Listen to hear how James Kandasamy moves from Malaysia with Intel and finds a way to create value and wealth in the land of opportunity in the good old USA. He started with single family, then went on to acquire 9 multifamily properties for 1,700 units. He loves the hunt of the deal and he loves to educate and impact others!

Table of Contents

• Where To Listen To The Podcast
• How to Create Wealth in the Land of Opportunity
• Humble Beginnings, Great Timing, and Hard Work
• Deciding Factors on How to Create Wealth
• How to Create Wealth Out of Thin Air
• How to Create Wealth When the Rubber Meets the Road
• Bringing Value to the Table
• The Right People to Coach on How to Create Wealth
• How to Create Wealth Is to Leave No Stone Unturned
• How to Deal With Fear and How to Push Through It
• The Spirit of Giving Back to the Community

How to Create Wealth in the Land of Opportunity

Darin: James Kandasamy grew up in Malaysia. He worked for Intel in Malaysia, and then came to the US with Intel to help work on a very large project. He started to invest in single family. After about 11 properties, he realized in order to scale, he needed to break into the multifamily space. He has done nine deals for over 1700 units. He lives in the Austin area and he has no plans to slow down.

James has a ton of experience, so I'm really looking forward to this. So the two of us connected through social media. James is a leader in the multifamily space and I've been watching him from afar through Facebook and other social media avenues, and he's got a podcast, he's written a book, he's got a private Facebook group, this guy has done it all. But other than just talking, I actually wanted to meet him personally. So I went down to Austin and he was kind enough to meet me and we had a great discussion.

Before we get into the discussion, just a recap, how many properties, how many units have you been part of in multifamily business?

James: We have done almost 1700 units. Now we have almost 1600 units, 1650, or something like that. We sold one deal out of our nine properties. Right now we have eight properties and these are properties where we are the single GPs. I have other passive investments, key principles and all that, which I'm not including into that number. Maybe another four or 500 units, I guess, but that's where we are. We are the owner-operator that's completely asset under management is almost valued at $130, maybe $140 million.

Being a Problem-Solver and Where It Can Take You

Darin: How'd you come to the US, where'd you come from and how'd you end up here?

James: I'm from Southeast Asia, a country called Malaysia. I come from a state called Penang, which is one of the top tourism cities in Malaysia. And there's also a city in Penang which is called George Town, it is one of the UNESCO heritage sites. Those are all 1960s and 1940s buildings and this is where I’m from. I'm an electrical engineer. I used to work for a multinational semiconductor company and I moved with that company to the US.

They needed me here and I wanted to come to the US as well. So I flew from Malaysia through my work. Compared to a lot of people who come here on an immigrant basis, usually people come to study here and stay but I came to work because of the project that was in trouble.

And I love projects in trouble because that keeps me going.

Darin: You're a problem solver.

James: Probably. In uncertain times, that's what is good for me. I really get pumped up with that. So basically moved to that company and worked almost seven years on a W2 job in the US. I've worked on a W2 for almost 22 years before I resigned from my full-time job and am doing real estate full-time right now.

Darin: So you were working for Intel in Malaysia. Then there’s a problem that needs to be solved in the US and they felt that you’re the guy who’ll solve that problem and they brought you over to the US and you started working for intel on the West Coast?

Humble Beginnings, Great Timing, and Hard Work

James: In Portland, Oregon. They needed me and I wanted to come too, so it was a good match. So we came here, we solved the problem within one year and after that, things started. I'm always looking for departments in my workplace to make it more exciting. Sometimes working on a W2 job can be pretty monotonous because you're doing the same thing over and over again.

Darin: Absolutely. And so when you came over, were you already super wealthy from multi-generations within Malaysia?

James: No, we are an okay family, we are not a well-to do family. My parents just used to be working low-income jobs. I'm the only one who came up to college level in my family. In fact, I'm the only one overseas and I'm the only one in the US right now. So we don't have any other family in the US, which makes it a pretty high risk. And I'll go into that later.

First one to go to college in my family. And when I came here, I moved in as an electrical engineering manager. My pay was almost more than a hundred thousand at that time. But I'm starting fresh in the US so I don't have any IRA. I don't have any 401(k) and I brought in almost 80,000 into the US. And all 80,000, we bought a house. Immediately when we came here within two weeks we bought a house.

Timing Is Everything

James: I want to be the traditional guy. I said, "Let's go and stay in an apartment." And my wife said, "No, we are buying a house, I'm not staying in an apartment." So we stayed in a two-bedroom hotel for two months and within two weeks we chose our house to take it to close two months. It was 2010. So it was just a really good timing in terms of the housing market starting to bounce.

Darin: Great timing. So you were working at Intel, you're in the engineering field, and at some point you decide to get into real estate. Why did you get into real estate and why'd you pick multifamily?

James: I'm very entrepreneurial. So I was trying to do different business. When we came here while I was working at night, I used to try to do some website business or some education websites, trying to make things work online and try to make money because the US is a land of opportunity. So I'm trying to do all kinds of things and I used to work late until one o'clock, two o'clock to midnight trying to do different businesses. At some point I did try stocks as well. And stocks is just another rollercoaster ride.

Darin: Yes, absolutely.

