Joel Friedland’s Class B Industrial Strategy for Safer Returns

Joel Friedland (00:00)
And my boundary is no debt. That’s my boundary. ⁓ We are, I don’t know if you’ve heard of keeping kosher, a Jewish thing where people keep kosher. ⁓ Members of my family keep kosher and friends of ours do. And what that means is just it’s biblical. It goes,

back thousands of years that people who take this seriously,

Cody Crabb (02:00)
Welcome back to the Real Estate Pros podcast. I’m Cody Crabb with Investor Fuel. And today I’m joined by Joel Friedland, senior partner at Brit Properties in Chicago, where he focuses on Class B industrial real estate with his zero debt strategy. Joel, thank you for coming on today. We’re so happy to have you here.

Joel Friedland (02:17)
Cody, thanks, it’s great to be with you.

Cody Crabb (02:19)
So for people meeting you for the first time, give us the quick version. How did you get into real estate ⁓ and how did it morph into what Brit Properties has become today?

Joel Friedland (02:31)
Yeah, well, I am 66 years old and I’ve been in the industrial real estate business since I was 22, just after I graduated from the University of Michigan. Yeah, just, started, it’s changed a lot. Yeah, it’s changed a lot, but the basics are the same. The basics are that we have to find tenants, which are manufacturers and distributors, and we have to keep our buildings filled.

Cody Crabb (02:42)
Wow. So things have changed a little bit since then, just a tiny bit, right?

Joel Friedland (03:00)
and vacancy is death.

Cody Crabb (03:02)
Hmm. Yeah, yeah. I mean that stands to reason. ⁓ So all right, so give us a little bit of background on Brit properties. I said in the intro, I said you do Class B industrial real estate and you have a zero debt strategy. I think that’s kind of caught people’s ears. I’d love to hear more about that. How did that start and why have you kept that up?

Joel Friedland (03:24)
I started investing in industrial buildings when I was in my 20s. And what I did was I put together groups of investors. We’d call them syndications. And when I was in my 20s, I did little deals and I raised money at clips of $20,000 each from investors. And I’d buy a building with a group of say 40 people for $800,000. And we would have it leased to a single tenant that would be typically a manufacturer.

manufacturers of protein bars, and we have manufacturers of cell tower equipment and magnets and anything you can think of. Chicago as a metropolitan area has 16,000 industrial buildings. And over the years we’ve bought over a hundred of them, 108 to be exact. And we’ve sold 82 of them. So we have 26 industrial buildings in our portfolio. And as I got older and older,

They got bigger and bigger and my investors got richer and richer. And so now when I raise money, it might be for a $12 million deal, but this is what makes it really difficult. In 2008, I got crushed. had 50 industrial buildings, mortgages on all of them. And then the downturn came. That’s this famous downturn, which people say was the greatest recession since the great depression.

I think some people feel that 2008 was equal to or worse in some ways than the Great Depression in 1929. I’ve got a book here called 1929. It was written by Andrew Ross Sorkin. And I read about what happened. Real estate was hit in 2008 like the stock market was hit in 1929. So I had seven banks and I owed $70 million in personal guarantees in addition to $200 million worth of mortgages.

And because of that, banks don’t have a sense of humor. And you know, you know, my, saying there’s a, there’s a biblical passage, ⁓ and it’s in Proverbs and it’s that the borrower is a slave to the lender. And man, I felt like a slave to seven lenders in 2008.

Cody Crabb (06:27)
Well with that amount especially, like that is not, that’s a lot of money to owe in 2008, yeah.

Joel Friedland (06:34)
a lot and i had two hundred and fifty investors and they were counting on me to keep their money safe and i wasn’t able to keep all of their money safe so i took a period of time off and i said i’m a regroup and then in twenty nineteen i turned sixty and i said i’m gonna get back in the game i still had two hundred and fifty investors i didn’t lose everybody’s money we just went through a really hard time

And I got together with a group of eight of my investors and I said, guys, I don’t want to lose anyone’s money. How can we be safe, like to the point of not losing money, almost no matter what happens to the economy. And they all said, keep your mortgages low. A typical mortgage for a typical real estate syndicator like us is 70 % loan to value ratio. That means they come up, if you do a $10 million acquisition,

That means that three million is the cash raised from the investors. So maybe you get 30 investors at $100,000 each. And then you go to the bank and you borrow the other seven million. So you’ve got seven million of debt and you’ve got three million of equity. That’s called a 70 % loan to value ratio. And my people said, why don’t you do the opposite and have 30 % loan to value and 70 % equity? And I said, how about if we do no debt?

How safe would that be? And they all said, well, that sounds kind of extreme. I said, OK, we’re doing it.

