Latest / Real Investor Radio Podcast / Ep. 93 | First Deals, Fix & Flips, and Lessons Learned Along the Way with Malhar Bhagat

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Ep. 93 | First Deals, Fix & Flips, and Lessons Learned Along the Way with Malhar Bhagat · Real Investor Radio Podcast

• Jack BeVier (00:12) Hey, this is Jack BeVier with real investor radio. Craig Fuhr out this week at his daughter's softball tournament. So it's just me today, but I'm excited to have a fantastic guest who I got to meet a couple months ago. Malhar Bhagat is a real estate investor out of Atlanta and as very experienced, uh, does a ton of different stuff. So we're, looking forward to talking to shop today to get his perspective on what's going on in the market and his experience as a real estate investor. So, Hey, Malhar how are welcome to the show. I really appreciate you coming. Malhar Bhagat (00:41) Thanks Jack, appreciate it. Thanks for having me man. Jack BeVier (00:44) Yeah. So, just to give a background, was super impressed. We got introduced by a friend, Pat Flynn out of Jacksonville and, was super impressed with your background. you've been doing this for a long time, doing a lot of different stuff over the years. If you wouldn't mind just like, take us through, like, you know, take us through the history, how you got into the business, the kind of stuff that you've been working on over the years, what you're into now, that would be a great place to start. Malhar Bhagat (01:06) For sure. So I started in the business during the last big economic downturn, the Great Recession 2008. I was in a really tough spot. Honestly didn't even have... $100 in my bank account back then what I did have is good credit and I kind of crashed and burned the family business So felt really responsible Super financially strapped not just for myself, but kind of jeopardized my family's livelihood as well So in the midst of that I was on this like internal search for like what the heck do I do with my life? ⁓ That's 25 or 24, something like that anyway, pretty young, know, mid 20s. And so I ended up going to one of those free three day seminars where they're going to teach you all about real estate, right? So I actually did go and you know, obviously didn't understand sales pitches and all that at the time. So what they have you do in the three days is get your credit limits up. This is a way for you to learn negotiation, right? So I went ahead and did that. had good credit. And so ended up, ⁓ story short, getting a bunch of credit cards, put a $40,000 real estate investing education across multiple credit cards, and got involved in the business. ⁓ My very first deal, know, so they taught me how to Essentially evaluate deals, write offers, and if you remember that time was a very challenging economic time. I was living in New Jersey with my parents at that time just because I couldn't afford anything. ⁓ And so I learned how to invest remotely initially in some of the top foreclosure markets around the country. So my very first deal, despite living in New Jersey, was in Charlotte, North Carolina. and everything that could go wrong on that deal did go wrong. But I worked through it all and made a little over almost 19,000, about $18,900 or so on my very first deal. And I was like, holy crap, this is the most money I've ever held in my life in a check. this could really work, you know. ⁓ Jack BeVier (03:30) Is it a wholesale deal? Malhar Bhagat (03:31) It was not, it was a remote rehab deal. yeah, so I... Jack BeVier (03:37) On your first one, how'd you, so, how'd you pull, how'd you pull that off? Like you found the contractor remotely, like relatively like rehab, I guess, like, you ever, did it come to go down to Charlotte? Malhar Bhagat (03:43) Yeah. Yeah. Yeah, absolutely. So all of those things. ⁓ Relatively, yeah, relatively light rehab. My very first one, so I didn't know what the heck I was doing. Looked at the comps. I was like, okay, I think this would be good to do. You know, interviewed a bunch of contractors over the phone. One committed to me. I had all the paperwork that you're supposed to fill out properly, you know, that I was taught. Send the contractor the paperwork. Jack BeVier (03:49) All those things. Malhar Bhagat (04:12) We just closed on the deal literally on Friday and I've been waiting for the contractor to send me the paperwork. Literally the day of closing in the evening, I've been calling this guy. He hasn't been calling me back. He emails me saying, hey, sorry, we can't do this job for you. And I'm like, ⁓ crap. Like I have a six points, 15 % hard money loan at that time, right? And people ask me, why'd you take such a high and hard money loan? because there were hardly any hard money lenders out there at that time. Yeah, there you go, right? So six and 15 and I was like, all right, well, you know, at least I get to do the deal. And then I borrowed money from a... Jack BeVier (04:43) What it was. Yeah. Yeah. We were 15 and five at the time. Yeah. Malhar Bhagat (04:58) credit card, which I still had some balance and then my mom actually gave me a little bit of money to kind of bridge the rest of the gap. And when I'm talking a little bit of money, I'm talking like a few thousand dollars, two, three, four thousand dollars. And yeah, so I was like, okay, I can really get this thing going after that first deal. So remote rehabbing, yeah. Contractor quits, I freak out. Now I go into further debt, like it was just like spend, spend, spend, right? With no return in sight. And I think that's really important for people to realize, like, you're gonna have challenges come up in this business. Real estate investing tests you, especially in the beginning, and it helps you figure out what you're made of. And so as soon as the contractor quit, like next week, I was like, I've never been to Charlotte. I don't know what the heck I'm doing. But I flew out there and I was like, all right, I'm out here. I was not gonna pick up a hammer. I didn't know what the heck I was doing in the construction department. But now I was like, all right, I gotta interview more contractors. I'm on the ground, let's figure this out. My first rehab, that rehab was $7,800. And at that time, $7,800 went a lot further than it does these days. But I'm talking, we painted the house, changed out some fixtures. added a little bit of concrete to the driveway to make a more flat area and interestingly