Latest / The Active Duty Passive Income Podcast / The Real Military Edge in Commercial Real Estate | Ep 400

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The Real Military Edge in Commercial Real Estate | Ep 400 · The Active Duty Passive Income Podcast

0:00
Speaker: Hey there, ADPi.
0:00
Speaker: Today, I'm going to talk about one of the most important topics, something I am incredibly passionate about, something that ADPi actually has as one of its cornerstone in how we approach education and, and everything we do in real estate.
0:16
Speaker: And I think that this one thing is the unfair advantage that military members have in commercial real estate, and honestly, even in residential real estate, that civilians can't replicate.
0:28
Speaker: Now that I mentioned that, let's call that...
0:31
Speaker: That is the title, right?
0:33
Speaker: I want to caveat that with, if you're here thinking and you're, you're like,"Ooh, I like that title," if you think that I'm going to go on this parade of how awesome military members are and how, you know, they're comparing to civilians and all that crap, no.
0:48
Speaker: Might as well go listen to the next episode or something.
0:50
Speaker: Th- and in fact, in fact, in fact, I have been, uh, pleasantly surprised, uh, that on how incredible so many civilians are.
1:03
Speaker: I don't know what it was while I was in the military, like, I, I mean, even when I was getting in the entrepreneurial space, I remember some of the early masterminds, like, uh, I don't know if any of you guys have ever heard of like VETpreneur Tribe back in the day in like 2017 or 2018.
1:16
Speaker: Um, there was like this separation from the civilians and the military and like we are, you know...
1:23
Speaker: We only-- We know what we went through, and we are amazing, and only we have the level of drive and professionalism.
1:28
Speaker: And honestly, it made me sick to my stomach Um, because I, I don't know, I just hate the ego.
1:35
Speaker: Like, uh, y- I have an actual aversion to it.
1:38
Speaker: We all have ego.
1:39
Speaker: I get it.
1:40
Speaker: I'm super proud of certain things, right, as well.
1:43
Speaker: But, but that type of mentality never sat well with me.
1:48
Speaker: And I was pleasantly surprised when I did, you know, basically start mostly working...
1:54
Speaker: Not even mostly.
1:54
Speaker: Uh, mostly is the wrong word.
1:55
Speaker: When I did start getting exposed a lot more to civilian professionals and business people and entrepreneurs than I ever thought I was going to, I was very pleasantly surprised with what I saw.
2:07
Speaker: Because it kind of like affirmed in my head that, yeah, that was all a bunch of bogus.
2:11
Speaker: There are plenty of, quote-unquote,"civilians" that are absolutely dominating it.
2:17
Speaker: I mean, go no further than just looking at, like, who the top billionaires are, right?
2:23
Speaker: So my, my whole thing with this i- and I'm gonna get into what the real unfair advantage is here any second now, but my whole thing with this is I-- my personal message to all of you listeners is don't fall into that trap.
2:37
Speaker: Cause there are people out there that have never served in the military that are gonna run circles around you in all of their investing, um, capabilities and skills and their business acumen, and, and they're gonna...
2:48
Speaker: They might, you know, take your lunch.
2:52
Speaker: And so I would say when you do get into this space, if you haven't already, have a ton of humility.
2:58
Speaker: Always be inquisitive and curious and want to learn.
3:02
Speaker: I think that's what helped me a lot.
3:04
Speaker: I mean, I, I, I almost feel uncomfortable when people are like,"Oh, yeah, well, I mean, like, you know, you served in the military, like, you, th-this is all chump cha- or easy, easy to you," right?
3:12
Speaker: And I'm like,"Yo, no." Like, some of this stuff is more daunting than it was, like, strapping in a helicopter.
3:17
Speaker: Like, it, it...
3:18
Speaker: For whatever reason, uh, for me, money was like a scary thing.
3:21
Speaker: Spending money, investing money, making money.
3:25
Speaker: Like, it was just, like, this highly delicate thing, right?
3:29
Speaker: Um, I don't know.
3:31
Speaker: I, I just wanted to mention that because, like, for whatever reason, that grinded my gears.
3:35
Speaker: And, um, that's not to say that you shouldn't have pride for serving in the military.
3:40
Speaker: That isn't to say that you, that you don't deserve certain benefits that the military's giving you.
