5. The Art of Commercial Real Estate Investing with Author Doug Marshall Continued

Welcome. This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program you'll learn about the world of commercial real estate and find out why it is one of the largest investment opportunities in New York and around the world. Now here is your host, James Nelson. Welcome everyone to the fifth show of Real Estate Investing Live from New York. This is your host, James Nelson and wow, what an education. Last week with Doug Marshall, author of Mastering the Art of Commercial Real Estate and then an incredible panel we had with Hugh Kelly from Fordham, Carly Weinreb, recent graduate of Columbia, and then Blaine Strickland, CCIM instructor. And for today's show, we're going to have part two of both of those segments. So week by week you all are going to be figuring out how to invest and operate commercial real estate. So before we get to that, let's get to the Weekend Review Powered by the Daily Beat in sales this past week, Munich Re has signed a contract to acquire 330 Madison Avenue from Abu Dhabi for 875 million. This 40 story office building spans 846,000 square feet and is located one off East 42nd Street. To note, the Abu Dhabi Fund allocates 5 to 10% of its massive portfolio to real estate. Its holdings are estimated to be close to $700 billion, according to Bloomberg. Also, Doug Eisenberg's A&E Real Estate holdings has acquired a rent stabilized portfolio in Regal Park, Queens from the Kestenbaum family for 129 and a half million dollars. There were 18 adjacent properties that total 568,000ft. The deal traded 5 cap according to the real deal with roughly 95% of the units being subject to rent stabilization. This was the first large scale sale since the new rent laws went into effect. And then lastly, Shimizu Realty Development has closed on its acquisition of 305 East 46th street from the Van Barton Group for $152 million. The office building spans 187,000ft and is entirely leased to the United nations. According to Rea, the deal traded at slightly under a 5 cap. Van Barten had paid $118.5 million back in 2018 and then extended the five year option on the lease. So quite a nice execution for them. In recent leases, Morgan Stanley has expanded its 1.2 million square foot lease at Brookfield's One New York Plaza by 88,000 square feet, according to the New York Post. Additionally, Denzu Aegis Network has will anchor Tishman spires redevelopment at 341 Ninth Avenue with 320,000ft asking rents there were 120 a foot and artist Peter Mack Studio has signed a 2,300 square foot lease on the second floor of Artemis's 541 West 25th street, asking rents for $75 a foot. Lastly, in leasing a study asking rents in Times Square for retail are down 24% from the same quarter five years ago as the availability rate rose to 8.9%. And according to the Wall Street Journal, during the same period, asking rents on Broadway in SoHo fell 43% to $486 a foot. And on Upper Madison Avenue rents have dropped 46% to $954 a foot. So sounds like an opportunity for tenants to lease space. Lastly in news, a group of landlords have filed another lawsuit challenging New York's new rent laws. According to the Real Deal and elsewhere, Brookfield Properties has released renderings for its massive planned residential development on the South Bronx waterfront. The 4.3-acre complex is expected to cost $950 million. And then finally, Carl Icahn is at it again, placing a big bet against mall owners. The billionaire investor stands to gain $400 million on his trade if mall owners run into challenges servicing their debt. So wow, a lot of activity this past week, so definitely want to keep you informed. We're now going to take a quick break from our sponsors and we'll be back for that continued conversation with Doug Marshall. So stick around. Thank you. Become our friend on Facebook Post your thoughts about our shows and network on our timeline. Visit facebook.com voiceamerica A different approach to Putting Our Clients First Avis and Young's Tri State Investment Sales Group sells multi family office, retail, development and and specialty sales throughout the New York metro area. As experienced thought leaders in our industry, our 35 member group is available to help you make informed investment decisions by advising you on your current holdings or identifying new opportunities in the marketplace. Our one unified team is built on an industry unique platform which promotes unparalleled collaboration and teamwork. We share core values of hard work, integrity and expertise. We we put our clients first providing tailor made strategies to achieve superior results. Please Visit us at aytristateinvestmentsales.com and follow us on Twitter, LinkedIn and Instagram amesnelsonnyc to learn more. Have you friended us on Facebook yet? Why not just go to facebook.com voiceamerica or search for the keywords Voice America Once you are part of our Facebook network. You'll receive daily messages about what's happening with our shows, this week's featured guests and and new happenings at the Voice America talk radio network. And you can add your voice to the always active discussions on our timeline. Just go to facebook.com voiceamerica or search for Voice America. Hello everyone, we are back. You are listening to Real Estate Investing live from New York. I'm James Nelson, your host on Voice America. And right now I have our special guest, Doug Marshall, who is author of the new book Mastering the art of commercial Real estate Investing, how to successfully build wealth and grow passive income from your rental property. So Doug, thanks again for joining us back on the show. And I know I just left our audience with a statement on how, yes, it can be scary to buy real estate in New York and curious your thoughts on that and maybe how that experience might to buying properties elsewhere in.

