#39: Hemant Pawar, Real Estate Investor - Setting expectations, scaling too quickly & more

Many people ask me in various podcasts, how did you go so fast so soon? And you know, I said, oh, there's no rocket science. Simple answer is no family, no kids. So all my time. Yeah. No relation, no, you know, no girlfriend, no dating. So all my time I spent by choice on this space. Right. But it's not a great, you know, great situation. I do need to change my status soon. Last year, last two and a half years have been exhaustive, but it allowed me to become a voice in, in the space that I thought I would, I would love to make as my passion and my retirement planning and my retirement journ. Foreign.

We have real estate investor Hament Pawar. Steve, this is one of those episodes that we don't, we don't always get. A lot of the guests we have on are real estate investors. That's their full time gig. That's all they do. And Heyman is one of the few where we're catching him in a season of life where he's got a full time W2 job in San Francisco as an IT consultant. So he's heavily involved in the tech world, but he's also a passive investor and an active investor in real estate investing. And he really talked a lot about how he was able to get started even while he had a W2 job, which I thought was fascinating.

And Jake, when he started describing what it looked like, he had a full time job and then jumped into real estate. And he went really fast. And over 33 months he learned a lot what worked, what didn't work. And his wisdom from that journey of 33 months is invaluable. I learned a lot from what he was doing with his real estate investing.

Yep, yep.

And he talked about that, you know, he didn't have a lot of on his plate during this time. Like he worked and that was it, you know, family. This was during COVID So he's kind of locked in his house anyways and he was able to learn fairly quickly. And he, he did what a lot of people don't do, which is he took action fairly quickly and he took a little bite size. Right. He got into a single family home and learned as he went along. And as you can see if you listen to this episode, he's had great success that, that not only helped him financially, but he talks about some of the charitable things he's been able to do not only from his W2 job, but also from his net worth increasing through real estate. And he's been able to help a lot of people. So I think people are going to really love this episode, so let's just head west. Stay tuned as we discuss setting expectations with partners, the perils of scaling too quickly, and focusing only on what you can control. With our guest, Hemant Puar, this episode is brought to you by Skyline Point Capital. If you're anything like me, you're always considering where to invest your money. Stocks, bonds, crypto and rental home. The list is literally endless. As we've all seen over the past year, the stock market is unstable, the housing market is just weird, and inflation is on the rise. In times like these, the clear place to invest my money is in multifamily real estate, AKA apartment complexes. Here's why. Returns on real estate investments have little to no correlation with the stock market. There's lower volatility, stable income streams, and the tax benefits are insane. And let's not forget that the apartments will typically appreciate in value over time, which means you can walk away with a pretty nice return when the complex is sold in three to five years. Best of all, multifamily investing is passive, so you get all the benefits without the hassle and headache of your typical rental home investment. Getting started has never been easier. Head to skylinepointcapital.com to learn how you can start investing today. Heyman I'm excited to have you on the podcast today. Your story is unique from a lot of our guests in that you're investing in real estate. You know, you're fairly well positioned in the syndication world. You've got some, some close some deals you've closed under your belt, but you also have a full time job like real estate is, is something that you do, let's say it on the side. I'm not saying it's, you don't do it a lot, but you've got a full time job that you're trying to balance and you're, you're, you're living in San Francisco, you're, you're in it and you've worked for some very well known businesses. I'd love to hear how did you get started in real estate? What are you doing in tech and what's that journey look like over the past few years?

Sure. First of all, thank you for having me here and allowing me to share my story. So you know, I had no clue few years back I would be in real estate. To be honest, I think the, the whole world turned upside down during COVID You know, I say this in a humorous way, but everyone sitting at home started thinking about how to sit at home Permanently.

Yeah, right.

Go to work. And I had zero background on real estate I listened to. So I was thinking of, you know, share market. I have really bad luck. You know, the stocks, I, I don't think I, I, I do them very well. So I was looking at what other markets was, you know, was an option. And then real estate came up. I listened to a podcast and I thought, oh wow, people are buying small houses, duplexes and you know, making cash flow. You know the rich dad, poor dad book by Robert Kiyosaki? I think. So that, that, that kind of interested me. I quickly purchased a duplex in Cleveland just to understand the process, how the agent re alter all that process works. What is the contract inspection process, how does it go? And it went very smooth. The duplex was mine. I started cash flowing. And I think six or eight weeks later I listened to a multifamily related podcast and Rod Cleef, one of my mentors and the event that we both attended, he was talking about how the a scale of operations really helps in multifamily real estate. And I was blown away with the numbers that were shared and the space, the information on the space and what people were doing there. And me being from the technology world, being a program director, managing 8,000 people on various projects, for me that made more sense. The scale of operations and handling different entities, different people, because when you take, take a step back, it's, it's basically budget, income, expenses, program management and you know, accountability with the vendors and our partners. So you just apply that to a different space as long as you understand and learn the space very well. And that's how I began my journey in multifamily real estate. I went very fast initially. I mean, sometimes I feel maybe I could have gone a little slow and made less mistakes, but my personal situation allowed me to make mistakes and spend more time and more effort when I started. So today I have done nine syndications, eight joint ventures, almost 1500 plus units will be 2000 by March, I guess. And I started with investor relations part because finding deals and talking to brokers and broker relationships was taking a lot of time. So I had to spend my time efficiently between my work and the real estate stuff. And that is the reason I chose those two as my starting journey in multifamily real estate.

