JF2001: Being Your Own Tenant in Commercial Real Estate with Ken Wimberly

February 24, 2020 | joefairless | 00:25:10

JF2001: Being Your Own Tenant in Commercial Real Estate with Ken Wimberly

Ken is a business owner who started out as a land broker and in 2008 he quickly learned how to adapt due to the economic downturn. Fast Forward to today and now he has developed a successful app called Legacy of Love, an app that helps connect kids with their parents. Ken also shares a story on how he went from purchasing a shopping center and searching for tenants to creating his own tenant. 

Ken Wimberly Real Estate Background:

  • Founder and visionary behind Legacy of Love, LLC.
  • Entrepreneur and real estate investor, and has 16 streams of passive income and 4 streams of active income
  • Based in Fort Worth, Texas 
  • Say hi to him at https://www.laundryluv.com/ 
  • Best Ever Book: The Obstacle is the Way 

Best Ever Tweet:

“Whether it’s a client, customers, tenants, your partners, your lenders, if we can figure out how to be a significant source of value to others life rewards us.” – Ken Wimberly


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Ken Wimberly. How are you doing, Ken?

Ken Wimberly: Dynamite. And you?

Joe Fairless: I am doing dynamite as well. You said that earlier, but when I first called you, I was like “No one’s ever said ‘dynamite’, and I love that.” So maybe I’ll start incorporating ‘dynamite’ more in my vocabulary. A little bit about Ken – he is the founder and visionary behind Legacy of Love LLC. He’s an entrepreneur and real estate investor, has 16 streams of passive income, and four streams of active income. Based in Cowtown; if you don’t know Cowtown, that’s Fort Worth, Texas. Go see the Stockyards.  It’s a great tourist place, as well as for locals in Fort Worth.

With that being said, Ken, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Ken Wimberly: I’d love to, and thanks so much for having me on the podcast. I’ve got a background in finance out of college. I studied finance and real estate in college – if you wanna date me here, back in the early ’90s. I served in the Navy for a little while, got out… Kind of got into an entrepreneurial spirit. I was a restauranteur for a little while… And I eventually made my way into the real estate business in 2002.

I got into real estate brokerage, and really got into the land brokerage business. For anyone getting into the real estate brokerage business, especially the commercial real estate brokerage business, the lead time is long to start really producing. It took about a year to start making any money. But once I did, I spent that year building a pipeline and things started to really kind of flow in.

So from end of 2002 is when I got into the real estate business, I started making money in 2003. Around 2006 I broke away from the small, family-owned partnership that I had interned with and mentored with and learned the business, I started my own company in 2006, and around that time I started looking for my own real estate deals at that time, and got involved in a couple of commercial real estate deals. Around that time markets crashed; basically,  July 2008 the commercial real estate market crashed, and I had to really reset and restart, figure out what I was gonna do within the brokerage business… Because the land brokerage business died. Everything I had dried up at that point that we’d stuck in the brokerage business. I did a lot of REO work with some banks, and really just whatever I could do to help people at that point… Help them, which helped me.

I stuck with that, and continued to grow my real estate business. I really started to scale it around late 2009, early 2010, and scaled a pretty significant brokerage operation. We became the number one producing real estate team in all of KW Commercial out of about 2,000 agents… So we scaled a nice business, which was beautiful, because that threw off income, and we were able to use that income to make investments, both in our own deals, and in some other folks’ deals, and start to slowly build this passive wealth path that we’re on today. Also, the income from those allowed us to venture into some other endeavors that have evolved, other businesses that are also creating income opportunities. One of those is a laundromat business that we’ve actually created. The beauty of the laundromat business is we have a built-in tenant for real estate opportunities. So our first laundromat called Laundry Luv just opened three weeks ago. We bought a shopping center a year prior to that, where our laundromat is now a tenant in the shopping center… We bought a 50,000 sqft. center, we’ve now got a 6,200 sqft. laundromat as a tenant in that center, and now we are looking to repeat that process over and over and over again as we expand the laundromat operations.

