Get Rich Education 569: Star of A&E’s "The Real Estate Commission": Todd Drowlette on Big Deals, Big Drama & Bigger Negotiations
Todd Drowlette, a commercial real estate broker with over $2 billion in closed deals, joins to discuss his upcoming A&E show, "The Real Estate Commission," which premieres October 12.
Todd emphasizes that commercial real estate is "a trillion dollar industry hiding in plain sight."
He points out that people interact with commercial real estate every day - when they go to a grocery store, coffee shop, gas station, or office building - without consciously thinking about it.
Commercial real estate loans are about to face a major challenge, with many 5-year loans needing refinancing at much higher interest rates, potentially creating significant market opportunities for investors.
Check out the "The Real Estate Commission" show on A&E starting October 12th.
Resources:
Follow Todd Drowlette on Instagram at @bettertalktoTodd and check out Real Estate Commission
Show Notes:
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Complete episode transcript:
Keith Weinhold 0:01
Welcome to GRE I'm your host. Keith Weinhold, why is that convenience store, gas station or coffee shop located on that exact corner that it's on? It's strategic, and how does a deal like that really get negotiated? We're discussing this and more with an A and E television and streaming star today on get rich education
Keith Weinhold 0:28
since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors and delivers a new show every week since 2014 there's been millions of listener downloads in 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast, or visit get rich education.com
Speaker 1 1:14
You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.
Keith Weinhold 1:30
Welcome to GRE from Sudbury, Ontario to Sudbury, Pennsylvania, and across 188 nations worldwide, you're listening to one of America's longest running and most listened to real estate investing shows this is Get Rich Education. I'm your host. Keith Weinhold, how did that ever happen? Here I am more slack jaw than a patient in a dentist's chair. But back with you for the 569th consecutive week. Anyway, this is the time of year where many people have just gone back to school. Here at GRE you go forward to school as you learn about what's really going to make a difference and move the financial meter in your future. Now, the world's best known negotiators include Mahatma Gandhi and Nelson Mandela today, the former FBI agent Chris Voss is perhaps the world's best known negotiator. You'll recall that we've hosted Chris Voss on the show twice here and talked a good bit about real estate negotiation. Then, I mean, who can forget my mock negotiation with him over a four Plex building, which played out right here on air. It was obvious who won that debate, but Chris is an all around negotiator, not specific to real estate. I thought, wouldn't it be great to get sort of a Chris Voss, but specific to real estate here on the show for you, and that's what we're doing today. So you're really going to enjoy this week's guest. He's also the star of a real estate reality show on the A E Network that's going to make its big, flashy debut next month. Now I had a small negotiation, I suppose, over email with one of my property managers in Florida recently, yeah, I got an email from my manager saying that an air conditioning unit needed to be removed and replaced in one of my single family rental properties there in Florida. Attached was a quote that they obtained from a company for $6,350 and there's conveniently a button for me to hit to approve this charge. But I did not hit the Approve button on that 6350, price. I requested that they provide me with two more quotes. And yes, remember, you pay your property manager often eight to 10% of the monthly rent in management fees they are working for you. So what are they working on to earn that make them go to work and do this for you? All right, for substantial work items, it's a reasonable request for you to seek three quotes. And all right, while they were tracking down the two other quotes, I went to AI. I asked chat GPT, what should the cost be to remove and replace an air conditioner in a 1500 square foot home in Florida? Chat GPT answered, 5500 to $7,500. For a standard three ton system in a 1500 square foot home. All right, so the first number the manager gave me that was sort of right in the middle of that range. A few days later, the second quote came in at 6150, all right, 200 bucks less than. The first one, I replied to them that if the third one doesn't come in substantially lower, that I am going to go seek quotes myself. A couple days later, the third and final quote came in, and it was 4990, yes, so I accepted it. This is about $1,300 less than the first quote that they gave me just for returning a few emails, and it will make the tenant happy to have a new air conditioning system. Newer systems tend to be more efficient, so it's probably going to make the tenant's electricity bill lower as well, and it probably makes it easier for me to justify future rent increases too. That tenant's been there for quite a few years. I'm thinking six years, and today's low home buyer affordability is probably going to keep them renting for a while. And the other thing that could keep them there longer is a new air conditioning system, and that is the biggest rental property expense, or the most I even had to get involved in quite a while, because remember, at GRE marketplace, almost every property there is either brand new or completely renovated. Your cap x expenses should be small for years. Let's meet this week's featured guest.
