Data Beats Gut Feeling: An Ongoing Experiment in Efficiency and Optimization with Neal Bawa

by | Nov 3, 2020 | The Level Up REI Podcast

LUR Neal | Efficiency And Optimization

 

Everything has to be measured. In this episode, Neal Bawa, Founder and CEO at Grocapitus, joins Lisa Hylton as they talk about the ongoing experiment in efficiency and optimization of Neil’s multifamily portfolio. Get to know Neil and his company as he shares his story and journey in real estate that stemmed from running a technology company. Neil and Lisa discuss some data-driven strategies and systems to improve and maximize growth and the benefits of outsourcing in real estate. Tune in and learn how you can improve your business through data and promote efficacy within your organization.

—

Watch the episode here

Listen to the podcast here


 

Data Beats Gut Feeling: An Ongoing Experiment in Efficiency and Optimization with Neal Bawa

In this episode, I have yet another amazing guest, Neal Bawa. He is a technologist who is universally known in real estate circles as the mad scientist of multifamily. Besides being one of the most in-demand speakers in commercial real estate, Neal is a data guru, a process freak and an outsourcing expert. Neal treats his $250 million multifamily portfolios as an ongoing experiment in efficiency and optimization. The mad scientist lives in two mantras. The first is the mantra that we can manage what we can measure and his second mantra is that data beats gut feeling a trillion miles. These mantras and a dozen other disruptive beliefs drive profit for his 300 plus investors. Thank you so much, Neal, for coming on the show.

Thanks for having me on the show, Lisa. I’m glad to be here.

I’m excited to have you. To jump in, how did you get started investing in real estate?

By accident. I was running a technology company as Chief Operations Officer with hundreds of employees. The company was growing and we were a tech education company and our landlords hated us because the students would walk on the carpet and mess them up. We decided we didn’t want to be tenants anymore. We wanted to be our own landlord, so we decided to build a campus. Most people get into real estate by doing a flip, a buy and hold, rental or a loan. I got into real estate by building a 27,000 square foot campus from scratch. The word trial by fire was designed for me because I made every mistake in the book and it still worked out. It was our own campus. We weren’t paying anybody. There wasn’t a landlord involved. We were paying ourselves rent so we could make mistakes and go back and fix them and afford to go back and fix them. That’s how I got started in real estate and it started rolling from there. That campus was built in 2003 or 2004. It’s been about several years.

After that, I understood that you got into doing some investing on your own.

I had the big fat tech salary and what comes with the big fat tech salary is the big fat tech stress, where you’re thinking that your boss is one day going to wake up, get off the wrong side of the bed and replace you with three younger cheaper guys. You have a huge salary so he can afford to have three six-figure people replace you. That big fat tech stress takes you away from enjoying the money that you’re making as a technologist. Around the age of 35 or 36, I got to the point where I’m like, “This is too stressful. I need to find a way to create income.” That’s what I ended up creating through real estate and it changed my life.

The level of stress that I felt before that was 10X higher than the level of stress that I felt afterward. Even though I didn’t completely replace my income because my income is high. I replaced a portion of it but the feeling of knowing that you can replace your income changes the way you look at life. You’re not stressed every single day. You’re not running into your boss’s office and trying to justify your existence every day. You’re not working every Saturday and Sunday and trying to kill yourself to prove yourself over and over again. You know that if something goes wrong and your boss does do something wrong, and he never did. I had a wonderful boss and he had a phenomenal exit in 2013. All went well but you still got that in your mind. I started investing in real estate to get around that.

I’m a geek and a freak so to me, everything has to be measured. I got in there by measuring. In late 2008, the world was falling apart, I started looking at real estate saying that this is great for tax benefits and everything looks cheap to me. People would come up to me and say, “This is the worst time ever to buy real estate.” I couldn’t understand what they were saying. I was Dustin Hoffman in Rain Man who couldn’t understand anybody else around him because I’m like, “The numbers have never looked better in history.” The people are looking at me as if I’m some total moron. I’m like, “I can’t understand what any of these people are saying. Everything that they’re saying makes no sense. I’m going to go and start doing this myself.”

