Direct Outreach with David Shorenstein

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and Head of Avis & Young's Tri State investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host.

This podcast is for educational purposes only and should not be relied upon for investment decisions. The opinions expressed are those of the guests and not their company companies. Listeners should not act upon the information without first seeking appropriate advice from an accountant, lawyer or other professional.

Welcome to episode number 201 of the Insider's Edge to Real Estate Investing. I'm your host as always, James Nelson. I'm Principal and head of Tri State Investment Sales for Avis and Young. And back with us today by Popular Demand is David Shorenstein. For those of you who have not listened to the first interview we did, that is a must listen, a precursor to this episode. Those of you who have heard that interview, I know some of you have listened to it multiple times because I will tell you that I have never seen a canvasser, someone who's been able to source as many off market opportunities as David does. His deal count now is up into the mid-200s. He is founder and Principal at Hildreth Real Estate Advisors, but he has been an investor now for going on 1718 years after his time as a broker at Marcus and Millichap. So I know you're going to get a tremendous amount of this episode and David, I looking forward to getting into this discussion with you right after the break.

A Different Approach to Putting our Clients First Avis and Young's Tri State Investment Sales Group sells multifamily office, retail, development 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 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.

Foreign.

Welcome everyone. With us today we have David Shorenstein who is principal of Hildreth Real Estate Advisors. Welcome back. I know it's been a while since you've been on the show, but you were definitely a popular guest at the time. I know we've had a lot of great feedback from the first episode, so looking forward to getting back into it.

Thank you for having me.

And I. I should also note that I will tell you that one investor in particular who may rename Nameless for now, has said that he's not listened to episode once, but multiple times because he really liked what you had to say about canvassing. So I know we're going to get into that because you had your start as, as a real estate broker, Right. So just for. For those who. Who maybe don't know you or didn't have not heard the first episode yet, maybe give everyone a quick background on how you got into the business.

Sure. So I studied finance at NYU Stern School of Business. Through a family connection. I got my first job canvassing for office spaces for an owner who had buildings in the West 30s and they had an office on Park Avenue. And my job was to find them tenants for their class C and D office buildings.

I didn't even know there was class.

D. Oh, these are probably class d. They're talking 2003, 2004, the garments.

I'm sure you have some stories from then, right? Run ins with tenants.

You're trying to take one tenant from one building to the next building. This is before key cards and security. And so I was getting paid $25,000 a year. And there was one guy, he was an old timer, probably know who it was in the company. And he was selling buildings and he had Massi Nakal books. He had books of these portfolios. And that really interested me and I spent a lot of time with him. And I started putting these setups together and trying to sell my friends other people's listings. I didn't know what I was doing. And basically after a month of being there, they fired me because they said they didn't want an investment sales broker while they were paying someone this $25,000. So I thought I had this job with the upside. And then I got fired. Then went to go work at City Habitats Commercial.

Okay.

Was there for about a couple years until that company was sold. And while I was there, sold about four buildings.

Okay.

Just calling out of the blue book. Also didn't know what I was doing, right? Just, just this guy gave me a blue book, said start calling and just started drumming up things. Brought a buyer to a couple of buildings that City Habitats agents had. So I brought buyers to those. So I made A nice bit of amount of money. And they hired a guy who was a Marcus Millichap who was trying to teach the business the right way. And once City Habitats Assault ultimately went to go work at Marcus Millichap to learn the business the right way and how to canvas and how to value buildings. So ended up staying there for about three and a half, four years, did well there, sold an $82 million office building while I was there and a bunch of walkups in the Village, and then once again actually bought some buildings while I worked there to get experience in a partnership with a couple other people. And then the market crashed in 2007. That partnership disbands. Everyone goes their separate ways. And that's when I started silver shore. From 2008 to about 2018, 10 years bought over, let's call it 180 buildings or so, market changes in New York City. We had the whole rent stabilized, collapse. That was a big part of the business that we had. So that's when I started Hildreth real estate advisors 2018, focusing on more cash flowing types of real estate and businesses.

Wow.

Okay, I, I want to go back to your time at City Habitats because I find this very interesting that, you know, and you said I didn't know what I was doing, but I just started making some calls and you, you sold four buildings. And you know, we certainly talk about in the book the need for specialization and studying and having that information, but what's fascinating to me is that there wasn't, you know, hesitation. I mean, I would imagine picking up the call, you know, the phone, making calls. I mean, it's interesting in, and even trying to coach my oldest, he's in college now, but encouraging him to now do a little canvassing and start looking at properties. He goes to usc, so around la and he says, well, you know, Dad, I don't know if I can reach out yet. I don't, you know, I don't have the perfect information. I'm not quite sure what to say or do. And I, you know, and I think part of it is, you know, you're gonna make mistakes along the way.

Right.

So I would imagine, even though you said you didn't know what you're doing, I'm sure you kind of figured it out as you went along.

I mean, I mean, you're always still figuring it out. You know, everyone that I think is successful is always canvassing for something.

Right.

And you're always talking to new people, whether it's you need new investors.

Right.

You're Going to make mistakes. You're talking to new business sellers or new sellers of property. There's nothing right to say. You just got to keep doing it. And it's just a numbers game at the end of the day. And that's what I tell all the young guys that work with me. Dive in.

But I got to imagine, maybe even before that, when you're showing office space, like canvassing buildings where you're going into another owner's building and try to, you know, find tenants, you probably wouldn't surprise me if you said, you know, I was kicked out of some of these buildings. I've been, you know, doors slammed to my face, people hung up on. So is that hung up on?

Cursed out, you know, screamed at, threatened, people show up. I mean, all of it, it's just, you know, you never know what's going to come from it. But you got to do the uncomfortable.

