How to 100x your Wholesale Profits with Tyler Bennett (SS #15)

What is going on? Welcome to Spy Series number 15. We got commercial wholesaling extraordinaire Tyler Bennett out of AZ in the house. Uh, excited to have him on. We first connected through maybe Instagram. It's actually the first time we had, you know, or seen each other face to face. Talked on the phone, um, at length about a couple deals. One was a pretty big one, didn't, didn't come into into play. As I'm learning now, these things are marathons trying to get these commercial wholesale deals closed. But appreciate you coming on. How you doing?

Jake, I'm doing wonderful. Thank you for having me, brother. And actually, I'm glad you mentioned that deal. We're circling back with Steven today, and hopefully maybe we can make something work on that one. Seller's more motivated, things are— property's made some progress, the units are rented, rehabs are getting done. So maybe we could make a deal on that one.

I think that's an important point just to jump on right off the bat is like, how big does follow-up, how big of a factor is that in the whole commercial sector?

Yeah. So I've been telling my guys a lot of, we do some single-family wholesaling as well here more recently, but follow-up is key, right? So there's a deal I have in Phoenix, just for example. I've been maintaining a relationship with this guy for like 2 years now, right? It's a $5 million apartment complex. He wants to pay me a good fee, it's worth it. Just more of a complex scenario. And I want to explain how it changes and how it differs from single family. And especially, and as you get into larger deals where it's going to change, but where there's other partners and it makes the deal a little bit harder to buy and sell and transact, right? So sometimes you have to wait 12 months, 18 months, 24 months to actually do that deal.

Absolutely. So that was a, what, a $15 million or $5 million?

$5 million.

$5 million. Yeah. And I think it's, uh, it's interesting because it's kind of like this quality over quantity approach with commercial, where it's like, it's great in the sense that, okay, it's higher price points, bigger spreads. But I think the part that people don't talk about is like, if you're only doing commercial, this— the sales cycle's so long, it's almost more stressful because—

right, right.

I haven't done it But I can imagine if I only have 3 deals closing throughout the year, when it's coming down to the finish line for that 1 of 3 deals, I'm probably stressing, like, "I got to get this deal closed." Yeah.

I love that you say that, man.

Yeah.

Yeah. I love that you say that because for the last 3, 4 years, all I've done is commercial, right? Deals take 3, 6, 9, 12 months to do. Then after that, you manage, operate. I've done syndications. I own and operate 44 units in hospitality. We have healthcare facilities. And outpatient behavioral health care. And so it just takes so long to get these facilities going. Like, we have— we've been waiting 9 months for one of our healthcare facilities to get licensed, surveys. It's just so many hurdles, right? Um, and I had this, this shift. I have a partner of mine, he does really well wholesaling single family, and he, he does 6-figure months, right? And he doesn't have assets or some of the other benefits that I have, but The transactions, they come every 2 weeks, every 3 weeks, you know, monthly consistent. So there's just a big difference with the commercial deals, especially the larger they get, with the time frame it takes to actually close them. You might make a couple hundred thousand dollars, but it's going to take you 9 months, a lot of work, uh, and a lot of stress, you know. And that whole time you might not have pay, right? So it's just a lot of pressure on you. Um, so As you do that, I would always recommend to dabble in single family, have some shorter life cycles where you could get more frequent wins, $5K, $10K rips, and then shoot for the $100 grand, $200 grand, get 1 or 2 across the year.

100%. It's like, you know, you got to have that mix whatever business you're in, especially with real estate, because a lot of it is longer term play. Uh, you got to have that mix of today money and tomorrow money. You know, if you're only investing in multifamily, it's tough because You got to live today. Maybe you got to implement some fix and flip or some wholesale to offset that. You're building wealth, but you got the today money. But that deal you had spoken about, so it's a $5 million deal and it's a hospital, you said, or a hotel?

No, this one's actually an apartment complex. It's a really nice apartment complex. It's a new development. It's really, really nice here in Phoenix. It's a gentleman and his ex-wife. Getting both of them on board in order to sell this. I've taken them two offers, really solid buyers, proof of funds, everything's there. The guy wants to sell it. I've taken him, his new wife out to lunch. We have a great relationship, but it's just getting this ex-wife on board to sell the deal. Um, and he knows she wants to sell, but she's trying to wait till after the election next year. So hopefully we could finally get it, but that's a 5% assignment fee off of $5 million. That I would be able to get, uh, in just waiting 2 years of, you know, building the relationship with the guy. That's pretty— that's worth $250,000, you know.

