On the show today we talk… Industrial Real Estate Investing with Joel Friedland!
Show Links:
Show notes: Industrial Real Estate Investing with Joel Friedland!
Julie is getting some snowboarding in and Joe is riding mountain bikes.
We are very excited to have Joel Friedland on the podcast today.
Joel is in Florida for a month, out of town from Chicago.
Are people stupid
E-commerce has caused a boom in industrial because products have to come from a warehouse. Even manufacturing is doing really well because people are expanding to the US.
Even since Covid people are buying more things to be shipping to home.
What is Joel’s background
He went to school in Michigan and wanted to get into real estate. His friend met a guy that was looking for someone to manage his industrial properties. So Joel got an interview with this real estate investor. Joel said he was good with sales, but not details.
He was hired and started the next morning.
It was 1981 and interest rates were 17%.
He was told to learn and then fill up the empty buildings. Which he did. Cold calling was crazy! He got kicked out of two places. Even carried out of a building.
Joel learned a lot of what to do and what not to do. And he loved every min of it!
Then he asked if the company he was working for would let him become a partner, and they said no. So he left to start his own company.
Joel asked the owner to teach him the syndication side of the business, and the owner was the first investor.
Raising the money was a track record
Yep, and Joel went to some of the people that he helped find buildings and people’s lawns he used to cut.
What would you tell someone who wants to get started
Get the best mentor in the world! The person who hires you is who you will become.
Find someone that is not threatened by teaching you.
Joel’s mentor is still an investor in his deals.
The younger generation has an issue with immediate gratification.
What is the difference between classes of industrial buildings
If you drive down the highway and see those big buildings that are tall with corner windows for some offices… Those are A.
Joel’s into B and C. A lot of these are manufacturing.
It’s mostly the size and the age the distinguishes the classes from each other.
What do you think if the key to success on your portfolio
They own their buildings all cash with no mortgages. They are extremely conservative. All of the issues they’ve had are because of debt.
When Joel did his first deal it was an all cash deal. He wanted to be the safe guy.
Joel’s young partner wanted to borrow a little money on his third and forth deals. And Joel forgot what his philosophy was to do all cash deals.
In 2008 he almost had to go into bankruptcy. He thought he had lost $200k, and went into depression. It was horrible.
What was the trouble back then
It was vacancy. Companies would have leases come up and they would consolidate into smaller spaces.
Multi tenant or what is your mix
B and C mostly single tenant buildings.
They like single tenant buildings because you can sell a single tenant building to an owner occupant.
Joel has mentored about 60 brokers over the years. Something he told someone. Users need a building so badly that when they find a building that they need, you can push them in the face and they will ask how much you want for the building.
Do you attempt to stager
They currently have 16 buildings and they stagger the leases as much as they can.
When you bring in a tenant they have a need. You have to go with what the tenant wants/needs.
If someone wants your building they will find a way to lease it. But it’s hard to dictate terms.
How does low/no debt work with value add
It’s a mix of occupied and vacant, and it’s about getting there first so you can do the value add.
Joel is a broker and wants to do business with brokers.
BUT he finds buildings by cold calling. Of the 95 buildings they have bought, they have bought 92 off market from cold calling.
The value add is knowing the market.
He knows every industrial building in Chicago!
Is there a criteria for you to buy a building
Yes, they are extreme due diligence people!
Checkout the podcast to hear a great due diligence story from Joel!
What are the top 3 due diligence items
Condition of the roof, HVAC is super costly, title and survey work. #1 rule is parking, it must have enough parking for growth.
How much do you keep in reserves
About $5 million in the bank.
Right now they aren’t earning any interest on the $5 million, and they have multiple accounts to keep the money insured.
What do syndication structures look like
He has an internal group that has been investing for a long time. This group puts the money up to buy the buildings for cash. This allows it to close fast. Then they figure out how to structure the syndication based on the deal.
$25k minimum. Never put in more than 1% of net worth!
For one of his deals… it needed an 8% return. 8% pref, and the owner takes a permute of 20% after investors get 8%.
At what point does your cash flow kick in
They are usually in for 25% of the deals. They are very deeply in with their investors.
They don’t need the money, they just need the right people.
Do you have any buildings that are fully depreciated
Yes, there is one in Illinois. They’ve owned it for 32 years, and it’s throwing off 9% to the investors.
Do you do 1031’s
Yes, they’ve done 40 of them. They bring in people that own 50%.
Is this a less complicated class of investments
The accounting is a big, big thing! Tenants call when there are issues, so there’s lots of property management that they do themselves.
Reserves for each building
The minimum is $100k and would like to have 1 year of rent in the bank.
This is raised from the very beginning.
He likes to sleep at night.
Joel thinks a lot of real estate investors are gamblers.
Joel thinks there is a bubble that is going to pop because there is a period of growth for a very long time. Young people can take risks because they can screw up and restart.
He isn’t out to impress people, he wants to relate to people.
What is your goal today
Joel has a YouTube channel that’s new.
Joel’s son became an adventure travel trip leader and came into the business last year. He wants to get some new people into the business. They shot a video that cost $30k.
They need to add people because there is attrition. They have some new buildings right now, and are looking for $25-50k. When the bubble pops they would like to buy more buildings, and would like to add about 20 people a year.
How does someone engage with you to invest
They’ve found 3 investors from sending cold emails.
People can go to britproperties.com to learn about them. Read the article on how they shouldn’t invest with them. They are looking for super safe things for a group of people.
Is there going to be some opportunities coming up
Yeah, the interest rates are going to hurt people.
Every 4th deal they end up flipping before syndication. They assign the contract.
Leave a Reply