WIN185. Why Flex Space and Industrial Real Estate Is Booming with Cody Payne

AJ: Welcome to the Westside Investors Network (WIN) your community of investing knowledge for growth. This is the real estate professionals investing podcast for real estate professionals by real estate professionals. This show is focused on the next step in your career, investing. Thank you for listening. And please, if you like our content, rate us on your podcast provider.

Just a quick disclaimer. The views and opinions expressed in this podcast are for educational purposes only and should not be construed as an offer to buy or sell any shares or securities, make or consider any investments or take any other action. All right. Today we've got Cody Payne with us. Cody, thanks for coming on the show.

You know, we usually get started by just kind of having you tell us a little bit about yourself and kind of like how you got to where you are today. So, with that, let us let us know.

Cody: Yeah, no, I appreciate it. AJ, thanks for letting me come on. So, you know, I'm Cody Payne with Flex Parks USA. You know, we specialize in selling small bay industrial parks, which is, you know, kind of one of the hot rising, you know, very interesting asset classes in commercial real estate right now. You know, I've been in business for about twenty years, you know, I've worked at, you know, local firms, you know, where I started, you know, as a small local firm, you know, worked for regional and international firms as well.

And right now, you know, me and the guys that we've actually been together for a very long time, we run our own gig now and it's called Flexparks USA. And so we specialize in the small Bay Side. We can help people, you know, buy it, sell it, evaluate a piece of land to see if it's something that they want to build on, you know, if they're a developer. And so we're pretty multifaceted. And, you know, we love the asset class.

We love all the people that are coming to it from other asset classes, and it's been a been a good ride.

AJ: That's awesome. I'm not gonna lie. I'm not super familiar with industrial. So when you say small bay flex, like, I'm sure some of my listeners are probably like, what is that? Yeah.

Cody: So and, you know, it's something that you always see. But I think, know, a lot of times when people are driving down the road, it's something that they they see, but they don't really pay attention to. And so a lot of times, these are gonna be tenant sizes or suite sizes that are, you know, 5,000 square feet and under, right? They'll have a garage door, a walk in door, there'll be mostly warehouse, maybe a little bit of office in it. But for the most part, you know, a lot of the tenants that you'll see in there are going to be, you know, tradesmen style tenants, right, you know, contractor based tenants.

But these parks can be made, you know, very nice to to get, you know, retail and showroom style tenants as well. But, you know, when you see it, it's not a huge distribution warehouses, they're usually a little bit smaller, and heavier multi tenanted. Yeah. And so that's kind of how you can kind of see and understand it. As you drive through industrial districts and things of that nature, and even in the county and whatnot, you'll you'll start to see them.

A lot of a lot of the new construction is metal construction. So, you know, they'll all look pretty consistent as well. But, you know, it's a little above the self storage side, in my opinion, you know, as far as. You know, how they look and the way they're built and the people that are in them, but. They're they're very good.

They're very efficient. They're great assets. And, you know, COVID was actually one of the big helpers and drivers of really shining a spotlight on it.

AJ: Yeah. So presumably tenant base is like small businesses, you know, like you said, contractors, but, you know, maybe like small manufacturers or kind of like maybe small redistributors or something like that.

Cody: Yeah. And it's not it's not uncommon to see, you know, ecommerce tenants in there. You know, we sell facilities all the time. They have, you know, gyms, fitness studios. You know, they can have car mechanics, body shops, you know, floor and decor, custom cabinetry, pool people, plumbers.

I mean, it's a very diverse that's what I think makes it so good. It's such a diverse asset class that it can pull in, as far as tenant base goes as to where when you compare it to retail, it's retail, office, it's office. This one can pull a little bit from everybody. Yeah. And then you also I'm sure you probably see the car condos too, right?

The luxury car condos that people make. You know, that's a part of the flex world as well.

AJ: Okay. I am I'm not a car guy necessarily. I think, you might be a little bit, but what what's tell me what you're talking about.

Cody: So, you know, some people make these flex parks is like luxury condos, right? So people will buy them and they can store and work on their cars there. A lot of times those are sale units where people will sell them as, you know, condo units. And, you know, there's companies like Garages of Americas and things like that that, you know, build these flex industrial parks that are really no contractor based or any type of tenant like that is there. It's all just car enthusiasts.

And you're really starting to see those things pop up around racetracks where people can, you know, go and drive their cars on and whatnot, because the car, you know, the people in the car world are, you know, love hanging out with each other, love doing stuff with each other and things of that nature. And so that's why anytime you go to a Cars and Coffee and things like that, I mean, those things just keep getting bigger and bigger. And so I think, you know, that world obviously tailors to a different prospective buyer, but it's also something that's very, very popular.

