Creating Wealth Through Multifamily With Prashant Kumar

On This Episode of Peak Market Watch...

Creating Wealth Through Multifamily With Prashant Kumar

Prashant Kumar, Founder and Managing Partner of My Realty Gains Management LLC, and Anton Mattli, together with this week’s co-host, Abel Pacheco will dive into Prashant’s experience in sourcing multifamily properties, analyzing deals, negotiating, contracts, and closing the deal.

Episode Highlights:

  • Challenges that he faced with all his syndication and own large multifamily properties
  • What are some of the big differences he sees in the various markets that he’s in
  • Decisions, experiences, and challenges with investing in assisted living

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Show Host

Guest Speaker

Co-host

Connect with Anton Mattli

Connect with Prashant Kumar

  • prashant@multifamilyrealtygains.com
  • https://multifamilyrealtygains.com/

Connect with Abel Pacheco

VIDEO TRANSCRIPTION

welcome today’s episode of peak market
00:02
watch we speak with market leaders in
00:04
commercial real estate and related
00:06
services who have a close pulse
00:08
on the current market environment my
00:10
name is anton madley co-founder and ceo
00:12
of peak financing and my co-host today
00:15
is abel pacheco
00:16
one of our great data advisors
00:20
uh with uh peak financing uh
00:23
we are honored to welcome prashan kumar
00:25
founder managing partner of multifamily
00:27
realty gains multifamily investment firm
00:30
active in various parts of the united
00:33
states
00:34
including indiana texas and georgia
00:36
where they have
00:38
most of their activities well
00:41
compressant
00:42
it’s a pleasure to have you with us
00:44
today uh
00:45
why don’t you give us a brief background
00:47
about you as well as
00:49
multi-family realty gains so i
00:52
i come from india right you guys can
00:54
figure it out
00:55
i came here in 98 with 50 dollars in my
00:58
pocket
00:59
now work my way up in the corporate
01:01
environment all my life you know
01:04
you know and you guys know abel knows it
01:06
very well uh you know how corporate
01:08
environment is you get three percent
01:09
raise and you are happy you know every
01:11
year
01:12
and you don’t know that you know you are
01:13
losing money actually at three percent
01:15
because the inflation is typically more
01:17
than that so
01:19
long story short you know five years ago
01:21
i thought guys you know i have to build
01:23
something
01:23
which can work for me while i’m not
01:26
working you know
01:27
well now it was all trading time you
01:30
know you
01:30
you work you get paid you don’t work you
01:32
don’t get paid
01:33
but at some point you know you know as
01:35
as life catches on you
01:37
you start taking a step back and think
01:40
about
01:40
what is that do you really want to do in
01:43
your life i mean
01:44
is that what you want to continue to do
01:45
all your life so
01:47
that brings me to real estate you know i
01:49
said i have to do something so that i
01:51
can have some
01:52
cash flow that even if i’m not working
01:54
you know
01:55
so like everybody else you know i
01:57
started in single families bought bunch
01:59
of single families then it went into
02:01
multi-family bought
02:02
from the multi-family myself and then i
02:04
realized i don’t have money
02:06
more enough money to buy more so
02:10
you know long story short within one
02:11
year i bought three single families
02:14
i bought 24 unit built a family and then
02:17
i
02:17
jumped into syndication and the first
02:20
indication that we did
02:21
and of course i came in as gp capacity
02:24
considerable gp capacity on the project
02:27
458 units so it was it was a journey
02:31
in the first year very you know i
02:33
learned a lot i
02:34
you know give myself i put myself into
02:37
the projects you know
02:38
with whomsoever and you know i ended up
02:41
learning and creating a space for me and
02:44
that’s when i founded
02:45
my reality gains i said i have to have
02:48
my own
02:49
brand name and i mean my real purpose is
02:52
not just making money for myself
02:54
i come from a very humble background
02:56
where my grandparents
02:58
used to live with us all life you know i
03:01
spent a bunch of time
03:02
helping others to gain peace you know i
03:04
spent considerable amount of time
03:06
um you know helping folks to learn
03:09
i mean i teach meditation free of cost
03:12
uh
03:13
and similarly you know i have i have
03:15
passion to help you know older gentle
03:17
older generation so i i wanted to dabble
03:20
into
03:21
uh dabbling to assisted living space
03:23
which we did couple of years ago
03:25
two years ago one year ago actually to
03:26
be precise and we are exploring that
03:28
space also
03:30
it’s not about just making money for
03:31
myself it’s that’s not
03:33
the real thing the real thing is much
03:35
deeper
03:36
uh we are you know we help you know
03:39
community
03:40
we help even people like us you know who
03:43
don’t have time
03:45
to be able to make their money work for
03:48
them even if they are not
03:49
you know actively involved in the real
03:52
estate transactions
03:54
so the goal is to continue to acquire
03:56
some assets
03:57
help the community at the same time
03:59
helping the investors
04:00
who can who can make money while they
04:03
don’t
04:04
while they don’t need to pay that much
04:05
attention on to the asset and get all
04:08
the benefits of real estate investing
04:10
you know pride of ownership of real
04:12
estate
04:13
and may reduce the taxes also so those
04:16
kind of things that’s the real purpose
04:18
and
04:18
you know the goal here in this
04:20
communication is to
04:21
share the knowledge with whatever we
04:23
have
04:24
with you know very humbly with the
04:26
listeners
04:28
yeah that’s uh that’s great to hear
04:31
right uh obviously as you said it’s not
04:34
always about making money but uh you
04:36
need money in order to help others
04:38
right so yeah uh obviously as as always
04:42
uh it’s it’s important to to invest and
04:46
it’s important to make money and
04:47
it’s important to have cash flow uh
04:50
because if that is not there
04:52
you don’t have time to help right and
04:55
so so that’s the ideal environment where
04:57
you uh
04:58
where you can balance both the investing
05:01
as well as the
05:02
the helping part right and that’s uh
05:05
that’s a it’s very important and it
05:08
would
05:08
only say solely also in in a space that
05:12
a lot of uh syndicators including you
05:15
invest in which is
05:16
more the workforce housing right very
05:19
often you have the ability to improve
05:21
the lives even of the tenants yes you
