#28 - Commercial Real Estate w/ Ben Kogut

That, that really is what I teach a lot of people about. And it's also, to answer your question, I don't know, I mean, I can't really answer it for other people why they haven't, but I can tell you that once I did, I've now invested in 37 different, you know, commercial real estate projects personally. And I've helped hundreds of people invest. And really I've, I, I've had a lot of people tell me how much I've changed their life literally by educating them on, you know, it, you know, how to invest, how to also be tax efficient. I think that's also a subject that a lot of people aren't as familiar with because, you know, that phrase, you know, it's not what you make, it's what you keep is, is really underrated.

I think it's something that we need to be, you know, educating people about. And so why, why don't you know, brokers invest? I, I don't know, but if I was, you know, I think a lot of people think like Bitcoin or the stock market, or I mean, there's, there's that really an infinite number of places for somebody to put their money. Commercial real estate is just one of them, but it's something that I've studied and I've seen a lot of. I mean, it's no secret that real estate investors as a whole generally are wealthier. So it attracts, you know, some people that are more into that it's an illiquid asset, meaning that, you know, unlike in the stock market or Bitcoin, you can't just sell it at any, you know, moment.

So you have to be prepared and be in a financial position to be able to put that money into a project and just let it sit there usually for years. So again, that's a mentality. So that that that's my answer. OK, Yeah, fair enough. So something else you touched on, you said you wanted to start your own company because you wanted to live a life of meaning. Let's dive in. Go. Yeah, yeah, yeah. It's not just about making money. It's about, you know, for me, it's about making a positive, lasting impact in the community and being a positive, you know, force for good, for my partners, for my investors, for my tenants, for, you know, everything that we get involved in.

And I think that I think this is also very, you know, a thing Jewish thought that's been ingrained with me. I grew up Jewish and being involved in the Jewish community. And I really believe that the more, the more we give, the more we get back and we don't, we don't give to get back. But we, you know, we, we, I believe in Tikkunalam and you know, we, I know you interviewed Rabbi Mendy and, and you know, this is really, you know, I, I grew up Jewish and I've been Jewish, but I would say like in the last like couple of years, the spirituality aspect of Judaism has really has really kind of touched me in a way that I did.

Like I grew up with all the Jewish education, but I, until recently, I didn't realize how much actual spirituality, the, the energy of money. I mean, it sounds a little woo woo, but I, I really believe like that everything is energy, especially money. And so, you know, living a life and meaning is, is sort of encapsulating all of these things, you know, like I, I love what I do. I love giving back to and being involved in the community. I love helping other people and, and trying to, you know, put them in the position where they can make more money so that they can get back more to the community or whatever it is that they're passionate about.

I, I will say, since I haven't really talked about this too much, but life of meaning, you know what? One of my mentors, one of my teachers taught me that you should, if you can, put yourself in a position where you can. Can I curse on this? If if you're asked to do something that is against your morals and ethics, you want to be able to say F you and no or quit your job or move on. And so I've been put in that position. And because I took the time to, to think through what, what it is for me personally to have a life of meaning and what it, what, what, what it means for me to just to say, F, you know, I'm not going to do that.

I morally think that's wrong or whatever the reason is. I, I was, I, I thought through that back in 2010, eleven, when I was in school and it got really clear on what my, what my personal, you know, borders are, what I'm not willing to cross. And I was put in a position where I was asked to cross those lines. And I, I lost some sleep over it and I, and I really didn't know what to do. And then I realized that I had already made the decision that if I was put into a position where I, I didn't, you know, was going to cross a personal boundary, that I wouldn't do it.

And, and for me, it was to, I was asked to raise capital for a project that I didn't believe in. And so I slept on it and then realized that you knew the answer. And I went back and said, no, I'm not going to tell somebody to invest in this project. I, I wouldn't, you know, I invest in all the deals that I raised in. And so I wouldn't ask someone else to put money into a project that I wouldn't personally invest in. And so, you know, I, I was really agonizing about that decision because, you know, it ended up, you know, me leaving a, a job in a position that I loved.

And ultimately, you know, again, I think there's some spirituality to this that like it led to me being able to start Rooster Equity and, and really create my own company, which was really what my goal was this entire time. So, you know, it's those weird moments where even like the really hard bad things that happened to us in life, you give it some time and you realize that it was God's plan and it was all for the best. Dang, so I guess that answers the question like I was going to ask you. It sounds like everything you're saying like life of meaning and helping people.

