Breaking Into Real Estate Investing with Neal Bawa

by Neal Bawa | Millenial Investing

ROBERT LEONARD: On today’s show, I talked with real estate expert Neal Bawa. Neal is the founder and CEO of Grocapitus, CEO of multifamilyU, Co-founder of the largest multifamily real estate investing meet up in the US. And he has successfully navigated the sale of the large text start-up as the chief operations officer and executive VP. He has raised 10 million dollars in real state funding, currently owns a thousand units in his portfolio. Which is expected to grow over 3000 units in the next 12 months. Neal is a passionate teacher that loves to share all he’s learned through all his journey with the next generation of real estate investors. I hope you greatly enjoy this fantastic conversation with Neal Bawa.


You’re listening to millennial investing by the invested podcast network with your host Robert Leonard interviews successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

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ROBERT LEONARD: Hey everyone welcomes to the show, I’m your host Robert Leonard, and with me today, I have Neal Bawa from Grocapitus and multifamilyU, welcome to the show, Neal.


NEAL BAWA: Thank you, I’m excited to be here.


ROBERT LEONARD: For the listeners who may be not familiar with you can you please walk us through your background and how you get to where you are today?


NEAL BAWA: Sure, unlike most of the people that appear on your show, I’m not somebody that’s real estate royalty; I’m a technologist that accidentally found his way to real estate. Basically, in kind of a rivers passion most people start with a single-family rental, but in 2003 my boss was the CEO of a technology education company asked me for help to build campuses from scratch. We were doing well, we have a lot of money and she asked me to help with that and that led me to 9 months of sheer, I think I slept for maybe 6 hours in those 9 months, but at the end of it we had a stunning campus that vaulted our business to the next level and made impossible for our San Francisco area competitors to compete with us it was optimized in every which way of business where everyone else is just renting space and I realized the incredible power of real estate and things sort of built from there.


ROBERT LEONARD: Did you wait to leave your corporate career before you jumped into real estate?


NEAL BAWA: The corporate career was very lucrative making a huge amount of money, and also I knew that eventually my senior partner and CEO would quit, not quite, but sell the business it was a partner so could leave that large amount of money and run off the real state. But I did plenty of real estates while doing this so the company was not sold until mid-2013, which is almost 10 years after we started building this first campus 2 years after we build this first one, we build the second campus and this time with that CEO’s help we brought in investors. And basically what we did is we took the building and you’ve heard about condominiumizing apartment complexes. We condo-minimized office building it can be done, we basically chopped it off into individual offices and everybody had their condo and everybody had their address, but we were the tenants so, we bought the building, we built the building and 9 doctor investors invested into the building and then we rented the units once they were complete back from them. It was a sweet deal from them because that was 2007 a d11 years late those units are still rented so back to that business, we’ve sold it. But it’s still rented back to that business. So I think it was a win, win, win, win for everybody that was concern so it was delightful and as it happen one of those doctors jumped out so I ended up buying one of those suites myself, and then I realized the incredible power of depreciation, because for the first time in a long time my salary went up and my taxes went down, which was awesome, incredibly awesome, and I was like ” I gotta do more of this real state stuff, this is incredible” . And so in 2008, I started my non-construction real state journey, bought 10 homes in California, then I ended up buying 10 tri-plexes in Chicago, then I ended up investing in 16 syndications, open my meet up group. I mean it’s a sort of snowballed over a decade and a half. I started teaching in meetups, then started teaching at conferences. Then build my udemy course. And so its sort a snowball but none of it was planned, it just sort of happened.


ROBERT LEONARD: Yeah it’s a very interesting way to get into a real state, so for those that are listening to the show that might be new to real estate, can you explain what a tri-plexes and what is syndication is?


