Step into the dynamic world of commercial real estate with our latest Key Factors Podcast episode, featuring the insights of Andy Hilger and JJ Garina. Navigate the twists and turns of the market as we explore how local economic conditions, the Texas Triangle's growth, and the transformative power of relationships drive success in this complex industry. Discover how today's commercial real estate landscape is adapting to the post-COVID era, where reimagining office spaces and embracing adaptability become the keys to investment survival.
We're peeling back the curtain on the art of discretion within property sales, essential in states like Texas, and diving into the strategic intricacies of leasing and valuation that hinge on more than just brick and mortar. Hear firsthand accounts of how nuanced strategies can repurpose a warehouse into a buzzing brewery and why the valuation matrix of commercial properties is pivotal to maximizing returns. Our experts, with their rich experience in medical office spaces and transitioning from residential to commercial real estate, illustrate the pivotal role of expert representation and the critical lessons learned from past transactions in shaping future success.
Wrap up your listening experience with an invaluable conversation on the broader economic implications of current real estate practices. Learn how savvy investors and owners are leveraging market conditions to their advantage, the role of inflation in property valuation, and what the recent yield curve inversion might mean for the future of commercial real estate. Whether you're a seasoned investor or a residential realtor venturing into new territory, the wisdom shared by Andy and JJ is a priceless guide through the commercial real estate maze.
Key Factors Podcast is Powered by ReviewMyMortgage.com
Host: Mark Jones | Sr. Loan Officer | NMLS# 513437
If you would like to work with Mark on your next home purchase or as a partner visit iThink Mortgage.
Step into the dynamic world of commercial real estate with our latest Key Factors Podcast episode, featuring the insights of Andy Hilger and JJ Garina. Navigate the twists and turns of the market as we explore how local economic conditions, the Texas Triangle's growth, and the transformative power of relationships drive success in this complex industry. Discover how today's commercial real estate landscape is adapting to the post-COVID era, where reimagining office spaces and embracing adaptability become the keys to investment survival.
We're peeling back the curtain on the art of discretion within property sales, essential in states like Texas, and diving into the strategic intricacies of leasing and valuation that hinge on more than just brick and mortar. Hear firsthand accounts of how nuanced strategies can repurpose a warehouse into a buzzing brewery and why the valuation matrix of commercial properties is pivotal to maximizing returns. Our experts, with their rich experience in medical office spaces and transitioning from residential to commercial real estate, illustrate the pivotal role of expert representation and the critical lessons learned from past transactions in shaping future success.
Wrap up your listening experience with an invaluable conversation on the broader economic implications of current real estate practices. Learn how savvy investors and owners are leveraging market conditions to their advantage, the role of inflation in property valuation, and what the recent yield curve inversion might mean for the future of commercial real estate. Whether you're a seasoned investor or a residential realtor venturing into new territory, the wisdom shared by Andy and JJ is a priceless guide through the commercial real estate maze.
Key Factors Podcast is Powered by ReviewMyMortgage.com
Host: Mark Jones | Sr. Loan Officer | NMLS# 513437
If you would like to work with Mark on your next home purchase or as a partner visit iThink Mortgage.
Whether you're a seasoned professional, an aspiring investor or simply looking to stay ahead of the curve, this is the ultimate guide to making informed decisions in the world of property and real estate. So grab a seat and let's uncover the key factors that make all the difference. Welcome to Key Factors Podcast. Let the journey begin.
Speaker 2:What is New York City without its skyline Monuments to commerce standing proudly shoulder to shoulder, More office space than any city in the world? But peek inside all this vertical real estate and there's a fundamental question when is everyone? More than 95 million square feet of New York office space currently unoccupied the equivalent of 30 Empire State Buildings.
Speaker 3:I think this is an existential moment. You know, I call it crushing the chasm. What's the chasm, specifically? This post-COVID world of higher interest rates, the changing nature of how people work and live. We're not going back to where we were. It's a different world and it's going to be turbulent.
Speaker 1:All right, welcome back to another episode of Key Factors Podcast. I'm your host, mark Jones, and we are sponsored by ReviewMyMortgagecom, the largest index of mortgage programs in the nation, and we've been talking a lot about residential real estate. We've talked about the ins and outs, we've talked about tips, tricks, market data, all of those things. But I didn't want to go another day or another episode without bringing in commercial. So I've got two experts on the panel today with me that I can share some of my thoughts, ask some technical questions, because I'm going to treat this episode as if I'm an infant. I focus a lot on residential and really don't get to see or hear the nuances of commercial. So, without further ado, let me introduce my guests today. I've got Andy Hilger and also JJ Garina. How's it going, guys? What's?
Speaker 4:up. How are you Doing well? This should be a poker podcast, because this is a shark right here.
Speaker 1:Play a little heads up tournament.
Speaker 4:No, not with me. I can't think of it.
Speaker 1:Oh my goodness, so that means that commercial must be doing well, then huh.
Speaker 4:We do have more time on our heads.
Speaker 1:But yeah, today, guys, I want to dive into the world of commercial real estate. As you saw the video that we played just before this. It's all doom and gloom out there, but everything, in my opinion, with real estate tends to be local and our local market is not like any other market, and we'll dive into that stuff as we move further. But I want to take a step back and just kind of talk about some of the basics of commercial real estate. Sure, number one matter of fact, let's take a step back. If you guys could just introduce yourself again and give us your expertise, your history in real estate and all that jazz, go for it.
Speaker 5:Andy Hilger. I have been in real estate since 2003. The first 10 years of that career was with a home builder developer and then moving on with Marcus to start the Laffy Hilger group that we've worked at for the last many years since then and we do residential real estate primarily and then within the commercial world I've been very involved in medical offices and done many medical office buildings and some additional commercial real estate outside of that over the years. So I feel like I'm pretty versed in that regard. Very good JJ 2004,.
Speaker 4:Did residence for nine years, had our radio show so started getting a lot of leads on commercials so I ended up doing commercial now for the last 10.
Speaker 3:Very good, so just concentrate on that.
Speaker 4:Obviously I'll put my best. Part is always on a plane every three weeks, so I'll step back in. I'll stick back into residential, but for the most part just commercial.
Speaker 1:Okay, okay, and it obviously does enough to pay the bills and build the empire. Sure, and I believe that San Antonio is one of those markets where we're still very affordable, not just on a residential side, but on a commercial side as well.
Speaker 4:Well, what I would talk about. It's a little bit bigger than San Antonio and I actually got some numbers. So the triangle that makes up Dallas to us, you know, taking in Fort Worth, austin to Houston, we call that the Texas Triangle. Okay, so, since 2017, the numbers, I looked it up we're at 22 million people live in this triangle. It's been. The population growth has been 14% year over year. The job growth is 37% year over year. Now do we?
Speaker 1:know if that population growth is due to people migrating this way, or is it due to the big migrations are coming from the East Coast, like New York ish, a lot from Seattle and California.
Speaker 4:Yeah, wonder why.
Speaker 1:No state income tax.
Speaker 4:I can go off on that. Yeah, that being said so, and you're correct. So I think the biggest change or difference between residential and commercial is the financing.
Speaker 1:Definitely, definitely.
Speaker 4:Because with you, you have to abide by housing the urban development. So, like you know, just because we're ugly, you have to give us a loan, right.
Speaker 3:We have an 800 credit score.
Speaker 4:Right, I don't know. If we have a 50 credit score, no debt, make a lot of money. You can't discriminate Correct. Whereas the we're a regional Banks want to lend in their backyard, chase can't do it. In a macro level. They will Right, like the Wells Fargo's and the Chase's will, but for the most part, you're dealing with PNC, you're dealing with frost, you're dealing with all those and what your local credit unions your local investors that can do portfolio and keep them all in your book.
Speaker 1:Credit human Bank of San.
Speaker 4:Antonio Because and let's take frost, for instance, like I think, when I look before that $2 billion of assets that they manage, they want four and a half buckets to be all. Even those buckets are office, industrial, retail and multifamily. You can throw in some land they don't love it and you can throw in a little bit of self-sort. But if I poured this water out they would want all like, if this is a $2 billion that I'm for frost, that I'm dealing with, I want a little bit in each one. So when someone says, hey, how can I finance this piece of land or this multifamily, I go you know what sucks, or it does or doesn't. I can't just call my lender, my one lender that works at ThingMorgots, because he's the best and whatever, because you're going to just give us whatever all the options that we have. So instead I got to go to my Chase guy, my PNC guy, my Bank of San Antonio guy, and say who wants multifamily?
Speaker 1:Going for this appetite. Who's got the appetite for it Exactly?
Speaker 4:Because who needs to fill in their bucket a little bit more, and so what's weird about the commercial on the finance side is that this guy will have better rates and terms than that guy and that girl, and so on and so forth. So we are insulated in that regard. Because frost is doing well. They're throwing up buildings all over the place. That means our region is doing well. In fact, where there's four major population regions in the US, it's the Cali, it's the Eastern Seaboard, it's all the lakes and it's us. We've already taken the lakes and now we're going after the other two and they say by 2026, we'll be pretty much on par with Cali. We're the seventh largest economy in the world. We have more GDP in Texas than Italy and Canada.
Speaker 5:Wow, I know that's strong.
Speaker 4:So, like all this stuff that I know you showed a clue.
Speaker 1:Yeah.
Speaker 4:Insulated homie.
Speaker 1:And we'll get to more of that. I just wanted to stick to more so the basics and giving the folks out there listening a basic understanding of determining what is commercial, what is not commercial. So different types of commercial would be your retail space, you've got the store's apartment complex, you've got storage units. What are some other examples of commercial real estate?
Speaker 5:I mean anything and everything that's not a residential property, that's zoned accordingly. You've got land, non-denominational churches or commercial real estate. I mean the list goes on and on. Every type of business, industrial warehouses, I mean it kind of never ends Everything outside of a residential single-dealing residential property. When you see the contracts, one to four families, anything above four families is going to fall into the multifamily commercial category. So it's really anything except for your house, your house.
Speaker 1:Correct. That makes sense and for me, as I started getting I'll be honest, as we started making more money, one of my goals was to own a commercial space and lease it back to myself and obviously run that through P&Ls and all that jazz.