Also, the income from the real estate brokerage business had allowed us to get into the Legacy of Love app, and that allowed me to really focus on a passion project of giving back and being a parent, and being a dad, and we created an app that is [unintelligible [00:05:05].27] parent-to-child journaling platform; a cross-platform journaling app that we’ve got a pretty rapid growth trajectory so far… And we’re growing and scaling that business.

All of this came from the ultimate real estate, and now I continue to invest in real estate and focus on these two growing businesses as well.

Joe Fairless: So much to talk about… [laughs]

Ken Wimberly: Pick and choose.

Joe Fairless: Yeah, well – let’s talk about Legacy of Love app. We are gonna spend a lot of time on the shopping center stuff, but just to quickly touch on Legacy of Love app… You said it’s a parent-to-child journaling platform. When I hear that, I think “It’s a way to take notes that are then shared with my kid.” But I’m sure that it’s a little bit more to it than that. Can you just elaborate a little bit more?

Ken Wimberly: Yeah. Think of this as a place to capture moments, memories, and lessons of life before they fade away with the passage of time. Things happen, the funny little stuff that your kids will say, and you wanna capture that moment, and you think “Oh, I’m gonna remember that forever”, and a month later you can’t even remember what they said, or even what was funny about it.

I guess the best way to describe it is a modern-day, easy to use digital scrapbook. It creates a chronological history of your child’s life based on what you input in there. The system automatically calculates your age and your child’s age of each entry, so that later in life they can go back and read these entries with the context of where you were at the different stages of your life.

You can put photos, videos, voice notes, save voicemail… I remember some of the sweetest little voicemail of my now 15-year-old son left for me back when he was 4-5 years old. Of course, now it’s hard to get him to say five words, but back then he used to leave the sweetest little voicemails. And of course, with phone upgrades and whatnot they eventually disappeared, but we created a space where all of that can be captured and passed down to future generations.

Joe Fairless: I love it. I have now downloaded it, and I am registering it right now, and I have successfully created the account, it says… And I’m off and running. I’m gonna be doing that. Such a great idea.

Ken Wimberly: Thank you.

Joe Fairless: Thank you for creating it. You’re the one who created it, so I appreciate you and other entrepreneurs for creating stuff that can be useful, and is useful, and fills a need, so props to you for that. I guarantee you I am your newest downloader, because I literally just did.

So let’s talk about the shopping center stuff.

Ken Wimberly: Yeah.

Joe Fairless: And it was very quick to register, I did it while you were talking about it, by the way…

Ken Wimberly: Awesome.

Joe Fairless: So the shopping center – the business model, it sounds like, is buy a shopping center and then have your own  businesses, or have some of your own businesses be the tenants to double-dip on the income. Is that correct?

Ken Wimberly: That’s correct. And I learned that strategy from a client of mine that we’ve done a fair amount of business with. This client owns the Family Video chain. No doubt that that is a dying industry, and they’ve realized that for years, but now they’re converting those locations into other tenants. But what that tenant allowed them to do was acquire a lot of real estate. They own somewhere in the neighborhood of 800 real estate assets that they have these old video storage locations in… I thought “That is a beautiful idea.”

So when we came up with this idea for the laundromat, we thought “This is our foray into having a great tenant to go into these B and C class shopping centers.” So our objective is to go pick up some of these centers with a decent amount of vacancy at a significant discount, that we can then go put our built-in tenant and then other tenants that would like to cohabitate with us… Because there’s kind of a natural fit based on the demographics and income that we’re looking for for a laundromat.

Joe Fairless: Okay, it makes sense. Your businesses that you bring into your shopping centers – are they only laundromats?

Ken Wimberly: Yes, our business that we have is just the laundromats. However, it’s a different laundromat. It’s not like you would drive by and see in so many places. We are a laundromat with a mission. Laundry Luv  is our laundromat concept, and we’re a large-store format, 5k to 7k sqft, brand new, beautiful [unintelligible [00:09:26].13] machines. You walk into our store – it’s super-clean, super well-lit, safe, big-screen TV showing positive programming up there… We don’t allow daytime crap TV on there; we put positive programs on our TVs. Big areas in the laundromat to sit as families while your laundry is being done… So we’re building these to be an impact in the community. But with a 6,000 sqft. tenant, that allows us to put a very nice tenant in an otherwise vacant center right there. That’s the one business we have at this time, and frankly, it’s enough to keep us busy.

