Listen to This Before Buying your First Commercial Property (Office Hours)

In this week's Office Hours, we're diving deep into the hard lessons of real estate investing—what people wish they knew before they jumped in. A recent Reddit discussion in r/realestateinvesting revealed some brutal truths about real estate, from unexpected maintenance costs to tenant nightmares and overestimated cash flow projections, and we're going to talk about the things you should know before you start buying commercial real estate.

Get commercial real estate coaching, courses, and community to jumpstart your investment journey over at CRE Central: www.crecentral.com

Key Takeaways:

• Budget conservatively for unexpected maintenance costs when buying older commercial properties. Factors like HVAC issues, plumbing problems, and deferred maintenance can lead to significant unplanned expenses.

• Scaling up in commercial real estate can help minimize maintenance costs per square foot. Larger properties often have economies of scale compared to smaller, lower-cost properties.

• Prioritize finding quality tenants and building strong relationships with them. Bad tenants can make an investment experience very difficult, so proper tenant screening and management is crucial.

• Consider hiring a professional property management company rather than self-managing. While it costs more, it can save time and headaches in the long run.

• Hands-on experience is invaluable in commercial real estate. Finding a partner with expertise can help navigate the initial learning curve.

• Focus on acquiring quality properties, even if the upfront cost is higher. This can pay off in the long run with fewer maintenance issues.

• Recognize that commercial real estate investing, while more passive than a full-time job, still requires ongoing work and oversight. Setting up the right team and systems is key to scaling.

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:

Tyler Cauble 0:00

This episode of the commercial real estate investor podcast is brought to you by my cre accelerator mastermind, where you'll get access to my step by step investment blueprint, essentially a library of resources on how to invest in commercial real estate. You'll get connected to a supportive community of other commercial real estate investors that are doing projects just like you. You'll get personalized coaching and feedback from me every step of the way. Go to www dot cre central.com to learn more. Welcome back to the commercial real estate investor podcast live from the combo group Studios here in Nashville, Tennessee. Today, we're diving into another round of office hours. You've got questions on commercial real estate, and I'm here to answer them, at least to the best of my ability. Today we're gonna be diving into a an interesting Reddit thread on what investors wish they knew before diving into residential real estate. I'm going to relate that to commercial and we're going to talk about all of the things that I wish I knew about commercial real estate before I jumped into it. And I want to hear from y'all, question of the day is, what do you wish you knew before you jumped into commercial real estate? I know there's a lot of lessons learned that we could all take away from that. We'll dive into kind of what I've been up to, what I've got coming up. We'll jump into the Reddit thread, and then we're going to open it up for your Q and A and I'm going to dive into all of your questions. So this past week has been a good one. Wanted to let you know, if you're in the Nashville area every other Thursday, I have a commercial real estate investors breakfast. Really, it's usually just coffee hanging out at retrograde coffee 7:15am on Thursday. So we just had one last Thursday. So the next one's probably in a week. If you're listening to this, I don't know when you're probably going to listen to it, so shoot me a message on Instagram if you want to get added to that invite list. It is open to anybody that is interested in investing in commercial real estate. Wants to just come and hang and talk about commercial properties and what we've got going on. It's a great group of people. I was in Chattanooga on Friday, meeting with a bunch of subs, getting ready for our self storage development out there. We're building 350 indoor, climate controlled self storage units within two of the buildings that I own at the peerless mill. It's gonna be a very fun project. I'm really looking forward to that, because it's really it's interesting, right? It's gonna be a lot of fun telling you guys about it. We're gonna about it. We're going to document every bit of the journey, of course. But I am in a 1031 exchange, and so I sold a property at the end of November. We basically, at this point, have 120 days, give or take, to spend one and a half million dollars building this thing out. So it's going to be quite a journey, that's for sure. So looking forward to that, we were up there all day, meeting with subs, touring the space, met with a couple of the tenants that we have out at the property there, and about to have to replace one of the roofs, which is never fun, but sometimes you just have to do it right. It's like $150,000 that we were not hoping to spend. But hey, I guess it makes the building better, keeps the tenants happy. In the next couple of weeks, I'm actually going to be down in Atlanta for a day. Basically, we've got a one of my Siri accelerator pods. So if you're if you're in the mastermind, we break everybody out in these four to six member pods, where they get together once a week, or once every two weeks, and have their own calls and kind of hold each other accountable and underwrite deals together, dive into projects together, all that kind of stuff. I have my first pod organized meetup, which is really cool. I'm really excited to see that, so I'll be down there for the event. They've got a pretty big private equity fund that's going to be coming and talking to the group as well. Couple of friends of