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Engineered for Investment: Sandhya Seshadri's Transition from Tech to Real Estate · Go Big with Gib Podcast

• 0:00
  Speaker 1: Welcome to the Go Big with Gibb podcast, where we talk to professionals, business owners and entrepreneurs about their big wins.
• 0:06
  Speaker 1: Welcome to this episode of Go Big with Gibb.
• 0:16
  Speaker 1: Today, I've got a very special guest here with me, Sandhya Sandhya.
• 0:20
  Speaker 1: How are you today?
• 0:21
  Speaker 2: Doing great.
• 0:21
  Speaker 2: Gibb, Thank you so much for having me on your show.
• 0:24
  Speaker 1: Yeah, absolutely no.
• 0:25
  Speaker 1: It's a pleasure to have you on.
• 0:27
  Speaker 1: Let's dive right into it.
• 0:28
  Speaker 1: If you could tell our listeners a little bit about yourself.
• 0:32
  Speaker 2: Sandhya Seshadri.
• 0:33
  Speaker 2: I'm here, based in Dallas, came to the United States to go to college in engineering here in the Dallas area and went on to get my master's degree in engineering.
• 0:43
  Speaker 2: Got a full-time job at Texas Instruments, which is a local Fortune 500 employer.
• 0:47
  Speaker 2: Worked in like full-time technical roles first and then my company was kind enough to send me to evening school to work on my MBA and that's where I got my investing, business and finance knowledge.
• 0:58
  Speaker 2: I started running groups and moved over more to the business side of management.
• 1:03
  Speaker 2: Program director was my last role.
• 1:05
  Speaker 2: Ran a 240-person team with a global project of doing Bluetooth, fm, wireless, gps kind of integration project with teams in Israel and Taiwan and India and, of course, san Jose and locally in the Dallas area.
• 1:21
  Speaker 2: That was a phenomenal experience and a lot of that ties well into multifamily.
• 1:26
  Speaker 2: So in between my engineering career moving to the business side, I was also a heavy stock trader, part of several investor clubs locally, but I attended a weekend event on multifamily investing where I could see the tax benefits of depreciation etc.
• 1:42
  Speaker 2: As well as the fact that I can employ a full-time property management company with staff on site.
• 1:48
  Speaker 2: So I have maintenance on site, leasing manager, property manager, et cetera.
• 1:52
  Speaker 2: As long as I bought a property of at least 80 doors and up at that size, the property's financials can pay for these personnel.
• 2:00
  Speaker 2: And then I would be more of an asset manager supervising the property management company, and that was very similar to my program management kind of role that I did in corporate anyway.
• 2:10
  Speaker 2: So it was an excellent fit and so that's how I got in.
• 2:13
  Speaker 2: I got into this business about five years ago and Dallas has been a great market for multifamily.
• 2:19
  Speaker 2: So as the local expert, having lived here for over three decades, it made perfect sense for me to be in Dallas as the asset manager boots on the ground, but also because of my engineering background.
• 2:30
  Speaker 2: I love underwriting and four brokers live in my neighborhood, so certainly the broker relationships to get the tours etc was very handy.
• 2:38
  Speaker 2: We go to the same country club etc in my neighborhood.
• 2:41
  Speaker 2: So underwriting as well as asset management was something I always did right from the beginning and I learned to raise capital along the way.
• 2:48
  Speaker 2: As you get smarter, you understand the terminology more.
• 2:51
  Speaker 2: This is a new industry.
• 2:52
  Speaker 2: Then you can speak with greater confidence and after the success of my first couple of deals then you know, raising capital also became one of my primary roles.
• 3:01
  Speaker 2: So I kind of dabble in all of the three major roles, if you will of multifamily investing.
• 3:11
  Speaker 2: So, sandhya, for people that don't know, what are the three main categories of multifamily investing so it's not that different from single family in the sense that you need to study and understand, analyze your market to find the deal and you need to know how to underwrite it for its income and its expenses so that you know how to make this business profitable, right?
• 3:30
  Speaker 2: Single family is just one door.
• 3:32
  Speaker 2: Multifamily might be 80 or 100 times that, but the principles are the same you have to analyze your market, find your deal and underwrite it to make sure it's a profitable business.
• 3:44
  Speaker 2: So that's the first half, that's the acquisition phase, and then a big piece of it is because we're buying properties worth $10, $20, $30, $40 million.
• 3:52
  Speaker 2: Typically, none of us have the money for it, so we have to take a loan for 70% of the value and then even the remaining 30% down payment.
• 4:01
  Speaker 2: We have to raise that money from investors and some of these deals have had to raise like $10 million.
• 4:07
  Speaker 2: So that's where the raising capital side comes from and that's another very important piece of the acquisition.
• 4:15
  Speaker 2: So finding the deal, raising the money and then managing the assets.
• 4:19
  Speaker 1: When did you realize that you had such a knack for asset management?
