Commercial Real Estate Investing From A-Z

What is happening in the retail space given the high interest rates? Are national tenants still leasing at the same speed as last year? What are some things to keep in mind when negotiating leases in today's environment? James Chung, founder of the econic company shares his insights.You can read this entire interview here: bit.ly/3Xg8pkEWhat is the state of retail and leasing with national tenants in California, in the Bay Area in particular?From a velocity point, the market has actually stayed pretty high. And I think that would be very shocking for people to hear especially coming out of COVID. However, what was interesting is that we found that, like what happened during the financial crisis in 2008, the Bay Area, because of its fundamentals, is usually the last to fail and the first to recover. And because the barrier to entry has always been so high a lot of national tenants and local tenants, when they see opportunities that were never available historically become available, there becomes a classic supply and demand situation where the opportunities unfortunately are less than the demand. We've actually seen in the better shopping centers, there has been almost an increase in demand for those opportunities, especially for second gen food space. So there has been a lift, believe it or not in occupancy costs for those premier opportunities.What do you think the plan will be for big spaces that are becoming available?What we've seen along those lines are a lot of alternative uses that are being proposed and introduced. Things like large pharma medical enter into retail environments where traditionally they would have never done so, we've seen industries like auto want to get in. With the onset of all the EV cars coming into the market, there are many new brands that are looking for showrooms and even sale centers, or service centers. What's great about that new segment is that they do not expose the projects to hazardous materials, because they're not changing oil. They're not fixing engines, they're fixing batteries at the end of the day. My guess is that there will be a return of that demand in the larger format sector sooner rather than later. People are rethinking their execution plans and sizes, and that trend started pre COVID, as we saw a lot of what we called right sizing, those that realized they didn't need as much space as they thought. But as that continues to evolve, I think at some point in the near term we will see a return of a lot of those tenants back into that larger format space.What do you think owners should be doing to prepare for the next couple of years?It's important to think long term, not short term. The knee jerk reaction is to transact differently, and while inflation is 100% real, and CPI is at an all time rate, a lot of landlords were reacting by trying to be hyper aggressive with annual increases, redefining how transactions are put together. And while there is merit to that, and it does need to evolve, I think it's also about securing a tenant today for the next 10, 20 years, and working in partnership with them in finding a solution for a healthy ratio and occupancy costs for that tenant. And while that description is not a one size fits all, the complexion of a transaction for a small restaurant tenant versus a 50,000 foot box tenant are completely different. James Chungthe econic company--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What is happening with commercial property prices in this market given the latest interest rate hikes? What are some of the lessons learned over the last few weeks?You can read this entire interview here: bit.ly/3V9hfigHas our time to buy commercial properties finally arrived? I think so. The prices for commercial real estate are going down, I am getting at least one email per that that says “price reduction”. And I haven’t seen these price reduction emails since I started investing up until the last couple of months. Today I even got a call from a broker that just 2 weeks ago said that the pricing guidance for a particular property was $10.5M, now it’s $8.5M, and they told our assistant that the guidance was north of $7M! So not only did we hear two different prices, but we also just got a 30% discount in 2 weeks. It is finally here, it is my prediction that prices will continue to drop well into 2023.It’s worth reminding you of my calculations that I shared a few weeks ago, where, when the cap rate increases just 1% on a $6M deal that was selling in 2021 at a 5% cap, and today it’s at a 6% cap, you just got a $1M discount. At a 2% cap increase, you got a 1.7M discount. I predict a minimum of a 2% cap rate increase on average, depending on the asset class. And let’s not forget that your mortgage payment is about $30k more per year, but when rates go down again 5 years from now (at the latest in my opinion), you’ll be able to refinance, and sell it at a 5% cap again. You paid $150k in higher payment, for a $1.7M discount, which by the way the interest part of it is tax deductible. Not to mention that your downpayment is less as well, you keep an extra $600k that you don’t need to put as a down payment. And then invest that at anything that gives you even a 10% return yearly, you get $60k per year, pay your higher mortgage at $30k more, and you still get to keep $30k! Brilliant!Lessons Learned1. Over the last several weeks I learned a few lessons that I thought would be beneficial for you to know. I’ve a friend that I believe is a billionaire real estate investor. Besides the fact that he is an awesome human being, he was sharing with me the other day about one of his huge deals, I don’t recall what the issue was, but he had to work with a legal team, and he told me that he met with the entire legal team every Saturday morning to get an update. He said that we always need to be on top of everything and demand regular updates from everyone, otherwise they will let it slide. Imagine, he