Triple Net Leases for Beginner with Drew Wahlgren

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[casey_]: hey there and welcome to today's episode
of cash flow pro your daily real estate

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[casey_]: investing podcast and youtube channel i'm here
today with drew waldron of mag capi partners

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[casey_]: drew how are you today

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[drew_wahlgren]: doing well thanks for having me on
the podcast case

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[casey_]: absolutely man absolutely you know we heard
you on kevin's it kevin bupps podcast and

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[casey_]: i just i really thought that you
brought a lot of value there i thought

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[casey_]: that it was worth reaching out and
saying seeing if you could could maybe bring

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[casey_]: some of that to our audience as
well and i know you specifically and i

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[casey_]: know it's kind of a it can
tend to be a lil bit of a

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[casey_]: dry subject when you get on to
triple net leases but at the same time

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[casey_]: it it's one of those almost like
you almost have to know it or have

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[casey_]: to learn it in order to really
appreciate what it can do for your investors

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[casey_]: what it can do for your business
what it can do for everybody all the

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[casey_]: way around and i know that typically
in the space um myself included are scared

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[casey_]: of the types of properties that come
along with triple net mostly being like shopping

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[casey_]: centers and and common are a stuff
so anyway so why don't you tell us

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[casey_]: a little bit about who you are
what mag is and we just kind of

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[casey_]: go from there and see where it
leads us i

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[drew_wahlgren]: yeah first of all i don't find
it to be a dry subject so hopefully

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[drew_wahlgren]: i'll change that for you i'll find
i'll change that for some of the listeners

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[drew_wahlgren]: here

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[casey_]: yeah

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[drew_wahlgren]: and

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[casey_]: i hope

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[drew_wahlgren]: think

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[casey_]: so too

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[drew_wahlgren]: more interesting than i thought so

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[casey_]: yeah

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[drew_wahlgren]: yeah drew walter an i'm on the
capital market side of our team here ma

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[drew_wahlgren]: capital partners so we're an investment firm
we specialize and exactly a little bit of

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[drew_wahlgren]: what you said there single tenants triple
net lease trial real estate we've you know

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[drew_wahlgren]: done quite a bit in the time
that we've had since twenty fifteen we owned

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[drew_wahlgren]: a little bit over five hunderd million
dollars and assets that our management today you

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[drew_wahlgren]: know we've this point one something like
close to a hundred transactions in commercial real

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[drew_wahlgren]: estate buying and selling and end so
that's really the history behind us and we've

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[drew_wahlgren]: built up over time and really found
this niche and i'll get into even more

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[drew_wahlgren]: specifics in a moment but i joined
the team a few years ago and it

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[drew_wahlgren]: was a group that i had known
and participated with as a limited partner invest

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[drew_wahlgren]: with really appreciated the model and the
team here and i just said hey look

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[drew_wahlgren]: let's i can help you grow on
this side of the business and but before

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[drew_wahlgren]: i did that i had been in
and actively and passively and really early in

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[drew_wahlgren]: the twenty tens i really chose to
go passive and i've always enjoyed that i

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[drew_wahlgren]: put a lot of my money into
our own deals and l p you know

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[drew_wahlgren]: i do my work here but i
don't want to get calls from tenants and

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[drew_wahlgren]: i don't

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[casey_]: r

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[drew_wahlgren]: want to get calls from property managers
frankly i want to spend time with my

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[drew_wahlgren]: family you know

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[casey_]: yep

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[drew_wahlgren]: we're all working towards our personal freedom
of time right and that's one way you

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[drew_wahlgren]: know i've been moving personally and so
just being able to offer what we do

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[drew_wahlgren]: to other pasts for vest s who
feel the same way it's pretty cool so

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[drew_wahlgren]: i've had a lot of experience in
other asset classes but yeah

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[casey_]: ay

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[drew_wahlgren]: i concentrate a lot of my decets
over here with the team

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[casey_]: sure sure awesome so i'd like for
just just to give us some context and

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[casey_]: and kind of a starting point will
you now you specified in trial so i'm

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[casey_]: assuming i said shopping centers you said
industrial but i'm assuming you're talking like big

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[casey_]: warehouse type buildings where some type of
manufacturing or some type of storage type of

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[casey_]: industrial activity is happening and and the
triple net part of that is i guess

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[casey_]: what makes it so attractive because then
it becomes a a passive deal for the

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[casey_]: passive investor like you have passive investors
investing in a triple net deal that which

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[casey_]: almost makes it passive for the management
company too right

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[drew_wahlgren]: yeah

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[casey_]: in a

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[drew_wahlgren]: so

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[casey_]: way

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[drew_wahlgren]: that's

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[casey_]: m

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[drew_wahlgren]: start for jumping in but we we
like that right we want to be able

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[drew_wahlgren]: to think of course the manager likes
that right they don't want to lift their

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[drew_wahlgren]: finger they're lazy maybe a little bit
of that you

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[casey_]: maybe

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[drew_wahlgren]: know there

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[casey_]: no i don't think it's lazy think
it's got other things to do except i

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[casey_]: know that's what we say in the
multi family space it's termites trash tenants toilets

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[casey_]: you know it's not necessarily that you
don't want to but it's like man i

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[casey_]: could be off like making more money
somewhere else or doing something that then

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[drew_wahlgren]: exactly

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[casey_]: change unpluging a toilet o go ahead
sorry

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[drew_wahlgren]: exactly no absolutely so it's not that
we don't want to do it but it

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[drew_wahlgren]: is that we don't want to do
it and the reason is we want to

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[drew_wahlgren]: scale so i want to be able
to do a lot of work up front

