Unlock the power of commercial real estate wholesaling! Join Derek Dombeck as he sits down with commercial real estate expert Terry Hale who reveals his proven strategies for finding lucrative deals, negotiating with sellers, and closing with no money down. Terry shares his journey from swinging a hammer to building generational wealth through creative financing and mastering the art of wholesaling. Tune in to discover how you can replicate his success and achieve financial freedom in the world of commercial real estate.
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The Insider’s Guide To Wholesaling Commercial Real Estate With Terry Hale
Welcome to the Generations of Wealth podcast. I am your host, Derek Dombeck, and we, like always, have another incredible guest. People ask me a lot of questions about commercial real estate. It’s not something I have a lot of experience in. I’m segwaying into that space more now than ever, but Terry Hale, he’s been doing this for a really long time. I love this show because many commercial investors are all about using banks and raising syndication money and things like that.
Terry has a completely different take on it. He loves the creative deal structuring side of it, which those of you that know me know that that’s my passion. Before I bring Terry on, I really want to be thankful and appreciative to all of you that have been listening and following the show for a long time and sharing the message, getting it out to others that you know. Anything you can do to help us grow the family that we consider Generations of Wealth to be, we appreciate. If there’s anything we can do to help you, don’t hesitate to reach out. Shoot me an email, Derek@GlobalGow.com. Tell us what you think about the show. Give us some feedback.
If there’s something you want to hear about or somebody that you think you’d like me to interview on the show, that’d be awesome. You can jump on Facebook, get into the Generations of Wealth Facebook group, follow us on TikTok at @generationofwealth1, Instagram at @thegenerationsofwealth, all the different social media platforms. Again, thank you. We appreciate you. Let’s bring on Terry Hale.
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As promised, all the way from sunny Malibu, California, Mr. Terry Hale. Terry, thank you so much for joining me.
Thanks for having me. I greatly appreciate it.
I was picking on you a little bit before we started recording that I thought Malibu was going to fall into the ocean a long time ago, but you’re still there.
We’re still here. Still a bit strong, although we just had some fires that came through. Other than that, the mudslides, the fires, and the ocean right up on our back, we’re pretty good.
Repositioning Commercial Real Estate: An Investor’s Journey
In Wisconsin, there’s no chance of us sliding into Lake Michigan, so we’re fine. We’ll be all right. Especially now, because Lake Michigan is starting to freeze. Why don’t you tell us a little bit about yourself, your background, your history, and I’m jacked up about talking about what you do in commercial real estate. Give us a little background.
No doubt. I’ve been at it for quite some time. I started out doing the whole contract work, swinging the hammer. It’s from my father and his three brothers. They did a lot of development and stuff like out towards Frisco, Texas. I decided that I just wanted to stop swinging the hammer and wanted to be on the other side, writing the contract. Long and short, early in my career, I started off with my first apartment building. I did it the wrong way, of course. I bought retail. I thought stabilizing rents was the way to go, made a little bit of money. Sometime down the road, I figured it out.
What I’ve been doing is purchasing all different types of commercial real estate for repositioning. I look for distressed value-add properties, and I get creative with terms and typically purchase without my own money or credit. I’m able to move some big dollars. I started teaching this stuff. The reason why I was teaching it, Derek, is because I found out that I can only do so much in a day, in a week, in a month, in a year. Duplicating myself is just a smart business move, just like people have employees, same type of an approach. I teach this stuff to people. They go out, they find me some good deals, they bring me off-market projects. That’s the reason why I share my strategies.
Exploring Asset Classes And Cash Flow In Commercial Real Estate
It’s beautiful. We do the same thing. I do a lot more in the residential space than the commercial space, but it’s very similar. If I have a wholesaler or somebody in my market that doesn’t know how to creatively structure, because I am one of the better guys in my region for that, I love partnering with them and we all win. Specifically, to the commercial stuff, you said you started in apartments, now you’re just repositioning. Do you have a favorite asset class or does it not necessarily matter as long as the cash flows? How does that look?
That’s a great question, Derek. What I found, just like you do with the houses, everybody wants the ugliest house on the prettiest block, more than likely, so then they can rehab it and create the value. Commercial is really no different than that, but what I find is a lot of folks fall into that same asset class, like multifamily. I got into self-storage very early on in the game. There is a handful of storage guys out there, no doubt. A lot more of their newbies are just coming out talking, and you can scroll on Instagram and see them all on there.