What It Means to Be in the Land of Opportunity

Darin: Well, the hard part about stocks is, I mean, if it goes up, you wonder "Should I sell and take my profit?" And then all of a sudden you sell and it keeps going up. And if you don't, then all of a sudden it drops. You're always having to think every day, do I sell, do I keep?

But one of the things I love about what you just said was you said America was the land of opportunity. Look, I've had a number of guests on here that had the same type of story where they came and they didn't have much, and they made it and I believe there's a lot of people in the US that take that for granted, that think that it's not as easy as it used to be, and it should be handed to them. And here we have people that come in from out of the country, still believe it and find a way to make it happen. And you're one of those guys, so that's incredible. So go on in terms of how you decide to get into the multifamily world.

James: The land opportunities, I'm going to come back to that again, because it's very, very relevant, right? How can one guy start and do what I've been doing? So basically I was trying to do all this business and nothing really worked because it's hard to really do websites and do online businesses. A lot of big companies, big startup companies, which have a lot of money, a lot of experience and I'm trying to get some software developers overseas trying to do something. And I'm not even a developer, I've never done a development but I know this.

Deciding Factors on How to Create Wealth

James: So I've been trying a lot of things. After two, three years, we give up on all these businesses. And I met a friend who has been doing single family rental, and I always wonder how that works? He says he buys one house per year. So at that time in Austin, it was like 130,000 per house. And this is not far away.

This is 2013, 2012. Then I calculated the house cash on cash return. If you buy a normal house, just buy and put down a normal down payment, let’s say, 20% down payment of 130, I can buy like two houses. I have like $50,000 at that time. I probably can make like a 9% return, right?

For me, I want more, but again, 9% return just buying a house and is going by itself while someone's paying your mortgage. It's a really good amount, a really good price, right? Then later I found there are other ways to put much less money, a technique called double closing in single family houses. And then you can put much less down payment, like three, $4,000, and you can get $130,000 houses.

Opportunities in Real Estate

James: So real estate is the only asset that you can buy 20% below market value and you get 80% loan on it and you can push up the cash on cash above the market value as well. So it's crazy how real estate works, right? You can't do that in stocks. Stock is like, whatever price they're telling you, that is the value for the day. And you can't take out a mortgage.

Darin: And you're not getting the leverage, you're not getting the tax efficiency. So many different factors of real estate just help how to create wealth.

James: Yes. So I started looking at houses and I started looking at buying houses. I started buying in San Antonio because it's much cheaper and I was able to get much better deals there compared to Austin. So we bought 13 houses within two years, we accumulated almost 400,000 in equity within that and we were just surprised. I went, wow, we can do this! You just had to work hard. I mean, it's not easy. I was working full-time and my wife was trying to manage it. We used to drive down to San Antonio a few days a week to look at buying deals. And later on, I move on to multifamily just because single family is not scalable, it's too much work for too little money.

Turning Point From Single Family to Multifamily

Darin: That's a common theme. I never wanted to do single family, I went straight into multifamily. But I've talked to a lot of people that did start in single family and when they decided to get into multifamily, it was because it started to become too hard to scale. And I don't know what your number was, but, I don't know. The numbers that I hear from other people were somewhere in between 10 and 20 single family properties. It just gets to be so much that they really can't keep on growing. So you decide, you need to get into multifamily. Well, how do you make that leap?

James: Once I started going into 11 houses and I can't get loans anymore unless I start buying under my wife's name. I think each person can buy 10 properties. Once you go above 10, you have to go to a portfolio loan and all that. I started doing that, but it's just becoming so much of work because the insurance expires at different times and you have tenants and toilets and all kinds of things. We said, "Okay, we're going to go and do multifamily." So I did find some mentors to help me out, to scale me into multifamily and it's a mindset shift. I said, in the next six months, I'm going to buy a multifamily.

Darin: What was your goal? What size of multifamily?

James: 50 to 70 is what I was targeting.

Darin: That's a pretty big jump, right? I mean, you could have bought your 12 single family house, but instead you have a mindset shift and you decide to buy a 50 to 70-unit property.

Seeing the Infinite Returns

James: Yes, exactly. Well, the other thing is also, it's very tricky. I'm buying single family houses for $3,000 or $4,000 per unit. I'm getting 30 to 50% cash on cash.

Darin: Wow, that's crazy.

James: And when I met my multifamily guys and they're saying, "Oh, we're happy with eight to 10% cash on cash." So it never makes sense to me why you need to do multifamily. So I've been trying to put an Excel spreadsheet and trying to figure out what's wrong here? Why are all these guys excited just because some guru there is telling them. So I was like, "Oh, why are they so happy with 8 to 9% and I'm here doing 30 to 40% cash on cash?"

James: Then after a week, or maybe two weeks after trying to analyze this whole thing, I realize, "Okay, so that's one thing in commercial real estate, which is something called forced appreciation, right?" So when you talk about forced appreciation, you can go and force appreciate the value of operational income on an asset. And you can basically refinance out all your cash that you put in. And that is something that you don't get in single family houses. So that makes a lot of sense because now let's say you refinance all your money out, you're not talking about 30 or 50% cash on cash, you're talking about infinite return.

Darin: Infinite returns.

James: Yes. So basically you are making money out of the thin air.

