September 26, 2024 • 31 mins
What if you could transform a small duplex purchase into a sprawling portfolio of commercial properties? In this episode, we sit down with Carlos Rovira from Florida, who takes us through his remarkable 15-year journey in real estate investing. Starting in 2009 with a modest duplex, Carlos has become a specialist in triple net shopping centers and highlights why he prefers smaller retail spaces under 2,000 square feet. Learn about his unique approach to managing properties in-house for optimal performance and his insightful strategies for acquiring properties in Miami, Kansas City, and Orlando.
As we dive deeper, you'll hear about the complexities of finding and managing commercial real estate in diverse markets like Kansas City and Florida. Carlos shares the challenges of acquiring vacant or distressed properties and dealing with undesirable tenants. We explore a hypothetical scenario to illustrate how to analyze potential deals, focusing on occupancy rates, rental income, and property value appreciation. Discover the stark differences between commercial and residential real estate investments and the incredible potential for substantial returns through Carlos’s expert property management and tenant placement tactics.
In our final segment, Carlos opens up about his capital-raising strategies and the importance of maintaining controlling interests in his investments. Hear about his journey of self-funding and raising capital from close networks, and how starting in a tough market shaped his resilience and preparedness. We touch on current market conditions, economic fluctuations, and the unpredictable nature of property transactions. To wrap up, Carlos introduces Rovira Property Management’s services in Miami, Orlando, and Kansas City, inviting listeners to connect for more information and personalized guidance.
To learn more about Tony Johnson and Timeless visit us at:
https://timelessci.com/
https://timelessco.com/
https://www.linkedin.com/in/tonytimeless/
If you would like to discuss investing in Commercial Properties create a profile and schedule a call:
https://timelessci.investnext.com/
Reach out to us directly at:
info@timelessci.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to another episode of Carolina Commercial
Real Estate Connection.
Today I have Carlos Rovira withme out of Florida.
Carlos, thanks so much forjoining us.
Speaker 2 (00:11):
How are you?
How's it going, Tony?
It's great to be here.
Speaker 1 (00:14):
Thanks so much, man.
Yeah, it's going fabulous,beautiful day in Florida and
we're in coastal North Carolina,so I think we're both in nice
areas with nice weather.
It already feels like summerhere.
Speaker 2 (00:27):
It's heating up.
It's heating up.
That's the way I like it.
Speaker 1 (00:29):
Absolutely.
So Carlos has a propertymanagement company, also invests
in triple net commercial assetsand other commercial assets.
So Carlos, how long have youbeen investing in real estate?
Speaker 2 (00:43):
Tony, I've been investing for about, I want to
say, 15 years.
First property was a smallduplex purchase in 2009.
And I've been growing theportfolio and trading up ever
since.
Now we do commercial, so we buytriple net shopping centers,
all value add deals wherethere's opportunity to improve
(01:06):
management occupancy, do someCapEx improvements, et cetera,
et cetera, and get theperformance up and get the
equity higher.
That's pretty much our deal andI control the management.
So we're in a unique positionto be able to perform much
better than a lot of otheroperators who are outsourcing
their management.
So we're in a unique positionto be able to perform much
better than a lot of otheroperators who are outsourcing
(01:28):
their management.
Speaker 1 (01:31):
So is everything that you're buying in Florida or
where all are you?
Speaker 2 (01:36):
No, actually I'm in three markets Miami Florida,
kansas City and Orlando.
Florida Orlando is a newaddition.
We just acquired a propertymanagement company over there,
so that got our foot in the doorand now we're actively looking
for deals in that market as well.
Most of our portfolio, most ofmy portfolio, is in Kansas City,
(01:57):
and I've been looking at somedeals down here in South Florida
.
Now there's actually some dealsthat are looking more doable
after a crazy run-up in pricesafter COVID.
Speaker 1 (02:11):
Nice.
Speaker 2 (02:12):
Yeah, we got our hands full.
Speaker 1 (02:14):
That's great.
Now, when you're looking atthese shopping centers and their
triple net, are you looking atanchored centers?
Are they neighborhood centers?
What type of centers?
So are you dealing with a lotof national tenants or are you
dealing with smaller mom andpops?
Speaker 2 (02:29):
Smaller mom and pops.
I love the mom and pops and Ilove small bay retail Sub 2,000
square feet.
If I can go 1,000 square feetand below, even better.
It's just so much easier tofill those vacancies.
There's a lot more demand.
Dealing with national tenantsis a lot more difficult to do,
the leasing which keeps me up atnight.
(02:51):
I like to know that I have theability to fill vacancies
relatively quickly if I need to,and I like economies of scale.
So I like more tenants versusless per property.
I don't do any single tenantstuff and everything I have is
seven plus tenants per property.
I don't do any single tenantstuff and everything I have is,
you know, seven plus tenants perbuilding.
Speaker 1 (03:10):
Okay, all right.
So when we're looking at these,what typical range of occupancy
is there?
When you're looking to investin something, are you typically
investing in centers that have60% or 65% occupancy or higher?
Speaker 2 (03:31):
It depends.
I did one that I've done acouple of deals where we were at
60% 70% on acquisition.
I've bought one property thatwas at 0%.
We brought it up from 0% to Ithink we're at 90 something or
maybe in the high 80% of theoccupancy.
That was a big project we tookon.
But yeah, ideally I'd like alower occupancy because that
(03:54):
provides opportunity to addvalue through leasing.
And, as you know, commercialproperty you purchase based on
its income, on its currentincome.
So if you buy something that'scurrently underperforming you
can get a better deal and thenyou have immediate upside to add
by leasing up the spaces.
Speaker 1 (04:11):
Sure, absolutely.
And when you're putting inthese new tenants, when you're
doing, when we're talking athousand to 2000 square feet and
these tenants might not havegreat financials it might be a
first time someone going intotheir first business I'm curious
do you typically do zero tenantimprovement allowance?
(04:34):
You do a small tenantimprovement allowance on
something like that.
It's kind of risky, right Witha new mom and pop tenant.
Speaker 2 (04:41):
Yes, totally, you have to.
You definitely have to weighthe risk.
On the TI side, I typicallypush towards no TI and we'll
give a free rent period.
We've done up to, I think, fouror five months of free rent in
exchange for tenants taking thespace as is, and then we'll take
a double month deposit and thefirst month upfront.
So if they blow out after thethird or fourth month, you have
(05:04):
some cash that you can fall backon.
We've had a couple of tenantsthat have done that.
They just, you know, they signa lease and then they sort of
flake out during the free rentperiod and then you know, we
just let them out of the lease,we relet the space and we keep
their cash.
So it's relatively low risk onthat end.
Speaker 1 (05:26):
And yeah, we don't do any TI unless it's a more
valuable tenant that we feel wecan risk it on.
That's interesting.
So, and I mean I'm assuming,when you're going in and they're
doing no TI and these peopleare taking the space because
when you were talking 1,000,2,000 square foot and you're
getting one, especially onewhere you said you were zero,
you're really trying to get atenant in there you want.
You want them to survive andlast so you can build up your
(05:50):
value and start generatingrevenue on that property.
When you're looking at marketsand taking and acquiring these,
are you typically underwritingyour rental numbers below market
?
Are you assuming you're goingto pull numbers up to market in
these small, because theneighborhood ones aren't like a
(06:10):
standard where you can go with anational tenant and really pump
these numbers up, get reallylong lease terms?