You can do that whether you have your own company or not. But it sounds like the impetus to form your own company was because of these, you know, the ability to say F you. No, I'm not going to cross that line. Yeah, exactly. Yeah, I was, yeah. So it's, it's always for the best. You just, you might not see it at that point in time, but give it some time and you'll you'll realize that it, it it, it's all good. So OK, perfect segue into dude, starting a business is hard. It's it's a lot of it's a lot different going for I don't know if you were AW 2 or 1099 before, but like having a steady paycheck and presumably a pretty cushy lifestyle all of a sudden to being on your own.

You still have bills to pay. You don't know where that next paycheck is coming from. Like how was how was that process? How was the first year for you? Great question. I would say again I it's been a journey. I was able to invest in 30 plus real estate deals, each one paying me some amount of, you know, preferred return. I usually get either a monthly check or quarterly checks, sometimes annual, but mostly that's how it goes. And so I had to kind of figure out, OK, how much, how much money can I expect, you know, is going to come in whether I work or not?

And then I had to figure out, OK, well, how much is my cost of living and how much is going to be to start a business and hire people and, you know, grow, keep investing into this company. And so I had to really cut back on my personal expenses. I had to structure my cash flow to be able. I, I just been reinvesting into the company into my people for, for a few years now. And then as, as we start doing deals and making money, you know, trying to be really smart about how to, you know, allocate those funds into myself personally as well as into the business.

I'm somebody that I don't really like drive a fancy car or have a real fancy house or really like, that's just like who I am. I think it, you know, and like, no, yeah, to each their own, but it's just, you know, when you're in your own business, you really have to be mindful about how you spend your money and invest your money. And so, yeah, it's been, it's been, it's definitely been a journey. It's been stressful, it's been a roller coaster and it's been awesome. And I, I, I choose this, I choose this. So it has gotten better and better and better.

We've made some really good investments. We've, you know, I've brought on like a really great team of people around me. And I think this year is probably going to be the best year yet. And I know for sure that next year is on track to, you know, exceed the successes that we've had this year. So I, I've, I will add one more thought to this, which is just like another lesson that I hope people understand is like, you know, comparison. What do they say? Like comparison is like basically the devil. It's like the enemy of happiness. And so I just, you know, when I get tempted to compare myself to others, I have to kind of stop that and just compare that, compare myself to myself.

And when I do that, I'm just like super proud and excited about what I've been able to accomplish where I'm at now. And what I see coming down the pipeline for the next, you know, one to three years. Dude, that's amazing. That's amazing. So thank you. I want to ask you about hiring for a second. So like when, when did you make your first hire And like how did you structure that because? Yeah. We'll talk about your business model in a second, but like you're starting this company, you probably you're not making, the company's not making an income, the company's not making revenue.

Like how did you pay for your first hire? So I, I hired my childhood best friend as my first partner and I, I, I want to get it's, it's a little bit between us. But I will say that the way I structured it was in real estate, it's common to have a draw. So that's how I started in the business. And that's basically like, I make payments and then as we make money, it goes to reimburse what had gone out. So basically like pre paying commissions and structuring in a way where he would get, you know, percentages of the commissions that are earned. And then so I was, but I was funding that out of out of my pocket.

So I, I did have the funds to be able to do that. And then I, my next hire was a virtual assistant. So I hired somebody to help me with marketing just to kind of like with scheduling and with just a bunch of tasks. You know, I read that Tim Ferriss book The four Hour Work Week and so really tried to implement some of those ideas. I now have three virtual assistants that do different things for me. And then I hired another friend shortly thereafter who is helping me with acquisitions and with raising capital and with just kind of like a thinking partner and with like also we're working on company culture.

So he's brought a lot to the table in regards to that. And so, yeah, that's that's that's that's how we've been able to grow the team. Dude, that's awesome. That's awesome. So OK, now let's let's dive in a little bit to like what the heck is triple net lease? Maybe if you've seen something on on a flyer it's NNN 3 NS. So. What is that? Why is that it's own thing? Why does that interest you? Yeah, so triple net is literally means the net, net, net, meaning the net of the taxes, the insurance and maintenance costs. So think about where you live. Maybe there's an HEB, there's a water burger, there's a Bank of America, there's, you know, Chipotle or whatever.

