How I Made 200% Return in 30 Days Investing in Commercial Real Estate

How I made 200% in 30 days in real estate
Frontline commercial real estate investing with Jordan Wirsz

Disclosures
Savant Investment Partners is a publisher. This webinar and all content published therein (collectively,
the “Content”) is strictly intended for general informational and entertainment purposes only and may not
be relied upon for any other purpose. Reproduction of the Content by any means is prohibited without
prior written permission of Savant Investment Partners.
The views expressed in the Content are the authors' own opinions only and do not necessarily reflect the
views of Savant Investment Partners. None of the Content constitutes a recommendation that any
particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any
specific person. Further, none of the creators or providers of our Content or their affiliates will advise
anyone personally concerning the nature, potential, value or suitability of any particular investment,
security, portfolio of securities, transaction, investment strategy or other matter. Accordingly, do not
attempt to contact them seeking personalized investment advice, which they cannot provide. To the
extent any of the Content may be deemed to be investment advice, such information is impersonal and
not tailored to the investment needs of any specific person.
Any performance data in the Content is supplied by sources believed to be reliable, that the calculations
therein are made using such data, and that such calculations are not guaranteed by these sources, the
information providers, or any other person or entity, and may not be complete. In addition, past
performance is not an indication of future results.

Disclosures
THIS IS NOT AN OFFERING OR THE SOLICITATION OF AN OFFER TO PURCHASE AN INTEREST IN SAVANT REAL ESTATE
OPPORTUNITY FUND I, LP (THE “FUND”). ANY SUCH OFFER OR SOLICITATION WILL ONLY BE MADE TO QUALIFIED INVESTORS BY
MEANS OF A CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM AND ONLY IN THOSE JURISDICTIONS WHERE PERMITTED BY
LAW.
AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. OPPORTUNITIES FOR WITHDRAWAL,
REDEMPTION AND TRANSFERABILITY OF INTERESTS ARE RESTRICTED, SO INVESTORS MAY NOT HAVE ACCESS TO CAPITAL
WHEN IT IS NEEDED. THERE IS NO SECONDARY MARKET FOR THE INTERESTS AND NONE IS EXPECTED TO DEVELOP.
THE FEES AND EXPENSES CHARGED IN CONNECTION WITH THIS INVESTMENT MAY BE HIGHER THAN THE FEES AND EXPENSES
OF OTHER INVESTMENT ALTERNATIVES AND MAY OFFSET PROFITS. NO ASSURANCE CAN BE GIVEN THAT THE INVESTMENT
OBJECTIVE WILL BE ACHIEVED OR THAT AN INVESTOR WILL RECEIVE A RETURN OF ALL OR PART OF HIS OR HER INVESTMENT.
INVESTMENT RESULTS MAY VARY SUBSTANTIALLY OVER ANY GIVEN TIME PERIOD.
The investment case studies shown herein are presented for informational purposes only. The case studies shown are included to illustrate the
application of the investment methodology of Savant Investment Management, LLC (the “Manager”) in practice in order to demonstrate catalysts
for investment and sale, among other things. These case studies were executed through the [personal account(s)] of principals of the Manager,
clients of the Manager, or affiliates of the Manager, and are not necessarily indicative of typical investment positions of the Fund. The returns
referenced in the case studies shown do not include the impact of advisory fees or other Fund expenses, which would serve to decrease profits
or otherwise increase losses. It should not be assumed that investments made in the future will be profitable or will equal the performance
results shown herein.
This material contains certain forward-looking statements and projections regarding the future performance and asset allocation of the Fund.
These projections are included for illustrative purposes only. By their nature, forward-looking statements and projections are inherently
predictive, speculative, and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these
forward-looking statements and projections. No assurances can be given that the forward-looking statements in this document will be realized.
It is not intended that these forward-looking statements will be updated in the future.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
3

4
The Catalyst for Opportunity
The Commercial Real Estate Cycle is at the right place to take
advantage of the opportunities.

Why Commercial real estate?
 Commercial real estate has yet to see the strong recovery that housing has, thus it remains
undervalued in many markets. Why? Simple: Economic recovery and availability of capital has
only been apparent for about 24 months. Housing is consumer based, which leads recoveries.
 The commercial real estate cycle has only begun to turn bullish for the long-term. Investing at the
right time in the cycle is key – you want to swim with the current, not against it.
 Many commercial properties can be bought far below replacement cost. In a normal market,
properties will sell for more than replacement cost. Why? Developers need entrepreneurial
incentive to build, so comparable existing prices must support new development.
 Banks/Hedge Funds are still holding onto commercial foreclosure inventory, and it’s time for them
to sell, presenting opportunities for “value buyers” such as myself.
5

The Backdrop – Bullish Case for Real Estate
The real estate cycle is perhaps one of the most clear and consistent cycles to study.
6
2022