You're probably looking two,three, maximum five-year lease
terms right on these tenants.
Speaker 2 (06:22):
Yeah, yeah, yeah, totally.
Lease terms right On thesetenants.
Yeah, yeah, yeah, totally.
It's definitely a little bit ofa higher risk on those types of
tenants.
You, you know, you just want tomake sure you vet them
correctly.
They, you know the spaces thatwe hand over.
They're not totally trashed andthey don't require that much TI
Usually.
(06:42):
Just, you know, some paint andsome ceiling tiles will do the
trick and then the tenant cancome in and kind of kind of do
their thing.
We do a lot of white boxing, soit depends on the on the
property itself.
The one that I told you Imentioned that we went from zero
to to 89 um was a total, a hugerenovation that we went through
, where we basically white boxedall the units.
(07:04):
Of course, the basis, our basis, our purchase price was very
low on that deal.
So you want to make sure youmitigate the potential risk of
having to improve the propertyby buying the property real
cheap, since it's a value adddeal.
And then you know I don't dothat many deals because my
underwriting is so conservativethat I say no more often than
not.
(07:25):
But you really want to putyourself in a position,
especially in those types ofproperties, where you're
actually able to offer belowmarket rent.
So if you're the cheapest rentin town it's sort of hard to
beat you and you can really takea lot more risk on these
(07:46):
tenants because they are payinga lot less.
So it's easier for them tosurvive in your center than you
know center down the street andthey also stay longer because
when you go to rent bump them,you know, after the lease is
expired they go around and theysearch for the nearest property.
They realize they're getting asweet deal and they're more
likely to stay.
Speaker 1 (08:05):
Yeah, I mean I love this plan and philosophy.
This is fantastic and you knowthis is one of the safer in my
thought process that you know Iam highly interested in
multi-tenant retail, like whatyou're saying.
Neighborhood retail is great,you know, you get your
neighborhood pizza place, justyour your hair salon, maybe a
(08:27):
judo studio, stuff like that,and these tenants are sticky if
you can keep that rent belowrate.
And something else, carlos,that I'm curious to know.
I know we say triple net.
A lot of these, more thanlikely you're buying they're not
triple net because they're justowned by somebody who's owned
them for a long time, maybegross leases.
Is that something that you'realso putting in your plan, that
(08:51):
you're increasing value with?
Speaker 2 (08:53):
Yeah, so we try our best to convert all gross leases
to true triple net.
It's a little bit of a growingpain because a lot of these
tenants they don't reallyunderstand it.
A little bit of a growing painbecause a lot of these tenants
they don't really understand it.
So when you hit them with thatfirst CAM charge or that first
reimbursement charge, a lot oftimes there's some pushback.
But it's just, you know, it's amatter of communicating it and
(09:14):
just making sure that theyunderstand what they're getting
themselves into.
But yeah, that's part of theprocess, right, and that's
another way that you add value.
At the end of the day is to makesure you got your triple net
leases in place and actuallyenforced, Because another thing
is sometimes you buy a propertythat has triple net leases but
the landlord hasn't beenenforcing it, and then you come
in there and start enforcing anexisting lease and you get a lot
(09:37):
of pushback.
We've done that as well.
Sometimes you get tenants, youget a lot of churn, right.
Sometimes you get tenants thatjust blow out and then you got
to refill the lease.
So it's a matter of kind ofbalancing out the risk reward
side of that.
But yeah, it's definitely afactor company on these.
Speaker 1 (10:07):
So are you advertising this?
Do you have boots on the groundin all these areas that are out
active real estate agents inthose areas that are marketing
to properties for you?
Are you putting them onFacebook Marketplace?
Where are you picking uptenants from?
Speaker 2 (10:18):
Yeah, it's a great question.
Leasing was definitelysomething that we had a big
learning curve on, because it'svery different from residential,
which is where we started in.
On the commercial side,especially the smaller mom and
pop stuff, we got our LoopNetlistings up, which is sort of
mandatory, and we get leads fromthere.
(10:38):
But yeah, like you mentioned,facebook Marketplace has been
great.
We have a partner in KansasCity who handles all the leasing
and he's the boots on theground and he's excellent.
He's really good at followingup and he's got a great process.
So thanks to him, we've beenable to get our properties
filled up relatively quickly.
We did start off hiring onebroker when we did our first
(11:01):
property and it was just adisaster.
I mean, they're just not.
The commissions are so small onthose small retail spaces that
there's really no incentive forthe brokers to go out and hunt
for you.
So all they do is put up a loopnet listing and then sit and
wait, and most of the timebrokers don't even pick up their
phone.
So imagine the few leads theydo get they're not even
(11:23):
following up on.
So we took that in-house.
It was an existential moment.
We realized we needed to reallytake ownership of that and we
took it in-house and we haven'tlooked back since.
Speaker 1 (11:32):
Yeah, I mean that's a great plan and you're exactly
right for anybody.
You know that's that hasn'treally researched this.
So when you have these agents,they're they're getting, you
know, a percentage of the totallease agreement.
So if they're doing on this momand pop, you know you're below
market first of all, right, andthen you're you're doing a
two-year lease as opposed to aseven-year lease, and so their
(11:55):
commission is next to nothing ona thousand square foot.
You know it's like nothing.
So there's no motivation forthese people to go out and work
for this.
So then you can't attract theagents, and so what you guys are
doing this is a great way ofhandling.
You're pulling that in-housevertically integrating.
(12:18):
It makes you more competitiveand gets your product out there
better.
So doing the path you guys havegone is a perfect path.
So what is the average, let'ssay, dollar amount or square
footage of the centers you'relooking at?
Speaker 2 (12:30):
From a purchase price perspective or rent amounts.
Speaker 1 (12:34):
Purchase price perspective, just so we have an
idea of what's the best.
Speaker 2 (12:38):
It's a little bit of a loaded question because we've
bought.
I mean just to give you someperspective.
We bought one building for $12a foot.
That was completely vacant Holycrap.
Yeah, we put another probably$12 into it in renovation.
So let's say we're all in a $24a foot, um, but then at the
(12:59):
same time I purchased anotherbuilding at $60 a foot.
So it really depends on thecurrent state of the property.
In the Kansas city market youcan find stuff real cheap.
Um, you know, the $12 foot onewas totally vacant and it was
overrun by crackheads, so thework was cut out for us there.
We you know.
Thankfully we got a deal inexchange for that.
(13:21):
But yeah, it really again, itreally depends and with
commercial, your income or yourNOI is what determines the value
of the property at the end ofthe day.
So you got a property that'svacant or overrun by crackheads,
that's a negative NOI in myopinion, and that's negative
(13:48):
income because you've got to paythese crackheads to get out of
there, and so you've got to geta good deal.
Speaker 1 (13:50):
You're putting a crack party together for these
guys to go somewhere else.
Speaker 2 (13:55):
Cash for keys.
That was a good month on thatbuilding.
Speaker 1 (13:58):
That's awesome, yeah.
So now when you're saying, whenwe're talking $12 and $60 a
foot, you're not finding that inFlorida.
We're saying Kansas City, nowin Florida, that market.
I would find it shocking ifyou're finding something $60 a
foot there, unless you're insome tertiary market out in the
middle of nowhere in Floridait's crazy.
Speaker 2 (14:19):
Yeah, in Florida you're looking at, on a good day
, probably around 200 bucks afoot on a decent mom and pop
center.
I'm in South Florida which iseven more expensive.
