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

Summary

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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

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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.

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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]

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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]

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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]

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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)

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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)

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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]

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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]

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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]

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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.

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Transcript

[A]

Because we were so aggressive and we were still abundant, it then turned into a killer situation that begat a lot of awesome opportunity for us very quickly. Jockey, timing, whatever. But we got the timing because we were playing when nobody else was.

[B]

What is up, everybody? Welcome back to the Real Estate Investing school podcast. This is a real deal series, and this is your host, Brody Fawcett. Today I'm joined with guest Ty Thorne. What's up, Ty? How are you, man?

[A]

Okay, dude. Happy to be here, man.

[B]

Good, dude. Well, we're. We're stoked because this is like, this is one of the fun things that I do. Get a dive into a deal that somebody has done. You have done lots and lots of deals. We're just gonna pick one today, and we're gonna talk about the ins and outs of it. It's the best way to learn. It's the best way to fill kind of your. Your repertoire of all these different strategies and how you can, you know, pull from that tool belt when you need it. You know how it goes. So we want to just kind of dive into what you've done, how you've done it, to kind of learn from it. So with that being said, give us quick overview of the deal, and then we'll dive into the nitty gritty. What is it? Tell us all about it.

[A]

Yeah, so the deal, I kind of just figured I'd share with you. I think it's a cool one. It to me, I love deals that, like, combo and develop into bigger things and perpetuate. So this is a commercial deal that did at the beginning of COVID 2020. So it was in, like, historically the worst time ever to get into retail space. Everybody's panicking, yada, yada, the banks, everybody's like, staying away from it. The whole world doesn't know what's going on. But we had an opportunity. Kind of short list from a banker, pretty pre foreclosure on a property really, really close to us. We knew the site, like, really well. It's like five minutes from my house. And honestly, we'd never done a retail space deal before. My team, like, we'd done one office building, but like, this retail space. Never done anything like it, but kind of, you know, you talk about this all the time. If you can get creative enough and the numbers make sense and you get it for the right scenario, like, you can. You can explore some new stuff. And the bank literally just said, hey, look, dude, we don't care, just make an offer. We just. We just need to get rid of it and this property, originally new, was built for, like, 125 bucks a square foot. It's 12 commercial units. It's least. It was 60 occupied when we. We put an offer. And we're just like, frick, 47 bucks a square foot. The bank's, like, done, like, well, yeah, that'll make sense for us. So, you know, we send. It felt that we knew the air, we knew the local businesses and all the small business owners in the area that we could get it occupied pretty quick, regardless of what's going on. It's a really conservative area. We didn't really think the shutdown would affect it as much. We were right. 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. And that deal begat a deal, like a raw land deal about two minutes away that we didn't have to use any new money to get. So, like, total, it created, like, 1.8 in equity, like, in 18 months, really quickly between the two little combos. And we kept the cash flow the same as we refied it out. It was just. It was a killer deal.

[B]

Wow, dude. Okay, cool. There's a lot to unpack there. I love it. This is obviously a. A home run deal. Maybe not for you. Maybe this is like a single for you. But I was a great deal.

[A]

Yeah, it was a great deal for us.

[B]

So I'm excited to unpack it because I think this is different than what most people are hearing with, like, oh, single family house, this, that, and that. Right. With that being said, as we unpack this, what are your thoughts really quick on? Because obviously you do things big, right? When I say big, I feel like that's just one of the principles you live by, is like, hey, I want to think big. I want to do big things. I want to go big. And you have this. This belief system that, like, you can actually go do those big things and accomplish those big things. And I think there's a lot, like, knowing you really well, I think there's a lot that kind of leads into that. Right. But for the most part, what's your advice to somebody who's like, oh, they're. They're listening right now, and they're like, okay, we haven't dove into this, but right off the bat, Ty's talking about this deal that he created, you know. You know, a million dollars of equity that led into another $800,000 of equity really quickly on another property. Like, I'm not there yet. I gotta work my way up to that. It's going to be a long time. I'm going to kind of zone out because this doesn't apply to me yet. What do you say to that person?

[A]

I love that. I literally had this conversation with a buddy that exact convo last night. And my answer is always exposure. You just, 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 size and the difference of technicality to the deal you've done. And it's just not true. And I feel like so many things in life are that way. You go and you get crazy amounts of exposure to people that are executing at whatever level that kind of hurts your brain to think about. And they're just the same humans as you're like, when, when you meet these people and you humanize that they're just shooting bigger targets. Like, they're not crazy smarter or like have extra hours or all these crazy, like, secret hacks. It's just that exposure builds, I feel, just a lot of risk management and understanding and just teaches you to think bigger inherently.

