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Own the Outcome with Tyler Deveraux
Own the Outcome dives deep into the real stories of resilience and triumph that arise from the depths of failure. Join Tyler Deveraux on a journey of inspiration, growth, and authentic conversation. Within every stumble lies a valuable lesson, a chance for transformation, and a path towards success. Each episode features compelling stories from a diverse range of guests, from entrepreneurs and artists to everyday heroes—all sharing one thing in common: their ability to turn adversity into an opportunity for growth. Because in the end, it's not about avoiding failure; it's about owning the outcome.
Own the Outcome with Tyler Deveraux
Master Industrial Real Estate Success with Joel Friedland
It's time to learn the secrets of industrial real estate with Joel Friedland, a seasoned expert who has mastered the art of the deal over four decades.
Joel shares his journey and the invaluable lessons he's learned along the way. Whether navigating industrial parks or forming genuine connections with investors, Joel's insights a wealth of knowledge for aspiring and seasoned real estate professionals alike.
Tune in to discover why fostering meaningful connections and owning your outcomes can propel your real estate endeavors to new heights.
Thank you for listening to today's episode. If this podcast has brought a smile to your face or sparked some new ideas, I'd love to hear from you! Leaving a review would mean the world to me. Appreciate you!
Connect with Tyler on Instagram: @tyler_deveraux
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All right, aloha and welcome to Own the Outcome podcast. My name is Tyler Devereaux and today we have Mr Joel Friedland man. I'm so excited. I told you this off camera but, joel, I'm so excited to pick your mind today and all y'all listening to this. You're going to find massive value. This is somebody who's been in the industrial space for 40 years. I know he doesn't look like it, but he's been in there for 40 years an absolute wealth of knowledge. So, joel, welcome to the podcast.
Speaker 2:Tyler, thank you, and before we start, I want to tell you what a big fan I am of yours. I have watched at least a dozen of your podcasts and some of your speaking engagements, and I just have to give you so much credit. At your stage in the game, which is you're much younger than I am, you've succeeded in such a big way, and I love the way you give back. I love the way that you talk about personal development, so I'm just really delighted to finally meet you.
Speaker 1:You do. Thank you so much. I appreciate that a ton, thank you. The feeling is very mutual and I was telling Strat off, you know, off camera before we, before we even got on here of how how much I love, love, love to learn from men, or how excited I am to learn from you, as because, brother, you've been in it for way longer than I have, I mean way, way longer. You've seen so many amazing you've you've done billions of dollars of transactions of commercial real estate. I can't remember the exact number. I want to say two something billion, is that? Do you know the exact number?
Speaker 2:Yeah, about two and a half billion, but I don't look at that number as being very important. The most important thing is the current deal, whether it's going to work or not work, and how to make sure that it does.
Speaker 1:That's exactly it. So let's talk a little bit about that, just quickly, about the journey, like how you got into the industrial space. You know we're going to talk in, talk about raising capital and how you source deals, but how did you even get into the space period and maybe even let people know what industrial even is?
Speaker 2:Well, I didn't know what it was either. I was 22 years old, I graduated from the university of Michigan and I knew I wanted to get into real estate. And my girlfriend at the time, who is now my wife, her dad knew a bunch of guys in real estate and gave me a list of names and I cold called all of them and I said hey, I'm looking for a job in real estate. I wasn't quite sure what it meant. I sort of knew, and I ended up meeting a guy not on the list that a friend of mine said hey, there's this man that owns industrial property, you should call him. So I cold called him at 10 o'clock in the morning on a Tuesday. I was 22, just out of college and I had no experience. His name was Milt Podolsky and he was about 60. And I didn't know anything about him other than his name. I called him. I said Mr Padowski, I want to get into real estate and I'm looking for a job. And I said I really don't know what industrial is. He says kid, come to my office today. I said well, I'm not dressed, I don't have a suit and tie. He says just come over today. So I went over to his office and we met in the conference room. Big guy, big, imposing, interesting looking guy and his son and another fellow that worked for them were all in the conference room waiting for me and I'm so intimidated, I'm shaking. And they started asking me questions and they said we would like to know what your position is on going out and meeting people you've never met before. I said, oh well, that's easy.
Speaker 2:I had a lawn business all through high school and college and I went door to door and I convinced people to let me cut their lawn and I ended up getting 64 lawns in a weekend, which is, they said, you did yeah, 64 lawns. I didn't know how I was going to cut 64 lawns a week, but I figured if I got the lawns. So my folks went away on a trip and we had a garage and I went to the store where I bought lawnmowers on credit, along with bags and bags of Scott's fertilizer and these fertilizer spreaders. My folks come home from the vacation and they try to pull the car into the garage and it's stuffed with landscaping supplies. And they walked in the door and they said what did you do?
Speaker 2:And I said I started a business while you were away, I was 14. I couldn't even drive. I had to have friends drive so we could move stuff around in their pickup trucks and in their cars. And I hired dozens of high school kids to help me do that business. So Mr Podolsky says you are so hired.