So those tenants are typically in in, it's very typical in our industry. They sign a lease where they pay the landlord rent and then they pay their taxes, insurance and maintenance costs. The landlords, the tenant pays those expenses. Right, but they pay the landlord's costs. Yeah, right. They, they'll pay the, the costs to ensure the building, the property taxes and, you know, the landscaping or the lights or the whatever, you know, maintenance needs to happen on that property. The tenants are responsible for that expense. So as a landlord, you know, it doesn't really impact my bottom line when the taxes go up, which is very different.

So I know I have some friends, I know a lot of people that have made a lot of money in the apartment business or in the residential home business, which is also a great business, just different. And think about it like if you live in an apartment, you pay your landlord, let's say $2000 a month and that's it. Like you're not. And you pay your utility bill, but you don't know what your proportionate share of the taxes or what your insurance or what it costs for them to maintain the apartment complex. You just write your $2000 a month check and you know, the rest is up to the landlord.

So this kind of, you know, separates that if you were to, you know, write a check to your landlord for $1000 a month. And then paid $500 in taxes and $250 in insurance and $250 in maintenance. You know it, it would be the same number, but it's just broken out differently. And as as taxes go up and insurance go. So it's just like a, it's, it's just a different way. So the reason why we have to do this in, in commercial is because we usually will sign 10 to 20 year leases. And so it helps it to for me as a landlord when we invest. So for example, we bought a industrial building in San Antonio this year and it's got like, I think like caliber collision kind of tenant collision repair place.

And they have they signed a 12 year lease where they pay X number of dollars of rent. The rent goes up, I think 2 or 3% every year, so slowly kind of keeping up with inflation. And then the tenant will pay the taxes, insurance and maintenance. So as a landlord, I know pretty much to the penny what my cash flow is going to look like for the next 12 years, right? You know, so it it really, you know, risk, risk is something that is, is like what we the way we look at risk is like we want to be able to calculate the risk as much as possible or in or mitigate any unknowns.

And so if we know that we're not responsible for the taxes, insurance and maintenance, then that goes away. And we're really just have to focus on is this tent strong enough? Do they have enough business to be able to pay the rent to be able to afford the triple Nets? And if the answer is yes and if we buy it at a price that is is low enough for us, we need to have, we like to be able to pay our investors an 8% preferred return on a monthly basis. So if we can buy something with like a 10 or 12% annual type of return, we can pretty easily calculate that we can afford to pay the investors 8.

And then usually we'll split what's less. So if it's 12% returns, the first eight go to the investors at least 4. And so we'll split that. So the investors will get 2 and we'll get 2. And so they'll end up with 10% of their money and we'll get 2. Got it. So that's that's kind of how we structured these things. Got it. And do you want to just define preferred return? I know you kind of just did, but like, what does that mean? Preferred return is. I don't know the definition per SE, but it's kind of like almost looks and feels like an interest rate.

OK, It's, it's not an interest rate, but it's like almost like an IOU. So like I'll, I'll help you with the math. So if someone made it $100,000 investment into that project, the 8% preferred return would be 8% of 100. So that's 8000. That's on an annual basis and it's paid monthly. So if you take 8000, you divide that by 12, that's $667 a month. So they for some of the put 100, they get $667 a month. And and that that's the, that's where the passive income part comes into this whole thing. So they're getting that money sent directly into their account.

And then on top of that, and I touched on this briefly, that the tax benefits of owning a commercial real estate are pretty meaningful as well. With the IRS allows you to depreciate, which is a fancy word for a tax write off the, the, the building. And you know, now you can take the, instead of usually like you'll depreciate it over like a, a long, like 20-30 year period of time. The government now allows you to take all that and condense it and take pretty much all of it into the first year. So you'll see a pretty big tax savings on your tax returns.

And that's, I like to think of that as like an interest free loan from the government. You get to use that money and put it to work elsewhere. So that's kind of like A, at a high level, the benefits of investing in commercial real estate. Dude, and that's it. It's so interesting, like, I don't know, I'm a I'm a multi family investor. I've done a couple single family homes and triple net is always such a it it kind of feels like the the city on a hill, you know, like you always see triple net investors and you're like, dude, that sounds awesome.

Like you don't have to deal with broken toilets and broken windows and, you know, tenants not paying and, you know, occupancy stuff. So it's it's always been super fascinating to me. Yeah, it's it's, it's fantastic. I mean, I not to say that it's not competitive because it definitely is, but I do think there's a lot less competition than residential or multi family. Right, right, when, when you're thinking about kind of business planning for you, like how much do you anticipate like your revenues are going to be from monthly distributions, like monthly cash flows versus like because you also get paid on the sale, right?