Speaker 1:But as we continue moving forward, the way that this industry that I'm in has shifted to not necessarily needing to be in the office, all of my operations work from home. Matter of fact, I've got a processor that's in Louisiana, other in Bernie. I mean we're all over the place because we can and have the ability to do that. It now kind of makes me take a step back as someone that considered having this as their dream to have the triple net, and we'll explain all that kind of stuff later. But it kind of has a pause in it for me at the moment until I find out more information, and you guys are the right ones to talk to to get a good understanding of what the hell is going on.
Speaker 4:Well, I think Andy's pivoted right you had an offer and you don't anymore. Is that correct?
Speaker 5:Yeah, we've gone to a work from home structure. We had almost 3,000 square feet. Ever since COVID. A lot of things have changed. Once people got into the habit of setting up an office from home and working from there. It's been very slow for people to want to come back you know what I mean.
Speaker 5:They've got a new routine of how they take their kids to school and pick them up, and it works and you adapt to those types of changes very quickly. Like you just said, you have people in other states that work for you and do these roles and we just made that change to go to that type of structure where we don't have the overhead of an office that's being used by one or two people a week.
Speaker 4:You know what I mean, right.
Speaker 5:So yeah.
Speaker 4:And I was with KW for 17 and a half years love them. But I saw the writing on the wall too. When I had my radio show pre-COVID. I was screaming that office was dead back then because they were doing like half a. They're like 400,000 square feet right next to 300,000 square feet, like on Northus Military and 6104. And I'm like these are empty. We could have ran down the halls like remember Breakfast Club?
Speaker 1:We could just ran down the halls.
Speaker 4:And no one would have bothered us. And so you know, helping market centers and looking at P&Ls at that level or offices for lots of agents like he had because he's a broker, I realized like it's one of the biggest. It's just the eight. If you're going to make money in real estate, you can't, you shouldn't be in the office, right, we make our money in the streets. You might need somewhere to like hold your crap, maybe lead generate for a little bit, but for the most part, like we're not a nine to five type of industry.
Speaker 4:It's a contact sport with belly to belly contact. We need to be with people, we need to be out there. There's the prospecting times and whatnot, but assistance, you know our contract. People may need a space, but we don't, for the most part, full time. That being said, that's why I don't. I don't know if Lisa Guzman and I are opening up she's opening up and I'm her in-house coach the success space, which is a co-working space. It's agnostic. We actually we're not even having real estate agents per se.
Speaker 1:It's going to be shared space, Financial advisors, CPAs. You can rent an office if you want to, or you can rent by the hour.
Speaker 4:It's a. It's less than $50 a month, that's very cool. And you can come in and you can work. There's a cafe there. It, you know, smoke a cigar in the patio.
Speaker 1:We actually used one of those spaces I don't remember what the name of it was but down in Brownsville, when I opened the Brownsville office, we used a temporary space like that for a couple of weeks. Wait, Brownsville has co-working space.
Speaker 4:Oh yeah. Oh yeah, I don't remember what the name of it was. They barely have running water. That's my hometown.
Speaker 1:It was super, super cool, Was not very expensive. They had three shared conference rooms, one on each level. You have large offices, small offices, cubicles, but the concept of it and this was three and a half, almost four years ago, first time seeing it going holy cow, what, what is everybody going to do when this starts blowing up? Because that's what this new generation is about. They'd rather go to Starbucks and work around everybody else when I'm like, leave me the hell alone. I need to get some work done so.
Speaker 4:Our success. Space is a perfect mix because we have a podcast room, a content room that you can have by the hour, we have a conference room, we have training rooms, we have huddle booths, we have soundproof rooms if you want to just bang out calls, so anything you want. You get there, you click and I need this for an hour. I need that for an hour. So we've realized that that's the need, unlike how he knew. That's why he's pivoted. He's smart as a broker. You set two agents to the office out of however many are under you. Why? Like what's the point?
Speaker 4:Yeah, and then come recession time. That's a fixed cost that you can get out of.
Speaker 4:And if you look at some of these bigger offices and you see what their overhead is. It's ungodly and the worst part is is most of them lease. The only argument that I would have for someone like you is, like where you talk about triple net is, with commercial real estate you can depreciate the asset over 39 years. So that's I'm a weirdo, but I know these numbers 2.64% per year. So let's just say it's a million dollar building and you're using half or a little bit more than half of it for a thing mortgage you can rent the other half to like, let's say, me or Andy or whoever you can, if you're. It's a million dollar building and you can depreciate it every year at 2.64%. Right, that means you're writing off essentially $30,000 almost every single year on the top of your you know at the top, and you can do that every year for 29 years.
Speaker 4:And you can front load. You can front load so much of it too, because people usually have office, or they used to when they were still selling for about what? Five to seven years on average. You can front load so much of that too, like the build out the interest that you pay the closing costs. So maybe not for office, but if you're a trucking company, buy warehouse. If you're a, you know like he doesn't so much, he's the medical office guru here. If you're, if you're a group of physicians, leasing doesn't really make sense.
Speaker 5:Oh, not at all, not at all, that's um, that's been the majority of my commercial experience and I learned this quite some time ago. My ex-wife is a physician and her partner doctors were kind of pioneers in the West over Hills area and they moved out of the Christa Santa Rosa Hospital facility where they were leasing and built their own freestanding building. And when you look at the numbers, you know for what they pay compared to what you know.
Speaker 3:Why the time?
Speaker 5:you pay $30 a square foot plus triple net expenses right. You're paying a huge portion of what you would pay to finance and build your own building.
Speaker 1:Oh yeah and the.
Speaker 5:The cool part about that is, you know, it just kind of created a domino effect and a flood where other people are saying, hey, we want to do this too, and we want to do this too, and now you're eight buildings or whatever. Later, you know what I mean of that spider web as you, as you refer to it, because once you, once you do it, and once you do it for a client, you realize how much sense it makes right very easy For you to say do you want to?
Speaker 5:you know You're gonna be in business for another 20 or 25 years you can go, get a note and build your own building. You can through that money, you know, or you can pay very close to the same amount in rent for the next 20, 25 years is up to you with one route You're gonna have an asset when you're done.
Speaker 5:That's a retirement asset that you can rent out and make this exorbitant rent, you know, until right through your retirement and pass that on to your children, or you can simply Sell it and put a few million dollars in the bank and right off into the sunset Fully.
Speaker 4:Oh, but it makes right, or 1031, exchange it. There you go, or 1031.
Speaker 5:Exchange it, buy another, buy another Property right. You know, so there's, there's so many more you're so greedy, you're so greedy. It makes. It makes so much sense to go that route if you can.
Speaker 1:Positions, if you can and I remember, andy Beck, when you helped me negotiate the first least here at lock and Tara. They continued to to repeat to us was lock and Tara is not. We're not retail, we're a Real estate company like we own real estate. That's our number one money driver. And then Andy and I were talking before this and he mentioned that H eb is one of the largest Landowners.
Speaker 4:Industrial, industrial more than anyone. Yeah, like everything off of 35 and 14 is there.
Speaker 5:Yeah, when you go to, I go to look for land for a client in Bear County and half the stuff that pops up is owned by H eb no, and you're like, okay, never gonna get that one, and a lot of people don't know that you know there's and they don't pay you if if you, if you try to leave, actually yeah they don't pay you, they're like we don't need you.
Speaker 4:Yeah and they don't I mean they don't eat it.
Speaker 5:A lot of people think H eb is a grocery Store company, and once upon a time they were, but the margin and groceries is very tiny and every center you look at. Mm-hmm where H eb is the anchor store, and there's 30 businesses Renting space around that anchor store. They own it all they do and they've and they and they won't pass out and they Probably paid for it outright and so they've got that rental income coming in. That I obviously don't know for certain, but I would suspect we can do the passes any.
Speaker 5:Any grocery.
Speaker 4:You know what you pay for a steak there, you know yeah, so right, well, think about all the industrial they have, though, like it's all you know, the north, the bottom, northeast side of San Antonio, 35 and 410. If you're trying to find any industrial, you can't, it's all theirs like and they're and they'll listen and have it vegan cuz they just may need a, may need it in the future. They may need in the future. Yeah, and and he's being humble I think he created the medical center that is now 151 and 604. No, really, cuz he was talking to me about that stuff, I was like who the hell's gonna go to a hospital of 151 and 604? But now it's a. It's like a second medical center out there for sure right it is and banks love.
Speaker 4:They will still then on medical office all day long.
Speaker 5:Oh yeah, it's one of those things. We're proof. Yeah, it's recession proof, absolutely. And to piggyback on one thing you said earlier about the banks, that's very important for you know, there's how I don't. I don't keep track, I don't know if it's 15, 16, 17,000 licensed real estate agents and bear counting, we drop, we drop, and there's and there's only four or five hundred.
Speaker 4:You know real commercial real estate and I know those four or five hundred no, we're being serious, right, like like. Out of those four or five hundred, we all know each other. Yeah right like it's a handful.
Speaker 5:I believe it's a very small.
Speaker 1:You know, it's a very small group and do you do you think that that is because it is so complex, or do you think it's because they're they're too few and far between on the opportunity.
Speaker 4:I know why. Cuz cost our lube net cause way too much.
Speaker 3:Say that again cost our lube net our mls costs is way too much. Okay, a 90 a month, a 90 a month.
Speaker 4:Oh wow, and that's it, that's with like one listing it. We, they're smart enough to know like, oh, you have a listing, they charge you per listing and they'll. And they make you commit to six months up front when, if I'm a residential agent, I have MLS, I give a thousand listings. Sure, same price, same price. Yeah so that bar? So remember last summer talking yeah, that bar of entry got high. Okay, so, and what?
Speaker 1:it did is made the cream of the crop does the good look at it's? Right, that's right, the GQ's. So so now question right before Andy question if an agent does residential and wanted to take a crack at helping somebody procure a Commercial lease, can they do that? Or do they need to now go and pay their fees, get a new designation, etc. Etc.
Speaker 4:I mean layman Asking this question from an infant here, here, let me. Let me take a crack at this and tell me if I'm wrong.
Speaker 1:I'm not saying if it's right to do that, no, no, no.
Speaker 4:I want to explain to every residential agent or out here, there you go. Residential Kind of boring, but it's fun. So what I tell residential agents is like, okay, you have an MLS that has accurate numbers that are updated every minute by like right, every second. Yeah we don't, do you have? You have comps, comparable properties.
Speaker 4:That's only we do not you. You have lock boxes so that you can go on a Saturday at 2 pm or a Sunday. We don't. If we do a showing, the landlord has to show up, the owners to show up, right, it's crazy.
