Investing in Retail Centers, City vs. Brokerage Firm, and More (Office Hours)

Tyler hosted his weekly commercial real estate office hours livestream where he provided updates on his recent speaking engagements and took live questions from listeners about financial modeling, investment property types, deal sourcing strategies, construction methods, 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:

• Tyler gave a talk on building a personal brand at a conference and is preparing for another talk at Brandon Turner's REI Summit about how to get started in commercial real estate.

• He recently got approvals to start construction on his boutique hotel project called Salt Ranch in East Nashville after two years of working on it.

• He is considering hiring another assistant to help with community engagement and daily tasks.

• He answered various questions about financial modeling, shopping centers vs apartments, deal flow generation, and other commercial real estate topics based on his experience.

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:

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.crelaunchpro.com.

Welcome back to the commercial real estate investor podcast live from the combo group Studios here in Nashville, Tennessee for another episode of office hours. If you have any questions about commercial real estate, that is what this time is for. Come join me live Tuesdays 8:30 a.m. Central Standard Time. Ask whatever questions you have on commercial real estate, and I will give you some answers. Hopefully they're good answers. I can't really promise that because we're live and sometimes I gotta go research six, but I get emails all the time. I get DMs on Instagram. Some of y'all actually manage to find my cell phone number and send me text messages and ask me one off questions all the time. And it's tough. I want to respond to everybody. It's great to, of course, hear from you all and know that you are curious on my opinion on things, but it's really tough because I am running three companies and doing this YouTube channel as well and trying to grow my business there too. So bear with me. Join me, you know live here Tuesdays 8:30 a.m. Central Standard Time because if you've got that question somebody else probably does, as well.

Young 10 Amira says: Hey, Tyler.

Welcome to the live stream. Appreciate you joining me want to catch you guys up on the last week. Before we dive into whatever questions you all have around commercial real estate, be sure to drop those in the live chat here on YouTube so that I can get around to those. Hopefully we don't get too many. But if we do super chats get bumped up to the front.

So, last week I spoke at the Nashville Junior Chamber Leadership Conference, which was a lot of fun, I actually had I gave a talk on a different topic that I'm accustomed to, which was building a personal brand. That's something that I have done over the last, you know, five plus years give or take longer than that. But really, I started my company back in 2018. And that's when I started taking it seriously, building a personal brand. And a lot of it has been through things like this, right YouTube, live streaming, interacting with the audience creating content, it was a lot of fun. So you know, I hope that I can continue honing in on that talk and making it even better, and maybe I can start giving that a little bit more.

I'm also putting together my talk for Brandon Turner's REI Summit, which is coming up here at the beginning of May. Really excited for that one, it's gonna be a lot of fun. My aim is that my talk alone will be worth the ticket price, because I'm gonna be giving a talk on how to get started in commercial real estate. And we are going to be really diving in deep dive on exactly how to get started in commercial real estate. I mean, I'm talking actionable items, like, hey, here is how I write my letters. And here's how I send them out, just copy this schedule, things like that, you know, when I'm when I'm trying to find some off market deals, so I think it'd be a lot of fun to have something like that. So it's gonna be a really, really good talk, really looking forward to it. Last week, welcome Freeman and I did our February business updates. Good to see some very positive trends on the horizon for commercial real estate this year is shaping up to be a good year, it's not going to be a year like 2021 .I doubt very many years ever will be like that again. But it's, you know, we're finally starting to come out of this initial shell shock that we received from interest rates going up what I think Jerome Powell raised him like 10 or 11 times very quickly, which is kind of crazy to think about. I mean, I don't think that there are very many times in our history as a country that that has ever happened.

We also finally got our approvals for Salt Ranch man, I've been working on that for two years. So we're not across the finish line yet. This is my boutique hotel that we're building here in East Nashville if you're not familiar with it, 48 keys. We have been trying to get our construction permits for two years. And we finally got a vote from the neighboring HOA that we could get a second easement across their property for stormwater. So very excited to finalize that submit that to Metro Nashville and then we should be able to get our permits and actually start construction so stay tuned for some updates on salt ranch really looking forward to getting that one underway. There's a much anticipated project and I mean, we've been working on it now for like three years so I'm just ready to be done with it. But man, it's gonna be really cool by the time we're done.