That makes sense.

Yeah, it just felt easy to do at that point of time. Today, if you ask me, I have changed my opinion. Capital raise is not easy at all. It took away, you know, a lot of stressful hours. So to answer your, you know, how we started on this particular point was I, I used to spend 40 hours, 40, 45 hours on W2, another 40, 45 hours on my real estate, building relationships, looking at the, learning the space, networking with new people, trying to understand how the big players are playing this game. And you know, many people ask me in various podcasts, how did you go so fast so soon? And you know, I said, oh, there's no rocket sense. Simple answer is no family, no kids. So all my time, yeah. Spent no relation, no, you know, no girlfriend, no dating. So all my time I spent by choice on this space. Right. But it's not a great, you know, great situation. My, I do need to change my status soon. Last year, last two and a half years have been exhaustive and, but it allowed me to become a voice in, in the space that I thought I would, I would love to make as my passion and my retirement planning and my retirement journey. So success comes with some sacrifice. And you know, I think that my story is a perfect example for that.

But yeah, yeah, I love that that I mean, to your point, you were able to get going fast because you just didn't have a lot on your plate at the time. Obviously, you know, 40, 45 hours a week of work for your W2, but whatever spare time you have, you dedicated to this new passion of yours of learning the ropes, you know, I assume going to conferences, networking, getting on one on one calls and talking to potential investors about the basics of real estate investing as a passive way of generating passive income. And you were able to get to scale pretty quickly. I mean, I think you said 15 deals. And what's the time frame? We're talking in a year, two years.

Today I have 17 deals. It's been 33 months of, 33 months of my journey. Two of those deals have been sold. We exited them. Joint ventures, the syndications are still being held.

What have you learned along the way? I mean you, you went faster than most people we've talked to. Do you, what do you think you've learned from the speed and the pace that you've, you've gone in good and bad and you know, what advice do you give to people who are looking just to get into maybe not syndication, but maybe even just investing and learning? Like what advice do you give to those sorts of people?

I think the first advice I give, the top advice is be very realistic. If you feel you are going to join this space and be able to leave your job in 12 to 18 months, forget about it. It's not. It probably used to happen in yesteryears when the market was more sensible. But in Covid, things changed. Cap rates came down, the numbers game completely changed. There's a lot of effort that you need to put in at the start, and the profits and your returns come later. At the same time, there are hundreds and thousands of new people who jumped into this space in the last three years. So the competition is tough. If you think this is the right offer, there's always somebody else who's going to give a higher offer on those deals. There is also a situation which I have encountered many times where many of my investors who had been investing in real estate before they shared their previous numbers, and those numbers were much more profitable, much more attractive than what we were offering in the last two, three years. But that was the reality of the market. Everything just. People jumped in, the prices went up, cap rates came down, the. The lending market changed in the last two, three years. So that's my first suggestion. Our recommendation to everyone, this is a long game. You know, you plan it for a long time, understand the basics and then start your journey. Also look at various options. And the reason I say various options is because I see many folks who join this industry from the single family world, or the fix and flip world, or maybe business world. They don't see those immediate returns on their effort and investment because it's a long game. We all know that whoever has experience in multifamily, and then they get discouraged, they get disheartened, and they go back to whatever they were doing, thinking, this is not for me. Whereas it's a different ball game, it's a different way of looking at things. It's a different way of calculating your ROI on the effort that you take in taking down deals, making relationships, and then having somebody who underwrites very well so that any situation that go up and down, whether it is lenders or a recession or whatever, is taken care of in your underwriting itself. What?

So you said, you've so backing up. You're in the IT world, you're living in San Francisco. You, you jumped into real estate once Covid hit because you said, okay, I gotta, I gotta find a way to keep this going. Staying at home, working from home. But also, you know, I imagine there's some aspect of. I don't want to rely on my W2 in case there's, you know, layoffs or, you know, whatever the case may be. And so you ventured into real estate, you jumped into single family homes, and you said, I Think I heard you say you bought in Ohio.