Keith Weinhold 6:31
Have you ever wondered why that coffee shop is on that corner that they're on, or why your grocery store is located just where it is? And how do those deals get negotiated? That's what you'll see on an upcoming new series on A and E. It starts October 12. It's called The Real Estate Commission. There are no scripts. The show captures real life deals as they unfold, as they crumble and fall apart and maybe come back together again. The star of that show is with us today. He believes he will tell you that he's the most prolific commercial real estate broker in the nation, and he has the experience and the gravitas to back that up, because he brings over two decades as a broker, and he's the managing director at Titan commercial Realty Group in New York. He's closed more than 1700 deals. Yes, 1700 deals totaling over $2 billion across the commercial real estate sectors. He's represented everyone from local startups to national REITs. Hey, welcome to get rich education, Todd Drowlette
Todd Drowlette 7:36
thank you, and that was quite the introduction. I don't think I could pop up myself.
Keith Weinhold 7:40
You've got a full interview is worth the time here to live up to that. Todd, you know, more than 10 years ago, I started living this life where it seems like everything that I say gets recorded and uploaded to the internet, and now you're gone down that same road similar to that. Tell us about your forthcoming reality TV and streaming show that starts next month. What can viewers really expect to see?
Todd Drowlette 8:04
There's over 100 shows on national TV about slipping houses, renovating houses, residential brokers. Ours is the first show ever on television to feature commercial real estate and to be entirely about commercial real estate. So it's a docu series. It's an there's eight episodes in the season. It follows my team at Titan and I doing actual real deals, from helping a divorce attorney search for new office space to investors to selling multi family properties. So viewers will be able to kind of see behind the scenes and see actual documented deals as they happen, fall apart, come back together again. I'm hoping the viewers will take away the fact that, yes, you have to be sophisticated and understand what's going on, but it's something that the average person can be involved in. Commercial real estate is a trillion dollar industry hiding in plain sight. You know, people go to the grocery store, like you said, they go to the coffee shop, they go to the gas station, they go to their office building. People use and interact with commercial real estate every single day. It's just like the air. You're not consciously thinking about it, even though you're using it almost every moment of the day,
Keith Weinhold 9:10
right? It's something that we all need and interact with. It's almost non discretionary, whether we're buying something at a retail store or filling up at a gas station? Yeah, I think to some people, commercial real estate sounds unapproachable. And as you watch this series, you're thinking, Oh, that's the life that that somebody else lives. It's really not that unapproachable. Does this series really help break that down?
Todd Drowlette 9:36
It does, and we made a very conscious decision. So I represent some very large corporations, but the series follows like smaller business and entrepreneurs, and seeing kind of people from the beginning or in different transitions of their business, like I'm growing but you're seeing in real life, actual successful business people. You're seeing them to react to real situations and that kind of moment where there. Like, Man, I think I'm ready to grow and expand. But what if I'm wrong? What if the economy turns Am I doing the right thing? And you're kind of watching us guide them through that process. But you see, you know so much of the internet is reception and people going, Oh, look at this. Look how successful I am. This. You're seeing successful people, and knowing that there's no guarantee in life like the best you're ever going to make is a calculated decision. But there's no point where your life where you're so successful that it just doesn't matter if you lose. Like the deals get larger and the stakes get higher, and every decision you make is potentially a pitfall. So you're going to see real entrepreneurs and real business executives dealing with those decisions of, when do I move? Do I invest? Do I buy? You know, I have this property, I need to get rid of it, and what's that process look like? I love commercial real estate. I can go on, on about it. What I'll be really excited to see is if the everyday person finds commercial real estate interesting,
Keith Weinhold 10:54
doers don't wait for uncertainty to abate, or else they would never get anything done. Doers educate themselves and make strategic moves despite the uncertainty and Todd shortly, I do want to ask you more about negotiation and just how that coffee shop gets that prime corner spot, if you will. But first dropping back a bit more introspective, I know that some have called this the series that launched five new real estate careers already. So how transformative is this? Personally for you to do this show, besides making mom proud, it probably changes how others think of you and how you think of yourself.
