Dan Brisse 0:00
I do sympathize and understand the market change but this is a very dangerous time to be buying if you don’t know what you’re doing very very dangerous and very it’s not the right time to be coming into a market you know if you’re a newbie investor wait for this to wait for this to blow over wait for interest rates to bottom out wait for something to be a more stable than trying to get into a market right now. So there’s the gap between the buyers and sellers. sellers want prices from June buyers are saying your price is crazy. We’re not paying that. So we’re at more of a standstill I think.
Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.
J Darrin Gross 0:50
Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.
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Today, my guest is Dan Brisse. Dan is the co founder and principal at Granite Towers Equity Group, where he oversees the Operations, Acquisitions, Investor Relations and Asset Management. Dan is resident of southern Washington and is also a former professional athlete. As a professional snowboarder for over 13 years, Dan took home multiple X Games gold medals, and was known as one of the top urban snowboarders in the world. Dan’s drive for excellence and success transpires into Granite Towers real estate portfolio. Dan is also the co host of the podcast, Keeping It Real Estate, and the co author of Four steps to Successful Passive Investing. In just a minute, we’re gonna speak with Dan about the multifamily marketplace for 2023.
But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see our answer our guests are Be sure to check out our YouTube channel. You can find us on YouTube at Commercial Real Estate Pro Network. And while you’re there, please subscribe. With that I want to welcome my guest, Dan Brisse, welcome to CRE PN Radio.
Dan Brisse 3:03
Hey, Darrin, thanks for having me. I’m excited to be here.
J Darrin Gross 3:06
I’m really looking forward to our conversation. But before we get started, if you could take just a minute and share with listeners a little bit about your background.
Dan Brisse 3:15
Yeah, you bet. I grew up in central Minnesota with this childhood dream of trying to become a professional snowboarder. And you know, at that age, I was 1011 years old. 12 years old. I went and told everybody about how I was going to be this pro snowboarder. And most everybody told me to get real and you know, I was like, you know, you are in Minnesota. There’s no mountains here, Dan, or maybe you should have a backup plan for that. And yeah, long story short, my parents believed in me and I told my parents and my mom, my dad told me Go for it. You know, they my parents were the biggest asset I’ve ever had in my life growing up. I mean, they basically they just said we didn’t do what we love. Make sure you do what you love as you grow up. And I never forgot that. So with their, you know, support, I had down, started snowboarding and just did it because I loved it. I didn’t you know, first 234 years of snowboarding. I didn’t want to be a pro snowboarder. I just loved doing it. By the time of 15 1617 years old. It was very clear that they were pro athletes. They were these guys who traveled around the world got paid to snowboard very well and had a career out of it. So that was kind of the background there. And as 18 years old, I moved out of Minnesota I transplanted to Salt Lake City. I lived in Salt Lake City for 10 years. Never had any financial help from my parents. I worked the most odd jobs you can imagine. As an ally coordinator at Red Lobster I worked at Blockbuster checking people’s out for movie as I was a busser at TGI Fridays, and after being in Salt Lake City for four years grinding working my tail off snowboarding every day I went to the Aspen open in Aspen, Colorado, and I my buddy actually paid for me to get in the contest and he drove me there because I was still living paycheck to paycheck. And I entered the contest, got through finals I had to get through 250 riders, they’d be the top 10 to get finals, finals, they came, I won the contest and my career took off. And I had a really great successful run as a professional snowboarder and have now since transitioned into real estate investing. So that’s kind of I’ll let you go from there, Darren.
J Darrin Gross 5:14
Well, I’m just gonna encourage any of our listeners, if they want to see some of the rides that you took, it’s pretty easy if you if you Google or search on YouTube, Dan, breezy snowboard, you’ll be entertained. It was pretty, pretty amazing stuff that you did there. Extreme. Extreme. I mean, that is the rider or extreme? Yeah. But well, awesome. I like that. I’m really looking forward to our conversation. So tell me a little bit about the the, the transfer from your snowboarding days into real estate because it’s not exactly like they’re, they’re connected other than the fact that you were snowboarding on real estate there.