Yes.

Is that so? How and why Ohio and how did that pan out? Most people buy in their backyard, like San Francisco, like investing in San Francisco. I imagine that's where you would have started.

Yeah, and I think that that's the key to my journey because over the years, and I don't know if you have heard about my story before, through, through some of the charity work that I was doing, my, my savings or my bank balance was not that great. So I thought about this point, like if tomorrow, if I don't have to do a job, what is the cash flow that I'm looking at? What is the monthly income or a passive income that is coming in? So for me the key was the cash flow. And when I did my research on what are the top cash flowing areas and cities, Ohio and Cleveland came as one of the top ones. And at the same time I had my extended family, my cousin and his family living in Cleveland. So I thought probably I would visit once or twice a year and it would be more convenient. So that was the plan, that was the objective behind buying something in Cleveland. I sold it in six months today. Looking back, I think I shouldn't have sold it.

Why'd you sell it?

There's a trend here moving too quickly.

Yeah, again, like lessons learned, mistakes made. Somebody asked me the other day, what's your biggest life coach? And I said, who's your biggest life coach? Or do you have a coach? I said, my coach is my lessons learned and mistakes made. So the reason I sold it was when I jumped into multi family and then the, you know, I realized the scale of operations, I, I thought that maybe holding that would, would bog me down or, you know, I, I don't have time and distract you. Yes. And that's exactly why I thought maybe it's good to just sell it off, use that money into multifamily. So far what I have done is whatever limited resources I have, I have invested my own money on my own deals right along with my investors. So that way you showcase to the investors you have a skin in the game, number one. Number two, your money gets you a longer way on getting onto deals as a GP when you are capital raising. And number three, I am totally on the job on the task on asset management operations because you know, my money is also involved. So I do hold the KPs and the lead GPS accountable. Now I myself am a lead sponsor on a couple of deals I've signed on agency loans. So you know, so I've gone through the whole spectrum of activities. But yeah, I don't hold that single family more today if you ask me, do I regret, do I regret selling it? I would say a little bit, yes. The reason being I could have spent some extra time in managing both portfolios because multifamily returns come at phases at different milestones. Your single family returns come every month if you buy it. Right. And today when I'm in that mindset where, you know, where, you know, if I don't have a job, where would my monthly be coming from? You know, I wouldn't have to make a lot of calculations if I, if that situation arises.

Have you thought about investing in San Francisco or in California? Because I hear some people don't want to do it, but then I have some buddies and peers that they love California and I don't know what they love it about in investing.

So. So Steve, to answer that question, I can easily tell you if I had half a million or a million with me, I would have definitely invested in California in some of the areas that I know are high growth, high appreciation areas. The reason being if you do the research or you pull some research papers, some of the areas have just never gone down, even during the recession cycles. They have either stayed there or they have appreciated twice thrice. And I can tell you right now, there's. I live in the central, central Bay area, Palo Alto, one of the richest counties in the country. And literally 37, 37 minutes away is a town which was non existent three years back. Whoever bought land and built houses there, they are millionaires within a year. So the potential and the appreciation that happens is just phenomenal. So I wouldn't. And the reason I don't invest is my objective was different, the cash flow aspect because the pricing is so high, you can still buy it, right? And cash flow maybe 2, 3%. But then my thought process is you can get that much in your savings account in a high yield savings account.

Nowadays without the headaches. Yeah.

And I don't want to invest for appreciation because I have a short time period to make the most of my money, which I can do in various states. So now, for example, couple of my syndications will exit in the next year or two. I will get a big chunk of money out of that and I want to make sure that that kind of balance improves and then maybe I'll buy something in California. But that's, I mean it's a great market and I really appreciate people.

Who.

Only invest in California because they have a game plan. They know exactly where to look, what kind of numbers will be. They know the risks, they are ready to take the risks. And you know, they have some loyal investors. There are so many people I meet their investors like oh, if it's in California, I'm good. If it's not, then I don't want to. So yeah, there are, there are various groups here.

So you were talking about there's investors that want to invest in California but if you, if it's outside California, they don't. So where do you go? You're in, you're in San Francisco and you look everything to the, to your south, to the east. I mean the United States is your oyster as they say. Where, where are you going?

