Full transcript
0:00You know, I've just seen some things
0:02work out so well. I've also seen people
0:04do stupid stuff that, you know, [music]
0:07it's out of my control. You can get in
0:09some trouble in this business as well.
0:11So, you got to be careful. You got to be
0:12calculated. And you got to surround
0:13yourself with the right people and the
0:15right team.
0:19Welcome to Dirty Deeds. Colin Mlen's
0:22going to come talk with us today about
0:23commercial real estate. We spend a bunch
0:24of our time figuring out how to make
0:26ordinary income and great real estate
0:27investments. And over time, we start to
0:29build up money, uh, equity, capital,
0:32like all this stuff starts to happen and
0:34we get good. But the next problem is
0:35like, what do we do with that money? We
0:37all know I'm I'm into a lot of land and
0:38a lot of industrial. Colin is a broker
0:41here who I've worked with a lot, knows
0:42the South Texas market, great. Um, if
0:44you're in a different market outside of
0:46South Texas, industrial is industrial
0:48everywhere. It's really the same flavor
0:49of product. Sometimes pricing changes
0:52and little individual things change, but
0:54it's the same thing. So, Colin and I are
0:55going to talk about that today. Welcome,
0:57Colin. Thank you for having me on, man.
0:58>> No doubt. Um,
1:02real quick, tell me how you wound up in
1:03this business because nobody like comes
1:05out of high school and like, I'm going
1:06to be a commercial broker. Like,
1:08>> it doesn't happen. How'd you get here?
1:09>> And to probably a lot of your listeners
1:11points of view, I was from outside the
1:13industry as well. Um,
1:15>> I was actually in the commercial
1:16insurance business in the healthcare
1:18world. So, I sold to brokers who had,
1:20you know, they represented companies and
1:23had books of business and I would uh
1:24sell health insurance lines to them.
1:27>> My sales territory was San Antonio and
1:30so I had to be here about every other
1:31week. So, this
1:32>> You're from Houston, right?
1:33>> I'm from Houston. So, this was I'm 32
1:36now. This was 10 years ago. Um,
1:38>> bang boy. You're aging,
1:40>> dude. I know. I know. [laughter]
1:42And um really it was um it was I was 25
1:4826ish and um co hit it's really how I
1:53got into this business was really San
1:55Antonio because I started long story
1:58short I do started doing pretty well
2:00here at a young age just in sales
2:03knocking on doors you know we have a ton
2:05of universities in San Antonio but all
2:08the talent goes to Houston, Dallas or
2:10Austin. That's right.
2:11>> It's a current problem San Antonio, I
2:13think, is still dealing with. We lost
2:15AT&T. We still have Valero. We've got
2:16the USAAS of the world, but um there's
2:19not a lot of corporate headquarters here
2:20to keep talent. So, I was cold calling.
2:24I was knocking on doors and I started
2:27getting business relatively quickly. I'd
2:28call my mom and my dad, be like, "Man, I
2:30I need to move out here." I mean, it I
2:33didn't have a lot of people to go grab a
2:34beer with or go to dinner with that were
2:36my age. Um
2:37>> you know, a lot of people say, "I don't
2:39like San Antonio. I don't like this
2:40place. I don't like that place. I was
2:42willing to follow the money all the way
2:43down to South Texas and take any job I
2:44could. In the oil field, you're being
2:46smart. You're like, I'll follow the
2:47money,
2:47>> right? Like
2:48>> you can make a good life even if a town
2:49you don't love with [laughter] 100%. And
2:51a lot of
2:53>> I think people, you know, our age or my
2:55age at the time, and I mean, they waited
2:56till my age now to kind of stop [ __ ]
2:59around and and get serious about it. I
3:01didn't really care. I wanted to get
3:02ahead.
3:03>> And um and so, long story short, we're
3:06in COVID. I'm working at the house. I
3:07can't get in my truck and go see
3:09clients. And you know, I worked for a
3:10really big corporation based out of New
3:12York and Philadelphia. And um I was
3:16talking to one of my mutual buddies who
3:18knew my now two current partners, Adam
3:20and Cullen Mills. So
3:22>> Adam's a proven entrepreneur in San
3:23Antonio, Double Diamond Transport and
3:25Tanager Logistics, an assetbased
3:27trucking company and a freight brokerage
3:30company. Um and his brother-in-law,
3:31Cullen Mills, um he worked for his
3:34father's family office building tilt
3:36wall industrial from here all the way up
3:39to Cedar Park, Austin area. Um they
3:42would build spec, raise the money in
3:43house, buy the dirt, put the building
3:46up, lease it in house, and exit in house
3:48as well. So they were a full vertically
3:51integrated shop. And so when I met Adam
3:55and Cullen, and business was still great
3:57during CO, but like a lot of people
3:59during CO, your mind just starts to
4:00wander and like, man, I hadn't been back
4:02to San Antonio in a while. I'm in this
4:04house. And so Adam and Cullen um started
4:07Lo Realy Partners in 2020. Met them
4:10through a mutual contact. And when we
4:12sat down,
4:13>> they were starting this commercial real
4:15estate business, Lo Realy Partners, on
4:17the same premise as to why I wanted to
4:20move to San Antonio. They noticed
4:22complacency
4:23>> in the San Antonio market, and the I35
4:26market. A lot of leasing and sales signs
4:28that were from Austin or from Houston or
4:31from Dallas and no local presence.
4:33>> Yeah. you had a talent gap and you said,
4:34"Let's go fill that talent gap. We got a
4:36better shot to compete,"
4:37>> right? And so it was a lot. I mean, I
4:40was making good money where I was at. I
4:42I took a massive, massive pay cut, um,
4:46you know, got a little apartment, moved
4:48out here, quit my current job, took a
4:50massive step. And,
4:51>> you know, I was asking my mom, I was
4:52like, "Man, this just feels right.
4:54Should I do it?" You know, and all that.
4:56And she's like, "Man, you've got you
4:57don't have a wife. You don't have a
4:59mortgage. You don't have and you know,
5:02we got you if you fall on your feet. I I
5:04I'll support you and all that." And and
5:06so she made me feel comfortable about it
5:07as well, which helped. And um and so
5:10yeah, we took a chance and we did it.
5:12And so I say that to say, you know, and
5:16when we're hiring brokers now, fast
5:18forward, you know, six years later, it's
5:21um we like to hire from outside the
5:23industry to teach them how we do things.
5:25And um you know, you're not bringing any
5:28prior baggage with you. And sales is
5:30sales. I think I was born to be in
5:32sales. Whether you're doing health
5:33insurance or whether you're hawking
5:35commercial real estate, residential real
5:36estate, flipping land, whatever, it's a
5:38people business.
5:38>> You still Yeah, exactly. You still got
5:40to connect the deal. And um that's kind
5:43of what that's kind of how we approach
5:46things. Um and so it's not rocket
5:50science what we do, right? It's one you
5:53got to bust your ass obviously. Um
5:55that's a no-brainer. It helps to have an
5:57outgoing personality, things of that
6:00nature. But it's it's really staying
6:03organized, having a plan, knowing what
6:05you're going to do the next day. We
6:07preach organization. Like we when we
6:10hire brokers, we're like, "Look, you
6:11don't one, you don't have to know the
6:13business. We're going to teach you the
6:14business. You've got a great
6:16personality, but we're going to teach
6:17you how to be organized." And, um, I
6:20think that's a big part of it. So, uh,
6:22I've been in it five years now, and, um,
6:26it's been fun, man. It's been a lot of
6:27fun working with people like you and
6:29and, uh, I love it. And that's that's
6:32that's cool how you there's still the
6:35exact same entrepreneurial mindset of
6:37I'm leaving this. I'm going to take a
6:39>> take a shot at something much bigger. It
6:40might work. It might not. I'm young. I
6:42got no risk. Let's try it. And you look
6:44back and say what was I scared of?
6:46>> Right. Exactly. And I think probably 95%
6:49of the people don't do that.
6:52>> Even though I don't think I'm some rare
6:55commodity that, you know, I took this
6:56chance and I I don't think of myself
6:58like that. I think a ton of people could
7:01do that and have the ability to do that
7:03and to take a risk and would succeed,
7:06but not a lot of people step out and do
7:08it and do the unpopular thing. And um
7:12which is fine, you know, but it it I
7:14think a lot of people have the
7:15capability to to do something like that,
7:17but just not a lot of people do it.
7:19>> Yeah. On the entrepreneurial spirit, if
7:21if you're driven to do that, do it. If
7:22you're not, I have some best friends
7:23that are like super high up in
7:25organizations and they love that model
7:28and that's perfectly great for them.
7:29Yeah. But if something inside tells you,
7:31I want something different and it's not
7:33this. I'm going to bet on myself, then I
7:35feel like you should take the risk. And
7:37if it works, great. If it doesn't, you
7:39know it
7:39>> and you know more about yourself and you
7:40go back to where you went. People always
7:42think the downside is so much further
7:44down than it is,
7:44>> right?