Todd Drowlette 11:32
Well, my mom thought I was nuts to national television, but she's proud, but thinks I'm crazy and she's probably not wrong. How this whole thing came about was we had a show also called The Real Estate Commission, that was on Facebook watch that we averaged about 1.3 million views per episode. The premise of that show that was also called The Real Estate Commission, was, Can four successful real estate brokers take just anyone off the street and turn them into the next 100 million dollar real estate agent. It was two commercial brokers, two residential brokers. When covid happened, I said to Brandon in my office, who's part of the cast of the show, on a I was, you know, looking back now, we know how covid played out, but at the time, it was like they made the announcement, I'm somebody who works 80 hours a week, and I'm looking at potentially, could we be a year with not working and doing nothing. So I'm like, we really need to do something to market. I go, why don't we do a reality show about real estate? And he's like, What in the hell do you know about producing a TV show? I go, well, nothing, but the whole world stopped. There's got to be people. We must know, people in TV who might be sitting at home and might be willing to help produce the show. And he started laughing. He goes, Well, actually, one of my college roommates is high up at Viacom, so we called him, and we put together a whole production team of 50 people in the middle of covid, put out a casting call and filmed the show, and it did really well. And then we kind of went around to the networks and made a deal with a E, but with A and E, I really wanted to show off commercial real estate and kind of show it to the average person and show them, hey, here's this thing that people can participate and be a part of. And it's a super interesting industry because, like, when I was 22 I was the youngest exclusive Starbucks broker in the country. So have you said that coffee shop that ends up in the corner? I was the guy that, you know, Starbucks would run their software and say, you run traffic counts that are available on, you know, state, D, o, t websites. People don't realize when you're driving down the road and you see the rubber thing goes, that's actually either a traffic engineer or the state, and they're seeing how many cars a day, but they're also tracking to the hour on which side of the road. So like, why is McDonald's on the pm side of the road? Or why is Starbucks or Duncan or seven brew coffee? Why are they on the am side of the road? Because they know, looking at the traffic patterns, who's going where. So when we would negotiate a deal like that, they would say, Hey, here's the target markets we want to be in. I was the boots on the ground, so to speak. That says, Okay, let me look up the tax records and let me look up the tax maps. I know they need three quarters of an acre to an acre to fit on. They want to be at a traffic light. We need this many cars per day. Hey, it's great. If we're across the street from a university or a hospital or a major office park or a grocery anchored shopping center. Can we get out in the out parcel? There's a deal structure to it, and then you negotiate the rent and how much tenant improvement dollars, or what contributions the landlord is going to make to the deal. And that's kind of how we identify, you know, locations and negotiate. And as a broker, I get paid a percentage of that overall lease value or a sales transaction,
Keith Weinhold 14:36
well, talking about making decisions in the face of uncertainty. I mean, there it is. Case in point, you put together the architecture of a show like this during the pandemic, during the height of uncertainty. That was a really interesting thing that you said when you talk about how, for example, you probably do want to have a coffee shop located, I would imagine when you're in bound on the right. Side of the road there sort of for am traffic, 100%
Todd Drowlette 15:05
the same reason, like restaurants that are more dinner based business, businesses will be on the pm side the afternoon drive home. Or liquor stores typically like to be on the pm side of the road because people are going home, they pop in and just continue on their way home,
Keith Weinhold 15:20
right? That makes total sense to me. Todd, you do have this great command of real world negotiation tactics, helping to be sure that those prime locations, sort of like we just described, play out and happen from this $2 billion in closed deals, which is a remarkable figure. I'm sure a lot of it has to do with who you work with, who you're negotiating with. Trump was negotiating Manhattan real estate deals, and now that's pretty different, as he's trying to broker a ceasefire agreement among foreign nations. So you've got all these stories, from working with small business owners to multinational brands. So can you tell us about how who you work with changes your approach?
