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Wouldn’t it be cool to maybe get six figure assignments? What if you could make $100,000 as an assignment fee, doing bigger deals like commercial properties? Obviously, I can't guarantee or promise that you're going to make six figures wholesaling deals. But I can tell you this, you'll probably be more likely to make that kind of money when you're wholesaling bigger properties than you would if you're wholesaling houses or recreational vacant land. 

Commercial real estate can be real intimidating, right? It can be a little scary. That's why I've asked a good friend of mine, Trent Ellingford, to come on the show to talk about this. He’s a commercial real estate investor who does a lot of these bigger deals and has been teaching and helping people do commercial wholesaling. If you want to get these kinds of larger assignment deals, you're in the right spot.

Listen and learn:

What’s inside:

  • How to land six figure wholesaling deals
  • Which properties to target as a beginner
  • How to get access to Trent’s wholesaling blueprint

Mentioned in this episode:

Download episode transcript in PDF format here…

Joe:   Hey, what's going on? Joe McCall,welcome to the Real Estate Investing Mastery podcast. You're in for a treat today. You know, if you ever thought about, wouldn't it be cool to maybe get six figure assignments? You know, when you're wholesaling a house or vacant land, we try to shoot for 10,000 bucks. You know, a minimum. But what if you could make $100,000 as an assignment fee, doing bigger deals like commercial properties? Now, obviously, I can't guarantee or promise that you're going to make six figures wholesaling deals. But I can tell you this, you'll probably be more likely to make that kind of money when you're wholesaling bigger properties, like commercial deals, than you would if you're wholesaling houses or recreational vacant land, right? But sometimes when you're thinking commercial wholesaling, commercial deals, big apartments or strip malls or office buildings or whatever, right? They can be real intimidating, can it? It can be like, oh my gosh, like, I've never done that before. I don't know anybody who's ever done that before. So you can be it can be intimidating. It can be a little scary. And I get it right. That's why I've asked a good friend of mine, Trent Ellingford, to come on the show today to talk about this. This is a guy who is a commercial real estate investor who does a lot of these bigger deals and has been teaching and helping people do commercial wholesaling. And we're going to be talking about that on this podcast. We're going to be asking him a lot of questions. I'm going to be digging deep into this because I understand I'm a little intimidated by it. Right. But I like the idea of finding somebody else that knows what they're doing, who has been there, done that, who has that t shirt. Right. And he knows how to do these deals. And what if I could just find the deals for a guy like him and bring them to him and get these kinds of larger assignment fees, you know, so if you're interested in that, you're in the right spot. We're going to be talking about that with Trent. Let's go ahead and bring him on a by the way too. I'm going to, bring him on here. There he is. Trent, how are you doing?

Trent:   Very well. Good to see you, Joe.

Joe:   So, Trent, we've got a just in case anybody bails early, we've got a special treat for everybody here. Just so you guys know, I get a lot of people that ask me to be on the show, and they just want to talk about their story and how amazing and awesome they are, and how they went from rags to riches and that's all, you know, that's nice, but I don't like doing those kinds of podcasts. I want to dive deep into the how to how do you do this stuff? What? Explain this thing, show me how this works. And so I told Trent when we were talking about this, said, hey, let's turn this into a class and let's give away some really cool free things to the audience that they can actually take and implement and use on their own. So we've put together a little, not a little. It's a, it's a massive a kit for this kind of stuff. And I'm showing I'm trying to look for the link. Here it is. If you go to Joe mccall.com/6 figure the number six and then the word figure Joe mccall.com/6 figure Trent just put together a bunch of things here. Number one he's put together what he calls a commercial wholesaling 101 blueprint. It's a it's a course on how to do these deals step by step of the way. He also did another little course called Seven Steps to Getting Your First Deal Done. He was going to walk through step by step how to get your first. And we're going to be talking about that on our podcast as well today. But this is going to be an additional thing that you can get. He's got a directory of commercial real estate websites and tools that he uses. You're going to get access to this directory. He's got like a glossary of terms. You know, there's a lot of things we're going to be talking about expense ratios and net operating income and things like that. And so he's put together a glossary or a directory of terms so you can understand kind of these fancy complicated words. And he's also got a fancy, simple, fancy spreadsheet software that will show you how to come up with you. Just put in the numbers and how to come up with a good offer. And it's very simple. We're going to be walking through these kinds of examples and stuff like that, but you can get all of that stuff for free. No strings attached to Joe mccall.com/6 figure the number six. The word figure John mccall.com/6 figure. And it's a one on one wholesaling course on how to do these commercial deals.

Trent:   Cool. Yeah. Joe, I have to say this. So, first of all, when we did speak in here, you told me about, you know, I really want to deliver just information applicable, vowing the people can go out and implement and get results instead of, you know, we can talk about my story, but really doesn't matter. Let's talk about kind of the nuts and bolts what we put together with this. If somebody will take it and go out and implement this is all the stuff I wish I had when I started, right, that I've learned over years of trial and error making mistakes. And so, yeah, not to oversell it, but I because this is a ton of extremely valuable information. So I challenge you to go out and actually use it because the results that you can get from it are there's not a lot comparable in the residential space.

Joe:   No, there's nothing. And this is a very interesting topic that I'm fascinated with. And I want to get more information out to you guys. So the link if you're watching this on the YouTubes, the link will be in the description below. All right. So Trent. You. How did you get started in the business? How did you get started wholesaling real estate?

