Engineering Your Future with Carl Wright

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis and 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.

Welcome to the Insider's Edge to Real Estate Investing. This is your host, James Nelson for episode number 146. And wow, we are on a roll. We're now four shows back from the break where we launched the book, same title as the podcast, the Insider's Edge to Real Estate Investing. Subtitle Game Changing Strategies to outperform the Market. That is what we're talking about here on the show is how to outperform the market. I talk about in the book how I love real estate because it is an inefficient market where you can certainly gain the advantage. And so thank you to all of you who have already ordered the book, supported it, your ratings, that is what helps spread the word. And we have certainly gotten such positive momentum from that Wall Street Journal announcement.

On the bestseller list.

So thank you for helping keep this going. My goal is to get this into all the master's programs across the country. I've been speaking to some students who said, james, I wish I got this book before I started my journey, because this lays out the entire transaction from start to finish, and it gives actionable, practical information on how to go and do this business. And look, even the veterans who've read.

This book, they've come back to me.

Said James, I even learned a couple things and have a couple actionable items that I'm going to employ in my business right now to really step up my game. So that is so gratifying to hear. Okay, enough about the book. Let's get into our show today with my friend Carl Wright. Carl is the founder and president of Wright Partners. Like many of my past guests, I got to know Carl through BizNow's ESCAPE conference. I've now been going for over 10 years. I think Carl's been going there probably just for about as long as. And I've really gotten to know him over the years and he's a huge fan of this podcast.

It's so amazing.

When I have someone on the show who's listening to the podcast, we can reference past shows. He understands the value of what we are offering here. So Carl started as a civil engineer from the University of Delaware and became a licensed professional engineer in Pennsylvania and New Jersey. He started in the construction trades to work his way through high school and college. After graduation, Carl was hired by urs, a global leader in engineering and construction, leading environmental cleanup projects as a general contractor. Carl then learned the land development business from inside as a project manager for Nave Newell, a land development engineering company. Carl founded the wright Partners in 1998, which interestingly that was the year I graduated from Colgate. Great, great year, great era there to really dive in.

And he combined his passion for real.

Estate, engineering and construction. We spent a lot of time in this discussion talking about his early years and how he unlocked the value of contaminated sites to be able to offer them to some of the top retail brands in the world. He talked about finding out fundamental truth and then how to avoid problems down the line with his margin of safety. He also shares about his first acquisition, the hundred acre horse farm where he was able to entitle and resell, giving him his start. Some fun facts Carl has been interviewed by Darrell, excuse me, Darren Hardy, publisher of Success Magazine and has been a repeat guest on the Onward Nation podcast for how business owners think, act and achieve. In his spare time he is surfing at the world's best surf spots and training in Brazilian Jiu Jitsu in which he's a first degree black belt. I'm glad he's a frowning he's on my side. He completed Ironman Lake Placid in 2014. So Carl has some incredible takeaways here, not just to succeed in real estate, but life. He shares about embracing learning, avoiding the trap of comparing and choosing great partners. So I know you're going to get so much out of this episode. As always, you can find out more about Carl and his company@jamesnelson.com that's where the podcast show notes are and links to how to reach our guests as well as a lot of other incredible content. So thank you all for joining. As always, we're going to have a brief word from our sponsor and we'll get right into that interview with Carl.

Wright.

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 their 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.

And now it's time for our investor spotlight.

And with us today, thrilled to have.

Carl Wright with us, who is founder and president of Wright Partners.

Carl, welcome to the show. Great to see you.

Thank you, James. I'm thrilled to be here.

Wonderful. Yeah. Carl, I know we've known each other a long time and we've both attended that incredible escape and ascent retreat that Biz now puts on. So we've spent a lot of time and I know you follow the show as well. So it's always great when we get someone on the show who actually knows that doing here. And so won't be a lot of curveballs here for you, but definitely appreciate your sharing your story.

Well, as I mentioned to you, your podcast is by far my favorite and I very excited to get your book. I keep checking my mailbox. Not there yet, but I'm ready.

I could not ask for a better plug, but by the time people are listening to this, hopefully it will be in your mailbox. And if not, I'll have to send you a couple extra copies to make up for it. But yes, it is all culminating.

And you know, I know you're passionate.

About this too, and I will get into this, but you know, really hoping I know this, this discussion is going to bring a lot of value for the audience.

I'm hoping that's the plan for the.

Book, especially those who are maybe looking to get into the business or new to it, looking to step up their game.

So with that, Carl, maybe tell our.

Audience a little bit about your story and how you got into real estate.

