Sale Leasebacks, Warehouse for Beginners, Land Entitlement | (Office Hours)
In today's episode of office Hours we learned about the focus on YouTube content to educate people about commercial real estate, updates on a development project nearing permitting completion after delays from the city, and an exciting lease deal as well as an upcoming major commercial real estate networking event.
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Key Takeaways:
Tyler is focusing more on YouTube content and livestreaming to educate people about commercial real estate. He's seeing good growth and engagement on certain videos.
His salt ranch development project is nearing completion of permitting but has faced delays from the city.
He's working on an exciting lease deal at the Peerless Mill property in Chattanooga.
CCC Nashville, a major commercial real estate networking event, is being launched in April that Tyler thinks will be very beneficial for people in the industry.
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 dotcrelaunchpro.com.
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Welcome back to the commercial real estate investor podcast live from the combo group Studios here in Nashville, Tennessee, on YouTube, as always, with every Tuesday 8:30am Central Standard Time, unless I'm traveling, we are going live and answering whatever questions that you have around commercial real estate. So if you want some free coaching, you want to get some advice, you have questions about how to get started, or you know a specific project that you're working on, jump in happy to talk to you about it. It's been a good past week for me we've been for whatever reason I've had a little more downtime than usual. So not as many phone calls. When I say not as many I think I had probably like 40 or 50 phone calls last week, which gave me a little bit of time to dive into our systems around YouTube. That's been a lot of fun getting to really focus on what we have going on here. With the YouTube channel. If you've been kind of tracking me on Instagram or following me on Instagram for the past few weeks, you've seen that we've had a couple of videos going viral, for me at least over got, I guess one of them had like 180,000 views in the past two or three weeks, and the other one's gotten well over 100,000 views, bringing us up to like 400,000 views in the past 28 days, which typically I get about 40,000. So really exciting to see that a couple of the videos that we've put out there are taking off and resonating with a lot of people. But it's giving us the chance to start to focus more on treating YouTube, like a full time job. You know, it's interesting, I never would have thought when I got started doing this back in April of 2020, that we would be here today, we'll live streaming multiple times a week, putting out what I feel like is pretty high quality content. And having a lot of fun doing it. The education side to me is so much fun. And I feel like it's at least serving the intent that I had for it. When I first got started, which is you know me back in 2013, as commercial real estate broker, I was always frustrated with the lack of knowledge out there. And hopefully we're making the commercial real estate industry a little more transparent, making it easier for people to jump into both is, you know, brokers, vendors, as well as investors. It's been interesting, we use a project management software called notion. And that has been an absolute game changer for how we are organizing our videos, how we're working through the topics, my team and I have got, Brett, my videographer winner, my girlfriend, and also my writer, she's been helping me quite a bit with coming up with scripts and working through the research on the videos that we're doing. Let's see, we are getting close to the finish line for permits on salt Ranch, hoping to knock that out here in the next 30 days we shall see. It's been really frustrating dealing with Metro Nashville, any any developer or investor in Nashville will tell you is it's not going so well with the city and what they're trying to accomplish. You know, I am always amazed at how we're still working on basically the same level of staff that we were as back in 2013. And I don't know if you know anything about Nashville, but it is a little bit bigger, things are moving a little bit faster than they were in 2013. So it's really time for us to start taking codes and permitting seriously in the city. And hiring the help that we need down there and paying them what they deserve to be paid. It's tough because a lot of people will go and work for Metro codes and planning and, you know, for a few years, and then they'll get hired away into the private sector after they've built relationships and kind of understand how things are going and they get paid twice as much as they were by the city. So we don't have a lot of continuity. It gets really frustrating. Because every time you talk to somebody, you know, each person says you got to do something differently. With salt wrench, they came back after stormwater did after six months of having the plans and told us in December again, they've had the plants for over six months. Oh by the way, you need to either spend $150,000 to pump all the stormwater up to the street, or we've got to go get an easement through the neighbor's property. So we're working through that. It's