Large Group Short Term Rental Investment With Andrew Llewellyn

The REI Diamonds Show - Daniel Breslin | Andrew Llewellyn | Large Group

 

Host Dan Breslin and Andrew Llewellyn discuss the unique and profitable real estate strategy of converting distressed, non-liquid commercial office buildings into highly liquid, cash-flowing residential-style boutique hotels designed for large group short term rentals. Llewellyn’s model works by acquiring property for the value of the “dirt” and transforming the asset. He capitalizes on Louisville’s favorable zoning and consistent demand, ensuring his properties are premium experiences rather than commodity rentals. Llewellyn views the operation as a “cash manufacturing machine,” optimizing efficiency and turnover using operational principles from books like Traction and The Goal.

 

Andrew Llewellyn & I Discuss Large Group Short Term Rental Investment:

  • The Strategic Advantage of Office- to Apartments Conversion  (00:26:50-00:28:37)
  • Acquisition and Build Out Costs for the A12 Project (00:28:58-00:30:12)
  • Key Market Factors for the Duplicating the Strategy (00:31:16-00:37:09)
  • Future Pivot to Flex Space and Operational Strategy (00:40:04-00:46:26)

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

 

Watch the episode here

 

Listen to the podcast here

 

Large Group Short Term Rental Investment With Andrew Llewellyn

Andrew Llewellyn, welcome to The REI Diamonds Show. How are you? 

I’m great. Thanks for having me, Dan.

Getting Into Real Estate Through The Hospitality And Food Industry

For sure. Interesting topic and interesting asset class. I probably would label this maybe commercial real estate/short-term rental, which is intriguing. A lot of people are doing these mountain house short-term rentals. This is something new. Before we get into that topic, I have a question. Was it true that you were trying to open up a bakery business or something of that nature? 

That’s some great research. Originally, we had purchased the building I’m in to be a wholesale bakery. Our city permitting council had other ideas for me in order to do the bakery. The cost shot up so much to the point where I was like, “I don’t think we can sell that many blueberry muffins to recoup that money.” During the tour when I bought the building, a buddy of mine had said, “You should Airbnb the whole place.” I thought it was a joke. It turns out that when I modeled it, we should Airbnb the whole place.

That’s pretty cool. What year was this? 

 

The REI Diamonds Show - Daniel Breslin | Andrew Llewellyn | Large Group

 

This was 2021. It was still in that “Is the world going to melt down?” COVID era. I had two ice cream shops. We were running a food truck with that concept and a wholesale bakery out of the back of the ice cream shop. We needed to move the wholesale bakery. That’s how we got to this property. It got into real estate by mistake.

From a location stamping question, I’m in Chicago right now, and you are in? 

Louisville, Kentucky.

It will be relevant to the rest of what we’re going to cover here. Why the food trucks? Was that a business that had a low barrier to entry? Was it family? This is an interesting start. We don’t hear it often on this show. 

The food truck was a mobile concept of what we were running in the ice cream shops. Our twist on the ice cream shop was that we were doing the European Liège waffle. That’s a yeasted dough with pearls of sugar in it. I had the thought to add that product to the menu because you have one new product, one new piece of equipment, and you get a whole new menu. We were doing ice cream on top of these waffles. They were the same toppings as ice cream. From a production standpoint, it was super simple to set ourselves apart from the competition.

Is that cyclical? It’s not hot year-round in Louisville. 

It’s very cyclical. It’s a warm-weather business only.

Is it still operating, or did you make the decision to close that down? 

When the lease ran out, I decided to close it down because we were doing so well with our short-term rentals. After COVID, they printed so much money. The cost of a 15 or 16-year-old kid to scoop ice cream became expensive. Plus, they had to take tips. The food cost went crazy. All of a sudden, to make the right margin that we were making, we stopped being a snack or a treat. We were like a meal. We were having $40 checkout tickets for ice cream. That doesn’t fly. That’s not sustainable.

That’s wild. We have this hospitality food industry entry point into real estate. It feels like it was more of a business than an investment. I would like to ask about investment philosophy. That would be the set of rules or your thought process around investing. Do you have an investment strategy at this point, like an investment philosophy? If so, what would that be like in a sentence? 

Our investment strategy is to buy a building for what the dirt is worth, something unwanted that has been on the market for a while, with some potential, and in a good location.

You then turn that around.

I guess the most familiar term to people would be the BRRRR model. Run the BRRRR model on a commercial building and turn it into a hospitality.

Getting A 10,000-Square-Foot Five Apartment Property

I believe this is your building. Is this the building you’re in now? 

That’s the building I’m in now. I am in the basement of that building. Our guest showed up at the bachelor party. We typically do a full property buyout on the weekend. About 25 guys showed up three hours early before check-in time. I’m down here in the basement doing this show.

Here’s the interesting thing. For people who are not watching, you can check this out. What is this, Swepson? 

The best place to check us out is SuperStaysSTR.com.

You got that. This is the Swepson Guesthouse. This is 10,000 to 12,000 square feet. It’s a storefront with apartments above it. Those in Chicago and Philly know the deal with what this is. It’s 5,000 square feet per floor, give or take, maybe. 

It’s about 3,300 a floor, 10,000 square feet total. We have apartments on every floor, including the storefront. We fogged that glass in and put apartments there. It’s pretty cool.

It’s an interesting loft-style construction layout here, 42 guests maybe, if you took the whole building. Is that right? 

If you took the whole building and you packed it in, we can do 42 to 50, depending on how tight you want to pack it. Forty-two is a good place to stop.

This is spread across four or five apartment units total? What’s the layout? 

It is across five apartment units, two on the first floor, two on the second, and then this cool, lofty space on the third floor. That winds up being the hangout space.

That’s a lofty spot. How many beds and baths per unit do you have in there? 

It’s a mix. We have one four-bedroom unit. We have three three-bedroom units and one two-bedroom unit. It’s a bit of a mix.

How many bathrooms per?

There are two bathrooms per unit.

The details are important. I know you and I are looking at this, and you look at this every day because you’re working out there right now. For people reading, I’m trying to help paint the picture of what we have here. A 10,000-square-foot. I would call this a five Class-A apartments due to the construction, the detail, and design that we have here. What my mind goes to is, Airbnb is working right now. I’m sure it’s always going to work. You’re operating it very closely. 

Even for somebody who’s going to make the loan on the property, co-invest, or own the property long term, if you don’t want to do the short-term rental thing at some point in the future, if the short-term rental thing becomes not a fad, or if people migrated away from it for some reason, the backup plan is you’re renting it out as an apartment building. You’re walking away with cashflows. Is that what you were thinking here?

When we decided to pivot from the bakery to this, it was like, “What’s plan B, C, and D if Airbnb doesn’t work out?” Plan B was, “We’ve got five great apartments in this building and a growing neighborhood. It should cover the note if the Airbnb doesn’t work out.” Luckily, it has worked out well.

One thing to highlight here, I have a property where I stay in the wintertime in Florida. I throw it on Airbnb. It offsets some of my expenses. It’s not a cashflow machine. It’s not a business I’m running. I don’t self-manage it. I’m not tweaking all the knobs and trying to make it push every last dollar the way that you can when you’re running the business. It was good the first year, and then 3, 4, 5, or I don’t know how many more, popped up in the same neighborhood. 

One of the neighborhoods would allow it to happen. You could get a short-term rental there. It was legal. It was part of why I bought the house there. That’s why everyone else followed suit and moved in. Our creative property, 3,500 to 3,800 square feet, with the slides for the kids in the building and bunk beds. Suddenly, the neighbor down the street is putting in an outdoor basketball court and a pickleball court. They’ve gone Disneyland with it. There’s a ton of competition is where I’m getting at. 

One of the niches in short-term rentals that you have taken advantage of here is that you can accommodate a small number of guests in one apartment unit. The thing that is hard to replicate is that somebody takes all five units and has the bachelor party, the wedding, and the corporate event. I look at a property like this, and I’m thinking to myself, “If I were going to have my family all together, we have a choice.”

We rent six or seven hotel rooms. It’s odd. We’re all eating down there in the public space. We find an interesting place like this. We take the whole building over, whether there are couples with kids, the grandparents, or what have you. You have this very unique place that you’ve created with a lot of flexibility and a high barrier to entry for someone else to come in here and compete with you. 

With families, we find that they like that they can be together. There’s enough space to gather, have a meal, hang out, and be with one another. At the end of the night, as families do, you’re like, “I’m ready to get away. I want to go back to my unit. I’m good. I’ve had eight hours with you. That’s good. I want to go watch TV by myself.” You can do that. Families with kids who come here love that the kids are contained. The backyard’s fenced in, gated. They know where the kids are. The kids can run the whole building.

 

Large group short term rentals work best for families who want to gather for meals and hang out together in one common space.

 

It’s a great setup for families, large groups, and corporate retreats. We can see all our reasons that people stay with us up there. It’s a great place for everything. With the high barriers to entry, it is a big chunk of change to open one of these, and then to find a lender that believes that you can operate at this scale. That’s definitely a barrier to entry.

Breaking Down The Financial Aspect of The Property

Let’s run through what the numbers look like. What did this cost to buy? What did it cost to renovate? What is the high end of the rent if someone takes the whole building? What’s the low end of the rent? This thing is probably seasonal. You’re going to get more money at certain times of the year than the other. 

We bought this in a questionably up-and-coming area during COVID. It was a big bet. It wasn’t for Airbnb like I talked about. We were like, “I hope the neighborhood turns around. It’ll be a great investment. We’ll have a cool property if the neighborhood turns around. If not, that’s okay. We’ll have a bakery. We’ll make it work.” We paid $980,000 for this building, which was not much. We spent about another $400,000 to renovate the first floor and furnish the place on one floor. When the property was purchased, it was this cool, lofty apartment on the third floor, and then two long-term tenants on the second floor. Their leases came up. They didn’t want to renew. That was another reason to push for this Airbnb project.

Did you also have to do some improvements on the other floors, or are they not quite like the other build-out? 

They required, and I would put it in lipstick-on-a-pig category, a little bit of paint, a change in a couple of light fixtures, and a couple of bathroom vanities. It was nothing like the first floor, where we were putting in demising walls and plumbing. That was a complete gut and restart.

All in basis here, maybe 1.6 or 1.7, or something like that. 

It is 1.5.

What are the rents looking like, high and low seasonally? 

We’re typically running about $2,000 a night for the whole property. That works well for us. It produces plenty of cashflow. Depending on the month, it is $10,000 $15,000 in free cashflow.

That’s after the mortgage, the expenses, and the whole thing?

Yes. It’s a great deal.

Were you able to refinance all the cash out at the 1.5 basis? 

We were. I’ll speak to that quickly. When we decided all of a sudden, we were doing real estate instead of ice cream and food service, it became clear that I needed to take a couple of courses. I found a couple of online courses. I don’t remember what they were, but I learned about cap rate, refinancing, and NOI. I got up to speed on everything. By the time we had started construction, I had an idea of what the process needed to be and how to execute on that.

You have the most accidental real estate beginning. There are people who have the accidental thing, but usually, it’s like, “I read Rich Dad Poor Dad. I found out about rental houses, and then I went out and did X, Y, Z to get into real estate.” You’re like, “We’re here making these ice cream pies. We couldn’t do it, so we decided that this would work,” then it did. On the website here, you have your newsletter. Sign up here. Keep in touch. That’s good, if anyone wants to check that out. 

Understanding How A Residential-Style Boutique Hotel Works

That site that I looked at here is SwepsonGuesthouse.com. You could check out those photos for yourself or check out our video on YouTube. We have this first very interesting mini hotel/experience/oversized Airbnb asset class. I don’t know if a boutique hotel is how it fits. How would you define this? You watched a couple of courses on commercial real estate, so clearly, you are an expert by now. How would you define the asset class? 

It sits in no man’s land. Let’s take the perspective of banks. If you go to a bank that loans on Airbnb, they say, “No, it’s a hotel. We don’t do that.” If you go to banks that do hotels, they say, “It walks like a duck. It’s an Airbnb. We don’t do that.” It’s in between. The term that we’ve come up with is residential-style boutique hotel. That’s the best way we figured out how to clearly describe it to people and be articulate with it.

I’ll probably agree. You’re pretty hands-on. You’re in the basement and probably talk to those guests who are upstairs. 

My favorite part of the job is meeting the guests, finding out where they’re from, finding out why they came to Louisville, and giving them a tour of the property. That’s a highlight.

It makes sense. The investor stack, were you independently wealthy, and then you built this project because you had enough money to do it? What was it like? How did you get it done from the beginning? It was $980,000 to accidentally do a real estate deal. You’re like, “It was a good deal.” That’s almost $1 million. That’s a big swing. 

I had the ice cream shops. We were doing well with that. My dad was my business partner. He was silent off to the side. I called him. I was like, “This bakery thing, we’ve got to get this out of the back of the ice cream shop. We need a new space.” Dad had been in business for a while. He was like, “I’m tired of seeing you pay rent to somebody else. Let’s go find something to buy, and I’ll help you. You can get it stabilized. We can figure out the bank thing in a little bit. I can’t stand seeing you pay any more rent.” Dad’s tired of seeing us pay rent. A buddy of mine knows someone in his real estate office who owns this building. She was trying to offload it quickly.

Dad stepped in and said, “We’ll deal with the banks later. I’ll help you purchase it.” Dad purchased it with me and with the idea that it would be a bakery. That was very helpful. When we got to the Airbnb part, by the time we got there, I had taken the real estate courses. At the time, it didn’t feel so whimsical and like “This is such an accident.” It felt more like, “I’ve got a million-dollar problem on my hands. We’ve got to dig in. We have to solve this.” It’s how it felt. In that process and taking those courses, I understood then, “If we do this, we add the value of the renovation. Dad can get his money back out. We can move along. We can keep going.”

These buildings are hard products to make work. We’re doing deals all over the country, probably 1,800 since 2020, and 1,000-plus before that. Any time we get these mixed-use storefronts and apartments above them, it’s a very limited buyer pool. The tenant pool is also limited. You’ve got to be in a prime real estate location to get Starbucks or some national tenant in there, and then suddenly, the building looks like a no-brainer. 

Ninety-eight percent of this product is not national tenant type locations, Class A locations, where you’re going to be able to get that. You’re stuck dealing with the local ice cream guy who leaves at the end of his lease. The product doesn’t have a lot of buyers. It is viewed as highly risky, the storefront with a couple of apartments above it. I can imagine the fire lit under your ass as you were sitting there with this million-dollar building and no more bakery plan. Did the neighborhood end up swinging up a little bit since then? What happened in the market there?

The neighborhood thankfully continues to grow. We’ve had a couple of other entrepreneurs in the neighborhood come in. There’s a guy in the neighborhood. It’s a QOZ. It’s a qualified opportunity zone. That’s actually helpful for bringing in the neighborhood and getting it to rise. The city has been putting a lot of dollars and promotion behind getting people to come to the neighborhood and be entrepreneurs here. Across the street, two girls opened a fancy wine bar and a coffee shop. That has been great. We’ve got a carpet store next to us, a wedding shop, restaurants, and a brewery. It continues to grow and grow.

Acquisition And Build Out Costs For The A12 Project

Some of that, you were part of the trailblazing pioneer. Your dad’s faith is admirable in taking the step in that direction, as is the case for a lot of real estate investors who take the plunge into these areas on the upswing. We covered that case study pretty well in detail. Let’s switch gears here a little bit. You had mentioned a new project. 

It is called A-12.

The A-12 project is probably bigger than this. I couldn’t find much info or photos online. You’re going to have to paint a picture all on your own using words. 

We’ve been very purposeful about not having that out there yet. We want to have a good launch with it, trying to tease it as much as we can. The picture is that we are three blocks away from Whiskey Row in downtown Louisville. This property that I currently sit in, geographically, is about 2 or 3 miles away, so they’re generally pretty close. They’re about five minutes apart driving, but it is in the prime bourbon tourism location that you want to be. It’s 18,000 square feet of a 1970s warehouse that was then converted to 1990s office space.

When I purchased that building, it had an adult daycare on the first floor that was on a month-to-month verbal lease at half the market rate and an ACT high school kids’ test-taking prep on the second floor, also on a month-to-month verbal lease. That property had been on the market for almost 500 days. Nobody wanted it. I walked in, and I was like, “This is a huge problem. I don’t know if I can take this one on.”

Just out of curiosity, I called a real estate lawyer that I knew. I was like, “How much if I have to go all the way and evict these guys?” He gave me the number. I was like, “That’s not that bad,” considering the size of the project that we would have to do. I was like, “Let’s try it out. It’s 18,000 square feet. We’ll end up with 32 bedrooms down there. We’ll run essentially the same exact model that we run at the Swepson of large groups that need a place to stay together and then want some cool hangout space to be able to actually gather, not in a public hotel lobby.

Will those 32 bedrooms be laid out in ten units or something like that? What would that look like? 

That’ll be laid out in eight four-bedroom units and then two annex units in the basement.

It’s so great because, even from a retirement perspective in commercial real estate, we deal a lot with owners of businesses who are 75, 80, or 85 and are still running their business. A lot of times, we have an offering on a 9,000-square-foot warehouse. The guys are closing down this odd niche, little stamping business. The exit on that is not very liquid. We have to take risks. It’s the same thing you’re dealing with. We have to get it at a good price. There aren’t a lot of buyers out there. 

There are some buyers out there. I even liken this to the Swepson house. Had you bought it, run the bakery in there, and then run that until you were 75 years old, you turn around and sell it. You’re selling this odd mixed-use thing with the storefronts. That’s not a lot of buyers out there. There is not a lot of great exit out there, whereas the model that you have, you can run this for assuming the market holds up for 10, 20, 30, 40, or 50 years, however long. If a day comes and you want to retire, you have a highly liquid asset in a logically built-out with large-unit apartment building. 

Barring big negative population growth or something like that, aside from single-family houses, apartment buildings are the most liquid asset that I’ve dealt with out of all the asset classes. It’s simple. The banks know it. It’s easy for people to understand. It’s like the apartment they lived in, so they can relate to it. You have a huge buyer pool compared to many other businesses running in their own or operated locations that then have to exit their unique, not-so-liquid, hard-to-figure-out property. It is exactly what you bought here in 18,000 square feet of office space, in today’s environment. 

The people we bought it from are a legacy family in Louisville. They have plenty of money. The brother-in-law was tasked with managing these tenants. He was like, “I have a family office that I operate. This is a thorn in my side.” We offered him around $50 a square foot for it above ground. That was off the ground. It was $11,800. We paid $1.18 million for it. It’s got 25 parking spots downtown in the central business district.

You even have a lot there. 

We looked at it. We’re like, “What would somebody pay for this lot? That’s probably what we’ll pay for it.” We picked up the headache of the tenants.

That project, if I had to guess, is probably going to run somewhere around $1.2 million to $1.5 million to build. 

Yes, a little bit more, with the furniture and the plumbing.

It makes sense. Is it wide open lofts right now? There’s the frame and everything.

It is completely gutted. It’s just four walls, a white box, essentially. I’ve had guys in there for a month, gutting the ’90s office space.

What a great asset, though. Once it’s all done, it’s all modern plumbing. It’s the newest wiring with brand new insulation wrapped around it. You have probably 100 years of usable life out of what goes in there. In some of my old apartment buildings, which I got rid of, there was the cloth wiring. It’s a never-ending repair pit. This is a great example of office building adaptive reuse, or the mixed-use thing. It’s tough, and it’s a cool way to reuse that space. 

Key Market Factors For The Duplicating The Strategy

I guess this would work in some areas of Chicago, but it doesn’t work everywhere. If people are reading, they know of some building, and they want to duplicate the strategy in another city, what are a handful of things they would look for and say, “Yes, it would work in this location, this neighborhood”? What are the things that drive this large group gathering event space that you’re running? 

Here’s the first thing I would look at. Can you run a residential hotel, a boutique hotel thing that we’re doing here? Can you run that in a commercial building? I know you can go down to Atlanta. No chance you’ll be able to do that down there. You’re going to have to get rezoned, that whole process. I wouldn’t say we have a lack of zoning laws, but they’re not as strict as in some places. “Can you do it?” is the first question, with the zoning. The second question is, do you have the neighborhoods surrounding you to support it? Every time you go to a hotel, you’ve got a coffee shop. You’ve got a place to get breakfast. It’s got a gym and a workout room. Does the neighborhood have those amenities that you’re not going to put in the building? You don’t want to end up on an island by yourself.

 

Make sure the neighborhood around your hotel has various amenities available that you will not put in the building itself

 

What about demand in the area? We can’t have this in a high-crime area, in an area of town where things don’t work. We have the coffee shop. We have the gym. Maybe we even have a bunch of restaurants around there. In Louisville, you guys have the Kentucky Derby. You got this bourbon culture thing going. 

I always tell people, Louisville Tourism, the organization that promotes tourism and gets events to come to Louisville, the whole city is riding on their back. We’ve got the Kentucky Derby. We’ve got two giant music festivals. Two weekends in a row, they attracted over 100,000 people, back-to-back weekends. That’s huge for a city like Louisville that has a million people total. We have one of the larger convention centers and a tertiary market. Also, we have a giant fairgrounds. They keep those things booked. We’ll do obscure events year-round, like a farm and machinery show. The power company has those trucks with the buckets. They’ll have that convention. We have the Rabbit Breeders of America convention here.

I know a guy who used to attend that.

It’s obscure events after obscure events that are bringing tens of thousands of people to Louisville. Here’s the last piece that drives traffic for us specifically. Louisville is fairly easy to get to because it is central to the United States. There are a lot of remote teams out there that are trying to find a place to get together. We’re finding corporate retreats that need to get people from all around the US together in one place. Louisville is central on the map.

You have to be in a location where you can potentially have a corporate retreat. Ideally, you have some tourism functions there, maybe sports teams. You guys have the Kentucky Derby, but those same tourism things are going to be part of the draw for things like bachelor parties and bachelorette parties. Family reunions probably even need some semblance of a tourism draw. 

You don’t want to be out in the middle of a small town in America, where there’s no population, no airport, and barely a highway exit. This is not going to work there. There’s probably a spectrum of rural near-zero population, near-zero traffic to New York City or downtown Chicago. A little further back on that is maybe the Louisville market. Somewhere up at that other end of that population, that tourism thing, this strategy works. It’ll be left to the eye of the beholder to figure out where that is. 

I did a small case study with a mentor of mine. He said, “Why don’t you go to Nashville next? It’s the bachelorette version of Las Vegas on the East Coast, and plenty of traffic. You can get it to work.” We looked at it. The problem is that the real estate costs twice as much there. There are so many investors there that the rental rate is half. The math doesn’t work on paper. You have to find that right balance for the market and the aging of the market, too.

 

Before opening a rental property in a certain location, make sure to strike the right balance between what works on paper and what works on the market.

 

Is there a strategy for underwriting the rent? How did you determine that Nashville was a pass and that the rates were half of where you’re at? 

They have a lot of class B or class C inventory of large units. There are guys down there building zero-lot-line houses and multi-story condos, and doing large group stays. They’re not unique. They’re commodity-type things.

How are you going to stand out? 

They are not three times the price cooler to the commodity guy.

A lot of them are going to be commodity guys when it boils down to the end. That’s part of the issue I’ve always had with the short-term rentals. I was bullish on it when I bought my own vacation house in Florida. I’m like, “This is great. The projections look great.” Year one was great. That was probably 2023 or something, then the bubble popped. It seemed like all that printed money that you were talking about earlier cycled its way back through to its rightful owners. 

It is the government.

It is probably those who figured out the game of money who are tuning in to this show. Certainly, all of us have some of that in our pockets and net worse here at this point. It’s that competition thing. Airbnb, several years ago, or whenever it first came out, you could put these somewhat dated places to stay, and people would do that. You couldn’t get away with that. I remember 2017 or 2018, I had an Airbnb. Mine was the dated apartment unit. It’s booked. It did okay. It was in a decent enough neighborhood that was trending, probably similar to where your project is located, translated into the city of Chicago, but then everyone else was competing me away. They were renovating units. They weren’t even cool, but they were a fresh renovation. 

What happened in Florida, we were on the front end of the design and coolness with my property. That got trumped exponentially two or three more times by the next units that came on. You got a good thing going. I don’t know how duplicable it would be. I’d probably caution the audience to make sure you’ve dialed in the business model and tested the market and all of your assumptions before you pull the trigger on a $980,000 purchase for the asset no one else wants. 

We were lucky to have the first floor and, at the time, the second floor. We were getting a little bit of cashflow from there. It was covering the interest, so that worked.

Future Pivot To Flex Space And Operational Strategy

It sounded like a perfect deal, especially for deal number one here. We have A-12 cooking and being developed. What’s the future looking like for you? What is the goal in 12, 18, or 24 months, or in 5 years? What goals do you have? What vision do you have for the future? It seems like you’re working towards something. 

We’ll probably stay in the real estate game. I like the side of real estate that we’re in. You can put some business acumen into it. You can set yourself apart from the competition and do something a little different to get a premium price per square foot, if you want to put it in real estate terms. I don’t know if we’ll actually do any more short-term rentals, to your point. There might be a city where we could do it, but the economics of getting there and running it probably don’t work.

We’re here in Louisville. This is where we live, and it works well, but getting on a plane and spending a day or two getting there is not a passive game. For the audience, I’d be cautious about that as well. We might start looking into some higher-end flex space. I have a couple of friends who are doing that in different cities. Listening to them, the business acumen that they’re applying to it, and helping those smaller, newer, unsophisticated business owners grow their business and have a nice space to run it out of seems interesting.

I think that flex is having its moment. There’s certainly a place for that as an asset class. You’re absolutely right. The inability to scale what you’re doing is what I suspect would happen. I probably would have worried for you if you’re like, “We’re going to have 62 of these things in every city, including Anchorage, Alaska.” Maybe you can do it. I have a friend who had a similar product to what you have here in Savannah, Georgia. It was great for a while, but he didn’t live there. 

He lived in Boston. It was the flights and the back and forth. Eventually, the management got tired of it. He sold it. He exited. Ironically, that guy is doing pretty much all flex space now and loving it. He’s doing some scaled-up deals, but in the interim, if I were in the basement, that was my office, I’m working there, and you don’t mind it, great business model. Let’s run this thing. 

I don’t think the scalability is there. It’s so hands-on, which is fine. We’re getting paid well for what we’re doing. I don’t see it scaling with the amount of capital required to build one of these. Unless you’ve got multiple family offices in your pocket that are super bullish about large-scale Airbnbs, you’re probably not going to be able to scale it nationwide.

It makes sense. Have you gotten any repeat bookings yet? Are there any people who come for the same week, year after year, and you can inch up the rates on them? 

We’ve got a couple of those guys, a couple of church groups that come every year, corporate retreats, and sales teams that bring customers in. They spend money, take them on the bourbon trail, and have a great time. We’re getting more and more of those. Our Thanksgiving guest is actually a family. That’ll be their second time with us.

It seems like the endgame for one of these other vacation homes that I have my eye on. It’s a summer town in New Jersey. I’m like, “I don’t know. Short season, egregious prices out there, but I like going out there. I’d like to stay for a month or six weeks before I head to Florida.” Some of the allure is that it is the same family who is coming. That’s their week. The second week of July, they take their vacation. They’re going to do that for ten years. 

It seems like this great end goal, where you have your property. It’s like January, and the same people are there. It’s a twelve-week season or something. Maybe nine or ten of those weeks, it is the same people. As soon as they’re done with that vacation, they book for the following year. It’s something to repeat native subscription revenue out of real estate at the high end when you’re dealing with these group luxury rentals that we have here. 

We’re trying to push more and more recurring revenue from past guests. Part of our business is milestone events. Let’s hope you don’t have two bachelor parties. Guys, don’t turn 50 twice. That recurring thing for us is a little difficult. We definitely need to work on it.

What other things do you think are relevant that I may have forgotten to ask about? 

We hit all the main real estate side investment points about this business, the way we look at properties, buying them for the dirt, and building them back up.

Andrew’s Book Recommendations

There are a couple of quick questions here as we close and wrap up. Book recommendations. I’m interested to hear one or two books that you found impactful as you started on this real estate journey. I’m expecting to be different than a lot of the guests who showed up because your path is.

