EP 668 – Commercial Real Estate Strategies To Scale Your Business Up With Sam Wilson

NCS 668 | Commercial Real Estate

NCS 668 | Commercial Real Estate

 

Nothing is impossible if you want to grow and succeed. You can take action now. Join your host Scott Carson as he talks with commercial real estate investor Sam Wilson from the Bricken Investment Group on how Sam went from residential to commercial real estate investing, systematized, and scaled his business. Sam is an active investor in self-storage, parking, multi-family apartments, RV parks, and single-family homes. Tune in to learn the different aspects you need to know to scale in this industry!

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Commercial Real Estate Strategies To Scale Your Business Up With Sam Wilson

Welcome to the show. I am excited to be here. I’m jacked up for our special guest. He is an absolute rock star when it comes to real estate investing. Before I introduce him, I get a lot of phone calls, especially with the market being crazy like it is. Investors who are reading this are like, “How do I find commercial notes? How do I buy commercial on an apartment complex, RV resort, parking, or any type of commercial asset?”

I’m always saying like, “Before you get rocking and rolling, you got to know how those assets operate and make money on those before you get a buy in the that because you could overpay quickly and end up in a whole lot of an underwater mess.” We have the man, the myth and the investing legend from Bricken Investment Group out of Memphis. This guy is a rock star. He’s been an investor in self-storage, parking facilities, multifamily apartments, RV parks and SFRs. He hosts the How to Scale Commercial Real Estate podcast, which I was honored to be a guest on.

If you want to learn more about how to scale commercial real estate, you need to check out that podcast. He’s interviewing real estate experts besides walking the walk. We hosts love to talk and talk, but this guy’s out walking the walk. I’m so honored to have him on the show to share his insight, valuable information and experience for you readers out there. He is a University of Memphis grad. He’s a licensed agent. They’re also in the volunteer state and we’re honored to have the man, the myth, the legend, Mr. Sam Wilson. Sam, how are you doing?

I’m doing great. How are you, Scott?

It’s a beautiful day here in Austin. I’m six feet above ground. It’s always a good day when that happens. You’ve done a variety of things. Besides what I shared, let’s talk a little bit how you made that conversion from starting off single-family into that commercial space aspect of things.

I get bored easily. I’ll start that by saying that once I figure something out, I get bored. I did about 60 or so single-family flips. At the end of it, a couple of things happened. I got bored and it seemed like the lowest barrier to entry. Suddenly, I’m competing with everyone else in the exact same space. I’m like, “A guy that has two weeks of experience can buy the same house as I can.” There we are duking it out over price.

I was buying the courthouse steps but duking it out over price with something that doesn’t know that much about it. I’m going to go, “I need to get out of the game where everyone else starts,” because you want to lower your competition. In commercial real estate, it brings its own level of competition that’s even way more sophisticated than the guy at the courthouse steps. That’s how I transitioned out because it wasn’t a scalable model I was working in and I said, “I got to do something else.”

That makes a lot of sense because there are a lot of weekend warriors that watch the TV shows that think they’re the next fix and flippers or Joanna Gaines out of Waco and overbidding, especially buying the foreclosure steps. They’re going to overbid because they want to scratch that proverbial itch of doing that first deal and overpaying for stuff. Price has gone up as we’ve seen in the last few years. You’ve probably seen a lot of that happening at the courthouse steps, too.

I realized that you can buy an Investor Carrot site, hire an SEO or AdWords marketing company and be in business within 24 hours with your name on the front page that somebody else can click if you’re doing seller marketing like, “Maybe we need to go do something different.”

There are a lot of fix and flippers and traditional single-family investors. It all comes down to how many postcards can you slam down somebody’s throat or how many times you can show up in their search engines. We all know that AdWords, Facebook, or as we call it Fakebook, don’t have an equal playing field for a lot of people out there.

Speaking of AdWords, I’ll give this to anybody who is in the single-family space. That was one thing that we did figure out was that we could outspend everyone else. In that, we generated higher quality leads than everybody else could, but even within that, it was like, “Your cost per lead was so high.” It became like, “Why are we duking this out? Let’s do something different that’s both scalable and more fun because I was bored.”