mine that own a fund out there, really a syndication, the guys that actually taught me how to syndicate, I didn't know anything about it until I met those guys at Greenleaf, at a at a mastermind back in like 2017 so really cool to be going down there and hanging out with them. And then also, if you're going to, if you're interested in any conferences or events, this year, I'm speaking at the best ever conference in Salt Lake City, March 3 through the fifth. So if you're planning on being there, or if you weren't, and now you are, come say, Hey, I'm going to be there hanging out. And so when I am, when I'm not giving my talk, I'm gonna have a lot of free time, so I want to hang out with you guys and talk more about commercial properties. All right, let's dive into this Reddit thread. We're gonna have a discussion around what you wish you knew before diving into real estate, and then we'll jump into your questions. So this one popped up for me this morning. I thought it was pretty interesting. Things you wish you knew before you invested in residential real estate, obviously, it's residential. We're going to take the commercial approach. A lot of these same lessons do apply to commercial property owners. So kicking off the thread, this person saying, if you're buying older properties, you won't catch everything in the inspection. There will be deferred maintenance that only pops up once. Uh, some like a tenant, is there slow leaks, HVAC issues that happen intermittently? You should budget for your initial rehab and monthly maintenance capex, but you should also expect the first few months of occupancy to have a greater than normal cost of repairs and maintenance. That is exactly why, when you're buying commercial properties, you come in and approach it in a very conservative manner, right? You want to make sure that you have a contingency budget built in, a CapEx budget built in because while inspections come back and say, everything is fine, more often than not, not everything is fine, and you just won't know until somebody is occupying that space full time, or honestly, the seller is not going to tell you, and then you take it over, and the first thing the tenant tells you is, hey, we've got a problem. That's always great to learn. It's when you first buy a property. For example, the building that is actually in the thumbnail of this of this video, of this live stream. That's a building that I bought. It was my first property, $575,000 a little 6000 square foot building in a suburb here in Nashville. And everything came back on the expect on the inspection, perfectly fine. Two months in, the HVAC blows out, and it's a very interesting system. They somehow managed to get this entire thing into the basement of the property, which, if you saw the access to the basement, like this thing needed a crane. You have no I have no idea how they got it in there. So we ended up having to get all of that hauled out and replaced. And we decided to just put it back into the basement instead of putting anything on the roof, because we didn't have too much roof space, just with the way that, like there was a penthouse, and it was kind of awkward, ended up costing us $20,000 $20,000 like, two months into owning this property, had no idea that I was going to be spending that, but fortunately, we came in conservatively. I had enough of a capital expenditure capex budget to cut to more than cover that, and so I was able to just draw down on our line of credit from the bank to pay for that. And it was, it was great, because I didn't have to go to my investors and ask them for more capital. That is the last thing that you want to do when you're raising money from investors to do these deals, is to get in something breaks, and now you've got to go back to them for more money. It also just starts to one, it hurts your relationship with them. Two, it hurts their cash on cash returns because they're just putting so much more cash in. Yes, having a loan for $20,000 will also hurt your cash on cash, but not like it will if you're actually having to put pure equity in the next comment, they say is properties in low cost of living markets are attractive if you don't have a ton of initial capital, but there is a downside. Buying a $120,000 property and renting it for $1,500 a month is great on paper, but roofs and central HVAC systems cost the same on a rental unit that rents for $1,500 and a rental unit that rents for $2,500 we talk about that a lot in commercial real estate, right? Because we see you always hear, hey, just scale, right? Because if you scale, you kind of start to minimize a lot of these issues. It's incredibly true, right? I mean that $20,000 HVAC system that I had in that property would have accommodated, I mean, more than I'm in a 30,000 square foot office building that I bought now back in 2019 that is probably about as much as I spend the units here, maybe a little bit less, but you get my point, like, That's a lot of money for such a small property. So if you're going to go and buy commercial real estate when you're first starting out, yes, these lower price points are very attractive, but they are going to have some aspects of the property that you'll have to maintain and repair that are just as expensive as it would be on a bigger property where you're making more money. So that's why commercial real estate is so attractive. You can go and raise capital for these deals and go bigger, right? Because investors do want to be in real estate. A lot of people that you know probably would love to invest with you if you're able to go and find really good deals. I'll give you an example. So we built the wash back in 2021 delivered it in 2022 if you're not familiar with that property that I did, it's a six Bay car wash that I converted into five micro restaurants and a bar. Well, it's 2400 square feet total, right? The size of one restaurant. It cost us over $1,000 a foot to build that out. To put that in perspective, you can build a house for $150 foot, $165