Sure. So came from relatively humble background, a little dysfunctional, like many households, maybe a little worse. But I did come across in my childhood a book, how to get rich in real estate or something like that. And that really ignited a passion for me and it actually wasn't a great book, but it just ignited the passion in me to be a real estate investor. And so I went to engineering school and then I worked in a construction company doing environmental cleanups. But doing environmental cleanups takes you all around the country, which is challenging, and you're away months and months at a time. So I was like, well, I know I love engineering, I know I love real estate, I know I love construction because we were Actual general contractors. A developer would be the perfect thing for me to do. So I used my engineering degree to get a job as a consultant for developers doing site engineering for. And my clients were like CVS Pharmacy, Lowe's Home center. And so just learn the business on the inside. And you know, for instance, for CVS Pharmacy, we probably did hundreds of site plans for them where they would say, hey, we're thinking about this corner. What do you think? And then I would do the zoning analysis, traffic analysis. How's the drive through work? How much parking do we fit the setbacks? And you do that a few hundred times and you start to get a feel for, hey, maybe, maybe. I think I know how to get this done myself. So about 25 years ago, I started doing my own deals and it's been going great ever since.

Amazing. So, and I want to get more into that experience that you had early on, before you went into development on your own. But just curious, going in and getting an engineering degree, I mean, was that something that you were passionate about in high school?

Did you like tinkering around with things?

How did you know that you had that engineering mind?

Yeah, well, definitely more math inclined than verbal. I'm sure your listeners have already picked up on that. But I was in construction. Even in high school, I was doing roofing, siding, additions, and I just love construction. I love building. And it seemed like engineering was the natural way for me to dive deeper into that world. So it was just a love of all things mechanical is what led me into engineering.

Perfect. And I'm sure that helped establish a great platform for your career. Even as a developer today, do you ever kind of look back on your schooling and are there things that kind of stuck with you throughout?

Absolutely, yeah. I'm always breaking things down to its fundamental truths. First principle. Elon Musk talks about that. Yeah, absolutely. What do you know? What do we know for sure? And building up from there, which helps eliminate some of the biases that are little mind games that we fall vulnerable to. So yeah, it's been super helpful. And I built a company that's essentially a team of engineers. And our thought process is, you know, we can learn the deal making, but the engineering is where a lot of the problems happen and there's a lot of waste, there's a lot of inefficiency in design and building buildings. And we'd like to think with in house engineering we can make a fewer stakes.

Fantastic. So I want to talk about those early days with those site selections and, and today, you know, we're in the golden age of data and there's all this AI to, you know, to locate these sites. So, you know, I sometimes it's great because it makes everybody's job easier. But then again, everybody else has that technology as well, so. But I am curious, like going back, and I'm not that there wasn't data, you know, back in the late 90s, you know, or 2000s, but, you know, what were the kind of things that you were looking for back then? And you could take cbs, if that's a good example, that, you know, would let you lead you to believe that it would be a successful location for them. I mean, beyond just the, you know, looking at the demographics, you know, the traffic counts, I mean, that seems like pretty black and white, but kind of what are the other things that you might not think of right off the bat that might contribute to a good location?

Well, I mean, for me it was trying to find environmentally contaminated sites because if it was a clean 2 acre corner across from a Home Depot, you know, it was already a deal for somebody, you know, so we were trying to find deals that had a little bit of complexity to them. Maybe it was two or three owners that had to be assembled. But more than anything, it was the environmentally contaminated. The gas stations. We loved purchase and still do love purchasing gas stations, just because we as engineers and have an environmental background, we feel comfortable that we can get it done. So an example of that would be CVS brought us a deal a few years ago in northern New Jersey that it was a form of dry cleaner and dry cleaning. Contamination is a real problem because dry cleaning sinks in the groundwater and stays along the bottom of the groundwater reservoir and it travels into neighboring communities and can complete their wells, it can pollute their basements and it can make people sick. It's a real, real problem. So CVS found a great corner, but because it was dry clean, they said that's too much liability for a company like us and too much complexity. So our team got involved and we excavated out the contamination using bioremediation, which is basically adding chemicals to treat the groundwater. We got rid of the source of the problem and then we monitored the off site migration, which is actually going under a community and heading toward a drinking reservoir. It was a real messy deal, but ultimately we contained what we call the plume, which is the extent of contamination, got rid of the source, and today it's an operating CVS pharmacy that's doing really, really well. So, you know, for me, I think, and I think for all Your listeners. I think you want to find a little bit of complexity, otherwise it's going to be gone. Right. Like if it's, it's, it's just the good sites are not hanging around too long and if they are, CVS will buy it themselves, you know.