The US I listened to what you had to say and I was sitting there saying, my goodness, that would be very difficult to be buying real estate under that type of time pressure. We on the west coast, at least pretty much throughout the West Coast, I know that we have that free look due diligence period to be able to check out the property and, and we have financing contingencies and things of that sort. So it takes away much of the risk because you never know when you have somebody, you look at a property and it looks okay on the surface and then you bring somebody in to take a look at the deferred maintenance and find out that, oh, by the way, they have dry rot all over the place or there's a need for a new roof or whatever it might be. So I would find it, James, very hard for me to really get comfortable with investing in New York real estate.

Right. Well, it is very challenging and it's a very tough market to break into. And I think it makes it all the more important to have your team in place. You need to have your professionals lined up. If you have an equity partner, your banking relationships, you know, if you're talking to these people for the first time when you have received a contract, there's no shot that you're going to be successful on the transaction. You know, you really need to get to know your professionals beforehand, get that team ready. Because when it's time to move, you know, again, when we send out contracts, you know, it's usually a week or two of back and forth between the attorneys to finalize the contract. But then yes, you're putting down a deposit, that deposit's hard and non refundable day one. And the typical closing period is 60 to 90 days. And in some cases it's even tighter. And a lot of the things that the sellers will also ask for is what's known as a time of the essence provision, where that's a drop dead date, where there's no further extensions under the contract. So it can be very daunting. I will say on the flip side, when you're a seller so you've bought in, when it comes time to sell, you have the luxury of getting those terms and knowing that you have a sure thing when you sell. So there are different principles in different markets. And again, even though the title of this show is Live from New York, my clients, many of them invest all over the country. In fact, some invest overseas, overseas as well. And so probably, and certainly all the more reason to have local professionals who know what the customs are, how things work before you decide to dive in. So on that point, Doug, maybe you could give a sense of who is the transaction team, because I know a lot about the show and you know, every week we're going to be building on this theme and talking to some of the various specialists out there. But if I said Doug, who is your transactional team? Who are the essential professionals who you need to close a transaction?

Well, you know, I think that's a. I would call that Real estate transaction team is the same thing for me as what I would call my real estate advisory group. And they are those people that you specifically need where you have a weakness or you have little or no knowledge. And so you have to figure out that for yourself. Where is it, where are your strengths, what things are you knowledgeable about and what things that you're clueless about? And so you need to fill in the gaps with people that you can trust. Their advice. So just a few, the five that come to mind for me on a regular basis is that you need a really good real estate broker that can represent you well. And there are lots of brokers out there. You need to find one that you can trust and that you enjoy just being around them. They have to be good people from that standpoint, but also have particular expertise on the property type that you're looking for. I believe you need a commercial mortgage broker versus a lender. I think you get a much better opportunity, a better chance of getting the best possible financing available by going through a mortgage broker. You need a general contractor that can go and walk the property and see if there's anything that obviously needs to be repaired, any deferred maintenance of any kind. You need to have a good property manager on your team that can help you manage the property once the property is under contract or you actually have it purchased it. But they also could probably provide advice as to what market rents should be on that property at time of closing. And maybe there's a big difference between what actual rents are on that property versus what market market rents are. So you need to have a property manager that can kind of help you in that regard. And then finally it's good to have a real estate attorney who can look at the contracts, make sure that there aren't any clauses in there that you'll regret later that will cause problems down in the future. So those are the five advisors that I would have on a team. But you could have others. Those are not all exclusive group of just those people. It could be CPA or bookkeeper and a variety of other things as well.

