The Power of Commercial Real Estate: Insights with Gary Smith

Are you ready to unlock the wealth-building potential of real estate investing? This week, we're diving into the vast world of real estate investment with our insightful host Gary Smith. We're unraveling the ins and outs of real estate investment trusts, syndications, and commercial real estate, sharing invaluable tips to help you chart your path to financial independence. We'll also reveal how to navigate current market conditions, purchase a property, and secure financing, all while maintaining a clear and robust strategy.

Gary Smith takes us deeper into the world of commercial real estate, defying traditional conventions and unveiling the wonders of creative financing. Learn how to maximize your investment opportunities and limit restrictions with seller financing. Gary also shares his wisdom on the importance of building a powerful team and staying ahead of the curve with continuous learning in areas like interest rates and property valuation. The commercial real estate market may be your untapped goldmine, ready for you to explore regardless of your background or community. Tune in every Thursday for more wealth-building and health-enhancing insights from your favorite hosts - George Crumley, Gary Smith, and Dr. Paul Clemens.

Transcript

Speaker 1: 0:00

Hi, this is George Cremling with the Crouchy the Old man podcast. Gary Smith, Paul Clements and I will be taking off the month of December. This will give us an opportunity to replenish and recharge and get ready for 2024. We hope you have enjoyed many of the 75 episodes we have produced over the last two years. Our goal for 2024 is to continue to bring you our audience, wealth building as well as health building tips. We are just wishing you a happy and safe holiday season. As we always say on the Crouchy the Old man podcast, if you didn't know, now you know.

Speaker 2: 0:49

Well, hello, hello, hello and welcome to another episode of the Crouchy the Old man podcast. Hi, I'm Gary Smith and I'm one of the co-hosts of the Crouchy the Old man podcast and, as always, I've got my main man in the studio with me, George Cremling. Top of the day to you, George.

Speaker 1: 1:08

Hey, Smitty Top of the day to you. Awesome man, how you doing.

Speaker 2: 1:11

Hey man, I'm doing great. You know the weather is keeping me on the inside, but other than that my sunshine is still bright. You've got this inclement weather up here, man, so I can't get out and swing the clubs.

Speaker 1: 1:24

Oh well, okay, it'll come. It'll come soon, just be patient.

Speaker 2: 1:28

Yeah, that's what they tell me. People that know me know I don't have a whole lot of patience.

Speaker 1: 1:36

Nothing better to do than talk about finances and educate our audience, man, because you know, here again I'm really excited. Today we're going to talk about your book. Congratulations on finishing that book.

Speaker 2: 1:49

Thank you.

Speaker 1: 1:50

For today. We're going to talk about five keys to create passive income with commercial real estate, written by Gary Smith. I think that's a great accomplishment, Great accomplishment.

Speaker 2: 2:02

Hey, man. Well, thank you so much, george. It was a project into making for a while and I've always had it. You know, I've always loved to write anyway. But when it comes to business finance and certainly you know how we are here at the Prodigy Omen podcast we like to share information. So what better way to do it is through a book. You know, and one of the things is on my bucket list anyway.

Speaker 1: 2:27

Yeah, that's what I was thinking too. What a great way to share information is through a book. I mean, that's a heck of a accomplishment. So, yeah, let's dive right into it. So, as I'm looking at the table of contents, you hit on a couple of different topics which you start off with. It says introduction creating passive income through real estate investing. So let's talk a little bit about this. I'm going to spend a couple of minutes on that.

Speaker 2: 2:57

Sure, you know, a lot of people look at real estate as a vehicle that can produce passive income. Now I guess first we have to describe what is passive income, right? Passive income is that type of income that you do not actively have to generate. What I mean by that? Well, hey, you take, for instance, people who buy a fix and flips. All right, that's pretty much work intensive. You have to do something to get that property up and running and it requires you or manager of some sort to make that happen, whereas with passive income it typically is derived from, let's say, for instance, real estate investment trusts.