Self-storage is a great asset class because it’s apartments without the people. I did some wholesaling as well, but wholesaling is a bad word in the real estate business because people feel like you don’t have the wherewithal of the financial means to pull it off. You’re just trying to squeeze your way in there for a check without a license being a licensed broker. When I wholesale deals, typically what I do is I’m very transparent. I’m very open about it. I position the end buyer, and a lot of times, I keep an equity piece of it. It’s not really wholesaling. It’s like a hybrid. My favorite asset class, no doubt, is four. One is obviously multifamily because I’ve been involved in it for so long. Definitely self-storage. I have a lot of self-storage under my belt. I’ve done dozens upon dozens of facilities. I’m very well-known in this space. A lot of brokers know me.
Over the last 90 days, I’ve closed a deal in Lubbock, Texas, Lake City, Michigan. I’ve closed one in Texarkana, closed one in Panama City, another one out in Dayton, Ohio, closed one in St. Augustine, Florida. That’s just over the last 90 days in transactions. I have a very large portfolio, and I sell property too. I have a full, complete portfolio in Mississippi I’m selling, one in Alabama that I’m selling. I’m constantly transacting. I found that money is not made until you transact. There’s a lot of these misconceptions where if you don’t have perfect credit or a lot of money, you can’t transact. I cracked the code on that too, because all you really need is an earnest money deposit and the knowledge on how to put it together.
Money is not made until you transact. Share on XThat was two asset classes.
Mobile home parks and big box warehouse. Anything with mobile home parks, it trades different, Derek. A lot of people will buy on certain metrics like dollar cost per door or what the value of the replacement value of the property is. The more they’ll buy it, like a metric, like cap rate or cash on cash return. Mobile home parks are different. They use a different metric. You got to be careful with that because there’s park-owned homes and then tenant-owned homes.
It’s a different dynamic, which is on all the real estate. That is one of my favorite asset classes because it’s recessionary proof. The big box, anything over ten big boxes. When I say big box, I’m talking very large, more like a space that people do things in and then they just rent. I like the triple net leases and owning the real estate and just having people run around and do whatever they do inside the box.
Building Relationships With Brokers For Commercial Real Estate
You mentioned brokers, relationships with brokers, people that may be listening to this are in the residential space, looking to start getting into the commercial space. How do you do that? I can send out or direct mail to a list of people in residential world and directly market to them. What do you suggest somebody wanting to get into commercial does? You start relationships with brokers, but that takes time. How do you break in?
You got to break the ice with the broker. They’re the gatekeeper, without a shadow of a doubt. You can look at it in a few different ways. You can look at some real key identifiers, which I’ll share now, is if you’re on certain sites out there, obviously there’s LoopNet, which is a very high traffic site for commercial. You have sites like City Feed, MobileHomeParkStore.com for mobile home parks. You got Crexie for self-storage. There are all these different websites that are out there. If you go on these websites, you’ll see that a lot of times there’s price that are actually listed. Another great one is key identifier is days on market.
Your average broker has a listing for six months, 180 days. When you see something that’s been on there for over a hundred days, you know that they dealt with tons of tire kickers, tons of time wasters, maybe a bunch of bunk offers that came through, the sellers getting frustrated. Those are some of the key identifiers that I teach and share. When you’re dealing with someone that’s had it for a little while and they’re just over it and they want to sell it, time and circumstances change. There’s a lot of property out there talking about brokers and reaching out to property. I call it locating because deals really aren’t found, Derek, they’re created. You know this because you’re in the space. People say, I don’t know how to find any houses. It’s like, what do you mean? You drive down the street, there’s city blocks full of houses.
Deals really aren't found. They're created. Share on XIt’s more about getting in touch with somebody that’s got a situation that’s got a problem and they have to sell, not just want to sell. Until you can identify and touch base with that person, like you said, you send out direct mail or what have you. Until you can touch that person and find out if they actually have a problem, you don’t know if it’s a good deal or a lead or not. As a good takeaway for all your listeners, brokers are just one way of locating property. I have my clients also phone call owners direct. It’s pretty interesting. If you were to locate a property in a good area like self-storage, you can Google. What’s really cool is there’s over 50,000 self-storage facilities across the nation, and 95% of those are owned by mom and pop.
That’s a lot of product. Can you go to a list broker and purchase a list and have like ownership of over ten years and send out a direct mail campaign? Sure, you can. That’s one way to do it. You can also get the phone numbers of those people. You can also just locate one property in one area that you like. I’ll use Panama City for an example. If you located a property and you knew the address in Panama City of a storage facility, and you just Googled self-storage near and you pop in that address, you’re going to get all these other facilities that pop up. You know that on Google, when they show it, they show a map with all the different business profile pins, which is real basic stuff. On the left column, it’ll show like all the stars and like ownership and like comments and stuff.
