Deals Under $250k, Best Property for Beginners, Finding NNN Tenants (Office Hours)
In today's episode of Office Hours we dive into opportunities for lower budget commercial real estate investing, such as properties under $250k, as well as the importance of networking to find deals, partners, and funding options even with less than ideal personal credit.
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Key Takeaways:
Tyler discussed looking at commercial properties under $250k, such as a 2500 sqft warehouse near Houston for under $250k that could provide a 10% cap rate. This shows opportunities exist for lower budget investors.
He emphasized the importance of networking to find deals and partners, such as through events like CCC.
When asked about first-time commercial investments, Tyler recommended flex space, self storage, or other trending property types that may be easier to find investors for.
He provided advice on funding options even with poor personal credit, such as partnering with heavier investors or syndicating deals.
Tyler discussed opportunities in converting non-traditional properties like car washes into alternative uses like restaurants or micro-units.
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.
Episode Transcript:
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This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls. Learn how to confidently buy your first commercial property today at www dot c r e launch pro.com.
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Welcome back to the commercial real estate investor podcast live in Nashville, Tennessee from the cowboy group Studios back for another episode of office hours. If you ever have any questions about how to get started in commercial real estate, or specific strategies, you've got a property that you're looking at and you want some advice on it. That is what this episode is for. I go live every tuesday at 8:30am Central Standard Time to answer whatever questions you got. Consider it free mentorship, free coaching. Come join me live hear me rant a little bit about my week and what I've been up to and listen to the questions that everybody else has this this week. I mean, yesterday, we actually had a phenomenal group coaching call, I'm catching up on some of the group coaching calls that I had to miss because of the weather in January and also partially my sabbatical. So we've been doing a coaching call every Monday, typically they're every other Monday. And it was a fun one. You know, when I get bored, I like to go on to Craxi or, you know, some other online listing service and look at weird properties. You know, what, what, what can we turn these, you know, interesting buildings into? What can we find for you know, under a certain price per square foot, or what can I find that is under a certain total price all in. And yesterday, we were looking at properties that were under $250,000 commercial properties that you can go and buy for under 250 grand. I hear people say all the time, like commercial real estate's too expensive, there's nothing out there, that, you know, I could get started on my own, you know, I don't have $300,000 for a downpayment. And you don't need all that, you know, you might have to put a little bit more work into a cheaper property. But the ones that we were looking at yesterday, some of them were basically moving ready for a tenant. I mean, we were looking at some, there was a what was it was like 2500 square foot warehouse just outside of Houston for under 250,000. And it looked like it was basically moving ready for a tenant and I was running the numbers on it. All you have to get $10 a square foot triple net to get a 10% cap rate on a deal like that, which is phenomenal. So those opportunities are out there. It's always fun to look at them. You know, I like to just kind of peruse through CoreXY almost as if you know, I'm on Zillow, right, let's just go look at weird interesting things and think about what we can do with them. It's a good exercise to put yourself through. Because it kind of gets you in the right mindset of thinking creatively with some of these deals. And we started saying morning from Houston, Texas. Good morning, thanks for joining. It's funny, that's actually mostly where we were looking yesterday was kind of the Houston Galveston area. So that was a lot of fun. This past weekend traveled with the predators out to St. Louis for the St. Louis Blues game. That was, that's always an awesome experience. It's It's our second time doing the flyaway game with the predators. I got a couple of friends that have some season tickets that are closer to the eyes. So they get invited on those trips. And we are fortunate enough to join them so much fun, especially when the predators actually go out and win. You know, Thursday night was a really rough game against Dallas at home. But the boys came back and we won five to two in St. Louis, such a cool experience. I got to go up to the top of the Gateway Arch. We took the little tram up there and looked out over, you know, St. Louis, and you know, Illinois, it's right there on the border. And it's kind of wild. I mean, you're over 600 feet in the air. And it's it's wild to look at how they constructed that. I think back then it cost. Gosh, I want to say it was like under $20 million to build. And today to do the same thing would be well over 200 or $300 million to build that. That structure. So really neat getting out