Trent:   I'm going to try and keep this short because I didn't start out as a whole. So I started in residential real estate doing single family rentals. I bought my first rental property when I was 22, actually dropped out of college and had decent enough credit to get a loan, did all the things that I wouldn't do now. Contacted a real estate agent. Got pre-qualified. Did just an official process, but I bought a property and started running out. College kids. That was my first investment. Yeah, and then repeated that process and did it again. And did it again. And then when 2007, 2008 hit, I realized there was a lot I didn't know. And, you know, you pay for education one way or another. And that was an expensive learning experience. And so coming out of the recession, I took a different approach and really started to learn from others because up until that point, I was just doing a 100% on my own and took a couple pretty big hits. And then I met a gentleman in Phoenix, Arizona. I was actually introduced to him who was investing commercial real estate. I was still in single family. Now I had wholesale properties, just a couple. It was not my model. It's not what I was doing. So but I understood the process. And when I saw what he was doing in commercial real estate and saw his model, honestly, Joe was like, I looked at this and said, I've been playing in the kiddy pool because what I saw him doing was not more difficult than what I was doing in residential, but the results were just exponentially larger. And because value in some of your viewers may know this and some don't, but value in commercial real estate is determined by the income, not so much by comps called value in residential. So if you increase the joy the gross operating income, increase the NOI, the net operating income, in terms, you increase the value of the property. And when I saw what he was doing, that's what led me to get into commercial real estate, to actually get into wholesaling, commercial real estate. I never connected the dots. And, you know, there's no gurus or anybody out there teaching and there's no courses or classes on commercial wholesaling. So for whatever reason, it just never clicked until we had a property. There was a deal of my partners. I had two partners on it. They wanted to let it fall out because they found something better. And I looked at it and I said, well, no, I could find a buyer for this. And they said, okay, well, we got seven weeks before, money goes hard. So our seven weeks, excuse me, seven days before the money goes hard. So we need to cancel West rule and six if you can find a buyer. I'm like, six is cool. We'll sign the contract. And there's more to that story. But the short of it is. That's exactly what happened. I found a buyer we signed. I'm going to sign a contract for multiple six figures on that deal, and then that's when the lightbulb kind of went off. I was like, okay, wait, this is something I've never thought about. Can I do this again? You know, can I, can I duplicate this? And so that's what led me to where I am now.

Joe:   And how many years ago was that?

Trent:   Close to five.

Joe:   Five years ago. And what market was this in? Phoenix.

Trent:   Phoenix, Arizona.

Joe:   Okay. Now, as some people are thinking, okay, interest rates were a lot lower five years ago than they are today, right? So how is that how is the how has the increase in interest rates affected your business?

Trent:   Oh, it's definitely affected the debt markets. Things just on pencil the same right. When you go from interest rates at 3.5%. And now on a lot of commercial products, we're looking at 8.5%, if not more. And so there was this lag for a minute where sellers still wanted yesterday's price. The buyers were willing to pay it. And so we saw kind of a lull the least I did. But we're in a place now where sellers have come to a lot of sellers. I've come to terms with that and they understand that their price is too high. You know, they wish, well, I should have sold four years ago. I should have sold five years ago. But they didn't. And so if they want to sell, they have to come down on price. But really, Joe, it just comes out and it opens the door to more creative terms. And so, you know, creative financing has gotten extremely popular. You know, you've taught it for years. And then you have people like these movies. You've made subject to's extremely possible. But those aren't new strategy, right? Those strategies have always been around. And what I tell people to is are much more common in commercial real estate. Oh yeah, I'm way more common. And so seller financing is a big part of what we do. You know, if we can get a seller financed, carry it a 3.5% interest rate when the debt markets are 8.5%, then I can help get the seller lower for their property. Better still makes sense on a cash flow perspective from the buyer. So it's just about being creative and putting the deals together.

Joe:   I want to remind people to I mean, we're not talking about buying and holding these for ourselves. You can. Right? But we're just wholesalers. And so it almost doesn't matter what interest rates are doing, as long as you have buyers who are hungry for deals, there's always going to be sellers that need to sell. Right. And you just you just got to put the deals together and you don't actually close on the deal, and you don't buy it until you have somebody to sell it to or assign it to. Right.

Trent:   That's exactly right. In fact, we don't even let. Our money go hard. So if you think about it, what's the upside of wholesaling? And I would say this about commercial and residential. I don't think that should ever be your end all be all strategy. Okay. If you want to create some long term wealth, you need to start holding some assets, have some long term cash flow. So money's coming in when you're not working and take advantage of that long term appreciation. But why is wholesaling residential so attractive. Low barrier of entry right. You don't have to have a lot of experience. You don't have to be licensed. Also little to no capital. Maybe you're putting up some earnest money, but it should be refundable within a due diligence time period, but usually with low risk. What do you get the reward. So you're getting five, ten, maybe 15 K rips on that was commercial. You get the exact same benefits as you do with residential super low risk. We're not taking on the market risk. We're not taking on the capital risk. But then the upside is significant way bigger.

Joe:   Yeah. All right. So basic steps to wholesaling a house. You know as you find where the demand is. That's where I always start. Right. You find the markets where there's a lot of activity and high demand for properties. You find motivated sellers, people who own property. They want to sell it. You talk to them, you make an offer. You might have to make a bunch of offers. You might have to do a lot of follow up, when you get it under contract, you make an offer, get it under contract, then you find a buyer and you bring the deal to them. You either assign the deal or you double close and you make your money in the middle. You get a property for $100,000. You sell it for $120,000. You make the middle 20 grand. That's your wholesale fee. Same with commercial. Is there any difference?