I had to start with the data. I said, “There’s this website called Zillow, which has 3,000 cities listed. I’m going to go pay a Ukrainian hacker to spider the entire Zillow website.” The only thing I told him is, “Please for God’s sake, spider the website slowly so the FBI doesn’t come knocking at my door.” Having told him the next day the entire website is spidered and provided to me in an Excel spreadsheet. I was like, “Did you completely miss what I told you yesterday about the FBI?” He sends me the Excel spreadsheet and every city is in there. Their peak in 2005 is there and their trough in December 2008 was there. What I did was I clicked on the sort button. I sorted and I picked the city that had the highest decline from 2005 to 2009. Luckily, it happened to be in my state, California. I live in California and it was 144 miles away.

I did this on a Friday. I got the spreadsheet. I did the sort and on Saturday morning, I jumped into my car and ran off to Madera, California. I went there and I try to figure out why this city has fallen so much. Values had fallen from $250,000 a home to $90,000 a home. They’ve fallen by 70% so I’m like, “There’s got to be some reason.” The reason was that this big fancy company called Kaufman & Broad built thousands and thousands of these homes in an agricultural city with farms all around it. Either it’s them or somebody else on their behalf went out and got all these non-documented income agricultural workers to buy these beautiful four-bedroom home communities.

LUR Neal | Efficiency And Optimization

Efficiency And Optimization: Anyone that has exposure to retail, malls and Airbnb has suffered greatly.

 

As soon as the recession hit, those people walked away so now an entire section of the city of Madera was empty. All of those homes were empty. My challenge was that I could buy these homes that observed the low prices, I knew that I was buying absurdly low prices, but how do I find the tenants? My journey in real estate started with one question. How do I get those people that are twenty miles away in Fresno to come here? How do I do that? That’s where I truly started my journey in real estate and the answer was technology.

I went back to the Ukrainian hacker and I said, “I need you to find out every single website on the internet that you can do apartment listings on.” He comes back to me after a week with a big list of 45 different websites. I’m like, “I need to find a way to instead of listing my properties once I want you to find a way to list them 10, 20, or 50 times.” He figured out things like, if you put a semicolon after the name of the property, Zillow considers it to be a different site. If you on Realtor.com you put a comma after that, now you can consider it to be a different site.

Instead of one listing, you can have 10, 100, or 1,000, whatever you want by hacking these sites and adding semicolons, letters or doing apartment 1A, apartment 1B, and those sorts of hacks. You can list as many times as you like. Some of those hacks have gone away over time as the sites realize that they were nerds like me who’s exploiting them. Back then, people haven’t done that. I got to buy a property in Fresno. It’s an old property built in 1994. It was three bedrooms but it was not good-looking. I bought that one property in Fresno as my lead magnet. Imagine the most expensive lead magnet ever. I paid $113,000 for that lead magnet, so now I go back to the Ukrainian say, “Here’s this property, pictures, and the descriptions. I want this property blasted all over those 45 sites.” On each site, give me 20 or 30 listings.

The next day the phone goes insane. It’s ringing every minute. I go back to the Ukrainian hacker and I say, “I need somebody to pick up the phone calls because I have lots of these homes in Madera that I want to buy and I want to redirect these people. Somebody has to talk with them. The phone’s ringing too much. I can’t work.” He’s like, “I know this girl in the Philippines.” I hired this girl in the Philippines for $5.27 an hour and I tell her, “All day long, I’m going to change the number and all my listings. They’re all going to come to you and here’s what I want you to pitch them.”

It’s like, “We have this home in Fresno, but there are lots of people interested in it but we also have these ten beautiful brand new homes that are one-bedroom bigger, 500 square feet bigger and they’re twenty miles away.” People are like, “No. I don’t want to go 20 miles away.” “How about if I give you a $50 Amazon or gas card? All you have to do is drive twenty miles, go check out this home and come back and we’ll give you a $50 gift card.” People are like, “You’ll give me $50 to go there?” It’s 2008. A lot of these people are unemployed or their hours have been cut so they have time. They are like, “Fine. I’ll take $50 bucks. I’m never going to go live in Madera.”

