Ep 55 - Elevators, Signs & Stuff

Chugging along here with Thunderbird, some housekeeping stuff I've been putting off is getting done.  New marketing campaign is in full swing.  Lenders getting called and so far all rejections, but to be expected.  Close on a new tenant, was hoping to get a signed lease before the show.  

Overall it's been nice to have a bit of breathing room, starting to feel normal again which is amazing.  Still have a lot of work cut out for this deal, but I feel very in control of that portion of this deal.  

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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 55. If this is your first time tuning in, greatly appreciate you doing so. To give you an idea of what it is we are talking about here, I am just documenting my journey into commercial real estate. Started with no experience, and now it's been a little over a year, and I have two separate commercial buildings. One is an office building that's getting converted into salon suites, and the other one is an industrial building which is mostly rented out to automotive folks. Uh there's good, there's bad, there's ugly. So I kind of wanted to catch it all. Every time I listen to a podcast or listen to a YouTube video, you're getting everyone's highlight reels, and after doing this so long, it's like uh that's bullshit, right? I wanna I wanna see the bad. So that's why I guess why I am doing this to expose lifting the curtain, if you will, on real estate, commercial real estate. Basically the same thing at the end of the day. So uh back to it. Here we are. Updates for this past week. I believe last week, yeah, last week I mentioned hey, we got we secured some money, uh, partial uh of the loan, a partial amount of the loan, $25,000. So that has been great. First thing I did was pay my contractor, which he was a couple days late on payment, which he was totally fine with. And for the record, I feel like contractors are normally used to getting paid late. I always just like to pay as soon as quickly as possible because I know how it is to be on the other end waiting for money from customers, and it is annoying. Some people do not like to depart with their money, and I like to leave a good taste in my contractor's mouth so that way when I need a favor, they will gladly accept it. So totally fine. That wasn't even a stink. I told him, Hey, give me a couple days. He's like, No, no factor, you're all good. He actually went on a trip and I was able to get him that money the day that he was leaving, so that's always nice to have a little bit of walking around money. So got him taken care of. He is waiting for more work and which hopefully we will have some for him soon. And the other order of business I took care of was the elevator. I know elevators uh can be very, very, very expensive, like multiple hundreds of thousands of dollars to replace an elevator. So I want to make sure that this one is a up to snuff, up to code, because now people are using it every day, and then b it doesn't break because I do not want to spend hundreds of thousands of dollars on an elevator that goes up and down 10 feet. That's ridiculous. So got that taken care of. Uh I don't know if all elevator companies are like this, but mine is $185 a month, $190 a month now, and it includes a it's not just like an insurance, it's uh like a maintenance package where they came out their first visit and checked a lot of stuff and uh maintenance and cleaned and lubed and uh did you know basically a good tune-up, I guess you could call it. I'm not really familiar with everything he was saying, a lot of things, and I was just pretending like I knew what he was talking about. Um, the elevator technician. So uh sounds like everything is a-oka with the elevator, which is funny because I thought I saw a leak from this big like the motor section of it or something. I don't know exactly what it is, but apparently not. Everything is all good, and he gave me a great tip. Um, because there's a certificate in the elevator that says, last time this is inspected was 2021. He was like, bro, get rid of those things in general. You have to get those inspections done. I actually got one done and didn't even know it. I called before I bought the building, I called the City of Surprise uh, or I forget the elevator people, and I said, Hey, I need an inspection on this elevator. They didn't even tell me they came out. And I find out from this elevator tech that, oh yeah, the last time you got it inspected was 925. And now I was like, Oh, cool. I guess they came out and and didn't tell me, but you got to get a different inspection from the state, I think it is. And you don't have to print out that permit every time he said, Hey, get this sign made and just a permanent sign with your elevator serial number on it, and you can just leave that there. And if anyone is questioning it, they can look up that elevator number online, and that way you don't have to go out and replace and get a new permit and print it out and hang it up and blah blah blah blah every year. So that was pretty cool. That was a long explanation for a very, very simple problem. I definitely have a knack for that. Um, what else with the elevator? So they it it includes a lot of other things like repairs as well. So hopefully, I'm not gonna have much of an expense outside of the 190 bucks a month, which I just