Ed Mathews: Greetings and salutations, Real Estate Undergrounders. It is Ed Mathews. Once again. Thank you so much for joining us today. Uh, today is a really interesting, uh, show, uh, this gentleman and I, so, you know, it's funny when you meet somebody, you can always tell the busy ones because they, they, every time I've talked to my friend, Phil Brooks, he's on his way someplace, and fortunately I've gotten him to stop for 30 minutes so we can have this conversation, but, uh, Phil Brooks from Raw Funds, welcome to the show.
Thank you so much for your time. I know you're literally on site right now doing a due diligence for a project, so I really appreciate you breaking away. How you doing, my friend?
Phil Brooks: Oh, I'm doing awesome, man. And thank you for having me here. It's a pleasure.
Ed Mathews: Yeah, cool. You know, I've been following you on LinkedIn and elsewhere for quite some time.
And I've, I've really enjoyed your journey. And I'm, I'm curious, you know, with regard to that, for those folks out there that don't know who you are, why don't you give us a couple, couple seconds on who you are and what you do?
Phil Brooks: Yes. My name is Phil Brooks. I'm from Buffalo, New York, but I currently reside in Dallas, Texas.
Married with three kids.
Ed Mathews: Lovely.
Phil Brooks: Some of my real reasons why I love doing this business is to have the freedom to spend time with them. But I am in commercial real estate. I started off in residential. Like, most people think you gotta start in residential, but I'm now in trade multifamily and commercial property.
Ed Mathews: Okay, alright, awesome. And, have you always been in real estate or for some reason, I think you were, you did something else beforehand.
Phil Brooks: Yeah. So I was working at 12 hour shift, an hour commute, and an hour commute back more like 14 hour shift, right. And I was a supervisor at a distribution warehouse.
And I used to supervise about 40 to 50 guys, making about 70K a year, but I felt like I was in the hamster wheel. You know, I was trying to do real estate on the side, like as a hobby or whatever, but I ended up on full-time.
Ed Mathews: Awesome. And so you've been full-time for what about a couple of three years now, right?
Phil Brooks: Going on three now.
Ed Mathews: Yeah. Congrats. So, you know, it's funny. I, uh, I just celebrated my sixth. year, uh, full time. And it's, it's so strange, man. It's like, you know, I don't even remember what it was like to work for somebody else. Yeah.
Phil Brooks: Yeah. And I love the freedom, the freedom of it to be able to, you know, really pour into what you really want to do and it's worth it.
It was a struggle in the beginning, but it definitely worked.
Ed Mathews: Yeah, and you know, the time freedom of this is awesome because I know, you know, your kids are younger, right, than my kids. I mean, my kids are in their, I've got a 21 year old and a 16 year old, but you have little ones. Memory serves, right?
Phil Brooks: Yep, I have an 8 year old and a 15 year old.
Ed Mathews: Okay, so, medium and small. So, You know, as far real estate goes, you know, obviously you had a lot of experience in your corporate job and, you know, you could have done anything, right? I mean, obviously you're, you know, you're a talented guy. Why was it real estate? What was the, what was that thing about real estate that kind of piqued your interest?
Phil Brooks: So my dad used to build houses from the ground up, but then he lost everything and he just, he wasn't paying the taxes or whatever and ended up losing everything. But just then before seeing how he's, uh, take a patch of dirt, right. And make it a beautiful home for someone to live in. It always piqued my interest.
Ed Mathews: It's so gratifying, right?
Phil Brooks: Yes, it is.
Ed Mathews: So it's interesting you tell that story about your dad. Because I. So when I was 17 years old, I, I started, uh, in real estate, but my, my real estate start was me pushing a broom, cleaning up construction sites for a builder, local builder, and so this would have been like 1987, 88, right?
So long time ago. So I'm an old dude, right? And, uh, older, not old. So, you know, and it's funny because I, one Friday. Uh, it was middle of summer one Friday, I walked into my boss Ed's office and, you know, usually you just swing in, you pick up your check and you hop down to the local bank and cash it. And, you know, then go have a nice weekend, a fun weekend.
