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Show Summary
In this episode of the Real Estate Pros Show, host Erika interviews Joel Owens, a seasoned expert in commercial real estate, particularly in triple net properties. Joel shares his journey from the restaurant industry to becoming a successful real estate broker, emphasizing the importance of location and market dynamics in investment strategies. He discusses the appeal of triple net properties for passive income and the significance of understanding the market to navigate challenges effectively. Joel also shares valuable lessons learned from his experiences in the field, highlighting the importance of building long-term relationships with clients and the critical role of location in real estate investments.
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Investor Fuel Show Transcript:
Joel Owens (00:00)
I could own an asset where the business deals with the employees and all that other BS. And then I own the building and I make as much or more money than they do running their business through the real estate appreciation of the property and tax depreciation. And I can be passive at the same time and collect mailbox money.Erika (01:52)
Hey everyone, welcome to the Real Estate Pros Show. I’m your host, Erika, and today I’m excited to be joined by Joel Owens. He’s been dominating the commercial real estate space. Joel, it’s awesome to have you here today.Joel Owens (02:06)
Thanks.Erika (02:08)
think our listeners are going to love hearing how you’ve built a powerhouse business. So let’s jump on in for our listeners who don’t know you yet. Give us the rundown. How did you get started in the world of real estate?Joel Owens (02:23)
So I used to be in the restaurant space working for large pizza operator Domino’s Pizza, my core cut, Calbunka Incorporated, and I own my own restaurant, not Domino’s Pizza, but my own independent. Then I went into real estate and then ⁓ drove part time for pizza. And then I had a ⁓ older gentleman where they’re trying to buy his commercial property overlooked, looked over the contract for the developer on behalf of myI client, had a seller, and they said I caught every out in the contract, and so they brought me on to assemble the other pieces of land. It was about 25 acres, it about 20 parcels, and I worked on that for two or three years, cut my teeth on commercial real estate. Then when the economic downturn happened, you could buy buildings for cheaper than you could construct, and so I went to sell large apartment buildings. Then I went to retail shopping centers, and then I went into the triple net single tenant space.
Erika (03:21)
That’s such a cool journey. Was there a specific moment for you that you knew that triple net properties were going to be your thing?Joel Owens (03:30)
Yeah, you know, I tried, ⁓ you know, I had owned some apartment buildings myself and some retail shopping centers and it just wasn’t the kind of life I want. So there’s a thousand ways to make money out there, you know, even in real estate or just, you know, different, you know, professions and everything. So it comes down to more like what makes you happy and what kind of optimal life you want. And so the retail shopping centers, required property management.And sometimes watching over kind of mom and pop tenants and need more hand holding and they have more issues that come up. They don’t have capital expenditures for repairs often. So you got to make an agreement with them to extend that out, to collect the payments over time. There’s just a hassle factor. The same thing with the apartment building, tenants, tollless termites, trying to get a good property manager in there dealing with not paying tenants, that kind of thing. And so that, you know,
My natural progression just landed on the single tenant triple net. I was like, you know,
could own an asset where the business deals with the employees and all that other BS. And then I own the building and I make as much or more money than they do running their business through the real estate appreciation of the property and tax depreciation. And I can be passive at the same time and collect mailbox money.
And so that was just very attractive to me. And so that’s why I.
just kind of went into the triple net single tenant and never looked back. I do have some clients that
buy some retail shopping centers, but I don’t really mess with those anymore. ⁓ I just only do the single tenant thing now. It’s just a simpler life.
Erika (05:58)
Are there particular areasin the market that you’re excited about right now?
Joel Owens (06:04)
Yeah, so, you know, I call it dirt first. So anytime you’re creating value and commercial real estate, it’s all about the dirt. People get often hyper focused on, you know, how’s the building and the tenant and the lease term and all that’s important to credit quality of the tenant. But I focus on where’s the dirt at? Like where’s it sitting in the market? Is it on a hard corner or are there ⁓ big back, I call them back acres that dodaily cross feeder traffic to a site. So as an example, you could have a Chick-fil-A that’s at a four and a half cap and you don’t want a four and a half cap percent return, but right next to it, there’s a Starbucks that you could get for six and a half cap rate. That’s right next to the Chick-fil-A and then the Walmart’s behind it. So every day there’s cross feeder traffic from people going to the Walmart and the Chick-fil-A. It also goes around your site, but your site, you got the higher cap rates, you got a higher cash on cash return.