Dan Brisse 5:59
Yeah, good way to put that. Yeah, real, really what happened was is as I got into my career, and I started to get to know a bunch of the other pro snowboarders in the industry who were older than me, I saw some of their careers and and it was brutal. It scared me. You know, they ended up coming into this career where you’re this huge known athlete getting paid very well traveling the world, everyone knows you, you go up these events, everyone wants your autograph, and then the career ends and you’re a nobody, or at least that’s how you feel. You’re still somebody but your identity of who you were, your whole life is gone. You’re maybe didn’t manage your money. Well, like most folks that they start making money as athletes, they just don’t know what to do with it. You know, I hear so many people say, and the money ruined me, it wasn’t the money, you just didn’t know what to do with the money. You know, you give someone a million dollars, and they’re broke two years later, you give someone a million dollars, and they’re worth 4 million, you know, two years later, it’s about what you do with it. So really what happened was I just kind of got scared and started reading books on what separates folks and what makes what’s the difference between people who do well and take their money and multiply and other folks that lose it all. So I read a bunch of books, and I started investing in real estate as I figured out I wanted passive income. That was my main goal. How can I find a way to create residual money coming in whether I work or don’t work? And then how can I get a tax savings? How can I get a tax break based on my income. And so I hired a CPA out of Arizona after reading a bunch of books. And we set up a business plan with them, including my wife, to help with the real estate investing. And we were off to the races buying smaller stuff. I bought a duplex in 2012. I bought a nine unit deal. Couple years in the year later. And then I bought a 24 unit deal. All on my own all my self education didn’t have a mentor yet, but I was just reading books and trying to find a way to invest the cash I was making.
J Darrin Gross 7:52
Cool. So the the, you know, seeking some sort of plan B passive income, you’re drawn to real estate. If I understand correctly, now with granite, you guys are doing syndication. Is that correct?
Dan Brisse 8:07
Yeah, that’s correct. After buying our first few deals on my own my business partner now Mike Roeder, one of my best friends I grew up with. He’s actually in high net worth insurance sales. He was buying a ton of single family homes in central Minnesota, and I just said, Hey, let’s buy a deal together. So he myself and one other guy that I went to high school with bought a 28 unit deal together. And then Mike and I went on to hire a personal mentor, or somebody who had been doing this for 24 years, had several 1000 doors, and had the results we were looking to, you know, move to for granite towers. So we started the company. And since then we’ve been buying, you know, 150 to 400 unit deals with private investors, you know, all value at apartments
J Darrin Gross 8:57
counted. So let’s say you said around 200 or 220 12, you buy your first duplex. What about did you start syndicating
Dan Brisse 9:09
the first deal? We syndicated wasn’t 2017 or 2018. So there was a period of time there. Where there’s there’s a steep learning curve in real estate, you know, it takes time. There’s everything takes time. So yeah, it was it was 2017 2018. We didn’t raise money until we had our really, really raise money from several investors until we had had more training
J Darrin Gross 9:37
on it. Got it. So and now how many how many doors do you guys have under?
Dan Brisse 9:42
Yeah, we’re right around 2400 units or so. Just around 300 million of assets under management that we’re overseeing as our team at Granite towers, as you know, takes the property from where it is to its new level through the business plan operation.
J Darrin Gross 9:58
So is it primarily evaluated A value add strategy that you guys?
Dan Brisse 10:02
Yeah, Yeah, it’s it’s exactly like that every every property is pretty dang similar. It’s a rinse and repeat model, you know, we don’t buy Office and storage and all the other stuff we focus on B and C, and we have one a class deal multifamily in Dallas Fort Worth in Nashville, Tennessee. And that’s really all we look at.
J Darrin Gross 10:21
Gotcha, gotcha. So in, excuse me in the the run up here told us, I mean, we’re talking now it’s it’s January 2023. The last, you know, five or six years, or even before that, I want to say back when I first started this podcast in 2010, it was 2015. I remember talking to people going like, Oh, my God, it’s you know, we’re running long, extra long and extra innings. You know, it’s the least the normal cycle of things was running kind of long from when the crash had happened. They were expecting a crash to occur, then. Clearly, it didn’t happen. We had multiple things that had kind of interrupted the normal cycles, including COVID. Your, your build up to the 2400 doors? How many? How many times have you gone full cycle? How many how many deals have you guys sold? And
Dan Brisse 11:22
yeah, we’ve gone we’ve gone full cycle on six deals, four that have been syndicated the two that I bought before I’ve sold off on my own. So that’s, that’s where we’re at currently.