Also want to say I'm possibly on the hunt for another assistant. So my my assistant recently moved back home to New Jersey, and I have contemplated whether or not I'm going to fill that slot again. But the more that I think about it, the more that we're growing this community, I need somebody that can help me with community engagement, somebody that can help with scheduling, and just staying on top of my emails and everything like that. So if you or anyone you know is an absolute rockstar, have an assistant and wants to, you know, come hang out with me and learn more about commercial real estate wealth, you know, knocking out tasks already done on a day to day basis, shoot me a DM on Instagram at Commercial in Nashville. It's up there in the top left hand corner, I guess if you're if you're watching this on YouTube, because you know, that it can be a lot of fun.

My assistants always get a really interesting look at commercial real estate, because they're involved in a lot of conversations that almost nobody else for my team is because they have to be right there with me pretty much all the time. So yeah, there we go.

Alright, let's let's jump into your questions. Clay is saying I want to get better at financial modelling. Any tips or resources to help with that? So as far as getting better at financial modeling, there's there's a couple of different paths that you could take one, I've got a few videos here on YouTube, where we dive into a bunch of different aspects of financial modeling. So if you just search, you know, underwriting, and probably my last name, Cauble, you'll it'll bring up a whole bunch of those videos got a bunch on Triple Net investing, we've got a bunch on, you know, various types of, of assets. So you can go in there and kind of get a feel for that. I've also talked about this pretty in depth on my course that is that one of the biggest questions I get is underwriting and financial modeling.

How do you run the numbers on commercial real estate, so we've got a whole bunch of videos going really in depth on that in my course. You could also take a CCIM course 104 is the one that they actually dive into financial modeling on, you do have to take 101 First, I think that's probably 1200 to $1,500 plus travel. And then 104 is the same 1200 to $1,500 plus travel, so probably cost you somewhere around, you know, three to $4,000 to go through CCIM it's really good. I mean, their class is worth it, I took that and within like 60 days sold a $1.8 million deal. Because I was just underwriting them and sending them out to my clients. You know, on the reverse, my course is $1,000. So a lot cheaper. It's not as in depth on the underwriting portion as a three day eight hour a day class on underwriting is. But I do think that it's a little more practically useful, in my opinion, because like I've said, I've been through a bunch of these underwriting classes, and some of them are a little too old school, they don't really make a whole lot of sense, etc.

Honey is saying, Hey, guys, hey, honey, welcome to the live stream.

Young is saying Tyler, I'm having a serious problem in a sense of I'm stuck between buying a block of 34 apartments, or a medium retail shopping center, not a mall, I don't know which one to choose, my heart is telling me the retail center is the best option because apartment buildings seem like a lot of stress. Young that's a that's a great point. So what's talked about it, you may need to jump into the live chat and give me some more information on this apartment complex. But I mean, if all things are equal, let's assume it's the same cap rate, you're likely going to be paying more for the 34 apartments, I would think but it depends on what the retail center how big it is, what the what the rents are. I mean, I would need to know more about the tenants the lease structure of the retail center, the age and condition of it. But at the end of the day, I mean, I'm picking retail all day over 30 for apartment units. From what I've found. There are too many buyers in the apartment world, especially in that like sub 50 units range because think about it, not only are you competing with people that want to go do their first syndication, rather going on raising capital to buy this apartment complex.

You're also competing with people that have 1031 exchange money, and high net worth individuals that just want to buy something like that, right. And they're typically willing to pay a little bit more than you probably are for these investments. And at that point, it just doesn't make that much sense. Whereas you just don't have as much competition in the retail world. So that's why I have always loved commercial over multifamily. That being said, lending terms are very different, you actually might be able to bring less money down or have lower monthly mortgage payments on the apartment complex than you would on the retail. So I mean, what I would do is just do a cost benefit analysis and try to figure out which one is actually going to be the better investment over the next five years which one's going to create less headache for you and make your life more enjoyable because with even the smallest strip center, you can still justify property management because the tenants pay through cam.