AJ: Super cool. Yeah. That sounds very, very niche. And, I know. So That side is.

Cody: Yeah. Yeah. That side is very niche.

AJ: Yeah. You know, for for our listeners, like, I guess so you you guys kinda help, like I mean, tell me kind of like what it is that you guys do. I'm I'm

Cody: Yeah. So we're a brokerage for most most for the most part. Right? That's our main line of business. So we help people buy and sell small bay industrial parks or flex parks.

You know, there's a lot of different names to us. Some people call it contractor garages. At the end the day, it's all the same thing. It's all small bay industrial. So we help people buy and sell it.

But then also, there's a lot of people that are building it across The US. And so we help people identify parcels of land to see, you know, the business metrics, the demographics and things of that nature, to see how it works for small bay and if it's, you know, a good side for development. So if people are looking to build, we can help them get a good gauge of the land to see if it'll if an industrial park will work well there.

AJ: And so by doing that, are you kind of, like, researching the market and seeing, like, whether those small bays will be absorbed or if the kind of the market needs more. Is that what I'm hearing?

Cody: Yeah. So there's a lot of factors that you look at whenever you're trying to find a site. So, AJ, say say you have a piece of land and you go, Cody, I wanna know if this piece of land can have a small bay industrial park on So what the first thing we'll do is we'll look to see if there's any competition around there. We'll see who it is, the quality, how much, you know, leased up they are, what their occupancy is, what their rental rates are, what their rental rates are today, maybe what they were two, three, four, five years ago. So you get that data, that'll give you a lot of info.

And then you want to look at the demographic and the business metrics as well to see, you know, spending patterns, household income, how many businesses are in the area, how many, you know, have been coming into the area year over year to make sure you got good, you know, business growth, business regulation going on. So when you look at all those factors, that'll really give you a good idea of, hey, I can build a nice park here, maybe a basic park, maybe something with some showroom to it. When you factor in all those, that'll give you a really good idea of what you could do there, what you shouldn't do there.

AJ: Yeah. So, and I'm assuming I'm looking at like the local laws on like what type of building you can build and the zoning to along with that?

Cody: Yeah. So, you know, that's an important thing. A lot of people are building these in the county or ETJ. But if you're doing it zoned, you know, that's going to be a whole nother avenue that you want to take a look at. Because each zoning in every jurisdiction is a little bit different.

Some will have permitted uses, non permitted uses. And so we've seen people build parks where there's a, you know, a laundry list of tenants that they can't have. Right. Like no automotive, no this, no that. And so you want to be careful with that because obviously you don't want to build something that is restricting a lot of different tenants from coming there.

And so that's why we like county. That's why we like ETJ. You know, those are always easiest to work with. You know, light industrial is a really good one to work with as well. So, yeah, those are very important things to look at.

AJ: And then so maybe kind of like, what's the what's the sweet spot for, like, the overall size of the building with, like, maybe, like, size? I'm assuming that you guys do by square feet and then, like, you know, kind of how many how many bays or how many tenants does that look like?

Cody: So my favorite size industrial par

AJ: Is your is your favorite the ones that make the most money, hopefully?

Cody: Those are the ones that make the most yes. Our favorite, the ones that that do the best. That's a good it's a good, like, political answer there. Whichever one does the best. No.

As far as square feet goes, you know, I like anything from 50 to 100,000 square feet. Right? There's a huge buyer pool for it. We can usually move those pretty quickly. As far as the tenant base goes, the tenant suite size that I like is around 1,500 to 2,000 square feet.

You know, that's a great tenant size that allows you like, say you have a bunch of 1,500 square foot units that allows you to be able to bring in a tenant that can maybe do two or three units. So, you know, 1,500, three, four thousand five hundred. That's a good increment. So I like keeping it small, not too small. You don't want go down to the micro flex for your thousand square feet.

Those tenants tend to have a little bit more rollover. But I like 1,500, 2,000 square feet. And I like parks around if you're going to build 50 to 100,000 square feet, that gives you the biggest buyer pool. If you're looking to sell, It uses the biggest buyer pool. But also you gotta keep in mind, if you've got 2,000 square foot units and you got a 100,000 feet, you're, you know, you're dealing with 50 tenants.

Yeah. So, you know, you also got a lot there too.

AJ: Yeah, for sure. So do you guys do you do you feel like you're the clients that you're helping out are mostly like the ones developing this, like, thing? Or do they are you working with guys that come in and then, like, raise the rents on these tenants and kind of I mean, I'm sure these are probably longer leases too. They're usually five years or three years with two or three options on on the end of them.

Cody: No. That's that's the best thing about Small Bay, AJ, is a lot of these leases are one to three years.

AJ: Okay.

Cody: So yeah, so that's and had

AJ: commercial lease before and usually it's like minimum of three years.