Right. And, but this time I walked in and there were a whole bunch of suits in the office. I'm like, what is going on here? And, uh, So next thing I know, the computers are walking out the door, the filing cabinets are walking out the door, and then poor Ed walked out the door in cuffs and, I looked at, I'm, I'm like astonished standing in the, in the lobby of this place.
I'm like, what is going on here? And same thing. He hadn't paid his taxes. And, you know, he got caught behind and, you know, instead of paying his taxes, he was using that money to keep the building, you know, to keep the building business afloat, because a couple of key laws had changed and the tax situation changed.
And, you know, those 30 houses that he was building, the demand dried up basically overnight. Right. So he got caught, you know, it's the old musical chairs thing. Music stopped and he was the one without the chair. And, um, it sucks cause he's a good, he was a good guy. He is a good guy. I still know him, but, uh, but yeah, I mean, the poor guy lost everything.
And, you know, he's since built it back twice. Um, and it got bigger and better and badder. But, uh, but yeah, I mean that it can happen to anybody, right? You gotta, you gotta make sure that you gotta know your numbers, as I like to say on social media. So with regard to the types of real estate, you know, obviously it sounds like you straddle a couple of different, um, asset classes when you say commercial, what does that mean in your world?
Phil Brooks: Yes. Yes. It's triple net leases, office space, office center, you know, commercial space.
Ed Mathews: Interesting. So I'm curious, you know, so you're down in, in the Dallas, uh, kind of central States, but what are you seeing in, like, the office space? Cause up here in Connecticut, it is deader than a doornail. There are empty buildings everywhere in the Northeast.
Phil Brooks: Aw, man, there's too many people in Dallas.
Ed Mathews: Really?
Phil Brooks: Everything is filled. Dallas is growing, growing. You go out, you go for, you driving late at night. There's gonna be a bunch of cars. You be like, man, where's all these people going? You go early in the morning. Like, it don't matter what time of day it is.
They're like, oh, many people in cars on the road.
Ed Mathews: Wow. Holy cow. And so when you're looking at, triple net deals, right. You know, actually for those folks out there, cause a lot of the folks that listen to this podcast are multifamily folks, right? So it's, it's, there's, there is no triple net. There is, you know, pay the expenses and, and plow the parking lots and, you know, mow the lawns.
And that's part of the expense model. So how does triple network?
Phil Brooks: Yeah. So for example, I'm here right now on site and this is a 10 suite commercial office space, fully occupied. And our only thing with this one, our performer is just to get everybody on triple net. And that is paying the, all the expenses besides fixing the roof, besides, you know, major mechanical stuff, but any electricity bills that's inside maintenance of a suite.
That's all on them. Taxes insurance, it all gets let it out by their percentage or the square footage that they have.
Ed Mathews: And so if I'm a, you know, a leaser or lessor in that building, why would I agree to that?
Phil Brooks: So it’s a business, right? You got the space. The building is lovely, right? Totally remodeled. The area got so much traffic coming in and out of this area.
Plus I'm not upping the rent. So they rent for the square footage can be a lot higher.
Ed Mathews: Gotcha.
Phil Brooks: So I can hook up the rent or you could just pay your own rent.
Ed Mathews: That's how it works. Okay. So it's a value exchange basically instead of me jacking your rent up to cover that cost. Um, if you just take it over, you can control that cost and, and your rent doesn't change at least for the next, you know, X amount of years.
Right? So then you go in. So let me take this one step further. Then. So you go in, you're moving the entire. building over to your paper so that they operate using your lease so you can create operational efficiencies as well, right?
Phil Brooks: Yeah, so I got to wait till they lease come up, right? They lease come up.
Like, so we got two coming up this year, two coming up next year. That would put us about 70 percent triple net. So I only got to pay 30 percent of the expenses. Only reason I probably won't 30 percent in the next year. 10 years because we had a new lead sign last year before I acquired it and they signed a 10 year lease.
Ed Mathews: So good on them. Bad, bad for you, but that's okay. Right?
Phil Brooks: Well, the good thing about it is they rent go up 300 a month every year.
Ed Mathews: So you're going to make it back either way. So six in one hand, half dozen the other, right? Awesome. Okay. So now I understand it, you know, and it's a. It's a classic business model for like ultra wealthy people who are looking to park their money and get a known and very consistent return on their capital.
