Full transcript
0:00Today we're going to teach you guys how
0:02to develop your own buy box. We're going
0:04to share with you a buy box that we use
0:06in Houston and we want to let you know
0:08the importance of building your own buy
0:10box.
0:10>> What is a buy box?
0:11>> A buy box is something that helps you
0:13narrow down what area, what class of
0:15real estate you're going to be looking
0:16for. What happens is you will decide,
0:19hey, I want to get in real estate. Well,
0:21what we always recommend is that you
0:22start close to your home, draw a five
0:24mile circle around your house, and get
0:26started. But you still need a buy box
0:28cuz what will happen is we're all
0:30humans. We love shiny things. So if it's
0:33a shiny piece of gold, silver, diamond,
0:35water, we'll be attracted to it. We're
0:37deal junkies. We're assuming you could
0:39become a deal junkie. You'll start
0:40looking at real estate that doesn't meet
0:42your buy box because it's a good deal.
0:45So it might be on the other side of the
0:46city, maybe not a good place to start.
0:48The other side of the county because it
0:49seems like something good. Other side of
0:51the state or the other side of the
0:52country. But with a buy box, you'll
0:54develop a discipline to chase the real
0:57estate that you're looking for
0:58specifically in your area. And that's
1:00what a buy box.
1:01>> What it's going to do, too, is it's
1:02going to narrow down everything from
1:04price, what's going to be the best
1:06return on investment. It's like whenever
1:07you go out to go buy a car, normally you
1:09don't go out to buy a car and you look
1:10at the Mercedes dealer to the Hyundai,
1:13you have an idea what you want. So, what
1:15we're trying to provide is time is of
1:17the essence. Time is money. So, you
1:19don't want to spend a bunch of time,
1:21like Mike says, just looking at every
1:22shiny object out there. You need to know
1:24exactly and narrow down exactly what
1:26you're looking for and what a good
1:28investment looks like. So, everybody has
1:30a different buy box. You got guys like
1:31Pace Morby out there. He's doing
1:33residential. He's doing single family
1:34homes that are sub two,
1:36>> all sub two stuff that are like three
1:38bedrooms that he can turn into eight
1:39bedrooms. But for us, we are light
1:41industrial investors. We do stuff in
1:43storage. But today, we're talking about
1:44light industrial and our buy box, what
1:46it is, and then we're also going to give
1:48you an example of exactly like what our
1:50buy box looks like. All right, check it
1:52out. When you're watching these videos,
1:53we know that you guys have questions
1:54that aren't answered. Might be about
1:56business, might be about real estate.
1:57Well, guess what? We can answer all
1:58those questions that aren't getting
1:59answered in this video. So, shoot us a
2:01text at 9286054335
2:04cuz there's questions that need to be
2:05answered and this dude and I will answer
2:07those questions for you. 9286054335.
2:10Shoot us a text. So, as an example, for
2:13our Houston buy box, this is the exact
2:15buy box that we use. So, one thing we're
2:17looking for is we broke it down to three
2:19different categories in the Houston area
2:20that we're chasing as far as real
2:22estate. Number one, flex space,
2:24stabilized yards, so parking equipment
2:26on and semis and things like that and um
2:28products from the port. And we also look
2:30at industrial buildings. So, we have
2:32three different categories in the
2:33Houston market. Now, what we do is we
2:35actually narrow down. So, those are the
2:37three main ones. Not to make it too
2:38complicated, like Mike said, it's flex
2:40space, stabilized yards, and industrial
2:42buildings. So, if we talk about like
2:43flex space, tell them a little bit about
2:45like our buy box for just the flex
2:48space. So, we're not looking for the
2:49class A flex space. There's not enough
2:51profit in it for us. So, we don't chase
2:53those ones. We don't buy flex space at a
2:55four, five, or six um cap. We're not
2:57interested in that type of investment.
2:59We're looking for distressed properties.
3:00So, number one, flex space in the
3:02Houston area. It has to be a distress
3:04flex space. So, what is a um distress
3:07flex space? It's probably 30 years old,
3:0940 years old, maybe 20 years old. It's
3:11owned by an old guy that built it in the
3:1470s or 80s, maybe the '9s, and now he's
3:17aged out and hasn't raised rents. So,
3:20the value ad is going to be simple. We
3:22can go in there and simply raise the
3:23rates after we put on some lipstick. So,
3:25what we're looking for distressed
3:27properties, the most we're willing to
3:28pay in our buy box, they can be asking
3:30any amount they want, but we know we can
3:33only pay up to $80 a square foot. So,
3:36the reason that we look for distressed
3:38properties instead of going to Loop Ned
3:39and Craigslist whenever we're looking
3:41for a flex space is because we already
3:43know that if you look at all the flex
3:45space, you know that your buy box is
3:47going to be around $80 a square foot.