How to Create Wealth Out of Thin Air

Darin: It's an interesting topic. A couple of things come to mind with that. One is, the difference in valuation, right? So in a single family, anything from one to four units is going to be valued based on other properties in the surrounding area. So it doesn't matter if you're renting a house for a thousand dollars a month, and the person next to you is renting the same type of house for $500 a month, your property is going to be valued similar to that property next door, even though your cash on cash is better, but the valuation won't really change. It's more valued based on surrounding properties.

When you get into multifamily, it's not. It's valued based off of the cash flow of the property, the actual performance. So the income, less the expenses, the net operating income, and that's how it's valued. So you can have two multifamily properties right next to each other, and if one is generating double the income of the one next to it, it will be valued at double the price of the property next to it. So that gives you the ability to control and to force the appreciation as you mentioned.

Different Knobs in Multifamily

James: It has many knobs to turn around to turn it. So you can increase income, you can increase your miscellaneous income, you can reduce the turnover of people, you can reduce your expenses. So there's many knobs to tweak in multifamily. And you can get a more efficient loan, you can get a loan, which is without prepayment penalty so you can move from one loan to another pretty quickly. So there's a lot more exit and a lot more at play.

Darin: If you have no prepayment penalty, you must be doing bank loans.

James: Yes. At the beginning, I did that.

Darin: Because the agency loans, the prepayment penalty can be pretty stiff.

James: Absolutely. In the beginning we did bank loans and we did very well with all that.

Darin: Fantastic. So you mentioned that your wife was part of your business as well. So what are each of your roles?

Where the Rubber Meets the Road

James: She runs the property management and construction management and I do the acquisition and investor relationship. So I do the underwriting, building relationship with investors and she does the harder part, I would say, of our work. I do the easier one.

Darin: It's funny because there's so much emphasis on how to get the deal, how to land the deal, how to close the deal but once you do, that's like the beginning, right? Now you have to actually perform.

James: That's where the rubber meets the road.

Darin: So you mentioned earlier that you had nine deals, you just sold a deal, can you share a little bit about the performance on that one deal that went full cycle?

James: Don’t take this number and think that this is going to happen all the time, even though it has happened a few times. So the first deal we bought is 45 units, we bought it at 1.5 million and we refinanced 117% after 12 months, which means after 12 months, the building is free and clear. None of our money's in the deal, right? So after 12 months, we did that. And when we sold recently, last February, we made almost 332% return in four years, 50% IRR.

The Beauty of Infinite Returns

Darin: I can see why you said, listen, listeners don’t think this can happen again. I have talked to some other people that have had some pretty amazing returns and they’ve agreed, look, we did a lot of things right but we also had a lot of head wins just buying at the right time and being at the right market.

That's amazing. And when you say that you refinanced out, what's great about that refinancing and pulling all your capital out, now its infinite returns, you don't have any of your money in it, but that transaction is a tax-free transaction.

So when you pull that money out in the refi and you return it, say an investor invested a hundred thousand dollars with you, and then you said 117%. So now you give him back 117,000, he's not paying any tax on that.

And then he's getting the cash flow and then you end it with a huge bang after four years. I kind of set you up because I didn't ask you that when we met. So the performance may not have been that strong. I should have known the answer to that before I asked you.

The Luckiest Coincidence

James: We did the same for the other two deals as well. The first three deals, the second deal, we did almost another 117%. I mean, just coincidence, 117% on the second deal as well after 12 months. We still have that property. So it's free-flowing in a no-cost basis building which is turning out infinite return for us. If you look at original investment, it turns out like 7% with zero cost basis in it. And the third deal we did, we almost pulled out 80% within 15 months. So that one we missed by three months, but it's still crazy in 15 months, we take 80% out.

Darin: That is unbelievable and I wish I was part of that deal. So in any event you mentioned that you do solo GP. So I've met a lot of syndicators where two, three, four or five guys and girls will get together and they'll all partner in on a deal.

You guys have taken the approach of husband and wife, and just focus on the two of you finding the deals, running the deals, raising the capital, why did you choose that approach? And do you see that changing going forward or maintaining that same approach?

Bringing Value to the Table

James: That's a really good question. I mean, we have a key principal who helps us to sign on the loan but in terms of GP, controlling the deal and owning the lion's share of the compensation as part of the GPs, we are the one, right? It's just how it is from day one. We did single family and 45 units, we really didn't need any other partners, it was only four or five people investing in that 45 units. In the next one, we were able to raise another 3.6 million. These people get to know our track record and people start investing. So there's no real need to bring in other partners, right?

But as I said, moving forward as I go bigger, and our life is really busy. My wife and I live very busy. We have three young kids, so we can't be doing this all the time. So we are looking at partnerships for the right partners. If we need to do it, we will partner up with the right people, someone who brings something different to the table.

Darin: Right. That's an interesting topic in itself because I talked to a lot of people that reach out on Instagram and there's a lot of people, including myself when I first got into the business, I remember going to the first networking thing and I was like, "I'm a good guy. Why don't you partner with me?" And that's the approach that a lot of people approached me with for Instagram. I just explain the same thing that I was told is just that you really have to bring value to the table.

Find the Right Deal With the Right Partner

Darin: So when I was at that networking session the person said to me, "Well, Darin, if you bring me the deal, you've brought me value, you've done all the work and I'm the experienced person and I'll partner with you if I think it's a good deal."