a foot, $1,000 a foot, because even though it's only 2400 square feet, I still had a lot of fixed costs that were the same no matter how big the restaurant was. I mean, to a certain extent. Debt, right? We still had to build a grease trap. We still had to do a walk in cooler for every single unit. We still had to do a hood vent for every single unit. Same with, you know, hand washing sinks. I mean, there's a lot of infrastructure there that regardless of whether we had six restaurants in 2400 square feet or 50,000 feet, is basically the same cost. So it can be very expensive doing these, doing those smaller deals, it just can't I like them, depending on what it is this person is saying, a single mom with younger kids and a good government job is absolutely the best tenant. So talking about the quality of your tenants, that's why a lot of banks much prefer bigger corporate entities as opposed to smaller mom and pop shops, right? I love small business as much as the next guy, probably more than to be honest with you, because most of my tenants are small businesses, and I'm very focused on that intentionally. But I also do have to pay a price as an investor for doing that. We get a higher benefit on the community side of things. But banks don't like it as much. They just don't tend to like credit. And they're they can be generally fine with it, but if you're comparing a local Mexican restaurant that has five locations to $1 General, they're gonna give you more money in better terms to buy $1 General all day than they would the local Mexican restaurant, right? They just see it as riskier. You know, for many reasons, some valid, some not, but it is something to keep in mind. You know what? What kind of tenants are you going to be having on your property? This person saying the tenant is going to make or break your real estate investing experience. Bad Tenants are going to make your life hell, especially if you were self managing to start. Please don't self manage. Please don't self manage. I tell the members of my mastermind like, Yes, can you self manage? Of course, can you make an extra 500 or 1000 or even 2000 bucks a month by self managing? Sure, that's a lot of work to save that little amount of money, right? And I'm not saying that $24,000 is a little amount of money. I know it's a lot, but when you start to put it in perspective that your time is better spent finding the next deal and building a portfolio versus managing what you already have, and you can only, like you can get away with paying somebody only $24,000 a year to take it completely off your hands. It's a great way to, I mean, that's that's tough to argue against. Right right? Tenants do make or break these commercial real estate investments. I mean, if you're buying a property, right, that is commercial, you're probably going to pay some sort of cap rate if you are buying it with a tenant in place, right? You're buying the net operating income that comes with that property. The lease there and the tenant that backed the lease are incredibly important, because if you've got a bad tenant that just decides they're not going to take care of the property, or they're going to stop paying rent because they can't, or they don't want to anymore, or they just move out, you've lost all of your income, right? And so make sure that you have a good relationship with your tenants. I go out of my way to build relationships with the tenants, because I want them to know, if there's ever any issues, call me like, I'll take care of this. You know, I genuinely care about what you've got going on. Say, you can analyze all you want, but at some point you're going to need to take action and start making some offers. You will learn as much through the process as you can through all the podcasts and books in existence. Damn, is that true. That's so true. Yes, you can, you can stack up knowledge from podcasts, books, go into coffee with other investors, right? I always felt like, oh, man, you know, like, before I bought my first property, I was like, there's one more coffee I've got to have, and then it's going to click, there's one more book I'm going to read, and then it's going to click. It honestly didn't click for me until I bought my first deal. Having gone through that experience, having actually raised money from investors and having those conversations, having actually applied my knowledge of how to lease and manage properties, having actually gone through a full cycle on a deal I learned infinitely more than I could have from just reading about it, right? And I'll put it this way, I went and took a cc im development class. It was like the first one, I think they ever offered. I want to say it was back in 2016 2017 and this was when I had I had done my first development deal. We had started in 2015 so I had gone through the actual hands on boots in the trenches, experience of developing my first piece of commercial property and going through a class afterwards, because I still wanted the formal knowledge. I. Was honestly, really surprised one I knew everything that they covered in that class, and more and a lot of the stuff that they talked about in the class. And I'm not talking about about CC im, I love CC im, I'm just saying the difference between hands on experience versus classroom. I felt like walking out of it. If I hadn't done a development deal. I don't know that I would have had my head wrapped around how they actually work. I really didn't, because the amount of I mean, maybe I'm just much more of a kinetic learner, but going through the process, you learn it infinitely better than you would otherwise. I just genuinely believe that. So look, if you're, if you're sitting there and you're thinking to yourself, Okay, well, yeah, but how the hell do I go about doing that? I've read the books. I just can't find my first deal or whatever. One you're in the right place, right? I've got a bunch of podcasts and a bunch of videos on all of this stuff, right? So one, get the base level knowledge, right? Build the foundation of the house you're building, right? But two, get out there and find a partner, find someone that has been there and done that, and find a way for you to do a deal with them, right? That's what I did. My first development deal. I partnered with an experienced developer who had done everything before I went out, I found the deal. I ran the project for two years, and of course, they were there to help me, right? They provided me with their resources. They had all the cash. They brought the debt to the table, right? So I didn't have to worry about any of that. And without that, I don't know that I could have gotten that first one off the ground. I mean, it would have been unbelievably difficult. So find a partner, and, and, and, you know, there's a couple of different ways you can add value to people like them. One, go find the deals right? Be the person that understands how to look for, analyze and find these deals, because that's incredibly valuable no matter where you are, right? If you're just getting into commercial real estate, start knocking on doors, cold calling, network with everybody and underwrite a deal a day. You know, we've got a couple videos on this channel about underwriting. I think I was telling somebody this this morning, the most valuable skill that you can have in commercial real estate hands down is being able to find and analyze deals. It doesn't matter what direction you want to take in commercial real estate, whether that's brokerage development investment, doesn't matter. Being able to find and analyze deals is hands down the best skill that you can have. So dive all in on that. Figure out how to do it and then start making those those outreaches, right? I would get to know investors really well, learn what they looked for in a deal, and then I would go find that deal. Would I get a minority share of it? Of course, I'm not the one bringing the cash. I'm not the one bringing the track record. I'm not the one bringing the bank to the table, but I found the deal, and that's pretty damn valuable to a lot of people, right? Let's see this person's saying, buy quality in order to hopefully buy once. This can be appliances, flooring, etc. I would also say that applies to buildings. I mean, yes, you can get cheaper buildings that are more run down, but unless you have a lot of experience repositioning these assets, going through renovations and actually dealing with the headache that can come from older, worn out systems, right? I mean, the plumbing at peerless mill is an absolute nightmare. There. There are pipes running zigzag across that property. It's 32 acres with 29 buildings on it.

