Full transcript
0:00how to buy commercial real estate or
0:02industrial real estate with zero money
0:03out of pocket that cash flows between 5
0:05and 10 grand a month. What I'm going to
0:06do is I'm going to break down a deal for
0:07you guys from A to Z. It's a deal that
0:09took zero money out of our own pocket.
0:11I'm going to break it down for you so
0:13you guys understand exactly how
0:14everything played out. And then I'm
0:16gonna spend the second half of this kind
0:18of breaking down exactly the different
0:19ways that you guys can go about closing
0:21on real estate deals, putting together
0:23real estate deals to do this for
0:24yourself. Because I guarantee there's
0:26deals just like this one that I'm about
0:28to talk about in your local community or
0:30somewhere around you. And if you don't
0:32know of any, there's going to be
0:33somebody around you or in your circle
0:35that probably does know about deals like
0:37this. There's millions of buildings that
0:38are vacant or abandoned or full of weeds
0:41that are just dilapidated buildings that
0:43are distressed that you guys can
0:44capitalize on and do what we've done.
0:46This is not something that I'm talking
0:48about from theory. We're closing on a
0:50property in Texas this week that is a
0:51dilapidated property. It's a big lay
0:54down yard. There's a massive value ad
0:55opportunity for us to go in there and
0:57create revenue from that property. So,
0:59we're closing on deals just like this
1:01one that I'm telling you about. This is
1:02going to be a self- storage complex, but
1:03there's deals just like this in the
1:05market today for you guys to go and
1:07find. Without further ado, let's kind of
1:08jump into the specs of this deal. You
1:10could look up this property address and
1:12you'll see that we own it and you'll see
1:13how much we paid for it. You can see a
1:15lot of the specs on the property. This
1:16is a real property in our portfolio
1:18today. So, 1129 Interstate Place. It was
1:22a 9600 ft² storage complex that was
1:25completely abandoned. It was fully
1:26dilapidated. So, this is what it looked
1:28like. This is only a portion of it, but
1:29it was 9600 ft² of self storage, fully
1:32vacant on about 2 acres. It looked like
1:34a piece of junk. As you can see, it was
1:36really dilapidated. Clearly, there was
1:38nobody leasing any units out of this
1:40property. So, this property when we
1:41bought it, it was 9,600 ft². And the
1:43purchase price, this was an offmarket
1:45deal, by the way. We literally found
1:46this deal by driving through our local
1:48neighborhood. We drove by down one of
1:50the streets. One of the the partners in
1:52the self storage business, his name's
1:53Denny Sixberry. He found this deal
1:55literally just by driving around and he
1:57just saw that it was vacant. It looked
1:59really disgusting. It was distressed.
2:00And so he started digging in. He used an
2:03app that we like to use called Landlide
2:04to find out who owned it. And then from
2:06there he used softwares or websites like
2:08True People Search, White Pages, Batch
2:10Leads to go and find that owner's number
2:12and call him. All right, check it out.
2:14When you're watching these videos, we
2:15know that you guys have questions that
2:17aren't answered. Might be about
2:18business, might be about real estate.
2:19Well, guess what? We can answer all
2:21those questions that aren't getting
2:22answered in this video. So shoot us a
2:23text at 9286054335
2:26cuz there's questions that need to be
2:28answered and this dude and I will answer
2:29those questions for you. 9286054335.
2:33Shoot us a text. Once we got in contact
2:35with the owner for this offmarket deal,
2:36we ended up getting it under contract
2:38for $280,000. That doesn't mean that we
2:41took $280,000 out of our pocket to go
2:44close this deal. We used hard money at
2:4510% interest only. We knew that we were
2:47going to need $280,000 to buy the deal.
2:50And we also knew that we were going to
2:51need about $70,000 to go and fix this
2:53up. We have a full in-house construction
2:55crew and company and we got materials
2:57for dirt cheap because we get them at
2:59cost. Our all-in was going to be
3:00$350,000.
3:02What we did is we have some
3:03relationships with hard money lenders.
