Should I Buy or Lease a Building? – Ask Clay Anything

Show Notes

Are you trying to decide whether to buy or lease a building? Clay breaks down 6 important rules you should use when deciding what do as it relates to your company’s commercial real estate needs in this Ask Clay Anything.

Question from a Thriver?

“How do you decide whether to buy or lease a building? Our medical office is old and we need to move. We could buy a lot and build our own building. I had considered building larger and renting space to other referral sources, synergistic businesses, or businesses that work at different hours to avoid parking congestion. However, that locks us into that site for decades. Alternatively, I could try to lease space. It seems like commercial real estate may not be a great investment moving forward as retail stores decline in the face of e-businesses which would drive down rents significantly. I was curious if you would let that affect your decision at all.I can provide more details if it would help the podcast episode.?”

Businesses that never own a building:

  1. Marriott Hotel
  2. QT
  3. Walgreens

Rule #1 – Never Put Yourself In a Position Where You Are Rich On Paper and Poor on Cash – “Number one, cash is king. Number two, communicate. Number three, buy or bury the competition.” – Jack Welch (The CEO who grew GE by 4,000%)

Action Item – If you are going to buy a building

  1. Step 1 – buy all of the insurance you can from reputable vendors

Rule #2 – Plan for the Worst and Hope for the Best

  1. The economy will eventually have massive upturns and downturns.

Rule #3 – Being a Landlord is Only Profitable When Your Building is Filled with Tenants

  1. EXAMPLE – Jenks Riverwalk:
    1. Opened in 2005 – It cost approximately $22 million to build
    2. The Creek Nation bought the property at a foreclosure auction for $11.5 million.

Rule #4 – Speak to Your Accountant About the True Write-Offs versus the Myths

  1. As a general rule, you may deduct interest on money you borrow for a business or investment activity, including being a landlord. A landlord’s most common deductible interest payments are: mortgage interest payments to banks and other financial institutions on loans used to acquire rental property.

Rule #5 – Location, Location, Location

  1. Areas get worse and better over time…look for trends.

Rule #6 – You Make Your Money When You Buy an Undervalued Property

  1. Buy low
  2. Sell high
  3. NOTABLE QUOTABLE – “Be Fearful when others are greedy and greedy when others are fearful.” – Warren Buffett (The legendary founder of Berkshire Hathaway)

Action Item – If you are a landlord – group interview candidates every week for leasing your space.

Business Coach | Ask Clay & Z Anything

Audio Transcription

Do you have questions? America’s number one business coach has answers. It’s your brought up from Minnesota. Here’s another edition of ask clay. Anything on the thrive time business coach radio show?

Yes. Basically. Welcome back.

What other exciting edition of the thrive time show on your radio and podcasts downloaded? On today’s show? We’re answering a tough question from a member of the thrive nation. Mr Eric. Chupp can you read the question to us?

I can. I can’t. Okay. We’ve got a thriver. He writes and he says, how do you decide whether to buy or lease a building? Our medical office is old and we need to move. We could buy a lot and build our own building. I had considered building larger and renting space to other referral sources. Synergistic business.

Let’s go line by line. I have A. I have a very, a dense cranium and I would like to go line by line. So let’s go first. The first two lines. One more time,

two lines. How do you decide whether to buy or lease a building? He says her medical offices old and we need to move

time out. So how do we know whether to buy or lease a building? Right? That is. So that’s a. that’s the broad question. So it might say, well, what kind of business owners don’t own their buildings? So we have. There’s listening and saying, yeah, people, if you’re new to entrepreneurship, I think a lot of people assume that you own your building. Yeah. So what you do, right? Or some people think that you. Everyone leases. So just to get that idea out there. I know of major companies and chef, I want to put these on the show notes. Major companies, huge businesses that are totally against the idea of ever owning a building. So let me give you some examples. The Marriott Hotel chip, are you aware of the marrow? Have you ever been to a Marriott Hotel? Good. Dr Breck, who is joining us today? Sir? Have you ever been to a Marriott Hotel? I have, yeah. It’s a Mormon owned an organization. If you go to the hotel, you will find the, the Bible, the Christian Bible, and the Mormon Bible in the hotel room. And the company was started by Bill Marriott back in the day and what they do is they are going to build the building to their specifications. That’s step one. Step two is they are going to sell the building as soon as they finished building it. Does anybody want to jump? You have to speculate as to why they do that.

Uh, maybe they don’t have to deal with maintenance. They don’t have to deal with all the issues of owning a building.

Keep going matter, no cash flow. They want all their money back. That makes sense. Yeah. So they get their money back immediately. So now let’s just say they been $100,000,000 building a building. They immediately get $100,000,000 back. And then they leased their building to their. They’re leasing the building, the building that they just built, their leasing it from the new owner. And they sign a hundred-year lease. It’s usually 99 years. So now they’re going to be leasing. So the landlord now has a tenant who’s not going anywhere for 99 years and they have all their money back and they then move on to another one. Right? So that hundred million dollars just keeps rolling. They can reinvest. Yeah. They’re never cash poor. Another example would be quiktrip. Quiktrip builds the buildings to their specifications and then almost every time they sell them. Yep. And why do you think, chuck, they sell their buildings so they could get that money back.

