Ep #555 – The Art and Science of Multifamily Underwriting

Veena Jetti is in over 3000 doors, is a mother of twin toddlers and gives back by helping companies develop disaster recovery plans. To say she is a powerhouse would be putting it mildly. We covered a lot of ground on this interview and I know you’ll get value from it. Here’s some of what we covered:

  • Why multifamily beats out other real estate classes
  • Dealing with Covid challenges
  • CDC Declarations
  • Re-trading deals
  • KPIs for investors
  • Improving the resident experience
  • Artificial Intelligence for underwriting
  • AI for pricing
  • Team and staffing issues
  • The art and science of underwriting
  • Compound interest – Those who understand it earn it, those who don’t pay it.

To find out more about our guest:

Full Transcript Below:

Rod: Welcome to another edition of “How to Build a Lifetime Cash Flow through Real Estate Investing.” I’m Rod Khleif and I’m thrilled you’re here. And I’m super excited about the dynamic woman that I’m interviewing today. Her name is Veena Jetti and she’s the founding partner of Vive Funds. Let’s see, where do I start? She actually graduated from the University of Illinois in Chicago with a degree in finance when she was 20 which should tell you a lot right there. She’s done over a billion dollars in real estate transactions or real estate assets she’s been involved with. She’s in over 3,000 doors right now but you know what’s really cool, she’s also a philanthropist. So she founded and serves on a board of a non-profit and, you know, basically she helps companies and charitable organizations develop better disaster recovery protocols. So I want to actually dig into that a little bit but very excited to have you on the show Veena.

Veena: Thank you so much for having me. I’m so excited to be here. It’s been a long time overdue.

Rod: Yes, it is. And you know what’s crazy guys is we actually met Veena in a clubhouse room and had not even heard of you before then. I’m embarrassed to say which shocks me because I’m, you know, pretty well connected in the business. But, you know, when I listen to her talk and you guys are really in for a treat, not only is she beautiful which I didn’t know until she came on the show here today and she just had a couple of toddlers too, twin girls, but she is one sharp cookie. So really excited to have you on.

Veena: Thank you. I’m so excited to be here.

Rod: I love it. So why don’t you tell us, you know, how you got in the business? I mean, you know, why multifamily? How you ended up there after the finance degree? And just kind of give us a little better, a much better background than I was able to do there.

Veena: Yeah. I always tell everybody I kind of like cheated and took the shortcut in because I was born into a real estate family. And my mom is actually a very successful real estate investor. My parents retired early from their real estate portfolio which they’ve now divested from and everything that they have in real estate is invested with me at this point. So I started with a really solid foundation in finance and real estate finance and then went to undergrad, graduated with my degree in finance and my mom was like, great, now you’ll join the family business. And I was like, no, I’m an adult. I’m going to do something totally revolutionary and, you know, I can do this on my own. And so I went and worked in corporate real estate and made a lot of money for someone else. The first year, my husband and I, paid taxes jointly. We were living in D.C. I was working at Tishman’s Fire. At the time, I had a billion dollar asset that I was on the management team for. And I remember calling my mom going, what just happened? We just paid like hundreds of thousands of dollars in taxes. I don’t know what to do. And she’s like, well, you need to be in business for yourself. And she kind of, you know, sat me down and walked through why it is beneficial to have your own business and to be an entrepreneur. And I’ve always had this entrepreneurial spirit, like I’ve always had these little side businesses as a kid and stuff so it was a really good fit for me. And so I left corporate America and never looked back.

Rod: Wow. So, did you go right into multifamily or did you start with single family? Did you do the natural progression? You do a house, a duplex, a 10 unit, a 20 then 100 or talk about that that bring us there.

Veena: Yeah. So I actually, I didn’t do the duplex, 10 and 20. I actually was doing condos and single families and it got to the point where I was buying like five houses a week sometimes. It was very high volume–

Rod: In Dallas where you’re at?

Veena: I was in Dallas, yeah.

Rod: Okay.

Veena: So anybody who has done this knows that that’s not really a scalable position to be in because you’re at five different assets. Dallas is a very large market so they could be an hour away from each other and it, you know, it’s not as glamorous as HGTV makes you think. So, ended up deciding that needed to scale and that’s actually when I started getting into kind of the multi-unit side and I ended up going into the multifamily space. It’s my favorite asset class because it’s, number one, the most stable, number two, has a lot of scale so the volatility compared to the scale is really great and then if you look historically at the sharp ratios multifamily by far beats out any asset class within real estate.

