Joel Friedland - Crafting a Profitable Strategy While Mitigating Risk in Real Estate Investing

Welcome to the Untold Stories of Real Estate Investing hosted by Wayne Courageous iii, a place where active and passive investors come to hear the good, bad and ugly of real estate investing. Our guests consist of experienced operators and investors who want others to succeed by sharing their stories. If you're looking to syndicate deals or grow your wealth passively in real estate, you've come to the right show. It's now time to sit back, take mental notes and enjoy next episode of the Untold Stories of Real Estate Investing.

All right, welcome back to the Untold Stories of Real Estate Investing. I'm your host, Wayne Courageous today. I'm excited to have Joel Friedland with us today. Joel has a 42 year track record in industrial real estate. He has co founded Epic Savage Realty Partners in 1991, where he oversaw hiring and mentoring 60 industrial real estate professionals, many of whom became his partners. His group sold the firm to an international real estate company in 2014. And Joel started Brit Properties as an industrial real estate broker and owner. Joel has secured over 2,000 industrial property leases and sales totaling over $250 million in acquisitions. His greatest achievement is maintaining valued relationships with brokers, tenants and investors spanning five decades. He does fully syndicated deals with zero percent debt, an unheard of approach in real estate with which caters to his wealthy investor base, primarily concerned with conserv conservative of principle. His experiences during the Great Recession in 2008 have informed his investment approach to be hyper conservative while still allowing 8% plus cash flow for his investors. Welcome to our show, Joel.

Hey, Wayne. Great to see you.

Great seeing you. We, we definitely hit it off before the show, so I was like, all right, we need to like start recording because there's a lot of value that I see us getting into today. So before we dig in, can you share more about your background, how you got into real estate, and, you know, really what you're focusing on these days?

Sure. So Today I am 64 years old and I was a child entrepreneur. I started out, I did so many entrepreneurial things. My parents are therapists, so there's like a big mental health element in, in my background where they were helping people who had all kinds of issues and problems. But it didn't pay that well to be a therapist. So when I was a kid, I, I needed to buy things and I'd go to my parents and say, hey, I need this or I want that. And it was sort of like, we're, you know, we're, we're kind of frugal because we need to be so I started a lawn business and I, in one weekend went out and door to door convinced 70 families to let me cut their lawn. I was 14 years old. I couldn't even drive. I just, I learned how to cold call and I learned, I was, it was like a talent that I had. I was very shy as a little kid, so it was amazing that I did that. So my parents were on vacation, they came home and I said, hey, I've got a business. I was 14. And they said, you got a business? Said, yeah, I convinced a bunch of the neighbors to let me cut their lawns. And then I hired a bunch of kids to work cutting the lawns and trimming bushes and all that kind of thing. So when I graduated from college, I knew I wanted to be in sales. And I accidentally met a guy that had a business in industrial real estate. He had 84 industrial buildings, 6 million square feet worth hundreds of millions of dollars. And I cold called him to see if he was looking to hire somebody. And I went and I met him and he hired me on the spot because it was 1981, 10 of the buildings were vacant and he was struggling with 17% interest rates and the economy was just bad. It was horrible. Nobody was doing anything. And I told him I'd go door to door in industrial parks, talking to companies that might move into his empty buildings. And I filled up all of them but one in one year. So I fell in love with the business. And industrial is so great. I, I love the, I love the multi family business, but industrial, I, I've learned it over these 42 years. It's such an incredibly great business and.

It seems to keep booming, especially as online retailers and you know, everything is shifting more online, so. So I haven't mentioned this on our podcast, I don't believe, but my wife is a marriage family counselor, licensed professional counselor, so we have that in common too. Yep. And since COVID everything's moved to telehealth. So when we moved, like her clients and everything just, everything's just been going, you know, online. So anyway, yeah, my daughter is also.

By the way, in addition to my parents, my daughter is a therapist. She's a little younger than you are and she sees people by telehealth. She's never, she's never met her clients. Wow.