a lot of fun, and we shall see where it goes. So hoping to finalize the foreclosure on that residential house here soon. Some of you may know that I went hoard money to a contractor this past summer, who ended up committing a massive amount of fraud he stole hundreds of 1000s of dollars from homeowners for jobs He was supposed to do he would come in somehow negotiated to get massive upfront payments or, you know, these the, the payments in full. And then he would demo the houses and walk away and just keep the money, he would change his phone numbers. And it's unfortunate it was a buddy of mine from high school. So I trusted him probably more than I should have. And, you know, that's that's kind of where that is. Now, unfortunately, He's filed for bankruptcy, which is crazy to me that he could even file for bankruptcy on money that he is stealing. But that's, I guess, on us as creditors. I think there's 10 or 14 other people who are objecting to his bankruptcy. So hopefully, we'll be able to finalize that foreclosure soon. It's just a crazy process. I've never been through that before. So seeing it from the creditor side is really interesting, because it's just a, it's an intensive process. That's for sure. We are working on some very exciting things at peerless mill out in Chattanooga, we've got an LOI executed on a pretty large amount of space. And we're hoping to finalize that lease here in the next 30 days. So we'll be able to announce that then. Pretty exciting to see you know, that's a massive project. And we want to do it right. So we're taking our time, we're making sure that things are done the way that they should be. And we'll have hopefully some fun news for you all here in the next 30 to 60 days about what we've got going on out peerless. Took a YouTube poll here pretty recently of the audience, and just asking you guys what kind of commercial real estate content you want to see more of on the channel. We've picked up over 8000 subscribers in the past month. And so that's a lot of new people here. And so I figured, hey, you know what, let's let's see what they want to see more of. We were talking about getting started in commercial real estate, commercial real estate leasing interviews with top dogs behind the scenes, stories of projects, and commercial real estate brokerage, and it was, overwhelmingly 58% of you all voted for getting started in commercial real estate. So these polls actually do determine the type of content that we're putting out. So my team and I sat down we looked at the poll, we said okay, let's come up with even more in depth content on how to get started in commercial real estate. So stay tuned for that here on the YouTube channel, we'll be diving into even more of that type of content. here pretty soon if you ever have suggestions on videos that you would like to see something that would specifically help you feel free to leave me a comment in any of my videos I do look at and respond to every comment. So you know that will help us create the content that you all want to see. Let's see we're getting a bunch of questions in the live chat here. Charlotte Good morning. I've seen a few listings lately for owner occupied properties being sold anything to watch out for in a leaseback situation. I love sale leaseback opportunities, they are one of my favorite deals to do right now, because you can get a good credit tenant, you can pretty much negotiate the lease, it's going to work for both of you all, and you'll be able to take that lease and use it to help finance the property on your acquisition. So, you know, in terms of a sale leaseback situation, it's really just the same as any other commercial real estate investment, where you're buying it for the lease and the cash flow that are in place. Make sure that you do your due diligence on the tenant on the business, see if you can get financials from them, see how they're performing? I would ask the questions, you know, what are you going to be using this capital for? Right because these businesses wouldn't be selling unless there was a higher and better use for the capital that they can pull out of the building. I get asked all the time, why would businesses not just buy all of their own property. And there's a pretty obvious reason, most businesses can make higher returns dollar for dollar by reinvesting into their business than they could by owning their own real estate. So for many businesses, it actually makes more sense for them to lease. There are some very clear exceptions. But commercial real estate, as you all know, can be very capital intensive. And so it may not make the most sense if you want to scale a business to own the real estate. So those are a couple of questions that I would ask or dive into. Again, I love sale leaseback situations that can be very very good opportunities. Jorge is saying good morning, Tyler. I'm falling behind on all your videos. Keep it up. Yeah, we've been we've been pumping them out. It's It's been fun. You know, we we've got the one video a week that's fully produced. We dropped those on Sundays at 5:30pm Central Standard Time. We always premiere those. So if you want to jump in the live chat on those premieres, I'm always in there, having conversations with everybody and answering any questions that may come up. But we are live streaming now two to three times a week. Which is kind of funny because when I first got started, I was like we need to be doing this every day. And somebody gave me the advice. Hey, just start off once a week and See if you can keep up with that. And we did. And it was surprising to me how much work live streaming one time a week was. And then we slowly built it up over the past three years, I guess two to three times a week with different segments, different types of videos, different types of conversations. That way, it's just not the same thing kind of over and over again. And I really love these office hours. It's fun for me, it