Todd Drowlette 16:04
You have to always know what your goal is, and the more research you know about who you're negotiating with, and the more you understand them, the better you're going to do right. Sometimes winning in negotiation is about winning. Sometimes winning in negotiation is just about not losing so sometimes I have clients that say, Get me that particular piece of real estate. I don't care what it costs me. Just get it under any circumstances. I don't care you have I have other clients like, I represent a clothing chain that's like, similar to a TJ Maxx or Marshalls. They've been around 40 years, called label shopper. They're in secondary and tertiary markets all over the country. They are very inexpensive, and they pay very low rent, and they're opportunistic. So the approach for every single deal is completely different on depending what the person's trying to do, but the tactics always the same. I always try to, as a broker, you're in the middle, so I'm always trying to figure out what are the actual deal breakers and what's motivating this side that side, and then you meet somewhere in the middle. And I try to do deals where nobody feels like you bend them over a barrel, you know, and they have a vendetta for 20 years, because it's a very small world in a very long life. So if you really stick it to somebody to the point where they hate you over it, you don't know what's that deal next week or 20 years from now that you really need and find out that person is the kid of the person you really stuck it to, and now, all of a sudden, that deal you need comes back to haunt you from the deal that you won 20 years ago. So I try to like, let people keep their pride intact, and there's a lot of like for just general negotiations. A lot of people negotiate against themselves without even realizing it. So most people fear silence, and I always say, whoever talks first loses. So if I throw out like a number, like if you were selling me something, and I said, I think my top number is $100,000 I will not speak until the other person speaks, because most people are afraid of silence. And if I throw that number out, I'm gonna go, Oh my God, he's not responding. That number is too low, and I'm instantly gonna go, well, maybe I could pay 120 or maybe I could pay 150 I've seen people do it a million times. So when I'm negotiating against people, whatever they say to me, I never respond until they talk a second time, because I wanna see how much line there is in that run before it gets to the end, and whatever number they stop at, that's where the negotiation starts. And so many people do that. They just negotiate against themselves, unintentionally
Keith Weinhold 18:31
get comfortable with silence. Oh, you just brought up so many good points there. Todd, such an important one in negotiating. You sort of touched on it is that successful negotiation is finding out what the other side wants. I might be willing to pay you full price if you give me my timeline, say you get me to the closing table in 30 days rather than 90. So terms often mean more than price. So can you speak more about how to find out what the other side wants and making sure they actually get it while still getting what you need.
Speaker 2 19:03
It depends on person. I mean, generally, this crazy and dumb of an answer as it sounds, is I just ask anyone who's blooming knows I'm a very direct person. If I won't ask you on Monday morning, how was your weekend, if I don't sincerely care how your weekend was, I'm very much a get to the point type of guy, and I find in negotiating, unless I know the person in advance, or I've done research, that there's somebody who likes to circle the wagons and go around I'm kind of a very direct right to the point kind of person. So I'll say, listen, here's things that are important to my client, what's important to you, and let me see if we can work something out that either we both can mutually agree upon and feel good about or if we can't get a deal done, I always say, I'll take a quick no over a long maybe any day. I find most people will tell you like it kind of throws people off, because most people are slick and sly, and they kind of like circle the wagons. I think people, if they like my personality, they'll find it refreshing, because whatever I say or mean is what really what I say or mean, I'm not hiding anything. So when I say, Listen, I have a client. This is what they want. Can we get this done? You'd be amazed when you're candid with people, how directly candid most people are, because it kind of throws them off, and they don't really have any choice but to be honest
Keith Weinhold 20:17
yeah, how weird this guy actually says what he means. It means what he says. A lot of people really aren't used to that type of approach. You're listening to get rich education. We're talking with the star of the upcoming A E show the real estate commission. Todd Drowlette, more, when we come back, I'm your host. Keith Weinhold
Keith Weinhold 20:35
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Robert Helms 22:16
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Keith Weinhold 22:35
