Robert Leonard  02:04

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

Neal Bawa  02:24

The corporate career was very lucrative. I’m making a huge amount of money and also, I knew that eventually my senior partner and CEO would quit and not quit, but he would sell the business and I was a partner. So I couldn’t leave that large amount of money and run off to real estate, but I did plenty of real estate while doing this. So the company was not sold until mid-2013, which was almost 10 years after we started building this first campus.

Two years after we built that first one, we built a second campus and this time with that CEO’s help, we actually brought in investors and basically what we did was we took the building and you’ve heard about condo-minimizing, you know, apartment complexes will be condo-minimized a office building. It can be done. We basically chopped it up into individual offices and everybody had their own condo and everybody had their own address, but we were the tenant. So we bought the building, we built the building and nine doctor investors invested into the building, and then we rented the units, once they were complete back from them. It was a sweet deal for them because that was 2007 and 11 years later, 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 for everybody that was concerned. So it was it was delightful and as it happened that 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, which is incredibly awesome. I was like, “I gotta do more of this real estate stuff.” It is this just absolutely incredible.  And so in 2008, I started basically my non-construction real estate journey. I bought 10 homes in California then I ended up buying 10 triplexes in Chicago that I ended up investing in 16 syndications. I openED my own MEetup group. I mean, it just sort of snowballed over a decade and a half then I started Teaching at meetups and then started teaching at conferences. I thenn built my own Udemy course. And so, it sort of snowballed, but none of it was planned. It just sort of happened.

Robert Leonard  04:25

Yeah, that’s a really interesting way to get into real estate. So for those listening to the show that might be new to real estate. Can you explain what a triplex is and what a syndication is?

Neal Bawa  04:34

Sure. So a syndication is a process where you’re looking to buy something that’s institutional class. a large asset. So my next project is a Atlanta property that comes out in 15 days and it’s a $24 million property. Why am I buying a $24 million property? Why not buy basically a triplex which is you know three… It’s a building that has three units, right? Triplex. Quadplex has four units. Why not buy those? And the answer is scale.  The problem with buying a duplex, triplex or quadplexes you don’t have a property manager at the property. So you don’t really have the level of control that you want. You have a property manager that’s managing 1000 units and maybe some time you’ll pay attention to your triplex.

When you buy a $25 million asset, you have five to six employees that work at the property and many of them actually live in your apartment complex because you tend to offer them discounts if 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 maintenance guy just lives in one of the units is going to get there in 15 minutes and you’re going to save $100,000 on your laminate. So the level of control that you have on a 250 unit, $25 million property, is in a completely different class from a single family rental, a quadplex, or even a small five or 10 unit property. It’s not just the level of control. It’s the fact that you have efficiencies of scale.

When you want to do a rehab on a 250 unit, you have 250 units to rehab. Guess what? You can choose to buy the laminate instead of buying it from Home Depot. You can choose to go to alibaba.com and buy it in a single shipping container from China and basically pay half of what you would be paying at Home Depot and have that shipping container delivered in the back of your property, just taking up two parking spots and lock it with a padlock. Then whenever you need, just go to the shipping container and take your laminate out. You realize just how insanely efficient that is. I mean you’re not running to Home Depot every single day. You’ve got all of this stuff in the back.

You do the same thing with 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 Best Buy to have a deal you wait for the price to have a deal and you basically buy 20 or 30 sets. You get huge efficiencies of scale, instead of hiring a contractor at $75 or $125 an hour. You hire a full time employee at 20 bucks an hour that is going to just to do laminate in 250 units. Laminate today, laminate tomorrow, laminate next week. Basically that way you can roll out your upgrades.

You know in our world we spend we spent $7,000 in a year. We’re like, “Oh my God, we spent a lot.” Imagine spending $7,000 in a single family upgrade, you’ll be done with that in the first three days. In our world, 7000 is a huge upgrade. We call it the premium upgrade. So I think that the efficiencies that come with large properties can only come if you’re buying something that’s really expensive, $20-$25 million with six employees.  But how do you buy that? I mean, no one investor has the money to pay $6 million or $7 million down for a $25 million property. So what you do is you take $100,000 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 upside at the end to those investors. And that is known as a syndication and it’s very, very popular in the US, especially since the 2014 JOBS Act that made it much easier to syndicate.

