D’Nette Wood has been in the real estate business for 23 years and is currently a real estate advisor for Sotheby’s International Realty, where she focuses on luxury homes as well as commercial real estate. In this episode, she discusses transitioning from a loan officer to getting involved in commercial real estate, what she’s learned from experiencing downturns in the economy firsthand, and how she focuses on her client’s needs.
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TRANSCRIPT
Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, Dnette Wood. Dnette is joining us from Albuquerque, New Mexico. She works with Sotheby's International Realty, and has been in this business for over 23 years. Dnette focuses on luxury homes, and also does commercial real estate as well. Dnette is also an equestrian. Dnette, thank you for joining us, and how are you today?
Dnette Wood: I'm great. Thank you for inviting me to be on your show. I love it. It's such great information; every time there's a nugget of wealth.
Ash Patel: Thank you so much. It's our pleasure to have you. Dnette, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Dnette Wood: Oh, thanks. I've been in the business 23 years. I started as a loan officer, which gave me a great background in finance. I did FHA, VA, and I also did commercial loans. I migrated to commercial real estate full-time until 2008, when this thing happened. Then I switched it up, and then I work vertically with my clients now. So whether it's a triple net kind of sexy retail thing, or they're going to be downsizing their home; I really love working vertically with my clients. Right now I'm focused a lot on people's changing of lifestyles, which I think is still part of the COVID-19 "take a look at your life." And here we are. It's exciting.
Ash Patel: That's incredible. What does it mean when you work with them vertically?
Dnette Wood: Well, my business has always been set up as a customer service business. So when the recession hit, I had clients looking to me for advice. I am a real estate advisor. Historically, I think the residential and the commercial worlds are very separate, but I wouldn't consider myself a generalist. I consider myself a vertical expert. So if I have a client that wants to buy a shopping center, I might partner with somebody who has sold a lot of shopping centers before, but I'm still that client's real estate advisor. So working vertically to help them look at their overall portfolio. I'm a big advocate of diversified portfolios; you're gonna have stocks, and bonds... Right now, our investors are looking for flight to quality, and that means a lifestyle quality from a residential perspective, and it also means a flight to quality from an investment perspective of "Where am I going to be putting my money?" And I want to help them be the quarterback of their team. And I'm going to be getting the rest of the team together for our owner. And that team has a lot of people in it; your accountant, your CPA... And I'm just part of that team as a real estate advisor.
Ash Patel: Dnette, 23 years in the business... Do you do a lot of your own investments as well?
Dnette Wood: I do. But I'm probably more of a passive investor. I spend a lot of my time doing other things. I do have investments, we could talk about that for sure, but I'm not that active investor who's always making a lot of deals. It's a lot of work.
Ash Patel: It is a lot of work... But here's where my mind goes. You're trying to find investment properties for your clients. And you've got to see some great deals. Have you ever been tempted to take the deal on yourself and bring on additional investors?
Dnette Wood: I have, and I've done it once, really successfully. And I think I was really lucky and really successful because it was multifamily dirt, and then six months after that the market crashed. So I haven't put that team together... Putting together a group of investors to me is like putting a band together. I used to be a musician. And when everybody works well together, it's kinda like a marriage. Everybody's got to have a role, everybody's got to have the same vision. So you've got the band together, and then maybe somebody in the band breaks off and they want to do something different. It's hard on the band; it's hard to break up. So I'm a little shy about bringing on other people, but I have been successful in the past.
Ash Patel: Yeah. I get it, and that's a great analogy. You mentioned lifestyle changes... What have you seen in the last two years in terms of lifestyle changes, both from an investment perspective, as well as people's homes, relocating...? What are people doing really, post COVID?
Dnette Wood: Well, you have this sector of people that just have to move because they have a job change; that's unknown. But what COVID really did was it opened the door from an employment perspective that you could live anywhere you want to live, and work, if you had good internet. So that was a lifestyle change.
New Mexico has beautiful weather, we're the headquarters of Netflix, we've got some super-sexy, cool stuff going on, and people from each coast are saying, "Maybe I don't like living out in this traffic. I want to do something different." I saw that change, where they just really wanted a disruptive, physical environment change, wide open space; the New Mexico skies.
There's the other lifestyle change that I'm seeing a lot in my personal business, and that's downsizing. We have the older family members, the kids are all gone, they've got grandkids, and they're moving; they're moving because it doesn't fit their lifestyle anymore. And I see that more often than I did probably 10 years ago, that people are moving for lifestyle change. "This house is too much work. It's just the two of us, the kids are gone. They live out of state, they never come home anymore."
Or it's also very expensive. When you had that big girl job and you were making a bunch of cash, you didn't care about the really high property taxes, right? But when you're on a fixed income, all of that changes, and they need a lifestyle change. It's very hard. I really am a therapist at my job; I just don't have the acronyms.
