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June 2, 2022

The Commercial Real Estate Show (Pt 2) w/ Jake Harris

The Commercial Real Estate Show (Pt 2) w/ Jake Harris

Jake Harris is the founder and managing partner of a private equity real estate firm that has managed, developed, and acquired more than $200 million in commercial assets under management in the last five years alone.

With nearly two decades of experience in real estate, construction, and investment management, Jake is a licensed California broker and a recognized expert in opportunity zones, infill development, construction cost-control systems, and the scaling of distressed investing business.

Today's show is PART 2 of our conversation on all things commercial REI.

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Transcript
brian:

Yay. Cara's welcome back.

jake:

Thank you. Thank you, Brian. How are you?

brian:

I am doing well, my friend and today is going to be another one that I equally have fun with because the first one we went off on a tangent man. We went off on a little bit of

jake:

inspiration or motivation. Yeah, I don't think we talked about real estate at all. Yeah. I don't know what we actually talked about. Cause I black out, usually when these things like my wife asks me what do you talk about in these podcasts? And I was like, I have no idea. And usually when I see snippets or people create, the little 15, 30, second little things, I was like, oh, I said, that sounds insightful. Yeah. That's so clever. Gosh, that guy is so smart. Yeah. He started

brian:

going off on a tangent and then , yeah, you complete your blackout and then you start regurgitating everything that your subconscious brain like holds and you're like, whoa. Yeah.

jake:

It's a hundred percent. Yeah. It's like, where'd that come from? I said, no I didn't say that.

brian:

I love her brother. Today I want to break it down into two parts. Maybe we can go the full hour. Maybe not. We'll see where we want to end up at today. I want to talk a super tactics. Just get down into the nitty gritty. If possible. I'd like to break this into almost two halves. First half we can just talk about. Pro core principles of commercial real estate. What to look for, what not to look for, what a see and be like, okay, I gotta run away screaming from this deal. Just commercial real estate basics. And then in the back. Hospitality specifically, because that's a really interesting niche and that's not something that a lot of people are looking into to your point in the last episode. So we're want to talk about what we're looking for there. What draws us in what scares us, how to underwrite, stuff like that. So let's begin with commercial in general. Walk us through your current allocation of your current portfolio and like how we built this over the years. Cause I know that you were flipping all the houses and then you jumped into commercial, but I don't really know about the gap between the

jake:

two. Yeah. So there's some overlap. And really when I was doing single family investing I got to doing it at scale, so we were buying and we would have, I don't know, like a hundred flips going on. And that was, and really as we started looking at it, we make 20 grand, we make 30 grand, we make, whatever. And so it, it had a nice role too, that when you're doing 20, 30, 40, $50,000 a house, and you got a hundred of those in the pipeline is it was nice profit. But it was a lot of work. It was a hamster wheel. And so then what happened is, A few kinds of commercial deals came across my desk and it was like, oh, Hey, we can go do this, won a 4,000,005, and we'd fix it up. And we did it. And then we make $500,000 and I was like, whoa, that's. Doing 10 deals or 20 deals like, whoa, like that was not any harder than doing a single family house that was not any harder. And so then we were looking at, it was like, oh, maybe. And the realization was that it's the same amount of work. Like I don't care if it's a hundred thousand dollar house. Or a $25 million deal. It's like essentially the same amount of work. It's the same steps, the same mechanisms, the same thing that you're going through throughout that process. And so it was, I felt very nervous, especially, in a declining value when I started initially investing of doing high dollar. Like houses, single family, the amount of people that can afford 1,000,005. And some of these markets is a very small pool and it's very subjective to someone's individual taste, a one and a half to $3 million house, like in there, those do exist. They take sometimes a very long time to sell or you have to take a very big haircut in the price and we've done some of those, but it's a little bit more dicey, but like a $2 million commercial deal or $5 million commercial deal, like lots of people. Our buyers of that. Yeah. And so to me, it seemed risky. So we needed to do scale and it couldn't be by doing more houses because we couldn't, physically or get enough deal into our funnel. So then it was like, how can we do bigger deals while we were our, I was, nervous about doing. Dollar amount, houses. So then that became that natural progression to, layering into commercial deals. Those have then subsequently grown over time. And so I have some deals that are, 35, $40 million plus deals. And I have deals that are, two, $3 million. And so when I actually feel like those five, two. 15 is like a good, space to play in because it's above the mom, Paul kind of ambassador. And I say, mom, Paul investors, it's the guy that's got like a 10 31 exchange. They got a million bucks that they're rolling out. They're not basing their investment decisions on fundamentals. They're basing it on avoiding a tax bill or it's down the street. It's doctor that, wants to go buy this office. Him and his collective country club friends can buy that deal. And so once you get a little bit above that and it's going to be subjective. Each individual market. Sometimes that might be one or $2 million deals that might be five or 10 and other markets, but there is some kind of like the entry level commercial real estate investor that doesn't actually get. And maybe they're a bigger sucker or they do less due diligence or something related to that where the pricing, it doesn't make a whole lot of sense. Then you get above those investors is now what. It is, it's this gray area. It's not institutional quality. You don't have, sophisticated, models or capital that you're competing against. And so then when you're not competing against an institutional buyer, but you're also basing your investment decisions on some kind of fundamental approach is there's less buyers available. And so for me, it is like I can structure a better deal. To your question about what are deals that you should run away from? And I go, really, there's very few deals that you should run away from because it tends on the way that you structure those deals. There are, of course are very extreme cases of this, where you can go get a contaminated land that may take 10, 15, years to clean up. And that may cost you millions of dollars to do that. In the right structure or the mechanisms is you give me $10 million to clean up this land and then I'll take it and do a deal that could be the right deal structure. And so what you're trying to do is understand the dynamics of what is that deal, that the way you're approaching it. And then also depends on your timeline too, that are in your business plan to execute whether it's going to be a good deal. So you may do something. That would be a terrible deal if you were trying to get out of it in the next 12 months, but that same purchase price may make sense if you are trying to add value or something that you're holding on for 10 plus years. Okay. And so understanding, like what is your business plan? What is it that you're trying to achieve helps you then also understand the structure of the deal that the deal needs to be. And these are ultimately kind of business. Decisions it gets and removes itself from some of the valuations that like a Zestimate is giving or a Zillow or a, as a single family space, like a single family home is oftentimes worth more money vacant than it is occupied. That is not the case in commercial leases. Yeah. It's all about the leases. And so if something that. Vacant can be worth little to no money. And so understanding, who and how, or it's going to be occupied or who is the tenant right now? What is their credit worthiness? A lot of those things are then become variables of making your investment decision on the commercial side. And the fact that there's some more complexity to it a little bit harder. And then there is this gray space that allows me to structure deals that are beneficial to me or to our investors, out of the gate is something that I'm looking towards and for the specific deals that I'm investing into

brian:

and you're talking the five to 10 million range.

jake:

Typically. And so I say it's it's three to 25, three to 30 again, that's going to be subject to each individual market. I've just also found that as. The government went and printed a bunch of money. And so some of those like $3 million deals are less appealing or they, maybe that's pushed up to five institutional capital. So the Blackstones, the Carlyles and BlackRocks and the big institutional investors they've started moving down the chain because they're. They want to do only $50 million deals to the illustration is it's the same amount of work to do a 5 million as it to do a $5 billion deal. Like almost the same amount of work they're paid on fees. And they're also paid on. They go do 20% return on a, a a hundred billion dollar deal. There's $20 million profit. They do that on a hundred thousand dollar deal, it's $20,000, the same amount of work. And so they're like, they want to be rewarded for the work that they're going to do. And then those numbers become much more significant. And if you can do bigger deals. But, oftentimes that's because they have tremendous track record, a, an amazing ability to raise capital and their cost of capital is like next to nothing. I know that there was a rental fund that I was, doing some work with. They had a $500 million line of credit. Point two, 5% interest from you told me. No, I go when their cost of capital's 0.2, 5% and it's half a billion dollars, is your money cheaper than. No. Paul. Yeah. And so I was like, so if that's who you're competing against, ultimately you have a higher risk profile and potential losing money because your cost of capital is more significant. So I don't want to compete against them because they're better. Their cost of capital is better. Their team they're smarter. They're more sophisticated. They're, doing things on a, in a better way. So I don't want to go compete with them. And that's why I say that three to 30. And oftentimes it narrows down to maybe that's five to 15 or five to 25. For me, five, $10 million deals seem, quite appetizing, for some of the things that we're like.

