How to Invest in Commercial Real Estate

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Episode #062 - You're Always ONE CONTACT AWAY From Changing Your Life FOREVER!

by Criterion, Braden Cheek, Brian Duck
May 16th 2022

Today our hosts Braden Cheek, Brian Duck, and Joel Thompson with The Criterion Fund discuss how being open to meeting new people and asking them the right questions can change your life forever! More

certain Uber drivers, they pull up to my house, they see I'm in a really big house and they want to know about what I do and I want to know about what they do. But then I'll have the occasional one where I'll ask them questions and it's a 30 minute Uber ride. Let's say I'm going all the way downtown and and they won't stop talking about themselves and they never want to ask me one question, which is fine. I'm interested in them. But I just think, you know, here there's a potential for some back and forth and I feel like, you know, they might be interested in real estate or how to make money or how to invest or whatever. But no, certain people, they're not thinking about what I can learn from people. They just want to tell me about their last four jobs and why they got fired and they're driving an Uber, which is fine, but they would serve themselves well. We all would if we, if we just take time to be the question asked her at the conferences and not the guy talking about everything. He's always done. Don't be the guy that's or the girl that's always telling everybody else what they're doing because you're not learning anything when you're doing that. All right. Welcome back to how to invest in commercial real estate.

And today we're leaning in. We are leaning in today. So today is all about random people every now and then you're gonna get approached by random people, you're gonna have new people walk into your life, you're going to, you're gonna have somebody that's gonna change your life forever and you have a split decision, they have to make immediately. It's like, do I ignore them? Do I give them my worst self? Or do I, do I lean in and say, hey, how are you? What's up? How can I help you today? It goes along with the theme that we've been trying to convince people listening to this podcast for months now, is that you not only are one idea away, but you are one contact away from changing your life. And the thing is if you don't believe that you're not going to be looking for it, you're gonna go about your day. And like I said, right before the podcast, most people are too consumed with themselves what they can offer what they're doing uh then to see the value that people can bring uh that their meeting day to day and those people can change their lives. But if you're not thinking, hey, this person can change my life, well then you may not give them the time or the consideration that you would have otherwise, Yeah, it's like you kind of have to have that mindset all the time, right?

It's like you said, a lot of people are just too busy. They they don't want to mess with other people. So their mindset is when someone calls, they don't know, I'm no, I'm not gonna, you know, I'm not gonna do anything with this person. But if you have the mindset of, well yeah, this is this person could actually have some influence and, and you know every meeting that you go with someone or phone call, it's not, it may not, you know, turn into something but every once in a while it will. Yeah. And I think, you know now especially, I mean our our phone numbers are are everywhere. We run businesses. We are meeting with people constantly where we have events were getting out business cards all the time and I can't tell you how many times random complete. I don't have the number saved. So that's why I'm saying random, I don't have the number saved people that I don't have the number safe called me more than people that I do have their number saved. Call me and every single time I'm like, hello, this is Brandon. You know, and I smile and I act exciting and every now and then there, you know, I had an investor call me a few weeks ago. Hey, I listened to a podcast. Um, and I love to learn more about what you do and you know, I had that phone call and it wasn't necessarily the most convenient time for me.

No, you know, it was sketchy reception when I first picked up. So it's kind of aggravating, you know when you pick up and you can't hear them or it's like kicking over the bluetooth and you're just like, what you call me man, what do you mean? Anyway, we get into the conversation, it's a great conversation. They'd listen to our podcast now, they're, they've invested with us, not once but twice I think, and it's just crazy and that wouldn't have happened unless I, I was just genuinely interested in what we're doing, which is why we're running the podcast. If you want to talk commercial real estate, you call me well. And so we thought, okay, to emphasize the point, let's give some real world examples about particular uh people that we've met, phone calls that we took emails that we received where we followed up and they ended up having a big impact on our investing career or lives or whatever. So yeah, I will start the favorite, my favorite building that I own, my absolute favorite building. I love telling the story too, because I get this call from this guy who I didn't, I didn't know from Adam. His name was Neil, he's been on our podcast. His name is Neil daily, but Neil called me the first time I ever spoke to him and he was trying to get ahold of you and he couldn't get a hold of you.

