Listen to hear how Prashant Satoskar transitions from investing in single family to large scale multifamily. Prashant grew up in India, came to the US to obtain his Master's Degree and built his name and reputation from scratch. He worked in IT, started his own business, invested in single family and successfully transitioned into large scale multifamily. He and his business partner have closed on four syndications with over 700 multifamily units. Don't tell this guy you can't make it happen in the good old USA. He's living proof that you can make it happen with persistence and determination!
Table of Contents
- Transitioning From Single Family to Large Scale Multifamily
- The First Business Venture
- How to Stay in a Large Scale Multifamily Business for the Longterm
- The Advantage of Large Scale Multifamily Over Single Family Real Estate
- One Way to Learn the Business Is To Be A Passive Investor
- How to Build Longterm Relationships in the Large Scale Multifamily Business
- Texas Is the Place to Be
- Fear Holds Most People Back From Taking the First Step
- How to Reach Prashant Satoskar
Transitioning From Single Family to Large Scale Multifamily
Darin: Prashant Satoskar grew up in India and obtained his master's degree in the U.S. Now he’s a full-time syndicator with four syndications, and 700 plus units under his belt. He started his career as an employee for an IT company then went on to start his own business.
He started to focus on real estate investing, first in single family, and then in large scale multifamily. Let's listen in on Prashant's story of successfully making that transition from single family to multifamily.
Prashant: Thanks for having me Darin, and congratulations on your new show.
Darin: Prashant was one of the first people that I really connected with when I joined a multifamily mentorship group two and a half years ago. A great guy to learn from. He would pull me off to the side and always be looking to say, "How are you doing, man? What can I do to help?" This guy has a lot of knowledge and has a service mindset, just a good guy to be around. Prashant, can you help us understand how many multifamily deals you guys have done, and total number of units? I think it's three or four.
Prashant: Thanks for the kind introduction. Yes, we have four properties that we've sponsored so far, and one of them we've gone full cycle already. Currently, we are operating three properties here in Dallas, Fort Worth metroplex.
Darin: Of the four, what's the total number of units that you guys invested in?
Prashant: A little over 700.
Darin: So, four properties like 700 units. That's fantastic.
Taking the First Step Out of the E Quadrant
Darin: We're going to get back into the multifamily realm. Before that, I just want to give the listeners a little on your background before you got into real estate. What career path were you in? I believe you were in IT.
Prashant: Originally, I'm from India. I'm an engineer. Came here for my grad school back in early '90s. Went to UT Arlington right here near DFW. Did my biomedical engineering for a little while. I did work in the biomedical engineering field. I switched to the technology side just because I kind of enjoy the technology aspect of things much more.
Then I started working in the corporate world for a few years. I always had the itch to get into business, but I just didn't know how. So, I took my first step trying to get away from the W-2 job. It was trying to go from the E quadrant to the self-employed quadrant.
For the benefit of the listeners, the ESBI quadrant is from the famous book of Robert Kiyosaki, the Cashflow Quadrant. That's what I'm referring to. I was an employee for a few years in the technology world. Then I became an independent consultant, self-employed for a little while.
Darin: Let me just jump in there a little bit. You said you had an itch, you said you had an inkling, you said there was something that was a driving force that you wanted to eventually move away from being an employee, and start your own business. When did that occur? What brought that motivation? Was it these books?
Prashant: It wasn't the books. When I was growing up, interestingly, I grew up in an environment where everybody was an employee.
Forging Your Own Destiny
Prashant: My dad was an employee for 30 years, I had eight uncles, all of them were employees. I grew up in that environment, but I had some friends who came from the business world. Their father was a businessman. I could see their lifestyle was a little different. So, I knew there was something there that I wanted to explore. When I was young I just wanted to get away from that employee mindset and try the business side. I couldn't do that in India.
One of the reasons I wanted to come to the U.S. was for the opportunity to try something different. I didn't know what it was at that time, I just wanted to try out different opportunities. As I became an employee, I knew that's not something that I wanted to do. I always was itching to get out, and do something on my own. Be my own boss, experiment, try to forge my own destiny if you may will.
Darin: That story is very similar to the Rich Dad Poor Dad story. It was a teacher, and his friend's dad was a business owner, and he really admired that.
Prashant: I didn't even know about that book, I ended up reading it sometime in mid-2000, and it just clicked. That's when I realized, "Hey, this is what I've been feeling, and thinking all this time. And here it is written down in a book." That reinforced what I was thinking of all these years.
Darin: So, you're in India. Were you the first person that came to the U.S. to study?
Prashant: Yes. That was the first time ever I sat in an airplane to come to the U.S.