NEAL BAWA: Sure, so syndication is a process where you’re looking to buy something that’s institutional class, a large asset. So my next project is an Atlanta property that comes out in 15 days and that’s 24 million dollar property. Why am I a 24 million dollar property, why not buy a tri-plex which is, it’s a building that has 3 units, right? Tri-plex, quad-plex has 4 units. Why not buy those, and the answer is scale, the problem with buying du-plex or a tri-plex or a quad-plex you don’t have a property manager in your property, see you don’t have the level of control that you want. You have a property manager that will manage a thousand units and maybe sometime you’ll pay attention to your tri-plex. When you buy a 25 million dollar asset, you have 5-6 employees that work at the property, and many of them living on your apartment complex, because you tend to offer them discounts when they live there, right? That makes their life easier and your life easier because if there’s a pipe that burst at 11 o’clock the manager just live in one of the units, you’ll gonna get there in 15 minutes and you gonna save a hundred thousand dollars on your laminate, so the level of control that you have on a 250 unit 25 million dollar property, isn’t it completely different class, from a single-family rental quad-plex, even in a small fiber unit property. Not just the level of control, it’s the fact you have efficiencies of scale when you wanna do a rehab on a 250 unit, 250 units to rehab, guess what? You can choose to buy the laminate, instead of buying it from home depot. You choose to go to alibaba.com and choose and buy it for a single shipping container in China. pay half of what you would be paying at home depot, and now that shipping container delivered in the back of your property just taking up to parking spots and look bucket with the padlock and then whenever you need it just go to the shipping container and take your laminate out. You’ll realize how insanely efficient that is, I mean I’m running the home depot every single day you got all of this stuff on the back you do the same thing with other pieces of equipment. When you’re buying appliances you don’t buy one, you buy 30, you buy sets of 30, you wait for the best buy to have a deal, you wait for the price to have a deal and you buy 20 or 30 sets. You get huge huge efficiency of scale instead of hiring a contractor for 75 or $125 for an hour, you hire a full-time employee at 20 bucks an hour that is going to just do laminate in 250 units. Laminate today, laminate tomorrow, laminate next week and that way you can roll out your upgrades. You know, in our world when we spend $7000 in a unit, we’re like ” oh my god, we spent a lot” imagine spending thousand dollars in a single-family upgrade you’ll be done with that in the first3 days. In our world 7000 is a huge upgrade. We call it the premium upgrade, so I think the efficiency that comes with the large properties can only come if you’re buying something really expensive 23-25 million dollars with 6 employees. Where do you buy that? No one investor has the money to pay 6-7 million dollars down for 25 million dollar properties so what you do is you take a hundred thousand dollars from 60 investors and you aggregate it together in one LLC and you buy the property in the LLC, and then you give fractional profits both cash flow and up site at the end to those investors, that is known as a syndication. It’s very very popular in the US especially since the 2014 jobs that made it much easier to syndicate.


ROBERT LEONARD: Yeah that’s a great example of what syndication is, and the efficiencies are you said incredibly in buying scale like that you can negotiate such discounts and again you kinda avoid the retail outlets like home depot and go directly to the source and get much better deals.


NEAL BAWA: Not just for equipment, but also for staff, right? Because if you are going out there to bring in a contract he’s gonna ask for 70-125 bucks an hour plus you don’t have any control over him, because he can just come and go as he pleases. But what if you had a guy which is working on the property from 9 to 5 cause that’s a day job. You can have a property manager or the assistant property manager just walk in twice a day to check and make sure he’s doing his job. And you can pressure him and say ” I need to show this unit by tomorrow morning” so even if you have to stay late today, this laminate needs to be completed because from tomorrow 8 o’clock I’m gonna send in a cleaner and 9 o’clock I’m showing this unit” . How do you do that with people that don’t work for you?


ROBERT LEONARD: Yeah, certainly cannot. Now syndication is a great strategy but if something I think you need to build up to, so what is the best way for a millennial who’s looking to get started in real estate that’s working a corporate job, what is the best way for them to get started?


