Market Pulse: Insights from a Commercial Broker, Investor, and Millwork Business Owner, Jeff Struck

Foreign.

Bowling here with Pivot to Prosperity, the podcast brought to you by Pivotal Real Estate Investments, where we help our investors build wealth and income through commercial property that also improves communities. Today we have Jeff Struck as a guest. Thank you for coming on, Jeff.

Glad to be here.

Yeah, Good, good, good. I would say that you are a sought after speaker and coach and broker, commercial broker. And I'm going to let you take it from there and talk about your background.

Well, thank you very much. I'm also a real estate investor and business owner. Been an investor for many, many years. Been a landlord for many years. Somewhere in the 2000 teens, I was looking into commercial real estate, wanting to cross over, owning larger multi family properties instead of just duplexes and quads. And because of my timing, I happen to be chasing the cap rates down. So around somewhere around 2019, I started thinking that these cap rates are getting too low, I'm getting scared. And I pivoted and I began buying businesses and I, I've closed on two businesses, one in 2019 and one in 2020. One bargain business which I'm now working on, cleaning up and turning around and that one does cabinet manufacturing. And, and in addition to that, I'm also working as a commercial real estate broker and I also sit on the board of a tiny home developer.

Right. Yes. Many interesting things. What do you want to talk about first?

Well, I'm, I'm sidelined from the large commercial real estate, but looking to dive back into it. And I think a lot of that has to do with market cycles.

Okay. And that dovetails with something that you would like to expand on, I believe. Right?

Well, we are doing syndications. We're doing syndications for the tiny home developer. And I'm looking at putting a fund together at some point in the near future for acquisition of multifamily and retail properties. I believe that. Well, there is the way market cycles work. There's, there's buyers markets and sellers markets and, and we can split them further into phase one and phase two. So you've got a, a buyer's market. Phase one is real early on when there's just beginning to get recovery from a recession or a slow point. And then you have, and so that would be like 2009, 1011 buyer's market phase one, and you have this massive fast appreciation happening and, and then you have this upswing in prices and you're, you're in a buyer's market Phase two, you're getting close to the top, but you're not at the top. Yet, and I recognize this is buyer's market phase, too. Nobody knows how long it'll last. Some people were getting in still. Some people got very lucky because those cap rates pushed down even further. Those prices just kept going up and up and up.

You mean seller's market. Right. Are you saying buyers or sellers?

Well, I'm saying that was a buyer's market phase two. So phase two is towards the end of the buyer's market. There's still a little bit of room left to make a profit, but it could turn at any minute. And. And then when it does turn, you start to see those prices go flat and, and you. Sometimes you'll see them go down. I don't think that's going to happen in this cycle. If it does, I think it's going to be slight. I think we're in more of an S curve. But that would be a seller's market phase one, when that's early on, and then as those prices bottom out, or in the case of what's happening right now, 24 and 25, I think we're just going to have a flat line. And you. In most markets, of course, all real estate is local, but I think we're going to see a flat line, which is our buying opportunity to get in. And then once these rates actually start coming down and the economy starts moving again, I think that's. That's going to be our transition from that buyer's market to a seller's market.

Gotcha. Okay. I was taking it from2012 and. Never mind. No worries.

Yeah. I hope it wasn't too confusing with that.

No worries.

Help a lot to explain these kinds of things. You can imagine a sign, a sine wave, but it's going up a hill. That's the graphic I like.

Yeah.

I didn't have time to put it together for today, but.

And so right now you feel like.

We'Re where I think we're buyer's market phase one right now. I think it's a great time to get in. I think for the next 12 months, it's going to be a great time to get in. I think maybe next year it's going to stabilize. Of course, I don't have a crystal ball. It's anybody's guess, right? I thought we were. I thought we were ready for a market shift in 2019. And we continue to see very rapid appreciation. And I think that was a once in a lifetime phenomenon with everything that happened and the massive flood out of the north and into the south.

Right. Covid really changed things. We were really due for that price adjustment back then, right?

Yeah, yeah, yep.