is already working with a top law firm that money can afford, and he is telling me that he is the one scheduling weekly in person meetings with the legal team to get updates and demand progress on the project. This same person, on another note, got to where he is today by working very hard for decades.2. I recently asked George Ross, Trump’s attorney from the apprentice, what should I do to get bigger deals, not only from a mindset perspective but also a team’s perspective, etc. He said it’s as easy as adding a zero. With regards to team, he said I could join an experienced team, or build one myself.3. When doing anything related to your real estate investments, make sure to involve your lawyer, even for standard sales agreements. Our attorney caught a few things in a recent standard sale agreement we were about to get in contract for.Join George Ross’s Mastermind here: www.victorjm.com/mastermind-seriesSubscribe to our newsletter here: www.montecarlorei.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What is cost segregation? Are there asset classes that have better depreciation than others? Cindy Blumenfeld, Director of Client Development at Engineered Tax Services shares her knowledge.You can read this entire episode here: bit.ly/3VzZIksWhat is cost segregation, and when should people get that study done?It's a study for depreciation of an investment property, not the primary residence that you live in, but any investment property, it could be commercial, it could be a house, or an office condo that you're doing significant leasehold improvements to. The IRS for some reason has commercial property being depreciated over 39 years, and residential, such as apartment buildings 27.5 years. That means that, let's say you spent $5 million to buy or build a building, not including land, land isn't depreciable, and your CPA takes that $5 million and divides it by 39 years, that's how much can write off every year, and that doesn't make a whole lot of sense, or give the owners a whole lot of benefit because none of the components in the building lasts 30 or 40 years. An alternate method, not only approved by the IRS, but preferred by the IRS is via an engineered cost segregation study. It's basically an engineering appraisal of the building for tax purposes.Is there a particular asset class that is more favorable for someone who needs that depreciation that year?When you turn that building upside down, and the more things that fall out of it the better, those are all the things that we're going to reclassify. Maybe there are more benefits in multifamily, or a retail store, or a manufacturing facility that has more different components inside it. I know self storage is a hot market right now, and depending on what the structures are made out of, if they're metal, or aluminum, as opposed to concrete, they can be depreciated over a 15 year life. We do a lot of restaurants, McDonald's, for example, and the franchisees don't own the shell of the building, which is a 39 year asset anyway, we can't accelerate it, but all the components inside the building we can. I had one McDonald's client that we did a portfolio of eight locations, he had acquired them about five or six years prior to us doing this study, and we were able to recapture all that missed depreciation, giving him back over a million dollars in cash.Are there any other tips for investors to take advantage of depreciation that is important for them to know?We didn't talk about energy yet, we also certify for 179D and the 45L energy certifications. This is for bigger commercial real estate, 45L is a tax credit, we've been talking about depreciations, which is tax deduction. If I got somebody a $500,000 tax deduction, they would have to times that by their tax rate, and that's their net cash benefit, whereas a tax credit is a dollar for dollar straight credit. The 45L had expired, they're reinstating it as of January 2023 and that's for large, low rise multifamily development, three stories and under, and that would go to the developer, a couple of $1,000 per door or dwelling for designing with the ultimate energy efficiency. That's where we come in, it has to be certified by an engineer. And the 179D has actually been out since 2006, and never got the front page recognition it was due, it was a temporary incentive, it was out for a few years, it expired for a few years. They reinstated it and made it retroactive, and it expired again for a few years, reinstated, made retroactive, it expired again. It was just going around like that for a while and now they finally made it permanent.Cindy Blumenfeld(954) 439-1671--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What are some major items you should keep in mind when negotiating and reviewing an industrial lease? What are some potential major pitfalls? Chad Griffiths a commercial real estate broker and industrial investor will share his knowledge with us.You can read this entire episode here: bit.ly/3e0P84YLet's review things people should keep in mind regarding industrial leases.A lease is going to spell out who the tenant is, who the landlord is, who the parties are, the size of the space, when it commences, how long of a lease term it is, what the lease rate is going to be, and that can be a fixed rate for the duration of the lease, or it can be a lease that has predetermined escalations in it. Let's use a quick 10-year lease as an example, it might start at $10 a square foot and go to $15 a square foot by the end of the term. What we're actually seeing is quite common right now is a rent increase tied to some percentage, so it could be tied to CPI, or it can just be a percentage that's put in. I just did a lease late last week. It started at $8.50 a square foot and had two and a half percent yearly escalations for a five-year term. We're starting to see that that is pretty common as well.Once you start getting beyond the obvious terms of what's in the lease, who the parties