Exposing Real Estate Lies You've Been Told | Office Hours
In this episode of the Commercial Real Estate Investor Podcast, we’re busting the biggest real estate myths that could cost you big time. You've probably heard things like "Real estate always goes up!" or "If you find a deal, the money will come!"—but are they actually true?
I’m breaking down the lies, sharing real-world examples, and giving you the straight facts on what it really takes to succeed in commercial real estate. Don’t fall for the hype—let’s get into it!
Get commercial real estate coaching, courses, and community to jumpstart your investment journey over at CRE Central: www.crecentral.com
Key Takeaways:
Being a generalist in commercial real estate is better than being a specialist, as it broadens your investment skills and opportunities.
The numbers alone don't make a deal - you need to consider operational capacity, management ability, and local market conditions as well.
Real estate doesn't always go up in value, and can experience significant drops in the short-term.
Just because you find a good deal doesn't mean the money will automatically come - raising capital is an ongoing process that requires preparation.
The 1031 exchange is not always the best option, and it's important to consult your CPA.
Single-family rentals are no longer a good investment due to the high risk and low reward.
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:
Tyler Cauble 0:00
This episode of the commercial real estate investor podcast is brought to you by my cre accelerator mastermind, where you'll get access to my step by step investment blueprint, essentially a library of resources on how to invest in commercial real estate. You'll get connected to a supportive community of other commercial real estate investors that are doing projects just like you. You'll get personalized coaching and feedback from me every step of the way. Go to www dot cre central.com to learn more. Welcome back to the commercial real estate investor podcast live from the COVID group studios in Nashville, Tennessee. Back after a week of missing you guys, I'll explain kind of what happened there. Also going to be diving into exposing some of the lies that you have been told about real estate, real estate, investing and commercial real estate today. I think that'll be a fun conversation. And then, of course, as always, we're gonna dive into your questions. That's what this is. It's office hours. I go live and answer your questions. If you don't ask questions, we just sit here and look at each other awkwardly. So anyways, last week, some of you all may know, I spoke at the best ever conference in Salt Lake City. It was a great event. Really excited to be a part of that. I taught a workshop on Sunday on due diligence, which I will be sharing with you guys here on the YouTube channel, probably about an hour and a half long on how to properly go about doing your due diligence when you're buying commercial real estate, because there is so much that you absolutely have to get right when it comes to buying these properties, and that makes due diligence an incredibly important piece. We got some feedback that it was the best workshop of the day. So you know whether that's true or not, I'll take it. I appreciate that the trip back was a nightmare. I'm not a I don't like flying. I'm not a big fan of flying. I just I never really have been. And my flight back from Salt Lake City got delayed because of wind in Denver, so I ended up having to stay the night again in Salt Lake City, which is why I ended up missing office hours last week, and then I had probably the roughest flight I have ever had, flying from Salt Lake City to Denver. It was pretty insane. I mean, it felt like we were in a tornado. They were passing out coffee, and I had just gotten my coffee, when all of a sudden, we dropped a few feet and started basically swinging side to side. So the flight attendants had to rush and put everything up and buckle up. And we were only halfway into the fight there, and it took us another 30 minutes before landing. So that was not fun. Not a big fan of that. But hey, they handled it really well. And I'm here today, so we'll take it. This was my first weekend home in a month, which is kind of, it's just that's tough. You know, been speaking at a lot of events, had a lot of things going on, and so, you know, it's nice, and I'm fortunate to be able to do that. It's also really nice to be able to spend some time at home and work kind of on the farm, because it's, it's gardening season, baby. So we've got a My girlfriend and I started working on just getting the land ready for a lot of planting and landscaping and and all the fun stuff. So we built some raised garden beds and had a good time there. So excited to have that. And then, of course, this week, if you've been paying attention, or if you're in the accelerator mastermind, we've got our in person meetup this week. So excited to be getting down to Birmingham and hanging out with everybody. We've got the first meetup for the inner circle, which is a smaller group of people that I'm working hands on with on their deals. And of course, we've got the overall accelerator mastermind meetup on Friday and Saturday after that. So