EP37:Biden’s Exit: Is this the Right Time to Invest in Real Estate? with Bikran Sandhu's $1.8Billion view

Looking over operations, you see a lot of uncertainty in the market, right? You have obviously interest rates shot up a couple years ago and then new supply hitting the markets really kind of dampened the activity or the growth on the multifamily sector. And on top of that you have a new election that's happening and you have Biden obviously dropping out and Kamala Harris coming on facing against Donald Trump. And there is uncertainty. But you know, the as the old adage goes, you know, be hungry when others are fearful here, so be greedy when others are fearful.

Are you frustrated watching your hard earned money ride the knee jerking Wall street roller coaster? Are you looking to diversify into alternate investments and set them on autopilot to achieve financial freedom? It's time to learn the ways of the wealthy. It's time to Think Outside the Stocks with your host Madhvi Jain, an immigrant from India and ex IT professional who who will bring you industry experts to illustrate a passive and holistic financial approach to build not just passive income, but also your generational wealth. Madvi is on a mission to change the financial trajectory of one family at a time. And a thousand more to go. Are you going to be part of this vision? And now without further ado, here is the host of Think Outside the Stocks, Madhvi Jain.

Before we go ahead, just a little bit, 2 cents from my lawyer that this is information and education purpose only. If you want to engage with any of our guests, including Shauna, please do your own due diligence. And I am not particularly a financial, legal or tax advisor or investment advisor. So please seek your own team and maybe Tashana would be one of that team members. Right. And also we, you know, we'll have some examples for educational information purpose only. So keep that in mind. These are point in time. These are not representative of any real information. Hey, hey, hey. Welcome back to Think Outside this Talks. We have an interesting guest today and a friend, vikram Sandhu from Rise 48. I'm so incredibly grateful, Vikram, to have you joined us on this podcast. So welcome to Think Outside the Stocks.

Thank you, Marvi. I'm glad to be here and as usual, thanks again for having me and love to get into it.

Absolutely. And guys, and we know there is a lot of political pressure, political drama happening and we typically don't talk about it. But I understand that with President Biden pulling out of the race and there's just so much turmoil happening, more and more investors thinking that is this even right time for me to invest and especially in real estate and multifamily so that's the topic of the hour because we are going to talk about is this the right time for, for investors to invest into multifamily. And we have none other than the expert Vikram Sandhu here. And I'm going to just talk about why he is an expert Because Rise 48, they have closed about 53, yes, 53 multifamily deals. They have 11 full cycle dispositions since their inception and they have written over $119 million back to investors. Yes, this is the real numbers, guys. I'm not kidding. They have 1.8 billion dollar assets under management and that's about, you know, just over 10,000 units in multifamily. So that's the expert. And you know, Vikrant here is the CEO and CFO of Rise 48 and he is actually the one who deals with the numbers a lot. I love the numbers, Vikrant too. I play with the spreadsheets but not as much as you. We will talk about that today. So before we go ahead, I'm going to talk about three fun facts. And you know, I always like to talk about three fun facts about my guests. And the first fun fact, first fun fact about Bikran is he actually graduated cum laude from UC Irvine and that's incredible feat by the way in you know, finance as a degree. And the second fun fact about him is that, you know, typically bickering is a very general, gentle person and a very kind person. But if you're playing sports with him, be ready for such a tough competition because Bikran gets really, really tough competitive in, in the sports. So Vikrant, I'll, I'll hope to see you soon. You know, in that competitive nature that's a different aspect of you will get to see. And the third and most interesting fact about him is that he got married in 2020 but he had known his wife for 10 years. So it took a long time to pull that plug. And I'm so glad Vikram, you did that and congratulations by the way. And it's incredible with that. Let's jump into our episode for today. And have you been hearing about that sentiment as well that there's just so much uncertainty? Is this even the right time to invest? Do you see that in sentiment in your investors as well?

Yeah, yeah. No thanks, Madhavi. Yeah, no, I mean as a CFO here and looking over operations, you see a lot of uncertainty in the market, right? You have obviously interest rates shot up a couple of years ago and then new supply hitting the Markets really kind of dampened the activity or the growth on the multifamily sector. And on top of that, you have a new election that's happening and you have Biden obviously dropping out and Kamala Harris coming on facing against Donald Trump. And there is uncertainty. But as the old adage goes, be hungry when others are fearful here or be greedy when others are fearful. And you can see it from the large institutional partners out there or the large institutional investors. Blackstone and KKR are active buying deals currently just cause everyone else is on the sidelines. And when everybody else starts jumping in, you'll see the margin for error starts slimming down and you have to start executing a lot more tighter to be able to achieve your deal. So right now there's definitely a lot of uncertainty, but right now is the time to pounce. Active in three different markets. Phoenix, DFW and Charlotte, North Carolina. And the things that we keep hearing over and over are there's distressed sales happening where, you know, the seller is in some sort of a. You know, they have a loan maturity coming up or they have to buy an interest rate cap or, you know, their equity just wants to pull out and they need to get rid of the deal. And we are one of the very few buyers that are currently active. So there's not a lot of competition. You can pick up good assets at a good basis. And knowing where construction is going and knowing where interest rates are going, you can pretty much get in a good position and exit in two to five years. Knowing that you can forecast these things out. It's hard for investors and for us sometimes to kind of look past the current environment. But sometimes you just got to look past the headlines. Multifamily is not a sector of the economy where you can flip on its head overnight. Right? You can foresee constructions ramping up. You can foresee to a certain extent, you know, interest rates going up. But you can see, you know, on two to three years from now, the economic environment is going to be hopefully a lot less restrictive from where it's at today. And given that, you know, it takes two years for multifamily apartments to get constructed and where construction is falling off a cliff, you're going to have a significant supply chain or supply demand imbalance, which is going to cause rent growth, growth to go up, which is going to cause basis to increase and it's going to cause cap rates to compress. So getting in now, like Blackstone or KKR are doing is a smart move, not waiting until everyone's Pouncing in and everyone's trying to get into the deals because now the economy's opened up and you feel a lot more comfortable.