Yeah, no, I love how you're a problem solver, but you also, you have those hard skills to apply to that. So that's obviously a key piece is your success. So, and it's interesting, I mean, we're going on close to 150 shows and I don't think we've really talked about environmental issues before. And I think it is worth spending a little more time on this. And, you know, it probably, you know, maybe rightfully so, scares, you know, a lot of people away, you know, namely the banks. Right. So even, you know, if you're not planning to build ground up, most conventional lenders are going to look for, you know, a phase one. And if there's issues beyond that, and then all of a sudden you're talking about having to do borings and soil samples, that's when, you know, people really start to panic. So I guess the question would be, how do you, how do you assess the environmental risk? Right. And then, you know, can you quantify it? And I've got to imagine, if you've done hundreds of these, I've got to imagine at some point there was an issue where it, whether there was a spread or you couldn't control it. And so, I don't know, maybe you'll tell me insurance was the answer there. But talk about the inherent risks and how you hedge against that.

Yeah, I'm happy to. It's an area that I really find interesting. If you have petroleum contamination, gasoline contamination, it's a relatively solvable problem. And the reason for that is gasoline contaminants float on the groundwater. And because they float on the groundwater, they get exposed to oxygen from the soil and the oxygen allows microorganisms to eat, essentially eat the gas contamination. And so it doesn't create a major problem unless you spill a lot of gasoline. Now, it's still a problem to be solved. You still have to excavate the source, you still have to do groundwater wells, and sometimes you need to treat it with biological enhancements, but it's a solvable problem. But what we look for is path to exposure. Is someone getting hurt by this contamination? Is there a well, is there a stream, is there a reservoir? Those what they call path to exposure. If there's a path to exposure, we'll we won't pursue that project because, you know, if someone is getting hurt or their family's getting sick, you know, we don't want. We don't want to be a part of that. But yeah, so we just look for tricky sites with. Now if it has dry cleaning contamination, that's a problem because it sinks to the ground, the bottom of the groundwater, and it travels and just takes forever. But if we find that, if we have a really good environmental team, a really good environmental attorney. You talk about this all the time, putting the right team together. If you find a really good environmental consultant and you find a really good environmental attorney, you can navigate through the process. You know, the best team wins. So we always find a team that we feel that can solve the problem and we can usually quantify it within an order of magnitude. We haven't had any. Ones have blown up on us completely, but.

And are you taking out insurance as.

Well against that future risk, or do the lenders ever. I mean, how do you give the lenders comfort that it's taken care of?

Well, you have to have a track record. Well, a good team will solve the problem for you, you know, solve most problems for you. So let's just say you have a phase, phase two, and it shows contamination. We like to make a little progress with the DEP or whoever the regulating authority is before we purchase it. In other words, we'll say this is the extent of contamination. You really must know the extent of contamination. You can't just know that it's on your property and migrating off, but you don't know how far. So if you can assess the extent of contamination, you can quantify the worst case scenario from a financial standpoint, and then you can explain to the lender, this is the plan. The DEP or whatever regular state authority has accepted what we call the work plan, and now it's a matter of executing it, which can take one month, one year, five years. We have projects that we're still monitoring, you know, 15 years later, so. But yeah, as long as you can quantify the risk. We've been having success with lenders financing our projects. As far as insurance, no, we don't. I've never had any success with insurance, except sometimes a seller. Some states have programs where there's. There's money set aside to help with cleanups.

Right. Well, I was going to ask about that and. Or at least, you know, tax credits for doing that. I remember I sold a site years back in the East Village and there was on site dry cleaning and you know, most developers just said, you know, thanks, but no thanks. But one developer jumped at the opportunity and he turned it into a brownfield tax credit site. I know that's state by state and they have to have allocation, but, you know, there was certainly, you know, he received a lot of benefit from that, that cleanup. So when he went to go sell condos down the road that, you know, a lot of his gain was, was sheltered. So do you, do you get into that as well? Do you ever get tax doing these cleanups?

No, not tax credits, but we will find funds of money. Where? You know, I think like, for instance, in Pennsylvania, maybe it's Delaware. Well, both gasoline companies will have to pay a tax, and that tax goes to a cleanup fund. And that cleanup fund is used to solve problems that owners can't handle. So if we buy a property and we'll check and see if there is a fund available in that state or in that municipality and draw upon those funds. But it can be, you know, you can get hundreds of thousands of dollars towards your project in some states. And so it goes back to your team again. So you want to make sure that you ask your environmental consultant and your environmental attorney, you know, what sources of funds are out there. If you ask the right question and have the right team. I think Environmental League Challenge projects are a big opportunity.

