Commercial Real Estate Investing From A-Z

Today we are talking about a deal we recently raised for, mostly so you can understand some of the things that happen behind the scenes and why we decided to have this be our first syndication for 2025. Read this episode here: https://tinyurl.com/2km2c2k9 Why did it pass our test besides the fact that these partners have a great track record and having exited 4 deals with them? 1. Low vacancy. There is a shortage of small bay industrial in the Phoenix market, people have been building large bay industrial. For the small tenants that need a smaller space, the available inventory is very low. 2. Leases expiring and below market. A lot of the tenants had their lease expiring during our ownership, and the vast majority is below market, one of the largest tenants in the property with the biggest rent upside, already decided to not renew. We underwrote them not renewing a year from now, and they are significantly below market. 3. IG Leases. All of the tenants except one are on industrial gross (IG) leases. We are converting all of the tenants to NNN leases. This will also increase the bottom line for our investors. 4. Prohibited cost to build. Besides the market having very low vacancy, the vast majority of tenants being between 30 to 70% below market, and the leases expiring in the next 24 months, small bay industrial is cost prohibited to build. It costs more to build than the rents that you’re going to get. We are purchasing the property at a significant discount to replacement cost. The property was built in 1999 and it looks really good. 5. Location. The property has freeway visibility and is right next to the freeway exit. 6. Market. Phoenix is a phenomenal market. It has a 16% population growth since 2010, a job growth of 45 to 50% since 2010. The personal income tax is very low at 2.5%. They’re exploding in terms of plants, campuses, and jobs being created in the area. There is a $65 billion chip plant being created next to the property. There is a $20 billion Intel expansion. These are all creating jobs, which is always a great sign of a phenomenal market to be in. Final Thoughts The raise took a little bit longer than what we thought it was going to take. We did not finish the entire raise and still have a couple million to go, however, we did manage to close on the property and the couple million that we have to go is mainly for reserves, so that still needs to be finalized. Commercial Real Estate Tips Learned Recently: Turn expense into income: e.g., rent dumpster out. You can open a Senior Living home in any state if one tenant has a disability due to the ADA / Fair Housing Act. Always over-raise in case investors don’t send funds. If a deal blows up, attorney often refunds fees (to keep you as a client). When you refinance, you don’t pay taxes. This means you can cash out of a property, or get a line of credit, and buy another property without paying taxes on that down payment. Make sure you are comfortable with the LTV’s when you cash out. Interest rates are always negotiable, you can get ~0.25% interest rate break if you open a checking/savings with lender. When developing a property from the ground up, always assume that the piece of land has all of these: endangered species, wetlands, easements, utility issues, trees – until proven otherwise. This means you need to get all of these reports and surveys done (amongst many other things)) before purchasing a piece of land for development. Join our investor club here: https://montecarlorei.com/investors/

With regards to SEC exemptions and compliance, what are some of the common mistakes that syndicators make? What are potential consequences if the SEC finds out you paid a GP to raise capital? How would you structure a deal for the GP's and LP's to hold real estate forever and get infinite cashflow? What are some of the legal challenges and opportunities in real estate investing today? Jonathan Tavares, Managing Partner of Premier Law Group shares his knowledge Also some great news for raising funds: an investor can now be considered accredited if they invest 200k or more in the offering! Jonathan Tavares (508) 212-1193 jonathan@plglp.com www.premierlawgroup.net Join our investor club here: https://montecarlorei.com/investors/

What are the pros and cons of office, retail, and industrial? What should your real estate agent do for you as a buyer? How to get over fear in real estate investing? Trinity (Trent) Herrera, commercial director and real estate consultant of Black Tie Real Estate, shares his insights. Trent Herrera trinity@blacktie-re.com

What should be your acquisition targets and goals as an investor? What are the pros and cons of different asset classes? What should your real estate agent do for you and what should you do as an operator? Trinity (Trent) Herrera, commercial director and real estate consultant of Black Tie Real Estate, shares his knowledge. Trent Herrera trinity@blacktie-re.com Join our investor club here: www.montecarlorei.com/investors