Rod: Oh, no question. I mean, that’s why we’re here. You know, even after the 2008 crash, the rents were back to exceeding 2006 levels within like two or three years so it’s a very, very stable asset class. And so you got that memo real quick on the single family. See? I had to do 2,000 houses before I got that memo that I rented long term. I know you’re–

Veena: I had no idea how you did that.

Rod: Yeah, no. I mean, just not as smart as you are but that’s the bottom line. But, you know, so what year was it that you did your first multifamily? I’m just trying to get a feel.

Veena: 2014. So what is this–

Rod: Wow. It hasn’t been that long then. Okay, fantastic. And are all your assets have they been in Dallas or all over Texas or talk a little bit about geographically where you’re invested?

Veena: Yeah. So we like Dallas as a market obviously. It’s a home market and it’s been on fire. So we have assets, currently we have Dallas, Jacksonville, Orlando and Atlanta. Well, and by Atlanta I mean, technically it’s Marietta but it’s Atlanta.

Rod: Nice. Yeah, we’ve got three assets in Dallas. We’ve got one kind of northeast of Atlanta. I’m trying to remember. I’m gonna lose the name of the city.

Veena: That ones field area.

Rod: Yeah, I know. It’s highland something but I’m drawing a blank. But of course, we love Florida because I live in Florida. And, you know, that whole Orlando Corridor, one of my friends who’s it was my first podcast interview, Albert Berriz is a billionaire that he owns tons of assets between Orlando and like Tampa on that I-4 Corridor. Let me ask you this just as a squirrel moment. Did the Orlando, is that, no you’re not in Orlando, in Jacksonville?

Veena: I’m in Orlando.

Rod: Or did you see Orlando? Oh, you’re Orlando. Did you get dinged because of the whole Disney thing? Talk about that for a second.

Veena: Yeah. I’m actually glad you brought that up. So we have a little over 100 million currently in Orlando. What’s interesting is so we have two really large assets there. One asset is very close to Disney and we definitely have seen a lot of CDC declarations or a lot of bad debt delinquency so we definitely got hurt there quite a bit. The other asset that we have is just outside of Orlando, it’s an area called Melbourne and it’s kind of like a tech hub and so what was interesting about the two assets compared to each other is the one in Melbourne didn’t have a whole lot of issues with occupancy, didn’t have a whole lot of issues with delinquency we have zero CDC declarations. We’ve been collecting it like 99% the entire time code.

Rod: Wow.

Veena: And so we got hit on one and we didn’t get hit on the other. The challenge we have on that asset is it was a value-add asset and that market has been experiencing a negative one percent rent growth over the last few months. And so, the challenge there and the other issue was is a lot of product got delayed and so licenses that we had planned to see come online within the first year hold not now got delayed to the second year of hold. And so, our business plan has just been completely thrown off and we weren’t really able to go in and add the value we had anticipated which is where you see a pop on the rent and you start seeing that higher cash on cash. So it’s been a real challenge to kind of navigate through, but the asset otherwise is stable. It’s kind of, the kind of asset you actually want to own, the post renovation in a turbulent time, it’s just we closed December 2019.

Rod: Oh, yeah. Ouch.

Veena: And then three months later–

Rod: Right, right.

Veena: We just put everything on hold so–

Rod: The world stopped. Yeah, no. So yeah, I mean, and your investors aren’t stupid. They know that some of that’s just completely out of your control obviously. Now, just out of curiosity, not to add to your pain that asset that’s near Disney, what sort of economic– what was that I was trying to think of the way I want to phrase this but what’s the bad debt or what’s the– how are the collections? What’s your percentage of collections on that, I mean–

Veena: It actually remains strong on the asset for the tenants that are in there. So what we actually saw was a combination of occupancy dipped lower.

Rod: Right.

Veena: Because we couldn’t find the tenants that would qualify on our income requirements so that was one challenge. We were hovering in the high 80s maybe low 90s depending on the month which in general is not terrible but it’s obviously not where we want it to be either. The other challenge we have there is same with the other asset is we halted all renovation when–

Rod: Right.

Veena: I think most people did, right?

Rod: Yeah, smart.

Veena: We switched from monthly distributions to quarterly distributions which, you know, I hate doing that because I want to perform for ambassadors and it was a totally different market when we went into that asset than we’re going into today. And so, I always tell people now it’s easy because I have a cheat sheet. I know Covid is a thing. I can underwrite for Covid today.

Rod: Sure.

