Why Networking, Patience, And Value-Add Beat Cookie-Cutter Strategies | Tanh | Part 3

This episode isn't about picking the right market or finding off-market deals. It's about the structural decisions most real estate operators make on autopilot - and why some of them quietly destroy long-term returns.

In Part 3 of this conversation, Tanh - former pharmacist, licensed in four states, now a commercial real estate operator - breaks down why the buy-and-hold strategy becomes a liability over time, how he structures his 3–5 year value-add exits, and what he does with capital between deals to keep it compounding.

We cover:

• The buy-and-hold math: why $2M in cash flow over 20 years can net you $500K after capex catches up
• Why every commercial deal requires its own business plan - and why that's the hardest part of the business
• The cash-on-cash threshold he targets on day one, and what stabilization actually looks like
• What Tanh does with proceeds after an exit - hard money loans, alternative assets, syndications
• The sacrifice behind the transition: six years of pharmacy school, four state licenses, and what he'd spend differently if he had the time back
• Why networking was the highest-leverage skill from his medical training - and why he didn't understand that until after he left the field
• The delayed gratification mindset: one deal at $5M over two years versus a hundred smaller ones

Tanh builds inside a market where no two leases are the same, no two deals run the same playbook, and patience is a structural requirement - not a personality trait.

This is Part 3 of an ongoing conversation. Parts 1 and 2 are available in the Chief Milestones feed.

Chief Milestones is a podcast studying how real operators, founders, and decision-makers build durable outcomes under real constraints - in business, capital, and life outside the boardroom.

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Transcript

Systems Thinking: Body To Building

Tanh 0:00

There's multiple systems within the body that operate in order for you to be alive. You take that, the commercial property plumbing system. You have your heating and air. You have your water alarm, fire alarm, electricity. So all of those things together make up the building. The biggest challenge is that every deal is different. You don't have one cookie cutter lease. You can't go in and implement the same exact business plan. From an overview perspective, possibly.

Reshma Vadlamudi 0:33

What did you have to sacrifice to build what you have today?

Tanh 0:38

What did I have to sacrifice? Well, as I mentioned, I retired after practicing pharmacy for three years. I was licensed in four states. I just recently I canceled or I let three of my licenses lapse and I kept one. And that last one is in Ohio. So I think the biggest sacrifice was all those years that you spent. And if you guys are healthcare practitioners, you know how long and how rigorous the whole process is. Yes. All for a piece of paper and a lot of debt.

Reshma Vadlamudi 1:14

Yes.

Tanh 1:15

So in reality, you know, I wasted six years. But you have to look at it optimistically. If I didn't use those six years for that, I probably wouldn't have had the capital to start, nor would I've met the people along the way. So looking at it from a glass half full, it's I think that's fine. On a sacrificing perspective, I think I I actually went to pharmacy school, not for myself. I went there to appease my parents because they they actually wanted me to go to medical school.

Reshma Vadlamudi 1:49

Same story. I can you can relate, yeah.

Tanh 1:52

Yes, yeah. The timing is the biggest thing, right? And I think now I'm utilizing more time, which is a very it's a commodity, it's a priceless object. And I'm you I'm utilizing that time now, or more time, I should say, to in order to build something. Yes. And that takes time away from my own family. So that's probably my biggest sacrifice is having to work harder efficiently in order to get to where I want faster to recover from all the years that I've spent.

Reshma Vadlamudi 2:25

Yes.

School Lessons That Transfer To Business

Tanh 2:26

But I do agree with you. The education and what it taught you in school, although it was very tailored towards a specific field of medicine, it also taught you some good life lessons. Networking being one of them, they I had multiple conferences while I was in pharmacy school, and I never realized why I was doing it. Why am I going to this conference? Why am I shaking hands with people? I know where I'm going to work, I know what I'm going to do, but looking back, the networking piece is very powerful because it opens up a lot of doors for you. Now, on top of that, you have all that rigorous training. You have to be punctual. And the grades is one thing, but you know, a lot of people get did a lot better than me in pharmacy school. And I was just one of those that got shit done. If you give me a task and you know, whatever, I'll get it done. Yes. Preparing for exams.

Reshma Vadlamudi 3:23

Yes.