Cody Crabb (08:06)
Yeah,

good. That’s what I was going for. Sounds good, yeah.

Joel Friedland (08:10)
Right? And some of them said, well, that’s ridiculous. You’re being an idiot. said, well, I’m doing it. And guess what? All eight of them said, maybe it’s not so stupid. Let’s do our first deal. And they all invested. Cause if you’re in a no mortgage situation and anything bad happens to the economy, you’re still safe because no one can take it away. The worst thing that happens is there’s a vacancy and you’re

your distributions. So we do quarterly distributions to the investors. Actually, they all went out yesterday and I’m starting to get all these texts. Hey, we got our money. So now our typical investors have a minimum investment of 50,000. The average is about 100,000. And when I put together a new deal, we just raise all the money and it’s a bottleneck. It’s hard. It’s hard to raise all the money compared to borrowing.

70 % and only needing to raise 30%. The other bottleneck we have, which is really difficult, is we only want to do good deals, which means we want to buy buildings that we love that have all the correct, and in industrial you need good geometry. You need great loading docks that are easy to maneuver into for semi-trailers. You need great parking. You need high ceilings.

the building has to be laid out on the site just a certain way. So we’ve narrowed down the 16,000 buildings in the Chicago area to the 700 we like the most. We own 26 of them and we’d like to buy all the rest of them. But sellers are usually families that have owned the companies that occupy the buildings. These manufacturers started by grandpa in the 1960s.

Family’s rich, they’re making a million or more dollars a year owning the company and they own the building and they just don’t want to sell.

Cody Crabb (10:47)
Yeah, they’re just fine where they are. They don’t want to change anything.

Joel Friedland (10:48)
⁓

yeah. I made a video yesterday of a guy. walked into his lobby of his building and I asked for him by name because we know all the names of the 700 owners. So I said, it’s a lot of work, man. Yeah. So I walked into this building and I asked for Tom and Tom comes out. He says, you again. He says, I told you we’re not moving. Never. My sister and my brother and I own the building.

Cody Crabb (11:01)
See, that’s impressive by itself. Yeah, you’re doing your research. Yeah.

Joel Friedland (11:17)
Grandpa built it in the 1960s and we love our business. Get out of here. I said, come on, Tom. says, okay, thanks for coming. That was good.

Cody Crabb (11:29)
Well, and I think there’s something to be said because someday Someday it’s they’re going to have it in their head that you know, maybe it would be a good idea Where was that guy that would just never leave us alone? Like what was his name? Like, you know what? I mean, I think there’s something to be said for being the squeaky wheel there because it’s not gonna last forever nothing does and so maybe one day in the recent, know recent future or near future they’ll they’ll

they’ll start thinking about that and you’re gonna be the first person on their mind.

Joel Friedland (12:00)
Yeah, I have three guys and myself and we all go door to door to the 700 buildings. And generally speaking, we try to hit all of them seven times a year. that’s 4,900 hits. And we do it door to door. It’s a lot. I have one guy who started yesterday that used to be a TV news anchor. He, he no longer is one. Something happened. He’s not working there anymore. And he, he’s starting to go door to door for us. He had his first day yesterday.

Cody Crabb (12:13)
Allah

Joel Friedland (12:29)
comes back, he goes, I love this. And then I’ve got a young guy who’s 24 and he found four buildings last year. And I have a young partner who’s I’m 66. I still do it. And my young partner goes door to door in industrial parks, also gets thrown out. Also has people who are friendly and invite us in. It depends who the person is that we’re talking to. Sometimes they want to know, what’s my building worth?

Cody Crabb (12:58)
Yeah.

Joel Friedland (12:58)
And we’ll

say we own two buildings down the street and we bought them last year for $130 a square foot. So the building’s worth about a million three. And people like to know what their building’s worth. Also last year we had five interns during the summer and we sick them on the 700 buildings and we oversaw them going door to door and they learned a lot. And last year we bought seven buildings.

Cody Crabb (13:11)
Yeah, sure.

Joel Friedland (13:30)
We brought in 40 new investors because people were waiting for us to buy buildings. We hadn’t bought any in a couple, really in about eight months. So the money just starts coming in because people say, where else can I get debt-free, single-tenant, safe buildings like this? And the answer is nowhere.

Cody Crabb (13:30)
Wow, so.

Yeah, it’s a unique for sure. I don’t know if I’ve ever run into someone that operates like that ⁓ so it sounds like you kind of ⁓ Just kind of the way that you’re describing this you kind of don’t really care What the regular strategies are like you’re just kind of like no I’ll go door to door and I’ll see visit them all then and I’ll also just you know We’ll pay it all the way off who cares and it’s it sounds like you’re just like no I figured out what works and I’m gonna do it and there you go Whatever if people think it’s weird, then they’re welcome to do that

So how did you get to the point where you did that specifically, where you were just like, no, this is what works and we’re going to stick with it.

