#18 The Skilled Realtor's Guide to Thriving in Commercial Investments with Don Zelesny

Intro: 0:13

Ready to get the inside scoop on equity funding? Tune in to TDJ Equity Funding Insiders podcast for an in-depth look at what it takes to access financial capital and maximize your investments.

Jacquelyn Jackson: 0:47

Welcome to TDJ Equity Funding Insiders podcast. Today we are pleased to introduce our guest co-host, don Zelesny, a seasoned commercial realtor based in Texas With over four decades of experience in real estate investments. Since 1982, don has honed his skills in finding the perfect spaces for businesses to thrive and helping investors achieve remarkable returns. Don's expertise extends far beyond real estate. As a lifelong business owner and a company sales professional, he brings knowledge, particularly in contract negotiation. So whether it's securing the best deal for a building purchase, a sale, lease or sublet, don's dedication to his clients ensures they get nothing short of excellence.

Jacquelyn Jackson: 1:33

Beyond his professional endeavors, don is a true advocate for community engagement. He is a founding board member of the BYO Musicians Network, a non-profit organization comprising businesses, professionals who share a passion for music, business and giving back Through their performance across the Metroplex, don and his colleagues have raised funds for numerous area charities, embodying the spirit of philanthropy. Additionally, don helps a monthly Scotch and Cigar gathering, providing a unique platform for local business owners to network and forge meaningful connections. Join us as we dive into a commercial real estate, business ownership and community environment with our friend Don Zalissni.

Don Zelezny: 2:25

Hi there, jackie, thanks for having me on.

Jacquelyn Jackson: 2:28

Thank you for being here as well, don. We want to definitely we want to welcome you coming in and I love, like, like I said, what we did for us introducing you. It tells us so much of what you actually do, what you can bring to our table for our listeners. So, as I say, if I can talk a little bit with the listeners that we bring people in, it's not just about the funding of the bank itself or getting a loan, but you also need to know what you need to do to get to that process, and Don is the one that you can actually listen to. So we're going to listen to Don, see what he got to say and bring to us as a commercial realtor here in Texas, and let us know, first of all, starting out, if you could tell us a little bit more about yourself and your own words as well.

Don Zelezny: 3:11

Yeah, I'll. After that introduction that doesn't anything would be lesser. But you know, per what you said, I help people find what's right for them in commercial real estate. That may be a building to purchase for investment purposes, or it may be a new location to grow the business in. It might be a lease from where we've been to where we're going, could be up sizing, could be downsizing, so all kinds of different transactions around helping businesses or investors get their best opportunity in real estate.

Jacquelyn Jackson: 3:52

When they actually look at, which I think is great. So we do want to clear up for the listeners so you all can understand that he's talking commercial is dealing with just business. It's what is considered owner-occupied or somewhere.

Don Zelezny: 4:05

That'd be a residential property.

Jacquelyn Jackson: 4:08

Okay.

Don Zelezny: 4:08

Yeah, although I own a lot of rent homes, I don't assist other people with rent homes.

Jacquelyn Jackson: 4:13

So when we hear a commercial realtor that is only that's non-home, non-owner-occupied at that point. So you don't talk to a commercial realtor by looking for a house. You only talk to them when you're looking for property for your business. Is that correct?

Jacquelyn Jackson: 4:27

Or for investment, one of the other, or for investments and for investment, and so in the world of lending, we look at investment as a business. It's a business entity that's actually doing business dealing. So basically that's what you're dealing with, and we want to say it because people get confused, because they think what you do to find a house is it the same way as what we do to find investment properties? So that's the question we want to ask in your experience, what's the difference between the two when you're looking for a house compared to investment property?

Don Zelezny: 4:55

Well, the tools that one would use are totally different.

Don Zelezny: 5:00

Residential realtors would be using MLS to create lists of available homes, versus commercial realtors are going to be using CoStar, loopnet, crexie and all different branded that are primarily for commercial and they're going to tend to have more information in them, such as information about the revenue streams.

