Many paths lead to millionaire net worth as a gym owner, and one of them involves buying your gym’s building.
In this episode of “Run a Profitable Gym,” host John Franklin sits down with Brian Strump, a chiropractor and the owner of Live Active Charlotte, who recently bought his gym’s building for $1.8 million.
The pair get into the details of the huge purchase and discuss the benefits of owning your building—some might surprise you!
Whether you’re ready to buy now or considering real estate as an option in the future, John and Brian share tips to get you moving toward your goal.
To find out how a dozen other gym owners became millionaires, check out Chris Cooper's latest book, “Millionaire Gym Owner,” available via the link below.
Links
"Millionaire Gym Owner"
Gym Owners United
Book a Call
1:04 - Brian and the CrossFit Forum
9:09 - Brian’s team
17:53 - Brian's building
26:28 - Advice for first-time building owners
39:22 - When is someone ready?
Many paths lead to millionaire net worth as a gym owner, and one of them involves buying your gym’s building.
In this episode of “Run a Profitable Gym,” host John Franklin sits down with Brian Strump, a chiropractor and the owner of Live Active Charlotte, who recently bought his gym’s building for $1.8 million.
The pair get into the details of the huge purchase and discuss the benefits of owning your building—some might surprise you!
Whether you’re ready to buy now or considering real estate as an option in the future, John and Brian share tips to get you moving toward your goal.
To find out how a dozen other gym owners became millionaires, check out Chris Cooper's latest book, “Millionaire Gym Owner,” available via the link below.
Links
"Millionaire Gym Owner"
Gym Owners United
Book a Call
1:04 - Brian and the CrossFit Forum
9:09 - Brian’s team
17:53 - Brian's building
26:28 - Advice for first-time building owners
39:22 - When is someone ready?
Welcome to Run a Profitable Gym. This episode was recorded live with most John Franklin in Dallas, Texas for a meetup of some of the world's best gym owners. Some of them are featured in Chris Cooper's latest book, millionaire Gym Owner. Available now@millionairegymowner.com. Now, here's John Franklin .
Speaker 2:I have in front of me a legend, if you will, one of one of the first men of the crossfit.com forum and , uh, the former owner of CrossFit Steel Creek and the current owner of Live Active Charlotte, which happened to be the same building. Maybe we'll talk about that. Maybe we won won't. And he happens to be the owner of that building now, which is why I want to talk with him and , uh, get into the nitty gritty of purchasing that, because from what I understand, that's a multimillion dollar purchase. So , uh, congratulations on all your new debt. Right . Uh , looking forward to hearing about that. Uh, it is none other than , uh, Brian Rum . How you doing? Thank
Speaker 3:You. Awesome. No , I'm excited to , uh, to be here.
Speaker 2:Good morning. Good morning. So I know you from the early days, so I started in, I started doing it in 2009, 2010, and then I opened up my first affiliate in 2013. And I remember the only way to get business information at the time was to just kind of Google in the CrossFit forum.
Speaker 3:Yeah , of course. Yeah.
Speaker 2:And I think you were like probably one of the most active people on there. I think to this day, you're still one of the most active people on the Facebook group . So what type of mental disease do you have <laugh> that makes you want to just to argue with people on the internet for , uh, decades?
Speaker 3:I feel like I should have been a lawyer. You know, I feel like I would've been a pretty good, a pretty good lawyer given that background of introduction. But, you know, back in 2008 when I was deciding to open the gym, I went around to a bunch of different gyms and somebody told me like, Hey, there's this message board that you should go on. And they were naming like Andy Petron Neck , skip Chase , and Doug Chapman. The three that I specifically remember, like, and I had yellow lawyer pads filled with notes, as you would imagine, and , uh, of like how to potentially operate something circa 2009. And then <laugh> ,
Speaker 2:It was like, make boxes, <laugh> make rings. Yeah . Yeah.
Speaker 3:And , uh, open Jim . And then since then, I guess it always just stayed. I just felt like I tried to be a , a voice of reason, as nice as I could do it. Some people might, might, may have found it abrasive, but I , I , I'd hope that most people found it helpful. And then I think I try to do the same now, like a little bit of sarcasm, but I realize some sarcasms pretty, pretty difficult to read online, so I just try to stick to the point and answer the question.
Speaker 2:And you are, you are a doctor, you're just not a Juris doctor. You're a , you're Yeah . Chiropractor. Yes . You , you went the other route.
Speaker 3:Yes, I went the other route. Yes. Yes,
Speaker 2:Yes. That seems , uh, somewhat helpful, I guess. So you were one of the, the OGs, you were like the $500 affiliate,
Speaker 3:Right? I think I just missed it. I think we actually paid to be an affiliate in , uh, October, 2009. I was paying $2,000 up until, you know, a couple weeks ago.
Speaker 2:Oh, you were the you were two grand, huh ? Yeah ,
Speaker 3:I think I was were 500 . Oh , I may have been one of the first 2000 ERs.
Speaker 2:Oh, okay. You , you got the Just missed it . The end of the price increase. Yeah . Yeah . Sounds like you're no longer affiliated. When did you, when did you drop the affiliation?
Speaker 3:Actually, so I still am affiliated in two th the way the name changed, which is still confusing. And the very first time when we were thinking about, oh , not a couple times, we were looking at purchasing something and in 2018 or 19, I was like, this is gonna be it. We'll get a new building, buy something new, put that live act to Charlotte name and maybe still do like, you know, home of CrossFit Steel Creek or something. It didn't work out, but I already went like down the rabbit hole of kind of changing everything. And this was pre covid , pre Greg Lastman tweets, black box on Facebook, everything. So I was like, when am I'm supposed to do now? So we just kept it and I was like, eventually, maybe I'll drop it and I'll buy a building and we'll do this. And then now I bought like MySpace and now it's like we're just all in the same thing. We, we have an affiliate. We, we , we , we , we still are an affiliate. There was never a time that we didn't de affiliate over 2020. So it's, like I said, it's a , it's a a little bit confusing. If you type in CrossFit Steel Creek, you'll find us new people would refer to us as probably live Active Charlotte, but like my Steel Creek area, they'll see bumper stickers on cars from a decade ago that'd say CrossFit Steel Creek.
Speaker 2:Oh, so you're, you're still in it. You were still , okay . So you're , you're probably one of the oldest
Speaker 3:Standing now. Yeah , so probably now. Yeah . Yeah , yeah , yeah . Yeah .