As entrepreneurs, we do get bored as it’s the same old. If we do the same thing each and every day, we do get bored because our creative juices go away. We’ve got it down and we want to do something different. Let’s talk about that. What kind of asset class did you move into from the SFR side once you are like, “I don’t want to outspend everybody? You need to keep giving Google away a big chunk of my revenue on my deals.” 

We moved into the parking lot business. It had all the things that single-family didn’t. No one was in it, at least not that was widely talked about. It was easy to manage and was virtually no maintenance. It was one of those things where everybody talks about the no toilets, no tenants, no termites, but we even went one step further like, “What’s it going to do, flood?” It’s a piece of asphalt like, “This is what I want to buy.”

We always joke because we said our phone would never ring. Times were different then in the parking business, but we had deals set up where they were not management agreements, which is where you have shared revenue with your operator. It was a guaranteed triple net lease on our assets and it was like, “This gives an ACH every month.” It was silent and great.

You bought parking lots. What kind of locations where they around, like university use, overflow parking for game days, or downtown? There’s a variety of how you handle it, depending on where it’s at.

What you’re touching on is what we call the demand generator. What is the demand generator? Why are people parking there? You had to look at those things and figure out what the value of the lot was based upon what the demand generator is and how stable you thought that would be, as well as what its current operating income is.

You hit it on the head. You’d have to have ball games that you’d either be ballgame parking, bar or weekend traffic parking, or courthouse parking. Pre-pandemic, you’re buying at the jail. If you can get a lot across the street from the jail because that’s consistent traffic and heavy turnover. I don’t know how long you get to visit someone in jail, but it can’t be more than hour. Those lots turnover, Jalen Courthouse lots were goldmines. That’s changed dramatically with the backflow of being weird with the pandemic. That’s what your demand generator is and you’d figure that out. Lots of different styles of parking.

When you look at calculating income and things like that, was there a percentage you bought them at or you can see we’re talking like 50% of value? Were there are a lot of distressed parking lots or not? 

There weren’t and that was one of the things that made it a very challenging space to bring investors in on because you might be buying in at an 8% cap. I’ll put some caveats in there, you bought it and you underwrote it, say we’d buy some at an 8% cap. That makes sense like, “It’s an 8% cap. It’s practically a triple-net lease. If it’s not, then it’s closed.” There’s not a lot of risks involved here, but that’s the cap that you could underwrite.

It essentially became a covered land play versus a real investment where you’re holding it for a long time because if you’re ever going to get any upside out of it, there’s going to have to be redeveloped into something else. Unless you were able to dramatically turn around revenues on it. If it was poorly managed, that can happen, which we’ve had that happen. Those are harder to find because you’ve got professional operators running these and they’re going to try to squeeze every last dollar out of this. If that’s already happening, finding your true real value add was a tougher thing to do.

For those out there, if you’re buying commercial real estate, unless you’re in California, where they’ll slice their grandmother’s throat for a 3% cap, you would try to buy it like 10% to 12% cap and then sell it on an 8% cap. You buy it distressed, you get a 13% return on investment. If you’re going to buy some distress, do some work in it, sell an 8% cap, you have a 50% increase in value that you’re selling on roughly. What you’re saying is figuring is it’s a triple net lease. It’s going to be generating cashflow, maybe a little bit more depending on how many people they can park on top of each other like a GEICO commercial. 

It was a very stable workhorse investment. There are people looking for that, but for me, at this stage in my game, it was a harder asset to sell. I preferred value add strategies, but we’ll talk about that in another episode. It was not that it didn’t fit because I liked it, but there are more attractive returns elsewhere.

You bought some of those. Do you still hold any or get rid of those? 

We unloaded everything in January of 2020. Parking took it on the chin in March of 2020. Think about it. Who’s going to ball games? Who’s at the bars on the weekend? At least we would be driving and drinking anyway. Who was going and doing all these things that made life fun? Who’s paying the park in central business districts? Nobody. What’s the interesting thing is, and we still haven’t seen it, we’ve not seen any price corrections of any meaningful value in that market.