brian:

So we got a buy box established here. And then, so I know that the three different levers to pull on one of these deals is like rate terms and purchase price. So that's what you're always looking for. And then obviously like the lease length. How are you normally seeing people finance these? And I'm asking this question just to set it up to us, taking a buyer's journey, right? Talking to the person that is listening that is maybe a multifamily investor. Maybe they're a single family investor. Maybe they have 10, 20, 30 single family homes or multi-family units. And they've got some equity. They've got some cash flow, but they've heard about commercial real estate and they know that's the next level up walking this, walk them through. Okay. Here's where you're at right now. Here's how you're going to go into taking down this first commercial deal and what this looks like.

jake:

Yeah. So that's there's a lot of things to unpack in that. Talk about this is I think the big misconception that people have about commercial real estate is that it's going to be easy or there's not going to be any work that is going to just be mailbox money. And I have yet to find that, to be the case as an LP investor, when I've invested into other people's deals. That is very hands-off. I don't, I'm not the one that's responsible for solving those problems, but I give up control. And so I'm giving them that money to invest into that commercial deal or to invest into a business or whatever that is as that kind of limited partner. And then I receive distributions and, cash that's coming in off of those. But when you're actually buying a deal, when you are the sponsor and then. Are going to have to do work and it is going to be work. And because, even a net lease deals that we have, you have stuff come up. Oh, by the way, there's a pandemic. Oh. The city decided to, do a bunch of work on the street, out in front of your property. And there is, driven by. No traffic counts. So they want a reduction or rent the, the, a bunch of other things. You're just always dealing with that. And so if you're looking for a stress-free or no worries. I've yet to really find that there are a few absolute net lease deals that, exist, but those are, traded at very low cap rates because that's, what's been priced into the pricing. So let me talk you through that because of the. Tears or qualities of a good deal, because that's another thing that I get asked often as people like, I want to buy a good deal. What's a good commercial deal. And I like, I have no idea what is a good deal for you. I know what is a good deal for me. I know what my skillsets are, what I'm looking for. I know what I'm looking from a cashflow perspective or a value add component. And to that example is like there's people that are looking for, I do not want to do any work.

brian:

Okay. So let's forget those people let's get completely. Yeah. Those people are not listening to this show. These people are willing to work and they want some damn cashflow. And they've heard about triple net lease and they got a little tiny.

jake:

Okay. Yeah. And so if they first divorce themselves from the idea that it's going to not be work, I'm looking for things that have some value add components to it, because I want to be able to toggle and control my destiny moving forward. And so when that looks like that is there may be some vacant. Or a lease that is coming due soon that maybe is under market rent or under market rates. And so in commercial real estate and people that are smarter than me have given the example of this, you can do a value add in commercial real estate while you're in. That is very difficult to do when it's a multifamily building or hospitality or something else. So you're like, ah, I'm confused. How can you do a value add on a commercial building when you don't actually own it? The reality is that most commercial real estate is valued on lease. The value add is the lease. So what you need to do is just go find the tenant or lease up that space and you can do that and start advertising while you're in escrow with the seller's permission, say, Hey, I'm interested in buying your shopping center, your retail center, your industrial building, whatever that has vacancy or as a hundred percent vacant or something like that. But I want to advertise. That leasing I've also found that brokers traditionally are pretty lazy. They don't really want to do work. They don't really care. They'll put a small sign out somewhere on the property. Oftentimes maybe you've seen it. It's like overgrown sun drink. Four leaves and like that is the extent of their marketing for that property. We're waiting for some random person to look on CoStar or drive by that thing, call me up and say, I need. That land or that building or whatever, and that's the extent of their marketing. And so technology has allowed this to evolve much faster. And so when I'm looking at it is like, how can we go do a value, add, you can go do a Matterport. You can do drone footage, you can do a very nice flyers. You can have, Fiverr, VA's go do this. You can go spend cup a thousand bucks and have a amazing. Marketing flyer that you can not only put up on a listing on a LoopNet or CoStar or craxy, but you can also blast that out as a PDF, as a mailer, to all potential tenants, to all potential brokers, as anyone else in that kind of area. That may be what you can identify using technology to see. Would you be interested in this space? Here's the thing, there's what we can do. We'll we're willing to commit T eyes. We're willing to do something else related to that at this. And then if you get demand so you can create a value add scenario while you're in escrow. And what you're trying to do is remove risk from your acquisition while you're in escrow. And while. You can still cancel. And so you're not really in a place of losing your money, but that intensity of being in escrow is real. You learn more while being an escrow, then you will learn, in reading books and going to schools and going to colleges and doing all those things. You're going to learn more because it's intense. I feel like I'm buying a $10 million building right now, so we need to do a lot of stuff. A lot of people don't understand how to do due diligence. So they don't do that. Or they just buried their head on their sand and then they close on the property and just hope nothing ever comes up. It goes wrong. And yeah. And so I go, so first you, what you want to be doing it. You want to be very proactive, be quick to get in something and Asgrow. That makes sense. There's very little. To being in escrow, you then experience a little bit of risk by doing due diligence, inspection reports, engineering, drone footage is, checking out, flying out the property. That's a little bit of risk into the thousands, tens of thousands of dollars. Maybe if it's a super complex deal, maybe a hundred thousand, $150,000, but I go, your risk is much, much less. Let's call it tens of thousand dollars, $10,000 to do due diligence on this property. That's a $5 million. So then when you're proactive, you've got this property in escrow, you're now, collectively racing towards a close of escrow time. Your goal is to remove all that risk that would be potentially losing $5 million or whatever that deal was. And so you can go through this and you're looking at identifying those things that we talked about earlier. Is there contamination is, there's the structures, there's something wrong with it, is there a functional obsolescence, is the code up-to-date, are there zoning issues? Has the zoning change or never changed and it's grandfathered in, so then you couldn't get financing on that. And so when you can start eliminating all of these things and variables that are risks, Or at least having a solution to them. So they're like, Hey, there's the roof is all messed up. I need $250,000 off the price because, oh my gosh, you told me this. But based on the conditions I need, you're reducing that risk that also allows to you to exercise and do some things around like that value add component. Like here's my. That I have signed on the lease. That's going to pay $15 a year, triple net. That also helps with your financing. Then you also know like how much money am I going to have to put down on this deal? And if there's are some extreme cases where you buy something, that's completely vacant, you sign a new lease to fix it up, and it's going to cost you $3 million to fix it up, to do the tenant improvement. But when it's done, it's. $20 million. Then you can go take that package to the bank. I'm buying this for six, I'm going to spend $3 million, fixing it up to get this tenant in there. And, and I need some working capital and other things. So I need a loan for 50% of its future value. Once that tenant moves. That becomes a very easy yes. For a bank, because they're like, do you want to do a 50% loan on this property? And you already have, the future valuation would be like, yes, we want to do a 50% loan. So then you can get into that deal with little, to no money down. You can go structure a $10 million deal when do no money and have $10 million equity in that property. Either for cashflow or refinance out or sell it off or do whatever you ultimately want to do with that property. But what you've done is you've used that in escrow time to start eliminating the risk and doing that value, add understanding, or what you're going to do, you then have, this is my business plan in which I'm going to execute. And when you go share that to the bank, to investors, to others, like people are like, man, that makes sense. Oh, cool. You're buying something that's super discounted. And so you're paying vacant prices or. Pricing, but you're getting occupied values. And so I go, so those are some of the things that you can do in commercial real estate that you can not do in multifamily. You can't go necessarily fix up in apartment. And so that's where, like I'm looking for deals that have value, add components that I can go drive new vision. I'm, not just grabbing onto this and hoping that this tenant stays in there and. Collect this cashflow like can, so I'm always looking for something that allows me to manipulate or craft the future to what it is that I'm going to be doing. And then through that value add exercise is how I can drive a value and vision into what this collective deal is.

brian:

Okay. So couple questions, observations, clarifications for the people listening that are completely mind blown. So first and foremost mindset, right? We've talked about this. We've talked about all, talk about this on the show people. And this is something that Jason helps me with, is, people are like, okay, I want, $20,000 a month in cash flow. I want to get up to that $10 million net worth. That's going to take this many years with Jake is talking about he's doing it in a deal like. This is possible people, the people are doing this and they're on the fricking show and they're telling you how to do this. So it's just, it's really cool to be able to see all the different perspectives of it and see that, like you said, as much effort, obviously there's career capital that goes into this and there's 10,000 hours that go into it because a lot of industry terminology and secrets of what to look for, what not to look for. So a couple of different questions that I have. And I'm trying to think about how to phrase them so that we can knock them out pretty quickly to jump into hospitality like that vertical, the three questions that I have, and that you can tackle any way that you want to, in whatever order you want to. First question is, so we've said, who commercial real estate isn't for, people that want complete, pacivity go be an LP who is commercial real estate for, and why commercial real is. Just one question two, how much money should people have in their war, chest liquid to pursue commercial real estate as a generality, cause this obviously gonna do. With the deals. And then question three would be for the person that's getting into commercial real estate. So you have the person that now knows why they want to do commercial real estate. They have the capital that you say that they should have. How should they best go about taking down that first deal? It sounds to me like they need to find someone as a mentor to partner with, from what you're saying, it sounds like they need to have an operator. That's done this for them to partner with and then maybe bring the cab. Those are the three questions I want to close on with before we jump into hospitality.

jake:

Yeah. So there's, we could do a show on each of those questions individually. And so let's start with why commercial real estate. So years ago I read real estate riches by Dolf deRoos. He was a rich dad advisor at one point. And so he focused on more of the commercial real estate space. And so he's got a PhD not in real estate. I think it was actually on something else. And he did his first deal. He made like more money on his first deal than he was being offered for the. Annual salary of when he was leaving as being this PhD kind of person. So it was like, why would I go do a job that pays me less than I just did an, a deal that took me 20 hours worth of work, or understanding so commercial real estate in, in, in something that he wrote or, in that book stuck with me is every thing. Every amount of wealth ultimately ends up in real estate. know, You can see this as example, Larry Ellison Bill gates, some of these very wealthy people, where do they put their money? They don't sit in cash. They go buy like an island. , they buy, real estate, all alarms. Yeah. They buy, 75, 80, a hundred thousand million acres of farmland. They go buy real estate. And and part of that is real estate and all. 80 90% of all wealth is in realist. You make it in tech and business or in these other things, but then you go and it lives in perpetuity in real estate. And so for me, it was just like, man, if I could just go start learning this when I'm young and younger and continue along that thing, most people are waiting until they're 65 years old to go start investing in a real estate, or they're going to start investing into commercial deals. And that's fine for them to do that, but like even their first initial deals that going to make mistakes, they're going to invest into the wrong deal or with the wrong sponsor or make the wrong assumptions. So I was like, by the time I'm 65, like I'll be like I'm 40 something years experience. So it was like, it's a different place is so I just felt like I can play a very long game in the real estate space because every all money ultimately comes to real estate. And then also related is 80, 90% of the law. Are written as favorable benefits to real estate because if 90% of the wealth in the world in the United States is sitting in real estate. Guess what? These are the most powerful people on the planet that are like, we're going to make the laws fit. Protecting our wealth. So there's going to be protections of landlord laws. There's going to be protections of taxes. And that's one of the biggest things that I've seen, that people that are high income earning kind of W2 jobs, doctors that are making a million, salesmen that are making one, $2 million a year, they're paying 50, 60% and taxes like they're getting murdered and I'm like, And they're focused on, lowering the mortgage rate from 3.8 to 3%. And I was like, you're going to save, What $800 a month by lowering your mortgage rate. But I go, but if you go by commercial deal, you become as far as a real estate professional. And there's certain, dynamics around a high income earner, maybe. Partner and spouse becomes a real estate professional, but you can then write off and then start structuring a lot of these things. So then, like instead of paying $500,000 in taxes a year, you can take that and go pay a hundred thousand dollars in taxes or pays no money in taxes. So what's more beneficial to you is to go make more money. Or to save on the money that you're already making. And so to the short order, like the fastest thing that I can oftentimes see, and when I talk to people that have some levels of success that have achieved high income earning status is like saving. Taxes is by far and away, the easiest and fastest thing that we can toggle because in not only that you can do that instantly. You don't have to create these, the value add you don't have to go build the building. You don't have to do that. These are paper losses. These are things that are structured because of the. Code has been written by everyone that owns commercial real estate to benefit the people that own commercial real estate. So that's why I was like, to me, like that makes so much sense to why someone's should be playing in that space and the why they should have allocations and to that space. And so it is not a get rich quick kind of typical process. It's a get rich slow. What a pretty steady Eddie thing that, over time, if you keep doing that, buy and hold for. Even if you overpaid for it, five years ago, 10 years ago, eight years, whatever it is, if you're just holding forever, oftentimes it pretty much works out and talk about

brian:

the lease types for people that are listening that maybe have heard a triple net lease, but they don't really understand it.

