Commercial Real Estate Investing From A-Z

Today I will be talking about the recent interest rate hikes. How crazy is it that just the latest rate increase was a whopping .75%? But... is that actually good or bad? Have you done the math? I have, and I will let you know how does that look for us, awesome investors. You can read this entire episode here: bit.ly/3Ja6yreOne super important thing that I want to talk about that I haven't heard anyone talk about yet is the fact that obviously, interest rates are going up, Oh, how terrible is going to be, a 6.5% interest rate after this latest increase on July 25th 2022. Some people are saying it's going to be in the eights by the end of this year. And guess what? I literally don't care. I did all the calculations and wanted to share it with you so that you understand that having high interest rates really do not matter. The cap rates go up as interest rates go up. I'll start by sharing some calculations that I did. Let's say you have a property that has a $300,000 NOI (net operating income) per year. And up until the beginning of this year, cap rates were for this kind of property were at around 5%. So the sales price for this property would be $6 million in January of 2022, and at that time, the interest rates were at about 4%. So we're going to do a calculation here at a 30% downpayment on a $6 million property at a beautiful interest rate of 4%. Your loan is going to be $4.2 million, and to keep things simple, we're going to do an interest only calculation, so $4.2 million at 4% interest only is $168,000 payment per year. That's a beautiful interest rate. That's a high price.Today, we're getting a higher interest rate, and because of that the cap rates are going up. So that means that the price for these properties are starting to go down. It's pure math, unless people are buying this with 100% cash, they need to get a loan and the loan is directly tied with a debt service coverage ratio. The debt service coverage ratio for those of you who may not know exactly what that is, is the ratio of cash available after expenses to service the debt, in other words, it is the ratio of how much net operating income you have to make your mortgage payments. So this should be around 1.2 to 1.3 debt service coverage ratio, that's what the banks look for. And in order for people to be able to stay at that 1.2 to 1.3 debt service coverage ratio, the price has to go down on these properties. So now, let's look at a mortgage rate of 5.75%, which is more or less what is happening today.Let's move this $300,000 NOI property to a 6% cap rate, and depending on the asset class, you may be a little bit higher, you may be a little bit lower, but let's average this cap rate at 6%. So at 6%, the sales price is going to be $5 million, you just got a $1 million discount because the interest rates went up. Now, I'm calculating from 4% interest rates to almost 2% more at 5.75%. The interest only payment with 30% down on a $5 million property is $201,250. Now, you are paying $168,000 a year at a 4% interest rate, and now you're paying $200,000. With this higher interest rate, as well as shaving off a million dollars, the price difference on your mortgage payment is an additional $33,250 per year. But let's not forget, we got a discount of a million dollars. To put it simply, you're going to be paying $33,000 more per year, and you got a $1 million discount! So let's calculate $1 million divided by $33,000, guess how many years is going to take for you to start being on the red? 30 years, it's going to take 30 years for you to get to that $1 million discount you got. If you're worried about the high interest rates, you should actually start celebrating!Steffany Boldrinilinkedin.com/in/steffboldSign up for our newsletter here: www.montecarlorei.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Top lessons learned from a bad industrial investment. How to analyze an industrial property? What's the state of industrial investments today? Chad Griffiths has been an industrial real estate broker since 2005 and investor since 2014.You can read this entire episode here: bit.ly/3APQyIKWhat is your success criteria for selecting an industrial property for purchase?I am a big believer in looking at downside risk first. Instead of trying to convince myself why I should do that deal, and to some extend you have to, but I do look at the downside risk first. How I look at it is, once the property is vacant, I do the exercise of finding out what that property is worth vacant. Even if you’re buying an industrial property and it has a five year tenant in it, that tenant might not renew when their term is up, they might go bankrupt, there are any number of reasons why the tenant could move out before their lease expires.I go through the exercise of determining what that building is worth vacant, and compare that to the pool of available properties for lease, properties for sale, any comparable transaction data that can be offset against it is helpful. This helps us go through the exercise of identifying any things that might be wrong with the building – for example: low ceiling heights, limited power or a poor