David Schwalb is a real estate entrepreneur based in the Chicago area. He is President of Schwalb Realty Group, Inc. a firm specializing in privately-brokered commercial real estate and finance transactions nationwide. He joins us today to give valuable advice on how to win over people, make meaningful connections, and get access to off-market deals. He believes building relationships is key to growing your business and he shares his experiences where he found opportunities through networking. He also offers expert insights into industrial real estate and what it takes to be successful in the space.
[00:01] – [07:30] Finding Deals No One Knows About
- David talks about how he got into real estate
- Focusing on below-the-radar deals
- It’s about looking for owners who don’t want to list and who want to transact confidentially
- He tapped into his network to gain introductions and open up opportunities
[07:31] – [15:52] Scaling Through Smart Networking
- Use your brain and follow your interests in order to reach out to people
- David tells us how he joined a club to find leads
- It’s essential to be committed to develop these relationships
- Be a giver, not a taker
- Benefits come if you do good deeds
- Have discipline and use your time efficiently
- You need to be realistic about what opportunities are available and how you can make the most of them
[15:53] – [20:37] The Potential of Industrial Real Estate
- There’s always a demand for industrial properties and there are so many niches
- David discusses how he created connections with people in the railroad, barge, and truck fleet industry
- Find businesses because they would always need facilities
[20:38] – [21:47] Closing Segment
- Reach out to David!
- Links Below
- Final Words
Tweetable Quotes
“There’s some psychology to it ’cause we do try to bring together parties, buyers, and sellers that are compatible. Just because someone’s sitting on a pile of money doesn’t mean that they’re the right buyer for it.” – David Schwalb
“I like to meet people and I have like zero expectations about what they can do for me. I want to help ’em and maybe one day, it comes back and benefit me.” – David Schwalb
“You got to meet people that are successful and you got to meet people off the beaten path.” – David Schwalb
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Connect with David at david@schwalb.com!
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] David Schwalb: Sometimes that lower, you know, a smaller commission piece might be a stepping stone, so don’t always pass on it, especially if it opens up the door to deal with someone that is, you know, a long term relationship and maybe has bigger assets.
[00:00:28] Sam Wilson: David Schwalb was a real estate deal maker specializing in below-the-radar deals with a big focus on companies that make or move things. David, welcome to the show.
[00:00:37] David Schwalb: Thank you. Thank you, Sam.
[00:00:38] Sam Wilson: Absolutely. David, there are three questions I ask every guest who comes from the show: in 90 seconds or less, can you tell me where did you start? Where are you now and how did you get there?
[00:00:46] David Schwalb: Born and raised in Omaha, Nebraska, and I went to college at Boston University, majored in international relations, minored in business. After that, I went to University of Illinois Law School, graduated from there about 26 years ago. I started out in private law practice. I was involved in transactional work with corporate law and real estate law and some franchising law. And 20 years ago I really felt that it was more of an entrepreneur than just someone sitting at a desk, you know, doing law. Well, I enjoyed the practice of law. I didn’t like the business of law and I was seeing clients who are involved in real estate, you know, making money and that might be more interesting than worrying about billable hours the rest of my life. So I got into, I actually started to invest in multifamily properties in the south shore neighborhood of Chicago. And you know, worked fine in the beginning. And then after a while, I realized it was a saturated market and I needed to peace out of that. And during that time I also obtained a real estate brokerage license, which being a licensed attorney is a lot easier to, you know, get a license and hang out a shingle on your own. And I had people coming to me looking for deals, particularly apartments, and they said, Hey, we’re having a hard time to find apartments to acquire, you know, can you find us something? And I early on, you know, I was kind of feeling my way around and I poked around on the MLS and, you know, LoopNet, some other online things. And yeah, I realized like, you know, my clients had access to a lot of those things. And it would be hard to add value for them to find them things that the whole world knew about. And one client in particular said, David, you know, find me deals that like, just know what knows about, you know, find them. He suggested to me, oh, how about you drive up and down the, you