When to Quit Your W2 for Real Estate | Office Hours
In this episode of the Commercial Real Estate Investor Podcast, we’re tackling one of the biggest questions I get: When should you quit your W2 to go full-time in real estate?
It’s a conversation packed with lessons from the front lines—because let’s face it, syndication sounds sexy… until you realize those fees don’t cover the mortgage, much less your rent. I’ll walk you through how I approached this decision, why I’m only now closing my first solo deal after a decade in CRE, and what most gurus won’t tell you about raising capital and replacing your paycheck.
Get commercial real estate coaching, courses, and community to jumpstart your investment journey over at CRE Central: www.crecentral.com
Key Takeaways:
Advice on leaving W2 job for real estate syndication:
Don't leave your W2 job too quickly
Start small and gradually build your portfolio
Fees from initial deals likely won't cover living expenses
Have a backup income source while growing your real estate business
Challenges of starting a syndication:
Raising capital is difficult
Initial deals may not generate significant income
Need to be prepared for 2-3 years of limited earnings
Requires careful deal selection and strategic planning
Personal updates:
Closing first solo commercial real estate deal
Writing third book on commercial real estate
Growing mastermind groups to 140-160 members
Upcoming events and speaking engagements
Investment strategy recommendations:
Partner on deals when possible
Start with smaller projects
Build relationships in the industry
Be patient and strategic about growth
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:
Tyler Cauble 0:00
Steve, this episode of the commercial real estate investor podcast is brought to you by my cre accelerator mastermind, where you'll get access to my step by step investment blueprint, essentially a library of resources on how to invest in commercial real estate. You'll get connected to a supportive community of other commercial real estate investors that are doing projects just like you. You'll get personalized coaching and feedback from me every step of the way. Go to www.crecentral.com to learn more. Welcome back to the commercial real estate investor podcast. We are live from the cobble group Studios here in Nashville, Tennessee, and back at it after a couple week hiatus for office hours where I am going live, and answering your questions about commercial real estate. I've been gone. I had a mastermind out in Vancouver. I'll tell you guys a little bit about that. And then I was asked to come and speak at a residential real estate firm last Tuesday about commercial real estate, and so I had to to miss unfortunately, but we will have a new schedule going forward, so I will not be doing this every Tuesday. I will update you guys on that as well. Today, we're going to be diving into some a topic that I think that you all will find interesting. Leaving your w2 to go and start your own syndication. Should you leave your w2 to jump all in on real estate investing. Does it make any sense? I'll give you my thoughts on that as well, but before we dive into your questions, I'll give you guys kind of an update. Over the past couple of weeks, what's been going on? What is going to be happening in the world of the commercial real estate investor podcast? We're still going to be doing this. The podcast isn't going anywhere, but I am changing things up a little bit. I texted the guys from the brokers roundtable and the investors roundtable last week, thanking them for all of the time that they have put into the podcast with me over the past couple of years. But we were no longer going to be doing that series. I have a lot of my play. I've got a lot going on, and I needed to pull back, and so we're no longer going to be doing that every week, and we're no longer going to be doing the office hours every week, so we're only going to be doing office hours once a month, moving forward, so second Tuesday of the month, jump in. Ask your questions. Happy to answer that. But as you guys will see in my update today, we've just got a ton going on, and I'm not gonna be able to live stream every single week anymore. But last week, I was in Vancouver for a YouTube mastermind. Had a great time. Flew into Vancouver, drove out to Whistler. It's the second time I've been out to Whistler. Beautiful. Love it out there. Had a great time. Really interesting. Getting to hear from some other people that are, you know, growing their businesses through YouTube, how they're going about doing it. It's just a really interesting platform. I mean, you know, it's been kind of wild that, you know, when I first went on this journey, YouTube was not, I mean, you know, I didn't have any hopes or aspirations other than, Hey, it's COVID. I don't have anything else to do. Let's start a channel and see where it goes. So it's kind of fun connecting with other people that are that have been doing that for a little while, and hearing some best practices, as if I don't have anything else to do. I'm writing a third book. You know, you guys may have been, may know, if you've been following me for a little bit, that we're in the middle of writing our second book, and it's, for the most