05:23
make
05:24
money right to improve a property you
05:26
make it
05:27
crime free right you make it a safe
05:29
place
05:30
and yes you can raise rents and yes you
05:33
make more money
05:34
but at the same time you also give a
05:36
safe space for
05:37
for your tenants right so so it’s a
05:40
win-win situation
05:42
you said it very right anton i mean and
05:44
you you guys know it how what we do it
05:46
what we do i mean the goal is to you
05:48
know provide the cleaner environment you
05:50
know
05:50
you have you have crime in the property
05:53
you have poor
05:54
work uh you know living condition we get
05:57
in we clean up the place you know
06:00
uh you know we we put the right kind of
06:02
lightings you know so that
06:04
place is bright and inviting you know
06:06
it’s not
06:07
not any any more gloomy uh you know you
06:10
you you put in right like you know
06:13
but you do that you have of the property
06:16
basically
06:16
you clean up you know good bathrooms
06:18
good kitchens in a nice clean carpet
06:21
or you know even a vinyl plank um you
06:24
know so
06:25
we do all that you know and that there’s
06:27
a better place for
06:28
folks to live and and we put processes
06:32
in place so that
06:33
you know they don’t have to come to our
06:34
offices you know they they do the e-pay
06:37
and you know all those delivery
06:38
mechanisms we use technology to
06:41
reduce our expenses also
06:45
so very good yeah these are all great
06:48
things
06:49
right so uh tell us a little bit about
06:52
uh
06:52
what challenges you currently face right
06:55
you have
06:56
you are obviously with larger properties
06:58
you’re as indicator on one hand but you
07:00
also own
07:01
your own property right that is another
07:03
indicator deal that is smaller
07:05
right in in indiana which is outside of
07:08
your
07:09
uh home residence right you live in on
07:12
long island in new york
07:13
and you have your own property that you
07:16
own outright in
07:17
uh not syndicated in indiana and then
07:21
you
07:21
also obviously have syndicated a lot of
07:24
the larger properties
07:26
so what are the challenges that you face
07:28
with with
07:29
both of these types of properties right
07:31
now and how do you
07:33
how do you address those see one one
07:36
thing
07:37
one thing we have to realize that when
07:39
we are out of
07:40
state owners it is very important for us
07:43
to find the right
07:44
partner or the right property manager to
07:47
manage our assets
07:48
that’s the the key of the project and
07:51
when you
07:52
find a property manager you have to
07:54
consider that
07:56
that company as your partner in the deal
08:00
rather than considering them only a fee
08:03
based
08:03
employee or contract employee
08:07
the moment you have that the moment you
08:09
just consider somebody just a fee based
08:12
employee you know you are gonna get only
08:14
what they are gonna give it to you
08:16
but the moment you start considering
08:18
them as a partner
08:19
so i mean i i kind of gave you the
08:21
solution of what challenges i had
08:23
but the challenges are always there
08:25
that’s the biggest challenge you know
08:26
who’s going to manage the property for
08:27
you
08:28
right whether it is a bigger 500 unit
08:31
apartment complex or a smaller 72 unit
08:33
apartment complex
08:35
right so the so the boots on the ground
08:38
has to have the vested interest
08:41
otherwise you are like you know when cat
08:44
is not there cat is not around my
08:46
plate so so basically you are not there
08:50
and you are talking to them on a daily
08:52
basis they are telling you what they are
08:54
telling you
08:55
numbers are not but at the end of the
08:57
time i mean the end of the
08:59
quarter your numbers don’t lie right
09:03
so so that that’s the challenge i mean
09:06
they say they tell you something else
09:08
and they do something else
09:11
but the moment you start putting
09:12
incentive-based
09:14
uh compensation plan where they feel
09:16
that they are being
09:18
they are being you know they are earning
09:21
a little bit more for their effort
09:23
or they feel that there’s a growth in
09:26
their career
09:27
you know you go from one property to
09:29
another property and you still bring
09:31
them on
09:32
with you all the challenges will be gone
09:36
i mean would it be wise for me to go to
09:38
my properties one property to another
09:40
property
09:40
every week i mean i don’t it’s just not
09:42
technically i mean it’s not logistically
09:44
possible
09:45
so the folks who are there they have to
09:48
replicate
09:49
what you would like them to do
09:52
and that’s it that’s the real i mean all
09:55
the hurdles will be sold right there
09:57
everything else kind of small things you
10:00
know talking to the city
10:02
you know having the right gc coming in
10:05
and doing the work
10:06
or getting the work done uh those are
10:09
the small things because you have taken
10:11
care of the
10:11
fundamental root problem i mean of
10:14
course the guy has to be competent right
10:16
i mean
10:16
the property manager somebody who has
10:19
not
10:19
done any real estate and you put them as
10:21
a property manager is not going to work
10:23
out
10:23
so the guy has to be competent but you
10:25
have to take their buy in
10:27
you know once you have that mind at the
10:29
at the root level
10:31
then you are gold i mean then all these
10:35
issues that we have had and you have
10:37
heard it all the time gc is not
10:39
delivering
10:39
what they have to have to deliver
10:42
property manager not doing the lease up
10:44
is taking longer time they are not
10:47
motivated enough
10:48
they are not able to hire the right
10:50
people i mean tell me these are
10:52
100 000 things that can go wrong but if
10:54
you’re the right resource with the right
10:56
attitude
10:57
your life can become easier and and the
11:00
moment you start treating them as your
11:01
partner in the crime
11:04
they start working with you even if you
11:05
have to spend few bucks more
11:07
even if you have to have lesser uh part
11:10
of the pie
11:12
you know it just works i mean for me it
11:14
works very well i mean my inner
11:16
indiana property you know i don’t even i
11:18
don’t lift my finger
11:19
from here to here in a month i spent
11:22
three to five minutes at most
11:25
that’s it but i pay the guy more than
11:27
what he deserved
11:29
i said i paid him more than what he
11:31
deserved
11:32
and he’s happy for that right i mean i
11:34
don’t even question him you know i know
11:36
that you know there might be some
11:37
i mean i shouldn’t even say that i don’t
11:40
i just closed my eyes i said listen
