercial real estate. And let's record it, we'll send it out on YouTube, we'll send it out on the podcasts that way. Anybody else that might have those same questions can get those asked, it's also a time for y'all to get to know me a little bit more. Because typically, I'll come in here with some updates over the past couple of weeks, what we're working on, you know, it's if you follow me on Instagram, it's been a it's going to be a very busy live streaming week. This is the, I guess, first of, I don't know, four or five live streams we're gonna be doing this week, which I usually try not to do because live streaming and talking can be very exhausting on the voice so trying to stay hydrated. It's been. It's been good though I finished my sauna at the house. This past week. I've been using that every day yesterday, I used it twice, to Steam Sauna that I built out of cedar. And if you want something that is an absolute game changer at Asana in your bathroom, it completely changes your life. I mean, I have never felt so good and started my day off in such a good mood. I know, some people love to work out in the mornings, or there's just something about sweating in the sauna that makes me feel really good. This weekend. In other press one beat Arizona, which feels feels nice. We've been joking, you know, it's great that we got season tickets to the predators at home, since they lose all of the home games and win their way games. So nice to see them bringing home for a change. It was really cool. I mean, the fans were going wild. And it felt like a playoff game, which was was awesome to see. I also had been building a cook shack at my house. And that that, you know, it's going it's going great. I got a nail in my hand this weekend when I was putting the trusses up. One of the contractors that I had initially put up some of the support beams and pour the concrete left a loose nail up on top of one of the support beams and it just went right in my hand as I was loading those trusses on to it. So had to go get a tetanus shot yesterday. That was a lot of fun. But yeah, it's it's it's been good. It's, you know, things are going great. It's been a good year. So far, I'm really looking forward to what we're going to be able to do. We're going to be doing our first January business update. Tomorrow live with Logan Freeman. Come join us if you can, I think that's at 2pm Central Standard Time, you can check it out on the YouTube channel. For you know any further details, but we'll be going into the financials of the brokerage be talking to you all about what our goals are for the year, what we're aiming to do, and how we fared so far in January, it's gonna be really fun. I'm kind of nervous about doing that. But it's a it's a way for me to have y'all hold me accountable to the goals that I want to hit, which are definitely stretch goals this year, a couple of other updates, we are completely updating our spreadsheets on the website. So if you've bought the spreadsheets before or if you are in one of my courses or care launch Pro, we will be adding those new spreadsheets hopefully in the next few weeks. They are almost entirely redone. I wanted to reformat them, I wanted to make them easier to kind of go through have summary pages, we're adding preferred returns and waterfalls. So I'm really excited about that we've gotten the first couple of drafts back and I think that they're going to be 10 times better. But if you've already bought the spreadsheets and or you're in the course, you will get those for free. As I've said before, anytime we update those spreadsheets, we just resend them out. So I'll have to record a bunch of new videos on how to use those. But that is one of the benefits of getting those. Whenever we update them, you get the updated version. This week, I'm gonna be traveling to Atlanta for contractors closers and connections. If you're not familiar with that group, it is one of the largest networking groups for commercial real estate. And we're bringing it to Nashville. So I'm one of the founding members of the Nashville chapter. We're going to be hosting our launch party in Nashville on April 25, I believe. Stay tuned for that. If you want to join, reach out I'll get you an invite It's gonna be great. I mean, it's, it's, it's one of the best networking events in commercial real estate I've ever been to, I get asked all the time, like, hey, how do you go out and meet people that are actually in the industry? Usually the answer is go to Uli Urban Land Institute events, you know, try and find something local will, CCC is a phenomenal chapter to be a part of, I went to my first event with him in Atlanta, I guess, last summer, and met some awesome people, they are very intentional about curating who gets to get into that group. So you can't be a residential agent. You can be somebody that's just getting started in commercial real estate. They're typically going for the heavy hitters. So developers, investors, lenders, people that are actually