It's the most expensive marketin Florida.
But yeah, I mean I'll look'lllook at a 200 foot retail center
any day.
Again, depends on the income.
It's got a cash flow.
(14:39):
I have a one rule and it ifit's, I'm gonna pay 200 bucks a
foot.
The property has to cash flowon day one.
Even if it's a one percent cashon cash return, I it has to
cash flow.
And of course then there has tobe that value add component so
we can increase the income.
Speaker 1 (15:02):
But yeah, the differences in prices of
properties are huge over here.
So could you walk the listenersthrough something?
So let's just do a hypotheticalbuilding and could we kind of,
on a high level, walk throughhow you analyze something so
people can understand?
Could we kind of, on a highlevel, walk through how you
analyze something so people canunderstand?
So let's just go with the rangeof finding a 12,000 or let's
(15:25):
say a 20,000 square foot.
Sorry, we got, if we're talking, smaller base, let's say 12,000
square foot building, $60 perfoot.
So for a 12,000 square footbuilding, $60 per foot.
So for a 12,000 square footbuilding, $60 per foot.
Right, could you just kind ofunderwrite real quick and say
that this thing, the averagetenant is paying $7 a foot
triple net and you're 60%occupied.
(15:45):
So let's say $7 a foot triplenet and you're 60% occupied.
So let's say $7 a foot triplenet and you're 60% occupied.
Would you look at this deal?
Speaker 2 (16:01):
All right, let's see $7 a foot, triple net times 0.6.
It's about 50 grand in.
Noi yeah, I don't look at thatdeal all day long.
Um, of course, there's that 40%potential occupancy that you
have to uh to capitalize on.
(16:22):
Um, so you've got.
let's see $720,000, $33,000 ofpotential uh revenue there to
capture just by leasing.
So that's a great, that's anice little meat that you got on
that bone.
It depends on the price.
Right Now I'd like to cash flowout the gate.
So if it's 60% occupied, it'smaking 50 grand a year.
Speaker 1 (16:47):
And I'm saying it was $60 a foot, 12,000 square feet,
so $720,000.
Speaker 2 (16:53):
Yeah, $720,000.
If it's making 50 grand a yearand bottom line and NOI divided
$725,000, that's a six cap,that's a seven cap.
I figured deal that's a greatdeal.
I mean I bought deals that areone caps because they were so
(17:14):
distressed but the upside wastremendous.
With 60% occupancy you'rebuying something at a seven cap.
You could basically almostdouble its value just by leasing
.
Speaker 1 (17:26):
Right, yeah, just so everybody's keeping up with what
we just went through.
So we're saying buying thisthing for $720,000, it was 60%
occupied at a $7 triple net.
So we were figuring $50,000 ayear in NOI at purchase.
Okay, then when we, if we canfill it up, fill those vacancies
, just on quick numbers, sayingwe're adding 33,000 in NOI so
(17:53):
we're then at 83 000 in noi, wetake it by that same seven cap.
All of a sudden our value wentfrom our purchase price of 720
value, yeah, around 1.3 on theproperty, so big big upside
(18:15):
right.
So just quick, quick number runby what the kind of stuff that
Carlos is looking at and whathe's doing, the amount of value
he can create, and so thedifference in this and
residential is massive.
All he's doing is going in,doing some grassroots searching
for tenants, putting some goodtenants in place, filling it up,
(18:36):
stabilizing it and increasingvalue significantly on the
property.
So there's a ton of moneyopportunity in a deal like this.
Same goes for Flex IndustrialSmall Bay.
It's the same type premise.
If you can line it up like this, uh, small retail spaces, I
(18:56):
love it.
So that's fantastic, carlos.
So tell me a bit more about how, uh, the property management
operates.
You've got where you are.
You've got a teammate, is ityou?
And one other person that's inyour company is just two of you,
is that right?
Speaker 2 (19:15):
No, we've got a whole bunch of employees.
So we're in three marketsKansas City, Orlando, Miami.
We have two property managersthat are boots on the ground in
Kansas City, we got one inOrlando and one here in Miami.
Then we got my wife and I sortof run the business.
She's our COO, so she handlesall the office and
administrative stuff.
(19:36):
And I actually just hired abusiness development manager
here in Miami to help grow thePM business, the property
management business in Miami,and bring in some more doors.
So that's a fresh new hire.
He just started last week.
He's starting to ramp up.
So, yeah, we've gotten somegood growth and we have have a
solid team and we're excited tokeep growing.
Speaker 1 (19:57):
Now, what do you use as far as an operating system
for management?
Do you use EOS, do you operateunder EOS or do you use any
hiring stuff like Culture Indexor Enneagram or anything like
that?
Speaker 2 (20:14):
I have not jumped on the EOS bandwagon yet even
though I run in circles withpeople who are into it For
hiring.
I always hire a recruiter, it'syou know.
I pay five grand flat fee andthey do all the interviewing for
me and it's the best five grandI've ever spent.
I don't have to spend any timegoing through resumes or
(20:34):
watching interviews or doinginterviews.
I just't have to spend any timegoing through resumes or
watching interviews or doinginterviews.
I just watch the best you know,the top three interviews that
they've sent for a week and Imake my decision there.
They use the DISC profile to dopersonality assessments.
You know which is an older sortof older personality test?
There's better ones.
I have not used Culture Indexas much.
(20:54):
I sort of like mooch off of myother friends that have it
whenever I want to use it, but Ihaven't really used it at scale
to do my own hiring.
I rely on the disk and then myown sort of intuition and
abilities to interview.
But yeah, I love the CultureIndex.
It's a great product.
It's just pretty expensive.
Speaker 1 (21:15):
Yeah, it's expensive, we use it, but we love it.
It's been a game changer for usto really.
We've had turnover in the pastand you know you go on intuition
.
Obviously, you having arecruiter, you've got a second
pair of eyes on it, which isgood.
They're still using the discprofile, which is, you know,
(21:40):
time-tested eyes on it, which isgood.
They're still using the discprofile, which is, you know,
time tested profile analyzer.
So that's still a good product.
So that's definitely helpful.
I think, as long as you'redoing something to, you know,
take out just personal judgmentcompletely then you're doing.
You're doing better than most.
So that's pretty exciting.
So what is your guys's longterm aspirations?
Are you looking to just stay inthese three markets you're in?
Are you looking to scale intolarger markets, or are you
(22:02):
wanting to stay with that sameproduct long-term that you're
involved in right now?
Speaker 2 (22:07):
I'd like to get to a thousand units.
We're at about 320 something or230 units to date.
That's sort of the goal andthat's going to be a mix of
third-party property managementclients and then properties that
we personally purchase withinthe portfolio.
Obviously I'm building wealth,and long-term wealth, by
(22:30):
purchasing the shopping centers,and then the property
management business is anoperating business that's going
to throw off a decent amount ofcash.
So I like the balance betweenthe two.
And then you know thebusinesses complement each other
.
I need the management and themanagement needs the portfolio.
So we'll just keep buying dealsthat make sense and grow in the
PM business and see where thatleads us.
Speaker 1 (22:52):
Sure Now, carlos, do you and your wife?
Are you guys?
Is this all self-funded?
Are you guys raising capitalfor your projects?
Are you taking on passiveinvestors?
Speaker 2 (23:06):
Yeah, we have some.
We go to friends and familyonly and I typically try to own
at least 51% of all theproperties.
That way we have a controllinginterest.