NEAL BAWA: Well one of the paths I think is to consider being an equity partner with some of these syndicators out there. There are very severe SCC consequences you need to learn more about this, but there are number of syndicators that will invite you in, and you can do investor management for them you definitely have to play other roles as well which they know, and they’ll help you with that as well so you play some kind of roles once the property is purchased, you primary role before the property purchases and investor management and I think that’s a very very good place to start. Everybody has investors around them, anybody who says they don’t, simply don’t know what they’re talking about, there are investors everywhere, there are more than 2 million accredited investors in the US and they all want to place money. So in my mind, that is potentially a path to go to. I’m not a big fan of buying properties inexpensive places like new York or California, I live in California, I love California, I just don’t invest here because in my mind cash flow is important, appreciation is equally important. The problem is in New York and California you depending on just appreciation, which is a bad strategy in my opinion, especially towards the end of the cycle, this is a very mature real state cycle where definitely in the 7th or 8th evening, not the 9th and this kind of a market, making an appreciation bad is a very problematic sort of challenge so I would encourage people to look outside of their area, look at the sunbelt market which is growing much much faster.


ROBERT LEONARD: I like that first strategy that you mention, that I wanna dive in a little bit more because it not only helps, would help a new investor get a piece of a deal, but it will also help them, I’m sure they would learn a ton for being involved on that so could somebody find an opportunity like that, where should I look, and how can I get involved?


NEAL BAWA: Well there are 2 different strategies. One of the things is there are several conferences each year that happen in the united states, where people who have deals go there to make connections to people that could raise equity for them, right? So ill just repost some of those day ultimate partnering conference that happens in Boston there is Michael Blanks steelmaker, a live conference that either in Washington and Dallas. There’s Jake and Gino’s conference that happens in Orlando or Nashville, and there’s the capital racing conference that’s happened in Denver. You can Google all of these. And I think if you go to these conferences and talk with people who have projects already? Then you’re not finding a deal at all. The deal exists, the deal is in contract, the deal has a beautiful pitch deck, and the deal has an investment summary. All of that is done. Your job is to take it from there and bring in investors and play other roles. They will typically give you other roles that probably we asked to help with the diligence, you probably be asked to help at marketing, there’s probably investor management task after the property’s purchase that you’re going to have to work on. But what’s nice is that you don’t need to know these things, because the syndicator was looking for additional equity. Already knows these things. And he has a person assigned to kinda help the millennial through it, right? And again a lot of millennials think that they don’t have the access to equity which I find to be nonsense and collecting just that day a limiting belief.


ROBERT LEONARD: Yeah, that was gonna be my next question is what if somebody like the strategy that we’re talking about but they don’t think, they think they can do the part what’s to purchase, the property to purchase, they think they gonna handle all of that whatever’s turn to them, but what if they don’t know how to raise capital? Is that still a strategy that can still implement?


NEAL BAWA: Yeah. So firstly, at least one of those conferences is called raising capital. So there are 50+ speakers there telling you how to raise capital using different techniques, right? So I’m teaching at the raising capital conference this Saturday, and I’m gonna be talking about 2 channels. So meaning there are dozens of channels of raising money the two that I’m gonna talk about are meet up and facebook using those 2 channels to raise money. But there are so many different strategies that 50 guys, 52 speakers have heard of this conference. So you got your choice of stuff. Somebody’s talking about linked in. somebody else is talking going to a yacht club, somebody else is gonna talk about automation so that you’re automating the process of money, somebody else is going to talk about paid ads. There are so many strategies for raising money. There are books out there; Amazon has a whole bunch of books on how to raise capital. In my mind raising capital may seem to doubt but is exponentially easier than the million things you do to find properties, to put them on contract pay or less money find the key sponsor and then find equity, do you still have to do that? Right? So this strategy takes all of those away and you’re just raising equity to make sure that you’re following SCC guidelines and remain compliant.

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ROBERT LEONARD: and you mentioned limiting beliefs a few minutes ago and I wanna go back to that a little bit, what if you found to be some of the biggest hurdles for new real state investors getting harder in, how can they overcome those?