The CAPITAL market cycle is very tightly correlated to the PRICE cycle.
7

The 30 year bond interest rate cycle. As rates rise, banks have more incentive to lend with bigger
margins. This means availability of capital to borrow/increasing sales volume will increase also driving
the increase in prices.
8

The current interest rate cycle is allowing long term leverage at historically low interest rates!
9

Will higher interest rates mean “soft” real estate prices? No!
 A conviction amongst the general public (who are always late to the correct conclusion) that
interest rates have bottomed will lead to a spurt of buying activity, which will drive prices higher.
 Rising interest rates usually means rising inflation. Real estate usually does well in an
inflationary environment.
 Higher interest rates and inflation will mean growing rents, which is positive for the price of
commercial real estate.
 It is important to remember that we are at HISTORICAL LOWS in interest rates. A rise to 5%, 6%,
or even 6.5% is still relatively low, and real estate will have no problem continuing to thrive in that
type of rate environment.
10

 Credit “tightness” has declined, and loan demand is up!
11
The Lending Environment
Capital Markets Are Back!

 The relationship between money supply and inflation is largely misunderstood. The financial crisis
in 2008 created a debt deleveraging process, which is by nature deflationary. This debt that was
extinguished effectively netted out against any money that was printed.
 Up until the real estate crash, the adjusted monetary base and real estate prices in the U.S. were
highly correlated. The deleveraging process - concentrated mostly in real estate and consumer
debt - created a temporary disconnect that we believe will reverse. This means increasing real
estate prices.
12
The Backdrop – Inflationary Pressures
0%
1000%
2000%
3000%
4000%
5000%
Jan1975
Aug1976
Mar1978
Oct1979
May1981
Dec1982
Jul1984
Feb1986
Sep1987
Apr1989
Nov1990
Jun1992
Jan1994
Aug1995
Mar1997
Oct1998
May2000
Dec2001
Jul2003
Feb2005
Sep2006
Apr2008
Nov2009
Jun2011
Jan2013
Aug2014
U.S. Real Estate Prices vs Adjusted Monetary Base
U.S. Real Estate Price Index Adjusted Monetary Base

 Replacement costs rise during inflationary periods. Today, you can still buy commercial real estate
well below replacement cost. Thus, we expect to “double end” the gains with market conditions
recovering to replacement cost levels, in addition to the inflationary tailwinds.
13

Step #1: Find the right deal.
 BANKS: Still have foreclosure inventory that they are usually willing to sell at 20-25%
discounts to current market value.
 HEDGE FUNDS: Bought notes during the downturn for pennies on the dollar. They then
foreclosed on the assets, and now they are liquidating assets to capture liquidity and
profits. They have also mis-managed assets due to extreme workload and lack of
motivation to extract every ounce of value.
 DISTRESSED SELLERS: Many sellers have “hung on” during the tough times and are
now wanting to sell their assets. They have often mis-managed their properties, have high
vacancy rates and the properties are in need of fix-up or repairs, and the sellers simply
don’t have the funds to do that. Thus, they are selling a “value add” asset for less than
market.
14
200% - “The art of the deal”

Understanding Commercial Valuations
CAP rates & “N.O.I.” = Net Operating Income
N.O.I. Means
 Net Operating Income
 After Taxes
 After Insurance
 After Management Fees
 After other regular expenses
 But BEFORE Debt payments
Think of “NOI” as your cash on cash
return, prior to paying debt payments.
CAP rates are figured with NOI
NOI Purchase Price = CAP
Example:
$100,000 NOI
$1,000,000 Purchase price = 10% CAP
Rate
CAP rates in general range from 5% to
10% depending on the asset itself.
15

It is important to understand that VALUE in commercial real estate is in the income stream.
Commercial properties are often valued on “CAP” (capitalization rates).
For example:
123 Main Street, Las Vegas, Nevada
10,000 square foot retail center
5 tenants
Net Operating Income (NOI): $80,000
Value at a 7% CAP Rate: $1,145,000
Value at a 8% CAP Rate: $1,000,000
Value at a 9% CAP Rate: $890,000
Every property is worth what an investor is willing to accept as its yield.
 ****Commercial Property Owners Buy The Income Stream.
16
Commercial CAP Rate Valuations

CAP rates – Commercial Real Estate Returns
“CAP rate” = Capitalization Rate i.e. “ROI”
More risk = higher CAP
 Tertiary/smaller markets
 Older, less desirable property
 Uniqueness
 Un-favored asset type
 More complex property to manage or lease
 High vacancy potential
Lower Risk = Lower CAP
 Mainstream markets (i.e. LA, San Fran.,
Phoenix, Chicago, etc.)
 Newer construction
 Easy to lease/manage
 Highly favored asset type
 Well-leased / low vacancy potential
17