Speaker 2:I would guess you're definitely in the top , uh, hundred, if
Speaker 3:Not. Yeah, I think over 2020 we kinda moved up a big
Speaker 2:Chunk . I know Harry, Harry at Black Box told us he's the oldest. He's
Speaker 3:The number. I'm definitely not. Yeah,
Speaker 2:He's the number one. And I don't remember when they started, but it was , it was around that time. Maybe a couple years. Yeah , maybe a year before you guys, so
Speaker 3:Maybe there's a , I mean, there's, there's two more in , in Charlotte CrossFit, Charlotte and , and Ultimate CrossFit that were affiliates in 2007. So like, they're still around CrossFit. Wilmington was one that I went to CrossFit Cleveland, so I know there's a,
Speaker 2:The , the namesake . Yeah . If it's a city. That's
Speaker 3:Right . Right , right .
Speaker 2:So ,
Speaker 3:So I'm still there.
Speaker 2:So let's talk about , uh, so you run your business is , how would it differ from the average CrossFit gym if you walked in so people could have that context before we get into the, so
Speaker 3:Like , from the space perspective, probably, right. We have, we occupy 11,775 square feet. It's in like a light industrial space. The front's a doctor's office. I've been a chiropractor since 2003. So the fronts of doctor's office about like , uh, 1800 square feet, myself, another chiropractor and an assistant. And then the back is like the, the rest of that 10,000 square feet of the building, most people for the gym would kind of enter around the back. Most people for the doctor's office would enter in the front. And I think from, from like outside looking in the, you know, the size and maybe just like the amount of equipment and stuff like that is like the first thing when people come in like, oh, this is, this is larger than something, or this is more well equipped than something, but I don't, you know. And then obviously a lot of differences. I I know on like the inner workings, I would imagine that from mistakes that we've learned over the last 13, 14 years is different. What do you
Speaker 2:Mean primarily? I'm , I'm looking more ops model. Yeah ,
Speaker 3:Yeah .
Speaker 2:For 12,000 square feet. But you walk in, it's just gonna look like a large
Speaker 3:Yeah , it just looks like a gym . Cross the gym, like gym . Yeah. So, so, so from an operations model, like I am the, I work on , uh, doing some sales and creating content, like written content. I prefer to write, I'm very rarely like in front of a camera like this. 'cause I , I don't love it. And then I have a couple of key staff that either work on the, like using Kilo and GLM to kind of run that. So I think like our, our strongest points is our follow up and continuing to kind of touch base with leads and follow with , uh, people that cancel and keeping track with the current people that are in the gym from like a culture caring about standpoint, which I think that we do remarkably well. Like , I think one of the biggest things that I look at when a new member comes in is how long they've been in our , like, sphere of system or like, how long ago did they like click to get more information. And some of those I , I enjoy seeing it's like 7, 8, 2 years and they maybe respond to an email or they, or they just have been still thinking about us for something. It makes me feel like the, the work of the emails that I write are , uh, valuable. And I, I think like that's where a lot of people like Miss the Boat from like the follow up perspective. So I think like we do that really, really well. So I think like from an operations perspective like that and the sales funnel, not, no , not , not so much like paid Facebook funnel stuff, but just like once they come into our system, I think we do a good job.
Speaker 2:Yeah. We do origin tracking for everybody who comes into Two Brain and they tend to fall into one to two camps. It's like they saw it, they fell into the funnel. They bought in the first 90 days that they interacted with us, or they've been in there for like five years. Yeah. And there's like no middle ground and the , the , the , that long tail, there's a lot of value in just kind of hitting those people over and over and over again. So if you've been consistent with the writing and consistent with the follow up , uh, that makes a pretty meaningful difference over a long period of time. Yeah.
Speaker 3:And when those people come in, it's just like if you , if you , if you , if you click the link logged in and you, you know, three days ago you booked your appointment, I've got like some ammo in a sales conversation. But like, if you've been in our thing for two years, like there's very little chance that you're leaving and not getting started.
Speaker 2:Right. 'cause you've just been consuming content .
Speaker 3:Yeah . Like what else are you waiting for?
Speaker 2:You know it now . Yeah, yeah , yeah , yeah . You pulled the trigger. So you talked about you're a writer, you're content creator, you got somebody who manages your pipeline. So the follow-up is pretty good. In terms of other staff, what do you have in order to run the ship?
Speaker 3:I've got, me and my , uh, admin or assistant's been with me for seven years. Uh, Kristen , who kind of like, takes care of everything. She's kind of like my filter, so to speak, of like , uh, messaging coming in that allows me to have a little bit of freedom to like, create and take care of bigger problems. And then we've got two other coaches that run the nutrition program, which we , uh, sell a lot of that in terms of nutrition. And then maybe like , uh, nine other coaches, I think like four or five, let's call 'em like full, full-time, full focus . This is their only job, their only source of income. And then a couple that may be coach anywhere from , uh, 20 to 25 hours a month to like four or six. Some of the ones that are coaching four and six have been with us for, you know, a decade plus now. And maybe they've kind of moved up and have another job and they're just still wanna be a part of just coaching every now and then. So
Speaker 2:You, Kristen five coaches and then are the nutrition people full-time, full income from the
Speaker 3:Gym? Yeah, those two. Yeah. Yeah .
Speaker 2:So, so you do about seven people, you got seven careers in fitness you're responsible for.
Speaker 3:Yeah, I , I'd say that's fair.
Speaker 2:Okay. And , and what does it , what does membership and top line look like to support all that?
Speaker 3:Probably like averaging a little bit over, you know, between, you know , 52 and 57,000. So what's that like 6, 6 50 for the, for the year? Is that what you meant?
Speaker 2:6 0 6
Speaker 3:50,000. Oh,
Speaker 2:You're trying to
Speaker 3:Multiply it 50 by 50 over by 12.
Speaker 2:Yeah . Yeah . We don't do math before 10:00 AM on the show. Don't worry. You just do the monthly numbers.
Speaker 3:Yeah . So , uh, so yeah, so I would say between like , um, you know , uh, it's been a while since we've been under 50. Yeah. So , um, and I feel like that's a, that's a good spot. I'd like to con at this point now I wanted to grow, so I continue to like, get staff to get what they need. Like I'll get a little bit more, but like, I wanna be able to like create a bigger pie for everybody, you know?