Speaker 1:Exactly, exactly. So he said look it's amazing.
Speaker 2:It was 1981. Interest rates were 18%. He had 80 buildings and 10 of them were vacant. And he said your job is going to be to go cold calling, like you did with the lawns in industrial parks, talking to the owners of companies seeing if they'll move from where they're at to leasing one of my vacant buildings. And I just went out and started driving around and stopping in and I never stopped it. Just I loved industrial because it's manufacturing and distribution buildings where people make stuff and distribute stuff and every business is different and they're fascinating.
Speaker 1:I bet that is what's cool about that. That is a cool thing about that is you have different businesses. That I'm sure you learn. Naturally, you learn some things about what's the most interesting tenant that you've had.
Speaker 2:Well, the one that I like to talk about the most.
Speaker 2:You watch shark tank yeah, yeah, yeah so in season one there was this guy, jonathan miller, who had a company called element bars and he got a deal with kevin harrington it it was before mark cuban even joined it. It was, uh, the other group, um, so the other, kevin and I think, damon and the women Lori, so he gets Barbara, he gets a deal, and they said this is the best negotiator we've ever seen. And we own a building in the city of Chicago, which is where we live. We have 20 buildings in Chicago.
Speaker 2:And this guy gets in touch with me and he says my name's Jonathan Miller and I have a company and I need 50,000 square feet to lease. I said I saw you on Shark Tank. He said yeah, yeah, I was on Shark Tank. So I leased him the building and he's been in the building for five years at this point and he makes millions of protein. He's been in the building for five years at this point and he makes millions of protein bars a year in our building. That's my most interesting, the worst one. The worst one is the U S postal service. They have a space where they've got 17,000 feet for a warehouse and they've got 40 parking spaces, but they have 70 trucks so they clog up the street and nobody can get by and all the neighbors are up in arms because the street is ruined and they won't leave. They have a lease and I can't get rid of them.
Speaker 1:Oh my gosh. And that, yeah, filters and funnels back up to you for sure that's. That is a tough one. Yeah, you know, I would love to get into some of the nitty gritty. Because is this? Well, I know there's similarities between the multifamily space, I'm sure, and the, the industrial space, but how do you, how are you, sourcing these deals? Are you cold calling right now to source deals as well, or broker relationships, or what is that?
Speaker 2:Yeah, it's broker relationships. So there's a group of brokers called the Society of Industrial and Office Realtors. It's an international group. There's 4,000 members and they're the most experienced brokers who do industrial and office in the world. They're all over. They're in Hawaii, they're everywhere, and in the Chicago area we've got about 80 members and these are people who have been in the business a long time and they all have relationships with owners of these industrial buildings and tenants and we do a lot of work with them. We reach out to them. I talked to three of them today. Hey, do you have any deals you can sell that you know about, that I don't know about. And so we work with the brokerage community. We're very into paying commissions because they like to earn money for bringing us a deal. But we also cold call and we've got people making this sub.
Speaker 2:This past summer I hired 10 summer interns college students and we gave them 500 buildings between the 10 of them to go meet all the owners and make offers. We made 500 offers with these young guys going in groups of two and three to meet owners of companies that also own buildings. They'd bring an offer and they'd say, hey, would you like to sell your building and they mostly got thrown out. It was mostly like get the hell out of here, I'm not looking to sell. But one of the young guys brought an offer and he handed it to the guy. He walked in the front door and the owner just happened to be by the door and he said hey, I'm looking to see if you might want to sell your building. I have an offer for you from my boss, the, to see if you might want to sell your building. I have an offer for you from my boss. The guy says let me see that offer. And he takes this piece of paper, literally takes a piece of paper, and he says this is what I think of your offer and he drops it on the floor.
Speaker 2:And these guys come back to the office and they said we had this really bad experience. I said let's get on the phone and call the guy right now. They said what I said. Let's recall him, let's not take no for an answer. And we called him up. All 10 interns were in my conference room and the guy's on a speaker. So I say to him Bill, you weren't very nice today to a couple of my summer interns who brought you an offer which I'm just going to ask you would you consider selling your building? He said no, fuck off. And then he slammed. He slams the phone down and my guys are like in the conference room clapping and hooting and hollering because the 65 year old guy just got a. Fuck you in a hang up.
Speaker 1:That's so great. Yeah, you know what I love. So what I love about that is that you know, I'm sure people listening because I did too. You're going to come in, you're going to save the day, you're going to close the deal, but it's like listen, man, no matter what level you're at, you still get those. You still have those conversations. You still have those days, for sure.
Speaker 2:Yeah, yeah.
Speaker 1:You can't take them seriously. That's awesome. Yeah, how do you so? I love that creative approach, though. I absolutely love that creative approach, and what a great learning experience for them. My question for you how do you determine, like, how, what's your buy box? I'm like what is a good one, what is a bad one, because I know that you're a very conservative investor a conservative investor so what does that buy box look like for?