I’m not saying it’s not possible. There are always deals to be found, but we found that the chase became so much harder and we couldn’t underwrite them because who’s going to land on an asset that’s not producing an income? “Help me buy this land in a downtown central business which is not making any money.” Thanks, but no. Part of getting some of your returns is the ability to use leverage. Without that, it became even a much less compelling asset class for us. We’re waiting, I would go back to buying parking in a heartbeat if it became a viable investment opportunity again.

What was your best strategy to find these deals pre-Uncle COVID Charlie? 

You got to get your bicycle and put it in the trunk of your car, go to that city and ride each street back and forth. That’s what I do with my phone. It’s exactly what I did because there’s no CoStar listing of parking lots. You can get on Google Maps and tell me where a parking lot is. You look at downtown, it’s all asphalt. You can’t tell what’s paid parking lot, why people are parking there, or what building’s next to it. You have to be physically present. I walked one city and I said, “Screw that. I’m not doing that anymore,” because that took me three days to walk. It was Louisville. It’s not even a big city.

NCS 668 | Commercial Real Estate

Commercial Real Estate: Commercial real estate brings its own level of competition. That’s even way more sophisticated than the guy at the courthouse steps.

 

The next cities from then on, I took my bicycle with me and pulled my bicycle out of the trunk. I’d use my phone on Google Maps and I’d mark every single asset I was interested in a city on Google Maps. I could kill a whole city in a day because there are not that many paid parking lots. That’s what you’re buying. You’re buying preexisting. You could gamble and attempt to develop new paid parking, but that’s exactly what you’re doing. You’re gambling at that point. We were looking for stuff that is already functioning in the parking lot, mark them on the map, have my VA’s do all the research, and then we start cold calling.

What was the next step? 

Part of that was launching the podcast last 2020. It was like, “Parking is taking it on the chin. I’ve got to transition.” In 2020, there were probably 3 or 4 months of absolute panic. There was like, “What do we do now? All I was doing was parking. I don’t want to go back to single-family housing.” We had the blessing of money and time and we’ve got some other businesses running as well, so I shouldn’t have stressed, which I did. I took the time to focus.

I started partnering with other sponsors on deals, taking down multifamily assets, bought about 70 acres about an hour outside of Kansas City that we’re developing into a boat and RV storage and some other stuff. We’re being opportunistic in what we’re going to take down. We closed the 246-unit in Winston-Salem. Moving forward, that’s the type of stuff we’re looking at.

Let’s talk about the boat and RV storage. It’s very relevant now because when you have people that can’t pay their mortgage, they’re probably not going to pay the payment on their boat or RV storage, too, correct? 

I wondered about that. To follow your lead, yes is the answer.

Do you see that in what you’re talking about and then the stuff that you’re looking and developing? 

People paying to park a boat worth quite a bit of money don’t want that asset foreclosed on so that they can satisfy whatever they owe for their boat in our brief storage facility. I’m thinking that they’re going to go ahead and, at worst, try to keep that payment made because they know that the next thing I’m going to do is have the sheriff come out and sell it. Once they sell that asset, you know what boats cost these days. They’re outrageous. I don’t know the intricacies of how all that works out there in Missouri, but we’ve thought about what it looks like if we have to start selling these assets off.

We saw that a lot more back in 2008, 2009 and 2010 in different parts of the country like Florida. It wasn’t the million-dollar yachts because those people usually have money. It was Bayliner, bass boats and stuff like that were parked in storage for a few months. It’s like you’re repo-ing the stuff and then selling it like a foreclosure auction. They repo-ed a car, this getting paid and then going from there. 

What were the challenges involved in taking those assets, repoing and selling them at auction?

