Ep 28 - Minor Moves

Slower week overall, the last few months have been a lot so not too much to report.  Slowly getting ready for new tenants, moving stuff out, getting everything ready on Grand has been the big push.  Roof is getting done ASAP along with swamp coolers.  I'm trying to get everything done so I don't have to put it in the lease, not that it's a problem.  But the less stuff in the lease that I'm 'responsible' for, the better IMO.  

TBird had some positive news, Regus the coworking space is interested in doing a master lease which would be pretty cool.  More details to come!

Transcript

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Boys and girls, welcome back to the commercial real estate starting from scratch podcast with me, your host John Kleisch, on episode number 28. If this is your first time tuning into the podcast, appreciate you listening. Uh, what's going on here? Well, I'm documenting my journey from uh starting from scratch, believe it or not, uh with zero dollars owned of commercial real estate and no experience in commercial real estate. All the way up until today, about seven to eight months later, now I own two commercial buildings uh valued at about two and a half million dollars based out of the Phoenix metro area. Uh right now I own an industrial building that's mostly leased out to auto mechanics and body shop folks. And then I own an office building in Sun City, Arizona, which is partially leased out to a financial firm, and then the other portion is uh vacant at the moment. And I'm trying to make this very authentic. I'm taking you along on my journey from literally nothing up until however long we do this podcast uh for uh probably for a long time. So that's the the brief introduction. I recommend starting at the beginning if you wanted to not take my advice and just listen to today's episode and move forward from there. Cool, so be it. Is what it is. So let's see here. Not much updates for you guys. The last three weeks have been hellish, it's been crazy, it's been nonstop. I feel like I probably could have recorded five, six podcasts in that in that time, and uh, so no real lulls. Let's see what actually happened after Wednesday. Oh, I guess some stuff happened. My insurance agent got that all handled. Uh, I mean, six thousand dollars for insurance for the year seems like free compared to the$17,000 quote we got. So that's all been short up, taken care of. Uh, shout out uh Colby Fryer again. He drove out to me and got all the papers and documents signed um to get that all taken care of. So rest assured, now the building is insured, so we can sleep good at night, and knowing that if it does burn down, we're covered. And um, so that's that little bit of an update there. On Friday, we did a lot of work on getting these outdoor bays up to snuff, mostly electrical. And when I say mostly electrical, that's all that we did was electrical type of work, making sure that all of these bays, not all of the bays actually, but the the bays that at least we had rented out, get uh get power to them, and then got a really good idea on what has to happen to get power to the rest of these bays. I didn't want to go out and spend a ton of money since these bays aren't leased yet, but one of them we did get leased, and their lease starts on Monday, so or this started Monday, so I wanted to make sure that they had full operating power, and they did. We got that all taken care of, and just like any other job you do, there was some great news that made it cheaper, and there was some other news that wasn't great that made it more expensive, but in the end, got it all taken care of, and I have a really good idea of what it's gonna cost to get these bays up and running, which is great, and shouldn't be too much work. What I'm gonna do is get them leased up and then get my electrician over there, ASAP. That way we don't spend a bunch of money and just have it sit waiting around. Project that we have to do sooner than later, the roof is number one, like that roof's happening. I mean, uh not this week, maybe, but potentially. I mean, basically, we just need to get our loan all shored up. We're getting uh a pretty aggressive hard money loan. That's really how do you say uh it's it's very willy-nilly, like a cowboy wow wow west, it won't be backed by anything. It makes it makes it easier paying 15% on it, but typically I'm borrowing money at 2 and 12 anyway, so 15%, not too bad. But at least this way we can get everything knocked out all at once, taken care of, especially now that I got my new tenant, my new new tenant to the spot. My tenant from spot two in grand will be moving over to spot one. And uh still haven't signed that lease, but we talked about all the details. He actually called me and messaged me today saying, Hey, I want to make sure I'm good to go so we can start moving in. The place got cleaned out. Boy, oh boy, did it get cleaned out. That place went from a hoarder house to looking like a proper shop. So that's exciting. I couldn't believe those pictures. I can't wait to actually see it in person and take a take a look with my own