are, how long it's going to go for, what the rent is, then you're going to start getting into provisions that deal with the operating costs. For those needing a quick refresher on it, the majority of leases are going to be structured, I should preface that there are NNN leases. You'll have one lease, it'll say that this is the base amount that they pay, then the tenants also pay for their proportionate share of all the operating level expenses of the building. That's property taxes, building insurance, commentary, maintenance, management fees, and that's always going to be an estimate. The landlord will give the tenant an estimate on what it's going to be in advance. After the year ends and all the bills come in, they either give the tenant a credit, if they charged too much, or they invoice them if there was not enough paid throughout the course of the year. That language is probably the most important thing as a property owner myself, you want to have it very clear that any increases in those expenses can get passed through to the tenant. If that language is vague, and it becomes contentious, it might not be a big deal if it's a small lease like a 5,000 square foot lease, and those discrepancies, but you can imagine when some of these big distribution centers are approaching a million square feet, if there's a small discrepancy between how the landlord expected it to be and what the tenant interpreted it at, that can be 10s, hundreds of 1,000s, if not millions of dollars.Make sure that you understand all the little details, even insurance could be another one that becomes contentious, it varies market to market, but in my market it was common that tenants had to have $2 million worth of insurance. And now almost every landlord has increased that to $5 million of insurance, and there'll be markets where I'm sure it's even higher where prices are higher. But just making sure that that insurance provision is correct, involving your insurance agent, but at least it should be viewed as a document where a number of people have input into it, and the accountant might want to have input into how some of these costs are handled, your lawyer definitely needs to be involved in it, insurance broker is another one.Chad Griffithswww.youtube.com/c/ChadGriffithsCRE--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

How to find a good general contractor for your commercial projects? What questions should you ask? What’s a typical timeline for a medium to large project? Aaron Saunders, Managing Director of Spartan Investment Group has 16 years of experience in the construction management industry and shares his knowledge.You can read this entire episode here: bit.ly/3BxQD2pWhat are some questions you recommend people asking a potential General Contractor (GC)? And how to find a good one that is specific to their location?Spartan Investment Group had hired a couple of GC’s in the past and one of them did pretty well, one of them did okay, but it just didn’t feel like they were meeting the expectations. And that morphed into questions such as “Well, what if we built this in house? What would it look like? What are some expectations that we would have if we had a general contracting arm?”. If we are treating these projects as our own projects, and having our investors best intentions in place, and I’m not saying other general contractors don’t, but we felt we could be the best stewards of our investors money if we were really managing their projects in house, with an internal team. With that in place, 18 months ago we started to build out tools and processes. The thought process was always coming back to what is the best way to execute a project when someone knocks on our door, because ultimately we want to build all of our projects.What are some things to look for when you’re trying to identify a general contractor?Look at their history, their resume, the projects that they have completed, you may see that the general contractor doesn’t have the specific projects that you are looking for, but you can ask them, do people on your team have a resume from other organizations that you have brought over that have executed something similar to this? Look for that portfolio of projects, ask for recommendations from architects, and that will help you narrow down your search as you identify a GC or multiple GC’s that you want to work with. The next step would be to sit down, interview them, and make sure that your scope of work aligns with what they do and the expectations that they have for the project because ultimately, they may be a good contractor.Let’s say it is zoned for whatever asset class we’re building. What is next? And how do you assemble a team in a city that you may not have done business with in the past?We will reach out to some of our industry partners that we are working with currently to find out if they have worked in that city, and who is a good civil engineer to work with in that city. The nice thing about having a local civil engineer is that they know the city, they understand the process, they understand a lot of the soil types in that city and how we want to build our building.If they haven’t done self storage before, we will coach them a little bit on what our typical building structures look like. For example, that we don’t need a large deep foundation, obviously depending on the geotechnical report, and let them know what the parameters of our building requirements are.First is going to be identifying that civil engineer and starting to build. Then it depends, are you going to be building a multi-story facility? Do we need an architect on board? Is it going to be a single-story facility where we can go to one of our building manufacturers and they can provide us building elevations?Aaron Saundersaaron@spartan-investors.comInterested in our next self storage syndication? Fill out this interest form: bit.ly/3LyCWos--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What questions should