NEAL BAWA: I think the biggest belief that I hear is, well all these other guys are better than me and have more experience and more money and more track record. How can I even get started? I think that particular limiting belief has a very simple answer. How do you think those people got started? Right? Wasn’t there somebody ahead of them when they got started? They still got started its fair to say to yourself, look my first deal is going to be harder than my second one. And my second one is going to be harder than my third. That’s okay to say. But when you start saying I can’t do it because these guys are better than me, you’re simply saying Google cannot exist because yahoo is already there, you’re saying that anyone and everyone got started in business could not start because somebody on the same business already existed. It’s just a limiting belief. People start new businesses all the time, the real state is no different.


ROBERT LEONARD: Yeah, I mean facebook. Look at facebook, facebook was not the first social media.


NEAL BAWA: You remember my space? It’s ridiculous, how the being first is sometimes doesn’t mean anything. What’s beautiful is in the real estate syndication business it’s not like facebook so right now if I ask a thousand people in America, name your number one social network in the US. All of them will say facebook or some of them might say Instagram, there’s gonna be 2 picks between these people. The key is if you take 1000 random investors in the US and say name your favorite syndicator, you will get 500 responses. What that means is the market is so fragmented that the ability for a new entrance is exponentially easier than, let’s say somebody is doing a new social media app because there’s no brand, right? A thousand people will give you 500 answers so there is in the incumbent, it’s just a fractured market, it’s like when you open a laundry store you don’t worry about they’re being some superstar laundry store that everybody loves. Well, real state syndication life.


ROBERT LEONARD: Yeah, I mean I’m pretty involved in real estate and I couldn’t name my real estate syndicator. so yeah I completely agree and to your point Instagrams owned by facebook.


NEAL BAWA: My point is in technology when you start something new, you can have a huge hurdle you gotta convince everybody that they’re gotta get off their favorite network and join yours. No such hurdle exists in real estate syndication there is nobody in real estate syndication that has 5% of the market. There’s nobody that has 1%. What are you worried about it?


ROBERT LEONARD: Yeah it’s all about the mentality of abundance other than scarcity.


NEAL BAWA: I think you have to combine the abundance mentality with massive action; you also need to understand that part of abundance and part of massive action is fake it until you make it. Cause that’s what Steve Job did, that’s what Bill Gates did, they faked it until they make it. You have to tell your mind. I may not be there yet but I’m going to get there. That has to be enough to your mind for you to be able to take that massive action.


ROBERT LEONARD: Yeah I agree about the massive action, we had a couple of episodes ago. we had Garry upon the show and he said the same thing that massive action is all that matters when it comes through it because action is the only thing that is gonna change anything and it’s a common thread that I’ve seen throughout this podcast is that a lot of the guest that we had on the show, I have said action is the key to success. So guys if you’re listening to this note that down and tries to go out there and take action. Now I wanna talk about having a mentor, cause on the real estate basis seems that is important and a lot of experts recommend getting a mentor. How can an inspiring real estate investor find the mentor, maybe a syndicator that would mentor them?


NEAL BAWA: So the short answer is, how are you putting yourself out there, okay? There are so many ways to put yourself out there, there is one method of mentors collection is going to a bunch of people that you like, and ask would you mentor me? I don’t favor that that approach, I’m not saying it doesn’t work but I think it’s problematic. The best way to do it is to put yourself out there. If you’re into meetups go to the top five meetups, and every single time you go to the meet up make sure you’re early and make sure you’re last to leave because of what you and make sure you’re early there only the owner of the meetups there, right? nobody else is walked in yet and so that’s your chance to talk to him, that’s your chance to help, that’s your chance to say, “you want me to move this desk, you want me to set this up and hook up the projector and the laptop for you, how can I help you” right? Don’t just say, “How can I help you,” you say you want me to do x you want me to do y, you know should I sit at the front and sign people up. Offer help but offer discrete specific help and if he says no, nothing happened, he just said no. The key is that you have to inject yourself. If you’re the one sitting at the front when people come in, you now have the chance to, number one, know exactly who the person is, cause you’re the person next to the sign-up list. So what you’re doing is, by doing that, you have to sign up list, you know that person’s face was like. Now when throughout the meetup people are talking you figure out who the movers and shakers in the room are and you connect them, and once again you offer them very specific help. The way to get mentors is to offer a significant amount of help to those mentors or something that truly helps them and then the mentorship comes very naturally. They just gravitate words. I had a guy, his name is Eric Lou, he’s now our director of social and local and Eric was basically what Eric did was followed everything I said for the last 3 minutes. And He ended up being an equity partner in all of our projects because he started, he took a step and he took the second and he took the 3rd, he didn’t worry about the fact that when he took the first step he didn’t get anywhere. He took the second, he took the third. So when you’re looking for a mentor, don’t just profile mentors. Figure out what they’re doing and figure out how you’re going to help them in whatever they do.