So once you do your, you know, you buy the property, you have a business plan, you're going to like make it better, you're going to do some stuff to, to increase revenues or decrease expenses and you're going to sell it. How much of, yeah, I guess how, how much do you think about like, OK, your company needs to live off of the monthly revenues and then all of the, the sales are gravy. Like it. Is that how you, how you plan? I'm always so curious how syndication companies operate. Oh, man, great question. So you're, you're basically asking like how, how do I financially plan?

Yeah, with the business and with life. It's hard, it's lumpy. You know, we, yeah, we do maybe 4 to 6 deals a year, which we're happy with. So there's, there's big gaps of time in between when we make a Commission and see, you know, cash flow coming in. So I, I try to keep a cushion of money into a high interest savings account to kind of absorb the, the, the downs part of the cycle and, and wait for the, for the higher part. And then I use the, the monthly cash flow to, I try to pretty much have that cover my personal expenses and then the, the business expenses.

I, I basically just have like an account where I, I'm funding that out of pocket and what, you know, as, and just reimbursing myself once we get the deals done. And so, yeah, it's just, it's, it's hard. It's very hard. I mean, especially when you go longer periods of time. I, I kind of on that point, I've so I have money sitting into a checking account. I have invested in a couple other things that have given me. They're kind of like my backup, backup plan if I ever need access to, to cash. And so one of those things is I bought one of those insurance policies where the.

Whole life thing like the infinite banking. Yes, that idea. OK. Yeah. So I've I've bought into that and it's now kind of built up over time where if, if I need cash within like a week, maybe less, maybe 5 days, I can borrow against that insurance policy to get cash. Now I have to pay I think 5 or 6% in interest on it, but at least like if I need cash, I that's one place to get it. I also have a little bit of money in crypto that, you know, if I needed to sell that, you know, I could liquidate that pretty instantly. So that's kind of like the backup, backup plan if I ever, cuz like sometimes I need cash to put down as earnest money or for due diligence on some different acquisitions.

So I like to be able to have cash available to to pursue different projects if needed. Yeah, that makes sense. That makes sense. OK, well dude, it sounds like, you know, obviously we talked about it at the beginning like you do a lot, like you got a lot going on. How do you structure your time? Like what is a typical day in the life look like for you? Yeah, so I'm, I'm like a 6:00 AM get up kind of guy. I like to get the workouts done in the morning. I like to cold plunge in the morning. I got one at the house. Every day is a little different. I, I have a, like a, like a calendar that I write in every day.

It's always kind of by my desk and I have a, a calendar up on my, one of my screens. Most of the time. It's really, you know, bouncing back and forth between, you know, working on the deals. We're negotiating a bunch of stuff right now, man, it, every day is a little bit different. I would say this is probably 1 area that I have a lot of room to improve. I, I think that I used to do better about time blocking and I, I haven't, I have not done a great job of that. So when it comes to time management, I I think I have a lot of room for improvement.

Hey, at least you know for sure, At least you know that's it's a perfect time of the year to have that goal. Yeah. Yeah, exactly. Are you a big like reader? Do you consume content? And if so, like what's what kind? Podcast, books, Internet stuff, YouTube videos, any of that. Yeah, definitely. So podcast, something that I listen to on a daily basis is Kedali Fenster. Do you know him? No, who's? That yeah, he's, he's like, I, I like to call him Jewish. Tony Robbins. Yeah, he talks about, you know, the, the lessons. He, he talked about the lessons for that that the Rebbe, you know, taught, you know, that kind of started the whole Habad movement.

And so that has, that's also been part of my spiritual journey, listening to him talk about Judaism and like a very practical, meaningful way. So definitely, you know, check out Kadali Feinster and he actually just wrote a book. So I've been reading through that. I read a lot of business books. I have an app called Blinkist. Blinkist is like, you can take books and it'll summarize it and you know, 1520 minutes. So that's one way that I like to consume information. Fun fact, I'm 450 days in a row on Duolingo. Whoa. So I'm learning Spanish. Let's go.

So I usually do that while I'm sitting in the cold plunge and I read the Austin Business Journal and I read a little bit of the news, but I try to minimize the news and like just stick to things that I really need to know because I think the news could be really draining. Yeah, totally. If if someone was graduating college and they came to you and they said, Ben, I'm not sure what I should do right now. I'm interested in business. I don't know what's going on with AII, don't know what's going on in the world. What would you tell them? What? What advice would you give them?