11:42
you do what you have to do as long as my
11:44
numbers my meet my
11:45
numbers are meeting that’s all i care
11:48
and
11:49
he’s happy and and i can sleep in the
11:51
night basically
11:53
otherwise you know you talk about single
11:55
family home and you know your tenant is
11:57
screwing up your home and you are
11:59
running there you know going
12:01
you know in the middle of the night
12:02
going there so i mean you got the idea
12:05
what i’m saying is
12:06
challenges will always be there whether
12:08
it is single family
12:09
or a smaller multi-family or a big
12:11
multi-family
12:12
yeah the kind of resource that you put
12:15
there
12:16
is you are the owner you have to put the
12:18
right resource number one
12:19
and number two you have to create those
12:22
resources correctly
12:24
you have to pay them you have to pay
12:25
them you have to motivate them you have
12:27
to take care of them
12:28
you know the times when they are sick go
12:31
do not even just don’t even come both
12:34
about the property when they know that
12:36
the person talking to them on phone not
12:39
just a
12:40
businessman okay what is going on what
12:42
is going on
12:43
um then then you you build that
12:45
relationship
12:46
yeah i hear uh this is awesome i hear a
12:49
lot of good
12:50
points uh prashanth because when you
12:53
pick a good
12:53
property manager like you said or good
12:56
boots on the ground
12:57
in various different markets uh treating
12:59
them well
13:00
and obviously they’re gonna you know
13:02
treat your tenants and you’re building
13:04
your property all investors well right
13:06
and and being market watch right i heard
13:08
texas
13:09
indiana i know you’re in in the
13:10
northeast and so
13:12
you that that’s part of the market watch
13:14
you have to know what’s going on in one
13:16
market versus another right
13:18
uh what are some of the biggest
13:19
differences you see in like the texas
13:21
market versus
13:23
or other markets that that you’re in see
13:26
see right now everything is overpriced
13:28
you know it and i know it very well
13:30
right now everything is overpriced i got
13:32
two properties yesterday night
13:36
both industrial market and one one had
13:39
eleven offers today morning
13:41
i mean i cannot compete with that you
13:43
know i’m talking about
13:45
midwest similarly one in northeast in a
13:48
smaller property
13:50
the guy says he’s gonna meet what he’s
13:52
asking
13:53
so overall the market is high overall
13:56
market is high
13:57
uh and i mean if you have the capacity
14:01
to
14:01
take on the difficult projects then
14:03
maybe
14:04
you can survive but if you are just you
14:07
know
14:08
you know very simple uh non you know
14:11
not too much of you don’t want to take a
14:13
project where you have heavy lift that’s
14:16
when
14:16
you will have trouble you know because
14:18
there are a lot of people who want to
14:19
get into those projects
14:21
and you will you will end up paying more
14:24
than
14:25
what it what it is worth and i would be
14:28
very careful
14:29
i mean i don’t know where the market is
14:30
i don’t have a crystal wall you know it
14:32
more than me
14:33
um cap rates you know right now people
14:35
people are trading at 3.5 cap rate i
14:38
i don’t know how can they make money the
14:40
cost of the money is three points
14:42
more than 3.5 it’s it’s nutty it’s a
14:45
nutty and
14:46
and you know anton shares this with us
14:48
on a daily basis
14:49
or the 10-year treasury you know anton
14:52
where’s the 10-year treasury uh at this
14:55
current you know time
14:56
you know right today it uh it breached
15:00
the 150 mark
15:01
right so the the funny story there is
15:04
right i’m uh
15:05
one of the uh preferred partners for the
15:09
real estate guys
15:11
and so they they do every year at the
15:14
beginning of the year to do a 2021
15:16
forecast for this year and obviously the
15:18
previous years
15:19
uh so robert helms naturally asked
15:23
for for input from all the experts he
15:26
has
15:27
within in his network what they think
15:30
about
15:31
their particular space and i went on a
15:34
limb and said i think
15:35
we will see uh 150 treasury rates uh
15:40
this year i actually said that i’m i
15:43
think we will see a two percent plus
15:45
uh but the 150 i was really confident
15:48
about what i was not really confident
15:50
about that it would happen just within a
15:52
month after i said it
15:54
right so the reality is it can the
15:56
market can move
15:57
very quickly and uh it remains to be
16:01
seen where the cap rates
16:03
ultimately how much they are being
16:05
impacted right because the argument
16:07
still
16:08
is in with the treasury yield moving up
16:11
the delta the spread between the the
16:14
10-year treasury and the cap rates is
16:16
still
16:17
relatively historically relatively big
16:20
so there is a lot of r
16:21
there are a lot of arguments out there
16:23
that uh the market can support it
16:26
uh but to your point uh uh prashant
16:29
certainly we see
16:30
so many deals that are the going in cap
16:33
rating for c-class properties on a with
16:35
a
16:36
soft value add right so not a true
16:39
value-add property
16:40
where the cap rates come in as you
16:42
mentioned in the three and a half
16:44
to four percent range and you
16:47
essentially pay for a stabilized
16:49
property
16:50
for a c-class uh three and a half to
16:53
four percent because you have that
16:55
slight
16:55
upside with uh spending three to five
16:58
thousand dollars in
16:59
rehab hoping that you can push your
17:01
rents in order 75
17:04
right so there is a lot of hope in
17:08
in all of that and obviously when you
17:10
when you buy it at three and a half to
17:12
four percent and your borrowing costs
17:14
are essentially at the same
17:16
or very similar level you need to come
17:19
up with pretty creative rank growth
17:21
numbers to make that all work right
17:24
absolutely i mean that’s the real point
17:27
right gap rate versus your
17:28
cost of the money yeah i mean if the
17:30
cost of money is equivalent to cap rate
17:32
then
17:33
then you are not really making any money
17:35
on the property so you are
17:37
all your return is based on based on the
17:40
value addition
17:41
and and the rent growth
17:44
and you have to be confident that that
17:46
random group is gonna drive your cap
17:49
rate uh keep the cap rate where it is
17:51
right now i mean if the cap rate
17:52
starts decompressing even that rental
17:55
growth is not gonna
17:56
give you anything right i mean the
17:58
market becomes softer
18:00
cap rate starts becoming a little bit
18:02
higher
18:03
um you know you’re done i mean