And that didn't bother you. You know, when someone, you know, hangs up on you or, you know, told you to get out of their building.

You don't take it personally. At the end of the day, this is, this is a business and this is all business practices. And if you're not going to do it, someone else is going to do it and take that opportunity from you. But potentially exists. But like I say, it's just, it's just a numbers game and if you're not out there, nothing is going to happen.

Yeah, it might seem like a topic that, you know, maybe it's not worth dwelling on, but I think it is so important because. And now this is where I sound like the, you know, the old guy in the room. But you know, when I see a lot of the younger brokers today, it's, oh, you know, I'm going to send an email, you know, and you hear the floor and it's a lot of, you know, people are sending that and that's kind of how they communicate or it's by text or, you know, whatever, social media. But the notion of just like picking up the phone and in my experience, because clearly I do all those things as well, you know, the email blasts, you know, plenty of social media. I don't, I think that's a great thing to stay top of mind, but it's not actually generating business. So would you say like today, even as you, you said you bought now over 180propert, right? How, if you had to, you know, if there was a pie chart to say, David, how did you buy those 180 properties? How would you say the Majority of those were sourced.

Yeah. Well, between that and now. Hildreth. Hildreth. I have about 70 properties and a bunch of businesses.

All right, so you probably over 250 acquisitions.

Yeah, hundreds. I mean, most of it is, you know, you want it mostly to be direct through cold calling, I would say cold calling is. Is a huge part of it, and most people don't want to do it. And then there's a proportion that's direct mail, but it's the follow up. It's not just. You're not just going to make that deal, even in that first call or even the first response to the letter. It's about tracking and tracking those people for years and building those relationships.

How does that first phone call go? Let's. I mean, not to role play this out, but you're calling an owner and what's the script?

Well, if someone's calling me, that's more of a warm call.

Okay, so hopefully they've got your letter. So let's start there. You were a big. I remember I visited your office and I know we did talk about this on the first podcast interview, because people love this, but I remember I went to your office once and you had like a dozen interns who were sitting there writing handwritten letters.

Right.

And what did those letters say again?

Please call me, I'd like to make an offer on your building. Or then you switch it up and say, I'm very interested in your building, or I own the building next door, please call me. And you put your cell phone number on there.

That's it.

That's basically it. Very, very simple.

How many of these letters do you think you would send out at a time?

I mean, previously I would send out 50,000 letters a month, and it was very, very expensive.

50,000Amonth.

@ the height of it, like this.

Was human beings writing out.

No, no.

Those would go to a mailing company and the mailing company would then send them out.

Okay.

They would mass produce them. So now I want you to come to my office. Now, I have a robot that we've built, proprietary robot that you can feed the robot the data, and the robot will now hand write all the letters and send them out. But I don't do 50,000 letters a month anymore because I a. It's extremely expensive. You're talking about spending, you know, a dollar at least per letter, you know, dollar letter.

Okay.

The major, major investment. And it paid off. But now I do it in a much more targeted. I say, okay, this is what I'm Going to focus on, this is the type of shopping center I want, or this is the type of industrial building or New York City. Even if I'm only buying free market mixed use buildings in Manhattan, there's only, let's call it 3,000 of those left of long term owned. So those are pretty easy for me to get into the robot and send out once every six months.

So how many? I mean, maybe it was a better sample size with 50,000amonth, but what is the success rate? I mean, when you sending these letters out, how many calls were you getting back?

It's probably about a 2%.

2%?

Yep.

Okay, so your phone would just ring off the hook, right? I mean, hopefully you sent out 50,000 pieces of mail. You have inbound calls, so that, that's better.

Usually when the mail goes out, it's like a bomb would explode. I mean, we're talking 10 years ago, you know, I'd have two phones. Bomb would explode. Your phone doesn't stop ringing Saturday, Sunday night, midnight, 6am people would just get so annoyed by it. And there wasn't a very good way at the time because.

What do you mean annoyed by? I mean, they're calling.

Well, sometimes they would get the same letter two months or three months in a row, and you wouldn't be able to take the people out of the database fast enough.

Oh, I.

So they say, take me out and like, okay, I'll take you out.

Oh, so some of these calls are. Stop harassing me.

Yes, people are just get nuts over direct mail. Or you say. Or they say, oh, you sent it to my mom, she's senile. Why are you harassing her? We're not selling. And you can't keep up with it fast enough of take out because the databases were all made by like you saw an army of people.

All right, so you get a warm call there where someone is actually intrigued and they say, david, I received your letter. I'm interested in selling. Okay, now what?

Right now you try to obviously meet with the person. Just like old school brokerage, right? You want to build relationships. Them say, okay, when can I come see the property? Can I come see the property? This is what I own. This is what I. This is what I have near the area. Did you know that you want to give them some information. You got to be an expert in all these things.

So you're competing. I mean, I've interviewed, you know, now over 200 investors for the show. I don't. There's a couple I can think of that are certainly aggressive Canvassers as well, but, but not, not to this level. And the, the question would be, you know, you're not just competing with other investors calling direct, but you're really competing with the brokers. Right. You got tons of brokers who are canvassing, calling, hey, I can get you more money for your property. Don't sell off market. You're gonna leave money on the table. I mean, how, how successful have you been buying without a broker being involved? And how do you, how do you.

I mean, I, you know, you have to want to be able to win. It's like sports. You know, you play a lot of sports, you want to win in, and you do the best to win. You know, usually I tend to, to win because I know what I could deliver quickly.