3:45
Speaker: I love the military for everything it's done for me and my family.
3:48
Speaker: I'm just saying that, uh, i- if you hear or if you feel inside you that there, you're, that there's some kind of separation, I would say imagine that the playing field is leveled when you go into business, okay?
4:05
Speaker: Imagine that, that you are agnostic of whether somebody is military or civilian.
4:09
Speaker: I think that'll actually do more for you.
4:11
Speaker: I think that'll be better for you.
4:13
Speaker: Now That being said, there's one thing that I feel like is truly, as I mentioned earlier, an unfair advantage, and it's not because of, like, skill set or, or better or something, it's because of exposure.
4:28
Speaker: The military exposes you to something in a very forced way that truly does build up something that's very valuable in business that I, I just don't think that there's any civilian counterpart to that or, or, or, um, you know, comparable to that, that is, that is across the board, so to speak.
4:50
Speaker: And that is team building We, I mean, obviously in corporate America, there's like teams and structures and organizations and, you know, hierarchy and all that kind of stuff.
5:01
Speaker: Sure, sure, sure.
5:02
Speaker: But the going through boot camp and then various levels of training and relying on each other to, for your own lives, right?
5:11
Speaker: Um, and then building teams with an absolutely massively eclectic group of, uh, of leaders, right?
5:20
Speaker: The, the range of leadership that we witness in the military is insane.
5:24
Speaker: Some of the best leaders and some of the absolute worst, right?
5:27
Speaker: And being exposed to having to perform with a team, right?
5:32
Speaker: Like you, you guys remember hearing like,"Oh, look, we have an individual here," right?
5:36
Speaker: Like it was almost looked down upon to be an individual, to be a lone wolf, right?
5:42
Speaker: You ha- i- and, and it, it was celebrated constantly to do things as a team, um, under pressure, on a timeline, on a budget with, with an absolute smorgasbord of, of leadership.
5:58
Speaker: And the leadership change-- Oh, by the way, the leadership changes all the time, right?
6:03
Speaker: And I...
6:04
Speaker: That is adversity, um, that, that, that is put on top of the team building that I think I, I just don't know where that, where else that is replicated.
6:14
Speaker: And that is something that if you look through that lens and you try to hone in on essentially a superpower that the military has forced you to, to learn and, and, you know, regardless of what your MOS is, you being just, you just understanding that, that you are forced to work with other human beings at a level and at a pace and on a budget that most people don't have to, that to use that to your advantage.
6:43
Speaker: And to, um, when, if you want to get into very high-level investing in business, you should use that to your advantage.
6:49
Speaker: And so ADPI, for example, this is how we approach it.
6:53
Speaker: First of all, I try to...
6:57
Speaker: I mean, maybe it's'cause I'm an educator, maybe it's'cause I'm a Marine and I need things simple.
7:01
Speaker: I, for whatever re- I need like frameworks or artifacts or, or just step-by-step checklist in my brain, which it's funny because I used to hate that when I was flying aircraft.
7:11
Speaker: I was very much a conceptual guy and following a checklist or, uh, it just grinded my gears, right?
7:16
Speaker: For whatever reason.
7:17
Speaker: That was, that was-- I had to rewire my brain.
7:19
Speaker: But what it did is it made me realize that this is what, um This is what makes it so that you can educate and achieve results at scale.
7:30
Speaker: It's a double-edged sword because you, it kinda like tampers your own spark if you're like kind of a, you know, you're, you, you have, you have a wild bone in your body, if you guys have listened to that podcast before.
7:40
Speaker: But it does allow you to perform at scale, is to have steps, have frameworks, something you can follow, something you can remember.
7:47
Speaker: And this is true.
7:48
Speaker: When I got, stepped into business building, um, it was obvious that those that followed SOPs, right, standard operating procedures, uh, which is essentially frameworks for businesses, those were the ones that really thrived.
8:01
Speaker: So at ADPI, when it comes to team building, we have a framework, and we call it the core four.
8:06
Speaker: And I'm gonna talk about, in particular right now with commercial real estate, but I, there is, uh, team building also in residential real estate.
8:15
Speaker: Uh, it's more of an external team ver- versus internal team, but I, I'm not, I'm not gonna go down that rabbit hole too much.
8:21
Speaker: Let's just focus on the commercial teams real quick.
