The Psychology Behind Winning Commercial Real Estate Deals

0:00 Commercial isn't no emotion. There's emotion it's but it's different. Tell me that you're working with a family who is taking their entire life savings, taking a second mortgage on their on their home because the mom's dream is to go start a restaurant. Tell me that's not an emotional transaction. Every bit of that is emotional. Then when you go out there and you support them and you realize mom can't cook, it's the true story. Then what are you doing six months later when they're closing down and they're calling you like, what did we do wrong? What happened? That could be me, that could be my mom, you know, that could be my wife. But us doing the same thing that the motion is there. Where did you come from and how did you get to 1 billion in commercial real estate transactions and counting? Right.

0:41 And counting's the important part, right? If not, I may not have a happy wife at home. I kind of came at commercial real estate completely by accident right out of high school, end up joining the Army, spent some time in the service and had a, what we call a command financial specialist who's typically the guy that tells you don't go and buy the Camaro for 36% interest rate. You have to balance your checkbook and you do have pay a credit card. Those are typical classes they give on basic financial literacy. And he came in and gave a very rich dad, poor dad type presentation about how he was making more money in his real estate investments than he was as an E6 with 20 plus years in the military. And here I am as a young private making 1200 bucks a month and going this guy is normal.

1:26 He's not brilliant. He's a normal guy. I need to go do what he's doing. Like that's how I'm going to build. Well, so I started looking at going in that direction. And when they change the the GI Bill in the military to where they actually would pay you to go to college, I was like, well, now's my time. I'm gonna go out there. I'm gonna get a degree in real estate. I'm gonna be the smartest house flipper there ever was. And I was gonna go Commission back in the Army and live like I was a living, like I was enlisted guy, end up going to an undergrad program in real estate, started learning there was this thing called commercial real estate and had no idea that was even a thing. I thought the government owned shopping centers. I had no idea, right? It just wasn't anything. It was on my radar and just happened to get lucky to get paired up with a, you know, small family office.

2:06 He was a fraternity brother needs somebody to answer the phones. And I started to answer the phones and then he's like, well, you're not dumb. Here's a lease, here's a management agreement, here's tenant relations. And then next thing you know it grew into, you know be starting off on the commercial property management side of things. OK, wait, First off, thank you for your service. Did you just say this happened in Iraq? Yeah, it was. It was kind of an after after work kind of thing where I think I was working the the like the overnight to morning shift. So right about lunchtime was when we broke for the day. So he had, it was say 1:00 something like that. He did a class and me and my roommate both were like, hey, let's go do this. Let's go sit through it. Let's go learn something and and see this whole real estate investing thing so literally in, you know, just outside of Baghdad, sitting in a class learning about it.

2:55 You got to keep, you got to put that part in the initial. That's wild. That's super, super interesting. So I know your efforts in the Army have served you today in commercial real estate. And I want to talk about that because I think storytelling is a really profound way to get a point across. So that's my little I'm throwing the ball up and you're going to hit a home run with me. I know there was an airplane incident. Oh, yeah, yeah, yeah. So in that side of it, it's really kind of formed me as as a leader while we're still dealing with that idea of am I still gonna get out of us, still gonna, you know, trying to go through that, that struggle. I was still trying to work to promote, still trying to do everything because at the end of the day, I still wanted to have the military as my career as we kind of got started into it.

3:39 Part of the process of going to promote is you've got to go to something called the Soldier of the Month board before you do it. And basically it's a trial run before you go in front of your promotion board. So they ask you, what's the effective range of AM/16A4, What is the, you know, the weight of a hand grenade, just all sorts of random stuff that should be general military knowledge. So you go to it. I went, didn't win, but I was pretty stinking close. It was, you know, half a point between me and the other guy and my squad leader knew that was the plan. I wanted to go to to the promotion board after that. And as we're getting ready to prep, about a week or so before I was going to go to the promotion board, he came to me. He's like, look, I'm not recommending to go. You're not ready and you know, at 2223, you know, full of ego and military machismo.

4:26 That didn't sit well with me. I was absolutely floored and furious that how dare you. You don't know me. I know as much as you do. And pride really kind of stepped in in a lot of that. We had an aircraft that had a really weird fault and I was an Apache guy. That's what we maintained was the Apache helicopter. I was an avionics electronics tech. So we had something where suddenly the in flight controls would switch off of the manual push pull rods, but to fly by wire randomly. So you'd be flying normally and all of a sudden he would get a different input and fly somewhere else. And it was just a disaster of aircraft. So we had all the best people working on it. I was like, you know what, I'm going to show him. I'm more than ready. I'm gonna go out there and I'm working the aircraft.