But how does the seller figure out that what you're offering is fair? Because I would doubt you'd say that You've acquired over 250 properties if you were just lowballing. So, like, what is your strategy when you were submitting these offers? Like, did you have kind of metrics that you were looking to follow? Like, and I'm sure if you were, you probably bought, if you bought 2, 250 properties, you were probably submitting, you know, three thousands of offers. Right. So was this kind of a back of the envelope underwriting? You'd submit an offer if you got their attention, then you, you know, you tweak the numbers. Like, talk about that too.

A lot of price per square foot. I mean, you know, if I look at the comps of something and try to be, let's call it 10 to 20% below.

Yeah.

Because then, you know, at the end of the day, it's really, sell me the building. A building you want to buy. I could pay market for it, but then we just subtract the brokerage fee because, like, if there's all the buildings I'm going after have hopefully have inherent upside. So I could still pay a market price per se, but if a broker gets their hand on it, they're going to sell to their friend or they're going to sell it to the guy they sold 10 of their buildings to. And I was never, and I said, I'm never going to be that first phone call because, you know, I don't come from rich family.

Right.

Started with zero buildings or zero money to begin with. And there's other families out there or sons of families that are going to get those first phone calls. So I have to separate myself.

Right, right.

So, so, so you make, okay, so you make the offer and then I, I guess whatever the seller comes back with. And you know, I would imagine you're not really heavy on the due diligence process, meaning that you're an easy buyer to work with. I, I would imagine if you were.

Difficult, you know, that's the way you do a lot of transactions. You have to be easy to deal with. And that was one thing I always pride myself on being easy to deal with. You know, due diligence is important and you're going to make mistakes.

Well, I was going to ask you about that. You do this much volume, there's no way that you could really fully vet, you know, every single one of these deals. Like how many times would you buy something and say, oh my gosh, I had no idea that this was going to be an issue.

Right.

Did that.

Right.

Well, things when you're dealing with a lot of tenants or you're buying a 40 unit building, which I'm not doing anymore, but you're going to run into roadblocks, you're going to run into boilers, you're going to run into electrical, you're going to run into structural.

Right.

You're going to run into all these things.

So, so what are the top pitfalls? I guess when you're buying something that you just, you have to make sure whether it's, you know, are the tenants current in their rents, is there litigation, is there issues with the civo? Like what are the major boxes that you have to check to say that I'm not gonna fall in a huge trap here.

Right.

Nowadays I have a little bit different approach, but then like when I was, let's call it more gunslinging, right. And doing so many transactions. Right. The market now is not, you can't really do as many transactions. So you can be much more highly selective now. But if everyone's paying, that's, that's great. Something to verify. Hopefully the seller will tell you the truth. If they, sometimes they don't tell you the truth, then you have to make a decision.

Right.

Structural, obviously structural integrity of any type of building. Roofs have. Now the price of any roof has.

Gone up, especially new in shopping centers. That's a lot of roof. A brownstone in Brooklyn, no big deal.

But still the price of a roof has gone exponentially higher. The price of everything has gone exponentially higher. Also making sure you have a reserve, you know, that's one thing I learned, like making sure you have a nice cushion. Hopefully, you know, you have enough investors where you're able to fully fund. But you got to keep making sure you fully capitalize the deal even after closing.

Right.

So let's talk about, I mean, New York, one of the most competitive markets in the world to buy in. Right. So clearly there's a lot of competition, but also the terms when you're buying, I mean, if you're going to buy in a secondary tertiary market, you know, sure, here's 60 days exclusivity, here's another 60 days of diligence. You tie up a deal for $25,000, like that's not happening in New York. So were you, I mean, clearly from accepted offer to negotiate in a contract, you said, look, I'm an easy buyer. I mean, you're showing up and putting 5, 10% hard money day one.

Right.

I mean, so a lot of these times you're getting. Right, in the contract, 98% of the.

Deals were done without due diligence in New York.

Right.

And as far as financing the deal as opposed to raising equity, what was the, you know, what was the vehicle that you use to, to tap into that capital to be able to close quickly? Did you bridge it with financing syndicate the deal later? What was the.

A lot of bridge financing. And that's why a lot of people won't get into this business, period. They don't want to sign recourse.

Right.

You know, and all these deals, even today on a regular bank deals, they're all recourse deals.

What's, what's the leverage? I mean, back in the day, I mean, now it's probably changed a lot, but with these bridge lenders, when you were taking down these deals, what was.

How much, you know, they were given 80% of cost.

Right.

The business plan was different of buying out tenants.

Right.

Renovating, increase the rent five, six times. That was, that was business.

And how quickly did it take you to improve the property and then swap that out for refinance it for conventional debt?

I mean, a lot of times I would do it six months or a year. I mean, it was just a different, just different world.

And were you usually able to take out the entire bridge or even cash.

Out on, on the perm, which I haven't seen many cash outs in the last since like 2015. I haven't really seen too many of those.

Yeah.

So talk about, I mean, recourse, you said was part of this. I mean, how did you view the recourse? I mean, some people say, hey, I want to sleep well at night, I don't have to worry. You know, my investment is just limited to you know, this asset, I mean, how do you kind of wrap your, your mind around recourse and making sure that you're protecting. Because if, you know, you go out and buy 100 deals and inevitably one or two of them are not going to work out, you know, you don't want one or two bad deals to upset the entire portfolio. So how do you.

Well, that's why I think it's good not to cross deals. And I've had the opportunity many times because I buy and I build packages of things, right? So I've had opportunities from investors, from lenders to cross deals over. I don't think I would ever do that. Because of that. If one, if you own three buildings and one of them turns out to be bad, it could take down the other two. Instead of just selling one and getting your money back and making money on the other two, you don't want the whole thing to mess, necessarily go down. So that's the way I also look at it, but with recourse. Look, if you're buying something that you believe is under market and you're not buying something that's totally empty, that you can never fill up, I think you, and you somewhat execute and you make few mistakes, but not a ton. You should be fine. You know, today it's like you want to buy certain things that, you know, you could fill with tenants then, then your downside's pretty limited, right? You have good partners in the deal who will stick behind you. You know, we'll work with very good people, hopefully that, you know, if you do need to put more money in the deal, they understand why you're doing everything the right way. You're doing your investor reports on time, you're sending out your distributions on time. People will stand behind you.

