Why Office Buildings May Be the Best Opportunity Right Now with Ash Patel

Ash Patel (00:00)
My advice is avoid the rat race. Do not get into residential. Go into commercial. And you know, people think it’s too expensive. It’s not. I can find you, you know, a little strip mall. That’s the same price of a single family home.

that makes way more money than anything residential.

Michelle Kesil (01:53)
Hey, everybody. Welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil And today I’m joined by someone I’m looking forward to chatting with, ⁓Ash Patel of Invest Beyond Multifamily, a commercial real estate investor with about 20 years of experience. So excited to have you here today, Ash.

Ash Patel (02:13)
Michelle, happy to talk to you. Let’s give your audience some value.

Michelle Kesil (02:16)
Amazing. Let’s dive in. First off, for those not familiar with you and your work yet, can you share what your main focus is these days?

Ash Patel (02:24)
Yes, give you a quick background. So excuse me, 15 years in the corporate IT world. And I left that, I don’t know, 2009. And ever since then, I’ve been doing non-residential commercial real estate.

So office, retail, medical, industrial, anything that does not have residential tenants in it. And the whole reason for that is my very first building was a mixed use building. So apartments over a retail store. And I saw that the apartment dwellers were destroying my property and the store owner was actually improving it on his dime. So became a full-time commercial real estate investor.

17, 18 years ago.

Michelle Kesil (03:08)
Amazing. And so what markets do you operate out of?

Ash Patel (03:11)
We are all over the Midwest and Southeast.

Michelle Kesil (03:14)
What would you say have been some of the main keys that have allowed your business to be able to grow and run successfully?

Ash Patel (03:23)
I think it was getting over the fear of raising capital and also hiring key people. I’ll elaborate on those. So raising capital for 10 years, I did all of my own deals, too afraid to take other people’s money.

until I saw that I would actually be doing a lot of my friends a favor by letting them invest into our deals because they were making the dumbest investments out there. know, a bunch of stupid crypto bars, restaurants, marijuana companies, and they were losing money. They were investing because they had fear of missing out. And a lot of these high net worth people focus so much on their craft or their business. No one ever teaches them how to invest their own money.

So once I took on accredited investors ⁓ business skyrocketed And sorry the other one was hiring people I was too stupid to hire people I had a you know, I used to pay these coaches some of them were thousand dollars an hour and they would always tell me you need to hire like four or five people and

I don’t know what it was that I couldn’t get out of my own way. In the corporate world, I managed dozens of people, but for whatever reason, it never occurred to me that I needed to hire somebody in my own business. So once I got out of my way and started hiring people, another game changer.

Michelle Kesil (04:49)
Yeah, amazing to receive that load off and that support.

And so why specifically commercial real estate?

Ash Patel (05:45)
Yeah, there’s a vicious cycle.

in real estate where people likely start off with a residential house, the house down the street, and then maybe they get a duplex and a quad and then an eight unit. And they continue to progress in apartments and they think that’s the end all. Maybe their goal is to have thousand apartment units. The problem with that, I know most of the big players in that industry, their margins are razor thin. And now that interest rates went up,

had variable rate loans they’re getting slaughtered so apartments are going into foreclosure left and right people are still overpaying for new deals there’s just way too much competition in apartments because the barriers to entry are much lower

And even with lending, can get agency debt. If you don’t have the balance sheet, you could bring somebody in to ⁓ put a down payment in. You could bring somebody in to sign on the loan. And all you really have to do is find the deal, hire a property management company, and you’re good to go. With what we do, retail, industrial, medical, office.

Every deal is so different. Every lease is different. So give you an example. We have a strip mall that we actually just sold, but it had about a dozen tenants. Every lease was written by a different attorney and some in different decades. So it’s there’s no cookie cutter formula to doing what we’re doing.

you have to go in and analyze each deal like you’ve never done one before. ⁓ In every lease, have to read word for word. Some of them are 70 pages long. And that’s what keeps people afraid of what we do. So we have such little competition.

