Welcome to our latest episode! Today, we have the pleasure of hosting Jonathan Hayek, Managing Partner at Endurance Properties and the voice behind The Source of CRE Podcast. Jonathan’s journey took him from the classroom as a special education teacher to flipping houses and ultimately investing in larger commercial real estate assets. Now an owner and operator of multifamily and industrial properties, Jonathan shares his insights on achieving financial freedom through strategic real estate investments.
In this episode, Jonathan shares his unique path into the commercial real estate world, discussing how he leveraged his teaching income to build his initial portfolio. He reveals the lessons he learned while transitioning into commercial investments, including the acquisition and management of industrial properties. Jonathan dives deep into strategies for handling value-add deals, navigating lease negotiations, and creating long-term tenant relationships. He also highlights why now is an opportune time to explore non-residential real estate investments and how to mitigate risks in this sector.
Tune in now for actionable insights on building wealth, securing financial freedom, and taking advantage of the current real estate landscape.
Whether you’re new to commercial real estate or looking to level up, Jonathan provides actionable strategies to help you succeed. Tune in now to learn from Jonathan’s inspiring journey and gain practical tips for navigating the commercial real estate space.
HIGHLIGHTS OF THE EPISODE
00:00 – Welcome to the BigMike Fund Podcast
00:19 – Guest intro: Jonathan Hayek
02:53 – Why Colorado became Jonathan’s home base for lifestyle
04:02 – Lessons from flipping houses and small multifamily investments
06:38 – First commercial deal: A vacant office building
09:12 – Industrial properties for scalability and simplicity
12:07 – Industrial tenants and properties
15:04 – Navigating expiring leases and adding value in industrial real estate
17:18 – Tenant quality and long-term lease strategies
19:56 – Balancing risk and opportunity with value-add commercial deals
23:21 – Cap rates and market analysis in industrial real estate
26:18 – Book recommendation: Crushing It in Apartments and Commercial Real Estate
30:02 – How to connect with Jonathan
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Full Transcript:
Intro: Welcome to the BigMikeFund Podcast, where you’ll learn about advanced wealth building strategies from real estate investing to creating massive ROI and secure retirement profits. So pour yourself a cup of coffee, grab a notepad, and lean in. Because Big Mike has got the mic, starting now.
Mike Zlotnik: Welcome to the BigMikeFund Podcast.
I’m the Big Mike, Mike Zlotnik, and today it is my pleasure and a privilege to welcome Jonathan Hayek. Thanks Hey, Jonathan.
Jonathan Hayek: Hey, Big Mike. Thank you for having me. Really looking forward to talking with you.
Mike Zlotnik: Awesome to have you. I appreciate, uh, you coming on a podcast and I’ll just read a couple of things about you and then I’ll give you a chance to talk a little bit more about you directly.
So while working as a public school teacher, Jonathan began investing in real estate with a few dollars. Through a grid and creative strategies, Jonathan flipped single family homes to build a portfolio of small multifamily properties. Now using his real estate to fuel his lifestyle of family, uh, time playing in the mountains of Colorado.
Here’s what’s next! Jonathan now invests in larger commercial assets. Preferred net, uh, leased industrial properties. He enjoys inspiring other speakers about the freedom real estate can provide, traveling, and ultra running. So, that was a long introduction. Tell us your story. You’re in Colorado. Just, uh, a little bit about you and your family. How did you wind up being there? And we’ll switch to real estate.
Jonathan Hayek: Sure. Yeah. So I grew up in Illinois, in the suburbs of Chicago, went to Illinois State University, got a degree in special education, got a master’s degree from a small school called North Central College, thought I wanted to be a school principal.
So I was a special ed teacher for eight years. And the way teaching works is if you want to make money, you have to stay in it. And you have to get more education. And so if you’re going to be a teacher, it just makes sense to get to continue your education and get more degrees. So got a master’s degree and thought my path was towards, uh, administration in, um, in, in the school setting.
And, um, eventually, I mean, that gets into my real estate life, but eventually, um, Quit teaching thanks to real estate and relocated out west. I met my wife in Arizona when I was living there working for a non for profit. We migrated to Wyoming and then recently Colorado and we’re here for lifestyle. I actually don’t currently own any real estate.
