JF2286: Buying Businesses & The Land With Nigel Guisinger

Nigel started investing in 2008 when he bird dogged a mobile home park for a family friend and from that original deal, he was able to cut a nice profit that he then turned into a handful of foreclosed condos. Fast forward, today, Nigel has 160+ units in three states. His main goal is now to buy businesses that have real estate to help him compound his buying power.

Nigel Guisinger Real Estate Background:

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Best Ever Tweet:

“Real estate does not appreciate in value” – Nigel Guisinger

TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today we’re speaking with Nigel Guisinger. Nigel, how are you doing today?

Nigel Guisinger: I’m doing great. Thanks, Theo.

Theo Hicks: Awesome. Well, thank you for joining us. Looking forward to our conversation. A little bit about Nigel – he is a full-time investor and likes to focus on buying businesses, but also have real estate so he can compound his buying power. He started investing in 2008 and his portfolio consists of over 160 units in three states, an office, a condo, 9,000 square feet of commercial space, 4.2 acres of development land, 2 appliance stores,  a laundromat, a home building company, and a single-family home. He is based in Springfield, Missouri and you can say hi to him on his Instagram account, which is just his name, Nigel Guisinger. So Nigel, do you mind telling us some more about your background and what you’re focused on today?

Nigel Guisinger: Absolutely. So I grew in Salem, Oregon, and went to a public school, didn’t have anything really special, did some private school when I was little, and that taught me to get into thinking for myself and getting into thinking about wanting to be an entrepreneur. From the time I was little, I knew I want to be my own business owner, I wanted to kind of forge my own path. Started out with selling rocks on the beach at six years old, seven years old, to kids who could have just picked them up and skipped them, and I’d go pick them up at low tide and sell them back to them. So that entrepreneurial spirit has always been in me.

I went to Oregon State, before that I went to Germany for a year as an exchange student. At Oregon State I got my degree in German, not in business. And then met my wife, got married, got into the construction supply business; while all of my co-workers were buying boats and nice houses and everything, I stacked cash from ’04, ’05, ’06 up until 2008, 2009 when the market fell out. And then I went in and started buying foreclosed condos from banks directly, and then bought some apartment complexes, and then realized that some of my customers were beginning to hurt, which is similar to what’s going on now… So the result is they needed an equity partner. So I came in and I was able to buy things like a homebuilding company, a glass company that did 27 million dollars of business and I didn’t have to pony up any cash. And I also got the warehouse, I ended up owning the building that was next door to them because they had the options on that. So I look at things and how I can both grow a business and buy real estate.

That kind of brings me to today – I ended up flipping a couple of apartment complexes; I’ve never flipped houses but done apartment complexes and rehabbed those. I like that sweet spot of a million dollars to five million dollars, both on the purchase price and on the ARV, that way I’m sticking out of what any newbie can do, but also stand out of what the institutional guys can do. So I like sitting in that sweet spot. But the new thing that I’m really passionate about right now is buying businesses of baby boomers that is either home services or critical services, essential workers, to get people back to work and to keep these businesses that were closed down due to the Coronavirus, or because we’ve got five million baby boomers that are trying to exit the market, there is an opportunity. So that’s something that I want to capitalize on. So right now, doing that, and helping people look for business and giving advice on how to do that so we can get this economy going.

Theo Hicks: So when you’re buying these businesses now, are you just buying the business, or is it the purpose of buying the business and the real estate that they’re in?

Nigel Guisinger: So ideal situation is a business where you’re buying the business and buying the land. So one of my business models which is something that I think anybody can pick up right now is there is a bunch of baby boomers who want to exit the market, if it’s due to COVID if it’s due to whatever choices that they have; they’re just tired of the grind, right? Well, they own these businesses and they have a substantial amount of equity, but then they also own the building that they’re in. So you can utilize owner financing on a deal where you’d buy the business on contract from the existing ownership, or if you use a SBA loan to maybe put 10% down.

I did that with an appliance store where the total buy was 1.8 million dollars for the land and the business. I used an SPA loan, we got a $500,000 purchase price on the business, 1.3 million dollars on the land, I put $50,000 down for the 10% requirement for the SPA on the business, the owners carried 100% on the land, that gave them enough to pay off the property. I ended up getting the piece of property that was worth, after we did the work to it, 3.2 million dollars, and you’ve got a business that did four and a half million dollars last year in gross revenue, with an 8% EBITDA.