Printing money changes things. Doesn't really does.

You know, too bad you and I don't have that power.

I know. Really great. Well, so, yeah, I, I totally agree. And, and all the different conferences and masterminds where they have all these economic gurus come in say the same really. Eight, the next 18 to 24 months should be pretty good. You know, you kind of want to be buying when blood's in the street, so to speak. And so there is some blood out there too, right?

Yeah, there definitely is. I, I've. I've got costar commercial software where I can watch delinquencies on commercial buildings. And I'm seeing a lot more dots on the map in the past 12 months. And, and I think that's increasing. And, and I'm now I'm reading about defaults and very large defaults and some short sales taking place on, on downtown towers, which you know, are some of the most stable real estate assets. And yet these properties are being short sale or auctioned off.

Now, do you feel that's from the switch to hybrid working or telecommuting, however you want to say it? Is the vacancy the reason for that, in your opinion?

Yeah, a lot of those are office properties and I think that has something to do with it. But real estate's like predicting the weather. There's a lot of variables. There's a lot of upward and downward pressures. Certainly interest rates is a downward pressure. A slower economy is a downward pressure. There's. There's in and out migration which is affecting local markets. Industrial remains strong and because of a lot of online ordering and what they call last mile logistics, where they need more and more warehouses to store stuff so they can deliver it quicker. There are people, more people working from home than ever before. But there has been some return to the office since COVID But there's a lot of pressure there on office and I think you're right on that is one of the major factors.

Right, right. And so, yeah, more and more you're seeing some adaptive reuse as well. Right. With trying to convert some of them to multifamily or medical office. Those are the two preferred most. I think medical office is most compatible. But the, the most demand is in residential and that's tricky with those buildings. Right?

Yeah. Yeah. I think anytime you can buy a property at an 8 cap and convert it into something that's worth a 4 cap like office right now in a lot of markets is going in that 7, 8, 9 cap rate range, you get into multifamily or medical, and if it's class a, you're at 4 or 5 cap rates even in this market. So you know, if you're going from an A to A4 with your conversion, you're doubling the value. But these are massive projects, very engineering intense, very architecturally intense. Lots of permissions, they take a long time. And the big question is, are you gonna through that doubling of value or whatever that value increase is, is it going to be enough to offset years of holding cost and all of those engineering and general contracting expenses that take place in those couple of years and then where's that market really going to be at two or three years down the road when that project is finished? There is a lot of talk about that and there is some activity on that. But you know, you got to keep in mind the timelines. These are things that just don't happen overnight. This isn't remodeling your kitchen.

Right. Spoken like a true commercial broker.

Thank you.

Yeah, so true. So tell us about tiny homes.

So I sit on the board of Dream Quest Tiny Homes. So we are kind of a startup. It's been there a couple of years, but we have secured our first plot of land in Deland, Florida and we're going to build somewhere close to 80 houses. And I say somewhere close. We don't have a final from the county yet. The county is allowing anywhere from 72 to 84, I believe was the last count. And we're of course we're pushing for the 84 because more houses on the same land lowers our price per unit. That fund for the build fund, there's two funds and one was the entitlement fund and that's coming to a close. The build fund is still wide open. If anybody's interested in investing in the building fund, that's the verticals, that's a concrete slab and everything that happens after that and that, that is still open for investment. And we are hopefully, if we can get all the approvals in place, going to be breaking ground within another month or two.

Great, great, great. So that's 506C, I believe it is in.

Our CEO handles all the details on that.

Okay. Yeah. All right, well at the end we'll also get your contact information and put it in the show notes as well. So.

Very good.

Yeah, tiny homes are popular, you know, affordable housing. We all think that the tiny homes is a potential solution and just can't get those darn cities and counties to, to loosen up the, the guidelines and allow for some of that. Right. Is that big thing.

We've had some interesting experiences. We've tried that in Volusia county, which is Deland, and they loved us. They said when can you get started? And they actually helped us find land that we could build on. We tried the same thing in Seminole county and they loved us. But they had to change their municipal code in order to allow it. And that took about a year. So that's coming around now. And Orange county just didn't seem to be to into the idea.

