From Hustle to Passive Income: Why Entrepreneurs Need to Invest in Commercial Real Estate with Wayne Courreges III

0:02Who's ready to rock today Fire Nation JLD here and welcome to Entrepreneurs on Fire the only daily show interviewing the world's top entrepreneurs seven days a week. Today, we'll talk about going from hustle to passive income, why entrepreneurs need to invest in commercial real estate. To draw these value bombs, I brought to Wayne Courageous III into EO Fire Studios. Wayne is passionate about helping busy professionals build generational wealth by offering the opportunity to invest in commercial real estate syndications. His company, CREI Partners, currently has over$50 million in assets under management in Texas, Louisiana, and Alabama.

0:35So we'll talk about the importance of investing early, passive investing, the best ways to vet sponsors and partnerships, and oh, so much more. And a big thank you for sponsoring today's episode goes to Wayne and our sponsors. Tackle everything you need from inventory to payments to analytics and more with Shopify. It's no wonder they have the best converting checkout on the planet. If you want to see less cars being abandoned, it's time for you to head over to Shopify. Sign up for your$1 per month trial and start selling today at shopify.com slash on fire. Wayne, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.

1:20And thanks for having me on. And it's always a great question to start out with. I've really been thinking about this one. So I believe that true success comes from leaning into challenges rather than avoiding them. I think most people think success is about perfect timing or having the right opportunity. I've just learned that pushing through tough times, whether it's market downturns or failed deals, it really builds resilience and insight from like lessons learned that will lead to long-term success. In my line of business, real estate success isn't about avoiding failure. It's about managing it and, of course, turning setbacks into growth.

2:02Fire Nation, you can already tell we're going to have an on-fire conversation today with Wayne because we're talking about going from hustle to passive income and why entrepreneurs need to invest in commercial real estate. And I want to start, Wayne, by talking about the importance of investing early. Take it away. Yeah, I think from an entrepreneurial standpoint, and I'll list three bullet points in my head here, but really the big one is reducing dependency on your business. So as an entrepreneur myself, I've owned our commercial real estate investment company. We've got about 50 million assets under management and looking to double that this year.

2:40But a lot of the income that comes in are based on acquisitions or asset management fees, et cetera. And, you know, other businesses are in a similar boat where there's maybe monies that come in and lump sums throughout the year, or maybe it's, you know, consistent every month. But ultimately, investing early makes it so that we're not so dependent on our business. Creates additional income. And, you know, I love having multiple streams of income to reduce pressures on your business, ultimately providing financial security. Another reason why I think importance of investing early is huge is hedging against business volatility.

3:21You know, right now there's a lot of uncertainty in the markets. One of the things I do not have much concern about is my real estate investments. Our real estate investments, people need a place to live. People are paying their rent on the first. I don't have to worry about tweets. I don't have to worry about things that are happening overseas or geopolitical events. It is a consistent cash flow business. And if you think of a real estate investment or whether it's multifamily storage, et cetera, if you think of this as a business, it definitely hedges against business volatility. The other thing is building long term financial freedom.

3:58Not only do you get passive income through investing in commercial real estate, but through equity upside as well, as well, you know, just another multiple stream of income to grow to grow your wealth. But really the big one I want to hit on is not being so dependent on your business. If you're wanting that consistent cash flow, I think it's just a really important thing to do, in my opinion. But let's be honest. You wouldn't mind the 10-year interest rates coming down just a little bit. Well, and they are. What's crazy, GLD, is that all this uncertainty in the markets are helping reduce inflation.

4:35It's also reducing 10-year treasuries. We're almost at 4%, which is great. And if it continues going down, now we lock in fixed rate debt on all of our deals. We're about to go under contract on a deal in San Antonio, and that will be fixed rate debt. And so we won't have to, we're not so tied to what's going on in the markets. In a way, I guess we are in a little bit, but for the most part, we reduce our risk by getting fixed rate long-term debt. Now we've all heard about the importance of passive investing. Talk to us about the value of this, of passive investing? I think first and foremost, entrepreneurs can focus on their business.

5:14I would say at least 90 % of our investors, whether they're doctors, engineers, architects, lawyers, many cases, they're entrepreneurs. They have their own practice and or they're part of a partnership or an ownership of their business and they love what they do. I don't have many investors who absolutely hate what they do and they want passive income so they can get out of their jobs. I think that mentality of out there, they're like, oh, people want passive income to get out of their jobs. Now, I do think people want to get, have the option and the freedom to maybe make that decision at some day, but being able to focus on your business, not the day-to-day, you know, us as real estate investors, active investors, so think of the passive investors as truly being passive, you know, underwriting the deal or looking at the deal, looking at the team, all that work happens on the front end.

