How to Earn Huge Returns on Retail and Industrial Real Estate with Danny Newberry

Full Transcript

Taylor   0:01  

Welcome to passive wealth strategies for busy professionals. Today our guest is Danny Newberry from the value Investment Group. If you're new to the show. I am a real estate investor. I'm a real estate syndicator. I buy multifamily real estate with passive investors. I invest in self-storage. And I am a busy professional. I love what I do. I love talking about investing. I've been investing in various companies and etc. Since I have two nickels to rub together and I love sharing what I've learned with others and learning more myself. There's a lot of joy in that and I hope you're going to learn a lot today Danny Newberry is going to teach you about retail. Real Estate Investing which is very interesting. Because we get in this mode everybody is in this mode these days of Amazon is destroying retail and we see these effects all over the place but guys like Danny are making ratable returns still with retail because there still is a lot of demand for retail real estate, but it's shifting. So Danny's going to teach us about his strategy today and what he does to earn fantastic returns in retail. We also talked about industrial real estate investing, which again, I find fascinating, we learned that industrial is one of the best performing asset classes out there for four reasons that we get into and the strategies that you can implement. If you want to get into either one of those. We asked the critical question of Danny, if someone is new to either one of these businesses, what should they do? What should you do to get into the business? What's your best advice? So we get into that today on this episode of passive wealth strategies for busy professionals. Without any further ado, here we go with Danny Newberry from the value Investment Group. Danny, thank you for joining us.

Danny Newberry  2:00  

Hey, appreciate it. Taylor, thanks for having me on the show.

Taylor   2:02  

A lot of fun, great topics. I mean, you know, the we could talk for hours, I'm sure about each one of these, I first wanted to dig into shopping centers and what you like about them compared to say, apartments where, you know, we, we know that people are always going to need a place to live, but, and with Amazon and everything, are they always going to need a place to shop? So, you know, let's dive into it. What do you think?

Danny Newberry  2:29  

Absolutely. I get that question a lot. So I'll just start out by saying I did start out in the single family multifamily world. When I first got started, I scaled up to a couple hundred units. So I had apartments from like four Plex is all the way up to 138 unit apartment complexes and in between, so I owned in three states. It was Utah Vegas and Oklahoma that I owned all this multifamily and my ultimate goal at that time. At that point in time in my life I wanted to, you know, build a portfolio of a couple thousand apartment units to manage and hold for cash flow. Well, I gotta tell you it wasn't all roses as they like to tell us, you know, the multifamily world for me, what I found out was that there was a lot of work involved and it was very tedious, very management intensive. Now I will say I was buying classy apartments, they were all you know, pre 70 construction, they were all in classy neighborhoods. They were all projects that needed rehab in one sense or another. Typically that was going in and rehabbing the unit, rehabbing the exterior, you know putting in the cap X dollars to really take it from a class, the asset to you know, let's say a Class B asset. The problem was is that I would buy this apartment building, I put in all new exterior windows and siding and landscaping and you know parking, I would seal coat stripe the parking lot fill the potholes, you know, I do everything if I need to do new roof, whatever it was, we would come in and do it. And then 12 months to 18 months later, my apartment complex looked like when I bought it, the people would come in there, they would beat the hell out of it. They would, you know, you'd go in and out 10 $20,000 a unit in upgrades and, you know, the turnover was, you know, the turnover just cost you an arm and a leg. I mean, sometimes there went your cash flow for, you know, a month or two depending on how many move outs there were the incentives, the incentives that you had to, you know, to bring in new tenants, and we're talking, you know, 2010 to 2015 is when when I was primarily doing that, so the economy was a little different than it is today. Today. It's more of a you know, landlords market than it is the tenants market back then. You know, you really had to be striking deals. You had to be aggressive. If you had to, you really had to get, you know, people in the door and keep them. So from my standpoint, I just got really burnt out of doing multifamily. And not to say it's not a great asset class, and if you've got a really good operation and I think if you're buying the right type of assets, the right locations, that makes all the difference. And he and I think he makes a big difference, especially on your expense to income ratio, because that'll fluctuate tremendously from 60s products to 90s products. And so anyways, I ended up buying all these apartment units. I had an investor of mine that owned only commercial and he owned a lot of commercial, he owned, you know, retail industrial office, a mixed bag of different stuff. And one day I asked him, `` Why don't you invest in a multifamily and he goes, and he's an older guy, he's in his late 50s. And he said to me, Danny, I don't want to work that Hard, always invest in them, or you go buy them and manage them and all invest in you. But in my own portfolio, I don't buy them. I used to buy them back in the day. But I don't do that anymore in a light when a light bulb goes off in my head, I said, well, that's weird. What Why don't what why? Tell me more. And he goes, Danny, I like dealing with triple net leases. And I'm like, well, what's that I didn't even know at the time. And basically, he turned me on to commercials.