Cody: Yeah, no, and I get that on the Small Bay Side, you'll see a lot of being closer to one to three years, probably, you know, closer to two to three on average, which is good because these have had a lot of really good rent growth across The US. So, you know, if you're signing somebody up with too many options or too long of lease, you know, your rent growth may outrun where they're at on their current rental rate. But yeah, you know, as far as the sales side, I think there's still a lot of opportunity on that for people to come in and raise rates or convert to triple net. That's been really big on the small base side is, you know, people buying products that, you know, maybe a mom and pops has been running on gross leases for a long time, and they'll come in and convert to triple net. We see that all the time.

We've done it as well. But there's a lot of opportunity because, you know, there is a lot of small bay out there because it has been around for a long time. But there's lot of opportunity on the buy side and on the development side. Me personally, I rather buy existing than develop new because I'm a fan of day one cash flow. But, you know, to each of them.

AJ: Yeah. I mean, our bailiwick, we're in, you know, multifamily and we're buying stuff that's a C class and fixing it up to like a B class, like doing some value add and trying to bump rents. So that's where, like, my knowledge base comes from. But like I said, I know it's time. I know just enough to be dangerous in the in in this space because we our our first office was a 4,000 square foot warehouse.

We actually sub leased like 2,500 square feet to a couple other businesses for the price of our rent. So we literally had like free rent in this false small flex flex space and had a free office for a bit. That was nice.

Cody: Well, I will tell you this, some of the top cross asset investors that are coming and buying this at coming and buying small bay is people from the multifamily sector.

AJ: Yeah,

Cody: it's been that way for the past couple of years. We've got a

AJ: lot of

Cody: those guys that have been

AJ: interest rates have been up deals, volumes been weighed down making deals. And so, you know, a lot of these guys need

Cody: to get this is a good alternative investment too, because a lot of people look at it as the multifamily of industrial. Yeah, because you do have a lot of units. So you know, a lot of times if you've got, you know, fifty, forty, fifty, sixty tenants, it's similar to multifamily. If you lose a few, you're not being drained.

AJ: Yeah.

Cody: And so and a lot of those guys don't have any issues managing it. And so, yeah, it's been it's been interesting the past couple years how many multifamily people have been buying this asset class.

AJ: You know, I the I'm sure that you guys are brokers, so you're dealing mostly with, like, the buy and sale of it. Do you guys also do the management of it? Or is that We don't do any management. We've got a

Cody: Yeah, that's usually more local people. We do have leasing guys here that can lease the product. But property management, a lot of times that's third party management that people use. There's a lot of management companies that can manage this kind of stuff. Yeah.

They like it. They're usually running three or four or 5% of the gross income on the on the fee side.

AJ: Yeah. Yeah. And I I mean, I'm just not familiar with the space, but, like, what sort of vacancy, I guess, do you guys run into? Like

Cody: So yeah. No. That's good because actually we were pulling those debts today because they kind of change obviously from state to state and area area, right, just like multifamily does. I'm sure it's, it kind of varies. Across The US, you're probably sitting a little over 5% across the board.

And to be honest with you, that's how it's been for a long time. And, you know, you got some areas that are sitting higher than that. And the only reason for that is, is because of all the new construction. And so when a small bay park is built, it's immediate vacancy. So because there's not always as much pre leasing going on.

And so it is similar to that fact in multifamily and self storage as to where if you have a lot of supply come online one time, it can it can bring that occupancy down across the board, even though it's not actually, you know, at that occupancy, it's just whenever that much square footage gets added on, it can bring it down. But no, across The US, it's it's it's doing very well. It's had great positive rent growth over the past seven years. Good annual rent growth, good rental escalations, good renewal probabilities for the most part, meaning, you know, the average if a tenant's going to renew or not, you know, what the probability is that that looks good across The US in many areas. And so the stats for it are very, very good.

And, you know, I think it's because there are so many people, as you know, I mean, how many people, you know, that have like five businesses or you know, that run small businesses or people that move out of their garage and go into a little warehouse? Yeah, exactly. And so that's why these have been so good, because they're great for the entrepreneur, they're great for the new businesses, and all these major metros and areas that keep expanding. That's just more and more small bay that's needed out in those areas.

AJ: Yeah. Well, that's that's super cool. I mean, what I mean, if you're if you're look I mean, you're looking at a lot of different properties, like, what what do you consider like maybe like a good buy or if you look at something you're like, this is going to be a good deal?

Cody: I would probably say, you know, your basis is going to be one, right? Which is probably similar to what y'all look at, right? Y'all look at it per door. We look at it per square foot in most most cases. So your basis is going to be number one, right?