3:49Don't look on LootNet or Crexy for
3:50those. You will not find them. It has to
3:53be a distressed property. So by
3:55identifying a buy box, identifying flex
3:57space, identifying distressed, we keep
4:00narrowing it down so we stay focused on
4:02the target. And the target is to buy 30%
4:04under value. Well, if you go look at
4:06like class A properties, like Mike was
4:08saying, you are not going to find many
4:09distressed class A properties because
4:11they're class A properties. They're not
4:13distressed. They're not 30% under value.
4:16So like Mike was saying, target is a
4:18distress flex space. Two is got to be
4:20priced under $80 a square foot,
4:22>> right? And so when we find them just
4:23above $80, we'll still look at it, but
4:25we know we have to negotiate down to get
4:27it below $80 a square foot for the
4:29Houston market. Stabilized yards. We
4:31love stabilized yards. In different
4:32areas of the country, there's abandoned
4:34areas with large parking lots or large
4:37layown areas. We love it when we find a
4:39piece of property. Minimum size is an
4:41acre up to 20 acres, even 40 acres of
4:44crushed concrete, asphalt.
4:45>> Yeah. They'll put like bull rock down to
4:47stabilize the yard and then put AB over
4:49the top of it. But it's got to be
4:50stabilized. And there's so much value
4:51because the last time we stabilized over
4:53an acre, it's now up to $110,000
4:56per acre just to stabilize. And that
4:59does not include concrete or asphalt.
5:00That's just the bull rock and the gravel
5:03on top that can support a semi. So like
5:05a stabilized yard, too. If it has a
5:07building, that's a plus. But it doesn't
5:09necessarily have to have like a certain
5:11square footage building because we're
5:13looking at it as a stabilized yard that
5:14we can actually lease that yard out and
5:17have it meet the 1% rule of the purchase
5:19price of it. But a stabilized yard, if
5:21you're looking for a stabilized yard,
5:22that's your buy box. If it's got a 500
5:25foot building or a 500 foot building or
5:275,000t building or 50,000, you're
5:30looking at the stabilized yard and we're
5:31giving you all the parameters of the buy
5:32box for a stabilized yard. And in the
5:34Houston market, we realize that we're
5:36able to lease, and it depends on the
5:38area of Houston. We're able to lease
5:41empty properties that have a fence
5:42around them that are stabilized between
5:442500 a month and $4,000 a month. So we
5:48use that in our formula to develop a buy
5:50box and try to find properties. A lot of
5:52times people do not put value in the
5:54crushed concrete, asphalt or regular
5:57concrete on top of the ground. So we can
5:59buy properties, let's say it's got a
6:01small building and they're just valuing
6:02the building and there's three acres on
6:03it. Well, a lot of times people aren't
6:05thinking of the three acres that
6:06stabilized. And if they are thinking of
6:08the three acres, they're pricing it as
6:10though it's not stabilized. Well, we
6:12look at three acres that is stabilized.
6:14We understand that it's $100,000 per
6:16acre just to have that done. So, if it's
6:18already done, there's a value ad already
6:20on the property of $300,000. So, we've
6:23been able to score a lot of different
6:25properties that have the stabilized yard
6:28and we weren't charged for it. Yeah. So,
6:30if we can find land in our buy box in
6:33the Houston area of an acre, we would be
6:35interested somewhere around 80,000 to
6:38110,000 per acre for that property. Now,
6:41when we're talking about a buy box too,
6:43these are all recommendations in your
6:45buy box. Say that you have 10 or 12
6:47different things in that section in a
6:49stabilized yard or a flex space. You
6:50have 10 different things. Well, if it
6:52doesn't hit all 10, sometimes you may
6:54still be interested in it, but obviously
6:56the more that you can hit, it seems like
6:58that's a better one to chase after. So,
7:00when we're going and we're identifying
7:01the area, we're using our buy box, we're
7:03hunting down that flex space or that
7:05stabilized yard, we're trying to check
7:07as many of those boxes in the buy box
7:10before we run at it. So, if you went out
7:11and you find 10 of them, say two of them
7:13checked every box. Well, those are the
7:15ones that you chase after first. And
7:16then at like two of them only check like
7:18four boxes. Well, then that one you're
7:20probably not going to chase as hard. Or
7:22you need to do some more math to figure
7:23out, okay, that one's not stabilized,
7:25but I like it. It's an acre or more.
