Ep 43 - Locked and Loaded

I'm talking about locks today, that's why the episode is called locked and loaded.  You get it?????!!???

Back from my trip, and several updates over the last 2 weeks.  All good news, is this a new trend?!?!  Maybe I won't go bankrupt and I can continue buying commercial buildings?  That would be swell.

Mostly focusing on Tbird and getting that leased up as quickly as I can.  You can  listen to the episode to find out the rest, I don't feel like typing anymore!

Transcript

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Boys and girls, welcome back to the commercial real estate starting from scratch podcast with me, John Kleisch, on episode number 43. If this is your first time tuning in, greatly appreciate you doing so uh to give you an idea of what we are talking about here on this podcast. Uh now you could call it more of a vlogumentary. I don't even know if that's a thing or not, but I am just documenting my journey in commercial real estate, starting from the very beginning of no experience, no buildings owned, up until today, which is call it the 43rd week, I guess. And now I own two commercial buildings in the greater Phoenix metro area. One is an industrial building, and then the other one is an office building. And one of them is stabilized, the other one not so much. So we have a lot more content on going through the stabilization of the office building, which moving forward here, probably the next 10 or 15 episodes will be mostly catered around that. Hopefully, maybe a new acquisition. Did I just do a spoiler alert? I don't know, maybe not. But um, either way, that's what we're doing here. I always like to listen to podcasts and hear all these guests talk about all these crazy good things, but then you know what? You get into the business and realize that those good things do happen, but there's a lot of bad stuff that comes along with it. Uh, bad, hard, whatever you want to call it, uh stressful, and I am not necessarily highlighting all of those things, but I am opening the curtain behind the scenes on what it's like for a dummy like me to start buying and operating commercial buildings. So here it is. I'm putting it all out there the good, the bad, the ugly. So if you're interested in something like that, subscribe, leave me a review, share this with your friends, all of that, and here we are about to get to it. So, um, I was told, again, I know I do this, I use so a lot. Other people, um, like this, whatever. I'm a so guy. So so I guess deal with it. My mom called me out on that the other day again, and um it is what it is. So again, darn it, I tried to do a transition without it, but I guess I guess we're stuck with it. Great news. The oh, I guess I could have maybe had this in the intro. The podcast you're listening to right now, the commercial real estate starting from scratch, is officially a top 50% podcast. Would you believe that? Not only are we we're all over the world, we're in every single continent on earth we have a download in, we're a top 50% podcast. All thanks to you folks, really appreciate it. Cool m milestone, I guess, to hit. Um, but that's not why we're here. We're moving forward uh and see um how crazy this thing can get. But I figured I would pat myself on the back for that. So if you've been following along, you know I've been off for two weeks. I pre-recorded one podcast to give you guys only one week off because I know the raging, roaring fans here couldn't go two weeks without hearing my voice. So I'm back. Was in um Illinois, family vacation, seeing both sides of my family. It was great. I loved it. It was amazing to really kind of turn off my brain, which has been going a million miles an hour for about the last year-ish or so, and it was really good to a not only see family, but bring my kids home and introduce my twins to everybody, but also just to step out of the environment and kind of undo all the brain damage that I've given myself the last year. But um, very good, glad to be back. Two weeks is a very long time. I've never ever ever taken a break like that or even a trip that long. I'm usually like a two, three, four days would be kind of long. So um, two weeks, a century. It felt like forever. I am like it still feels very weird to be back here in Phoenix. It feels weird to work again, it feels weird to actually handle business, and I'm not gonna lie, I woke up this morning knowing I had to get to work uh or to do work, and it was a little bit of a struggle. And I knew this going in, right? Like you go on vacation, you're like, wow, vacation's the best. And then you're like, man, wow, my life, it's it's like busy. I shouldn't be so busy. I have so much stuff to do. When I get back, I'm not gonna get back into the grind and this and that. Swear to god, I pulled up to my house and I was home for like maybe 70 seconds before all of the oh, this, that, the pool, unpacking this thing, this thing needs to be clean, this thing's broken, switch this, fix this, the the the. I did like four hours of just like work of just like stuff that was like needed to get done. And I'm like, oh, here we go again. So much for learning something from vacation, but whatever at this point, you know, it's hard to not be grinding, I guess. Uh that's kind of where I live. So maybe need to plan some more vacations. But back at it, uh getting everything rocking and rolling. So kind of unfortunate timing to be gone for two weeks, right when literally uh maybe two days before, or like I think two days before I left, really the Salon Suites idea really came to fruition and really uh became a possibility. Uh like as I was leaving. Uh, as you guys know, we have three tenants there now, two