Grabbing the Opportunity to Change Lives
Darin: Nobody else in your family had done that before.
Prashant: Nobody had done that before, nobody had traveled even outside the state that I lived in.
Darin: Where in India were you?
Prashant: I grew up in a city called Bombay. It's called Mumbai now.
Darin: That's a huge city. What's the population there?
Prashant: It's a little over 20 million.
Darin: So, you come to the U.S., hats off to you. That's a huge risk, and that's scary. Even though you had that itch, that desire, how did you push past that fear of going overseas where you knew nobody?
Prashant: It was definitely scary, but, luckily, I had the drive. I just knew that I wanted to do something big, and something different. That was my opportunity to not only change my personal life but my family's life. My parents, I had two brothers and 40 cousins.
I was thinking about the whole family, I wanted to do something that could help the rest of the family, give them opportunities and I could do that after coming here.
Darin: A lot of things that you're doing for the first time, they're scary, but they're exciting, you have that mixed emotion. You probably had the excitement of wanting to try something new, go someplace new. But you also have the fear of the unknown.
Darin: You're in the IT field, and you decide to start your own business. What business did you start up, and how'd you do it?
Prashant: I was in a specific area within IT, which was test automation, and software testing. I started my job in that area and learned the skills there.
The First Business Venture
Prashant: Eventually, I left my job, and became an independent consultant, honed my skill in the same area. I started building my network there, and I realized that I was good at what I was doing. I’ve built a big enough network that I was getting more work than I could handle myself. That pushed me in starting a business direction. Just to fulfill all the work that I was getting, I started hiring people and building from there.
That's how the business started. Then I sat down and created a business plan. I became serious about the business and started building the company. It was in the same general area. Technology software testing area and I did that about 10 years.
Darin: What year?
Prashant: It was around 2009, 2010 timeframes, around nine years of being an employee, and an independent consultant. Then I started my business.
Darin: We're going to get into the real estate side. Most of the listeners are probably focused on the real estate side. One of the driving forces for putting together this podcast, and develop a listener base is to inspire people to go after their dreams, not just real estate. If they are looking to get out of having a job, and take a chance, and start a business, knowing that other people took that risk and it was a positive outcome on the your side is encouraging. You accomplished that and that's fantastic.
Prashant: Being here, land of opportunity, that's what they call it. It truly is. I couldn't have done it if I wasn't here. I'm blessed, and it's scary at times, but all the tools are available. If you have the drive and the desire, you can pretty much do anything out here.
The Decision to Invest in Large Scale Multifamily Real Estate
Darin: I grew up that way, believing that we live in America and the American dream. Whatever you think you can achieve, you can, if you have the perseverance and determination. I love talking to people that have done it. It's an inspiration for the next people who think that they have too many steps, too many obstacles. Yes, there are many obstacles in any new endeavor.
I'm sure that you ran into a lot of them, but you overcome them. There's a lot of obstacles, there's a lot of hard things that you do as an employee as well. You just have to overcome them. So, now, you're a business owner. You decide to start investing in real estate. It's my understanding that you started to invest in residential real estate first.
Prashant: You're right. Even through my employment, independent consulting, I was starting my business, I was always fascinated by the investment side of things. Started with stocks and bonds like everybody does. I knew that if you really wanted to build wealth you have to figure out how to make your money work for you while you're also trying to make money. I was dabbling in investments, I started with stocks and bonds like I said, I even dabbled in restaurants ventures.
I became a passive investor in some restaurant ventures and quickly learned that that's not where I wanted to be. Because that's a very tough business to be in. Then, I slowly started exploring other options. And during my technology career, I was traveling a lot. I used to travel almost every week to different cities and stuff.
The Big Real Estate Boom
Prashant: Around the mid-2000s, we had this big real estate boom going on. Interestingly, I was living here in Dallas. If you remember, Texas didn't really participate in that boom as much as other states did.
Darin: I was in South Florida, and it was booming.
Prashant: I used to travel to Florida, and Phoenix. As I go through these airports and work in these cities, I used to listen to all these stories of people buying houses, flipping them in two months, and making money. I said, "Man, this sounds exciting, I always wanted to be in real estate. Maybe this might be the time that everybody's making money, and maybe I should get into it."
Around 2006 timeframe, I decided to get into real estate. My first investment was a condo in Orlando of all the places, my extended family lived there. I knew a little bit about the city, I had actually lived there for a couple of years during my employment as a technology guy.
So, I knew the city. I ended up buying, 2006, a condo for $175,000. And I was super excited, "Hey, I'm going into real estate, jumped on the bandwagon just like everybody else." A year later that $175,000 condo is like 250, six months later it's almost touched 300 on paper. So, I thought I was a real estate rockstar.