So it’s a win-win all around; all the people who work for him, still employed. In fact, we grew that company; there are more service desks, there are more delivery guys, there are more employees, people are getting more salary, everybody wins in that. The seller’s got an annuity basically in the form of the land, because they were carrying the contract. The SBA paid them a big chunk of money at the beginning, which we’re making payments on that. And then because of that, we were able to cash flow, make sure that we could hire more employees, more vehicles, give raises, add insurance, things that they had never had before, right?

There’s a lot of opportunity for this, so I’m really passionate about how to get people who maybe don’t have something, to get something. How do you go from being that employee that has never had it, to having that business? That’s what I’m passionate about right now.

Theo Hicks: Perfect. Let’s dive into details on this particular deal you were just talking about, just so we can pull out the strategies that people can replicate this. So I understand most of what you said, so I might ask some follow up questions. But let’s go back to the very beginning. So I want to buy a business and the land from a baby boomer.

Nigel Guisinger: Yes.

Theo Hicks: Where do I go? Am I just googling it? How do I find these businesses?

Nigel Guisinger: Sure. So every day you drive past businesses, unless you decided to shut yourself in completely. But you’re driving past a business — I guarantee within this week you’ll drive past of business in your town, wherever you are, that has a baby boomer; somebody who’s between the ages of 60 and 70 years old that has been in that business for a long time. In this example it was called Walt’s Sherwood Appliance. A great business, had been around for 25 years, by Tom and Carol Vincent. Amazing people, I can’t say enough positive about them; they’re involved in the chamber of commerce, they’re involved in their church, they were involved locally for kids sports, everything that you’d want in a business. [unintelligible [00:09:46].24]  whatever everybody thinks of when it comes to that, that was these guys; they were amazing, they were givers to their community. So there are ample businesses like this, but the problem is they’re getting old, and they got tired. That doesn’t mean that they couldn’t do the job anymore, they wanted to continue to do it, but they wanted to also be able to enjoy the fruits of 25 years of labor. They wanted to go to Hawaii, they wanted to go to Alaska on cruises, they wanted to go do whatever they wanted to do. They didn’t want to just hang up their business because they got tired of it, because they have enough integrity and they cared so much about their employees that they couldn’t just wrap up the business.

And you’re going to find that a lot of business owners, no matter what the mainstream media is saying right now, the facts are business owners actually care about their employees, at least all the small guys that I know care about their employees. They would continue and they do continue fighting it out right now when it would be easy to give up. They do that solely for the people that work with them, because you’re in and out with them every single day in the grind. So Tom and Carol cared about one thing and cared about one thing only. They wanted some money, right? But they were fine, because they have done well. But what they really wanted more than anything was to make sure that their employees were still employed, that I’d keep that business going. They didn’t care about the name, they didn’t care about who was running it, they cared that the people who work for them still had a job. Because they didn’t want to just take theirs and get out and bounce on everybody else. So over the course of about a year – it took a while – we talked about buying the business, and I found out that they owned the land, and I found out what their needs were. They didn’t need a chunk of cash all at once, because they wanted to go to Hawaii this month, they wanted to go to Alaska the next month, they wanted to go down to the coast another day, they wanted to go to up to the mountains another week. They didn’t have to be a chunk of cash, they needed a constant cash flow, which is just something that you get in normal real estate.

So what we did was we found a creative solution on how to do that. We established a value based on the real estate off of what they were paying, and then in addition to that, we found out what the value of the business was. We were able to figure out what the value of the business was based on their P&L and balance sheet, and then based on what they’re paying for rent for that area, we created what would that loan amount look like if I went and got a normal loan through conventional terms.

So once we’ve established the baseline of where the prices need to be, we re-engineer those values based on that total price; the business plus the land equals X. Now what they care about is the total deal, so now based on tax strategies and based on what we need to do, we maneuver those numbers so that they get what they need when they need it for a chunk of cash that they mitigate their tax expense, and then they get an annuity over a period of time. So that’s what we did.

Theo Hicks: And an annuity – is that cash flow, payments?

Nigel Guisinger: Cash flow they get every month. That’s right. So when people get old — you’ll see that some people want real estate, and what that does is if I bought an apartment complex and it was paying me $2500 a month and that $2500 a month, if a paid pure cash for it was $300,000, I could do an essence buy an annuity for the same amount from an insurance company, and they would control the asset but they’d pay out the annuity amount every month. You can create your own by buying the real estate from somebody and making payments to them. It’s called owner carry finance, but instead of going in and saying “Hey, I want you to carry this note for me, here’s what I’m going to do for you. I want to give you an annuity.” It’s the same thing, it’s just termed different.