That's awesome. Well, thank you for going into such depths there. And I certainly for our investors, I mean, if you're out there active looking at things, you're going to come across one of these, whether you're looking to build ground up or not. And so it's always helpful to really understand what to know. Right. You know, or know what you don't know. So certainly at least people know at least some of the considerations. So, Carl, tell me about. Okay, so 1998, you've seen so many of these opportunities. Say, look, I can do this. So tell us about your first deal. So, you know, how did that happen? Maybe tell us a little bit about the process, how you raised the money to do the deal and just kind of walk us through that one from. From start to finish.

Yeah, yeah, that was actually an environmental. I'm sorry, that was a residential project, which is not what I do for the most part, but I'll be happy to walk you through it. So There was a 100 acre farm in suburban Philadelphia. That was tricky from a zoning perspective. So I got under agreement while still an engineer, and I had found that a seller who was willing to wait for me to get the approvals and then I did the approvals on my own at night, on weekends, in order to. To save on the money that I really didn't have. And then when it came time to finally get the. Unfortunately, and then we were denied, but we turned it around and we got the project approved, ultimately by addressing their concerns. But it was a narrow vote and we did get it. And then a national home builder wanted to buy it. So I never even took title to the property. I signed my contract at closing. The national home builder bought the property directly from my owner and gave me the check for the difference. So without any, really, without hardly much money into it, I was able to make a really nice return. And then that was the seed money moving forward. And that allowed me to get in more and like finding environmentally contaminated projects to build CVS pharmacies, for instance, in near State College, Pennsylvania. So. Yeah, so.

So tell me, so when you showed up at the closing table with the national home builder, I mean, that. That owner of that horse farm, you know, what. What was he thinking? Was he saying, you know, carl, I gave you all this time. What. What are we doing here? I mean, did, did, did he realize what was happening? Did he? Because I. I've seen some owners who say, look, I struck my deal. You know, I agreed. You know, you. Ultimately, that's the price I ended up with. And, you know, if you made profit above and beyond, you know, great, others really, you know, take exception, especially if they kind of gave you time and flexibility. So I'm curious how that went down.

Yeah, it was interesting. It was actually a woman seller. She was the sheriff of the county, believe it or not, and a woman who had a construction company. So she was a very unusual woman, but keeping her updated all the way, letting her know what I've done, the extraordinary measures we've taken, and I think that's a good lesson for all investors, is keep your seller or your buyer, whatever side you're on, informed and let them know. And I have a consultant who advises, if you do something and it's good, you do want to kind of take credit for it. You want to kind of share it. I mean, it doesn't. It goes against some of our human nature. But hey, like, there was a problem and I solved it. And just sharing that with my seller, let her know that, hey, I'm committed and I am on this project and I am determined to get it done. And when I needed extensions, time extensions, which of course I did, and most of us do in these, in today's world, she Felt like that, yeah, I was making the effort and deserved the extension. Now, when it came time to actually sell to the home builder, I don't know that she knew or cared how much more I made over and above the sale price because I think she recognized the value I added.

I really liked that. And just, yeah, being upfront and clearly you did add value that, you know, she wasn't able to apply. So, you know, otherwise if she had paid someone else, she would have to pay someone else to go through that process. And who knows if she would have even achieved that result. So, okay, so once you had that seed money and you found your first cvs, what was at that point? Did you have enough on your own to do it all yourself, or did you bring on investors and maybe tell everybody a little bit how these deals are capitalized? Obviously you got to go buy the land if you know you've got a lease, I would assume if you built to suit. So I assume you're financing off that lease, but maybe just kind of talk our audience through the capital stack to do something like this.

Yeah, no, in a perfect world, you have enough time from your seller to get the approvals. And if you get the approvals and you have your lease in place, financing is even a lot of financing options. In fact, you can lend. They'll lend upon the as completed value of the property. Now, they'll always make sure you have minimum 10, 20 today in today's world, maybe more percent in, but they'll lend you most of what you need. And because you've spent money along the way with the approvals and whatever, all that counts towards your equity requirement, we found that if a deal has enough margin, there's really not a need for investors that you can borrow most of what you need. Now, I have friends and family who certainly contribute, but I don't have any alliances with capital partners or private equity firms. We feel that if we can get the right margin, get the right lease terms, buy the property, right, normally there's that we have the capital available to execute on that project.

And I mean, obviously there's no such thing as a real estate deal being risk free. But I would think that if you have the land that's tied up where you put down a soft deposit that's contingent on approvals, and then you get those approvals, which I would assume is what effectuates that lease that you have. And at that point, you know, you put it all together at once. Is there ever kind of a time in the process where you have to go exposed where, you know, the owner says, hey, you know, Carl, this is great, but I've been waiting six months. I got plenty of buyers, you know, are you going to step up or not? And you know, you're going to get there. But maybe it's just a timing issue. Maybe it's another three months, six months to get what you need. So is, is that kind of the exception or is it pretty safe to say that generally everything is, you know, teed up?