jake:

So there's Sonya net lease Double triple absolute. Those are terms that you can Google each one of those and they'll do a much better illustration, but so a net lease or a triple net lease is that the tenant is going to pay all the expenses related to the operating of that building. So you'll have something like the property tax. Property taxes go up every year. That net of that expense is passed onto the tenant. And the tenant pays for that if the the cams, so the community or common area maintenance and whatever that expense is to mow the lawns to irrigate the. Planters to clean up the building to pick up the trash, that common area maintenance is passed onto the tenant. Say, here you go. Here's your prorata share of that. Then your insurance, Hey, we're insuring this building. We're going to cover this and then make sure that it doesn't, if it burns down, it covers your business and those other things, but here's the cost of that insurance. All of those items. Typically go up every year, you have insurance premium increases your property taxes, go up your paying the maintenance guy or the lawn care provider or the trash, all of those things go up. And so when you have a triple net lease, what it does is it allows you to protect and understand the cashflow that you are going to have coming in when you are a full service gross. Or a modified gross or some of these other different ways in which you structure some leases is as those expenses go up, you're actually making less and less money because you're like we're renting. To that tenant for $10,000 a month. That worked great when it was $10,000 a month in your expenses were a thousand. So you're like I'm making $9,000 that Delta, that profit. As those expenses go from a thousand to 1500 to 2003, 4, 5, 6 years down the road, you're like, I'm only making $8,000 a month or I've seen it in other situations. Go where you have. Super old lease and they're not covering these expenses. And you're like, this sucks. Like I don't like them as a tenant. They oftentimes Clint. So then what happens is people will start trying to eat away or, not maintain the property because they're not being able to cover that. And so that also oftentimes identifies where there's deferred maintenance issues in a commercial building. And you can say, something's not going right there. And so why you'd want that net lease? And there's some caveats to that about they may be responsible for the building, but you're responsible for the routes. You're responsible for the roof leaks or you're responsible if or the HPAC unit. So it's still a net lease, but you cover those. And then like in the absolute net lease. Is, you're not doing anything. The HPAC goes out, deal with it, tenant, deal with it. And you just handle your self and you do it. You, they may have you approve some of their doing, Hey, we're putting a new roof on, is that okay? And he'd be like what kind of roof? It's a new TPO roof. Oh, cool. Yeah, that's fine. Whose thing did it, I get covered insurance. They still check with you, even though they're paying for those. So that creates mechanisms do you still have to manage. The maintenance people, you still have to manage, like what happens when somebody goes and breaks out your window? You probably have to deal with that. And what happens when, the oldest service contracts related to that property, it's still work. And but collectively there is possibilities to do this on little to no work. That's what and why the differences of delays really do matter. But do you have to do a lot of accounting work for net lease deals, triple net lease deals. You have to count all the invoices you have to account for, and they often, and the tenants often want a reconciliation of that. Send me all the receipts for all the work that was done. Send me that because you're telling me it's, $3,000 a month. Sure. It'd be like, so there's a lot of accounting that you need to do to make sure that you need to hire them and make sure they showed up and did the thing, did they do it properly? Did they do so again, there is work related to these investment deals or at least I have yet to find one. You know what, there are ground leases groundless as you do. You rent the, you rent the ground out. So you just be like, give me this amount of money for the ground. And so you'll see that like a Dunkin donuts or a McDonald's or one of these kind of they're going to build their own building. They're going to manage that. They're going to handle everything. And, but you're like, great. Give me $3,000 a month for that. And I'm going to do nothing. I don't know. I don't care if your thing burns down. I don't care if it, whatever. So there are something, but those are a lot more. Difficult to structure as far as a fine, they have to fit a very, specific criteria and that's, you'll see like a mall developer will do that. And they'll ground lease the parcels on the outskirts. Sometimes they'll sell them. Sometimes it'll just ground lease them on intersections. Those will oftentimes be under a ground lease because it makes sense for a gas station or a, a drive-through right off the freeway. So there's times in which you can do that, but that's typically the land developer is taking raw land and converting it to something else and then says, Hey, I don't want to give up the land, but if you pay me this, I'll let you build whatever you want. Okay.