of them are office people at really crazy low rates compared to the salon suites, and then I have one massage therapist that just started. So, right as we were getting all that momentum, boom, hit that trip. But what was good about it is that I met with my friend Mo, who runs Salon Suites the day before we left. He walked it, absolutely loved it. Um, I forget if I touched on that in the podcast prior. If I did not, yeah, we'll glaze over it. But he walked it and affirmed, like, hey, these are the numbers, this is gonna work great, this is awesome, the space is gonna be perfect for what you want to do salon suites-wise, and then gave me his pricing. And then I honestly I took a lot off about 20% off of that pricing, just because the numbers that he's given me are just crazy, they don't they don't seem like they pencil out, but after doing market research and calling a bunch of other suites, and that's the case. The Mo knows, so Mo's market rents are very accurate, and now I'm gonna try to get those market rents. Still gonna run some deals here because we have quite a bit of office space or suites now, you could call it, to fill. And we are running out or running against a deadline. Uh, I forget exactly when we bought this place, I believe it was like November 20th, November something, like right around Thanksgiving, so right before Thanksgiving. And our notes are all due then, and I would really like to get this place filled up enough to where we can get a solid refinance going and get our hard money lenders paid back, get off of those notes, and then on to a longer-term financial plan is my goal right now. We still have time, I still have what four months-ish to do that. So call it two to three months of lease up and then start that that process. So I got I got a little bit of time, I'm not feeling very anxious, however, I do know that clock is ticking, and I will be damned if I don't get this thing refinanced before then. I'm sure we can do some extensions. I know one of the notes we have on our private lender, shout out Dane, you demand, has an extension built in there. Our hard money loan does not, but I don't think it's gonna be a deal breaker. However, anything like where a company has power over me and controls everything, especially to the tune of like half a million dollars, I don't like it. So I want to make sure that this refinance gets taken care of. And how do I do that? I lease this place up and make it print money. It doesn't even need to really print money, it just needs to basically pay for itself, and then we can get some kind of note in there. However, the higher revenue I can produce for this refinance, the more money we can pull out. And if we could pay back all of our hard money lenders, pay off all of that interest, pay off all of the rehab and the improvement budgets, and come into this deal with zero dollars out of pocket, that would be amazing. That would be absolutely incredible. I also believe that we could pull a lot of money out of it, and I guess I don't know what we would want to do. I would venture to say it's really hard to pass up on free money that you can access now, right? Commercial real estate is great for numerous reasons. If you've been following around, you know, following along, you know, right? Like you can make cash flow, you can get tax benefits, and you can make big fat profit pops on refinances or or exits. So we'll play that by ear. I imagine that taking tax-free money is never a bad thing. I like it. I mean, that's why I'm doing this. And probably roll that into another deal, right? If we're able to refinance and pull a bunch of money out of this deal, ooh, you better believe that I am gonna go out there and try to find some more, not try to, I will find more office deals that pencil out just like this because this may be the path, boys and girls. I have seen I've been following along with the salon suites long enough to know that it's a great business. It cash flows like crazy, and that combination of owning the real estate as well as owning the business itself. Whoo, what a deadly, deadly combination. So um, what it you know, what's going on? Well, uh I a couple problems over a Thunderbird. A I got internet signed up on Monday, we left on Tuesday, right? So Monday I uh got cable internet installed, we then um let's see what else did I do. That was that was pretty much it, right? Got that tenant signed up, got that cable internet installed, and then boom, I had to go. So I needed to get I have three tenants in there that need internet. So the internet was in the elevator room, which is like an equipment room, so you can imagine it's not producing a great stream. So I had to pay my handyman shout out, Tyler. If anyone's in Phoenix and needs some handiwork done or tractor work or whatever, give me a shot, let me know. I'll hook you up with Tyler, he's fantastic. I shopped around for some like mesh Wi-Fi, uh, how do you say this? Expenders, uh expander, extender. You're talking to the wrong guy on technology. Basically, it takes that signal and pop, pop, pop, repeats it, makes it basically. I'm putting these machines all over the place to get Wi-Fi throughout the building. Uh, it was a 400 bucks for the equipment and a couple hundred bucks for Tyler to install it. If I did this through Cox, they were gonna charge me uh the plan was like $300 more dollars a month and probably some crazy install stuff. So I haven't been there yet. I haven't gotten a complaint on the internet, so hopefully that works for four or five hundred bucks instead of an extra 300-400 bucks a month. I like it. So we got that installed, and we are putting in deadbolt keypad office door, like handles, locks, whatever you