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In this episode we’ll learn how you can manage multiple companies at the same time, how to hire and inspire the best people, what types of asset classes and what markets are interesting to invest in today’s market, and we will also learn what are opportunities zones and how you can leverage opportunities zones in your investments. We’re interviewing Greg Dickerson, a serial entrepreneur, real estate developer, coach and mentor. Over the last 20 years he has bought, developed and sold over $200 million in real estate. He built and renovated hundreds of custom homes and commercial buildings, and started 12 different companies from the ground up.

Can you share a little bit more about your background?
I started in 1997, I joined the navy out of high school in 1985, and in 1989 I got out of the navy. I worked in restaurants and had a construction company on the side. The two things I had done in my entire life prior to starting my entrepreneurial journey was restaurants and construction. I learned all about business, management and leadership, how to recruit, hire, train, manage, motivate, and lead people.

In 1997, I moved to the East Coast, I bought a house and was trying to get an addition built on the house, but I couldn’t get anybody to call me back and show up to give me a quote. So I started talking to my neighbors and they said that everybody’s so busy, they can’t even return your phone call. So I said “Where there’s a problem, there’s an opportunity”, and started a construction company.

It was a little remodeling company and it was just me, my truck, and tools and I would do whatever I could do. In my first year I did $250,000 in sales by myself. By my seventh year, I was one of the largest builder/developer in the area at $30 million in revenue per year. I started 12 other companies along the way during that seven year period, all related to the construction industry, except for a couple of restaurants: plumbing, landscaping, electrical, hurricane shutter, painting. I like to help people, to coach and mentor them. That’s how I did so many things at the same time, by leading, motivating and delegating to others, teaching them how to be entrepreneurial, and helping them build the businesses.

People that have been in the military are one of the best partners you could ever get, similar to people that have founded their own startups or companies because they have great work ethics. 
Work ethic, diligence, discipline, and a “stick-to-it-ness” that a lot of people don’t have these days.

How do you make sure that you’re successful when you’re doing everything from fundraising to investing in all kinds of asset classes? You have done multifamily, retail, medical center, offices, etc, how do you make everything move forward? 
First and foremost, it’s education. I didn’t go to college but I am very highly self-educated, I’ve always developed myself personally and professionally. I’ve never owned one song, only audio books and courses. Business and personal professional development are important in order to accomplish things. You need to be a visionary, a leader. What is it that you’re trying to accomplish? Create the vision, communicate that vision in a way that people understand it and can see it even though it’s not there. Put together the right team, inspire the results out of that team, delegate, motivate, and lead.

How do you make sure that people are inspired, and how do you pick the best people to work for you? 
You find winners and champions and coach them to success. Usually the best people are the ones that approached me on a business level, or my own intuition. When I’m talking to somebody, or working with somebody, I know whether they’re good people or not, whether they’re going to actually be able to accomplish something or not. When I’m interviewing somebody, I let them do all the talking. One mistake that a lot of people make in the interview process is that they spend all their time pitching their company or their idea. Lastly, I give them an audition, we have an agreement up front that this may or may not be the right fit for you. We may not be the right company, you may not be the right person, so we’re going to try this.

I then tell them how the job gets done, I measure performance and hold people accountable. I provide a clear direction and exactly what’s expected. That’s our job as leaders, to serve the individuals in the organizations and give them everything they needed: tools, training, systems and support to be successful – and more importantly, a clear direction and exactly what’s expected.

When you measure their performance, compare it to the goal that was set and have an accountability session: maybe they achieved it or not. And then you look back at the leader, and make sure that they gave them everything that they need to be successful, did they know exactly what was expected, and when? When you measure that, you either got the result that you’re looking for or you didn’t. And if you did everything as a leader that you were supposed to do and you didn’t get the result, then you had the wrong person, or you had the right person in the wrong position. Not everybody is right for every job.