Every twentieth of those people came back to Madera. It was more every tenth came back to Madera saying, “That was a gorgeous house. Stone facade, four bedrooms with a huge living room. It was double the size of what I can get in Fresno and it’s only twenty minutes away on a freeway that has no traffic.” I only needed 1 out of 10 people that say that. A few days later, I have all these people going off to Fresno to Madera. I go to the bank and I haven’t bought these properties yet. I’m talking to the bank and telling them what I’m doing so they know what I’m trying to do.

I went back to the bank and said, “How many can I buy?” One of the biggest tragedies of my life occurred at that moment because the person in the bank said, “You can only buy ten properties.” What the moron should have said is, “You can only get ten loans but after you get ten loans, you can refinance those loans and put them into a commercial rap and you can come and buy ten more for me.” He didn’t say that. I’m not going to forgive that person until the day I die because I only bought ten. I came from the bank and as you can imagine, they were all filled up, and I was making huge amounts of cashflow and my life changed.

After that experience, did you continue investing in California or did you start considering investing out of California?

What comes with the big fat tech salary is the big fat tech stress. Click To Tweet

I did the out of state investment and I made ridiculous mistakes. Instead of doing what I was continuing to do, I went from being data-driven to being referred by somebody who felt that South Chicago was the right place to invest in and I said, “This guy knows what they’re doing.” I went in and invested in South Chicago. I bought ten triplexes and I had huge issues. Everything from maintenance to delinquency to tenants trashing the place to all of those things happening on the same property. There are horrible problems in South Chicago. I started selling those properties and I pretty much sold all of them but not all of them were bad, to be honest, but I lost my taste for investing in South Chicago. What I said was to myself was, “There are all these people investing in these places and having trouble.” Why isn’t there some help kit, YouTube video, or primer on how to invest properly and how to figure out if this place is better than that place? Where is that? There’s got to be something like that. I went out and I researched that.

Is that what brought you to creating the Udemy course?

That’s exactly right. I’m saying that somebody somewhere must have created a simple ten-minute system on how to figure out the best neighborhoods and cities in America so I never have to deal with a place like South Chicago again. How does a person like me, I’m an intelligent person, I have money but how do I tell the difference between let’s say, South Chicago and Buckhead, Atlanta, which is a great market to invest in that I didn’t know about until it was too late?

The bottom line is, there has to be a methodology. I went out and looked and I couldn’t find anything and I looked. Now there are websites like Local Market Monitor and Housing Alerts that do some of these, but they don’t explain it. They keep it as a secret sauce. It’s a black box, “Buy my subscription and I’ll tell you what to do,” but they don’t explain it, which I don’t like. As a technologist, I’m more of an open-source frame of mind. It’s like how Google gives away Android. I want to be able to say, “Here are my ideas. Here’s why it works. Take a look at it, improve it, do something with it, and if you find something better than bring it back to me and show me how you’ve improved it.” That was my mindset. I couldn’t find anybody doing it and the ones that were doing it are charging a lot of money. I said, “Maybe I can build my own.”

As technologists, we have insane amounts of hubris. We think that we can do anything in the world and we can but because we think that way every once in a while, we can achieve more than other people. I’m like, “I’m going to start building this.” What I do is I go back and I re-mined those 3,300 cities from Zillow, and I find that the Census Bureau website has a lot of data, so I mine that website using the Ukrainian hacker. The next thing that I do is, I start looking for real estate profit data in those same cities and I find sources where I can find profit data and I start to correlate the two. I say, “Let’s take a look at demographics, population growth, job growth, income growth, and correlate them to profits.” Is there a high correlation? Is there a low correlation?

What I found was that there were metrics that had an extraordinarily high correlation to profits. What I found was that once you’re at a certain threshold of those metrics, a certain level of population growth, a certain level of job growth, a certain level of income growth, beyond that point, you’re making money like crazy because it was almost like a dam bursting. Beyond that point, everybody wanted to buy stuff. It was driving up the cost of real estate, which was driving people who couldn’t afford to buy those homes out of that market into the rental market. Because they were dreaming about buying a home a few months ago, they wanted the best possible apartment, which meant rehabbed apartments. I looked at this and said, “This is great. This is a great place to be a landlord.”

LUR Neal | Efficiency And Optimization

Efficiency And Optimization: If you’re investing in a development opportunity and it doesn’t come to market for a year, you’re going to skip over twelve months of difficult times.