My personal formula for evaluating the primary aspects of any deal are:
1. What is the price per foot?
2. Is there room for growth in rent rates?
3. What is the existing income and quality of tenants?
4. Is there room to create additional income by leasing vacant space?
5. What is the age/location grade of the property? A, B, or C?
***It is obviously a bit more complex than the above, but these points are where I start my evaluation
on every deal.
18
200% - “The art of the deal”

Retail shopping center in Las Vegas, Nevada
19
200% - My Deal

 I was presented with an opportunity to buy an asset from a hedge fund that needed to liquidate
prior to the end of November, 2014 for unknown, but “firm” circumstances.
 The property was 81% leased at the time, and cash flowing a NOI of approx. $96,000.
 Due to closing time constraints, the buyer needed to act fast and be committed. Savant was able
to meet those requirements.
 We wrote an offer to purchase the property within 24 hours of touring it for the first time.
 Due to our reputation of performance, we were awarded the contract to purchase.
20
200% - My Deal

 Built in 2008
 Existing leases with 7 tenants
 81% Occupied
 $96,000 existing NOI
 Purchase price of $1,062,500 (9% CAP on existing income, better than market rate)
 11,668 square feet ($91/ft. acquisition price – estimated $160/ft. replacement cost)
 $1,300,000 value estimate upon closing (almost $250k made day 1)
21
200% - The property

 Paid $1,062,500 on November 24, 2014
 Financed $800,000
 Down payment of $262,500 + closing costs (my equity investment)
 At closing, I bought a 9% net investment that was also $250k below market value.
Immediately after closing, I approached the strongest of the existing tenants and determined if
any of them were interested in additional space. Indeed, the best and strongest tenant was
interested.
22
200% - How I did it

We negotiated the following terms on a new lease
with an existing tenant to expand their business:
 7 year lease on the vacant 2,165 s.f. (now 100% occupied).
 Renewed the tenant’s original space for a new 7 year term.
 $1.25/s.f. lease rate + CAM Expenses ($.30/ft.).
 3% annual increases in rent for the 7 year term.
 Landlord (me) to pay $30k in tenant improvements.
23
200% - How I did it

Purchase Price:
Tenant Improvements:
Total Basis:
Down Payment + TI’s:
New NOI:
Debt Service:
Cash Return:
Property Value based on 7.75% CAP rate with $140,000 of NOI =
$1,800,000
-$1,092,500 invested
-6% sales costs (I’m realistic)
= $599,500 Equity Profit
+ 29% annualized cash return on current income
24
200% - How the math works out
$1,062,500
$30,000
$1,092,500
$292,500
$140,000
$52,800 annually
$87,200 / 29.8% on my cash investment

***I can’t give you the “Savant Secret Sauce” but I can give you pointers.
1. Contact small and large local commercial brokers and get on their email list for available
deals. Tell them you’re looking for “opportunistic” assets with “upside.”
1. Contact local banks/lenders and ask if they have any foreclosure inventory they want to
sell.
1. Search www.Loopnet.com
1. Be on the lookout for distressed, tired, or undercapitalized sellers.
Finding the right opportunities requires having your ear to the ground, strategic relationships,
a keen and discerning eye, as well as a lot of persistence.
25
200% - How do you find these kinds of 200% deals?

***NOTE:
The example I just gave is an extraordinarily “Good Deal.” Not all commercial real estate investments
turn out as well, and this math example is not “typical” of commercial real estate investing.
We were able to achieve this extraordinary return by being aggressive in our acquisition negotiations,
our leasing negotiations, and utilizing our unique abilities to maximize property performance.
Are these results typical? No.
Are they possible from time to time? Absolutely.
As Warren Buffet says, “you can’t go broke making a profit.”
We strive to make every deal profitable…Some are better than others.
26
200% - Typical? Definitely not.

We strive to hit home runs on all of our acquisitions. However, the notorious story of the tortious and
the hare prove that slow and steady wins the race.
27
Under promise…Over deliver.

The Savant Opportunity
What we do and how we do it.

Investments in:
Geography:
Est. Avg. Cash Return:
Target Capital Appreciation:
Combined Targeted Return:
Hold Period:
Minimum Investment:
Qualifications:
29
$100 Million Commercial Real Estate Fund
Commercial Real Estate Throughout The U.S.
(Office, Medical, Retail/Shopping, Industrial, Multi-Family)
Nationwide with emphasis on the S.W. region
7-10%
7% compounded
15%
7 Years
$50,000
Must be an *accredited investor.
Introducing:
Savant Commercial Real Estate Opportunity Fund I

Why the Savant CRE fund?
 We align our interests with yours by taking a reduced management fee of 1.5% in exchange for
profit participation with you.
 We are aggressive, active and largely experienced managers. We thoroughly understand “the art
of the deal.”
 The Savant Fund will have 100% transparency to investors, quarterly reporting, and annual
investor meetings.
30

