Episode 83 of the Diary of an Apartment Investor Podcast with Prashant Kumar and Max Harkavy, hosted by Brian Briscoe. Transcript by Otter.ai – please forgive any errors.
Brian Briscoe 0:00
Max, we got Prashant on the line here. What do you want to ask him about real estate
Max Harkavy 0:04
in terms of deal flow? How do you get brokers to take you seriously, before you've done your first multifamily deal?
Prashant Kumar 0:10
One thing is very important is when in when a broker sends you the deal, you just don't send the loi to them, you get back to them within 24 to 48 hours along with a request to have a conversation who review your underwriting with them so broken knows that you are serious. The second thing is you know, when you send a resume me you put an advisor name along with that, and this is the advisors experience and we do our doing this deal irrespective of what advisor is part of the project or not, but that always felt
Brian Briscoe 0:50
Welcome to the Diary of an Apartment Investor Podcast with your host Brian Briscoe. In this podcast we bring some of the top professionals in the apartment investment field to discuss various aspects of the apartment investing journey, with the sole purpose of educating listeners to make wise investment decisions. The Diary of an Apartment Investor podcast is sponsored by Four Oaks Capital, bringing you high yield returns through apartment complex investing.This is journal entry number 83 and part of our Ask the Expert series. Today we bring on experienced investor Prashant Kumar and aspiring investor Max Harkavy. Stay tuned to learn more about that all important subject for every aspiring investor, which is how to get brokers to take you seriously. Now before we get to today's episode, I do want to remind everybody that this coming Monday the 18th of January we're going to have our monthly webinar series we're bringing in Julie Peterson from old capital lending is going to speak all about how to fund your apartment deals. So head on over to our website diary of an apartment investor calm. Look for the upcoming events tab and RSVP so you can get the zoom link. Or go ahead and check the show notes tab link to the webinar series and RSVP. And now the show Welcome to the diamond apartment investor podcast. I'm your host Brian brisco with four oaks capital. I'm super excited for today's show. It's another one of our Ask the Expert episodes we have two amazing guests here on the line with us. We've got a man with a tonne of experience in this and other businesses Prashant Kumar, and a very motivated aspiring investor Matt harkavy. first introduce you to Prashant. He has a technology and management background and has built a personal real estate portfolio of about 100 units of single and multifamily assets. Today, he's been involved as a general partner in numerous apartment complexes with over 1200 units under management. He's also interested in his purchase a handful of assisted living facilities and plans to continue both multifamily and assisted living in the future. So that said, Prashant, welcome to the show.
Prashant Kumar 2:44
Thank you so much, Brian, appreciate you appreciate coming on the show today. Yeah, no
Brian Briscoe 2:48
problem, no problem. So let's let's do this. Let's talk about your background first, who you are and what led you to investing in real estate and then apartments.
Prashant Kumar 2:59
So the Brian, you know, as I say, you know, I come from a very humble background, you know, way back and from India, right. I mean, although my education has been one of the top tier institutes in India, I came here in United States in about 9798 timeframe, or $100 in my pocket, ever since then I have worked in technology and management jobs all across the world, all across the country managing hundreds and 1000s of people while doing across the globe manually, and it's a problem with you know, hundreds and 1000s of people across the globe. But while doing that job you know, I always thought that if I don't do it, what happens you know what happens you know, you don't work you don't get paid. So I was always trading time for my money. You know, it was sort of the golden handcuffs I couldn't quit my job and I couldn't you know, I couldn't move away so if I was sleeping I was not making money so the point I'm trying to communicate is I you know, I always had it in my mind but I never took a step but you know one day you know my brother in law you know is a person you have to go to buy some single families with me he had been buying some started buying with him not with him you know he asked me to buy one and then I bought two and then I bought three when I realised this start working on my time you know it takes three months to buy one single family to three months and thanks take forever to sign that loan, you know that $100,000 loan, which I can probably cut a check but I don't want didn't want to do it because you know, of course for the leverage reasons. Yep. I said mudejar to jump into multifamily, something more scalable. So within that that year itself, you know, single family two, I went into multifamily. I bought a multifamily. But you know the first multifamily was lost I mean I close it in 18 days, you know I have to write only one letter to the bank, you know my PFS and miss my si reo and he they close the close with and I was like excited. Super excited. Yeah. Long story short, I realised that it's not going to work long because money is gonna dry up, you know, I keep buying these multi families, you know, you know, I wouldn't have enough money. So then, you know, I started learning about syndication. I started jumping into, went onto the plane and going all these conferences, you know, before COVID, you know that, you know, we used to have those conferences, which we don't, which we missed nowadays. So, I've been going there all, you know, like seven of them in a year, like 2017 18 timeframe. I said, I have to do syndication. And that's something which I wanted to do, you know, I did my first syndication with with a group 500 units. I mean, it took time for us to do it. But eventually the results were fruitful. Right. So you know, that's how my journey started, basically, so one syndication after another syndication. I mean, I have not done many, I've done only four or five of them. One of them I have flipped. I mean, I'm done. I'm out of quick copy of the man, Mr. Lin. But that's my background, basically, you know, I come from a very strong technology and management background I do a lot of I know, I'm in my skill set is, you know, I can manage things very well, you know, underwriting and all that stuff from an apartment perspective. But I wanted to, as I said, I wanted to develop something where I can quit my job, I have not, I have not left my job yet. I plan to quit it. I wanted to do it in 2020. And I did that. But you know, nothing was going on in the real estate world. So I had to go back. Yep. I said, you have to go back. So now the plants are shifted for another year. Yeah. So goal is to get out of my job. It's not the golden handcuffs to me, you know, I get paid a lot and skill set, the sort of a golden handcuffs, you know, I have to get to that level. And then I then hopefully I can quit.
