Today, my guest is George Pino. George is the CEO of Commercial Brokers International, a full service commercial real estate firm, headquartered in Los Angeles, California, with over 27 affiliate offices around the US. And in just a minute, we're going to speak with George bout Keys to Getting Started Investing in Commercial Real Estate in 2023.

J Darrin Gross

I'd like to ask you, George Pino, what is the BIGGEST RISK?

George Pino  

Biggest risk? Um, I'm gonna answer that as the biggest risk I see for investing in real estate when you're just getting started. Because that's kind of what we're talking about as well. And the biggest risk there, I think, is, we see this happen a lot. And you'd mentioned like jumping on the bandwagon. You know, I'm constantly getting calls and our offices getting calls over the last month and a half about adaptive reuse for office space. And yet people have no clue what that is or what to how to go about it. But they hear about it, and they read it and I want to do this not understanding the whole business of it. And that right now, at this point, it's just too cost prohibitive for the most part. It may not be especially if the government's come in and give some incentives. So you know, I think one jumping on the bandwagon but I think that correlates into the ultimate answer, which is not doing your homework or due diligence ahead of time. Just here's my investment money. This is what I heard was going to happen. This is what I'm going to do. You know, I I think the program that you're looking at, you're talking about as far as an insurance company, you know, identifying the risks, mitigating the risks, transferring the risk, absolutely correct in any type of aspect, and investors should be looking at that as well, you know, identifying what the risks are, and then mitigating and we're transferring it. Part of that is also not understanding what's going on in the future or reading that. And, you know, we don't have crystal balls, I don't have a crystal ball, no one has a crystal ball that I'm aware of, was at the Magic Castle a few weeks ago, they had a crystal ball there, but I don't trust it. So. But when you're looking at the future, though, you can still kind of see what's happening, you know, what laws are going to come into place, you know, if it's going to be a headache, if you know if you know, right now there's, you know, insurance industry, at least in Southern California, we're having some issues, you know, there's a lot of carriers are pulling out of California. And that's going to cause an increase in your insurance rates. Now, if you're in a single tenant net lease or net lease property, sure, you're looking at what the tenants are going to pay for that. But you have to think a little bit further, if your triple net expenses are too high, and they're going to offset by trying to lower the rent. So it can't just be a complete passer, you have to think about what's going to work for everybody. And also, the last thing you want is to pass through expenses that cause your tenant to go out of business. So you have to really think about how to go about that and how to plan for that action. And a lot of people don't don't really think about that. I mean, speaking of insurance, I just got a insurance person, I had a company that just denied insurance on a property because the neighboring property had too many homeless people based on aerial photos. So the insurance companies are getting very picky and pushing and that's been an issue. But you have to understand that going in if you're investing that this is going to just be part of my investment strategy here my expenses, they may be this today. But in reality after I close escrow, it's going to be here, and a lot of people don't really look at that and have a plan for that action. They're just kind of looking at that snapshot today. And I think that's the biggest risk that they have if they're just not taking the whole picture in.

Today, my guest is Scott Lyons. Scott is with the global commercial construction firm DPR. And that's where Scott is the national commercial core market leader where he is directly responsible for understanding the needs of DPRs customers and delivering predictable results. And in just a minute, we're going to speak with Scott about leading your commercial construction team through these volatile economic times.

J Darrin Gross

I'd like to ask you, Scott Lyons, what is the BIGGEST RISK?

Scott Lyons   

So I think the biggest risk for us Darrin is is is making decisions around in kind of moment of duress, and let me kind of explain what I mean there. So what you won't get imagine that, hey, you're going into a recession will or we think there might be a recession? Maybe it's soft landing, who knows, but guess what interest rates are up there and a whole lot of is many projects opportunities out there, we better sell a bunch of work. We better just, you know, be the squirrel that goes out and just grabs, you know, every night that we can. And that rarely works out. And so what we're doing to mitigate risk really, Darren is just like, radically just discipline decision making. And so in other words, don't go out and overextend ourselves, don't go remote, don't take on projects, for customers whom we don't know. And because histories, you know, history is a great teacher, and just a lot of times that doesn't work out. And so what we're trying to do is, stay the course, be disciplined, make great decisions, work with customers, whom we just value and really can deliver for and who wants to, you know, and that's, you know, the risk is just panicking. And so we're not, we're not going to do the opposite of that, and just stay steady. Because of the macro factors, you know, of interest rates and economy, hopefully, this debt ceiling deal gets, you know, done by Congress. We can't control that, but we can control our decisions.

Today, my guest is Bruce Mack. Bruce is an in demand national speaker real estate investor involved with over $90 million in transactions. He's an author and the founder of platinum trust group has a licensed financial advisor at trust expert, Bruce empowers investors to achieve significant tax mitigation plus bulletproof asset protection through his proprietary IRS compliant trusts. Over 80% of his clients are real estate investors, ranging from owning just a few doors to over 3000. He educates on the ideal alternative solution to 1030 ones for capital gains treatment, as well as the best entity for holding assets that hands down are superior to LLCs, or corporations. Bruce has an exceptional relevant training for newbie investors as well as seasoned pros with multimillion dollar portfolios. And in just a minute, we're going to speak with Bruce, about how a trust can protect you and your assets, provide tax mitigation and help you transfer your wealth to the next generation.

J Darrin Gross

I'd like to ask you, Bruce Mac, what is the BIGGEST RISK?

Bruce Mack  

I think, for me and for my clients. undoubtably the biggest risk is to not have a trust because the the exposures that are out there in today's litigious environment are so massive that you unfortunately, if you don't have one, you could be wiped out. And therefore, without a doubt that would be my my direct answer.