That person was saying, "If I found the deal why am I going to ask you? I'm going to ask that person across the room, that's done three, four or five deals. I know that they have existing relationships, I know that they can raise the capital, I know they have the balance sheet." So that opened my eyes and I was glad to hear that early on, because that told me, okay, my approach has to be, I go find the deal and then I present it to an experienced syndicator and then we partner together. So we both bring value to the table.

One Is Value, The Other Thing Is Belief System

Darin: So in your case, you guys have been solo GPs, from where I'm sitting, I don't see that changing unless there's somebody else that brings significant value to the table.

James: One is value, absolutely. The other thing is just the belief system, right?

So when you are partnering in a deal, a lot of things are being exposed right now. Your response to money, right? Your response to a lot of money. So that's where some people's true colors show up. And not say true color, they're not bad people, but just people responding to a certain gush of money or the opportunity to change some things that passive investors don't know. So it's a value system.

So whoever you are partnering with needs to have the same value as you. I mean, I've seen a lot of partners and I know a lot of people in the industry and a lot of partnership breaks because of their value system difference. And you wouldn't know in the beginning.

The Power of Belief System

James: When you're starting to dance, you wouldn't know, but the dance gets heated up and different lights, different music comes in, people react differently, right? Especially this involving money and as a sponsor, you can do a lot of things without passive investors knowing. And if your partner doesn't have the same value and belief system as you are, you'll be, "Oh, why is he doing that? Oh, I don't feel good." So you don't feel good having a partner.

So you have to really practice the slow dance at the beginning for anybody who wants to partner, see whether you are really compatible or not. If it's not comfortable, it's better to just split and go. But if you're compatible, then of course, then you want to continue. It's a lot more things.

First is bringing the values, second is the values' belief system and value itself. Life value and belief value and how do you respond to money when you are in control of it. And how do you work out things between two of them, are you putting boundaries in terms of roles and responsibilities, and you do what, and I do what kind of thing.

And somebody is going to step on someone else's toes and as long as you're able to talk it out and figure it out. So it's a lot more things than of course the value, yes. But there are a lot more things.

The Right People to Coach on How to Create Wealth

Darin: Those are all great points. And somebody that's trying to get their first deal, you don't realize it, but some of these deals, they can last three, four, five, six years, right? So it's not like you're just partnering for six months, you're going to be in this transaction together for potentially a long time. So having a common value system and belief system is extremely important.

James: Absolutely.

Darin: So, James, in addition to raising all this money and buying these properties and managing these properties, you also have some other products and services that you offer. There's a lot of people that want to get into space and they want to learn how to do it, and they want to learn how to do it from somebody that they trust. So you also offer some coaching services, is that correct?

James: Yes. I started my coaching services, almost 9 to 12 months ago. I started having a small group of students. I have always been teaching people offline and spending a lot of time coaching people or whoever calls. When people find out about, "Oh, you're doing commercial, how do you do that? I want to pick your brain, give me some time."

How Coaching Opened Up New Opportunities

James: So I used to spend a lot of time coaching people and I realized that most of the time people are not really serious or they think they're serious, but they're not really serious, right? And you spend two, three hours on the phone coaching them, giving them materials and sometimes they don't even read the materials that you give them. Sometimes they just don't take action, right? Because it takes a lot of effort to take action in this space.

So after a few years of coaching people and wasting a lot of my time and realizing that I'm talking to a lot of people who really don't want to get ahead in life, even though they think they want to get ahead. And a lot of people just do not want to do the hard work, right? Then I said, "Oh, maybe I should start charging for this."

Just because first of all, I mean, people will be more serious, they'll be thinking twice whether they want to take my time. Second is it becomes a filter for me. Whenever people say, "They want to pick my brain." I say, "What are you going to talk about?" If you want to talk about passive investing, you have my calendar. But if you want to ask about how I do this? That's a big topic, right? I say, "Well, I have this coaching program."

Do Not Just Help People

Darin: I was just going to say when we met and you were sharing that with me, I thought it was just great reasoning for putting that together in the sense that I didn't hear you once say, "You know what Darin? I wanted another revenue stream. I wanted to create a new product so I can just make more money."

It was more about, look, I love to help people, but I want to help the right people. I want to help the people that are committed. I want to help the people that I can actually see some development with versus having a one-off conversation and then getting off and never knowing if that person took action or went on to something completely different the next day. So that was a completely different response than I was expecting and I think it's very admirable.

Help the Right People

James: Yes, I know people talk about revenue streams. I mean, we make a lot of money on our properties. This is not significant in terms of education and I'm just doing this not a full-time job. It's just a very small amount of my time. But I love helping people, I love it when someone comes and says, "I really want to do this because I need to."

And I know a lot of people who are really trying hard to come up in life and it's important for me to give them quality information. And I need to be happy giving them my time and they need to be committed to it. At the same time, they have to get full information A to Z, not on a one hour call, how much can I tell them? I cannot tell them how to do syndication, I wouldn't be able to help them how to raise money, right? There are so many things, how to underwrite.

