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  • Positive Growth Mindset Building $2 Billion Real Estate Portfolio With Swapnil Agarwal [Ep. 054]
Positive Growth Mindset Building $2 Billion Real Estate Portfolio With Swapnil Agarwal [Ep. 054]

June 22, 2021

Positive Growth Mindset Building $2 Billion Real Estate Portfolio With Swapnil Agarwal [Ep. 054]

Do you want to learn how to grow your business? Swapnil Agarwal started investing in multifamily in 2013 with a 37 unit $1.3 million property. Fast forward to today and Swapnil's company, Nitya Capital, has grown to over 20,000 units and over $2 billion in assets under management. His positive growth mindset will help you grow your business too!

Swapnil’s story is about overcoming challenges through hard work, dedication, creativity, persistence, and patience – things anyone can do if they put their mind to it. Listen as he shares his journey from humble beginnings to becoming one of the most successful real estate investing entrepreneurs today!

Table of Contents:

Five-Step Process For Passively Investing In Real Estate
Five-Step Process For Passively Investing In Real Estate

The Guy With a Positive Growth Mindset

The Guy With a Positive Growth Mindset
Photographer: Francesco Gallarotti | Source: Unsplash

Darin: Swapnil Agarwal lives in the Houston area. His background is in the investment banking and private equity space. He's from a small town in India and actually came to the US at the age of 15 years old. He and his company have experienced massive growth from 37 units in 2013 to over 20,000 units and $2 billion in assets today. Swapnil has a drive for excellence in everything he does.

Just a little bit about how I know Swapnil. So this is the first time I've actually talked to him, but I've had a number of other people in the multifamily world come to me and tell me, you know what? You got to have Swapnil on the show, man. This guy is just killing it, and I'm telling you listeners, if you don't know him, this is going to be a very interesting conversation because we brought in the big guns today. So Swapnil, appreciate you coming on.

Swapnil: Thank you. Thank you. I appreciate the introduction, I hope I can live up to it.

Darin: We'll see, for sure. Hey, could you just start by sharing with the listeners how many properties, how many units you guys are invested in?

Swapnil: Yes, I think approximately 63 assets for about 20,000 units.

Darin: That was 63 properties for 20,000 units. Guys and girls, this guy manages over $2 billion, if I have it correctly, in assets under management.

Swapnil: Yes sir.

Understanding Swapnil’s Positive Growth Mindset

Darin: That's crazy. So the questions I think are a little different that I ask you, than somebody that has a thousand or 2000 units. The first thing I kind of want to go to is mindset. How do you even think to yourself that I could get a billion or $2 billion on assets under management? And look, when I ask people, other people what their stretch goal is, they tell me, I want to have a billion dollars. I want to be like Swapnil. So how do you get that mindset?

Swapnil: No, I think you asked a great question. I think mindset is so key, and when you talk about mindset or what I think about my mindset to myself, it's not really that I'm thinking about a number or whether it's a billion, 2 billion, 5. Yes, maybe I think about a hundred billion sometimes, that I want to be a hundred billion. But other than that, it's trying to keep that mindset in a positive frame. More often than it goes in the negative zone.

Because in reality is we're all are humans and as human, you're going to have mental struggles, just like everybody else. Whether you have 2 billion or whether you have 2 million or whether you have $2 in your pocket, right. Everyone is going to go through that struggle in their mind, whether it's related to their business, their personal, their career aspirations or their business aspirations, for where they want to be life or where they are right now, the frustrations.

Offense More Than Defense Mindset

Swapnil: So what I try to do personally, is try to keep my mind and it's almost like you're playing a game of offense and defense.

I've tried to be in the offense more than defense, which means I try to be more positive often than not. And that takes a lot of work.

I mean, there are days where you're just like what are you doing? What's my purpose in this world? I mean, so what if I have the 2 billion or 63 assets. So that won't change right, for your listeners or anybody, for yourself. So I mean, I try to keep my mindset where I'm in a zone where I'm more productive. I try to keep my mind in a zone where I'm being efficient with my time. I try to keep my mindset in the zone where I am being respectful of times. And also in the mindset, I'm trying to be creative, like trying to be creative in my given field.

Again, real estate is not a difficult business, a very, I would say is relatively easy. It's not rocket science. I mean, you have apartments, people pay rent, you pay your expenses and get the distributions in terms of excess cashflow. I mean, that's basically it. But how do you get creative? How do you get creative so you can maximize not only returns for your investors, but also maximize professional growth for employees, but also give your tenants that experience that everyone deserves, when living in an apartment complex.

Darin: I think that you said a lot of good things there. I think you don't really think of real estate as being creative. I'm sure you've heard of Sam Zell, I read his book.

Control Your Mind and Have a Positive Growth Mindset

Darin: And one of the things he says in the book is that he's very creative and that he finds that he was successful because a lot of people weren't able to figure out a way to make a deal work, and he was able to figure out how to make it work. And that's where his creativity came in. He's probably the number one real estate guy out there.