8:24
Speaker: So in a commercial multifamily, or I don't know, maybe you wanna go mobile home parks.
8:29
Speaker: I mean, you don't have to do apartment complexes.
8:31
Speaker: It's just we like to, as the initial asset class, we like to focus on apartment complexes'cause just, it's just tried and true.
8:37
Speaker: It, it's like an easy foot in the door, no pun intended.
8:40
Speaker: Like it's, uh, everybody needs a place to live.
8:42
Speaker: Everybody, everybody understands apartment complexes and like on a general level, even if you never looked at it as a business, right?
8:49
Speaker: Um, and so when you're building a team, we have the core four.
8:52
Speaker: Here's the four roles, okay?
8:54
Speaker: And, and think of this as I explain this, think of this as like an MOS in the military, right?
9:00
Speaker: You may or may not have had the opportunity to actually choose your MOS.
9:04
Speaker: You might have been assigned your MOS, right?
9:06
Speaker: Your military occupational specialty.
9:08
Speaker: I get that.
9:09
Speaker: But as you know, certain people ended up being better at certain MOSs.
9:14
Speaker: Um, and also some MOSs have interview processes and, and, and selection processes to try to make sure that they get the right type of people in there.
9:25
Speaker: And that is largely based off of background skill sets, experience levels, uh, just raw talent and also personality types, right?
9:34
Speaker: So, you know, pilots a lot of times are kind of like maybe looked at as being more outgoing, uh, more extroverted.
9:42
Speaker: Uh, honestly, I would like to challenge that sometimes.
9:44
Speaker: I think a lot of pilots are very introverted and analytical.
9:47
Speaker: But anyway, it...
11:28
Speaker: You know that there are stereotypes with that, right?
11:30
Speaker: And certain roles truly do, or MOSs, right, truly do fit certain personality types more.
11:37
Speaker: Like if you love crunching numbers and looking at a spreadsheet and analyzing data to be able to build, for example, a business plan of what has to happen every month and every year for a business to be successful, like an apartment complex, that, that might be in some ways similar to like an intel officer because an intel officer has to like, you know, really know the area of operations.
11:58
Speaker: They have to understand trends.
12:00
Speaker: They have to look at what may or may not happen long term.
12:04
Speaker: So for example, with, with...
12:06
Speaker: As an apartment complex underwriter or deal analyzer, the one that looks at the big spreadsheet and builds the business plan, they need to know what maybe is going on with the local government.
12:14
Speaker: They need to know what's going on with the schools because that might affect property taxes.
12:19
Speaker: They wanna know what's going on with insurance, um, you know, because insurance quotes fluctuating can affect your cash flow massively.
12:26
Speaker: I've-- Ask me how I know, right?
12:28
Speaker: Um- There's all the, they, they wanna really have their feelers out in that local area, um, to, to become a master of that.
12:36
Speaker: And, and so that is one of the roles.
12:39
Speaker: It kind of just, it just made sense as we were building ADPI and our program.
12:42
Speaker: We're like, well, you, you need to have...
12:44
Speaker: Like we always-- I mean, when I got in, I always knew that there was like an underwriter and every guru talks about it.
12:49
Speaker: But like, um, underwriters are often misunderstood.
12:53
Speaker: Uh, people th- you know, it's, it-- There's an underwriter in insurance, there's an underwriter in loans.
12:57
Speaker: But what I'm talking about is like an underwriter or an easier way to think of it as a deal analyzer, the person who m- who makes sure the numbers work, and, um, that's, that's, that's a, that's a role.
13:10
Speaker: We call it, you know, the underwriter or the deal analyzer, or you can think of it as an intel officer, right?
13:15
Speaker: Um, that is one of the core four roles at ADPI.
13:19
Speaker: Now, I will add one thing.
13:20
Speaker: Typically, this person, since they love the numbers, they're so good at the numbers, and they're typically a very trustworthy and a reliable person, just, I don't know, I'm not trying to stereotype, but just that it, it's like a level-headed individual who focuses on data more than emotions.
13:33
Speaker: They're a good person to also then put into kind of like a pseudo CFO role, meaning like a chief financial officer.
13:38
Speaker: Basically somebody who like manages the bank accounts and helps the accountant do the distributions.
13:43
Speaker: They probably manage the accountant.
