Buying Commercial Offices (During Covid) for Huge Returns with Carlos Rovira

Carlos Rovira: [0:00] So the theory was that eventually people have to come back to work, right? But what does that look like in a post COVID or post pandemic? The hypothesis that my partner and I came up with was that companies are gonna downsize. They're gonna want smaller space. They're still gonna need space, but they're gonna want smaller space. So we can position ourselves to acquire buildings that have sub thousand square foot office suites.

Speaker 2: [0:30] Welcome to the Collecting Keys Real Estate Investing Podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:53] On this episode of the Click and Keys real estate investing podcast, we have Carlos Rovira, who is a residential investor turned commercial investor based out of the Miami area, but does a lot of his stuff virtually in the Kansas City market. He has found such an incredible niche in the commercial real estate space. Like, let me put it this way. When we got into COVID, commercial real estate was getting kind of weird, especially the office space realm. And he jumped head first into office space commercial real estate when everyone else didn't wanna touch with a 10 foot pole. He said, I'm gonna start buying these assets. In doing so, he hypothesized how he needed to modify these assets for the future, and he successfully did it. And now he has properties that are like 16 caps that are just printing money. Like, honestly, if you list the end of it, he talks about one of the deals he bought. They have $750 into it, and it is now making like bottom line, things at a $180,000 each year, which is absolutely unheard of, you know, in a time when commercial assets are trading for like five or 6% returns. He has ones that are 16 caps. Like unbelievable. So unique way that you approach these deals, definitely listen to that. And also to reach out to Carlos. He's super nice guy.

Mike DeHaan: [2:10] You know, he loves talk real estate. He's also looking for deals super heavily. So if you have any commercial deals that might fit his box, go ahead and shoot him a DM and he would love to hear about them. Aside from that, guys, please go and share this episode with anyone who might find it interesting. Also go and leave us a five star review or ever listen to your podcast. If you go and you leave that review, send me a DM at Mike underscore invest on Instagram showing that you left that review. I will send you a free collecting keys shirt. They're super nice shirts. They're real soft. And I'll send that to you for free. If you leave a five star review, you send me a DM with that. Aside from that, if you want to start finding off market leads, go to collectingkeyspodcast.com/free, and you will get our free five step guide to start finding off market properties. And that'll get you started, you know, being able to invest without having to rely on anybody else very, very quickly. So go check that out, guys. Besides that, enjoy this this show with Carlos. He has tons of great nuggets in here. And I hope you get as much out of it as I did. Thanks, everybody, and enjoy the show. Carlos, thanks for coming on the show, man. Appreciate your time.

Mike DeHaan: [3:12] I would love to hear about your background and all the stuff you're working on these days.

Carlos Rovira: [3:15] What's up, Micah? Why are you happy to be here? Excited and humbled. Yeah. Mean, I guess maybe you want me to start at the beginning, how I got started in real estate, what do you Yeah.

Mike DeHaan: [3:23] Let's go way back from the point of conception. I remember that exciting,

Carlos Rovira: [3:28] it was commodic, it was memorable. Okay, let's go, let's start around college time. Perfect. Miami guy, I was born in Miami, Florida into a Cuban family, so we're a traditional Latin family, went to Catholic high school, Catholic school, Catholic high school my whole life, and then went into engineering. I studied engineering, computer engineering at the University of Miami, went into the tech world with a full time W-two job, thinking I was pretty much set for life. It was 2008, so that's about the time when the, you know, the financial crisis was sort of ramping up, and it was a big reality check just because, you know, my first job right out of college, I was I was working at Yahoo. There was a big layoff like six months in as a result of the financial crisis. And that sort of opened my eyes to the fact that a quote unquote steady career is really not a steady career, and I started reading a bunch of books, discovered real estate, before I knew it I owned a duplex, my wife and I had just got married, so we purchased a duplex, lived in half of it and then rented out the other half, Kind of caught the bug, I became very obsessed with this concept of having passive income, of having income that essentially comes to you whether you know, get out of bed in the morning or not, and this idea of you know, having multiple lines of income to sort of hedge yourself against any sort of, you know, downfall Mhmm. If you will. We have a full time job, you have one source of income, you get fired from that job, that's it.