It’s a steam roller invested. Right. Another example would be if you were. Have you ever noticed the de Walgreens? Have you ever noticed the Walgreens on the corner? Yeah. Hard corners, everyone. Walgreens, what they do is they build their buildings and then they sell them and they lease them for 99 years. Those are three big companies that never want to own their buildings. Almost ever. Almost ever. Seriously in a lot of people go. I did not. I did not. I did not know a lot of small business owners that uh, I know that we work with clay. They think that’s the Holy Grail, right? I’m going to build that building and really that you can just take a ton of cash, the blood right out of your business. So now I will give you a sad, sad tales of people that bought buildings that should not have bought buildings.

You’re a CNA, a blockbuster chip. Not Lately. You do. You remember blockbuster? Blockbuster. Please tell us a tale, a Dr. Breck of renting movies with your family. Did your dad ever take you to get a new release? Yeah. It was a big deal to go to blockbuster and peruse all the fun. Find just the right movie or video game back in day. I remember reading game systems, renting a VCR. You remember how you would do it? Will you do as you would? You’d walk in Aardvark Video Aardvark. Oh yeah. You can rent a Nintendo or a soup. You can rent a Super Nintendo or a Sega. Genesis. Sega Genesis is the better than ever because she could rent that thing for like 25 bucks. It was all weekend. And you came with this container with like velcro everywhere and just like case. Yeah. And You bring it home, taking me back and you plug it in there and you get your duck hunt out.

You know, if you, if your parents were a baller, you drop. We, we could never do this. But I knew my neighbor, his parents were ballers. His Dad was like an executive of some heat, a two-story house. Oh Gosh, this guy. And he bought the power glove. Oh no one could ever figure it out, but it felt so cool and you’d play out. What was the game was it was mega man. Nigga man love Peggy Sue’s tech, mobile tech, mobile tech, mobile. If you, if you had Bo Jackson, you always won the super player does. That was, that was a great time. And what happened is a lot of these companies that had rented video games and videos, they thought this model’s never going to change. Yeah. And I remember the first time I saw a red box, it was like in front of a gas station of some kind.

And I thought, oh no, that’s pretty cheap. And then we used to. Streaming was still taken too long for a while there, but, but the Redbox allowed you to rent the vehicle and have the video from a, a, like a vending machine vending machine. Yeah, but essentially eliminated the whole idea and now I’m pretty much every video store except for family video, which continues to be the last outpost of video rentals. They’re all out of business and they own the place to place his own their buildings and one by one they had to shut their doors, but they still have to make payments on those buildings. Right. So, um, again, these are, these are examples of the highs and lows of real estate. So let’s go chip, let’s go through the rules of real estate purchasing. Okay. After we finished reading the rest of this question, he says we could buy a lot or build our own building.

I consider building larger and renting space to other referral sources. Synergistic businesses. Timeout. I’m building a building. I don’t almost ever endorse that idea. And let me explain to you why. Oh boy, we can get into this if you will. If you buy like this House that I’m in, it’s crazy, but the house that I’m in now, where were the studios located? The man cave. I’m spending more money on my deck that it costs me to buy the house in that sense. Um, because when you buy an existing structure that was built in the seventies, it’s already built. The building materials were already built. The walls are already up. The concrete already poured and adjusted to inflation are now building the exact same building costs three times more. Yeah. So if you buy a building that was from the seventies and you can renovate it, man, you can make some money on that.

Especially if you’re a smart renovator. They buy a building from the eighties, from the nineties. You, you make your money in real estate when you buy a property. So you want to buy a property at the low, the low end, you buy them, you make your money when you buy something at the low end of its value cycles. So if you, if you bought a house that was poorly maintained and should be worth 120, but you’re buying it at foreclosure for 70,000, you’re making money. Right? Another example, here’s, remember the jinx riverwalk. Oh yeah. September. Because we office there, right? Okay. So if you scroll to the bottom of today’s show notes, I put it on there. How much did it cost to build the jinx river walk in and what year do you see that? Doesn’t see it looks like opened in 2005 and it cost approximately $22 million to buy, to build, to build.

I would like for our listener to look that up. Okay. So if you, if you just type in, we’ll put it on the show notes. If you type in jinx riverwalk, 2005, you can see it was built the supposed to be $22 million all in Indep costing $25 million to build it. Now if you notice, when was it purchased? Most recently it was a by the creek nation. I’m not sure when, but it was purchased for 11 point 5 million. Which is roughly half paid to build it now. Wasn’t that have been a good deal to buy it out of, out of. They bought it out of foreclosure. So if you’re gonna build a new building, you better have a really, really good reason for that. I, I struggled to find those reasons and this might be like part two of the show because if you email in more details that would clarify certain things.