Robert Leonard  07:47

Yeah, that’s a great example of of what syndication is and the efficiencies are, like you said, incredible when you’re buying at scale like that you can negotiate such discounts. And again, you can kind of avoid the retail outlets like Home Depot and go to the source and get much better deals.

Neal Bawa  08:02

Not just for equipment, but also for staff, right? Because if you are going out there to bring in a contractor, he’s going to basically ask for 75 or 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 who was basically working in the property from nine to five, because that’s his day job. You can have the property manager, this system property manager, just walk in twice a day to check to 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 come tomorrow at eight o’clock, I’m going to send in a cleaner. At nine o’clock, I’m showing this unit.” How do you do that with people that don’t work for you?

Robert Leonard  08:38

Yeah, you certainly cannot. Now, syndication is definitely a great strategy, but it’s 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  08:53

Well, one of the paths I think is to consider actually being an equity partner with some of the syndicators out there. There’s very severe SEC consequences. You need to learn more about this. But there are a number of syndicators that will actually invite you in. And you can do investor management for them that you definitely have to play other roles as well, which they know and they will help you with that as well.  So you play some kind of roles once the property is purchased ,your primary role before the property purchase is 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’s 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 in expensive 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 and appreciation is equally important. The problem is in New York and California, you’re dependent on just appreciation, which is a bad strategy, in my opinion, especially towards the end of the cycle, right? This is a very mature real estate cycle. We’re definitely in the seventh or eighth inning, if not the ninth. In this kind of market, making an appreciation bet is a very problematic sort of challenge. So I would encourage people to look outside of their area. Look at the Sunbelt markets, which are growing much, much faster.

Robert Leonard  10:14

I really like that first strategy that you mentioned and I want to dive into that a little bit more, because it not only helps would help a new investor get a piece of a deal, but it would also help them… I mean, I’m sure they would learn a ton from being involved in that. So how could somebody find an opportunity like that, where should they look and how can they get involved?

Neal Bawa  10:32

Well, there’s two or three different strategies, right? One of the things is there’s a number of conferences each year that happen in the United States where people who have deals go there to make connections with people that could raise equity for them. And so, I’ll just reel off some of those. There’s Dave Lindell, the ultimate partnering conference that happens in Boston. There is Michael blank’s Deal Maker live conference that is either in Washington or in Dallas. There’s Jake and Gino’s conference that happens in Orlando or Nashville. Then there’s the the Capital Raising conference that happens in Denver. You can google all of these.

I think if you go to these conferences and talk with people that have projects already, then you’re not finding the deal at all. The deal exists, the deal is in contract, the deal has a beautiful pitch deck, 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’ll typically give you other roles there, you’ll probably be asked to help a due diligence, you’ll probably be asked to help with marketing. There’s probably investor management tasks after the properties purchase that you’re going to have to work on.  But what’s nice is that you don’t really need to know these things because the syndicator who is looking for additional equity already knows these things, and he has a person assigned to kind of help the millennials through it. Righ? And again, a lot of millennials think that they don’t have access to equity, which I find to be nonsensical. I think that’s just a limiting belief.

Robert Leonard  11:55

Yeah, that was gonna be my next question is what if somebody really likes the strategy and likes what we’re talking about but they think they can do the part of once the property is purchased. They think they can handle all of that whatever is thrown at them. But what if they don’t know how to raise capital? Is that still a strategy they could implement?

Neal Bawa  12:10

Yeah. So firstly, at least one of those conferences is called Raising Capital, right? So there’s 50 plus speakers and they’re telling you how to raise capital using different techniques, right? So I’m teaching at the Raising Capital conference this Saturday, and I’m going to be talking about two channels. I mean, there’s dozens of channels of raising money. The two that I’m going to talk about are meetup and Facebook, using those two channels to raise money. But there’s so many different strategies that 50 guys…. There’s 52 speakers I’ve heard at this conference. So you’ve got your choice of stuff.

Somebody is talking about LinkedIn, somebody else’s talking about you basically going to Yacht Club, somebody else is going to talk about automation so that you’re automating the process of raising money, somebody else is going to talk about paid ads. There are so many strategies of raising money. There’s folks out there, Amazon has a whole bunch of books on how to raise capital. In my mind, raising capital may seem daunting, but it is exponentially easier than the million things you need to do to find properties, put them in contract, pay earnest money, find a key sponsor, and then find equity, because you still have to do that. So this strategy takes all of those away, and you’re just raising equity, just make sure that you’re following SEC guidelines and remain compliant.