Carlos Rovira: [5:03] You're basically wiped out. You own 10 different single family homes, you've got 10 different lines of income, the likelihood of you going out of business is not, you know, is not as high as you getting fired from a full time job. So kinda got obsessed with the real estate before I knew what we owned, I think it was like three or four, maybe five duplexes in Miami. Market turned, became very, very expensive, so you know we were sort of buying in the middle of the financial crisis when things were cheap, and around 2014, 2015, things just kind of got really, really expensive. So I had to look out outside of Miami, discovered another market, which is Kansas City, Missouri. Things were still kind of cheap there in '15, I think it was like 2015, '16 maybe, I think it was 2016 when I first bought a house in Kansas City. Little single family home, I paid $80,000 for it, as kind of like a test to see if you know, I could do this from far away. I had a property manager, things were going well, we continued to grow that, purchased, I think it was at the end of that, was probably, by 2020, I think I had probably maybe fifteen, sixteen houses that we were just basically owning and cash flowing from afar, and then 2020 COVID hits and things kind of shut down, Didn't do that many deals for a while. Assumed management of the portfolio around that time because the property manager just sort of started to fail. So that's how I kind of accidentally got into the property management business in 2020 when the property managers basically everybody shut down, people stopped working, the portfolio started to really underperform.

Carlos Rovira: [6:39] Lots of maintenance issues, lots of just a lot of crap started to pile up. Made this strategic decision in 2020 to fire that property manager, take over management, I was basically in the middle of COVID, we were in The Bahamas for three months. We went to The Bahamas with the intention to stay there for two weeks, and then foreclosures kind of like this there, so I'm in The Bahamas with really bad internet, and I decide to assume management of this portfolio that's like 3,000 miles away. So I had the amount of problems I inherited were crazy. I mean, just deferred maintenance issues, tenants I had to pay. Took me probably six months to a year to sort of stabilize the portfolio again, and in 2021, yes, I was introduced to Alfredo, who is my current partner, he is the son-in-law of a friend of mine here in Miami who had moved up to Kansas City, coincidentally he was in Kansas City, you know, very into real estate, he had never never done any real estate, but he had his PhD, and he had studied he had studied this neighborhood, it might be called Wynnewood, which sort of had like this this huge resurgence. Was he was basically obsessed with like development and creation. Alfredo and I hit it off, we decided, hey, let's start buying some bigger deals together. He was in a kind of like a fundraising position in the University of Missouri up in Kansas City, so he had built up kind of like this network of higher net worth people and he had sort of embedded himself within the community to a point where it became evident that my ability to manage property and underwrite deals and his ability to raise funds would allow us to be able to purchase bigger properties And so he and I got together, we had the intention of finding multifamily properties.

Carlos Rovira: [8:31] And during COVID, I mean, is already 2021 when prices start to like

Mike DeHaan: [8:34] It's going crazy,

Carlos Rovira: [8:36] yeah. What? And there's just like no multifamily anywhere, like nothing worth buying. We wanted value add, we wanted stuff we could cash flow, and it didn't exist. And in 2021, the most distressed real estate or the most distressed asset class at the time was office, because nobody was in an office, everybody's working from home. So these like office landlords had like really like lost their shirts and that's what we ended up purchasing, like those are the deals that we ended up finding were just these like derelict office buildings and office buildings with really high vacancies and we did it. I mean it was pretty scary to take on that asset class, but none of us had ever done office before, we had no idea how to lease office, we had no idea how to run office, we had to figure it all on our own, but it's been like two years, we own two buildings, two office buildings, we have a retail, like a little strip mall in Kansas City, and we're about to close next week on another retail property, so we sort of like kind of accidentally fell into the commercial side of real estate where we were trying to be residential people. Yeah. So that's interesting how that sort of played out, and I'm convinced that I'm pretty much done with residential. Like, I prefer commercial so much better, so much easier to manage, so much easier to run.

Carlos Rovira: [10:01] So I think that's what we're kinda gonna gonna kinda be doing for the next couple of of years, hopefully. Yeah. Awesome. That's pretty much the the story in a nutshell. Don't if you have any any questions you wanna dig into,

Mike DeHaan: [10:11] No. I think that's the show, Carlos. Thanks for coming on. No. I'm kidding. But no. That that's fascinating, though. Like, there's a there's a lot to unpack there, and I guess just to then on the end there, the fact that when there was the ultimate, I guess, like fire, right, the ultimate sort of emergency with this asset class being the office spaces, everyone was running away from that, like fling from it. And you just said, Nope, I'm gonna that's what I'm going to pursue, which is super, super interesting. So we'll dive into that in a sec. But I want to go back to kind of the start with your engineering background, because that's always, I always vibe with that really well, because I have a super similar backstory to you. Where I went to school, I got an engineering degree. I worked at Boeing, which is like the big, the big company that, you know, you were kind of made it once you'd been there. And while I was there, this was like twenty thirteen fourteen fifteen. They're having layoffs and all this sort of stuff. But ultimately, I just like hated it. And I similar to you, I started reading books about passive income and got into real estate. Afterwards, after I quit, I actually quit, I laid myself off, so that I had to figure stuff out as opposed to getting like laid off. But there's always such a, there's like such a parallel people that are like started engineering and like get into real estate like that is such a common trend that we see for some reason. And I don't know if it's just like the analytical nature of real estate, it just like sits well with engineers or what.