5:07 So I go out there, I talk to the flight company that manages the aircraft basically, hey, this is like 4th or 5th down the list. Like it was going to take four other aircraft to break before we get to it. You're completely fine. Go work on the aircraft. So I get out there, I start tearing it apart. I'm troubleshooting, I'm doing all the things and I'm kind of watching, you know, the blades spin an aircraft, you know, four or five bays over from me and then they stop and then you can hear the crew start moving in the next aircraft. All right, well, that was weird. First one didn't work, that's fine. Second one's fine. Then the next one didn't work. And then the next one, this time I realized, oh God, they're literally an aircraft away from me. I need to start figuring that out. I've got this aircraft completely tore apart. So finally they jump to last aircraft, which is mine that I'm sitting there got tore apart. The crew chief comes and be like, hey, they're going to launch.

5:48 So we're putting everything thing back together. The maintenance test pilot, the guy who was in charge has the ability to sign off on everything, but there's a ton of paperwork legally you're supposed to do put it back in. He blessed it. They got in, they went to go fly off in mission. This is in Iraq. You know that. I still didn't get it. I couldn't fix it. I couldn't fix it in time. Go to lunch, come back, and I'm sitting in the shop and we've got a radio sitting in the shop that we can hear all the aircraft traffic and those kind of things we'll use for troubleshooter and whatnot. And as we got to that point, you know, sitting there, nothing else to do, There's really nothing going on. So we're all kind of sitting there, the shop and all of a sudden we hear over the, the radio, we hear fallen Angel, fallen Angel, fallen Angel. And for us, that was that's code for the aircraft went down. So of course, immediately we all stop what we're doing.

6:29 We're playing cards and chess and whatever we're doing, we stop everything. We're listening to it, trying to figure it out. And the moment that happened, they call it a call sign for the pilot. And I realized that was the aircraft I was working on and my, my gut just dropped, put the aircraft back together in a hurry, doing everything that I, I thought was right. And for me, the first thing was I screwed up and I just killed 2 pilots. It was literally what I thought. And you know, I kind of stepped away. My squad leader was wise enough to watch me and watch my demeanor change very quickly. He pulls me outside. He's like, what's going on? I was like, I was working on that bird. What do you mean we'll go now. So I walked him through everything and he's like, you're an idiot. He said other things, but that's the nice, that's the nice way you put it.

7:13 You're an idiot. Let's just chill out. Let's just wait, let's see what happens. 45 minutes to an hour later. What we found out actually happened was it was actual, it was a missile that actually came up, hit the aircraft. It's the only time I've ever been happy that an aircraft got shot down, right, because it means I didn't kill pilots. Ultimately, both pilots were OK. They they lived, they came out just fine. But I think one of the biggest things I took away from that, especially leadership was that every time that, you know, you get real prideful, you think you know everything, you know, you kind of get knocked down a peg and that humility comes in and you go from there. So there was a, there was a good like 3 months worth of just a whole lot of humility, like, Oh my God, I was almost scared to touch aircraft again, you know, thinking, oh jeez, I, I can kill people with not doing a good job. And from there I got picked up shortly after that. We're like, hey, he's ready to promote, we need to do this. Went to the promotion board first time go the whole 9 yards with all that.

8:04 But that experience is always stuck with me, right? Because as you know, I started going to something make making a change in commercial real estate thinking I was going to be it. I was going to be that, that machismo. And then I got in and couldn't get a deal closed the first several months, man, deflated. And I go back to that moment while it's completely different. I go back to that moment going, all right, I got to be humble and humility, you know, kind of having that opportunity to kind of kick you in the face a little. Bit the risk that you took when you were in the Army, how do you find that apply to your day-to-day today? I believe you said 25 years later in commercial real estate? 15 not that old yeah no, I mean I think the risk is there. It's just different in aircraft maintenance small mistakes or life and death.

8:48 So just coming in that attention to detail is literally in there right. So you know in underwriting you don't screw it up because that attention to detail is bending. Now obviously the deal blows up not you know somebody's life. But I want to say that that attention to detail really comes in there. So even the in the humility side of things. I mean just this last week Monday terrible day cold call and doing all the things I haven't had a worse day in a long time. Tuesday comes through phones ringing off the hook with people coming into me and it was just a complete different day right and especially in brokerage where you're going out and killing what you eat the hour can make complete difference. A matter of fact Monday it was literally five O 5 somebody called me going hey do you do this Yeah, we do. I've got something it's huge. Do you think you can work on it Yes, I will figure out how we're going to work on it.

9:33 But yet the rest of the beginning of that day was just terrible. So that humility absolutely comes in on on a very regular basis and if you get too prideful. I think that's just life going to turn around and beat you down just a little bit more to kind of keep you going. In my household, in my family, the cards have fallen in that you either work in 2 lines of professions, medical or real estate, and both can feel like life or death and both have huge risk, huge reward. I mean, look, you do a smaller transaction and it's the biggest transaction of a person's life, or you do a huge transaction and who knows, you know who's got money in the deal, right?