Speaker 2:And Charlotte's pretty low cost of living. Right? So I had Dan on here yesterday and I think Dan , uh, Perrington. Okay .
Speaker 3:Yeah . Yeah . He's on , like ,
Speaker 2:He's in Portland, which I think you need like a hundred grand a year to Right . Just survive in Portland. Yeah . Uh , what , uh, yeah , what can you live on like a $30,000 a year salary in, in Charlotte?
Speaker 3:I don't think you could live on a $30,000 a year salary. I mean, I , I don't know. I mean, I'm sure it's being done, but I would say probably like that, you know, that , uh, 55 to 60 would be my guess, that you could probably, you know, live and be somewhat frugal and not be spending on the finest things and, you know, take a vacation and do some stuff, you know, but there , there , there , there , there is a lot of kind of big business and commerce there. So there are , um, probably drives the average up, but I would think like between 50 and 60 you could probably , uh, pretty similar to the average us .
Speaker 2:Yeah. And so are you able to provide that for some of the staff? Yeah, yeah,
Speaker 3:Yeah, yeah , yeah. Yeah . For , for some of those, of those five, I'd say, you know, three or four of them would be within that number.
Speaker 2:Okay. Yeah. 'cause that's more than the average affiliate owner reports taking home. So a lot of people think there's always more money in starting an affiliate having Yeah . Uh , mentored hundreds. Right . We both know that that's not always the case. And a lot of times it is , you know , uh, opening up a gym if you're not ready and prepared can , uh, incinerate your net worth very quickly. So <laugh> , um, yeah, the , the , a lot of people , uh, poo p on this idea of working for , uh, a gym owner , but in a lot of instances, you, you can make a lot more money than you would opening your own gym and it's risk free . So Yeah,
Speaker 3:I think I was just hearing about , uh, and maybe even being , I think it was actually Chris's little podcast on, in that meta about explaining four ninths , and he talked about how it works and he is like, sometimes that coach is gonna go and think that they could take it all and they go there and they end up making less than they were making when they were working for, said Jim before they went to open up their own.
Speaker 2:Some of the best coaches , uh, that we hear about in the two brain system are failed affiliate owners. Yeah . And they come back and say, Hey, I just wanna coach. I wanna write the programming. This is, I don't wanna do the business stuff. And , and yeah, there's a , if you have a sound business and you know, you can create these opportunities for people like that. And , um,
Speaker 3:Yeah. So I'll go now of growing is like, I don't have any, oh, it needs to be a million dollars. Like, it's more how everybody else, if I could get 10, 20% more for , for some of those people or bring in another full-time staff that could kind of hit that number that, that they want, whatever that might be, is kind more of the goal. The getting the building, which I maybe we'll get to is just like , uh,
Speaker 2:We're gonna get there. That's gonna be the , that's the purpose of the show.
Speaker 3:That was kind of like my, my my way of long term taking care of myself. At least that's my, my theory. So if the gym grows, I don't, I don't need all of the profit. I could kind of share
Speaker 2:It. And so 12,000 square feet is huge. That sounds like a, that's like a massive gym space for , uh, someone like me who, who operated out of New York. Yeah .
Speaker 3:That's just , it's like a city
Speaker 2:Conceivably large. What, how many members do you train on that space? Like what do , what do you keep membership at?
Speaker 3:Probably like two 20 to two 40 .
Speaker 2:So everybody just has their own gym. Like every
Speaker 3:Single member has a private gym. They have their own barbell. Uh , not everybody has their own rope. Some people would want , uh, their own rogue GHD , but they don't,
Speaker 2:You gotta pay extra for that . Yeah .
Speaker 3:That's a little extra rent. So
Speaker 2:If, if you would do it again, would you , uh, go as large? You know, I , we've been profiling a lot of people who are having a lot of success with much smaller footprints. Like, and , and we've talked to a lot of people from that started in your era that have since downsized. Yeah . And that's been a lot better for their mental health. Yeah. <laugh>. Um , yeah , like if you were redoing it, would you do the exact same thing?
Speaker 3:No. No. And I guess I , if , if I kind of started with the story of like, when we first started, we were in , uh, 3,200 square feet of my doctor's office in the gym, and that was 2000 9, 10, 11. We were about to get kicked out. So we had to find a space quickly, so there wasn't a lot around . So , uh, this was one of the few spots that was clo you know, the hard part about the gym and moving it is like the , the locale. I didn't wanna lose a lot of people. So we moved into this space that was, you know, almost, you know, let's say , uh, three and a half to four times the size, two times the rent. So from a , from an economic standpoint, it was not a wise decision, but I was like, okay, maybe I , I also didn't have many decisions. So we moved in there and when you go from the gym space at that time was a 40 by 40 square foot box, so maybe what you'd be more familiar with. So then you go into this 10,000 square feet and you're just like, tossing stuff everywhere, building walls because it's like, we're never gonna ride outta space.
Speaker 2:I remember I would see the pictures on like, the affiliate owners group where they would rent the space, but they couldn't afford the flooring <laugh> . So there's like a rig and then just like an empty warehouse, like just concrete surrounding it. Yeah.
Speaker 3:So , um, so to answer your question, no, I, I , I would've moved in smaller. It just wasn't an option. And then once we moved in there, the best part about the space is the locations probably like a, you know, from a real estate, probably like a, a , a b building from like a, you know, light industrial, but like on a , a location on like a heavily traveled, you know, big artery in a , in a , in the largest county in the state of North Carolina. So that's kinda why we stayed. And it just, and you know, people just started kind of moving and growing in that area. So that's, and then at that point, downsizing, we certainly could have done it, but there just, there just wasn't a lot of available space that would've been much smaller. And even in this most recent purchase was like, there's nothing smaller. I would've bought smaller a a little bit if , if , if I could have , but the only option to buy was like massive structures.
Speaker 2:And so let, let's get into the, let's get into that because we talked to , uh, quite a few successful gym owners. One of the most proven paths to increasing your net worth is owning your building. Like on the mentorship staff, you can , I can think of Andrew Ard who made I think a little over $5 million on a flip in Covid , uh, for her gym . Peter Brass of , and Jared Beco are another pair that I can think of that I think they were at three. They, they pocketed two to $3 million from their building. Right. And they got a completely new gym built out for them and two years of free rent. Chris Cooper, if you've heard of him, he's a , sounds
Speaker 3:Familiar. Yeah.