• 4:24
  Speaker 1: I mean, I find most engineers to be highly technical people.
• 4:28
  Speaker 1: They're very analytical, they ask a lot of questions and they do like to run numbers.
• 4:34
  Speaker 1: And were those the type of skills that led you into asset management?
• 4:39
  Speaker 2: Those are definitely essential.
• 4:40
  Speaker 2: But in my program management kind of role that I did for TI was also coordinating large teams, making sure they speak to each other, even though they're globally dispersed, and making sure we're all marching to the same tune for the same goal, which in those case was delivering a product to the customer in their timeline so that they could launch their product.
• 5:01
  Speaker 2: Because we delivered electronic chips like the kinds that go into your phone, etc.
• 5:05
  Speaker 2: So there's a launch date for that.
• 5:07
  Speaker 2: You know iPhone 5, iphone 13, now iPhone 14, whatever.
• 5:10
  Speaker 2: And so you have to, you know, work towards that same goal.
• 5:14
  Speaker 2: So some engineers want to be perfectionists and you have to tell them well, at this level of operation, at this level of standard, this is enough.
• 5:22
  Speaker 2: So, the same way, you have to communicate with your property manager, your maintenance guy, everybody on site and then the company as a whole to make sure we're all working towards the same things.
• 5:33
  Speaker 2: Like you might want to go and install some brand new landscape to make the property beautiful, but it might cost $30,000.
• 5:41
  Speaker 2: You might then decide okay, is curb appeal the most important thing when I'm already 97% occupied, or is it retaining the existing tenants is a greater priority?
• 5:51
  Speaker 2: So let me do a good job of customer service first, right Versus attracting new tenants, because I have a low occupancy.
• 5:58
  Speaker 2: Then the curb appeal matters more than you know attracting the right tenants and getting good reviews from the existing tenants.
• 6:05
  Speaker 2: So it's just different priorities depending on the deal.
• 6:07
  Speaker 2: But at a high level, the thing I had going for me that led me to being an asset manager is I can look at things at a high level, which I call the helicopter view of your property, but then I can also come right in and look at the street level of the potholes in the level of detail and depth that an engineer can look at, but I don't forget the big picture.
• 6:28
  Speaker 2: So in our deals, as an example, if you have a bridge loan deal that has coming up on its three-year maturity very soon, you need that helicopter view or the strategy given to you by your lender and your listing broker.
• 6:42
  Speaker 2: They'll both tell you this is where you have to improve your operations, your income has to be this much, your net rental income has to be this number and your expenses have to be down to this number and your NOI has to reach this number.
• 6:55
  Speaker 2: Those targets will be given to you by the listing broker to say this is how you can get to the price at which you want to sell it.
• 7:01
  Speaker 2: And the same way, the lender will give you the same guidance to say, oh, you want to get $15 million in proceeds.
• 7:08
  Speaker 2: Well, I need to see this kind of an income on your T6 over the last six months, I need to see this kind of an improvement in your expense reduction by this much, etc.
• 7:18
  Speaker 2: So those are your steering guidelines from listing broker and lender broker.
• 7:24
  Speaker 2: Then, on the strategic level, which is removing the potholes and roadblocks at the street level, that's where you go to your property manager and you say, well, it looks like we're making $170,000 in net rental income.
• 7:36
  Speaker 2: This number, how do I increase that to $182,000 and sustain that for six months?
• 7:41
  Speaker 2: Where are my problems?
• 7:43
  Speaker 2: My retention, should I increase the rent?
• 7:45
  Speaker 2: Is it getting all these units occupied, et cetera.
• 7:49
  Speaker 2: So you go from strategy to tactical tips to get the project executed, and I've been able to do both the big picture as well as the microscopic details, if you will, and you need both of that to be a successful asset manager.
• 8:03
  Speaker 1: Yeah, obviously.
• 8:04
  Speaker 1: Obviously you've been involved in the market for a good period of time I think you told me you got into this about five years ago, you know and so you've seen a lot of different market cycles.
• 8:15
  Speaker 1: You've seen market fluctuation, you've seen interest rates go down, you've seen interest rates go up.
• 8:20
  Speaker 1: You've seen prices go down, you've seen prices go up.
• 8:23
  Speaker 1: You know one of the things I hear at one point, when everybody was making money in multifamily, you know prices, everything was up and to the right and you didn't even really have to be that good of an asset manager and you were still making money because prices were going up so rapidly.
• 8:41
  Speaker 1: There was rent growth.
• 8:42
  Speaker 1: It was easy to raise NOI.
• 8:45
  Speaker 1: But how are things different today?
• 8:48
  Speaker 1: And are we in a situation that kind of separates the men from the boys or the women from the girls?