I could probably explain a scenario where you should build, but I would say almost never should anyone ever build a commercial deal takes so long and there’s so many headaches that come along with it as well. It’s not just the cost. There’s opportunity costs as well. It is such a pain. What’s go through some of those costs here. Zoning. Yeah. A chef. Have you ever tried to get something zoned? I’ve never tried to get something changed or zoned a different way. Have you ever tried to get a permit to build something? Yeah. We built our parents commercial building and it was a huge pain. Dr Breck have ever tried to get a permit to build something. Yeah, we actually did buy a house, a foreclosure, and did exactly what you said. Got It. The very low end really got a lot of equity just built into it, but we had to do some Tlc, some renovation, but we had to out of foreclosure. Yeah. Uh, well it was already repoed. Um, and so we had to build a retaining wall to keep our house from falling into the neighbor’s house. It is, it is your house in a very hilly area. It is midtown South Tulsa. Really Sunny first and Harvard. Oh, I love that area. I live at 61st and Harvard.

Are you up on a hill? Just below the hill actually. Okay. If you had to build a huge retaining wall. Yes. Can I ask you how much money does retaining wall cost? Uh, this was five years ago and it cost about $17,000. Crazy. And yeah, that’s not a glamorous way to spend your first books on your new house. Very foundational. So I want to make sure that listeners are getting this though. Um, it is such a, it’s so much. Have a better idea if possible to buy an existing building that’s vacant because let me explain to you sad real estate stories. I did real estate with a company called fears and Clark and if you Google search fears and Clark Tulsa world, you can find evidence of what I’m saying. My partner Braxton fears is and was a real estate superstar. He really knows what he’s doing and I’m just very good at running company.

So my job was to bring in the leads, bring in the potential tenants, bringing the potential landlords and we were kind of like a real estate matchmakers. So what I would do is I would cold call my team, would cold call a tenants and ask them when their lease was expiring, and then we would also simultaneously cold call landlords and ask them if they had vacancies and then we would be matchmaker. We got paid six percent of whatever the total value of the lease was. There you go. So if somebody signed a lease to pay $10,000 a month to lease the building, then we basically made $600 a month to make that deal happen. You get all up front when the deal signs and I have really, really sad, sad stories there. We had one lady said straight, beautiful building in Tulsa, South Tulsa, pristine building.

Her husband was a doctor in this building, was awesome. Custom built in. Very nice. He died of the widow maker, the heart, the heart issue, or just random death, like 45. Then building too close to home buildings. Awesome. Dies down. So when he dies, she calls us. She had been trying to lease the building for over two years. Not Good. Hadn’t had a single lead that made sense. And so she was paying the mortgage on this thing. Yes, she had life insurance, but it was eating away at her savings and she started to realize she only had about 18 months left for. She’s at a savings. And so what we have, because it’s expensive when you’re paying eight grand a month, mortgage payment and no income coming in, change is bad. So what we ended up doing was helping her find a tenant. And what happened was, is she said, no, I want to use this other tenant instead.

So she got a tenant pet story and the tenant was a colleague of her husbands and this guy paid rent for about two months and he went out of business, but he wouldn’t move out so she couldn’t lease it again. He’d cheat, he’d already dentals renovation to customize it. And it was just awful. And so it was, the story ended up ending terribly. There is no happily ever after. She didn’t losing the building and somebody bought the building for about forty cents on the dollar and moved in and was doing great. And I’m just the worst thing I’ve ever seen. Uh, I saw another person build a huge mansion in a neighborhood called winmore, a huge, huge, huge, beautiful mansion. Beautiful. And uh, basically they had a business and somebody at their business made an ethical, full poc. They lost their license to do whatever guys living in a huge mansion and can’t pay the taxes on it.

Not Good. So if you’re going to buy a building, I would recommend that you buy an existing building and you want to buy a building that allows you to observe or to live by these rules. We’re now going to go over. So triplets will treat the first rule. Okay? Rule number one, never put yourself in a position where you are rich on paper and poor on cash. Got To have a lot of cash, Jack. Well, so we have a notable quotable. He says, number one, cash is king. Number two, communicate number three by or bury the competition, words of wisdom. Jack Welch, the CEO of Ge that grew the company by 4,000 percent. You got to have that cash. And the reason why you have to have that cash is that something bad is going to happen. So, uh, Dr. Breck, since you’ve been leasing space for your business, have you ever had the air conditioning unit go on?

Uh, the heater, the heater. Okay. There you go. Chop. If you ever had a major issue at your house with any kind of, you know, water leak, power goes out, heat and air. What, what happened? Uh, when I very first bought the house, the day we got the keys, the heater, the heating unit went out and the water heater was leaking under the house and they hid it from us. So I had to replace the water line and the heat and air unit the day we got the keys, I bought a very, very nice house back in the day. 90 first and Lynn Lane, the lady who sold me the house ended up losing her real estate license over the deal because there was so much navigant’s. They have this thing called an anaerobic system where basically, and stretch. Let’s go anaerobic. What happened? It’s kind of gross, but it takes your fecal matter right?