7:45>> If it doesn't work, just go back and get
7:46the other job. You might go negative on
7:48your credit card a month or two. Who
7:49cares? You took a major life risk.
7:51>> Exactly. You'll go get another job,
7:52you'll be fine, right? It's okay.
7:53>> 100%.
7:54>> People miss that.
7:55>> Completely agree.
7:56>> All right. So,
7:58>> let's for folks when I say industrial,
8:00people can think of different things. I
8:01might think of a 4,000 foot building on
8:03two acres that a trucking company is
8:05leasing or owning or some people might
8:07think a Walmart distribution like a
8:09warehouse center.
8:10>> Y
8:10>> what what is what are the spectrums of
8:12it in your world?
8:14Yeah, it's um you know you you have
8:17everything from what we call you know in
8:19our office big bombers which is what you
8:21see on the the side of the highway the
8:23massive distribution centers the east
8:24groups of the world uh product that you
8:28know anywhere from 100 150 400 million
8:31square feet whatever the massive um you
8:34know tilt wall projects meaning you know
8:37concrete construction the whole nine and
8:39um then you have what you're talking
8:41about and what you know the arena that
8:43you and I both play in with regard to
8:45industrial is the class that what I was
8:47mentioning earlier was class A. We
8:49operate in the um in the class B and
8:52class C space. And when we first got in
8:55the business, there was a massive rift.
8:56There was this space that no brokers
9:00were calling on freestanding buildings
9:03with that were class B and class C. They
9:05weren't the sexiest on the street, but
9:08they were functional. They had big grade
9:09level doors. They had dock level
9:11loading. they were they had large layown
9:13yards and we started calling on that
9:16product and um kind of how we grew our
9:20market share was one basically getting
9:24on the phone with active buyers in the
9:26market from family offices to people
9:28like yourself, private equity groups,
9:31institutions, the whole nine and are you
9:34active in central Texas here, New Bron
9:36Falls, Austin, Laredo, whatever the case
9:40may be and what is your buy box? What
9:42are you buying? What are the specs? We
9:44curate a list for that. Um because when
9:47we first started the business, we only
9:49had two listings. We weren't making any
9:51money. And so, um then we started cold
9:54calling on building owners and we would
9:58connect the deal with the people that we
10:00talked to that were active buyers. We
10:02would lease those buildings that we sold
10:04and then once their hold period was up
10:07with the uh institution or the family
10:09office we sold it to, we would then
10:11hopefully exit and do a full circle.
10:13>> That's nice. You get two, three bites of
10:15that apple.
10:15>> Right. Exactly. And so, um, that's how
10:18we grew our our square footage and our,
10:20um, our basically our building count
10:24that we now represent. And we're the,
10:25you know, number one, uh, landlord rep
10:28and and, um, by number of buildings and
10:30square footage in San Antonio right now.
10:32Nice.
10:33>> And so, but um, yeah, we it's
10:37interesting when we the class B and
10:40class C space that you and I, you know,
10:42specialize in. Now it's this thing we
10:45call it's called iOS industrial outside
10:47storage which is a subset of the
10:49industrial market right um and we didn't
10:53realize when we were calling on that
10:55stuff at the time 5 years ago it wasn't
10:59there was no acronym called iOS at the
11:01time but we were natural right exactly
11:03we would call it was just
11:05>> freestanding buildings that were infill
11:07that today we could get for $100 a foot
11:10$130 a foot if we're lucky $80 or $90 $8
11:14a foot, but if you replace that building
11:16today that's inside the loop on 410 or
11:18inside the loop on 1604, it's $275 a
11:22foot [snorts]
11:22>> and they're extremely leasable, right?
11:24And so that that was our thesis and that
11:28was Cullen's thesis, my my partner and
11:30our principal broker and uh who taught
11:33me a lot of this and a lot of the
11:34fundamentals and the economics of it.
11:36Shout out to him. And um and that was
11:39our theory on on what we so that's what
11:41we play in the class B class C which is
11:441980s you know 1990s sometimes7s vintage
11:48stuff um and early 2000s as well but we
11:52you know we're not doing a ton of the
11:54massive tilt wall
11:56>> leasing um like the streams or
11:58>> that's a much longer leasing cycle a
12:00much bigger bite that's just
12:03>> that's elephant hunting
12:04>> right
12:04>> and you know what happens in I say this
12:06all the time to people. You know what
12:07happens in between elephant hunts?
12:08Sometimes your tribe starves and dies.
12:10[laughter] If you miss that next
12:11elephant,
12:12>> everybody's dying,
12:13>> right?
12:14>> So like eating some pheasant along the
12:15way is a good idea, but you can also
12:16feed the whole tribe on
12:18>> Exactly. Exactly. And depending on the
12:19economic cycle, you know, those those
12:22tilt wall buildings go like this.
12:24They're very large operators that
12:26>> a lot of things have to connect on their
12:28operation side to, you know, to commit
12:30to a 75,000
12:33foot lease, things like that. So, um,
12:35obviously we as a market, we need that
12:38stuff to lease in those large operators
12:40here because that brings vendors,
12:42suppliers, etc. that lease buildings
12:44like ours, right?
12:46>> Um, but yeah, there's there is a massive
12:49market in the arena that that you play
12:51in, that we play in, and it's um, it's
12:56been awesome, man. It's been awesome.
12:59Let's
13:00>> you talk you talked about the economics
13:01for a minute. So, let's talk about that
13:02because people in our business look at
13:04price a lot of times up front to assess
13:06their risk. Yep.
13:07>> Should I continue further?
13:09>> You guys looked at it and said, "Okay,
13:10it can cost you $2 to $300 a foot to buy
13:13the land and build this in in the
13:14Interloop, for example." But that's
13:15common in a lot of big cities like
13:17similar economics. Well, wait a second.
13:19I can buy a 1980s building that's red
13:23iron concrete foundation, maybe a little
13:26office that might only cost 10 to
13:28$40,000 remodel, right? I can get that
13:30for a third or half that,
13:31>> right?
13:31>> Hold on a minute. There's an opportunity
13:33here. And when the rent rates,
13:35>> they differ from an older building to a
13:37newer building, but it's not the same
13:39swing as the cost to build it. So, you
13:40say if the rent rates could be somewhere
13:41in the middle, holy cow, these older
13:43buildings have a lot of upside.
13:44>> You're 100% correct. It's like
13:47>> it's it's interesting. Cullen Mills, our
13:50principal broker, and his father, uh,
13:52Ron Mills, rest in peace, he said
13:54something that has always stuck with me.
13:56He goes,
13:57>> "If you know what it leases for or if
13:59you can lease it,
14:01>> you can back into anything. Y
14:03>> if you know what income it can produce,
14:05and it sounds cliche. It's a very simple
14:08>> thing to say, but it's so true. What's
14:09the first thing that you ask yourself
14:11when you go look at a building on, you
14:13know, anywhere here or Houston or what
14:15is it going to lease for? What's the
14:16income?" And then we can back
14:18>> ask, is it already lease? Because that's
14:19my favorite. Right.
14:20>> Second question is, what will it lease
14:22for?
14:23>> Exly. Exactly. And uh and but it's
14:25great. Some people love vacancy as well
14:28and uh because they get an immediate
14:29value ad, but um it's 100% correct. Once
14:34you know what something leases for, you
14:36realize
14:37if you come across a seller that
14:41every situation's different, every
14:43deal's different in this business. It's
14:44part of why the reason why it's so fun.
14:46But when you know the income a building
14:48can produce, you know a good deal on the
14:51purchase side when you come across one.
14:53And you just got to be diligent and
14:54patient about it. And it is always going
14:58to be, if you're talking about what
15:00we're talking about, [snorts] infill
15:03product, standalone in a proven market,
15:07it's
15:07>> going to be more than doubled to replace
15:09that building. Um, and it's going to
15:11bring in,
15:12>> you know, if it's Turbo, for instance,
15:154,000 on, you know, 75 acres, I mean,
15:17that's going to bring in $13 net on
15:20that, you know, and it's it's a great
15:22asset to own. you put a 5-year lease in
15:24there, your options are open on what you
15:26want to do. You could sell it with a
15:28year left on the lease and someone that
15:29wants to come in and mark to market it
15:31and or you could sell it after your five
15:33years vacant to an owner user. I mean,
15:36it's the world's kind of your oyster at
15:38that point. If you find those
15:39opportunities rather than your other
15:42>> your other option is going to find dirt
15:44that's outside the MSA or trying to find
15:48going to,
15:49>> you know, OCL, which can work. it it can
15:52work in different markets, you know, and
15:55um I'm not saying that's a that's a bad
15:58strategy, but uh for you know, a lot of
16:00your listeners, for people like me, for
16:02a lot of the people that we send deals
16:04to from the institutions on downward,
16:07they like existing um for this reason.
16:10It's safe. So,
16:12>> yes, I know these real estate stories
16:14are crazy. And yes, I do have a coaching
16:16program where a lot of these folks have
16:19built a business or revived their own.