Yeah, that's incredible. I mean, multiple 6-figure spread right there, right off the bat. Um, so I guess with that deal specifically, how does that differ from, say, you're just traditional residential wholesale deal? What are some of the nuances between what you've had to deal with there Because now you do do some residential wholesaling as well. What are some major differences there that someone would need to understand if they got into commercial?

Yeah. I love that you asked that, Jake, and I want to break it down like this, right? When you're doing single family, it's retail buyers, individuals. Sometimes you deal with investors. Majority of the time you're dealing with an individual, right? It's property conditions, essentially, rehab budgets, rent estimates, and the personal situation. What are they going through, right? Divorce, you know, there's, there's death in family, there's all these challenges, right? Loss of jobs, all these pain points for the individual, okay? And so as you go into a business and you start doing commercial, like I, I mentioned that $5 million deal, right? Um, you deal with a group of individuals, right? There's partners, there's dad, son, they're the, the guy next door. I actually almost sold the one next door too as a father and a son. And so you're dealing with a family or uncle and an investor and a friend, right? So there's 3 to 5 people always in commercial deals. But then as you scale into larger transactions— I've mentioned that I'm doing a hospital and we tried that other, uh, big deal in Texas— those are institutional-level transactions, right? So you're dealing with people that are institutions. They're no longer just groups, but they have whole systems and process, tens of thousands of employees depending on the size of these businesses, right? Um, and so those are kind of the differences within the transactions of the seller types of those types of deals. So single family, you have individuals. Anything above $1 million, I would say it's a 5, maybe even 10, small groups, syndicators, young, you know, younger, smaller groups. But anything over 10, you're dealing with, you know, Hilton, Marriott, big hotel chains. That's the only person you're going to transact with Got it.

So that's awesome. So the biggest thing, the first thing you'd mentioned is the difference in distress type. So with single-family, you deal with a lot of personal distress. Uh, when you get into commercial, it's probably more asset distress, right? It's mismanaged, things like that. Rents are low, capital expenditures are needed. Um, you could run into some situations, exactly, you know, overleveraged or, or whatnot.

Yeah, yeah. So, and not even just like the— not even mentioning the property first, but also just talking about the seller, right? Again, negotiating with those people in the process of negotiating with them. We could get more into the actual property, the inspections, the due diligence, and everything that comes along that, but the, the individuals themselves, it's, it's a lot harder to negotiate with institutional level Funds, you know, that own a billion dollars worth of real estate, they want 10% hard-earned if you're serious in the transaction, you know. And we're talking about $20 million deal, like you need to put $2 million up, right, just for them to take you serious because they have billions and billions of dollars that they manage, that they own. And so you need to bring someone of like equal clout to even take, like, to get their attention, you know what I mean? Like the deal we're working on in Texas that group is reputable enough to get that deal done, the deal size, and they could actually perform, right? And so you, you need to find that, and matching that's really, really, really hard, uh, in my opinion. Not even just— look, not even factoring the property, you know, just, just negotiating with those sellers and actually getting a contract with them.

Yeah, no, that's really good. And I think, so like I said, you You know, there's two different types of distress. There's also the two different— the major difference you said is a single family, you're dealing with one individual typically. Maybe sometimes you have a brother or sister. Commercial, pretty much always, you know. So it seems like there's probably three levels of commercial properties. You have the mom-and-pop commercial owner who might own a small commercial building and he is just a sole person. Then you have a cohort in the, you know, $1 million to $10 million range that are syndicators and it's a group. And then at the very top, you have institutional level um, parties which you have to deal with, which is even harder to get everyone on board, and huge barrier to entry. Um, so what would you say the barriers to entry to getting into commercial are at those different levels for someone who's just doing residential right now?

Yeah, so making themselves see— I would say like making them seem reputable enough and and experienced enough in that specific subcategory of commercial. Like I've mentioned, healthcare and multifamily and hospitality. So make like, just to get insurance, when we first bought a hotel, we bought our hotel in cash and we couldn't even insure it because we didn't have experience to insure it, for example, right? So like, just to make yourself look reputable enough and experienced to actually do that deal, And I think that's the hard part, right? So bringing on partners, and that's why people have partners, PGs, on the deals, or however they structure it, especially if you're trying to acquire and/or flip, you need pretty good earnest funding and you need to have that ready and able. So if you want to buy a deal, you need to have $20,000, $50,000, $100,000 ready to be able to put up. And a lot of those are the barriers to entry. So If you have lending opportunities, you know, with people that could help you with the earnest and provide proof of funds, uh, in some sort of liquidity, like actual bank accounts where you could see $5, $10, $20 million and, and ready and accessible, like, that's what they're going to want to see. They don't want to just see a spam hard money lender proof of funds. They want to, they want to actually see liquidity in the form of a down payment. And so I would recommend finding partners and resources, like for example, myself or other people in the industry that you could partner with that have those resources and that could help you acquire those deals and seem reputable enough to even lock up the contract and help the seller.