Trent:   Almost exactly the same. So the mechanics themselves are super, super similar. It's the nuances of all those little activities. Yeah, that do make it different. You know, if somebody were to just jump in straight from residential to commercial, is it a completely lateral move? No it's not, you know, part of the free stuff that we're giving everybody is a glossary of terms. I can't stress how important that is. Just being able to understand the language and have those a little bit more sophisticated conversation. But yes, finding that motivated seller. Although seller motivation in commercial is typically a lot different than residential, it's not somebody who just lost their job or doesn't, you know, they're about to lose. The house is going into foreclosure. Most of the time it's they're processing their 80s and they're thinking, well, yeah, maybe I would sell. They typically don't have to sell, but they're open to sell. Don't get me wrong. You do occasionally get the somebody that was in residential decided they wanted to jump in a commercial bid off more than they can chew, or change asset types, or the son and daughter that inherited a property. And they live out of state. They want nothing to do with it. For the most case, it's usually that retirement age later in life. That's. Yeah. You know what? I think maybe now was the time if it was, the right offer would sell. It's the way you get. Data is very similar. The way you speak with the sellers is different for sure. The way we structure our offers and underwrite them is different. And the follow up, though, with everybody says the money's in a follow up and this is no different. It's building that pipeline. Sellers want to work with people they trust and have a relationship with. And so that's another key thing. And I think where beginners maybe struggle is confidence on the phone. Yeah. Because if you haven't done it is it's tough to be confident in something that you haven't done before. But oh yeah, if you're if you're a seller, you want to work with someone that you have confidence that you can actually execute and perform. And calls are still because you're dual cycle. This is another important thing is longer than residential. Yeah. You're not tying a property up and turning it in seven days or turning it in 14 days. The due diligence periods are going to be 45 to 60 days and then another 30 days on top of that for a week. And so you're typically looking at 90 days close of escrow.

Joe:   What is COE.

Trent:   Close of escrow. So actually closing on that deal is a longer cash cycle than a residential. But to your point, you know, if you're taking a $100,000 property and you're trying to pull a $20,000 spread on that wall, if it's a million over property, same percentages, I'm now trying to pull a $200,000 spread on. That's the reason we can take bigger spreads, is just because the price points are so much higher. Yeah, right. And for beginners, I always tell people, look, the big stuff you're going to come across it. The $50 million, the $80 million apartment complex or hotel. And you're going to get dollar signs in your eyes, like, I could make seven figures. I could make multiple seven figures. Look, when the home runs happen, great. But focus on the low hanging fruit. Really, the sweet spot is that million bucks. So maybe 7 or 8 million bucks. It's too big for the residential guys. It's too small for the funds on the reads. So you have the sweet spot where you're not competing against them to get it. But there's still a ton of buyers. And in fact, I'll say one more thing to that, too. The buyers are different than residential, you know, like most your buyers in residential. You know, when the capital markets and interest rates really increased. They started to sit on the sidelines because most of them rely on hard money lenders. You have a lot of commercial buyers that they have to play. It doesn't mean they're not going to be more conservative. They're not going to take on wild risk. But if I'm managing $2 billion and I have to pay return on their money, you got to put that money to work somewhere. And so, you know, I hear about, well, isn't the commercial market going to crash? Look, every market has ebbs and flows and that's a conversation we can have too. Because I always laugh when somebody says, well, isn't commercial due for a crash? What part? Office hospitality, industrial flex. Mobile home parks are being like, what are we talking about. Because commercial so broad. But there's always opportunities. Just position yourself on the right side of it.

Joe:   That's a really interesting point because if you think about it, a lot of these buyers, they have a ton of money. They have to deploy it. They've got to put it somewhere afterwards. And a lot of them also have 1031 exchanges. Right. And they have a deadline of how many months to actually place that money to similar property.

Trent:   Yep. So they have to identify they've got a few months to identify and then they've got a place at capital. And, you know, we're working with you right now that have 20 million that they don't want to pay capital gains taxes on that. So they've got to roll that money into something.

Joe:   Yeah. So if you don't know what a 1031 exchange is, it's basically when you sell a property that you own, you have a certain number of months to put that money somewhere else in another deal, or you have to pay capital gains taxes. You have to pay taxes on the gains that, that of that money. So that's an interesting perspective. There is in some ways, these buyers are more motivated than residential buyers because they have to place their money somewhere. It's not earning interest, so they have to place their money somewhere. Right. Super important now okay, I want to I want to ask like what types of properties you gave a sweet spot a price range? I like that we did a million. Is that what you said?

Trent:   Yeah, I think that's a really good sweet spot to work in.

Joe:   Okay, so what kind of property commercial properties are you looking at then?

Trent:   So, myself and my team, we are, I would say asset agnostic. We work on several different types of a property types. Anybody who's new. I definitely don't recommend that. I think you should always go deep before you go wide, because if you're chasing a bunch of different property types, they all wander right different way. The language is a little bit different. You're going to get very good at, not getting anything across the finish line. So pick something. So when I started the first deal that I actually did, which wasn't really planned, was office, but I really don't do a lot of in office, although that is changing because right now, what is everybody doing there running from office.

Joe:   Yeah.