ROBERT LEONARD: I mean, the core event is building a relationship, you’re building a new relationship and you have to remember that, you can’t go and expecting anything and expect a real relationship to form.


NEAL BAWA: Yeah I have people that sent me an email and say “will you mentor me?” that is the content of the email, right? Guess what I’m doing, hitting the delete button.


ROBERT LEONARD: Yeah that’s not a great way to build a real long-lasting relationship, now I wanna talk about how you find good markets to invest in. I’m familiar with your strategy and what I like about it is that it’s rooted in data; it’s not based on some opinion of an area it’s based on hard data. Can you walk us through your strategy for finding great markets to invest in?


NEAL BAWA: Sure, so the strategy is based on the fact that there are these 800-pound gorillas in the room when you’re looking at properties. These 800-pound gorillas are demographic gorillas, okay? And they affect everything you do, they affect your rent, they affect your delinquency, they affect your appreciation, and I believe that there are 5 of these demographic gorillas, and here they are I’ll come back to them so don’t worry about the speed. Number one population growth. Number two-income growth. Number three job growth. Number four home price growth, and number five crime reduction. When you measure the size of these gorillas for every single property in every single city that you’re looking at, you become much better investors, because you are data-driven investor, you’re not a speculator you don’t speculate, right? And when a property break or a city break those rules, you say well you know this is a nice property but I’m looking for better cities and the best cities. And the only way for me to do that is to stick with my rules. So when you’re looking at the population growth, you want at least a minimum of a 1% year population growth, one in a quarter % would be better, at the end of this podcast I can show you exactly where to get that data but what’s key is you need about one and a quarter % population growth because at one in a quarter % of population growth then drives roughly a 2 and quarter percent growth in peoples you know house hold income, so you want their house hold income to increase by 2% and a quarter percent somewhere in that range and I’ll give you the specific rage is later on the podcast then when your population is rising and there’s competition for several units in the city and more and more people coming in and that tends to put push up incomes, and income tends to push up home prices, home prices in the metro to at least go up by 2.5% in a year I’m usually a fan of like 3% a year increase in home prices and these days that’s not hard to find in the last 8 years but keep in mind the method that I’m gonna show you measures from 2000. So it’s going to include the 2001 depth, it’s gonna include the 2008 crash and then it’s gonna include the subsequent 2009 into 2019 run or 2011 to 2019 run. So it’s got some good periods and some bad periods. But over that time, I wanna make sure that the place that you were in has at least a 3% annualized home price growth and some of those years are going to be negative. They’re gonna be home price growth 2008-2009-2010-2011 will all be negative. So that’s the first 3 we talked about the population growth and income growth and home price growth. The 4th one is jobs and I’ll show you where to get the jobs but with job, here’s the basic metric, 2% job growth you usually support 2% rent growth, 3% job growth, you’re happy because you’re getting job, you’re getting your rent growth which is probably more like 3% a year and you’re getting appreciation, why? Cause everybody has a job, everybody has a good job, and now they’re all fighting for the same real estate. The 5th one is crime reduction, and there’s a way using a website called city-data to measure crime in a particular city and figure out what the benchmark is, right? firstly, you want crime to below, second, you want it to be going downwards so both of those are in a single line on a city data page for any city in America they can just look left or right, and go up, going down, very nice and smooth decline in crime that’s awesome and below a 500 benchmark. That’s the bench that I’ve said and you look at those areas in your safe. So I’m not saying this is the best system, I know it’s not full proof that doesn’t work 100% all of the time but a data-driven system will probably put you in the right direction 90+% of a time where most investors are just guessing, right? It’s just constantly investors guessing and guessing and guessing and that’s what usually leads them in the wrong direction because they think they’re investors but they’re not investors, they are speculators.