enough it sat on the market right it sat on the market just because the market wasn't hot at that time ⁓ I didn't stage it you know I didn't do all the things that I do now that I've learned I got professional photos the carpet was old and I was like we gotta keep it like I don't have a lot of So I kept old carpet, you know, like I just learned all these lessons and it took three months to sell we had a FHA offer and then you have the 90-day flip rule and all the things that I learned on that first deal It was just like okay sock it away. And you know after all these years I've been doing this almost 18 years at the end of this year of the 18 years I mean I could I could give you a Lesson book, you know with Thousands of pages at this point, you know? Jack BeVier (07:09) ⁓ Malhar Bhagat (07:15) Yeah. Jack BeVier (07:15) and then fast forward to today, you're doing a ton of different stuff. How did that migrate over time? You, still in, you still in Jersey or you, ⁓ Malhar Bhagat (07:21) Yeah, so you know, no, so now I'm in Atlanta, Georgia. So my first deal was in ⁓ Charlotte, North Carolina. I did exactly one deal in Charlotte, North Carolina. Then I went into Indianapolis, Indiana. The reason I did is because all the different cities I was looking at, ⁓ I look for a few factors. Housing inventory availability, cost of living, job growth. Those are like the three big ones. And then I look for net migration. Are more people moving into that city or moving out? know? So as I saw that, and then landlord friendly states as well. Indiana hit all those marks. And so after my first deal, was like, oh, I was able to raise some capital. And so I was like, it wasn't much. In real estate, wasn't much. know, 300 grand at that time I raised. And I was like, oh, now I can go buy rentals. Stupid idea. And so I bought a bunch of rentals in Indianapolis for dirt cheap, eight, 10, $12,000. I was like, I'm gonna retire. And then I stabilized all of them, right? It was only like five or six rentals at the time out of the 300 grand. And then I look at my net cashflow, I'm like $800, $900 net cashflow per month. I was like, yeah, I can't survive on this. So I have to kind of back out a little bit. And ⁓ then I started buying deals in Atlanta very quickly. So I was working Indianapolis, Atlanta, and then also the New Jersey and New York market. So I was kind of spread out a little bit. But then I moved to Atlanta real quick because I was just getting a lot more traction here. There was a lot more housing availability inventory wise. ⁓ The market looked ripe, you know, good weather. lower cost of living, good job growth, net migration into it, all those things that I said. And started growing the remote rehabbing business in Atlanta where I started doing more flips. margins at that time were pretty low, 25, 30 grand a flip. And I wasn't doing a ton of margin at that time or a ton of deals at that time either. So maybe do two or three deals in a given year, but. I realized like I was making steady progress, know? 2009, 2010, yeah, yeah, yeah, yeah, pretty early. So 2009, 10, and then 11, 12 continued to develop that. And then what happened in 2012 was very interesting. That was officially the bottom of the market when you look at all the stats and stuff. Jack BeVier (09:41) What year is this right now? yeah, early, kind of early. Yeah, yeah, yeah. Malhar Bhagat (10:05) 2012 I started listening to all the noise out there ⁓ which was, you can't get great deals anymore, it's super saturated, too many investors in the market, blah blah blah, right? Guess what happened? All of a sudden for four months I had no activity going on because I was listening to the noise and at an unconscious level I believed that I was believing it, right? And when you begin to allow that type of negative news and nonsense to penetrate into your mind, it begins to affect your activity. So for four months, wasn't doing any business. Literally no deals going on. And I was like, crap, like maybe the market is bad or, know, like, and so I shut it off. I put my head back down, started marketing and all of a sudden the deals started flowing again, right? So it's like. There's a lot of, I guess what I'm saying is there's a lot of freaking noise out there all the time. And I'll get to your point, like how did I get to where I am? ⁓ So when you listen to all the noise, you think that it's shiny objects syndrome. Right now, there's a hundred ways to make money in real estate, right? I got really clear and good at fix and flip. That became our bread and butter. Jack BeVier (11:04) No, it's good. Malhar Bhagat (11:23) And for 10 years, roughly, from 2008 to about 2018, 95%, 90%, 90 to 95 % of our activity was fix and flip. Fix and flip, a little bit of new construction as we were learning it, and then I'd buy some rentals here and there to hold into my portfolio, but I became a beast at fixing and flipping properties. And then it wasn't just me, in 2013 I got married to my lovely wife who was working a full-time job in New York. So we moved to New York living in a small, really small apartment in ⁓ Couldn't afford it, but still wanted to do that. And I'm glad I did because I met some of my best investors there and developed some amazing relationships for friends and investors to this day. So as soon as we got married, next week I asked my wife, said, let's go to Atlanta. Let's blow this thing up big time. Like I think we can do it. And to my surprise, she was like, all right, let's do it. Literally, and I was on the fence. I had asked her before we were married and she was like, heck no. But then once we got married, she was like, let's do it. And I was on the fence and I said, you know, let's just put our apartment onto Craigslist, see if we can sublet it. And we'll take that as a sign. Literally we put our apartment up on Craigslist and in less than 24 hours we had seven people that wanted the apartment. So we're like, all right, I guess we're moving. Literally a month and a half after I got married, I was in Atlanta. And my wife who does now and always has ⁓ loved the project management side, the design side, the construction side, and is really good at the project management side. Jack BeVier (12:54) Yeah Malhar Bhagat (13:13) I'm not so much. I'm great at that. I'm more of a relationship builder, raising capital, finding deals, underwriting, that type of thing. And so in 2000, yeah. Yeah, yeah, it was incredible. I