want to call them. That way everyone can get a code, they can lock it, they feel safe, and then ultimately, if they stop paying, I can just change the code and they get locked out. Or even more so, scenario that they are moving out. I don't need to exchange keys, I don't need to change keys and do all of this and that. It's just a code. Whop, whop, bop, wham, bam, thank you, ma'am, in and out. So everyone uh that gets a lease signed, boom, we're gonna go out and install one of those on their door, just like a Home Depot Schlag special, 147 bucks, I believe, was each keypad. So that's cool. I got that done. I also lined up a cleaning lady to clean the place because it's been sitting for about six months and light, very, very, very light traffic of people walking through there, but it was enough to where the place needed to get spruced up a little bit, and now people are in there using the bathroom and you know, piss everywhere and whatnot. So had to get that taken care of. Now I gotta figure out what type of cadence we're gonna do the cleanings on. Mo told me every two days, so it's gonna be very, very expensive. However, that's once the place gets filled up. As more and more people are coming, more and more clients are using the facilities. I will up the um the frequency of these cleanings. And I would say the most important thing that I got done while I was gone was the entry locks. Now, this is not a normal office building where there's like a lobby or there's uh you know, it's um there's two different entries. They they don't need how do you say like the downstairs has a key, so we can't operate that right because I don't want this facility to stay open all the time um overnight, even though the individual offices are locked. I don't want any homeless people freaking walking in here at night. So have to go with a very, very heavy-duty commercial lock, which um I've never bought before, never even looked into. I knew they were gonna be expensive, but I had no idea they were gonna be like this. Um, to give you an idea of what these locks are, if you've ever been to a Chipotle, uh Starbucks or whatever, and they got this big honker on there with like a very mechanical-looking keypad, there's a reason you see those everywhere, and because that's the best, right? They're just built like tanks, they're very simple, no frills really. It's not this crazy Wi-Fi technology thing. Everything is like there is a computer in there, you have to hook up your computer to it. It sounds like a pain in the butt for an user like me to do. However, the way that we're gonna get this set up is this guy's gonna basically set up everything every year, like for the schedules and everything. And this is why we need to go with this lock because it is it has to be on like a timed sensitive deal. It's an old wooden door, so you couldn't use a lot of other things, like a magnetic lock or whatever, it's gonna have to use that old deadbolt. If you follow me on Instagram, you'll see the pictures of these old school, super heavy, crazy wooden doors. And the um so it requires a little bit of special installation, blah blah blah blah blah, whatever, whatever, whatever. But the whole spiel with these locks is that I can put it on a time delay, right? Or a time sequence, if you will, or schedule. I'm gonna have these locks open up automatically at 8 a.m. and then lock at 5 p.m. and then outside so customers can come and go at that time beyond those hours. Boom, it'll stay, it'll automatically locked, and the only way to enter the building will be by a key code, which is preset by me or that that locksmith. So uh the only major problem with these types of locks is it's not like that easy internet iOS over the air, you can just change everything like a nest or a EcoB thermostat. It's not like that. Uh so every year is different, right? There's the holidays change, so what you need to do is this locksmith is gonna have to come out every year. He said January 2nd, he comes out every January 2nd, and all of his clients that have these locks, he gets everyone to submit the new days, times, whatever, and then he plugs it in and goes out and installs it in the computer base or into the system via like you can't Wi-Fi connect, you got to be there physically. You hook up your laptop to this lock, so it's pretty crazy. I had no idea. And then what we're gonna do every time I have a new client, I don't want to have to call him and pay him a hundred bucks to come out, so I'm gonna assign one number for every single office. That way I have already all of those. I'm gonna assign, say, 20 different random numbers that way I can have extra room and play and and change things. And then, God willing, if I really did have to kick out a couple people or evict some people to change everything, I can have him get out there and change it. But I also think that eventually I'll be able to learn the software and maybe do something simple like that. But needless to say, I'm going on and on. However, I'm kind of excited about this because what I would never have gone out and spent this much on locks ever, ever, ever. However, this is so important because there's gonna be 60 to 100 people coming and going from this facility. I can't be getting phone calls. John, I can't get in. John, I can't I can't do it. Can't deal with that, do not want to deal with that at all. I'm not driving 30 minutes to help some freaking idiot that doesn't know how to punch in their code access the doors. So I need this to be reliable, it needs to work every single time, and it needs to be easy, and uh I don't want to deal with it. So the the locks, four locks, two of them are gonna have uh the timed, the the timed approach