Veena: And so, that’s actually been the bigger challenge there and then also we’ve had a lot of CDC declarations there so what that means is we can’t evict for non-payment. But what we’ve actually done recently to try to manage some of the delinquency and bad debt on the asset is we’ve actually brought in an employee who their only job is dedicated toward decreasing the bad debt and delinquency of the asset. And part of the CDC recommended or I guess declaration is that if you are declaring that this is true, you’re also agreeing to make a good faith effort to pay your rent. And so we have tenants who haven’t made a single dollar payment in the last 10 months or 12 months. That’s not really abiding by this–

Rod: Yeah. Yeah, I’m going to call, you know, what called BS, right?

Veena: Yes, exactly.

Rod: Right.

Veena: Exactly.

Rod: So, okay. Okay. Well, that’s really smart that you have one person dedicated to that. I mean, you know, now are those what asset class would you say those two assets in Orlando are? They B assets? What are they, C?

Veena: Yeah, the one that’s faring a little bit better is probably closer to like B plus, A minus and the other one followed B asset, 180’s vintage, the other ones early 2000s vintage.

Rod: Well, you know, from my understanding nationally back in the big crash, you know, 08′ and 09′ multifamily only pulled back. I mean, all things being equal, about 11% is what I– is the number I heard. And so, you know, that’s about where you’re at, you know, what it was at 89%-88%, 89%. And, you know, in light of, you know, Disney effectively shutting down that’s still pretty freaking amazing, right?

Veena: Yeah.

Rod: So, you know, you have to look at it from the glasses half full side. Yeah. So, you know, you got into real estate because of the tax issue. You know, talk a little bit about– so what was your first, talk about your first, let’s talk about your first deal. What was your first multifamily deal? Was it in Dallas? How many doors was it? How’d you find it? Was it scary? How did you push through the fear? Talk about that first deal.

Veena: Oh, yeah. It was absolutely terrifying. So the first deal I raised money on was actually before my multifamily. I actually had like a small new development community there.

Rod: Okay.

Veena: By community, I mean, it was custom luxury homes. It was, we had bought five lots to build these like million dollar plus houses here.

Rod: Spec?

Veena: Yup, spec.

Rod: Spec? Wow, million dollar spec homes. Okay, that’s pretty brave. Okay.

Veena: It was totally brave and absolutely insane. I remember we were raising my first time raising money. Usually we just financed it from our own family and I don’t think I slept for like six weeks straight. I am pretty sure I cried myself to sleep every single night thinking we were not gonna be able to close the deal. Because you and I both know if you don’t close the deal, if you retrade that is the kiss of death in any market that you’re in.

Rod: Or you’ll lose your hard equity. Your hard–

Veena: Yeah.

Rod: Right? So, you know, that’s pretty freaking painful too.

Veena: It is.

Rod: Wow.

Veena: I will say that we’ve never reach a deal and so I haven’t had that experience. But I will say, for me, the reputational hit is way more expensive than any dollars. I can make them dollars back. I can’t re-frame my reputation and that’s what’s harder for me.

Rod: So you’ve never retraded a deal? Fantastic. Yeah, and guys of course retrade means to renegotiate and, you know, brokers don’t love that guys and brokers can make you wealthy so, you know, if you’re known to renegotiate you’re not going to get deals because that makes them look bad to their sellers. And, you know, and it means that you don’t know what you’re doing. You’re not going in there and doing the important due diligence that you should be doing ahead of time so you’re not wasting everybody’s time. You know, of course unless something is misrepresented that’s significant or missing that significant that would be the exception of course but, right.

Veena: And that’s the thing, right? Is like, if you keep a reputation for not retrading deals–

Rod: Right.

Veena: You might have to if you do enough transactions at some point you’re going to have to re-trade a deal. And if you have a good reputation, and so far we haven’t, I’m trying to keep it that way but if something comes up that I can’t control or know going in it’s going to happen but at least then the brokers know.

Rod: Right.

Veena: This is a one-off. This isn’t just kind of like her MO–

Rod: Right. It’s not your business model, right? And by the way guys, you heard her talk about, you know, exercising 100 business model on that one asset in Orlando. And those of you who don’t realize, buying an apartment complex is a business and you have to have a business model. You have to just decide how you’re going to act and have a game plan to execute on. And so, for those of you that are brand new that’s what we’re talking about here. So, you know, so the first– okay, fair enough. So you raise money on that first one. Let me ask you this. Did you do anything to create reach? Did you do a meetup group or some other way to create reach to find investors for deals?

Veena: You know, I didn’t. I was telling you right before this, I’m so bad at content creation and like sticking to regularly scheduled content that I did not. So the way I initially raised capital was I called everybody I knew in my network like my uncles, my aunts, my friends, my family, people I went to —

Rod: But okay, that’s how most people do it but risky.