So we've been able to pull thatoff on most of the acquisitions
we've done.
But yeah, we do some capitalraising on the friends and
family side.
Speaker 1 (23:26):
Even let's state that maybe on a couple you don't own
51%, are you still writing upyour agreement as you are in
sole control of everything asfar as the property is concerned
, so the other ones are justalong for the ride or are you
giving some of these people on acase where you don't own 51%,
(23:51):
are you sharing control?
Are you writing up youragreements where you're still
100% in control of decisionmaking?
Speaker 2 (23:57):
The agreement has us as the manager for the
properties.
We do have regular calls wherewe run things by the other
investors and we get theirfeedback, especially when it
comes to bigger ticket expensesand that sort of stuff.
But for the most part theypretty much trust us to run the
deals and make sure that theyperform.
But yeah, I mean, that's youknow.
(24:20):
Once the properties areperforming, people tend to stop
asking questions.
They just kind of trust you.
Speaker 1 (24:28):
Sure, absolutely.
And the good thing too whenyou've been, you know, doing
this since 2009, you've got thelong-term track record and
obviously, once you have aclient, that friends and family,
once they invest in you andthey get a good return, the
majority of them probably wantto take that money and just
reinvest it, right, Cause it'salready passive money and so as
(24:48):
as you build up, you don't evennecessarily have to build up
much more of a network.
But those same people are goingto then want in on the next
deal, want to reinvest.
When a deal, you know, uh, goesthrough full cycle and they've
gotten a good return, they'regoing to be wanting to up that
back.
So they're coming right back toyou and so, long term, this is
how you grow.
Carlos obviously done great jobthrough the years.
(25:09):
Coming in at 2009 was a verytough time to join.
I mean I, I was building backthen.
You know the majority of whatwe were doing was working for
the banks.
There wasn't a bunch of otherwork there is, just the banks
were taking everything andtrying to get the heck rid of it
all.
Speaker 2 (25:26):
Yeah, I have a lot of PTSD from my early years
because it was just so hard toget deals done.
Things were so cheap.
I mean I look back and I wishwe had the same prices we had
back then now, but it was sohard to get financing that man.
I mean I lost so many yearsfrom my life just trying to
(25:48):
close a small duplex loanbecause the credit markets were
so tight back then.
But it helps, because now itturned me into a very resilient
investor because now it's easierto find financing.
But I approach it with the samelike, uh, like relentlessness
(26:08):
that I did back then, knowingthat they were going to ask me
for all this paperwork and allthis other crap that I've done.
Now I'm just prepared to justsend everything.
So it's made me a little bit,you know, stronger in that.
In that regard, it's actuallynot as difficult now to do deals
.
So it was good to get the painout of the way early in my years
.
But yeah, I definitely do havea lot of PTSD with regard to
getting the loans closed.
Sure, and every time I applyfor financing I get the same.
(26:32):
I get like a flashback, for oh,you know what are they going to
come back at me for.
You know what are they going toask for.
Speaker 1 (26:36):
So oh, yeah, Well, yeah, and that's the other thing
.
I mean there just was not a lotof movement.
I mean, really, from 2009,2016,.
Even to 2017, I mean there wasreally not a lot happening.
There's no movement in themarket.
It was just like a flat line.
I mean it started to slowly goup.
I mean it really didn't startto make a big turn up till 2017,
(26:57):
18, to where everything startedto really look different and
the deals were starting to dryup by late 2008.
I mean, you could still getdeals in 2018 and 19, but now
it's just a whole differentworld.
What is your outlook movingforward?
Inflation is still up.
What do you foresee as far asvalues go on properties?
Speaker 2 (27:23):
Yeah, I'm sort of done trying to predict the
market.
Every time I try to predictsomething, some craziness
happens, like COVID that throwseverything out of you know, out
of whack.
That said, I don't really seetoo much distress.
You know the amount of distressthat we were projecting when
interest rates shot up.
There's some distress and I'mseeing some deals that are, you
(27:45):
know, that are not doing welland that are having people
having to sell.
But I'm not really seeing, likethe fire sale that I was
expecting Deals are, you know,that are not doing well and that
are having people having tosell.
But I'm not really seeing, likethe fire sale that I was
expecting, deals are.
You know there's not that manydeals.
What's happened is thattransaction volume has really
decreased so people that don'thave to sell are not selling,
and then there's not that manypeople that have to sell, at
least not yet.
(28:06):
So that has made it difficultto find deals.
But again, from one day to thenext I mean I haven't done a
single deal this year, but lastyear we did three and the year
before that we didn't do anyright.
So it was like you could havenothing for a whole year and
then all of a sudden the dealpops up and you got to jump on
(28:27):
it from one day to the next.
So it's kind of hard to predict.
But yeah, I haven't really seenthat much distress.
I mean, you see all this crazynews about San Francisco and all
these towns where, like, theoffice towers are trading for
like ridiculous numbers.
But here in my market I haven'treally seen that much.
And in the Kansas City market,you know it's the Midwest, so
you don't really see that manyswings in either direction.
(28:50):
Things tend to stay relativelystable and the distressed deals
that I've seen in that markethaven't been distressed enough
for me to really jump on.
Speaker 1 (29:02):
So it's interesting.
I'm with you.
So what we're seeing is thenumbers haven't come down,
they've still stayed elevatedand you can almost at this point
.
You know I'm a builder and Ibuild and do buildings for
developers and we self-developand it's to a point where you
(29:23):
can build something for theprice that everyone's selling it
for.
That's supposedly the greatdeal.
So when I look at somethinglike that and I can build new
for what someone is selling,that is the bottom of the market
selling.
So we have Flex Industrial inmy market that the bottom dollar
is $155 a foot, that you canbuy it for.
(29:46):
Well, I can.
If I get the price per acre at50, 60 000, I can develop, you
know, brand new buildings for145 a foot.
So what's the?
What's the incentive to buy itfor 155?
But they trade in a second 155.
It's crazy.
Speaker 2 (30:01):
And if I buy that industrial uh, john you know, by
the notion of 150 a foot, whatdo I rent it for?
What can I rent it for?
And will it cash flow?
And it makes sense, I need tofind definitely seven, eight
percent interest rates right.
Speaker 1 (30:17):
Well, you're exactly right.
Well, I mean, you know.
So, for instance, our rentalrate here for this product that
we're talking, you'd be attwelve dollars a foot, triple
net, so it doesn't even cash.
That's some cash flow really,you know.
Yeah.
So you know, I don't, I don'tget it, but they trade all day
long.
I mean why?
Speaker 2 (30:35):
who's buying these things?
But I want to look at deals Ilook at industrial deals like
that all the time that make nosense and somehow they trade and
somehow bad deals like thatkeep popping up.
I just don't know you're.
Speaker 1 (30:46):
You're I mean you and me are in the same boat.
I have no understanding on whythese things are trading.
You know, the difference iswhen we're doing new we'd be at
$15 a foot triple net.
So then they get close tomaking sense.
Now they're not some home run,but those at least you know when
you're new they can make sense.
That's what I like.
Speaker 2 (31:06):
And if you're hedging against inflation and you can
somehow carry it, I guess itmakes sense.
You know who that's what I have.
You're hedging againstinflation and you can somehow
carry it I guess it makes sense.
Speaker 1 (31:13):
You know who knows.
Yeah, that's it.
Well, yeah, I mean, I reallyappreciate you coming on today.