Robert Leonard  13:24

And you mentioned limiting beliefs a few minutes ago. I want to go back to that a little bit. What have you found to be some of the biggest hurdles for new real estate investors getting started? And how can they overcome those?

Neal Bawa  13:34

Well, I think the biggest belief that I hear is, well, there’s all these other guys that are better than me and have more experience and more money and more track record. How can I ever get started? I think that particular limiting belief has 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.  It’s 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 was already there. You’re saying that anyone and everyone that got started in business could not start because somebody in that same business already existed. It’s just a limiting belief. People start new businesses all the time, real estate’s no different.

Robert Leonard  14:24

Yeah, I mean, Facebook. Facebook was not the first social media.

Neal Bawa  14:28

You remember MySpace? 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, right? So right now if I asked 1000 people in America, “Name  the number one social network in the US.” All of them will say Facebook, okay? Or some of them might say Instagram, but really, there’s just going to be really two picks right 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 new entrants is exponentially easier than let’s say somebody doing a new social media app because there’s no brand, right? 1000 people will give you 500 answers. So there is no incumbent. It’s just a fractured market. It’s like when you open a laundry store, you don’t worry about there being some superstar laundry store that everybody loves. Well, real estate syndication is like that.

Robert Leonard  15:28

Yeah, I mean, I’m pretty involved in in real estate, and I couldn’t name my favorite real estate syndicator. So yeah, I completely agree. And to your point, Instagram is owned by Facebook.

Neal Bawa  15:37

My point is in technology, when you start something new, you have a huge hurdle. You’ve got to convince everybody that they’ve got to 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?

Robert Leonard  15:54

Yeah, it’s all about the mentality of abundance rather than scarcity.

Neal Bawa  15:59

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” because that’s what Steve Jobs did. That’s what Bill Gates did. They faked it until they they made it. You have to tell your mind, “I may not be there yet, but I’m going to get there.” And that has to be enough for your mind for you to be able to take that massive action.

Robert Leonard  16:23

Yeah, I agree about the massive action. We had a couple episodes ago, we had Gary John Bishop on the show and he said the exact same thing that massive action is all that really matters when it comes to it, because action is the only thing that’s going to change anything. It’s actually a common thread that I’ve seen throughout this podcast is that a lot of the guests that we’ve had on the show have said “Action is the biggest key to success.” So guys, if you’re listening to this, note that down and really try to go out there and take action.  Now, I want to talk about having a mentor because in the real estate space it seems that it’s really important and a lot of experts recommend getting a mentor. How can an aspiring real estate agent find a mentor, you know, maybe a syndicator that would mentor them?

Neal Bawa  17:04

So the short answer is how are you putting yourself out there? Okay. There are so many ways to put yourself out there there. One method of mentor selection is go to a bunch of people that you like and say, “Would you mentor me?” I don’t favor 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 meetup, make sure you’re early and make sure you’re the last to leave and make sure that when you’re early, only the owner of the meetups there, right?

Nobody else has walked in yet. And so that’s your chance to talk with him. That’s your chance to help. That’s your chance to say, “You want me to move these desks. You want me to set this up? Can I hook up the projector in the laptop for you? How can I help you?” Right? Don’t just say how can I help you. Say do you want me to do X? Do you want me to do Y? You know, should I sit at the front and sign people up? Offer help but offer discreet specific help and if he says no, nothing’s 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 that person is, because you’re next to the signup list.

So what you’re doing is you’re doing that… You have the signup list, you know what 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 with them. And once again, you offer them very specific help.  The way to get mentors is to offer significant amount of help to those mentors, something that truly helps them and then the mentorship comes very naturally, they just gravitate towards. I had a guy, his name’s Eric Blue. He’s now our Director of Social and Local. What Eric did was follow everything I’ve said for the last three minutes and he ended up being an equity partner in all of our projects because he took a step. Then he took a second and then he took a third. He didn’t really worry about the fact that when he took the first step, he didn’t get anywhere. He took the second and he took the third. So when you’re looking for mentors, don’t just profile the mentors. Figure out what they’re doing and figure out how you’re going to help them in whatever they’re doing.

Robert Leonard  19:10

Yeah, I mean, at the at the core of it, it’s building a relationship. You’re building a real relationship. And you have to remember that you can’t go in expecting anything and expect a real relationship to form.