type of deal, and then uh for both entrances, and then the other two are just keypads, just literally enter uh one code, and that's a wrap. I got the I got the bill installed, four thousand five hundred dollars and change. I was pretty much floored, but I also get it. These locks are like a thousand dollars a piece. Um so at the end of the day, like, dude, I think the the two locks are a thousand and then the bathroom locks were seven hundred because they didn't have all those the the funky things on there, so or seven fifty. So is that fifteen hundred, twenty five hundred, thirty five hundred? So the guy's making a thousand bucks. Uh, I'm cool with that. That sounds good after really thinking about it. My main concern was that I didn't want to spend all of this money and then get a shit product. But after speaking with this guy, like this is the guy for sure. I'm gonna meet him up tomorrow to uh he's gonna take measurements. I want to meet him up. But what I wanted to find out was hey, is this the guy? And he was not a normal locksmith, he's he installs these things all the time. He's got a bunch of different clients with him. He was able to speak extremely intelligently on all of the features, aspects, the problems, how it works. Don't do this, this, this. So once I heard that, I mean, we had a 35-minute conversation about locks, right? So that's the guy that I want. If there's a problem, I call him, he takes care of it. Goodbye, thank you. That's what I'm what what we're really going for here. And I'm the type of guy that would never go out and get the best of anything because I'm such a cheap ass. But this is one area that I already know will save some problems because the entrance, um, the locks already have been an issue. They have already been an issue. So uh, and I have three clients there now, so absolutely necessary to get these taken care of and make sure that people can in and out and easily uh with without having hassle, because especially in the salon suite world, there's a plethora of them. They can go anywhere and not have those problems. So I want to make sure everything is smooth for them, and honest to God, mostly for my sanity and time. So that's that's basically what I did that whole time. There, got all of that lined up, which was quite a bit of stuff to do, you know, um, which is great. A kind of good practice on how to operate without me being in town, which worked out really well. I got a lot of good stuff done, didn't get any leasing done. I was able to set up a few appointments. Um, I have a few appointments coming up here over the next couple days on prospective tenants, uh three, maybe, maybe four. So we'll see how those end up. It'll be great to get another lease signed by the next podcast. But I'm thinking I need to get everybody, let's see here, we have 17 spaces left to go. I would we need to be trending at about one a week, to be honest. So I really think that's a real possibility. There are other suites that are going to need uh effort and money put into them before we can lease them, like walls built, doors installed. One, I gotta like build a wall, close up a wall, install a door, install a window, install sinks, and things like that. So, not all of this is gonna be super easy. Wham bam, thank you, ma'am. But we are gonna spend about 15 grand up front on a major portion of the locks, the internet. We gotta get this place decorated, and I gotta get some speaker systems. I want to get some kind of speaker system where I can have two or three speakers just for the main areas and play music, just a nice little slow, soft kind of music or something, just so the dead air isn't really there. Um, if you know of anything like that that I can just plug into a wall and sit in a corner or something like that that links together, that'd be great. Let me know, please. That'd be great. Huge help. So there's about, like I said, 15 grand of things that we need to get going. And then as we move forward, each individual room, there's some rooms that'll need zero. There's some rooms that'll need maybe just new light bulbs or can lights or something. And then others are going to need like three grand for a sink installed, maybe less, maybe two grand 2500, depending if it's easy. But those are things we're going to tackle as we go. Because there's no reason to meet for me to go out and spend that much money right now. Whereas we can walk the place if a tenant likes this perfect room and they want a sink in it, they'll sign the lease and then I can get that sink rocking and rolling. That way we're not just uh wasting money. And I have a feeling that once we get going, this this place will self-sustain, right? Once they put in their security deposit and their first month's rent, that's usually something to the tune of $1200 or something. Then you know we could use that money to go out and repair the uh or put that money into the suite so we're not having to raise a bunch of money on that end of things. So perfect segue about raising money. Thunderbird's pretty much done. Um we great news on grand. Uh John Heisler, my partner on this deal, was able to s to fully secure a an investor on the deal. Uh, I'm not sure I if I could talk about the numbers and everything like that. So I guess let's talk in talking hypotheticals, right? So um hypothetically, we got a hundred thousand dollars for eight point one two five percent of the building. So, what does that mean? A, this gentleman gave us a hundred thousand dollars, and then in return, he is now eight point one two five percent owner on grand av, which is cool because we had a thirty-five thousand dollar interest-only loan at fifteen percent that we used to get the roof done, which