What you're going in on the basis? Are you at market or you're above market? And then figuring out where your rents are to the market, right? I want something that is on the lower rented side compared to the market average, right? You never want to get something that's leading the market rental rates.

And so I prefer something that's a little lesser, but also has the ability to add money to maybe add amenities like, you know, side yards, mezzanine space or something of that nature to help, you know, get more tenant traction, get get rates up, add things that other people don't have. And so some of it's also just looking at amenities. What does the area have? What is it missing? How can I add that?

AJ: Yeah. You mentioned like mezzanines and side yards. What what sort of other kind of are those the two main value adds? And when you say side yard, I'm assuming?

Cody: Well, maybe describe what side yard is. Yeah. So it can be sometimes it's side yard, sometimes it's rear yard. So, you know, some of these little some of these projects will have an area where you can have a fenced in yard space to it. Right?

So Yeah. If a contractor is renting the warehouse, they love having a fenced in yard to store materials, equipment, products, whatever.

AJ: Connexes.

Cody: And so oh, yeah. Yeah. And so if if you've got that ability to add that that can be huge, that can improve your rental rate, improve your renewal probability, your tenant retention, all that's great. Sometimes mezzanine space is a good thing to add as well, right, which is, you know, additional space for storage or office or whatnot. Those are the two main amenities that you can add on to an existing park, right?

You can't go in and raise the ceiling height from 16 to 18. But those are the two main that that I like to look at. And then if there's areas to add additional parking or even industrial outdoor storage.

AJ: Okay. I mean, is there an is there an opportunity to go in and charge for parking with these spaces? I mean, I know that you can't really park in they typically have, like, a garage door. Right? Like, that's why.

Cody: Yeah. And I will tell you most small bay parks are under parked as it is. Yeah. So that's a huge amenity to go on and add. And so I've seen people buy projects that have maybe a little bit of extra land and they'll carve out some more parking and even charge for it.

And so that's one of the key things, because most of the parks that are built don't have much parking as it is. That's one thing that people skimp out on whenever they're building these. And so and that's what's funny because I'm always. Looking at things that other asset class, other asset classes have as well, which you would probably know a multifamily like there's always something that everybody kind of skimps out on that is, you know, a good, you know, x factor, but is maybe not a direct money generator, but is a money generator.

AJ: I mean, we

Cody: and so

AJ: Our last deal we picked up, it's got huge amount of green space. And none of the none of the, you know, ground apartments have backyards. And so we're putting in, we're putting in a door and throwing backyards in. Even though it doesn't directly relate to rent, like tenants love having pets and being able to just let their pet out in the back and not have to go walk it in the rain. And, you know, we find that that that is something that, you know, they skip on when building the building.

They're like, we don't need to put in backyards or delineate the space, and that's been a good moneymaker for us.

Cody: Once yeah. So this is same thing that we like to look at, and a lot of people look at too is like, hey. They skimped out on parking. They skimped out on rear storage yards or something of that nature. And so, yeah, that's a that's a good analogy, I would say.

AJ: So you mentioned ceiling height. I mean, not all buildings are built the same. Like, when when you're looking maybe to buy something, what are some of the things of the actual building, like, that you wanna look at or maybe are a larger benefit?

Cody: So as far as ceiling height goes, I like anything at at least 18 feet. That way you can put mezzanine in there. If you're under that, you really can't do that, you know, it's too hard to do. So I like 18 feet. The e commerce tenants love it.

Anybody that's holding a lot of storage, they love it so they can stack high because, you know, a lot of these businesses are small businesses. And so they'll rent these spaces and they'll rent these small units, but they want to be able to stack high. And so, you know, that's one thing that is very important to me is, you know, ceiling height, because that can get your gym tenants, your sports related, you know, your volleyball, baseball training facilities, your ecommerce guys, anyway, the story you think ceiling height is a lot more important than a lot of people think. So that's going to be number one. And then looking into your other stuff, what can I add?

How can I diversify this? What needs to be improved? Is it paying scheme? Is it adding maybe a monument sign so tenants can have their name out on the road? Like, what can I add to help this park, you know, be, you know, more proficient, efficient, you know, something that, you know, tenants are really wanting to be at?

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AJ: Nice. Yeah. That monument sign and getting, you know, advertising up. Some some tenants probably want to be advertised, and some are like, yeah. We don't really want anyone coming here.

Cody: And in a lot of cases, AJ, tenants will pay for that monument slot. We just sold a park not too long ago where they were paying 50 and $75 a slot. So, you know, it's an additional revenue generator as well on top of being an amenity.

AJ: Yeah. That's awesome. Do you ever run into like, like, of the same business? Or is there like, when you're lease when someone's leasing this out or someone's operating it, like, running into multiple of the same tenants and conflicts that way?