We know that there's plumbing and sewer there, but in many cases, we can't find it. Like we don't know where it goes, we don't know where it starts, we don't know where it ends. I mean, the property is over 100 years old right? Now, I'm able to work through that. I've done this before, but it's still a headache for me, right? Like, I have the experience of doing this stuff. It's still a lot of work. To be fair, even the city doesn't know where some of the plumbing is, which I think is hilarious, but it just shows you how complex these older properties can be. So buy quality. You know, yes, are you going to pay more? Sure, but here's the thing, if you have a nicer property with a more stable tenant, I would bet, over a five year period, comparing that to a higher cap rate property with a lower quality tenant, you're going to put far less work into it, and yeah, maybe you'll get a little bit less of a return. But I would bet, if you actually go back and run the math of having to replace an HVAC unit, or having to replace a roof because it went bad or or your tenant moves out, and it takes you six months to fill it. I bet it's not all that different, and it's a lot easier to deal with a property that has a high quality tenant that doesn't require a lot of maintenance than it is to do the exact opposite. Let's see real estate investing. Is not passive. Don't let others fool you into thinking that it is. I love that, because we talk all the time about passive income in commercial real estate. Is it more passive than other types of income you can make? Hell yeah. But is it truly like sitting back, you know, reading a book, sipping coffee, you know, until 10 in the morning, doing nothing but collecting checks. No, it's not. It's, it's way more passive than your w2 hands down, it's, it's more passive than a lot of things that you could do. But there is still work required, right? You still have to go out and find these deals, you still have to go out and manage the property manager like even if you're not the one managing it right, you still have to manage the property manager or manage your accounting team to make sure that you're getting your taxes done properly and K ones are being sent out to investors. There's still always stuff to do. Now that being said, I probably spend fewer than five hours a week on my portfolio. It's over $65 million in assets, right? Because I've got the right team in place to do all of this stuff for me. I've got an accounting team, I've got a property management team, I've got a leasing team, I've got a site selection team, right? I've got guys that are going out there and looking for deals for me, so that I don't have to be the only one that's always doing all of that. That's how you start to really scale this and make it more passive. But it's never truly passive. Let's see the best syndications don't often advertise and are based on who you know. That being said, I'd advise to buy your own properties whenever possible to retain full control of decisions. I like that because I have a lot of investors that. I mean, look, I've got over 2000 investors on my investor West, right? They invest in deals with me that I'm buying. Every now and then, I'll have people say, I want to invest with you, because I want to learn how it works. Well, that's great. And I'm always happy to be, I'm always happy to be, you know, as open of a book as possible. But when you're investing in a syndication, you're really not seeing the day to day. You're really not going to learn all that much. You're going to see what it's like to go through as an LP investor, and you're going to see what it's like to, you know, sign the legal documents and to get your monthly or quarterly updates and to get your distribution checks, and maybe, you know, an annual site tour, or something to that extent. Right outside of that, there's really not a lot of opportunity for you to go out and actually learn what's going on or how they're doing a lot of the things that they're doing. I love investing in syndications, right? I mean, I'm at a point now where I'm starting to consider that a lot more, because I used to be on the active site. Active side, so I kept my cash for me to do my own active projects. Now I'm moving more into the you know, I'm going to probably start investing, over the next few years, more into other people's deals and letting them do all the work so that I don't have to do that anymore. But buying your own properties and actually going through the process is still the best way to learn. Last one I'll cover. Finding a quality property manager is nearly impossible. They'll never take care of the property like you do. Painfully true. It's just one of those things. Are you willing to give up 100% of the control for 80% of the quality, right? And to me, the answer is absolutely right. I don't have the time to go and do all of this. Is every single little thing going to be done to my exact specs, probably not, but 80% is better than 80% of somebody else doing it is 100% better than me having to do everything, hands down. I couldn't scale. I couldn't do all of this without it. So that's why I was saying earlier. You know, you still want to keep an eye on the property managers. You still want to have conversations with them. You still want to be active. If you completely abdicate and like, give it 100% to a property manager for them to do everything, you're probably going to have problems because, yeah, they're not going to take care of it in certain ways that you would, right. They might be looking at it as you know, I need to make sure that, you know, we're returning our owner the distributions that they want, thinking that's what matters to you. Instead of I should go ahead and replace this HVAC unit before it becomes an issue, because that's what the property owner would probably prefer, right? It's spending money, but you might prefer that to keep your tenants happy, to keep them there longer. You know what I mean, like, they're still thinking the right way based on what they may think you want. So that's why it's so important to just keep all of that kind of, kind of in check. All right, guys, I'm gonna go ahead and open it up to y'all questions. We'll dive in on these. Geez, we got a lot. Okay, keep them coming. I love this. Angela and David are saying, As a recent retiree and commercial real estate, not. This. I wish I knew that support from other commercial real estate agents and brokers is difficult to find. Unfortunately true. It's unfortunately true. That's when I was first getting started in the industry. What I found, because I started off with a boutique firm, right? A boutique developer, I was basically the only guy in house doing any commercial real estate brokerage. Everybody else was on the everybody else was on the project management, construction development side. I had no support. Nobody wanted to teach me how to do anything. Nobody cared about the leasing side of things. They were more focused on actually building new projects. And I found I figured, hey, I'm gonna call these other commercial real estate broker real estate brokers. I'll buy them lunch, I'll pick their brains. And there were some that were willing to share information and be supportive and help. Most were not. In fact, I had some very bad conversations around that of agents basically blatantly saying, Go do your own work. I'm not going to help you. And it's not like I was asking for help. It's like, Hey. I mean, you know, talk to me about how you came to this valuation for this property. I'd be very curious to know that, right? Because I didn't know. I didn't know. I literally had an agent one time. It was like, that's not my job. My you need to figure that out on your own. I was like, Okay, I mean, I get that. So, yeah, it could be, it could be very difficult to find support from other commercial real estate agents and brokers, and that's why it's very important to, one, make sure that you had a great brokerage with a great team. But two, just build your own network. You know, join a mastermind, join CCIM, join Uli and go spend time with those people. Jonah is saying, Hi, Tyler, good morning, Jonah, thanks for joining us. Rich. What's going on? Man? He's saying, one on vacant retail space. Does finish out on a play? Finish out on a play? Does finish out play a big factor on lease up time, for example, listing shell space for lease and giving tenant improvements versus having the space being white boxed. It's a good question. So it really depends on your market. I mean, I hate to use that as the answer, but everything in commercial real estate depends. It depends on where you are, the size of the space depends on the quality of the building. Like, if you're in, you know, downtown Nashville, I would say go for white box, right? Because whoever's coming in is going to want to completely build it out on their own, right? But if you're out in the suburbs, you may want to just go ahead and finish it out to a certain extent, right? I mean, maybe there's no interior demising walls, but go ahead and put the restrooms in the back. Go ahead and put the drop ceiling in, just things like that, to help a tenant move faster. It depends on how your local market is moving. If you have a lot of tenants and there's a lot of space, more often than not, they're just going to go to the next space and sign a lease at whoever's going to make it the easiest on them to where they don't have to wait. But if you're in a market where it's really tight, there's a lot of tenants looking and there's not a lot of space available, so high demand, low supply, you may be able to just get away with with white boxing and giving them tenant improvements, because they're more willing to spend the time to actually build out their own space.