But I was answering your phone at the time. So I'm like, hey, what's up Neil were busy. He's like, well I have this deal that's not even for sale, I'd like to sell it to you and I mean, it was, it was kind of a funny thing, It wasn't listed, It was this off market deal. He said, hey, you know, I think I've got a cellar here. I'd love, I'd love to sit down with coffee for you guys. Can you set me up a meeting with Joel? And again, this guy's not, I wasn't anybody. I was working for you. We set up the meeting and sure enough, Joel goes to the wrong coffee shop. I remember this completely wrong coffee shop. So here I am. You know, nobody's sitting with Neil and his team about to sell me a property that's signing for sale. It's great meeting so far. So every indicator is, why am I here? What am I doing? My boss isn't here. This property is not even for sale, a complete waste of time, but you know, being the good steward that I am, I sat there and I was excited, willing, eager and, and tried to act like I was able to have that conversation. Sure enough, we get all the information. I bring it back and I'm so excited. I'm like, hey guys, this building's on Cherry Street and Cherry Street, is this uh super walkable, awesome part of town and Tulsa up and coming young up and coming.

Not necessarily, you know the spot yet, but it was, it was on its way and there's some new things kind of happening and we dig into this deal. And I'm like man, it's a, it's, it's awesome and jewels first question, he said, what's the cap rate? And I'm like, well it's like a 6, 6.5 and he's like no, just immediately crumpled it up like no into the trash and I was not going to have it, I was absolutely not gonna have it. So I, I underwrote that thing like a son of a gun and I built models and build models and assume things and I called Neil and I'm like, hey man, this doesn't work. You know, something's got to give, you know the roof sucks these tenants or whatever they are. I mean it was just had a lot of problems and it was just no, no, no, no. Finally I don't, I can't remember what gave but we got it up to like a 7.5 or an eight cap maybe at this point. So we got it in contract and it was still like Joel wanted to cancel this thing. It didn't, it didn't make money on paper. It's probably not going to make money in real life and we keep fighting, keep fighting, keep fighting, we get the deal closed. Finally we, I mean Joel and precision have owned it for years. They bought it in 2019.

I hate saying that it was 2018, I thought it was 20 anyway, I bought in 2019 and that was when I met Neil now Neil and I still go to the same coffee shop and we discussed business and real estate deals. Most of them aren't even for sale because that's that's what you do well and having the courage to pursue that meeting, even though you weren't necessarily ready for it and what, you know, you weren't experienced enough for it. That caused you to go to the next step of listening to the deal and then you had this deal that you brought to me and I'm like, I'm not going to underwrite that, you underwrite it. And so then you had forced you to to go through the steps of underwriting it. And how much did you learn from underwriting that? And it was the first deal you invested in and me, you know, pushing back on all of the issues and the problems and you happen to find a work around with the sellers, all that experience is really what you know, prepared you to do the job you're doing now. Yeah. And and even even more, the sellers of that building ended up investing with criterion, a decent amount of money. And, and they invested in our first three or four deals.

He was a super nice guy that we still talked to. Um, and again, it wouldn't have had that building wouldn't have had any of that knowledge or experience or those, those failures, you know, to get to the excess success, I would have had any of that. If I, if I blew Neil off and that was it. That's a great one. I'll go next. I have several. I'm trying just to pick on maybe to uh, for this discussion. But one of them, I was working part time as an apartment broker with Brandon lamb. We've had him on the podcast in that group and I'm sitting in this small office, just kind of getting, going in my feet wet in, in multifamily brokerage. And I get, I get, we, we owned apartments at the time. I get a cold call from a guy in boston. He's a mortgage broker and most of the time people are blowing off mortgage brokers, but for me, I thought I'm going to take the call and see, see what's going on. So I took the time to listen to them. Yeah. So a mortgage broker, they go out and they find a loan for your commercial property and they charge you, you know, 123 points or whatever it is. Yeah, usually appoint. Um, but man, we hit it off.