Speaker 2: 3:40

Okay, that you can buy those, as we talked to in previous episodes in the stock market, if you will. Then you also have your passive income types from syndications. I know that's big right. Now there are people who just entrust a sponsor who is knowledgeable about real estate investing or apartment properties specifically, and they'll invest in those people and that they'll do the work, all the heavy lift lifting, as we like to call it, and then the investor themselves. They just reap the cash flow and hopefully a waterfall, depending upon their exit strategy. And then another form of passive income is commercial real estate, such as I talk about often and single tenant real estate is a drive from your CVS, drug stores, dollar stores, stuff like that.

Speaker 1: 4:29

Oh man, that's pretty good. So, interesting enough, you talk about strategies in your in chapter two, so let's talk a little bit. How do you, how did you go into and discuss strategies? Well, you know.

Speaker 2: 4:43

George, I kind of looked at it like and I look back on my career you got to have an end game in mind. Why, why are you buying a property or investing in real estate? To begin with, all right, and so my strategy is always to well, it's like this too. Before I get deep into that strategy piece is this is that you make your money when you buy real estate, right, and so your strategy has to be well. First of all, how am I going to buy it?

Speaker 2: 5:10

And I think people kind of get it twisted sometime.

Speaker 2: 5:13

They still focus on what to buy and sometime neglect spending a lot of time on how to buy it, and so if you buy wrong, you end up not coming out on top. Or let's put it this way you, you, you, you're yield is probably going to be a lot less if you buy the property wrong. And in the book I try to delve into how the structure offers, how to get your financing up front in terms of where you want to get that money from. Of course, buying it right also could mean that gets seller financing, and I liked it. And I talk a lot about creative financing because so many times, particularly in today's market, it's hard to get debt, it's hard to get financing from the banks, and it's going to get more hard. It's going to get harder. So hopefully those principles in my book will help people navigate through the turbulent time just coming as it relates to being able to get money. The cost of money is high now, and so you want to be able to navigate around that.

Speaker 1: 6:15

Yeah, that's so important, smitty, because you know it's almost the situation where you you don't want to have money to invest, you just want to have more of the idea of investing because you have the money.

Speaker 1: 6:30

You often go to the traditional methods, which is, to a mortgage company or to a bank which is going to charge you a certain amount of interest and you're going to go off on your merry way after you showing your taxes and things of that nature. But, like you say, when you get into the creative side of it, you actually take advantage of some of the things that are out there which you already talked about. You know, seller financing that's probably one of the easiest way, or one of the most lucrative ways to buy property, because now you're not all in, but you kind of take advantage of what the situation is, of what the owner maybe he's losing the property, maybe he's got an urgent need to get out of the property. So you basically you got to do some more, you got to do some sales work, you got to find those properties and it makes you a better person because of the fact that now you're putting forth some effort to get this property.

Speaker 2: 7:26

Sure, absolutely. As a matter of fact, when you talk about seller financing, some people think that it's a desperate seller and not all cases. That's the situation, and seller financing has a lot of benefits to a seller. One is the tax benefits. If you don't need all your cash at once, then it's the opportune way of exiting a property without creating a huge tax bill, versus if you get all the cash at once, that's a big tax bill right there, unless you do a 1031 exchange and that's a whole another chapter. Mm-hmm.

Speaker 1: 8:01

Well, interesting. We've kind of leaned into chapter three, where you talk about purchasing real estate even if you have limited capital or experience.

Speaker 2: 8:13

Yeah, you know. So I think, sometimes, when people the best way I forgot who said it, I'm going to mess up the quote but if you don't have any money, then you can't spend any. So therefore you can't invest, and sometimes that could be a good thing because you can get if you have a good deal. A good deal will always attract money, so that should never be the first concern. Certainly, you want to structure your deals, whereas that where the money comes from is not nearly as important as to how much you have to put in and what you expect to get back out. Money returns sooner is always better than money return later, and so as I show in the book and as I teach in the course, is that you have to understand the power of money. You need to understand the compounding of money and how interest rates affect your deal. All right, and so that's why I always go back to buying the property right, structuring the right financing.