Speaker 2:I don't know what his is worth <laugh> . He , he's , he's never sell , you know, it doesn't , it doesn't matter what it , it's because , uh, his hold period is forever. Forever . But it's a very proven model while you're continuing to operate, especially if you're operating over a long-term time horizon like you've been. So tell me a little bit about your thought process and , uh, what you did to kind of get ready to gear up for this building.
Speaker 3:Yeah, I think it started, I've been looking since 2016. There was a time that we bought land and we had to back out because the environmentals of the, and that would've been a ground up construction
Speaker 2:Terrible
Speaker 3:Idea. Yeah. And like when I'm just thinking numbers, this purchase was $1.8 million, 2016 was gonna be like 1.3. And I didn't have like, nearly the funding for myself or the smarts to be able to take that on. So it was probably better off that it was , that it ended up, you know, that way. So the really, the thing that got me pushing in this direction was I've been on the same lease since 2012 at like 3% increases renewals. And in my last one in 2021, my landlord's like, you know, I'd like you to sign a five year lease, but at the end we gotta like, at some point figure out the new rental rates.
Speaker 2:'cause Charlotte's boomed, basically.
Speaker 3:Yeah. Like, I'd be, yeah, like my rent would've been triple.
Speaker 2:Like , what , what , what are you paying or what were you paying going into it?
Speaker 3:I was probably paying like $4,500 on like ,
Speaker 2:For
Speaker 3:13,013 square feet, you know , let's say. And now I'm paying and , and , uh, maybe like 50, maybe like five to 5,500 let's say. You know, give or take. It was a long time ago. And then , uh, now my rent was , uh, 8,300.
Speaker 2:And are you paying that? Like did you form a separate entity? No , no , no ,
Speaker 3:No , no . That , that , that was rent. Oh, so so
Speaker 2:You started at 45? Yeah . It was 83 before you started to
Speaker 3:Buy . Yeah . Okay . Yeah . And then in 2026, it was probably gonna , I know what, I know what other tenants are paying in this building, so it's probably gonna be, I , at the end, I was probably gonna be paying like 14 to $16,000 in rent. So when I'm looking at that 80 at that, at that 8,300 in 2021, I was like, okay, in 2026, I've gotta either get outta here or buy something. And so that's kind of what started just like that number. So I started talking with my landlord and looking at pricing, and we started this process like the worst time to buy from like a interest standpoint, when I first started this process, I was at a 5.7 rate. We ended up buying , uh, SBA loan. SBA hasn't closed yet, but my rate with the bank is seven. So I 1.8, that's like $1,300 more a month. Let's call it $15,000 for the year. You
Speaker 2:Could have done worse though. Oh, yeah,
Speaker 3:Yeah, yeah , yeah , yeah , yeah , yeah . I definitely could have done worse. But either way, watching that tick up. So that was kind of the, the thing that made me realize that I had that five year horizon. So then I was like, okay, the , the , the next two years from 2021 to 2023, I'm just going to focus on the gym and kind of get it to continue to grow. Where when I try to get this loan, I maybe I could've gotten in 2021, but I wanted to make sure, like financially I had enough liquidity to be able to do it. I , I , I really didn't want to have a , a partner in like, the purchase of the real estate for like, my, my , my space, unless it was like gonna be a , you know, a big, big one. If I was able to do it myself, I was gonna try to risk to do it by myself. Um, I wasn't always like that, but like , um, you know, I'm in part of these groups like this , like the t group that's here and some other ones, and watching some of these people do some things with , with money that like scare the crap out . Like , I'm usually pretty conservative. So watching some of these people like do it and not go bankrupt and like live under a bridge was like, okay , uh, <laugh> . Yeah , yeah , yeah. Like, I'm gonna try to do this. So that was kind of the piece was like, I , I need to have a plan by 2026. And it just all kind of fell into place at like, over this 20, 23 year. And then we closed in December, December 15th.
Speaker 2:So, but it's your existing building, right?
Speaker 3:Yes. Well my, it's, it's four units, right? The entire building is 38,000 square feet. Uh, they were condos, so I was trying to buy more than one. The , the entire building was $5.3 million. But since it wasn't gonna be owner occupied, I would've had to have raised 35%. So I like tried, I talked to a couple of people and I had a couple of people in mind that were like, yeah, maybe. Yeah, maybe. Yeah , maybe. And maybe, and that kind of, but I didn't wanna , after talking with my broker and a couple other people, I didn't wanna risk losing out on like the golden goose was my space . I didn't wanna risk out losing like maybe a bigger buyout , but maybe risk out somebody else coming in and buying that whole space or something. So then I tried to buy half the building, and we were pretty close to that with an investor that fell through because of like, say like the seller maybe got a little bit greedy and found another fat , found another buyer for, for the other unit. So then I'm like, all right , I'm starting to run out of time. I just, I just wanna get my unit and be done. So the building was condoed and my unit, I bought that 11,775 square feet. That's 31% of the entire building for that $1.8 million. Now it's four condos for individual businesses in that building.
Speaker 2:But you occupy
Speaker 3:One person . I occupied my Yeah, yeah, yeah, yeah ,
Speaker 2:Yeah . And so what did you end up having to put down
Speaker 3:$180,000?
Speaker 2:What ? Yeah , so , so to buy the whole thing, you had to put down 35%. So that was gonna be like point ,
Speaker 3:Like 1.8 , 1.7 million or something.
Speaker 2:Yeah, that sounds about right. Yeah . And then I'm assuming, was it, were you able to get the half for the smaller SBA rate?
