November 20, 2024 • 40 mins
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ABOUT NEAL BAWA
Neal Bawa is CEO / Founder at Grocapitus and Mission 10K, two commercial real estate investment companies. Neal’s companies use cutting-edge real estate analytics technology to source and acquire OR build large Commercial properties across the U.S., for over 1,000 investors. Neal shares his team’s unique and cutting-edge real estate data methodologies to connect with geeky and nerdy (or just data-driven) investors who share his vision – that data beats gut feel by a million miles.
Over 10,000 real estate investors have taken his free Real Estate Data Analytics course on udemy.com and the course has over 1,000 five-star reviews. Neal speaks at dozens of real estate conferences across the country and virtually online. Neal believes that we are at a turning point, where traditional commercial real estate will combine with Proptech and Fintech technology disruptors, and will truly reach its potential as a tradable, highly liquid asset class that will rival and eventually beat the stock market in its size and scope.
THIS TOPIC IN A NUTSHELL:
Neal as the “mad scientist” of real estate
How Grocapitus started
What is mission 10k?
Acquisition and Development
Challenges of interest rates spike
His Insight on the real estate market in the next two years
How to Forecast Housing Demand and Supply
Knowing the different markets to invest
Effect of the spike of interest rates on Development
FED’s role in rates and impact on the economy
About the Super Value Add Deal
Location, metrics, and what they like about the property
Raising capital
Value Add Implementation and Returns
Challenges encountered along the way
Connect with Neal
KEY QUOTE:
“A lot of times you'll find opportunity in a deal, but you have to be able to follow through and solve challenges. You constantly try to look for solutions to every problem. That is the true value we created there.”
SUMMARY OF BUSINESS:
Grocapitus Investments is a very fast-growing Multifamily Real Estate Investment company based in Fremont, CA. Grocapitus sources, acquires, manages, and develops large Multifamily, Build-to-Rent, and Fourplex communities in many states across the U.S. We help people become financially free by investing in apartment buildings, student housing and self-storage properties in high-quality markets nationwide. We also build best in class new construction multiplexes and student housing.
ABOUT THE WESTSIDE INVESTORS NETWORK
The Westside Investors Network is your community for investing knowledge for growth. For real estate professionals by real estate professionals. This show is focused on the next step in your career... investing, for those starting with nothing to multifamily syndication.
The Westside Investors Network strives to bring knowledge and education to real estate professionals that is seeking to gain more freedom in their life. The host AJ and Chris Shepard, are committed to sharing the wealth of knowledge that they have gained throughout the years to allow others the opportunity to learn and grow in their investing. They own Uptown Properties, a successful Property Management, and Brokerage Company. If you are interested in Property Management in the Portland Metro or Bend Metro Areas, please visit www.uptownpm.com
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Episode Transcript
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Intro speaker (00:03):
Welcome to the Westside Investors Network. Win,
your community of investingknowledge for growth. This is
the Real Estate ProfessionalsInvesting podcast for real
estate professionals by realestate professionals. This show
is focused on the next step inyour career, investing. Thank
you for listening.
And please, if you like ourcontent, rate us on your podcast
(00:24):
provider. Just a quickdisclaimer. The views and
opinions expressed in thispodcast are for educational
purposes only and should not beconstrued as an offer to buy or
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investments, or take any otheraction.
Trent Werner (00:40):
Welcome back to another episode of the Deal Deep
Dive segment on the WestsideInvestors Network podcast. I'm
your host, Trent Werner. In thissegment, our featured guests
will share their unique storieson a specific deal they've
invested in. We will dive deepinto finding the deal, financing
the deal, writing an offer, andthe due diligence. Do us a solid
and smash that subscribe button,leave us a rating, and share
(01:03):
this episode.
And now, let's dive deep.Welcome back to the Westside
Investors Network podcast. I'myour host, Trent Warner. On
today's deal deep dive episode,we're joined by the one and only
Neil Bawa with Grow Capitis andMission 10 k. Neil is very well
known across the real estatemultifamily syndication space
(01:23):
and presents across the countryat different conferences and
classes and boot camps.
Today, Neil is gonna share hisinsights and opinions on where
multifamily real estate is goingto be over the next 24 months
and beyond, as well as you'regoing to hear about a super
value add deal that Neil andBrokapadis did just outside of
(01:45):
Chattanooga. Now let's welcomeNeil Bawa. Alright. Westside
Investors Network podcast. Wegot a huge guest today, Neil
Bawa with Grow Capitis.
Neil, thanks for joining us.
Neal Bawa (01:57):
Well, thanks for having me on the show. I'm very
excited to be here.
Trent Werner (02:00):
I was, I was fanboying Neil a little bit
before we started recording.I've heard him talk at the best
ever conference, I think 3 yearsin a row now. It'll be 4 this
upcoming year. Neil is I mean,can I call you a genius when it
comes to real estate? Are youokay with that?
Neal Bawa (02:15):
I prefer mad scientist because I that really
is an accurate description.
Trent Werner (02:19):
And, yes, Neil is the mad scientist of real
estate. Very insightful, veryknowledgeable, plenty of
experience. How long have youbeen doing it now?
Neal Bawa (02:27):
10 years for a technology company that I was
running and then 10 years withinvestor money. So 20.
Trent Werner (02:34):
Very nice. And Grow Capitis, that means Grow
Capitis is 10 years old?
Neal Bawa (02:37):
So this is my second company. I used to, work with a
partner and then eventuallydecided to do it in my own. Grow
Capitis is 6 years old, and thenMission 10 k is about 3 and a
half years old. And then beforethat was 5 years with financial
attunement. And then 10 years, Iwas building I was building
campuses from scratch for mytechnology company because we
were you know, we just had ahuge amount of cash coming in,
(02:59):
and we didn't wanna pay taxes onit.
So we would build our owncampuses. So instead of being
you know, having a landlord,we'd basically be our own
landlords. And so I built 7campuses in 10 years. It was a
it was it was a lot of fun, butalso a lot of stress because,
you know, you you had a companythat was growing at 30% year
over year with 100 of employeesall reporting up to me. Our our
CEO was sort of partly partpartly retired.
(03:22):
And in the evenings, like, at,you know, 3 o'clock, we'd finish
our meetings. And then from 3 to9, we'd be building campuses and
doing architectural and designwork and going out and, you
know, meeting the city because,you know, typically, the city
closes at 5. So it was, it waslike having this other job,
which was both stressful andvery exciting.
Trent Werner (03:41):
And that that experience, I guess, kind of
correlates with Mission 10 k.Right?
Neal Bawa (03:46):
It does, to with both companies. So Growcapitus has
built thousands of units ofapartments. Mission 10 k builds
only townhomes. So mission 10 kis a very specific mission to
build 10,000 rental townhomes,so it does not build apartments.
Grow Capitalist currentlyactually is in a sweet spot
right now where we have a 184unit close to the end of lease
(04:08):
up in Provo.
We have a 240 unit halfwaythrough lease up and a 320 unit
going into lease up. So we're inall phases of lease up right
now. We've been doing very heavyconstruction in the past. Now
we're sort of more on the on thelease up side for for
apartments. So Grow Capital isbuys and builds apartments.
(04:28):
You know, of our 9 exits, 7 areare value add to our new
construction.
Trent Werner (04:34):
And what do you I mean, what do you focus on more?
Do you focus on development orstuff that's already existing
and and go in and do the valueadd for it?
Neal Bawa (04:41):
It's 2 different companies. There's different
teams. So we have an acquisitionteam and we have a development
team. They don't really overlapwith each other. So think of it
as 2 separate companies.
So I can say that me and mypartner are the only people that
are on both sides. But otherthan that, they function as
independent companies.Development is more challenging,
especially in the last 2 years.But, on the value add side,
(05:02):
we've seen a decline in value. Imean, obviously, you know,
properties are 25 to 30% cheaperthan they were in at the peak in
2022.
And so one has to create a lotof value when we are working.
Like, for example, I have aproperty in Texas in Killeen,
which is north of Austin, wherewe've applied for what is known
as PFC, you know, where once wequalify, our property taxes will
(05:23):
go down about $50,000 a year.And that $50,000 a year
basically creates a $1,000,000more in NOI value and helps us
with our refinance because theproperty, as you can imagine, is
quite challenged at this pointof today at this point today
because we bought it in 2022.
Trent Werner (05:39):
And you said so 7 of the 9 exits you said were
value add. Of the the 2, arethose ones that, you know, that
you started way back in the day?Are you holding those for 7, 10
years? Or how long are youholding these ones that you're
developing?
Neal Bawa (05:53):
It's a it's a mix. You know, so one of them, we we
actually started building it 2months after COVID started, and
we sold it in 20 late 22, lateearly 23. So it was a quick
development, quick exit. Theother one, yeah, it took a
while. It it took a while to do,and so it's from it's it's a pre
COVID property that we exited,last year or year year before.
Trent Werner (06:13):
And the ones that you were mix. The ones that you
were talking about that are, youknow, in that lease up or pre
lease up phase, how long haveyou had those ones on your
books?
Neal Bawa (06:21):
Somewhere 2019, somewhere 2020, somewhere 2021.
So so those are the sort of the3 years where we did a lot of,
you know, let's do new projects,bring in equity. You know? But
there was one project had27,000,000 equity, one had 17,
and another one, I think, was12. So different project sizes.
So we obviously, that was veryeasy to raise equity back then,
(06:43):
and so we did a lot of theseprojects. Now we're like, oh,
let's slow down. Let's justfocus on getting these projects
completed and getting themleased up. So we're very much in
implementation mode right now,optimization mode where we're
basically optimizing ourproperties. There's a lot more
asset management meetings and alot more, you know, delinquency
meetings.
There's a lot more meetingsabout, you know, what what are
(07:04):
we going to do to bring up NOIthan there were in the past.