Yeah. So credibility is a massive thing in that commercial space. You said PG, I think you're referring to personal guarantee. What is that for people who don't know?

So personal guarantee. So typically when you're doing a deal, right? When you're syndicating, you got like 4 parts of it. You have a lender, You have a personal guarantee, someone that has assets or, or cash sufficient, like greater or sufficient, same to the, the asset value you're purchasing. So if you're doing $10 million, they need like $10 million cash or portfolio of $10 million. Um, then you have like the deal specialist, which is probably you, where you found it, you procured it, and then you have a broker that's working on it. So typically with where— how you negotiate those deals is with those four parts, and that's how you'd structure it, you know. And the PG is crucial to getting that loan. And the syndicators, typically they raise the capital, right? They own a small percentage of the deal to operate and manage, but the personal guarantee is just the, the majority owner of the asset since they had to bring the majority of that equity and actually secure the deal. So it's an investor or, or someone that you could use to partner with on a transaction.

Love it. So I heard being a personal guarantee, you don't do anything, but you do take all the liability if anything were to go wrong. So it's kind of a double-edged sword, right?

Right.

Um, so I— so it sounds like what you're saying is, you know, if I'm in residential and I wanted to get into commercial wholesaling, right, there's essentially 3 different levels, as I had mentioned. If I wanted to get in it on my own, where, you know, credibility— credibility always matters, I'm not going to say it doesn't matter— but where credibility is less significant is in that smaller commercial range. So maybe it's a commercial property, you know, $800,000 to like $3 million. It's a mom-and-pop person. That's something that like I could just go take down, right? And maybe that's the first step from going from residential, just dealing with those mom-and-pops in commercial. And then once you start to understand the verbiage and you can speak the language of commercial, then you can kind of move up to talking to those, maybe those syndicators, and then eventually the, uh, institutional people. Is that fair, would you say?

Yeah. And Jake, I love that you broke that down into 3. I had it 2, but you broke it down into 3. Now that I'm thinking about it, the first 2 deals that I've purchased and syndicated with was mom-and-pop sellers. They were tired landlords, 70 years old plus, been running it for 20, 30 years. They had all the equity. They just really needed to retire, health, all these other concerns in their life. And the motivation was there, and they were motivated to work with someone younger and ambitious and hungry that might not even have the resources, right? But they just want to see them succeed, and they want it to like be passed off, right? So that's where I found my success in my first commercial transactions and where I shifted all my focus from residential to commercial.

Yeah, and that's where we found success in commercial too. You know, all of our threads that have been over 6 figures have come from that. They come from 8 to 12-unit multifamilies or a small commercial strip mall that was owned by some guy, inherited, whatever the case may be. So that's phenomenal. I think that's some great actionable steps there. I think the biggest thing to take away from that is the 3 different levels. Let's target those mom-and-pop commercial people first, and see what you can do because that's the most similar to the residential process. But just know that, you know, you are talking to an investor avatar type versus a, like, you know, Sally Joe who's selling her house down the street avatar type. So you got to speak a little bit of a different language, you know, to build rapport with those commercial people. You want to speak the investor lingo and know those things. So there'll be something to note there. Um, but I think it's just important to note too that just because these, these prices are inherently larger you know, the wholesale spreads are larger. Because if you think about, okay, wholesalers make on average 10% of the fee. So say it's a $400,000 house, you make $40K. If it's a $4 million property, you know, you make 10%, you could make $400,000. And it's like the same, same percentage, but it's, you know, 100 times more— not 100 times more, 10 times more. Um, but I think that's something to know. Just because the prices are higher, it's kind of the same thing. But Um, anyways, so you talked about different asset classes. Can you kind of talk about what's your, uh, favorite asset class in the commercial space, uh, to target and why?