I like how you called them advisors and that's certainly a good group to start with. And my advice was to get that team on before you do a transaction. And there are of course specialists and I'm glad you mentioned someone who knows that specific asset class because there's going to be different things that you're going to be looking for if you're buying a multi family property as opposed to a triple net that I just referenced. Clearly someone who has that local knowledge that I spoke of before, you know. So examples are if you're vetting a mixed use property that has a store on the ground floor and apartments above, you might have a landlord, tenant attorney. Take a look at some of the leases you might have. Reach out to a retail leasing broker if that lease is coming due and asking, you know, what is this space worth? What, what's, you know, what are market rents? And you know, I truly believe as much as you could say, you know, James, you know, you're a salesperson at heart. I really feel that I'm in the information business and my job when clients call me and I really do consider myself an advisor, you want to put yourself in the client's shoes and say what's the best strategy moving forward? And sometimes when I meet with owners, sometimes the advice and they come to me and say, James, I'd like to sell the property. And if I was short sighted and saying, well, that might make a nice commission, sometimes it's premature. Sometimes the advice is, look, we need a little more time, the area is still maturing, you need to reposition these rents. You need to extend these leases. Whatever you need to do, do to position it for sale. But I like, and I know you definitely cover this in your book as well. Trust, trust is, I mean we truly are in the people business and these relationships and how you decide who you're going to work with is so vital. And so I know you cover that in your book as well. So that was, that's a great lead in. Now I'd like to talk a little bit about because. And it's great. And you mentioned that these are on your blog as well. And so you've got bullet points on a lot of these. But you have five questions that you listed that new investors should answer before buying their first rental property. What are those five questions?

Well, it gets back to the very first question is, is rather obvious in many ways, and it's a real simple question. Do you want to be an active or a passive investor? And an active investor is one that makes all the decisions about the property. And a passive investor lets someone else make those decisions. I invest, James, as a passive investor. I have a person I've gone to over the 12 years that is the managing member of the LLC and I come in and I provide a down payment for the equity necessary to close on the transaction. So for me, from my perspective, I'm very happy being a passive investor. But if you're going to be a passive investor, you really only have one decision to make and that is who do you want as your real estate sponsor? And once you've made that decision, you're done. So the first question is, do you want to be an active or passive investor? If you want to be a passive investor, who do you want as your real estate sponsor? Who do you want to trust with your money? And once you've made that decision, you know, you can kind of kick back and relax. But if you choose to be an active investor, which is a lot of people go that route, you really have three other decisions that you have to make. And they are who do you want on your real estate advisory team, which we just talked about? How will the property be financed and how will the property we manage? And once you've answered those questions, fear of the unknown is really significantly reduced because you now made three very critical decisions about your future rental property. So those are the five questions that you need to go through. And if you can answer those questions, you can all the other questions that you have going forward kind of fall by the wayside. They're not as critical as those five questions.

I can definitely personally relate and attest to what you just said. Also, I mean, we both have very busy and very happy with our day jobs and it is a full time job to be a sponsor and to work an asset and to be on top of it. And so when I invest, I do invest as a limited partner or through fund vehicles where I'm not involved in the day to day. But it also made me think about, and I forgot to mention before when we talked about why do some real estate professionals choose not to invest? In addition to fear, sometimes I think it is for good reason, which is conflict. And as a real estate broker, I choose not to be a buyer in the marketplace because how can I give objective advice to owners if they say, well, you know, James, I see you're out there buying all these properties. How do I know you're going to give me a fair valuation? And you don't just decide to turn around and buy properties and buy my property. I know there's certainly some brokers who, who might do that, but just wanting to be objective and not wanting to be competition with my clients. So one of the vehicles I invest through with River Oak is the name of the fund and I'm going to have my partners on the show later in the season. But we provide equity. And so the nice thing there is we're not buying properties at the asset level because. Because if we were out there competing with the clients, my clients, I don't think they'd like that that much. And here we're actually helping because we provide some of the equity to get the deal done. So that can be a reason also why you might want to be passive as opposed to taking an active role. So beyond having a firm grasp on value, and we're going to talk a little bit later about how you value properties, you wrote that successful investors need vision. What do you mean by that?

Well, many times the seller is selling his property because he's lost vision for the property. He really has. He sees the property as it is at the present time, not as it could be. And the buyer, on the other hand, because of the way market is today and prices are kind of at their peak, he needs to have a vision for the property to justify purchasing the property because the price that he's being offered, that is the asking price for that property today in most instances doesn't make sense from a cash on cash return basis. And so he needs to have a vision that says, you know, if I did these things to this property, you know, I make these couple of changes Here, this property's cash on cash return or cash flow after debt service could significantly improve. And so he needs to have that vision for the property that the seller at the present time doesn't have. And if he has it and he can figure out exactly what needs to be done to tweak that property, he can then justify purchasing that overinflated price for that property because he can substantially improve the value and the cash flow that's being generated from it. Does that make sense?

Absolutely. And when we talk to investors and we ask them what their investor is, profile is, the terminology that you'll hear in the institutional world is you're a core investor, core plus value add or opportunistic. So a core investor, that is.

That.