Joel Friedland (15:15)
It’s a great question. I’m going to go to a place you wouldn’t even expect me to go to, which is boundaries. My mother is a therapist. She’s 89. She still sees about 10 people a week. My daughter’s a therapist. Yeah, my dad also was one. And when the family gets together, sometimes the discussion turns to what makes a person emotionally healthy. And the answer is

Cody Crabb (15:29)
really wow

Joel Friedland (15:43)
having good boundaries, having good boundaries with your relationships, with your family and with your values.

And my boundary is no debt. That’s my boundary. ⁓ We are, I don’t know if you’ve heard of keeping kosher, a Jewish thing where people keep kosher. ⁓ Members of my family keep kosher and friends of ours do. And what that means is just it’s biblical. It goes,

back thousands of years that people who take this seriously, don’t eat seafood and they don’t eat pork.

Now, I’m not religious and I love bacon and I’m big into shrimps. So that’s not one of my boundaries. But if somebody say is really religious and they say, I’m strictly kosher, that means they won’t eat seafood. They won’t eat lobster or crab and they won’t eat pork chops or bacon.

So a boundary is I go to lunch with somebody who thinks they want to invest in one of my deals that’s debt free. And they say, Joel, if this deal worked out and we put 50 % debt, it would still be safe and we’d still be OK. And why wouldn’t you just do that? It’s a better return. And my answer to them, it’s a boundary for me. let’s say I’m having lunch with them.

And I say, so you keep strictly kosher, right? Yes. said, so why don’t you just have a little tiny shrimp? Like, why don’t, just a bite, just so you can taste the shrimp. Right, right. So if you have a boundary, there’s many different boundaries, which one is honesty versus dishonesty. One is sharing personal information with people you don’t know well before most people do.

Cody Crabb (17:20)
Yeah, that barely counts.

Joel Friedland (17:38)
That’s a boundary. Addictions, ⁓ people who have alcohol addictions, drug addictions, gambling, sex, whatever it is, they go to meetings. They sit in the meetings and they say, it’s not that we’re gonna just have a little more ⁓ weed in our lives. There’s none. I’m not gonna just have a little more alcohol. I can handle it. It’s a boundary. And it’s a boundary for mental health and for safety. And for me, no debt.

is a boundary because I went into a depression, a mental health disastrous depression in 2008. And I don’t want to ever be there again. The same way my friends who have an alcohol problem don’t want to get into that downward spiral where they abandon their boundary, where they go to meetings to stop doing that and just do it a little bit and see if they can restart.

just a little tiny bit, test themselves. So there’s no testing. It’s just no debt. Safety, no debt, mental health, sleep well at night. And that’s my thing.

Cody Crabb (18:44)
Yeah.

Do you feel like going all in on something like that with no exceptions gives you better results than not doing that?

Joel Friedland (18:59)
⁓ it gives me less of an uncertainty in my mind about things.

Cody Crabb (19:06)
So regardless,

whether it does or not, you feel better. Yeah.

Joel Friedland (19:09)
Yeah,

and sleep better. And so do my investors. I have a group of people who say, do you know anyone else, Joel, who does what you do with no debt anywhere in the country? And the answer is no, I really don’t. I don’t. And they wish that I knew someone who did what we do. I wish I knew someone who did what we do, because I’d invest with them.

Cody Crabb (19:31)
Yeah, there’s something to be said for, you could get double, it’s like that thing, you know, you always hear like the would you rather type thing, like would you rather have a million dollars or ⁓ one in three chance at $10 million? Sure, $10 million is a lot more money, but like really? You’re gonna risk that? So there’s something to be said for that, I think for sure. And I think especially as people are kind of,

A lot of people that listen to this podcast, ⁓ our listeners use real estate as a way to get a safe retirement and to provide for their family going forward and creative some resources for their future family. And I feel like that’s not something you can get necessarily. The risk is good because it gets you more return, but the safer you play it, like you said, it’s gonna be.

It’s just gonna be safer, even if it’s less money. You’re gonna feel like you’ve got a more secure future.

Joel Friedland (20:39)
Yeah,

I’m not saying that anyone should do all of what we do, just debt-free and everything. And I’m not saying people shouldn’t take risk. Yes, you should take risk, but you have to allocate certain parts of your investment portfolio into certain aspects of investing, whether it’s the stock market bonds, just cash and treasury notes, treasury bills. I believe that there’s a place for

Cody Crabb (20:59)
Yeah.