gives me an opportunity to kind of tell you guys what I've been working on what's been happening the past week, and and you know what we've got moving forward. We are, the biggest thing I'm working on right now is CCC Nashville. We are bringing contractors closers and connections to Nashville. They've got chapters all over the United States. And it is the biggest commercial real estate networking event. And any city that it's in, hands down. It is the who's who of commercial real estate. We're launching it here in Nashville at the fontanelle on April 25. So if you want some information on that event, go to contractors closers. connections.com. And check out the Nashville chapter and you should be able to send an application in to come in for for that event, it's going to be great. I think, so far, we've got well over 500 people that are planning on attending, it's a fun event, I've been to a couple down in Atlanta, and it's absolutely worth it. Even if you're driving in from another city. It's a good chance to meet other commercial real estate investors, vendors, you know, people that are making moves in the industry. Let's see Richard cars. Good morning. Tyler, sorry to hear about your issues of the city of Nashville. Yeah. So my it's it's unbelievably frustrating. You should check out city of El Monte alto, Monte springs suburb of Orlando, they're in a beta phase of using AI for preliminary approvals. Wouldn't that be amazing? I mean, the whole process could so easily be automated or subbed out to a third party vendor that can oversee a lot of this. You know, it's, it's, it's frustrating, because they're still operating the same way that they were basically 10 years ago, where it just has to go through this very manual process. And a lot of times, you'll have people at the city that will say, Oh, you know, we don't like how you did this, we need you to redo that. And also, we're going to put you back at the back of the line. So you wait all of this time to get to the front of the line, to hear what they want you to change on it. And then they just throw you to the back of the line so that they can keep moving through everything else, it doesn't make a whole lot of sense. There's a lot of really easy ways for them to improve upon that. But I'm not I'm not in city government, in my opinion, doesn't really matter. So I'm hoping I'm hoping AI will change that, that it makes a lot of sense. Right. At the end of the day, it's formulaic. Like It either makes sense, or it doesn't. So hopefully, we can start seeing that implemented in more metros across the country and streamline the permitting process. Because if you think about it, I mean, just the amount of property taxes or sales tax alone, that the city is missing out of by not having these projects done, we were supposed to have our hotel done a year ago, like done, if we had gotten it permanent in the time that we thought that we were going to get permitted in which is what the normal permitting time is. And if it had been done, we'd be paying 10s of 1000s of dollars in hotel tax property taxes. And instead the property is just sitting there vacant making the city almost nothing. So it makes zero sense to me, but I'm in the private sector. So you know, that's government. Charlotte says, What do you think about buying a single warehouse unit as a first investment? I like industrial real estate as a first investment. It's a very good asset class. You know, it's what a lot of people would consider to be Amazon proof or E commerce proof. And honestly, even pandemic proof, right. I mean, we don't know what the next big thing will be. But industrial has proven to be very resilient in those times. Because a lot of the tenants that occupy industrial real estate, they're out doing services, or shipping to clients. I mean, it's stuff that they don't necessarily need people coming in to see. Right. So you know, like a clothing boutique. It's very tough for them to adapt when, you know, ecommerce or a pandemic happens because they're used to people coming in trying on clothes and being in that space, whereas industrial users, they're driving around the city, so they just need a spot to, you know, kind of have an office to keep their administrative documents organized, as well as a warehouse for shipping things. So I love warehouses. That can be relatively straightforward as a commercial real estate investment. So that's good for beginners, you can kind of learn without a whole lot of, I don't know, Nuance involved in every project you're working on. I would just make sure as you're going through that process, just get a good commercial real estate broker, get a good commercial real estate attorney and make sure that you're protected on all fronts. But yeah, I think they're great first investments. Rich's saying I guess different