And somehow breaks it down, down and sprays it in the lawn. Great for your lungs. Get out of this. We had a huge property. Well, I don’t know what happened, but apparently something was done wrong and they knew about it before we sold the list before they sold us the property that they did not disclose it. So we had a safe room. It’s underground and we were storing stuff in there, you know, and I opened it up and it’s probably 10 feet underground and the whole room was filled rooms like half the size of this room with water, water all the way up to almost the door on the verge of flooding the whole house. So I immediately called somebody to sump pump the thing and they said, well, hey, uh, luckily we didn’t flood your old house, however we need to replace boom, boom, buy my bank.

And I said, okay, so how much does it cost to replace to replace the system? Oh, it’s like $30,000. I said, okay, uh, what else? They said, well, the do it. We have to, uh, open up your house and drill down through the middle of your house. And we had marble floors. You’ve got to drill all the way through that and we need to put in like 60 peers. Was it 60? And he said, yeah, just 60 peers just so it was a little over $100,000 to do that. And that was a house that’s about a 7,000 square foot house. Now think about a building. So I see a lot of people buying buildings and then they can’t afford the first big roof starts leaking roof. Whatever happens. Dude, a roof is so expensive to relieve. Experienced the elephant in the room. Leaky roofs before.

Yes. So if you do buy a building, step one, this is an action item. Check step one by all of the insurance that people can sell you from reputable vendors. Um, Dr. Breck you are a chiropractor? Yes sir. And you have patients that come in and I’m sure you’ve dealt with this, but they have a good insurance company. Oh yeah. Can you think of an insurance company where you say that company is one of the better insurance companies out there to deal with? Can you maybe name one of them? He thinks really good. Yeah. Um, well I wouldn’t say are good, but some are better than others. You Cross Blue Shield community care. So you’d say it’s Blue Cross Blue Shield and community care. They will pay you. They will. Okay. Now I don’t want you to name the company, but if you can you think of a company that did that never pays you a yes.

They will fight you over. Ever reimbursing you for the patient’s visit? Yes. Alright. Same thing goes for insurance companies. There are insurance companies out there that their specialty as being the lowest priced right and they have a reputation for never paint denying claims. So you definitely want to have the best insurance possible from a reputable vendor fo sho. Now check what is the next rule? Rule number two, plan for the worst and hope for the best. You just got to plan for it. You got to plan that, that the snow storms going to cave in the roof. So many people don’t do this and it’s like this stuff is going to happen. So quit looking through those rose colored glasses because bad things are gonna happen and when you prepare for them, it doesn’t ruin your week, your year, it’s just a bad moment. And then you go back to your fallback plan.

You remember you mentioned it earlier, but the elephant in the room, it was the 23rd, December 23rd 2017 I believe. Yes. And uh, I got a call and the ceiling collapsed at our elephant in the room store at 16th in Boston that did snow everywhere. It was like a 10 by 10 area of the roof that just collapsed. Well, you know, we had to fix it and it didn’t shut down. The would replace all the wood floor ended up being about $20,000 issue, but it didn’t really rocked me a sense of urgency to fix it. Right. We didn’t get down there and take it. So it wasn’t like going on because I have cash that I have saved. I planned for bad things. Exactly right. Dark, dark. Have you ever had a bad thing happened at your chiropractic business where you go, that was not good?

Yes. Get rid of you if you’re an epic bad thing. No, nothing to add to epic shop. Did you ever have an epic bad thing happened at your concrete company? Yeah, we mean all of the time. There’s huge pieces of equipment. 100,000 dollars back, hoes going down. There’s just stuff that happens all the time. And if you don’t have that cash, you know, I got to run out and rent new generators. I got to go. You have to do all that stuff when bad things happen and it’s going to happen. So examples, if you buy this building, plan on an act of God happening, plan on a tornado, hitting plan on, um, the roof collapsing. Somebody is going to smash your glass door at some point. Plan on Gunna happen when it happens, be insured and B, cash strong. I’ve see so many business owners put up all their cash to buy the property and then something bad happens in month two and they’re done right? Got No money for payroll. And that’s not good chunk. What’s the next rule? Rule three, being a landlord is only profitable when you are building is filled with an attendance. So thinking about this for a second chip and our river walk the building. Yes. Um, I think before you, before you arrived there and since you’ve been with us, you’ve probably seen people rent space from us. Oh. And then move out. Oh, at the thrive office. Oh yeah, like probably dozens. Yeah.

You’ll get somebody else that you know, I’m, I’m moving in. Oh this is gonna be great. I’m passionate. Center. Just going to be. I love the energy. I love the atmosphere. I’m moving in. I’m not going anywhere. And they’ll pay upfront for the first and last month’s rent and it will be the only two months they’re there. We never see them again first and last month. It’s like the third day. And what happened? They say, well the business, the business is working on any leads. Dr. Breck do you lease from somebody right now? I do enter you in a building with other tenants. We, I am. Okay. Well what kind of other tenants are your neighbors? Oh, it varies a lot. There’s a janitorial company, there’s, um, some people are building is kind of a mixed use, so it has some industrial warehouse space like towards the back know.

