Single Family Investor Turned Commercial And Never Looked Back…

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Should you jump from residential to commercial real estate Adam Craig has done it and he s here to tell you why you should follow him and many other investors who have jumped to commercial already Adam is the Founder of CLE Real Estate Group an Ohio-based real estate investment company Since 2013 he has closed over 80 real estate deals and acquired a rental portfolio worth more than 8 million dollars Adam s success is rooted in a genuine passion and enthusiasm for real estate investing 00 01 – 02 19 Opening Segment Adam Craig talks about his journey into the real estate industry He talks about the asset classes they re investing in right now 02 20 – 11 21 Why Jump From Residential to Commercial Adam reveals their secret in underwriting properties on sale How to raise private money for your deals The importance of drawing your investor or lender profile Listen to Adam s explanation The reason Adam s team is self-marketing and self-managing The disadvantages of following Adam s business model 11 22 – 13 50 Closing Segment A tool or resource you can t live without Their property management software TenantCloud A real estate mistake you want our listeners to avoid Don t be too intricate on your properties Make them basic clean and neat Your way to make the world a better place Helping new and experienced investors through social media Reach out to Adam See links below Final words Tweetable Quotes Once you get past that initial group of friends and family in your immediate network you just had to sharpen up your presentation of the deal – Adam Craig We re not typically concerned with credit score but cash on hand income coming in the ability to pay obviously are the big determining factors in vetting tenants – Adam Craig I ll get together with any investor looking to talk real estate and I ll give my two cents on whatever issue they have It tends to pay back tenfold in relationships and networking and issues down the road – Adam Craig —————————————————————————– Email adam clerealestategroup com to connect with Adam or follow him on LinkedIn and Instagram Visit CLE Real Estate Group to find value-add properties in the residential and commercial spaces Connect with me I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns Facebook LinkedIn Like subscribe and leave us a review on Apple Podcasts Spotify Google Podcasts or whatever platform you listen on Thank you for tuning in Email me sam brickeninvestmentgroup com Want to read the full show notes of the episode Check it out below Adam Craig 00 00 The offering to do the build-out obviously takes more management We end up dealing with a lot more headaches because tenants aren t happy with X Y or Z So if we can we encourage them to get their own people to do it but we will sometimes assist with the cost of that because a lot of the mom and pop investors that we work with don t have the budget for first month s rent last month s rent build-out no income so we try to ease the pain of that any way we can as long as we get our money somewhere down the road Now another drawback of that would be if the tenant doesn t perform certainly wasted a lot of money building up their space But so far we ve been pretty lucky with that Intro 00 35 Welcome to the How to Scale Commercial Real Estate Show Whether you are an active or passive investor we will teach you how to scale your real estate investing business into something big Sam Wilson 00 43 Adam Craig is a real estate investor since 2013 He has more than 80 deals completed in residential and commercial Adam welcome to the show Adam Craig 00 51 Hey thank you for having me Excited to be on Sam Wilson 00 53 Hey man Pleasure s mine Same three questions I ask every guest who comes to the show In 90 seconds or less can you tell me where did you start Where are you now And how did you get there Adam Craig 01 00 Sure I started just outside Cleveland Ohio I went to school for business finance right after school finished up a degree that I thought I d be using but ended up starting my own business From that business I invested everything into real estate started with some single family homes eventually evolved into the commercial side of things 2018 was when I made my first commercial purchase Since then been doing a mix of residential and commercial with the focus being primarily on commercial So right now that s where I m at and looking to eventually leave the single family space in the rearview and concentrate solely on commercial Sam Wilson 01 34 Right What kind of asset class are you buying right now Adam Craig 01 37 Mostly office mini strip plazas things of that sort I didn t think I d be getting into that I thought maybe apartment buildings was where I saw myself but kind of fell into that in 2018 And it worked out So well We ve kind of been going after that asset class ever since Sam Wilson 01 50 Are there buying opportunities in office right now Adam Craig 01 53 Yeah in my market there certainly are and it s not strictly office it s a combination sometimes flex space But yeah when COVID happened office space was definitely on sale And in my market there s still some really good deals Sam Wilson 02 04 Yeah what is flex space Can you define that for us Adam Craig 02 06 So we always say we re rehabbing office space But I mean we ve had you know guys who build furniture to banquet centers to you know all kinds of businesses go into our space So they re not technically all office space we have just about everything that goes into it Sam Wilson 02 20 Okay very very interesting So things went on sale I guess talk to us about how you underwrite something that is on sale And then how do you get financing for it because it s on sale for a reason Adam Craig 02 31 Yeah So just like we did on the single family space everything in the commercial world that I buy is distressed So it s either vacant or nearly vacant meaning you know banks don t typically touch it until it s stabilized So private money is how we finance that I have a hard money lender that I used for a lot of years And since about 2017 I started developing some private lending relationships And that s really grown considerably So I finance them all with private money refinance them with the bank after they re stabilized Sam Wilson 02 58 Right So talk to us about that private money Is there what advice would you give to somebody you know looking to kind of repeat your process What should they be doing in order to go out and find especially private money you guys are