Speaker 2:you Okay. So we're long-term holders first of all. So we look for buildings that have a certain long-term value. We're not looking to buy and sell and get out. We're not two-year, three-year holds. We don't look to make big IRRs real quick. We look for yield. We're trying to get an average, let's say, of an 8% cash on cash return for a no debt deal over, let's say, a period of seven years.
Speaker 2:And so my buy box is buildings with good geometry. In industrial and I'm sure it's true in multifamily right, if it lays out right, it's better. The parking has to be in the right place. There has to be enough parking. The front door has to be in the right place. In industrial it's about loading docks and driving doors because there's truck traffic that brings the products in and out. So every over-the-road trailer you see on the highway every single day, all they're doing is going between one industrial building and another and they have to have enough room, feet of maneuvering room, so that when the truck pulls into the parking lot and backs up, there's enough room that they can maneuver without having to do a jackknife.
Speaker 2:So geometry of where the parking is I'll give you a crazy one. People bring me buildings all the time where the parking's in the back. Well, we live in Chicago. It gets cold, it snows, it gets icy. If the parking's all in the back and the office is in the front, visitors don't know where to park, so they go in the back. And now on a cold or rainy day, they have to walk all the way around, and either that or they have to walk through where they're at risk of getting hit by a forklift truck or getting their finger caught in a machine. So I don't like parking in the back. I will turn down a building, no matter how good it is, if there's not parking on the side or in the front near the front door. It gets that specific. So it's the truck, the touring room, where the parking is.
Speaker 2:And the first three rules of industrial real estate are parking, parking and parking. Because if there's not enough, if there aren't enough places to put people's cars, the employees can't go to work, they have nowhere to park, they get squeezed out. So you have to have enough parking, in addition to it being in the right place. Plus, in industrial, if you drive by the Amazon warehouses, those are all industrial buildings. The ceilings have to be high because companies stack products in racks. So if you've got a real low ceiling you can't stack the stuff up. And even in a small building, we buy smaller buildings under 100,000 square feet. A small building? We buy smaller buildings under 100,000 square feet. The Amazon buildings are more like 400 or 600,000 square feet. But these little buildings we still need higher ceilings. The low ceilings bring the value down. So that's our buy box.
Speaker 1:Yeah, those are not things that I would have. Those are great details. Those are details that I would have not thought of. With your ceilings, is there a you said high enough? Is there a certain like height? That is like a walk away like I'm done. This is a no-go.
Speaker 2:Yeah, we bought a building today. We bought a building in a town called Carroll Stream and we have an international tenant that's based in Japan and they make equipment for doing surveys for when people build roads or they put foundations into buildings. Yep, they have to be perfectly flat, and when you're on the tollway driving around, there can't be water pooling around. So they have these laser-based. They work with the satellite. It's crazy, but they make perfectly flat and or tapered areas of ground when you do the excavation and when you pave. So that's our tenant. It's an amazing tenant.
Speaker 2:The problem that we have with a building like the one we bought today is it's only 10,000 square feet and the ceiling height is 14 and a half clear. I wish it was 16. I wish it was 20, but when it's that small they don't really stack up that much stuff. So this equipment that they use for surveying, it's in racks, but it doesn't have to go all the way up. So we compromise depending on size. But if I bought a 50,000 foot building and the ceiling wasn't 28 foot clear, I would be literally making a stupid deal.
Speaker 1:Yeah, that's a great point too, depending on how big it is and the needs, because how big it is is going to correlate over to the needs of the tenant, I'm sure.
Speaker 2:Yeah, amazon needs 36 to 40 feet clear.
Speaker 1:Okay, there we go.
Speaker 2:Yeah.
Speaker 1:And what's funny.
Speaker 2:I'll tell you a really funny story. The owners of the buildings don't know how high the ceilings are, generally in these smaller buildings. It's not an important detail to them, it's important to me. So I have my little laser measurer. It's important to me. So I'm sitting in a meeting with a seller in about a 20,000 square foot building Must have been about 30 years ago, and this is where I learned it 30 years ago that no owner knows how high their ceiling is. So I'm sitting there with him and I said I'm interested in your building, it's great. How high is your ceiling? He says I think it's like 30 feet. We go back there and I look at it and I said this is 14. How can he be so wrong? You know, it just seemed really high to him. He made up the number, so people don't know. And he made up the number, so people don't know, ordinary people don't.
Speaker 1:Yeah, that's funny. You know what that correlates into multiple areas of size we overestimate a little bit. So what would make you walk away from deals? Have you ever had that experience where you're under contract on a deal going through due diligence we can even talk about what your due diligence process looks like but having to walk away from deals or anything like that?