• 8:56
  Speaker 2: Yes, we certainly are in that situation, because a lot of people got into floating rate bridge loans in 2021 and 2022, myself included and some of them forgot to buy what we call a rate cap to cap how high your mortgage payment could go up to every month, and those deals actually ended up foreclosing many of them.
• 9:15
  Speaker 2: Then the ones who were able to buy the rate cap still couldn't keep up when they went into extreme value-add situations.
• 9:23
  Speaker 2: They might have started off with just 60% occupancy and had to put in a lot of capital to get the deals to perform.
• 9:30
  Speaker 2: So when you have interest rates going up like crazy and your mortgage payment doubles, not every deal has been able to keep up with that, and so you need very efficient operations and very quickly done so.
• 9:43
  Speaker 2: Does it make sense for you to put $20,000 into an interior to get a $200 rent bump?
• 9:49
  Speaker 2: Or maybe you just put $3,000 into an interior and you get a $50 rent bump and do it in stages rather than all of it up front, because up until then, a lot of people go in and they want to dramatically transform a property to almost make it go from a C to like an A minus level very quickly, and I like to do it in stages.
• 10:10
  Speaker 2: So another thing we focus on is retention.
• 10:12
  Speaker 2: You need to retain your good paying tenants and not let them leave, because the cost of a unit turn is going to be greater than the so-called rent bump you might be able to get from them.
• 10:22
  Speaker 2: So even if you want to get $200 more, which is $2,400 for the year, your unit turn is going to cost you way more than that, especially if those tenants have been good-paying tenants for a while.
• 10:32
  Speaker 2: The rehab might be more in the range of $10,000.
• 10:35
  Speaker 2: So you always have to look at the ROI and the payback period for every dollar that you spend on these properties.
• 10:42
  Speaker 2: And not everyone scrutinized it that carefully because we all were spoiled.
• 10:47
  Speaker 2: Like I have a deal I bought in 2019.
• 10:49
  Speaker 2: And I sold in 2021.
• 10:51
  Speaker 2: We more than tripled people's money in like a 25 month period, and that was half because of the cap rate compression.
• 10:59
  Speaker 2: So we could have done nothing with the property and we would have still at least doubled people's money, but we ended up also doing our value add and executed it.
• 11:06
  Speaker 2: So we never stopped distributions, even through COVID.
• 11:09
  Speaker 2: So asset management has always been a focus for me, because I'm always afraid that there's going to be a disaster at one of my properties Like, let's say, we have a building on fire or some floods and storms happen you have to cough up the money first to get those units rehabbed quickly before insurance will pay you out months later.
• 11:27
  Speaker 2: So I've always been tight with my spending on properties and always done my rehabs in stages or in steps.
• 11:35
  Speaker 2: And those who spend large sums of money to do these rehabs, the problem is with bridge loans.
• 11:40
  Speaker 2: It's what's called a lender draw.
• 11:41
  Speaker 2: So the lender waits for you to finish the rehab.
• 11:44
  Speaker 2: They come and verify that it was done and once they approve it they send you the money.
• 11:48
  Speaker 2: So a lot of times people become illiquid from those deals Because if your mortgage went up you barely have enough net operating income to pay the mortgage.
• 11:56
  Speaker 2: And then you do these capital projects.
• 11:58
  Speaker 2: Lender doesn't front the money ahead of the project scheduled to you.
• 12:03
  Speaker 2: If you're planning to do a $300,000 update on your exterior paint or these fancy 20K per door interior rehabs.
• 12:10
  Speaker 2: You need to be flush with cash, and a lot of people forgot that net cash is what matters, not just NOI.
• 12:16
  Speaker 2: Net operating income is emphasized a lot, but ultimately it's net cash, cash in your account that's going to be enough to pay for these unexpected expenses and ultimately to distribute to your investors.
• 12:28
  Speaker 1: That's a wonderful point.
• 12:30
  Speaker 1: I know you live in Dallas, Fort Worth, in the DFW area.
• 12:34
  Speaker 1: I know you're hyper-focused on the DFW area.
• 12:38
  Speaker 1: Where do you see us in terms of the market cycle?
• 12:41
  Speaker 1: I always like to ask real estate experts their opinion.
• 12:45
  Speaker 1: I know you don't have a crystal ball but, like when do you think we're at in terms of the market?
• 12:50
  Speaker 1: Like, where do you see the market going over the next 12 to 18 months?
• 12:55
  Speaker 2: I think we're nearing the bottom of the cycle, if we're not already in it.
• 12:59
  Speaker 2: As far as property values go, I do believe that the interest rates increases have stopped.
• 13:05
  Speaker 2: I think it's unlikely that interest rates will go up again and that's going to help a lot in terms of volume of transactions and property values.
• 13:13
  Speaker 2: So even last week, as we're speaking here, around the mid-June time frame, the Fed announcement made the interest rates go down by about a half point, which immediately increased proceeds on a lot of loans by again like half million dollars and up.
