Adam Torres and Joel Friedland discuss real estate investing.
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Show Notes:
How can real estate investing risks be decreased and managed effectively? In this episode, Adam Torres and Joel Friedland, Founder/CEO/Principal at Brit Properties, explore the Brit Properties brand of real estate investing and approach.
About Brit Properties
Brit Properties is a boutique owner and operator of industrial real estate. Since 1989, our Chicago-based team has acquired 95 industrial properties with an aggregate value of nearly $200 million. Through hands-on acquisition and skillful property management, they strive to provide the pool of 200 investors with consistent cash flow, appreciation in value, and straightforward communication.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest in the show, just head on over to missionmatters. com and click on be our guest to apply. All right. So today I have Joel Friedland on the line and he is founder of Brit Properties.
Joel, welcome to the show. Thanks, Adam. Nice to talk to you. All right, Joel. So excited to have you on the show today and to have some fun. We’re warming up in the week here. It’s only Tuesday and we’re just getting cooking. So we’ll start this episode, Joel, as you may know, the way that we start them all with what we call our Mission Matters Minute.
So, Joel, we at Mission Matters, we amplify stories for entrepreneurs, executives, and experts. That’s our mission. Joel, what mission matters to you? To me, Adam, I am convinced that real estate investors do not often understand that real estate investing can be as much of a casino as Wall Street. And what I mean by that is if you invest in a bond or in a stock, it can go up or it can go down.
In real estate, because leverage is used so often by almost everybody, when you leverage up, when you get a mortgage, It makes that investment so much riskier than if a deal was made all cash, no debt, and especially at the end of the cycle. Right now, we are at the end of a 15 year up cycle, and every time in the 43 years I’ve been in the business that I’ve seen a cycle go down, people who have a lot of leverage And who are sort of living on the edge, and who are deal junkies, let’s call them.
And sometimes that’s what they call themselves. And by the way, it’s not good to be an anything junkie. But people who jam as many deals where they grow for growth’s sake, and not because they have a different mission, they’re at risk. And I’m seeing so many people get in trouble today because they’ve been gambling.
I’m glad to have you on the show and our topic too. When we talk about doing deals that may be, you know, low leverage or, and really with the thought process of financial security and financial safety. I like your approach overall to real estate. Like when normally when we have guests in the show, I mean, why different range in the real estate side, but not enough people talk about what you’re saying and with.
Interest rates changing and other things. I mean, I’ve seen not to pick on one segment, but it’s just one that comes to mind. I know commercial has, you know, felt something even for these billion dollar companies, right? Like Oceanwide or even like a lot of the smaller. Individuals that were caught in the flipping.
I don’t, I shouldn’t say game, but that particular strategy of flipping when the interest rates change, depending on their inventory that they were holding and when their short term, you know, hard money loan was going to adjust, you know, some people found them on the wrong side of that, right? Yeah.
Flipping, flipping’s gambling. There’s no doubt about it. I’m a hundred percent sure of it. Now it doesn’t mean you shouldn’t do it. There are people who are not compulsive gamblers who are business people. Absolutely. And they can flip and they can take outside risks, outsized risks, but I don’t, because I’ve been through the four cycles and I’ve been hurt in two of the cycles, right at the end of a really long period of sustained growth in the economy, that’s when you have to really watch it.
So in both, real quick, real quick, Joe was one of the cycles, 2008, I just don’t want to assume all that. And in fact, that’s also that you just for some context. Absolutely. Yeah, so two cycles where I got pretty badly burned because I had debt. 1990 and then 2008. In 2008, I had 50 industrial buildings. I’m in the industrial real estate world, and I’m an industrial syndicator, so I have numerous buildings all in the Chicago area, primarily single tenant, primarily net leased, and primarily no debt anymore.
Totally debt free. Three out of four of my deals, no mortgage. And that’s because I feel that I am gambling with my money and my investors money when I put mortgages on. A point in the cycle like what we’re at right now. Mm hmm. Mm hmm. let’s just for context and for everybody listening I’ll do the disclaimer for you Joel like if somebody’s thinking about investing you need to talk to your professional your lawyer everything else We’re not going to give you specific investing advice that we’re having a conversation here today.
So Joel did the disclaimer for us for context it’s January 23rd of 2024, just getting into the new year, so to speak. What are some things that are on your mind and that you think maybe should be on the mind of other maybe potential real estate investors the market right now? Be careful.
Don’t do any deal that comes along is not necessarily the right deal. During the period starting in 2009 up until recently, you couldn’t do anything wrong. If you were buying real estate and it, and you didn’t make money, something, Went wrong was just very unlucky, but today Careful, just be careful.