gonna be a lot of fun. We'll be documenting the whole journey. We'll be sharing some of that with you all here on YouTube as well. So back to what I wanted to talk about today, before we get into all those questions, which, by the way, the question of the day is, what's a commonly held belief in real estate that you disagree with? There's a question that I posed to the mastermind last night, and we ended up having a really good discussion around it, and there were a few things. There were a few things that really stood out to me from that conversation, right? Being a specialist is better than being a generalist, right? These are all contrarian takes, right? I mean, some of y'all are probably going to disagree with them. Traditional wisdom suggests that going an inch wide and a mile deep, or just like, you know, focusing on a single asset class or a single location is the best way to go, right? But the argument there that we were making is that being involved in multiple asset classes overall improves your investment skills, broadens the amount of opportunities that you have, and really just sets you up for success in multiple ways. If you invest in hotels, you understand branding better than somebody that just has office space, right? So if you bring the expertise of doing hotels into the office world, that's how you create a really cool co working space. Yes, right? It's a totally different experience because you're kind of blending the two, right? And so I think that, I mean, that's how I've built my career. I'm a generalist. I would, I would never specialize. To me, it's so boring. I would rather have fun, enjoy multiple different asset classes, do different types of deals, keep my day to day different than to just do multifamily over and over and over again. I mean, come on, that's got to be so boring. And I get it, you're probably sitting and thinking, Well, yeah, but if you only do multifamily for the rest of your life, you'll be the best at multifamily, sure. But like, can you quantify the return, like, the difference in returns that you could get by being by just doing that, right? Sure, maybe you're a better multi family investor than I am, but does that mean that overall, your portfolio is going to bring you better returns because of that, or will I have the opportunity to outperform you? Because, as we've seen for the past few years, multi family has really, really been struggling, and I haven't even been thinking about it, it doesn't cross my mind that multifamily is struggling. There's some people that that's all they can think about, because that's all they've done for the last 10 years, and they've kind of pigeonholed themselves into into, you know, one asset class, right? Food for thought, if nothing else. The next point that came up was, if the numbers make sense, you should do it, right? I mean, hey, if the numbers, if the deal pencils, if it's a good deal, it should make sense, right? And while financials are important, right? Strong financials, you also have the operational capacity for you personally, right? I mean, there's, there's the intangibles that you've got to think about on your to think about on your team. Can you actually handle that deal? There's the management ability. There's local market conditions that you've got to consider. The example that I gave last night was I almost bought a hotel in Mexico last year, right? It seemed like a great deal, like on paper, it made all the sense of the world we were getting seller financing, like everything was lining up. And I was like, Man, this is gonna be really cool. I'm gonna get to fly down to Mexico and hang out at my boutique hotel and write the whole damn trip off until we started digging a little bit more. And the cartel completely runs that state or province, whatever they call them, in Mexico. And the risk of being a an American, owning Mexican real estate was so high that it didn't matter what the returns were. I couldn't get comfortable with it, right? So there's always, there's always some sort of other intangible factors. So yes, the numbers are very important. The numbers have to work, but they're not necessarily the only thing that you have to see in order for the deal to make sense, right? Another one, and this is good, real estate always goes up. No, it doesn't everybody. There's this commonly held belief that real estate is always increasing in value, and over a long period of time, that may be true, but in snapshots, it can be completely false, right? I mean, we've seen like if you look at the Austin multifamily market today, it's down probably 10 or 12% that's a pretty big drop, right? But if you looked at it over the last 10 years, it's up quite a bit. So it's important to keep that in mind that if you're investing in real estate, you're doing this for the long term. If you get into a short term, like you only lose money on real estate. If you sell during a loss, it will come back. It's just going to take a little bit of time, right? So make sure that you're prepared to ride that wave, right? Because real estate doesn't always go up. In fact, sometimes it goes down pretty sharply, pretty significantly, and it can be pretty painful if you're not prepared to weather that. This is my favorite. I think