Episode #081- Why You Should LEVEL UP From Residential to Commercial Real Estate Investing!

Today hosts Braden Cheek, Brian Duck and Joel Thompson discuss the pros & cons of residential and commercial real estate in an episode you don't want to miss!

Well there's there's a lot of people, they have a house and they have an extra you know 25 50 $100,000. That's not invested in the market let's say. But they they're they're like oh I could go buy another house but they're thinking I don't wanna go buy another house. That's a lot of work. That's a lot of risk mortgage payments and real estate taxes and what if the tenant moves out? All those things are keeping people from not investing in real estate and we're trying to make it easy. 876 five Houston. We're clear for launch what is up guys and welcome to how to invest in commercial real estate. What's going on? Well, an eventful weekend. An eventful weekend. I think we should start out with maybe a moment of silence for ou yeah, I think we should man rest in peace sooners go pokes though. Yeah, that was that was a much better game, you know, at least interesting. You know, both teams scored being the first one. Well I hate to say but oh you was the only FBS team not to score a point this last weekend.

The only team that got shut out And we haven't haven't lost three games and haven't been shut out in 20, almost 25 years. I was thinking I heard 65 or something but well could be it's bad. We're setting records in the wrong way. Well um this weekend we had some eventful, eventful news down in Georgia. I got sent a video this morning of, somebody will play here in a second but somebody is literally just crashing into our building. I mean just a big parking lot too. They got a dry and empty. The parking lot is empty at the middle of night one am so they don't have to drive like a couple of blocks to an empty parking lot just to hit our building with their car. I was actually impressed. I was watching it this morning. How how fast a curb a little bit of pole scrape and storefront glass can shut down a moving vehicle. I mean think about it. I mean he hit pretty hard but but what I noticed is after you look at it, he didn't even have a tire on the right side tires just is off to the side ripped the whole tire off the wheel. I mean it was nasty, it was nasty.

So just joys of real estate you know in the in the grand scheme of things. It's not that big of a deal. You know the car is insured, we'll get the building fixed, the insurance will pay for it. But this is just you know one of the joys of owning real estate every now and then a U. Haul truck just drives through your front door. Yeah I noticed. I mean we've got not to make a delivery. He hit a column bounced off a column went through the window, the window of one of our tenants knocked up some bricks. I mean so we got a good topic today. Uh You know I always reflect a lot on why more people aren't in commercial real estate and today we want to talk about you know your best investment or your biggest asset for most people is what it's their home, it's their personal house. And so I got to thinking You know maybe some people don't understand commercial real estate because the only way they have to relate to it is the only real estate that they've ever purchased which is their their primary residence. And you know, most people what do they do? They put a down payment of about 10 or 20% down and uh then they have to make a mortgage payment every month.

And then so they think in terms of man real estate's expensive. I gotta make mortgage payment every month. I got where's that money coming from taxes? They gotta pay taxes, they've got to get insurance, they've got to uh you know replace and maintain the H. V. A. C. And the plumbing and they've got to pay to cut the grass and maintain the lawn. Uh And every once in a while they got to paint the exterior and put on a new roof and it all gets so expensive. So yes is it a great investment down the road? That house is gonna be worth double what they paid for it. But in their mind it's not that great of an investment even though it may be the best one they've ever made. It's still not that great because all they've done is handle hassle and problems and pump money into this asset in order to keep it going up in value. I can tell you in Tulsa Oklahoma, the way houses go up pretty slowly here, it's gonna take you a long time to double your money, Right? I mean Around here they go up two or 3% a year. Yeah, lately we had a good run, but yeah, maybe it doubles in 20 years. I can tell you, I've probably bought, I've lived in Tulsa all my life. I've probably bought, I don't know, five or six houses. Um and what you're saying is, right, you know, if you, if you own a house that long that you want to make a good profit, you also have to renovate the inside, right?

Because now your house is 15 or 20 years old maybe and it's time that, you know, all the fixtures need to be changed because gold is the new thing. Um, there's a new countertop that you need in your kitchen. So there's another 30 $40,000. So, uh, it's, it's a hassle, man. I think here you said something that was, I think really crucial is uh, the asset, right? So like let's define what an asset versus the liability is. I mean to me, people think, you know, some exotic cars, some of these, their personal home, maybe assets, the rolex and they're, they're safe is an asset that's not an asset. Well, it can be technically an asset. I think they define an asset as anything that that you know, has net worth contributing to your or has value contributing to your net worth. You know, you owe you uh it's worth more than you. Oh, so there's technically an asset piece to that. We need, we need more, I need more. You know what I mean? For me, a liability will just start there something that I have to pay for every single month if I get to enjoy it.

