Masterminds, Software, Partnering with Sellers (Office Hours)

In today's episode of office hours we learned about several projects Tyler Cauble and his team are working on at Peerless Mill, including a second Wash project and plans for industrial outdoor storage. Tyler also provided updates about upcoming events like CCC in Nashville and his guest appearance on Brandon Turner's coaching call. He answered questions from listeners about mastermind groups, partnering with sellers, and typical cap rates for self storage properties.

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Key Takeaways:

• Tyler provided updates on projects being worked on at Peerless Mill, including a second version of the Wash project and plans for industrial outdoor storage.

• He discussed upcoming events like CCC in Nashville on April 25th and his guest appearance on Brandon Turner's coaching call on April 28th where he will discuss getting started in commercial real estate.

• Tyler answered questions about mastermind groups he finds valuable, partnering with sellers, and cap rates for self storage properties. He emphasized looking at the experience and track record of investment sponsors over projected returns.

About Your Host:

Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.

Episode Transcript:

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This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls. Learn how to confidently buy your first commercial property today at www dot c r e launch pro.com. Welcome back to the commercial real estate investor podcast live from the cowboy group Studios here in Nashville, Tennessee, back with you all for a another episode of office hours. This is the weekly live stream that I do here on YouTube to answer any and all questions that you have about commercial real estate. So if you have questions on how to get started, about a specific property that's in your market that you're interested in buying, and you want to bounce some ideas off me feel free to join me live here Tuesdays at 8:30am Central Standard Time, go live just about every week except for last week. First time I've had the flu since I was a little kid. So that definitely knocked me out for a few days. So appreciate you all being patient with me excited to be back here this week. So wanted to remind you all of the CCC event on April 25 coming up here in Nashville. That is for contractors closers and connections. It is the best commercial real estate networking group that you can be a part of hands down the event, we've got a capacity of around five or 600. And I know that we are somewhere between 250 and 300 RSVPs already. So we are nearing capacity. If you're interested in joining check out the link in the description below. Or just search you know CCC Nashville on LinkedIn or, you know a Google to get in there and get your RSVP in before it is too late. Really looking forward to that event. It's going to be a lot of fun. It's the who's who of commercial real estate. And if you want to get out and meet some other investors, developers, brokers, that is the place to do it. So come on out April 25th. We'll be at the fontanelle here in Nashville which is a really really cool mansion. It's gonna be a lot of fun a couple of updates on peerless I was down there last week, meeting with the city of Rossville to talk to them about some of the projects that we have in the works at peerless mill. We are I guess we got probably four or five different projects that we're actively working on. So kind of wanted to present to them, where we're looking at. Some of them are pretty big and will be pretty nice announcements. So looking forward to being able to share that with you all at some point, I can kind of talk about two of them. One will be a version of the wash, we are finally working through a second version of that project. The the wash is a is a phenomenal concept, really humbled to see just the community reception for that that project. But it's next to impossible to replicate because of the amount of parking that you need. The walkability a lot, there's a lot of factors that kind of came together to make that site perfect. And peerless mill fortunately has that. So we're working through some design concepts right now, and talking through what it would look like if we're going to do it a second time. So it's gonna be even cooler than the first go round. And I will be opening that one up as a 506 b syndication. So if you are currently on our investors list, you will be able to invest in that project with us. So stay tuned More to come on that one. And the other one that we're working on is some industrial outdoor storage. That is a piece that you know, obviously peerless mill is 32 acres. So we are working through what that would look like on about 3.75 acres in the back of the property. I broke down all of the numbers and our plans on our group coaching call last night, which was a lot of fun to get some feedback from the group and actually share what is going on with that project. So really looking forward to getting some of those up and going because they will be game changers for the mill. And of course, doesn't hurt to get cash flow. Couple more updates working through the book right now as some of y'all may know if you've been joining me live for