Tyler Cauble's Debt-Free $400K Payoff From a $1K Investment

226: In episode 226 of the REtipster Podcast, I’m talking with Tyler Cauble, a commercial real estate investor and YouTuber flipping the script on the CRE game. Tyler started selling Cutco knives in college, dropped out, and built a massive portfolio without ever touching residential real estate.

(Show Notes: REtipster.com/226)

We dive deep into how he has built massive value, like finding $215K in equity without doing any rehab. We also explore flex space vs. retail, cost segregation studies, broker strategies, and the creative partnerships he forms (like pairing pickup with storage facilities to boost occupancy).

If you want to break into commercial or industrial real estate, this episode is packed with tactics you can use today.

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Transcript

0:58

Hey folks, how's it going? This is Seth Williams. You're listening to the REtipster podcast. This is episode 226. And today I get to interview a fellow YouTuber whom I've followed for the past year. His name is Tyler Cobble. And if you're doing any YouTube searches for how to invest in any kind of commercial or industrial real estate, you will inevitably come across this guy because he has some of the best videos out there right now about how to get into this side of the real estate game and make a killing. He and I also did back-to-back breakout sessions recently at the Midwest Real Estate Investors Conference in Grand Rapids, Michigan. So as soon as I was done with my presentation, I just stayed there in the room and watched him and it was awesome. I learned a ton of great insights from him and I knew I had to ask him to come on the podcast so we could all learn from this guy. So Tyler is also in the self-storage business as I am and he's into even more things that I want to do, like flex space and triple net leases and a lot more. There's a ton of ground we're going to cover today. You're all going to love it. Tyler, welcome. How are you doing? Seth, I'm doing great, man. It's a nice, beautiful, rainy day here in Nashville. So perfect for recording some beautiful podcast content. And yeah, it was great meeting you up in Grand Rapids, Michigan. That was a great event. It's always fun getting out. I mean, this whole real estate thing, we were talking about this before we went live. It's kind of funny putting together all this content. We're both by ourselves in our room, right? And so getting out and meeting people that are actively investing in real estate as well is always a fun thing to do. So I was asking you about this a little bit before we started recording here, but why don't you tell us your real estate investing origin story? Like when and how did you get into this? What were you doing before then? How'd you get into the commercial and industrial space specifically? Yeah, absolutely. So I have a very interesting origin story because it's not really what everybody would expect. I actually never did residential real estate. I fortunately didn't even have to see the light when it came to trying to scale my portfolio. So my story starts back in really 2011. I graduated high school and I had heard my neighbor, Clay Looney, he had made over $10,000 one summer. He was a few years older than I. Selling knives for Cutco. And I was like, man, I want to make $10,000. So I went and got a sales job doing Cutco Knives and made 30 grand that summer. And man, that might as well be a million dollars for a kid going to college, right? Yeah, exactly. So, you know, of course I spent it like I had a million dollars too, but I was sitting in class in college and I kept thinking through that. I was like $30,000, you know, over three months, that's $120,000 a year. If I was doing sales full time, what in the world am I doing? Wasting my time in college. So I dropped out, moved back to Nashville, started working as a project manager for my grandfather's construction company. And about three months into that, a developer that I had sold some knives to for his beach house down in Destin. Heard that I was back in town, offered me a job, paid for me to get my real estate license. And this was back in 2013. So back then, Nashville was still coming out of the recession and there was not a lot of leasing activity going on on commercial properties. And he'd had a couple of older, or not older, but bigger commercial real estate firms working on his assets. And they weren't really getting any leases. Now, it wasn't really their fault. We were coming out of the recession. So he wanted somebody to work full-time in-house on these assets. And it was 150,000 square foot shopping center, a 57,000 square foot office building, and a couple hundred thousand square feet of industrial. So right off the bat, I'm working on kind of everything. And that was kind of how I cut my teeth. He said, I mean, my training was go knock on doors. And when you find somebody that wants to lease some space, let me know, and I'll show you what to do next. So I got to a man and spent a couple of years there working in-house, putting leasing deals together, kind of stabilized that portfolio, got to sit in on all of the development meetings. So I learned how they put those deals together. Did my first project, which was 42 townhomes that we built from the ground up, partnered with the company on that one, which was pretty cool. What a phenomenal experience to have as a 25-year-old. I left at 26, wrote a book on how to lease commercial real estate, opened for business, The Insider's Guide to Leasing Commercial Real Estate, and then left and started my own firm. I've been doing that ever since. That was 2018. And so since then, we've been raising capital for deals. We've been doing our own deals. I've got a brokerage, started the YouTube channel in 2020. So it's just been commercial real estate as much as I can eat, sleep, and breathe it. You must have made a really big impact on this guy when you sold him knives, right? For him to actually remember you and then offer you a job? Like, were you just like really good at this or something? How did that, I mean, it just seemed like a random thing. Like if somebody came to my house selling knives, they'd have to do something pretty incredible for me to like keep their name and call them back and offer them a job in the future. So. Yeah. I kind of made a splash, uh, when, when I did the whole knife thing, because, you know, most people did that as like a summer job and it was kind of a, Oh, you kind of go and sell to your family and make a couple bucks. The average Cutco knife sales rep sells $3,000. That summer, I sold over $84,000. And then I came back in December and I sold another $40,000. And I think the following summer, I sold another $100,000, something pretty close to that. So I sold over $200,000 in just over 12 months. So it was a lot of knives. It kind of got around pretty quickly, like, man, this kid didn't kind of sell. Was that a hard job for you? Or was it fun? Like when you recall what that experience was like, it sounds like a terrible job to me just because I don't think I'd be very good at it or I would be intimidated by knocking on doors and stuff. You seem like maybe it was easy. I don't know. Man, I loved it. I loved every minute of it. I've loved the competitiveness of it, the team environment, going into our sales meetings and getting fired up for it, the sitting in and making phone calls together and cold calling, because we didn't knock on doors. We would get referrals from all of our customers. And so I started innovating in that way. I didn't want to cold call people because that was miserable. So what I would do is I would help my customers make a list of all the items that they wish that they could get, right? Because they would get this bucket today, but here's what I'm going to get tomorrow. And I'd say, okay, well, Mrs. Jones, I'll give