Speaker 3:Yeah, yeah, yeah, yeah , yeah. Yeah. So then , or originally we , I originally we were gonna do a conventional loan and I was gonna get 10%. And then as we started moving along, and I think like just all the news with like banks tightening up lending and stuff like that, my bank who I, a bank that I'm switching with now, first National Bank, I think like a regional bank, they're like, Hey, I , I've , I've got an idea, which kinda made me a little nervous, <laugh> , you know , and maybe we'll go this SBA route. And I was , I was like, you know, I heard it's longer a lot of crap to deal with. And it was really very easy for me. We closed on the SBA in 11 days. What some guy , this guy, so I guess there's a program in the SBA, if you're in north of South Carolina, you send John a message, he'll get it to me since I don't go on Instagram to give you my, I'll
Speaker 2:Send it to Kristen
Speaker 3:And put my stuff . Yeah . And then it'll get to me. I have this guy in , uh, this is a grant program for the SBA and I paid $7,200 and like gave him all my stuff. And in like 10 days,
Speaker 2:<laugh> sounds like these people who like message you and be like, I need personal training. I will Uber my son, I will pay 200% your
Speaker 3:Rate . Yeah . And I , I was introduced to him through the bank, so like, it , it , it seemed legit. And so I paid him $7,200. They did every , they took all my, all my personal financial statements and returns and everything that they needed that the bank already had took it. And they were in a rush. He really wanted to get it closed before the potential shutdown , whatever that date was, a couple, a couple months ago. And once the SBA loan closes, the SBA will reimburse him and then they'll send me back the $7,200. 'cause they'll get paid from the SBA for their, for their work. Back to that . The SBA was the , the , the first national bank was like, Hey, I have, I have an idea, and like, maybe we'll go to the SBA route. This 5 0 4, it's , uh, potentially a lower, lower rate, but you could also add in some closing costs if you want. And it could be locked in for 25 years, which like may or may not be a good idea, but it's definitely the fact that you could always change it is a little bit safer versus the bank. I think I have like a 10 year balloon or something like that.
Speaker 2:So, Jim , owners , if your eyes are glazing over right now, <laugh> , because we're going into all this technical jargon , uh, my advice is pay attention, sharpen the pencil because , uh, we are out here in Dallas with a group of 70 something gym owners. This is the conversation. This is where a lot of people are going. And , uh, I know sometimes if you're early on in your career or if your gym is in a great place, your mind kind of shuts off to some of this stuff. And it , it sounds like Brian went through a little bit of that as well. And then also some risk aversion. But like as you'll learn, you're probably a lot closer to being able to pull something like this off than you think because of these programs. So the SBA really is a cheat code if you want to get your hand on some real estate, especially for your gym.
Speaker 3:Yeah, I think it's, it gets a bad rap , a , a bad rap and like, you know, prob I'm , I'm , I'm sure there's some some reasons, but it certainly gives you a , like you said, A-A-A-A-A , a cheat code of wanting to help, especially owner occupied buildings with, with the rates. And they have like the seven A and the 5 0 4, which you don't know if you get into, you kind of research that stuff. Those are just kind of the two programs. And we ended up going with the 5 0 4, which is like just res just real estate. It's , it's cheaper money. Pretty significant, recently cheaper money for us.
Speaker 2:Yeah. And so I've written about both of these and I have an interview with the head of the largest SBA lender , uh, who, who Brian talked with as well. But again, you don't, as a gym owner, you're not expected to be an expert on these things. What was your first step? Uh , I , I know you talked to some people here Yeah . And watched people do it, so you're kind of following a proven path, but, but if you're a gym owner, you're like, I want to own my building. Yeah . One day. Like what are you advising them to do?
Speaker 3:I think the first step is like, especially if you're like, number one, I think the first step is trying to find an ex existing building. It's like you said, like building from the ground up has, for me way too many unknown costs. And a lot of time that usually takes a lot more time and a lot more money. So like finding a building or finding something would be like even another cheat code just because it's, you can negotiate more and it , and you already know what you already know what you're getting. I think just kind of starting to play around with calculators, even if you just talk to your own bank, even if you don't have, you're , you're not making enough , enough money that you want, just go into the bank just to try to get an idea of like, you know, how much is a million , how much is a $600,000 mortgage? How much is a million dollar mortgage? How much is a $2 million mortgage? And just to try to get some ideas of like, mortgages, taxes, and insurance, just to kind of see where you are, right. And how far away you are from some of these things. Like right now we're doing like the annual planning with all these gyms, right? And it's, it's really good to see like, oh, I'm , I'm not as far away as I thought I was because I only need 36 new members this year to stay. Like three a month is a much easier number to kind of look at than just a bigger picture of dollars or , or, or something else. I think just educating yourself on that. I think if you go to your like, local bank and tell them what your, you know, three year plan is, they'll talk to you because they can look at you as like, more business to loan you the money. So I think it's just getting an idea of like where you are and what you could do. And even just getting an idea of like, this wouldn't, I wouldn't be able to own something like this in some, like if I was in New York City Right. Or in some place , or maybe just getting an idea of like what your locale is to get to , to figure out like size and dollars just to get started. It would be kind of the, the first steps.
Speaker 2:And if your bank isn't an SBA bank, you can find one. Like there is one in your town that is, and because the difference is if you're doing a traditional loan on a space, you probably would've had to put down what, 30, 35%?
Speaker 3:Uh, yes.
Speaker 2:Right. So on a $1.8 million building, that's
Speaker 3:Probably like too much
Speaker 2:<laugh> five 50 you have to have .
Speaker 3:So yeah . So , so for something like that, right, I would've needed, I would've considered strongly considered an investor, but like I've been doing it my whole, the whole time by myself. I don't have a problem with investors, but like, I wanted to try to make it as clean and, and me be able to make the calls as possible.
Speaker 2:If it's a good deal, it's a good deal and you wanna own as much of it as you can, you know , especially if it's your business operating out it . So , right.
Speaker 3:That was the biggest reason. If , if it wasn't my business, I'd be more willing, but the fact it was like my business was gonna be like the one signing the, you know, 20 whatever long lease that the SBA requires. So it's like, I want to be the one
Speaker 2:I could see value in if you were buying the whole space Yes . A hundred and you had somebody with a lot of expertise or maybe could lease out some of the other spaces. And so there's a value add play there. Yeah . Yeah . Like, like I , I see that, but yeah, what you did, you , you wanna , you wanna own that? Yeah.
Speaker 3:At the end of the day, I wasn't willing to risk, like I sat down, I was, was like, man, this would be really great to own this whole thing. And my landlord was willing to sell it, but I just wasn't willing to risk not getting it. And something financially changed in my life that I wouldn't be able to then go back to the bank and , uh, get it.
Speaker 2:And so you went through that process. Uh , what are they, you know, 11 days is insane that , um, that's the fastest I've ever heard it getting done in , uh, which
Speaker 3:Still has to close, right? But like I got , I got my approval in 11 days because he's like, I want to get your approval, be before the shutdown , because if, if any, if they shut down and you already have your approval, you'll be able to close when they ,
Speaker 2:Who shuts down
Speaker 3:The US government, it was like, right , it was like , it was like two or three months ago, like right before they had the , had had like the government shut down . So he is like, I'm a little nervous. I'd like to see if we can get you, if , if , if we could get this closed done then, because if there is a shutdown for a little bit, all those loans are just gonna kind of back up and I don't want you to be able to have to be , be delayed. So I think we close in, like either, I don't really know how it works. Like January 11th or March 11th, whenever they kind of package and sell these loans.