16:21Look, do these testimonials sound like
16:23something that you want to be your
16:24story? Look, it is possible. If you're
16:26ready or you think you're ready, why
16:27don't you listen to the video and at
16:28least find out if it's for you. It's
16:30linked down in the comments in this
16:32episode. So, go check it out. You know
16:34what? I think folks would want to hear
16:36this. So, let's like work backwards. So,
16:39we say these things at a very high level
16:40and I'm in it. You're in it. You know
16:42it. But some of these people are not.
16:43So, let's underwrite a 10,000 foot
16:45building in this market and work our way
16:47backwards real quick. You can work your
16:48way forwards or backwards on this with a
16:51couple different questions.
16:52>> So, let's say it's 10,000 square foot.
16:55Let's say in this market that should be
16:57worth 100 to 150 bucks a foot depending
17:00on the condition.
17:01>> Let's say it's on a on two acres.
17:03>> Okay, 10,000 square foot on two acres.
17:07That's worth 150 a square foot. Well,
17:10immediately I just say a simple number.
17:13It it it keeps it always like lands back
17:15at this is 10 bucks a foot a year.
17:17That's like a real round number.
17:19>> So, let's just say 10 a square foot a
17:22year. And some of these guys don't know
17:24a net lease means the tenant pays all of
17:26his bills, taxes, insurance,
17:28maintenance, whatever, and sends me a
17:29net check.
17:30>> So, with a rent house, if I collect
17:32$1,000 a month as a landlord, the
17:34landlord pays taxes, insurance,
17:35maintenance, and gets to keep a couple
17:37hundred dollars after maybe paying the
17:38mortgage.
17:39>> Right? In this case, the property tenant
17:43just pays the couple hundred straight to
17:44me.
17:45>> Yes. You're passing through property
17:47taxes, property insurance, maintenance,
17:50you know, landscaping, the whole nine,
17:51which is awesome.
17:53>> So, your base rent is complete profit,
17:54>> right? So, if property taxes go up or
17:56down, the rent house guy gets squeezed.
17:58For me, that's up to the tenant. Now, it
17:59could affect his financials. It's a
18:01different situation. Correct.
18:02>> But, I'm getting 10 grand a month or
18:04$8,300 a month or whatever it is, and
18:06that's what the deal is. And I know what
18:07I'm counting on. I don't have to fool
18:08with the other management, which means
18:10it's easier to manage.
18:11>> Y
18:11>> So, let's just say 10,000 square foot
18:15times 10 bucks a square foot a year.
18:16That means you're getting a h 100red
18:17grand a month or 100 grand a year in
18:20rent.
18:21>> Um divide that by 12. That's 8,300
18:25>> a month. You're collecting $8,300. So
18:27now, how much should we pay for that
18:30building?
18:31>> Right?
18:32>> Depends on your discipline level.
18:33Depends on what kind of return you want.
18:34Depends on if you're using debt.
18:35>> Yep.
18:36>> So, let's do it this way. %
18:37>> usually these days I'll put down a third
18:39something like that.
18:40>> So let's say on a
18:41>> 30% yeah
18:42>> so let's just say it's 10,000 square
18:44foot for simple numbers let's say it's
18:46worth a million bucks 10,000 foot at
18:48$100 a foot it's a million that might be
18:50a little light on the value let's just I
18:52don't know let's go 125 1.25 million
18:56so it's 1.25 25 million and let's say
19:0012500.
19:02Um, that's it fair market value,
19:06but I might want to get that thing for I
19:10don't know if I can get it for let's say
19:11a million, how does that look? So, if
19:14it's 10,000 foot and we're collecting
19:17$10,000 a month in rent or 10,000
19:21>> $100,000 a year.
19:23>> Yeah. On a million dollar purchase,
19:24that's basically a 10 cap.
19:26>> Yes. So, if I put [snorts] 300 grand
19:29down and finance 700, I got 300 out of
19:32pocket and I'm collecting a hundred
19:34grand a year and my debt service on that
19:36600 grand is going to be five or six
19:38thousand a month, I'll probably cash
19:40flow three to $4,000 a month on that
19:43asset and I'm getting a big old tax
19:46>> depreciation lump
19:47>> on the million and we might depreciate
19:50two 300. I got a $300,000 depreciation
19:52hit. That's the money I put in.
19:53>> Exactly. So, I'm either giving it to the
19:54IRS or going to give it to the bank as a
19:57down payment or the seller as a down
19:59payment. And now I'm saving on taxes.
20:01But I also I'm cash flowing. If you put
20:04down 300 grand and you're cash flowing,
20:07>> I don't know 3K a month, that's a what
20:11is that 10% return on your cash.
20:14>> The tenants paying your mortgage down.
20:16>> Yep.
20:16>> And then you're going to bring your rent
20:17rate up 2 to 4% a year.
20:19>> A year. Yep.
20:20>> So, the investment looks pretty good in
20:22the beginning. Yep.
20:23>> But I usually tell people you don't need
20:27to lose money in the beginning. You need
20:28to have some cash flow. But where it
20:29really starts to look good is in five
20:30years and 10 years. Holy moly.
20:33>> Yeah.
20:34>> Like what what is 3% if it's not
20:37compounding on itself? 3% times 5 years.
20:40That's a 15% lift without compounding on
20:42itself.
20:44>> Yeah.
20:44>> So you went from $100,000 a year to
20:46115,000 a year.
20:48>> Exactly.
20:48>> And your mortgage is smaller.
20:50>> Right. And if you, you know, if you're
20:51in year seven, say you did a five-year
20:53deal, you retened it, or you just
20:56renewed that tenant for another five
20:57years, uh, obviously the lowcost option
20:59there. But, um, you know, if you want to
21:02go buy another building, you know, you
21:04go meet with your bank, where am I at on
21:05my depending on your lending terms that
21:07you have, you go refinance that thing,
21:09cash out, go buy another one.
21:11>> And that's how you really
21:13>> start to kind of build a portfolio, an
21:16empire, and and the whole nine. Um, over
21:18and over and over. So you can use the
21:21time that you own that building, not
21:22only depreciation, but if you if you
21:25want to commit to it and build a
21:27portfolio and to like you're saying, buy
21:29another building, get another 3,000 net
21:32profit a month, you're at 6,000 and then
21:34you
21:35>> you know, you rinse and repeat
21:36basically. Um obviously you got to find
21:38the deals and source the deals, but um
21:40>> so let's talk about that. So's over
21:42there, you know, sending some emails,
21:44taking some calls with his boots kicked
21:46back on his desk. And one of our
21:47listeners just did a whopper deal, made
21:50himself 200 grand, and he says, "If I
21:52put 200 grand down, I can buy a $600
21:54700,000 warehouse." What's their first
21:56step? What do they do?
21:59They
22:01So, I would Yeah, I I would probably go
22:04meet with a good commercial lender. Um,
22:07I would have that conversation with them
22:09just to make sure they're ironed out on
22:10that side.
22:12>> Make sure they even get a loan.
22:13>> Right. Exactly. 100%. And then it
22:16depends on what you It depends on what
22:19your appetite is, right? I mean, a lot
22:22of people that I would maybe go talk to
22:25a commercial broker potentially, you
22:27know, someone like me or or otherwise or
22:30they could start sourcing deals direct.
22:32I mean, the great part about commercial
22:34real estate is everything we do is
22:36pretty much public knowledge, right?
22:38We're a non-disclosure state on the comp
22:40side of things and things like that, but
22:42you can go on LoopNet and start doing
22:45this thing. I mean, go on LoopNet, find
22:47addresses, go to your county CAD, find
22:49the entity that's on the address, then
22:51go to taxable entity search, find the
22:53individual's name.
22:55>> Now you're start Yeah. Now you're Now
22:57we're now we're now we're drilling down
22:58talking to it. [laughter] And uh and so
23:01that um you know, you basically follow
23:03those three steps. You do research on
23:05that person. Hopefully, you find a phone
23:06number and then you that's the dirty
23:09part of this game. And that's why you
23:11know, we talk about it like it's easy
23:13and
23:14>> that's the hard work.
23:15>> That's the hard part of it. It's it is
23:17easy from an economic standpoint. Like I
23:19said, it's not this business is not
23:21rocket science, but if you want to find
23:23good deals, it's going to take
23:24discipline, hard work, and it's going to
23:26take organization, which I think you do
23:28a really good good job of teaching at
23:30with, you know, you're waking up early
23:31and and being very disciplined in your
23:33approach. Like for someone like me, um,
23:36I start working on what I at 4:00 every
23:40day, I start working on what I'm going
23:42to be calling on the next day. kind of
23:45when things slow down a little bit, I
23:47can respond to a few emails and then
23:48start doing research on, okay, this
23:51pocket right here of buildings, it's a
23:52great pocket. They're very functional.