We, I, I went ahead and took the call, I gave him the time of day and he's like, hey, let me help you underwrite deals, what do you have, Should we look at refinancing? And that one phone call, uh he ended up doing a Fannie loan for us on an apartment building. Uh that was great. And we actually pulled out a bunch of cash and then we, we had a deal in in Indianapolis and he helped us uh underwrite that refi that helped us understand what the agencies were looking for during the refi and how can we maximize our, our cash out position, which view is great at, I would have never known uh, that much about agency debt. I mean, I think he was maybe the first, uh, we had, we had assumed a hud loan before, but we've never gotten Fannie Freddie debt before. So here was my gateway into understanding agency debt, which is the gold standard for multi family properties. And I did, that was an area I wasn't familiar with yet. We had done bank debt. So a similar situation to what Brandon was going into, where he didn't really know everything about the subject. But you went in and yeah and so giving people the time of day and he was able to educate me on an area of commercial state, didn't know he was able to make money for himself by providing a service for me.

But he was able, he was able to help vic and I maximize our cash position and our debt position on multi family assets that we owned because of his expertise. But it literally was a cold call. I didn't know him. I hadn't met him. In fact, I didn't even meet him before. We had done our first deal all over the phone. Was it worth the fee? Absolutely worth the fee. Absolutely worth the fee that I don't, I don't know if you can, it's hard to do an agency deal without paying a fee. Even if you go to an agency lender, they're going to charge you. So basically it was, it was, he was charging a fee. But anybody, I would have had to pay that to anybody. Uh but a great example of every time you pick up the phone instead of thinking to yourself, oh, I don't know this person, you know, I'm busy ask yourself, okay, how can this person benefit me? What can I learn from this person? What knowledge do they have that? I could, I could learn. Well, the guy that you talked to had to do that in his mind before he called you right. Yes. It wasn't just you receiving it it was, he had to say, well what can this guy, how can, how can we work together?

And and he probably don't want to make a bunch of cold calls that day. No, I mean cold calls aren't easy. So that that was one you got another one or Yeah. And and you know, through through the process, I mean everyone's got to do that. You know, you're either on the receiving or the giving end of a cold call. You know, so if you've, if you've done cold calls, you probably a nicer receiver of cold calls because you know how much they tend to suck. But I mean when you're first starting out, we've had these conversations and we've had these episodes, you have to cold call bankers. Hey, I'm nobody and I own no property and I want a real estate loan. Hey, I'm nobody and I own no property and I want you to invest with me. You know, you, you've got to, you've got to be able to add value to people. Yeah, I do have another one. Another super influential person in my life and criterion this guy, he, he was almost, he was almost a kid at the time. I mean he's like the same age as me were, you know, a little young and he called me and he said, hey, um, I see you guys are a commercial real estate company. I'm based in, in Dallas or Fort Worth or whatever it was.

And, and there's this property in norman that I think you should look at and, and back then, you know, we didn't do any joint ventures and precision didn't do any joint ventures at the time. So I'm like, you know, I don't even think I returned this guy's phone call, which was really bad. But this guy being amazing. He called me back again six months later and he said, hey, this is so, and so do you remember me and I said, oh yeah, so sorry about that. No, he's like, no, no, no, let me stop you right there. Are you sitting in front of a computer, go to this website and he's okay, auction 10 x dot com okay. He said, do you remember the name of that property was so and so uh pull pull that up in the search bar and I looked it up and it's, it's going for auction and I'm like, man, this seems expensive. I thought we could have bought this for like 10 million, you know, or even less. And he's like, well you could have, We think it's going to go for like 16 million. I wanted you to watch the auction. This this is the goals on this guy calling me back the let me suffer. Unfortunately I remember you talking to me about it and we had just uh 10 31 a bunch of money into a deal in Vegas. And so the timing was just not good for us and this was a pretty big deal for us at the time back then $10 million would have been a big deal for us.