And that’s why anything that I’m buying today with my group of investors I’m just gonna do it all cash And by the way, I think I’m the only person in the United States who believes that that’s a good idea because without leverage You haven’t magnified your returns. If you have 75 percent leverage you make four times as much money on your equity If you have debt, however, I have so many friends who are in deep trouble because they have floating rate debt and some tenants stopped paying rent in some of their multifamily buildings.
Oh yeah. During COVID and other people stopped paying because they saw other people stop paying and now they’re in deep, deep trouble. And I remember that feeling. It was, I got into a serious, deep depression. Both times that it happened to me that I got caught when the music stopped and there weren’t any chairs left in the game.
Hmm, I see that and I subscribe to this concept of you couldn’t have done wrong I think about like a property I bought back in I think it was 2009 off the top of my head and I was a Little bit younger there just getting into real estate and I was There’s a winner and loser on both sides, right?
So I was the beneficiary of somebody else’s being over leveraged. And it was just the timing thing. No amazing foresight or a real estate insight. I just had been to the point where I was out of college and had enough money to get a property. And I, you know, purchased something that, you know, was a low six figures.
That was at one point going for a mid to high six figures. And it wasn’t because that person really, well, I’m not going to say he did something right or wrong, but there was quite a bit of leverage in their overall strategy and exactly what you said happened. So I, see that I want to switch the, switch the topic just slightly here or just pivot a little here.
Industrial real estate interesting to me. We don’t always have people in the show that specialize in this. So tell, tell me a little bit more about what attracts you to that, to that sector. Well, I was hired. I know your story and you had a mentor. I actually had a mentor named Steve Podolsky whose family owned 80 industrial buildings.
So I went to work for them and they were all in Chicago. They were all Industrial, which means manufacturers and distributors, and they were pretty small buildings are under 100, 000 square feet for the most part, and the companies inside of them. They were distributors today. Industrial includes Amazon and Wayfair and targets warehouse when you order online.
So industrial is booming because of the Internet, but it’s also booming because Manufacturing companies, who used to make a lot of products in China, got in trouble with the supply chain. They sort of just stopped during COVID. And now they’re doing something called on shoring, which means bringing a lot of manufacturing back from overseas.
So these industrial buildings, which are just boxes, they’re They’re boxes that are, they have truck docks, and they have high ceilings, and they have heavy power. Companies move in, and they manufacture stuff there, and they stay for decades. Yeah. That’s our kind of building. Yeah, I’ve interviewed quite a a few people during, especially during COVID.
Actually, I interviewed quite a few people when I saw some of the the manufacturing that was coming here and I wanted to get a feel and just for a pulse because, you know, the, the company and, and I don’t want to, I’m not going to. I’m just using it as an example, my next question is, is there a particular geographies you have, but that you focus on.
But before we get to that, so I had quite a few people that were either in Wisconsin, the Midwest, other areas to where there was this supply chain that was. Kind of disrupted for whatever that particular product was there. I think one of them was like ball bearings or something like that off the top of my head.
And it was a similar scenario to what you’re talking about. And when they were talking about expansion and other things like that and how business was great. And they were actually like expanding their footprint. I guess I didn’t really think about it from the real estate side of that thing. So expanding their footprint probably meant leasing and or acquiring a building, like one of them that you’re talking about.
So to my question, geographies is there somewhere you told us building type, is there geographies that you’re, you look at it nationwide, certain sectors, give us a feel there. Yeah, so there are some very, very large industrial markets. The key for me is to have a market where there’s a lot of depth, a lot of population.
In Chicago, for example, where I live where we do most of our deals, are 16, 000 industrial buildings, 1. 5 billion square feet. It’s huge. And in the Inland Empire By you. Oh yeah. It’s a huge market. New Jersey and New York, a huge market. And then, you know how they, they, they rate cities if you have a television station, you’re, you’re either number one, two, three, four, whatever market you’re in.
Oh yeah. I wouldn’t buy industrial buildings unless they were in one of the top ten markets. And the reason is because there’s not enough Tenants and buyers when things get bad in certain markets. Mm-Hmm. , a lot of people are going to these smaller markets in the, in the Sunbelt and the reason that they’re going there.
I like what I described, by the way, that would be like a smaller market in my example. I understand. Go ahead. Mm-Hmm. . Yeah. I, I don’t wanna own buildings in small markets because, yep. In 43 years, what I learned is when a building comes available that I own with a group of investors in a small market, we were in Florida in a place called Ormond beach.
And what happened was 2008 hit in our tenant left in 2010 and things weren’t that much better in 2011. So we couldn’t find a tenant or a buyer because there weren’t enough companies in the market. So we got crushed. We bought the building for a million four. And we sold it for a million one and we lost three hundred thousand dollars Ouch Ouch is right.