It’s difficult if you don’t know where the hell the asset is at. That’s the first thing. That’s why you got to track things. We’ve bought some auto debt. I bought some boat debt back. I’ll never buy a boat debt again because boats are not only depreciating assets if they’re not being used. They’re sitting in the water and rotting. People will rip off the radar equipment and then you’ve got a non-operating boat for the most part. That’s a difficult thing, but boat debt can be bought. A boatload of it is pretty cheap. If you’ve ever watched the show Airplane Repo, that’s a great idea of what you have to go into.

You’ve got to find and locate it then you got to repo it, either telling with another boat or repo-ing an airplane. I’ve repo-ed a truck. $0.25 is what I paid for the note, became a bank, repo-ed it and gave the guy an opportunity to pay me off. He didn’t want to do that, so we did what we did. I held onto that truck for three years and I got $3,500 trading value as I drove it across the country. That’s exactly what I paid for the $3,500.

I had a truck for free for three years, put close to 30,000 miles on it driving across the country. It’s an interesting thing when you get into those assets, boats, RVs, and then find the higher value stuff. People will come back and pay it or they’ll, “I forgot to pay.” They get you payback in chunks in a lot of cases. Each state you’re in regulates how fast you can evict or foreclose on that, too, so you got to know on a state-by-state basis too.

It will be interesting to see how that plays out. It’s one of those things that at least RV deliveries were up almost 50% in 2020, which is insane. My thinking on this is there are two sides of this. One is if RV deliveries are up 50%, then you’re going to have to have 50% more storage to put those somewhere. Most HOAs, most people don’t want them sitting in their driveway. They want somewhere out of sight. They’re going to have a place to put that.

The smart thing in that too is people are thinking to travel less via airplane. We don’t see cruises taking place. People are doing more staycations or parking and traveling stuff there. I’ve talked to a gentleman in our big RV center here in South of Austin. He said, “We’re have few delinquencies. We’re seeing more orders than we’ve ever seen before because of the staycations or the stay in place.” 

Which presents the next phase of that is the interest in RV parks. That space is seeing an influx of all sorts of new investors in that space as well. It’s very interesting to see. I don’t have a crystal ball, so I’m sorry about that.

It’s all right if you don’t have a crystal ball, but here’s the thing that we’ve seen interesting. I had the founder and creator of Austin’s most talked about the homeless community where they get people back in to live in houses and everybody pays rent. He started at first with RVs and RV parks. 

They had homeless people taking care of RVs?

He had people moving into RVs. He worked with different organizations and got the homeless to qualify for Social Security disability. That’s what they did. Every time they got a check, they paid their monthly rent. They had to stay. They needed a place off the streets. It was brilliant. It may be $200 to $400 a month for the rent, but it’s pretty cheap compared to if you even bought a brand new RV and put it on a lot. I see the wheels turn it in right there like, “How can I do that?” 

That sounds like work. That’s somebody with a mission and a heart for that. That goes back to the scalability thing. That’s a philanthropic endeavor more than an income generator.

They’ve taken $0 from the government and have over $100 million in development. It’s going to house about 2,000 people here in Austin, Texas. They got 400, I have another 1,400-plus and it was done with tiny homes, but in a big chunk of RVs making it, which I found interesting. I immediately called them. I was like, “Do you have any debt I can repo on?”

Let’s get into scaling because that’s one of the biggest things that you preach and talk about. What do you see people screwing up on? The people you’ve talked to, what have been some of the biggest mistakes when they’re diving in commercial real estate? Is it that they’re trying to do too many things at once, or that they’re not educated in what they’re doing and trying to do it all by the seat of their pants? 

It comes down to the same things passive and active investors both look at, deal market and team. Building all of those things out, what is your asset class? What is your deal? What are you investing in? What’s the market much your team look like? Everything that revolves around the problems people have faced have come from one of those three aspects, either on the passive side as a passive investor. I’m both a passive and an active investor and, thank goodness, haven’t had anything so far go sour on the passive side. Those are the same things on both sides of the equation that people need to be looking at. Those are the places where people find the most complications.

When you’re moving from single-family, parking lots, multifamily and RV, you’ve probably partnered up with some people. That is probably a good learning curve to help you take advantage and learn the business better, correct?