Basically, a triple net leases where your tenant pays for your taxes, your insurance and your common area maintenance, meaning that if if anything goes wrong in the unit, let's say the plumbing backs up, they're not calling the landlord they're calling a plumber and getting it fixed themselves. If they have a leaky roof, we will come fix it but we build it back to the tenant. When we get our tax bill whether it goes up or it goes down. The tenant pays for that. So if it goes up, it doesn't really matter to me as a landlord because it's going to be To the tenant for them to reimburse us to pay it. Same thing with insurance. And then all of your common area maintenance, your landscaping, your parking lot, you're citing your roofing, your monument signage, or you know what you name it, it's on the tenant, not on the landlord. So that is the beauty of triple net leases. And then the other thing that I absolutely love about commercial real estate, true commercial, which I'm talking more in the sense of triple net leases, is that your tenants are going to sign typically five 710 20 year leases. To me that is stable cash flow, especially if it's a solid tenant, right? So you come in, sign up, you know, a 10 year deal. I just signed a 15 year deal with a national Athletic Club. And they're taking 40,000 square feet. They've got a 130 million dollar balance sheet. I can tell you I sleep a lot better knowing that that tenants then the guy that can barely make rent every month, right? He shows up and he's every month got an excuse why he can't pay rent or Haley's app or you know this or that or you know, it's they're beating up your unit and you've got to pay to remodel it you've got to pay to fix it up every time someone leaves and so I just got really sick of that in the multifamily and really fell in love with the triple net lease side of the business when when I was exposed to it. And so, you know, today we've been doing mostly turnaround value add shopping centers, industrial buildings, office buildings, medical buildings, some pad site land development stuff, but yeah, I mean it's, it's a different world and it's a different it's definitely different different from the standpoint of like the asset classes, how it works with the least like least in multifamily is there it's all standard across the board. Every lease from one apartment building to the next is almost identical. There might be a few little things here and there. They're different. But with commercials, every lease could be totally different. And it's all negotiable and they're typically anywhere from 20 to I've had leases up to 16 pages long. You know they're very strategic, they're very long. I call it brain damage commercials, like the triple net leases and negotiating these deals is definitely brain damage. But it's fun because everyone's different, you have to be hard, you have to, you have to, I mean, at least it can take you anywhere from two weeks to a year to actually get to the finish line. Like right now I'm working with Camping World on a lease. And I'm already six months in and I still don't have a signed lease done with them. But you know, I gotta get done here pretty soon. So you know, it's just one of those things that some people don't want to work that hard to get a lease, but when I land in the camping world, that's a really solid company, that's going to be at my property for probably the next 10 to 20 years at least. And that's going to be guaranteed income and that's going to be a corporate guarantee. So going through those motions creates a ton of value, a ton of equity in the properties that we purchase. And that's why I love commercials. You can buy one one lead could create, I'll just give you a quick example on how much money one lease can create. I did this lease with the Athletic Club that I told you about. And I'm just grabbing my calculator here, they signed 40,000 square feet at $14 triple net, so that their yearly income is $560,000 if they're gonna pay me, not including their cams, which is their common area maintenance fee, so that's probably another hundred thousand or so. But on that 560,000, depending on the cap rate for the area, will give us the value of the value of this lease. So it's a seven cap area that is $8 million in value for that one lease, one lease $8 million. That's how much that the value of that deal is. I bought the property for 4 million. So I can give you an idea of the value of what one lease can do in commercial real estate. It's a very, very beautiful thing. So I just don't know the value of what I paid for the building.

Taylor   11:02  

Wow. So I can see in that that you have a long time to find a tenant and you need to have a lot of competence when you go in to buy that this is going to be a leasable property if it's if you're buying an empty, so how do you prepare to handle the costs of just owning the building without a tenant in it, because you're going to at six months of paying your note and keeping the building up, and all of those things, keeping it looking nice that people want to rent the property. So how do you handle that in the business?