Properties in Colorado. My properties are outside Colorado, but we live here for lifestyle because it’s just an amazing quality of life. And so we love the lifestyle here. And we, I have two young kids and, um, just really enjoy spending time with them and, and, um, you know, using the freedom that that real estate can provide.
Mike Zlotnik: That’s a wonderful story. School teaching is actually very important. It’s a great profession, but we all wind up looking for our passion, right? I assume you’re calling with more real estate than a public school teacher or a private school teacher. I guess that’s why you’re in real estate. And Colorado is one of the most beautiful states in the country, right?
You can’t Yeah, summers are great, winters are great, and everything is great in Colorado, right?
Jonathan Hayek: Yeah, I that’s what I think. That’s what I think. It gets cold. It gets snowy, but you have to enjoy it. And, um, so, you know, when it snows, you gotta learn how to get out in the snow and, um, whether it’s skiing and snowboarding or snowshoeing or, uh, whatever it is.
So, uh, you have to enjoy it. And, yeah, I mean, I, I still love teaching. Um, I think teaching is a calling, just probably not in the public school setting. Um, I love it. Teaching people about real estate. Um, and, um, so, you know, lots of people in the real estate world can, um, you know, they, uh, you know, have all kinds of digs on what the public schools do and what, what they, what they teach and what they don’t teach.
And look, there are plenty of faults with the public school system in our country, but, um, you know, We need teachers and we need great teachers and, and, uh, you know, our, our kids have to go somewhere while we’re off doing real estate. And, um, so yeah, teaching is a great profession. It was just not for me. Long term.
Mike Zlotnik: Understood. The one thing they don’t really teach in, in public schools or any school, I don’t see too many. I don’t want to teach this teacher. Well, in colleges, there are some colleges, of course, real estate is not a, not a typical topic. They’ll teach you engineering. They’ll teach you computer science.
They’ll teach you nursing. They’ll Uh, et cetera, premed, uh, but the real estate as a, as a trade is not typically taught, it almost That folks have to discover on their own how to invest in real estate. And most of us start passively and one day we wake up and we become active professionals. So how did you make it from, what’s your transition path?
How did you went from a few houses to industrial, uh, triple net lease properties? This is not a typical path.
Jonathan Hayek: My path is not typical. I will warn you of that. Um, you know, I originally got into real estate when I was still teaching. So, my wife and I, we gradually started realizing that the teaching profession was just not ultimately going to offer our family, The lifestyle that we wanted the time freedom, the financial freedom, all the freedoms.
It’s a great profession. Like I said, we need great teachers, but, you know, we, we wanted to travel. We wanted a little more freedom than teaching would provide. And so I started flipping houses on nights and weekends and school holidays. And so, I was able to use my W2 income to Uh, you know, to, to pay for my lifestyle expenses, pay for food and my mortgage.
Um, but then, you know, banks also really like to see W2 income when you’re trying to get loans, even on commercial properties. They love W2 income. And so I was able to use that to get great loans on these flip properties, and I wanted to use. the proceeds from the flips to buy small multifamily properties.
And, uh, my hope was to build an empire of small multifamily properties and, uh, sort of get my way out of teaching, uh, by using the rental income from small multifamily properties. And it worked. Um, I did build up a portfolio of small multifamily was able to quit teaching in 2019 and pursue real estate full time.
But as I continued with small multifamily, I realized From a management perspective, I did not want to build an empire of small multifamily properties. I’m a DIYer, possibly to a fault. And so I was managing everything, uh, self managing all my properties. And I’m like, man, I, you know, at one point I got up to like 22 doors or something like that.
And I realized, uh, I don’t think I want any more of these small multifamily properties. So it got me curious about the commercial world. And so, uh, you know, specifically the, the non residential world. And so thinking about retail strips and office buildings and industrial properties, and I was like, how, how do I learn how to buy this stuff?
What, How do the numbers work? How do you find tenants? Um, and so my first commercial deal was, uh, was a little office building. I bought a vacant office building and it was just a way for me to learn the commercial world. I learned best by doing. And so that’s what I did. I bought this little office building and figured it out. And, um, yes. Did you say where?