Well, that's, I mean, that's what all that Jen's doing right now is telehealth. I actually like it more because when she was doing office, like going into the office, it was fine during business hours, but when she would see some of the evening clients because, you know, when we had young kids, I would, when I come home from work, she would go, the, the safety of it all, I was just like, anyway, when it, when it moved to telehealth, I mean, it's, it's pretty amazing. And Joel, it's a different person. Like, I like the emotions that they're able to handle. It's, it's not who I am. I'm like, suck it up, you know, you'll be all right. But she, she, she's my therapist when it comes to real estate. And she is quite like those listening to this podcast, like, probably care at some point level about real estate. Like, she's just over it. She's, she's like, I don't care about your deals or your capital raise. And I'm like, you're, you're, you're supposed to listen. But anyway, yeah.

And you come from such a different background with the Marines background that.

Yeah, yeah.

So opposites attract for sure.

Well, all right, so there's a few things I want to break down there. So one of which is the broker aspect. So we talk a lot about owning assets on this podcast, but we really haven't spoken about brokerage. I, when I first joined CBRE back in 2007, Joe, they put me through a program called CB101 and it was in California. And I was the only property manager there with a bunch of brokers. And these guys were new brokers, all very hungry to be that next millionaire type broker and the mentality of it. And it really got me excited because I was like, man, I really want to be a broker. But the risk that those guys and ladies were dealing with, you know, sort of like you have that eat what you kill type mentality. So talk to us a little bit about like sort of that mentality of brokerage and the type of person who really fits that mold really well. Because again, there's different areas that you can join. Commercial real estate brokerage being one.

Yeah, I've got a bunch of brokers in our market here in Chicago that I trained, I mentored while I had my brokerage company for almost 20 years. I mentored about 60 potential new invest new brokers and none of them had any experience when I hired them. Some of them were MBAs, some of them had law degrees. They were all people who wanted to try something where they had sort of like an unlimited no ceiling way to make a living. And the problem is it's very slow in the beginning because you don't have any clients, and so you have to build your clientele. Of the 60 that I hired, there's a. There's a rule that. That most people understand. It's the 80, 20 rule, where 80% of the people do very little and 20% do almost all of the business. And that was true in brokerage. 20% of the people that I hired turned into superstars. And today, those 20%, they're all multimillionaires, all of them. And these are people in their 30s and 40s and 50s. And the reason that they're successful is because they're great relationship builders and because they know how to negotiate. Being a broker, what you have to do is convince a client that you're going to fight for them. It's not a lot different than being a politician where politicians get up and they say, I'm going to fight for you. It's like, well, who are you fighting against? You're going to fight for me? Like, who's the enemy? So you need to create an enemy, and the enemy and brokerage is the person you're negotiating against. So when a broker becomes good, they go to a meeting and they say, I'm going to fight for you. I'm going to get you the best deal. I'm going to get you the best concession package. If it's representing a tenant and if it's representing a seller, I'm going to get you the highest price. I know how to find buyers and find people who will pay more than anybody else. I'm going to fight for you. And. And that is really the common link. It's about fighting. It's. And if you look at the world today, the whole world is about fighting. So it's the same theme. I've got a young man that I hired in 2009, and today I would say he probably makes $2 million a year in brokerage. I would say that my. My 20%, none of them make less than a million dollars a year as brokers. Very few of them have shifted into what you and I do, you know, you shifted in from cbre. I shifted in from transwestern after we sold to them. I've been doing acquisitions like you were before you left cbre. I've been doing acquisitions while being a broker so I could make a living while building up my group of investors and a big portfolio.

Absolutely.

But it's the same thing when you get investors. I'm going to fight for you. I'm going to get you the highest return, and I'M going to sell the building and make you a big profit. It's all the same thing. It's this fighting thing. And so that's what it is. It's, they're competitive if they're successful, they're aggressive if they're successful, they're very direct and they can get right to the point very fast. This one guy that worked for us early, early on he was like a mealy mouth guy. Everything that came out of his mouth that was like half understandable and I wasn't sure what he was saying. It wasn't direct enough. Yeah. And years later I ran into him. He was still a broker and he was still unsuccessful. So you know.