Let me give you probably three, the most impactful for this business. Gino Wickman’s Traction is amazing. FranklinCovey’s The 4 Disciplines of Execution is about leading measures. Eli Goldratt’s The Goal is for looking at this as a cash manufacturing machine and sending cleaners through here efficiently to get the place clean quickly and turned back over.

 

Mentorship will be effective if you take the time to have an actual conversation. You should know when to keep quiet and not ask too many questions.

 

Those are some interesting ones. Two out of the three, I have not heard of or considered before. 

Which two are those?

Covey and Goldratt’s. Traction is making its rounds. We hear a lot of that. A lot of us have gotten a lot of value out of Traction, 100% worthwhile, but the other two are interesting. I have to get those ordered. 

Those are good.

Get In Touch With Andrew

Where do you want readers to go? I know you mentioned a couple of websites early in the show, but where should readers go if they want to get more information? 

If they want to get more information about staying with us, it is SuperStaysSTR.com. I love to help you plan your bourbon trail trip, corporate retreat, bachelor party, or fiftieth birthday party. If you want to follow the renovation down there at A-12 from the office to a boutique hotel, and probably eight months to a year is what it’s going to take us, you can follow me on all of socials @IAmAndrewLlewellyn.

Take The Time To Have A Real Conversation

My final question, I ask all the guests, what is the kindest thing anyone has done for you, Andrew? 

It is taking the time to have a conversation with me and let me ask questions, not telling me, “You’re asking too many questions. Be quiet.” It is mentorship.

Ditto. I have a couple of pages of notes. It was a great topic and a cool business model. I appreciate your time, Andrew, coming on the show. 

Thanks for having me on, Dan. I loved it.

 

Important Links

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

About Andrew Llewellyn

The REI Diamonds Show - Daniel Breslin | Andrew Llewellyn | Large GroupAndrew Llewellyn, CEO/Founder of Super Stays STR, is a real estate entrepreneur in Louisville, Kentucky, who specializes converting non-liquid commercial buildings into highly liquid mini-boutique hotels for large groups.

His strategy thrives on a strong local demand and is highly optimized using business systems.

 

 

 

 

Build-To-Rent Development With Natalie Cloutier

The REI Diamonds Show - Daniel Breslin | Natalie Cloutier | Build-To-Rent

 

Host Dan Breslin and Natalie Cloutier discuss her unique Build, Rent, Refinance, and Repeat (BRRRR 2.0) strategy for real estate investing. Leveraging her architectural technology background, Natalie Cloutier explains how she scaled a portfolio of high-quality, dense, small multi-family new builds starting with zero capital. The conversation details the practical aspects of her business, including maximizing bedrooms for higher rents and managing significant development risks, such as unexpected municipal fees. Ultimately, the discussion highlights how strategic building and densification offer a superior, capital-recycling approach compared to buying older rental stock.

 

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%.  Buy & Hold Loans Offered Even Lower.  Get a FREE IPad when you Close Your First Deal by Registering Now at http://REILineOfCredit.com

 

Natalie & I Discuss Build-to-Rent Development:

  • BRRRR 2.0 (00:01:30-00:01:55)
  • Mitigating Development Risk (00:15:18- 00:18:42)
  • Tenant Vetting & Operations (00:31:38- 00:37:28)
  • The Sabbatical (00:37:23- 00:24:16)

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

 

Watch the episode here

 

Listen to the podcast here

 

Build-To-Rent Development With Natalie Cloutier

Natalie Cloutier, welcome to the show. How are you?

I am great. Thank you so much for inviting me on. I’m very excited to be here.

I’m glad you came. When I saw the booking come through and do a little preliminary research. I was like, “This is an interesting one. We haven’t explored this topic and not a lot of people are doing it or talking about it.” We’re going to be talking about the build-to-rent for the folks reading. There’s a lot of institutional money doing that. That’s what I thought when I saw the topic, “It’s the institutional thing.” It’s not that. The readers will be surprised. Before we jump into that, though. One of the other interesting fun facts here. I’m recording from Chicago and you’re recording from?

Canada in Ottawa, so the capital of Canada.

I have some friends doing some development in Winnipeg now with a 30 or 40 or 50-story building or something like that with the university. I think in a partnership, it’s a cool project to watch these guys bring out of the ground.

 

The REI Diamonds Show - Daniel Breslin | Natalie Cloutier | Build-To-Rent

 

That’s awesome. I don’t do that.

Understanding Natalie’s BRRR 2.0 Strategy

I wouldn’t be little or talk down. The things you’re doing are very interesting and they’re relevant for what we have for the audience. Let’s start with the investment philosophy. If you had to distill your investment philosophy, your strategy down to like a single sentence. What would that be?

I’ve been using the BRRRR 2.0. If your audience is familiar with the BRRRR strategy that Brenda Turner coined, the buy, renovate, refinance, and repeat or whatever. I might be missing R in there. I do the build, rent, refinance, and repeat. It’s basically the same strategy and what’s cool with it is that you can recycle capital endlessly to grow your portfolio and scale it to whatever amount of units you want to do.

How Natalie Started Out With Zero Capital

For the reader who hasn’t figured it out and didn’t do the research. Would you mind telling us the origin evolution story? Maybe use those photos on the wall behind you.

For those who are looking on YouTube, I have a couple pictures behind me of the houses we build. My mother-in-law likes to paint our projects. These are the first starter projects that we started with. What’s great with the strategy is that anybody can start. We started at nineteen years old with $0. We had no money. We had a basic entry-level salary and graduated from college. We built our own house, which is the greenhouse here. We still live in it. I’m sitting in it and we house hacked, which I didn’t know was a thing back in the day.

We added a basement apartment to help supplement the income because, as I said, we had crappy salaries starting out. We started with $0. We started by buying a basement unit condo right out of college just because that was the only thing we could afford. We bought it with the CMHC first-time buyer loan. Which for you guys in the states, it’s similar to an FHA loan. You go in with a low down payment but you get a higher interest rate in exchange. We were just excited that we were approved for a mortgage but then going in, you realize the interest rate was about 6%. Plus the condo fees were adding up.

As soon as we walked in, they were scheduled to go up. You don’t have a yard and a garage, and you’re in a basement. A few months in, we were very unhappy. My parents sat us down and they’re like, “I’m going to get you in on the little family secret.” They told us about how you can build your own house for $0 dollars down as long as you do some labor work. You get in there and you do some labor yourself to save the money. That’s what we did.

 

You can build your own house for $0 as long as you do some labor work yourself.

 

We built our house. Long story short, we got a basement apartment, lived for a fraction of the mortgage, and then we got a HELOC. We found this very cheap lot local to us. It was a problem that nobody wanted to buy but we have a background and we studied architectural technology. That’s where my husband and I met. We’re not architects but we’re like the CAS ad monkeys, if you will, or did the draftsman. We said, “With our background, maybe we can make something happen with this lot.”

We bought it with the HELOC and we built a little single-family home that we eventually converted into a duplex a couple of years down the road and we kept going. We’re like, “This could be a recipe for a business.” Eventually, after a couple years we realize, “This is investing.” This is an investment strategy. We went in blindly.

Dealing With Fear, Hesitation, And Doubts In Real Estate

You’re getting ready to build the first house. You found a piece of land. Do you remember what was going through your mind as far as the fears or the hesitations as you were considering doing it? Maybe there were any because the family was like, “This is easy. We’ve done him a hundred times. No big thing.”

There’s so much fear. I remember the first day when the excavation equipment was coming on site to come and clear the land. My husband threw up in the bushes because he was so nervous. We were not confident in any way possible. When I told my husband about this, the strategy that my mom talked to me about. I was trying to convince him and we got into this huge fight because he’s like, “I’m not doing that. I’m not taking risks.” He came from a family that never took this risk.

After we did one, he was the one pressuring me to do the next ones. It’s funny how that works. There was a lot of fear and a lot of doubt, but it definitely helped that we had my parents in our corner. They had it built. They built four houses in four years before they had my sister and I, which was like 30 years or 20 years prior to this house. They had experienced but times changed.

They were nervous about it too a little bit, but they had a little built my sister’s house years before. I don’t remember how many years ago. They were helping us through it. We had that guidance, but we knew that it was something we wanted to do because we were just unhappy being in a basement condo. We wanted to do more, so we did it anyway. I’m glad we did.

It’s very interesting. The architectural background, having a mom with experience pushing you in this direction and a husband. What’s the husband’s name?

Rob.

Rob’s over there throwing up in the bushes. I bet the readers can relate. I know I certainly can, even though I’m like 1,800 deals closed and tons of construction and still, I feel not fear but certain anxiety. It’s like, we came through 2020 through 2023 with the inflation that happened, and a lot of very sophisticated investors, companies, and people who’ve been doing the business for 10 years, 15 years, 20 years, and 25 years got jammed up. Some to the point of bankruptcy from the cost overruns when lumber went from, I don’t know what the numbers were, but it was like a 10X cost on just the lumber. Let alone the labor and every other thing you’re going to need. You can’t stop halfway through.

You got to keep going.

Was there a moment in the build that was the same one? The excavator shows Rob’s up chucking in the bushes. Was there another moment where maybe halfway through and maybe it’s like being out on a rope bridge and your past appointed a return or was that it when they were like doing the excavation?

I think that was it because once you get the ball rolling and you get working, for us anyway. Especially when you’re doing the actual physical work. You just get into this work mode, survival mode, and we’re in it. You got to finish it. There’s no turning back now. You just get into that grinding and keep going. Once we had to let go over excavator. It wasn’t working well. We had to hire another one. Early on, we learned the ropes of managing trades, finding the good ones and the importance of all that. It had a stressful moment but this was many years ago already. It’s getting a little blurry. We’ve lived some scary moments since then and all of our other builds. That I can say.

The Challenges Of Mitigating Development Risks

What’s the toughest trade, maybe that you have the most problems hiring and finding or maybe just one of the toughest challenges you faced over that ten-year building cycle out of all these properties that might be like a pitfall for other people to look out for?

That’s like two separate questions. First for the trade. One of the traits that we had the most problems finding was a good plumber because plumbing is tricky. You’ve always got working components with the water and stuff. That’s the first issue like floods and leaks. I think we went through three or four, maybe five plumbers. Now, we finally have a good one, but we’re about to take a break for a year and sit on our assets for a little while. It sucks when you finally have built your team up for ten years. Plumbing was probably the trickiest one because then you have to do service calls during management and then you want to make sure that they follow through on that.

In terms of probably the hardship that we’ve lived. One of the reasons why we’re taking a break for a year, we’re going to do a little bit of soul rejuvenation after that. There’s a lot of things going across the board. Not just in Canada and Ontario, but across the board. There’s new bills in California and Wisconsin that came up to incentivize affordable housing, where anything to make affordable housing help builders cut the red tape and just make the process faster and make it more affordable for people to get in and find rentals.

In 2023, they did that. The province passed a bill, where you could add a secondary dwelling unit onto existing zoning. I’m going to make it easy to understand. For example, if you had a zoning where you were allowed to do a single-family home. You were allowed to add a basement apartment, let’s just say. Now this new bill allows you to add another apartment on top of that already allowed apartment. If you have like this project here, for the people looking. This used to be a duplex. There was no third floor.

We ripped off the roof. We set it on the front lawn. Built up a third unit, and then we put the roof back on when that bill passed into doing three. We doubled the income of that property. That was one of the things we did with that bill. The other thing we could do is if you were allowed to do a semi-detached and then you could add basement units. With this bill, you could add other units on top making it into a sixplex, which saves you the development charges. You only paid development charges on the two main dwelling units. You don’t pay them on the secondary apartments.

That was huge for us because in Ontario, the development charges are like $40,000 for the main unit. You’re spending a lot of money. It would have been in 140,000 permits on a sixplex that we instead paid a fraction of that. The problem we had or the hardship we lived in was that because this was all very new and this was the province’s goals and not the municipality’s goals. The municipality is influenced by the province, by the Upper State to follow these goals. If they don’t want to follow it, they don’t have to.

They’re the ones missing out on these development charges. If you’re going in to build a sixplex that they would have otherwise had like $140,000 of income from that permit. Now, they’re only getting $60,000. They’re not very happy about it. What happened was because we were the first ones in applying for a sixplex in the area. They let it go with the pre-consultation. They were all okay with it, but then when it came time to release the permit, they had some time to do some internal policy changes. They decided to charge us the full amount. We were very unhappy about that because that skewed our numbers completely.

The price from the start, the numbers from the start didn’t make sense. We had a long battle with the city. We got lawyers involved. We got the province’s ministry and the leader of the city involved. Anyways, we had to fight it out and they kept saying, “No, we don’t care.” Eventually, we went for an appeal in front of the city council and that’s where we won. We won our case and we got credited at least $40,000 back which was better than nothing.

That took a toll on us because it was unexpected. It’s something that your audience could maybe learn from. You have to make sure that you’ve got all of these initial consultations with the municipalities in writing, in Black and White, that you are allowed to do this and that means something until you get your permit. There can be a significant amount of time between the time that you do your initial consultations and your studies to the time that you’re ready to pick up your permit. Sorry, that was a long story, but I feel like it’s worth mentioning.

 

Make sure to make initial consultations with municipalities in writing when securing real estate deals.

 

We love stories like this, Natalie. I appreciate the granular detail here. It’s extremely relevant and it highlights the development risk. In a moment, we’re going to take a look at some of the projects. For anyone reading, it’s probably worth going and checking out the video to see the quality of the new construction. It fills in the rest of the story.

It probably also justifies the aggravation and the risk to have this quality class A asset when it’s all said and done. Even if you had to overpay for it by $100,000. If you asked for a 5 or 10 years from now, that is going to be a superior product with higher rental rates than the existing stuff you could have bought that’s 30, 40, 50, or 70 in some of the areas where we invest 100 to 150 years old.

You get a class A tenant from the start, too, which is great.

For the new construction.

That’s what I mean. Sorry.

We ran into that. We have a development project. We’re going to go in for like 7 or 8 units and get that approved. We have a developer who’s going to take the project from us assuming the approvals come. The neighborhood filed with the historic society to try to get it labeled as a historic house so that we couldn’t tear that down. Historic society is like, “This person uses this as a weapon. It’s a pretty common tactic or technique. We don’t see any historical value here.”

My fingers are crossed. Maybe by the time this is live, we’ve gotten our good news and we’re at least one more step into the entitlement process toward getting it done. These are the things that you run into on a development. It’s very common for a $40,000 or $50,000 or six-figure unexpected expense before you even get your permits and that’s where the risk comes in. There’s a certain amount of value that a developer can bring to the market. When they bring a lot that’s entitled and has a permit issued and it’s basically what we call shovel-ready in the industry. It’s a separate topic for another day.

At the same time, it’s worth mentioning because there is risk involved. If you do your due diligence correctly and you go in with the right conditions before even going solid on your offer. You can mitigate that risk. There’s always a way, but especially when you’re doing larger development, then it gets riskier because there’s more studies involved. There’s more contingencies you have to plan for. If you stick to small multifamily, there’s a way to make it a lot less risky.

 

If you do your due diligence in real estate correctly and set the right conditions before even going solid on your offer, you can manage and mitigate development risks.

 

The Price Tag You Should Be Preparing For

What’s the price tag on that? We’re doing some large 100-lot subdivisions and our price tag is about $200,000 to $300,000 at least. Sometimes $400,000 in soft costs, meaning the engineering, the architecture to figure out if we’re going to get the answer from the municipality of, “Yes, you can build,” and we have a project or not. What is that line item for you? You have a lot. You’re going to build 2, 3, or 4 units there, and you’re in due diligence on your contract. Before you lose your earnest money and you got to perform, you have to pay how much to get the answer, whether or not it’s a project you can go forward with?

First of all, that’s why we don’t do development the way that you were explaining it, like the 100 lot development. We don’t do that, especially because of that. It’s very high risk. You need a lot of capital. You need to fund it for a long time. We don’t do it because of that. We stick to infill projects, where the lot and the services are there. Basically, you take property in an urban area. You’ll tear down a house maybe, and then you’ll rebuild and take advantage of the zoning loopholes where you can identify a little bit more than just a single-family home.

Let’s say before you even lift your conditions on your offer and you go firm on your offer. You probably only need a couple thousand because you just need to do maybe a soil test. The conditions that I usually tell people to do is to do a soil test. Make sure your soil makes sense and you’re ready if you need a bigger foundation or whatever to support that soil. You need a pre-consultation with the municipality to make sure that they are in favor of the project you want to do. You want to be clear and upfront with them and you need your financing conditions.

For the financing, you might need to hire a designer to get at least a preliminary done. You don’t have to have the full set of plans done, but you want to make sure that what you want to build fits on the lot. If you want to do a sixplex, fourplex or a triplex, you want to make sure that it fits within that fill project, that lot. You might have to pay a couple of thousand for that initial design or probably not. It’s probably just a few dollars.

For us, we do the designs in-house because we started architecture. I do the designs myself. It’s just that soil test of $350 that we pay for and that’s it. It depends on what project you want to do, how big you want to go and what you need for your conditions. If you’re doing something bigger than a sixplex, then it usually falls into commercial lending. You might need environmental studies. That’s a different ballgame, too. You might still be able to stay conditional on your offer until you can at least raise like phase one of that environmental study. That might be a few more thousand dollars, but we’ve never had to do that yet. We try to stick to small multifamily because the numbers just work.

In the US, the limit would be four. Five units up in the US is commercial financing. Four and under fits the owner-occupant far easier.

It’s the same thing here. It’s just that when you go for six or more, you’re still commercial lending but that’s when the lender might ask for environmental studies. As a fiveplex or sixplex, you might still not need them yet. It just depends on the lender and their specific requirements for the number of units you’re doing.

A Deeper Look At Natalie’s Real Estate Projects

We would hit that with five units. You would fall into that book. Let’s take a look at some of these projects. We’ll treat this like a case study. This is what I thought was cool. It’s the Instagram page. Nice brick facade. We’re looking at a duplex.

It’s a triplex that we just finished building.

You have a two-door entry on the front.

One, you have to go down a couple steps on the side of the building and that gets you into the basement walkout.

It’s a great-looking building.

Those are like larger three-bedroom and three-bath units. We have a four-bedroom in that triplex. Our biggest unit yet.

A four-bedroom?

A four-bedroom and three-bath at the top unit.

What does it cost to build this? It’s Canadian dollars, but we could do the calculation.

This one, we did with a joint venture partner. It was our first time with the joint venture. We’re doing a sixplex with him as well. There’s more cash involved because we’re making sure that all the duties and responsibilities are separate. He takes care of money management. We take care of the actual construction. We’re paying ourselves a rate for each of those. We’re at about $750,000, I have to say. I don’t know the numbers. What is that in America, probably about $550,000?

That’s great.

That’s pretty good. It is valued at about a million.

Is that based on cashflow typically on an appraisal or comparable sales?

They’ll do all three approaches on your appraisal. They’ll take the cost approach. The income approach and the comparison approach, and then they’ll give you a fair market value with those through approaches. It depends on how much weight they want to put on each. In my book that I wrote, I talked about and explained the appraisal process in detail. It’s about the same in the states. The process is very similar for new construction because I spoke to a couple of people in the states. They’ll just take a general amount based on those three approaches.

In the City of Philadelphia, we have an office just outside of Philadelphia. A lot of the audience are from that region, but they’ve had a pro development support, I guess, subsidy. When you build a new building there, you get a ten-year tax abatement. It didn’t matter if it was in the higher-end area, the lower-end area, etc. The lots are small. We’re talking like a 600 square foot lot or 750 square foot lot. Tiny lots, but you could buy them very cheap in areas that were lower income, build a six-unit building as long as it was a corner lot, and then do like public housing. Get an income-based appraisal because there were no six flat comparable sales to get all their cash back out.

His strategy, the guy I know who was doing this, was not to sell any of them. Only keep recycling to cash the same way that you did. I love this build, particularly. A lot of long-term readers probably have heard me say this before, but it’s all about beds and bass when you’re buying a rental property. It’s like, if you’re going to house hack, go out, get the most bedrooms and most bass that you can because you’re going to come in.

The ability to rent to a family as opposed to a one single person or a couple, if this was a one-bedroom, one-bath unit or three-bedroom and three-bath. Now, you maybe got two or three roommates, if you want to accept that, who can afford a higher rent. Maybe you have a family or a couple and two or three children who will probably make that a home and stick around a lot longer than someone who’s a little more transient in the one-bedroom unit.

Over time, the higher rent as it increases and inflation occurs. It just turns out to be a much bigger number that moves the needle. For me, how much dollar and rent can I get for each roof, each unit? The maintenance costs there, if I had have ten units to make that certain rent versus maybe three units to make the same rent. Now, I only have maintenance calls on three units and not ten. I love the three-bed strategy. You put like a classic A product out there that just has no competition.

That’s the goal. A lot of people will stick to two bedrooms because it is easier to manage a tenant that way. When we’re talking Airbnb’s or short-term rentals, then that’s where people maximize bedrooms, typically. For long-term rentals, a lot of the local builders here will stick to two bedrooms also because sometimes that’s what fits the most on a lot. When I’m designing the space, I try to maximize it as much as I can because, as you said, it gives you a broader shot at the market.

It’s less competition. It’s cool that you’re the designer. You’re the one who sat down and made these decisions.

I designed the whole footprint and the outside and all that. I have a lot of fun with it. That’s the part I like doing the most. This one is a six plex that we did. This is the one we had the whole fun with the city council where they owed us $40,000. This one is a sixplex and I loved it. This one is more of an inner rural area. We had to do a septic field for that one. A little bit lower rents, but still three bedrooms and one bath.

What is the rent there?

These are $1965 and we include the internet for $40. It’s more like $1,925 and then for $40 more, they get the internet included. We just put the Elon Musk dish at the top there.

It’s literally that rural?

Yes, exactly. Bell services stop right before this building. This is something that was a hiccup that we learned only after during the build. We thought we weren’t going to get internet access at this building and we were freaking. We’re like, “People need the internet more than the water these days. What are we going to do?” Bell was like, “It’s there. It’s just that, to get it, it stops right before your driveway. To get it to you, it’ll be like $30,000.” We’re like, “Screw you, Bell.” We got Starlink instead and we got a tech guy to wire the units. We put one dish on the roof, and it feeds all six units.

This is from April 28th, the picture that we’re looking at. Do you have six tenants now living in this building?

I do.

Have you had any complaints about the Wi-Fi?

There was one day that they said it was a little slow but I think it’s because it was like a Sunday. Everybody was using it. It just happened. Our tech guy said, “If everybody’s at home using it at once,” which is usually rare. Most people are out and about. Not all six or there at once. We have people doing night shifts and stuff. It doesn’t always happen that way but it only happened once. We had one complaint once from one tenant. I didn’t hear from the other five.

They probably did deal with it. We live in a condo building. There’s 450 units in our building. It’s like a city, but the internet is often slow and that’s why I was wondering. Maybe I’ll have to get a Starlink dish and put it on the balcony railing out here or something.

We love it. My husband’s parents have a cottage. Very rural. It’s like a nomad’s land. They don’t even pay taxes. It’s in the middle of the woods and they never had internet for their 50 years of owning that cottage. Now, they finally got to the Starlink dish and they’re all excited. They’re texting us from the cottage.

How Natalie’s Strategy Evolved For The Past Several Years

Very cool. A couple of things here, class A tenants. We talked about the investment philosophy, the buy-to-rent, and all that. Has that evolved at all? It sounds like you guys just build to rent right from the very beginning. I’m curious if there’s any evolution around your strategy in the way that you invest over the past years.

We grew our business. We grew our team. When we started, my husband and I were doing work around the clock. We started with a forward focus and we were strapping lumber on top of the focus on the roof and that thing. We were working 40 to 50 hours a week and then working nights and weekends on our builds. We didn’t have much starting off as a couple. Eventually, now we have a full-grown business.

There were some hiccups obviously with COVID, the high prices, the lumber skyrocketing and the interest rates skyrocketing. We just always stuck to our core value of staying under leverage. That’s the most important thing that you can do. It’s to remain under leverage throughout your journey because when crap like this happens like interest rates skyrocketing, COVID and all that nonsense. We kept our heads above water. We had positive cash flow in each of our properties. There’s not one.

For a lot of Americans, they don’t know this but in Canada, we have to renew our interest rate every 3 to 5 years. You can lock your rate for a year, 2 years, 3 years, or 4 years, but never more than five. Some lenders will do ten but I’ve never lived that. You guys are very lucky that you can lock in a rate for 25-30 years. That blows my mind. The first time I heard that, I was like, “What?” We don’t do that. There’s a lot of renewal rates in 2023 when the interest rates were spiking or had spiked.

People were going from 3% rates to 6%. A lot of people were cashflow negative and barely holding on to their investment properties. There’s a lot of sales, too. We managed to stay afloat in all of them. We had a little less cash flow for a few of them. When we finished a build, we tried to stay within the 70% loan to racial value. A lot of builders will try to maximize the loan so that they can pull out as much cash as possible.

We usually try to stay moderate with that and we’ll pull out maybe $40,000 or $50,000 if we can. Sometimes less than that and then we recycle that into the next project. We make sure that we’re below 80% as much as possible. We didn’t change our perception that much of the build-to-rent. The industry changes around us but because we stuck to being more risk averted or mitigating that risk. It helped us a lot. I don’t know if that answers your question, though. Is that what you were asking?

That’s spot-on. How does it evolve? Maybe you did it by default in the beginning, but there is a temptation for investors to milk the cash cow and go to the bank to take the money out. I watched a lot of people go belly up in 2007, ‘08, ‘09, ‘10, and ‘11 and that was the strategy. I remember this one guy. He said, “I had a closing.” We went out to dinner and it was a nice restaurant. He’s popping champagne and everything. I said, “Tell me about the closing. We did this and this. We did a refinance and got $90,000.” I’m like, “This is not a celebration. You didn’t make a profit. It’s not sold in the books here. You owe that $90,000.”

You have to make sure you can pay that back with high rents and interest rates.

Dealing With Tenant Vetting And Operations

Being on the lower leverage side is a critical and important piece. Class A tenants, was it a deliberate choice? Did it happen by accident? Maybe some advice on people who are dealing with class C and maybe highlighting a few of the differences if you wouldn’t mind.

I luckily do not have a lot of experience with class C. I’m very happy about that. I can’t compare the two. I’ve had some tenants that gave us problems. I have a list of those but that just came with experience of not vetting correctly. In the beginning, sometimes we’re just nervous building our first properties. The first person who came up and it was ready to rent. We would do like the soft check, but we’re like, “They’re just ready to rent. We know we’ll be able to cover the mortgage. We’re good. Let’s do it.” We had issues with those tenants specifically, but that was in the first few years.

The biggest piece of advice I can give people and I tell this to everybody now when I’m doing coaching calls or whatever. I tell them to make sure you take the emotions out of the equation at all times. There is no room for that in business. You have to be backed up by data and numbers. When you’re vetting someone, like if you can’t find a good tenant that passes all of your criteria. You’re better off keeping the place empty for a month or two until you find that right person, especially in Ontario. Where it’s impossible to get rid of a bad tenant. The tenant board is not on your side.

 

If you cannot find a good tenant for your property who passes your criteria, you are better off keeping the place empty for a month or two.

 

You want to make sure that you’re not getting tenants where they’ll cause you issues because I’ve lived it and it’s not fun. Vetting as much as possible. Calling references is probably more important than just checking documents. Calling references and asking the tough questions and speaking on the phone with them. Not just getting a letter because anybody can type up a letter. You want to catch the person in their life. If you can do that, if you can vet someone and then create systems.

The biggest piece that I should say and I probably should be keeping some of this from my book. The biggest thing that I tell people is don’t give your phone number for day-to-day communication. That is for emergencies only. Even that, if the house is on fire, they call 911. If there’s a toilet clogged, they should still be able to send you an email. They should know what’s your processes in place. They have to shut up the water. Wait for a plumber to come. Call an emergency plumber or something like that. There’s always a way to go around keeping it systematized and keeping your sanity if you will.

On the calling references, are these past landlords or personal friends? Maybe you have a specific interesting question that you asked and a specific answer that then led you to take a pass on that tenant.