So I am in nine states currently, all outside California. And to answer your previous question, the, the investors that like California are the ones who are, you know, have done single family homes, have probably have a holiday home or a resort or a lake house or something of that sort. You know, where they know where they know the space, they know the area, they know how the numbers are working. When I started, I think the easy catch and again going back to one of Jake's question, one of the best ways to start in this field and capital raise is to educate people about their IRA and 401k accounts. Living in the tech area in the Silicon Valley, people do have IRA 401k but they don't know the avenues that they can invest through that and, and also make money, tax free money. So I Remember for my first 1520 investors were all through IRA 401k and I only attended one session of some company sharing how they can invest in real estate through the sdira accounts and 401k accounts. And I only shared that, I explored that, I researched that and then I shared that and that's how I got my first 1520 investors and then they brought in their friends and family and you know, then it just grew, it just multiplied over the years. Then there are some folks who are coming out of some heavy sales of their single family second homes sale. They may not have enough to 1031, but they may have enough to invest in various things. The third kind of investors I met where people who didn't believe in investing at all. But when you showcase the SEC related aspect where I could go in and tell somebody there is a watchdog on this investment, it is not my private investment. I showcase some of the documents that we use which are very valid, which are very legal so they know that this money kept somewhere else and it grows is also being watched by somebody else, right? So especially the older folks, they are very skeptical about what this person is doing. So and, and then there are various avenues to, you know, to see how your investment is going. The fourth kind of investors will always want to call you any time of the day, night, you know what's happening. They want the charts, the graphs. So I implemented this process since the last, I think 12 months. Every month, the last Friday of every month, we have a 20 minute call on every property that I am managing for investors. So that call is recorded. If you join, great. If you don't join, you get the recording. So that's how I reduce the calls. But what I have realized is many of these investors, they especially the ones who want to stay in touch more frequently, they do love to see what kind of things are being done, how the, how the rents and the income is improving, how the backsplash is looking. Even though they are not going to live there, they feel happy, they have opinions. Why white? Why not use gray or black? So being in touch with them at a one to one level helped me a lot initially. Even, even in the events check that we go to, there are so many folks who, you know, following up with them and the way you follow up what, what kind of information you give. I had this, I had this old lady I met at, at Ross conference in Orlando and she mentioned to me, I, I, I do want to invest, but I don't understand this space. I don't understand how the numbers work. I remember I spent I think six or seven hours on various, I said, call me anytime, I'll explain to you. She was in Colorado and you know, there were many other folks, but you know, I spent six, seven hours with her. Finally she invested 50,000, not like 1 million, but, but, but, but it's a slow game. The effort pays off in some way where you are adding value to their knowledge. You are making sure that they know that this space, you know their money is being taken care of. Yes, there are risks. We disclose everything right at the start, but there are risks everywhere. People who invested in Bitcoin were crying last year, for example, right? Or you have even in the stock market. It just goes up and down. So finally it's about how a team works together to not just preserve. The first step is you preserve the investment. You make sure that you don't lose money. This is a part of my investor pitch or the elevator pitch. Always say, our first objective is we don't lose money. Our second objective is to Meet our milestones and projections and our third objective is to how to play this game longer with you. You know that that comes in my elevator pitch usually. Yeah.

I love that your approach is as it should be, is to educate investors. Right. You talked about educating people on self turked IRAs. We had a, we had a guest on a couple weeks ago where he made the joke that he'd been in corporate world investing in his IRA for 20 years and he had never had one of his financial advisors tell him about a substituted ira. And he was joking because obviously they wouldn't tell them about that. But that's an avenue in which you can invest today without, you know, you don't have to have a pile of cash sitting at home or buried in the backyard in order to invest in real estate passively. And you talked about like you spent seven hours just sitting down and talking, walking through the basics of multifamily and why it makes sense and why it's better than in most cases than the stock market or in a single family home. That's the approach that syndicators should take. And that's, that's really what for people who are listening, who are, who are not willing to syndicate but are really wanting just to invest in a syndication as a passive investor, an lp, a limit partner. Find somebody who wants to educate you, who wants to tell you, is willing to tell you about the basics about this and how it works and why it matters. Cause that's really where you start to see a good partner. But also from a syndication standpoint, it really helps build that relationship with your investor so that they're with you, like you said, for the long run.

Yeah, absolutely.

So I'd love to go back, I keep going back. But your story of being in it, what have you been able to leverage from your time spent in IT towards real estate?

Right.

So if I look at the surface, I look at IT and I look at real estate, I really don't see a lot of crossover. I'm sure there's a lot, but I maybe see like tech savvy, I think of, you know, your data driven and whatnot. But what specifically have you been able to leverage from your IT background into real estate that's really allowed you to scale more quickly and becoming successful in real estate?