And so that's interesting to hear him say that and then I hear you say the same thing, so that's very cool. The other thing is, in terms of mindset, and you said it again, it doesn't matter if you have $2 in your pocket or if you have $2 million of assets or 2 billion, learning how to control your mind and not let that negativity get in the way is critical.

So with that, in today's market, we're in low interest rates, look, I'm seeing a lot of large deals come across the desk. Large portfolio deals. Some people are like, man interest rates are super low and we're at tail end, and I'm cashing in and I'm getting out. And other people are like, you know what, we're going to have inflation, and real estate is a good place to be, and I'm going to continue buying. So I want to hear your perspective on that.

Swapnil: I think both are right perspective. I think it just depends on do you feel comfortable buying in an environment at three cap rate and borrowing at three and a half or more knowing that your interest rate is going to go up?

What Makes Nitya Capital Different

Swapnil: Do you feel confident that your rent growth will outpace your mortgage or your expense. So for me, I'm a net seller in today's market. Now, by having said that, I have a portfolio of 12 assets I'm selling in Houston, but then I'm under contract of 2,500 unit portfolio in Dallas. And buying an asset, pretty large asset in Denver, Colorado. So net seller, but again, being very opportunistic because selling a portfolio at three and a quarter, three and a half cap rate, or buying a portfolio at four and a half or above cap rate, I'm trading in that differential, and I'm happy with that all day long. So it's just, again, being creative, thinking about things the way nobody else usually would think about, right.

Darin: Yes. I mean, that's fantastic. So your company is called Nitya Capital, Did I pronounce that right?

Swapnil: That's right.

Darin: So talk to me about what make, other than size, what makes you guys different? What's your special sauce?

Swapnil: Yes. I think the biggest difference between our firm and any other firm is, in my mind, I mean, again, it might not translate to everybody, but in my mind, it's we're so very entrepreneurial. I'm very entrepreneurial. I am of the mindset where the limits are only in your mind, otherwise there's no limits. So why can't we underwrite deals in Australia and Cabo, Mexico? Why do we have to do this multifamily deals in Texas all the time, right? So very, very opportunistic, very entrepreneurial, very creative, very numbers driven. At least I am personally. I'm very mathematical, very financial structuring driven.

A Thankless Job

Swapnil: And I think people miss that aspect. I mean, you'll see a lot of people in today's day and age where they think buying apartments is a flavor of the time, right, and it's easy, you can leverage.

Darin: It kind of is, right, multifamily and industrial are both hot sectors.

Swapnil: Yes. I mean, look, especially for multifamily. Because you can borrow 80% leverage today at three and a half, that is 20% equity, so all of a sudden you're buying a $30 million deal, you got to raise five, $6 million. Yes, I can do that, right. Everybody is syndicating now. But I think they don't appreciate how hard it is to manage the investment. They don't appreciate the working capital issues that you face on daily basis. Spending money for rehabs, debating for six months for lenders to fund that draw or just managing expectations of your investors. It's just a tedious business. It's almost like a thankless job in a way where, I mean, what's your life?

Darin: Until you give them their check at the end, the investor's check, then they're thankful, right? You're giving them nice returns.

Swapnil: Yes. No, not even thankful. Just like, okay, that's, you're supposed to do that.

Darin: Oh, that's, you're expected.

Swapnil: Yes. I mean, it's almost like baked in the stock price, right, they call it. So being entrepreneurial, I think the limits are only in our minds. And having done what I've done, we've done, and having the experience of running these assets and selling and buying and refinancing, it's a difficult business.

What Drives Swapnil

Swapnil: I mean, your major expenses on the property is what? Property taxes, your insurance, utilities, payroll, these are fixed expenses. You can change around your last five, 10% in your R&M and some of those costs. And then your income growth is not as easy as what people say the value add play, right. They said, okay, we'll put in eight grand a door, raise the rent by $150. Sounds great on paper. It's just impossible for this type of tenant base to achieve that because they're very price conscious.

So I'd say that one, few things that sets us apart from any other firm is just a drive for excellence for us. Drive for excellence and drive to maximize investors' return. I mean, that's really what drives me. I think a more important fact than the AUM that you mentioned early on is a track record of selling 1.2 billion worth of deals and achieving a 22% net IRR for investors.

Darin: 22%, that's amazing.

Swapnil: I think that's probably the biggest step than anything else.

Darin: It's amazing, it really is. Hey you talked about being entrepreneurial and opportunistic and you're heavy, heavy in the multifamily space. But looking at your background, you also have assets in other real estate categories as well. When I think of what has transpired in the whole COVID downturn, what has been hit more is hospitality and office and retail. So going forward, do you see playing being opportunistic in those areas? Or do you see kind of still staying more heavily weighted in the multifamily world?

An Opposite Mindset Is a Positive Growth Mindset

An Opposite Mindset Is a Positive Growth Mindset
Photographer: HalGatewood.com | Source: Unsplash

Swapnil: No, no, absolutely, man. I mean, just to give you an example of a story that your listeners like to hear. Last year, we bought about 300 million worth of assets during the COVID year and out of the 300 hundred, 130 million were commercial office assets in suburban Houston market. So now you talk about people are following the herd mentality, I'm a complete opposite mindset. I'll do anything and everything that other people are not doing. So buying an office building in the worst time in Houston and oil prices of negative 35 and 37.