Speaker 3:Yeah, schedule appointment. And these do golf every morning.
Speaker 4:So 10 to 3 right.
Speaker 5:Oh it's, it's bankers hours. Oh no right, not even. I wish you a banker's hours.
Speaker 4:So we have to do all our business. This is why we play poker so much because we have to do our business between 10 and 3 yeah, money through Thursday, cuz Friday. I can't get them on the phone, gotcha, and they don't. So the big boys like Rihanna, cbr E, they, they, they're in-house there, their costar. They have a back-end MLS where they just share their own numbers, and so Broke that's what you were talking about last time yes, exclusive and so they have their own numbers.
Speaker 4:They know price for screw it. So it mean Andy call, cuz we're not them, right, andy's independent on with the XP commercial. They're like hmm, let me see if I want to tell you the numbers that we have. So it's all hidden and it's like smoke and mirrors. So if I have a like I'm representing a franchise or I'm helping up this really delicious restaurant in San Antonio franchise, and I told them look, it's gonna cost more time than anything with me, I have a dedicated person on my team that calls over 250 agents to see like what do you have some leads? What do you have in the? We have to call them in Texas.
Speaker 4:Like this is like 1984, like when my dad did real safe. Whereas residential I just go click, click, click, here's all my options email and then I go. I don't know what else do do, cuz they don't work, so like we have to work in calling right Texan. Yeah, am I right?
Speaker 5:Yeah.
Speaker 4:So so if I'm a resident, you say I'm gonna crack into commercialist like bring it, because you're gonna have to pay 90 a month, you're gonna have to have an assistant full-time or you're not gonna sleep. You have to call 250 agents just to get options for a renter. Gotcha you know, like just to get options for someone that's leasing. Wow. I mean so. So the best thing to do is refer Andy. I can share a quick story on what exactly what JJ's saying?
Speaker 5:when I transitioned from a home builder, I might wait oh to to General real estate. The first broker I worked for, tamara Alar Kohn, with full spectrum remember great, great broker and she saw me getting involved in some of these you know Commercial transactions and she was like. I remember her telling me this it's the Wild West.
Speaker 4:Wild.
Speaker 5:West real estate. Wow, it's crazy. There's no control, there's no limits. You got a double triple check everything.
Speaker 4:Yep, and it's a good old. They'll change the numbers on you, like that good old boys club.
Speaker 5:That's hard to break into, wow. And so the first building that I did was a was a 30,000 square foot ground up medical office. You put a group of doctors together, created a holding company so they can charge rent to the holding company, write it off, everything you were talking about earlier. We bought the land and we built the bit, we hired the contractors, the architects, and we built the building. But just getting that transaction done, you know, I would, I would call, you know the numbers for the people that had listings. And then you get this Reception at this receptionist that says this is mixed fires. Yeah, man, who are you? You know?
Speaker 4:and you're like I'm.
Speaker 5:Andy Hilger, with with you know so-and-so really.
Speaker 4:I've never heard of you. You know like well, you know, Does that?
Speaker 5:matter.
Speaker 3:Does that?
Speaker 5:matter. Right. Why is that? And literally that was mm-hmm. Where's your office at? Do you have a physical office? Where's?
Speaker 3:the low and no kidding.
Speaker 5:This is about a key serious and I had to get out and go beat the streets and take pictures of every sign with land available and come home and organize it and call these people and if I called ten of them to get the information I needed to try to advance this transaction, I might hear back from four.
Speaker 3:You know the other ones either, just didn't care, they're all, they're all, they're all, they're all, they're all, they're whatever and you have to adapt and work with what you can get your hands on and what you can make work.
Speaker 5:And you know that's always been one of the the Best parts of my career. And this is just in that small area. And you know, a few years later I've done multiple buildings and, yeah, multiple listings, and you know when I get the call. I know the column, one of my you know listings I'm like so.
Speaker 1:That's awesome full circle, yeah, right.
Speaker 4:We're making it sound like this is the bat. Let me tell you why.
Speaker 1:For a little bit, let me let me just real quick, because the question was is it possible in a realtor? The answers yes, but based on what you guys have just said Good point.
Speaker 4:Why just give it to one of us, right? We will pay you, you pay refer.
Speaker 5:Yeah, no I pay referrals every single week, bro Gotcha, my favorite check to write several of the agents on my group group have done Commercial transactions and we just end up doing it together. Yes, some of them are like I don't want to mess with this. This took four months, you know what I mean, or whatever. Yeah for a leave, for a lease, to lease this space and non-stop work.
Speaker 4:My P&L, start they in in August for 2025, because anything I run up past August gets paid next year. So you have, like, the bandwidth and the runway to do it right, why don't you? Let's put here me out. Well, we're giving. I don't want anyone to Commercial, we're making them sound terrible.
Speaker 4:Yeah, the reason that all this fuck, I know, I know it's fucked up there. The reason that it's so secretive, though, is because we're a non-disclosure state. So what if you're representing your clients best interests, like this dude creating, you know, holding companies for for medical office partners, and the last thing they want is to have bear counting, know how much they're charging and paying. So we don't throw it out there. The MLS is forced to put their numbers on there because NAR controls.
Speaker 4:There they're their boards which controls Yep what they do. But Texas is another reason why a lot of people come down here. It's a non-disclosure state. So the last thing that I one of their like how come you don't you know residence? Is like why don't you just put the price on the Flyer? I was like because I would be doing a disservice to the next buyer, correct of.
Speaker 1:His medical. That's a great point, so that's why it's so secretive. Maybe those listening may not know what you mean by that. Can you explain? So non-disclosure and what the impact actually is up.
Speaker 4:Texas is so business Friendly that they there's a law that says we don't, you don't have to disclose the sale of any property residence either. By the way, right Again, the MLS is controlled by the board, which is controlled by NAR, so that's how that trickles down, why you could. I can't put anything on the MLS like call me right, but but he has. I mean, I've no cuz. I look at his property all time. He has like what's the price per square foot to lease, or how much is the price points? And it's like call me and check this out. It makes so much more sense how we do it, because if interest rates go like this, then shouldn't our price move Right? And so, yeah, so we can adjust price. Does that make sense? Yep, so all of it makes way more, of course, is more labor intensive.
Speaker 1:I guess, sure but you comes with the territory 100%.
Speaker 4:And you got to be smart, you got to be good at numbers, like Andy, creating holding companies. I mean this, dudes. So you have, you have to control that information. Because if I let's say us we want to go open or go buy a retail center, we don't want anyone to know what we will. We bought it for right. Because let's say, that retail center is being taxed at 1.2 million and big beacons, but you know the numbers make sense and you know we could. We should buy it at 1.8.
Speaker 3:It's the last thing that I want anyone to know also.
Speaker 4:We don't want the next tenants to know what we pay for it, because then they'll know how much we should be charging parent.
Speaker 1:Do you see how they'll put that in their perception and use that as their reason?
Speaker 4:to not. That is the only thing that we have all going for us like. Why would we give it away?
Speaker 1:So would that be similar to, let's say, on the residential side, somebody listing in the MLS private listing, no key right, and then Somebody wanting to buy it calls that agent and says hey, I'll buy it, but you need to take it down from MLS I.
Speaker 4:Wish it was like that but is that possible? See what I'm saying. I don't want to get in trouble.
Speaker 5:Anytime something's on MLS Yep, you want it to end that way. I believe their guidelines are such that if it sells, a selling price is disclosed, gotcha Sessions are disclosed, all those types of things are disclosed. The whole reason, the whole reason that there's this entire other platform in Commercial real estate right, the only reason it exists was to create another platform where none of that disclosure is required.
Speaker 5:Right, you know all behind you put a building on the property for two million dollars and you sell it and it just says soul, it's all behind the curtain, wow you know, you have to know, and I'm sure JJ does the same thing. You know after you have to have relationship.
Speaker 4:I got a good.
Speaker 5:I got a call, the appraisers and say, hey, I'm looking for x, y and z you can send me, you know me or call other brokers and say hey. I'm trying to find you know called. Jj. Hey, I'm trying to, you know, help a client you know do with this particular property here can't find any cops. Have you sold anything? Is your office sold anything? You just have to kind of dig in under the surface and go find your information, and that's. That's the way the process is designed.
Speaker 4:Sure. So it's a lot of blink twice stuff to say like so, let's say, annie has a medical office space that he sold for two million dollars off A 151, and I'm about to list one. Okay, and it's mine's a little bit smaller and older, whatever, and he just puts sold, I'll call anybody. Hey, buddy, did you, did you get around 1.8 million? And he was like um, I was a little better than that.
Speaker 4:That crap and then and if you're a residential agent, you have all the information in front of you like you're frustrated and they run away.
Speaker 3:Right, but with me.
Speaker 4:I'm like blink twice, homie, I'm gonna go 1.9, blink twice. Won't argue to me, okay, cool, so then it. But here's the thing, it's all math. There's no why I like and I'm sure Andy's the same way, because we're poker players, right. So why I like commercial? There's no, no emotion, like if it doesn't worry. I'm like hey, dude, we'll get them next time, right?
Speaker 1:especially with the folks none you represent, I would imagine. Well no.
Speaker 4:Well, that's cuz. I think people are getting lost in the weeds. Let's start about. You talked about triple net and if someone's not doesn't understand what that means. This is how weird commercial is. Like let's say, I have people that own 20 houses. I'm like why don't you just own a 20 door?
Speaker 4:apartment complex and they're like uh, it seems like too much. From first of all, it's all centralized tenants Management is easier, blah, blah, blah. But look at this like even in the commercial real estate, where it's a we've, we all bought a retail spot, the tenant Think about this, they least, they. They lease from us a price per square foot per month or year. Right, they maintain it, they build it out to the spec for themselves.
Speaker 3:We might throw a little bit in there TI money, yep.
Speaker 4:And they pay the taxes and insurance. Could you imagine?
Speaker 5:And they pay the property management, they pay everything. Yeah, yeah.