marshaling area for trucks to get into.If a property has any of those characteristics, at some point it will be vacant and I want to know what my downside risk is by identifying that first, then I will start building out a pro forma on 5 or 10 years and making a number of assumptions. You can manipulate a pro forma in any way you want to have it spit out numbers that look appealing, but before I go through that exercise, I’m making sure that I don’t have exposure that I can’t afford.Can we go over a deal that you have recently looked at and you either decided to write an LOI for, or not move forward with it?I can share one that I bought, and subsequently sold and lost money on it which is what really helped shape my position on this on why I’m so diligent about this. In 2015, the second property that my partner and I bought, it was a condominium building, similar to residential, a lot of people don’t realize that industrial can also be condominiums. This was a 20,000 square foot building, and there were 10 individual condo warehouse bays, and the neighboring company owned their bay, they were a seafood distributor that wanted to expand, but couldn’t afford to buy the one next door. We ended up doing a lease with the owner at the time and then buying it back from him.We thought we were geniuses, this company already owns the bay next door, they just invested $250,000 and a cooler, and when 5 years comes up, we’re either going to be able to renew them at a higher rate, or we can sell it to them at that point. When the time came, we caught word that they had moved to another building and they were preparing to vacate ours. They were either brilliant in their negotiation tactic, or we just panicked, but we ended up selling it to them for about a 15% loss, because they called our bluff on it.The reason we sold it was because it only had a cooler in it. There was no washroom, no office space, so we would have been forced to pay to have that cooler removed. We tried finding other companies for it and we couldn’t, and we didn’t want to take on that risk, it was right at the beginning of COVID. Had we gone through the exercise of asking what is this space worth vacant before purchasing it, we wouldn’t have paid the price that we did.Chad Griffithswww.industrialize.comGriffithsCRE@gmail.comyoutube.com/c/ChadGriffithsCRE--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What are the steps you should take to develop a self storage facility from the ground up? Skyler Hartman, CEO of Capitaline Ventures will generously share his knowledge with us.You can read this entire interview here: bit.ly/3bEbUyaLet's go over the process of developing a self storage facility from the ground up, you can start from the decision on where to find the land, all the way to the beginning of construction, and everything in between.I like to look in my backyard first because I know the the economics of my surrounding area better than anywhere else in the country, there's less research needed, but that does give you a limited scope. I would always start with the economic analysis and verify that the city or town is growing, that there are good jobs, schools are adequate and getting good ratings, I don't want to be in a war zone. Wether storage may perform great in a war zone, that's just not the place I want to be. So I start with an economic analysis and a little bit of city due diligence, I find out what the zoning process is, is it a conditional use permit? Does it fit into commercial general? Is there any overlay districts that may allow storage that I'm not seeing? Or is it strictly light industrial? Know your zoning, and your economic analysis.From there, I do some competition analysis, basically mystery shopping. I have a basic spreadsheet with unit sizes prices, I'll shop online first and try to pinpoint their occupancy rates. And you can see that on some sites have "not available" or "call for availability". And you'll see the other units that are available as "rent now". Some REITs like U-haul won't even publish prices if they don't have units available. So you can really drill down on your competition quickly. And from the online search, I'll then do a phone call and evaluate the customer service. Did they answer the phone? If not, did they call me back? Were they polite? Were they professional?Moving on to finding contractors and doing land surveys, let's say someone is brand new to all of this lingo, what do they need to look for? What do they need to get? And how would they even figure out if a contractor is good for self storage or not?I would interview at least five general contractors, and I'd prefer a design build contractor. They will help me through any of my processes that I get hung up on, and the entitlement process if needed. We're really good at that in our company, nut sometimes there are some issues that we don't see or it's an area that we're not familiar with, such as California, we have a project going there right now, which I probably won't do another one there. With that being said, design build firms are excellent in walking you through the entire process, as well as optimizing your design from the