Podcast Summary: The David Greene Show – "Mortgage Monday - Is Commercial Real Estate for You?" | Episode 69

Podcast Information:

• Title: The David Greene Show
• Host: David Greene
• Description: Real Talk Real Estate with David Greene dives deep into the dynamic world of real estate business and investing, offering unfiltered stories, insider details, and expert insights. Whether building wealth, pivoting careers, or understanding the real estate industry's behind-the-scenes action, this podcast serves as the ultimate guide for enthusiasts and professionals alike.
• Episode: Mortgage Monday - Is Commercial Real Estate for You?
• Release Date: June 30, 2025

Introduction to Commercial Real Estate (00:00 – 02:51)

David Greene kicks off the episode with an engaging introduction, emphasizing the focus on commercial real estate (CRE)—a topic not frequently discussed on the show. He highlights the current volatility in the residential real estate market, noting that while some areas like Austin, Texas, South Florida, and parts of California are experiencing declining prices and rising days on market, CRE presents a viable alternative for investors seeking stability and growth.

David Greene: "The market is changing rapidly and residential real estate is getting pummeled in many markets across the country. [...] Commercial real estate could be the girl next door you're looking for." (00:34)

His co-host, Christian, complements David by outlining their access to a vast network of commercial lenders nationwide, enabling them to secure the best deals and creatively fund projects that others might decline.

Christian: "We have access to just about every single commercial lender in the country [...] What works today may shift, but our connections ensure continuous opportunities." (02:51)

Navigating Commercial Loans and Market Trends (02:51 – 07:42)

David and Christian delve into the intricacies of commercial lending, contrasting it with their past experiences in residential loans. They discuss how commercial properties—especially multifamily units ranging from 10 to over 1,000 units—are thriving despite challenges in other commercial sectors like office spaces and large storage facilities.

Christian: "Multifamily is still doing great. [...] Access to capital is outstanding, and it is very, very possible to get a loan to buy a performing or a non-performing commercial multifamily asset." (03:25)

Christian explains that while traditional office spaces are dwindling due to the digital age and the rise of remote work, multifamily properties remain resilient. The discussion extends to the potential conversion of underperforming commercial assets into multifamily units, highlighting an emerging trend in the industry.

David Greene: "There's a lot of repurposing going on in the commercial space. [...] We can help repurpose properties into more lucrative uses, such as residential real estate or retail spaces." (05:46)

Valuation Differences: Residential vs. Commercial Real Estate (07:42 – 17:24)

A significant portion of the episode focuses on how commercial properties are valued differently from residential ones. David explains the Income Approach, which assesses a property's value based on its income-generating potential, unlike the Comparable Sales Approach used in residential real estate.

Christian: "Commercial is valuated based on the income approach. [...] How much money can it make determines how much it's worth." (07:42)

David provides a clear analogy comparing a single-family home flip to a commercial property investment. He emphasizes that increasing the Net Operating Income (NOI) of a commercial property can directly double its value, a leverage not possible in residential flipping due to market cap constraints.

David Greene: "If you take a commercial asset from making $10,000 a month to $20,000, you actually double the property's value." (10:00)

They further discuss cap rates—a critical metric in CRE that measures the return on investment based on the property's income. David clarifies common misconceptions, distinguishing cap rates from cash on cash returns and explaining their significance in gauging market demand.

David Greene: "Cap rate is short for capitalization rate. It's a way of measuring demand for a type of asset in a specific area." (11:46)

Types of Commercial Real Estate (17:24 – 21:50)

Christian enumerates the diverse types of commercial properties they encounter, providing listeners with a broad understanding of CRE's versatility. The categories include:

• Multifamily Units: Ranging from 5 to 100+ units.
• Gas Stations: Common but variable in success.
• Public Storage: Still a robust sector.
• Mobile Home Parks: Distinct from individual mobile home investments.
• Retail Spaces: Restaurants, strip malls, and retail centers.
• Specialized Uses: Medical offices, law offices, production facilities, industrial buildings, and more.

Christian: "We do a lot of owner-occupied purchases, like a dentist buying a medical office. [...] We can handle almost every type of commercial asset." (17:24)

This segment underscores the breadth of opportunities within CRE, indicating that commercial properties can cater to various investment strategies and personal interests.