If you see a lot of bad comments, like the owner’s never there. It says closed. It’s like 2:00 in the afternoon. That’s like a really good lead to call because it’s this thing’s mismanaged. Somebody owns it. They’re sitting on it. They’re probably tired. They’re sitting in the box for a while, waiting for people to come in. Self-storage is a very boring business. A lot of people just fail with the marketing and the management aspect. You can full call them as well, which is just awesome. They pick up the phone and you can talk to the owners direct. A lot of these are mom and pop owned.
Unlock Real Estate Deals With Creative Financing Strategies
That was going to be one of my questions and one of my points. I love creative deal structuring, which typically in my world requires, you got to know what the seller’s challenge is to solve their problem. When you’re just dealing through a broker, that’s very hard to do because the broker is the buffer between buyer and seller. Oftentimes they can’t or won’t share pertinent information. When you’re talking about acquiring property, oftentimes you’re using seller financing, you’re structuring things creatively. Talk about that because to me, that’s my world. I love that world. I know it’s even more prevalent in commercial real estate than it is in residential. I do it all the time in residential.
You’re absolutely right. That’s the key that truly unlocks the whole, not to be cheesy about the saying, but it really is. It truly is because you’re bypassing banks. You don’t have to use tax returns, bank statements. You don’t have to do something called cross-collateralization where you put up other assets. It just really gives you the freedom. I know this may sound crazy, but it gives you the freedom to manipulate the numbers.
I’ll tell you, 9 out of 10 deals that I move on, I’m creating a cash-on-cash return where I’m actually cash flowing at closing. Panama City, I’m pulling in $4,600 a month at closing. It’s like, you can’t do that with a lot of different products out there. For that reason, seller financing is super important. Let me throw some tips on things that I do to protect people’s money and some of the creative structures that I get for long-term financing and why. Let me get into some of the meat. There’s some really solid giveaway on this call, because I like to do that.
First things first, as I mentioned, the earnest money deposits to move on a commercial project, just like Panama City, that was $1,850,000 purchased. I put in a $5,000 earnest money deposit. Dayton, Ohio, that is $1,925,000 transaction. Same thing, $5,000 deposit. We don’t have $5,000. It’s okay. You can get your hands on $5,000. It’s not difficult. If you get the right deal, you’re going to have time to put that earnest money in, but that earnest money is also refundable. It’s applied to the purchase price at closing. That’s the only capital that’s needed in this transaction. It sits in an escrow and title company, but here’s the best golden nugget that I’m going to drop here to protect that money, especially if it’s not yours.
You want to make sure that you have something called a unilateral clause. The unilateral clause allows just your signature to return that capital back to you. Title escrow knows exactly what a unilateral clause is. Otherwise, if you go down due diligence, and if you’re trying to wholesale it, or you’re trying to place capital to buy a commercial project, and you have, let’s say, 30 days due diligence or 60 days due diligence, whatever, and like a 30-day close, you have to make sure that you conduct your due diligence and that you transact and bring in your money partner. However, it’s going to be whether it’s joint venture, borrowed capital, hard money, your money, family, friends, money, whatever. You have to make sure that you have that money and that you are secured before you release your contingencies. Otherwise, your money goes hard.
Let’s say, you have 60 days due diligence and you go 55 days, and then you pull the plug on it, you may piss somebody off at the end of the day. Let’s be real, because if you sell property, people do it to me, Derek, they go through their due diligence and the deal falls apart, they pull the plug. It’s frustrating, but it’s part of the business and it happens. If you’re doing business with somebody that gets frustrated, how great is it to know that it just takes your signature to release your capital? That you don’t need their signature. It doesn’t take two people’s signature. That’s what the unilateral clause is. I wanted to drop that. I think that that’s a huge value add for people so they can be secure. I get long-term seller financing. I don’t mind asking for a ten-year seller finance note.
Deals can fall apart. People pull the plug, and it's frustrating, but it's an unfortunate reality of business. Share on XOn Texarkana, I have a twenty-year seller finance note. Twenty years. All my notes are non-recourse. That’s a buzzword in commercial. Non-recourse means that you’re not going recourse. It’s no personal guarantee. If they ask for a guarantee, you can let them know you’re going to do a corporate guarantee. A corporate guarantee means that your new empty shell LLC signs on behalf of the purchase, which means nothing because it’s an empty shell LLC. That’s the way we get around the PGs, the personal guarantees. By getting what’s so great about stroking a long-term seller finance note, how we get them to carry that long-term is I do something called an escalation of interest. We can call the shots on the negotiation with seller financing. We can start off low.