6:09But once you invest in the deal, you become passive. And all this sweat, tears, hard work, stress, dealing with tenants, termites, and toilets are all on the active sponsor. And that allows the entrepreneur to focus on their business without any distractions of managing properties. A lot of people tend to, and I started my real estate career, buying a single family rental, renting it out that took so much time. And oh, by the way, they don't tell you, you don't get cashflow when you're looking for a deal, when someone are looking for a tenant, once they leave. And so we do larger multifamily deals, a hundred plus.

6:50So if I'm even with five units vacant, as an example, I'm still 95 % leased and still producing cashflow. And so that's one focusing on the business. I think Another thing is, is it creates consistent cashflow. It goes back to importance of investing early, but that cashflow and having multiple streams of income really reduces the stress and the risk of the business owner, uh, that reliable income cover personal expenses, uh, reinvestment capital to other deals. My wife's from Montana and we spend a lot of time, uh, you know, going to Montana, uh, as much as we can, um, every year. And there's a lot of people there that I'm always like, man, how do they live?

7:30You know, what are they doing? And a lot of it is passive income. And then, you know, I would say another thing about passive investing is just diversifying income streams. I've already hit it on it a couple of times. And I think that's a big point for today's conversation is having separate stable income streams that's not tied to an industry specific downturn, like your business or what's going on in the markets and the S &P 500, et cetera, just having that consistent brick and mortar investment is, in my mind, essential for entrepreneurs to diversify. Now, why specifically commercial multifamily real estate over other options?

8:11There's a lot of just like stocks, different industries, et cetera, that you can invest in. Same goes into commercial real estate, multifamily, office, retail, industrial, storage, flex warehouse space, you know, VRBOs, etc. I really dug in and really have doubled down on multifamily for a few reasons. One, it's scalable, there's predictable income, people need a place to live. We focus on markets that are landlord friendly. So primarily in Texas, but the multifamily generates, you know, consistent cash flow. And, you know, of course we, in doing so, we distribute consistent cash flow to our investors, which we said many are entrepreneurs.

9:01We also not really worrying about occupancy. Like I worked for CBRE for 16 years and personally saw the ups and downs of office and retail. when times are good you know tenants pay their rent when times are bad and they can't pay their rent they they go dark you know we're checking on them the next day and seeing if they moved out in the middle of the night so from occupant we saw that sort of in COVID time period with retail you know really retail really got impacted pretty bad and we don't need to be an extreme like COVID but just like any market downturn office and retail you know they you know a lot of times the door is shut, but multifamily, it's their home.

9:44It's where they live. And there's a lot of groups, charities and, you know, government, et cetera, that will help people stay in their home. You can't say that a lot about office and retail. So for me, I like multifamily for the income. I love multifamily because I have the ability to make a great community. One of the things that we love to do, JLD, is, you know, obviously renovate pools and the fitness center and all, but I love putting playgrounds and, you know, on our properties. I love adding like soccer fields, whatever I can do to really benefit the kids. I'm really passionate about that.

10:20I have three kids myself and, you know, having the ability to do that and create a better community is, is something that I love. And the last thing I'll say on this JLD is, is the tax advantages. You get a lot more tax depreciation and we can go down this road or there's, you know, So people listening can reach out to me and I can help them with this. But tax depreciation is pretty massive and multifamily. So what I mean by that is everything inside an apartment building, or maybe if you're in an office listening, but the walls, the carpet, the cabinets, the roof, everything has a life to it.

10:58And in commercial real estate in particular, you're able to accelerate the depreciation, in essence, paper losses to offset passive income. So if you're a passive investor, the passive income that you receive through your investments are offset with passive losses that come through tax depreciation through what we call cost segregation. So when I look at the income, I look at the tax advantages of offsetting passive income, and then the ability to really have the opportunity to do something good for the community was really a big reason why I just focused heavily on multifamily. Fire Nation, value bombs being dropped by Wayne.

11:48I love these step-by-step processes. And now that I am a father as well, it's pretty awesome to hear about improving an area for the children. I mean, you can just see how that can just have such a positive of impact on a location, on an area, on a community. And we have so much more to talk about on this topic when we get back from thanking our sponsors. Entering your credit card details every time you buy something online can be a pain. As an online consumer, I'm sure you appreciate the convenience of clicking just one button to get the job done. Well, that one-click convenience is thanks to the purple ShopPay button brought to you by Shopify.

12:23And Shopify doesn't just make it easy to buy. It makes it easy to start a business too, no matter your experience. Shopify is the commerce platform behind 10 % of all e-commerce in the U.S., from household names like Mattel and Gymshark to brands just getting started. That's in part because it helps you tackle all those important tasks in one place, from inventory to payments to analytics and more. And did I mention that iconic purple Shop Pay button that's used by millions of businesses around the world? It's why Shopify has the best converting checkout on the planet. Your customers already love it.