He's saying too on your 1031 exchanges, exchange construction for peerless mill. So it seems like you were able to do a 1031 construction on a property you already own. I didn't think that was allowed. Good question. Rich, so it's because I am not 100% controlling of or 100% owner of either entity. I am a partner in both of them. And so what we're doing is we're buying in as a Tenants in Common into the property so it will own its own piece of the property. Rich. Hilarious is saying, Tyler, have you explored salon suites? We list lease two spaces and operate them, and they're quite profitable per square foot, 750 to $800 in rent for 120 square feet. We're looking to build one from the ground up. Now, I've not personally looked into doing any of these, like on the investment side. When I first got started in commercial real estate brokerage, we did have a pretty big salon suites that did that, this exact same model. They went and built it out, and then they just subleased basically each individual suite to somebody else. They can be incredibly profitable. Yeah, I mean, there's a lot of plumbing that you've got to do in these build outs. There's a lot of, like, kind of lot of like kind of headache with the build out side of things, but if you're willing to go through that, absolutely. I mean, the deals seem pretty lucrative, and they work. Andy is saying, I'm under contract on five acres currently zoned residential. County would allow rezoning to light. Industrial. If I build a small, multi unit flex space, the county said I wouldn't be able to rent to any commercial tenants. That wouldn't make any sense for the county to say that if they allow you to rezone to white industrial, I they may be, they may be being very technical with the way that they are saying commercial because technically, there is a difference between a commercial tenant and an industrial tenant, right? So they may be thinking that when you say commercial tenants, you know business, right, like retail or something to that extent, whereas you're you're technically talking industrial. So I would just make sure to review the zoning code and be 100% confident in what light industrial will allow you to do in that space. Shouldn't matter. In light industrial if you're doing flex space or one giant warehouse, right, as long as the businesses fall under that zoning code should be fine. Rich is saying, when buying a commercial property, do you hire a general inspector or bring in the trades? I had an inspector come on in on a flex and they missed a ton of electrical issues. He's saying, in hindsight, I think it would be better to hire an electrician, HVAC, tech, roofer, etc, instead of an inspection report. So Rich, I think, I think it just depends on on what you're comfortable with. I never bring in trades just to go through and inspect a property. A couple of reasons. I mean, one, I can I'm comfortable enough with my own inspection of a property that if we need to get an inspector in there, I kind of know what's probably going to come back, but at least we have an official report. Yeah, they're probably not going to catch every single electrical issue. I mean, there's just no way that any inspection is ever going to catch 100% of everything. It's impossible, because if you think about it, they can't see through walls. There's no telling what's going on in there. So that being said. I mean, you know, hey, maybe on your next building you have an electric an electrician, come through and take a look at everything. But generally I don't even have inspections done. I mean, I can kind of tell what's going on with the property whenever we're taking it over. But I do like getting PCAs. It's a property condition assessment. You know, group like Terracon will do that for you. We use Terracon for a lot of things. They really kind of make it simple for you. And, I mean, they'll put together, like, 100 page reports. But there's just, there's just some things that you really, really can't catch. That's what I was saying earlier. You know, you may want to just budget for things that pop up. You never know, options Equity Series saying those grease trap trenching can get so expensive, yeah? Talking about the wash, yeah. Grease traps very expensive because, I mean, for a grease trap, you know, they're like, 1500 or 2000 gallons, right? They're massive. Actually shared a picture of me standing in one that we put it into my hotel. I mean, I'm at the very bottom of this giant pit. And, I mean, it's a lot of digging, and that's a big piece of, you know, equipment, so starts to add up for sure. Let's see here, I got somebody dropping Bible verses in here that doesn't really make any sense for commercial real estate, but cheers to that. Andrew is saying, What can I expect from a second interview for a commercial real estate, investment sales internship. It's a good question. Andrew. Let me know how the first one went, and kind of what you're going for, and I'm happy to kind of give you my feedback. But if you're going back for a second interview, I would imagine they probably liked you in the first one. You know? I mean, look, the biggest thing as as an intern, is that you don't want to be a burden on whoever you're interning for. It's really tough to, like I do interns almost every summer. It's really tough to deal with them sometimes, because they're great people and they work hard. There's just such a steep learning curve for commercial real estate that it makes it really tough to kind of bring them on, catch them up to speed, and then actually have them doing anything. So I mean, honestly, like, if I were you, I would try and showcase your knowledge around commercial real estate and kind of what you've been focused on and what you've been learning so far, Rich is saying, Would you self manage even as a commercial broker? Hell no, I, I would. I don't like self managing properties. I really don't. I don't. I don't know exactly what you mean by as a commercial broker, though, but no, I mean. I, I'm not into self managing properties. One, it allows me to keep every conversation I have at arm's length, right? So I don't have to worry about feelings or upsetting somebody or whatever, right? But two, also, it protects me, right? I get to, you know, have a filter of a property manager, because sometimes somebody will say something, and I just default to like they're being insulting, like, you know, Oh, you want, you know, you want to dispute your cam. That's, I mean, you can dispute it all you want, but the cam is what the cam is like idiot. So having a property manager there helps me filter those conversations a little bit better. So, yeah, I'm very against self management. That being said, I may not own a property management company, so I guess, in a way, I do self manage, but I have a whole team that does all of that for me. It's very different than being the actual person managing the properties. I just I don't like that. I mean, in my opinion, like self managing commercial properties is kind of like, like being a part time or like aviation enthusiast, right? Like you like to go fly, you know, once a month, or whatever you got your pilot's license, that's great. Those are the people that are more likely to get into aviation accidents than your commercial guys that are doing it every single day. So I think that's a great analogy for commercial real estate. Somebody that manages part time is probably going to make a bigger mistake than somebody that manages full time. Hasten Liu is saying, hey, Cobble, been following you for four months. One question as a foreigner, how do you deal with investors like us, and how can I stay longer in your country for investing purposes? Great question to be one. I've got a lot of Canadian investors, so foreign investors that jump in on our deals, it's more paperwork on our end, simply because we have to make sure that we're complying with a lot of the reporting we absolutely take on foreign investors. So, I mean, if you're interested in investing in any of our projects, go to Tyler cobble.com/invest I think, also have a link in the description below, but, and you can sign up and get on the list and have a conversation with me about jumping in on our deals, as far as, like, staying longer in the US for investing purposes. Man, I have no idea. I don't really know how any of that process works. And I feel like today with with where our current administration views immigrants and foreigners, I don't know that that's going to be possible. But hey, we've got zoom, we've got Google meet. I'm always happy to FaceTime and show you the properties you invest in. So Austin is saying, what percentage do you ask for a minority partner or deal finder or assignment fee? That's a good question. It comes down to a couple of things. One, how good is the damn deal, right? Like, if it's a great deal, I'm probably gonna be asking for a little bit more. If it's an okay deal, probably a little bit less, right? As far as, like, a deal finder fee. I mean, just for example, that first building that I bought, that I was telling you guys about earlier, I got 10% of that deal just for finding it, putting it together. I rolled in my Commission's on it for another 15% equity. So I had 25% equity total.