If you know that you’re getting into multifamily and your plan of attack is to do some maybe light cosmetic repair, fix it up, put the lipstick on it, and you’re going to bring in maybe five tenants on the twenty-unit, and you’re planning to reposition and sell it within a year, and your plan is one year, you want to create a buffer because Murphy’s your partner. Call it two years. If you know that you’re going to transact within two years, if you’ve got a ten-year seller finance note, what I’ll do is I’ll structure the interest only, because that’s how you get the lowest payment. There’s interest only, and then there’s amortization. I’ll do interest only really low at like 3%, 4% for year 1 and 2, and that may sound crazy, but I play on the greed of the seller.
As I trickle along up to that ten-year note, I’ll start creating higher interest. Go 6, go 7, go 8, go 10, go 12, and then I calculate all that interest and it comes out to a huge number. That’s the carrot that I dangle in front of their face to show them that if we go to term, there’s this big, huge whopping payday, but just make sure that you don’t sign a prepayment penalty, and then you can transact and close that thing whenever you want. You can take advantage of really low interest for the first couple of years while you transact.
Selling Property With Financing Options
Do you ever structure it where you might sell that property? Let’s say you had the one-year plan, which went two years. Sell that property on a wraparound and keep that, because even though you’re dangling the carrot and giving them a sizable amount of interest, that’s still a selling feature to sell to your end buyer and say, I’ve got financing built in.
I did just that on another one that I had right on the border of St. Augustine. It’s a great little 130-unit self-storage facility. There was no capex being capital expenditures, the roofs were good, ingress, egress was all tight, fully fence-gated, cameras, lighting, the whole shebang. It was all set up through easy storage solutions. It was a third-party marketing management collection company. It was literally turnkey. I never went to the property. I didn’t have to. There was nothing for me to do. There was a story. The story was this elderly couple owned it. They got it for super cheap. They did all the capex to it. They already owned it for the last five years. They hired their family friend’s son to run it, and he was thieving from them, put money in his pocket, which is common in any business. The cat’s away, the mice will play.
Long and short, they didn’t have the heart to fire him, so they were just stuck. They wanted to sell, take their money, because they created value over the last five years. Plus, they wanted to go buy themselves a really nice RV and go drive into the sunset and go enjoy life, have a glass of wine on the lake. That’s what they wanted to do. Here I come in there. One of my students called it, Cole called it. Turned out that they were super motivated to sell, but they needed to know how to do it, and they didn’t want to pay a lot of capital gains tax. We created a seven-year seller finance note at 4% interest only, but I made it, here’s the kicker, non-recourse, assumable, transferable seller finance note. Versus the wrap, I was just transparent and straight up about it, Derek.
I was just like, I’m going to sell this thing at one point, and I’ll make sure that the person that’s going to be coming in is qualified, and they’re just going to jump into my shoes. They said, that’s fine, we don’t care, as long as they’re qualified to run the business and you bet them we’re good. I said, fine, let’s go. I owned that for nine months. I bought it for $480,000, and I sold it for $900,000. I cashflowed every month that I owned, never went. I was actually in the Jacksonville Business Journal with this gentleman, Eric, who was with Prime Realty out of Jacksonville, Florida. There was a broker involved in it, because I transacted with a broker. My thing is this, I don’t mind paying commission to a broker, because I only have basically one license, which is a driver’s license. I actually have a marriage license too, two licenses.
I like to hire the professionals, let them do what they do best. When I transact, I want to make sure I use the right boilerplate contract for that state specific. If they’re just going to be doing a simple transaction and run it through their brokerage, they’re not going to be making 6%. They do it at a discount. I have them do a feasibility study for me. I have them do a demographic research study. I always get an inspection report. Inspections are like $300. I used Gator Inspections, and they did a 300-point inspection. It was like $400. Very thorough. For me to go to the property, I don’t want to make it seem like you never want to put eyes on a property, but if you’re overqualified or underqualified, maybe it’s just not the best thing to go jump on a stinky plane and go fly around when you can hire people to do all the studies and due diligence for you, is what I’m saying.
Wholesaling Commercial Real Estate: Tips And Strategies
I would argue that what you did was a form of wholesaling or wholetailing. That’s not a bad thing, because I do want to talk about how can people wholesale commercial real estate. Myself, I’ve got some commercial and it is definitely an asset class that I’m looking to grow in as well, but I’m just like you. I get students. I get people that hear the show, whatever, they bring me deals. Sometimes, in fact, one example, a mobile home park that was in Indiana, and it was actually a friend of mine that owned it. I seriously looked at buying it myself, and it just didn’t fit for a multitude of reasons. How can somebody wholesale in the commercial space?