Trent Werner (07:08):
And with these, I guess, with the challenges that
some of the interest rateincreases have caused, I know I
think it was in 2023, the thekind of mantra for best ever
conference was survive to 25,which it sounds like, you know,
optimization, asset managementis the focus, which, you know,
falls in line with that. Wheredo you see the market and grow
(07:28):
cap at Mission 10 ks going from,you know, the beginning of 2024
through 2025 now with ratesstarting to come down a little
bit?
Neal Bawa (07:38):
So I think we're still in that optimization mode.
I I don't I think survive to2025 works. I think I've added a
piece, and you'll thrive in2026. Right? So 2026 is turning
out to be, for a variety ofyears, a phenomenal year for
multifamily.
I think it will be one of thebest years we've had. Not as
good as 2022 because that was alittle crazy and bublish. But I
(08:01):
think that we will we will seerates 5 year fixed rates under
4% sometime in 2026. Not maybethroughout the year, but, you
know, we'll see under 4. Justfor reference, today, if I
wanted to get a 5 year FannieMae or Freddie Mac locked loan,
right, that's fixed rate, I'mright around 5.2%.
(08:23):
So we'll see a 100 basis pointreduction in 2025. We'll see
another 50 basis point thisyear. So that's a 150 basis
points. So if I take that 5point to apply the 150, we could
be as, you know, as little as3.7, but it the math doesn't
exactly work that way. So Ithink it's possible that at some
point in 2026, we could see 3.99percent for a 5 year fixed loan.
(08:47):
And if that happens, theindustry will do really well.
What I'm more excited about isnot the lowering interest rates.
What I'm much more excited aboutis what will happen with rents
in 2026. So in 2024, we've hadthe largest delivery of new
apartment units since 1972.700,000 units have been
(09:09):
delivered this year.
The market has absorbed almostall of them, and to be honest,
there's been slight negativeabsorption, but overall
absorption has been phenomenal.A lot of it is because of, new
immigrants coming in intosouthern markets. And so the
absorption rates have beenincredible, but still we haven't
managed to absorb 700 unitswithout some discounts and some
lot you know, reduction inoccupancy. So we've seen
(09:31):
occupancy fall by roughly about1% this year from above 95 to
below 95%. And the the the thingthat's very exciting is a lot of
times, you know, I makepredictions, but there are
really guesses.
Right? You look at the data andyou make what you think is the
appropriate guess. But there arecertain areas where it's fair to
say that I'm not reallyguessing. I I really know. And
(09:54):
one of the way one of the areasthat I feel the strongest about
when I make a guess is aboutwhat would be the supply for
any, what would be the supply ofapartments 2 years in the
future?
Now you might say, how is yourcrystal ball so good? The answer
is, in the United States, ittakes 2 years to build
apartments. While it's possiblethat somebody can build 1 in 18
(10:14):
months, it's also possible thatsome projects will get delayed
and be built in 30 months. Sothat 24 month sweet spot means
that if I wanna make aprediction of how many apartment
units will deliver in the secondhalf of twenty twenty six, 2
years from now, all I have to dois look at permits that are
being pulled today. Permits areexpensive.
So when a developer goes out andpulls permits today and pays
(10:37):
300,000, 500,000, a $1,000,000for permits, They only do that
when the construction loan issigned because they wouldn't
pull the permits unless theirconstruction loan signed. So if
the construction loan signed,you're gonna be in construction
within 30 days. Right? Becausewhat's the point? You're you're
now paying for equity.
You're paying for debt. So ifthey're starting today, I know
(10:57):
that they're gonna complete 24months from now. And so when I'm
looking at the total number ofpermits that is being pulled in
2024 on an annualized basis,that number is somewhere around
238,000, annualized. Our demandis 450,000 units a year. Right?
This year, demand was muchhigher because of the
immigration boost that we gotfrom the from the southern
(11:19):
border. So demand was more like5.50, 600,000, and we delivered
700,000 units, which is whyoccupancy came down. We saw that
rent growth this year was, youknow, 1%, 1 a half percent,
somewhere in that range. So itwasn't very good. Next year, we
that number, that 700,000delivery shrinks and goes down
to maybe 450, 500,000.
(11:40):
And our, you know, and that's sothat's our delivery. That's our
supply. Our demand is rightaround that 500,000. So next
year looks like a goodequilibrium year, year. But 2026
looks like a year where we willonly deliver 2238, 248,000 units
in a year where there's 4 50,500 k units of supply needed,
(12:00):
right, for an equilibrium.
So now you have the reverseproblem that we have this year
where there's too little supplyand too much demand. And so we
could see rent growth in theUnited States in 2026 as a
nation be over 5%, andindividual markets could easily
be 6, 7, 8, 9, 10, 11%. That'swhat I'm most excited about. So
(12:21):
I I tell people, now is a greattime to buy, and you need to
target to sell it in at the endof 2026. So, you know, get a
bridge loan.
If you're getting a fixed loan,that's fine as long as you go
with a lender that will give youa supplemental loan because at
the end of 2026, you should beable to get a supplemental loan
and cash out your investors. Ifyou do that, that's almost as
(12:42):
good as selling the property.Not quite. I prefer to sell it,
but almost as good. So so that'ssort of my view of where we are
for the next 2 2 years.
One of the key things is I Ihear a lot of people coming on
these shows, and they don'tfully understand that the £800
gorilla is supply. There's a lotof conversations about asset
(13:02):
management. I think that'sreally great. There's a lot of
conversations about, you know,cap rates, but the 800 pound
gorilla is supply. And supply isthe one thing where you can be
sure about the future becausepermits today means supply 2
years from now.
Right? Right. And there's notenough supply in 2026. So I'm
I'm very excited about being inthat market. Pricing power
(13:24):
should start to return next yearbecause in the second half of
next year, in most markets inthe US, and when I say most
markets, I mean sort of thehotter markets, you know, the
Phoenix, Dallas, you know,Houston, Austin, San Antonio,
Nashville, you know, and and theFlorida markets.
By the second half of next year,supply will be slightly lower
(13:44):
than demand, so pricing powerwill return. Right now, the
multifamily industry in thesesouthern markets doesn't have
pricing power. Why? Becausethere's a lot of incoming supply
coming in, and that supply is 1month off, 2 months off. And so
it gives the people that haveclass b and class c very little
pricing power to raise theirtheir rents.
So rents are, you know, mostlyflat with the exception of the
(14:06):
Midwest, which is doing reallywell in the Northeast because
the Midwest and the Northeastdon't have much supply coming
in. Most of the supply is Westand, Southwest and and
Southeast. So so the theSouthwest is really suffering.
And and on average, I'd say if Ilook at the top 10 Southwest
markets, rent growth for thelast, you know, year has been 0.
Trent Werner (14:27):
Right. Well, and that's I've had some
conversation recently with, youknow, other professionals in the
industry and they they've talkedabout Arizona, Texas maybe
having negative, you know, rentdecreases over the last 12
months where Florida maybehasn't seen that quite yet?
Neal Bawa (14:45):
Not quite, but I think Florida is a trailing
market. So we are now seeingrents fall in Florida. So it's
Florida just sort of avoided itfor a while, and and there's a
variety of reasons Miami wasdoing well. So as a state, one
can say that Florida rents arenot falling yet. But though I I
think in the last quarter, theystarted to fall.
So the same story that we'veseen in Texas and Arizona is
being repeated there. Keep inmind that Arizona as a state has
(15:08):
not lost it's not negative rentgrowth, but Phoenix is negative
rent growth, where, you know,Tucson's okay, maybe just slight
negative rent growth. Fair youknow, the the other smaller
markets are actually doing okay.So it it's it's you know, you
know, when you sort of roll itup to a to a state level,
sometimes you miss the fact thatdifferent markets are actually
(15:28):
reacting differently. ButPhoenix is negative rent growth.
Phoenix, Austin are significantright negative rent growth, San
Antonio. And we've seen a littlebit of negative rent growth in
the last quarter in Dallas, alittle bit in Nashville, and a
little bit in Tampa. So,overall, it's not a lot of
negative rent growth. You know,the the US still had roughly 1
(15:49):
and a half percent rent growthin the last 12 months. The next
12 months, I'm anticipating morelike 2 and a half, per perhaps
3, And then we get a bonanzayear in 2026.
Trent Werner (15:58):
Right. So what I I mean, based on what you were
just talking about with delivernumber of units that are gonna
be delivered, it sounds likethis interest rate conversation
that everyone's having that, youknow, everyone normally talks
about you can't make a dealpencil right now. But the more
important piece that peopleshould be talking about related
to this huge spike in interestrates was what it did to
(16:22):
development.
Neal Bawa (16:23):
Yep. Yep. And I think that's the story. Right? That's
the that's the story.
The the catch is it's a 2 yearlag.
Trent Werner (16:30):
Right.
Neal Bawa (16:30):
Right? So this this development is really hitting
our rents hard right now. It'shitting our cap rates really
hard because there's, you know,class a properties that you can
buy at 5a half cap. So it'sreally hitting us hard now, but
we get the benefit of it 24months from now. Right?
When development does theopposite, it becomes a a a
(16:51):
beneficiary to value add asopposed to right now being the
biggest the the the evil Sauronthat's affecting, you know, the
the market.
Trent Werner (17:00):
Yeah. And you and you talked about a 150 point or
basis point reduction ininterest rates, give or take.
And is that strictly based onwhat the Fed is is saying that
they project is gonna be theinterest rate?
Neal Bawa (17:13):
Yep. The Fed is currently projecting that in
addition to the 50 basis pointrate cut that we've already
gotten, they are projecting a150 basis points by the end of
next year. I think they're righton track. So, I mean, so far, I
have to say this. I can't sayanything negative about the Fed
except for the fact that theywere late to this party.
Right? So they they should havestarted cutting rates or raising
(17:36):
rates about 6 months before theydid. So their mistake and and I
have to say, unlike ourpoliticians who never take any
responsibility, the Fed hasrepeatedly taken responsibility
for its mistakes and said, wewere late. We thought it was
transitory. We misread themarketplace.