 

Back then I was thinking single-family, not the 250 units that I buy now but I looked at that. I started correlating and building a system. First, I found one metric, found two, and found five for cities and five for neighborhoods. I put the system together and started teaching it at my local meetup groups and I thought, “Five people are going to show up.” Before I knew it, 200 people were showing up at my meetup groups to learn from this nerdy guy that has nothing to sell. He’s not a real estate guy. He’s a technology guy. He’s simply showing all this stuff.

The question I get the most is, “What are you selling?” I’m like, “I’m a tech guy. I’m not selling anything. Do you want to use the system?” He’s like, “Yeah, do I have to pay something for it?” “No, it’s free.” They’re like, “Really? It’s free?” I’m like, “It’s more than free. You can take the system and call it Lisa Hylton’s Location Magic System and give it away to everybody else. It’s open-source.” People are like, “This guy is a total moron. He doesn’t know what he’s talking about. He should be charging people for this,” but I didn’t. What I got out of it was ten times more valuable than money. I got notoriety.

Before I knew it, everybody wanted to meet me to be on his or her podcast. People wanted me to be teaching at conferences and now I teach it as many conferences a year as I want and I appear in 100 podcasts, sitting from home in a t-shirt. That got me everything that I wanted because eventually people started approaching me and saying, “We want to invest with you. We like this data-driven stuff that you’re doing. We think you’re boring and dry but we love the data. We love the money that it picks.” Eventually, people flocked to me and the rest is history.

That then brings me to the way you play in real estate now. You touched on it a bit that you play in 250 plus units, but officially how do you play?

I now both buy and build in multiple asset classes. Multifamily is the bread and butter. We do a lot of student housing and public storage. We try to do industrial though we haven’t managed to do an industrial project yet. We try to do bigger projects. A typical project is in the $20 million to $50 million range. We syndicate these for investors. Investors that are data-driven and tech-driven, tend to be attracted to me so I have a huge database of technology investors, people that are working in the tech field, doctors, lawyers and scientists.

Those people are more attracted to me because they can understand that I’m anal about every metric, methodology, and using that methodology to identify cities, neighborhoods, and properties in an appropriate fashion. Also, we use my massive army of virtual assistants in the Philippines to optimize them. I’m also well-known for the use of virtual assistants. I have eighteen full-time virtual assistants, one of them set up this podcast. I give away the tricks, tips, and techniques on how to create 10X companies using virtual assistants.

Investors like that know the massive benefits that can come from having a call center. I own a call center in the Philippines that has a number of employees. Those employees generate about 30,000 to 40,000 tenant leads a year and they process those leads in real-time thirteen hours a day on the phone and they schedule 2,000 to 3,000 appointments at my properties, which ends up in hundreds and hundreds of additional leases. The property already had its leasing. There were people coming in by looking at the sign, people from word of mouth and things like that. We’re topping those off and that’s giving us high occupancy. We have a high occupancy in the middle of a pandemic. Investors that understood the value of that, we’re not hype-driven eventually flocked to us. We are in the bizarre situation of having too much equity and not enough projects.

There are a couple of different places we could go from here. The first I’d like to go to is you touched a little bit when you said, “High occupancy in the middle of a pandemic.” That ties into the impact or non-impact that the pandemic has had on your personal real estate strategy Grocapitus and the outlook that you see for the maybe the end of 2020.

Live in a world of hybrid employment. It's never been easier. Click To Tweet

Let’s address those separately. Let’s talk about my portfolio so because of this team in the Philippines, we were at a high occupancy level. I don’t think that our properties are any different from anyone else’s when it comes to delinquency. We’ve suffered from delinquency in our Class C properties, not so much the Class B. We haven’t had much delinquency there. We don’t have any Class A properties that are currently leased out. We have a number of Class A that are being built but luckily will not be released until 2021. Thank you, God.

In the meantime, the B’s are not having much delinquency, which is the case across the industry, so nothing special about that. The Cs are having delinquency and we’re doing with those, but because we have a high level of physical occupancy, we are protected. If you have 98% physical occupancy and 8% delinquency, you’re still getting 90% of your rents and you’re not going to have any trouble paying your mortgage, investors, and cashflow, if you’re 90% economic occupancy. That’s what we’ve seen. We have one property that’s a little bit below 90%, but still paying its mortgage. We’ve stopped distributions at this point in time, which we think is prudent and we’re building up a war chest in case there are multiple shutdowns in the future because of rebounds of the COVID virus. That’s where we stand.