The language that we choose to use when we negotiate these deals is really really important, because if we say “Hey can you do me a favor and carry a note for me?” That’s not the same as me saying “Hey you know what? Theo, you’ve got a need for a certain amount of money every month, so why don’t I give you that amount of money every month and you give me your assets?” Right? So that’s an annuity; there’s a difference. It’s the same exact aspect, but the language that we’re choosing to use encourages them to say “Hey, wait a second, we’re partners on this”, not
You’re doing me [unintelligible [00:13:38].12] by being the bank for me.”

So this is truly a partnership, because I’m paying them every month and they have a vested interest to make sure the business still survives. So when something’s difficult and I don’t know how to do it — because I don’t have the experience that they have; they have 25 years on me, right? So what do I do? I just call them up, “Hey, by the way, this happened, what would you do?” They have a vested interest to make sure that we succeed. That’s what happened in this case.

And then here about a year ago, an incident happened where the need to refinance and have a big chunk of cash occurred. As a result, we actually ended up after three years refinancing Tom and Carol out of that note; they got paid off, and we put in permanent financing for them. Because we had a partnership — I still get to call Tom and Carol every week, I still get to ask him questions. It was just that they had a need for something and I had a need for something, and we were able to fulfill those needs by refinancing out. But that partnership and that friendship still exist, and today it’s a thriving appliance store in Sherwood, Oregon and in Canby, Oregon, and we have a dozen or so employees, and nobody makes minimum wage, and everybody’s got better services than what they had. I think it’s turned out really well; it was a win-win for everybody.

And in the end, I’ve got a great piece of property, and I’ll end up selling that business one day to somebody else and probably do the same thing, because we have the obligation as business owners to reach out our hand and help people up. And right now — I saw a stat here… Two weeks ago I was in Breckenridge, Colorado with GoBundance, and there was a stat that said 1,900 businesses that do a million dollars of revenue close up every single day in this country. And if we look at that, 1900 businesses every single day just wrap up, that do over a million dollars… That’s just money coming off the table. All you have to do is ask, “Hey are you willing to sell? Instead of hanging it up, why don’t you call me and why don’t we cut a deal?” Because they’re going to walk out with nothing. So you can create terms, you can get in… Why do we have to wait for banks? JP Morgan said that they’re not going to lend on stuff. Why do we have to give the money to the banks? Why don’t we as small business people step it up and come in and say “You know what? Let’s buy this out, let’s create an annuity, and let’s really bring up some people who have been held back, that maybe aren’t accessible to financing, and carry those notes?” Because there are owners right now are walking away getting absolutely zero, and it is millions of dollars that they leave on the table.

So my encouragement for everybody on this podcast is I hope that people can look creatively to see what are ways that we can get real estate, and think creatively to get that, while at the same time helping out our economy, keeping jobs, and really growing the market, which is what’s needed right now in this country more than ever. And specifically, one of those awkward areas of town that you’re not normally in. Those businesses are getting thumped; and if people just stepped up and say “Hey, let me carry the torch for you”, you’d have that owner that says “Hey, I want a dog fight with you” and it’s always a winning ticket. So it’s made me millions of dollars, it’s made owners that were going to walk away with nothing millions of dollars… It’s truly a win. The only people who don’t make any money in my deals are the banks.

Theo Hicks: Alright, Nigel, what is your best real estate investing advice ever?

Nigel Guisinger: That number one piece of advice that I was given was from my grandma. And I hear this all the time, that people think that this isn’t true, but she told me one thing and she said “If you want to make more money in real estate than you can even imagine, you’ve got to accept one absolute truth. That absolute truth is real estate it does not appreciate in value. What you think of as appreciation is actually a measure of inflation.” So if you can invest so that you’re cash-flowing, that’s where you make your money. The people who make their money long term in real estate understand that what they’re doing is they’re actually pegging a certain amount of money in a certain date, and they’ve paused time. Because the three weapons to negotiate are price, rate, and duration. And if you can pause time, you win every single time.

Theo Hicks: Perfect. And that’s actually one of our three unbeatable laws of real estate investing, so we cannot agree more, Nigel. So are you ready for the best ever lightning round?

Nigel Guisinger: Absolutely.

Theo Hicks: Alright.  First, a quick word from our sponsor.

Break: [00:17:53] – [00:18:34]

Theo Hicks: Okay Nigel. What is the Best Ever book you’ve recently read?

Nigel Guisinger: I just read Tim Grover’s Relentless. It’s a story about basketball players Michael Jordan and Kobe Bryant, but from the perspective of there are closers, there are cleaners. And guys like Kobe Bryant and Michael Jordan, they are cleaners. I consider myself a cleaner.