One hundred percent. That’s the only way I’ve moved forward. On the single-family side, no. I fell into the single-family space. That was learn as you go. On the parking lot side, yes, partnering with a guy who had at your home state and said, “I want to own the parking industry.” He said, “Here are the things you can do.” We flew down, toured some cities, and looked at some stuff and every deal I looked at went across his desk.

I learned enough from talking to him, having calls with potential sellers and listening to them back and forth. I’m like, “You thought about this. I’d have gotten hamstrung. If you weren’t on this call with me, my moron self probably would have bought this deal. I’m glad you were here and asked that question.” The same thing with multifamily. As we partner up with other lead sponsors in the multifamily space, I’m finding other guys that have more experience and more organized teams than me. I can participate in much larger projects by scaling alongside them. I get a front-row seat to what works and what doesn’t.

That’s always the best way. You can row the boat in the same direction. You can learn a lot faster from somebody who’s experienced. That’s what I find across the board a lot of times. Commercial space can be a lot more adaptive and friendly in helping you get deals done versus the residential space where a lot of people are worried about cutthroats or joker brokers like, “You’re going to steal my deal.”

NCS 668 | Commercial Real Estate

Commercial Real Estate: People will get your payback in chunks in a lot of cases; obviously, each state you’re in regulates how fast you can evict or foreclose on that too. So you have to know on a state-by-state basis too.

 

The commercial real estate space is a team sport. Maybe you could, you’re a hero and you can, but taking down a 300-unit apartment complex would be a very challenging thing to do on your own. There are too many moving pieces and seats in the boat, to use your analogy, they have to be filled and you’re going through rapids. You need a lot of people paddling alongside you.

What’s been a mistake that you’ve learned along the way that stands out? Besides being on a phone call and hearing somebody ask a question, but seen a mistake happen? Maybe it’s not you. Maybe it was somebody else that you know in the commercial space.

Here’s a $400,000 mistake. I had a parking lot in Lexington, Kentucky, that I’d been grooming the seller for a year. It came across my partner’s and my desk. We were hemming and hawing on price on this and that. The short answer is all I had to do was get it under contract. I could have wholesaled that to one of our buyers for about $400,000. No questions asked. Just put my assignment fee on top of it, taking the check and written off in the sunset.

Instead, we monkey farted around with the seller, with this and with that, then ended up showing it to our buyer before we had it under contract. The buyer ends up going behind our back and trying to deal for more money than I could have sold it to him for if I had gotten that under contract what the seller wanted. Out of my $400,000, he still would have bought it for less.

That’s burning bridges and money in a variety of ways. 

In the end, I had a candid conversation. I was like, “I want to let you know that sucks because you still ended up screwing yourself.” I was also mad at myself. I knew better. Get this from the single-family side. I wholesaled enough deals. I don’t want this. It doesn’t fit my buyer criteria, but I know this guy wants it. Put it under contract, sign the paperwork and I didn’t. I screwed around.

That’s the thing a lot of people forget about, is that commercial deals are not normally you’re 7 to 30 to 45-day closing.

In the parking space, they were 45 to 60 and that was about it.

That’s parking space. It’s a different side. It’s less stuff to have to evaluate. You’re not walking rooms and doing due diligence, inspections or anything like that on a parking lot. 

You’re going to phase one study and that’s about it. There are no contaminants in the soil underneath the asphalt and otherwise, what you see is what you get.

Speaking of putting things in contract, things can always be adjusted in the contract aspect. It’s what a lot of people get so bogged down. Did you have the money for every commercial deal that you did when you put it under contract? 

No. I didn’t have the money for it. That was the other thing too, it was a bigger deal and you get scared. I was like, “What if I get this under contract?” I got to put earnest money down, which is fine. I had the earnest money for it, but even so, I should’ve done it. Everything in your gut is a go. Quit screwing around. That had been a fun vacation. What could we have done with $400,000? I could have a lot of fun.