Sure. I think the biggest, the single biggest piece that is pretty common, sometimes it exists in real estate, sometimes it's totally absent is the kind of process you follow in managing your resources and your budget properly. So if you are, you know, especially at a Managerial project, managerial program, managerial level. In an IT field, that's what is your primary roles and responsibilities. Working with corporate. You are given a budget, you have resources you need to manage that budget, you have some outcomes, some milestones to track. You have the delivery of your IT projects and you track that continuously, every week, every month. And once the milestone is complete, everybody reviews and then you go on to the next milestone. So this kind of process driven approach that I learned in the IT side of things, I brought it on, you know, obviously it was already there. I just gave my own flavor to it when I do my asset management. So when we have property managers, we share the budget with them, we make them partners in our strategy. They understand this is what the lead sponsors have planned for this particular property, how they need to come in. This is the budget that we have, this is our capex plan. Every month, what units are being turned every month, what kind of expenses are going towards these renovated units, how much is left, what kind of Runway do you have? And then flagging milestones of what is the ROI that we are getting on these rehab projects. And if we need to go back a few steps or re strategize, so bringing the resources, money, budget partners together and tracking it throughout every week, every month. That particular aspect seamlessly flowed into my asset management activities in real estate. It's just that people were different, they came from different background, they had different skill sets, you know, but, but the process was, was similar so it was easy to catch that.

How do you go about, excuse me, in the IT world you're working with the team, they're in your company or a vendor, et cetera. But now you're, you're working with a team outside your business and you've got multiple people, multiple disciplines, multiple experience and skill sets. How do you go about selecting a team that you want to sign up with to make a property hum, to make it work? Can you tell us about that, what you go through?

Sure. And I think that that's a very good question because that was the piece that I had to learn in my education. So we have a checklist or some of the mentorship programs I did or the courses I did. We have a questionnaire for the property manager and their experience. We look at their sample KPI reports, we look at the references that someone else, they give us, who they have worked for previously, what kind of properties they have handled, whether the kind of properties match with what we have and the strategy that they drove on the other properties, whether they have experience and whether they will be capable to do so on our properties. And then various other questions that we ask these folks. Based on that, we rank them. Most of the big cities usually have at least six to seven interviews, detailed interviews with property managers and our scorecard is ready. And then together with the lead gps, we take the decision of whom to choose. So that's one thing. So that was something that I had to learn new because it's selecting a vendor in my IT job. It was not part of my role to go and select a vendor, it was the vendor management team. But here I was part of that. So that was something new I learned. And I also grasped a lot of things from the senior partners that I joined early in the cycle. And then the interesting thing was about how to hire contractors and how to write the scope of work and how to look at the estimates and how to compare the estimates. I think that was something that, you know, I did have a flavor of that in my IT job where I was looking at the estimates of the various IT contractors that I used to hire. But this was something, yes, this was the skill set as well as they are bringing in materials, that materials cost would be this much, plus to implement that, to execute the strategy to go in and fix the flooring along with the materials. This is how IT will look, this is how the final estimate will come. This guy is doing this way. This guy has asked us to source the materials and he'll be only charging us for his effort. So doing different kinds of contract management and sow management activities was something new, which again I learned on the job while managing various properties. So it's been, you know, it's been an interesting phase.

How about on selecting gps, teaming up with people and the reason I ask, when everything's going well, GPS all get along, your partners all get along. And when things are little challenging, you hear about things. You hear about different GPs and how they mix and how they handle problems and challenges. How do you go about selecting a GP or a team you want to team up with?

So, you know, that was, that was a big chapter of my lessons learned mistakes.

I think with everybody it is so.

The space is such that it's a high energy, positive environment, everyone's helping each other. You know, there are a lot of good people and you do want to trust the process. You want, you do want to trust their intentions and you do want to, you know, feel that everything will be all right. You know, it's, everyone has good intentions. What happens is when things start going wrong and how each Person is attached to the cause in their own way. So I may have a lot of leverage because I have a lot of investors, but I don't have strategic decision making on the asset management which is actually impacting my investors. Or somebody is handling the financial management and they are continuously saying no to distributions or no to giving certain amount when they don't have a single investor in the deal. Right. So decisions taken by others which actually impact us and when we should have had a lot of strategic decision making ability. Those kind of scenarios happened quite early in my journey. And that's how when, you know, it happened the first time, second time, the third time, I had my questionnaire ready, I had my expectations ready. At one point. It comes down to how clearly you have given the expectations to the partners. If you are clear about that, then people either go and find somebody else or they do want to do the deal with you in the right structure. So today I'm at that position and I know people do talk behind my back to that, hey, this guy demands a lot. But to be honest, you know, if you see what I'm saying, it's more of a I'm coming with this kind of thing. I'm taking this risk. You are leveraging me for certain things where, which are very critical to the entire execution. So would it be possible for me to be a part of this? I'm not saying I'm going to be the whole and sole decision maker, but I want to be a part of this chain. I would like to be involved in this side and my vote should be counted. And at the same time, these are the kind of returns I expect. And the reason I say, you know, I always make it, make this clear is what I have realized in what changed in the last three years is the pie becomes smaller. But the way the pie used to be cut before, it's still getting cut. So someone who is new to the space, if he used to get a smaller portion, which was enough pre 2020, nowadays they get such a minuscule portion that it's not even worth that effort. And I can give you an example of how somebody who raised a million dollars on a deal and when they finally calculated their acquisition, exit and cash flow, and if you're making like $300 a month for doing all that effort or something, it's not going to, you know, help them, especially if you're living in California. And I gave this, I gave this calculation to people, I'm like, would you do this if you were me? And they were like, no, then, like, then how can I be, you know, labeled as a demanding person? This is. Yeah.