Brian Briscoe 6:56
Yeah, you know, a lot, a lot of real good things you mentioned there and you you summarise a warren buffett quote, quote up front, you know, if you don't, you don't learn how to make money while you sleep, you're going to work until you die, I think is the exact quote. But I think that is a common thread among everyone who makes the switch from a W two job to investing in apartments, you know, and that's, that's one of the keys here is real estate will allow you to make that money while you sleep. Something else you brought up is just you you contrast it, getting a loan for a single family home and getting a loan for a multifamily property. And I was also completely blown away at the difference in signing it. I mean, you said you sent them over your SRO, which is a statement of real estate owned, and your personal financial statement. And you probably signed one or two documents. And that's it. You know, I remember I remember signing my first mortgage for a house, you know, I probably had a stack, you know, two inches tall, right? I had the assignor initial almost every single page, you know, it's just one of those. It's a whole different ballgame and scaling with multifamily, which is what you found out it's so much easier to scale with multifamily than it is with single family for many reasons. You know, it's Buy one get X amount, or the loans are easier or anyway, lots lots of goodness packed in there. So So 2021 is going to be the year you quit your your golden handcuffs job for the rest of your life. Right.
Prashant Kumar 8:33
That is that is my goal. I mean, right? Now, that's my goal. I mean, I probably can quit, you know, sometime mid mid of the year. But, you know, I don't want to announce it as yet. But, you know, I'm moving in the direction.
Brian Briscoe 8:44
Nice, nice. I'm in a similar position, except I've announced it, you know, I've announced it, you know, far and wide. I'll be retiring. I'm active duty Marine Corps, most people who listen to the show know that, but I'll be retiring after 20 years. On October 31, with all the vacation that I've built up, I've got 233 days left. So, I mean, I've announced that far and wide here. But anyway, that's, that's that's something that, you know, hopefully, you know, right around mid middle of July, we can both get on a call together and congratulate each other for forgetting our w twos.
Prashant Kumar 9:19
I would love that. I mean, on the other hand, you know, the reason is I'm not a W two. I'm a private contractor. Okay, good, good. And I you know, as I said, I always get paid, like very handsome money in technology world, you know, you know, how much you get paid. And, you know, when we don't work, you know, like during Christmas or Thanksgiving when we don't work, we don't get paid. So, you know, you kind of feel that, you know, you are trading your time with the money. You know, if I get sick, I don't get paid. I mean, is it there is no residual value left? In my my experience, you know, right if I'm not billable, you know, you know, I'm not getting paid. So that was Something which was always there the back of the mind. And there is a deeper why which we'll discuss a little bit later into the episode, I wanted to free up my time to do what I really wanted to do. And with this job, you know, working from mornings, eight o'clock till evening, eight o'clock, even though I get paid for eight hours only, you know, that doesn't leave much time for what you really want to do. So that's the primary reason. And in addition to that, you know, I started doing so, and I am continuing a little bit more on my background, I started doing some assisted living, because in a facilities also, because that is my real passion is, you know, I mean, as I said, I come from a very humble background, very close knit family, my grandparents are with me, my parents are, you know, getting older now. So, you know, there is some element to be to serve elderly, you know, provide some elderly care, and that's the reason I'm getting into this. It is a business, but yes, you know, I, you know, I'm buying two assisted living facilities, trying to help where I can, and hopefully make a difference to elderly residents in my care homes, you know,
Brian Briscoe 11:11
so yeah, that's, that's important to know, there's a growing number of people who will be, you know, retiring and eventually moving into assisted living centre soon. So, I mean, my dad is in his 70s, I mean, he's still perfectly capable of you taking care of himself. But, you know, it's, it's a matter of 10 1520 years before, you know, that that happens with him, but we're good, good. Now, something else that you you mentioned, that I kind of want to unpack is, you know, whether you're, you're on a contract, getting your W two income or contract income, if you get sick, you know, or if you don't work, you don't get paid. And it's something that I've reflected on lately is the fact that how insecure that income really is, you know, and that that's something that I think a lot of people don't realise, you know, I know, in my life, I clung to that income a lot thinking that that income stream is keeping me alive without realising that you're making yourself 100% dependent on that income stream is actually much less secure than most people realise. So end of the day, you know, building income, building passive income, building assets, that are going to create residual income, is something that you've been working on. So you get the key to that, those golden handcuffs, and move on. So, we're good. Let's say, we talked a little bit about your why, let's let's just flesh that out completely right now. So what is your motivation, you know, just as complete as you want to go with that, your motivation for what you do?
Prashant Kumar 12:45
Okay. All right. So basically, you know, I personally am a meditation instructor, you know, that is something which I have always loved in my life, you know, I, I mean, I meditate a lot, and I help others to meditate, too. And it's all voluntary, you know, I, there's no money charged or anything like that. That's my passion. I started meditating when I was probably 1819 year old. And for the last 25 years, I've been meditating. And, and I have a group of people, you know, I help meditate, you know, I conduct meditation sessions, it's all free of charge. So to me, that's the, that's the real call. I mean, I would quit my job, you know, in like that, you know, if I have enough people, you know, to be able to kind of impart what I can impart comes off these, you know, the content in in their heart, right? I mean, that's what I learned. And that's what I have. You know, I want to teach basically, that. That's, and with this job, yes, I do it. I mean, I, after eight to eight work, or eight to six work, I spend good 10 to 15 hours a week helping on doing what I really love doing. But time is still limited, right? You have a family to you know, take care of everything. There's not much left. Yeah. So that's my real vibe. And once I'm financially free, that's what I want to do in my in my time. You know, yes, I'm in multifamily. Yes, I'm in businessmen, but I can still spear STM my time the way I want to do. morning, evening, afternoon, whenever I want to do, right, I can tell the world and, and still be able to do what I want to do. That's the real passion behind the the deepest why I have in my mind is if I'm able to quit. If I have the enough residual income, then I can steer my time the way I want to allocate to different things.