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ROBERT LEONARD: I mean if you’re not using data, and you’re just taking the opinion of somebody that lives there, that’s subjective and I’ve seen a lot of investors do that were they talk to real estate agent that lives in that area and talk about what the agent is seeing, and that agent might be thinking one thing is happening but if you look at the underline data that might not be the actual pictures. If you’re looking at true real hard data, it’s hard to argue with what’s happening there.

NEAL BAWA: Yup! So, where do you get all this stuff, right? So I just talk about the metrics, but where do you get them. So first, there’s a beautiful excel spreadsheet that has 5 metrics per city level, which we talked about and then it has 5 even more important metrics at the neighborhood level, which even more important cause you could go a great city and end up investing into a war zone, right? So there are 5 metrics that I gave you for cities, there are 5 metrics for the neighborhood. Those are mention in a beautiful spreadsheet and that spreadsheet tells you exactly where to get the information. The spreadsheet is stored at www.multifamilyU.com/toolkit , so hopefully, you can do that in the show notes. So you go to the tool kit and scroll down to section 7 and you’ll see a spreadsheet and then you’ll see a word document and that document will have all the rules that I gave you but they’ve expanded. Things like, how do I use this system next year, the cause wouldn’t that range need to grow? Cause now it’s another year added in. So how do I use it next year, how do I use it 5 years from now? How do I use it for larger cities that grow lower? How do I use it for smaller cities that tend to grow faster? All of those rules are in the word doc excel spreadsheet. All of that at multifamilyU.com/toolkit, it’s free. The actual implementation is a 90-minute video course, and it’s at udemy.com, that’s www.udemy.com . Just search for my name, Neal Bawa or the direct link is udemy.com/realfocus, one word. Go there, the course is 49 box type in the coupon code “MAGIC 49” all caps, MAGIC 49, one word, and it will turn the course for it, so go take that course in a video tutorial, I’ll explain all of those 10 metrics and exactly where to find them and exactly how to use them and it will be free for you forever. There’s no pitch in this course, I don’t even get your email address. It’s just my gift to you.


ROBERT LEONARD: That’s a very great offer, Neal thank you that, the listeners. I definitely will put all of that in the show notes for you to check out take advantage of it. I actually put the strategy into action myself, and I purchase a few rental properties using Neal’s strategy, So I know firsthand it works and I highly recommend and go check it out.


NEAL BAWA: the key thing is that it’s great for those people that are not looking at the syndicate; people are not looking at the passive investments. I wanna be active, right? Okay, here’s a strategy and you don’t have to go buy any course, you don’t have to pay any mentor. I just learn and implement.


ROBERT LEONARD: Doesn’t get so much better than that. So, what is a common piece of advice that you often hear experts giving about a real estate investing that you don’t think is necessarily true?


NEAL BAWA: I think the first thing that I hear more and more often these days are people, “well you know because the nation, it is aging and millennials are so burdened with student depth, you know. We think that even if a recession comes, you know rentals are growing to do well. I can tell you whether it’s single-family rentals or its multifamily rentals, there’s no reason why the rental market would not take a hit for a recession. I do not want you guys to start up on the wrong foot thinking that you are in some magical fairyland where nothing ever goes wrong, simply because the millennial doesn’t have money to buy homes or simply because people were getting older. That’s not nonsense. The data does not suggest anything like that. Be prepared for the fact that when the next recession comes, whenever the heck it comes. It’s been coming for 6 years now might be coming for the 6 as well. When it comes you’ll get hit, that’s no reason not to invest in real estate but that’s the reason to be cautious then that’s the reason to have reserves. That’s the reason careful and honest with your investors, you’re going to appreciate your honesty. So I hear a lot of people have these stars in their eyes where they think that’s something magical had happened where rentals will only ever go up and they even tell other people on facebook about it and find it to nonsense at all.


