The Real Market with Chris Rising – Ep. 73 Neal Bawa

Chris Rising (00:00:02):

Welcome to the Real Market with Chris Rising, the only podcast that brings the real estate conference panel to your headphones. You’ll hear from superstars from every realm of commercial real estate, the biggest brokers, the most well-known architects, the largest investors, and the most visionary developers to learn what they do, how they do it, and what drives their success. We’ll discuss the latest trends across regional markets, capital flows, both national and global. And we’ll explore technology’s role in shaping all of them. We’ll take a clear-eyed look at where we’ve been, where we are now, and what’s to come.

Chris Rising (00:00:38):

Real conversations, real experts, real insights. This is the Real Market. Welcome to the Real Market with Chris Rising. I’m very excited today to have Neal Bawa with me today, who has a company called Growcapitus. He is, I will tell you of all the people I’ve interviewed on my podcast, from VC people, to lawyers to brokers, you are the first, Neal, who I’d self-identify as a technologist first before you say you’re a real estate guy. I think that’s pretty cool and pretty interesting. And I’m really pleased that I can get you to come on the podcast.

Neal Bawa (00:01:17):

Thanks for having me on. I’m really excited to be on the podcast. And yes, I say to people, I am a geek, a dork, a nerd, whichever one catches your fancy. Because some of the things that I’m going to say today are very, very nerdy, extremely nerdy, but they make an insane amount of money.

Chris Rising (00:01:37):

Well, what will be interesting as we go through this, I know you’ve got your 10 items of the forecast for the future that I want to go through that in some detail. But one of the battles that I see going on amongst my colleagues in the real estate industry is that just where does data, especially from an acquisition standpoint, play in someone’s acquisition process? I think traditionally, it’s easy to say comps are very important. You just look at the things that go into an appraisal. And that data is important. But I think you’ve taken it to a whole another level.

Chris Rising (00:02:13):

So, as we start to go through this conversation, why don’t we start how a self-described nerd or a geek technologist has been so successful, and how did you get into real estate?

Neal Bawa (00:02:25):

Sure. So, my friends, and when I’m not at conferences, I get called to a lot of conferences, because they want to have a nerd at every conference, because they want to be seen as the data-driven conference. Right? So, my role is to go up there and talk about data. And so, my nickname which I really like, I think it’s very representative of me is the mad scientist of multifamily, right? And so, I am obsessed with the idea of using data science to create real estate profits, right?

Neal Bawa (00:02:56):

So, I’m actually not interested in data science just for the sake of science. I’m interested in how do I correlate numbers to maximization of profit for the least amount of work done, right? So, my two x-axes and y-axes are, I want to do the least amount of work. And I want to have the most amount of profit. And I want to track the heck out of it so that when I’m not successful, I can come back and say, “I tried this experiment, and it failed. But this one succeeded.” Because I’ve done both. I’ve had failed experiments and successful experiments. So, the goal is continuously to be tracking.

Neal Bawa (00:03:30):

To go back to your question, there’s always this discussion about how much data should people really be using when they’re investing in real estate because people are making profit. And everyone believes that they’re data-driven. And the truth is most people that are doing multifamily acquisition are in fact, data-driven. Because you’re doing performance. You’re doing underwriting. You’re looking at rents. You’re looking at expense ratios. There’s a lot of data that is actually going into determining your offered price.

Neal Bawa (00:03:58):

So, in that sense, all of you are data-driven. What I do, though, is I’m not saying I’m data-driven. I’m saying I’m a data scientist. What I’m saying is when I look at what Christopher is doing and what 100 other people are doing, how do I do what they do? Maybe there’s room to improve it slightly. But to be honest, it’s not a huge difference, right? And then, I say, “What can I put on top of this? What can I do on top of this that accelerates profits, that I don’t see people doing?”

Neal Bawa (00:04:30):

Because the key thing about data science, whether you’re applying it to technology, or to real estate, or to banking is you want to have access to data that other people don’t have access to, or they have access to it six months or 12 months after you, in which your first two, it’s obviously, you get a big benefit. So, my interest as a data scientist is really not in improving what Christopher is doing and what a bunch of other people are doing. My interest is in adding to it. Right?