To be honest, we’re happy. I have friends and people who have invested with us, passive investors that have hotels and they’re, pardon my French, screwed. Anyone that has exposure to retail, malls and Airbnb has suffered greatly. For my property, we’re getting 90% plus of the money that we’re supposed to get now. Should we be complaining? You should count your blessings and shut your mouth. That’s how I feel. Looking at the industry, I go to conferences and these days, I go to virtual conferences and I present in them. I feel like the multifamily industry is a little bit giddy and overly bullish because they’ve had a good April and May and they’ve started to believe that the worst is done, which is nonsensical because the reason for the good April and May is the enormous amount of fiscal impetus. The $1,200 payments, the PPP, the unemployment, the extended unemployment benefits and the EIDL loans. All of this stuff runs out within the next few months.

I don’t think that the multifamily industry knows the impact until August and that’s when we’re going to either figure out, “It’s okay. We’re going to be fine,” or if we’re going to see a decline. For the Class A properties, we are already seeing a decline in prices, rent prices, and occupancy. We’ve seen that and it’s well-documented. Class B is doing better. Class C so far doing the best in terms of physical occupancy not being affected at all. We haven’t seen anything in the US where physical occupancy is affected. We’re beginning to see a slight downturn in rents, but it’s so tiny that you can’t measure it easily and there are still a number of markets in the US that are, in May, were positive growth on the rent side. There were a number of markets that at least on the Class C side where doing well. It’s a mixed bag.

My message is, how can anyone claim to say that the worst is over when we have a fake economy that’s driven by this stimulus? We’re going to have a real economy in August when all of this impact runs out. I, for one, cannot say that I know what it’s going to look like. I’m hoping that it’ll be better than it will be. Even if it’s not, then for those of you that are in multifamily, this would be a great time to pick up bargains. For years, you’ve been saying, “I wish there was a time when things would slow down and the buying selling balance would come back into balance because it’s all we’ve all been sellers who had all the power in the last three years.” Things are already back in balance.

Sellers and buyers are in balance now and buyers are going to have an upper hand in Q3, Q4, and Q1 of 2021. Does this look like 2008? No. There’s no real estate bust coming. There’s no meltdown coming but there are buying opportunities that are going to be strong in Q4 and Q1 in multifamily. If you want to see a meltdown, take a look at the retail sector. Take a look at the mall sector. I saw an article that 33% of America’s malls will cease to exist over the next few months. That’s a stunning number. It’s not like we lost 33% of the residential in 2008 and look how bad that was.

When 33% of a sector goes out of business, it is beyond a bloodbath. Whatever comes after the bloodbath, that’s what they’re going to be experiencing. Airbnb is going to have some challenges because a lot of people have been hit by not having occupancy. Although the sector is on its way back up so I don’t think it’s going to be quite as bad. The strongest vertical ironically this time came out to be multifamily. If you’d asked me months ago if there’s a pandemic and what’s going to be strongest, I would have said, “Industrial and self-storage.” Industrials have been strong because of the use of eCommerce and Amazon doing well but self-storage has seen weakness. What’s done well is multifamily, my sector. I’m pleased and to be honest, a little surprised.

LUR Neal | Efficiency And Optimization

Efficiency And Optimization: The vast majority of opportunity zones in the United States are awful, and no one should be investing anything in them.

 

You talk about how in August 2020, the later part of the year potentially it might transition into a more of a buyers’ market. I’m thinking that a lot of people who are potential passive investors or people who are actively playing who want to buy more properties, who might be even playing in the value add strategy. What would be your advice in terms of trying to execute those value-add strategies in these later quarters given the current environment?