Speaker 4:We just as owners, we just we just like. So it's weird, cause our gross profit is our net profit and those numbers are crucial cause that is how we find value in real estate. Everyone looks online and they're like, oh, it's an NOI, it's, you know, it's net operating income. So what we take off the top or on the bottom, divided by the value, equals the cap rate. The bad thing about cap rates, especially right now, is cap rates are, or it's a formula that the weighted average of equity and the weighted average of debt are added together. So I'll give you an example. So if Frostbank is only giving loans or 20 year notes at 9% interest with 30% down, then we have to say like, okay, if my investor, let's use a million dollars, my investor has $300,000 that they have to put down as a down payment. They lose that money in the market, so what would they want us to return on that money right now? And so you? So we actually have to know Bloomberg stuff, like I gotta know what, what? What is the index?
Speaker 1:Yes and so.
Speaker 4:I have to look at the index and say, okay, so that's a formula times 0.3. And then there's there's a decimal and four numbers on the right side, and then I gotta go take a freaking Frostbank banker out there to lunch or coffee. That's what I spend most of my half my days doing and I gotta say what are your terms? And I find the best terms, and then I gotta figure that out, and then I add them together and that's a cap rate.
Speaker 1:Gotcha.
Speaker 4:So the good thing, though, is like, once you figure it out like, this is what it's gonna sell for. Cause this is what it, this is what it can be. You know, bar finance, finance and that's it, whereas residential is like well, I really liked the master, like there's none of that crap, so that go ahead.
Speaker 5:Andy, it is a lot more complexity and I know JJ's probably dealt with a lot of this as well With these banks. I would say in my experience, I'm sure it depends on price point. Most of the time they're splitting up the notes, you know. So, like you go to Frostbank or whatever bank and they say, yeah, we want medical offices, we're gonna take this to our board, yeah, we're gonna approve it. And then when you get the term sheet from whatever bank, it is a lot of times they're they're gonna take 40% and bank B is gonna take 40% and there's a completely different note, a completely different lien on the building.
Speaker 5:And then the buyer is gonna put down that remaining 20%. Or whatever or in some cases they do an SBA route and they put 10% down.
Speaker 4:No, that is the one, that is the one time that there's almost like you all is SBA. If you're using, like, if you know, if you're a restaurant and you're buying it for the use of your company, it's like FHA. It's 10% down. Right now. The interest rates aren't that bad. Well, they're like 7.5%, like 10% out of 7%.
Speaker 1:That's not bad. No, hell. No Like you as a loan, no for the benefit of what you get, as thus far what I've heard of being an actual owner of a commercial building. Hey man, 7%, take your money and run. Yeah, I mean yeah.
Speaker 4:so that's how it is.
Speaker 1:So you guys talked a lot about the basics and whatnot, and I will have one more question to that regard, which you mentioned a little bit. But how the hell do you guys figure out comparables on commercial space? Does it have to do with the use of?
Speaker 4:it.
Speaker 1:There's no comps. I mean, how is any of that stuff determined?
Speaker 4:No, I can't explain it. Commercial real estate is worth the income that it creates, right, if you ever look at a commercial appraisal.
Speaker 5:It'd be a great way to learn this. You look at a commercial app which are expensive.
Speaker 4:You know we do appraiser appraisal it's $600, $700.
Speaker 5:The commercial appraisals I've seen are like 3,000. They're much more expensive that the buyer has to pay for this appraisal. But the asset the physical asset is only one factor of that.
Speaker 3:That makes money yeah.
Speaker 5:The rest of it is what's the going rate for rent and this market? How many square feet is in the building? How much income can it produce, based on what the market will bear and what the property's gonna?
Speaker 1:be used for.
Speaker 5:And what it's gonna be used for. And so and those calculations are all there you know the average rate in this area is $24 a square foot or whatever it might be, plus triple net Gotcha. And the income generation aspect for the future is a big part of what the determination is for what that building is worth, gotcha. And in residential real estate you don't see any of that. You know it's not even really brought into the equation no there's comps Right, there's just comps In that world.
Speaker 5:it's probably a little bit more heavily weighted toward what location and income will this bring in?
Speaker 4:That makes sense, but even more so think about as an investor. I know it seems like, oh, this is so complicated. Think about all right, let's say do I wanna own 20 houses or apartment complex? Let's go back to that. If I own 20 houses on a block, anytime any of those sell around us, that's gonna directly affect our value. But if we buy an apartment complex, all we gotta do is raise the rent.
Speaker 1:Right, you know, does that make sense? It sure does actually.
Speaker 4:So that's why I'm saying you can mean the get, or oh, I can't say that.
Speaker 1:You can be in a, I mean, but at the same time you are also accounting for the vacancy factor. If that is the case, you lower the rent, which also increases your revenue, which brings that value right back up.
Speaker 4:But sometimes what they were doing so much in here in San Antonio is we only made class A, we didn't make any class B. In then San Antonio's blue collar, so they can afford class A. So explain class A, class B. Class A is brand new. High price per square foot apartment complexes. Very good, think about the rent. 15 years ago there was none of this.
Speaker 1:Correct.
Speaker 4:Think about the Perl or near South Flores, where the HUB is, all those apartment complexes. The new ones are just they're swanky, they got the pool, they got all the stuff. But I always look at like my siblings are like my cousins that are just blue collar with San Antonians. They can't afford that, bro. They can't afford that. So no one built anything for them. So what ended up happening in the last 15 or so years is that there was all these ugly apartments from like the 70s and 80s that you would see on like Vance Jackson, jackson Keller, and then you saw like man that looks dilapidated and they would come in there and then they're like gray with like mint trim, and now it's called it's called like the park and.
Speaker 4:Jackson.
Speaker 1:Keller and you're like what the hell? Right here, UTSA Boulevard, they do the same thing, Still orange on the outside.
Speaker 4:Yeah, you're like dude. I never wanted a party there, but now I kinda want to. So think about that investment. You can go into a demographic. It's not location, it's like no, now they got something, put lipstick on the pig or, even better, they made those rents go up because they put in work and made the amenities better and it doesn't matter the location. So much more control as an investor is in commercial.
Speaker 1:You just gotta like get ready for it, because every so often I'll do a search online just to look at office spaces and you'll see this is just for information purposes. Some of the properties actually do have a price per square foot or a value if you want to buy the whole building. So that would mean that they've already done the calculations based on the best use of this property. Blah, blah, blah blah. But at the same time it doesn't mean that that's accurate. I don't wanna give away my market strategy If they're putting it out there if that makes sense.
Speaker 4:I don't wanna give away my market strategy, but this is how it usually goes.
Speaker 1:I don't wanna give it away, but here we go.
Speaker 4:I'm sure Andy's the same way, if I'm like I just I got this really cool, nearly historic warehouse right by Alamodil. Okay, the best use for it is a distillery or a brewery. Okay, so I'm gonna go. So it's not on the coaster. Well, it's on the coaster, but it's just like, call me if you want the price. Where is it at? It's on Hopkins.
Speaker 1:Oh coffee. Okay, my buddy owns a MMA gym right by there. Okay, tell him to call me.
Speaker 4:So the best use is for a brewery is perfect, because the missions are coming right across the street. It's right by the Alamodilm. It should be a distillery because you can distill on. It. Has a conveyor belt here, oh wow, so they can actually sell it out the back, have people taste it on the bottom. You see them. Absolutely, that's the best use, Like I did. It's called a feasibility study.
Speaker 1:Feasibility.
Speaker 4:there you go what is the best use for that, so a brewery or a distillery. They should pay a certain price because it's premiumly located for them.
Speaker 1:Walkability all that stuff. They'll go out for that the whole nine yep.
Speaker 4:Now. So strategy for marketing as a listing agent is like I'm not gonna tell anyone the price, because the certain price for this demographic, this class of people, should be this, but they should be paying premium because it's awesome. But let's say withering springs and all the different breweries and distilleries, like, now, we don't want anything there. Well then, who's the second best user? The second best user. I think would be like a trucking company or a small to mid-size storage Well yes and no or still the assembly concept.
Speaker 4:Yeah, maybe light industrial like someone that's like you know, making small, putting stuff together and shipping it out. That's probably second best. Yeah, exactly Second best. Use a little bit of manufacturing and then distribution. And then the third one is just like someone's gonna chop it up and just lease it.
Speaker 3:So three different prices.
Speaker 4:So we go to A and if we run out of a runway, everyone told us no or F off. We go to marketing B, marketing C. If you get past those three then you have to kind of put price in so that because these are all local eyeballs. So then if I want national eyeballs then so we called all the broker. I called Andy. I told him you want it? No, I told I called because we don't just sit. We actually called all the brewers, all the distilleries. They told us F off. We called all of the manufacturing companies. They said we don't need it, it's too small, too big, whatever. And then we're like, okay, we're out of options. So like now six months and this is six, nine months into the listing, then I'm like all right, let's see if we can get some national eyeballs on it, cause see the national, there's commercial real estate and investment trust that might just want to buy it to keep it vacant.
Speaker 1:To have an asset.
Speaker 4:No, just to keep it vacant, oh, really, just to write it off. There's so many people that call me like, hey, dude, how much is this property? Why aren't they selling it? And I was like and I hope we have these problems one day but like if they're a commercial real estate and investment trust that owns a bunch of warehouse and they do a 1031 exchange, they might want to just buy this, to hold it and just be like you know what that's gonna be worth a lot more later, once the emissions come out. I just want to eat crap, I want it to like be. I want to bleed out into Correct. I wish we had those problems, but we don't yet. So that's see, it's so much more versus.
Speaker 1:It's very intricate absolutely.
Speaker 4:Versus, just put it on MLS and like pray.
Speaker 5:Yeah, One thing that comes to mind in commercial real estate here and you say that is it's very true is in commercial, more than any other aspect of real estate, everything is always for sale.
Speaker 3:The statement that everything is for sale.
Speaker 5:In commercial real estate, everything is always for sale. I'm sure JJ gets a lot of this too. You do one of these projects, you build one of these buildings, you fill it up with tenants and you I've had pension funds from other states contact me, asset managers from other states wanting to know if they can do a presentation to go through what they would offer from the building, the real estate investment trusts. You know what I mean. These are the buyers of these types of assets and they're always looking, they're always looking.
Speaker 5:You know when you own one you're gonna get approached. They're always looking. They're like on the prowl. You know if they can get the right deal, but they don't want them until you filled it up with tenants and it's got a calculator, cause they're in New York. Right, they're buying that cap rate. That's exactly what it is. That's all they're buying.
Speaker 3:You know what I mean.
Speaker 5:The building needs to be in good shape. It's gonna hold up. It looks good, it was built right. Everybody's happy with it. There's not any issues. That's great. And then now, what is this return?