you this knife from your bucket from tomorrow. I've got it actually outside in the trunk. I'll give it to you today. If you send a text message to all of your friends and just let them know that I'm going to be giving them a call. And so every single person that I would call would be a very quick yes or no, I'm interested. And I could move on to the next one because they already knew who I was. And so it cut down on my phone time by half and it increased my success rate substantially. And so I just kind of kept trying to perfect it and make it better and better and better. And so that's what I enjoyed about it was how can I do this better and improve upon it? And so I loved it. Yeah. Do you use those kinds of techniques or anything from that cut code job in your life today in terms of how you find commercial deals or find tenants or anything like that? Not really anymore. I mean, when I first got into commercial real estate brokerage, all of those skills completely applied. I'm not really in that sales role anymore. I don't have to sit there and make those cold calls or try and find those deals. Fortunately, I've got enough fishing lines out there through the YouTube channel, Instagram, my website, my relationships, my own brokerage team to where the deals kind of come to me. So I don't have to worry about that. But yeah, when I was first getting started, I was applying all of those principles. Talking about commercial real estate and industrial for that matter, something I'm sure you've seen is that a lot of people out there kind of feel like they need to start with houses or something on the residential side. They either never explore commercial or they feel like they have to wait a long time before they can get into it. I don't know if it's like an issue of limiting beliefs or they think it's harder or it takes more money. I don't know what it is, but why do you think so many people don't see that or don't even explore it? Yeah, I think that's a great question. Look, I've worked with hundreds of residential investors that are transitioning into the commercial side and they all have the same common thread. Look, most people grow up. Or are familiar with residential housing. Most people do not grow up with a parent or parents that, or family that owns a business or that let alone that owns commercial real estate, right? That's a niche of a niche. And so when you start thinking about investing in real estate. Housing is a very easy first step. And you can start by buying your first home, right? So it's much more approachable. And people tend to think too, oh, well, it's a lot cheaper to start off in the residential world. And I think in most cases that can be true, but I will dispute that with the fact that the first building that I went out and bought that I raised capital for was a two-tenant office building that I bought here in Nashville, 20 minutes outside of town, 6,000 square feet for $575,000. That was back in 2019. So you can go and find these buildings that are not nearly that much more expensive than residential homes. And we fixed it up. We probably put $20,000 into that. I signed two leases and we sold it 18 months later for $750,000. So there's a lot of opportunity that can be created there without having to spend a bunch of money to do physical upgrades. Sometimes all you just have to do in commercial real estate is sign a lease. And on that, I was going to ask earlier, when your job was to go out and knock on doors and find tenants to lease to when you got that first job. What is the secret to that? Like, let's say this deal you just talked about where you bought it, you put tenants in there. Where do you go about finding these tenants? Say if you had a shopping center or something and you need retail people to be leasing that from you, do you like call the corporate offices of who you think should be in there? Like, where do you even start with that kind of thing? Yeah. The first thing you've got to do is get really good signage, because I would say probably 60 or 70% of your quality leads are actually going to come from signage. It just kind of is what it is. When you say signage, are you talking about putting like a yard sign in the front lawn of the place or like, what do you mean by that? Yeah. I mean, I wouldn't go down to Home Depot and pick up a little floor release sign and write your phone number on it, right? I mean, We're talking about go down to your local print shop and have a four foot by eight foot sign that says four lease printed on it. You'll notice these when you start driving by shopping centers, they have massive four lease signs out front of these properties. It gets people's attention and they get a lot of calls. And we get a fair amount of traffic from that. And it just becomes a matter of filtering down those phone calls into which tenants are tire killers, which tenants are actually qualified to, who should we actually tour? Then it becomes, okay, what is our tenant mix or what are the most ideal types of tenants for this type of property? Let's go out and target them, right? So if you've got a target anchor shopping center, you're going to have a lot of moms that are going to that shopping center. So you start to think of all of the ancillary businesses that are going to work really well in that. And I bring up target specifically because that was the 150,000 square feet that we were working on was in a Target-anchored shopping center. So that was all that I had to think about for two years, three years, four years. And so it was like, okay, we don't have a nail salon. Well, let's go get a nail salon. We don't have a kid's dental office. Let's go get a kid's dental office because what's easier than mom being able to drop the kids off at the dentist while she goes and does the grocery shopping at Kroger, picks up a couple of things at Target, and then goes back to pick up the kids. So it's things like that that you try to think through when you're selecting your tenants. Because I mean, one, the tenants will see that, but two, if they don't, you can pitch them on that and help them see that. And it just makes the sale that much easier. And that's obviously a retail example, but you could do the same in flex, industrial, office. It doesn't really matter. Each one has its own nuances, but you can craft a pitch in the same way. So this example of like a nail salon or a dentist. So, okay, we've established those would be good tenants. What do you do next? Like, do you just go through the yellow pages and find them and call them? Or do you got to like, how do you seek these people out? Sure. Yeah. I mean, you start making the cold calls, sitting out flyers. I mean, there's multiple things that we do. I mean, there's postcards that we actually mail out. There's flyers that you go and hand out. You know, we're members of the local chamber of commerce. We used to be members of BNI, Business Network International. We've got a lot of signage. We have very strong SEO. So whenever a business is looking for space in Nashville, they're going and come across us. We post a lot of stuff on social media. So it's very easy for businesses to find us there. That's oftentimes where they're finding things now. And a lot of commercial real estate landlords and brokers are not posting anything there. Oftentimes your tenants can be some of the best referral sources. I have tenants in my buildings that because I'm a good landlord and I treat them right, they'll refer their friends to us. And that's one of the easiest ways to keep your vacancies filled. But yeah, I mean, it just becomes a matter of going onto Google, mapping out where all of those spaces are, dropping in and handing out flyers. And over time, you can build up databases of every single nail salon in your area so that next time you have a space available, you just click a button and you send out an email to 50 nail salons that says, hey, we've