How to make sure a syndicator/operator cares about your money as an investor, what can you do to mitigate the risk of investing with a bad operator? Trinity (Trent) Herrera, commercial director and real estate consultant of Black Tie Real Estate, shares his knowledge. Read the entire episode here: https://tinyurl.com/mr4ces9c How can a passive investor know that a syndicator/operator cares about their money? We've all looked at deals that, at the surface, the sponsor looked great, and everything was above board, and the yield was what we wanted, and it was our appetite. And something happens. And to some degree, I think that you can never, 100%, insulate yourself from a bad egg, but there are signs. We have this term in the industry, commission breath, that's always a number one red flag. Someone with a servant mindset is not going to have commission breath at all. There's no sizzle in that industry of building generational wealth, the sizzle is, we're going to build generational wealth using math and fundamentals. But when there's too much sizzle, that's a red flag. The biggest single indicator is the math and the story, and the history track record. When you have a target of an asset type or class that you're comfortable with, and when you have a track record, when you have some under your belt, it's easier to see when something doesn't look or feel the way it should in that industry. I guess I will answer that by saying the single biggest defense is sophistication and experience, and maybe even leveraging your friends, there have certainly been friends that have saved me from bad investments, just from a second look and talking through a deal. We're talking about the foundation of what makes a syndication or an investment successful, Underwriting is no joke; it's 75% of what makes a syndication work. My best clients, my best investors, all understand underwriting, and if they don't, they've hired me to help them understand it, and to walk them through it so that they can see what I'm seeing. There are so many ways that you can look at a property wrong. And I also believe that not one person should look at a property. There should be a multitude of people and aspects looking at a property, opining and giving valid, good criticism and feedback. My number one tip when it comes to foundations is to dive into underwriting and do your best to understand each deal; it takes years, and even then, there are still deals that you see and you struggle. The underwriting in the math is where you'll see if the deal is truly viable for you or not. And that goes along with the risk management side and accreditation. Each one of us has a very different life. We all live such different lives, and we all have different amounts of kids and cars and mortgages and investments, and so we all have these tolerances and knowing what those are for you through the eyes of someone like you or I, who's been doing this for a long time, is important, understanding the level you should be playing at. How much is too big a bite off for you? How are you accredited? What's your accreditation level? Those things are all guardrails that are in place to help each investor make good decisions. Each style of offering that is done is styled differently to either accept less of a wealthy and sophisticated base or not, through your underwriting and through your understanding of your life and your position, not biting off more than you can chew, and only investing money that you can tolerate losing. Trent Herrera trinity@blacktie-re.com Join our investor club here

What is the state of syndications today? How to structure a syndication for protection purposes? Major differences between funds vs syndications and why are funds popular today? Jonathan Tavares, Managing Partner at Premier Law Group, shares his insights. Read the entire interview here: https://tinyurl.com/25hhhjsf What is the state of the market today? What are the IRRs looking like? Are you seeing more or fewer deals come across your desk? There has been a shift to funds in the last 6-8 mos. Traditionally, especially during COVID, a lot of clients were doing a lot of multifamily syndication. Now, granted, that's been a piece that we focused on for a long time. A lot of our clients are heavily involved in the multifamily space, but with increasing interest rates over 22 and various other factors, property taxes throughout many counties and throughout the country, going up very quickly, as well as insurance and specific markets. We have a lot of clients in various markets in Texas that have just gone crazy, places like Houston or Florida, where insurance rates have skyrocketed. It's presented some challenges for some of our clients. Instead of seeing just a straight deal with a certain percentage of debt somewhere around 70- 80%, a lot of times, there's a lot of creative financing going on to make up for that debt piece that may not be there or where those percentages of debt to purchase price may be a little bit lower than what a lot of clients were used to before. You see a lot of preferred equity. We've seen clients building out structures where, in essence, they're providing almost a debt structure to their investors too, to create a sort of debt piece as well as an equity piece in their raises. We've seen a lot of clients create funds and use their funds to come in for part of the debt piece for specific projects as well. Depending on the asset type, and I'll specifically exclude development projects, we're seeing a lot of target IRRs between 15 and 20% generally. Where do all the LLCs go for a syndication so that everyone is protected as much as they can possibly be? There's all sorts of different structures that you might use to set up a syndication or a fund and for different reasons, for tax reasons, for asset protection reasons, etc. A typical syndication structure is going to include a syndication entity, and that's typically known as the issuer entity, that's the entity that's selling securities. Why does the SEC care about what I'm doing if I'm raising capital to go buy real estate? The Supreme Court came up with a test that's called the Howie test. The SEC does an analysis to determine if you were selling securities or not, and essentially boils down to the four main tenets of the Howie test: 1) Is an investor investing money? Typically, the answer is yes. 2) Are they expecting some sort of return on profits? And usually the answer is yes. 3) Whether the efforts are generated by someone other than the person who's investing, like some sort of promoter, or in the space we call a sponsor. In these deals, a sponsor where a GP that is raising the capital from investors. The investors are passive in the deal. 4) A common enterprise is if the investors are pooling together capital through the efforts of the GP to buy some sort of underlying investments. That's typically going to be real estate. Jonathan Tavares (508) 212-1193 jonathan@plglp.com www.premierlawgroup.net Join our investor list at https://montecarlorei.com/investors/