But on a 34 unit apartment complex, you're likely either self managing, or you're hiring a, an off site property manager at like eight to 10%. So it's really tough to justify, you know, making those makes sense, in my opinion. Max is saying good morning, can we talk about shopping centers, pros cons, what makes a good deal, what makes a bad deal, the future of retail, etc? Absolutely, we can max I love shopping centers. As you kind of heard there when I was talking to young shopping centers are great, I think that, especially if you're focused more on neighborhoods, or grocery anchored, right, so I personally, like when I'm investing in shopping centers, I go for the smaller, you know, 2345 tenant strip centers that are located, you know, close to neighborhoods, or within neighborhoods, or on major corridors that are adjacent to neighborhoods. I like those because they tend to serve the daily, maybe weekly needs of the surrounding neighbors, and are therefore semi Amazon proof. Right? I mean, let's be honest, you're probably not going to start sending your dry cleaning through Amazon anytime soon. And that's what a lot of these, you know, strip centers are, that's it's kind of that, you know, the dry cleaner, the little neighborhood market, maybe it's a restaurant or a bar, you know, things like that, that the neighborhood's going to continue going to even salons and boutiques, you know, I like those tenants, they're great tenants. So I would say, you know, those are some pros cons on shopping centers. I mean, it depends on what kind of shopping center you're buying, right, I wouldn't want to go by a massive regional shopping center right now, that has a lot of, you know, big box retailers in it. I mean, Best Buy has survived thus far, I don't know how much longer they're going to survive. Or if they will survive over the next five to 10 years, the market could change so much, there's a lot of uncertainty out there, BestBuy, could completely change. I mean, they survived the first round, right? But they could completely change, you know, their approach and stay relevant. But there's also a good chance that they won't, and that's just one of many big box retailers that I'm a little concerned about. Now, if you're able to get a really, really good deal on a shopping center, like that to a point where you know, okay, if this big box retailer leaves, it's not that big of a deal, I can just go through and rent it out to, you know, an indoor climate controlled self storage facility or to a church or a gym, or any number of other things. Cool, go for it. But I would be, you know, hoping to have some sort of a higher and better use in the future. Right.

So that's typically what I do when I'm buying a shopping center is what is the future of this area? Can I get it for such a low price per square foot for the dirt, that it just really makes sense. Overall maximum and I think retail is strong. I think that there's a there's something to be said for, for for an in person shopping and buying experience. I don't think that everything can be bought online. And I'll caveat that with, you know, look, I've bought shoes online, I've bought, you know, clothing, tools, whatever online, and it can be convenient. But they're just some things wrong, like, Man, I really don't want to bother with receiving the wrong size. Right. So I did this last year, I bought some workout equipment that I thought was the right size to fit on my home gym. And it wasn't the right size. And then I just forgot I just literally just saw it again the other day, I forgot to go and return it. And while now it's been a year or whatever. And so I mean that now I've just got a piece that doesn't fit this gonna sit in my gym for a while. So I don't know. But I try to avoid things like that. And that's the problem with online shopping. Is that you just can't know until it gets there. So it's one thing I would say. Youngest thing.

Yeah, Max. One thing to note, shopping centers aren't as easy to find like apartment blocks depending on where you are. I mean, that depends. I would argue that there are too many buyers going after apartments. That makes it harder to find apartments than it is to find shopping centers. I mean, I could go into LoopNet and find a whole bunch of shopping centers into in Middle Tennessee right now but I'm not going to find a whole lot of apartments. But yeah, I mean, like like Yun said it does depend on where you are.

Robert is saying Hey, Tyler, will your your university courses be available online? So if I do start teaching at the university, no. Those courses will not be available online. But my I do have an online course that I put together last year or a year and a half ago. That is on mine. So that's self paced, you can take whatever you want Tylercauble.com/course, you're welcome to go check all those out.

Or if he is saying, Hey, Tyler, what's your opinion on the recent studies coming out regarding the 385 smaller banks potentially defaulting on their commercial real estate loans, big banks, potentially eating them up possibly.