For years we’ve been saying, “Build broker relationships,” now’s the time to double down on that. You’ve got time. I’m not bullish on buying anything because you’re not getting the discounts yet. The sellers are not adjusted to their new reality and it takes several months to adjust to that. Keep in mind that in the 2008 crash, the real estate market bottomed in early 2012. That’s almost four years later so it takes a while for the market to go down and it takes a while for it to bottom out. I don’t expect the bottom to be in 2020. I expect it to be 2021 so you’ve got some time. Use that time to build broker relationships towards the end of 2020. It may also be a good idea to start building relationships with lenders, with banks because there are going to be some foreclosures nothing in 2008 is expected by me. I do think that there’s going to be some foreclosures. There were some properties that were weak anyway and were hanging on by their toenails and this COVID is going to make them slip off.

You talked about how you build and buy, development opportunities. What do investors need to know if they’re looking to invest in development opportunities in the next couple of months of 2020?

There are pros and cons. The biggest pro, which is a huge pro is that if you’re investing in a development opportunity, and it doesn’t come to market for a year, you’re going to skip over twelve months of difficult times. Who doesn’t want to simply at this point get into Doc Brown’s Back to the Future machine and jump forward a year? We all want to do that. We get past this pandemic and get past its effects. Development deals are allowing you to do that but that huge pro comes with some cons.

Number one, we are seeing that construction financing is tighter now. You might want to get into deals where there are recognized folks and they’ve got relationships with banks. We have a bank that did a deal for us. That bank has completely backed out of construction financing, but they’ve told us three times that they still want to do our deal. They still have the money. They’re not doing any new deals. They’re not going out there with new sponsors, but because they like the way that they implemented our first deal, they’re doing this second deal without putting any onerous restrictions on us. It’s a lower interest rate. The interest rates are phenomenal on the new construction site.

On the value add side, things are bad because if you’re trying to get a bridge loan the spread on the bridge loans has gotten from two points to six points. They’re outrageous numbers that make no sense whatsoever for value add to do a bridge loan. The ten-year financing for value-add is phenomenal now but ten-year financing takes a lot of money out of your pocket even though it’s low rates. You don’t have the ability to refinance easily. There are lots of things you’re giving up when you take on fixed financing.

On a new construction site, there are no issues. All we’ve seen is rates go down but we’ve also seen a hesitancy amongst banks to give these loans out. Some of the banks are trying to break their loans into pieces. It’s good news and bad news. In general, I am much more comfortable being on the construction side, being an experienced syndicator that’s done construction before and has relationships with banks. I am skipping the next twelve months of turbulence and dropping my properties in the second half of 2021 when there’s going to be a significant upswing beyond this recession.

For those of you that are in multifamily, this would be a great time to pick up bargains. Click To Tweet

This brings me to my next question, which is opportunity zones. This has been a buzz in for a couple of years. People are super interested in investing in these types of projects. Can you talk about the pros and cons? The key things that investors need to know when investing in these projects.

The biggest reason to invest in the opportunity zone is simply the tax benefits that you receive. Let’s say that you sold Apple stock and you had $1 million in profits. On that $1 million, you’re probably going to end up paying 24% taxes and there are capital gains. If you’re in California, you’ll end up paying 24%. If you’re in other states, you probably end up paying, 15% or 20%, most likely 20%. You want to avoid that. You want to avoid that tax. Let’s say you take this $1 million and you invest it and that $1 million becomes $3 million. You now have $2 million of additional profits. You don’t want to pay taxes on those either.

If you’re like me and I don’t want to pay any of these taxes, that’s when you invest in an opportunity zone project. I gave you a high-level overview of that. There’s a lot to learn there but the bottom line is that the tax benefits of opportunity zones are phenomenal. Opportunity zone investing is better than before. The key thing is to invest in an opportunity zone, where you’re not the 1st, 2nd, or 3rd guy to get in. This means that you already have the all ships rising effect that is coming from other people making investments.

I am a strong believer that the vast majority of opportunity zones in the United States are awful and no one should be investing anything in them. There are 8,700 opportunity zones and about 500 to 700 are investment grade. If you want to know which ones are investment grade, go to a website called InvestReal.com. Plug in a whole bunch of opportunity zone projects that you know about and look at their rankings. You want to have more than 70% out of 100% aggregate ranking or industrial to even look at projects.