18:06
so i mean to me it’s a very scary market
18:11
you know i don’t have the crystal ball
18:13
as i said um you know just
18:16
just do what you can do very carefully
18:20
because it is very easy to lose the
18:21
shirt you know
18:22
we are talking about millions and
18:23
dollars you know it’s not one single
18:25
family home where you make a mistake you
18:27
can survive
18:28
if you have a 10 million dollar property
18:30
and one percent cap rate
18:32
you know is a million dollar you know so
18:35
uh
18:35
you’re gonna you know it’s a difficult
18:38
market let’s just put it this way
18:40
yeah no that’s a it’s a very good point
18:43
and on top of it right
18:44
when you’re syndicating the deal then
18:47
you put also your
18:48
investors money at risk right uh
18:51
to be frank i see a lot of syndicators
18:54
that still do these deals
18:56
because they have very little skin in
18:58
the game right
18:59
yes they charge an acquisition fee and
19:02
then put that fee
19:03
into the deal claiming that they have
19:05
skin in the game but ultimately it’s
19:06
just
19:07
taking some money that you receive and
19:09
put it into the deal that’s not really
19:11
skin
19:12
right yeah and obviously the upside for
19:16
a sponsor is
19:18
is very significant whereas the downside
19:20
is relatively
19:21
limited at the same time for the sponsor
19:24
right
19:24
so i think they’re really the ethical
19:28
element comes in whether you as a
19:30
sponsor really believe
19:32
that this deal can work or whether you
19:34
just hope for the best
19:36
right i think most of most of the time
19:38
these whatever these
19:39
people are doing the deals they’re just
19:40
hoping for the best
19:42
they’re hoping that the markets can will
19:44
continue to grow the way it is growing
19:46
and you and i know it very very clearly
19:49
that’s not
19:49
i mean if it is growing it has to come
19:52
down someday right whenever it is i mean
19:55
maybe maybe maybe six months maybe a
19:57
year maybe two years
19:59
but point is are you able to catch
20:02
your returns in within that time frame
20:04
or not if
20:06
the moment it starts going down you’re
20:07
not able to catch those returns
20:09
you’re just waiting for the next upside
20:11
which will happen probably after four or
20:13
five years if at all
20:15
so yeah i mean i’m a little conservative
20:17
guys you know i’m not
20:18
i’m i’m not trying to scare anybody but
20:21
i you know that that’s all i’m saying
20:24
you know
20:25
look at what you are mine you know there
20:27
is a if there is a
20:29
way you can create value whether it is
20:32
ground up development or you know that
20:35
this property
20:37
is messed up you have huge advantage you
20:40
can create huge huge value here
20:43
um about the many many inefficiency you
20:46
know somebody is
20:47
or somebody’s giving you the property
20:49
for free that doesn’t happen of course
20:52
uh then you know you get into the
20:54
project
20:55
uh i mean there are good people out
20:57
there who can do good job um
20:59
and that’s why we are surviving we are
21:02
also looking to buy more it’s not that
21:04
we are not looking
21:05
we are just we are we are crediting our
21:07
workplace carefully
21:09
you have to turn over a lot of rocks to
21:11
keep turning over a lot of rocks and
21:13
you know to add to the market side of it
21:16
uh
21:16
yes 2021 brings with you an additional
21:19
challenge additional hurdle find as
21:21
many rocks to turn over as you can to
21:24
find
21:24
you know your pearl right so that is
21:26
correct yeah that is correct just
21:28
this hard work i mean so and the second
21:30
thing is
21:31
i mean if you are in a value-add
21:33
multi-family space
21:35
i mean if that’s not the space which is
21:38
giving you the value you have to adapt
21:39
to the change also
21:40
what else can you do i mean the goal is
21:43
for you to create
21:44
value do you want
21:47
if you are not able to create value
21:48
invest one space you have to adapt to
21:51
the
21:51
market condition and see where else can
21:54
you create that value
21:55
which others cannot create i mean there
21:58
are things like you know ground up i
22:00
mean if
22:00
you find a good piece of land you know
22:04
get in touch with a with a developer and
22:06
and maybe build something
22:08
you know you are you are creating value
22:11
you
22:11
you can do value addition in in
22:14
many many ways basically you know ground
22:16
up multi-family ground up assisted
22:19
living ground up
22:20
storage ground up i don’t know whether
22:23
anything called mobile home bar ground
22:24
up because they have
22:26
hardly anything but the point is you can
22:29
do
22:30
wherever you can create value you have
22:32
to be creative basically don’t don’t get
22:34
stuck into what you
22:36
have been doing the last couple of years
22:38
and the market is changing and you want
22:40
to start
22:40
remain stuck in the same space uh
22:44
maybe maybe we’ll have to find a
22:46
different niche
22:47
again um you know as the as the market
22:50
condition
22:51
warrants it yeah that’s an excellent
22:54
point right
22:56
you mentioned mobile home park ground up
22:58
uh i know
23:00
some that are doing it or attempting it
23:03
it’s
23:03
it’s not that easy right because the the
23:05
value creation
23:07
in developing a mobile home park is
23:09
pretty limited right so you do not
23:11
create any vertical structure you
23:13
essentially create the paths
23:17
and the if it’s in within steady limits
23:20
it’s pretty hard to even get that
23:22
approved within
23:23
anything so you have to go into the
23:25
countryside
23:27
and then you need to balance again is
23:29
it’s the investment you do really
23:31
uh turning into a positive cash flow at
23:34
some point
23:34
at some point right so yeah cities are
23:37
not alone mobile home parks at all i
23:39
mean
23:40
that’s the biggest challenge i mean they
23:41
don’t i don’t know for what
23:43
for what what is the reason but the
23:45
fundamental fact is
23:47
you cannot do roundup development for
23:49
mobile home parks i mean the only thing
23:50
you can do is
23:52
you can buy and then you can improve the
23:54
rents and you know improve clean up that
23:56
park
23:58
um but creating a new one as you said
24:00
enter is
24:01
is very very very difficult right now
24:03
yeah yeah
24:04
now i think another challenge you have
24:07
and we we just had uh
24:09
brian murray uh on as a guest for for
24:12
the multi-family master uh meetup in in
24:15
texas uh maybe a week ago or so and
24:18
he talked about his uh his success there
24:21
and he actually has
24:22
partnered up with with brent turner from