The next thing you know 2008 happened, and here my $300,000 condo dropped all the way to $80,000 in less than a year after that. That was my first foray into real estate, and a lot of lessons learned. The first lesson I learned is don't ever buy real estate for appreciation.
How to Stay in a Large Scale Multifamily Business for the Longterm
Prashant: That's what I bought it for. I didn't really educate myself. One thing I learned is don't invest in anything that you don't educate yourself in first. Secondly, especially, around real estate, don't just buy for appreciations. That lesson stayed with me for a while. I couldn't sell the condo because I was underwater. So, I was holding onto it. But I learned a lot through that process.
I spent a couple of years after that educating myself on, "Hey, what are the strategies? What do other people do? If I want to stay in this business longterm as an investor in real estate, what should I be thinking about? How should I be looking at an investment?" And with that newfound knowledge, I decided to double down. In 2012 I went and bought four more single families. This time my mindset was different.
I wasn't really buying it for the appreciation, but I was more focused on the cashflow aspect of it. So, I did my calculations, and did my underwriting, and bought things right. Understanding what my rent is going to be, what my expenses are going to be and if there's going to be cashflow. I went and bought four properties in South Florida, West Palm Beach area because I knew that area too very well. There's a lot of job growth, and population growth coming there, I did well there.
I bought another one in Plano right here. That was how I started. I started buying these single families for a while and did that for a few years.
Darin: A few things that you said here. One, you said that you were always fascinated with investments.
How to Make Money Work for You
Darin: You really wanted to figure out a way to make your money work for you. Everybody isn't just born thinking that. How did you get that ingrained in your head that you wanted the money to work for you? The way I was taught was, get good grades, go to a good college, get a good job, and climb the corporate ladder. Put away a certain percentage of your savings, and just put it into the stock market. Then, the fairy tale will happen, and it'll just grow exponentially over time.
I found out that it did grow, but not to the point that I would have expected. You knew that you needed to find a way, and that you had to take the responsibility for that money. Put it in a place that was going to leverage itself the best it could, where I just believed what everybody told me. I just put it off to the side, and let the stock market do its thing, and hoped for the best. And I think a lot of people do that.
Prashant: That is true. That's what my dad did all his life, and that's what he tried to teach me. He taught me a lot of great things, and I picked up all the good things. But some things I chose not to listen to because I had my friends, and their dads talking something completely different. They were talking a different language.
Darin: So that’s who you got it from was your friends. Business owners that were your influence at a younger age that stuck with you.
Prashant: They were. I still talk to them on a regular basis. They definitely define my life in some ways.
From Buying for Appreciation to Buying for Cashflow
Darin: That's extremely important. I would say to the listeners that this goes to surrounding yourself with like-minded people. If you don't have those people around you, go seek them out. You need to be around people that have done the things that you want to do. That will give you positive guidance, and good counsel, where other friends and family, they have good intentions. But if they haven't done it, they don't know the right path.
You mentioned a lesson that you learned on the residential side, your first deal. It appreciated, then it dropped dramatically when the real estate market turned. Then when you came back years later and decided to double down, you bought four more properties. You changed your focus from buying for appreciation to buying for cashflow. A lot of people may not understand that. It basically just means that you're looking at all of your cash outflows, and all your cash inflows. You want to have positive cash every month. Until I joined this multifamily mentorship group that we're both a part of, I had the mindset of growing your nest egg.
Then at some point you retire, and you pull money from that nest egg little by little in retirement. All of a sudden, I'm part of this multifamily mentorship group, and people are talking a different language. People are telling me, "Hey, Darin, don't focus so much on that big nest egg. Focus on buying assets that create cashflow. Then set your lifestyle to be less than the cashflow that's coming in." If that's the case, it doesn't matter how big that nest egg is.
Prashant: The key thing is people have to understand, especially, people who are employees. Ask the simple question.
Moving From Stock Investments to Real Estate
Prashant: What if you can make the same amount of money you're making now, and the money comes in while you're sleeping. How can you get there? That's your ticket to retirement. You want to at some point stop working. Wouldn't it be great if you have money coming in after you retired in the form of cashflow? Or in the form of dividends? Rather than just having a big nest egg sitting there.
Darin: Prior generations they accomplished it by having pensions. They would sacrifice 30 years of their life to work at a company, so they would get a pension. But for our generation, we grew up, and the pensions went away, and it all turned into 401ks. It was all about building that nest egg. From my personal opinion, the approach of focusing more on monthly cashflow is a much smarter approach. We'll see how it turns out in the long run.