Michelle Kesil (07:31)
Yeah, amazing. And so.

Ash Patel (07:33)
Do you invest in

real estate? Let me ask you this. Do you invest in real estate? Yeah. Okay.

Michelle Kesil (07:35)
me personally? I have not yet.

Ash Patel (07:38)
My advice is avoid the rat race. Do not get into residential. Go into commercial. And you know, people think it’s too expensive. It’s not. I can find you, you know, a little strip mall. That’s the same price of a single family home.

that makes way more money than anything residential.

Michelle Kesil (07:59)
Yeah, amazing. And so what would you say are some drawbacks of commercial or why do you think people steer from it or are more comfortable with residential?

Ash Patel (08:09)
Residential has a comfort factor because you can always find a tenant at the right price. So, you know, my mom was a residential realtor way back when, and she said every house will sell at the right price. So it’s the same thing with rents. If you want something rented out, put it out there, cheap it off, you’ll get it rented. So you can essentially stop the bleeding if you have a vacancy.

with what we do in commercial, it’s not about the money.

There might be times where you go six months or a year without finding a tenant. So we had a 30,000 square foot retail space and I think it was over a year that we went, no tenants. And that was a big hit, right? It’s very difficult to find somebody that wants to lease 30,000 square feet in retail. So that’s the biggest drawback is you need some liquidity.

to withstand vacancies. But the benefit is you make much higher returns. So that one strip mall we bought for five million and three and a half years sold it for 7.4 plus got $500,000 for selling 22 parking spots to a coffee shop. So five to almost eight million in three and a half years.

Almost impossible to do that with anything residential.

Michelle Kesil (09:33)
Right. And how does the operations aspect look in terms of operating the commercial? Yeah.

Ash Patel (09:37)
Yeah.

So Michelle, we have somewhere around $50 million of assets under management. And I have a team of one and a half or I guess two and a half people, including me. So, you know, if you had $50 million of apartments, you would need maintenance people, leasing people, property management people. We do this with a team in my little office with two and a half people. And I’m

really just the decision maker, ⁓ my operations guy and my property manager who’s part time, they do most of the heavy lifting. So it’s so much easier to manage. We rarely hear from our tenants. And do know what triple net leases are?

Michelle Kesil (10:54)
Yeah. Let me share for the audience.

Ash Patel (10:55)
Yeah, so it’s

yeah. So when you have a tenant who signs a triple net lease, the building could burn down and it’s their responsibility to rebuild it. If a car goes through the front door, they don’t even call you. They just repair it.

If the roof is leaking, HVAC goes out. ⁓ It’s all on the tenant. Now there’s various levels to triple net, right? So sometimes tenants are responsible for HVAC repair, but not replacement.

There’s so many different levels, but the point is, most of our leases, the tenants have a large degree of responsibility towards maintaining their own space. I’ve had apartments, I’ve had single family houses, and I dreaded every time somebody called me from there because it was a sink that was clogged, a dryer that wasn’t working, a dryer vent, shower drain, just nuisance stuff that I had to attend to.

tenons has a clogged sink, we don’t even hear about it. It’s their responsibility.

Michelle Kesil (12:00)
Yeah, that’s helpful, I’m sure.

Ash Patel (12:02)
is a much better way to invest in real estate than residential.

Michelle Kesil (12:06)
Yeah, absolutely. And what have been the biggest obstacles that you’ve overcome as an investor?

Ash Patel (12:13)
It’s always mindset. ⁓ So I’ll tell you a story. I was on a stage with a friend of mine named Joe Fairless and he said something that I didn’t believe. And ⁓ he said 80 percent sorry 20 percent of my success is mechanics. Eighty percent is mindset. And I’m like all right that’s easy for you to say. You’ve got three billion dollars of assets like.

Great. Like think back to the early days when you’re coming up.