Darin: You thrive on people telling you you're crazy.

Swapnil: Yes. I love it.

Darin: So what's the play on those office buildings

Swapnil: Well, look at these. I mean, look, we do our analysis. We are contrarians, but we do our analysis. We bought almost what, 130 million. So that's about a million square foot of office space last year. Average cap rate we bought it for was 9.8 cap rate at 130 bucks a foot where your replacement value is over 500 bucks a foot. And you're borrowing at one deal 3%, other is 4%. So you're getting five, 600 basis differential where there’s in place going in cap rate of over nine and a half. Add 80 to 83% average occupancy, so you not only have occupancy upside, you have rent upside, and you're going in business so strong that you have a lot of room for error.

A Good Judge of People's Capabilities

Swapnil: Since last year we've done 16% cash and cash on those deals, I would take that all day long. I can't find any asset in multifamily that didn't give me half of that.

Darin: That's awesome. What about taking office and retro fitting it into multifamily?

Swapnil: It sounds great in theory, but I don't think we've come close to trying to get there, to be honest. And again, for me the stage I am, where I sit now, for me, it's about, okay, who could be a champion of something like you say. So if some partner openly comes like I'm expert in converting office into multifamily or vice versa, whatever it is. Great, I'll support and back that person. So for me, I see myself as not an expert in everything, but I'm a good judge of people. I’m a good judge of people's capabilities and what they can achieve. And that's what led me to success, to be honest so far.

Darin: No, that's important for listeners. I mean, I've had a lot of people on that have been successful, not to your level, but that there's a theme that goes around over and over and over again, is if you wanted to learn something is go find somebody that's already done it and then learn from them. And here you are, and you've got $2 billion in assets under management, but yet you're still like, hey, look, if I'm going to go do something that I haven't done before, I want to align myself with somebody who's an expert in doing that.

A Positive Growth Mindset While Spreading Greatness

Darin: And then I'll partner with that guy and move forward and then I'll learn.

Swapnil: Yes. And I'm happy to share. In my mind, it's never about economics or profitability, I think about it, probably the last thing.

For me, it's about the people that I'm going to work with and then the opportunity. So the qualitative part comes first for me, money-wise there's enough for everyone to make. I'm not greedy at all, I'm not trying to maximize economics. I've been blessed with so much already. So it's about doing good things, spreading greatness and doing things the right way and being creative. It's the satisfaction when you get, when you make something happen and nobody else saw it coming.

Darin: Yes. I mean, I think for me that where I get charged up the most is doing something I haven't done before. And like, you don't know how it's going to turn out, but you're trying to figure it out, and you just keep raising the bar. So, hey, how did you even get into the business and when did you get in the business?

Swapnil: Yes. I come from investment banking, private equity background. So before I started Nitya, I was in a private equity real estate firm for about eight plus years. And finally, I've had enough of working in the corporate world, I want to do something on my own, and this is what I came about of it. And I didn't know what and what to buy. I found a property 37 unit apartment complex on LoopNet in 2013.

Darin: Did you really?

How Nitya Capital Started From a Positive Growth Mindset

Swapnil: Yes, 1.3 million. I got somehow a million-dollar loan after getting my friend to co-sign it. Because I had nowhere close to the net worth needed to get that loan. And I had to raise 300,000 and I was planning to put all my savings in that one deal. But I put together a presentation, showed it to a few friends and they all wanted to invest a few thousand each and that's how Nitya Capital got started.

Darin: Wow. Holy cow. Listeners, think about that. I didn't know your backstory. I just knew you were managing $2 billion in assets. But, I say it over and over again, everybody starts with their first investment property, whether it's buying a house or a duplex or for you it’s 37 units, 1.3 million. It was only a $300,000 equity raise and that's what got the ball rolling

Swapnil: That's it.

Darin:In 2013, it's not like you've been in it for 20, 30 years.

Swapnil: Seven years.

Darin: Eight years, seven, eight years. Holy cow. That's crazy. So very good run my man. That's awesome. Hey, talk about vertical integration. You guys, as you've grown, you've taken the company into other areas as well. So talk about that a little bit.

Swapnil: Yes. I think that the biggest challenge that I saw when I got into this business and I was in private equity before wearing a white-collar job and placing capital and just like any other financial institution does. And what I saw was a lack of operating partners. A lack of operating partners who are sophisticated to understand the financial terms in the world.

Positive Growth Mindset Plus Another Value Add

Swapnil: And also be hands-on in terms of the actual property management side. And to be honest, I didn't find any single operator who's good at both. So I said, let me start by doing that myself. So bought the first property, 37 units, bought the second property, 76 units, and the third property was in Houston, 160 units. And I sat in the property myself. I collected rent from a very tough tenant base.