Yeah, great question. In today's world, no, we're not able to get all of our approvals prior to closing. It's just not realistic for sellers expect sellers to wait around that long. So we do have to buy it earlier. But if we have the zoning approval, we feel like we've mitigated the risk. So sometimes say we need a front yard variance or a use variance, and that's the first step in the process and we get that done. The following 8, 10, 12 months it takes to actually get to a building permit is relatively low risk. And we can usually convince our lenders that we can execute on that deal post closing on their loan. Now, I will say that we have a track record of getting things done and maybe it wouldn't be quite as easy for others, but you know, and also just been in this business for 20 some years. You know, we have the resources to pay the debt service should something go wrong. So it's been okay for us. Now sometimes you have to really buy quick. And that's just, you know, a land loan with no income. And that's, you know, those are painful terms. And we do that, but, boy, we really try not to because what did Bob Towle say? You can buy more lots in an afternoon than you can sell in a lifetime. And I can buy, I can buy more space in an afternoon than I can lease in a lifetime. So.

Got it. Well, let's. Yeah, no, that's, that's a good segue because I want to talk about the tenant demand as well. So, you know, you obviously, and I'm sure every time you do one of these deals, you know, these, these tenants, And I know CVS AutoZone, maybe can, you know, share some of the other tenants who you actually actively build for. But at this point, you probably know them so well that, you know, whether it's a handshake, if you know that they like a site that you're going to deliver. But I'm sure some of our audience listening too says, you know, hey, maybe I'd like to try this out. Themselves. But I would imagine if you don't have a deep relationship with a tenant, you know either, you know, maybe you risk losing them to another site. And then, yeah, why don't we, why don't we start there And I got a follow up question.

Yeah, yeah, no problem. So I guess there's two ways of doing it. I mean, the ideal way is when CVS or an urgent care or National Tire and Battery or autozone or a car wash come to you and say, we want to be in these 10 towns and go make it happen. And you're exclusive. And when that happens, it's fantastic. But that's the exception. That's not. So more than likely you're finding the property and now you're looking for the tenants. So you say, hey, I think this would be a great Chase Bank. I think this would be a great Chick Fil A. So you tie it up and then you do some engineering, some site plan. Yeah, I think this works. And you send it to a Chick Fil A without having a relationship with them. Sometimes it's a little slow to get them to respond. And meanwhile your clock is ticking on your due diligence and that becomes a bit of a challenge. But if you find a really good site for your potential investors, send it out to all the various expanding tenants. You mean it's googleable? Who's expanding from a retail, restaurant and medical sectors and see if they'll, see if they'll make a move on your property. And if not, maybe you'll have to drop it, but.

Or do you ever spec it? Have you ever, or is that pretty dangerous to build a box and hope somebody shows up?

I don't do that. You know, I will build like we just built a 10,000 square foot building and we only had 3,000 square foot lease, so we'll do that. But we had, it was a really good 3,000 square foot. It was, it was a, it was a health care system that was doing an urgent care credit tenant. And we're like, okay, you know, we feel like we can build this building only being 20, whatever, 25, 30% occupied. But it was also, it was, it was a big, big rent Almost, I think 50 or $60 a square foot. And we felt like, okay, now we can, we can spec the rest of the building. And we're slowly leasing up that building as we go. We're, we're not there yet, but we're making enough progress to make our lenders happy. So I wouldn't build a building personally without a tenant Many developers do, but I don't think that's in my best interest.

I'm sure you sleep well at night. So the other way I thought this happens is the tenant says, we like this location that might be on the market for, that's on the market for sale. And they have four or five preferred developers, not exclusive developers. And then they basically tell the preferred developers, look, this is what we'll pay. You guys go figure it out. Whoever gets the deal does, does that, does that ever happen?

Yeah, absolutely, that happens. You know, Wildwa comes to mind for those of us in the Northeast and Florida. You know, they don't have an exclusive developer, but they have a team. They have their favorites and they'll send their favorites a you know what they're willing to pay in certain markets and let them, and let them figure it out. Other opportunities are just, if it's an environmentally contaminated site, these companies will not take on that risk and they will seek out the developer. And if you can convince the various retailers and expanding companies of the world that you can solve this problem, they will bring you sites. We've had, we've had a lot of deals brought to us due to environmentally contamination. And the reason is, so I'll have a single purpose entity, right? So if the worst case scenario, God forbid, a family files a lawsuit against the property owner and the risk runs with the property, so you're dealing with it and they say, hey, you contaminated my house, you devaluated my house. I want a million dollars As a single purpose entity, my risk is finite to the equity I have in the project. But if I'm CVS Pharmacy, whatever liability it is, that's what it is. So they have infinite liability and they will not take that risk. And therefore that creates an opportunity for developers to step in and, and help them solve that problem.