Welcome back to get rich Education. I'm your host, Keith Weinhold. We're talking with the star of the upcoming A and E show, Todd Drowlette. He's not shy. He will also tell you that he is the most prolific commercial real estate broker in the entire nation, and it's great to have him here. Todd, I know that through all your dealings, again, 1700 deals, it's put you in between a lot of interesting situations. And it sure isn't always about the numbers. Sometimes it's about the story,
Todd Drowlette 23:06
a very interesting story. So I mentioned earlier that I have a client called label shopper, that's a off price clothing chain. I was doing a deal in Oxford Maine, which is a very small town, and, you know, Central Maine, and I called up this time when fashion bug had gone out of business, and we were taking over closed fashion bugs, and they said, You got to talk to Bob. I didn't know who Bob was. Bob gets on the phone. He was the biggest stone Buster you could ever imagine. I'm negotiating the deal with and talking to him, and I realized the guy kind of just wanted to fight, and he had multiple shopping centers that he wanted us to look at. And I'm like, Bob, we have enough time to get up there. And he's like, Oh no, no. I'll send my helicopter down to millionaire in Albany, New York, and I'll pick you guys up. I'll show you my three shopping centers. I'll have you back in the early afternoon. And the same guy, while he said that was literally arguing over a difference of $5,000 on my commission that I wanted for the deals. And like, I go, I'm like, Bob. So I googled the guy, and then I realized he was a billionaire, and he had founded the NASCAR track in Loudoun, New Hampshire. I said to him, I go, I'm going to say something to him, and I'm not going to speak until he speaks. And I literally go, Bob, give me the difference of the five grand on the fees. I go, stick your helicopter. I go, and I'll drive up. And I literally stared at the clock on my wall for 33 seconds. And then finally, he's like, well, well, all right, I'll give you the money. But if you don't like that, you can go to Plum hell. And I started laughing, and I said, Okay, I go. I'll call you on Monday. So I call him up on Monday. Okay, Bob, we're gonna take the deal. We're gonna we'll drive up. And he's like, No, you sob. He's like, I'm sending the helicopter anyway. It's gonna pick you up tomorrow at 9am we end up flying up to his huge estate in Lake Winnipesaukee. We land in this like, looks like Beverly Hills, manicured garden. This guy walks up to me with his son, gets in the helicopter. After he looks at my client, Peter and I, and goes, which one of you two is Jesse? I go, Jesse, I'm like, I'm Todd, and he's Peter. He goes, No, Jesse, James robbing me blind on the commission. We birthed out laughing, and then we were friends ever since, unfortunately, he died recently, but he was, like, the most fascinating, coolest guy I met him. He was in his mid 70s. He went into his 80s, but he was literally a self made guy that, you know, grew up in Connecticut on a tobacco farm. Parents had no money, you know, never went to college, and just the most fascinating guy he could decide on a deal on the back of a napkin with a pencil he always kept in his pocket. So you never know in the world, like who you meet and who you're going to become friends with, and that's just funny stories of really fascinating, interesting people I met in very unlikely places,
Keith Weinhold 25:51
amazing. You just don't know everyone's story when you first meet them. 100% Todd, a lot of your experience has given you insight on how to help develop some of the best real estate technology in order to make deals more efficient. For example, I know you developed a software platform that's soon launching that competes with costar and LoopNet. So tell us more about what you're doing in the real estate technology space and about trends there.
Speaker 2 26:18
So we have software that's the same name as the show the realestatecommission.com it's kind of a category killer. So very, very low monthly price. People can post properties. They can search commercial properties. There's blogs so you can follow up and learn you know about commercial real estate. You can find traffic counts that we referenced earlier. You can run demographic reports and say, Hey, in this particular block, or from this street over to this river, or in one mile or three miles or five miles, how much money does the average person have? What are median incomes? What race are they? What's their education levels? That's all information that exists in the public domain, but software companies charge a fortune for it, even though it's public information. Just to aggregate it, we've put all the information, and we want the information to be inexpensive and available to the average user. The other interesting thing about what's happening right now is the larger companies are kind of asleep at the wheel, where you can buy your way to the front of search results in Google and Bing, the amount of daily searches that are going to platforms like chatgpt and other AI search engines is astronomical, and you can't buy your way to the front of those search engines right now. So if you're up on your SEO search engine optimization game, it's like resetting the clock 20 years that you have another chance to bite at the apple to get customers and clients potentially directly in front of you to your platforms. So it's a really exciting time and software right now.