Wholesaling is a very simple transaction. How you wholesale a commercial real estate deal is to make sure that on the contract, it specifies in the checkbox that you can assign the contract. Very important. There is some controversy against, in the signature line, if you say, like for me, Terry Hale and/or signs. That does, a lot of times, supersede that checkbox, even if it says that you can’t, but you have to check with your attorney if they feel comfortable with it or not. I make sure that the box is checked, and I also have “and/or signs.” It’s just a layer of protection for an opportunity on the exit for wholesaling. With that said, all you’re basically doing is taking the paper from one side of the table to the next side of the table. That’s it. You’re just transacting in that fashion.
Make sure that you have enough timeline on your due diligence. That way, you can position an end buyer. It’s up to you if it’s something where you want to disclose that to a broker, if there is one, or direct to the owner as well. If you’re not actually doing seller financing, it’s just a cash trade, then I think that that’s, again, up to you. When I transact on cash, it’s different than if I’m going to be transacting on seller financing. I’ll give you an example. I had a deal, and it was out in Montgomery, Alabama, and that deal to transact it with seller financing, they wanted me to be on the deal. That was one of their stipulations because I come with a lot of credibility in the business, 25 plus years of experience. When I sent my buyer and they verified, they’re like, “This guy knows what he’s doing.”
Make sure that you have enough timeline on your due diligence when wholesaling. That way, you can position an end buyer. Share on XI want to do business with them. They didn’t care that I wholesaled it, Derek. They just wanted to make sure that I was on it. I said, “How much?” They go, “We don’t even care if you’re a 1% owner. We just want to make sure that someone’s not going to be a ding dong and run the thing into the ground.” Here’s some really good additional takeaways that I want to throw out there for everyone to strengthen reasons why the seller would actually consider seller financing. We’ll circle back to the wholesaling real quick. Let me drop these nuggets on everybody. You got to look at it and put yourself in their shoes. Why would somebody even seller finance you? What if you run the property into the ground? What if you don’t do a good job? What if you don’t make the payments? I refer to them as security instruments. What kind of security instruments can we put in play as if you were the bank? What would a bank want? Here it is.
There’s three main ones. One is a maintenance clause that says that you’re going to keep the property in its as-is current state, current condition, or better. That way, it doesn’t turn into a trash dump. It doesn’t matter what type of property it is, whether it’s a mobile home park. You don’t stay on top of those tenants. All of a sudden, the barbecue chicken stays out and you get rats. It just is what it is. I don’t care what kind of property it is, a big box warehouse, all of a sudden, they start parking their other vehicles there and they put tarps on them. It just can turn into a trash dump. That’s one, maintenance. Second is a performance clause. What you want to show them is that you’re going to keep that property performing. Wherever the current occupancy happens to be, you let them know that it’s not going to fluctuate a certain percentage, wherever you’re comfortable.
Typically, I use 10% to 15%. It won’t dip below 10% or 15% of the current occupancy. That way, you don’t deliver the property back vacant. That’s a huge problem for people that they have this in their head that they don’t want to seller finance. Lastly, the most, and it just depends if you’re in the deed state. If you’re in a deed state, then you want to go ahead and exercise a deed in lieu of foreclosure. I know you know what that is, because most people do. The basics of it, if someone doesn’t, if you miss three consecutive payments, you toss back the keys, you forfeit your deposit, everything that you’ve done to the property, you walk away. You’re forfeiting. That’s a benefit to the seller because it bypasses judicial foreclosure. Judicial foreclosure, in certain times of life, can be a long time, a year plus. Somebody can just squat in a property and not do anything with it, hold on to it.
In that timeline, it deteriorates. By putting those three security instruments in place, it helps. When I’m wholesaling, I like to put those security instruments into play too, if they’re seller financing. When I do so, then the sellers are like, “This guy, he’s really making it where he’s putting his heart on his sleeve and he’s making it a bulletproof transaction as low risk as possible for me to carry paper.” And because of that reason, a lot of times, I can still wholesale. Before we go too far, I did author this book. It’s called The Two Best Strategies to Profit with Commercial Real Estate. One way is to hold it for long-term cash flow. You reposition it, you keep it for cash flow. The second way is to wholesale it. I’m going to put this already in everybody’s hands. It’ll talk more in depth about wholesaling.