realized like 2400 bucks a year, pretty much, 2300 bucks a year. That's a lot, man. Elevators are crazy. Uh, you know, it's funny because it sounded cheap to me at first, and then I just did the math real quick and I'm like, gee, that's a lot. That's like a that you that's like a staycation a year, but instead I'm you know servicing my elevator. Cool, okay. Um, yeah, note to self elevators suck. Uh, but so far, so good on that. Uh, I need to get a phone line connected to it for emergency purposes. I guess I don't know if it's a special phone line or something, but I just called Cox, who I use my internet with, and they're like, Yeah, no problem. It's uh a hundred bucks, ninety bucks to get set up, and then twenty bucks a month, and they'll get it live. I call that elevator tech to come back and he'll do his thing, boom, boom, boom, get it hooked up, and that way we're rocking and rolling and we can go out and get our inspection. Also, when I first got it inspected by this company, they kind of made it sound like I had to get this door um thing right now. I don't know if you guys remember this, but old school elevators, there's a physical bumper that you have to slap. So if you're in the way, it goes gadersion hits you, and then it uh it stops. Nowadays, you probably don't realize this, but they're all infrared stuff, so there's never uh anything you gotta hit, you can just stick your finger or your hand in front of it. That was like 2200 bucks, and I thought we had to get it, so I was like, hey, let's go get that done. He's like, actually, no, you don't have to get it done. I'm like, all right, good, yeah, let's save that money. I think I mentioned this last time. Cool fun fact about elevators, and this will be the last time we talk about elevators in this podcast, at least. And honest to God, hopefully forever, because if we're talking about an elevator, usually it means there's a problem. I'm never gonna come on here and say, guys, great news, my elevator's been working for three and a half weeks without a concern. That's never gonna be said. So back, um, and I if I mentioned this, I'm sorry, guys, but in the elevator, mine was built in 1986, so it goes by code for that time period, which is probably 1978, was the last time it got revised or something, which is great, right? The only time you need to get, like if the state of Arizona releases a new code saying, hey, all elevators have to have this, they have to have this and that, I don't have to get that done because I'm grandfathered in. Now, if I got a new box or a car, I think it's called, what you actually sit in, like that goes up and down in the shaft, that rectangular thing you walk into. If I got a new one of those, then that classifies as a new elevator, and I would have to go by the 2026 standard. So as long as I don't do that, I can change parts out here and there, but as long as I don't do like a major thing like that, I'm still grandfathered into that code, which is ideal. Uh, I lied, I'm gonna say one more fun fact. Uh, I do want to pull up what serial number it is because uh this guy was like, Wow, this serial number, this when I first started in this uh in the industry, the uh the they were at like six thousand. So I guess the state what they do is they label each one, and uh you know, mine's I think eighteen hundred or something like that. So he's like, dude, this is really oh thirteen forty-one is is the serial number. So I was the 1,341st elevator to be installed in the state of Arizona that is outside of Phoenix, so uh not bad. He said right now they're at 18,000. So since 1986, they've put in 17,000 elevators in Arizona, not including Phoenix. I don't know why they worked it that way, but I thought that was a really cool fun fact. The elevator tech got a kick out of that, and now we're done talking about elevators. What else happened? Oh, I don't know if I mentioned this last week or not. I don't I don't know. We started doing the Facebook ads actually, not just the Facebook Marketplace boosting, which I was doing, which was costing about $300 a month the way that we were running it, which is quite a bit for a Facebook marketplace. But I found 10 tenants off of it, so obviously it works. However, towards the end, it was slowing down dramatically. Like we were spending, I paid 45 bucks and I got one lead. One person asked a question, and honestly, it wasn't even a lead, it was just a person that responded, something stupid, I forget, but that's how bad it was. So now the main problem is that Facebook ads, they're expensive, they're like 30 bucks a day. So we're spending um $900 a month, and I've gotten, I don't know, similar to the to the tune of 12 leads, and I would say probably 10 of them are just complete ass, junk, just shouldn't even be messaging anyone about salon suites. And then one guy was pretty interested, but then uh was like, Cool, uh, I I'll see it, I want to see it, and then he just stopped talking and wouldn't respond. And then the other one uh haven't signed a lease yet, but I was damn certain I was gonna get a lease signed by now. I was actually kind of bummed out that I didn't happen before this podcast, but I met a gentleman up once by himself, loved it, came back the next day with his wife. I met him there at 6 40 p.m., dropped what I was doing, went all the way there, actually twice, 6 40 p.m. My happy ass is driving uh through through rush