• 13:30
  Speaker 2: So even the interest rates pausing and a slight rate cut is going to boost those property values because it's increasing the buying power of your buyers.
• 13:39
  Speaker 2: I think in the next 18 months the population growth, the economy in the Dallas-Fort Worth area, the number and variety of industries moving in here still even now, whether it's the CHIP Act that Biden did that's getting so much of manufacturing in the electronic chip industry, which I have a lot of history in in the Sherman area as an example, or just a variety of, like Wells Fargo setting up its headquarters in Irving in one of its branches so much economic growth and development across a variety of industries is happening in Dallas, I don't think it's going think you're going to make a mistake.
• 14:14
  Speaker 2: As far as choosing Dallas for a market, you do have to know your pricing.
• 14:17
  Speaker 2: So if you overpay or you buy a property a Class B property in an area with a lot of empty land and brand new buildings come up there, they're going to start offering concessions there and so for the same price because they'll get one month free or something for the next 12 months that A is going to be more attractive than your B.
• 14:36
  Speaker 2: So you really have to look at the macro and micro economics of where you're buying your property.
• 14:41
  Speaker 2: Like Irving is an area we talked about.
• 14:43
  Speaker 2: There's not a lot of empty land there.
• 14:45
  Speaker 2: It's already pretty densely populated.
• 14:47
  Speaker 2: So if you want to move into Irving around, let's say, 183 and Beltline area, you've got to go to an existing property.
• 14:53
  Speaker 2: There's not empty land to build more there.
• 14:55
  Speaker 2: So you really got to know macro and micro factors that influence a property and the location, because that's the one thing you can never change.
• 15:03
  Speaker 2: But buying at the right price with good guidance from not just brokers but your own knowledge of that area, is going to be a winner in Dallas, I think in the next 18 months for sure.
• 15:16
  Speaker 2: If you buy a property now, it's going to be in good shape in about 18 months, as long as you're careful in your spending and reasonable in your cap rate assumptions at that time.
• 15:26
  Speaker 2: So always the exit cap has to be higher than the entry cap.
• 15:29
  Speaker 2: That's a basic rule, because if the exit cap ends up being less, that's great for you, but that's like a bonus.
• 15:36
  Speaker 2: You can't bet on it to be able to refinance, because a lot of people who bet on you know cap rates compressing and being able to refinance out of their loans are the ones ending up in foreclosures now Because interest rates went up like crazy.
• 15:49
  Speaker 2: What if interest rates don't come down in the next two years?
• 15:51
  Speaker 2: They just remain flat.
• 15:57
  Speaker 1: Can your deal handle it?
• 15:57
  Speaker 1: This episode of Go Big with Gibb is brought to you by Irons Equity.
• 15:59
  Speaker 1: At Irons Equity, we specialize in helping investors like you create long-term generational wealth and save money on taxes through recession-resistant real estate investments that create passive income for you and your family.
• 16:11
  Speaker 1: If you want to secure your financial future, go to investwithgibbcom to schedule a 30-minute introductory meeting with me.
• 16:18
  Speaker 1: Gibb Irons Again, that's investwithgibbcom.
• 16:21
  Speaker 1: Yeah, yeah.
• 16:26
  Speaker 1: So I've noticed that you know, in your LinkedIn posts, you're very comfortable talking about the successes of the multifamily industry, but you're also very comfortable talking about the failures, and I love that.
• 16:39
  Speaker 1: I think it gives a level of authenticity to the.
• 16:42
  Speaker 1: You know people that are absorbing your content.
• 16:45
  Speaker 1: As far as what you've seen in terms of things that haven't gone well, are you seeing a lot of distress in the market right now?
• 16:57
  Speaker 1: Are you seeing properties that are trading because of a forced sale, or are you seeing something different?
• 17:04
  Speaker 2: I'm seeing a good amount of that from the highly leveraged bridge loan deals of 21 and 22, especially when there are private equity companies involved doing an additional check.
• 17:13
  Speaker 2: So let's say somebody bought a $50 million deal and there are some many famous companies who did exactly that, and so they were able to raise some of the equity from individual retail investors like you and me at you know, 50, 100k a pop.
• 17:26
  Speaker 2: But then they also got fat checks from private equity companies to the tune of 10 or $20 million.
• 17:31
  Speaker 2: And so when they got those large checks, that pref equity is standing at a higher level.
• 17:36
  Speaker 2: So the main lender, your bridge lender, and then this pref equity company so they have it written because they wrote such a large check to the deal they have the right, if the deal doesn't perform to certain metrics in a three-month period, for them to take over the asset management, take over the asset and take over the asset and remove the main GP.
• 17:55
  Speaker 2: And that's happening a lot to where the prefect equity company wants to save their money.
• 17:59
  Speaker 2: So when the deal doesn't even have a market value today of the amount of the primary loan, then the private equity company stands to lose all of their money.