Speaker 2:Okay. And to get ready you had to do like personal tax returns.
Speaker 3:Yeah . It wasn't as business statements . Yeah .
Speaker 2:Bank statements. It
Speaker 3:Wasn't as bad as I, as I had imagined. Right. Like my last three years tax returns, a personal financial statement and then like, you know, every so often, just like your year to date , profit loss and balance sheet . So it's like I have a bookkeeper, so , and that, that keeps up to date . So it was clean . So yeah, so it was clean and easy. And I guess part of the benefit of me being pretty conservative was like, it looked like a business that could take on the debt, whereas like other businesses that like funnel their entire life through the business, which is, I mean, I would do that too, but it's like, you don't look as strong as you would go into the bank. So like, in preparation for this since 2021, I just kind of made sure that I was a little wiser with like, it looked like I was a good lendable steward of money.
Speaker 2:So you're not running your yacht through the business,
Speaker 3:Right? No, no, no. My accountant said definitely not.
Speaker 2:Okay, cool. And the Lambos are a different entity. Yeah , yeah .
Speaker 3:Different , yeah , yeah , yeah , yeah , for sure .
Speaker 2:Got it , got it, got it. And so how, how has your payment changed? You said you were paying about 8,400 in rent. Yeah . Uh , and then you were , you were looking at a $16,000 payment or something if you would've, if the lease would've expired. So , so where are you now?
Speaker 3:So I think , uh, I think my , uh, my mortgage payment will be roughly like , uh, 11,300. And then I have the doctor's office, you know , so I have the doctor's office that doesn't in the , in the , in the , in the building, right? The doctor's office. Like I have it set up to , it breaks even. So that takes off some of the lease, but that's gonna pay, you know , um, 2,500, $3,000. And then the mortgage payments 11,300 cam for like the , like the common area stuff is probably like , uh, 900 , uh, taxes is $10,000 for the year. So like, that was 900 a month . Let's call that like 10,000 for the year for common area, $10,000 for the year for , um, taxes and a little bit more for insurance. I'm gonna probably pay like 15 five .
Speaker 2:So you're just, you're getting up there, you're, you're what you would've been paying anyway, but
Speaker 3:Yeah, yeah, yeah. But now , right , right . So , so, so exact . So I'll probably be like 10% less by , by that time, you know, maybe , uh, 5% less. But now the way that I looked at it was not so much from that cash flow perspective. Like I'll still be paying that, but now, you know, let's say 2,500 of that's gonna be like cash flow to that new entity, that entity that bought it. Right? So if I'm paying 15, but my mortgage plus cam and taxes is 12 five, right? Uh , 13 maybe. So like 2000. So
Speaker 2:You , you bought the , let , let's , uh, take a step back so people understand. So you bought the building and created a different entity that was in your gym. Correct. And now your gym pays the entity that owns the building rent. Correct. And you are the owner of that entity?
Speaker 3:Correct.
Speaker 2:So you pocket a little bit off of
Speaker 3:That. So like $2,000, it's still hard for me to understand, like, to like wrap my head around, but I understand now it's like essentially, you know , I'm taking money from like my right pocket, moving it to my left pocket. It goes into this entity. So to , to kinda make it easy, right? Let's just say the math , let's just say the all in was $12,000 a month and I'm paying 15. That new business that purchased is gonna be plus $3,000 a month. That's still mine. Just like not in the gym. So the other benefit that I liked was that it's also gonna be lowering like my profitable income on this side. So if , if I look at now, I don't need this gym for a couple of years to show that, like it's making a ton of profit because I , I've gotten this loan now, it's gonna lower, I'll be paying less taxes also. And then I have the interest on the building. So I think at , in , in , in , in the end, I'll still be greater in terms of cash flow . It just might flow out a little bit differently from like taxes and stuff.
Speaker 2:Yeah. So what are you saying is the actual building itself, you can depreciate it over its useful life. And even though the, the building isn't depreciating, it's an appreciating asset, over time, the building gets worth more , uh, you can actually deduct that from your taxable income. So a percentage of the purchase price , uh, essentially becomes a tax shield every year.
Speaker 3:Right. Whereas like if I was just paying that $15,000 in rent, where I'm just like, there's no, there's , there's , there's no interest running off, there's no appreciation. I was just losing that. And I , I , I, I didn't wanna be there. I would've been frustrated if, if, if, if I was there, if I had this opportunity to be able to take it. And
Speaker 2:What's your biggest fear? <laugh> ? That's a big chunk of risk.
Speaker 3:Yeah. Yeah, yeah, yeah. My biggest fear is not paying it. I mean, I , I am , I , I some , you know, I didn't tell a lot of people and , uh, I didn't, I mean, I publicly put it on like, like Facebook so people could see like this was a possibility and I got a lot of good feedback, but like members, I didn't like share it in there . Like, Hey guys, guess what? I just, you know, I own this now. Because one, like that's, if they find out, they find out. But I think my, my , my , my biggest fear was like, it still makes me uncomfortable. The people that didn't know it , like, how do you feel now? I was like, there was times when I was talking to the broker and their banker, I was like, I almost hope you called and you were gonna say, Hey Brian , sorry, like, we can't give you the money anymore. And they would be like, ah ,
Speaker 2:<laugh> .
Speaker 3:You know? And then when I sat down at the lawyer's table, he is like, how do you feel to close? Like how do you feel? It's like, like it's a little bit surreal. It's risk, but like, I feel like I take pretty calculated risks and I'm pretty smart with my money. I feel like worst case scenario, I , I would sell it. Like if hit the fan, like what's the worst that could happen? I'd sell it and I'd start renting from who ? Whoever bought it from me, you know? But I really looked at it as like, I'm pretty terrible at looking at like visions three years, 10 years down the line. But I looked at it like, I'm 45 when I'm 55, what can that be like? And I love the gym. I love being there, the people that I work with, the people that come in there. So I'm not like looking for it to be something else. I wanted to get something down that I felt comfortable with that in 10 years it's gonna be, I'll look back and be like, I probably should have tried to have done it sooner.
Speaker 2:And you probably are gonna kick yourself for not buying the whole thing.