Ash Patel: [laughs] Oh, man... I believe it. I believe it.
Dnette Wood: Right? How do you change your whole lifestyle?
Ash Patel: Yeah, I would imagine you do a lot of handholding and therapy work.
Dnette Wood: People move for pain or pleasure.
Ash Patel: Dnette, I'm a Gen X-er, and I think a lot of us wanted the biggest, baddest house we can get... And then years later, we realized it was a dumb decision, because you don't use half of your house. Who's buying these giant luxury homes right now?
Dnette Wood: Well, Albuquerque is really the work hub, the center of New Mexico. So in our area, it's really professionals. It's the entrepreneurs, it's the medical professionals, lawyers, etc. In the Santa Fe market, we really are attracting the young billionaire class, and there's a lot of millennials, even younger than you, Gen X-er, that want to have something really special. And it's like somewhere to take your friends, and it's just a special place to go. That's the other part of it.
Ash Patel: I get that. But from my experience, most people that have these giant homes kind of regret over-buying. Is that your experience as well?
Dnette Wood: Yeah, I think the fun wears off.
Ash Patel: Yeah, exactly.
Dnette Wood: When the party's over, the fun wears off.
Ash Patel: Yeah. All you need is enough bedrooms and a large entertaining space. That's it.
Dnette Wood: Yeah.
Ash Patel: So you advise your clients on a lot of real estate investments... Can we dive into some of the commercial investments that you've done?
Dnette Wood: Yes.
Ash Patel: So what's the typical evolution? If one of your clients comes to you and says, "Look, I want to put some money into commercial real estate. What can you do to help me?"
Dnette Wood: Well, we have to figure out, first, I feel like, what is the timeframe for this investment? Is it short-term? Is it long-term? And how much money do we have to put into it? That's where I start - how much money do we have? How long do you want to hold it? If it's a small amount of money - that's kind of a vague term, but if it's $300,000 and they just want it to sit somewhere, and they don't want to manage it, that might be a perfect land opportunity. Some commercial piece of property that's maybe a little bit of an infill on a good block - that might be kind of nice. The property taxes are low, they can drive by it, pull a weed here or there.
If they want to be a little more active... I have a lot of people calling right now that are industrial, commercial, large investment companies that are picking up single family residences. So I look at that trend and say, "Where are we going with that?" So housing, a single-family home is great. I think a really great investment is a small multi, like a duplex, or a fourplex if you want a little bit of a hands-on... But it comes down to the money and the time, how much they want to be a associated with that. Because when you're a hands-on manager, you're going into business with that tenant; you're going to have to meet with them, etc. So really getting an idea of how much hands-on work they want to do. They just want to coupon - we're gonna go buy a Chick-fil-A.
Ash Patel: And then you also invest passively in other people's deals, right?
Dnette Wood: I do not.
Ash Patel: You don't? Okay. Do you have any passive real estate investments?
Dnette Wood: Well, I consider passive to be -- [unintelligible 00:10:27.08] dirt, because dirt just sits there; it's going to appreciate, and I'm going to be able to sell it, and I don't have to manage it. That's what I mean by passive. As opposed to - I've got single family homes, I'm doing Airbnb, I've got to be over there every day or every few days, or have somebody else do it.
Ash Patel: In terms of people working remotely, do you think that's going to last forever? Or do you think -- and my opinion is the next economic downturn, employers will have the upper hand again, and they will demand people are back in the office. What are your thoughts?
Dnette Wood: I love this question, because I think there is truly a decrease in productivity when people are working remotely at home. I think that that's been proven statistically. So if I am the consumer, and I'm going to be hiring an ad agency, for instance, and I've got a $50,000 budget; I want to hire an ad. I want to know that they're at work getting my ads done, because they're on the time clock. And it's 20% of delta between the two statistically of productivity. I think there's no doubt -- when I was working in a bullpen office situation, there's a lot to be said about that. "Hey, I've got this guy that's looking for a deal." Deals are made in the office. They say deals are made on the golf course; it just means people are getting together to be more productive.
I think people got tired, and the disruptive element of COVID allowed us to come home, be with our loved ones, be with the kids... But now I think people have been with the kids and they're like "I'm going back to work." Also, don't you feel like when you're around people and you're productive, you feel better?
Ash Patel: 100%. You're energized, you're motivated... If everyone else around you is grinding, it motivates you to do the same. I have not heard that 20% statistic, but what I get quoted a lot from the work from home crowd is they think they're more productive... I've gotta tell you, if it's a nice day outside - and I rarely go out to lunch, but if I do, and we sit outside somewhere, all around me there's people drinking, having liquid lunches for two, three hours not moving. And these are the work from home people that you never would have seen pre-COVID. And now everybody's just enjoying themselves, taking long walks, going to the park with the kids. And then in the summer, when kids are home, how are you productive? To me, I don't understand that.