That list of expectations, though, is so critical. Right. Going into any partnership, whether it's a, a dating relationship, whether it's a, you know, friendship or a business partnership, you have to have your expectations sort of laid out and clearly communicates people. The problem is, is you typically don't know what your expectations are or need to be until you get into that situation.

Yeah, right.

And you realize, oh, shoot, I should have thought about this ahead of time. I should have more of a say in distributions if I'm bringing most of the investors who, you know, that decision affects. Unfortunately, you have to get there before you can figure out what the expectation should be.

No, and you're absolutely right. And you know, throughout this conversation, I'm adding answers to some of the previous questions you asked because I remember things. And I'm also coaching a lot of students through Rodcliffe program and people ask me separately also on my. I hold a monthly free mastermind. People ask all kinds of questions and I tell them, once you learn the space and you understand the basics, returns, where you are, what you need to do, etc. The first six to eight weeks, sit down with your partner, with your wife, if they are going to be partners on your journey, and then look at how returns are calculated, then sit together and say, if we bring in a million dollars for this deal, these are the kind of returns, whether it is the acquisition fees or the cash flow that comes after preferred return or the exit, this is where we will fit in. These are the activities that we will be managing as part of this deal. And for doing all of this, this is how our returns will look like. Some will be coming to us when the deal closes, some may be coming to us during the course of the whole period, and some will be coming to us at exit. And then decide if this is what you want to get into. And this satisfies your idea of this, how the journey would look like, you know, what kind of effort you need to put, what kind of returns you get, and whether you will be happy with it and then move ahead with this journey. Once you do that, your disillusionment is less. Your dissatisfaction. If even if something goes wrong, you knew that there were certain risks that right at the start that you were okay with.

You'll.

You'll still be in a good space and you'll not be disappointed. Which, which I feel many people, you know, just sometimes happens. They come to know information as they go along and it Disappoints them.

Hemet, you were, you were asking or you were talking about what it was like three years ago or four years ago when cash on cash was so much higher and everything else. What are you seeing right now when you guys do underwriting that if you're not in, not in California and, but in, in Texas, Arizona, Southeaster, etc. What do you see in the typical syndication underwriting is for cash on cash, cap rates and things like that right now?

Sure. I, I'll elaborate on the answer by starting with an example. In the. In my last QA monthly Mastermind call, I gave an example of a property and I got the actual numbers from one of my investors who invested in that property. That Property got sold three times in 10 years. Last time it got sold was four months back. So the first time it got sold it was like 38% IRR, 22% cash on cash. Crazy numbers, right? The second time it got sold around 1718 cash on cash, 25 IRR. You know, again, very good numbers. Beating every asset class that is out there. Today it is 15 IRR, 7 cash on cash over five years. Okay, so this is the story of my journey. The other aspect where so many investors I met, they just went away from multifamily to other asset classes. They are like, yes, this is good, but it is not as great as it used to be. Right? And the scale of operations is great. You guys are working a lot. But the returns for their effort don't justify moving so much money into this asset class. And I was always wondering why they say that. So when I looked at this particular deal then I was like, okay, now I understand. So today, to answer the second part of your question, if the whole game or the whole space, what was the thumb rule of real estate? If you look at all the senior guys talking about it, the thumb rule of any real estate is you make money when you buy. If you don't make money when you buy, everything is based on projections. And there are hundred things in those projections that you don't control. You don't control how lenders are going to behave. You don't control how property management will perform. You don't control contractors and their materials cost going high. The only thing that you can control is at what price point you buy. And in the last three years, because of thousands of people and the whole world and their mother jumping in buying real estate, nobody purchased properties at the right price. So 80% of the turmoil in the market, you see, everyone is saying, oh, there's so much turmoil, bridge loans and for foreclosures is because guys, you didn't buy it right? And obviously you didn't look at the risks that came along with the lending landscape and the bridge loan interest rates and you didn't put the right levers in place. So that's the second thing you have to buy, right. And when I say buy right, Everyone was in this game for the cash flow and appreciation. And obviously if you're not in California, then I, I hope everyone invests for cash flow because that's where otherwise come to California, just put your money in California, it will double every five years anyways, you know. Yep.