Triple net example where you're just looking for that stable cash flow. Core plus is kind of light value add. Maybe you're just upgrading a little bit of the common areas, maybe swapping out some of the fixtures. A heavy value add usually involves gutting property, apartments and then opportunistic. Usually when you're looking for those types of returns, you're talking about ground up development, which can be the most risky. So I think also deciding where you are on a risk profile and again how involved you want to be. And there's certainly trade offs. I mean the core type investments in New York that might generate a 5, 6% return, a core plus might be a high single digit, a value add over a three to five year holding period, which is typical, might be a mid teens return and opportunistic. Usually someone is swinging for the fences, looking for 20% returns and above. But obviously then you're taking on a lot more risk. I know you said earlier, it doesn't necessarily mean that there's a zero sum game where it's going to be total success or total failure, but oftentimes with those opportunistic ones, it is high risk, high reward. And I really do like what you had to say about vision. And that's really where the creativity comes into play. And I remember selling this property in the West Village and as the broker, we really try to sell, you know, the future potential of the property, the upside as we call it, and always thinking of ways and trying to make the case to investors on why they should be willing to pay a higher price today, which means accepting a lower return because of the future potential of the property. So it might be, well, right now you've got an apartment building with 20 units that are all one bedrooms, but we think they could be easily be made into two bedrooms and generate higher rents, or maybe we could convert the ground floor into retail. Maybe there's additional development potential. So these are the kind of things that we look for and when we put out our marketing package that we try to unlock. So in my firm, what we do is we represent owners to go out market properties and what we're looking to get, you know, maximum value for them. And so that's part of our job. And yet so many times we've sold the property and you know, a year later I'm catching up with the buyer saying, hey, how's it going so far? And you know, whether they, they've, you know, figured out a way to add square footage that we didn't know or unlock some additional potential by bringing on maybe a different type of tenant that we hadn't considered. You know, the creativity and the vision, as you put it, really can make some of these investments really pop. So let's talk about how you underwrite and how you value properties. Because although you covered in your book, and we talk about that irr, and again, for those new to investing, that's short for an internal rate of return. So the, the premise talked about that cap rate, which is that snapshot the property's value today and what type of return you are getting before debt service and IRR factors in the whole life of investment. Right. So if you're running a 10 year IRR, you're still saying, okay, well I'm going to look at that stream of cash flow over the next 10 years and then in year 10, I'm going to assume that we sell it and maybe I bought the property at 5 and a half percent cap rate today and maybe in 10 years I'm hoping I can sell it for a 4 and a half cap and at that point hoping that the net operating income would be a lot higher. And so, you know, oftentimes that exit cap and that sale in year 10 is what really justifies that purchase today. So first of all, is that a fair characterization of how IRR works? And if so, why do you not necessarily agree with that approach when buying?

Well, you have an accurate understanding of, of internal rate of return. And the reason why I don't believe using an internal rate of return for a purchase is because of my background. Early on, in the early 80s, I worked for a real estate developer who turned into a syndicator. And my responsibility, I was a financial analyst for them. And so one of my responsibilities was that I would run the numbers on future developments that they were going to build, and they were typically apartments. And I would play with these numbers on a regular basis. And if the numbers didn't generate a high enough return, I was told to go back and tweak the numbers until they did. And so I got really good at playing with the IRR calculations. James. It was kind of a fun game to play, but I learned from that that you can make an IRR calculation, say anything you want it to say, and if you don't have a high enough irr, then increase the inflation rate over time or lower the cap rate in year 10, and you can do a variety of things to manipulate that internal rate of return. So I am not a fan of using IRR on the purchase side. I really am not. And instead I will use an IRR calculation, but it's after I've sold the property, because at that point, you know all the data necessary for establishing an accurate irr, you know the number of years you own the property, you know what you paid for it, you know the cash flows that were generated by year, you know the sales price and the loan balance and the amount of equity that you received at the end. So then you can calculate an accurate internal rate of return. And at that point you either can do the happy dance because you bought, you're incredibly smart, you purchased this property and you managed it well, or you could say, well, this one didn't go particularly well, but you know, you can't win them all. And at least at that point, you know, when you're purchasing the property, it's anybody's guess.

Great point, and could not agree with you more about the sensitivity of these models, and I've certainly had a hand in many of those as well. But sometimes when you tweak these assumptions, whether you grow the rents by 3% per year as opposed to 2% and the expenses, and, you know, what, what, what the capex, what, what it's going to cost to improve the property. I mean, and certainly that exit cap, I mean, to sit here and guess, what is a property going to sell for in 10 years? I mean, I have a hard enough time advising clients. I get asked the question, well, James, are, you know, where are we, Are we, where are we in the market? Do you think that values are going to go up next year, two years, which is a tough enough question to ask, let alone speculating where things are going to be in five or 10 years.

