BiggerPockets Real Estate Podcast - 214: Building a $30M Fund to Invest in Real Estate with Joel Sherlock

Episode Date: February 16, 2017

Some investors buy a single house. Some buy a small multifamily. But today on The BiggerPockets Podcast, we sit down with someone who jumped into real estate in a much bigger way! Joel Sherlock is an investor from Canada who put together a $30 million dollar fund to buy real estate in America. You’ll learn why he went this route and how you can follow a similar strategy in your own business. You’ll also learn about Joel’s entrance into the world of commercial real estate, including the pros and cons of that niche. In This Episode We Cover: How Joel started real estate back in college Why he eventually moved his investing in Canada to America How he was able to come up with $32 million in funds What a “hurdle rate” is Why he considers his model to be conservative  The kind of properties he’s buying Why he chose Scottsdale Innovative strategies for finding deals How he “trades deals“ How to get fixed-priced bids from contractors Why he’s made the move to commercial real estate Why people avoid commercial real estate How to evaluate strip malls Tips for analyzing commercial deals Future plans for his business And SO much more! Links from the Show We are hiring! BiggerPockets Forums Bond BP Podcast 047: Apartment Complexes, NNN Leases, and Commercial Real Estate with Joel Owens Books Mentioned in this Show The Millionaire Real Estate Agent by Gary Keller Shift by Gary Keller Think and Grow Rich by Napoleon Hill The Saint, the Surfer, and the CEO by Robin Sharma Tweetable Topics: “It’s exactly the same thing, there is just more zeroes.” (Tweet This!) “In the real estate sales world, as soon as you stop selling, you stop stop making money.” (Tweet This!) “Getting started is the key. You don’t have to be great to start but you have to start to be great.” (Tweet This!) Connect with Joel Joel’s BiggerPockets Profile Joel’s Website Joel’s Company Website Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the bigger... This... This is the Bigger Pockets podcast. Show 214. You know, they want to list and they have to list and sell their home before they can buy ours. We'll step in and make them an offer and say, listen, I mean, if you want to buy the property that we have to sell, we'll buy yours. And so we sort of facilitate a lot of deals that way. You're listening to Bigger Pockets Radio.

Simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. What's going on, everybody? This is Josh Dorkin, host to the Bigger Pockets podcast here with my co-host, Mr. Brandon Turner. What's going on, Brandon? Josh Dorkin. How are you?

I'm doing okay, man, doing okay. living life enjoying this lovely gloomy day that we have here in Denver. Yeah, it kind of looks like I'm looking at your window that looks like Washington. It does. It's a little unusual, but, you know, that's all good. Well, you're a little unusual. It fits. Welcome back from Canada. I'm just going to ignore your comments.

No problem. Yeah, Canada. I'm back. We're back in the States. However, we are talking to a Canadian today. We are. Ironic, isn't it? Yeah, Aboot, Canada.

Is that a bad Canadian accent? I mean, we're talking to investing in the U.S. So, yeah. And this is a show for everybody because we're not, it's not like specific to, hey, here's issues that a Canadian is going to have buying in the States. It's, you know, hey, here's what this guy's doing, how he's doing it. And it's, it's interesting. He's, he's definitely raising, raising the bar a little bit, huh?

Yeah, definitely is. I like his whole, like, I don't know, perspective on think bigger. Like, he's like, I could go buy a house or I could put together a 30, million dollar fund do it by houses you know like very cool stuff that's great that's great cool well before we get into the show why don't we do today's quick tip all right today's quick tip we are hiring here at bigger pockets we have we've got a couple jobs but by the time this episode comes out those jobs will likely be filled we're hiring engineers we're hiring all sorts of other folks if you are looking for a job and amazing company go to biggerpockets dot com slash jobs

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That's Indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. All right, guys, today's show is show 214 of the Bigger Pockets podcast and you can check out the show notes at biggerpockets.com slash show 240. Today's guest is Joel Sherlock. All right, Joel's a real estate investor turned agent.

He's got to focus on fix and flips and income properties. He does live up in Canada, but does, you know, has been doing the, what sounds like the bulk of his investing down in the states, lots and lots of great information. And, you know, he's, as Brandon said earlier, I mean, he's, he's gone out and kind of raised the game here. He's one of his first deals, what's, was this, you know, Wopper. Well, it wasn't a deal, but he put together this. this big fund and started finding lots and lots of deals. Fascinating stuff. Really interesting.

Again, another perspective, different than all the others that we've had on the show. And hopefully we keep doing that. But let's bring him out here and hear a little bit more about his story and what he's doing. So all right, Joel, welcome to the show, man. It's good to have you here. Hey, thanks so much for having me. Yeah, yeah. So we've not had a lot of Canadians here on the show. In fact, I'm not sure if we've had any, but you do invest. You just lost your entire audience. Well, you invest in you do more. You do American stuff as well, right? Absolutely. Okay. So just people listen to this don't have to be like, oh, well, it's Canadian. I'm not going to listen. I won't learn anything. I think we're going to learn a lot from you. That is my hope anyway. So yeah, I hope so. Yeah, I hope so. Yeah, I hope so. Yeah, I hope so, yeah, I hope so, yeah, I'm going way back. I'm a finance student and big numbers guy. And then of course, as, you know, you come out of high school and then it was like, well, do you buy or rent, run the numbers and you buy, but at the time, I had a credit card with some room on it and not a lot of money. So a friend and I bought a pretty terrible one-bedroom den apartment and then put a small little reno in it.

And, you know, we sort of split that. And it, you know, we called it a two-bedroom, but it wasn't quite. And then he met a girl six months in and first year of college for me and said, hey, you know, I'm in love and I'm going to move in with her. Like, you should buy me out. And I said, well, let me just check the couch and see how that's going to work. But, you know, we put it up on the market and we bought it for $89,000. put about four grand into it and then put it on the market six months later and sold it for 145.