Why Invest in Commercial Real Estate? (19:18 – 25:23)

David presents three primary reasons to consider investing in CRE:

1. Scalability: Transitioning from multiple small residential properties to fewer, larger commercial ones reduces management burdens and increases efficiency.

   David Greene: "If you have a bunch of cheap properties, it becomes burdensome with constant issues. Investing in CRE allows you to streamline and manage fewer assets more effectively." (19:18)

2. Passing on Expenses: Commercial properties often utilize triple net leases, where tenants are responsible for property taxes, insurance, and maintenance, mitigating the landlord's expense risks.

   David Greene: "With commercial properties, most are done under triple net leases. So when your insurance goes up, you pass that cost on to your tenants." (21:50)

3. Tax Benefits: CRE offers substantial tax advantages, including significant depreciation write-offs. Christian elaborates on leveraging these benefits to shield income from taxes effectively.

   Christian: "You can depreciate the real estate you buy and roll those tax savings into new investments, potentially creating a pathway to long-term tax-free income." (23:20)

Additionally, David introduces a fifth reason—the potential reset of CRE prices due to rising interest rates. As rates increase, cap rates rise, leading to lower property prices, presenting lucrative buying opportunities for new investors.

David Greene: "As interest rates go up, cap rates go up, and prices go down. This is an opportunity to buy at better prices in the CRE market." (25:58)

Call to Action and Closing Remarks (25:23 – 28:42)

The episode concludes with a strong encouragement for listeners to explore CRE opportunities. David and Christian invite interested individuals to reach out through their website, the1brokerage.com, or directly via Instagram (@the1broker). They emphasize their commitment to providing transparent, straightforward service without the jargon and hidden fees often associated with commercial lending.

David Greene: "We break down loans like nobody else does. [...] If you're a numbers person or find this content aligns with your investment strategy, reach out to us." (28:08)

Christian echoes this sentiment, highlighting their broad range of loan products and readiness to assist both novice and seasoned investors.

Christian: "We're not just investor lenders. We can help you buy your first home or scale up to commercial properties. We're built to handle every type of real estate loan." (28:42)

David wraps up by expressing gratitude to listeners, encouraging engagement through questions and comments, and reaffirming their dedication to providing honest, valuable real estate insights.

David Greene: "Thank you for listening. Let us know what you learned and what you'd like to see in future episodes. This is David Green for Christian Big Brain BR signing off." (28:42)

Key Takeaways:

• Commercial Real Estate (CRE) offers a resilient alternative to the fluctuating residential market.
• Multifamily units remain a strong sector within CRE, outperforming other commercial segments.
• Valuation in CRE is predominantly based on income approaches and cap rates, allowing for direct value increases through income enhancements.
• Triple net leases in CRE enable the passing of expenses to tenants, reducing landlord liabilities.
• Tax benefits in CRE can significantly enhance investment returns through depreciation and other write-offs.
• Rising interest rates may lead to lower CRE prices, presenting buying opportunities.
• Diverse property types within CRE provide varied investment avenues tailored to different strategies and interests.

Notable Quotes:

• David Greene (00:34): "The market is changing rapidly and residential real estate is getting pummeled in many markets across the country."
• Christian (03:25): "We have access to just about every single commercial lender in the country [...] What works today may shift, but our connections ensure continuous opportunities."
• Christian (07:42): "Commercial is valuated based on the income approach. [...] How much money can it make determines how much it's worth."
• David Greene (11:46): "Cap rate is short for capitalization rate. It's a way of measuring demand for a type of asset in a specific area."
• David Greene (19:18): "If you have a bunch of cheap properties, it becomes burdensome with constant issues. Investing in CRE allows you to streamline and manage fewer assets more effectively."
• Christian (23:20): "You can depreciate the real estate you buy and roll those tax savings into new investments, potentially creating a pathway to long-term tax-free income."

Conclusion: In Episode 69 of The David Greene Show, David and Christian provide a comprehensive exploration of commercial real estate, presenting it as a robust investment avenue amid residential market challenges. They elucidate the operational, financial, and strategic advantages of CRE, equipped with clear explanations and actionable insights. Whether you're a seasoned investor looking to scale or a newcomer seeking new opportunities, this episode serves as a valuable guide to understanding and venturing into the commercial real estate landscape.