That makes a ton of sense. So, so Carl is the term of what you do, you know, merchant builder, is that kind of the idea? So your, your business model is you buy the sites, you build the suit and you sell repeat. Right? So, so you've never, you never thought about, hey, I'm going to just hold on to these forever. You just did the math and you said it's much more efficient, I make a better return and I, you know, this is the business I'm in. Is that, is that right?

No, no. Great question. Well, I like to keep my brokers happy for sure. So I try and sell as much as I can, but we sell about 50%, so we'll hold about 50%. And, you know, if we think that it has, the sales are good in whatever in, in whatever sector it's in, whether it be medical and measured in terms of patients per day or whether cvs, pharmacy, whatever, we'll hold onto that asset. The dream for us, the dream situation for us is to buy with enough margin that we can refinance, pull our money out and still have the ongoing cash flow forward. And then we can do two things. We can use that cash, the proceeds from the refi, to do our next project and also still not incur a capital gains event, because obviously refi proceeds are not considered a taxable event. So that's the perfect scenario. Where that doesn't work is if the deal is a little tighter or rates are a little higher, something we're all dealing with. All of a sudden, your refi proceeds, which are constrained by probably your debt service coverage, that's not good enough to, to, to get you your money back. So it's pushing, it's pushing us to sell a little more today than we normally would like to. But that's, that's just us adapting to the, to the market, that is.

So let's talk about that, because in your development process, between, you know, acquisition or once, once you're putting your money to work through construction and sale, I mean, is it fair to say, what is that? Probably 18 months from start to finish. Okay, so, so you're asking yourself, you know, what are cap rates 18 months from now? Right. So I love to get your thoughts, you know, on, you know, how you try to solve for something like that, especially with everything going on today. And then what is the spread? So you're building to a stabilized return on cost, and then you got to figure out what you're going to sell it for. So how much margin are you looking for?

You know what? We'll try and get a point and a half or two points of a spread to give us some, some room for the market to move, which it did. Obviously it moved and it moved against us. Moved against us by, I don't know, a half, A half. A half. A point, maybe, maybe three quarters. But, you know, that's, that's 10, that's 10, 20% of the valuation. Just, just gone. So, you know, where we all get in trouble and where I've made mistakes in the past, it's just not having enough margin. Margin of safety. I mean, Warren Buffett preaches it. And so if I do a tight deal and I talk myself into it and I don't leave myself room for cap rates to move against me. And now I'm doing a deal basically for free, which is, which is always a problem because it requires a lot of cash to do a property, to do a deal for free. I mean, no one wants to do a deal for free, but sometimes you're just kind of stuck. Now you're putting up hundreds of thousands, maybe even a million to make nothing. And that's, and that's how companies fail. So where, when we get it right, we have the margin of safety. Where we mess up is when we talk ourselves into doing a deal that's too tight. So my advice for investors would be is protect your margins and walk from deals that don't make sense. Now when cap rates move so dramatically recently and rates, there was opportunities if you hadn't purchased the property, and I think even Silverstein talked about this, you have to renegotiate and you have a story and it's up to them, the seller, to either work with you or take the property back, drop the contract. And we had to do that quite a bit just because suddenly we were. The reason you don't want to do a development deal for no profit is now you're taking all that risk, putting up all that capital and you could have just bought it from a net lease investment broker like yourself and saved all your at the same basis and save yourself all that craziness. So anyway, so that's why we really try to avoid tight deals, because things will work against you for sure.

That makes a ton of sense. So with that in mind, because on one hand, there's a lot of appeal to what you're doing if you know how to do it right. And that obviously involves the knowledge the know how the tenant relationships, the construction knowledge, which we haven't even talked about. And is there, I mean, after you've, you've built a couple of these, is that, you know, is that a pretty streamlined process or is that, you know, something that you also have to closely watch?

You know, I have a partner, we have. Our company has nine people and I have a partner who's really, really good at construction. And my partner for 18 years, I do believe you have to have in house construction knowledge, you can learn it. There's enough resources out there where you can, you know, some of the latest books on building science are phenomenal and I'm reading two of them right now. So the process of learning how to build a building correctly. And there's also organizations you can join, ULI and a few others, Retcon, Real Estate Technology Conference. So I would say, you know, read, learn. Learn from your consultants, learn from your contractors, learn from your design professionals, learn from your architect. If you have enough intellectual curiosity, you can figure it out. But if you just hire, excuse me, just hire a GC and hope for the best and don't really learn from the process, I think that would give.