When underwriting, my class right now takes three deals and we underwrite one by one. So we are not able to give them when you're talking on the phone for one hour or two hours. So I said, okay, I'm going to do this properly, teach someone properly and someone who's serious and I just love it because now I have students, I can go in the car, who do I call now? Sometimes when driving, you do not know who to call. I call one of the students to ask what are they doing? So I'm happy. What are you doing? So they are happy because they're getting free coaching and I'm okay because I love to teach.

Helping Others Brings Joy to a Mentor

Darin: You're both invested in each other. Look, my son is a sophomore in college and he played baseball since he was five until I think, junior year in high school. And so I was a baseball dad every weekend and I coached him up all the way till probably he was, I don't know, 11 or 12 or whatever it was, maybe 10. But getting to see the kids on the team, it wasn't just my son, when I was a coach, it wasn't just my son, but I was able to see all the other kids develop.

They all started at different levels but just seeing each one of them improve and their face light up, that's a joy about life. That you're able to help them improve. So at our age, this is a way of giving back, to educate other people on how to grow their wealth and how to provide for their family in addition to, or possibly in exchange for their W2 job.

James: Yes, I mean, for me, it's ultimate happiness if I can take someone from not knowing anything in commercial real estate and get them to buy a deal and change their whole family life, right?

Darin: Absolutely.

Just by Our Effort, We Can Impact People's Lives

James: Because they're going to remember you forever, right? I mean they're going to remember, "This guy changed my entire family life." So it's a completely different satisfaction than just getting money.

Darin: I completely agree and even just syndications, just even with the passive investors and that's what's got me charged up with this business is, I have another business, all the profit comes to me and my family. But with syndications, I've got 44 limited partners and if we improve the value of the property, they're going to get a huge return that's going to increase their wealth.

For you, you sold that one deal and provided a 332% return in four years. Well, you helped all those families grow their wealth and what they do with it, some may give back to charity, right? Some may help a loved one, family member, their mother or father who's ill, and another one may take a great vacation with the family, but because of the work that you provided, you've potentially helped all those families do a ton of different things with that money.

James: You're absolutely right. So, I mean, I didn't realize that until my second deal, when we did a refinance of 117%, I gave back the money within 12 months. I mean, there were a few emotional emails that came to me and these are like grown-up men. These are professional people. They're engineers, software engineers, say, "James, you do not know how much this money means to me." And I was like

Oh my God. So just by our effort, we can impact people's lives. I mean, that's big.

Reputation Is King

Darin: It's huge. It really is. So talk about reputation. In this space, when you're raising money to put into deals, there's a lot of people that are out there doing it and it could take a while before the returns come back and how important is reputation and how does that impact whether passive investors come back to you and whether they recommend you and bring back other family members and friends, just talk about reputation and what your thoughts are there.

James: Of course, reputation is ultimately important in this. I mean, even though I have a big Facebook group, like 5,500, I will get almost zero people who are investing from that group with me. So it's not about Facebook groups, it's about word of mouth referral.

Word of Mouth Referral

James: From our first deal and as we move along, a second deal and also how you add value. I mean, when I started this business in 2013 – 2015, I was starting to write blogs and nobody was writing about multifamily investment and how to create wealth. There were a lot of people charging for all this information and I was giving this for free. And I started doing webinars which are focusing a lot on my investors. And I wrote a book just for my passive investors.

I mean, everybody knows you don't really make money out of a book. I probably make like $2 or $3 off each book sold on Amazon. But I think just making sure that people who come and talk to me about this kind of investment, they know what they're getting into. They know how to analyze deals and just adding value to people. I mean, I just did it not to say to grow my influence, but I just want to continue to educate people so that people know what they are getting into, right? And they just give a hundred or 200,000 and later they say, "Oh, I didn't know that." So in between deals, I do a lot of educational webinars for people so that everyone learns.

Darin: That's fantastic. So I have not gone full cycle, so I can't speak to that. But one of the things that I do get positive contacts from my investors, which I find important because I've invested in seven other deals as a passive investor is communication. Every month as a sponsor, you're going to send an email out to your investors, giving them an update on the property.

Educating the Passive Investors

Darin: And for me, and maybe it's not that important to everybody, but for me it was. So, I looked at all the syndicators that I was doing business with as a passive investor and I was trying to take the things I liked about each one of them and mold my own philosophy. But what was important to me was transparency.

I want to know the good, the bad, and the ugly of what's going on and what proactively you're doing as the leader, as the sponsor of that deal to continue to improve the property and improve the performance. There are some sponsors that send out a short little blurb and then attach a bunch of reports. Well, I don't really want to analyze all those reports, I just don't.

I've got my own syndication that I gotta send it out to, and I've got other things in my life and I just want to know, "Hey, where are we at?" If it's not where we're supposed to be, why? And what are we doing? So communication, I feel is very important. It sounds like you take it to a different level. It's just not even on the deals. It's you want to communicate by writing a book and providing blogs and providing education so that passive investors are that much better educated.

James: Yes and everyone writes their email directly to me. So there's no investor relationship person and they usually get responses within a half a day from me. And I like to talk directly to investors so that at least they have direct access to me, right? I write a pretty detailed report every month because I want to really show what we're doing.

How to Create Wealth Is to Leave No Stone Unturned

James: I mean, there are two ways to think about this. For investors, they are giving us an opportunity. For us, it's like, we want to do bigger things, and investors are helping us. So I'm really like, okay, you're helping me, I'm going to give you all the information that we're doing. So I usually spend a lot of time writing my report. I put a lot of before and after pictures. So people love to see all that because people like to see HGTV type of transformation of their property, especially if they're involved in it.