Well, and I think the, I think just my experience of commercial real estate, you're either an operator or you're that broker type, you know, type person. And I had a mentor so because in property management, you know, I approved large checks to these brokers that, you know, and in our world in the big office tenant leases, I mean they're representing Google and indeed, I mean these are large thousands of square feet, you know, and they're getting commission off operating expenses plus rent. And so these are huge checks. And I'm like, man, I need, I'm in the wrong business. But I kept going back to Joel, realizing that you know, I would rather be. And one of my mentors asked me, he's like, would you rather be the President of the United States or would you be Ross Perot? That was, and many people may not know Ross Perot. So you can equate to like Bill Gates but like you know, a billionaire, what would you choose? And my choice was to be the President of the United States. I love leadership. It's, I mean it's just been ingrained for me early on. So he's like, well then, you know, continue doing property management and stuff like that. So even recently when I was looking at, I joined a mastermind that has a heavy amount of capital raisers and capital raisers, very transactional sales, like fighting for investors etc, you know, had that mentality. But they're very transactional, deal to deal. And I was like, you know, I could really scale my business towards that equity, private equity type work. The problem that I have is that I really enjoy the life cycle, the operations of the asset. And so yes I have to raise capital and stuff like that but I enjoy and I the control and the aspect of leadership from A to Z of the life cycle of the property. So just an interesting way of thinking of like those that are listening and may want to get into commercial real estate of, you know, are you an operator or are you a sales? And at the end of the day, make a good point, like, everyone needs to have sales and negotiation, and everything in real estate is relationships. So a lot of those can be tied together.

I think what you're saying is, is exactly right. There are two kinds of people. There are the salespeople, as you mentioned, and they're the operators. A good salesperson probably is a bad operator. That's been my experience. I've seen that dozens and dozens of times. And a good operator usually can't sell anything. So what's ideal is if you have partners, two partners or three partners who trust each other, and one or two bring the sales or. And one or two bring the operations. The problem with the salespeople, when we started our business, I had a partner who was 10 years younger, and he took the approach that anything that was in sales was a waste of time, which is very wrong. You know, that's how you get in trouble. Right. So he didn't really believe in the back office. He didn't care about property management. He just cared about finding the next deal and making the next hundred thousand dollars. And what happens is you get in trouble when your back room gets disorganized. You've got to have a great bookkeeper or accountant or cfo. You've got to have that, and you've got to have someone who's hands on with when the sewers back up and when the H Vac on the roof breaks down, you've got to have that person who's in charge of that. And when the company gets big, the leader of your side of the business, the operations side, has to be a good delegator and has to be a good leader. Like you're talking about, you know how to do it. You've done that. That's been your position in my end, in the sales end, and in the acquisition and finding deals. We have to be good door openers. And then once the door is open, we have to be good relationship builders. And that has nothing to do with credits and debits in the accounting department. Nothing. So I have learned that having a partner who's fantastic. I have one of those. His name is Eric Schneider, and I was on the phone with him this morning. He said, we had a sprinkler test at the Rose street building, and there's thousands of gallons of water in the sprinkler system. And when they empty it out, it goes into the sewer when they test. I know nothing about this, but he knows everything about this. He said. So I get a call from the tenant and the sewers in their bathrooms are. The little drains are backing up and something very bad smelling is coming up through the, the drains. I said, oh, no, that's terrible. I said, your problem. I said, thank you. I said, thank you for taking care of it. I know that the sewer backup is a really big problem and if it, if you weren't handling this, someone would be calling me and I wouldn't know what to do and I wouldn't want to do it. Yeah, yeah. Well, somebody's starting a business. Warning, warning, warning. Figure out what you're not good at. Make sure you have somebody. Right? That's what we did. Somebody who's really great at doing the other thing and that you can trust them huge.