you ask operators who will be managing an investment? Whether you’re a syndicator or a passive investor, it’s important to know what questions to ask in order to vet them properly. Camilla Jeffs, Principal at Steady Stream Investments shares her knowledge.You can read this entire episode here: bit.ly/3epLwt3As a syndicator, how do you find good operators for your deals?One of the keys is finding someone who is experienced. You want someone that has at least four or five years of experience. And by experience, I don’t mean how long they have been in business, but what kind of experience have they had? Think about the quality of experience, for example, a woman I know started her syndication journey as an operator in the last two years. She has already been through a fire in her apartment, squatters, all sorts of things. She is one of the best operators I have ever seen because she’s there at the property, getting into the details, she’s really working hard to make sure that asset is running well. Whereas other people that might be more “experienced”, they may have moved away from actually managing the asset and hired a team. Sometimes the team doesn’t quite do it as well, so you get into problems. The more removed you get from the asset can make it problematic.How do you go about vetting them for the first time that you’re working with them?I have a specific list of questions that I ask. For example, I ask about their track record and their experience, and almost all of them will tell you the highs, the great things that they have done, which is good, you need to know that they can achieve greatness. If they can’t achieve greatness, you don’t want to invest with them. Then I ask, “tell me about a failure that you had, or a big challenge that you experienced in real estate”. If they say, “Oh, I haven’t really had any big failures”, you have to run the other way because there is a big failure coming. It happens every time in real estate, real estate can be unpredictable, like I said, my friend went through a fire at her apartment units, you don’t know when things like that will happen. What is important is not whether they have faced challenges, but how they approached those challenges. Have they tackled them head on? Or did they just hide their head in the sand? And are they honest about it? Are they honest that they actually lost money and that taught them they need to do X, Y, and Z differently? And now we do XYZ different to really hedge against losing any money in the future. That’s what I want to know. I want to know that you’ve experienced some hard knocks, and that you’ve learned from them, so that now my money is safer with you than it was before.What are some of the biggest complaints you hear the most from passive investors?The number one thing is lack of communication. As a syndicator, if you tell your investors that you will be sending out a monthly report, send out the monthly report. Don’t resist it, don’t be late on it, send out your report. If myself, as a passive investor, don’t get those reports I’m scratching my head wondering if something wrong happened. The brain jumps to conclusions, and now I might think my money is at risk, and I start panicking. You will then get calls and emails asking what is going on, so send out the updates.Camilla Jeffswww.steadystreaminvestments.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Almost two years after investing in a few car washes, what are the results? Would I invest in car washes again? What are the pros and cons? Is there any upside in this asset class?You can read this entire episode here: bit.ly/3cnH25OThe last time I spoke about the car washes they were going great. We had 36% cash on cash returns. And last year we had a full year of managing the entire thing. And we ended up not with a 36% cash on cash return, we ended up with a 55% cash on cash return on that deal. I want to note a couple of things:1. I was managing the whole thing myself and not paying myself. There is no management fee there. If someone were to underwrite this deal, they should definitely put a management fee. For example, when I buy a self storage facility, if it’s managed by a mom and pop, and they don’t have a management fee, I have to underwrite it with a management fee. I wanted to let you guys know that fact.2. This also includes the credit card that we installed on all locations. I think we spent 60 or 70k. Yes, it was an absurd, we got screwed by this particular vendor. This includes that as a “downpayment” because it was out of pocket.We had a 55% cash on cash on our entire first year, our first full 12 months. Amazing, right? Well, after that, I decided I do not want to do car washes anymore. Why? Because it took my entire year, I was not able to learn how to manage it, or how to have a system in place for it to be somewhat a passive investment. I am not local, and that added to the issues. And that is not where the issues ended, I realized that we were getting significantly robbed, 1000s of dollars have been missing.Now I need to figure out how to exit them because cannot sell as a carwash anymore, because the income is not matching, and at the same time, I decided to exit these properties as soon as humanly possible. What is the first thing that I thought I could do to exit all of these car washes?I could do a build to suit, I could go out to retailers and figure out who would want any of these locations and we would build whatever their heart desires, and then we would lease it to them and either keep the property, or exit.Another option was to sell it as land. One of the carwashes has an extra piece of land in the back. If we look at the value of the entire thing with the land, it does make up for the mission NOI and it’s basically the price of the carwash, that is currently in the market as land.Another option was that the two remaining are actually not only zoned for retail, they’re also zoned for multifamily. So for the one that has a