there to go and see that. Last week was a week of travel for me the I actually went to Atlanta on Thursday, got back from Atlanta Friday morning, and then pretty much went home packed. Got back on the plane to go to St. Louis. But Thursday in Atlanta was a lot of fun. We went down for the CCC event to have my brokers and so Phil and Nick joined me at the event as well as Brent my videographer went down there did some networking. It was a huge event. I think there were over 600 people in the room. And we were able to interview a couple of heavy hitters while we were out there, one of them being Bob Knakal. If you do not know who Bob Knakal is, he's about as close to a celebrity as you will get in the commercial real estate world. He is a $20 billion plus broker. Since 1984, he has sold over $22 billion of commercial real estate. That is with a B, that is a lot of commercial real estate. He's have multiple billion dollar years, some over $2 billion. So phenomenal experience, just getting to sit down with him, pick his brain, ask him some fun and interesting questions. And can't wait for those videos to come out. We are doing a so if y'all don't know Samer and I are the co founders of the CCC national chapter, which is contractors closers and connections. It is the number one commercial real estate networking event out there. Hands down. The attendees are typically the who's who of commercial real estate within that market. So if you want to get out and rub elbows with some of the top dogs in commercial real estate, highly recommend checking out those events. They have chapters all over the United States. And like I said, we're kicking off the one here in Nashville, April 25, from five to 9pm. Let me pull this up on the screen. If you're joining me live on YouTube. The website is Nashville dot contractors closers. connections.com. I've also dropped a link into the video description. So you can go here and see it's it's April 25, from five to 9pm. At the fontanel mansion, it's going to be a lot of fun. So go to that website. If you're interested in joining us for that event. I think there's a just submission form. Or send us an email and say, Yeah, request an invitation, there's a big orange button that says requesting invitation, come join us, it's going to be a whole lot of fun. kicking that off in Nashville can't wait. Because, you know, we haven't really had any big commercial real estate networking events. And I tell you all the time, right, the best way to find a mentor to find a partner to find deals is by getting out there and networking. And there's a lot of deals that get done at these events. And it was fun. I mean, Phil and Nick, were working the floor while we were in Atlanta. And it sounds like they might have gotten a couple of opportunities out of it. So really excited to see where that goes. We've got some comments dropping in. Let's go check them out. Anthony is saying appreciate the vids Tyler. Absolutely. Glad to hear that. super informative and helpful. What would you what do you recommend would be the most ideal commercial properties for first time investors with not a lot of financial backing? So I think, you know, if you don't have a lot of financial backing, of course, you could kind of jump into that, you know, let's just go see what's out there under $250,000. Can I like I was talking about the top of the show. But if you don't have a lot of financial backing, but you can get investors or you can get partners, then I would look into probably flex space, self storage, whatever is trending in the world of commercial real estate today. You know, we had Craxi on the podcast last week. And they said that car washes are the number one most searched commercial real estate investment on their platform today. The reason that I would take that approach is that that means that there are people out there that are interested in finding deals. So that fit that type, right. So if you go and find a really good opportunity, chances are good if you know the right people, you could probably pull some money together to get started there. I love flexpays it's relatively easy, it's relatively inexpensive. I've got a ton of videos on this channel about how to get started in commercial real estate with little to no money. In fact, that's what I did for my first couple of deals. I didn't have any cash when I was getting started. It's not like I come from money or even made that much money in brokerage. The year that I started buying office buildings, it was 2019 I had just started my brokerage in 2018. So I was really just trying to save money up and keep my business alive. Until I found out that you can syndicate deals, right you can raise capital from other people, I was able to go find some really good deals to where I since I had my brokerage license, I was able to find two investors to put all the cash up. I rolled my commission in as partial equity in the deal. And then I took some more equity just for finding the deal putting it together and running it. And the investors were totally fine with that because they wouldn't have that opportunity without me. So there's plenty of ways for you to get started. Highly recommend diving into those videos are super helpful. I will be honest, it's not super easy to get started with that money. It takes a lot of work and you have to have the knowledge and the skills to pull it together. But it's not a possible, it is very doable. I have done it many times.