So people know that we work really hard and that's the ultimate most important thing. I mean you need to be sincere in whatever you're doing and you have to communicate that too. Be sincere, communicate very well with them, keep on educating them, whether you're doing deals or not doing deals and that's how people build trust with you. I want to really educate them, make sure that they know what they're doing, every stone's unturned in the industry.

Darin: Where do most of your passive investors come from? I get it as time goes on, there's word of mouth. So where did it start? Did it start with people from work? How did you get the ball rolling?

Professional Investors Outside Social Media

James: Basically, there are not many investors that I'm getting from my social media network. So it's basically from word of mouth. When we started our single family houses, we were doing ourselves without syndication, but we did tell a lot of people. And when we did our first 45 units, we did tell a lot more people saying that we are doing this, we're doing that, we're doing that. I was supposed to do a webinar on how did we do this 330% because I think it's an interesting thing people want to know.

We did a lot of things. We reduced water, expenses, and electricity. We did so many things. We renegotiated contracts and I want to communicate that to normal passive investors. So that at least they know what are we doing, right?

Otherwise, people think that these guys are just making money, just buying, letting the market run. That's not true. There's a lot of work in the apartment so it’s basically word of mouth. A lot of my investors are not in social media. They are not in this any groups, they are basically professionals who are busy working and they trust you.

They're all really professional, but business owners, doctors, engineers, lawyers, CPAs, real estate professionals.

Darin: Look, there's a lot of people out there that they make good money and they don't know about syndication. I know that I was in a number of different career paths where I made very, very good money.

Helping People to Multiply Their Money

Darin: I would have loved to have had somebody come to me and say, "Hey, Darin, you want to invest 50,000 or a hundred thousand in this huge apartment complex?" I had no idea you could do it. So for them to be able to pull aside a portion of their money and allocate it to real estate and they have somebody they trust, manage that for them, that's huge.

James: A lot of people, high net worth people, they just want to go to a financial advisor. And financial advisors have all kinds of fees that tie to whatever investment that they're recommending, especially in mutual funds and stocks. All the industry runs on fees. That's how they make it so easy to trade in, trade out. You can buy very easily because they make fees on an upmarket and downmarket.

But real estate is not that, you have to go out and educate people how it works, about syndication, what kind of deal we buy, how do you make tax benefit. How do we turn around properties? And that's why I added so much value and that's how I grow my network. Through webinars and a lot of people are just invested on a real estate with me and maybe they are with a few other people but they are not in big organizations and groups and any social media, they're busy with their life.

Darin: Right. They're busy making money and then you help them multiply that. So how do you source most of your deals?

Your First Deal Can Define Your Career

James: So in the beginning I was sourcing a lot of off-market. I'm still sourcing a lot of off-market right now. I have my own marketing strategy where I go direct to sellers even though now I'm not doing that a lot. But I think in the beginning I started with direct marketing where we did a yellow letter marketing. We did cold texting and we did cold calling, just to get our first deal. Because usually it's very important for newbies like me when I started, it's very hard to get a good decent deal.

But getting a really good deal as your first deal will launch your career. Like I talked about 330%, right? That's a deal that we bought directly from the seller and he sold it at market rate but if he has gone to a broker and market to me, I mean, you have to go through the bidding process and have the best and final and prices are different. But he sold it to me at a really good price. I mean, it was a market rate, the cap was market rate, but the upside was so much, and I'm able to go and realize that upside.

We did a direct to sellers and after that there's a lot of brokers, we start establishing relationships. They know you're a true closer because you have closed one or two deals and they bring off-market deals to you, right? I mean, 95% of the deals are done off-market. Maybe 40% of it's a true off-market. Another 60%, off-market but it's on- market.

The Search for the Real Off-Market

Darin: So I'm down the totem pole a little bit from you. So I've had the off-market that comes to me, "Hey, Darin, I'm just showing this to you." Right? Then I call one guy and go, "Hey, do you want to partner on this deal?" "Oh, is it this deal?" And he names the deal before me, right? And I say, "Yeah." "Oh, I saw that last week." And then I call the next person and then they tell me, "Oh, is it this deal? Oh, yeah. I saw that deal already." I'm like, "I thought the broker said he was only showing it to me." Right?

James: He'd say it's called an off-market premium. I'm telling you off-market, but it's very expensive because there are many people looking at it.

We are trying to look for a real true off-market, where it doesn't know the broker. The sellers are only talking to you and they may not be in the mindset of selling but because they like you, they may sell it to you. So that is how I got started. But now I have a lot more broker relationships now.

Darin: What markets are you focused on? Are you Austin only?

James: Austin and San Antonio.

James: Our properties are scattered in these two markets.

How to Deal With Fear and How to Push Through It

Darin: And going after B&C properties, or what are you focusing on in one area?

James: We started a lot with the C. Now we are moving more into the 1980s product, which can be considered as B in Texas because of the construction age. So it's 1980s is what we are looking at nowadays.

Darin: Talk to me about, has there ever been a time that you had fear and how did you push through that?

James: Absolutely.