Uh, I mean, we've gotten a lotof great information from you.
If people wanted to reach outto you, what's the best way to
get in touch with you, carlos?
Speaker 2 (31:24):
uh, yeah, you can shoot me an email, carlos, at
rovira pmcom.
Pm is in management and, yeah,go to our website, which is
roverapmcom as well.
You can find out about us.
If you're looking for propertymanagers in either Miami,
orlando or Kansas City, let usknow.
We're happy to help.
We'll take a look at whateveryou got and hopefully we can
(31:45):
help you out.
Speaker 1 (31:47):
Awesome, and we'll have all this in the show notes
and we greatly appreciate youtaking the time today, Carlos,
and jumping on with us.
It's been a pleasure meetingyou sir.
Speaker 2 (31:53):
Yeah, man Likewise.
Thanks for having me on.
Speaker 1 (31:55):
Yes, sir, have a great one.
Welcome to another episode of Carolina Commercial
Real Estate Connection.
Today I have Carlos Rovira withme out of Florida.
Carlos, thanks so much forjoining us.
Speaker 2 (00:11):
How are you?
How's it going, Tony?
It's great to be here.
Speaker 1 (00:14):
Thanks so much, man.
Yeah, it's going fabulous,beautiful day in Florida and
we're in coastal North Carolina,so I think we're both in nice
areas with nice weather.
It already feels like summerhere.
Speaker 2 (00:27):
It's heating up.
It's heating up.
That's the way I like it.
Speaker 1 (00:29):
Absolutely.
So Carlos has a propertymanagement company, also invests
in triple net commercial assetsand other commercial assets.
So Carlos, how long have youbeen investing in real estate?
Speaker 2 (00:43):
Tony, I've been investing for about, I want to
say, 15 years.
First property was a smallduplex purchase in 2009.
And I've been growing theportfolio and trading up ever
since.
Now we do commercial, so we buytriple net shopping centers,
all value add deals wherethere's opportunity to improve
(01:06):
management occupancy, do someCapEx improvements, et cetera,
et cetera, and get theperformance up and get the
equity higher.
That's pretty much our deal andI control the management.
So we're in a unique positionto be able to perform much
better than a lot of otheroperators who are outsourcing
their management.
So we're in a unique positionto be able to perform much
better than a lot of otheroperators who are outsourcing
(01:28):
their management.
Speaker 1 (01:31):
So is everything that you're buying in Florida or
where all are you?
Speaker 2 (01:36):
No, actually I'm in three markets Miami Florida,
kansas City and Orlando.
Florida Orlando is a newaddition.
We just acquired a propertymanagement company over there,
so that got our foot in the doorand now we're actively looking
for deals in that market as well.
Most of our portfolio, most ofmy portfolio, is in Kansas City,
(01:57):
and I've been looking at somedeals down here in South Florida
.
Now there's actually some dealsthat are looking more doable
after a crazy run-up in pricesafter COVID.
Speaker 1 (02:11):
Nice.
Speaker 2 (02:12):
Yeah, we got our hands full.
Speaker 1 (02:14):
That's great.
Now, when you're looking atthese shopping centers and their
triple net, are you looking atanchored centers?
Are they neighborhood centers?
What type of centers?
So are you dealing with a lotof national tenants or are you
dealing with smaller mom andpops?
Speaker 2 (02:29):
Smaller mom and pops.
I love the mom and pops and Ilove small bay retail Sub 2,000
square feet.
If I can go 1,000 square feetand below, even better.
It's just so much easier tofill those vacancies.
There's a lot more demand.
Dealing with national tenantsis a lot more difficult to do,
the leasing which keeps me up atnight.
(02:51):
I like to know that I have theability to fill vacancies
relatively quickly if I need to,and I like economies of scale.
So I like more tenants versusless per property.
I don't do any single tenantstuff and everything I have is
seven plus tenants per property.
I don't do any single tenantstuff and everything I have is,
you know, seven plus tenants perbuilding.
Speaker 1 (03:10):
Okay, all right.
So when we're looking at these,what typical range of occupancy
is there?
When you're looking to investin something, are you typically
investing in centers that have60% or 65% occupancy or higher?
Speaker 2 (03:31):
It depends.
I did one that I've done acouple of deals where we were at
60% 70% on acquisition.
I've bought one property thatwas at 0%.
We brought it up from 0% to Ithink we're at 90 something or
maybe in the high 80% of theoccupancy.
That was a big project we tookon.
But yeah, ideally I'd like alower occupancy because that
(03:54):
provides opportunity to addvalue through leasing.
And, as you know, commercialproperty you purchase based on
its income, on its currentincome.
So if you buy something that'scurrently underperforming you
can get a better deal and thenyou have immediate upside to add
by leasing up the spaces.
Speaker 1 (04:11):
Sure, absolutely.
And when you're putting inthese new tenants, when you're
doing, when we're talking athousand to 2000 square feet and
these tenants might not havegreat financials it might be a
first time someone going intotheir first business I'm curious
do you typically do zero tenantimprovement allowance?
(04:34):
You do a small tenantimprovement allowance on
something like that.
It's kind of risky, right Witha new mom and pop tenant.
Speaker 2 (04:41):
Yes, totally, you have to.
You definitely have to weighthe risk.
On the TI side, I typicallypush towards no TI and we'll
give a free rent period.
We've done up to, I think, fouror five months of free rent in
exchange for tenants taking thespace as is, and then we'll take
a double month deposit and thefirst month upfront.
So if they blow out after thethird or fourth month, you have
(05:04):
some cash that you can fall backon.
We've had a couple of tenantsthat have done that.
They just, you know, they signa lease and then they sort of
flake out during the free rentperiod and then you know, we
just let them out of the lease,we relet the space and we keep
their cash.
So it's relatively low risk onthat end.
Speaker 1 (05:26):
And yeah, we don't do any TI unless it's a more
valuable tenant that we feel wecan risk it on.
That's interesting.
So, and I mean I'm assuming,when you're going in and they're
doing no TI and these peopleare taking the space because
when you were talking 1,000,2,000 square foot and you're
getting one, especially onewhere you said you were zero,
you're really trying to get atenant in there you want.
You want them to survive andlast so you can build up your
(05:50):
value and start generatingrevenue on that property.
When you're looking at marketsand taking and acquiring these,
are you typically underwritingyour rental numbers below market
?
Are you assuming you're goingto pull numbers up to market in
these small, because theneighborhood ones aren't like a
(06:10):
standard where you can go with anational tenant and really pump
these numbers up, get reallylong lease terms?
You're probably looking two,three, maximum five-year lease
terms right on these tenants.
Speaker 2 (06:22):
Yeah, yeah, yeah, totally.
Lease terms right On thesetenants.
Yeah, yeah, yeah, totally.
It's definitely a little bit ofa higher risk on those types of
tenants.
You, you know, you just want tomake sure you vet them
correctly.
They, you know the spaces thatwe hand over.
They're not totally trashed andthey don't require that much TI
Usually.
(06:42):
Just, you know, some paint andsome ceiling tiles will do the
trick and then the tenant cancome in and kind of kind of do
their thing.
We do a lot of white boxing, soit depends on the on the
property itself.
The one that I told you Imentioned that we went from zero
to to 89 um was a total, a hugerenovation that we went through
, where we basically white boxedall the units.
(07:04):
Of course, the basis, our basis, our purchase price was very
low on that deal.