this is the biggest lie, hands down that real estate investors and new real estate investors especially, have been told, if you find a deal, the money will come. No it won't. It will not come. It won't. Money doesn't just appear out of nowhere, just because you found a good deal. Do you know how many good deals there are out there? More than you could ever buy, more than all of your friends could ever buy. There's an ungodly amount of good deals out there. There's not an ungodly amount of cash, right, and it's and it's tough to go out and raise that capital, right? Just because you have a good deal doesn't mean that you've got the track record to make investors feel good. Just because you have a good deal doesn't mean that you have a relationship with the person that has money that's going to make them feel good enough to give you that money, right? Just because you have a good deal doesn't mean that your balance sheet is strong enough for you to actually qualify for the debt on that property, right? So I think that that's a major lie, and maybe that makes sense. When you're talking about a single family home, that's $150,000
and you need, you know, 20 grand from your uncle. Sure, that doesn't happen with like, true real estate investments. So I think that if you are interested in doing real estate whatsoever, and you know, at some point you're going to have to raise capital, yes, you have to be looking for the deal, but you're raising capital today or yesterday. You started yesterday, right? Let everybody know that you come across that you invest in real estate. These are the this is your Buy Box. These are the returns that you're going for. If they're interested. Get them on your list, right? You need to start prepping people today, because I guarantee you, just because somebody says, Oh yeah, I'll give you $100,000 in a real estate deal doesn't mean that they're going to do it trust. I mean, I raise capital for a living. I literally have 2100 people on my investor list that have called me. I have personally had conversations with every single one of them. They have called me and said, Tyler, I want to invest in your real estate projects. I have 100 of those 2100 that are actively involved in my deals. 1/21 of the people that have called me and said they want to invest in my deals have actually given me money. Right? So that means, if we're just going to use that metric, which it may or may not be a good one, but 5% of the people that you talk to that say they will give you money, will probably actually give you money for a deal. And that seems to ring true. I mean, it's anywhere from like five to 10% of any given deal that an investor is interested in, will they actually give you the money? Right? So keep that in mind, five to 10% if you need five people at $50,000 each, you better get 100 people to say that they're interested, right? It's it's work. I'm not gonna lie. Raising, raising capital is not easy, but if it was easy, everybody would be doing it, and there would be no upside in this business, the 1031 exchange is always your best option. Lie. It is a lie. A lot of people will assume that rolling over the profits and doing a 1031 exchange into any type of property, regardless of how good of a deal it is or isn't, simply to avoid paying the capital gains tax is preferable, or it's better. Sometimes it's actually better to take the tax hit and wait for a better investment opportunity, right? You don't want to, you need to actually sit down and talk to your CPA. I do this on every single one of mine, because my CPA will put me into check because I'll think, oh, we have to, we have to do a 1031 exchange, because I don't want to pay, you know, the capital gains tax on this. It's way too much money. And then she'll actually run it out. And I'm like, okay, that's not, like, it's not as much as I thought it was going to be. So now we're not really as desperate to make a deal or make a decision as I might have before, yes, of course, I don't want to pay the 20% in capital gains tax, but at the same time, I want to make sure that I'm getting into a good deal. I could pay 20% on the capital gains portion of a 1031 and go wait and find a better deal and buy something at a 20% discount that's going to give me a higher cash on cash return than the last thing, and it's a better deal and a better investment for me overall. So the 1031 is not always actually your best option. Uh, yes, it's a phenomenal thing, and I love it. Look. I've done a lot of 1031 exchanges. Big fan of them. I think they're great. It's not a one size fits all type of product. So keep that in mind the last one. And I know this is gonna be controversial with some of y'all, and I think that, but I think it's true. I think it's I think it's so true. Single Family rentals are a great way to build wealth. No, they're not, absolutely not, not anymore. Maybe, maybe it was 10 or 15 years ago. One I would never want to buy a bunch of single family rentals and deal with that like talk about a headache. What a pain in the ass. But they're not good. I mean, you objectively cannot tell me that investing in single family homes is a good investment. You're hoping to get in with as little cash as possible. You know, do the burst