Darin: Well, most of the time I say that to people and they respond that way. Everybody has fear. Well, I talked to one guy and he was like, "I'm just not scared, man. I don't know. I just plow ahead." And I'm like, "All right." Well, maybe, maybe he's the one that doesn't have fear. So talk to me about when you have fear and how you push past that.

James: Many times I have fear. Fear of underwriting wrongly, fear of exit cap rate or what the exit cap rate is going to be, what is the rent growth going to be? Because whatever, when you underwrite a deal, you are basically trying to model tenants' behavior on Excel spreadsheets, right? That's what you're doing.

How Do You Estimate Someone's Behavior

James: How do you estimate someone's behavior, right? There's a lot of data that's missing. So how do you overcome that kind of thing is to basically educate our passive investors saying that this is our proforma and making sure that they know that. Of course, we want to try to underwrite as conservative as possible, but even conservative is a very relative term, right? So things change as the market changes.

Darin: Sure. I mean, in that example, you talk about first maybe you underwrite it on Excel and then maybe to get a little comfortable. You go out and you actually shop the comps and you're like, oh, now I see that what they've done and they're already achieving those rents. And if they could achieve those rents, I know I can put these improvements in. I've done it in three other properties and so we should be able to achieve those rents or just below it, or whatever.

So that could help give you confidence. And the fact that each deal that you've done has performed well and you've learned, you always learn, right? On every deal, I'm sure you and your wife talk about this deal is different from this deal because this happened and you learn that, so you know what to do on your next deal. So that confidence helps propel you.

Business Always Involves Some Risk-Taking

Darin: But I think that in real estate, it's such a big investment. Even buying that first single family home. When you had to put 20% down for that 9% return, there's a lot of people that just let fear stop them from making that first investment, whether that is a single family home, a big multifamily complex, whether that's doing a passive investment.

I remember the first time I wired 50 grand into a passive investment, I emailed the sponsor and was like, "Please confirm receipt of the wire." No answer. I'm like, "Oh-oh." And this was somebody that people told me had a great track record. Then I call and it’s voicemail. Then a text, no response. I'm like, "Oh my gosh, what's going on?"

And then I get a response saying, "Hey, Darin, I could see all these deposits, but I can't see who it's from until tomorrow morning because the bank doesn't provide that detail till tomorrow." Well, if I had known that I would maybe have been a little bit more at ease.

From Malaysia to USA: Worth the Risk

Darin: So I tell my investors that, "Hey, look, I may not know until tomorrow morning." But there's that fear that creeps in and that fear could paralyze somebody from actually doing something. And for you, it's changed your life such that you came from Malaysia with Intel, you brought $80,000 with you, you worked for Intel for a while, you got into real estate, you started seeing the power of wealth building and leverage and tax efficiency. And then you ended up going full-time and now you've been full-time for how long?

James: Almost three years.

Darin: Almost three years. And you said something earlier that I wanted to ask you about. You said you've always been entrepreneurial, but it sounded like your parents were not. So how did you become entrepreneurial? What influence brought that about?

You Make Your Money When You Buy

James: I'm not sure what influence, but I always liked to buy things at a discount. I mean, of course, everyone likes a discount, but if you get a discount compared to everyone else, you are the only one getting that discount, that's the ultimate feeling.

Darin: Nice. So that's true, you make your money on the buy.

James: On the buy. Exactly. And I was just thinking about being entrepreneurial. I mean, even in college. The other day when I went back home and I met some of my college friends and they told me, "James, you remember you sold that shirt?" I said, "What shirt did I sell?" So I buy three shirts for $10 and sell them in retail, right? One by one. That was a wow. So I always had that excitement about making money by doing some kind of wholesale-retail kind of thing. Or finding that big discount where nobody else got it, that gave me a lot of a boost in my motivation.

Darin: That's awesome. Because look, when you're starting out, a lot of people, you don't have a ton of money, right? You have some capital, you're trying to break-in, you're trying to build a reputation for yourself. But then once you become a leader in the space, which I would put you in that category, I don't know your personal wealth, but I'm sure that you're doing pretty good. And then there has to be other intangibles that continue to drive you, it's not just about the money. It's about the excitement of being able to find the deal, find the right deal and then help other people both from an education standpoint and building their wealth standpoint.

The Spirit of Giving Back to the Community

James: Yes, absolutely. So we are very passionate about giving back to others in our community. We do a lot of programs because we are vertically integrated. So we do a lot of backpacks, we give school supplies to the kids that are living in the community. We do Thanksgiving parties, we do Christmas parties, we do Halloween parties, all kinds of parties we do for the kids there, and we just love it.

Personally, we are sponsoring a lot of kids for education, especially in Africa, India, Mexico and we share that vision with our staff. Recently we started sharing it. And right now we have almost 330 kids that we are sponsoring on a monthly basis for their education. That's what keeps us driving. So we want to grow that to a much larger number. I mean, I can just sit down and do nothing but where's the fun?

Darin: That's fantastic. So what's the next big stretch goal for you? I mean, you've written a book, you've got a private Facebook group, you've got a podcast, you've got nine properties that you've had, one's gone full cycle. What's the next big stretch goal for James?