know, some quiet streets, you know, in Chicago, like in the Lincoln Park neighborhood, maybe there’s a a building that looks like there’s an out of town owner. Go, I’ll reach out to them, look ’em up, you know, call ’em, send ’em a letter. So I actually, you know, tried that for a few weeks and with limited success. And I liked the idea of finding deals that were below the radar, but I felt that, you know, that still involved an element of cold calling. And what I also learned is that, you know, in traditional real estate brokerage, it’s very focused on sellers where, you know, people are cold calling owners all day long, you know, saying, Hey, we can sell your apartment complex. And you know, being myself, a principal and multifamily, like, I get those calls and postcards and emails and so forth. And so I realized like that’s just not the best use of my brain. I mean, anyone can, you know, do cold calling, and not the most efficient use of time, at least in my opinion. It must work for someone, but some small percentage of population, I think. So I realized when I was a private law practice, I met a lot of really neat people along the way in the law firms I was at, clients, bankers, CPAs, you know, professional advisors, and I realized that that that’s my network. That’s where I probably could find warm introductions to deals, to potential opportunities. . And so I then just focused on that and it was a refreshing, you know, message to people that, hey, there’s someone out there looking to deals below the radar. I got introductions to some really great buyers who were tired of being, you know, one of a hundred recipients of a deal. And there were owners who I met who didn’t necessarily want to list. I mean, despite the conventional wisdom out. There are a number of situations where an owner does not want to publicize that their properties for sale, and they don’t want to do an exclusive listing because, again, don’t want it even to be circulating amongst multiple people. So, like, a great example early on, there up Milwaukee. There was an office part called Brookfield Lakes Corporate Center. And I was introduced to the owner through a banker, private banker, had a nice relationship with, and the owner wanted to sell to someone from outside the Milwaukee market. And the rationale was that if they were to hire one of the usual big brokerages, and even if they handled it confidentially, very likely the brokerages there would approach local competitors. And they could sign confidentiality agreements all day long. But anyone can feign interest and obtain operating data, and they did not want their local competitors to gain operating data about their office complex. They also had some tenants that were in renewals to major tenants. They didn’t want those tenants to get wind that, you know, their landlord is thinking about selling. So on our end, took this investment banking approach where we identified through our, you know, relationships a few different prospects to approach. And within about three or four, you know, parties that we approached, we had one that said, hey, let’s go out there. Let’s look at it. And they made an offer. And you know, and to this day, I never mass email below-the-radar deals, no fax blasts, nothing. It’s just, it’s very low-key. There’s, you know, some psychology to it ’cause we do try to bring together parties, buyers, and sellers that are compatible. Just because someone’s sitting on a pile of money doesn’t mean that they’re the right buyer for it, whether it comes to penciling the deal or personality issues, you know, different people work in different ways. Although I must say that I’m lucky enough that I can, you know, choose who to really focus on. And if there are clients that, they’re not behaving appropriately, then I don’t have to work with them. And by the way, we do handle some exclusive listings once in a while, but those come to us because we have an existing relationship with someone they say, hey, we want this to be shown to the whole world. We want there to be a pretty open process, and so we’ll gladly tackle that. You know, we can put that out there so we do it. But for the most part, you know, 97% of all the deals we’ve ever done have been done non-listed deals. So yeah, we’re a niche player. There are other people that do it, but I like to think that we’re also thought leaders in that approach.
[00:07:30] Sam Wilson: That’s fantastic. I love that. What are some ways, I know you said you kind of mind your own network in the beginning going, oh, hey, who are the attorneys, who are some of these people that I can connect with that might know people that have assets to sell? What advice would you give to somebody in today’s environment if maybe, you know, like you cold calling all day long isn’t their bag? Like, what would you say to them to say, hey, you’re going to go out and find off-market deals, you’re going to find, or as you put it below the radar deals, what’s an effective strategy may be that you’re using or that you’d recommend?
