Being Broke Is No Excuse
In today's episode we learn how to buy commercial properties with no money down through creative deal structures like seller financing, partnering, private capital raising, rolling commissions as equity, building valuable skills, finding killer deals, and more.
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Key Takeaways:
Commercial properties can be bought with no money down through creative deal structures like seller financing, partnering with existing owners, or raising private capital from investors.
Getting a real estate license allows you to represent buyers and roll commissions into equity in deals, effectively buying in with no money out of pocket.
Building skills in areas like leasing, property management, or renovation can allow you to partner with existing owners and earn equity without cash by adding value.
Finding "killer deals" is a valuable skill partners will value in exchange for cash in a deal.
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:
0:00
Alright, I'm caffeinated and excited. And you should be too because today, even if you are sick of your job, and you're broke, I'm going to teach you how to buy commercial properties without any money. So I'm going to show you how I've done it in the past, we'll talk to some other people that have done this as well. So you can hear a couple of different methods. And I'm gonna give you some action items so that you can go out there and buy your first commercial property too. So if you're on the low end, and looking at a million dollar property, you're looking at bringing 200 to $250,000 to the closing table. So what do you do if you don't actually have that cash? Well, you can still buy commercial properties. And you can actually even use some of the same methods that you can in residential real estate, such as the seller carry back where the seller ends up carrying the note on your behalf. But you could also raise private capital from investors, you could partner or joint venture with the existing owners. And there are many other ways to get creative with the way that you structure your deals. Today, we're sitting down with Taj Stevens, he recently closed a deal with zero money out of pocket tell us about this deal and how you manage to creatively structure the financing.
1:11
Yeah, so this was a property owner that I had been in communication with for some time I reached out to him over really the course of like a year and a half just kept building rapport with him, I call them like every month or every other month, and one day, he kind of called me and said, you know, hey, he's ready to sell. So he had an SBA loan on the property around $200,000, his interest rate on the loan was outrageous, and he really wanted to get out of the loan, he just wanted to be done with it. So the way we structured the deal was, I bought the property for $485,000. I got a bank loan for the 200,000. So I wiped out his SBA loan with that, and then the remaining balance ski seller financed to me now he's just paying me rent every month, I'm taking care of the $200,000 mortgage payment, and his seller finance portion actually doesn't start until he leaves. So it kind of worked out worked out great. Yeah,
2:06
that's pretty great. So you were able to get really creative on this one and structure not only seller finance, but a sale leaseback essentially so that you knew going into it, you had a tenant already Exactly. Creative deal structures, or what have gotten me to the point that I'm at in my career in such a short time. Now, I'll be honest with you, I was kind of forced into my first deal, which really is a pretty good way to get started in commercial real estate, if you think about it, because I didn't really have the chance to talk myself out of what I was getting into. See, I was a commercial real estate broker. And I had a client that was buying this building, and couldn't get their funding together. It was a $575,000 building, run 3% of that, as a commercial real estate broker, it's almost $20,000. So when they started to back out, I started thinking myself, well, I've got to find a way to make this happen so that I can at least get a paycheck. So we ended up assigning it to another one of my investors. And guess what his financing backed out to, to this point, I've been working on this project for three months, I know the building really well is a little 6000 square foot building that could easily house to tenants. Now with my background in leasing, I figured we could actually probably get this done pretty quickly. So I ended up asking the investor to just assign me the contract. And I would find a way to put it together, I had never put my own deal together. I didn't know what it was like to talk to a lender, or to structure the financing of the deal or anything like that. So I did what I recommend anybody that's just getting started do, I sent text messages out to people that had known me for three to five years, telling them, Hey, I've got a deal. Here's why I think it's a deal. And I would love for you to partner with me on it. Now the key thing for this first project was that it was smaller, I only had to put together about $125,000 For this first project. So I really needed to investors that were willing to throw 50 grand in each and I was gonna roll in my 3% commission. So if you have your real estate license, that's a great way to start buying commercial property with no money out of pocket, if you have a couple of people that are willing to invest with you as well, now that 3% was just under 20 grand, I ended up throwing another I don't know five or $7,000 in to make it an even 25,000. And because of that I got 25% of the deal. Now let's break that down a little bit further. My 25,000 was only about 15% of the total cash needed to buy this deal. So how did I get 25%? Well, since I found the deal, I put it together and I was the one running everything. I took an additional 10% of the equity in the deal. And my investors were totally fine with that. So in all reality, I bought 25% Of the nearly 600,000 Our building with only about five to $7,000 out of pocket because my 3% commission was just rolled in it was never really cash that I actually had in my account. So that's my hack number one, get your real estate license and represent yourself or your buyers group. get a commission on the deal, you can just roll that in his equity into the project. And I have done that on countless deals ever since that first day back in February of 2019, when we bought that first building, So Brad, you bought your first building ever, which was a $1.1 million building with only 5% down. So talk to us about that deal. How did you pull that off,
5:20
this deal was a double tenant or multi tenant office building. For my first investment, I wanted something very easy to manage. So with this, it was 1.1 million, I had to bring a little over $200,000 down, which was 20%, I came to him actually, with the request of him carrying 20%. Okay, which I actually accomplished. But now Tyler, as you probably understand who wasn't going for that, and that was the banks, they want you to have some skin in the game, that seller did a 15% carry back and then I brought 5% Okay, which was little round 50 G's, it's worked for me, you know, even from then on as well. So now
6:01
this building that we're sitting in right now, is a 28,000 square foot office building that I acquired in 2019. When I say acquired, I didn't actually acquire it. I just partnered with the existing owners who were a couple of hotel guys that needed somebody with some experience on the office space side, I came in when it was 40% occupied, the building needed some serious renovation. So we spruced it up, I brought all of those ideas to the table on how to make it more leasable for tenants. And today, we're sitting at over 90% occupancy now I negotiated on the front end for a percent equity of the deal, that would vest after I hit a certain metric of occupancy within the building, so the owners had nothing to lose, either I was going to come in and lease it all the way up and significantly increase the value of the property. And they would just give me a small percentage of the building or we'd fix it up for him, I wouldn't hit my equity vesting schedule, and they would still have more tenants in here paying rent. Now of course, since we're well over 90% occupancy today, my equity did vest, but I didn't have to come out of pocket for any of that equity. In fact, I got paid to get it right, because my property management company manages the building, my brokerage team leased up the building. And that's all stuff that we would have done before. But I took on a little more of an ownership role in determining the ways that the building would get renovated, how we're going to structure all of our leases, how we're going to plan everything moving forward into the future to increase the value of the building. So that's Hack number two, build some sort of skill set in the commercial real estate industry, that other partners will find invaluable when you're going through these deals. So let's talk about the action items go out there and learn about seller financing. It's also a very creative way for you to structure debt on your assets. Without having to go through the whole process of a bank number to go out and build some sort of specific skill set in the commercial real estate industry, make sure that you are bringing so much value to the deal that even though you're not bringing cash, the other partners will see that your skill set is equivalent to the cash they're putting into the deal. Number three, research other creative ways that you can get deals done, there are plenty of podcasts and YouTube videos out there that will teach you some sort of different method for bringing no money to the table and closing on a deal. 99% of them are really good and they will work in the right situation, just not the morning. And number four, just keep at it. This is not easy to pull off, right, especially when you're just getting started. But it is possible for you to go out and buy commercial properties with no money down. You've just got to find the right opportunity, the right seller, the right partners, whatever that may be in order to pull this deal together and as long as you persevere and keep at it. One will land in your lap eventually. Now the number one skill set that you can bring to any investment group that you are working with that has money is finding killer deals. So check out this video here.
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!