Moving on from there a little bit, not sign a contract or waiting until you have the capital. As you’re raising capital for these projects, what is the best way for your commercial deals that you’ve gotten funding? Obviously, partnering up with people is probably better for raising capitals, or marketing and putting the pieces in place. What’s been the best way to get these deals funded? 

For us now and retooling from 2020, that’s the process we’re in. I’m in the thick of growing my investor database, raising more capital, making network connections both on the private equity side and from standalone investors. That’s what I’m right in the middle of.

That brings me to the second part of that. How valuable is the podcast in helping you raise capital? 

So far, it’s been great. It’s a daily podcast. It’s a lot of work. Getting that off of the ground and getting traction with that takes time. I said, “Give it 6 to 8 months before it begins to show any fruit.” We’ve had some great calls out of it and things like that. Nothing remarkable, but that’s okay because that’s what building is about. Our downloads have doubled in one month and I was like, “Cool.” All of a sudden, you start to see momentum. That’s when you’re building any business. It takes time and a lot of grind. I did 3 or 4 interviews in a day. It’s a lot of grind, but that’s life.

I’m so glad you brought it up because so many people have such little patience and that’s why they’re not successful at anything. They go from one thing to another thing and they never give any time for a seed to plant. You said it without saying is the consistency. A daily podcast is building consistency, getting the word out as you’ve made that pivot after you got rid of your stuff before COVID and you’re rebuilding not from the ground up. You’re re-pivoting from the focus. 

It’s a complete rebranding. It is retooling our lead sponsor database and the type of other industry partners I’m working alongside. I’m not so worried about my key parking operators anymore. I’m more worried about who great lead sponsors are in the multifamily or in the boat and RV storage space. It’s a retooling of what you’re doing and it takes time.

Are you seeing more flow leads from partners, commercial brokers, banks, LoopNet? What do you see on a different commercial that you trace and the number one way to find deals? 

I am relying solely on other sponsors. There are so many people who are interested in the commercial space, especially as it pertains to the multifamily. If you’re going to buy multifamily in Texas, the last thing Texas needs is the Bricken Investment Group throw in one more line in the water for multifamily deals in Austin. That means there’s one more guy bidding up the projects. Why don’t I find somebody in Austin that’s already doing it that has a capital need or has a need for some other skill I can bring to the table so I can co-GP with them? I can bring capital and a lot of other industries, knowledge and skill to the table that will help the GP? I don’t need to be out there fishing for more deals. Everything that comes across my desk is stuff that other sponsors have brought to me.

It’s also too easy to open yourself up to you and your team going out there and marketing. It opens up to a lot of bird dogs or people out there. It’s better getting your message out to those people that are in the fire.

Probably the biggest fruit I’ve gotten from podcasting is that I get to interview the brightest and best minds around the country and real estate and go, “What are you doing? What are your needs? What’s that look like? How should we work together?” Keep me in the loop and you get to see lots of deals that way. It’s fun and it also relieves the need for me to build a brand new system. I don’t have to get out there and build a whole new acquisitions arm. There are lots of guys and companies with acquisitions arms. I don’t need another one.

You plug and play where you’re needed. That’s a beautiful thing there for you. What’s your goal by the end of 2021? Do you have a goal that you’ve set for your team? 

I have an income goal of my own. I’ll probably keep that card close to the vest. That’s it, a certain number of doors under management or co-management. I certainly have very specific dates by this day, at this time, this amount of money brought in the door, this amount of assets under management. There’s one foot from here on the ground that I try to review every day. It’s open up that book and say, “Where am I on this path? Am I working towards that or am I off?” That’s penciled out.

If you take a look at KPIs as far as how many deals you look at before one year and finalize on? 

At this point, I’d probably say there are twenty deals that come across my desk and then there’s one that’s inquire further. That goes back to the deal market and team that we talked about. It needs to align on those in the first place. The potential returns have to make sense. There are no such things as returns. There are potential returns.

Don’t you love it when you see from my broker like, “This has the potential of this much profit at 91% capacity.” I’m like, “You’re only at 65%. Why are you selling that’s not there?”