13:44
Speaker: They make sure that the investors get the money that they need, all that kind of stuff, right?
13:48
Speaker: Now, the second role, okay?
13:51
Speaker: This one is a deal acquisition specialist.
13:54
Speaker: This is definitely probably the more outgoing type.
13:57
Speaker: Definitely probably one of those like ESTJs, um, somebody who's like really comfortable with getting to know people and getting what they want, commanding the situation.
14:07
Speaker: They typically maybe are almost like, um, somebody who like brings the team together sometimes.
14:13
Speaker: Um, they, uh...
14:15
Speaker: You need to know the brokers and the area where you want to invest in, right?
14:21
Speaker: And it needs to be aligned with the underwriter and the other roles.
14:24
Speaker: Like you guys have to focus on a single area.
14:25
Speaker: That is a hill I'm gonna die on, right?
14:27
Speaker: Like build in one area.
14:28
Speaker: Don't try to be like,"Oh, anywhere in the southeast." But so this individual, they need to know the insurance broker that you're gonna use.
14:37
Speaker: They need to know the mortgage or co-company, like lender, right?
14:42
Speaker: Um- Lending is complex sometimes in, in commercial real estate, but long story short, even loans with, uh, within commercial real estate, they have like three layers.
14:53
Speaker: You have like the actual no-kidding lender, like it could be Freddie Mac or Fannie Mae, then there's a mortgage company that is known as like the loan servicer, uh, and then there's brokers who know all the loan servicers and all their people at those shops, and then they kinda shop that out.
15:10
Speaker: So anyway, so you need to know those people.
15:12
Speaker: You need to know, so again, the brokers, the insurance brokers, the real estate brokers, the, the mortgage brokers, all the brokers, right?
15:20
Speaker: And you need to know what is required to close the deal.
15:24
Speaker: So like every single step.
15:25
Speaker: Okay, first there's like the l- uh, uh, the letter of intent, right?
15:28
Speaker: So they help negotiate the offer, they submit the offer, they go back and forth with the broker who's selling the dang deal or the seller themselves, and then also the, whatchamacallit, the underwriter to make sure the numbers are still right in case, in case the offer adjusts.
15:44
Speaker: And then they, and then they talk to the attorney to get the purchase agreement signed.
15:47
Speaker: And once the purchase agreement is signed, they, they follow the purchase agreement.
15:51
Speaker: They kinda like beat that drum to make sure that the due diligence is done on time and, and all this kind of stuff.
15:56
Speaker: And then finally, after every single, you know, thousands of steps are done within a 60 to 90-day timeframe typically, you close on the deal.
16:06
Speaker: So they kind of, they orchestrate and bring everything together to make sure they close the deal.
16:09
Speaker: So not only are they kinda like the deal finder and they work with the brokers to find deals or they find them themselves, they also, um, a lot of times are the ones that like take it from soup to nuts, all the way to the closing table, right?
16:25
Speaker: Now, the third role is an asset manager.
16:29
Speaker: Think of this as like the sergeant major.
16:31
Speaker: So if the deal analyzer is kinda like an intel officer, right?
16:36
Speaker: And then you have the...
16:39
Speaker: Well, we just talked about the deal acquisition specialist.
16:41
Speaker: Think of it as like a scout, okay?
16:43
Speaker: Somebody who, like, finds the deals, but then they also have to finish the job once they find it.
16:48
Speaker: Um, and then there's the asset manager.
16:51
Speaker: Think of it as a sergeant major or a senior enlisted officer.
16:55
Speaker: So this is somebody who, after the underwriter and the deal acquisition specialist agree on the numbers, submit an offer, get the offer accepted, and a purchase contract signed by the, by the, you know, the seller and, and, you know, the brokers are all on the same page, and so the deal is moving forward, right?
17:14
Speaker: The purchase and sale agreement, also known as a PSA, is signed and things are moving forward.
17:18
Speaker: This is where the asset manager steps in and they roll up their sleeves and they do the due diligence.
17:23
Speaker: They make sure that the property is truly what we all expect it to be.
17:26
Speaker: Like, that there's X amount of units, so many of them we, we expect need to be, uh, renovated.
17:32
Speaker: This, that, and the other thing, that we do have good contractors, we do have good property management solutions, boots on the ground.