You trouble, you know, Appreciate that. And you know, very, very much on, on point there. One of the things I talk about early in the book is the value of bringing on a trusted partner. And you know, for, for one of our listeners out there who, you know, maybe they're looking in their own town and they say, hey, there's this, this, this hard corner where the bank just went out, or I mean, you're seeing these all over the place and hey, we also need this tenant and, you know, they think they can put it all together. You know, if someone like that were to call you and say, hey, Carl, I think I've got the opportunity, I think I've got the tenant. I don't know how to put this all together. I don't have the construction. You know, what do you say? I mean, do you think, you know, you would partner in something like that or do you. If not, I mean, you certain sounds like you got plenty on your plate. Would you advise someone else trying to find a trusted partner who's done this before, before just jumping into this on their own?

Sure, absolutely. I'm very leery about who I'll partner with, but if I can just get comfortable with the integrity of the person. We did a. I won't name names. We did a joint venture with a project the landowners wouldn't sell, and they wanted a property. They wanted a half ownership of the CVS we were building, and whatever money we were going to make on that deal isn't worth it. They were just a pain in the ass the whole time and still are. So my lesson learned is that you really have to be selective about who you partner with. But if I can get comfortable with the integrity of a person that they're honest, then yes, I think that's a great solution, especially if they think like, hey, this bank went out to your example and there's no Starbucks in town. Hey, maybe, you know, there's already drive through, maybe there's a deal here. But, you know, I don't know where to start. And people have, you know, broad opportunities like that to us, and we will give them, you know, a percentage of the deal if it, you know, if it happens. So, yeah, Absolutely.

That's great to hear. So, Carl, I want to shift gears a little bit here and just kind of talk about, you know, some of your interests and passions. And I read that you were a Jiu Jitsu. Jiu jitsu first degree black belt. You've been written about in Success magazine, you've been on Onward Nation podcast. So, you know, clearly you've got this winning mindset. So, you know, maybe for our audience you could talk about kind of your discipline, you know, how you approach each day and how that positively impacts your business.

Oh, well, thank you. I really appreciate that. I really, I really try to just limit the areas that I'm trying to be successful in. So I want to be successful in real estate, I want to be successful in Brazilian jiu jitsu, and also I'm passionate about surfing. So I really try to just limit it to those three and therefore dive a little deeper and then just embrace the learning and the intellectual curiosity. Because the more you learn about something in real estate is a great example, the more there is to learn. And every book you read leads you to another book you want to read and then just seeing the incremental progress that comes out of the learning. So every day I read every day I try to watch a few videos on whatever I'm trying really on those three categories and just try and get a little better each time, a little better each day. So that would be my recommendation to anybody is to and really just find things that you love. I just love all three of those things. I love real estate, I love mixed martial arts, and I absolutely love surfing. So it's fun for me to learn a little more. And then I guess I would also just try to avoid the trap of comparing yourself to others, avoid the trap of comparing yourself to others because that is where all the fun goes away. There is always somebody better. In my case, many, most people are better or many people are better and just embrace and love the progress you made over the last month or year and live there and don't live to the person next to you who's even better. So, you know, I can listen to your podcast and you've had some legends, absolute legends on your podcast. And I could compare myself to them and make myself very unhappy, but I won't do that. I'll just look at the progress I've made over my career and be happy.

Thank you, Carl. You said so many good things there. So first of all, really, you know, focusing in on those areas of passion and if you really love what you're Doing. It's not work, but, you know, it's something. And that's what I love about this business is every day I'm learning and I enjoy it. And I know you're not just saying that because when I, when I say, oh, yeah, you know, I've listened all these podcasts of yours and, you know, look, someone in your position could easily say, you know, I've been doing this a long time. Right? You've been developing for as long as I've been brokering, and we're not really in the exact same business. Definitely adjacent. But you could say, oh, you know, James's show, you know, am I really going to learn something from some residential developer in, In New York, for example, you know, but that openness, that willingness to always learn from others. And, you know, although I know a lot of the people listening to the show are aspiring investors, college students, master's students, I will tell you there, there are definitely some, some veteran investors, and I'm sure some of them are listening now. And sometimes I hear, you know, from some of my clients, James, I like it when you interview my competition. And one, I won't name names, but one person in particular said, I've listened to one of your episodes three or four times in a row because I really want to understand. So you might have a lot of people going into environmental cleanup after this, but very least, we'll be doing some good around the world and cleaning things up. But, yeah, but, but, but I love the piece also about avoiding the competition, the comparisons, because that's also in this day and age with, you know, especially, especially social media. And look, I, you know, I love it. I'm out there. It's a great way to reach your audience and, you know, show people what you're up to and put content out there. That's really how I try to leverage it. But, you know, you get caught up in the, oh, this person's out, you know, skiing, you know, out there. This person's on a private island, flying around private or whatever, you know, and I think a lot of it just boils down to being grateful for what, you know, what you have. And, you know, if you're just kind of looking at somebody's highlight reel, you're probably, you know, not getting the full story anyways, so a lot of great stuff in there. So, Carl, tell us. So advice that you would give to someone who is looking to get into the business. And it doesn't have to be specifically what you do. It could just be real estate in general. What would you. What would you tell them?

