The Asset Class Most Investors Ignore (And Regret It)

The Real Estate Investing Club

Join an active community of RE investors here: https://linktr.ee/gabepetersen  0:00 - Introduction & Guest Welcome 1:00 - Stewart's Journey: From CPA to Real Estate Investor 4:24 - Why Stewart Left 200 Residential Doors Behind 6:07 - Vertical Integration: Why Doing It All Can Hurt You 9:25 - Commercial vs. Residential: The Real Difference 12:32 - Medical Office: Stewart's Favorite Asset Class Revealed 16:16 - Why Medical Office Tenants Rarely Ever Leave 19:55 - Cap Rates: Nashville vs. Birmingham Compared 24:06 - Regional Investing Along the I-65 Corridor 26:22 - Why Huntsville, Alabama Is the #1 Market to Watch 29:17 - Due Diligence and Trusting Your Gut: A Costly Lesson 31:35 - Best Deal Ever: A Suburban Office Windfall  ABOUT THIS EPISODE In this episode of The Real Estate Investing Club, I sit down with Stewart Heath, CPA and founder of Harvard Grace Capital in Tennessee. Stewart spent decades building his real estate investing career — from a 200-door residential portfolio to a focused commercial strategy along the I-65 corridor between Nashville and Birmingham. 🏢 Whether you are new to investing or a seasoned pro exploring commercial real estate, syndications, or regional market focus, this episode is packed with insights to accelerate your path to financial freedom.  THE COMMERCIAL REAL ESTATE PIVOT 💼  Stewart spent years managing 200 residential units before making a full pivot to commercial real estate investing. He breaks down exactly why dealing with business tenants rather than residential renters changed everything for him as an investor. 💡 He also shares a powerful warning about vertical integration — owning your property management company, construction firm, and investing business all at once — and why dividing your focus too many ways almost always means no single part of the business grows the way it needs to.  #RealEstateInvesting #CommercialRealEstate #MedicalOffice #PassiveIncome #RealEstateSyndication Want to learn more about our guest? Connect here: https://harvardgracecapital.com/ Want to learn more about the REI Club Podcast, how to invest with Gabe at Kaizen, or join our community of active real estate investors on Skool? Visit the podcast website at https://www.therealestateinvestingclub.com or click here: https://linktr.ee/gabepetersen

Transcript

00:06All right. We are back with another episode of the Real Estate Investing Club. I hope you guys

00:12are having a great week, great day, wherever you are and whatever day it is for you. This is going

00:17to be a good episode. We got Stuart Heath with us on the show from Harvard Grace Capital over

00:22there in Tennessee. They do syndications and they're starting their first fund. So if you

00:28guys have been interested in either of those, this is the episode to listen to. We're also

00:32going to be talking a little bit about regional investing. I know in the past couple of episodes,

00:36we've kind of gone over the difference between choosing an asset and going deep on it or choosing

00:40a location and going deep on the location. So that's what we'll be talking about a bit here.

00:45So Stuart, I'm excited to jump into this. Thanks for hopping on.

00:49Thanks for having me, Gabe. Quite an honor. Appreciate it.

00:52Absolutely. I told you before we got on here, we always like to start with stories. We like to

00:57hear how people got to where they are. So why don't you take us back to the beginning of your

01:01story in real estate and tell us how you got here. The beginning of my real estate story is

01:06kind of funny, I think. So I'm a CPA and I come out of college in 1987, which was right

01:17after the big

01:201986 Tax Act, which kind of destroyed certain sectors of real estate investing. And so as a baby

01:30business person back in the day, we were told real estate is bad. Real estate is bad. Don't ever do

01:34that.

01:35And I remember hearing bankers say, we don't lend on real estate anymore.

01:39Well, you know, fast forward. Really? I did not know that.

