Ep 31 - SHOW ME THE MONEY!

 I was out of town last week in Encinitas, CA enjoying the ocean and cool weather.  But the CRE fun did not stop!  Going over some updates on each property, and a major potential investor could change the path on both of these buildings.  Can't wait to see how that pans out.  

Also found out during the podcast we are now truly WORLDWIDE!  A person in each continent has listened to this podcast.  Which may not be a big deal, but to me, it's a really special milestone.  I started this podcast for no other reason that just to do it, no plan, no motive, no real expectations.  So to see it growing every week, especially international is something I never thought would happen.  

Thank you all for tuning in!

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 31. And last week, guys, I was out of town, so I did not do an episode. My apologies. Again, I did not die. I know everyone was really nervous, and everyone was really looking forward to their weekly commercial real estate starting from scratch podcast. But unfortunately, I was just out of town, had too many things to do, so we did not record a podcast. If this is your first time listening, really appreciate you tuning in. And to give you an idea of what we are doing here, I am just documenting my journey, uh, hence the title Commercial Real Estate Starting from Scratch. Started from scratch, uh, no commercial real estate experience. I've been running this for now seven, eight months. And here we are, started from scratch, and now we own two and a half million dollars worth of commercial real estate in the form of two buildings. One is an industrial building here in Glendale, Arizona, and the other is an office building in Sun City, Arizona. So trying to make this unfiltered, raw, and unedited as possible to give you guys a look into what it's like to be a dumbass like me and spend a lot of money on expensive things and be in a lot of pain. So on that topic, oh gosh, where do I start? So, what I'll do is I'll just go over some brief updates over the last couple weeks on each building. So let's just do grand since at that uh that's at the top of my head. As you guys know, we're redoing the roof. I'm pretty sure I found my roofer and I like him. He's got a lot of experience. He is new into the business world, so his prices are very competitive because he's new, he has to build a reputation. So I like that and I don't like that. Obviously, if something goes wrong, it is a little bit, I guess, less of a leg to stand on with uh, you know, having a big company. However, speaking of roofs, I hired a very big company, one of the biggest in the valley, to do my personal roof or a portion of my roof, and it did not end up well at all. It was like literally a nightmare. I don't even want to get into it. So, my point being that you kind of are rolling the dice, anyways, right? You're rolling your dice on the contractor, and just the experience and the luck of the draw overall. If you've done any home improvement project or big rehab, you know it just doesn't end up the way you want, right? Things happen and sometimes things are out of your control and they get out of hand. And one after another, after another, after another, they they could just happen, right? So that's just the nature of the beast, that's the nature of construction. However, I met with this guy in person at the roof, on the roof at the location, because I wanted to meet him, shake his hand, look him in the eye, see how he talks, see how he answered questions. The dude definitely knows what's up. There's no doubt about that. I like it, I feel really good about it, and he is a few thousand dollars cheaper. And by a few, I mean like three, four thousand dollars cheaper than everybody else, and I want to work a little bit better of a deal. So now we are ready to go. We have made that decision. Now the only other issue, and this is where things get wild and crazy, where it just this makes my head spin, right? Like, I feel like I've been limbo and and everything in my life because there's so many decisions that have to happen first and then work in a specific order. If you do them out of order, you can screw things up for your future self. This is one of those cases, and I'm just tired of being in limbo. I want to get stuff done, check off that list, scratch it off, move on, and and just power forward. Power forward, it's like a basketball position, I think. Move power forward. Are we in a power forward, boys and girls? Yeah, we're going with it. Power forward, let's go into the future. So the issue is so we're getting a whole new roof, right? We're taking off the old rolled rolled roofing, and then the other problem is here. I got a bunch of quotes from people online, this guy included, and I just like was like, hey, I feel like this is a little bit more intricate of a job. And I'm glad he came out because there are two layers of roofing on our roof, meaning it's twice as heavy, twice as much stuff. And the demo is a big deal. The demo is like a good chunk of it because it's very, very, very labor intensive. These packs of rolled roofing, I think they're like 60 pounds, 70 pounds, maybe even 80 pounds, right? And they go like 20 feet or something like that. And this roof's 3,200 square feet. So it's like, do the math. There's there's thousands of pounds of stuff of roofing material on this roof. So his price went up drastically from the price that he gave me online or uh over the phone rather, and it was so cheap that made me a little bit nervous. And I was like, ooh, what? So that's why I wanted him to come out and take a look. We are also putting in some crickets