Wow. And at the time, I was in school and I'm like, what a pain. And, you know, this is terrible. And so I went and bought a unit in the same building, one floor down, two bedroom this time. And I was going to renovate and just have a roommate and no one was ever going to, you know, now it's going to be mine and this wouldn't happen again. Sure. But as soon as that one was done, I thought, hey, wait a minute.

I wonder if I could sell this one. and going to school, doing my securities degree, so I like to be a stockbroker. And, you know, everyone's telling me that for the first couple years, I'm going to get yelled at, make 30 grand a year, and get people coffee. And I'm going, well, I just made double that flipping two houses. That was kind of fun. I'm going to try that for a while. So, you know, as the projects got larger, you know, the banks in Canada are a little more conservative. So they wanted me to have a job.

And I said, well, I have a job. I'm flipping houses. So ended up in the car business for a while just because it allowed me to make good revenue. and come and go as I please. And, you know, I was racing BMW cars at the time. So I went to work for them. And that was a great. It was a lot of fun.

But, you know, met a lot of people. And, you know, working with my realtors, you know, I'd show up in a suit in our market. They can be a little more casual at times. And it really frustrated me. So I got into the business with one of my realtors at the time. And I started a brokerage in, like an independent brokerage in the Okinawagon area, which is like Canada's Napa. And I did that before.

I was licensed, which for anyone listening, that is the wrong way to do it. So you started a real estate brokerage with my realtor. Oh, wow, interesting. With my realtor. So I put some money in. We started the brokerage, you know, got the branding together, started to put the systems in place. And then I, I race through my real estate course as quick as I can so that I could start

making some money on the sales side. So, you know, and we started that business in 07 in the Canadian market. So, you know, that was, luckily for me, I had sold some property that I owned to sort of fund my transition and I'd sold it at a very good time and then but you know learn the real estate sales business at the very bottom okay okay so uh I I you know I've I have never actually heard everybody do it that right so they opened the brokerage and then got the license but but I mean it's if it's not I don't think it's illegal to do that I mean because you had your your partner the was the broker right so it's not 100% right so yeah and then and then we had a you know a 915

so like a license broker on staff as well and compliance and accountant and you name it. So, I mean, I don't think it's, I mean, it's a bit unusual, but I don't think it's a horrible thing. Do you regret, I mean, like, do you regret that? Absolutely not. No, I mean, it was definitely, you know, it was an expensive way to learn the business for sure.

Sure. Yeah. And, and, you know, subsequently, I've sold that brokerage four years ago as we started to get more active in the United States. Okay. So let's, let's talk about that. Nice. Yeah.

Yeah. Yeah. So, why do that, by the way? That's good question. And we sort of stumbled into it. So, you know, from my, my soari in the BMW world, and met a lot of really incredible people, doctors, lawyers. And, you know, as the Canadians were coming down in droves to buy real estate in, you know,

Arizona or Florida or, you know, those depressed markets, a couple of surgeons were going down, friends of mine, and they were going to golf. And I thought, hey, it's a little gray here. I'll come down, look at some real estate. And, you know, we'll golf and maybe have a beer or two. And, you know, it was mind-boggling to me. The first trip we went down, we were through 75 houses. And, you know, we're talking about last sale.

was 715 and, you know, mortgage balance of 680 and, you know, it's listed at 350 and we're talking about a $200,000 offer. And the numbers to me were just, they were mind boggling. I mean, I'd never seen anything like that. But then when we learned a little bit more about it, I'm going, well, hold on. For a Canadian, looking at that, I'm going, well, hold on, I can, what's a rental market look like here? And if someone gave me that lot next door, could we replace what's here for that price? No, you couldn't. So, you. You know, at the peak, that market was taking a ton of starts. It was huge demand.

And then it slipped quite a bit. So, you know, we put a thesis together and just came back to see, you know, it was, we're going to buy some property and the market will come back. I don't know when. And in the meantime, we'll make some great rental returns. And, you know, so we put a fund together of $32 million and then went back down. Oh. Yeah.

So, you know, in a very standard like GP, LP, LP structure from the finance world, you know, the thesis worked very well. And we put a lot, you know, I put some money in. and a couple of our managing partners put some big cash in, too. So you're like, I mean, I love this because it's pretty bold, right? It's like, hey, I want to go buy a property. Most people think, I'm going to go buy a couple properties. Maybe I'll go flip a little house, right?

You're like, I'm going to put together a $30 million fund. I mean. So in the initial side, you know, I didn't know what the appetite would be. I thought, you know, we can, you know, we'll put in, we can probably get to 10, 15 million and come and, you know, spend some cash in the area and get some great returns. but, you know, we never really, it was huge demand because it was just on the tip of everyone's tongue. And in Western Canada, everyone was going to Arizona. And, you know, in Eastern Canada, Toronto, Winnipeg, Montreal, like they were going down to Florida.

And, you know, it worked out really well for us. We met some great people. And, you know, we had some really, really incredible connections down there. So, you know, we raised some money, went and spent it, started getting good returns. And then more money came in. And so from the real estate investment work that we were doing in Canada, we met so many people who wanted to participate down there, but didn't necessarily know how to get access to it or how to put it together. So, you know, it was a, it was an incredible ride. And now,

you know, we're divesting ourselves of all those assets now. We've got about 14, 15 doors left. And, you know, there's been, we've made some good returns on just the currency alone. Okay. So let me, let me back up a little bit and get kind of an overall picture of what we're talking about here for partially because I want to, I want to know more about what we actually ended up doing with the 39. Yeah, exactly. So I'm thinking like, first of all, what is a, for the people, have no idea. What do we even, when you say you built a fund, what does that mean? And then what does you go in and buy? And, and let's go there. So it's just like it's a big pool of capital. Okay. You know, so we came back into, basically it was everyone that we were talking to,

like coming out of the finance world and partnering with a real estate guy. And, you know, so I was selling real estate and then we were also flipping houses and we were working with investors and we'd been involved in some private financing up here. So, you know, again, with that background on the finance side, I'm very comfortable with those kind of structures and joint venture agreements and, you know, private lending, et cetera. So when we came back, you know, we had a very conservative business model and, you know, the rates and returns.