I have my list of questions. I have a lot of documents that I share through my books. If people want to check that out, I don’t want to make it like a sales pitch but it’s just that all of the resources are there. I share all of my templates that I created and I got from other people, too. There’s a list of further questions in there. I don’t know if there’s like a trick question. What I’ll do is I’ll ask for their photo ID.

I want an interesting one. I want gossip. I don’t want strategies and tactics. I want, “I can’t believe this lady answered that way about this tenant. This tenant is insane. We’re not taking this person.”

There’s a video on my Instagram that went viral when I shared that. I had like five million views. What happened with this guy is I caught him in a lie. He was applying and he had put a bunch of references and I called these references. I called them first and I just asked them, “Is this person a good person?” I would ask them to confirm the address where he rented and the amount. They weren’t sure and they acted like they had a lot of tenants and they couldn’t remember on top of their head. That’s usually a yellow flag for me to dig deeper.

I had my realtor license back then, which I don’t have anymore. I don’t have time for it but I would check through the realtor database. I would check with the address that he’d given me and the name of the owner in one match. I called those people back after checking and I asked them more specific questions and I said, “The owner of this property is listed as Tom and Jerry. Who is this?” They would be like, “It’s because I’m more of a friend,” and then they got caught in the lie.

I realized that these references were not legit references. There’s something in his pay stub even. There was some stuff written in pencil. I don’t know if he had highlighted some stuff out like white out and then he wrote on top. It was just a big red flag. I told him, “I’m so sorry, but you have not been accepted.”

No kidding. I love that underwriting technique there to verify the address and owner. I don’t know about Canada, but in the States, in most counties, you can go in and see the owner as public information. You can see who owns property. Even if it were held in an LLC, you can. A lot of the states, not all of them, go see who some of the managing members were there. I love calling the past landlord. What was the address? What was the rent? It gives you this little signal that you can then go check on. For me, if it doesn’t match up unless I want that tenant badly. I’m probably not needing a whole hell of a lot more evidence. It’s like I got that bad gut feeling like it’s a pass.

With experience, you can. As you said, you have that feeling. You get to know what you’re looking for and you get some similar cases where you can compare. You’re like, “This sounds like this case. I don’t want to.” You have a bad feeling and you just don’t touch it. I don’t want family or friends as references because that means nothing to me. It’s got to be a professional type of reference. I usually ask two references per applicant. One from a past landlord. If you’ve rented more than once in the past five years then I want all of those references. I want to speak to each landlord for at least the last five years. Plus, an employer. A minimum of two references per person.

Taking A Sabbatical To Prioritize Family Life

What’s next? I know what’s next, a little bit of what we were just talking about. A lot of readers may be on the front end and collect a few rentals. You have this goal of getting to a certain number of rentals and maybe having some level of freedom in life. From our previous conversation, I know that was a little bit of why you have been with Rob building these assets. What’s going to happen in the next 6 to 12 months or maybe even the next five years for you, Natalie?

We didn’t have a specific goal, but we knew that we wanted to build as much cash flow and equity from the least amount of properties or units as possible. We don’t want to have to manage a huge portfolio. It’s all about replacing that income and having a freedom lifestyle. We started from zero. Now, our portfolio consists of about 40 units, which is $13 million of value. We’re very happy with that. This past year with the city and the lawyers and all that whole fight for the $40,000. We needed a break. We realized too that the strategy with everything that’s going on in the municipality, revamping their policies and other upping the development charges by 83%, which is insane.

It was already $40,000. Now it’s going to be like $80,000 or whatever for a single-family home. We decided we’re going to sit back. We’re going to relax. We’re going to see what’s happening too with tariffs and everything across our border. We’re going to see what’s happening there, too. We just needed a break and some soul rejuvenation. We have a full-time staff now. We have three people full-time. They know we’re going to be letting them go after this sixplex that we’re building now is done. They’re going to take temporary contracts somewhere else.

Hopefully, we’ll be able to take them back in 6 to 12 months and maybe build up the business again. Maybe do something different. We don’t know. My husband has a bit of anxiety with that idea of not knowing what we’re going to do next. We always had another project lined up. For me, I’m excited. It’s going to project us. What do we want to do? How can we improve our health, our lifestyle, our relationship, our marriage, our relationship as parents, and with her kids?

I want to travel. I want to just chill and bask in the assets that we’ve built in the past years. It’s exciting that we get to do that and we get to pick what’s next. I don’t even know what’s in five years. For the past years, I would have told you we want to get to this amount of cash flow and equity. Now I don’t know and I love it. I love not knowing. We’re going to go with the flow and see what happens.

I hate the five-year question.

I do, too.

I will continue to ask it because it feels like the thing that a lot of people want to know the answer to. When people ask me, it’s the same thing. It’s like, “I’m going to focus now.” I’m focused on managing the team that I have built and managing our deal flow. I have no idea where we’ll be in five years. Not just gray and gold, X, Y, Z income, or what have you. Regarding the sabbatical that you and your family are taking. That’s very cool.

I have quite a few friends in the commercial real estate space who have backgrounds similar to yours and mine. They built up this momentum and got to this place where a level of freedom is an option for them. The one buddy that I’m thinking of now is pictures from the Grand Tetons. He bought an RV and he put Starlink on the roof of that, which is why I know the name of Starlink. He’s driving across the country and out in Yellowstone Park. This is 6 to 9 months, this road trip and there’s at least 6 to 9 months coming soon and he’s not the only one.

Good for him. That’s the life I want to do, too. My kid just started school. We finally have the freedom but now he doesn’t. We’re stuck in that jam of what we’re going to do but we bought a cottage about an hour and a half that we Airbnb out. We used love for ourselves, too. We go there very often on weekends and stuff. We’re going to be taking them out of school for several weeks no matter what. I don’t care. It’s just kindergarten. We’re going to be traveling.

One of the tips I’d picked up from them, because we’re considering that aspect of the family again. I have a grown daughter. I’m remarried and we’re considering children again. It’s a very serious plan. God willing that will come to fruition, but we look at the education options. We went to school at a place for nine months a year. That’s how my wife and I both did it. We took a glance at some homeschooling options.

What that led us to was that there’s quite a few of these apps that are probably more effective than teachers can be at teaching them those specific how-to-read, or what the mathematics are or whatever the case is, if the kid is able to sit there and pay attention to that. I haven’t landed on one or the other. I’m probably still 90% in the camp of like physical school and how I did it because that’s just how it’s done. I am open to the possibility that maybe there’s a better way coming down the pike here.

There’s a whole shift happening in the states. A lot of people are going towards homeschooling and it’s very interesting. It’s a very interesting option if you have the patience as a parent to follow through with it, which I do not.

I can talk all this crap now. It’s a different story.

You’d have to live it to know if you can do it.

There is that freedom for the 6 to 8 hours when the kids go to school, so another form of freedom.

Yes, it’s time for yourself.

Writing “Build-To-Rent Strategy” And Other Book Recommendations

I have a final question I ask all my guests, but before we get to that point. I normally ask for book recommendations and I’m going to have you talk about your own. If there’s any others that were impactful and you feel like me or the readers feel free to mention them but don’t feel obligated to throw a couple titles out. Would you mind elaborating on the build to rent strategy?

I just finished writing it. I’m still in my soft launch thing where I’m just collecting reviews. It’s 50% off, if you want to get a copy. It’s the time. It depends on when this is launched. It’s going to go up in mid-October. It’s called The Build-to-Rent Strategy: A Guide to a Successful Rental Property Construction. It helps people understand the basics. It can help anybody who’s never done it before just how to even build your own house and how to house hack. I’ve got numbers in there. I’ve got links to templates for budgets and stuff. Understand the math behind it, the construction draws and how the math works if you need to get a private lender to help you get started for a commercial property or whatever.

There’s a lot of details. I also have a lot of whole chapters dedicated to DIY landlords. It helps the small scale investors. It can be a larger-scale investor who has always done renovations and now they want to look into construction. It can help with that. Another book that I would recommend in Canada, but I think this book helps in the States, too, because it’s very broad. It’s called the Secrets of the Canadian Real Estate Cycle.

We talked about staying under leveraged and that’s one of the concepts that I took from that book when I read it. I read it just before COVID. I was happy I read it because I had my mindset at how to mitigate the portfolio and how to make sure that we were going to live through it. I read it a second time when rates started to go up again. It’s a good book to read. It applies to any. It’s the real estate cycle in general. Even though it has the word Canadian in it, it applies to Americans as well.

A third book is the Denzel event 10X book. I liked it because as a mom entrepreneur with a young baby and we were growing the business with getting full-time people. We were growing in terms of doing three builds in one year. It helped me manage my time and have focus days, buffer days and relaxed days. I like that book for that. If there’s anybody else out there who wants to start an investment business and/or young parents, that book can help manage your time.

It is a business, whether you’re going to buy rentals or build rentals or flip houses. It’s a business.

As soon as you have one rental. It’s a business.

That’s right. How much is the build trench strategy when it’s going to be full priced?

I don’t know about the conversion in the US. In Canada, it’s going to be aimed at $24.99. It’s still cheaper for you guys. It might be under $20. We might have to bring up the price so that you guys pay $25.

The value proposition of books. This is why I asked about books on every episode. For $25, how many hours did it take you to put this together?

It took me two years.

Could you imagine paying someone to sit down or even phone calls? Am I going to have like 150 phone calls to extract this?

It’s so hard to just even get somebody to review the book. I’m like, “It’ll take you 60 seconds. Write a two-liner. Say that it helped you or whatever.” It’s hard to just do that but I understand too. The issue is that there’s so much noise out there these days. You go on Instagram and there’s just ads that pop up. Everybody’s trying to sell something. You get to a point where you’re overloaded with information. It’s hard to pick which one is worth your $25. I understand people. I get it.

 

There is so much noise out there these days, especially online. Everybody is trying to sell something, to the point that your brain is overloaded with information.

 

I would even suggest the book. I’m going to guess, but is the soundproofing technique reading?

I talked about it. I have a video on Instagram that I posted a few months ago, but it’s there. I break all that down. I talked about managing construction, the soundproofing composition that we use and a few different alternatives and the different building systems building that.

 Anyone who’s going to build like the design and the details and design. You cannot just pass that to the architect. You have to understand why these design decisions are important, why you need them and where to pay for the money.

As a designer who designs rental properties, I put in a chapter about that too. Where if you’re going in like, “It’s easy for me because I design and I know what I want.” For other people who have to communicate that to a designer, they have to make sure that they give them clear instructions, so that they can follow and do it the way I’m thinking.

I can’t wait to order the book. You’ve got me excited. Is there anywhere else that readers can go? Contact information, website or something of that nature.

I have my website, TheNewBuildCouple.com. I’m also on Instagram at @TheNewBuildCouple. I also have a Facebook but I never go on Facebook. It’s not updated. There’s not a big following there. Most of my stuff is on Instagram. If you go on my website, there’s the links to both books, US link and Canadian link. You can send me a message through that website, too. I’m very responsive.

Getting The Right Support From Your Parents

My final question. What is the kindest thing anyone has done for you, Natalie?

I saw that and I read another episode before. I was like, “I don’t know what to say to that.” Do people always have an answer for that question? I can’t think of one thing, one specific thing. I can think of a bunch of little things. Honestly, I don’t know what to say. I might have to pass that question. I need to come back to that question. Give me time.

Fair enough. That’s good. It’s good when people are looking out for us and we certainly have had some of these moments along the way. I know I have.

What’s the kindest thing someone’s ever done for you?

It would have to be mom and dad. I know it sounds like an answer or an easy go-to. Especially my dad when I was first starting the business. He had this vision for real estate and paid for these seminars. Part of why I harped on the value of the book is I didn’t find books of that nature. We paid like $5,000. $10,000 or $15,000 for something called Millionaire University.

We got around a bunch of people. This was before podcast, YouTube and that thing in 2006. My dad was like an HVAC guy. He just retired. It’s not like he had money and put that on a credit card. He didn’t have the money to pay off. He took that advance and he pushed. I’m like, “We can’t afford this. We’re done.” He said, “You’re going.” He pushed me and paid for me to do it and he took a backseat. That was a cool moment that certainly helped us bring board my career in real estate.

I probably go with a similar answer of how I just always had the support of my parents. It wouldn’t be one specific act. They’re my people, so I get that.

Episode Wrap-Up And Closing Words

Natalie, it’s a great topic. Very interesting and cool portfolio that you build. I’m happy that you wrote a book and I’m looking forward to checking it out. I appreciate you coming on the show.

I appreciate you having me and talking about all the stuff. Let’s do it again sometime.

 

Important Links

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

About Natalie Cloutier

The REI Diamonds Show - Daniel Breslin | Natalie Cloutier | Build-To-RentNatalie Cloutier is a Canadian real estate investor specializing in BRRRR 2.0 (Build, Rent, Refinance, and Repeat) for small multi-family properties. She leverages her architectural background to design and construct dense, high-quality rental assets. She successfully scaled her business from a zero-capital start by continually recycling equity.

 

 

 

Flex Real Estate Development With Jonathan Tuttle

The REI Diamonds Show - Daniel Breslin | Jonathan Tuttle | Flex Space

 

Host Dan Breslin interviews Jonathan Tuttle, a real estate investor who has transitioned his focus from mobile home parks to a burgeoning asset class known as “flex space.” He explains how the saturation of the mobile home park market pushed him into the flex space, a promising, underserved sector ideal for small businesses poised for significant growth. Jonathan provides a detailed breakdown of his current development project in a high-growth area of Texas, sharing specific financials and outlining his strategy. They also explore broader market trends, including the impact of interest rates and the strategic value of specific locations in a rapidly evolving real estate landscape.

 

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%. Buy & Hold Loans Offered Even Lower. Get a FREE IPad when you Close Your First Deal by Registering Now at  http://REILineOfCredit.com

 

Jonathan Tuttle & I Discuss the Dynamic Market of Flex Space

  • Transition from Mobile Home Parks to Flex Space (00:01:33 – 00:04:19)
  • The Flex Space Business Model (00:04:19 – 00:06:02)
  • Current Market Challenges (00:21:16 – 00:23:54)
  • Attracting Capital and Investors (00:15:06 – 00:16:14)

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

    

 

Watch the episode here

 

Listen to the podcast here

 

Flex Real Estate Development With Jonathan Tuttle

Jonathan Tuttle, welcome to the REI Diamond show. How are you?

Thanks for having me. I’m excited to be here.

We normally do a little bit of a location stamp. I’m in Chicago. I spend the winters in Florida. That’s the extent of my nomading. We’ve had one other guest who’s going to give us an answer like you’re going to give us here. A guy who was living in Vietnam and maybe not as Tim Ferris as you’re about to say. Would you mind giving us the location stamp and what your plans have been?

I’ve been doing a whole digital nomad and then come back for conferences, specifically like family office and private equity conferences. I have been to Southeast Asia, Bali, Bangkok, and a lot of Singapore and Hong Kong. I’m going to be back on the other side of the world, basically in the Dominican Republic, Costa Rica for a while and Nicaragua before Miami. That’s the rest of the year and I’ll be speaking in Nashville at the private equity conference. Basically, my schedule is always planned out for five months in the van, so it becomes routine.

Transition from Mobile Home Parks to Flex Space

It’s interesting that we have the opportunity to live a life like this in this digital age with that flexibility and freedom of locations. That’s cool. As we jump in here, Jonathan, you’ve got an interesting story about how you landed in real estate. I will let you go as deep or wide or narrow and shallow as you might like to go on the stuff outside of real estate here.

 

The REI Diamonds Show - Daniel Breslin | Jonathan Tuttle | Flex Space

 

What I do want you to cap off there is through the evolution into the flex space because that’s relevant. It’s a hot topic and a hot asset class that I believe we’re in the middle of an event, a 3 to 5-year runway where that starts to get superheated. If you could finish there with your intro that’d be great.

It’s a great observation and 100% correct. I grew up in a real estate developer family. My dad was a GC. He built single-family and not commercial, 75 plus custom homes of like 30 years. Most of us were done in the ‘90s. That was like the big boom. I grew up in Chicago, right in your backyard. Rural and York Fell were the fast to page county areas. Those were the fast-growing markets back in the ‘90s, if you’re from Chicago then just segue that into, I worked in Chicago. I got to start in commercial real estate with Sperry Van Ness on the brokerage side. It’s called SVN now. I started with focusing on the mobile home parks sector because that’s where we were also investing at the same time. My dad was also investing in mobile home parks.

It did extraordinarily well in the last downturn and everything else. All the other real estate asset classes were having issues and that was like right in the beginning of the transition into private equity getting into this space in the 2010s. After that, it started just focusing more on the investment side of it. One of the things we’re doing now is the opportunity as we talked about beforehand. The mobile home park space is about 43,000-ish parks. There’s a lot of institutional players in the space now. The deals are far and few between as they were and not as frothy as they were many years ago.

It was a real opportunity where you alluded to. It’s flex space for us, specifically. It reminds me of things like, which you mentioned many years ago, home park and self-storage at that point. Before the institution is still underserved. The markets needed it and so, we’re focusing on the highest gross rates which specifically is Texas. That’s the fastest growing market in the States. We’ve acquired some pretty good prime locations on I-35 and around Austin, San Antonio area. That’s where my real estate story evolved.

The Flex Space Business Model

Let’s throw the reader the definition of flex space. It’s industrial and small but what would you put as very specific definitions of what that is?

The name implies itself. Basically, I say it’s like land with a self-storage type container on it. You can have some storage on it, but it’s built out mainly for eComm stores. People say eCommerce is big now. They have their own brands but also the biggest clientele is going to HVAC plumbing and small manufacturing. It’s usually those guys that want to put the money back into their business, their trucks, and they just want to have a prime location off a major road for some signage and also close proximity to who the actual tenants’ or clients would be.

Think of like a self-storage type but bigger building but just me and a very basic bare bone. It’s just store stuff. It reminds me of self-storage but for holding commercial assets and having a little. Most tenants typically just have a small little office with a little AC in it and that’s it or HVAC. It’s basically mainly for serving that specific need of the audience and now as we know with a lot of people and everything going to AI.

HVAC and plumbing is still like an industry that’s going to be resilient for the next 5 or 10 years. You’re seeing a lot of private equity guys trying to roll them up too. It’s so resilient and you can’t replace the robots. We like to look at the trends of where people are going and what the market’s needs are and try to find a little pocket and niche where other people aren’t. It’s not super competitive.

If we put a square footage size, what would be the size of each unit in the building that you’re working on developing now?

The one we’re doing now, it’s a two-phase with 84,000 square feet and we got a couple others. The second one is already 100,000 square feet. Typically, we look for 250,000 or 100,000. It’s like having a self-storage room. You want to be around 80,000. It’s similar dynamic to that.

 What is the size of each bay?

We just put up the signs for leasing, so there’s a new development on this one currently. It’s going to be flexible based on the tenant basically.

You’ll start with an 84,000 square footprint envelope shell and then if a tenant needs 30, that’s maybe why we’re calling it flex. If they need 2,000?

It will probably be too small. We have the top leasing broker and that area. To make sense, I don’t think anything under 10,000 to 15,000.

That’s what I was looking for there because I’m looking at a deal brought to me by some reader of the show. I think the units are probably 2,000 to 3,000 square feet and I have another friend, Saul, a Chicago guy as well. He’s buying stuff that is about that same thing, 1,000, 1,500 and 2,000 and it’s too small for the institutional buyer. You can’t build it that small. It’s expensive, like 130 a foot or 140 a foot by the time you put the HVAC.

You have a small office and a bathroom in each one. It’s like building a multifamily. It’s not economically feasible anymore. It’s interesting to hear that the ones that you’re building are in this 10,000 to 15,000 square foot range. You might end up with 5 to 7 tenants in that building if you had to guess.

Ultimately, the play is a tier player. We’re looking to sell it back as condos to the owners.

Will you lease those units up front first or will there be like a lease and an option on day one?

Both, lease up front and with options. Ultimately, we think they’ll be the most interested but also private equity guys will scoop it up. For example, the market was the second fastest growing market in the country. There’s 3.5 billion with the states putting in between San Antonio and Austin and the infrastructure of the highway. It’s about 110,000 vehicles per day.

There’s 10,000 brand new homes being developed across the street and there’s also an $18 million top copy and belt right down the corner and a bunch of national retailers. I think even Portillo’s coming down there, too. Everyone’s going there. We’re just like in the beginning of the rush. Even when you acquired it, it’s already worth like $1.2 million or more than what you’ve just acquired it from.

I have a buddy. It’s a diversion but it’s a Portillo story. All of our Chicago readers, you and I included. We know what Portillo’s is. We have a little history there and he had, let’s say a 4,000 to 8,000 square foot retail spot with a drive through. I’m like, “You need to get Portillo’s there.” I was texting him. He didn’t even reply to the text. I’m like, “He must not know what Portillo’s is.” They got bought and they’re going all over the country. It would be a phenomenal tenant in your retail spot. That’s what you want, but he didn’t recognize it.

They’re the highest grossing not fast casual restaurant in the United States per location. I think it’s $8 million or $9 million per location.

What A Flex Space Deal Looks Like

That’s phenomenal. Let’s walk through this deal. Let’s pretend that I am going to invest $250,000 so that this is real. I’m putting $250,000 in here and some of the questions I’m going to have up front, Jonathan, are going to be like, what’s the cost to build? What’s the cost to build including all the soft costs and the land? My actual cost basis. What is my rent per square foot? Do I have any pre-leasing going on? That would probably be where I would start as a first look to analyze the risk on the deal.

 

Flex space is like self-storage, but bigger and just bare bones.

 

I can pull it up. We just started preleasing. We do have the top leasing broker. It’s the top listing agent and in that market, that’s all he does is flex space and industrial in around Austin and San Antonio. The cool thing about this deal too, it’s with the flex space or I’ll say for our numbers, for example, are very conservative. We have 22 projects and that’s very conservative. That was like a $19 lease. The markets have gone up since we’ve done it.

That’s it, $19 a foot?

The market dynamics because of all the new development coming in and interest. With the leasing agent, we’re going to list it at $20. I don’t have the actual financial modeling of that because it’s just something I found out. There’s also a twelve pref with 80/20 split. It’s very generous towards the investors because we want to make sure we have a bunch of deals in the pipeline. We’re also looking at data centers. We also have a second project which is 100,000 square feet that’s already fully funded and that’s going to be a medical office.

One of our partners already owns the land. The 10.7 acres will be acquired for 2.719 with nearly $1 million equity already secured to a variable deal. It’s gone up because we’ve just seen the market dynamics. The soft costs, we have about 2.46832. To your question about construction, we have it at $10,254,397 and the land at $2.719. Our GC in our team is very seasoned. It’s about the law of the Walmart’s in the area and also many soft storages.

The other partner on the team flipped the land across but he did early across from the Tesla Giga Center. He saw the first side of it but he’s been getting favorable deals because he’s been boots on the ground. It’s his market. The one thing that makes a stand out is we have a seasoned team that all have their expert skill sets. We’re able to source some of these deals that most people wouldn’t have access to because they’ve been in this market for 5 or 10 years before anybody else is even there.

You don’t have your costs broken down on a per foot basis, it sounds like?

I have to look at it because we just did something new and some financial modeling. We just got the new model. On the accent, the proforma, we have a 251 but on the pre, which comes out a little over $21 million.

That’s the all-in cost basis at 251?

No, that’s the accent. I don’t have it because we just change the numbers on it. We have a better financial situation now. I don’t have the full financial breakdown with that. I don’t want to quote the wrong number but we’re keeping that in that GT in house. Even with our cost and even with different tariffs and stuff like that, we have favorable acquisition costs like just the supplies.

Do you guys already have the construction loan lined up? We’re working on a deal now and the construction loan pushes by like six months. I’m like, “That’s not what we were hoping for. That’s going to impact our returns at the end of the day.”

We’re due to close the initial $1.5 million. It’s due October 1st, and then the total for development is due January 1st.

When you say total for development, what does that mean?

The total of what the bank needs.

Meaning you have to have all of your equity raised by that day?

Yes.

When is that wire done then from an investor who’s interested in this deal now?

We’re trying to ramp up this. We’ve just solidified because we’re also looking for a long-term partner too. We’re trying to have everything solidified. We have the conference in Nashville. We have probably like 5 or 10 family offices that are considering. We do a lot of the family offers conferences. We’re just trying to solidify the last few that are just going to, hopefully, dial in. That’s what’s expected. After that, it’s going to be pretty smooth sailing.

If you commit now, the wire is due in three weeks or the wires due on January 1st or October 1st?

Before October 1st. The sooner the better. We always have some people that sit there. Get the initial $1.5 million and we’re in a million now. The last $500,000 probably will be full.

Is there a pref on there?

No. The focus of it is basically about the 12th month is when we figure everything should start going and getting done and eighteen months should be at least out.

I mean a preferred return for the investors. No preferred return?

I don’t know exactly. I have to see the breakdown when I start. Eric would know that better than I would.

 

It is hard to find deals that will be of institutional quality. You cannot compete with traditional operators because they have better access to capital.

 

Attracting Capital and Investors

Any depreciation benefits on a deal like this?

The new big bill. I know they just changed the solidified and put everything back in so at the bonus depreciation. We haven’t talked to the accountant yet to see exactly what that entails. They know it’s getting down to about 60% or 40% in the next year. I don’t know exactly what depreciation we qualify for because without having a costing on it.

We’re back to 100% now. We’re all celebrating. Those of us who write large checks and get tax benefits for doing so, are celebrating for sure.

Especially right past everything.

That’s done 100%.

I know they were talking about it. I didn’t know they had already passed.

That works which I guess on a two-year exit, that doesn’t make much difference. It’s like 22. What risk do you think is involved in this condo situation if you were hoping for an institutional exit? Do institutions buy flex condo spaces?

The location is what sells it and the visibility. The play could be a redevelopment plan for 3 to 5 years. Only because it’s on I-35, it’s like the fastest growing condo and the big retailers and national tenants are coming in right next door. The big play is probably somebody, first, that’s going to be the tenant owner. It’s going to get that loan for that and buy it out and/or the institutional play is going to come in and say, “We want to do this. We’ll buy out the leases. Here’s some money to move. We’re going to share this down and put something bigger here.”

You’ve given them all first right to refusal, so that makes you now handcuffed that institutional buyer when they come into do that. You make it a lot harder. That’s what I mean by the risk.

They could come in and pay out the tenant, though.

They could pay you out at a higher price if you just use straight leases one day.

The big thing is, the first one we’re going to go to is the tenants but the bigger play is even the tenants could join together and say, “We’re going to sell this to the private equity.” The play is like 4 or 5 years because the location is so prime. Basically, tear it down. It’s like with mobile home parks when the cashflow and the locations are great but if you go to Florida, a lot of the parks are turned out for senior healthcare centers and things of that nature because it’s way better and higher use for runs at that instead of a 500 lab rat.

I’d almost like the deal better if there was no lease option going on with the tenants. I feel like me, as an investor, getting out in two years is not that attractive if the area is redeveloping long term. It’s going to be a much better deal in five years. I’d rather invest in a deal that’s going to have a refi to pay back a portion of that capital. Those tenants get no first right of refusal. The tenants pay the market rent when the time comes where they move out when the redevelopment occurs. That feels like a safer bet to me, but I’m not going to tell you how to run your business. I’m sure you guys are doing well.

Institutionalizing Of The Asset Class

Here’s what we’re dealing with. You had alluded to it in some of the posts that you had put online, I think LinkedIn, articles or things of that nature. It’s the consensus around these conferences in these events and commercial real estate space. We looked at multifamily from 2011 through 2019 and 2020. Multifamily had this institutionalizing of the asset class. It was already, but we saw that happen a lot and the cap rates go down and the values go up. The competition for product gets superheated then we saw that same thing going on in self-storage from mid-2015 or so, all the way up through 2022.

When the stock price for public storage and extra space dropped, a lot of that institutional frostiness and self-storage had gone away. It became super heated to get your hands on a product for self-storage. You described the same thing happening in the mobile home space. We expect that we’re in this little opportunity for flex space now. Maybe that is 2 or 3 or 5 years.

There are some humongous portfolios for flex space trading in the headlines in the news, $190 million, $300 million or $150 million. These are big institutional deals in flex space that are happening. Are you guys still seeing some mobile home park deal flow coming through for you guys or is it like the parks you have or it’s becoming much more difficult to get deal flow in the mobile home community space?