How many investors would you typically bring in on a deal?

It could be anywhere from 1 to 20, depending on what it is.

And I would imagine you've had a lot of repeat investors over the years.

I have a lot of repeat investors.

And these are all, you know, proverbial friends and family. Or. Did you ever think about tapping into more institutional type capital?

We have a couple of quasi institutions, you know, but we work with a lot of like cogp partners, which is something that I've been doing over the last six years, where, you know, you bring in a strategic partner, someone who has other skill sets than you do, whether it's a developer or someone who raises money like professionally and give them a piece of your business.

Got it. Let's. And I want to Talk about what you're doing today, but just to kind of put a bow on, you know, what you were doing in New York City. Again, this is probably, I mean going back what, 10 years even. I remember at one point, I don't know if it was over 100 buildings in Brooklyn, but it was a lot. And I remember you sold them either in one or a couple large portfolios. So I don't know if that's public or you can share what that was and what the numbers look like. But needless to say, it would seem like to me that back then that there was a premium to aggregate a portfolio like that.

There was. And we put out the portfolio and we sold it in bunches, but really there weren't that many buyers. And I think most people don't realize, and I might have talked about this on the last podcast, the height of the New York City market was really 2015, 2016. And ever since then you've just seen especially rent regulated, people knew the laws were slowly changing. As you could approach tenants, as you could offer buyouts, or as you could renovate as you could destabilize, it just kept going against you. And I think people knew that. And, and ultimately, you know, we sold them in bunches. A lot of them were already free market that we either destabilized, so we sold one offs packages.

Yeah.

And it was just, we knew 2019 was approaching. Didn't know what it was going to be. But.

Yeah, I mean it really seems, and sometimes there's a little bit of luck involved as well, but the timing to kind of make an exit on New York multifamily, you know, Covid hits, interest rates go up. And so now I know a lot of your focus has now been out on Long island buying shopping centers, laundromats, car washes. So what was it that attracted you and kind of caused that shift?

Well, I got into first, my idea in 2018 was to really do shopping centers. You know, highly cash flowing value add. I bought a few by myself, still own those cash flowing. It's nice to get a check every month. And that was a foreign thing to me where there's actual cash flow after you pay your expenses and the tenants pay all your expenses. And one of our biggest investors was like, oh, what are you messing around with all these, you know, toilets for, you know, go buy like commercial, retail, commercial. So I said that's what I said I was going to do. And I bought, I don't know, I probably bought 17 or 18 shopping centers between New Jersey and New York. Some I've sold for.

What kind of cap rates were you originally buying in at?

You know, six to nine, let's call it.

And were they occupied at the time?

Occupied? I'm buying one right now in West HAM that's actually 40% empty, but that's a good thing. But a cash flow. It's a 6 cap even with the 40% vacancy.

Wow.

So we know this is a property that was once asking nine, we're paying six. So there's a lot of people that are now finally adjusting to the prices. And these things rarely sell because they're kind of like mini cash machines. They don't. They're not a lot of headaches.

Do you. Is there a certain kind of seller who you like to buy from? Because if you were buying from one of these big public REITs and their businesses, shopping centers, would you or is that not your profile? Are you going after the and pops?

No, this is 30 year ownership. You know, they don't even have for rent signs on the building. The one I just bought before this 25 year ownership guy was asking 12 at one point, paid 8. You know, it's just people are selling not, they're not selling, they're not price motivated. They're selling because it's just time.

Right?

Right. They have no mortgages.

Right.

And, and how competitive what you're doing now compared to buying in New York City and you're still writing your letters or your robot is what do you sense that when you're looking at these deals, still finding plenty to do off market?

There's, there's always some. I mean you can make a market anywhere is what I've found out.

Right.

It's like if you hit an area hard and it's a good area, I think you can drum something up. Whether it's Florida, California, we have some shopping centers. We were doing it there for a little bit. It's been very tough to find stuff there. New Jersey, we have a few properties, same type of thing you can make, you can make an opportunity anywhere if you, if you hit it.

Right.

And is it still the letter writing that that's still a big part of it, or is it picking up the phone? Are you actually calling owners directly?

The phone I mean, the letters is more targeted. You know, I say, okay, this is the type of thing I want to target, where I want to target. And there's only so few long term owners because I'm not buying from the public REITs. Right, right. Those are going to be broker Deals and not say we haven't brought some broker deals.

What about buying distress? I mean, everybody loves the idea of buying distress. Buying from banks. What, what success have you had there?

This is a different type of distress where the seller just has to sell anyway. Internal distress, let's call it a family members fighting. It's a different type of distress where we bought a number of buildings where, you know, you have these, these families that there could be six sellers.

Right.

And buying a marina where you have to get six different.

Oh, right, Marinas.

That was the other one, you know, so it's a different type of distress. Right. These, these sellers are selling like I said, because they have to sell.

So let's talk about, we can circle back on shopping centers because I know there's more to cover there. But let's talk about three asset classes that I don't think we've covered on this show before, which is pretty amazing. 200 plus shows now. Laundromats. So what attracted you to buying laundromats?

I mean, there's always a lot of social media hype about laundromats. I mean, the way I got into it, there's someone else in real estate that also divested his company and his father owns about 15 laundromats in Florida.

And so when you own, it's own and operate. So you're running the laundromat.