How can new investors get started in the self-storage industry? What technologies are transforming the self-storage industry? What are the biggest challenges in self-storage management? Amy Jenkins and Kathryn East, co-founders of Omni Asset Management Group, share their knowledge. Read the entire interview here: https://tinyurl.com/mrxzdtu9 What are some of the biggest things that we should keep in mind with regard to evaluating a property and managing it? Kathryn: Those two can be spoken of simultaneously, when you think about it. It's generally the third-largest expense that you have, and it's the most controllable one. If you have a facility that's 120 units, and you're trying to get to a 35% ratio, but the taxes are 15% of the money that you can spend, management is what's going to go out the window. That's how that affects the underwriting side of it: the evaluating. And I find it's the same issue whenever we're reading these OM's. Pro forma is pro forma. You need to know what that property is worth today. That is the current retail value of that property. What you're doing with your pro forma or your projections is based on the history of the underwriting process and nothing else. Now, population growth helps, not being supply-indexed out to the max does help. StorTrack has now put in a whole other section where you can see where brand-new housing developments are going in the markets. That's powerful to know, especially when you're looking at facilities in a market. You do want to know where all that new housing is going. And it'll tell you if it's multi-family, single-family, or apartments. Amy: automation isn't a one-size-fits-all. You have to do that market research to ensure that the model fits that location. Do you have the right technology in place? Are you using a kiosk, smart locks, and a security system? How does that maintain that smooth transition for a tenant experience? Who's going to handle that maintenance? Who's going to handle that oversight? Is this all going to transition and improve the facility's efficiency? And ultimately, the bottom line, because we all know and understand that anybody can buy a facility, what is the end game? Kathryn: Most of the AI-generated things right now are free to use for your facilities. The question is, where do you get it? How do you know which one to use? That's why I'm excited that Amy and I are so AI-driven. I've been using ChatGPT for two years. Amy: What works for a 45 to 100 unit facility does not work for a 700 to 800 unit facility. Is there anything else that you think is important for our audience to know? Kathryn: They should be going to state association meetings or to national meetings. If you're not even in self-storage yet, you should be telling people that you're looking for self-storage. You should be broadcasting that from every place you possibly can. In the ISS (Inside Self Storage) conference this week, I guarantee you that in that vendor hall, there are going to be at least 20 vendors that are strictly AI-driven. But you don't know about it unless you start actually going out there and actively getting involved in it. Go to your local self-storage facility. Talk to the manager there. If there's no manager, call their number, see if somebody answers. Start learning the verbiage for the love of goodness. Every time I hear somebody say that they're buying a unit and I've never sold a unit, the unit stays. But make sure that when you're out there, you're telling everybody, I want self-storage. You never know who you're going to run into. Amy Jenkins

What are the terms for an SBA construction loan? Can you refinance from a conventional loan into an SBA loan? Is there an 100% financing option with SBA? How many SBA loans can you take? Anne Mino, Senior Loan Officer at LiveOak Bank, shares her knowledge. Read the entire episode here: For construction, these loans are even more attractive. We offer a 26-year term, three years of interest only. The idea there is that you'll get 12 months for your construction process, we can extend it if it's a larger project, but then two more years of interest only for your lease-up period. And then, we capitalize everything the project needs until it can pay its bills. In other words, we are going to give you an interest reserve account that will make your debt payments during construction when there's no income. We'll also figure out what the operating deficit is during the lease-up period, and we can include that in the loan. It's a very all-encompassing loan. A lot of times, when we talk about what people can qualify for, they don't realize that it's as easy to qualify for a construction loan as it is for an acquisition loan. I'm not saying it's easier to do a construction project, but you can qualify just as easily. It just comes down to, "Do you have that 10%?" because we're going to give the project everything else it needs to get to stabilization. Can we refinance from a conventional into an SBA loan? Yes, the rule is we have to be able to reduce your monthly payment by 10%. And if there's a demand language in the original note and if it's on an unreasonable term, then it's also refinanceable. Let's say you got a hard money loan and it was a 10-year note. It did have a low rate, and I may not be able to improve your rate, but as long as the term of that loan wasn't appropriate for real estate, which SBA would say it wasn't, if it was 10 years versus 20 or 25 years, then that is refinanceable. You also have a 100% financing option. Can you elaborate on that? Yes, this is the people's favorite thing to hear. Once you own a facility, and you've owned it for 12 months, you can expand either via construction or acquisition with no more money down. The rules are, first of all, you have to have owned it for 12 months, at least. If you're obtaining a 504 loan, they want you to own it for 24 months. But let's just stick with the 7a world rate now. After 12 months, as long as the ownership is going to match identically, and it's the same LLC. Technically, if you're doing an acquisition, let's say, you're buying the facility down the street, you can roll it into its own LLC. The ownership of the two LLCs now needs to be identical, and they need to roll up to a parent company so that it essentially is one company that owns two LLCs, identical ownership, and the ownership can't have changed. If you came to me and six months ago you bought out your partner, I would tell you to wait 12 months, because it's going to be a 12-month look back. After all, that ownership needs to be the same. It needs to be reasonable that you're sharing branding, marketing resources, third-party management, all of those things, if it's an acquisition, and then SBA says that is technically an expansion. And then, of course, if you're adding on to an existing property, that's also an expansion. Again, after 12 months, we can do that expansion construction loan with no more money into the project. That's a great way to utilize the SBA. Take your project as far as it can go, and build a portfolio with the least amount of money. Anne Mino anne.mino@liveoak.bank