23:54If I could peel off one or two, I can
23:57connect the deal 100%. And um and so
24:00that's what I start working on. And
24:02because it
24:04it's not whether you're an owner that
24:06wants to start calling on buildings
24:08direct, whether you're a broker that you
24:10know is calling on buildings to send to
24:12someone like you who wants to buy them
24:13or one of your listeners who wants to
24:15buy them. It's um it it takes a lot of
24:19discipline and uh because it it's not a
24:22power dial
24:23>> deal. This is not a you know
24:26telemarketing I guess is what they call
24:27it. You've got to be
24:29>> you've got to create value when you're
24:31cold calling on these people. Like we
24:33before I cold call in a pocket, I look
24:35at what I've done prior around that
24:38building. So when I call that owner,
24:39hey, a few blocks down from you, I just
24:41leased, you know, Logan Fulmer's
24:43building for $13 a foot. And so then
24:46they're like, oh, okay. So this guy's
24:48not he's actually providing some value
24:50here. Even if I don't want to sell to
24:53him right now, um I still want to know
24:55what he has to say. And then trust is
24:58gained over time. And cuz it's it's
25:01rare. I mean, you got to be disciplined.
25:03It's rare that you know, you call
25:04someone, they're ready to sell uh sell
25:06ASAP and and it's just not that kind of
25:08business. And uh
25:10>> had a couple of those happen, but it's
25:12rare. I mean, it it you catch them in 3
25:14months or 6 months or they call you back
25:16and you put them in your CRM or whatever
25:18your system is and you just stay
25:20consistent with it every quarter calling
25:22them, checking in. Mhm.
25:24>> Um, and so that's really where the
25:28rubber meets the road and where the
25:29challenging part of our business is. So
25:32to answer your question, I didn't mean
25:34to ramble, but to answer your question,
25:36I it it depends on how much time and how
25:41much effort and and how organized, you
25:43know, whatever certain listener it is
25:45that wants to get into the game. Um, it
25:49depends on what they want to do, right?
25:50I mean the
25:51>> I'll tell you what I don't care what
25:53they want to do they better have a
25:54relationship with brokers right
25:56>> we were so used to soul sourcing doing
25:58everything on our own in the other part
25:59of our real estate world and when we
26:01started doing some commercial deals we
26:02realized we don't have information we
26:04don't have institutional knowledge about
26:06the market there's so much we don't know
26:08and I think their first industrial deal
26:10was in Dallas and I remember thinking I
26:13don't know this information what are we
26:15going to do we don't have time to learn
26:16it just call a broker and I remember one
26:17of the partners was like we're going to
26:18have to pay him all this money I'm like
26:19I don't care we got a smoking deal. We
26:21got to figure out what to do with it.
26:22No.
26:22>> Right. [clears throat]
26:24>> It was on Highway 16 on the way to
26:25Bandera.
26:26>> Okay.
26:27>> Uh it was a 4,000T building on one acre.
26:29Bought it for 50 grand. Sold it for
26:30$450,000.
26:32I knew we were in it for a smoking deal,
26:34but I didn't know Jack. Actually, we
26:35paid 20,000 and spent 30 cleaning it up,
26:37>> right?
26:38>> I didn't know anything, but I called a
26:39broker. Tax office said it was worth
26:41$250,000. I'm like, "Dude, we're going
26:42to kill it." When I called this broker
26:44who one of the guys in my office knew,
26:46he went and looked at it and said, "I
26:47think you can get like 400 to 500
26:49grand." And I'm like, "What?" The point
26:52is, whether you're going to go through
26:54the broker to buy the thing, you're
26:56going to need them to lease the thing,
26:57or when it comes time to sell, don't be
26:59an idiot and try to sell that yourself.
27:00If you've got a good deal on the front
27:02end and it makes sense, call an expert
27:04to deal with that. You're going to be
27:06>> It's going to cost you more to learn the
27:08hard way than it will be to call someone
27:09like you. So, you better get a
27:10relationship quick.
27:11>> Yes. Exactly. I mean, this is a fun
27:13game. It's a
27:14>> But it can make you a lot of money.
27:16Yeah. It can make a you a lot of money.
27:18It's a phenomenal way. Like, you know,
27:21you were telling me a lot of your
27:22listeners have, you know, they've
27:23already made their their net worth's
27:25already really solid and and you know,
27:27high W2 employees. They've they're
27:29trying to just get into real estate
27:30maybe as a you know, ongoing cash flow
27:33value ad to their current, you know,
27:35portfolios or whatever. And um but it is
27:38a it's a risky ball game and you've got
27:41to be
27:43you've if I was buying a building on my
27:45own, I'm an LP in a lot of different
27:47buildings, but if I'm buying a building
27:48on my own, I want to use, you know, my
27:51brokers that I have up at up at my
27:53office because I I trust them. They know
27:56the market. I've seen too many things go
27:59south in this world with owners that
28:03have just that have lost a lot where
28:05they can keep their you know you can
28:07keep your house and you keep a personal
28:09vehicle. It's called chapter 11
28:11>> and this game will eat you up if you
28:13don't
28:14>> if you're if you're just yeah like you
28:16said calculate your risk. Use a broker.
28:19Um, and certainly things have worked
28:23out, you know, with people not using
28:24them or whatever. But, um, I I'm always
28:27open like I tell people, you know, if
28:29you called me and just wanted a opinion
28:31on a building,
28:32>> yeah,
28:33>> I'm going [clears throat] to give you my
28:35opinion on it. Just market knowledge in
28:36general. I mean, that's what brokers are
28:38are for. Um, so I completely agree to
28:41that point on that.
28:43>> I just thought about something. So, you
28:45kind of touched on people soul sourcing
28:47and then you talked about when y'all
28:48were looking at this market, y'all did
28:49the work to connect the buyers and the
28:51sellers. Do you recall how I got
28:53connected y'all's company?
28:54>> Yes.
28:55>> One of y'all's guys was cold calling
28:57sellers and I bought this warehouse on G
28:59Street. It was worth somewhere between
29:01two and a half and four million. I
29:03didn't know, but the owner had tax
29:05issues. He was an alcoholic. He wasn't
29:07paying his bills. He had a tenant in
29:08there that had 50 truckloads of trash
29:11and he was a year behind on rent. I
29:13bought it from him. Actually, I tried to
29:15buy it from him for a million. We got
29:17close and then I was his lawyer looked
29:20me up on the internet and was like,
29:22"This guy is like latigious and he's
29:24aggressive. Don't sell to him." I'm
29:25like, "Crap." I had one of my other
29:27partners call him a couple weeks later.
29:30New guy, new face, more or less the
29:32same. We ended up settling on a million
29:33and a half because I knew it was such a
29:34good deal. I'll pay more. Let's just get
29:35it done.
29:36>> And we're hauling trash out. We evicted
29:39this tenant. It was kind of a three or
29:40four month process.
29:41>> Yeah.
29:4225,000 square foot building on three or
29:44four acres of the well. And then one of
29:46y'all's guys called like, "Hey, I think
29:47I know someone who wants your building."
29:48I'm like, "How great is this?"
29:51>> Yeah.
29:52>> Long story short, they ended up buying I
29:53think it was 3.2 or 3.4 million. Just
29:56about doubled our money.
29:59>> We did it in I remember going through
30:01this process saying, "Do we sell it now?
30:02Do we lease it?" And I remember
30:04thinking,
30:06"Oh, it took us several months to get
30:07going." It was 370 days. So, we were
30:10capital gains. We didn't pay ordinary
30:11income
30:13>> and that's how we met. He was connecting
30:14the buyer seller market.
30:16>> Yeah.
30:16>> And he was literally the first pig to
30:18the trough. I was like these [ __ ]
30:19guys.
30:20>> That's how we first that's how we first
30:21met. And this actually comes full circle
30:24>> cuz we just sold it again with the
30:25building behind it and package. Yeah. So
30:28really
30:28>> the guy we brought to that deal, his
30:30name's uh Chris Cotton out of out of
30:32Fort Worth. And um we
30:35>> we called on the building behind it uh
30:37Bill Morris. Capital Glass.
30:39>> Yeah. The glass company.
30:40>> And Yes. Exactly. And um
30:42>> I love that
30:43>> we ended up getting that deal for a
30:44pretty Oh, it's a great pocket. And um
30:46we ended up getting that deal at a under
30:48contract at a pretty good basis.
30:50Obviously,
30:52>> being a broker, I was like, "Hey, I'm
30:53going to send this to Chris. He's got
30:54the neighboring property because I
30:56already had something formulated in my
30:57mind of what I want to do if we got the
30:59building behind Chris's at a good
31:02basis." So Chris locked it up, put it
31:05under contract.
31:07We wholesaliled both to an institution
31:11out of Philadelphia. Um
31:12>> $4 dollars in one shot, stable tenants,
31:15good rents, good quality. I mean, it's
31:17an older product, but it's nice. Like
31:18>> Yeah. So, we actually
31:21>> cuz when we went under contract with you
31:23back at this was 2022, right?
31:25>> Yeah.
31:25>> 2022ish.
31:27>> Um while we were under contract, we put
31:30uh foundation support specialists
31:31groundworks in the building while we
31:33were under contract.
31:35Bill was going to be moving out upon
31:36closing. So, it was Chris liked it
31:40because it was a good basis even though
31:41it was vacant. You know, 30,000 ft on
31:44three and a half acres, 18 ft doors. I
31:48mean, 25 foot clear.