So team sport. We talk about that a lot. Where do as you just said, what you are passionate about and what you love doing because you're not going to get burned out. Real estate is, is tough. We were talking about this before. We can go into this a little bit, you know, of the business cycles and real estate cycles. And I, I love those memes that are like, you know, you're like a beautiful. A day one in real estate. At the end you're like, hair's grown out, you're just, you look like you've aged 50 years, you know, and, you know, so. But if you're doing what you love, that grit and that fire and that resolve that you need to get through any challenge, persist. Now if you're doing what you hate or, you know, you're, you're not doing what you're, you know, passionate about doing, it gets a little more tough. The other thing too is if you're a sales person that's great on real estate negotiating such if you're not having those other partners, then you can outsource like that property management, you know, third party property management. You know, they would be letting you know if what's going on and what they're doing. So that also helps. But it goes back to that trust. You got to trust the management company too and do your due diligence on them.

So.

Hey listeners, it's Wayne Courageous. I just want to pause real quick to say thank you for listening to our show. I hope that you're getting a lot of value out of it. If I could ask you to go ahead and like subscribe and share this podcast, that would mean a lot. It will get a Lot of other investors like yourself learning about the process and the steps to successfully invest in real estate either as a passive or an active investor. I also want to do a quick introduction of Crei Partners. I'm the managing principal for Crei Partners and we started it back in 2019 with one goal, to grow your wealth passively in real estate. We do so by buying assets in multi family, build to rent communities and RV boat storage facilities. And we do so in areas that have strong market fundamentals and also have strong partnerships with other real estate investors such as ourselves. We personally discovered that passively investing in real estate was a really great blend for people that are busy like yourself, and that you can invest passively in real estate and still reap the rewards of the returns, the tax benefits, et cetera. If you're interested in learning more about passively investing, check out our website. We do a lot of content through our passive investor coaching program, through our podcast, our blogs, and just other information that we do on a daily basis. Check out creipartners.com again creipartners.com if you're interested in building the relationship and joining our investor club, there's a link there to to join. We'll set up a call and continue building the relationship with you. We're super excited to have that opportunity and I want us to get back to the show and hopefully again you're enjoying the conversation and look forward to connecting soon. Thank you ma'.

Am.

So let's shift gears a little bit. So industrial, how did industrial fared in 2008? You know, what was your experience like during that time and what were some of the lessons learned, you know, for people like myself who are recently just going all in on on real estate investing?

Yeah, it was terrible, I can tell you that. I had 50 buildings in 2008. And unlike multifamily, which I love by the way, industrial is very different because industrial has two kinds of buildings. There's multi tenant, which are, which is more similar to multifamily, and then there's single tenant. I'd say at least two thirds of the buildings in industrial are single tenant, which means it's either 100% occupied or it's 100% vacant. So that's the big risk. And I had 10 single tenant buildings. I was like Milton Podolski, my, my mentor in 1981 who had 10 empty buildings. I had 10 empty buildings in 2008 and I had loans on all the buildings. And I'll tell you why I don't do loans anymore. I like to do my deals all cash, no debt. Having to go. Having to deal with the problems I had back then that I don't want to deal with again. So I've maybe gone way overboard, but I ended up on that couch back there. I lived in this house, and my wife and my kids watched me go into a depression because I had 200 investors. We had $200 million worth of real estate, and of the 50 buildings, 20% were vacant because tenants went out of business or tried to break their lease or called us and said, we can't pay the rent. And I had seven banks, and none of them have a sense of humor when you can't pay the mortgage and the taxes have to be paid and the utilities have to be paid and the insurance. So I was a mess because I thought I had lost everybody's money. I thought that I had 200 investors and I was going to have to tell them all that they were wiped out. And that was 2008 and 2009, and it didn't get a whole lot better until 2012 and 13. And even then, it was a slow climb back. It was like being in a dark hole and being halfway out. And it was, talk about mental health. My parents, the therapists, didn't even know what to do with me. They had no idea. And I had to go for counseling, meditation, medication. It was brutal. And so I learned a lesson, which was that I'm not a risk taker. I can't handle what happens if the risk turns a good situation into a bad situation. And so I learned the hard way that when things go bad, you have no control. We are not in control. Right Forces way beyond us are happening every day and cause us to have to deal with these things. And I climbed out of my hole, and I actually didn't lose everybody's money. I kept working. Perseverance was like the word, word of the decade for me. And I was able to bring everything back. When things got better, my investors called me and said, you did things that our other sponsors didn't do. A lot of them went bankrupt and just started over. And I appreciate how hard you've worked to bring it back, but it still hurts today. And that pain is what drives me to do my due diligence differently. I've listened to your theory on due diligence about being super careful and making sure that you account for things that might go wrong that you haven't thought of yet. The H VAC system that has to be replaced or a roof that may be older than it should be in terms of counting on it not leaking in a few years and things like that. So, yeah, it was extremely devastating and I think today we're in a situation where that could happen at any moment.