12:53If you want to see less carts being abandoned, it's time for you to head over to Shopify. Sign up for your$1 promo trial and start selling today at shopify.com slash onfire. Go to shopify.com slash onfire. Shopify.com slash onfire. Starting your own business can feel overwhelming. There's so much to consider. And protecting your identity and privacy are top concerns. With Northwest Registered Agents, you get more privacy, more guidance, and more freedom to run your business from anywhere in just 10 clicks and 10 minutes. Northwest Registered Agent has been helping businesses launch and grow for nearly 30 years.

13:30If you want to build your business while keeping your personal information secure, Northwest is the partner you need. In just 10 clicks and 10 minutes, they'll form your business, create a custom website, and set up your local presence wherever you need it. Once you sign up, you'll get everything from formation paperwork to custom domains and trademark registration all in one easy-to-use account, ready to form your business backed by real business experts with decades of experience. Don't wait. protect your privacy, build your brand, and set up your business in just 10 clicks and 10 minutes. Visit www.northwestregisteredagent.com slash fire and start building something amazing.

14:04Get more with Northwest Registered Agent at www.northwestregisteredagent.com slash fire. So Wayne, we're back. And when it comes to investing in commercial real estate, we need to vet sponsors. We need to vet partnerships. So in your experience, what are the best ways to do this, to vet both sponsors and partnerships? The thing I love about this podcast is it's business people, entrepreneurs that are the target audience, right? And so with that, most entrepreneurs and business people can relate to a income statement or think of things as a business. That's what we do. And so when you think of a property, so if somebody comes to you, JLD, and says, you know, we've got this opportunity for a passive investment.

14:52The first things I would do is look at the deal. They may invite you to a webinar. You'll go through that. And then afterwards, maybe get the recording, but get some of the documents and really treat this like a business. When you look at a business to purchase, whether it's a technology company or a trash company or plumbing company or multifamily real estate, it's a business. And so the revenue and the expenses and how the net operating income is driven needs to make sense. So if the partner is being extremely aggressive on rent growth, say five, 6%, and, you know, in some markets with high supply, you know, rents are going down or staying, you know, staying year over year, or maybe they're on two to 3%, but if they're overstating it and it sort of creates a red flag in your mind, ask the questions.

15:50Look at the expenses. Where are expenses, where do they make sense? Are taxes being valued on the sale price or are they being valued on the existing value of the property? Was insurance quoted by a insurance company or is this a number that is just a placeholder? And then once the deal is funded, they'll go out for their insurance quote. Who's managing the property? Is it going to be a third property manager or is it going to be the owner of the head general partner? If it is going to be managed vertically by the ownership, what is their experience? What is their track record? These are all things that you would have asked when looking at a business.

16:34Who's going to be managing the business? Where's the income coming from? Where are the expenses? What are capital improvements? So do the roofs need to be replaced at some point? Is there plumbing, you know, issues? So just like how you would, you know, look through due diligence on reviewing a business plan and the team who is bringing that investment to you is how you would look at, you know, multifamily. Now I've got a free passive investor coaching program. It's passiveinvestorcoaching.com. It's over like seven hours of content of really digging in. We won't have all that time here, obviously, to go through that.

17:16But I'm really passionate about helping people ask the right questions and look at it. But from a simplistic standpoint, just think of any real estate investment as a business. And if things don't seem right, whether it's the team, the expenses, the returns, no, you're not going to be missing out if you say no. There's going to be other opportunities. And as you get more educated and really dig in on passive investing in real estate, you'll feel more confident. The other thing I'll say, and this is the last thing I'll say on this topic for time reasons, is many people will invest in a deal thinking that that person that they were brought the deal to has decision, you know, they have decision rights on the partnership.

18:01And as an example, there are people, and this is totally fine. It's legal. We want those people that are in our deals to raise capital from their friends, family, and colleagues. But they may not have a decision when it comes to selling the property or the management company. And that's okay. But that needs to be transparent. So what I always tell people is find out who is really running the business. Is it the person that you're investing with who then, you know, is part of the partnership, but maybe it's not the true jockey on the horse. And if they're not, that's fine. Just make sure you're asking those questions, knowing what or who is making the decisions for the business, which in this case is real estate.

18:47And so that way you can make sure you're comfortable with the person leading the charge and that there's transparency. Because when the deal goes south, or not when, but if the deal goes south, you want to be able to say, okay, well, I knew that this person that brought me the deal wasn't a decision maker. We all did our due diligence. But now, you know, really, this person is running the charge and, you know, has the experience to get through any ups and downs. So most deals go well, but it is investing, it is a risk. And I think just knowing who, who's really the team driving your investment is essential.