Mike DeHaan: [11:33] But it's super common. Like we've had so many guests that have that same story. So I think that's pretty cool. So I guess I'm that transition when you got laid off, say read books, did you ever go back to an engineering job? Or were you just like done with it from that point? I was never laid off. Oh, you never laid off? Okay. Gotcha.

Carlos Rovira: [11:48] There for nine years. In that nine year period, I sort of created the or I built up the portfolio, and then it got to a point where the portfolio was cash flowing enough. And then like you, I laid my soul Gotcha. In 2016.

Mike DeHaan: [12:00] So Gotcha. No. That's cool. So I misunderstood that. That's still cool, though. So so you started into that. And so you did that over nine years. You started buying those properties. So when, I guess, did you actually leave your engineering job?

Carlos Rovira: [12:12] It was in 2016, finally, when my second son was born. Nice. I went out on paternity leave. Never came back.

Mike DeHaan: [12:19] Yeah. Yeah. Okay. That's cool. And then so you started buying those duplexes in Miami, which is great. And then something that stood out to me too, which I think is hilarious, is you said that Miami started to get too expensive. And this is back in two thousand fourteen, fifteen. Right? That's when you started to look in Kansas City. Yeah. What were the prices like? They should be that. Because those those those same duplexes must be worth two and a half times that now at this point.

Carlos Rovira: [12:44] I don't remember what the prices were. I just remember not being able to like get any deals to pencil out. Yeah. I'm a cash flow guy, so I'm trying to make a return, and I just remember just like underwriting deal after deal after deal, and this thing just got really really expensive, but Miami's a very very unique market because it's not really governed heavily by like normal market fluctuations. You have a lot of foreign capital coming in from different countries with totally different motivations, right? Like if you have a country like Venezuela that the economy totally collapses, all of the wealth in that country immediately comes out and they go straight to Miami, and they just start buying condos, they have no intention of cash flowing, it's mostly just like wealth preservation and that fence against like a collapsing economy, so when you're competing with that kind of money that has zero interest in value adding, zero interest in cash flow, it's hard to be a real estate investor in a market like that. Yeah. And we see that time and time again in this market and especially now after COVID with like the Florida becoming this crazy state that everybody wants to invest in, that's been even an additional sort of driver for prices to go up.

Mike DeHaan: [13:58] Yeah, that's interesting. I guess I didn't realize that about Miami. So you see that a lot in Pacific Northwest markets to up through Canada, like Vancouver, Seattle, Portland with Chinese, I guess, like billionaires basically come in buying like office buildings, and they'll just, like, let them sit vacant because it's wealth preservation, like you said, because the

Carlos Rovira: [14:16] Well, same thing happens here with condo. I mean, there's whole condo buildings that are basically, like, 80% vacant because Really? Money that's parked there and sitting there.

Mike DeHaan: [14:26] Yeah. That's crazy. That's funny because that, like, just artificially affects the prices because I would imagine they're not necessarily gonna be paying true prices for them either. Are they just, doing like are they like way overpaying for stuff? Are they just going for like volume and buying a bunch of them?

Carlos Rovira: [14:40] Yeah, I mean, they're overpaying and they're not paying a price for a condo so that they can make a 7% cash on cash return, right? They don't care about the rents, they don't care about the cap rate, they just need to get their money out of their country and put it somewhere quickly. You also have like these visa programs, I'm not an expert where you have investors that get to invest a certain amount of money in the country, so they'll do that, you get the visa and yeah, it just, there's constantly countries that are like going under, like now there's speculation or talk about Colombia, there's always some Latin American country that's going communist at any given moment, all the wealth is leaving that state, you know, and usually you know they come to Miami. Another factor is New Yorkers for example, during COVID, when everything is shut down in New York, there's a lot of New York investors and New York people just that moved to Miami and then stay here and they're used to paying New York Manhattan prices, then they come to Miami where things relative to their prices are a lot cheaper, so they feel they're getting a deal when in reality they're probably overpaying relative to the market and then that drives up prices as well.

Carlos Rovira: [15:52] So there's like so many little nuances there that just affect Miami as a whole, that just difficult to compete as a cash flow guy.