ROBERT LEONARD: Is there anything about investing in cities that you recommend that would help through the downturn to those cities because there’s so because they have those kinds of characteristics, did they do better in a downturn.


NEAL BAWA: I say the downturn might be slightly shallower but no, I don’t expect that a lot better what I do expect is that the upturn after the downturn in those cities will be sharper and will be last a lot longer so yes you get the benefits but during the recession, most cities kinda sort of resemble each other they’re not substantially better, They’re gonna be slightly better I think. But I think at the end of our recession is a city like Phoenix is likely to recover much faster than a city like Cleveland Because the demographics of phoenix are across the board better.


ROBERT LEONARD: So if this impending downturn is coming why would the investor invest now versus potentially waiting on sidelines until that time comes and then jumping in?


NEAL BAWA: Because the biggest opportunity is to buy the depth. Okay, you can’t buy the deep at that point of time, you can’t raise enough money, and you gotta get in now. So by the time the recession comes, maybe it’s coming in 18 months you’ve got a pool of investors and you can convince them. Oh! Investors, here’s the depth, here’s the buying opportunity. If you think that it makes sense to build your credibility in the middle of the recession, No! Build it now and you’ll have the money to buy in that depth. That is so important. And it makes so much sense when I say it, but people are like, I’m just gonna wait until the depth. Where are you going to get the money in depth, nobody wants to invest to that point of time unless they already have a relationship with you. Which case they’ll invest because it’ll make sense to them that you’re buying in the depth. Those relationships have to be built now; well it’s easy to find investors.


ROBERT LEONARD: What if somebody isn’t raising money from an outside investor, what if somebody has 25-30,000 dollars that they’re gonna put I to a small duplex or triplex or even a quadplex and just use their own money, should they wait from the depth?


NEAL BAWA: if their only strategy is to invest their own money, it makes sense, yes.


ROBERT LEONARD: got it. So what has been your biggest mistake in your real estate investing career, and you could do it over, what would you do differently?


NEAL BAWA: I think my biggest mistake has been not looking at the data, which is a data-driven approach that I have. I didn’t just wake up one day and said I would be the Mad Scientist of Multifamily. I made mistakes, I bought them in bad places. My investor suffered, I suffered if I could do something over again, I would be more careful buying in markets that are low growths, slow growths or no growths, because of that cost a lot of stress for me and a lot of stress for my investors.


ROBERT LEONARD: So if you could go back and do it again, you would start by using more data right from the beginning?


NEAL BAWA: Using more data, I’m focusing on market quality. We didn’t focus on much on market quality and that hurt us and it also hurt our investors.


ROBERT LEONARD: Along the similar lines Neal, what is the common mistake that you see new investors make?


NEAL BAWA: One of the common mistakes that I see them make is that they don’t believe that they can use other people’s money. I see a lot of rich technologists that have jobs at Google and they just keep throwing money into projects. My question is if you’re confident enough to be investing your heart on money, why would you not wanna bring in investors and say, I’m investing $100,000. I want an investor to invest a hundred thousand dollars. Do you know how to convince people to do that? When I’m raising 35 million dollars a year, I’m not investing half of that in my pocket. I’m not even investing 5% of that in my pocket, right? I’m still able to convince investors. Don’t you think you have a much easier play to say, well I’m you know, I’m gonna put in 100, he’s gonna put in a hundred? But now you got economies of scale, right? You got a property that is 3 times larger, even though you didn’t put in 3 times as much money. I’m not talking about syndication. I was talking about a bunch of friends getting together. Why would you want to involve other people and other people’s money to grow your scale? That’s a common mistake that people make. They stay in single families.