So we’re one of the few professional type officers move right at the front. So it’s, it’s kind of odd. How long have you been in that building? We’ve been there since 2009. So you right now we’re at a place at a fork in the road where you’re thinking about buying a building or intensely. So talk to me about when it occurred to you that it might be time to buy a building and sort of the conversations you’ve had and what you’re debating when you decide to buy one or not. So we’ve, we’re in 1500 square feet and we’ve outgrown it. So our practice has grown so much that we now have growing pains, so that’s a good problem. But, uh, and we’ve had a good relationship with the landlord and so we first considered leasing additional space from him. Um, but there just wasn’t a good way to do that, um, with the way that the building’s designed.

And so, uh, at that point we started looking at, okay, we’re going to be moving one way or the other and so do we want to continue to lease or bye and if you go, if you go out and buy a building, what would motivate you to buy a building and what are your reservations about buying a building at this point? So part of my motivation is that I hope to still be in practice, you know, 25, 30 years from now, got a, I’m 39 right now. You’re looking like you’re 29. Hey 19. I’d say I’d say 30 times. We might need you guys to go see Dr Z j. But uh, thank you. Um, so, uh, so, you know, owning my building and having that long term as an investment as an asset is part of the appeal. Um, and so there’s a number of ways that you can go about doing that.

I looked at spaces that are just large enough for what I need to expand into. But then also, okay, maybe if it’s double that then we have a tenant that’s going to help pay for part of that asset. And then, uh, as we’re looking, I actually came across a building that’s quite a bit larger than what I need and it is thankfully full of tenants. So right now we’re kind of making sure that, that all makes sense and it’s all up and up. I am not going to name the address of this building, but I’m going to communicate to you guys this idea. There is a very nice building. It’s awful. Harvard in Tulsa and um, it’s, this building was bought by a, a person that, that I think we all know or we know of and um, I used to work out of that building and it’s a huge building and it was awesome.

It was full. Yeah. Huge. Very full. And it was filled mate, uh, mainly with companies that were tied to a certain sector of the economy. Yes. And if you guys will recall the economy had the big correction, the big dip, the great recession. And when that happened he lost all of his tenants. And it is a huge building, it’s a monstrosity that is. And I remember him calling me the owner of the building and he said, clay, this is when we’re with fears and Clark, can you get me any tenants? And I said, what do you mean? He goes, well I got the building almost all paid for now, but I have these taxes I’m paying and I’ve got an the utilities and I’ve got no got nothing. And it was sad cause it’s a huge build, a beautiful, gorgeous building that was really not being used at all.

Yeah. And again, those are the kinds of scenarios you must think about because the economy is going to have ups and downs. It is, it is foolish to think that it will always be thriving or that it will always be a, a starving or you shouldn’t be pessimistic about the future or optimistic you to look at trends. And historically I was born in 1980. You were born in 79, 79. So we’ve gone through multiple corrections and we’re, we’re, we’re not even 40 yet, you know. So again, every 10 years the is going to make a little bit of a correction. Let’s move on to our next rule. Rule number four, speak to your candidate about the true writeoffs versus the myths. Yeah. You want to speak to your accountant about the, the true write offs versus the myths. There’s a lot of. I’m a jack ass are out there.

There’s a lot of false information. Misinformation. Dr Beck, have you spoken with an accountant yet about the tax ramifications of buying a building versus renting? Yes. And what kind of benefits are there for buying a building from attacks from what you’ve heard so far? So yeah, there are ways, ways you go about it. So you buy the building as a, a separate llc and a rent back from yourself. Um, is, is one of the biggest aspects of that. Yep. So there are some tax implications with that and, and overall decreasing your, um, income. Um, and so, uh, but, but a lot of that ends up balancing out, you know, one way or the other. And I want to make sure the listeners get this. If you do buy a building out there, if you’re listening right now, you buy the building, you want to buy the building in a different LLC, so an LLC, a limited liability corporation, you form step one, you form the limited liability corporation, step to that corporation buys the building.

That way if I’m renting from you and I decide to sue you or there’s an accident or an act of God or something horrible happens that that llc is liable for what happens in the building, not your other business that’s doing well, right? Then your current business would rent from that LLC and there are tax benefits of doing that, but you’re also protecting yourself. Now you can also write off the interest on the mortgage payments for a commercial building and that can be substantial for people to reduce your taxable income, but you shouldn’t buy a building just to save money on taxes. So you just think about this. Make sure it’s a good decision. What is the next move? Chubb rule number five, location, location, location. I want you guys to think about a place that used to be nice. That’s now kind of a ghetto.

I want you to think about a place that used to be nice. That’s now kind of a get and I’ll tee up one chuck. Do you remember Eastland Mall? You do? Yes, of course. In eastland mall used to have the big looked like big circus tent, like circus tents. Man, Eastland mall was the premium a mall to compete with Woodland Hills. I was an east side kids, so that’s where we went. Dealers was there, footlocker food clerk was home with a movie theater. There’s underground theater. They had fountains, those fountains. And what happened was, is the population shifted a little bit and uh, that part of Tulsa, and this is not a, this is not a racial idea. This is a false idea. If you go to like Brooklyn, you’re going to see like little Italy, you’re going to find like a chinatown. There’s different ethnic parts of the community.