Joe Fairless: Okay… And how do you make a laundromat profitable? Because most laundromats I see are not what you described, and my guess is they’re not what you described because it’s tough to make a lot of money out of a bunch of quarters that are being inserted into it… So educate us on the business model of your laundromat.

Ken Wimberly: Yeah, it’s interesting… When we started studying the industry and the profit margins that could be in the industry if done right… First of all, we have no coins in our operations; we’re all card-based systems; all of our machines are card-based, so it’s all cash going into a vault that issues a card out, like a Dave & Buster’s type card… But how it becomes profitable is just a matter of garnering enough of the business that is in a particular location. So the site selection is one of the most important factors in opening up a laundromat.

Number one, we need the right kind of demographics, and it’s a lower income demographic that typically goes in and visits a laundromat… Although with a pick-up and delivery wash/dry/fold business, that opens up the opportunity for laundering higher-income folks’ laundry. We have that very minorly factored into our proforma numbers right there. But we expect based on our investment that we’ve made into the asset, we expect pushing a 30% cash-on-cash year one return. You’ve gotta keep in mind, it’s an operating business; this is not a passive real estate business, although the real estate component is… But this is an operating business, so we’ve got employees that are hired, managers that are hired… It’s a full-on operating business here.

Joe Fairless: Okay. And out of the different types of businesses that you could put into a shipping center, how did you initially arrive at doing a laundromat?

Ken Wimberly: By a fluke. I was not looking for a business to get into. What I was looking for was a tenant for a shopping center. I actually had been asked to invest in a nearby shopping center, not the one that we purchased, and frankly, I was just looking for tenants  that we could backfill the vacancy on that center.

I met a guy at a conference that was kind of [unintelligible [00:12:15].15] and I said “Hey, would you guys be interested in coming in as a tenant in this center?” I sent him the details on the center, he ran a side-assessment on it… He said “Ken, this is like an ideal location for a laundromat.” And again, I thought he was a tenant; I said “Great, let’s get you signed up, get you in there”, and I came to realize that he was not a tenant, he was actually a manufacturing rep for a laundromat equipment company. So he started looking for an operator and couldn’t fine ond in this particular town – in Abilene, Texas, in West Texas. he just didn’t have any operators out there.

So I went to one of my partners in real estate deals and said “Hey, what would you think about us exploring this opportunity to become an operator of a laundromat?” Because we were already looking for opportunities in that area as far as real estate investments… Let’s look into it. So we went to a third friend of ours…

So this guy and I are both big-picture real estate guys, neither of us have the bandwidth to be an active operator, so we went to another friend of ours that is a phenomenal operator, asked if he would be interested in exploring the opportunity… And that’s how it started. So we went to a couple of seminars, and listened to these laundromat companies talk about how to run one, how to set one up, the economics of what it looks like… And that’s how it started.

We started by going to seminars, we talked to other laundromat operators, we talked to people that had good experiences, bad experiences, people that were doing it right, and wrong, and we started to learn a lot. And really, we took about a year of studying the industry before we pulled the trigger, and took about another year once we pulled the trigger to get it operational and the first one opened.

So it’s been a two-year endeavor, but now we have this beautiful model, a beautiful concept,  a business plan, and a way to move forward and do these time and time and time again.

Joe Fairless: And I believe if I heard you correctly earlier you said you opened it up three weeks ago, correct?

Ken Wimberly: Yeah. Our first location in Abilene, Texas opened three weeks ago. We had our official grand opening last Friday. Every day our customer base is growing, and the feedback has just been amazing. People have walked in there and said “I’ve never been in a laundromat like this in my life. I will never go anywhere else.” That is the response we’re looking for.

It’s more than just a laundromat, it’s a place for us to impact community. We want people to come in there… It’s a lower income demographic, and maybe it’s not always treated that well. And we want people to come into our operation and feel like it’s a home away from home, and it’s a place where they can gather the family. We’ve built in a children’s play area in our laundromat. We’ve got hundreds of books in there that children can read; we’re bringing in local librarians and volunteers from local colleges to read to children at pre-designated times, so that it is truly a community space where people wanna come back time and time again.