31:50>> The building's going to lease completely
31:51pass through. Awesome building. And um
31:55>> he knew he knew the building was going
31:56to lease. He was comfortable going under
31:59contract on it. But um when we
32:03wholesaliled it to that institution,
32:06what was good with them is they had
32:08groundworks on a 7-year deal. They were
32:10four years into their seven-year deal.
32:12So they still had it's a national credit
32:13tenant locations all over the country.
32:16So you have a cash flow. You know,
32:17you're good on that one. And then you
32:19can so you can hedge with the
32:20Groundworks building. And then your
32:23value ad immediate to your investors is
32:25the vacant building. and we leased it a
32:27week after closing, which is it ended up
32:30being a killer
32:31>> deal. And it was funny how I was coming
32:33on this podcast because [laughter] that
32:35closed in I think it was closed a month
32:36ago or something, but I was just like
32:38that whole thing. It's just crazy how
32:40this business works and how the cycles
32:42work. Um,
32:44>> it just it came full circle, you know,
32:46now that I'm I'm here and and all that.
32:48So, it's um
32:50>> So, yeah, you know what? Let's talk
32:52about that deal for a minute because
32:52people always want to know the numbers.
32:54What's that look like, right?
32:55>> So, I remember buying it. I think it was
32:561.5 or 1.7, something like that. Sell it
33:01for 3.2 to 3.5, I don't recall. More or
33:04less double the money.
33:04>> Yeah,
33:05>> I think y'all lease that, if I recall,
33:06for $10 a foot. Is that right?
33:08>> $1044 net.
33:10>> Okay. So, that's uh 25,000 foot. So,
33:12it's 250k a year in net rents, more or
33:15less.
33:15>> Yeah.
33:16>> So, at the time, like we're building
33:18capital, you know, our business is
33:20really growing, but like I mean, I got
33:22to pocket like a million and a half or
33:23million and a quarter bucks. That's a
33:24hell of a one shot deal.
33:26>> It it's a zerorisk deal for you as well.
33:28And that's what Chris liked about the
33:30the down leg on this whole thing that I
33:32was just explaining too. He's like,
33:33"Well, I could keep it and lease it, you
33:37know, but you got to fix up the office
33:39leasing commissions. Here's a guy that's
33:41basically coming in. He right, you know,
33:43he, you know, he made a lot of money on
33:45that, but um it's zero risk." So,
33:47>> so if my basis was 17 or5
33:50>> Yeah. And at least for 250. I might have
33:52spent a little money on it to clean it
33:54up, but I'm going to ignore that.
33:56>> That's a 14.7% return.
33:59>> Yeah.
34:00>> On cash.
34:00>> Yeah,
34:01>> that's crazy. Now,
34:02>> cash on cash returns. It's crazy.
34:03>> If that That's incredible deal. If that
34:06deal would come across my desk today, I
34:08would not sell it. I would put down 500
34:11grand, finance a million. So, I'd get a
34:13little juice on the leverage, but but
34:15put some money down so the bank would
34:16like it and cash flow like a son of a
34:18gun. And I would give that to my kids
34:20when I kick their bucket and they will
34:22pay their kids tuition with it. Like get
34:23the [ __ ] out of here.
34:24>> Yeah, I know. I know. It's [laughter] uh
34:28it's different strokes for different
34:29folks, you know, and it's the beautiful
34:31part about this business is it's
34:32another, you know, like Chris used all
34:34that money on the on the flip of the two
34:37buildings to the institution. He went
34:38and I think he went and bought RV parks
34:41out in uh Abalene for the um for the
34:44data center stuff that's going on out
34:46there. Yeah, they're building a bunch of
34:47data centers and um so it you know he so
34:52that my point is it's depending on what
34:54your business plan is there's a lot of
34:56ways to go. There's two, three, four
34:58different ways you can take things and
35:01depending on what your situation is,
35:03right?
35:03>> Because so many people in real estate,
35:04they look at like house building and
35:07wholesaling and renting and all these
35:09different things, development, whatever.
35:11So I kind of see these
35:14these aren't 100,000. These are like
35:1650,000 and less square foot buildings,
35:18usually single or maybe a couple bays,
35:20but I see kind of three different
35:22distinct ways. And I've looked at all of
35:23them to ask myself what's the best
35:24answer. And interestingly enough, it
35:25changes over time and what my goals are.
35:27>> But I would say you can buy dirt and
35:28build the building and lease it and keep
35:30it. You can do that and sell it. So it's
35:32basically development. Y
35:33>> another one is like the value ad. You
35:35buy something and need to get a better
35:36tenant or fix it up or just raise rent
35:38or whatever. That's the value ad.
35:40>> Um and then the other one is buying
35:41something that's more or less
35:43stabilized.
35:44>> Yeah. You're going to make probably the
35:45most amount of money doing development.
35:48Middle of the road or you can make as
35:50much on the value ad and reposition.
35:53>> Yep.
35:54>> And the stabilized one means you're
35:56going to have to pay more because it's
35:57less work. Those are the three different
35:59ways I kind of see I guess.
36:00>> Yeah.
36:02>> And in the beginning, value add and
36:04possibly development. I decided
36:05development wasn't the answer because
36:06it's just it's more work than I wanted
36:08to do.
36:09>> But if a building's already standing, I
36:11can clean it up a lot easier.
36:12>> Exactly.
36:13>> I liked that.
36:13>> Cheaper. Yeah.
36:14>> Yeah.
36:15>> And usually shorter timeline.
36:17>> Yeah.
36:17>> Because otherwise you're paying debt
36:19service and taxes and all these
36:20expenses.
36:21>> Yeah.
36:21>> I'm getting to the point today where I
36:23want a lot less value ad.
36:24>> Yeah.
36:25>> Um and now it's just something
36:28>> maybe I can raise the rents. Maybe I got
36:29a good tenant. Maybe I'm getting eight
36:31or nine cap. I'll take that instead of
36:33having to go for like
36:35>> one of the deals I'm working on now. I
36:36had to do drainage, a new concrete
36:38parking lot, had to demolish part of the
36:40building. I'm like, what the [ __ ] am I
36:42doing? Like I'm over me or one of the
36:43guys from my office is stop my mother
36:45every day to do something. I'm like no
36:47way. I'm done.
36:47>> Right. 100%. [laughter]
36:48>> I'm done with that.
36:50>> Yeah. Like I I personally like more
36:53stabilized deals um or you know deals
36:57with three to four years left on the on
36:59the lease and then you kind of decide
37:02what to do there depending on how
37:04leasable the building is and where
37:05you're at you know with your bank,
37:07things like that, where you bought it at
37:08originally. Everything that we've talked
37:10about before. Um, which is where you
37:13know on the middle tunch that you said
37:15you're you know your value ad where
37:17you're maybe you're buying a v building
37:20vacant which is immediate value ad or
37:22there's one year left on the lease or 18
37:23months left on the lease and that that
37:25lease is three $4 below market and you
37:28know it.
37:28>> Yeah.
37:28>> But you know that tenant might be moving
37:30out. So you could deal with six n 12
37:32months of vacancy and which is it's
37:35risky risky business. It is what it is.
37:37There's carry costs of this stuff. Um,
37:40and like it's not always pretty all the
37:43time, but um, depending on
37:47there's just basically so with the
37:50middle trunch, the value ad deals where
37:52there's 12 18 months left on the lease.
37:56That's when to your point and what you
37:58teach a lot of your listeners basis is
38:01extremely important. Run your sales
38:03comps. You got to know the downside
38:06risk, right? It's like, hey, if I lose
38:10on this deal, I'm gonna lose $30,000.
38:12You got to know if things go if the
38:14market goes to [ __ ] you know,
38:16Armageddon, the whole whatever the case
38:18may be. If another pandemic, whatever it
38:20is, um if there's a cataclysmic shift in
38:24the market, I'm going to my downside
38:26risk is this. And that's when buying
38:28buildings on a good basis is important.
38:30Whether that's 120 a foot depending on
38:33the subset of the industrial uh of the
38:35industrial asset class or 80 90 a foot
38:39or 60 $70 a foot some of the deals
38:42you've sourced which is
38:43>> amazing um on the value ad side middle
38:46tranchunch basis is going to be
38:48important because it protects downside
38:50risk
38:52stabilize it's the less risky of the
38:54three you mentioned to your point it's
38:57>> I like stabilized deals I really like
38:59value ad deals at a good basis. Anything
39:02around $100 a foot, I'm pretty
39:03comfortable with. When it gets up to
39:05130, 140, granted depends on the
39:08building, how much land, the whole nine.
39:10But in general, um, on a value ad play,
39:14when that basis gets more expensive, it
39:17gets a lot more risky. And so, um, you
39:21know, I got no problem with 120 or 130
39:23with the good credit tenant. Five, seven
39:25years left on the lease and then,
39:27>> yeah, stable
39:27>> two years left. you, like I said
39:29earlier, the world's your oyster on what
39:31you want to do. Whether depending on
39:32your debt situation or refinance, is the
39:35tenant going to renew. That's great. If
39:36they're going to renew, what rate are
39:37they going to renew at? Is this building
39:40right off 410 and I35 where a plumbing
39:43company can come in and pay $225 a foot
39:46for it?