part, done. It's in editing. It's an infographic book on commercial real estate investing. So it's heavily visualized. It's a bunch of visualizations on the commercial real estate investing process. There's nothing else like it out there. I've just got to get it finalized and edited so that I can get it out to you guys, which I'm very excited about. And so we've started writing our second book. I'm three chapters in, and I've got my editing review with my editor today, which I'm pretty excited about. So hopefully those three chapters are pretty close to being done, and we can move on to the next three, which is pretty cool. It's going to be a short book. It's basically, I think it'll be about 12 chapters, a manifesto on why I invest in commercial real estate, and why I think you should invest in commercial real estate. So it's, it's not necessarily going to be principles of commercial real estate investing or how to invest in commercial real estate. It's going to be more so my thoughts and opinions on, on why commercial real estate investing. So for, you know, it's basically one of those books that I'll be giving out at conferences, right to the people that are maybe on the fence, right? Maybe you're a residential real estate investor. Maybe you're a multifamily investor. And this is my little pocketbook, my little manifesto on, you know, 12 reasons why I choose commercial real estate over multifamily or residential I've got a closing this Thursday, which I'm pretty excited about. This will actually be the first deal that I have ever done solo, which may surprise some of you, every single deal that I have ever bought. For the past 10 years, 10 years, I've been buying commercial real estate every single. Deal I've had a partner in, and you'll know that I'm a big advocate for that. I think that having a partner in almost every single commercial real estate deal that you ever do is a great move to make. I also think that not having partners in some deals that you do is a great move to make as well. Not having partners is allows you 100% autonomy. I don't have to, I don't have to, I didn't have to raise capital for this one. It'll be an owner occupied deal, and I'm very excited for it. You know, I'm working with the architects and the engineers right now about pulling this one together, and it would be great. But the problem is, you can't do every deal like that, and if you tried to do every single deal like that. We were actually talking about this in the mastermind call last night, because a lot of people approach commercial real estate in the very beginning of I want to try and do deals all by myself, because I don't want to deal with investors, or I don't want to deal with partners, and I totally understand that that sentiment. The problem is, if you start off in commercial real estate that way, you have a finite amount of capital, and you won't be able to grow and scale quickly enough to the cash flow or the equity goals that many of you tell me that you have right when I'm onboarding people into the mastermind, the goal that I most often hear the first goal right, is $10,000 a month in passive income. Well, there's a couple of ways for you to get to $10,000 a month in passive income, right? Either you have $2 million in cash and you go and buy a Starbucks at a 5% cap rate, right? There you go. That'll basically get you there. That'll get you close, right? But not everybody has $2 million in cash, right? And so you start working your way back, okay, well, if you have to start taking on debt, taking on debt, what does that look like? Okay, well, now you need $4 million in cash, or 5 million, whatever that looks like, right? And it starts to change. And now you gotta raise capital. And now you gotta really start changing up the structure and how things look. And it just it's way easier if you start finding partners and raising capital, because then you're not limited to the amount of cash that you specifically have on hand. So all that is to say, the goal at the end of the day is to eventually own the portfolio by yourself, because then you don't have to worry about partners. You don't have to worry about calling somebody else to make a decision. But it's a means to an end, right? And it's a great means to an end. I've got some great partners. I love my investors. And, you know, we've, we've had some great deals together. But it's, it's really exciting to say, you know, after 10 years, I'm buying my first project by myself. So I'll let you guys know how the closing goes. The building is run down. It is a total POS but I'm very excited for it. It's going to be a total turnaround. We're going to document every single aspect of it. And you know, well, it's a heavy value add, as you guys have come to expect from the types of deals that I do. So it's going to be a very fun one. The Self Storage deals that I've got going on right now are absolutely crushing it. Really excited to have those in the portfolio. The hotel we are aiming we were supposed to deliver it in June, just not going to happen. I mean, furniture was supposed to be here in mid May. They like, I think, put it on the boats in mid May. So I'm expecting us to have the hotel open by August, which is really disappointing, because we've