That’s the general sentiment when you go to conferences. I know a lot of operators that would normally require five day parks a year in the last couple of years. Especially when interest rates changed in ’23. It went down to like one or two deals a year with multitude factors. You have the interest rates. You also have the sellers, which I mentioned before the call. The sellers have this mindset like, “This is what I was getting years ago but it didn’t make financial sense.” Those parks have been sold. The owner wants to go back to those mindset prices that they hacked up years ago.

Plus, there’s only 43,000 or 44,000 parks in the country and very few are ground up developments because there’s an ownership stipulation. As I’ve mentioned before, some of the best ones. Especially in the Florida locations, are some of the best primer locations but the lodges are tiny. You can’t put new modern homes on it because they’re pretty hot pre-1976. The lots are like a third the size they should be. They’re basically like tiny homes. They’d be better converted into like a tiny home community but the locations. You’ll have ocean or waterfront property like in Tampa, their mobile home parks before the zoning came around.

What they’re doing is, a lot of them are like, “What can we tear it down to?” The cities will give you what is best. They’ll give you basically what zoning you want, if it’s going to be the highest and vast. As I mentioned, you’d see a lot of senior healthcare, memory care, senior healthcare centers, and those are very expensive in the cashflow treatment and operator because one luxury senior healthcare tenant could be paying $6,000 to $8,000 a month compared to $500 or $1,000 lab rat. It’s a nice market.

Even for the developer side, it’s a lot more advantageous to that. To your question, it’s hard to find deals. The percentage of the deals are going to be institutional quality. Anything over like $15million or $20 million. Its traditional operators will bid you down. You can’t compete with them. They have better access to the capital. They get the rates and they have tons of billions in that asset class. It’s just rolling it up in their portfolio. There’s also the percentage that goes to the whole mobile home park or the trailer. Whatever you want to call it.

I don’t know what approximate with that is but there’s a percentage of products like that that gravel roads are not going to qualify for HUD financing. It’s going to be a complete turnaround project. You have the biggest challenge for doing a turnaround project. It’s sourcing your homes. Warren Buffett has the 21st program. Basically, he has Clayton Homes. He’s the biggest manufacturer with 50,000 plus homes a year out of 100,000 mobile homes. He also has the biggest financier and they have a program to push the homes, but then you’re just developing a subdivision at that point to get a $500 lab rat. He makes some money on the halls but again comes back to the highest and best use of your capital.

It’s your time, too, at that point.

We have this great return but you’re going to be so boots on the ground in debt. You could do three projects at the same time with a lot of work doing a mobile home park. Probably the biggest misconception to this whole point is it is just turnkey, but to get it turnkey unless it’s like a class A or a top tier professional property management for the last 5 or 10 years and system rules and everything’s digital.

 

There is a big opportunity in data centers in the next five to ten years.

 

Ninety percent of parks are not like that. You have to convert everything from the 1970s and ‘80s. Payments are going to different local banks. People don’t even pay online. They don’t even use it online. It’s not like multifamily and even class C multifamily. You’re basically doing a full turn around. A lot of those deals that were attractive have been all acquired and people are just holding on some for forever basically.

I own one with some partners in New Hampshire. It’s out there. It is not a Tampa type of highly developed area. We’re not doing land banking a thing, but the roads were done and it is turnkey. It’s like a hands-off an asset and that’s like a coupon clipper for us. It was well managed and it was bought originally as a turnaround by the previous partnership 3 or 4 or 5 years ago. Maybe we have 80 or 90 homes if I had to guess.

None of them are brand new Clayton Homes. We may add like nine lots but this is not the deal. We’re not raising money for this. This is not going to have an 18 or a 20 or a 22 IRR. We’re going to hang on at least for a decade. Our ad debt instrument on that one is that we can’t get out for ten years and that’s why we got an okay interest rate on the way in all things consider, but we’re going to look back in 3 or 4 or 5 years and be like, “That interest rate is high and we’re stuck. Our hands are tied by the interest rate.”

Again, our motivation is a little bit different. We’re going to be there for ten years. There were great tax benefits for the partners on the way in, and then it’s a cashflow. It wasn’t day one but maybe day 120 or so. Now, all the sudden, it’s just a coupon but that’s not the deal that a guy like yourself or the people who are running the funds are going to be able to go out and do it.

It’s not a capital preservation coupon clipping strategy. It’s more of an entrepreneurial operator/real estate developer strategy where there is going to be a lot more of a heavy lift than I’m putting into that mobile home park for you to bring the flex building in Texas out of the ground, get it stabilized and go through the entire process of executing on that.

It’s a lot faster. To your point, it’s with the mobile home park space. It’s like the mindset. You have to have that mindset. The value is at 7 or 10-year hold. It’s not a multifamily 3 or 5 cash out. You can cash out refi but it’s to keep a long term. The institutional buyers for investors, for example, like family office. The majority invest, who knows the exact number but 70 plus invest in multifamily. When they’re exploring the mobile home park space, for example. They’re like, “These deals aren’t big enough. We need these certain criteria or the fund needs to be like $50 million or $100 million.”

That’s why there’s not any park funds because they can’t source enough deals. A $15 million mobile home park is like a $60 million approximate equivalent like if you’re requiring a multifamily deal. It sounds great for them and they like the bigger numbers but in the realm of where we’re competing at, it’s two different worlds. A lot of the institutional money besides the private equity, the Black stones and the pile groups, the family office have been sitting on the sidelines on a lot of these deals because they just don’t understand the nuances and the opportunity.

Which is unusual because the family office’s whole premise is keeping the money, generational wealth, and preserving the wealth. What’s the number one performing asset for the last 50 years? It has been mobile home parks with the lowest failure rate and as you mentioned, the best tax benefits. It’s a try and shoot way and just preserving wealth. If you already have a capital, just put it in there. Acquire some small parks until you meet your portfolio standards. A lot of family offices have dropped the ball and not understanding where the real value is because that’s the real value of mobile home parks. It’s the cheapest form of affordable housing.

At the same time, the institutions do need to scale. We had a 300 lot deal a few months back or maybe a year ago. Our offer was $13.5 million. I think they traded it at like $24 million or $25 million. We’re talking like 4.5 or 5 cap is what it traded at on its current income.

They’ll bid you out.

It was even rent controlled. It was like a rent-controlled area where it was going to be a big hassle to try to bring anybody up to market rent. We see first-hand the competition is out there, 80 or 60 lots. We did get 1 or 2. There were 150 or 200 spaces maybe again with some partners and those were big projects. Those were the ones where a lot of old homes, a lot of 1980s payments and a big mess to clean up. A lot of work.

It’s not easy. They get sold on that. It’s like this turnkey, but once you get there and you have the property management. I still think parks will be one of my favorite asset classes of all time. You just got to go. If you look at all the other funds and operators, they all have multiple asset classes because of that reason. Bare Brandon started doing multifamily. I think he did self-storage and a couple other friends started doing self-storage and other asset classes and parking lots. Some guys started parking lots.

It’s just mainly because there’s just a scarcity or availability of the park assets. To your point with being bent down, the institutional, if it’s anything in the teens, that’s when they start coming in because they’re trying to scoop up these deals and roll them up. As I said to you, they’re cross acquired. They’re not even getting as nice a great return because they already know what the value is and they bid you out. It’s crazy. We had one deal for example.

It was off market and there’s three bidders. They wouldn’t tell us who it was. It was a family-owned operator. I had a broker relationship with the broker. He was pushing us and one of us wanted to make sure. One of us had $30 million cash in the bank. I couldn’t even believe it. I was like, “Who has that?” He could buy like about $80 million multifamily deals but I was like, “Who has $30 million in your bank account? That’s crazy.”

It’s not a bad thing.

To solidify, we said, “We’re going to take three offers just to show that you have the cash.” They want to see the story and we’re like, “You’re a smaller operator. We have access to capital on your upcoming incomes. We like that,” and that then tells who the better bidders would be. I told the investor, I’m like, “We need to come at like $25 million. We can’t scoop it up.” It’s saying things like, “It’s coming at like 21 or 22. We could scoop it up.” I’m like, “There’s no way.”

At the time, the last in average we’re trading it $48,000. We got a comment at least about what the average lot is trading in America because it was a college town. It was a major Butte College University. I don’t want to give too many details but the cool thing about it was like a waiting list for years. It’s a cool place for college kids to hang out. The parents are buying the homes. They’re ‘70s, ‘80s and ‘90s home stock. Basically, they know they had a safe place and they can flip the homes because there’s a waiting list. They’d still make a few grand into flipping it.

The park had all these amenities. They have a game room, arcade, pool, basketball court, and I think even a tennis court. It was just like a cool spot for people like college kids to hang out. Long story short, I said we came at 26 but we came in at 22 or 25 or something. I was embarrassed by the broker. He was like no. They just looked at it and threw it away. I was like, “I know. I told him we should have come in.” I waited a month. I’m like, “What’s on offer?” “26.2” I was like, “I knew it.” The whole point was like it would have traded in like a 4 something cap. The play was just going to just cashflow. You weren’t going to make much on the equity side of it.

No need to do a deal just to do a deal either.

That investor basically is like, “I’m sticking with a multifamily. I don’t like this.”

That’s fair.

He’s like, “I like the returns better than multifamily.”

What’s In Store For August 2025 And Beyond

If you know the space and you know the space. What are you excited about? It’s August 2025 as we’re doing this. Our hopes were dashed a little bit about interest rate drops. Interest rate aside, what are you excited about in the future here? in the next 12 or 24 months, Jonathan, what are you looking forward to?

Besides flex space, I think the big opportunity is data centers. The next 5 to 10 years, that’s like the long term play we’re like looking at. We’re looking at a very niche of that because instead of the PE or the private equity guys, on the other world, you have the tech guys. I don’t know if people read but Mark Zuckerberg’s building a data center the size of Manhattan. I don’t forget where he’s at, but with everything going on AI, everyone’s on their phones. The amount of data is just going to Skyrocket.

The REI Diamonds Show - Daniel Breslin | Jonathan Tuttle | Flex Space
Flex Space: The number one asset for the last 50 years has been mobile home parks because of their lowest failure rate.

 

We think that the opportunities can be abandoned office building for the cities that want the tax revenue because they’re not collecting revenue. It’s an eyesore but they already have the power and reconverting that. We’re still underneath the institution. We’re trying to find a niche where it serves. Also, it’s a lot better than developing. You’re still doing reconverting but you still have a lot of infrastructure and the city is going to work with you.

What was it you were going to convert?

Office buildings that already have the power like abandoned office buildings.

The issue they’re having with that on the conversions, we did an episode with the designer a little while back on the data centers. The racks don’t fit. You need like 24-foot clear height to fit the lower rack and the upper rack that have liquid cooling in them now. Engines back in the day used to have fins on them. I remember like dirt bikes in the ‘80s when I grew up and they’d have like fins. There was no radiator there. That’s how engines were. They were air-cooled and that’s how the data center racks used to be before they’ve gotten as powerful as they are now.

The same way engines now have this radiator and the hose. It’s pumping the liquid around. Now, the computer equipment has that cooling system technology in it for them to be competitive. If you end up building something that doesn’t have that cooling, you’re going to have a hard time keeping those racks least out to the tech. We looked at the office buildings too for the same thing. I forget the exact numbers but I think it was 16 or 18 or 20 feet. It was high and that was what was disqualifying a lot of the office buildings from the data center conversion.

We are researching. We’re bringing our team to do that. We have a couple family offices looking at. It’s not a bigger deal. It’s not like $100 million plus. It’s the same premise with people that are doing the retail centers into self-storage and what the height. You need about 17 or 18 foot ceiling clearance for that. The same premise converting the retailing into self-storage.

We’re just getting into exploring that and doing boots on the ground research on that but that’s the big play with AI and technology. I like to say how it trends because it reminds me of when I first got into commercial real estate and mobile home parks back in the day. It’s like, what’s new and what’s going to have longevity trends? Those are the two niches that are most exciting now.

The Biggest Wholesale Deal In History

Are there any books that you’ve read or maybe books that you’ve recommended to other people? Maybe in line with some of the stuff we talked about or maybe wealth creation business in general.

I would say if we’re doing real estate, you got to go with the class in Chicago doing stuff. It used to be, but Sam Zell’s. He passed away a couple years ago but his mindset and how you look at real estate and opportunities in real estate. His cue was always built on the trends and identifying opportunities and getting out before the trends changed.

What was that book called?

Am I Being Too Subtle? I haven’t read in a few years.

When it came out, it was huge, at least for all of us in Chicago. We all know Sam Zell’s name here in Chicago. It was interesting. It’s got an audiobook, too. Sam Zell sold equity office properties in 2007 or 2008. The peak is in the rear view. Everyone knows crap is literally flying through the air to hit the fan in the moment that he’s selling these office buildings and he’s selling them to Blackstone.

Blackstone is buying them and gets the deal closed. They go to a settlement. You can hear both sides of that deal go down. One in Am I being to Subtle from Sam’s perspective and then you hear from Steve Schwarzman’s perspective in What It Takes, the story of Blackstone’s founding but that’s the biggest wholesale deal that has gone down in history. I think it was a $50 billion deal all together and roughly half, so around $25 billion worth of the most trophy office buildings in the country or maybe the world, were sold on the same day they were bought from Sam Zell, which is pretty cool.

He was an innovator. He was, at one point, the biggest owner of office buildings, mobile home parks and multifamily. I think he still has, I don’t know exactly what his family office is doing now, but the last I heard he was selling a portion of his multifamily and keeping the class A stuff. He was like keeping the stuff in the Colorado’s and he was acquiring more mobile home parks and RV parks.

It reiterates what his positioning was. I remember I was going to go to a family office guy. I was in Chicago and I was flying back in for it. He was going to be one of the keynote speakers and he passed away like a month before. I’m like, “I’m not paying $3,000 in this conference now. He’s not there.” I’m sure they probably had a huge drop off.

They did. Half the seats are empty.

That was the whole premise of me going there. He’s not there so I don’t want to go.

Get In Touch With Jonathan

You were coming from halfway around the world. Where can readers go? Do you want to share a website or some contact information, Jonathan?

On LinkedIn, it’s @JonathanTuttle1. I’m not too active there but a lot of people message me there. I just noticed I have ten messages that I responded to. Land-Play.com is the flex space and also, Midwest Park Capital. Those are one off deals with the Midwest Park Capital. We’re just looking for opportunities that, hopefully, I will find something when I’m at a national conference. There’s a lot of the big operators. We’re all pretty good friends. Maybe I’ll score some deals.

The Kindest Thing Someone Did For Jonathan

It sounds like a plan. My final question I asked all the guests is, what is the kindest thing that anyone has ever done for you?

I thought of my mom. My mom’s always been at my back. She’s always on the line no matter what. She’s always there looking out and just helping. I don’t think anybody else could top that because she’s always there for me.

Nothing like our parents. They made quite a sacrifice for a hell of a long time to get us to where we’re at. Jonathan, I got pages of notes here. I appreciate you coming on the show.

Thanks for having me. It’s great to be on.

 

Important Links

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

About Jonathan Tuttle

The REI Diamonds Show - Daniel Breslin | Jonathan Tuttle | Flex SpaceJonathan Tuttle is the COO of Land Play, a flex office space development fund. Their focus is ground up development in an underbuilt asset with low vacancy rates and strong profit margins. He is also the Fund Manager at Midwest Park Capital which is a private real estate investment firm providing select and approved accredited investors with exclusive access to high yield investment in the mobile home park vertical. Midwest Park Capital was selected as one of 45 Best Startups Founded in Illinois 2020 & 101 Top Commercial Companies and Startups of 2021.

Jonathan is also the Founding Director of the AI digital marketing and consulting agency, Revenue Ascend which was selected as one of Chicago’s most inspiring stories by Chicago Voyage Magazine. He is also the founder at Get Podcast Bookings, a podcast booking agency for entrepreneurs, business owners, Funds, and those looking to build brand authority, raise capital, and trust through podcast tours. With 10 years of hands-on experience scaling his own businesses and crafting frameworks that consistently drive growth, he’s earned a reputation as one of the go-to experts in the space.

 

 

InstaShow Plus Founder Al Romero On Automated Secured Showings

The REI Diamonds Show - Daniel Breslin | Al Romero | Property Showings

 

Al Romero, founder of InstaShow Plus, real estate veteran, and tech innovator, explains how his platform automates and secures property showings, a need amplified by the pandemic. He presents how Instashow Plus offers robust identity verification for viewers, integrating with smart lockboxes and optional cameras for enhanced security and detailed access tracking. They also discuss its benefits for flippers and landlords, including contractor oversight and remote property management, citing a Philadelphia case study where the system facilitated a lease entirely virtually.

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%.Buy & Hold Loans Offered Even Lower.Get a FREE IPad when you Close Your First Deal by Registering Now at http://REILineOfCredit.com

 

Al Romero & I Discuss Automated Secured Showings:

  • InstaShow Plus as a Comprehensive Showing Solution (01:17-02:45)
  • Advanced Identity Verification and Security (09:06-10:13)
  • Audited Access and Contractor Monitoring (14:02-14:46)
  • Integrated Cameras for Virtual Presence (15:03-17:17)
  • Flexible Fee Structure and Landlord Adoption (26:15-27:29)

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

    

Watch the episode here

 

Listen to the podcast here

 

InstaShow Plus Founder Al Romero On Automated Secured Showings

Al Romero, welcome to the show. How are you doing?

I’m doing well. How about yourself?

I’m also doing well. You’re in PA. I’m in Chicago. I moved from PA to Chicago in 2015. Most of the readers know that. Are you a PA-born-and-raised kind of guy? What’s your story there?

I started in New Jersey when I was a kid. My parents brought me to Pennsylvania so I could touch more grass. I’ve been here ever since.

Is that North Jersey, New York kind of New Jersey?

Believe it or not, Wildwood, New Jersey.

 

The REI Diamonds Show - Daniel Breslin | Al Romero | Property Showings

 

How about that? Nice. I got a lot of friends and family out in the Jersey Shore points as we speak. I got my vacation booked for the end of August.

It’s gorgeous out there.

InstaShow Plus As A Comprehensive Showing Solution

You are the Founder of InstaShow+, which is an interesting take, at least from the research or my outsider’s view, on lockboxes. This was why it was interesting to me, and I decided we would do the show together. We have a ton of agents on the newsletter list and in the audience of fix and flip investors, commercial real estate, a lot of fix and flippers, and probably a lot more agents because we sell a lot of property and have a big brand with them. At first, it’s like, “Do we need another lockbox? Do we need a sentribox? We have this solved.” The more I looked into it, maybe not.

The other inflection point that you had touched on that I had noticed, which is this overarching trend in real estate, is that once COVID came, a lot of things went virtual. People were willing to sign leases and not move in. People, sight unseen, would buy houses. I bought my house in Florida sight unseen. I didn’t see it for nine months until I finally went down there for the following winter.

I don’t know if that is a blip or if it’s a long-term trend. I do know that we flip at least a few dozen houses a year in states that we never crossed the state line, and we do it 100% t virtually. We own VirtualOffer.com. We built that out with an app during COVID, as we couldn’t do showings, which is a little bit how InstaShow+ came to be. Rather than me butchering that origin story, I’ll hand it back over to you and let you do a Reader’s Digest of what InstaShow+ is and why it exists.

Thank you, and thanks for having me. My name is Al Romero. I am a real estate agent, real estate broker, and the founder of InstaShow+. My background is that I’ve been a real estate agent for over 25 years. About half of that, somewhere in between, I became a broker. In 2008, when everybody lost their shirt, I went back to tech, which is also my background, and worked for Google for a few years.

Real estate called me back. I became a real estate broker, and then turned around and bought a property management company. COVID hit at the perfect time. I had all of these properties that were vacant that I needed to fill for my customers. The state and the government were telling us, “You can’t meet anybody. You’re going to kill them.” I had to figure out how I could show these units, stay in line, not go to jail, and not hurt anybody.

I put together a rudimentary version and a very insecure version of what InstaShow+ is now. The great thing about it is that I got a ton of data. I filled those units fast. I also got a ton of information as InstaShow+ became more and more refined, where I’m getting the information from the customer. I’m doing a little mini background check on them.

We built in cameras with our self-guided tours, which we call open touring because it’s not just a self-guided tour system. It’s a full property showing system. It’s built whether you’re looking to use the open touring model or if you’re looking to identify people and get them to schedule so you can meet not a stranger that could potentially be a bad person.

All of this turned into the full showing platform that it is now. Property managers are using it, as well as the realtors that you mentioned. We’ve got some cool things happening for agents. This goes all the way down for folks that are flipping houses and investors that are buying. Some investors will turn around and try to maybe sell it themselves before they bring a pro in. We’re giving them the tools that professionals are using to manage showings.

Let’s walk through an example. I am flipping a house. I assume this is like a lockbox. At its deliverable thing, it’s a lockbox. I put that on my flip. Dan Breslin is flipping this house in Philadelphia. From a simplicity standpoint, am I sharing a link for them to download an app? Am I sharing a booking link that is a little less barrier for the technologically challenged? What am I sending out? Am I throwing this in my Craigslist ads and they’re clicking the link, automatically doing a showing because they did a background check in the background, or am I approving each showing? Where does this come in that makes it valuable for someone if I’m in that situation, flipping a house?

I got a lot of yeses for a lot of stuff that you mentioned. I’ll give you an example. Backing up a little bit, it’s a software platform. We’re integrated with great companies. We have partners from Master Lock. Do you remember that combination lock you had on your locker? They’ve got an amazing lockbox. It’s a digital Bluetooth lockbox. It’s meant for commercial everyday use.

We also have partners like igloohome, which also make lockboxes. These companies also make smart deadbolt door locks and everything like that. There are a lot of different hardware options that we’ve integrated with our system, including property management and real estate-specific cameras, which are cool. I’ll tell you about those in a minute.

In your case, if Dan Breslin has a property and you fixed it up, you’ve got your ARV together, and you put it on the market, and Dan says, “I want to try to maybe save on a few fees and try to sell this myself,” part of the issue that a lot of folks will have is if you’re not doing this day in and day out, and this isn’t your job as it is for professional real estate agent, you are going to limit your traffic. You can only show it after hours, on the weekend, and so on and so forth.

This professional tool will allow you to put this system on. You’re going to have a sign out front that says, “Tour this home today.” You’re going to have a QR code where they can download an app, or you’re going to have it in your marketing materials that says, “To see this property, download this app.” The app walks them through everything.

Advanced Identity Verification and Security

Once they download it, you’re going to have a property code where they can put it right into the search bar or put in the address, and it’ll pop right up. It’ll ask them if they want to schedule to see it, and they click a button. It’ll ask them for their ID. They take a picture of their ID and take a selfie. What we’re doing is we’re connected to DMVs all across the country. We’re matching that ID to make sure that there aren’t any frauds, like somebody is using a fake ID, and that the person who took their selfie is the same person who has a picture at the DMV. We’re matching all of this. We’re also doing a little background check on them.

With all this information, the cool thing about this is that during the onboarding process, they don’t have to go through and put in their name and all this information. We’re verifying that because we got a ton of information off of their ID and the boards that we use. Within four minutes, we’re onboarding them and verifying their emails, phone numbers, contact information, and who they are and that they are who they say they are. They can start scheduling a tour right away. The onboarding process for the visitor or the person who is touring is super quick. On the marketing side, all you’re telling them is, “Use InstaShow+. Here’s the property code. Go ahead and download it.” We walk them through everything else.

That’s interesting. They are doing this showing. For me, we’re control freaks. We probably aren’t going to do it this way in most instances. In our brokerages, we don’t use ShowingTime. We don’t do outside listings either, so it’s our flips. We do a verbal vetting process where we’re asking questions and sizing the person up. We’re pre-negotiating before the showing starts. It may not be a great fit for us, but it is a great fit for someone who is not going to be that deliberate. There are probably times in my business where the team doesn’t have the bandwidth to be that deliberate, and something like this also works.

We’ll carry on with that example. Five people downloaded the app from our ads. One of them was out front of the house. I’m logged into the software, and I assume I got a few notifications on my end and in my email that said five people went through in the last 24 hours. What would I now do with what you’ve collected in InstaShow+?

Let me back you up a second here. With exactly what you mentioned, there’s an article about an issue. If you’re not Dan Breslin and you don’t have the intuition that you have when you’re talking with that person, that could be a bad guy. You’re going off your gut there. What we’re doing is the background verification. There are scam artists out there who are good. Sometimes, they can get around our spidey senses. What they can’t get around is the verification and the tools that we’re using to make sure that they are who they say they are, and all the terms and conditions that they’re agreeing to.

If somebody is good and they say, “This is me,” and they even text you a picture of their ID, how do you know if it’s a real ID? You’re giving them a PIN code a lot of times. We don’t do PIN codes because we believe that they’re a worse security issue than even somebody having to copy a key. Copying a key takes effort. A PIN code can spread like wildfire with a text message. You have somebody who has a key to your property who can do damage. They may not have even been the person that you spoke to. The verification process is huge. The big part about it is that a lot of our competitors are making the verification process hard for that person to do. We’re making it easy.

 

PIN codes are the worst kind of security measure. It can easily spread like wildfire.

 

Let me pause before we get there. The security thing that you’re telling me about, forget about all things ARV and how they got it on five websites. I have fifteen different contractors going through with all of their helpers accessing it. There are drug addicted copper specialists who work for the painter.

I’ve had that happen to me.

Audited Access and Contractor Monitoring

The whole audience has probably had that once. Every one of them could potentially have ID verification. Quick question. Do we have a list of everyone who accessed the property and at what time?

Absolutely. When it comes to people accessing your property, you need it to be audited, tracked, and verified. That’s what we’re offering. You can use that for your contractors as well. Here’s the other thing. How about that contractor that says, “I was there for twelve hours,” and they’re charging you? You’re like, “You walked in at the property at this time and left at this time.” Consider the money-saving options that you have there.

Integrated Cameras for Virtual Presence

A flipper is very similar to a builder, which is one of our big clients as well. Let me tell you a little bit about the camera. We hooked up with a company called Reolink. We asked them to put certain things in the camera on their next manufacturing run. We built it for property managers. The brightest LEDs are on there. It’s two-way talk, like a ring camera. You’re greeting the folks when they’re walking in the door.

It’s not just a notification that you’re getting that Joe Schmo walked into the property or Joe Schmo left the property. You can pop it on. It’s got pan, tilt, and the whole nine yards. You can follow them around and say, “Joe, I see that you’re here. If you have any questions, I’m right here.” You can run ten of these at the same time. It’s not just a dark showing where you’re getting notifications. You can have eyes and ears on.

You’re saying, “We’re control freaks.” I get it. I’m also the same way. This is why when I saw the competition, I was like, “I can’t use that. I need to semi-be there at least digitally or be able to pop in when I need to.” For these cameras, you don’t need Wi-Fi. They’re all based on data like your cell phone. You don’t need power, even. They have solar panels.

You can put them right on the kitchen counter or wherever. We have builders who are using it to watch their work sites. In the same way, you can go, “Tim, you said you got there at 6:00 AM. You weren’t on the camera until noon, and you’re charging me for that. Also, you didn’t access the lock at that time either. I double verified that. I know that you weren’t there.”

Here’s the other thing. For the times that tours aren’t happening, you have a camera at the property that you can put there. You don’t need Wi-Fi. You don’t need all these things. It’s super easy to set up. They’re battery-powered. You can plug it in if you have power, but they’re completely self-sustaining. You don’t need Wi-Fi to run the system at all.

To be clear, Reolink would be another subscription model for that cell service.

Correct. Let me give you the economics here quickly. To be clear, the hardware is not necessary to use InstaShow+. We have folks that say, “Open touring is cool, but I’m never going to use it,” because they want that control, and they want to meet somebody. They’re using InstaShow+ for the scheduling system that fully automates everything end-to-end, and they’re using it for the identity.

Unfortunately, landlords and real estate agents get hurt or even killed every year, meeting a stranger at an empty house when it’s starting to get dark. All we’re thinking about is that paycheck, selling that property, or getting it leased, and then we’ll go meet strangers. What this does is it puts the safety in the part of the showing process as well.