Yes, but the way I'm able to do it is I have a 50% partner that knows what they're doing and been doing it for 15 years.

Okay.

So I just say I wanted to do laundromats and start dealing with them scratch. And I've seen a lot of people lose money or sell them at losses because they say they want to buy one and then they have to sell them for a loss now that I look for them.

So when you're buying these, I mean, I don't know what kind of financials, if anything that you get, but like, are you asking for a tax return from the seller? I would imagine there's probably a lot of these businesses, if they're still using quarters or, you know, cash. I mean, how do you even know what kind of volume?

Luckily, there's your partner, there's a certain. My partner. And then there's a bank, a specific type of bank which only certain people can borrow from are laundromat and car wash banks. And they also help you with the project.

So they know the volume and they know based on the demographic, they know.

They know the projections. And we've Looked at, I don't know, 200 of them and we bought five. Oh, wow. The same thing. Very, very competitive. Try to buy the real estate if you can.

You're not buying on a cap rate, are you?

You try to cash on cash return. You try to, try to push it to at least a double digit if it's not. And there's a lot of factors that can push you down.

And is this car wash same kind of thing? It's an operating business. I mean you're not buying these things least, are you?

Car wash is the same type of thing. Also have a dedicated, not a 50% partner, but someone, a guy that's basically his full time job and has ran them before. Otherwise I couldn't do it.

So why is it about. Is it just because you get that extra bump from actually operating? I mean, would there be an issue buying a laundromat or a car wash that's already leased?

You mean being the landlord? Yeah. And then just having them as a tenant. Yeah, no, I mean then it's a net lease deal.

Right.

And right now you could go buy a car wash and have, buy 9 cap. You can buy 9 caps all over the place. Right. And have it just collect your 9%. But I think that market has softened.

There's more potential.

Yeah, it's softened. But if you're going to go in and operate, you can get, let's call it like 20%.

Right.

Plus and that's what you try to get.

So talk about marinas now. So you're actually just buying. I mean, is this just the boat slips and I mean, what else comes with that? Real estate?

So same thing. My partner Jason, he really is like the head of marinas. He loves it. You know, you got to be passionate about the things that you do. He just loves boating, grew up boating, family. And we bought and sold one marina already that we did very well on. And then we said, all right, now let's look for more marinas. That's how we kind of get into a couple things by accident. That's how I got into the car washes. We bought a building that had a car wash and took over the lease of a car wash from the tenant. And then we sold it for a big profit and said, all right, let's start really looking into car washes. That's kind of how these things happened. Same with the laundromats. Bought a building, had the laundromat, brought in the partner and said, let's start going for more. So kind of get into these Things by accident. A little bit with partners, but with. In regards to Marina, we bought the third largest marina in Montauk. We have 100.

Which one?

Westlake Marina.

Okay.

So we have slips. 104 slips.

And people rent them for the season.

Rent the season, off season, daily.

Do you sell them individually? I've seen these marinas before. They.

Sometimes some people do them. I mean, we're trying to.

Trying to build cash flow.

We're trying to build cash flow and then aggregate a few more. Like I said, I try to aggregate these things and then exit. But then we have a restaurant there that we. We're just the landlord we have. You could probably add about 5 revenue streams to the marina over time.

I mean, my sense. And I get it, some people want to retire, partnership dispute, whatever. But if things were going incredibly well and the thing was cash flow, and I doubt they'd be selling. So how do you know that you're not buying something that's a loser?

Well, that one, the guy owned it for 55 years.

Okay.

Bought it direct without a broker.

Okay.

Certainly didn't operate it to its full capacity. He had rooms that he didn't even rent out for Airbnb. Now we've been renting them out for Airbnb after he renovated them. Didn't the lease on the restaurants coming up, you know, you could almost double the rent on that. And the slips were probably half of what the market was.

How did you. How did you figure out that the slips were half of. You just did some simple work and.

Just because, well, you know, being out in the community and also buying and selling one in that submarket.

You know what you.

We did all the research on the other one when we were going to buy this other one, but instead we sold it quick.

And is there something about the way. I mean, we're talking a lot about investing, but what about operating? I mean, is there a certain way where, you know, if you're going to increase the rates, I mean, clearly you've got to reach a larger audience. So is that kind of. Are you big into digital marketing or how do you.

There's like, software that you can use. You know, they take a percentage and, you know, you run it based upon software.

Yeah.

Daqa. So it's a lot of that word of mouth. Most of the people. We're in our second year now, everyone's pretty much stayed.

Yeah.

Even with an increase. And I think they're going to stay because it's still going to be below market.

Yeah.

And still it's Good for the community. You know, the point is not to throw everyone out, get all new people in. It's to have everyone stay and just increase them so you then makes your workload. Just like with any real estate tenant, you want those tenants to stay so you don't have to deal with three months of vacancy.

Right.

And the Airbnb, is that just something you kind of did on the side or do you have in your portfolio a lot of.

No, this is the only one. Really? Yeah. Okay. It was just, I mean, I know.

Some people make a whole business out of it and so I was curious. I mean, because I would imagine the management aspect of even putting something on Airbnb, you still have to coordinate with the tenant. And it's a lot of.

Yeah, I mean, we might switch it to a full year round because that's, you know, we have a. We built up a nice portfolio of workforce housing on the Hamptons and every. Most of our leases are all one year leases.

Right.

So what's, you know, what's the goal here in what you're creating? I mean, is this clearly, this is where the opportunity is next? It has been rather. So are you keeping your eye on New York? Are you thinking about other markets? I think you mentioned you were looking at California as well. So. So I guess the question is how do you figure out what's next? How do you stay ahead of the curve?