24:25
bigger pockets right today or we have uh
24:29
have created a big space for investment
24:31
space for for mobile home parks
24:33
attempting to uh to compete with the big
24:36
boys in that space you’re not that many
24:38
big players
24:40
and then you have all the mom and pop
24:41
players right that are out there and
24:43
obviously they have been very successful
24:45
in buying
24:46
up a lot of these mobile home parks but
24:49
at the same time he also said
24:51
the challenge is it’s it’s a very
24:53
limited space
24:54
once you buy up these parks it’s not not
24:57
like a multi-family you can buy for
25:00
a very long time and you still can buy
25:02
more
25:03
with mobile home parks to supply uh
25:07
of parks that actually meet your
25:09
requirements is pretty limited
25:10
right so so you better be an expert
25:14
in that field if you want to really
25:16
scale it
25:17
yes yeah i mean there’s no new supply
25:19
it’s not like you know population will
25:21
grow and the mobile home power number of
25:23
mobile home parks will grow that is not
25:26
happening at
25:27
all it’s not like you know single-family
25:29
homes coming up everywhere you know and
25:31
feeling
25:32
i mean you go you know builders are
25:34
building left and right
25:35
that’s not going to happen in mobile
25:37
home parks so you are just competing
25:38
with the existing
25:39
whatever is out there you are just
25:41
competing you know uh in that space
25:43
you know so yeah that that’s a difficult
25:47
difficult space then your storage i mean
25:49
storage is a good space you know
25:51
but again cap rates have come down so
25:53
much i mean
25:55
so you have to find your your niche you
25:56
know what you want to do what can you do
25:59
yeah so certainly social media has been
26:02
uh
26:02
a major challenge for all all uh
26:05
all the experts in in the various
26:08
segments white
26:09
it’s mobile home park whether it’s self
26:11
storage
26:12
even multi-family right they are it’s so
26:14
easy to learn about it
26:16
and then with all the coaches that are
26:18
out there everyone jumps on it
26:20
and now you just have all these
26:23
prospective buyers that don’t jump on it
26:28
yeah information flow is so easy
26:32
in 15 minutes you can you can have
26:35
all when the folks looking at your deal
26:37
you know and everybody underwriting and
26:38
next thing you know within 24 hours
26:41
you know you have multiple offers on the
26:42
same property you know it used to be
26:44
different
26:44
in you know a couple of years ago yeah
26:47
but now
26:48
i mean i told you yesterday i found a
26:50
property it came to the market yesterday
26:52
today morning i called the broker i said
26:53
i already have eleven offers
26:56
well what what market was that in us it
26:59
was like
27:00
like a louisville uh you know in that in
27:02
that area you know a smaller property
27:04
but
27:05
uh it just came in yesterday night and
27:07
uh here you go
27:08
so um you know what can you do
27:12
so that’s interesting that’s interesting
27:14
uh anton that
27:16
you know the social media you know i i
27:18
don’t know if i’d necessarily factored
27:19
that in until you said it right now but
27:20
that’s
27:21
the truth that’s part of the market
27:22
today because we’re all you know seeking
27:24
uh you know a great investment and and
27:28
capitals gonna seek a yield regardless
27:30
of where it’s at whether it’s retail or
27:33
institutional or family offices and and
27:35
in the retail space
27:36
then there are a ton of investors who
27:39
are trying to figure out what to do
27:40
with the stock market i’m not just sure
27:42
and the economy i’m not sure
27:44
what’s going to happen and you know it’s
27:47
it’s the the barriers
27:48
of entry into the you know these types
27:51
of assets are
27:52
are you know slowly dropping down with
27:54
information share and
27:55
and now you have more buyers potential
27:57
potential buyers and
27:59
11 offers in louisville they’re
28:02
overnight overnight
28:05
i don’t know whether whether you guys
28:07
have noticed in last uh
28:08
two weeks i mean right now it is 25th of
28:11
february that’s the day we are recording
28:12
with
28:13
this podcast but in last two weeks i
28:15
have seen a lot of inventory coming
28:18
a lot of new oms coming in my email
28:22
i mean i’m seeing at least one or two uh
28:24
in the markets which i have been
28:26
following
28:27
closely which used to be like one in a
28:30
month or one and one in a week
28:32
i’m seeing one or two daily you know the
28:35
email
28:36
i don’t know whether that is you guys
28:38
are seeing it or not
28:39
i don’t know what is the phenomena i
28:41
think
28:42
sellers are in hurry to solve their
28:44
assets
28:45
um that’s what it boils down to i mean
28:48
there is some wind going on somewhere
28:50
and i’m not trying to
28:52
spread the rumor in any way um but i’m
28:55
seeing a lot of lot of invent
28:56
i mean a lot of new properties
28:58
multi-family properties coming onto the
29:00
market
29:01
yeah yeah so to to be fair i think there
29:04
are
29:05
a co a number of factors that play into
29:08
it right so
29:09
year end and early of every year tends
29:11
to be slower
29:12
period right so that is kind of normal
29:16
that december and january
29:18
is a little bit slower now with kobe 19
29:21
everything i think
29:22
just has has come to a halt for a longer
29:25
period
29:26
where all the sellers wanted to to
29:28
figure out how the elections go
29:30
how the election go through how the
29:32
vaccinations ramp up how the eviction
29:34
laws
29:35
are being extended and so on and
29:38
also because we certainly have seen
29:41
quite a bit of stress with a lot of
29:43
property owners in november and december
29:45
with their collections
29:47
and i think they then realized that it
29:50
was
29:51
a weakness that could they could recover
29:54
from in
29:54
in january and actually all the brokers
29:57
were already ready with their
29:59
uh om uh so that they just had to update
30:03
the numbers
30:03
and now january and february
30:06
tend to look better again and now
30:09
everyone rushes to the market because
30:10
now it’s a perfect time to
30:13
to take advantage still of the
30:15
relatively low
30:17
borrowing cost and again
30:20
just that massive demand right of
30:23
buyers that are out there looking for
30:26
deals so if you’re a seller
30:28
uh you really have to wonder whether you
30:31
just want to sell
30:32
even if you didn’t plan to because the
30:36
you were in such a strong position as a
30:38
seller right now i
30:39
and i i kind of agree with the points
30:42
that you mentioned anton you know
30:43
coveted