Oh, okay. So the Seminole county code that's in the works right now to change that does have some districts that allow permitted automatically tiny homes or is it always a special. Special condition, a special exception or, or variance or some, some special approach?

You know, I'm not, I don't know all the details, but I know they did have to insert something in their code to allow it. Their code previously did not allow it. Now there is another thing going on in the state government that passed a number of months ago called the Live Local Act. And what the Live Local act does is it allows, no matter what the zoning is, it allows that land to be used for multi unit development, for subdivision development or multifamily or like tiny home development. So it could be industrial zoned and we can say we're going to build houses there or we're going to build an apartment complex there. And there's nothing the municipality can do about it. But as far as I understand it, they can still control how many units go there and the size of the units and some other aspects of it like that.

Right? Yeah, I've talked on the show about it because I helped with the meeting with legislators and getting that passed. And it's almost. What's that?

You probably know more than me then.

Well, I should because I had to deal with it a lot. But. But it's almost any zoning. It's commercial and industrial primarily. And they argue about the others. You know, there's a lot of. Of theory that goes behind. You know, what are those others? Do they fall under commercial? Well, a lot of them do. I mean, you know, institutional. And the rest of it, it doesn't stay institutional forever. And when it converts it's usually commercial. And so there's a lot of arguing in some areas about that. But yes, that's a big thing that really is. Hopefully that will help you a lot to not only maximize density, but well, the height. Height part of that won't help you. But the construction costs, you May or may not realize that the construction costs where you've paid tax is a reimbursable through the live local. There's other things too, but. Yeah, that should help a lot. But. So your timeline on the tiny homes is, is there? Well, so, yeah, it all depends on when you get the final approvals, I guess.

Yeah, yeah. Once we break ground, we're looking at less than 12 months to hand over the final key.

Oh, great, that's fast. Yeah. I've talked to your, your contractor, your. I forgot what his name is. But yeah, yeah, he sounds like he is dying to get going, so that's great. And I know it takes a lot meeting with government. I'm, you know, I kind of represent government in some ways since I've worked for government so long and I, I.

Get, I think that's half the timeline and, and I think our lawmakers do a great job at writing everything as ambiguously as possible.

Yeah. Sadly. Well, if you ever need help with something like that though, feel free to ask me because I appreciate that those places. But anyway, so going back to your cabinet company too, can you share with us some things that you actually construct?

So the company I bought in 2021 in Sanford, Florida, we operate out of a 12,000 square foot manufacturing facility and we do commercial cabinets and we do solid surface counters and laminate counters. We will subcontract out granite ports, things like that. But as far as manufacturing, it's, it's quarry and, and that kind of product. We're set up to do a really good volume. We do a lot of reception desk, point of sale stations, things like that.

Yes. And I've had the privilege of being there and I think it's a terrific shop and, and it looks like you do some really great stuff. Big, big stuff. So.

Yeah, we have plenty of resources.

Yeah. Yeah. And so you could be of service to apartment owners and lots of commercial users. And seems like you, you've got a lot of people that you're having to do quotes for. I know that. Right.

Actually, this morning I was working on a quote for a 200 unit apartment complex that's being remodeled and they're looking at us to do all the kitchens, all the counters, all the baseboard and trim and doors and all that.

Great, great. Wow.

And that'll be a nice meaty project.

Pardon me?

That'll be a nice meaty project.

Oh, yeah, yeah, yeah. So say the name of your company too.

So the, the company's craft work, carpentry and millwork.

Right. And in Sanford you said, right?

Yeah. We're right off of 1792 and Ronald Reagan in the back of an industrial loop.

And the other business that you bought in the last few years, what was the other one?

Now that is Sterling Architectural. That's primarily my partner's business. And that one is up in New England. It's in Springfield, Massachusetts and they specialize in dental and medical cabinets. So for dental and medical, my company has the expertise even though it's not our specialty because all of that expertise can easily cross over.