going to need large sums of money So how do you secure that Adam Craig 03 13 So I would not say I m an expert at raising private money I ve only been doing it for about four years But I ve certainly learned a lot considering it s we re only about four years in and I ve probably got about 2 million left out to me on the private world right now The biggie is once you get past that initial group of friends and family in your immediate network I just had to sharpen up my presentation At first it was pretty easy I just told people what I did They know me they trust me they like me you know they give the money I after that you really need to sharpen up just the whole presentation of the deal You can t just say this deal is great We re going to make a bunch of money which I was naively thinking in the beginning So now I have just a brokerage company would have a nice flashy presentation showing some returns showing pictures of the building a lot more insight And I like to prep them before the deal So I don t just come at them and say Hey I need 85 000 I say this is the deal coming down the pipeline If you re interested let me know I ll get you some more information And that has that s worked a lot more than just bringing them on when I need the money Sam Wilson 04 10 Right Yeah that s really intriguing Are these going to be typical syndication type deals when you say private money or are they just strictly lenders in your projects Adam Craig 04 19 Right now we re just doing strictly lenders on the projects We re doing mostly million and under deals right now So as I grow and I start to need bigger amounts of capital I can see that need to syndicate and partner and share equity But as of now if I m able to raise it on a strictly loan basis that s the route I ve been taking Sam Wilson 04 36 Yeah When it comes to that I would assume that you know there s a certain investor profile or call it investor or lender profile what s a typical return that you would offer on a project Adam Craig 04 48 So we average about 10 returns and a lot of times we ll offer a point or something for the logistics of closing I would say the investor profile for me tends to be an older investor looking to diversify and someone who s not looking to put their money into something that s you know a low-risk return we don t advertise the saying it s a low risk but we always say you know we re not the rollercoaster of the stock market it s a nice steady 10 to 12 return And for younger guys that doesn t really appeal they re aggressive they want to be in aggressive assets So it s pretty rare where we get a young guy that gets excited about 10 But you never know we do have a few guys that you know around my age or younger who are very happy with 10 Sam Wilson 05 26 Yeah you know you re right You never want to pigeonhole anyone or any demographic you know for that matter into saying Hey this is what they always do But it does seem to be the older you get the more predictable those cash flows become the more important those predictable cash flows become the less of you know hitting a home run Tell me about what your strategy is when you find an office building or a flex space for turning it around What are the other owners done or not done that you plan on doing Adam Craig 05 53 I think a big asset for us our big advantage for us has been self-marketing and self-managing I thought I didn t want to get into the weeds of real estate When I first started investing property management was kind of how I started And ever since then I ve evolved out of property management more into self-managing with an employee that I can oversee So I have spaces down the street from some of my buildings that have been for lease for you know six months or a year if not longer will come in there will rehab the unit And then we ll have at least up while their property is still on the market There s combination of reasons why we re able to lease them quicker obviously rehab space is more desirable But I m just on top of the leasing a lot more than a broker who has dozens and dozens of properties typically is Facebook has been a huge way that we ve been actually leasing places Unfortunately they don t have a commercial section but we have been posting some ads in the residential section and we typically have a picture of the office with office space in the actual pictures so people don t get confused So far Facebook hasn t kicked us off thank God because you know we re technically you know misrepresenting the category But I would say like 80 of our commercial applicants and tenants have come from Facebook in comparison to Loop Net and drive by signs Sam Wilson 07 02 Wow that s intriguing Do you think there is a price point where that makes sense to advertise a base like that on Facebook Adam Craig 07 10 The advertising we re doing is free So if you re saying the price point for the least yeah I think it s a lot of the smaller businesses and mom and pop shops that are out there mostly everything we have is maybe 23 000 square feet or less And we tend to break those up into considerably smaller units because the areas that we re buying in has a lot more small businesses than they do big corporations or LLCs trying to move into the area So we tailor it to the smaller business a little bit higher turnover But in return we can charge a little more per square foot Sam Wilson 07 40 Yeah And you said one of the things you guys are doing what the other owners didn t do was you re self-managing Is there anything else you find where you think I can add value here or I can turn this property because you know where s the kind of completion of those sentences maybe Adam Craig 07 53 So we re adding value to the building typically because they ve been distressed for so long So it s a lot of properties near us it s a shelf space and they re telling their tenants you know you have to build out you have to do everything our buildings are typically partially rehabbed or white box-ready and then in addition to that will offer to do build outs for attendance and amortize the cost of that build out over their lease So we try to be really flexible as the landlord to fill these things up So we can get them refinanced in the banks hands instead of our private lenders So I don t think a lot of my competition is as aggressive doing that They tend to hand over the space and say this is it Sam Wilson 08 26 Right Yeah that makes a lot of sense What are some downsides to doing that you know amortization of the lease or the build-out or being aggressive Is there some downsides to that Adam Craig 08 36 Well that the