jurisdictions face different issues depending on their budget. Hope you get through it, man. I think thank you. I appreciate that. Yeah, it's everybody's different. Right. And like, I mean, it's it's still Nashville at the end of the day. You know, we're not dealing with New York City or LA or Chicago, which I know are far more difficult. It's funny, you know, five, seven years ago, we were talking to developers out of Chicago that were coming here to build some pretty big opportunities in downtown Nashville. And they were looking at our process saying, Wow, Nashville is so easy to work in. And, you know, being from Nashville and seeing what was going on. You know, even five or seven years ago, I was like, No, Nashville is miserable. You should have seen a few years ago, it was great. It was really easy to get anything done and approved. But look, everything's relative, right? Frankie, what's going on, man? Good to see jumping in the live chat. What's your thoughts on lessor seeing tenants marketing plan? How deep can we dig into lessees business plan before crossing a line? Man, frankly, in my opinion, there is no crossing the line when it comes to commercial real estate and doing your due diligence on tenants, I typically ask for three years of tax returns. And if the business hasn't been around for three years, and I want three years of personal tax returns for every equity holder that owns 10% or more of the business, I like to see personal financial statements from all of those equity holders as well. And p&l is on the business. I like to see, you know, bank statements if we need it. But absolutely, I mean, I would dive into their business plan their marketing plan, you know, if they're a startup, or they're a smaller business, it makes all the sense in the world for you to ask all of that, because you're taking risk as a landlord in leasing to them. Now, if you're talking about, you know, Starbucks, and you want to see their financials, and you want to see their business plan for this space, now, they're probably going to tell you absolutely not pound sand, we're not doing that. But you can always look up Starbucks on Google to get a lot of their, you know, investor reports and their credit rating and stuff like that. So, you know, for for corporate businesses that have a lot of public information out there. We don't typically request any of that. As long as we're getting a corporate guarantee for a franchisee or a smaller business, then we're absolutely asking for everything. I don't think anything is really considered crossing the line. That's one of the beautiful things about commercial real estate. Is that you? I mean, I can ask for your mother's blood type, if I wanted to. There are no Fair Housing Act laws in this industry. It's all about does your business financially make sense? Can you financially bear the burden of paying the rent every month? And are you going to be successful here? That's really all that matters. At the end of the day, it's a business. So I would ask for anything that will make you feel comfortable with leasing to them as a tenant. Frank, right. Hi, thanks, again, for making the time most of my experience has been in residential but looking to go into commercial with the Nashville CCC be beneficial for those beginning in the commercial space? Absolutely. It could be, you know, I would certainly suggest applying it might be tough, if you're just getting into commercial to get accepted into as a member into CCC. It's more intended for the the movers and shakers that are already in the industry. That being said, this is a kickoff event here in Nashville. So it'll be a good opportunity for you to come and rub elbows, with people in the industry and hopefully make some connections, maybe find a partner, maybe find some equity. You know, whatever you're looking to do. I think that it's incredibly beneficial. You know, we've got a lot of people you know, on this channel, in the podcast, that are transitioning from residential to commercial real estate, and networking in the commercial industry is the best way to get started. You've got to go out there and meet people. You've got to learn more about how the industry works. I mean, there are so many different aspects of commercial real estate that even to this day, I mean, I'm out there networking all the time. If I find somebody that knows, you know, some sector of commercial real estate that I don't understand. I'm taking them out for lunch. I'm buying them lunch, I'm asking them questions about how that works. You know, last year, I spoke at a mastermind event here in Nashville, and there was a couple in there that did a lot of self service car washes. Well, I wanted to learn about self service car washes, so had a few phone calls with them learn more about how their business operated. And it was, it was it taught me a bunch about how that industry actually works. So the more people you meet, the more knowledge you can gain the better and networking is by far the best way to do that. Jared Silva and Hi Tyler. I know you're not big on multifamily, but I have three SFR Watts and considering a 25 to 30 unit development, thinking of going through entitlement process and trying to sell to a developer thoughts. So, Jared, I am not big on multifamily, necessarily, but I love residential development. Right. So 25 to 30 unit development is right up my alley.