strategy, right? Refinance, pull your cash out. That's great, and then cash flow like 100 bucks a month, 100 bucks a month. I mean, come on, if you're making 100 or 200 bucks a month, net off of your single family rentals and a tenant sends you a text message, the fact that you've had to spend two minutes looking at that text message has now wiped out all of your profit. Like, I know that's a ridiculous example, but seriously, like 100 or 200 bucks, the risk is way too high for the reward. If your HVAC unit goes out there. Your profit for the next two years. What's the point? Why would you bother with that? And then I know somebody's gonna argue, well, you're paying down the mortgage. You're building up wealth that way. Okay, well, you could, literally, you're gonna do that with any other type of real estate. So why are you taking all of that risk for 100 to 200 bucks a month? I mean, you know, I get it if you're if you're at the point where 100 or 200 bucks a month makes a big difference to you, fine, go to single family. I'm going to ask you why you're going to take on all of that debt and deal with that much of a headache for that much money. Because it's really not that much. At the end of the day, I really don't think it is also the 1% rule that's a total lie. Doesn't work anymore. Used to doesn't anymore. From what I see, it's more like a half a percent to a quarter of a percent rule on the rental side. But those are our contrarian takes. Those were the lies that you have been told about real estate investing. I figured that would be a fun conversation for us to dive into today. Now let's get to your questions. Let's see what you've guys got going on in your world. Jonah is saying, morning Tyler, good morning. Jonah, thoughts on, do you find the deal or the funds first? That's hilarious, because that came in before I went through all of these. So great question. Jonah, I think it's a simultaneous thing. I think you are looking for the funds today or yesterday. It doesn't matter how good of a deal you find if you don't have the people that you can go to for the money. So I'll say that vicin is saying, Good morning. Tyler, good morning. Vicin, thanks for joining us. As always, Dwayne, being a generalist makes you more money. Don't threaten me with a good time. Dwayne, I completely agree. Completely agree. Here's the thing, the market shifts. The market is always going to shift. If you are able to shift with it and pivot, that doesn't mean pick up both feet, right? You keep one foot planted and you pivot right. Now, don't pivot so much that you break an ankle, right? But keep one foot planted and shift the other. That's all that. Being a generalist in commercial real estate is 80 to 90% of these asset classes is the exact same. It's the exact same. People get so caught up in, oh my gosh, I don't understand anything about industrial because all I've done is office or, Oh, I don't understand anything about retail, because all I've done is, you know, hospitality, they're not that far apart, like they're really, really not. It's not, I mean, when I put my course together, I sat down and I was like, I want this course to apply to office, retail, industrial, hospitality. I mean, honestly, even multifamily, it's the same. It's the same thing. The whole process of getting prepared, finding funding, operating and exiting your deal the exact same, no matter what type of asset class it is, it's like the remaining five to 20% that's a little bit different. That takes you no time to learn. So just go and do it and start today. It's better to have the knowledge today about how to shift into a different asset class than it will be if you need it right or when you need it. Quality is saying for triple net, if I take the cap rate times the purchase price, does that equal roughly how much money that property will bring in per year? Yes, quality the cap rate is basically the cash on cash return that you would get if you paid all cash for that deal, right? So multiplying the cap rate by the purchase price is going to give you the net operating income, which is, you know, your net operating income. That's pretty much everything before your mortgage payment, right? Scott is saying, can you explain triple net leases on a building with four 1000 square foot storefronts? Yeah, Scott, what? What do you need me to explain on the triple net leases? Feel free to to jump in and let me know. Happy to dive into it. Evan is saying, do you do a feasibility study on every deal that you do? Do you do them yourself, or have a business do that if you have someone do them for you, how do you know you're getting charged a fair price? That's a good question. Evan. So I would say the majority of the deals that we're doing, I do the feasibility myself. It depends on what you consider feasibility, because everybody has a different definition of that is a feasibility study, just a property conditions assessment, right? Are you just basically having the building inspected to make sure that you can build what you want to build there, or is it more of like you want somebody to figure out what the highest and best use is for the property. To me, those are two very different things, but you could lump them together as feasibility for a deal.