Or even if I don't enjoy it every month or every quarter, there's an annual expense associated with that liability. The same thing on an asset, right? I want my assets to pay me, I don't just want the value intact. That's like the bare minimum for for any anywhere where money goes right, you need to have the value intact, but it needs to pay you, right? Yeah. So at least your house is retaining value. If you have fancy cars or, you know, jewelry or whatever. Those things are just gonna go down in value. Yeah, but it's really, most people's personal home is an asset and a liability. It's an asset in the form of yeah, it's an investment that's growing in value. But personally, they're also using it. So it's, it's a liability. They're, they're having to pay for the taxes, the insurance, all the upkeep the, so people don't think of it as man, I'll just buy another house because this is so easy. Yeah, it's such a good investment. It's not good enough to motivate them because of the experience of having to pay for all that and it's not going up. But what if we, so think about this, what if we said, hey, I've got a house you can buy and all.

It's gonna take the exact same down payment that you put in percentage wise or amount, uh, that you put into buying your home, exact amount only this time you're not going to pay a mortgage payment, there's no mortgage payment required to buy this asset. Okay, this house, you don't have to pay for the taxes, You don't have to get insurance. You don't have to pay for the maintenance. You don't have to do the maintenance. You don't have to mow the yard, you have to know responsibilities. You don't even get a phone call when something goes wrong, Don't even get a phone call or something goes on. And uh, not only is the loan on that going to be paid down, just like your purse, personal home, but it's also gonna double in value. Just like your personal home, all the good things with, with your home investment, we're going to deliver to you without any of the negative, what if I said that I had a house ready ready to go? And here's the thing, it gets even better is on your down payment. I'm gonna pay you a return on the down payment every year in your pocket without you paying a mortgage payment, without you paying taxes, without you paying insurance, without you doing anything. And you don't have to sign a personal guarantee for the for the yeah, you're not even on the hook uh for the debt.

And so really what we want to try to do is refrain, people's minds on how they think about real estate and get them away from uh something that's expensive, something that takes a lot of work, something that has a lot of risk and show them the model that we have, which we're gonna discuss more today, which is getting involved in commercial real estate. And so why on a commercial real estate, don't you have a mortgage payment? You invested the down payment, But don't you have a mortgage payment? You do have a mortgage payment, but somebody else is paying it for you? Somebody else pays it. So think about a rental house. If you buy a rental house and you have a renter in there, Are you really making the mortgage payment? No, the renter is and they're probably making more money than the mortgage payment. They're probably paying a little bit extra for maintenance. They're probably paying a little bit extra for profit. So it's paying the mortgage payment and there's cash flow, right? It's huge. And that that same example depending on the metrics of that single family home, you still are going to have the problem of going out and finding that rental property, making sure it's a good investment. All the risks associated with the condition of the home. When you buy it, then you have to wait and get a renter.

How long does that take? What if the tenant doesn't pay you now? You're gonna have to go a victim. How do I do that? How do I trash your house? Uh Yeah, they may trash it. You're gonna have to remodel it when they move out. All the things start adding up. You have to, even if the tenants paying some of it, you have to go get insurance on that house. You've got to make sure the real estate taxes are paid. Wait, wait, wait it's two am and my toilet's clogged brian. Can you come on clog it for me? Pass pass on all that. Well aside, no. People used to tell me all the time when I started buying houses that I was gonna be fixing toilets at two a.m. I'm like when's the last time you took a shot at two am like never. Okay, that's why they don't break as people don't use them in the middle of the night, they are sleeping. But anyway, that's a side note. Uh Okay so that's really what we're talking about guys, we want to, we want to change, your thinking about commercial real estate, we have commercial real estate you invest, let's say $50,000 with us. That can be a portion of the down payment. Uh Maybe the total down payments more than that.

But that doesn't matter. We're gonna pay a return on that money, we're gonna go buy real estate with it and that real estate is gonna increase in value. What you doing anything? You don't have to get the tenant, we don't even have to get the tenant, we'll have professional management coming to get that tenant. The tenant is gonna pay for that mortgage. Or the tenants, they're gonna pay the mortgage, they're paying down that loan, you're getting richer and the property taxes on the property to paying the insurance, they're paying you a feast, you can pay those things they're paying you. Yeah. Um Through cam. Yeah and then we're using economies of scale in order to hire these management companies because we have, you know, let's say 200 units in an apartment building. And we have uh 15 tenants in a multi tenant strip center. And so really the work all the work that you or people associate with real estate goes out the window because it's all covered. And guess who's paying for it, The tenants, that's the magic of it. They're not only paying all the expenses, but they're also paying you a return on your investment dollars. And so you wake up you let's say I buy a $5 million commercial building and you know, maybe it's one, maybe it's a million dollar commercial buildings down payments, only $200,000.

Okay. Two or three people could come up with that. Well what happens over you know, 20 years, 25 years that's paid down to zero. You get a return every year on your 200,000 investors, you get a return of 10 15 20% on that cash flow wise. And guess what? In 2025 years that's not worth a million, that's worth three million Plus. Like Brian was talking about appreciation like even let's just use two or 3% a year on the total million dollar property value, That's 3% on a million dollar property value, not 3% on your $200,000 investment. So the entire property is appreciating even though you only put a tiny percentage of cash in there and your bank rate is fixed. You can leverage it up way more than you think you can. And with commercial property you can actually continue to leveraging that. How many people do you know, they got into rent houses and they couldn't buy more. They got they got told no. Yeah. I just think if you buy one, let's say it's probably about 500,000 House and you put down $50,000 and get 45-4 and $50,000 loan where you're just about maxed out.

