Episoder
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Key Takeaways:
The commercial real estate industry, particularly the leasing process, has been slow to adopt technology and modernize workflows. Brokers often rely on manual, email-heavy processes.
Occupier is addressing this by building a deal collaboration platform to provide a centralized, transparent system for tenant reps and their clients to manage the leasing process.
The commercial real estate market is highly fragmented, with different trends and dynamics playing out in various sectors (office, retail) and geographic markets. Blanket statements about the overall market can be misleading.
Private equity involvement in some legacy brands has led to neglect of the core business in favor of monetizing real estate assets.
There is potential for AI and data analytics to revolutionize commercial real estate decision-making by quickly analyzing large amounts of data to provide valuable insights.
Occupier is taking an end-to-end approach, also providing lease management and accounting software to give corporate tenants more control over their real estate portfolios.
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Key Takeaways:
Hire slow, fire fast when it comes to contractors and builders. Aligning incentives is crucial.
Avoid 50/50 partnerships in real estate development. It's better to have a clear majority ownership and decision-making control.
Budget significantly more time for rezoning and entitlement processes than the typical 4-6 months, more like 6-9 months.
Diversify your income streams as a developer, such as starting a brokerage, wholesaling deals, and running an educational program.
Obsess over costs and line items, and always get backup invoices from contractors to maintain control over the financials.
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Key Takeaways:
Focus on active listening, nonverbal cues, and tactical empathy to better understand the other party's motivations and priorities.
Gather as much information as possible and build rapport before making offers or counteroffers.
Use anchoring and micro agreements to guide the negotiation in your favor.
Present market context and the impact of unrealistic pricing to help sellers be more realistic.
Be creative in structuring deals to satisfy both buyer and seller interests, such as adjusting interest rates, purchase prices, or payment terms.
Appeal to the other party's interests rather than getting stuck on positions when negotiating.
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Key Takeaways:
Specialize and become an expert in a specific niche of commercial real estate to attract referrals and build credibility.
Build strong relationships and provide excellent service to clients - this will lead to more referrals.
Ask for referrals directly, especially after completing a job well. Offer referral fees to incentivize others to send you business.
Leverage relationships with residential real estate agents, as they can be a great source of referrals for commercial brokers.
Use a CRM to track referrals and stay organized. Customize it to your needs and team.
Consider starting your commercial real estate career as part of a team rather than solo to build credibility and leverage others' expertise.
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Key Takeaways:
Real estate is more political than politics - developing relationships with local officials and understanding the entitlement process is crucial for successful development projects.
Nashville has experienced rapid growth, leading to challenges with managing growth and infrastructure. Density and mixed-use development are important but face resistance from some community members.
The entitlement process in Nashville has become much more lengthy and difficult, now taking 15-18 months on average compared to 7 months previously. This poses risks of losing buyers if projects take too long.
Construction lending is very challenging in the current environment, adding further risks to development projects.
Reaching out to experts like Eric Deems at Land Advisors Organization can provide valuable insights and data on the Nashville real estate market to help navigate these challenges.
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Key Takeaways:
Financing is challenging for commercial real estate deals, with lenders only offering 50-60% loan-to-value ratios on a strong industrial deal. Tyler is seeking a lender that can provide 70-75% financing.
The Walgreens and CVS store closures present opportunities for commercial real estate brokers to negotiate early lease buyouts with the companies, then find new tenants for the desirable locations.
Buying boutique commercial real estate brokerages can be difficult, as they are often built around a single high-producing agent rather than a true business. It may be better to try to recruit top agents from these firms instead.
Commercial real estate development projects can be difficult to document and share on video, but Tyler is interested in creating more development-focused content for his audience.
When assessing commercial properties, key factors beyond just the physical condition include zoning, environmental surveys, and geotechnical analysis - items not as crucial for residential properties.
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Key Takeaways:
There are concerns about the potential liability for brokers and property managers using AI-powered tools like RealPage, if the tools have biases that lead to unfair rent pricing recommendations.