You know, that's a tough question. You talk to smart people. I mean, I see people coming back into rent regulation in the city. I just don't know if I want to deal with it. I think that is a real opportunity, I think for me, like building these, I don't know, micro companies that will become like major roll ups. Whether it's the marinas, the car washes, the laundromats. Once you aggregate a certain revenue stream, you can have a nice exit. And I have this New York City portfolio which you're selling one of the buildings. Now I have a night all free market, mixed use buildings. I think those will just keep going up in value. So building these micro pockets, or it might be New Jersey industrial, which I've.

But close to home.

You're not close to home. I also have someone in California, 50% partner that their business is based there.

Right. Okay.

We bought a few shopping centers. We sold two that were development sites. We did well, we're. We're stuck with one because cap rates are adjusted with the interest rates still look there. It's like a thing I look in Florida, but it's extremely competitive and hard. I look at industrial and, and retail, I think that's, it's probably oversaturated. Maybe you got to look in these outskirt pockets. But I, I think the smart thing is to stay close to here so you could really keep an eye. Especially if it's an operating business, I wouldn't do that in far away.

So the volume you've done over your career, I mean again, I, I, this is probably, you know, unless a big publicly traded shop, there's probably few investors out there who, who can say that they've, you know, acquired, you know, whatever it is, you know, 250 properties. It's a lot of volume. I gotta imagine it's a lot of work, it's a lot of hustle, you know, now. And I don't know if originally the plan was you were buying, improving, reselling, which is great, you make a profit. But then whether you 10, 31 exchange or cash out, you got to go do it again. Right now you actually have this portfolio that's income producing is the thought process just to hold that forever in cash flow.

I mean some things possibly like there's some real jewel box buildings that we bought like amaganz things that'll never be able to recreate. You know, things that you buy for 10, you say they're worth 20. What's the point in even selling it for 20? You know, you could make that into 40 or 50. Right, right over.

So how do you decide when you want to sell or hold?

Well, right now I don't think is a great time to sell anything. You know, we've tested, we test the market all the time with certain things. And right now I see there's very few buyers out there, there's very few sellers, there's very few buyers. I think it's a good time to buy if you can find something that's worthwhile. But I mean we're opportunistic sellers. Like if someone offers a crazy number for something or a really good number, we'll sell it, we'll think about selling it.

But is a lot of the selling that you're doing kind of more off market? Someone approaches you with an offer or do you really engage a broker and do a broad campaign?

I would say engage a broker, try to buy without sell with.

And how do you find out? Let's talk about the island. I mean, how do you figure out you going to typically whoever brought you the deal, you're going to let them sell it or are you thinking about how do you figure out what broker you want to work.

There's a lot of that, but I work with the big ones, the Ripcos, the Marcus's.

I mean, you were a broker, so you know the game. Like what is it about, you know, the broker that you know is going to do right by you? What do you look for in the sales process?

You know, just guys that care pick up the phone, you know, that's a big thing. Because I don't know if some of these guys on the phone with the broker yesterday out there, he's like, I don't know if I could deal with you. I call them all because we gave him a lot of listings to sell, right. And there's very little activity, right. Because just the market is so soft right now. And he's just like, you call like every other day. I'm just like, that's just me, you know, that's just me. Because I have a list. I keep a very, very long list. Every day, every property, I do something for each property.

Every day you do something for each property.

Every day I try to, you know, whether it's one, one email, one text, there's always something to do for each property. Okay, the leasing broker, the sales broker, there's something. Or whether it's the budget to build the site, whether it's the architect, there's always something, one little thing. And that's why I try to tell my guys, if you have two deals in contract, all you got to do is spend like 15 minutes on each of those deals each day and then go find new stuff.

Yeah.

Where do you spend the majority of your time today?

Today? Well, I went through my list this morning.

Right.

You know, I'm trying to raise money for a few deals that were close, you know, figuring out the gp, the co. Gp. Am I going to merge the next two car washes into one one of them? I've. I'm hard on a car wash. I have a toe letter that has to close in 30 days. The new car wash that I'm getting Now, I have 45 day due diligence, which is nice. Am I putting these together? Am I not putting them together? That's kind of. This is a $12 million plus transaction. And these things bring in, let's call it, you know, about $4 million a year of, of cash flow. This is a real deal. So this, this requires a lot of thought and time.

And how many people do you have in your organization?

In the immediate company? Let's call it about 12.

And you self manage everything we self.

Manage most of our things now.

And when you lease space, the shopping centers all outsourced.

All outsourced to the major guys.

Yeah.

Do you think. And certainly you've done a tremendous amount of volume. So are capped on the amount of deal flow that's actually out there. I mean you said you looked at 100 laundry mats to do five. So it's not a matter of like, hey, if I built a larger platform here, we could do more. Or you're like, you're, you're good with what you're doing. I mean, where do you go from here?

I guess, I mean, I just got an accepted offer on a, on a laundromat today that a guy in my office has been chasing for, I don't know, a year on the Upper east side. It's small, you know, half a million, but brings in 700,000 gross. I mean if it was a $700,000 gross building 10 times that, $7 million. But we're buying it for 500. 500,000.

Right.

You know, if it all works out.

Right, right.

I'm not saying we're closing tomorrow. 45 day due diligence. Look at the tax turn send in my partner knows what he's doing. Yeah, there's, there's a long road ahead. I mean I don't expect the deal if it closes. That'd be phenomenal.

I think we have it in the disclaimer to the show about, you know, check with your accountant, check with your professionals. But you know, I've heard, and I don't know if it's car washes or maybe it's gas stations, maybe it's laundromats as well. But do you even think about kind of the tax efficiency of what you're doing? You know, is there accelerated depreciation? Are there benefits with, you know, when you're running this operating business, are you just paying ordinary income on whatever you bring in or like, are there efficiencies here that you can build in?