• 18:08
  Speaker 2: So that's when they take over.
• 18:10
  Speaker 2: They manage there, they put their own asset manager there and then they, when they can list it to where they come you know, full at least get all their money back.
• 18:18
  Speaker 2: They list it for sale and I'm seeing a lot of that happening.
• 18:22
  Speaker 2: So the retail investor, the 50, 100k investor like you and me, in such a deal might completely lose out because the pref equity company then takes over.
• 18:30
  Speaker 2: I'm seeing a lot of those deals getting listed for sale for prices even lower than what they bought it for back then, which would be just enough to get the pref equity company out and the primary lender out.
• 18:41
  Speaker 2: So I'm seeing a lot of deals of that kind.
• 18:43
  Speaker 2: And then I'm also seeing the individual small time syndicators like myself as an example right whose deals if they didn't buy a rate cap, then they've got a deadline coming up and they're willing to negotiate on those prices and it's a buyer's market.
• 18:57
  Speaker 2: So even if you agree on a price today, the buyer goes in, does their due diligence and keeps bringing that price down.
• 19:03
  Speaker 2: So this is not the time to sell and I'm certainly not going to sell any of my deals now just for that reason that it's a total buyer's market.
• 19:10
  Speaker 2: I think it's going to be 18 months before we see a true reduction in any potential interest rates, and that's when I think is the time to sell.
• 19:18
  Speaker 2: So yeah, there's a lot of distressed deals in the market if they've been on a negative cash flow for several months and they can't sustain it anymore.
• 19:25
  Speaker 1: Yeah.
• 19:25
  Speaker 1: So, sandhya, talk to me a little bit about what you're looking for when you're looking for a deal.
• 19:30
  Speaker 1: You know, I know, you do a lot of deal sourcing.
• 19:32
  Speaker 1: You're very familiar with all the properties in DFW.
• 19:35
  Speaker 1: I'm assuming you're doing predominantly, you know, multifamily value add deals like B and C class.
• 19:43
  Speaker 1: But to get a little more specific into the details, what are you looking for before you take on a new deal?
• 19:51
  Speaker 2: Ideally I want it stabilized and qualifying for an agency loan.
• 19:55
  Speaker 2: That's my ideal scenario.
• 19:57
  Speaker 2: So I don't have to take a risky bridge loan or any kind of a floating rate loan which has more stringent criteria.
• 20:03
  Speaker 2: So, fannie and Freddie, you know government agencies are always more stable.
• 20:07
  Speaker 2: If I can qualify for that, that's always my first choice.
• 20:11
  Speaker 2: Another thing I look for is I'm a bargain hunter.
• 20:13
  Speaker 2: I'm an immigrant, so you know I've had $8 a week as my food budget when I moved to this country, so I know the value of the dollar quite a bit.
• 20:21
  Speaker 2: So I always look for a deal that's been held by an owner for a long time, at least 10 years or longer.
• 20:27
  Speaker 2: Those are the ones where the rents haven't been bumped up, because the person probably solely owns the deal, is fully owns the deal just himself or herself and maybe one lender, or not even that, so they have not had the pressure of having to constantly increase rents.
• 20:44
  Speaker 2: Like you know, syndicators go through every two to three years.
• 20:47
  Speaker 2: They keep spinning these deals, the rents keep bumping and bumping each time and it's like, okay, now you've reached a max.
• 20:53
  Speaker 2: So I look for deals that have been long held by the same owner for as long as possible.
• 20:58
  Speaker 2: Those are the real bargains, because then I can get organic rent growth without having to do much to the interior.
• 21:04
  Speaker 2: I don't want to have to do granite countertops and stainless steel to get a $200 rent bump.
• 21:09
  Speaker 2: If I can help it, if I can just do a basic make ready and update whatever is broken, I should be able to get a $100 rent bump level, because I always call that my phase one and then my phase two can be the more premium updates.
• 21:23
  Speaker 2: So that's another thing that I look for In another way.
• 21:26
  Speaker 2: The crime is very important crime data.
• 21:27
  Speaker 2: So I drive my properties at night and if I don't feel safe as a woman getting out of my car and walking around, then I don't invest in that data.
• 21:30
  Speaker 2: So I drive my properties at night and if I don't feel safe as a woman getting out of my car and walking around, then I don't invest in that area.
• 21:37
  Speaker 2: So, pretty much, having lived in Dallas for 34 years.
• 21:40
  Speaker 2: Now you give me an address and I'm going to say yes or no.
• 21:43
  Speaker 2: I don't have to spend much time underwriting.
• 21:45
  Speaker 2: A lot of people say they underwrote 100 deals.
• 21:47
  Speaker 2: I don't have to underwrite 100 deals.
• 21:49
  Speaker 2: I might underwrite about five deals, but most of it is an initial back of the napkin calculation and the feel I get from driving the property.