Speaker 4:Yep.
Speaker 5:And just like the banks that buy these notes are diversifying their portfolios by taking on different types of commercial notes, these real estate investment trusts and fund managers and pension fund managers they're diversifying that portfolio that they manage by bringing in some fixed income you know assets to that.
Speaker 4:Which makes our region very attractive. So think about, like, if you run a CRE, commercial real estate investment trust, and you have a lot of stuff in like Kansas I don't want to talk crap, no, they're good. No, like you know somewhere where you're like man, it's you know whatever. Like Detroit for a while, like they couldn't get any kind of business going. Well, man, they're gonna rush to get their money out of there and put it into here because at least we have like job growth. A lot of people don't know this, but Laredo is the number one trucking port in North America and we're the first stop. Yeah, do you see what I'm saying? And so these are some factors because we're on the key factors.
Speaker 3:We're on the key factors podcast.
Speaker 4:There's some factors that are key, yeah.
Speaker 5:Too shamed.
Speaker 4:Too motherfucking, shaved yeah for sure.
Speaker 1:No, and that makes all the sense in the world and I'm glad we got a lot of the basics, higher level of the basics and nuance to what it is that commercial has to offer to folks out there. But now I want to talk about what the hell's going on with commercial real estate on a national scale that could have some implications on everyone else, simply because of the things that you guys are talking about. If somebody as a larger corporation I'm pretty sure Lock and Terra LLC owns more real estate than just Lock and Terra Mall, for sure, and just like you guys are saying, they diversify. So if they're going to unload properties over here, they're gonna go look for other properties in another location that they can fill their books with and keep these investors or shareholders or whoever it is, getting their dividend check and the demand for those dividend checks or the increases payouts to those investors is doubling every year. They want more, they want more, they want more.
Speaker 1:That being the case, covid changed a lot of what you guys do. It changed a lot of how we as consumers, commercial investors, view commercial real estate as a whole. Sure, in addition to that, we've got a lot of buyers of commercial real estate property that purchased and financed at a very, very low rate during the pandemic and more than likely do it on an arm or a short term type loan that a lot are about to become and do here soon and needing to be refinanced. There's a lot of money on the books that is being lost because of the vacancy factors. Triple nets have come down and all of those things on a national scale. From you guys' perspective, are you thinking that it is going to eventually or quickly affect the remaining market that we actually operate in?
Speaker 5:A lot has changed. I certainly agree with that. The video that you showed earlier talking about all these vacancies, I think the most impacted by what you're talking about is traditional office space, your call centers, your data entry folks, where some of these big companies have hundreds of people that do this type of work, and COVID did teach people that a lot of this could be done from home.
Speaker 5:You know what I mean and if you have, 100,000 square feet full of people making calls and cubicles or whatever the case may be. They can do it half the time from home and you can take half the space, Sure, and that's become a very popular concept. I talk to a lot of people that work for big companies and big corporations in pretty good positions, and I'm hearing a lot of this lately. They say they're usually my age and our age is like you get off your ass and you get up and you go to work.
Speaker 3:And there's no alternative to that. You know what I mean.
Speaker 5:It is what it is and they said, but the work environment has changed so much they're missing out on the best talent by not be when they're looking for a vice president or a high ranking official within their company, because they don't have the, if they don't have the flexibility to allow them to work from home once twice a week, or whatever it may be, which is, in my opinion, that's the expectation.
Speaker 1:That's a damn shame, but hey.
Speaker 5:That's the expectation nowadays. So that's, the world is adapting to that, yeah, and so I think you see the biggest vacancies in real estate in that arena and it'll probably take several years for that to work itself out. I can tell you in my little bubble, in medical offices in West Overheels it's always rock and roll. Like JJ has said, it kind of became the second medical center and everybody that had a significant, significant medical business downtown or in the medical center in San Antonio wanted to get a branch.
Speaker 5:And they would fill my lease space. They would take a spot, they would do put partner them up with another doctor and they would share the space. Everybody wanted to get it, build their own building, everybody wanted to get into West Overheels and then what happened? Now is the market's still moving, but what's struggling is shell space, because the big corporate guys came and built huge buildings.
Speaker 5:Now you have huge vacant buildings all over the place in West Overheels. That's all shell space, and so what you see is your second generation space is flying off the shelf. So for those that don't know, second generation, a shell space means there's just a cold, dark shell. You see those buildings? It's called white box.
Speaker 1:Yeah, it's just a white box, and you Now, in those cases, someone like myself goes in to use it for office space. I go and build it out.
Speaker 5:You go and build it out, you put the walls where you want them, right well, you know, a 5,000 square foot medical building is gonna be a five to $600,000 build out.
Speaker 3:There's a lot of things. There's a lot of plumbing, there's a lot of work that has to be, done, sprinkled.
Speaker 5:And so if you and you're gonna do a 10 year lease, well, if you're gonna do a 10 year lease for your medical office and you can find one that's already built out, you can see how that's a home run from anybody's perspective.
Speaker 5:So that type of space is still moving and moving very quickly, but the shell space has become pretty saturated and every email I get now is do you have any second generation stuff we can look at? Do you have anything in second generation? Cause everybody's trying to save that cost and gear toward that direction. Makes sense, that makes sense.
Speaker 4:Yeah, he's talking about exactly what's happening. So, remember the buckets, when we started it was. You know, if I'm an asset manager of, like Frostbanger, I want office, multifamily, industrial and then I want retail. Well, office was the first to go. 2020 knocked it out right and so they're bleeding out. So if we have those assets, then we're losing money on a monthly basis as a bank and people are just not making their payments. They're readjusting their mortgage or the yeah, the mortgage as if they can. They're not being leased out. You know, projections are all totally off. Here's the second bucket to not get full.
Speaker 4:Remember we're talking about the multifamily is where they were. It was almost like a flip where you go get something at like a 4% or 5% interest rate. You put lipstick on the pig so you have really good rents and then you would have a really good cap rate because you have a really good return cause your mortgage payments. Here you, your rents were here Now. Now you make them up here you just like now you're making some really good money and they would just literally flip it and then sell it to another. They 10, 30 exchange, not pay. Taxes, not pay taxes right.
Speaker 4:And they keep on going boom, boom, boom. This is what happened. Now, five years later, the numbers are right here 20, 270 billion this year is gonna come up for ReFi.
Speaker 1:Wow that's exactly what I'm talking about. I know you're gonna go there. That's exactly what I'm talking about. But now they're the these, these, because most say that it's too big to fail, and I have to agree with them.
Speaker 4:Well, let's get there, okay, so. So, 270 billion of ReFi come in this year, 2024, right? So let's say you have a really good relationship with Frostbank, you've done like three flips or whatever. You've taken their money and you gone and they're like, hey, I need to refinance this deal cause it's they only do five year balloons, homie.
Speaker 3:So the ones five years ago.
Speaker 4:They're like hey, we're ready to either put this to a 20 year or whatever, because everyone's kind of like they're, they're trigger shy, right. And then Frost goes sorry, homie, we can't because interest rate, the Fed is messed up, the interest rates are higher, right, and if you, they'll give them, they'll give them a deal that they don't like. They'll say all right, man, we need 40% down, so you gotta put some money in.
Speaker 4:That makes sense. Bring some money to the table. And we had, you had four and a half. Now we have to have you at nine and they're like well, if we take that on, then our cap rate, now our investment, sucks.
Speaker 1:Yes, does that make sense? It actually does.
Speaker 4:So all these ReFi's aren't happening. So the second bucket, which is multifamily, is which is making everything tighten up more right, which is now affecting if they'll lend on, definitely land sucks. They don't want land, cause? I mean now look at the projections, so land, so land is now being affected because you can't really finance. You see. So like the buckets makes so much sense, these buckets, waters are leaking so much that they're not just gonna pour more into it, Right. So there lies were we're going to be affected from the other regions to us.
Speaker 4:The craziest story that I heard was in San Francisco. There was like a I don't know some ungodly $145 million high rise that was just nearly vacant. So they got a broker. I know, Wow, they got a broker to list it, to auction it For one reason check this out and this might happen here, homie, we might be getting a lot of maybe me and you's just partner up on this. So they list these properties and they auction it, and the highest bid was 55 million out of 145 million. And they only only did that, just to go back to their bank and be like this is what it's worth. Let's renegotiate the terms, boom.
Speaker 1:I mean think about that. It's smart on their part 100%.
Speaker 4:They paid the broker out. They said thank you for your service.
Speaker 1:What I find funny is very different than residential side.
Speaker 4:But think about that. Imagine, imagine you listen to your house just to like say like bro, it's only worth a third of what you lent. Like, can we work something out? Yeah, that's what I mean, but they have leverage, cause the bank's like what else would do?
Speaker 1:and, unlike residential, you can't go to the bank and you're not trying to sell it, you're trying to keep it. But renegotiate the actual so that it makes sense, so that it makes sense on Residential side of the tracks you have to actually actualize the sale for that to even matter.
Speaker 1:You can go dispute the taxes on it, but you're only saving a little bit. But in this aspect you can literally go and I watched a good documentary on this or a podcast on it. You can literally as the commercial real estate, dependent on how much assets you have on hand or how much property you have on hand with these investors. Banks can renegotiate your terms based on the new value that it has. I mean, that's a cool concept, but is that fair?
Speaker 4:It is fair because if not, you know, if you, if you bank with frost, or I bank with PNC, like if if PNC like Needs and renegotiate some, some mortgages for like a 10-year term, then like maybe they only pay interest or whatever, right then so that I can still go get money from my bank, like I'm good, like do your thing. So yeah, I think there's ways out. What's good, would that not?
Speaker 1:yet put the commercial owner in a position of never really needing to be too too scared about their property, if they have the ability to renegotiate that, and, realistically, the only person that's on the hook is the bank, the person lending the money. But who makes the most money? Right? Yeah, so it all depends.
Speaker 4:What's the?
Speaker 1:best use of the property. Let's get a feasibility, let's compare it to what they make on the note, etc. I mean there's again more nuance to it. I mean.
Speaker 4:I can geek out on this you know what? I'm saying I can get out on this all day long. Well then, we got to change the 10 to 1 Lending rate. Then, mmm cuz, you know banks, if you absolutely leverage 10 to 1, yes, sir then the only way for that, for what you're saying they need to keep more on reserve.