ROBERT LEONARD: since you mention single-family there at the end and that’s a residential property anything up to 4 units is also considered residential. So I’m assuming that you’re only looking at things bigger than a fourplex, is that correct?


NEAL BAWA: It could be a fourplex, it’s like I have 50,000 dollars to invest well I’m gonna take 50 from this guy and 50 from that guy and the 3 of us gets 5o each; together now we have 150,000 dollars were gonna buy a $550,000 Quadplex. Instead of buying a thousand dollar single-family so it could be a quadplex. Nothing against that.


ROBERT LEONARD: Do you have any books or resources that you recommend to a new real estate’s investor that wants to learn about raising capital, you mention your courses, which I think is fantastic or finding good markets, but how maybe more specific about raising capital or just using other people’s money to buy real estate deals.


NEAL BAWA: well I think, books only get used so far I find that most books read our fairly shallow give you a lot of concepts but they’re not giving you any implementation. I think you should invest in your education. One of the key things is that, paying nothing for education means that you believe that for some reason that real estate investing is easier than going to college. Did you expect people to give you completely free college? No, in the same way, do you expect people that are in the trade to give you their time for free? No. so I think investing in education is key. I find that there’s just too much of a focus on, well I’m gonna listen to a 50 podcast and 200 books and I’m gonna get done. The question is, I don’t know what the percentage of people is that redone after that, you know they get in the trade but I think it’s pretty long.


ROBERT LEONARD: I think that’s so interesting because you know the end of the year is coming, I started to think about what I want my new year’s resolution would be, and one of the things I think I’m gonna make this year is not read a single book. I’ve read over 50 books for the last 2 years.


NEAL BAWA: too many my friend. It’s very difficult because your mind is dragged in so many different directions, right? Read 10 books, watch 10 podcasts, then stop.


ROBERT LEONARD: Exactly, yeah I’ve been lucky, or I’ve been… at least it took some action just good. If I think I slow my role in books, I think I can even take more action. That’s gonna be what I’m gonna do going in 2020. So I think that’s great advice. If you were to summarize everything that you’ve learned over your investing career into just 1 piece of advice, what would that advice be?


NEAL BAWA: Well, number one, data beats got feel 100% at the time and second, whatever you cannot measure, you cannot manage. It’s only a mirage if you think you can get away with not measuring something and managing it successfully it’s a mirage.


ROBERT LEONARD: Neal thank you so much for your time. I appreciate it. Where go to learn more about you?


NEAL BAWA: So we do the best way to connect with us, 2 different ways to connect with us depending upon what you like to do. If you like websites. We have multifamilyU.com, there are over 40-45 webinars from experts in every area of real estate not just, multifamily stored. There are student housing people there. There are a senior housing people there, there are lenders there, there’s lawyers, brokers all kinds of interesting information there, data analytics providers, they’re all there underwriting tools are there. So check put multifamilyU.com but those that like their information in real-time, we have a group called Magic of Multifamily, just go to facebook and type magic of multifamily. So those are your 2 ways.


ROBERT LEONARD: I’m one of those people that Neal mentions that posting in the magic of multifamily facebook group app, frequently so, I know to myself that it is a great group and I recommend you go check it out, I recommend you go check out all of Neal’s other resources as well, I’ll be sure to put links to everything Neal just mentioned and everything we talked about in the show notes can go dive into it further. Neal thank you so much, I appreciated it.


NEAL BAWA: Thank you! Thanks for having me on the show.


ROBERT LEONARD: Thank you for listening to the show today and being a part of the community. Make sure you subscribe to the podcast if you have it already. If you have subscribed and you’re enjoying the show it would mean so much to me if you would please rate and review the podcast in Apple podcast. You can also share what you’ve learned at social media and tag me on the post. I’m excited to connect with you all and hear all the amazing changes you’re making in your lives. I look forward to seeing you again next week.

Location Magic Real Estate eCourse

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