Is Now The Right Time To Make A Change?

We share four clear signals that it is time to make a commercial real estate change and why local needs should outrank national noise. 

We outline how to weigh leasing versus owning, tap equity for growth without over leveraging, plan a graceful exit, and avoid timing traps.

• Focusing on business needs over headlines
• Outgrowing space and right-sizing operations
• Lease versus own with cost-to-revenue guardrails
• Using equity to fuel higher-return growth
• Broker price opinions and market-read valuations
• Planning exits and legacy with runway
• Avoiding analysis paralysis and market timing
• What this show will teach across the CRE lifecycle

If you found this episode helpful, make sure to like, comment, and subscribe
And don't forget to hit the notification bell so you can unlock all of our content and never miss a beat

Transcript

Welcome And Show Mission

SPEAKER_00 0:00

Welcome to Commercial Unlocked, the podcast where we break down commercial real estate and unlock how it actually works. I'm Sam Klein, a commercial real estate broker here in the Carolinas. Each episode we'll talk through deals, markets, and decisions that shape commercial real estate from leasing and development to investing and community growth. You'll hear from business owners, city leaders, developers, and people on the ground doing the work. Because I think commercial real estate isn't just about the buildings, it's about the people. Whether you're a business owner, investor, or just trying to understand how commercial real estate really works, you are in the right place. Now let's get into it. Welcome to episode one of Commercial Unlocked. Man, I am pumped you are here and excited to share stuff about commercial real estate with you. This is a glimpse into the mind of Sam Klein, which hopefully isn't too scary. Um, it comes from over 10 years and pushing towards 500 transactions in the commercial real estate world. Um, some of the lessons I've learned, hopefully some of the wisdom I've gained, and then even looking forward at the exciting market that we're in. Um obviously Charlotte Metro, I do things in Charlotte, I do things in Gaston County, Cleveland County, and Lincoln County. Love industrial real estate, and uh am super excited to talk to you guys about it. The um title of the first episode is Is Now the Right Time to Make a Change? So I hear this a lot, and I think people often ask this question, and then they speculate um on the broad area of the United States. They'll pay attention to national headlines, they'll pay attention to interest rates, they'll pay attention to lots of other forces and factors. And of course, you have to pay attention to, say, interest rates or building costs or things of that nature, but I tend to believe that it's time to make a change when we focus on our house and our backyard. And what I mean by that is our business and our area. Um, if your business is starting to necessitate a change, that need and that ability to scale and grow, I believe, far outweighs, say, the interest rate. So there are four signals that uh it might be time to make a change in commercial real estate that I like to discuss. Um, easy one, first out of the gate. What if your space no longer fits your operation? Very simple. Let's talk about a startup business that has um grown significantly. Um started at the kitchen table, we move into that first space. Um, I love the trade, so let's take the plumbing, mechanical, HVAC, electrical contractors of the world, start at the kitchen table, move into their first space, put at a second, third, fourth crew on the road, have too many trucks, too many material to operate effectively, and start to feel that pressure. Great time to make a change. It's a great time to make a change when your business has grown successfully to where your space no longer meets the needs. We can talk about leasing versus owning tension. Uh, very common for a business to start off in the leasing part of the world because it makes the most sense. And, you know, I have people come to me and say, I'm tired of paying rent. I'm tired of investing in someone else's property. It's time for me to invest in my own. Um, I love that. It is a great way to build wealth and equity, is to purchase a piece of real estate that your business could afford. Um, I do advise people a lot that leveraging their business in order to buy a piece of real estate is a bad idea. So a great way to think about this is if I take the cost of ownership, and that would be debt, if I take that on, uh taxes, insurance, and general maintenance. And if I look at that as a percentage of my overall gross revenue, I want that percentage typically to try to be in to the single digits, maybe to 10% at the most. If I'm thinking about something higher than that, 15 to 20%, that's probably a piece of real estate that my business can't afford. If I leverage my business for real estate, I have other troubles. But try taking the time to take your business and move it from a lease space into a space that you either purchase or develop that's specific for your business is something that um it it's uh one of my favorite parts of my job is to see people kind of graduate to that next level, work with them to um to take on that challenge and develop something amazing for themselves, purchase something amazing for themselves, change their family tree with their wealth. So that's uh that's a great time to make a change. Um what about optimization? Uh go to that next level where I've purchased a property, I've paid the debt down considerably with um the fruits of my labor through the business. And now I've got a really strong equity position because not only have I paid debt down, I've experienced depreciation. And uh gosh, in the 10 years that I've sold real estate, it's just been amazing to watch the changes in this market and the Charlotte market, um, what things sold for when I first got into the business and what things are selling for now. It's incredible. 