Danny Newberry  11:36  

Okay, so on this deal, specifically, this was a deal in Denver, and it's a very hot area, it's got really big traffic counts. So when you go into retail, specifically, you want to look at the demographics, right, what is your rooftop densities, what are your traffic counts? You know, what are the incomes of the area, you know, is it lower income, middle income, higher income, so you're going to look at all these different factors you're going to see who are all the national tenants that are within that retail corridor. And is there a gap of people that are missing of tenants that should be there that aren't there? So what we did is we found this vacant Safeway, they had just left the market. But we knew that there was a vote, we pulled the void analysis and it said, Look, you're missing a health club, you're missing, you know, you know, whatever it was, there was a list of different types of tendencies that could fill that space. It wasn't in that immediate retail corridor. So we reached out and we went under contract. I had 90 days of due diligence. During that 90 days of due diligence. I reached out to several of the top brokers in the area. I have five Letters of Intent from tenants that wanted to occupy the space, Planet Fitness. Choose fitness. I had an Athletic Club. I had a gun range, I had a swim school. So I had all these elderlies on the table. And this is while I was in due diligence, so I could still walk away from the deal if I didn't want to move forward. But at the end of the day, I had so much interest that I knew that this was a really strong area. Number one, if the tenants were there, they were ready to go number two, and I knew what the lease rates were, I knew that I could create a lot of value in the deal if I was able to move forward with it. So I didn't actually sign the lease during due diligence, but I signed elderlies. So that way, we can start the process of going through those leases. Now. I bought it in June of last year, and I think I signed my first lease, it's 65,000 feet. So I actually have two tenants in there. Once an Athletic Club for 40,000, and then a swim school for 17,000. And then I've got about 7000 left over, but um, it took me probably three or four months after I closed the property to actually commence those leases. So from the time we went under, you know, Li knew a good three to six months until we got to the finish line on those leases, but I created a ton of value, and it ended up working out great. But you want to know that stuff before you go in and buy, you know, a deal like this, you want to make sure the interest is there, you want to make sure that that it's the type of area that you know, tenants want to be in.

Taylor   14:19  

So you need to know those things. Pretty much by hand. I mean, I can imagine, this takes a lot of looking at deals. I mean, just like anything is taking, you have to look at a lot of deals these days to find the good ones. So you need to know the metrics that you're looking for either you mentioned traffic count, or, or maybe the lease rate per square foot or something like that, so that you can narrow your first hundred deals down to 20 deals you want to dig into deeper and then narrow that 20 down from there, or what is your initial kind of search search algorithm look like when you're figuring out which deals you really want to dig into and go down that LSI hunt.