7:28It's got this, this, and this. Then you
7:29need to run the math problem to see if
7:31it'll actually work once you stabilize
7:32that. But let's move on to industrial
7:34buildings. When we're looking at
7:35industrial buildings, our buy box
7:36>> for industrial buildings, your buy box
7:38can change, but for ours right now,
7:40we're looking at buildings of 7,500
7:42square ft and larger, maybe up to 50,000
7:45ft². We started out in our first buy box
7:47were 3,000t buildings, but we've gone up
7:49to where, guess what, the expenses of
7:51running our company and doing things, we
7:52need bigger properties. So, our buy box
7:54in Houston area for light industrial
7:57buildings is 7,500 ft² up to 50,000 ft².
8:01the height of the ceilings on the
8:02inside. We want a minimum of 12 feet
8:05from the bottom of the trusses to the
8:07concrete stabilized floor. So, it's got
8:09to be at least 12 feet. If it's above
8:11that, we're good. We like it regardless.
8:13But sometimes whenever it's lower, then
8:15it's harder to get a tenant to move into
8:16that building. So, we have a minimum of
8:1812 feet from ceiling height all the way
8:20down to the concrete. Another thing that
8:21we'll look at is steel construction. And
8:23the reason we look at steel construction
8:25of a metal building is because we know
8:27the rehab is much cheaper on a steel
8:29constructed building as opposed to a
8:30concrete one. But that doesn't say that
8:32we're not into a concrete building. But
8:35in our buy box, we like to find
8:36distressed properties, get them cheaper
8:38in value. And the fixup cost is going to
8:41be minimal compared to like repairing a
8:43wood structure or even possibly a
8:45concrete building. And when he says
8:47concrete, we're talking about brick. It
8:48can be stuckle. It can be a lot of
8:50different products, but we specialize in
8:52steel buildings. We already have the
8:53crew set up to take care of those type
8:55of repairs in the Houston area. So
8:57again, we've developed our buy box.
8:59You'll need to develop your own buy box
9:01in your specialty, but we love steel
9:02buildings. We love the Houston market.
9:04We love light industrial. And so that's
9:06why we chase steel buildings.
9:07>> Yeah. Lot size.
9:08>> This is the bare minimum is a quarter
9:09acre, which there's not many things
9:11smaller than that. So the point is we
9:13like a little bit bigger yards so that
9:15the people have a place to park. But
9:16bare minimum is a quarter acre. We'll
9:18still buy a 2,000 foot building, you
9:20know, if it's lands in our lap on a
9:22small piece of property. But we like to
9:24stick at an acre, but we'll look at
9:25anything a quarter acre.
9:26>> Yeah. The other thing is like a lot of
9:27times we be like, "Well, I saw this
9:29building, but it's really shitty." We're
9:30like, "Perfect."
9:31>> Yeah. Condition doesn't matter.
9:33>> It does not matter. I mean, obviously if
9:35it's a total tear down, then at that
9:37point you're just buying bare land. So
9:39you have to analyze it that way. But a
9:40lot of times people are turned away when
9:42they're looking at buildings because
9:43they're like, "This one was really bad,
9:44so I didn't even bring it to you. Bring
9:45it to us." The shittier the building,
9:47the cheaper the price goes down and then
9:49the rehab is not as expensive as what a
9:51lot of people think it's going to be. So
9:53the maximum purchase price for our
9:54distress properties in the Houston area
9:56that we're talking about is $75 a square
9:58foot. We don't pay more than that
10:00because we just know what we can get for
10:02rents and it just doesn't pencil for us
10:04after $75 a square foot. Again, we're
10:06looking at distressed properties. We
10:07understand that someone's out there
10:08going, "Well, it's going to cost $130 a
10:10square foot to build." We get it, but we
10:12don't buy properties that are over $75 a
10:15square foot when it comes to light
10:16industrial. And the reason why we don't
10:17pay more than that is because we know
10:19that once the value ad and everything
10:20comes into it that it's about a $9
10:23annual triple net lease market. So that
10:25means on an annual basis, your tenant is
10:27going to pay $9 per square foot for that
10:30property and they'll take care of the
10:31property taxes, insurance, and common
10:32area maintenance. And we like to try to
10:34get to $12 and we always fight for that.