Prashant: The reality is not either/or. It's not that you're giving up one or the other. You can have your nest egg while you can supplement it with some cashflow component in your investment strategy.
Darin: The other thing that you didn't mention was moving from stock investments to real estate. A number of different factors come into play. One is, if you're going to buy $10,000 worth of stock, $10,000 comes out of your account. Where with real estate, you're getting a loan, typically, for 70 to 80%. So, you're able to leverage the bank’s money as well. In addition to that, there are significant tax benefits of real estate versus investing in say the stock market.
The Advantage of Large Scale Multifamily Over Single Family Real Estate
Prashant: That was a big eye-opener for me. Initially, when I first got into single family real estate, the tax component wasn't a big deciding factor. That's something that I learned over time, and to realize how powerful that can be. It's huge. That's one of the reasons I ended up getting into large scale multifamily to go bigger. To take advantage of these tax incentives that are available.
Darin: It's massive. You see the quotes over and over again that 90% of millionaires are created by investing in real estate. One, I wish I had known this a long time ago, and I started earlier, but I'm glad I know now. Two, I believe that it comes due to those two factors. It comes due to the leverage, and the tax efficiency. That just lets you compound your money that much quicker, and much more efficiently than other investments. You have all these single family, now, at some point you decide that you want to get into multifamily. Why?
Prashant: There are a lot of things I liked about single family. First of all, I learned the cashflow piece of it was very attractive. I was happy that I was making some extra money every month while I was doing my technology job. What I did not like about single family was dealing with tenants, dealing with all the repairs issues that came with that. For me particularly, I had four properties in Florida, one in Plano, Texas close by.
I was trying to manage them while I was traveling around the country. It was a nightmare. I hated getting calls from tenants, and I'm not a handyman.
A Better Way to Be in Real Estate
Prashant: If somebody called me, I couldn't even direct them in the right direction. That was a piece that I just did not enjoy. An advice for everybody who's trying to get into single family, just keep this piece in mind that you have to manage this property. Either you hire a property manager that could be an option, but that's not straightforward either. That's where I started thinking, "Can I really keep buying single families and deal with all these issues?" I just couldn't see myself doing that. So, scaling was being a problem.
That's when I started thinking, what would be a better way to still be in real estate. Still enjoy the cashflow, but not deal with so many different individual homes? I was trying to figure out a way to consolidate this, and maybe buy a fourplex or an eightplex. That was my mindset, initially, around 2015, 2016 timeframe. I wanted to figure out, "Why don't I set all this, and just buy like a small multiplex?"
I was on the quest to learn how to do that when I got introduced to this mentoring group in Dallas. It focused on large scale multifamily acquisitions, operations, and education around it. I went there thinking, "Hey, I might learn something over the weekend, and learn how to buy my first fourplex." It blew my mind on what opportunities large scale multifamily investing presented. I got out of there, and learned a lot, and actually joined that mentorship program. The next thing within a year we ended up buying 125 unit property.
At Some Point, You Have to Take Action
Darin: I love people that take action. There's a lot of people that say they want to do a lot of things but at some point you have to take action. You took action with buying these residential properties. The thing that was cool about that story on the residential side is you really got burned on that first one. That did not scare you off from being in real estate altogether. You just said, "Okay, I have to shift." Then you got back in with those other four. But then when you decided to scale, very natural thought: "I'm going to get out of single family, buy a fourplex, and then I'll make money on that. Then I'll buy an eightplex."
But you want to learn how to do it, so you go to hire somebody. You go to a conference, you pay money, and spend time to go invest in your own personal education. When you go there, all of a sudden, your mindset shifts based on the mentor, and both of us are part of that mentorship group. I'll just share who it is, it's Brad Sumrok in the Dallas market. He's done a phenomenal job of telling people that, "You know what? You don't have to go and do the duplex, and the fourplex, and the eightplex. You can go bigger right away." For you, your first deal was 100 and how many units?
Prashant: 125 units.
Darin: For me, I bought a duplex, and then I joined the group, and then I closed on a 76 unit townhome community. I had the same mindset like, "Okay, well, how do you go from two to four to eight?" Then no, you could really broaden that.
The Concept of Syndication
Prashant: It was just fascinating. First of all, before I went to this event, it was a weekend, education event. I didn't even know that these big apartment complexes were owned by regular people like us. I used to think that, "Hey, must be some private equity big fund guys, or wealthy families and stuff." And I didn't know what the concept of syndication was. It was just eye-opening.
Darin: I think that word is intimidating, syndication. There's a lot of people that start trying to learn this business. They hear that word and like, "Holy cow, that just sounds so intimidating." But really, it just means a bunch of people coming together and pulling their money to buy a bigger asset. But it could be intimidating when somebody first comes into this space. Afterward, it becomes commonplace.