I actually love that quite a bit. My first project was a 42 unit townhome development that we did down in Bellevue. So 15 minutes Southwest and Nashville. I actually bought a 1.7 acre lot a couple of years ago, north of Nashville, that was entitled for 11 units, we went through the rezoning process to get it rezone for 63 units. And now we're selling it. So you know, we bought it for 618 with the rezoning it's worth between 1.6 and 1.8 million, it's absolutely worth doing the right developer is going to say, Great, you've already made it very easy on me, you've already gone through the entitlement process, I don't have to worry about getting, you know, the unit's approved, it's already done. So I can buy this, put my plans together and move forward. So I like that. I like that strategy. I think that it's a good one, if you understand how the rezoning and entitlement process works. And if you feel very comfortable with that, it can be relatively risky. Just because you no one, buying land is not always the easiest, right? Most banks will want you to put down a substantial amount, if not 100%. Right, which means that they're obviously not going to loan to you. But it can be pretty good. So it all depends on what you're looking at doing. I think if you can go get something entitled for 25 to 30 units, it's going to make it very much attractive, very attractive to any number of residential developers. So yeah, I think you can make some good money doing that. For the saying 100%? What's up, Floyd, good to see you, man. Jorge Tyler, Chicago is doing a study to revamp their permitting process. I love it. I think that every city right now, with the growth that we have been saying, is going to have to update it somehow. It's not sustainable. The way that we are currently going through our approvals process, I don't think it's the most efficient, I don't think it's actually the best for ensuring what it's supposed to do. Right. Like, the whole permitting process is intended to make sure that the project is being developed in a way that is in line with what the city wants with what the people want. And all of those laws are relatively black and white, right? I mean, nothing is ever completely black and white, there's going to be some gray areas. But for the permitting process, like you either did it right, or you did it? Right. So I mean, it seems to me like it should be a very streamlined process. You don't need a bunch of people getting eyes on it if if AI can do it. And maybe every now and then you do some you know. Just double check things and have you know, somebody pull random plans and review them to make sure that the AI is actually seeing everything that it should be but who knows. That'd be great to say. Mike Martin, info on how to structure a deal as far as investors are concerned. As a new developer, it's overwhelming. Waterfall, mez debt equity investors, VC and also pay back structures, capital stack scenarios. Yeah, Mike, that can get very overwhelming. And that was the thing that really confused me the most, when I first started raising capital, I actually do have a video on this channel, on, on how to how to structure deals with investors. Obviously, if I can pull it up for you, and tell you exactly which video it is. I think it's just me with like a stack of cash showing you like how to how to form the capital stack. But, you know, it's it can be a little bit complicated. When you start looking at the way that some of these people do it, in my opinion, make it super simple. I learned this from my mentor, Bruce Peterson. You know, he he does it in a very, very simple way. And maybe maybe he's leaving some money on the table. But maybe not. Because you don't really have to worry about getting your funding for every single project that you do. So here it is. It's called how to structure real estate deals with investors and actually raise capital. I go through a lot of that in this video here. And really, at the end of the day, what I do is I do a 7030 or 8020 equity split a six to 8% preferred return to the investors. And after that preferred return, it's pero por su so the investors make the first six to 8% and then it's a 7030 or 8020 split. Very simple. You can over complicated in so many different ways. With waterfalls, right? I mean, you'll have some waterfalls, they're like, alright, well, when we hit a 12% IRR, it goes from 7030, to, you know, 6040, whatever it ends up being, the investor starts to make more, because they're making the investors more. Or the deal sponsor makes more, because they're making the investors more. And that's all good. And well, and if you've got very sophisticated investors, then they'll understand that and there'll be comfortable investing in it. But from what I've, I've seen, a lot of my investors are professional athletes, they're doctors, they're, you know, professionals in their industries, they don't have a lot of time to dig into this kind of stuff. And you know, Donald Miller over storebrand says it best if