Yeah, I, I appreciate you being vulnerable and talking through that because for me it's stressful and it's stressful not because, well, it's stressful because. And I see this in you, you know, as we're getting to know each other through this podcast, is people like you and I, we're the jockeys that are, you know, being entrusted with other people's money. Now. We've invested alongside, but the fiduciary responsibility that we have are what drives us to keep pushing and pushing. And you make from an operator side, you know, we, we try to have enough funds in reserves, we try to anticipate taxes, you know, being 100 of value. You try to underwrite these ways. And we've talked about previously on podcasts and meetups that, you know, sometimes sponsors can get a little more aggressive. But you know, during times, when times are good, those aggressiveness behaviors, aggressive behaviors is pretty overlooked because regardless of how you operate, you're winning at the end because the cap rates are, you know, compressing, et cetera. Right. So it's an interesting time. I mean, I, I, we talked about before the show, like 2019, you know, I started our investment business while I was with CBRE. Right. So over the last four years, you know, we've grown to about 40 million assets under management, heavily involved on operations day to day. And each one has their own quirks about them and they're always, they're never as easy as what I anticipated. Right. And I think it's just, I really liked what you said too is like even during all that rough time is you just kept fighting, you kept going and you got through it. You know, there's cycles in real estate and regardless of where you are, your investors are counting on you and the easy thing to do is just fold and walk away. All my debt is all non recourse. Right. And so technically we could just get back to Keys and say like, hey, we're, we're not doing, but that's just not who we are. That's not like, that's not in our blood to give up and you know, especially because our investors are counting on us. So anything more you want to say regarding that experience and sort of any similarities, what you're seeing in today's market?

Well, I am seeing today that things have been too good for too long. And it, it just isn't realistic to believe that they'll always be like that. And as a country, we have way too much debt and people are living beyond their means. And, and there, there will be, in my opinion. I'm just looking out. I don't know if it's two months or two years, but there will be a time when things are really rough. It's not going to be like today. In industrial today, rents have approximately doubled from where they were 10 years ago. That's 10% rent growth. And I don't believe that that's sustainable. It just isn't the way the world works. So I believe that something bad's going to happen and I'm prepared for it. And I'm making sure that my investors are aware that I believe something bad's company coming. So they, some of them say, well then maybe we shouldn't invest today. I believe there's, there are good deals happening all the time, but not everywhere. And not all deals are good deals. So we have to figure out which are the ones we want. And then the question is, how do you mitigate your risk by structuring the deal so that it's a lower risk deal. And that's, I think you're good at that. I know your philosophy. We should talk about that because there are many ways to do it. And my way of doing it is by being laser focused on one market, which is class B and C industrial buildings in the Chicago area, which I know like the back of my hand. There are 16,000 buildings and I've been to 15,000 of them, whether cold calling or going to meetings in 40 years. But how do you mitigate, how do you, how do you protect your investors against a drastic loss? And I think you figured out a way to do it by being super careful on diligence. And so are we. But this is where it gets to my, my issue of having zero debt. Yeah, people think I'm a moron. They say, come on, real estate's a leveraged business. How do you, how do you push your returns without having debt? My answer is my investors don't want to push their returns. They just don't want to lose their money. They want a good return that's better than they could get in an alternative investment to this where they don't lose their money because you can't make up the loss.