start. Typically, you'll get a cost plus bid from a GC or that's what we want to see, a cost plus. What that means is whatever the build cost, if it's $5 million, the builder will then put their price on top of that, which is typically six, eight, or 10%. Depending on how much business you do with the firm, you'll get a different pricing plan. The benefit there is if they bid the project at $5 million, it's an open book project, we come in at $4.5 million, that $500,000 in savings goes right back to us, which is excellent.How long would a project take from beginning to end?Let's say it's a 100,000 square feet of net rentable, depending on the city process, you could go from start to finish in 12 to 14 months. Six months in design and six months in the build process.Skyler Hartman(801) 899-3767skyler@yourwaystorage.comwww.capitalineventures.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What are the top 5 things you should keep in mind when negotiating retail leases? What kinds of tenants are leasing retail space today? Drew Kristol from Marcus & Millichap shares his insights.You can read this entire interview here: bit.ly/3OwCHubWhat is the state of retail right now, and what kinds of tenants are leasing a space?Florida came back very quickly after COVID, we have a government that is very pro business and has done as much as they can to try to encourage people to get outside and shop. There has been a lot of business occurring in Florida, whereas some other states have been locked down and not encouraging the amount of outdoor experiential shopping. Marcus and Millichap had its all time greatest year in 2021, with $90 billion worth of sales. Our previous high was $45 billion, and we’re actually ahead of the sales this year compared with the previous year. I think the main reason is that there has been a lot of real pent up demand in the retail market, and we are seeing returns that are a lot better than other product types. What do we mean by product type? Multifamily, industrial, office, retail land, those are really the major product types.What are the five most important things that retail investors should keep in mind when negotiating leases?1. Try to get annual rental increases that at least match inflation. Inflation is off the charts and I don’t know if it’s going to continue to go this way, but I would say try to negotiate at least 2.5-3% minimum annual increases, but the more the better. A lot of people are going to look at “What is my NOI growth over time?”. The only way to match inflation is to have increases. And if they don’t, when you market the property, people are going to do their analysis, and will be a little concerned that the growth is flat, and they may pass over your deal, or offer you a lower price to get a better return to cover for that.2. Always do a NNN lease. Expenses are going up, we’re going through a mini insurance crisis right now in South Florida, where insurance used to cost about $1 per sf for the building. We’re looking at quotes in some cases between three and $5 a foot in certain areas.3. Have a tenant base that is as service oriented as possible. You don’t want to have too many tenants in your tenant roster that someone’s going to inspect that rent roll and say “GameStop is not long for this world, kids are downloading video games, how is that business going to last if kids keep continuing to go online and download their video games?” You don’t want too many tenants like that, that are not long term for this retail world. You want to have a good mix of restaurants if you have the parking, because you need parking to add restaurants4. This is important, have a thematic tenant roster. You want to try to not put the wrong type of tenants together. If you have children’s clothing, a daycare, or a church, then you don’t want to put a marijuana dispensary in the center even if you’re allowed to. They may pay good money, but they may drive off other tenants. If you have a bar, or a liquor store, then sticking a marijuana dispensary may not be a bad idea.5. You should always be in constant contact with the rental market. An owner should want to know what all their neighbors are paying in rent, or what developments are happening locally, what new laws could affect their property, what new zoning codes are coming in, that could add density or be a detriment. Brokers can add a lot of value, it's important to pick up their calls, in order to understand where the market is, it would be a mistake not opening themselves up.Drew Kristol(786) 522-7065www.olsonkristolgroup.comdrew.kristol@marcusmillichap.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