got a space available for a nail salon. Who wants it? Yeah, I actually had a big aha moment in your presentation when you talked about sending direct mail for commercial real estate deals, like off-market deals and how Nobody really does this for commercial properties like they do for residential ones. Why do you think that is? Why have people not really caught on to that? Or why is that not as big of a thing in the commercial realm? That's a good question. I mean, I think that it's one, because commercial real estate is so old school that a lot of commercial real estate brokers and landlords, they're all still on the cold calling train. But I think residential real estate investing, if you're able to compete in that world, you can crush it in commercial real estate. If you can underwrite an apartment complex, you can easily underwrite commercial real estate. If you can find off-market deals in the residential world, you can easily find off-market deals in the commercial world. It's just a matter of understanding the difference between what makes a deal work and what doesn't in commercial. I think that's typically what tends to hold people up. But I don't really know why people don't do it. It's a no-brainer, in my opinion. It's a blue ocean, for sure. And so if you're sitting there listening to this and you're wondering, well, how could I even go about finding commercial deals? Just start with that. Go to your local tax records, filter by whatever property type you want, and then maybe even filter by how long that person has owned it. seven years or more tends to be more of a local mom and pop investor, right? Because typically under seven years could be, doesn't mean it's not mom and pop, but there's a higher chance that it could be institutional as well because they tend to trade every five to seven years. But over seven years, very high chance that it's going to be a local mom and pop. Those are more likely to trade and you're more likely to get creative financing opportunities on that and just start sending a mailers. So when I think through this idea of buying either a vacant commercial building or one that's partially vacant, or maybe there's a tenant there, but they're going to be done soon. And the whole value is predicated on me being able to find tenants or find better tenants or raise the rent and that kind of thing. There's this fear in my mind that like, what if I can't find the tenants? How do I get past that fear? Or how do I know, like, if I buy it, I will be able to fill this thing up because of that, that, that. Is it kind of based on my sales skill, my ability to like get out there and, you know, knock on the doors? Or is it like, no, people will come just because it's so great. and I put a sign there. I mean, look, if you're not confident in your own marketing abilities to go out and find a tenant, hire the leasing team that can. Because if you are buying the right properties, you should have no problem getting them filled. I know that there's always that commercial property that you drive by that you're like, man, that thing has sat vacant for years. Why is that commercial landlord okay with that still having a for-lease sign up? Here's the thing. I know that coming from residential to commercial, the big thing is cash flow, cash flow, cash flow. Well, commercial real estate investors don't necessarily care about cashflow. They don't necessarily think about that. And I know that's kind of a weird thing to think about, but a lot of these investors will buy a property and just let it sit. And if it doesn't get the rate that they want, they're fine not signing the lease because signing the lease at a lower rate just to collect the cashflow will devalue the property. So they're fine waiting for the right lease to come along and then they'll deal with it. They don't care about the cashflow today. And it's all because the valuation is based on cap rates and not necessarily on the cash flow. And so the thing is, this is probably a bit of a controversial statement, but if you want to be a poor investor, invest for cash flow. If you want to be a rich investor, invest for appreciation. And that's the approach that a lot of commercial real estate investors take, is I'm going to invest in a thing that may not necessarily have the best cash flow today, but it's going to have substantial appreciation on the upside. So for example, I bought a small little 2,200 square foot retail building here in East Nashville for $435,000 back in 2020. Needed a lot of work. While we were under contract, my brokerage team found a tenant. We signed a lease. I presented that to the bank. The bank took that lease, used that in their appraisal and appraised the building for $650,000. So just because I went and signed a lease, I didn't do anything to the building. I hadn't even closed on it yet. Just because we went and signed a lease. The bank appraised it for $215,000 more than what we had paid for it. So that's the value. And that didn't have anything to do with cashflow. The amount of cashflow that I would have to get in order to make $215,000 would be a lot of cashflow or it would take a long time. So food for thought, and it was probably controversial, but I think it's worth thinking about. So when I hear you say that, I could be totally making the wrong assumptions here, but it almost sounds like those kinds of commercial properties are for people who are already really rich because they don't need the cashflow right away, or they can wait however long they need to, or maybe they have a, I don't know, six-figure reserve account to just float the property until whenever the day comes that they find the right tenant. Am I thinking right or am I misguided or mistaken? Could be. Yeah. So in the scenario where I was talking about the landlord that just let it sit, I mean, that could be the situation, right? But like the deal that I was just telling you about, I mean, I didn't have any carry costs because I was under contract on it. So he hadn't even and closed it. I turned around and flipped it. I actually sold it to another investor and seller financed it. And they're about to pay me off. I literally just, I kid you not, before we jumped on this call, my CFO sent me the payoff note for this. I'm going to get $477,914.81 in a couple of days from that deal. And I've been collecting interest on it ever since of about like $2,500 a month, give or take. So not a bad deal for not having to put hardly anything down. Simply because we went out and signed a lease. Yeah. So it sounds like what's different about you or what is special about you or the value that you're bringing. Again, it kind of goes back to that being a good salesperson and that you can find a tenant for this place. Whereas the previous owner either didn't know how to do that or was not willing to do that or didn't want to put the effort into it. Is that kind of what it boils down to? Like if you can master finding tenants, like you can make a killing in this business. That's right. It's either finding tenants or finding good deals, right? Because I mean, at the end of the day, what differentiates great real estate investors from good ones? It's problem solving. That's all it is. The great real estate investors are just better at solving the problems. Because look, at the end of the day, the greatest real estate deals with the best returns are not going to show up on the MLS. They're not going to be online for everybody to find. Because if that investor could get a 5% cap rate for their deal instead of a 9% cap rate, you know that they're going to ask for a 5% cap rate, right? There's a reason that it's going for a nine. So it's just food for thought, something to think about. Because there's a lot of opportunity out there if you are willing to go out and create it. And that's where the value is. So if you're able to create value through signing leases, finding