3:05And when I say relationships with hard
3:07money lenders, I don't mean some massive
3:09company that you're going to find on the
3:11internet. We just built really good
3:12relationships with people in our local
3:14community that knew we were buying real
3:16estate. those people since they saw our
3:18track record and since they knew who we
3:20were, they were willing to lend the
3:21money to us. We didn't have to come out
3:23of pocket with anything. All we did was
3:25we just approached these people,
3:27explained the deal, explained the
3:28opportunity, showed them our
3:29projections, and then because of that,
3:32they gave us the money that we needed to
3:34close this deal. Now, you guys might be
3:36thinking, I don't know anybody that has
3:38$350,000. I don't know anybody that has
3:40$500,000. I don't know anybody that has
3:42a million. My question to you would be,
3:43how many times have you brought a deal
3:45to somebody that is a smoking deal? A
3:47deal that's going to number one,
3:49appreciate a ton once you buy it and
3:50value add it, and number two, a deal
3:52that's going to cash flow and have more
3:53than enough money left over to cover
3:55whatever payment you're going to be
3:56making to them. That would be my
3:57question to you because I guarantee that
3:59there's somebody either in your circle
4:01that is a primary firstderee connection
4:03or a second degree connection meaning a
4:05friend or a family member or a friend of
4:07a family member or a friend of a friend
4:09that you can get connected to that has
4:11the money to do this. We'll break down
4:13exactly some of the other opportunities
4:15and ways that we do deals with other
4:17people's money on the back. I'll go over
4:18what you guys can do to find money to
4:20close deals. With this deal, it was
4:22$350,000 and we bought it with hard
4:24money. So, the property itself when we
4:26bought it was 2 acres, 9600 ft², and
4:29there were 46 units that we could rent
4:31out once we stabilized it. And the best
4:33part about it, it was abandoned. Just so
4:34you guys know, commercial, light
4:36industrial, unlike residential, it's not
4:38really valued based off of comps, banks,
4:40hard money lenders, investors, they
4:42don't value commercial buildings off of
4:44just what other commercial buildings in
4:46the area sold for. They value it based
4:48off of revenue. So, we were able to get
4:49this for such a good deal because there
4:51was zero revenue coming into this
4:53property when we bought it. Plus, we
4:54knew that because of the 2 acres, we
4:56were going to be able to do a value ad
4:58expansion. We were going to be able to
4:59go and construct more self- storage
5:01units around it to increase the revenue.
5:03This addition that we knew we were going
5:05to be able to do came out to be about
5:0625,730
5:08ft² and it was going to be an addition
5:10of 108 units. This is what the property
5:12actually looks like today. You can see
5:14that strip down the middle. That was the
5:15very first original unit that we
5:17purchased. Everything that you see that
5:18looks like a U-shape around it, that was
5:20the value ad that we were able to go in
5:22and do. When we bought this property, we
5:24obviously had to put money into it. So,
5:26we did. We went and put money into it.
5:28And then up here, you can see that the
5:30revenue, the postrehab income was $7,600
5:33a month. And the value was $700,000,
5:36which was an appraisal from the bank.
5:38So, we went and we turned $350,000 into
5:41$700,000. And we didn't have any money
5:43out of our pocket. So, we didn't have
5:44any cash tied up in it. a bank because
5:46it was essentially a free and clear
5:48property. We had obviously the hard
5:49money, but we had enough equity sitting
5:51in that property to be able to go and
5:53get a construction loan for $1.4
5:56million. So, what we did is after the
5:58property was stabilized and it was
6:00making that $6,700 a month and it was
6:02valued at $700,000. We were able to
6:04leverage that to a bank or go to a bank,
6:06show it to the bank, get an appraisal,
6:08and then show them our projections and
6:10everything that we were going to do in
6:12the construction process to increase the
6:13value of the property and generate more
6:15revenue. And they were willing to give
6:16us a $1.4 million construction loan out
6:19a 20-year amortization term at 7 12%
6:21interest. That was the loan term we got.
6:23So, our payment on that was going to be
6:24$11,278.30.
6:27That was what we ended up getting from
6:28the bank. When we went to the bank, the
6:30best part about this entire deal was we
6:33were able to pay off all the hard money
6:34with that construction loan and have
6:36plenty of money left over to go and
6:37finish whatever construction we needed
6:39to to value add the property or to
6:41increase obviously the amount of square
6:42footage and units we were going to have.
6:44So, what I'm going to do now is I'll
6:45kind of break down what it looked like
6:46right after we did the value ad, which
6:48took about 90 to 120 days. And then I'm
6:50going to show you exactly what the
6:51propertyy's doing today. And this is all
6:53stuff that was pulled directly from
6:55P&Ls. This isn't made up numbers. This
6:56is directly from our P&Ls. the postrehab
6:59income. We were able to get the property
7:01stabilized at $6,700 a month. Our
7:04expenses, including property taxes,
7:06insurance, common area maintenance, all
7:08of those things, management, $1,67.50
7:12per month. The interest payment, like I
7:14said, we bought this with hard money, so
7:16$350,000.
7:17Our yearly payment to that owner or to
7:20that hard money lender was $35,000 a
7:22year. So 35,000 divided by 12 comes down
7:25to $2,916.667.
7:27So that's what we were paying every
7:28single month to our investor. Our profit
7:30after expenses and interest left over
7:32was $2,17583
7:35per month of cash flow money in the
7:37bank. 46 units, 9600 ft². Our cash flow
7:40just from that part of the property was
7:42$2,175.83
7:45per month. After we invested the money
7:47that we got from the bank into the
7:48construction and built out that U-shape,
7:50it was about $25,730
7:53ft and 108 units. Our revenue today is
7:56$28,592
7:58a month and that's at 97% occupancy. Our
8:01expenses, property taxes, insurance,
8:03maintenance comes out to $5,97420.