So that was kind of how I did it. I had 10% in the development deal that I did without having to bring any cash to the table or signing on the debt. So, I mean, I think, I think a minority partner, it depends on your level of experience, how much involvement you're gonna have. Are you signing on the debt or not? Are you bringing cash or not? Five to 10% of the deal? Maybe it depends. It just depends on how big it is and stuff like that. As far as assignment fees, I mean, I've never really done that again. If it's a very good deal that you know is going to praise for way higher or is can make them a lot of money. I've seen six and even seven figure assignment fees. Seven figure assignment fees are rare, but they do happen more often than not. You know, 20,000 30,000 that's, that's probably what you're going to see. But again, it depends on the deal size, right? I mean, if you're assigning a $200,000 deal, $20,000 dollar deal, $20,000 makes no sense. Colin is saying, Tyler, can you explain how the wash pencils at $1,000 a square foot? That seems so high to me? Yeah, it is. But our rent is also four times market rate. So, I mean, we're getting over 120 or $130 a foot in red, whereas most restaurants are like 25 or 30 bucks, so maybe 35 today. So that's, that's how it pencils. I mean, it's a smaller, smaller square footage, right? Smaller space. So because of that, you're able to charge higher prices per square foot, which you know, the. Tenants are looking at they're not looking at it on a price, price per square foot. They're looking at it on a monthly basis, right? So it pencils for them on a monthly basis. Scorpion is saying, How can I protect lost my lost my space here? How can I protect a commercial, wholesale flip during a JV to a more experienced investor, which contracts should I use for protection? How can I protect a commercial, wholesale flip during a JV scorpion? I'm having a hard time understanding the wholesale flip during a JV. I mean, if you're if you have a partner on this deal, which is what it sounds like and you're wholesaling it. I mean, I would just get a wholesale contract in place. Just Call your attorney and have them, have them put it all together for you. Kevin is saying, Good morning from Lakeland, Florida. Good morning, Kevin. Thanks for joining us. Allison is saying, Hi, Tyler, great meeting last night. Wish I had your accelerator program before getting into CRA I appreciate that, Ali, good to see you. Ali is, Ali is one of the pod members that I was telling you all about earlier that organized an event down in Atlanta. So excited to be diving into that. Yeah, hell, I wish I had the accelerator program before I got into commercial real estate. I mean, it's everything that I wish I had back then. Great group. Jonah, Hi, Tyler, I'm 23 and doing commercial real estate appraisals. How can I apply what I'm learning here to a first deal or switching to work on the investment side down the road? Jonah, you're in a great spot, dude. I mean, like I was saying earlier, if you can understand how to better annualize deals, you can partner with the people that have money. So what I would say is spend a couple more years on the appraisal side, make sure that you get a wide variety of work and just go all in, analyze as many deals as you possibly can, because then you can partner up with investors and say, Look, I have analyzed 2000 deals in Davidson County, Nashville, Tennessee, right? I can come in and help you guys, you know better evaluate your properties, this, that and the other. I mean, that's a very valuable skill. That's the one thing that I think can be really interesting about commercial real estate, is you don't have to be a well rounded investor if you were outperforming other people in one aspect of it. That's all it takes, right? For example, I'm really good at finding deals and putting deals together like that is, hands down, my superpower. I'm better than a lot of people with that, not everybody, but a lot of people, I can't stand raising capital I get. It's just not a thing that I enjoy dealing with the lending as well. Can I do it? Hell, yeah, absolutely, dude, I will pound the phones and and, you know, beat my chest until I finally get enough investors into a deal. But I'm not spending 100% of my time wining and dining investors and dealing with banks, right? I'm spending more of my time finding deals, whereas there are guys and gals in commercial real estate that focus on raising capital and building those relationships, why not just partner with them on a deal make your life so much easier? That's kind of how I feel about it. So if you're really good at the deal valuation side. Man, that's a huge skill that a lot of investors will find very valuable. Man, ma'am. You guys don't realize how hard it is to just talk for 45 minutes straight, until you get up here and do it. Daniel was