always have this joke, if you can't find a good contractor, marry them. And so my wife started managing all our projects from 2014 on and then, you know, she was always managing general contractors in the middle. Jack BeVier (13:23) Nice acquisition there. you Malhar Bhagat (13:42) She got tired of it, because she's an owner of the business. So she was like, look, I want to go out. I want to go ahead and get my own license. So I think in 2017 or 18, she became a licensed GC. So people always get surprised when they meet us at an event or at a house or something. And they're always talking to me about the construction. I'm like, dude, I'm not the contractor. Talk to her. She knows more than me. Yeah. Jack BeVier (14:05) Look over there. She's the expert. Malhar Bhagat (14:09) So she's a licensed GC in Georgia. I mean, of course I'm biased, but hands down, I mean, we get complimented all the time on our renovations. People ask us to do renovations for them. We don't do other people's work just because we are so busy with our own, ⁓ but she's a beast. I mean, she can build ground up, renovate houses. We have lifted houses in the air and redone foundations and put them down perfectly. Like, we've done all types of crazy stuff. Jack BeVier (14:40) Where'd she learn the business? Malhar Bhagat (14:44) The only thing she's ever renovated was her mom's attic and she did it by herself with her own hands and maybe a couple of subcontractors here and there. But she just loved that transformation piece and she's just naturally a good organizer, project manager, so it was a really good fit for her. I was just like. Here's the program that I bought many years ago, like go through it. She went through it and she was like, some of this stuff is very theoretical. Like some of this doesn't really work in real life. So, but she's just learned it over time from watching other contractors, what they did well, what they did not do well and improved upon. Jack BeVier (15:22) That's awesome. So you guys get down to New York in 2013, uh, start building, just, just finding deals. How you find yourself at the time you go into the courthouse steps, REO off MLS. Malhar Bhagat (15:33) No, so most of the deals we have gotten and still to this day, primarily our network. mean, we buy a ton of stuff from wholesalers, real estate agents used to bring me a ton of stuff. We did used to do a ton of our own marketing for from about 2017 to about 2013. I'm sorry, 2017 to 23. We did a ton of our own marketing spending literally. $40, $50,000 a month on marketing and we were generating a lot of leads, but then there was about a three to six month period. We spent about a quarter million dollars, but we didn't make that back. And that's when I was like, okay, market's slipping, holding the team accountable to do everything is not the easiest. So we just kind of disbanded that and we're like, we're gonna go back to basics where we're really good at, which is networking and still. To this day, in a hot market, we're still buying deals all the time. We're working on anywhere from eight to 12 projects at a time. Jack BeVier (16:38) When did you see that change in terms of your cost of acquisition from direct marketing going up? Malhar Bhagat (16:45) ⁓ I would say it became super clear to me in late 2022. ⁓ Right around September, October, I started closely watching it. I wrote it until March, 2023 to see kind of what was going on. The only way we would have been able to catch it ⁓ is because we keep very close KPIs. Like I'm a data guy. ⁓ So we kept very... Detailed KPI numbers like every dollar out every dollar in cost of lead cost of contract cost of closing Every single thing and we were just losing money and I was like Can't keep going down this road Jack BeVier (17:28) What were you spending money on at the time? Mostly direct mail or other stuff too? Malhar Bhagat (17:32) No, actually no direct mail. We were doing a ton of cold calling, SMS. ⁓ We were also doing PPC. That was doing pretty well for us, but I think what happened during that time, and you probably can remember this, Atlanta became a hotbed for the hedge funds. And so these hedge funds coming in paying literally over ARV values, over market value. Literally, and we've sold plenty to them. Now we don't sell anything to hedge funds, but they were literally paying, yeah, a property would be worth 300, they'd pay 320 to us. And we're like, okay, so we can lock this up for 275, 280 and still make a nice chunk of change. And that's what happened. Like people just started over bidding for properties. And so one section of our business did really well, which was the wholesale whole tail. But the other section, the fix and flip was just like, Jack BeVier (18:06) Mm-hmm. Malhar Bhagat (18:30) It was more difficult. We were getting squeezed in the middle plus also COVID, the cost of renovating and labor was going astronomically through the roof. So we as fix and flippers were getting squeezed in the middle. Jack BeVier (18:43) Yeah. Yeah. And like, why do, if you can, if you can make a wholesale margin and you can make like 60 % of the money, just wholesaling the thing, like why do any work? Why take any risk? Like take the easy rep. Yeah. so you, ⁓ so you moved the, did you move those dollars to other places or you just decrease that marketing budget and just, you know, just rolled your sleeves up and got out there and like started acquiring via, via networking. Malhar Bhagat (18:53) Exactly. Yeah, we didn't shift the marketing budget. It was just like, okay, more money, no profit, honestly. But yeah, I just, you know, I started doing a lot more social media. Now, I'm gonna be honest with you, I have not been great at social media. It's one aspect of my business that I wanna continue to develop a little bit more. as soon as I started doing social media, like, I have a lot to say, as you can see. ⁓ And ⁓ we were just getting ⁓ leads and as I would do consistent social media, you know, I would do these like 60 or 90 day sprints and then I'd lose momentum. And I even hired people and stuff like that, but I'm, you know, we all have our quirks. I'm kind of a perfectionist about certain things. So I never ended up. But I'll keep trying. Anyway, long story short, we just found how to vertically integrate. So from 2018 to now, we basically said, okay, what type of needs do we have? Well, one of the problems that I ran into in 2017, 18 is, was a great