Don Zelezny: 5:28

If they're investment properties, what do those properties create? That's what's going to help determine if you're going to lend somebody money, jackie, because a lot of that investment maybe does this person have enough to put down to make a cash flow. But cash flow is the magic. If you don't see the cash flow, they're going to have to be really, really wealthy before you're going to find them good money right, the investment has to make economic sense into itself and, counting in my background, in terms of investors, the very first thing we do is we look at what the potential for cash flow on this property is based on, the type of loan, how it's amortized, what the interest rate is on it, and we take what that cost is and subtract that cost from what the revenues are currently to get a good sense of does this cash flow?

Jacquelyn Jackson: 6:41

Okay. So let me make sure I'm hearing this right, which it sounds really good. So, as a commercial realtor, you can help them do the numbers they need to see if the property they're looking at is going to cash flow, because, let me say that I want to cut off. I want to get this out because you said something that we see all the time People are not aware, investors are not aware of their numbers. I'm talking about people that have property and maybe have had 11 properties. It doesn't mean you know numbers. I found that out. So if you're going into investment and you're looking into doing some investment, it sounds like a commercial realtor needs to be on the team, because you know how the numbers work and how everything needs to work when they start looking for property. Is that what you're saying? It needs to work.

Don Zelezny: 7:24

Well, I'll start my answer with I really don't have a crystal ball. I can't know that that tenant won't potentially have a financial problem here or two down the road or other things like damage, you know, due to storms and all that. Nobody has a crystal ball. But yes, if we're looking at investment property, the very first thing we want to know is what is the cash flow? What is the opportunity to increase that cash flow? Does the current cash flow support alone, that's amortized over 20 years or whatever? The particular amortization of that loan would be what we've seen more recently, because interest rates have gone up, it forces owners to sell at higher cap rates to the buyers who want to buy them. But it's also that higher interest has eaten into a lot of people's ability to simply get the deal closed.

Jacquelyn Jackson: 8:32

Right, Okay, so that's where you guys can kind of see what's going on and then you can kind of come up with a plan to help the client based on and I understood what you said we don't have a crystal ball based on what you're looking at the actual facts, the number, of crystal balls, what we got right now, right, right, and that's even a start, because you know, as investors and I do investors as well too and I'll be honest, it's sad to say, I didn't know my numbers when I first started.

Jacquelyn Jackson: 8:57

I was kind of like forced into it because of that pass and he left property and there you go. You know what I'm saying, but I realized down the road that it was some things that we got interested in, that you want to start purchasing, you have to have professionals in your investment career and for some reason, people think and I did it first to done, or I can find it by myself. So, based on what you're saying, that is what I did not know. And when it comes to a business deal, you need to look at it as a business deal and the numbers have to work. Am I correct?

Don Zelezny: 9:29

Well, the numbers have to work, but it also has to work for the individual.

Don Zelezny: 9:35

Okay, Right because, well, we all have different gains. You know what we're looking to gain in the long haul, somewhat predetermined, when we're beginning to search for some kind of investment. I'll use a recent client of mine as an example. This is an individual who is very gamefully employed, 55 hour weeks or more, making a lot of money on a monthly basis, and his sense is I got stocks and some of these other things, but I want to own some of my own real estate. I had a piece of commercial land listed and he called about the commercial land and, as he, I asked questions and he communicated with me about what his goals were.

Don Zelezny: 10:30

It started to not jive with a piece of commercial land, because where did this individual have the time to begin to develop the property and manage the property? Remember, he already had a full-time job which was making the money that he was earning currently. So after some discussion, I had suggested to him that I could help, but that what we really need to look for for you would be a piece of commercial building that has one or two tenants in it, or three, because you can't deal with a retail center with 20 or 30 people, because you looked at his time or you're going to have to hire managers If you want to do this yourself, which was one of his requirements, right?

Don Zelezny: 11:25

So we have offers on a building with two tenants. That should cash flow very, very well. Then we've looked at what that the price to buy would have to be and what the interest rates would have to be in order to be able to generate that cash flow. So for that person, that was fantastic. For somebody else who wants to do an awful lot themselves and take yet more risk, maybe the idea of a building with lots of tenants that I can turn them every few years and raise the rents should rents keep going up I'm going to try to do my fascinating more.

