Unlocking the Hidden Value in Underutilized Properties

Today’s guest is Alan Siebenaler.   Alan has flipped over 250 units, homes, apartment buildings, and condos. He has made SINGLE transaction profits of over $1m, and has bought and sold in 9 different states. His projects have been featured on HGTV.   Show summary:  In this episode, Alan talks about repositioning industrial properties into flex spaces, flipping homes, and exploring opportunities in the boutique hotel model. He also shares his current projects, including a luxury flip with ocean views. The conversation also covers the potential of converting office spaces into storage units and the shift towards experience-based retail. Alan emphasizes the importance of adapting to changing market trends and meeting the evolving needs of end users in the real estate industry.   -------------------------------------------------------------- Intro (00:00:34)   Alan Seaborn's Real Estate Background (00:01:03)   Alan Seaborn's Current Projects and Strategies (00:03:28)   The Industrial Property Trend (00:10:29)   Economies of Scale in Commercial Properties (00:12:39)   The Shift in Retail Experience (00:16:35)   Converting Office Space into Storage (00:21:27)   The Future of Office Space (00:21:55)   Conclusion and Contact Information (00:22:34) -------------------------------------------------------------- Connect with Alan: YouTube: www.youtube.com/alsiebs   Instagram: @alansiebs   Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → [email protected]   SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Alan Siebenaler (00:00:00) - But let's say you take an industrial property, just a large, maybe warehouse or something like that, and you divide it up. So you take 10,000ft² and you change it into five 2000 square foot spaces. You give each space their own roll up door, high ceilings, maybe a little bit of office space, but mostly what we'd call flex industrial. So high ceilings and a little bit of office, and then the amount of clients you can attract to that type of space right now is huge. Welcome to the how.   Intro (00:00:34) - To scale commercial real Estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.   Sam Wilson (00:00:46) - Alan Seaborn has flipped over 250 units, homes, apartments, buildings and condos. He had made single transaction profits of over $1 million and has bought and sold in nine different states. His projects have also been featured on HGTV. Alan, welcome to the show.   Alan Siebenaler (00:01:03) - Thanks for having me.   Sam Wilson (00:01:04) - Absolutely. The pleasure is mine. Alan.   Sam Wilson (00:01:06) - There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there?   Alan Siebenaler (00:01:14) - Where did I start? So I started with the desire to have some financial control over my future. I got a hold of the book Rich Dad, Poor Dad. This was over 23 years ago and I decided to start in real estate, and I got my real estate license and started in commercial real estate because I wanted to learn from real estate investors. So those were my clients. I was helping them buy and reposition retail centers, office buildings, industrial complexes, apartment buildings, and I just learned a ton. I didn't make a lot of money starting out as a commercial real estate agent, but I the the wealth was in the knowledge that I picked up. Um, what was the second question?   Sam Wilson (00:01:57) - Where are you now?   Alan Siebenaler (00:01:58) - Where am I now? So now I am 23 years down that journey. I started personally as an investor with one fixer condo, and we moved into it and fix it up.   Alan Siebenaler (00:02:11) - While living in it, my wife and I and somehow survived that and then moved out of it, rented it out, and then just kept moving forward. Eventually bought a four unit, fixed it up, rented it out, then started doing some 1031 exchanges up into larger properties and then into apartment buildings. And then during the Great Recession in 2009, commercial deals stopped. So I started raising capital and then flipping homes. We were buying them on the courthouse steps in Los Angeles, and we started buying these homes off of banks, repositioning them and selling them retail to like first time home buyers. And so now I have moved up in that portfolio. I've actually, ironically, sold most off. Fortunately, I sold my largest multifamily last February, which I think was kind of at the peak of the multifamily market, and I'm repositioning to re-enter the market. We actually just bought our first construction project. It is a bit of a flip. It's a multimillion dollar flip, and now we're going to be repositioning ourself back into the market, kind of taking advantage of a lot of the buyers sitting on the sidelines and having less competition.   Alan Siebenaler (00:03:28) - So we are actively looking right now.   Sam Wilson (00:03:32) - Is that the actively looking right now that's back into the multifamily space.   