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Show Summary
In this conversation, Jeffrey Jacobs shares insights on real estate investment strategies, particularly in Silicon Valley. He discusses the importance of pooling resources for young professionals, the challenges of project development, and the current market conditions affecting real estate decisions.
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Investor Fuel Show Transcript:
Jeffrey Jacobs (00:00)
Don’t rent. Renting is stupid. Renting is good to be a landlord and have the rent coming in. You only get rent receipts, a box of them, when you retire. See if you’re going to be in a position, if you’re a young professional in a city and you’re making $100,000, $150,000 a year, you know?and you got a couple friends, see if rather than spending three, four thousand a month in rent, you might all pool your resources or individually invest in the condo because at least then you’re going and you’re putting the…
monthly payment into your pocket essentially and you’re building credit and you’re building wealth.
Erika (02:10)
Hey everyone, welcome to the Real Estate Pros podcast. I’m your host Erika. Today I’m excited to be joined by Jeffrey Jacobs. He’s been making serious moves in the commercial and multifamily space. Jeffrey, it’s awesome to have you on the show today.Jeffrey Jacobs (02:27)
Thank you.Erika (02:28)
Well, Jeffrey, I’m excited to dive right in. You know, our listeners don’t know your story. So can you tell us more? What was it like getting into real estate? What was that journey like?Jeffrey Jacobs (02:39)
I had a family example of my dad. He’s an attorney, but he invested in…He invested in medical arts buildings and professional office buildings and then co-ops and condos in New York in Bulk. So when I left the music business in 1999, 2000, I was trying to reinvent myself and I thought a good way would be to have a base of income producing property. Took my life savings, invested in Lower Manhattan. 9-11 happened six, eight months later. But you know what? We all came back, we held on, didn’t let go of anything.
Yeah, it’s been good to me.
Erika (03:15)
Yeah, yeah, was there a moment for you in this journey that you knew this was gonna be your lane versus other career options out there?Jeffrey Jacobs (03:27)
Well, I still maintain a hand in entertainment management. I worked with a movie star and some UFC champions. But I knew that that’s really at the pleasure of that entertainer or individual succeeding. And my success would be tied to their success. So I just needed to have that real estate base, you know?Erika (03:51)
Yeah, yeah, absolutely. And then, Jeffrey, when it comes to your investing today, what’s the market that you’re in? What excites you? What opportunities do you see? What threats are outJeffrey Jacobs (04:03)
well, the markets I’m in are Manhattan exclusively, other than a Silicon Valley project that I’m involved with. But, for right now, I’m renovating, ⁓ condominium Parkview on Fifth Avenue. I’m going to retail at condominium for about…40 % higher than my purchase cost and my construction cost. And I’m getting ready to renegotiate a retail lease with a multinational company. They’ve got 250 stores and I’m going to reposition that building in SoHo to a much higher rent roll as a result of that. And then I plan to divest of that property and then move
to the Los Angeles area.
Erika (05:38)
that’s exciting. When it comes to Los Angeles, what do you want to do there?Jeffrey Jacobs (05:44)
I’m really a retail guy. I like retail space. In New York, retail comes with some luxury apartments, depending on the neighborhood. So I have luxury apartments as well at the Soho property. But in Los Angeles, I think I want to stay completely away from residential because of the laws of California and of Los Angeles, and instead only concentrate on standalone retail buildings, particularly Brentwood.Beverly Hills, Beverly Hills adjacent, West Hollywood. I like that West Side corridor and I know that there’s always a great demand for retail space, restaurant space.
Erika (06:21)
Yeah, for our listeners here, I think it would be helpful, Jeffrey, if you could share a moment along your journey that you had some big lessons. Maybe a deal went sideways, maybe you had to completely pivot. Can you share one of those moments on your real estate journey?Jeffrey Jacobs (06:40)
Um, honestly, the bulk of everything I’ve ever done, which are not that much volume, but very high value transactions, have all gone my way thus far. But it was frightening to me to take my entire life savings in 1999, which was about a million one.and spent about $850 of it on a down payment on a building in Soho, and then to have 9-11 happen one year later. I called up all my tenants from Singapore, where I was at the time when the planes hit, and I asked them.
Are you going to leave the apartments? Are you going to run away and abandon the apartments? And they said, no. Are you kicking us out? You can’t kick us out. We’ll fight you if you kick us out. I said, I don’t want to kick you out. I want you to stay. I just don’t know if there’s a war. Do people still stay? And they’re like, what do you expect us to do? We’ve to go to work. We have our jobs. I’m like, people still go to work in New York? They’re like, yeah. I came back. All the tenants stayed. I don’t know what happened. And even the retail stayed.