got a pool, you know, we really wanted to be able to take advantage of the summer for the hotel, and so missing that and then going into winter in Nashville kind of is what it is. But, you know, we'll have to ride it out and it'll still be great. I mean, the good thing is, we underwrote it conservatively, we're going into it pretty well. And the thing is, I mean, it's turning out beautifully, like we're really, really excited about it, so excited there. The hotel will be done in a couple of months, and then we're under contract right now on a big old flex space out in Chattanooga that we're releasing to our investors this week. So excited to finally put that one out into the world and get that out there so you guys can tell I've got a lot going on right now, which is one of the reasons why I've got to pull back now. The other thing is the Siri accelerator mastermind. I mean, obviously the brokers mastermind is going on its own too. We're at, you know, 18 members there. The accelerator mastermind has hit 140 members. And 40 members. And you know, I was having a board meeting. I've got my own board for my company
Tyler Cauble 9:30
this past Friday, and I had a mentor meeting before that. My mentor is also my executive coach. And, you know, we so I spent basically seven hours on Friday, just diving into that specifically and working on my business, and kind of came out of that with the whole, you know, hey, it's, it's time to kind of dial it back and start to really focus on what all you've built here, right? Because you've got basically 160 people. People now that have have bought into what you're doing, and it's time to start delivering even more for them, which I'm really excited about. So I spent the weekend which, you know, I was just fired up about it. So I spent the weekend putting together, you know, how can I deliver even more value for everybody that's already in the mastermind, or both masterminds, which is, which is really cool. And so part of that is moving office hours to monthly, which will be cool. I think, you know, it'll be good anyway, because now we'll be able to promote, you know, hey, next week, I'm going live for office hours. Put it on your calendar, show up. We'll have 50 people jump in with questions instead of 20 to 30, right? And it'll be a more interesting discussion once a month. I think that'll be really cool. We've got our next in person event for the accelerator mastermind here at the end of next week. So we're in the throes of planning that, or just not planning it. I mean, it's already planned, polishing the final details, which I'm really excited about. So it's going to be a good time. Kicking it off Friday night. We're going to spend all day Saturday, diving into I think Logan Freeman and I are teaching this, and I think we've got eight lessons that were or eight modules that we'll be teaching everybody. We've got 50 or 60 people registered for it that are in the masterminds. And it's going to be a day full of workshopping, which is going to be a lot of fun, all on deal analysis and underwriting. And then Sunday, I've got a surprise for everybody, so it'll be, it'll be a lot of fun. And then for for the mastermind event in October, we've decided last night on our call that we're going to talk all about raising capital and syndication. That's one of the questions that I've been getting here recently is, hey, how do I make sure that I structure a syndication properly? How do I make sure that I'm staying legally compliant. How do I make sure that, you know, we don't cross the line or say something that we're not supposed to because that is something that you have to keep in mind as you're going through that right? Syndications are SEC regulated offerings, and you have to make sure that you're staying compliant and being very careful as you're going through them. So excited to be doing that. And June is just a hell of a month for me. The day after that, as soon as I basically, as soon as I'm done with the event here in Nashville, I'm flying out to Boston and spending four days at Harvard Business School. I got chosen for the young American leadership program to go spend basically a week up there studying with. I think there's 15 or 20 cities that send eight or 10 representatives from their cities to go and study the school, to at the university to learn more about, you know, these basically case studies of what other cities have done to positively impact the city. So it's around, you know, transit and affordable housing and entrepreneurship and all sorts of policy, which is really cool. And so I'm thrilled about that. It's really exciting. So I've got a binder that's like this thick, full of case studies that I have to review between now and then. And it's like perfect on top of everything else that I have going on, I've got to review that. It's such a really cool it's a really cool honor to be able to do that. So excited to get that going. So thrilled. Cool. All right, let's, let's get to a couple of else questions. Luigi saying, Hello, I have a strip mall in Roxboro, North Carolina, but it's taking three years to fill up. Change three brokers. Luigi, sounds like you got a problem with that strip center. Either it's in a terrible location, the pricing is off, or