8:08Our loan payment is $11,278.30
8:12just like I said over here. And so when
8:14you deduct that from our revenue, our
8:16profit is $11,339.50.
8:19So, in total today, we have 154 units
8:22and it's 35,330
8:25ft of property of space that we have.
8:27The key here, the best part about real
8:29estate is the equity that you build over
8:31the course of time. There's about $162
8:33million of assets under management
8:35currently in the portfolio. Our loan to
8:37value on that, I couldn't tell you the
8:39exact percentage. It's about, I believe,
8:4045%, but we have $106 million of equity
8:44just sitting there. That's equity that
8:46we can pull out to go do more deals.
8:48It's equity that we can leverage and
8:50ultimately use to potentially own or
8:52finance out of the portfolio if we want
8:54to exit. But there's $106 million of
8:56equity that's sitting there in the
8:58portfolio today. In this property
9:00specifically, our current value that was
9:02appraised is $3,850,000.
9:05And so when you deduct the $1.4 million
9:08from the loan from this $3.85 million,
9:11that means we have $2.45 million of
9:14equity just sitting in this property.
9:15and we had the cash flow to support if
9:18we wanted to pulling some of this equity
9:19to go do more deals, which would mean we
9:22would have zero money out of pocket in
9:24those new deals because we could pull it
9:25directly from this deal. The thing about
9:27this that is so important to recognize
9:29is when you buy real estate like this
9:31that is cash flowing, our tenants in
9:33this storage facility are the ones that
9:34are paying down the debt. So every
9:36single year when you make a loan
9:37payment, you're paying the interest on
9:39that loan and you're paying the
9:40principal down. So every single year,
9:42this 2.45 million, it grows. It grows
9:45every single year, every single month.
9:46Every single time that we make a
9:48payment, it's growing. And we're not
9:49taking any money out of our pocket to go
9:51and pay that loan. It's simply being
9:52paid from all of our tenants. You saw
9:54what it looked like before. There are
9:56deals sitting in your neighborhood
9:58somewhere. There's an old old lady, an
10:00old man, whoever it is, they've owned
10:02the building for a long time. The story
10:03is always the same. It's generally
10:05somebody in their mid to late '7s, maybe
10:08their 80s or 90s. Whether if it's a
10:10storage complex, their husband or wife
10:12or their family built it and then
10:14they've just mismanaged it for years.
10:16They become friends with their tenants.
10:17They never raise rates or like in this
10:19scenario, they literally just let it
10:21fall apart and it just becomes nothing.
10:23It becomes valueless to them. What we
10:25end up doing is we go in and we build a
10:27personable relationship with these
10:29people. We call them, we send them
10:31letters, whatever it takes to get our
10:32foot in the door. And then what we do is
10:34we just build a relationship with them
10:36and we show them past deals we've done.
10:38We show them future deals we're doing
10:40and we explain to them to some extent
10:42what we're going to do to take care of
10:43their property. We're very transparent
10:45saying, you know, we're going to have to
10:46buy this property and put a lot of money
10:48into it to get it to where we need it to
10:49be. And that's why we're able to
10:51negotiate such good deals is because our
10:53thing that we are really good at is
10:55justifying our offer. Why would somebody
10:57sell it for below retail or below market
10:59value? You guys are probably thinking, I
11:00would never sell something for below the
11:02market. You never know what kind of
11:03situation some people are in. Sometimes
11:05they need cash. Sometimes they just are
11:07tired of owning it. But when you can go
11:08in and build a relationship, build a
11:10connection, and figure out what their
11:11pain points are, you can use those to
11:14then go in and negotiate a good deal for
11:16yourself, that's what we do time and
11:18time again. We build really good
11:19relationships with our sellers. Some of
11:21them have even gone so far as to get
11:23cash out on a deal just like this. And
11:24then what they end up doing is
11:26reinvesting their money with us as hard
11:27money lenders. So we'll give them either
11:29a cash out on their property or a lump
11:31sum down and an owner finance. And what
11:34we will do is we will then build a good
11:35enough relationship where they become
11:37lenders or investors to us. That's the
11:39most important thing with closing these
11:40deals that's different than a lot of
11:42other industries is you got to build a
11:44relationship with the seller. Because a
11:45lot of the times these deals, maybe they
11:47ran their business out of them, maybe it
11:49was something that they built, but
11:50they're connected to it emotionally. And
11:52so we go in and we figure out what their
11:54pain points are and we figure out a way
11:56to make it work for them and make it
11:57work for