Speaker 2:Yeah, first of all, last year we walked away from our favorite deal that we ever had. We had three buildings in one package and the owner told us the ceiling was 15 foot clear. They're little buildings and that was enough. So we believed him before we got serious. We then went to the building. We found out it was 12. You know that same story. The owner doesn't know how tall it is, we don't buy 12. But the price was so good that I thought these are little buildings. Maybe 12 feet will still buy them. One of the three buildings had the truck docks on the side.
Speaker 2:So, generally speaking, when you go into an industrial park, no one knows what industrial parks are, because they're hidden. They're like retail. You know Starbucks, you know Targets, you know office buildings multifamily, but industrials behind stuff. Office buildings multifamily, but industrials behind stuff. So I'm in this industrial park and I thought it was going to be an easy deal, even after the 12 foot clear. I compromised. I probably shouldn't have but the loading docks, which usually are facing front, so you can maneuver the truck on the street and that way you don't have to own extra land for maneuvering. The city owns the land and it just slows down traffic. While the trucker is backing in, the cars all have to stop while he's making the turn. This set of docks was on the side and what I noticed was that if you pulled the truck up the parking lot between the two rows of parking up the aisle and then you went to the very end at the back of the lot, there wasn't enough room to pull the truck forward. You need 136 feet. And then back into the dock. It was only about 80, 90 feet roughly. So the neighbor actually had a parking lot adjacent to ours. They touched it was like one lot here, one lot here. And I went to the neighbor and I said can I make a deal with you to get an easement, because I know your neighbor's using your parking lot to maneuver his trucks because that gives them 136 feet? We only have 80. You guys have about 70. It's 150. And he said yeah, yeah, for 50 grand I would give you an easement to use that to maneuver your trucks.
Speaker 2:So we went under contract and then we found out there was an environmental problem. Someone had spilled a solvent that created a carcinogen in the ground. That spilled on the floor and was never cleaned up. We called our environmental consultant. He came over. He said I can take care of this for about 60 grand. We'll fix it, we'll dig it out, we'll take the bad soil, we'll redo the floor. We had spent $40,000 on due diligence and I had counted on the neighbor giving me the easement. So I go to him after we're ready to close.
Speaker 2:It was a $4 million deal. I had raised $4 million. Close. It was a $4 million deal. I had raised $4 million, 100,000 each on average from 40 people. You know how much work that is. I was ready, our lawyer was ready to close. I just couldn't pin down the neighbor to get the easement agreement signed. So I go to him and I said I'm ready. He says I've changed my mind, I'm not doing it. I said why not? He says ruins the value of my property. I didn't think it through. I couldn't buy the properties. You can't buy a property where you can't get the truck in the dock. 40 investors, $4 million raised, environmental study, roof studies and legal fees, all of it and I had to walk away.
Speaker 1:Very disappointing. What's the timeframe on that?
Speaker 2:It took us three months to do it. Probably my partner Eric, in my time, I would say we each spent at least 60, 80 hours on that thing, probably 150 hours and we walked away after we thought we were going to buy it and, interestingly, after we walked away, one of our favorite competitors. We love the people who are in our business. It's a great group of people even when we compete. One of our competitors bought the property and I think he just didn't think through the truck dock thing and he didn't think through the environmental thing and he didn't think through the 12 foot ceiling problem. He just bought it and came to me I don't know, maybe three, four weeks ago, and he said he didn't know that we were under contract. We walked away. He never even knew we were there. And he comes to me. He says listen, I bought some properties. I don't think I want to own them long term. Do you want them? That's it. It's that property. I already turned them down once.
Speaker 1:same property oh my gosh. Yeah, that's man, that's so. Is he struggling to get so? Is he struggling to get tenants in there? And that's why he's wanting to offload?
Speaker 2:oh no, they're leased by a manufacturing company owned by a friend of mine who has been in there since the buildings were built in the 1960s, tenants going nowhere. There's nine years left on a lease but we're long-term holders when it comes back in nine years if the tenant leaves. We don't like the physical building. The geometry is bad we don't like the physical building the geometry is bad.
Speaker 1:Yep, yep, yeah. So look at it. Yeah, other than that, when you say long-term holders, cause you're, you're syndicating these deals, so you're bringing investors in, but then are you're holding them? For you said seven years, I think, but are you? Is that? Are you holding it even longer than that?
Speaker 2:Much longer than that. Our average is seven years. Our average is seven years, but we have buildings that we've owned for over 30 years. And we have buildings that we've owned for over 20 years and our investors never want to sell them because they get great cash flow and if we sell them they have to pay taxes and they can't get the same cash flow anywhere. And these are great buildings with good geometry, they're good long-term holds and they've gone up in value a lot.
Speaker 2:A building that we bought for, let's say, a million dollars 30 years ago today is worth $3 million. So we don't have to sell it to prove that it's worth $3 million, we just know that it is. But now the rent has gone up and the returns are more like 12 or 13% based on our original cost basis. It just doesn't make sense to sell. And if somebody wants to sell out, what I do is I introduce them to one of our other 250 investors and I let them work out a. I call it a mix and match, where someone who wants to buy that person's capital recapitalizes them and then they come out and they pay their tax and the new person comes in and they get a new tax basis, which is called a 754 step-up. You make a 754 election and the new people have a start over on the depreciation for the tax benefits.