Now we wanna make sure that wewe get ahead of it. Well, right
now, the Fed's ahead. At thispoint, the Fed I mean, 3 month
(18:00):
inflation is running at 1 a halfpercent. So there's no pressure
on the Fed. The Fed they caneven cut 50 basis points in
November they if they want to.
They probably won't because theFed really likes to say and they
opened with a 50 basis pointsurprise, a a really good
surprise, And now they'rethey're gonna go 25, 25, 50. The
Fed basically says, we look atthe market every month. We'll
(18:20):
you look at what we see. Itmight be a 50 basis point cut, a
25 basis point cut, or 0. Wemight just hold for a meeting
and say, okay.
We'll just let it go to the nextmeeting. So they're very, very
data driven, and I really likethat. The and the other thing is
that, you know, as far as Iknow, neither Donald Trump nor
Joe Biden have been able toinfluence the Fed, which is
great because both of these guysare boneheads when it comes to
(18:43):
actually understanding monetaryand fiscal policy. The Fed
actually knows what they'retalking about and should be left
alone. And so I I like that, andI think the Fed's right on
track.
150 basis points by the end of,2025.
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Trent Werner (19:29):
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uptownsyndication.com today tolearn more. I don't know if how
much you pay attention to I'msure you pay attention to past
data, but I saw something onlinethat the last time the Fed cut
rates by 50 basis points, arecession followed about 12 to
18 months after that.
Do you have any opinion on that?
Neal Bawa (20:07):
I I do. And I think that the answer is yes. So 7 or
8 times out of 10, when a fedcuts 50 basis points, you will
have a recession, but it's notguaranteed. Also, it's clear
that the Federal Reserve overtime has been getting better at
slowing the economy just enough.Keep in mind, their job is very,
very difficult.
(20:28):
What is the job? What is the Feddoing? The Fed's job is to bring
the economy to a near haltwithout tipping it into a
recession. Right? Near halt.
Right? So in an ideal scenario,the economy basically slows to a
GDP of roughly 1%, and then,basically, they pick it up again
by doing rate cuts. That'sextremely difficult to do
(20:49):
because because you're actuallytrying to predict what will
happen in the next 6 months.Right? The Fed obviously can
look at, it can't look at pastdata because it has to make
decisions based on what happenedin the last 30 to 60 days and
extrapolate that 6 months out.
So, yeah, there's a pretty highchance of, you know, that that
it could happen at this point intime. They have an advantage,
(21:09):
though. One of the things is wecan say well, one of the things
that I like to say and you'veyou've heard it in in in my
YouTube videos is the FederalReserve, out of the 9 rate
cutting cycles that they've beenpart of since World War 2, 8 of
those went into recession. Andthe 9th was so close that it
wasn't called a technicalrecession. It wasn't called a
(21:30):
technical recession, but,really, you could have called it
a recession because the theeconomy basically fell to 0, but
just didn't dip long enoughbelow 0 for it to be called a
recession.
So, basically, 9 times at at atime, the fed put us in a in a
recession, which is anacceptable compromise for them
as long as they kill inflation.Right? But none of those 9 times
(21:52):
was the Fed at did the Fed havethe benefit that it has right
now where unemployment is at4.2%, and they're already
cutting. They're alreadycutting. Right?
So inflation's down to 2 a halfpercent or a little bit less on
a 3 month basis. It's actuallydown to 1 a half percent. And so
they're down, but they've onlyaffected employment to the 4.2%
(22:12):
level, where if you look at thelast 9 times, by this time,
unemployment was already at 5%,6%, or even 7%. And that's how
much work they had to put in toget the inflation down to this
level. So this time, theydefinitely have an extraordinary
advantage.
I don't know if that means weavoid a recession or not, but
there's it's very important toacknowledge that the Fed has
(22:33):
done a much better job than itthey did in previous cycles, and
maybe there's external factorshelping them. One of the big
factors that's helping the Fedright now is this extraordinary
infusion of people from thesouthern border. While I'm not
at all a fan of what ishappening with immigration, not
at all a fan, there'd beobviously, the the data
scientist side of me, thelogical side of me says, when
(22:54):
you inject 6a half 1000000people into your economy, you
will get a boost. It may not bepermanent, but what we needed
was a temporary boost at theright time, and we got it at the
right time. And it basicallykept the economy humming, which
kept the unemployment rate low.
In the future, obviously,there's there's negative
consequences. But by that time,the inflation rate settles and
(23:16):
we may may not get a recessionthis time. So there's an
advantage there. Again, I am nota fan of what's happening with
immigration, but themathematical impact on
unemployment is the opposite ofwhat politicians like to say.
You know, mass immigrationdoesn't reduce employment.
It increases it. And that'sanybody who is a not a
(23:39):
politically biased person willtell you.
Trent Werner (23:42):
Right. Well, we've we've talked about the economy.
We've talked about your,insights and your opinions on
what's gonna happen here in thenext couple of years. Quickly, I
wanna talk about a deal in,Chattanooga, I believe. Sure.
Yeah. You said you just soldthat one how long ago?
Neal Bawa (23:57):
Well, actually, sold a couple years ago, but I I
thought I would highlight itbecause it's so unique. And and,
you know, we talk about valueadd, and this deal is what we
call a super value add. So it'sa super value add deal. And so
it's a 151 unit deal. It'scalled Park Canyon.
It's in a suburb of Chattanooga.Chattanooga has Chattanooga has
(24:19):
about a half 1000000 people, andthis suburb is about 37,000
people. It's called Dalton.Dalton is the carpet and
laminate capital of America, andso they have a lot of factories
there. So we bought thisproperty, and we bought the
property.
It was very lush. It's on theside of a hill, very rolling
hills, and it was built in theeighties. And, you know, I was
(24:40):
roaming around at the property,and I realized there's a lot of
trees. And there's also thismassive tennis court. And and
next to the tennis court,there's this area where clearly
something used to be therebecause there's no trees there.
It's just like there's dirt. Andso I go there, and I sort of use
(25:01):
my boot to dig around, and Irealized that I'm as, you know,
as soon as I dig down 3 or 4inches, there's concrete. So I'm
like, what is what is this? Whatis this? So I go back, and I
talked to the property manager.
She'd been there for 20 years.She said, yeah. Yeah. You know,
about 10 years ago, there werethere were 20 units. There was a
building there, and it burneddown.
And, we just decided to keep theinsurance money, And we had this
(25:23):
guy come in with a bulldozer,and he just bulldozed it. So you
have a full foundation there.Right? Oh, this is really
interesting. We had no idea.
I mean right? Because it I mean,the freeze were sort of covering
the top of that area. Like, thatthis is super interesting. So we
have a you know, we call ourlender friendly lender, and we
say, hey. You know, there's just20 units, so we'd like to build
it.
And they're like, no. No. No.No. No.
(25:44):
I own this property. I ain'tletting you get another lender
in here. So we're like, oh, thatthat sucks. So we go to the
city, and we say, hey. Is thereenough parking for this?
And so, of course, there'senough parking because you
already had 20 units there. Andwe're like, yeah. But we we
don't wanna build 20. We wannabuild more. So we huddle with
the city for a few weeks, andeventually, the city says, fine.
(26:04):
You know, we're looking at allthe parking, you know,
requirements. You can build 29units. So we're like, okay. But
we don't wanna we don't wannareuse the found we we wanna
reuse the foundation. I said,like, well, if you reuse the
foundation, there's a catch.
Because you wanna build 10 moreunits, now you'll have to add an
extra floor. And if you add theextra floor, you have to add an
elevator. And we're like, no.No. Elevators are really
expensive.
(26:25):
All that concrete. No. No. No.We don't wanna do that.
So we're, like, thinking aboutthis thing. You know, if it's 20
units, it it doesn't reallywork. If it's 20, 30 units, then
we have this elevator issue, andwe don't wanna, you know, have
the elevator. So we come up witha solution that the city
accepts, and this is a veryunique solution. So imagine a
property that is sloped.
Okay? So this property issloped, and we're building by
(26:49):
the side of the property. Sowhat we did was, on one side,
the property on the on the sidethat the stairs are, the
property is actually, you know,there's there's, it's so it's
it's 10 units, 10 units, and 10units. It's 30 units. Right?
On the other side, because thethe the there's a slope, it's
(27:09):
only 2 floors. And so we go backto the property to the city and
say, well, if you think aboutit, you can either count the
stairs on this side or stairs onthat side. And this side, the
stairs are only 2 floors, so wedon't need an elevator. Right?
And they're like, oh, we seewhat you're doing, you sneaky
bastard.
You know? So they're like, okay.We'll we'll come. We'll do a
site visit. They come and do asite visit, and everyone's sort
(27:31):
of laughing about it.
Eventually, the city says,that's fine. We'll just count it
on the right side. So now youhave 2 floors, so you don't need
an elevator. So now now we'relike, okay. Great.
We can build 29 units, butwhere's the equity going to come
from? Because the bank told usyou can't get another loan for
this because it's inside ofbank's property. Right? Property
is really owned by the bank, andthe bank's like, we we won't do
it. So we go back to ourinvestors, and we say, look.
(27:51):
The look. We're looking at this.The math is really compelling.
We got this quote for $2,900,000to build 29 units, 100,000 a
unit. And there's no way theseunits are worth less than a 150,
160,000.
Because it's a nice property. Ithas a lake and, you know,
fountains and greenery, and it'sfully amenitized. It's pretty.
It's pretty. It's nice look.
Nice look. And and we we had thehighest rents in the submarket.
(28:13):
Nobody else had rents anywhereclose to us. So we're like and
and if we can get those rentsfor 8 foot ceilings, we can
definitely get better rents for9 foot ceilings granite
countertops, but we're onlybuilding these at a 100,000 a
door. So we go back to ourinvestors, and we say our bank
is refusing to give us a loan.