Well, that's, that's the other thing. So what I noticed was in the last two years as it's been really slow, people didn't want to invest in a regular 7, 8, 9 cap. And I have tremendous respect for the people that have closed these deals and found these investors. But my 300 investors and I keep meeting new ones every day, want higher returns. They want tax advantaged opportunities where they get bigger write offs. And that comes with the laundromats and car washes. There's certain, you know, deductions you can get by replacing equipment. If you replace all your laundry equipment, you're going to get a massive write off. Replace all your car wash equipment, you're going to get a massive write off.

So, so that does factor in. So a lot of it's the investors.

And then your distributions are going to be offset by that. So the cash flow is basically, you know, not going to be taxed on some of it. But, you know, it helps when, you know, you're my partner, family tax attorneys, right. You know, you have to have these little like, niches, so to speak. So the investors have gravitated towards these types of investments. I also did an opportunity zone fund when that was very hot, as I think I was, you know, in Long Island, I built up a massive portfolio that was something people wanted to get into. So I rushed into that. So kind of now rushed into this stuff. And it's still. When you tell someone you're buying a car wash, they want to listen. When you say you're buying like a, a multifamily building at a 7 cap in Huntington, which I am buying, which is very rare. It's only building like it for, let's call it 30 miles, that is being sold. People aren't as interested. I probably have to make 200 phone calls to raise a million and a half dollars as opposed to a car wash. I could call up one or two big guys and they'll say, all right, this is what I want for giving you all the money.

So why wouldn't. I mean, maybe it'd be going all in. But if you said, hey, this car wash wash business, Laundromats, whatever, this is where I want to be and just national, like is that or it's.

It's two, two operations, the car washes, you know, we're, we're taking it slow. These things are expensive. They're all in the same geographic area where that one person can get to them all pretty quickly. Okay, the one we sold was in New Jersey that we bought and sold. I'm not to say that we won't. We've looked upstate New York. We look at them Westchester.

Right.

Looked in Connecticut. It's just got to be the right one, you know.

Do you think eventually and you know, with the Maltese in Brooklyn, you'd rolled them up into a portfolio? I mean, have you ever thought about doing a fund raising money to go or kind of pulling these together? Do you ever think about aggregating again?

Well, I did do a fund for New York City and that's how I Bought the nine buildings and you guys sold one of them already out of that fund. So that was successful. And that fund is, Is operated. It's closed now.

Yeah.

It was just to buy those buildings. Yeah. I just don't know if there's enough volume.

Right.

I think we, we toyed with and we spent money on doing a, like a shopping center fund, but if I raised the fund, I wouldn't have spent any of the money. I bought a handful of shopping centers since then.

Yeah.

So I'm able to kind of accomplish the goals without all that. And there's a bunch of different financial vehicles I've been working on to take things to the next level.

So, David, what I love about your approach, because I, I would say nine out of 10 investors that I speak with, with, you know, every day, you know, they talk about, oh, the market, it's been so challenging. There's nothing to buy, bid, ask, spread.

Right.

And you're just attacking the market. So what is it about you and your strategy that, I mean, in a very challenging market, let's be clear, since the middle of 22, it has not been easy. And I know even before we were talking saying, look, there's been a lot less to buy, certainly in the cities. So now that's why you, you're, you're, you've gone into these new asset classes. But, like, what is it about your approach? Maybe it's your DNA, how you operate, where, you know, you could have easily just said, hey, these last two years have been impossible. I'm sitting out.

Right.

But, but what is it that just keeps you going?

I mean, you want, if you want to keep challenging yourself, you want to keep learning. I mean, no one wants to sit on their hands.

Right.

A lot of people do.

Right. A lot of people do if they can afford to, but they want, you know, if you want to, you know, if you want to stay, stay interested, stay. That's just my approach. And, you know, I like to work with young people. I want to try to keep them busy, but it's hard to keep them motivated because the past two years has been. Yeah, like we were just talking about before the show, it's like, hasn't been like this since 2008, 2009, and no one knew what to do. They were scared. You see a lot of people leaving their jobs, not getting jobs. Companies are folding. So you want to be in the game when those things happen, because those are going to be the best opportunities. But, but this is definitely the slowest I've been in Years. I was talking about it yesterday with our team like Laundromats. Just one or two car wash. Well, we just got a new one coming in. Got to do our due diligence. Shopping centers. I can't just go out and buy one. Right now, I'm guessing closing on the West Hampton one, which is going to be a phenomenal deal, but I don't really have a real pipeline behind that right now. It's dry New York City. My pipeline, maybe there's building our two I'm tracking, but they want a thousand bucks a foot. Very hard to pay those numbers.

When people ask me if I'm busy, I say I'm always busy, which is the truth. Always busy. The question is, am I busy talking about the market? Am I busy listing properties, or am I busy actually signing and closing deals?

Right.

So I can only control my actions and showing up and what I'm doing. But if you, you know, peak market 2015, even like beginning of 22 was amazing. Like, finally we'd come out of COVID Debt was cheap, it was plentiful. You know, everybody was getting back in the market before rates shot up. But like, I'm spending the same amount of time, you know, during the week, if not more, in a more challenging market, you know, would you say you're the same way that, like, regardless of what's going on in the market, you're. You're putting in the same time and effort?

Same time and effort. Effort, yeah, same time and effort. But I'm also dealing with a lot of the projects that I bought. There's always constant work. There's constant entitlement that needs to be done. There's constant construction. There's. You know, I tried to devote a certain amount of time towards new business every single day. And, you know, I have guys that are. I'm trying to keep motivated in this challenging environment. Hunting for these.