I, this is such a great conversation. So I, I look at it and I, we do a lot of education with our investors. It's something that really. That's why I do the podcast. We do a monthly meetup, got a book coming out. And part of that education is understanding where everybody is on their investment path. Right. So I'm 38. I'm willing to be a little bit more risky on my personal investments because I would rather have the 2x 2.25. I'd rather the equity multiple over a 5 to 7 year hold period in my current cycle of business. Now, cash flow is important, but I'm okay taking on additional risk up front, doing a deep, deep value add, going in with our operational and our construction management teams, going in and doing complete value add, understanding that we're going to have to probably go down to a low occupancy and there's going to be some cash flow issues because so at that point we've got to make sure our reserves are higher. But to your investors and to a lot of investors, and there's never a right or wrong to any of this. I do feel like once you determine where your risk tolerance is, it's like stocks, you can determine where you want to invest and you know, with the risk is likely a higher return in theory. Right. That's the whole idea of the higher risk, the higher return. So having people understand where their risk tolerance is and what they're okay in the worst case scenario, losing for that risk and for that reward is I think it extremely important. So there are cash flow investors and then there's equity investors. And what I'm understanding from your investment, you know, your, your methods and your philosophy is your focus on, as we all should be, cash preservation. I mean that should be for everybody, number one. But two more of the conservative, more institutional, like, mindset of, you know, cash flow. It may not be sexy returns high, you know, 20% plus IRS, but the risk is lower. You're getting that cash flow and then your investors are getting that tax depreciation. Am I off base here? I'm definitely.

Oh, you're right. You're right. You're totally right. So let me dive into my typical investor and my typical deal. For sure. We like to own manufacturing buildings. When I say manufacturing buildings, I don't mean like smokestack. I'm talking about every town has a street called Industrial Drive and that's where all the old industrial is. And then there's another street that's named after somebody's daughter because the developer needed a name for a street. So it's like Melanie Lane.

Right.

And then there's another street where the big boxes that you see on the side of the tollway, and those are frontage road. We don't do the frontage road. We don't do those giant big boxes that are leased to Amazon and to Wayfair and Target for their warehouse. We, we do these smaller buildings that are older, built in the 1970s and 80s. Lower ceiling, you know, the big, the big boxes have to have really tall ceilings because they use racks and they use forklift trucks. And to them it's about cubic footage and being efficient. To my tenants it's about floor space and being able to put their machines in various places. The machines aren't that tall. Maybe they're 18ft tall at the most. So let me give you an example. We bought three buildings last week in Chicago near downtown. So we also like infill, which is where the population density allows for hiring employees easily getting to the, to the center city for various reasons, being near the tollways and the highways. So the company that occupies the buildings that we bought is called Tampico Beverage. And they make, they manufacture goop, it's concentrate for fruit drinks. And they have these huge tanks and wires and tubes. They can't move. We call that a sticky tenant for two reasons. And we love a sticky tenant because they stay for 15, 20, 30 years. Tampico has been in these buildings that were owned by a family for 30 years. So we bought the buildings subject to seven years of remaining lease with Tampico. And we have to give our investors an unlevered 8% return over, let's say a 10 year period. It might start at 7, it might go up 3% a year. And the investors like the yield, but they also like the, the idea that we're, we're at a maximum debt ratio, loan to value ratio of 30%. And that's actually in our PPM. We can't borrow more than that or we'd be violating our promise. And many of the buildings have zero debt. It's really hard to find an 8% return without leverage anywhere. I mean, I don't know if you could find it.

I, I, I'm struggling to find it. I mean, the only way to do that is just to buy it at an extremely low price versus the rent that's coming in. Right? I mean that's, so how are you getting those deals and getting them to even agree to sell at that price so you can get that return? I mean, it's, it is very difficult to do that, which is why people say leverage is the way to go.

Yeah. So, because I'm anti leverage, and my investors understand that, and that's why they invest with me. And incidentally, when an investor invests with me, I tell them one thing up front. I say, you can go into as many deals as you want with me, but you should never put more than 5% of your total net worth in my stuff. Because diversification is really important, for sure. And so I believe that people should maybe even keep it down to 3% of their net worth in any one particular investment, whether it's Apple stock, whether it's bonds, you know, Comcast bond or. Or a syndication. With us, when I tell people we're different, what I say is we actually cold call families. We cold call. This is our niche. It's very bizarre. We find families that used to own a business, sold the business to a private equity group or a much bigger company and then leased the building back. And then a decade or two go by, and now you're in the next generation of the family, and all the kids want to get rid of the building and cash out. Grandpa, who started the business is long dead.