Trent:   You can't practically we can give it away because so many people are working from home, especially in your big MSAs. And investors are looking at, okay, how do we change usage? Can I change it to multifamily? Can I change it to maybe, self-storage? Some investors are scraping it and they're just coming up ground up with new product. Wow. So whenever somebody runs away from something, I think there's opportunity. Because if it's selling, it was selling at 250 bucks a flip. And now we can pick it up for 50 bucks a foot. Well guess what? People still need office. Not everybody, but people still need office. If we're in it at 50 bucks a foot and put in another 50 and make it the nicest office on the street, well, we're in. And for 50% of our competitors, we can actually lower rents and price them out and we can fill it. So there's still opportunity with that. But during Covid, that was interesting because, multifamily skyrocketed rental price, right? The demand for affordable housing industrial did as well. Most markets industrial's like 9,099% occupancy. They couldn't build it fast enough. And so crazy returns. But office hotels, they were all bleeding money like hotels took huge hits because nobody could travel. And after a couple years of that, I was tying up hotels for pennies on the dollar to flip contracts to multifamily developers to change the usage to apartments, because high demand for apartments, low demand for hotels. And so it was a nice position to be in.

Joe:   You were said you were property agnostic, but you if you're somebody beginner, you want them to maybe drill down deeper into a specific type of commercial. So what would be some examples of a good types of properties for a beginner to like drill down into?

Trent:   Yeah. So if you're if you're a beginner, go after the low hanging. You know, there's nothing wrong with singles and doubles. And the nice thing is as a single and commercial still home run and residential. Oh, yeah. And so I think self-storage is great. You're going to find that.

Joe:   You were saying that, you were saying self-storage is great, right?

Trent:   Yeah, it's got a little bit more competitive, but that's actually good news to so many people want it's a high demand asset. We have seen a lot of institutional buyers moving into the space, meaning hedge funds and REIT's. And so you're going to find that there is it used to be about 80% more. That's not the case anymore, but there's still a lot of mom and pop owners out there. Yeah, and that's the type of stuff I like to target. And I would recommend anybody target. So if you look at mobile home parks, RV parks, those are all assets that have. 80. Like RV parks, it's over 80% of the owners are mom and pop owners. Institutions have started to make the move into mobile home parks for sure, but a lot of those are just owner operated. They own one of the homes on the park and they're managing themselves. They're 84, 85, and they're open to potentially selling. So when you're making that transition from residential and maybe some people listening, you're brand new. Okay, great. But if you're making a transition from residential to commercial, it's a much more similar conversation because you're speaking instead of going through attorneys and different brokers and you're speaking directly to the owners, and they're just average people.

Joe:   What about, smaller strip malls? Are those in that 1 to $1 million range?

Trent:   They are, and they do exist, but I don't do a lot of them. So that's those are typically triple net. Meaning that the tenant, they're also paying all the expenses. So street pass through for the landlord wherever the gross income is. There's also their net. There's high demand for that retail. And we've had a few of those under contract, but it's not a big focus of ours. It's a and really, the biggest reason, Joe, is it's a more niche type of buyer. And we haven't put a lot of energy into building that buyer list. So I would never tell somebody not to do it. It's just not our focus or our expertise.

Joe:   Okay. That's good to know because that's one of the first things I thought about when I'm thinking commercial real estate. I think strip malls.

Trent:   Yeah. And in fact, a partner that we work on, other deals, that's his focus is just that retail triple net. And they do extremely well with it. But from a wholesale perspective, we have found the best success with things like self-storage facilities, smaller industrial, mobile home parks, RV parks.

Joe:   Now, when you say smaller industrial, what do you mean by that? Would you have some examples? Yeah.

Trent:   Like, a ten, 20,000 square foot. Yeah. Now let's back up the 200,000 square foot eight class credit tenant industrial building. If somebody had that truly off market and was direct a seller with a contract, I could move that in a heartbeat. I mean, there's such high demand for that. That's a quick phone call and people would gobble that up. There's a bunch of funds and family offices that's often very difficult to get, but that's stuff that will pay you multiple seven figures. That's what I'm saying. Like if we were, we don't try and go after that because you could spend so much time and energy going down that rabbit hole to never get a deal done. And my experience, I want to save some people time here. Most people that say that they have that, or they say they have the 400 unit apartment complex, they don't. It's a big daisy chain. Nobody's direct. The more links in the chain, the more likely it's going to break. And you can waste hours and hours and hours that you will never get back on a deal that you're never going to get done.

Joe:   You're talking about when you when you're talking about daisy chain. You mean there's a lot of wholesalers in the middle trying to sell this thing?

Trent:   Correct? There's the there's a lot of people that like to play like they're in the commercial space. I don't know why, but it's reality. Like, I will have people and here's some red flags. I'll save some of your viewers a lot of time. Somebody that goes through, says, hey, Trent, I've got about 30, 40 off market properties. Can I share them with you? That's a red flag right there. Yeah. No you don't. And if they send it to me, it's a list is being recirculated by a bunch of different people. And they all think, oh, I'll tack on a million bucks and all tack on a million bucks. And so I vet that stuff very, very quickly. And because I know most of it's bullshit, who holds the contract? Nobody knows the contract. Nobody's in control. If, they don't, but their partner does. That's code for Daisy chain. Who's your partner? Can I have a conversation with him? If I have a buyer and we're putting together this contract. And because sometimes I don't have the contract. But I'm direct to sell or my partner short to sell. Okay. Can you set up a call with the seller? Yeah, they can, if they can't facilitate those things that I'm not going to waste my time. Sure. Go after the industrial. There's ten, 20,000ft². That's going to be a million to maybe 4 or 5 million bucks. We're back to that. Mom. Pop operated it maybe to a fairly sophisticated gentleman that owns 4 or 5 of them. But he's not a farm. He's not a family office. He owns them and himself. He operates as himself. And what we're looking for is value add, right. Where are some inefficiencies, where an end buyer can come in and add value below market rents would be the easiest example because it doesn't take a lot of capital, sometimes none at all to increase rents. But you have mom and pop owners that have owned, whether it's industrial or multifamily or self-storage or mobile home park, and they've owned it for ten years, 20 years. They haven't raised the rents in ten years. Because they know the people. That's a common one. I'm like, why haven't you raised rents? Because I know everybody. They know me. I don't want to raise rents.