I don't trust anybody else to come up with the idea of what to do with these deals like that is my specialty. That is what I'm better at than most people. I can come up with a really cool out of the box idea. So that makes a lot of sense. So generally, what I do is I will go through the entire process, do it myself, pull together all the data and information that I need, and then I will hand that to an architect or an engineering firm and say, make this real life, right? Because sometimes my ideas are a little too far out of the box, but an architect or an engineer can actually, you know, pull that together. So that's kind of how I approach it. I mean, if you're looking at from a, you know, tenant or rental perspective, what I would say is, talk to commercial real estate brokers, right? They'll be able to kind of look at your plans for the property and walk you through what they think, you know, the vacancy rates, leasing rates would be, etc, if you're looking for just highest and best use, I would talk to a civil engineer or an architecture firm, they'll typically be able to walk you through that. And as far as like, how do you know you're getting charged a fair price? The only way to really do that is to triangulate it right. And triangulate means get three beds right. Get three points. So get three beds to come up with the highest and best use of a property. Sometimes it's called a yield study, like the majority of this, what how much space you could actually build there? Some call it a massing study. It just depends on exactly what you're going for. It's all the same thing. If you get three prices, and two of them are pretty close, you know that that's probably the price, right? I mean to put it, to give you a good example, I'm replacing one of the roofs at peerless mill right now, and I had one bid at $150,000 I had one bid at $166,000 and I had one bid at $300,000 the $150,000 bid. And the $300,000 bid came in first. And so I was sitting there, I was like, Well, what the hell is the price? These are two very different numbers. The third one came in at 166 and so I was like, Okay, it's probably 150 to 166 the guy that came in at 166 was way more detailed, like down to pictures of all the issues, and here's what they were going to do to fix it. So I went with that one. That was what made me feel good. Scott is saying great point on SFR. I couldn't agree more, Scott. I mean to me, it's like it I it took me way too long, and probably, in my opinion, not way too long I got probably bought way too early. I didn't buy my own house, like my own personal residence, until two years ago. I didn't see the point. What's the point? It's a glorified bank account, and honestly, it's, it's such a pain, man. You know, we're dealing with home renovations, and then, you know, Nashville gets an unprecedented freeze, and my pipes break, and now I've got to deal with a plumber coming out, and I don't have water. And you know, it's pretty nice being able to rent and just pass the buck onto a landlord and be like, dude, fix this. I'm going to work. You know? I mean, I miss those days, but to be fair, I bought a small farm, and so I get to have a little retreat on the weekends. And that's worth it, right? Probably could have rented it, though. Anyway, Scott is saying, how would you structure the triple net lease? What components make up the triple net Thanks, Tyler. So Scott, a triple net lease just basically means that the tenant is paying base rent, plus common area maintenance, property taxes and building insurance. They're paying their pro rata share of those expenses. So what I would do is, I would just, you know, go through and calculate what those triple net expenses will be, right? Figure out what the common area maintenance is going to be, the property taxes, the building insurance. That'll help you come up with the total pass through they're called pass through expenses, so that'll give you the total pass through expense on a per square foot basis, right? Let's just say it's three bucks. So your tenants will pay the base rent, plus $3 a square foot in additional rent expenses, and your attorney will lay out everything in that lease for you, so you don't need to worry about getting into the legalese around around how triple net deals are structured. It's it's actually relatively straightforward, which is great. The thing with these smaller spaces, right that you may want to consider, right? Because you've got four 1000 square foot storefronts, you may want to do what's called a a gross lease with a base year expense stop, right? Exact, same thing as