Brian Briscoe 14:44
Yeah, you know, and once you're financially free, that's going to unlock, you know, 40 to 60 hours a week that you would have spent earning money, you know, to be able to provide for that families and provide for your living expenses. So, yeah, that's I think that's your area. One has a slightly different way. But I think the the ultimate goal is the same to be able to get to that point to where we can pursue what makes us happy. You know, and for you, it's it's teaching other people something that you found that has brought you, I think the word you said like an inner peace, you know, the meditation. So that's amazing, really good, really good. So, all right, let's, let's talk a little bit about some of the specific deals or projects you've done with with apartments and up to you, whether you you give us an investment philosophy overall, or if you want to just talk about one specific complex you guys have done? See,
Prashant Kumar 15:35
I would say is, you know, as I said, you know, my goal was to create a residual income, so I started buying so that I can get some income out of it. But then I went into syndication, right, I mean, I have two apartment complexes, about 100 units that give me some residual income. Then I realised, you know, I have to do syndication. I started doing syndication one after another. But the first syndication is what I really want to talk about. The first one was the most difficult one always is, yeah, it was actually a difficult one, it was, you know, 65% occupied 30% down units and 5% in a 10% economic vacancy. So all in all, about, you know, 50% economic events that we were collecting, you know, those were flooded, or whatever. So, it took us a good amount of time, our philosophy was in my philosophy was never say, No, that's how I started into this. I got into a group, you know, and they needed help, like, real serious help, and, and I became partner in the group, you know, I said, Listen, I'm gonna just do it, irrespective of whether I get anything out of it or not. So I started helping them out to start, and they had the deal. But you know, you're talking about, you know, money raise, you're talking about talking to the lenders negotiating with the lenders negotiating with the property managers, visiting the property doing the due diligence. I mean, that deal had at least three lender retrains. lender re trades. I mean, I had my my personal money hard, you know, a bunch of money, you know, I'm talking about, you know, 250 300,000 in your first or second syndication money. And, you know, we just kept on working I mean, finally, you know, you found, you know, even after all that we were a little short, so we had to go to an equity partner, private equity firm, they decided to give us some money. Long story short, five months into the contract, you know, after 3x, two extension, three extensions. The last night, the night before we were bought out. That was like, in a you have worked so hard you have you have created this deal. You have put together everything on a on a silver platter. But we were bought out the night before the closing. Our critique partner said he didn't want to be the D Yes. And no extension left nothing and and he said, if you think it is appropriate, I will do the deal by myself.
Brian Briscoe 18:11
Prashant Kumar 18:12
I mean, we had no option. We had to say, okay, you do the deal is over. And he was good. That he paid us, you know, our hard money, otherwise, I wouldn't be sitting here.
Brian Briscoe 18:23
Yeah. Wow. I mean, interesting. So so the equity partner Bochy, out of the deal, but you got your hard money back, you didn't lose money, but you gained an education. It sounds like, Wow. I mean, that's,
Prashant Kumar 18:38
yeah, I gain so much education out of it, you know, I can I can do. I mean, I don't want to brag, but I can do any deal. I mean, I can write a book, you know, easily, you know, and, you know, with all the experiences that I had, you know, with so many lenders, you know, property managers due diligence, you know, you name it, we had gigabytes worth of data created during that timeframe. But, I mean, the fact that I was saying that, I will not say no, because of that, even though we came out of this deal, and we made a little bit of money, the guy was gentle enough that he paid us 1%. So we made some money is, you know, I have to be honest on that. So we made some money. So, right after that, within 30 days, we got another deal. Nice, similar size. We didn't go we wouldn't make that much money in that. But maybe, maybe we'll make 25% out of, you know, as compared. But we did the second deal. And then I had another deal after after like three months. Yep. So that kind of opened up the gate for us.
Brian Briscoe 19:47
Yeah, you know, I saw the same thing happening with us. I mean, our first deal was was definitely our hardest years takes the cake. I mean, I can't quite compare with that one. The big hiccup we had was you The spread on Fannie and Freddie loans at a time jumped, you know, they had come up to the end of their, their fiscal, they had a fiscal year cap. And you know, anybody who's familiar with the Fannie and Freddie, it's federally regulated. So you know, lenders can only lend so much under the Fannie and Freddie programme. And both, both programmes were right at their cap. And so the lenders pushed back and said, okay, in order to slow things down, we're raising our interest rates. And so over a three day period, we'd lost, you know, $600,000 in loan proceeds that we had to come up with, you know, and my goodness, it was, it was one of those things where, compared compared to what you're talking about, you know, make it makes it sound like it's Child's Play, you know, but, you know, we had to raise, you know, within a couple of weeks, a lot more money than we thought we did, and ended up getting across the finish line. But wow, you know, but yeah, end of the day, you know, looks like you made probably more more money in the education you received going through the process, then then that 1% fee, which is end of the day, just as important?