• 21:57
  Speaker 2: It's a very gut feel, it's a very instinctive feel.
• 22:00
  Speaker 2: Then I go into the numbers.
• 22:02
  Speaker 2: I already know the price per door, what is reasonable for that vintage property in that area.
• 22:07
  Speaker 2: So all of those things help me a lot in shortcutting my time, because a broker might send me a deal and say, hey, I'm going to list it next week and I'll be like, okay, give me 24 hours and overnight I'll stay up to underwrite the deal and drive it at night because that really gives me a clue on how the pulse of the property is and then I'm ready to make an offer.
• 22:25
  Speaker 2: The last two deals I got, I was ready to make an offer within like a couple of days of seeing the property.
• 22:30
  Speaker 2: So you got to be ready to move fast and brokers know that if you have a history of closing with them before.
• 22:37
  Speaker 2: And then the other one is the median income.
• 22:39
  Speaker 2: The median household income is extremely important because, let's say, your rent plus utilities et cetera is going to cost the tenant $1,500 a month.
• 22:48
  Speaker 2: For a year that's going to be $18,000.
• 22:51
  Speaker 2: So you want to have at least a 3x factor minimum.
• 22:54
  Speaker 2: So $54,000 should be at the bottom level of the median income there.
• 23:00
  Speaker 2: So if their income is only $40,000, they're not going to be able to afford your property.
• 23:03
  Speaker 2: You're going to have a delinquency.
• 23:05
  Speaker 2: So you kind of want to find the C or B class property in a more A neighborhood where the median income is higher.
• 23:12
  Speaker 2: So it's a special, nice location that everybody wants to live and so they will want to come and live there and their income is higher.
• 23:20
  Speaker 2: That's very important.
• 23:21
  Speaker 1: Yeah, no, that makes a lot of sense.
• 23:24
  Speaker 1: Now, we were talking earlier, before we started the show, about deals back in 2019 and how they performed.
• 23:32
  Speaker 1: So well, tell me a little bit about what it was like back then, because I was in real estate at the time but I was doing single family back in 2019, and I didn't really experience the boom of multifamily.
• 23:47
  Speaker 1: But I've heard you guys talk about how much money was made for the investors and for the general partners back then.
• 23:54
  Speaker 1: What was it like?
• 23:55
  Speaker 2: So I invested passively in many deals at the beginning when I started out, and those deals whether or not the syndicators did much of a rehab with it typical returns were doubling your money in two to three years.
• 24:08
  Speaker 2: That was very typical, with very little effort, and that was very common.
• 24:13
  Speaker 2: And so I had three deals as a GP myself in that time frame and that was really nice.
• 24:19
  Speaker 2: Of course, my first deal I didn't personally make a lot of money.
• 24:21
  Speaker 2: It's what I call the intern phase.
• 24:23
  Speaker 2: So I mean, whatever I invested passively, I was able to triple it, which was pretty great.
• 24:27
  Speaker 2: But then I also didn't charge an acquisition fee, which seems to be pretty standard nowadays.
• 24:33
  Speaker 2: Back in the day we didn't have to charge all of these extra fees because we made such good money in the deals anyway.
• 24:38
  Speaker 2: So we didn't really have an acquisition fee, and I know a lot of people do have that Nowadays especially.
• 24:44
  Speaker 2: I also charge it, but it's in the range of 1% to 2%, right, and there's groups that charge 4% or 5%, which I think is pretty high, because I then look for skin in the game.
• 24:54
  Speaker 2: Do you have any money left in the deal after you take your acquisition fee?
• 24:57
  Speaker 2: Do you have any financial risk in the deal.
• 25:00
  Speaker 2: But the nice thing, in 2019, 2018, even prior to that I wish I had started prior to that as well people would just buy a deal, do pretty much nothing with it and, in a couple of years, sell it and easily double people's money, right, like, as an example, one of the companies we know is Rise48 in the Phoenix market.
• 25:16
  Speaker 2: Right, when the market was a huge boom in that timeframe 2019 to 2021, 2022, I mean they just bought and sold deals in a matter of 12, 13 months and double people's money, right, that's excellent, amazing returns.
• 25:31
  Speaker 2: But that was purely market conditions because of the interest rate and rents going up like crazy in that Phoenix area.
• 25:38
  Speaker 2: Even in Dallas, you know, rents went up $200, $300 a door in that time frame.
• 25:42
  Speaker 2: Now it's more stabilized and so you have to find those hidden gems to get that kind of a rent bump.
• 25:47
  Speaker 2: Now it's more typically, you know, $50, $75 maybe, and depends on the deal and the market and how badly.
• 25:54
  Speaker 2: What's the supply and demand going on there?
• 25:57
  Speaker 2: Are there any concessions being offered, et cetera?
• 25:59
  Speaker 2: So it's a very different time today and you need to focus on asset management, need to do a thorough market study, et cetera, compared to back then.