Speaker 1:Yes, so.
Speaker 4:So if you're allowing them to leverage 10 to 1 and you want the economy to be robust, then they have to take risk. No one knew Kobe was happening. Of course it was a really good run with the multi family. That was super fun.
Speaker 4:Did they? No, no, yeah, so like no. Then you got to change. You know I can geek out into this. So then you had to change the 10 to 1 leverage and if that's not gonna change for a while, so so then look, we don't have to bail them out, in no way. This is our fault. That was my fault. No, I was like if you could fog a mirror in 2007. I was getting your house. That's my fault. This is our fault. This time it's it's other economic factors.
Speaker 1:There's other levers that have been. It's inflation, what's?
Speaker 4:happening is inflation is tightening everyone's budget up. Those budgets are making class brand new. Class or brand new class A is still case. The second old's then has to drop price, so they're cap rate change, so they go to refi. Those numbers don't look good, those terms suck, and so like inflation is what's driving for sure the squeeze. Yep, not our fault. And so, therefore, we are gonna see a change in the next five, ten years. As an investor though, gets, get you some multifamily, get you some industrial that gives you some medical office if you can, because this is gonna be the biggest exchange of wealth I think will ever see in our lifetime, because we're already in our 40s and a lot of folks continue to talk about a hundred percent.
Speaker 4:Yeah cuz, like everyone's like. Oh, I wish I would have bought in 2021. I was like what? Like I never like, why were you buying when the Rollercoaster is going up there? There's no reason to do that.
Speaker 5:By low, sell high, correct, and I'll add some to that, jj, because every a lot of people hear about, you know, the Fed changing the interest rate and I think a lot of people don't really understand how that works. And JJ just touched on it, that 10 to 1, there's a reserve Requirement right that every bank in the country has the biggest, and we're talking billions and billions, maybe even trillions. I don't have dollars that are moved around every single day.
Speaker 1:Oh yeah, chase, it moves the most.
Speaker 5:They have to balance every day have to meet that reserve Requirement so that at the end of every single day a bank is gonna either be plus or minus and I've got to call JJ and say, hey, I need 40 billion dollars. You know what I mean. To correct what note are you gonna call it right and so that when the government changes that rate, they're changing what's called a Fed funds rate. So, they have that. They have a rate that does nothing more than create the market. You know what I mean.
Speaker 5:They say you can come to us and you can get that money overnight for four and a half percent.
Speaker 1:Well, other banks are gonna beat it and it's gonna create a market absolutely and to layman term this that help you out a little bit is Most consumers. When the Fed makes an announcement for the rate up down, not moving, that's not the rate that you get as a consumer. This is the rate that the, the investors, the banks get from the Fed that then lend to you. So back in the day 2020, we heard the Fed rate is at zero percent and I have customers that would call you like and I get zero.
Speaker 1:Yeah, but unfortunately somebody's got to make money. There's a spread between that and then a spread between from lender to investor, investor, etc. Etc.
Speaker 5:And over time that's what Andy's talking about is that rate changes. It affects all these other rates.
Speaker 1:You know it affects.
Speaker 5:You know when domino money for anything what your credit card rate is, what you pay for a mortgage, because these, these all come from who banks, so they're all affected by that change to rate and eventually it impacts everything. So, yeah, that's exactly right. No, that makes perfect sense.
Speaker 1:And and now, that being the case, do you see an alternative universe to where these commercial spaces that aren't being filled by the normal use of what they were being converted? To now residential.
Speaker 4:No, that's my favorite game, so. So check it out like there's. There's mid-rise buildings that have parking garages that are butt up against it and there's places that they're making them self-storage. We just drive through Really a metal frame building thing about it. You can just like, you can just go like, imagine having self-storage that stacked oh yeah, there's this one.
Speaker 1:I mean where I keep my storage unit right here across the street at the. What the hell is it called square storage? Sure, that's the coolest thing. Yeah, they're going by yourself. You're enclosed. Yeah, it's like that done. Yeah, they're there.
Speaker 4:They're also like you know, if you look at like office there. Someone did it, maybe it was in the Pacific Northwest, northwest or whatever. They cut a big hole in the middle of it so there could be enough sunlight to have a courtyard to make like a like a high-rise into into condos. So there will be a change of like what we're gonna use Office for. I feel like office as we know it is never gonna come back and we can all agree on that. I don't think anyone's gonna debate that not on the same level, for certain definitely not.
Speaker 4:And so there's gonna be this thing where we're all gonna adapt to those pieces of land. They might get scrapped. Some of them, I think, need to get scrapped. It's funny you can see relics of this before in the 19, before the savings and loans in 1987. Like you go up Warsbark and like Vance Jackson, do you see all these office buildings that all look from that time? Oh yeah, that's because back then it was like five year a doctor, you could do five percent down and you don't need a 2000 square feet. But you built 20,000 and it was like their medical and I-10 all that yeah absolutely.
Speaker 1:I know exactly so these.
Speaker 4:We have really pink building. Yeah, they're like. They're like, those are like they look so outdated. We've seen relics of this before. It's just like I'm like a walk driving around Athens, because we've seen relics of this type of thing before. They were lending to there were two loose on lending. It's crap changed so they're like they halted and so, yeah, that's exactly what's gonna happen now, no matter what that make all the sense in the world.
Speaker 1:Okay, so now we've covered the basics, we've covered the concept of what's actually happening from a national scale and the money and how it can shift and essentially Change in way of terms, based on the amount of rent or usability that it's bringing in with those banks. We know that, more than likely, there's plenty of loans that are going to need to be refinanced here in the next coming future, near, very near future. Are they too big to fail? We don't know. I don't think so, but who knows? Only time will tell.
Speaker 4:I think we kind of really sure type.
Speaker 1:So I want to read a quick article here and you guys tell me if it is spot-on or if they're just full of it. This is coming directly from NAR and this says Julia. Now it's a little outdated, but I don't think things are moving too too quickly. July 2023 commercial real estate market insight leasing Velocity slows down in commercial real estate during year second quarter.
Speaker 1:While the still much uncertain about the total impact of the banking failures earlier this year and we know about that part that we're bailed out, bailed out they are rising concerns of speculation about where commercial real estate is headed. Since commercial real estate relies heavily on small banks and capital For capital, a ballpark in lending among these banks could further impact commercial real estate. However, data shows that the commercial real estate lending activity is increasing weekly. Meanwhile, delinquency rates for commercial loans have increased since the end of 2022, but they remain below 1% never. Nevertheless, delinquencies are expected to rise further in the year's second half and we know that they did continue to rise, so continuing on.
Speaker 1:As a result, most commercial real estate sectors continue to experience slower rent growths and higher vacancy rates compared to the previous year. In the office Sector, there is a more available space for lease than ever before. Despite multiple efforts to Repurpose, use this office space and slow the return to office movement continues to hurt this sector. In the multifamily sector, rent growths has slowed even further compared to the beginning of the year, but vacancy rates remain virtually the same in the second quarter compared to the previous quarter, although lease activity continues to slow down. In the retail sector, the vacancy rate remains near 4%. The low rate in other sectors commercials, real estate. Finally, the performance in the industrial sector has ease, has eased from the 2022 record high, but rent prices for industrial spaces grew more than 8%, significantly higher, faster than pre-pandemic, which. What can we?
Speaker 4:attribute that to you know Amazon, absolutely, that's Amazon effect.
Speaker 1:I mean, and we're pretty much covering a lot of this stuff here without even reading this article.
Speaker 4:I mean, I could have written this better, I think.
Speaker 5:You know. I think there's a little bit of of deflection here, just my opinion, but you know they're tying this to bank struggles and are in association with a slowdown in commercial real estate. Maybe that's a tiny fraction, but I think more so. More impactful for banks are the rise in the 10 year bond. I take that back Short one year, two year, 10 year, five year, 30 year. The rise in bonds over the last, in a very short period of time, has a much, you know, much more substantial impact on a bank's bottom line.
Speaker 5:Just like banks invest in commercial real estate, they always try to invest in fixed income assets. Sure, they have a predictable. They're trying to manage a daily number, you know, to have a fixed amount of money coming in and a lot of that goes into the bond market. And so you have had interest rates on these bonds skyrocket in a very short period of time, over a couple years. Well, that means if you have a 10 year bond that you bought five years ago, the face value of that bond you know, today or last year is like 60% of what you know, so you can't.
Speaker 5:So what are you gonna do? Are you gonna sell that bond and take a 40% loss, or are you gonna sit here and hold it and continue to collect a 2% yield when the going rate is now 5%? Or whatever the case may?
Speaker 1:be Country loss.
Speaker 5:Either way, you're stuck in a real bad spot where you're losing a lot of money, and that happens on a very large scale, right? Right. Over very long periods of time, and even it got to a point. I haven't followed it recently for a while.
Speaker 3:The yield curves were even inverted where you can go to the market and buy a two year bond with only a two year obligation.
Speaker 5:That pays you more of a yield than a 10 year bond. That's right. Well, how are you gonna sell your 10 year bond?
Speaker 1:You know what I mean and, as we know, the inversion of that means that we've got that recession coming, but what the hell happened? We climbed out of it quickly, or did we? I mean, it's like what's coming next.
Speaker 5:So that's my. You know you talk about bank struggles and it being tied to commercial real estate. I would. My opinion on that would be like that's a tiny fraction compared to the real challenges that they're dealing with and it's just kind of being pointed in that direction.
Speaker 4:Think about where all the money is. Right now. Everyone's sitting on equity.
Speaker 1:It truly is because it's either in equity or it's on a charge card or credit card.
Speaker 4:You know, and one's got to give right. So, like I said, I feel like talking to normal families and you know I said this last time I was on here, so I think you're gonna get into the next phase, that we can cap this all off?
Speaker 1:I think I'm not sure, but this last piece and you correct me if I'm wrong I want to talk about how it can impact the everyday person, being that it's commercial, doesn't have anything to do with them per se, but definitely can, possibly will have an impact on everybody. Sure, I think-. Is that where you were going? Yes, perfect, okay, good deal.
Speaker 4:So inflation is happening in. I mean more than we've seen in our lifetime.
Speaker 5:I was born in 79.
Speaker 4:So I've never seen anything like this. You talk to, you know there's memes and everything about it. Like you can't go outside for $100.
Speaker 3:Like dude HEB bro.