 

Many landlords and real estate agents get hurt or even killed every year because of meeting a stranger at an empty house.

 

It automates it. My MLS access for my license, I don’t even remember the name of it, but I know there is an identity checking system. I’m sure that to use it, I have to collect the information. I’m like, “Text me a selfie and your ID.” I get the chance to kick the tires on a person, but not like the mobile notary structure that you have here in this app.

You hit the nail on the head, particularly with licensed agents. There’s a system that the realtors’ association pays for agents. Agents don’t even have to pay for this. Guess what? Agents don’t use it. It’s too much friction, and it’s not part of the process. What we have at InstaShow+ and what we built is that everything is part of the process, from the identity, scheduling, and access.

Even on the real estate side, it’s an open secret that you don’t even have to schedule to open a lockbox as a real estate agent. You can go to any property and pop a lock open without telling anybody. With InstaShow+, you can’t do that. The person who is going has got to be known. They have to schedule, they have to be approved, and then they can open the lock at their designated time.

We’ve had several examples where the tools got removed. We’d be like, “Who took the tools?” We wouldn’t even need the camera. You probably would need the camera if you had fifteen different people go through to dial it in, but you certainly could hand the fifteen people off to the police, who are inspecting the issue.

Even better if you could hand them the video. That’s what we did with InstaShow+ here. What you’re talking about are multiple factors of verification. It’s like the multifactor that you use with digital technology with your phone, where you verify that it’s you. What we did was that the chain of custody was accessed via video. We even used geofencing to make sure that you’re at the property and not trying to log in from somewhere else.

Here’s the big part. No PIN codes. Since you onboarded with your face, your ID, and so forth, when you get to the property, we’re going to go, “Are you at the property?” We have a geofence that was built automatically in the background. Secondly, we’re going to say, “If you’re going to start your tour, let’s take a little selfie of you to make sure that it matches the person that we approved and background-checked.” We send a signal to the lock, and it unlocks. They can start their tour.

Too many times, we’ve heard from folks who are working with our competitors that said, “I showed up there, and the person who got verified or had their picture on there was not the person in front of me.” It’s the same thing. They can get verified, but they have an alibi because they’re sitting over here under a camera somewhere else. You’re meeting somebody else who they were colluding with and getting hurt. We put all of these checks together with experience to make sure that they’re not getting around the system.

I was told to ask about the Philadelphia case study that you guys have.

It’s interesting. We hired our chief salesperson. He came from another vendor. When we were interviewing him, he said, “I love this, but I need to make sure that this works.” He lived in the Philadelphia area. He had a nice house there by the water. We’re in York, Pennsylvania, so we’re about 100 miles away from Philly.

He went out there and put the sign on the property. It was something very similar to, “To tour the property, download that QR code.” He put a lockbox and a camera on. Our system syndicated it to the MLS. He had, within days, agents and people off the street coming on and getting verified. He had about eighteen showings on a property that was $5,000 a month in rent, which was not cheap rent.

Real estate agents, first of all, don’t pay anything to tour or anything like that, but folks off the street were getting verified and getting through the property. He then turned around and sent them an application. He did his own background check. They DocuSigned the lease and sent him Zelle on everything. He completed everything and said, “Al, I put the system 100 miles away. All these showings happened. I got it leased, and I haven’t even met these people.” He’s scratching his head. He goes, “I’m in.” He’s killing it

If you’re going to sell anything, you have to believe in it. The truth of the matter is, it works. We’ve gone through it. We have everything from a property manager and folks who have sold their own houses, like a flipper who uses a professional tool to manage everything. You have the open touring on top of it. You can have a property that you’re in a different state. How are you going to manage it? If you’re not as good as Dan Breslin at having the intuition to figure out, “Is this a bad person or a good person? Can I trust them to give them the PIN code or not?” You need technology to be able to give that to you.

 

If you do not have the intuition to figure out if you are transacting with a good or a bad person, you need technology to help you out.

 

To be clear, we never give the lockboxes out to anybody. The people on our lists who see this probably know that. We don’t even care if they’re a bad person as long as they don’t act badly when they get there. We’re hoping they pay a lot. Step up and win the bid. I’m kidding. Not about them paying up. That isn’t bad. We don’t want to deal with bad people.

Not at all. If they got green, we’ll take their money.

Hide the bad part. Let’s shift gears and segue a bit into the landlord’s use itself. The Philadelphia case study is helpful. You mentioned that the agents don’t pay. Do tenants pay some kind of fee to get verified?

Flexible Fee Structure and Landlord Adoption

Absolutely. We have different customers. This is what we used to do, and this is how we changed. All of the data boards that we’re hitting, the DMVs, the background, and all of the AI verification of the ID and everything like that are a hard cost to us. To tour a property and get verified, it’s $5. That’s your tour fee. We used to always have the tenant pay for that.

There were some property management companies, especially in the DC area, that were getting $4,000 or $5,000 a month for some of these units that said, “We want the traffic. That’s why we’re using this. We’re going to absorb those fees. That’s the cost of a lead to us, and we want them to tour.” They know the value of the more traffic that you have to something, the faster you’re going to sell it, lease it, or anything else. That works across the board. Whether you have a website or you’re selling cars, you want it in a highly trafficked area.

 

The more traffic you have to something, the faster you will sell it.

 

You have the opportunity to go, “I want to pay for that $5 to get folks through the property, or I want them to take care of themselves.” There’s another case for that because some landlords will consider, “If they’re not willing to pay for a cup of coffee to go there on their own time at their convenience on their own to come see the property, I don’t know if I want them as a tenant.”

We give you the option on how you want to do that. I’ll give you a little interesting tidbit on that. We used to have the fee at $1, and we got complaints from folks. We raised it to $5, and our traffic went up, and the complaints went away. It gives you an idea of the value of something. It’s a nice little interesting tidbit that we found.

It’s fine when the market is in favor of landlords, tour fees, tenants be damned, rents are going up 10% a year, and there’s competition. If you’re dealing with a higher vacancy and falling rent situation, the landlords are going to change their tune quickly. Is there any opportunity for the landlord who does have volume to maybe buy search credits at a lower cost?

Absolutely. We take care of our landlords. Anything more than five tours, where you buy five tour tokens or five tour fees at a time, we’re starting to give out discounts. The more that you buy, the discounts get much lower for the landlords and property managers.

I’m doing the math. There are probably fifteen people who need access to the property during a renovation or a build. There are many verifications. What does it take to get them to $1 a piece?

It is going to take a little bit of volume to get them to $1 a piece, but we can get them there.

Is that volume 1,000 or 5,000?

You’re starting to get up into the thousands. I can tell you this. This is a cool thing. You’re talking about people who have to go in and out. If that same person comes back and they want to do another tour, they’re not paying again because we’ve already done the verification. It’s the same thing if you have anybody else that you don’t know you’re letting through, like an unknown contractor. You want to get them verified.

Here’s the other thing. We also give you known access. Let’s say one of the folks who works for you is either on your team, or maybe you have a painter that you trust and know. You can give that person a PIN code. The locks all have PIN codes for that reason to allow those known folks to get through the property without having to pay or even get identified, because we give you a full management system on that side.

It makes sense. It could get steep for $5 tours, and all of a sudden, you’re $300, $400, or $500 a month. I could see that being a little bit of a resistance barrier.

Correct. The volume systems go up, and the economics end up working all the way from the bottom up. You have to be a large property management group with a certain number of doors before the economics don’t make sense. If you have somebody who has ten doors, for example, who is managing the property themselves, and they would love to use a system like InstaShow+, our plans go down to $20 a month. You can use this system. It’s very economical for the small person. When you start getting into those larger tiers, it ends up making sense.

All About Software Backend Lead Management

It does seem nice, if we’re flipping a house in Tennessee, having something like this to track who went through and paying even if it was ten times the access for $50 to know the backgrounds checked out. We don’t know who these photographers are or anybody that we’ve hired. It’s scary now that you pointed it out. Let’s talk about software backend lead management. Back to the original fake example we were running with early on in the show. There’s a fix-and-flip house, and five people have gone through it. I’m logging into my dashboard in InstaShow+. What should I be doing there?

For example, you’re looking to sell or lease something. The big piece of this is the lead. When we’re talking about whether it’s an agent or a property manager, this lead is important. The one thing that we’re doing is we’re verifying contact info. A lot of times, in a lot of these systems, somebody can make up an email, and they send it to you and go, “I want to see this property,” or anything like that.

When you go to follow up with that person, that email is getting bounced, or it’s never coming through. We’re verifying these emails, contact numbers, and everything like that as part of the onboarding process. When all those five people went through, you have emails and phone numbers. You know who they are. You can dump that information into your CRM or make that phone call.

The great thing with real estate agents, for example, is that the leads are very important. Those leads can be lucrative for a real estate agent. When you have a buyer that goes through one of your listings that’s unrepresented, which is why they’re looking to schedule, that’s a lead that you have that wasn’t auctioned off by a web portal that sells the lead to another agent or anything like that. The tool that we have gets around all of that to make sure that this person books with you, so then you have a real, actionable follow-up with them. I don’t know if you’ve ever been to a model home. They have a little logbook.

They have a sign-in page.

That’s how they get their leads. Most people are writing Mickey Mouse 555-1212. You can’t do that with InstaShow+. You have an actionable, real lead that you can follow up with. We even ask them, “Are you working with a real estate agent?” You know that when they say no, you have a verified lead that you’d better hop on because they’re looking at houses and are looking to buy.

How would that differ, if at all, for the real estate agent who decides they want the system?

You mentioned a tool earlier on your license side called ShowingTime. ShowingTime is zoned by a company called Zillow, which we all know, but their business model is selling leads. They did a big survey, R&D, and they figured out that buyers wanted to see pictures and a little information on a house, but the biggest thing that they wanted to do was schedule and go tour of the house without having to talk to anybody.

Zillow ended up acquiring ShowingTime, which is a system that a lot of realtors are using. Unfortunately, when agents implement that, those leads are usually going to somebody else instead of the agent themselves, where they can disseminate it to their team or somebody within their company. They’re being siphoned off or redirected somewhere else.

Everybody else on Zillow who is looking at houses in their PJs found out that they’re anywhere from 12 to 18 months to never buying a house. They could be dreaming. The person who hits that button to go tour the property is 30 to 90 days away from closing on a listing, which is a smoking hot lead. If you can get that lead before they do or compete for that lead, that’s real money in the agent’s pockets.

Is that a button that’s on Zillow that they’re looking to do the showing? Is that somehow tied to ShowingTime?

Yes. If you look at Zillow at any listing, we call it on the website the call to action. What’s the biggest thing with the most color that draws your eye to it? There’s a big button that says, “Schedule to tour this house.” That’s ShowingTime. Agents loved it. It’s automated. It contacts your seller and says, “This agent wants to show this property,” behind your back. Now, they’re booking it directly with your seller. Another agent takes a client that should have been yours, and they’re showing your listing. You have to split that commission where that could have gone to somebody in your team, you could have referred it out, or whatever the case may be there.

I have it pulled up on Zillow as we speak. I have the option to book for Friday at 9:00 AM. If I were to click through Next, and I got this by clicking the Request to Tour button, you’re telling me that these times are what is available according to the ShowingTime of the listing agent.

It’s because the person who listed that property has that availability in ShowingTime.

If I click that, it’s going to send me to another buyer agent who Zillow has charged for the lead.

Unless that agent themselves is paying for that ZIP code, or they’re somehow paying Zillow to make sure that this lead goes to them, which is very expensive.

We need an antitrust suit there.

Agents have had way too many lawsuits for the past couple of years.

We need one against Zillow. This is BS.

Here’s the thing. You can either fight them in court, or you can adopt systems like InstaShow+ so you don’t have to give them your leads. That’s the big part with agents here.

When that showed up, does that mean that the agent who had that Williamsport property listing activated ShowingTime in their MLS?

Yes.

If they didn’t do that, we would put an InstaShow+ short link into the description to show and direct them?

Yes. You would have that information in the marketing materials, like your remarks and things like that. Everywhere that you advertise, where your signs are out there, is saying, “This is how you see this house.” Buyers, if they want to see that house, have to remember that it starts with the pictures and information, and then they go on the tour.

If they look at the pictures, they’re looking at the information. As that person is saying, “Contact me here,” you are saying, “This is how you tour this property. Download this app.” They know that the agent is saying, “This is how you tour.” They’re not even going to click that button up top. Some may, but here’s the thing. When you don’t put ShowingTime on this, you end up breaking that button. The only thing that happens is it’s not automatic anymore.

Maybe another agent will get a message, “Contact this buyer. They want to see this property,” but remember what I told you in the beginning. They want to schedule without having to talk to anybody. They’re going to go, “What’s going on here? I’m not going to wait for that call.” They’re going to go ahead and use what you told them to use to see this property. It’s a way to start getting your leads back. You want to market it everywhere else.

In this instance, the agent is Brian Girio. He puts his phone number in here. That makes sense. That’s a pro tip for any agents who aren’t already doing that to get around ShowingTime. Here’s how you double-end the commission. Will the public remarks section in MLS allow a link to be displayed for InstaShow+?

Yes. Take note of this. You’re hitting a very important point. NAR, which is the National Association of Realtors, has these ethical rules that we agents all have to follow. One of the rules is about access to a property. Those ethics say that access to the property is whatever the agent and the seller agreed to. If a seller is saying, “You told me about InstaShow+. That’s how I want my house shown because of the safety features. I don’t want anybody barging in here when they’re not supposed to be. I want to make sure everybody who comes through my property is identified. This is the only way that I’m going to allow you to show my house.”

Since there are some rules that are a little outdated, where they say, “We don’t want advertising in here,” you have to tell them to use InstaShow+. The consumer can schedule with the agent. We’re having folks put that information into their listing agreement with their seller, saying, “This is how I want my house shown.” We’ve had situations where some MLSs have contacted the agent, going, “You’re not allowed to put an advertisement in here.” They’ve sent them the listing agreement and said, “This is how my seller requires it.” Most MLSs have gone, “No problem.”

I was wondering if the live URL in there would be a bit of an issue. In this Zillow example, they probably would have to copy and paste that link to get it to activate.

It’s not even the URL. It’s the instructions, like, “Download InstaShow+ in your app store.” Everybody has an app store now. You then say, “Enter this code after you download the app.”

That makes sense.

We’re not putting URLs. In your marketing materials, we do have those links that we give everybody, like the QR code. We have this link that we can give everybody, and maybe you want that on your website. It has a button on your website that goes right there. We have agents and property managers who are doing that as well.

Are they allowing that QR code to be in the photos?

We’re talking about the MLSs that have weird rules around that, but here’s the thing. It’s not just the MLS. If you’re renting a property, you have HotPads and Zumper. You have all of these sites that we syndicate to. If the MLS doesn’t allow it, on the past syndication sites, you can go claim your listing and usually put whatever you want because they don’t have those rules. The buyers aren’t using the MLS to find a property. They’re finding them on the syndicated sites, the consumer-facing websites. That’s where we’re having agents go, “I’m going to make the change there and not have to worry about this.”

Addressing The “Apply First” Business Model

That makes sense. What else have I not considered or we didn’t touch on here that might be important to the developers, fix and flippers, landlords, and agents who tune in to the show, and this topic is relevant?

For the landlords, there’s a little piece here. I’ve been in the game for a long time. I’ve been a property manager. It’s the shift that’s happening in a lot of markets, and not everybody across the nation is experiencing this. We found that a lot of landlords and property managers are having a harder time turning their units. The units are sitting vacant a little longer.

 

A lot of landlords and property managers are having a hard time turning their units, most of which have been sitting vacant for so long.

 

I wanted to give a little bit of insight into the research that we’ve done. We’re going to be putting out an article on this. Some landlords have not been in the game long enough to understand the changes that have happened. You’ve been in the game a little bit. When we used to rent apartments, we used to have people show the properties first, and then if they liked them, they would apply. They’d pay the $40 or $60 fee for the application.

When COVID hit, everybody was fighting over the unit. We had 20 to 30 people in line to try to get into the unit. We changed to an apply-first model. Meaning, we said, “You’ve got to apply for the unit first, and then we’re going to pick the top applicants. That’s the person who’s going to get it.” We needed to manage that volume.

How many apply-first active listings are we talking about? Is this 50 to 100 or 10 to 20, or in the thousands?

Over 90% of property managers earn an apply-first business model. Here’s the thing. You almost had to do it because of the volume that we had of the influx of tenants. Do you remember the housing shortage that happened?

Yes. You’re telling me that for 90% of them, there’s $40 to $65 application fee being charged to show the property?

Upfront, before you even get to see the unit. Due to the housing shortage, there was a call to arms to builders, especially in the South. You had a lot of build-to-rent communities. They popped up everywhere. All of a sudden, it’s supply and demand. You added a bunch of supplies, which lowers that demand pressure. What do you have? You have a buyer’s and seller’s market in the rental space. The real estate cycle is a little bit bigger.

You’re coming back into a little bit of a tenant market. They have options. They’re like, “I have ten units I can go see.” If you’re saying, “I need you to pay $40 or $60 to go see it,” they’re going to go, “I can go see that one right now. I don’t have to pay for that.” You have properties that are sitting on the market. I know folks are out there going, “I’m not going to hire ten property managers to show these units first.” You don’t have to. You can go into what we call a hybrid model. This is how we’ve helped property managers.

If you use a system like InstaShot+ with open touring, for example, or even if you use it half and half where you might meet half the people on certain properties and the other properties may be a little further away or it makes sense, for those properties, especially if it’s competitive, you can get people through the door. They can go, “I like this unit. How do I apply?” You’re getting those application fees. If you think about it, in InstaShow+, we’re doubling the amount of traffic that’s going to a property because they can go on their time. It’s the Uber and Amazon effect. We want to be able to do it in an app.

You’re removing this resistance. In your system, and maybe you have data to track this or maybe not, what would be the total number of properties listed for rent, whatever the time period is, and then break them down to “This amount used open touring. Their average time on the market was this. This percentage of the total listings decided they were doing it the hard way. They’re just using this for verification scheduling, but they have to show up there. They took longer or shorter.” Do you happen to have that math done already?

Here’s the thing. I experienced that math. That’s something that we’re looking at with the data with our customers. Our customers are telling us, “People are coming through. I’m running them faster.” Let me give you an example of an experiment that I ran when I was doing this. We have those properties that are mirrors of each other.

For me, they were a line of duplexes, and the end units were exactly a mirror of each other. It was a two-bedroom duplex. The price was exactly the same. The condition was exactly the same. For the first unit, you had to either email me, call me, or come into the office so we could set up an appointment to go see it. For the second unit, it had big posters on the front that said, “Download this app. See it today.” It was on all my marketing. I rented the second unit out five times faster than the first unit. The second unit was rented out in a week. The first unit was still on the market three weeks later. I experienced that myself.

I imagine it would be. There are probably not a lot of landlords who would have enough properties on the market to do an A/B test at any one time. The guy or gal might have three on the market if they’re good and got to 100 or so units. Your landlord with 8 to 10 properties. I hope they only have one. If they’ve got four on the market, they are in dire straits. It happens.

Here’s something that we have for you and your audience. We have it open. Go to InstaShowPlus.com. For that guy, he might have ten units and only have one property pop up. They can create an account with InstaShow+. Especially if they’re going to go show it themselves, they’re not doing open touring, and they’re not using cameras or lockboxes, they can download it and use it on one property for free. The only thing that would be charged is the touring fee, whether for the visitor or if they want to absorb it. There’s no monthly fee if they want to try it on one property.

We have it on. It has built our customer base. We have this math. The person who downloads it and uses it on one property, about 45% of those people, which is a very high number, are turning into paid users within about one year. If you’re looking at that 10 or 15-unit user, it lines up whether they picked up another property or they have 1 or 2 listings that are vacant that they need to get folks through there.

Sign Up To InstaShow

That’s interesting. As we wrap up here, I know you plugged the site once. Do you want to plug the site one more time for the folks who didn’t catch it yet?

Absolutely. If you’re looking to automate your whole showing platform, you’re looking at your leads back, you’re looking for safety so you’re not meeting complete strangers at a vacant property, and you want to be able to expand your territory so you can buy, lease, or manage a property that’s 45 minutes away or further, go to InstaShowPlus.com and sign up for free. Download the app, play with it, and become our customer.

Why Giving A Benefit Of Doubt Is A Game-Changer

This is the final question I ask all guests who come on the show. What is the kindest thing anyone has ever done for you?

Honestly, giving me the benefit of the doubt, whether it be on a loan or a deal. It changed my path. I can be a little hard-nosed on things. If you think about it, open touring and all these things that we talked about are game-changing. It’s hard to wrap your mind around it and give up a little bit of control to get more efficiency. That doubt has turned into an industry where folks are competing with me as opposed to vice versa. The kindest thing somebody has given me is that benefit because it has made me a better entrepreneur and somebody who can give more to this world because of it.

I appreciate you coming on the show. I have a couple of pages of notes here. This is a very interesting product, and you have cool things you’re doing there.

Thank you. I super appreciate you having me on.

 

Important Links

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

About Al Romero

The REI Diamonds Show - Daniel Breslin | Al Romero | Property ShowingsAl Romero is a seasoned real estate agent and broker with over 25 years of experience, who also leveraged his background in tech to found Instashow Plus. Driven by the challenges of property showings during the COVID-19 pandemic, he developed Instashow Plus as a secure and automated platform for managing property access and viewings.

 

 

Self Storage Development With Ben Salzberg & Bill Kanatas

The REI Diamonds Show - Daniel Breslin | Ben Salzberg and Bill Kanatas | Self Storage

Bill Kanatas and Ben Salzberg, are experienced real estate developers, specializing in Class A facilities, often involving the repositioning of closed, dark spaces or ground-up construction. Their strategy is primarily that of a merchant builder, aiming to develop and sell these properties within a three to five-year window after stabilization. They highlighted the importance of community engagement and building trust with municipalities during the entitlement process, especially when addressing concerns about new developments. A key to their success in the Chicago area, despite its high property taxes, has been securing tax incentives, such as the 7B designation, and developing in TIF districts, which showcases their expertise in navigating complex local regulations.

 

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%. Buy & Hold Loans Offered Even Lower. Get a FREE IPad when you Close Your First Deal by Registering Now at http://REILineOfCredit.com

 

Ben Salzberg, Bill Kanatas & I Discuss Self Storage Development:

  • Merchant Builder Strategy for Self-Storage (00:05:40)
    Ben and Bill break down their merchant builder strategy where properties are developed and sold within a three to five-year window after stabilization.
  • Focus on Class A Self-Storage and RV/Boat Storage (00:14:38)
    Ben and Bill share how they found huge wins by concentrating on Class A self-storage and RV/boat storage, which often involve the repositioning of closed, dark spaced or ground-up construction.
  • Navigating the Entitlement Process and Building Municipal Trust (00:11:31)
    Ben and Bill discuss some valuable tips on how you can prepare for the entitlement process and the right way to build municipal trust, which are two essential components in a successful real estate transaction.
  • Overcoming Chicago’s Property Tax Challenges with Incentives (00:20:12)
    Ben and Bill talk about their experiences doing business in the Chicago area, particularly with how they navigate its complex tax hurdles and take advantage of all available incentives.
  • Strategic Cleanup of Environmentally Challenged Sites (00:24:57)
    Ben and Bill explain the right and compliant process of cleaning up overgrown properties to restore their best state and even make the necessary improvements.

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

    

Watch the episode here

 

Listen to the podcast here

 

Self Storage Development With Ben Salzberg & Bill Kanatas

Bill Kanatas and Ben Salzberg, welcome to the show. How are you guys doing?

Great, Dan. How are you doing?

I’m doing well.

Thank you for having us on your show.

Introducing Ben Salzberg And Bill Kanatas

Why don’t we get started so the guests have a chance to see who Bill and Ben are? Bill, we’ll start with you. Could you share a few highlights of your real estate development career?

 

The REI Diamonds Show - Daniel Breslin | Ben Salzberg and Bill Kanatas | Self Storage

 

I started many years ago doing retail strip centers, office buildings, and office condos. I did some residential development that I have developed over the years, primarily bringing the land, water, sewer, and streets, and developing the lots and selling them to builders. After that, I quickly got involved in some larger projects like ground-up development of storage facilities, as well as car washes, and some strip centers. We did one in St. Petersburg, Florida, several years ago, over 100,000 square feet. We developed some Fifth Third Bank, Auto Zone, and stuff like that in our portfolio.

Are you solely focused on storage lately?

Yeah. We’re concentrating on climate-controlled self-storage, as well as boat and RV storage.

I’m in the same lane there. That’s great. Ben?

My background is focused on managing brokers for over 30 years in Illinois. My background is in Engineering MBA, specializing in Six Sigma and quality. I’ve been in the commercial world. I did a lot of the air rights for the Boeing Center downtown. I saved about $50 million, looking at companies, assessing them, and making them more efficient and profitable. I looked at all of the classes of corporations that I’ve been working at and realized how good self-storage is as far as an investment and how resistant it is in the industry for any type of situation that’s going on with the economy, and I was looking to focus on that.

I kept it in my memory and met with Bill. Bill and I talked about it. We’re like, “We should start a company focusing on this self-storage arena.” My knowledge in statistics, Six Sigma, Lean, and engineering brings a host of skills to be able to develop, analyze, and know where to put these particular facilities. We have such a great team. I would love to discuss with you more about what we’ve been doing.

Are you guys doing 100% ground up, or is there some redevelopment of sites, or even buying of self-storage facilities, and doing a turnaround? What is the primary focus of self-storage developers?

We would love to do conversions, especially in Chicago. Conversions get to the market a lot quicker because we can work through winter conditions. For our first self-storage facility, we purchased a former Burlington Coat Factory that had closed. It was an eyesore for the village because it stayed vacant for probably about three years, if I recall correctly.

We came in there and we were able to talk to the city about bringing it back online and on the tax row. We converted that one. It was about 78,000 square feet of the Burlington Coat Factory. The ceiling heights were high enough in one of the areas where we could build a mezzanine in there. We added a second floor. I think we have about 90,000 of net rentable. There was like 89,980. The total footprint became 128,000 square feet. We do love conversions. We haven’t purchased any assets that were in trouble or needed a little bit of reviving. We would either do a ground-up construction or repositioning of a closed, dark space.

The nice thing about doing ground-up construction is that you can go to the areas where the numbers fit so well, and the profitability of it is so high that it makes sense to do ground-up construction. It’s something that people don’t understand or realize because there are these pockets and people who are moving and growing these communities who need self-storage. Those are the areas and pockets that Bill and I are filling in.

 

When you do ground-up construction, you can go into an area where the number fits so well and the profitability is so high.

 

Merchant Builder Strategy For Self-Storage

You guys are typically building these to sell more of a merchant builder situation, build it, develop it, sell it to maybe an institutional owner at a very favorable cap rate, and pay off all of the investor capital and keep it moving. There’s not much, if any, operating over a decade in the plan. Is that accurate?

Ideally, yeah. As developers, we’re always willing to change our plan. We’re merchant builders. You’re spot on. We’re looking to find that diamond in the rough. By the way, I love the diamond right behind you. Ben and I, and the team, will find that diamond in the rough. We’ll polish it and take it through the entitlement process. That’s what creates the value.

It’s not easy to find a piece of property and say, “We’re going to build self-storage here.” There’s a lot of work that goes behind the scenes. The municipalities don’t love that. When we were developing car washes, they were concerned about the noise. “The noise, we can’t have that.” When you sit down with a municipality and you explain to them the advantages and the need for the community, then they open up.

It takes a while. We do develop these self-storages. We get the communities to say yes. As Ben said, to his point, we’re able to find the market in the pocket. With that said, there are investors who want to keep this longer term. If our partners want to stay in this for 10 years versus 3 to 5 years, then Ben and I are also open to that. I’d like to say that the investors help guide that timeframe, but more so than others, we’re going to be flipping this out in 3 to 5 years because everybody wants to redeploy that capital into something else.

For the audience, the merchant builder is like fixing and flipping houses. We have a lot of fix-and-flip investors. We do hundreds of those ourselves per year on the audience and our email lists. Merchant building is like fixing and flipping a house, and then owning it long-term is like the landlord who’s 75 has owned everything for 40 years, never sells anything, and refuses to sell more long-term operations.