the past. Like a couple months, I've been talking about working on my second book. And I always forget how much work actually goes into pulling these together. Even though this one is a bit of a different version of a book, it's not like I need to sit down and write, you know, 3040 50,000 words to pull this one together. It's still always so much work. So hoping to kind of have the rough draft of that done here in the next week or so. So that we can start working with the design team on pulling it together for a little summer launch. So if you are interested in joining us on the launch team, the book launch Feel free to drop me a comment, let me know add you to the list, we'll be coming up with some sort of really cool watch team package for that. So that'll be a lot of fun. And then this Thursday, if you are familiar with Brandon Turner, yes, Brandon Turner from bigger pockets, I will be filling in on his his weekly coaching call for the better life tribe this Thursday, looking forward to that it's going to be a lot of fun, we're gonna be diving into how to get started in commercial real estate. And, you know, if you're not a member of group coaching, or a mentorship, highly recommend checking his out, or just getting involved in anybody's, because it's one of those. I mean, I'm still in masterminds, I'm still in group coaching. Because it's nice just getting to network with other people that are in the industry, and hearing their thoughts. You know, I mean, I'm, I've haven't several different groups. And every conversation I have, there's something that I take away, that helps me push what I'm, you know, push forward what I'm trying to do, which is always pretty nice. So I'm really looking forward to doing that this Thursday, it's gonna be a lot of fun, I haven't done a little, you know, educational presentation here in a little bit. And so that'll be it'll be nice to have that one fully prepared. Because typically, I'm going off the cuff this one, I'm actually preparing a slide deck, and, you know, really going all in on it, which will be fun, because we're talking about possibly teaching some university classes on investing in commercial real estate as well. So it'll be good. But yeah, if y'all have any questions on anything in commercial real estate, feel free to drop those in the live chat. Let me know what's let's talk about them. Trying to think of what else is going on, you know, the, the market today is really interesting. I've been getting a lot of questions from investors of, you know, do you think you'll be buying anything this year? Should I be buying anything this year? And, you know, it's you get some mixed signals from the market. But it's overall, it's trending positively, in my opinion. I mean, I know it depends, more specifically on where you are in the country. But Nashville is pretty well positioned. I mean, we're feeling pretty good about where we are headed. You know, the state has done a phenomenal job of continually recruiting big, I guess, companies to relocate their headquarters here, which doesn't ever hurt, right, because if a company relocates here, then you're gonna have all sorts of employees moving here for those jobs, which just continues to drive the economy. So every, you know, for every big corporate headquarters, I'm sure there's 10 smaller businesses that are, you know, relocating as well to help kind of serve the needs of those businesses. So, you know, pretty exciting to see what that kind of growth can do. And, you know, the type of commercial real estate that we focus on here, anyway, is much more neighborhood commercial, much more like, what are your daily weekly needs within a specific neighborhood that we can fulfill? So, you know, yes, we have to take into account market cycles, but not nearly as much as we would have to if we were doing larger, you know, multifamily development or larger office buildings or, you know, shopping centers, things like that. Which is, you know, pretty nice to not have to go all in on that. Yes, we're taking risk, but it's not, it's a much more calculated risk, much lower risk profile, then then some other types of deals. So, yeah, let me know what questions you have in the live chat. And we'll, we'll get around to those. So those are my my updates for the past past couple of weeks going on vacation, the subject upcoming weekend. Really excited. We're going out to New York, my girlfriend and I, we were just in Chattanooga this past weekend, of course, catching up on parallel smell but also celebrating her birthday. So that was a lot of fun. This spring is just a I've never had so much travel in the spring, as I will this year. It's kind of bonkers, and it's hard to keep my head on. Greg is saying, Hey, Tyler, glad you're feeling better. What groups are masterminds? Have you found most valuable? Okay, so there's two that I have found to be the most valuable. One is the Entrepreneurs Organization. And you have to be an entrepreneur, right? Founding member or controlling shareholder of a company that does a million dollars a year or more in business. And of course, if you're in real estate, there is additional qualifiers because they don't want you I mean, if you sell one house technically you've done a million dollars. No, it's a million dollars bottom line and And

