My interview w. Rod Santomassimo

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 episode number 142 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. I'm principal and head of Tri State Investment Sales for Avison Young. Thank you as always for joining. Happy New Year. I know it's been several weeks since we've aired an episode. I have been working round the clock on the launch of my upcoming book. It's due out any day. So thank you to all of you have already pre ordered. It means so much to me your support but also I am really looking forward to hearing about your thoughts on the book. I am hoping that it gives you the insider's edge so you can outperform the market. If you have not done so already, you can pre order at Amazon where most of you are finding the book. Or you could go to james nelson.com where you can find other places to buy the book or even purchase it in bulk. That's also where you can find show notes, all my other podcasts, White Papers. This is really a resource hub for you to make you the best investor possible. So for the next couple shows we're gonna be rebroadcasting some of the discussions that I've had with other podcast shows and for today's show had the pleasure of appearing on the Massimo show for the second time with my coach and mentor Rod Santomssimo. I think you're going to get a lot out of this show. We're going to talk about what it takes to get the insider's edge for you brokers out there. Also, I think you'll get a lot out of this understanding the best way to go about investing. So we cover a lot of great topics and by the way, if you have not read Rod's books and for brokers, the brokers who dominate and teams built to dominate are must reads. But his latest book, Not Knowing isn't Doing. I love not only the book but the title. It is so true. And I would ask you all, hopefully you're taking notes when you're listening to these and getting some good ideas. But ideas are just that. How do you make them actionable? How do you put great habits in place because knowing isn't doing. If you have not read James Clear's Atomic Habits, he really does a great job of talking about how you put great habits in place to, to make these goals become a reality. So we're gonna have a brief break with a word from our sponsor and then we'll get into that episode that I did with Rod Santomasimo.

Thank you.

A different approach to putting our clients first. Avis and Young's Tri State Investment Sales Group sells multifamily office, retail, development, health 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.

Hey everyone, it's Rod Santomssimo with the Massimo show and today, well, today we have a top producer within the North America. We have an author and we have an investor and an amazing broker. Wow. We have the one and only Mr. James Nelson who is the principal and head of Tri State Investments for Everson Young himself. Hi, this is Rod Santo. Massimo and welcome to the Mossimo Show. The objective of the Mossimo show is to share how you can maximize your personal professional margin. That's right. Let's make more money in less time. Let's turn chaos into clarity, confusion into confidence and income into real wealth. Along with sharing my insight on how I grew a multi million dollar professional business, we're going to bring you the expert advice from a variety of authors, consultants and thought leaders who provide the tools you need to maximize your own personal and professional margin. Welcome to the Mossimo Show. James. Welcome to the Mossimo Show.

Rod. Thank you so much for having me back. You did miss the most important part in my intro the bio that I'm also a long term coaching client of your group and it was so amazing to be a part of Massimo Khan and what you all did down in Dallas. I was just completely blown away. I'm sure a lot of people who attended are listening to this now and it was just, I just got so much value out of that. It was so amazing to be, you know, with Everyone in person. That fireside chat that we did afterwards, kind of impromptu, was just the icing on the cake. So thank you so much, as always, for everything you do and having me be a part of this.

Well, James, thank you for reminding me. I always am transparent with the audience. Let me know who our clients are. And, James, I can't tell you who the line will be for the next Moss Mo con, but I can tell you you're not going to be in the audience.

Just tell me when and where I'll be there.

Okay. Okay. Maybe this year, maybe. Maybe next year. Maybe 24. We'll look at that. But thanks for that. But James is about you, and you have a different perspective. A lot of our audience are brokers. And what I love about you is, And I've always felt this way, the question was, why don't brokers also invest in commercial real estate? So, James, before we. Before we get to the other elements of this discussion, do you see that as a conflict? Do you see it as they should invest? I mean, what's your position there?

Rod, I am so glad that you asked that question because it is so important. And one of the things I talk about in my book is reputation is everything. So, yes, if you are a broker and you're looking to invest, you need to do it in the right way, with full disclosure. And as a rule for myself personally, I would never invest in an opportunity that I'm listing or selling as a broker now, I'll even go one step further if an owner approaches me as a broker. You know, James, you know, tell me what my property's worth. I am always, first and foremost a broker. So I'm going to that opportunity to get them the highest possible sales price. You know, if you start picking and choosing, well, maybe I'll buy that one. I'll broker the other. Now you're on a really slippery slope. So my investing career, when I buy property, I buy when the property is listed by another broker, okay? So that seller's being properly advised and represented. There's no conflict. Where I should be going after there, that is a broker. But really, Rod, the way that I've done the most investing over my career is as an lp, a limited partner. So there. I have invested with dozens of clients, lots of opportunities. But then again, even as an lp, I will not invest in a deal that I sold. I would never want a client to say, even if it was after the fact, hey, James, you said you got me the top price, but now I find out you came in after the fact, as an investor, why even leave it open to questions? So just do it in the right way. And when in doubt over, communicate disclosures. Key.