And basically we had a management team down there, property managers, maintenance guys, pool guys, rehab teams. And, you know, it was just, hey, like, invest with. us, we'll go down and participate in this market and we can all split, you know, the management will be ours. The rehabs will be ours to manage. And then, you know, we'll give you this hurdle rate. And then everything above that hurdle rate, we took a trailing interest on. What do you mean hurdle rate? What does that mean? So basically it was like the investors made 8% and then everything above that, we participated in. Okay, cool. So yeah, I know that's kind of how a lot of syndications work.

You know, like if I'm going to go by an apartment complex, you know, I'll give a preferred rate, you know, 8% to the investors. And then after that, we'll, split everything, you know, 70, 30 or whatever. Totally. And so very similar there. I mean, again, I love that. You talk about your business model. You said you had a conservative business model.

So what does that mean exactly? You know, somebody's listening. They're like, I don't even know what was it. I mean, for like, well, okay, so I look at it as conservative because in Canada, we're buying houses at like $400,000 and we're adding a suite in a basement for $25, $30,000, depending on the area. And then we're getting, you know, $50,000. 15 to 1,600 upstairs and 1100 downstairs, right?

And we're looking at homes in Scottsdale where it's like $80,000 for a two-bedroom, you know, like walk-up sort of Melrose Place style development, and then, you know, $4,000 to rehab it and we can get $1,200 for it. So for me, I'm going, well, okay, I can buy one of these in Canada, or I could buy three of those down there or four. So is that? Yeah, like the cap rates were just a lot stronger. plus I saw, you know, a huge uptick coming in that market just had no idea when.

So was the intention of the $30 million to go and buy lots of these? Is that kind of what the plan was? Yeah, essentially, like we put some cash in, started buying, and then we went back out to our networks up here and just said, hey, you know, who wants to come and play ball with us down? And between BC and Alberta or like Calgary, which was, you know, an oil town and doing very well at the time, it was far more than we ever expected. And so, you know, we had four partners on that fund, if you will.

And one of them was a private mortgage finance guy that I had worked with before. And so he had some really, really big ties into some big capital. So what do you do with that? You go down to the States and now what? So, I mean, initially, like, we just had really good relationships with brokers and, you know, we would get great deals. But then, you know, as the banks started to parcel things and, you know, you're buying things on auction steps.

we're getting auction lists and you know you have somebody run out and you know we had a gal on staff who would just get the auction list and go to every property she can and look in the windows and okay that one's missing appliances or she said i'm at one two three maple street and it has a pool it doesn't say pool in the listing so we would know okay that's one we're buying for sure and you know it as the volumes came up it it got a lot harder to find deals you know and then the management of it you know the market down there the rental market did very very well for us and then most of the currency we brought across at par or, you know, a dollar in change. And then now we get $1.32 to $1.37 on the way out.

Oh, so a little currency arbitrage in the middle of it all, huh? That was a nice little, yeah, icing on the cake. Yeah. So what was the intent? Was this a buy and hold fund or was this repositioning? What exactly were you looking to do? Yeah, it was a sort of buy, improve, and then resell when the market came back. And, you know, in the meantime, it was, hey, we'll make some great rental returns.

I mean, essentially what you're doing is what all the hedge funds were doing, right? So, like, these big hedge funds were coming to the, like, markets all across the U.S., buy a bunch, told them for a few years and sell them. Yeah. We just had a tiny little hedge fund. Yeah, that's awesome. How many deals did you do in that time period with that fund? So that, we had about 214 doors.

Okay. Was that all, condos, single family, multi, all sorts? They did both. You know, our mindset, we didn't want to be more than 20 minutes out of Scottsdale. Okay. Just, you know, for that, for that team, you know, if we needed the pool guy over here, the maintenance guy over there, the property manager had showings. And, you know, again, when you looked at those sales numbers, the farther you got out,

if you got out into like Litchfield Park or, you know, surprise or some of those areas out, the price is just they sort of, on the uptakes came up slower. And then when things slowed down, they fell off way faster. So for us, it was just 20 minutes. You know, we liked newer inventory or things that we could add some good value to at a pretty inexpensive price because that was the other side of it, like Renault's in Canada versus There's rental costs down there. What I can get done for 12 grand in Arizona is night and day to up here in Canada.

What do you mean? I mean, why is that? So you're saying it's more expensive in Canada to get stuff done? Yeah. Why is that? I mean, just the cost a living? I don't know. Because I, you know what?

I'm not sure. Yeah. Interesting. Okay. Well, it's good to know. I watch it. Stay away from Canada. Wow.

All right. All right. Safe market. You know, we got a good solid lending here. And, you know, nice conservative returns. But no, it's been, it's been, both have been. brilliant markets for us. That was a really exciting project. Okay. So why, why Scott Stale? Frankly, it was a nice place to go and visit and we had a lot of people. The demand there was

huge. You know, when I went down for that first trip, I'd kind of gone down because we'd had a lot of clients who had gone down and got a deal buying second residences for themselves. And, you know, we'd had some people who'd gone down and didn't get a deal. And so we just thought, like, we had so many people asking me about it. I thought, you know, might as well go down, play some golf and get some sun and figure this thing out so that at least we can point people in the right direction. That's cool. I love the idea that you just, you know, you picked a market, you find out what was working there, and then you just went all in.

You bought a bunch of stuff in that, in that area. You know, I just love that bigger thinking. Well, you know, yeah, and we looked at, we looked at Florida. We looked at, you know, we've seen lots and lots of deals. And it's just, it wasn't a market. We knew. It wasn't a market. We had connections and it wasn't market.

We had people in. And, you know, and that's where I love, you know, bigger pockets. because it's amazing for that because, I mean, it's so quick to connect with people who are doing it in, you know, they are invested and flipping homes in this market. And you can ask questions and people are really open to it. So I'm very thankful for you guys putting that resource together for us. Thank you. Thank you.

No, that's great. That's great. So, okay. You're this guy. You start by, you know, buying an apartment with your buddy and turning it into this little thing and you make some money. And then you say, hey, I'm going to go build a fund. What follows? What follows after this $30 million fund?