Prashant Kumar 21:08
I think so. Yeah, yeah. Basically, you end up learning when you work on a deal. I mean, I know we have a bunch of, you know, people who try to teach things, but the real real knowledge is gained by working on the deal. And that's what my goal to get into this genius, I will do whatever needs to be done. Yeah, I did that, you know, like for three, four or five hours a day, I was helping, plus, you know, my net worth was good enough, you know, you know, I was able to put in money. So GP LP, Kp dp, whatever, you can call it, I was doing all that. You know, I was vested in the deal. Basically, we had to do it. It just did not work out in the end, the last night before, we could not raise another 3 million by the morning, you know, no, no, that's not gonna happen. So, yeah, we took we took our, you know, we just packed out these Okay, whatever. And as I said, you know, we got paid a little bit, but that kind of opened up the doors for us. Yeah.
Brian Briscoe 22:07
Yeah, and what you've done since I mean, 1200 and change units, you know, that your your GP on that that's a significant amount for for anybody, you know, we're looking at that number is, you know, maybe maybe one to two years from now. But that's, that's a really good, good track record do you have so far? Well, that said, what's what's next for you?
Prashant Kumar 22:29
This year, of course, 2020 was was bad for everybody, right? For obvious reasons. But this year, we had some goals, we could not meet them. We had few properties, which we were underwriting which were in contracts, with most likely we're not one was not close. One is still in negotiations. And there were some assisted livings that we are trying to buy, they are under negotiations also. So the goal is continue the journey basically continue the same journey, you know, buy more assets, help more people on all fronts, you know, those who who are our investors, as well as those who are residents in our assisted living. Just continue to open up our minds and, and help basically, I mean, money, money will come my mind, you know, as long as we our intentions are good, open and humble. And, you know, we are willing to help others. That's what we are doing every day without, without any limitations. So to say that, I mean, we do meet ups, we do, you know, webinars, things like that education, you know, for adults, we don't, you know, no one is ever charged. So you're just continuing to do what we are doing, and hoping that, you know, our deal pipeline will start, you know, we'll come back again, right now, we are in sort of a waiting mode, right for next couple of months. Because the economy is you know, right. We are on the top basically, we don't know where we are going. Yeah. properties are sold at four cap, three and a half cap, you know, I don't think we want to buy at that price range, right? Unless we get a discount by 20 30%. Yeah, and that's not going to happen. Because a lot of people out there looking for deals. There is no hurry, but yes, I mean, that's our next I mean, we don't know what is next, right? I mean, you really don't know. But we are just continuing to put engineering to put our efforts in the right direction. You know, meeting people you know, nice people like you, you know, like you and that in our country to educate educate the world and continue to to get educated you know, while giving I get back also, you know, and I'm talking to you, I'm forming up my ideas in my head. What I want to do next,
Brian Briscoe 24:43
yeah, you know, what, one of my favourite quotes you know, and whether you call it karma, the golden rule, but it's Zig Ziglar quote, you can have anything you want in this life by helping enough other people get what they want, you know, so it's one of those you know, what goes around comes around philosophies, you know, if you give freely to Others you'll get what you need out of this life you know so very much appreciate that you know and and for for you sharing your experiences with us today. But that said, let's let's shift gears a little bit, we've got Max harkavy, patiently waiting on the line here real quick. He's an active duty Air Force officer currently stationed at Wright Patterson Air Force Base in Ohio. He previously flew b 50. twos, and is now an acquisitions officer working on the F 15 defensive systems for the Air Force. And he's turning transitioning now into a multifamily investor. So that said, Max, welcome to the show.
Max Harkavy 25:38
Thanks for having me, Brian. I really appreciate it and looking forward to speaking with you. Prashant.
Prashant Kumar 25:42
Yeah, same same. For both of you guys. You know, thanks for your service. No.
Brian Briscoe 25:47
Well, thanks a lot. Appreciate that. Thanks for the support. Thank you. Yeah, so Max, why don't you go ahead and tell us a little bit about yourself.
Max Harkavy 25:57
So like you mentioned I currently stationed at Wright Patt which is up in Dayton, which happens to be about 40 minutes north of where I grew up in Cincinnati. My family's always been in real estate. My dad has had owned a property management company in the Cincinnati area for 30 plus years. And my uncles are in real estate My grandfather was in real estate I joined the Air Force because I didn't want to do the follow my dad's footsteps got like he did kind of thing. So I was like, I'm gonna have my own adventure. join the Air Force. Definitely don't regret my decision. But knowing what I know now what I do it again, I don't know. And it's funny because circling back and now I'm ultimately following in my predecessors, footsteps and getting trying to get into real estate. And so it's funny to watch my myself come full circle like that. But therefore, there's a lot of reasons why I want to get into multifamily. Most of what you guys have already talked about, but yeah, that's pretty much me in a nutshell, basically,
Brian Briscoe 26:55
I mean, it's not It sounds like it's in your DNA, you know, to generate leads to devolving into to the real estate. And you said your dad was a property manager.