Mike Zlotnik: Where? Yeah.
Jonathan Hayek: Sure. Yeah. So most of my investing has been in Cheyenne, Wyoming. Um, so most people don’t know where Cheyenne is. So go ahead and look it up on a map. That’s okay. It’s about, it’s about a hundred miles north of Denver, uh, just across the state line from Colorado into.
Mike Zlotnik: Why Cheyenne? What is that particular reason?
Jonathan Hayek: So we were living there at the time. Um, so my wife and I relocated from Arizona to Cheyenne for various reasons. And um, it’s a small town, but it ended up being a great place for us to invest. And I still invest there. I don’t live there anymore, but I still invest there.
And, uh, just ’cause, you know, I know the people. I know the players, I know the market. know the properties. So, um, you know, it’s, it’s turned out to be a great place to invest. And so, um, you know, in this transition from small multifamily to commercial, I would pass by this little office building that was for sale for like nine months.
It was just sitting on the market. So I went to see it with my broker and, um, I thought it would be Just kind of be like multifamily, like, okay, it had all these individual office suites. And I thought, well, I can rent out these office suites to small business owners to, um, you know, accountants and, um, massage therapist and an attorney and people like that.
And, uh, so I closed on it and, um, I did some cosmetic upgrades to it because I figured small business owners are gonna like a lot of the same things that apartment. Renters like so like an updated bathroom. And so I updated the bathroom with nice tile and nice finishes. And in a lot of the offices, I did like a like a barn wood shiplap accent wall just to kind of be trendy.
And so that Uh, a small business owner can walk into an office and say, Okay, yeah, I can, I can see myself here. And it worked. So I bought it totally vacant. And I ended up leasing out the entire building. And I sold it about 18 months later, and made some money on it and learned a million lessons. And the money was a great thing.
But the lessons are. What was, uh, you know, the most valuable part of that deal, just learning how to find tenants, what tenants want in an office building, how do you structure leases, you know, commercial leases. And, um, so yeah, so that office building, while I’m not anxious to do another office building, I just learned a million valuable lessons by doing that deal.
Mike Zlotnik: Yeah, that’s, that’s, that’s the wisdom, right? Sometimes you, uh, you win, sometimes you learn, sometimes both, right? And when you can do both, that’s the best of the world. So that was a step to learn and, and, and the fact that you made some money, that’s great. I assume if you bought a vacant and you leased it up and you sold it, it was pretty decent, uh, profit. Uh, what’s next? Where did you go from there?
Jonathan Hayek: So from there, as I’m doing this office building, I’m like, you know, this office building is actually kind of like multifamily. The good thing about this office building was that nobody was living there. That’s what I really wanted, uh, was to not own property that people were living in, but
Mike Zlotnik: no residential tenants.
Jonathan Hayek: Right, right. Now, I still do own some residential stuff, so I haven’t totally upheld that. But at the time, I’m like, you know, this is good, but I’d really like something even more passive because there were still, you know, responsibilities of finding tenants. I had 11 tenants in that. Building. And so people were, you know, frequently leaving.
And so then I’d have to find a new tenant. And, uh, I would be over there, you know, a couple of times a week cleaning common areas. And so then I started thinking, well, what about industrial? That seems kind of like low maintenance and not easy, but, you know, less management intensive than this office building.
And so I got into single tenant industrial properties. And so imagine these, Extremely unsexy properties that you pass by in, uh, industrial areas of town on, um, highway frontage roads, places like that. And so imagine, say, 10, 000 square feet, and the front is office, and there’s maybe A thousand square feet of office, 1500 square feet of office, and then in back is a warehouse with bay doors and the majority of it is warehouse and the types of tenants that occupy these properties are cabinet makers, granite fabricators, landscaping companies, window window installation companies.
So companies like this that need places to make stuff, to store vehicles, to store equipment, uh, store materials. Um, so these are the properties that I really like. And, um, I’ve been able to close two of them in the last, uh, 12 plus months. And I like them because they are really low management. They are, um, almost always on triple net leases.