A lot of people are right, you can't go buy another one because the bank won't loan you the money. Yeah. A lot of times it's you can get 234 rentals. Now there are some caveats and ways around that. But generally speaking, you're gonna have a harder time scaling the single family homes. Where not only can we buy what the equivalent of 20 homes all at once in one property, but there's no limit to how many we can buy. They're not the the deals that were doing, the banks are looking at the ability of that property to pay it back. And and so they once we get another one that we go to a new bank we have got a new property. They're looking at that property and and our signature and that's all we need to keep buying and there's infinite scale. Yeah. I actually think the competition to buy residential property and do what we're talking about is harder than commercial property buying commercial property because people I know that are trying to do it, say they can't buy a house because there's so many people out there looking for it. They have real estate agents that know that they'll do this. And so before house even goes on the market they're calling other buyers. So it's it's I think it's pretty difficult to get into. I mean scale up. I should Think about how many people, you know, that could buy a $200,000 house, $150,000 house, $275,000 house.

And now think about how many people, you know, they can buy a $5 million dollar house. Can you think of any, maybe a few? You know, I mean that right there should tell you enough. Well There's there's a lot of people they have a house and they have an extra, you know, $25, that's not invested in the market, let's say. But they they're they're like, oh I could go buy another house, but they're thinking, I don't wanna go buy another house. That's a lot of work, that's a lot of risk, mortgage payments and real estate taxes and what if the tenant moves out? All those things are keeping people from non investing in real estate and we're trying to make it easy. I'm just confused when you buy the house or you buy several houses, right? Because let's just consider average serious investing age. You know, I forget what level that was in our list, but let's just say you're investing maybe $100,000 a year after your lifestyle in retirement or some sort of investment vehicle. You bought several houses, you're 40 to 50 and you've made great money on those houses, you had to have made great money on those houses. I don't understand the thought process of somebody going to one of the best investments they've ever made and then just saying nah let's buy netflix stock or or whatever it is or let's just let's just put in the market or oh there's this new crypto thing, it's like you know you bought that house for way cheaper than you sold it, you know you borrowed most of the money and next to nothing you lived in it and and and like just calculate your return, it was a great return.

It's it's math how much money did you make, How much money did you put in? How much money do you have now? It's a great return but yet you're not gonna do it again and I get not wanting to buy rent houses because I don't want to buy rent houses. Find another investment vehicle in real estate, it's similar. Yeah, find find, find another option, but by real estate it works for everyone. Think about how many people buy houses, Joel is the only one I know that was really successful in real estate and then he went out and put it all in crypto, what was I thinking? Uh Anyway, I don't we don't have to belabor the point. I think today was just getting people to to think about what is probably their biggest investment and their biggest asset which is their home and and how well that works for them, even with the downsides of the home of having to make the mortgage payment yourself and having to put all that money in and renovating it and rehabbing it and maintenance and all that stuff and we're saying, hey, if you will make the switch to commercial real estate, you don't have any of those expenses, the tenants pay down that mortgage for you. The property goes up in value because rents are going up, the tenants pay the taxes and the insurance and all the maintenance and you know, we hire management companies to do all that for us.

And so it really is, it's not risk free, but it's a very low risk, uh, you know, no time requirement, uh, type of investment that can produce massive returns over time specifically. I mean, how many deals have we bought this year? 5567 deals. Right. Most all of them are cash line, we're gonna send out 350 plus $1000 at for the third quarter profit cash flow. Our mortgages were paid, our insurance was paid, our taxes were paid, everyone was paid. We built up cash for reserves were reduced our debts and we still made cash and now we're distributing that to our investors. Did any of our investors do anything other than just what they normally do day to day, they're just gonna get the check and cash. It didn't even call us. And so guys, when your girls guys, when you're driving around town, look around every commercial building that you're driving by, someone owns that and someone's making huge amounts of money on that. Most likely when I was a kid before I knew people invested in real estate just never crossed my mind.

Driving by a retail center, driving by apartments, thinking how rich is the person that owns that? How much money is this making them every single month just by owning it there in another state somewhere, they don't do anything and they get checks. Well now we're those people and we help other people get those checks that invest with us. Uh So every every property you drive by is a profit center for somebody and we want to get more people involved in that process rather than less. Well, if you're one of those people go to how to invest in CRE dot tv go to the criterion fund dot com, there's deals at precision equity dot com, there's several investor lists that you can sign up for and we'll send you deals just like the ones we're talking about and you can get those checks just like Joel is talking about and join us. Alright guys, thanks