Danny Newberry  15:00  

I've got two algorithms and I call it having two different buckets. I have one bucket that's my fix it fill it and flip it model and one's my find it, fix it with fill it up and hold it model which is so you've got one that's creating liquidity, and one that's creating cash flow. And every deal is a little bit different. You never at the end of the day, no, you know, if you're buying a value ideal, let's say completely bacon or 50% bacon, and I typically don't go buy 100% vacant buildings, I'll buy something that's got 20 to 50% vacancy, right? So let's say I buy a 20,000 square foot shopping center and 10,000 square feet is filled up by you know, a couple tenants, maybe it's got an all state and a nail salon in a dance studio, and your local barber and you know, etc, etc. And it's got a bunch of vacancies. What I'll do is I'll say okay, this deal makes sense. Depending on the area, I'll say this is a great deal to come in, fix it up. So I'll do the facade. Do the parking lot do monument signage, I'll go to all the tenants and I'll offer them 10 improvement dollars to renew their leases. Maybe I'll give them free rent for a couple months. And then I'll and then I'll offer that to the community as well. So like I'll go to the higher the top leasing agent in the area for that type of asset class, that type of product. And we get really aggressive. Hey, look, we're offering tenant improvement dollars, we can do turnkey suites, we could do, you know, build the suit, whatever the need is, we'll do it for, you know, qualified tenants. And depending on who we land, if we get a bunch of national tenants, if it's that type of area where, you know, hey, you've got your Verizon and your, you know, your Starbucks and your, you know, your really high quality tenants in there. Maybe that's a really good long term whole, right? Because it's got corporate guarantees with, you know, mid hundred million dollar or billion dollar companies that are backing the lease that they signed for your center. Those are good long term goals, but if it's a bunch of mom and pop Which is fine. It's just that in a downturn, you may say, Hey, I don't know if you know if your dance studio is going to make it maybe, you know, for this area and the demographics and the income levels, that if you know, if we were to go into a recession they might not be able to pull through. So maybe it's a good one where you get in, you fix up the building, fill it up, and then you flip it and make a nice profit. So if you could buy, you know, I just bought one for 700,000 20,000 square feet. And we put 400,000 into it. So we were in for 1.1. And we sold it for 2.5 million on month 14. So those kinds of deals you go in, you're like, Look, all I gotta do is do what the most owners in commercial real estate don't understand what they're sitting on. Because a lot of times they don't get on time. They don't want to put any money into it, that tenants come to them and say, Hey, we're willing to lease but I want you know, I need $20,000 to build out my space and the landlord doesn't want to contribute to that. So what I do is I come in and I say absolutely, how can we help you? How can we get you in the door? And how can we make you successful? And and then on top of that, if I'm giving a contribution, let's say it's $20,000, I'm going to amortize that $20,000 back into the rental rate over the course of the lease. So that really increases my net operating income, which really increases the value of the property. So I love to give 10 improvement dollars to the right tenants to the right, people with the right balance sheets, absolutely all day long, because it just adds more value to my deals. And a lot of times they'll find a center where you know, they're paying, let's say, $10 a square foot rent because the landlord didn't want to contribute to any tenant improvement or rent abatement or whatever it might be. And I come in, I say, Well, look, it's actually a $20 square foot area, right? That's the base rent, but tenants expect to get those things in, in, in, you know, in correlation. And so I'll absolutely bring them in, get them everybody for 20 bucks a foot. What did I just do to the value of my center? I just doubled all the rent. I mean, it's pretty obvious that I've created a lot of equity in that deal very quickly. So that's what we're always looking for is we're looking for those value add centers where either rents are below market vacancy, capital improvements are needed. You know, we're looking for that little niche that we can come in and create value for the neighborhood for the tenants, for ourselves, and it's really a win win win. So that's what that's what we're doing. We're, I'd say, half of our portfolio, we're, you know, flipping and the other half we're holding.

Taylor   19:37  

So interesting. So something that strikes me is that since you know, commercial real estate being valued based on its income, if you're buying a property with a huge amount of vacancy, like you mentioned, the one of the properties you bought that had a significant amount of vacancy is that empty space literally valued at zero or is there is an intrinsic value in the property that is factored in like what? Because the completely empty commercial property is not worth the zero dollars, especially the tax man. So you know, you're not going to show up and get a property for free just because there's nobody in it. So when you're going to look at a property with a lot of vacancy, how do you really come up with a good price that you're going to offer? And what are sellers expectations even though you know, they know they have an empty property? What do they look for? In terms of price,

Danny Newberry  20:32  

then it's really based on a price per square foot. Um, so like, if you have a vacant building, you're going to look at sales comps for vacant properties and vacant properties always go for less on a price per square foot than they do if it were full. Right? If you've got a tenant now we're going off the cap rate based on the income gap pretty right. So you're you're so it's, if you can find a vacancy, you're getting a discount for that vacancy. Maybe it's not Zero, sometimes it is easier. I mean, a lot of times I'll go to the seller and say look, I buy on today's value or today's numbers, not on the future projections or the PErforM I don't buy them perform I buy on today's value. So if I'm looking for an eight cap deal, I'm willing to pay you eight an eight cap on your current income. I don't really care if you have a vacancy, I'm not going to give you an eight cap on. So you know, sometimes you get it, sometimes you have to pay a little bit for it, but you're not going to pay full price you're not going to pay as if it were full. So if you know that the rents are, you know, $1 a square foot, you may, you know, offer the seller 10 cents a square foot so you're paying pennies on the dollar, right? What you know you're going to be able to get

Taylor   21:46  

Okay, that's something I've always wondered because even in the multifamily world, we do see a lot of people, at least a lot of sellers trying to sell on pro forma, or you know, they say well, it's, it's, you know, once you fix it up, it'll be worth 2 billion tried to sell it for 2 million.

Danny Newberry  22:02  

I get it.

Taylor   22:03  

Yeah, it's not worth 2 million today, man, like, something's got to put the work in.