Cody: All the time. Yeah, all the time. We sold a park that had like five body shops in it. I mean, we see. Yeah, we see that all the time.

You know,

AJ: I mean, I

Cody: know it can be a a conflict between tenants, but, you know, there's a lot of there's a lot of similar same style, you know, tenants in a lot of areas. And, you know, if that park can handle, you know, four or five body shops and they're making money and doing well and you don't mind having a body shop tenant, then, you know, by all means, go for it.

AJ: Do you do you see also some, like, synergies? Like, you know, when you got, a body body shop or body shop and then, like, auto repair and then, like, you know, cars used car sales and, like, that sort of synergy where people are kind of working together and sharing business?

Cody: Yeah, we do. And so there was actually a park that we sold that had an electrical contractor in there, and I think they did a bunch of business with one of the landscape contractors in there. You know, sometimes you'll have home builders and custom cabinet shops and custom pool people, and sometimes you'll see them kind of work together here and there. Not huge like coworking, you know, synergy, like the coworking office space as well. But but, yeah, you do see it.

AJ: Is is that something that's more desirable if you're, like, looking at the tenant base for buying that? I don't exist now. You're just No.

Cody: I don't think so.

AJ: Okay. Well, cool.

Cody: Well, that's that's that was big on the coworking side. You know, what's funny is that was how the coworking office space was always made. It's like, hey, as people come here, they collaborate, they work together. Every coworking place I've been to ain't nobody in there working together anyways.

AJ: Yeah. They're all focused on their own business. Right?

Cody: Yeah. They're all trying to run their own shift over there.

AJ: Yeah. A good

Cody: concept, though. It's a good concept.

AJ: So I'm guessing from a, like, sales and buy side, you guys use cap rate for evaluating kind of like a sales price?

Cody: Yes. So for the most part, right? Unless there is a tremendous amount of value add or something of that nature, right? Where maybe your market rents are, you know, 30 or 40% below market. So we'll sometimes blend a cap rate with a price per square foot, especially if it's vacant or it's new construction or spec build.

But cap rate is kind of the global number that's used, and I think that's used along all. So I was actually told this. I don't know if you know Rod Khalif or not. He's a multifamily guy. I've known him for a long time.

He was actually talking about cap rate, and he said, I don't know if it's true, but he said it was created to compare asset classes to each other.

AJ: I mean,

Cody: that's how it kind of

AJ: came, which makes sense. It makes sense.

Cody: And and so but yes, we do sell on cap rate quite often as well and cap rates for, you know, existing stuff across the country. I mean, it'll range anywhere from six to 8%.

AJ: Okay. So a little bit little bit higher than probably multifamily, but not quite as much as maybe retail, I think.

Cody: Yeah. I mean, not as not as high as office.

AJ: Yeah. Yeah.

Cody: For sure. But also the good thing about the small bay side is when a tenant leaves, a lot of times you don't have a whole lot of expense to re tenant that space, right? Yeah. It's where multifamily and retail and office, sometimes you're having to re carpet, repaint, refix, do whatever. On the small bay side is very minimal office.

Sometimes it's one office and a bathroom in shell warehouse.

AJ: Do

Cody: well. That's one that's one big benefit is you do have that. The only be the only the only asset class that has it any better is gonna be self storage because they just sweep the unit and move on.

AJ: Right. Yeah. Do do do operators get hit up for, like, tenant improvements sometimes? Or

Cody: Yeah. Depending on how nice the project is. Absolutely.

AJ: Like zoning changes. I mean, like, I know that we we started a brewery and I had to, like, change or change the use. I had to go from like a mercantile to an F two manufacturing. Like, is that

Cody: She probably did a SUP on that, I'm guessing.

AJ: It was a long time. It was, it was like ten years ago. So I, and I'm not the, I'm not an architect, but, you know, someone. But like, I mean, is that something that, you know, as a, you know, owner operator of the place do you get hit up for?

Cody: You can if you've got like commercial zoning, and you've got a tenant that comes in that doesn't conform to that. We have seen tenants go get SUPs for their specific space. Yeah. So that's not super uncommon. As far as tenant finish out goes, the only time you really see that is in the significantly higher end small bay side where it's more, you know, showroom and getting sort of retail tenants and things of that nature.

That's where we'll sometimes see, you know, some TI allowances and things of that nature. But it's it's very, very minimal TI for the most part. Very minimal. Because these things barely have 10% office for the most part.

AJ: Yeah. Yeah. It's usually I mean, I think our space was 4,000 square feet with a 400 square foot office. That's exactly what it was. Yeah.

Cody: So, yeah, you're 10% there.