there's just something physically wrong with it. I mean, if, if you've changed three brokers, and you still can't get it filled up, there's something specifically wrong with that property Curtis is saying, is wholesaling and commercial real estate the same as doing houses? Or is it more difficult? Curtis? It is far more difficult, infinitely more difficult. It's a totally different type of business. I'm gonna ask that all the time, can can you wholesale commercial real estate? Sure, absolutely you can. It's totally possible. The problem is due diligence and commercial real estate in the buying process is very different, and so I typically recommend against it, unless you really, really know what you're doing. Because as a wholesaler in commercial real estate, you're probably, I really encourage you to actually start the due diligence process, which means you're probably going to have to pull the trigger on on a survey and a phase one and start spending money on the due diligence to make sure that you can actually get this deal done. Because anybody coming in. Is gonna have to pull the trigger on doing all of that anyway, so you're gonna wanna make sure that you know that's not a problem. All right, let's get to this whole leaving your w2 so this is from Reddit, leaving w2 acquisitions role to start my own syndication. Any advice? So this redditor stated, I've been working on the buy side in New York for several years for both institutional and family office investors. Almost everyone I've met in the industry who didn't come from money like myself has built a fulfilling, successful career, eventually branched out around my age and experience level. They started syndicating deals, which later led to raising funds and creating incredible lives for themselves. One of my biggest fears about starting my own group is in the is the two to three plus years of little to no income until we start exiting deals. I've built up some savings and acquisitions. Asset management fees will help cover some of the bills, but much of that will likely need to be reinvested into the deals for the GP contribution. My first few deals will likely be funded by friends, family and high net worth individuals I know, while finding capital in New York shouldn't be an issue. Sourcing good value deals in this environment is challenging for those who have taken a similar leap. What advice would you give for getting this venture off the ground in the first couple of years, what worked for you and what unexpected challenges did you face? I really like this. This is a, this is really a scenario that I see a lot of you all facing, right, which is, you know, maybe, maybe you don't have necessarily the real estate experience, but it's basically a, you know, Hey, I am trying to go into real estate full time. I'm trying to get into this, you know, raising capital thing. How do I justify spending a lot of my time in real estate? But, you know, not necessarily making all of the money, right, or not necessarily making a living from the real estate? Do I leave my w2 do I, you know, go all in on the real estate? So let's see what this what the answers are. First response is, as a syndicator, unless you were doing massive deals, the fees you charge will not be enough to live off of I would recommend staying at your current job until you have enough secondary cash flow to sustain your life. I don't recommend desperation investing. So that's that's typically my advice. We had this conversation. So look, just so you all know, typically when we bring a Reddit thread up, it's because it's a discussion that we had in the in the mastermind the night before. And so I go and find a Reddit thread that's basically along the same lines. My advice is, generally, do not leave your w2 for as long as you don't have to, because it makes it infinitely easier for you to qualify for lending. But also, it is actually a lot harder to live off of cash flow, on in commercial real estate, in real estate in general. It's not just a commercial thing. This is also a residential thing. Way harder to live off the cash flow than some people make it out to sea, right? So let's take a million dollar deal. For example. You know, if you're gonna go syndicate a million dollar deal, you, as the GP, will take 20% of that million dollar deal, right? So it's 20% equity, but it's probably not. You're probably not gonna get 20% of the cash flow right off the bat, because you're gonna have right off the bat, because you're gonna have a preferred return for your investors. So that means that you're probably not going to get any cash flow for the first year, maybe two years, until you've increased to the cash flow, you'll get a 1% acquisition fee, maybe 2% so 10 to 20 grand, right off the bat. But that's probably not enough for you to live off of, unless you live in like, the middle of nowhere Nebraska, right now, you'll collect an asset management fee. Maybe that's, you know, one to 2% as well. And, you know, some people structure that in different ways. Maybe it's based off of the, maybe
Tyler Cauble 18:57