• 26:07
  Speaker 1: Yeah, yeah.
• 26:08
  Speaker 1: So you know I met you at a real estate conference.
• 26:11
  Speaker 1: You and I have been involved in a couple of different masterminds together and you know we've seen each other at these conferences, which have been just a whole lot of fun.
• 26:22
  Speaker 1: We've gone, you know, we've traveled all over the country.
• 26:24
  Speaker 1: What has been the role of mentorship and education in your real estate journey?
• 26:29
  Speaker 2: I think one of the primary ones is who, not how, so you can shortcut your path much more by knowing the right people to help you get there.
• 26:38
  Speaker 2: Now that I know you give as an example if I wanted to get into a different asset class, besides just multifamily, I know there's a whole world out there of different assets, from self-storage mobile home parks, you know, airbnbs, short-term rentals, blah, blah, blah, and I could learn all of that because I have connections now who have actually gone and invested in those types of assets.
• 27:01
  Speaker 2: So that's the main thing about mentorships is the connections you make.
• 27:05
  Speaker 2: That network is invaluable and I wouldn't have met people like you if I wasn't part of those mentorship programs.
• 27:11
  Speaker 2: Because we pay to play.
• 27:13
  Speaker 2: We realize the value of these connections, so just the connections make them worthwhile.
• 27:18
  Speaker 2: Somebody like Hunter putting us on those huge LED screen, big stages and the people he is connected to.
• 27:25
  Speaker 2: I know that if we ever needed a reference to somebody he knows he will help us out as an example, and so that's the power of mentorship, is the connection.
• 27:34
  Speaker 2: Of course there's the learning itself.
• 27:36
  Speaker 2: So raising capital wasn't a natural born skill for me.
• 27:39
  Speaker 2: You know, talking to people to raise money is not an easy conversation to have.
• 27:43
  Speaker 2: So that mindset shift right.
• 27:46
  Speaker 2: It's not raising money, asking people for money, it's attracting capital and providing an investment opportunity that's going to diversify their portfolio from the stock market.
• 27:58
  Speaker 2: So the whole mindset around that how do you learn to go attract investors instead of doing a marketing sales pitch like a door-to-door salesperson?
• 28:07
  Speaker 2: That's not what we do.
• 28:08
  Speaker 2: Just education, just I always believe in education so I will always spend more money on education and mentorships over, you know, teslas and Mercedes, but that's just me.
• 28:18
  Speaker 2: Like, I drive a nine-year-old car and it's worth maybe not even $10,000.
• 28:23
  Speaker 2: But when I go to all my properties I don't want to be seen in some fancy, flashy car because I go boots on the ground to all my properties once a week.
• 28:31
  Speaker 1: Sandy, let's go back to the conversation about asset management, because I know that's where you've really excelled in this business and I know you've raised a lot of capital too and done a lot of different things very, very well.
• 28:42
  Speaker 1: But you're absolutely well respected in the community for asset management.
• 28:47
  Speaker 1: Talk to me about Ace Operators Mastermind.
• 28:50
  Speaker 1: I know you started this mastermind.
• 28:52
  Speaker 1: I know you're putting together a really powerful network of people that want to learn how to properly manage their assets and learn all the tips and tricks that you've learned over the years and accelerate their learning.
• 29:06
  Speaker 1: Tell me a little bit about the mastermind and accelerate their learning.
• 29:10
  Speaker 2: Tell me a little bit about the mastermind when it started and what it's all about.
• 29:16
  Speaker 2: So back in 2023, I was at this best ever conference and a bunch of people came up to me saying their deals were distressed and needed help, etc.
• 29:20
  Speaker 2: And I found myself saying the same thing over and over to a bunch of different people.
• 29:23
  Speaker 2: And that's sort of where the idea was born to say let's create a mastermind that's only focused on asset management and operations, which at that time was definitely a forgotten topic in most mentorships, because they taught you the acquisition phase.
• 29:37
  Speaker 2: You got the deal, you celebrated with a photo and a dinner and that was the end, you know, like a fairy tale ending happily ever after.
• 29:43
  Speaker 2: Except that wasn't what was happening.
• 29:45
  Speaker 2: So that's why I launched it in May of 2023.
• 29:50
  Speaker 2: So we finished 12 months.
• 29:52
  Speaker 2: I had a one-day summit so everyone could get together in person.
• 29:56
  Speaker 2: But the purpose of it really is to make sure people get it right from the beginning.
• 30:00
  Speaker 2: The asset manager agrees to those numbers and can actually deliver on those numbers.
• 30:03
  Speaker 2: You want a $300 rent bump?
• 30:15
  Speaker 2: Your asset manager has to tell you that is possible and realistic in this environment.
• 30:17
  Speaker 2: That's where it starts.
• 30:17
  Speaker 2: It actually starts in the acquisition phase, but then to go on and execute a deal, especially if you're distressed with a bridge loan.