Speaker 1:That's cool. Yeah, I did not know that either. Okay, so how long? I love that play too. Wait, one more thing I want to talk about, because you go no debt. Do you go no debt or low debt when you're buying?
Speaker 2:We've done a few low debt deals, but mostly no debt. The one we bought today it's a million five total We've raised money from. I've got the chart here. We've got about 30 investors. The lowest investment is 25,000 from anybody and the largest in this one is 250,000.
Speaker 2:So the range is at that level and so when I sent this thing out and I said we're buying this building in Carroll Stream, the first question because people have heard me before is how's the geometry? Perfect, the dock faces the street, there's parking on the side by the front entrance and on the other side of the building there's a vacant lot that could be made into more parking, parking, parking, parking and the tenant's great on the on the Tokyo Stock Exchange and on the NASDAQ locally here in the United States and they have 14 locations. So everything lines up. The only problem is the ceiling's only 15, but again, because it's 10,000 feet, it's okay. So people say how's the geometry?
Speaker 2:I've learned from you the geometry is great. That's why I filled up, because when I say the geometry is great and we also do a Zoom call with all the investors who are interested before we put it out and we let everybody ask questions and we have one person who's a civil engineer, who just joined us, and he asked the best question. He said is the land next door buildable or do you have to do something with the stormwater, because today's stormwater detention is a big deal? So we had a value add new investor, which is great.
Speaker 1:Yeah, yeah, that is awesome, Okay. So this brings me to my next question, because you've raised a lot of capital and you've managed a lot of investors, like you just said, on that one deal that you backed out of that's 40 investors, but imagine you have hundreds of investors. Question one would be how are you building those relationships and how are you raising your capital? I know that that is a broad question, but if you were to bring it down, how are you at first finding the investors and then how are you building trust with them to raise that capital? Do?
Speaker 2:you ever watch. Curb your Enthusiasm.
Speaker 1:I haven't for a while. I need to watch that again. Yes, that's a very funny show.
Speaker 2:Do you ever watch Jerry Seinfeld, where he does comedians with coffee and cars?
Speaker 2:yeah, yeah, yeah that's what I do. I my life is going around having lunch with people and just getting to know them and understanding their struggles. They understand my struggles. It's really just a relationship building process. Where I really like my people and getting together with them is it's an honor. Like I'm grateful for the time with these great people.
Speaker 2:I've got one investor who's 97 years old. He and his family try to invest a million dollars in every deal, but I don't have enough room so they have to keep it down and I have breakfast with him. A lot of Saturdays I go to his house and I stop at a local restaurant and I bring the omelets, and now his grandson joined us. I mean, this is what it is. It's building the relationships with people and caring about them and having being enough of a giver that they care back. Yeah, I follow your, I love, I follow your philosophy. That's why I like you know. That's why I like what you have to say. I think you're that. That typifies very few people and you're one of them that it does thank you.
Speaker 1:I think that is best. Relationships are so sacred. And here's a question, because I know you talked about the no debt. I want to circle back to that, actually, because one of the questions that I had was what? What have you always bought them with, with no or low debt? And is that because of, and and what drove you to that? Because, because you know, I know that we talk about investors.
Speaker 2:Yeah, go ahead, yeah yeah, that's a great question. My first deal I ever did was all cash, no mortgage. It was a $560,000 deal, 14,000 square feet, and I brought in 20 something investors Some of them were contractors who did work at the building something investors Some of them were contractors who did work at the building and I felt that all cash was the way to go. I did my next deal all cash, the next one, all cash, and then I met a young guy who became my business partner. Eventually we had our company and he grew very quickly into being a very solid deal finder negotiator and I brought him in as a partner and he said, joel, we could do so much better if we borrowed money. And I said, yeah, but I don't want to. He said, well, why don't we try it? So we did our first deal with a bank and it worked out really really well. We did our second deal with a bank worked out really well. Well, somehow we got up to 50 buildings by 2008 and they all had debt. We no longer had anything. That was just debt free.
Speaker 2:And when the market crashed in 2008, I was at seven banks. We owed personal guarantees at banks of over 70 million between us and it was the most disastrous period of my life. You know, I felt that I was underwater, drowning, went into a deep depression, barely made my way out of it. Most of my friends who had debt at that time went bankrupt at that time if they were in the real estate business. Because if you had a 70% loan and the value of the property went down and the lender said we want you to pay down the loan, the value of the property went down and the lender said we want you to pay down the loan.