Keith Weinhold 27:46
That's interesting how consumers have shifted away from Google and some of the more conventional search engines, where deep pocketed people and companies can buy their way to the top. So tell us more about really the opportunity there, because that's really interesting.
Todd Drowlette 28:01
So essentially, if you understand so search engine optimization, SEO, if people don't know what that is, that's essentially you can do things to optimize your apps or your websites that allows people it's how the Internet finds you, so to speak. So there's basically ways that you can put in code that aren't complicated things, but you can also specifically submit those things to directly to chat, GPT and the other platforms, and then they go through and they index your site, and again, they're looking at it, going well, what's the most relevant so if you look at how people are searching and what the terms are, you can figure out those terms, and then you can make sure you come up at the top of those search results. And like I said, a lot of the bigger companies in different industries, from residential real estate to commercial real other things, those people rely heavily on just buying their way to the top of search results. And you can't do that right now. And I don't remember the last stat I saw was about 30 days ago, and it was something insane, like 180 million searches a day are being done on just chat. GPT, so that is a huge market that people can get their way to the top of, where you're not competing directly with a big boy, so to speak.
Keith Weinhold 29:11
Yeah, this is a way for you to get found for sure. Todd, dealing with commercial real estate, we know that that entire industry has been subject to these interest rate resets, where in the residential one to four fixed mortgage rate world, we really haven't been so I'd love to know from your perspective, and being this broker that does all this negotiating from your unique vantage point, how have higher interest rates changed things
Speaker 2 29:39
I'm often told To never make predictions, because you can be wrong. I'm somebody who's made calculated risks my entire life, and I'm not afraid of being wrong. The commercial real estate industry, I think, is about to have a coming to God moment that I think we're three to nine months away from, and the reason for that is, unlike residential loans that are 20 or 30 year. Or 15 year mortgages that are self amortizing. Commercial loans typically have a 20 or 25 year amortization, but only a five year term, or sometimes you're lucky, a 10 year term. And what happened was, when covid drove interest rates down, I have some clients that had interest rates that were 2.5 2.8% and the problem with that is interest rates are now over six so we're coming up on that five year period where you could have the same tenants, the same income, the same taxes, same expenses, if you have to refinance in the next three to six months, and those rates don't drop by at least a point, there's going to be blood in the streets like you've never seen. It's going to make the financial meltdown in 2008 2009 look like a walk in the park because you have so many loans. That's why Donald Trump, even though he's a president, that guy is, was and will always be a real estate guy. He isn't saying why he's doing it, but the reason he's pushing for the Fed so much to drop the rate is because commercial real estate is going to get murdered if the rates don't drop by at least three quarters of a point to a point in the next three to six months. That's why you're seeing the heavy pressure from Donald Trump to the Fed, because there's a lot of commercial real estate guys that have been playing musical chairs, and there's one chair for every 10 people when the music stops. So anyone listening who's only been in one to four in that unit, if you're sitting on cash, you're going to have the opportunity to buy small strip centers, you know, small office buildings, smaller properties where you can get your feet wet, where banks are going to be giving these things back, just trying to get out from underneath them. I'm willing to be wrong. I can be the guy who said it. If something drastically doesn't change the next three to six months, you're going to have major defaults. Another thing nobody's talking about is, for the last year, home loans and credit card default rates have been sky high through the roof, which means the economy is strong, as people are acting like the economy is. It's kind of like the emperor's new clothes or new robe. The economy is walking stark naked down the street, and everybody's pretending that it's wearing, you know, fine linens. And I think the rubber is about to hit the road if interest rates don't drop very quickly.
Keith Weinhold 32:04
Tell us how bad you think it will get. For example, nationally, we've seen apartment building values fall 25 to 30% or more, and some certainly not all, but some office buildings fall in value 80% tell us more. How bad will it get? Who will it be worst for?