The beauty of it is, if it’s got a high ranking, then other developers have already invested there and they’ve created that all ships rising effect that makes the opportunity zone such a compelling investment. Beyond that, it’s still new construction. You’ve still got some loan issues. Opportunity zone investing is a ten-year minimum timeframe and because you’re investing for ten years, bad results over one year don’t affect you as much as a value-add projects, which is 3 to 5 years where one bad year can mess up your returns. On a ten-year project, one bad year is not so much.

Keep in mind if you’re investing now, the products are not going to come to market for eighteen months. You may not have a bad year. You may get the benefit at the end. One of the things we see with real estate is when things go down, they tend to come back up sharply. You’re investing in project now and that apartment is going to come to market eighteen months from now you’re going to be on the up curve, which is the place to be. You skipped the turbulence once more, and you’re buying something that’s eighteen months out. Make sure that your syndicator or sponsor has the connections with the banks to take advantage of the super low-interest rates that they’re getting.

My last question before I go to my level up questions is on virtual assistance. It would behoove me to come off of this podcast without asking you for tips on managing, hiring and the decision to get a virtual assistant. Maybe we start with the importance of getting one and going into tips of building that process out.

My beliefs in this area are rather radical. I believe that everyone who makes more than $20 an hour should have a virtual assistant. Virtual assistants are multipliers. Their force multipliers. Think of yourself. Let’s say you make $30 an hour. Think of yourself as a lieutenant in an army. How many armies have lieutenants and no soldiers? That’s what your virtual assistants are. If you make $75 an hour, you’re a captain. If you make $150 an hour, you’re a general. It doesn’t matter. Lieutenants, captains, and generals all have soldiers.

LUR Neal | Efficiency And Optimization

Efficiency And Optimization: If you don’t want to pay any of the taxes from your profits, that’s when you invest in an opportunity zone project.

 

A virtual assistant is the soldier of this connected world that we are in. No company should ever have zero virtual assistants regardless of what they do. It doesn’t matter what they do. That’s my belief. If they are and over for the next few years, because they’re dinosaurs, they’re going to go out of business. Companies like me who have these 10X force multiplier are going to put you out of business. Understand that, accept that, and live in a world of hybrid employment. It’s never been easier. We have squares saying people who work from home never need to come back into the office.

If you have these people who you’re paying more than $100,000 working from home, how are they different from these virtual assistants that are going to pay $6 an hour? Yes, there’s a difference in quality. I’m not blind to that but I can tell you I’ve never once had a situation where I couldn’t hire ten virtual assistants at $6 an hour and not replace somebody who was at $60 an hour. You cannot replace top-level executives that way. It’s not possible in my experiments to replace top-level executives, because of the level of thinking and clarity that’s needed to be a top-level executive even if you had 50 virtual assistants or 500 of them.

Lower level and mid-level tasks can not only be managed better but also automated through the use of virtual assistants. My tips for hiring virtual assistants are if you can’t put it in two minutes because it’s complicated. All you have to do is search for the word Neal Bawa Virtual Assistants on the internet and you’ll see entire podcasts where I’m spending the whole podcast talking about the process of hiring virtual assistants. The biggest tip that I can give you is that if you Google my name, Neal Bawa Virtual Assistants. If you type that in, you’ll find podcasts where I’ve spent 30 or 40 minutes going over the individual steps in the process of hiring, training and retaining virtual assistants. That’s probably the best way for you to learn more about that.

Thank you so much so before I go into my level up questions, are there any other things that you would like to share with my audience before we go into the last three questions?

I’d like to invite everyone to my website, it’s Multifamily University or MultifamilyU.com. We hold about 40 webinars a year. We get about somewhere around 40,000 people that watch these webinars, and they are experts from the industry. For example, in my next webinar, I have the CEO of Realty Mogul, which is a multibillion-dollar fund. She’s going to come in. She and I locked horns at the Best Ever Conference in Denver so we had a one-hour Battle Royale and that was fun. I invited her to do this webinar where we’re going to talk about, where different asset classes are. I enjoy that process. The site also has the virtual assistant recording that you can take and watch me go through that process step by step.

There are dozens and dozens of webinars from industry professionals, from syndication lawyers to accountants to other syndicators. It’s helpful and most importantly, my entire ten metric Location Magic course is on the website so I recommend that you take a look at Location Magic. You’ll learn some astonishing things. I’ve had investors who have been doing investments since the ‘80s and they were blown away by the location magic course and it’s completely free. There is no upsell.