out there closing deals. That way, we can all get together and close more deals. So more more information on that to come soon. You probably saw this on Instagram, if you're following me there as well. But we are in the very beginning stages of putting together a mastermind, I've been asked that I've been asked to put one together for a couple of years now, mostly by followers on the YouTube channel. And we are finally starting to work on it. I've always wanted to do that. But you can imagine how much work goes into making a good mastermind I don't want it to be let me take the back. Great mastermind. I don't want it to be just your run of the mill. Oh, yeah, that was okay. I want it to be absolutely phenomenal, which means we've got to put a lot of work into it before I feel comfortable launching it out there into the world. So it's probably going to take me a little bit to pull that together. I'm looking at other masterminds, figuring out what they're doing, what we like, what we don't like about how their processes work. And you know, that way, we can make it an immense amount of value for anybody joining because it's as much about the content as it is about the people that are in there and the connections that you make, I've learned that from the masterminds that I've been in, you know, I'm in one right now go abundance, phenomenal group. And the content is awesome. But in my opinion, the people are even better, right? So it's all about how do you curate the right people. So you've got the right room. That makes everybody want to learn more and stay. So keep you know, stay tuned for that. Let me know in the comments, if you have any suggestions, or thoughts on things that we could do to make a commercial real estate mastermind amazing. Really looking forward to that we're also starting to build out our book launch team. Some of you may know that I am working on my second and third books right now. So the second book will hopefully be coming out late spring or summer. And I figured you know what, let's just go ahead and start building the launch team people that will help me kind of spread the word. And, you know, we'll we'll put together a little benefits package for anybody that wants to go out there and kind of help us promote the book. So if you're interested, drop me a line, you know, either in the comments on the YouTube videos or on Instagram, shoot me a DM, we'd love to get you on the list. I'm hoping to hit 500 to 1000 people on the book launch team, so that we can really make some waves with this book, because it's, I can't really release any details on it yet. But it's very different from any other commercial real estate or real estate books out there. And I think it'll make it very easy to understand a lot of the concepts and hopefully further your education on it. So we're really, really excited about that. Let's see, we've got some comments dropping in Gabe is saying update on salt Ranch, who that deal has been the bane of my existence. It's coming along, it's, we're still really excited for it. I mean, fortunately, the the the underwriting still works. You know, and we've been working on this project for two years, the property just keeps going up in value, which of course is a good thing, right? We paid cash for the land. So we can kind of sit there as long as we really need to, we do have the option to sell it if we have to the issue that we've been facing is permitting with Nashville is an absolute nightmare. We haven't gotten any help from our councilmembers. We haven't gotten any help with, you know, Metro zoning and codes. And it's nobody down there seems to talk to each other. Right. You talk to stormwater, they say one thing he talked to mdot, they say another and we've had a hard time getting them in a room to talk to each other about it. We actually ended up hiring a retaining an attorney to start going after them to get this project moving forward. And he you know, he's a very well known attorney in town. And he essentially came back to us and said, Look, you can pay me to go yell at them. And you know, maybe they'll listen, maybe they won't, but every single development in Nashville is dealing with this right now. And it's probably not going to go anywhere. So we said all right, well, we'll just keep you know, chugging along. So we're working right now and getting an access easement for our stormwater. After we get that we should have all of our finals for our permits, which means we should be able to begin construction this spring. So really looking forward to getting that done. Would love to have the hotel All you know, I've been thinking about as we're going through planning the mastermind, you know what it would look like to host it at Salt Ranch, right? have everybody come into town stay in the rooms there. And you know really make a cool thing out of it. But boutique hotels in Nashville are still doing really well. So we're really excited about the project the long term there. It's gonna be a fun one.