10:16 It as much as somebody won't necessarily die in front of you, we still have a responsibility. It's like you said, have that fiduciary duty and see your clients transaction through as if it were your own. I share this story all the time when residential agents want to come in a commercial, like I'm tired of the emotion. I'm like, commercial isn't no emotion. There's emotion. It's but it's different. Tell me that you're working with a family who is taking their entire life savings, taking a second mortgage on their on their home because the mom's dream is to go start a restaurant. Tell me that's not an emotional transaction. Every bit of that is emotional. Then when you go out there and you support them and you realize mom can't cook and it's just a true story, then what are you doing six months later when they're closing down and they're calling you like, what did we do wrong? What happened?

11:04 And tell me that doesn't tug on that. That could be me, that could be my mom, you know, that could be my wife and us doing the same thing that the motion is there. So absolutely, there are some of the huge risks that some of these folks take and you're you're a part of it. Out of curiosity and for the listeners, where do you find yourself today transacting most frequently? Are you like product type? What? What do you work on mostly? Most of my career has been in medical office. We've kind of branched out from medical office, of course, come COVID as that happened, what a lot of office transactions to begin with. I've always dabbled in in industrial and I actually was through COVID, was working for an industrial port. So I was brought in as their office guy.

11:47 All of a sudden it's like here is these airfields, here is all this industrial products. So I very quickly became the guy doing specialty office and all the, the industrial side of things as well. So we've done a good bit of industrial, that's where today most of our transactions are generally office or industrial. And then we do a good bit of property management as well. And we, we found that, you know, starting there, understanding how it's supposed to work and realizing there's so much value that many investors lose because they hire terrible property management. Or they hire their cousin or their sister or their brother to do property management, thinking it's easy, only to find that they've lost billions of dollars for the value because they just didn't manage it well. I see that more often than not.

12:30 Sadly. Way more often than not, there's like a stigma with brokers who can't, who have property management. We have a property management company as well. I find it to be hugely beneficial, hugely beneficial to our clients, hugely beneficial to the tenants and to the owners. It's a whole ecosystem that feeds itself, so I vote in favor of brokers who are property managers, but that's just me. I think as a broker who has understanding of property management, it makes you a much better negotiating the lease or negotiating the sale because you understand you're not just negotiating a clause and never going to see it again. You're negotiating a clause that you're going to understand how it's going to impact the tenant 3 years from now, how it's going to impact the owner three years from now, because you have a very different understanding of how that property actually will run. I say this every day, I'll say so I'm blue in the face. Every property is different, every owner is different. Everybody wants a one-size-fits-all answer and you're not going to get it in this business because it's not so simple.

13:29 Will I ask this to all my guests? What is your commercial real estate secret? I think it comes down to being extremely nerdy on demographics and psychographics. But one of the things we started doing in our business probably in the last year and a half, two years is kind of a combination of AI and using psychographics and really sitting down and saying, here is my trade area for this property. Here are my psychographics, their property. Who is the best tenant to actually come in here based off for the psychographics and AI can run a lot of that. And you know, somebody had talked about you can do it. And I was like, whatever, we had an office building, we put it together, we ran it. I just wanted to see how it was going to work. And it first thing it said it basically you need to create the, the market didn't have enough third spaces.

14:10 So you needed a coffee shop, bookstore or something like that. I was like, this is dumb. It's an office building, never going to happen. First 3 phone calls was used bookstores and I was like, okay, we're we're we're on to something here. And and what we've now shifted because of that is that as soon as we get a new listing that is a first report we pull is what is the trade area? What are the psychographics of the trade area? Who are the tenants are the businesses that would likely fit this best? We then run through and look at Nate's codes, get all the businesses that fall into that. And rather than putting a sign and praying, we've got a list of A100150 businesses that would be a good fit here. And now we're calling existing clients looking to look for a second or third space or relocate a space. And we've seen our days on market just shrink simply by getting nerdy and looking at the psychographics of a market and then going after those individuals cause a very different call.

15:02 Hey, are you interested in new space versus, hey, the demographics of this location is identical to what you have currently and there's a hole in the market for your product here. Have you thought about another space? Very different. Call, you know, we talked about the use cases of AI in our business and the use cases of social media in our business. And I think like the inherent response with change is just like, no, right. It's just like, no, no, no, like that's bad. And what's funny is hearing use cases like that where it's like no, no, no, no, no, it's actually useful. I'm not saying have a robot go cold go, you know, make your cold calls, but we're just saying, you know, use AI in an efficient way to maximize your transaction. It's like like you said, you used AI to increase your efficiency and then you saw a tangible result in the time on the market.

16:00 And I would say the other side of it is it's thinking outside of my biases, right? For an office building, I would have never thought bookstore. Why would you think bookstore for office building would it looked at here's what the market needs, bookstore made sense. And if you look at it, it actually would potentially work which hadn't found the right tenant for it. But it was something that would never have occurred to me. And sometimes it'll give you bad information like, yeah, that's not going to work, but I'd much rather have bad information with a couple things that I may not have thought about that now spins the wheels a little bit differently. So AI1 haters 0.