Joe:   Yeah, okay. I'm writing down questions and stuff like that. And so, you're looking for low hanging fruit, and in the commercial wholesaling space, you're thinking self-storage, mobile home parks, RV parks, smaller industrial.

Trent:   And I'd add one more thing to that small multifamily, like 10 to 50 units or 10 to 70, maybe once a year get 100 units. That's where the funds and the REITs are playing.

Joe:   Yeah. 10 to 70 units. Yeah. Are you doing any new construction? Small industrial, new construction?

Trent:   Yeah. No new constructions. Really. Now I am partners myself and some partners are doing some new construction. Yes. Not my expertise. So I partner with people who. It is their expertise. And we're doing ground up, mobile home park, self-storage and multifamily. I'm in the process of wholesaling a small ten unit development that's been entitled. So it's is shovel ready for the end investor. We're very close to getting the assignment contracts signed on that. But for the most part, no I don't.

Joe:   I'm just wondering if there's opportunity to wholesale vacant land where you could put a small RV like I'm thinking of in Saint Louis when I'm driving down south to go visit our family lake. You know, there's these lots that are next to the freeway that are popping up where they're building these RV storage parking lots, which that are covered, you know, and, these things, they, they fill very, very quickly, right, that you see them being built. And then the next time I'm going down there in 3 or 4 months, it's full of these RVs and boats that are parked underneath these. And they don't even have they didn't even pave with asphalt. The road, you know, it's just rock. It's just so I'm wondering like, and you're seeing, different vacant lots that are selling, modular homes or they're selling tiny homes or they're, they're building these little smaller strip malls or little, warehouses where they're putting things in there. Right. So is there a market for wholesaling vacant land in certain areas to commercial builders that will, you know, investors like you that will build some there?

Trent:   Most definitely there is. And so I know people that operate just in that space alone and in two different capacities, some who are finding the land. And if you are wholesaling it, but it's going to be turned into an RV park, storage, RV park and bulk storage, which is I mean, those things are cash cows and very little maintenance involved. And like you said, not a whole lot of construction costs involved either. Yeah, but if there's a zoning change that has to take place, if you want to wholesale that you need to make sure that your contract with the seller is contingent on the approval, final approval from the city, because that's what your end buyer is going to want.

Joe:   Sure.

Trent:   So that's going to be a longer process. Depending on the size of the municipality, it can be four months, six months, nine months, maybe a year before you get the final approval from the city. That's when the buyer will then let your money go hard and they'll close on the deal. The other side of that is those who don't technically wholesale. They'll go through the entire entitlement process while it is in escrow so you can close on or do it, or you can still do a while in escrow. Once you get the zoning approval, the use of change, and then the entitlements, then you wholesale to that point. And there's such an increase in value of the land because now it's shovel ready. And, in fact, the one that I was just mentioning, that's exactly what the seller is doing. They've taken it all the way up to entitlements. It's ready to go.

Joe:   So are they. I'm thinking when I first learned about, creative real estate, there was a guy who wrote a book. His name is Thomas Lucier, and he wrote a book about, options. So this guy Thomas Lucier wrote a book about real estate options. And one of the things he was saying in there is that the commercial. Yeah, real estate space was the ones who kind of invented the creative real estate stuff, you know, and it's much more common and accepted. So one of the things he talked about was, options. And when you are, when you are doing commercial deals, are you just using regular purchase and sale agreements with a bunch of contingencies in there, or are you doing simple option agreements.

Trent:   Both more purchase agreements and option agreements. But options are a great way to approach it. It depends on the deal. So we're wholesaling deals that are actually options. In fact one right now that we're working on, I just got an offer on it today from a buyer for 9 million is a hotel, but the owner of the hotel technically isn't an owner. They have a lease with an option to buy. The option expires in a few months. They're not there, so they're looking to sell their option.

Joe:   Okay.

Trent:   And so that's what I'm doing, is working with buyers to bring a buyer to the table to do it to sell that option so options can, you know, master lease options can make sense to or sometimes the numbers just don't quite. Line up. I've worked with some people in the hospitality space here that tied up multiple properties, all on lease options, upside for the buyer. Less capital out of pocket, right? And, they don't have to secure all the debt upfront, and they can improve their performance if they improve the performance with that 2 or 3 year lease, then it's much easier to get the bank financing they need to then purchase it.

Joe:   I can see that being a huge advantage to commercial real estate, because these owners are already going to be more familiar with creative type of structures, right?

Trent:   Yeah. They are. You know, occasionally I'll get the seller who's this is the only commercial property they own. They've operated themselves our whole life. They're not super sophisticated and they don't understand creative. And so it takes a little bit of time explaining. And the other cases, you know, they're very savvy, in most cases very savvy and understanding, creative financing and working with a seller. And this isn't the first time, but working with a seller right now on self-storage facility, he doesn't want to sell it for cash. He wants to self-finance it. He doesn't want the big tax implications up front, and he wants the mailbox money. He wants the check coming in every month. And so yeah, to your point, it's very, very common in commercial real estate. And there's a lot of different ways to structure it. Excuse me to make things work. You know, whether it's doing an interest equity buyout because there's good debt on the property already. So we don't flag the do on sale clause by the entity instead of the property, leave the debt in place and maybe the owner stays in and a 5% equity position, but no voting rights and they don't get paid out. But, leave the debt in place. And then a second position seller carry with the down payment. For me, that's the fun part of the business.