We didn't, we didn't know these guys from Adam didn't know him and he's like, hey, this is a good value, was kind of, you know, foreclosure type. I mean it was Receivership type retail even though it was right on the highway in norman Oklahoma, a new one in Oklahoma, that one filled up drain this one down of tenants. They had a very aggressive practical leasing plan to get it back up to reality, which they did they accomplished and some other group ended up buying it. But anyway, we, we lost out on millions of dollars of lost opportunity because we couldn't build the relationship with him on the phone. And I said, you know his name is Andy Andrew Fallon, he works for the Woodmont company. We've since done five deals with him were about to close our sixth deal with him. And it's been amazingly fruitful relationship because we both keep pouring into the relationship. We bring deals their way, they bring deals, our way we compare notes, we provide debt and equity. You know, they're providing deals and it's this amazing relationship because we fan the flame and we grew it and we fed it and now it's something, you know, that's, that's feeding us just imagine how many calls and he makes too many to a bunch of the people that he doesn't have the relationship that he has with us.

But because we fostered the relationship and we've committed to it and we've trusted them with with our equity and our investors equity. And it's returned to, well now we're doing deals and we're both making money and adding value to each other all because of an initial phone call, uh, and putting the time in and that's kind of what the show's about is that once again, you're see people for what they can add to to you. Uh, not don't be just so concerned about what you're doing. How can this person benefit me? What do they know that? I don't know what experience do they bring? I'll give one more example and then we can probably call it, but this is a recent example because I don't know if if people listening to the podcast. No, but we, we had our big, big downtown, big city project announced on monday we're doing, it's going to be iconic Bigsby. It's a mixed use development and in the heart of downtown Bigsby may be the largest development in downtown bixby's history. Make sure to get a picture up on the screen for that. Yeah. And That project is as prestigious as it is for us. It's a $30 million world that all started with a cold introduction meeting that was set up by a friend of mine.

So a friend of mine Chris Myers, I think he's been on the podcast. Great guy. He calls me to his office is, hey, I got this guy, he's messing with something down in Bigsby. Uh, you know, he's looking for equity and I'm like, well, we don't really partner with people, you know, we don't really give people equity, but I took the meeting, that's the key is I'm interested in what I can learn from the meeting and show up to the meeting and there's this really nice guy, uh, from England there, bob Egleston and so we need to have him on the podcast. But at the time, I don't know bob bob was like, hey there's, you know, there's this deal on Bigsby, I even think he was, we were looking at another property in Bigsby uh that that was not when we own now and and he was like, I got this guy that's out of town, he does my modeling for me. And so I'm like, okay, this guy doesn't do his own modeling, he's got this model, I don't understand the model british, well I like british like british people and uh and so I'm just trying to wrap my head around, okay, well what can I learn from this guy? What does he got going on? I was very unsure, but hey, we kept the dialogue going and and he was super friendly and and then I got my business partner involved victor and he became really good friends with bob and and we just kept pushing the relationship.

Well it turns out that RFP that we initially spoke on was delayed and this other R. F. Q. Had a vacant lot came up first and we need to partner with them. Uh we end up bidding on it. He introduced us to Red dog construction who we're partnering with on the deal. And so from one cold meeting, uh to uh $30 million development in downtown Bigsby friendships with with bob friendships with the red dog construction group now, the whole trajectory of our development platform and precision equity all changed from that cold meaning that chris Myers called me too. And so you know I I know I always think about people just listening to the podcast and I know people are listening and they're thinking man okay who have I met? Who, who have I passed up on that, that could have been an influential contact for me. And so there's people that you maybe thinking about listening that you may need to call back that you may need to invest in because once again everybody there's someone out there that that knows the piece of information you're missing to change your life, they're gonna expand your knowledge base, they're going to have and it may not even be them, it may be an uncle that they have that you need to meet.