problem to have. My lenders loved me. They said, stop returning our money. Cause every time you return our money, we're going from a... 10, 12 % interest to 0.1 % in the bank. And so said, all right, I'll solve your problem for you. You give me your money, but give me free rein. I can invest in my own deals, but I can also lend it out, right? And they said, okay, cool. You know, we came up with an interest rate that was mutually agreeable and I set minimums for them. That minimum and still to this day is this was a million dollars. If you invest a million dollars with me, I'll set up everything, I'll manage everything, and I'll hold your capital for you. I'm always paying an interest on it. So if I'm lending it out at a higher rate, at least I can ⁓ diffuse some of that interest. ⁓ Jack BeVier (21:11) Yeah. Yeah. Yeah. Where was, um, where have you been able to raise money? Was that the New York network or folks that you met through social media? All the above. Malhar Bhagat (21:21) Yeah, most of it has been the New York network. ⁓ And the thing is, a lot of people try to find many investors. My investor base is not a lot of people. And the reason I like less people is less management. Jack BeVier (21:38) You get so you got a million bucks of someone's money. ⁓ well they call you need to pick up. Malhar Bhagat (21:42) Oh yeah, heck yeah. I return their phone calls, I send them biannual reports about how much their money has grown. I mean, it's all dead investing so anyone can calculate it, but we keep very close track of all of our numbers. My operations coordinator has a degree in accounting, so she does a lot of our accounting work. We have VAs that do all that as well. But yeah, so we raise a lot of capital from... just our network outside of the real estate business. I think a lot of folks go inside the real estate business because they don't understand that. But here's the thing, inside the real estate business, you have savvier investors that know, hey, I could charge three points and 12, 13, 14 % and still get it. So you're get higher price capital. Jack BeVier (22:31) Yeah. You also have like a, and they're, and they're, they want access. They, put their, they put a premium on their own liquidity because they're seeing deals every day. like the doctor lawyer dentist who doesn't have like a constant stream of like opportunities across his desk is like this money sits there as like a liability, right? Like they're like, I gotta get this. How do, how do I get this to work? That's their problem, right? That you're there. That's awesome. So what kind of stuff do you guys loan on? Malhar Bhagat (22:55) Yeah, 100%. Jack BeVier (22:58) Is it all Atlanta or you guys brand out? Malhar Bhagat (23:00) Yeah, yeah, primarily it's Atlanta. We only loan ⁓ to people that we know have experience. Our goal is to never take a property back. We want you to succeed. We want you to keep coming back to do multiple deals together. I designed products that would have solved problems that I had when I was an investor. Like for example, there's not a hard money lender out there that won't take monthly payments. And I realized that was one of the problems I had when I was attempting to scale. So I designed a product that doesn't require monthly payments. And I created enough security where in all these years, we've probably done, I don't know, over 300, 400 loans. Not like a full-time lender, but that's a significant amount of loans. But at the same time, it's like we've only taken back two properties. Jack BeVier (23:51) yeah. Malhar Bhagat (23:57) in all that time, which I think is a really good rate compared to some of the stuff I hear hard money lenders taking back. The cool part is we understand construction. So we have a very unique advantage when we do take a property back if we need to, because we've already underwritten it as if what would happen if we had to take it back, you know? Jack BeVier (24:18) I've like, really, I mean, it's, you for the past five years, there's been people getting in a lot more people getting into the private lending space. When'd you start that? Malhar Bhagat (24:27) Around 2018. Jack BeVier (24:29) Okay, nice. and especially like real estate investors that I've noticed, like guys who have gotten to some scale and then kind of like gotten to a crossroads where they're like, this is just some, some folks that I know up in Baltimore. They kind of got to a crossroads where they're just like, Hey, the cashflow from the rental business is not what I thought it would be. Like, I'm not actually able to like eat off of this really. It's, it's painful. It's a painful business. Deals are harder to come by. flipping is a grind because you're only as good as your last deal, you know, your last six months of deals and like, and pound for pound from like your time, like private lending seems really interesting. and they've got all the skillsets for it, right? Like they, know who the active real estate investors are, the guys who you'd want to put money with. know, ⁓ they know how to underwrite. know construction. They're not afraid of, of having to take a property back. They don't want to, but they're not afraid of it, right? It doesn't keep them up at night. And like, I'm like, yeah, man. sounds perfect to me. that's like, yeah, it's a great business. from a lifestyle business perspective, privately having a, having a $5, $10 million hard money book is like about as good as it gets. ⁓ yeah. ⁓ that's cool. Yes. Similar stories. That's just lots of folks getting into that or have not getting into it, have gotten into it who have, who have a lot of experience. And I think it's making the market much more competitive and much more sophisticated. You know, it used to be like, some doctor had like 20 million bucks that this is what he did on the side. But now it's like, no, it's like a bunch of X, it's a bunch of X slash current real estate investors who like know the streets and know what good loans look like and don't get hustled. Malhar Bhagat (26:08) Yep, yeah, and I think, you know, when I started the business, one of my primary goals, and Charlotte, Charlotte is a big banking city, right? So when I landed in Charlotte after that story I told you, I looked up at the buildings in downtown Charlotte and all of the big buildings had names of banks on them, Bank of America and Chase and so on and so forth, and I was like, Those are the richest companies in