And I did the monthly financials for my investors. I prepared the company agreement for legals and asked for wires from my investors. And I track those wires. I check those signatures. I mean, literally I was doing everything. And that's how you learn. And that was the beginning of the property management arm after that, we’re doing our own rehabs as well.

The truth is it's a difficult business. Property management is a very difficult business. Almost like, again, like I said, thankless job. You're not really making a lot of money doing property management. But you're doing it so you can ensure the success of the property you bought because you are a fiduciary to your LP’s, right? So that's how the vertical integration came. So we manage all their properties ourselves. We don't do any third-party management so far. And we like to be in control because that's really my value add.

If I'm going to my investors and I'm pitching them a deal on paper or a very nice PowerPoint presentation, what is my value add? Am I just sourcing the deal and putting a presentation together because there's anybody who can do that.

How Swapnil Walk the Talk

Swapnil: But for me, the value add is buying it and operating it and then selling it and providing good returns. And the only way I can do that with a high level of consciousness with me and saying that high level of confidence that I can do is to have my own property management.

Darin: Sure. So a few things with that. One, I mean, part of the value add where you're bringing to the table too, is a lot of the LPs. Look, they're busy doing their own thing, and they've got capital. They're relying on you to pick the right deals, to source the right deals. Now, part of your success in that execution is the property management. So you're taking that back in, so you have control over that.

But you also did something a little different than a lot of syndicators I've talked to. A lot say use third party until you get to about a thousand units and then you've got scale to bring it in house. You started out doing it yourself, right from the get-go and you learned from the ground up, both sides of the business. And the name of the property management company is?

Swapnil: Karya Property Management.

Darin: Okay. But it's all in-house, you don't do any third party?

Swapnil: That's correct.

Darin: How do you look at when you're buying deals, how do you look at mitigating risk?

Swapnil: It's almost impossible to eliminate every risk.

Darin: Absolutely. It wouldn't be an investment, right, if it was guaranteed.

How Someone With Positive Growth Mindset Mitigate Risk

How Someone With Positive Growth Mindset Mitigate Risk
Photographer: Raúl Nájera | Source: Unsplash

Swapnil: Well, especially when you're buying 60, 70s, 80s apartment complex in Houston. Or Dallas, where there is no shortage of problems that come with the old vintage assets. But then on top layer in, once in a lifetime events like hurricane that happened two or three years ago, then you have COVID and then you have Texas freeze. I mean, how do you mitigate against that, right? You don't know.

Darin: Some of those you can't. One factor I think about that is important that I think some syndicators overlook is matching the debt to the deal and knowing what type of debt to put on. I've seen some syndicators where, hey, they can sell right now at attractive prices, but they have yield maintenance. They have a rate that's 150 basis point higher, and they're stuck because they have such a high pre-payment penalty.

Swapnil: Yes. One of the biggest, yes, one of the most important steps we took in our history, I never fixed any loans.

Darin: You never. So you're all floating.

Swapnil: Every time, always been floating unless the institution made us fix because of the particular institution's investment criteria, which we did on a couple of portfolios. But majority of our assets are floating rate debts, and that's why we've been so nimble and flexible in terms of what we need to do at any given point in time because it gives you that flexibility.

Darin: Yes, absolutely. Agency floating or bank?

Swapnil: Both, agency, bridge. I mean, agency is traditionally, but in this today's day and age, you're getting bridge at low threes at 80% cost. I mean, why would you not do that?

Darin: Right. And what about, do you focus on buying caps on that floating?

The American Dream

Swapnil: Yes.

Darin: Yes, perfect. So where did you grow up? What was your upbringing like?

Swapnil: I grew up in a small town in India and I came here to this country in 1996 as young as a 15-year-old at that time. I was an immigrant, started my high school here. And look, when I grew up in India and I was thinking about America, my dream was to go to America because I thought America is the greatest country. It still is. I still believe that, but I thought there's so much happiness, there is no trouble. Everyone is rich, even the maids jump in a car.

Darin: That's great.

Swapnil: Coming here and writing was a kind of problem. You can get a shock and you see the challenges you have to face as an immigrant. So my job to take me through college was passing out pizza flyers in the same apartment complexes that we own today, working at a mall, in a candy store. I worked at a financial consultant office, making cold calls, inviting people to financial seminars. That's how I paid through my college. Went to UT, and then always been interested in finance and economics. So I did finance there and was lucky to land an investment banking job. So I did that for three years and I then transitioned to real estate, private equity world. I was in Hong Kong for eight years.

Darin: Oh, wow.

Swapnil: And then came back here in 13 and started Nitya Capital.

Darin: Awesome. Brothers, sisters?

Swapnil: Only child.

Darin: Only child. Okay. And parents, are they entrepreneurial?

The Start of the Entrepreneurial Life

Swapnil: Yes, parents. My dad, when he came to America, when we all came together in 96, my dad ran a small liquor store all his life till he just recently sold. I made him sell it.

Darin: You made him sell it.