Speaker 3:Yeah, yeah, yeah, yeah . A hundred percent. But like, you know, but he said like, the biggest I could sleep well now with what I'm dealing with based on all I do in my math in my head is like, if we went to zero, how long can I pay for this thing? And if it was $5.3 million and it was like, if it went to zero, I'd be like, I'm not sleeping for a while .
Speaker 2:Not very long. <laugh> .
Speaker 3:Yeah . So like now I wanted to make a purchase that I could sleep with and feel comfortable with and really be able to pay attention to, like growing the gym and the business within it. But yeah, like I am my biggest, I don't know if weaknesses is the word, but like me getting comfortable is like the biggest thing that I'm kind of scared of. Like be being , being complacent. So this was probably the first time in the last, since 2020 that like, I'm not, like, since 2020, like the business was, has been doing really, really well. And , uh, this was the next thing that I kind of needed to be like, you gotta figure out again. Kinda like I felt in 2020 when things shut down. So I , I feel like I I'll, I do well under stress and pressure, so I feel like this was a good test, if you may, for like me to be able to like, get back a , a little bit uncomfortableness in my life of like paying, you know, pay attention.
Speaker 2:And the business has been going for 15 years now. So I'd imagine there , the chance of it going to zero is probably a pretty, pretty small.
Speaker 3:Yeah. But, you know, I'd like to always think, you know, I po I shared a , a meme that somebody posted yesterday is like, you know, you're not entrepreneuring hard enough if like, what every month you don't feel like burning it all down or going to work at McDonald's or something . So it's like, that's true. And maybe like the logical part of my brain would be like, that's true, but I still worry about it not to , again, not to the point that I'm like wake , you know, w waking up at night, but uh, when , when , and I'm getting better at, at all those little problems that used to derail the gym owner. You know, it was like one member left or this happened or that happened, but it's still a concern. And if anybody on here knows how to, how to stop that from creeping in message, John, he'll message Kristen and then I'll get the message to , uh,
Speaker 2:You just make a lot more money. That's right .
Speaker 3:Right , right , right , right , right, right, right, right . Yeah , so exactly. So I feel like that's like giving my , the same way I said like, how many months do I have if, if I can't pay this thing? It's like, if I could just increase that timeframe of like, how many months do I have till I can't pay that thing? And it goes from zero to six to 12 to 24 to a decade, then I think you start sleeping a little bit easier.
Speaker 2:So for those unfamiliar with Brian, his wrist tolerance , uh, he , his box spring is actually a hundred dollars bills . So I think he's got like $300,000 cash that he, that he rests his mattress on. So
Speaker 3:Not anymore because I
Speaker 2:Have to plan . Now I have one side of it, his wife sleeps on cash and he's on the ground. He wants to build it back up. So I'm sure people are approaching you saying, Hey, how do I do this? Um, how, and some of your mentees are probably talking to you about it. When is someone ready?
Speaker 3:I think you could be ready sooner than you think if you're willing to, like, you have to figure out the price first, right? Because I wasn't gonna be ready to take on this debt back then. But I have some, some people in some of these small area , in , in some of these more affordable areas, or they, they've got a three or 4,000 square foot space that they wanna buy . And, you know, if I had to do it all over again, the reason why I wanted to buy the the building was to like lower my risk and have other people help pay the mortgage in , in my case, I have the doctor's office to help offset some. But I would say like, if, if you wanna start looking at this, take your space and maybe look for, you know, an extra 1500 to $3,000 , um, 3000 square feet to have other units that you could rent and be the landlord to like take off some of that. There's SBA things that you kind of wanna check on if you wanna go that route. But I think like that's one thing to look at. And then I think just look at how much money you are , you are bringing in, how much profit you have, and then base it on like those numbers, I wouldn't base it on like what you've, what you think you might do and just go to the bank. Like it doesn't hurt to go to the bank and say like, if I'm looking at getting a loan for commercial bank, like, can I get one? And they'll say like, yeah, we'll approve you for $200,000. Okay, well I need eight. Or, and or they're like, yeah, we would approve you and then you just gotta work backwards from, from , from the math. For some people you could pay the same, you know, maybe minus taxes and insurance. You're just gonna have to do the math and know your numbers. That's where I think I do like some of my best work is like, just the math's not gonna lie to me. I'm not gonna let like my emotions get the best of me or get me too excited. So I think go , the first step is just like going to the bank and asking them some questions and looking around at like real estate in your area and trying to figure it out. And then if the bank says no, ask them for some help or somebody at the SBA or something that could , like, you know, what, what are you looking for that I'd become more lendable. And for some people it's like you're personal, right? Like if you've got a six, if you've got like under a six 50 credit score, it doesn't matter how much money your bank's making , uh, how much money your business is making. So I think like those are things that if you , if you know now and you give yourself three years to start to fix it, that's a better option than say, ma you know, my business is crushing it. And you go in there and you're just like, not very good with your money or, or you have like a bankruptcy or something on the back that you're, that , that, you know, so something bad going on there. I think just kind of starting to ask those questions and, and , and then that's where you'll start to realize like, how far away am I really, I definitely think that people are closer to it than they think. It's just taking on that added risk of, of, of , of , of , of , of that debt. And versus like, if something goes wrong, I can't just like end my debt, give my landlord the finger and say, come after me for nothing. You
Speaker 2:Know ? Right. And you hear 1.8 million, like we have people in Two Brain who they started with like a $200,000 building and they just kept, kept trading up. They just, you know, they , they sold their car to get the down payment to buy their their space, right ? And so, like Brian said, if you're in New York, LA forget about it, right ? Like you , you need to have some cash. But for anybody who's, who's not in a super expensive market, high cost of living area , uh, it's a lot more doable and accessible that you think , uh, than you think with these SBA programs. Um ,
Speaker 3:I think the one thing that you said on a podcast in the past, it might've been the one with Angelo, which , um, is I think good here. You said something like small business boutique gym owners have like one of the most powerful Rolodexes in the , in their city, right? And so when it comes to that, like there's a lot of people in your gym that have money that they need to put somewhere that you are unaware of. They come across you, you might think it's, you know, their , their their average Joe , but they've got a ton of money they , they need to figure out something to do. So I wouldn't be afraid. And uh , Jeff Smith told me this in 2016. He's like, just ask people. So when, originally I was gonna buy that land in 2016, I had two members that we agreed to terms for each loaning me $125,000 to come up with 20%. And , but I just, I just put out there and I would put some caveats to it. Like, you'll get everybody saying, oh, I'd love to help you with the real estate. I've got like $7,500. You're like , you know , so I would give it like a minimum number if you're gonna ask some people. But there's certainly people if like the down payment or some of the funding or, or , or ask some questions of some people in your gym, using that Rolodex of people in your gym could be super valuable and like a much more trustworthy , uh, group of people than just like the internet.