Is now a good time to invest in commercial real estate? If yes, what are your favorite markets? 
It’s always a good time to invest in commercial real estate, but it’s not always a great time to invest in every asset class. And every market is specific. Everybody says that real estate is local, I call it hyperlocal, real estate is local down to the block of the neighborhood within the city and the subdivision you’re investing in. You could say that multifamily is a great, safe place all across the country, which it is, it’s the safest bet from a real estate investment standpoint, especially at the low A, high B level. That’s an asset class that’s probably never going to go away, people need housing, so when you start going down in the B, C, D classes it can get a little risky in certain areas, but they can be slam dunks in other areas. In the commercial side, you’ve got multifamily, office, retail, industrial, land, hospitality, and there are different classes within all those assets.

Look at what the interest rates are doing, and what the institutional investors are doing – they’re going for primary markets and going after class A assets in this economy. A lot of them are just buying bonds and they’re paying for low cap rates, 3% cap rates in some areas. Sovereign wealth funds are coming into this country and buying properties in New York, San Francisco, San Diego, Seattle, Charlotte, DC. They’re going to the major markets and buying these trophy class A assets because they feel like that’s a safe long term bet. And then for the rest of us we have to look at a different angle because we’re not going to be able to compete on that level, with those buyers.

We have to look at the secondary and tertiary markets, within those secondary and tertiary markets, I really like certain kinds of offices, such as destination offices where you have medical, dental, a professional office space where tenants need an office and can’t work out of their house. When you think about investing in office, you have to think about the environment that we’re in now, and how everything is outsourced, everybody’s working remotely, you want to invest in types of office spaces that cannot be used out of the home.

Similarly in retail – that landscape is really changing right now, and you’ve to be very careful where your retail investment is. I love suburban strip centers where you’ve Starbucks, Chipotle, a hair salon, a nail salon, those are core services that, in any economic cycle, people are always going to need them and they’re always going to go to them, up to a certain level. There will never be a time when Starbucks has zero customers, people are going to go out for a cup of coffee every once in a while. They’re going to use those small core services like the McDonald’s of the world.

I’m not a fan of single tenant, NNN assets like pharmacies and restaurants. The problem with that is that you have one tenant and when they’re gone it’s very difficult to fill that space. Regional malls and power centers in certain areas can be good, but I’m not going into that asset class. I’d rather do the smaller strip centers, spread that out, and diversify in in several markets.

Warehouse is a great space to be in right now with the growth of Amazon and online shipping, those companies are looking for industrial parks and satellite warehousing areas because everybody’s competing for that instant delivery. So they have to have warehouse fulfillment centers close to the suburban markets all over the country.

You coach investors as well, what are some common characteristics of mentees that become very successful? 
People that educate themselves, that learn everything that they can, and that are doers. I find champions and coach them to success. I look for people that will get out there, get it done and take action. I like to help people do things in their life that they never thought was possible. Mindset is a big part of it, and I help people open their minds to think of ideas and opportunities that they just didn’t even know existed, much less that they could do. You’ve to be able to take action.

There are so many facets to opportunity zones. Can you to explain what it is in detail, and how can people leverage opportunity zones within their own investments?
The Tax and Jobs Act from 2017 gave governors of all the states in the United States the ability to designate certain areas as opportunities zones. The idea behind it was to incentivize investment into lower areas, primarily in business and in real estate assets. Each governor was able to go through their state and pick zones within cities of the state as opportunities. You can Google it and look at opportunity zones in your area. It was created to spur investment in businesses and in real estate in lower income, distressed areas.

With opportunity zones, you get to defer capital gains, let’s say that you sell stock, art, or property – anything that generates capital gains. You then can invest into an opportunity zone fund, and for the first five years 10% of that gain is a written off. After seven years you get an additional 5%, and an after ten years anything that you make on that gain is tax-free. You can also refinance, sell assets and reinvest in another opportunity zone within a year and roll it over. You could invest $1 million, make $10 million within a year, reinvest that gain and just keep on going, and going, and going. The other thing is that you will never pay capital gains on that initial million dollar gain after the 10 year period. If you do a project and, let’s say you’ve a $1 million gain, you invest it and it becomes $2 million, or you sell it in a year or two and then you reinvest that $2 million, then the clock starts ticking again on the five, seven, and ten years.

Every time you reinvest you have to hold it for ten years to get the full benefits of that gain, in order for it to be tax free.