Michael Becerra saying Hey, Tyler, great group coaching call yesterday update on the predators. Yeah, that was that was the best group coaching call we've had yet. It was really fun. Mike, thanks for being on it. Yeah, the predators, you know, hey, tonight, we have we have another game, which I'm really excited for. Let me see who we're playing. We're playing the devils. That'll be an interesting game, New Jersey. So, you know, it's it's been a it's been a tough year, right for the predators. But honestly, I'll say like, we're doing a lot better than I thought that we were going to, because you know, we've got a new GM Barry trots is great guy. Um, he was our former head coach. And he is rebuilding the team, right? We traded or got rid of almost half of our team last year. It's a very young team. So we knew it was going to be a rebuilding year going into this. And I gotta say, I think we're doing a lot better than anybody expected us to. We're having a winning season. It's not a wide margin of how much we're winning compared to how much we've lost. But the team is really starting to come together. And when they do, it's really exciting to watch. I mean, y'all know, it's my favorite thing hands down to do in Nashville. I go to almost every game. I'm going to be missing one on Thursday, because I'm going to CCC and Atlanta, which I'm really bummed about. But it's going to be my second game to miss this year. I go to every single home game, I think there's like 41. So hopefully, I won't miss another one. And we'll we'll end up hitting 39 for the season. Really looking forward to that. Anthony Russell. Good morning, Tyler. Morning, Anthony. What is the most effective way for new developers to build relationships with a DOI? Great question. So one join, right, that's, that's the first step of getting a DOI. And I think their fees are only like $500 a year. And it's I mean, it's really, really cheap. Even if it's 1000. It's worth it, just for the educational content they put out alone. But what I would do, if I wanted to meet a whole bunch of new people, is volunteer to hand out name tags, and check people in at the events, because you will learn everybody's names very quickly, you'll be able to say, hey, to everyone that walks through the door. And people will remember you because you're sitting there, right. I mean, that's that's how I got to know several people, and you will have very well not because I was checking people in which I have done before. But because I remembered all the people that were checking me in, because it's not like it's just, you know, some new commercial real estate broker. Usually that's sitting there, it's, you know, you've got the head of retail leasing for, you know, this major company. Oh, cool, like, what's going on? How are you? So, I think that that's, that's one of the best ways. And the other thing is to just be intentional, whenever you go there, I wouldn't say it's a volume game, don't go out and try to meet every single person at event, find one to three people and have deep conversations with them, follow up with them after the networking event, and build that relationship from there. I love you ally, they've got great, great content, as well as just phenomenal people that are involved in that in that organization. So couldn't recommend it more. And he's saying, how many projects does the CCC like to see as a baseline for membership? That's a good question. That's what I'm hoping to learn more about on Thursday, I don't know that it necessarily matters, how many projects you've done. If you're an investor or developer, it could just be more about, you know, How involved are you in the business? Is this something you're taking? Seriously? And, you know, I would say I would imagine a fair amount of it is subjective. And it depends on the connections that you have in there. So if you have a friend that is a member that can refer you to the group that typically would help you with your membership. So feel free to reach out to me, let me know. And I'm happy to see kind of what I can do for you there. Frank, right. Hi, Tyler, thanks for making the time. Always happy to do it. I really enjoy these mornings. It's fun getting to interact with you guys and see all the comments and questions. So feel free to jump in if you guys have anything. What has been your best strategy for finding off market deals? There's a second part of that question. I'll get to it here in a second. So the best strategy for finding off market deals, you know, it's there's there's no secret sauce, right? It's just putting in the work. So it's sending out mailers. And I do have a video on YouTube about like my direct mail method or something like that. And sending direct mail letters to property owners is a great way to cut through the LLCs and you know all the things that may be hidden because their mailing addresses tip We're going to be on the tax records. So your chances of getting directly to them are pretty high, especially if you're hand addressing the letters. That's my favorite method. But of course, door knocking, and cold calling, like, it's