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How to Turn $10M in Commercial Real Estate into $10

Avoid Rookie Mistakes

A successful veteran looks back at expensive—and embarrassing—lessons.

We recently worked with a new client who jokingly shared the “secrets” to her success.

Several years ago, she read a book about turning $10 into $10M worth of real estate… and followed the author’s instructions blindly.

Sure enough, she developed quite a portfolio of properties with low-interest rates and high demand in a rapidly growing market. But, of course, the wind behind her back helped as she made rookie mistakes along the way.

But then came 2007. And when the tables turned, she lost every gain she made and found herself on the brink of bankruptcy.

Fast forward to now-ish… She wanted our assistance in finding a new property for a 1031 exchange.

During our Zoom meeting, we introduced her to our Seller-Transaction-Property worksheet (The STP Matrix™), a tool we designed to help clients achieve successful transactions.

After we walked her through the STP Matrix™, she laughed, then put her face in her hands.

“If only I had known about the STP Matrix™,” she moaned. “I could have avoided learning real estate investing the hard way, and I would have become more successful quickly. Oh, the many sleepless nights…”

Here are some of the mistakes that she made but could have avoided with The STP Matrix™:

The Seller: Unfortunately, as a novice, she failed to consider the seller’s circumstances.

  • She bought a property aggressively marketed by a huge brokerage firm.
  • She bid on the property as if she were at an auction.
  • She bought properties from professional real estate owners.

 

The Transaction: She learned the hard way that how you structure the deal is the art of the deal.

  • She paid more in exchange for having a longer due diligence period when she could have closed quickly.
  • In addition, she failed to take advantage of seller financing terms that were more favorable than the ones she got from a conventional lender.
  • She did not consider the legal and tax consequences of a 1031 exchange, which were significant.

 

The Property: She didn’t know what property characteristics to look for. Instead, she bought:
Fully leased properties.

  • Class A properties with no opportunity for value add through leasing, hands-on management, or entrepreneurial risk-taking.
  • Commodity real estate with little upside potential. At Cardinal, we call properties like free-standing drug stores “commodity” real estate because these assets are in prime locations with high credit tenants, long-term leases, above market rent, new construction, and are fully occupied.

 

With the help of The STP Matrix™, she could identify six promising assets for her 1031 exchange, and she’s poised to make a smart tax play that matches her long-term strategy of accumulating wealth in commercial real estate.

And she doesn’t have to worry about making costly, embarrassing mistakes ever again.

P.S. I asked why she chose to work with Cardinal. Here’s what she said (her words, not mine):

“Cardinal is different. Over the years, going from boom to bust, I had become weary of commercial real estate brokers. Frankly, I felt they were condescending because I am female. Now I use this bias to my advantage and I am on the lookout for the good ole ‘boy brokerage industry. I found none of this B.S. at Cardinal. You guys listened to me and respected me from day one. I love The STP Matrix™ you introduced me to, and I have already started using it to make some great decisions!”

Cardinal is different. We reimburse you for our consulting fees when the transaction closes. Second, we ensure the interests of every party involved are aligned, improving the quality of advice and your chances of striking a lucrative deal. Third, we give you the tools and advice most brokers would never dream of sharing.

So if you’re interested in buying the right properties and making non-embarrassing, highly-rewarding commercial real estate decisions, give us a call. We’re easy to talk to.

Real estate transactions can be fraught with frustration and pitfalls.

Sometimes the hardest part turns out to be working with your broker, the person who is supposed to help you through the complexities. Veteran commercial real estate broker and client advisor John Culbertson discovered that brokers’ interests aren’t always aligned with those of their clients. He realized there was a better way to advocate for clients and get the deal done.

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