Speaker 2:Well, how do you do it? And so I had, like Milt Podolsky years and years ago. He had 10 bad buildings unleased. I had 10 vacant buildings out of 50 and I fell into despair. It was horrible and it took me a long time to come out, with meditation and medication, a lot of counseling, a lot of friends that I was leaning on, and I made a decision that the highest level of debt that I'm going to do in the future is 30%. Our portfolio of 20 buildings, our average loan to value, is 18%. But I only want to do debt-free deals and if someone wants to make like woo-hoo kind of IRRs by leveraging the crap out of stuff, they're going to have to go with someone else because I won't do it.
Speaker 1:That's a man. That is a journey right there. You know, the title of the podcast is Own the Outcome Somebody listening to the beginning of this? It could seem so easy, like everything's just fallen perfectly along the journey, but it's not how it works. There's always challenges, and so, first off, when I say own the outcome maybe that's the first question I'll ask is what does that mean to you? When I say own the outcome, how? That's the first question I'll ask is what does that mean to you? When I say own the outcome, what is?
Speaker 2:how do you translate that for you? Oh, I agree with something that you say a lot, which is don't blame people when something goes wrong. They didn't force you to do something, unless you were in a prison camp, right, I mean, that's the only time that you're forced to do anything. You make the decisions. Someone might suggest something or sell you on something Own it. You make the decision, own it. That's why I love what you talk about. You don't blame people, you take accountability and responsibility, and that's what it means, and that's why you call it that as a as as a podcast name. I think it's perfect.
Speaker 1:That's exactly, exactly, exactly it, and I can quote.
Speaker 2:I've got your quotes. I know the books. I mean I'm almost like a stalker of yours.
Speaker 1:Hey, honored Listen, napoleon Hill.
Speaker 2:The devil book. I mean I, I all your stuff, I got your stuff.
Speaker 1:You're such a stuff. Thank you, man. It is, though it's such a beautiful way to live life. You know, like placing blame is exhausting. It's exhausting and so dehabilitating and so debilitating. So how did you, when you were in that that period of all that debt due investor money at risk, how did you start to get out of it? Cause you said that you like what were the, I guess, the tactical things that you did to get out of that?
Speaker 2:How did you own it. I became more involved in some faith things. I did a lot of Bible study stuff. I had a core group of investors and friends and we would go to breakfast. We had a men's group. My wife was incredible. My in-laws came to dinner when I was really depressed and brought dinner almost every night. Laws came to dinner when I was really depressed and brought dinner almost every night. My mother at the time would come over and give me like a neck rub to make me feel better, like a massage, just to, and it was tough. I would go to the office and I was so depressed I actually closed my door of my office. I was lying on the floor just like moaning. It was so bad. I had my winter coat as my pillow on the floor and I put the chair up against the door so nobody would come in.
Speaker 2:It required finding a really good therapist.
Speaker 2:Also step programs and I found one that I liked because I had a friend who was a very big time business gambler and I stumbled into Gamblers Anonymous and I realized you know people who put a lot of debt on deals and are making bad decisions without really thoughtful due diligence and without having a backup plan.
Speaker 2:Real estate can become gambling, just like the stock market can become gambling, and I've met a bunch of people from that group and discovered that gambling is an addiction, but it's also an illness and there's this big, big part of it that's sort of big shot ism People who get into this. Sometimes. There's this big, big part of it that's sort of big shot ism People who are who get into this. Sometimes. There's a personality type where they're out to prove how fantastic they are and how rich they are, even if they're not, and so I decided not to be a big shot. I'm going to share my I open with I was. People say, tell me about your past and I say, well, I got into trouble in real estate in 2008 and went into a depression and hardly was able to come out of it. That's what I start with, because I'm so great Doesn't really resonate with anybody.
Speaker 1:Man, thank you for sharing that. Like I'm literally you saw me taking notes because here's what I took notes, here's what I wrote down. I put faith because I believe that success leaves clues and I believe the overcoming challenges leaves clues as well, and you put faith. What I put, sorry, was faith. Community family Sounds like you got a beautiful family man. What a blessing Like, what a beautiful family. That is like such an amazing, amazing what you can overcome with with family and love you know, and then therapist, and then sharing with others. I thought was so powerful too, because I'll tell you that I mean there's a couple of these things that I I need to be better at, and sharing with others is actually one of those, because it is you learn so much, and it's not complaining about it to others, it's sharing with others and talking about what has happened and what you're doing. I'm sure like the direction forward. But then just people come out of the woodworks to provide advice and guidance and experiences they had and what they did. It just is pretty powerful situation.
Speaker 2:Yeah, yeah, as I said, it's a lot like the Jerry Seinfeld. You know, driving around with people and I take people on tours of buildings. I love doing that. I tell people let's go to the post office building, where they hate my guts I'm the landlord but let's go and I drive people over there. We go in the back door and it takes I don't know three minutes for them to throw me out.
Speaker 1:What are you doing in?