Jacquelyn Jackson: 12:04

Okay, so that leads into my next question to talk to, because you've already mentioned which is what we look for in a commercial realtor, and listening to you, I wanted to mention that I see that you need someone that can look at the whole picture of what you got going on, not just telling you on what you have actually said. You want it and I think that's good. So if you could, you have some other points you can give our listeners. For is, when you look at a commercial realtor, what are we looking for when we go to get one, what do we look for?

Don Zelezny: 12:35

Oh, I think I'm going to say we look for the same things we look for in all the professionals that we want to work with. Can we communicate readily and easily?

Jacquelyn Jackson: 12:47

readily.

Don Zelezny: 12:48

That's the key. Do we feel in our hearts that our best interest is truly top of that person's mind, or are they looking to sell us something On that subject? I want to comment about the real estate industry and how it's set up and who represents who. A lot of people feel like they can drive by a sign and call the number and, should they have the appropriate amount of money and experience and what have you, maybe they can close, but that person has no obligation to you whatsoever. That person's obligation is to the seller that he has the listing with. That's true, okay, so one that I spoke of a little while ago.

Jacquelyn Jackson: 13:45

I want to break up before you stop, because we ran into this. So are you saying when an agent says I'm not agent for the building, but I can help you too, okay, because that's what they say on the same building, and so explain, because that's where I know my listeners go, because we've had that discussion how does that work Then? If you you just saying that person that you called is for that building, right?

Don Zelezny: 14:09

Their job is to sell that property or lease that property, that's that client.

Jacquelyn Jackson: 14:13

So I'm not that first. That's what I'm saying. I'm not that first. Yeah is to get the most money out of you.

Don Zelezny: 14:17

Oh, okay, that's their job, that's my job. When I represent a building, an owner, my job is to get them the most that we possibly can get in that deal. When I represent the buyer or the tenant, my job flips. My job now becomes what's in the best interest of that buyer or tenant and what's the best deal that can possibly be negotiated. And if I always tell people there's another property, we don't have to do this one.

Jacquelyn Jackson: 14:51

There's always another property, you get options. We say that too, you always got options.

Don Zelezny: 14:55

This may be what came to the top now, but we've got other options and on that buyer, tenant represent side of being a realtor. Your job as a realtor is to look at all of the properties that are available in the market, assess them against what it is that the client is seeking whether it be size or location or certain pricing, or and eliminate most of it and bring to them the handful of them that closest fit, because nothing is 100% what.

Jacquelyn Jackson: 15:36

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Speaker 4: 16:34

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Jacquelyn Jackson: 17:05

You're a seller agent and buyer agent, right.

Don Zelezny: 17:07

Well, I do both, but I can only do one at a time. Right, I can't have a client I'm representing to help them buy and also have a client who's looking to sell that and try to work them on.

Jacquelyn Jackson: 17:23

Now wait, doug. Now that's what Doug said. This is why this is called Funded Insights, because we're going to have a real conversation, because I personally had someone say it to me too, when we were looking at property, that, oh yeah, this property is available, you can get it. They were the agent. But they turned around and said, hey, what are y'all looking for? We told them, oh well, I can help you look. And I felt I don't know if that's the best thing to do, because everything she took me to was the properties that she had listened to, which was okay. But I was starting to think is she really looking at what's best? And then I found out the same person owned all those that she showed as well. So I didn't get anything outside of that. So you said but if I had my own buyer's agent, his job is to do what you just said you would do to make sure, check out everything.

Don Zelezny: 18:08

It's got nothing to do with who owns what out there. It's how the property meets the requirements that that investor or business has presented. They want from this many square feet. If it's industrial something, I care about how high my ceilings are.

Jacquelyn Jackson: 18:27

And what they do with the property. You want to see what that is.

Don Zelezny: 18:30

Well, you know what. I kind of want to know what people do and what their businesses are and where they're trying to go with their business and what are the challenges with if they're already in a property. I love to walk the property they're in already because it's really easy to get them to run their mouth about what they don't like. Great insight on my part. Right Now I know all the stuff they don't like. Let's try to find stuff that has the things that they do like.