Veena: So actually my uncle loaned me, I think it was like $370,000 at that time. And he loaned it to me just basically saying, I’ve known you since you were a little girl. I believe in you. Go and flourish.

Rod: That’s beautiful.

Veena: Yeah, so him and then, you know, my parents also like their–

Rod: Right.

Veena: Their business had a little bit of help there. But then, other than that, you know, I had a lot of people that did believe in me. And they– I had the resume too, right? Like I had a lot of corporate experience so it was a little bit different a little bit yeah someone who’s coming into this for the first time. And I, you know, I was trained at some of the best real estate companies in the world. And so–

Rod: Right.

Veena: A little bit different but, yeah, no I had– that’s how I initially raised funds and now the vast majority of my capital is from word of mouth. So, the KPIs I look at that are probably a little different than what other people look at is I look at how many investors invest in two or more deals with me because I care about that metric the most. Because 80% of my investors right now, previously was 90%, but now it’s about 80% are invested in two or more deals with me. That’s important to me because that tells me that they like what we’re doing, they trust me, they believe in what we’re doing, and so they continuously will reinvest. The other 20% today it’s because I just don’t have enough deals right now.

Rod: No, no, I get it. No, there’s plenty of money out there right now. It’s finding the deals. You know, we’ll circle back to that in a second. And I think you told me you really didn’t have any mentors but you did work at some, you know, a couple of these companies that are just, you know, obviously incredible companies. What role did you play when you started? Was it an analysis or what’s with your finance degree, how did that manifest into your role at these initial companies?

Veena: Yeah, so initially I wasn’t actually on the analysis side as much as I was on the management side, the portfolio management side, so I was seeing a lot of different aspects but not any one aspect so narrowly. So, you know, we’re looking at like rent rolls, and we’re looking at leases and tradeouts and, you know, obviously you’re making analysis on the portfolio in general but–

Rod: Were you in other asset classes as well or just multi?

Veena: No, I was actually in commercial. So I at Tishman, I was in large office.

Rod: Okay.

Veena: The asset I was in had took up a whole square block in D.C. on K street.

Rod: Wow.

Veena: Yeah, it was big.

Rod: That’s an asset right there. Okay, wow. Very cool. You know, when you started out in this business, were there any “aha” moments? Any moments you like, you know, that were pivotal. You know, epiphany moments for you.

Veena: Gosh, I have them like every day, every hour, so yes. There’s many.

Rod: Well, anything come to mind when you were just getting rolling, okay? Like from that first multifamily deal or, you know.

Veena: I think I would have started going into multi even sooner than I did and just kind of skipped single family all together. I think probably a lot of people say that hindsight being 2020. So I think that was like an “aha” moment for me there. I think too, I spend a lot of time even now investing into processes and the customer experience around my brand. And I really–

Rod: Okay, hold on. Hold on. I want you to drill down on that.

Veena: Okay.

Rod: I’m not gonna let that slide by. Not gonna let that slide by. Yeah, by the way, you already answered my last question which is if you could tell your 20 year old self, what might you do differently? It was you’d have gone bigger, faster, right? You wouldn’t mess with single, right. And I asked that question every time because I want my peeps to hear it every time so they don’t waste time with the tiny stuff. But anyway, so you work on your processes. Now, you’ve got that asset management background which they obviously saw that in you and that’s what we’re talking about here. Because guys, every business is nothing but people and systems. So, if you get the right people and you line out the right systems. So talk about the processes. Just please drill down on a little.

Veena: Yeah. I’m actually, I’m improving it all the time. So, as I’m supposed to I’m gonna hopefully find something that works even better and change it again. So, you know, that’s a kind of an example that this is always something that should be evolving in any business. But for me, I really focus on what the customer experience is like. So my investor experience is kind of the priority for me. And so–

Rod: Oh, you’re talking investor. You’re not talking resident? Okay, interesting.

Veena: Both, actually. So for me, I don’t touch the residents on a day-to-day basis because we have third-party property management that handles the day-to-day with residents. But on the investors side, I interact with my investors all day long. So, but I do want the resident experience to be great as well because obviously they’re the ones that are making your business model work. So we do a lot of really interesting things on the tenant side but as far as the client side goes, investor side goes, I invest into softwares and products that will allow them to have a better experience. I’m currently in the process of expanding my tech team so that they have the ability to onboard into my portal with a tech team that can help them exclusively versus having to reach out to me and then me going reaching out to someone else. So, you know, those are like little changes I’ve made to my business as time’s gone on and I wish I would have the “aha” moment for me would have been. I wish I would have invested in these processes right out of the gate and I just–

Rod: Saved you a lot of brain damage.