Joe:   Oh, yeah. There's still the, the mortgage, like, it's, there's a there's a mortgage on the commercial property. Do you still have the due on sale clauses or the things like that to be concerned about creating wraps, creative deals? You still have to be cautious.

Trent:   Yes. And cautious with commercial you do, but the debt is different. So one of the first things I ask is, is it assignable features? A lot of times the commercial debt is assignable. So there's a solution right there. Yeah. It's not always sometimes it's assignable one time okay. Great. So part of and what we're giving your viewers to is four things that we need to know on every property. Now, there's obviously more than we need to know than just for things. But there's four things I want to know on every property. Number one, what does the seller want for us? Right. What's their price? Number two, what's it actually worth. Because those are usually two different things. Yeah. You know, with a seller as an idea that he wants 4 million. My numbers are coming in at two. So based on its income what is it currently worth. Number three what's the value add. What could this property be worth. Yeah. What's it worth. What's the value add? You know, can we come in our rents at a thousand bucks a month, or we can raise rates to 2000 bucks a month. So now, instead of being worth 2 million in a year and a half, it's worth 4 million. We just doubled the value. Is there poor management in place or their vacancies that can be filled, or the additional units could be added or different income generators. And then number four is their debt on the property. And if there is debt how much. Because yeah a lot of times it's free and clear okay. Great. Solo financing makes the most sense. But if there is dead, if I don't ask that question, I might come in with an offer on a $2 million property. I'm going to offer 10%, down 200,000 bucks, and then find out that doesn't work because of their debt position. So anyway, there's that. There's always different ways to structure, but those are key things that we need to know. So we structure it right.

Joe:   Yeah. Good. And you cover that in the wholesaling one and one commercial blueprint and the seven steps to your first deal. The directory of real estate Websites and tools, the glossary of terms, all the stuff. I'm sure we've given out six of them that you probably like. What is that? And a calculator shows you how to come up with these offers. Again go to John mccall.com/6 figure to get all this dive deeper into more details. All right. So I want to ask you Trent how do you find these deals. Can you do direct mail. Can you knock on doors cold calling. Do you do PPC. What do you what do you do?

Trent:   So you can do all the above. And then I want to tie this back to something you said before to, you know, I'm not sure it can be overwhelming. I think initially, even if you're have a lot of experience in residential and the next lateral move, typically if somebody wants to move out of residential and they'll maybe step into multifamily, right. Because multifamily basically just residential in scale. There's a lot of, I think, misconceptions about commercial. And what makes it really seem confusing is the language, I think because it is different. So instead of saying down payment, we're talking about equity. Instead of saying mortgage, we're saying debt. It's the same thing. But you want to be able to talk the talk a little bit. I think it's actually easier in a lot of ways because it's not active. It's just based on the numbers. And the numbers don't lie. So once you learn how to run the numbers and that's the thing, I think people overcomplicate the underwriting. Process two and like a hack that I use as expense ratios, which we're giving your viewers that as well. So just a quick way to back in and determine what the numbers the value is our property. But when it comes to finding off market deals. Yes, direct mail works and I've done direct mail. I've done some. I have not done PPC for SEO that may work in commercial, I don't know, I don't my opinion and I'd love for somebody to prove me wrong is it's one thing to find people are searching the how do I sell my house fast for cash or something like that? I think it'd be a little less common in commercial, but yeah, I'm not speaking from experience. I haven't done it. Our bread and butter is cold calling. Yeah, it's a calling and having a conversation with the seller. That's where we get our leads. That's where we get our deals.

Joe:   Nice. I knew a guy that, would send offers to sellers commercial, mainly, smaller multifamily. So 4 to 10 units, maybe four. I'm trying to remember it's been years since I talked to this guy, but he would look at each deal based on he, and he would take a lot of guesses on what the rents were, the condition of the property, what percentage of the units were occupied, and all of that. And he would send an actual proposal in the mail, the cover letter, hey, we want to buy your property. And based on these assumptions, we could offer you this. If you're interested, give me a call. And it was a lot of upfront work. It wasn't something you could do, just that you don't, a bunch at a time. But he got a lot of deals from that. And I'm always thought that was fascinating. Do you do anything like that in commercial?

Trent:   I do not, but I know what's effective and I like it. And because you're right, there is a lot of upfront work that goes out. So you want to be extremely targeted on the properties and where you're sending an offer because. But what it's saying is you are serious.

Joe:   Oh yeah.

Trent:   Right. You're not kicking tires. You're actually you've actually put together, a formal offer. I have a buddy of mine, a mentor of mine that taught me a lot about commercial real estate. He would do something very similar. He would even take it a step further. He would open escrow if it was something he really liked. He said, call the title company. There's $100,000 sitting in Astro. You just need to sign. And so it would make it real for the seller was like, wow, yeah, we're going to get that. And so he had a lot of success just being aggressive and taking that extra step that others wouldn't take because it's a volume of what we do, meaning the Matador will take under contract or underwriting at once. I haven't taken that step. I still like it, but we're just we have people that are there, pound in the foam, that's it. And I tell anybody, look, this really is a simple business. I know it can seem overwhelming. Aversion can seem complicated. It really is a simple business. You got to pick an asset and then pull some off market data. How do we contact them? How we how we contact a storage facility is going to be a little bit different than how we contact Mobile Home Park. So contact them and have a conversation. What information do we need to get so we can make a decision? I can back into a ballpark number, just like your friend is sending him those offers right there on the phone. Based on if I have an idea of what they made last year and what they're on track to make this year, I can put in a verbal offer. And if they don't like it, that's okay, because at least now we have a dialog and I could use that to get more information from them and take them back to my quote unquote underwriting team to come back with a more official offer.