Mike DeHaan: [16:00] Yeah, yeah, Yeah. That's interesting. Yeah. We experienced similar here. So I'm in Spokane, Washington, on the border with Idaho. And we had tons of people move here from places like Seattle or San Francisco or those sort of things. Same sort of situation. They used to pay $900,000 for a three bed, two bath house in Seattle. And they come over here and they can have five bed, three bath with a pool on several acres for less than that. They just come and they just start snapping everything up. And there's like, there's real estate that I bought in 2018, like single family houses that I cash out refi ed in 2021 for two and a half times what I paid for them three three years. You know, it's just it's just crazy. So that's interesting. So I guess as you, know, started to go to that Kansas City market, you know, you were looking for property, single family homes there. Were you like working with a realtor? Were you buying from like a turnkey provider? Because virtual investing is something that a lot of people ask us about.

Carlos Rovira: [16:56] Yeah. It's hard. It was easy at first. Was buying from a turnkey provider. I think turnkey guys, they they sort of start off good and then they kinda as as the market Yeah. Turns, they don't really adapt very well, which I think would is what happened there around 2020 or in 2020 when COVID was sort of, like, ramping up. Yeah. You just you know, deals dried up. Right? When the turnkey guys, they rely on Mhmm. The the deal flow to keep them in business, and then the property management is sort of like a loss leader. And then when the deal flow came to a halt during 2020, then they had no cash flow coming in from that, and then the property management just sort of failed. Yeah. That's just what happened there. It was unfortunate. I had a lot of houses, so I, you know, I needed to do something. And that's when I just used my, you know, engineering, problem solving, engineering skills to to come in and set up the property management business, and before I knew it, had people asking me to manage their properties. So I accidentally became a property manager, and then set up a property management company as a defensive measure to turn around my own portfolio, realize I was really good at it, and the rest is history.

Mike DeHaan: [18:03] Yeah. So I guess what did that look like, standing that up from a distance? Because at at that point, what was your portfolio like in Kansas City?

Carlos Rovira: [18:10] It was 15 or 16 single family homes. Okay. It was a real pain in the ass. I had to set up a Buildium account and basically onboard every single tenant. There were 16 of them. I had to contact all of them, virtually, send them letters and one by one just add them to the platform, have conversations with every single one of them, so they give me their laundry list of repairs and deferred maintenance and complaints and it was rough for a couple of months there, I had to find handyman and contractors to help me, you go on bigger pockets, go on different forums to sort of ask people for advice and little by little, you just kind of piece it together. Took like six months I would say to start sort of cash flowing again in a meaningful way, but yeah, was rough. I'm used to working hard so it wasn't difficult to put in the hours, but yeah, it was tough.

Mike DeHaan: [19:06] Yeah. The number one thing that people always ask about when it comes to virtual investing, trying to manage it themselves especially, is the process of getting tenants in there. Right? You can have people fill out applications, see credit scores, see background checks, all that sort of stuff. But like for like showing the properties, right and going about like dealing with the general maintenance doing all that those sort of things for some reason, even though like what I always tell people is you should use the same principles you're doing in your local market. If you own 16 houses locally, and you're having to drive around and do all that yourself, you're not doing something right. But doing it virtually, how did you, I guess, start to approach that, especially since you are self manual? Did you find, like, full time staff that was there that was doing all that stuff for you?

Carlos Rovira: [19:47] Yeah, it was really hard, it's actually been an exercise in humility because, yes, I'm used to being that guy that just gets in the car and goes and does the thing, right? Mhmm. In this case, I find myself a lot of times just totally helpless because I'm far away. So yeah, I've had to sort of learn to rely on other people. Been lucky because then, know, I found one that I have now I have a partner Alfredo who's there, who's basically in Kansas City. Mhmm. But we have an employee now, we have one employee who sort of floats around to our different buildings and then we have another, you know, partneremployeeinvestor who owns a management company locally and we basically outsource all the repairs and maintenance to him and all the unit turns. So I got people on the ground that I rely on, it's just difficult, it was difficult to sort of ramp that up and get that going. I went through a bunch of different handyman that overcharged me, a couple of the first couple of months and I was desperate to just get stuff done, but, you know, eventually you sort of you sort of get back on track and you, you know, the right people get put in your in your path and it's just a matter of you choosing them, making sure you you compensate them well. But at this point, we have enough units under management where we can have an employee, right, or we can have we have enough volume where we can keep people busy and we've got a pretty good process going.

Carlos Rovira: [21:06] But in the beginning was tough, man, because you don't have that much. Yeah. You're working with almost nothing. So.

Mike DeHaan: [21:11] Yeah. Yeah. It it is tricky, and it what's funny, like, all the stuff that you're describing, though, those same issues exist if you're doing it locally. But for some reason, I think because people can go to the property themselves, that becomes like the bailout. But, realistically, if you wanna grow this legitimate business, you need to not be doing that if you're Yeah. You know, investing slowly. But it's funny. Do you know Kurt Booker from he's also a GoBundance guy.