tenants, finding really good deals. There's a lot of upside in that business. And can you do that on the residential side? Sure. Of course. But you're not going to be able to typically find a tenant, sign a lease and create $215,000 of value just by signing a lease. How much value can you put on traffic? Like say if you've got either a piece of land with nothing on it, or there's a building that's just like disgusting. It needs to be torn down. There's not much value in the building itself, but there's a lot of traffic going by it. Is there a way you can like monetarily say this traffic alone is worth this amount if this building were here, or does it not work like that? It's kind of tough to say. I would bet that a billboard company could put a dollar per car on that traffic, but it's harder to say for commercial real estate, because it depends on what type of business is going in there. Traffic can be good and it can be bad, surprisingly enough. It depends on what type of traffic it is. So if you've got interstate type of traffic where they're going super fast, it could even be highway traffic. They're going really, really fast. And yeah, you get the visibility, but there's no reason for those cars to be stopping. That's kind of low value traffic. Whereas if you look at, for example, there's a road here in Nashville called 12th Avenue South. Which back in the day used to be basically a highway. And now they've expanded the sidewalks. They've added bike lanes. They've made it very difficult for cars to go through. That traffic is now incredibly valuable because people are actually stopping. They're spending money in the shops. It's now some of the most expensive real estate in the city. So it's not necessarily the quantity of the traffic. It really comes down to the quality. From what I'm gathering, it sounds like you used to be in the broker side of the business. Now you're more in the investing and the deal finding side of the business. What are all the types of commercial or industrial properties you're currently investing in? Which sectors of the market are you in? Yeah, that's a good question. Yeah. I mean, I'm fortunate enough to have a brokerage team that I've kind of handed off everything too. So we still do a lot of leasing and sales, but I've got a wonderful team that manages all that for me. So as far as what I'm actively doing, I mean, we just bought a 105 unit self-storage facility back in December. I just broke ground a few weeks ago on a 350 unit indoor climate controlled self-storage facility. We are planning on delivering a 48-unit boutique hotel about two doors down from my office where we are right now in probably June, July here in East Nashville called Salt Ranch, which I'm pretty excited about. If you're ever coming to Nashville, hit me up. I'll put you up. It'll be a lot of fun. I converted a six-bay car wash into five micro restaurants and a bar. I've got about a million and a half square feet of industrial space out in Chattanooga, which will become a lot of indoor flex, light manufacturing. We're slowly building that out. We've got some industrial outdoor storage out there as well. So, I mean, this is a 30,000 square foot office building that I'm in right now. So, man, I mean, it's a little bit of everything. To me, it's more like I'm an opportunist. I don't like to pin myself down into any one asset class. It's more of like, what's the story? What can be told here? Do we understand why this is going to perform well in this neighborhood? Do we understand this neighborhood well and why this would perform well in the neighborhood? I think that that's really more important to me than any single asset class. Absolutely. What is your role in these deals? Like, are you the guy finding the deal or are you like bringing the money or like, what is the part that you play and how do you justify your equity that you have in each one? Yeah. So I'm, I'm generally a guy that's finding the deal, putting the deal together, raising the capital, signing on the debt. I'll generally bring in partners into the general partnership, depending on what is needed. So for example, like I had never done a boutique hotel before. I brought in a minority partner into the deal that has 30 years of a hotel experience, to make my investors feel good, to make my lender feel good. When I did a self-storage deal, I brought in my buddy who owns a moving company as a partner in the general partnership. I think strategically, who would make a really great partner in this deal? Not just a one plus one equals two, but a one plus one equals three. Having a moving company as a partner in a self-storage deal, we went from, I don't know, 64% occupancy to 90% within two months because he just had a bunch of clients that he just started moving in. Yeah, nice. Right? So you kind of think of like ways to almost cheat the system, right? So that's kind of how I go about doing it. So I don't have any partners like in my actual companies, but I have partners on almost every single deal that we do in a strategic way. Am I remembering right that oftentimes you don't bring any cash to the deal? You just put all the pieces together and find the opportunity and raise the capital? That's right. It depends on a deal by deal basis. I mean, my best return ever was a deal that I put $1,000 into as a general partner, and I got back $400,000. Yeah, it's a good deal. Yeah, it's a pretty good deal. I'll do that gladly every day. I had to put a lot of sweat equity into that one, though. So I earned my $400,000. But I typically at least invest the minimum investment as a limited partner into the deals with my investors. But generally, the way that I'm earning at least my 20% to 30% equity, I'm finding the deal. I'm putting it together. I'm the one signing on the debt. And we're doing all of the work for the five years. So there's a lot that goes into that. Now, with all these different types of commercial real estate that you've been involved with, if you were forced to only focus on one type, whether it's self-storage or flex space or whatever, which one would you choose and why? Oh, man. If I was only forced to focus on one type, I'm going to cheat and be very broad and just say industrial. That's real. Oh, come on. That's way too broad. If I had to pick within industrial, I'm going to say Flex. Just because, again, that's probably too broad. But I mean, look, Flex just allows you such a wide variety of tenants, a wide variety of uses. You're not pigeonholed into anyone. I love retail. I mean, we've got a lot of retail. My food hall is really freaking cool. And we've got dozens, if not hundreds of articles written about it. It's always going to be a food hall. What happens if for whatever reason, food isn't cool anymore? I don't know. I know that sounds ridiculous, but at some point, something could happen. Whereas FlexSpace, hey, if all of a sudden plumbers aren't needed anymore. Well, they can become high-end auto detailing base, whatever, right? A restaurant's kind of a restaurant. You're going to have a lot of expensive equipment in there that can't really be pivoted into something else. And so for that reason, I do really like FlexSpace because you can kind of do whatever you want with it. In FlexSpace, is this like those kind of units where there's like a bay where you can pull a truck in and there's an office in there and you can kind of use it as makeshift storage or a shop or that kind of thing? That's right. There's all different kinds of FlexSpace. It's generally some sort of smaller portion of office or retail in the front and then warehouse in the back, right? So you could think the local e-commerce company that needs a little bit of office and maybe they're shipping widgets out of the back, or it's your local flooring company that needs a showroom in the front, but they're managing their distribution out of the back, something like that. How often