if you're familiar with that. We're redoing the scuppers. Those are basically the drain holes that fall, don't fall, they are through the parapet wall. That way the crickets run the water into those scuppers, the scuppers then drain out, and you want those scuppers sitting far away from the wall. That way it just doesn't run down your wall. That way they can fall out and hit the ground and not touch your wall because water and walls they cause damage. Uh ask me how I know we have some issues in the front of the building as well due to water. So installing new scuppers, getting the water away from the building A. Um, so that's that. But now back to my original statement the the whole limbo thing. Now we are also getting new swamp coolers. The swamp coolers go on the roof. If you don't know what a swamp cooler is, it's a southwest thing, dry climate. It basically cools large spaces by pumping cold, wet air over these like pads, and then it makes it a little bit cooler. It doesn't work in a humid environment because it adds humidity, so it does absolutely nothing. If you live in a dry arid climate, you've probably heard of it. If you don't, you've probably never heard of them. But great for shops and big area, especially with big garage doors. We are definitely not going to use air conditioning. These swamp coolers are fantastic for that, makes a big difference out here in Arizona. Uh, so we're getting four new ones of those, but we are doing a foam roof, and that's like a big spray on foam. And I want that to go down once and then be done. I don't want to cut into it, I don't want to have any patches, blah, blah, blah, blah, blah, spending a ton of money. I want it to be done right. So now I'm trying to coordinate with these swamp cooler guys and the roofers. I have hired these exact swamp cooler guys in the past for grand here to do some maintenance on one of our units or two of our units. I think they did a great job. They were great. Their communication was fine. Now they're maybe busy or out of town because it's been three days. I called them saying, hey, I'm ready to move forward. That$10,000 job that uh you have out with me, I want to do it, but you got to call me. They even called me. So uh a little bit upsetting now. So my whole plan with calling them is I want to figure out what exactly they need from us. I spoke to them a while ago about it, but I want to make sure they understand what's going on because I am under the impression that they're probably gonna have to put new curbs in. Like a curb is like a big metal thing that sits on top of the roof that the swamp cooler will sit in. So I don't know. That's why I want to talk to them first because I want to make sure that if there's anything else that we need to do, this guy knows it because I do not want to get any surprises halfway through the job. The dude's like, oh, dude, well, I gotta do this. So now it's three grand more. Then it's like, well, shit, dude. I wish I would have known that before. I probably would have gone with somebody else. So, what am I trying to do? I'm trying to get ahead of everything. It's very unlike me to do that. Usually it's just go, go, go. 40 years of just screwing that all up. I've learned. So I am trying to get everything laid out and make this a flawless experience for me, for the roof, for the tenants, everything. As if you've been listening, you know I am on a crunch to get this roof and swamp coolers finished because my tenant cannot move in until that roof is um solid because it leaks a lot, a lot, a lot. He has very, very expensive cars, well into the hundred thousand dollar cars. He's probably honest to God, not maybe not a million, but five, six, seven hundred thousand dollars worth of cars that are not his that he cannot put underneath a leaking roof. And when I mean leaking, boy, oh boy, this thing is gushing. So, gotta get that taken care of, and that's why that's so important. So, still waiting to get that lined up. I love that I found the roofer, that's great. Now, need to get this swamp cooler, uh, fiasco, and that it's not even a fiasco, it's more I've just got to figure out what's going on with these swamp coolers that way. My roofer knows what's up, my swamp cooler guys know what's up, and then we can just go on, move forward. Should be a few days, probably a day to tear off, a day to spray, and then the next day. I don't know if they come back the next day and the last numeric it or uh they do that the same day. I'm assuming it's gonna be at least three days for roofing, anyways. Now, there are some other touch-ups on the roof that need to get done. I did not address those with him. I will probably do that here as we move forward, but I just wanted to get at least this part knocked out, taken care. So hopefully by the weekend, next week's episode, I'll have everybody hired and uh work maybe will be starting, but at least at least hire the guys, get on the books, and get this thing uh moving forward. I have been showing the place to potential tenants, not gonna lie, it's been really humdrum. Everybody that's interested is just honestly stupid and dumb, and I don't want to even rent to them, nor do I think they could afford the rent. So I have been uh after the eviction seeing the signs, I am starting to see uh like problems with people way ahead of the time. Uh so I'm really putting out my my sniffer there and really trusting my gut. Whereas if I'm talking to somebody and I think they're fucking stupid and they're gonna cause trouble, or not even cause trouble, they're just not gonna pay, or they're shisty, or they don't have a legitimate business, not even wasting my time. Not even