Can you buy a property with 10-15% down payment? What are SBA loans and why do they matter? Which asset classes qualify for an SBA loan? Can you get working capital on your loan? Is there a prepayment penalty? Can an SBA loan be fixed or variable? Can an SBA loan be assumable? Can the SBA be a second loan on a property? Anne Mino, Sr Loan Officer at LiveOak Bank shares her insights. You can read the entire interview here: https://tinyurl.com/bdkvxrnr What are SBA loans, and why do they matter? The Small Business Administration (which is what SBA stands for) is a loan program that was established back in the early 1950s. The entire purpose of it is to help entrepreneurs access capital financing that they may not otherwise be able to qualify for through traditional channels, so through conventional lending and the primary benefits are lower down payments. Think of a 10% down payment, instead of 30 to 40%, which you might see in a conventional loan, and longer repayment terms. For anything that has commercial real estate involved, it is automatically on a 25-year term with competitive interest rates, and then it's easier to qualify. You don't have to have experience in your subject field. In other words, in the self-storage world, if you don't own self-storage. That's perfectly okay, and that's why the SBA enables us to do these loans to anybody who needs them. It's a little more painful to get, but nothing compared to CMBS loans, which everybody hates, but the numbers do have to work out the debt service. Please elaborate on the debt service and what the requirements are. These loans are considered cash-flow-based loans. In other words, we want to see that the cash flow of the business can support the debt. For example, if you're just looking for a land loan, and there is no business attached to it, that's not something that we could do under this loan program. But as long as there's a business attached to it, we're looking at the debt service coverage of that business to pay back the debt. In an ideal world for self-storage, we want to see that in year one, the business can reach 1.15 debt service coverage, which essentially means the business is making its loan payment and then about a 15% profit. And then we want to see it steadily go up from there, and we're very lucky in the regard that we can use a borrower's projections that they've put together to tell us what they're going to do with that business. Can SBA do loans for any asset class in real estate? Yes, as long as it's a cash-flowing business and it must be owner-occupied, not retail, office, they're non-applicable. If you're a veterinarian, let's say you buy a strip center, and it owns some other real estate, it is okay as long as 51% of that strip center is going to be used by your veterinary practice. Same thing with storage. Let's say you had a storage facility, and there was another retail component on the property. That's fine, and still SBA eligible, as long as the storage makes up more than 51% of the total square footage. For offices, it's the same thing. I would have to occupy office minimum of 51% of my office building. And for multi-family, which is similar to self-storage because we are the operators, would we automatically qualify? Multi-family does not, as they don't touch anything with residential real estate at all, even though multi-family is considered commercial. Anne Mino anne.mino@liveoak.bank

Which real estate markets are growing more rapidly in the US, and why? What will happen to construction costs given the on and off tariffs? Pike Oliver, author of Transforming the Irvine Ranch shares his insights. Read the entire interview here: https://tinyurl.com/5fxk6ydm Regarding markets from your newsletter, the few growing cities are Raleigh, North Carolina, Gainesville, Georgia, and smaller, large metro areas. There are about 56 or so metropolitan areas and more than a million people in the USA, and the ones that are growing more rapidly now are the smaller ones, those that have a couple of million population. Raleigh and Gainesville would be an example of that. And even areas that are in the 500,000 to a million range, I think some of that has to do with housing affordability, and I think that also people just maybe wanting to be in a less congested environment, that has shown up to be a factor now. The larger regions, Southern California, the Bay Area on the West Coast, Seattle, New York, all the Boston to Washington corridor on the east coast, and Atlanta, they're growing at slower rates, and a large portion of those regions do present a housing affordability challenge. If you look at the percentage of household budgets that go to housing and transportation, it's a significant percentage. Can you manage your transportation cost? Maybe that'll be somewhat dependent on distance to work and commuting, but the big cost is having the vehicle, insuring the vehicle, and financing that. The one that you can manage is to go to a market that has much less expensive housing. If you're in a market that can offer you a $400,000 house, versus a market where it takes a million, that makes a big difference. I wonder how the inflation will continue to make an impact on the bedroom communities? That's a big question. The whole issue with potential tariffs. Now, I believe we're on again with some pretty significant tariffs on aluminum and steel, affecting Canada, Mexico and and certainly China. I think that's as I understand it, across the board, that'll have some impact. I think just the uncertainty will have some impact. And then construction costs, my take on that is I don't see much abatement in that area. We're going to have, I think, continuing in Southern California, because of the fire effect, they'll be as significant and particularly on the labor side. And this also then relates to the issue of immigration enforcement in the construction industry, particularly the residential construction industry, there's a substantial percentage of undocumented people working in those areas. Again, an open question as to how much of that is going to translate into higher labor costs. Looking ahead in 2025, people were saying, hold until 2025 and you'll be fine. And now, they move to 2026, I hear lenders are extending their loans to their existing clients based past 2025, where do you think we're going to be this year? Do you think it's a great or not so great time to invest in real estate? It's always a good time if the characteristics of the individual property are great and if you can swing the equity or the debt to close the deal. As to whether there are a lot of real bargains, that doesn't seem to be the case, the only area where that seems to be a possibility is with office assets, but then you're taking on the challenge of occupying that space, or undertaking a residential conversion. Pike Oliver news.ares.org pike@urbannexus.com

Will there be real estate opportunities in the Palisades area of California after the fire? What is the current state of the real estate industry, and what is the outlook for 2025? Pike Oliver, real estate veteran in master planned communities, and co-author of Transforming the Irvine Ranch book, shares his insights. Pike Oliver news.ares.org pike@urbannexus.com