30:44
of course you know kind of not slowing
30:46
down but at least you have some
30:48
some new some there you know about the
30:49
vaccine you know presidential election
30:52
has is over you know sellers are coming
30:55
out of their comfort zone
30:56
uh they were sitting on their oms and
30:58
now
30:59
now you know january has passed so
31:02
yeah i think that that is the real
31:04
factor in the last two weeks
31:06
what we have seen you know some
31:08
inventory coming into the market
31:10
yeah and uh i’ll add you know i know
31:12
we’re talking about commercial
31:14
but you know we we don’t operate in a
31:17
vacuum right the
31:18
sink in san antonio the market i saw
31:21
an express news article it said house
31:23
sales rose
31:24
by 22 compared to the same month last
31:27
year
31:28
and then 68 of the houses had a higher
31:32
median
31:33
income sorry higher average sale price
31:37
and then
31:38
a good number the median price point
31:41
jumped
31:42
about 13 so if
31:46
you have a higher number of sales at a
31:47
higher average uh sale price then even
31:50
on the single family they’re they’re
31:52
kind of experiencing the the the
31:54
increase in property values you know so
31:56
i’m like wow
31:57
this is a san antonio market yeah i mean
32:00
i would say it’s i don’t know how it is
32:02
in on long island but also
32:05
everywhere in texas right so like we
32:08
have a neighbor that
32:09
put the house up for for sale it’s it’s
32:12
not a
32:13
it’s on the upper end from a price point
32:15
perspective
32:17
and they they delisted it and they got
32:20
an offer before the first open house
32:23
right and i decided well we still do an
32:26
open house for four hours
32:28
right uh they had
32:31
the whole neighborhood was filled with
32:33
cars right so as they had
32:35
a time slots right so essentially
32:39
every 10 minutes you had someone else
32:40
looking at that house
32:43
so so they they will uh i don’t know yet
32:46
for for what it’s it’s going to trade
32:49
for but it’s
32:50
will be significantly above the asking
32:52
price yes 100
32:54
you know i have a house which i’m
32:56
selling you know my tenant left and
32:58
you know that was trashed house was
33:00
trashed i said
33:02
right fix it myself and then sell it or
33:04
just sell it right
33:05
so i just put it in the market and put
33:07
the retail price
33:09
all and i’ll fix the price and i’m still
33:12
getting an offer
33:13
above the asking price
33:16
why would i fix it you know yeah that’s
33:18
right yeah yeah
33:20
so let someone else have the headache
33:22
yeah
33:23
yeah i don’t want to go there and get it
33:25
fixed and whatnot so
33:26
yeah that’s right and good luck finding
33:29
contractors that do a good job now
33:32
yeah they are they are all previous new
33:34
york i don’t know whether you guys know
33:35
that new york is
33:37
i mean to lift to lift get out of the
33:39
car they charge you money you know
33:41
so forget about doing the work
33:46
so it’s like different different point
33:48
here all together
33:49
i had that’s funny i have got a few
33:51
times and every time me and my wife go
33:53
it feels like
33:54
we always have cash a little bit of cash
33:56
to spend here and there
33:58
everything feels like it’s like 25 bucks
34:01
you’re gonna get a drink and a coke and
34:03
you’re like that’s 25
34:04
so you’re gonna get on the on the subway
34:06
or like somehow it’s like 20 bucks and
34:09
i’m dropping 20s everywhere and we’re
34:11
just walking down the street
34:13
yeah but uh yeah this is costly yeah
34:16
that’s that’s uh certainly an
34:18
interesting aspect there right so we we
34:20
just have experienced that obviously
34:23
uh uh it’s it’s different in different
34:26
places of of the country but we
34:29
we live in uh uh in fresco which is
34:31
outside of dallas right
34:34
that’s really not real estate related at
34:36
all but it just shows that craziness
34:38
that
34:38
that we are facing uh so
34:41
we are used to pay twenty dollars plus
34:44
for a cocktail at the in the
34:47
in new york right and in vegas and and
34:49
all that
34:50
so now we are in a upscale restaurant in
34:53
frisco
34:54
and the the cocktails were over 20 bucks
34:57
right so so that’s just the way it is
35:01
everything is just uh increasing in
35:03
price and somehow
35:05
people are paying for it right it’s uh
35:09
whether it’s a brand real estate people
35:11
are gobbling it up whether it’s
35:13
multi-family
35:14
people gobbling up everything that comes
35:17
onto the market
35:19
you have buyers for it it seems yeah
35:22
people always have money
35:23
you know did you see that there’s a
35:26
that new article i can’t remember who
35:28
put it out but it was like
35:30
22 of all the money in circulation today
35:33
u.s supply
35:34
was printed like in 2020 uh this year
35:38
and it the article just shocked me i go
35:40
wow that’s that’s a
35:42
i mean that’s like almost a quarter it’s
35:44
a big big chunk of our
35:46
circula money that’s around right now
35:48
that’s why
35:49
that’s why you have so much uh inflation
35:51
higher than inflation right i mean
35:53
in last one year you know cost of living
35:56
has gone up
35:57
for that matter you know everything is
35:59
so expensive you know
36:00
your your number has gone up you know
36:03
yeah
36:04
you know you go to home depot anything
36:05
that you had bought for ten dollars now
36:07
it is twelve
36:08
thirteen fifteen dollars at least twenty
36:10
thirty percent you know i went there to
36:12
see the kitchen
36:13
granite you know as i’d like to figure
36:14
it out the green editor used to buy at
36:17
39 cents per square feet
36:19
now it’s 49 cents per square not cents
36:21
for ten dollars per square feet
36:23
yeah so everything is 20 30 percent
36:27
higher
36:28
so and it’s just not construction it is
36:32
labor it is consumer goods it is
36:35
medicine everything but your salaries
36:38
have not gone up
36:39
the money that you are making in your
36:40
lives has not gone up
36:42
so what what is the impact of that is
36:44
the fact that
36:45
your saving capacity has gone down yeah
36:48
so
36:48
so the question here really is right we
36:50
all feel that everything got so
36:52
expensive but yes yet
36:54
the official inflation rate is still
36:56
below two percent
36:58
so that’s that’s the crazy part how they
37:01
are somehow able to come up with a
37:03
number that
37:04
we solely do not feel is is the accurate
37:07
number
37:08
now when you talk about lumber obviously
37:10
that’s one of these other crazy things
37:12
that
37:12
impact uh rehab but it also impacts
37:16
ground up construction particularly in
37:18
