Ep 35 - Up and Down

Breath of fresh air with Grand, no more eviction issues, most of the stuff is gone, so call that a victory.  Leasing struggles have continued, but to be expected, not really bad news, just still trudging along.  

Thunderbird is getting close to a deal which is fantastic, that could very well be the bright star of the portfolio.  Which would be a good change of pace from being the pariah of the 2.  Which is an overstatement of course, but whatever!

It feels like any day we can get a huge victory, the stage is set, just waiting for something big to happen.  Could come in the form of an investor or a lessee, either way would be huge.  The beautiful thing about the game I'm playing, is at any given moment, I could hit a grand slam and my life financial life will change dramatically.  And for the record, I'm not playing to hit grand slams, but if you play long enough, you'll get one!

Transcript

SPEAKER_00 0:01

Boys and girls, welcome back to the Commercial Real Estate Starting from Scratch podcast with me, your host, John Kleisch, on episode number 34. If this is your first time tuning in, really appreciate you doing so. Um, to give you an idea of what this podcast is about, it is just me documenting my journey from zero experience and no commercial buildings owned, all the way up until however far we take this thing. I've been doing this for about eight, nine months or so. And currently in um based out of Phoenix, Arizona, I have two commercial buildings that I am 50% owner. One is an industrial building that mostly houses automotive tenants, and then the other one is an office building in Sun City, Arizona, which is uh suburb of Phoenix. Um thanks again for tuning in. Uh, really would like to hear how you uh you heard about us, and um feel free to send me a message uh there. Uh this is all in chronological order. So if you go back, it's like the very first episode, and then it all just goes up from there, and it's raw, unfiltered, bringing it to you as straight as humanly possible. So I feel that finally that eviction is is behind us. The if you listen to the last episode, definitely go back, listen to that one. To be honest, after all said and done, I'm not really upset because he did take mostly everything. There was some stuff that's still left behind that is going to get removed here, and I'm totally fine with that. Like my big thing was I just wanted this stuff off of my property. So it is now mostly gone. I haven't been there in a couple days, two, three days, so I do not know what is left behind. I have been slowly selling the stuff that has been uh left behind as far as tool, not necessarily tools, but more so equipment and stuff that I look at and have no idea what it is. It doesn't look valuable, it looks all worn, and I've just been selling it on Facebook Marketplace for as cheap as possible to the lowest bidder, I guess you could say. Whoever's willing to come pick it up. I've been working really crazy deals with people, so that's mostly taken care of, which is great. I feel like I can finally take a deep breath and put all of that behind us. Now, for grand, I really thought we had a tenant sign, sealed, and delivered. We were literally at the very, very, very like there was no more negotiating going on. We agreed on terms, we went over the lease, he redlined the lease, we looked at it, we went back and forth and agreed on everything. And then I get ghosted for a few days. I'm like trying to follow up, follow up, follow up. And then finally, the other day, I'm like, hey, dude, um, I haven't heard from you in like five days. I don't know what's going on. I have another party that's interested. I'd rather go with you, but uh, you know, let me know where you're at. And he says, just go with them. I was like, Oh, okay, uh, thanks for getting back to me, but what changed? You know, we went through all of his work, what changed? And he has zero response. So um, in my opinion, maybe that's a good, maybe that's a good thing. Maybe that's a good sign. Because, in my opinion, if you're willing to go through all of that work and then at the very minute, last minute, back out and not even tell me you're backing out, just ignore me. Um, I don't think that's a very good high-quality trait or a trait of a high-quality human being. Don't think favorably of people that do that. So maybe it's a good thing. Uh, but unfortunate because I thought we were done. I had another gentleman that was also very, very, very interested. Who reached out to me constantly, and I was the one slowing down the process because I thought this guy was ready to go. And I told him the other day, I was like, hey, I forget what day, Monday, Tuesday, yeah, probably Tuesday, Monday. I was like, hey, uh, dude, let's let's uh let's talk about it. Uh here's the application, here's the background check. And then I haven't heard anything since. I even followed up with him today. So uh hopefully by holding out on the other guy, I didn't lose my other tenant to. That would be really unfortunate. That is what my main concern was before about holding off because that was a tenant that I perceived to be of very high value and somebody that I wanted in my spot, so I held out for him. And then in the meantime, I was always like in the back of my head, uh, what if I hold out for this guy and then I lose that other guy, and then this guy doesn't even sign, right? Like, that's the worst case scenario right there. And maybe that's happening right now, which would really, really suck. That would really, really suck if that was the case. I guess really suck? No, it'd be very unfortunate because I lost, you know, we went from in my head cash flowing $5,500 a month to well the other guy was gonna cash flow us $3,500 because he was renting less space, or the other guy was renting more space. The new guy was gonna be renting less space, so that's why there was a difference in rent. We would be cash flowing $3,500, and it would have been, you know, nothing fantastic, but I could have gotten one more outdoor tenant, and we would have been like $4,500 cash flow, which is just fantastic. So now I'm afraid that we lost both, and I'm back to the drawing board again. I did have another gentleman go out that was very, very hopeful. Uh, on he was a very, very good potential tenant, but he did semi-truck diesel repair, which those things are like pretty tall, and our doors are only 14 feet, and uh those semis are about that. So we didn't be able to have him work out, so that was a shame too. So that's kind of the pickle that I am in right now. I don't want to be desperate and chase down this guy because people can smell desperation when you're oozing desperation, you could feel it, and that's not a good position to be in, neither. So I need to push this guy further along and really see where where he is at and hopefully he does want to move forward because it would be great to get grand almost checked off my list because we had our last meeting with the prospective, I don't even know how to say this without saying with the prospective partnership on Thunderbird, the office building, which is getting better and better. The more we look at this deal and partnership, the better and better it looks at fifty my I don't even know um what I can and can't say. So let's just leave it that both my partner and I are very, very, very bullish on this play. The worst case scenario is something that we can stomach, and the best case scenario is just out of this world, and for them to produce better than we would with a single tenant, they would need to miss their mark by like 30-40 percent. So I like those odds. Now the major factor is money. We need at least, I would say, to feel comfortable, 150 grand, which 60, 70 grand goes directly into the improvements, the furnishings, the technology printers, stuff like that. And then the rest of it would be to give us a buffer because this building is burning basically ten thousand dollars a month, regardless if it's rented or not. So uh that burn or that churn or whatever you want to call it, um, would be eaten up really, really quickly. Now, the positive thing is they don't take too long to get going, they pre-lease spaces, so that will help out as well. But there's definitely going to be a bleed. And if I know anything from my experience in real estate in general, is that nothing ever works out the way that it is supposed to. Everything takes longer, everything is more expensive. So um there's that too. So that's why we are preparing for not the worst, but giving ourselves a really good buffer to not have to worry about the the money. Um, because we'll be burning money for almost a year, about at least eight months is is is seemingly to be like the target of losing money. So not the best position to be in overall. However, if this does work out moderately well, this will be a great play, and it will be a fantastic cash flow play, and when that happens, you know that the value of that building goes way, way, way up. I don't even want to throw out crazy numbers because I have no idea, but uh the the value of that building will be worth two two to four times what what I initially thought it could be worth if um we we do a deal with these guys. So that is always very uh how do you say tempting, intriguing, right? But my whole point of that segue was that if grand was cash flowing 3,500 bucks instead of breaking even or losing a little bit, that would be a lot easier to stomach another building that is losing money. Because this is just how crazy my life is in general, and probably any entrepreneur, where a couple weeks ago my partner John and I were talking about how it would be very nice to de-risk ourselves, get our money out of these deals, and bring on partners that get equity instead of debt. It's a safer play to do the equity play. However, when it works out and the upside is there, you have to share that upside with them, which really eats into your potential, right? So it's like, what do you want? That safety, or do you want to have that more risky debt hanging over your head that you have to pay out every month, but you get to keep the upside? And me and John were laughing about how we wanted to de-risk ourselves and take chips off the table and sleep good at night. And now here we are talking about doing this deal and bringing on another partner, and then John was like, and I was thinking this before we even said, he's like, Well, what if we just kept it in-house? And I was like, bro, we were just talking last week about how we wanted to get rid of these debt plays and get into more equity plays, and now here we are wanting to either a put more of our money into this deal, which is a very real possibility, or B raising more debt on the building, which would be um a pretty risky play to begin with as well. Now, that's a decision that we're gonna have to think about and make here fairly soon because we want to get going on this partnership uh very soon because the window for leasing is coming up towards the towards Q3, Q4. Uh, you know, beginning, middle of Q3, end of Q4. Summertime is ending here in Phoenix. The kids are going back to school, the temperatures are starting to drop, and that's when leasing really starts to pick up. So we want to have our building available and ready for that because we don't want to miss a whole season of of leasing because that could be 20-30 percent. Um the a major victory in our meeting today, I asked I said, hey, a major victory if we started today, sign the paperwork today, what would be a major victory for this building um, you know, by the end of the year? And it was like if we could get to half the building leased up by the end of the year, that would be like a major success. That would be like we could put a feather in our cap or whatever that phrase is. So, and at that point, we're breaking evens, right? So we're eating, you know, we're eating debt for four months only, and then we're breaking even. That's great. That's not bad at all, right? Am I thinking that's gonna happen? No, however, my point is that we do want to get going on this. Unfortunately, I think that my partner and I are psychotic enough to move forward with this deal without the money lined up and then just kind of figure it out. Um, if you're watching this, you can see me. I'm like squeezing my face as I say that because I don't think it's the greatest idea. However, it just the deal feels so good to me that I kind of agree, and I feel like that we do have to just kind of figure it out because everything always works out for us, one way, shape, or form, whether that's a true statement or I'm just saying that to make myself feel good, I don't know. However, I do get nervous, uh, just thinking about it, of putting myself in a position I'm in a very like right now is I would say the riskiest, not I put myself in a very situation where my risk levels are pretty high right now. Now, does that mean that I am in a bad spot? No. Does that mean that I regret doing this? No, this is just facts, right? I just got into these deals, they are still mostly unstabilized, Thunderbird being only 20% stabilized, and Grand being about 50% stabilized the way it sits right now. So uh maybe not even, maybe a little bit less. But that's that's that's where the risk comes in, is that I took on a lot of debt. I increased my debt by, oh geez, let's see here, $2.1 million. And now I increase my monthly nut by $22,000, $20,000, basically $10,000 of property, so $10,000 a month, right? So I added that to my plate. Now, however, that's not like the upside. Once once these buildings get stabilized, I will not be in a very risky position. So for me to be in a risky position overall, and then to go out and get more debt or put more money into Thunderbird feels like uh I'm not gonna sugarcoat it. I would definitely be exposing myself to more risk, regardless if we take on debt or use our own cash. So, because then I mean stroking a check for 75 G's right now, I don't even know if I would say yes to that. Um I'm thinking in my head now about what I would do. And I could. There are some other things that I'd have to sell, but I don't like to sell anything. I don't want I want to keep everything that I have. Um, however, these investments uh like Bitcoin, for example, uh I could sell my some Bitcoin and I won't lose sleep over that because is Bitcoin gonna triple in the next year? Probably not. Is it possible? Yeah. Will my will that 75 grand I put into Thunderbird triple in in a year? I think so. I think so. It's a real possibility, real possibility. So those are the decisions that are floating around in my head. And again, back to it, is if grand gets a lease signed, that decision would be a lot easier to swallow because we can just take that three and a half grand, scoot it over to Thunderbird, and that means instead of burning, you know, we're burning ten grand, we're bringing in two, so that's eight grand that we're burning, we're burning you know, forty five hundred. So then John and I would have to come up to the table for with a few grand each a month for a handful of months. That's a lot more palatable, a lot more palatable than you know, having an eight thousand dollar uh you know deficit and then having grand still break even and not bring anything in. So I feel like that got my brain's going like a million miles an hour now, just just thinking about all my options. That's one of my favorite things about doing this podcast, guys, is that it allows me to put my thoughts out there and then hearing me say these idiotic things sometimes, or just saying crazy things, or maybe not even crazy things, just saying things in general. It really gets my uh brain thinking in a different way, which I would never really do if I was just sitting there in my own thoughts. So, benefit to having a podcast is that this is like a self-therapy session, maybe I don't know if it uh if that's a good thing or a bad thing, probably a good thing. But yeah, so those are the decisions that are are weighing over my head this week. And I'll tell you what, I will gladly deal with stuff like this 10 out of 10 times versus the stress that I was dealing with last week. That this is a lot more palatable, it's a lot more easy to swallow. And I also the thing I like about these decisions are I am the one controlling the ship, right? That is my decision. So if I make a bad decision and it goes sour, I don't have anyone else to look at, right? That's all on me, and that I kind of like that because when you have outside factors, there's so many things that could go blow up a deal, blow up anything in general. So I like being the one that decides kind of the victories and the losses and everything like that, especially makes the losses a lot easier to handle because you're the one that messed up, right? That's it. Send signed, sealed, and delivered. That's the end of the day. So it goes good and bad. And then when you obviously the problem is when you make a good decision and it works out really well, then you kind of get a little, oh yeah, I'm the man, right? And then you can also get into trouble doing that. I've been there before as well. So oh golly, that's basically it for the week, guys. Hopefully, I've been saying this for a long time now. Oh, next week I'm gonna have a lease, next week I'm gonna have a lease. Walking into next podcast would be fantastic if we actually had a lease signed. That would be a huge breath of fresh air and would really change the tune of everything. And I feel like that would be a good drive and a momentum shift to us to work with Thunderbird and get this deal going. And when you have momentum, man, it feels great. When you're fighting uphill and running uphill and the world's against you, like it's been the last couple months, that's when it gets really brutal. So getting a little victory would be huge. It would relieve a lot of stress, it would relieve a lot of work of me leasing this property, and it would also help us get into this Thunderbird deal a lot easier, which is uh a really big deal hanging over our heads right now. So fingers crossed, hopefully something comes in the next week or so, and I can celebrate because it would be great to do a nice little celebration here. It's up and down, up and down. If you've been following this podcast, you know it's been the waves, the roller coaster rides have been crazy. But this is what this is what real estate is, right? And especially when you're playing in the commercial real estate space, the numbers are just bigger. So the problems are more expensive, the everything is an extra dollar signs to it. So uh comes um with uh with both ends of the sword, the good and the bad. However, it's been fun, it's been great. I wouldn't change anything as of yet. So fingers crossed, we get some good news for you guys next week. Uh that's the update going across the board on both properties, nothing too overly crazy or exciting, but hoping for some good news and we can do some celebrating next week. And maybe, maybe Green gets released and we sign that deal before the next podcast. Wouldn't that be something? Very real possibility. Um putting that out there. So outside of that, boys and girls, really appreciate you guys tuning in. It has been a blast sharing this with you guys over the last nine months. I'm hoping that you guys get interest in it or uh find interest in it. If you like this episode or you like this podcast, guys, do me a huge favor. Please just take two seconds and leave me a review. I don't even think you need to type anything. If you just click five stars and GTFO, I'm cool with that too. Uh but also, guys, please, if you have a friend or a colleague or associate or a family member or somebody that you know that would enjoy this podcast, do me a favor and please send it to them and then have them leave a review for me as well. I do zero marketing, I don't even tell my own friends about this podcast. So this is growing uh completely organically, and I'd really like to keep it that way. I think that's kind of cool, which is like counterintuitive, I guess, but my plan isn't to like blow this thing up and have like this mainstream podcast at all. So I really like that uh this is growing organically. If you have not been tuning in, uh this is a uh officially a worldwide podcast, and when I mean worldwide, I mean somebody has listened to this podcast on every single continent. So um, I know, I know. Guys, it's a big deal. Thank you. I can hear the applause. I appreciate you. If you can't see me, I'm taking about um worldwide podcasts. You know, I don't know how many um podcasts go worldwide as quickly as this one did. So maybe we're on something. Maybe we're pioneering the commercial real estate internationally across the globe. Unbelievable. I was gonna make that joke, but I completely forget what it was. I think it was Step Brothers. They were on a boat. Prestige Worldwide, Global Prestige, Prestige Worldwide or something was the name of their LLC. Gosh dang it, I'll have to look that up. But either way, that's a wrap. We'll leave it on that awkward moment. Guys, follow me on Instagram, John DocLeich. Leave me a review, share the podcast. You guys are the best. Sincerely love having you guys follow along on this journey. Send me a message. Let me know if there's something else that I can do. And on that note, we're out of here. Take her easy.