It's ludicrous to try to figure out what your cap rate is going to be ten years from now. There's no way of knowing. And yet you have to make these very important, monumental assumptions that has a significant impact on whether you're going to purchase the property or whether you're going to pass on it. And so I just don't believe in IRR when it comes to buying a property.

So when you underwrite a property, what is your lens that you look through? What's the process that you undertake?

Well, the first thing I do is I put it through kind of a. A list of parameters that I find important to me. And everybody has their own list for me. I look for where is it located. Is it located in a small town or is it in a larger metropolitan area? I looked to the property type. There's only a few property types that I will invest in. And so I. And I want it to be a distance away from me that's relatively short so that I can go visit the property from time to time. So I do those things. And because of that, a vast majority of the deals that come across my desk I just say no to very quickly. It makes it real simple to do that. But really the next thing I do is let's say there's a property that's the property type I like. It's in a nice market area, sizable population base, steady or good neighborhood. First thing I ask is, what's the story on this property? I like to hear what the listing broker is going to tell me. What is it about this property? Why should I be buying this property? Now, I know I'm not naive. I know that the listing broker is going to try to paint as rosy a picture as possible for that property. But I do listen to it. I really do. I listen to it with a kind of a cynical viewpoint, thinking that this guy is just trying to sell me this property. But I do listen to it because there will be kernels of truth. And again, it's all about trust. And some real estate brokers, when they tell me what they believe about the property, I listen. Other ones who tell me that, it's like I just ignore them because they're just trying to sell the property. So it's all about trust. So the first thing I do is I listen to the reasons why this person believes that it has a value add component to it. And that's the first thing. The second thing I do, and this is really the crux, probably where you really wanted to know is, James, instead of using irr, I use a cash on cash return. I more or less throw out the marketing flyer pro forma because many times those are distorted. Not always, but most of the time they're distorted and don't even closely reflect reality. So I take the historical operating statements from the property in a current rent roll and I spread those historical numbers and I ask questions about the property itself to, to the listing broker and ask and try to get some answers why these numbers don't make sense. If they don't in certain areas on expense side or the income side, I try to get an understanding of what I'm looking at. And then I underwrite the loan. The thing that I do that's unique to most people is I actually underwrite the loan assuming how a lender would underwrite it. Because you need to get the right loan amount if you, you know, it's not just going to be 75% of the purchase price. You know, the lenders have a certain way of underwriting a deal and you need to understand what their, you know, the general rules of thumb that they use. And so I find out the right alone amount which then tells me how much equity is needed in the property. And then I try to, in a perfect sense, perfect way world, I'd like to see in the first year a cash on cash return of about 5% or greater. So that's what I look for. It might be that it doesn't even get close to that 5%. And that's okay if I really believe there's upside in year two, three and four that can make up for it. So that's how I take a look at a property.

You bring up once again some very good points. And yes, even as the broker, I will certainly admit when we get expenses and we put together a marketing flyer, first of all, we're making projections on the rents and we try to be as accurate as possible because if our projections are not realistic, then I think the investor questions our whole thesis on the property. So we do try to be as accurate as possible. We usually do supply supporting comparables, but it's still the investor's job to certainly verify that. And then when it comes to expenses, we're going to take a look at it. And there are market averages and usually our expenses will say actual or they will say projected. And when we say actual, we do say, say what year they are from. So if you're talking about real estate taxes, I might, when we put the property out, it might be from the previous tax year, which was the most recent information that we had at the time. But you need to take a look and make your projections on where Those taxes could go. And a lot of the expenses, I mean, we're going to cover the major operating expenses such as heat, insurance, repairs, payroll, management. But again, these in many cases are estimates. And you know, there's a ton of line items. If you ask a seller for their T12, the trailing 12 on where their expenses ran, they might include a lot of other expenses, whether it's bookkeeping, whether it's exterminating or, you know, there's dozens of expense line items. So it's really the investor's job again to kind of parcel through that and vet that and with the help of professionals. And that's where a managing agent can certainly come in helpful to say, okay, well, based on the experience of real operating expenses, this is what you should expect. So I think that's a point that's very well taken. Taken that as the investor, you know, trust but verify. And then the one thing I wanted to go back also because you mentioned, I like when you said you want to hear what the broker's pitch is, so to speak, on the property. But I would add to that, I would say one of the questions you should ask when buying is what's the seller's motivation? Why is the seller selling? And there's a whole host of reasons why someone selling. And sometimes, you know, the broker knows, sometimes maybe their client has shared that. Maybe, you know, maybe there's reasons why they're not able to discuss that. But, you know, sometimes it can be, look, it's a great time in the market. You've had the property for five, ten years. It's appreciated. You want to that your client wants to sell the property. They want a 1031 exchange, they want to buy something larger. And you know, we call those discretionary sellers. And you know, look, if you think it's a fair price and you see something there, then I wouldn't discourage it. But, you know, if that's kind of on one end of the spectrum, on, you know, the seller motivation scale, if you want to call it that, you know, then you have reasons such as partnership disputes where partners want to go. They're their separate ways. You have, you know, whether it's divorce, whether it's, you know, estate sales. And I would put that as far as, you know, on motivation. Oftentimes, you know, the family members, you know, they're not in the position to continue to run the assets they want to sell. And you know, we look at those as must sell situations. We also do some court work sometimes where there's a bankruptcy sale, where there's going to be an auction. And not that there's ever a sure thing on if a transaction is going to happen, but again, I would say that that certainly becomes a reason why a property is certainly going to sell. So I think one question as our listeners are out there looking to buy, when you're speaking to the broker, it's okay to ask what is the seller's motivation? What is their time frame? What are they looking for in a buyer? So with that, we're going to take another quick break from our sponsors and we'll be right back. Thank you. Become our friend on Facebook Post your thoughts about our shows and network on our timeline. Visit Facebook.comVoice America hi, I'm Mark Rose.