There are pros and cons to both sides. I think one of the risks that exists in self-storage is the potential for it to be overbuilt. If they open 2 or 3 facilities and are too close of a driving radius, suddenly, maybe you don’t get the rent growth long-term that you hoped for. I have not seen a ton of that. I know we’re going to get into avoiding that as well. You are also doing the construction and bringing verticals. It’s not just the entitlement of the land and then selling it to someone else.

We do dirt to doors. We develop the entire project.

At the end of that project, let’s say it’s maybe 12 to 18 months of actual construction?

That’s about right. Once you start going into construction and breaking ground, the general contractors will tell you it’s 10 to 12 months. Again, depending on where you’re building. If you’re in Arizona, it’s different than building in Chicago. The 12 to 18 months is a great window, but we’ve been very fortunate to get them right around 12 months.

The partnership on that deal is also going to hold that until you lease up a percentage of the units to stabilize it, get the cashflow looking right, and sell it. What time period would that be? Construction is done, and then how many more years until the build is ready? The fix and flip is done. We’re ready to exit at the retail value, if you will.

We tell the investors a 3-to-5-year window after we open up the doors.

Have you guys had some exits in the last 2 to 3 years?

Not in self-storage. We had some exits on the car washes, but we opened up our first one in 2022. We started the project in ‘21. That’s still operating. We’re over 75% occupied there. Public Storage is operating it and doing a great job. Our second investment, we did exit. We exited quickly. It was an Extra Space project. Ben and I purchased the land, closed on it, took it through the whole full entitlement process, and got it approved.

We’re talking about a full plan. Architectural was done, structural was done, and engineering was done. Permits are in hand. We were about to go vertical, but somebody knocked on our door, and they happened to be an Extra Space builder themselves and offered us a good dollar amount. Ben and I decided to exit that investment and concentrate on the next two that we’re working on.

On the Extra Space one, was that already a syndicated deal with partners involved at that point, or was the capital raise not quite done yet? Fill me in on how that shook out, if there were partners, and how they are meeting.

We didn’t finish the equity raise on that one because we wanted to wait until we had the full entitlement process ready to go. That’s what we typically do. We try to remove the risk for the investors. We find a property, we tie it up, we spend all of our money on the architect, engineers, civil, and all that stuff.

Once you’re ready to go vertical, we start putting our private placement memorandum together, and then we go and raise capital, either with individuals, family offices, funds, you name it. In this particular instance, we closed on the land and tied it up primarily with our capital. Before we had the chance to go to the market and start raising the capital, somebody was interested in purchasing it, so we decided to flip it.

Navigating The Entitlement Process And Building Municipal Trust

Online and doing my research, I found the Hanover Park meeting minutes. It looked almost like a rubber stamp of approval. You guys were looking for a floor area variance. It looked like they had it before. It was probably pretty simple. It didn’t look like you had a whole lot of pushback in that entitlement piece that I found. Is that your experience in general? I hear a lot of nightmares. I’ve been involved in some, where it doesn’t go quickly, and you don’t get what you’re looking for. That’s the entitlement risk that you’re alluding to. Do you guys have the experience of 20, 30 years?

You have to make relationships. It’s building those relationships and getting everybody on the same page, so that when you start to do all the work, everybody knows what you’re doing.

A lot of that is time invested before the meeting, and paperwork is filed.

This is what’s important to understand. Ben can talk a little bit more about this. Ben is an elected official at a college. When you’re dealing with board members for the first time, they’re looking at you as a developer, and you’re here to take something from them. A lot of times, developers make promises with pretty pictures, “Here’s our architect. We’re going to drive everything to you.” By the time it’s all said and done, it doesn’t look as pretty as they said it was. It wasn’t built to the quality that they said it was.

You’ve got to build that trust with the community, as well as the village and the board members. Ultimately, they’re going to vote for it. It’s important to deliver what you said you’re going to deliver. Once you don’t deliver what you said you’re going to deliver, it won’t be long before other board members in other communities start talking about that.

I’ve been developing for 30 years. When I did retail strip centers, office buildings, and office condos, there was a lot of pushback. Especially, as I mentioned a little bit earlier, when it comes to the car washes. People were very concerned about the noise. They were also concerned about people hanging out, watching their cars, and playing loud music. Who is going to come there? What’s the crowd you’re attracting?

It’s the same thing with self-storage. Who are you attracting? Is this going to be a homeless community? Are people going to be living in your units? What is it going to look like? What is security like? These are everything that we like to address when we sit down with the community, with the mayor, and also the economic developer, because these are good concerns. I would be concerned. You would be concerned if these were coming into your community. The key here is to address them and deliver. Once you deliver and they understand that you’re not about taking, you’re also giving back to the community. That’s important.

This is all about community development. This is all about giving back to the community. Self-storage is about giving back to every homeowner, and they have a product they can use. It’s not like you wanted to get everybody on board with it.

 

Self storage is about giving back to every homeowner.

 

Focus On Class A Self-Storage And RV/Boat Storage

I saw some commentary in that same application, or the meetings there, where you guys were talking about, I don’t know if it was specifically the word facade, but using certain types of doors in the design, where it was going to fit more. It almost looked like you’re illustrating the Class A nature of this product.

Maybe you could elaborate more on your thoughts, like we’re under contract right now. We’re closing a car wash that we’re selling. It’s old and existing, the kind where you put the quarters in, and it has the pump and the spray. If someone came and wanted to build that across the street from my condo building, I’m going to show up for the meeting and turn it down. My buddy, Glen Stygar, built 12 or 13 of these Woodie’s Wash Shacks in the St. Petersburg area.

They’re like what I would consider Class A car washes, brand new. There are the vacuums out there. They’ve got all the bells and whistles, and it’s a totally different environment because that’s what I would think of as a Class A car wash. Could you touch on what you think of as a Class A storage facility, maybe in comparison to a B, a C, or something else, where maybe the zoning board wants to shut that down because they don’t want that there, but they’re willing to put your Class A product there?

This is a generated model that is a Class A facility. It’s a very modern type of facility with the glass windows here. You have bays underneath that can store boats or cars. These are the type of Class A facilities. Maybe 120,000 square feet, fully air-conditioned, with automation in there, high-end facilities. Different types of materials are being used. Those are the type of Class A facilities.

What would be a Class B facility?

For me and to Ben’s point, one of the Hanover Parks that you were mentioning earlier had a full drive-through. You drive in one end, come out the other. In Chicago, that’s great for us, and for security, too. If you’re going there later at night, you want to be able to stay in your car. The door closes behind you, and nobody is there. You open up your car, and you unload. That gives you the added Class A security.

A Class B, for me, may not have all the bells and whistles. In our Class A facilities, we have somebody who works there. Our hours may be 6:00 AM, but by 9:00, we have an actual person working there. They can walk you around, they can show you the facility, they can get you registered, they can take your credit card payments, and all that stuff.

Some of the Class B facilities may not have that as an extra service to have somebody there. It may not be climate-controlled. If it is climate-controlled, it may be outdoor unloading where we have either a drive-through or drive-in bay. The Class A are built brand new. They have all these automated things in place, including the doors where you can lock or unlock them with your keypad. You have access on your cell phone. All those amenities go into a Class A facility.

To clarify, the Class B might look more like a row of garages or like five separate rows of garages.

That I was about to say. You’re driving down on some farmland, you’re like, “Look at those out there.” One level of facilities, and you have 20 or 30 bays, and non-climate-controlled.

When I started to invest in self-storage and become a partner in several organizations, I remember telling a family member about, “I’m putting my money in storage.” It’s like, “Is the land well located?” His mind went back to the self-storage was more of a land bank strategy. Maybe that’s how it was 15 or 20 years ago. You took this old building and you were going to hold it until the whole neighborhood changed, and then someday it would become condos and it would be like a vibe city, a Chicago downtown neighborhood with $500 rents, whatever it is.

I was like, “No.” I think the entire industry has shifted. We had public storage, and we have Extra Space. There are a few others that are very large like that. I feel like it’s gone from land bank, the farmers trying to generate income out of those garages, to something more of a business model that operates almost like a retail concept these days. The automation, the caliber of the facade, and the building behind you, Ben, have morphed into something a lot more evolved than it was twenty years ago, like my family member thought when I said self-storage.

I agree with that. It’s a different mindset that people are looking at self-storage now. It’s like living. You have an apartment or a condo. It’s something that you have to have. It’s not just something second mind. It’s right there. Like an apartment, I need self-storage.

 

People have a different mindset about self storage nowadays. Just like having an apartment or a condo, it has become something you need to have.

 

I probably need some myself. Both of my condo things in the basement are filled. I don’t know why I don’t break down and become a customer.

Maybe by the time the show is over, we can have you on as one of our customers.

Overcoming Chicago’s Property Tax Challenges With Incentives

That’s right. Give us an idea of 2 or 3 of the cities where you’ve been successful so far.

Hanover Park, you mentioned. Chicago Ridge which is a suburb of Chicago. We have a project there that we’ll be closing on the land. We had to go through the entitlement process. To your point, it’s a little challenging, but they welcome the development. It’s a piece of property that’s an eyesore for the city. I think the fact that somebody is willing to come in there and develop it, they’re very happy about. As we mentioned, we got that 7B, or maybe we didn’t mention it, but we were talking about a tax incentive that is available here on this property. It’s also in a TIF. The village realized that it needed to create a TIF to attract developers. We’re one of the developers that they attracted there, and we’re going to build it there.

We’ve been successful in getting that rezoned. Not only did we have to get it rezoned, which we did successfully, but we also needed to get a special permit for it. It was not only the process of getting it rezoned, but you needed a special use permit to allow it to operate as a self-storage facility as well. We got that one done. We’re working right now on a piece of property in Palmdale, California. The village there had been open to self-storage. We’ve sent them some renderings, and we’re showing them what we’re doing there. I think that’s going to be a successful self-storage facility as well.

Was Hanover Park the exit to Extra Space?

Yes.

When I first looked you guys up, I was excited to have you on because I see there’s a lot of development going on in Chicago. Everybody who has come across my audience here has mostly been out of other areas and avoided Cook County for the tax issues. There is a monumental problem with the property tax situation in Cook County. In certain villages of Cook County, even in the city of Chicago, certain properties are so impossible to make them work, even from the tenant’s perspective. The tenant on a triple net lease has to eat the taxes, so they have a higher risk of large increases as time goes on. I was like, “Here are some guys who are putting a shovel in the ground in the Chicago land region. This is amazing. I can’t wait to have them on.”

It was more amazing to hear you talk about the 7B designation for the development in Chicago Ridge to mitigate that risk. Any one of my friends who’s not investing in Chicago is well aware of why, and that’s the tax situation, and you’ve been able to get that as a solution. I guess you guys must have penciled that out. That was part of constructing that deal on the front end. It’s not like you bought the land and then hatched his plan later.

There was the whole process from the beginning to get there.

Without that incentive, it wouldn’t pencil out.

Bill and I are pretty good experts in that arena to make things work. That’s what sets us apart from a lot of the rest of the developers.

That took a while. I don’t want the audience to think, “We’re just going to check that box and apply for it, and we got it.” It isn’t like that. A lot of hard work went behind there. You have to prove that it needs it. They’re not giving it away for no reason. This property was undeveloped for 20-plus years, 30-plus years. It was an abandoned site where people were driving by and throwing whatever they could on it.

It did have some challenges with the EPA, so Ben and I cleaned that up. That took a long time with the EPA to apply for the plan and get it approved, etc. When we close on the land, it’ll be completely cleaned up, and we have our incentives in place. We were able to start breaking ground with that. You may or may not know, Chicago passed an ordinance to try to stop Chicago from developing new self-storage facilities, and only allowing the rezoning in certain areas of Chicago. I think that’s going to help Chicago Ridge if no new developments are being developed in the Chicago area. We think that this is going to be a home run for us.

Strategic Cleanup Of Environmentally Challenged Sites

Interesting. Phase one environmental came back bad. Phase two environmental, which is where they did core samples, also showed stuff that needed to be done. I think it’s phase three where they give you the remediation plan, and that’s what has to be approved by the EPA. Was there a cost to clean that up? Would you mind double-clicking on that? I think it would be an interesting segue here for the audience.

The three boxes are surprise, surprise, surprise. We checked off all three boxes. It took a long time to get the EPA, and the environmental engineers did a great job putting together an action plan. A lot of testing, a lot of boring samples, a lot of testing, but the EPA signed off on the actual action plan. The bid is under $100,000, but it’s to be said because, truth be told, until it’s completely dug out and sent to the haulers and they weigh it and they accept it, then they send you the bill later.

We’re estimating about $70,000. It’s in two tranches. Tranche one is going to one site that’s going to accept it. The second part of that is going to a different site, which comes with a different dollar amount. When it’s all said and done, we can now follow up on another episode, but we’re estimating about $70,000 in hauling fees and dump fees.

For context for the audience, the average in phase one is like $5,000. The average in phase two is between $10,000 and $20,000, and I’ve never bought a phase three. These are due diligence items, and you’re paying for this money while you’re under contract for the land. You don’t even know if you’re going to be able to clear the environmental and buy it. Do you mind sharing insight on the cost of the engineer’s work to come up with that plan, Bill?

The environmental engineers are probably in the neighborhood of about $40,000 when it’s all said and done. The civil engineers are in the $70,000 range. This is where development is very risky. Hopefully, this keeps some people not wanting to develop right next to you, if that makes any sense. Chicago Ridge is not going to allow another one because there’s not a market for it. Hanover Park, too, when we talk to the village, they said they’re not looking for any more self-storage directly in Hanover Park.

That limits our exposure from another guy opening up across the street. That’s good or bad, but we like to do all this work before we bring the investors in. The investors are not taking the risk of losing their money. Ben and I are taking the risk upfront. There are risks and rewards. When we do go vertical and we do have investors come in, there’s a balance between the risks and the rewards on development sites.

Have you guys ever killed a deal during this part before you got entitlement, and you lose all the due diligence money? What’s the hit rate? Are you 50% of the sites, 70%, 80%, or 100% of the sites? Clear it and get to being able to build?

There are dead costs involved in any type of development, and you build them into the business plan.

Ben hit it right on the nose. We walked away from a deal in the playing field that didn’t pencil out for us. We walked away and lost earnest money in Hampshire, Illinois, from a deal that we thought was going to go well. We had one in Michigan. We didn’t lose any money on that one, but we had that tied up. Money is also time. When we’re driving to the sites and you’re looking at them and spending time with not only mine and Ben’s time, we have a team here, as well as consultants.

You spend money. You spend $5,000 on a report here, $5,000 on a report here, and you end up walking away. Yes, it’s a dead cost, but that’s part of the development game. We’re not new to this. As I said earlier, we’ve been doing this for many years. There is money that you’re going to lose on some of those deals, and you make it up on the ones that will be your home runs.

Closer Look At The Site In Chicago

For the audience, if you’re going to invest in a ground-up development, I think that helps paint the picture for where to look out for risk, and where they are in the process. Do we have the plans before they’re asking for the wire, or no? Let’s double-click on this site in Chicago Ridge to walk through what this looks like from the investors. We’ll start with how big the site is and how big the building will be.

The footprint is it’s a three-story building. It’s going to have a full drive-through. You’ll drive in one end, unload, and then drive out the other end. We’ll also have a drive-in bay for unloading. You get the benefit of either a drive-in, a drive-in bay, or a complete drive-through. The site is about 5 acres. The footprint of the building is about 128,000 square feet. Public storage is going to be our operator on that one, and civil is finishing up all their drawings right now. We can submit to the MWRD for the water and sewer. We won’t have a full sewer line there, but we’ll have it for stormwater.

We’re finishing up with the architecture right now. To be honest with you, we’re waiting for a little bit more tweaks on the unit mix. We learned from our development that we had in Burbank, we probably should have had more of the 5x5s, very popular with people in this area. The 5x5s also generate more money per square foot. It makes more logical sense to put more of the 5x5s, 10x15s seem to be popular. We wanted to change the mix to add some more 10x15s here as well.

Do you guys have any insight on what the cost basis will be, maybe the cost to build per foot, and then maybe what the finished or projected stabilized exit price per foot might be?

We have about $81 per square foot on the cost of it. That doesn’t include the land cost. We think it’ll be worth somewhere in the neighborhood of $20 million to $21 million.

That’s about what they go for.

Yeah, so $128,000 gross. I can’t do it that quickly in my head, but Ben is a statistician. He could probably do it quicker than I can. All in all, the development is going to be about $15 million. It’s going to be a little bit less, probably about $14.5 million. The capital from the investors, let’s say, is $4 million. If you exited $20 million, it’s not a bad day.

I guess I’m doing the math on $21 million. It’s like $164 a foot. Does that sound about right?

It could, yeah.

Who’s a buyer for this kind of thing? Public storage, I would assume they were the owners, but no, they’re actually doing management and operating a facility. Do they gear up and then eventually buy this from you guys, or are a lot of these buildings that we drive by and see all the time owned by third-party, other investment institutions?

We were hoping that you would be the buyer for it. If you ask a public storage why they got into the business of third-party management, it wasn’t to make a profit. I don’t know if they’re making a profit now, I’m assuming they are, but that wasn’t their motivation. Their motivation was to get in there, have a presence, continue to grow their brand, and while they’re in there, they’re looking at your operations, clearly. They’re driving the revenue to your property again, so they know where they’re going to be in 6 months, 9 months, or 12 months from now, so they’re the likely buyer.

Same thing with Extra Space and CubeSmart and any of the other guys that are offering third-party management. It is our goal to sell it to them, but not necessarily to them. They may not be the best buyer. Extra Space might want to increase their footprint and throw public storage out and become an Extra Space, or CubeSmart, or any of the smaller ones, any of those guys that are coming space to this market. Any of those guys who want to be here potentially can be a buyer.

Dissecting The Waterfall Structure

One of the things we were working on was trying to get Extra Space to exit us out quite a bit, and then the stock price changed, so their appetite to buy had changed. You’re having to play the market from public storage or this one or that one. What does the waterfall structure look like here? What percentage of the deal goes to you as the general partner? What percentage goes to the passive investors? Maybe you could talk about things like the IRR, the cash-on-cash, and maybe the minimum investment, and that kind of thing.

I’d be happy to run that through. In this particular model, what we’re looking to do is we’re going to bring investors in for the full capital stack. For argument’s sake, I’ll say it’s $5 million. It’s less than that, but easy numbers. Ben and I typically will take some of that equity stack ourselves to show that we also have money on the LP side. We break it up between the GP side and the LP side. The general partners take on the majority of the risk, and they will sign and guarantee the debt, whereas the limited partners will not guarantee that debt.

They’ll come in after the debt is already secured and ready to go vertical. They’re not going to sign the loan documents. Ben and I will do that. These loans are full recourse, which means if something goes south, they’re coming after Ben and me, our company, and our assets. They’re not coming after the limited investors.

We set it up where they own 100% of the preferred shares, which are Class A shares. Ben and I, and our company, would take the Class B shares. They have 100% ownership of those. We give them 60% of all the profits when we liquidate the asset, and we also give them a 10% preferred rate of return on their investment. There may be some distributions prior to the exit of the investment. In this particular one, we’re shooting in year three. It’ll have some revenues to start paying some of that pref rate.

If we fast forward to the end of the day and we’re ready to sell the asset, the investors will get the accrued 10%. The first check that will be written is the mortgage. You pay off the mortgage. The second check will go to the investors, so they get 100% of their equity back. The next check will be a 10% accrued from day one, even when they give us the money, not when we open up the doors. They’ll get that money. What’s left over will be a 60-40 split, 60% in favor of the investors and 40% in favor of our company.

Ordinarily, I would probably look for something that’s a 20-80. A lot of the private equity deals that we do are 20% to the GP, 80% to the LPs. However, those deals are structured recently, even ones I’m invested in, with maybe a 6% preferred return. Having the 10% preferred return helps tip the needle. When the 10% preface caught up, now you guys are doing 40-60 to the limited partners. Is that accurate?

That’s accurate. I’ve seen similar deals. Ben and I have also invested in other deals. Sometimes you’ve got to peel back the onion because the sponsor might have a guaranteed fee for signing the loan. There’s a percentage of 2 or 3 there. It might have an acquisition fee. There might be a few points in there. There may be some other fees in there. At the end of the day, it may not be too far off from a 60-40 split.

That makes sense.

I’m always telling investors to read the private placement memorandum, understand where the money is going, look at the sources and uses, and make sure you understand that. We always say, “Apples to apples.”

 

Investors must always read the private placement memorandum to understand where the money is going.

 

I have a few wrap-up questions here, but I want to give you a chance to plug a website or any contact information. Now will be a good time to do that.

We have a website, Self-StorageDevelopers.com. I believe people can contact me if they need to contact me. I always put my information, my cell phone number is out there to everybody. 847-338-5517. Anybody can give me a call. My email is very easy, [email protected]. I’d love to talk to everyone.

We forgot to plug the IRR expected on that deal. That might be helpful. Maybe a question.

That’s a great question. The target IRR is North of 20%. I think right now, we’re about 21.22%, and the cash-on-cash is over 30%. Luckily for us, we’re getting a new model from Public Storage that’s coming through. It looks like the market rates have gone up in Chicago Ridge. I think we’re at $1.85 for the walk-in rate. The online was $1.61, $1.70-ish.

We typically do a new model right before we’re about to go vertical. Assuming the rates get a little bit better, then it’ll be a little bit better on the IRR if the construction costs come a little bit lower than we have anticipated. I know you’re like, “Is that possible?” It is possible. Ben always works with our engineers, so we could do some cost savings there. That might also help the IRR as well.

Are there any cost segregation benefits there? Are you guys going to build it to a cost segregation where there might be some tax benefits that way?

We’re planning on doing that.

For the audience, everyone who invests in these kinds of deals, builds these kinds of deals, and runs syndications, we are all collectively holding our breath right now on the big beautiful tax bill or whatever. If it passes and it has our costs 100% bonus depreciation, we’ll all be dancing a jig here. Raising money will be a lot easier for the syndicators. It’ll be a little harder for the little guy to get his $50,000, $100,000, $200,0000 into each deal because they’ll go so quickly.

Especially in this economy. The uncertain times and what’s happening with Wall Street, this is a great time. Real estate is a good time to invest in, and self-storage is king in that.

Ben And Bill’s Book Recommendations

A quick couple of questions here as we wrap. I’ll ask each of you individually here. Is there a book that you found most helpful as you were getting into real estate development? It’s something that, in the real estate development world, this book came along. It could have been any time over the last 20 to 30 years, whatever it was. Is there a book of that nature that would be very interesting to read, coming from that context?

For me, it’s less of a book and more of an author. In 2009, I went to a Jack Canfield conference. I had finished doing a bunch of real estate. I found Jack. I’m not sure who told me about it. I went there and I liked the way he delivered. He wasn’t talking about real estate. He was talking about the business mindset and what you should be thinking about.

He talked a little bit about meditation, a little bit about visualization. I connected with that. That was many years ago. To this day, I still listen to a little Jack Canfield, or I listen to visualization. I take time in the morning to try to visualize Chicago Ridge, and it’s under construction, and it’s working. It helps me through my times of continuing to push forward as a developer.

Ben?

I’m part of the Family Office Club with Richard Wilson. He created a book called The Family Office Book. It talks about managing investments for single-family through family offices, and even for real estate. I love that book. That’s a book that I believe in. I agree with the philosophies that go about in that book for investment. That’s how I think that a lot of small offices and single-family offices should invest in this type of asset class.

I enjoyed reading those books, especially those Family Office books, because it’s a small business. Even though they grow into large corporations, they start small, and it starts with the family. That’s why I love reading these Family Office books and The Family Office Club. I love that type of area, talking to all these people, and associating myself with fantastic people who have the same mindset.

 

Even though businesses eventually grow into large corporations, it starts small and within the family.

 

Richard was a guest on the show a few years ago.

I enjoy him. I enjoyed the club. I came back from New York. I met a lot of great people. To me, it’s like a family.

Random Acts Of Kindness

This is my final question, which I’m going to ask each of you individually again. We’ll start with you, Bill. What is the kindest thing anyone has ever done for you?

Outside of my wife saying yes? I had an old boss of mine. I’m talking about 30-plus years ago. I started working as a loan officer, and I wanted to buy the mortgage company. I didn’t like the way my boss was running it. One day, I jokingly said to him, “Sell me the company.” He said, “All right, give me $100,000.” I went to my old boss, who knew me and trusted me, and he gave me $100,000. I bought that company. I think that launched my career. It was a handshake. He knew me and trusted me. He gave me $100,000. I think that was probably one of the nicest things anybody has ever done for me.

I love it. Ben?

I ran for a political position at Oakton College as trustee. They voted for me. That was the kind thing that people could do, to write down and vote for me. I was working for a corporation. I turned them around. The CEO comes to me and says, “Thank you, Ben. Job well done. I love your work. We couldn’t have done this without you. You saved our company.” I think those were the kindest words I’ve ever heard.

I hope that if we asked that corporation the same question, they would say, “Ben Salzberg came in here,” and that would be their answer. “He saved our company.”

They would.

Here’s one thing that Ben and I are involved with. This is something that we do as a passion project. Many years ago, I co-founded an organization called FEED6. Your audience can go to FEED6.org. We’ve packed almost 9 million meals here in the Chicagoland area. We partnered with the Chicago Food Depository, Northern Illinois Food Bank, Salvation Army, and I got them together with corporations. We did an event with Fifth Third Bank and the Chicago Blackhawks at the arena downtown. We packed 50,000 meals that we donated to the Chicago Food Depository. We’re doing it all the time.

Dan, if you’re around the Chicagoland area, I would love to have you come to one of our events. We do a signature event every November with the Chicago Wolves. We call it Hunger Heroes, where we pack 100,000 meals for veterans, and we distribute them to veterans. We’d love to get your audience involved, to come and help us pack these meals, and then we donate them. It’s something that we love to do as our give back. We talked about earlier with the villages that we can’t always ask. We’ve got to give. This is part of our giving program. We’ve done 9 million meals. Hopefully, we’ll be at 10 million next year.

There’s a great place to wrap the episode. For a lot of our Chicagoland readers, I’m sure this will be right in our backyard. We’ll have to have to meet up in person there.

We’d love to have you guys at our events.

Ben and Bill, thank you.

Thank you so much.

 

Important Links

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

About Benjamin Salzberg

The REI Diamonds Show - Daniel Breslin | Ben Salzberg and Bill Kanatas | Self StorageBenjamin Salzberg brings a background rooted in engineering and quality control, with an MBA specializing in Six Sigma. He has spent over three decades as a commercial real estate broker in Illinois and has recently focused on self-storage investment, recognizing its resilience and strong industry growth. Benjamin combines his analytical skills, engineering background, and strategic insights to identify and develop successful self-storage projects.

 

 

About Bill Kanatas

The REI Diamonds Show - Daniel Breslin | Ben Salzberg and Bill Kanatas | Self StorageBill Kanatas is a highly experienced real estate developer with over 30 years of expertise spanning retail strip centers, office buildings, residential projects, and, most recently, self-storage facilities. His focus has evolved towards climate-controlled storage and boat/RV storage, with a strong emphasis on land development, entitlements, community relations, and environmental remediation.

 

 

 

Commercial Real Estate Investing With Jarred Elmar Of The Geneva Group

The REI Diamonds Show - Daniel Breslin | Jarred Elmar | Commercial Real Estate

 

Jarred Elmar of The Geneva Group has learned so much in his journey from investing in single-family home to building a diverse commercial real estate portfolio. He joins host Dan Breslin in this enlightening conversation about the most valuable lessons and takeaways from his career experiences. Together, they explore the importance of “buying right” and adhering to fundamental investment principles. They also discuss the current state of the multifamily market, noting the potential for distressed assets to emerge due to expiring loan terms and overbuilding in certain areas.