Jacquelyn Jackson: 19:02

Okay, Well, listen to that, guys. You heard it done. Gave all the commercial realtors, are you not doing it? He just gave you a tip or what you could do. I think it's really great.

Don Zelezny: 19:10

This is residential also. Yeah, I think it's great. It's the same. Either way, you go, look to buy your next home.

Jacquelyn Jackson: 19:19

You want to see the home again.

Don Zelezny: 19:20

You might want to get a residential realtor to represent you to go find that home. I do need to say people push back on this because we want exclusive relationships. If I'm going to show you properties and analyze them with you, take my time doing that. I want to make sure, when you're ready to buy one of them that we've presented, that you know I'm going to get paid my share of the commission and in some instances landlords or owners who were selling won't pay commission in some instances. In some instances. In some instances.

Jacquelyn Jackson: 20:00

So we said and we can talk about it on the show. Are you saying, let's you know the pushback, let's talk about the pushback, why is it a pushback? And explain to them what is really going on so people can know why they should do it. I mean, you know more about what's involved with it.

Don Zelezny: 20:13

Well, their pushback is you know I feel locked into that agent. The agent feels like I'm now going to get up every morning working for you. I want you locked in, Right, Right. So for the inexperienced buyer, you know to go about trying to do this without having a buyer representative. Or even if we're leasing our first space for a business, you want to go with somebody who knows the ropes, knows what's going on out there and has your own best interests at heart. Exactly All, all agreements that track Texas real estate commission puts together. It mandatory. Whoever signs these agreements has a one pager that they have to sign. That explains the difference between a seller's agent, a buyer's agent or in the instance of an intermediary relationship, and that it comes into play with a real estate company that's got a lot of different agents. One agent might have it listed in, another agent might be bringing the buyer to it. That's intermediary status.

Don Zelezny: 21:35

And you actually have to approve if you're willing to investigate that transaction, because they're got both sides of it. It's kind of similar to what you described about the agent who took you to only the properties that they represented.

Jacquelyn Jackson: 21:53

Okay, so so that's something we all need to be aware of. Again, this is the insights behind it. I mean, we're not commercial realtors, you know, we, we, we have to take part of all these different professionals, but what I teach is that you need to know a little bit about it before you go to them. That way you all can have a conversation that's pretty intellectual conversation, but one that really works for you. So that means coming into.

Jacquelyn Jackson: 22:18

Like I said, the first thing and I think that's really gay is to go with a commercial realtor. You know, you see properties that you want to get, even those that have been in business for a while doing real estate, you looking for your own property. Switch and try going with the commercial realtor, because that data is out there and I will tell you, when it comes to you making a decision on what you should buy, the days of buying stuff, a gut feeling is over. You need to go by actual, actual, actual data that you have and you guys collect that for. So we can't make those intelligent choices, am I correct?

Don Zelezny: 22:51

Yes, intelligent choices, but I'm still going to say there's always a little emotion associated with you know why do? We like this property more than the other.

Don Zelezny: 23:03

Why am I willing to take a little less cash flow to get this. Then we can analyze that. Maybe we think rents are going to go up higher. But there are other things that drive people the prestige level Right, a long term hope of greater appreciation because it's in a better neighborhood, right to begin with, there's a lot of factors other than the numbers that we need to look at.

Jacquelyn Jackson: 23:31

We need to be looked at If we're going to go to Jackie and get financing.

Don Zelezny: 23:34

We better have our numbers.

Jacquelyn Jackson: 23:36

I'm telling you, you see it Before we get there.

Don Zelezny: 23:39

As a matter of fact, I have to say this because a frustration that I've learned how to deal with as a realtor, especially with the new, new commercial buyers not the people with lots of experience. Many of them are well, I got a lot of money right, I could do this deal, no problem and you start asking them questions about well, what's your net worth and how much free cash do you really have sitting there?

Jacquelyn Jackson: 24:15

What is the DSR CR on it? They don't know what that is. They don't know what that is. They don't know how you got to make sure your rating point for it to be fundable is there, even if they got their own cash. You don't want to buy nothing that's not at value, but those are something with people and that deals with your debt servicing ratio. But anyway, go ahead.