Carlos Rovira: [21:34] Of course, I know Kurt Booker. Yeah.

Mike DeHaan: [21:36] Yeah. Yeah. He was on

Carlos Rovira: [21:37] Kurt Booker, to be on. Getting that love.

Mike DeHaan: [21:39] Or he's he's great. He's a character. He was on our show a little while back. And he does all of his stuff in New Orleans. Yeah, he has a bunch of properties in New Orleans that he manages from North Florida. And we were asking him that same question about screening tenants. And he goes, Oh, I just have him do like a zoom call to do a walkthrough. And my business partner is not here today. He's busy on dad duty. He said, Well, we can do that because our like a lot of the tenants that we have, they wouldn't be able to figure out how to do like a mobile zoom call. Encourage goes perfect. That means they don't qualify to be your tenants if they can't figure out something as basic as that. I'm like, that's the easiest way does prescreen future problems right there is if they can't

Carlos Rovira: [22:21] figure out how to use a mobile phone. Kurt Hall was the funniest one of the funniest people I know, man. He's like the type of person that posts posts so many things on social media that I wish I had the guts to do myself. Post all the things I think of but then don't do. Yeah. Yeah, it's true, there's so many ways to weed out the idiots and a lot of landlords don't do it, so I know. Screening process really is like kind of your make and break when it comes to if you don't make, if you don't put in the time and the effort to screen a person and put in a very high quality individual upfront, then you're screwing yourself over in the in the long term. That's a key thing. And yeah, if a person can't figure out how to do a FaceTime call, how are they gonna figure out how to pay their rent online?

Mike DeHaan: [23:06] Exactly. Right? And it's just just it's like the soft test as well. You know, some people focus on credit score and those are things, which is obviously important, But especially when you're doing stuff remotely, you gotta look at, like, is this person going to make the actual management process for you difficult or not? Outside of, like, them being a credible person. That's a very important thing to look at.

Carlos Rovira: [23:25] Yeah. And it's as easy as a phone call. You pick up the phone and talk with them. You can sort of figure out if the person's an idiot or not.

Mike DeHaan: [23:31] Oh, dude. Absolutely. Yeah. You're definitely not wrong. Cool. Well, that that's good stuff. So sorry to grow that out. And then you transitioned over to the commercial side. So let's start about that. Like, you ran towards the fire when everyone else was running away from it. I mean, I guess, first off, like, how did you have the gusto to do that? And, like, what and also do what kind of office spaces are we talking about here? Are these, like, is this like a building? Is this like a strip mall? Is this like office condos? What did you sort of find your your ditch there?

Carlos Rovira: [24:03] Okay. So the theory was that eventually people have to come back to work, right? But what does that look like in a post COVID or post pandemic? The hypothesis that my partner and I came up with was that companies are gonna downsize, they're gonna want smaller space. They're still gonna need space, but they're gonna want smaller space. So we can position ourselves to acquire buildings that have sub thousand square foot office suites, then we will be well positioned to capitalize on the return to office, which we're already starting to see all these tech companies hiring people that don't come back to work. So it's happening already. What we did was we bought buildings with really small office suites, you know, even in some of our other buildings where we have like 4,500 square foot spaces, we're starting to cut those up into like small 500 square foot spaces, because we're finding that there's a lot of entrepreneurs, and a lot of people who were sort of forced into entrepreneurship because of COVID, because they were fired from their jobs, and now are fighting themselves with businesses that are actually doing well, and are needing to go into an office because working from home is no longer working for them. We're kind of like in this unique position to be able to help these like rising star entrepreneurs and like business owners, small business owners get their first office spaces, and we have these really small suites, I mean I can offer a 500 square foot office suite for $500 a month or $600 a month, that's really doable, really easily and achievable for a small business owner to do, and that kind of gets them, gets their foot in the door, gives them an office, and allows them to continue growing their business.

Carlos Rovira: [25:48] So we've had some real good success with that, we've even started to like acquire buildings with that mentality in mind, looking at the largest spaces and figuring out how can we cut them up into as little spaces as possible. Yeah. These economies of scale because you have now multiple tenants versus one big tenant, that can just blow out of there and then leave you with a huge vacancy. It makes the leasing process a lot easier, right? Because we can, there's so many small business owners, right? There's so many people looking for office space now, trying to get out of the house, that are looking for these tiny spaces and we're ready to give them those spaces. So there's not lot of people catering to that crowd. So that was the strategy we took and got it worked out. I mean we're now starting to see like a really, really, like a big uptick in leasing activity in the past, I want to say six to twelve months, it was pretty slow in the beginning and we also didn't know what we were doing, right, like we didn't know how to lease office, now we're starting to learn and my partner and I have two partners, Alfredo and Jake and they both do the leasing, and we've gotten really good process down for getting tenants in there and signed quickly, and they're really easy, I mean it's so easy to get a 500 square foot user in the door within a month, so. That's awesome.