We would like you guys to giveus $2,900,000 in equity to build
(28:37):
it, right, from our database.And we'll put in 250 ourselves
just to get us started. So wego, we talk to the investors, we
beg, borrow, steal, andeventually, we ended up with
$2,900,000. Now we didn't quiteget to 2.9 from the investor, so
we did have some money that camein from the outside. And the
whole thing basically took about14 months.
And because there there was nodebt, there was no lender, we we
(28:59):
showed the lender basically,okay. We have $2,000,000 in in
equity. The total is 3,000,000.We're gonna continue raising.
Could you just let us start?
And the bank's like, yeah. Goahead. You know, you're you're
making my property more moreprofitable and bigger. So
without increasing my loan, sowhy do I care? Go ahead.
They they made us, like, getbuilders insurance and things
like that. And so we go buildthis, and it's beautiful. Right?
(29:21):
So 29 beautiful units, about a1000 square foot, mostly 3
bedrooms, some 2 bedrooms aswell. And I think we leased up
the 29 units in about 3 or 4months because there was already
a wait list.
And a lot of people are like,what is this 29 units? What is
the big deal here? Right? Whatis the big deal? Okay?
29 units doesn't sound like alot. How much could it possibly
(29:43):
affect the property's value? Letme do the math for you. Right?
Keep in mind that the theexpense ratio at the property
didn't change.
We had the same employees, 4 151units versus 1 80. Right? The
property taxes didn't changebecause the property already had
20 units. So it changed by atiny little bit for the extra 9
(30:04):
units. We didn't build anyparking.
Property already had plenty ofparking. We just built the
vertical, and we didn't have anycost for the foundation because
we already reused an existingfoundation. No, amenities either
because the property was alreadyamenitized. Right? So can you
imagine when you have 29 unitsat a $1100 each, your rents are
(30:27):
gonna go up by about $33,000 amonth, but your expenses are
only going up by about 5,000 amonth because you're paying a
little more in property taxesand a little more in property
management fees.
Mhmm. But everything else isalready counted. Right? So you
have a $28,000 growth in yournet operating income on a
(30:50):
monthly basis. Multiply by 12,and you're looking at a $330,000
growth in NOI, net operatingincome.
It was more like 300, so we'lljust use that number. $300,000.
When you sell a property for 5cap, 300,000 multiplied by 20. 5
cap basically means you dividetake 100, divide by 5, that
(31:11):
becomes 20. So you get 20 x forevery additional dollar of NOI,
and we have created 300,000additional dollars.
300,000 multiplied by 20,$6,000,000 of profit. Yeah.
Additional on top of what theproperty was going to make
anyway. Right? So we we had tojust this is a disgusting IRR.
I don't remember what it was.Right? Was it just a ridiculous
(31:34):
IRR? Because we'd created$6,000,000 of new value. And the
value add, you know, plan thatwe had the property worked
anyway.
It was fine that, you know, wewe, you know, added value,
raised rents by 1.50 on existingunits. And when we sold it, to
spike juice it a little bit, Weactually created there was this
(31:54):
one other tennis court where youcould build another, you know,
26 units. So we sold it with theplans for those 26 units. Now as
I know, the new owner wasn'table to build it because the
market changed, but we gotpremium value. We had 23 offers,
and we still had 6 offers inbest and final because the
buyers were like, if thesepeople can do it, we can do it.
(32:15):
What they don't understand is wehave in house development team,
and you should never really tryto do development without having
development staff, but theydidn't know that. Right? And so
somebody says, oh, wow. I canbuy this 180 unit property and
make it a 210 unit property.Well, good luck to you for that,
but we got out.
Trent Werner (32:32):
So what I mean, is would you say that this deal is
one of the I wanna call itlucky, but the fact that you
were walking around and happenedto find concrete, it's almost
like you struck gold with yourboot when you were doing that.
Right?
Neal Bawa (32:44):
Yeah. I I think that, you know, again, we created our
own luck, and we came up withlots and lots of obstacles. I
haven't told you the wholestory. I mean, the city
basically made us drive youknow, pull in a 170 yard sewer
line because they said, you'rebuilding new additional units.
The the sewer line doesn'tsupport it.
So we had to get around that. Itcost us an extra 50, $60,000.
(33:06):
But when you're making$6,000,000, you can pay the
extra $60,000. And I had to putthat money up at the end myself
because I didn't wanna go backto my investors again. So there
were challenges.
I think the key is a lot oftimes you find opportunity, but
you have to be able to followthrough and solve challenges.
Like, if if the city had forcedus to make the elevator, it
would have made the buildingwider. We'd have to shore up the
(33:28):
the foundation. Elevators cost a$150,000, you know, and
construction goes on muchlonger. We may not have even
done it.
So you you're constantly tryingto look for solutions to every
problem. Right? And that'sreally the value that we created
there, not the fact that wefound that there were additional
units to be built. The truth ismany buildings built in the
United States in the seventieseighties land was so cheap in
(33:52):
the United States back in theseventies eighties that there
were many, many buildings in theUS where you have the capability
of building more, meaningthey're zoned for a higher, you
know, units per acre than thebuilding currently has. And in
the seventies eighties, we werealso building more parking than
we are building today.
Today, the parking ratios arelower. You can get away with a
(34:13):
lot less parking. So thoseproperties had extra parking. So
when you build additional units,you don't need that. But people
have to that's not enough.
You have to follow-up. You haveto do the work. You have to
establish a team and and workwith, you know, a builder to get
it done. So it's a it's a hugeamount of work. I mean, I it was
probably not even worth theextra work for us, for the GPs,
(34:34):
because we took on a massiveamount of extra work.
But it was just fun to do. Itwas, it was interesting. It was
new, and so we really enjoyedit.
Trent Werner (34:41):
And I'm sure your investors were glad that you
guys decided to do that.
Neal Bawa (34:45):
Yeah. It was, again, it was it was nice that we got
more than 2 of the $2,900,000out from our existing investors.
They believed in what we weredoing and were willing to put
more money in. Nobody wasforcing them to put money in.
Trent Werner (34:57):
When and you said that the development took 14
months. It took 3 or 4 months toget it leased out. How long did
you guys have it before youstarted adding the additional 29
units?
Neal Bawa (35:08):
Little over a year. I think the 1st year was obviously
our value add program, and so wewere focused on that. The 2nd
year is when we started lookingat this. Maybe maybe towards the
end of the 2nd year because ittook us about 18 months to
implement our value add program,and then we were like, okay. So
we're done.
You know, is there anything elsewe can do?
Trent Werner (35:25):
And the total hold time was what? 4 years? Little
over 4 years. Yeah. That's notnot a bad return in 4 years
then.
Neal Bawa (35:32):
Not a bad return at all. So I think that those kinds
of, you know, pivots reallyhelp. Obviously, all of us know
how to do the, you know, typicalvalue add. But sometimes you get
lucky and do super value add.Right?
We we did we went on to do supervalue add again at a at a
property in Memphis and had aneven higher return. But in that
(35:55):
case, we did not. It was a selfstorage property, and the value
that we the super value that weadded was we built more RVs
parking spots. And to pay forthe RVs parking spots, we put
solar on top, which was which isin Tennessee, you get a huge
kickback from the government toput solar. And so we had EV
(36:15):
charging spots, and we werecharging 40¢ per kilowatt hour,
and we were generating at 6¢.
So generating at 6, selling at40.
Trent Werner (36:25):
Also not a bad return.
Neal Bawa (36:27):
It worked out well for us. And that one, we
actually sold in only 3 years, alittle over 3 years, because,
you know, building RV parkingspots takes a lot less time than
building an entire building.
Trent Werner (36:37):
And I guess last question before, you know,
before we wrap this up. Youmentioned storage. I know your,
I guess primary focus ismultifamily or, you know,
residential. Do you, and selfstorage has been a big topic of
conversation over the last 5, 7years. Where do you see
Growcapitus getting more intoself storage, or are you gonna
(36:59):
keep it at a minimum?
Neal Bawa (37:01):
No. I think we've missed the boat on that. You
know, we obviously did this oneproperty. It was a pretty large
self storage property. But Ithink that we could could have
gotten the self storage 5 or 6years ago, but we were busy with
townhomes and other things.
So I think we've missed the boatat this point in time. Self
storage cap rates havecompressed. Now, of course,
they've decompressed in the last12 months like every other asset
(37:21):
class, but they haven'tdecompressed as much as
multifamily as multifamily caprates have changed more than
self storage has. So I I justthink that there's less money in
self storage today than thanthere was in the past. The good
operators are in there.
They're making offers. They'redoing their job. You know? It's
it's just the the mathematics isnot as compelling for self
storage as it as it was about 5years ago.
Trent Werner (37:42):
And based on what we talked about earlier, 2026,
you know, multifamily should seean increase again. So it sounds
like multifamily is where youwanna be right now.
Neal Bawa (37:52):
Absolutely. And I I I also I'm making the bet that the
you know, I think that KamalaHarris will tweak out a win. I
don't think that they get to a asome, you know, absurd number of
seats in the house or in thesenate. But I think that as long
as we have a Republicanpresident, we should get a
healthy amount of immigration,and that definitely helps us
(38:12):
from a perspective of rentgrowth.
Trent Werner (38:14):
Absolutely. Well, Neil, where can
Neal Bawa (38:16):
people I don't think it'll be crazy like what they
did in 2022 or 2023. I get thefeeling that Democrats figured
out, oops. You made a hugemistake. Let's not ever do
something as stupid as thisagain. But but I think we'll get
a healthy rate of immigration.
Trent Werner (38:29):
And I I mean, I I would tend to agree with you. We
can we can talk politics whenwhen we're at best ever
conference 2025.
Neal Bawa (38:38):
Sounds good.