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[drew_wahlgren]: close on a property sign a long
term least with these tenants talk about in

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[drew_wahlgren]: a second but be able to put
this property on cruise control because that's a

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[drew_wahlgren]: little bit of what triple at least
is you know people refer to it as

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[drew_wahlgren]: mail box money that's really it's very
passive and for vest or i mean people

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[drew_wahlgren]: tell me all the time they go
look i'm already a passive investor what do

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[drew_wahlgren]: i care how passive the management of
the property is right and you know there's

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[drew_wahlgren]: there's a lot that translates to even
a passive vestor which is really the insulation

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[drew_wahlgren]: from all the expenses that can really
eat away and a road cash flow

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[casey_]: yep

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[drew_wahlgren]: right you have a least that protects
you and we take this a step further

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[drew_wahlgren]: and i i did this in more
detail but really an absolute triple net least

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[drew_wahlgren]: where even the cap ex items roof
and structure and paving the parking lot you

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[drew_wahlgren]: know who's landscape in who's responsible for
that expense all of that is falling on

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[drew_wahlgren]: tenant so even though you're passive anyway
as an investor i can go well i'm

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[drew_wahlgren]: passive in a gross least property where
you know there's a lot more operational risk

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[drew_wahlgren]: right management risk how is my manager
doing managing these expenses and even the best

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[drew_wahlgren]: managers run into bad luck hey we've
done a property conditions assessment but sure enough

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[drew_wahlgren]: year or two later things just you
know a property dition'sassessment is anything but perfect

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[casey_]: well

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[drew_wahlgren]: so

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[casey_]: it's

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[drew_wahlgren]: in

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[casey_]: good for like two minutes because something
is going to change

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[drew_wahlgren]: yep

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[casey_]: two minutes

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[drew_wahlgren]: yeah

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[casey_]: later

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[drew_wahlgren]: down in the road exactly so there's
a lot of luck that can come with

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[drew_wahlgren]: that too and how conservative someone's underwriting
is so in this this least structure i

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[drew_wahlgren]: could say look i know what i'm
going to get for cash flow and i

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[drew_wahlgren]: know that i'm not going to get
eaten away by an increase in property taxes

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[drew_wahlgren]: and look at today right around inflation
rates any manager who says hey we're going

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[drew_wahlgren]: to get fifteen sent you know rent
increases every year this multi family property hey

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[drew_wahlgren]: that sounds great right what are expenses
doing and if they say well you know

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[drew_wahlgren]: they're still relatively flat you're crazy all
of you guys are going to need to

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[drew_wahlgren]: beget had your landscape he's got to
feed his family the insurance company they're going

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[drew_wahlgren]: to say look here we're looking at
replacement costs it's

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[casey_]: oh

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[drew_wahlgren]: not staying still everything is moving up
they're gonna adjust those pregums to go with

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[drew_wahlgren]: it so on all fronts you're going
to see this expense is moved to and

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[drew_wahlgren]: that's okay you just need to make
sure rents out pacing that so for us

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[drew_wahlgren]: go look your rent is a direct
line to n o i i know what

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[drew_wahlgren]: i'm getting for n o i so
if i have yearly rent increases from a

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[drew_wahlgren]: tenant that's a really well insulated net
operating income increase that i can count on

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[drew_wahlgren]: each year and not worry about what's
going to lock me in the back of

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[drew_wahlgren]: the head

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[casey_]: i want to i want to well
we've gotten a little further away from where

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[casey_]: i wanted to dig in about two

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[drew_wahlgren]: yes

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[casey_]: minutes ago so i'm

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[drew_wahlgren]: oh

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[casey_]: going to stop

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[drew_wahlgren]: yeah

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[casey_]: you right there on that because i
want to go back and i want to

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[casey_]: discuss this absolute triple net least now
i in my business models and the different

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[casey_]: multi family stuff that we've been involved
in other things like that always look for

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[casey_]: where the human element comes in okay
because the human element is what ultimately at

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[casey_]: the end of the day is always
no matter any of us i don't care

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[casey_]: who it is is the wild card
right

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[drew_wahlgren]: right

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[casey_]: so what now i'm going to relate
this to agricultural to my ag background okay

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[casey_]: and one of the big things that
happened here a few years ago was i'd

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[casey_]: say a few years probably been ten
years ago right land rents went like tripled

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[casey_]: in two years okay like like they
just went stupid high

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[drew_wahlgren]: yeah

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[casey_]: and what was happening is is these
new guys had

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[casey_]: are you there

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[drew_wahlgren]: i am i see you're a little
frozen but i can hear you

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[casey_]: i don't know what in the world
okay well

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[casey_]: all right m

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[drew_wahlgren]: yeah am i frozen for you

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[casey_]: no not at all

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[drew_wahlgren]: of course oh

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[casey_]: i'm gonna

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[drew_wahlgren]: yeah yeah

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[drew_wahlgren]: story building second

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[drew_wahlgren]: ah can you hear me

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[casey_]: yeah i can hear you

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[drew_wahlgren]: i was narrating

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[casey_]: there

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[drew_wahlgren]: narrating for your podcastvallue left the building

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[casey_]: need somebody to narrate for me

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[drew_wahlgren]: uh

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[casey_]: i don't know man

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[drew_wahlgren]: uh

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[casey_]: this

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[casey_]: see if that helps is that all
of a sudden saying connecting the us b

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[casey_]: that doesn't making sense all right i
gonna have to hit stop on the record

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[drew_wahlgren]: hm yeah

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[casey_]: and then

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[drew_wahlgren]: our going to jump out and back
in

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[casey_]: no you don't have to i just
i just stopped the recording