Danny Newberry  22:07  

Exactly. No. And then again, you just gotta educate your, your sellers. Right and, and a lot of times, look, they'll go out there, you know their brokers sell them the dream that Yeah, we can sell this you know, you fix up five of your hundred units now I can sell the dream I trust me I know all the tricks of the game. And you know, maybe there's someone out there willing to buy it, you know, you never know until you go out there and try it. But if they've been sitting out there for a few months and no one's biting on that hook, then a seller is going to hopefully get realistic, right? And they're going to say, Well, I guess no one really wants to buy the dream. I guess I gotta sell it based on today's numbers. You know, a lot of deals. I find, you know, have been out there for a little while or, you know, they've tried to get a higher price and now, now they're there. They're realizing that Yeah, I'm not going to get what I thought I was going to get and so they're willing to play ball and sometimes You're willing to pay a little more, right? So let's say you're like, Man, I'm not going to pay full value for that vacancy, but I'll pay you 50% if, if you give me really good seller financing terms, right? So I want to get in really light number one, right? Let's say it's a million dollars, I'm going to give you 50,000 down, you're going to carry the note at 4% interest only for five years, I'll probably pay off in one or two. And, and maybe it works that way. So they you know, they get if you ever heard the term, your price, my terms, my price, your terms, whatever, it's, you can definitely go about it from that standpoint, and I've done that a lot too.

Taylor   23:37  

Interesting. I don't think I've ever heard that phrase before, but I like it.

Unknown Speaker  23:41  

Yeah, it works.

Taylor   23:45  

Okay, so while we have you I also wanted to touch on industrial. This is something that I've heard about i know i know people who have been friends who invest in industrial real estate, but it just it's so Like it's such a blanket term that I don't know how to how to even get started and it's not some something that there's a lot of people out there talking about so you know are the basics kind of the same to the the the retail in terms of what you look for and you know, leasing a place up and all that trying to get by to something of a discount. Or, you know, what does that business look like?

Danny Newberry  24:24  

Yeah, so the reason I like like small Bay light flex industrial is because that's really all of your general trades and it's right there all your local your local trades means like your electricians, your plumbers, your contractors, your flooring guys, your you know, center of center like these guys that are going they need a little bit of warehouse space and a little bitty office with a bathroom right so the offices are administration and then they've got all their you know, all their supplies and their you know, all their all their other everything that they need to keep in the warehouse their trucks etc etc. and So, you know, these people tend to, you know, work no matter if it's a recession or not, right? I mean, you're always going to have plumbing issues, electrical issues, you're going to have, you know, snow plowing guys and, you know, etc, etc. And so the way that I The reason I like these deals is that you can go in a lot of times and we find them where they're way below market rate rents, the people that own them typically own these things a long time, like, a lot of my sellers have owned these industrial buildings for 10 2030 years. They just seem to hold them and there's a reason. Industrial is the least management intensive asset class out of you name it, apartments, office, retail, you know, construction, storage, you name it seriously, it is just easy. There's not much to do. I own a lot of industries and I don't spend any time managing Jim because they're just nothing to do. And the other beautiful thing is there's not a lot of money to put back into them like with apartments Holy cow, it just bugged me so much how much I'd have to put back into the apartments. When I own them it was like you know, fix a unit up for 20 grand and then a year later that same unit needed another you know, seven grand because of the previous owners messed up the new flooring that I put in and they you know, Crandall over the wall, so I gotta paint the whole thing again, and they busted the you know, the all the light fixture, whatever it might be, right? It just, it just you have to put all this money back into it, and industrialize. What are you dealing with? It's usually either concrete or metal. It's one of the two, you have got a slab and it's a box. That's all it is. It's so there's nothing there. When tenants come in, they don't really expect any tenant improvement owners so they don't come in and say well, I'll take the space if you know if you paint the walls Why? And you know, you put up you know You know, this here that there and you know, put some windows over here, it doesn't work that way. They walk in and say, Okay, this fits, I'll take it. It's like as you know, it's kind of like storage space, they're not going to come in there and tell you, they're only going to say what size they need. Do I need a 10 by 10 or a 10? By 20? Right. It's pretty standard from that standpoint. So really easy from that point. And right now, in today's economic environment, industrials, never been stronger than vacancies have, literally, across the nation. Been at their lowest point in 50 years. I mean, the industry was doing so good because of the economic policies in place. Manufacturing brings back all the e-commerce so what you don't realize is that forever, I can't remember what the exact statistic was, but it was like for every, I think it was for every billion dollars of retail sold. You need, like 100,000 square feet or no, no, sorry. What was it?