Max Harkavy 27:04
Yeah, he owns a property management company. in Cincinnati. It's called bounce property solutions. They mostly managed large shopping centres, and they they recently last decade or so got into managing larger multifamily assets. And my dad actually sold a large percentage of the company to his partner to step away because he wanted to start actually acquiring more real estate himself instead of just managing it. So I've actually tried been trying to work with him a little bit to get some deals done because he's been in the game for so long. And he knows so many people in the southern Cincinnati, Indiana, Kentucky area, he knows all the people so it's been a it's been a struggle trying to get him to work with me because we're kind of on two different planes. You know, he's older, he's made his money he's not as motivated. I'm a lot younger, and kind of pretty passionate about you know, the finance behind this and how it all works. And yeah, but it's it's a struggle, but it's a good struggle to have because we're working together and good things will come with it. Yeah, you know, I
Brian Briscoe 28:06
know a lot of newer investors would be very envious of that position that you're in because a lot of people know and Prashant mentioned it earlier you know, you have to get loans you have to have experience you have to have net worth and balance sheet you know, and your your dad's been in industry for so long that he he'll be able to navigate that super easy whereas other people have to when they're looking for partners and building teams, that's just one more person or one more hat has to find somebody that can wear it so good for you. I mean, being in that area, there's there's a lot of markets, you know, within a couple hours drive of where you're at right now that are actually doing very, very well right now. You know, a lot of people who have come on the show and love people that I network with that have talked very highly about the Columbus market Indianapolis and then getting into Northern Kentucky. I think Louisville is the city Northern Kentucky right in the border. Is that right?
Max Harkavy 28:58
Yeah, Louisville. Yeah, there's Covington, which is right across the border from Cincinnati. And then south of that is Louisville. And there's Lexington as well.
Brian Briscoe 29:04
Louisville and Lexington. Yeah, those are all cities that have pretty strong futures. You know, as far as you know what direction they're going. So, so good. Now, you said you went into Air Force to to get your adventures? You know, I imagine Flying V 50. twos is is quite adventurous. A couple. Yeah. Yeah. What was in your mind? I mean, you told us that initially, you didn't want to follow your father's footsteps. You didn't want to go in real estate you got into Air Force? what triggered that? That change in direction? So that's a good,
Max Harkavy 29:35
that's a great question. The there's a lot of different reasons that made me kind of circle back. One of the main ones is, is that I know that this the Air Force thing is not a permanent thing. I have to do something after the Air Force. And like you guys were talking about earlier being so reliant on that income, yeah, it's it's very secure and the government you know, they can't fire you. The next day, you'd be out of a paycheck. It takes the they're gonna find Have you take a while? Yes. So, I mean, you have that security net. But, you know, I've got three years left on my contract. And one of my goals is to try and replace as much as much as my Airforce salary as I can with apartment. You know, passive apartment, apartment income, excuse me. And so, the fear of not being able to support myself in three years is kind of making me it's lighting a fire under me, if you will. So that's one and the other. The other big reason is if you just if you have a basic understanding of finance, you know, that this asset class basically can't be beat. I mean, it's almost as safe as gold and it pays your return. I don't know, the argument, I don't really know of an argument against multifamily that would hold up in my book. So
Brian Briscoe 30:45
yeah, you know, and a lot a lot of things there that are similar, you know, I, I looked at the kind of burning the boats, philosophy, you know, myself, you know, I, about two years ago, kind of looked at, you know, just just moving into a brand new area with a brand new job. And, you know, very typical, I mean, I'm Marine Corps, your air force, our tours are almost three years on the DOD, like clockwork, you know, and I think Air Force similar. So, I showed up here with 17 years under my belt, and I, for the first time realised, Oh, my gosh, you know, at the end of this duty station, I could potentially get out, retire, have a pension, you know, and I made the same, same thing. As you, I started planning and thinking, Okay, I've got three years to replace my active duty income. All right. And in fact, I'll tell you right now, you know, you got three years, you can do it. It's achievable. All right. You know, this this year, I haven't quite replaced it, but we're well on track to have it fully replaced, you know, in 300. And I shoot, I forgot my count 233 days left. Can't believe I missed that number of everyone. Count. Yeah, yeah. But very, very achievable. Alright, so let's, we, you talked a little bit about your why. But let's let's dive into that a little bit deeper, what is your big burning wire your motivation for doing this? So another,
Max Harkavy 32:10
I guess it comes back again, to the military thing, you know, a few years after joining and, you know, the novelty of flying, flying aeroplanes kind of wore off, and it's like, this is a lot of work, the pay isn't that great for what they're asking you to do. And you're always you're always working for somebody, and you're always answering to somebody, and there's always someone you know, every time you graduate from something in the military, I'm sure you've had a similar experience, you're, you know, you're the you're the lowest guy on the rung, it doesn't matter if you're a lieutenant colonel, or Oh, six at the Pentagon, oh, six is at the Pentagon make coffee for generals. So I'm like, it literally never ends. So I kind of decided that I the best way for me to work on my own hopes and dreams in my life. And my own aspirations is to be my own boss, and make my own money and not have to answer to anyone, you know, saved the wife.
Brian Briscoe 33:04
So that you choose to answer to the people you choose to to be accountable to.
Max Harkavy 33:09
Right, right, exactly. It's not someone who's arbitrarily placed over my head in a leadership role that I have to please all the time. So that's, that's my, that's other than, you know, it kind of being in my blood to be in real estate, and be in real estate, like we talked about, that is my biggest reason is, is so I can have my own aspirations and do things on my own time in my own life and dictated my own terms. So
Brian Briscoe 33:33
yeah, you know, and if, if that's important to you, you know, living your life dictating things on your own terms. You know, I think I realised not too long ago that the military is just not compatible with that, you know, it's just a friend of mine and I were talking last week about you know, being a commander, you know, which is, you know, Lieutenant Colonel, you got about 15 to 18 years of commissioned service at the time when you get there. But when I was younger in my career, you know, a lieutenant maybe a junior captain, we used to look at that Lieutenant, Lieutenant Colonel CEO as almost a minor deity, you know what I'm saying, but, you know, now sitting where I'm at, I just realised, you know, they, they sit in a very small box with very little room to actually operate but, you know, it's one of those things that over the years, you know, it's kind of you get to peek behind the curtain and see, anyway, it's a very, very rigid system and anybody I think a lot of people clash with it who who can't quite you know, just buckle up and and do what they're told. But anyway, we're we're getting on a tangent, but I could do a whole podcast episode just on that one subject, but it got me to that one, please. I would love to be on that with you. Yeah. So So that said, let's, let's, let's get back to real estate here and Max, we got Prashant on the line here. What do you want to ask him about real estate?