Prashant: I actually started in multifamily being a passive investor. After this weekend event, I learned a lot on how this business works. I really got the opportunity that was presented, I knew what was possible by getting into this business. But I didn't have time that time. I was so busy with my technology job, I was traveling, I had my single families.
One way I could get into this business to get my feet wet was being a passive investor. I could just invest my money into somebody else's syndication, or with a lead sponsor, what they called. And I started doing that for the first six months. I was invested in almost 10 deals.
Part of it was intentional. I wanted to learn what it is like, and how other people run their projects. Because the reality is it's a business that you're going to run once you started getting into syndication.
One Way to Learn the Business Is To Be A Passive Investor
Prashant: I wanted to learn that business, and the one way to learn the business is being a passive investor. I learned a lot, I understood how people run their projects, what the risks are, what their rewards are. How to be conservative, and all those things. I slowly transitioned by selling single families one at a time, moving some of the money into my passive investments. Once I got comfortable and learned enough, that's when I made my move saying, "Okay, I think I'm ready."
I had the business background, I understood how this large scale multifamily business works. That's when we decided to go ahead and buy it. I say we because I met a friend. Now he's my good friend and a partner. I met this guy at this event that I had attended, we decided to work together, and become business partners. We started an investment company, and together we bought our first deal.
Darin: Another great guy, Shane Thomas, out of the Houston area. The two of you are both class acts. Actually, I took the same approach when I got in. I started to invest passively. And as you know, I invested in one of your deals. I have to say that that property had its challenges when I drove by it. I was new to the passive game. It was probably my third deal or something.
Prashant: It was scary.
Darin: It was a little scary looking. There were cracks down the brick, it was obvious that there were foundation issues. I was like, "All right, well, I like these guys. And I really want to see how they can take an ugly property, and turn it into an attractive property." You guys have done that.
The Importance of Bringing Together a Strong Team
Darin: And the product, the community has really turned around. The performance has been fantastic as an investor. I appreciate being a part of that. It was a great experience, it's a great experience to learn from others. The other thing I've learned about being just in this syndication space altogether is that the real estate space people are willing to share. To teach the next guy. I've been in a lot of different industries where the guys that have figured it out, and they're on top, they don't want to tell the guy who's coming up how to do it. They don't want the competition, they want to stay on top.
Here, the senior guys are like, "All right, well, you guys are probably going to be going after smaller deals than me anyway." It's just an abundance mindset. I really appreciate that. Let's talk about the relationship business. There's a lot of different partners that you have to partner with to get a deal done on the large scale multifamily side. How do you develop those relationships? What's the importance of bringing together a strong team?
Prashant: Any business is a relationship business, and more so in large scale multifamily because it's really everybody knows everybody. It's a pretty tight-knit world out there. That's something that's very intimidating for some people who are not used to networking and going out. So, that's really an integral part of the business, and people have to get used to it. Fortunately, I came from a consulting world, my business partner came from a consulting world. We were used to going out, and networking with people, and building relationships.
You’ve Got to Be on Top of the Deal Flow
Prashant: It was a little easier for us. It's a very critical aspect of that, building broker relationship. If you want to buy deals, that's the source of where you're going to get leads for purchasing these properties. You got to know the brokers, they got to know you, and you've got to be on top of the deal flow. Then investors, once you have the deal, you got to have investors to trust you, and invest in your projects, you're pretty much networking all the time out there.
Darin: To get your first deal, you're doing all that. Then once you have your first deal, you're going for your second and third.
Prashant: It’s a snowball effect.
Darin: Right, snowball effect, but what's critical is all those conversations that you had with brokers, and with investors. When you come to do your second, and third, and fourth deal, they remember what you said, and the projections you made. If you were trying to get investors to invest in a deal with faulty expectations, projections that were unrealistic, and the deal was not performing well, your reputation is most likely going to be hurt. Not only are they not going to invest, but they're not going to recommend their brother, and their mother, and their aunt, and uncle.
Like you said, it's pretty tight-knit world. There are all these meetup groups, and conferences, and passive investors talk to each other. You really want to have a fiduciary responsibility to performing on that first deal. So that you build the reputation for performing, and being a fiduciary for your investors.
How to Build Longterm Relationships in the Large Scale Multifamily Business
Prashant: If you want to have longevity in this business, you got to be honest, you got to be transparent. You got to build that trust. And you want to have longterm relationships in this business. You want to have investors coming back investing with you on more than one project. Everything that you do matters in the long run.
