Ep 27 - Making Major Money Moves

The times, they are a changin!  For the better, which is welcomed with open arms.  Have an agreement for tenant 2 to take over tenant 1, signed a lease for $1,600/mo for an outdoor covered area, and saved $12,000 on insurance.  OH AND I don't have to worry about the junk left behind.  I can't believe it worked out, now granted, no lease is signed yet, but we agreed verbally to all the terms.  

Lots of work yet to do, but will keep everyone up to date!

Transcript

SPEAKER_00 0:01

Boys and girls, welcome back to the commercial real estate starting from scratch podcast on episode number 27 with me, John Kleisch. If this is your first time listening to the podcast, thank you very much for tuning in. What we are doing here is just documenting my journey of zero dollars owned commercial real estate and zero commercial real estate experience up until the point today where I own two buildings valued valued at about two and a half million dollars, and I'm 50% owner in those. I'm based out of Phoenix, Arizona. One building is in Glendale, Arizona, and the other is in Sun City. Uh my goal here is to make this as raw, unfiltered, unedited, and just documenting what I'm doing, when I'm doing, and how things are working out. So whoo! It has been a journey up until this point, that's for damn sure. Holy cow. So last week's episode, I was just toast. I was just done. I was so sick of the word eviction. It's been just dominating everything in my life, and just physically tired, mentally tired of it. And then finally, now I have like some great news to report. Finally, you know, if you deal with enough pain, there's something good on the other end. And here it is. So tenant one is my biggest tenant, he's the one that got evicted. So now I was nervous about filling that spot. However, I was casually talking with tenant number two about him wanting that space, and then once it actually happened, it was like, oh wow, holy cow, that was a surprise. Uh, here we go. Started negotiating back and forth. The big sticking point was all of the stuff that was left behind. There, it's like hoarder central. Like, I can't I can't even exaggerate at how much stuff was actually there. I don't even know how many cars. For sure, over 30. For sure over 30, and just uh an enormous amount. I mean, just imagine a wholesale hoarder house when you walk into it, but a commercial building. So that was a big sticking point. He made it very clear. He's like, dude, I'm not doing anything with this junk. That's just way too much work. There's no way. And I knew that relying on the gentleman that got evicted to come get this junk was pretty much not gonna happen. So that would rely on us to get rid of it. And a lot of these were customer cars, so it would have been just a complete nightmare. So the whole time, my partner John was like, Man, we gotta find somebody that wants the junk. Everyone I'm talking to, I'm bringing them through. I'm like, hey, I'll work you out a deal if you take on the junk. And everyone was literally their comment was like, Yeah, right, you crazy. Good luck. No one's gonna take on all this junk. This is insane. Like, aye aye. And then even 10 and 2 was like that as well. And then we were negotiating, and then finally it was like, hey, if you want this deal, we can get you this deal, but you gotta you gotta take all of this junk on. And he was thinking about it, and I was here uh yesterday, actually, I was on property yesterday, and Tenant One's brother came through perfect timing to come get some things who is allowed on the property. And I worked out a deal with him saying, Hey, Josh is now taking over this stuff. They actually know each other, they're friends. So I said, Hey, Josh is now taking over all of this stuff. You are the middleman between you know tenant number one and all the stuff. You know a lot about it. You guys can work together and get this shop all cleaned up. And in three weeks, uh, so we're signing that lease. Basically, he's gonna adopt the same lease that we had for tenant one, which is okay, it's definitely a discount, but there are big jumps in the next uh the next year. There's like a$700 bump in rent, so that'll bring it up to much closer to to market. And he's gonna adopt that lease, and it's gonna start here uh April 1st. So three weeks basically, he has to clean up this spot and then move his stuff in, and then that way I can rent out his spot. Now I was thinking of doing all of that back area as rent by the bay, but ooh, before we go there, I was there, I forget what day, working, moving cars around, and these two guys come up and they must have seen the Facebook ad. The the guy's father used to work with the old guys that used to rent this spot out from like 20 years ago. So he recognized the place. They drove by, popped in, wanted to rent one of the outdoor bays. At that time, I had some other guys that were interested in renting that whole back lot. So I just showed them the one area that the other guys wouldn't even get. And I was like, hey, it's this busted down blue tarp area where it's just got uh sun shade that's just torn to pieces. I mean, just looks like a tornado ripped through there. Terrible. And they came through, they liked it, they wanted it. We got to run some power to it, and I was gonna put up a roof, a metal roof over this area, 28 by 28 outdoor space. It was gonna be about four grand to put up a metal roof over this structure, and I was gonna do it. We were gonna pay four grand, and then they were like, Hey, I don't want to do metal, I want to just have another shade like this. And I was like, Okay, I'll tell you what, I'll give you one month free and you handle the roof situation, and I don't gotta do nothing with it. And they were ecstatic. So yesterday we signed a lease, month-to-month lease, sixteen hundred dollars for a 28 by 28 outdoor space. They are taking care of the roof, whatever they do, and that's great. It's gonna be a really good experiment on how these outdoor bays work, and it just shows you how easy it was to list this this place uh and and get this bay. I feel like I wanted to get a little bit more. I was trying to get closer to uh I forget what I wanted to get him at. Maybe it was 2000. I think 2000 is where I first started, but that seems to be a little bit too high. But also realizing now having three, four, five different people or businesses there with maybe a couple more employees, that place is gonna get pretty crowded. So I really don't know how feasible it is to do any much more rent by the bays. I have two more outdoor spots that are about the same size, they're 25 by 25. So those should bring in 1600 for sure. And then I have another small bay that I could probably get for a thousand, maybe, maybe twelve hundred, probably a thousand bucks. And then I got two other individual bays that I can rent out as well, but maybe I can make that a double and have three doubles and then a single. So we'll see. But it would be nice now to rent out that back spot where tenant two is at. He was leased at 4,200 bucks, which I thought was really cheap. It's 3,800 square foot with a big lot. You got about 8,000 square feet of exterior lot that you can park a lot of different things. So I think uh it's very valuable to the right person. I really feel like I can get a new lease at 5,000. So if I can get that place at 5,000, which is a stretch. Let's just call it 4,500 because I can get that for sure. It was at 4,200, which is crazy cheap. Better yet, no, let's call it$4,200. I'm getting$7,500 from the front. Let's bust out the calculator. It's a little bit late. Plus$1,600 plus$1,000. If I get that place all leased up on those numbers right there, which is cheap.