Todd Drowlette 32:25
So the problem with a lot of commercial loans. So a lot of commercial loans, the banks are lending money to borrowers based on the credit of the leases of the tenants. Like when you own a residential portfolio, they're looking at your credit score, your assets and liabilities, deciding, okay, we're lending you the money and we have recourse. We're gonna come after you if this doesn't work out. There are a ton in commercial real estate of non recourse loans, meaning the only thing I'm risking as the owner is this property and my down payment. If this goes bad here bank, here's the key back. You can't come after me. Personally. You can't affect my more. This is non recourse. So as those large office tenants go bad, or the economy goes bad, and all of a sudden their credit ratings, of those things drop, you're going to have banks left holding the bag to the tune of hundreds of billions, if not a trillion dollars. It's going to be bad,
Keith Weinhold 33:15
and who knows if the banks will get bailed out. I don't really know if that's the right formula, if that's the right example to set there where we publicize losses and privatize gains.
Speaker 2 33:28
I mean, they might argue it worked in 2008 2009 but even if that's the case, you still have a lot of people commercial real estate's driven by ego. So before the the actual foreclosures that can take one to two to three years to finalize out with the court systems. You still will have people doing short sales. So there will be a big opportunity for people to make a leap into commercial real estate. And guys ahead of me that you know taught me the business always said you make money in real estate when you buy, not when you sell. Anytime you can buy $1 for 50 cents, you buy that dollar. So if the market drops, and you know, that's a great location of a great property that has a good roof, has good mechanicals, is in a great location. If that thing was trading for $4 million and you can buy it for 1.5 million today, that's when you buy and then you write it back up. And you know, there's guys like me, I negotiate and broker for a living, so I have an advantage that I can go out and get the tenants and find the tenants. But there's guys that do what I do, and women that do what I do, all over the country. So people can start aligning themselves with local commercial real estate experts. And maybe it's the time that they can say, You know what, maybe I'll buy a 10,000 square foot office building and give it a try. Maybe I'll buy a two or three unit strip center that has a nail salon or a beauty salon or things in it that Amazon isn't going to come along and knock out of business.
Keith Weinhold 34:52
What sectors are going to have the best opportunities?
Todd Drowlette 34:55
I'm heavy, heavy, heavy on office so I'm a big proponent of reading books that are out of college. Be right. So I love reading books that were written interviewing the robber barons, you know, the Rockefellers, the carnegies, but were written at the time they were still alive. And there's one thing, when you go back to like the panic of 1893 or 2001 you can go back and look at all these things that happen, and things are based on cycles. And one thing I can tell you with absolute certainty is the people who don't panic in times of panic when everything drops and falls apart. They're the people that in the shortest window in a two to three year recovery period where that dollar dropped at 50 cents, and it's just coming back to $1 but they bought it at 50 cents. They're the guys in like every 10 or 15 or 20 years that ride a two or three year upscale when everybody else is panicking, that's when they buy the stocks, that's when they buy the real estate, when it's low, and then they ride it back just to normal. It doesn't have to get better, it just has to go back to sea level. And I think that's about to happen in commercial real estate. And I think office is a great market because it's been getting murdered in the headlines since covid, but in any headline, there's always an opportunity, because that scares a ton of people out and people will fire sale stuff because they think it's bad and there isn't bad real estate, there's bad deals. And if you overpay for something, they're the people who get hurt. If you underpay and buy something in a value, you can make deals other people can't, and you don't take the hits the way other people take the hits. People need to be conservative. So many real estate people are like, Oh, put as little cash into the deal. Borrow as much as you can. Highly leverage, leverage deals, leverage deals. And that's fine when it works, but when it doesn't work. You know, people who could have a $50 million net worth that become broke overnight because they never took the money off the table. To me keep some of that money in, pay down your debt and just increase your cash flow and work off the cash flow. That's always been my strategy. I have friends who make a fortune and they live that high life. I like calculated risks, and to me, I never want the bank to be my boss. I like being the boss's bank, and if you owe them too much money, and especially if people cross collateralize loans and say, this is a great property, but let me borrow against it to buy this property and this property, that can be the domino effect when it goes badly all of a sudden now you put all your assets at risk. I always strongly encourage people to not do that and to keep their loans and to keep their assets separate.