eyes. But the place looks fantastic, which was great because now night tenant two can move in, and starting um April 1st, we're gonna start boom$7,500 a month. Starts hitting on the docket for me. Sounds like he's all short up, ready to go. Which, if you've been listening, that was a huge to-do, a massive, massive to-do was get this place cleaned out. And I put that on him, and I'm glad that I did. It worked out really, really, really, really well. There's still some stuff in the back area that I'm not overly concerned about, mostly because it's worth money, and I could probably just take it and tow it and keep it. But I don't even want to do that. But I will if I have to at some certain point in time. So, whenever this back area gets leased out, that's when that clock gets ticking. And and even not even then, I'm putting the pressure on them now, especially that the front spot is open. So now I need to lease out that back spot, tenant two spot. I believe I have somebody. We've been going back and forth. I'm I'm happy that they're busy, but it's also like I've met them at the property, they've walked it, they've wanted to go at these very obscure hours, and I just can't meet them there at these weird at six in the morning. I can't I can't even get in. I gotta wait for the guys to get in. I don't I don't even have a key for that for that back area, and they can never seem to make it. So that makes me a little bit not worried, but just like, hey, if you really needed this place, don't you think you'd make a little bit of time? I mean, I've tried meeting up with them three times now post their first visit, so they're very interested. Would be great to lease that up to them. The only downside is I would lose a lot of bays, but I have less tenants, so I'm not super hot to trot on them. I I would much rather, to be honest, lease out those outdoor bays. There's three big outdoor bays that I could lease up and then lease out that back area. And guys, if this if this uh leasing these outdoor bays works really well, I got 10,000 square feet. I could start putting up more of these shade structures, and we're getting sixteen hundred dollars a month for 725 square feet of of covered space. That's really good. That's insane. I mean, think about a uh the the dollar rate on that sixteen hundred divided by what I say seven hundred. Well, let's do the exact math. We're 25 by 25 is basically where we're where we're cooking. 625, that's not bad at all. So price per square foot, two dollars and fifty-six cents per square foot per month. That's that's crazy. That's insane. I don't know what else fetches that. Normally, to get you guys an idea, I mean, we're renting out the tenant one spot for a dollar, so that's two and a half times, two point five six times the rent. What we are renting is an outdoor metal shade structure. So these numbers are nuts. Now that I'm thinking about it, it's like, golly, do I just get a bunch of these? You know, find some land that's zoned M2, heavy industrial, and do whatever on it, that would be pretty cool. Pretty sweet. So maybe something to think about. But um so on the docket, get the roof fixed, get swamp coolers installed. Those are the big things for grand. And then next up, find a tenant spot for number two. And if these guys don't sign up because they want all the space, if these guys don't sign up, get these other outdoor bays leased up. But I feel like we're on a pretty good path. I forget if I talked about this last week. I got another call from another guy that went out and saw it and said$1,600 for this, this crazy good deal. Uh, haven't heard from him again, though, so probably uh, you know, don't know what his deal was. However, I was excited to talk to another guy that thought that was a great deal, so maybe I should raise the rents a little bit and make it a little bit more expensive, which might be on the docket. So I'm gonna start advertising those at$1,800 a month and see what happens. Because uh even though it's only$200 more, I got three of them. If I can get six hundred dollars more a month, that's seven thousand two hundred dollars a year. What is that? At a seven and a half cap, hundred thousand dollar, ninety-six thousand dollar valuation. So if I can get two hundred dollars more for those outdoor bays, that increases the value of the building by ninety-six thousand dollars. Holy cow, that's why I love commercial. That that exact number right there, that little math problem, is what makes freaking commercial really cool. Imagine if you had a rental, uh single family house, and you turned a shed into a guest house that you could rent out for say six hundred dollars a month. You ain't increasing that value by a hundred thousand dollars. No way. Even if you increase the value at all, because it's all depending on the appraised value. Uh no way. So no way, no way. Let's do the math and just see what each one gets me. Sixteen hundred. Let's just call it sixteen, let's call it eighteen hundred dollars times twelve. It's annual rent, twenty-one thousand six hundred dollars at a seven and a half captive thousand dollar increase in valuation. Are you kidding me? Guess how much it cost me to build one of those structures? That one five grand? Five thousand dollars plus electric. Call it sixty five hundred dollars. Sixty five hundred dollars. Are you guys kidding me? Eighteen hundred times twelve? Is it gonna cost me? Let's call it$7,500. Let's go crazy.