but you still own good dirt. And so I’m, I look at like, you know, if it’s a dark Walgreens or it’s a dark bank, if I can get it at the right price for the building for less than replacement cost and I get to land too, then I can either ground lease that land or I can re-tenant the existing building or a tenant could buy the land in the building from me for a profit. My goal typically is to
double on the value ideals, a 2x equity multiple in three years time as a minimum. So if someone invests with me, credit investor invests with me 200,000 to the cashflow and equity upside of the property within three years time, they’re looking to get 400,000 backed total as just a target goal as a minimum. And why I like TripleNet specifically for the people that invest in syndications or credit investors, investors.
What happens often, you might have heard of this, there’s some credit investors that invested with multifamily syndicators and other asset classes that used a ton of debt and massage that debt just to entice investment from those investors to give them a certain preff or cash on cash return. And what they do is by taking on 65, 75 % debt,
They boost the returns from maybe one or 2 % because I know that’s what the LP investor is looking forward to invest in those multifamily properties. But the problem is the interest rates almost doubled and the rent didn’t go up high enough. And so now they’re having capital calls and they’re bleeding cashflow and they’re not distributing anything to their LP investors. And so a lot of people have lost a lot of money with these syndicators that use debt. The other thing is on the exit, when you go to sell say a 50 or $80 million apartment building, the buyer is not paying cash.
they’re using debt. And so if you can’t time that debt market cycle properly, when you got to exit your loans to your, your underworld hurt, either get a refi to a capital call with investors. What I love about triple net is there’s always some retirees, no matter whatever the economic cycle is typically 4 million and below, about 70 % of them pay cash. They’re always like, you know, we’ll pay a low cap rate. Like even if the interest rates like six stuff still trading at a six and a half cap.
because most of them pay cash and they don’t care about the interest rate. And so that’s why I love these properties. When I reposition them, there’s always a buyer, no matter the economic cycle, to buy these properties and make a profit on them. And that’s why I love this space.
Erika (09:38)
Yeah, absolutely.And it really shows that you love it because you you, help other people find properties, whether that’s directly or through your syndication. How do you, you know, keep all those plates spinning, balancing all those deals and keeping profitability with yourself too.
Joel Owens (09:56)
Yeah.So, ⁓
yeah, I used to be mainly, you know, I’m a principal broker on my own company. So I don’t work for a company. It’s my company. and I’ve stayed as a buyer specialist for decades. And so the triple net space that’s kind of rare. people at my level that have closed the volume that I have, not with a team, just as individual on the buyer side, there’s maybe a handful of us in the country on the buyer side. There’s not that many of us that, know, typically what happens is if you’re a buyer,
Even if it were 10, $20 million, you see a property like you call up the listing brokerage, the listing brokerage, the giant corporations. have three people on a team, the director, senior director, and then they have the junior agent. They make the junior agent do all the grunt work, answer the calls from the buyers. Because they don’t make any money off the stuff they sell. Like I have friends that are senior directors and they might sell hundreds of properties a year, but they take reduced commissions to sell big portfolios.
And so, and then they, half of that commission then goes to the parent company. So they might sell hundreds of properties, but they only make maybe eight or 900,000 for themselves as a senior director. Whereas I get to keep it all. I could do a dozen deals a year and make a couple million bucks for myself on the, on the broker side, because it’s my company. I get to keep it all. It’s just me, you know? And so I’m wealthy. And so I can sit there and I can tell you what I really think about a property. They’re just pushing whatever’s in their listing inventory.
the seller has given them to sell. The developer, the pension fund, the insurance company said, sell this, get it off our portfolio. It be a mediocre to crap property. They want to answer no questions for the buyer. They want to slam them in. And then if it falls out in four weeks, they want to slam another buyer in because it’s a volume game to them. They don’t have time to deal with buyers one-on-one. Me, I’m different. I do so many deals a year. If I have a client that’s worth 10 million or whatever it is,
I can spend the time with them. They’re an expert in their field, but they don’t know anything about Triple Nut. wrote a book on Triple Nut and I have tons of information out there for people to review. And then I walk them through the process. It’s not like I just hand them off. When we’re under contract, I’m reviewing the PSA, I’m reviewing the lease, I’m reviewing everything alongside the attorney, the commercial mortgage loan, capital markets broker, everything. And then even post-closing.