Keith Weinhold 37:18
Yeah, loan terms can certainly be more precarious on the commercial side than the residential side, much of it due to fixed versus variable. History doesn't repeat. It often rhymes, and sometimes in some sectors, you want to be that buyer, when the reaction to you buying is like, are you nuts? What are you doing? Maybe office is at that point. Todd, this has been a great chat about negotiation and industry trends and more. Again, the Real Estate Commission, the show on A E debuts October 12, Todd. Do you have any last thoughts, or maybe a call to action for our audience if they want to learn more about what you're up to?
Speaker 2 37:56
Yeah, if they want to visit the realestatecommission.com my instagram handle is at better talk to Todd and at the real estate commission, and the show begins airing on October 12, on a next day streaming. And I think people, if they have interest in real estate, will find this show fascinating, if not at me at better, talk to Todd and tell me what you think of the show,
Keith Weinhold 38:20
Todd. It's been an engaging chat. Good luck on the TV show. It's been great having you here.
Todd Drowlette 38:25
I would love to come back anytime, and thank you so much for having me. I always appreciate your time. And I love the podcast,
Keith Weinhold 38:31
yeah, and I appreciate that Todd is a GRE fan. It's always great to have celebrity listeners like him, but to me, it's just as special to have you as a listener. What a wide ranging conversation between Todd Drolet and I today. It just shows the breadth of his knowledge. And Drolet is spelled D, R, O, W, l, e, t, t, e. You know, these prominent negotiators, including when we had Chris Voss here, they don't have this disposition of some vicious pit bull. Instead, they come off as reasonable. It doesn't feel hard nosed like using well placed silence that Todd talked about today, he's a pragmatist, and even comes off as likable. See if you can feel that, and video helps here, the video of our chat today might be on our get rich education YouTube channel by now, when you drive around, have you wondered about that? Before? You know that was super interesting about how coffee shops are on the am side of the road, meaning, as you're inbound toward a city center, they'd be on the right side a liquor store on the pm side. You've got to think about how humans interact with real estate. For example, a car wash that's best placed on the. Pm side of the road. I mean, most commuters, they don't leave extra time during their morning commute to get their car washed. They don't want to feel rushed. People are more likely to wash their car after work. So it'll be on the right side outbound, which is the pm side. And let's keep in mind too, that the US and Canada, for better or worse, have car centric cultures. So these things matter here more than they would in, say, the Netherlands, the location of commercial real estate. I mean, it comes down to tax maps and traffic counts and income levels in this AMPM side, and some want to be at a traffic light, you're going to get more traffic if it's already stopped or slowed down, is it across from a university or a hospital or a grocery anchor shopping center that makes it more desirable for a location? So really some interesting demographic and economic considerations there. Todd likes office real estate as return to Office. Policies help somewhat with absorption there. It is not accurate to say that office real estate is dead, perhaps permanently contracted. Is more like it, yes, the scenes from another popular show, the office with Dunder Mifflin in Scranton, Pennsylvania. Those scenes are diminished, but they are going to live on. Speaking of popular shows, check out our friend Todd Drolet in the real estate commission starting October 12 on A E, besides being entertained, it might make a daunting topic like commercial real estate feel somewhat more approachable for you. Big thanks to Todd Drolet. As far as listening to get rich education every week, what you've got to do on most platforms to ensure that you don't miss it is be sure to find the Follow button. Hitting follow will get it delivered until next week, I'm your host, Keith Weinhold, don't quit your Daydream.
Speaker 3 42:08
Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC exclusively.
Keith Weinhold 42:31
You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access, and it's got paywalls and pop ups and push notifications and cookies disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor, and it's to the point because even the word abbreviation is too long, my letter usually takes less than three minutes to read. And when you start the letter, you also get my one hour fast real estate, video, course, it's all completely free. It's called the Don't quit your Daydream. Letter, it wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text gre 266, 866, while it's on your mind, take a moment to do it right now. Text, gre 266, 866, you
Keith Weinhold 43:47
The preceding program was brought to you by your home for wealth, building, get richeducation.com