01:42Oh, yeah. You know, they much preferred rolling stock and collateral that had wheels and could

01:47be in another state in an hour. And, you know, it was just a sign of the times. It was

01:53just a sign

01:54of the times. And, you know, the focus of that was the old real estate limited partnership where,

01:58which was abusive tax rules, but, you know, Congress passed it and people just used it. And

02:07anyway, so all really up through the early 90s, real estate was bad. And so I was with Price

02:15Waterhouse, big national firm, and had the entrepreneurial itch, got out on my own. And

02:24almost all of my clients that I was attracting were somehow connected to real estate. And, you know,

02:30they were contractors and some of them were high producing real estate agents. And they were all

02:35doing, they were all doing everything. You know, they were all doing fixing flips and selling real

02:40estate and doing all this kind of stuff. And so finally, and I'm just working away, building my

02:44practice. And finally, about 10 years into this, you know, late 90s, I'm doing my tax practice in

02:54March, late one night, it's two o'clock in the morning, and I'm slaving away. And I'm realizing,

03:00I'm not building any wealth here, what's going on. And, and, and I sit there and I look at my

03:06clients, first time I really looked at them, and it's like, none of my clients are paying any taxes.

03:12And they're, and then they go sell these pieces of property, and they're, they're banking six

03:16figure profits and all this kind of stuff. And it finally dawned on me that real estate was maybe not

03:25bad. And so that sort of spurred me to start taking a look. And then I start talking to my

03:30clients. And we did some deals together. And then I bought my first duplex. And then I bought 14

03:37duplexes about six months after that. And, and literally, then I got my contractor's license.

03:43And then I started doing building and developing. And I was doing it all and created up my own

03:48property management company and, and really just got the just got the fever all the while I'm still

03:55a practicing CPA. And, you know, had some rough times during 2009 to 2010, left a CPA practice went into

04:08the corporate world held several CFO level or C level positions, COO and CFO positions along the way. And

04:17then, and then around 2017, I said, I just want to get back to real estate. And so to finance

04:24that,

04:25I did some, you know, fractional CFO consulting gigs, but then we just started, I gathered a board

04:32around me and we started pursuing commercial real estate. I didn't like residential real estate

04:37anymore. I didn't like it. When I, I had 200 residential units at one point and decided that

04:44that was the nearest definition of hell on earth. Uh, I could ever imagine, but, um, but I like

04:49commercial and that's been a good move for us. And so, uh, since, uh, 21, we've done, um, uh, 10

04:57deals

04:57in our, um, uh, I 65 corridor from Nashville to Birmingham. Uh, and that's been our geographic focus

05:06because, uh, we do manage everything that we do. Uh, so, uh, I can't do something in Texas or,

05:15uh, Phoenix or anything like that. Uh, so we like to keep them close. Uh, and, uh, and so we've

05:22pursued various different asset classes in that geography. Yeah. Yeah, man, there are so many, um,

05:29so many different ways to take this. I mean, you, the thing that kind of stood out to me about

05:33your

05:33story, first of all, that you, you attempted to make essentially a vertically integrated

05:38investing company. You had the property management company, you had the construction company,

05:42you were buying properties. Um, and so you were making all these different companies side by side,

05:49um, that served each other. I'm curious, do you feel like that is like, if you were to go back

05:53to

05:53yourself, you know, whenever this was, I think you said this was the 2000s. Yeah. Yeah. If you were

05:59to go back to that version of yourself, would you, would you, you know, give the advice of,

06:03of going down that path or would you say just buy and then hire third party to do the other

06:09things?

06:10Um, well, I still do property management, uh, for our own stuff. I wouldn't do property management.

06:17You don't do it as a property management. You don't like, you don't have other clients that

06:22you manage their properties. Right. I do not. Um, it, it, it, you, you, um, you end up with

06:28divided loyalties between your third party customer and yourself. And in most of us,

06:35you know, we was like, well, my customer always comes first. That's not being really true to

06:39ourselves. We're going to come first, but really what you end up doing, you don't serve either one

06:44of them very well. So yeah, we do it. Uh, but we don't do it for other people. Uh, I

06:50w I would never

06:50do construction again myself. You know, I went and got the license. It wasn't that hard. Um, I was a

06:56CPA that,

06:58uh, you know, got a license, but I couldn't frame a wall if you, um, you, if you held a

07:04gun to my

07:04head, but, uh, and there's not enough margin in that business. I mean, the guys who are good at it

07:09are, are really good because they're so focused on the details and you'd think, well, CPA is not

07:16focused on details. No, I'm focused on big picture numbers. Yeah. And so, uh, you know, and frankly,