a triple net lease, right? Except for it's much, much easier to explain to a tenant what that is. Oftentimes, when you get into these smaller businesses, you're dealing with smaller tenants, they start to get confused, right? Like, okay, wait, so you're telling me I have to pay you a base rent, but then there's this additional rent, and then I'm paying my utilities. So I'm paying all of these right? Like they start to just get confused about, okay, well, why? Why can't I just pay you base rent? Why can't I just pay you Why am I paying you additional rent? Why am I paying my utilities too? Whereas a base year expense stop basically says you take the base rent, you add in the additional rent for the. They are going in there, right? So you've estimated it for year one, right? 2025, any increases above and beyond that base year expense will get added back to their bill, right? So if it goes from $3 a foot in year one to $3.50 in year two, they're going to pay you that 50 cent difference, right? So it's kind of a way for you to give them a full service gross lease, but also protect yourself on the back end, when expenses will inevitably increase, so you don't have to worry about all of those expenses. So hope that helps man. Vic, and is saying, Tyler, is it a good idea to invest in real estate in Middle East countries after a war? Vic, and I have no idea. Man, you were asking the wrong person. I don't know anything about investing in the Middle East or investing in a war zone. You know? I know Hamza invests in Dubai. He's big on investing in Dubai. To me, I just don't know the countries well enough. I don't know how they operate, well enough to say whether or not it could be good or bad, right? I mean, it could be bad, it could be really good. I'm really not sure, because it depends on how those those countries operate, and every country handles real estate very differently, right? I had a group reach out yesterday, or the day before, it was yesterday from London, right? That wanted me to kind of advise them on how to structure deals in London and Italy. And I was like, look, I mean, I can jump on the phone and I can, I can walk you through how we structure deals with our investors, but at the end of the day, you're gonna have to hire an attorney in London that knows Italian law too to make sure that you're, you're legally structuring these the right way. Because there's, you know, my opinion on how things can be structured with investors, but then there's also like, can you legally do that? Like, is that actually permitted based on the local laws? And so that's one thing that you do have to keep in mind. Scott is saying, Thanks for the explanation. On triple net. Do you have a video that talks about triple net? Yeah, Scott, I've got a whole bunch of videos on Triple Net. If you just search triple net cobble on YouTube, or N and N Cobble, I mean, there's a whole bunch of videos I've probably done, maybe 10 going through all different aspects of triple net investing in commercial real estate. So there's, there's a whole bunch there, if you want to dive into that. Well, guys, thanks for joining me on this week's episode of office hours. If you're enjoying this, let me know, like subscribe to the channel if you're listening on, you know, Apple podcasts or Spotify, leave me a review. I want to know what you guys are enjoying. Let me know what you want to hear more about. I am going to be down in Birmingham this week, so if you're in the accelerator mastermind, looking forward to seeing you all there. Otherwise, I'll catch up with you next Tuesday morning. This episode of the commercial real estate investor podcast is brought to you by my cre accelerator mastermind, where you'll get access to my step by step investment blueprint, essentially a library of resources on how to invest in commercial real estate. You'll get connected to a supportive community of other commercial real estate investors that are doing projects just like you, you'll get personalized coaching and feedback from me every step of the way. Go to www.crecentral.com to learn more you.
In this episode of the Commercial Real Estate Investor Podcast, we’re breaking down the non-negotiables—the must-have criteria that every smart investor should consider before closing a deal.
From location and zoning to cash flow and environmental risks, I’m diving into the key factors that could make or break your next commercial investment. I’ll share insights straight from my own deals, plus lessons from other experienced investors, so you don’t waste time—or worse, lose money—on the wrong property.