the world or some of these banks, right? And in my mind, I had always said, that's part of the end game. That's part of the end game. One day I'm gonna be a lender, you know? And, you know, was able to accomplish that seven years ago and still doing the business. I love the business, but yeah, I'm playing my end game. And to go back to what I was talking about a little earlier, vertical integration. On most flip projects, I get paid four times, right? I'm the investor, I'm the agent, my construction, right, which is my wife, so it's ours, and then ⁓ I'm the lender, right, so all four. So I figured out how do you extract the most juice out of every deal, and that's how we've been able to do it. So now when an investor's like, I'm gonna make 30 grand on this deal or 40 grand on this deal, I'm like, all right, I'll probably make more than double that because I'm... Jack BeVier (27:29) Mm-hmm. Malhar Bhagat (27:30) dipping into every single one of these areas. Jack BeVier (27:33) Yeah, it's super interesting. were, mean, Atlanta was a super interesting market because as you mentioned the hedge fund entrance there that like, you know, really started buying up stuff. And so if you were like looking to do your own deals, at least my experience watching that market was that people had to start doing harder stuff, right? Like you couldn't, you couldn't make, you know, you couldn't make decent spreads off of doing patch and paint rehabs anymore. Or even, and then by 2018, 2019, like Even full guts were getting a little skinny for the, for the risk profile, ⁓ the wholesaling, wholesaling game was, was attractive for a couple more years, but then inventory has remained low, I think. And, and so the prof, like the risk profile, the execution risk profile of deals has gotten a lot harder, right? If you want to find deals with margin, you have to do more, more sophisticated, ⁓ harder construction work. Is that something that you guys have experienced? You mentioned doing some. some new construction and, and, ⁓ what's the, how did you guys migrate into those, ⁓ more difficult projects? Malhar Bhagat (28:34) Yeah, so I mean, Atlanta is a unique market because we get a lot of virtual wholesalers coming from Arizona or California or Texas. You're dealing with slab foundations in many of those markets. You're dealing with newer types of builds in those markets. So you can just replace the kitchen and replace some light fixtures. Good to go. Atlanta is not like that. Most of the houses in proper Atlanta, mean, inside the city limits, yeah, inside the perimeter, they are built in the 20s, 30s, 40s, 50s, 60s. When you're dealing with houses like that, you're gutting them. You got old plumbing, old electrical, old HVAC, and buyers are savvy, especially now. They are pickier than God knows what, right? And so we just found that Jack BeVier (29:05) inside the perimeter here. Malhar Bhagat (29:26) that was an arena that we had to master. But we've always done full renovations because that's what the market required. A lot of these, ⁓ Elena is really separated into two parts, in my opinion, which you got the East side and the West side. The West side has been more transitional where the East side is a little bit more established. You have older neighborhoods that have gone through more of the development, transition, gentrification process. But the West side has been developing quite a bit over the last, especially eight to 10 years. Now, unfortunately though, a lot of folks wanted to jump in because the price points are lower on the West side. but the types of rehabs they were doing is lipstick on a pig. They would take old plumbing, electrical HVAC and just put nicer stuff and then the inspections would happen and they would fall out of contract. Right now, we're talking June, 2025, there's over eight and a half months of inventory on the West side. I haven't bought a single deal on the West side in the last. four or five years. Just because I was seeing that trend happening and I was like, I'm not going into an area where I have to compete against 50 other rehabs in literally a quarter mile radius, you know? Jack BeVier (30:47) Yeah, that's really interesting. mean, the inside the perimeter you are you still are you still holding rentals? Malhar Bhagat (30:52) Yeah, yeah, yeah. We have plenty of rentals and continue to expand our rental portfolio. Mostly though, I prefer higher end rentals. That's something that I learned through the fires, you know? Jack BeVier (31:02) Yeah. Yeah. I mean, the home price appreciation and a lot of the Atlanta markets, particularly inside the perimeter, like East side of East side of downtown is like an incredible, like places where I remember, like when we were down in Atlanta, like 2011 and 2014, we were, it was like, you could get that stuff for 15 grand and now I'm doing the loans where the shells one 50. I'm like, Holy shit, man. Like that's wild. Uh, you got, you benefit from any of that? Malhar Bhagat (31:19) Yeah. Yeah, yeah, yeah. ⁓ heck yeah, man. I own some of these rentals that I've owned for 15 years or so. One of the best ones I bought for 30 grand, put about 20 into it, had someone renting it on ⁓ Section 8 for about 12 or 13 years, was cash flowing nicely, and then they moved out. So I gutted it, because it was time to gut it. I gutted it and I put it on Airbnb. And now it's making even more money. And now it's probably worth about $450. So I'm all in for $50. It's worth $450, almost 10x my investment. Plus, I'm cash flowing really well with our short-term rental. Jack BeVier (32:07) Yeah. You, mentioned that you're doing some short-term rentals and ADUs. I'm curious about both of those because they're kind of niche your things that like, you know, the AD or a short-term rentals, obviously more operationally intensive. Do you get like, how many of those do you have? Have you, how have you found management for that? Like, is it something you can dip your toe in or you do need to jump in knee deep or waist deep or head deep to like do it successfully? Like what's your perspective on that? Malhar Bhagat (32:29) Yeah, for sure. So short-term rentals, have, I think, 26 units all owned. We don't manage other people's stuff. Pretty much we don't manage anything for anyone else, for any area of our business. So all owned. And it is operationally intensive. However, I got very clear when we did our first one. I said, we ain't doing just one. We're