Neal Bawa (00:04:59):

And when I add to it, I can add to it in two different ways, right? Three different ways. Sorry. Number one is, what are the bigger long-term trends in the economy that people are not looking at? Because people are looking at, oh, here’s a nice property, it’s in Tucson, Tucson is doing well, blah, blah, blah. And the numbers work, so I’m going to make X offer. That’s very common. That’s how math is done.

Neal Bawa (00:05:21):

My question is, over the next five years, what are the trends affecting all of real estate in all of the US? How do I take those trends and tie them back to Tucson? Right? Is there an actual way of doing that? So that is trend-based data science. And the second data science is city-based data science. A lot of people are like, “Hey, I’ve been investing in Phoenix. I have made money in Phoenix on six consecutive properties.” Therefore, Phoenix is a great market. And I completely agree with everything that you just said.

Neal Bawa (00:05:48):

But data scientists are not obsessed with finding great markets. They are obsessed with finding the great test markets. And there’s a big difference between those, right? So, I’m obsessed with what is the greatest market? And data science tells us there is no greatest market. It’s simply a stupid thing to say that, but there’s always a greatest market today. And tomorrow, it will be some other market.

Chris Rising (00:06:11):

Let me just interrupt real quickly. Because all of these things sound like our investment committee meetings, these big macro-trends, and how do you pick that overall market. But at the end of the day, a real estate project, a real estate asset is not a stock. It is not a widget. It is something that once owned, also then has to be managed. And depending on what you’re buying, a value add or a core. I hear everything you’re saying. And the, I go to, well, then once you own it, that’s when you really create the value.

Neal Bawa (00:06:45):

No, you don’t. And I’m going to actually give you examples of the use of data science in managing an asset, okay? I guarantee if you’ve ever heard it, you’ve only heard it from me in other podcasts. So, I’ll give you examples of how you can use data science to improve the asset after you purchased it, right? But for the moment, Chris, and I love this conversation by the way. I’m glad you interrupted me because it gets better that way.

Neal Bawa (00:07:08):

For the moment, assume that the asset that you and I are buying is the same asset. And our underwriting is identical. So, we are both basically saying this asset is worth 23.3 million. We’re both bidding the exact same price based on the quality of the asset and the quality of the neighbor. With me so far?

Chris Rising (00:07:29):

Yes.

Neal Bawa (00:07:29):

But I will often go and pay $500,000 more for that asset than you would. Because I am using long-term trends, where I’m actually mapping the benefit of those trends in cities that are ahead of Tucson in these made-up examples of ours. Because cities in the US are in cycles, and some cities are two or sometimes even three years behind in the cycle. So, if I’m tracking what the impact of a particular long-term trend is on other cities that are three years ahead, I also know which cities are ahead in the cycle or not as data science tells you that, then I can actually pay more than you and buy more properties and you can and still create more profit because I’m using the long-term trending.

Neal Bawa (00:08:11):

And I would argue that the syndication community is pretty awesome at pro-forma development when it comes to individual properties and understanding the value of the property. I would tell you, I completely will disagree with anyone that says that they’re good in tracking trends. They are not, they are not. Ninety percent of syndication companies focus on one or two metros. There is no way to combine long-term trending either at the trend level or the city level with a syndicator that invest in two markets.

Neal Bawa (00:08:45):

Because what you’re saying is I’m in great markets, and I don’t care about the greatest markets. So, I think that from a pro-forma perspective, the industry does really, really well and it’s very data-driven at an individual property level. But once we start looking at the back off at a city level or a trend level, trend level is national, city level is at the city level. I am not seeing the proper use of data science as I define it as a data scientist.

Chris Rising (00:09:13):

Well, just to give a little context, Grocapitus has about 3000 units. You are mostly as we were talking before, in red states, maybe a purple state here or there. You are based in the Silicon Valley, San Francisco area, but yet you’re buying things which I have to imagine on a day-to-day basis. You’re not living in those markets. And that’s one of the things that syndicators love to say, “Well, I know every block on every street, in every little niche of the sub-markets and that’s why I’m good at it.”

Chris Rising (00:09:46):

So, as you sit where you sit and look out, how are you getting the data that even tells you? Are you just going to Google and plugging in Tucson and saying, let me see what reports? What are you doing that allows you to invest in these markets, but not be in them day to day physically?