just the blocking and tackling of any sales job, if you can get out there and do that, you'll find some great deals, you know, you can build relationships with other brokers that are also doing that. And they'll likely be able to bring something you know, kind of to your plate if they've got an off market or pocket listing. But there's something to be said, for just getting out there and doing the work. You know, that's I'm really impressed with my brokerage team this year, they're doing so much of that it's insane. And I love it, because that's what I built my business on. That is the most successful way for you to go about doing anything is going out there and finding off market deals. I mean, the you know, don't get me wrong, there's there's plenty of actually good deals on loop net, and crex, either or Western online. And a lot of people like to, you know, just say that, that's where deals go to die. And sometimes that is true. But if you can look at deals creatively through those online listing platforms, or if you know, you just happen to look at a deal the right way, there's plenty of good deals online. But finding something off market gives you the better chance of negotiating seller financing, it gives you a better chance of negotiating a better purchase price or better terms on the deal. So I love finding off market deals. But yeah, that's what I would do, I would start sending letters, you can go to your local tax records type in, you know, I want to look at every industrially zoned property within these four zip codes that's bigger than 10,000 square feet, and it'll pull it all up. Or you could use a program like CRS data to do that. And it'll pull up all their mailing addresses. And what I would do is I would just go hire a third party company, there's a bunch of letter writing groups out there that will hand address the envelopes for you, you draft the letter, they print them off, you know, add all the addresses everything, customize it, and send them out. And you can send you know, 100 letters, or you can send out 10,000, it just depends on what you want to do. And what I will say with the letters is that it's a long term game, right. So just because you didn't get a response within a month of sending those letters, doesn't mean you won't get 124 months from today. And I'll put it this way. So when I first started sending letters back in probably 2016 2017, I sent a letter to a property here in East Nashville. And it was a 10,800 square foot building. And I didn't get a call back from them until 18 months later. And they reached out they said, Hey, we kept your letter, we wanted to see if we could lease it ourselves. But we haven't been successful. And we would like for you to come in and list our property and and get at least up for us. That was in 2018. And we signed three leases on 10,800 Square feet, pretty good deal. And then we've been managing and leasing it ever since. So here we are, you know, five, six years later. So that one letter has created an immense amount of business for us. I've also bought plenty of properties off of letters, there's one, I've actually done a video on it. It's also here in East Nashville, smaller 2000 square foot retail building, we sent a letter on it during COVID. I got a I got it under contract at 435 We signed a lease with a tenant that we knew wanted to move in there. And it appraised for like 650. So pretty good deal, right? I mean, you're not gonna retire off of that, but pretty tough to argue with, you know, $220,000 with equity. Day one. The second half of Frank's question was Secondly, do you have a strategy or advice on making offers on off market properties. So, you know, biggest thing to me is to just build rapport, get to know the property owner really well. I typically like to go and meet with them in person, walk around the property with them, hear everything they have to say about it, and build a good relationship with them. Because it's very easy to get a lowball offer from someone you don't know and just throw it in the trash. But you know, if you've had a good conversation with someone, you've had an honest conversation, you've kind of talked through the pros and cons of the property, they're probably going to be a little more willing to entertain a lower offer than they would like to see. Especially if they like you, and especially if, you know there are some other terms things that you pick up on in your conversation with them that you can accommodate. Right? Maybe in your conversations, you you ask them, you know, what are your plans to do with the money once you sell it? I love asking that question. Some people get really uncomfortable asking that. But it's a great question to ask because most people have a plan If it's like, Oh, I'm gonna buy a beach house, or Oh, I'm gonna, you know, you know, buy a house for my mom, or I'm gonna do that, whatever it is, right, there's so many different ways that you can learn their motivations for selling, and help them with that. If one of them is oh, I don't know what I'm gonna do with it, but you know, I don't want to have to pay any taxes.