Alan Siebenaler (00:03:38) - Uh, that's a good question. It depends. I now I'm only I'm in California based out of Santa Barbara, California, and I'm not going to go long distance unless I have a multifamily. First of all, that's large enough. Meaning? Well, north of 100 units, be able to have a really good management company and a full time presence on the property. And also I'd want it in an A location but with value add, right. So that I can get really good demographics of tenants by adding value to the property, repositioning and improving it, then I might go out of state. In terms of in our area, we're on the coast, so prices are really high. But I really like the model of repositioning industrial space into flex space and breaking it up into smaller spaces, which we can talk about when we talk about industrial and flex. But I'm looking for that. I also like the boutique hotel model.   Alan Siebenaler (00:04:34) - I've done a lot of short term rentals, Airbnbs, furnished corporate rentals in our apartment buildings over the past 15 years, and so transitioning that into a hospitality model like boutique hotels in wine country, looking up and down the coast here in wine country. So that's kind of fun.   Sam Wilson (00:04:54) - Absolutely. How do you decide? I mean, there's there's you've done so much. You've seen so many aspects of this business. How do you decide what it is that you're going to focus on for the foreseeable future?   Alan Siebenaler (00:05:06) - Man. That's a good question. I'll do my best to answer it. One is based on the team of support I have around me. Real estate's a team sport, so there's no way I can pull off what we do on my own. So I have to have the right team. And that's everyone from. It could be my my investors that I have on board. It could be the contractor and renovation team because typically we're doing value add. You know, we're not just buying something that's already completely turned around.   Alan Siebenaler (00:05:39) - So I have to have the right team in position in that area to know and have confidence. And we can build a team fairly quickly. But my team here, my home base, you know, we can only go so far and then we're out of range. And then I'd have to build a whole new team. So a lot of it will depend on that and of course on the opportunity. Sometimes when you find the right opportunity, you can quickly build a team around it. But that's high, higher risk. Because when you're using a new team that that's not seasoned, a lot more things can go wrong. And typically you'll have turnover and you'll have to get to the point where you actually have a good team, if that makes sense.   Sam Wilson (00:06:21) - It does indeed. Yeah. No, I appreciate appreciate your insights there on that front. So just to clarify, I mean, you've done a lot of different things over the years. You've got a high end construction. You said a project flip I think you mentioned that.   Sam Wilson (00:06:34) - Yeah, they're in the things you're working on right now as well. What type of a project is that? Yeah.   Alan Siebenaler (00:06:40) - Right now it's really a fun project. We are working on basically a luxury flip. It's full ocean view, 180 degree view of the ocean and city. It overlooks the city of Santa Barbara Harbor views. You can see the sailboats going in and out, and we purchased it for 2.5 million, and we're putting about 400,000 into it. And we're repositioning it into like a modern beach feel. When I say modern and beach, those two terms kind of clash. But so it's not modern modern. It's like a modern beach. So wide plank floors, lots of whites and woods and and we're creating this feel to it that'll just modernize the property. And with that view, we can afford a lot of upside if the project's done right.   Sam Wilson (00:07:34) - Yeah. No. Absolutely. How do you go? I mean, I'm just really curious, you know, when you when you say luxury ocean flip, I'm thinking like, okay, 2.9 million.   Sam Wilson (00:07:43) - Why would it seems like that seller could just sell it open market as opposed to selling it probably to somebody that's looking to renovate it and flip it? I mean.   Alan Siebenaler (00:07:51) - Yeah, it was a motivated seller. It was, you know, it's what you're looking for is a motivated seller. It was a divorce and the property had been neglected for years. And so the inside of it looked like it was dated 1980s. The outside is like 1970s stucco. So we're just modernizing everything, the stucco, we're turning it into a smooth plaster. We're adding a bunch of custom features to the property. You know, everything cosmetically is changing on the property. And then we're doing some value add where we're making because it's up high with the view, there's not as much flat yards. So we're adding a retaining wall and adding some more yard space, which is huge to have yard space with an ocean view. So there's just certain things we're doing that they would have never done because they were divorced. And you know, unfortunately fighting.   