are you building from the ground up versus buying something existing? Very rarely. I actually haven't built anything from the ground up since my first project in 2015. We have looked at it a number of times and I've gotten pretty damn close to it. I have taken heavy value add to the nth degree to where it was like, that really wasn't value add. That was basically new construction. But to me, finding something that's existing and trying to work with what you already have is one, it's substantially easier. Two, it's less risky. Three. I've been able to get as good of, if not better returns from doing that than I can ground up. And so I look at that from a risk-adjusted return perspective and I'm like. Well, why would I bother doing something from the ground up, which would take longer, it's going to be more expensive and it's riskier when I could kind of just do it with something that's semi-existing and just make a couple of tweaks to it. Yeah. I actually started to realize that after I was coming to the end of building my first self-storage facility, which was all just the, you know, steel buildings and that kind of thing. And my general contractor was telling me, you know, if you just like buy an existing building and like retrofit that, it's way cheaper than what we're doing here. And I was like, oh yeah, I guess maybe I should be looking into that for the next one. Yeah. Not a bad idea. Yeah. Yeah. Have you ever had a deal that went like horribly wrong where you lost money? Oh, sure. Yeah. Who hasn't? Yeah. And like, how does that happen? You know, like what went wrong there? I've got a couple. I mean, one where we didn't actually lose money. We just didn't make nearly as much money as we thought we were going to make. So the first deal that I did that I raised capital on, $575,000 office building, we sold it 18 months into it for $750,000. I was planning on over $800,000 on the exit and making a lot more money. We ended up only making like 8%, give or take on our money. One of the partners was a developer who ended up stealing over $10 million of investor capital. It just disappeared overnight. And he stopped responding to investor calls. And it became like this really big deal here in Nashville. And so I didn't know what to do. I got really worried about it. And I had been advised that there was a chance it was going to get caught up in an FBI investigation and frozen. And I didn't want to deal with that. And so we kind of fire sold it. So I grabbed one of the tenants. I said, hey, if you bought this building, you're going to pay less than a mortgage than you're paying me in rent right now. Here's how that works. Let me help you buy this. And so I helped them go through that process. So it ended up working out really, really well for both of us, actually. And so that's, you know, it is what it is. We still make money. I had a deal where I lost a million dollars back in 2022. That was a bit of a different, you know, that one, that kind of sucked. It's a decent amount of money. Sounds like it. Yeah. Basically one of my partners went rogue, bought the debt on the property. It's a, it's kind of a complicated story, bought the debt, told me verbally that I didn't have to make any of the payments. Obviously, never sent us any payment demands. Six months later, decided that he wanted the property for himself, which I don't blame him. I had assembled a bunch of land for like a million...$250,000 to $1,500,000 an acre. And it was valued at $2.5 million an acre. And it was $4.5 million acres. So there was a lot of cash just sitting there. And so he decided to foreclose on it. And something went wrong at title. And so we ended up not being able to get title insurance issued. And I was sitting there at the closing table. I had $3.5 million sitting with the title company to pay off the note. And they're like, we can't issue title insurance on this. I was like, it's going from me to me. I own the property. I am paying off the note with my cash. They wouldn't issue it. And to this day, I can't figure out why. It makes absolutely no sense. So if anybody listening has any clue as to why something like that might happen, please let me know. I'd love to figure out why. So that was tough. I'm not going to lie. I wallowed away in a hotel room in Charlotte, North Carolina for the weekend because I was there with my girlfriend. Got back home, turned around, wrote my investors a check for a million dollars, made everybody whole, and we called it a day. So they all still invest with me for the most part, which is a pretty great outcome. But that was a really tough time. On that whole note of getting people involved in the deal that are good, whether it's, I guess, partners or how do you find these people? Is it just like, yeah, I know that guy. I can bring him in. Or is it like referrals that friends of friends? Or how do you make sure you get good quality people who don't cause a huge problem? And if they do, how do you get out of a deal in a clean way so that you're not stuck with the wrong people? Yeah. I mean, I don't hardly partner with anybody anymore. I mean, I either have to have known you for a long time if I'm bringing you into my deal or if you're bringing me into your deal, which I have people ask me like, hey, will you come in as an advisor in this deal or whatever, like all the time. And at that point, I'm like, look, the only way that I'll come into your deal is if I you're in the mastermind and I'm coaching you through this whole thing. And I know that you know how to actually go through the process, right? Because it's just not worth it to me anymore. The longer you're in this business, you start to realize like having equity, like quote unquote, free equity as an advisor in deals, isn't worth it with the way that some people act and behave in the way that they invest because it becomes a liability. And to me, I don't have time for that. In your presentation, you were talking about this idea of whether it's sending mail or a cold calling or something, but reaching out to property owners who have owned their property for, I think it was seven years or more, because institutional investors will typically sell after five to seven years. You also mentioned finding property owners who bought around five years ago because their rates will be resetting soon, which I thought both were brilliant ideas. But I'm wondering, how do you find these people? How do you know which people bought five to seven years ago and, or, you know, what their loan amounts were or what the interest rates were or anything like that. And I actually do know the answer to this, but I'm curious if you have a different way that you do it. Yeah. Yeah. So, I mean, the easiest way is to just go into your local tax records and figure out anybody that bought property five years ago. I mean, you can go in and basically just filter it by properties that have transacted before, you know, X date or after X date, however you want to do it. And that'll tell you how that's really all you need to know. You don't even need to know how much of a loan they have, what the interest rate is. If they bought anything five years ago, the interest rate is going to be lower than it is today unless they just had horrific credit and somehow, or did a hard money loan and just kept it and never refinanced it. So that's what I would do. Local tax records. That's the easiest thing to do. And the institutional investors... So are we talking like REITs and that kind of thing? Yeah, REITs, syndicators, private equity funds, whatever. They typically sell every five to seven years because that's when, one, you can maximize velocity of capital. That's when you're maximizing your potential returns on any given deal, any given deal. It doesn't matter if you're mom and pop or private equity. Five to seven years is typically the best juice you're going to squeeze out of a deal is in that time