Well, go ahead.

So the third argument I had was where if you, when you buy, if you're buying at a certain, you know, at a certain situation, certain lending landscape, certain risks included in the underwriting, certain numbers, the cap rate fluctuations included in the underwriting and if it cash flows enough, enough so that investors have an option that this particular number is better than keeping money in the bank. And then you have enough Runway to take it higher, maybe increase the rents by $200, make some value at plan and give a 8 to 10% cash on cash over five years, 20% average annual returns over five years. It will still be considered a healthy good, you know, investment. And you will find many people who would say, okay, this looks, I mean obviously there, there are still some cynics and critics out there, but I mean especially from you know, people who have been hard money lending and fix and flips, they are used to 17, 18, 20, cash on cash or whatever, crazy numbers. But this asset class, you give them a good property, they feel proud of owning a class B, class A in a Miami downtown or a Nashville downtown. And they want to showcase it to their families. They understood the process. They have some kind of pride in being associated as a shareholder or being a shareholder in this property. I think these numbers really help that kind of marketing and communication with the investors. But if when you are buying something and it doesn't cash flow enough to cover those risks, then right from the start, you know, you have certain risks that will affect you. So you know, it's 70% your effort, 30% to chance, you know, that's what I would say because the way the landscape went up and down, the way the lenders cut down their LTVs, you know, loan to value ratios, the way the cap rates went crazy, this is not in anybody's hand. Nobody knew what was happening in the last two and a half, three years. And you Know, Jake and I, you know, if the events that we go to, many people say, oh no, we haven't, like seniors especially, nobody has seen this market in their lifetime. Then I'm like, if nobody has seen this market in their lifetime, what are we coaching people on?

Yeah, so true. I, I've seen some underwriting on some properties on the market and it's interesting that you look at the IRRs and the cash on cash, the cash is just north of 5 and the IRS are still 15. I mean, it's like in this marketplace and it's like, it's, it's the same thing. It's not, it's. Some people think their properties are still worth a lot of money and they're not. And so you just walk away from them to the risk. You just walk away.

Absolutely. And, and the sellers don't, don't have a lot of incentive to sell if the property is doing well because the rents have gone up and everybody's saying, hey, what happened? Just few months back you were throwing crazy offers at us. Now why is not anybody throwing that crazy offer? Until I get that number, I don't want to sell, so look somewhere else. Right. And it's kind of a situation where nobody is able to disentangle from the current market unless something happens. And to answer one of your earlier questions, the reason I talk about the investors mindset so much is I remember for my second deal I had this college friends whom I really wanted to bring on through the deal as investors because the whole other group had invested and they were part of the same group, but for some reason, this person being a numbers guy, financials guy, he was like, no, I don't believe this. I mean, it's good. Your underwriting is great, but I don't think this is the best thing that we can do with our money. Maybe we'll do something else. Those guys did not invest in that deal. That deal is currently trailing projections. We have not given a lot of distributions. It didn't go the way we planned because of the way things changed in the last two years. Fortunately, there's no capital call, there's no risk, default risk. But we have not been giving what we projected. That's a fact. Those two guys went in and purchased a portfolio of single family houses. Ten of them on the same street. They managed it like a multifamily. And they are making 25 cash on cash, 35. So who am I to tell them, hey, this is the best thing in the world to invest, so we have to be Very realistic. And showcase the risk and the good and the bad and everything, and then let them make the decision.

I love that. Well, before we end, I want to come back to. You made a comment about charity. One of the things that you hear often, and Rod's a big proponent of this, is investing in real estate. Affords you a lot of opportunities to give back, to pay it forward and to help others out. I'd love to hear a little bit about what you're doing from a charity standpoint that real estate has allowed you to do.