The information in this post were my notes from the Women's Real Estate Investment Summit by Beth Azor. I highly recommend attending this next year.You can read this entire episode here: bit.ly/3QbW8KFLendingBecause self storage is a business, you can do an SBA loan to purchase. Make sure to go with a lender that is experienced in SBA loans in order for it to take the least amount of time. You will find these lenders at industry specific conferences, you should also ask your network about them.It was recommended to never to do a CMBS loan, even thought the rates are great, because you are stuck with it for 10 yrs, there's a prepayment penalty, you cannot put a second loan on the property, and it gets sold multiple times over the life of the loan, and you don’t have a direct contact. They can foreclose on you very quickly.Make sure to ask lenders if they service their own loans.Look at NOI/debt amount. Lenders like 9% and above debt yield ratio.If you're syndicating a deal, documentation on capital call is important for banks. Also, the controlling interest should stay with operator (this will also be required by the bank).Finding dealsCall brokers regularly so they keep you in mind.Deals are getting done because of Linkedin. People are meeting people online, they are becoming influencers in their specific real estate field, and they are finding deals because of that, as well as growing their network.Purchasing propertiesLet/make brokers invest in the deals that they’re bringing you. They will be very honest with the value of the deal they are investing in, they are also a great resource for any questions, and they understand the industry.Best practicesDo a stress test analysis on your underwriting (and your existing properties) to see how the potential property would survive in an economic downturn. For instance, what would happen if 10-20% of the tenants left, what would happen if rents decreased by 10-20%.By the numbersWomen outperform men in real estate investing by 2x1. I say this knowing that my audience is 65% men, and I love men. I say this because I want all the guys here to be mindful and purposeful to partner up with women. It has been proven over and over again that diverse teams in all industries do much better than non diverse teams.Beth asked lenders how many women have they lent to in their entire careers, they said between 1 and 3 women. That's an average of one woman per decade.RetailBeth’s #1 acquisition strategy: 100% leased centers (rents are too low).Never vacate old tenants before new leases are signed.Watch out if a business is being sold to an EB5 person who is just buying to get a visa. If that happens, they will likely not run it properly and will close the business after they get the visa. So you need to start thinking of who may take over that space.When you paint a retail center, calls from leasing brokers go up 20%, every time!When your tenants call asking for something, give it to them, but ask for something in return (like a waiver).For retail signage, have white letters on dark backgrounds, it jumps out in retail.Metro PCS is known for not paying rent.Beth AzorJoin the conference next year here.--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

How to evaluate and purchase a retail property by yourself? Where to get started? Jessica Malcomnson purchased two retail centers in the last couple of years and shares her lessons learned.You can read this entire interview here: bit.ly/3m59g6tHow did you purchase your first retail center?I started out with a single family investment. I then also picked up short term rentals, office, and a warehouse building. My dream was to own shopping centers, and in 2019 was when I really began the journey to invest in shopping centers. And I realized at that time that, because I had taken some time off, I knew that I had to get back in the business, my career had lost momentum from a leasing perspective. But I knew I had to get back in and start networking with the brokers who are selling the real estate that I'm looking to purchase. I started to get back in to attending networking functions, local ICSC events, just so I could get my goals out there and network with the brokers who are selling shopping center.How did you get your first few loans because a lot of lenders don't want to lend to people who don't have a full time job.That was one of the challenges. My first shopping center was going to be my biggest purchase to date, and the lending process was new to me. Originally when I started the process, the broker that I was working with, Joe Russo of Marcus and Millichap, was fabulous throughout the process and really held my hand in every step. I never at any point felt like he was doing this for financial gain, he referred me to a loan broker. They want to see what kind of experience do you have. And then they look at your financial statement.What was this first opportunity and what was the upside of it?Looking at photos of it, I was thinking that it's probably not a property that I want to purchase, but once we dove into the financials, I realized that this is something that should be of interest to me, I can't judge it just by looking at the photos. I decided to take a road trip to visit the property, I'm located in South Florida, the property is located in the Jacksonville market, that's roughly a four to five hour commute. I remember standing in the parking lot, sometime around two to three in the afternoon, seeing the amount of traffic passing by the property. It was also located at a lighted intersection, next to a McDonald's, across the street from a Walmart neighborhood market. I said, "Wow!", I was willing to pass on this property just based on photos