So, yeah, it was heartening to see that. ⁓
Erika (07:50)
Absolutely. Jeffrey, when we were chatting earlier, I know you have a passion for educating the next generation when it comes to real estate. So what kind of advice do you want to get to the folks listening who are new to real estate and investing?Jeffrey Jacobs (08:06)
Don’t rent. Renting is stupid. Renting is good to be a landlord and have the rent coming in. You only get rent receipts, a box of them, when you retire. See if you’re going to be in a position, if you’re a young professional in a city and you’re making $100,000, $150,000 a year, you know?and you got a couple friends, see if rather than spending three, four thousand a month in rent, you might all pool your resources or individually invest in the condo because at least then you’re going and you’re putting the…
monthly payment into your pocket essentially and you’re building credit and you’re building wealth.
So I’ve always given that advice to any construction workers, people that come to work on my projects and so they take any advice and they’ve thanked me for it years later. It’s very, very important that before you rent that you consider repositioning that money into purchase. I know it’s hard to down payment, but people can come up with it, you know.
Erika (09:38)
Yeah, yeah. You know, for those new listeners, you know, and of course, every situation is different. But have you found certain creative financing offers that have been helpful in that situation?Jeffrey Jacobs (09:51)
I think anybody can go first time and a mortgage. I would really target people that are making at least 80,000, $90,000 a year so that they have the means to do so. Sometimes when people are in maybe like a sub 80,000 in a high tax market, it’s not going to really give them the flexibility unless they want a tiny studio and that might not appeal to them. I understand those concerns. But in metropolitan areas in the United States andhigher net worth areas, I see so many people burning a lot of rent and it just boggles my mind as to why, you know. So I just kind of would like people to really consider…
Banks, mortgage, loan, down payment, instead of rent, people tend to think it gives them freedom and they can fly away at any time or move to different city. But even if you’re in a property in that city and you need to relocate to another city, you can still rent that property out.
and then you can use that rent to pay the mortgage. So starting as early as you can and making sure that you get something. Even if it’s $150,000 studio apartment somewhere, it’s going to probably come out right now at about $1,400 a month for the $200, you know? And maintenance and taxes, maybe another.
30, maybe, what am I saying? Maybe another 300 and 400. So maybe you’re into about 22, 2300 a month. Some people at that level would be paying rent, 1600, 1700, 1800, and what are they getting for it? And then as you scale up, then you understand. We can put that into a $400,000 property, a 600,000, you know, whatever the location you’re at.
I really suggest that people put the bulk of their spending power into paying off a mortgage and always make sure that it has a very high absorption rate. Always get in the best location, always get in the best property you can and try and get it in bad condition. Because if it’s in bad condition, it’s very, very easy. People are intimidated about construction. It’s very easy to bring people in to do that work. Even if they don’t know what they’re doing, there are enough contractors that can pull it off.
Erika (12:01)
Yes, speaking of which, how do you find a good contractor? Because that’s so often what I’ve heard that can make or break a project that you have going on.Jeffrey Jacobs (12:13)
Well, I live in the most delicate and…spoiled and you know I live in a place in Manhattan where contractors feel like they’re movie stars and they frighten people. So I look at my dad, wealthy guy, my mom who purchased a 3,000 square foot apartment in
2002 and they brought in a contractor and a decorator that they knew and everything and the construction was about a million four and I looked at my dad when he was done with it and I said you know I could have done this entire thing for you for about 600,000 okay and I know you spent a million four and you have a relationship with the decorator and mom likes the decorator and he has his own contractors and stuff but there’s a lot of markup in what you did
And I felt if I had any delays or I did something that the workmanship wasn’t good, you know, we’re family, so I didn’t want to involve myself. But by being your own GC, hiring your own electrician, hiring your own plumber, hiring your own floor guy, hiring your own carpenter, that’s kind of the way to get power and to get about…
100 % discount on each of those services because there’s usually a hundred percent markup. That’s what a GC does He’s got to keep people on staff. He’s got an office insurance trucks tools, you know, they have costs I don’t have those costs. So I like to go to the bottom I was interviewing I’ll give you an example for this apartment at 641 Fifth Avenue right now. I Got a wonderful deal on this property. I bought it for three million and it was appraised at 3.7 when I
The ask price was 3.8. So they were desperate and it was before the election and interest rates were very high and they had problems overseas. So I got the property for inexpensive. I hadn’t built anything in a while in New York. It’s been about six years. So…
I went out and spoke to about 16 different contractors that came to the property and went through it and were all giving me quotes in the 450 to 600 range for all the plumbing, electrical, wood floors, marble work, tile, limestone for all the bass and such. And I just wasn’t happy. They were all giving me the same or within 8%, 10 % of one another, and they would now be the boss of my job because they’ll control all the trades.
didn’t like that, so I instead decided that a lot of the work in this is going to be tile work. I’m doing French limestone floor to ceiling on four baths. I’m doing porcelanosa, 48 by 48 faux white marble and porcelain, a matte finish for the entire apartment. It’s a very modern sort of apartment with floor to ceiling glass, nine foot ceiling, 10 foot ceiling in certain areas.
I’m going to, I understand what I’m doing. So I went and started talking to some of the best tile men in New York and say, I’d like you to come in and take over the entire job. The tile men were excited that they would have this much work.
