StripMallGuy

There was no chance I was going to agree to take him to ride his bike after work today. He kept asking, used charm, pestered, asked what my objections were, asked 7 more times, and smiled a lot. You know, a textbook sales process. And so here we are.

Many of you will be joining us in New York City for the annual Real Estate Gala. I have to admit there is no way the gala happens without our friends at Crexi Here's the back story: When I was just starting out, I noticed someone named "Crexi Mike" was following the account. I dug in a bit and thought—wait, Mike, as in the guy who started Crexi? I knew lots of people in the industry were talking about them and that they were growing really fast, and was a bit surprised their CEO would just be following different accounts without saying much. So, I did what most people who figured out the magic of this platform do—I sent him a DM. And it was legit! Next thing I know, we're chatting, connecting in real life, and then I later mention Michael DeGiorgio that I'm hosting some folks from the social media community at SOHO House in the spring of 2023. He offered to cover the bill! But they didn't just want their logo in the background; they wanted to be in the room, meet everyone, and celebrate right alongside us. So, they flew a whole team in, and we all had dinner the night before. The event was amazing, and they have been all-in ever since. Last year, they sent a huge crew to celebrate with us, including Mike, of course—and they sort of became the life of the party! If you were there, you probably now friends with someone on their team IRL 😅 The Gala simply wouldn't exist without Mike taking that chance on us in 2023! Excited to welcome the Crexi team back on May 1!

Yesterday I posted about a successful real estate investor who lost it all when his last deal went bad. This stuff happens a lot, but few talk about it. If you go based on social media, you'd think real estate was this easy business where anyone who gets in makes big money. This couldn't be further from the truth. The vast majority of real estate folks only post their wins - never their losses. Every investment has profit potential, but also downside - it's common sense. But the second part, the risk, has largely taken a back seat. People picture the exit and the money they'll make and ignore that fact it's a cutthroat business that'll smack you down mercilessly. Crazy things happen suddenly, and wipe outs happens fast. -A major tenant vacates -You runs into an unforeseen delay, and you won't see any rent for 18 months longer than you thought, but the loan payments are still due -Interest rates jump 4x more than you'd imagined, your rate adjusts soon, and you personally guaranteed the loan -You finish construction and there's no demand for your product I saw this first-hand in 2014. I was 34 and went to meet a man in his early 60s so he could hand over keys. By all accounts, he was a much better investor than me. He owned lots of big properties, and been in real estate longer than I'd been alive. But he overpaid, counted on rents higher historic norms, couldn't fill vacancies at those rents, and PGd the loan. His lender didn't work with him, and auctioned off the note. He asked if we were going after him, and was relieved when I told him we would not. He is a huge and seasoned landlord with a huge portfolio, but the debt got him. I can't unsee the look in his eye. It's a constant reminder of what the combo of aggressive underwriting + debt can do -- and I think about it on every deal. Yes I look at upside, but I'm obsessed with the downside. Most of my DD is spent on what may go wrong. Are the rents too high vs what they have been historically? What's vacancy been over the last 20 years? Yes I spend a TON of time on the street view timeline. And debt? Not a big fan, but there's obviously an advantage if you use it right -- and investors want to see it. So -- I don't takedebt that's over 55% LTV, and even write it in our docs. For investors that want more leverage and want to push it - I'm not the guy. People forget upside isn't what makes a deal great. A great deal has lots of downside protection. The crazy bull run we had in real estate lead to a world where the potential profit became the obsession -- and the only thing people looked at. People became great at understanding how much money a deal could make them, but terrible at understanding the risk involved. It was backwards world. You're supposed to be really great at understanding the risk of a deal, or you're not ready to invest. The roulette player can double their money in two minutes, too—but the real question is, how much risk did they take to get there?

Spoke to a guy who did about 50 development deals in NYC, all successful. Then he pursued a more ambitious project, and agreed to personally guarantee all the debt. It went south, the bank went after him, and he lost everything he ever worked for. After all those years, he started again from zero. I always have these stories in mind, and so should every single real estate investor.

It's a new era in the real estate world. Brokers: You owe it to yourselves to forget about the golden era that's passed, and adjust to the reality in front of you. The rate environment we saw was likely a fluke. The free money party's long gone. Here's how to adjust: Yes, gone are the days where all you had to do was get the listing, make a package, and throw it on the market. That era was about talking to a ton of owners, quoting the highest price, and managing a ton of listings / escrows at once. Now you need to understand each listing inside and out. You need know if the rents are below or above market, how likely tenants are to renew, if the price per foot is reasonable, and how easy it'll be to finance. You need to speak to lenders that specialize in that particular asset and understand how they'll look at it. You need to know how to explain the deal to a buyer - both the pros and the cons. Buyers have many more deals to look at now. With all the 1031 buyers running around before, these things didn't matter. Many deals were cash anyway. That's now largely dried up - and will likely be the reality for quite some time. You need to work the deal like crazy to get it sold - just like it used to be. Your need to track the 5 & 10 year treasuries, stay on top of what lenders will quote for the asset you're going to list - and understand buyers are going to need positive leverage to make it pencil. Because of the location, strength of the tenant, condition of the property - some assets will require a wider spread than others. You need to understand why. You can't just slap a 6 cap on it and call it a day. You need to understand that the same cap rate should not apply to a new Starbucks on a main street in Dallas as a side street in Fresno. And you should understand that it makes sense to pick and choose the listings you take on. If you don't think it pencils, and that 6% cap makes little sense when the buyer has to borrow at 6.5%, you should probably pass. Focus your time and efforts on what will sell - not on the listing that will leave you, the seller, and prospective buyers frustrated. When you do get the listing - you need to work it. That's how it used to be. Things took a while to sell. You need to research which property owners own similar assets, and call them. Track recent sales, and find out if that seller is now in a 1031 exchange. The days of easy double-ending are over. You can no longer find a buyer on your own nearly as quickly and easily as before. You need to reach out to brokers who are active in the area, and you have to make sure your listing gives you the flexibility to offer them a fair fee. They have to earn it too - getting buyers through the finish line is no longer easy. We’re well into the Back to Normal Era. You can earn an amazing living. It's an incredible industry. But you have to know your craft and you have to put in the work. Just like it always was.

AI commercial real estate brokerage?? 👀

You either: Want to get ahead of your peers, grow your professional life quickly, do big things, and make a ton of money. OR You want to work remote

The SEC just made a big change! Our fund is as 506 (c) -- so we have to verify that all of our investors are accredited. I must say it can sometimes be a bit awkward -- pretty silly to ask someone who's putting in $1M into our fund to verify that they have a $1M net worth. What just changed? (I am not a lawyer, do not rely on this, and this is just my understanding and interpretation based on the newly available information, not legal advice): Instead of having to have their CPA or attorney verify that their client is accredited, in writing, or having them work through a third party verification platform (which everyone finds annoying) -- here is the new change: You no longer have to verify as before, as long as: -They are committing at least $200k (or $1M if an entity) -They did not borrow that money -We have no knowledge that they are not accredited Game changer!

This weekend I asked where people think housing prices will be a year from now. 3,450 people voted. 58% of responders thought they’d be either flat or down. I’d say that my follower base is very much pro real estate. Interesting…

If the first thing you ask me about is how many days a week you can work remote, it’s not a fit. I’m here to build something big and create a high energy environment where I enthusiastically teach you what I know and help you reach new heights. You’re trying to figure out how much time you can be away from that environment. Not a match.