Love is saying I found a property that was 1.3 million and went down to $800,000. Recently, that is a huge price drop. Wow, it would probably need about $100,000 in rehab, I have never purchased a commercial building and my personal financial state is not great. Is it possible to invest in something like this? Yeah, well, I think it absolutely is. I mean, look, today, you're gonna have to put down 25 to 30% of the total purchase price in the construction, right. So if you're able to get it for 800, and you have $100,000 of rehab, your total purchase price is $900,000. Assuming 30% of that, you're gonna have to come up with around 270 $300,000. Right, give or take to get it closed. You could go five, three investors to put $100,000 Each into it. Or you could go find 10 investors, but $30,000 Each and two, it just depends on kind of how you want to approach it. But absolutely, it's possible. I mean, my the first commercial building that I ever bought, I did a development, but the first, like true investment, it was already existing, was a $980,000 building. It needed $230,000 in rehab, and I didn't have any money. So I went out and raised capital from investors through a syndication put together about I think it was 400 430,400 40,000 Somewhere around there. Dollars and rolled my commission in on that one as well. Right. I mean, that's that's kind of the benefit of having your brokerage license and being a brokerage is that you kind of get 3% cash back, right? As you're as you're acquiring your own deals. So highly recommend taking that approach. You don't necessarily have to get your commercial real estate license. In order to do that, though it did help me when I was getting started. Biggest thing is just going out there networking, and everybody that you come across, make sure that they know you are out there looking for commercial real estate deals. And if they want the tax benefits, they want the cash flow. They want the appreciation of investing in these deals, that they need to be on your list called Conrad northwest Arkansas chapter kicks off in March. Looking forward to it. Awesome, Kyle. Yeah, he's talking about the CCC chapter of Northwest Arkansas. If you're in that area, go look him up. I think you could just go to their main website contractors closers. connections.com. And they actually they have a tab for all of the different chapters. So definitely go check that out. Like I said, I left the link in the description below for Nashville, but you can just go to that one and then click on other chapters, and it'll show you kind of where to where to where to get started. Graham is saying How about car washes to turn into small kitchens. Winky face? Yeah, that is a that is definitely a possibility you could do something called the wash. In these car washes. I do have a couple of videos on how we did that. So yeah, go out there, get creative with it. I mean, that's the thing. Like you really just got to get creative with how you're looking at these deals. There's nothing special about what I've been able to accomplish. Other than the fact that I can look at deals a little bit differently than everybody else does. Most people will look at a deal. They'll see a carwash, they try to make it work as a carwash. If it doesn't work as a carwash, they move on. But if you're able to look at a carwash and think of all the different things that it can become, I mean, let's talk about it, the bays are basically a little over 300 square feet, it could become small flex warehousing, it could become office space, they could become Airbnbs, they could become retail boutiques, that could become five micro restaurants in a bar, there's so many different ways for you to actually convert it don't look at a building for what it is today, look at the bones. And think about what else could fit within those bones. Of course, you're gonna have to spend money. I mean, building out the wash wasn't cheap, we basically built out six restaurants in 2400 square feet. So on a price per square foot basis, it was very expensive. But we were able to justify the expense on that because we're able to charge a rental rate that makes sense. It's very high on a price per square foot basis, our rent is, but on a monthly basis for a restaurant group. It's very affordable. So highly recommend taking a look at those approaches. We've got. I've actually coached some other people through how to do that concept. I've got a buddy Chris out of Florida, who had a very similar deal. He converted it into micro units. And he has done very well with that. So I'm a big fan of micro units. Y'all know that I've been talking about that on the show for