hour traffic. Oh, and that wasn't on that one. The other time was that like I was literally just at Thunderbird. I forgot what I was doing there, but oh, I was meeting up a signed person, which is another thing we'll talk about. So it's meeting up a signed person, and I get home, and I'm dude, I'm in my house for maybe seven minutes. Guy, boom, hey, I want to see it. Cool, hey, no problem, I can show it to you. I just want to ask you some questions first before I commit to driving 30 minutes in traffic all the way out to come to see you and 25 minutes home and spend 30 minutes with you. Before I spend an hour and a half with you, sir, I'd like to ask you some questions. Okay, no problem. I ask him three questions, he answers one of them and then says, I am coming here now. And I'm like, Oh my god, you know, what do I do? Is this guy just like I thought he was yanking my chain for a minute there, but uh then I thought this guy, if he's not answering my questions, he's gonna, you know, blow me off or be a bad tenant. So I'm like, you know what, screw it, and then I was like, dude, we just got these Facebook ads going. We probably spent, I don't know, 200 bucks already on them with nothing to show for it. I'm like, this guy wants to come see it, doesn't know the price, doesn't know what he wants. All I know is that he's a hair haircutter dude. So I'm like, all right, let's run it. Hop in the car, sit in rush hour traffic, get all the way there. He messaged me, I'm here. And I pull up, like, hey, where are you at? I don't see you. And I'm like, oh, dude, this for sure. This guy's just blowing me off. And eventually I see him driving around the parking lot, flagging him down, whatever, long story. But my point in all this was that I I didn't want to go to this appointment, didn't really like the way that conversation went. However, showed him the place, he really liked it. I cut him a pretty good deal as it was. Then his wife that night, his wife started messaging me on the Facebook, asking a bunch of questions, wanting a better deal. I said, you know, whatever, cool, let's do it. Let's if you're going, let's go. I'm down, sure. And then he messages me, hey, can I can you or can I come see it at 7 p.m. on Thursday? And I'm like, bro, 7 p.m. Like, sure, whatever. And then I take the kiddo golfing, and then we're on hole like four, and he's like, Hey, can you come show me it? And I'm like, dude, I am literally just gonna get off the golf course, driving 20 minutes the opposite direction. The kiddo hasn't even been home yet. We haven't eaten dinner, and then I'm like, forget it. Yeah, let's do it. Let's do it. So I meet him up there, bring the kid with me. He's there with his wife and his kid. They walk around, see it. I said, Hey, you're gonna get this room. I could tell they didn't like it. I'm like, dude, whatever. Kid over here, come on, check out this room. I'll give you this one 900 bucks. And they liked it, everything was good. They went back and forth. Very funny people, very funny, uh, dynamic in their relationship. I won't go into details, but uh very funny and uh fun to work with. Uh, they were foreign, the English wasn't that great, so they were both going back and forth. The wife knew a little bit more English than the husband. Um, my kid was like, Yeah, what's going on? He's never seen anything like that, but it was fun, cool people. And I thought we would have had a had a lease by now. They were very thrilled, excited about it, and then I was like, Hey, just send me, you know, your info. Nothing. I hit them up in the morning, hey, send me your info. Nothing again. So they're probably getting cold feet, would be my guess, or like thinking about it more. I know how these types of personality types go. This is this first time this guy's branching off on his own. He has worked at a salon or a haircutting place, uh, but I don't know if he got fired or something. He's not working right now at the moment. So uh I imagine there's a lot of just anxiety. First time maybe in business, uh, all of that. So to me, come on, baby, let's go. But to them, this is a big deal. 900 bucks a month is probably something that is a big deal for them, and that's a large that's a large swing for someone to go out on their own. But in the salon suites world, baby, that's cheap, cheap, cheap, cheap, especially for a nice room that he's getting in a nice building like like we got. So, do I still think he will sign? Yeah, I can't see a world where he doesn't. It's perfect for him. It's down the street, all signs point it to yes, loves it. He loves the the room, really like the building. So the price, like I said, no one's gonna be able to get him that much of a space for the price. To give you an idea, at 900 bucks a month in general. That thing should be pulling in uh it's 143 square 143 square foot, 225 is like the standard going rate for like a solid salon a week. That's 321 a week. That's $16,731 a year. Monthly rate, $1,394.25 is the going rate, and he's getting it for $900, so that's a heck of a discount. It's $494 off, basically $500 off divided by $13.94. He's getting a 35% discount. Come on, baby, that's crazy to pass up on. So, either way, I don't know. Uh couldn't tell you, but I am betting that he does come around, and it might just take some time, which is cool. I had another former lady that I showed the place to, liked her a lot, got along great, and