Neal Bawa (00:10:08):

I became obsessed with this concept of, and this is a while back. I created the system about six or seven years ago. Because I realized that I was vulnerable as a data scientist, because data will tell me a lot about a city. It’ll tell me, but what about the neighborhood? People say, “This side of the tracks is better than that side, this side of the road is better than that side.” And they’re right. They’re absolutely right. In fact, it’s a huge difference. Often one side of a road, you can see the property, it’s on the other side.

Neal Bawa (00:10:35):

But that side of the road is $200,000 less per unit, right? Compared to this side, because that’s how we define neighborhoods in the US. So, how do I without actually physically being in a city know it? And not just know it. I wanted to know it better than the agent that’s been working that neighborhood for 20 years. I wanted to know it better than them, right? And the answer is data science allows you to do that.

Neal Bawa (00:11:00):

In fact, I use a software where I overlay trends such as income increases, home price increases, poverty reduction on a neighborhood level. And the beautiful thing is the data actually, if you use color shows you where each neighborhood starts and ends. So, I have the ability to randomly pick a city. So, Christopher can give me a city. Christopher says, “Quarterly in Idaho.” Right? I can actually sit down with Christopher, overlay data on top of quarterly in Idaho and tell you where the neighborhoods are starting and ending and where does the affluent neighborhood.

Neal Bawa (00:11:37):

And I can say things like, if you go to the other side of this road, you’re going to go up 50,000 a unit or down 50,000 unit. So, data does allow you to do that in a way that is actually better than some of the people that live there. Having said that, I always, always, always send people there because you can’t know about things such as there’s a porn store right next to this property, or there’s women standing at 10:00 at the corner. Those are necessary. There’s nothing that data science can do to overcome those things.

Chris Rising (00:12:13):

Google Earth doesn’t do that for you.

Neal Bawa (00:12:15):

Well, I’m two years out of date, right?

Chris Rising (00:12:17):

Yeah. Let me ask you this. Is this your proprietary IP that you’re discussing the software? Or is this someone off-the-shelf software?

Neal Bawa (00:12:26):

So, I’m very obsessed with being the Wikipedia of data science. I cannot be Wikipedia and have proprietary technology. So, every time I come up with a concept, I create a course. One of the course is on udemy.com. And there’s 10,000 people right now taking the course. You can just type in Neal Bawa Udemy, and you’ll see there’s 10,000 people taking it. There’s 1005 star reviews. And so, whenever I come up with a new version of it, I’ll update it. The only thing I’m careful about doing is this.

Neal Bawa (00:12:59):

I try and get the public stuff that I give away to about 90% accuracy compared to the private stuff that I do, which probably has 20 or 50 other metrics. What I find is, if I make it too complicated for people, they just want to do it. So, I’m obsessed with this concept of when I’m giving technology and data science away to people, they should be able to evaluate with less than 30 minutes of work. So, I’ll give them the simplest system that works in a 30-minute timeframe. So, maybe they’re evaluating a city or a region or a state.

Neal Bawa (00:13:31):

I don’t want them to spend more than 30 minutes, because I’ve noticed people don’t do it. Right? Internally, my team adds on a lot of macro-metrics. And some of those are available as paid data. So, we’re paying for different services, I think about five or six services that we pay for. But I’m delighted to let you know that more than 90% of the time, the free course that we give away on udemy.com, and the updated version is on a website called multifamilyu.com, which is Multifamily University.

Neal Bawa (00:14:00):

I’m first and always a teacher. Right. So, to me, what comes most naturally is teaching things to people because I came from a family of teachers. Dad was a teacher, mom was a teacher, mother-in-law, father-in-law, sister-in-law, all teachers, right? So, to me, I think that gives me the most amount of joy to share this with other people. And you might say, “How is it that you share this with people? What’s the benefit you get out of it?” The benefit that I receive is massively greater than charging for this, very simple reason.

Neal Bawa (00:14:31):

I’m one of maybe four syndicators in the US that can raise a market because I have 50,000 people following me. When I see the data, I will go out and buy my land first. I’ll go out and put properties and contract first, and then I’ll publish the data. So, it’s often is 60 days out of date, which is still extremely current data.

Chris Rising (00:14:53):

You’ve just hit on about five things that I want to break down and go through. But the first is, when the Jobs Act happened in 2012, what a lot of people didn’t pay attention to early on was the fact that when I started in this business, if you wanted to go raise money, you had to have number of PPMs, private placement memorandum. You had to send something out for a deal. Those people who didn’t invest at it sent it back to you. And then, in 2012, that all changed. And you can try to attract accredited investors through some advertising and things like that.