now we were paying, I think, five hundred bucks a month on, and we used that for four or five months. So I know that sounds crazy expensive, but at the end of the day, to get 35 grand and it costs us only a couple grand to utilize that money, beautiful. So paid that off. Uh, there are some other things like the block wall, the stucco, uh, paint, exterior paint that we were wanting to uh to put attention into, and then that rest of that money is gonna go to us as a distribution. So that's pretty cool. So I'll have a little bit of money coming back to me, not much, I think it's like 25 grand, so it's not like life-changing money, but it's good enough to kind of keep the juices flowing around the household, and maybe I'll uh go out and put that into a note or something like that. So that's great. I always like that. Now, what does that mean on the other end of things? It means hey, we have a partner here, and that partner is gonna want to know what's going on. And now that we also have a partner, there are rules and regulations that we need to follow, so we can't be all willy-nilly just sending money this way, that way. It has to always be documented and uh like classified as the correct thing, and the reports and the bookkeeping have to be on point now because this is how you can get into trouble if money goes missing or something like that. And I know now that we have somebody else to answer to now as well. So if something's not going well, we're gonna need to call him and let him know. Uh, he is also guaranteed an 8% cash on cash return. So that means that if he is not making at least six hundred and sixty-six dollars, I think what it is, every month we from the business, that means that he is going to make that regardless. And who pays that? You're looking at the guy. That would be me. So overall, I'm not too concerned about that at all. Currently, the way it sits right now, without getting more tenants in its cash flowing $3,500. We have some potential to rent out maybe $15,000 to maybe $2,000 more in that. So you can do the math on the cash flow there. He will be well more um than compensated over or for his 8% unless something crazy happens again. But that is all good news on that front as well. So it's exciting. It's my first capital partner, so we'll get to work through all the kinks on that and really get used to that because eventually I have a feeling it's pretty rare that we had it was just internally us two on these deals. Do I like having a capital partner? Uh, I'd rather not, but I also would rather not have a hundred thousand dollars into this deal as well. So to each their own, it goes both ways. But at the end of it, we're hitting that 30-minute mark, and I'm starting to blab. So this is kind of where we start wrapping it up. So, overall, Thunderbird couldn't be in a better spot. We're already in that, really in that launching pad, about to spend some good money, get this place leased up, get this rocking and rolling on the salon suites, and then grand pretty much cruise control. Got that private capital investor on board. Money is in our bank. We're working through all of the distributions right now. Um, fantastic news on that end, guys. It's crazy to actually have these podcasts and not being so anxious and worried and sharing all this bad news, right? Things are trending in the right direction. It's been about a year, so that makes sense. A lot of it is experience, a lot of it is timing, a lot of it is the market, a lot of it is just whatever, whatever you want to chalk it up to. But here we are, we're doing it, we're alive, I'm back in town, we're running full steam ahead, and the plan is to just keep pushing as hard as I can until I get this place mostly leased up. Guys, follow me on Instagram, john.cleish. I do shorts, I do reels, I post pictures on there. That way you can see these assets and actually uh get an idea. I do a video podcast as well. So if you're watching this, hello. If not and you want would rather see uh the other person on the side of this camera, I Spotify, I think Apple has them now. I think that everyone kind of you can do that um as you wish. So if I start getting some more video folks watching, I could probably do some more slideshows or walkthrough videos to get you non-followers or non-Instagram followers up to speed on what these buildings actually look like. I think especially good for when we are breaking down the numbers. I can show you the spreadsheets and things like that, which Thunderbird, everyone's gonna want to see those numbers. But um, if you guys got a kick out of this podcast, leave me a review. You can just do five stars, you don't even need to write words. If you felt compelled and loved this podcast so much, leaving a couple sentences would mean the world to me. I greatly appreciate hearing that feedback, and it just helps me out. I'm terrible marketer and promoting of myself, so I don't put this out anywhere. So this is all growing organically, just naturally through the interwebs and whoever I know in my network that is listening, and maybe they share it with their friends. Either way, um leave me a review, please. It really helps out a lot. And if you maybe didn't like this show or you did love it, and you know of somebody else that would like it, share it with them, please. That would mean the world to me, guys. Seriously, that's like the best compliment you can get uh or I could get. That would just uh gosh mean a lot. Um, if you can share this podcast with anyone you think that would get a kick out of it overall. Guys, thanks again. Really appreciate you tuning in. Episode 43. Here, we're about to bang out of this bad boy. So, on that note, adios, guys. Take her easy.