[B]

Yeah, dude, I think that's, I think, I love that. I don't even remember I heard this, but I don't even know where it came from. But essentially this guy was some, some book probably that I, that I had read. But basically this, this guy hires this other company that's doing really, really well in his same space and he wants to go consult, you know, from. The guy. Spends a lot of money, I don't know, 20,000 bucks for like the day to go shadow this guy and his company, right? And he comes back and he's telling his, his buddy about it. Just like, it was crazy. Like, they, like, the guy showed up late, you know, he came in this. I didn't learn anything. I didn't know, like. And his buddy was like, man, that sounds like the biggest waste of 20,000 bucks. And he's like, no, like, it was the, it was the biggest return I'm gonna get because I realized that that guy does exactly the same things that I am doing or can do, right? In fact, I'm doing better than him, so I deserve better results. And so he's like, that was worth 20,000 bucks because that changed the way that I now view things and the way that I go and take action and do whatnot. So kind of a, a different answer than I was expecting. But I, I love that exposure. That's Such a good, good concept there.

[A]

Yeah. And like, just on what you said, that story, it's. You think the accomplishments, like, equal the people. And it's like, dude, it's the same imperfect human beings. And when you meet them, I, 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? And sometimes I go to stuff and I, dude, I get my like, ego checked hard. I'm like, dude, these guys are unreal and they're doing crazy big stuff. I'm like, well, shoot, who do I need to be to be this person? And it's like, also as good of a value add to myself.

[B]

Yeah. Yeah, dude. So good. So good. We could like, we can do the entire entire podcast on that topic right there because I think it's so powerful. Okay, back to this deal. Where did you, where did you find it? How did you find out about it?

[A]

Yes, it just kind of our, our normal relationships were. We always are, are looking and we're on short sell lists. And these commercial deals, a lot of these come from brokers or bankers because in the commercial multi family stuff, it's, you're, you're really buying businesses that are just attached to physical assets. So they're looking at the profits, the top line, bottom line of these, these businesses. And so who finances these banks? Right. Like, and there's different financing and structures that are involved, but we get a lot of our best deals from the banks we use and all of our other businesses or all other deals, because banks aren't in the business of holding the assets. They want the loan. And so if they know that there's an opportunity to pair those two, like they want to put it in people who can finance, like, can, can pull it off. So it just came from a bank.

[B]

Yeah. Yeah. Cool. Awesome. Yeah. And we could definitely dive deeper into that and how you get those relationships and all that stuff. I think that this is one thing as we, you know, get deeper into the, the commercial world that is, is different. Right. Than the residential world is. Like if you, if someone knows that you can close and you can execute and you kind of build that reputation. So guess what brokers want to do. They want to bring you the deal because they want paid and they want. Someone's going to execute and not waste their time. And so yeah, there's a, there's a lot there for sure, but love it. So it came from a bank, they want to sell it. I love how you pointed that out. They're not in the business of holding it. So it's like, hey, let's create this win, win, snare. Let's get rid of this thing. And do they come to you saying, hey, this is the existing price, or do they come to you saying, like, hey, what will you give us for this? Like, you mentioned that, you know, you got it for, I think, 47 bucks a square foot. Like, what does that mean? What was it listed at? What did you buy it for?

[A]

So it wasn't listed. The bank really didn't want it, and rightfully so. It's Covid. So if you guys can kind of refresh. Now, looking back, we all have a lot clearer eyes, but, like, in 2020, as we're entering this, nobody wants retail. Like, there's mandates and shutdowns everywhere. Mom. Pa. Businesses are freaking out. Like, nobody wants to touch this space. Nobody knows how long it's going to be.

[B]

Everyone's gonna be working from home forever. This is the. Everything's changed now. It's not gonna go back.

[A]

There was just all this uncertainty and. And the bank, like, they. They didn't even come with us with, like, hey, price. They literally came to us, said, hey, we've got this. Because we were. We were looking at other deals. Like, we were in talks about some other stuff that we were doing already, and they just, like, dropped it on our. Our plate kind of in the combo, and their executives just. Just make an offer. And we were like, dude, we don't want it. And they're like, just make an offer. So that's why we came back with the number, because we knew what it was built for. We kind of knew some. Some vague stuff about it. We were just like, dude, let's. We'll. We'll spitball something out. And we. We genuinely just didn't think that they'd even entertain it. And they're. No negotiation back. They're like, done.