How to negotiate better loan terms and manage lender relationships? We will also cover top lessons learned at the latest conference and evens, and what is the current state of the market? Read this interview here: https://tinyurl.com/yf53zdpu Lessons Learned Loans and Lenders: You must pick up 5-6 new lenders a year. Meet all of your lenders yearly, give them a report with your PFS (personal financial statement), show all property owned, how they have performed, share your mistakes and lessons learned, share the vision for the company, be proactive, present the business plan, how have you operated the assets. After a loan is done, the lenders get a 2 week update, then it becomes quarterly. Send pictures, and show how are you doing vs pro forma. Negotiate on loan unforeseen costs, stick with your needs even if you may lose that lender. Negotiate that if you hit x percentage value increase, the lender gives the loan at x interest rate. Agency debt is non recourse, and credit unions are great. Don’t give any personal guarantees, the bigger you go, the less common it is for them to ask for a personal guarantee, lots of co-GP family offices can help and will show their balance sheet. You will need to have some guarantor for carve outs only. We must negotiate debt to the ground, LTC is currently at 50%, don’t do variable rate. We must read all pages of the loan docs and comment, edit, someone I know has made as many as 500 comments. You must have other banks lined up first they say no. Also, put a homestead exemption on all of your loan documents so they can’t take your home in case things go south, and make sure that they’re not removing any of your constitutional rights. What topics should I cover next? Let me know at admin@montecarlorei.com

What are some retail trends that may not be so obvious today? Why should you add a retail component to your multi-family project? How to host a successful popup in your center? Edie Weintraub, Founder and Managing Director of Terra Alma, shares her insights. Edie Weintraub www.terraalma.com https://podcasts.apple.com/us/podcast/hustle-and-heart-conversations-with-culture-creators/id1750502470

How to repurpose real estate? How to negotiate a contract in an expensive area? How to work with the city to get your project entitled? These were notes from a development event we attended. Read the entire interview here: https://tinyurl.com/9624cn5k Smart developers are in touch with their city representatives. The city is a great resource for leads. If you meet with them, they will tell you: that’s a bad land owner, or we want this place developed. Entitlement goes super fast when the city owns the land. Create a public/private partnership with the city so they sell their land for cheap and you build what they need in the area, and they allow the change of use to what is needed. You would put a development agreement in place, and the city offsets fees to help the deal work. Ask city what projects are stuck, which projects developers are not paying them for or have loans coming up. If working with land that the city owns isn't an option, and for areas that you may think there is no more land to build, note that everything is still available to build, in the sense of you can repurpose several buildings. The things the presenter looks to get in contract and build (in their case multi family) are: auto dealerships, used car lots, private schools, a shopping center that isn’t doing well. When working on a deal in a city that is known to be difficult, for example, any city in California, make sure to keep the deposit on your offer very low. They recommend $50-100k, and make sure that you can get your deposit back if there is a 50-50 chance of the project working out. Try to figure out early with the city if it is likely to work out or not. If the seller doesn't like your offer with a $50k deposit and 2 yr due diligence, show them your track record, in the sense that you will close once you get through the city, and show the fact that you have always closed on all of your deals. A contract that has worked for the presenter is having 75-90 days feasibility, and at the end of that, have a non refundable deposit, in this example $50k, and have a close of escrow based on getting the permit, or a 18-24 month timeframe, with options to extend. You should also note that you will close earlier if you get the grading permit, or within 18 months and 3 extension options. You may think this is unrealistic in expensive areas in California, but they normally get this accepted because they close on 100% of deals that they get permits for. As far as getting any property entitled, make sure to have individual meetings with each city council member before getting it entitled, so you can manage the story very well. Find what’s important to the neighbor as well. People are investing in what they call "bedroom communities" which are the cities near larger cities that are growing, also known as path of progress. An example would be Atlanta and Marietta which is a near by town that people started moving to after prices in Atlanta got too expensive, but they still work in Atlanta. Lastly, a few months ago we interviewed someone that was building homes with a retail component in the bottom in Utah, so that the owner would have their business at the bottom and live on top, and that person said that those were very popular. However, at this event, they said the opposite, shopkeep space for the bottom part of a house is not the best way to address that, the best is to have a condominium lease floor and have a retail broker lease them out. We are highlighting both perspectives so that you do your own homework, if this is something you'd like to build in the future.