Tanh 3:24

All of this can be translated over to business. Yes. Being punctual. You gotta be punctual with your meetings, business meetings. And if you some you need to get something done in order to appease a client or a customer or what have you, you gotta get it done.

Reshma Vadlamudi 3:42

Yes.

Tanh 3:42

Right?

Reshma Vadlamudi 3:43

Yes.

Time, Family, And Buying Back Freedom

Tanh 3:44

And on top of that, I think looking at medicine in general, so you we learned a lot of anatomy and physiology, and I'm sure in the medical practice it's even more rigorous. If you think about it from a human perspective, there's multiple systems within the body that operate in order for you to be alive. You take that, the commercial properties, the same shit. You have your plumbing system, you have your heating and air, you have your water lines, fire alarm, electricity. So all of those things together make up the building.

Reshma Vadlamudi 4:27

Yeah.

Tanh 4:27

Same thing in medicine. Yes. Right? Yeah. So those are some of the I guess similarities that you can kind of see that takes you from a medical field to business and or real estate.

Reshma Vadlamudi 4:40

Yes. Yes. Totally agree. And totally agree with that. I can totally relate with the sacrifices that you mentioned too, like where you said, like I've I I think I have the same kind of feeling. Like I'm still making up for all the years that I lost studying something that didn't even like make sense to me. But then it was easy to even study, I guess. Um now I'm like, we are in these prime years with our kids, and then like I'm still working 15 to 18 hours a day and getting things done, and this doesn't feel like working, or this doesn't, this feels good actually. And then, but then I still have to draw a line because I'm also a mom and I still have to spend time with my kids, not just because I have to, but I like spending time with them.

Tanh 5:32

So and that's why we're here, right? We're we're we're chasing wealth to an extent so that we can buy back that time to spend with our families.

Reshma Vadlamudi 5:45

Yes.

If Starting Over: Network First

Tanh 5:45

And and and yes, I said, you know, I'm trying to recover that time because I've lost it, right? But I can the only thing that I can do at at this moment in time is use it wisely in order to make sure that in the future or sometime soon, I can utilize that time to spend it however I want. Yeah. Whether it be with family or doing something fun or whatever. Yes. Right.

Reshma Vadlamudi 6:06

Okay. Based on your experience today, what's one thing you would do differently if you were to start over?

Tanh 6:13

If I were to start over. Okay, so give me a little bit more here. If I had absolutely nothing, or if I had to learn commercial real estate all over.

Reshma Vadlamudi 6:22

If you were to start over in real estate, not just commercial. If you were to start over in real estate today, how would you if I had to start over today, I would amplify the amount of conversations that I have.

Tanh 6:42

Once again, with the networking piece in medical school, pharmacy school, that I didn't learn the power of that until I was retired from pharmacy. So within the network here that we have in real estate, I would not have had near as much success if I didn't meet the people that I did while networking, whether it be at a national conference or a local conference. If you want to go fast, you go alone. But if you want to go far, you have to go together. And that is where the networking piece and knowing people actually helps. For example, when I first started, I needed an accountant. You know, I might have needed a partner, I needed contractors. Without those people, none of my projects would have been done correctly, nor gotten done.

Reshma Vadlamudi 7:34

Yes.

Residential Versus Commercial Paths

Tanh 7:35

So to answer that question, I think to answer it to be fair, the networking piece I would amplify. I would go to as many conferences as I can, whether it's local or online or whatever shape or form, I would do that. But then again, there's also two ways to kind of approach it. Networking only gets you so far. You have to have some action into this. And I don't think I would have redone all the education that I did because that that gave me a really good leg up on how to start, what to do, etc. Your network could do that too. That's why it's so important. So what I'm saying with the two aspects is you can start with the residential side like I did, I would probably amp up the marketing. I would probably look for more opportunities, figure out more ways to capitalize on those opportunities. And obviously with your network, that's gonna help you. It it's two sides: the marketing aspect to find your leads, and how to capitalize on it, how to sell it essentially. If I want the commercial, uh the other side is you can go the commercial route. You can go straight from the get-go and the commercial route. Obviously, the education piece is gonna be important, the networking is gonna be very important, but it you're looking at bigger numbers, and that's probably going to scare some people off. They're gonna be nervous about it, and they're probably gonna be analysis paralysis. They're gonna keep looking at it for a while and probably never pull the trigger. So, from that aspect, the networking, the education, and finding a mentor, very similar. You could do that in the residential side, but I don't really think you need too much of mentorship on the rent on the residential side. In the commercial, I do think you need that. Something. You need somebody to hold your hand. So if I started over and just did commercial, I would have been completely happy with that. Because just because it's bigger numbers, it if you have the ability to delay gratification, your paydays are going to be phenomenal. Versus if you need constant income or constant reinforcement that you're doing something well, you're probably more so on the residential side. Because it it it's probably if you did the off-market stuff like I did, it'll probably take you six months before you get one deal. And then it just gonna be constant from there. So once again, if you if you are okay, if you don't want, if you're not a delayed gratification guy, that's probably your route. But if you're okay waiting for something worthwhile, I think learning about commercial, looking at commercial deals, and underwriting it consistently would be another route. And that's kind of I I did a mixture of the two. Yes. So I would I'm the type of guy that would delay gratification. I don't need it right now. Give it to me later, it's fine. So I think I would evaluate, I would look at a hundred more deals today.

Reshma Vadlamudi 10:48

Yeah.

Tanh 10:48

I would talk to a hundred more people if I could. Yeah. Because then that in and of itself would have amplified everything that I know and can do opportunity-wise.

Patience, Mindset, And Fortitude

Reshma Vadlamudi 11:00

Yes.

Tanh 11:00

That's what I would do if I had to start over today.

Reshma Vadlamudi 11:03

Yes. Do you think you learned the delayed gratification from the pharmacy school, or were you always that way? The delayed gratification part?

Tanh 11:13

I would say I think that was more inherent than it was something that was learned. Although everything within my career and education and whatnot pretty much set me up for delayed gratification. And something like that can be learned. It it doesn't have to be inherent. Just quit complaining about things, quit wanting things. There's a difference between wanting and needing.

Reshma Vadlamudi 11:40

Yes.

Tanh 11:42

As you gradually teach yourself to wait, right? It's because it's so I don't know if demoralizing is the right word, but you're you're waiting so long sometimes that it becomes hopeless. It's like, am I am I really doing what's right? You have to have the mental fortitude to see it through. Patience is obviously one of the biggest things here. You have to believe that what you're doing is producing results.

Reshma Vadlamudi 12:11

Yes, you have to set that vision, you have to have that goal and 1,000%.

One Big Deal Or One Hundred Small

Tanh 12:15

1,000%. Yes. And and for me, it's if I compare what I did on the residential side to the commercial side, I worked a lot harder, I would say, on the commercial side. Because the system within the residential side is a lot easier. The data is cleaner, and the system is tried and true. Completely easy. But it's a volume game in both aspects. It's how many leads you get, how many properties you get, and how much you can make off of it. On the commercial side, I'm more of a favor, I'm more of a fan of the commercial side because I love talking about business. I love talking to tenants. I love figuring out what problems they have. But I'm I'm working harder on the commercial side because I have to make problems. The pool is very small, commercial-wise. So you have to call people consistently. You have to continually mail them. And you have no idea if your data's good or not. So you have to work a little bit harder in order to get a deal, whether it's finding it on the MLS or looking at it off market. But I would rather do one deal versus a hundred. The value in one deal, if this deal makes five million dollars and it took me 12 months to do it, I'd rather do that than do a hundred deals. How much time are you utilizing to get those hundred deals? How many wholesale, how many contracts you gotta sign?

Reshma Vadlamudi 13:52

Yes.

Tanh 13:54

Where one deal take gives me, you know, 30 days to 60 days in order to purchase a deal, and uh well, okay. To add the value, it might take you another year. Yes. So over two years, five million dollars over two years. That's pr that's not a bad return.

Reshma Vadlamudi 14:08

Yes.

Tanh 14:09

I'd rather do it one time for the big upside than a hundred times for smaller, yeah, smaller pieces.

Reshma Vadlamudi 14:16

Yes. The hardest part about the business and how you overcome it.

Tanh 14:22

The hardest part about the business. The hardest part is probably the fact that every deal is not the same. It is so different, and you have to be able to have a good system to take care of all that. Once again, all every lease is gonna be different. You don't have one cookie cutter lease, and you're not I'm not in one jurisdiction, I'm in plenty. So I e each of those deals are gonna come with their own set of challenges. And it's not cookie-cutter like the residential side, where you have one business plan, you go in and you implement it, and it gives you the same results. Well, you could fail, but hopefully, hopefully it's on the upside. But with the commercial side, you don't have that luxury. You can't go in and implement the same exact business plan. From an overview perspective, possibly. But it gets a lot more granular once you dig into the leases and identify the relationship between the landlord and the tenant. Some leases, a lot of our leases are multi-year. Some might be expiring soon. So that right now is probably the biggest challenge. Having all of these opportunities that we're looking at and figuring out and retailering a business plan to add value to those buildings. And internally, it's challenging because you know there's a million different things that you have to do with commercial tenants too. Don't get me wrong, it's more of a passive play if you're on a triple net lease with a with a tenant, but you also have some accounting nightmare or not headaches that you gotta figure out. Cam recs, right? Making sure that everything's billed correctly from a rent perspective and a cam perspective. In your we use building, but everything in that has to be correct in order to be built out correctly, right? So each year, generally you have a 3% increase in rent, or you can make it whatever you want. But three is kind of the standard. Yes. So your system has to be able to figure that out, or you manually do it. You gotta be on time with the CamREX. So I now that I'm hearing myself, it sounds like more of it's an accounting issue. Right? But general overview, 30,000 foot view, the biggest challenge is that every deal is different, and you have to be able to implement a business plan or whatever action to get that done correctly. What I do for this deal is not what I'm gonna do for this deal.

Exit Plans, CapEx, And Buy-Hold Rethink

Reshma Vadlamudi 17:11

Yeah, is there a way like if you were to own like is your plan to exit every deal that you buy in five years? Yeah. Okay. So you there is no way you could create the system so you could like there is no way you would buy and hold. So every time you buy, then you just have to keep doing this thing again and again.

Tanh 17:34

It's the generally back in the day, my my thesis was buy and hold forever. And I don't know why that was in probably because from Warren Buffett, he bought and held forever. And a lot of people do that within real estate. But what I've also learned is that that strategy ultimately becomes a liability at some point. Because let's say, rough numbers, your cash flowing $100,000 a year. The longer you hold it, your asset starts depreciating.

Reshma Vadlamudi 18:10

Yes.

Tanh 18:11

Your roof is getting older, your concrete's getting older, your parking lot, and your HVAC's getting older. All your mechanics are getting older. Which means that over time, you're eventually you're gonna have to replace this thing. Let's say 20 years down the road, and you're making 100 grand a year, what is that two million dollars? Yeah. You made two million dollars in cash flow, but now you have to replace the parking lot, the HVAC system, and the roof. Let's say the roof is 400 grand, let's say the HVAC's another 500, let's say the parking lot's 400, you're roughly in for a million and a half, you've technically made 500 grand over the past 20 years.

Reshma Vadlamudi 18:52

Okay.

Tanh 18:53

Just because all of those things have failed you.

Reshma Vadlamudi 18:55

So, yes. Um then how do you how do you build the wealth? Like, so you're making money in these deals. So how are you going to invest? Like, what what's your I I didn't know this. Like, this is so shocking to me. So how are you creating the wealth? So you can buy and hold, but uh like I said But this one yes, in commercial, this one doesn't make sense. Do you think it's the same thing?

Tanh 19:28

Well, some people still do it. Some people still do the buy and hold for years. Now, if you're on a ground lease or an absolute net lease, that completely makes sense.

Reshma Vadlamudi 19:39

Okay.

Value-Add Math And Timing The Sale

Tanh 19:39

To hold buy and hold it, right? But the problem is those cap rates are very compressed. So from that perspective, let's say we bought a Starbucks today on an absolute net lease, two million dollars, but it's at a five cap. We're gonna buy cash for two million, but it's only making you five percent every year. Which is fine because the tenants paying for everything, it's pretty much worry-free almost. But I can put money into a CD or a savings account, it makes me four percent. Do I want that? Do I do I want to put in more work to make one more percent? Possibly. From a tax perspective, you might want some depreciation, and that might be more valuable to you. Now, to answer your question on how you build wealth outside of those net leases, what you do, we have a three to five year plan, and we want to exit at year five because we don't want the liability of everything falling upon us in 10, 15, 20 years.

Reshma Vadlamudi 20:34

Yes.

Tanh 20:34

And to backtrack, those net leases, they can be, you know, five, ten, twenty years. Some ground leases will go for a hundred.

Reshma Vadlamudi 20:42

Wow.

Tanh 20:42

99 years, 100 years, whatever. So you can hold that forever. You just own the ground, the ground. People leasing the ground from you, which is nice. What we do from three years, three to five years, we're value add investors. We find the value, we add the value, get it stabilized, and then sell it. So once again, every deal's different, but if you if you look at what you should cash flow, when I purchase a property, I want to have some margin of safety. I'd like for it to be around 10, 12, 15% cash on cash day one with the ability to add more value to get to roughly 20, 30%. In today's market, it's a little bit more difficult, but that was generally my basis for it. As soon as you have a margin of safety, you know you're profiting.

Reshma Vadlamudi 21:30

Yeah.

Where The Profits Go: Reinvest And Alternatives

Tanh 21:31

And that gives you time and energy in order to implement your value add plan. Once you add your value add plan, the property is stabilized. And yes, you could argue for that let's say it's let's say we bought a property, it was ten percent cash on cash. Let's say it took us a year and now it's at thirty percent cash on cash. That's a great return. You can hold that thing for a long time, right? But once again that problem comes up of diminishing returns for for your your mechanicals for your capex items. Okay. So now let's do simple some simple math. You make 30% on your money. In three years you're going to make your money back. Great. But uh and we we've already gotten past the point that if you hold it for longer that number's going to be that's going to drop. So let's say that 30% number, let's say we're all in for a million on this deal and you're making 300 grand a year. It takes you three years to make your your million back. So that's a 100% return in three years. But if the value of this property today is let's say two million and I can get a million dollars today versus waiting three years, why would I?

Reshma Vadlamudi 22:49

What are you doing with the money that you're making off the deals? Because it's only going to be one more job eventually like let's say you don't make the next deal or let's say you don't go make do one more deal after this. Then what happens?

Tanh 23:05

I firmly believe that the money is better suited in my hands. I can grow it faster than having it as equity or in the bank's hands. So that's why we sell and we obviously want to capitalize the timing aspect of it. We're in the business to compound versus letting it ride in a property.

Reshma Vadlamudi 23:27

Yes.

Tanh 23:28

So to answer your question with that you also have to figure out whether or not there's an opportunity to invest it in. Whether you can 10301 it or there's another opportunity out there in order to purchase again. And I can't speak for my partner but for me in and of itself I'll put the capital that I have into alternative assets. So obviously you can throw it into IRAs your Roth blah blah blah you can have it in a savings account making 4% you could do that. Or you could lend it out on the side. You know you can you can do a hard money loan lend it out on the side and there's tons of alternative assets out there. I mean without getting too granular with it you obviously have equities there's crypto is a big thing now.

Reshma Vadlamudi 24:14

Yeah.

Tanh 24:14

You can put it in the treasury or you can expand it within the real estate market once again note investing or or hard money loans etc but generally when we do sell we try to capitalize on that money whether it's idle or putting it into an alternative asset. Because we have a lot of people with that are business owners and real estate guys that sometimes they might need more capital. So you give it to them at a 10% 12% what have you and outside of real estate I would say as an alternative investment we invest in other businesses as well. So I would try to avoid bar restaurants because those are those are challenging.

Reshma Vadlamudi 24:59

Yes.

Tanh 25:00

But any other businesses that have some potential will invest in some of that as well.

Reshma Vadlamudi 25:06

Okay.

Tanh 25:07

But those are higher risk. Yeah so you're going to demand a higher return.

Reshma Vadlamudi 25:12

Yes.

Tanh 25:13

It's it's all about your risk tolerance and how you evaluate some of these things. But plenty of other ways to to park money.

Reshma Vadlamudi 25:20

Okay. Got it.

Tanh 25:21

Got it. Or you can syndicate.

Reshma Vadlamudi 25:23

Yes.

Tanh 25:23

Syndicate with other people. You don't have to syndicate your own deals syndicate some of your own if you don't have a deal put it in with somebody else