Trent Werner (38:38):
Neil, where can people hear more from you? I
know you got a YouTube channel.Where can they find you on
online? Best thing
Neal Bawa (38:44):
to do is to either Google my name. I'm the only
Neil Bauer on the world wideweb. And so all everything good
and bad is about me. Or justtype in Multifamily University
into Google. Click on that link.
We publish 10 webinars a year.About 20,000 people sign up for
those webinars. I just did onefor Airbnb. So short term
(39:04):
rentals is something that I'minterested in, and we had 1400
people sign up for that webinar.So these are free webinars.
We do them on all kinds ofdifferent things. My next
webinar is the impact ofartificial intelligence on
industrial real estate, and thatis at the end of October,
beginning of November. So thereare all kinds of webinars on
things that I'm interested in,impact of climate change on real
(39:25):
estate. So I do research forabout 30 days. My research
assistant, Chad GPT, is heavilyinvolved.
And then we do beautiful decks,and we present them 10 times a
year. Obviously, as you canimagine, 3 or 4 of the
presentations every year areabout multifamily or single
family, but others are aboutother asset classes in real
estate. So that's how we scratchour our, you know, research
(39:46):
itch, and anyone can, checkthose out at Multifamily
University. It it's free. It'salways free.
We don't have an educationalprogram. So it's meant to be
given away forever.
Trent Werner (39:55):
Awesome. Well, thank you so much for joining us
today, Neil. I appreciate yousharing all your, vast knowledge
and expertise with us.
Neal Bawa (40:03):
Thanks for having me.
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Trent Werner (00:40):
Welcome back to another episode of the Deal Deep
Dive segment on the WestsideInvestors Network podcast. I'm
your host, Trent Werner. In thissegment, our featured guests
will share their unique storieson a specific deal they've
invested in. We will dive deepinto finding the deal, financing
the deal, writing an offer, andthe due diligence. Do us a solid
and smash that subscribe button,leave us a rating, and share
(01:03):
this episode.
And now, let's dive deep.Welcome back to the Westside
Investors Network podcast. I'myour host, Trent Warner. On
today's deal deep dive episode,we're joined by the one and only
Neil Bawa with Grow Capitis andMission 10 k. Neil is very well
known across the real estatemultifamily syndication space
(01:23):
and presents across the countryat different conferences and
classes and boot camps.
Today, Neil is gonna share hisinsights and opinions on where
multifamily real estate is goingto be over the next 24 months
and beyond, as well as you'regoing to hear about a super
value add deal that Neil andBrokapadis did just outside of
(01:45):
Chattanooga. Now let's welcomeNeil Bawa. Alright. Westside
Investors Network podcast. Wegot a huge guest today, Neil
Bawa with Grow Capitis.
Neil, thanks for joining us.
Neal Bawa (01:57):
Well, thanks for having me on the show. I'm very
excited to be here.
Trent Werner (02:00):
I was, I was fanboying Neil a little bit
before we started recording.I've heard him talk at the best
ever conference, I think 3 yearsin a row now. It'll be 4 this
upcoming year. Neil is I mean,can I call you a genius when it
comes to real estate? Are youokay with that?
Neal Bawa (02:15):
I prefer mad scientist because I that really
is an accurate description.
Trent Werner (02:19):
And, yes, Neil is the mad scientist of real
estate. Very insightful, veryknowledgeable, plenty of
experience. How long have youbeen doing it now?
Neal Bawa (02:27):
10 years for a technology company that I was
running and then 10 years withinvestor money. So 20.
Trent Werner (02:34):
Very nice. And Grow Capitis, that means Grow
Capitis is 10 years old?
Neal Bawa (02:37):
So this is my second company. I used to, work with a
partner and then eventuallydecided to do it in my own. Grow
Capitis is 6 years old, and thenMission 10 k is about 3 and a
half years old. And then beforethat was 5 years with financial
attunement. And then 10 years, Iwas building I was building
campuses from scratch for mytechnology company because we
were you know, we just had ahuge amount of cash coming in,
(02:59):
and we didn't wanna pay taxes onit.
So we would build our owncampuses. So instead of being
you know, having a landlord,we'd basically be our own
landlords. And so I built 7campuses in 10 years. It was a
it was it was a lot of fun, butalso a lot of stress because,
you know, you you had a companythat was growing at 30% year
over year with 100 of employeesall reporting up to me. Our our
CEO was sort of partly partpartly retired.
(03:22):
And in the evenings, like, at,you know, 3 o'clock, we'd finish
our meetings. And then from 3 to9, we'd be building campuses and
doing architectural and designwork and going out and, you
know, meeting the city because,you know, typically, the city
closes at 5. So it was, it waslike having this other job,
which was both stressful andvery exciting.
Trent Werner (03:41):
And that that experience, I guess, kind of
correlates with Mission 10 k.Right?
Neal Bawa (03:46):
It does, to with both companies. So Growcapitus has
built thousands of units ofapartments. Mission 10 k builds
only townhomes. So mission 10 kis a very specific mission to
build 10,000 rental townhomes,so it does not build apartments.
Grow Capitalist currentlyactually is in a sweet spot
right now where we have a 184unit close to the end of lease
(04:08):
up in Provo.
We have a 240 unit halfwaythrough lease up and a 320 unit
going into lease up. So we're inall phases of lease up right
now. We've been doing very heavyconstruction in the past. Now
we're sort of more on the on thelease up side for for
apartments. So Grow Capital isbuys and builds apartments.
(04:28):
You know, of our 9 exits, 7 areare value add to our new
construction.
Trent Werner (04:34):
And what do you I mean, what do you focus on more?
Do you focus on development orstuff that's already existing
and and go in and do the valueadd for it?
Neal Bawa (04:41):
It's 2 different companies. There's different
teams. So we have an acquisitionteam and we have a development
team. They don't really overlapwith each other. So think of it
as 2 separate companies.
So I can say that me and mypartner are the only people that
are on both sides. But otherthan that, they function as
independent companies.Development is more challenging,
especially in the last 2 years.But, on the value add side,
(05:02):
we've seen a decline in value. Imean, obviously, you know,
properties are 25 to 30% cheaperthan they were in at the peak in
2022.
And so one has to create a lotof value when we are working.
Like, for example, I have aproperty in Texas in Killeen,
which is north of Austin, wherewe've applied for what is known
as PFC, you know, where once wequalify, our property taxes will
(05:23):
go down about $50,000 a year.And that $50,000 a year
basically creates a $1,000,000more in NOI value and helps us
with our refinance because theproperty, as you can imagine, is
quite challenged at this pointof today at this point today
because we bought it in 2022.
Trent Werner (05:39):
And you said so 7 of the 9 exits you said were
value add. Of the the 2, arethose ones that, you know, that
you started way back in the day?Are you holding those for 7, 10
years? Or how long are youholding these ones that you're
developing?
Neal Bawa (05:53):
It's a it's a mix. You know, so one of them, we we
actually started building it 2months after COVID started, and
we sold it in 20 late 22, lateearly 23. So it was a quick
development, quick exit. Theother one, yeah, it took a
while. It it took a while to do,and so it's from it's it's a pre
COVID property that we exited,last year or year year before.
Trent Werner (06:13):
And the ones that you were mix. The ones that you
were talking about that are, youknow, in that lease up or pre
lease up phase, how long haveyou had those ones on your
books?
Neal Bawa (06:21):
Somewhere 2019, somewhere 2020, somewhere 2021.
So so those are the sort of the3 years where we did a lot of,
you know, let's do new projects,bring in equity. You know? But
there was one project had27,000,000 equity, one had 17,
and another one, I think, was12. So different project sizes.
So we obviously, that was veryeasy to raise equity back then,
(06:43):
and so we did a lot of theseprojects. Now we're like, oh,
let's slow down. Let's justfocus on getting these projects
completed and getting themleased up. So we're very much in
implementation mode right now,optimization mode where we're
basically optimizing ourproperties. There's a lot more
asset management meetings and alot more, you know, delinquency
meetings.
There's a lot more meetingsabout, you know, what what are
(07:04):
we going to do to bring up NOIthan there were in the past.
Trent Werner (07:08):
And with these, I guess, with the challenges that
some of the interest rateincreases have caused, I know I
think it was in 2023, the thekind of mantra for best ever
conference was survive to 25,which it sounds like, you know,
optimization, asset managementis the focus, which, you know,
falls in line with that. Wheredo you see the market and grow
(07:28):
cap at Mission 10 ks going from,you know, the beginning of 2024
through 2025 now with ratesstarting to come down a little
bit?
Neal Bawa (07:38):
So I think we're still in that optimization mode.
I I don't I think survive to2025 works. I think I've added a
piece, and you'll thrive in2026. Right? So 2026 is turning
out to be, for a variety ofyears, a phenomenal year for
multifamily.
I think it will be one of thebest years we've had. Not as
good as 2022 because that was alittle crazy and bublish. But I
(08:01):
think that we will we will seerates 5 year fixed rates under
4% sometime in 2026. Not maybethroughout the year, but, you
know, we'll see under 4. Justfor reference, today, if I
wanted to get a 5 year FannieMae or Freddie Mac locked loan,
right, that's fixed rate, I'mright around 5.2%.
(08:23):
So we'll see a 100 basis pointreduction in 2025. We'll see
another 50 basis point thisyear. So that's a 150 basis
points. So if I take that 5point to apply the 150, we could
be as, you know, as little as3.7, but it the math doesn't
exactly work that way. So Ithink it's possible that at some
point in 2026, we could see 3.99percent for a 5 year fixed loan.
(08:47):
And if that happens, theindustry will do really well.
What I'm more excited about isnot the lowering interest rates.
What I'm much more excited aboutis what will happen with rents
in 2026. So in 2024, we've hadthe largest delivery of new
apartment units since 1972.700,000 units have been
(09:09):
delivered this year.