Veena: Yeah, I didn’t know how important they were gonna be. It’s so much easier to implement them at the onset than it is to implement them retroactively.

Rod: Yeah, and we’re actually, I’m forming a new partnership right now with a real rockstar. I’m really excited about this. His name Scott Holmes and we’re actually exploring portals right now ourselves. And yeah, what portal are you using, may I ask?

Veena: So I’m actually getting ready to put everything onto Groundbreaker.

Rod: Groundbreaker? I’ve not even heard of that one. Okay. This is a portal for syndications, and investors, and k-1s, and communication, does it have a CRM component?

Veena: It does.

Rod: Yeah, that’s really important. Okay. Groundbreaker, well, for sure I’m really glad I asked because we will look at that one before we make a decision. Well, so they just got a free plug to tens of thousands of people but let’s see. We’ll see how it goes here. So, let me ask you this. What does your– well, hold on before we move on, you said you’re always looking to improve the resident experience, can you speak to maybe that a little bit because you use third party. You haven’t gone vertically integrated which, you know, I admire because it’s such a pain. But, you know, can you speak to what sort of KPIs you’re looking at? When you are on your weekly calls with your, you know, third party property management partners? And maybe what suggestions you’ve made to improve that resident experience?

Veena: Yeah, I think especially right now it’s even more important that residents enjoy being at the asset. So we’ve– as we’re acquiring we’re focusing a lot on the amenities package because that’s the play we’re in right now. But some of the things we’ve done we’ve implemented, reward systems. There’s a system called “Modern Message”, I don’t know if you’ve used that on your assets. But it’s something that creates kind of community around the tenant base at a particular asset. They can give you reviews, you can kind of gamify things, you can do rewards, etc. which is really fantastic. The other thing that we’ve done is we’ve actually implemented a lot of AI across our assets. So what I mean by that, is it number one in underwriting? We started to implement artificial intelligence to give us better predictors of where the market’s moving, what our line items on our pro forma code and should be.

Rod: Pre-purchase or post purchase?

Veena: Both, pre-purchase and post purchase. I mean, we’re underwriting our deals like a bajillion times in the whole period so it never stops. And then when we are in the asset itself, we utilize AI for our pricing. So our LRO systems have actually been really instrumental during Covid especially to track where other assets or other comps are, where we can push rents to, so we can get we want to squeeze every dollar out of these assets that we can. So, that’s been another really great use of AI and also the maintenance side. So there’s a lot of decision logic that you can use and we’re still kind of implementing into some of our assets but being able to utilize AI to decide on repair versus buy decisions, if we see the kind of issues that pop up let’s say unit 207 has a plumbing call to the kitchen every three weeks, okay, well now that’s going to kind of flag for us and we can kind of look further into and see what the cause of it is. Is the tenant constantly putting something down a garbage disposal that they shouldn’t be or is it time to–

Rod: Defective.

Veena: Yeah, so we make better decisions. It allows us to respond faster and more effectively to tenant requests as well.

Rod: Nice, nice. So your team at jive(Vive) is it, are they all focused on– what is it? Sorry, I say it wrong. Sorry, oops, oops. Sorry about that. Right, Vive guys, Vive funds. So your team at Vive sorry, and I know you do micro lending, is that part of that as well or is that in a different entry, is that somewhere else?

Veena: Micro lending.

Rod: Oh, I thought I saw that lending team at Okiva. That’s I’m sorry, sorry, sorry, sorry.

Veena: Oh, that’s like a charity that I like.

Rod: Sorry, sorry, sorry. I got confused. Those ran together. Okay, so for me, so it’s never pretty when you lose your mind and you’re as old as I am so forgive me. But so your– I just want to hear about your team because, you know, you don’t have the management in-house so it’s, you know, you’re on the acquisitions and investor relations and asset management. You know, for what sorts of– how big is the team? Let me ask that question and then what sorts of roles do you have there. It sounds like you’re, you know, doing some things that a lot of operators aren’t doing so I’d love to have you just kind of expand on that a little bit.

Veena: Yeah, so I actually am the point of external contact for Vive. So my entire team sits behind me kind of, so I have underwriting that I work with a few different underwriters behind the scenes. I also work with obviously I have my admin staff who respond to a lot of my emails and queries. I have my social media. I also have, so my sister’s a minority owner in my company and so she’s the one that gets to do like bank account stuff because I don’t trust anybody with bank accounts or any of that, so everything financial stays either with me my sister or if I have a JV partner on an asset. And then depending on the asset various roles within the project life cycle are broken up between different JV partners and myself or obviously if it’s just me then I would be handling everything so it depends on that.