that's phenomenal because I've got a board that meets every month. And we all are in different industries, we hold each other accountable and help each other through all sorts of issues. So I think EO has been unbelievably that's by far the best one. Next one is go abundance, join that one earlier this year, but I had actually started getting involved with him back in 2017. That's a great group. It's not real estate specific, it is more, you know, adventure, business, you know, kind of wealth, whatever personal life, you know, it's very well rounded. And I like that one, because you know, everyone in there, it's just very, when you get guys together that are all into extreme adventures. I feel like it translates very well into people that are successful in business as well. And so there's a lot to learn from that group. So that has been super helpful. I've really enjoyed being a member of Gabon. It's an EO. I haven't really found any other masterminds and commercial real estate that necessarily resonated with me. We are considering starting one, I'm working through that process right now of doing some interviews with people that have been in commercial real estate masterminds, what they liked what they didn't like, because I want to deliver something that everybody wants, right? You don't really want to deliver something that is what I think people want to experience. It's no what what do you want to experience? Let's go Let's go create that. So working through the details on that, pretty excited to see where that could go? You know, we've already bought the domain. I mean, one thing that I'm working on more of this year is how can we create more of an online community community presents more online offerings for what we've got going on. So currently meeting with a web developer, a buddy of mine, that's actually Ennio. And he's going to be putting together some some online software for us. That will be in my opinion, a game changer for commercial real estate investors. So really looking forward to that can't, can't really release anything about that just yet. But we certainly will be here, probably by this summer, is when I'm thinking we'll see these things take time. I am not a web developer, software developer by any means. I barely understand how any of that stuff works. I'm a master with Squarespace. But that's because all you have to do is drop bubbles in places. So looking forward to you know what that could do? Me we've got really strong SEO on the website. That's one thing that I've always been very intentional about, you know, Google reviews, writing blog posts, having the podcast. I mean, that creates updates for the website, which, you know, in turn drives more traffic to our website. I had somebody asked me the other day, like, you know, we're at 50,000 subscribers on the YouTube channel now, which is really, really exciting to see, it's kind of crazy to see that we finally hit that milestone and we were 450 videos in and they were like, oh, you know, what, what are you doing for YouTube? Seo? How did you hit that that fast? I was like, Dude, we put up 450 videos over four years, like it was not, there is no YouTube SEO hack. It's just let's keep putting out quality content. And hopefully we continue to find the right audience and, and grow it from there. But it's, you know, it's all about creating content for me now. I mean, that's, that's the majority of what I'm focusing on this year, whether that's courses, whether that's the mastermind group coaching calls, more YouTube videos, better YouTube videos, blog posts, podcasts, really enjoy this type of thing. So it's kind of fun to get to do it all the time. Alison is saying Hi, Tyler. What Siri admin software? Do you use any others to recommend? Allison What do you mean by commercial real estate admin software? Are you saying like property management software or if you don't mind, just drop that in the in the chat give me a little bit of clarity so I can kind of point you in the right direction there.