when they want to decide if they want to sell in a couple of years and 1031 exchange into something else or they want to acquire another property, I’m there with them through that whole process. So I view it more as a relationship long-term than a transaction. So that’s why I’m picky as to who I want to bring into my inner circle because I’ve got assistant clients and it’s like, really want syndicator, know, accredited investors, I want to invest me in the syndication side or own direct. I really want them to value that relationship.
I’m not looking for someone that’s like, I got 25,000. I want to put around 40 different syndicators and put some tiny amount. That’s not the person I’m looking for. I’m looking for, you know, ones like for triple net, you’re my triple net guy from a syndication investments. I’m going to put in, you know, 200,000, 500,000, a million at a time, you know, and just keep growing with you and buy on direct. That’s those are the types of clients that, that I work with. And the other thing about triple net too, that people don’t understand.
I always make this analogy. When you’re in the residential space and you might flip houses or you’ve owned 10 or 20 property rentals and maybe make 100, 200,000 a year, maybe your net worth is two or three million bucks. In this residential space, you might be considered like a big fish, right? But when you get into commercial, that’s like the beginning, right? You’re like a minnow swimming among the megalodons. Like a…
$2 million triple net properties equivalent to like a $200,000 house, know, in residential is kind of how I tell people, you know, so that they understand it. So typically to find something good, you need to be in a strong suburban area. You need to be about two and a half million and up in price, putting about 35 % down. And the difference with me is since I’m a specialist, you work exclusively with me, I’m looking for the off-market properties, the pre-market properties. I’m looking everywhere for the diamond properties. I’m not just
I don’t have a mandate from a seller to just sell some crap, to get more listings again.
Erika (14:53)
So what’s that process like for you when you’re looking for these deals? Do you have a system in place that helps you with that?Joel Owens (15:43)
Yeah, so what happens typically is someone goes to my website, the nninvest.com, they click start today, they fill out the form, ⁓ they tell me their liquidity and their net worth. I get in with my capital markets mortgage broker if they want to use debt, if they’re paying cash, I don’t do that. He pre qualifies them for free. And then at that point, we set up a phone call. I talked to them about their specific goals. And then I discussed theory versus reality, you know.they might have seen a little blip of something about triple net and might have it in their mind that they can find this and buy this at this and make this return at everything. And I’m the one that’s been doing it 21 years and sold a billion dollars worth of it. And I’m the one that knows the realities of it and each price point and each state and each market for the credit quality and how much debt you can get on it. I already know all this stuff. don’t even, I used to a bunch of years ago.
I have software where you punch in all this stuff and it tells you the cash on cash and all this stuff. It’s all in my brain now. I can just do it in like five seconds. I can just tell you what it’s going to be and if you’re realistic or not. And so that’s why I have that call with them. And then after that call, they see my exclusive buyer agreements for six months only related to triple net properties only. They work with me exclusively. And then from that point on, depending on if they have a 1031 exchange, we talk about timing.
So if you have a 1031 exchange, a triple net seller is typically only gonna wanna deal with you if you’re under contract to sell your property and the buyer has gone non-refundable with their money and passed contingency and they’re checking out a closing, or if you’re in the 45 day ID period. They’re not gonna go under contract with you if you just put your property on the market for sale, or if it just went under contract and your buyer can still back out, because they don’t wanna tie up their property on the triple net side. So what I do is,
with what I call as a soft search. So often tell my 1031 clients, what we need to do is build in a 30 day extension period after your buyer goes hard with their earnest money on the property you’re selling so that you have more time in addition to that 45 days. So that way we’d give you like 75 days. And then that gives us more time to search for the correct property for you, the most optimal property. And the goal, even though there’s three selections, really by the time we’re making the three choices,
We’ve already selected one, we’re under contract on it. We’ve already been getting the reports back or basically checking down the closing. Because the reality is if you choose one property, the second or third property, if you had to jump to those, if they’re good properties, they’re probably under contract and con anyway. can’t go to those properties anyway. So I do a soft search in the beginning and as it gets closer, I ramp up the intensity of that search and I save these properties to their file. Because sometimes they’re great property, but the cap rate’s too low.