Joe Fairless: How many other spots does the shopping center have that need to be filled?

Ken Wimberly: We have one remaining vacancy, and then we have four other tenants, our primary tenants; we’ve got a CSL Plasma, an EZPAWN, and a buddy’s home furnishing in there, then us with the laundromat, and then we’ve got a 12,000 sqft. vacancy remaining… So we’re looking for larger tenants who would fill it all, but we’re also talking with a few smaller tenants to subdivide the 12,000 sqft. into a number of smaller tenants.

Joe Fairless: And how much did you purchase the shopping center for?

Ken Wimberly: We got it for a song, actually. We bought this thing at just over $20/sqft. and it’s  a 50,000 sqft. center, so we’re around 1.1 (million)

Joe Fairless: And how many tenants were there when you purchased it?

Ken Wimberly: Those primary tenants were already there.

Joe Fairless: Oh, okay…

Ken Wimberly: …and EZPAWN. So we went in at over an 8 cap, buying it with the vacancy, and then we knew we were gonna back-fill some of the vacancies… So to give you perspective, we’re cash-flowing at a 12,5% cash-on-cash today, and the laundromat tenant is just now starting to pay. This is one of those things that will be  a really phenomenal investment… And we just went in, we did a basic rehab of the center as we were opening the laundromat… So we went in and repainted the entire center, we resurfaced and striped the parking lot, just refreshed it, and it looks much brighter.

We’ve put wall pack LED lighting up, so it’s super-bright at night, and upgraded the sign… So we’ve just done some little minor improvements, and we budgeted for that when we bought the center. So we had the reserve funds in there, budgeted for it, and we had the intent that we would do it when we opened the laundromat, so it all looks new and fresh at the same time.

Joe Fairless: What’s something that if you had unlimited budget and you didn’t quite care about profitability, that you would do to enhance the shopping center?

Ken Wimberly: There’s only so much you can do with a C+ shopping center… If I had unlimited budget, I would probably update the facade even more. So we’ve repainted everything, it looks great… But I would update the facade and put a really nice sign up front. Just a couple of things like that.

I can tell you, the parking lot improvements alone made a massive difference, from resurfacing and restriping the parking… That and the paint refresh – it looks incredible.

Joe Fairless: About how much did it cost to resurface and restripe the parking lot?

Ken Wimberly: We were pretty close — around $15,000.

Joe Fairless: And how did you find the deal?

Ken Wimberly: In that market, in Abilene, Texas, I have a [unintelligible [00:17:36].16] realty franchise in Abilene, so I’m out there quite a bit… And this was a broker friend of mine that I know; he had this for sale, and I’d kind of seen it come across, and I called him to start enquiring about it, because I thought it would be a good fit for our laundromat.

Joe Fairless: And how many shopping centers have you purchased to date?

Ken Wimberly: In addition to this, we have some office buildings, some land holdings… I’m in shopping centers with some other people… This was the first one that I’d put together that was just me and my partner as a large-size shopping center.

Joe Fairless: What type loan did you get on it, if any?

Ken Wimberly: We put debt on it. In this case, a traditional bank loan. It was a lender that we’ve done other business with. It’s a 5-year fixed interest rate on it, and then it bumps for another five.

Joe Fairless: The reason why I ask that is what concerns did they bring up – if any – about you all creating a tenant from scratch, doing a business model that you’ve never done before?

Ken Wimberly: The separate lender on that, that is a lender on our laundry deals… And our primary lender had no concerns, even though we did not have direct experience in the laundromats, my other two partners did not have certainly a lot of experience in business… Our operating part was a West Point grad, and has run some very sizeable companies; he’s really dialed in, got his act together… So we had an incredible business plan that we put together as we launched this. Frankly, all the lenders that look at that were very pleased with what we had come up in the plan.

Joe Fairless: Do you remember what year your buddy graduated from West Point? Or do you know?

Ken Wimberly: I don’t know… It was 10-12 years ago.