Speaker 4:It costs more money to cook at home. Think about that inversion right First time in my lifetime where if I go to Salada I can eat $13. And I can't feed my child or anyone for $13 per person. And I'm a numbers guy so I'm not cheap. I just know my numbers.
Speaker 1:You ain't eating at Salada, the whole family, no, but me. I'm just being selfish. They can starve no.
Speaker 4:But I do those things like it's $13 a head if I eat here, but if I cook it's, like you know, same $40 a head, I'm like, and I had to clean up and cook. So we've never seen this inflation before and what that's happening is a combination of things. It's free money that was on the market for a long time. Interest rates were too low, so the only way to think about we spill water on this. I'm not gonna give them any credit because they haven't sponsored you, but there's water on this table. And then inflation is a sponge to kind of absorb it. Sure, so how do you absorb it? You have interest rates are up. How this is affecting average Americans more than San Antonio's, because we already started with a low standard of living. Cause I went to go visit my friends in California. I was like holy smokes, bro. Like we went to the grocery store. I was like does this come with?
Speaker 5:like a free servant, like it was crazy, I come cook it. Yeah, I'm like dude, I do what he wanted to do. Yeah, I was like yeah, I know.
Speaker 4:So, but we've been so blessed in such a I love Santa. We're starting to feel it, but we're blue collar, so just San Antonio's in general we're blue collar, we don't. You know. You talk to people, they get the 3% annual increase but we have 14% increase in-.
Speaker 1:You can't say it's all fixed, but it's very close to a fixed type of lifestyle. It's very close.
Speaker 4:So now that the rents are gonna get high in retail because remember the buckets, back to the buckets how are they gonna make up for these other buckets hurtin? They're gonna say like, look, now when we rent to industrial and retail it's higher, so now the costs of goods and services are higher. Correct, which squeezes America more Absolutely, which forces them into debt.
Speaker 1:Yes.
Speaker 4:Which forces them. When my business partner, or when he does residential, goes and says, hey, we gotta list your house, and then usually it's like why will I want the dream home? And the next one, they're like I just gotta be off my debt.
Speaker 1:Right.
Speaker 4:So this is how we're getting squeezed at all angles to get to shake the bust of piñata, to get where all the money is, which is equity that people are sitting on, and it's working it is, and I can't necessarily fault the investors or anything like that for having to raise rents, and one would say, well, they're being greedy, it's a business.
Speaker 1:It's a business, this is how they make their money, this is how they're used to making their money. And, let's be honest and real, they're the ones that took the risk initially, at some point in time, to make that decision, to do that. And for the folks that say, well, that's not fair, life's not fair. Number one. Number two if you were in the position that you took that risk to become that investor to start with residential, switch over to commercial, now you're onto apartment complexes, now you're onto XXYZ wouldn't you think that you would want to maintain that level of lifestyle, living? Because once you grow that large, it's not just you that you're having to feed. You've now got corporations, you've got shell companies, you've got shareholders, investors, banks counting on you.
Speaker 1:There's taxes, there's so many different factors that are a burden for the actual investor. And I was watching something the other day to where how we were talking about the consumers and their rents going up and they were the ones that were getting a lot of the relief, but at the same time, you still had landlords, similar to the servicers of notes that were receiving the consumer, receiving the relief to go into forbearance and not having to pay their actual mortgage. Well, that note was still due, so those investors still had to make those payments, just like the landlords still have to make their payments to the investors, et cetera. There's a lot of that that still has not been filled. Within the realm of bringing the books back to even or getting out of that hole, is that going to affect us more than we think? And I think you have alluded to that it has to, because it's kind of the trickle down effect.
Speaker 4:The average American's getting into debt and so everything's getting too expensive, and so we gotta live in our means, and America doesn't know how to do that, and the only way to do that is like they're forcing our hand, and it's working. It's definitely working.
Speaker 5:And it's gonna be like that for a while what you were. I think what you're referring to, mark. I can remember in 2020 and 2021, every time I talked to my real estate attorney for help on a project that I'm working on, he would say he's buried in rent abatements.
Speaker 5:So rent abatements mean that you're renegotiating somebody's rent and maybe it was a five year lease and you're gonna say, okay, the only way we can stay here and not default on you is if you let us go six months without paying anything, and then we're gonna add a six months to the term. And so a lot of that took place and a lot of it will shake out and work through. I think it's still yet to see how it all plays out, but it was definitely an overwhelming time.
Speaker 4:Sure for a lot of that to happen.
Speaker 5:It will be for a while and it will be for a while, but I learned something during that time as well I'd like to share, because it was probably one of the biggest lessons of my real estate to career. A lot of people hear me say all the time, at the end of the day, all the problems, all the things that look like they're going wrong, when it's all said and done, in my experience, the answer is still always to get your hands on the real estate, to buy the real estate.
Speaker 5:And I'll share a story. In April of 2020, I think you've probably heard this from me before I had two big medical projects in feasibility. One was a 20,000 square foot building with multiple doctors and one was an independent doctor's office about $10 million worth of real estate and in April of 2020, both are in the feasibility period they both call me and say we can't operate, we can't have people in the office our business is down 60%.
Speaker 3:This is April, right when you know yeah, every day, yeah, chaos.
Speaker 5:You know, we, our business is down 60%. There's no way we can move forward. And I made a huge mistake because, you know, I come from a sales background. I was a sales manager for many years. As you know, when you know what's right, you overcome those objections and you try to keep things moving forward. Well, I was caught up in all the BS too, you know, and I didn't push back. I was like, hey, I get it. You know, your business is down 60%. We're talking about a multimillion dollar project. The future is so unclear, I understand, and we ended up, you know, terminating those transactions. Kind of sucked, as you can imagine, I'm sure.
Speaker 1:I'm sad. Yeah, I'm on my way back from Vegas, right now.
Speaker 5:Now the good news is most of those doctors a year or so later built another office and it wasn't the same big project. But we did several other small offices and got everybody taken care of. But here's why I take responsibility for being a little bit at fault. If I'd have pushed back more, they'd have got a better interest rate, they would have bought it at a lower price and prices would have gone up. If you could see through how challenging the time is and understand that, even though you can't see it and it doesn't seem right, the answer is still to buy the real estate and they would have been much better off.
Speaker 5:You know, don't get me wrong. Everybody's happy. They love their offices. It's great, it worked out just fine, but I'll never forget that I could have done better.
Speaker 3:You know what I mean.
Speaker 5:I'll never forget that, and so that's one of those things that I guess you just learn from life, and you know what I mean. And doing the best you can. But the answer, in my opinion, no matter what the circumassisted answers are and how cloudy that they might look, the answer is usually always to buy the real estate and to own it and to operate your business out of it and move forward from that.
Speaker 4:I would also say don't panic. You know, looking at your money market right now, you can lose so much. If anyone has stocks, they're like. They look at them and they're like, oh my God, I lost 10, 30,000. Doesn't matter. But when they get a rental and they're like, oh my God, I had to pay a third of my mortgage and I want to sell it. I'm like mm-hmm, Mm-hmm. I'm right there with you.
Speaker 1:Yeah, I'm like tighten up, you know, I mean like, yeah, I know like you just made an investment for a quarter of what the investment should have been Just in that month. You still own the property. That is still going to increase minimum 56% every year in addition, in addition, and you can make it pretty.
Speaker 4:I can Money, did you?
Speaker 1:put into your savings account this month.
Speaker 4:Yeah, exactly See what I'm saying like they Know there's so much panic that I'll get a call from someone because you know I've been in business for 20 years this August, and so I get, I make my clients buy investment properties. And they'll call me like dude, like vacancy two months, or you know I had to pay a mortgage payment. I'm like how, that, that's what investment is. There's right, there's risks, there's vacancy rates. Yeah, you know, if you can, I mean obviously, like if there's health matters, and you just like whatever, I'm like you know I would. I'd rather not go to To, you know, disneyland this year and keep the asset, because the keep the asset Will give that kid a college money instead of down the road.
Speaker 1:Yeah, for sure, so sure. Make decisions. They pay dividends in the long run.
Speaker 4:Make decisions and make them Smart for the long term, because this is a marathon, not a, not a sprint.
Speaker 1:I like that. Well, guys, that's been freaking awesome information. I've got one last question per se for this before we close it out, and that is advice for First-time investors, the consumers out there that are looking to potentially Move out of their house to finally start their business or to finally start leveraging some money to grow some real generational wealth and opportunities. What is the advice you would give to them on why it's so important to have representation from a commercial realtor? Hmm?
Speaker 5:well, I Would certainly say it's extremely important, and for one reason a lot of people don't understand it and don't understand what they can get, what they should be asking for In the in the way of terms. I remember when we did your lease and and you wanted a chicken coop. That was, and we got the chicken got the damn chicken.
Speaker 4:What ever right? Yeah, they're like yeah, any chickens.
Speaker 5:I'm like we're about to, you know, like when we get our coup, that's right. You know a lot of people don't know what can be asked for. See, can be a little intimidating true story.
Speaker 5:You're not. You're not dealing with usually just your, your average new Corraltor. You're dealing with somebody at a big company or you know big organizations that have been doing this for a very, very long period of time and you have to have somebody that that knows what they're doing, represent you. And I'll take it a step further and kind of what I take pride in and, jj, we laughed about it earlier both kind of breaking into this commercial Real estate world and, like I said, I call it bankers hours on steroids, you know what I mean, yeah, try to call on a bunch of listings at 2, 3 o'clock on a Friday.
Speaker 4:You know what I?
Speaker 5:mean and then set your calendar for Tuesday on when you're gonna hear something back. Maybe you know what I mean. It's, it's, it's said, it's bankers hours on steroids. They also Consumers need somebody that's available.
Speaker 5:I don't treat it any different than my residential real estate business that we have a deadline that ends tonight, so I'm available all night to make that work. I treat my commercial business the same way, and I'm sure JJ does as well. That's what differentiates you from from everybody else. And I've had projects where, you know, a lot of times they're physicians and they're only available after clinic. So we're meeting on this project once or twice a month for sometimes a year or more, and that needs to happen at 7 pm. That happens at 7 pm. You know what I mean, and so I would suggest not only finding the right commercial real estate agent that's knowledgeable and can make sure you get everything you need to get and got what the Expectations are and guide you through the complex process, but it's also available all the time. You know I mean that's buried in this transaction just like you are.