Neal Bawa  19:20

I have people that send me an email and say, “Will you mentor me?” That is the content of the email, right? Guess what I’m doing? I’m hitting the delete button.

Robert Leonard  19:27

Yeah, that’s definitely not a great way to build a real long lasting relationship.  Now, I want to 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 someone’s 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  19:48

Sure. So the strategy is based on the fact that there’s these 800 pound gorillas in the room when you’re looking at properties. These 800 pound gorillas are basically demographic gorillas. And they affect everything. They affect your rent, they affect your delinquency, they affect your appreciation. I believe that there are five of these demographic gorillas. Here they are, and 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 guerrillas for every single property in every single city that you’re looking at, you become much better investors, because you’re a data driven investor. You’re not a speculator, you don’t speculate, right? And when a property or a city breaks those rules, you say, “Well, you know, this is a nice property, but I’m looking for better cities, the best cities, and the only way for me to do that is stick with my rules.”  So when you’re looking at population growth, you want at least a minimum of a 1% a year population growth, one and a quarter percent would be better. At the end of this podcast, I’ll show you exactly where to get that data.

But what’s key is you need about a one in a quarter percent population growth because that one and a quarter percent population growth then drives roughly a two and a quarter percent growth in people’s household income. So you want their household income to increase by 2% or two and a quarter percent, somewhere in that range, right? And I’ll give you the specific ranges later in the podcast.  Then when your populatio is rising and there’s competition for the same number of units in a city but more and more people coming in, that tends to push up incomes and income tends to push up home prices, and the home prices in a metro to at least go up by two and a half percent in a year. I’m usually a fan of more like 3% a year increase in home prices. These days, that’s not hard to find in the last eight years.

But keep in mind the method that I’m going to show you measures all the way from 2000. So it’s going to include the 2001 dip, it’s going to include the 2008 crash, and then it’s going to include the subsequent 2009-2019 run or 2011 to 2019 run. So it’s got some good periods and some bad periods. But over that time, I want to make sure that the place that you are in has at least a 3% annualized home price growth and some of those years is obviously going to be negative, right? They’re going to be negative home price growth. 2008, 2009, 2010, and 2011 will all be negative.

So that is the first three. We’ve talked about population growth and income growth and home price growth. The fourth one is jobs, and I’ll show you where to get the jobs but with jobs, here’s the basic metric: 2% job growth usually supports 2% rent growth. 3% job growth, you’re really really 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? Because everybody has a job, everybody has a good job, and now they’re all fighting for the same real estate.

The fifth one is crime reduction. And there’s a way using a website called “city-data” to measure the crime in a particular city and figure out what the benchmark is. So firstly, you want crime to be low. 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. You can just look left, right, and go, “Yep, going down very nice and smooth decline in crime. That’s awesome.” And below a 500 benchmark, that’s the benchmark that I’ve set. Then you basically look at those areas and you’re safer.  So I’m not saying this is the best system. I know it’s not foolproof, it doesn’t work hundred percent of the time, but a data driven system will probably put you in the right direction, 90 plus percent of the 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 are not investors, they’re speculators.

Robert Leonard  23:33

I mean, if you’re not using data, and you’re just taking the opinion of somebody that lives there, that’s really subjective. And I’ve seen a lot of investors do that, where they’ll talk to real estate agents that live in that area and they’ll talk about what the agent is seeing. That agent might be thinking one thing’s actually happening. But if you look at the underlying data, that might not be the actual picture. So if you’re looking at true real hard data, it’s hard to argue with what’s actually happening there.

Neal Bawa  23:56

Yep. So where do you get all this stuff? So I just talked about the metrics. But where do you get them? So firstly, there’s a beautiful excel spreadsheet that has five metrics for city level, which we talked about. And then it has five even more important metrics at the neighborhood level, which are even more important because you could go to a great city and end up investing into a war zone, right? So there’s five metrics that I gave you for city, there’s five metrics for neighborhood, those are all mentioned in a beautiful spreadsheet. And that spreadsheet tells you exactly where to get the information.