17:38
Speaker: And they, they're, they're the people that really know the area and the people, and so they're the manager of the managers.
17:43
Speaker: They're making sure that the business plan that the underwriter, right, the deal analyzer, laid out on a spreadsheet, that that actually gets accomplished.
17:48
Speaker: 'Cause the spreadsheet will show you,"Hey, we need rents to rise at this rate every year.
17:53
Speaker: We need, um, so many units to be renovated so we can charge higher rents at, at the, uh..." Higher rents, excuse me, at this rate.
18:01
Speaker: You know, maybe two units need to be renovated and bumped up in price per month, as an example.
18:07
Speaker: So that's what that person does.
18:09
Speaker: He like...
18:10
Speaker: He, he or she gets like the, the, uh, what do you call it?
18:14
Speaker: Maybe the orders, right?
18:15
Speaker: You think of it as like you're, you're given orders.
18:17
Speaker: And they look at the underwriting, right?
18:19
Speaker: And they're like,"Okay, we're gonna execute this," okay?
18:21
Speaker: So that's what the sergeant major does.
18:22
Speaker: So they just, they just beat that drum.
18:24
Speaker: They make sure that all the numbers are known by the team weekly or monthly, and that everything's reported and the...
18:30
Speaker: And it's actually executed, okay?
18:32
Speaker: Now, last but not least, in order to close a dang deal, you need the money to close the deal.
18:37
Speaker: Um, and a lot of times with multimillion dollar properties, you need somebody, uh, who has a lot of money for the down payment, or you need to raise money from other people, because oftentimes the money we have in our own pockets will only get us so far, right?
18:53
Speaker: If you wanna keep scaling in this business, you wanna keep buying more and more large properties, again, millions and millions of dollars.
19:00
Speaker: That's typically not just chilling liquid in most military members' pockets, right?
19:04
Speaker: So you're gonna have to go raise the money.
19:07
Speaker: And what that entails is I mean, it can be things like, you know, one coffee at a time, a bunch of phone calls at a time, pitching people on the deal or your team, um, or you can do it at scale, and I'm gonna do a separate episode on this, of how you can, like, do presentations to multiple people at the same time.
19:26
Speaker: And there's a lot of tips and tricks and, uh, things you can do with that, but you can really raise money a lot more efficiently when you present it to many people at the same time.
19:38
Speaker: And so that is done by the fourth role.
19:40
Speaker: Okay?
19:41
Speaker: So we had, uh...
19:42
Speaker: Let's just go over it again.
19:43
Speaker: We had the intel officer, right?
19:45
Speaker: The deal analyzer.
19:46
Speaker: Then we had our deal acquisition specialist or the scout.
19:50
Speaker: And then we had the asset manager or kinda like the sergeant major.
19:54
Speaker: Now, the fourth role is a capital raiser.
19:57
Speaker: Uh, you can think of it as a recruiter, right?
19:59
Speaker: Somebody who, who's essentially a salesperson, and they have to sell y- the deal and your team's ability to execute the business plan successfully to investors.
20:08
Speaker: And they want to raise that money from investors to...
20:10
Speaker: And, and everybody kinda benefits from that, right?
20:13
Speaker: So capital raisers are, um, some people joke, they're like,"Oh, it's the social media star of the group," or they definitely are very outgoing, right?
20:20
Speaker: Whereas like sergeant major, uh, role and, um, you know, the...
20:25
Speaker: What's the other one?
20:26
Speaker: Sorry.
20:27
Speaker: The intel officer, they might be a little bit, uh, more reserved on the team.
20:31
Speaker: The scout and the recruiter, they're less reserved, right?
20:33
Speaker: They're, they're, they're, they're finding deals.
20:36
Speaker: They're raising money for deals.
20:37
Speaker: They're closing deals, right?
20:39
Speaker: And, um, they're the deal junkies on the team.
20:42
Speaker: So, uh, yeah.
20:44
Speaker: The recruiter They, they have a tough job.
20:48
Speaker: Like, the deal is basically gonna fall through if the money isn't raised.
20:51
Speaker: So there's a lot of pressure on them, and that's why, you know, they get rewarded handsomely with equity on the, on the, on the deal for, for helping raise money.