Um, they’re low maintenance. The tenants are very sticky. They stay for a long time. And there’s a shortage of these properties. There’s, for the most part, these properties are not getting built. Um, if anything, they’re being taken down for other uses. And, uh, but there’s no shortage of companies needing spaces.
like this. Um, and so there’s a real demand in a lot of markets for these kinds of properties, rate, uh, rent rates are continuing to escalate. And, um, it’s just, uh, it’s just a really great asset class that I found.
Mike Zlotnik: Yeah, I concur. So when you were talking about the, these 10, 000, 12, 000 square feet, uh, warehouses, this is, we do quite a bit of work with, with some of the folks who do heavy renovations.
So you need a warehouse and it’s exactly you have a thousand square feet and you have 10, 000 12, 000 square feet warehouse that they’re perfect. And you’re right. This product is not typically built. So it’s a great asset class. So how did you find those deals? What kind of cap rate? Uh, I’m just curious what kind of financing terms, what kind of, uh, lease escalation clauses, and yes, they require a lot less maintenance.
You have one tenant like this, uh, probably generating more income than you have a bunch of tenants with toilets and giving you a hard time about, you know,
Jonathan Hayek: Yeah, absolutely. So there’s a lot of nuance to this asset class and, you know, I’ve been learning about this asset class for a couple of years now, and I’m still learning every day. So I’ll try to be concise, uh, but thorough. And so feel free to ask questions. As many follow up questions as you want. So I found I’ll start with the first deal. I found this is an Oklahoma City, Oklahoma City. If you’re not familiar with it, it’s a great market. It has great fundamentals. It’s growing, um, and has great demographics.
And so this was on market and it’s a value add deal. So when I talk about value add industrial properties, what I’m talking about. Is property with an expiring lease and below market rents. So typically these properties are leased for. Three, five, 10 years long. And the value of these properties is derided by a couple of things.
It comes from the NOI, how much, how much rent the tenant is paying. It also comes from the quality of lease and the quality of the tenant. And so if you have below market rents, that’s going to bring the value of the property down. Uh, if you’ve got a great tenant that might bring the value up a little bit, but if you have an expiring lease, that scares a lot of investors away because a lot of investors in this asset class are looking for mailbox money.
They’re looking for a property with a great tenant with a 10 year lease with annual escalations and they don’t want to do anything. They just want to collect money every month. And there are plenty of properties that you can do that with, but I’m looking for value add properties. And so. When I find a property that has an expiring lease, it’s going to scare off a lot of these other investors that are looking for security.
So I’m willing to take a little more risk in exchange for a higher upside. So this property in Oklahoma City had an expiring lease. They had about six months left on their lease. And so the risk there is that the tenant could leave in six months. The tenant could say, no, we’re, you know, we found another place or we’re closing down operations here and they could leave, and then you have a vacant property that’s not bringing in any income and then you have to find another tenant.
A lot of people, a lot of investors don’t want to have to deal with that hassle. Um, but I had a conversation with the tenant during my due diligence period to get a gauge on if they wanted to stay. And they did they were actually really scared that uh of who I was as a buyer that I was going to come in Maybe as a competing company and kick them out Uh, but that’s not what I did.
I wanted them to stay. They’re a regional landscaping company. Uh, they’re fantastic tenant. They pay their rent five to seven days early every month, and they wanted to stay long term. They even wanted to sign a longer lease. And so I came to a verbal agreement with them during due diligence. And then after I closed, was able to extend them with a five year lease with significant escalations.
They were paying below market. I think they were paying. Uh, around 5 a foot market was, uh, at the time, like 8 a foot. And so I was able to, uh, you know, almost overnight get some pretty significant rental increases from them along with a long term lease. I was hoping for longer than five years, but, um, I wanted them to stay and they said, we don’t sign leases longer than five years.
So that was a compromise that I made, um, So, yeah, so that’s, that’s kind of the story for that. I ended up closing with cash, uh, because, you know, like investors, banks are a little scared off by expiring leases also because the bank is thinking, how am I going to get paid back? You know, six months left on this lease.