period. And the best tax benefits, the majority of the tax benefits you'll get from a deal all happen in that five to seven year period. So when some people tell me like, oh, I want to hold all of my deals forever, I'm like, I think that's in theory a good idea, but you should be open-minded to selling some of these assets every five to seven years. In terms of squeezing out the most tax benefit, is that like accelerated depreciation or something? Yes. Yeah. So you do accelerated depreciation and typically like five to seven years is when you're going to be able to write off a majority of it. How often do you do cost segregation studies? Is that a common thing you do with your deals? Every single deal that I'm holding for at least more than two years, which is every deal. Yeah. I've got a couple pieces of content out there about cost segregation studies and what they are and why do them. I'll link to it in the show notes, retipster.com forward slash 226. Yeah. I mean, you're basically just taking the different components of your property and putting it into different buckets so you can depreciate certain portions of the property faster. Correct? That's right. That's exactly it. Yeah. Because I mean, they're going to look at commercial real estate and according to the IRS, you're going to write it off over a straight line basis of 39 years. So every year you get to write off one 39th of the total value of the property minus the cost of the land or the basis of the land. And that doesn't make sense. You're going to write off one 39th of your HVAC unit. Well, that's going to be depreciated off over five to seven years instead because we all know your HVAC unit is not going to make it that long. So you have an engineer, a cost segregation engineer come in and they separate all of that stuff out so you can actually write it off in the proper time. And so you get some massive benefits out of that. You said something that I thought was kind of brilliant. I just have never thought of this, but you had pulled up a slide in your presentation with a map of the different Starbucks locations. And you were talking about how Starbucks spends a lot of money to make sure they only buy in good areas. And we can basically ride their coattails and buy wherever you see Starbucks popping up because other big retailers want to be in those areas too. I thought that was super smart. Just made me wonder, is there a way I can just like go directly to Starbucks and ask them, so where do you want to be? So I can buy land or buildings near those places and get them ready for you. Is that something you can do? Or is that, am I oversimplifying how that process might look? No, you could. I mean, that is exactly how it works. So, I mean, they do have what's called tenant rep brokers, representing them in pretty much all major cities, right? So here in Nashville, there's one guy that pretty much does all the locations for them. And so we'll talk to him whenever they're looking at finding a new location for a lease, right? And so when they do a location, like here in East Nashville that they just did a couple of years ago, he was the guy that did that deal, right? And so you're welcome to reach out to those brokers. They represent Starbucks or AutoZone or Target, whichever brand you pick them, there's probably a local broker in your area that represents that brand in that area. And they are actively looking for sites. And so if you go to conventions like the ICSC, the International Council of Shopping Centers, they have a recon real estate convention out in Vegas every year. Almost all these brands go out there and you can get to know the real estate directors and whoever and get to know what they're looking for, what markets they're actively looking in so that you could see if maybe your properties are a fit or if maybe you should be looking for property to buy that could be a fit for them. You had mentioned something about the importance of the AM and PM side of the road. Can you explain what that even means? What is the AM and PM side of the road and why is that important for a tenant like a Starbucks or any other type of tenant where the AM or PM side matters? Yeah. So there are some nuances when you get into retail, especially in commercial real estate, There's a lot of considerations that you'll have to take into account that you may not necessarily think of unless you've been in this business for a little while. But Starbucks doesn't want to be on the PM side of the street, right? They want to be on the AM side. So what are the AM and PM sides of the street? Well, the AM side of the street is the side of the road that is going to where everybody's going to work in the morning, right? So if you think about it, if everybody lives south of town, and they're headed north of town to, you know, north to go work, then the eastern side of the road is going to be the a.m. side of the road, right? Because you can very easily just go north, pull right in, take a right, right into Starbucks, get your coffee, turn right as you're going out. You don't have to cross any traffic. You don't have to wait at any lights. You don't have to deal with any problems, right? Whereas if Starbucks was on the wrong side of the road, Now you've got to get into the turn lane. You've got to go wait at a stoplight. And then that's always a problem. And once you get your coffee, you've got to now turn left across all this traffic to get back out. And of course, in the morning and rush hour traffic, that's such a problem. So what that causes is your consumer to say, you know what? It's probably easier for me to just go to the next coffee shop instead of waiting on this one. That next coffee shop might be at Dunkin' instead of a Starbucks. So now they could lose out on that customer because they're on the wrong side of the road. Conversely, Kroger or Publix or any other grocery store, they probably don't want to be on the AM side of the road because you're not doing your grocery shopping as you're heading into work. You're doing it as you're headed home. They want to be on the PM side so that you can just very easily turn right, pull into the parking lot, and then turn right as you head back out to go home. So, yeah, little things like that. You got to think through the access. What are the considerations that a tenant is going to have as they're utilizing the space? How are they actually utilizing the property? How will their customers utilize the property? All of that matters. I've heard you say that commercial is easier than residential. Are there any ways that commercial is harder? And if so, in what ways is it harder? Yeah, I mean, I think when you start getting into the nuances like what we just talked about with the AM, PM side of the road or some of the retail considerations, retail can be infinitely more difficult, right? Simply because each retailer will have its own specific demographic requirements that get very, very nuanced and honestly overwhelming. But if we're talking about flex space, it's substantially easier. You'll sign some of those leases. You will never hear from those tenants again. There's tradeoffs in every single type of asset class that you're working on. It just completely depends on what you're going for. I mean, the thing that I appreciate about commercial real estate, especially compared to residential, is that you're really getting... The value out of the work that you're putting into it, instead of having to be very careful about not going above comps in the area. If you're buying a three-bedroom, two-bath house in a neighborhood full of three-bedroom, two-bath houses, you now have to make sure that you're not going to renovate above and beyond the highest selling three-bed, two-bath house. Because if you do, then you're now going to be overpriced for the area. Whereas in my building, I could put $1,000 a square foot to build it. I could spend way more