Mike DeHaan: [26:59] Yeah, it's been good, and

Carlos Rovira: [27:00] then we have, so we have two office buildings that are kind of that style in Kansas City, and then we have another one that is a kind of like a retail, it's like retail on the 1st Floor and then office on the 2nd Floor, that one has been really good. We bought it with like a very high vacancy and we just, we marathoned it this past year and we got it to like 99% occupancy. So that one's kicking ass and we just want to do more of them. Still an inexpensive market, I mean you can still buy below replacement cost in Kansas City, so the acquisition costs are a lot less than any other market or many other markets and there's a lot of distressed stuff in that market. It's just a lot of vacant buildings and just forgotten properties that you can pick up for real cheap. If you just put a little bit of effort man, like it's not that hard to paint a building, floors in, right? Like it's really easy at the end of the day. So you know, we're buying for pretty cheap, which allows us to offer cheap rents, that's another thing, like we bought a, I I think it was a, the Chrysler Building has 24,000 square feet, we paid 350,000 for it. Wow. Like $12 a foot for this building. Yeah. Total distress, basically vacant, had been overrun by crackheads and homeless people. You know, we kicked everybody out, we put in new floors, we painted the building, we've been turning all the units, and we're like, think we're, the last time I checked, we were almost at 70% occupy on that building in less than a year, so it's not that hard, man, like, and if you're buying it cheap, you can offer cheap rents. We're the cheapest office building in Kansas City. So as long as you can keep the prices low, people will keep coming in, and if somebody leaves, we'll get a new one in there tomorrow.

Carlos Rovira: [28:43] Not a big deal. Perfect.

Mike DeHaan: [28:45] So like what sort of rents do you get for that? Like that's a super interesting niche. Mean, I it makes perfect sense what you're saying. And, like, even me and Dan, we've talked about getting a a space, not even necessarily that we need it, but just so that Dan has kids at home. He wants to get out of this out of the house. We wanna have, like, a in person podcast guest, things like that. We can, like, have a recording studio there, but we wanna be able to rent out the other portions of it. You're actually cutting them up into smaller pieces to make that more viable, which is awesome. Like, I guess, what do people pay for, like, a 400 square foot office in that market? I'm like comparing to the sales price.

Carlos Rovira: [29:20] Yeah. I think, it's a Christmas bill loan paid 350,000 for. We put another $3.50 into it to fix it, so we're in for about 700. K. I think that one's at $11 a foot. Okay. And then on the the smaller units, the 500 square feet, I think we're averaging probably 13 a foot. Oh wow, okay. Basically rule of thumb is 500 square foot for $500 a month. At least that comes out at $12 a foot, so it's about $12 a foot average, so it's really an expensive rent. Yeah. And but our basis is so low that we're able to offer that. And we're we're literally the cheapest office building in the entire Kansas City market. Not the moment.

Mike DeHaan: [29:52] That's cool. Yeah. Was just trying to do some math there. So you have 500 square feet for $500 a month, and you said it's 24,000 square feet? Yes. Okay. So just like so what is that? Like, what's your total if it's fully rented out that you can expect? On a 100%, it would

Carlos Rovira: [30:06] be almost 24,000 a month. That's

Mike DeHaan: [30:08] crazy. If it were a 100%.

Carlos Rovira: [30:10] We're averaging about 90% occupancy, which we're defying the market there. I think the market vacancy in office is like at 25%. Yeah. So if we're above that, we're defying the market. So it's sort of what the the milestone that we try to hit always is 90% occupancy. You're really gonna be at 100100%.

Mike DeHaan: [30:25] Percent. Yeah. And then what are the expenses associated with that? So you probably because I mean, I can't it's obviously not gonna be triple net, I would imagine. You know, you probably have to cover all the electricity, water, Internet.

Carlos Rovira: [30:36] Yeah. That's full service. So you pay for everything, cleaning, everything. And then I'll pull up my little pro form a here. Our total expenses are, and that's adding in $20 in repairs and maintenance, that's

Mike DeHaan: [30:50] like an inflated number. For all the office parties that they have there where they just trash everything?

Carlos Rovira: [30:55] Yeah. About 130,000 a year on revenue of 275,000.

Mike DeHaan: [31:02] So $100,130 grand net? 16% cap rate. That's what I know. Push it that way. That's sick.