Swapnil: Yes. I mean, look. I worked at the store growing up all the time. So that's where the entrepreneurial life started. My mom worked in a daycare and then later on, she joined my dad in running the store. But he has been an entrepreneur in a different sort of entrepreneur. And I was telling my dad, why don't you guys just replicate and multiply the liquor stores? And he could never understand their concept. Well, if I'm not there, how can I ensure that the store will be successful? And that's where I said, okay, I'm going to buy not one apartment complex, but multiple of them.

Darin: Yes. So, I mean, you took something that you saw your dad was successful with, but then you put your own slant on it.

Swapnil: Yes.

Darin: Where in the US did you grow up?

Swapnil: Houston.

Darin: It was in Houston. Okay. So your family is still there?

Swapnil: Yes.

Darin: Fantastic. And when you were growing up, did you ever think that you were, look, I'm going to be successful, I'm going to be a rock star.

It Starts in Your Head

Swapnil: Yes. To be honest, to be really honest, I always believed that. And it's so funny, you mentioned, I'll give you the story, again, another story. I had my calculus class teacher from high school came and my partner, he's also from the same high school. She came and she brought a journal that she made everyone write on the last day of class in high school in 1999. She gave me my journal and you'll be surprised. I'll send it to you. The last four lines were, it said what's your future plan? So my future plans was go get a job, save some money, start a company, have stock in the stock exchange, get rich, give all the money back to the underprivileged or the people who need it, and retire at 45. So, the teacher said you're ahead by five years.

Darin: That's great. I asked that question because look, it goes back to the mindset discussion early on. For the listeners' benefit, I think that's the first step in anything is that you actually have to believe that you can accomplish it, and then you have to make a decision to actually take action to go after it. Because some people, I don't know why, but they have that negative talk in their head and that tells them that they're not worthy, it's for somebody else. Somebody else can do it. So, I think it's important for people to hear that, like, look, way before any of the financial rewards come, it starts in your head, that you believe that you could actually do it.

Swapnil: Absolutely.

Darin: So why do you keep doing it?

Swapnil: It's the passion.

Doing Things Out of Passion and Positive Growth Mindset

Darin: Passion, good.

Swapnil: It's that passion, I’m very passionate. And if I don't do this, what else would I do, right?

Darin: You know what? I mean, that says a lot, because you could go buy a small island or go sit.

Swapnil: And then do what?

Darin: Exactly. Some people, they say to me, oh, I just want to get this and I'm going to retire. I'm like, that's when you go downhill, man, is like, when you retire and you're not working your mind anymore and you're not contributing back to society.

Swapnil: Yes, if your mind has not been stimulated, right?

Darin: I mean, that's when you start to see people kind of fall away. So I think that that's a smart approach. I mean, yes. I mean, at some point in this world, whether it be through real estate or buying and building companies and selling them, at some point, not everybody is like this. But at some point, it's not really going to change your lifestyle that much. To go from $2 billion in assets under management to five or 10, but you're helping a lot of people along the way. There may be somebody that listens to this conversation that, even if it's just one person that makes a decision to change their life. If you were sitting on the beach, not giving back, they would never learn from that. So I applaud you.

Swapnil: Yes. And then look, there's so many stakeholders right. In our business, we have investors, employees, thousands of tenants.

Paying It Forward

Paying It Forward
Photographer: Toa Heftiba | Source: Unsplash

Swapnil: I mean, look for me, really, the reason I started this business is to uplift people's living conditions. Because I grew up in the same apartment complex. And just providing a nice, clean, safe place to live, it means a lot to families, the immigrants or refugees. These people are not the most sophisticated or have access to the best healthcare or doctors or lawyers. So we can play our part. So last week, we inaugurated a hundred percent free healthcare clinic for all public. Through our foundation called Karya Cares and opened up a free healthcare clinic.

Darin: In Houston?

Swapnil: Right, in Houston.

Darin: Anybody that wants to go can just show up?

Swapnil: Anybody that wants to go can show up, yes.

Darin: Wow. That's huge.

Swapnil: So we do a lot of those things through our foundation. This year, last year during COVID, I don't know if you read, but we had announced their own private $4 million rental assistance fund, for our own tenant. This is for our tenants who lost their jobs. So we've deployed a significant portion of that money and we do a lot of stuff. We give education and we employ all these people.

So just like you rightly said, if I decide not to do this, our world will not be better off by me not doing that, right? I need to do it because if I can inspire one person. One person who says, look, this guy can do it, why can't I do it?

The Land of Opportunity

Swapnil: An immigrant from India who didn't even become a US citizen until a few years ago can employ so many people and make an impact to this world, that's all we are here for.

Darin: Yes, that's huge. Hey, talk about when you were in India and you had this vision of America and you didn't use these terms, but I'm thinking that you were thinking it was the land of opportunity. You come here and look, you saw challenges, but you made it and successfully financially and I've met a lot of other people that came over with next to nothing and did it. And then I know people that grew up here that feel like there's no opportunity. So talk to that.

What was your view before coming and why do you think that some people that come with nothing find that opportunity and some people that grow up and maybe a better class neighborhood just wants it given to them versus going and searching it out?

