Happy Friday. This is the Shake 🤝 : The free 5-minute newsletter that is on a mission to up your real estate game every week.

Here’s what we've got for you this week:

• Church Confessions ⛪️

• Creative Finance Cafe ☕️ Sandwich Lease

• Commercial Corner 🏢 Subway: Is It Really A Foot Long?

MARKET RADAR

CHURCH CONFESSIONS ⛪️

I have a confession to make: I’ve become a horrible driver since I got into real estate.

I catch myself paying more attention to the properties I’m driving by rather than the road in front of me. Sometimes making immediate hard turns if I see a distressed property. It’s almost like…

I hope I'm not the only one

Anyways, one thing I’ve noticed while driving (sometimes recklessly) is that churches have a 💩 ton of land in prime locations. This led me down a rabbit hole to find out how much land they have and what they plan to do with it.

Turns out the biggest low-profile landowner in Florida is The Church of Jesus Christ of Latter-day Saints of Salt Lake City (saying all that in one sentence should be a sin). The devoutly private faith is known to have at least 630,000 acres! Must be nice.

But there are some significant headwinds that churches are starting to face:

• Membership dropped from 71% in 1985 to 47% in 2020 📉

• 80% of churches are in plateau or decline 🔻

• >60% decline in church revenues is projected over the next 30 years 👀

• ~50% of most church finances go to real estate ⛪️

• 3,700 churches are closing annually, and this is projected to increase by 50% over the next 30 years 🤯

This is forcing churches to question what to do with the valuable property they own - should they sit tight and dwindle or downsize strategically? Since the two biggest line items in their budgets are people and real estate, most are determining that the low-hanging fruit is getting creative with their real estate.

Get this: the average church spends half of its finances on a building it only fully utilizes 5% of the week. On top of that, there is roughly 1 trillion dollars of equity tied up in church real estate in the US.

So what options do churches have? Sell or go with the WeWork model.

Those located in high-density zoning areas won’t have an issue selling facilities as demand from real estate investors is on the rise. Instead of 5 facilities, they will elect to have only 2 or 3. Might be a good time to start door-knocking some churches.

Another option we discovered was for churches to start renovating parts of their facilities in order to lease back to tenants like coffee shops, preschools, and coworking spaces to drive revenue and in parallel, their mission of faith. Wonder if Adam Neuman will raise a seed round on this…

The way we see it, churches are looking like a solid buying opportunity over the next 10 years. American culture is changing and there are no signs of trends shifting back.

CREATIVE FINANCE CAFE ☕️

SANDWICH LEASE

In this segment of CFC, we are covering a juicy tactic that allows you to take control of a million-dollar building without having to put much (if any) money down.

Mostly known as a master lease, a sandwich lease (SL) is a lease with the ability to sublease.

The owner is the top slice of bread (leasing to you), you’re the juicy middle, and your subletting tenants are the bottom slice. This is a bit different than the Airbnb arbitrage hacks that ‘gurus’ preach.

Think of this scenario: the buyer (you) has more talent and time than money and the property owner, usually older, knows their property is not performing as it should and does not have the time, energy, or desire to stabilize the property. It’s partially vacant and you’re confident you can lease it up but you don’t have the money to traditionally buy it.

Let’s whip up a sandwich! 👨‍🍳

You call the seller and say “Just imagine getting the same amount of income but never having to manage or pay for anything on this place again". If needed, you can sprinkle in some sauce - “I'll pay you 10% more than the current income you’re getting on the property without the hassle of management/maintenance”.

Mention that you’ll lease back the units at breakeven so the owner doesn’t get too jealous about any profit you make. So now you are essentially taking away all the hard problems (maintenance and fixing things that break) and working for free, the least you can get is a long-term option to buy the place!

Combine your SL with an option agreement to buy the property. If the place is in bad shape, you might get away with no money down. The hack here is to add in the option agreement that any repairs done get a $1.25 credit for every $1 you pay...which counts against the purchase price.

Don't get hung up on purchase price, be flexible so long that it’s reasonable. Remember that the meat is really what you want (spread from what you owe the owner & income from tenants).

So next you sign the SL, record the option, fix the place up, raise the rents, fill any vacancies, and start profiting on that spread!

If anything goes wrong, you don’t have to buy. If things go great, you can buy with a discount given the repairs you made to the place.

Ok, I'm hungry now… 🥪

THIS WEEK'S EDITION IS BROUGHT TO YOU BY CLOSING PACKS

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COMMERCIAL CORNER 🏢

SUBWAY: IS IT REALLY A FOOT LONG?

Remember when no one had anything better to do besides measure the length of a sandwich? “It’s not even 12 inches” my ex-girlfriend, I mean Subway customers screamed!

Now, Subway is feeling the pain of growth without substance. Kind of like ordering a tuna sandwich and not getting actual tuna...

Shocking to see that there are over 10,000 more Subways than Mcdonald's in the U.S. It's the classic battle of quantity versus quality. With an extremely large footprint of over 21,000 stores and an average of under $440,000 in revenue, Subway is missing the boat massively.

On top of this, there are endless lawsuits for fraud being charged against them. Sounds familiar...

In many ways, from the perspective of any person interested in real estate, it is absolutely staggering the numbers that Chik Fil A does versus other restaurant users, especially competitors.

There is even a buying method that some real estate pros use to target properties closely located to Chik Fil A due to the extensive local research being done before developing a location. That's a story for another day.

For any newer retailer starting off, it’s important to consider that product and brand are clearly far more important than scale and accessibility. This is why we now see the top retailers doing more, with less 😉.

If you got extra time this Friday and want to watch some Subway fraud 👇

And that’s a wrap! We hope you enjoyed this week's edition.

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