quite a bit. So highly recommend doing anything you can to just look at smaller units. You know, I think that if you think about that 2400 square foot property, the wash, right 2400 square feet, most people would look at that and go that's one tenants, or maybe two tenants at 1200 square feet each. But by going smaller, sure, maybe you have to deal with a little bit more work, right. And that's what a lot of bigger landlords just don't want to deal with. Too many tenants too much work for that small property. But it diversifies your risk, it diversifies your income. And you have people that are, you know, if one tenant moves out, you're not losing 50 to 100% of your rental income. If I have one tenant that moves out, we're not losing that much. And because it's so small, it's very easy to replace a new tenant into that space, because it's not cost prohibitive. So I love micro units, we've done it multiple times multiple different deals. And I think that it's I think it's the future, I think I look, I was having this, this discussion with my girlfriend yesterday, the costs are not going to be coming down, nothing's going to be coming back down, there's there's no way that you know, lumber is going to go back to what it was back in 2000. It just doesn't happen that way. I mean, one because you've got inflation. But two, you're gonna think once these businesses start seeing that they can sell their products for more money, they're not just going to start selling them for less. So you've got to you know, so building commercial real estate today is going to be more expensive than it was 10 years ago, or even five years ago. And that's just part of where we're headed. But if you want to make it affordable for business owners make it easier on yourself as an investor. To find tenants and get spaces leased micro units is the way to go. Again, they're paying a higher price per square foot for the space. But all in monthly rates are lower. So it makes it and that's typically what businesses are actually looking at. The Game Master is saying I appreciate the videos you put out about commercial leasing videos from the lessee perspective. Absolutely. Game Master Glad you're liking those. We haven't done any and quite some time, we're gonna have to get back to that we've been doing a whole bunch on the investor perspective. But there are plenty of topics that we could cover from being a tenant, and you know how to how to approach things. So yeah, Gamester if you have any questions on you know, commercial leasing from from the tenants perspective, let me know happy to dive into those. Grandmas say my wife will be a doctor in the coming years, and we were debating the cost benefit of purchasing an outpatient center space rather than leasing. Do you have any insight into the health care side of commercial real estate? Whoo, I love that question. Sorry, had a drink some water, I got a son at the house. And I've been using it every morning, Steam Sauna is amazing. But man do I have to drink a ton of water throughout the day or I start losing my voice. So Okay, a couple of things that we can dive into here. You know, with her freshly becoming a doctor. You want to make sure whenever you're starting a business, typically, I recommend not buying commercial real estate for the first five years of your business because you don't know how fast or slow you're gonna grow, how many employees or zero employees you'll need, how much parking you need, where your clientele is going to be based out of things like that tend to matter when you're first getting started. But after five years, you kind of have a good idea of that, right? You know which zip codes your patients are coming from, you know, whether your parking is good or not your access, all that kind of stuff. And you've got enough to think about when you're first getting started on your business to not worry about the commercial real estate side of things. That being said, Graham, if you are interested in willing to run the commercial real estate side of things while your wife runs the business, then I think it could be an excellent investment opportunity for both of you for multiple reasons. So being a doctor, banks will love her. They absolutely love medical practitioners, it doesn't matter what kind you are a dentist, a, you know, a family practitioner, everything in between, they will throw money at you, especially if you're owner occupying the deal, right. So that's 51% or more, you could probably go for an SBA loan if you really wanted to. But a lot of banks have loan programs where doctors don't even have to put any money down to buy their buildings. Kind of crazy.