saying, what type of commercial real estate would be good for someone in Chicago? Thanks, brother, any type of commercial real estate, man, I think it just depends. I know that's a terrible answer, but it depends. Are you in downtown Chicago? Are you in the suburbs? I think, more than anything else, it's all about the deal. I think any type of commercial real estate can be a great investment. I really do. I think office could be a phenomenal investment today if you get the right deal. And I think that's what really matters. So Daniel, I would spend some time studying the market and try to figure out where the opportunities are right. What is selling for a price per square foot that's cheaper than anything else? What opportunity are people missing? What types of businesses are looking for space that can't find it? All that stuff matters. Joe is saying, other than talking to a realtor, what are some ways on finding rental rates for flex to underwrite? You could go on loop net, and you could look at what people were asking for rent. You could also go and look at flex space investments that are for sale in the area and see what the rent rolls those offering memorandums might have rent rolls in them on those properties that are for sale. So you can go and do that hands down, though, the easiest thing is to just call commercial real estate agents in your area. Jonah is saying, Can you do a video where you go through loop net costar properties for sale and how you determine which ones to look further into? Sure. Yeah. I mean, I've got a couple videos like that on this channel I just haven't done in a while. But yeah, I'd be happy to do that sometime. I. Ronald, I have light industrial with seven California tenants. Congrats, Ronald, I thought that was gonna go somewhere else. That was it. All right. Scott lofwood, what are your thoughts on the price we pay and the value we receive for the commercial real estate we have diverged over the last couple of years thoughts on the price we pay and the value we receive for commercial real estate. Oh, how they have diverged. Oh, Scott, I think some parts of commercial real estate have gotten too expensive, and I think some are on sale. So he's basically saying like we're paying more or paying less, but the value that we're getting in return is not as great. Back in 2013 when I first started looking into deals, you could buy a self storage facility like a 15 to 18% cap rate. Nuts, 15 can you? Can you imagine a 15 to 18% cap rate on a self storage facility today? Pretty wild. I would love that. Oh my gosh, if I could find them. That would be killer. Today, those same buildings are below a 7% cap rate, right? So the value has exponentially, got up. It's the same with multifamily. Like I stopped recommending to my investors to buy multifamily back in 2018 back then, I saw that cap rates had gotten too compressed. The value didn't make any sense. You had a lot of dumb money going into apartments. In my opinion, there's a lot of dumb apartment investors that are willing to do all of that work for very little return. And that's dumb, like I'm not here. Like, that's so much work and so much risk to make a 12% IRR, why would you do that? Go invest in a REIT. I mean, come on, invest in real estate stocks. You'll get a nine to 11% return. Like, why even bother? You don't have to do anything for it. Why bother with all the effort. So, yeah, I mean, I think that there's a big divergence between the two, and I think that today it's more about finding the right deal, right? I mean, that's why I won't touch apartments. It makes no sense to me. A lot of industrial doesn't make sense anymore. Are you kidding me? Some of these industrial buildings are going for 5% cap rates. That's insane. It doesn't make sense. So, I mean, you know, I That being said. I mean, there's a lot of private equity and hedge funds and REITs that have jumped in and raised a lot of capital, and guess what? They can afford to get worse returns than you or I could, and they don't care. They're happy to do it because that that guy at the hedge fund has been given a billion dollars that he has to spend in the next 12 months, and they don't care how he gets it done. He's just got to spend the money, and that's how that happens. So, yeah, I mean, I'm not a I'm not a fan. I do think there are still great returns out there. I mean, we just exited a deal last year that had a 41% IRR, right. You couldn't do that in multifamily or most people are not right. So I think the deals are out there. You just gotta go look for them. Nate Scott, what return are you seeing on land leases to credit tenants, and how do you calculate the lease amount? Good question. Nate, I'm gonna be honest with you, man, I am not your guy when it comes to land leases. I'm in Nashville, Tennessee, where we have way too much land to really be doing a lot of land leases that