You take the pro forma and you should throw it out. Do your own homework and then I’ll tell you what it’s worth.

NCS 668 | Commercial Real Estate

Commercial Real Estate: If you can run the boat in the same direction, you can learn a lot faster from somebody who’s experienced. You’ve got to be your operation.

 

If you weren’t in real estate, what would you be doing otherwise?

This is honestly all I want to do. I like doing real estate. I’ve owned other businesses in other industries. I enjoy this. This is not the golden ticket, but it is the vehicle that will allow me to provide the life I want for me and my family. If I had a wishy-washy other career, I might be a pilot. I do have my pilot’s license, but I might be a commercial pilot because I geek out on flying. If I can get in the cockpit, that’s a good time.

Are you still living in Tennessee?

I am.

You mentioned Kansas City, Louisville, Kentucky, Lexington and stuff like that. With your commercial deals, how important is it for you to go out and take a look at the property? 

One hundred percent. There was a potential operating partner that I was looking at in January 2022 in the Pacific Northwest. I said, “I love what you’re doing. It’s great. I’ll see you next Wednesday. I’m going to your market. We are going to drive around and spend the day looking at your market, looking at what you’re seeing and building.” If I’m not there touching what you’re doing, then I don’t think you’re doing a good job of vetting what it is you’re investing in.

The commercial space is so different than the residential space. Every asset is a different story based on location, operation, tenants, and things in place. 

Even in my passive investments, there’s a couple I have not seen but certainly have gone to those pre-investment and looked at them. If you’re plugging down $50,000 or $100,000 but you’re not willing to spend $400 on a plane ticket in a day to go look at it, you probably shouldn’t be throwing $100,000 at it. Maybe $100,000 is easier for you to earn than for me, but that seems a lot of money. You get half a day out of town, go look at it, eat dinner out, spend the night somewhere and spend $400 and make sure it’s something you want to invest in.

That’s important. The residential stuff, you have realtors look at eyes. If I’m buying bulk portfolio stuff in Michigan, I’ll jump on a plane and fly up there and take a look at it in a couple of days and look at 40, 50 assets. You have to. 

There’s something beyond spreadsheets. There’s an intangible something you acquire by getting the vibe of the place. I don’t know, maybe I’m weird, but that’s what I like to do.

One of my first commercial deals I looked at, it was one of the most interesting ways. It was one of the ways that I understood that if it’s a good deal, money’s out there. I got this deal sent to me from a couple of investors here in Texas, these 29 doors in Corpus Christi. I grew up in Corpus Christi, Texas down on the bay. I thought it was a heck of a deal worth for $1.1 million and they want $5.5 million for it. I was like, “I’ll bid $5.1 million.” They came back and I said, “$5.15 million, but before I put anything down, I’ll come down and look at the asset.” I realized only one of the guys out of the three have seen any of the properties.

The first property I showed up to put fresh paint and carpeting on the outside, but it looked like a Jumanji house on the inside. I was like, “This is not a good deal when the floors are warping and the marble splits into four pieces.” It’s so confused which way it should roll. The roof is draping in, the floors are buckling. I was like, “This is not going to take $10,000 even on for half of the rehab to do that.” That’s the most important thing about commercials. Always put eyes and take a look at it. With your financing in some of the commercial deals, have these all been financed to private capital? Has there been any bank financing that you stepped into or took over? 

On the single-family side, no. I’ve done lots of takeovers and things like that. My office now is a subject-to deal. On the commercial side, no. Parking lots and parking garages, that was bank financing. That’s a bank that understood what we were doing. That’s where my partner came into play because he already had these preexisting relationships.

On the multifamily deal that we closed, that was a bridge debt deal because we needed a quick close and there were some other things that we had to get around that agency debt wouldn’t cover. We’re looking once we get stabilized, we’ll refinance it with agency debt. For us, it’s always been investor equity, one investor at a time, investor equity plus whatever our traditional method of financing is.

Putting together some PPM and stuff like that too. 

Yes. We pay our attorneys well.