brian:

So a lot of information, a lot of expertise.

jake:

The question I'll ask question that got quickly, you also asked about how much money should you have? Sure. Like you don't have to have any. Nia, honestly, if this is what you want to start doing, you can figure out how to do things with no money. I don't know if we talked about the guy in Miami from Venezuela, they built the high rise. Okay. So this is okay. Great for mindset. So I've done a few real estate deals and I was like, Hey, I want to I want to build a skyscraper. I want to build. High rise and like it, I was like, man, now I've done these hundreds of millions of dollars worth of deals. I was finishing up grad school. So a master's degree in real estate and international real estate and finance. And I met this guy down in Miami and he just finished building like this 42 story condo project. And it was a kit. And I was like, and I say kid, he was like 28. He was like 28. And I was just like, dude, send me his information. Like you just built this 42 story wow, like how did you do that? Was your dad a developer? Did you inherit, did drug dealer? I was like, I am, I'm very confused on how a 28 year old person just built a 42 story building. And I was like, where are you in construction? He's I just got here from Venezuela three years ago with no money and I've never done real estate in my entire life. And I'm just like so I'm even more confused now. Like I know I was like RO like what, and he's no, I was just told that, America's the land of opportunity. You just come here and then you can just go create and do these things and take action. And I was just like, okay. And he's so I just saw that there was this old broker sign. Grown over with weeds that was said for sale. And I called them up and I said, Hey, this land you have here that says for sale, is it still for sale? And they said, yes, it is. It's however much amount of money, $5 million for this piece of land because it's in Miami beach. And he said, oh, that's fantastic. Great. Let's do a deal. So he's he took. He saw down the street was an architect and a builder that was building this other high rise kind of thing. And they said, Hey, could you build one of those over there on this lot? And they went, oh yeah, it's almost actually very similar. We could almost build almost the exact same building right there. It worked really well. And they're like, oh, he's wow, that's great. Yeah, the agent. And they said, Hey, you should talk to the agent they've been doing all the same. For this this deal. And so you should talk to them and they went and talked and they said, oh my gosh, like we have overwhelming demand for this. We can actually start doing sales for, you could do up some renders, do up some things and start getting soliciting people that are wanting to buy. That potential, property. And so he's and then, Miami is a weird place as well, where you can just walk around on a street corner and say, Hey, I'm building a $70 million tower project. And there you'll probably find somebody that has some money that can partner with you. They're like, oh, that's amazing. And be like, here's some of the pre-sales, here's some of the things that I need to do this to complete the plans and the architecture and the other things like that. And they're like, wow, that seems so cheap. Only got to put a million bucks up to go finish the plans. And we're in escrow and we're working towards a great, so then they got enough sales where they're selling out through the building so that the bank was like, oh yeah, with all your deposits and the way this thing's done, like Wolf finances deal like you don't, great. That's a good builder. That's a good architect. That's a good location. We have all these presales. Great. Let's do the deal. And so we started building out in that building. Immediately had all the, pre sold out. And so he ended up making $30 million. I think it was on the first deal on the first piece of real estate that he ever bought in his entire life. Straight away, fresh off of coming in from Venezuela and to Miami. And so I'm just like, it hit me over the head, like a two by four where I was just like, oh my gosh, how many. Of these limitations are my own self limitations. And the reality was like, it was all me holding myself back thinking I don't have enough experience. I don't, haven't done enough of those deals. I haven't done X, Y, and Z. And so what happened and what that was, is an illustration to me that you don't need money to do a deal. It is not a lack of resources. It's a lack of resourcefulness. And so like when I was like, dude oh my gosh. And so it's just a mindset shift. Everything is a construct of imagination. Someone had a vision that this kid, from Venezuela, looked at that and said, I think I could build and do something there. This is the land of opportunity. All you have to do is take action. All you have to do is take action. How much money did he have? How many market studies did he do? How many. None of those. He took action. And by taking action, it created and manifest something that then became what was my dream project of oh my gosh. At some point in my future, I can do, when I've now had 200, 300, $400 million worth of experience then I can do one of those. When the reality is that's not the case, someone is doing your dream life, your dream project, your dream experience with. Just because they simply believed in themselves and took action

brian:

actually got in the pockets, hit the soundboard, Jake.