And I got a town man to give me a quote that was fantastic and it was good for him and good for me. And then I said, by the way, do you have a drywall guy and a sheetrock guy that you like to work with? And he says, I got a guy who has a brother who’s an electrician. He’s got a cousin who’s a plumber. He does all the drywall. He does everything like that. You should meet him and his people. Couple meetings, couple lunches later, I’ve got the entire job specked out, all the labor for $240,000.
I’m going to come in with Philip Stark bathrooms from DuraVid. I’ve got Wetworks.
Cabinets from Montreal coming down, Sub-Zero and Wolf Plants, C-Matic is doing the kitchen. I’m getting a 50 % discount, designer discount, trade discount, architect discount on most of that stuff. So when you put all that together, there’s a lot of upside and a of profit. Most people can’t think at that high level on their first purchase, but on the first purchase…
a small apartment, there isn’t that much work to do anyway. So I think a GC’s good. If they’re going into something into the millions of dollars, it’s probably better to separate. Start with your tile people. I like that. Start with your tile people or your carpenters and then see if you can strike a deal with them and then bring in their associates. Let the Supervising Architect pull the permits and be sort of the…
face the boss of the project. But in reality, he reports to me and you know, it takes the pressure off me with the condominium board. He’s the guy in charge. I don’t know anything. But it gives me the strength. He’s the guy in charge, yet I give him his power.
Erika (17:29)
Jiffer, you’ve got a really good setup here and I’m sure our listeners will have a lot to take away from that. When it comes to what you have going on in the future, can you tell us more? I know you’ve got a lot of great ideas and plans that you want to implement soon.Jeffrey Jacobs (17:49)
Well, I became a minority partner in a Silicon Valley, three and a half acre, 50,000 square foot building, very well located next door to Cisco Systems and Adobe and Oracle. And we were to do a hotel when interest rates were four and a half.When they went up to 7-8, it became more of a quagmire. The property sits empty, but I’m preparing to either lease it to a robotics company, the Fifth Addison Square Foot Building for the next five years, or perhaps do a supercar owners club where we do storage for Ferrari, Lamborghini, Maserati, Aston Martin, et cetera. I’m a Ferrari person. I’m in Ferrari club. I’m one of the more-
important customers of Ferrari, I get special cars that people can’t get. And from those relationships, I don’t think it’s going to be difficult to find 300 to 350 people to pay $850 to $1000 a month to store their cars out there. It’s the wealthiest county in the United States, Santa Clara County. And the property’s five minutes from Levi’s Stadium, 10 minutes from Santa Jose Airport.
20 minutes from Palo Alto, Stanford University, and it’s a huge wealth base of people who drive Teslas for their neighbors to see, but keep their Ferraris and Lamborghinis tucked away. So the model will work, and it should keep a nice income on the property once I break ground. I’ve gutted the entire building for the purpose of this, so.
Erika (19:12)
That is really exciting and really unique. I think when people create something that they can’t easily find anywhere else, that it’s easy to bring people into that space.Jeffrey Jacobs (19:24)
Yeah, I’ve considered looking into the crowdfunding for investment partners on it. I’ve been talking to some investment banks. I spoke with Hagerty, the company that does the Blue Book, and they were interested, but they didn’t want to give me the 50 % of the gross that I wanted off the top. But I’m one of the owners of the building. It’s in a fantastic location.We’ve got a hotel plan for the future when interest rates come down and residential components, which will make me a lot of money. But for the time being, I think that a nice few million dollar cash flow on this type of business is nice money for my pocket and it’s also nice to take care of the $400,000 of property taxes every year.
Erika (20:06)
Yes, yes, those tax strategies are important there. Well, Jeffrey, this has been great for our listeners who want to connect, learn more. Maybe they want to collaborate with you. What’s the best way for them to reach you?Jeffrey Jacobs (20:21)
people can reach out to my email.It’s integralnyc66 @ gmail.com. So if you want to do it that way, if you want to help me, I can.
Erika (20:33)
got it.Yep, yep, we’ll take care of that. Well, again, Jeffrey, I appreciate having you on here. We need more people in this space who are doing things the right way like you with your resilience and your market expansion strategies.
Jeffrey Jacobs (20:50)
I’m small right now. dream of being big in the future, but if it doesn’t happen, I still feel like I’m big right now. I’ve been able to largely live off the investment properties since I’m 30, and I live a good life, you know? But I just think in my mind, there’s not things that I want to buy at this point. It’s more just to see something large. I’ve never built ground up before, and I want to build ground up something tall, something big in the future. So that’s kind of where I’d like to be.Erika (20:53)
YouYeah, that’s exciting. Thanks for being here. And for our listeners, if you enjoyed this episode, make sure that you’re subscribed to the Real Estate Pros podcast. We’ve got more conversations lined up with operators like Jeffrey who are out there building fantastic real estate empires. We’ll see you on the next episode.