wasting my time because if your boy has to go through another eviction this year, uh yeah, that's not gonna be uh something I'm trying to do. I'm trying to place a tenant and forget about it. Minimum three years. If I could get a guy to go for longer, like I'm pretty sure my current tenant that's moving into tenant one, I'm pretty sure he's gonna be around for a long, long, long time. I can't imagine he's gonna want to move anywhere else. He's upgrading his shop. It's gonna be awesome, it's gonna be good for him. And leasing, not my favorite thing, it doesn't suck, but leasing means that you are not making money because you have an empty unit, and that's the part that I don't like about it. So overall, actually, I kind of enjoy it. I did not like it at first, but now uh it's like a hustle and bustle type of thing, which is which is good for me, right? Like leads come in, I get him on the phone, I'm qualifying him, I'm talking to him, I'm talking about how awesome my place is, and then trying to work out a deal with them. So it's a it's a mini deal, and I like deals. So good for me. I'm getting better at it, and it's been fun. The current tenants that are in the outdoor space that I have are interested in renting out more of the space, which is great because I have three more bigger bays and a huge lot to rent, and it has been really slow, really hard to find people to be honest, that want to rent these outdoor shops, which I don't get. I mean, I I get I don't blame them, but for the price, it's like golly, what else what else are you gonna be doing? So working out a deal with them, I am even willing to cut them such a ridiculous deal in the very beginning and then slowly bump it up just to help because I know they're just getting started too, they're like they just branched off on their own as well, so they're buying tools, they're buying a bunch of cars and parts, and you know, I get that. And I don't um if that person was having that conversation with me on wanting my indoor facility on tenant number two, that's already a red flag. If they're like, Oh, I'm having trouble, I want to do nope, nope, nope, nope, nope, nope, nope, nope, nope, get that out of here. Nope. But this is this outdoor space, who cares, right? Like, I get it. These guys like it. We're gonna go month to month, anyways. So um definitely willing to work out a super fat deal to give you guys an idea. That whole outdoor space that they want basically would be renting for somewhere about fifty, five hundred bucks. Honest to God, I would start them maybe in the threes or maybe even less than that, just to get some cash flow going, get that spot rented out, and then also too, leasing takes a ton of time. I mean, I'm down there two, three times a week. It's an hour drive back and forth minimum. I'm spending two hours there each visit minimum. So I'm already talking at least 10-15 hours a week just uh just on there. I don't mind being there because it's it's nice now with my newer tenants there. Uh, I get to see what they're about, see what they're doing, and then that lets them know that I care about the place, and I come by and I yell at them for leaving trash or parking something or using a space they're not supposed to. So it keeps them honest overall. But however, I don't want to be spending 10-15 hours a week going down there. If I could get these guys in there at a much lower rate and they're uh producing some cash flow and it saves me a bunch of time, you know, sign me up. Sign me up for that. That that's uh what I'm after there. I have a really great prospective tenant for tenant number two. However, he hasn't gotten back to me yet, so I walked it with him. His dad saw the place, he he appeared to like it, but I'm getting ghosted, which is never a good thing. Maybe the guy's busy and had a bunch of stuff to do, but um he was my favorite by far, seemed honest, good, good quality folks. Uh, so that is what it is. I'm not nervous about finding a tenant for that, it's just gonna take a little bit of time. If this guy doesn't come through, I'm gonna hang a big old banner out front on grand and you know, 4,000 square foot shop, 10,000 square foot lot for lease and just hang that puppy up there. I mean, grand sees a lot of cars, so we're gonna do that. If this guy doesn't uh get back to me in about a week, I'll spend a couple hundred bucks and and do that. That's pretty much it for grand. I can't believe, or I'm trying to think if there's anything else for that. Not really, not really. And uh Thunderbird still uh no major hits. However, this deal with the co-working space is looking more and more feasible by the day. Now, the main problem, and I've talked about this before, just to touch on it, is the A, we gotta come to the table with a lot of money, somewhere to the tune of like 70 grand. Plus, we're gonna need to carry a lot of expenses moving forward during the leaseup phase, probably a year, six months, we're like pretty much eating sand, and then after six months, uh they're projecting break-even, which isn't terrible to be honest, but it just adds up to a lot of money. It's like over well, over 100 grand, 120, 130 grand. So that's the main problem with it. The upside is that we could double our rent that we get. So do the math, right? If you can double your rent income, you just increase the building by uh by a lot, and you increase your cash flow by double. So very intriguing. Now it's hard to do a deal like that right now because we would definitely need to bring on another capital partner. We have a hard money loan, we have a private loan on it, and we have to bring in a third to do that. However, now this is gonna be