Right. You know, very different than like parking your money in a, in a S & P 500 ETF kind of situation, even bonds funds, a little more stable, but you know, even those reprice every, every month. Periodic, you know, year, five years, seven year, 10 year. And so it's an interesting business because I have a really good friend of mine that does triple net and all he works on is, CVS.
It's, you know, the drugstore that's all he does. They build them. So CVS will build it. Uh, his company comes in and, and acquires it and then sells off and then leases it out back to CVS and the triple net. Cause CVS doesn't want to be in the real estate business. They just, they want to be in the health business, right? So, but they want the buildings built to their spec. So they control the construction and then hand it off. It's a, it's, I was always, I was fascinated by it. It's like, why would you build it and not own it? And, uh, you know, I mean, they're a multi tens of billion dollar a year company. So they, you know, they probably are a lot smarter than I am about this. I'm figuring.
Phil Brooks: So it's funny you mentioned that just on this property alone why we like this deal so much, right? The seller is going to come in as a tenant as well after we acquire it for about eight thousand a month, right? So and then the other tenant that and they already put about three hundred thousand into their part of the of the building And then the tenant that did the 10 year already put about three hundred thousand in their suite So they don't plan on going nowhere as well.
So we got some long term tenants tenant and they did the remodel of their pocket and they leased it from us.
Ed Mathews: Yeah. So there are, you know, that's some cash for them. They're not going to walk away from that. Right. All right, cool. So when you convert or when you acquire a building like this, is this, I, and I know you're a creative genius or creative financing genius.
So I'm going to ask you a whole bunch of loaded questions about this, but the first one is, you know, are you syndicating these or are they joint ventures or how are you, how are you pulling the capital together? What's the stack look like?
Phil Brooks: This, they are joint ventures, so I do create a financing. So it's very, very minimum money out of pocket.
So for example, um, we purchased in this for 2. 7. We've taken over the, just the loan at 2. 25. We bring in about 350 to the table and the seller's financing the rest.
Ed Mathews: Nice! And then, so your joint venture partners are the 350. You and your, and your JVs. Correct. Uh, so I'm, I tend to be a syndicator, not a JV. Um, for, you know, depends on the deal, but that's just the way a lot of my deals shake out.
So I'm curious about the joint venture thing, right? Because doesn't that, how do you manage all of those varying opinions when you're trying to run a business?
Phil Brooks:So you're going to have your tools and fees, right? But what it is, is every week I'm running a meeting with the property manager, if it needs some construction and the construction manager, you know, All the partners on that call, listening to what's going on with the property.
If we need to make a decision, making a decision together, it's going to be a voting decision. And if we can't, I'm the manager partner, I'll make the final, but I like to leave it up to everybody to have the input on what's going on with property. So it won't just be my fault. We made a collective decision together as a business team.
And most of the time they love it because if they can't even make them a meeting, I have the fireflies as on every meeting that was. Send them the transcript and the email so they can know what's going on with the property. So, so far, I haven't had any major issues that couldn't be worked out. So, it's just a, it's just a matter of communication.
Ed Mathews: Yeah, of course. And, you know, it's, uh, yeah, communication is the basis of everything, right? It's, you know, as long as everybody's, you know, Understands what's going on. Can usually work the problem if there is one, right? So, so I'm curious. How do you find your We're gonna pause here. We lost him. Let him dial back in.
Phil Brooks: I know I put it on do not disturb. Cause I got the little moon up here.
Ed Mathews: We're not live. It's fine. We'll, we'll, we'll handle it in editing.
Philip Brooks: All good. And I just told him I was on my, uh, on an interview. I'm about to go get interviewed. And it's my broker calling me.
Ed Mathews: So, so I'm always curious about how you find your investors. You know, most people start with friends and family and then friends of friends of family, and then expand from there. You know, what's your, what's your strategy?
Phil Brooks: Yes. I'm constantly posting on different social media, LinkedIn, Facebook, Instagram, giving value, constantly giving value. So a lot of people reached out to me wondering how they could be involved and how they could join, because I'm constantly giving, but most of my investors came from me marketing myself and giving out.