Sure. And I have actually a live example. So I was doing charity even before the real estate. And if you heard my story on stage or on other podcasts, I was helping these human trafficking families through a twist of fate. Six years back, I met this family detained at an airport, and the mother and her four kids who were caught in the, you know, or rather were part of some human trafficking scam, which they were not aware of. So I, you know, on the spot, I decided to work with the social worker. We took care of the family, sent them back, built a house for them, did the education part. Today I have almost seven families, 25 kids. The first family went ahead. You know, the kids did their education. One of them opened a business. We helped them open a business. That business grew. To date today it employs seven other girls like them who would have, you know, been in an unfortunate situation otherwise. So I had done all that when I joined, before I even joined real estate, and I thought I would do more of that. And, you know, when. When I, when my returns come, it enables me to do more of that. But what it really allowed me, and a real case study, was I had close ties with Ukraine and some of my close friends in Ukraine and whatever was happening with the war with Russia, the government opened a humanitarian visa program to allow war affected families to move to the US and how real estate helped me was the more net worth the. That I show while sponsoring these families. So we sponsored 11 families so far, almost 28 members of those 11 families to move to the US and settle in various states and start a new life. Their houses were destroyed. The kids were injured in the bombing. So, you know, we. I was part of this group, a nonprofit group that was helping them. And through them, I found out a lot of people that I wanted to help. So how real estate helped me was because my net worth increased. My income from my W2 was not enough to sponsor so many. They go by how much income you have, not because I need to pay everything, but Because I need to make sure if something happens to them, I am capable enough to take care of them, to pay for their healthcare, to pay for their housing. So technically, on paper, I am responsible for all of whatever goes with them. But those people are skilled enough. They have, they do jobs in construction, truck driving, whatever. Right? So. So they take care of themselves too. But on paper, the more net worth I had, the more people I could sponsor. And that helped me a lot. I didn't know when I started, but when everyone was like, hey, how are you doing this? Because I could only sponsor two families, then I started finding out how it, how it was getting done. Every time I submitted my, my, my pay stub, my salary slip, along with my net worth, that net worth was being counted as his, as the capability of this person to take care of these many people. So this is a real case study. You know, I never shared this such detail, but this is what happens in, when you, when you want to sponsor somebody or bring them to the immigration channels. Wow, I love that.

That's really cool.

Well, let's head into what we do we call speed round. It allows listeners to get to know you a little questions, quick answers. We've got three, so I'll launch right into them. What's one book that you've read recently that's had a big impact on you and why?

The book I read was something called as the Journey Within. And it is how you. How the thoughts that come to my mind when you're happy, sad, struggling down. And it is a way. It. It's a way of how to look at your actions, words, your thoughts in such a way that it is normal. It is, it is. It is a part of the process of being a human being on this planet, doing so many things and handling. Handling various relationships. It's how you look at it as a third person. So you don't get attached. You don't get attached to the result, but you enjoy the process anyways and you learn from the mistakes. You learn from the, the heavy emotions that come to you. So that, that's something.

What's one item you couldn't live without?

Well, you know, I wish I could say my iPhone or my car, but I'm least attached to these things. One item I cannot live without are my relationships with my family, my nephews, my friends. You know, I treasure them a lot. And, you know, some people come into your life, some. Some move away, but whoever stays with you, I do treasure those relationships a lot. Yeah.

What's one piece of real Estate advice that you give to others.

One advice would be look at it as a long term, profitable and enjoyable journey. You know, it is not just about the money you make or the aeroplane that you buy. Do not burn bridges. Maintain and, you know, make the relationships stronger. That will make your progress faster. Any kind of real estate, even if you are in a single family, relationships will matter even if you are fixing and flipping, even if multifamily. So be clear of your expectations and give everything you can to maintain the relationships. If they don't, I mean, it's finally destiny whom you work, with, whom you don't. But make it an enjoyable journey.

Yeah, yeah, that's good. Last question. As you quote, unquote, head west in life, where what does the destination look like for you? Where do you hope it ends up?

You know, yesterday I was talking to a performance coach. That person was not my performance coach. He was taking feedback from me for the CEO and after 20 minutes he said, can I stop you for a minute? I say, sure. He's like, you look very content on screen. Am I? Are you content with life? It seems you're very content with life, you know, and I'm like, yes, it's kind of that peaceful destination where what you have in your bank, in your account is enough to do things for yourself, your family, you know, that is the starting point. Anything else you get above that is a bonus that the Almighty is giving you. Right? So if your starting point is, you know exactly what you are happy with and everything else is nothing, you know, it's very transient. I think that's where contentment comes in. So, you know, be grateful for what you have, try for the things, the other dreams that you have, the objectives you have in life. But as long as the basic needs are taken care of, I think, you know, there's no reason to feel sad, disappointed and you'll have enough energy to do more.

That's really good answer.

That's nice.

Well, Heyman, if people want to get a hold of you, if they want to look you up, where could they find you?

Yeah, my website is jewelequity.com so all my contact details are there. You can set up a calendar with me and I also have my phone number on my website. But you know, basically that's, that's where that's all about me. My website is all about me. Jewelequity.com Wonderful.

And we'll link that in the, in the show notes for everybody to listen to. But Heyman, thank you so much for joining us. On this episode of Heading West.

Yes. Thank you, Jake. Thank you, Steven. Very happy.