Rod: Okay. Yeah, fair enough. Do you use VA’s at all? You said admin staff behind you, do you use any VA’s?

Veena: Yeah, I do. So I have a bookkeeper that I use that’s a VA. I also have an admin that I’ve been using that’s a VA. I’m actually getting ready to switch to another VA company that actually handles legal cases more because I find that the case management for legal practices is very similar to what we do and I find when you kind of look for a real estate VA, they’re more geared toward the residential or non-commercial, non-investor side, so it’s a new change I’m making. I haven’t rolled it out yet but that’s–

Rod: What country for the VA? Just curious.

Veena: The Philippines.

Rod: The Philippines, yeah. That’s the most common. Okay. I mean, you can get a licensed attorney for like, I mean, it’s crazy how reasonable it is. Yeah, so okay. Awesome. Let’s see, what else? So, let me ask you this. Where do you get that drive? Where’s this drive coming from? You’ve got two toddlers, twin girls, right? How old are they?

Veena: They’re 20 months old.

Rod: Oh my god, and you’re buying and managing assets. And wow, where’s this drive come from? Tell me.

Veena: You know, I think it’s gotta be my parents. I’m the daughter of immigrants. They came here literally with $26.

Rod: From where?

Veena: From India.

Rod: From India, okay. Yeah.

Veena: They came here in the 80’s, $26 from their name, and my mom and dad together they built, you know, a portfolio and they built a life so that my sister and I could have an opportunity. They left everything that they knew home and they did it so we could have a chance to do this. And so I feel this sense of responsibility, you know, it’s like the typical story right. The first generation makes it. The second generation grows it and the third generation blows it. So, let’s see what my kids do.

Rod: Well let’s, you know, you better start grooming those toddlers soon then.

Veena: They have savings accounts, they have investable accounts, they have their– they will learn.

Rod: Love it. love it. So, what do you think’s the most challenging part of what you do in your role today? I mean, besides the juggling that we’re just talking about. But now, your husband’s a physician if I recall from the clubhouse I think I heard that, yeah.

Veena: Yes, he’s a physician. So he does not– he has no idea what we own.

Rod: No kidding.

Veena: I think we have something in Florida somewhere. Oh, yeah. He doesn’t do it.

Rod: He has no interest. Okay, got it. So it’s all you. Wow. That’s even more impressive. So what’s the most challenging part of your role at Vive? And I mean, you’re the point obviously, so you’re the CEO but, you know, just curious.

Veena: I think the most challenging, right now the most challenging is easily finding deals that make sense. We are very true to our underwriting models and our strategy, and so what happened and I can invest alongside of all my investors. I don’t know if you–

Rod: I’m sorry, I didn’t catch that. What’d you say?

Veena: I co-invest with all of my investors.

Rod: Oh, yeah.

Veena: I always put money into deals that I have my name on and so naturally it has to fit my criteria in order for me to be willing to put my money at risk. And the vast, vast, vast majority of deals don’t.

Rod: Right.

Veena: You know, and underwriting is one of those things that’s as much of an art as it is a science. So you put garbage in you’ll get garbage out, right? And so, I see underwriting so often come across my desk from other sponsors that, you know, are raising capital and I invest passively into deals too. So I’m always looking at them and I see them and I’m like–

Rod: What were they thinking?

Veena: What am I looking here?

Rod: Right, right, right.

Veena: Please, let me do–

Rod: I want to flag something you just said because it was like coming out of my skin. Because I never heard it articulated that way but it’s so dead on that underwriting is not a science. There’s an art to it because there’s so many nuances and, you know, you can make something look good and to someone that doesn’t know what they’re doing or doesn’t have a clue, you know, and you know, you see what some of these properties that you get into best and final and you make what you feel is a fair offer, significantly fair offer, and you see what they ultimately trade for and you’re like, what were they thinking? So, okay.

Veena: I have a funny story about that.

Rod: All right. Let’s hear it.

Veena: I just and it’s not funny. It’s like boo-hoo funny because I just lost a deal last week in Dallas. The broker said guidance is around 37 and we said okay. We went in a little bit above that and he’s like putting your best offer right out of the game we’re not doing it best in finals. We’re like, okay, so we went in pretty aggressively but as aggressive as our underwriting would allow and–

Rod: Right, of course.

Veena: He called us back and said, we we’re under contract at 38 and a half. It’s like a million and a half dollar difference on this asset and there’s no way we would even gotten to 38 with our modeling but that’s the nature of the market here. And again, there are times where it makes sense to slightly overpay for an asset so the asset right next door had just traded to another group. I don’t know who bought the asset but that group it really makes sense for them to have paid a premium for it because now they control that whole entire block.