But maybe like in two months, the seller will be more motivated to do a deal now than they were two months ago. So I saved those properties in their file. There might be a match and I do a bunch of front work. So I have a, LOI that we submit that has a confidentiality component in it. And I want to see the, the lease and the amendments and all that stuff before I ever go, before we ever go into contract. Because with the 1031 exchange, you can afford for some problem to happen and have a failed exchange.
And also it’s different than, you know, apartments or residential in triple net, each contract is different. So a commercial retail attorney on each side will have a custom word document that’s redlined back and forth. And that process usually takes a week and a half to two weeks. And that cost of all this may be about 2000 bucks for that. And so you really have to allocate time to negotiate that purchase and sell agreement.
From the time that we find the property and do the LOI to the time we close on the property, that’s about a 60 to 75 day
Erika (19:43)
Well, you had said earlier that you have 21 years of experience. So I’m sure you’ve got some stories in there, you know, with all your experience, was there a moment in your real estate journey that a deal went sideways or you had to pivot fast? Can you share one of those moments and what you learned from it?Joel Owens (20:06)
Yeah. So sometimes, I mean, there’s multiple, you know, there’s tons of stuff I’ve seen over the years. So for a client, one time there was an auto zone, or as a ground lease, auto zone built a building and we did an updated survey before we closed on the property. But what happened is they built part of the sidewall of the building on a utility easement that was underneath it. wasn’t supposed to be. And so insurance would ensure the building. And so.Our options were we either had to take out part of the wall and then set the building, which that wasn’t going to happen. Or we had to get a, a variance that said from the city and also from the utility company that they were never going to alter where that easement was there. And so we had to go to the, we had to go to the city and file a request. Well, they didn’t tell us that the mayor was retiring. And so when we got on the docket.
They said anything that’s not official city business, we’re pushing in the next docket because the new mayor came in. And so the loan was almost about to come do the fixed rate that my buyer was going to get with this 1031 exchange. And so we had to set up an agreement with the developer where the developer was going to give us a whole 30,000 in escrow. ⁓ so that, you know, if my, if my buyer’s interest rate went up because we can’t get it done in time from the adjustment, then we got that money to offset what he would have lost with the interest rate.
Luckily, we got the sign off like two days before the loan was supposed to close. We had to go on the city docket like three times. ⁓ And that’s one of my clients that owned one. Now, I have a property right now that is a very interesting one. So I bought ⁓ a property a bunch of years ago with a syndication. We bought it at auction.
It was interesting. So they had a big mall there that was torn down and an industrial developer built an Amazon where the old mall used to be. And so you had a road that went around, you know, how you kind of drive around the circle around the mall and you got the little smaller buildings around it. And so I bought one of those buildings. I was right next to the Amazon. Well, you know, after coronavirus ended, Amazon built all these new buildings, but the volume of deliveries, you know, went down because people wanted to drive and get out now, you know.
And so they had like a skeleton crew there, but not a full building. And so when I tried to lease that vacant building I bought up, the tenants wanted to pay a super low rent because Amazon wasn’t open yet. And they wanted to ⁓ say, when Amazon opens, we’ll pay you more rent. I’m like, well, I’m not going to do that. I’m just going to wait and leave it vacant then, you know, because I’m not going to sign something and you get the benefit with a low rent. And so what happened over time is a developer came along with a investment grade credit tenant.