39:47>> Because an owner user doesn't care as
39:49much about capital markets, interest
39:51rates.
39:52>> Can I run my business and pay this bill
39:54and be good? they it's completely
39:56detached from the rest of the mechanics
39:59of the commercial real estate um
40:02equation
40:02>> 100% 100%. And so if you know you've got
40:06a very functional building that has a
40:08lot of parking and it's got good access
40:10and you've made your money on the
40:12leasing and
40:14>> you can pay the carry cost for six to
40:15nine months, it is 1,000% worth the risk
40:18if your plan is to exit. Depends on each
40:21person's got a different strategy. Each
40:23of your listeners have a different, you
40:24know, situation and what they're trying
40:25to accomplish, but it's 1,000% worth the
40:28risk of uh selling it to an operator
40:30that's going to come in there and
40:31doesn't care about the basis.
40:33>> So, one way to manage your risk is can I
40:34liquidate and get out and not lose money
40:36or lose a small enough to where it won't
40:38take me down? Did I not personally
40:39guarantee the loan? That's like your
40:41worst case scenario,
40:42>> right?
40:42>> Another way I look at this is sometimes
40:44I could go to a bigger asset, 5 million
40:46or $10 million. But when I can get,
40:48example, the one y'all have listed for
40:50me now, it's like 10,000 foot on a half
40:52acre maybe.
40:52>> Yeah.
40:53>> All in that thing, I'll be in it for
40:54like 900,000. We did maybe a million. I
40:57did 300,000 400,000 down and finance
41:00five or 600 grand, something like that.
41:02So the debt service is like 3 4,000
41:04bucks a month. I want it to lease
41:06because I don't want to have to pay out
41:07of pocket. But there is no world in
41:09which me having to pay $4,000 a month
41:11mortgage while it sits vacant is going
41:12to change my life. I don't even notice
41:14it. It's a blip on the radar,
41:15>> right? So, I don't even have to
41:16liquidate. I'll just pay the damn
41:18mortgage until the tenant shows up, even
41:19if it takes a year. Now, I'm going to be
41:20pissed if it takes a year. Yeah.
41:21>> But I can do it. My kids are still
41:23paying their tuition. We're still going
41:24to vacation, right?
41:25>> And nobody's missing any meals.
41:27>> Exactly.
41:27>> So, for me, the downside risk there has
41:29gotten so low. I say, "Do the deal."
41:30Even though it took me six months longer
41:32to finish the building,
41:33>> [ __ ]
41:34>> Yeah. And you're underwriting deals the
41:35right way, right? And and your your
41:37listeners need to underwrite deals the
41:39right way as well. and they need to
41:41calculate those carry costs and
41:43depending because there's a lot of
41:44there's a lot of vacancy
41:46>> across the corridor right now in central
41:48Texas. I mean, there's a lot of vacancy
41:49in San Antonio. There's a lot of vacancy
41:51in Austin. Um
41:52>> yeah, talk about the market for a
41:54minute. Like what what's going on market
41:55here?
41:57>> There's a lot of vacancy. Yeah, it's um
42:00>> there's a lot of vacancy. you know, back
42:02when you and I started working with you,
42:03it was 3 and a half to 5% fluctuating
42:06between that and the tilt wall buildings
42:09were going nuts and and I think um I
42:12think part of the reason
42:14>> the vacancy factor right now the large
42:16amount of vacancies due to to over
42:18supply and and overdevelopment I think
42:20from a lot of the institutions. So it
42:22gets watered down um a little bit, but
42:25um man, I just think that it's funny the
42:28last three months leasing in the iOS
42:31space has gone nuts. It's gone haywire.
42:34I mean, in that in that in that um
42:37example that you um laid out earlier,
42:4010,000 ft on two acres. We did a deal in
42:43New Bronals off I35. We got uh we got
42:471750 a foot net on that. Yeah, it was u
42:51it was 10,000 ft on 2.68 acres. Yeah.
42:54>> Retail real estate price.
42:55>> It's crazy. You know, on on G Street,
42:57what we uh you know, we got in the 15
42:59net on that behind the building. Yeah.
43:02So,
43:03>> but for for the last man, for the last
43:0724 months,
43:08>> those are super premium like location.
43:10>> They are. It's premium locations. It's
43:11it's iOS. So, you know, meaning that the
43:15F, the Florida area ratio, I think to
43:18your listeners is important. that's
43:19looking at any industrial like right now
43:22and and we think going forward the next
43:24five to to 10 years your tenant pool on
43:27stuff where your F meaning the Florida
43:29area ratio the the size of the building
43:32compared to the lot that it sits on is
43:3525% or less um on
43:37>> so you want you want a 10,000 foot
43:39building and a four uh 40,000 square
43:42foot site.
43:43>> Yeah.
43:43>> So 10,000 foot building on one acre or
43:455,000 square foot on half an acre.
43:48>> Right. Right. Our our litmus test is 25%
43:52or less. Right. And we
43:55>> more parking, more lay down yard, the
43:58bigger doors you can get, the better.
44:00But the tenant pool for that right now
44:02and this the housing bill just passed
44:04and there's going to be a lot of
44:05building material companies. this data
44:07center craze, the you know, the
44:10logistics industry is still in the in
44:12the gutter a little bit, but um as far
44:15as what how central Texas is growing
44:19from kind of a macroeconomic standpoint,
44:22these sites are leasing like hot cakes.
44:24And um but I will say I mean to your
44:27original question last 24 months I mean
44:30you know we had the election to then the
44:34tariffs
44:35>> and now the Iran thing hasn't stopped in
44:38months and we don't know when that's
44:40going to stop and the 10ear treasury
44:41>> stopped every week now.
44:42>> Yeah. Right. And so every you know I'm
44:44on Twitter you know one hour then it
44:46stopped. We're on a ceasefire and then
44:47the next hour they're bombing each other
44:49again or whatever. But um the 10-year
44:51Treasury's up, interest rates are coming
44:54up. We thought potentially they could
44:56come down um with this last Fed meeting,
44:59but the opposite uh the opposite
45:02happened. I think as long as inflation's
45:04over three, they're going to try to
45:06figure out a way to control it. Um and
45:08it is what it is. You got to work within
45:10the confines of what you're dealt with.
45:11Uh which I think we're very good at. Um,
45:15but
45:16I think potentially the reason why
45:20vacancy got high was because us in
45:24commercial real estate, we're not the
45:26only ones that depend on lending and
45:28interest rates and things like that. the
45:30smaller to midcap operators that you
45:33lease to that we lease to that would be
45:35operating out of your turbo building.
45:37That's a good small cap operator, but
45:39they have lines of credit too with their
45:41banks and they have equity. And so they
45:45deal with the same issues that we deal
45:46with even though they're not in the
45:47commercial real estate business. So it's
45:49not like we're the only ones affected by
45:51this.
45:52>> And when the when the lending markets
45:54and the and the economy and they're high
45:56we're in a high cost market of goods.
45:58It's I think for a long time it took a
46:01while for absorption to take place.
46:05Exactly. Because now
46:08>> as brokers we read and react as owners
46:09you kind of read and react. If we all
46:11knew it was going to happen, you know, I
46:12think we'd all be super rich if we were
46:14in sitting inside those Fed meetings.
46:16>> I think a lot of operators are getting
46:18used to this is the way the people that
46:21we lease to you. If you're operating a
46:23business, you can't stay flat. you
46:25you're either you're either high and to
46:26the right or you're going out of
46:28business or you are flat and you're
46:29adjusting to get high to the right.
46:31Yeah.
46:31>> And so I think people are getting used
46:33to potentially operating in this
46:34environment and we're starting to see um
46:38we're starting to see some leases happen
46:42um which has been great. I um but
46:46>> get tight economics worked their way
46:48from the Fed from Wall Street all the
46:50way down to Main Street. The regular old
46:51guy's business has gotten tougher. he's
46:53closing down, doing something else. He's
46:54not expanding. He's not moving. He holds
46:56still. Like that happens. And then over
46:58time, those that figure out how to do
46:59it, things kind of break free. Economy
47:01starts to roll a little bit. Money
47:03starts to move or people get now
47:04comfortable with just their new level,
47:06>> right?
47:06>> And [snorts] it starts to roll the other
47:08direction again,
47:09>> right? And from the buyer's perspective
47:10and your listeners and and you I mean,
47:12that's when you really you pay attention
47:15to the leasing market. You have to pay
47:16attention to the leasing market. Have
47:18relationships with brokers that are in
47:19the deal flow because we lease to sale.
47:22Like we we sold 72 million in the first
47:256 months this year across 26
47:27transactions. Phenomenal first half of
47:30the year, but we don't just sell. We
47:33focus mainly on leasing and then the
47:36sales follow.
47:38>> Got it.