07:25that experience was very much a, I became a believer in, you know, division of labor and,

07:30and, you know, sort of the industrial process. Everybody's a specialist and, and construction

07:35is a, um, um, uh, is a, uh, specialization and there are experts in it, just like there

07:44are experts in property management and experts in capital raising and experts in underwriting

07:49and things like that. Doesn't mean we all can't wear a few hats, but we shouldn't wear

07:54them all. Yeah. Yeah. I think, I feel like that's kind of the boat that I take. I I've

07:59talked to a couple of guys who, um, you know, they have done that same thing and they've built

08:03out a construction company and they've built out property management company, a brokerage,

08:07all these things alongside their investing company. And, um, to me, when I, when I see that,

08:13at least when I think of myself going down that path, I just, I just see everything being,

08:18um, diluted almost. And like my, my focus, not, none of them would, would work well because

08:24I wouldn't be able to focus enough on anything individually for it to grow. Um, so yeah, that

08:29kind of, that kind of aligns with what I thought you'd say.

08:32The classic mistake is when you don't hire the expert to run that division. If you're thinking

08:38and you're just going to supervise it with mid-level management, it's not going to work.

08:44Yeah. Yeah. That makes sense. Um, so the other thing before we get into, you know,

08:49I really want to talk about your regional investing, but the other thing that I wanted

08:51to talk about, you mentioned you don't like single family and that's, um, kind of contrary

08:56to what a lot of people start out with. Uh, most people start out with a single family

08:59house and go to duplexes and then get a little bit bigger and then to get to commercial.

09:03Um, you had up to single 200 single family doors, which is a portfolio. That's a lot.

09:08You got to add doors. There was a mix between single family condos and duplexes. So, okay.

09:14But yeah, I mean all essentially residential. Yes. Yeah. Um, and so you really didn't like

09:21that. What was, what was it that you didn't like about, um, single family that you do like

09:26that's, you know, not present in, um, commercial. Um, well, I think they're perfectly fine as an

09:33asset class. Uh, and I didn't like managing them. Uh, and, and going back to our other

09:41discussion, I didn't have good managers. I hired a property manager, uh, to handle things,

09:46but you know, uh, it, things weren't getting handled. So being a control freak, uh, you know,

09:53I would, I would march on in and handle things and, and go in and try to collect the rent

09:58and,

09:58and, and, you know, people in their homes, uh, it's not a rational, it's not necessarily

10:06a business transaction anymore. Uh, and, uh, yeah, I'm, I'm just sort of a black and white

10:13kind of guy. He's just, look, if you don't pay your rent, please leave. And that just doesn't

10:17work in the residential world. And I'm just so glad I wasn't in that during the COVID pandemic

10:23because look what happened in many States. I mean, people just got to squat for a year

10:29or more. And, and it's like, nobody ever seemed too concerned about the landlord who probably

10:36had a mortgage payment. They had to carry, uh, you know, you know, uh, counting on that

10:44rent to come in. So I just don't like the residential or the, I guess I'd call it the retail

10:49business

10:50transaction in my, um, in our work. Now we're dealing with business people and I'm a CPA.

10:58I've always dealt with business people. And so it was, it's just more comfortable to me. So

11:04it's all about me that didn't like that. I think they're perfectly fine for investment.

11:09Yeah, no, absolutely. And something you mentioned in there that, you know, I've run into and countless

11:14other investors have run into is if you have a bad property manager, you're going to have a bad

11:19time. If you, if you don't, can't find a good one, then it's just going to be, you know, pulling

11:23your

11:24hair out and hitting your head against the wall. It's not going to be a lot of fun. We had

11:27this,

11:27uh, one mobile home park that we owned, um, and we had a bad property manager and we, we drug

11:32our

11:32feet. And that was the mistake we made is that, um, we were like, you know, let's, let's coach her.