Yeah, I mean, you know what? I was a cog in the $30 million wheel, and it was a very exciting time for me. I mean, I really wish I had put more capital in. You know, going back, I should have sold everything I had in Canada and put it all in there, but I didn't. You know, we still, I still buy fix and flip. I've got a phenomenal business partner up here who's a luxury builder. So, you know, I go out, find the deals.

You know, we plan them together. And then I hand the keys over to her. She does a rental. I go find the next deal. Yeah, she, you know, she does a phenomenal job. keeps us on budget much, much better than I, which is incredibly important. And then we manage the sale. And then, yeah, so I'm, I'm just kind of out finding deals.

And we plan it together and she does all the, all the build and management. All right. So what are you doing to find deals today? And in this market, obviously it's changed a little bit last few years, probably since the for sure. So what are you doing to find deals? Yeah. You know what?

We have a lot of innovative strategies, you know, like I write a ton of handwritten personal notes and we leave those indoors. And I find that they just, they work so much better than, than a printed thing. Yeah. You know, I said it, yeah. So you find a deal, you'll walk up and, well, you find a property that looks like it could use some work and you'll leave a handnote, handwritten note. Handwritten note. And then, you know, recently I was in New York last week and I met the guys at Bond, which have like little machines that write handwritten notes first.

I've heard of that. I was like, yes, this is amazing. Because, you know, for me, I'll get a hundred of those printed up. And if there's an area, you know, especially if there's an area where we just sold a house, we'll go and put a, you know, put a note in. every single door. And I find that the handwritten notes just, they get us so much more phone calls back. And that's where we get to really talk to people about, you know, what we do, how the deals work. And, you know, what kind of money we can offer them and sort of how much value we'll have to put into that house to really get to the sale prices and really just explain, you know,

what it needs to look like for us to make money. And a lot of people, you know, it doesn't work for everyone. But, you know, we've found a lot of deals that way. We've also traded a lot of deals. So like we'll put deals out, you know, on our listings when we have a finished product. You know, we'll let everybody know and at the open houses, we're very open about it, that if you have a home that needs renaos, you know, we'll buy your home if you buy this one. And that's been really successful for us. So, you know, basically we find us a buyer for the home we're in and we find our next project at the same time. Walk me through that.

Maybe I'm tired or something. Like, give me a hypothetical situation. Brandon, Brandon's, you know, got a property. you're you how does this work so open house agents are there you know it's one of the guys from our team and all the guys you know people come in and they go oh this is so beautiful and they go well where's where's your home and they're oh you know we live in the area oh really well what's the address well we'll go and look at it and if it's something that you know they want to list and they have to list and sell their home before they can buy ours we'll step in and make them an offer and say listen

i mean if you want to buy the property that we have to sell we'll buy yours and so we sort of facilitate a lot of deals that way. Interesting. Yeah, I've not heard anybody doing that, but it's clever. I like that. Yeah. And you're also an agent still, right? I am also, yeah. So I as still an agent and then we still have our team in the Kelona market. So I'm assuming you can say, you know, they come to your open house or you meet them or whatever, even if the deal doesn't work out in terms of you guys don't want to buy it to flip or whatever, you can still offer to then list it for them as well. A hundred percent. Yeah. And, you know, so it's a great, it's a great lead tool for our agents.

And they love them, you know, I don't list our projects. There's, some challenges with that in the Canadian marketplace. So I always have one of the other guys on our team listed. And then we spend good money to advertise those listings. And we really push those open houses. So there's great traffic. It's a great lead source for the agent. But it's also been a great lead source to get deals and to find our next deals.

Nice. Nice. So how? I want to go back a drop here. Yeah. How do you find deals at scale? So, you know, you've got this. Take the fund.

I mean, obviously, you know, You've got a fair amount of money. You can't just buy a $30,000 house once a year. You need to be buying at a respectable pace. So how do you go about doing that in a market? To be honest, I don't know if we could remake that now. And we've had a lot of talks about it. And the reason we're selling those assets and sort of reinvesting in commercial now

is just because we can't find deals on that scale anymore. I think that was a very unique time in the Scottsdale, Arizona market. you know, and the bank's coming out with big blocks and we could go through and go, okay, we'll take those seven and we're going to pass up. This is like 0.809 then you're talking about. Yeah, so eight, nine and ten is when we were spending. Sure. Yeah. And then we've been, we've been selling for a year and a half. And I think, you know, it's probably, Scott's deal is probably not, you know, you're not going to do that there. But I mean, I know guys right now that are doing the exact same fun thing in Florida. They got a big fun and they're buying.

I love to talk to them. Yeah, dozens of property. I'll totally connect to you. Yeah, They're doing like, you know, dozens, if not hundreds of deals they're looking at in Florida. And they just find a market, find a niche that works there. And then they put together a fund and they're making it work. And I've heard you guys doing that in other cities as well. And so, you know, even if you guys, you know, people listen to this might be interested in buying that a little bit larger scale somewhere. And, you know, if one area is booked out, maybe find another one. Where are people doing it?

And the interesting part, I mean, you know, it was a mentor of mine who was involved with us. You know, he'd always tell me. He's like, Joel, it's exactly the same thing. There's just more zeros. Yeah. I'm like, okay, that makes sense. But, you know, it's the same analysis on each property. It's the same, you know, analysis on the market.

You know, we always look at job growth and, you know, population growth and unemployment rates and just to make sure there's a good stream of tenants coming in and also a good stream of new buyers coming in. I love that. Nice. So, you know, before we do, before we do an episode of the podcast here, we always have our guests felt like a little questionnaire and we just say, is there anything specifically you think you'd like to talk about? And so, Joel, you wrote on yours, as I was reading it, you said, our full-proof inspection strategy to get fixed price bids from our contractors. Less surprise is poor profits. I love that.