Joe:   You know, I'm thinking, this is why I wanted to get you on because you had the experience to do this. And if somebody wanted to go into wholesaling commercial, you they know that you have their back, right? Like you can actually close on the deals and you can actually evaluate them and tell them, hey, yeah, this is a good deal or no, it's not. Go back, offer them this instead. But I imagine, too, if somebody is like wanting to bring you deals, you have the financial backing behind you. So like if they wanted to send an offer, you probably have something like a proof of funds or a letter, from a bank or experience of some kind of resume that you can show. It says, hey, you know, we're we have this experience doing these deals and, and, we have already, as a certain line of credit established or whatever, we can close these deals quick. Does that make sense?

Trent:   Yeah it does. And I you know, I think one of the most common things I've heard from beginners is they ask for proof of funds, or they asked me about my experience and what I own. How do I get past this? What's really interesting is I very rarely get asked for proof of funds when I'm seeking to sell. I'm very, very wary or about my other deals, but that's just because of the conference I have. Yeah, with them on the phone and within just a minute or two minutes of speaking with them, they're at ease and like, okay, he's sophisticated, he understands the business. And so they now have confidence that I can actually perform. That is an obstacle, I think, for one, somebody new. And so yes, we have the relationships, we have the, the, the pops if needed. I people I work closely with, I teach them how to build that confidence. And certain things to say and also certain things to ask. So instead of you chasing and wanting their business, they're now wanting to work with you. If you can kind of position yourself and change that, that's effective. And, just being able to speak with confidence so they don't get asked those questions. But when they do, that's a huge piece is being able to leverage somebody who's been doing it for a long time. Yeah. And so now the seller has confidence in working with that individual. And you know, Joel, that's kind of I know you've still businesses and you've been in real estate for a long time. And there's always for me personally. And when I look at it there's always just like give and take like especially wholesaling because I told you I wasn't a wholesaler. The reason I got into the business was because I wanted to create cash flow, and I wanted to create long term wealth. When I saw that I could make two, three, $400,000, just moving the paper from one side of the table to the other. And that's worth my time and energy, because what a lot of people don't have this liquidity to maybe to be able to buy that asset. You know, if you do that a couple times now, you have enough for that down payment, even negotiate and sell or financing on a great storage facility that's going to give you a grand, a monster, 808 grand a month and cash flow, right? There's a difference between residential and commercial. Why not buy you negotiated 3% interest. You only at about $200,000 down. Awesome. So what I really stressed to everybody is learning the acquisition piece, because if you learn how to find good deals and get them under contract, you can then pick the exit, right? If it's really a good deal, you can wholesale it. If it's really a good deal, you can raise the capital to buy it or you can keep it yourself, so focus on that. But for me, when it came to like scaling, scaling a wholesale business typically involves a big team, right? You need you need people on the phone getting leads. You need closers, your acquisition team. You need the TC. You need the Dispo side. There's also training involved. And then there's turnover. And to me, where I'm at in my life, I just didn't really have interest doing that. It seemed like buying myself a job. Because when I went all in on commercial wholesaling, here was the really cool thing about it. My top line was my bottom line, I wasn't running ads, wasn't doing any type of marketing. Just making phone calls. I didn't have admins and acquisitions and dispositions, whatever. So if I sold the property, I'd made 300 grand. I made three on a grand on that deal. Yeah. And so I didn't have to go out and do 50 deals in a year. Like, I don't know about your viewers, but how many? That that's more than a lot of attorneys and CPAs and doctors makes an entire year. And we're talking about that on one deal. So yes, the deal cycles longer. But what if you did two or 3 or 4 of those in a year's time? So for me, it was like, okay, it's not about more deals. It's about better deals. It's about bigger deals. But with what's taking place right now and what I mean by that with multifamily. So once it was bought when interest rates were super low, but it was bought on bridge debt, that short term debt. Right. Five years that stuff's come and do and refinance out of it and pay their investors and keep the property. Well. Interest rates are now six and a half, seven and a half a percent, whatever it may be. Most banks are saying, okay, we'll refinance it, but we're not going to refinance 70, 75%. We'll get a refinance 55, 60, 65%. So you got to bring another 3 million to the table. There's whenever there's difficulty there's opportunity. And so there's you can just see it and you can fill it. And it's happening right now. And there's going to be another huge transfer of wealth. So for me it was like, okay, do I go out and build a team and train or manage or do I teach other people how to do exactly what I'm doing them partner with them on deals and those you want to go in and put out and the work will partner, and those who don't will. That's on them honestly. Right. So that's what kind of led me to what we're doing now, because I would say 50, maybe 60%, at least 50% of the deal flow we have right now or just from everyday people that we've started working with, and they're out there finding the deals are bring to us are really cool.

Joe:   Yeah, we're going to talk about that and we just have a few more minutes here. But again, guys, if you want this course, if you want to learn how to bring deals to Trent so he can buy them, go to Joe mccall.com/6 figure. I just wanted to ask you about how do you make the offers and you talked about, you. Yeah. To determine the income, the gross operating income, the net operating income. And you make your offers best based on expense ratios. I think you said here. Correct. So explain that. And what kind of water example deals.