10:36But it's just there's areas that we just
10:38can't get that. So $9 is what we try to
10:40budget everything on and then we can get
10:42more while we're just winning more.
10:43>> Yeah. If we can get 12, we'll take it.
10:45But we don't try and fool oursel. We
10:46don't go, well, it's 12. You know, if
10:48everything turns out perfect. No, we
10:49kind of look at the rental and then we
10:51just say because you're going to have
10:52some vacancies in there. So we end up
10:53pushing it down to $9 per square foot.
10:55And when we say the Houston market
10:57again, our buy box, what we have
10:58developed is we use a system where we
11:01look at a city and we draw a circle
11:02around the city and we turn it into a
11:04clock. So you got 12:00, 1:00, 2:00. As
11:07an example, this is the Houston market
11:08that we're chasing right now. There's
11:10downtown Houston and we separate it by
11:12freeways. So in this piece of pie in
11:15Houston, in our buy box right now, not
11:17saying we wouldn't look somewhere else,
11:19but we are only concentrating on this
11:21piece of pie. So that's what we've done.
11:22We broke this down into a clock of
11:24Houston. You can do it in Seattle. You
11:26can do it anywhere you want. You can do
11:27it in your small town. But we break it
11:28down and then we are going to drive each
11:30one of these roads. We're going to be on
11:32Google. We're going to be on maps. We're
11:34going to be looking at every single
11:35thing we can. We're going to be looking
11:35at tax record because we're going to do
11:37everything we can to find every
11:38distressed property that meets our buy
11:41box. But we have a concentrated area. If
11:43you don't have a buy box, you'll be
11:45looking at a duplex over here because
11:46your buddy said there's a hot one over
11:48here on the other side of Houston. We're
11:49not doing that. And we want you to
11:50understand that a buy box is very
11:53important to keeping every single thing
11:55focused. And so you can just zero in on
11:58an area and you can cover all the roads.
12:00You can drive for dollars we call it.
12:02But you need a buy box. And it relates
12:03to every form of real estate investor
12:06whether it's residential, commercial,
12:07all the different classes of commercial.
12:09You can use it for anything. You can use
12:10it for uh self- storage, anything like
12:12that. And like Mike's talking about the
12:14clock. So if you just imagine whenever
12:15you're picking your targeted area,
12:17whether it's Seattle, Phoenix, Houston,
12:19Mike's just saying take like a five mile
12:21circle or a 10 mile circle around the
12:23center area and then as you're building
12:25your buy box, you can't tackle too much
12:28at once. That's why you have a buy box.
12:29You can't tackle too many areas at once.
12:32So, if you draw that circle all the way
12:33around that area and then you put your
12:35buy box together and you go search in
12:37that area, rather than searching the
12:39whole thing all together, just take from
12:4012:00 to 3:00 and that portion of the
12:43map is where you're going to go look.
12:44And then what I like to do is once we
12:46create our CRM or even just a sheet of
12:48paper with all the addresses and stuff
12:50on it and seeing what's in your buy box,
12:51then to do the followup to try and
12:53purchase it, it's much easier to do
12:54that.
12:55>> So, again, buy boxes are essential for
12:57keeping focused and keeping success
12:59coming your way. you need to be able to
13:01zero in and so that you don't end up all
13:03over the place. So, build a buy box. So,
13:05what we do is we coach people on how to
13:07buy and how to invest in commercial real
13:09estate. It's really easy to reach out to
13:11us, honestly. You can text us at
13:129286054335.
13:15You can DM us on Instagram, but we're
13:17we're honestly truly here to help you to
13:19to create your buy box, to understand
13:22what a buy box is. We're here to educate
13:24you. So, if you need help, the reason we
13:26do this is because we needed help. We
13:27had nowhere to go.
13:28>> That's exactly right. If you got Mike
13:29and Bo, we'll help you guys out. So, DM
13:31us or text us 9286054335.
13:35>> We have closed on over 200 commercial
13:37pieces of property. So, we know what
13:39we're talking about. We know the
13:40importance of a buy box and want to show
13:41you how to do it.