you confuse you lose, I don't want anybody looking at all of these waterfalls, and all these, you know, targets and thinking, Okay, well, I don't really understand what's going on here. But I feel like I'm getting screwed at some point. And we just make it very simple. It's like, No, you get your 68% preferred return. And then every dollar after that is split 7030. We just make it very easy. That's, that's been very successful for us. As I've gone and raised capital, my investors appreciate that. It's very transparent, very easy. And I don't have to worry about sitting there. Like the problem with waterfalls is now you're having to calculate returns all the time to determine should I be paying myself more? Or should I be paying, you know, the investors more, I don't want to do that. I just want to go out there and make a successful project. And look, if I overpay my investors, great. They're happy, they'll invest with me in the next project. And we'll keep doing this. And there's always more money to be made. That's kind of my philosophy on that. Jason, good morning. Sorry, if you have covered this, how do you feel about the prospects for iOS, that's industrial outdoor storage, and warehouse space, and 2024 and 25, if the economy takes a dip, so if if the economy takes a dip, the great thing about industrial outdoor storage is that it's not like all of those materials, all of those trucks, all of those businesses are just going to disappear. You know, you might not be able to get the occupancy rate that you'd hoped, because maybe somebody will start parking their truck at their house. But I think they'll still do fine. I mean, industrial tends to fare through economic downturns pretty well, depending on what kind of businesses you're leasing to. So if you're doing industrial outdoor storage, you're focused on, you know, trailer tractor and truck parking, that could be a dump truck, it could be a fleet of pickup trucks. You're also looking at construction materials, a laydown yard stuff that doesn't necessarily need to be covered indoors. And just because the economy takes a little bit of a dip doesn't mean that they're suddenly going to just get rid of all that material and closed down. So you may need to work with a tenants through an economic downturn, which I always suggest it's so much easier to just work with a tenant that you've gotten than to have vacancy. So I think they'll do fine. I mean, we've got a bunch of clients that are buying industrial outdoor storage right now that we're representing on the brokerage front. And we love that asset class, it makes a great covered land play, they typically cashflow if you do it, right. It's not a whole lot of maintenance and oversight from the landlord. So I like them. And they're, again, they're good covered land plays. So in the future, you'll have a lot of opportunity to do something else with them. Paul, what about single tenant Walgreens or Starbucks for first time you have little landlord responsibilities that might be easier for first time landlord. Yeah, so Paul, single tenant, Net Lease deals are great for beginner investors, because you don't have hardly any responsibilities. Starbucks will often sign a double net or a triple net lease. In my experience, Walgreens is more on the triple net side. In some of them, you'll find this isn't typical in Starbucks, but you'll see it you know, with like dollar generals and things like that, they'll do it what's called an absolute net lease, which means the landlord has zero responsibilities, a tenant is taking care of the roof, the structure, everything, you're just collecting a check. I think they can be great first time investments. But for most people, when you're first getting started in commercial real estate, you know, getting some sort of equity bump or cash flow is very important.
The problem with single tenant Net Lease deals is because they're stabilized because they are such high quality tenants, you're not going to have high cap rates, right, they're typically going to be five to 6% cap rates, which means you're not really gonna be cash flowing that much. They're great for like 1031, exchanging into and forgetting about the money. But as far as a cash flowing, wealth building investment, they're not where you would start, it's more of where you would start to preserve your wealth for the long run. So that's why I typically don't recommend single tenant Net Lease deals for beginners, simply for those reasons. That is all the time that we have for today. If you join me live on YouTube and I wasn't able to get you to your comment, feel free to We'll leave it in the main video and I will respond to you. If you're listening on the podcast please rate and review 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 crelaunchpro.com
Each week, I'm going live at 8:30am CST for my "office hours" to answer your questions about commercial real estate on the show. Let's hear what you'd like to know when it comes to brokerage, investment, and development!