things kind of fizzled out. I wrote her off, and then she called me out of the blue, and she's like, Hey, I want a suite, but I don't want to start until January. And I'm like, Girl, let's go. I got you. Just sign a lease, let's get in. You pay the down payment, you don't have to pay any rent until your lease starts, but this way I can secure it for you, getting a great deal. And then, you know, radio silence again. So it is what it is. Oh, the other people that signed the lease with me two, three weeks ago, no, no bueno, no good. I already wrote them off. The lady that called me wanted their suite, and I said, Yeah, that's available. You got it. If you want it, you got it. So I wrote those people off. If they want to come back, uh, will I let them? Probably because I'm desperate. Um, but they're not gonna get that suite if it is not available anymore. The signage has been a big thing. Let's move on to the new topic. Signage is a big thing that has to get done. Exterior signage because it's still showing the CNF accounting or CNS accounting, whatever the heck the accounting firm was there before, and there's no signage inside. And uh, we need like a directory. Uh, hey, rooms, this, this, this are this way, this, this, this are that way, and everything. So I walked through with a sign lady. Fun fact, I used to own a hookah lounge 20 years ago, now more. Holy cow, is it 20 years? No, uh, 17 years ago, and I used this guy for my signage, my exterior signage for posters, for window stickers, things like that. And I hit him. It's been forever. I mean, it's been probably 15 years since I spoke to him, hit him up, said, Hey, Ray, you still in the biz? And he was kinda. I sold my business, I retired, but I still work here two days a week, and he was awesome. So I was like, perfect, let's run it. He sent out a lady that is maybe the new owner or something. Honestly, wasn't overly impressed. I feel like she wasn't really in the game for that long or knew too much about it, but we'll see what they come back as. I'll talk to Ray, see what's up with that. Uh, looking for interior signs, uh, how do you say it? Like everyone's suite listed on it with their name, um, what floor they're on, and then also I want a map as well, because the building is kind of confusing. So I really would like it to be very, very easy to get around. I want someone to walk in any part of that building and go, oh, okay, I'm here, I need to go there. What however that takes, I'm probably not the best guy to come up with stuff like that, but I am going to go a little bit overboard on signs just to make people feel at ease when because I've been touring the facilities with a lot of folks, and a lot of the comments I hear, it's so confusing, it's so confusing. And I'm not gonna lie, it is. Once I get it kind of walled off the way I want, then it's gonna be a lot less confusing. The downstairs is very simple, the upstairs is is a big circle, so I'm gonna cut off the circle that way you can only go one way or the other way, and then it'll be a lot easier to get around. So I have no idea what those signs are gonna cost. I'm hoping they're gonna be under three grand. I'm just literally throwing out random numbers, but it feels like I don't know, like it would cost that much. So we'll see how that pans out. That was another big thing on my list. Overall, let's see here, anything else with Thunderbird? So now that I got a little bit of dough, I am just making sure that I don't run out and saving some thousands for put uh new people getting signed up. Uh, but I do want to get a few things done for starters. I am going to prep a suite ahead of time without having at least, just like I talked about, I want to wall that part that portion off. That way it's a lot less confusing and be done with it. And then right now, that's like a pretty noisy job with drywall moving doors and cutting and everything, and there's nobody up in that section now, so I want to get that knocked out of the way before that place gets crowded because working around these people's schedules is terrible, and we're making a mess, and this is like a facility that should be clean. So I want to avoid any headaches in the future. Now that we got a little bit of dough, that's something that I'm gonna do and prep that suite. And the beautiful thing is I get the plumbing installed in there, and it's a twofer, it's on two suites, share one wall. So I basically pay for the price of one and I get two stub outs, which is also great. So I'll spend that three grand on that, and then I'll start really pushing those suites. Um, that's next. The washer and dryer is high up on my list. I'm kind of really waiting to get complaints before I go out and spend three, four grand converting the bathroom, the exterior bathroom into the washing machine place. One thing that I do have to get addressed is the A the AC. Even though it's October and things are cooling down, I was kind of hoping the tenants would shut up, but they're not. And I get it. If they're hot, they're hot. I I understand. It's easy for me to say, just be quiet and deal with it. But um, especially when I'm paying a sixteen hundred dollar a month electric bill for the AC. But that's the other thing. So returns are having to get added in these suites as well. Those are about 900 bucks a suite. I got quoted from my AC guy. And speaking of which, I had one of my very first