SPEAKER_01 8:10

$17,500. This place is costing me. Let's do the math and$245 mortgage. Insurance. Oh, I got an insurance update for you guys too. Holy cow.$416 a month for insurance.

SPEAKER_00 8:31

Taxes, I don't know exactly no yet, but I I bet it's fifteen hundred bucks a month at least. We're at$9,161.

SPEAKER_01 8:41

And then there's gonna be other things that we're gonna save for CapEx and whatnot. Probably a thousand bucks a month. So call it ten grand.

SPEAKER_00 8:53

And that puppy should bring in$17.5. That's cash flow, baby. That's cash flow. I don't even know what the building is gonna be worth then. Probably two and a half million dollars. I think I gotta get to$22,000 a month to make it worth three million. And that's also a very real possibility, too. There is plenty, plenty, plenty of space on this property to put another building. And even with normal 3% bumps, 22 is not that far off, especially if the price of these outdoor bays gets up a little bit more. What I need to do is figure out what like good amenities are for these outside bays that can help increase the rent. Maybe it's more storage, maybe it's uh swamp cooler, uh, who knows? But I'll figure that out, and I think we can get this place humming along. But even if we settle at$15,000, like I said, that's$10,000 of expenses,$5,000 of true actual cash flow, it's not bad. That is not bad at all. Nothing to nothing to sneeze at there. I bet I bet that increases the value by about$700,000. So that'll increase my net worth by$350,000, which is really cool. Really cool. Insurance too, man. Oh wow. The last quote that we got was seventeen thousand dollars for insurance. That was just absolutely nuts. The quote we got about six months ago was like$13.7, I believe. Started at$16,000 and then they came down to$13,7. And that was ridiculous. My other building, my office building, we pay$484 a month or something like that. So a little over five grand. In this building, they wanted$17,000. And I was like, yeah, uh, that's not happening. And then uh shout out Colby Fryer. If you're in Arizona and you need an insurance guy, uh, even if you don't need an insurance guy, but you want to check rates or whatever, he's the man, dude. I mean, he literally got me a plan for$5,000 and he worked his tail off. He worked his tail off to get to get him. And I mean, quotes were coming in at$1,000, and I was ready to jump on him. He's like, hold on, hold on, hold on. Let me get to work, let me get to work. And he did. Kobe Fryer, uh, fantastic farmers, farmers agency, uh, based out of Buckeye. He even drove all the way out to me to do the signing of all the documents and stuff like that. So, guys, uh, shout out Kobe Fryer, man. You the man. Thanks, dude. Appreciate it. Yeah,$12,000,000 a month. You know, that's about$160,000 in value that got uh, you know, that we got from not having to pay that crazy, crazy, crazy insurance. So that's cool. So finally, guys, wins are happening, and it it feels really good. It feels really, really, really good. We were there last Friday, uh, hopped on a forklift and just started picking up all these cars and moving them and just smashing them in the back corner just to make room. That way we can start prepping and uh making it happen. And I'm glad we did because those guys showed up as we were moving those cars out of their spot. So it worked out really, really well. And now you're going through all of it and figuring out what the power situation is. I know we got to do a bunch of work on that tomorrow. We're going over there and doing a really deep dive into the power situation and kind of just find out what it's gonna take to get these buildings up to snuff, and then I can start taking pictures of the actual bays and uh see what kind of activity we get. I have a feeling a lot of people have been messaging me wanting an indoor shop. Actually, I know that because I asked them. I would say everybody says, oh yeah, I want an indoor shop, I want an indoor shop, I want an indoor shop. And I have that listed at 1500. But if I could get 1500 bucks a bay on an interior interior bay with a lift, that's really good. That's really good. That's about half the size of my blue tarp area.