And I think the statistic that people are quoting is when COVID first started, and the work from home was initiated, productivity may have gone up because everybody was gung-ho. They were excited that they don't have to go into the office. Maybe they worked the same hours, including their commute time. But that's gone by the wayside. I don't see that happening anymore. And I love what you said - if you're paying somebody, you want to pay them to go into an office; you want them working, not sitting at their kitchen table, kind of working. So great example. what's that going to do to real estate?
Dnette Wood: In terms of getting back in the office?
Ash Patel: In terms of getting back into the office and this huge shift of people moving to warmer climates, thinking that their work from home job was gonna last forever. I know a lot of people who have been called back to work, and they tell their employers, "I'm three states away. I can't commute back to the office." And they're like, "We never gave you permission to move." "You never said I couldn't." So do you think that people will have to relocate to where the jobs are?
Dnette Wood: Or maybe they create a new job for themselves to match the lifestyle they want to live.
Ash Patel: In an ideal world, yes. But if we're heading towards a rough patch in the economy, that could be a challenge.
Dnette Wood: Then I see [unintelligible 00:14:22.15] back to work.
Break: [00:14:26.10] to [00:15:31.25]
Ash Patel: I think office is going to be strong. I think it's a great buying opportunity right now to pick up office space for pennies on the dollar. Would you advise any of your clients to get into that space?
Dnette Wood: Absolutely. And when you're talking about getting into the buying low and selling high - that's the basics of an investment, right? So what's suffering right now? I'll tell you what's not suffering right now, is industrial warehouse. You can't get enough of it. But it always lags behind. We're reacting to what was happening in the market. How do we look ahead? Let's react and buy some office right now.
I'm not sure what's going to happen in terms of how office is going to look. I'm fascinated to see how office is going to look; how it's going to be a little bit different. I went back to the bullpen issue - do we still need that space? A hybrid example that I see - and part of it is we don't have enough housing for some of our laboratories here. They have to go in three days a week; instead of five, maybe you go in three days. Maybe it's a hybrid for a while, where you do get in, and you get that office area... So are we going to have some hotel spaces where there's some shared areas? I don't know; are we going to still have some sanitary kind of questions about the office? I'm not sure. But buying office right now - we don't have a lot of class A space here in Albuquerque; we have mostly B.
I do see -- what's going on here is I see a lot of re-facing of those tired B- buildings going on, and they're going to be popping back up as remodeled. And I think that's important. If you're going to be buying the office space for pennies on the dollar, whatever that is, then I think you have to put the money back into the infrastructure of the building to make it appealing for people to come back to the office.
If you looked at an example like a McDonald's, I don't know how many years you can have a McDonald's, have a franchise, and you have to remodel it completely. It's like every ten years. Why? It's because people want to feel good in their environment, no matter what the environment is, across the board.
Ash Patel: That's a great point. So you want to go into a fresh office, not something that's dated, from the '80s. And yeah, you want to feel good about your surroundings. What experience do you have with industrial?
Dnette Wood: My dad was a highway contractor, so I grew up around warehouses and scrap metal, and parts all over the yard, and talking about EPA all the time. So when I first got into commercial, I did industrial [unintelligible 00:18:11.15] It was easy for me. What I love about industrial is that it's got a lot of flexibility. Industrial can be chopped up, it can be flex space, etc. We don't have enough of it. I've been going back and forth to Texas, and in here in New Mexico we have the film industry expanding... We don't have any new industrial warehouse; we don't have the clear height that we need. We don't have the power that we need. It's a whole different product that we need right now for our market than it was 20 years ago. And it hasn't changed. So innovation...
Ash Patel: Can we dive into some factors to look at? You mentioned adequate power... What's the ideal clear height for an industrial building?
Dnette Wood: Well, for us here, I think it needs to at least be 25 feet. And I haven't done industrial for a while, so I don't know what the new users are really needing. We have -- Amazon has come out here for a distribution center. I've seen pictures of it. I haven't been in there. But I mean, that is a very modern industrial building, because they did it for themselves.
I don't think that you're gonna have investors go out and build those, and build them and they will come, because there's a lot of tax incentives that go with that. But if you have these tractor trailers coming in and they need some spots, I could see, if you have a multi-tenant warehousing industrial park to offload and distribute - I think that's where we could see some logistic changes in the old model, to be able to put the distribution in different parts.
Ash Patel: Yeah, and especially last mile delivery. What's too small for a warehouse or an industrial building?
Dnette Wood: Can't get too small. You can even have the makers, the craftsmen. The makers want little warehouse space. I have tenants that come in -- or not tenants, clients that come in and they just want to work on their cars. So you can't have it too small. It's hard to find, with all the power and everything, but you can demise these things down and have people need warehouse space. You don't have to have 100,000 under roof for one tenant. That we don't have either enough of.