If somebody needs a check, like they need air, wholesaling is a very quick way to transact. I did a deal in Wichita, Kansas. I’ve never been to Kansas before in my life. It was a big ol’ 350-plus-unit storage, right on Kellogg Drive, one of the most popular thoroughfares right there in Wichita, so I’ve heard. This gentleman from NAI Global had it. He was listing it for $1.6 million. It was on LoopNet. It got brought to me. I basically said, “You’re selling this thing on Performa, on future value.” I said, “Where’s the as-is value?”
Once I looked at the financials, I had the guy, he’s a young buck broker, do a drive-by. Once I saw all the capex that was needed, I ended up locking it down at $700,000. I know that sounds crazy, but I told him, “I got to buy as-is, whereas, in its current state, under its current income potential,” then I wholesaled it for $1,000,050. I did that within fourteen days. That gives an example of what somebody can do and the way that they can transact. Nothing wrong with picking up $350,000 in a couple of weeks for a few phone calls.
One of the points I wanted to make is, in your protections to the sellers, the deed in lieu of foreclosure, having that pre-drafted and sitting in escrow with an attorney, that’s something you can do largely in commercial, where you can’t do it in residential. That’s a beautiful thing because I co-owned a hard money lending company for ten years, and we didn’t lend to owner-occupants because there’s all these consumer protections.
In the commercial space, we’re all considered to be adults, and commercial foreclosure laws are typically different in state by state. Same thing, I have no problem offering somebody a deed in lieu of foreclosure on a commercial deal, but I can’t ask a homeowner, or I can’t structure the same thing with a homeowner, at least in the state of Wisconsin and many states that I know of.
That’s correct.
The commercial space, same thing with buying property subject to existing financing, very common. Residential space, there’s a chance those loans get called due. Commercial, probably not as likely. A lot of advantages, for sure.
I’ve only heard of a loan being potentially called due one time in my entire career. It was just because it was a friend/family who was the bank, and they heard word that it was a transaction. They said, “I don’t even know who I’m now financing. I need to call it due,” but it got cured because that person stepped to the plate and said, “I’ll give you a personal guarantee.” We transacted, and so it cured itself.
Banks are in the business of transacting and making money. They’re not in the business of owning real estate. In commercial, it’s much different than residential because you get bulk REO, real estate on packages when residential tanks. With commercial, like one deal, it could be a $10 million deal, and you get a handful of those, now you’re transacting in the hundreds of millions in default. Banks get fined. A lot of times, they shut down. Banks get shut down frequently, or they’re forced to merge.
Navigating Commercial Real Estate In A Changing Banking Landscape
I am not a huge fan of using banks. Most of my listeners know that. I have nothing against them, but I like dealing with people. I like dealing with private money for that same reason. What’s your thought process? The banking industry, as it relates to commercial, many people over the last few years that had 3- to 5-year financing, and then rates went up, are in a stressful position because they bought properties that are not going to cash flow, or don’t cash flow at the rates. Where’s your thought process on all that?
I don’t think it’s a local, I think it’s a global issue, and it’s unpredictable. For me to give an educated answer of exactly the direction it’s going to, I can basically say my crystal ball is shot. Common sense, that’s not so common.
That’s a fact.
It basically says that we’re in a new race now. We have someone who’s a business individual, a successful businessman, that’s going to be running the country. I believe that there’s going to be a driving force to correct inflation and interest rates. If I were a betting man, I’d say the interest rates will trickle down and be more palpable for the average person to transact. I’m like you, the only time that I ever deal with banks is on a refinance basis, and that’s on an asset-based loan. You’ve got a loan to purchase, and you’ve got a loan to value. Everything that I do, I buy underperforming, and then I correct the value.
I’m, a lot of times, duplicating or two- or even three-timing the income approach. For that reason, my LTVs are through the roof. They’re salivating to refinance my properties. It just comes down to what kind of product they have, a lending product, that is. That’s if you’re going to be keeping it long-term. A lot of people, you can get long-term seller finance notes. One thing that a lot of people forget is that if you were to zip back in a time machine ten years, if you had a ten-year seller finance note, if you were to scoot back ten years and look at how much property you could purchase, and then zip back to today, look at the appreciation factor and depreciation.
I got the sun glaring me in the face over here. You can be moving over here. That’s the thing, is appreciation and depreciation factors along the side of cash-flowing property, which gives you a major advantage in buying and planting those seeds today, will give you that shady tree to sit under, as Warren Buffett says.
I would go back even to the seller financing things. One of the things I teach my students in my Negotiations Academy, they’ll say, “Why would somebody want the long-term seller financing if they’re in their twilight years?” People underestimate how much it’s going to cost for them to live twenty years from now. If the seller is 60, 70, 80 years old, and you’re asking them for a 20- or 30-year deal, they may still very much take that. It’s all in how you present it. I’ve had people tell me they were 70 years old, like, “I want a balloon in five years because I don’t know if I’ll be around.”