Giving more without receiving anything as far as action responses is me giving out value. That's when people want to be more involved.
Ed Mathews: Yeah, it's amazing. So, you know, it's fascinating how much social media contributes to credibility as well as just, you know, figuring out if. Ed and Phil are good guys, right?
Phil Brooks: Correct, correct. So let me ask you something, Ed, right? When I, if I asked you to say, hey, you ever heard of such and such, say John Matthews or somebody, right? You ever heard of them? What's the first thing you're going to do? I'm going to Google them. You're going to go on social media looking for them. So yes, that's your credibility, you know?
So, yeah. So I agree with you. Same thing I do. Simple like, Hey, Phil, you know, I go right on some type of Instagram or anything, looking to see if I can, if I know them.
Ed Mathews: You know, it's, it's funny. And I've had this experience with, Several, and almost to the point where it's many investors within our world, where, you know, we taught, we started talking about like we, you know, I think you probably do the same thing when, when we get a deal together, you know, we give them our due diligence and, and, you know, all about us and the deal and all that, and I've had more than one investor, several, almost to the point of many who have said, nah, I don't need to know anything about you.
I feel like I already know you, right. Cause I've been watching you on YouTube or watching you on LinkedIn, or I've been listening to your podcast and, you know, my answer is, well, yeah, you do indeed. This you've got to do your homework, right? Cause I mean, you don't know me from Adam. I could be an ax murderer for all you know, but, uh, I'm not, but you know, I mean, and so the, but it's amazing.
The credibility that gets created when you put yourself out there and you're vulnerable and you kind of talk through, you know, the good, the bad and the ugly. Right. You know, today we're talking about doing due diligence on a cool building that you're working on tomorrow. It may be, there's a problem.
There's a problem with one of the, one of the lessors and, you know, you've got to sit down with them and have a hard conversation, right. And you want to document that just as well, because, you know, for me, I think like one of the reasons I became interested in what you're doing is because like, I always, I'm always interested not only in how people handle success, but also, you know, when things, when things get a little bumpy or things don't go exactly as planned.
How do you handle it? Right. Cause that's the true test. And you know, as my grandfather always used to say, judge people by what they do, not by what they say. Right. And, and I try really hard to live up to that. You know, sometimes I'm not that great at it, but most of the time I am. And you know, it's, uh, hopefully, you know, I, I think you are as well.
So it's really interesting how that connection gets created when, you know, You haven't met the person yet, but they feel like they've known you for six months, right? And we're almost all, we're it's like, we're, we're almost all already friends. It's just a matter of us meeting at some point, right?
Philip Brooks: Correct. So I had multiple people say that to me as well.
And I do get a bad as well. So when I was working at 14 hour shift, how I went full time and made me dive deeper. I got into a car accident. I fell asleep on my way home and I hit a pole head on airbags exploded. Tire popped off glass. It seemed like everything was moving in slow motion, right? When I got out.
And I used to act like something needs to change. I need to do something different. It's like I moved the needle a little bit, but I'm not, I'm, I could, I know I could be doing more and I kept, I'm, I'm spiritual, you know, I'm Christian. I believe in God. So I was asked, I'm constantly talking to Him. Hey, I don't feel like I'm living.
I'm, I'm as a place. 12 hours and I don't feel like I'm living out my first. Something has to change. Something has to change. I walked out that car without a scratch on me. No, not a scratch. No aches, not a scratch. Cause that was my next one. That's what I want. So that's when I went four times. Yup. And I'm like, Hey, I kept asking them, telling them something needs to change.
You made a change. So that's when I went four times and I've been going at it ever since. So my first four deals, the content I'll be sharing, I'll, I'll give the baddest And I questioned myself, can I really do this? I was in a single family. I was working a 12 hour shift. Can I really buy commercial real estate?
This really And it fell down because of due diligence. I lost earnest money, but I learned from it. And I didn't give up. Because I heard an episode on the Ed Mylett Show. And he was interviewing the guy from Sustain Your Game. And he said, If you was asked to build a brick wall, and didn't know how to do it, but you lay that brick nicely where it goes, then the next day, brick laid out with precisely where it goes.