47:38>> Because we execute on the business plan,
47:40which is leasing it for that owner. Most
47:42likely we sold them that building
47:44because we told them what it would lease
47:46for. Um,
47:48and so if the market's not leasing, you
47:52know, we get a little stressed about it
47:53because we don't know if these
47:54institutions, family offices are going
47:56to want to continue to invest here,
47:58right? And so, um, you got to keep your
48:01finger on the pulse of the leasing
48:02market. It's
48:04>> leasing you get,
48:05>> you know, it's it's it's kind of the
48:07dirty work sometimes. A lot of times
48:09you're, you know, when you're leasing
48:11smaller buildings, it's not the biggest
48:13fee in the world. Um, but there is a lot
48:15of money in leasing and then like I
48:19said, you lease to sell once you once
48:21you know what these things lease for and
48:23you're cold calling for acquisitions and
48:26for
48:27>> someone to buy a building.
48:28>> Y'all did that for one that we had on in
48:30church, but it was the opposite.
48:32>> You represented the buyer to buy for me
48:34and then ended up placing a tenant with
48:35him. Y
48:36>> and based on what I know about him, I
48:38don't know him well, but for three early
48:39conversations, I have a feeling he's
48:41going to want to sell it in a certain
48:42amount of time.
48:43>> Yep. So it's b the exact same situation
48:45happened right there.
48:46>> Exactly. Exactly. Like Yeah. We we had
48:48gotten screwed by the city on a couple
48:50tenants. You were ready to offload, I
48:53think. And we Yeah. We sold it to one of
48:54our clients up in New Jersey. And that's
48:57the other thing about Central Texas, you
49:00know, depending on where you are and and
49:02basically all the Sunb Belt region,
49:03right? So, you know, you got
49:06Dallas, Houston, San Antonio, you know,
49:09I'm an LP in three buildings in El Paso.
49:12Florida's phenomenal. Arizona continues
49:14to be really well or to be really good
49:17and performing well. And
49:20that guy that bought your building on on
49:24in Universal City here in San Antonio,
49:26they're a family office in in New
49:28Jersey. We represent over 200,000 ft for
49:31them now
49:32>> in San Antonio. The first acquisition
49:35they got here in San Antonio was an
49:388,000 square foot metal building on
49:40Topper Wine for like $85. Now their
49:44portfolio is spread across multiple
49:46buildings, large sites, um, yeah, I
49:49think probably over 200,000 ft. And we
49:53have performed on the leasing and the
49:55business plan for them so much to where
49:58when we call them
50:00>> and we have a good deal to them, they
50:02stop what they're doing and we execute
50:04on it. And it's so
50:07>> when your listeners are buying,
50:09depending on what market you're in, it
50:11helps to buy in markets that are getting
50:13a lot of institutional capital. I mean,
50:15the people that we're sending deals to
50:17right now, Logan,
50:18>> I had met half of them in person.
50:20They're out of Miami. They're out of Los
50:22Angeles. They're out of New Jersey.
50:24They're out of New York City,
50:25Philadelphia. I mean, they're
50:27>> What is it? What kind of product are
50:28they wanting to buy?
50:29>> Like, is it 8,000 foot building for for
50:32that company? I looked them up when they
50:33made the offer to us. Yeah.
50:34>> And I would They sounded like the kid
50:36the guy's dad seemed like some super big
50:38time guy. I'm like, why are they doing
50:40this little deal here,
50:41>> right?
50:41>> What? They're buying little deals at the
50:43big ones.
50:43>> They will that group in particular, they
50:46will buy the $1 million deal. They'll
50:48buy a two or $3 million deal.
50:51A lot of them are really liking this
50:53lower coverage iOS product, this less
50:56than 25% building toy yard ratio. Um,
51:01and it's strictly because of the way
51:03it's leasing. I mean, if you blow up San
51:05Antonio on a map or Austin on a map, the
51:08really the class B and C buildings, the
51:0970s to 80s builds that have no parking
51:12that aren't on a lot, they got blue pins
51:15on them on Co-Star. they're not they're
51:17not leased or that tenants's leaving and
51:19they're not leasing as good. Um
51:22>> it's unfortunate but it's just the
51:24nature of the game. There's been more
51:26small bay built. So your 1 2 3,000 foot
51:30inline small bay parks.
51:32>> Those tenants are going to a lot of the
51:34>> newer build small bay parks instead of
51:36even operating a standalone building
51:38that's 3 to 4,000 feet on Rap City or
51:41Nakoma. Right. And so that's kind of um
51:46like that group, they will buy what
51:49leases, they'll get their hands dirty on
51:51a million-dollar deal. A lot of the
51:53other companies that we deal with, it's
51:553 million and up or 5 million and up and
51:58but they're same thing. It's it's a lot
52:00of iOS type product or good infill real
52:04estate that you know may not be 25% F
52:07but manufacturing right now in central
52:10Texas you know really across it's not
52:12even just central Texas it's Houston D
52:13it's across all of our markets
52:16manufacturing building so high power you
52:18know high amperage thousand amps 2000
52:20amps running into that building
52:21speculatively
52:23>> it's a big deal um
52:24>> location stands out to me in that part
52:26of the conversation over time I realized
52:29You know, I'll take a good deal
52:30anywhere, but I really try to stay in
52:31better locations these days. If it's not
52:33something we're just flipping out of, I
52:34want to own it for a while.
52:35>> Yeah.
52:36>> That premium location means in a good
52:37market, you're going to get the best
52:38tenant you're going to get to push
52:39rents. In a crummy market, your A
52:41quality tenant may go away, but there's
52:42always a B or C tenant like in the back
52:44ready to go. But if you have a crummy
52:46product or a crummy loca, a crummy
52:48location, your B tenant might go away
52:50and you have a C tenant or no tenant,
52:52right?
52:53>> So, it's like location almost trumps
52:54like everything. It's like the three
52:56most important things in real estate,
52:57you know? Location, location, location.
52:59It really is. It's uh
53:00>> Yeah.
53:00>> No, it's crazy. Access and location.
53:03It's um
53:04>> it's the name of the game, man. It
53:05really is.
53:06>> So,
53:06>> dude, this has been fun. What else? What
53:08else do the other folks that are just so
53:10new in this business saying, "Gosh, I
53:12don't know what I don't know." They need
53:13to know some rough numbers. Get a
53:14relationship with a tenant with a
53:15broker. Yeah.
53:16>> Probably go talk to a a banker up front,
53:20>> a lender or something. Yep.
53:21>> Um [snorts] I like what you said. go
53:22poke around on Loopnet because if they
53:24poke around for a couple months on
53:25Loopnet, maybe call some people, get
53:27some ideas, they're going to be better
53:29when they talk to you because they're
53:30going to have some groundwork already
53:31there.
53:32>> Right. Right. I think and also equity,
53:34right? And if you if some of your
53:37listeners are not um you know, they
53:40don't have that high net worth yet like
53:42me, I'm I'm not extremely high net worth
53:44or anything like that, but I've still
53:47found a way to be a partner in deals.
53:51you know, my um my uncle who's a
53:53developer in Northwest Arkansas,
53:55>> we formed our LLC together and I asked
53:58him and he knows he's he develops
54:00neighborhoods um uh semi-custom homes up
54:03in Northwest Arkansas. He actually just
54:05sold his development company and I he's
54:08done very well and I asked I asked him I
54:11said, "Hey, I don't have a lot of
54:13capital. I know this market and I know
54:17these deals very well. I could teach it
54:19to you." And I asked him and we started
54:21our own LLC. I throw in a little bit of
54:23money. He's got a lot more Skrilla than
54:25I do. So he, you know, we've got an
54:27operating agreement where I, you know,
54:29throw in 25%, he throws in 75% and it
54:32allows me to get involved in some of
54:35these deals. And um obviously you can
54:38you can LP and stuff. Uh that that's
54:41also a good option for for some of your
54:43investors. A lot of
54:45>> what those returns look like these days
54:46from what you see. So when when Colin's
54:48saying LP, what he means is a limited
54:50partner. So you have a general partner,
54:51limited partner. That's the way a lot of
54:52these investment deals are structured.
54:54The general partner will go and find the
54:56deal, operate the deal, um sometimes
54:58take the debt on the deal, and the
54:59limited partner puts money in
55:01>> and that's basically it.
55:02>> And just gets a quarterly dividend, and
55:04it's a you know, it's it's
55:07virtually no risk, right? Um
55:10>> so what kind of returns are you seeing
55:11these So yeah, I mean on the it's
55:13basically everything that I'm a part of
55:16it is 8% preferred return on this before
55:19the waterfall hits with your capital
55:21back, right? So you get capital back
55:24plus 8%. Say you put in, you know,
55:2650,000 $75,000 25 doesn't matter. um you
55:30get your preferred return plus 8% the
55:33first waterfall hits then the GPS start
55:36making some money it those
55:37>> once the LP gets all their money back
55:39plus an 8% then you hit what they say
55:42the waterfall which means now there's
55:43going to be a split it's like the LP
55:45gets
55:46>> 30
55:47>> 30 and the GP gets 70 so every dollar
55:50after you as the investor get your money
55:51back then you get 8% so if you put in
55:53100 grand and it's been in there for a
55:54year you get your 100 grand then you get
55:56your eight grand now you've hit the
55:57waterfall now if that deal starts to
55:58make 100 grand a year, you as the
56:00investor might get 30 grand of that and
56:02the developer might get or the general
56:04partner might get 70,000 of that.