tenants was on month a month. She's on a pretty good deal, not like a smoking deal, but a pretty good deal for her, probably 25% off, 30% off. And she was on month a month and expressed some concerns about the AC and some lighting. I said, Hey, if you want to stay here, I will replace these with LED lights and put a dimmer on you, and I'll get that register for the ACs installed. Excuse me. And she was like, Yeah, I'm here, I like it. Let's do it. You do that for me, and I'll sign a year lease. Boom, signed that year lease last night, which is great. Because the banker's concern a lot of I forget the exact term, but there's like the average length of lease. Uh that um the bankers look at, right? Like, how stable is this business? Are there a lot of leases that are coming up soon? Are they longer leases and so on? Ours aren't that great. There's not many annual leases, but there are many six months and a few month-to-month. So the bankers see that automatically and don't like that. So converting one month a month into a annual lease is absolutely huge for our loan program, which is a perfect segue into that. What's going on with that? So the hard money lenders that we are working with are still willing and able to do an extension. We talked about getting into a DSCR loan with them. However, they are at 10 to 11%, which is crazy because that's about what we're paying on hard money right now. So going with them for a DSCR is no good. So now John is working with them on getting an extension still, and still working with uh banks, local banks, uh credit unions for conventional commercial financing as well. Either way, we're still going to need an extension. I don't think he's gonna get any bankers to bite right now with the rent roll that we have. But I know that if I stacked a couple people in there, that would greatly help out that. But I still like regardless, I still want to do an extension, get a six-month extension on it because the more people we put in this suite before we get this refinance, the better. Because we want to pull out, we're not gonna pull out any extra cash, we just want to pay off all of our debt, which is gonna be somewhere to the tune, let's see here, 47 plus 250 plus call it 60 plus the interest. Yeah, we're looking at about 850 to 900,000 total. Uh and we want to make sure that we can pull that out. Because imagine we owe 900 and they're like, Yeah, we'll lend you 750. That means we need to come to the table with 150 G's, which that would suck. That would suck a lot. Um, would it be the worst thing? No. Do I have 150 G's? No, not even close. In fact, quite the opposite. So either way, I don't want to get too deep into that rabbit hole, but basically the gist of it is get an extension on hard money, continue to whore myself out and get this place leased up as quickly as possible. That way, this rent roll is very, very appetizing to lenders, and we can pull out all of the money without having to come to the table to closing to get into a refined note. And unfortunately, if you are paying attention to the news or interest rates, they are going up and up and up, which is not good because the interest rates are very, very much so tied to the value of your building in commercial real estate. So the higher the interest rate, the lower of uh the lower value the building gets. So it ruins the value of your building. So kind of important, but at this point, it is what it is. Nothing that we can do. We can only control what we can control, and that is why you only buy good deagles that can sustain interest rate hikes. Uh, we were not looking at this um as a like an in an overly interest rate sensitive deal. Uh, I guess back then it was looking to be office, but especially right now, the position that we are in, it's gonna be like 500 bucks more, 800 bucks more a month. Meh, whatever, whatever at this point, you know. So, guys, I didn't realize this was going on for so long. I got into this podcast thinking I was gonna struggle to make it 15 minutes, but here we are, 25 minutes deep, perfect place to stop. Grand, no big updates on grand. We're gonna end this thing just on those Thunderbird notes. Boys and girls, really appreciate you listening. If you could take the time and leave me a five-star review, you don't even have to write anything out. If you would, that'd be awesome. If not, just go back a page, go scroll down to reviews, five stars, click it, submit. Thank you very much. Really appreciate you if you do that for me. And then also, the greatest compliment you could give me would be to share this episode with somebody. So if you know anyone that would get a kick or some entertainment factor or maybe some educational purposes, hopefully not for learning from me, it's a bad idea. But either way, if you know someone that would enjoy a podcast like this, please send it their way. That would mean the world to me. Thank you very much. Also, follow me on Instagram, guys. I do post pictures and updates on there so you can actually see the places and see how that works, and then you can see how much I golf, which is embarrassing. Um, but either way, thank you very much, guys. It's been a great pleasure. Why did I say that? It's like I'm dying or saying goodbye to you guys. Either way, guys, thank you very much for listening. Thank you for your support, and we will catch you on the next one. And on that note, take her easy.