But it makes sense if you think about it, because doctors make a pretty decent amount of money. They and they tend to not leave, right if they occupy a space, they're gonna be there for a while because their patients are there. So, you know, I think the health care side of commercial real estate is phenomenal. You can typically get better well in terms especially if you're owner occupying banks can be very aggressive on them just because they are more stable than other types of commercial real estate. And the great thing is, you know, starting today, you could basically be building your retirement right so she can get in there. Run the practice for 1015 20 yours, you could sign another 10 year lease with the practice, she could sell off the practice to somebody else. And now you're just going to collect passive income from owning the real estate. With an established medical practice, that's probably not going to go anywhere, anytime soon, at least for the next 10 years. And after that, they're probably just going to renew. Or maybe they'll want to buy the building from you. So you have multiple exit options. So I like that approach. Paulo is saying what financing options come to mind when building a flex space warehouse land is taken care of outside of Austin, do you think it's worth pulling equity to start the permitting process and design? So I mean, if you already own the land, I mean, typically what I recommend, especially today, if you own the land outright, it should be fairly easy for you to go and get a construction loan to develop the space, especially if you've already gotten all your plans pulled together, you have decent financials, you shouldn't have any issues, development gets tricky, because a lot of banks don't want to finance the takedown of land. And what most investors will try and do is what's called an acquisition and development loan, and D loan, which means you're buying the land, and you're gonna develop all wrapped into the same loan. So the bank is basically having to put up a portion of the money for you to buy a non income producing asset, when it's just inherently risky. So, you know, we even had to do this on our hotel, I couldn't get a bank to finance the the acquisition and development of the hotel. So we ended up having to close on it in cash, and then go back to the bank and get a construction loan. And it was infinitely easier. You know, because you'll collateralize the land for the loan. And banks like that they know on the construction side of things, you're only going to be able to draw down from the construction loan as you are completing certain aspects of the build out, which means that they don't really have that much financial risk, right. If they have to come in and foreclose or take the property back, you've improved it. So you know, it makes it more valuable for them, their loan to value on the entire property may be a little bit lower, but they have zero risk on the land side. So that's that's typically how I like to structure the development side of things, it's so much easier to just pay cash for the land, and consider that your downpayment and then get a construction loan makes your life so much easier. So pulling out equity to start the permitting process and design, I probably wouldn't. If you don't already have a loan on it, then I would find a way to come up with the cash that way, again, you can go to the bank and say, hey, the land is free and clear. Give us a construction loan. And let's go down that path. Now. You could also go to a bank and get a line of credit, or something along those lines, I would just have those discussions with your winder and say, Look, we on this layout ride, we want to get a construction loan, but you know, I need some some funding for the initial, you know, pre development process. Some banks may be willing to do that most probably won't. But some well, and you know, it's worth at least asking those questions to see if they will, they'll fund that part of the process. But usually what we'll do is we pay for those expenses out of pocket. And then we'll go to a bank get a construction loan, we include those expenses in our budget. So we can basically get those reimbursed through the construction loan, the day that we close the construction one. So hope that helps power. James is saying triple and double net. I'm very interested in going down this path. The one concern is my personal credit. It's not the best in any way. I know your feelings here. What options do I have in terms of funding options? Okay, let's talk about credit. So, for the longest time, I had terrible credit. And it's not because I didn't pay my loans on time or pay credit cards off. It's because I never took out a loan for anything. And I never had a credit card, which basically means you don't have any credit. I paid cash for everything, thinking that that was this. That's the smart thing to do. I'm just gonna pay cash for stuff. Well, then I started building credit and getting commercial real estate loans. Every time that we buy a property I get hit on my credit for buying that property. So of course, you know, I look at my credit score and it's like you are well below average on the you know, the number of inquiries you've had on your credit report. It's not like I'm going out and getting a bunch of credit cards. It's literally every time I buy a property, it's unbelievably frustrating. So I will say I didn't really have any credit when I first started buying commercial real estate. They don't necessarily look at that as much as they do in residential and residential. That means a lot. And commercial, they certainly factor it in. But it's not everything, they're going to look at your debt service coverage ratio, they're going to look at the commercial property and the value of the property, they're going to look at your global cash flow, right, yours and your partners. So if you don't think that you would qualify from that perspective, then I would recommend going out and getting a partner, the first few deals that I did, and even deals to this day, I bring in a bigger, heavier hitter, to be my partner on every deal to help me qualify for everything because, you know, one, I want their expertise at the table, right? I