So Vikrant, thank you so much. That's a lot to unfold there. Let's take it step by step. Let's talk about the distress. What is the, you know, the underlying cause of the distress? Why are we here? Why do we have so much distress? Can you unfold that a little bit for us?

Yeah, of course. So there's a couple major factors that are impacting multifamily right now. One is obviously interest rates, right? Interest rates increased by, you know, the largest from 0% to 5% in 12 months, which has been the fastest tick up in history. And look in the last 40 years and you know, the, the, the pace at which those rate up really kind of increased the cost of capital from a debt perspective as well where you know, you could have gotten loans for 2, 3%, 4, five years ago. Now those same rates are close to 5, 6, 7, even 8% depending on type of debt you're taking on a deal. And you know, the debt piece on a multifamily acquisition is typically around between 60 to 80% of the total total purchase price. So if that cost doubles in 12 months, you're not going to see a lot of activity continuing at the same pace. Now a lot of the loans that were originated, you know, most of the multifamily community, they typically underwrite to a five, maybe a seven year hold. They don't underwrite 10, 20, 30 year holds. Not a lot of syndicators out there or you know, the, the new players out there, they're not a 10, 20 year hold period. And investors don't really like that. They want to get their money in and get it churned and then get it, get a good profit on it in two to five years. So a lot of the syndicators out, you know, they went out acquired deals in 20, 19, 20, 20, 2021 with three maybe four or five year terms. While those terms are coming up for maturity. And now they have to make the decision of refinancing the deal or selling from a refinance perspective, you know, because rates again have doubled from where they were. You can't get the same loan proceeds. If your NOI has stayed the same, your loan proceeds are going to cut significantly. So it means you have to do a cash in refinance to keep deal going. A cash and refinance is going to require capital calls because you can't come up with millions of dollars out of your pocket to do a cash and refi. So that's, you know, one aspect where you, where some sponsors are getting hung up is, hey, you know, I bought this deal for X million with Y in terms of total loan. Well, my loan now is going to be Z and how do I plug that gap? So they're opting for either doing a refinance with a capital call, or they're opting to just sell the deal, hopefully return some, if any, equ to the investors and just kind of their hands and move forward. But that's only one side of the story. The other side of the story is you have rent growth, right? Typically markets around 2, 3% rent growth every single year. Expense growth is supposed to be around 2 to 3% as well. Well, over the past two, three years, you know, rent growth has gone from, I can talk about Phoenix, you know, has gone from 18% in 2021 to negative 4% in 2022, and it's staying close to that percentage in 2023.

For.

And the biggest portion of underwriting, you know, that really kind of makes or breaks a deal is going to be that rent growth. Right? Now, we Never underwrote an 18% rent growth in our underwritings. We always assume 3, maybe 4%, depending on the area. But, you know, that impacts everybody. If I'm selling a deal today, I know for a fact that the buyer is going to underwrite 0%. And the best case scenario for rent growth for the first one to two years. So that in turn impacts your values pretty significantly. Right? So that's the other aspect is you have so many new starts happening, you have so much supply being delivered that rent growth has stayed either zero or low for the, for the past couple of years. And this should subside at the end of 24, beginning of 25, as that new supply gets absorbed. Thankfully, absorption's keeping up with the pace. But that's where, you know, you see that double impact is you have higher cost of capital, you have lower projected returns. So it's causing values to come down almost twice as hard as they should. But it should even out. You have the Fed assuming that they're going to be cutting rates in the next one to two meetings, they're going to start cutting rates. And you also have multifamily being absorbed at a record high pace. So that pendulum should start coming back to normal, but it's going to take six to 12 months. But if you're selling deals right now, you know that's happening. But you have to sell right now because of term maturities coming up. And that's where buyers can come in and pick up deals at a good basis.