Maybe 100 million square feet of industrial land within a five mile radius. I can't remember what the metric was. But it's huge like all this retail, it starts off in a, you know, e-commerce scenario where it's going to a facility first, then it's going to either someone's house or to a retail location. So you don't realize it when you're, you know, next to target. A lot of that stuff is sitting over in a warehouse, not that far away. Right. And that's why all these Amazon fulfillment centers are popping up all over the place. And, you know, it's the same thing, you have these spaces well located, rents have never been higher. So what I'm finding a lot is you'll find these owners that have been for a long time and the rents are so low, but the rents have really ramped up over the last decade. And there's a lot of value to be made. And a lot of good tenants that come in like we just signed a deal with Ferguson, which you know, they're the largest h HVAC company in the southwest. Yeah, they signed a five year deal on 27,000 square feet at one of my centers. You know, right in Arizona, I mean, what kind of better tenant do you want? In Arizona, you want to go to an H fat company because it's hot there, right? So you know that they're always going to do good there no matter what, good times or bad. So, you know, I just really, really liked industrial. I mean, it's a great asset class. I really, really like it, you got to buy right and get to buy it for a low price per square foot. You always want to buy below replacement costs and buy the right areas. Again, you don't have to have the traffic counts or the visibility like you do with retail, but you have to have the right demographics. You have to be in the right areas where there's a lot of, you know, a lot of rooftop density where you're being able to supply those people with, you know, with either your local tradesmen or with your e-commerce product.

Taylor   29:45  

Hmm, okay, interesting. So, it sounds like it's kind of a similar value add strategy to retail if you're going to find some place that's under least or under used and find a tenant essentially to place a minute and then boom. There's your value add, and then you hang on that property for decades, because they tend to produce good cash flow is that

Danny Newberry  30:08  

they're just easy. They're just easy. Yeah, they produce cash flow, a lot of them can be cash cows. And they just, I mean, there's not much to do, you know, really, I mean, maybe on your small like, if you the smaller you go closer to like storage, you have a lot of people coming in and coming out, right, they're there for moving from one house to another. So they rent for a couple months, or maybe up to a year, maybe sometimes longer, but like on your smaller, you know, 500 to 2000 square feet, you know, those tend to be probably the more management intensive tenants on industrial because, you know, they're there, they're moving, they're just more more likely to move around. And but yeah, for the most part, I mean, you know, you got your auto mechanics, a lot of times they're putting all their stuff in there you got storage guys are just and want to store some nice cards or not, you know, files from 50 years ago and I'm a hoarder. So I'm just gonna Put it in a little small baby warehouse. I mean, you just see everything and there's just not a lot of damage that really happens to them. You know, there's typically, again, you just got four, four walls and a roof and a slab. That's it. You know, sometimes there's a small little office area and maybe a maybe a bathroom, no,

Taylor   31:21  

nothing. So I'm kind of curious about this. As we get deeper and deeper into commercial real estate, it gets more and more opaque more and more difficult for someone to get started. And while you didn't get your start in commercial real estate, you started by getting into residential and then progressing your way there. What are your thoughts about someone who's interested? How would you recommend they get started if they want to get into commercial real estate, true commercial as you as you say,

Danny Newberry  31:52  

get educated. I mean, I can't tell you there so many people that want to get into this space, they don't know what they're doing, they go out and buy a deal. They just get slaughtered. I mean, it's just because you can, you can make a lot of money in this business, but you can lose a lot of money if you don't know what you're doing. So, you know, we try and tend to be the guys buying bright and buying from unfortunately, people just didn't know what they were doing and they're just trying to get out. So get educated. You know, find a good mentor, find people that have done it, hang around those people to make sure you really understand it's a totally different language than multifamily or residential. It really is. So I don't you know, you don't just go out there and do it. You really should find some education behind it. I mean, like for me, I'm part of a mastermind group that I've been part of for the last seven years now with the commercial property Academy. J Scott shield has been a great mentor for me. And you know, it's finding the right group, the right people to be around like there's a lot of masterminds revolving around residential. revolved around multifamily. And so if that's what you want to do, that's the perfect place, you should be right, you should be in that group, you should be around those periods. For me, I'm around guys that are only doing retail industrial office and development like that and I'm not in the multifamily world so much anymore. So I'm not that mastermind. I'm in the one that I'm specifically focused in in that category and that asset class.