Chris Rising (00:15:27):

Our company has moved its platform, what used to be friends and family all to a digital platform. You’ve done that. I have a few friends out there. You may know Chris Powers, Fort Capital does that, and Keith Wasserman does that at Gelt, but it’s still a relatively small group of people who are building their own I would say, platform of investors not doing it like Realty Mogul or Crowdstreet or Fundrise. But proprietary.

Chris Rising (00:15:55):

Let me ask you, I guess a long-winded setup to, did you start with three people or five people when you made your first acquisition? Or did you take this mentality, get it out there and you were able to syndicate on a bigger basis? I’m just trying to get to your origin story on your first deal or two.

Neal Bawa (00:16:14):

Sure. So I’ll give you the answer to it and then I’ll give you the background. Right. I came from selling a technology company before I got started with real estate as a professional. I’ve been playing with real estate for a long time for my personal gains. But as a professional taking other people’s money, I was already rich. I was a technology professional owned a piece of a company that I sold. I came from this background that’s very rare.

Neal Bawa (00:16:43):

Most syndicators start their business by investing their time, and usually they take on a partner or two, and the investment that you’re making is your time. I’ve always believed that that’s not enough if you want to make a truly successful company, right? Because my initial goal, which I’ve already reached was I wanted a billion dollars of real estate at the same time, assets under management, 1 billion. And I realized it would take me too long to get there through generic growth.

Neal Bawa (00:17:08):

So, I came from the belief that you actually shouldn’t just be investing your time when you start a syndication company. You have to invest your money. So, I took a quarter million dollars out of my technology company profit. And I basically started building scaled digital systems. And I hired experts who are growth hackers from the San Francisco Bay Area market. San Francisco Bay Area has the most number of growth hackers.

Neal Bawa (00:17:36):

A growth hacker is a term for a marketing director that is just focused on hacking the system, whatever system they’re targeting, to create 5x or 10x annual growth, where most marketers are looking at a 30% annual growth. Growth hackers’ job is you go up 10x, then you go up another 10x. Right? So, it’s a completely different marketing director. And so, at the same time, when I started the company, I use that money to hire two completely different marketing departments.

Neal Bawa (00:18:07):

So, they stayed separate. So, I have a growth hacking department of four people and a marketing department of four people. And so, very early on, I made that investment because I wanted that extraordinary, rapid growth. But having said that, yes, I started like everybody else with four or five people. I just made very, very rapid investments of money, injected a significant amount of money. And then, eventually, one day I took that money out as the fees started to come in.

Neal Bawa (00:18:35):

But I made that investment. And I think that that was the difference because my growth curve in the industry is much faster than anyone else’s. Right. So, I tripled, for example, the amount of equity I raised in the last 12 months. In the last 12 months, as of last week, I’ve raised $120 million. Most people in the industry, even the superstars do not raise $120 million in a year. There are some, but they’re cheating because they raise it through large checks from institutions.

Neal Bawa (00:19:02):

I’ve raised $120 million in the last 12 months. And I think the biggest check was a million and it was just a regular retail investor. But when I look at my average, it’s still couple of 100,000. So, it’s 100s and 100s and 100s of investors through a massive marketing machine, which is based on data science. So, I’m a nerd, and my investors are nerds too.

Chris Rising (00:19:23):

What you said is based on data science, so I take it, this is hardly one person writing five emails. You must have a very sophisticated process. And I assume it relies on at least bots, if not stronger AI. What are you doing in that marketing that you think is probably different than 99% of the syndicators out there?

Neal Bawa (00:19:48):

Lots of different things. So, I’ll give you some examples but understand that I’m giving you maybe 1%. Right? So, one of the things that I looked at very early on was everyone is obsessed with finding accredited investors. I have no interest from the very beginning in non-accredited investors. I realized that to scale, you had to go to investors that not only had money, but had enough money to keep giving me money if six or seven or eight times in a year, which non-accredited investors don’t do. They give you $25,000 once and they back off for a couple of years, right?