That's an excellent point. I love that. You know, kind of a holistic perspective that you presented based on how the cash flow is diminishing and how even, you know, with the, with the rent growth, the income is also coming in less. One thing to remember, and again guys, perspective is everything. Right? Because you talked about cash in refinance, right. For new investors going in multifamily, be very careful when you know, I had an investor come to me and say that, hey, I have this property and this property is doing good and they're actually refinancing and they're actually have investors have a chance to bring in more capital to this deal because this property is great. Ask question guys, because that's not the case. They need more money. If there is a refinance, it should be at least the capital, some capital coming out, but they're doing cash in. So ask questions that are we just throwing more kitchen sink at that investment? Right. So ask those questions. For new investors, that's really, really important. For savvy investors, what's important is, and bikin you kind of alluded to that, that is the problem of the high interest rate. If they had that floating debt now, their expenses for going towards the interest has suddenly doubled and that's why the cash flow is impacted. What's really important is the fundamentals. The bonds of these properties are still strong, people are still staying there, people are still paying rent, there's occupancy is still high. And that's kind of, you know, there's still that, you know, a kind of renovation happening, increasing the rent and some markets are impacted. But if you give a good product to somebody to live in and pay like 100, $200 more per month, they're gonna choose because most of these people are not gonna have buying house in near future because of the high interest rate and skyrocketing values. So that investment, that education is really important for savvy investors. Right. So what do you think about that? I mean, it's really, the fundamentals are strong. It's just the impact of the cash flow.

Right, right, exactly. It's a temporary impact. Right. The Fed's going to cut and increase rates on their cycle. Sometimes those cycles take, you know, three to five years to increase all the way up and then come back down. But the Fed at the end of the day wants to bring Infl. They want to keep unemployment at a full employment, whereas around 4.1, 4.2%. But they have a dual mandate. They want to make sure that both those objectives are met and they're not going to wait for one to go skyrocketing the other way before they make a decision. Now, they did, in my opinion, they made a mistake back in 2021 when they weren't increasing rates, and they had to catch up in 2022 when they did start increasing, which I think left a lot of, a lot of owners in that negative position. But again, at the property level, as you mentioned, Madhavi are doing well. You know, you have good tenants, and as long as you provide good quality product in a good location, you're going to do well. This whole interest rate environment and the negative rent growth, it's a temporary impact. It's not for the rest of the world, you know, where the rest of your life you're going to have negative rent growth, you're not going to have neg, you're not going to have 10% interest rates for the rest of your life. It's a temporary impact. And because of where the supply, demand is, as you mentioned, Madhavi, home prices are in some of coming down because rates going up, they're staying the same or going higher. So the average consumer, you know, the workforce, housing, they're getting completely shut out of the market right now because of what the Fed's doing. So instead of, you know, finding a nice home to live in, they're completely priced out. You know, their, their job has not gone from, you know, making 60,000 a year to 100,000 a year. But in order to qualify for the same home, that's what they needed to be at. So they're required to be renting today versus being able to, you know, start family, start, start, start their household. So it's unfortunate what's happening in the economy, but from a fundamental perspective, multifamily still doing really well. You know, we're not, quote, unquote, a renter nation just yet, but we're very quickly getting there. And, and that's, I'm only speaking about, you know, the workforce, housing from a lug, from the luxury side, you're seeing a lot more individuals, especially millennials and the new generations, they don't want to keep up a house, right? They don't want to have to deal with plumbing issues or electrical issues. I mean, I have electrical issues that I don't want to deal with. And every other day I think about an apartment. But you know, you have those renters as well that just want to live in a place that's taken care of, that they don't have to worry about the maintenance stuff. So we're quickly becoming a renter nation and multifamily is going to be here for the long term. And you know, Blackstone I think at the end of last year, beginning of this year mentioned, they're going to start expanding out to other countries, you know, where multifamily is essentially becoming the bread and butter for, for the, for that commercial real estate ser seeing a lot of movement towards apartments, towards built to rent as opposed to buying brand new houses which are just priced out.

Yeah, it's incredible. Incredible how much of that moment, I mean, how many, even the millionaires are getting interested in just renting and being that, you know, kind of independent of the city so that they can go and rent anywhere. So that's, that's spot on. And this is what I like about multifamily, that multifamily is kind of solving a, a problem on both the sides from affordability side. And you know, somebody will not be able to stay in the their own home for next 5, 10, 20 years probably. You know, multifamily. I mean, you know, operators like you are creating that space even in an apartment which feels, and you know, has like really good interiors, right. You go for a platinum finish typically, which is, you know, quartz and stainless steel appliances. So these are, you know, the flooring, the you know, kind of a wood look flooring. This is the luxury of they, of the home that they can actually experience in the apartment. So that's the beauty of it. I like that. Kind of in a social part of it, people focus too much on that. Hey, multifamily operators are just pushing the rents, pushing the rents, but it is also providing that value. So that's, that's great. Now let's talk about that pressure that is creating in terms of the kind of cycle we are in. Right. You talked about their, you know, operators getting squeezed because of the, the interest rates, the rental income is kind of dropping and you know, the cap rates are also impacted. Right. So now let's talk about what we started with. You know, is this the right time to find, find a multifamily deal and go into the multifamily deal. So you know, with Rise 48, what is, what is your approach? You know, how do you identify and how many deals do you have to really go through to identify that one gem? Is it like just okay. The deals are everywhere. So just, you know, throw a stone and there is a deal. You know that that's not how it is. Right, I understand that. So can you elaborate a little bit about, you know, why this is the right time and probably the 2008 situation that has happened, that's happening right now, to go in and then how is Rise approaching this to identify that diamond in the rough?