 

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%. Buy & Hold Loans Offered Even Lower. Get a FREE IPad when you Close Your First Deal by Registering Now at http://REILineOfCredit.com

 

Jarred Elmar & I Discuss Commercial Real Estate Investing:

  • Transition From Residential To Commercial (00:01:21)
    Jarred Elmar transitioned from residential to commercial real estate after an unsolicited offer for his single-family homes in 2007. This move allowed him to capitalize on the REO market and scale more efficiently with multifamily properties.
  • Lessons From First Multifamily Deal – “Buying Right” (00:04:05)
    His first multifamily deal in Atlanta in 2011, purchased at $9,700 per door and sold for $18,000, taught him the critical importance of “buying right” at market lows, as this saved the deal despite numerous challenges.
  • Luck Vs. Skill & Delusional Optimism (00:06:50)
    Jarred emphasizes that while luck plays a role, especially with good market timing, relying solely on momentum is dangerous. He highlights the need for “delusional optimism” to take risks, but warns against confusing luck with true skill.
  • Focusing On Primary Markets (00:12:52)
    The Geneva Group’s strategy focuses on primary markets (e.g., Atlanta, Fort Lauderdale) because they are more resilient during economic downturns, being the last to fall and the first to recover.
  • Impending Multifamily Opportunities (00:15:38)
    Jarred foresees significant opportunities in the multifamily market due to maturing loans, past overbuilding, and rising expenses, which will likely lead to many quality assets becoming available.
  • Fund Structure Vs. Individual Deal Capital Raises (00:18:03)
    The Geneva Group raises capital for individual deals rather than through a fund. This avoids pressure to deploy capital, allowing for more selective and disciplined investments, thus safeguarding investor returns.
  • Identifying The Right Timing (00:24:21)
    Jarred acknowledges that market timing can be tricky, as seen in a recent multifamily deal in Atlanta where they were “a little bit early” due to bank reluctance to purge bad loans and market oversupply. He anticipates rent increases in 9-12 months.
  • Information: The Most Critical Piece (00:27:20)
    Beyond a low purchase price, superior information is paramount for successful commercial real estate deals. This includes thorough due diligence on municipal projects and identifying potential tenants to enhance value.
  • Phone Book And Gym Subscriptions (00:34:05)
    Jarred’s early sales experience cold-calling from a phone book for gym memberships honed his salesmanship and proactive approach, a philosophy he applied to later real estate ventures.
  • A Review Of Jarred’s Numbers (00:43:06)
    The Geneva Group’s portfolio boasts 1.5 million square feet and over 60 transactions in 13 years, with an average 33% annualized return for investors. This success is attributed to strict discipline and selectivity, with about four deals closed annually from numerous offers.
  • Jarred’s Book Recommendations And Contact Info (00:48:04)
    Jarred recommends his book, “Built From Nothing,” and classics like “Think and Grow Rich.” He can be found via Google or his company website, Genevagp.com.
  • Getting The Right Motivation (00:50:20)
    Jarred credits his mentor, Ben, an “industrial king,” whose unselfish guidance on his first industrial deal was a career catalyst. This act of kindness reinforced Jarred’s belief in the abundance that comes from giving back.

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

    

Watch the episode here

 

Listen to the podcast here

 

Commercial Real Estate Investing With Jarred Elmar Of The Geneva Group

Mr. Jarred Elmar, welcome to the show. How are you doing?

I’m doing good. How are you doing?

I’m doing well. I’m recording from Chicago, and you are recording from?

I’m currently in Deerfield Beach, Florida, Fort Lauderdale, Florida.

Why don’t we start? I know you. I know many of the people on our newsletter, podcast readers know you as well from our mutual group, I guess, but why don’t you start with, like, who is The Geneva Group? What do you focus on, and then the abbreviated version of how you arrived at this moment in your business?

 

The REI Diamonds Show - Daniel Breslin | Jarred Elmar | Commercial Real Estate

 

Transition From Residential To Commercial

You and many other listeners, we buy value-added commercial real estate. Our portfolio runs the gamut through between multifamily, office, retail, and industrial. I would say 60% of our portfolio is industrial in nature, specifically small bay industrial, that’s a bread and butter. I started in residential, like many people listening, bought houses on the courthouse steps at auctions and tax sales, and did that natural evolution from residential to commercial.

When I got solicited for an unsolicited offer to buy the bulk of my single-family homes, at the right time, which happened to be in 2007. Obviously, I had no idea what was coming up in 2008. The timing was good for me to be in a good position to take advantage of REOs that started flushing through the system in 2009. I got into multifamily, which is the easy progression or natural progression from residential single-family homes to multifamily. I got into an apartment complex.

From there, I wanted to divest and figure out where I could best scale a business, and started getting into retail, office, and industrial. Over the years, we built a well-balanced portfolio, and we still have that quandary, whether we want to get laser-focused on one product type or simply be opportunistic and continue to buy different product types and have that many more at-bats. That’s my 30,000-foot view of how we got started. Geneva Group was originally set out to buy single-family homes at the auctions.

I had a good system in place on bidding and pull entitle on 100-plus homes each month. It evolved. I realized that was me being a rogue investor, and it was going to be very difficult to scale a business with residential homes. There are a lot of inconsistencies, and you’re driving from one unit to another. It’s very different than when you consolidate to one place and have all kinds of consistent units, fixtures. It was easier than most people think to make that jump.

From single-family to multi-family, I guess that was in Atlanta Region 1. What was that around 2011, somewhere in there?

Lessons From First Multifamily Deal – “Buying Right”

Yeah, in 2011 we bought 156 units. Look, what gave me the confidence is that I had single-family homes scattered throughout Atlanta. I knew the good pockets from the bad pockets. I knew those markets. I knew that the apartment complex I bought was not in the best area. It was hood, but it was on the good side of hood. It wasn’t much crime. I only knew that because I had these houses all scattered. The efficiency that came along with buying an apartment complex and selling off the houses, the revenue jumped that much more, with half the work.

I know the answer because I read your book, but the price per door on the way in price per door on the way out.

We paid $9,700 a door in 2011. We sold it for $18,000 a door. You’ve heard this story many times. I told you many times. Everything could have went wrong in this deal went wrong. I had fires, I had a murder. I had cars going through a building. I had strong-arm robberies, all theft. Still, sixteen months later, we were able to turn this thing around and deliver a great return to our investors. That wasn’t because I’m so good. That was my first commercial deal. I only knew so much. I was learning on the job, that scale, but I bought it at the lowest point, arguably. This has been one of the greatest bull runs of real estate in history. We bought in 2011. Buying at the right price at the right time bailed me out of a bad deal because today, I would never buy that deal. If there was a deal for $10,000 a door in Atlanta, I’m not buying it. I won’t even look at it.

I’m sure that one is selling what would look like a screaming deal to today’s investors. It’s probably like $55,000 a door for that same.

That’s probably right. $55,000 to $60,000 a door. That sounds about right. The thing is, the guys who bought it from us were a bunch of, I met them, and again, a little chip on my shoulder. They seem like a bunch of Ivy Leaguers from Southern California. They had delusions of grandeur. They were coming in. They were a non-renewal for everybody.

They were going to upgrade the units and make this thing look like the Taj Mahal. They thought that they were going to get rents commensurate with the high caliber of the finishes that they were going to do. They put way too much money in that deal. They technically overpaid at that time, and they got stuck. They got stuck for years. They couldn’t get out without losing money. They had to wait.

Luck Vs. Skill & Delusional Optimism

They needed time in the market to bail them out, and that was still a good time in the market. I think they wound up selling in 2015. The next guy who bought it in 2015 had a triple homicide with three 15-year-olds over a video game. That guy’s still holding the deal. He cannot get out. There’s such a stigma about that deal. I’m very jaded when it comes to class C apartments. I think there are a lot of easier ways to make money in commercial real estate than buying Class C multifamily.

As you were talking, I was thinking about one of the themes. Have you ever read Thinking in Bets by Annie Duke?

Yes.

There’s a lot in there about luck and making good decisions, and having a good process. When you’re met with what I talk about with my team, a lot of luck in the market, things go tremendously well. Real estate is a tricky business, Jarred, because people can not have a good process. Make all the mistakes in the world, and get lucky and make a bunch of money.

In my opinion, that’s the most dangerous thing that could happen to someone early in their career because they think it’s just like they put too much allocation on their skill, and they think they’ve got the process mastered, and didn’t recognize the amount of luck that occurred there. All that said, if you’re not going to get in the game and you’re not going to put some risk on, you’re not going to put some money in a deal, you’re not going to pull the trigger and buy something, fix it up, flip it.

You’re not going to step up and do a commercial deal. You’re never going to put yourself in a position to get lucky. I wrote an article, which I sent out to the newsletter, I don’t know, 5 or 6 months ago, and the title was Delusional Optimism. My delusional optimism is that I want to know where I can get lucky a little bit in this deal if things go my way. I’m not underwriting it, and I need that optimism in order for things to make the deal pencil out. If I’m going to go in on a deal, I want there to be some small chance that we’re going to get lucky in the market.

I say this all the time. This business allows you to get very lucky. I didn’t necessarily do things right on the apartment deal, but I did the right thing. For me, in that moment, the right thing was not putting traditional debt on a deal that I didn’t know what I was getting into. I didn’t have experience with that scale. I didn’t put on any traditional debt. Thank God I didn’t because we wouldn’t have been able to cover debt service for the first 6, 7 months. It was not cash-flowing.

The good news is I was able to get lucky even though I didn’t know what the hell I was doing. I’ll be the first to say it. My skill set and my superpower at the time were being too ignorant to realize that I could lose on that deal. I agree with you. The last thing I want to be, Keith Cunningham talks about, you don’t want to be running enthusiastically in the wrong direction. That happens so much with people that we even know very closely, Dan.

You mentioned this earlier, the idea of getting lucky, and people don’t realize and it’s probably the most dangerous thing to happen is that somebody gets lucky. You need timing skills and balls in this business. If you have balls at the right time, you don’t necessarily need skills. That’s happened so many times with people that we know that just hit the market right.

They bought in tertiary markets, they bought deep value add deals. They bought crazy asset classes that nobody wants to touch, but they caught the right time in the market. That’s a momentum play. We’re fundamental and we’ll always be fundamental. We’re 20 miles from Miami. I would love to own. I was born and raised in Miami. Miami is the new New York and LA. The values are up there now with New York and LA.

I won’t buy because, in my opinion, I do believe there are some fundamentals, but Miami, more than, by and large is a momentum play and we’re just not momentum investors. We’ve seen that so many times with people that we know that they’re just going with the momentum, and that is a dangerous game. At some point, the music stops, and you’re left without the chair.

There’s a lot of money to be made in a momentum play if you catch it right, but the risk, I think, people are unaware of, maybe the level of risk they take on all the way through that entire momentum play. It’s a give and take. I entered the Atlanta market on a momentum play mindset. When you sold in 2007, those prices went down in some of those houses, like 60%, 70%?

 

People often just go with the momentum, which is a dangerous game. The music will stop at some point and you will be left without a chair.

 

Yes.

We came in 2016, we started buying houses, and you look at the public record, you see what they bought it for in 2011, 2010, 2009, etc. I’m like, “Man.” You see what they traded for even in ‘07, ‘06, ‘05. It’s like, these were brand new construction homes in 2005 that sold for whatever, $130,000, and they were bought for like $26,000 like five years later.

It’s an unbelievable time.

Yeah. But, but then on the flip side of that and coming back, I feel like the fundamentals have been pretty strong over the last 15 to 20 years in Atlanta in terms of population growth and a business-friendly environment.

Great content.

It’s the ACK structure, so we went in in 2016. When I first looked, it’s like, “All these prices are all over inflated. There’s no way this bubble could continue,” but it was a momentum play where we put our flag down and we’ve had a hell of a decade now I guess, since 2016 in the atlanta markets. It’s a little bit soft but I think that still enough fundamentals where if the price discounts calm maybe it’s 10% or 20% over the next 36 months of value drop and we’ve already seen 10% in some of the areas, but there’s a lot of areas there that simply are unwilling to move based on the desirability of the school districts and things of that nature.

Focusing On Primary Markets

If not, my style of investing personally to be a momentum player. One thing you touched on there, and I think I want to do a double click on is I’ve never seen you pitching a deal that’s not in a market where I’m like, “Holy shit.” The fundamentals, the growth, the dynamics of this Florida deal, or this Kennesaw deal, or the Tucker, Georgia deal. I know these markets, and they’re not like, “Wait, what’s that town I’ve never heard of?” I have to Google the population. Have you intentionally focused on more, I mean, these are primary markets?

In the beginning, we’re looking for value add deals. We took a flyer in maybe tertiary markets. In Florida, Lakeland, which has some decent demographics and has quite a bit of drivers for a small city with 100,000 people. Its tertiaries can be. We bought an office building. Thank God we sold that office building. We did well on it, but we sold it. The guy who bought it from us paid too much, and he cannot get out.

That is what happens when the market turns. The tertiary markets are not where you want to be when there’s a sense that the economy might slow down. Those are the markets that get hit the soonest and come back later. Whereas the major markets, the primary markets like Atlanta, even Fort Lauderdale, those markets, they’re the last to fall and they’re the first to come back. That’s just a fundamental principle that we have is that we want to stay focused on primary markets.

Now, we’re buying a deal in Asheville, North Carolina. Asheville historically is tertiary, but the drivers that I’m seeing in the small market and the supply constraints and the cost of construction in that area, because the topography is very different. Besides just the storms rolling through, and you’ve got the contractors that are crazy busy, we’re looking at industrial in that market. There’s a very low supply of industrial, quality industrial in that market. That’s a market that we see uptrend.

Nashville, Tennessee, was another one. In 2014, we got involved in Nashville. Nashville would not have been considered a primary market at that time. Now they’ve never seen a boom like they’ve seen before. We’re trying to figure out where the puck is landing before we pulled the trigger on it on the market. Again, it’s what keeps us out of the abyss. It helps me sleep at night knowing that if all else fails, I bought in a good market, I bought a quality asset, and all the fundamentals behind it made sense at the time of the purchase.

Impending Multifamily Opportunities

We’re buying right. If we’re buying with the idea that the market’s going to give us 10% rent growth every single year, that’s momentum-driven. That’s what’s happened, especially in multifamily. I don’t mean to keep picking on multifamily, but that’s exactly what’s happened and why the opportunities are starting to present themselves in that asset class to get the small guy all the way to the big guy. Everybody was buying based on momentum.

Everybody had floating debt. Everybody thought that good times would last and rents would continue to go up, and nobody thought expenses were going to blow out like they did. It is a perfect storm for a lot of these assets, quality assets to flush through the system and give all of us an at-back. The bigger institutions are going to pounce all over multifamily.

Everybody’s got dry powder for multifamily, the larger guy all down to the smaller guy, but we’re going to get our tregs. We’re going to get our 500, 800 units. You will too. A lot of your readers will also, because there’s going to be that much good inventory that’s going to be hitting the market in the next 6 to 12 months. It has to happen. There are way too many bad loans on the bank’s books, specifically with multifamily.

We’re here. It’s like the 0% interest era started in March or April or whatever it was of 2020. We’re at 2025, so like that five-year term that is so popular with many banks and many loans on the low end, and you got a 7, maybe a 10-year term. Those resets are happening now. That’s for the people who are disciplined enough to even get a more traditional structure.

With the boom over the last fifteen years in the apartment multifamily space, there’s so much exotic financing. It’s almost like the Ninja loans in single-family that happened in 2000 to 2006, where you didn’t have to put any money down. The level of creativity that these loan providers put out there in multifamily.

I found out about it afterwards, looking back, and I’m like, “Man, no wonder we had the bubble.” It was lower and lower, down payments and larger interest-only periods. Sometimes, construction money included, no payments. The level of lending that occurred in multifamily, yeah, it has to come to roost now. That’s why I think what I saw was like 10% to 20% value gone since 2022, dollar per dollar.

Fund Structure Vs. Individual Deal Capital Raises

Most of our industry is a zero-sum game. The good news with that is it’s like, I’m in South Florida, so I deal with hurricanes every once in a while. We’ve got a whole week to prepare for a possible storm. There’s no reason to have lost lives in a hurricane because you have so much time to prepare for it. There was so much time to prepare for the idea that rates are not going to stay at 3%, 3.5%. Yet everybody sat and just watched the storm come at them. I don’t want to say nobody, but even the most seasoned and sophisticated higher-end institutions floated debt to meet some degree of yield for their investors.

They were buying at 3 caps, 3.5 caps, and they were borrowing at 3.5 floating debt, and all of a sudden, their three and a half is now 6% debt. Their loan is coming due, and expenses are higher, and rents flatten out. What do you think’s going to happen? These are very smart investors. They needed to deploy capital. That’s the one reason not to shift gears, but it’s why we raise our money, our capital, from our investors, on an individual basis.

Every deal is compartmentalized with a different tranche of investors, and every deal has to stand on their own. There’s no co-mingling of funds and rents. It’s all separate. With a fund, you’re raising the money first, and you’re going to find the deal second. That means you’ve got a gun to your head to deploy capital. We just don’t want to be in that position because a lot of the guys that are in trouble at the moment and they’re trying to rebalance their portfolio by selling off deals that might’ve had all the equity wiped out of it to support their quality deals that are still above water. We just don’t want to be a statistic. We don’t want to be in that position. I’ve seen it way too many times.

I think one of the things, at least I’ve observed from the outside, is, and maybe this is part of the progression of your career, maybe this is intentional, but it’s the size of each deal. The deals that you’re putting together are not a $5.5 million, 97-unit property that you’re raising a million bucks on. Compare that contrast it with somebody who goes out, raises a $10 million fund, and now they’re out there searching for whatever 4 to 7 of them, depending on how exotic their financing stack is.

Your last deal was somewhere in the $17 million to $18 million range, and I’ve seen a few of them in the past that were in that range. A cap raises a five to $8 million on each individual deal. I feel like it’s a safer, more strategic method, not just saying, “I fund each deal individually,” but combining that with the size of the deal. I mean, you’re right up there, if I had to guess, competing with what would have been or what is out there in the market, the institutional REIT buyers are potentially other buyers for the same deal that you’re picking up.

It does happen. We try to stay under the institutional radar. We’re usually buying under 25 million. A lot of these private equity or even family offices don’t want to deploy less than $5 million to $10 million in equity. When we’re buying a deal, we’ll need $3 million to $5 million. That’s definitely the smaller to mid-level guys chasing those deals. We’re not going head-to-head with institutions that have such low cost of capital. We stay right there.

 

You only have a finite amount of capital. Although every real estate deal is not a bullseye, it has to be on the board.

 

The stakes are going up. The deals are getting more valuable, especially in the markets that we’re shopping in. That’s really been our model as to find the value add deals. We’ve to roll up our sleeves. We’re buying the deal at pretty much the worst scenario that it’s been in in twenty years. Whereas, a lot of this multifamily stuff that was purchased was priced to perfection. Everything was great. The proforma was where we thought rent growth was going to go. Everything looked great.

You bought it at the peak of where it could be. It only had one place to go, which was down. That happens with retail, where the leases are ten years long, and you’re clipping a coupon, you’re buying the center at its most valuable moment. Now, you can argue that certain market rents are just going to keep going up.

Again, most of your readers, including myself, we only have a finite amount of capital. Every deal has to be, maybe not a bullseye, but it’s got to be on the board. We cannot get it wrong. We’re only as good as our last deal. If I have investors that aren’t making returns that they’ve been used to, they’re going to forget me very quickly. We’re super selective, which is why we don’t need a fund at this time.

Now, if we wind up having one of those RTC moments where there are deals that come in left and right at $0.20 on a dollar, then we’ll reevaluate. Maybe we even go institutional and take a thinner promote. For now, there’s just not that robust value add inventory out there yet. I think it’s coming. Our pipeline is getting more full, but I don’t think it’s going to be enough for us to warrant doing a fund.

I think you’re right. It’s like, are they going to make the same mistake as RTC in the ‘80s, ‘90s? Probably not. The government looks back and everyone who was involved and probably wishes that it would have been handled differently. 2007, 20087, 2009, 2010, 2011, 2012, I don’t think it happened at the level of the RTC.

Looking back at the actual numbers, yeah, there were some deals that came through, but it was not like a wholesale liquidation like occurred when the savings and loan crisis happened during the RTC. Resolution Trust Corporation, if anyone wants to Google that. Now this time around, it was like all the loans got frozen during COVID. Who would have saw that coming?

Now banking regulations are a little bit different that aren’t forcing the asset sale quite as quickly as they may have had to do in the past. We have this procrastination technique, which maybe stop the flood, but we do see some periodic letting of the floodwaters out so the dam doesn’t break over time. I think that periodic letting out of the deals is where we might have our opportunity to pick off.

Identifying The Right Timing

I agree. I’m sure you saw the big short. You read the book. One of the things that they talk about is the timing of when the rating agencies decided to lower the ratings on the bonds. They were buying all the credit default swaps, and the rating agencies weren’t reducing the rating on the bonds. Like, “What the hell’s going on?” Everything’s turned into crap, but it’s still a triple A rating. This is what’s happening right now with multifamily.

We bought a 240-unit deal in Atlanta, and it was a situational deal. The loan was coming due, same with everything we talked about, floating debt. These guys got over their skis, and they sold it at a $6.5 million loss to what they bought it for two years prior. All their equity was wiped out. We bought the deal last year, and our basis is right. I’m confident that the market’s right, but it has been a very heavy lift. It’s been very tough to cash flow, and it’s because we’re a little bit early. We wouldn’t have been early if the market, if the land loans, if the bank started purging a lot of that multifamily. That hasn’t happened yet.

Are you a little bit early on that because maybe the rental market softened a bit too? Is it just like a little bit of a tougher push to try to get more rents up? Like, clearly, any deal we look at in commercial space, if you can raise the rents, that’s one path to making the deal better.

The main issue, and I know Atlanta. Atlanta was one of the major metros in the country that overbuilt. They tend to do that all the time. South Florida does it too. They overbuilt, and there are so many new units coming online, new products coming online. What happens is if we have a 1970s vintage apartment deal and a good market, a merchant builder down the street is building brand new, and they just have to lease up.

They got to get out from under the property. They’re carrying debt. The construction costs were higher than they anticipated in the beginning. The timing they were delayed because of nuances in the market. Now, all of a sudden, they just want to get out from under it, make their profit, and move on to the next deal. They’re renting those one bedrooms at the same rate that we’re renting our one bedrooms for.

Until those units and all those merchant builders, those units get absorbed, we’re not going to see rent increases in Atlanta. Now, the good news is there’s been a year and a half lag now on anything coming out of the ground in Atlanta. Once these units get absorbed, we’re now going to have this lag in construction. At that time, you’re going to see, I think, a major spike in rental growth in the Atlanta market. I think we’re probably about nine months to a year away from starting to see upticks in rent. Rent will remain flattened now.

Information: The Most Critical Piece

What would you say is the most critical piece of making a successful commercial real estate deal?

What was the first one?

Driver piece, consideration. I mean, if there was one thing, maybe that’s a different answer on the front end when you’re buying it, it’s buying right, and that simple. Maybe a better way to point this question would be you own it now. What is the thing that the novice is missing, or doesn’t acknowledge, or put enough emphasis on once they own that property?

I could address both sides. Obviously, everybody’s going to say basis. You make your money on the buy. That’s our cliche. The reality is we make the money on the information, and the information goes beyond just the basis, which is why we’re so diligent in our process of evaluating a deal through tenant interviews, dissecting, you going to the CRA, going to the municipality to figure out what projects are coming up.

We’ve had deals where we were looking at it, and because of our due diligence, we realized that this is the best the property is ever going to get because a flyover is being built in front of the shopping center we were looking at. Nobody was about to divulge that to us. Forget about the six years of construction that’s about to occur in front of the center.

Once the flyover goes in, the traffic patterns change. That’s all the bits and pieces of information that determine whether you go in a deal or not go in a deal. Another one is a deal in Fort Lauderdale that we had. We knew we were buying it at the right price per foot, but the minute we had the tenant in tow during our due diligence, it was a home run.

Even if we could have paid a million dollars more for that property because we had the tenant in tow. If you’re lucky enough to have that tenant to fill any vacant space, you can pay more than the average guy, and you’ll still make plenty of money on it because that is the secret. That’s the ultimate arbitrage play when you have a tenant. It really is the information more than just the buy on the basis of the nice.

What about after you own it? Maybe that is having the tenant in place. Maybe there’s a level of tenacity in getting tenants that one entrepreneurial investor like yourself might have, whereas the capital preservation guy sitting in Vail, Colorado, skiing all day. Maybe he doesn’t have that tenacity. How would you go with the second half there?

You took the words out on that. Marketing is so important. Enhancing the curb appeal, very important, but the marketing of it. We all, as guys that can only do so much in the course of a day, rely

on third parties, third party management, third party leasing brokers. A lot of times, they think the buck stops there. Those that just allow the leasing brokers to run it and with the expectation that in a year, 2 years, 3 years, the leasing broker is going to turn the deal around, is just short-sighted. That’s the type of people that we want to buy from.

 

Do not rely heavily on third parties when closing real estate deals. Use them as a tool, not as the end.

 

We’re not going to be that guy. We’re going to be breathing over the leasing broker’s shoulder. We’ve got a perfect example. We have the apartment deal, and we have third-party management, and they’re ultimately our third-party leasing. We have calls every single week with them. We’ve had the property for a year, and we have the biggest sign on the main road. It’s the marquee sign on the road. You can see that there’s an apartment complex as you drive by, but something so simple like having it under new ownership, leasing specials, flags, and the little men that blow all around.

Those things attract attention on if you drive up and down the street all the time, you’re desensitized to a large sign that says, “The apartment complex is here.” When you start seeing yellow signs and flags and things that attract attention, even if you’re not looking for an apartment unit, that catches your eye. You recognize that. That’s something that if we didn’t have these calls and ask those probing questions and go on site on a regular basis to figure out where we can enhance value and enhance marketing, they would have never done it.

They’re a higher gun. They don’t have ownership. They’re not looking at it with the same eyes as an owner. Especially if an owner is raising capital, it is their fiduciary responsibility to breathe over the shoulder of their third parties. That’s the main way that we force value is that we don’t rely so heavily on third parties. We’ll use them, but we’re using them as a tool, not as the end-all be-all, turning this property around.

It’s interesting that you say that putting the flags up in the way the guy in the balloons vacancy is available out there by the apartment sign. I’m in Chicago, and a lot of the buildings when I walk the dog around the city here have like a static sign studios 1 bed, 2 bed, and have the phone number of the manager.

I think it’s required by law for them to put the property manager’s phone number on the outside of the building. That’s why they do it. I’m not looking for an apartment myself, but I always assume that all those units are full. If I drove by your place in Tucker, Georgia, I think it is, and I just see like, the marquee apartments, and there’s a phone number, I’m like, “Clearly, they’re all filled up.”

Whereas if you have like, vacant units ready to move or something like that, and you’re like looking from a timing thing like, “Dude, I’m a lazy consumer. I don’t want to waste my time dialing nine numbers on the phone, going through some prompts on to get to the person, leaving a voicemail, then having to take this person’s call back later just to find out if they have a vacant unit or not.” It seems obvious, I guess, but maybe it’s just not to everyone out there in the market.

The best part about commercial is that a lot of these key principles translate to different product types. Retail is the same thing. When I first bought my first retail center, I went grassroots prospecting. I started knocking on doors at other retail centers in the area and tried to sell them on the idea. I was essentially poaching them from other buildings. “Our access is better. Our parking ratios are better. Our visibility is better. We just have a nicer-looking building. You may want to consider moving over.”

Those are the things that your traditional leasing broker is not going to do. That’s the hard stuff. Hopefully, that leasing broker has a team of young guys who are hustlers and they’re knocking on doors and driving potential leads. One thing is for sure. I know we’re doing it. We personally are doing that. We’re not relying on just the leasing brokers to have that team in place.

Phone Book And Gym Subscriptions

I feel like I found the foundation of that idea in your life when I read your book, Built From Nothing. I sent it out to the newsletter a few weeks ago. It’s on Audible. Jarred reads it himself. It’s enjoyable. It’s not a how-to commercial real estate, it’s a little bit more of the story. I get a lot more from biographies of successful people than I get from how-to books, typically, because it elaborates on the decisions in the context of this person as they went from zero to something a lot higher than zero a lot of times.

You can find that in Steve Jobs’ book, Elon Musk, and the whole list, but yours is also that way. Yours is in a space that most of us listening to the REI Diamond show are interested in, real estate. I’m to let you tell the story that involves a phone book and Jim’s subscriptions early on in your career. Would you mind giving us that one?