Uh, that part of Tulsa. So simple and evidence now call it little Mexico, but basically a lot of the immigrants have moved to that part of town. And long story short, for whatever reason, I’m just reporting the facts. I’m not giving you my opinion on this. People quit shopping there. Yeah. And so the, the economy fell apart and my good friend Arthur Greeno had his chick filet in that mall and he said, dude, nobody started coming up. Pretty soon there was like four major, like for department stores. It got down to one and you would walk around. There was nobody there that ghost town. And so a circle back about 10 years later, uh, my partner Braxton fears teamed up with a guy named pill stickered bob pill sticker I think. And they ended up leasing the, almost like a huge part of the building to Coca Cola to turn it into a call center.

That’s what started it. And now it’s a lot of call centers and a lot of things. But I’m just saying that building, it was awesome and I don’t think anybody could have foreseen that that building would ever be vacant. And then it stayed vacant for like a decade, a long time. That whole part of town, my grandparents lived over there. And that’s what I grew up there and he’d go over there now and it’s just there. All the businesses are different. All the buildings are different. Yeah, it’s a totally different place. Now. Have you seen the, uh, the former, it’s the former warehouse market that’s now called

La Mexicano

law mosquito or kit margin? My God. Oh, Miranda. But it, it’s, it’s painted. The sign is painted and it is now a grocery store. And in, for people who don’t speak English, have you seen this place? I’ve seen place likely talking about like they’ve ever been in Brexton signed one of those leases. It’s pretty amazing story. You should check it out really pretty good. It’s more than just grocery, but they don’t have different things. What are they doing there? Um, I mean it’s mostly grocery, but they do some side things. Like you could, you could buy a pair of boots in there. Release. I’m not playing some new boots. It’s a, it’s an interesting. It’s like, is it like as woods and a research, have you noticed? It’s like a, it’s like you come on. This is like your two favorite stories mixed in one.

I tried to make sure the listeners get this idea. There used to be like a car dealership will say no. It was called like Bob Bob Smith Store Barbara Smith or, or a Tim Adams who used cars. You know, there’s all these like a Mike Thomas huge car. Everything was kind of the guy who owned it was a good old boy and now the same businesses exist, but now it’s called El Dorado’s. Alright, this seriously, it’s Rico’s Rico’s. He used cars and you go there and everybody works there. His is Hispanic. Everyone who shops there is Hispanic and the market shifted. And I’m saying this to you because if you bought that Eastland Mall building, man, you, you would hate your life for about a decade. If not for longer. These are went downhill quick. These are things to think about and I care enough to give you all these cautionary tales. Chuck, let’s move on to our next move.

OK? Rule six, you make your money. When you buy an undervalued property. Hey Man, you make your money. So do you guys want to talk about the private, the coolest, the best, the most ridiculous real estate purchase in Tulsa history that I know of? Yes. Yes. This is crazy. Um, I don’t know if you guys are aware of these are two moves, one move that one deal that happened in one that didn’t happen. We’re interviewing here in a couple of days. Sam Walton’s right hand man. This guy was the one who came up with the idea of the super center who he hung out with. Sam Walton. Very good buddies with Sam Walton for his entire career. When Sam Walton died, he moved on, went to Home Depot and took her. And basically how that company was his name. Walt Sampson? No, that’d be cool. No, but you know what chuck, you know, I don’t want to.

I don’t want to take the room down. I don’t want it to feel awkward like, that deserves more of like a god. But anyway. Did you guys know that Sam Walton was very close to buying these city flux towers from Oral Roberts University? Did Not know that. Very close, very like last minute. Like, should we do it? We’re going to do it. Let’s look at what corporate offices moving them over to. Yes. Now who. Have you guys been to Bentonville before? Yes. If you’re in Bentonville, this is the rule. If you do business with Walmart as a vendor, you’re required to have your corporate office in Bentonville. You have so much power. You have to have an office because Sam Walton got to a place where he was done flying to people to negotiate. He wanted him to fly to a Bentonville. Now if you’ve ever been to. Has Been to the airport? Yes. Isn’t it crazy? It’s not. I’m not actually been in it, but I’ve driven around. Yeah, it’s like very nice and like their embassy suites is very, very nice and her whole foods is very nice town. It is. It’s very upscale. Very unwell. I mean it is awesome. Now as you’re driving through though from Oklahoma, if you’re driving from Tulsa east to Bentonville along the way, you’re going to encounter things that make you say,

how did this happen? Because you’ll see people with like buses parked and they got a tree growing through it. You’ll see shirtless hillbillies who are in their life on the streets

planter. Yeah, it’s crazy. But that decision for Sam Walton to open up in Bentonville change. It became like an a way cysts in the. If out there listening and you live in Arkansas and you have not embraced the concept that your state is known for rednecks, I apologize, but it’s the truth as a 19 get with the times. So there are way too many confederate flags out there. Even one confederate flags too many which are driving out there and it’s just like they’re everywhere. They’re everywhere. It’s a crazy place. But Bentonville is like this oasis, this thriving metropolis. So Nice. Unbelievable. So think about that for a second. If Sam Walton did by the city plex tower, it’s the tallest towers in built by oral Roberts. How Tulsa be different today? Probably. Let me think about that. Yeah, I mean it would be up there with Dallas.