And so That’s different than if you buy in dallas or you buy in chicago or you buy in edison, new jersey Those are the markets that I prefer and because I live in chicago and I don’t like flying that much all of our deals all of our current properties are here and the market’s big enough that Our investors can make a really good yield on their investments because Chicago’s got just tons of industrial.
Okay, so I gotta pause you there. Shameless plug, if you’re listening to this right now and you haven’t hit that button, this is my commercial. Saved you some money or made you some money by we, I mean, Joel, because he’s dropping knowledge today, man. I really appreciate all of that insight to, this is why I do what I do.
I know in the, in the pre show, Joel, you kind of, we were talking about, Hey, why are you doing these interviews? Why does, what’s Mission Matters about? It’s right there. Like that knowledge you just gave, you saved a lot of people from some potential pain, assuming they were, you know, maybe going to be going down the wrong way.
And they get to benefit from your 40 plus years of experience. I think I caught that right. In terms of, in investing here, like that’s, that’s big, that’s big knowledge right there, but I appreciate you. Yeah, I hope somebody can have some gain from my pain. That would be really, then I’m making a difference.
We’re going back to the mission. That’s my mission. My mission is to communicate that there is a way to do deals that is less risky. And even though, what’s a, Dave Ramsey who talks about not having any debt and paying for things. I like Dave. I like Dave. I’m the Dave Ramsey of real estate. Oh, did we just coin that?
Come on, I can’t listen. He talks to people who don’t have any money. Yeah. And I talked to people who have a lot of money. Yeah. It’s the same message though. It’s you don’t have to put debt on properties and take outsized risks. Every day I read the Wall Street Journal and I read the local business journals.
Everybody’s getting foreclosed on. lenders are taking stuff back. Big companies. These are from sophisticated people. Yeah, like there’s big companies we’re talking about. Not just the little guy. Contact billions of dollars in projects. Blackstone. Yeah, there you go. And add a foreclosure. Ouch. when I saw that, I was like, oof, that kind of like too big to fail or whatever the old coin term was, oof, that hit me in the stomach when I heard that.
I was like, oh my gosh, that’s significant and for the little guy that’s kind of not, I won’t say playing the same game, but maybe isn’t, you know, if they don’t have to, like why, right? Yeah. My guys are happy. Yeah. I mean, I can give them an 8 percent yield. And tell them with no debt, no bank’s going to foreclose on us.
Because banks don’t have a sense of humor. They never have. So, we just, we just, we’re just different. And my mission is to tell people, it’s okay to be different. can actually do that. My accountant, when I started doing debt free deals, told me I was nuts. And that I would never, ever get an investor because real estate’s a leverage game.
I said, well, then I need a new accountant. Because that’s what I’m going to do. Wow, that’s what I’m talking about, Joel. Well, hey I just have to say it has been great having you on the show. I mean, it’s great to get your insight and to see another side of how to do things and to have someone, like you said, to use your words different, like, because this is different and I see why you’re accounting it.
Would have said that because I think you may have the record. one of my listeners, if I’m wrong on this, call me out, but I’m going to make a statement here, send me an email, call me out if I’m wrong or leave a comment, whatever. But I think you’re the first person in 6, 000 plus interviews, Joel, that has.
Talked about like doing completely debt free deals in the matter that you’re talking about. I know for sure. If you combine that with with a commercial, I know you are for sure. But wow, so you, you’re one of a one over here and and I’m happy for that because that does give. The audience, a idea that, Hey, things can be done differently.
And profitably at the same time. That being said, Joel, if somebody is listening to this and they do want to connect and learn more about BRIT properties and continue the conversation with you, how do they do that? Sure. Our website is BRIT Properties, B R I T with one T, properties dot com. And we’ve got lots of content on our website.
Especially, there’s an article called, Why You Should Not Invest With Us. And it’s something that everybody should read before, before they invest with anybody. It’s the top ten questions you need to ask a sponsor before you invest. Yeah, that’s amazing. And for all the listeners, just so you know, if once you click that subscribe button, you’re going to get a special report that says why you shouldn’t subscribe with us.
Joking. That’s not going to happen. Subscribe button anyway, I don’t care. No joke, seriously. Amazing having you on the show today. Appreciate all you do. I look forward to having you part of our community and to continue to build. So thank you for that. And to the audience, in all sincerity, thank you for your time and attention.
But I do mean it hit that subscribe button and we have some more mission based individuals coming up for you. Thanks again, Joel. Thanks, Adam. Thanks, Adam.