it's based on the off the equity that's raised. Or maybe it's based off of the, you know, gross income collected. You know, there's different ways to structure that. Either way, that's really going to cover costs. That's not going to cover a lot of what your living expenses are. So again, you know, a million dollar deal, you could see what they're talking about, like, unless you're doing a massive deal, it's not going to be big. Now, if you're going to go out and do a $10 million deal, and you get a 1% fee, $100,000 okay, great. That's probably enough for you to live off of for one year. You got to go do a $10 million deal every single year. And that's pretty tough. I mean, raising enough capital to do a $10 million deal, if you can do that every year, call me. Let's talk. I want to partner with you. This next response is, you think fundraising for a brand new fund in New York City is going to be easy? I mean, that was, yeah, I thought that was a pretty bold statement. They're saying syndicating from friends, family and a few high net worth individuals I know, not raising for a fund deal by deal basis. I mean, look at. Still tough. I don't care who you are. I don't care how well people know you. Sometimes, the people that know you like even better, like friends and family, are often the toughest to raise from. You know, the people that know like what you were like back in middle school, you know, when you were getting in trouble on weekends. They're the people that just, you know, they don't trust you for, you know, 20 years of history, and sometimes, honestly, you don't want to take their money anyway, just because you don't want the pressure of showing up to Thanksgiving dinner and your uncle asking you how their money's doing. And for that reason, actually, I won't take money from family, because I don't want that. Oh, here's a long answer. Let's see how this one turns out. Okay, I have your exact background, and let me suggest you wait another year or two, as you are already aware, any of your peers that you are comparing yourself to, who started at around 2000 till pre COVID, caught a wave of growth never seen before, and pretty much anything you purchased made money. And if you did make a mistake, appreciation cured it. Let's face it, many people lucked out. This is true. If you were doing real estate pre 2021 you could have completely screwed everything up and looked like a genius. I mean, it was the you know, what's that saying? Like, you really see who's swimming naked when the tides go out or whatever. Like, that was 2022 right? Or 2023 like the people that had no clue what they were doing, those were all the people that started losing their tail in 22 and 23 because they were just betting and buying everything. They were gambling. Really. They weren't investing. They were gambling. The debt markets are different today. Some lenders want recourse loan to values are more conservative and rates are up. Unfortunately, cap rates are too low and even compressing in some categories. Yeah, it just honestly doesn't make any sense. Admittedly, leading in certain sectors is up. I don't know what that means. However, let's look at retail, where bankruptcies are still going strong and the replacement tenants for these spaces are generally lower rent payers, and many times, rents are rolling down. And whether office or retail, the cost to install a replacement tenant or dividing space is out of control. For example, $100 plus per square foot for retail. That can be true. It depends. It may completely depends, like I have also seen. And to be fair, they're talking about New York City here, but like in the south, right? It's very easy to take. You know, first second generation retail space, and convert it into flex, or, you know, industrial, depending on where you're located, because basically, at the end of the day, those are just distribution warehouses. It's really all it is. Oh, let's see here. Grady is saying, Hey, Tyler, I'm interning for CBRE currently, specifically on the research team. How can I stand out? Grady, I don't even know necessarily that it's about standing out. What I would say is build relationships with brokers, because there's not a lot that you can do necessarily to stand out on the research team. You know what? I mean, like you're at CBRE, there's a lot of, like, standout people there. Real estate is, is a lot about relationships. And so what I would do is just, you know, just build good relationships, spend some time there and ask some of those brokers, like, how you can help them. That's what I would do. You know, look, I've got an intern that's working for me now, and he's awesome. Colin, shout out if you're, if you're watching this right now, because you've been great. He's usually tuning in and, you know, he's constantly asking everybody on the team how he can help. Which, which I really appreciate, because I've had interns in the past that just sit there quietly and try to not do anything right? And the fact that he's asking everybody what he can do, like really, actually stands out to everybody. So just ask, ask people what you can do. That stands out to me. Renaissance is saying I need to consolidate debt from high interest lines. A broker recommended a debt restructuring where an attorney comes in and sort of challenges debtors, et cetera. Are you familiar and would you recommend? I mean, Renaissance, yeah, it's basically threatening bankruptcy