What if the tenant leaves? How is the bank? How is the bank going to get aid? And so banks typically You know, with I’m sure some rare exceptions typically don’t lend on a short lease frame, lease timeframes. So I closed with cash. And then, um, I’m actually now in the process of refinancing that property now that I’ve got a long term lease.
And so that’s, I think, a really nice blueprint for a lot of these value add properties. If you can close with cash. Add value by extending the lease, increasing rent, and then refinancing your money out. It’s kind of an industrial burr. So you can do that with a single family home, but then you can also do it with commercial assets as well.
Mike Zlotnik: Yeah, this is very cool. I appreciate so many great nuggets, uh, and, and really, I wanted to point out that the, the things that you, you, you, you stressed, the value of the asset and the bank’s confidence to loan on a property like this is a function of a few things, and you mentioned these things, is who is the tenant, credit quality of the tenant, obviously lease duration and lease escalation clauses, and, and, uh, obviously the lease market or below the market.
And that’s a very simple, but very powerful way to think about it. And the fact that you can pick it up at sounds like you picked it up at 60 percent of the market lease, more market rent, we’re able to buy it and then increase and lock in a five year term and take it to refi. It’s a. You know, it’s a great strategy.
So, uh, most certainly a classic example of a small, uh, triple net, I guess, industrial that can work really well. And, um, you, I guess you just found this property on the market. I assume this wasn’t a, a private listing just kind of, you know, being listed there and it took a little work to, uh, figure out this was a good deal. Right.
Jonathan Hayek: Yeah, exactly. And the seller, you know, I got feedback after I went under contract and the seller said they liked that I had cash. Uh, so, you know, we all know cash is king. And so if you’re able to, and these are small deals, you know, this is not a 40 million apartment complex. And so if you’re able to do these smaller deals and close with cash, even if it’s someone else’s and, um, you know, you can.
Have a real competitive advantage if you feel good about the property. So yeah, that deal was on market. The next deal I did after that, I closed it in this past January. That was off market. It was brought to me by a broker. This broker had just sold a couple of my properties. I was looking to 1031. So he was aware that I had cash to, uh, to spend and he knew what I was looking for.
And so, um, he. Brought a deal to me. It’s a glass manufacturer. They make, uh, make and install windows and windshields and shower doors, that kind of stuff. And so he came to me and said, Hey, you know, that BNW glass building, I think that’s available. Do you want to look at it? And like, Yeah, sure. So, you know, that was another really similar one.
They had like nine months left on their lease when I closed on it and really similar, really below market. And, um, so I was able to extend them for two years. They had a two year option in their lease. And so the best I could do was two years at that point. So, um, I did and, um, their, their, their extension was at market rate.
So I was able to, uh, Bring them up to market rate, which was about a 20 percent increase overnight. And, um, I can continue to add value. I’m hoping that after their two year extension, they’re going to want to sign another long term lease. It’s a quality property in the middle of town. That one’s in Cheyenne, Wyoming.
And, um, infill location. So, um, you know, you really can’t find properties like this. You can’t build properties like this in the middle of town. So great location. And, um, you know, what am I. Big lessons from getting into the commercial world. There are tons of them, but it’s just the amount of time stuff takes when you’re, you know, doing a single family home or a fourplex or something like that.
You can add value pretty quick. You can find tenants for a fourplex pretty quick and refinance in six months and, and get your money out. And you know, that’s a, that’s a pretty good game plan, but with commercial properties. It takes longer, you know, some of these leases are really long and so you might have to wait a year or two or longer to sign extensions and, um, you know, when you’re working with business owners, sometimes the decision maker is not on site and the decision makers in another state.
And so it, you know, it can take time to work through these things, but, um. You know, it’s just a different beast. And so, you know, that’s, that’s one of my real learnings from getting into the commercial world is just expect things to take a little bit longer than the residential world.
Mike Zlotnik: Yeah, I appreciate that. And for sure, commercial, you’re dealing with a little more sophistication, although small. Uh, organizations are not your, um, you know, you’re not doing 100, 000 square feet industrial. Uh, that’s very different on judicial quality. Of course, at that point, you’re dealing with lawyers, uh, to the nth degree. And of course, uh, it’s very different, um, discussions.