What is the current state of the economy and real estate market? What are the opportunities and challenges in the commercial real estate market? Michael Ryan, an investor and loan broker with over 23 years of experience, shares his knowledge. Read this episode here: https://tinyurl.com/49eua957 Based on all of your readings so far, what is happening right now? The two fundamentals for generating wealth in the US have not changed, it's either small business or real estate. The economy goes up and down. We are having a recession right now, I purchased more properties at the peak of markets, knowing the markets were going to roll over and go down. It isn't because I wanted to, it's because as an independent contractor in the mortgage business, my income is best at market peaks, and it tanks in the downturns which are the best times to buy. My tax returns don't support it, so I have to figure out how to generate wealth through real estate, and buy at market peaks, knowing that I am doing exactly that. Real estate is the slowest and the most boring path to wealth, but if you hang on to something for 20 years, the value is going to be up. We see the same thing with the equities market, the stock markets, spin the wheel of fortune, pick a date, and roll 20 years forward. I've property outside of Tampa, and they're talking about Tampa residential real estate stinks now due to over building, people moving to Florida seem to be slowing down, that's the headline. When you're coming off of five years of massive growth, does it make sense to have a little cooling period? Apartment buildings, after massive growth, does it make sense for the market to pull back a little bit? Does that mean that apartments are a bad investment? After Phoenix goes up 25% a year for four years, do you want to buy in Phoenix? Maybe not in year five but does that mean you're going to ignore Phoenix for the next 37 years? As far as a recession, I've always been in the "easy landing camp", because of other aspects going on. The job market is holding up because until the job market tanks, which is a trailing indicator, we're not hitting it. The bigger challenge we're having is the two, or three years of overcooked inflation, that's what everybody's fighting right now. Looking into the next two years, what do you think people should be doing right now about commercial real estate investing? What an incredible time to buy! When I'm talking with people, if you're a Democrat, I'm going to play a Republican and if you're Republican, I'm going to play a Democrat. The purpose is, you don't need Yes folks around you. You need people who are going to work to broaden your thought process, challenge it and you get to sleep on it. Then, come back and tell me what you want to do, and we will execute. Before the Fed meeting, when they lowered the rates, I put in my residential newsletter that the best time to buy was 90 days ago. When the interest rates were hitting 8% was the absolute best time to buy residential real estate in California. You had no competition, and the sellers were scared to death, so you were able to negotiate lower prices. We're in Prop 13, and lower prices mean lower taxes forever. And when the interest rates drop, we know what to do then. Now that the interest rates have gone back up, the commercial real estate cap rates are up. "Why is that happening?" Because now they're not expecting the Fed to be continuing half-percent cuts because the news is out that maybe the economy isn't as stinky as mainstream media would like to talk about. Go back historically and you start pulling cap rates to get a perspective. Michael Ryan mike@michael-ryan.com

What type of industrial building is Chad Griffiths investing in today? What are the downsides of the industrial asset class? Chad Griffiths, Partner and Commercial Real Estate Agent at NAI Commercial Real Estate shares his knowledge. Read this entire interview here: https://tinyurl.com/mre9kmt4 What are you investing in right now? I like very simple buildings that can be used for multiple purposes, and my favorite is Flex Industrial. It is any industrial building in an industrial park used for other purposes than manufacturing or warehousing. One building that I have on a main industrial road used to look industrial until we did a renovation on it. We have an office tenant in there, a hot tub store, a flower shop, a cabinet store and we just put a bridal dress company in there, all are nonindustrial uses. Most people would never think of a bridal shop being an industrial building, but this building works for so many different types of uses, that if we have a vacancy come up, we might have 20 to 30 different ideas that people present to us in terms of what could work in the building. I love that in flex industrial the rates tend to be a lot more competitive than retail. If someone wants to be in the suburbs as an office user, you're typically going to be paying a lot less than being in a dedicated office building in the suburbs, and you could still have light industrial in there as well. It's versatile and it's somewhat removed from warehousing. The one that I have is more in the inner city limits. It's very difficult to build something next door to us to compete with us, whereas, if you have a warehouse outside of city limits and there's available land, you could go and build another building next door, and have the versatility of the different types of tenants, that's my preference. If I could buy one thing going forward, that's what I'd focus on. There are a lot of people who are opposed to data centers. Anytime a new one gets presented, it seems that there's an opposition group that are trying to fight it and get it blocked. I understand that pushback, but we need these data centers. AI is growing at a crazy pace. We need the data centers on top of it. There's a study that said that by 2030 data centers will take up 9% of the total US grid, that's double from what it is today, and that's already coming off of huge growth in the last few years, as these data centers have become more prevalent. They're taking up a lot of power, the forecast is for them to take up even more power, and they also need water, which is, I think, an under appreciated component of data centers. What are the downsides of the industrial? I've said to a lot of people, don't invest in industrial real estate. The biggest thing is, if you make a mistake, it's magnified much more than any other asset class. To illustrate, imagine if you were to buy a 15-unit apartment building, and you bought it in a good area, in a city, you're always going to have tenants in there. You just might need to lower the rent a little bit. If it's $1,200 and you say, "I just want to have I want to make sure my bills are paid." and you undercut the market at $800, you'll always have tenants. It's a matter of what price you need to accept. In industrial, if you buy the wrong building, you might never find a tenant. There are horror stories that I could tell of guys that have bought a property and they've sat vacant for years. If you do that with a single-tenant building, perhaps for the equivalent price of a multi-tenant apartment building, and it sits vacant, you lose 100% of your revenue. Chad Griffiths www.industrialize.com www.youtube.com/@industrialize