Carlos Rovira: [31:09] Audit cash. Yeah. So, I mean, once we finance that one, once the cash on cash return on negative Yeah. You know, once we've gone like

Mike DeHaan: [31:17] It's infinite at that point. Right? But so if it's a 16 cap rate, you're gonna go out refinance it. The bank's gonna look at it as what? Let's say, like, a seven or eight on like the high end, you know, maybe with the market things like that, you're gonna pull out fat money and still have a really really strong position. That's a sick deal, dude. That's awesome.

Carlos Rovira: [31:35] Yeah. The the only trouble now we're having is that, well, when rates are going up, right, and they go up, they're going quickly, which on this deal doesn't really matter, because at a 16% cap rate, 8%, what is an 8% rate on But a the issue we're having now is that all these banks have like these seasoning periods, like we're just now getting to 70% occupancy, so I can't refinance today, I'd have to give a bank like a year or six months worth of, yeah, of revenue, so who knows what the rates are gonna be at, what's the twelve months from now, so it's kind of a mixed bag there, but yeah, I mean in theory once we go ahead and refinance, we'll pull more than our initial capital out and we'll just go do it again.

Mike DeHaan: [32:17] Yeah, well I mean like at the very least you're sitting in a position where you have a 16% cap rate that you're sitting on that. Mean

Carlos Rovira: [32:23] That's it's great cash flow. Right? So the win win no matter what.

Mike DeHaan: [32:26] Yeah. I mean, like, are people that are doing these big value ads where they're having millions of dollars tied up, and they're not cash flowing at all who have that same stressor. And you definitely don't wanna be one of those people. You're in a you're in an awesome position. That's super cool, man.

Carlos Rovira: [32:38] Yeah, the problem is now that the standard is set, right? So I look at every deal like this deal, and now I can't find anything. I'm looking for that like crazy smoking hot deal. And honestly, we were buying this deal, my partner and I were like crapping our pants, I mean we were so scared because we had never done office, like the middle of a pandemic, we're buying this overrun building, but you know, it's been a year, know, it's one of the best deals we've ever done. Now that's becomes the standard for the next deals, and we're so conservative that we don't do that many deals, so like you said, you have a bunch of guys that have tied up millions of dollars on a deal that's gonna cash flow at 6% eventually, we are looking for these like extreme value add deals that can give us those 16% plus returns. So it's we'll do less deals, but we'll we'll make more money on the deals that we do. It's a quality over quantity type.

Mike DeHaan: [33:34] Yeah. No. That's cool, man. Yeah. You got you got a taste for for unicorns on your first hunt. You know? You can't go back to eating chicken after that. No. But no, that that's super cool, man. I love it. Awesome. Well, we'll get stuff, Carlos. I'd love to dive into our initial questions here as we get towards the end the show. So first off, our first question, which is always the most fun question, I think is, what is your craziest real estate investing story? So this can be a big win, a big loss, dealing with a crackhead, like having to do anything in between. The only rule is you're not allowed to tell a story about discovering a dead body in a property, because people always use that as their crazy story, and it just gets super depressing.

Carlos Rovira: [34:15] No, I haven't. No? Okay. Well, the Krisler Building, what we've been talking about, has a whole a few gems in it. I mean, one, the the building had been overrun by this guy named Richard McNeil, I'll never forget that name, he was the slumlord that was basically running the building. Yeah. And he was essentially a squatter, and he was charging people $500 a month, or like whatever bucks a month to like sublet these huge units from him. He had the electricity turned off the building, so Ted doesn't even have electricity, no AC, imagine like during wintertime, total slumlord. Basically we had to get that guy cash for keys, once we closed the building, we had to basically give him $2, I had my partner Steve meet him in the parking lot with $2,000 and a thing, the sign that says, I will never come back to this building again, give me the keys, and right then and there we changed the locks. That guy had so many characters in that building, I mean, there was a homeless guy that had like five bikes just in one of the offices and he was working in there, and we told the guy he needed to leave, and we drove up to the building one day, and this homeless guy is like packing up all his stuff, all his bikes are outside and he's walking around and he has a machete like in his backpack, just like freaking out.

Carlos Rovira: [35:37] I went to, who is this guy with the machete leaving the building? And Steve was like, Woah. I found him on the 2nd Floor, he had been Oh my god. Living there. Then I went into the bathroom and somebody had defecated all over the floor, it was probably like, it was just shit everywhere, like I have a video of me discovering smears of shit all over the floor, which wasn't there like two days before, so it was fresh. We found like jugs of urine, like in the building, I have pictures of all this, it's gross, like just like imagine like a glass jug full of yellow like, just piss, the guys were peeing it and then just leaving it, just crazy, just crazy the amount of things that you go through or that you discover when you pick up these like distressed properties, and it's also like incredible how these like landlords and these owners just allow their properties to end up in such a state of disrepair, like you really have to try hard for your property to end up that bad, know? Oh yeah. You end up selling it for 350,000 because you're a loser and you didn't do anything for a year.