Rod: Oh, so they bought they had the one next door already so that’s why they pay more.

Veena: Yeah, I don’t know if they were the ones that actually bought it but it had made sense to me if they were willing to pay a significant premium because now both assets could do a little bit better. But, I mean, and I’ve walked away over 25,000 indifference on, you know, a 10 million dollar deal before so–

Rod: No kidding. No kidding. Wow.

Veena: Yeah, it was hard. It was hard.

Rod: Guys, that’s the other end of the spectrum right there, $25,000 on a $10 million deal. Listen, you can–

Veena: It was out of principle because–

Rod: Okay.

Veena: I went back and forth with the broker and he came back to me and said, we are down to you and one other group. We really like you. We really believe that you’re going to be able to close it. We’re not really sure about this other group but they’re $25,000 higher than you. So if you match their offer then we’re gonna choose you and get this deal closed. And I was like, well, it sounds like your seller has a decision to make and it sounds like a surely of close is gonna cost $25,000. And I told them beforehand I was like, listen, this is my best and final and I really mean it’s my final offer because we’ve gone through so many rounds of battle.

Rod: Oh, yeah. That can be mind-numbing and frustrating and kind of maddening actually. You know, when they play that game with you so, oh yeah, I get it. Okay.

Veena: I was like, you know what? This is the offer, you guys make a decision, they chose, he was like, are you serious you’re gonna walk for 25,000 on this deal? It’s like, are you gonna let me walk for 25,000 on this deal? I don’t know. He did and it ended up getting retraded.

Rod: No kidding. Oh my god.

Veena: He came back to me and I was like, hey, the deal’s yours if you want. I was like, I’m so glad you came back to me. I’ve totally changed on my pricing now. I’ll submit another LOI so he’s not happy.

Rod: Oh, you went down on your price after that. Okay, that’s what you get. By the way, you know, I don’t know I’m sure this has happened to you as well like you just missed out on that deal you just talked about the one, recent one. You make it a point to stay in touch with these brokers because these deals do come back all the time. Yes, I’m sure that’s happened to you. Yes? You’re nodding.

Veena: Oh, yeah. If we don’t get a deal, we always tell the broker if it retrades, let us know. We’ll come in with the capital and we’ll get it.

Rod: Okay.

Veena: And like I said, we’ve never retraded a deal, we’ve never not closed on a deal we put under contract. So, they already know that they’ll call around and reference check and they’ll find out. And we also pride ourselves on being easy to work with. So that’s another key. For new people, do not be a huge pain in the you know what because no one will want to work with you.

Rod: Right, right, right. Yeah, no that’s really good advice. So let me ask you this. What words of wisdom would you share with an aspiring investor that’s listening, that’s done some single family, they may have done some plexes, they know they need to go bigger because it’s such a pain to be in the small stuff, what would you tell them?

Veena: I mean, I always start with the numbers really are everything and if you have good numbers and a good business plan then you can execute on it. So, I always tell people to learn how to underwrite, first and foremost, whether that’s, you know, finding a program like yours or whatever they can do to really understand the underwriting and how to look at the numbers. I think that’s absolutely key for anybody regardless of what position you’ll play within the deal you have to understand the numbers. Second is find a partner that you can trust or you can lean on that you can work with, someone who’s done this before, you can borrow their resume and lean on them to give you good guidance. I think that’s the second thing and the third thing is don’t get stuck in analysis paralysis because that will happen to most people because it’s scary. Like I said, I cried for like six weeks straight thinking I’d have to sell all of my worldly possessions to close this deal. The first one is the most painful but after you get that first one under your belt, it gets so much easier. And the next one after that gets easier and so you will be able to get a faster momentum going and treat your investors the way you want to be treated. For me, everything in my business stops and starts with how investors are being treated, what their investor experiences, and I think that’s really important. I think it’s helped me build a really good brand. I get a lot of referrals from that alone and I think that’s an important focus.

Rod: You bet. No, you bet especially because you didn’t go out and create reach like through a podcast or a meetup or, you know, some other social media mechanism. You know, most of the big hitters that I’ve had on the show like you have had a meet-up. You know, this pre-social media they’ve had a, you know, there was a real estate investor club at that point before meetup.com even came around. And so, you know, that just speaks to your integrity and the fact that you’ve got it through networking. Well, let me ask you this. You know, you’ve got your parents in the business, what do you think is the best advice you’ve ever received?

Veena: Oh, ever?

Rod: Yeah.

Veena: Oh, gosh.

Rod: Well, I know I didn’t prep you for this but–

Veena: Yeah. I was like, wow, I have to think of the best advice. You know what? I think it honestly more than advice, I think it was my parents encouraging me to just start doing it.