piece of land in the back, we could tear the carwash down and build a multifamily building.The last property doesn’t have extra piece of land. So that one I might sell to somebody local, completely separate from everything else.In the meantime, what I decided to do is to partner up with somebody local, whom I trust, he is a vendor that has been great up until now with everything. I’ll give him a percentage of the NOI and he will take care of everything. We’re going to have weekly calls to make sure that nothing falls through the cracks. The idea is for us to bring the NOI back to normal, make some improvements, even increase the NOI from last year, and then sell the very last carwash, if that will be the only one remaining.If you like the cash on cash and you want to figure out how to manage a carwash remotely, how to hire and have the best employees and how to make sure that the employees follow all of the steps, car washes are for you. However, if you want something more on the passive side, carwashes is 100% not for you.Join our newsletter here: www.montecarlorei.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What items should you go over when you're talking to a self storage broker? How to present an offer? Kathryn East has several years experience in the self storage space, she is the Founder of Sopapta Consulting, Management & Auditing, and shares her knowledge.You can read this entire episode here: bit.ly/3dHeNiRHow do you present an offer that is 30% below what they are asking for?You explain how you came up with this number based on what they told you, for instance, you are trying to sell it to me at 85% occupied, but your economic occupancy is 60%. I am not going to pay you for what you didn’t do with that facility. So we’re going to go with your 60% economic occupancy, which means it’s worth $1.7M, not $2.4.If it’s an experienced self storage broker, they will generally come back with “I absolutely understand what you are saying, however, this facility is not using the right kind of website, they’re not really promoting themselves very well. There’s delinquency that you could clear up”. Then your answer is "Okay, you said it right there for me, I have to do it. Why would I pay your client for what they did not do?". Or they will say “I’ve done a market research on this property, as you can see in my OM, based on my pro forma numbers in year one, and you could bring it to this value, which means it’ll actually exceed the purchase price in year one”. I will then say, Great, why didn’t you have your client do that? If you are going to sell this property at a price point that’s less than if you would have instructed that client to do what you state that they can do – why are you selling it? You're selling it short and ultimately affecting your client.Obviously, they can project numbers, it’s like having a crystal ball in your hand. Sometimes that’s what it feels like when they're projecting exit strategies of three to five years from now. Do I know what cap rates or interest rates are going to be in three to five years? Of course not, all I know is this asset class is in a cycle. We were at the top of that cycle six months ago and now we’re going back down, and at some point we're going back up. After I have said to the broker “If you know it can do this, why not instruct your client to do that, and re-list it after six months of implementing your ideas that created this pro forma"? And they answer, Because they want to sell it now. Fair enough, then the now price is $1.7M.Brokers are actually really nice, I have never felt disrespected or been disrespected by them. If they're not a self storage broker, your goal is not to offend them with your underwriting, it’s to educate them. It’s a give and take relationship when you are a buyer versus a seller. That’s what we’re looking at. I wish I could say that there is this long process about underwriting, and learning it does takes time, it might take you three hours to underwrite something to where you feel comfortable with writing an LOI, and that can take me 20 minutes, but I have been doing this for many years. I have perfected the way I am looking at it, but to be clear, I learn new things every single day about the underwriting process.Broker OM's make it easier because they have done a lot of the legwork for you. Just reading that offering memorandum, looking at pictures, getting a good visual identity of what that property looks like currently, that’s all it’s about.Trust but verify, no matter how you are looking at it.Kathyrn East(314) 596-6542sopapta21@gmail.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

How to underwrite a self storage property? How to look at an OM? Kathryn East has several years experience in the self storage space, she is the Founder of Sopapta Consulting, Management & Auditing, and shares her knowledge.You can read this entire interview here: bit.ly/3JMFgayWe are going to underwrite a deal together, and see where Kathryn's mind is at when she gets an OM, I will let you take it from here.Deals are made. In order to create the cap rates and the profit analysis that’s needed for specific clients, I have to underwrite these very carefully. I love OM's, they generally have 95% of the information that I need. The first thing I’m doing is looking at pictures, it sounds very elementary, but I need to see the property from their eyes. Those pictures are designed to make the property look better than what it is, so there could be some filtering applied. The purpose of that is to see what the general condition of the property is, because I have to know how much Capex I’m going to have to put into this property, and that’s directly going to affect my evaluation.The next step is to enter the numbers exactly as they’re stated on the OM, into an evaluator. I need to see, from the numbers that they provide, how accurate is it to get that price point that they’re looking for. Most of the time, brokers are cap rate