Darin: Then, with the brokers, you land the deal. You get under contract, and you typically have 60 to possibly 90 days, depending on extensions to close the deal.
Prashant: Can you perform?
Darin: Not only can you perform, but how was it working with you as a buyer? The broker is going to evaluate you as to how easy are they to work with. How easy did they make the transaction? If you're just very difficult to work with, brokers have options. On the next deal, if your price and terms are very comparable to somebody else, and they know that the other group is a lot easier to work with, who do you think they're going to pick?
Prashant: You're right.
Darin: Talk about growth. You did the first deal, now you've done three other deals. As you grow in this business, help us understand what additional resources and/or systems you had to put in place.
Prashant: The first deal was really a learning experience for us. This was the first time, we were raising money for the first time. We were going through the process. Shane and I took a pause, rolling up our sleeves, and pretty much doing every task that process entailed.
Internal Processes That Can Be Applied to Future Deals
Prashant: We did that, and fully involved in that, and grew from there, bought three more deals. Now we are at a stage where we understand the process. We've done it four times, and now we've systematized everything that we do. We have built internal processes that are now we can say are repeatable and can be applied to future deals.
We've built in a lot of processes. Currently, we've brought in some software to help us automate some of the processes including stuff like investor management, investor communication, internal communication. We've started building all that out now for the next phase of our company. We also started hiring people internally. Starting with an admin, and an underwriter, some VAs to help out with some back-office tasks. So that Shane and I can focus on the business building activities, investor relations, and other things where our skills are more applicable.
Darin: How many books do you read that talk about once you accomplish a goal, you need to set the next goal? With that, what's Prashant's stretch goal?
Prashant: As a company, our goal was to get to 1,000 units in 2020. Actually, it was 1,000 units in 2019. We are a little behind on that. Then COVID hit, so it's slipped by a few months. We think we can hit that goal this year and then go from there. From the services that we offer, right now, we're just acquiring deals, and operating deals. Eventually, we want to build a fully integrated company with an in-house property management company, in-house construction, and then go that route. But that's year two and further out goal.
Looking for Deals in the Midst of COVID
Darin: That's a big undertaking. Let's assume that you hit the number, and you hit 1,000 units this year, what's the next big goal? How many units do you need before you start looking at bringing property management in-house?
Prashant: 1,000 is our number. Another property or two is a good size to make it worthwhile. The reality is the property management company itself is not going to be a profit center. It's just a supporting team to help us focus on our main business. So, it is a lot of work to build that, but we believe 1,000 units is a good number. That's just a number in our mind, we could even do it now. But we would like to get to 1,000 and have enough revenue to support that activity.
Darin: That makes sense, and that's a big undertaking. I look forward to hearing how you guys do when you get there. I've seen you guys work, and I know that you guys have a great following of investors. People are very happy with what you guys are doing. I wish you guys all the luck as you guys proceed down that path.
We mentioned COVID-19, so we're recording these several weeks before this will come out, so, we're probably 60 days into COVID now. Let's not talk about all the specifics on what you've done to manage through that process. With still being in the middle here, and states are starting to open up, gradually, and are you guys still actively looking for deals? Are you on hold? If you are looking for deals, has your target changed on what you look for?
Prashant: We are looking. We are always looking, just our underwriting has changed a little bit.
The Kind of Deals to Look For
Prashant: There are some unknowns that are out there. Obviously, in terms of what the rent growth is going to be, what the future looks like. So, we will look. I mean, it just going to be a little, slightly different underwriting. That's all. We have to factor in some other financing conditions that are out there. From the banks which require us to put up more escrow money, and stuff, we have to factor all that in an underwriting.
Darin: Let me ask you this. One of the questions I have is, the government is providing unemployment through the end of July. What happens when we get into August, and September with 30 to 40 million people unemployed? I know that we're starting to bring jobs back but most likely not all 30, 40 million are going to come back in the next month or two.
When August and September hits, do you think that multifamily may be impacted more than it has been up to now? Because there’s been all the stimulus checks, and unemployment benefits, et cetera, or do you think that the economy is to the point where it can self-sustain itself?
Prashant: That is a big debate, and we can have a whole one-hour session.
Darin: But neither one of us has a crystal ball but I'm putting you on the spot a little bit. Do you think that we're going to be smooth sailing, or do you think that there's going to be a hiccup going into the fall?
Prashant: This is just my opinion.
Darin: That's all I'm asking.
Prashant: I think, it's not going to be smooth sailing for sure. There's going to be flat to lower growth. It really depends on location to location also.
Texas Is the Place to Be
Prashant: There's a lot of factors that are going to come into play. I do believe that August, September, October are going to be a little tougher than what we had March, April, May.