Today, my guest is Ran Eliasaf. Ran is the founder and managing partner at Northwind Group. Ran founded Northwind Group in 2008. And oversees all company investment activities across its equity and debt strategies. Today Northwind group has over $3 billion in assets, assets under management. And in just a minute we're going to speak with Ran Eliasaf off about the rise of office to home conversion in commercial buildings.

J Darrin Gross

I'd like to ask you, Ran Eliasaf, what is the BIGGEST RISK?

Ran Eliasaf  

Our biggest risk is determining the value of the collateral we're lending on? It's never a scientific answer. You can get all the appraisals, you want third parties and all of your internal knowledge. But eventually, a value of an asset is only what somebody else would be willing to pay for it as a term at a certain point in time. So we spend a lot of time on the writing and diligence thing and trying to determine what's the value and then what's our LTV, what's our loan to value. And that's where we focus most of our engine, that's the biggest risk, because if you gave a loan and you find you're at 50%, LTV, and then you realize you're at 80 or 90, then then that's that's a big problem. That's a big risk. What we do to mitigate that risk, first of all, we lower their LTV. If you know two years ago, we learned that 65% LTV, now we're more around 54% LTV to we kind of focus on asset classes that are less volatile, like residential in New York City where there's, you know, yeah, prices can shift. But the chances of, you know, the value of residential in New York dropping 50% is less likely than it is for an office building, for example. And that's where we're the biggest risk for us. And that's where we focus on.

Today, my guest is Fernando Angelucci. In the past four years, Fernando has built a real estate portfolio of over $200 million and self storage assets across the country. And just a minute, we're going to speak with Fernando Angelucci about investing in self storage.

J Darrin Gross

I'd like to ask you Fernando Angelucci, what is the BIGGEST RISK?

Fernando Angelucci  

So I would answer that with actually there being three things that we look at in our business. So the first being compressed cap rates, the second being oversaturation of given markets, and the third being reconnaissance competition are basically competitors, they have unlimited capital. So let's let's dissect each one of those press cap rates, has been an issue in the storage space for the last 10 to 15 years. That's partially because of just the easy money policies that we've been in for last 10 years, and that capital needing a home that has yield, but then also the fact that self storage used to be kind of this ugly asset. And if you weren't getting a 15% cap rate, day one, you know, what were you doing, then all of a sudden fortune and Money Magazine start talking about it as an attractive alternative asset, and that cause this floodgate of institutional capital come in compressing all the cap rates. So because of that, it creates a very competitive acquisition environment. And it also creates an environment in which middlemen can strip a lot of upside, aka brokers, right. So one of the ways that we decided to mitigate that was to shift our business from retail, aka buying on market to off market acquisition strategies, where we're the only one at the table. And then to switch from acquiring stabilized assets to only buying value add or building self storage, where we can force a ton of appreciation. So that was one of the ways that we were able to mitigate the compressed cap rate environment. Now, recently, with interest rates, increasing at such a high velocity, we've had this mismatch between sellers and buyers, or sellers still think their facilities are worth what they were in 2021. And buyers looking ahead and and saying, hey, well, you know, my debt service coverage ratios are not gonna allow me to Buy at your price. So one of the ways that we've gotten around this is by saying, basically getting creative. If you want the price from March 2021, I want you to carry the financing at rates and terms similar to what was available to me in March 2021. So that's one of the ways that we get around the compressed cap rates. A lot of people don't realize that the price is only half of the equation, the financing around. That asset is also a huge component that basically no one ever looks at, I'm willing to buy your property at twice the going rate if you give me a 0% 30 year loan, because then I'm still paying the same amount I would have if I bought it at the going market rate with the going market capital or financing structures. So that's how we overcome compressed cap rates. The second piece is the problem of oversaturation. Because of this rush of institutional capital, you see these land grabs occurring where larger operators are trying to basically stick a flag in a market. The other piece of this is that you're seeing a lot of investors switch asset classes because of the construction costs, you know, storage produces roughly the same rent per square foot that multifamily gets. However, to build a Class A multifamily facility you're at 400 $450 a foot were to build a Class A self storage facility that gets similar rents. You're at 100 In 20, to 150 bucks per foot. So you have this, this transfer of capital and investing pressure coming from different asset classes. And that's causing a drop year over year and in the sort of supply index numbers. So the one way to mitigate this is the importance of underwriting and getting third party feasibility studies to make sure that you're not wearing rose colored glasses, and to truly deep dive into hyper specific markets where you're looking at all of the competition and a five mile radius and seeing if this area is saturated, versus the five mile plot down the road. And then the last piece, of course, is is the REIT competition, they have basically unlimited capital that is needed deployed, they've raised a lot of equity, a very cheap cost, they've raised a lot of debt that is long term at very cheap costs. And typically, they have a longer investment timeline than some of the smaller counterparts, you know, when they're investing in 30 year horizons, I'm usually investing on five to 10 year horizons. So that means that they can usually stick it out and drop flags in a market that right now doesn't make sense. And they're willing to lose money on because when the population moves in, they can take and be the first ones to take advantage of that. So there's a few ways to get around this, you know, the first is to avoid, you know, downtown primary markets, you know, don't build in downtown Miami. And as opposed to doing that, go to secondary or tertiary markets, or go to the, you know, the suburbs, or the exurbs of some of these primary markets, or even some of the rural areas around these primary markets like we are. So that's one piece. And then the second piece of the competition is if you can't beat them, join them. So that's one of the strategies that we employ, in which these REITs they do not have the bandwidth, nor do they want to waste the manpower on negotiating one deal. But if you do all that legwork, and you bring them a 20 property portfolio, now it makes sense for them to use all that manpower to underwrite and see the feasibility of that. So there's the, this, this aggregation that is occurring right now in our industry that's causing a lot of opportunity for those that are willing to play along bet that feeding chain, if you will.