Don Zelezny: 24:34

Well, exactly, yeah. So I'm always very upfront that these are really the first steps you should be managing before we shop. We don't want to shop for what you can't afford. If we're going to try to figure out mathematically how a property cash flows for you and you're not paying cash for the property, you're financing it we better know what the interest rate's going to be and how that loan's going to be amortized. Or I can't tell you the mathematical result of what this will look like, short of all of the things nobody can control, like tenants going out of business.

Jacquelyn Jackson: 25:20

Things like that. But the numbers that really and I love to hear that are from you, don, that you are a numbers person at the same time, actual facts, and I mean you have to be successful as you are, but, like you said, you also go into consideration of what you want. So to me you're still keeping it. It's emotional, but it's emotional bias is emotional. That make any sense.

Don Zelezny: 25:41

Well, I have one client right now who you know wanted to. I want to buy, I want to buy. Maybe, at least, maybe, at least. I want to buy. And you know, have you got to a bank yet? Have you got to a loan broker yet? Do you really know where you stand? No, I don't think it'll be a problem. Well, so I figured the way I need to move this person to the next level is let's just go find something that they like. Right, so we go, we go find one that he likes. Now, now we're in terror, we're going to get the money for it.

Don Zelezny: 26:22

And for whatever whatever length of time. Hopefully they're not going to sell it underneath us, right? I mean, we can take an option on it, but they're going to want to get paid for that that option. And so I ended up sending this person to the small business administration, because they're a business, so they, they, they may be able to get very good long-term loans and these are that nature.

Jacquelyn Jackson: 26:46

But you had to actually send them there first. Well, I sent them there.

Don Zelezny: 26:51

first it didn't do any good. It only did good once we found the property that he became emotionally attached to. Then we had terror. I liked it, and then we had. Let me, let me go figure this out.

Jacquelyn Jackson: 27:06

Terror. Do we have running? I have to terror because he's running to get it done now, Right, so yeah yeah, yeah, the terror is.

Don Zelezny: 27:13

I found something I like and I'm not sure if I'm going to be able to finance it or not.

Jacquelyn Jackson: 27:18

Right, right.

Don Zelezny: 27:20

And how long is it going to take me to figure this out and and get that? How long is the seller going to wait, especially if we don't tie him up in an option Right?

Jacquelyn Jackson: 27:30

So so time begins to not hear your friend.

Don Zelezny: 27:35

He started working pretty fast at solving this problem. At that point I could not get the first base to begin with.

Jacquelyn Jackson: 27:42

And you couldn't stop him once he started because he realized, oh my goodness, that's right. And I think now let's talk about because I do want to talk at least into the pre-approval process, because people like they would call and say, well, they say I have to have a pre-approval letter. I'm like, yeah, you do, I want us to talk about it.

Don Zelezny: 27:58

Well, we hear that in residential. You'd hear it all the time.

Jacquelyn Jackson: 28:00

Right, so commercial, you know I'm hearing it when people say, well, they want to know, we have a letter. You know that I qualify for this bit, which is no problem once, because we already have your stuff, we'll give it to you. But I want you to explain it because people ask I'll tell you why do I have to have that? I want you to explain it.

Don Zelezny: 28:16

Absolutely yes, that great subject.

Don Zelezny: 28:20

Oh I mean that is. That is a great subject. Here's why it's a great subject. Do you want me to be able to do the very best that I can do to get you the very best deal? Yes, right, that's what I want to do for you. So can you give me any tools to help me get there?

Don Zelezny: 28:40

If somebody, if a seller, has got multiple offers and one offer comes in with a preapproval that we know that we've got, they've got financing, there may not be a 100% chance, but there's a good chance. This falls within what they've been preapproved for. We ought to be able to get this done. Seller, or the seller's agent, is going to pay a lot more attention to me. Another option is cross off a brokerage account number so they don't know the number and give me a picture of it that shows you got a million dollars in the bank, or even your brokerage account, right, again, somebody who's got multiple offers that they're looking at. They're going to pay more attention and spend more time with the ones that are coming to them that look like they can get the deal done.