Speaker 2: 9:11

There's a time to use your commercial lenders, but initially, most investors don't use them in the beginning. Okay, and that's the thing most of us don't know. We think that. You know, I got to get my credit score up to 720 and I got to go give the bank all this other stuff and etc. Etc. Etc. And you'll find out that you're working for the bank and so, and then, if you're a buy and hold strategy, well, the first five, 10, 15 years that you have that bank debt, the majority of that money is going toward interest and you're not paying down any of your debt. So you're further behind actually than you are than you than it looks appears to be. So those are things that I try to bring out in the book, try to help people understand how the money, how money, is used.

Speaker 3: 10:03

And real estate is really a finance game.

Speaker 2: 10:07

You know it's not about bricks and mortar. It's primarily a finance game. That building is there for the sole purpose of generating the means of exchange of capital. That's it.

Speaker 1: 10:16

Yeah, yeah. I think, once you understand that, your approach to real estate becomes completely different. You know, because like. I said people hammer in that there's only one way to buy real estate. But there's a multitude of ways to buy and as you investigate and get into some of the more alternative ways to do it, it's definitely more so benefits you in the long run. So yeah, let's talk a little bit about some of the pitfalls. I mean maintaining rental properties. What do you talk about when you get to that chapter? That's chapter five.

Speaker 2: 10:52

Well, yeah, well, pitfalls. As you know, some folks use the Burr method by renovate, rent, refinance, repeat. You know that's that Burr mythology. And so it's all set up primarily to entice people who are, you know, you're able to get into a property and but it's not as easy as that. It's not as easy as it is it made to see, because you have to deal with contractors, you have to understand budgeting, you may have to understand supply chain issues that could crop up.

Speaker 2: 11:28

You kind of mentioned it earlier that there's a lot of ways to get into real estate, but how do you get out? Okay, I'll go back to that extra strategy. Either your extra strategy is going to be to refinance or it's going to be to sell. All right, and with traditional financing it kind of forces you into that box, whereas if you use seller financing or creative financing now you've opened up several other options to yourself other than being forced to sell.

Speaker 2: 11:58

Because, let's look at it, if you're buying real estate or investing in real estate for the purpose of having passive income, why would you ever want to sell that income? Well, you know, and the way the system is set up is that it forces you to either sell the asset because of the balloon payment coming, particularly if you use interest only. See, interest only seems like it's a good idea in the beginning because your note is lower, but you've got to pay the piper into that term for the three years interest only, or five years interest only, and then, when that balloon payment kicks in and that's what we're going to see a lot of in 2023, this year and the next 24 to 36 months after this year and it's going to be a lot of opportunities.

Speaker 1: 12:44

Yeah, you're absolutely correct. So tell me what are some of the takeaways from the book.

Speaker 2: 12:51

All right. Well, some of the takeaways I try to share with people. Number one build a team. Teamwork does make the dream work.

Speaker 2: 13:00

Real estate, and specifically commercial real estate, is not a solo artist industry. You have to surround yourself with professionals, people, hopefully to know more than you do about it. And even to this day, I still try to surround myself with people. I don't want to be the smartest guy in the room, All right, so I try to surround myself with other people. What I mean by that become, you know.

Speaker 2: 13:20

You certainly should have a real estate agent or broker that specializes in the type of property that you're most interested in. You see, some people run out here, george, and they'll buy a property that doesn't even fit their lifestyle, that doesn't fit what they really want. All right, why buy? Let's say I'll pick on rental properties If you know you want to travel a lot and you're not a handy person, you know. So why not buy a property either through a syndication, where you don't have to deal with that sort of stuff?