because it's not "sexy real estate". But now I'm here standing in the parking lot looking around and noticing everything that's happening, and then I realized that this is something that I need to pull the trigger on.What are some of the cons of retail?One of the issues that came up, after I purchased my first shopping center was that the insurance company that I used sent an inspector out within the first couple of months. They do a full inspection of the property, and they come back with a list of items that they want taken care of in order to continue with the policy. And that was a big surprise, I never had that issue with any of the properties that I managed in the past. They wanted me to reroof the property because the roof was old, but it was also not leaking, so they accepted a seal coat of the roof. That was a huge expense that was not expected, when we didn't even have reserves yet.Jessica Malcolmsoninstagram.com/Jess_Malclinkedin.com/in/jessica-malcolmson-8569a322/--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What are some top advices for an investor looking at growing their portfolio and taking it to the next level? Chris Rising, co-founder and CEO of Rising Realty Partners, shares his top insights on scaling, delegating and syndications.You can read this entire interview here: bit.ly/3lmpB6zYou have scaled your business to an incredible level. What are some of your top advice for an investor looking at growing their portfolio and taking it to the next level?On the syndication level, investors do expect a lot of hand-holding, and a lot of communication. And there’s a lot you can do digitally now that you weren’t able to do before. You’re really in two businesses, and maybe even three if you’re a property manager. You’re in the business of identifying real estate that you want to buy, you have the acquisition side, the operation side, and the investor relations, syndication business. That’s what our business looks like.On the operations side, we have asset managers who are more experienced in the real estate business, they have an MBA that oversees, maybe five assets or four assets. We have property managers, we have four or five people in the acquisitions team, and they are finding deals and underwriting deals. And then, we have about three or four people in our Investor Relations team. The mantra of my former mentor, or of my former boss, John Fishman used to say is, “You have to find them, mine them, and grind them.” And so, you have to be able to find the investors, you have to mine them, and then you’re grinding, you have to keep communicating and you have to keep growing.You can raise millions of dollars from one person if you keep communicating, even if deals don’t meet the return that we project. That doesn’t happen often, but it does happen. It doesn’t always happen the way we hope it would, but if you communicate with people, they feel like they’re part of your team and they understand the issues that you have. If you don’t communicate, you’ll never hear from that investor again.How you approach things when you want to delegate things? And when do you want to partner up with people, and what is your process for partnerships?I have enough scar tissue from bad partners, but I don't want someone to interpret bad partners as a bad human beings. When I say bad partners, it's just that our interests and/or expectations were not aligned, and it gets very difficult. The interesting thing about investing is that everybody's nice when things are good. When you lose a big tenant, or there might be a capital call, then not everybody is so nice. And that can also be within your partnership. I wish I could tell you that I have this wonderful method after so many years to identify partners, but I don't. What I do know is that if I'm talking to someone about being a parter, and if I can't make the decision right away, and I'm thinking about things, I usually say no. It's not always a scientific method.On delegation, the hardest thing you can do is to hire people. And the reason is, you really don't know what people are until they've been in the company for a while. We now make sure that they take tests to know if they can do their job. If you're going to be an acquisitions person, we're going to make you underwrite two or three buildings before we hire you. You have to have systems that allow you to use your time most effectively to make sure some things get done correctly.Chris Risingwww.chrisrising.comtwitter.com/chrisrisinginstagram.com/chrisrising--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