AJ: Yeah. Exactly. So I have seen listings because when I was looking that there there is some I don't I don't know if the developer does it or what, but they condo the units. Yeah. Have you can you

Cody: tell the listeners? We worked on those. Yeah. So sometimes and obviously, you want to be in an area that has the buying power, right? Because, as you know, that's what sometimes makes renters as compared to purchasers is is that buying power.

And so, yeah, we'll see people build these parks.

AJ: But I I think like in a lot of these flex spaces, you get newer businesses too. Right? So in order for someone to like buy a, you know, a space for their business, they've kind of got to be established.

Cody: Or have good credit or, you know, good money or funds, you know? And so but yeah, people will build these parks to sell as condos. I'm not as big into those. Because what we sometimes see is people will build, you know, 40 or 50 condos and then get stuck with, you know, 10 or 15 of them they can't sell. So now they're having to lease them.

And then selling a leased condo doesn't sell for as much on an investment side, because it's a condo. But you do see that, you know, that can be really, really good. Where I see the condos also struggle a little bit is when the economy, you know, has a little bit of hesitation or has high interest rates. It's so much easier to go sign a lease than to buy a condo. Yeah.

And I think that's what, you know, residential and multifamily is seeing a lot too right now is because of the prices of homes and interest rates and things of that nature. It's just so much easier to lease.

AJ: Yeah, for sure.

Cody: Less headache, you don't got to open up all the books and tell them how much you made and, and this and that. And, you know, it's but a majority of the small bay is leased.

AJ: And so I'm hearing you're not a big fan of the condoization of of it. Can I mean, is it have you seen any operators, like, buy up a bunch of the condos and then turn it back into, like, kind of run on the HOA themselves?

Cody: No. What we usually see is the leftover condos that they lease. We just sell on a portfolio.

AJ: Yeah. Okay.

Cody: As an investment. And so but for the most part, you know, there is there there is an area for condos. You know, there is a market for condos. There's a lot of people that love diversifying into these from the residential side or whatnot. But I'm looking at it from a builder's perspective.

And if you're developing it, if you're going to condos, you want to do, you know, a certain amount of units, you don't want go overboard doing too many units where you're sometimes getting stuck with some because, as you know, what can happen in condo communities, too, is sometimes when these turn into lease projects, you start having various investors buy more and more of them. And now you've got a condo community that's got 15 different owners. And over time, it just battles for who's the cheapest rate. Yeah. And so that's a risk that you run-in the industrial condo side.

AJ: Yeah. It's a race to the race to the bottom on the lease aspect.

Cody: Yeah. I I crashed in 2008. I bought some residential homes, and I bought a duplex at a duplex community. And this duplex community, AJ, every single one was an investor from somewhere else across the country, it seemed like. And it was just a battle for who could do the cheapest rent.

AJ: Yeah.

Cody: And I wanted out of that. I wanted out of that duplex so badly after I got it. And it's the same thing with any condo project is they can turn into that very easily. And when you have the exact same product owned by 20 or 30 different people, it becomes a race to the bottom.

AJ: Yeah. My my experience with condos is that typically the HOA fees, if you're if you're renting it out as an investor, you've got you kind of double up on the management and the HOA fees just strip out the profit from it. So I'd imagine it's

Cody: Yeah.

AJ: I mean, I'm I'm imagining HOA fees probably aren't that much on, you know, a a condoized flex space, but when they're there and you're not getting away from them, typically don't have that much control over them.

Cody: That's correct as well. So

AJ: the I I know you mentioned, like, 18 foot ceilings. Like and you said that they're mostly steel studded, or do you have, like, tilt up concrete? And then the this this the Yeah. Spaces that are, like, demised, I'm assuming they're just kind of, like, pretty uniform, like, 20 by 100 or so. Is that kind of, like, a typical thing?

Or, like, what what do

Cody: you're closer to closer to 30 by 60 in most cases.

AJ: Okay.

Cody: But most of the new construction is steel. Is metal construction.

AJ: Okay.

Cody: You do have some tilt wall that's built. You know, that's usually higher end stuff in condos. That's obviously your more expensive build. Most of your older build from the seventies, eighties, and nineties is gonna be tilt wall as well. So when you say, yeah, new construction

AJ: Are you talking like a pre manufactured steel building? Or

Cody: Pretty much. Yeah.

AJ: Pretty much. Yeah.

Cody: Pretty much a pre engineered metal building. Now, these can still look really, really good. Yeah. But you have a lot of retail centers made out of that stuff too nowadays as well. But I'm a big fan of the pre engineered metal.

I think you can make it look really good. I think you can color scheme it. I think you can add a lot of glass, retail kind of glass to it. There's a lot of things you can do to it to make it look really, really good. Yeah.

And there's not a huge difference from the metal construction to the tilt wall construction either. And a lot of times we see the metal construction actually doing better on rental rates than the tilt wall.