Darin: A couple of other things that could happen. It's an election year. Trump and the government could extend benefits to get to the election. Also, another mitigating factor just from a geography perspective that I think about is that here we are in Dallas, this crisis has caused a lot of people in New York, and in California, and in expensive markets to reconsider where they live. Companies are becoming more adept at working with employees that work from home.
One thing that could help this area, I don't know if it will or not, but Texas has been the number one job state in the country for several years. That could continue where we see migration from those more expensive states to come to Texas. If we have some tenants that are still in a tough bind in the fall, they may end up having to look elsewhere. But then there may be other people moving into the state to take those spots.
Prashant: I totally agree. Considering everything's that going on, Texas is the place to be no doubt about it. There's definitely job growth that is going to continue here, and more people are moving in here, and that's going to continue. Overall, I think we should be fine, compared to other states.
Darin: There are other states also that people may move to, Arizona, the Carolinas, Florida. These growth markets. It may be a case where even if the economy is stumbling still in the third and fourth quarter that the population shift could help.
Large Scale Multifamily Is One of the Safe Asset Types to Be In
Darin: Time will tell.
Prashant: But all in all, multifamily is one of the safer asset types to be in. In the end, people are going to need a place to live. The economy might soften a little bit, but still, the renters are there, and people might move out of their houses, and started renting. Overall, it should be a safe place to be.
Darin: Exactly. Let's shift over to what I call fear. We all have times when we're fearful, where we're afraid to take action on something. Man, your story, you've pushed past the fear in so many different areas. You're the first person from your family to leave India, and come to the U.S. You had to push past that fear. Then, you get a job commonplace thing to do is go to university, and then get a job, but you had the foresight, and the determination to start your own company.
I have to imagine there's fear there, and then getting into real estate. Well, actually, you had a restaurant venture that didn't go so well first, and then got into real estate. So, talk to me about fear, and how do you push past that fear?
Prashant: There are three things that have helped me push past the fear component of it. First thing is, I always try to focus on what I stand to gain from whatever I do versus trying to worry about what could happen if I failed. You mentioned about me leaving India. At that time, the only thing that was on my mind was, "What do I have to gain there?"
What Is the Worst Thing That Can Happen When You Fail
Prashant: I was going to come to the U.S., change my life, change my family's life. That was huge.
Darin: It's the land of opportunity. Right?
Prashant: The land of opportunities. If I had failed, what's the worst thing that could have happened? I could have gone back home. That's the mindset that I always kept. Even when I started my business, what I would have gained was financial freedom potentially. I would have had an opportunity to work on things that I enjoyed, the opportunity to work with people that I enjoyed. If I failed, I could have easily gone back to my job, and work there.
Always keeping in mind that what I'm going to gain is going to be always larger than the other side helped me. The second thing is seeking out like-minded people. That has helped me tremendously. Every time I went on a new endeavor, I seek out either people who have done what I wanted to do or people who are on the same path that I was going. That helped me quite a bit. A lot of times I ended up with great partners. I met people like you. We exchanged great ideas, that helped me get over some of the fear.
Darin: That point about surrounding yourself with like-minded people is so crucial if you want to do anything you haven't done before. The other people that are in your network, your close friends and family, they may not be encouraging because they don't know how to do it. They may actually talk you out of trying. That's phenomenal. So, you had one more point you were about to bring up.
The Journey Is More Exciting Than the End Goal
Prashant: The third thing I just want to add here is just to have a growth mindset. You want to learn new things and grow. The only way you're going to learn and grow is by trying things out. So, just jump into it. You never learned how to ride a bicycle by reading a book. You just had to try it, and you might get some bruises when you start up, but hey, you learn to ride a bike. It's the same thing.
Darin: That's a great point as well. Correct me if wrong, but I've started a business also. I went after my first real estate deal and got it. I've climbed the corporate ladder in different industries. The journey is really, for me, more exciting than the actual end goal.
Prashant: That's always the case.
Darin: Always pushing, and creating another goal of something that you have not done yet. That's the exciting part, the journey to whether you can get there or not.
Prashant: You're right. One thing I've been blessed with is I've got a phenomenal spouse who's been very supportive, and you met her, Teja, my wife. She's been involved in every activity that I've been involved in. That has given me a little bit more confidence to get over my fears.
Darin: It’s nice to have that support system. Let me ask you another question in regards to making these very difficult life decisions, crossroad decisions. What I've tried to teach my kids is that when I hit one of those roads where I'm scared, how do I push past that fear? One of the mechanisms I use is to think back to another time in my life when I was in that position.