[00:08:04] David Schwalb: Well, I think a big part of it is the networking and it’s about smart networking. Not just networking, smart networking. Smart networking involves using your brain, you know? Sure, LinkedIn’s a wonderful tool, but it’s a tool. It’s not going to find for you the deals of the people. And you really should try to go out there and meet people in person. And, you know, I have associates in my brokerage, when I’m, you know, coaching them about how to network, I tell ’em, you know, follow your interest. And, you know, I have this kind of this extreme example, it’s kind of a joke. I say, you know, if you have a hobby, if you’re into knitting, go join a knitting group and, you know, be involved in that knitting group. And over time you never know where you may get your next deal from. Somebody in the knitting group might be sitting on a major property. And so that’s why I made sure to be. And different things and you know, charitable things, volunteer things, professional groups. But the big part of it is that you have to have a commitment to those things. You can’t just like show up once and expect to, you know, bring in business. I mean, a long time ago when I lived and worked in the city of Chicago downtown, I joined this downtown club called the Standard Club, and, you know, it’s by invitation and there’s a lot of old guys who have done really well there. And I just remember a lot of, you know, people like my age or younger, well, I’m going to join there and I’m going to get him to sell immediately. Like, no, it doesn’t work like that. You then got to get involved in the club. So I started to get involved in committees at the club, you know, helping to plan events. I eventually found myself on the membership committee, the house committee, and then I eventually found myself on the board of directors at the club, and I served on the board of directors at that club for six years. And you learn a lot, by the way, that’s the other neat thing you learn about how a business runs ’cause a club is a business. You have paid employees and assets and so forth. And so as you interact with those people, those committees, those boards they get to know you. You build a level of trust and that’s how you get connected. So there’s no one way, it’s just about, like, how do you connect with people? And then, you know, the other thing, the really important thing is try very hard every day to be a giver, not a taker. And so, and especially at the point in my life, I’m at, like, I like to meet people and I have like zero expectations what they can do for me, I kind of feel like, hey, I like this person. I want to help ’em. And you know, maybe one day it comes back and benefits me. But, you know, it’s part of like just doing a, you know, good deeds every day. And so I help people looking for jobs, you know, looking for jobs in industries that maybe have nothing to do in real estate but, like, I know people in those different businesses. We have a friend, you know, she was CPA looking to work in a big corporation and, you know, I got her an introduction to the CEO who got her an interview and do a nice thing. I don’t know if it will turn into a real estate lead for me, but if I do, you know, enough good deeds on an ongoing basis, hopefully, something comes back out of it. You know, and I know enough people where I’m at my career that it gets even easier. But you have to be really committed to developing relationships. People have to really trust you. I mean, if someone wants to quietly, you know, sell a property. They don’t want you to spill the beans, and they want you also to be knowledgeable and they have to see you kind of in action, maybe in other environments.
[00:11:46] Sam Wilson: What you’ve proposed to me sounds like the get rich slow game, right? And I’m not saying it’s a bad method. Don’t mishear me. It’s one of those things where it’s like this is something that you build over time. Is there a way, you know, if someone were starting out to follow in your footsteps, but do it in such a way that they can build momentum? Because I feel like momentum begets momentum. And I love your method. I love the idea of finding off-market properties, I love the idea of doing below-the-radar deals, helping out sellers and buyers, and keeping it all in a pretty quiet, low profile. That speaks to me. I like that entirely. But is there a way to execute your plan purposefully, such that you find scale in a meaningful amount of time?
[00:12:31] David Schwalb: Sure. Well, certainly, it does have to do with the focus on what kind of opportunities to find through that network. And I do think that someone that is committed, even a young person that’s committed to connecting with people, can scale up pretty quickly. You know, it’s not necessarily all, like, relationships just through years. You may meet someone over the course of weeks or months that you develop a relationship with, especially if you’re involved in, you know, volunteer grant or, you know, professional. So then you gotta look at like, what kind of deals you got to go, you got to spend time on and, you know, like, an hour spent on a commission that makes you say, only $5,000 is the same one hour that you could spend on a deal that could make you a hundred thousand. It’s about using your time effectively. If you are chasing too many small things, then it’s inefficient. How are you going to scale up on that income aspect? So there’s a discipline. You know, there is some risk taking, I think there’s risk-taking in anything. I mean, you know, whether if someone’s looking to be an investor and they want to, you know, scale up to like, you know, a few hundred departments and they set out a timeline, it’s all about the vectors that they choose to go on, right? So it’s the same thing with brokerage. You got to find that balance, you know, like, and you have to be realistic about some things. So like, yeah, everybody would like to make, you know, a million dollars a year, you know, okay, well, but how do you get from point A to point B? And so what kind of commissions? What’s the frequency? And what kind of deals produce that? What’s the timeline? And so, like, when I was younger, you know, I was kind of feeling my way around. You know, I was doing also a lot of deals involving development. I had a whole stable of clients that were looking to develop sites for Walgreens and other, you know, net lease tenants. And that was hot, you know, 15, 20 years ago. And it was something that, you know, obviously changed. But one thing I learned early on was that those commissions don’t come within 90 or 120 days. Those commissions are contingent upon the developer client getting their zoning contingencies, you know, maybe some financing contingencies, et cetera. I had some deals where I waited like 18 or 24 months for commission. And frankly, the commissions, when it’s land, you know, that’s usually kind of at more bottom of the whole thing because, you know, it’s unimproved. So there’s not as much value to make commission off of, but I still learned a lot of things. I was glad I did some of those deals because it did actually open up the door to selling existing Walgreens. So those same developers said, hey, Dave, you know, we want to sell those Walgreens. And then other people at Walgreens saw me selling them. And I had people saying, well, I’ve got this older Walgreens, it’s got like seven years left on it. What do you think I can do with it? Sometimes that lower, you know, a smaller commission piece might be a stepping stone, so don’t always pass on it, especially if it opens up the door to deal with someone that is, you know, a long term relationship and maybe has bigger assets to get involved with.
