The Attack of the Side Hustle!

The Attack of the Side Hustle!

When I purchased my first commercial building, I was a property manager.  Therefore, it was natural for me to accept the same role for our investing group.  It dove-tailed nicely into my day-to-day routine.  I could field calls throughout the day for my own property as well as from the portfolio I managed.  Everything rolled together well.  It was a comfortable fit.

I didn’t know it was called a side hustle then, but I was creating a new stream of income (albeit small) and having fun while doing it.

Fast forward eight years and I’ve found myself in an uncomfortable situation.  I’ve grown my portfolio to fifteen properties with more on the way.  I’m now overwhelmed by the level of work I’ve created with the management duties.  The income created from this side hustle is nice, but it’s nowhere near the level I earn as a commercial real estate broker.  It’s not even an amount that I could subside on if I decided to solely do my side hustle.

Therefore, I was faced with a choice – continue to drown or seek immediate help.

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How I Bought My First $1.5M Commercial Building

How I Bought My First $1.5M Commercial Building

In late 2016, we bought a 10,135 square foot retail building in Deer Park, Washington.

At that point, it was the largest and most expensive building I’d been a part of acquiring.  Quite frankly, I was a bit scared that we could pull it off.  Up until then, the most expensive building I had purchased with partners was $390,000.  The building we were contemplating was almost four times that price.  It made my heart race considering it.

However, we believed the building to be well-built, positioned great and priced right.  That’s the trifecta when looking at a commercial project.

We made our offer on the building and then conducted our due diligence.  My investing partner and I believed in the project, but our partners thought the price needed to be a bit better.

Then we did what we previously thought unthinkable.

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Cleaning Up after Forty Years – Rosewood Retail - Part 4

Cleaning Up after Forty Years – Rosewood Retail - Part 4

In May of 2017, a tenant at our Rosewood Retail property moved out.  Spokane Vitamin Supply had been in the building for more than forty years.

We had only owned the building for seven years, so we didn’t enjoy their entire run of tenancy.  The business had changed ownership at least twice.  In our records, there was a transfer of ownership in 1993 to Mr. Smith (not his real name).  Then in 2015 the business was sold again to the Williams family (not their real name).

Initially, Mr. Smith was going to close his business instead of renew his lease.  He was an older gentleman and didn’t actively run the business anymore.  He operated the business as a way to keep a couple employees working since they had been loyal to him for so many years.  The employees were now ready to retire which would allow him to shutter the business.

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When Revaluing a Property Doesn’t Go Your Way – Rosewood Retail Part 3

When Revaluing a Property Doesn’t Go Your Way – Rosewood Retail Part 3

Roughly six years into the ownership of our Rosewood Retail property, one of the partners decided she wanted to sell out.  A couple years prior, Bobbi (not her real name) had gone through a divorce and a year later relocated to another state.  She was involved in another partnership with us and had chosen to sell her portion of ownership earlier.  It had gone very well for her as detailed in The Little Property That Could – A Partner Wants Out.

Now, Bobbi decided she wanted to sell her portion of the Rosewood partnership.  After running the numbers, the news wasn’t good.

If she still wanted to sell her 25% stake in the partnership, Bobbi would actually get less money than she originally put in.

It was a tough reminder that an investment property’s value is tied to its net income which is a function of both income and expenses.

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The Buy-Out or How a Lease Termination Can Benefit You - Rosewood Retail, Part 2

The Buy-Out or How a Lease Termination Can Benefit You - Rosewood Retail, Part 2

As time moves forward, things will change at any investment property.  You are incredibly lucky if your tenants stay in place for a multitude of years and steadily pay rent.  This reduces the associated costs and headaches of vacancies.

At our Rosewood Retail property, everything proceeded nicely for about two years.  Then we were approached by one of the tenants who stated they wanted to terminate their lease early.

The medical billing service was ceasing operations.  The doctor associated with the service was joining a larger organization and, therefore, needed to shut down his practice.  However, they still had three years on their contract.

When you’re faced with this scenario, it’s an interesting proposition, but an exciting opportunity.

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It Always Starts with One – Rosewood Retail, Part 1

It Always Starts with One – Rosewood Retail, Part 1

It’s embarrassing to admit, but when I was a property manager, I didn’t know how to invest in commercial real estate.  In my area, most property managers don’t own investment real estate.  I’d imagine that trend continues beyond my part of the country.  Perhaps it’s because property managers spend so much of their work time around real estate that they don’t want to do it on their personal time.  Maybe it’s an employee versus entrepreneur mindset that holds them back.  Whatever the reason, it’s a strange reality to encounter.

No one shows you how to invest while you’re working on their properties.  They don’t have to do that, now do they?  If you ask them, though, most investors would be happy to share their investing stories and insight with you.  However, when I was a property manager I didn’t have the courage to ask my own clients how they developed their portfolios.  Instead, I remained a guy collecting a check to manage other people’s properties, helping them achieve their dreams while mine seemed like a distant mirage.

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The Little Property That Could – Part I - The Initial Purchase

The Little Property That Could – Part I - The Initial Purchase

It was a small building with a single tenant, The Medicine Shoppe.

My investing partner, Kevin had cold-called the owner and asked if they wanted to sell. 

It was 2010.  The real estate market was still in turmoil and struggling to retain its value.  The owners of the property were excited to hear from him and agreed to meet.

They toured the building and Kevin said he was interested in buying.  Unfortunately, they couldn’t agree on price and Kevin didn’t want to let the deal slip away.  He came up with an idea to get the deal across the goal line.

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