The market has absorbed almostall of them, and to be honest,
there's been slight negativeabsorption, but overall
absorption has been phenomenal.A lot of it is because of, new
immigrants coming in intosouthern markets. And so the
absorption rates have beenincredible, but still we haven't
managed to absorb 700 unitswithout some discounts and some
lot you know, reduction inoccupancy. So we've seen
(09:31):
occupancy fall by roughly about1% this year from above 95 to
below 95%. And the the the thingthat's very exciting is a lot of
times, you know, I makepredictions, but there are
really guesses.
Right? You look at the data andyou make what you think is the
appropriate guess. But there arecertain areas where it's fair to
say that I'm not reallyguessing. I I really know. And
(09:54):
one of the way one of the areasthat I feel the strongest about
when I make a guess is aboutwhat would be the supply for
any, what would be the supply ofapartments 2 years in the
future?
Now you might say, how is yourcrystal ball so good? The answer
is, in the United States, ittakes 2 years to build
apartments. While it's possiblethat somebody can build 1 in 18
(10:14):
months, it's also possible thatsome projects will get delayed
and be built in 30 months. Sothat 24 month sweet spot means
that if I wanna make aprediction of how many apartment
units will deliver in the secondhalf of twenty twenty six, 2
years from now, all I have to dois look at permits that are
being pulled today. Permits areexpensive.
So when a developer goes out andpulls permits today and pays
(10:37):
300,000, 500,000, a $1,000,000for permits, They only do that
when the construction loan issigned because they wouldn't
pull the permits unless theirconstruction loan signed. So if
the construction loan signed,you're gonna be in construction
within 30 days. Right? Becausewhat's the point? You're you're
now paying for equity.
You're paying for debt. So ifthey're starting today, I know
(10:57):
that they're gonna complete 24months from now. And so when I'm
looking at the total number ofpermits that is being pulled in
2024 on an annualized basis,that number is somewhere around
238,000, annualized. Our demandis 450,000 units a year. Right?
This year, demand was muchhigher because of the
immigration boost that we gotfrom the from the southern
(11:19):
border. So demand was more like5.50, 600,000, and we delivered
700,000 units, which is whyoccupancy came down. We saw that
rent growth this year was, youknow, 1%, 1 a half percent,
somewhere in that range. So itwasn't very good. Next year, we
that number, that 700,000delivery shrinks and goes down
to maybe 450, 500,000.
(11:40):
And our, you know, and that's sothat's our delivery. That's our
supply. Our demand is rightaround that 500,000. So next
year looks like a goodequilibrium year, year. But 2026
looks like a year where we willonly deliver 2238, 248,000 units
in a year where there's 4 50,500 k units of supply needed,
(12:00):
right, for an equilibrium.
So now you have the reverseproblem that we have this year
where there's too little supplyand too much demand. And so we
could see rent growth in theUnited States in 2026 as a
nation be over 5%, andindividual markets could easily
be 6, 7, 8, 9, 10, 11%. That'swhat I'm most excited about. So
(12:21):
I I tell people, now is a greattime to buy, and you need to
target to sell it in at the endof 2026. So, you know, get a
bridge loan.
If you're getting a fixed loan,that's fine as long as you go
with a lender that will give youa supplemental loan because at
the end of 2026, you should beable to get a supplemental loan
and cash out your investors. Ifyou do that, that's almost as
(12:42):
good as selling the property.Not quite. I prefer to sell it,
but almost as good. So so that'ssort of my view of where we are
for the next 2 2 years.
One of the key things is I Ihear a lot of people coming on
these shows, and they don'tfully understand that the £800
gorilla is supply. There's a lotof conversations about asset
(13:02):
management. I think that'sreally great. There's a lot of
conversations about, you know,cap rates, but the 800 pound
gorilla is supply. And supply isthe one thing where you can be
sure about the future becausepermits today means supply 2
years from now.
Right? Right. And there's notenough supply in 2026. So I'm
I'm very excited about being inthat market. Pricing power
(13:24):
should start to return next yearbecause in the second half of
next year, in most markets inthe US, and when I say most
markets, I mean sort of thehotter markets, you know, the
Phoenix, Dallas, you know,Houston, Austin, San Antonio,
Nashville, you know, and and theFlorida markets.
By the second half of next year,supply will be slightly lower
(13:44):
than demand, so pricing powerwill return. Right now, the
multifamily industry in thesesouthern markets doesn't have
pricing power. Why? Becausethere's a lot of incoming supply
coming in, and that supply is 1month off, 2 months off. And so
it gives the people that haveclass b and class c very little
pricing power to raise theirtheir rents.
So rents are, you know, mostlyflat with the exception of the
(14:06):
Midwest, which is doing reallywell in the Northeast because
the Midwest and the Northeastdon't have much supply coming
in. Most of the supply is Westand, Southwest and and
Southeast. So so the theSouthwest is really suffering.
And and on average, I'd say if Ilook at the top 10 Southwest
markets, rent growth for thelast, you know, year has been 0.
Trent Werner (14:27):
Right. Well, and that's I've had some
conversation recently with, youknow, other professionals in the
industry and they they've talkedabout Arizona, Texas maybe
having negative, you know, rentdecreases over the last 12
months where Florida maybehasn't seen that quite yet?
Neal Bawa (14:45):
Not quite, but I think Florida is a trailing
market. So we are now seeingrents fall in Florida. So it's
Florida just sort of avoided itfor a while, and and there's a
variety of reasons Miami wasdoing well. So as a state, one
can say that Florida rents arenot falling yet. But though I I
think in the last quarter, theystarted to fall.
So the same story that we'veseen in Texas and Arizona is
being repeated there. Keep inmind that Arizona as a state has
(15:08):
not lost it's not negative rentgrowth, but Phoenix is negative
rent growth, where, you know,Tucson's okay, maybe just slight
negative rent growth. Fair youknow, the the other smaller
markets are actually doing okay.So it it's it's you know, you
know, when you sort of roll itup to a to a state level,
sometimes you miss the fact thatdifferent markets are actually
(15:28):
reacting differently. ButPhoenix is negative rent growth.
Phoenix, Austin are significantright negative rent growth, San
Antonio. And we've seen a littlebit of negative rent growth in
the last quarter in Dallas, alittle bit in Nashville, and a
little bit in Tampa. So,overall, it's not a lot of
negative rent growth. You know,the the US still had roughly 1
(15:49):
and a half percent rent growthin the last 12 months. The next
12 months, I'm anticipating morelike 2 and a half, per perhaps
3, And then we get a bonanzayear in 2026.
Trent Werner (15:58):
Right. So what I I mean, based on what you were
just talking about with delivernumber of units that are gonna
be delivered, it sounds likethis interest rate conversation
that everyone's having that, youknow, everyone normally talks
about you can't make a dealpencil right now. But the more
important piece that peopleshould be talking about related
to this huge spike in interestrates was what it did to
(16:22):
development.
Neal Bawa (16:23):
Yep. Yep. And I think that's the story. Right? That's
the that's the story.
The the catch is it's a 2 yearlag.
Trent Werner (16:30):
Right.
Neal Bawa (16:30):
Right? So this this development is really hitting
our rents hard right now. It'shitting our cap rates really
hard because there's, you know,class a properties that you can
buy at 5a half cap. So it'sreally hitting us hard now, but
we get the benefit of it 24months from now. Right?
When development does theopposite, it becomes a a a
(16:51):
beneficiary to value add asopposed to right now being the
biggest the the the evil Sauronthat's affecting, you know, the
the market.
Trent Werner (17:00):
Yeah. And you and you talked about a 150 point or
basis point reduction ininterest rates, give or take.
And is that strictly based onwhat the Fed is is saying that
they project is gonna be theinterest rate?
Neal Bawa (17:13):
Yep. The Fed is currently projecting that in
addition to the 50 basis pointrate cut that we've already
gotten, they are projecting a150 basis points by the end of
next year. I think they're righton track. So, I mean, so far, I
have to say this. I can't sayanything negative about the Fed
except for the fact that theywere late to this party.
Right? So they they should havestarted cutting rates or raising
(17:36):
rates about 6 months before theydid. So their mistake and and I
have to say, unlike ourpoliticians who never take any
responsibility, the Fed hasrepeatedly taken responsibility
for its mistakes and said, wewere late. We thought it was
transitory. We misread themarketplace.
Now we wanna make sure that wewe get ahead of it. Well, right
now, the Fed's ahead. At thispoint, the Fed I mean, 3 month
(18:00):
inflation is running at 1 a halfpercent. So there's no pressure
on the Fed. The Fed they caneven cut 50 basis points in
November they if they want to.
They probably won't because theFed really likes to say and they
opened with a 50 basis pointsurprise, a a really good
surprise, And now they'rethey're gonna go 25, 25, 50. The
Fed basically says, we look atthe market every month. We'll
(18:20):
you look at what we see. Itmight be a 50 basis point cut, a
25 basis point cut, or 0. Wemight just hold for a meeting
and say, okay.
We'll just let it go to the nextmeeting. So they're very, very
data driven, and I really likethat. The and the other thing is
that, you know, as far as Iknow, neither Donald Trump nor
Joe Biden have been able toinfluence the Fed, which is
great because both of these guysare boneheads when it comes to
(18:43):
actually understanding monetaryand fiscal policy. The Fed
actually knows what they'retalking about and should be left
alone. And so I I like that, andI think the Fed's right on
track.
150 basis points by the end of,2025.
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Trent Werner (19:29):
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uptownsyndication.com today tolearn more. I don't know if how
much you pay attention to I'msure you pay attention to past
data, but I saw something onlinethat the last time the Fed cut
rates by 50 basis points, arecession followed about 12 to
18 months after that.
Do you have any opinion on that?
Neal Bawa (20:07):
I I do. And I think that the answer is yes. So 7 or
8 times out of 10, when a fedcuts 50 basis points, you will
have a recession, but it's notguaranteed. Also, it's clear
that the Federal Reserve overtime has been getting better at
slowing the economy just enough.Keep in mind, their job is very,
very difficult.