Stretching the Goal to Leverage Time

James: So ultimately we are trying to see where we go from here. How do we leverage our time? We're actually creating a foundation right now, 501C foundation for orphanages. So we want to really go big on that and contribute a lot to other people's life. Especially in terms of educating them because I think that it's just a mission that we have in life.

Darin: That's fantastic. I read a book by Andre Agassi. He wrote a book and I couldn't believe it when I was reading it. He would say that he actually hated tennis. He ended up becoming number one in the world, and he talks in his book about hating tennis. But he knew he was good at it and a light switch went off on him at some point when he realized that he could play tennis and use the money he made from that to build schools to help underprivileged kids.

All of a sudden it changed his perspective on playing and winning. He was doing it for another cause that was bigger than just a nicer car, a nicer house. So that's fantastic when you see somebody that could just camp out on the beach but continues to add value to others and continues to try to excel in life so that they can help more people.

The Purpose of Existing and Investing

James: I think at the end of the day we have to figure out why we are here in this world. I mean, are you just going to get rich? Do you want to drive fast cars? I mean, I want to buy a nice fast car, but on this road, I can't even drive them. The police are going to come after you so what's the point of buying all these fancy cars when you can’t drive it fast?

So since we are brought up not in a very wealthy family, we don't have that big, big taste that we need to have. We want to live comfortably and all that, but you can make a dent in someone else's life. It's more fulfilling than you enjoying a much larger wealthy life, how much are you going to change your life from having $1 million in the bank to two million, there's nothing much you can do in terms of changing your life.

What are you going to do? I mean, are you going to be flying everywhere? No, you can't do that. So there's a very small difference in lifestyle that happens when you go, from one million, two million, three million to 10 million, there's nothing much you can change. You can have good food, you can have a good education and good health, that's it. And you don't need a lot of money for that.

Darin: Although as you're saying that I'm thinking of the country song that talks about, I forget the name of the song. But the guy starts singing and he's like, "But I could buy a boat and I could buy a truck to pull it." So that's the Texas songs. What do you like to do outside work?

Touching People's Lives Through Mentoring

James: The problem with entrepreneurs is we always like to look for new, exciting things. Sometimes I'm always looking for deals but I want to make sure that I don't divert too much to some other asset class or businesses. So I am looking for deals, looking for discounts and where to find it and just have fun teaching people. Just free education.

I said a lot of people come to me and say that "James, you've added so much value in my life through my books and my podcast." And whenever I go for a meetup people come and tell me, "James, I thought I already know you."

I'm sure for you too. They already know you because you talk on podcasts and you have so much educational content. People have told me many times, your book has changed my life.

Darin: How incredible is that? You know what? You mentioned that you didn't make a ton of money off the book. And that a lot of people don't make a ton of money off the book. But one, it brings credibility and two, it brings people that you may not have touched before. But the people that I've talked to that have written books, especially the first one, it's not easy, it's a lot of your time and effort to not make a ton of money but you do it because you want to impact more people and touch more people.

James: Especially when someone is writing a serious book. I mean, anyone can write a two-day book and just publish it saying that they're an author. But to write a serious book, I took almost one and a half year to write my book and I was working at that time.

Getting the Message Through Writing a Book

James: It's a big commitment. I want to make sure it's done right and I just don't want to just say, I'm an author. I want to be a best selling author, of course, but I want to impact people. I've almost sold almost 2,000 copies of my book in 12 months. I didn't expect that.

I mean, English is my third language and I came from a school where they teach in a different language. If I can change someone's life, get a top 15 real estate book by Jim Cramer, which is crazy. People have told me when I want to publish the book, "James your book is not written very well." I mean, well, that's okay, fine. I'm done.

Darin: What's the name of the book?

James: It's called Passive Investing in Commercial Real Estate: Insider Secrets to Financial Independence.

I need to make sure I put all the content into the title. It's on Amazon, so you should be able to get it. But I got really good reviews from third parties without me knowing and that's a very fulfilling venture in my life.

Darin: That's fantastic. Well, James, I really appreciate you sharing your story and your time, and it just sounds like you're a guy who loves to give back and I'm really appreciative that you took time out of your day when I came to Austin and we were able to meet face to face. You meet some people and they have an impact on you and you meet other people and it's just a meeting, right? So I really appreciate having the time to get together with you. How do people reach out to you if they want to reach out to you?

Free Insider Secrets to Financial Independence

James: So my website is achieveinvestmentgroup.com and my email is james@achieveinvestmentgroup.com. If you come to my website, there's a link on the top so if anybody wants to figure out how to partner with us, they can register there.

And I have a free book offer for everyone. I'm just launching a campaign now on my free book to make sure that a lot more people get it.

Darin: The book that you were just talking about? You're giving it for free?

James: Yes. Correct.

Darin: Listeners, you heard it go to his web, is it on your website?

James: No, it's not on my website, it's actually a different website.

Darin: Oh, how do they get the free book?

James: You go to this website called passiveinvestinginrealestate.com and you should be able to get the book for free. There's a 3.95 processing fee, but that's nothing, right? If you go and buy it from Amazon, it's going to be $19 for the physical book.

Darin: There you go. Thank you for sharing that with everybody. And then he's also got a Facebook group and this guy is on a lot of podcasts. He has his own podcast, and we're going to be hearing about him for years to come. So thanks James, I really appreciate you coming on.

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