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Have you friended us on Facebook yet? Why not just go to facebook.com voiceamerica or search for the keywords Voice America. Once you are part of our Facebook network, you'll receive daily messages about what's happening with our shows, this week's featured guests and new happenings at the Voice America Talk Radio network. And you can add your voice to the always active discussions on our Timeline. Just go to facebook.com voiceamerica or search for Voice America. Welcome back to Real Estate Investing Live from New York. I'm your host James Nelson. I am here with Carly Weinreb who recently received her Master's degree From Columbia University Dr. Hugh Kelly, who is special advisor to Fordham University and Blaine Strickland who is founder of HBS Resources and a CCIM designee and instructor. So Blaine, we just had the chance to hear from Carly as well as Hugh as far as what their experience was with the Master's program. What does CCIM have to offer in the way of coursework? You talked a lot little bit about it, but what type of technical practical skills are they are students learning and would this be of interest to someone who wants to become a real estate investor?

Okay, well, let's look at all of those questions. The Designation is about 50 years old. It's got academic underpinnings. In other words, when you learn the calculation of internal rate of return, you learn the same formula at Columbia or Florida or anywhere else. So it's the same basic analytical material. But the differences might be that first, it's presented primarily by practitioners in the industry. So the instructors have to be recertified every two years. There's a requirement that they are active in earning their fees from the conducting of the real estate brokerage industry. In the industry.

And I'm sorry, real estate brokers or real estate investors. Are you learning from, let's call it.

Players, people that show up every day and somehow find their way in the commercial real estate arena. Whether they're a broker, a lender, an investor. The instruction faculty is made up of these people.

And that's an interesting distinction because if you're hearing from someone who is actively in the business, you probably are getting a lot of real live in the trenches kind of stories. And it seems from Carlene Hughes, experience, yes, they bring that in as well. But when you have instructors, multiple instructors who are out there in the field, I'm sure that adds to the experience.

Yeah. From my own experience, I have been an instructor at a graduate level program. So I understand the rigor, the academic rigor that's involved. But at the same time, I've signed personally on millions of dollars of loans. And so when you think about market analysis as someone who signs personally on the outcome of that, it can be a little different than a lifelong academic.

So Carly told me that at Columbia, they told her always to sign non recourse.

Good luck with that.

We'll see how that they actually did, though.

Yeah, well. Yeah, well, welcome to becoming a developer. Right where you put it. So I was in a class once, and you know our friend Jeff Ravitz, and he starts off by the class by saying, okay, who wants to become a real estate investor? And everyone in the room raises their hand. He says, okay, let me tell you what happens at a real estate closing. And there was a bunch of brokers in the room. He says, who do you think gets paid at a closing? The real estate broker gets their check. The attorneys, they get paid. Otherwise, you know, it's not happening. The title people get paid. What does the developer do? Guarantees. They sign personally. They put everything on the line. And let's fast forward. I mean, everyone Loves hearing about these incredibly successful deals. But when things don't go according to plans, do. Hey, for you brokers in the room, have you ever had to give back a fee a couple years down the road? How about you attorneys? You ever give a money back guarantee? So it was after that he said, how many people still want to be an investor? We still had probably a quarter of the room, but certainly a lot to be involved. It does seem that through higher learning, this is not just an academic experience. There is really technical skills where understanding the capital stack, how you structure deals is very helpful as far as learning how to get started. Although, Hugh, I really liked what you had to say about the ethics piece, because without that, again, you're nowhere.