How to grow your retail portfolio and syndications? We will review the career of Aaron Zucker, founder and principal of Zucker Investment Group, they purchased 22 deals in the last 40 months through syndications. What does he look for when purchasing a retail property? What are some of the lessons learned so far?You can read this entire interview here: bit.ly/3w5RwO2How did you scale so fast? Let's go over your journey in the retail space and break it down to about every two months since you decided to start your company. In the beginning I moved into my parents basement with a six month old. That was interesting to say the least, with no portfolio and not much of a plan. There was a plan, it was just notes on an iPad. We bought our first property as a covered land play in Irving, Texas, we still own that property today. It's on the border, on a great location, and we are planning to monetize that property in some way shape or form over time. Until then we're enjoying the cash flow. I'm about to break out in hives thinking about that experience, I had $50,000 of my saved money non-refundable without all the equity figured out. I was raising $1.8 million, which I definitely didn't have, from anybody and everybody who told me they would be interested in buying real estate. It was a good litmus test to see who was actually going to be a real LP in that company and who was just talking, or maybe wasn't interested in that type of deal. It worked itself out, we got the equity resolved and bought a deal.Then some time went by and people were still feeling out whether or not Zig was real. I'm sure that's still certainly the case, we're still trying to build a reasonable reputation. But we were able to source a couple more opportunities pretty much exclusively through the brokerage community, off market. That's a testament to the quality of relationships that I had and still have and I'm always building upon which we couldn't be any more bullish on leveraging the brokerage community, and getting them excited about the fact that we not only allow but encourage them to invest in deals with us, and they appreciate the fact that we move extremely quickly. We're young and nimble and are certainly aggressively growing. The mantra about our organization is that we're super aggressive, and we are, but when we look in the microcosm of a specific acquisition, it's usually pretty conservative.I'm a one man band at this point, I continue doing my thing, posting on social media saying we're looking for deals, hitting the phones hard, following up with the brokerage community, calling sellers, whatever it takes to procure something. Then one day, we acquired a sexy site, which was a Lululemon, single tenant. It was a Lululemon condo, and a joint venture with a group called Konover South based out of South Florida.Months thereafter, we were able to unlock an off market Chipotle deal, at an aggressive cap rate in a great market in Orlando, we executed on a blend and extend with the tenant and then flipped out of it. We sold that property in March of 2020 before the pandemic was hitting, and there were a few other acquisitions that were a little bit more boring. Between the time that we bought and sold that Chipotle, and the disposition of that, was what put Zig 1.0 on the map and gave us some some credibility that our group was looking for, and then more most importantly, executing on value add retail deals with great tenants, Chipotle, Lululemon in very good markets like Cincinnati and Orlando.Aaron Zuckerinstagram.com/aaron.zuckerwww.zuckerinvestmentgroup.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

I’d like to share something that I started doing in 2020 that has been very useful for my real estate investment career.You can read this entire episode here: https://bit.ly/3se26jQIt's a very simple thing that I developed that has been very beneficial for me. It’s what I call the “Word of the Year”. It started in 2020 when I decided that that year I would focus on diversifying my investments because of the chaotic environment we were in, especially where I was in CA. My word for 2020 was “Diversification” and I decided that I had to diversify not to optimize for returns, but to decrease risks, well because the entire globe was shut down, nobody knew what would happen and that the country would print so much money. I ended up purchasing car washes, self storage, land, some crypto and some unique stocks I hadn’t thought of investing in before. The car washes and self storage did well, land we are a bit above what we invested, and the stocks initially went up and today they are down, so I am on the red at the moment. Looking back, it seems like I have achieved my goal of decreasing risks. I haven’t sold the stocks yet so that is TBD.For 2021 I realized that I was getting overwhelmed with doing everything myself, I knew that in order to expand my business I had to start putting processes in place and delegating as much as possible, so that I could focus on the important things and the bigger vision. I decided that my word of the year for 2021 would be “Delegation”. That year I started writing down everything I was doing, step by step, creating videos, making it as fool proof as possible, and hiring virtual assistants. Not all VA’s worked out, but I ended up with a couple of them that are working out quite well. You then start to see what each of their strengths are and you move tasks accordingly. In order for this to continue going smoothly throughout the years, the processes will have to be reviewed every 6 months to 1 year in order for us to make sure that the steps are up to date and that the videos are up to date. I will delegate that job to my VA :)Because you spend all year focused on the word of the year, it