Speaker 2:It's always the quiet guy in the 6:00 AM class. Yeah . He's he's the rich one. Right,
Speaker 3:Right, right . <laugh> .
Speaker 2:So if you got , if you got a quiet guy who shows up consistently to your 6:00 AM class driving
Speaker 3:A Corolla.
Speaker 2:Yeah. Like a beat up 10-year-old RAV4 , that's your guy. He's sitting on a , he's got the box spring of cash. And then one of the things Brian brought up that is a good point is if you go to one of these lenders and you just give them your information, they'll tell, if you're financeable they'll tell you, Hey, you can bite off a $2 million building based off of this. And if you say, I need a 3 million, what do you need to see? And they'll , they'll literally tell you. So , um, that's a great starting point. If you're not there yet, you can go and like Google, SBA loan calculator and you can figure out how much cash flow you need to spit off to afford a certain size mortgage. And , um, there's,
Speaker 3:There was one thing that I was unaware of, you know, and I think the mortgage is one thing, but like, paying attention to your taxes is another, in some of these places, I mean, I wasn't not unaware of taxes, but when I was first, when you, when I first went in y years ago, you just kind of type into that calculating like, all right , pretty close. And then you're like, oh, insurance and taxes. Insurance
Speaker 2:Taxes ,
Speaker 3:Scam . Yeah . And , and , and , and , you know, taxes on , taxes on , on any commercial building is gonna be substantial. Insurance is gonna be more substantial than you used to on a home. And then , um, some banks also require you to pay, you know, like my , my bank's requirement was , uh, 1.25% higher than my mortgage into the, into the new company. So for example, if , uh, for every dollar that , that , that my mortgage was worth, I need to put in a , a dollar 25 to create , uh, a , a a a buffer. I would , um, imagine. So
Speaker 2:That's a 15,000 Yeah . Versus the 2,500
Speaker 3:Talking . Exactly . So like my Right , right , right , right , right, right. Exactly. So , um, and that buffer is still to me, but I'm guessing that it gives the bank, you know, a , it it shows them that I'm able to kind of build up a buffer of liquidity if something goes wrong. So like, those are things like, just because you could, just, because the mortgage shows 5,000, the bank might require you to be paying 6,500 in there. So that, that was kind of a new one that it's still your money, but for me it's still kind of hard to understand that, like it's just moving to a different account.
Speaker 2:Right. And another another point that you brought up that I think it's worth reiterating is if you're going through the SBA there , there's a couple other advantages. One is you can get up to a 25 year term on the loan. So most commercial , uh, mortgages will be for like a , the term will be fixed for like five years, and then you have to refinance and refinance and refinance. With the SBA, you can lock it down for a very long period of time. The , uh, second thing worth noting is that , uh, you can buy more space than you need. So if you, you only, let's say Brian only needed 10,000 square feet, he could , uh, buy, he could have bought the nextdoor unit if that unit was 9,900 square feet. Uh, because your area only needs to occupy 51%. And so we've seen a lot of cases where, you know, you, you buy a whole thing and then some, someone wants to use the entire thing and they make offers that generate more cash flow than just operating the gym. So, you know , uh, a lot of people who we've talked to , uh, successfully, I , I , I don't think we've talked to anybody who's, who's gone bankrupt doing this and said, the , the most common thing we hear is, I , I , yeah , you may be the
Speaker 3:First
Speaker 2:<laugh> ,
Speaker 3:I'll be back in a couple years ,
Speaker 2:The 2026 <laugh> Tinker podcast. Um , yeah. So one of the most common things we hear is that I wish I would've bought more.
Speaker 3:Yeah, yeah, for sure.
Speaker 2:And so , um,
Speaker 3:And that , and that , you know , in, in, in, in 20 19, 20 18 when I was looking like I could have that building was 3.5 when I first asked,
Speaker 2:Should
Speaker 3:Coulda would've. Yeah, yeah , yeah , yeah , yeah .
Speaker 2:$2 million . That , that's a , that's a much higher box spring.
Speaker 3:And that's, and that's the reason why now it's like, I , you know what ? I just like , I hate seeing that money leave, but knowing that it's kind of inequity somewhere else. And if everything continues a as as we expect, it seemed like, like the right time. I just didn't wanna fi five more years from now, not have done it. So yeah, I think buying , buying sooner and buying more is , um, that that will come and I could just kinda do it again, but at least I kind , I wanted to get this first piece under my belt . Yeah . You know ,
Speaker 2:So, Brian, we're running outta time. We gotta go downstairs and soak in some knowledge. I would ask where should people find you? But I know the answer . So , uh,
Speaker 3:Crusher.com 2000, I think nine 10 kicking
Speaker 2:On Google . All you need to do is go to gym owners united.com, join the group, make some controversial hot take <laugh> , and uh, Brian will be there. He'll be there to , uh, correct you with a slight hint of sarcasm. So , uh, yeah, just say something that Brian doesn't agree with in any affiliate owner group. And , and , uh, he's right there.
Speaker 3:Yeah. I'm not allowed out to be on Instagram or Twitter per my work orders. Yeah . So
Speaker 2:<laugh> the bank, it's too much of a liability. It's on your insurance policy. Thanks for taking the time to do this , uh, separating from the group for a little bit. Uh , I appreciate it. I think it's gonna help gym owners, man . Thank
Speaker 3:You. Thanks
Speaker 1:For listening to Run a Profitable Gym. Please subscribe for more episodes. Now. Here's Chris Cooper with a final message.
Speaker 4:Hey, it's two Brain founder Chris Cooper. With a quick note , we created the Gym Owners United Facebook group to help you run a profitable gym. Thousands of gym owners, just like you have already joined in the group, we share sound advice about the business of fitness. Every day I answer questions, I run free webinars, and I give away all kinds of great resources to help you grow your gym. I'd love to have you in that group. It's Gym Owners United on Facebook, or go to gym owners united.com to join. Do it today.