J Darrin Gross 11:34
Okay. And in the in the syndication model, raising capital? How, tell me a little bit about that, as far as your experience with the initial efforts to raise capital versus where you are now.
Dan Brisse 11:54
You know, the market is changing quickly. Right now, obviously, everybody knows being we’re in is January 2023. When we first tried to raise money on our first deal, we raised 575,000 bucks on a 45 unit deal, located in River Falls, Wisconsin. And because of our database at the time in the work we had done, and the folks we had already spoken to about what we were doing, it was relatively quick, it was probably three, four or five days. And we had maybe like 10 or 15 investors who threw in 50 grand. So it was always very easily knock on wood. It’s always been very easy to raise money. I think that you’ve got some positives and some negatives. The positives are that you know, cash is looked at more I think as as trash at times you hear guys like Ray Dalio saying cash is trash on NBC News. I mean, that catches some attention. You know, what does that mean? Obviously, right now, cash feels like King. So are you still thinking cash is trash? I don’t think it is I never thought it was. But I think you have more folks that are thinking, Hey, I can’t let the dollar sit in the bank, I need to find a place to create some residual income find a tax savings? Can I be a part of the inflation through, you know, the destruction of the dollar? So I think I think there’s gonna be challenges for different groups, it really depends on you know, what do you know? And what kind of reputation do you have in the real estate business?
J Darrin Gross 13:28
Got it. So you mentioned like the first deal it took you only like a couple of days to raise the money you needed? Are you guys actively looking for for properties? Now? Do you have any under contract, or where are you at in in your acquisition phase?
Dan Brisse 13:47
Yeah. We’re always looking WE ARE WE every single deal that comes out in Dallas and Nashville, we’re underwriting and trying to see how close we can get to the Whisper price or their offer price. Right now, we don’t have anything under contract we have submitted a few offers, and it’s just there’s a gap right now. And realistically is the gap. I mean, if I’m selling, which we are, we’re selling one deal, you know, that went under contract in June, and the gentleman is still trying to get it closed. And he’s got $860,000 of non refundable money that he’s already released to us that we have in our bank account. And, you know, for us, we’re still of the opinion that you put the deal under contract in June at that price. That’s the valuation he’s of the opinion that interest rates have moved and now you know, the values come down and I i understand what he’s saying. But our noi has also massively increased. And you know, most of the time you don’t close a deal over six months, you close it in 60 to 75 days, at least we do. So I do sympathize and understand the market changed but this is a very dangerous time to be buying if you don’t know what you’re doing very, very dangerous and very it’s not the right time to be coming into a market. You know, if you’re a newbie investor what wait for this to wait for this to blow over wait for interest rates to bottom out wait for something to be a more stable than trying to get into a market right now. So there’s the gap between the buyers and sellers, sellers want prices from June buyers are saying your price is crazy. We’re not paying that. So we’re at more of a standstill, I think.
J Darrin Gross 15:19
That kind of sums up kind of what my my sense of things have been. But yet I still hear about, you know, deals being done. I’m kind of curious, have you in the deals you’ve underwritten? Has there been any change in your strategy as far as maybe some of the, you know, the points you were looking to historically for whether it be value add or always had been more of a financing? You know, Rubik’s cube on how to solve the financing.
Dan Brisse 15:52
Here, our biggest change definitely is what we’re using for debt. And how we’re going about that, and that affects your what you can pay for these deals, you know, when you’re in a very volatile market, like he are, how do you go put bridge debt on in Bridge debt where the variable rate you might get way more loan dollars, but just because you’re getting more loan dollars, and the returns look better on paper does not mean in my opinion, and our philosophy, granite towers, that that’s the way you go. So our biggest thing is just low leverage fixed debt. And if you can’t make the deal work with low leverage fixed debt in a market we’re familiar with, then we’re gonna wait a little bit, we’re gonna stack cash and and see how things play out. You know, we we bought a lot of deals over the last four or five years. And if we have to pause for six or 12 months to see what comes of this, we’re going to pause.
J Darrin Gross 16:51
And historically, your acquisitions, have you raised the capital for the value add capital improvements, or have you built that into your loan? Or have you done bridge financing? Or have you handled the capital improvement budget?