Full disclosure, Orpheus, I haven't seen that study. So I would want to sit down and read it and see exactly what it says. That being said, it's not really surprising. I mean, if you think about smaller banks are typically the ones that are winning on commercial real estate, right? I've talked about this all the time on this channel, don't go talk to the banks of America, don't go talk to the Wells Fargo's of the world there, they're probably not going to wind on your assets. Right. And they're, they're just not worth dealing with your smaller local banks are the ones that better understand the market and are probably going to give you better terms anyway. So it's not really surprising, considering where interest rates have gone that 385 smaller banks might potentially default on some commercial real estate loans. You know, that being said, I have been surprised at how few banks have actually defaulted here recently. And a lot of it seems to be happening because you know, these bigger banks are stepping in and buying them up before anything really goes wrong. So I mean, I think it's a good opportunity for them. I think that and by them being the big banks to step in, and basically buy up these balance sheets, get market share in the smaller markets where they don't have anything yet. But, you know, we'll see, if you don't mind shoot me that study, I'd love to take a look at it. Maybe we could talk about on the show next week.

Rich is saying, Hey, Tyler, when you started your brokerage, how do you advertise or find agents for your office? Were you looking for experience or hustle? Thanks. So Rich. When I first started my commercial real estate brokerage, I didn't want any other agents to come work with me. Funny enough. I mean, that's why that's why I called it the cobble group. I know that that's very common. But let's be honest, name it putting your name on the door of a business is not a very scalable approach. It's not a very, I mean, very rarely does it happen in commercial real estate. It's actually everything right? Like Avis and Young. CB Richard Ellis, right. Like there's a lot of brokerages out there that it's just the people's names. But you know, I mean, if I had been planning on just hiring a bunch of people and not really necessarily doing it myself, I probably would have branded it and come up with a different name other than the cobble group. That being said, I mean, I don't know, I really love the branding, the direction that we've taken with it works out pretty well for me, because it's you know, people recognize my name. So it works because I'm in Nashville, but like if we expanded to Chattanooga, or we expanded to Huntsville, or we will, like that name is not going to help me at all. So, you know, it is what it is. I mean, today, I've got a team of seven brokers that work with me, and not a single one of them came from a job posting, or, you know, our actively trying to hire anyone. I have never really taken that approach. To me, it's always, you know, I mean, if I go back and look at, you know, our top brokers, they've reached out to me, and they've wanted to come work with me based on the brand that we've put out there based on our accomplishments based on the deals that we're closing, based on how much business we've got. So, you know, that has been huge for us. Because, I mean, if I look back on, like last year, out of those six or seven guys, I gave them probably over 70 or 80% of their business last year, I handed the leads to them. So I get to be very picky about the brokers that I bring into the firm. Because they're gonna get a lot of leads from me, which means that they better be closing a lot of deals, they might have better have a lot of experience and getting deals closed, and have the ability to do that. So I know it's a little bit different than probably what you were expecting. But that's that's kind of how I've just always approached it. You know, fortunately, like, I mean, it wasn't until last year that I stopped brokering. I mean, I was just kind of planning on, you know, being the broker investor for a long time. And then last year, you know, got a great enough team to where I was like, oh, man, I can just hand this off and they can kind of take care of everything.

Clay saying appreciate it. Absolutely. Clay happy to happy to help.

Delano Singh: Brother, I'm always having problems with the city getting a land approved for parking. Should I hire a lawyer? Does he read questions from Instagram? Yes, I do read questions from Instagram. They are coming through. I just get I get a lot of questions in his office hours. So I'm trying to make sure that I get through to everything.

So what I'll say about that, I mean, you know, one, you want to make sure that you look into your cities regulations, whatever your zoning and code say about parking. I don't know if you're trying to get are approved for less parking or for more parking. But, you know, parking is just one of those things, it's an absolute nightmare.

The only reason we were able to get the Wash, John, is because I had zero parking requirements, I did not have to do a single parking space for that site. I'm a big believer in zero parking requirements, because the market will dictate how much parking you actually need.