Alan Siebenaler (00:08:42) - And so we were able to come in and solve those problems and reposition it for a higher end buyer to come in and say, that's my home. I want to live the rest of my days in and purchase it at a, you know, at what would be a good return for us, right?   Sam Wilson (00:08:58) - No. That's awesome. I love that I don't know where you live currently or what your house looks like, but when you see projects like that with, what do you say, 180 degree ocean views, is it tough not to be like, man, I should just move in here instead?   Alan Siebenaler (00:09:11) - Yeah, I think about that every day. I'm thinking, how do I keep this property? You know, maybe one of the exit strategies as well is that we'd keep it and we'd rent it out as a what you call mid term rental. So 30 days or more. Because in that area, like a lot of areas right now you can't do short term rentals but you can do mid term. So I could have someone come down from Canada or you know Memphis.   Alan Siebenaler (00:09:37) - And then in the wintertime you're going to come out here and get some sunshine and look at the ocean all day. You might rent it for a month or three months, and we can get a really good rental rate from that. And so that that is another exit strategy, is just to hold it and rent it in mid term furnished. Right.   Sam Wilson (00:09:53) - Oh that's cool I love it. Those got to be kind of fun projects there to work on, which is not necessarily, you know the the standard. Just basic flip. It is something where you get to use your creative skills and actually see a fun project come, come full circle. That's awesome. Let's talk a little bit about so. So that's the construction project flip you mentioned right there. You said something about industrial to flex. Yes. What? I don't even know what that means. Can you break that?   Alan Siebenaler (00:10:22) - Yeah, that's that's a really exciting strategy. You've seen it I know you've seen it. It's it's happening across the country right now.   Alan Siebenaler (00:10:29) - But let's say you take an industrial property just a large maybe warehouse or something like that, and you divide it up. So you take, you know, I'll just use the analogy of 10,000ft² and you change it into five, 2000 square foot spaces. You give each space their own roll up door, high ceilings, maybe a little bit of office space, but mostly what we'd call flex industrial. So high ceilings and a little bit of office, and then the amount of clients you can attract to that type of space right now is huge. You have everything from CrossFit gyms to every contractor. You could think of plumbers, wood floors, you know, tile, Hvac to, you know, I'm even seeing wine bars going in our area. You know, we live in a little bit of wine country and you have wine bars going into these industrial spaces and, you know, setting up a tasting area and, and breweries going in. And, you know, so we're seeing all this kind of just intersection between retail and industrial happening.   Alan Siebenaler (00:11:41) - And just for that cool sort of feel of high ceilings and a roll up door, you can do a lot with that. And that's a very popular trend right now that I'm pretty excited about.   Sam Wilson (00:11:51) - Oh yeah. No, I can I can certainly see the appeal because they're so like you said, there's so many different uses for it that it's even even for some of the stuff that we're doing. I'm like, gosh, you know, that'd be that'd be fantastic. If you know your little 2 or 4000 square foot, I mean, that that would just you can serve a lot of customers that way, each in their own, I think, unique way. And they're probably not limited in from a zoning perspective. I mean, you're probably not fighting the I mean, if it's if it's zoned industrial and they're putting a wine tasting bar in like. Who actually cares?   Alan Siebenaler (00:12:25) - Yeah, yeah, usually you're okay, but you have to work with the government. But the most exciting part about it for the investor is that when you're dividing up that space, you're now going to a much higher price per square foot because of economies of scale.   Alan Siebenaler (00:12:39) - Right? Because now you're not leasing a 10,000 square foot space, now you're leasing five 2000 square foot spaces. So you can imagine what that does to your income on the property at the end of the day, not costs you something. I mean, we looked at one just yesterday where we realized that if we did this on this property, we divided it up. We estimated, let's say it cost us 300,000 to do it. You know, just because it needed the ceiling's blown out. It needed a lot of stuff. But let's say it cost us 300,000 to divide up this industrial property. We ran the numbers on what the new rent would be. And because these commercial properties, the value is determined by the rent and by the leases that back them, we ran a cap rate analysis and figured out that that property would go up in value by $1 million. So spending 300 to go up by buy a million, we're like, man, that's a that's a green light, right? That's a good one.   