Eventually you had a brick wall. So it was about living in a process because I just asked God, I'm like, now I feel like I'm questioning God. I just asked him to change something. He showed me something and I'm almost there and why not keep pushing through? Yeah.
Ed Mathews: And that's an amazing, you talking about Alan Stein?
Phil Brooks: It was Alan Stein. Yes, it is.
Ed Mathews: I have not read his book, but I'll make sure I have, uh, I know several people have been telling me to read it. So I'll put that in the, in the notes and I'm going to read that book. Now you've given me the, uh, the push I needed. Yeah. It's I watched, um, I was just telling somebody the story not two hours ago.
It's funny you mentioned, mentioned this. It's like, you know, the, the, the whole concept of being unstoppable, perseverance, and, you know, doing the right things and laying those bricks as Alan says, so that, so that by the time you get to the point where you're ready to succeed, the foundation is already there.
Right. And then there's, you know, the next step of that is, so I, I recently become a huge fan of Tom Bilyeu. Are you familiar with him, Tom? So impact theory is his podcast. And I saw him speak at a conference I was at a couple of weeks ago. And the thing that he was talking about in terms of being unstoppable is, you know, recognizing that we are biological beings, right.
And we are in the middle of a biological experience. And so when things go well and the dopamine's firing and the, and, you good, good chemicals are flowing through your brain. You're experiencing that. It's just, it's just a chemical reaction. And likewise, when things don't go as planned, you're feeling that stress and the cortisol is firing and you know, you're either frustrated or anxious or depressed or angry or whatever.
Again, it's just a chemical reaction. And if you can take that beat to let that process happen, right. And just acknowledge, okay, I'm in the middle of it, but I'm not going to do anything until I can get through it. And then once you get through it, you can work that problem, whatever it is, right? Deal falls through, you lose earnest money.
You know, you're, you're done. Debt costs change from what you thought they were going to be partner drops out. Or, you know, instead of, instead of a 70 percent triple net, the company that was the other 30 percent decides, you know what, we're actually going to renegotiate this cause it's in our best interest, right?
And now you've created a win win that you didn't expect. Happy. Right. All of it is. All of it's just a chemical experience. And as soon as you recognize that, you know, it's the feelings that you get from that up and down kind of, you still experience them. You're still a human being, right? But, but you also realize that, you know, the only thing that matters is being present right at that moment, right?
Like you were, I assume, right after your car accident. Like when you're like, Oh my God, am I, I'm okay. I can't believe this, right? That's as present as you're going to ever get. Right? So, all right. Well, anyway, I'm going to hop off my soapbox. Let's get to the final four. So you can get back to your due diligence process.
And, uh, and then we'll go from there. So do me a favor, Phil, uh, finish this sentence. My purpose is…
Phil Brooks: serve as many as I can.
Ed Mathews: Love that. Uh, second question then, uh, what is the best advice you ever got? And who gave it to you?
Phil Brooks: The best advice I ever got was, I won't say it's one of the things that stuck out for me while I'm out.
And while I'm in commercial, my goal was to buy one house a year for 10 years, have 10 house. And I met a guy that said, Phil, it's taking just as much time to buy one building with 10 apartments in it as it do to buy one house a year. So why just go for the, why, why not just go big?
Ed Mathews: I love that advice. I got the same advice not that long ago. You know, it's so easy to get comfortable, right? So I'm curious, who was that guy?
Phil Brooks: Oh, his name is, he was a mentor of mine back home in Buffalo, New York. His name is Keith Canazzi, he was flipping about 20, 30 houses. He owned a bunch of real estate.
Ed Mathews: Well, all right. Um, all right. Third question. So leaders like you and me, we tend to be readers, right?
Obviously, you know, you're, you've already proven that given the Allen Stein, you were listening to him, you know, but the thing is, is that I find these days a lot of folks, you know, because we're running around, we're moving all the time, you know, reading a physical book doesn't necessarily. You know, isn't necessarily realistic.
So a lot of people listen to podcasts or audible books, or, you know, they listen to listening and watch YouTube videos or go to conferences or whatever. So I'm curious, you know, how do you take in information and also from an author or creator perspective, who are you paying attention to these days?
Phil Brooks: Oh, I do all of the above.