Great, but what happens if you are around? That chunk of money goes away very quickly, whereas the monthly cash flow and revenue that you can budget on every month is there for the duration of your life and then goes on to your heirs if you do pass. It’s all in how you present it. I have a habit of asking people if they’re planning on dying anytime soon. I do it in a comical way, but it has a very clear message. If they’re in their twilight years and they’re selling a business or a property, I do want to know what’s going to happen because we can save them tax dollars if we structure a deal properly. They can get paid until they die, and then they get a step-up in basis. There are all kinds of different fun stuff, right?
Yeah, and that’s a good point that you bring up. To be comical about it and to be light about it, be open about it, have that discussion. It is a discussion to have with people. The one thing that the big takeaway as well with commercial is we’re not always dealing with highly sophisticated people because a lot of times it’s just average mom and pop, but there are a lot of transactions that are made with people that have the financial mindset and the business sense where they’re like, “I will carry long-term because I’m planning to leave this to my heirs and put this into a statutory trust. I want to avoid probate issues.” They’re that savvy. I’d say probably like 8 out of 10 are savvy. You just get your handful of the mom and pops.
A lot of transactions are made with people that have the financial mindset and the business sense. Share on XMost of them understand the structuring of, “I can create an income stream not only for myself but for the next generation when I go.” I just got through dealing with a transaction where there were two partners. One partner actually had dementia because he was elderly. The grandson had power of attorney. It was a transaction that we had to engage with attorneys and say, “What’s the solid way to go about this to make sure that there’s a clear understanding of how we’re transacting?” One of the partners was very sound of mind, but it was just one of those things. Sometimes it can be a sensitive nature. Not always. I had a guy tell me, “I want to sell my property. I got into this thing. I didn’t realize that it’s out of my wheelhouse. I 1031 into it.
Somebody told me storage is a great asset class to get into. I don’t understand it. When I bought it, it was full. I’m doing a horrible job. I’m tired of driving over there, picking up the checks out of the mailbox.” I’m thinking to myself the whole time, “Why are you driving over there, picking checks up out of the mailbox anyway?” But I didn’t say that. I like mailbox money as much as the next guy or gal, but there’s a way that you can put them on autopay and give them discounts to encourage them to be on autopay on their credit card. This is a new world. We’re not just dealing with checks and cash.
Mailbox money doesn’t actually have to involve a mailbox anymore.
Bingo. That’s right. Great.
Strategy Sessions For Aspiring Real Estate Investors
As we wind this up, two things I want to make sure I get out there. Everybody can go to TheGenerationsOfWealth.com/Terry, and that will get you the book that Terry mentioned. I think you’re also open to doing strategy sessions with people. Is that right?
Yeah, exactly. I was talking to you earlier about this, Derek, and we were just exchanging pleasantries before the call. I’m not a salesperson in that regard. I save my sales ability. You mentioned negotiations. I consider myself a master negotiator. I save that for commercial real estate. I’ve been in retirement once. I came out of retirement. The reason being is because I went into retirement in my late 30s and ended up having a child right when I was 40, and now I’m 52. I got some patina on me. The reason why I do what I do and I’m still bringing people on is because I’m building something called generational wealth.
It’s an entire new approach. It’s not like I’m this newbie that’s out there on Instagram. I’m a dinosaur in the space. I transact personally, and I don’t need anybody’s capital or chest of funds. I don’t go and raise capital. That’s what I do. I can explain that through the strategy session and how to get involved, get the education piece to it. I’m here to help people build wealth. If we end up doing some business together, great. I never know who I’m on the phone with, Derek. I was on the phone with this guy. All of a sudden, he’s like, “I want to learn it because I want to build a portfolio of $10 million.” Next thing I know, we’re doing business together, which is great. You never know if it could be a $10 million phone call or it’s just somebody that wants to pick my brain, but the twenty-minute strategy session is there for people who want to get involved if they’re serious.
It sounds great. It’ll be at the same link, TheGenerationsOfWealth.com/Terry. If you have a problem spelling Terry, go look at the title of the show.
That’s right. It’s with a Y.
Stop Waiting: Take Action On Your Dreams Today
Quite frankly, I enjoy this, getting to know you, because I might be on one of those strategy sessions with you as well. I get so many different things that cross my desk. Sometimes it’s like, “Is this worth chasing? Is it not worth chasing? Is it just shiny object syndrome or not?” That’s why I love everything about having a podcast, being on other people’s podcasts, growing our network. It’s you helping people, me helping people, and us helping each other. I love that aspect of this business when done properly. Final question, what is something I should have asked you that I didn’t? It does not have to be related to commercial real estate if you don’t want it to be.