It's unclear if new construction technology like Field Materials solves a major problem today, given the challenges of getting multiple parties to adopt new tools in the construction process.
Enterprise-level software for commercial real estate may not always justify the high cost, as it doesn't fully replace employees and requires dedicated staff to manage the implementation.
Brokers should carefully evaluate the value and functionality of new technologies to ensure they are worth the investment, rather than just adopting the latest tools.
Nate has some Ohio vacation cabins for sale that listeners can inquire about through his LinkedIn profile.
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Key Takeaways:
Cost segregation is an advanced depreciation strategy that allows you to depreciate certain components of a commercial property (like flooring, cabinets, appliances) over a shorter 5-7 year period instead of the standard 27.5 or 39 year period. This can provide significant tax savings.
Cost segregation studies are recommended for properties over $200,000, as the upfront cost of the study is usually worth the tax benefits. Even a $480,000 property can see $120,000 in year one depreciation deductions.
The potential downsides of cost segregation include not being able to use the tax benefits if you don't have enough tax liability, and potential recapture taxes when the property is sold.
Some of the best assets to maximize depreciation benefits are mobile home parks, RV parks, and golf courses, which can allocate 70-80% of the purchase price to 15-year land improvements that qualify for bonus depreciation.
When investing in syndicated deals, key factors to consider are the experience and integrity of the sponsor, the cash flow, and the ability to utilize the tax benefits from cost segregation and depreciation.
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Key Takeaways:
Walgreens is closing a significant number of its US stores, up to 25% of profitable locations, due to an unsustainable pharmacy model. This presents potential opportunities to acquire vacant Walgreens properties in good locations.
Tyler advises against buying dollar general stores due to their short lease terms and potential for location obsolescence.
Cauble is launching a commercial real estate brokerage mastermind and a 12-week course to teach foundational knowledge for new brokers.
We discuss financing strategies for commercial real estate, including using commercial lines of credit and equity in existing properties.
Tyler discusses his views on the affordable housing crisis in Nashville, suggesting government incentives and higher density rezonings as potential solutions.
Cauble is planning a commercial real estate conference in Nashville in October with keynote speakers, breakout sessions, and exclusive content for his accelerator group.
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Key Takeaways:
Gather specific market data and property information to strengthen your negotiating position
Determine your walkaway price and other non-negotiable terms before entering negotiations
Use strategic questioning to uncover the other party's motivations and find common ground
Employ tactics like tactical empathy, flipping the script, and asking "how am I supposed to do that?" to change the dynamics of a negotiation
Be transparent and willing to share your experiences, both successes and failures, to help others learn
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Key Takeaways:
Commercial property valuation involves considering many factors beyond just the cap rate, including rent roll, tenant credit, market trends, population growth, and development costs.
Filling information gaps through networking and direct communication is crucial, as data sources like CoStar may not always be accurate or complete.
Sudden changes in the market, like interest rate spikes, can significantly impact property valuations and require frequent re-evaluation.
Diversifying risk by having multiple tenants in a property is important, rather than relying on a single large tenant.
Experienced investors who have been through real estate cycles are valuable, as they can better anticipate and manage risks.
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Key Takeaways:
Tyler hired an office manager to help run his company and is planning to hire a sales manager next to lead the brokerage team.
He is planning a commercial real estate conference in Nashville in October, with exclusive content for his serie accelerator members.
Tyler is conducting final interviews this week to select an apprentice for his company.
Tyler recommends using apps like LandGlide and CRS Data for real estate research and analysis.
He advises getting an experienced partner or consultant when doing new construction projects to avoid issues with contractors.
Tyler is open to joint ventures outside his state, but prefers to work with his accelerator students he knows well.
He suggests selling residential rental properties and 1031 exchanging into commercial real estate for more passive income and tax benefits.
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Key Takeaways:
Building a commercial real estate portfolio part-time is possible with hard work, networking, and assembling the right team.
Thorough due diligence on leases, tenant estoppels, and debt is critical in commercial real estate investing.
Partnerships can be valuable in commercial real estate, but it's important to fully understand the deal and have everything documented.