not doing just three. And the reason I said that is because I figured out the math on What's it gonna take for someone else to be hired to manage it so that me or my wife or someone on our immediate in-house team, like office team, doesn't have to go run around for toilet paper? Right? I figured out that number and I said, we gotta get to 20 as fast as possible. So literally in two years, less than two years, in about 18 months, I got to 20 units. All live, all doing great. And immediately, before we even got to 20, we hired someone within, I wanna say within about six months, we hired someone. Just because we're like, we're not doing this stuff. Jack BeVier (33:37) And 20 carries a full-time person to help manage. Malhar Bhagat (33:40) yeah, yeah, for us easily. Plus, not only do they manage us our short-term rentals, now they're freed up more so they help manage some of our rooming houses, some of our long-term rentals. Now we still have a property manager for our long-term rentals, but we hope one day soon we'll be able to bring it in-house and really develop our own property management side. We don't currently have an interest to manage other people's properties, but we just want to manage all of our rentals, which Jack BeVier (33:42) Where is it? Malhar Bhagat (34:10) Right now, I don't have a massive portfolio for like big investors, but we have about 60 plus doors. I don't know, it'll be like 67 or so in the next like 60 days. Jack BeVier (34:25) What do you think? is there a number, how many, how many short term rentals can that one person handle? Like when do you need your second person? Malhar Bhagat (34:32) I think there's multiple components, right? So you have the guest communication, the customer service piece. I have been on a crazy search, especially after the advent of AI ⁓ for some sort of AI software. The cool part is about five months ago, I found it. And it is incredible. We had an entire communication service that we had hired for communicating. We were spending about $1,200 a month. I just love sharing this story real quick. We're spending about $1,200 a month. After I got the AI software for the same amount of properties, better service, because AI doesn't forget. Once we taught it, it remembers forever. ⁓ We dropped our costs for the same service, better service. Jack BeVier (35:03) Yeah, yeah. Malhar Bhagat (35:20) to $169 a month. It's called HostBuddy AI. yeah, yeah. There's a bunch now. There's a bunch now. Reply AI is another one. So I'm looking into other softwares, but HostBuddy has been working out pretty well. So I loved it. I embraced it and have continued to like watch it learn by itself. So it's been pretty cool. Jack BeVier (35:23) What's the software? Host buddy, cool, all right, cool. I'm really interested. ⁓ I'm really nerding out on the AI stuff right now and trying to figure out like all the applications to real estate and property management lending. So like that's definitely a specific area of interest for me right now. Malhar Bhagat (35:58) Yeah, for sure. mean, you gotta, you gotta embrace it, man. I mean, that's what it takes to be a business owner, to be an investor. It's like, look, if your entire business, for example, was reliant on the hedge funds, which a lot of people's was. Jack BeVier (36:01) Yeah, yeah, you got it. Malhar Bhagat (36:15) guess what happened when the hedge funds were gone? You were out of business. You're going back to the corporate world or working at Macy's, whatever it is, right? And like the point that I'm trying to make is you have to have versatility in this business. I always refer to that book, Who Moved My Cheese, ⁓ really quick read, but it lies true. It's like you gotta stay at the forefront. If you don't, you will be swallowed because... Jack BeVier (36:17) Yeah. Malhar Bhagat (36:41) Someone's trying to take your bag. I don't mean that in like a scarcity way It's just like you got to be at the forefront AI is going to be very well integrated into all of our lives If you're not using it right now You're just not developing and you will become antiquated within easily the next five to ten years Jack BeVier (37:00) Yeah, it sounds like some of the we've experienced definitely over the years is like, we've come to like, think of ourselves. used to be like, we were bought, you know, we're Baltimore real estate investor. do affordable housing in Baltimore. Well, and then three years went by and like, well, we, you know what, we're also going to do this other thing. And then three years went by and we're like, we also need to pivot to doing this other thing. And now we've really kind of like fast forward a bunch of years. We've come, we've come to realize like, we're really just like, We're single family real estate or like we're residential, real residential real estate investors. And depending on what the market's giving us at any particular time, we're going to apply that skillset and the balance sheet that we've built up to like different areas of the business, but like wait three years and we won't be doing this. I promise you that. Cause if you rewind every three years of the company's 25 year history, we did it. We're doing a different thing every three years. So to think that we're going to, you know, scale in this. ⁓ Malhar Bhagat (37:46) Yeah. Jack BeVier (37:52) like, you know, scale to a certain point, but like you had a scale in a flexible way that still allows for that pivot because the market's going to move underneath, you know, the ground, the ground is constantly moving underneath you. And then, I, couldn't agree more. Like I think that this AI, I think the AI, ⁓ the advent of AI and integration of AI and everything is going to be like, you know, really, really shake the feet of the ground underneath a lot of people's feet. And, ⁓ I'm a little, I'm a little scared about it actually, like, from a disruption perspective. I don't think it's going to go smoothly, but I feel it's like you said, it's going to be like a, like, so, so lean in or dot like lean in or be disrupted, know, lean in or die. So yeah, we're, we're, head, head forward into it. What have you been using to like learn, to learn about that? Like what resources are Malhar Bhagat (38:30) Thousand percent, yeah. I'm pretty voracious when it comes to article reading. I am not a great book reader. I do not enjoy reading a lot of books personally. So sometimes in the evenings I end up just kind of reading