2x, 3x, things of that nature. So could I potentially pull money out or restructure my real estate and invest to grow my business? Um, again, as long as I'm not leveraging too much on my business, sometimes that can be a good strategy. Real estate generally has returns of about 6 to 9% year over year. Again, I'm painting with a very broad uh brush. Sometimes that might be lower, sometimes that might be higher. But if I take money out of a building and put it into a business that maybe has 30, 40, or 50% profit margin, is that a good decision? Sometimes it is. And when I run into people like that, probably the most important thing that I can do to help them out is tell them what their building is worth. I offer a lot of broker price opinions. Um, sometimes that's for a fee, but often it's a way for me to segue into a relationship with somebody to try to help them along their commercial real estate journey. Being able to look at a piece of property and understand what it would bring if it sold and what it would lease for in a timely manner is probably one of the most important parts of my job and one of the things that I can add most value to your business in when discussing your real estate with you. What about the next chapter? Um, we are all leaving a legacy, of course. Uh, a lot of people, a lot of entrepreneurs don't think about an exit strategy. They jump on the treadmill again. We think about um folks in the trades and they take off running and they hire crews and they do good work and they turn around and it's time to think about something different, and they haven't thought about how to close their business down, move their business to the next phase, um, or dispose of their real estate. I love it when people call me and give me some runway for that. So instead of wanting to do it in a week or a month, it's like, hey, I'm gonna make a change in a year. How do we set, how do, how do we go through my business? How do we set this entire thing up for success so that I can step down gracefully and move into the next phase of my life? Love getting calls like that. Great time to make a change when you're deciding to again. I'm not I'm not gonna use the word retirement when you're deciding that it's time to pivot and do something different in your life. The last thing I really want to talk about is timing. Why is timing the market a bad idea? Of course, if I say that um it can be taken out of context. Sometimes we do have to consider the timing in the market. Um, sometimes we have to consider uh not enough, too much super high interest rates, um, difficulty and disposition. But I think a lot of times, again, it goes back to my comment um out of the gate on this episode. I need to pay attention to my house and my backyard. If I start to think about what serves me best, then I can work within the market that I'm in and create the best scenario. When I start paying attention to the a much broader picture, I think um I lose traction. I create analysis, paralysis. Weighting is a decision in and amongst itself. And um I can really create some negative impact for myself by paying attention to too much outside of my world instead of paying attention to what's inside my world. What's this podcast gonna do for you? Well, we talked in the beginning about who it's for. It's for those of us who own commercial real estate, lease commercial commercial real estate, want to invest in commercial real estate. We're gonna break down how a property is evaluated, what gives it value. We're gonna talk to general contractors about the building process. We're gonna talk to attorneys about the entitlement process. We're gonna talk to attorneys about the closing process, what it takes to close a piece of real estate. We're gonna get an appraiser here to talk about how to appraise a piece of real estate. Again, broker price opinion and appraisers offer two different services. We're gonna have some great guests on the show, and we're gonna try to give you the building blocks of what makes a commercial real estate, a piece of commercial real estate have value and how a piece of commercial real estate works, what its life cycle is like. Um I tell people all the time that when I started, I worked a lot of jobs. Um, worked at Lowe's Home Improvement Warehouse a long time ago, if you can believe that. Worked for various construction companies. When I started selling commercial real estate, for me it was like putting on a pair of jeans that fit just right. Just everything about the way that the commercial real estate world works, the way it lives and breathes, the things that I needed to learn to be good at it were just they were made for me. So I'm super excited to host this podcast, work through a year's worth of material and bring it into your ear to hopefully help you with the next time you have a transaction, a commercial real estate transaction to make sense of it all. Thanks for spending your time with us today. I really appreciate you being here. If you found this episode helpful, make sure to like, comment, and subscribe. And don't forget to hit the notification bell so you can unlock all of our content and never miss a beat. We've got a lot more conversations coming your way, and I'm excited to unlock even more of the commercial real estate industry with you in the next episode. We'll see you there.