All Forum Posts by: Joel Owens

You are thinking from an INVESTOR standpoint buying multiple properties a year or every other year based on NUMBERS.

HOME BUYERS unless get job transferred sell or buy a house maybe every 5 to 10 years. So often there is a big gap in changes since they lost sold or bought with forms and how the market is. For that they want a local specialist and not a computer because it's an emotional decision for them. Different worlds. That is why companies have been trying to cut out the broker and agent on the residential side for decades and it has not worked. You get a small percentage of the FSBO and others that try it but not mass adoption. That's the flaw in trying to automate everything that involves emotional thinking and decisions especially home buyers.

AI will first replace basic jobs.

Think of ordering a t-shirt etc.

Those with ultra high net worth will want to pay for service as they have no time to do it themselves.

So even fast forward 10 years from now those with lots of wealth even if they made it on youtube will most times be smart enough to know they need an expert to help them grow the money in other asset types or industries they are interested in.

So the major masses will adopt AI and the consumers on the budget will use it.

As an example someone pinching pennies will use a budget pest control service. For that service to be 20 dollars less a month they use a phone tree that requires outsourcing to other countries to answer and sending them to an information web black hole to spend endless time finding what they are looking for.

Then you have someone like me that makes up a very small percentage of the population in income and wealth. My times is worth about 3,000 an hour. So I will pay an extra 20 or 30 a month to use a local company with very high service where immediately someone in their office answers the phone and my issue or scheduling is resolved in a few minutes. Those monthly hours and frustrations I save by paying more saves me time, improves my quality of life, and makes me more money in time savings per hour.

The masses living by credit cards want service so cheap those companies have to use AI and automation to make the numbers work.

Millionaires today in U.S. about 14 million so still small compared to overall population.

I think residential will automate more over coming decades versus commercial. Commercial on a transaction you can have thousands of pages to review. If you talk to engineers and AI companies that also build robots they say the very complex tasks are many. many decades away from semi-automation. There will be more data drive AI collecting data and putting in formats but humans still using it and interpreting it to make final decisions. They are using AI as grunts but still have to check the data.

Purchase and ordering, restaurants, self-check out that kind of stuff is more main stream and growing.  

You know how many times in 20 years of doing real estate I have heard the sky is falling the fees are too high and so and so company is going to replace brokers and agents because fees are high? Hundreds of times and I have seen the discussions on here dozens of times.

The discount companies often do not care about consumers because they make it up with VOLUME.

To do volume generally acceptable standards of service have to fall. Now some can build in teams and still maintain a decent quality per transaction but much harder to do.

There is a human element to real estate that consumers crave when making one of the biggest investment decisions of their lives.

Maybe one day in 20 to 30 years AI will become so mainstream and the younger generation will embrace it as a normal way of doing things.

My research has shown talking with thousands of millionaires over the phone the last 2 decades wanting to invest in commercial real estate that technology adoptability on average varies by age.

Lots of 70 and 80 year olds have snail mail only. Not saying all but a big percentage.

50 to 60 year olds might have a cell phone and be on the computer

30 to 40 year old familiar with zoom meetings, texting, cell phone, computers

kids to 20 year olds embracing group text, videos, all emerging technology etc.

Of course this is not an absolute but in general as the age goes up the use of technology goes down.

I could retire today if I wanted to and live off of the money the rest of my life. 48 years old now.

Any industry out there has a certain golden age run up where those get in with the right timing and determination can do something magical. After that arc that industry is just like an inflated stock it gets diluted with too many people jumping in. Now the next culling of the herds and up wave if the specific industry has one can present future opportunities again to capitalize on.

What I do is instead of focusing on volume I focus on quality.

Maybe I do 15 transactions a year but each deal is six figures income. Often these buyers are investing life savings from decades at a job or their own business. They might have sold the business and now want to plan for retirement passively. They do not want the discount broker they want one of the best in their field to put odds in their favor of buying a good investment.

Since I am already wealthy I can tell them what I really think about a potential investment whereas the brokers needing that money in the moment to do a transaction struggle with paying their bills versus being completely open about what they think with an investment. Sure there are some without money the brokers and agent starting out that have integrity but odds generally better with those brokers and agents that do not need the money to survive.

I just do not see someone saving up 5 or 10 million to invest and then having a computer spitting out a formula telling them what to do. They want to talk to a real person that has decades of experience and a specialist in such a space.

Recently I had a residential agent friend and others using AI now to doctor up photos and make them look better. I strongly disagree with that today using tech to create fake worlds and personas just to try to get business on the basis of a deception.