SPEAKER_01 13:10

So you're talking about double the price per square foot. Maybe it is. Something to think about.

SPEAKER_00 13:19

I can try leasing it out and doing uh doing a little test and see how many people would actually want to rent out that spot with the lift. I'll come show them exactly and we'll see. That might be the ticket right there. But I don't know. We'll play that, we'll play that day by day. So, guys, major wins. I feel like the wind is at my back instead of you know head on just clobbering me. So that's really cool. And then also, too, it's funny when I'm meeting these new guys up for the the the lessies, and I'm like, man, I'm looking at him, asking them all these questions, really trying to vet him really hard. And I'm like, God, what's going on in your brain right now? How bad are you gonna wreck me here? What are you what's the what's the plan here, guys? So I don't know. We'll see. These ones, you know, we're talking to guys that are renting sixteen hundred dollars a month outdoor spots, right? So the qualification process is a lot different than someone that's running a business and their rent's gonna be$7,500 or four grand or whatever. So uh month-to-month lease too, it's like kind of whatever is the uh the research that I've gathered from talking to people that rented this type of demographic. It's kind of just like, yeah, man, I mean, if they can pay, they could pay. If not, you know, they're they're gone. But oh golly, so there's probably some other things that happened in in that week that um that I just completely forgot about. However, this has been crazy, crazy, crazy whirlwind starting to wind down my pool business. I'm finishing up a lot of jobs actually, so that's really cool. I'm putting like I don't know, six, seven grand, eight grand of revenue on the board here in the last couple weeks here before uh that closing happens, which is in about 20 days from now. So that's pretty cool too. I haven't really thought about that much. I've just been so dang busy. But now with Grand completely opening up, my schedule of not having to get any of the stuff out is just like incredible, but still a lot of work to be done. The roof needs to get done, we need to shore up all this electric issues, and there are a handful of issues uh that need to get fixed uh from our lease as well. Swamp coolers, like we're dropping loot, it's gonna be like pretty dang close to 100 grand is gonna get spent here. Um, but like you guys saw those numbers, so once that place gets humming along, we'll be in great, great shape. Uh, no update on Thunderbird, really. There's some crazy fire stuff, but nothing crazy there, a little bit slower than anticipated, but it's not like we expected that to fly off the shelf, neither. So we're just in a holding pattern. Maybe we'll reduce the price. Uh, the HOA thing's a whole nother story that's kind of in limbo as well. So, kind of a lot of that whole deal is just hanging out in the background and uh still looking for tenants because if we get tenants, that kind of solves all of our problems, and then it's like, all right, everything else doesn't matter at that point. So um, nothing good, nothing bad to report on that end. And on that note, we're gonna wrap it up here. Boys and girls, really appreciate you sticking around, hanging around, and listening to the whole episode. If you liked it, please leave me a review. And if you know that uh of someone that would like something like this, please share it. That would mean the world to me. Uh, that way we can grow the audience and uh be a lot more fun for everybody. Um, on that note, boys and girls, we are wrapping it up, and I'm out of here. Take her easy.