So you want to make sure youmitigate the potential risk of
having to improve the propertyby buying the property real
cheap, since it's a value adddeal.
And then you know I don't dothat many deals because my
underwriting is so conservativethat I say no more often than
not.
(07:25):
But you really want to putyourself in a position,
especially in those types ofproperties, where you're
actually able to offer belowmarket rent.
So if you're the cheapest rentin town it's sort of hard to
beat you and you can really takea lot more risk on these
(07:46):
tenants because they are payinga lot less.
So it's easier for them tosurvive in your center than you
know center down the street andthey also stay longer because
when you go to rent bump them,you know, after the lease is
expired they go around and theysearch for the nearest property.
They realize they're getting asweet deal and they're more
likely to stay.
Speaker 1 (08:05):
Yeah, I mean I love this plan and philosophy.
This is fantastic and you knowthis is one of the safer in my
thought process that you know Iam highly interested in
multi-tenant retail, like whatyou're saying.
Neighborhood retail is great,you know, you get your
neighborhood pizza place, justyour your hair salon, maybe a
(08:27):
judo studio, stuff like that,and these tenants are sticky if
you can keep that rent belowrate.
And something else, carlos,that I'm curious to know.
I know we say triple net.
A lot of these, more thanlikely you're buying they're not
triple net because they're justowned by somebody who's owned
them for a long time, maybegross leases.
Is that something that you'realso putting in your plan, that
(08:51):
you're increasing value with?
Speaker 2 (08:53):
Yeah, so we try our best to convert all gross leases
to true triple net.
It's a little bit of a growingpain because a lot of these
tenants they don't reallyunderstand it.
A little bit of a growing painbecause a lot of these tenants
they don't really understand it.
So when you hit them with thatfirst CAM charge or that first
reimbursement charge, a lot oftimes there's some pushback.
But it's just, you know, it's amatter of communicating it and
(09:14):
just making sure that theyunderstand what they're getting
themselves into.
But yeah, that's part of theprocess, right, and that's
another way that you add value.
At the end of the day is to makesure you got your triple net
leases in place and actuallyenforced, Because another thing
is sometimes you buy a propertythat has triple net leases but
the landlord hasn't beenenforcing it, and then you come
in there and start enforcing anexisting lease and you get a lot
(09:37):
of pushback.
We've done that as well.
Sometimes you get tenants, youget a lot of churn, right.
Sometimes you get tenants thatjust blow out and then you got
to refill the lease.
So it's a matter of kind ofbalancing out the risk reward
side of that.
But yeah, it's definitely afactor company on these.
Speaker 1 (10:07):
So are you advertising this?
Do you have boots on the groundin all these areas that are out
active real estate agents inthose areas that are marketing
to properties for you?
Are you putting them onFacebook Marketplace?
Where are you picking uptenants from?
Speaker 2 (10:18):
Yeah, it's a great question.
Leasing was definitelysomething that we had a big
learning curve on, because it'svery different from residential,
which is where we started in.
On the commercial side,especially the smaller mom and
pop stuff, we got our LoopNetlistings up, which is sort of
mandatory, and we get leads fromthere.
(10:38):
But yeah, like you mentioned,facebook Marketplace has been
great.
We have a partner in KansasCity who handles all the leasing
and he's the boots on theground and he's excellent.
He's really good at followingup and he's got a great process.
So thanks to him, we've beenable to get our properties
filled up relatively quickly.
We did start off hiring onebroker when we did our first
(11:01):
property and it was just adisaster.
I mean, they're just not.
The commissions are so small onthose small retail spaces that
there's really no incentive forthe brokers to go out and hunt
for you.
So all they do is put up a loopnet listing and then sit and
wait, and most of the timebrokers don't even pick up their
phone.
So imagine the few leads theydo get they're not even
(11:23):
following up on.
So we took that in-house.
It was an existential moment.
We realized we needed to reallytake ownership of that and we
took it in-house and we haven'tlooked back since.
Speaker 1 (11:32):
Yeah, I mean that's a great plan and you're exactly
right for anybody.
You know that's that hasn'treally researched this.
So when you have these agents,they're they're getting, you
know, a percentage of the totallease agreement.
So if they're doing on this momand pop, you know you're below
market first of all, right, andthen you're you're doing a
two-year lease as opposed to aseven-year lease, and so their
(11:55):
commission is next to nothing ona thousand square foot.
You know it's like nothing.
So there's no motivation forthese people to go out and work
for this.
So then you can't attract theagents, and so what you guys are
doing this is a great way ofhandling.
You're pulling that in-housevertically integrating.
(12:18):
It makes you more competitiveand gets your product out there
better.
So doing the path you guys havegone is a perfect path.
So what is the average, let'ssay, dollar amount or square
footage of the centers you'relooking at?
Speaker 2 (12:30):
From a purchase price perspective or rent amounts.
Speaker 1 (12:34):
Purchase price perspective, just so we have an
idea of what's the best.
Speaker 2 (12:38):
It's a little bit of a loaded question because we've
bought.
I mean just to give you someperspective.
We bought one building for $12a foot.
That was completely vacant Holycrap.
Yeah, we put another probably$12 into it in renovation.
So let's say we're all in a $24a foot, um, but then at the
(12:59):
same time I purchased anotherbuilding at $60 a foot.
So it really depends on thecurrent state of the property.
In the Kansas city market youcan find stuff real cheap.
Um, you know, the $12 foot onewas totally vacant and it was
overrun by crackheads, so thework was cut out for us there.
We you know.
Thankfully we got a deal inexchange for that.
(13:21):
But yeah, it really again, itreally depends and with
commercial, your income or yourNOI is what determines the value
of the property at the end ofthe day.
So you got a property that'svacant or overrun by crackheads,
that's a negative NOI in myopinion, and that's negative
(13:48):
income because you've got to paythese crackheads to get out of
there, and so you've got to geta good deal.
Speaker 1 (13:50):
You're putting a crack party together for these
guys to go somewhere else.
Speaker 2 (13:55):
Cash for keys.
That was a good month on thatbuilding.
Speaker 1 (13:58):
That's awesome, yeah.
So now when you're saying, whenwe're talking $12 and $60 a
foot, you're not finding that inFlorida.
We're saying Kansas City, nowin Florida, that market.
I would find it shocking ifyou're finding something $60 a
foot there, unless you're insome tertiary market out in the
middle of nowhere in Floridait's crazy.
Speaker 2 (14:19):
Yeah, in Florida you're looking at, on a good day
, probably around 200 bucks afoot on a decent mom and pop
center.
I'm in South Florida which iseven more expensive.
It's the most expensive marketin Florida.
But yeah, I mean I'll look'lllook at a 200 foot retail center
any day.
Again, depends on the income.
It's got a cash flow.
(14:39):
I have a one rule and it ifit's, I'm gonna pay 200 bucks a
foot.
The property has to cash flowon day one.
Even if it's a one percent cashon cash return, I it has to
cash flow.
And of course then there has tobe that value add component so
we can increase the income.
Speaker 1 (15:02):
But yeah, the differences in prices of
properties are huge over here.
So could you walk the listenersthrough something?
So let's just do a hypotheticalbuilding and could we kind of,
on a high level, walk throughhow you analyze something so
people can understand?
Could we kind of, on a highlevel, walk through how you
analyze something so people canunderstand?
So let's just go with the rangeof finding a 12,000 or let's
(15:25):
say a 20,000 square foot.