Our airport would have been bigger, a huge. And if people, if I don’t know people get this idea, but you know, Tulsa back in 1971, I read j Dot Paul Getty’s, a book called, uh, as I see it. And back in 1971, Oklahoma, Tulsa specifically was the world’s wealthiest city in that crazy. All those buildings, downtown Tulsa, all that. Art Deco was awesome. Now let me tell you a deal that, that did happen, that, that changed everything. Tulsa, Oklahoma, they kit with this idea. Government came up with, came up with this idea that it was mayor of the fortune had this idea and he’s called it vision 20, 25. And he said by 2025 we’re going to build a state of the art arena right there in Tulsa. And I lived in Tulsa long enough. I lived in Tulsa till I was 12. I moved to Minnesota, came back.

I thought it’s not gonna happen a chuck, you remember downtown Tulsa? It was, it was a ghost town. Terrible. And then once they got that thing approved, they built the duck tape center known as the Bank of Oklahoma Center. They built, it looks like a big ducks. They built that thing and I know a guy who, uh, made a ton of money. He was buying historic downtown buildings. One of the guys was Maurice Kanbar who hired a brexit to help rent those spaces here guys. John Snyder. Yup. And I won’t share on the show how much that. I’m sure you can find it if you do your google search for how much they bought the Mayo Hotel for. But people thought jen was crazy and he bought that building and he rented out that lobby. Just the lobby because it had homeless people living in it. It had been vacant forever. The Mayo hotel is now perhaps the most iconic hotel in Oklahoma.

Presidents have stayed there. Justin bieber stays there. Lady Gaga stays there. It’s awesome. It’s beautiful. It was vacant. It was. And it was vacant. Did you guys ever go to a wedding there? When it first opened? Yeah. Yeah, yeah, I dj the first wedding there. Did you really don’t want to be a Jeremy Thorn Dj with me. We’re down there and it was just. The lobby is, there’s no other rooms that were open. There was no working elevator, no second floor, no staircase, just the lobbyists to lobby and they took the money from that and they began renting out a ticket to my from that renovating the next floor and the next floor. Then then they sold a certain percentage of it and turned it into condos and they made it very nice rooftop bar, lounge area. Now it’s posh and nice. It’s happened, but if you would’ve bought that building on the hopes that the bok center would have been built and it didn’t go through, you would have lost, but.

But because John bought it on the belief that it would go up in value because he believed that the bok center was going up in value, that that would be constructed. He made a killing. Yeah, so you buy when you make your money, when you buy, you’ve got to find an undervalued property. That is the goal. Buy Low, sell high, buy low, sell high, and you want to be greedy when others are fearful. Chuck can read the notable quotable from Warren Buffett. He says, fearful when others are greedy and greedy, when others are fearful. One more time, be fearful when others are greedy and greedy, when others are fearful. That is so important for somebody out there to hinge was so. Think about. Think about the decision of the business. Now, think about what’s best for your business. Your Business is what it looks like. It’s growing.

Things are going good right now for your business. Do you need to spend $40,000 on marketing? Would that make a bigger impact to just pummel the market with Internet marketing and search engine domination and just pummel the market, just dominate the market place with marketing or is it better to take that same 40,000 and use it as a down payment to buy a building? Is it better to take $100,000 in, spend that on marketing or $100,000 on buying a new building? I am of the opinion my this, my personal take. I would definitely encourage you to think twice and a third time before buying real estate and if you do buy real estate, find something that is undervalued and when possible, make it so that the monthly payment you’re paying now and lease is equal to your mortgage payment because you’re used to that, right?

Yes. If you’ve never had tenants before, I’m gonna walk you through this real fast. I want to walk you through this. Have you ever had a tenant, a Dr Breck and neighbor in the past? Not recently. Who was crazy? Yes. So I’m giving you examples of this because this, this, this just happened to me 10 days ago. Had a guy in one of our buildings, he says to me, he says, I am not going to office here anymore if this person continues to be here. And I’m like, well, you both have lease agreements. What do want me to do? What happened is I don’t want to talk about it. It’s between he and he and I, but I’m not going to be here anymore unless he moves out. Okay. Can I get the two of you together in a room? We can talk. No, it’s personal.