$2,1600. I mean, yeah, we're getting our money back in We're making basically a 34% return on our money on that. Are you kidding me? That's crazy. That's absolutely nuts. No, it's way more than that. Way more than that. I'm bringing in$21,600 and we're spending$7,500, 2.88 times. Yeah, that's really good. That's really, really, really good. You can't beat that. Can't beat that. Let's pay that off quick. So there's an idea. I really like that. Now, the one thing we really haven't talked about, the main issue with that strategy would be the fact that we're gonna have three more tenants on the property. If we get all of those spots leased up, one, two, three, four, five, six. That's six tenants on one property. Could that be a problem? Six personalities, six people, six customer, six different customers show up at the same time, all of these people parking, right? There's other things that do pop up. However, something to something to think about. Definitely not gonna go out and start building new shade structures immediately. That'll happen once we have a use case for it and proof that these buildings do lease out or these structures do lease out and the tenants stay, and it's not a huge pain in the dupa. But I'll tell you what, bro, if we put up two more of these things and then increase the value uh by 600 grand, even if it's 500 grand by doing that and just sell this puppy and move on. Woo! Hard to pass that up for sure, for sure, for sure. But that's pretty much grand in a nutshell. Uh, let's move on to Thunderbird. Nothing too crazy. Thunderbird's been pretty quiet overall, still haven't figured out what we're gonna do with that HOA issue. We need to figure that out for sure. Uh but on the good news side of things, my broker called me today and said, Hey, would you be down to sign a master lease with Regis? For you guys that don't know, Regis does co-working spaces, so they will sign a lease on a place and then they will go out and sublease each different office. So curious to see how that works. My broker has no experience with them. He did mention that they do start aggressively lower on their rents and then with bigger increases as it goes on. Interesting, I'm sure that's just to mitigate their risk. I would want the same thing if I was a tenant. They're a, as far as I know, they're a reputable company. They have spots all over the valley here. I think I even rented one from them four or five years ago when we started Middleton. So that's exciting. Uh, I like it, and especially I like it because they're interested in that building, which, worst case for us, if we had to go out and do the co-working thing, that was an option for us, and it would cash flow pretty well. So the fact that they're interested in it also makes me feel a little bit better that that option is viable, and what they are interested in is having single individual offices in this place. I know you guys haven't been there, uh, but it's got 15 individual rooms that are straight up offices, so perfect for the co-working space. It's got a gorgeous front entrance, so I think it would do really well as uh as a co-working space, to be honest. Uh, the area I'm not so certain on because it is a pretty unique area, the old person's part of town, the 55 plus communities. However, I feel like there are probably a lot more businesses that are wanting to rent one or two offices rather than rent 6,400 square feet. So be more than happy to walk into a lease with Regis as long as it cash flows, that'd be great. So we'll see what happens with that. The other broker that came out from that nationally credited company, he went blank, he went ghost rider on us. So obviously not interested any longer. Strange how people operate, but you know, it is what it is. I wasn't holding my breath on that. So now we'll see what Regis has to do. They wanted to sign an NDA, so I got that taken care of. Now I can learn about what they're looking for, how they operate. And at the worst case, I can at least get a little inner workings on their business. That way, in the future, if I ever wanted to work with them again or they wanted to become a tenant, I would have a good idea on how that works. So that's exciting to see that kind of uh unfold. As everyone knows here, this is my first time doing of everything that I'm doing. This is my first time doing it, and I love to learn, especially when I'm actually doing it. So uh great experience, nonetheless. And now I got my wheels turning, it's like, shoot, man, maybe do we just go out there and lease it up as co-working? You know, we could split it up into smaller offices too, and maybe section off one area and have that be their own separate area and then try to lease other offices too. I don't know, we'll see. Uh, it would be nice to get a move on on that, but just grand has