Today we celebrate our 200th episode of the Commercial Real Estate Investing From A-Z podcast, we have this podcast going for over 5 years and I am very grateful to have you as a listener, it has also been an honor to get to know so many of you personally. We have been ranking as a the top 1% podcast globally for a while, thanks to you and our wonderful guests.
As you know by now, 99% of our guests are here through invite only, I make sure to pick people that I think are very knowledgeable in their field of expertise and that they’re not trying to sell anything to you. I really hope that the lessons shared here either made you a lot of money or helped you avoid a massive cost or mistake. Of course, we all make mistakes, we all learn new things daily, even veterans in the industry still learn things every day. It’s impossible to know or predict every single aspect of a deal, even for veterans.
In this episode, I will share some of my most recent learnings and observations, some are in mindset, some are related to real estate investing.
Real Estate Investing
Every single deal has multiple problems you will have to overcome, a friend of mine that has been building multi family projects in California for several years told me that for each problem you must "block and tackle”, and I have never heard anyone say that there was an “easy” deal, especially in development. In fact, they say “if there was ever an easy deal, they all happened before I started my career, we were only left with the difficult ones”.
For my first development, which I’ve been working on for one year, it has truly been a rollercoaster, one week we have decent news, another month we have no news, and then another week we have terrible news. It’s easy to want to give up, but if we want to build anything, we can’t give up. I have to come up with solutions, or alternatives. I have to talk to a lot of people in the industry to see if they can come up with another suggestion that I may not know exists. Today’s interest rates is a prime example, we face different challenges than when the rates were low. When rates were low, it was hard to find any opportunity that worked, and now when the rates are high, we need to figure out a way to be creative on the lending side (such as seller financing), or if you are in development, you must be creative around keeping costs down.
As far as my beloved car washes, I had a lot of negative energy towards them because they were not doing well. Last year I was reading a book that told me to put all my problems in a “God box” and stop worrying about them. I wrote “car wash” in a piece of paper and put it in my God box in December, and decided to close them in January, and stop thinking about them. By April, one of the car washes was sold. Also, another item on my God box got fulfilled by April, both of these happened very unexpectedly. In this lesson I not only learned to stop worrying about the small ticket items, but I also learned that our time is way more valuable being put in high return items vs low return items. High and low returns can be calculated in different ways, so let me clarify: sometimes cash on cash is NOT what you should be thinking about, but the actual dollar amount that you are making for the time you spent on that deal. For example, I can have a 50% cash on cash return on a $50,000 investment, which is $25,000 net per year, or I can spend the same amount of time on a larger deal that will return me, say $1M in one year, but the cash on cash on that $1M is 15% for example. Should I focus 500 hours on an item that will make me 25k, or on an item that will make me $1M?
Another thing I learned is that buying a portfolio of properties for a discount is a fantastic way to invest. You not only get a discount on them, but you can turn around and sell a couple of them individually for a higher price and keep the other properties. As far as the car washes, I got 3 of them, and a self storage facility, and I got a discount on everything because I bought a portfolio, plus I negotiated a price reduction. And today, 3.5 years later, with the sale of that 1 car wash, I could have paid the entire mortgage for the 3 car washes and would have had money left.
I have also been working on partnerships with people that know their field very well but don’t have cash to invest, for example employees working at commercial real estate firms that are very good at what they do and haven’t thought about doing their own thing, or incredibly driven individuals. Say, you have 5 partners that are very capable, each working on a deal, yes your slice of the pie is smaller, but you now have 5 properties that you’re working on with very capable people. Regarding partnerships, you must do your due diligence on them, for me, it works to get to know them over time, see how they act and react to certain hurdles, see their integrity, and then I will partner up with them after I know them for a while.
Mindset
You may already know this first one and that is “Readers are leaders” indeed, I try observe what common traits highly successful people have, a lot of them did read a lot in their childhood, some of them started reading in their adult years, but what they have in common is that they do read a lot. The reason that this makes sense is because we can read one book and, no matter how amazing it was, we forget most of what we read. However, when we have “reading” as a regular thing in our lives, a lot of the messages of these books are very similar, they’re just written in different ways, and it’s through repetition that this information begins to stay with you for the long run.
Talking about books, if $ is part of your goals, read books written by billionaires, there are quite a few out there. When I read about The Irvine Company, it was such an incredible way to learn about some of the hurdles they went through and how they overcame them. Another billionaire book I recently read was Alan Sugar, What You See is What You Get, I learned so much with that book about tenacity, speed, and that everyone at the top has faced many challenges. Autobiographies are very easy to get through via audio books because they are stories. And btw, if you subscribe to Spotify, they are now giving 15 hours of free audio books per month.
Another trait that I have observed from some very successful people is that they experienced different extremes in their lives, wether they experienced poverty, or lived in a country that had a lot of problems, or even if they were born with a silver spoon but their parents made sure that in the summer time, they’d spend half of the time working at a farm doing hard labor, and the other half with the time they’d spend at one of their parent’s friends companies doing an internship. The common trait was that they had seen the good life and the bad life and that made them very driven. They are also very curious people and good listeners.
Earlier this year I realized I was becoming very negative with all that I was learning about what is happening to our country, I was not sure if this is how it has always been and we now just have more access to this information, or was it indeed getting worse. I have my personal opinions on that, but I decided to delete social media from my phone and I can attest that I have been a lot happier ever since. I still check one social media once in a while on my laptop, but none of the others and life has been wonderful.
Another goal I had this year was to not spend time on things that would cost $250 or less, and this I learned from the book The Almanack of Naval Ravikant: A Guide to Wealth and Happiness and from The 4 Hour Work Week by Tim Ferris, here’s another example of how when you make reading a part of your life, these messages show up many times. For this part, it could be anything such as a return of $50, or finding a cheaper hotel, or spending time with customer service for small items.