What are the opportunities in front of us?
 Collateralized Mortgage Backed Securities (CMBS) loan maturities are facing a “cliff” over
the next few years. This will provide strategic opportunities to acquire properties from
owners under pressure from banks to pay them off.
 Banks/lenders still have foreclosure inventory that they are willing to sell at discounted
prices.
 Commercial property owning baby boomers are looking for liquidity.
 Hedge funds who acquired distressed assets are looking to divest and obtain liquidity.
 Inexperienced real estate investors with poor management and inadequate capital to
upgrade the property need to sell.
31
The Savant Fund – Opportunities Ahead

Savant Notable Deals
 $44.5 Million Multi-Family
 $22.5 Million Multi-Family
 $7.5 Million Development Land
 $8.7 Million SFR Portfolio
 $4.3 Million Luxury Portfolio
 $2.0 Million Office Acquisition
 $1.1 Million Retail Acquisition
 $3.2 Million Industrial build-2-suit
Small or large, sexy or not.
 Multi-Family
 Office
 Medical
 Industrial
 Retail/Shopping
 Land Development
32

Interested in learning more about how to invest with us?
Call or e-mail us for:
 A detailed summary of the fund
 A preliminary fund summary and investor term sheet
 A call with myself or one of our investment relations representatives
Inquire@SavantInvestments.com
(702) 474-3003
www.SavantInvestments.com
5586 S. Fort Apache Rd. Suite 120
Las Vegas, NV 89148
33

The Savant Report
FREE Monthly Savant Report that
covers topics such as:
 THE ECONOMY
 STOCK MARKET
 REAL ESTATE
 COMMODITIES
 OIL & GAS
 ALTERNATIVE INVESTMENTS
 BUSINESS MANAGEMENT
 PRIVATE EQUITY
 AGRICULTURE
 & MORE
www.SavantReport.com
34

Disclosures
THIS IS NOT AN OFFERING OR THE SOLICITATION OF AN OFFER TO PURCHASE AN INTEREST IN SAVANT REAL ESTATE
OPPORTUNITY FUND I, LP (THE “FUND”). ANY SUCH OFFER OR SOLICITATION WILL ONLY BE MADE TO QUALIFIED INVESTORS BY
MEANS OF A CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM AND ONLY IN THOSE JURISDICTIONS WHERE PERMITTED BY
LAW.
AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. OPPORTUNITIES FOR WITHDRAWAL,
REDEMPTION AND TRANSFERABILITY OF INTERESTS ARE RESTRICTED, SO INVESTORS MAY NOT HAVE ACCESS TO CAPITAL
WHEN IT IS NEEDED. THERE IS NO SECONDARY MARKET FOR THE INTERESTS AND NONE IS EXPECTED TO DEVELOP.
THE FEES AND EXPENSES CHARGED IN CONNECTION WITH THIS INVESTMENT MAY BE HIGHER THAN THE FEES AND EXPENSES
OF OTHER INVESTMENT ALTERNATIVES AND MAY OFFSET PROFITS. NO ASSURANCE CAN BE GIVEN THAT THE INVESTMENT
OBJECTIVE WILL BE ACHIEVED OR THAT AN INVESTOR WILL RECEIVE A RETURN OF ALL OR PART OF HIS OR HER INVESTMENT.
INVESTMENT RESULTS MAY VARY SUBSTANTIALLY OVER ANY GIVEN TIME PERIOD.
The investment case studies shown herein are presented for informational purposes only. The case studies shown are included to illustrate the
application of the investment methodology of Savant Investment Management, LLC (the “Manager”) in practice in order to demonstrate catalysts
for investment and sale, among other things. These case studies were executed through the [personal account(s)] of principals of the Manager,
clients of the Manager, or affiliates of the Manager, and are not necessarily indicative of typical investment positions of the Fund. The returns
referenced in the case studies shown do not include the impact of advisory fees or other Fund expenses, which would serve to decrease profits
or otherwise increase losses. It should not be assumed that investments made in the future will be profitable or will equal the performance
results shown herein.
This material contains certain forward-looking statements and projections regarding the future performance and asset allocation of the Fund.
These projections are included for illustrative purposes only. By their nature, forward-looking statements and projections are inherently
predictive, speculative, and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these
forward-looking statements and projections. No assurances can be given that the forward-looking statements in this document will be realized.
It is not intended that these forward-looking statements will be updated in the future.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
36

How I Made 200% Return in 30 Days Investing in Commercial Real Estate

More Related Content

What's hot

Viewers also liked

Similar to How I Made 200% Return in 30 Days Investing in Commercial Real Estate

Recently uploaded

How I Made 200% Return in 30 Days Investing in Commercial Real Estate