offering to do the build-out obviously takes more management we end up dealing with a lot more headaches because tenants aren t happy with X Y or Z So if we can we encourage them to get their own people to do it But we will sometimes assist with the cost of that because a lot of the mom and pop investors that we work with don t have the budget for first month s rent last month s rent build out no income So we try to ease the pain of that any way we can as long as we get our money somewhere down the road And another drawback of that would be if the tenant doesn t perform certainly wasted a lot of money building out their space But so far we ve been pretty lucky with that Sam Wilson 09 09 Yeah that s interesting How do you vet the tenant to make sure they are going to perform or at least vet them as well as you can Adam Craig 09 15 Similar to our residential single family space the application we want to see get we re not typically concerned with credit score but cash on hand income coming in the ability to pay obviously are the big determining factors and a lot of our they re not micro-units but a lot of our units that are maybe 1 500 or 2 000 square feet or less we re not betting the tenant is the same We you know we just signed a lease on a commercial restaurant and that was 4 000 a month So we ve rented that tenant a lot differently than we did the 900 a month tenant So the smaller space is we re not too concerned about it Typically a partner a couple of partners can afford 1 500 a month without a problem Sam Wilson 09 52 Right Yeah absolutely The research and time spent vetting that tenant isn t worth it because it s 900 bucks on month and there s not the same eviction laws commercially that there are residential it s just much easier to get out and stop paying and to replace that tenant to So obviously it s like you re saying you know 900 bucks a month that s an easy tenant to find somebody else to fill that gap Adam Craig 10 15 Yeah yeah the bigger spaces tend to take longer obviously better rewards for waiting it out for a bigger tenants But with our buildings financed on higher interest loans we re much more I would say aggressive and filling them And with that comes maybe converting some of the bigger spaces to small spaces if the tenants want that Sam Wilson 10 30 Right Yeah absolutely Talk to me once you get these stabilized and refinance what sort of debt terms are available in the office and flex space right now Adam Craig 10 41 We re pretty much seeing right now the rates are anywhere from four to four and a half percent 20-year amortization with five-year adjustable so pretty standard across the board with what we re doing I have been trying to break into getting bank financing right off the rip which has been an uphill battle But I ve got some relationships with some banks now who said you know I recently had a deal that I wasn t able to get an offer on quick enough and it s under contract But this was a 100 vacant building And I talked to my lender enough about the building to possibly get some 70 financing right off the rip which I didn t think could be done But being on shows like this and talking to other investors I know people are doing it If you can get ground-up construction you should be able to get bank financing on vacant buildings Sam Wilson 11 22 Right Yeah you should And especially once you ve developed a track record that says Hey I know how to turn these around I mean that s the they re betting on the jockey as much as they are the horse So you know getting a few of those reps under your belt is certainly helpful as well Adam I ve enjoyed this It s been lots of fun Thanks for taking the time today to come on and chat Let s jump into the final few questions What s one tool or resource think digital think software maybe that you find you can t live without Adam Craig 11 46 I would say our property management software there s a million of them out there The one we use is called tenant cloud But when I think back to the 90s or days where I wasn t managing properties or even alive I don t know how they did it picking up checks and picking up applications The ease of the software we have these days just makes managing a lot of doors for one or two people pretty simple Sam Wilson 12 04 Right Yeah that s exactly what it does It cuts down on manpower That just simplifies the process as a whole I love that What is one mistake you can help us avoid And how would you avoid it Adam Craig 12 14 I guess I would throw this back to single family by single family days For a lot of years I was over-improving a lot of our single families you know really fancy finishes over-detailing areas thinking a little bit too much about the rehab at the end of the day Just put in something clean something nice get it ready to go We ve had customers we flipped houses too and I later found out they ripped out our beautiful tile design only to put it in their own So that was kind of a wake-up call Don t get too intricate Make it basic make it clean make it neat Move on Sam Wilson 12 41 Right Love that question number three when it comes to investing in the world what s one thing you re doing right now to make the world a better place Adam Craig 12 47 So I wish I could say it was something more impactful than offering my real estate information But right now I m offering a lot of help to new and experienced investors through social media outlets and other avenues and I m not charging anything for the service So I ll grab coffee I ll have a phone call I ll get together with any investor looking to talk real estate and I ll give my two cents on whatever issue they have or just a job about real estate It tends to pay back tenfold in relationships and networking and issues down the road Sam Wilson 13 11 That s awesome man I love it Adam if our listeners want to get in touch with you what s the best way to do that Adam Craig 13 15 You can visit my website CLEinvest com I am also on Instagram as Adam The Investor Sam Wilson 13 21 Awesome Adam thank you for your time today I do appreciate it Adam Craig 13 25 Thank you Sam Wilson 13 26 Hey thanks for listening to the How to Scale Commercial Real Estate Podcast If you can do me a favor and subscribe and leave us a review on Apple Podcasts Spotify Google Podcasts whatever platform it is you use to listen if you can do that for us that would be a fantastic help to the show It helps us both attract new listeners as well as rank higher on those directories So I appreciate you listening Thanks so much and hope to catch you on the next episode Click here to visit this podcast episode