Speaker 2:here and they toss us out. So we go to lunch and we talk about hey, they invested in this deal where the post office? Is this so difficult of a tenant? We just have a lot to talk about. But then it gets into personal stuff and we talk about their family and my family and everyone's got illnesses in the family. Right now, unfortunately, we're going through. My wife was diagnosed with cancer and she's having treatments and people are delivering dinners to our house every other night and people are driving her for her treatments. The hour that it takes to get to the hospital. The community has just really put their arms around us and our kids live local. We've got three grandkids and our daughters bring the grandkids over and it's such a joy to be with them, joy to be with them. My grandkids are younger than your kids, but it's a fun age six one. No-transcript.
Speaker 1:Those are so fun. And that is, you know, the leverage side and being over leveraged and the game that you're in and the challenges that it poses, and then the beauty that's on the other side of it doesn't mean there's not challenges, but just the beauty that comes from the other side of that and getting through the challenge, you know, which then translates into everything we do, like the challenge that you're overcoming right now with your wife.
Speaker 2:amen I have to. I have to tell you one thing there are challenges every day. One of the greatest challenges is one of our buildings, um the wall separated from the floor, and the rats and the mice are coming in. I don't know if you can see this. You see that rat with this.
Speaker 1:Oh my goodness, yep, I can see that.
Speaker 2:With its head caught in the trap. So I get a call from my tenant yesterday and he says I went to Vegas for New Year's and I parked my BMW in the loading dock and while I was away, the mice or the rats crawled in and they ate the wires and the rubber that coats the wires to the battery and to all of the equipment. He says $4,000 to get my car rewired. It's two years old BMW, two years old, $4,000. So I said look, that's not right. We own the building. I'll split that with you, $2,000 each. And I don't know, maybe that was really stupid, but that's how you build a relationship and he'll never forget that. He'll never forget the rats.
Speaker 1:Yeah, a learning lesson that I pulled from what you were saying was well, and it's something that has just been evident to me as of late you share the challenges with your investors because, see, there's been times where I've thought to myself it's my job to keep those challenges so they don't even know about them.
Speaker 1:It's like we're grinding, we're getting after it, but it's like, literally, it was a pure intent of like I don't want to burden them with a challenge, but then here's what happened. Then some of those challenges start to get into their returns and when that happened, they didn't realize we've been navigating challenges for all these other investments that we've had in the past and those kinds of things. Like we've exited and they've reinvested, and so now, when they have challenges that now aid into their returns, there was panic and there's panic, and I created that panic because I hadn't told them there's always been challenges on every one of these deals. I just haven't shared it. So that's a huge takeaway for me when you say that is, it's so powerful, so important to share them the whole way through, and you share them in such an intimate setting too, which is so powerful.
Speaker 2:Yeah, I do a letter every quarter to all my investors for each deal and it's a lot of it was going to be.
Speaker 1:One of my questions is how you maintain the relationship through the whole.
Speaker 2:Yeah, it's a lot of work. It's a ton of work to do that. But you know the lunches and the dinners and the coffees and just phone calls with people. I like to talk to at least three or four investors every day. Just I keep them up to date.
Speaker 2:I was telling two guys about the reason I have the picture of the rat is because the tenant took the picture of the rat and I've already talked to three investors about it and you know, at first they laugh and then they say what's it going to cost to fix this? There will be a cost to fix it. So it's thousands and thousands of dollars because it's a very big building and it can't be the only place where the little rodents come in. It's 106,000 foot building. My partner, eric, tells me that the fix on this to put the material where the floor meets the bricks is somewhere in the neighborhood of $40,000. Well, I have to tell the investors about that. But it does go along with the rat story and the picture. So it's a little entertaining and a little upsetting.
Speaker 2:Guy calls me today. He's in, not Cabo, he's in Canc, cancun, and he says how's our deal going? And I said, oh, let me show you the picture of the rat and he says oh, and he looks at it. I said you won't be able to afford dessert tonight because we're spending 40 grand to fix it and your share of it's whatever dessert costs you tonight at dinner. So tell your wife and kids no dessert because joel's spending my money on getting the rats dislocated from our building on Roosevelt Road. So you know it's part of the relationship building.
Speaker 1:Yes, that is. That is, what advice would you give you know somebody newer in the space who's about to start raising capital? What's some tactical three to five bits, I don't know something.
Speaker 2:tactical advice you'd give them, knowing what you know now, both on how to source it, but also just bits of advice, I guess, in the raising capital side of things yeah, the number one thing in raising capital for me is bringing the pPM to the meeting and saying I'm going to start with the risks, I'm going to go to the risk section, I'm not going to go to the what you get, I'm going to go to what could go wrong. And they say, well, I don't want to hear that, I want to hear what's good about the deal. I said, okay, then I'm going to give you three things that can go wrong. I want to give you my three biggest worries before you talk about whether you're going to go in or not. And I'm going to make it fast. I'm going to tell you the three worries in one minute, but I'm not going to start with how great the deal is. If I didn't think it was great, I wouldn't be bringing it to you in the first place.