Rod: Yeah.

Veena: Because I think that’s the biggest hurdle for a lot of people is actually taking that leap of faith. And one thing I will say is my mom used to always tell me, the younger you are the more you can afford to take risks and bigger risks and it’s so true, right? And I think that even now, I mean, like now I have kids so I have to like, you know, think about their future. But even now, once you’ve made a million dollars, it’s a lot easier to make your second million dollars. And it’s not because your money makes more money. It’s because now you know how to make money. And so, you can replicate that. And I mean, you know, this better than anyone. I can use it all today and I can make it all back again and I’m confident in that now.

Rod: Yep, I do know that better than most.

Veena: I definitely do.

Rod: So, let me ask you this. What is– well, do you have any previous failures or big setbacks that set you up for future success? What comes to mind is like the doozy?

Veena: Oh, gosh. I have so many.

Rod: Yeah, we all do, right?

Veena: I have all the time. I think that– okay, so one big thing that you can learn from this mistake is, you know, I’ve had businesses that I’ve started with people that I knew and trusted. And, you know, it’s like a handshake and everything feels good and there’s not a great set of operating agreements and that can be very expensive when things do not go well.

Rod: Right. So you’ve had partnerships that have, you know, not ended in the most positive manner.

Veena: Yes.

Rod: I know I have.

Veena: I’ve had that happen. I think the best way to kind of handle that is to plan before you go into business and make sure everything’s written ahead of time.

Rod: I have a book on this. “Questions to ask when forming a partnership.” I’m trying to remember, oh yeah, it’s partnership. Text “partnership” to “72345.” You get this list of questions because the partnership, you guys have heard me say this before. It’s easy to get into like a marriage. It’s easy, the emotions are excited and it’s very hard to get out of. Ask me how I know? Ask Veena how she knows? Asked all the big hitters that I, you know, interview on this podcast how they know because it happens all the time. So, yeah. All right, that’s awesome. That’s really good. So, do you have any favorite quotes or books or things that inspire you? What comes to mind when I ask that question or maybe a book that you’ve gifted more than another to people?

Veena: I always tell people that my parents made me read “The Millionaire Next Door” when I was like and I thought it was the most boring thing ever. But now I’ve read it a whole bunch of times willingly and I really love that book as a good base for anybody who is just interested in personal finance. It doesn’t even have to be real estate related. And as far as quotes go when it comes to real estate especially in the rooms I’ve been speaking in on clubhouse and whatnot, I feel like I’m always saying this over and over, the best time to plant a tree was 20 years ago. The second best time is today. And I feel like that’s so important in real estate specifically and tell me your thoughts on this.

Rod: Oh no, I completely agree. I mean, you know, what can you buy that someone else pays off? So get started though. That’s the key is get freaking started.

Veena: Exactly, like today. Start now, whatever you’re gonna do, make a step in that direction right now because a lot of people think, oh, I wish I would have done this in my 20s. I wish I would have done this in my 30s. And that’s great but you can’t invest in hindsight so now is the time to do it and, you know, it’s I just tweeted this out that compound interest is the eighth wonder of the world, right? Those who understand it earn it and those who don’t pay it. And this is exactly what it is with investing even in real estate because we compound our investments. And money isn’t actually the limiting factor. It’s time. That’s the commodity.

Rod: It’s the only non-renewable resource we have, you know. That’s the most important resource we have so you can’t squander it.

Veena: Yeah.

Rod: It’s going by. This second right now is over right now. You’ve got to take action. I love it. I love it. So, what is– last question, because you already answered the one I normally asked last. What is your definition of success?

Veena: Oh, for me, it’s a happy and healthy family and being able to spend time with them and knowing that they’re well taken care of.

Rod: Yeah.

Veena: That’s all I want.

Rod: I love it. No, I love it. And, you know, when I saw on your bio all the stuff you do to make the world a better place, you know, when I– and so, when I interview students to come into my warrior mentorship program, I asked them, you know, what’s the why that you have? And whenever I hear something that’s outside of them, I know success is inevitable because, you know, power moves to those who serve and want to make the world a better place. God, you know, whatever, you know, whatever your belief system is, it just doesn’t matter even if it’s just the universe. It’s just the way it works. So, listen. It’s been such a treat to have you on the show and meet you finally after hearing your voice enough times. So thank you so much for coming on and adding incredible value and I’m sure that we’ll see more of each other now.

Veena: Yes, thank you so much for having me. It’s been so much fun.

Rod: Likewise. All right. Well, you take care, okay?

Veena: You too.