Speaker 2: 13:49

All right, if you're in a cumulative phase, meaning that you're pretty much younger, you have that energy, you have the acclamation to maybe go out there and get your hands dirty or what have you, and that's okay. You learn the business. Or you have a pension for dealing with people. You know you got to understand people when you're dealing with real estate. You know People buy real estate and rent real estate for various reasons, so you got to educate yourself and do those type of things. Some of the other takeaways is that continue always to continue to increase your knowledge about financing, about interest rates, about mortgages and property valuations and those sort of things. And today we have the AI and artificial intelligence so you have all these machines out here and things like that that finding properties is becoming easier and easier, so finding them is not nearly as easy as finding them. The important is learning how to finance.

Speaker 1: 14:50

No, it's not. That's interesting and, as we talk about the book, it also makes it easier for those that are trying to get in to this business. All they do is run out and get your book as far as when we were coming up, we had to stub our toe and scramble and try to figure all this stuff out on the go.

Speaker 1: 15:15

So for our listening audience out there, grab this book and it'll take you through how to do this and help me out here. You can do this on the commercial side as well as the residential side.

Speaker 2: 15:27

Absolutely. That's the beauty of it Although that's my playground, if you will commercial but there's also some tips in there for residential investors if they're looking to do that. But I wanted to really put this book out for those who have always aspired to get into commercial real estate. There's not enough of us black folks that's actively involved in commercial real estate, whether on the brokerage side or whether on the investment side or even in some of the other careers. We've had people on our podcast from area area, from appraisers to inspectors and what have you, but from the just a totality of what we represent here in the United States.

Speaker 2: 16:11

Commercial real estate is the core or the center or the driver of the economy. That's what drives the economy. Commercial real estate, I think, is about $20 trillion of commercial real estate just here in the United States alone and investors from all over the world. They come here to the US and invest in commercial real estate and we can do the same thing. It doesn't have to be at the top where you're doing $800 billion transactions. You can make a whole heck of a lot of money by investing in commercial real estate.

Speaker 2: 16:47

That's under a million dollars actually, it all depends on what type of passive income and what's that number of needs to look like. You know, george, there's a lot of people when they look at passive income and I say this in my book how much money do you want to have extra coming into your household? Because you see, if you can create an extra $500 a month, that changes some people's lives. An extra $500 a month right now will change some households. Let me tell you this An extra $1,000 a month can change some zip codes out there. So we're not talking about monumental type of leaps from buying a two-family flat to buying a four-unit strip center, and that's what I say in the book. I want to expand people's dreams, expand your thinking and, more importantly, expand your horizon.

Speaker 1: 17:38

Yeah, I think it's a mindset, smitty. It's a mindset that's something that we think is out of our touch, out of our reach, out of our grasp. We don't really understand that commercial real estate is something that's obtainable. And we have to make sure that the information is put out. I think your book is going to be a great asset. To do that is to put the word out. You know to folks that, hey, commercial real estate is something that's obtainable, something you can do, and it's not out of your grasp. And I think that's so important because, like you say, commercial real estate can change your life and change the life of you know those coming after you once you get involved. And it just takes one deal.

Speaker 2: 18:24

It's one deal getting in the commercial real estate certainly changed mine, and so once I got on the inside, I didn't want to be the spook by the door, I want to be the spook who removed the door, you know so.

Speaker 1: 18:39

Definitely help remove the door because the fact that it's here again getting information out and that's what you know. Our core pillar is information, education, exposure and opportunity and and your book definitely hits on all four those, those key pillars, really ask for that. Any more than that. Yeah great, this is a great opportunity. I'm glad you, you do, you wrote the book. Here again, congratulations for that. And here again, tell our audience where they can pick the book up.

Speaker 2: 19:09

Well, the book is available right now on Amazon. All you need to do is go to Amazoncom, put in five keys to create passive income with commercial real estate. It's going to pop up and there you are. I wanted to make sure that it's affordable. So 10 bucks hey, that's a $10 investment and my goal is that if you take just one idea out of that book and apply it, you could possibly turn that $10 investment to a thousand fold return. You know, and change generations and possibly change your own zip code. There's a lot of information in here and I just wanted to make sure that, again, it's accessible. There's not a lot of people who look like me this it talks about commercial real estate but have actually done the deals and and the financing of them. So I want to make sure that I don't leave this planet but all this information and knowledge inside of me. So the best for me, best way for me to do that or accomplish that, is to put in a book.