When you think of it, would you go to a doctor who had never had a course in medical ethics and didn't keep that up or any other profession? It's amazing to me that real estate stands so alone in this and lacking as a requirement. So I've partnered with a couple of other colleagues and have prepared a case to try and not only bring this at Fordham, but to make it more of a feature for real estate education on a nationwide basis.

Well, that's really important work that you're doing, so thank you. So now I'd like to talk a little bit about the networking aspect. And I don't mean networking in the sense of kind of working the room and giving business cards out. But I mean, Carly, you've just spent a year of your life with. And how many students were in your graduating class?

We spent about 120 of us.

Okay. And if you had to give us a pie chart of those 120 people, I mean, how many were existing investors? How many wanted to be lenders, wanted to go work for private equity? What was the makeup of that? 120. And then I guess the next step of that question is, how would you utilize those contacts in the future?

Columbia's program has a really interesting mix of people. I would say a good percentage are actually architects, people that are on the design side and realizing, you know, maybe the opportunity is not there for them to earn as much as they'd like, or they want to be shifting but still doing the same thing. That's a good amount of people. There are a good portion that are brokers. I found that there's a lot more residential brokers that were out there than investment sales. There's a good amount of debt brokers, and also people that were just on the lending side in general. And then you honestly have A mixed bag of people that are just looking for a career change. Now I would say say that at Columbia's program, a lot of people had prior experience working somewhere for at least a portion of time. I know a lot of programs, some people go directly from undergrad, and that definitely happened, but it wasn't a great number. And yeah, I mean, I think the fact that my program was 120 was the perfect size. It was the right number where I could get to know everyone, but not too big where, you know, there would be people that faces I didn't recognize. And then also with 120 people, you have quite a range of personalities and interests and abilities. So like you said, I can go to those people and reference them for years to come, whether that's, you know, to achieve a certain debt package or whether that's to help with design of a property or even just a fellow investor that maybe is focusing on a different asset class. I have a few friend that's going into hotels. And so, you know, a few years down the line, if I decide I want to go into hotels, that's someone I can reference and I can, I trust her enough to say, you know, what has your experience been? What would you recommend? What are your, what are your models look like? Things like that. I think when you are in a classroom setting with someone, it really opens the doors up to a different type of relationship. We obviously do a ton of networking on the brokerage side. And you know, through my work with you, I've met so many amazing people in the industry. But I would say that the relationship and the type of friendship that was there is just different.

That's a really great point, and I really like how you summarize that. Hugh, you did something with the Fordham program, having mentors for every student. Can you talk about that?

Yes. My experience in working in this, in the business end of real estate was that when I began, I had no idea how broad the industry was. And then once I picked specialty, I picked research how deep you could go. So my assumption was that students would need to learn the breadth and the depth of the industry. And the best way to do that, I think, is to build collaborative structures. So we try to provide each and every one of our students with a mentor from the industry. And it could be a banker, it could be a lawyer, it could be a broker, it could be a developer, but someone that they can go to as their student who will then introduce them to the breadth of the industry and give them the opportunity to do things like Sit in on business meetings where real deals are discussed. I think that's an important element. We're in a very competitive world. We learn to compete. We also need to learn to collaborate. And I'm happy to say that we do collaborate with Columbia as well. We hold events jointly to try and bring the industry in, to bring industry groups as sponsors of that, so that we can make New York City a global center for real estate education. And we're not going to do that if we're just competing with each other. We can begin to collaborate and get the synergy of these great educational institutions.

That's really fantastic. And could not agree more. The importance of bringing people together. And this is collaboration. It's really the world that we live in today. Blaine, I think you mentioned there's 15,000 CCIM designees out there. What about that network? How does that work?

Well, these 15,000 people are spread across the planet. We have designees in Poland, China, Korea, Mexico, Canada. So they're really across the world. There's probably another 30,000 people that have taken at least one class. So many people are experimenting with the material and taking maybe one class to see how it feels. And I think that's maybe a difference between the CCIM program and say, a program where you have to be fully committed, like Carli's program. You could take a one week class, see how it goes, decide if you want to take the next class. And so I think that in terms of network, there's certainly the opportunity to work together. Many CCIM designees count that as a very favorable benefit. Hey, I have an opportunity to do a deal in some other place. I'm not part of a big network. Who could I go to? But there's national conventions, there's regional meetings, There's a lot of ways to find each other and to work together.