Speaker 5:I like to tell the medical clients. You know what I mean Like I'm sorry, but you know what I mean, I'm in it. You know what I want to go to all these meetings. I go to every architecture meeting. I want to be involved. I don't want to miss anything because that's how I learned to.
Speaker 1:That's how I didn't you have an example of a client that ended up not going with you, that Ended up reaching back out to yeah, I did. That was a tough lesson.
Speaker 5:That was many years ago but I worked with a client quite some time for that wanted to buy a medical office. We looked at a bunch that's a lot of time with them and they ultimately decided on a Residential home of over a million dollar residential home. We went to it five or six times with contractors and they had a vision of Converting that into a medical office and they wanted to put in a parking lot and you know I was a little skeptical about it. But Showing them everything they want to see, working through the process, we got to get the price and they were hell-bent on it. Well, I was digging in a little bit further for them and found out that this is, you know, obviously now Zern zoned residential and in this particular municipality the process to change that from Residential to commercial was very complex and it required a lot of things, like your neighbors agreeing to you know what I mean.
Speaker 5:And and Then the the city council of that municipality has to agree to it. And so I went to him and said, look, I'm not comfortable this. You know. I have no desire to ever participate in a project that doesn't kick ass.
Speaker 3:You know, I just I don't know, no desire what's on your car?
Speaker 4:Yeah sure.
Speaker 5:No desire whatsoever and so far powers right. So far we're at 100% we don't kick ass any don't want to do it yeah.
Speaker 5:And so and I told them I don't think this is gonna work, I don't think we're gonna be able to zoning you want. And we had a difficult conversation one night. They called me you know the husband and the wife and we think we can do it and we think it'll work. And we found another realtor that has no problem writing this up and, and you know, I said, okay, you know I'll send you, I'll send you the paperwork to release you from our agreement. You know, for the buyer representation agreement, you're welcome to do what you want to do. And this other agent wrote them up and made $40,000 you know what I mean and went on about their way and I mean I just considered that dirty money.
Speaker 5:I know it's not gonna work right and several months later I get a call, you know, and they're going. Hey, we need your help. We can't get this zone, doug resident. I'm like I can't get this zone to commercial. I'm like I know and I'm sorry but I can't help you.
Speaker 3:You know what I mean. Like there's nothing I can do now.
Speaker 5:I was trying to help at the time when I could make a difference for you. Correct, and you know, maybe they didn't recognize that they were working with somebody that knew what they're doing. Yeah maybe they thought they'd do better, I don't know, but I'm sure that was a very painful and expensive experience.
Speaker 1:Oh, I'm sure, and I'm sure that if you were a an incredibly freaking talented realtor salesperson, you'd have said would you like me to list it? I'm sure you did. I'm just a great residential.
Speaker 5:Hold on one second, hello.
Speaker 1:This is Andy. This is Andrew.
Speaker 4:So how about you, jj? What he just said is like in the. We're so fortunate to be in the seventh largest city in the United States of America, and so in in. If you look at how the big boys do it, you know, you know CBRE jail you in the niches are the riches. I'll be honest with you if I get a mole, if I get a medical office client, I'm gonna send it to Andy and he's gonna pay me referral right.
Speaker 4:Yeah, see all day long. Well, I mean, I like to learn more, sure, but then he's, I mean you know, I mean like you've gone down the road of your Expertise.
Speaker 1:yeah, you, it's very nichey it sounds, isn't?
Speaker 4:in the niches of the riches.
Speaker 1:I'm good at industrial.
Speaker 4:I'm good in dust from good. A retail Multifam is okay. I hate land, so like. But if I this guy's niched out, so I have a rav, so rav does all the hotels all over the US. If I get a deal with a hotel, it's going to rav. A 30% referral is dope because all I do is just pass the ball. It's like I'm.
Speaker 4:Jason kid, and they're just dropping dimes. I'm getting paid. So it's cool because we're big in a big enough city that we can. It's like if we lived in like Kansas I'm back to catch, I'm kidding but if you lived in like a rural town, you know, you kind of have to know it all right, you don't have that flexibility, and so but it's so overwhelming, bro, just to know, like you know, like just one portion of commercial, and I wish it was called commercial trading and residential real estate, because you yeah because they we don't even say what did that sell for, we say what did that trade for in the word yeah, because we only trade.
Speaker 4:We turn 3, 1, exchange stuff. So I wish it was called something completely different so that residential agents wouldn't differentiate their toe. Because they're like trade, trade, what so in the niches are the riches. So definitely look, if you're going to hire someone, you definitely need it almost as much or more. And then Residential and then say like how many? Like I've sold a lot of churches for some reason. So like like chicken.
Speaker 1:They never sell. Yeah, they're recession proof.
Speaker 4:Yeah them and Fred's frif right there not going anywhere. So so, like you know, I get a lot of you say, hey, man, I don't, I don't want to deal with the, the churches, they're 5, 1c, 3's, there's all these tax implications and I'm like I've gone through it and and over time, if you go through enough, I mean there's always that first one that maybe I'll do one with Andy. I'll give them the bulk of it, heal them, me, hang out with them, and then he'll teach me the ropes a little bit, Right, and then I, then I it's I do, we do, you do right in our game, right, I'm gonna do it. You're gonna watch and shut the hell up. We're gonna do it. I'm gonna take more than you, you're gonna shut the hell up and then you do it. And that's enough for me to give Andy some money and vice versa.
Speaker 4:And that's how Commercials done is. So just ask him, like how many churches have you sold? How many franchises have you helped as a tenant? How many whatever multifamily units have you sold? So we're fortunate enough to be able to niche in San Antonio. So, as an investor, make sure you know you don't want to be the guinea pig, right? I'll? You should like it. When multiple brokers are working for you at the same time. That means You're they're doing their due diligence and I'm bringing in an expert because he's the man. I'm the boy right now, and so I'm feeling all the yeah, that's role and everything he's saying.
Speaker 5:You know too. What's? That's the difference between a lot of agents that just want to get their next deal done, true, and somebody that's trying to do the right thing for the consumer, right term, because bringing in the right people that know about this particular niche Right is the right thing for the client to get them the best service? Absolutely, I get it all the time. People you problem? Sure, you do too.
Speaker 5:people say commercial real estate and they just assume you know everything and that's not true, not sure people call me and they want to build a bar in a loft downtown and I'm like man, I just don't know about that. You know, I know some of that does right. I can get you to somebody that's done this type of work before, but you know this is not in my wheelhouse really right and once again, I don't want to participate in any project that doesn't kick ass you know I mean so so I'm gonna have to partner you with this person that knows a lot more than I do about it and it's so litigious.
Speaker 5:Yeah, and I may tag along because I want to learn. You know, but, but that's what's doing right for the, for the consumer. So I would certainly say, when you're talking about finding the right Broker, ask all those questions. Yeah, how many warehouses have you done? Can you give me some examples?
Speaker 4:Exactly that.
Speaker 5:I can go take a look at. Can I see how they?
Speaker 5:went Absolutely if you built it from the ground up. Who's your team? What contractors do you do? What exactly? What architects do you use? You know, I mean, what all needs to happen. The biggest question, I guess what all that needs to happen during a feasibility study. Well, you need to do x, y. It's not like residential is not just one inspection and you're done. There's a lot of stuff that has to be done to meet bank requirements. You know a different phase one, environmental studies, I mean. The list goes on, and you need to have somebody that knows how to do all that right.
Speaker 5:And if they don't know how to do all that, you need to have somebody that's responsible enough to say we're gonna partner with with this person, because they understand Correct, correct and and I think everybody needs to understand that they're getting that and you have to ask those questions to make Sure you're dealing with the type of person that's gonna make sure your best interest is first and foremost. Right the rest of it will work out Wow.
Speaker 1:Well, guys, that's a hell of a lot of good information, especially for me being somebody that's like a sponge, especially in this, this sector of Real estate, as we operate in every day. I've learned a lot from this, definitely, especially from someone that is an aspiring investor. On that regard, I now kind of have reaffirmed my Dream to own residential I'm sorry a commercial real estate, truly To start earning my triple net and getting those right off, some building my long-term legacy because, you can do so much with Residential, but the real game, the real big boy club, is that commercial sector.
Speaker 1:Sure, I know a guy. So for you folks out there listening, we've got plenty of key factors and insight. I mean from a, from a. Let's start with commercial Potential investor super important to have great representation. It is totally fine to shop those realtors and to ask all the questions that you need to feel comfortable because it's a large investment.
Speaker 1:From the consumers aspect of it, what's happening in our market and what took place with COVID has shifted the way we do business, how we operate and how this commercial real estate is viewed, especially from the Investor bank side of things. And if you're thinking that this may or may not affect you in the long term, it probably will. So if you're currently renting, paying to a landlord, paying to an apartment complex, something along those lines, it may be time to start looking into owning your own real estate. Simply because your rents are going to rise there's nothing you can truly control about it and it is their right to be able to do so, because they've got more people behind them that are Are waiting for their mouths to be fed as well. From a realtor standpoint. If you are a residential realtor looking to try and put a commercial deal together, I'm going to advise right now Don't do it, just don't do it.
Speaker 1:Get yourself a solid, a referral source like one of these two gentlemen and and cling close to them, but obviously make sure to respect their boundaries. They're in a different class of realtors. That I'm not gonna say better or worse, but totally different. There are way more ins and outs and nuances to just the the the contractual side of doing commercial real estate. The world is gonna be okay, the sky is not falling, and is it too big to fail? I don't know. We'll find out here soon, but I do know that there was plenty of information that you can actually take to the bank and cash on this one. So, that being the case, gentlemen, thank you so much for sharing all the time.
Speaker 4:It was damn good.
Speaker 1:Other than that, like share, subscribe, all that jazz. But we will catch you on the next one. Welcome to key factors podcast, where knowledge meets ambition in the fast-paced world of real estate and mortgage. I'm your host, mark Jones, bringing you the latest insight, trends and expert advice to navigate this dynamic property market. In each episode, we dive deep into the heart of the industry, dissecting market movement, exploring investment strategies and unlocking the secret to real estate success. Whether you're a seasoned professional, an aspiring investor or simply looking to stay ahead of the curve, this is the ultimate guide to making informed decisions in the world of property and real estate. So grab a seat and let's uncover the key factors that make all the difference. Welcome to key factors podcast. Let the journey begin I.