Yeah, no great questions, Madhavi. So, yeah, I mean the best deals to buy right now are the ones where there's some sort of distress related to the deal. And distress comes in many ways and forms. We typically try to target the deals where there's some sort of a term distress coming up on the owner. Right. They waited out through the entire high interest rate period. They have floating rate debt or they have a long term maturity coming up and they're at a point where rates are not moving. They have to buy a significant money in the money cap and they can't just come up with the money. It's millions of dollars. They tried a capital call, didn't work. So they just have to get out of the deal. Those are the deals that we pursue now. There's a lot of deals in the market where, you know, someone owned a deal from 2010 to 2012, great basis for them, and they're just getting out because their fund is closing. And some of those deals are really great and we have pursued some of those. But majority of the deals that we do look at and we do try to go after are the ones that have some sort of distress. So just on like a high level perspective, you know, just for the DFW market, we underwrote north of 300 deals in the past since 2020, November 2022. That's when we started DFW. And of those 300 deals, we've been only able to get around 11 to 12 to pencil. That's running strike rate. And these underwriting, this is not a back of the napkin. Oh, take the noi divided by the purchase. Oh, the cap rate doesn't work. These are full on underwritings where we take the financials, plug it into our model. We run rental comps, we check out the area. It takes about 10 to 20 hours to underwrite every single deal. And we do that for every single one of those 300 deals to find those diamonds in the rough. Now there is, you know, we've, we've come across deals where, you know, the lender has already foreclosed and they're taking over and they're doing a UCC sale or they just want to sell the deal just to get their money back. And you know, honestly, we don't pursue deals where occupancy is less than 85%. We don't pursue deals where, you know, the expenses are just completely out of whack. And that's because we don't want to, we don't want to take on a bad egg at the, at the end of the day. We've made mistakes in the past for sure. You know, where we took deals which had lower occupancy that we needed to turn around and the operational manpower that we need to do that, it's just not worth the risk, it's not worth the squeeze, right? So we try to go after deals that have good bones, that, you know that we're taking care of. The seller just ran out of time. And that's when we can come in and really kind of take, take advantage of that. But we won't go after deals, you know, where the seller has been foreclosed on. Occupancy is near 50, 60, 70%. We have to turn the entire, entire thing around. Just turning it around may or may not get us our money back. So that's where we just want to make sure we don't take that type of risk. And investors need to understand that as well, is just because there's a higher level of distress doesn't mean you're going to have more profit. It just might mean that there's a higher risk of you losing your money and the same type of return. So that's why we want to stay away from deals where we know from a location or deal perspective or the bones perspective that this is just a mess. You don't want to inherit this hairball. Let's somebody else deal with it.

I love that. It's a great perspective. It's not just about, it's all about risk managed approach. Right? So the, the deep value that you're talking about, which is having that 50, 60% and people think that, oh, there is just so much room and there is in a risk reward ratio, more you risk, you take more reward you're gonna get. But really it's time to ask that question. Is there a risk reward ratio? Is there is there is a proportionate reward included in that. Right. So I love that strategy. You know, I always, I think outside the stocks talk about risk manage risk manage, risk management. That's the top right is capital preservation. So something that is, you know, have a break even. About 75 to 80% in, in your case, you know, it's going to produce some income still. Right. So I, I like that, you know, the approach that you have. What is your typical business plan look like? You know, just for our listeners who are probably first time listeners of what the multifamily is and how does it work and how does do you make money? Can you just in like a two minutes, explain your business plan and how do they make money in multifamily?

Yeah, of course. So we always try to target some sort of a value at play in multifamily. We're trying to look for apartments between 1 to 500 units. And our business plan is three steps. Step one, we do the rebrand and upgrade the amenities at the property. You know, give it a nice feel. A new marketing scheme, a new banners, new name so people feel like, you know, new ownership is in, they're going to re energize the product. The second step is take care of deferred maintenance. You know, if there's H vacs that are shot out or roofs that are, you know, that need to be replaced, we'll go in and take care of those right away. So that the tenants feel, hey, we're putting money into the, into the property, make it a better place for you to live so you can encourage other people to live here as well. So we have, you know, referral programs, we increase marketing spend. So bring in new tenants in there. There especially you have to do a tenant turnover. That's going to have to happen a third. And the most important step is doing interior renovations. So we don't just, you know, quote, unquote, put lipstick on a pig. We don't just repaint the interior and say, oh, we're going to bump up rents by $200. We replace the appliances with brand new stainless steel appliances. We put quartz countertops, white shaker doors, vinyl plank flooring and not rolled vinyl that, you know, will get unchapped and then go ahead and need to be replaced again in six months and nothing like that. So, so we put in quality finishes into these units so we can justify an increase in the rent so we don't just go off the market. We don't try to, you know, squeeze every single dollar out of every single tenant. We give them a good quality product and we get premiums in rent because of that. So all of that is our business plan. Once we've got done renovating, you know, we typically renovate between 2 to 5% of the product or the property every single month. Month after takeover and then in 24 to 36 months once we're done, we'll either look to sell, which is our most likely scenario, or we'll look to refinance if we can. If we need to wait out, you know, like a market such as this where rates are too high, rent growth is negative and we're going to have to be selling at a discount if we sell it currently. So we'll typically do a refinance if that's the case. But the 11 deals that we've sold, all of those were in a good environment. You know, we executed our business plan plan on average we exceeded our NOI by around 10 to 15% on those 11 deals and we were able to get a great return for investors within an 18 month hold period on those assets.