[B]

Cool. Cool. So with. With that. I mean, was that for you guys? Were you. Were you nervous? Like, oh, it is Covid. I don't know what's gonna happen. Let's just underwrite this at, like, if we got it, we'd feel good about it, or were you bullish on, hey, things are going to bounce back.

[A]

We underwrote it from a place where the offer is just like, dude, there's just no way we could lose on this. And that was why we. We didn't think they'd take it.

[B]

Yeah.

[A]

But we also do know the air really well, and it's the community. We Live in. And we know the, we know the culture, we know the, the political layout a little bit better. And so we had pretty good faith that people weren't gonna just like shut it down forever.

[B]

Yeah.

[A]

And the business is a little more old school area, more like kind of like conservative midwestern United States area.

[B]

Yeah. Cool. And what, what, where was it?

[A]

So it's in Kearney, Missouri, which is where I actually live. Like, and it's got businesses in it that, you know, I grew up with. And we know the whole community super well. So we just, we, we definitely had a, a lot of hedge on the risk.

[B]

Yeah, no, that's great. I love that. And I think that's, you know, too many people go in with the, with thinking the best case scenario, you know, because like, yeah, we can, we can hope things are going to bounce back quick as much as we want, but they don't, you know, they might think, oh yeah, things are gonna be back to normal next year. So I'm gonna make this investment and underwrite this based on things being back to normal. Best case scenario, when reality is, it's like, no, you hope for that, but you also want to look at things. Worst case scenarios is still pencils. So I think that's, that's phenomenal the way you guys did that. And I also think too, this is something I've been thinking about a lot just in general, this concept of like the long game. Right? And like Warren Buffett, for example, his first stock he bought, he was 11 years old. Like such a, such a young age. Right. And obviously I think that that's led into why he's known as like one of the richest people in the world. Right? But just this concept of. And he preaches this is, it's the long game. I think too many people try and like, you know, hit gold. And I want this shiny object and I want the, the quick, fast this, that and that. But it's like, hey, no, I'm gonna, I know that if I do this the right way and you make your money when you buy, not when you sell, right? So up front, I'm gonna have this long term outlook on this thing. Not like this quick shiny object, I'm gonna make a million bucks. And I think if you go into it that way, which is the way you guys did, you ended up making a million bucks. But what did you get it for? What was the price?

[A]

We got it like right at a million bucks, which is, I know it sounds crazy when you. Because people are over the place, but it's in a little bitty area in the Midwest, United States. It's 12 units and nobody freaking wanted to touch it.

[B]

Cool. So great timing there too. Not to chalk it all up to timing. I hate when people do that. It's just like, oh yeah, you got lucky on your timing because it's all the other principles that added up to it. But how did you fund it then?

[A]

Yeah. So the historically, right. This is just me and my partner, my dad, like we had the funds for that type, which in that type of commercial deal, like it's, it's not a crazy amount of capital needed to pull it off. And we didn't we have to raise anything. I mean, we just self funded it from our key, you know, our core active incomes, ourselves.

[B]

Cool. Awesome. Awesome. And I think it's always important to point out too like, dude, if you're listening to this, you're like, well, I don't have, you know, a million bucks to go buy cash for a property. I'm gonna check out like that. I just love putting this stuff out because it's not the way that it works, man. It's like, I promise you, like Ty in this situation, if he didn't have that, he would go figure it out. He would raise the money or he'd go get hard money. And guess what, you're. Who cares if you're paying 100 grand for that money when you're making 900k from it, you know? So cool. Love that. And then at the end of the day, like we've talked about a few different things, the way you forced it and kind of got creative with it, but was there anything else that you would say, like, oh, this is how I, I forced this deal and turned it into, you know, a million plus bucks.

[A]

You know, I think the most important thing in this one and the reason I like it so much, I like to share it with people and figure to be a good one, is just, this is a crazy time. A lot of people weren't doing deals. We were and we weren't looking for this deal. We were looking at different deals. But being in a buy mindset and like no matter what's going on, we're still playing and like we're being aggressive. We stumbled upon a deal like, and at the time, right. We, we submitted an offer not to go make a home run situation.

[B]

Yeah.

[A]

We did it to make it a not lose situation. And it just.

[B]

Yes.