Alan Siebenaler (00:13:36) - And so that's where it gets really exciting. Is that much more than residential residential. You can improve and you kind of have to fight with the price per square foot and compare it to other residential properties where commercial you can improve. And if your income goes up, the value goes up accordingly. So it's that's a pretty exciting strategy to use.   Sam Wilson (00:13:56) - Absolutely. No, I think that's really, really cool. Is there are there certain types of assets or certain, I guess, profiles of buildings that people should be looking out for, or even locations in general that people should be looking out for to say, hey, these would be the types of assets that this could work in or that strategy could work in.   Alan Siebenaler (00:14:16) - Yeah. Good question. I think, you know, you have to put on your hat of what would it be like to be the end user of this property. Right. So if I'm the investor, I'm thinking if I'm going to divide this up, who are my end users? And we just went through some of them.   Alan Siebenaler (00:14:34) - My end user is a contractor. So what's important to a contractor? Well, they want probably as big of a rollup door as possible that I can get away with in my current zoning. They probably want ceilings as high as possible. They want some storage area. They they might want some power. If I can upgrade the power, that would be great. Um, you know, and then they might want a little bit of office space to be able to go in there and close the door, or have someone go in there and do the books and close the door. So just thinking through, what would your end user want? And some end users won't want any office space if it's going to be, you know, the CrossFit gym or the wine bar sort of space, they might just want as big and open as possible. So just thinking about what an end user want and maybe giving them a few options.   Sam Wilson (00:15:25) - I like that. No, that's absolutely great. Let's talk about some other opportunities that are out there right now.   Sam Wilson (00:15:30) - What are you seeing in maybe the retail. And then if you can talk and touch on the much probably looked down upon office space right now.   Alan Siebenaler (00:15:41) - Yeah. Yes. I'd love to talk about both of those. So retail right now, even if you just look back, maybe the past 1015 years, it's been really interesting to watch. Somewhat painful as the Amazons and the, the online businesses came in. And then you saw all these smaller stores just go out of business, and it's been a little bit painful to watch. But what's been exciting is some of the new life that's coming in, especially over the past few years in that retail experience has shifted to become more of an experience based business than just buying a widget. Like if you want to buy a widget, your Radio Shack type of widgets, you're going to just click a button on your phone and that widgets going to show up in right 1 or 2 days, right? But if you want an experience, you want to go and have a drink or you want to go in for kids, it's the Build-A-Bear thing.   Alan Siebenaler (00:16:35) - Or you know, you want to build a toy, your kid wants to build a toy, or you want to throw an axe. You know, axe throwing is is a new chain that's spreading across the country. Any of those sort of retail experiences, wine tasting, brewery, all of those are bringing in new life into retail. But it's also changing. You know, it's hard to take what was a RadioShack, which were just but ugly on the inside and make it look really, you know, for an experience. We wanted to have a certain feel right now would be more typical to have higher ceilings and beams and lots of window or natural light or whatever. And so there is a bit of a painful transition going on, but there's a lot of excitement there as well for the just the experience based retail, I think.   Sam Wilson (00:17:24) - Experience based retail and then also the I mean, the type of retail that we're seeing, not go places, is like even down to I'm just thinking in here in Memphis, the, you know, ice cream, like ice cream stores or barber shops or there's still a lot of things, I think in retail where there's opportunity on the smaller retail side that is, I think still a compelling, still a compelling asset to, to, to invest in just because again, it's not it can't be Amazon.   Sam Wilson (00:17:55) - It can't be shipped. It can't necessarily be DoorDash. It's something where you got to actually go and and again, that's experience base the ice cream shop, the you know, the barber shop, the liquor store, whatever it is, it's all still experience based retail but just a little bit different.   