AJ: Oh, why why do you think that is?

Cody: Because most of tilt wall, the older construction and more established areas and the metal is usually in newer construction areas, growing areas, things of that nature.

AJ: Yeah. And the the tilt walls typically are flat roofs too, aren't they?

Cody: Yeah. Usually TPO roofs.

AJ: Yeah. Which

Cody: Or tar and brass.

AJ: You get older, those are much

Cody: more expensive to replace. Zero fun whatsoever.

AJ: Yeah. Just hope you don't get a leak in those. Yeah. So, I mean, do you often get tenants that the reason I was asking about, like, the building construction is, like, are those demising walls of the units, like, absolutely necessary? And when you do get a tenant that takes up two, three spaces, like, can they just take out those demising walls completely?

Or do they just punch it?

Cody: If you build it without stuff, if you build it without, you know, poles or pillars, I mean, yes, you can. Even with them, you still can. And so the metal construction side is very easy to stack units on to each other and until all too, because a lot of times those have a clear span roof that don't have any center columns either. So there's not a huge issue on combining spaces. It's just finding out where the plumbing is, if that needs to be capped off and things of

AJ: that nature. Is it pretty common for tenants to combine spaces or is that pretty unusual?

Cody: Oh, yeah. Yeah. No, all the time. All the time. I see them combine multiples, sometimes downsize like, oh, yeah, it's it's that's what that's what makes it flex.

AJ: Yeah. Right.

Cody: So you call it it's flexible. And so it's flexible industrial warehouse.

AJ: You know, it's not it's not like growing a family, right? Like you're growing a business and a business can grow, you know, 100% per year, and all of a sudden, you know, you just you need more space.

Cody: And then they can also

AJ: Go there.

Cody: Very quickly too. So that's why I think these parks are so good for tenants, especially small small businesses is because they give you that flexibility. Yeah. That expansion and downsizability.

AJ: Okay. So, I mean, I I hear a lot of positives about it, but what what what do you see as, like, the main risks of these type of investments?

Cody: The main risks we see are sometimes when people are building, cutting too much costs and building too basic of a product.

AJ: So can you describe what, like, what would be too basic?

Cody: Yeah. Just making just just making a, you know, straight up metal warehouse. No no anything to it. No good color scheme. Doing a rock and gravel driveway that's, you know, kind of that sand and gravel caliche mix, you know, not concreting it, just cutting every corner of the books.

I mean, I've seen parks that are built and have one shared restroom on it because they didn't want to plumb and put a restroom in each suite. And obviously, when they sold it, they found out why you want to do that. And so there's always like any any construction projects, you can always cut corners on it. And sometimes when you cut too many corners, it's you know, it can turn into a problem. But the other thing that people probably run into is, you know, not hiring the right management or leasing company, and that's any asset class.

Yeah. And so you want to make sure that whoever you have run-in the park is familiar with it, knows how to market it, knows how to lease it and knows how to maintain it. But other than that, I mean, people are right now are wildly successful with a lot of these projects.

AJ: Yeah. Okay. That's interesting, like having a bathroom in each unit, like something I probably wouldn't have thought about.

Cody: It's important.

AJ: I mean, like, you put a kitchenette in each unit and, like, a little break room too, or that just leave that up to the tenant?

Cody: Wanna do leave that up to them. Just put a restroom and a sink and an office and move on to the next.

AJ: Okay. Well, cool. Well, fun stuff. Is is there any other questions that, like, I haven't asked that I should ask?

Cody: No. I can't. I mean, you covered quite a bit. You know, debt's friendly on it right now too. Like, you know, like, debt's friendly.

I mean, obviously, you're not getting Fannie Fannie and Freddie. You know, you're getting traditional conventional loans on this kind of stuff. So, like You're not getting SBA.

AJ: Regular bank loans. Regular CMBS. Yeah.

Cody: CMBS, local banks, life insurance, you know, those are the kind of guys you got to go to. And, you know, it's all friendly. We don't really have people have issues getting loans. But no, I mean, I think I think we covered quite a bit. I think you you asked a lot of good stuff.

AJ: Cool. Well then, you know, I will get on to our last four questions. So the first one's like, what's one piece of advice you would give to your 25 year old self?

Cody: That I was very impatient when I was younger, and so I try to have more patience, try not to force things, try not to, you know, go too far over the ledge and, you know, making things happen that, you know, things progress, things work. Because, you know, when I got started, I was 18 years old. So I was really young. Right. And I felt like I didn't get a lot of business because I was I looked so young and I was so green.

And so I was always like, man, I just can't wait till I'm older. Right. I can't wait till I'm almost 40 or something like that. Can tell you now, I don't think that's the case. I got osteoarthritis in my knees.