56:06>> Right? But on the first waterfall with
56:08the stuff that I'm involved in the the
56:10GPS
56:12the split changes where the GPS get 30%
56:14and the limited partners get 70, right?
56:17And so because the general partners a
56:19lot of times they're I mean it's
56:21>> it is hard right now to find debt.
56:24Virtually impossible to find debt where
56:26you're not personally guaranteeing it.
56:28the general partners are putting their
56:30signature on that paper with the bank
56:33and their personal lives are at are at
56:36stake if this thing goes south or
56:38whatever. You as a limited partner,
56:40you're just getting a quarterly
56:41distribution, right? So, it's it's 8%
56:44preferred return plus your capital back
56:46and then the waterfall hits the general
56:48partner. That's when the general partner
56:50starts making some money. 30%
56:53>> LPS will get 70%. And this changes
56:56depending on what whoever you do this
56:59with, whoever whatever investment group
57:01you're you're working with or whatever
57:02family office or private equity group.
57:04But um and then on the exit, the split
57:07that that's when the the third waterfall
57:09hits or the second waterfall and it's,
57:11you know, 50/50 and the general partners
57:14make their promote. Um which at that
57:16point they've they deserve because the
57:18they put their name on the line.
57:20>> We hit a home run. the LPs made their
57:22money and I just think that's a lowrisk
57:24option for a way for some of your
57:28listeners to get into the game a little
57:31bit and really learn cuz then once you
57:34learn some of that I mean like I'll be
57:37ready to
57:38>> do my own deals in you know two three
57:41four years or whatever um because you
57:44really get to know it you see some deals
57:46that have worked most of them have
57:47worked a couple haven't worked as well
57:50>> and it is what it is. Um that's just the
57:52nature of the game. But um yeah, and I
57:56if you're getting into it basis, I I
57:59know I I keep going back to it, but it's
58:01so important. It's something that you
58:03get on. It's what you've made a lot of
58:05your
58:06>> platform based on is buying smart. And
58:09um it's something that I I appreciate
58:11about you and what you've been able to
58:13accomplish.
58:14Um, it's definitely something that that
58:17your listeners should should keep an eye
58:19on, especially if they're first getting
58:20started.
58:21>> In summary, you make your money when you
58:22buy. People think you make your money
58:24when you sell. You don't. You get paid
58:26when you sell, but you make your money
58:27when you buy.
58:28>> Yeah,
58:28>> you can resell it, you can rent it, you
58:30can fix it, you can sit on it forever,
58:31whatever you want, but if you got it
58:33cheap enough, all things just seem to
58:35work.
58:36>> Markets can We've bought deals that we
58:38thought were home run deals and markets
58:39cooled off and we didn't move quickly
58:41enough and we would sell it and break
58:42even. over a 12-month period and we made
58:45every mistake possible. But when the one
58:47thing we did right is we bought it low
58:49enough so we didn't lose money.
58:50>> Yeah.
58:51>> And other guys like have to come out of
58:53pocket. I've seen bankruptcies just like
58:54you said. I've seen divorces come out of
58:56that. Like
58:57>> there ain't no amount of dollars that I
58:59want to risk my family for. That deal
59:00ain't worth it. So I think about what's
59:02the worst thing that can happen. I'm
59:04looking at my family. I'm looking at my
59:05bank account.
59:06>> Let's make sure we do right on the front
59:07end so those aren't at risk.
59:08>> Exactly. Yeah. [laughter] I get Yeah. I
59:10mean, I get scared, you know. I I still
59:12kind of as a broker, it just kind of it
59:15it, you know, and the reason why I like
59:18being a limited partner and stuff right
59:20now, I'm just not one running the
59:23brokerage in San Antonio. We have an
59:24Austin office now. It takes up so much
59:27of my time. I don't have time to raise a
59:29lot of money right now. And eventually,
59:31I think that's something I'm going to be
59:34doing. Um, but I'm also just kind of
59:36getting over and observing, you know,
59:38I've just seen some things work out so
59:41well. You know, I I've I've seen
59:43phenomenal success stories like you and
59:45and G Street, what we were able to
59:47execute there and Bird where we were
59:49able to execute on that. And I've also
59:52seen people do stupid stuff that, you
59:55know, it's out of my control. My job is
59:58to recommend and to advise, you know, be
1:00:00a fiduciary. Um, but people are still
1:00:03going to do what they're going to do.
1:00:05And it's um, you know, you can you can
1:00:08get in some trouble in this business as
1:00:10well. It's not, you know, you're not
1:00:12buying 100 $200,000 houses. I mean, some
1:00:15of these buildings [laughter] can get
1:00:16>> get low like that and and all that, but
1:00:18these are, you know, commercial is a
1:00:21it's a big game. And, uh, even if you
1:00:23are buying a 7,000 foot warehouse or
1:00:26whatever the case may be. Um, so you got
1:00:28to be careful, you got to be calculated,
1:00:30and you got to surround yourself with
1:00:31the right with the right people and the
1:00:34right team, whether that's a brokerage
1:00:36in your local community, a family
1:00:38member, a you know, whatever the case
1:00:41may be. So, it barrier to entry isn't
1:00:44extremely hard in this business. It's
1:00:46but finding your way to success is is
1:00:48calculated. Um, you know, you go out,
1:00:51buy building, whatever, but you've got
1:00:52to be calculated in the way you want
1:00:54your business plan to work. You know
1:00:55what I I agree with that. I tell people
1:00:58if they want to try it, just like you
1:00:59said, go through those steps. Your first
1:01:01deal, it doesn't have to be huge. Our
1:01:02first one was 2500 square foot. Now that
1:01:04I'm thinking about 2500 square foot on
1:01:06like 0.9 acres.
1:01:07>> There we go.
1:01:08>> It was small. It was easy. It did well.
1:01:11And then we said, "Okay, let's try
1:01:12more." And we just at this point, I'd
1:01:14take anything probably less than five
1:01:15million bucks if it felt safe, like the
1:01:18location. Yep.
1:01:19>> And that was that first deal was maybe
1:01:21three or four years ago. So, it doesn't
1:01:22take long to work your way through those
1:01:24traps. Right. Right. And there's going
1:01:26to be risk, but that's,
1:01:29you know, you want to make high risk,
1:01:30high reward. You know what I mean? This
1:01:31is a this is a game where you can make a
1:01:33lot of money, be very successful, and
1:01:36set your kids and your and your family
1:01:38up for, you know, success going forward
1:01:40and to where they don't have to to worry
1:01:42about as much. And um with that comes a
1:01:46a cost. So, you better be prepared and
1:01:48be calculated about it. So,
1:01:50>> I always tell people risk is the price
1:01:52you never thought you'd have to think
1:01:54about.
1:01:55>> That is good. That's very good. Yeah. I
1:01:59uh
1:01:59>> I've had to pay that cost a few times.
1:02:01>> Yeah, for [laughter] sure. Nothing
1:02:02ever's No one's batting a thousand. I'll
1:02:05tell you that. If someone says they're
1:02:06batting a thousand in this world, it's
1:02:09they're talking out of their ass.
1:02:10>> Someone's raising money for a Ponzi
1:02:11scheme, [laughter] a thousand.
1:02:13>> Exactly right. Exactly right. So,
1:02:15>> well, dude, this has been good. Let's
1:02:16wrap it up. Hey, if folks want to
1:02:18>> track you down, get a hold of you. Um,
1:02:21what are all the markets y'all cover and
1:02:22how do they find you?
1:02:23>> Yeah. So, um, I'm a partner at Atlanta
1:02:26Realy Partners, full service commercial
1:02:28real estate firm. We do buyer
1:02:30representation,
1:02:32um, seller representation, all the
1:02:34business lines. We represent companies,
1:02:36tenants moving into buildings. Um, and
1:02:39we represent landlords uh, leasing their
1:02:41buildings just like Logan. Um, and uh,
1:02:45yeah, land realy partners.com. We're in
1:02:48San Antonio and we have a full operation
1:02:51going in Austin now as well. Um, with
1:02:54Carson. Uh, my name's Colin Mlen. Um,
1:02:57our principal broker's name is Cullen
1:02:59Mills. We're on uh, we're on the
1:03:01internet. We're on Instagram. My
1:03:04Instagram's Sebass Main. I follow Logan
1:03:07as well. And, uh, it's um, it's been a
1:03:10lot of fun, man. So, you'll you'll see
1:03:12our signs around the community if you
1:03:13live around here as well. And um yeah,
1:03:16man, I really appreciate the the time.
1:03:18This was fun.
1:03:19>> No doubt. All right, that's all we got
1:03:20today.