Jacquelyn Jackson: 29:36

Exactly.

Don Zelezny: 29:37

Right, yes, preapproval. I wish everybody who had an interest in buying a piece of property had some kind of preapproval. It's not the way the world works, but I wish yes.

Jacquelyn Jackson: 29:55

But you know, a lot of people are cutting it off If you don't have a preapproval. I've had some of the commercial realtors, my clients, my realtor investors say, well, I'm working with it, they needed this. And I told them I'm going to give it. And they like, well, we won't be able to help you. And they're like is that right? That's their choice. I don't.

Jacquelyn Jackson: 30:10

And I I believe I mean because they want to make sure people don't have time, especially with being so competitive, for as when people are looking for investment probably looking for homes too, it's the same thing.

Jacquelyn Jackson: 30:20

Yeah, same thing. People don't understand it. What's going on? You only see you try to get this property. You don't see what else is going on. The realtor, see, and the loan broker, we see everything happening real quick. And you're right, there are several offers that's going on and you think, oh, I can just wait out, you can't. You got to come correct. And the first way, which I think was a good idea, is that if they can show they they have money market account, showing that they have that money in a statement or bank statement somewhere, or From a lender right.

Jacquelyn Jackson: 30:50

So if you don't get to us to get a pre-approval letter, then you can least have your bank account that you could show your realtor something, something to get started. So we do. We want you all understand how it is important to get that type of Evidence for somebody to work as hard like you said. I don't want to be working that hard. If I'm not, you don't even have a down payment. I mean whatever is needed, you don't have it. Who wants to do that?

Don Zelezny: 31:13

So I well, I'm silly enough to you Do that. I just explained one that I did, but it was my strategy, right, that he needed to be emotionally connected to a Before real action on how am I gonna find out, saying it is gonna take place.

Jacquelyn Jackson: 31:34

It just made it a lot more real real well, I tell you what I do appreciate you. So, to wind down for today, what is one of your big, I Guess, a vice or call the action you want to talk to our lenders about today? What do you want to say to them on your takeaway?

Don Zelezny: 31:53

to talk to lenders to talk.

Jacquelyn Jackson: 31:55

I'm sorry to talk to our listeners today, thank you, yeah, our listeners, listeners. What do you want to give them before it's a call to action for our listeners?

Don Zelezny: 32:04

for those who have interest in buying, the selling, renting, subletting a commercial real estate, don's the lesney of the Zalesny team or wwwzalesneyteamcom. We can assist in Locating those properties or listening and selling those properties. We always work as though the properties that we're looking at and the deals are my own, and that way I get into what is always best for you as well, not what's best for me or for the other people or commissions or any of that. And I Think my specialty, having been a business owner longer than being a commercial realtor, is Understanding the business drivers to why we're even making these considerations. It's what I want to know first. Right, right, and then go get your money lined up before we go shop. Right, definitely, definitely go do that.

Jacquelyn Jackson: 33:11

Well, we want to thank you for being here today. I have really enjoyed you. You've given us some information and we definitely want to welcome you to come back. Okay, we want that and definitely want you to come back.

Don Zelezny: 33:22

Jackie, I can't thank you enough for this Opportunity. I feel absolutely honored. You should be. You love you. You are a piece of great work.

Jacquelyn Jackson: 33:32

Well, thank you. Thank you, I work hard, I work hard. Look at me and I appreciate you. So this is what I want to say to our listeners. If you guys will want to get in touch with done, you can go to our website at wwwtdjequity LLC net back Podcast backslash, I'm sorry podcast where we'll actually have a connection on our site so you guys can reach out to him as well. And so I want to thank you guys for coming in and if you like the information and would like to learn more, please log on to our website at TDJ equity LLC net podcast. And until next time, you all, thank you and take care.

Intro: 34:15

We hope you enjoyed this episode of TDJ equity funding insiders podcast. If you'd like to be a guest or get in touch with us, please visit our website at TDJ equity LLC net forward slash podcast or email us at podcast at TDJ equity funding insiders net. Until next time, take care.