19:26So if Fire Nation is ready to just dig in and start getting dirty with this and start finding opportunities, what are the best ways to both find and close investment opportunities off market? Yeah, I think from a passive. So most of the listeners here are going to be wanting to come in more as a passive investor. And that really comes through networking, whether it's local meetups, you know, here in Bryan College Station, we're on base, we do an in-person meetup the second Monday of every month, but we also have a virtual meetup, which is the fourth Monday of every month. And, you know, it brings people together where we're learning and growing together and really educating people.

20:09When you have a deal, it's not the time to then get educated. The time to be educated on the opportunities in passive investing is today through this podcast of learning about passive investments and then tomorrow continuing to dig in. So that way you're ready to have the opportunity to invest passively in a deal. You know, for me on an off market, that is where we really focus and off market doesn't mean it doesn't come from brokers. For me, it just means it doesn't go to the wider market of people where there's now a bidding war. So whenever it goes to market, if there's an offering memorandum and it's out there for the entire world to see, and there's bidding on it, we don't get involved.

20:54So the deals that come to us are opportunities that are coming to us before they go out to market, or we have, you know, a big robust strategy of finding off-market sellers who, you know, are looking to sell. And what that does is day one creates an opportunity to buy real estate at a value price where you're not the highest bidder. So I would say the education, the meetups, getting people's track record, and then looking at the deal. And we're going back to what I was saying earlier and treating this as a business on the revenue side, Think of rental income, other income, reimbursed utility billings, storage.

21:39I mean, none of this is overly complicated, but look at all those revenue line items. Look at the expenses, see where things can, you know, and as a passive investor, you're not the one who's like driving the business plan, but looking at it and just making sure, okay, like, Hey, if this, if does this make sense or the underwriting techniques, whether it's a two or 3 % year over year expense growth, our taxes growing based on, you know, solid projections over, you know, year over year insurance, et cetera, because all these expenses are increasing. So we just got to make sure that we're underwriting and we're buying out, you know, that right value.

22:21So making the deal work is not so much the passive investor's job. the passive investor's job is to vet the deal and make sure it's a good fit for them. The other thing I'd like to really point out is there's two types of investors. There's cash flow investors and there's equity investors. You know, depending on where you are in your investment life cycle, like if you're like later on in your career, you're looking to retire, that cash flow is really important. Typically cash flow, there's less risk. There's, you know, maybe a little less upside, but that's okay because you're getting that cashflow.

22:58And then there's equity upside investors who want maybe some cashflow, but they're good with value adding a business plan, JLD, that where you go in and maybe it's poor management, or maybe, you know, it's a long-term owner that didn't really move rents very much. So there's, there's more work that needs to be done, maybe a little bit more risk, but then there's more upside when it comes to sell. So a lot of different ways to make the deal work. Definitely, you know, to dive in a little bit further on that, you know, passiveinvestorcoaching.com would be good for those listeners. But hopefully that added some value for this podcast.

23:35Absolutely. And Fire Nation, this is the deal. We talked about from hustle to passive income, why entrepreneurs need to invest in commercial real estate. Wayne's dropped value bomb after value bomb. So thank you for that, Wayne. And if Fire Nation wants to learn more from you, Wayne wants to connect with you, what is your call to action for our listeners today? Yeah, I mentioned a couple times, education's huge. So passiveinvestorcoaching.com. If you want to continue learning about passive investing, there's no sales pitch or anything on that. It's just a lot of great content. The other way to reach out to us is going to creipartners.com.

24:11There, there's a lot of information about our portfolio, our team, and other educational resources. We'd love to connect. We have got a great team within our investor relations and our asset management and myself leading the charge. So we'd love to help anybody on their journey, whether they're investing with CRI partners or not. We want to continue growing together and adding value to the entrepreneurs out there. Fire Nation, you're the average of the five people you spend the most time with. You've been hanging out with WC and JLD today, so keep up the heat. For links to everything we talked about, visit eofire.com.

24:48Just type Wayne, W-A-Y-N-E in the search bar. the show notes page will pop right up. And Wayne, thank you for sharing your truth, your knowledge, your value with Fire Nation. For that, we salute you and we'll catch you on the flip side. Hey, Fire Nation, a huge thank you to our sponsors and Wayne for sponsoring today's episode and Fire Nation. Over the last decade, I've interviewed more than 4 ,000 of the world's most successful entrepreneurs, and I've created a revolutionary 17-step roadmap to your financial freedom and fulfillment. I put it all into my first traditionally published book, The Common Path to Uncommon Success, which is personally endorsed by Seth Godin and Gary Vaynerchuk.

25:26The Common Path to Uncommon Success is the step-by-step guidance that you need to achieve the lifestyle of your dreams. Visit UncommonSuccessBook.com. I'll catch you there or on the flip side. You know that purple shop pay button that helps us save time at checkout and that we all know and love? That's thanks to Shopify. If you want to see less cars being abandoned, it's time for you to head over to Shopify. Sign up for your$1 per month trial and start selling today at shopify.com slash on fire.