Trent:   So cap rate I've seen videos where people take an hour to explain train own cap rate and make it really, really confusing. Cap rate is really simple. It's the return that you're getting on that property. So for simple math, if I have $1 million property and I buy it at a 10% cap rate, I'm getting a 10% annualized return on my million bucks, which is $100,000. That 100,000 is my NOI, my net. Operating income. So on a commercial property, you're going to have your gross income. That's all the rents plus any other income that comes in on the property, late fees, parking, whatever else you may have. Then you back out all of your expenses and then you have your NOI. And based on that NOI, we now know what the value.

Joe:   NOI is before any, mortgage debt.

Trent:   Correct. Before any mortgage debt. And that's a great point. So I'm glad you bring that up because cash flow and NOI or two separate, right. Because we do have to take the debt into account. But the reason debt is not considered a part of determining carburetor NOI is because cap rate tells us how the asset performs right. Not how our money performs. Right, right. If Joe buys it with only 10% down and seller financing and 3% interest, that I put 25% down a good conventional debt, that 8% interest or money is going to perform very differently on a cash flow basis, but the asset performs the same. Yeah. So the way I use that is if I'm having a conversation with the seller and I get to know them, find out a little bit more about their property, and then they tell me their gross income last year was $200,000. Well, if it's a self storage facility, I know their expenses are going to be somewhere around 30 to 40% of their gross income. So I just use an expense ratio of 35%. So I know for every hundred thousand dollars, about 35% of that is going to go towards expenses. So if they're brought in $200,000, while only about 130,000 of that is their NOI. Now, if I need to get that on a ten cap, which I don't, I could be a little more aggressive than that. But at a ten cap 130,000 times 10%, there's 1.3 million. There's my number 1.3 million. And I'll make a verbal offer on that 1.3.

Joe:   And so different types of commercial have different expense ratios and different cap different cap rates.

Trent:   Yes.

Joe:   So can you run through an example of the different expense ratios of the different you mentioned? Self-storage, mobile homes, RV parks.

Trent:   Yeah. So self storage, I use a 35% multifamily is probably the most subjective because cap rates change market to market. Where self-storage for the most part trades versus. And when I say trade what it sells for the trade for about the same cap rate nationwide, multifamily, that's not the case, but I use a 40% expense ratio. I know groups that use higher, they'll do 50% plus, but 40% is my number as a good starting point for multifamily. With self-storage, I like 35%, except for maybe certain markets where insurance has gone up like Florida or bump it up to 40%. But those are pretty spot on. What the other really cool thing about a job is it'll help you uncover opportunity, and it will also help you. Very. I'm all about efficiency. I don't want to spend weeks working on a deal that doesn't have legs in the for sure, sure. So if somebody comes in because I'll say, hey Trent, I have this great deal that a ten cap very first thing I look at gross income expenses, I'm going to take the expenses divided by the gross. Like, well, actually their expenses are only 15%. That's great for them. But any and buyers are going to be closer to 35%, right? Because they're not going to self-manage it right there. There's their expenses. They're going to they're going to be more. So that's not a ten cap. It's actually a five or it's actually a seven, whatever it is. So you can sniff that out. But I've also had it the other way where I've had a common the expenses are 70%, like, why are these so high? And then I find out they're paying themselves a salary of $100,000 a year, and they're making a car payments through it. Okay. We can normalize it and take that stuff out and get it back to 35%. Then all of a sudden, this deal that didn't look like a deal actually is once we normalize the expenses so that self-storage for mobile home parks, 35%, if it's city water and sewer, if it's a well in separate communities, 40%, with an RV park. It depends if it's long term tenants, because some RV parks basically are mobile home parks and just haven't been kind of found a, you know, people that's affordable housing. And, if that's the case, you don't have all that turnover. Your expenses are going to be a lot less. So 35% if it's all transient, it's going to be 50, 55%.

Joe:   Okay.

Trent:   You're going to find a lot of movie parks. Are there a mix some long term some transient. So it's going to be like 4,045%. But I broke all those down. And yeah, that's a free gift. Everybody just for tuning in or listening is a great tool to use to help analyze and determine value.

Joe:   So that's in the calculator in the classes that you have. Again this is all free Joe mccall.com/6 figure. And the reason why Trent's doing this is because he wants more deals. He's got a bunch of money. He's got capital that he needs to spend. He's got buyers. I got a bunch of capital that they need to spend and he's looking for bird dogs. He's looking for people that will bring him deals. And as I'm listing this, I'm really interested in this. I'm thinking back about what my friend did, where he was sending offers. I mean, what if guys, you could learn how. How to find these deals. Learn how to create offers and just send a bunch of offers. You send 100 offers. You're probably going to get some phone calls, right? What if you can send 100 offers every month to these properties? Brant will. I mean, Trent will also be talking about like what markets to stay in, what markets to avoid. Right. You're probably talking about staying away from certain states. Certain counties and.

Trent:   Yeah, absolutely. In fact in the free training that they get as well, which I think you're going to drop that link. I talk about all that stuff too, like what states we focus on, which ones we stay out of, what I consider to be the low hanging fruit. And if you're starting, here's where I would start and what I would go after. So yeah, I break all that down.

Joe:   Nice. Again Joe mccall.com/6 figure. Check that out. And, Trent sure appreciate you being on the podcast, man.

Trent:   Yeah, man. It's been a pleasure. Thanks for having me on. And within all that stuff, at Joe McCall 6 figure there's a free, much more in-depth training as well. Sort of walking through this. So, if it resonates with anybody, guys go out and make it happen.

Joe:   Yeah, we flew through this pretty fast. But Joe McCall.com/ 6 figure and the description will be in the YouTube video down below. All right. Got to go. Trent. Thank you so much.

Trent:   Appreciate you. Thank you.

Joe:   We'll see you guys later. Bye bye everybody.

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