the south where everything is done with
37:20
uh
37:21
with with lumber the interesting
37:24
element there is uh i read an article in
37:26
the wall street journal that
37:28
the the mills make a fortune right they
37:31
are really benefiting from it but the
37:33
actual
37:34
uh prices for the for for the trees
37:38
have gone down they are at the lowest
37:40
level inflation trusted over the last 50
37:43
years
37:43
yeah i mean see they have there is there
37:45
uh
37:46
their price the cost is cost is lower
37:50
and you know the prices are higher so
37:52
who’s making money
37:53
yeah you know these mills are making
37:56
money right i mean
37:58
they’re just you know that’s their time
37:59
to make money basically in the yeah
38:02
so yeah so talking about uh some niches
38:06
that
38:06
uh obviously we have talked about uh
38:08
multifamily being
38:10
really overheated uh in in
38:13
to the large extent uh
38:16
unless you find a niche and a mobile
38:19
home park we see the same
38:20
uh uh storage we see the same thing
38:24
uh you you have uh in have been
38:27
investing in assisted living
38:29
and that’s pretty close to my heart
38:31
because our family is also active in
38:33
in that in that space so can you tell us
38:36
a little bit what your experience
38:38
has been there and also particularly
38:41
what i’m interested in
38:42
because you invested in california which
38:44
is not necessarily
38:46
the first place you would would invest
38:48
in in
38:49
assisted living so why did you make that
38:52
decision and how did that all work out
38:54
and where do you see the challenges
38:56
you see the biggest challenge in
38:58
assisted living is um
39:00
you know of course california is not the
39:02
best best
39:04
market to invest in assisted living
39:06
because the regulations
39:07
not because of anything else california
39:09
has huge huge huge regulations
39:11
we end up spending a lot of time meeting
39:14
the demand
39:15
you know we have almost like one guy
39:17
always working on
39:19
filling up the paper like 24×7 for
39:22
making sure
39:22
you know we are complying to those
39:24
regulations
39:26
so california is not definitely the best
39:28
market
39:29
however you know in six bed facilities
39:33
i still feel that we are we can make
39:36
money uh in terms of
39:39
higher cap rate although your project
39:42
size is smaller
39:43
if we can buy multiple six beds
39:47
closer to each other three six nine
39:50
twelve
39:51
then possibly we can make money up to
39:54
you know fifteen 10 15
39:56
cap the challenge that we have
39:59
is the lending you know it’s very
40:02
difficult to find a lender who lends it
40:04
very very difficult you know it’s just
40:07
almost impossible you know unless you
40:09
really find a lender
40:10
who can lend you um on
40:13
just the property and then you put in
40:15
the money to
40:17
to establish a business there if you can
40:20
do that
40:21
you can make good money there if you’re
40:24
if you’re buying an existing
40:26
home with the business in it you’ll have
40:29
tough time finding a lender because
40:30
that’s not a residential home anymore
40:32
and you are going to use it for the
40:34
business purposes and there is no
40:36
commercial lender who is giving me the
40:37
money on the residential
40:39
you’ll go to the sba and sba has huge
40:42
huge amount of
40:43
um guidelines you know spoke me
40:47
into this space so
40:50
to me to me california
40:54
lender and what are you buying
40:58
are you buying a home or are you buying
41:01
i mean if you’re buying a single family
41:03
home on a personal loan
41:05
on on your w-2 i mean on your debt
41:07
basically
41:08
back-to-income ratio goes down every
41:11
time you buy how many of them can you
41:13
buy
41:13
and can you put them into into an llc
41:17
because some lenders don’t allow you to
41:18
do that so that’s the challenge so there
41:20
are the challenges
41:22
this space is filled with challenges
41:24
yeah
41:25
yeah very very good point there right
41:28
and uh
41:29
wanted to to touch on on that financing
41:32
piece right we have had that discussion
41:34
many times about uh financing and
41:38
specifically right for our listeners who
41:40
may not be familiar with that there are
41:42
assisted living you essentially have
41:44
residential assisted living what
41:46
prashant was talking about and then you
41:48
have the
41:49
large assisted living facilities that
41:52
are more
41:53
institutional types now for the
41:54
institutional types there
41:56
is financing readily available in from
41:59
the agencies
42:00
right from large banks from the agencies
42:02
and so on
42:04
uh what brashant has touched on is very
42:07
specific to
42:08
residential assisted living where
42:11
somehow
42:12
at the sba length so that’s the positive
42:14
part but you have a 5
42:16
million limits right so that is
42:18
restrictive on one hand apart from their
42:20
regulations
42:22
the benefit is that the leverage is
42:24
pretty good right it can go
42:26
all the way up to 90 percent leverage
42:29
but the problem is
42:30
that the same language that would be
42:32
happy to lend to you
42:33
with an sba guarantee won’t be willing
42:36
to lend to you without that guarantee
42:38
even though
42:38
the cash flow is actually much stronger
42:41
for that
42:42
business combined real estate and
42:44
business
42:45
then it would be for an accrual and
42:47
multi-family property or single-family
42:49
property
42:50
but somehow in that residential assisted
42:54
living space
42:55
there are no lenders out there that are
42:58
that offer any reasonable financing
43:00
right so you you
43:01
clearly touch on the point that is a is
43:03
a main challenge there
43:05
i see it also has an advantage for
43:08
someone who can overcome it with
43:10
creative
43:10
financing and or also work
43:13
work around all the regulations the sda
43:16
yeah so your creative financing is the
43:19
way
43:20
through which you can get into this
43:21
business you know if
43:23
if you have creative financing seller
43:25
financing you can get in
43:26
and once you establish yourself then you
43:29
can go to the lender and then
43:31
ask for a commercial loan based on ny of
43:34
the asset
43:36
but california trust me that has taken
43:39
the toll out of us
43:40
i do not know why we spent so much time
43:43
trying to find the lender
43:44
but eventually we had to go back to sba
43:48
to find we are still acquiring some more
43:51
uh
43:51
i don’t know why they’re acquiring it
43:52
based on what i told you but
43:55
we are in that mode we acquired fuel
43:57
year and you know 15 months ago we are
43:59
acquiring one or two more
44:01