really engrains in your mind, so the words trickle down to the following years. For example in 2021 I invested in short term rentals. In 2022 I made a point looking at every task I was doing and to first ask myself: Can my VA do this? I am delegating more and more and finding more time. It can be literally anything from personal things all the way to calling the city planning department and finding out if this property is zoned for something we want to build there.The 2022 word just came to me in April, I am a part of a book club and the book we were reading The Almanack of Naval Ravikant and one of the quotes that stuck with me was “You will get rich by giving society what it wants but does not yet know how to get. At scale.” The way I made it work as far as real estate investing is, giving investors (when I syndicate) the absolute best service ever, they are our customers from a communications perspective, to great returns, to implementing technology in our investments as much as possible, and doing that "At Scale". Doing real estate at scale. With this mindset, everything that I am doing and thinking and looking at is, How am I going to be scaling this business?It has been wonderful, and I think it’s important to keep it a word of the year, or maybe every 6 months, but definitely not a monthly word because that may not really stay with you and you may not end up doing everything you want to get done during a month.Add me on Linkedin: www.linkedin.com/in/steffboldSubscribe to our newsletter: www.montecarlorei.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Are funds more beneficial than syndications for the investors? Are they better for the sponsors? How to approach investors when you have a deal? How to find a great partner in the industry? Brian Spear, Principal at Sunrise Capital shares his experience.You can read this entire interview here: https://bit.ly/3vjvOGaWhy do you recommend people creating a fund instead of syndications to be begin with?I wouldn’t say that, with absolute assurance, everyone should always create a fund, but I do believe that funds are better structure for both parties involved. Selfishly from the general partner side, it ‘s more flexibility of capital, it affords you the opportunity to be able to move at a moment’s notice. If every time that we stumbled upon a given transaction that we wanted to acquire, we had to roll out a brand new syndication. Then we would miss some deals, some opportunities in a hot market such as this, when you have to compete against other people. The brokers want to know where your equity derives. If you don’t have the ability to say, “I’ve eight figures sitting in the bank right now and I can close on this next week if we really need it to”, then you’re going to be at a little bit of a disadvantage, especially in this crazy environment where there’s so much capital chasing deals. The fund affords you to have that capital ready when those opportunities arise so that you can act and move faster, that expediency helps tremendously. Funds will afford you to provide outsized IRRs as well. Depending upon the scale of your respective fund, you may be able to garner some lines of credit, which would afford you to be selective about when you bring capital in and leveraging that provides your investors with a higher internal rate of return. In addition, you get diversification across the various different assets.I’m assuming that you recommend people doing a syndication first, because it’s probably very hard to raise for a fund first?Yes, you want to use your own capital to go out and prove the business model. To have a simple, scalable, and repeatable one prior to rolling out a fund. It would be imprudent to just launch a fund from scratch, you need to go out and prove yourself first. There’s nothing wrong with that. But I do think that ultimately, the fund structure provides more benefits for everybody involved. I would pose to you that’s why the likes of Blackstone, Carlyle Group, Apollo, all the guys on Wall Street, don’t run out and do individual deals specific syndications. They do fund structures without fail for all those reasons.How do you approach an investor when you have a deal?The question of how you approach investors when you have a deal begins well in advance of when you have a deal. You’re never going to reach out to somebody, and hard sell them on wiring you $100,000 one day after you have a deal, come under contract, and all of a sudden need to scramble to get that capital. What you need to do is develop that relationship with the prospect or the potential investor many days, weeks, months or years in advance of that opportunity arising. If you intend to scale actively in this business, you’re going to need to build a substantive Rolodex. And you’re going to need to begin providing that Rolodex with valuable content that provides them with insight and knowledge that you are an authority in your industry and are worthy of their time, energy, effort, and ultimately capital, to partner with you on deals as you progress.Brian Spearwww.parkinglotprofits.comwww.sunrisecapitalinvestors.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support