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While many investors focus exclusively on residential real estate, industrial real estate can be incredibly rewarding. And many industry veterans — like Levi Benkert, Founder and CEO of Harbor Capital — have jumped into the industrial real estate waters with both feet.
We recently sat down with Levi for an episode of The Deal Makers podcast, a show in which we talk to the best and brightest in the world of real estate. The goal? To figure out how they’ve found success. Levi’s interview did not disappoint. You can listen to it here.
In this article, we’ll share Levi’s tips for growing an industrial real estate business, as well as our own insights into the process. Let’s dive in!
Levi Benkert is a real estate expert with 20+ years of experience, and he has bought, managed, and developed over $400M in real estate properties in his career.
He recently established Harbor Capital, a real estate private equity shop that focuses on industrial properties in Texas. Benkert has built Harbor’s portfolio on the time-tested philosophy of buy right, lease well, refinance, repeat — otherwise known as “Buy, Refi, Die.”
Like any entrepreneur, Benkert has experienced his share of ups and downs. The Great Recession was especially difficult for him—as it was for many in the real estate industry. But he emerged from the financial downturn with the knowledge he now uses to succeed in industrial real estate.
After many years in residential real estate, Benkert switched his focus to commercial properties used for industrial purposes, such as warehousing, manufacturing, and logistics.
Why? There are many advantages to commercial real estate, including low vacancy rates, less tenant turnover, and lower maintenance.
But building a successful business in this niche still requires hard work and dedication. Benkert has succeeded in the sector by keeping these five tips in mind.
According to Benkert, “Industrial real estate is extremely relationship oriented.”
To succeed in this industry, you have to take a proactive approach when it comes to networking and pursue it on a daily basis. Fortunately, there are plenty of ways to do this.
As a General Partner (GP) syndicating deals for the last 20 years, Benkert has a robust network of Limited Partners (LPs) to work with. But he also cites how incredible Twitter has been for networking, saying it’s been “rocket fuel” for Harbor Capital’s growth.
The key: don’t overcomplicate things. All Benkert does is, “Share what we’re doing. And there’s a link to our website in the bio.” He notes that 85-90% of the investors on his last deal were connected through Twitter conversations.
And you can’t underestimate the effect networking with brokers can have on your business. “Some of the best money we spend is on brokers, and we’re happy to hire the best, high-end shops that have great marketing teams behind them and are good networkers,” Benkert says.
Why is a good broker key to successful industrial real estate deals? In Benkert’s case, Harbor Capital can “Get as much as 15% more if we hire a great broker! I want to lease or sell with the top industrial brokers in the city, and I’m happy to pay for it.”
There’s no shortage of industrial properties on the market. But not all of them are worth your investment. The key is finding the right property and negotiating a price that makes sense.
This begs the question, what does the right property look like?
Obviously, it depends on the particulars of your business. In general, look for well-located properties in growing cities. Then make sure they have high ceilings and good circulation.
For Harbor Capital, flexibility is key as well. “Having a space that’s flexible gives you that much more of a buffer against a certain market crashing or having an issue.”
Your business is only as good as the people it employs. That’s why it’s so important to hire well. Admittedly, this hasn’t always been an area in which Benkert excelled.
“We’ve had a couple of hires that didn’t work, and that’s always been a struggle for me. Some of the people we brought on were great people, just not a good fit for where we’re at.”
Now, Benkert loves his team. He recommends figuring out what areas of the business you’re good at, then hiring people to boost the other areas. Find people who believe in the vision you have for your company and are willing to work hard to achieve it. And importantly, make sure their personality fits with the culture of your organization.
According to Benkert, “There are two main inputs that help a business like ours grow. One is deal flow, and the other is capital sources.” Put simply, those who achieve success with industrial real estate know how to find good deals and generate the finances needed to fund them.
How do you find good deals? “The only answer is just to be relentless,” Benkert says.
His team doesn’t sit around waiting for deals to fall in their laps. They’re “Cold calling, taking brokers out to dinner… and shipping them bottles of whiskey” to show their appreciation.
Once you land a deal, you have to be able to pay for it. Stellar marketing campaigns, a solid pitch deck, and conservative underwriting will help you connect with (and win over) investors. Benkert also recommends treating these people with the utmost respect and integrity.
Harbor Capital doesn’t “sell to investors.” Instead, Benkert and his team approach every deal by pointing out each property’s positive and negative aspects. They then allow each investor to decide if they want to move forward with a transaction.
While this approach may seem counterintuitive, it’s allowed Harbor Capital to build better, longer-lasting relationships with investors that will continue to pay off in the future.
Here’s the truth: nobody knows the future of real estate. All anyone can do is look at data from the past and guess how the next couple of years will unfold.
Benkert explains, “We’ve had one of the longest bull runs in the history of U.S. real estate, and bull runs typically don’t last very long.” As such, he says, “We’ve got to be extremely cautious. So we’re doing careful, cautious deals, and I encourage everybody to do the same.”
His recommendation? “Take less debt, higher debt service coverage ratios, and find value-add opportunities where things are under leased and in growing cities and markets where demand is likely to increase.”
Industrial real estate is an exciting opportunity. To find success in this area, implement the tips, tricks, and best practices we shared in this article.
Looking for more advice to guide your real estate career? Check out The Deal Makers podcast, a new real estate podcast from Agora. We talk to industry experts in every episode to help you close more deals, turn more profit, and achieve more success.