Looking back on it, it’s funny when you’re young, the younger you are, the more you absorb. I remember my grandfather taught me how to memorize all the presidents in order when I was nine years old. I haven’t said it in years, and I can still recite every single president’s first name and last name because it’s so ingrained in my brain when my brain was being developed. Just the same, when I got into the job force, when I was just trying to find my bearings and figure out how I’m going to support myself, because I’d been on my own since I was seventeen.

I was trying to figure out a way to be a little bit different in whatever I was doing. I got hired by Bally Total Fitness as a membership sales. I did it because I was going to get a free membership, and I was into working out. That appealed to me. The guys that were smooth and were seasoned and were aggressive, they were getting all the leads, and they were closing the deals.

I was trying to figure out a way not to just rely on random walk-ins, and I’m like, “I don’t think anybody’s just cold called out of the phone book.” I’ve pulled up all the names under a specific zip code close by the gym. I just said, “I got approval to get a week’s free pass for anybody that I bring in.” I would say, “So-and-so and membership sales at Bally’s. I want to invite you and your significant other end to work out for a week, get to know the gym. No pressure, no catch. Just come in and I’ll hand you the pass. This way, I just get to meet you.”

You would be shocked how many people said, “We have a meeting to come in. We’ll come in.” I’m bringing them in and then having the volume of people that I got in gave me so many times to recite my spiel, the pitch, on how to actually convert that to an actual gym sale. Over 3 or 4 months of doing that, I started to get pretty good at closing on the sales. In the first three months, it wasn’t that difficult to bring people in that were smooth and articulate and knew how to close on a gym membership. We just split the commissions.

I’ll bring in the lead, you close it, and I’ll watch, I’ll observe. That’s something my grandfather taught me when I was very young. Find something you love to do and then go work for somebody that’s doing it for free and learn everything you can because that is your college education. Not paying for your college education, maybe most people are looking at saying, “I don’t want to work for free.”

You’re getting an education for free. You’re not having to pay. They might not be paying you, but you’re not paying them. You’re learning so much. That helped me take that philosophy into the gym and bring guys in that can close the deals, so I can observe and watch a closer go to work. That helped me throughout the process of initially starting to cold call my own building owners, finding value add deals.

I started calling the building owners and find the motivation and try to make a deal. We started buying deals that way. Finally, as it evolves, now I train our guys, and we have an internship program where we train our interns on how to pound the phones, how to manage the letter campaign,s and have a whole rebuttal script lined up. It was this progression that all started with selling memberships at a gym for $60 a shot.

How old were you? Was that like 17, 18 when you were doing that?

Yeah, I was 18.

This might be quite for me one of the most valuable pieces of the book. There’s a lot of value in there other than this, but the story about the president at nine years old illustrates how powerful laying down the foundation for someone while they’re really young can be. Trying to teach yourself cold call at 45, 50, 60 years old. You can do it, and you probably have more stick-to-it-iveness and confidence than you would at 18 years old, but the benefit of laying down that brain map at 9 or 18 years old.

I’m doing this with my daughter. She just graduated from Temple Criminal Justice, and in her whole job role she’s handling some lead management stuff. I’m like, “You’re cold calling, like get into the mojo dialer and you’re just going to call. This is your number of calls you have to make per week, and like figure out how to like test the script and say that.” “I don’t know how long we’re going to do that for, but one of the reasons I’m doing it is to get that resilience built early.”

Her life is obviously a lot different than my life when I was 22 years old, just with the resources that are available in our household compared to what we had. When I was at that age, I’m really trying to do something like you were hungry at that age. I was hungry at that age. Those are the things we would do out of hunger, and I’m trying to make sure I incentivize her to do that difficult work, like raise your hand in the audience.

If you just love cold calling, there are probably two people out of the 10,000 or so who are going to listen to it, who are interested in doing that and enjoy it. Most people don’t. I think the younger you are in the earlier you could start. I feel like it’s just reps in the gym. You and I both like enjoy weight training to this day.

 

The ability to adapt, be open-minded, and have strong opinions are key aspects in business and in life.

 

You have to do them when you’re weak, and you have to get better at them, and you have to track them, and you have to have this evolution. You have to keep on doing that. To me, it’s like she’s training for this triathlon of a lifelong need to be resilient and persistent and handle rejection. I cannot think of any better way than sitting her down on the mojo dialer, making 6, 7, 800 calls a week to do that.

My daughter inherited that salesmanship and that high EQ from me. She’s using it for evil as a teenage girl would. She tends to manipulate a little bit, but all the things, all the traits that I see in her are going to serve her very well later in life. She’ll start using it for good. I will put emotional intelligence over standard academia all day, every day.

There’s just no comparison to be truly observant, to be truly aware and intuitive on human emotions. There’s a part of my book that we talk about, essentially the born loser theory. I know it’s mean to talk like that, but there’s a reason why there’s a dark cloud that’s over certain people’s heads their entire life. It comes down to how they work with different personalities.

If you’re one of those people that have are true to your principles and you’re opinionated and you’re not willing to listen, especially with this political turmoil, how many people, how many friends did you lose because you don’t necessarily agree with their stance in politics? The ability to adapt and to be open-minded, and to have strong opinions loosely held, is key in business and in life. You go around thinking everybody’s wrong and you’re right. You’re not going to get the opportunities that those that are willing to be open-minded get. Unfortunately, in many ways, that means having to bend a little bit on your principles.

A Review Of Jarred’s Numbers

A 100%. I know we’re getting to the top of our time here. Can we take a moment to do a little bit of, if you’re willing to, some of the results you’ve gotten, maybe for investors, a little bit of a resume of the deal sheet numbers that might be relevant to someone if they were thinking about picking the phone up and giving you a call after they hear this episode.

I appreciate it, Dan. We currently have 1.5 million square feet in our portfolio. We’ve sold quite a bit over the last couple of years. We’ve done just over 60 transactions over 13 years. I’m proud to say that over those 13 years and 60 transactions, we’ve netted our investors approximately a 33% annualized return over that time span on average. Again, I mentioned this early in the show, we’ve been the beneficiary of a hell of a real estate bull run.

I don’t anticipate being able to deliver those returns over the next 13 years. We’ve never projected higher than eighteen annualized on any deal that we’ve done. Here we are, average 33. We’ve never gone below a twelve percent annualized return on any one deal. I don’t say that to impress anybody. I say that to make sure it’s understood. It’s not that we’re so great. It’s that we’re so disciplined. It’s that we’re so selective. We’re not just going to buy a deal because we have capital to deploy. It has to check all the boxes.

We offer on 2 to 3 deals a week. We go under contract about 6 to 7 times a year, and we close on about four deals a year. That’s a lot of volume, and it’s a complete numbers game, and it shows how much of a sniper we really are. We’re not just going to buy a deal to buy a deal because we have some costs. We have investors clamoring. It happens a lot, but we’re not going to deviate from our buying box. That’s what delivers the type of returns.

The investors are clamoring for those type of returns, not for you to do some horseshit deal just to do the deal.

That’s right. I said this before, we’re only as good as our last deal. If we start delivering lackluster returns, we’re losing our investor base. I had a chapter, your tenants and your investors or your kings and your queens, and you need to treat them like that. Their money is more important than your money. Thank God we had the crash because though I sold the houses at the right time, I bought condos at the wrong time.

As you said, the values on those condo units in South Florida dropped 80%. I had to float those deals for eight years before I then still had to come to the closing table with money to get out from under them. Thank God that all happened prior to me ever syndicating a deal or bringing in an investor, because it made me much more astute. It made me much more disciplined.

I hear your conservative underwriting, and that’s like my role. I don’t know. We’ve done like 105 deals this year, and we did 259 last year, and we have about 170 of them in process as we speak.

Crazy numbers.

Thank you. Blessed to have a strong team, good executive bench here across the company, but where I was going is like, I’m the conservative underwriting guy and people our age, yours and mine, Jarred, who actually were in the business through that period of time, 8, 9, 10, 11, 6 even longer than that. Who knows what it’s hitting for.

A lot of the people who are younger than that, that’s one of my first underwriting questions. It’s like, “When did you start?” I’m like, “2015.” I’m like, “No, there’s no way I’m going to put a in your hands.” You don’t know what’s about to hit the fan right now. Anything that you’ve underwritten may have nothing but delusional optimism in it.

I digress, and maybe there’s going to be a crop of young guys eventually who I’ll be handing to. I guess I handed the checks, but that guy was actually in there through that period of time and started at like twenty-something years old. There’s a push-pull. There’s a conservative underwriting, and then sometimes the partners have to convince me of the value, if you will. A lot of the deals turn out a lot better than I would think about on the front end, but I’ll attribute that to luck.

I’ll say, “That’s what the delusional optimism was in the back of my mind, but I’m not pricing that in day one.” I want nothing more than to eat my foot. When I say it’s going to sell for 500, and it sells for 600. I love the taste of my foot in my mouth when that happens. I would not, and it’s happened before to where I think it’s 6 and then sells for 5, and it’s like, “What did we do?” That’s a terrible situation to be in.

A 100%. He’s going over deliver.

Jarred’s Book Recommendations And Contact Info

Book recommendations here.

I’ve got to be a little biased. Built From Nothing is my book, available on Amazon, not on Audible. Look, the best books I have ever read and continue to read over and over again. Think and Grow Rich is your number one Bible. Napoleon Hill. Is it the 46 Laws of Power?

Yeah, I think it is 48, yeah.

The 48 Laws of Power. Amazing book. Amazing book. It’s a long audible. I probably listened to that about ten times. It’s been so good. I always go back to it. Lately, maybe it’s a little bit of marketing, and I cannot deny our president being a good marketer. I’m reading The Art of the Deal, probably for the fifth time. The first time I read was twelve years old. My grandfather stuck it in my hand.

To try and get a sense of with the negotiations with the tariffs, all kinds of geopolitical issues, how his mind is thinking. It’s pretty much documented what he does, and he’s very consistent. Regardless of political leanings, you don’t have to guess what he’s doing. It’s very consistent. Now, whether it’s the right decision, I guess to be determined, we’ll post game it in a year from now, but there’s no guesswork. I know we know exactly what he’s doing. It’s well documented. He’s done his entire career.

 

Spend some time doing charity. It will come back to you six-fold.

 

Before I ask you my final question here, I’ll give you a chance to plug some contact information if you want people to go to a website, something like that.

Our website is GenevaGP.com. I’m pretty easy to find. I’m the only Jarred Elmar on the entire planet. It’s pretty easy to Google and find our company name and be able to get access to the book in any other way that we can help your listener.

Jarred is spelled with two R’s, Jarred.

I always say my mom misspelled it. Everybody else spells it right, but not me.

Getting The Right Motivation

That’ll help limit those Google results you’re talking about. My final question, Jarred, what is the kindest thing that anyone has ever done for you?

My now partner in many of our best deals. He was my mentor. His name is Ben. When he barely knew me. He met me through a charity event, and he didn’t know who I was. He knew my name. I called him. I got his number from somebody else, and he’s the industrial king in South Florida. I had an industrial deal. My first industrial deal, I think it was 2012. I was buying it for $29 a foot, a major thoroughfare in Pompano Beach, Florida.

I knew it was a great price. I just didn’t know what I had. I didn’t know what to do. I called him and I said, “Listen, I have this deal, I think it’s a good deal, but I don’t know what I’m doing on this.” He says, “I’ll be there in an hour.” He barely knew who I was, he’s running his own empire, and he came to meet me on site, and he looked at it. He says, “How much are you paying for this?” He walked through some of the units.

Said, “You need to close your eyes and close on this deal because if you don’t, I will. This is a steal, and you’ll figure it out once you close.” It was my largest deal at the time. That was the nicest thing anybody could have done for me to drop everything they’re doing for somebody he barely knows and push me in and motivate me and give me some degree of confidence from a seasoned guy to say, “Go ahead and close this. You’re going to be okay.”

You had it under contract at the time?

I had it under contract. Yep. That led to a compounding effect with confidence in doing the next deal. He was a catalyst to the career.

Do you think Ben had done that for dozens, hundreds of people before that, or do you think it was unique? Why do you think he chose to do that in that example?

I’m lucky enough where the guy is so charitably inclined and he does want to help. I don’t know how many times he’s done quite that exactly, but he’s one of the most philanthropic guys I know. I do believe that he feels that the opportunities come to him organically when he puts it out there. That’s why I’m so big into charity. I do believe that it comes back to you 5, 6 fold. It doesn’t have to be altruistic. It’s a lot of self-serving reasons why I donate to organizations. At the end of the day, you’re still helping somebody regardless of what your motives were. I continue to do it, and it’s amazing how it all comes back. It’s an abundance.

I’d probably highlight on there with Ben, there’s some level of like having the interests aligned that’s important for anyone reading, they’re thinking of who you’re going to call. I don’t know that the cold call to the guy without having a deal and asking him a bunch of questions that are not even relevant about theoretical deals that may come down the pike. I don’t think that’s a great use of your one shot at the apple.

Anytime you can find a way to have aligned interests with someone who’s going to partner or give you insight. I think that’s important. The guy who has a bunch of money may be the partner at some point down the line. Maybe you need that person, and you’re not Jarred, and you couldn’t close it yourself for $29. The guy’s thinking, “There might be some chance that the kid needs a way to get it to the settlement.”

Having a line of interest is the most powerful way to cement long-term partnerships. Anytime the interests get out of whack, it starts to break down, it starts to fall apart. I think Ben was like, “The kid has the deal under contract,” probably knows the building by memory or something like that. That was a shining, you know, those parking lot lights that like shoot up into the dark, you see them for miles when they used to have the grand openings back in the day. It’s like a beacon.

It’s like the bat symbol. “The guy has the deal locked up.” That’s way further down the field and totally will kick the door open. How that’s relevant to the reader, I’m not sure. Whoever’s reading will have to figure out like, “How do I get the deal started and bring something of value to the table for me, Jarred? I had no money. I had no skills.” I was like, “I’m to be the number one source of real estate deals.

No one in the fucking whole world is going to bring more deals to the table than Dan Breslin.” The guys with the money who are fixing and flipping, and I want to land and all that. They’re all going to take my call because I have a deal to talk about. I noticed they didn’t like to take my call when I didn’t have a deal to talk about. “I had a deal to talk about.” It was like, drop everything, hold the presses, we’re on the phone within ten minutes.

Listen, what the reader can take away from this is, I’m sure you get it. I get probably 4 to 5 calls a day from platforms that you and I know very well. A lot of them are very “Let me pick your brain.” I hate that term. Let me pick your brain, and they don’t have anything tangible. They just want to pump you for information, and I want to help people. I really do. Please don’t waste my time.

Let me know what your ideas are. Let me know what your solutions are. We can evaluate which one makes the most sense, but don’t just throw your monkey on my back and want me to come up with a solution for you. I have no vested interest whatsoever because I barely know you. You’re not inviting me into the deal.

Have it under contract, have a game plan of what you intend on doing, and then go to somebody’s season and say, “Here’s what I intend on doing, what do you think?” It’s going to take less of my time, and you’re going to get a seasoned investor to give you their point of view with all the facts. That’s the biggest thing. Just, I guess, make sure you have all the facts before you present it to somebody that you’re looking for advice from.

Yeah, 100%. Jarred, we’ve reached the end of our time. I really appreciate you carving out. I got like three pages of notes here, and I enjoyed the conversation. I appreciate you coming on the show.

You, too, Dan. I appreciate you having me.

 

Important Links

 

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

About Jarred Elmar

The REI Diamonds Show - Daniel Breslin | Jarred Elmar | Commercial Real EstateJarred Elmar is the Managing Partner of The Geneva Group.

Jarred E. Elmar is the Managing Partner of The Geneva Group. Since 1999 Mr. Elmar and his partners have been acquiring and managing residential and commercial real estate for their own portfolio with over 1.8 million square feet of retail, multi-family, industrial and residential acquisitions to date. The Geneva Group focuses primarily on neighborhood retail centers, light industrial and small bay warehouse complexes, office buildings and multi-family apartment complexes.

Mr. Elmar began his real estate career in the Atlanta Georgia Metro area, where he began purchasing single family homes on the courthouse steps right after high school. After acquiring dozens of rental homes, he sold the residential portfolio and began investing in apartment communities in 2010 while at the same time acquiring value-add office buildings and retail shopping centers. Until recently, Mr. Elmar hosted a financial radio show on WSBR radio 5 days a week for 7 years strong. He has been featured on several radio talk shows to discuss how money works rather than how one particular investment or asset class may perform. His financial aptitude has allowed him to creatively purchase assets, buy out existing leases from national credit tenants and find higher and better uses to reposition blighted properties.

Mr. Elmar is a self-educated entrepreneur. He has created an impressive real estate portfolio.

 

Limited Partner Syndication Investing with Spencer Hilligoss

 

Limited Partner Syndication Investing with Spencer Hilligoss

 

Guest: Spencer Hilligoss is the co-founder and CEO of Madison Investing, a firm focused on helping passive investors achieve financial freedom through real estate. With a background in technology and experience in high-growth Silicon Valley companies, he leverages his expertise to navigate the investment landscape and educate new investors on rigorous due diligence and risk management.

 

Big Idea: Dan Breslin and Spencer Hilligoss discuss the journey of investing in real estate through limited partnerships. They emphasize the importance of due diligence, understanding the dynamics of risk management, and building long-term relationships.

 

 

    

Dan Breslin: Okay, cool, cool. So would you mind giving us a few highlights here just to kind of paint a picture of the background of a guy like yourself who started as an Lp, and then probably started bringing some friends in. As you see, you know, 1819 20 returns come in. You kind of want to share this thing, and then maybe that continued to compound from there.

Spencer Hilligoss: Yeah, you know, happy to looking back now, I mean. Never would have thought if you had gone back in time, and I talked to myself 20 years ago that this would be kind of the business and the life that we’d be leading. So you know, like we chatted up front, I lead Madison investing passive Lp. Club alongside our investors. We invest alongside them in big assets that we like and man the landscape over the last few years in particular, Dan. Such a helpful educational experience in so many ways, you know. Mostly good, you know. You get your learnings the tough way a couple of times in this market landscape. But, I would say, looking back at my corporate career in tech so many of the principles and tough learnings I got from working in these 5 different high growth, high paced Silicon Valley tech companies, man thrust into leadership at the age of 26 and managing 200 people way before I knew what the heck I was doing way over my skis, like those learnings. Those frameworks. So much of that translates directly to how we look at and do what we do now, which is, find great sponsors, commercial real estate sponsors doing self storage multifamily and beyond.

 

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

 

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%.  Buy & Hold Loans Offered Even Lower.  Get a FREE IPad when you Close Your First Deal by Registering Now at  http://REILineOfCredit.com

 

Resources mentioned in this episode:

https://www.MadisonInvesting.com/

 

For Access to Real Estate Deals You Can Buy & Sell for Profit:

https://AccessOffMarketDeals.com/podcast/

 

Spencer Hilligoss & I Discuss Limited Partner Syndication Investing:

  • Investment Framework for Evaluating Sponsors (00:02:15 – 00:04:41)

  • Emotional Journey of First-Time LP Investors (00:18:56 – 00:22:46)

  • Understanding Illiquidity in Real Estate Investments (00:27:29 – 00:28:44)

  • Risk Management and Financial Structuring (00:45:22 – 00:47:06)

  • The Significance of Building Relationships (00:52:54 – 00:53:52)

 

    

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

 

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

Multi-Family Real Estate Investing with CPI Capital CIO August Biniaz

 

Multi-Family Real Estate Investing with CPI Capital CIO August Biniaz

 

Guest: An accomplished real estate investor, August is passionate about teaching and empowering others in the industry. With years of experience in various aspects of real estate, including acquisitions and deal structuring while navigating diverse markets successfully. Dedicated to sharing knowledge and best practices, August helps elevate the success of individuals and teams within the real estate community.

 

Big Idea: Dan and August highlight the importance of mastering four critical decisions that influence deal-making, as optimizing these can boost revenue. It emphasizes collaboration among team members for optimal outcomes and advocates using data from past deals to inform decisions and prevent missed opportunities. Lastly, it promotes a culture of continuous improvement, encouraging team members to reflect on their choices and consider alternative approaches for greater success.

 

 

    

Dan Breslin: Tell me about your 1st spec home deal, because I imagine that was not day one in real estate that was somewhere between day one and where we are today. But I feel like that was probably some leap of faith, some new level, some unknown, that you face there. So maybe that story would be interesting and reveal some lessons about stepping into the next level. Even if someone’s not trying to build spec homes, there is certain times where you have to kind of. Take that next step of faith. If you’re going to grow in the real estate business.

August Biniaz: Yeah, no absolutely great starting point. I had gotten my real estate agent license. This is probably around 1520 years ago, and was trying to kind of make it in that business, which I found it very difficult, and didn’t see it as very scalable. So I had certain concerns, and my partner, who was a pretty, experienced real estate agent. There was a lot that came up for sale, and when I say a lot there was old home on it. But in Vancouver you call anything that’s somewhat old, basically just a lot. It’s just lot value. And it had come for sale for 725,000, and he’s like, Hey, let’s buy this thing and let’s build something on it. And he was convinced me to get into kind of the Spec home development side of the business, and and we bought the property and we started building it.

We actually got a mortgage in my name and was able to get better terms from the banks on a personal type of resident construction which wasn’t on their business, and we went through the process of construction draws building this thing, but my partner was more the one that was involved in the construction process earlier on. But as the project went on I seemed to get more involved, and I was somewhat of a the project manager or site superintendent on that project, and we built the project. We we hadn’t even listed it, and there was a knock on the door from a real estate agent. There was a Chinese family that had moved down the road, and if you don’t know Vancouver, Vancouver has a you know, a mind blowing number of Chinese nationals that live in Vancouver, the city of Richmond, where I was, from which is a suburb of Vancouver, 200,000 population. 70% of the population are actually from mainland China.

 

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

 

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%.  Buy & Hold Loans Offered Even Lower.  Get a FREE IPad when you Close Your First Deal by Registering Now at  http://REILineOfCredit.com

 

Resources mentioned in this episode:

https://cpicapital.com

 

For Access to Real Estate Deals You Can Buy & Sell for Profit:

https://AccessOffMarketDeals.com/podcast/

 

August & I Discuss MultiFamily Real Estate Investing with CPI Capital

  • Mastery of Critical Decisions (Timestamp: 00:00:12)

  • Real-Time Collaboration (Timestamp: 00:05:12)

  • Data-Driven Decision-Making (Timestamp: 00:20:18)

  • Continuous Improvement Mindset (Timestamp: 00:37:45)

 

    

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

Short Term Rental Strategy with Danielle & Culin Tate

 

Short Term Rental Strategy with Danielle & Culin Tate

 

Guest: Danielle & Culin Tate went from unemployed to grossing over $1 Million annually through Short Term Rental/Airbnb Investing. Culin used his background in SEO to reverse engineer the AirBNB algorithm to rank their 10 listings on the top page.

Big Idea: Selecting the right properties for your portfolio in a tight geographic region provides the opportunity to better monopolize your chosen market.

 

 

    

Dan Breslin: Sweet. Yeah. So for listeners who don’t know, we’re on the video call. And you could see the host, Coach neon sign in the background. That is Danielle and Culin’s Hosting Company. They have 10 short term rentals that they have operated at what is an above average performance rate compared to what most people probably get out of their short term rentals soon to be 11. They’ve been doing this since 2018, and have written the book, which I believe, is also called Host Coach as well. Plug for the book. Cool. Welcome to the show. Do you guys want to share the backstory? How did you end up doing this, you know, starting in 2018, and maybe what’s the business model look like.

CTate: Yeah, yeah, excellent question. I started real estate the way a lot of people do kind of by accident, meaning that in 2018 I’ve always been a serial entrepreneur. I’ve had many startups, and in 2018 I was part of a startup that would basically shut down shop and just kind of looking at my life thinking. You know, I’ve got a 8 year old, son, am I gonna really go? You know, what’s the what’s the effort level look like starting another startup right? And and everybody that’s done that knows, you know the grind involved, and we had one short term rental at the time and it was, you know, a sideline kind of thing, but it was doing $4,000 a month or so in in gross revenue, and I thought. You know, I’ve always been kind of excited and interested in real estate. I could do easy math, and I can multiply 4 times 2 or 3, and start to see some scale there. And then doing what we do best. We iterated and used all of our background from having various tech companies separately and together, and really started to dig into. How do you make this perform? How do you? Once we had a couple we accidentally bought 3 from different people simultaneously. So we had enough to test some theories and really start to manipulate how we were presenting things and and work on the Airbnb Algorithm to be at 97% occupancy year round.

 

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

 

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%.  Buy & Hold Loans Offered Even Lower.  Get a FREE IPad when you Close Your First Deal by Registering Now at  http://REILineOfCredit.com

 

Resources mentioned in this episode:

https://www.HostCoach.co/

 

For Access to Real Estate Deals You Can Buy & Sell for Profit:

https://AccessOffMarketDeals.com/podcast/

 

Danielle & Culin Tate & I Discuss Short Term Rental Investing:

  • Top Page Ranking on AirBNB

  • Benefits of a highly focused Short Term Rental Portfolio

  • Blue Ridge Mountains, Virginia

  • The Recent Evolution of Short Term Rentals

 

    

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.

Dallas – Fort Worth Industrial Real Estate Development with Michael Tran

 

Dallas – Fort Worth Industrial Real Estate Development with Michael Tran

 

Guest: Michael Tran is an associate vice president in the Colliers International Dallas-Fort Worth real estate office where he specializes in acquisitions & dispositions of industrial properties in Dallas-Fort Worth and throughout Texas. He has a background driving more than $600M in value through leasing and has closed more than 900 commercial real estate deals to date.

Big Idea: Dallas – Fort Worth Texas industrial real estate offers strong opportunities in the Small Bay Industrial flex space asset class. This asset class seems poised for continued cap rate compression & value increases as institutional investors have begun buying in bulk.

 

 

    

 

Michael Tran: Oh, yeah, yeah. You know, we’re we’re probably a little bit over like 9 50. Now, you know, we’ve had a little bit of slow down last year or 2. But you know, we’re a team of 5 guys who been out in the industry for over like 50 years combined. So we’ve got some heavy deal volume. We try to do at least 50 to a hundred transactions a year on the multi 10 industrial side.

Dan Breslin: So I am going to start us in a little bit of a unique philosophical place. If that’s okay, this is this is not going to be like a question. I have a little little bit of verbiage here to package this. So we have on one side of the coin, Sam Zell, and for anyone listening who does not know who Sam Zell is, Sam built a very large, multifamily portfolio. I believe he sold that. He built one of the largest mobile Home Park portfolios in the country. I believe he may have sold that he may still own it or his company, and he was probably the most known recently for timing in the office market and exiting equity office properties. I believe it was in 2017, and looking back, what we all know about office now, I mean, that was like impeccable timing. And unfortunately Sam Zell passed. So that’s Sam Zell and Sam Zell’s philosophy was. There’s way too much risk in developing real estate. There’s way too many assets out here that can be bought.

 

This Episode of The REI Diamonds Show is Sponsored by the Deal Machine. This Software Enables Real Estate Investors to Develop a Reliable & Low Cost Source of Off Market Deals. For a Limited Time, You Get Free Access at http://REIDealMachine.com/

 

This Episode is Also Sponsored by the Lending Home. Lending Home Offers Reliable & Low Cost Fix & Flip Loans with Interest Rates as Low as 9.25%.  Buy & Hold Loans Offered Even Lower.  Get a FREE IPad when you Close Your First Deal by Registering Now at  http://REILineOfCredit.com

 

Resources mentioned in this episode:

www.FlexBusinessParks.com

 

For Access to Real Estate Deals You Can Buy & Sell for Profit:

https://AccessOffMarketDeals.com/podcast/

 

Michael Tran & I Discuss Dallas-Fort Worth Real Estate:

  • Uncapped Income Opportunities

  • Development of Small Bay Industrial

  • Buying into the Upward Trend

  • Lower Risk from a Broad Tenant Base

 

    

Relevant Episodes: (200+ Content Packed Interviews in Total)

 

The transcript of this episode can be found here.
Transcripts of all episodes can be found here.