Man, I, I would tell them to start a podcast like what you just said, because like what you're doing is like, so when I was in college and I was trying to figure out what I wanted to do, somebody told me to do 50 informational interviews. And so I knew that I wanted to be in business, but I didn't know what kind or what direction. And so I reached out and I networked around the community and, you know, ask people that for breakfast, lunch, coffee, whatever, whatever I could get my, you know, hands on. And yeah, I in that, you know, I, I ended up meeting these guys in commercial real estate, some guys that, you know, built the domain as an example.

And I, you know, I realized that like what they were doing was the direction I wanted to go. So I think podcasting is kind of like the modern day version of what I did back then is, you know, when you ask someone to come on the podcast, I'm guessing most people say yes. So it gives you access to maybe, you know, people that you wouldn't normally have access to. So and ask whatever questions you want to ask. So, you know, whether anybody listens or not, it doesn't really matter because you get to, you know, have this conversation. So I think right now, I think it's starting a podcast is really a smart thing to do.

So good for you. Thank you man. I appreciate that. And I didn't even know that was going to be your answer, so I'd, I'd double appreciate it. That's cool. Well, man, thank you so much for coming on. I super appreciate you and your time. And if people want to find out more about you or Rooster Equity or triple net leases, where can they find you? What's the best way to get in touch? Yeah, So Rooster, equity.com, I don't know if you know why. Do you know why it's Rooster? No, that was my, I was, I was realizing. I was like, I don't know why it's called rooster.

I have to ask. So yeah. So Kogut is my last name. KOGUT. OK. Kogut is a Polish word. In Polish, it means Rooster. I didn't feel like calling it COVID capital or something cheesy like that. So I wanted to do something that was a little bit different and hopefully memorable. It felt a little bit risky to go with Rooster Equity when I made the decision. But to be honest, like it's just been a blast. You know, we, we were serious, but also like we can have a little fun. We could throw some cock jokes in there, you know, so like it's been great and you know, people seem to be really receptive to it.

I I sometimes wear like a some like silly shirts with like Roosters all over it as kind of like part of the brand. And sometimes people know me as like people know me as rooster or rooster equity. So I'm just kind of leaning into that. If anybody wants to, to see or get on my investor list or see some of our deals, of course, you can reach out to me at ben@roosterequity.com. I, I wrote a book also, which kind of talked about some of the lessons learned. And that's also at roosterequity.com. It's called Mission Matters and it's a blend of what we just talked about.

It's a blend of the lessons I've learned investing and raising over $100 million, blended with living a life and meaning. And so that you can download that ebook at roosterequity.com/book or ebook or something like that. And yeah, if anybody, you can find me on LinkedIn or on all the socials, I'm at Ben Coget and happy to connect with anybody if you want to talk triple net commercial real estate. Amazing dude. When did you write a book? How did I not know that? I did that in between starting the company, like when I left the other company and started this company.

So I'm I, I'm happy to send you a copy. Dude, I'd love that most people play golf. There's like, no, I'll just write a book. Yeah, I, I traveled, I wrote a book. And then one, one last little thing. I feel like you might appreciate this. The, the Rebbe is buried at the Oh Hell, which is in Queens near New York City. And so the day after my 41st birthday, I'm 43 now, I went to visit the Oh Hell. And I was, that was a very spiritual experience that that was the point when I decided because I was on like a sabbatical at that point, it's like, OK, sabbatical's over, let's get to work.

I created a whole vision for what I wanted to do with this company. I wrote down what it is that I want in a partner. And so now I'm engaged by the way, so. Congratulations, that's. Awesome, it's amazing. And you know, I, I would highly recommend anybody go, if you have a chance, go visit the Ohio. What a way to end it, Woo. Yeah. You thought you were going to hear something about commercial real estate, turns out. Party where it's go. To the oh hell. Go to the oh hell, go say hi to the Rebbe for me, would you? I've never, I've never been, but obviously I know quite a few people who have and it's I've never heard anybody have it.

Meh experience like everyone and maybe it's self selecting bias like people who go or into it and so but yeah. Changed my life really, for sure, yeah. More so than anything else spiritually. It's yeah, one of the things that's changed my life. There's there's been a lot of, a lot of things that have impacted me on this journey. Yeah, well, Ben, thank you so much again man. I super appreciate you and your time and looking forward to chatting again soon. My pleasure, Jeff. Thanks so much. All right. Bye everybody.