Yeah, uh, real quick, I want to— you were mentioning price, and I want to talk about valuation and kind of a difference with, uh, comparables. Typically in single family, we look at comparables, maybe rent estimates at most, but we don't really value on revenue, right? Whereas in commercial, you're going to be more focused on revenue, replacement costs, comps, and a lot— like, you could look at CapEx, you could look at a lot of other— whereas purchased before, what the CapEx— and you could really determine value 4 to 5 different ways. And why? You could look at it and analyze it and then average it out based on all of those things, see what the market's calling for, right? See comp at 8 cap, then you see the replacement cost, call your insurance guy, see the revenue, see the gross, see the NOI. And that's where you're going to want to analyze the value and how do you— how you determine the value and worth of a business in commercial. So take a blended average, that's what they do with an appraisal, um, and they focus on those 3, 4 valuation methods, um, and that's how you determine value, and that's how you could even make sense if it's a good deal or not. So if you can't value it, you don't know what to resell it at, and you don't know where it's good or not. But as far as asset classes where I'm invested in, I started in commercial, in, uh, hospitality. We focus on hospitality, multifamily, and healthcare. I would say that one of the most lucrative is going to be healthcare, but where I'm most experienced is going to be hospitality. I've done Airbnb since 2018, converted all my Airbnb into commercial hotels, motels. And operated that. But where I've made most money is through healthcare, and, um, that's where I would say my favorite's becoming is more of like a healthcare and/or hospitality facility.

Love it. So what about healthcare and hospitality do you find more attractive than other things? Just because you've known it the longest, or what are some of the nuances of that versus multifamily or gas stations or retail or whatever?

Uh, maybe it's not as attractive at this moment. For example, hospitality after 2020, hospitality took a big hit. There's a huge conversion. A lot of multifamily investors shifted and went in. The, the barriers lower and the cash flow is high. So typically most hospitality assets are gonna be like a 12 to 15 cap, whereas multifamily's gonna be like a 3 to 8, you know, in most markets is what you're seeing. And so the cash on cash returns are there. And as an investor, interest rates are high. So if you're acquiring multifamily, you're basing it off of appreciation and not a cap rate because the cap rate's lower than the interest rate. Um, so you're not making money, right? You're hoping that election goes well, values go up, interest rates drop, and, and all that. But whereas in hospitality, you could still make money because the, the cash-on-cash returns are there. And so, and you could buy for $50, $80 a key and make $1,500 a month net return on that investment per door, which is, which is huge in some markets, right? So you can't replicate that in multifamily. And so that's why I would like it. Through my experience investing the last 3 years, that's where I found a lot of my success. And, um, in healthcare, wow, like, it is really complex. It's really hard to get into, but when you start to learn the ropes and you have the relationships, the The deals are incredibly lucrative, very complex and hard, a lot of inspections and things you need to know, regulations, but the deals make a lot of money. And so I'm looking at like a $75 million nursing facility in Kansas. It's huge, right? And being able to work on something that big and move that, just a 1% fee would be multiple, multiple six figures, you know? Uh, but having the, the complex or the special knowledge, I guess, to do that is, um, where you gotta acquire it. Maybe make some relationships, but I would highly recommend those areas.

That's incredible. Yeah. So you like the, the hospitality seems a little bit more resilient for downturns just cuz that's such a, you know, integral part of the economy. Hospitality, especially COVID, you know, more people in the in the healthcare facilities and just the up-and-coming, um, retirement sector, you know, this assisted living, things like that. Uh, that's all becoming really, really popular. Um, what kind of timelines are associated with this deal? Like, for example, this, this hospital that's, you know, $70 million, what could you expect from first time you touch someone to when you're actually getting paid if everything goes perfectly?

Well, I'm gonna base it off of some connections I have, but if I— everything goes well with the connection, I'd say 90 to 120 days. Through everything, right? But something that's vacant— this is important to know— something that's vacant— there's another property I'm working on in Phoenix, it's going to take 2 to 3 years to get that operational and running, right? So like, think about it from an investor standpoint. The people that are in this space that are pouring $10, $20, $30 million into a facility and waiting 3 years to get it licensed, rehabbing it, going through all these processes— it's a very long process. So you have to have someone that's very committed and, and able to perform, right? But here recently with the last hospital I worked on in Arizona, I've made some pretty good connections and just trying to see if I can line something up with that. 3, 4 months, man.

Yeah, I mean, just at the end of the day, it's, it's risk and reward. So, you know, the higher, the higher the risk, the longer that timeline to pay off, the bigger the payoff's going to be. That's just a natural part of, you know, economics. It's just higher, higher the risk, higher the reward. So Definitely have to be patient with those. That's insane, 2 to 3 years. And again, going back to what I said before, something like that, you'd want to make sure that you have some other income coming in as well, whether it's smaller deals, mixing something else in so you could get some stipends of money in between.