I love that and I think that's one of the differentiator that you also have that you typically plan for the five years but you know, two to three years is what you have exited again. You know, what happened in the past, it's not the determination now, you know, for listeners, but still it's kind of a good plan. Right? So love that and you know, love that you have that two exit strategies, right. Depending on the market, if you want to refinance, you still have a room there, you can kind of have accounted for that and if it allows you to sell, exit and kind of recap and you know, keep on moving to next investment so that the, the, the gains are realized. Right. And that's very important and that's typically does not happen a lot in the stock market unless you really know when to time your exit. Right. So, so I like that portion and, and love that even the business strategy and I have seen you guys implement that business strategy pretty quickly. I have been to your investment which you closed recently and just I think couple of weeks in it and it was a long weekend and I was just you know, doing my due diligence as you know, I'm all about due diligence and I, you know, the physical due diligence, taking the tours and you know that, that I was just doing the due diligence. And even on a long weekend you guys were like, you know, the exterior painting was going on, the rebranding was going on, on. So that happens almost immediately. So listeners, I mean if you are a passive investor, just think about the amount of effort that needs to go behind. Not only just identifying the investments as Bikran has said that you know, about you know, 11% rate. Right, sorry, 4% rate, about 300, 400 deals evaluated to get into it. And then the physical due diligence happened. Literally four or five days. There are like 10, 15 people members on site doing that walkthroughs and roof inspections and H vacs and all that things. And even after that implementing the business plan Bikran just explained and all the passive investors do is they just sit tight. They, you know, once they decided that they have to go into that investment, that's kind of a upfront work. And after that the experts like this, which has $1.8 billion portfolio over 10,000 units, they know like a clockwork. And Bikin, I joke this about, you know, your strategy that Bikram and Zach, your strategy is boring, but it is, it is the beauty of it because it's the same model coming repeated again and again. Right. And I think one of the distinctions that you have is your renovation strategy. Can you elaborate a little bit more on your renovation strategy as well?

Yeah, yeah. So we, as I mentioned, you know, we, we typically do a high end finish where we put in brand new, brand new appliances. We're, you know, secondhand appliances for, for the tenants where in a year they're going to break down and we have to redo it. So the way we, we have a unique approach. We'll buy all the materials at the Rise 48 construction, which is our sister property or sister company. We'll buy all the materials at that level. So we get wholesale discounts for all the properties, you know, so we can spread out that discount for all the assets. And then we'll essentially hire third party contractors to go in and install all those products. So when we negotiate contracts with our suppliers, we tell them, hey, we need everything that we've, we've bought. We don't want to pick it up from your warehouse. We need this delivered inside the unit. So, you know, say it's a 14 day reno. Day one, they're going to, they're going to deliver the flooring, any of the fixtures that they need to do. Day two and then the, obviously the, the contractors will go in and start doing their, you know, tear outs and then start installing the new flooring, et cetera. Day five, say, you know, now the appliances in and then day nine, all the finishing touches come in. So we have this schedule that's built out with our suppliers so that when our contractors are there, they're not having to go to a warehouse for half the day, pick up stuff and move it over. Everything's there for them and they can go ahead and finish their installs, finish their work, and then move to the next unit. Typically, you know, last year we had a ramp up in our renovations. We were renovating close to 3 to 400 units a month in Q2, Q3 of last year just to kind of catch up on some of our business plans. And we were getting strong rental premiums on all the units. So we said, hey, it makes sense to continue to renovate. We're pushing noi and it's showing on the financials that these deals are doing better this year. We slowed it down to our normal pace, but the strategy is still the same. We buy in bulk, we get it delivered to the property, and then the contractors who are going in to do the tear outs, they have all the materials at their doorstep to go ahead and do the stuff as opposed to spending half the day driving back and forth picking up things that are missing. So that's the one reason we've been so successful in renovations, is because we have that system and that process geared down and it was all done based on the strong employees that we have at our company. This isn't Zach and my mindset. We hired the right people to do this stuff and they put together this process and they deserve all the credit for making sure this is actually getting executed.

I love that. And that was actually going to be my next question about the infrastructure and team. And you kind of alluded to that, but let's talk talk about that. I mean, you are in three markets now and how does this infrastructure, the team, and you know, what is that again? You know, being the massive kind of operator that you are in, can't be done without the team. So can you talk a little bit about who's supporting you in this massive kind of a framework?