(20:28):
What is the job? What is the Feddoing? The Fed's job is to bring
the economy to a near haltwithout tipping it into a
recession. Right? Near halt.
Right? So in an ideal scenario,the economy basically slows to a
GDP of roughly 1%, and then,basically, they pick it up again
by doing rate cuts. That'sextremely difficult to do
(20:49):
because because you're actuallytrying to predict what will
happen in the next 6 months.Right? The Fed obviously can
look at, it can't look at pastdata because it has to make
decisions based on what happenedin the last 30 to 60 days and
extrapolate that 6 months out.
So, yeah, there's a pretty highchance of, you know, that that
it could happen at this point intime. They have an advantage,
(21:09):
though. One of the things is wecan say well, one of the things
that I like to say and you'veyou've heard it in in in my
YouTube videos is the FederalReserve, out of the 9 rate
cutting cycles that they've beenpart of since World War 2, 8 of
those went into recession. Andthe 9th was so close that it
wasn't called a technicalrecession. It wasn't called a
(21:30):
technical recession, but,really, you could have called it
a recession because the theeconomy basically fell to 0, but
just didn't dip long enoughbelow 0 for it to be called a
recession.
So, basically, 9 times at at atime, the fed put us in a in a
recession, which is anacceptable compromise for them
as long as they kill inflation.Right? But none of those 9 times
(21:52):
was the Fed at did the Fed havethe benefit that it has right
now where unemployment is at4.2%, and they're already
cutting. They're alreadycutting. Right?
So inflation's down to 2 a halfpercent or a little bit less on
a 3 month basis. It's actuallydown to 1 a half percent. And so
they're down, but they've onlyaffected employment to the 4.2%
(22:12):
level, where if you look at thelast 9 times, by this time,
unemployment was already at 5%,6%, or even 7%. And that's how
much work they had to put in toget the inflation down to this
level. So this time, theydefinitely have an extraordinary
advantage.
I don't know if that means weavoid a recession or not, but
there's it's very important toacknowledge that the Fed has
(22:33):
done a much better job than itthey did in previous cycles, and
maybe there's external factorshelping them. One of the big
factors that's helping the Fedright now is this extraordinary
infusion of people from thesouthern border. While I'm not
at all a fan of what ishappening with immigration, not
at all a fan, there'd beobviously, the the data
scientist side of me, thelogical side of me says, when
(22:54):
you inject 6a half 1000000people into your economy, you
will get a boost. It may not bepermanent, but what we needed
was a temporary boost at theright time, and we got it at the
right time. And it basicallykept the economy humming, which
kept the unemployment rate low.
In the future, obviously,there's there's negative
consequences. But by that time,the inflation rate settles and
(23:16):
we may may not get a recessionthis time. So there's an
advantage there. Again, I am nota fan of what's happening with
immigration, but themathematical impact on
unemployment is the opposite ofwhat politicians like to say.
You know, mass immigrationdoesn't reduce employment.
It increases it. And that'sanybody who is a not a
(23:39):
politically biased person willtell you.
Trent Werner (23:42):
Right. Well, we've we've talked about the economy.
We've talked about your,insights and your opinions on
what's gonna happen here in thenext couple of years. Quickly, I
wanna talk about a deal in,Chattanooga, I believe. Sure.
Yeah. You said you just soldthat one how long ago?
Neal Bawa (23:57):
Well, actually, sold a couple years ago, but I I
thought I would highlight itbecause it's so unique. And and,
you know, we talk about valueadd, and this deal is what we
call a super value add. So it'sa super value add deal. And so
it's a 151 unit deal. It'scalled Park Canyon.
It's in a suburb of Chattanooga.Chattanooga has Chattanooga has
(24:19):
about a half 1000000 people, andthis suburb is about 37,000
people. It's called Dalton.Dalton is the carpet and
laminate capital of America, andso they have a lot of factories
there. So we bought thisproperty, and we bought the
property.
It was very lush. It's on theside of a hill, very rolling
hills, and it was built in theeighties. And, you know, I was
(24:40):
roaming around at the property,and I realized there's a lot of
trees. And there's also thismassive tennis court. And and
next to the tennis court,there's this area where clearly
something used to be therebecause there's no trees there.
It's just like there's dirt. Andso I go there, and I sort of use
(25:01):
my boot to dig around, and Irealized that I'm as, you know,
as soon as I dig down 3 or 4inches, there's concrete. So I'm
like, what is what is this? Whatis this? So I go back, and I
talked to the property manager.
She'd been there for 20 years.She said, yeah. Yeah. You know,
about 10 years ago, there werethere were 20 units. There was a
building there, and it burneddown.
And, we just decided to keep theinsurance money, And we had this
(25:23):
guy come in with a bulldozer,and he just bulldozed it. So you
have a full foundation there.Right? Oh, this is really
interesting. We had no idea.
I mean right? Because it I mean,the freeze were sort of covering
the top of that area. Like, thatthis is super interesting. So we
have a you know, we call ourlender friendly lender, and we
say, hey. You know, there's just20 units, so we'd like to build
it.
And they're like, no. No. No.No. No.
(25:44):
I own this property. I ain'tletting you get another lender
in here. So we're like, oh, thatthat sucks. So we go to the
city, and we say, hey. Is thereenough parking for this?
And so, of course, there'senough parking because you
already had 20 units there. Andwe're like, yeah. But we we
don't wanna build 20. We wannabuild more. So we huddle with
the city for a few weeks, andeventually, the city says, fine.
(26:04):
You know, we're looking at allthe parking, you know,
requirements. You can build 29units. So we're like, okay. But
we don't wanna we don't wannareuse the found we we wanna
reuse the foundation. I said,like, well, if you reuse the
foundation, there's a catch.
Because you wanna build 10 moreunits, now you'll have to add an
extra floor. And if you add theextra floor, you have to add an
elevator. And we're like, no.No. Elevators are really
expensive.
(26:25):
All that concrete. No. No. No.We don't wanna do that.
So we're, like, thinking aboutthis thing. You know, if it's 20
units, it it doesn't reallywork. If it's 20, 30 units, then
we have this elevator issue, andwe don't wanna, you know, have
the elevator. So we come up witha solution that the city
accepts, and this is a veryunique solution. So imagine a
property that is sloped.
Okay? So this property issloped, and we're building by
(26:49):
the side of the property. Sowhat we did was, on one side,
the property on the on the sidethat the stairs are, the
property is actually, you know,there's there's, it's so it's
it's 10 units, 10 units, and 10units. It's 30 units. Right?
On the other side, because thethe the there's a slope, it's
(27:09):
only 2 floors. And so we go backto the property to the city and
say, well, if you think aboutit, you can either count the
stairs on this side or stairs onthat side. And this side, the
stairs are only 2 floors, so wedon't need an elevator. Right?
And they're like, oh, we seewhat you're doing, you sneaky
bastard.
You know? So they're like, okay.We'll we'll come. We'll do a
site visit. They come and do asite visit, and everyone's sort
(27:31):
of laughing about it.
Eventually, the city says,that's fine. We'll just count it
on the right side. So now youhave 2 floors, so you don't need
an elevator. So now now we'relike, okay. Great.
We can build 29 units, butwhere's the equity going to come
from? Because the bank told usyou can't get another loan for
this because it's inside ofbank's property. Right? Property
is really owned by the bank, andthe bank's like, we we won't do
it. So we go back to ourinvestors, and we say, look.
(27:51):
The look. We're looking at this.The math is really compelling.
We got this quote for $2,900,000to build 29 units, 100,000 a
unit. And there's no way theseunits are worth less than a 150,
160,000.
Because it's a nice property. Ithas a lake and, you know,
fountains and greenery, and it'sfully amenitized. It's pretty.
It's pretty. It's nice look.
Nice look. And and we we had thehighest rents in the submarket.
(28:13):
Nobody else had rents anywhereclose to us. So we're like and
and if we can get those rentsfor 8 foot ceilings, we can
definitely get better rents for9 foot ceilings granite
countertops, but we're onlybuilding these at a 100,000 a
door. So we go back to ourinvestors, and we say our bank
is refusing to give us a loan.
We would like you guys to giveus $2,900,000 in equity to build
(28:37):
it, right, from our database.And we'll put in 250 ourselves
just to get us started. So wego, we talk to the investors, we
beg, borrow, steal, andeventually, we ended up with
$2,900,000. Now we didn't quiteget to 2.9 from the investor, so
we did have some money that camein from the outside. And the
whole thing basically took about14 months.
And because there there was nodebt, there was no lender, we we
(28:59):
showed the lender basically,okay. We have $2,000,000 in in
equity. The total is 3,000,000.We're gonna continue raising.
Could you just let us start?
And the bank's like, yeah. Goahead. You know, you're you're
making my property more moreprofitable and bigger. So
without increasing my loan, sowhy do I care? Go ahead.
They they made us, like, getbuilders insurance and things
like that. And so we go buildthis, and it's beautiful. Right?
(29:21):
So 29 beautiful units, about a1000 square foot, mostly 3
bedrooms, some 2 bedrooms aswell. And I think we leased up
the 29 units in about 3 or 4months because there was already
a wait list.
And a lot of people are like,what is this 29 units? What is
the big deal here? Right? Whatis the big deal? Okay?
29 units doesn't sound like alot. How much could it possibly
(29:43):
affect the property's value? Letme do the math for you. Right?
Keep in mind that the theexpense ratio at the property
didn't change.
We had the same employees, 4 151units versus 1 80. Right? The
property taxes didn't changebecause the property already had
20 units. So it changed by atiny little bit for the extra 9
(30:04):
units. We didn't build anyparking.
Property already had plenty ofparking. We just built the
vertical, and we didn't have anycost for the foundation because
we already reused an existingfoundation. No, amenities either
because the property was alreadyamenitized. Right? So can you
imagine when you have 29 unitsat a $1100 each, your rents are
(30:27):
gonna go up by about $33,000 amonth, but your expenses are
only going up by about 5,000 amonth because you're paying a
little more in property taxesand a little more in property
management fees.