Neal Bawa (00:20:16):

I wanted somebody that could give me a million dollars a year in six different projects. And I came to the realization it had to be accredited investors. Now, everyone basically says, “Okay, we’re going to go after accredited investors, we’re going to do this, we’re going to do that.” But I realized you have to basically build a technology system. So, what we did was, we first looked for lists of accredited investors. When we found them on the web, they’re horrible. They’re absolutely terrible.

Neal Bawa (00:20:39):

Most syndicators have bought them and wasted humongous amounts of money. So, I set up my growth hacking director. I set up his department to buy those lists, and there are 10s of 1000s of dollars, to buy those lists, millions of people, but only 20% of the list is actually accurate. You know that the good people are in there, but there are mostly bad people in there, right? Because otherwise, this would cost millions of dollars. They wouldn’t cost 10s of 1000s of dollars.

Neal Bawa (00:21:04):

So, we created a system where we purchase six or seven different software subscriptions. And then, we moved those lists through these six or seven different software cleaning them up until we ended up with just the exact accredited investors. Right. And so, we cleaned the rest of the list out, threw it away. We had no interest in it. Found those 20%. And once we had those 20%, we started targeting those people using platforms like Facebook and LinkedIn.

Chris Rising (00:21:33):

What would be those software that you used as a filter? You said you had five or six software filters to get to a final list?

Neal Bawa (00:21:41):

Let me think about that. The truth is the software change every six months, and the growth hacking director who you’re welcome to bring onto your program. We don’t hide this stuff by the way. We’ll be happy to give it to you. I’m going to give it to you later in the program, because I’m going to think about this in the back of my mind on what are the most recent software.

Chris Rising (00:22:02):

Is that just something you found going through a Google search and things like that? Or is that something that’s unique-

Neal Bawa (00:22:05):

No, no, no, no, no, no, no. No, that’s a very elaborate setup. We use a software called Zapier, Z-A-P-I-E-R.

Chris Rising (00:22:12):

Yeah, we use them too.

Neal Bawa (00:22:13):

And you connect six or seven different cleaning software together. And you push each record through at a time pushing somewhere between 50,000 and 100,000 records a month, right? And that’s going to cost you about maybe $5000 to $10,000 a month to clean that data, right? Because what you really want, and by the way, at the end of this time, when you had that million person list, now you’re down to 200,000. It’s not like you can directly use them. So, people think that if I had a list of 200,000 true accredited investors, I could just send them emails.

Neal Bawa (00:22:43):

The answer is, it’s completely worthless. You will not generate one dime from those people, right? You have to find a way to attract rich people in a way that they don’t think they’re being advertised to. Right? And the answer to that is Facebook. So, we spent a year building a true list. And then, we spent two years, so following just these 200,000 people around the web. That’s a very elaborate process

Neal Bawa (00:23:08):

But if someone is truly interested, and you spend a few weeks immersed into how Facebook works, you can find it. It’s called Custom Audiences. Right? Facebook, if you advertise to them, they will show your ad to a bunch of people that will never be accredited, that will never buy a syndication. They’re not interested in real estate. So, your Facebook cost is 100 times higher than you can afford. But what if you told Facebook the audience?

Chris Rising (00:23:34):

Yeah. We are in this similar area doing some of the things. But what I’m amazed by and I’d love to get your thought on this is, I personally don’t use Facebook very often. I’m on it. And it was something that I was more engaged with years ago. My kids, my 17-year-old certainly don’t have an interest in it. Yet over and over again, the best success we’ve had is our advertising through Facebook. So, what is it about Facebook, and the accredited investors in your mind that allows people to raise money from Facebook?

Neal Bawa (00:24:09):

And this will change in five years. It’ll be a different software 10 years from now, because of what you just mentioned. Facebook is losing brand value with younger people. Right? And to some extent, it’s losing brand value with older people as well. It’s this in between group of 35 to 55-year-olds, where there’s still enough engagement. The answer is Facebook has the best data. Facebook gives all this stuff away for free. Like for example, WhatsApp is free. Have you ever paid for WhatsApp? No. But there’s 10s of millions of people or 100s of millions of people using Facebook, WhatsApp.

Neal Bawa (00:24:39):

Why don’t they charge a buck a month or a buck a year for it? Well, that’s because they’re only interested in watching what you’re doing on WhatsApp, right? So, they’re taking every single data stream there and they’re turning it into interest lists. So, the reason why Facebook is more successful is they are truly a company that creates value through snooping on people and looking at what it is that you’re doing and categorizing you.