Swapnil: Yes. I had that vision when I was in India, that America is the land of opportunities and I still believe America is the greatest country in the world. I don't think in any other part of the world someone like me can achieve what I've achieved in America, anywhere else. Because unless you have political backing or financial strength. I mean, for me to start from this and being here, it's not possible in many other countries. And not to say that it's not difficult. Yes, country has many challenges. There's things that we need to improve, like healthcare is inefficient, immigration system is a mess.

Capitalism

Swapnil: There's a lot of inefficiencies that for me as a private enterprise can resolve it. And that's why America is the greatest country, because it's all driven by capitalism.

Capitalism is the single biggest tool to this mankind.

Without capitalism, we don't have America. So I am very driven. I'm passionate, I have a lot of strong opinions, but at the end of the day, America, it still works. You still get the stimulus checks. You still get that employment benefit sitting at home during COVID when nobody could get out, right? It still works compared to any other country and that's why we are where we are. Doesn't mean it's not tough. Things are very difficult to achieve, but if you have that passion, you have that drive to make a difference, you will figure it out and no other better country to do it than America.

Darin: Yes. I completely agree and I still believe in America. I still believe in opportunity, but you have to get up and take action. You have to get up and actually get off the couch and you have to go out and meet people that can help you. Look, I don't know you that well. This is our first conversation, but you seem like a guy that is willing to help others. I believe that a lot of successful people are that way and that if people would reach out to them, they want to help.

Good Relationships Plus Positive Growth Mindset

Darin: They want to help the next guy. Not necessarily write a check and just hand it to them, but like hey, you want advice? Here's what I would do. But then you got to get up off the couch and actually go do it, right? So that's huge. Talk about how you guys source deals because it's different when you get to your level to kind of move the needle. Are you mainly all off-market deals? Are you looking always at portfolio-type deals?

Swapnil: Yes. Majority of them. And I'll tell you, there's no secret sauce in how we find deals. I mean, look, everybody's chasing the same deals, but for us, I have a trusted group of brokers in the markets we are actively in. And if they're showing me a deal, I take it seriously and I pursue them. It also gets dictated by what's in my portfolio. If it's close to another asset or if I'm trying to build in a certain market like Vegas. I mean, I'm trying to build a portfolio, so I'll be more active there.

It's a mix and it just comes down to relationships. And brokers will bring you those deals because they know, once you say, yes, you're good to go and you're least painful to deal with. You don't re-trade. I put apart deposit day one. So these are the things you have to take the risk to get these off-market deals, which a lot of people can’t. I mean, this portfolio in Dallas, I could put up 2 million non-refundable deposit day one, which a lot of people can do that. And so these are some of the advantages you get.

The Power of Social Media

Darin: And thank you, by the way, because I'm an LP in one of those nine assets that are part of that deal. So thank you for that. I appreciate that.

Swapnil: Awesome.

Darin: So in terms of like you giving back and what's your viewpoint on social media? How involved do you get?

Swapnil: I think it's a great tool for marketing. Since I started in 13, 14, the source of marketing was physical flyers at a bus stop. Now, nobody talks about the physical flyers. It's all about your presence on social media, your videos, your ratings, your pictures. So I think if you use it for the right reasons, I think it can really play a major role.

Darin: Yes. I agree. I think that there's pieces of it that are, I don't know, they come across as a little fake and a little look at me type. But what I've found by doing it is that all of a sudden I'm talking to somebody in Ohio or in Vegas that I wouldn't have been talking to had you not taken a chance and put a few things out there for people to see. So yes, there's going to be people that will judge you for doing it. But then there's going to be other people and other relationships that will be built that wouldn't have otherwise been built.

Swapnil: Absolutely.

Darin: So I'm not a big proponent in I need to fail fast. Look, I would rather succeed than fail. There's all these quotes out there that say fail fast.

Pivot When There's a Need To

Darin: But look, there's challenges that happen and sometimes something works and sometimes it doesn't and you have to pivot. And so talk about a time where you maybe had to pivot and you learned something from it and how did you move forward from there?

Swapnil: Yes, I think you're right. Failure is just not an option for me. I am just ultra competitively driven and I just hate losing. That being said, there are plenty of scenarios where it doesn't work out the way you want it to work out. And then how do you pivot? How you manage define you. And again, it comes back to structuring and being creative in different circumstances.

I mean, I've had cases where lenders back out 48 hours before close. I've had equity back out. I mean, there's millions of stories, I can say. I mean, on operational there's problems every day. It's the manager quit. There's staffing shortage at this property, or some deal fell out of contract and there's a title issue. I mean, there's so many issues. There's lender-related issues that you're constantly trying to satisfy so many different parties. So I can't even tell you that I haven't failed.

I mean, I am having to pivot literally every second of my life because my plan usually doesn't go the way I want to go. So I'm pivoting literally every second, but that doesn't mean I'm failing. I'm still succeeding. And if you give it a longer time horizon, probably it works out better for you, whatever.