Yeah, let's talk about that. Yeah, so we'll get a, well, it's sort of two-pronged. When we're closing on a property, like when we get a property under contract, we'll set out a four-hour window for, you know, our inspection and to have our trades come through. But by the time, so we book that, the owners are out. We are, you know, we don't have earnest money up yet. like you know we still have conditions on this or subjects on the sale as we say in Canada okay but basically we've done our rough budgets and then you know we'll have our painter

come in we'll have our drywaller come in or have our hVAC guy come in like basically there'll be a team of like 16 people in that house and they're all firming up their quotes wow that's awesome so you know I mean and the reason we set that up is you know one time we had a a large you know it was a 4,000 square foot house and it had a 1212 pitch on the roof and And so, you know, I just thought, okay, roof, that many square feet, good, go, let's do it. And, you know, when we started to get the quotes back from the roofers, as soon as they got there, the majority of them said, no, we're not doing it because, you know, you have to clip in and it takes them a lot longer and there's a lot more safety things and they need racks and pullies and all these.

And I mean, I had no idea. So, you know, those kind of surprises can throw off a budget so quickly. So for us, we were really focused on just, you know, how do we minimize that? Again, for me, and I'm a systems guy. So anytime we make a mistake, it's like, how do we put something in place so that we never do that again? Yeah. Because, yeah, I mean, I've never made any mistakes. I've just invested heavily in my education.

Oh, I like that. I like that. That's how I at least sleep at night when you have those silly things that we should have caught. I love that. I mean, so you're basically saying like, yeah, I mean, like, so I've got a property under contract. And what most people do, including myself, and I'm sure Josh, too, like, when you put a property under contract, usually I'll do an inspection with the inspector will come over and then I'll buy the property and then I'll start getting bids to come in but that point it's too late you've already bought

the property it's already too late you can't back out right so you're saying help it up yeah I mean do the work up front to get the guys in during the inspection period so it's not just the house inspector it's that all the bids you can possibly fit into that hour or four hour window I love that I've never done that we usually put we usually put like a two week clause period in there and then the first week is planning we're going out this many square feet you know what's the flooring guy going to come in at? And then once he has his rough quote in, we're like, great, Thursday, 12 to 4, we need you on site to firm up this number.

And then Friday we'll remove subjects and, you know. So how do you do that? I mean, given that so many of these guys are so flaky, obviously you found a good team of people, but like, you know, getting, getting them to commit in that period. And I ask this primarily from like, you know, somebody who's trying to do this the first time who hasn't done a lot of deals, like having that confidence. to kind of go and convince these guys that, yeah, I'm going to be a great investor to work with.

But, you know, I want you to do something that most people don't do. This is very different. And so I don't know. What advice do you have on that? Well, oftentimes, I mean, you know, a lot of the trades guys, and for sure, it's trial and error. Some guys will just blow those appointments and not show up and we just won't call them one the next time.

But, you know, for us, we've worked with a couple. We've made those errors. But I do find, you know, if you're clear in your community, communication and like we only have the house for these four hours. And so it has to be during those four hours. And we really, you know, you do have to stress that. We usually call them the day prior and confirm it with them. But they're also looking to sell their services as well. So, you know, that we usually have their attention on that. But, you know, it's certainly with scale that's really helped us, you know, because now we have a bit more of a consistent team. And, you know, the flooring guys

know that we'll be doing more jobs in the future or their drywall guys. And, you know, so that that has helped, but in the beginning, it was just a lot of handholding, you know, check in calls, follow up calls a day prior and just reminding them that we only have a 12 hour or four hour window and just letting them know, like, if you don't get in in these four hours, you won't get the job. That's great. Because that's great advice, yeah. When you get people, if you're like, hey, can you come over sometime to take a bid on this project? I mean, that's my Noah, just thinking aloud here, like, I do that.

I'm like, hey, come in three weeks. Yep. Can you come over and sometimes the next couple weeks to come to look at this property? Sure. And then two weeks later, it's like, hey, you never made it yet. oh yeah i'm gonna get over there still okay well how about next week you know like hey we've got four hours if you want the job you have to be here doing these four hours they will make it there i love that tip well at least the good ones well right exactly yeah yeah and and we also do it and and for us you know

if somebody doesn't show you know then we're also we haven't given them any money and so if they don't show we've sort of weeded them out before we write them a check and then they disappear you know that's actually yeah that's fantastic yeah and well we do the same thing with with closings as well in tenanted properties and things that we're buying to hold, you know, we'll set the closing up for, you know, the 27th of a month. And then on the 15th, we'll book it for four hours and a very similar thing so we can run ads on the property. We clear that with the current owner. And then we have a bunch of tenants come through so that we close on it on the 27th and then it's fully rented already on the first. Yeah, I love it. I love the efficiency in that. That's very cool. People love to call

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Go to mine.co slash show me to see how mine performs and get your first month free, which is much cheaper than learning the hard way. So moving on a little bit, you mentioned that you're getting into commercial. talk about that? Like, what are you doing with that right now? Well, I mean, commercial, especially in Canada, well, BC in particular, the laws for, the laws on the tenant side in BC certainly favor the tenant. In commercial, there are a lot more,

you know, fair and equitable. And we've also just been able to find, again, larger deals. You know, we don't have to find 200 deals. You know, we can, we can buy shopping malls or, you know, we can redevelop some pieces or, you know, look at development sites or land deals. And, you know, just larger ticket items, which has been really great. But but also on the tenant side, you know, we find that it's just a smoother process, right? You know, you can have a tenant in there for 10, 15 years. No problem. Yeah.

Got it. Yeah. I had a buddy this weekend I was talking to who's a broker, a commercial broker down in like the Nashville, Tennessee area. And he, he's like, why aren't there more people on bigger pockets doing commercial, even small stuff? And I didn't really have a great answer for him. I was just kind of like, it's just not what a lot of people do. I was like there's not, maybe it's not a lot of writers writing about it. Maybe we don't have enough bigger pockets of bloggers that are blogging about it.