I get asked all the time, “If you could know early on what you know now, what would you do differently?” I guess that’s a really good question. People always say, “I had this guy say this to me as well.” I was actually at this local beach. We were at a birthday party for his child. He said, “I only wish I knew back then what I know now.” I was thinking to myself, I’m like, “Why don’t you just do it now then? Isn’t that like, so what? You’re in your 50s now, and you should have done it in your 20s. What should you have done differently? Why aren’t you doing it right now?” That sounds like an excuse to me.
My point is, I did it. I went out there, and I wasn’t afraid to ask. I wasn’t afraid to get out of my comfort zone. I’m not afraid to ask for deep discounts and seller financing and long-term seller finance notes. I would just say that if someone is starting out, or if they’re in a position right now, don’t let time be an excuse. Don’t let the mundane tasks be an excuse. Don’t think that you have to do everything, because you don’t. Don’t let money be the Achilles’ heel that says, “I can’t do it because I don’t have any money to do it.” My transactions, I like to say this, I have deep pockets, but I got short arms. I don’t mind using OPM, other people’s money. I got stellar credit, but I don’t use my credit. If you don’t have perfect credit, you don’t have any capital, you don’t have a lot of time, and you’re a little hesitant, don’t let all those be the factors that hold you back.
Do something today that your future self will thank you for. Commercial real estate is a vehicle, seriously, that can build exponential wealth more so than any other vehicle out there. If you bought a ton of Bitcoin for a thousand bucks a coin, you’re probably doing okay. Other than those lucky plays and winning the lotto like that, something that you can do that is reality, there’s so much commercial real estate, as I mentioned, 50,000 self-storage facilities across the nation that are not corporate conglomerates. These are mom and pops, a lot of multifamily, a lot of mobile home parks, like you said, you get tons of stuff coming across your desk. I love Warren Buffett. I’ve met him a couple of times. I mentioned one of his, I call them Buffettisms.
A few more that he says that I want to share real quick in closing are, “Look for 6-inch bars to step over, not 7-foot bars to jump over.” Look for the easy deals. He says, “Look at a lot of pitches and swing when you’re good and ready.” You don’t have to rush into anything. Like, keep your posture, be smart. If you need help, get help. There’s tons of resources and tons of people out there, like you and including myself, that are here willing to help. Just reach out. If you don’t, then that’s your fault, but you should, and that’s where it’s at. Just like I reached out when I started out, I had to reach out to people. That’s my golden question and the takeaway.
I love that. I was going to actually bring up a quote earlier, and I forgot, but when we were talking about seller financing and asking for those long-term deals, especially when you’re dealing with people in their twilight years, a mentor of mine used to say, “It’s very inconvenient to be physically alive, but financially dead.” I always remember that quote when I’m asking for that long-term financing, because that person, if they get paid off when they’re 80 years old and they live to a hundred, they’re physically alive, but could very much be financially dead. I wanted to throw that out there because that quote’s affected my life a lot over the years.
I love that. It’s solid. I hope everybody heard it because it’s very powerful, and you got to be a transactioneer in this business. You got to get out there.
Terry, thanks so much for your time. You got the sun shining on you over in Malibu. I don’t necessarily have that challenge in Wisconsin. It’s a little bit cloudy. I appreciate your time and your knowledge. I look forward to us hopefully shaking hands in person one day. If nothing else, transacting some business back and forth. For everybody else, I’d love your feedback. It’s something that I want to get more of from you. If you go on our TikTok account or you’re on Facebook, on the Generations of Wealth Facebook group, let us know what you think, what you like about the show. If you have questions, let me help them get answered. You can always send me an email direct to Derek@GlobalGow.com. Until the next show, go out, live your vision, love your life. See you.
Important Links
- Reicot.com
- Gowvoyage.com
- TheGenerationsOf Wealth.com/Fbgroups
- TheGenerationsOfWealth.com/Terry
- TheGenerationsOfWealth.com/YTChannel
- TheGenerationsOfWealth.com/Instagram
About Terry Hale
Terry Hale is an author of eight published books, numerous trade and business magazine articles and has presented live seminars to over 85,000 attendees across the nation for educational advisory services.
Terry has been featured on CBS Radio,KFWB, and several syndicated radio broadcast networks as a leading authority in commercial Real Estate.
Today with the support of his family and the help of his advisory staff, Terry continues to actively share his expertise.
Terry Hale has over 25 years of real estate experience.