Dan Brisse 17:09
Great question. We’ve done it all. We’ve done it where it’s financed through Fannie Mae. And we’ve done bridge, when we’ve done it, where we raise the capital and just have it liquid in our bank account. Right now the last three deals we’ve bought has been Freddie Mac, fixed debt, and we raise the cap x and it’s liquid. And it gives us more flexibility. Prior to that, we’ve done some bridge debt that we’ve put rate cap insurance policies on where as rates rise, which they have now you have your rate cap insurance paying you to offset your cost and debt still very uncomfortable. Something that, you know, as we go through this cycle, probably will be very hesitant with bridge debt moving forward doesn’t mean you still can’t do well with the deal. I think I think there’s still an opportunity as long as you manage very well. And you can make it through this elevated interest rate period, how low? Did they come down? When did they come down? That’s the unknown factor. So you need cash reserves to get through that stuff. And then the other one Fannie Mae debt, with your capex finance, we’ve done that as well. It’s just a little bit more tedious and much more of a headache to get those loan dollars when you do want to use them. They’re very, very critical on seeing exactly what you did with the money was the work done perfectly, and then you get your money released? So it’s just it just depends on the deal. Depends on your your business plan.
J Darrin Gross 18:37
On those Fannie capex dollars, is that kind of like a construction loan where you have to submit all the work that was done and they inspector?
Dan Brisse 18:47
Yep, that’s exactly how it goes. It’s just part of the loan. I don’t think they consider it a construction loan, like a second loan, it’s just part of the loan that’s you can tap into when you’re ready, it’s available for you.
J Darrin Gross 18:58
Right, but those capex dollars are like in escrow and you’ve got to submit proof. Okay,
Dan Brisse 19:03
that’s 100% Correct.
J Darrin Gross 19:05
Gotcha. So, as far as the, you know, kind of the market changed, are you are you I guess what I’m trying to think is on your hold times, I’m assuming that up until now, you know, there’s been multiple people I’ve talked to if, you know, they bought the deal in January and you know, maybe January the following year, they’ve got a, an offer to sell at a multiple that they had, you know, anticipated for a couple of years. I’m assuming or let me ask it this way. Are you seeing your hold hold times extend based on you know, just the market and kind of the, the, you know, buyer seller gap? Are you do you anticipate holding your deals longer than then maybe you might have a couple of years ago?
Dan Brisse 19:55
Yeah, it one 100% will be dependent on what happens With interest rates in this recession, and how deep we go, and how long the Fed holds rates where they need to hold them, you know, I don’t know right now, that’s the part where if you want certainty of weathering a storm, you want to have fixed debt for a long period of time, because you don’t control when Jerome Powell is going to bring rates back down, or the Federal Reserve decides that it’s, you know, we’re far enough we need to help the market come back to life. So you know, going back to the chant, the biggest change we’ve made is just low leverage fixed debt. You can weather storms, yeah, you’re gonna have a prepayment penalty if you want to exit early. And it’s probably going to be a little bit painful. But which would you rather go back to your investors and say, Hey, we’re going to exit, we do have a prepayment penalty return instead of being 110 is going to be, you know, 97%. Or, you know, what our bridge debt is needing more capital put in 50 grand right now, or you’re we’re going to lose the deal. I mean, what would you rather be in as a syndicator? I’d rather be in the first position and always that position, I want boredom. I want to be bored. I don’t want to be gripped one bit when I’m investing in real estate, you shouldn’t be if you do it, right. You should. You should, it should be somewhat boring. And if it’s exciting, great. You’re just gonna sell for more because the market is good.
J Darrin Gross 21:18
Yeah, no, exciting is good when it’s the right kind of exciting that the Oh my god. Yeah, yeah, exciting. What about rate increase, not rate increases, but rent increases? In the last few years, there’s been quite a run out based on supply and demand, and inflation, etc. And, and all that. In the market you’re in in Texas and Tennessee, are you seen? Or have you seen substantial rent increases? And also looking forward? Based on kind of the economic conditions we’ve discussed? Do you have any kind of expectations for for rent increases? Or what are your expectations for rent increases?