The spreadsheet is stored at www.multifamilyu.com. Don’t forget that Multifamily, followed by the letter U dot com, slash toolkit. So hopefully, you can include that in the show notes.  So you go to the toolkit and you scroll down to section seven, and you’ll see a spreadsheet and then you’ll see a Word document. That word document will have all the rules that I gave you, but they’re expanded things like how do I use this system next year because Wouldn’t that range need to grow? Because the number now is another year added in? So how do I use it next year? How do I use it five years from now? How do I use it for larger cities that grows slower? How do I use it for smaller cities that tend to grow faster?

All of those rules are in the Word doc and Excel spreadsheet, all of that at www.multifamilyu.com/toolkit, it’s free.  The actual implementation is a 90 minute video course and it is at udemy.com. Just search for my name, Neal Bawa, or the direct link is udemy.com/realfocus. Go there, of course, it is 49 bucks, type in the coupon code, “MAGIC49,” and it will turn the course free for you. So go take that course and in in a video tutorial, I’ll explain all of those 10 metrics and exactly where to find them, exactly how to use them. It’ll 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  25:45

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

Neal Bawa  26:01

The key thing is that it’s great for those people that are not looking to syndicate, people that are not looking to place passive investments, I want to be active. Okay, here’s the strategy, right? And you don’t have to go buy any course, you don’t have to pay any mentor. It’s just learn and implement.

Robert Leonard  26:15

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

Neal Bawa  26:25

I think the first thing that I hear more and more often these days is people saying, “Well, you know, because the nation is aging and millennials are so burdened with, you know, student debt. We think that even if a recession comes, you know, rentals are going to do well.” I can tell you, whether it’s single family rentals, or it’s 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 off on the wrong foot thinking that you’re in some magical fairy land where nothing ever goes wrong simply because the millennials don’t have money to buy homes or Simply because people are getting older. That’s 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 six years now. It might be coming for the next six as well, when it comes, you’ll get hit. That’s no reason not to invest in real estate. But that’s a reason to be cautious, then that’s a reason to have extra reserves. That’s a reason to be careful and honest with your investors. They’re going to appreciate your honesty.  So I hear a lot of people have these stars in their eyes where they think that something magical has happened where rentals will only ever go up and they even tell other people on Facebook about it and I find it to be nonsensical.

Robert Leonard  27:37

Is there anything about investing in the cities that you recommend that would help through a downturn? Do those cities because they have those characteristics, do they do better in downturns?

Neal Bawa  27:47

I’d say they the downturn might be slightly shallower. But no, I don’t expect that to be a lot better. What I do expect is that the upturn after the downturn in those cities will be sharper and will last a lot longer. So yes, you get the benefits.  But during the recession, most cities kind of sort of resemble each other there. They’re not substantially better. They’re going to be slightly better, I think. But I think at the end of a recession, 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  28:20

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

Neal Bawa  28:30

Because the biggest opportunity is to buy the dip, okay? You can’t buy the dip. At that point of time. You can’t raise enough money you got to 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 dip. Here’s the buying opportunity.”  Do you think that it makes sense to build your credibility in the middle of a recession? No, build it now and you’ll have the money to buy in that day. That is so important. It makes so much sense when I say it, but people are like, “I’m just gonna wait until the dip.” Well, where are you going to get the money in the dip? Nobody wants to invest at that point of time unless they already have a relationship with you, in which case, they’ll invest because it will make sense to them that you’re buying in the dip. Those relationships have to be built now, while it’s easy to find investors.

Robert Leonard  29:17

What if somebody isn’t raising money from an outside investor? What if somebody has $25,000 to $30,000 that they’re going to put into a small duplex or triplex or even quadplex and just use your own money? Should they wait for the dip?

Neal Bawa  29:28

If their only strategy is to invest your own money, I think it makes sense. Yes. Wait.

Robert Leonard  29:33

Got it. So what has been your biggest mistake in your real estate investing career? And if you could do it over, what would you do differently?

Neal Bawa  29:41

I think my biggest mistake has been not looking at the data. This data driven approach that I have, I didn’t just wake up one day and said I want to be the mad scientist in Multifamily. I made mistakes I bought in bad places. My investor suffered. I suffered. If I could do something over again, I would be more careful buying in market that are low growth, slow growth or no growth, because that caused a lot of stress for me and a lot of stress for my investors.

Robert Leonard  30:08

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

Neal Bawa  30:14

Using more data and really focusing on market quality. We didn’t focus as much on market quality and that hurt us and it also hurt our investors.

Robert Leonard  30:23

Along similar lines, Neal, what is a common mistake that you see new investors make?

Neal Bawa  30:27

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 hard earned money, why would you not want to bring an investor in at parity and say, “I’m investing $100,000. I want an investor to invest $100,000.” You know how easy it is to convince people to do that. Obviously, when I’m raising $35 million a year, I’m not investing half of that on my own pocket. I’m not even investing 5% of that from my own pocket, right? And I’m still able to convince investors. Don’t you think you have a much easier place to say, “Well, you know, I’m gonna put in 100, you’re gonna put in 100, he’s gonna put in 100.” But now you’ve got economies of scale, right? You’ve got a property that’s three times larger, even though you didn’t put in three times as much money. I’m not talking about a syndication. I’m just talking about a bunch of friends getting together. Why wouldn’t you want to involve other people and other people’s money to grow your scale? That’s a common mistake that people make. They stick with the single families.

Robert Leonard  31:27

Since you mentioned single family, they’re at the end. And that’s a residential property. Anything up to four 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  31:39

It could be a fourplex. I mean, it’s like I have $50,000 to invest. Well, I’m gonna take 50 from this guy and 50 from that guy and the three of us will get together, and now we have $150,000. We’re gonna buy a $550,000 quadplex, instead of buying $150,000 single family. So it could be a quadplex. There’s nothing against that.

Robert Leonard  31:56

Do you have any books or resources that you’d recommend to a new real estate investor that wants to learn about raising capital? You mentioned your courses or your course earlier, which I think is fantastic for finding good markets. But how about maybe more specific about raising capital or just using other people’s money to buy real estate deals?

Neal Bawa  32:14

Well, I think books can only get you so far. I find that most books that I read are fairly shallow, they give you a lot of concepts, but they’re not giving you implementation. I think that you should invest in your own education. One of the key things is that paying nothing for education means that you believe that for some reason, real estate investing is easier than going to college. Did you expect people to give you a 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 really key. I find that there’s just too much of a focus on, “Well, I’m going to listen to 50 podcasts and 200 books and I’m going to get done.” The question is I don’t know what the percentage of people are that are done after that. You know that get in the trade, but I think it’s pretty low.

Robert Leonard  32:56

Yeah, I think that’s so interesting because I have been thinking about the end of the year is coming. I started to think about what I want my new year’s resolution to be. And one of the things I think I’m going to make it this year is to not read a single book. I’ve read over 50 books for the last two years.

Neal Bawa  33:12

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

Robert Leonard  33:23

Exactly, I’ve been lucky, or I’ve been at least I took some action, which is good. But I think if I slow my roll with books, I think I can even take more action. So that’s going to be what I’m going to do going into 2020. So I think that’s great advice.  If you were to summarize everything that you’ve learned over your investing career into just one piece of advice, what would that advice be?

Neal Bawa  33:43

Well, number one, data beats gut feel 100% of the time. Second, whatever you cannot measure you cannot manage. It’s only a mirage. If you think that you can get away with not measuring something and managing it successfully, it’s just a mirage.

Robert Leonard  34:01

Neal, thank you so much for your time. I really appreciate it. Where can the audience go to learn more about you?

Neal Bawa  34:07

The best way to connect with us. We have two different ways to connect with us depending upon what you like to do. You like websites, the magic, we have multifamilyu.com. There’s over 40 or 45 webinars from experts in every area of real estate, not just Multifamily, stored. There’s a student housing people, there are senior housing people, there are lenders there, there’s lawyers, brokers, all kinds of interesting information, data analytics providers. They’re all there. Underwriting tools are there. So check out multifamilyu.com. For those that like their information in real time, we have a group called Magic of Multifamily. So just go to Facebook and type Magic of Multifamily. So those are your two ways.

Robert Leonard  34:48

I’m one of those people that Neal mentions that’s posting in the Magic of Multifamily Facebook group frequently so I know myself that it’s a great group and I recommend you go check it out. I recommend you check out all of Neal’s others resources as well. I’ll be sure to put links to everything Neal just mentioned and everything we talked about in the show notes. You guys can go dive into it further.  Neia, thanks so much. I really appreciate it.

Neal Bawa  35:09

Thank you. Thanks for having me on the show.

Robert Leonard  35:11

Thank you for listening to the show today and being a part of the community. Make sure you subscribe to the podcast if you haven’t 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 podcasts. You can also share what you’ve learned on social media and tag me in 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.

Outro  35:37

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