Right?

He's gone. Oh, we miss Grandpa. Thank God he started the business because now we're all rich and we own this building. And there's 16 cousins, and Uncle John and Uncle Peter hate each other because when they were in the business working for grandpa, they got in a fight. So now you got brothers who don't get along. You got 16 kids between them and their grandchildren, and they want to get rid of it. So we, we cold call the. The people who are the families that own the buildings that used to own the company in the building. And if you look at our 19 buildings, 15 of them we bought from families that had to get rid of each other. Yeah, that's how you get 8% off market.

Yep. It's very niche. It's very focused. You know, a lot of people are doing that in multifamily, where you'd find the mom and pop multifamily you're trying to sell or, you know, that's become harder to find because everything, you know, got a lot of these value ad groups, but with your focus on these, and especially there's 15, you said 16,000 industrial buildings that, that's a big base of. Of properties that y' all can go after. And then I love the niche approach. I also love that you're still buying. So. So last week we closed on 44 units in Houston, and I. I'm still bullish even during this time of uncertainty. And I always say that if you take the facts that are going on in the market and you try to de. Risk as much as you can. For example, like this was a five year deal. Now it's probably not going to hit your, it definitely won't hit your risk tolerance because there is debt involved. But what we did was a seller financing 6% fixed rate for five years, interest only, no prepayment penalty. And the story behind it, Joel, is we bought it less than what they bought it for in 2018 and we found it off market direct. You know, well, we had a broker relationship that we've cultivate over the years. But you know, if you're finding those niche and you're really honing in on what your investors and, and what is going on in the markets, you know, you can, you can definitely find these things. So I just love that you're, you're one, you're still buying. You know, you said you closed three deals last or three properties last week. I mean it just, there's a lot of people just sitting on the sidelines, A lot of cash sitting on the sidelines. But you know, just through consistent strategy that you're doing, it seems to be, seems to be working. And I love that you're doing it with no, no debt. I mean, wow. That if you can do it this way, I mean like think about that 6% seller fixed financing. Right. So instead of paying that 6% to the seller for their financing, that 6% in theory would go to the investors.

Right, right.

You know, and so that's your, your, your equity. You think about the capital stack and how you're, you're accomplishing it. That debt is part of that capital stack. So if you have none of that, then it just pushes those returns. So I, I'm thinking out loud here as I'm talking to you because I think it's, it's, it's not a common strategy. So I commend you for.

Nobody else does it. I've not been able to find anyone else in the United States and I, I talk to a lot of syndicators and I watch a lot of podcasts and I read a lot of, I look at crowdstreet and I look at all the different platforms. Nobody does what we do. And it's because I was on the couch in 2008 and I know at my age, at 64, I'm not in a position where I can afford to start over again like I did in 2009 to save a portfolio and bring it back from the brink. So my investors are like minded. These are people who are older. I'm not trying to teach people who are young people how to invest.

For sure.

I deal with accredited, very, very wealthy people who may have, you know, I don't know if you know this, but the top 1% of wealthy people in the United States have a net worth of $11 million or more. I would say 2/3 of my investors are 1 percenters and I'd say that the rest of them are either in the 2% or 3% range, which means 97% of the people in the world cannot invest in our deals because they don't make sense. We have a fifty thousand dollar minimum on most deals and fifty thousand is five percent of a million. So if your net worth is a million, you're done with your first $50,000 with us.

Yes.

So we really have a different clientele than most people because I've been doing this for 40 years and when I was a kid, when I was in my 20s and I was a broker and I was making 20 or 30 brokerage deals in industrial a year, I would meet the owners of 20 or 30 companies and when I started syndicating, those are the people that I had relationships for because remember I was fighting for them. They know I'm a fighter for them. So I go back to my old brokerage clients and say, hey, I'm putting together a syndication to buy a building on Trip Avenue and we're raising 2.7 million in $50,000 chunks. And very regularly it's like, well, what's your strategy? It's all cash, no mortgage, don't want to lose any money. We're all too old and we have too much money and we don't want to lose it. In this case the investor will say I'll put in 250. Yeah, you know, that's how it works.