My last questions are what are you grateful for in your life now?

I’m grateful for my family, most of all, and for my health. These are the two things that we tend not to be grateful enough about. I have a phenomenal family and tremendous support. I’m healthy and those are the two things that I’m grateful for. More than that, as an immigrant, I’m Indian. I came here in 1997. I’m grateful for the United States. I feel that people in the US, yes, we’ve got problems, yes, we have a country that’s becoming dysfunctional but what I want to tell people is coming from another country, even if it’s dysfunctional, this is unquestionably the greatest country in the world. Every once in a while, while we’re complaining at Democrats or complaining about Republicans, we should thank ourselves for being American.

What has attributed to your success and continuous growth?

Experimentation. I am known as the mad scientist. I experiment all the time. I publish my experiments. I’m constantly experimenting. I believe that you have to have a huge number of failures. You constantly have to fail, because failures are steps to success. Nobody wants to fail. I don’t particularly try to fail but it doesn’t bother me because it gets me one step closer. When I was a kid, I read that Edison once said, “I found 1,024 ways of how not to build the electric bulb before I found one way to build it right.” To me, that was inspiration so I’m constantly looking to experiment and hopefully improve over time.

What do you now know that you wish you knew at the beginning of your journey?

Build broker relationships Click To Tweet

I wish I knew the propensity of real estate professionals to exaggerate. Coming from the technology industry, I’ve been a little shocked by how much exaggeration there is in the real estate industry and it’s something that I’ve struggled to deal with throughout my real estate career. I wish I’d known more about how much exaggeration is possible in this industry. That would have helped me.

Thank you so much, Neal, for coming on the show. I appreciate it. You mentioned that if my readers want to learn more about you, the best places to go MultifamilyU.com for webinars and all that good stuff. You have Facebook as well. It’s the same thing with Multifamily University, and Grocapitus on there, they can check out more information.

Thanks for having me, Lisa.

Thank you. Take care.

Important Links:

About Neal Bawa

LUR Neal | Efficiency And OptimizationNeal Bawa is a technologist who is universally known in the real estate circles as the Mad Scientist of Multifamily. Besides being one of the most in-demand speakers in commercial real estate, Neal is a data guru, a process freak, and an outsourcing expert. Neal treats his $250+ million-dollar multifamily portfolio as an ongoing experiment in efficiency and optimization. The Mad Scientist lives by two mantras. His first mantra is that We can only manage what we can measure. His second mantra is that Data beats gut feel by a million miles. These mantras and a dozen other disruptive beliefs drive profit for his 300+ investors.

Neal serves CEO / Founder at Grocapitus, an iconic, data-driven commercial real estate investment company. Grocapitus’ 28 person team acquires and builds multifamily & commercial properties across the U.S. With more than 300 active investors and over 2,000 reviewing our projects, the Grocapitus portfolio currently spans across 7 states with 12 projects and 2,000+ units/beds. The powerful Grocapitus brand has a cult-like following of data driven investors. The result – Completed equity raises of $50 million+ for Multifamily, Mixed-Use and Self-Storage Acquisitions in the last 18 months, over 2,000 units purchased. Grocapitus is on track to close another 1,500 units in the next 12 months.

Neal loves public speaking and is an energetic and humorous speaker. He also serves as CEO at MultifamilyU, an apartment investing education company. He is a top-rated, in demand presenter at conferences and events across the country. Over 5,000 students attend his multifamily seminar series each year and hundreds attend his Magic of Multifamily Boot Camps. Tens of thousands listen to his podcast appearances and he has been featured in over 50 top-rated podcasts and radio shows. Neal’s asset management and revenue optimization techniques for multifamily are considered unique in the industry.

The Mad Scientist engages very frequently and deeply with his vast investor and RE Pro community, with tens of thousands of active connections and conversations across Facebook, LinkedIn, Meetup.com, Youtube, and other channels. Neal is a backyard tomato farmer and a protein diet health nut. He believes in positivity and Karma. He is passionate about the sport of Cricket and about the enormous potential of self-driving electric vehicles to solve the global climate crisis.

Love the show? Subscribe, rate, review, and share!

Join The Level Up REI Podcast Community today: