Indian Immigrant Becomes Elite Engineer, then Investor- Kunal dewan

Hey, how's it sound to work less and make more? I am talking about money. And there are ways to do that through commercial real estate investing. And a lot of people don't know just how easy it is to do nowadays. So this channel, Pivot to Prosperity, will show you how you can do that. It's brought to you by Pivotal Real Estate Investments, where we go find the deals and do the heavy lifting and then bring you the opportunities. So if you want to know when opportunities come available, you need to register at pivotalrealestateinvestments.com every Tuesday at 2 for about 22 minutes. We plan to bring you another video and so like, share, subscribe. Thank you. Hi there, this is Ginny Bowling with Pivotal Real Estate Investments. And you are on the Pivot to Prosperity channel. And today we have Kunal Dewan. Did I pronounce that right? I meant to ask you beforehand. Did I say it right?

You said it right, Kunal Diwan.

All right, all right. Well, very good. Well, I appreciate you coming on the show and I, I love to let people say what their own background is. So I am going to turn it right over to you to do that.

Thank you, Jenny. I'm excited to be here. My name is Kunal. I'm in Southern California. First generation immigrant, started my journey in real estate more than 15 years ago. And I, I have been blessed when I came to this country, Jeanne, you know, as many other first generation immigrant, I came with a one way ticket for education for a few hundred dollars in my pocket. Right. So, and since then, that journey from education, then I started my career as an engineer, a civil structural engineer. Then I was designing tall buildings, I'm designing schools and hospitals. Then suddenly realized, I mean not suddenly like over the few years, realized that this journey is not going to lead me where I came to this country for the dream that I built in, but I came with a dream in this country. Then I started my first real estate investment immediately after the Great Recession and started with a majority, the condo. Then moved up to a townhome, then moved up to a duplex and a triplex and a four flex. And it was a sequential journey, one by one. And as I was buying one step above, I was learning more about the power of multifamily. And this journey led to owning my own syndication business that I started a few years ago. And now we own over almost 300 units, almost 45 million assets. And it started all the way back from my journey as an immigrant in this country. So I'm Excited to share my experiences, my, my mistakes that I made over the years to add value to your show.

Well, that's terrific. And congratulations. That's. That's honorable. Quite honorable. And so where are these investments? Where, where have you invested? Primarily for the, the larger units, the, the syndicated projects.

They are all in Southwest and Texas and in Midwest as well. So my, my projects are predominantly I, I go for cash flow genie and I, I try to stay at the markets which are not on the radar, but yet there's a huge supply and demand disparity, you know, so we have a couple of assets where our rent has almost doubled in past.

That's phenomenal.

18 months.

Wow.

This is because there is no new construction coming up even for next year. That's the huge shortage. So we try, I personally try to find these local markets where there's a huge gap between supply and demand in the multifamily space especially. And then I kind of go aggressive and double down on these markets. So these are in New Mexico and Texas.

Okay, where in Texas?

We have one in San Antonio.

Oh, okay. Yeah. Well, that's, that's terrific rent growth and I guess we all expect it to slow now with inflation and whatnot. And we've had so much growth for, for a while. I just came from an economic outlook presentation for Orlando and I know, I'm sure you monitor it very closely as, as we all do in this business. Right?

That's right.

It's so. And are you going to Race Fest? I meant to ask you that.

No, unfortunately I won't be able to make it.

Oh, okay. Yeah. Okay. So for the viewers, this is an event that, where we, a lot of us get together. You'll be able to get the lowdown, I am sure. On it.

So. Or.

Yeah, but so. So talk a little more for us about what you look for in a property.

Well, it starts, it starts with the first market, you know, so it starts with the market first. So I have a few markets where I still feel there's plenty of Runway left before either it gets too much attention or get bombarded with supply. So once you have these few markets locked down, then it goes into relationship with the brokers that is such an important element because they're actually there. They're in the business, they're in the dirt. They know the pulse of the market, of the property, of the neighborhood. So once you develop that, then you know it's over a long term. So you get to know what's going on. And then when you get into the Inner circle. Then you start getting these leads. Then you communicate your expectations with the broker on what that property should look like. So to answer your question, that is actually step four in this journey of finding a property. My number one thing is the property must cash flow within the first 12 to 18 months. Anything more than that is just too much aggressive offer for me. So it starts with the right basis. So step one, start with the right basis. You know, gone are the days where there used to be a super high bidding war and there are like three rounds of vest and final in the current market. But even in that phase that we went through in 2022 and part of 2021, I never left my, my buy box. You know, which, which is this, the metrics that I go by, number one of that is cash flow. So the property must cash flow within 12 to 18 months. Once that is said, then look at the that cash flow. You know, we know in multifamily the biggest driver is the rent. So how far off are you from the market? Rent. Right. It's a very wide question because you can compare a class B property to a class A asset with a swimming pool and with a hiking trail in the back. I mean you have to really drill down that the very every single amenities or neighborhoods or communities or accessibilities, perhaps even the employers, the population trend at a local level, demographics, income level. There's like so many things that I'm sure you follow as well, the data points. So this is the process what I look for in a property. But my driving factor is the cash flow. As I said, it must cash flow within 12 to 18 months after acquisition. And the reason for that is Ginny, I feel that if the property is cash flowing, you can ride out any recession assuming your debt is stable. Right. And within 12, 18 months you start churning out cash flow from the property. Right. Who cares? The market is up, S P is down or Dow Jones is up. We are churning out cash flows quarter after quarter, month after month. And if our business plan stretches from three year to five years, that's okay, we still churning cash flow, right. So we can fight the right time to exit. So cash flow gives us leverage as syndicators to plan the exit, write out the recessions, and from a passive investor perspective, cash flow gives them risk adjusted returns even if it goes more than the planned exit time frame.

Right. Right now. So, and if you're going into more emerging markets, the neighborhoods that are still out of balance, do you have a minimum population base and do you have a minimum Income level that for the demographics that you're looking at.

Of course, absolutely. So this is a very wide spectrum. I am in primary markets, I'm in gateway markets. I'm also in secondary and tertiary markets. I'm just looking for the opportunity. Right. So in primary markets or secondary markets, you know, I usually go at a million in the metro, a million people. Right. But if I go into tertiary market, which I have one of my best performing assets in tertiary markets, the supply demand gap has to be a whole lot more to offset the smaller population. Because accepted in tertiary market exit is a challenge because there are not as many people looking for properties. Right. So your exit cap rate has to be way above than any other property in your community in your neighborhood to offset that risk. So population and tertiary markets are usually about 150 to $250,000, provided you meet the metrics of supply and demand. You meet the metrics of population growth, you meet the metrics of schools or retail or growth along employers. Right. Income wise, my multiplier is at least 3.25. I will not do any deals unless I am three and a quarter, which is the market rent and the median income, not the average median income. Sometimes I even go two standard deviations. So in a tertiary market, when I know, hey, exit is at risk, what else can I do to further, to get the data, to further, you know, solidify my underwriting? So these are my major, like, indicators, and then I have like 20 other indicators that I go by before I even select the market.

Right, right. Well. And do you have any preferred employers? You kind of follow it all. Have you found, found anything you've latched onto?

Yeah, well, I wouldn't say the employers. I would call it the industries. Right. So. And the spectrum is pretty wide. Again, you know, if I go in San Antonio, the type of employers that I'm looking at, the location where my asset is located is totally different. If I'm looking for an employer in a state like New Mexico. So let me give you a flavor of both. You know, so this, this asset that we have, you know, which is performing been fantastically from past two years, there are not as many huge employers because the whole population is 160 or little under 200,000 people. But the main employers is city, you know, union jobs and state counties and all of this organizations. I would say like maybe 60% of people who work in that city work at one of these union jobs. So we got this, I would say end of 2020. So Covid was still on. It was still pretty high. And they were like 7 million or the ridiculous number of people who were still unemployed. We didn't know what was going to happen in 2021 and moving on for 2022. So the general consensus was well, people are going to lose jobs. There's no recession is coming. If you remember those times. Right. Well, our market that we're making offers had a job security because these were unionized job and many times unionized job have a contract of employment payroll growth 2%, 3%, 4%, whatever that is, it's built in the union contract. So in other words, if more than half of my population is employed by these people, their payroll growth is built in, which means my rent growth is built in. So this was one of the indicators that we pick when we went aggressive on this off in this and this asset in the tertiary market. So that's the type of employer that worked for this market. When I go to primary and secondary markets, you know, San Antonio even I have portfolio in Southern California as well. I look for predominantly medical, you know, professions or STEM jobs, traveling nurses in, in that category, of course, tech is the leader. I mean who does not want tech jobs, right? Yeah. But many times as these assets are not class A, they're not located in a neighborhood where somebody who makes $200,000 will move in. So it's a trickle down effect. You know, the money comes from tech to the, I would say the second tier of income. So the tech jobs are great for marketing. When it comes to rent growth, it's my, it's my nurses or it's my, the contractor or it's, it's the people who are working little above retail, you know, industrial workers, the unionized workers.

Thatcher.

Yeah, that is my, within my.

So you're doing class B properties or, or some C or both?

No, I try to stay away from class C. Yeah. BB minus, I don't go more than that. Both on the properties and the, and the markets and the neighborhoods.

Okay. And so, and you have an engineering background, so you look at things in a different way, I'm sure. And that's, and you're quite analytical. I, I, I, I know from talking with you and all. And so when you, when you find a property and you've, you've put together your business plan and you're going to your investors to present the opportunity, what do you find with your investors? Are they, have you educated them enough already to, because you've been in it two years. Do they already know what these are or are you having to Educate. Where are you at with that?

Yes, yes, both of those statements are correct. So I have a pool of investors, you know, I'm hoping by now they understand what cap rate is or the exit cap rate is with the ny. So that's. And then there's always new pool of investors that they are coming into my ecosystem and believe it or not, 95% of them are all referrals.

Yeah.

So I'm hoping that they have had some exposure to real estate and the numbers. But if not, in every communication, I keep my cell phone number. So I, I ask them to text me a call me, set up a time to meet. Although I do have a team that they can reach out directly to understand. You know, what does this look like in my quarterly report? What does that number mean? So I have that as well. But I like to personally answer these basic questions when it comes to investing, because the expectations must be met, and expectations can only be exceeded or met if they understand what those expectations really are.

Yes.

Right. So 5% average cash on cash is not the same as 5% cash on cash, year one. That clarification needs to be met. So the splits, and there are the IRRs and the IRR and the ARR. There's so many fantastic lingo that they need to understand. So I have, my spectrum is pretty wide. And so I have sophisticated business owners who invest with me, and I also have families who invest with me have. They've never done real estate before. That's.

That's good, that's good. And, and now you're from India, I believe, correct?

Yes.

Yeah. And do you have any overseas investors then, as a result of your roots or what are you doing there? Is there anything?

I say, no, I have investors. But I said, you know what, I don't really understand how it works. And plus the Forex has been really bad from past two years. Right. So when I say for the foreign exchange rate. Right, right, right. So I say no to them just because the market is so volatile, even though I perform and I can create a 30% return on the investment, but if the Forex drops by another 30% next five years, you know, the. So that's the risk I cannot mitigate. See, I have a saying, genie. People who focus on returns get the risk and the people who focus on risk get the returns. So I focus on risk first and see which ones I can mitigate. And if I'm not able to mitigate, I let my investor know, look, this is beyond my control, I cannot do that. So I advise don't do this or I can definitely control this. I have done this for last 15 years. These are the repercussions or these are the rewards. I got you. So I believe in that communication. So for that reason, I don't take overseas investors right now.

Gotcha. Okay. Yeah, it takes practice. I understand.

It's.

It is. Well, in any real estate it's always knowing the right, the right way to do things. There's again, mitigating risk.

That's right.

But so, and now have you, you're not doing a podcast of your own, right? You're, you're guesting on podcasts, right?

Correct?

Yes, yes. That's terrific. And I've heard a couple of years, you, you have quite the story. Do you want to get into something more before we wrap it up here?

Yeah. Yeah. Well, you're too kind. Yes. Like many first generation immigrants, I mean I went through a lot. Like I was the first one who even sat on a plane for my entire family. Forget about coming international, leaving the country. So I started with that background. So when I landed in the country, I did not have a place to go, but I reached out to other Indian people who had been through this journey and I reached out to like 30 some people and one kind soul allowed me to crash on their couch for, for two days, I think for like three, three, three nights. By the time I found a bed in a two bedroom apartment where eight other guys were living in while I found another part time job so I can pay the next month's rent. So all of that, you know, somebody asked me, hey, how did you scale up so fast? I said, well that's easy. Scaling up is so easy. What I, what you went through in, when you were in 22 year old, that was tough. So once you go through certain experiences in your life, the rest of the life becomes a whole lot easier. You know, while I was working my W2 job, you know, I became a licensed structural engineer and I think just a few percentage points of the entire engineers in California make it to that level to design the tall skyscrapers. And I did all that only to find out it's not my journey. So I started a business which was, I bought a tax franchise and I, and I built that franchise up from single location to multi 5 plus location with 30 plus employees. And then I made that business as a passive income. So I did that. So somebody asked me how I did that. Well, that's easy. But what's hard is when you start understanding people, what they're looking for. And Jim Rohn has this wonderful saying. If you help enough people in life, then you will get in what you want in life. Along those lines, I'm a strong believer in that. So I can talk about this journey for another 30 minutes. But the thing that I want to share with the viewers is nothing is hard in life. Nothing. As long as you have the mindset that you have the ability, you know, you have strong leadership skill. Jeannie, I know that talking to you, you know how to build people up. That is a powerful skill. And so when you build people around, you beat your employees, beat your investors or be their capital, everything else will just fall in place.

It does. It.

It.

What goes around comes around. Generally, you reap what you sow.

That's right. That's right. Indeed.

There's a lot of old sayings that really work. But you have one more good one that you didn't touch on yet, I believe has to do with risk.

The. The risk. People who focus on risk.

Wait, was it risk or.

No, I was talking. I think we were talking about capital preservation.

That one.

Capital preservation, yeah. So I have a saying. You know, when I get a lot of investors calls, right, and they want to invest with me, and they ask me very easy questions. What's the return? What's the hold? How am I getting money? I said, those questions are easy. You got to look away from the shiny object, right? You got to mitigate the risk. So you got to ask me a question. Hey, what am I, Canal? What are my fact? What are my indicators that the capital will not get lost, that we should be focused on? And so I try to have this difficult conversation with my investors, especially the newbies, and I tell them, look, I built several business in my life, and this is my. The business that I adore the most, the real estate syndication. And this is because people invest money with me. And that's the highest level of trust somebody can place with a stranger. So I get emotionally attached to this. So I'm this. Why this business is very emotional to me. So for that reason, I tell them, your capital preservation is more important than my business reputation. So that's the same. Capital preservation is more important than a business reputation. I will communicate to you when things are rosy and beautiful and sunny, and I will also commit perhaps even more when there was a risk that I was not able to mitigate. So I think that's every syndicator, every operator, and perhaps every passive investor must have this difficult conversation with their investors. I agree. Preservation versus reputation, right?

Yeah, yeah. And A lot of people haven't thought these things through in this. And when you ask them how much money they're thinking to place, you know, in these preliminary calls, hopefully before you actually are raising capital on a deal, I think that that's like a wake up call for them to really size up things in their own head. And. And that's when the good questions come out.

Exactly, exactly. And not only creates an open and clear trend, communication, transfer, communication between the operator and the newbie investor, but these hard conversations actually strengthen the relationships between the two.

Yeah, yeah, couldn't agree more. Right. Well, very good. Well, so why don't you tell people how to be reached, how they can reach you if they want.

I think the easiest way to get in touch with me is through LinkedIn and Facebook. I'm active on Facebook and promise to get more active on LinkedIn. But I have plenty of spreadsheets that I have created over time myself. I've tweaked other people's spreadsheets. I have created flowcharts for passive investors. Reach out to me, message me any of those two platforms. I'll be happy to share those flowcharts with them. This flowchart is actually a decision making flowchart. The passive investor can just go one by one to preliminarily quantify if this is a good investment for them or not. Great.

Excellent. Excellent. Well, thank you so much. I appreciate you coming and sharing your experiences. It's always interesting to especially, I think, hear from someone that's been in that immigrating scenario because it's, it's just got to be mind bending and, and it's phenomenal to see you and, and so many people do. Well, I, I congratulate you again.

Yes, thank you, Jeannie. You're too kind. It was a pleasure. I enjoyed it.

Okay, you take care.

You too.

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Thank you.