jake:

Oh,

brian:

man. Fired up. Okay, let's go. So let's talk. So we got the

jake:

mindset to answer your question. You don't need any money to start.

brian:

Okay. So yeah, so no money. Okay. So we got that part now for time's sake here, because I know that you gotta run and do some stuff. And I got I'm about to hop on another one to. Best resources. What are some resources that people can go to? Because for commercial real estate, obviously, yes, you can manipulate the lease. You can do a lot more value add without having to do actual stuff to the building. Like for the multifamily, you could almost have to break it down to the studs. Reboot. That's what we're looking for here, you're just manipulating a lease and you can be able to have the triple net lease. You can have all this different stuff. There's thousands of different benefits to doing commercial real estate. What are some resources that somebody can go look at besides obviously your book plug your book and where else can they go to dive into this now so that they can know what to look for when they're taking down this $42 million condo.

jake:

Resources you don't, I think things about being around other people. You are the average of the five people you spend the most time with. I think mindset of that is it's peer pressure. And so then your group, obviously we're part of GoBundance mastermind group. You're collectively getting around people that you're just like my mind's blown all the time. It has nothing to do with age. There are people that have. Less experienced different, understandings of things. And so it just it changes your mind. It becomes a paradigm shift for you and for me, at least is being around other people that are proactively. Creating their life. And just being alongside of them is like they drag you up. The tide gets raised. And so what does that do for somebody who's looking to get a commercial real estate, get around other people that are doing the thing that you want to do, go to, if it's a meetup or to a club or a, or in investment committee or, whatever group, a mastermind that's doing, the things that you want to do, spend that money. And it's not going to necessarily be cheap. There's some times where it's I hired a coach and it's 2000, $3,000 a month and you'd be like, great. But did they give you a lot more intensive focus and that, $30,000 allowed you to do. $3 million. Did that being around that, in that mastermind group that maybe cost 10 grand, did that 10 grand allow you the new opening of the aperture and that you poured into it that made you $10 million. Absolutely. Those things are possible. And so I say that because there is no like true, real hack, like you just go do this, you do that. The holistic approach of you shifting your mindset becomes one of the most beneficial things that you can do because now everything is possible. And it's not just about doing this deal is like, how do you do all the deals? How can you get even, and they're going to give you stage advisors, people that give me stage advice and things that we talked about on the previous show about Robert Kiyosaki, just throwing out comments of B where a young man of, failure and these other things I wasn't in the place that could hear it or listen to it. But if you are in an environment where you have people that have a little bit more Sage wisdom, and it's not just one person, but it's multiple, they may also help you prevent from doing the wrong thing. And I think collectively when you're in a group that cares about each other, that, once the tide to be raised and then you have access to those types of people, is that, Hey, Brian, I need advice on this because you do that or Hey Aaron, this or Maddie or whoever else. And so you can dive into very specifics of I don't know how to do this, but I know somebody that does, and they're going to be able to give you a much more condensed, short cut version and allow you to see the other side. And there's times I've told people to not do that. I would not do this deal. They did it anyway, and that's fine for them. They may, and it may actually work out just fine for them. Maybe it doesn't, as far as, I can give them that advice because I'm, collectively in a group like that.

brian:

So screw your book, then nobody read the book. Screw catching knives.

jake:

Yeah. I was like, honestly, that's a great cause it's again, building your mom's. Getting around the right team, doing those things. Those are good tactics gives you, and really, especially in a distressed environment that I think there is going to be a little bit more distressed because par, people are just. Baton on the com forever interest rates being super low, forever rents going up forever. And I still think there's going to be, the vast majority of real estate will be just fine.

brian:

Let's go, brother. Let's get you to that. Thanks again, as always for coming on, buddy. Love having you as a friend, love having you as a mentor. This has been phenomenal and it's been truly a masterclass in commercial real estate. Go get your blood drawn dog. Go get your blood test has been Brian and Jake Harris signing off with beet action academy podcast.