Well, I run a commercial mastermind and that night I went home and I had a class with my group and I said, Hey guys, Joe said this. Do you really believe it? And overwhelmingly everybody said, my God, yes, it’s probably 90 % mindset. So for, your listeners out there, you have to remember this. It’s not your network. It’s not what you know. It’s not your knowledge. It’s truly your mindset. And if you’re around successful people, they

will overwhelmingly share that advice. So Michelle, know, anybody who thinks they can’t get to a certain level, that was me. ⁓ It’s always mindset. Find mentors, find people who are very successful. And the biggest thing you need to work on is mindset. Sounds like a cliche. I promise you that is what’s holding all of you back.

Including me right even people at the top levels ⁓ I’ve I’ve got some Accountability calls that I do with very very successful people and you’ll be amazed how all we work on is mindset These are people that never have to work again private jets But the number of mindset issues that hold them back and it’s not necessarily in business. It could be in different areas of life always mindset

Michelle Kesil (14:03)
Yeah, that makes sense that most of the limits are self-imposed and created in the mind.

Ash Patel (14:08)
Yep.

Michelle Kesil (14:10)
Awesome. And so what are you most focusing on solving or scaling to next?

Ash Patel (14:56)
Right now, we’re heavily focused on office. So.

Office is the most toxic asset in all of real estate. And what’s happening is trophy buildings are being punished because just office in general, nobody wants to touch. Banks don’t want to touch them. Lenders, sorry, investors don’t want to touch them. There is the greatest opportunity to buy buildings that once were almost unattainable because there were institutional quality assets. Now you could buy them for pennies on the dollar.

you were listeners who think, okay, look, I’m not buying a $20 million office. Cool. That $4 million office building that sold seven years ago. Now you could probably get it for less than a million. So cash flowing, incredible office properties, once in a lifetime opportunity. And it’s only because of COVID that office took a huge decline. This whole work from home nonsense, right? Which is ending.

Michelle Kesil (15:54)
Yeah, and why do you say it’s ending?

Ash Patel (15:56)
Well, Michelle, if you look at when COVID started, ⁓ employers were forced to adapt to a remote workforce, ⁓ Government shut down everything and people had to work from home. So employers like, we have to figure this out. Well, most of them were apprehensive about it, but they had no choice.

You know, you’re locked down for two weeks, can’t leave your house. You have to keep working. Your employer’s got to provide a way for you to work. So they made it work. And then the metrics came out. So on average, when COVID started, people were three hours more productive per week working from home than they were in the office. So all of these CEOs that were like, you know, this is never going to work. Now they see the data and they’re like, wait a minute, we get more productivity.

great let’s just keep it going and what happened was this large office lease that they had they’re like you know what we don’t need that we’re a well-oiled machine when our employees are working from home so we’re not going to renew our office lease everyone’s remote or they downsized and got a smaller footprint lease well let’s fast forward four or five years the latest metrics on people working from home any idea what it is

Michelle Kesil (17:14)
I’m sure they’ve shifted.

Ash Patel (17:14)
on

Yes,

you got it. So on average, they are four hours less productive working from home. So what happened was we were all very grateful that we don’t have to commute to the office. We don’t have to go in for a certain number of hours. We can work on our time at our house. And then we started gaming the system. So we started taking two hour lunches, long walks, going to the gym, walk the dog, hang out with the kids. And we became more ⁓

We became less productive, right? Because we learned how to game the system. So now, you know, all the big employers, Disney, Amazon, Metta, JP Morgan, all the Wall Street banks are saying, okay, you guys are back in the office five days a week because this is not working anymore. And there’s no collaboration. We’ve got young people that say, you know, they’re mentally isolated and whatever. So none of this is healthy. Young people need to be around others.

So the work from home era is coming to an end very quickly and nobody’s picking up on that. So Office still has a little bit of runway where you can find incredible deals.

Michelle Kesil (18:26)
Yeah, so it sounds like you’re keeping up with where trends are heading and using that data to find the next best real estate investment.