Got it. Love it. Love it. So, James, look, you're a broker. You're making an amazing living. You know, you're one of the top producers in North America. That's a fact. Just working with thousands of clients and know the numbers. I know your numbers. Why? Why commercial real estate? Why commercial investing versus, you know, put it in stock market. Put it. Although I won't use the word crypto right now, but no, I can rule.

That out for now.

Yes, let's roll that out for now. But why? Why commercial real estate?

Yeah. Well, Rod, I just love the business. And yes, as a broker, to be able to see hundreds, if not thousands of transactions every year. It's just every single day I learn something new and I really have a passion for it. But also, as a broker, you are on the sidelines, right? And why wouldn't you take your expertise and your knowledge and parlay that into an investment? Again, we're telling all our clients the benefits of why you should be buying and all the long term wealth creation, you know, why would we not practice what we preach? So as far as your question of why real estate as opposed to the stock market, you know, and this is a big part of the book's title, the Insider's Edge to Real Estate Investing, the reason why I called the insider's edge is really one of the main benefits of real estate. You can gain the insider's edge to outperform the market. Whereas, you know, with the stock market, everybody has the same information. You and I can go and find out where a stock is trading to the penny at any point in the day. Whereas there's a lot of inefficiencies in real estate. You might see two properties on the same block and one might sell for double this renovated, the other's not. Maybe one has stronger income or a better credit tenant, or maybe, you know, one seller decided to go with a broker, maximize the exposure of the property and get a higher price, and the other owner just took the first offer that came along and sold off market. So those are the kind of opportunities that I talk about in the book and you just don't see that in the public markets.

Okay. How long you been brokering, James?

Hard to believe, but it's coming up on 25 years.

Okay, so when did you start investing?

Actually pretty early on. I would say about five years into my career. A friend of mine who I'd met through nyu, who was going out on his own investment career. He retained me to go flip a contract for him. So in this case I'm representing him to try to see if I could find another buyer. He was in contract for $2.1 million. And within 30 days, and I knew he got a great deal on it. He was offered over $500,000 just to take over the contract. And he said, james, I really appreciate your effort. You did a great job, but I just love this deal too much. I'm going to just go ahead and buy it myself. He then further goes on. There were some issues that came up with the deal, negotiates the price down to $1,800,000. And I said, well, Matt, I haven't really done this before, but are you taking on investors? He says, well, yes, of course, I was his first investor ever. Gone on to invest with him over a dozen times. But that deal was probably without question, the best deal of my career. Because as an investor, because not only do we buy this deal for a million eight, when we could have sold it right off the bat for 2 6, he went on to conduit sold individual units. You know, the sales, the sell up there was four or five million dollars. And of course there were costs for him to convert and do that. But we kept the retail. So the retail kept throwing off income. Years later, we sold the retail for $4 million. Then we took that retail, we went, we bought a building in Brooklyn, an apartment building. We sold off the air rights, got paid for that. This was the gift that just kept giving. So, yeah, so it started at a very early time in my career.

So, James, it's different for you because you've been investing for a while and then it's across the country, the landscape. Maybe you can appreciate this given that you're in New York, but we find that most brokers who represent on the investment side, not the leasing side, but on the investment side, when they underwrite a deal, the way the broker underwrites a deal is not the same way a professional investor underwrites a deal. Would you agree?

Yes.

What would you say are the main or main deltas on how a professional investor looks at a deal versus how a broker looks at a deal.

Right. So if you're investing, you're very interested in learning the actuals and what it's going to really take to operate the property. Right. So you're actually going to be asking questions like, I'd like to see the T12. I want to see the trailing 12. I want to see what actually occurred at this property. I want to see copies of bills. I want to know what it actually costs to run this building. Not a broker set up where we're going to just make kind of market wide averages. And we probably, you know, we're going to put the property in its best light. And of course, we put in that the expenses are estimates. Right. And then for projections. As an investor, you really need to think about what is this space going to rent for? Okay. And then what are the concessions that it's going to take to get there? Is there going to be downtime, brokerage commissions, ti. And then of course, you know, what type of work and time is it going to take to do this. So, yes, an investor underwriting is very different than what you're going to find on a broker setup.

Yeah, look, I'm thinking of all the clients we've worked with over 14 years and those that went on to write books, and there's definitely a handful of them, but they all seem to be top producers. So, James, you're so busy, you're running the tri state area of a major brokerage firm, you have your own brokerage practice. How do you have time to find, to write a book?

Well, Rod, I mean, first of all, you gave me some great advice in this category, which is you get a lot of help. Right. So if I was doing this alone, it would not have happened. So I was very quick to bring on a writing partner, and we do share a writing partner in common. And Wally and I already have a second book in the works with Wally.