A Positive Growth Mindset in Times of Chaos

A Positive Growth Mindset in Times of Chaos
Photographer: Kalen Emsley | Source: Unsplash

Swapnil: So I have a firm belief whatever's happening is probably happening for the better, and you will see that later on. But that time it’s hard to recognize it. But yes, there's moments when some certain big decisions don't come your way. You're down, but then it's about how do you get back and solve that problem. It's almost become a challenge until I not solve that problem, I will not move on. And I try to solve the problem really fast.

Darin: It's great perspective. My business partner on my first syndication deal, Raj Gupta out of Chicago, I don't know if you've ever come across him. I only got involved in real estate market, like three and a half years ago, and he said, Darin, what you're going to learn is it's all about problem solving. There's always some new challenge that happens, and you got to keep emotions out of it and learn how to problem solve. But I love that fact that you said that failing is not an option for you. And I remember being in a training program at one point and some girl saying, hey, Darin, man, what are you going to do if this doesn't work out? And I'm like, that's just such a bizarre question to me. I don't look at it that way. It's like, I see these other guys being successful.

Swapnil: That's how 99% of people look at it, right?

Darin: Yes. I'm like, I'm just looking at what do I have to do to be successful rather than what if it doesn't, isn't successful. So I love that you said that, that's huge. Where does most of your equity come from?

The Perks of a Good Track Record

Darin: Is it still high net worth individuals, limited partners, and where do those investors come from? Is it word of mouth?

Swapnil: To be honest, I even don't know.

Darin: To be honest, I don't know.

Swapnil: I started with 6 investors and today we have 1600.

Darin: Holy cow.

Swapnil: And I've never paid, and I've never paid a single broker, dealer, whatever middle guys to bring any equity for us. And I get emails from, I run into people in different events and occasions and I get emails from people sitting in India and then some big shots of country heads. And so I'm invested in these deals. I'm like, wow, how did they get connected to our platform? And I feel very fortunate and blessed, but again, it goes back to your track record.

I think you're only as good as your track record and I'm blessed and I'm happy that I have a great reputation of track record. And I hope to continue that, because if you have that, that's all it matters and people will invest in you.

Darin: The existing investors go and tell their brothers and sisters and mothers and colleagues, and all of a sudden it just kind of snowballs. I'm still shocked at the first deal that you did, 37 units, $1.3 million in 2013. It's just awesome. Awesome. I love success stories. But what you did too, is that you kept upping the ante. And I'm not saying that you have to always get bigger units and always be growing but it's like what we were talking about before.

The Cycle of Giving and Making an Impact

Darin: If you don't keep raising the bar on whatever your next challenge is, you're going to get bored. You personally, you're going to get bored. So, how do you view success now, because you've have financial success. So what's kind of the way you look at success going forward.

Swapnil: For me, it's about giving back, making impact in people's lives, how I can improve their lives. So for me, the goal is touching 1 billion people's lives in a positive manner.

Darin: 1 billion?

Swapnil: That's correct.

Darin: And how are you going to know whether you did that?

Swapnil: I don't know. Well, I probably won't, but I'll get a sense of it if I'm making an impact, but many ways to do it, right? Some people join non-profits. My thing is earn a lot of money and then give back in the most efficient manner where it’s needed the most. It doesn't mean that you have to be rich to give, you have to give continuously, right?

Some people think, let me make million first and I'll give back whatever. It's like, no, you have to keep giving. And then you get more. It's almost like a circle. You give a dollar, you're going to get $10 back. I firmly believe in that. So I keep giving and I keep getting blessed with more deals, more investors.

Darin: That's a weird thing in life, and not just giving. It's like a lot of different things. Look, you want more energy, go work out. All of a sudden you have more energy, it doesn't make sense, right?

Swapnil’s Sacrifices

Darin: You sit on the couch and you feel like blah. You go work out, and then all of a sudden you want to eat better food. And you want more money, give money away. All of a sudden, somehow it comes back, it's crazy.

Swapnil: To make money, you have to invest money. Invest in people, invest in company, invest in assets, everything.

Darin: So what sacrifices? Any sacrifices along the way?

Swapnil: Many. Personal life, obviously, and I have a seven-year-old son and wife, beautiful wife. So time gets taken away from them and when you're responsible for a portfolio this size, you've kind of mind is always occupied, which you can't spare for little things that normal people can do. So yes, those are some of the sacrifices that you have.

Darin: So you're at a completely different level than I am. I'm an entrepreneur and I fall into that where, look, I'm home, but sometimes my mind is churning. It's thinking of how to solve whatever challenge I'm going through in my business or whatever. And so, when you're running a company to your size, I have to imagine that's a challenge to kind of shut, try to shut that off when you're with your family.

Swapnil: Absolutely.

Darin: What about networking and being a part of different mastermind groups and different groups. Do you still do that and why?

A Different Take On Mentorship Groups

Swapnil: In fact, I never did that and I was never a part of any group. I was never a part of any networking group, and I still don't. I mean, I'm happy to be a speaker and share my knowledge and whatever advice I can give. But I think it worked out better because I didn't have to hear anybody else. I didn't have to read the so-called experts or people with experience when I started the business. Because they've always have their wisdom and your mind gets clouded by what you're hearing. So I think I stayed away from all of that. And I was fortunate that almost like an outsider, I came in and started raising capital and doing deals. It worked out great for me and I haven't changed that aspect.