Speaker 1: 20:06

Yeah, but there's another key to that too You're doing a class right also right, right, right.

Speaker 2: 20:10

I have a course in there.

Speaker 1: 20:12

Let's just take a couple of minutes and talk about the class you know, and so then then people can see how the book and the class kind of work together.

Speaker 2: 20:19

Oh, absolutely. The course is a 12 week course and what I do is take you from A to Z In terms of preparing you to buy property. You know, theory is one thing. You know, we can talk and talk about real estate and talk about Ideas and credit, finance and all that stuff, and it's good to talk, but hey, you got to take action. You know, take action. So the course is designed to develop you.

Speaker 2: 20:41

If you start off, our first module is about the mindset. You nailed it earlier. It's all about your mindset. But we take you through a step-by-step 12 week course, called my 12th Street 12 step program, but basically because you have to change your mindset when you step into the big game of commercial real estate. But we take you with that and so through this course you'll learn how to not only finance the properties. You'll know how, the difference of spreads, you're gonna understand the nuances of negotiation. More importantly, gonna understand the contracts and how to structure those deals. And then we get really deep into creative financing and All some of the nuances that I'm not gonna go into too much here on the podcast, but by the book.

Speaker 1: 21:26

Sign up for the course and then you will go from there is your special way for them to sign up for the course if they're interested?

Speaker 2: 21:33

Once they get. Yes, it's, it's it, yeah, absolutely my website. You can go to the website WWW swan money calm. There's a video on the website. It talks about the webinar you can tune into that. That's free. I'm thinking in terms of perhaps having an introductory course, a freebie for those that are interested, and Simeon email info at swan money calm, those that may have interest. Based upon that interest, certainly, I want people to be able to get access to information. You know, george, that's what's been, that's what has kept us back for so long. We don't have access to information, we don't have access to deal flow and we don't have access to cash flow. I Am here to eliminate all that mess, and so now I wanted to be to the point where we don't have any more excuses about why we can't do the same thing. Like Reginald Lewis said years ago in his book, why should white guys have all the fun?

Speaker 1: 22:32

Well, you just built that room and we've got access to Gary Smith and we got access to five keys to create passive income with commercial real estate. So hey, with those two we're gonna we're gonna make millionaires, right?

Speaker 1: 22:45

Hey man, that's the goal there's a thousand at least there we go, all right. So hey, this kind of concludes another episode of the Crotchet old man podcast. Smitty got anything to send us off with. I mean, you got it. You it's been pretty much your show today, so you might as well end it what you got, nice.

Speaker 2: 23:03

Well, let's see here, I think, what's the appropriate quote for today. You know, george, you know usually.

Speaker 1: 23:11

I want to get one stored up there, you know, there you go. All right, give our audience a few pearls.

Speaker 2: 23:18

All right, here comes a pearl. I'm, I'm, I'm, I'm stammering for time here as I look, looking through my book, and I'm looking at stuff that I haven't, that I've said. All right, here you are. A problem is simply a question to be resolved. A solution is an answer to a problem.

Speaker 1: 23:38

There you go, and we've just provided that answer to the problem.

Speaker 2: 23:42

Hey man welcome. That's right.

Speaker 1: 23:45

So, as we always say, on the crotch it all, men, if you didn't know. Now you know, you know, take care Peace.

Speaker 2: 23:53

All right Peace.

Speaker 3: 23:55

This is Dr Paul Clemens with the crotchety old men podcast. If you're interested in financial tools to build wealth and you're interested in ways to maximize your health with holistic alternatives, then you are just the audience that we're looking for. Tune in each week, every Thursday, to the crotchety old men podcast, where George Crumley, gary Smith and I offer you in-depth discussions on health and wealth. Subscribe to the crotchety old men podcast on Google, spotify, apple, iheartradio or wherever you get your favorite podcast.