Great, there's, there's, you're in right there to negotiate seller financing, right, because you could put 0% down, they don't have to pay any capital gains tax today. And you could pay interest only for five years, right. And then in five years of balloons, they get 100% of the principal. And then they'll have to, you know, worry about taxes. So there are some other strategies that you can employ, of course, talk to an attorney, talk to a CPA, that can help them mitigate their their tax liability, and, and make it a beneficial deal for you. So I like that. I mean, it's really all about building relationships, and just having conversations because you gotta know what's motivating them, you know, you got to know what's driving them to sell or to not sell, and see kind of what you can put together that's mutually beneficial for you both, you know, I was having a coaching call yesterday. And we were talking through, you know, the, the hardball negotiation tactics. And I'm not a big fan of that, right, I don't really like the whole, like, trying to keep everything, you know, all your cards close to your chest and, and really not trying to open up a dialogue with somebody because you, you think that, you know, that negotiation tactic is gonna work. I like laying everything out on the table, like, Hey, here's what works for me. You know, here's where I'm probably going to be willing to negotiate depending on some other terms here. But I just want to be honest, like, this is where I am, you know, if you think that, that we can negotiate a deal here, based on that, let's do it, let's find something that's mutually beneficial for us both. But if this is too far off, I completely understand and you know, I'll move on to the next one. It saves you time, it saves the seller time, there's no point in going back and forth if you guys aren't even remotely close to putting a deal together. So I like that method. I'm here to get a deal done, right? Everybody wins when the deal gets done. I don't want to sit here and negotiate and you know, puff my chest. And it's just not the the approach that I've ever taken. I don't really like it that much. So that's that's kind of my approach. Hope that helps. Jorge say, Good morning, Tyler. Good morning, Jorge. Thank you for making yourself available. Would you consider doing projects in Chicago? Whoo. That's a good question. So I've kind of a lot of thoughts on this. I mean, one, yes. Right. Like, I would love I would do deals anywhere in the country. Maybe except for California. But you know, that's a that's a different beast. I would consider doing a deal in Chicago, if it really made sense. For me, I would have to wrap my mind around, what is the long term play here? What are the tax implications, because Illinois is a very, very different state than Tennessee. And because of that, you know, property taxes are significantly higher. And there's just some things there that make it tough to be a real estate owner. But if it was a good enough deal, if it made enough sense, if it was a triple net lease, or a single tenant net lease, or there was a really good story to be told as to how we're going to make a pretty fair amount of money doing this. Absolutely. Yeah. I mean, I'm always willing to consider it. I think that, you know, especially this past year, I've gotten far more open to looking at deals across the country than I had previously. You know, I used to only want to do do deals in Middle Tennessee and Chattanooga, because my team could easily get to it. But now, you know, I mean, we've on my brokerage team represents a lot of buyers buying triple net lease deals all over the country. So why shouldn't we be doing that, in my opinion. Now, that doesn't mean to say that I'm going to compete with any of my clients, because it doesn't make sense to do that. But not every deal is going to be a fit for them. Not every deal is gonna be a fit for me. And so, you know, I think that there's something to be said about having these deals that are not near you. But you still have to get eyes on them. Right? You still have to get out there. You got to look at them. I typically recommend at least twice a year, if not every quarter, just so you know what's going on. Biggest thing is making sure you've got a really good team that can work remotely with you and oversee you know the day to day so that you don't have to write and that's why we got into commercial real estate right? It's to work on that passive income so we don't have to be actively doing it all the time. Jason's saying good morning, Tyler. What kind of conditions in terms would you include in an offer for a 1940 warehouse? never bought a building a sold rents are low, great value add and seller is open to financing. Oh gosh. 1940 is really old. So first things that I would want to check are all of the major building systems, right? So your mechanical, electrical and plumbing, your MEP, make sure you understand what's going on with those, right? biggest issue is probably going to be the plumbing, right? Because electrical in a warehouse, you typically don't have to, you know, rip through too many walls to start pulling out wiring. But plumbing is typically underground, which means you're going to have to cut everything out in order to start replacing lines. So, you know, it'd be very important to see what's going on there. If it was built back in 1940, I would want to make sure that you get an environmental done, right phase one, at the very minimum, because there may or may not be as best as in a building that old, you know, that was really prevalent in the 60s and 70s. But somebody could have renovated at that and put his best to sell. So it's important to know that you want to make sure there's no red paint, you're gonna have to remediate all that. But outside of that, I mean, I wouldn't be scared by building this 1940 This warehouse, they're typically pretty straightforward. You know, the building warehouses that were built in 