Perfect. So we only have a couple minutes left, so maybe we could close with this, because I've been asking all of our guests, what advice would you give to an aspiring real estate investor that could be someone who's entirely new to the industry. It could be someone who maybe grew up in a real estate family, or maybe they've even had some internships or maybe even a couple years as a broker, maybe. Hugh, we'll start with you. You have someone who wants to become an investor. You offer this new coursework. What would you your advice be to them to come to Fordham to learn, and where do they go from there?

It's all about becoming a full human being. You need to broaden your Horizons. And that means a couple things. One, never stop learning, James. You never stop learning. I earned my PhD when I was 62, and I continue to to research and study because you have to keep learning if you're going to grow in the business. And then the second thing is don't get so wrapped up in your primary career that you don't keep your perspective on what else is going on in the world. In my early career, I studied and studied and studied, took real estate courses. And I realized I was becoming a really boring person. And I had to read. I had to take advantage of what New York has to offer in terms of theater and entertainment. I had to meet people who were not like me. And I think that's part of lifelong learning.

Never stop learning. And I did not give your accolades to mention that you were a graduate for the University of Ulster in Urban economics. But also I'll give you a plug. Bestselling author of 24 Hour Cities and talking about taking research and making it practical for all the listeners out there. 24 hour cities. Really fascinating, powerful stuff. And so I'll go to our next author. So, Blaine Strickland, also author of the book Thrive, same question for you. For an aspiring real estate investor, what is the best track? Is it going and getting your master's? Is it a ccim? Is it both? Is it interning at a real estate office? What advice would you give?

Well, if they're truly aspiring, my advice would be to not commit to a formal education program too soon. There are many master's degree programs that won't admit you until you're 27 or 28 years old, minimum, because they want you to have some experience. I think Carly benefited tremendously and is able to apply the information much more powerfully because she had a few years of experience. So I think if you're aspiring, there are many opportunities to learn. We've talked about those already. There's books, courses, they can learn from you. You're all over the social media networks. So I would say that if someone's a aspiring, the best thing to do would be to have as many experiences as possible. And then those that formal program will be that much more powerful.

Great advice. And again, this is why we're doing this show. Because when I got into the business and then friends asked, how do I learn about how to become an investor? Where do I go? What's the book? And there was, of course, the rich dad, poor dads, and, you know, buy money, buy real estate, no money down. But how do you actually Learn how to do it. This is what the show is all about. Carly, I'm going to let you take us out because you're about to take the plunge. You're doing this and I'm sure there's a lot of people listening to the show who are thinking, I want to become an investor, I want to do it. I know we caught you. Just you are going to be leaving New York City. You're finding more opportunity and also a new way of life. And you're headed to Tulsa.

To Tulsa, Oklahoma? Yep.

Okay, so what are you going to be doing down there? What are you looking to invest in?

So that's a great question. Really quickly, I would say my piece of advice for anyone that's looking to do anything, a favorite quote of mine is you have to be interested in order to be interesting. So whatever it is that you guys listening want to do, give it your all and give it 100% because you can't be good at anything unless you really apply yourself. But in Tulsa, you know, it's a really interesting opportunity. I love learning in New York. That would be another piece of advice is to be in a big city to learn if you're going to do a formal program because you're going to get the best instructors like Fordham we have at Columbia, you know, top executives in the city that are coming up giving lectures and instructors that are teaching classes. But for me, I'm going to take all of that knowledge and try to be as intelligent as I can with this knowledge. They say if you can make it here, you can make it anywhere. Hopefully that's true. Guess we'll see. But hopefully we'll be investing in some office and some multifamily to start and eventually would definitely love to be doing some ground up development.

Perfect. Well, Carly, Hugh, Blaine, this has been a really interesting and exciting discussion and no doubt will be helpful to our audience. So thank you again for, for joining us today and for all our listeners out there. We look forward to connecting with you next week. Thanks again.

Thank you, James.

Thank you, James.

Thank you.

Thank you for tuning in this week to real estate Investing live from New York. Please join your host, James Nelson for another program next Tuesday at 7pm in New York, 4pm Pacific Time on the Voice America Business Channel. All shows are rebroadcast Wednesday mornings at 7:00am Eastern Time, 4:00pm Pacific Time, as well as always on Demand. We'll talk again next week.