Evan is saying thoughts on going into partnership with seller over the property? I'm 26. He's 70 Goodstart to get first storage facility built, I buy land and he would finance the project. Would I just pay him interest or? I mean, I think that you know, JV with the seller of the property is a great way to get started, especially if you're thinking creatively on how you can you know, jump into buying commercial property without having you know, any money out of pocket. Maybe you don't have any money and you've got to get creative. You know, I think it's it's always very tempting to want to do that, but because again, you don't have to have the money. So it makes it so much easier for you. But you got to be really careful who you're partnering with. Because if they have a completely idea of how the project should go, or if they feel like, Oh, well, I only want to have my money in here for three years, but you're expecting, you know, five or seven, or whatever that ends up being. I mean, that that could really throw some friction in there with the relationship. So make sure you know them really well make sure that you have a very well written out and defined operating agreement that was put together by an attorney, not chat, GBT. And yeah, I mean, as long as you're very clear as to what the responsibilities are, and, you know, hopefully you have control over, you know, the the project, then yeah, I don't think that it would be a bad idea to partner with them. As long as again, you're on the same page, you guys know exactly what you're getting into. Alison is saying property management, landlord and tenant. So in the property management side, we use a software called resin. It's residential management, I believe is like the the long form of it, we've used several other pieces of software in the past, my partner's use Redman, and their property management company down in Texas for managing a lot of multifamily apartment units. And so they know the software really well. And I think they know the owners really well. So we had them basically modify it for, for commercial, and it works really well for us. I mean, you know, the, at the end of the day, I feel like property management software is just like CRMs, there's no special sauce to it, they all kind of do the same thing. And they all kind of do it a little bit differently. So it's whatever software you're going to end up using, and utilizing the most, right, because those programs are only as good as you feed them. So you know, if you like Bill Diem, you know, a few like Rozman, you know, I would say just just kind of pick one and roll with it stick to it. Now, that being said, we've, we use yardie, than we used to build it, and then we landed on Raspbian. And I think we're done, we would have probably started off with Raspbian had Raspbian been big enough to accommodate commercial use at the time that we started the company back in 2018. They were not. So you know, I think that's part of why we had to bounce around for a little bit. I don't like bouncing around, you know, even though it's not necessarily my responsibility as as you know, one of the one of the owners of the company to deal with software, onboarding, and transitions. Managing the team through that is painful, because it is a lot of work, there's there are things that can fall through the cracks. And you've really got to stay on top of everything. And then on top of that, you know, we lose data, right? Whenever we switch from one software to another, like there's a, you know, whole year of Billiam data that we don't have anymore. So you know, that's kind of frustrating. So, you know, I would probably just go through and try them out and see which one kind of resonates with you the most, and then just pick one and stick to it. Hopefully it's one that has good communication. That's why we liked RASSMAN. Right? We have a problem, we'll get a hold of them pretty quickly, they'll fix him. Connor is saying when you get an investment package for potential investments, what are the numbers that you look for first? I mean, this is probably a different answer than what you're looking for. But how many deals the general partners have done and successfully completed and what their track record has been. Look, here's here's the thing on investment packages, they're all lies. Everything in that package is a why. And it may not necessarily intentionally be a lie, but they're pro forma numbers, right? I mean, if somebody's looking at an offering memorandum, like these are projection numbers, they're not true numbers, that is not a 100% case of that's going to happen. I don't care if it's Blackrock that's putting these offering memorandums out there all projections based on underwriting. And it is very easily easy to manipulate a spreadsheet to show the IRR that you want it to, even though that may not be the most realistic scenario. So it's kind of the old Shark Tank. motto, right? You are betting on the you're betting on the horse, right? Who are who are the founders, who are the people that are leading the company that are running it, they're gonna be managing this investment, it is all on them. Because you want to make sure that you've got somebody that has been through some trouble before. So that if you hit any issues with this investment that said after that, then yeah, you start looking at the the return metrics. And if I've questions on the return metrics, then I start looking into what are their assumptions, right. I want to know what they their their rents are going to be where their vacancy rates are. How much they're paying their brokers Right, because some people will just underwrite it at a 5% or 4%, or 3%. Commission. Well, if you're only going to be paying a 3% commission, you've got to fill up 30,000 square feet who's going to be taking that? Because the the tenants rep is going to want three or 4% commission on their own, then, you know, the landlord reps gonna want two to 3%. So, you know, if you're not underwriting at least 6% commissions, then you're you're making your assumptions completely wrong. It can be difficult to get a sponsor to actually share their underwriting with you. And you're not necessarily going to understand it. Because everybody's spreadsheets are so different. But it could be worth looking into, you know, what are at least their assumptions that they're making? how quickly you're going, Are you going to lease this up? What are you going to start marketing it? What's your cap rate on exit? You know, what's the what's the cash flow, or the NOI at the the assumed exit? Because, you know, I mean, look, when I when we underwrote our hotel that we're doing, we underwrote it at an 8% cap rate exit, is really conservative. But I see people all the time that assume they're gonna get a 6% cap rate on exit. And you can't make that assumption. Like, what if you what if you were supposed to sell last year? What if your your loan came due last year, and you had assumed a 6% cap rate? Well, interest rates were over 8%. So you would be lucky to get an 8% cap rate last year. And now of course, assuming you were forced to sell no matter what you might have even ended up going for 9% cap rate. So it's much better to be a little more conservative on that front, than it necessarily would be to be more aggressive. So that's probably a long winded answer, Connor, you know, to your question about what what numbers Am I looking at first, but to me, the the IRR, the equity multiple the cash on cash, this stuff doesn't actually really matter. It's all you know, somebody's thoughts and ideas. And to me, it's more about the team behind it that's actually going to pull that together. So what is their track record? Sorry, my phone is blowing up feels like a Monday. Usually, I'm getting all these texts and calls on a Monday. Not usually during my Tuesday morning live streams. But that's a good thing. Hopefully, we're getting back to doing some serious business. It's been a wild, wild last 12 months, that's for sure. I mean, we it's it's interesting. So I was talking to try not to name names here. But talking to somebody that works with the development authority, and one of the cities in which we have some property. And two years ago, there was $17 million in transactions and commercial real estate properties in this area. And last year, there were $1.2 million in commercial real estate transactions. That is how crazy interest rates affected the market in some of these areas. So