So you’re gonna walk away? Yes. Okay. Well then I have to see. That’s fine. But that’s the mindset. Right? And when I had the a bit, I used to rent space at 16th in Boston [inaudible] and uh, I had a lot of wedding vendors in there and I don’t know that any of them ever got along ever. There was a magazine in town where the lady who ran the magazine would always park in the spaces meant for the elephant, the room customers. And every time I would bring it up to her attention she would say, well, I’m sorry, I forgot every day. Yeah. So our customers had nowhere to park. Then she would never trim the bushes in front of her building, but she wouldn’t let us do it either because in, in the, in the agreement, because I had the master lease on the whole building and I could sublease it out. So I subleased it to where I actually got paid to be in the building. And so I, my, my bushes and just a little greenery was always pristine. Yeah, right. Did you ever go to that building chip? No. Oh boy. And, but this neighbor sheet, never ever. And I know, I know that she never would, would trim the bushes, but she wouldn’t let me do it either. Yeah. So I have a confession I’d like to share on the show every second.

Once she told me I couldn’t trim the bushes, my son and I would drive down to the first who had stopped by

home depot down and I would buy

car, car liquids. There certain industries in a freeze. And there’s, there are things that you put in your toilet. What are those things? The drainage and it talks. Oh yes. And I would take that and I would pour that on her flannery when I ripped him shavings from. What is it? A luminum foil because it’s explosive, but small ones won’t blow. And I put it. It just sizzles.

Do you guys know that? You guys know this. If you take a two liter bottle of a two, two dot two, two liter bottle of Coca Cola, emptied out, cleaned it up so there’s no, no residue. You put drainage in there, you put up works, you put works in there with uh, with aluminum. It makes it effective bomb. Wow. But don’t do that. Don’t do that. Then you can tell people on the radio to do this. He said, don’t do that. No, no, no, no, no. That’s how, that’s how it could hurt a neighbor’s dog. Don’t do that. No. Seriously. You and I speak from my own. I know I have a friend of mine who actually blew up a mailbox in high school and I got a felony because you can’t blow up mailboxes. Just got taken off his record. He’s like 35, 36 terrible every week.

And I used to go in there and every, every week I’d go in there and I would just pour. And so they all died. Maybe that’s why I couldn’t visually picture the bushes that you were speaking. No, they would all die. They would all die. And, and she would say to me, all the bushes are dying. I don’t know. It’s bad Karma. You’re putting bad energy. Seriously. They were crazy dude. Like Amazon, they have that. You can’t have that. No. And I talked to this lady multiple times. Every single time she would park in there and our customer parking, she, every single time never ever would ever do anything with the landscaping would never help with the landscaping. And so what happens is when you have a building with multiple tenants, they will fight. Oh yeah. Oh yeah. People be people. They will fight. You will fight.

So you got to get good tenants that he did agree. Because I have, I’ve had neighbors in my life that we’ve never, ever spoken, never had an issue. I’d say the vast majority of them have no problem with them. They have no problem with me. But there are certain personality types. And Chuck, why would somebody rent to a difficult personality? Why would somebody do it? Because they need to write half. So if you are a landlord, put this on the show notes. We do group interviews every week. If you have a group interview every week, if you have a business, you want to interview candidates every week, you never want to get run out of options because of your top web developer or a graphic designer leaves you, you’re in a bad spot. You never want to stop recruiting. You never want to get in a bad. You have to do the group interview for tenants.

So part of your expenses, you have to get an ad on loopnet. Uh, it’s just one of the places out there and you want to advertise on LoopNet that you have space available even when you don’t, and never stop, right? So true, because you always want to have good tenants because man, I’ll tell you what, when you run out of tenants, you start renting out to like these people who hate each other. It gets crazy. Then you can’t play odic chaotic. The other thing, like you just hit on something when we were saying, you know, because they need to. I see this a lot. If you’re going to build a building, uh, when you’re running your numbers, make sure that you’re being realistic about those numbers, your income, your expenses and everything because building is more expensive than they tell you. It’s going to be right, you’re going to go over budget and it’s going to take longer.

And so if you’re basing these projections off, we’re open April first, we start making this much money and then you don’t open until July. That’s gonna put you in a very bad spot for that is everything you need to know about buying a building I want, but I do. I do want to give Dr Breck the opportunity to share this about your process. How long have you been looking for a building? A little over a year. And do you know the criteria that you’re looking for? Yes. So I needed personally to increase my space to about 3000 square feet and I need better parking. Yep. Better accessibility, better visibility. Um, and by accessibility I mean closer to the highways. Um, our building actually, it’s kind of a weird, I’m a drive-through or drive in the entryways backward. Um, so you don’t, you don’t, you go in on the left and then you come out on the right and it, it messes with people all the time.

So that as well as getting closer to the highway, uh, it was part of my criteria, but also we want to stay relatively close geographically to, but you’ve been looking for over a year and so again, if you’re out there thinking about buying a building and it’s not going to be a two month thing, right? Don’t. When I did commercial real estate with Braxton, most of the people that we worked with who bought the building would spend about 18 to 24 months looking. Yeah. And that’s a big, that’s a big deal because it’s a big purchase. We, we’re fortunate that we don’t have to force the decision quickly. We have the time available when, so that’s, that’s the better way to make that decision. For sure. Now Chuck would like to add each and every show with a boom. Are you psychologically ready to bring the boom? I am. Dr. Brecher, you ready? I am. Ready. Oh, here we go. Oh yeah. Boom.

Dramatic.

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