Right, right. That was the wake-up call for me. So I'm coming back to it. I have some commercial wholesale knowledge and experience. I've made a lot of acquisitions. I've dabbled in residential, but launching a residential and treating it like a business— we have 5 full-time VAs, we have 3 closers, we have someone on dispo, we have a whole business that we built out to it. But we've generated 130 leads in 6 weeks. We have 11 contracts or so. August is looking amazing. We launched this in June, taking it full-time and trying to make it a real business, right? And applying business experience that we've learned in hotels and healthcare and whatever we've done before in scaling with me and my partner and, and making that work. Because a $2K rip or $5K rip is totally worth it. Don't get discouraged, you know. People that are wholesaling, like, I'm envious of other people that are doing that consistently because I'm waiting 9 months on a license for facility. Maybe we do that, we make multiple 6 figures a month, but It took me a year and a half and a lot of stress and time and applications and surveys and inspections, fire marshals, everything you could think of, you know, the state coming here and, and it's really hard, right? So I was tired of waiting and I needed some money, right? And so that's where I've shifted and the $2,000, $5,000, $10,000 are worth it all day. If you could do that for a month, you're still winning, right? But just shift some focus, make some relationships to commercial, because that's what's going to change your life. A lot of the people that do residential wholesale, you know, like, they're— if you're investing in commercial, if you make some of those relations, maybe you do 1 or 2 wholesale deals in commercial, but you start acquiring. That's what changed my life, was making acquisitions there. Stopped buying single family, started buying motels and healthcare facilities, and everything changed for me, you know. So I would highly recommend that.

Yeah, that's— it almost seems like the, the, you know, the best thing to do in terms of a— from a risk perspective is to have some income coming in on a daily basis, and then you can have these longer commercial plays be like, you know, your daily expenses are taken care of with this, you know, more frequent income. And then if these big deals hit, you can just take all that money and just go use it to make more money, you know, just go take that and reinvest it, right?

Because you have your daily expenses It's like your lottery, you know, it's like a lottery ticket, right? It's like you can't, you can't really base it like you can make 300, 400 grand, right? But it's like if it happens, you know, like these deals are huge. There's Fannie Mae, Freddie Mac. These surveys are hard on multifamily deals. 300, 400 units are up. I would say 50 to 100 units, stay below 100 units if you want to wholesale commercial multifamily. Everything above that's really hard to value. Insurance costs are going up, just doesn't underwrite anymore. Interest rates are high. I haven't had much success in very large deals, but maybe one works. But just treat it like a Hail Mary. If it lands, thank God. If not, keep moving on to other ones.

I think that's so good. So good, man. So many actionable steps, tactical things I think help people understand the differences between residential and commercial. What are those major differences? Obviously, commercial, you're dealing with more people. There's different levels to commercial. Um, timelines are longer, there's more things you have to look at, different valuations, all those things. Um, definitely a lot to take in. Where can people go to find out more, um, about you? Or say they had a question about commercial, or they have a commercial deal they want to bring to you, where's the best place to reach you?

Yeah, so Jake, I'm working on my branding. We're launching a new website, we're changing our actual venture capital company, right? So I'm gonna get with you here soon, but right now you could reach me at my Instagram, just focus there, and then I'll roll something out in the near future. It's just @tylerskybennett. Um, you have my information, Jake, and you could share it. Feel free to share that. Um, but I'm going to work on branding and social media. Kind of been a recluse in that area, but moving forward, and I've, I've noticed as I'm getting to that bigger level, like I said, institutional level, they require it. Where's the website? Where's your portfolio? What have you done? Show me. Like, I need, I need proof, right? And everyone on New York has it. So, you know, if you're, if you're comparing yourself to the biggest companies, that's where we're going. So yeah, you could reach me at Instagram, but here in the near future we'll be rolling out our brand.

Love it. Tyler Skybender on Instagram, probably DM him. Then he's got some, some websites coming out and things. Yeah, that's huge. All right, last, last question here. What's the number one piece of advice you'd have for someone who's looking to get started in commercial real estate, the number one action step they can take today?

Relationships. You want to make relationships with people, introductions, you know, and connect to people that are, are, that are already operating at that level. Brokers— I've worked with brokers, mortgage lenders, people in that space for 20, 30 years, and that's who's going to get you connected to other investors, you know, and the opportunities to actually get your feet wet in that space successfully. You know, you don't want to go there with no connection. So if you could focus on one thing, it's just make the right relationships.

I agree, that goes for a lot of things in life. Relationships, network, your net worth. You know, it's the most— it's the most trite saying, but, uh, it really is the truth. But Tyler, I appreciate you, man. Um, good to finally see you, and, uh, we'll be in touch. Till next time, guys. I got, uh, I think next time is Justin Tumanowski. I said that last time, but next time we got Justin Tumanowski coming on talking about creative finance. Um, have a good week.

Awesome, appreciate it, Jake.