Fear Holds Most People Back From Taking the First Step
Darin: I didn't know what the outcome was going to be. It was scary, but I took action, and then think about, well, how did it turn out? When I think about how it's turned out well, that helps build the confidence for me to take the next leap of faith in that next journey. I don't know if that has worked for you as well but maybe comment on that.
Prashant: Every little thing that you do helps you build confidence. We took baby steps and tried little things. I had mentioned that "Hey, I went from employee to self-employed first." That was a little baby step. I got a little bit more confidence, and I started a business. That's the growth path that you're on.
Darin: There are so many different, scary things in life. I talk to my kids, and I try to explain, you know what? That first day of school. Walking into your class, everybody is afraid. Like, "Who am I going to sit next to? Are they going to be friendly, are they going to smile at me, are they going to say hi?" I try to teach them, you know what?
Everybody's thinking the same thing. Be the first person to smile, and say hello. Then the next person is going to feel so much more relaxed, and they're going to reciprocate. Sometimes you don't run across somebody that's going to reciprocate but in most cases. But that fear holds most people back from taking that first step.
Prashant: Like they say, progress is on the other side of fear. You got to get through fear to have progress in life.
Fun Things to Do Outside Real Estate
Darin: That's such a great point. I am so thankful for our friendship, and you mentored me as I got into the group, and helped me along the way. I'm extremely appreciative of our friendship, and our business relationship. I've invested money with you guys, and I'm very confident with you guys at the helm. So, what do you do for fun outside of real estate?
Prashant: I've always been involved in sports all my life. That's my first passion. I played a lot when I was growing up, and I played here, I played squash and racketball and I played cricket in India. As I started growing older I realized that I wanted to do all this thing. Now, I've got just one sport, golf. That's all I do. I love traveling with my family. I was supposed to be in Italy this week on a vacation, but we had to cancel that.
Darin: We did talk before we got on and hit record, we did say we were going to get out and play golf next week. Let's make that happen. Before we wrap up here, we talked about it a little bit in the middle of the discussion. Help our listeners understand if you haven't invested in one of these deals before. You're interested in trying to figure out how do you do your first passive investment? How does somebody go about doing that?
Prashant: It's pretty easy nowadays, with the syndication models going on, and that's what we do. First of all, definitely reach out to us at www.catequity.com. I'd love to walk you through how this whole process works.
Get Education and Do It the Right Way
Prashant: It's as easy as you deciding if a particular project is right for you, and you investing. Just sitting back, and enjoying the cashflow that the project produces. But before you do that, I would highly recommend, get the education, there are multiple sources of education. There's a lot of stuff online, or join a mentorship group like we did, but definitely get educated. You don't want to do what I did by trying stuff out. We've already done it. You want to get your education and do it the right way.
Darin: This is a different market. If you haven't been exposed to syndications, it's not like the stock market where you could just call up your broker and say, "I want to buy 100 shares of this stock." You actually have to go, and take a proactive approach to going out and meeting the sponsors. The sponsors are just the general partners. They're just the people, like Prashant that go out, and find a deal. Then they raise money from other limited partners that want to invest in the deal. But they don't want to work on the day-to-day management of that deal.
The first step for a passive investor is that you need to go and meet sponsors that are putting the deals together. You can do that a number of different ways, you can do that by reaching out to people on podcasts. Like Prashant, like myself, like other guests that will be on the show. Other podcasts that are focused on multifamily, or other real estate investments that you have interest in. You can go to free meetup groups, in your local market.
Reach Out to Prashant
Darin: You can look up on the app on your phone, and just look up for multifamily investing or apartment investing. Go to meetup groups, they're free. You'll meet sponsors, and you'll also meet other passive investors. A couple other ways you can meet sponsors is going to large scale multifamily investment conferences that are held all over the country. Now, with social media, there's a lot of Facebook groups that are focused on multifamily.
You can meet sponsors by getting a part of those mentorship, those Facebook groups. Those are a lot of different ways to put yourself out there and start to learn. Prashant, if people want to get a hold of you, you just gave them your website info. Is there any other way that listeners can reach out to you?
Prashant: You can just go to the website, our contact information is there, you can just connect through that. There's an email, there's a contact us form. Just connect us, and we'll be happy to connect with you on the phone.
Darin: I will include that information in the show notes as well. Prashant, I want to thank you so much for being on the show.
Darin: And I want to thank you for your friendship, and your guidance for the last several years. I really appreciate you taking me under your wing early on. It's always nice when you go out, you venture off to do something new, somebody comes over and becomes your first friend. Thank you for that.
Listeners, I really hope that you enjoyed that one. I'm invested in these guys deal. These guys are the real deal. They're honest. They're good guys. Give them a shout. Until next week, signing off.