Theo Hicks: If your businesses – since you got a lot of them – if all of them across the board were to collapse today, what would you do next?

Nigel Guisinger: I love this question, because one of the challenges I think that would be awesome is to see if you can go from zero to hero in 365 days. And I think I’d be a millionaire in 365 days, because what I’d do is I’d go knock on the door of every single business that I saw they haven’t opened up from Coronavirus, and say “Hey, this business was a legitimate business before. Are you willing to jump back into it? You’ve got the know-how, I’ve got the motor, let’s do this, let’s fire this thing back up.” And I would find somebody in this town today that would carry on that, and 365 days from now I’d be a millionaire again. And I think anybody can do that, too.

Theo Hicks: Can you tell us about a deal that you’ve lost money on? How much money you lost, and then what lesson you learned.

Nigel Guisinger: Sure. I got a big hit, probably bigger than most of the people that are on the show. Never lost any money in real estate, but on a business, I had an appliance store where we thought that we had cloud back up, we paid for primary back up in a [unintelligible [00:20:00].11], found out that our server provider wasn’t doing what they needed to. We had to go through insurance because they lost their accounts receivable. That was 2.2 million dollars; it was expunged, just like that. I thought that we had enough insurance to cover that; I only had a hundred thousand dollar policy, they only had a million-dollar policy. That one cost me seven figures. So make sure that you are checking your insurances regularly, that you have adequate coverage… Because the size that we were had enough insurance, but then five years later when we grew from $350,000 to $9,000,000 of revenue I hadn’t revised what my aging was. And back, then my aging was at a hundred thousand, and it was up to 2.2 million dollars.

So if I could go back, my number one thing is make sure as you grow your businesses, that you’re sitting down with your insurance providers. If you’re going through hypergrowth, peg out where you think you’re going to be in six months and in a year; if you’ve got goals to get there, make sure that you’re doing it… Because the other guy had insurance, I had insurance, it was no fault of our own, and a million bucks plus got wiped. And that hurts. But I went and made another million bucks, so…

Theo Hicks: There you go. What is the Best Ever way you like to give back?

Nigel Guisinger: My number one thing that I’m doing right now is — I call it a passion project, it’s called yoursmallbusinesshub.com. I teamed up with one of the other guys from GoBundance to help new investors and help people who want to buy businesses buy businesses. Basically, folks who have never done it, they don’t know how to underwrite a deal in business; maybe they know how to do it in real estate, but… How do we do this? One of the things that I feel obligated to do because I know how to do it is to help underwrite and be that secondary check for people.

So we’ve got a website called yoursmallbusinesshub.com. We don’t sell anything, we just help people buy businesses, and in the right situations, we’ll actually team up with people and co-buy businesses with people. If they want to be the operator, we’ll help get that deal done. And it has been great so far, we’ve helped buy a couple of hundred businesses and keep probably 30-40 million dollars in the economy, which is awesome, not losing that to attrition.

Theo Hicks: And then lastly, what is the Best Ever place to reach you?

Nigel Guisinger: The best way to reach me is just through Instagram. I’m just @nigelguisinger. I have a hundred percent commitment to if you send me a message, I will respond back. I think it’s important. I post about some of the apartment rehabs I’m doing, some of the businesses that I’m doing, but most of all, if you send me a message through Instagram, I promise I will respond back every single time.

Theo Hicks: And that Instagram handle again is his name @nigelguisinger. So Nigel, I really appreciate you coming to the show. I always enjoy having conversations with people that are doing something that I don’t know anything about. So essentially, your strategy has been to buy businesses as well as the underlying real estate, with the combination of your own money, small business loans, and then seller financing.

And obviously, right now this is something that is very relevant, and you mentioned that during the lightning round that if your business ever collapsed, you would just go to these businesses that you can clearly see aren’t open right now, or maybe just re-opened and are struggling and maybe you just don’t know that they are, and try to work out some sort of deal by determining how much the real estate is worth, plus what the value of the company is worth, plus figuring out what their goals are, whether it’s a chunk of cash or an ongoing cash flow, and try to figure how to make a deal [unintelligible [00:23:40].28] This is a little complicated, so make sure you check out his website yoursmallbusinesshub.com, as well as take him up on his offer to talk to him on Instagram if there is a business in your local area that you want to consider buying; maybe he can help you out determine what the value is and how to come up with a solution. So Nigel, again I really appreciate it. Best Ever listeners as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

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