Dan Brisse 22:08
Yeah, um, thus far with our DFW deals, and our Nashville deals, we’re still seeing very large rental increases in somewhere between you know, that 12 to 30%, which is, which is not normal, you know, based off of history, what we think is coming with the oversupply of a class is, is, is definitely gonna be less, you know, how much less again, unknown, do we have negative rent, I don’t know. As far as what we’re underwriting, we’re taking a look at costar, what they’re projecting, we’re taking a look at our one mile median income, we’re making sure we have a B or C Class DL a class, I think we’ll probably get rekt a lot harder than B or C class. And, you know, based off of what we can see with our primary data of what the other competitors are doing, and we take a look at costar and compare it, we’ll make a rent projection based off of that data of what’s coming over the next five years. This is part of real estate, though, that’s always been a challenge. What do you think your exit cap rates gonna be? What our rents gonna do? We’re interest rates going to be you there’s no way of knowing that information other than, you know, and I think you can read a lot on cycles, you know, that’s one thing I think is worth putting more time and effort into is studying real estate market cycles, and trying to better understand if you’re going into a downward cycle, what are the past cycles look like? And should you be using some numbers that are closer to what they were modeling in 2008? Nine, maybe that’s your best kind of, you know, projection of the future. As of right now, you’re in 2023.
J Darrin Gross 23:50
Yeah, no doubt. I, you know, the funny thing to me is, and this is just my, you know, brief experience in investing and just kind of observing the, the market cycles net, but, but it feels like a lot of times what happened before corrections have been made, like, Take, for instance, the Great Recession, there were measures put in place by Congress and, and, you know, other kind of real estate lender fixes that we’re putting into place. And I have this weird sense of a lot of times people when they when they look to the future, because they see certain signs they anticipate is going to happen, just like it did last time. And but, you know, what I’ve seen is that, you know, wherever the problem came from last time, those those holes have been plugged in. So now it’s not leaking over here, but it’s, you know, over there or up there down there. There’s a different cause. Doesn’t mean that it won’t be the same effect. But it’s just about where, where it’s coming from and I think also one of the challenges that I think we have this time is with all of the cash that was pumped into the marketplace. You know, there’s, there’s still I and I haven’t looked at anything recently, but I seemed like I read somewhere that, you know, the the amount of cash, whether it be savings or just, you know, just just cash that people or people are holding as cash as opposed to him in liquid. He has significantly greater than, than what it had been historically. And I should probably check out and have a resource, you know, to cite, but, but there’s like, it’s been more like a sense of like, kind of hanging on like, you know, the, we might need this. Yeah, to cash. And yeah, so,
Dan Brisse 25:47
Yeah, I don’t know if you’re familiar with Ken McElroy, he shared a pretty interesting chart on that as far as the amount of cash in people’s bank accounts, and it was very, very high during COVID. And very quickly, it’s been coming down to some of the lower levels we’ve seen in recent history over the last three, four months. So the direction we’re heading is definitely toward pain. The part that’s interesting to me is how much the Federal Reserve controls the market with these with interest rates, you know, I think the flick of the pen and they bring rates down 2% overnight, and all of a sudden everyone refinancing deals. People are able to now sell deals, people are back to buying deals, you know, people are back to building. It’s just It’s just unbelievable. And the other piece I think that’s unique now compared to the Great Recession is the amount of unrest between our the folks in their country. I am concerned as we go later into this debt debt cycle, and Ray Dalio talks about this in the changing world order. It’s a great book, if you haven’t read it, take a look at changing world order by Ray Dalio just talks about as you get late into a debt cycle like we are, that the amount of synergy and people working together goes down, and you have more fighting amongst political parties. And we’re seeing that I mean, I can tell you right now, firsthand, Portland is a different city now now than it was two years ago. And I don’t know why there isn’t more action being taken to stop what’s happening, because that seems very clear what we need to do, but it seems like it’s being allowed, and it’s trending down very quickly. So, um, you know, that’s the other piece is how, how much do people fight? Versus do they get along? You know?