That that's the key that you're just, if you just knew that one person uh for me like on the debt guy, I didn't know agency debt but I needed to know agency debt because agency debt was what was going to help me get low interest financing, cash out. Refis on my multi family. He was another member of the team. Yeah part of the team that you put together and so part of being successful in life, this is not just real estate, it's life, part of being successful in life is networking, making connections but making people important enough to figure out what they know what you don't know that they do, asking them about what they do and, and, and who, who, what connections they have, that's such a good point. I remember real quick, we were on a conference, I think it was the, I am in multi family conference in santa Barbara and I was, I was nervous and I was like, man, what do I do? And he's like, just go sit at that table and ask people questions and it was just like this redefining moment of my life. I was like, oh man, and I really think it's, it's almost binary now.

I mean there's people who will wait for people to ask them questions and they'll answer them, then they'll shut up and they won't say another thing and then there's the people who are just asking everyone questions, trying to learn about them, starting conversations, saying, oh man, that's really cool. And eventually if these people care and are interested at all, they'll, they'll ask you a question, you know, they'll scratch that itch if you have it. But that's how the relationship has started, it's like going up and saying and I asked these guys all the time, I mean I'm, I'm a question, ask her if you're around me and you came up in some brand new Ferrari? I would be like, dude gorgeous car, what the heck do you do and and how can I be a part of it, That is an amazing car or, or just anything in that respect, man, that is a gorgeous building. How did you build that? I would love to pick your brain on it or I had people call me pitch me deals. Hey, there's this mall I'd love for you to invest in. Well it's like, first of all, no, but I'd love to look at it. Hey, there's this hotel, I want you to invest in. Probably not for me, but I love to look at it because I want to know I'm not interested, but I'm not interested interested because I don't know enough yet. So if I knew what they knew and they know enough to pitch it to me, they believe in it.

So if I could just try to figure out what they knew to pitch it to me, maybe it would be more comfortable with it and you do that enough times and then pretty soon you'll hotels and malls. That's funny. You know, people are making millions of dollars on hotels. There's hotel magnets. I never bought a hotel, but I don't know the secrets of making money at hotels, but, but people do 11 final example. I, I take Ubers, I don't know if I'm gonna ever have a drink or two, I'm, I'm maneuvering. Uh, and, and so over there and Uber back and so I spent a lot of time talking to Uber drivers and for me, it's really fun because I ask them a bunch of questions and I get to know people, I want to know where they're from. I want to know what their kids do. I want to know where they work while they're driving the Uber, what you know, what's going on their last name and social security number and now I want to follow them home. But what I think is interesting sometimes is I'll have certain Uber drivers, they pull up to my house, they see I'm in a really big house and they want to know about what I do and I want to know about what they do. But then I'll have the occasional one where I'll ask them questions and it's a 30 minute Uber ride, let's say I'm going all the way downtown and and they won't stop talking about themselves and they never want to ask me one question, which is fine.

I'm interested in them. But I just think, you know, here there's a potential for some back and forth and I feel like, you know, they might be interested in real estate or how to make money or how to invest or whatever. But no, certain people, they're not thinking about what I can learn from people, they just want to tell me about their last four jobs and why they got fired and they're driving an Uber, which is fine, but they would serve themselves well. We all would if we, if we just take time to be the question asked her at the conferences and not the guy talking about everything he's always done, don't be the guy that's or the girl that's always telling everybody else what they're doing because you're not learning anything when you're doing that, you know, find out what they're doing. You'll learn from what they're doing, not from telling them about what you do. Well I think that was a great episode. I think I think people need to learn to you know, listen a little bit more, ask a little bit more questions, don't be afraid to ask questions and and really just lean in because you could be one contact away from everything in your entire life changing for the better essentially.

Alright guys, thanks. Alrighty.

Episode #062 - You're Always ONE CONTACT AWAY From Changing Your Life FOREVER!
Episode #062 - You're Always ONE CONTACT AWAY From Changing Your Life FOREVER!
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