Instead be authentic with all of yourself and put yourself out there. When people want to work with you the connection will be real and hopefully long lasting.

If you are just like all the other brokers and agents out there then expect the same results. You need a differentiator, an edge. Something that says ( Hey I am special to work with ). People then engage you on services offered and not on price.

Between being selective on clients and making my own investments my net worth grows 7 to 8 figures each year. I do not need all the clients just the right ones for my business model. When agents are first starting out they tend to have little direction and knowledge. Same thing with buyers which is why new agents and new buyers to a space often can have disastrous results without proper guidance.

I do agree barrier to entry should be much higher than what it is. Last down cycle I think 1 million agents just about left the space. Most do maybe 1 to 2 deals a year with clients and then personal investments.

Lots of them do not make the commitment to excellence which is why they never excel to their potential. Instead they swim in mediocrity which is a majority of the public at large these days. They are doing the minimum and expecting a maximum result which is why they are often disappointed wondering aimlessly through life wishing for dreams that never come to be. 

There can be no plan B. If you have a plan B you have already accepted failure for plan A you are just waiting for it to happen. That makes you give minimal effort and say (see it didn't work). If instead plan A was the only option or you lose everything then you have to get real with yourself and put in maximum effort to try and be successful. Not every endeavor in life will be a massive success but not trying you will always wonder what if.

The first million I made was very hard and a lot of sacrifice. When you make the first million the hucksters come out in droves ( think of marketing people telling new businesses that have just opened what the latest and greatest thing is to spend money on ). They try to separate you from that million because they know those worth 10, 100 million won't be as easy targets and will tell them to F'off. 

Keeping that million and turning it into multi-millions, tens of millions, hundreds of millions takes a different skillset.

People will still be talking years to decades from now about this topic. No matter how flat a pancake it forever has 2 sides. 

It's not a perfect system the real estate but it's a pretty good one. No system is perfect in any industry, any government, etc.

People went from industry standard words to normal now. There is no normal. 

I could drive down the street and find 5 different burger brands all charging close to the same price for a cheeseburger ( one is awful, one is okay, one is amazing). They all charge similar price because costs are about in same range to operate but the QUALITY of the product and service varies.

So consumers go out and research when they want to make a choice or decisions and THEY decide what to spend their dollars and time on. They own their decision because they did the research and made the choice. Sometimes it might work out how they want, other times differently, other times not at all.

Commissions are not FIXED nationally. It's a free market. If that seller wants a certain companies services they can AGREE to the percentage, try to negotiate it, or walk away.

With a free market I as a commercial broker and owner of my company can get out of bed everyday and say ( I am not working for less than X percent ). The other potential clients can go elsewhere. 

Brokers in the business a long time are in demand from those that want to pay for the best. There will always be options for cheapo customers. That's why some pay up for a Ferrari and others drive a Hyundai.

I disagree on the higher prices are less work. The more you go up in price the more smaller the buyer pool gets. You have to work harder to find the buyer that will pay the price the seller wants. In lower price ranges the buyer pools tend to be larger and many pay cash. Those buyers are not having to do 1031 exchanges most times.

In residential as an example the higher end houses tend to sit on the market longer and more of them do not sell at all. So those brokers and agents often eat very high marketing and open house costs and hope to profit out in the end just like an investor would have investments that break even, lose money, make some money, and do really well. The buyers of the move up houses often have to sell their house so makes for a more complex puzzle the broker has to solve.

This forum is more investor based where purchases are made more on numbers than emotions. For a family choosing to live in a home it is numbers based to a degree but more emotionally based purchase.

I have been in NNN as a principal broker and investor for almost 20 years now. I own properties nationally.

Traffic count is decent at 20k plus.

1/2 acre now is tiny site. Most tenants now want 1 acre plus for double and triple drive thru's. 100k rent is pretty high for 1/2 acre ground lease.

You need to assess the franchisee coffee tenant and their ability to pay over time. Lease it theoretical and could be for 100 years and means nothing if they go dark in a few years. You want personal guaranty, required updated business and personal financials every 4 months or so, and business guarantee covering ALL of their franchise locations. Make sure you attorney is familiar with NNN properties because I have seen attorneys make tons of mistakes with the leases.

Rental increases every 5 years is usually reserved for the Starbucks and Chick Fil A's of the world. Franchisee you want increase every year to blend yield up faster. Any investor wanting to buy your ground lease later with just an okay tenant will want to see max yield every year on the investment and a slightly higher cap rate with purchase price to offset perceived risk.