Max Harkavy 34:56
So I had a list of questions here, but 101 popped into my head. had that I didn't have written down when you guys were talking earlier. And you mentioned deal selling for three or four caps these days, I've also noticed a similar phenomenon in my market that I'm, you know, the Cincinnati Greater Cincinnati area. Do either of you anticipate, you know, obviously, there's going to be one, but I guess my question is, when do you anticipate the correction? And when that occurs, do you think that will be an opportunity similar to what I imagined 2008 was for people that are on our shoes right now.
Prashant Kumar 35:29
So basically, it is, you know, patience is virtue, right? I mean, that is something that we have to realise, you know, I know a lot of people who are sitting on the sidelines with a lot of cash. And, you know, people will start making mistakes, you know, that, you know, those who are waiting, you know, like me, and I'm waiting, people will start making mistake, they will start jumping into the real estate sooner than when it when it is going to start falling apart, right? I mean, it's gonna, it's gonna fall apart, like, what happened in 2008 2009 timeframe. But you know, the answers are in is gonna kind of plateau, maybe we'll go a little bit down or and you know, and come back or whatever, is not going to be going up all the time, right? Just practically. Right? Right. So the idea is, do you want to jump on the waggon? Now? Or do you want to wait to jump onto the waggon in my mind, unless you find a distressed asset, yourself through your own effort, if you are going through a broker broker wants to sell you any property at the stabilised value, and add stabilised value. And there are a lot of people who are giving away their money. And maybe I'm wrong. But my thinking is that unless you find a distressed assets, where you where you can find it, you can get a discount of 10 15%. Time right, right now is not the right time to buy. right all along is going to be nobody has a crystal ball. But as you know, I was I talked to a lot of people like everybody does. And somebody was telling me that, you know, multifamily foreclosures have already started coming. And he buys foreclosures, you know, in Washington, DC area, he said he saw seven full couriers in one week, last week. And he doesn't see that, you know, during the year. So I mean, things that things will change, would they change drastically? We don't know, we know that nobody is pressed to pay their rents, you know, like a class 10. And even a class tenants are not paying rents right now. There are many states No, the courts are not giving the dates to the deeper analysis of why would it happen? Because people are not pressed to pay rent, irrespective of whether they have in their pocket or not. And they will not be pressed to pay rent for next six months. Right? Because evictions are Yeah, yeah, who's who's that loss. You and I are at loss, the one who's the owner landlord is at loss, whether you're a syndicator, or a passive owner, you are the one at loss from the day will come and this sink, sinking feeling in your heart, you're going these guys are not paying me that will burst and you know, it will go into foreclosure. That's when you will have an opportunity to to buy those assets. And when that happened, I don't think it will happen in three months is just too short of a time. It will take maybe six months, you know, or nine months, you know, that's my my gut feeling. And that's what I'm hearing. Maybe I'm wrong. I'm not gonna have a crystal ball.
Brian Briscoe 38:42
Yeah, my my crystal ball broke, you know, so? You know, good, good question about the low cap rates, you know, we've had a historic period of very low interest rates and interest rates and cap rates are tied together. You know, if you look at what's going on in Europe, and in eastern Asia, some of those countries have negative savings rates and negative interest rates for for savings programmes. And theoretically, cap rates can continue to go down in the US. I mean, right now, our savings rates are low, but they're positive. All right. Zero is not I mean, we're not looking at you know, positive numbers, only that number could get negative, just like it has in Europe, and just like it has in countries like Japan, you know, so can the cap rates keep going down? The answer is Yes, they can. All right. Will it keep going down? I mean, if we're looking at our international counterparts as an example, I think they will still go down from here, you know, but like, like Prashant said, I don't have a crystal ball. And, you know, I also you know, that that's, that's one hand of the equation the other hand of the equation exactly what Prashant was talking about, there are economic cycles, you know, even though our cap rates can still come down, either economics cycles that are that are affecting everything else that's going on. So, you know, what's what's been consistent over time is that, you know, real estate does appreciate, and it outpaces inflation, you know. So when you look at that, and you add the leverage back in, it's still a safe investment. There's, there's timing, that you make things easier and better for you. But you know, so if you can buy it the right time and sell at the right time, great, but, you know, if you happen to buy at the top, you have to wait a little longer for that top to come back up again. So,
Max Harkavy 40:35
yeah, yeah, kind of a follow on what you guys were talking about earlier, there was a warren buffett quotes spoken at one point, and what was your answer? The question kind of brought that back up, Prashant? For me, timing the market is hard. And Warren Buffett, you know, said, I think it was Warren Buffett said that to never try and time the market. And so as a as an relatively inexperienced investor, I look, I get all these deals sent to my inbox. And I underwrite them, I go through the practice of, you know, is this a good deal, I do market research in the area. And sometimes they pencil out and most of the time, they're, they're junk. But you know, I'm really eager to buy one. So it's hard for me to it's that that voice in my head saying don't try and time the market if the deal makes sense, buy it. So it's kind of like this internal struggle I have where it's, it, objectively, is probably a bad time to buy for all the reasons you both stated. But I have a time limit, like we were talking about earlier as well. And I you know, I just want to, it's hard to know if this is the right one or not, I've actually just closed on a my first deal I did by myself as a four family, actually only 20 minutes or so from my house. But that you know, it's residential property, residential loans, it's not really going to count towards anything practically on paper for acquiring my first multifamily. But it was a good deal pencilled out, so I bought it. And I guess, that leads to my next question. In terms of deal flow, how do you get brokers to take you seriously, before you've done your first multifamily deal? I seem to get only sent the things that have been passed over 150 times, I don't get the deal that could actually make sense. So how do you get the broker to take you seriously and send you something you could actually buy?