And they reviewed, their attorney reviewed all the title work. And when they were dissolving a, an REA association, if people don’t know, was kind of like a homeowners association for residential, but it’s for commercial, you know, has, ⁓ know, easements and, know, covenants, like you can’t have another paint store here. If there’s a tenant with another paint store and that whole, you know, mall development. And they were supposed to have dissolved all that, but there was a remnant piece that never got dissolved. And of course it said, you’re not allowed to have a paint store.
and this investment grade credit tenant is a paint business. And so what happened is, is my title company missed it when I bought. I could have sued them because they missed it, but then I would have been involved in years of litigation. I would have eventually won, but it would taken years. So what we’ve done instead is we filed a quiet title action and we had to go to all the other…
owners, adjacent owners to sign off to quiet the title. So you can file a quiet title action where it goes to court and then that could take like, you know, five or six months that way for it to eventually get dissolved. Or once you file it and the complainants are served, then you can get them to sign off on the letter early where it clears the title issue where you don’t have to go through the, it’s been filed in the court, but you don’t have to go through the whole process. takes longer. So where we’re at now is they’ve talked with all their attorneys.
and they wanted the language amended in the termination letter for the title issue and they’re fixing to sign off on that and then this developer will then be able to close in about two months after that. So this one property that was next to the Amazon that I thought would go quick because of this title issue it’s taken a couple years with that. But the good news is we’re making great money on it. It’s still going to be a great return. So like all my deals even where I had like some issue come up I’ve made money on all of them. never ⁓
You know, my deals, haven’t lost money. I’ve always made money. You know, it might be a single sometimes instead of the home run you thought you were going to get. But, you know, I’ve always done good on my deals. I’m real cautious when I buy stuff.
Erika (25:08)
Does that go back to what you were saying earlier about buying it for the dirt?Joel Owens (25:15)
Yeah, so yeah, so the principle is so they don’t often talk about this, but there’s there’s business life cycles typically, right? So Walgreens been in business 100 years. That’s an anomaly. There’s only a handful of companies that last 100 years. You know, then there’s another handful of companies that last 50 years. Typically, when you see a quick service brand that they you know, they go boom real fast and start adding these locations going throughout the whole country and then they get bought out. They might have like a 20 year lifespan Max.or 30 year lifespan. If you have the quality dirt in a strong suburban to urban core area, then even if that tenant goes out, say 15 years into the 20 year lease that you have with them, that area is still going to be supply constrained for land and it’s going to have high income and it’s going to have high population levels. And the tenants are going to desire to expand in those areas or move up to a bigger spot within that area, more dirt.
And if you have the premium piece of land in the good location, your rents are often going to be way less for them than what it would cost a new developer to build like new construction, because they have to buy the land at that new higher price. They have to pay the market materials and they have to pay for the labor. So what often happens is if you have a building that’s 10 or 15 years old, new construction, that tenant might have to pay $45 a foot on a lease for that developer.
pencil and make profit on that. Well, if I bought it cheap enough for them to reface that building and go in, they could sign a lease with me for $28 a foot. And I still make like a lot of money on the upside and they’re paying like 12, 15 bucks less per foot for their business while they do the same sales and make more profit because they’re paying less rent, but they still have a strong location with great dirt, you know, so ⁓ that’s what they look at. So that’s why I’m always about the dirt. The dirt is like the number one thing in commercial.
Erika (27:09)
Well, Joel, this has been such an insightful conversation. Before I let you go, if someone wants to reach out, connect with you, learn more about triple net deals or syndication opportunities, what’s the best way for them to get in touch?Joel Owens (27:25)
the best way is ⁓ the www.NNNinvest.com and there’s a form to fill out start today on there. We will be in touch. You just fill it out, hit submit. And there’s also two books, my personal life story that’s in PDF and also a book on triple net that’s in PDF that they can look at. And they can also find me on.BiggerPockets.com. I’m a moderator on there and I have over 15,000 posts where I’ve answered questions over decades of time on there. And I’m on a bunch of other podcast shows. I’m all over the place. Basically you go to my website, you’ll see I have tons of testimony, video testimonials, picture testimonials. I’ve been doing this a long time. Um, you can just go there and just spread all the material. And when you’re ready for a call to talk about your specific situation, just felt the start today form and I’ll be a touch and reach out.
Erika (28:21)
of you’re not just building your own portfolio, but you’re helping other investors succeed in this space as well. Thanks for dropping all this knowledge today, Joel.Joel Owens (28:30)
All right, appreciate it. Thank you.Erika (28:32)
And for our listeners, if you got value from this episode, make sure that you’re subscribed to the Real Estate Pro Show. We’ve got more conversations lined up with operators like Joel who are crushing it in the real estate world. We’ll see you on the next episode.