than ever makes sense to build that building out. But if I've got Bank of America signing a lease there, who cares? Because I've got corporate credit tenant signing a 10, 15, 20-year lease on absolute net terms. And I could sell that to a private investor that's going to really want to buy that asset. So it's all relative. It all depends. When you think about the future of your portfolio or your business, do you have some end game in mind? Are you trying to build passive income or I don't know, what's the goal for you 10 to 15, 20 years from now? That's a great question. I mean, right now, since I have been actively involved in the business, I haven't invested for cashflow at all, which means that my equity has grown substantially over the last six years. So now I'm starting to look at that and go, okay, cool. Now that I've done that, it's time to start investing for some cashflow. And so the next goal is $100,000 a month in passive cashflow. So I think we can get to that in the next few years. And then after that, I mean, who knows, man? To me, I always say real estate investing is like golf. It's, you can do it. It's fun. You can do it for as long as you want and anybody can enjoy it. So who knows? We'll see where it goes. If you were starting out today from scratch, what's the one piece of advice you wish someone had given you earlier on? Learn how to put good deals together earlier on. Learn how to put good deals together. That's all that matters. Because if you, if you learn how to put a good deal together, and you go out and network and find the right people to partner with, you don't have to have any of the other pieces because that's the value that you bring to the table is finding a good deal. I've done plenty of deals where I had no idea what in the world I was doing. I just found a good deal. I had control of it. And I was brought in as a partner very early on because of that. What do you think is the hardest and easiest part about doing what you just said, putting a good deal together? I think the hardest part is trusting the information or finding the information to be able to do that. I mean, hey, I've got over 600 videos on my YouTube channel on how to do that. That's basically all I talk about. So go check that out if you want to. I think the easiest part about that is that you don't have to worry about investors. You don't have to worry about financing. You don't have to worry about all of the other complicated steps. Just focus on one thing. Just get really good at finding deals and networking with the people that can solve all those other problems. When you say you don't need to worry about finding investors, is that because when you show them a good no-brainer deal, they're going to want to throw their money at you? Yeah. Let's let somebody else that has the capital and has the investors deal with that side of things, right? If you've got the deal, find the person with the money. Typically, the person that's really good at finding the deal is not necessarily going to be the person that has the money, right? The person that's really good at finding the deal may not necessarily be the operator, right? These are all, you know, you can, you don't necessarily have to be good at everything. And I think that that's one thing that's really important for a out of newer real estate investors to realize early on is you don't have to be great at every single aspect of real estate investing. It's impossible. You're not going to be. And if you try to be, you're going to fail at some point and it could cost you a lot of money. So just recognize what your strengths are very early on and try to find partners for every deal. You don't necessarily have to find one person you do everything with, but try and find partners for every single deal that kind of compliment your strengths and weaknesses. On that whole note of finding the right information and knowing that you can trust it. How do you do that? Because I just had a self-storage broker email me a PDF about a facility that I've known about for years that's up for sale. Full of information, all kinds of numbers. And it was actually a terrible deal. A million dollars over price. Awful. But like, if I didn't know that I've hadn't looked at the numbers long enough on so many other facilities, I kind of would have been clueless to it. Maybe. But you know, when somebody just gives you numbers or just rattles off, like, yeah, they make X amount per year. This is anything like that. How do you know? Okay. Yep. That's true. I can trust that. Or I don't believe that for a second. I got to go somewhere else and find the real answer. Like, how do you know that? I mean, trust, but verify. I mean, don't believe of any numbers that I've said on this podcast. I mean, you guys are all welcome to go do your own due diligence, right? On me and all the stuff that I've said. I think that that's how it is with everybody. I mean, look, there's a lot of people that lie about everything in this business. People will lie to you about how many doors they have. Then you start to dig into it. It's like, oh, well, I invested $25,000 into a handful of deals that have 2,000 doors. Okay. So you don't have 2,000 doors. People will lie to you about how much cashflow they have come in. I get 10,000 a month. Okay. That's gross. And you know what I mean? Like there's just people inflate these numbers. Who cares? There's no, I don't understand the vanity metrics in this business. It doesn't make any sense to me. Like, look, if your BS radar starts going off, it's probably for a reason. So trust that instinct, get references, make sure that you are around this person in public or that you are just around them and go look at deals with them for a while before you ever jump into a deal with them. I slow play everything now. I do not want to partner with anybody on anything because it is so easy to partner on something. It is so difficult to unwind that partnership if things go wrong. So just keep that in mind. There's no race to jump into a partnership. On that whole thing about partnerships. So when I ended up partnering with somebody on my storage facility, they're like a minority partner and they manage the thing for me, but I still own the majority of it. This was a big thing that we spent a lot of time and money with attorneys to hash out. How do we do this? How do we figure out a way so that neither one of us are stuck? We both have a trigger we can pull to get out of it. And I've got a blog post explaining exactly what we did if anybody's interested in that. It's called the Freedom Clause. I'll link to that in the show notes. Again, retipster.com forward slash 226. But it's a huge thing to think about because you could really end up in a bad place if you don't have a mutual understanding of how it's going to work and how you can get out if you ever need to do that. So what's one thing that you see new investors focusing on that you think is actually a distraction from long-term success? I would actually, I would say that one thing that new investors focus on that distracts them from long-term success is too much of everything, right? Which I know is almost the opposite of what you're asking. But, you know, I had a call earlier today with somebody that's interested in getting into commercial real estate. And they were like, well, and I'm looking at this, you know, I'm looking at a self-storage building and I'm looking at an office building and I'm looking at a multifamily building and I'm looking at a single family home and I'm looking at this and that. And he was like, what's your advice? And I said, pick one. You know what I mean? You can't focus on all of that. They're all entirely different. You're not going to be able to find any good deals if you're looking at everything. So just pick one and focus on one thing. And that's when you're going to start to see what deals look like. Is there