an all-encompassing update. So basically, that's the update I have on Thunderbird. Nothing really much has been going on outside of these negotiations and back and forth and having meetings with this one company, which have been going good. I like it. They seem very interested in this spa, which is another reason why I like it because they are very bullish on the area. Partner John had um he is always working on capital, capital, capital. That's like his big shtick. And he's been working this guy, working this guy of I don't know if it's ultra high net worth or just a high net worth individual, had a couple different exits. He's a business buyer, he buys businesses, is pretty much what he does. And he's got a butt a buttload of money, and he just exited a company and has uh his eight-figure checkbook ready to good to deploy. And he didn't really like our our deals, I guess, in the very beginning on the surface level, but then maybe I think John kept on pushing it and talking with him to him about it and really showed the value. Now this guy's very, very interested. So what we're trying to do, and John is trying to do now, is he is very, very interested in in grand, which we would go back to our old strategy, which was our first play, was to go out and raise money for the whole rehab and uh get that all taken care of, get our money removed out of the deal so we're zero dollars into it, and even uh collect like an acquisitions fee. We opted out of that plan for a handful of reasons, and now we kind of liked being just 50-50 in it now, but bringing in this dude, he would stroke a four hundred thousand dollar check. We would get everything just knocked out, the whole kitten caboodle off of the off of day one. Uh downside is we would be giving up 50% of the the deal overall, so that means then my shares would get diluted down to 25%. However, getting my 80 plus grand back and then some on an acquisitions fee, uh talking low six-figure range, would be uh not sucky right now. That would be very, very, very good. We talked about this quite a bit today. Uh the I call future John. I'm doing commercial real estate for future John, right? Current present state John has always been looking out for present state John and never, and I shouldn't say never, but mostly focused on present state John making money today so that I can continue to operate and uh just make a lot of money. But future John was always in the slowly in the background. There were slowly things that I was doing, certainly, but this was a big push to be like, okay, hey, current John, you know, current state John is fine. Let's go out and take care of Future John and buy these buildings and let them sit, let them appreciate cash flow, blah, blah, blah, blah, blah. And then by the end of that term, uh, however long that would be, these buildings would be worth X amount more, and that would be my retirement. So not giving up or giving up equity kind of goes against that. However, current state John is in a state of needing more capital, cash, just for just for anything, everything type of stuff. I am going to be selling my pool business here soon, so income will pretty much drop to zero. And in fact, it will be negative because on these buildings right now we are cutting checks instead of bringing them in for the short period of time. So that trade-off, I feel like, is worth it to uh just make today a lot, a lot better. And it's not like we're totally screwing future John, he's just future John's gonna make a little bit less. And getting him in on Thunderbird, this investor on Thunderbird would be absolutely ideal because our main problem is we need cash today, cash today, cash today, and a lot of it to float this deal along. This gentleman and this deal would mesh beautifully, so beautifully that this is like perfect. Because if this space or this company does come in and they do close to what they say, they don't even need to hit their projections. If they get within 30% of their projections, this building crushes. And that's great. That makes me very, very, very happy. And I would love I would have signed this deal already with this company if we had$150,000 burning a hole in our pocket. That would have been a no-brainer. So moving forward, if this guy does come in, cuts us a check, he will become, you know, we'll wipe out all of our debt on that, and then he will become 50% partner on that. And getting these two monkeys off of my back would be just incredibly amazing because a this company would take care of all the leasings, the operations, everything. And uh not only that, but I wouldn't be worried about the rent payments, I wouldn't be worried about the interest payments, I wouldn't be worried about the place sitting vacant for a little bit longer. This guy coming in would alleviate all of that. And honest to God, if this building does work out the way that it's supposed to with the projections, then I would make even more money, even being 25% owner versus 50%. So that would be the ideal situation. If John can pull this off and this guy decides to move forward with us and invest in these deals, that would be incredible. And honestly, we're not talking a lot of money. We're talking like six hundred thousand dollars, which for a gentleman like this does not seem like that would be very worrisome. That's kind of like a I feel like a very, very light tester deal for someone like this. So not only would it be good for us, but I think it's gonna be great for him because both of these buildings are gonna be fantastic. I'm gonna reiterate, like right now, they just suck because we're in the stabilization portion of them. Both of these buildings we've gotten great deals on. I like them both. It's just in this very moment in time, they are hurting. I feel like they are dragging me down. However, I know that in the future, these buildings are both gonna be bangers, they're both gonna produce and produce and produce. I always thought Grand was gonna be the main producer, but after thinking about this co-working space here and seeing their numbers, that might be the cash cow that we uh bring to the fair. You know what I'm saying? I don't know if that's a phrase. I just felt like saying something kind of crazy and weird, and you know, I kind of like going to the fairs, so actually I don't. Have I even been to a fair? Probably. Do I like them? Either way, now we digress back to where I was at. It would be great for him too. So it'd be great for him, it'd be great for us, it would be great for everybody. So I am stoked. The guys wanting to move forward really quickly. The conversation was hey, like a week or two is kind of what the the gist was, what I was hearing on my end. So it would be just absolute, I would be elated. I would be absolutely elated because getting some wins here is very, very important. I feel like we've just been taking L after L after L, and the human psyche can only take so much of that, right? Even if it's a little bit of a victory here, get the juices flowing, you know, get a little bit of action and some momentum, uh, wind at our backs, and then honest to God, if this guy truly does cut some checks and we move forward and he's happy with these deals, bro, I'll go out and get more deals, right? If I don't gotta worry about funding at all, and all I'm worrying about is acquisitions and the operation side of it, and maybe I could work out something where I just do the acquisitions piece, which would be absolutely ideal. That would be very, very cool. So fingers crossed, this guy does work out because this could be a game changer. You're only always, always, always just one little move away, and this could very well be it. If he decides not to invest with us, so be it. We have our backup plan moving forward. In fact, I still think that I'm gonna go move forward and get everything fixed. And then if this guy does want to hop in, we can just cash out that third lender or the I guess the second private lender that we use for the rehab. Um, get that person paid up, gone, bada boom, bada bing, and be done and move on. So pretty exciting news overall. I feel like this is probably one of the most hopeful podcasts I've done in recent memory, right? So it uh it feels good to even have that opportunity, right? Because there are guys like this that are out there looking for deals like this. And if it doesn't work out, like I mentioned, so be it, we'll be just fine, we'll figure it out. That's what you always do, especially in real estate. It's always crazy. So, overall, guys, pretty much wraps up the podcast. I'm trying to do any last-minute scrambling thoughts in my head to see if I'm not touching on something that um that I should be, and I don't think so. Boys and girls, that's a wrap here. Really appreciate you guys tuning in. If this is your first time listening, thanks for making it this far in the episode. Everybody, please leave me a review. I would love to hear what your thoughts are. If you want to ask me a question, uh message me, guys. There's like a send me a message button or something like that in the show notes. Click that button, send it to me. I get an email, really cool. Just say hi if you got nothing to say. I want to hear from you guys. And if there's anything that I have not talked about or I wasn't like good enough or didn't go over enough or you're confused about, let me know. I would love to kind of cater it towards what you guys are are wanting to hear because frankly, I have no idea. So hence why I'm just up here blah blah blah blah blah blah blah blah blah. What else is there? Follow me on Instagram, guys, John.cleish. I'll put that in the show notes as well. I I believe that we still don't have a South America uh download, and that'll be really cool if I can go. Oh, we did! Oh, we did, we did it. We got some South American downloads. Guys, the podcast is finally international. We're worldwide, fully, fully, fully worldwide. Yes, how cool is that? Wow, I didn't check beforehand. I just totally forgot and that spurred it. Here we are. Oh my gosh, guys, that was huge. That was probably the happiest I've been in a very long time on this podcast. Here, we are worldwide. Woo! How cool, dude. That's something else. Holy cow. That's cool. Wow, wow, wow, wow, wow. I could cry. Um, not really, but actually, I do have a little bit of water in my eyes. I wonder if there's a sprinkler going on here or something. Um, wow, that's so cool. Very neat. And we blew it out of the water. We got four downloads, man. So somebody must have somebody must have made their VA listen to a Kiran. Was that you? You got to message me, Kiran. If that was you, told your VA to listen to uh the the podcast, you got to message me and let me know. All right, guys. Uh that was a good spot to stop it. Boys and girls, really appreciate you tuning in. Uh, like I said, guys, also, too, if you listen to this podcast and you maybe didn't like it, but you know somebody else that would get a kick out of this, send it to him. Send him a text message and say, hey, listen to this goofball here. You may like him. I didn't like him because he's a dumbass, but you know, you might, you got weird taste. So, guys, on that note, really appreciate you. Thank you very much. And uh starting from scratch, worldwide, we out of here. Take her easy until next time.