Neal Bawa (00:25:03):

We still use their technology to filter. But first, we provide pre-filtered lists. And I think the minimum list we provide is 200,000 people.

Chris Rising (00:25:11):

Wow. What do you think of other places like LinkedIn, or Instagram, or Twitter? Who knows what may be happening today with Twitter or Elon Musk? But what do you think of those venues?

Neal Bawa (00:25:25):

So, obviously, with 14 person marketing team, we are currently on Insta, on Twitter. We’re on all of these platforms that you just mentioned. But what I’m finding is that when it comes to platforms, you can’t focus on six or seven of them. So, what we’ve done is we focus on one or two platforms that really work for us, and they generate 70%or 80% of our incoming referrals. And then, we have the rest. And what we do is we create a system where we’re creating our content for the two platforms that we like. And then, we create a secondary system where that content is taken and broken up into uses on Insta or Twitter.

Neal Bawa (00:26:04):

But we never actually spend any brain power on those other platforms. So, they’re still being maintained. If you go to my Twitter account, by the way, I don’t use Facebook or Twitter. So, if you’re seeing me post 60 times a week on Twitter or Facebook, it’s not me. Right? There’s other people posting on there, right? I don’t even actually need to have my Facebook log in every time I need it. I have to go and ask a bunch of people.

Neal Bawa (00:26:25):

The bottom line, though, is that if you know which of these work, right, so the obsession with data science is about tracking everything. I’ll give you an example of this, right? So, I believe we are the only syndicate in the US that has 3 million tags in our database. A tag is me looking at what Christopher Rising is doing, and saying, Christopher, I see you’re interested in this syndication, but you’re not interested in that kind. I see you’re interested in my banking webinar, but you’re not interested in my interest rate webinar, right?

Neal Bawa (00:26:58):

I’m basically profiling everything that you’re doing once you’re in my database, and I’m tagging you. So, there are investors in my database that I’ve been in there for five years. I might have 1000 tags about them. And then, I have a bunch of people that say, “Okay, now we’re going to take these tags and segment or slice up the database, so that not everyone gets the same advertisements. Not everyone gets the same email, and not everyone gets the same pitch.” So, we’ve created slices of our database of people that respond to certain pitches.

Neal Bawa (00:27:31):

Is it a fear-based pitch? Is it a greed-based pitch? Right? Is it based on long-term growth? Is it based on fear of taxes? What attracts Christopher the most? Right? And then, I’m going to customize all of my messaging so that Christopher gets it. And then, you might say, “Oh, my God, that’s a lot of work.” No, it isn’t. The way technology is, it makes it simple. Because what we do is we create something known as a segment.

Neal Bawa (00:27:59):

So, if I am sending a message to Christopher, that’s three pages long, only one paragraph changes. But that paragraph is always at the top. And it addresses Christopher’s greed, his fear, his interest. Right? Only that one paragraph is different. Everything else is the same in the marketing. And so, as we use tags, different people tag differently are getting that one paragraph different, because that’s what catches their attention, the fear, the greed, the interest. And then, the rest of it is the same.

Chris Rising (00:28:32):

Is there some AI that’s tagging it? Or is it really people in your marketing department? You’re like, “Well, I could tell… How do the tags get performed?

Neal Bawa (00:28:42):

So, the answer is, nobody is actually physically tagging people. As you can imagine, that would be too hard. What we are doing is working on something known as automation. So, whether you’re using Salesforce or ActiveCampaign. We’re using a feature called automations. And the automations feature, the way that it works, regardless of which software you use, the way that all of them work is they give a ranking to a certain action.

Neal Bawa (00:29:07):

So, if Christopher clicks on a certain page on my website, and then clicks on another page within it, and another page, well, every click has a certain score and a certain tag. Overall, if Christopher engages more with us, his score goes up, right? And then, his tags keep getting added in. And over time, because the tags, we do create the tags manually. We don’t add them manually to Christopher’s account, but we do create them, we put them in a certain umbrella.

Neal Bawa (00:29:37):

So, an umbrella might be very interested in taxation impact. Or another umbrella might be extremely paranoid about interest rates and how they affect real estate. So, because the tags are in buckets, and all of the tags are pointed back to clicks action that Christopher takes an email in our website or during our webinar, all of the rest is happening through automations. And we have 100s if not 1000s of automations running.