Sorry, we got, if we're talking, smaller base, let's say 12,000
square foot building, $60 perfoot.
So for a 12,000 square footbuilding, $60 per foot.
So for a 12,000 square footbuilding, $60 per foot.
Right, could you just kind ofunderwrite real quick and say
that this thing, the averagetenant is paying $7 a foot
triple net and you're 60%occupied.
(15:45):
So let's say $7 a foot triplenet and you're 60% occupied.
So let's say $7 a foot triplenet and you're 60% occupied.
Would you look at this deal?
Speaker 2 (16:01):
All right, let's see $7 a foot, triple net times 0.6.
It's about 50 grand in.
Noi yeah, I don't look at thatdeal all day long.
Um, of course, there's that 40%potential occupancy that you
have to uh to capitalize on.
(16:22):
Um, so you've got.
let's see $720,000, $33,000 ofpotential uh revenue there to
capture just by leasing.
So that's a great, that's anice little meat that you got on
that bone.
It depends on the price.
Right Now I'd like to cash flowout the gate.
So if it's 60% occupied, it'smaking 50 grand a year.
Speaker 1 (16:47):
And I'm saying it was $60 a foot, 12,000 square feet,
so $720,000.
Speaker 2 (16:53):
Yeah, $720,000.
If it's making 50 grand a yearand bottom line and NOI divided
$725,000, that's a six cap,that's a seven cap.
I figured deal that's a greatdeal.
I mean I bought deals that areone caps because they were so
(17:14):
distressed but the upside wastremendous.
With 60% occupancy you'rebuying something at a seven cap.
You could basically almostdouble its value just by leasing
.
Speaker 1 (17:26):
Right, yeah, just so everybody's keeping up with what
we just went through.
So we're saying buying thisthing for $720,000, it was 60%
occupied at a $7 triple net.
So we were figuring $50,000 ayear in NOI at purchase.
Okay, then when we, if we canfill it up, fill those vacancies
, just on quick numbers, sayingwe're adding 33,000 in NOI so
(17:53):
we're then at 83 000 in noi, wetake it by that same seven cap.
All of a sudden our value wentfrom our purchase price of 720
value, yeah, around 1.3 on theproperty, so big big upside
(18:15):
right.
So just quick, quick number runby what the kind of stuff that
Carlos is looking at and whathe's doing, the amount of value
he can create, and so thedifference in this and
residential is massive.
All he's doing is going in,doing some grassroots searching
for tenants, putting some goodtenants in place, filling it up,
(18:36):
stabilizing it and increasingvalue significantly on the
property.
So there's a ton of moneyopportunity in a deal like this.
Same goes for Flex IndustrialSmall Bay.
It's the same type premise.
If you can line it up like this, uh, small retail spaces, I
(18:56):
love it.
So that's fantastic, carlos.
So tell me a bit more about how, uh, the property management
operates.
You've got where you are.
You've got a teammate, is ityou?
And one other person that's inyour company is just two of you,
is that right?
Speaker 2 (19:15):
No, we've got a whole bunch of employees.
So we're in three marketsKansas City, Orlando, Miami.
We have two property managersthat are boots on the ground in
Kansas City, we got one inOrlando and one here in Miami.
Then we got my wife and I sortof run the business.
She's our COO, so she handlesall the office and
administrative stuff.
(19:36):
And I actually just hired abusiness development manager
here in Miami to help grow thePM business, the property
management business in Miami,and bring in some more doors.
So that's a fresh new hire.
He just started last week.
He's starting to ramp up.
So, yeah, we've gotten somegood growth and we have have a
solid team and we're excited tokeep growing.
Speaker 1 (19:57):
Now, what do you use as far as an operating system
for management?
Do you use EOS, do you operateunder EOS or do you use any
hiring stuff like Culture Indexor Enneagram or anything like
that?
Speaker 2 (20:14):
I have not jumped on the EOS bandwagon yet even
though I run in circles withpeople who are into it For
hiring.
I always hire a recruiter, it'syou know.
I pay five grand flat fee andthey do all the interviewing for
me and it's the best five grandI've ever spent.
I don't have to spend any timegoing through resumes or
(20:34):
watching interviews or doinginterviews.
I just't have to spend any timegoing through resumes or
watching interviews or doinginterviews.
I just watch the best you know,the top three interviews that
they've sent for a week and Imake my decision there.
They use the DISC profile to dopersonality assessments.
You know which is an older sortof older personality test?
There's better ones.
I have not used Culture Indexas much.
(20:54):
I sort of like mooch off of myother friends that have it
whenever I want to use it, but Ihaven't really used it at scale
to do my own hiring.
I rely on the disk and then myown sort of intuition and
abilities to interview.
But yeah, I love the CultureIndex.
It's a great product.
It's just pretty expensive.
Speaker 1 (21:15):
Yeah, it's expensive, we use it, but we love it.
It's been a game changer for usto really.
We've had turnover in the pastand you know you go on intuition
.
Obviously, you having arecruiter, you've got a second
pair of eyes on it, which isgood.
They're still using the discprofile, which is, you know,
(21:40):
time-tested eyes on it, which isgood.
They're still using the discprofile, which is, you know,
time tested profile analyzer.
So that's still a good product.
So that's definitely helpful.
I think, as long as you'redoing something to, you know,
take out just personal judgmentcompletely then you're doing.
You're doing better than most.
So that's pretty exciting.
So what is your guys's longterm aspirations?
Are you looking to just stay inthese three markets you're in?
Are you looking to scale intolarger markets, or are you
(22:02):
wanting to stay with that sameproduct long-term that you're
involved in right now?
Speaker 2 (22:07):
I'd like to get to a thousand units.
We're at about 320 something or230 units to date.
That's sort of the goal andthat's going to be a mix of
third-party property managementclients and then properties that
we personally purchase withinthe portfolio.
Obviously I'm building wealth,and long-term wealth, by
(22:30):
purchasing the shopping centers,and then the property
management business is anoperating business that's going
to throw off a decent amount ofcash.
So I like the balance betweenthe two.
And then you know thebusinesses complement each other
.
I need the management and themanagement needs the portfolio.
So we'll just keep buying dealsthat make sense and grow in the
PM business and see where thatleads us.
Speaker 1 (22:52):
Sure Now, carlos, do you and your wife?
Are you guys?
Is this all self-funded?
Are you guys raising capitalfor your projects?
Are you taking on passiveinvestors?
Speaker 2 (23:06):
Yeah, we have some.
We go to friends and familyonly and I typically try to own
at least 51% of all theproperties.
That way we have a controllinginterest.
So we've been able to pull thatoff on most of the acquisitions
we've done.
But yeah, we do some capitalraising on the friends and
family side.
Speaker 1 (23:26):
Even let's state that maybe on a couple you don't own
51%, are you still writing upyour agreement as you are in
sole control of everything asfar as the property is concerned
, so the other ones are justalong for the ride or are you
giving some of these people on acase where you don't own 51%,
(23:51):
are you sharing control?
Are you writing up youragreements where you're still
100% in control of decisionmaking?
Speaker 2 (23:57):
The agreement has us as the manager for the
properties.
We do have regular calls wherewe run things by the other
investors and we get theirfeedback, especially when it
comes to bigger ticket expensesand that sort of stuff.
But for the most part theypretty much trust us to run the
deals and make sure that theyperform.
But yeah, I mean, that's youknow.
(24:20):
Once the properties areperforming, people tend to stop
asking questions.