20:58
Speaker: Now, the SEC, you know, Mauricio Rawul, um, Todd Robinson, a lot of attorneys that we have worked with, like, they will be the first to say that the SEC, right, the Securities and Exchange Commission, doesn't like it when, um, people talk about capital raising as, as just like a finite thing.
21:17
Speaker: Uh, essentially, if you have a role on a team, your role can't be just capital raising.
21:22
Speaker: That's what the long and the short of it is.
21:23
Speaker: You need to have another...
21:25
Speaker: You need to have more responsibility other than just bringing money to the table, because then technically that flirts with the line of, if I understand it correctly, like you kind of, you're, you're basically looked at as like you're brokering or selling money from one hand to another, from one party to another, and that requires licensing.
21:41
Speaker: And so you're kind of flirting with the line of what is allowed and what is not allowed, and you don't wanna get in trouble with the SEC.
21:48
Speaker: Okay.
21:48
Speaker: Now that I went over all the roles and how all that works together, right?
21:53
Speaker: Let's go back to the fact that this does...
21:55
Speaker: Doesn't that seem to you like kind of like MOSs or roles that we're already familiar with in the military?
22:00
Speaker: And if you're already comfortable with understanding that, hey, trust but verify, but also kind of like let everybody...
22:06
Speaker: If, if everybody blooms where they're planted or, or they really become students of their craft, as my s- uh, Master Guns would say, you're able to be a pretty formidable and effective team.
22:17
Speaker: And if you all, on top of that, have the same level of ambitions, right?
22:20
Speaker: Like all of y'all maybe want to, I don't know, within five years have 1,000 units, or within 10 years have 1,000 u- what- whatever your goal is, um, in cash flow X amount, uh, instead of it being like three of y'all are on board with that, but the fourth just wants, I don't know, 10 units within the next year, and then they're done, right?
22:40
Speaker: You guys are aligned in like the level of success you're looking for.
22:43
Speaker: Uh, and you guys are maybe even doing it for, for similar reasons.
22:47
Speaker: Um- That type of team building is, is-- I, I feel like that creates a mission that's similar to like when, when we're in the military and we have a mission and a purpose.
22:58
Speaker: Um, especially if you go so far as like really building the team out with core values and you brand each other a certain way, kind of like all the branches of the military have branding, right?
23:10
Speaker: Huh.
23:10
Speaker: I, I, I hope all this makes sense, but ADPi truly believes that our approach to that is what helps people see themselves getting into business.
23:20
Speaker: That they don't have to feel like they're a lone wolf just relying on, on themselves.
23:24
Speaker: That they get to do it with a team of individuals with ver- with, with all the skill sets combined together that are required to do the thing to accomplish the mission, but that you yourself doesn't...
23:36
Speaker: You don't have to have all those skill sets or all those personality types, right?
23:41
Speaker: You're able to rely on team members and, and basically, here's where the word leverage comes in, you're able to leverage the skill sets of others to accomplish more than you'd ever be able to accomplish by yourself.
23:50
Speaker: And that's, again, the biggest unfair advantage for the military community when it comes to commercial real estate, and honestly maybe anything, is that we were forced to experience that.
24:06
Speaker: Uh, we were for- we were put into a position where we were exposed to various different leadership and we had to perform as a team.
24:12
Speaker: And so if nothing else, we, we just have more reps.
24:17
Speaker: We've, we've, we've, we've tossed the ball into the hoop more times maybe just statistically or, or, um...
24:26
Speaker: It's kind of a sport, you know?
24:27
Speaker: I, I always, I always liken business to s- to being similar to a sport.
24:31
Speaker: So that's all I got.
24:32
Speaker: I just wanted to express that, and I know in the beginning I j- I was kind of having this diatribe of like,"Hey, you know, be prepared.
24:39
Speaker: Don't, don't have that ego mindset that like everybody out in the civilian world is, is just like, you know, inferior,"'cause that is not the case.
24:48
Speaker: Uh, go out there with humility.
24:51
Speaker: Go out there knowing what your advantage is, that I just talked about, of being able to build teams with other military members.
24:57
Speaker: But when it comes to doing the things, go out there with humility, go out there c- with curiosity, and that's what's gonna carry you through big time.
25:05
Speaker: Um, all right.
25:07
Speaker: Thank you, ADPi.
25:07
Speaker: See you in the n- uh, see you in the next episode.