11:38Let's try to get her to work. And we should have seen the signs and immediately been like, no,

11:43we need to cut loose and find somebody else. But once we did find somebody good and thank God we

11:47have

11:47somebody that's a rockstar right now, managing that property, um, it's night and day. And it's

11:52just like, all of a sudden the property becomes, uh, not something that's draining your energy,

11:57but something that you look forward to doing the meetings to seeing how things are progressing

12:01that coming up solutions to problems. Um, so yeah, it's night and day. Yeah. But, uh, so you

12:07mentioned, um, single family, you don't like it. You like interacting with businesses. You said you

12:12like to invest in commercial now regionally. Um, so before we get into regional and how that's kind

12:18of impacting your investing strategy, let's talk about the actual things you're buying. Commercial

12:22is a huge umbrella. There's a lot in an industrial, you know, multifamily is commercial. Um, you know,

12:28you name it commercials. There's a lot of things out there that are commercial. So what specifically

12:31do you like to buy in the commercial umbrella?

12:35Well, my absolute favorite asset class is, um, medical office. Uh, we've bought suburban office

12:42and some small strip retail. We have a very large storage facility in Huntsville. Uh, and, uh,

12:51and we always look at multifamily within our region, but as we talked about before the show,

12:56uh, we're all about the numbers. Uh, our, our deals must cashflow from day one, uh, and which

13:04means you got to buy it. Right. Uh, and I've yet to have a multifamily offer, even entertained.

13:11Uh, we underwrite a lot. We make a lot of offers, uh, and cause I think multifamily is a great

13:16asset

13:17class. Uh, and yes, it's residential. Uh, and so, yeah, we would hire a property manager for that one.

13:24Um, but, uh, I honestly don't know that we'll ever get into that asset class. Uh, we do follow

13:31multifamily quite a bit because, uh, it sort of dictates everything else, but, uh, suburban office

13:37and, you know, not necessarily downtown office. Um, a lot of people from different parts of the

13:44country say, are you crazy? You're doing office, you know, office is dead. Um, office has never

13:50been dead in the South. Uh, we've always pretended like there was no pandemic and, uh, people kept going

13:56to the office. Uh, and, you know, a couple of, uh, our properties were full before, during, and after,

14:03um, uh, you know, the pandemic. And so it, and I focus on those suburban office and, and just like

14:12medical, this is where I break it down. Um, I like the tenant mix where that's where they see their

14:20customers. Yeah. You get a big downtown office and they got their lawyers and whatever, uh, you know,

14:26their, their clients probably hardly ever go there. Um, and, but, uh, you got your doctors and

14:33your dentists and your state farm agents and your mortgage companies. And that's where people go to

14:39meet with that business. And so they're customer facing businesses. And, and that's what, that's kind

14:46of what we look at when we're looking at a property. It's very much like retail. Some people call it

14:51service retail, what I call suburban office. Uh, and I try to stay away with, from ones that have

14:59restaurants in them, uh, cause, uh, restaurants tend to be less stable. They also tend to, um, you know,

15:08attract pests of certain kinds and, um, and, and they always, in fact, everybody around them, you know,

15:14so, um, uh, but, uh, we'll probably do, we'll probably have a restaurant one day, but, um, uh,

15:23but that's what we look for. Uh, and, and, but first and foremost, it's got to meet the numbers.

15:28Yeah. Yeah. Um, so medical office, that's kind of interesting. I'm actually, uh, just right now,

15:33you know, I buy a mobile home RV self storage, uh, but we got something happened. Deal came into our,

15:38our, you know, our purview and we are buying a, uh, a retail location and it's the first one I've

15:44ever

15:44done, but it's actually, um, I, you know, I've never dealt with triple net leases. I've never,

15:49uh, never thought about having a, a business customer rent from you. And it's, I like the

15:54world. I like the, uh, the idea of it. And so it's a, it's a new, new thing. Um, medical

15:59office

15:59makes a lot of sense. Uh, what do you, that's something that I've never, ever looked at. What do

16:04you like? What are the top three things that when you see them, you're like, okay, this is a deal,

16:10you know, outside of just the numbers, um, you know, what are the, the, the value add elements

16:16that you look for when you're looking for a medical office? Well, and if, as soon as you

16:23start getting into that world, you realize how competitive it gets, but, um, it's the stickiness

16:30of the tenants or starters, they come in and they usually do a 10 year lease. And the reason

16:35they're, they're inclined to do that is because, uh, at least in, in our markets, the tenants