Ash Patel (18:38)
⁓ I don’t know. I don’t study a ton of data. But you’re right. I do look at trends. ⁓ I’m not disciplined enough to look at data. I fly by the seat of my pants. So it’s really just trends, right? Read the Wall Street Journal every day. ⁓

But you know, I also want to stress one more thing. So, yeah, I got 50 million dollars of assets now. But when I started, my very first building was two hundred and thirty thousand dollars. That was a mixed use building. My very first office building that I bought, I think it was about 10,000 square feet, maybe a dozen or so different tenants was two hundred and fifty thousand dollars. Right. So I started small and I scaled.

So don’t think you can’t do this if you’re listening. I literally, I put all the money I had into my first building and just continued to scale thereafter. But I work my ass off, right? So in the beginning, just grind. I mean, you’re working every waking hour that you’re not spending with your family or friends or going to your W-2. So yeah, I didn’t, you know.

I didn’t know anything about real estate when I started. I was really stupid. There weren’t these courses and masterminds when I got started. learned by making all the hard mistakes myself.

Michelle Kesil (20:00)
What was one big mistake that you made?

Ash Patel (20:02)
Ego. I think everybody, hopefully your listeners don’t go through this, but when things are going really well and the market was doing well too. So about 15 years ago, we were out on a boat and a couple of buddies were out there and they’re like, man, everything you touch turns to gold.

And I kept hearing that and I started believing it. And in reality, it was just the market was going up and I was buying complete crap hole properties that had no choice. mean, they couldn’t go down anymore. the only one way to go. Well, nonetheless, there was an estate auction where this investor bought up most of this one town.

and they were divesting it. So I ended up ⁓ bidding for

a number of properties in this town. But here’s how stupid I was. I was on vacation. I had a tenant in that town. And this town was one that I thought I could revive. It was once a tourist destination and now it was ravaged with job losses and drug use. And it was just a multi-decade decline. So I thought, OK, I’m going to go in there and do what I always do. I’m going to turn these buildings around and improve the town. Well, I was out of town.

So I had one of my tenants go there and bid on my behalf. I couldn’t even hear him on the phone. All I heard was like, ⁓ you want to keep bidding? I’m like, yes, go, go, bid higher, bid higher, until we won. I won half a dozen properties. I come back to town and I want to see what I bought. So Google Maps drive out to this town. And one of the first buildings that I bought, it was half torn down.

It looked like a missile hit it like half the building was gone and my heart sank. like, what have I done? So it ultimately took me about eight years to offload all the buildings, the mindset, the squatters that I had. It was just an absolute nightmare, but a lesson learned. Don’t be stupid. Don’t have an ego. You’re going to make mistakes. You’re to take losses. So minimize your losses. Know that you’re going to lose.

Know that you’re going to have failures and be prepared for them. And look, I see it. I see it. Sorry, Michelle. I see it a lot of people that I mentor. They have a couple of huge wins and then they want to take on these monumental projects. And it’s like, guys, you’re not ready for that yet. This is too big. You got to ramp up slower. So watch that ego.

Michelle Kesil (22:19)
Absolutely.

Yeah, absolutely. Thank you for sharing your wisdom.

Well, before we begin to wrap up here, if someone wants to reach out, connect and learn more, where can people find you and connect with you?

Ash Patel (22:47)
Very easy. ⁓ My email address is [email protected] can go to our website, invest beyond multifamily.com. ⁓ Ash Patel, Cincinnati. I’m very easy to find. I answer all my own messages and calls. ⁓ You could book a call with me. I’m very accessible.

Michelle Kesil (23:10)
Well, I appreciate your time and your story. Thank you for being here.

Ash Patel (23:14)
You’re very welcome, thank you for your time, this was fun.

Michelle Kesil (23:16)
Of

course. And for the listeners tuning in, if you got value, make sure you have subscribed. We’ve got more conversations with operators like Ash who are building real businesses. We’ll see you on our next episode.