[00:15:52] Sam Wilson: What would you say are some opportunities you’re seeing right now in commercial real estate that you feel are compelling?
[00:16:01] David Schwalb: I think right now, Industrial is like one of the neatest areas, but it also depends on what part of industrial. So like I don’t go chasing, you know, the shiny balls, so to speak, in industrial, which would be now your Amazon lease facilities, you know, things that are, you know, capital markets deals. I mean, even when I hear that term, capital markets deal, it’s like, is that a real estate deal? Is that a finance play? Is it financial alchemy? You know, what heck is that? So industrial, I focus on my B and C grade industrial, stuff that, you know, is value add, stuff that’s not exactly pretty, you know, but, there’s still a need. And you know, we work also with users, by the way. We don’t just work with investors, we also work with users. And then what’s neat about industrial is that there’s so many different niches. There’s industrial outdoor storage. There’s user deals, there’s investor deals, and then there’s one of my sub-niches is railroads. I develop relationships with some railroads, some shortline railroad. And a couple of them even hired me for consulting work with some potential real estate deals. They actually were paying me to help explore some things. That’s kind of nice to get paid for your time as a real estate broker without having to wait for a commission. And then, you know, when I got involved in that, then all of a sudden I picked up also a client that’s in the barge business. And so, you know, I’ve learned a lot about barges and I, again, going back to rail, not too many people have much expertise on rail. So that enables me also to work with users who have needs that may involve rail. And then, you know, the other thing, kind of as an aside, going back to me being a real estate entrepreneur, I am also in the truck stop business. I got into that about 10 years ago, and so I have some partners in that and I’m one of the founding partners of this business. We took an old truck stop and turned it around. You know, it was a foreclosed truck stop. We approach it as a real estate play, and we realized we better operate it. We said let’s apply professional grade management in an industry that’s surely lacking that. So through my involvement in the truck business, guess what, I met owners of truck fleets. And so, look, people are very, very successful individuals. and they have real estate needs. They also like to invest in real estate. I met guys who, like, were maybe even nearly 40 years old and they sold their truck fleet for like a hundred million dollars, and that was a cash deal. So, you know, you got to meet people that are successful and you got to meet people off the beaten path. And so, you know, I kind of going back to the industrial, we like to work with companies that make or move things, truck fleets, manufacturers, logistics, distributors. That is the key cornerstone of our economy. And right now there’s also a lot of onshoring. You know, that a lot of manufacturing is coming back. And so that’s where the opportunities are. I think, you know, I, I strongly recommend to people like trying to find businesses that need facilities, and whether they want to lease them, buy them, maybe, you know, bringing in an investor that’s going to be, you know, their landlord, you know, do like a sale lease bout. There’s so many different opportunities in industrial. I think that’s a great place to focus on, versus like with multifamily. Sure, the demand is very robust. But the supply is very meager. And I have the perspective of an owner in multifamily. And so within my family, we have zero interest in selling anything because how do we replace the cash flow? You know, we’re not like a REIT, we’re not a syndicator. We’re a family. We have some cousins occasionally that participate with us in our deals. So if it’s hard to, you know, acquire a multifamily and, like, why pursue that as a broker? And I know a number of, you know, successful real estate brokers and they focus on multifamily, they tend to be involved in deals in very specific areas, specific niche. And, like, I don’t think I want to be too narrow. You know, I don’t want to be the guy that’s the expert on apartments in the eastern part of the northwest section of Western Chicago. You know, like, that’s scary, you know?
[00:20:37] Sam Wilson: Absolutely. Absolutely. David, you’ve given us so much to think about today. This has been a blast learning about all the various things that, both business-wise that you’re involved in and just how you’ve built your business over time and then how you just got started in the industry and finding those below-the-radar deals, and then connecting buyers and sellers, and then also, you know, what you personally have invested in. Certainly, a lot to learn from you and appreciate you taking the time to come on today. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
[00:21:05] David Schwalb: They’re welcome to email me D A V I D @ S C H W A L B.com.
[00:21:14] Sam Wilson: Fantastic, David. We’ll make sure we put that there also in the show notes. And thank you again for coming on today. Certainly appreciate it.
[00:21:20] David Schwalb: Thank you, Sam. Have a good one.