am not going to sit here and pretend like I know everything. I've been in commercial real estate for 10 years, over 10 years. And I feel like I have a pretty good grasp on things. But in this industry, things are always changing, something new is always coming about, there's always something else that you can learn. And, you know, I like to do different kinds of investments, right? So we're looking at doing a self storage deal. Well, I haven't done a self storage deal. And I'm not gonna go to a bank and say you need to give me a money money to just do a self storage deal, because they're gonna look at that and go, yeah, you've got a successful track record and office retail, industrial, but you haven't done self storage. So even on that one, I'm going to be bringing in a partner that has successfully done over 1000 self storage units. One, again, it brings her expertise to the table. Two, it makes the bank and our investors feel more comfortable. But three, it means that I've got a second set of eyes that really knows how this industry works, that you might come up with other ideas, or might have other strategies that I would not have thought of, that makes my life so much easier. So I always look at it as I'd rather have a slice of a watermelon than all of a grape. It's it's way easier to find good partners and scale than it is to try and do everything on your own. So I would kind of approach it from from that perspective. James saying I'm digging the guitar. Yeah, I appreciate it. It's a it's a Gibson, J 200. I love that guitar. I've had it. I think since I was in college, I traded an electric guitar for it couldn't believe that the guy who wanted to trade it was like a, I can't remember. I think it was an Epiphone electric, but I traded for that. So, you know, I think I got the better end of the trade on that one. It's a beautiful sounding guitar. I love it so much. Eddie Brock, any ideas to generate income with our third floor, it is set up for Office currently, but has no heat or AC, have thought of storage units. Our first floor is retail. Second is Office, we have an elevator. So Eddie, for self storage up there, you'd really have to have a freight elevator. Because it's, I mean, it maybe you do have a freight elevator. But I would recommend if you don't have a freight elevator, probably not going to storage. Because one, it's probably not going to be big enough for people to get things up there that they really want to, if it's not a freight elevator, people are going to beat it up. I mean, you think about moving things in and how heavy they are. And people are gonna be filling the elevator up. It's just a pain. But I would look at, you know, going through and I mean, it shouldn't be all that expensive to add AC. I mean, you can get a good unit for eight or $12,000. Just depending on how big the space is. Now, I don't know how big the floor is. But you could easily convert it into Office depending on the zoning, and kind of like what Rich's saying you go with multifamily. But it just, you know, again, it depends on how much money you have to build out all that fun stuff. So if you've got a big enough elevator, I love self storage, it's by far the cheapest thing that you could do. You could also look at making it an event space. If you want to keep it open. Again, you're going to need some AC. But there are a lot of opportunities there. Depending on kind of which route you want to take. Let's see pelo saying thank you so much very helpful in determining path forward. I have been hesitant pull it equity versus using equity for the construction one. Thanks again. Absolutely power. Yeah, glad that glad that helped.
Yeah, we're just saying if zoning would allow you This is for Eddie, have you considered multifamily? It will require substantial planning and CAPEX but would bring good income. And I don't like that too. If you've got retail office and multifamily that is a true mixed use property. You should feel pretty comfortable with the with the diversity of your income there. Vernon is saying I have a one acre wad that is at an intersection. How do you approach a business for a triple net lease deal? Good question. So sounds like you're gonna go for either a build to suit or a ground lease. Depending on which direction that you want to take. There are a couple of different routes for you to go. One is to reach out to the brands that you want to lease to directly. That can be a lot of work. It's often very difficult to Find the amount of tenants at scale. But you can also go to an event like ICSC and Las Vegas, which is coming up this spring, I think it's in May. It's the International Council of shopping centers, it's basically the biggest convinced commercial real estate convention in the world. Absolutely massive. I'm going to try and get the team out there this year. And you can walk around with with some flyers on your lawn and hand them out to all the brands that you want to see, collect cards, meet them there, you know, hopefully knock it out of the park, the easiest thing to do is to just list it with a commercial real estate broker that specializes in that they're going to have all of the contacts, they're going to have all of the marketing channels to be able to get this out there and distribute it to all the people that need it. The best thing about it is you're not going to pay them a fee until they have successfully closed a transaction. So always recommend working with commercial real estate brokers, you just got to make sure that you interview them and approach it the right way. That is all that we have today. All the time that we have for today. On this episode of office hours.
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Thank you all for joining me. We'll be live again next Tuesday at 8:30am Central Standard Time, and I will see y'all then. This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls. Learn how to confidently buy your first commercial property today at www dot c r e launch pro.com
This episode of Office Hours covers strategies for commercial real estate investing, brokerage, and career growth as Tyler Cauble takes live questions. He also discusses upcoming projects like a brokerage mastermind and hiring an investor relations lead.