Yeah, no, of course. So, you know, when we first started, it was just Zach, Robert and I, and then Alice, my wife, and Grace, Zach's wife. You know, we were all kind of in it together doing different things. But when we started Rise 48 Equity, you know, the first person we hired was our Director of Asset management, who's now our president of operations. She oversees all. Kayleigh oversees all of our assets in terms of operations as well as the business plan execution. And she, bless her heart, she's very strong in analytics and with people. So she knows exactly what's happening at every single property. And I can grill her question after question on a single asset and she can get me an answer within two to three min. And she oversees these properties very closely. Like her Own babies. And our VP of operations, Dana, he's been her right hand man since we started our property management company. We started our PM company back in November of 2021. And the reason was, you know, we wanted to consolidate the control on these assets because we knew at the end of the day we were liable to our investors. We can't say, hey, the property manager messed up or the construction company messed up. We brought all that in house fast as possible. So our investors understand and trust that we are ultimately responsible. We're not going to pass the blame to anybody else. So we built out our property management company here. Really took our time making sure we had the standard operating procedures and the standard processes established here before we took that and replicated it out to DFW in 2023. When we did that, we hired again hired the right people and gave them the same processes as here and they improved on it, they stumbled on items. But we kind of learned our lessons there and you know, we again took that same process and we moved it over to Charlotte where we expanded out to this year we're vertically integrated with all our companies. So we want to make sure, you know, when investors see a deal that comes from us, we're not just, you know, you know, shooting a Dart on the U.S. you know, map and saying, oh, we're going to buy a deal in Kansas today or we're going to buy a deal in Seattle tomorrow. We only buy deals where we're vertically integrated and we have presence there. So we know the market, we understand it very, very well. Before we ever, you know, ask an investor to risk their capital to put it with us, we want to make sure we vetted the area before an investor comes in.

Love that, love that. And that vertical integration that you're talking about, that's your another distinguisher right to have control in all the aspects. So you have the Rice equity, you have the construction, you have the project manage property management. So having the control on each aspect of the deal is going to place that, you know, success, high chances of success. So I love that about you and you know, listeners, I mean if you are interested in Rise 48, we think outside the stocks, we do a lot of due diligence on their deals coming in and we, you know, every now and then we have their deals coming in, they go quickly because of course, you know, a lot of people love what Rise 48 are and what they're doing in terms of the company, their business plan, their exit plans, etc, so you know, do jump in and just Sign up for that invest with us form so that you can get informed about if there's Investments coming from Rise 48 if you're interested and we do the due diligence. But again, if you choose to do, you know, investments, just do a due diligence. Right. Do your own due diligence as well. So with that, you know, just wrapping up this segment, we can literally talk about this all along. Let's talk about what that one thing that you think that interest investors should keep it in mind. I mean, we talked about a lot of fundamentals per se, about multifamily and why this is right time to invest. What is that kind of a wrapping up that you would suggest the investors to keep in mind to ask the same question that is this the right time to invest in multifamily or anything?

Yeah, no, great question. I think that a lot of people, they'll overanalyze a deal. At the end of the day, if you're an investor, I completely understand. I used to be one of those people. I used to have what they call analysis or paralysis analysis. Yeah, yeah. So whenever I saw a deal, I would basically try to find every single way that I can tank the deal that it wouldn't work. And I still do that, obviously on a holistic perspective. But looking at say one expense line item and saying, oh, repair and maintenance was too high, that means this deal's not going to work work. Looking at it such a detailed level sometimes leads you to that, to that level of analysis where you just can't pull the trigger. But as an investor, you know, you have to vet the sponsor. That's your number one thing that you need to do. You can't just say, hey, I'm going to look at the deal by itself. Because there's a lot of fraud that happens when you know people, you're. I mean, if you're an out of state investor, first you want to make sure the deal actually exists. You know, look up the location, look up the property. But if you want to get analytical, I think the three biggest things to look at are. One is assumptions related to rent growth. You want to make sure those assumptions aren't wild or inaccurate. They're in line with industry standards. The second assumption we'll look at is your exit cap, because that exit cap can make a 14% IRR look like a 20% IRR if you're being impressive. And the third assumption you want to look at is the rent comps. Right. You want to make sure that the rents that are Being projected can actually be achieved in the market. They're not just, you know, taking the highest possible rents and saying, hey, this is how you go after a deal. So we spend a lot of time making sure we have data that backs up these comps. We want to make sure that our investors understand that we don't just, you know, make a deal pencil. For the sake of penciling, we've gone, you know, three, four months in the past or even almost five, six months in the past where we don't have a deal under contract because we can't find anything that works. Even if we're in three different markets, it's hard to find those deals to work. And it's very easy for a sponsor to change, you know, a three to a four or a five or change, you know, the rents from 1100 to 1200 to 1300 just to make a deal pencil just because you're so close. But you always got to make sure, you know, you stay true to your underwriting. Don't start swaying your assumptions unless they're supported by something out there, right? So that's the biggest things I would tell investors is, hey, make sure. Do the basic. Dude, do the. Sorry. Do the advanced due diligence on the sponsor. Make sure they're ready, reputable, they have a track record. You know, they actually do what they say they're going to do. Once you're done with that, when you have a deal come in, look at the assumptions, look at, you know, do you like this area? Do you like the location? Does the deal actually exist? And at that point, make your decision, but don't get so into the analysis where you're asking every nitty gritty question which you're just looking for a reason to say no essentially. So you get to be careful.

You. You touched my softest nerve, Vikran. You know how passionate I am about due diligence and especially the team's due diligence, right. That, you know, a good sponsor can take an average deal, can make it really good, but you know, a bad sponsor can take a really good deal and can kind of destroy it. So I'm very passionate about the sponsor due diligence first. The due diligence of the property, the investment options, the market. So many of these different aspect of it. We focus on, on that a lot. So thank you for sharing that for our investors because I call it a shiny object syndrome. People see two deals and they're like, okay, one deal is giving me 17% annualized returns and the other deal is 25% I'm going to go with the 125% but you know the three things or five things that Bikin just mentioned that could be detrimental to that IRR if you let's take your rent growth or you know just the projections that if you assumption from 3% to 5% that's going to change. Humongous, you know that's going to make a humongous difference. Stress test is also important and I like you know Vikrant that you do do the stress test on you know, different factors as well. But with that, you know one last thing I would ask is what about the mindset that you have advice for investors. And of course there are two more segments which is kind of a fun but honestly serious note. I would like to end this segment with talking about mindset of the investors.