A lot of people want to get into doing bigger deals and they get so bogged down to seeing what’s in their bank accounts. What’s that bit of advice you can tell for somebody who’s thinking they want to go start a fund, but they haven’t closed a ton of deals?

I’ve never started a fund. I do know that starting a fund is an expensive endeavor. I’ve got a lot of friends in the business that have funds and the expenses are everywhere from $25,000 to $100,000 to get their fund set up. That takes some working capital to get going. If somebody is low on cash and wants to get involved in bigger deals, go network.

I’m blown away by the number of people who were willing to share their industry expertise. I always feel privileged when they come on. It’s like, “You’re taking 45 minutes out of your day to sit down with me and share everything that you’ve learned over a lifetime of experience. That’s awesome. Thank you.” That same thing holds true. People who are genuinely interested in starting now. If you’re low on funds but can afford a mentor of some kind, go that route. That’s going to cut off.

If you can’t afford the mentor, find a partner that you can work alongside and bring value to because that’s exactly what I did the parking space. Guess how many parking mentors there are, zero. Nobody’s doing it, so I said, “How can I bring value to you?” He said, “Go do this. Bring me deals. Here’s how you do it.” I said, “I’ll bring you deals and I’ll learn alongside you.” The only thing you can do is invest your time. You’re going to invest time, money, or both.

It makes complete sense because that’s the thing. People are like, “I’m going to put a fund together and raise capital.” If you haven’t done any deals, nobody’s going to invest with you. The cheapest I’ve ever seen a PPM get reinforced is $10,000.

That’s my first single syndication. Not for a fund. A fund is different.

You mentioned flying as being one of your favorite hobbies and stuff like that. Do you have a plane or are you eyeing a plane that you’re looking at buying?

The short answer is no to both of those. Flying is like owning a boat. It’s not something you use every day. Those are what you call club purchases. There’s something where you can have ten owners of an airplane and everyone gets to fly as much as they want. I’ve got a flying club here in Memphis. I am waiting on the plane. It’s coming out of the avionic shop. That’ll be the plane I’ll have access to. You’re taking the cost of what would otherwise be an ordinarily expensive endeavor, spreading it across ten people. I’ll spend less on an airplane every month than I will on my car.

Sam, thank you so much for coming on the show and delivering your wisdom and insight there as well for you. What’s the best way for folks who are reading to get a hold of you or connect with? 

Go to the BrickenInvestmentGroup.com. If you’re looking for a freebie, here’s a giveaway for you. If you go to BrickenInvestmentGroup.com/checklist, here’s a checklist that you can download that will help you vet a deal. It’s called How To Vet A Deal In Under 10 Minutes. I’ve spent countless hours looking at the wrong deals going, “Is this something I want to look at?” I was hemming, hawing and wondering if I can make the deal fit. I’ve created a guide where all you got to do is look at it and you can in ten minutes say, “Yes, is this something I can do further research on, or do we pitch this in the round recycling bin?”

NCS 668 | Commercial Real Estate

Commercial Real Estate: Commercial space is so different from residential space. Every asset is such a different story based on location, operation, and tenants.

 

Thank you so much for that. Check out his podcast, guys. Once again, it is the How To Scale Commercial Real Estate podcast. Check them out and give it a listen to. Give them a subscribe button and leave them a nice five-star review as I’m honored to be a guest on there.

Thank you for having me on. I do appreciate it.

All right, guys and gals, take Sam up on his free checklist there to help you save some time and some hair so you’re not falling it out. Go out and take some action and we’ll see you all at the top.

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About Sam Wilson

Sam is an active investor in self storage, parking, multi-family apartments, RV parks and single family homes. He hosts the “How to Scale Commercial Real Estate Podcast”, where he interviews real estate experts to give listeners the tips, tools, and tricks to scale their investment portfolio.

Sam holds his bachelor’s degree in business finance from the University of Memphis and holds his real estate license in Tennessee. In addition to his years of real estate experience, he also has a diverse background in business ownership, building construction, and management.

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