Chris Rising (00:30:05):

What are the things that you-

Neal Bawa (00:30:08):

We’re a technology company, right? I’m not a real estate guy. I’m just a technologist that is trying to basically use technology to hack everything. And that’s why I have an army in the Philippines, right? I have a massive office in the Philippines. And two-thirds of my company is Filipino. So, if I hire one person in the US, I open two requisitions in the Philippines. And they have their own managers.

Neal Bawa (00:30:28):

They have their own directors. They have their own recruiting departments. They do all of that stuff in the Philippines. And so, by attaching those two people to this one person, I triple my gain for each employee.

Chris Rising (00:30:40):

Interesting. So, let me ask you a couple of questions that I know my audience sometimes asked about this. So, did you say you use Salesforce or do you use HubSpot? What are some of the backbone technologies that are allowing you to do it that sound like they’re off-the-shelf whether it’s Salesforce or HubSpot?

Neal Bawa (00:30:57):

Salesforce is the best sales-based CRM product in the world. So, if you have large sales teams, which I don’t, you should use Salesforce. That’s what they tend to focus on the most, right? The managing the effort of 100s or 1000s of salespeople, Salesforce will do the best job in the world. HubSpot is a marketing automation product. It’s the best in the world, marketing-driven companies that have very small sales forces, almost all the messaging is going out in an automated fashion.

Neal Bawa (00:31:27):

ActiveCampaign is something in the middle. And if you look at the names, they are very interesting. They tell you a lot, right? ActiveCampaign is not as powerful as HubSpot. But it’s for people like me that want to actively track my customers, active campaign. So, it is the world’s best CRM for automations-driven marketing. Right? It’s in the middle. It’s in the middle. HubSpot is much more powerful, but its automation capability is nowhere near ActiveCampaign.

Chris Rising (00:32:00):

Now, when you deal with your investors, do you use something like Juniper, Square or IMS? How does that integrate into anything you’re doing, that security with the money that comes in and out and reporting to investors?

Neal Bawa (00:32:14):

We use a tool called IDR. So, Investor Deal Room. And what I like to do is, as a technology pioneer in a company filled with technologists and software people, is that I like to be the alpha customer for a new company. So, when IDR was just basically two guys writing code, I went to them and I said, “I want a locked-in price for three years. I will become your alpha customer. You can get somebody with $800 million record like me.”

Neal Bawa (00:32:45):

I’m also very well-known at conferences, because this is a question I get asked a lot, right? You’d be surprised how often people ask me this question. And so, I felt like there was brand value. They agreed with me. So, we basically said, “We will be on your advisory board. And when we need features, you’re going to do your best effort to write those features in.” Right? And they’ve now written dozens of features into the software, including its support of something known as Zapier.

Neal Bawa (00:33:12):

Zapier is basically an incredible tool that allows different software to talk to each other without programming. And so, we kept pushing them until they basically built Zapier into the platform. So, the answer is our tool, IDR is fully integrated with ActiveCampaign but through Zapier. That way, we’re not messing with IDR too much. We’re simply defining, okay, this person in ActiveCampaign, it’s this contact record in the IDR. That relationship is being defined through Zapier.

Chris Rising (00:33:44):

We use Zapier a lot too. We do find it has its limitations.

Neal Bawa (00:33:48):

It does. It does, it does.

Chris Rising (00:33:48):

At some point, my tasks in HubSpot are going to work with my task at Asana, and Zapier haven’t figured that out yet. But anyway, that’s my own personal frustration.

Neal Bawa (00:34:00):

And Asana, by the way, is a third piece because neither one of the two software you just mentioned does project management. So, for us, Asana is the center of all of this stuff. For example, in our company, email is banned inside the company, unless it’s for specific purposes, right?

Chris Rising (00:34:17):

We do the same.

Neal Bawa (00:34:19):

So, there’s two places where you can talk to other people inside the company. One is Slack, which is our communication software. So, you have to talk in Slack channels for specific projects or specific departments. And the second is if you’re sending an email, fine, you can send an email, but you must send it to Asana. You can’t send email to people.

Neal Bawa (00:34:40):

You have to send it to Asana, and then Asana takes actions based on that and creates tasks. So, by doing that, we’ve managed to even integrate IDR and ActiveCampaign with Asana through email, right? So that greatly speeds things up.

