If you enjoy commercial real estate podcasts, this week’s guest will certainly be no stranger. Cory and Matt are excited to welcome Sam Wilson, the renowned host of the hugely popular podcast, How to Scale Commercial Real Estate.
Sam uncovers his roots in commercial investing, share some mistakes he has made along the way and talks us through what a good deal looks like to him. On top of all that, you’ll want to stick around to hear about the portfolio sale he exited in January 2020, which is a definite example of ‘timing the market’.
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Who is Sam Wilson?
I grew up in Indianapolis in a family that has always been entrepreneurial. We learned as kids how to hustle, which has stuck with me throughout my life. I got into real estate in my 30’s when I bought a house during a foreclosure auction. I made money on that and decided it was something I wanted to keep doing. After some time, I transitioned from single family residential to investing in the commercial real estate side of things.
Why did you transition from residential to commercial real estate?
Commercial real estate investing is the same amount of work as residential investing, but there’s more zeroes at the end of it. It takes just as long to put together a $10 million deal as it does a $500,000 deal and the $10 million deal is more easily financed. There’s a lot of money out there for large commercial projects.
It’s harder to scale in residential real estate. I could make it work with single family homes, but it was tough.
Tell us about your podcast, “How to Scale Commercial Real Estate.”
The podcast is purely educational in nature. I get to speak with people who are way ahead of me in commercial real estate and ask them anything I want. People are very willing to share information. Yes, this industry is competitive but it’s also very collaborative. Partnerships happen all the time in commercial real estate because it takes a lot of people to get deals done.
It’s been an incredible blessing for me to get to learn from people through my podcast. Every Tuesday I record about 10 episodes and the episodes are released daily. How cool is it that I get to pick the brains of people in commercial real estate from all over the country? And at the same time, my listeners get to learn from them too. I talk to anyone who touches the commercial real estate space.
I have interviewed people who run nine different companies and have hundreds or thousands of employees under them. And I get to talk to that person for 30-45 minutes. I get insight from that person that employees inside their own companies might not even have access to.
Tell us about your commercial real estate portfolio and how you scaled it.
We were in the parking industry until March 2020. But covid killed parking, which left me floundering for about five months. I reached out to my industry contacts to ask what people were working on that was fun. I would tell my friends to give me a call if they had something on the line and I could help them reel it in. That’s been a great way for me to scale and diversify.
It’s a fun way to participate in the market and grow your portfolio. I did that on several multi-family deals and then built a boat and RV storage space on my own. So my mix has mostly been storage and multi-family recently.
You recently started working in RV parks and RV resorts. Tell us about that asset class.
We are finding deals on RV resorts with 10-11% cap rates, so I think we’ll be on a good run with that asset class. These resorts are destinations with pools and other amenities where people want to stay for a good amount of time; they’re not simply roadside parks where people come and go every night.
I think there are good headwinds in the RV space. These parks and resorts are severely under-built for the number of RVs that are now in the market. This market has been underlooked so our plan is to either buy a lot and sell them off or buy a lot and attract an institutional buyer.
How involved are you in your commercial real estate deals?
I’m very involved in my commercial real estate deals. Investing in these RV resorts is an active business, which helps to explain the higher cap rates. We’re not only buying the RV parks but we’re building out management companies. It’s daunting to take on and there are a lot of people involved. It’s a huge undertaking.
What kind of RV parks are you buying?
We’re currently buying in the $3-7 million range so we can wrap our head around the system. And then we’ll move onto larger parks. But maybe we won’t! If we get into $10-15+ million parks, we’re into institutional levels. Right now, all of the parks we work on are mom and pop owned and there are lots of inefficiencies we can take advantage of like adding wifi, online booking, more spots, etc. There are lots of levers we can pull to add revenue, but they also add complexity. Those same opportunities might not be available at the higher price range.
How did you discover that RV parks were a profitable asset class?
We did a ton of research on the RV market when we built the boat and RV storage site last year. From there, it became clear that there was an opportunity to invest in these RV parks and resorts. I’m a cash-flow investor; I like building equity but I really love money showing up in my account every month. If we can produce that for our investors, why not?
RV parks are a completely different ballgame from parking. Parking was the most hands-off commercial real estate investment. So this is more hands on, but there are more attractive deals available.
How do you find a commercial real estate deal? Where are you finding the RV parks to invest in?
The RV parks need to be within two hours of a major city and they need to be a destination. These RV resorts need to be in places where people want to spend a weekend. That’s how they differ from the roadside parks.
We are continually monitoring the market and looking for deals. If the economy tanks, we think people will still want to head out in their RV and go fishing. To find the deals, we do whatever it takes. We’re cold calling, sending mailers, networking, etc. Most of these deals are off-market; there are brokers out there but it’s a very small, niche market. All of our deals so far have been off-market and sourced directly by us.
What mistakes have you made in your commercial real estate investing career and what have you learned from them?
Early on as a limited partner, I probably put some money into deals I didn’t understand very well. Those deals are still performing, but maybe not as well as they could have. That’s made me more leery of deals as a passive investor.
If there are too many people on the team, that tells me they need a lot of help getting capital and that most of those people don’t know as much about this deal as they should. So those early deals have taught me some red flags to look out for now.
What advice do you have for people looking to scale in commercial real estate?
For active investors, I’d suggest finding a mentor. Find the person who is doing what you are doing, but doing it better. Find that person and ask, “How can I add value for you?” I did that with parking. I flew down and helped my mentor find parking assets, splitting the deals, and that’s how I learned that business.
Alternatively, you can buy your mentor’s time. I’ve written cheques worth more than a college education to buy someone’s time and the advice I’ve received has paid off.
But this industry is fraught with the “guru but no do” type of people. They’re course hustlers. Don’t waste your time on courses. Find someone who can mentor you one-on-one by either paying for their time or adding value to their work.
Find out more: https://brickeninvestmentgroup.com/