Right? Yeah, yeah. Well, great. Okay. And so what's coming down the pike for you? Anything in particular that you're able to share with us?

You know, I'm just, just working on turning around a company that was very broken when I bought and in increasing that. And at the same time we're taking some listings and selling some land and selling some buildings and keeping that going.

Great, great. Well, and you work with who as a broker?

I'm with Coldwell Banker Commercial.

Right. So that goes.

And I'm at the office in Winter Park.

Right. CBRE is what they.

Cbc. Cbc. CBRE is a different company.

Oh, I didn't realize that.

Yeah.

Okay, good. I'm glad you fixed that there. Corrected me. Good. Okay, well, all right, well tell people how they can reach you.

So they can reach me at 407-986-7653 call or text. And again that's 407-986. Sold.

Ah, good. And LinkedIn, you're there. And, and typical social medias.

Typical social medias on LinkedIn. Just search my name. You can search my name in the city of Orlando and I'm all over the first page. And you can email me at Jeff A Struck Gmail.

Right. And that is STR U C K for those listeners that are only able to listen because sometimes the show notes don't show up for itunes and. Yeah, yeah, yeah, yeah. But great. So lastly. Oh, I almost forgot.

Oh.

Share with me a pivotal person or event that changed your life.

Well, the business thing is kind of funny. I was, I was in Orlando trying to decide what to do for the weekend and a guy out of South Carolina, so called guru named Larry Goins had a seminar going on for the whole weekend for 99 bucks. And I thought I want to go to Larry's seminar. He was a great speaker at another RIA I was involved in years ago. So I was looking it up and I got a phone call from a friend of mine in Canada who said I signed up for these businesses buying classes in Las Vegas. You want to meet me in Vegas this weekend? And I said sure, without even thinking about it. And I just bought a ticket, went out there and I was actually thinking of selling a remodeling business I had at the time. And I thought, well, this is about buying businesses, but I'm going to sell one. And my knowledge, that knowledge should cross over. I met my partner Dimitri, and he talked me into buying the first company in New England. And we partnered on that and purchased that manufacturing company in 2019, which specializes in dental and medical cabinets and has a granite shop in it serves all of Massachusetts and Connecticut. And then in 2021, I purchased the Sanford company. So while multifamily was trading at a 3 cap and a very negative cash flow, I was out buying businesses at what would be considered a 20 or 30 or 40 cap. Although it's not measured in cap rate, it's measured in what they call EBITDA multiplier, which is earnings before interest, taxes and amortization. And there's a few variations of that too. But if you were to convert it to cap rate to give our listeners something to compare it to. Yeah. Then you're into a business at like a 20 to 40 cap rate. So it's a much quicker way to make your money and it's a lot riskier. And I've got a few black eyes in the last few years from it. And it's a lot of work, so you make a lot more money a lot faster, but it's a lot more work and there's a lot more risk. As opposed to say, a multifamily or medical office investment.

Well, yeah, but what you bought in the construction trade is in high demand at least. So with our housing shortage, that's a good, good thing, right?

Well, I have an electronic bulletin board subscription and it only cost me a few hundred dollars a month and it's supposed to be just for central Florida. And what I get is I get emails and bid invitations. I really need to hire two more people to keep up with all the bid invitations. Just from that one subscription. That's only a few hundred dollars a month. So the demand in the industry is just off the scale.

Yeah, yeah, I would say last month.

Alone we did $3 million in estimates that we submitted and we're doing 3 to 4 million a month in estimates and we're not even getting to 1/3 of the request.

Oh, wow.

So fantastic demand. We're going to be hiring soon. I've renewed the contract with a well known grocery store to do maintenance on their shopping centers. So come June or, or May even, we're going to be needing to hire some handyman to go out and do a lot of maintenance and repairs there. So if anybody's listening that knows of any handy person with their own vehicle, hey, send them my way. I've got to hire one person every two weeks.

All right.

That's my goal.

Very good. Well, again, thank you for coming on the show and thank you for having me. Your contact information in the show notes and make it so that people can get in touch with you. And I thank you again.

Fantastic. Thank you.