driven, so if I’m looking at a property that says that they want 1.2 million at a 6.5 cap rate, I need to determine whether or not that’s realistic, based on the information they’ve provided in their current analysis column. We all know that as interest rates go up, cap rates go up, things fluctuate, it’s a cycle.When I’m looking at the numbers, I’m trying to determine whether or not it’s a fair asking price. A lot of times we’ll find some small issues on the underwriting on the offering memorandum and that leads to questions for the broker, so we're able not only to decipher whether or not they’re necessarily a self storage broker, and believe me, I love self storage brokers, because their underwriting is quite impeccable, but they often underwrite price for pro forma.What do you think when you see a broker put a projected cap rate for year one or two and not the existing cap rate?First of all, don’t buy off of a cap rate, but you can determine what the value is on your exit strategies on cap rates. If I buy this property at a six and a half cap, I’m estimating to sell it at a 6.5 cap in my exit strategies, which are three to five years, generally. We have seen a lot of inventory come across that has been selling in a year or 18 months, that was a year ago, that’s the past. Now we’re back onto our holding pattern. It’s always a cycle, so we are back to the three to five years. When they say “I want $2.4 million based on the exit strategy I’m projecting in five years of an eight cap", I’m asking “Where did you come up with that information, because our current column is more like 2.5?”.A lot of brokers are dictated the pricing by the seller themselves, so they have to ask their clients how much are you wanting for this property? They throw out $2.4 million, the broker runs the analysis on the current numbers and says “That’s at a four cap, interest rates are at a six and a half, you’re probably not going to get that”. Then the client says “Well, you are going to get it for me anyway”. Which is why underwriting as-is is so important, that is what will give you your actual asking price.Kathyrn East(314) 596-6542sopapta21@gmail.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Why should anyone invest in car washes? What are the pros and cons? What are some ways to add value in car washes? Whitney Elkins-Hutten, Director of Investor Education at passiveinvesting.com shares her knowledge.You can read this entire interview here: bit.ly/3zV7qvFWhat are some of the pros and cons of car washes that you have invested in so far?A pro would be that we are looking to buy properties from Mom and Pop owners that are already stabilized and performing, ideally they already may have several properties under management. However, because they are the operator, they haven't figured out how to scale themselves out of the business. That scaling problem is what we are looking to solve. That is also the next pro, because we are looking to build one of the only third party management companies for carwashes. We take advantage of not only operational expenses, sharing full time employees between different properties and keeping our labor expenses low. But we can also keep our chemicals and supply expenses low because we can buy in bulk. We also have a great Training Management Program. Anyone that has run a business knows that one of the hardest things to scale is your people so with this, we can actually achieve that type of scaling. Then, the ability to layer on a strong brand and duplicate that model over several other properties is of benefit. As for cons, this is a different type of investment. Investors that get into the space can be starry-eyed, they may look at the returns and think that this is easy money. They may think they can make passively 10 to 15% cash on cash 20 30% IRR on this type of investment, but it does come with its different types of risks. It has seasonality type risks, business competition and competition between competitors. There is also intra competition, which is between the assets you already currently own. You have to be partnered with an operator that knows what they are doing as far as being able to acquire the right facilities that have the right metrics layer on this type of strong marketing brand. When buying a carwash, you can't just pick a piece of land and build a carwash, it doesn't just work anywhere, you have to have eyeballs on the property. More importantly, you have to have the traffic count coming by, similar to self storage, you need the traffic count coming by, but it also needs to be able to turn in the correct direction and lead to the correct direction. Whenever you get the traffic on the property, you now need to be able to manage the traffic on the property and get a correct flow to be able to service your customers because at the end of the day, it's your customers that's going to drive your business.What are some ways to add value in car washes?One, make sure you are in a great metropolitan service area that has the demographics to be able to support a carwash. Start the due diligence while you're under contract, what is the current operator doing well? What are they not doing well? What we are seeing, especially picking up from mom and pop owners, is that their employee count is very high. Their employees are not trained, there is no strong branding on the property, they haven't moved to subscription model. Look for ways to increase your income, look for ways to decrease your expenses. Can you renegotiate vendor contracts to bring down some of your chemicals that you purchase? Can you optimize the tunnel speeds so you are not spending as much in water and electricity? Can you add an express lane to the property to add an additional tier to your subscription model and move those people that pay a higher tier through faster?Whitney Elkins-Huttenwhitney@passiveinvesting.comwww.passiveinvesting.com/whitney--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support