different articles about it. ⁓ And I play around with it. I have a ⁓ paid version of ChatGPT so that I can utilize it effectively. I'm learning about Claude and Grok and perplexity. And I think in business, this is a trait that I just inherently have had and have developed over time, which is curiosity. I think curiosity is absolutely critical for you to run anything successfully that you want to get really good at. ⁓ When it comes to health, even, for example, right now I'm on a health kick, you know, going to saunas, working out every day, like I want to get in better shape because I have the privilege to be able to focus on that now. I'm lucky to be able to focus on that, but guess what? I don't have it all figured out. I don't know ⁓ Jack about. ⁓ Jack BeVier (39:16) Mm. Malhar Bhagat (39:44) nutrition, right? But I'm learning about it by being curious and saying, hey, I want to make a move to be better in this area or arena of my life. Same thing applies in business or real estate investing. So. Jack BeVier (39:56) ⁓ Yeah, that's, gonna be, it's gonna be really interesting. ⁓ you, ⁓ you mentioned like doing the, the ADU was that something that was that an opportunity that came just because of the price per square foot went up high enough where it became economically viable or was that like a zoning change that enabled that? Malhar Bhagat (40:01) Yeah. So, zoning, there was a zoning change. We were one of the very first permits to ever be issued when the zoning change happened in the city of Atlanta. ADU's... ⁓ What I saw based off of, back to the curiosity piece, I love to read about the real estate market, because it's my industry. I better know what the heck's going on in my industry, not just in my own market, but around the country. And I've read in some other major cities, like Austin, for example, there was this idea and concept that ⁓ either was introduced at the time or passed or something of the parent-child concept on a property. And being able to split the ADU or the guest house out and sell that separately. I did some math and I said to myself, well, I can rent it out right now, but eventually once the financing gets figured out for ADUs and guest houses on a single family lot or residential lot, the prices are gonna go through the roof because let's say in XYZ neighborhood, let's say it's a decent neighborhood on the east side of it. Kirkwood being an example. That's a nice neighborhood in Eastside Atlanta. Well, you can't buy a three bedroom, two bath house for any less than 600,000 in that neighborhood. If you build a two bedroom ADU for, even say, let's use a number that I think what retail people will spend maybe 225, 230, 250 a foot. You can build a 750 square foot house for about 150, $175,000, right? Let's say 200,000. Well, the minute. Jack BeVier (41:50) Mm-hmm. Malhar Bhagat (42:00) you're allowed to get financing and break that off. That might happen in five years, that might happen in 10 years, that might happen in two years, we don't know. But I believe that it will eventually happen. so now you're at 750 square feet, which is the limit for ADUs in the city of Atlanta on certain types of lots. But now... Jack BeVier (42:12) Mm-hmm. Malhar Bhagat (42:24) all of a sudden you might be able to sell that for $300,000. It's instantaneous equity of 100 grand. So that's kind how I did my math and I was like, and I'm gonna cash flow in the meantime, so I can rent it out because it's a nicer neighborhood, has a higher rent available for it. Jack BeVier (42:46) Yeah, gotcha. Yeah. It's, it's a, ⁓ an idea that like just increased density, right? Just seems to be a trend everywhere and trying to, trying to get past the, the NIMBY zoning laws to, put it in place. ⁓ I was surprised to see even in Baltimore, we, ⁓ the mayor introduced a bill or, you know, sponsored a bill that is allowing for an up zoning in for multifamily. ⁓ and that's been like, Malhar Bhagat (42:52) Yeah. Yeah. Jack BeVier (43:12) a third rail, we don't want any more density. We don't want any more rentals like homeownership or nothing for like the past 20 years. And all of sudden everyone's just like, Hey man, like we just, we just need more, we need more affordable housing stock. like, so if, even if like a place, you know, if a place like Baltimore city's coming around to hire density, like, yeah, that's a, it's going to be an enduring trend. I'm sure. Malhar Bhagat (43:34) You have to. mean, the reality of the matter is like, you know, you can, and. I see this mostly from older people in some of these neighborhoods. They're like, well, I bought my house. I'm like, yeah, you bought your house 25 years ago, 30 years ago. You could afford to buy it with the wages you were making at that time. You talk to someone who's 23 years old, 25 years old right now, they're not making enough to go put a 20 % or 5 % even down payment majority on a house that's $500,000 at this point. So like, Jack BeVier (44:03) Yep. Malhar Bhagat (44:09) Times are different because real estate values ⁓ go up faster, or historically speaking have gone up way faster than wages, and that's just how it's been, you know? Jack BeVier (44:19) Yeah. Yeah. So, ⁓ yeah. What's, so what's your perspective on the market today? Like you mentioned some softness on the West side of Atlanta, but like, you know, I mean, we're seeing like increase in days on market. I mean, in not every market, but in most markets and, ⁓ you know, now like some concerns about recession, like, how are you still finding deals that you're comfortable moving forward on? How are you seeing your inventory moving? Malhar Bhagat (44:26) Yeah. Yeah, yeah. So honestly, it has soften even on the East side, even in some of these hotter neighborhoods. ⁓ I think the market is very uncertain right now, right? There's, you know, ⁓ all types of economic changes happening. It's almost schizophrenic in certain ways, right? It's like tariffs and no tariffs and, you know, like ⁓ You know everything that's going on, right? The point is it's very volatile and volatility does not create certainty for the average ⁓ home buyer. And so I think ⁓ buyers are a lot more picky right now. They want the perfect property and it's gotta have all the nuts and bolts tied really well together. ⁓ They still want a deal because they know there's uncertainty in the marketplace. Jack BeVier (45:12) Yeah, political instability. Yeah, yeah. Malhar Bhagat (45:36) I have