What are the latest news in industrial real estate? How to predict what kind of industrial will be in demand in the future? What are some characteristics of an industrial building that would allow you to have different types of tenants? Chad Griffiths, Partner and Commercial Real Estate Agent at NAI Commercial Real Estate shares his knowledge. Read this episode here: https://tinyurl.com/mvnjh5sp What are some of the latest things happening in the industrial asset class? What I find so fascinating about industrial real estate is that it's such a wide variety of activities and subcategories of industrial. Ten years ago, most people just grouped industrial as one big asset class, and they'd talk about it at a very high level, and that was it. But now, we should be breaking industrial into more subcategories, because if you look at the warehousing or the logistics side of it, that's gone through a pretty big roller coaster on its own that's independent of other subcategories. And just to give you an example, there are so many warehouses, distribution centers, and logistics facilities that went up so crazy over the last couple of years that in some large markets, they were adding 10- 20 million square feet of warehouse space every year. And now, some of those markets where they overbuilt, there's too much inventory. Their vacancy rate has gone from very low to being problematic in some areas, and it's going to take some time to work through that. If you look at other subcategories of industrial, manufacturing has still done quite well and it is coming back to North America. Manufacturing and warehousing have been on different paths. There's a new one that has only come up within the last few years, which I think deserves its subcategory, and that is the high-tech industrial which could be EV factories or gigafactories, which is a kind of broad term they use to describe battery factories. Tesla has their gigafactories, that name is kind of extended to other companies as well. You also have semiconductor manufacturing plants, like high-tech labs. Essentially, these aren't manufacturing facilities, if you were to picture Boeing making airplanes, that is traditional manufacturing but these high-tech ones are completely different and there are billions of dollars being invested. TSMC is doing a multi-billion dollar facility in Phoenix, and there's another one going up in Ohio and Columbus, they're popping up everywhere and these are massive facilities. And then the other one that you have is data centers which are growing at a crazy pace. How do you keep up with that as an industrial investor? How do you look ahead and try to understand what you should be investing in the future? There are two primary things that I do myself. First, you need to be in a city that has population growth for the foreseeable future. It can't be that there's population growth because there's one major project going on, and then once that project is done, perhaps jobs leave with it. You need to be in a big city where there's optimism that the population growth will continue. Population grows, everybody needs more stuff, they're shopping more, they're doing more online shopping and so warehouses and industrial investment follows population growth. The second thing is to invest in properties that have multiple uses. If that one tenant that's in there, or multiple tenants that are in there, whether it's at the end of their lease, or they go into bankruptcy, or they get bought out and they just no longer need it, they eventually leave. I want to make sure that when that tenant leaves, that building is suitable and compatible for the next tenant without me having to spend a ton of money retrofitting it. Chad Griffiths www.industrialize.com www.youtube.com/@industrialize

Why should you have a mid-term rental? What are the pros and cons of mid-term rentals? What do corporations look for when looking for corporate housing? Angela Healy, CEO of AvenueWest Managed Corporate Housing shares her knowledge. Read this episode here: https://tinyurl.com/4uaeke3p What are midterm rentals? Why should someone have to offer a midterm rental as an investor? Most people are very familiar with long-term unfurnished rentals, and in the last decade, short-term rentals have been very popular with Airbnb. Those midterm rentals have slid under the radar for quite some time, but we're making more headlines now because so many cities are prohibiting short-term rentals. In New York and Denver, we have a lot of regulations around short-term rentals, whether you need a license, whether you're restricted in which kind of properties you can offer, whether it has to be your primary residence, or whether you can only do it for 90 days. A lot of regulations happening around short-term rentals so what people are finding is, instead of either selling the property, especially in this real estate market, or switching it back to an unfurnished, long-term rental. They have another opportunity to be able to keep the rental furniture there and still be able to make a higher yield than they would be renting it unfurnished. The nice thing about midterm rentals is if you work with a corporation like ours, you could rent them to corporations in the area, so you have a really solid customer base. No one's going to do anything to their corporate apartment that will make them get disciplined at work, and the average stay is about 99- 100 Days. You do have a couple of turns a year but nowhere like what you were doing with Airbnb in terms of maybe a couple of nights and then a turn. It is a nice medium compared to the unfurnished rental. We have a couple of offices in California where the rules and laws around renting properties are very much geared toward the tenant or The occupant. By having the corporation rent the property for a specific assignment, you're not going to have somebody end up squatting or staying there beyond their term of what they're allowed, which also allows you to keep the rental rate up with the market. Once someone moves out, you're not subject to rent control, you can set your new market. If the industry or the real estate market is on an upswing, you can certainly get the increased prices related to the upswing and it is a nice way to diversify your overall portfolio. What are some cons to midterm rentals? We are subject to corporations and their ebbs and flows. That doesn't necessarily mean that it's only good in an up environment, because when there's a down environment, we do see movement of employees when they consolidate locations. Maybe they're closing this office and they're going to relocate everyone to this office. If your property is located near the office that closed, that could certainly be a con. And then, there are times where we can be affected by the overall economy, like, if the government shuts down for a week, and everyone takes a deep breath and they're like, "Oh, what's going on? How long will they be closed?" We could see pockets of times when everyone is kind of taking a breath and trying to adjust to the new economy but once they do start making those plans, like either closing places, maybe they're going to expand, or maybe interest rates are rising, and everyone's kind of taking a breath, businesses will start to adapt to that and start to make some sort of change, and that change is good for corporate housing. Corporations do not relocate people, and they do not start new assignments in December but that doesn't mean that we go vacant in that month, but if your tenant happens to leave in December, the likelihood of us finding somebody new before