Alan Siebenaler (00:18:09) - Even you reminded me of another one. Have you seen the ones where they'll take a space? Let's say it's 3000ft² and no one's leasing it, and then they'll have three concepts come in and lease that space together. And one will be like a coffee shop concept, and another will be like empanadas or Latin food, and then something else will be over here, maybe knickknacks or touristy items or whatever, and all three of them will share the space. And that. That's been kind of cool too.   Sam Wilson (00:18:36) - Yes, yes, I have seen that. And I like I like that as well, because it's kind of like that, that indoor outdoor shopping, whatever experience it can be, you know, depending on the space is laid out.   Sam Wilson (00:18:45) - But yeah, I've seen that as well. And that's really cool. Talk to me then, if you can, about opportunity if there is any in office.   Alan Siebenaler (00:18:54) - Office. Yeah. Office is kind of the elephant in the room right now isn't it. My gosh, who would have predicted who would have predicted that no one wants to go to office anymore and they can kind of get away with it. So yeah, it's our post-Covid world is that we have office spaces. Sitting vacant all across the country, and I've got one right now. I'm trying to help a client get leased because they consolidated their offices, and so they're subleasing this space. And I've had like two showings in six months. I mean, it's just we just keep reducing the price. And so office there is always an opportunity in the crisis. Right. So office opportunity is to be repositioned into probably residential. But that's not an easy thing to do. These buildings were built for office, not for every unit to have its own, you know, bathroom and kitchen.   Alan Siebenaler (00:19:54) - And and then you got the zoning challenges and just all kinds of challenges. And so they're really trying to figure that out. It is something that I have my eye on and I don't think anybody's figured it out. But but there is opportunity there. It's kind of like just brainstorming on what that could be. And are there places that could be converted into residential in a way that wouldn't be cost prohibitive? You know, I saw a school recently that was converted to residential, so that was interesting. But yeah, I mean, there's ways to do it for sure, especially if the numbers can make sense. But there's a lot of challenges too.   Sam Wilson (00:20:38) - There are a lot of challenges, man. And that's I think that's it. Like you said, it just it's kind of a in its own right, a TBD in the right locations. I know I'm a passive investor in, in office. What is it. Office to office to storage conversion. Yes. And it's going really well like yeah they're they're ahead of projections across the board.   Sam Wilson (00:21:01) - But again it has to be in the right spot. Like you can't just do office to storage everywhere. There's because one we don't need that much storage I don't think Americans and their stuff but I don't think we need that much storage. And then secondly, just need to be in the right spot. So, you know, but that's that's a much easier lift, I think putting up partitions and roll up doors versus, like you said, running plumbing for every residential unit inside a building like that. Yeah, I.   Alan Siebenaler (00:21:27) - Like that one. I like Office of Storage because you're just like you said, you're not putting in a kitchen in a bathroom. So if you're converting office into storage, you're really just building out the framework for walls and doors and, you know, electrical and but that could work really well of course. Yeah. Based on is the demand in that area enough to support it because you will have some fairly significant construction costs. But that's a cool one. Yeah.   Sam Wilson (00:21:54) - Yeah, yeah.   Sam Wilson (00:21:55) - No, it absolutely is. I'm excited about that project from a personal standpoint. But again, you know, it's I think it is just an interesting time to be looking at office and going, okay, what where does this go in the end. So this has been fascinating. Thank you, Allen, for taking the time to come on the show today and really talk to us about a lot of different asset classes, things that you're both seeing personally and that you have also invested in and done your your resume, if I'll call it that, of things that you've done in the real estate space is fascinating and certainly been insightful to have you on the show today. So thank you for taking the time to come on and share this. If our listeners want to get in touch with you and learn more about you, what is the best way to do that?   Alan Siebenaler (00:22:34) - Yeah, I'm on YouTube at youtube.com. So it's a l s like Sam I e b like boy, s like Sam. That's a best place to find me.   Sam Wilson (00:22:48) - Awesome. YouTube.com al Allen, thank you again for your time today. I certainly appreciate.   Alan Siebenaler (00:22:53) - It. Thanks for having me.   Sam Wilson (00:22:55) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can, do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.