Really?

Yes. But for this first book, I actually, I went in, I had an idea on this book and I took it to an agent. The agent was able to land me a book deal with McGraw Hill, which I'm incredibly excited about. The last real estate book that McGraw Hill published sold well over 100, if not 200,000 copies. And so they helped me bring on a writing partner. And the way we did this was because I also have a podcast. It's the same name of the book, the Insider's Edge to Real Estate Investing. So, so my writing partner for this, Rachel Hartman, I gave her the outline, I gave her the questions to ask, and she interviewed me for 12 consecutive episodes. Each one of those hour long episodes she then transcribed. Well, she did more than transcribe. She put it into a readable chapter. I of course edited it. I then went in and where it needed points needed to be expanded, you know, I would go in and write A lot of the content myself. But yes, I had a great team and now working with my publisher and copywriters, you know, there's been multiple revisions and looking forward to finally hitting the shelf in the end of January.

That's tremendous. That's absolutely tremendous. And yeah, and we do. But James and I have a common writing coach. Writing, writing help in Wally again partly, also part ghostwriter. And now on my fourth book, Wally's role has changed from writing to coaching to now more consulting. And my book comes out in end of Q1. But James, you're in my second book, Teams Built to dominate. So James, you talked about teams for investing. So what does an investment team look like? I mean how many parties are on your investment team versus a brokerage team?

Right. And that is very essential point to the process and covered early in my book about having the right specialists. And this is a business that's all about having the right people. So you just don't have, of course you need an attorney, right, who's going to review the contract. But you don't just want a generalist, right? You don't use your family's trust in estate attorney unless they happen to have a specialty in commercial real estate as well. But you want to find that attorney who has transacted in your market with the asset class that you are buying, right? So in addition to the attorney, you're going to need an investment sale broker who's going to find you the opportunity. You're going to need a mortgage broker who's going to help put debt options out on the table. If you are looking to buy multifamily or property, that's going to require a significant amount of management. Bringing on a third party managing agent, you know, that's really the core of the team. And of course, you know, accountants, appraisers, engineers, inspectors, along the way there's a whole host that I go over on the book. Those are kind of the major service providers. But for those of you who are thinking about your first investment, what I also talk about in the book is bringing in a well trusted partner. Okay. So you have the expertise and most importantly, what you bring to the table is the deal. The deal is the most important thing that you can bring when starting off right. Because you bring the right opportunity. You go find a partner who has the capital, the expertise and the track record. Right. To execute on that after you team up with that partner. And again, I've even advised those looking to get in the business who have no money. And I'm not Talking about the Carlton Sheets late night infomercial. Buy real estate with no money down. You know, I'm talking about finding an opportunity, going to a trusted partner and saying, look, I would like to learn and partner with you. Can you give me sweat equity in your deal? So don't pay me a finder's fee on this deal. I am bringing you the opportunity. I'd like to roll it in with whatever else I can contribute. I'd like to help raise some capital, but again, I'd like to leverage your network as well. And you know, that's a great way to start off in the business. You do a couple of those, you know, then, then you should be home free. If you want to go and start doing this on your own, you know, that's great. But there's also those who say, look, I still want to be a broker, I still want to be able to do other things. You know, I don't want to build out a whole investment team. So I'm going to continue to work with, with great partners. And in that capacity, what we call that, Rod, is being a co gp. A co general partner.

Right? So let's talk about that. There's the LPs, any broker, most brokers who invest, if they do, they do on the LP side, like you shared earlier. Then there's the GP side. And beyond the risk and reward, what do you think of the most significant differences? Risk and reward, GP versus lp.

Right. So with, with lp, you know, the advantage is for the most part, you know, they're typically entirely passive. Right? Whereas you're investing in a sponsor, obviously a specific property in a business plan, but you are there, you are solely providing capital. Okay. So the advantages there are you don't have to spend any time actually working on the property asset managing. Right? You're basically sitting there waiting for your quarterly report. You're waiting for returns and hopefully a capital event. Okay? The downside though is that unless if you are the major investor, you do not have any decision making rights. Okay? So you basically have to go along with whatever takes place. You're entrusting the sponsor to do the right thing. And look, if challenges happen, like right now, we're going into uncertain times in the market. There may be capital calls where the sponsor said, hey, we all thought this was gonna be a big home run, but we're really having challenges here. We need to do a capital call and if you don't want to participate in that, your interest might be completely diluted. So that's kind of one End of the spectrum. I mean, as far as the advantage of being a general partner. Okay, so now you have full control. Right. You also have the ability to promote your limited partners. So you've got a much bigger piece of the upside if you do this correctly. But the risks that come along with this is, yeah, I mean, in some cases, and I don't advise it in the book, but you know, certain lenders might ask for you to personally guarantee the loan amount. Right. You're dealing with all the day to day, you know, and in most cases, the way general partners will structure the deals is you're in that first loss position, meaning your limited partners, they're going to get paid first, they get their preferred return, then you get your promote. Right. And so, you know, again, there's a lot more upside, but there's certainly a lot more downside. But at least you're in control of your destiny.