you know, I'm excited to get back to bite again, I'm ready to do it. I've been saying with your experience and commercial Do you know, a fair cap rate on storage online seems to be all over. So that's the that's the tough thing about cap rates is there is no like fair cap rate yet 7% across the board. And this, this applies to every single asset class, every single asset type. Cap rates are different in different markets, there are different and different size ranges. There are different and different brands, I mean, vacancy rates, right? I mean, a cap rate is basically the cash on cash return that you would get if you paid all cash, right. So it's a factor of risk, a lower cap rate should denote lower risk. So you could have a smaller self storage facility that isn't really that great of an investment. But they have nailed down their operations, they maintain very low, very low vacancy rates, and have little turnover, maybe they have very little bad debt. You know, their collections are nearly 100% Every month, you might get a better cap rate on that, then you know something that's two to three times the size, simply because the rent comes in and gets paid. You don't have to worry about it every month. So, you know, it's it's tough to say what a fair cap rate on storage is, you'd have to look at what similar self storage units are trading for in your area, and what it's worth to you, right? At the end of the day. You know, it may not be worth the six and a half cap to you might be worth a 7% cap rate. And you won't know that they'll sell for that until you make the offer. Right so I think it all comes down to you know cap rates are determined by the market and you as a buyer are part of that market. You might you might get turned down, they may say, Absolutely not, we would never sell for that. But I mean, don't hurt to make the offer. But yeah, there's no like one blanket cap rate, like, you know, self storage across the country today is trading for a 7.15. Cap. It's it varies really heavily depending on which market you're in.

I mean, I'll be honest with you, I wouldn't pay more than a percent cap rate for self storage today. And that's my personal opinion. And I know that there's a lot of people out there that would have very different opinions. But I mean, I remember back in 2013, when I first got started in commercial real estate, you could buy self storage for 15 to 20%, cap rates. And times have changed. But they haven't changed that much. I mean, honestly, you know what you want to know why Self Storage cap rates have come down, because multifamily guys couldn't buy any more multifamily because their cap rates went so far down, that they started buying self storage. So Oh, self storage is the same as multifamily. Except we don't have to deal with, you know, tenant headaches, let's start buying self storage. And, you know, it's, it's like, you know, here in the south, everybody's upset that Californians are moving here, right, I couldn't care less, I think it's great. But you've got all this, oh, well, they're moving from California, and they're bringing their pricing, right. So now all housing is going up. And you know, the cost of going out and you know, having dinner and drinks is going up. I mean, that's exactly what happened in, in self storage. I mean, it should be a lot cheaper than it is, it is a riskier asset class, there is no reason for self storage to be trading at the same cap rates as multifamily. It doesn't make any sense to me at all. But, you know, here we are, hopefully, they continue to hold strong. I like self storage as an asset class. But to me, I just wouldn't pay more than or lower than an 8% cap rate doesn't make sense to me. That's why we're looking at building some. I mean, I think you can get the yield that makes the risk worth it to build it. Problem on building self storage is that you then have to deal with the lease app. And the lease that's kind of a pain. I mean, it's, you average about 3% per month on a lease up. So it takes you almost three years to hit stability on on a self storage facility, which, you know, I'm sure there are some ways that you could speed that up here and there. But overall, you've got to just plan for a three year stability stabilization. So you know, you're really, really kind of pushing it there. So well. Awesome, guys. Well, it's been a great episode of office hours. Appreciate you all joining me live. Feel free to come back every Tuesday 8:30am Central Standard Time. Don't forget to check out CCC, Atlanta, Nashville. CCC is based out of Atlanta. But we are opening up the national chapter here, April 25, at the fontanelle there's a link in the description below if you want to go ahead and RSVP for the event. And I would go ahead and get that in quickly because as the event is filling up, it's going to be a really fun night. We're still going through all the planning right now. So I'm excited. I mean, I'm going to be there. There's gonna be over 250 Close to 300 people that have already RSVP they will be there. So come out, you know, rub elbows with the who's who in commercial real estate, and we will see y'all in the next one. This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls. Learn how to confidently buy your first commercial property today@www.cr e launch pro.com