been totally consuming all of my time. But now, you know, it's whoever's yelling the loudest gets my attention. So Grand was having a hissy fit. Uh, now I gotta put that puppy to bed, get that cash flowing, and that way we can draw back the attention to Thunderbird. And it would be a great time to do that because we need to get that place leased up. I think we have three, four months before uh we're gonna need to start dumping more money into that account, which is never a fun thing. However, it is to be expected for sure. So that wouldn't be the worst thing, especially once grand gets leased up and starts cash flowing a ton, that will more than cover the deficit from an empty Thunderbird by far. By far, by far, by far, by far. So, overall, man, this was a lot longer than I thought it was gonna go. Surprise, surprise. I thought this was gonna be a quick little under 10-minute update because I didn't have much to talk about, but turns out we did. So, overall, uh, you know, kind of a lighter week last week, and then this week is my kids' spring break, and I got my parents in town, so I'm not expecting anything crazy and wild to happen overall to begin with, since I'm really not doing much outside of trying to get Grand all leased up. But hopefully, maybe we get some exciting news on Thunderbird and we start making some progress on this roof at uh at Grand, that way we can get it all short up, tightened up, and be done because that'd be great to get that asset fully stabilized, moving in the right direction, guys. Feels great. Looking forward to seeing what that place could do. Looking forward to documenting it and having you guys come along on the journey to see how much money we make off this thing. Dude, I'm calling it right now. Um put me on record, I'm gonna say that this thing will cash flow, cash flow, seven thousand dollars a month. And I'm talking true cash flow after all of our expenses, after CapEx, after you know, everything after taxes, after insurance. True, true, true, true, true cash flow. We're gonna make$7,000 a month. And if I am wrong, I don't think I'm gonna be wrong by by much. So that would be really, really, really cool. I believe that puts the valuation of that building at like 2.2, 2.3, 2.4, something like that, and bought it for 1.5. So that would be really cool if we could get it up to 2.5 and do a seven-figure increase in equity on this puppy. I mean, that would be crazy. Crazy, crazy, crazy. But give me let's see, let's put a let's put a let's put a goal to this one.$7,000 a month cash flow in less than six months. So that's the end of summer, September 18. Shoot, that's sandbagging. That's sandbagging. What do you think, guys? Six months? Okay, let's keep it. Let's keep it. I'll tell you what. If we're if we're hitting$7,000, you know, that's like$17,000,$18,000 a month in gross rent in six months or less. Yeah, right now we're at$9,175 plus 16. Yeah,$9,100. So shoot, I got work cut out for me. Holy cow. That's a lot of work, boys and girls. All right. Well, let's let's go end this podcast here. I'm hungry. I got a steak in the sous vide that I'm about to fire up here. So let's get this puppy on the road. Appreciate you guys listening in, tuning in for the episode. Episode 28, I believe, man. Uh, really appreciate it. Yeah, episode 28. Really appreciate everyone sticking around, listening. I love getting the stats every week. We're getting more and more listeners every week out there. Uh, guys, follow me on Instagram. I post pictures and updates on there, especially with the projects that are going on, with actual pictures of the facility, the the improvements that we're doing, walkthrough videos, things like that. John DocLish, K-L-E-I-S-C-H. I'll maybe I'll put that in the in the show notes once I get around to it. Guys, send me a message too. If you have any questions, want to talk about something, or want me to talk about something, or have uh a comment or anything, go ahead. There's a button that says send me a message. Click the button. No one's doing it. I got my brother, Matt, you're the only one. Have someone else do it for Cry Eye. Please don't don't don't make me beg. I want to hear from somebody else. And oh, there was something else. Oh, guys, uh, subscribe and like the and then also comment too. Comment, comment, comment, not comment, leave me a review. That's what I'm asking for. Leave me a five-star review, whether you like it or not, and leave me uh some notes on there, maybe with some suggestions. But if you guys could do that, that would be very helpful. And lastly, if you uh know someone that you think would get a kick out of this uh for entertainment purposes, or they think they could learn something from this, or uh love watch watching me suffer and make a bunch of mistakes, please, please, please send it to that friend, send it to them and say, Hey, I thought this podcast would be awesome for you. Here you go, give it a listen, and then have them give me a review too, because that really helps out. All right, boys and girls. Just like that, we are out of here. Episode 28 in the books, and on that note, take your easy.