1940 are not too dissimilar from warehouses that were built today. So it should still function. For the most part. Just make sure that you've got the loading docks, or the roll up doors that you would need to suit today's standards for what tenants want. And do your perform your typical due diligence process. But other than that, I mean, I think it's a pretty straightforward deal. If you can get a really good deal on it. I say go for it. Let's see, Jay gel is saying, Hey, Tyler, good morning, what's the best way to get started on triple net lease? So Jay, Joe, I'm assuming you're wanting to buy triple net deals, best way to get started is to just start looking at deals, right start looking at, you know, typically, what I recommend to my coaching clients is underwrite a deal a day, go out and find a deal doesn't matter if you think it's gonna be a deal that you're gonna buy or not. But go through the full process of underwriting it, look at the look at the deal, Go into all the details, tax records, everything. Look at the tenants, do some credit, you know, background checks on those tenants, with the cap rates, what they're asking what the rents they're paying, understand every single metric around that deal. And underwriting right see how much money you'd have to put down in order to make a cash flow to where you would need it to or to get the debt service coverage ratio that you need. Or just to, you know, go for the long term value add play that you want. And do that every day. I mean, that's, that's by far the best way to get started. Because then you'll start to realize what a good deal is, and what a bad deal is. And you don't have to waste your time looking at the bad deals anymore. I mean, I can look at a deal and in five minutes tell you whether it's worth moving forward on or not. Just because I've looked at so many opportunities now, when I'm looking at deals in new markets takes me a little bit longer than that, because I've got to understand all the deal metrics in that market. But it's a that's a great way to learn, right? You just got to get that base that foundation of knowledge on that sector, and take it from there. But other than that, I mean, I would, I would talk to some triple net lease brokers. And I would talk to some lenders and start getting quotes and kind of figuring out what how you know how much you're going to have to bring down what the opportunities are out there in the market, and see what you can do. Will be saying worse things worse. How do you sell a note on a seller finance deal? That isn't doing good? Who, yikes, who wants it? Why did they want it over something else? Look, that's a tough one. Because if it's not performing well for you, then I would say it's not going to be very attractive for a buyer to want to come in and purchase that note. If you're able to sell it at a discount, so that you know, instead of getting maybe six or 7% interest rate, they can you know, get closer to an eight or 9% interest rate. There may be somebody willing to buy it. Sometimes people investors just want those, you know those coupons, right? Very easy, relatively easy money. But what I would say is if it's not working well for you, it's gonna be a tough sell. Because selling notes is it's a very interesting game. I've bought a note before but that was on a deal where I had second position and I wanted to buy first position, so we bought it and then ended up foreclosing on the property. And it's, it can be a tough spot to be in, you know, I mean, if if they're not performing, if they're not making their payments and stuff like that I would just foreclose on the deal and take the deal back. Or, you know, notify them that they need to refinance it out in the next 30 or 60 days. I mean, it all comes down to the loan documents you've got in place, it may make sense for you to talk to an attorney and to figure out what your your recourse could be. Because that stuff can get very tricky. very fast.
Evidence saying planning on buying commercial land soon, but don't want to buy until end of year, how do I come across to the seller? With asking for a lot bigger closing time, put bigger money down? Yeah, so if you're wanting to buy some land, you want an extended amount of time to close, there's a couple of things you could do. I mean, one is just find the right seller that understands why you need that much time, right? I mean, if I was buying land today, I'm going for 90 to 120 days of due diligence, and then 30 days to close after that. Because I need to make sure I've got enough time to get all of the due diligence done on it, right, which is everything from a survey to core samples to Phase One environmental to, you know, making sure that zoning will approve the use that I want to put on it all the way to financing, right financing raw land today is really tough. And I would have that conversation with the seller, you know, hey, look, it's it's really tough market out there. You know, banks are not willing to lend a whole lot. And I need you to work with me while I'm trying to buy this property from you. So that's, you know, it's it's, it's tough to kind of pull that together. But that's what that's what I would say. So that is all the time we have for today is just after nine o'clock if you have any further questions that I was not able to get to leave them in the comments on the video below. And I'll be sure to get to them. Otherwise, I will see you all this afternoon for our commercial real estate brokers roundtable, which will be a lot of fun. We're gonna be diving into commercial real estate investment sales, how do you find and sell those as a broker? Other than that,
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I'll see you guys next week. Thanks for joining.
Each week, I'm going live at 8:30am CST for my "office hours" to answer your questions about commercial real estate on the show. Let's hear what you'd like to know when it comes to brokerage, investment, and development!