[A]

Because we were so aggressive and we were still abundant like that I think would be the principle of like it then Turned into a killer situation that begat a lot of awesome opportunity for us. Very quickly. That chalk it to timing, whatever. But we got the timing because we were playing when nobody else was.

[B]

Yeah. Yeah. 100, dude. Yes, man. Yeah, I think that's. I think that's amazing. Not to keep going off on analogies, but it's like with the gold rush, right there was a guy, I think his name was Samuel Brennan. But his concept why everybody was like, oh, I'm going to strike gold. I'm panning for gold. He was like, I'm going to buy the real estate and the tools that people are using and they need to go in and buy gold. And so as they flock to these places, like he was, hey, I'm going to play the long game. Maybe I'm not going to like strike gold and get this thousand x return like some people did right when they did strike gold, But I'm going to play this like, safe, long game, same principles day in and day out. Consistency, like I know what I want and then what ended up happening, like, maybe he didn't strike gold, but he did better than 99% of the people that went out and lost their shorts. Right? Yeah. So fundamental principles and just sticking to that. I love that. Anything else, like kind of wrapping this one up, if. If somebody were to ask you just like, hey, how can I go replicate something similar to what you did? Ty that that's a cool deal. I want to be involved in something like that. How do I go do something like this on my own? What advice do you have?

[A]

I. I think if you just commercial in general, if you want to get in the commercial space that you. You. It's. In my opinion, I think it's easier than single family for. For certain things. But it is easier. It. I. I think if you understand business and there's a lot of things in the commercial space because they're valued as businesses, there's a lot more data that you can use to, in my opinion, like not speculate at all. It's. 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. And you can identify gaps, in my opinion, a lot easier. And you don't need the same financing structures like the banks that are supplying the loans for these. They're looking at the met businesses. So it's easier to validate. It's easier to get funds in. It's really easy to prove or project pretty justifiably to an investor. Why it's a good deal, why it's safe, where, where it's at already. There's a track record in these properties generally. There's a track record in these assets and in these type of businesses and in these consumers. And so I just think you do have to learn business and you do have to get maybe a little bit more financially, like, savvy with balance sheets and income statements and things like that. But I think once you do, I, I love them. I think there's, there's just more you can use to really justify your purchases.

[B]

Yeah, well, and just to kind of like touch on that for people that are listening and they're like, okay, what does that, what does that even mean? Right. I think that, yeah, if we only understand single family, the way that that works, when they go and appraise a property, they're looking at what other comps have appraised for or have sold for. Right. So. So it's valued based on what the market's telling you that it's kind of worth. It's completely different. When you go to commercial, they're not valuing it as much based on, oh, this other, you know, commercial building sold for this much or this other apartment complex sold for this much. No, they want it. They want the math, they want the numbers. So if you can show them and say, hey, it's renting for this much money. And if you buy it and you go in and you, you raise rents. Right. For different reasons and getting creative, the bank's not going to say, okay, just because you raised rents and didn't go in and do anything to the property, it's not worth anymore because it still aligns with this comp over here. No, they're going to look at it and say, cool, this is the rent roll. Sweet. Now this property is worth this much more money. And I think that for you, that's one of the things you said it was, you know, 60% occupancy, and you came in, you're able to get it to 100. I'm sure you even raised rent, too.

[A]

Yeah, I think I explained it somebody the other night. I think this just makes the most sense when you're, when you're doing single family. So much of your projections and what the market on, like what you go exit, it doesn't matter what your Airbnb rates are. It doesn't matter how well you're getting the asset to produce when it sells. The product was designed for homeowners, so it gets evaluated based on what a homeowner would pay to live in it when you exit. But these businesses have multiple on the income they produce and so it's that, that's what they want to see. 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.

[B]

Yeah. Yeah. Great way of explaining. I love it. Dude, we're bumping up on time. We just try and keep these ones pretty short and sweet but I know a lot of people are gonna have some follow up questions and just want to connect with you in general. What. What's the best place for them to do that?

[A]

I'm probably the most active on Instagram just at Ty Thorne and I love to chat and chop it up with people so you can just DM me and I'll. I'll hit you back for sure if you have any questions.

[B]

Sweet, dude. Well, you're the man. So much love for you dude, honestly. And, and yeah, just, just excited that have you my have you in my life to bounce ideas off with and just to connect with. It means a lot. So much love brother. And we'll catch you on the next one.

[A]

Appreciate it, man.