Taylor   33:26  

Interesting. It's, I find it interesting that the or instructive or whatever, that the advice for someone who wants to get into commercial real estate like you do is very similar to the advice that anybody who wants to get into any kind of real estate is get educated, get a mentor, learn the ropes before you jump in and lose a bunch of money. Yeah.

Danny Newberry  33:49  

You can lose a lot of money in any asset class, right? I mean, you can go buy a house and if you buy the biggest, nicest house on the block, you're probably not doing so well. And you want to buy the ugliest duckling on the block and then hope you'll probably do good, right? But if you don't know that if you think, hey, doesn't it? In some sense, it might make sense, hey, let's just go buy the nicest one. That seems like a good idea. But typically it's not. So you want to you want to be around right, the right group and people who know know how to how to make money in these different asset classes.

Taylor   34:20  

Yeah, absolutely. So right now we're going to take a quick break for our sponsor. All right, Danny, I got three questions I ask every guest at the end of the show. Are you ready?

Unknown Speaker  34:29  

Yes.

Taylor   34:30  

All right. First one, what is the best investment that you ever made?

Danny Newberry  34:35  

best investment I ever made? Let's see. I bought a deal on 10 x, which is an auction platform. In Denver, it was a flex industrial building that we bought for three and a half million, got 100% financed on it, and sold it in a month. 13 first seven and a quarter million. Whoa. That was good. It was a good day

Unknown Speaker  35:01  

100% financed by an institution not by the seller

Danny Newberry  35:05  

by a lender of mine, he liked the deal so much. And he knew that I just bought it. Absolutely right. So we financed 100% so I had zero dollars in the deal, and we netted three and a half million and like I said, in about 13 months. Nice.

Taylor   35:25  

On the other side of that we have the worst investment. What is the worst investment you ever made?

Danny Newberry  35:30  

Oh, back to the multifamily days

138 unit apartment complex. The sellers did a pump and dump on me, where they basically filled up the rent roll with unqualified tenants that weren't really paying rent, so they gave me falsified documentation, p&l and 90 days after I closed on the property, it was supposed to be cash flowing 10,000 a month. I was negatively cashing here, about 25 to 30,000 a month. So you can imagine what that did that was really, that was really some dark days. But we were able to turn the property around in about a year, we took the physical occupancy back from 60% to about 90 to 93%. I bought it for 3.6 million. And we sold it two years later for 4.9 million. So me and my partner still made a 33% return on investment, but it was the worst, the worst investment I had bought to date. So we still make good money. So it's still a good ending at the end, you know, at the end of the day,

Taylor   36:41  

but sounds like a lot of heartache along the way. So

Danny Newberry  36:44  

very, very, very difficult. But, you know, when you're determined and you roll up your sleeves, and again, going back to having people around you that can help you and mentor you to give you the right advice. It's invaluable.

Taylor   37:01  

Nice. Nice. I like that last question. My favorite one, what is the most important lesson that you've learned in business and investing?

Danny Newberry  37:10  

The most important lesson that I've learned is to get good at what you do. I mean, you've got to be the best of the best. You've got to learn every day. Gotta educate every day. You've got to build the right team around you, have the right mentors, the right partnerships, and build up really world class habits. I mean, you have to if you want to be really successful, you have to build world class habits. So

Taylor   37:35  

nice. I like that. We'll let that one sink in. All right. I love it. Danny, thank you for joining us today. If folks want to learn more about you more about your business, where can they get in touch?

Danny Newberry  37:46  

Absolutely. I'd love for anyone to reach out if you have any questions we'd love to partner. I always joint venture if you have deals I'm willing to look at. You can go to my website value Investment Group. com or you can just shoot me an email at Newberry daini at gmail. com that's n e w PRYDA ny at gmail. com. And again, we'd love to chat with you.

Taylor   38:09  

All right, everybody that is going to do it for today. Thank you for tuning in for our interview with Danny Dewberry fascinating subjects there is a lot of potential upside in this realm of industrial and retail real estate investing. So thank you, Danny, for bringing that to us. If you're enjoying the show, please leave us a rating and review on iTunes. It's an Apple podcast, please leave us a rating review on Apple podcasts. It's very much appreciated, and helps other people learn about the show. If you know anyone out there who could use a little bit more passive wealth in their lives. Please share the show with them and bring them into the fold. Thank you for tuning in. And we'll talk to you in the next episode. Goodbye