Speaker 2:But let's talk real. Let's talk real. The roof's bad, it's going to need to be replaced, it's going to cost tens of thousands of dollars at some point. And what I'm doing to be good with that is I'm going to add a lot of reserves to what we're raising. So we've got money in the bank and instead of sitting in the bank today, you can get about a four and a half percent return on Treasury bills. I'm going to put it in T-bills. We'll earn some money on it and the roof's bad, so you've got to know that and I've made a provision for it.
Speaker 2:Second thing the tenant has only two and a half years left on their lease and I don't know if they're going to stay. And if it's vacant we can have some vacancy for a period of months. In an industrial usually it's a single tenant building and if they leave it's 100% vacant. So you may have an interruption in your cash flow if that happens. I just want you to know Now. The good news is I think we'll get more rent from the new tenant. So you tell them both sides, but you don't tell them only the good side. And so that's number one. Be upfront with what could go wrong, that's for sure. That's the number one thing.
Speaker 1:The number one advice.
Speaker 2:Yeah, yeah. The number two thing is saying to them I want to make sure that this deal is right for you and that you're going in with the right amount of money, because I believe that diversification is really important and I'm not looking for you to put a gigantic chunk of your net worth in this. My opinion is that any one deal, if you put more than 3% of your net worth in it, you're making a tragic mistake in terms of the common sense of diversification in the business world. So if your personal net worth is $5 million, you better not be putting more than 150 grand in, and I'd say 100,000 is probably right, which is more. It's 2%. And because if something does go wrong, you want it spread around.
Speaker 2:I got a call from a guy today and he said I want to put 100 grand in the Carol Stream deal. I just put in 50. I want to put in another 50. Unfortunately, we're oversubscribed. So I said I know you so well, I know you love this deal. Put the 50 in another deal and diversify. Let me give you another one to think about. So that kind of thing.
Speaker 1:Those are great. That is like honestly gold when it comes for capital raising. And you saw, once again, you saw me taking notes and I'll re-listen to this whole episode and take even more notes. But I take notes on that kind of stuff because I love how you my takeaway from this when you went through you start with the risk and I'll tell you that that is one thing that I talk about where I'll say you start with the risk Number one, because they don't expect you to Number two, like they need to know that there are. But what I loved how you did is you're like hey, this is the roof problem, this is how I'm mitigating it. Hey, this is the tenant problem that you need to be aware of, this is how we're mitigating it. It's like you're putting in the solution behind it, but you're making them aware of the risk so that they know.
Speaker 1:I think it's just powerful. And then you talk about truly wanting to do what's best for them, because what's so slippery in the raising capital space is you want to raise as much as you can, as quickly as you can, so you can get the deal done. Once again, like you said, it is a lot of work to raise money from 40 investors, but you also want to do what is best for them, truly best for them, and that's a long-term perspective. Because if you don't, long-term it's going to come back to bite you Long-term. It's not going to be a fit for both of you. It's just going to cause more turmoil and stress on all fronts. So setting that stage it's truly doing what's best for them. I love that you said 3% of the net worth, no more than 3% of the net worth.
Speaker 2:Yeah, yeah, I believe that very strongly.
Speaker 1:Yeah, very good man. Joel, I could talk to you for way too long. We're going to have to do another one man where I pick your mind even more, but you just provided such tactical, beautiful advice today that I'm very grateful for and I know are so valuable to listeners.
Speaker 2:As I said, I'm probably your biggest fan, so I'm the one who's lucky when I get to talk to you for an hour.
Speaker 1:This is great, Thank you. No, thank you so much. Do you have any last bits of I don't know, advice or anything that you would like to tell the newer or seasoned investor that's listening to this?
Speaker 2:Yeah, listen to more of Tyler's podcast. They're great. That's my advice.
Speaker 1:Thank you. Yeah, I appreciate you so much. You're such a kind, kind individual and we're praying for your wife and your family as well, as you guys go through that. How can people get ahold of you?
Speaker 2:We are BRIT Properties, b-r-i-t Properties, and we have a website that talks about our philosophy and how to get in touch with us through a contact form, and it's informational, so that's the best way.
Speaker 1:One thing that I've heard you say before, too, is that you ask your investors more questions than you ask them or than they ask you, so that you're like truly interviewing them to make sure that it's a good fit. I love that, and so I will put all your we'll put that contact information, those things within the show notes, and I, my goodness, I can't believe I didn't even mention your company name in the very beginning. I just dove right in, so we'll make sure that we splice something in on that as well.
Speaker 2:That's all right. All right, great Awesome.
Speaker 1:Joel, thank you so much for your time and just for being willing to give back, to share the knowledge, the expertise to help those of us who are coming behind you, and just so grateful for your time today. Thank you, thank you, you and just so grateful after your time today.
Speaker 2:Thank you, thank you, thank you.
Speaker 1:Thanks, tyler, hey and everybody else out there, go share this episode, go connect with Joel and Brit properties and see what investments they have and live always with the low hop Peace.