Darin: Awesome. Multifamily is the biggest asset class and most of the listeners are either wanting to be investors in multifamily or they're syndicators looking to scale up. But there are some new people in there. Why do you like multifamily more than other real estate asset classes?

Swapnil: Well, I didn't know any better where else to invest, so I just started buying multifamily because it's just easy to manage. The scale, you can build very fast. Single family, it takes long time to build up a scale. So we are fortunate that we actually have multifamily as an asset class, because if you really step back, multifamily doesn't exist anywhere else in the world. Maybe Germany there is a bit, but there is no multifamily asset class. In Asia, it's all individual titles.

Multifamily in America

Swapnil: So you sell the flats or the apartments, not rent the whole complex. Canada, you don't have anything. I mean, really there's no concept of multifamily except America.

Darin: That's crazy when you think about it, right?

Swapnil: Yes. Again, I came from a real estate financial institutions. So I had the experience in terms of underwriting and whatnot, but multifamily at that time, seemed cheap. We’re paying 25, 30,000 a unit in 14, 13, and you're like, how can you really go wrong with paying these prices. I mean, land is probably worth more and that's why I got really aggressive so early on because I didn't think it would last that long. It was a short window of opportunity, and now you're seeing that play out, but paying 25, 34, 35, 40 a door, it was insane at those times. It's just so cheap. But again, there were people that were thinking that I'm overpaying at that time.

Darin: That's funny that people thought you were overpaying at 30 a door.

Swapnil: Yes. Because they're used to paying 15, 10, 20 a door.

Darin: Yes. It's funny. When I got involved, it was like 80 a door and I had some people that said, hey, Darin, man, I was buying at 30, 40 a door and I'm out. This is too much, and now it's like, 120 or more? You know what I mean? It's crazy. I don't know how much further it goes but, I guess what's your view on that in terms of Texas versus other major metropolitan markets? I'm originally an East Coast guy from Connecticut and I've been in Dallas for 11 years now.

Handling Risk With a Positive Growth Mindset

Darin: I am a believer that we're not going to ever be on top of the coasts in terms of, right on top rent, residential values, per unit values. But I think that that gap can continue to squeeze over time between the differential. Because it's still so much more affordable here than it is in most major other metropolitan markets.

Swapnil: Yes, absolutely. Absolutely. I think we have to step back and really appreciate we live in a state where it's net migration, population growth, there's job growth, if you look at Texas as a whole. A lot of good things, but again, there's advantages to living around the coast. So I don't think we'll ever get there like what you said. But it's just how much more juice is left. It comes back to your risk-reward. I mean, it might be better off building a new product versus paying 150 a door for a class C product. I mean, it's just all these who knows the answer. If you make the best calculations in your mind, then go ahead. You just got to have conviction in whatever you're doing.

Darin: So you brought up a good point. I mean I've heard a lot of syndicators over the last couple of years, looking to trade up. Move from C assets to B plus, A minus type assets. And then I've also been hearing people talk about, hey, it's getting so expensive per unit. Maybe I should just build. So what's your viewpoint on build versus existing?

Swapnil: Yes. There's no right or wrong answer. You can build, it's a great time, but then are you good at building some things or are you going to hire a GC?

The Next Big Stretch Goal

Swapnil: Who's going to sign on those completion loan guarantees. It's a different ball game. Then you're basically forecasting how the market will be two years later when you're leasing those apartments. So it's sacrificing cashflow versus upside at the end. So it just depends on your underwriting and what you're comfortable with.

Darin: Awesome. Hey what do you like to do outside of work?

Swapnil: I love sports.

Darin: What kind of sports?

Swapnil: Every sport. I wasn't happy about the Astros getting and losing three games in a row to you guys. But I'm a big baseball guy. I love basketball, football. Cricket, I grew up in India. I love cricket. I love working out. So a lot of outdoor, playing golf. So I like to do a lot of those things.

Darin: Awesome, you like to play golf?

Swapnil: I like to play golf, doesn't mean I'm good at it.

Darin: Well, hey, it's just about a matter of getting out and having some fun, right? Having a few pops afterwards. Very good. Well, what's the next big stretch goal for you? I heard you say early on, and they are not my words, they are yours, a hundred billion.

Swapnil: 2025, a hundred billion.

Darin: 2025, a hundred billion, wow.

Swapnil: We'll do another podcast if we get there.

Darin: That's awesome. That's awesome. Well, I really appreciate you coming on. I think it's huge for people to hear that sometimes when you get to the level that you're at, people just think that you just landed there. It's important for people to understand that, look, you started just like a lot of other people start. And so, get out there and start taking action and you may not get to his level, but hey, if you get halfway there, you're still doing pretty darn good. So I really appreciate you coming on the show. Listeners, I hope you enjoyed that one. Until next week, signing off.

How to Reach Swapnil Agarwal

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