And, uh, the fact that it takes a little longer, it’s not really a problem. When you have a tenant paying tenant, it’s usually a good thing. But quick question, what are cap rates? What kind of cap rates were you able to assuming? So let’s quote this for you. What did you buy them at versus what did you, uh, kind of, uh, re lease them at or, or, uh, sign them at?
Jonathan Hayek: So that Oklahoma City deal, I think I bought that at about a seven and a half cap based on currents. So that was a seven and a half cap with rents that were pretty low. 30 percent below market or so, so
Mike Zlotnik: went to over 10 over 10 cap or
Jonathan Hayek: something like that. Yeah. Once, once rents are at market, it would, you know, it’s going to come to an over, over a 10 cap rate.
And so, you know, in hindsight, that was my first, you know, industrial deal in hindsight. Do I wish I could have done a little better than a seven and a half cap? Sure. An eight cap eight and a quarter cap would have been great, but you know what? These are long term plays. And so in five years from now, when I’m looking back on this deal, um, you know, I’m going to try not to cry over 20 grand that, you know, I paid seven 50 for it.
So if I paid. Would that be better? Of course, but in the long run, it’s probably not a huge deal. And then same thing with this other deal, the glass building in, um, in Cheyenne, I think I was at about an 8. 2 cap on purchase and That’s probably about right for this asset and, um, you know, when you get to expiring leases, the cap rate, some brokers will say, well, the cap rate doesn’t really apply.
We have to look at the price per square foot. And so the, the values get a little, uh, I don’t know, muddied or, you know, it depends on who’s looking at it because Yeah. When you get really low rents, then you start analyzing it on a price per square foot basis. And you’re like, well, the rents are super low.
And then it’s like 35 a square foot to purchase. We can’t sell it for 35 a square foot, but then if you bring it up to 50 or 60 bucks a foot, then, you know, the cap rates at like a six. And so then as a buyer, you’re like, I can’t pay a six cap for this. And so, you know, there’s, then there’s, you know, a lot of negotiation involved and you’re thinking about.
You know, who, who’s going to be the buyer for this when I go to sell it? And, um, how fast am I going to add value? And so, um, it’d be nice if things were, if you could only use a cap rate and things were that straightforward, but sometimes with these assets, things are not always as straightforward as simply a cap rate.
Mike Zlotnik: Yeah, that’s, that’s a great point and, uh, I’ve seen this again and again, commercial real estate. You can’t always, on a value add project or a project that doesn’t always trade at the, uh, at the right current lease or significant, I don’t know why, increase is possible through all the work. You have to trade it per pound, as they call it.
It’s not a pound, it’s per foot, that, that, that this stuff on a reconstruction basis would cost much more to reconstruct. There’s another way to look at this. If you were to build new, what would it cost you per square foot to build, versus you have an existing per square foot, um, then you, you’re effectively, uh, pricing it as a discount to the construction cost.
In, in, in commercial real estate, there’s really three methodologies, right? You have the income approach. The COMS approach, and then the COST approach, if I remember from my good old days of, of, uh, learning this stuff. And COST approach is actually very legit. It’s a very legit approach, uh, of price per, per pound, so.
Uh, next, just to continue your journey, so you, uh, what are you looking for next? Um, Are you still looking for these similar deals? Uh, and then, what I really like about what you just kind of picked up on, these deals are trading at a pretty decent cap rates. They’re much better than multifamily, much better than storage.
It’s a different play there, of course, but you’re picking it up. You’re cash on cash. Uh, is meaningfully better because of a higher cap rate, but you’re financing that more or less still bank money, right? Ideally when you do a refi when you have a stabilized lease and you can refinance you’re still going to the bank You’re still going with an asset that you can get decent leverage on and just curious What kind of leverage do you get? Do you get 60 percent leverage? Do they go a little higher?
Jonathan Hayek: It’s going to depend on the lender. It’s going to depend on the, uh, the lending environment and, um, you know, and, and the tenant and the lease I’m getting quotes. And as I’m going through a refi and talking with lenders, they’re quoting me 75 to 80 percent LTV right now
Mike Zlotnik: on the cost basis or on the as is value.
Jonathan Hayek: On the current appraised value.