Yeah, you know as I mentioned, you know you, you wanna, you wanna invest when others are fearful, right? It's, there's definitely a reason for uncertainty in the market. You know you have high interest rates, you have an election, you have, you don't know what's gonna happen in Ukraine and Russia. You know, TSMC is moving to Phoenix. You know what's gonna happen to Taiwan and China. There's a lot of uncertainty on the globe. Global level. But you're not investing in the global level. You're investing in a multi family project or any sort of cre or any other investment at the local level. Right. I know what the drivers are for that property or that asset and you want to focus on those as opposed to the noise in the, in the area. So you know, say tomorrow there's going to be an election either you know, the Democrats or the Republican Republicans are going to win. There's not going to be a stalemate, you know where the country just falls into disarray and everything, all the values go down to zero, zero. And that's how the news media likes to kind of frame it is hey, if the other person wins, the country falls apart. It hasn't happened for 200 plus years. I doubt it's going to happen today. We're not in that situation. The world's not going to fall apart tomorrow. So you need to focus at the property or at the asset and the fundamentals of that asset. And if you think hey five years from now, given where the fundamentals are, you know, where the location is, the construction supply is, the demand is and you can make an argument that hey this is gonna be a good investment, invest in that asset. But if you don't think it's gonna be a good investment. Do not invest in the asset. Right? That's at the property level. If Biden or, sorry, Kamala Harris wins or Trump wins, that's not gonna negatively or positively impact a deal in Des Moines, Iowa. It has little to no impact there. So do your due diligence, but don't let the scary headlines keep you from investing because. Because that's what the typical investor does. And the typical investor typically only invests when things are too heated. You want to be that conscientious investor that understands where you want to be in the, in the market and you want to make money off of it because you want to build generational wealth. You don't want to make a quick buck out of, you know, a two year hold, make a 50k to 100k. You want to make it from 50k to a million to 3 million. But that's going to take 30, 40 years. It's not going to take two years to time the market. That's the one thing I'll agree with. On the stock market they always tell you, hey, it's not how, when you get into the market, it's how long you've been in it. And they always say on a 30 year horizon it's a 7% average annual return. And there's a reason for that. There has not been a lot of very successful hedge fund managers which have timed the market very well. You'll hear about the, you know, the offshoots obviously, but 99% of the investors are better off investing and staying in the market. Whether it's the stock market or real estate or venture capital or whatever is your, you know, cup of tea. It's how long you stay in the market that's going to build you generational wealth. Not when you get in.

Love that, love that perspective. You know, I always talk about in think outside the stocks that typically people come to me and investors especially come and ask me when is your next investment coming and what is the annualized returns on that? And you know, know, how can I be financially free at the most. But I always say that, you know, got to step back and look at from eagle's eye perspective, not just, you know, your immediate returns, but really, you know, to grow, preserve, protect and pass your generational wealth. And so that's spot on again you hit my, another soft nerve that, you know, just changing that perspective from being a frog in a pond to being an eagle and just kind of, you look at different problems and different solutions. So thank you for kind of reiterating that, that Bikin. And with that note, you know, I, I'm going to the next segment of our show here which is going to be, you know, you know, coming from the expertise that you have and you know, the kind of investor you have, we just like to learn, our listeners and me like to learn from your strategy about, you know, how do you think do things differently? How do you, for example, pick how do you think outside the stocks and what is your diversification approach? And not just a diversification approach, but also how do you, you know, work on growing, preserving, protecting and passing this generational wealth, whether it's estate planning, estate tax planning or, or whatever else. Right. Can you enlighten us on that, please?

Of course, yeah. You know, from my investments perspective, a bulk of it is in real estate. You know, we, we run Rise 48, one of the co founders. So almost all of my money is invested in the company or it's invested in the real estate that the company buys. We have a secondary company that we started called Fundamental Portal. I have money invested there. That's our investor portal software. You know, it's in its infancy and we're going to grow it and it's going to be, I think it's going to be a great success. And then, you know, we're slowly. I'll invest, you know, passively as like a limited partner in some of the tech companies out there that are startups. I just feel, you know, like I like some of the visions out there. I look at the, the product and look at, you know, what the founder is doing and I'll put out a little, a little bit of money here and there. But that's not my, you know, complete retirement plan right there. It's more related to real estate from a, you know, estate planning perspective. Obviously I have a family trust. You know, I have a holding company underneath that and all of the deals that we do, they go under that family trust. So if something, God forbids, happens to, you know, myself or my w if that money's taken care of and it's going to get distributed based on the operating agreements in that entity Also, you know, in that entity we also set up that, you know, at least 50% of the money that we do collect and you know, that has, that's going to produce more generational income that gets allocated to charitable donations in the family. So we do try to give back as much as possible from that perspective. Perspective. And then, you know, from our goal right now is just to continue to Accumulate wealth and put it into real estate so it generates good returns and then that those returns are what we essentially live off of.