No developer is going to come in and build a 300 story tower with zero parking, or at least zero ability for those tenants to get to that building. Because nobody will read it, right, they'll just pass by and say, Oh, it's too inconvenient for me to do anything, you know, with that building. So you know, I think that if you're, I mean, you could, you could definitely hire a lawyer. Typically, when I'm going through approvals or trying to get a variance on my property, I'm going to hire a civil engineer or an architect that has a really good relationship with the city. And somebody that has also been there and done that before. So a lot of your civil engineering firms will typically be able to take care of a lot of the stuff for you. They'll be able to put forth case studies and other items that will help you towards getting those approvals doesn't necessarily mean that you'll get them. But that's that'll hopefully get you started in the right direction.

Ron is saying, let's see, Ron is saying you said on one of your last shows that you're recently in Buffalo, New York. Any advice for investors up here and the recent federal tech hub cities? Are you going to invest? Are you going to invest in Buffalo or Syracuse? Rod?

Great question. It's funny, my girlfriend and I, she's got some friends up in Buffalo, New York. So we've got up there a couple of times this past year. I actually love Buffalo. It's a really cool, cool town. It'd be tough for me to invest in, I just I still haven't wrapped my head around what's going on in the market yet. That's that's not necessarily a good or a bad thing for Buffalo. I genuinely don't know the way that I invest. I have to start like I studied Chattanooga for two or three years before I started buying there. So it just takes me time to kind of wrap my head around that. I'm not an early adopter. For any C's. I'm typically like a mid-level adopter. So I get in ahead of you know, most people, but I'm certainly not the first.

So you know, I think that Buffalo has got a lot of interesting prospects. It's got a really cool little downtown kind of budding area. I'm forgetting what that district was called. But there are a bunch of breweries over there. We've gotten there a few times, you'll have the coolest old churches I have ever seen in my life. And there's so much potential there. I mean, there's one on their street on our friends’ street that I want to buy and just turn into a buffalo house, because it's really neat.

So, as far as like, you know, advice for investors up there. Just make sure you're buying right, make sure you understand the fundamentals of your market, what tenants are moving around, what your days on market typically will be for an asset like that and what your vacancy rates are. That's the biggest thing. I mean, once if you've got all that down, and you feel very comfortable with it, you should be good.

Zach is saying good morning, Tyler advice on how to create deal flow as a new industrial investor. The few brokers I've spoken to haven't seen any deal, haven't sent any deals my way. So okay, Zach, getting started as an industrial real estate investor. Building relationships with commercial real estate brokers is hands down the best thing that you can do. It's not easy, though. Because a lot of commercial real estate brokers, if you think about what they they get paid Commission's when a deal closes, which means they're going to be very protective of who they're putting these deals in front of, because they want the deal to close. So typically, most industrial real estate brokers and most commercial real estate brokers in general, will have a few investors three to five, typically, maybe more, maybe less, that they will send these deals to and typically they know that they will get them done. Just from years of experience from building a good relationship with those investors. That's typically how that works. So what I say for new investors that are getting started wanting to build a relationship with brokers is touch base with them every three weeks, just set it on your calendar recurring event, to either send them a text, send them an email, send them a phone call, or meet with them in person, every three weeks, you will be the only person that is reaching out to them touching base with them every three weeks, I almost can guarantee that and that will keep you top of mind with these brokers.

The other thing that you'll want to do is create such a specific buy box that they know you know what you're talking about. So I coach a lot of newer commercial real estate investors. And that is one thing that we spent a lot of time on because some investors when they first get started, they just say hey, I'll look at anything you have. That's Industrial? Well, and I'm not saying that you're necessarily doing this, I'm just saying I see this a lot. For a broker that's really tough to do anything with, like, I don't have the ability to just send everything industrial over to you. But if you came to me, and you said, Hey, I am looking for, you know, flex space properties between five and 10,000 square feet in the 37207 zip code that are ideally in the, you know, one to $2 million price point range, I would be like, damn, this guy has done this before he knows exactly what he's talking about. And guess what, whenever that specific deal pops up, you're the first one to see it, because they go down their list. And they're like, that is exactly what he wanted. It checks all the boxes. He also calls me every three weeks. Damn, I gotta get this guy deal. It works. I promise it does. Because I've been on both sides of the table. I've been the broker and I've been the investor and it works every time.