I got a creek every time I move a shoulder. So I so, you know, just enjoy the time and just stay patient.

AJ: Yeah. I like that a lot. I definitely wish I was 18 again.

Cody: I know. Right.

AJ: All right. What was your first entrepreneurial endeavor? It was

Cody: taking all the money that I had made from early on and buying residential homes when the market crashed and duplexes. And so every dollar I made because I didn't have enough money to buy a commercial real estate property, you know? And so but I was buying homes. You know, I'm out here in DFW. And so, I mean, I was buying homes at 25,000, 11,000.

Like, I was getting really good deals. And that was my kind of first endeavor in owning real estate and becoming a owner, manager, leasing agent, you know, even construction worker doing my own work to the houses, because I don't want to pay, you know, somebody else to put in cabinets or, you know, do drywall work or something like that. So that was my first entrepreneurial experience. And yeah, if you look back on it and there were a lot of times where you're like, I just want to get out of this thing or is that? But it was actually fun.

Had a lot of good, good time and good memories doing that kind stuff.

AJ: My brother and I, when we first started out, were it was all DIY. I mean, it was get your hands dirty, learn learn how to do it. And, you know, that knowledge that we have now that, like, we know how long things take because we we did it. That that hasn't changed.

Cody: It makes you respect a lot of things that Yeah. You were always like, why is this taking so long? And then you go in there and paint a house, paint an entire house yourself and you realize why.

AJ: Yeah. Exactly. Cool. Well, the next question is, how has your formal and informal training shaped your journey?

Cody: You know, it's been good. Luckily for me, I will tell you, I've had some good mentors in my life. That have helped me out quite a bit. And then obviously, as a man, you just learn things the hard way as well in many cases. Because sometimes you think you're a know it all and you got to go get proven that you're not.

And so, you know, both ways I've learned a lot, but I've been very blessed to have some very good people in my life that have looked out for me.

AJ: That's awesome. Yeah. How did just kinda curious, but how did you come across or get those mentors?

Cody: I mean, one was just one that I was younger, and I think he was a guy that just, you know, liked me and saw, you know, the motivation that I had and the drive that I had and knew that I just needed kind of the tools and the things to put forward on it. You know, the first place that I worked was a local real estate firm and a lot of people wouldn't hire me because I was out of high school. I didn't have a college degree. And this guy did. And, you know, so he saw that, you know, I had drive, I had motivation.

And, so he put, you know, time and effort into me, I worked for him for ten years. You know, I enjoyed my time with him.

AJ: Cool. That's that's awesome. I hear a lot of, you know, people that maybe take a job that's not as much to, like, gain that knowledge and and work with the people that are going to help you understand what to do later and it's going to be pretty valuable. All right, last question. What was your biggest mistake and what did you learn?

Cody: Biggest mistake, you know, I had left a I had left a real estate firm. This was probably ten years ago. I'd left a real estate firm. This is actually when I was working with him. I left a real estate firm to go work for another guy that had promised all these great things.

AJ, they promised all these great things. And then you go over there, and then there's nothing there. And so, you know, sometimes it's easy to kind of look out and go, Oh, man, they got it all they got, they're doing great, they're doing all these things. But it's not always what you think it is when you get there. And so you never want to expect someone to give you business.

You know, it's always business is always earned. It's never handed to you.

AJ: Yeah. Well, the grass is always greener on the other side, isn't it?

Cody: That's yeah. That was it. And I I literally left there pretty quickly, so I wouldn't be very long. But there was one of those things where, you know, you thought the grass was greener on the other side, and you go over there and you're like, I'll mow this shit in days. And so yeah.

I get it.

AJ: Yeah. Awesome. Hey, Cody.

Cody: Y'all spray y'all spray painted this grass over here. You know?

AJ: Yeah. Cody, it's been great chatting with you and learning a little, you know, about some flex space. If if our listeners want to learn more, get ahold of you, what's what's what's some what's a good way for them to find you?

Cody: Easy. Flexparksusa.com. Our whole team's there ready to go, ready to help you get a park built, buy a park, sell a park, whatever you wanna do in the small bay industrial world, we'll get you taken care of.

AJ: Awesome. That sounds great. Hey. Really appreciate it. And Yeah.

Thanks for spending some time with us.

Cody: No. Thank you, AJ.

AJ: Thank you for listening to this episode of the Real Estate Professionals Investing Podcast on WIN, your community of investing knowledge for growth. We hope that this episode has increased your knowledge and added value to your path to freedom. If you would, please take a second to rate us so that we can get more great investors to interview. If you or someone that you know wants to be on, please visit westsideinvestors.com and fill out our form to be on

Cody: the show.

AJ: Thank you again, and enjoy your day.