16:42doing all their own build out. Uh, so they're paying for all of that. So they're sinking

16:47half million, $750,000 into their build out. So, you know, they don't want to have to walk

16:54away from that end of a three-year lease or a five-year lease is that, so they're doing

16:57these beautiful 10 year leases. And if you write your lease, right, which adjusts to inflation

17:02and through one mechanism or another, triple net leases in the office world are increasingly

17:10popular in our region now. Um, it, which is a bit unusual in a multi-tenant environment, but it,

17:17it's just math. It actually works beautifully. Uh, so I just really like the stickiness of those

17:25tenants because, uh, and, and then, uh, and that I've already renewed many people coming off of a 10

17:32year lease and they renew for another 10 year. And because that's where their, their customers know

17:38where they are, you know, they're dealing with hundreds, if not a couple of thousand customers.

17:42And do you want to communicate to them and say, Hey, I moved across town. Um, yeah, because, uh, they,

17:50uh, you know, they see the value of a part of their practice is people knowing where they are.

17:54Um, and they tend to be less cost conscious. There's a lot of margin, a lot of money in medicine.

18:03Uh, I've never had an argument with a medical professional over, uh, whether it's going to be

18:0928 or $29 a square foot. I mean, we just don't even negotiate. Uh, sometimes they want to, well,

18:17can you contribute some X to our build out? And, you know, so then we arm wrestle over that. Um,

18:23um, everybody else is always, um, uh, you know, what can you do for me on the rate? Frankly,

18:30that's the wrong argument to have with your potential landlord, but, um, uh, cause the

18:35rate, it makes very little difference on a monthly basis. If you know what I mean, it makes a huge

18:40difference when it goes to, uh, selling that. So those, those are the things that I really,

18:45really love about medical office buildings. Uh, just really steady long-term, uh, uh, net

18:53operating in code. So do you, um, for medical office, do you have to build or buy existing

18:59or, or how does zoning work? Is there a specific zoning that you need to have for medical office

19:04or can it just be any, any commercial? Um, depends on, depends on where you are. Uh,

19:09sometimes the zoning, uh, will use the same. The biggest issue is the parking ratio to square

19:14foot of the building. The same, um, as a general office, sometimes medical will have a slightly

19:20different, a slightly higher requirement, uh, for parking ratio. Um, those are really not my

19:27issues. I'm always buying existing, I'm buying stabilized, uh, income already. So some, some

19:33developer, uh, who made the big bucks, um, is, um, uh, has already solved all of those

19:40problems. So usually the buildings we have are either 90% or a hundred percent full. Uh, and

19:45so we're, it just becomes a financial transaction to us. Uh, how much are we willing to pay for

19:51that stream of income? And what, what are, I have no idea what, what are cap rates for

19:56this kind of product?

19:58All over the board, um, newer stuff, uh, and so up in Nashville, um, cap rates for that

20:08are going to be in the, uh, low sixes, um, down in Birmingham. And we just bought one in

20:14September, uh, uh, at almost a nine, it was 8.9 something. Uh, and I thought about just

20:22lying saying it's a nine cap. No, it was 8.99, uh, something like that. Uh, as a, and it's

20:27like, and, you know, and I'm borrowing at six and a quarter, uh, and it's like, this is

20:33tremendous positive, uh, uh, leverage. Um, uh, and that's just the Birmingham market. Uh, and

20:42that's, uh, that building is just so strong, a hundred percent full and that's, I mean, mobile

20:49home parks aren't even nine caps anymore. That's a, that's a question. Yeah. You know, I see storage

20:56in 5.75 and, uh, and it is a row one that was in a four I'd had, it had

21:03value add, but I was just

21:04like, what? I'm not, nobody's going to buy a four cap. That's right. Um, maybe in 2020, but, uh,

21:11not, not today rates are coming down at an attractive level now. Um, uh, but, uh, you know,

21:20the cap rate just depends on where you are, frankly. So, um, what are, I mean, it sounds

21:26like, you know, you, you sold the prod, the, the asset class to me. It sounds interesting,

21:30but there's always downsides to everything. So what are the things that, um, that make

21:35it less attractive, uh, medical office? We've kind of pigeonholed ourself into medical office.