Prashant Kumar 42:17
See, one thing, one thing is very important is when in when a broker sends you the deal, you just don't send the alloy to them, you get back to them within 24 to 48 hours with along with a request to have a conversation to kind of review your underwriting with them. Right. So, we are talking broker, I sent you a deal, you have done your underwriting now, you are set, you are asking broker and it just an example. Right? I mean, there are many other things that we do you discuss your underwriting, you know, what is the basis of the price that broker is asking, you know, most of the deal don't ask for now it's on the mark to kind of discuss your deal. So broker knows that you are, you are serious, you know, you're not just caballo I, you know, just send the, you know, alloy for the deal. That's one thing, you know, which has helped me a lot, you know, in my initial days, you know, I would respond back to the broker, I call him right away, and probably sent him an email with my underwriting file. And listen, buddy, this is not working out, I mean, this is what I think should be the right price. So once he looks at once or twice with you, in that cycle, they start looking at you a little bit more mature person, because you are spending, they know, at the end of the day, they want to sell a deal. And if you are the first one responding to them, with with all the hard work, it is hard work, but eventually, you know, they start looking at you that yes, you want to buy. The second thing is, you know, when you send me a resume, me, you put an advisor name along with that in it, and you're assuming that you know, you have this much experience, you don't have to put your own deal because you have not done one. So it's not it's not that you are faking or anything, it's just that you say Listen, this is my organisation and in my organisation, this is the advisor, a lot of people do that. And this is the advisors experience and and and we do are doing this deal, irrespective of what advisor is part of the project or not, but that always helps you know, you have so these are, you know, kind of some tips to build your credibility. You know, you are building a team, you know, you are not going to buy it yourself. You cannot I mean, I don't know about you, but I cannot buy $5 million deal myself. Only wonder Yes, yes. You can buy it after a couple of years. You know, 5 million is not that big of a deal in at least in multifamily. The other thing I was gonna say that when I was listening to you being impatient, right, yeah, you make a mistake. In single family, you can survive that you make mistake and mark that family, you know, you buy a $2 million asset for 4 million you or 2 million out of your pocket? Yeah, it's gonna, it's gonna take years before it comes to a bank two banks loan will always sit there on your head bank will acquire that, take that property and run with it. Yep. So, you know, trying to see I'm the boss example and I bought my residence primary residence in 2008, when it was on the top, right, it has never come there, but it doesn't hurt me. Because I knew the right house still cannot sell the house and the price I but if I make a mistake in my multifamily, which I'm buying for myself, if I pay a million dollar more, on a on a, if I pay 50% more on a on that big kind of what kind of an asset is gonna sit on on my balance sheet, I mean, banks are gonna ask for that money. So waiting and treading your, you know, waters carefully is the game here, you know, and as I keep saying, Do not buy anything on retail price, buy it at a discounted price. You want to buy, I want to buy right away, there are a lot of impatient people and somebody is going to make a mistake, and they will suffer. So we can advise your prayer warriors carefully. You know, that's my, again, pick it as a grain of salt. But these are my my comments on that.
Brian Briscoe 46:24
Yeah. So the follow on to what Prashant just said, you know, that there's a couple of golden nuggets there, you know, get back to the brokers quickly, you know, build your team, you have to have credibility before the brokers you're gonna keep sending your your your deals. And by right, you know, incidentally, and this is very coincidentally, about 10 minutes ago, I just got a text from my partner, we just closed on 167 unit apartment building. And yeah, thanks. I mean, that's, that's great news. For us. It's almost doubles our portfolio size, but 167 units, but we bought at 7.1 million on a property that was appraised at 7.4 million, three years ago. You know, so so be able to buy at a discount is absolutely crucial. I mean, don't not buy. But you know, just do exactly what Sean said, make sure if you're buying right now you're buying at a discount so that you have you have that buffer. So you're not sitting on a you know, million dollar, you know, you're not a million dollars underwater, you know, in our case, we're probably a million dollars in equity right now. Just Just walking into this. Alright. Alright, so we Max, you got another question?
Max Harkavy 47:34
Yeah, this can be directed at both of you as well. Did either of you have a have a mentor figure that kind of coached you through the first deal? And if so, how did you get that person to agree to be your mentor? That I'm finding that difficult? Everyone's like, fundamental, find a mentor. I'm like, how do you find one?
Brian Briscoe 47:55
Yeah, Prashant, I'll let you go first on that one.