Joel Friedland (21:08)
every kind of investment. I’ve got a friend who’s got what he calls play money. He’s very wealthy and he says, I’ve got 300,000 a year that I like to put at big risk to make giant returns on things that if I lose that money, I won’t care. I think he’ll care, but it won’t change his life.

Cody Crabb (21:24)
Wow. Yeah,

it’s kind of like going to a casino and leaving your wallet up in the hotel room and you just bring some bills down with you. that’s just, you’ve just already mentally separated with that money. It’s just already gone.

Joel Friedland (21:41)
It’s interesting you’re talking

about gambling because I believe a lot of real estate investors and stock market investors and day traders are actually addicted gamblers and don’t know it. yeah, and I think a lot of them need help and don’t know it.

Cody Crabb (21:52)
⁓ I would absolutely agree with that.

Yeah, crypto has not helped with that either. You can kind of do everything right there on your phone and it’s all just so quick and easy. ⁓ Well, see, the message I really take away is not that you shouldn’t take risk. The message I take away is ⁓ sometimes the textbook version of investing, how everyone says you should do it, is maybe not the way for you. And there is maybe a way to do what makes sense for you in your situation that helps you the most.

And don’t be afraid to do it, even if it’s a little unconventional, because it’ll help you out.

Joel Friedland (22:32)
Yeah,

we look at it this way. We tell people, if you’re going to invest with us, don’t invest more than 3 % of your personal net worth in any one of our deals. That’s number one, because you need diversification. Number two, you should never invest any more than 10 to 12 % of your entire net worth with any single sponsor or in any single investment. And the reason that I say that is,

It could go bad. There could be a problem. There could be a badly run company that goes bankrupt, a badly run building that gets in trouble and is vacant. I really believe that diversification is critical. And I tell people, if you’re putting more than 12 % of your net worth in my stuff, you’re crazy. That doesn’t make sense. You should have eight investments at minimum with 12 % each.

Cody Crabb (23:08)
Sure, yeah.

Joel Friedland (23:30)
And if you’re into something with 30%, what happens, these endowments and ⁓ pension funds, they have allocations to certain things. They have allocations to real estate. They have allocations to timber. have allocations. Of course. And when something goes up a lot, their allocations go up and they need to get rid of some of it so that the allocation goes back to where it’s supposed to be. They don’t want it over-weighted and too heavy in one.

Cody Crabb (23:43)
Yeah, even they’re doing it, yeah.

Joel Friedland (24:00)
area of investment. And I think that’s a great philosophy. So most of my investors do a lot more real estate than they probably should. And a lot of them got really badly hurt in the last few years when interest rates went up and they had floating rate debt. A lot of our friends who invested in those things have lost all their money. A friend of mine, Mark, sent me a text yesterday that the multifamily building in Nashville that he invested in

Cody Crabb (24:16)
You

Joel Friedland (24:29)
totally gone and he is so pissed. He is so pissed and that sponsor just didn’t really mitigate their risk properly.

Cody Crabb (24:41)
Yeah, like you said, you should feel like it’s play money. Maybe it should hurt a little bit, but not so much that it scares you. I think that’s a good way to look at it when you’re taking big risks and so otherwise diversifying. think this has been really, really valuable. think the big takeaway is not everyone should copy your exact model, but think more seriously about what kind of risk are you comfortable with? What kind of boundaries do you want to set? What kind of investing lets you do what you want to do? Maybe you do want to risk everything.

Joel Friedland (24:50)
Yeah.

Cody Crabb (25:11)
but you better do it on purpose. It better be intentional. ⁓ Well, Joel, thank you so much for joining us here today. This has been really helpful for our audience. For people who want to learn more about you and Brit properties, ⁓ where should they go?

Joel Friedland (25:28)
Brit Properties website, BRIT, BRIT with one T, properties.com.

Cody Crabb (25:35)
And can anybody in the US invest with you or is there more qualifications there?

Joel Friedland (25:42)
Yeah, they have to be accredited. That means they have to have net worth ⁓ that’s significant, over a million dollars aside from their personal home. ⁓ Most of our investors are fairly wealthy.

Cody Crabb (25:51)
Gotcha.

Gotcha, okay, so if you’re hearing that and you fit that qualification, and this sounds interesting to you, go ahead and reach out to Joel and his team. Thank you so much again once more for joining us today, and thank you listeners for joining us too. Don’t forget to like, subscribe, comment, all the things this video, especially if you got something out of it, which I know you did. And thanks again Joel, I’ve said thank you like a thousand times, but one more, thank you.

for joining us and giving such awesome advice to our audience. Have a good one.