Real Estate Investing School Podcast

Episode 146: REAL DEAL: Turning COVID Challenges into Real Estate Wins

Host: Brody Fawcett
Guest: Ty Thorne
Date: April 4, 2024

Episode Overview

This episode of the "Real Estate Investing School Podcast" dives deep into how guest Ty Thorne leveraged the uncertainty of the early COVID era to score a remarkable commercial real estate deal. Host Brody Fawcett and Ty break down the deal’s background, strategy, and mindset shifts that allowed Ty and his team to create $1.8 million in equity in just 18 months by capitalizing on fear and staying aggressive when others pulled back.

Key Discussion Points & Insights

1. The Deal: Background & Fundamentals

• Ty’s Chosen Deal: A commercial retail space acquisition in Kearney, Missouri, during the onset of COVID-19—historically “the worst time ever to get into retail space.” (01:15)
• Acquisition Details:
  • 12 commercial units, 60% occupied at purchase
  • Bought for ~$47/sq ft (original build cost was $125/sq ft)
  • Purchased directly from a local bank’s pre-foreclosure list through established banking relationships (01:15, 07:58)
  • Total purchase price: Approximately $1 million (13:37)
• Execution:
  • Rapidly stabilized occupancy to 100% within three months
  • Reappraised at $1 million over purchase price
  • Led to a subsequent land deal nearby without investing additional personal capital
  • Combined, both deals yielded $1.8 million in equity in under 18 months (01:15)

Notable Quote:
"We had 100% occupied in the first three months. We got it reappraised. It appraised about a million over for what we got it for."
—Ty Thorne [03:05]

2. Mindset: Thinking Bigger & Embracing Exposure

• Brody asks Ty how listeners can break through the mental barrier of “not being ready” for big deals.
• Ty’s Principle: Exposure to bigger deals/players is key; the jump from small to large isn’t as technical or drastic as many novices believe (04:48).

Notable Quote:
"You think maybe because you did a little single family deal or something, that a deal that size with those numbers is going to be in direct correlation to the ... difference of technicality to the deal you've done. And it's just not true."
—Ty Thorne [04:48]

• Both discuss how seeing high-level operators humanizes big deals; you realize “they’re not crazy smarter…They’re just shooting bigger targets.” (05:55–07:07)

• Ty on Risk & Value of Exposure:
  "I go to stuff intentionally all the time, not even to learn, just to say, like, am I good enough to do what this guy's doing?"
  —Ty Thorne [07:07]

3. Origins of the Deal & Creative Deal-Making

• Deal Source: Longstanding banking relationships and always being “in the game” led to being offered off-market, distressed properties (“short sell” lists). Banks prefer to offload assets fast to solid closers (07:58–08:50)
• Negotiation: No formal listing. Bank asked for “any” offer. Ty’s team offered low, expecting it wouldn’t be accepted. Bank took the offer immediately (09:50–11:01)

Notable Quote:
“We submitted an offer not to go make a home run situation. We did it to make it a not lose situation. And it just…because we were so aggressive and we were still abundant, like that I think would be the principle…it then turned into a killer situation that begat a lot of awesome opportunity for us."
—Ty Thorne [15:54]

4. Underwriting Deals in Uncertain Times

• Risk Mitigation: Underwrote heavily for downside; Ty’s local knowledge gave confidence that the area would rebound and not be hit as hard by shutdowns. They based their offer on worst-case outcomes, not best-case speculation (11:17–12:08)
• Long-Term Outlook: Brody discusses the importance of playing the long game, echoing Warren Buffett’s philosophy: “Make your money when you buy, not when you sell.” (12:08–13:37)

5. Funding & Accessibility

• Funded with Own Capital: Ty and his partner self-funded from their active business income (14:07)
• Advice for Listeners: Brody emphasizes nobody should rule out big deals for lack of cash—raise capital, use creative financing, or take hard money if necessary. The spread can more than pay for “expensive money.” (14:31)

6. Key Principles for Replicating Success

Ty’s Advice for Aspiring Commercial Investors:

• Commercial deals can be easier to underwrite and raise funds for vs. single family, because:
  • Properties are valued as businesses (based on income/NOI)
  • Reliable financial data eliminates much of the guesswork
  • Easier to justify numbers to banks/investors (17:37)
• Importance of understanding business, financial statements, and balance sheets
• Commercial properties usually have track records for business performance, making due diligence and projections more trustworthy (17:37–19:08)

Notable Quote:
"If you understand business...there's a lot more data you can use to, in my opinion, not speculate at all...You can really eliminate a lot of guesswork based off of just revenues and bottom lines and what the competitors in the space are able to create."
—Ty Thorne [17:37]

• Brody summarizes the difference: Residential values are comp-driven, while commercial is all about income, rent roll, and NOI. If you improve occupancy/rents, you force appreciation directly (19:08–20:19)

Notable Quote:
"These businesses have multiple on the income they produce...How effective is the business, how profitable is the business and what's the likelihood I'm gonna buy an income-producing business that's attached to this physical asset? So just. It's a different lens."
—Ty Thorne [20:19]

Memorable Moments & Quotes

• “You make your money when you buy, not when you sell.”
  —Brody Fawcett (paraphrasing Warren Buffett) [12:08]

• “We were in a buy mindset...we’re still playing and being aggressive. We stumbled upon a deal...we submitted an offer not to go make a home run situation. We did it to make it a not lose situation.”
  —Ty Thorne [15:53]

• “We got the timing because we were playing when nobody else was.”
  —Ty Thorne [15:58]

How to Connect with Ty Thorne

• Instagram: @tythorne
  "I love to chat and chop it up with people so you can just DM me and I'll hit you back for sure if you have any questions."
  —Ty Thorne [21:15]

Key Takeaways

• Aggressiveness and abundance during fearful times create outsized opportunities.
• Exposure to big deals and high-level operators dispels myths about difficulty and accessibility.
• Commercial real estate relies on business fundamentals and income, making creative value-add easier to quantify and achieve than in residential.
• Relationship-building (with banks, brokers) is as important as market timing.
• Thinking long-term, risk-mitigating, and always being “in the game” are compounding principles—luck meets preparation and consistency.