How to determine the highest and best use for a piece of land? What is a new product that is in high demand in certain areas? What systems to put in place to manage a growing company? Amy Johnson, managing partner of Y Street Capital, shares her knowledge. Read this episode here: https://tinyurl.com/4ajk387f How to find the highest and best use for a piece of land? It comes down to vision. For us and our process, if it's under 5 acres, I don't want to worry about it because doing something with 3 acres is the same amount of work, and the same amount of headache, as it does with 300 acres. I'm going to look at the overview of the market, what is the need, what is the city's master plan? And just because they have something in their master plan doesn't mean they want to stick with it. What's the city's vision? What's the market's vision? What is the market demanding right now? For example, right now, I am not looking necessarily for really large lots or humongous houses, attainable housing is a lot more in demand, that means multifamily housing and townhome developments. It is not because I love the look of townhomes, but that's what the market is demanding and what is needed in the community. We've the city's vision, the market conditions vision, and then the possibility of what's there. There may also be some products that were very successful in other cities that we put it in this city. What is a new product that is in high demand in certain areas? We’re fitting 30 units in 5 acres that the city wanted to just zone commercial. The commercial is great if you have a specific tenant. You've to build it specifically for the commercial people. Jack in the Box wants a specific look, Starbucks, etc. We've built this product in Brigham City, and I've also seen it be successful in other cities, the market was saying "We want some commercial but we also need attainable housing, multifamily housing, or townhomes on top". We've designed this unit that is one single tax ID. It's an individual townhome. The bottom is a commercial use that they can run a business from, they don't need to get a special license and the other two floors are the residential housing. The maker spaces are usually in high demand. They sell for about $100,000 more than the typical townhome unit. Can you share a couple of tips on how you manage things, and how you keep the company growing from a leader's perspective? These are important: 1) Delegation and utilizing the actual systems. 2) Being able to say "no" to things that don't serve you, and 3) Set expectations, and that can be expectations for vendors, other contractors that we're working with, and civil engineers having a clear scope of work. 5) I live and breathe by my calendar, if it's not on my calendar, it doesn't exist. That means even if my executive assistant and I need to work on a project, and it's just working on something, we will block that time, and we'll put it in the calendar. Or even if it's in person, it has to be on my calendar. On Sundays my husband and I go through our week and plan our week and say, "What does this week look like? Am I missing anything?" Amy Johnson amyj@ystreetcapital.com https://www.linkedin.com/in/amy-johnson-358217162/

How to form a successful partnership as real estate operators, what are some of the important tools and processes to make your company run smoothly? Amy Johnson, managing partner of Y Street Capital, shares her knowledge. Read the interview here: https://tinyurl.com/bddxjmvv How did you partnership come about? My husband and I decided to get into the rental game market of residential houses and we turned our own little primary house into a rental and moved into an ugly, disgusting house and kept doing that over and over. It was difficult for us to scale, to keep doing individual residential house: get the loan, qualify, find the right property, all of those things and we knew we wanted to continue to grow. Fast forward, we acquired a great amount of properties, and decided to sell some of our portfolio and roll those into some larger assets. And one of those assets, we were an LP or a limited partner in some self-storage and saw the power of that. Then we got into land development, I needed some additional support, and that's where I met Victor Menasce, through a different mastermind. I paid him as a consultant on a project. As we were bringing on different projects, I had brought on some others and we just had a really good working relationship with different things, and they had some skills and knowledge and different things that I needed. I realized, that if I wanted to scale this, I couldn't do everything on my own. How did the conversation start so people can understand where values come from? Why would you both want to do that? Both companies were very successful before and I think that it is like a relationship, because partnerships are a good relationship. Instead of coming for a spouse or boyfriend having a cup that's half full, and expecting your partner to fill the other half, both of you come with a very full cup and come together, and then you get to create something even bigger. It wasn't that one person came in and tried to save or rescue or take over, that is not a great partnership. Now, that can be a business move. I have looked at other companies where I could see where I could add value. It doesn't mean you can't add value to them, but you're going to come together full and create something bigger, so that each has one cup and, together instead of making two cups, you make three. What tools have you implemented? What has been the most helpful to your company and how do you manage and oversee everything? One of the systems that we utilize is our EOS system, our rocks and our wigs. It is aligned and doing our level 10. If you have a good EOS system, it's because you have your priorities straight. When you have a company that is only handling emergencies or firefighting, you're not putting your priorities in straight and that's where you're not growing as well. Another system for us is Asana, but that's more for our project management standpoint. I used to use Google Doc to make my to-do list, and I'd share it with my assistant. Good tracker, but there's more accountability with Asana. Some individuals say, "The last thing I want to do is taking four meetings a year of two days each, plus every single Friday for two hours to go over our rocks and wigs and our issues lists, and things like that. If you're busy, sometimes that can seem overwhelming and I was grateful for the structure. There were times that I was like, "I'm so busy I don't have time for this." You need to make time so that you can create it. Amy Johnson amyj@ystreetcapital.com https://www.linkedin.com/in/amy-johnson-358217162/