21:40We're not going to get into regional, but yeah, to me, the only thing that, that detracts from it

21:47is, um, uh, on a case by case basis, uh, who your tenants are. Sometimes you get a problem tenant.

21:54Uh, sometimes you get a tenant, um, uh, that is, uh, maybe 50% of your building. And, and, and

22:04sometimes they think that they like to use that leverage, uh, you know, but you know,

22:10the lease is the lease. Uh, but the only thing that takes away from that asset class to me is,

22:15um, uh, potential just, um, conflict with an individual tenant. And, and it is, and, you know,

22:22in the residential world, you can work that out. Usually in a, in a few months, uh, you can either

22:28evict them if you have to, or, or they agree to leave, whatever, you know, it's harder when you

22:34have a problem with a tenant and you're dealing with seven and a half years left to go on a

22:3810 year

22:38lease. Um, and they have a huge investment in there. Um, you know, sometimes, uh, I would say

22:48doctors more than others. Um, but not just doctors. Um, sometimes I don't play by the rules. Uh, and I

22:58mean, I just had one, we had, uh, he was moving out. He'd been building a new building. Um, I

23:04had

23:04already re-rented his space to another doctor in the building and he wouldn't leave. Let me just

23:11caused all kinds of, you know, cascading problems and, you know, and, and a lawsuit ensued. So, um,

23:18it's, it's, uh, no, and that it wasn't just because he's a doctor, but, uh, to me that it,

23:25that does tend to go more with a doctor mentality, but a lot of practices have professional practice

23:31managers and therefore, and they're, you're, you're, you're dealing with business people again and not,

23:37uh, and, and not, uh, doctors. So, yeah, that's funny. My, uh, my sister is, uh, as a nurse and

23:45she,

23:45um, would always say that doctors can be a little bit headstrong. And so I can imagine them as, uh,

23:50as a tenant. That's funny. Um, well, Hey man, we have run down the clock. Uh, I really wanted to

23:56get into regional. So actually before we move on, let's just talk about, um, the benefits that you've,

24:00you've seen focusing exclusively on a region versus an asset class, just really high level. Cause we do

24:07need to move on. But, um, what, what do you see the benefits are? We're high level, uh, and, uh,

24:12probably goes back to me being a control freak and us managing. So we just have to have access.

24:18I'm much more comfortable investing in a, in an asset, in an area that I have known my entire life.

24:24I've lived from Birmingham to Nashville my entire life. And, and, and I know these markets, uh, and,

24:31and we follow them. Uh, and, um, and, uh, that's not a criticizing criticism. Anybody else who

24:37special is specializes in an asset class and we'll pursue that across the country. This is just what

24:43we've chosen to do. And we think it, uh, helps us deliver, uh, good results for our investors.

24:49Nice. Easy enough. All right. With that, I'm pushing us into the quick question round. Are you ready?

24:53Yeah, let's do it. Starts with education. Could be any form, could be a mentorship program. You've

25:00conference you've gone to a movie. You've seen anything. I just need one recommendation for real

25:04estate. Um, I, I joined a mastermind called raise masters. It's, it is specifically targeted at

25:14learning how to raise capital primarily for real estate. The founder is, uh, really skilled at that.

25:20He's done a lot of real estate investing and, uh, I highly recommend the program. I'm just about to

25:25re-up for my fifth year. Oh, nice. Fifth year. Sweet. I like that.

25:30Um, all right. Next question is for your younger self. Let's go back to the Stuart who was still a

25:35CPA at PwC. Um, go back to him, look him in the eye, give him one piece of advice moving

25:41forward.

25:43Um, stay a little bit longer. Uh, you, you didn't know what you didn't know and, um, uh, learn some

25:51of your, uh, business lessons on somebody else's dime. Interesting. All right. Stay a little bit

25:57longer. So stay a little bit in the corporate world, a little bit longer. Yeah. Just a little

26:00bit longer. Yeah. Huh. Interesting. That's, um, contrary to most people say, I wish I got started

26:06sooner. Um, but I like that, you know, there's positives and negatives to each side. So I,

26:11that's, uh, I like that. All right. Next question is about the U S it's a big place. There is

26:16a lot

26:17of opportunity out there. Give me the single Metro and in your case, you're very local. So give me the

26:22single city you're most excited about investing in today. Huntsville, Alabama. Huntsville. All right.

26:28I've actually heard that, uh, a lot of, a lot of interests in Huntsville. What is the driving

26:33factor there? What is, uh, what's driving so much growth in Huntsville? Well, um, mainly it's the

26:39federal government. Uh, but, uh, in the last eight years, there's also been a massive, um, interest from

26:47other corporate types, um, manufacturing, moving in high, high tech manufacturing. Facebook has a

26:53major, um, data center there. Polaris has a factory. Amazon put, it was on the list for Amazon Q, uh,

27:01HQ too, if you remember that, but they put a major, everybody's here or something like that. Yeah.

27:07Yeah. Everybody's here. Not to mention all the defense. Uh, I mean, all the defense people were

27:12already here. The FBI is building a second Quantico, Virginia training facility on the Redstone

27:17arsenal. Uh, the CIA is here. The NSA is here. They won't tell you how many people. I did not

27:23know

27:23Huntsville was all about the defense contractors. That's interesting. It is. And it's been that way

27:27for a long time. You know, NASA is, is, is based here. Uh, and so all the, all of that,

27:35and it's been

27:36here for years and that also spurs off a lot of private sector stuff, but we've seen a much more

27:41balanced private sector. Um, even as the space industry goes, private sector, you know, Jeff

27:48Bezos, there's, um, rocket engine plant, uh, is based here. They make rocket engines here in

27:54Huntsville. So, uh, it's, it's a diverse, uh, but ample labor pool here. Uh, and it's really not

28:01just Huntsville. It's the center, but the entirety of Northern Alabama, uh, is, um, it's just right,

28:08uh, for the take and it's, it's going to run this way at least another 20 years. So lots of

28:13opportunity. I love it. All right. Next question is about finding deals. It all starts with getting

28:19in contact with the seller and pending that purchase agreement. So what is your favorite

28:22way to generate leads and find new deals? Um, these days I have a fairly extensive broker

28:29network who we have, um, closed deals with and they bring me deals. Uh, but, um, some of my

28:36favorite quiet time is, uh, perusing CoStar and Crexie, just sort of cruising around looking

28:42at stuff or just driving around and, uh, and following up on something I saw on the side

28:47of the road. And sometimes I'll see a building that I want and we'll go and contact the seller

28:53directly. And usually we have a door slammed in our face, but that's okay. But the fun is

28:58in the hunt.

28:58That's my favorite. Yeah, exactly. It's my favorite way to go. Just getting that door slammed

29:03into your face. Yeah. Yeah. All right. Next lesson. Our next question is about lessons

29:07learned. Uh, not every deal we get into goes the way we expect it. In fact, pretty much

29:11every time something's going to go wrong and that's when we get to learn a lesson. So what

29:15was the deal that went a little bit sideways for you? And then what was the lesson you pulled

29:19from it? Um, yeah, I had one, um, sort of a professional retail building, uh, west of

29:28Huntsville in town called Madison. Um, the biggest tenant in there, um, uh, was a medical

29:37facility and long story short, the lady who ran it was just a fraud. Um, and so I got

29:45exactly one rent payment out of her after we bought it. And then, then we had to evict

29:50in, in, in, in, I mean, so, so long story short, we've turned over the occupancy of that

29:57building, uh, 50% worth, and now we're in such better position, but not the lesson learned

30:04is not trusting your gut. Um, cause I, I, I met her as we try to meet all the tenants

30:12and talk through, especially the, the big ones. And there was just, there was something

30:16off there, um, and not following through and doing more due diligence when you're, when

30:23you get the spidey senses going to do some more due diligence, check it out. Um, and I

30:29could have still bought the building and maybe could have gotten as much as a million dollars

30:34off the sales price, you know, um, because, uh, uh, you know, we, we did get the seller to

30:40guarantee their rent for, for a period. Uh, and, um, and it was, uh, it wasn't enough,

30:48but, but it's, it's sure, uh, made the deal work. So, uh, um, yeah, just trust your gut

30:54is what I would say and do your due diligence. Yeah. Yeah. And that is a lesson you, uh, don't