Do opportunity zone funds buy properties?
They do not buy property and almost all of the opportunities zone funds are equity investors, they invest equity into projects because it’s all about leverage, they’re not direct buyers. They raise equity to be used for projects and opportunities zones. The other thing to keep in mind is that not all opportunities are created equal, and not all opportunity zone properties are going to exponentially be worth more. Property owners think that their properties can double in price, but it doesn’t work that way. It still needs to be in a good area, it still needs to be a good project on its own merit.

The opportunity zone aspect is just icing on the cake, so it’s not any capital chasing opportunities on deals, it’s actually even more intelligent and patient capital. The 1031 exchange money can be “not smart” capital, they’ll buy properties and pay more just because they have an exchange to make. You’ve to look at the market and the rating. You can find a website where they rate opportunity zones, look at income levels, and different zones in different states and cities. You want to make sure that you’ve a good, highly rated opportunity zone, and make sure that your project stands on its own, that it’s going to generate a minimum of 18-22% IRR for the investors.

There are some caveats to it: you have to invest a certain dollar amount in that building in order to get the tax breaks. It’s called the substantial improvement test. You can’t just buy a performing multi-family asset and shelter that gain. The idea was to spur investments, you have to either invest in a business (any business), and there is no substantial improvement test for a business. But there is for real estate assets, if it’s a vacant building, it has to have been vacant for five years, and then you can go in there and sweep it out, paint it, etc. But if it’s a performing asset that has been in service in the past five years and has not been vacant, or it has only been vacant for two years in the past, then you have to spend an equal amount of capital that’s equivalent to the value of the asset, not including the land. If you buy a building that’s worth $5 million and the land is $3 million of that, the building itself is valued at $2 million. You have to spend $2 million on that building – this is only if it’s a building that has been in service and has not been vacant. If it’s a vacant building, it has to have been vacant for more than five years, and then you don’t have to meet that substantial improvement test. Steve Glickman’s website has a lot of great information on that.

Is there anything else that our audience should know? 
What it boils down to is education: understand the asset classes. Each of them have their own nuances, their own language, their own metric, and they each have their own opportunities, especially in the opportunity zones.

I love commercial real estate, I think there’s a lot of opportunity in retail, offices, warehouses, and land can also be really good. Find out where the demand is. Don’t go by the mantra like opportunities zones, a lot of them are in rural areas, people say “I can go build in this little town in the middle of nowhere, 45 minutes outside of town.” It doesn’t work that way. Don’t think that you can build it and they will come. In today’s world, it doesn’t work that way.

You’ve to go where the demand is and fill the need in the niche of that demand. You’ve to find out what people want and give it to them, and if you can marry that with an opportunity zone, or the right kind of asset, that’s a big thing.

How do you even determine highest and best use?
The way you determine the highest and best use is by demand in the area that you’re in. If you’re looking at a piece of land in an area ask yourself: what do you have around you? Do you have a lot of rooftops or do you have a lot of commercial? If you see commercial, you probably need more rooftops. If you have a lot of rooftops, and not a lot of commercial, then you probably need some commercial. Make sure that you always look at what’s around you, and what is surrounding that asset. What is the demand in the market? Where are things going? Look at common sense, simple things. Make sure you understand the metrics, the language, and the nuances of each asset type and then the class of each asset in those types, and the demographics surrounding them. Then it’s hard to go wrong.

What type of mentees do you look for to mentor?
I’m looking for people that want to do big things, that wanted to achieve results and success, and that are ready to take action. I coach some of the most successful investors in the industry and I’ve some beginners that are starting out. The best fit for me is somebody that has some level of sophistication, some level of business success, and the ability to take action. They’ve to have some capital to work with, or be able to raise it, and be able to take advantage of a higher level project, whether it’s commercial, multifamily, or businesses. I coach business owners and help them grow and scale their business and sometimes I get involved if it’s something that’s really scalable. I’ll come in from an intellectual capital standpoint. We help them develop their teams and a lot of times we see profits double, triple, or even more in a very short period of time.

gregdickerson.com
Cell: (434) 326-3903

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