being said. I mean, they're not entirely uncommon here. It's just not. I mean, well, let me rephrase that. They are entirely uncommon here. They they're few and far between. So I would probably talk to somebody in New York about how they figure that out. At the end of the day, it's kind of one of those things where you're probably not gonna be able to find a lot of comps for it, and it's whatever you guys kind of come to an agreement on. Honestly, John is saying, when pulling a list for direct mail and industrial buildings, what are you filtering out for data? Probably, probably the only filter that I'm gonna do is based on square footage, right? How big is the space and how long has the owner owned it? Because if they've owned it for more than seven years, chances are good. It's not a private equity firm, it's not a read, it's not a hedge fund. It's probably a smaller investor, right? Because most of those guys are selling every five to seven years, so you have a better opportunity to make a deal with those guys. Joe, what impact do you think tariffs will have on the market? I can only imagine industrial in the US would grow for manufacturing. Yeah. I mean, I think that industrial could certainly grow. I think that tariffs will have a horrible effect on the market overall, though. I mean, that's the funny thing about tariffs, man, they're not a good idea, and there's no point in having them if we wanted to have more manufacturing in the United States. Incentivize manufacturing in the in the United States. Don't punish American citizens for finding cheaper goods abroad. I mean, the problem is, if you. Look at the way that the US has treated blue collar jobs for the last 50 years. Of course, we have a lack of manufacturing. Nobody wants to get into those kinds of jobs because you're basically shamed for it. Everybody's told you have to go to college, you have to get an office job. You got to do this. You got to do that. Dude, there are guys that are HVAC technicians and electricians and plumbers that I know that are making six figures a year and crushing it and doing better than a lot of the people that I know that graduated from college with a with a graduate degree. Obviously a tangent here, but I think that that there's a lot more systemic issues that we have with regards to manufacturing. So yes, could industrial grow because of that? Sure, we're starting to see a lot of vacancy sitting on the market in industrial though we've gotten over built in many markets. I also think if tariffs go into effect, they're going to directly hurt the American consumer, who is the person that is buying all of the goods that is being stored in all of these warehouses? If the American consumer stops spending as much money, then everybody's going to have a problem, right? I mean, you look back at 2008 2009 nobody was really spending any money, and it caused all sorts of industries to come to a complete halt, right? So kind of scary, saying I should make a video about that. Yeah. I mean, I wouldn't. I wouldn't mind. Problem is, like that venture so far into the political realm, I don't like getting political, so I don't know. We'll figure out how I could navigate that. Maybe I could just keep it straight to the facts and try to keep my opinions out of it. Scorpion is saying, How can I have you analyze a commercial mixed use building deal in New York City without with a motivated out of town owner? Scorpion, the only way to do that, honestly is is to be in the mastermind. We analyze multiple deals a week with members of the mastermind Siri accelerator. So you're welcome to go check that out and book a call with me about joining otherwise, I would just say, see if you can find an underwriter local to New York City that could do that for you. All right, last two questions, because I have got to run. Got to get on site at Salt Ranch, see how our construction is going. Rebo is saying. What markets are you most interested in? Nashville, Tennessee, Chattanooga, Tennessee. I think Louisville, Kentucky is interesting. I think that Birmingham, Alabama, Huntsville are interesting. I love Charlotte. There's some really cool pockets going on there. I think Denver is really interesting. Austin used to be one of my favorite cities outside of Nashville, and I think that Austin is is a bit over built, so it'll be interesting to see what happens there over the next few years. Trying to think of where else it's probably kind of it. I mean, those are, those are the major ones for me, at least TED is saying, what techniques do you suggest to find a tenant? Before purchasing a property? One, hire a commercial real estate broker to go to any sort of business networking events. Three, get some signage up and run some ads. I mean, there's a lot of things that you can do, but hiring a broker that is very familiar with the market makes it a lot easier. So, for example, you know, we did a property here in East Nashville, but that's where my brokerage team works. That's where I work. We spend all of our time over here getting to know everybody. And I put a building under contract. We had a lease signed before we closed on it, because we knew all of the businesses that were looking for space. The other thing you could do is go and build a relationship with a business that is looking for space, and then go buy a building specifically for them. We've looked at doing that too, so you basically have a tenant in hand as you're going through that. Appreciate you guys joining me today for another round of office hours. We do this live every week, Tuesdays at 8:30am Central Standard Time. Love all the questions. This is great, guys. This might have been the most questions that we have gotten in such a long time. So I appreciate you guys jumping and doing this. I'll see y'all in the next one. This episode of the commercial real estate investor podcast is brought to you by my cre accelerator mastermind, where you'll get access to my step by step investment blueprint, essentially a library of resources on how to invest in commercial real estate. You'll get connected to a supportive community of other commercial real estate investors that are doing projects just like you. You'll get personalized coaching and feedback from me every step of the way. Go to www dot cre central.com to learn more you.