anything that you hear people complain about with regard to commercial real estate investing that kind of makes you roll your eyes? Commercial real estate brokers never return calls, which I roll my eyes at because it's true. It's not because those people complaining are wrong. A lot of commercial real estate brokers are tough to work with. They really are. You've got to really work to get a foot in the door with them. So if you're wanting to break in with a commercial real estate broker, you have to prove that you're worth working with. Put together a buy box. If you don't know what a buy box is, Look it up. Make sure that you have defined criteria that you're looking to, under which you are investing and, you know, go out there and just follow up every two to three weeks. Touch base with that broker. Here's what I'm looking for. Have you found anything yet? What's the latest? What's going on? Et cetera, et cetera. That's the best way to make it happen. I remember you said that at the conference. I thought that was really smart because it's actually fairly simple. It's just extra steps that most people don't do because I've totally had these experiences talking with commercial brokers and they're either rude or they just don't answer and they never return your call or something. But I can also say something I don't do is tell them a very clear buy box and follow up every two to three to four weeks. So it's like, if I just did that, that would probably solve a lot of my problems. Just being persistent on my end, not throwing it in their lap and expecting them to like perform for me. So great advice. That's right. Now that you've been in this business as long as you have. Presumably, you've made plenty of money. You're in a place where a lot of people would dream of being. And now that you're on this side of the fence, what's something that really is everything you thought it would be? And what are some dreams you had early on that turned out to be false hopes or harsh realities of the business? I mean, I think the wealth generation is definitely something that is everything I thought it would be. It's probably a lot stronger than honestly that I thought it would be, which has been pretty incredible. Having to deal with tenants that have no idea what they're doing, having to deal with contractors that have no idea what they're doing, that's frustrating. But at the end of the day, there's nothing you could do about that. I feel like in every industry, there's going to be something that you're going to have to deal with that you're not really a fan of. And so if I had to pick a poison, I think I'm going to be okay with that. When you're evaluating a new potential investment, putting one of these deals together, What's one factor you absolutely must feel good about before moving forward? What's the opportunity, right? Like, what's the story? Why are we doing this? If there's no good reason as to why... Uh, we're doing this and it's not just because we can make money, then there's no point moving forward. Right. If, if, if it's not fitting a community need, right. Um, or, or, or something to that extent, or it's filling a gap, then who cares? We're, we're probably not going to make money on it anyway. Huh. Interesting. So it's, um, you know, I heard you talking earlier about how you can add value to a deal just by getting a tenant in there, for example. Uh, is that kind know what you mean? Or are you saying, no, there needs to be like a deeper purpose to this. Like it's got to actually improve the lives of people and make money. And that's why we're going to do it. Yeah. I mean, there's that portion of it too, for me, but I mean, honestly, it's, it's more of like, if there is not a need for this in this community, why are we doing it? Right. I think that's what a lot of investors and developers get wrong. If there's not a need for self-storage in that community, why are you building self-storage? Right. If there is already too much self-storage over there, you're just going to cause a problem. You're going to build a bunch of stuff that nobody needs and you're going to lose a lot of money. So it could be as surface level as that, but it could also be, does that neighborhood really need another advanced check cashing place that's just going to prey upon the people there? Probably not. I mean, not probably. It just doesn't. We do everything that we can to get rid of those types of businesses. Do you need another vape shop? No, you don't. I There's things like that that you could tactically do on a local landlord perspective for sure. But yeah, I mean, it also just helps you, honestly, as an investor. I'll promise you this. Nobody ever got upset that their real estate portfolio wasn't going up in value because they didn't sign that pay police. Not worth it. And on that whole note of like knowing if there's demand for the thing that you're trying to put in there, how do you know that? I know how to do this with self-storage, but like I think about other stuff. Is there like very concrete metrics you can look at to be like, yes, officially there is demand now versus nope, it's oversaturated. How do you do that stuff? Yeah. I mean, I'm sure there are certain things that you can look into. I know Esri has some, hey, there's this many dentists in this area and there's probably this much demand. I mean, we don't get that tactical with it because I'm not necessarily saying like, hey, I need to have a dentist in this building. To me, it's more of getting to know the neighborhood super well and what types of businesses could all go into this space. So let's go target all of them. If you don't have really good relationships with all the brokers in an area, if you don't understand the market really well, and if you don't understand what types of businesses would do really well in that area and that are missing, you shouldn't be buying commercial properties in that area. It's the exact same in single family homes. If you don't understand who is going to be a renter and why they would rent from you, why would you buy that house? It's the exact same thing. So think through who your tenant would be before you buy a property. Well, if people are listening to this and they want to explore the commercial side of the business, what do you think is like the first step to tap into this part of the industry and figuring out, Hey, is there something for me here? Like, is there an action plan they should take to start calling brokers or do this or do that? What would you say they should do? I think honestly, even before you start calling brokers, you need to brush up on your commercial real estate knowledge first. I mean, you got to make sure that you at least understand the lingo because for whatever reason, we have our own language over here with, you know, triple net and cap rate and this and that and the other, we're going to talk our own language. So, I mean, I've got a YouTube channel with a whole bunch of free information that you are more than welcome to go dive into. It's just under my name, at Tyler Cobble. Highly recommend you go check it out because we've got some great videos on it. And I would start there. I mean, look, it's free and it's good quality content. Well, Tyler, thanks so much for spending time with me today. Awesome to talk to you more. Sounds like your YouTube channel is one of the key places they should go to check things out. Do you have a website or any other place you point people to? You can go to tylercobble.com if you want to learn any more about us, but I typically just point everybody to the YouTube channel. Sounds good, man. Thanks again. Appreciate it. Again, if people want to check out the show notes. Retipster.com forward slash 226. I'll have links to all of Tyler's stuff, as well as a handful of other things we've talked about. Tyler, again, thanks for your time. Seth, thanks for having me on, man. This was great.