Most people dream of ditching their W-2, retiring early and fulfilling their entrepreneurial appetite, but unfortunately, many are unsuccessful. Yet, especially in recent years, the commercial real estate industry and investor community have increased dramatically. The internet has spread real estate information, education, and data availability. Leveling off the playing field for whom would have been previously considered "outsiders."
Tanh Truong, a Cincinnati native, started his real estate education while attending Pharmacy School at the University of Cincinnati. However, like most entrepreneurs, Tanh planned to retire early but knew a pharmacy career likely would have provided something other than early retirement. Since pharmacy school did not provide proper financial courses, he had to rely on self-education. Diving into the rabbit hole of finance and investments, he stumbled across real estate. From there, Tanh consumed every book, podcast, and blog post online.
After graduation, he began his career in pharmacy but took his real estate education even further, attributing a lot of his early education to BiggerPockets forums and books. While working as a pharmacist, he and a partner (also a pharmacist) began to grow their residential portfolio at the start of 2018. By putting a majority of their salary together, they quickly scaled a small portfolio of residential properties. On New Year's Eve of 2020, Tanh waved goodbye to his W-2 and transitioned to full-time commercial real estate investor. After offloading his residential portfolio in 2021, he is strictly focused on non-residential commercial assets. Tanh's portfolio primarily consists of retail and warehouse assets in midwest states, which are considerably more inexpensive than coastal markets.
Youthful investors traditionally take the natural progression from residential to multifamily, but Tanh decided to focus on retail, warehouse, and flex-space assets. The primary reason was due to the yield compression in multifamily assets. Multifamily became so competitive that cap rates were as low as sub 4% in some markets. But since retail had recently been brushed under the rug, the yields are significantly higher than multifamily.
Tanh's value-add approach begins with searching for opportunities with high vacancies, unaligned tenant mixes, and underutilized space. Retail and flex space provides creative opportunities; one of Tanh's passions is identifying tenant asynchronies. Tenant mix is an essential factor that investors commonly overlook; a proper tenant mix drives maximum traffic and sales to the center. In addition, tenant mix is not exclusive to a property, as it is essential to identify competitive retailers within the market. Understanding the market trends, needs, and voids will allow better positioning for any center. Cincinnati provides an excellent opportunity to optimize tenant synchronies, as high construction costs have limited retail development, increasing existing shopping centers' performance by lowering vacancy and rising rents.
Proton Capital's most recent deal was an off-market flex-industrial property in Englewood, Ohio. This property was purchased at an 11% Cap Rate, with 40% vacancy; yet in its current standing, it was producing a 15% cash-on-cash return. Since this property is located between two major highways, Proton Capital will have no issue filling the vacant warehouse space. According to Truong, the stabilization of the asset will yield upwards of 30% cash-on-cash return and could trade around a 7-8% cap rate. Considering this opportunity came about through a mail campaign, it is quite the find.
Transitioning from a W-2 into a full-time real estate investor within a few years is an outstanding accomplishment. By putting his nose to the grindstone, he was able to educate himself and drastically change his career course. Proton Captial currently has $100M+ assets under management and plans to continue to scale throughout Cincinnati and surrounding markets in the mid-west. The team at Rockval is excited to see Proton's portfolio expand throughout this year.
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