um but it was a tough thing and you can
44:04
do the same thing in other states also i
44:05
mean i’m hearing
44:06
like in phoenix and all there are some
44:08
lenders who are willing to give you
44:10
the money uh but not in california
44:15
for whatever reason what i suggest
44:18
what i suggest if you are in this
44:20
business i think the better way to go is
44:23
to the bigger box facility
44:25
where you know big box where you have
44:27
lenders available where you know
44:30
that nothing works yes you would make
44:32
less money
44:34
but if you syndicate that whole deal
44:38
you you will end up making
44:41
worthwhile for your time rather than
44:44
finding
44:44
the lenders and filling up their
44:46
requirements you do a ground-up
44:48
development
44:49
maybe 10 20 million dollar worth of
44:51
asset and
44:52
and then you know you still create a
44:55
value
44:55
for your investors you know investors
44:58
may go 10 12
44:59
easily you know maybe more and and
45:02
that time that you have spent is is well
45:05
utilized
45:06
um but the third challenge i would tell
45:09
you
45:10
in the small assisted living space is
45:11
finding the labor
45:13
because a 24-hour business and
45:16
you have to have an operator who has
45:19
good grasp on on labor
45:22
and who is who is familiar with the
45:24
labor laws of the state
45:27
again california is a tough state you
45:30
have to have the right kind of labor
45:32
you know be prepared that you will get
45:34
sued by your employees
45:36
you know recommend comps and things like
45:38
that i mean i have
45:39
met a lot of operators in other states
45:42
who are doing
45:43
weird things i mean that’s not how we do
45:46
the business so we
45:47
we don’t want to get into that too much
45:50
more
45:50
a lot of people who are doing it um you
45:53
know
45:54
colorado you know you can find lenders
45:57
but some places you know you cannot find
45:59
lenders you know
46:00
and the workforce basically yeah so very
46:03
good point workforce is only
46:05
very challenging right uh it’s uh
46:09
being a caregiver uh being paid 12 13 15
46:13
per hour is is a thankless job
46:17
right so finding find the right to staff
46:20
obviously is a
46:21
is is a challenge right so i think what
46:23
you have highlighted here
46:25
this is a great niche for the right
46:28
operator that is willing to put a lot of
46:32
time and energy up front into into that
46:36
and then the returns are essentially
46:39
double or more than what multifamily can
46:42
provide but it
46:43
it takes a lot of effort to achieve that
46:46
and one more point i would say if you
46:48
are just an investor
46:49
if you are not an operator you know
46:52
it’s not worth your time you know
46:55
finding there are no operators there’s
46:58
no company who will give you
47:00
unless you become a partner with an
47:02
operator
47:04
and then operator is a partner in the
47:05
business
47:07
you cannot just go hire an operator for
47:09
your living
47:10
smaller facility it’s not like big
47:13
facility where they are properly
47:14
operating companies who will give them
47:17
the whole thing
47:18
so there is nothing called assisted
47:21
living operating company in the
47:22
residential space
47:24
yeah that do it that do a decent job for
47:27
you yeah
47:28
yeah it has yeah i mean i’m talking
47:29
about the decent job i mean you may find
47:31
somebody
47:32
but you know you’ll end up losing your
47:34
shirts easily
47:35
yeah yeah very good point yeah
47:38
so all all great points obviously we
47:41
veered away a little bit from the
47:43
from the typical topic but i think uh
47:46
our listeners
47:47
appreciate that uh additional insight
47:50
you have there and anyone who
47:52
who thinks to to jump into assisted
47:55
living
47:56
residential assisted living uh don’t be
47:59
scared
47:59
but recognize that it’s there are a lot
48:02
of
48:02
challenges that are there so
48:06
yes the returns all look very good but
48:08
it also takes a lot of effort
48:10
to get to those returns yeah and there
48:12
are a lot of gurus who are selling the
48:14
dreams
48:15
you know i would say that guys just be
48:17
careful you know
48:19
it is so easy to sell the dreams but
48:21
it’s so so difficult to operate a
48:23
business
48:24
and i’m willing to talk one-on-one with
48:25
anybody um
48:27
i kind of bring them up to the street
48:28
and i have resources you know in other
48:30
states i have resources
48:32
in colorado phoenix uh i mean i can hook
48:35
you up with the right people
48:36
uh if you wish to start something
48:39
in those states i’m not i don’t i mean
48:42
the other states also of course we have
48:44
those homes uh and i’m building my
48:47
network uh
48:48
anything i can help i would love to help
48:51
yeah
48:51
very good appreciate it so uh
48:55
you mentioned that you’re willing to
48:56
help so uh uh
48:58
as always right uh it’s important that
49:01
our listeners have
49:03
have the ability to reach out to you uh
49:05
for
49:06
hopefully not just asking for your help
49:08
but also if you have a deal that uh
49:10
you you meet some new prospective
49:12
investors right
49:14
so how can how can our listeners uh
49:17
reach you
49:18
see i have created a website where um
49:20
you know
49:21
just for my my friends you know and and
49:24
you know where i educate my investors
49:26
through my portal my realtygains.com
49:30
um you know they are please subscribe to
49:32
a seven-day email course
49:34
you know which tells you the benefits of
49:37
passive investing you know it’s all free
49:40
and you know you can join a fashion
49:42
impressive investors club
49:44
it’s more education and you want to talk
49:47
to me there is a link there to set up
49:49
some time
49:49
on my calendar my email is pretrant at
49:53
my realtygains.com
49:55
so there are many many ways nowadays to
49:57
connect with anybody
49:59
but prashanth myrialtvians.com this
50:01
simple thing you know drop me an email
50:04
i would love to talk to you
50:07
very good really appreciate it able to
50:10
have a last uh
50:12
uh last comment or statement before we
50:15
say
50:16
goodbye to prashant no just i i
50:19
appreciate
50:19
your hearing your insight and hearing
50:21
your uh your take on
50:22
on the market as as also your your
50:26
different uh
50:27
your assets that you have that you’ve
50:29
managed it’s always really cool to to
50:31
you know hang out with you for a few
50:32
minutes prashant so we’re honored
50:34
grateful
50:34
appreciative humble thank you very much
50:38
thanks again
50:41
you know it’s all mine you know that you
50:43
are taking time to
50:45
talk to me you know thank you so much
50:47
thank you
50:48
bye-bye bye guys