Cool is saying what is more important when starting a career in commercial real estate, the city that you were in, or the firm that you started? Oh, cool. That's a great question. Okay. So let's, let's throw out a couple of qualifiers. Like if you live in a city with a population of 5000 people, I don't think it matters, what city or what firm you're with. If we're talking like, let's say that we're in like, tertiary and secondary markets, right, let's, let's take the New York's Houston's Atlanta's out of it. We're talking Nashville, Huntsville, Atlanta, Louisville, St. Louis, cities like that. Okay. So all relatively the same size, give or take him, you know, I would say that the firm that you start with is actually probably more important. I'm a big believer that no matter what kind of market you're in, there is a way to create deals and create deal flow. But I do think that if you've got a bad broker, or you've got a bad team, or you're just not being taught properly, like, that's the biggest thing when you start as a commercial real estate broker, the learning curve is so steep, the amount of information and knowledge that you have to ingest and then become the expert on in order to actually negotiate deals properly. It's insane. I mean, it's a lot, I'm sure other markets are like that, too. Sure, of course, other industries. But I mean, it takes three to five years before you can really, you know, get a grasp on what's going on in commercial real estate.

So, but kinda like what I was saying earlier with my brokerage team, I'm able to basically lessen that learning curve, because I'm able to give them so many leads. We're very active in meeting with a team like I have one to ones with everybody on my team every week. I have a team meeting every week, we do a lunch and learn every week. So I'm very involved in making sure that these guys are growing and getting better at their respective, you know, industries or verticals, whatever you want to call it. So I think I think the firm you start with is actually more important, like all things being equal. So hope that helps cool.

Troy's saying, Tyler, what are your thoughts on pole barns versus clear span steel buildings for flex industrial? Oh, man. So if we're just talking about flex, industrial, I think pole barns are fine, I think if you can still have a clear span within their space, right? Because I mean, the big thing, the biggest problem with like, why people are doing clear span is because you have one tenant occupying 10,000 square feet. And they don't want to have a single pole in the way so that they can maximize their usage of all that space. However, if you're taking 10,000 square feet, and you're cutting it up into five 2000 square foot spaces, you can easily you know, not have to have clear span and just run, you know, vertical sports in the walls that are demising the space so it's probably going to be cheaper for you to do kind of a pole barn style construction, then, you know, steel span buildings. So that's that's the path that I would take right there.

Let's see. Newlook is saying office and apartment investing which one is more profitable? Which commercial real estate niche can get me to financial freedom faster? Thank you. May God bless you, sir. Newlook. I would say either one can be equally as profitable. It depends on how you're approaching it and how well you know the industry. I am a big proponent, that there is not one asset class that is necessarily better than the others, although I don't really like multifamily all that much. But that's for a totally different reason. It's not because of the fundamentals of the market. It's not because they're not good investments. There's just too many sharks in that body water for me to want to even compete. Right. I think you could be equally as profitable in either one.

The biggest thing is to just pick your niche, narrow down Don't become the expert in it and know everything about that niche, right? I mean, there are people that are making millions of dollars today in office space, when everybody is terrified of it, and not wanting to do anything with Office because Oh, nobody's ever go into the office again. Maybe there's a lot of companies that are still going back to the office, if you understand how the office environment works. You're making money in it today. I mean, I've got a 28,000 square foot office building I'm sitting in right now. And it's fully occupied. So and it has been since 2021. about it and 2019 at 40% occupancy. So think about that. We leased it up during COVID Because we knew and understood the market. So that's all it takes. Thank you guys for joining me for this week's episode of office hours 8:30 a.m. to 9 a.m. Central Standard Time, every Tuesday. So feel free to join us in the next one. If your questions didn't get asked, or if your questions didn't get answered, drop them in the comment section below and I'll be sure to respond over text. And we'll see you guys 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.crelaunchpro.com