J Darrin Gross 27:31
Excuse me? Yeah, no doubt the work together versus the, you know, the friction in all phases, but more, you know, more dramatically, so in the political space. And I think, you know, there’s, there’s all sorts of things you can point to that, that, probably exacerbate that. But, you know, it’s, it’s just, it’s just really a sad state of affairs, when you see, the the only thing that has been publicized is about how the other guy is all wrong. As opposed to, you know, going behind closed doors and finding out where the common ground is, and trying to, you know, come out with a solution. But yeah, I mean, Portland, right now, I don’t I don’t get it. How the, you know, just the, the leadership does understand the the value of the businesses and the people in you know, coming in the city and making your your, your city the most attractive and most wanted place, which, you know, people people, I mean, the people with money can leave. Yeah, I think say enough of this. I’m out. Yeah, those are exactly the people you want. Yeah, the if you don’t do what you need to do to attract and keep their interest, you’ll lose them. And
Dan Brisse 28:58
Yeah, and just think about as a parent, if I’m a parent, and I’m looking out the window, seeing the stuff I’m seeing with children, like, I can’t keep my kids there, I have to leave the city, you’re forcing me out because it’s unsafe. And I can’t be explaining, you know what, to them. They’re not at that age, they shouldn’t be seeing the stuff that I’m seeing. So, you know, it seems so obvious and so clear. I wonder if there’s something more it just it, you know, it doesn’t make sense. It’s beyond me.
J Darrin Gross 29:25
Yeah. Well, I’m with you there. And I don’t know what the, the answer is. But I think unfortunately, it’s one of these things where it won’t correct until it gets worse or you know, enough people leave to where, you know, somebody, somebody new in charge. changes the direction but yeah, yeah, not something they’re asking me to solve, but my two cents. Yeah. So, what is as far as looking forward here? You know, we’ve talked about interest rates and kind of the gap in the marketplace between buyers and sellers. With the information that you’re taking in the conversations you’re having with brokers, investors, you know, all of the different players, what what are you? Or where are you with expectations as far as whether it be a a new normal that people just accept? This is the marketplace? Or things change for the better to where it’s, it feels more easy to do business? Do you have a any sense of time that you guys are looking for? Or do you have any sense of that? Or is it just you keep looking until you see something that works? And maybe you find somebody that has to sell? And you’re able to pick up a deal?
Dan Brisse 30:52
Yeah, we’re very tuned into CPI each month to the consumer price index and just monitoring the pace of inflation, just to see how quickly it changes? And can they get it under control? And what does it look like? He looked back at history based off of the last 40 5060 years, then bringing inflation down, it doesn’t happen as quick as some people might think it you know, yours can take. So, you know, you’re heading into this environment. I just it’s it’s hard to say what the heck is coming? It’s hard to say, you know, with how quickly they’ve raised interest rates, and how quickly things have come to a stop, at least in real estate. You know, will it be something we haven’t seen before my not put my money on it. But what we’re really doing is we’re taking care of what we have, we’re making dang sure that the assets we do have are asset managing to the absolute best of our ability. We’re making sure all of our team members that we do have in place are trained well, and are taking care of our tenants focusing on the fundamentals, making sure that any of our debt that we do have it is variable, how are you going to exit it? What does it look like? Well, you know, Can we can we exit it sooner? And just just kind of hunkering down, you know, and seeing how far this needs to go for the system to break. I think that’s probably the next step is at some point, you think that there will be something that breaks in the system where they have to make a pivot move?
J Darrin Gross 32:17
Yeah, no, and it is kind of that I feel like more and more of the people I talked to, there’s I mean, there’s plenty of people I talk with, that are looking that are, you know, hungry that want to do a deal. But it’s again, it’s trying to get the numbers to make sense. And I’m curious when you go and underwrite a deal, and you mentioned kind of like the Whisper price. If you’re not able to get there, do you whisper back a price where you’d be interested? Or are you just kind of like, yeah, doesn’t work for us?
Dan Brisse 32:49
Yeah, we always do it. I think that’s one thing that helps you with your reputation as you go to build relationships with these brokers is they want to know where you’re coming in, you know, if you’ve got a seller who’s selling, and they take the deal out to the market, and all the buyers come back, and here’s a two and a half million dollar gap, they can at least go back to the seller and say you guys are two and a half million bucks off, what do you want to do, and see if they can get the seller to just or if he’s just holding steady. So I think the real deals you’re gonna see come to the market will because of force, you know, force of sale in the sense that their bridge loan variable debt has gone up too much. They don’t have a rate cap in place, and they can no longer make the debt payment, they need to do a capital call to investors, or they need to offload the deal wherever at whatever level they can. So if things don’t change, that seems like the most logical exit for for the deals that are distressed.