Mhmm. But everything else isalready counted. Right? So you
have a $28,000 growth in yournet operating income on a
(30:50):
monthly basis. Multiply by 12,and you're looking at a $330,000
growth in NOI, net operatingincome.
It was more like 300, so we'lljust use that number. $300,000.
When you sell a property for 5cap, 300,000 multiplied by 20. 5
cap basically means you dividetake 100, divide by 5, that
(31:11):
becomes 20. So you get 20 x forevery additional dollar of NOI,
and we have created 300,000additional dollars.
300,000 multiplied by 20,$6,000,000 of profit. Yeah.
Additional on top of what theproperty was going to make
anyway. Right? So we we had tojust this is a disgusting IRR.
I don't remember what it was.Right? Was it just a ridiculous
(31:34):
IRR? Because we'd created$6,000,000 of new value. And the
value add, you know, plan thatwe had the property worked
anyway.
It was fine that, you know, wewe, you know, added value,
raised rents by 1.50 on existingunits. And when we sold it, to
spike juice it a little bit, Weactually created there was this
(31:54):
one other tennis court where youcould build another, you know,
26 units. So we sold it with theplans for those 26 units. Now as
I know, the new owner wasn'table to build it because the
market changed, but we gotpremium value. We had 23 offers,
and we still had 6 offers inbest and final because the
buyers were like, if thesepeople can do it, we can do it.
(32:15):
What they don't understand is wehave in house development team,
and you should never really tryto do development without having
development staff, but theydidn't know that. Right? And so
somebody says, oh, wow. I canbuy this 180 unit property and
make it a 210 unit property.Well, good luck to you for that,
but we got out.
Trent Werner (32:32):
So what I mean, is would you say that this deal is
one of the I wanna call itlucky, but the fact that you
were walking around and happenedto find concrete, it's almost
like you struck gold with yourboot when you were doing that.
Right?
Neal Bawa (32:44):
Yeah. I I think that, you know, again, we created our
own luck, and we came up withlots and lots of obstacles. I
haven't told you the wholestory. I mean, the city
basically made us drive youknow, pull in a 170 yard sewer
line because they said, you'rebuilding new additional units.
The the sewer line doesn'tsupport it.
So we had to get around that. Itcost us an extra 50, $60,000.
(33:06):
But when you're making$6,000,000, you can pay the
extra $60,000. And I had to putthat money up at the end myself
because I didn't wanna go backto my investors again. So there
were challenges.
I think the key is a lot oftimes you find opportunity, but
you have to be able to followthrough and solve challenges.
Like, if if the city had forcedus to make the elevator, it
would have made the buildingwider. We'd have to shore up the
(33:28):
the foundation. Elevators cost a$150,000, you know, and
construction goes on muchlonger. We may not have even
done it.
So you you're constantly tryingto look for solutions to every
problem. Right? And that'sreally the value that we created
there, not the fact that wefound that there were additional
units to be built. The truth ismany buildings built in the
United States in the seventieseighties land was so cheap in
(33:52):
the United States back in theseventies eighties that there
were many, many buildings in theUS where you have the capability
of building more, meaningthey're zoned for a higher, you
know, units per acre than thebuilding currently has. And in
the seventies eighties, we werealso building more parking than
we are building today.
Today, the parking ratios arelower. You can get away with a
(34:13):
lot less parking. So thoseproperties had extra parking. So
when you build additional units,you don't need that. But people
have to that's not enough.
You have to follow-up. You haveto do the work. You have to
establish a team and and workwith, you know, a builder to get
it done. So it's a it's a hugeamount of work. I mean, I it was
probably not even worth theextra work for us, for the GPs,
(34:34):
because we took on a massiveamount of extra work.
But it was just fun to do. Itwas, it was interesting. It was
new, and so we really enjoyedit.
Trent Werner (34:41):
And I'm sure your investors were glad that you
guys decided to do that.
Neal Bawa (34:45):
Yeah. It was, again, it was it was nice that we got
more than 2 of the $2,900,000out from our existing investors.
They believed in what we weredoing and were willing to put
more money in. Nobody wasforcing them to put money in.
Trent Werner (34:57):
When and you said that the development took 14
months. It took 3 or 4 months toget it leased out. How long did
you guys have it before youstarted adding the additional 29
units?
Neal Bawa (35:08):
Little over a year. I think the 1st year was obviously
our value add program, and so wewere focused on that. The 2nd
year is when we started lookingat this. Maybe maybe towards the
end of the 2nd year because ittook us about 18 months to
implement our value add program,and then we were like, okay. So
we're done.
You know, is there anything elsewe can do?
Trent Werner (35:25):
And the total hold time was what? 4 years? Little
over 4 years. Yeah. That's notnot a bad return in 4 years
then.
Neal Bawa (35:32):
Not a bad return at all. So I think that those kinds
of, you know, pivots reallyhelp. Obviously, all of us know
how to do the, you know, typicalvalue add. But sometimes you get
lucky and do super value add.Right?
We we did we went on to do supervalue add again at a at a
property in Memphis and had aneven higher return. But in that
(35:55):
case, we did not. It was a selfstorage property, and the value
that we the super value that weadded was we built more RVs
parking spots. And to pay forthe RVs parking spots, we put
solar on top, which was which isin Tennessee, you get a huge
kickback from the government toput solar. And so we had EV
(36:15):
charging spots, and we werecharging 40¢ per kilowatt hour,
and we were generating at 6¢.
So generating at 6, selling at40.
Trent Werner (36:25):
Also not a bad return.
Neal Bawa (36:27):
It worked out well for us. And that one, we
actually sold in only 3 years, alittle over 3 years, because,
you know, building RV parkingspots takes a lot less time than
building an entire building.
Trent Werner (36:37):
And I guess last question before, you know,
before we wrap this up. Youmentioned storage. I know your,
I guess primary focus ismultifamily or, you know,
residential. Do you, and selfstorage has been a big topic of
conversation over the last 5, 7years. Where do you see
Growcapitus getting more intoself storage, or are you gonna
(36:59):
keep it at a minimum?
Neal Bawa (37:01):
No. I think we've missed the boat on that. You
know, we obviously did this oneproperty. It was a pretty large
self storage property. But Ithink that we could could have
gotten the self storage 5 or 6years ago, but we were busy with
townhomes and other things.
So I think we've missed the boatat this point in time. Self
storage cap rates havecompressed. Now, of course,
they've decompressed in the last12 months like every other asset
(37:21):
class, but they haven'tdecompressed as much as
multifamily as multifamily caprates have changed more than
self storage has. So I I justthink that there's less money in
self storage today than thanthere was in the past. The good
operators are in there.
They're making offers. They'redoing their job. You know? It's
it's just the the mathematics isnot as compelling for self
storage as it as it was about 5years ago.
Trent Werner (37:42):
And based on what we talked about earlier, 2026,
you know, multifamily should seean increase again. So it sounds
like multifamily is where youwanna be right now.
Neal Bawa (37:52):
Absolutely. And I I I also I'm making the bet that the
you know, I think that KamalaHarris will tweak out a win. I
don't think that they get to a asome, you know, absurd number of
seats in the house or in thesenate. But I think that as long
as we have a Republicanpresident, we should get a
healthy amount of immigration,and that definitely helps us
(38:12):
from a perspective of rentgrowth.
Trent Werner (38:14):
Absolutely. Well, Neil, where can
Neal Bawa (38:16):
people I don't think it'll be crazy like what they
did in 2022 or 2023. I get thefeeling that Democrats figured
out, oops. You made a hugemistake. Let's not ever do
something as stupid as thisagain. But but I think we'll get
a healthy rate of immigration.
Trent Werner (38:29):
And I I mean, I I would tend to agree with you. We
can we can talk politics whenwhen we're at best ever
conference 2025.
Neal Bawa (38:38):
Sounds good.
Trent Werner (38:38):
Neil, where can people hear more from you? I
know you got a YouTube channel.Where can they find you on
online? Best thing
Neal Bawa (38:44):
to do is to either Google my name. I'm the only
Neil Bauer on the world wideweb. And so all everything good
and bad is about me. Or justtype in Multifamily University
into Google. Click on that link.
We publish 10 webinars a year.About 20,000 people sign up for
those webinars. I just did onefor Airbnb. So short term
(39:04):
rentals is something that I'minterested in, and we had 1400
people sign up for that webinar.So these are free webinars.
We do them on all kinds ofdifferent things. My next
webinar is the impact ofartificial intelligence on
industrial real estate, and thatis at the end of October,
beginning of November. So thereare all kinds of webinars on
things that I'm interested in,impact of climate change on real
(39:25):
estate. So I do research forabout 30 days. My research
assistant, Chad GPT, is heavilyinvolved.
And then we do beautiful decks,and we present them 10 times a
year. Obviously, as you canimagine, 3 or 4 of the
presentations every year areabout multifamily or single
family, but others are aboutother asset classes in real
estate. So that's how we scratchour our, you know, research
(39:46):
itch, and anyone can, checkthose out at Multifamily
University. It it's free. It'salways free.
We don't have an educationalprogram. So it's meant to be
given away forever.
Trent Werner (39:55):
Awesome. Well, thank you so much for joining us
today, Neil. I appreciate yousharing all your, vast knowledge
and expertise with us.
Neal Bawa (40:03):
Thanks for having me.
Intro speaker (40:04):
Thank you for listening to this episode of the
Real Estate ProfessionalsInvesting podcast on Wynn, your
community of investing knowledgefor growth. We hope that this
episode has increased yourknowledge and added value to
your path to freedom. If youwould, please take a second to
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you or someone that you knowwants to be on, please visit
(40:24):
westsideinvestors.com and fillout our form to be on the show.
Thank you again, and enjoy yourday.
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