Mike DeHaan: [36:40] Yeah. Thanks. Exactly. Oh, yeah, man. You're speaking my language. We're we're residential wholesalers is like our main business model. And so we see all that same sort of stuff. And it is a special level of negligence to let the properties get to to that. Yeah. Gives us a name. It does.

Carlos Rovira: [36:54] Gives us a bad name. That's why the woods landlord Right? You tell people you're in real estate, they assume you're one of those. Right.

Mike DeHaan: [36:59] You know, that becomes the standard. Exactly. Yeah. And we've bought a lot of properties from landlords like that. And the thing that really sucks is because of these past couple years, how the market went, a lot of them made off like bandits with these properties, you know, which is

Carlos Rovira: [37:13] super unfortunate. Hey, man. That's the tides are burning, man. Property values are going down. I'm having a hard time selling some of my smaller stuff now. So we'll we'll see what happens.

Mike DeHaan: [37:21] Yeah. That's just a good thing. I got the full ringer. Got the full homeless experience with that one.

Carlos Rovira: [37:28] Why with a machete man? That's crazy. So funny. Like, does he have like five bikes? Like, do you do with all those bikes? Does he ride them all all? Did he steal? He probably stole them. He was probably stealing them to sit with and sell them. I don't know.

Mike DeHaan: [37:38] Yeah. Yeah. Maybe that. I mean, dude, it's like the Central Americans that are parking their capital in Miami condos. That's like the homeless version. He has parking his capital and his bikes there. So he has a harness

Carlos Rovira: [37:50] There's whole there's whole condo buildings actually in Miami that are just full of bikes. Just think of buildings with a bunch bikes. We don't know why.

Mike DeHaan: [37:57] Yeah. There probably is too. That's funny. Alright. Second question. What is the number one piece of advice you would give to a new investor looking to get started or to a small time investor looking to take their business to the next level?

Carlos Rovira: [38:11] Yeah man, I mean taking action I think is key, because a lot of people just never take that first step, it's You're out of always gonna be scared, it's always gonna be scary, and you're always gonna be leveling up, that first deal is probably the most scariest deal you'll ever do, just do it. If it makes sense, take the emotion out of it and do it. But one of the best things I ever did was buy that duplex. When my wife and I got married, that was our first house, and it basically paid for itself. The rent next door paid for us to live free, and if it weren't for that, I wouldn't be where I am today, because we wouldn't have been able to save as much, we wouldn't have been able to purchase as many following duplexes as we did. So you know, something like that where you can house hack or just figure out a way to creatively get into real estate in a relatively inexpensive way, and that's how really you're gonna start building up that snowball that you know, we'll just grow and grow and grow. Yeah, take action, forget about the fear, don't think about it too much. If it makes sense on paper, then just go for go for it. At the end of the day, it's not that hard to manage property. Exactly.

Mike DeHaan: [39:12] The key to all success is consistent action over time, and most people, they never even start with the action part, that's success never comes. Awesome. Good stuff. Alright. Last question, where can people find you, follow you, and reach out to you if you'd like them to do so?

Carlos Rovira: [39:27] Yeah. Find me on Instagram. I'm not that great about posting. I'm a horrible social media er. But yeah, my Instagram is v carlos rovira. Yes, I had to put a v, a t h e, part of my name, because some other guy took my name. Yeah. And same with Twitter, vcarlosrovira, you can message me on either of those, I'm pretty good about responding, I'm not great about posting, I tend to post more when I'm like, I'm on vacation, and I have, you know, nice beach to show off. But, yeah, that's where you can find me, and I'm good about responding to So that's pretty much Awesome.

Mike DeHaan: [39:56] Well, definitely reach out to Carlos, you guys. Ask him about how you can buy 16 cap office buildings. And if you have something like that, he definitely wants to buy them from you. So yeah, there's lots lots of good stuff here, Carlos. Thanks much for coming on. So yeah, give Carlos a follow you guys. Appreciate you all listening. Please go and leave a five star review for the show where it was your podcast and share it with anyone else who has any interest in real estate investing, especially if they want to get into commercial stuff. Carlos has cracked a code here that is pretty unique. So go and share with everybody. Aside from that, you guys, if you want to learn how to start getting off market leads, you can go to collectingkeyspodcast.com/free and get our free five step guide to start generating off market leads. And that can get you started finding all sorts of opportunities all by yourself without having to rely on realtors, wholesalers, or anyone else. Besides that, guys, thanks so much for listening, and we'll talk to y'all next week.

Speaker 2: [40:52] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.