J Darrin Gross 33:43
I got it. As far as the markets you’re invested in in Nashville and Dallas. Do you are those the two markets that you’re limited to? Do you have any sense of anywhere else that you might go? If you were to what would be some of the the I don’t say the where but what would be some of the the criteria or or let me put this way? Historically, there have been there have been certain things that people look to mainly, I would say population growth and jobs and demand for housing. Has any of that change for you, given the COVID experience? And if so, what are some of the characteristics or the market characteristics that have have changed? So
Dan Brisse 34:37
Yeah, I would say one of the things that we’re more focused on than ever is just your one mile median income of what kind of demographic Are you buying in? And what kind of laws are being passed by politicians that give you know your tenants more rights than you you’re the one buying the property putting the debt on the property guaranteeing these loans? Taking the risk and building the business plan, bringing these investors together working on the property day after day, and then your tenants have the ability to not pay their rent and they can stay that just doesn’t work. So where are you going to buy so that it doesn’t matter what the government does that the people care enough about their credit, or their future to, to perform in just means pay rent? You know, I mean, at the end of the day, when I buy a home, I don’t just call the bank and say, I’m not paying this month, and they say, no worries, just stay there and enjoy, you know, they just take the house. So so, you know, it is a little black and white. But that’s, that’s the way it is.
J Darrin Gross 35:38
No, I just, it is kind of screwy. And, and, but I think as an investor, you have to be, you know, hyper aware of that kind of stuff. So that you can protect your asset. And, you know, I was having coffee with some investors this morning, we get to talking about and it’s not so much that you have the one bad apple, if he will, I mean, honestly, I made the other part of this conversation was, you know, evictions on a smaller portfolio are not something you’re dealing with all the time, it’s kind of a, you know, a rare kind of thing. But as you get to scale, it’s more of a common, I mean, it becomes more of a regular thing. But just how a, you know, a tenant that needs to go is likely causing other problems that may bleed over to some of your other good tenants that don’t want to be around, you know, that, that that situation and and so it really is it becomes more of an operational thing, and just how you can contain that and get rid of that that problem as efficiently as possible. So it doesn’t become more of a, you know, larger problem, but
Dan Brisse 36:49
Right, right. I could not agree more. I mean, that is that is something we’re evicting constantly, unfortunately, in this environment, there are, there’s more in some demographics than others. But I mean, there’s, there’s, there’s always folks that just decide not to pay, I don’t know what happens exactly, or, you know, because if they’re willing to work with us, or they give us a heads up that things are challenging, then we can work with them, but they just stopped communicating in skip or whatever, you know, it may be that they just go silent on you. And it just I’m not sure what’s going on over there.
J Darrin Gross 37:21
No, no, that’s always kind of a pain that. I mean, nobody, nobody wants to go there. But something you got to you got to have the access to it when you need it. So you can protect yourself. So yeah. Hey, Dan, if we could, I’d like to shift gears here for a second. My day, I’m an insurance broker. And as such, I work with my clients to assess risk, and determine what to do with the risk. And there’s three strategies that we typically consider, we first look to see if there’s a way we can avoid the risk. And when that’s not an option, and we look to see if there’s a way we can minimize the risk. And when we cannot avoid nor minimize the risk, then we look to see if there’s a way we can transfer the risk. And that’s what an insurance policy is. It’s a risk transfer vehicle. And as such, I like to ask my guests, if they can look at their own situation, could be your investors, your tenants, the market, the interest rates, political however you choose to identify what you consider to be the biggest risk. And for clarification, again, while I’m an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, Dan, Brisse, What is the Biggest Risk?
Dan Brisse 38:42
Yeah, I would say that there’s a couple boats the the one biggest one is get your debt right. In this market, particularly if your debts wrong, they can blow up the deal, and you can lose the entire deal lose all investors equity. So I’d say that that right now is the most important piece if you’re looking for the one biggest risk.
J Darrin Gross 39:01
I think that’s that is a pretty good answer given the circumstances. So I gotcha. Hey, Dan, where can listeners go if they’d like to learn more connect with you?
Dan Brisse 39:13
Yeah, they can just go to our website, www.granitetowersequitygroup.com. And there’s a Contact Us form. Fill it out a little email, phone number, hop on a call and we can get to know you guys better see if what we do is a good fit for you.
J Darrin Gross 39:29
Awesome. Well, Dan, I cannot say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot, and I look forward to doing it again soon. Yeah, thanks for having me on deer has been great. All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.
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