31:00want to learn the hard way is, um, you know, skipping due diligence steps and then getting

31:04into the deal and being like, well, crap, that wasn't true. Right. Exactly. Yeah. Um, trusting

31:10your gut is definitely something that I've, I've had happen to myself. It's just getting

31:13into a deal and being like this, there's something off. I don't know what it is, but there's something

31:17off. And, uh, sometimes I've even walked away just cause I couldn't put my finger on it,

31:21but things just seem to walk away from plenty. Yeah. Yeah. All right. Next question is about,

31:28uh, is the opposite of what we just talked about. Um, we just talked about lessons learned,

31:31things going wrong, but sometimes things go right. And those are deals that stick out in your

31:35mind as your favorite. So what deal is that for you? Well, um,

31:39one of our earliest deals, uh, a suburban office building, um, and, and, you know,

31:47we were buying some under market leases and, and, and, you know, we knew it. So we thought it was

31:52going to be a, a long slog, uh, you know, to where we could get everything back to market. You

31:57got to

31:58wait for leases to mature and stuff like that. Um, what, what we didn't realize was going to happen

32:05is that that town, um, was going to put in a sewer moratorium and nothing new could be built.

32:12So here I am with the largest office building, one of the largest buildings, uh, almost in the

32:19entire city. Uh, and, and every time we have a renewal, I mean, rental rates, they're like 10

32:27bucks a foot more than, than where we bought it from, you know, two years later. And so, uh,

32:32uh, we've renewed most everybody's leases and I'm, you know, uh, I'm their buddy. I'm going in at 80%

32:40of market and we're killing it. I mean, we're just absolutely killing it. You know, so just

32:46put numbers on it. Our average, um, building per square foot going in was like 17, 25 a foot.

32:54Um, four years later, we're at, um, 28. Wow. That's crazy. I mean, we're just, and on, and really

33:04more just accidental brilliance. Uh, that was one we closed in early 2022 and we've got a 10 year loan

33:10at three and a quarter percent. So we, we got, we got rates going like this and, you know, just

33:17cheap,

33:18cheap money. We'll never see again. Uh, and so, um, yeah, we're, we're, we're doing cash on cash on

33:25that one about 16%. So, uh, that's awesome. Well, some will that, you know, luck comes your way

33:31sometimes. You just stick with it because, uh, you know, other times luck will go the other way. So

33:37yeah, I love it. All right. That leads us to the very last question. This is for the listeners. You've

33:42given us a lot to think about. I'm sure people want to reach out, get in contact with you. This

33:46is a

33:46two-parter. Where can they find you? And then what can they expect when they reach out?

33:49Yeah. The best way to find us is at harvardgrace.com. Uh, you can find my Calendly link

33:55and I do invite anybody and everybody to, uh, book some time with me on there. I can talk real

34:01estate all day long. We have lots of resources on the site, uh, free resources. You can get a link

34:07to,

34:07um, uh, to the book that we just came out with. Don't do what I did. My 10 rules for

34:13investing in

34:13commercial real estate. We've got other free resources like, uh, questions. Uh, you should

34:19be asking your passive activity sponsor. Uh, there's a glossary of investment terms for, for,

34:25for newer people. So all of that's a free, uh, just sign up and you can get, um, you know,

34:31you will get on our email list, but it's easy to get off if, if, uh, you know, if you

34:36don't want

34:36to be on that too, but, uh, but I do invite anybody and everybody to reach out. I'm happy to

34:40chat

34:41anytime. Perfect. I'll put that link in the show notes. So if you guys want to reach out,

34:45all you got to do is click the little, the little more in the description, it'll pull down that full

34:49description. And in there, you can find Stuart's links. All right, man, that wraps it up. Thank

34:55you very much for having on the show. Thank you, Gabe. Appreciate it. Absolutely. For everybody who's

35:00with us today. Thank you guys for showing up. You are the reason we do this. So if you guys

35:04have any

35:05questions, reach out to me, Gabe with the real estate investing club.com. If you guys want to support

35:09the show, just leave us a review comment, anything like that. Other than that, I hope you guys have

35:12a great week. Keep rocking real estate. And I look forward to seeing you on the next episode.

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