So, I mean, I'm recruiting him in. He's going to start blogging for us. But I mean, there are some definite advantages. It's happening. Yeah. Yeah. Yeah. So why don't we, you know, like, why don't more newbies or people get into,

even not newbies, just investors. Why do we all avoid commercial? I mean, there's more cash up front without a doubt. But, you know, once you get a few, you know, the banks also prefer commercial, right? You know, here you are with, here, I got a five years. lease with a five-year renew and it's to like a bank or Starbucks or, you know, whatever that would be. That's like gold to them, right? You know, so one of the challenges we had was, you know, as you started to build the investment portfolio, you know, then all of a sudden the bank starts

giving you pressure on all how many mortgages we have. Okay, you know, to get past sort of seven or eight became a bit of a challenge. And then to get into your 20s became a bit of a challenge. Where on the commercial side, you know, they look at you like, okay, you're a commercial landlord and they're a lot more flexible. But to get started in it, If we hadn't have made those returns that we did on some of those flips, the private equity fund and those things, I wouldn't have had a capital to get in. Okay.

So you threw a lot out. I mean, you talked about malls and redevelopment. And I mean, it sounds like you've done lots of stuff. So maybe you can walk us through just a couple small examples of some of the commercial stuff you've done. Yeah. So, I mean,

the big thing for us is downside risk management. You know, so what's the possibility of having a large vacancy? You know, so we look at a lot of deals. We analyze a ton of deals. And it's always through exactly the same spreadsheets. And, you know, we sort of build them out and vacancy risk. And, you know, so we've looked at shopping malls.

We've looked at development deals. I mean, we've looked at some multifamily pieces. But again, you know, it's, we want to be in a market that has good population growth. You know, shopping malls, I'm, I'm sort of torn, like looking at the way people are shopping now and the growth of Amazon and all of that. And, you know, what's what's, what's the strip mall? future, but they can still be very, very good investments. And, you know, you got a lot of security when you have those anchor tenants on either side. And then you really make the money off the smaller businesses in the center. Unless they go out of business, which is happening, left and right.

Yeah. Our mall here in Averdeen, Washington where I live, I mean, it's the, it's the creepiest mall because you walk through it. And it was at one time a big, huge mall. Right now there's like four stores left in it. Both anchor tenants are gone. I think both, maybe the Sears is still there. But there's probably two to 300 stores and there's four left. So you walk through it and it's like there's like tumbleweed blowing and there's just garbage around. It's a weird and creepy kind of place to be. And that's happening all over the country. Yeah, it is.

Yep. Yeah, it's an interesting place. But somebody just bought it for pennies on the dollar. I should have even, you know, I don't know. Yeah, I just heard a story last week about somebody buying, you know, this $100 million mall for like, you know, thousands of dollars. It's just crazy. Well, tell me, Joel.

So, I mean, it sounds like you're talking and hypothetical. Like you're evaluating a lot of these deals. But what types of commercial properties are you actually buying or have you bought? Yeah, we do say no to most. I mean, you know, we've bought a couple multifamilies, you know, eight units, 16 units. I love those. They're just very hard to find in Western Canada for reasonable cap rates without getting too far outside of our area.

So that's really where I would like to go. But, you know, we did get into a couple malls, smaller strip malls, in good growth areas. And then we've done a couple private lending deals in the development world. So, you know, where we've come in as a partner on the land. And then the great part for us is we can help them develop their sales strategy and exit the property once finished too. Let's talk about their small strip malls for a second because I don't think we've,

I mean, I know we had Joel Owens talking about Triple Net, but I don't know that we've beautiful done a show necessarily where we've really covered strip malls specifically. So what are the economics of a strip mall? How do you kind of make a decision on how do you evaluate that differently than potentially a multi or something else? What are you looking for? So really what we're focused on on that side is like possibilities of big vacancies. So if there are two big box stores on either side, you know, those can be safe, but you want to look at, well, Target, for instance, was a huge, you know, came into Canada, massive, massive expansion plans. and then subsequently, shortly turned around and pulled right back out.

So, you know, if one of your 40,000 square foot tenants all of a sudden leaves, that could be detrimental to the entire investment. However, Target was backed by, you know, that lease into Canada on some cases, you know, was backed by the parent company. So then that gives you a ton of security. Yeah. So, you know, again, it's looking at all of those. But Triple Net is really the reason that we started going into commercial purely because

you know, if property taxes go up, their lease goes up. If operating costs, you know, we can put a management fee on top, you know, it's just everything is totally, totally separate. So it's more consistent cap rates and frankly, they're better cap rates. So can you talk about the numbers on one of these? So we have an idea. Yeah, actually, you know what I'd be happy to do too if you want is I can put one of our spreadsheets at the bottom of, you know, I can actually share the numbers and just, it's totally open book. I'll just black out the addresses.

That'd be awesome too. Yeah, we'll put them in the sort of 10. But yeah, so like, I mean, so basically give us, you know, something, one of these products. Yeah. So, I mean, what we'll look at is, is each individual strata unit will come in and then we'll put a different, you know, if it's a hair salon or something that's got a 12 cap on it, you know, we might put a higher vacancy rate on that unit in comparison to, you know,

the $8 of a square foot we're getting from the big box guy at the end or something along those lines. So really it's, it's an analysis of each of the businesses individually. and then we combine it all into one unit. It just doesn't sense. Yeah, it does. So how do you, I mean, this is a much bigger question that we're not going to be able to dive fully into, but like, how do you begin analyzing a commercial deal?

Like, I mean, in terms of- You analyze thousands of residential deals. Okay. Yeah. And you're like kind of getting know what you're doing and that you add the kind of thing in there. Yeah, I mean, really, again, you know, you come back to like downside risk management, right? I mean, you know, what's, you know, in, well, but again, it's very, very similar. like we just closed on a warehouse here, which, you know, has a, as an interesting use and a great cap rate,

but that's exactly the same. We go out and look at how much space is available and how much future potential, like strip malls as well, right? I mean, if there's seven other malls that are getting developed and there's going to be a whole bunch of commercial property coming out, that's a huge negative on that. You know, now there's a whole bunch more competition coming out of the market. Okay, we don't want to do that deal. You said interesting use also. What, what was that? What does that mean? So, you know, we had a welding company in one of our buildings, and they just really, it was a bad tenant. So we ended up exiting that company and, you know, we had an add out $10 a square foot and we got an offer for 12. I thought that's interesting negotiating.