is kind of what that is. I'm not super familiar with all of that. I have had a guy that I went some money to go through bankruptcy before, and he kind of went through a debt restructuring. I mean, basically what bankruptcy is, it's just a debt restructuring. They just get to get out of some of the debt. And it gets some of it gets to get paid off. I mean, if you can just refinance out of those high interest lines, but if you can. Can't I mean, you know, I think your your bankruptcy attorney would probably be the best person to talk to. Unfortunately, I don't really know a whole lot about that world. CBA is saying I think the failure rate of starting a business jumping off the cliff is lower than people think, growing it on the side and slowly moving it to full time seems way more practical and strategic, in my opinion. Yeah, absolutely. CBA, I completely agree. Start off small, start off slowly, and just let it grow kind of on its own. All right, getting back to this article, they're saying there's a lack of both stabilized and value add product. Sellers are restructuring deals with their existing lenders. They cannot sell due to tax reasons, and the 1031 market is halfway in the grave. There are few owners that are desperate right now. I don't know that. I necessarily agree with that. I don't think that the 1031 market is halfway in the grave. I wish that they would have explained a little bit more what they mean by that, because I've got buddies that specialize in 1031 exchanges, and they're crushing it right now. We just did a 1031 exchange, and we're doing great. So I don't know necessarily what that means. I'm also trying to keep it in context of New York City. So I'm wondering if there's something in New York with 1030 ones that's struggling. Finally, the buyer pool is changing, where the private buyers cannot compete in the institutional product arena, and there's a ton of money chasing value added deals, and that is pushing up pricing. So I'm not saying you should not go out on your own, but you should line up your first deal as you're working and be prepared to make a solid paycheck in your two to three year window. Personally, I worked for both a large family office and a public company with billions of acquisitions under my belt. I should have went out on my own, but did not take the leap when I should have, and then just got too busy. I think you should take the leap, but it's all about timing. It's always about timing. I agree. I think that that's a pretty interesting take. I mean, look, if you're considering going all in on commercial real estate, the biggest thing that you can do is, I think, dip your toe in the water. The great thing about these types of deals is that they're relatively inherently passive. Now, not every commercial real estate deal right off the bat is going to be passive. There is going to be some work involved. However you can justify hiring a property management company. You could probably justify hiring an asset manager depending or a third party asset manager, meaning you don't have to have somebody full time working on this deal. So for your first 1234, maybe even five projects, you don't necessarily need to be working on this full time, and you could justify having a team doing it for you so you can keep your w2 you can keep your paycheck coming in while you're growing this portfolio, until it gets to a point where you can justify being the full time asset manager or the full time property manager and collecting those fees. I mean, for me, it was very easy, right off the bat, to always go in 100% because I have a commercial real estate brokerage team. So we were doing the leasing, and we were doing the acquisitions and the dispositions. I had a property management team, so we were doing the property management right, and I've got a development team, so we were doing the project management right. So it was, it was very easy for us to go all in right off the bat, even when we were doing smaller deals. I mean, my first deal was $575,000 right? And that's typically where I recommend people start like, start off small. It doesn't have to be big. You don't have to go $10 million on your first commercial deal. Just start off small and slowly ease your way in. So there you have it. Guys for this month's office hours. Join me the second Tuesday of every month, we'll go live. I'll answer your questions about commercial real estate. That's what this is for. I'll see you guys in the next one. This
Tyler Cauble 28:55
episode of the commercial real estate investor podcast is brought to you by my cre accelerator mastermind, where you'll get access to my step by step investment blueprint, essentially a library of resources on how to invest in commercial real estate. You'll get connected to a supportive community of other commercial real estate investors that are doing projects just like you. You'll get personalized coaching and feedback from me every step of the way. Go to www.crecentral.com to learn more you.
Alec McElhinny is an industrial owner, operator, and developer based in Texas. He was one of the earliest members of my CRE Accelerator mastermind and today, we're diving into why he decided that developing flex space from the ground up was the right move for him.