I would probably just say what Charlie Munger said. If someone. But Warren Buffett's partner, if someone embraces learning and growing and won't quit, they're very difficult to beat. And I would just suggest anybody who wants to become an investor, dive in and really learn the business, master your profession, all aspects of it, learn, improve, and never give up. And I think if you do those two things now, you can add on. You have to have a great team. You have to have great brokers. I mean, all of that is just as important. But if you just start off with the embracing, learning and improving and never giving up. I mean, you can give up on a deal if it. If it's a dead end, of course, but never giving up on the process of getting to where you want to go.

Yeah, that's incredible advice. And certainly a big part of that is having great mentors and people who you can learn from. And it's not just, you know, and I try to tell the team as well, you know, it's great if you're keeping up with all the publications and, you know, seeing all the reports, but you're really taking that information and making it actionable and also gathering information that's not publicly available. And I think a lot of that is talking to people and you hear things. And certainly for brokers, that's helpful when you can give an investor a lay of the land. So a lot of great advice there.

For instance, when your book shows up, I won't just read your book. I will read, I will highlight. I will take notes in the margins, and I will take away principles that I will want to use forever forward, whether it be a mindset or a strategy or whatever. And then I have an Evernote document which is all the principles I've learned from all the reading. And it's categorized. And so you'll be in the investor. Right. So whatever I learned in your book, I'm going to create a system where it's there for me to access in the future.

Oh, I love that. Thank you for doing that.

And, you know, I'll send you. I'll text you.

I was going to ask you for that. I didn't want to put you on the spot while we're recording here, but I. Yes. Because I am fascinated to kind of see, you know, your takeaways there. And, you know, I was actually just on another podcast the other day and talking about books, and, you know, I just finished reading one of my coach, Rod Santomosimo, he has a book knowing isn't doing. And so what I was encouraged. I just love the title. The title is. It's so spot on because it's clear to me that you're not just reading this information, right? And you don't just know it, but the fact that you're taking notes and coming up with a plan to how to make it actionable, like that's the key. Because you can listen to this podcast, you know, a hundred times, but unless you're going to actually take some of these, these steps and apply them to your. Your business, you know, your life, it's not going to do you any good. So, you know, and so if you kind of take that premise and you combine it with a James Clear atomic habits. And what are the habits? What are the things you are going to actually do to. To. To make this change is really how you put it all together. So, Carl, this has been a real treat and it's been really fun getting to know you over the years and, you know, really appreciate the, you know, the support here and also all the knowledge that you've shared with our audience. So thank you again and I know I will be in touch with you soon. I can't wait to get your feedback on my book.

I look forward to it. Did I hear you saying a podcast is maybe a second book in the works?

That's the plan. Wow, you're definitely listening out there. Yeah, the quick story on that is that I was actually starting another book. The original book that I was doing was really kind of based on some of these interviews I've done with these legendary investors. And that is still very much in the works. But as I thought more about it, I said, look, there's a lot of inspirational advice here, but what's missing is the actual how to. And so that's why I said, look, before roll out this book, got to lay the foundation. So, you know, the good news out there for you all is, you know, assuming that this first book has some marginal degree of success, which I'm hoping it will, I'm very hopeful that that will lead to a second book. So appreciate the mention there. So. Well, good. And Carl, last question. Where. Where should our audience find out about what you're doing? Your site, you know, that. Where can they follow what you're doing?

You know, we're just LinkedIn, that's pretty much all we do. So just. Carl Wright Wright Partners. You'll find me there.

Awesome. Carl, thanks again for everything. Really appreciate it.

Thank you. It was a joy. Bye.

And thank you to everyone, as always, for tuning in. This is your host, James Nelson, and if you have not already, really appreciate. If you subscribe, share your comments. That's how other people find the show. If you really like this, send it to your friends.

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