Prashant Kumar 47:58
See, as you know, I was saying that I, you know, I do not have any, like, paid mentor, but I had, I had mentors, you know, in my, in my career, the way I started, why I started doing this deal, you know, I said, Listen, I, I just stumbled upon and I said, Listen, I'm gonna do it. And I held that. And those guys, were a little bit ahead of me, so they were sort of my mentor while doing so. I was gaining knowledge from them. And, and my network kept on increasing and one of the partner actually is one of the coaches in, in a, in a, in a different organisation. And, you know, he's my partner so so to say, you know, I'm lucky that you know, he's there we always and in your case Max, you know, your, your father, your, you know, your family, you're generally you know, you have mentors in your family itself is not bad, you I mean, you have to see through them and sometimes you said differently, but you have to see that the value that they bring to you is priceless. You know, so, your impatience is you know, your impatience and they are kind of sitting back attitude. They have to kind of find a balance and you have to get what you have, you can get out of it. Right? mentor I mean, yes, you can join any any mentorship programme, roughly your fair, less whatever. But the most important, most important thing most of our learning is when you are in a deal. When you are in if you are one of a syndicator when you are doing a syndication at that time, what you will learn you will not learn anywhere else, you know, you can watch my videos, you know, have a bunch of videos, for that matter. You know, there are there are tonnes of things you can you know, Brian's podcast, you know, you're learning, right? I mean, this is a learning process, basically. So this is sort of a mentoring but you have to get, you have to do something to do unless you apply it. Or at least it doesn't stick to me. You know, it kind of lumps and goes under size apply that knowledge is useless. So, yeah, I mean, good luck to you. I mean, anything you need. I mean, from that perspective, I, you know, I would love to talk to you and share my insights, you know, anything that you need. And I would love to see if you find some some deals and I mean, I'm in the neck of the woods, by the way, you know, I have properties in Indianapolis. Oh, yeah. Yeah, I look in Indianapolis every day, I talked to five brokers today, called sorry. So Ohio. I mean, I work in Columbus, even though I live in New York, okay. I like that area very much would like to partner up, you know, whatever, she or my group, you know, I have a group also. So you kind of double up your network, basically. Right?
Max Harkavy 50:48
That's my talk. If you ever need someone to go and go check out a deal for you. in Indianapolis, I'm only like an hour and a half away. So if you need someone to drive out there and look at something for you, you can always reach out. Awesome. Awesome. See?
Brian Briscoe 50:59
Yeah, there you go. I mean, you just answered your own question there. That's it. So how do you get mentors, I paid for a mentor, because I was, I was under the impression that I'd have a hard time finding a mentor. But really the key there, there's, I think two keys in finding mentors. Number one is you got to network. Alright, and number two, you've got to find a way to add value, you know, there, there has to be value on both sides of the equation, you know, and the more you network, the more you learn. And the more you learn about the subjects, and the more you're you're doing things, the more value you're going to be able to add to a potential mentor. So it's one of those where you've got to be working on both sides of the spectrum, you know, networking, networking, networking, finding people with experience, building my own experience, so I can be a good partner, or I can attract a mentor, you know, so, I mean, for most, the easiest way, I mean, depending on your financial situation, the easiest way is to pay for a mentor, you know, and there's lots of programmes that will do that. But the harder and maybe the more valuable way is, you know, to keep on networking until you can, you know, keep on networking, keep on learning until something just happens. So, alright, that said, we're we're out of time right now, as much as I'd love to continue conversation, we're going to break it off here. But one question for both of you to finish up and push out You go first, how can our listeners learn more about you?
Prashant Kumar 52:28
See, oh, you know, you'll see my my name behind me know, my company's my delta gains. So I have an email address special that my realty gains.com You know, that's a simple, simple website, you know, they are I have a seven day email course, for all the passive investors there a lot of people who do not know what a passive investment in real estate can do for you to really know, the benefits of passive investing in real estate, specifically in multifamily, specifically in the assets, where we do cost segregation in a cash flow, depreciation, you know, appreciation, you name it, I mean, these are the fundamental benefits, and a lot of people do not know about it, right? I mean, people think that they are giving money to syndicator, they are not giving money to syndicator, they are big, owning the real estate, they are part owner, federal state. So all those benefits in the satisfaction of owning the real estate, you have kind of put together everything into one, seven day email course is just two minutes of video per email, you know, it kind of walks you through those benefits. Well, feel free to subscribe to that, feel free to schedule a time with me on my calendar, you know, my cell phone, you know, 6314 to 86479, I'm always there, you know, I always pick up or text me I know, then find out ways to Facebook, LinkedIn, whatnot.
Brian Briscoe 53:57
All right, so that information is going to end up in the show notes, we got my real t gains calm, you got the email address, and he gave his phone number out as well. So you know, feel free to contact him? And definitely, you know, sign up for that seven day email course. That's it Max, same question for you. How can people learn more about you?
Max Harkavy 54:15
Right. So I guess the best way to learn more about me and my background would be through my LinkedIn profile, until I have reason to build a website, that's just going to be where that that stuff lives, the LinkedIn, it's just Max harkavy, LinkedIn, and then my email address is harkavy firstname.lastname@example.org. And then you can also just feel free to call or text me 513462810 and I'm always happy to learn more and help out other investors as
Brian Briscoe 54:44
where I can and everything so all right, and once again, all that information is going to be in the show notes. You know, reach out to him if you're a mentor that needs somebody in the you know, Columbus Ohio area. You know, he's your guy. So thanks so much guys for coming on the show. Really appreciate your time today. And you know, I learned a lot This is Greg.
Thank you for listening to the diary of an apartment investor podcast today brought to you by four oaks capital. If you'd like to know more about how to invest in apartment buildings or want to be a guest on our show, visit our website at four oaks capital comm slash podcast or email us directly. If you're still listening, you obviously like the show. So pull out your phone, app, subscribe, and leave us a five star rating on your favourite podcast app. And we'll see you again next week.
Transcribed by https://otter.ai