And they had a license to grow cannabis, which is federally legal in Canada, which is interesting. So, yeah, we ended up bringing that tenant on, which is a new showery for me. I learned a lot. Like, asked me about wine. I can tell you a lot. I unfortunately didn't know a lot about that. Interesting. Interesting.

I mean, so what is the candidate rule on that? I mean, like, you said it's federally legal? Federally legal. So you can't, they, so you guys don't have states, right? Providence. Like, is it providential? Medically legal in every province. Okay.

medically, okay. So it's kind of like the U.S. where we, most states have, well, not most, but a lot have medical and some have just, you know, recreational. Recreational. Yeah. So, I mean, the thing is for us, like we call the governing body and we check those guys on licenses and then they have security that they have to put together. And, you know, it's, it's an option agreement. So, you know, they, they're ultimately will, we'll buy the

company or buy the building from us because Canada's unique where, you know, they're publicly traded companies worth over a billion dollars in the cannabis sector, like canopy growth. So it's quite a different landscape up here. Like in the U.S., we've looked at it, but there's the, the federal illegality, the new president coming in, you know, the last thing you, that's downside risk management right there. Like the possibility of maybe losing a building, no, thank you. You know, that's the beauty of real estate as it can't be taken away. It's interesting. The Denver, I know the Denver market, you know, at least well enough to be dangerous at this point.

And, you know, when everything became legalized here, all the old warehouse space around town, you know, just started exploding. And rents went up double, triple, quadruple. It was crazy. It's crazy. I mean, you know, is it good for Colorado? Yeah, sure. It's good for Colorado. Is it good for landlords?

Sure, it's good for landlords. It's, I mean, it's, it's been fascinating to see the city grow as a result of all this money flowing into different parts of the city that really were fading. Yeah. Well, it's interesting. I mean, and we looked at a number of buildings in Colorado. And, you know, I'd actually taken a couple trips down and looked around. But anything that spikes up that fast, it's just so reminiscent for us of, like, Fort McMurray,

which is an oil town here, you know, in northern Alberta where the oil sands are. And, you know, oil is a cyclical. market for sure. And the challenge that we look at, you know, can you get, you know, at times they had double wide trailers that were selling for $500,000 and they were leased out at, you know, like $4,200 a month. And I'm going, okay, but when oil, not if, when oil does this again, you know, then who wants to be in Fort McMurray? And, you know, not a lot of people. It's not the same amount of people that live there when oil's booming. So that kind of risk is just, you know, even if you can get a great cap rate 50% of the time. You know, it can be sexy and attractive, but, you know, all of a sudden,

you get a couple zeros on there and that just throws off the entire return. Hey, Joel, how are you financing all this stuff at this point? Like, what is, what does your company actually look like today? So closing out that private equity fund, right, which was like a GP and LP structure, you know, traditional like, like a private equity fund, if you will. And then we do a lot of joint ventures with those partners just because we've worked together and any deal that we do, we have some skin in the game. But certainly, you know, we were proven earners now to those people. And so we've, you know, we've got a lot of access to capital,

which has really allowed us to just grow the business for sure. You know, the last five years have been incredibly exciting. But again, it's the same fundamentals. We just spend less time now looking for cash. Are they, are those people funding the down payment and then you're using a bank traditional financing for the rest? Or are they funding the entire purchase price, like almost like they are the bank? So, you know, sometimes it's a hybrid of both, but usually, especially in Canada right now, we've got mortgage rates on the residential side at 2.9.

So, you know, of course, the structure is always, you know, we might buy it, renovate and then refite and get the cash out without a doubt. Yeah. Very cool. Cool. All right. Kind of last question before I headed the fire run. What are your future plans for your business? Like where's it headed?

Ah, you know what? It's, again, I still love, like I absolutely love the demo part of rehabbing property. so I don't think I'd ever get away from that. You know, my RSP or like my 401K is real estate, and I like the longevity and security of commercial. So, you know, keep building that. That's a lot more passive income. It's not as active or as much fun as, you know,

going to find a deal and planning out a rental and smashing it down and redeveloping it. We are looking at a couple development pieces here. We've got a beautiful lake, so there's a lot of scarcity of, you know, of land. And so, you know, the beauty of that is we're looking at a couple development pieces there. So really, I just love looking at these deals. And so continuing to look at deals and do ones that make sense and learning. I mean, I'm just, I'm addicted to it.

Cool. I love it. Very cool. Awesome. All right. Well, hey, let's shift gears here and head over to the world famous fire round. It's time for the fire round. All right, let's get to the fire. These questions of course come direct out of the Bigger Pockets forums, which you can get to at biggerpockets.com slash forums. All right. The world famous fire round. These questions come direct out of the Bigger Pockets forums. And we're going to fire them at you right now. Number one, I got $100,000 to begin investing. Am I stupid to consider, I mean, Josh, don't answer that yet. Am I stupid to consider skipping the small deals and beginning with a larger multifamily or commercial property? Depends on the market. You know, again, look at population. If you can get in at a reasonable rate on a multifamily,

you know, then you're diversifying, right? You know, that way, if you only have one property and that tenant leaves, you get zero. If you have four properties and one tenant leaves, you still have 75% of your revenue. So if you can, you know, again, I don't know what market that's in and what multifamily costs, but if you can get into multifamily, I would highly recommend it. Okay. Okay. Perfect. What's the best strategy for bringing inherited residential tenants up to market rent? Don't. Keep them, keep them if they're low? No, so usually we'll inherit a tenant. Don't inherit a tenant. Yeah, it's always been a headache for us. So now, you know, we'll always leave that to the current landlord to deal with to pay the fees.