They just kind of trust you.
Speaker 1 (24:28):
Sure, absolutely.
And the good thing too whenyou've been, you know, doing
this since 2009, you've got thelong-term track record and
obviously, once you have aclient, that friends and family,
once they invest in you andthey get a good return, the
majority of them probably wantto take that money and just
reinvest it, right, Cause it'salready passive money and so as
(24:48):
as you build up, you don't evennecessarily have to build up
much more of a network.
But those same people are goingto then want in on the next
deal, want to reinvest.
When a deal, you know, uh, goesthrough full cycle and they've
gotten a good return, they'regoing to be wanting to up that
back.
So they're coming right back toyou and so, long term, this is
how you grow.
Carlos obviously done great jobthrough the years.
(25:09):
Coming in at 2009 was a verytough time to join.
I mean I, I was building backthen.
You know the majority of whatwe were doing was working for
the banks.
There wasn't a bunch of otherwork there is, just the banks
were taking everything andtrying to get the heck rid of it
all.
Speaker 2 (25:26):
Yeah, I have a lot of PTSD from my early years
because it was just so hard toget deals done.
Things were so cheap.
I mean I look back and I wishwe had the same prices we had
back then now, but it was sohard to get financing that man.
I mean I lost so many yearsfrom my life just trying to
(25:48):
close a small duplex loanbecause the credit markets were
so tight back then.
But it helps, because now itturned me into a very resilient
investor because now it's easierto find financing.
But I approach it with the samelike, uh, like relentlessness
(26:08):
that I did back then, knowingthat they were going to ask me
for all this paperwork and allthis other crap that I've done.
Now I'm just prepared to justsend everything.
So it's made me a little bit,you know, stronger in that.
In that regard, it's actuallynot as difficult now to do deals
.
So it was good to get the painout of the way early in my years
.
But yeah, I definitely do havea lot of PTSD with regard to
getting the loans closed.
Sure, and every time I applyfor financing I get the same.
(26:32):
I get like a flashback, for oh,you know what are they going to
come back at me for.
You know what are they going toask for.
Speaker 1 (26:36):
So oh, yeah, Well, yeah, and that's the other thing
.
I mean there just was not a lotof movement.
I mean, really, from 2009,2016,.
Even to 2017, I mean there wasreally not a lot happening.
There's no movement in themarket.
It was just like a flat line.
I mean it started to slowly goup.
I mean it really didn't startto make a big turn up till 2017,
(26:57):
18, to where everything startedto really look different and
the deals were starting to dryup by late 2008.
I mean, you could still getdeals in 2018 and 19, but now
it's just a whole differentworld.
What is your outlook movingforward?
Inflation is still up.
What do you foresee as far asvalues go on properties?
Speaker 2 (27:23):
Yeah, I'm sort of done trying to predict the
market.
Every time I try to predictsomething, some craziness
happens, like COVID that throwseverything out of you know, out
of whack.
That said, I don't really seetoo much distress.
You know the amount of distressthat we were projecting when
interest rates shot up.
There's some distress and I'mseeing some deals that are, you
(27:45):
know, that are not doing welland that are having people
having to sell.
But I'm not really seeing, likethe fire sale that I was
expecting Deals are, you know,that are not doing well and that
are having people having tosell.
But I'm not really seeing, likethe fire sale that I was
expecting, deals are.
You know there's not that manydeals.
What's happened is thattransaction volume has really
decreased so people that don'thave to sell are not selling,
and then there's not that manypeople that have to sell, at
least not yet.
(28:06):
So that has made it difficultto find deals.
But again, from one day to thenext I mean I haven't done a
single deal this year, but lastyear we did three and the year
before that we didn't do anyright.
So it was like you could havenothing for a whole year and
then all of a sudden the dealpops up and you got to jump on
(28:27):
it from one day to the next.
So it's kind of hard to predict.
But yeah, I haven't really seenthat much distress.
I mean, you see all this crazynews about San Francisco and all
these towns where, like, theoffice towers are trading for
like ridiculous numbers.
But here in my market I haven'treally seen that much.
And in the Kansas City market,you know it's the Midwest, so
you don't really see that manyswings in either direction.
(28:50):
Things tend to stay relativelystable and the distressed deals
that I've seen in that markethaven't been distressed enough
for me to really jump on.
Speaker 1 (29:02):
So it's interesting.
I'm with you.
So what we're seeing is thenumbers haven't come down,
they've still stayed elevatedand you can almost at this point
.
You know I'm a builder and Ibuild and do buildings for
developers and we self-developand it's to a point where you
(29:23):
can build something for theprice that everyone's selling it
for.
That's supposedly the greatdeal.
So when I look at somethinglike that and I can build new
for what someone is selling,that is the bottom of the market
selling.
So we have Flex Industrial inmy market that the bottom dollar
is $155 a foot, that you canbuy it for.
(29:46):
Well, I can.
If I get the price per acre at50, 60 000, I can develop, you
know, brand new buildings for145 a foot.
So what's the?
What's the incentive to buy itfor 155?
But they trade in a second 155.
It's crazy.
Speaker 2 (30:01):
And if I buy that industrial uh, john you know, by
the notion of 150 a foot, whatdo I rent it for?
What can I rent it for?
And will it cash flow?
And it makes sense, I need tofind definitely seven, eight
percent interest rates right.
Speaker 1 (30:17):
Well, you're exactly right.
Well, I mean, you know.
So, for instance, our rentalrate here for this product that
we're talking, you'd be attwelve dollars a foot, triple
net, so it doesn't even cash.
That's some cash flow really,you know.
Yeah.
So you know, I don't, I don'tget it, but they trade all day
long.
I mean why?
Speaker 2 (30:35):
who's buying these things?
But I want to look at deals Ilook at industrial deals like
that all the time that make nosense and somehow they trade and
somehow bad deals like thatkeep popping up.
I just don't know you're.
Speaker 1 (30:46):
You're I mean you and me are in the same boat.
I have no understanding on whythese things are trading.
You know, the difference iswhen we're doing new we'd be at
$15 a foot triple net.
So then they get close tomaking sense.
Now they're not some home run,but those at least you know when
you're new they can make sense.
That's what I like.
Speaker 2 (31:06):
And if you're hedging against inflation and you can
somehow carry it, I guess itmakes sense.
You know who that's what I have.
You're hedging againstinflation and you can somehow
carry it I guess it makes sense.
Speaker 1 (31:13):
You know who knows.
Yeah, that's it.
Well, yeah, I mean, I reallyappreciate you coming on today.
Uh, I mean, we've gotten a lotof great information from you.
If people wanted to reach outto you, what's the best way to
get in touch with you, carlos?
Speaker 2 (31:24):
uh, yeah, you can shoot me an email, carlos, at
rovira pmcom.
Pm is in management and, yeah,go to our website, which is
roverapmcom as well.
You can find out about us.
If you're looking for propertymanagers in either Miami,
orlando or Kansas City, let usknow.
We're happy to help.
We'll take a look at whateveryou got and hopefully we can
(31:45):
help you out.
Speaker 1 (31:47):
Awesome, and we'll have all this in the show notes
and we greatly appreciate youtaking the time today, Carlos,
and jumping on with us.
It's been a pleasure meetingyou sir.
Speaker 2 (31:53):
Yeah, man Likewise.
Thanks for having me on.
Speaker 1 (31:55):
Yes, sir, have a great one.
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