And I go to conferences, I listen to podcasts, I listen to audio books when I get the chance. And I actually sit down and physically read a book, you know. So I do all of them. It depends on what I'm doing at that moment, but I'm always trying to grow in different I love self-development books. I love books because I could books that improve me, I only could be better from anything that I'm doing.
So I always try to work on myself. So, yeah, I could read a business book and I'll take it in. But when I realized when I read stuff that helps me and build habits that it's going to let me read that book or it's going to tell me to turn on that podcast and things of that nature and I apply it. That's when, um, that's, I love reading books and getting self-development.
Ed Mathews: So who do you pay attention to these days? What are you reading?
Phil Brooks: So I'm going to give you four books that I love. I probably read, um, three times because I always get something new every time I read it. It's going to be Think and Grow Rich by Napoleon Hill, Ed Mylett The Power of One More, Gym Room Days That Turned My Life Around, and Robert Kiyosaki, that’s the book that changed my life Robert Kiyosaki, Rich Dad, Poor Dad.
Ed Mathews:
I read, so I read two of those books every January. Every year, I've never read Ed Mylett's book, but I'm well aware. I, I do know the concept. I know the concept from being, because I was an athlete, right? So it's, you know, in the weight room, you do one more, right. And then do one more and then one. But, uh, and I think that's conceptually what he's talking about, but so I will, um, our team will make sure that all of those books, including the Allen Stein book will be in the, in the notes.
Uh, so that if you want to follow Mr. Brooks and his example, um, it's easy to do, but those are awesome. All four of them are phenomenal books. So the last question, the last question of the final four, finish this sentence. Success means joy. All right, my friend. Well, Hey, when you're not talking about real estate, when you're not saving the world from tripl, triple net leases, uh, what do you like to do for fun?
Phil Brooks: So I'm learning how to golf and I'm also learning how to fly a plane. So I'm going to take some lessons as well, but I always wanted to get into learning how to play golf. I'm starting to do that now. And plus my family loves traveling. We at least travel about four or five times a year now, if not more.
Ed Mathews: Well, I'm a, I've been golfing for a long time. I actually took a break that, but I'm about to get back into it. My philosophy on golf is you get your money's worth. And what that means is you hit the ball as many times as you possibly can, because I'm never me. I've come to the conclusion. I'm never going to be Tiger Woods, so I'm just going to have fun.
Phil Brooks: Yeah. Enjoy.
Ed Mathews: And, uh, yeah, it's, uh, flying a plane. Oof. I'm going to leave that one to you. Yeah, so
Phil Brooks: Yeah, so I went on a flight, some flight lessons before and I loved it. So now I want to, um, really want to dive into it and learn how to do it. Buy my own smaller plane.
Ed Mathews: I have a couple of friends that, that, you know, they, they're, they're flyers.
In fact, one of them lives at an airstrip and he parks his plane in his backyard. And, uh, Dan Roark, for real. And, uh, he lives down South. Um, actually, no, he doesn't live anywhere near you, but, um, yeah, he's down South in the Carolinas, I believe. And, uh, yeah, it's crazy, man. Yeah. So, all right, well, hey, Phil, I've really enjoyed our conversation today.
Thank you again for the opportunity. If people want to get in touch with you, learn about the projects you have coming up or talk to you about other things, you know, maybe they can offer a golf tip for you. What's, uh, what's the best way to get ahold of you? What's the best way to reach you? So yes,
Phil Brooks: So yes, phil@rawfunds.com is my email. I'm also on LinkedIn at I'm Phil Brooks. That's I am. PHIL, P H I L B R O O K S. I'm also on Facebook, just Phil Bsrook. And Instagram is @imphilbrooks as well. I am P H I L B R O O K S.
Ed Mathews: Awesome. So Philbrook's from Raw Funds, continued success. Congratulations on everything you've accomplished.
And, uh, Hey, if you're finding yourself in a plane and you're flying up northeast, uh, land at, uh, Chester airport, I'm 10 minutes away and I'll, I'll buy you lunch. Sounds good to me.
Phil Brooks: Uh, I'm looking forward to that.
Ed Mathews: Really nice to talk to you. Thanks. All right. Have a good one, buddy. See yah.