I appreciate that. So limited partner, general partner. Some people are asking right now, wait a minute. This guy runs AY's tri state brokerage. He's a toppersing broker. He's an investor. Yes. He has a family. Has a lovely family. James, how do you do it all? I mean, seriously, how do you do it all?

So it goes back to, first of all, just managing your time. And I don't know if it was you or our friend Bob Nackle who taught that time is the most valuable thing that we possess. So I am very organized with my time and how I approach things. Yes, it does involve a lot of hard work and putting in extra time, whether it's, you know, looking at opportunities on the weekends or earlier in the day, but having a great team. Right. So you have to think. And I know your program is incredible for helping brokers build out their own teams. Well, hey, if you're going to be an investor, you need a team. Well as well. And so very excited to hear about the launch of your CRE Investor Coach program because I know that's going to be a big part of it and is how do you build up the team, how do you build the infrastructure? So again, what you can bring to the table, if going back to the most important thing I said was to find the opportunity, you know, that's where you want to be focusing your time, not figuring out how to, you know, get K1s out to your investors.

Yes. And James is correct. We are, we have launched a new program, coaching program called CRE Investor Coach and working just with those brokers who are ready to become investors both on the LP more importantly on the GP side. And James is on our board of advisors. But James, let's put on, and we're doing that because we feel the market's in a great position to start looking at deals, especially in the second quarter, third quarter of 23. But James, put your broker hat on for a second. What do you see in the market as far as opportunities for 2023?

Well, you know, I kind of go back to a lot of the podcast interviews I've done with some of the legends in the business. And I remember one in particular with Don Peebles, self made billionaire and he said, look, all the best deals I've ever made were at the bottom of the market. And if you subscribe to the Warren Buffett school of investing, which is be greedy when those are fearful and be fearful when those are greedy, right now we're in a great deal of uncertainty. Rates have gone up at an unprecedented rate. And so as a result, a lot of investors are on the sidelines because they believe that pricing is going to get better next year and it might be right. But I think the call to action now is if you have all these investors sitting on the sidelines, there's going to be less competition and there is still owners who need to sell today. And this is a big part of my book as well, is talking about, you know, the most important attribute for a great opportunity is seller's motivation. And Rod, you would be shocked how rarely investors ask me, hey, James, why are they selling? Right? And if you kind of look at the spectrum, you know, going to most motivated, you know, estate sales, partnership disputes, distress, right? And then on the other end spectrum, you have discretionary sellers who say, hey, you know, James, you know, I know my Property's only worth 40 million, but if you can get me 50, you know, I'll sell. That's not someone you want to buy from, right? So you really want to look for those motivated sellers, you know. But again, right now there's not a lot of competition out there. And once everybody, even if pricing corrects a little bit, if there's a lot more competition, you know it's going to be a lot more challenging to transact.

There you have it, folks. James Nelson, principal and head of Tri State Investment Sales for Evans and Young and more recently and more, more applicably for you. All right, now the author by the book post by McGraw Hill, the insider Edge to Real Estate Investing. It should be read by every broker, every investor on the planet.

James, wow, thank you.

Thank you so much for your time on the Mossimo Show.

Rod, I can't thank you enough. You've been such a mentor to me all these years, you know, really appreciate everything you've done. So yes, for anyone out there listening, James Nelson.com that's where you can find my podcast information on the book. Or of course you can go to Amazon and pre order now. Thank you so much.

Hey folks, there you have it. James nelson.com man, the fact that you got that is pretty incredible. I did get rod sonomasmo.com believe me.

It did not come free.

Rod sonomasmo.com did come free. So there you go folks. James Nelson, you got look, we'll promote the heck of his book. I've read his book. We'll promote the hack of it when it comes available. We'll get out the word to everyone. Go pre order it now if you can. But again, James jumped a lot of information on you and right we know this knowing isn't doing. So go out, listen to what he said, think about investing and if you're a broker, he gave you a path to how you can broker and more importantly, how you can invest and start building that business and life you've always desired. Until next time, this is Rod Santomssimo with the Massimo Show. I want to thank you for listening to this version of the Massimo show and please, please go out and share this with your friends, your colleagues. Heck, share with your dog. Just share it and more importantly, just give me some feedback. Good, better and different. We all grow from understanding what our audience wants to hear. So until next time, this is Rod Santomssimo with Massimo Show.

Thank you for listening to the Insider's Edge to Real Estate Investing. We appreciate you're 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.

SA.