So we purchase vacant. Interesting. Okay. Yeah. Unless now, if they're at good rates, right, we'll actually take the new tenant and actually run them through before we remove subjects. We run them through our own analysis and, you know, take a look at how many late payments they've had. You know, we've even will look at potentially pulling credit and checking on those things. Fascinating.

Yeah. When I think of most of my most difficult tenants have ever had, they're all inherited. Yeah, because once they're trained wrong. Well, and especially if, you know, if they've been in the property and they're paying $1,200. And then, you know, you're the mean guy who's come in and said, hey, we got up this to 15 or, you know, even if you get them to agree to it, which, you know, there's a lot of rental laws here of how much we can put that out. And it's just so, yeah, vacant. Vacant possession. Yeah. I like it. There you go. Number three, I have the opportunity to buy a retail commercial. property, but it has three rental units upstairs. Well, it'll be hard to find good tenants. Again, depending on the market, depending on what the vacancy rate looks like in there. But I, you know what? If they're unique properties, we've done really well with those sort of mixed use commercial on the front.

I love it. And then, you know, if it's a funky loft style piece on the roof, you know, I really like the unique rental properties that, you know, you can kind of control the market and, you know, you're not competing with that sort of, oh, it's a two bedroom and den condo, look like every single other one. Yeah. Makes sense. A little advantage, right?

And there's disadvantages and that only specific people want those potentially when the time comes to sell. Yeah. All right. Last question. How do other agents balance their time between being an agent and growing their own real estate? It's something I struggle with a lot. If I'm working on my agent business, I'm not really working on my investing and vice versa.

So where's the balance from one agent to you? I color block my calendar. and there's a little thing that these guys put out called a productivity planner, simple, and it's paper and pen. And I, you know, again, in the morning, I just map out like the top three things of my day. And so, you know, if we've just exited a property or if we're looking to close a deal, you know, then that's a priority. And I just need to put it in there and make time for it. Because, you know, on the agent's side, you can be reactionary all day, every day as busy as you want. But, you know, we've got to be purposeful and really focus the time and make sure we're,

get into the highest and best use of that time, which for me, you know, is making sure I'm planning for that retirement. And yeah. Yeah, I know a lot of agents who, you know, have been, agents for 10 years and they still don't even, you know, they own a single property. They've just been so busy with their building their agent business and keeping that steady. They never take time to look in their future. But, you know, it's such an active income, right? And it's a brilliant. Like, I absolutely love the real estate sales world. But, you know, as soon as you stop selling, you stop making money. So, you know, Yeah, diversify.

There you go. I love it. All right. Well, hey, before we get out here, let's go to our world famous. Famous for. All right, Joel. So number one, what is your favorite real estate related book? Oh, I'm in the process of writing one.

So I don't think it can be mine. No, it can't be yours. That's cool. No, it can be mine. You know what? The millionaire real estate agent. Okay. And shift.

Shift was brilliant too. Yeah. Right on. Both Gary Keller, by the way. Yes. Yes. Good stuff. All right, cool.

favorite business book who favorite business book there's there's a couple you know napoleon hill anything by napoleon's been great i really like the saint the surfer and the CEO robin charma great book yeah i don't know that one more so but like balance in work i i i struggle with that for sure you know i can just put my head down and be crazy focused on work and i love what i do but you know you got to make sure there's time for family friends relationships and all that yeah excellent cool What about hobbies? What do you do for fun outside of real estate?

I love to travel for sure. Love wine. Snowboard in the winter, wake surf in the summer. So yeah, really anything outdoors. I mean, I'm just in the office and on the phone so much that anytime I can put that down. And we got a beautiful backyard here, you know, like definitely very clean four seasons. Summer is summer, winter is winter. So, yeah, just getting outside.

Awesome. Cool. My last question of the day. Joel, what do you think sets apart successful real estate investors for? from those who give up, fail, or never get started. Getting started is definitely the key. You know, he's like, yeah, you don't have to be great to start, but you have to start to be great.

Ooh, I like that. You know, start with a plan. Yeah. Start with a plan and look at like how could this go wrong and what can I put in place to protect myself. Yeah, I love that. Yeah. Interesting.

Let's start. That's great. Cool. Hey, before we let you go, where can people find out more about you? So track me down on the real estate side is Sherlock and Associates. CA and then our matching platform that talks about, you know, when we were matching our deals to our found deals is house harmony.com. So like a dating site for people.

Like a dating site for real estate deals. Yeah. That's cool. Very cool. Well, Joel, thank you so much for coming on. Lots of luck to you going forward and we appreciate your time. Hey, thank you. All right.

Thanks. Cheers, guys. Cheers. All right, guys, that was Joel Sherlock. big thanks to Joel for coming on the show. Interesting stuff, huh? Yeah, very cool. I like his, again, I like the thinking big. I like the, you know, let's not buy one property list, buy a whole bunch of them, 200 and some doors. You know, I like this picking the markets. I mean, I just think some solid, solid advice there. Yeah, yeah, that's great. It's great. So definitely interesting.

Not for everybody, obviously, you know, I think, you know, going after the big stuff is, you know, potentially you need to have a little more knowledge, right? You've got to understand finance a little better. You have to understand real estate a little bit better before you start to get into that stuff. But, you know, hey, listen, hopefully you guys all learned something. And it was, it was cool to have another Canadian on the show. Yeah, it is always good to have our brothers from the north. Yes, yes, of course. Awesome. Awesome. Well, cool. Guys, thank you so much for listening. This is show 215. If you've got any questions for Joel, jump on the show notes at biggerpockets.com. so I should show 215.

And I don't know, Brandon, you got anything else or we get to go? You know, I think we're probably good to go. I'm, uh, you feel my voice getting a little scratchy here. I think I'm coming down with something. You sound tired. Yeah, it could be like yelling a lot this weekend or it could just be like I'm getting sick. I don't know. Well, I don't know.

Thank you, Josh. Why don't you take us out of here? All right. Well, for the Bigger Pockets podcast, my name is Brandon. And this is Josh. Signing up. You're listening to Bigger Pockets Radio. So simplifying real estate for investors large and small.

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