Joe Fairless: Okay. One of my brothers graduated in ’96 or ’97; that’s why I was wondering. You said you have office buildings… What’s the last office building you purchased?

Ken Wimberly: We bought an office building that houses our [unintelligible [00:19:28].01] It’s a single-tenant office building, it’s leased [unintelligible [00:19:35].13] as the single tenant.

Joe Fairless: Cool. So that is a building you purchased, and then you are the tenant for that?

Ken Wimberly: That’s right. We added a tenant in there. Then I’ve got some guys that have done a whole lot of different office buildings, and I’m passive in that. However, I would encourage your listeners… Someone made a comment to me about five years ago, and it really was a light bulb moment. He said “Ken, I own a small interest in a lot of deals, and they all add up.”

Prior to that, I would just look at my own deals, and putting my own deals together that I was either going to be the sponsor of, or own then all outright… And that was a light bulb moment. Since that time, I’ve started investing into many other people’s deals. I only had so much bandwidth that I can run on my own stuff… Some great deals I’ve done have been frankly from investing into other folks that I know have a good track record, that invest in things that I understand as well, and I trust them… And they’ve performed quite nicely.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Ken Wimberly: Be a source of value for others… Whether it’s a client, customers, tenants, your partners, your lenders… If we can figure out how to be a significant source of value to others, life rewards us.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever lightning round?

Ken Wimberly: Yes, sir.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:20:58].21] to [00:21:47].13]

Joe Fairless: Best ever book you’ve recently read?

Ken Wimberly: The Obstacle is the Way, Ryan Holiday. I’m gonna give you my second and third – Building Your Story Brand (Donald Miller) and Profit First (Michael Michalowicz). I’ve read all three of those recently, and they’re all dynamite.

Joe Fairless: What deals have you lost the most amount of money on?

Ken Wimberly: I haven’t lost money on deals yet. I’ve not made money, but I haven’t lost money on a real estate deal here.

Joe Fairless: What’s the best ever deal you’ve done?

Ken Wimberly: One of my first deals that I did – a buddy and I put together  a land assemblage. We acquired three parcels, about 6,5 acres, took it through zoning, got the land entitled for a beautiful office complex that we were gonna develop… We dealt with the asbestos issue on the house that was there, razed the house, got everything planned, and ready to develop. It was interesting, because it was almost the worst deal I ever had, because the day before we closed on our development loan to start our first two buildings, our equity investor walked. The financial markets were turning, he walked from the deal, and we didn’t start construction on our first two buildings.

Shortly thereafter, about two months later, the financial markets started to collapse. A couple months after that, I had someone approach me about buying my interest out. I had less than $10,000 of my own money invested in this. We had an equity partner that had put up the bulk of the money that we did, and a lender on it… And I sold  my interest in that for $150,000 based on the value that we created bringing in this project. So I think that was my best deal yet.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Ken Wimberly: Giving up control of a deal. One of the first deals as I was starting — probably THE first deal I tried to put together, with the same partner that I later did the one I just described to you (the one where I sold my interest out for such a big return), we tried to put our first deal together and put a deal under contract. We went to someone that was gonna be our  equity partner in it… We ended up assigning the contract over to the equity partner. We just didn’t know better at the time. I’ll tell you what – we learned on that.

The equity partner ended up not manifesting, not materializing, and we had assigned the deal over to him, and the deal ended up dying.

Joe Fairless: Best ever way you like to give back to the community?

Ken Wimberly: The two ways that I’ve kind of mentioned – with our laundromat, and what we’re doing with  the laundromat as a community service; I love what we’re doing there. And then with Legacy of Love, just as a way to help parents to really create a true, beautiful legacy to pass on to their children.

Joe Fairless: How can the best ever listeners learn more about what you’re doing?

Ken Wimberly: Go check us out at LaundryLuv.com or LegacyOfLove.app, to learn a lot about what we’re doing there.

Joe Fairless: Ken, thank you for being on the show today, talking about your business model at Laundry Luv, your business model of buying shopping centers, and putting in a business that you create; the app that you’ve created along those lines as well… And just overall your real estate experience as an entrepreneur.

Thank you for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Ken Wimberly: Thanks so much, I appreciate it.

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