You need to know average ground leases in the area per ft. Typically ground lease is much less per foot than absolute NNN. You want that ground lease rent way under NNN as a buyer so that if property goes dark you have upside. You owning the property already not a main focus for you. I think clients always tend to look at what they get NOW for cash flow versus what value they get on exit if they ever want to 1031 exchange out.

The rental increases could be set to annual and to the greater of CPI up to 5% a year or 2.5% increase whichever is GREATER. That way you have a higher inflationary year you get more yield.

The tenant is trying to get the best long term deal for them. You need to know how desirable your site is in the area. The strength of your site will tend to determine how much you can push the tenant on terms.

Another option is to tie in ground rent at say 100k but then tenant pays bonus rent above a certain annual sales number per year. That way if they do really great at the site so do you. The rent still increases each year that's just a bonus. Again the tenants like to find unsophisticated landlords so they can take advantage.

The weaker your site ( C site example with just a few bites interest) versus an ( A site with 8 tenants rushing to win the site ) tends to weaken the chances of getting them to agree to your terms.

They might be high in your mind.

The majority of agents work for scraps.

The awesome brokers and agents can pick and choose who they work with because of their track record, exceptional skills, depth of knowledge in a specialty type of real estate.

Example I can tell someone with 25 million cash to get lost if they do not want to sign my agreement and go through the qualifications process. They are not forced to do anything. They can simply walk away and I can also walk away and choose not to work with them. I do not need every potential client just those that work well for a long term relationship where both parties respect each others time and skills.

When a broker or agent is already wealthy they can define when they will work and with whom. The first goal of a broker or agent should be to work for a plan that eventually gives them enough passive income to not have to live deal to deal.

Other countries are not the United States. Quit comparing apples to oranges.

I can't speak to FNRP what they pay etc. as I have not invested with them.

I CAN tell you that I have heard from some of our accredited investors that have invested with us that they have other investments into multifamily and other syndications with different GP's where those deals are going south and the operators are asking for capital calls and restructures.

This is why I like small ball properties where we buy for CASH. I do not want to be a slave to the interest rate market and debt cycles when trying to reposition a property for upside.

WHY do syndicators use debt then? They mainly do it because they need big syndication aquisition fees going in to keep making payroll. By making equity raise small and max leverage they try to pump returns with tax savings because the cash distribution is so poor so tout overall returns ( think of Wal-mart touting overall pay for employees at 30 an hour when most of that is covering some insurance and other benefits type fluff versus what someone would take home on a check). By making a big fee going in on a larger property they manipulate smaller pref and split to themselves hoping the investment pans out over 7 to 10 year plus holds.

Some larger deals can be great but on value-add stuff I am typically debt adverse. 

We are usually in an out in under 3 years on our deals. Long term deals that take 7 to 10 years plus you are more at risk for economic cycle shock and interest rate shocks to exit and the right time. Our smaller properties tend to always have buyers for passive NNN single tenant properties and most pay cash so are not really debt cycle affected. Small blips in market but not massive shifts like other asset classes.

Mainly 4 types of client buyers I have right now.

1. 1031 buyers converting active assets like SFR and apartment buildings like NNN with long term tenant with primary lease and investment grade credit.

2. Those buying to mitigate year end taxes for the 80% bonus depreciation.

3. Those that just make a ton of cash from owning their business or from their job and want to invest into SOMETHING SAFELY instead of sitting in a bank. These are often people making 600k to millions a year or higher in income but live 100k to maybe 200k lifestyles and invest the rest.

4. The buyers sittings on tons of cash waiting for market to change ( yield buyers ). I have many of these also under exclusive agreements. They might be sitting on 50 million, 100 million cash just waiting for right time to deploy in cycle. They care less about the cash flow in the moment but CYCLING up the equity multiple to the max.

Dollar Stores often instead of renewing the lease get sucked away to developers promising to build them Dollar Plus stores with upgraded construction for slight rental increases.

Especially is absolute NNN lease the DG could jump ship to a brand new building and avoid tons of TI costs they are on the hook for with older building ( parking lot, roof, A/C, etc.)

Professional tenants with thousands of locations tend not to be dummies. Don't get taken advantage of with a developer, regular seller, or tenant with the lease on a NNN property. There are great properties out there you have to be selective and diligent with your process and have patience.

5 cap DG is crazy with 6 years left. In rural area those go for like 9 caps because area is so rural you are buying fixed and flat yield for the primary lease term and then building and dirt have very little value long term.

Think area with 10,000 people in 5 mile radius. They say area is booming...lol and 20% growth. Now you have a whopping 12,000 when lenders want about 50k in a 5 mile radius minimum.

Now if an area has 200k in 5 miles and growing by 15% to 230k with affluent area that can be a positive.