Ash Patel: That's a great point. Even carpenters, HVAC companies, plumbing companies, tradespeople need that type of space. Great example. Dnette, what is your best real estate investing advice ever?
Dnette Wood: Know your numbers. Definitely, it's an investment. I always tell my clients this - even if it's your dream home, it's still an investment. So treat it as such; know your numbers. If you have a budget, you have to do the work to create the budget to know where you're going, right? It's the map of where you're going. And that is how you're going to know if you make money or not at the end of the day. So know your numbers. Stick to your numbers.
Ash Patel: Yeah, great advice. Dnette, you and I are fortunate that we've lived through a couple of market cycles... There's a lot of people that -- or anyone under the age of 33 has not seen anything but a booming economy. What's your advice to them?
Dnette Wood: Six months savings is not enough. [laughs] Six months savings is not enough. And I'm a big advocate now of cash is king. And how you leverage today, you really have to be careful. I talked about house hacking, how you can make some of your properties income-generating, in a bad time; if you rent out a room, or you rent the garage [unintelligible 00:21:48.02] the house, or whatever. But cash is king, and I think it's okay to have a lot of cash. I think there's a lot of investors that will poopoo me, but it's hard to sell real estate when the market is going down. And that's what I learned. We always thought "Well, it'll take 30-60 days." But when that market is going down, you're still chasing it. And we kept chasing it and chasing it. New Mexico, we had a double dip. We chased it forever; we couldn't give it away. You really have to be creative. So being more careful moving forward. I think it takes more cash to carry you through those bad times. And living below your means is really the lesson there.
Ash Patel: Yeah, great perspective. Thank you for that. Out of all the years that you've been in this business, what's one of the toughest lessons you've learned?
Dnette Wood: Oh... Fraud. We do not talk about fraud enough in real estate classes, or master classes. I think that the biggest lesson I learned was that you really have to do your due diligence with people before you get in the contract, because it's tough to unwind. And as we get more sophisticated in our technology, and wire fraud, and all of that, we have to do our due diligence to help our customers see through that. And it's a topic I don't think that we talked about much.
Ash Patel: Is your an example that hits home?
Dnette Wood: Yeah. I have PTSD from it still. I mean, I can't name any names or anything, but I've had several times - and a lot of it comes from online, it starts, but the fraud was the earnest money didn't get there. There was excuses. It starts at beginning, right? The proof of funds letter wasn't legit; nobody answered the phone calls. And when that starts, you have to listen to your intuition and say, "This is a red flag. We've got to stop here and not let it go on." Because once you're under contract, lots of things can happen, and it's hard to unwind. So do your due diligence.
Especially when people are stressed, I think there's more fraud that happens. So do your due diligence and make sure that everybody's legit in the game.
Ash Patel: That is a great example, and especially when emotions are involved. If the seller is getting an astronomical price for their property, they want to see through some of those red flags, and just look at the end goal, and I've seen that happen as well. So yeah, thank you for sharing that. Dnette, are you ready for the Best Ever lightning round?
Dnette Wood: Okay!
Ash Patel: Alright. What is the Best Ever book you've recently read?
Dnette Wood: [unintelligible 00:24:33.20] it's going to be made into a movie. It is so descriptive and beautiful etc. And I know that's not investment-related, but from an investment real estate perspective, I am loving Jen Cisneros "Badass" series. That's not even real estate-related, but she's got such a great -- you know, you can read "How to be a millionaire" and "The Go Giver"... I've read all of those books. But Jen Cisneros is a comedian who's writing about wealth is a good thing, and you can be a badass... And I love getting up and listening to her on my devices. It's just great.
Ash Patel: Alright, I'm gonna lean into that. Thank you for that. Dnette, what's the Best Ever way you like to give back?
Dnette Wood: I am a philanthropist by my heart, and I'm on the New Mexico Museum of Natural History Foundation Board... And philanthropy is super-important to me for giving back to others, for the betterment of humankind. So that's what I do in my spare time. And we're creating an initiative through that, and it's called "What is philanthropy?"
Ash Patel: And Dnette, how can our Best Ever listeners reach out to you?
Dnette Wood: Find me on the web, Dnettewood.com.
Ash Patel: Awesome Dnette, thank you so much for your time today sharing over 20 years of real estate experience with our listeners, going from being a loan officer, getting into commercial real estate, seeing some downturns in the economy, focusing on luxury homes, and most importantly, focusing on your client's needs... And thank you for a great conversation today.
Dnette Wood: Thanks so much for having me here.
Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review, share this episode with someone you think and benefit from it... Also, follow, subscribe and have a Best Ever day.
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