Love that. Thanks for showing that behind the curtain and look that we can all learn from by the way. Fun fact, guys. Bikram don't have any kids yet and he still has his estate planning in place. So if you have kids and you haven't done done it and they're, you know, probably 2, 10, 18 years old and you haven't done it, when is the right time to do it? Right? So, so, so that's a great learning from that. Thanks for sharing. So with that we are gonna go in the like last segment of it and I, you know, I really truly appreciate you being here and you know, this is a long conversation. I wish there's so many golden nuggets that you already have. I wish we could continue this conversation but the last round is going to be kind of a rapid fire. It's a fun round now, you know, just like three questions, quick questions, quick answers, kind of something fun. Not, not so heavy. We talked a lot of heavy topic today. So are you ready for that rapid fire?

Let's go.

Absolutely. So my first question is going to be that if somebody wants to lose against you in a game, what sports should that be?

Oh, that's a good one. I would say. I'm a big fan of cricket for sure.

Oh goodness.

A little bit, yeah. So if we have a stadium out here somewhere and it's not 120 degrees outside, let's go play. I'll be, it'll be a good match.

Love that. Well, I don't play cricket. My son does too. He's a left baseballer and he has, he plays in the leagues here. So I would take you up on that with my son Rentek, but I love that. And if somebody wants to make win against you in a sport, so what that sport would be.

Oh, let's see. That's a good one. I'm good at racing like, like, you know, what do you call it? Go kart racing. But I tend to be on the cautious side. Just I'm the one driving. So if we're going to go go kart racing, we used to do that a couple times in Dallas with, with our team. I'm always second or third behind Zach and or Robert.

Well, I, I didn't think that you will answer that question but as, as always, I have seen the most. The biggest aspect of you guys is your complete transparency. And nevertheless this is the same transparency that you have. So thank you for sharing that. The next fun question I'm going to ask is, you know, when you have really built this one, 1.8 billion dollar portfolio, what was your most favorite? And this is like, really, you know, if you have like two kids asking who's your favorite child? But I'm gonna still gonna ask that, what's by far your most favorite asset.

And why it's always the next one. All our assets, we love them all equally, but it's always, you know, the, the, the feeling of buying a new deal that, that you can put under your portfolio and run it and you can see the vision of where it's gonna go. That always gets me the most excited. All our assets perform really well. We've executed our business plan across all of them and most of them take out the market component for a little bit. We execute everything exactly what we say, but it's always the next one that gets me the most excited.

Wow. Wow. So you like a true parent. Parent, you're not gonna tell us who's your favorite child? Thank you, Vikrant. And the last question I'm gonna ask a little personal, right. You know, why? 10 years. And what really pushed you after that 10 years to pop that question and say that, okay, let's do this.

It was my wife, Alice. She has this thing where she, there's like a statistic out where most of the people who get divorced, and I'm not saying everybody, but statistically, if you're gonna get divorced, it typically happens between the age of 20 to 30 if you get married. So she wanted to wait until she was 30 years old so she could get, you know, skip that divorce essentially between us. So the moment she turned 30, she was like, okay, I'm ready to get married. So I was like, ah, finally.

Love that I married her day one.

But she wanted to wait 10 years. So.

10 years. Years is a long time. That's a lot of commitment. By the way, fun fact about us, me and my husband are celebrating 25th anniversary this year. So thank you so much. Yeah, so I guess, you know, it's, it's beautiful, you know, finding a partner and, you know, living your life with it with him or her, it's, it's incredible joy. So congratulations. Finally that happened in 10 years. But with that, you know, sadly, we have come to the end of this, you know, this episode, this segment and I truly, truly, truly, you know, am sincerely grateful about you being here and throwing so many nuggets for our audience and just being that completely transparent again in all our conversations. So thank you so much from our audience and me for, for you to being here at Think Outside this talks.

Yeah, no thanks again, Madhavi. Really appreciate you having me. And yeah, if anybody has any questions or if you want to get a conversation, happy to jump on. Happy to. We're an open book. I have nothing to hide. We're happy to open up whatever we need to for investors so they feel comfortable, you know, getting on a journey with us.

Absolutely. And we're going to put put some contact information in the links in the episode description, so find that. So again, you know, just wrapping up the thought. If you think that there is a lot of uncertainty in the market, in real estate, in interest rates, in inflation and especially where we are, you know, politically situated, there's just so much of turmoil going on and you're questioning is this the right time for me to invest or invest into real estate or invest into multifamily. Even with so much of going on in multifamily, the turmoil that it's going to go through. This is the time, as Bikran said, that this is the time to be greedy because there's just, just so much intense pressure built in the market. And those deals, these opportunities are going to be available for you for next probably few months or you know, going in the next year probably. So this is a time to pull that plug and not be afraid and start your, you know, dipping your toes step by step but not without that due diligence and, you know, making sure that this is the right property for you. So with that thought, I'm to going, going to wrap this up. Thank you so much for listening. We do have our passive power hours coming up and we're going to talk about real estate syndication. We are going to spell it out, what it takes, what the investment is, what your role is in as passive investors. So join us. It's coming in two weeks. That link will be also provided. And thank you so much for listening again. Thank you so much again, Victor. Thank you.

Thank you.

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