The benefits of commercial real estate investing, like forced appreciation and velocity of money, can outweigh the challenges compared to residential investing.
Balancing financial goals with emotional well-being and having adequate liquidity/reserves is important when scaling a real estate portfolio.
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Key Takeaways:
Thoroughly evaluate the landlord and property management to avoid issues down the line, such as delayed repairs or non-payment of broker commissions.
Conduct thorough due diligence on the property, including permitting, construction, and utility access, to ensure the space meets your needs.
Negotiate lease terms strategically, focusing on more than just the rental rate and considering factors like renewal options and additional fees.
Avoid a "take it or leave it" mentality during negotiations and instead seek common ground to reach a mutually beneficial agreement.
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Key Takeaways:
Transitioning from residential to commercial real estate investing takes time, patience, and the right mindset. It's not an overnight process.
Raising other people's capital can be a great way to get started in commercial real estate, but you need to be very diligent in your underwriting and risk mitigation.
Getting into boutique hotels can be challenging, with issues like labor shortages and operational complexities. Focusing on larger hospitality assets with more economies of scale can be beneficial.
Building brand loyalty and creating unique experiences for guests are important in the hospitality business.
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Key Takeaways:
Office space has evolved significantly, shifting from traditional to open floor plans to remote work, similar to the changes seen in retail
Cauble is hiring for an office manager and integrator roles at his company
Cauble is organizing an in-person commercial real estate conference in Nashville this fall
Cauble and Logan Freeman are launching a commercial real estate brokerage mastermind on October 1, 2024
Cauble provided advice on calculating GP percentage for capital raises, the importance of having an active role when raising capital, and the challenges of wholesaling commercial real estate compared to residential
Cauble emphasized the value of gaining experience working at another brokerage before starting your own, and the need to prioritize your skills and goals when considering running a brokerage
Cauble provided tips on tenant selection, including being cautious of auto mechanics and thoroughly vetting potential tenants
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Key Takeaways:
Opportunity zones are still active and viable, despite some thinking the program has expired
The biggest benefit is the ability to defer capital gains taxes until 2026 and then potentially avoid them entirely if the investment is held for 10 years
Investors can set up a qualified opportunity fund (QOF) to hold their investments and get the tax benefits, rather than having to invest directly in a property
The QOF structure provides flexibility, as investors can buy and sell properties within the fund without affecting the 10-year holding period
Opportunity zones can also be used for estate planning purposes to avoid or minimize estate taxes
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Key Takeaways:
Tenants want certainty and predictability in their lease costs, but landlords cannot fully provide this due to unpredictable expenses.
Triple net leases are the most common structure, especially in retail, as they hold landlords accountable and provide transparency for tenants.
Lease negotiations require careful attention to key terms like rent escalations, security deposits, operating expenses, and environmental liability.
Involving both a commercial real estate broker and an attorney is crucial to navigate the complexities of commercial leases and protect the tenant's interests.
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Key Takeaways:
Tyler is working on a boutique hotel project called Salt Ranch and is providing video updates on the project's progress.
Cauble is also running an apprenticeship program at Peerless Mill and is in the process of reviewing applications and scheduling follow-up calls.
Cauble emphasizes the importance of networking, cold calling, and personal effort in commercial real estate rather than relying heavily on software and technology.
He advises aspiring commercial real estate investors to "just do it" and make the leap, finding a mentor and getting hands-on experience.
Cauble discusses strategies for evaluating sites, maximizing cash flow, and educating tenants on triple net leases.
He also shares his perspective on why banks are hesitant to finance properties with ground leases.
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Key Takeaways:
Commercial leases are much more complex than residential leases, and everything is typically negotiable
New business owners should assemble a team of professionals (broker, attorney, lender, etc.) to help them navigate the leasing process
Determining the right amount of space for your business can be challenging, so it's important to physically tour spaces and get a sense of the space needs
Landlords typically prefer longer-term leases (5+ years) but may be willing to do shorter terms for new businesses if they have a solid business plan
Having a detailed business plan can help differentiate your business and give the landlord confidence in your ability to succeed
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