For these deals, would you say? You know, because I think part of this is kind of like the herd mentality as well. What's been going on the last two years. Like, no one's buying, so it's like the safe thing to, you know, kind of be a. A bystander.

Right.

And so, well, hey, I'm. I'm not jumping in until everyone's back. Like, my thesis is that over the last year too, I. I think hopefully you'll look back and say what you bought were really great purchases. Because if, look, if someone had had to sell in the last year or two, you know, there had to be a good reason. Right. You, you're not going to just be a discretionary seller when things are that challenging. And yet there probably was nowhere near the amount of competition in a hot market. So, you know, picks back up. It's easier to get debt. You know, there's more, maybe sellers and product out there, but I think there's probably a lot more competition there as well. Like, do you even, I mean, again, you're an active participant throughout, but like, do you, do you think there's something to be said for that kind of bucking the trend?

I mean, I think what you said is correct. Those are going to be this, this West Hampton shopping center. You could tell by your investors feedback if you can raise the money quickly. You know, it's amazing. The deal. Same with this other shopping center I bought. These things are few and far between. Those are going to be some of the best deals. I just Wish I had 10 of them.

Yeah, right.

They just don't. They just. You have to search deeper and harder.

Right.

And the people that are doing that, you see who's having success out there. And these are going to be everyone who's, like you said, bought in the last two years, whatever it is, whether it's the Riverhead car wash they bought. I know it was a great deal. Yeah, I know I could probably sell that even right now for 30, 40% more. In two years from now, it's going to be probably double the price of what I paid for it. So just like I said, I wish I had like three or four of them.

Usually one of the final questions I ask is, you know, what advice would you give to an aspiring investor? Whether it's someone who's just starting out and. But, but I would actually ask the question for the veteran investor. What about someone listening to this saying, like, wow, like, this guy, David Hustles, he's doing deals. Like, I've got a really nice portfolio, but like, I'm just not in the game anymore. Like, what would you say to that veteran investor who. I mean, because what you're doing is a lot of work. So what would you say to that? You know, and maybe some of them are your investors today. Maybe they have big portfolios on their own, but they're like, I can't do what you're doing. I mean, what would you say to that? That family that has holdings and just, you know, for whatever reason, because they haven't been active over the last five, ten years, they're just, they're not getting the calls anymore.

I mean, they're gonna have to either partner up with someone or create some sort of new venture or new business and figure out someone that's willing to do the dirty work and partner up. Whether they get into one of those operating businesses with a partner like I did, or they're gonna have to get into someone who's maybe a little bit younger and wants to canvas and hire an acquisitions guy, which you've seen many families go out and start these other new ventures. Right. And raise money. So that's, that's what I would say. It just comes down to how motivated you are.

Yeah.

And would you say, I mean, deals breed other deals, but I mean, what you're doing at Silver Shore Properties, I mean, do you spend a lot of time thinking about your brand and, you know, whether it's PR on deals that you close, getting the word out social media, like, you know, how would you grade yourself on all that? And is that even important to have that image? Like when, when an owner's calling you, you know, and talking about selling off market, like, are they looking at your website? I mean, they're looking your track record saying, wow, this guy's for real.

Right.

That's, that's got to help. And then obviously for brokers to bring you deals as well. What are you doing in that department?

Yeah, I mean, Hildreth, I think we have a very good brand, a recognizable brand. Most people know, I don't know. One guy said, I was the Jeff Sutton of the Hamptons the other day, came up to me at a newmark event and said, jeff Sutton in the Hamptons, because he's seen how many, many jewel box retail buildings I bought. I said, oh, that's amazing compliment. You know, I said, if I bought this thing, then I would be, you know, like Jeff Sutton in the Hamptons. Like someone just paid 34 million for a corner property in Sag harbor that is an iconic, you know, and that only trickles down to the stuff that I own. I'm trying to do more there. I'm always trying to do more there. So I think it's, it's important to have a presence out there. I mean, I know you preach about it. I think it's, it's a good way to stay top of mind for brokers. When I post something on LinkedIn, whether I'm looking, looking for a partner, an investor or deal, I get a tremendous response. So I, I do it. This will go all over my social media trade. It, I think, is amazing to put it out there. It'd be foolish not to you do a deal, put it on there, put it on your social media. Why? Why not? It's just, you know, am I creating content like you are? No. Is it something I thought about? Yes, but it's a lot of work, Right.

We got to do two things on every property every day, so it adds up. David, this has been amazing. This is. I'm so happy that you came back and really appreciate. And I want to thank you on behalf of the audience as well, because you've really been an open book. I mean, I, you know, the, the kind of the secret sauce, if you will, and the approach. And again, that there, there's no, you know, shortcuts. Like what you're doing is obviously a lot of hard work, but you really, you know, figured out how to scale this thing. So this is really inspiring and just appreciate your sharing your story with us today.

Thank you for having me.

Awesome. And thank you so much, everyone for joining us, especially those of you joining us on live stream or maybe you're watching now on LinkedIn, Instagram, Twitter or YouTube or if not on whatever podcast medium that you choose, as always, you can go to james nelson.com I built this site for you. That's also where you can find show notes. You can figure out how to connect with David. I also put out a lot of content to really help you gain the insider's edge to real estate investing. So really appreciate, as always, if you like the show, forward it to a friend. I do that all the time. When I listen to a podcast that I like, I send it to someone if I think it'd be helpful. So until next week, thank you again for joining.

Thank you for listening to the insider's edge to Real estate Investing. We appreciate your subscribing and sharing with your friends. If you haven't already, please connect with James at James Nelson NYC on LinkedIn, Instagram and Twitter. Please also visit James Nelson.com where you can find the show notes and other episodes along with an exclusive video series and other helpful resources so you can gain the insider's edge to real estate investing. Until next week.