• 30:23
  Speaker 2: Give yourself as much time as possible to negotiate with your bridge lender so we bring in experts as needed, based on what the members of the mastermind need.
• 30:32
  Speaker 2: And then, amongst us, all of us have at least you know minimum is 100 doors to join my mastermind.
• 30:38
  Speaker 2: If you are trying to get your first deal, you're not a good fit for my mastermind until you get at least 100 doors.
• 30:43
  Speaker 2: But we can typically save someone at least $10,000 to their NOI within a couple of calls and that's sort of a challenge.
• 30:52
  Speaker 2: So when I launched it initially, I actually said you get a full refund if you don't get a $10,000 impact within the first month.
• 30:58
  Speaker 2: And we've seen it.
• 31:00
  Speaker 2: We've seen a very distressed deal with 65% occupancy completely turned around the property.
• 31:07
  Speaker 2: He's now at 90% plus occupancy in the Atlanta area and he's on the road to refinancing and even getting a little cash out, whereas he was on a negative cash flow and wasn't sure if he was going to make it.
• 31:20
  Speaker 2: So it's been phenomenal to see the success of all the members.
• 31:24
  Speaker 2: And so it's by application.
• 31:26
  Speaker 2: It's not.
• 31:26
  Speaker 2: Here's a QR code, scan and pay for it and then you get the training they apply, they have a conversation with me.
• 31:32
  Speaker 2: We make sure it's a good fit, not just in terms of being able to help them, but also in terms of are they a good fit for the culture of the mastermind, because that is so important.
• 31:44
  Speaker 2: We don't want one person to drain the energy of the mastermind.
• 31:47
  Speaker 2: But we have discussions, we bring in experts and it's about four hours a month of calls, but in between, if people need help, you know we help each other and new partnerships have formed from it and it's fantastic and it's exactly my dream of what a mastermind would look like.
• 32:04
  Speaker 1: That's awesome.
• 32:04
  Speaker 1: I love the way that it came about.
• 32:07
  Speaker 1: It sounds like it came about very organically.
• 32:09
  Speaker 1: You know, like people were coming to you because they were in trouble right, they were having problems with their properties and they were coming to you for help.
• 32:18
  Speaker 1: And you turned it, turned, you know that into a positive and said, hey, I bet I can help a lot of people before they get into trouble, so that they can start out doing it correctly from the beginning.
• 32:29
  Speaker 1: So they never even get to that point where you know there's that desperation of, oh my gosh, my property's not performing.
• 32:37
  Speaker 1: And so it sounds like you're educating them now and giving them resources and a network of a support network at the very beginning, which which basically can eliminate those negative experiences.
• 32:50
  Speaker 1: That's beautiful.
• 32:51
  Speaker 1: So, sandhya, for folks that have been listening to the podcast that want to get a hold of you, what's the best way for them to reach out and get in touch?
• 33:01
  Speaker 2: Find me on LinkedIn, find me through Gibb, and if you're an operator needing help with asset management, then it's aceoperatorscom.
• 33:09
  Speaker 2: Or if you're a passive investor looking to invest in a future deal of mine after we establish a good relationship, it's engineered-capitalcom, where I have a free checklist to vet a sponsorship team.
• 33:24
  Speaker 1: Fantastic.
• 33:24
  Speaker 1: Sandy well look, it's been a pleasure to have you on.
• 33:28
  Speaker 1: I really appreciate you coming on.
• 33:29
  Speaker 1: And Sandy well look, it's been a pleasure to have you on.
• 33:30
  Speaker 1: I really appreciate you coming on.
• 33:31
  Speaker 1: You've got a ton of knowledge in this space and I look up to you as a mentor and somebody that I would feel very comfortable calling and asking for help, because I know that that's the kind of person that you are.
• 33:42
  Speaker 1: You've learned a lot.
• 33:44
  Speaker 1: Some of it you know from experience.
• 33:46
  Speaker 1: Sometimes we fail forward, you know, but I know you want to help other real estate investors and sponsors, you know, and operators.
• 33:56
  Speaker 1: But thank you so much for your time today.
• 33:58
  Speaker 1: It's been a pleasure.
• 34:00
  Speaker 2: Sure.
• 34:00
  Speaker 2: Thank you so much for having me.
• 34:01
  Speaker 2: What a great name for a podcast.
• 34:03
  Speaker 2: Go big with Gibb.
• 34:05
  Speaker 2: Thank you, Sandhya.
• 34:05
  Speaker 2: Thank you.
• 34:06
  Speaker 1: Thank you, sandia, thank you.
• 34:13
  Speaker 1: Thank you for listening to this episode of Go Big with Gibb.
• 34:17
  Speaker 1: If you haven't already, go follow us on social media at Gibb Irons.
• 34:19
  Speaker 1: We'll see you next time.