Yeah. Well, you take that huge risk away with that dead side and you're able to get the returns because you're buying right and you're buying right because you've got a niche and you know exactly what you're going for in the locations, etc. So niching down every aspect of your business seems to reduce a lot of the risk. Helps you sleep at night and you know that no one's going to be losing money because at the end of the day you don't have to sell and you really don't need rent. Yeah, you, I mean at the end day you want to have your, your buildings leased, but in Your case, if you don't have the debt. Yes. You can tell your investors, hey, we're not doing distributions right now in a worst case scenario. But they haven't lost their principal because they're still value in that, that dirt and that, those improvements on that property. Yeah.

And I'll give you an analogy. I told you that I had basal cell carcinoma from too much golf over the years. Too much sun exposure, probably from when I was a little kid. My, my mother probably thought it was doing me a favor to have me out in the sun getting burned. So I, the doctor says, hey, you got this little thing and I've got to take it off. I went to a doctor, this guy in Northbrook, Illinois, who does nothing but what's called Mohs surgery. And he, he just does the same thing over and over and over. And he's been doing it for 25 years. And that's who I want to go to to do surgery on my nose. I'm not going to some guy who does. Well, I do a little bit of this with people's hands and I do a little bit of this with people's knees. And sometimes I, sometimes I, I prescribe medications to this person and that person for this. I don't want to go to a generalist. I want to go to the guy who's done this surgery 5,000 times.

Absolutely.

That's my. Great. So that's my analogy for the day. Right. And so I just came from the stitches being taken out today, and I'm thinking about it. That doctor, Dr. Lottie in Northbrook, Illinois is the only person that I would ever recommend someone who has this too, because I know that he has done it well and gets better and better and better and just keeps doing the same thing over and over. And so our little focus on industrial B and C in Chicago is the same idea. I don't need COSTAR to tell me what something's worth because I own 10 buildings on the north side of Chicago. We are the market for that. So if we buy another building that's just like that, we know how much rent we're getting on the other 10 buildings, and we know how much we bought them for, and we know how much a potential user might buy them for if they go vacant. So I'm with you. Being careful is everything. And gambling is bad.

Yeah.

And I think a lot of syndicators and developers become gamblers and don't know it. Right. So I'm the anti gambler. And that's, that's the whole key.

Yeah. Well, we could keep having this long conversation. It's been really, really enjoyable. As we sort of close up here, though, I always ask, you know, what is your proudest moment in real estate investing? And then, Joel, if you can share with the audience how they can reach out to you as well, I would appreciate that.

I think my proudest moment was I talked to one of my investors. His name is Mike, Mike F. And he called me about three years ago and he said, I just want you to know that I was scared with you. In 2008, we had a big investment with you and we trusted you. And now that we're 10 or whatever years later, I want you to know how much my wife and I appreciate how hard you worked to dig your way out of the hole and I'm interested in your next deal. And I said, that means so much to me. He said, I know what you went through. We saw your personality change when you went into the depression. We were, we were scared for you and for us for so many reasons. And we're just, we're with you. And that was, that was a moment that was very memorable to me.

Absolutely. And how can those listening reach out to you?

Britproperties.com B R I T Properties and just so you know how important property management is to us, the company, when we started it, we had to come up with a name because we sold Transwestern and needed a new company. Sold to Transwestern. And our property manager, Brad, we loved him and we decided to call the company Brit, which stands for Brad really is terrific.

Hey, property management, the operations is the backbone, right?

It's backbone.

It's the backbone. So I really enjoyed this. I love the vulnerability. I love the conversation about the risk tolerance and, you know, how do we de risk real estate so we can preserve capital and take care of our investors through good and bad times. So appreciate it and look forward to continuing to have future conversations with you.

Thanks, Wayne. Ditto.

That's all for this episode. We hope you subscribe, share and leave a review of the show. For more information about passively investing in multi family apartments, check out Wayne's free ebook by going to creipartners.com ebook also follow us on Facebook by searching CREI partners this was the untold stories of real estate investing.