Mike Zlotnik: That’s that’s not bad at all. That’s actually pretty good.
Jonathan Hayek: So if you’ve got, if you’ve raised rents and you’ve got an effective 10 cap and you get, say 7 percent bank financing right now, those are pretty decent cash on cash returns. You’re going to be probably in the 13 to 15 percent cash on cash returns.
And hopefully you’ve got some annual escalations in there. And so, yeah, I mean, they’re. These are trading at higher cap rates than multifamily. Um, but. Yeah, and there’s, you know, there’s some, there’s some risk there, there’s some lease up risk, but you do have to learn, you have to research, you have to know what you’re doing, you have to know your markets, just like anything, and you can get burned with a vacant building.
I, I don’t buy vacant buildings. I, right now, I like, Leased buildings to quality tenants and quality tenants that want to stay long term. And so I think that’s a way to to hedge your risk with some of these properties. And, um, yeah, you know, you asked what I’m looking for. I’m continuing to look for these properties.
Um, I think finding properties with expiring leases with six months left on the lease with a tenant that wants to stay. Those are rare properties. Those, those two deals that I bought, the seller was retiring. The seller didn’t care that they could make more money if they extended the lease or if they raised rents, they didn’t want to do that.
They’re ready to retire, go sit on the beach somewhere, go play golf. And so these types of deals are hard to find more of what I’m finding. Our deals with maybe a year or two left on a lease. Maybe there’s a year left on the lease and they have a three year extension period, um, or, you know, a three year option.
And so those are longer term plays. It’s just going to take longer because if they exercise their option, you know, it could be three or four years before I’m able to raise rents, but I could do, um, something like a blend and extend. Where I, um, offer them some potential concessions in exchange for a long term lease, because a lot of these tenants are scared of losing their property.
They know that it’s hard to find a property and they know that rents are going up. And so a lot of these tenants, if they can lock in. A predictable rent for the next 5, 7, 10, even 15 years, they might go for that. And so that’s another play that you can do is, um, even if they’ve got two or three years left on their lease, try to extend them for 10 years.
Um, and, you know, in exchange for maybe they get a free month of rent or maybe you just start with, hey, if you wanna have some certainty of having. Uh, you know, your building and your place of operations locked in for another 10 years. Let’s just sign a new lease right now and get it taken care of. And it’s a win win for everyone.
Mike Zlotnik: Yeah. Great wisdom. It’s, um, uh, just recently I had another guest on a podcast. They do larger industrial leases and they don’t, Do brand new buildings. They actually, like the same idea, existing tenant, usually single tenant, which is the best, what they do is a, is a buy lease back type of a environment where they buy it from the owner who, um, it’s, it’s a different story, but it’s a lot of similarities from the point of view that you, you want existing committed tenant, ideally.
They want to stay there. Uh, and for some reason, uh, it’s just a lease negotiation and, and, uh, some kind of extension. So a lot of great wisdoms. How would folks reach out to you? Uh, and before we do that, any best book, any best advice, any other quick, quick thoughts? And how would folks reach out if they wanted to learn more about industrial or just chat with you about anything they’d like to chat?
Jonathan Hayek: You know, one book that got me really interested and, uh, in commercial real estate was, uh, Brian Murray’s book, crushing it in apartments and commercial real estate. Um, so it’s a book that’s not talked about a lot, but Brian Murray’s an awesome guy. And that book goes through larger multifamily properties.
He also. Talks about some retail and office properties. And so it, I first read that book when I was still dabbling with small multifamily. And so that book really got me thinking about the commercial world. And so that’d be my book recommendation, crushing it in apartments and commercial real estate by Brian Murray.
If you want to reach out to me, go to my personal website. That website is jonathanhayek. co and you can, um, on that website, you can see a little bit of my portfolio and there’s links to reach out to me if you choose to do that.
Mike Zlotnik: Thank you, Jonathan, for coming on the podcast. Thank you for sharing. Very, very cool story. Enjoy Colorado and, um, good luck with the next set of industrial acquisitions. Hopefully you find some awesome deals.
Jonathan Hayek: Yeah. Thanks for having me.
Mike Zlotnik: Thank you.
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