recently sold my properties where we have hit record price per square foot just six months ago or nine months ago. And I literally have sales in that same neighborhood ongoing right now for eight to 12 % less price per square foot than I did six to nine months ago. And you're not gonna see that in the data. This is the experience that I'm experiencing right now. Jack BeVier (46:01) Yeah. I have the same perspective where I'm like, ah, like the past 90 days prices are down, man. Like, like there, you know, it's, know it's not in the data yet, or, you know, I know it's not in the, you know, the data that's been reported yet, but I'm telling you like the contracts that I'm seeing right now are lower than on the same houses than they were before. Um, yeah. Which, so what's your perspective in, know, given that, like, you know, one of the things I like having about like being both a real estate investor in Baltimore in Maryland area. Malhar Bhagat (46:19) Yeah. Jack BeVier (46:31) And then also lending is that like, you know, there are different points in the cycle. Like if you're in 20, in 2021, the equity was like the place to be. mean, you murdered it. today. I'm like, ah, you know, like I'm not making as much, but I like, but, but the risk profile of the debt investments are, are much lower. Cause you know, if I underwrote it, right, I'm at 70 % Linda value. So like if prices come down 5%, like I'm, I'm not going to have defaults, right? Like sucks, you know, sucks that are, you know, that are, that are, ⁓ borrowers aren't making as much as they thought they would. And we hope that they like come back and realize there's, and we, you we hope that as his prices resets to like maintain margins. And I think they probably will. Right. I think it'll actually probably get better because of this kind of shake out, but like for us right now, like, I, you know, I like being the debt right now. I like the risk profile of being a lender at the moment. Malhar Bhagat (47:22) Absolutely. think, I mean, same thing, right? That we just talked about, who moved my cheese? Like lean into the aspect of your business that's gonna perform better in a changing market. I say this and it's not meant to come off arrogant. I'm a win no matter what. That's my thought process mindset belief. What area of the business do I need to lean into? This is why I talked about vertical integration. Now don't do vertical integration too early. I said for 10 years, my bread and butter became fix and flip. We came beast at fixing and flipping properties. With that as a foundation, we were able to vertically integrate and say, hey, I can lend to XYZ person because I know what to look for. I know where they're gonna screw up. I know how to take that property back and finish it out if I need to. Plus, they're putting some skin in the game. So my cost basis on it, taking it back, is gonna be lower than where they're buying. You know, so to your point, ⁓ you gotta lean into the market. you know, I always think about this simple saying that Warren Buffett has, which is when people are fearful, be greedy. When people are greedy, be fearful. And wealth is created in down markets, not in up markets. So if you're gonna freeze and be scared to buy right now, you are going to miss out on potentially the opportunity that's currently here in my opinion and will probably be around for at least the foreseeable 12 to 18 months, maybe longer, maybe a little bit shorter. Jack BeVier (49:01) Yeah. I get a lot of questions like about, Hey, you know, are you backing off right now? Because things are softening a little bit. you know, the, the, inference being like, are you trying to time the market? Right. Like, and I've just kind of like, gotten to, know, Hey, when COVID happened, I was like, Hey, you know what? Let's kill all of our contracts because we're going to have a recession. I've seen this before prices are going to come down. Let's stack cash. Completely fucked that up. Right. Like I got that so wrong. ⁓ and like, Malhar Bhagat (49:27) Yeah, yeah. Yeah. Jack BeVier (49:31) And, and, and, and and the best deals that we have are when money was the absolute tightest and we could barely, you know, we couldn't afford or we could barely afford from a cashflow perspective to, to add rentals. And it was like the hardest to do that. Right. So, you know, to your point, I think like, it's, it's more about like, build that skill set up that you can deploy it wherever there are opportunities and, ⁓ and where, ⁓ and where it's hard. Is probably like in the wake of hard is opportunity and we're seeing a bunch of hard right now. So I'm actually like, I'm nervous about the next six months, but I'm also kind of like jacked about like once the spring selling season's over what the depths of like late summer. And like, once we get into the fall and people start being like, I can't carry this thing for another eight, you know, six months. Like I'm kind of jacked about October, you know, like, and like the stuff we might be able to get in October. So. Malhar Bhagat (50:27) Yeah, I mean, look. Real estate's where it's at. I I love real estate, right? Like if you can hold on long enough, me and one of my friends, Terry, talk about it all the time. The goal is to hold on, right? Hold on as long as you can. And if you can cashflow and hold on, the market's gonna come back. Even if it dips right now, it only dips for people that are looking to liquidate at that time. If you can hold on and ride out the market, Historically speaking, real estate values go up faster than inflation, right? And you have so many other benefits, right? Which I'm sure you've talked about on previous podcasts. So, I mean, that's the engine for wealth building in this country, period. Jack BeVier (51:14) Yeah. Hey man. Well, I really appreciate your time. ⁓ thanks for, for taking the time to speak with me. was, you know, really, really enjoyed it. Your experience has been, you know, is fantastic and it's really cool. Love to see all the stuff that you branched out to do. ⁓ thanks. Thanks for being on. Really appreciate it. Malhar Bhagat (51:28) Thanks man, yeah. Yeah, no doubt man. Well, thank you for having me. It's been a pleasure to have this conversation and hope we get to connect again soon. Thanks again. Jack BeVier (51:38) Yeah, absolutely sounds good. All right, guys. Thanks everyone for watching. This is Real Investor Radio with Jack Bevier. Have a great one.