Chris Rising (00:34:58):

We do the same. We do the same.

Neal Bawa (00:34:59):

By the way, this is a wonderful geeky conversation. I usually don’t get into it in podcast.

Chris Rising (00:35:05):

Well, what I love is, and I’ve met Dustin in 2012 up on summit outside, on a mountain in Utah. And I started talking to him about how much I love this product Asana. And I said, “But it gets frustrating, because you do five things great.” And then he goes, “You just watch… This is almost 10 years ago. He was saying, “We listened. So, while there are customers, you’ll start to get frustrated, we’ll hear people frustrated, and then we’ll have an update. And we’ll fix it.” And it’s been very true, and the way that software is running.

Chris Rising (00:35:38):

We actually have internally our own interactive PDF on how to use Asana within our company. And rule number one, you never email each other internally. You should never do it. I get it that there are going to be emails to people in the outside world. But if there’s going to be something internal, it has to be a task.

Chris Rising (00:35:56):

And I love the way Asana has moved in goals. It keeps getting there. But we’ve talked a lot about all this stuff. But I wanted to give you the chance to say, Okay, you do all this stuff. How successful? How many investors do you think that you can reliably count on to invest in deals? Do you have on your platform?

Neal Bawa (00:36:15):

So, I’ll give you that number. But I’m not obsessed with how many investors I have. That’s just a byproduct. I’m interested in speed of growth. My primary target is doubling to tripling my investor database each year. And I have three different levels of those. One is that multimillion database that I call the shadow database, okay, shadow database, which is basically everyone in the universe that I think I want to attract, right? It’s the cleaned-up version of these crappy lists that you buy on the web, right? So, it’s called a shadow database.

Neal Bawa (00:36:52):

And then, the second piece of it is people that are highly engaged with me, they have very high engagement scores. They haven’t given me money yet. And there’s 58,000 of those people. And then, there’s the people that have given me money. And it’s not easy to give me money, because I keep raising my minimum. So, the last four years, my minimum has been 100,000. And now, I’ve raised it to a quarter million, right. So, it’s harder and harder to be in that list, because I keep raising that amount.

Neal Bawa (00:37:17):

And so, that’s 800. So, I’ve got 800 investors. Again, I’m not interested in that 800 number. It’s just it makes you feel good. What I’m interested in is how fast am I growing in every quarter from the previous list of investors? How fast am I growing that 58,000 lists? What’s the Delta every quarter and every year? All of my marketing teams are compensated based on Delta, right? How much is that million-person list growing by?

Neal Bawa (00:37:43):

So, I’m really more focused on what that number is. Last year, I set a goal of two and a half X for the investors and the database. On the database side, we didn’t quite make it. But on the investor side, we actually went beyond. So, we were at 3x in terms of that count.

Chris Rising (00:38:00):

So, we were talking a lot about syndication and building your list. One of my great frustrations is I find real estate can often be very linear, because it’s so complicated to find a deal to go through a best and final or convince an off-market seller. And then, to close the deal. How do you deal with that issue? We talked about it all the time. We have a meeting later on the day to say I want us to stop thinking so linearly on our top 10 list and get to more exponential. We can be buying three, five, 10 properties in a quarter instead of just trying to get one to three closed in a quarter. How do you deal with that issue?

Neal Bawa (00:38:40):

Two different approaches. Number one, if the market won’t give me all the product that I want, if the market is so restricted that I can’t really grow in a nonlinear fashion, I will create my own product. So, 70% of my product is new construction, 30% is what everybody loves, value add. You never stop value add, right? It’s awesome. So, 70% of my product is product that I created so that other people may buy it.

Neal Bawa (00:39:08):

If I am convinced that a certain market or a certain corridor in the US will have shortages for the next three to five years, then I go and create that product in there myself. Right? So, I basically ended up being on the seller side of the equation instead of the buyer side of the equation. Right? One way to fix the problem. It doesn’t work all the time, by the way. Right?

Chris Rising (00:39:27):

But, well, let’s break that down. Because I don’t know if I understand you’re saying. Are you saying you’re buying land and then selling the land? Are you buying land and you’re building something?

Neal Bawa (00:39:36):

I’m a Full Stack developer. I have an army of people that work for me, all the way from zoning and permitting to city approvals to going vertical. So, all of these people are inside of the company and basically because I’ve had this frustration as long as you’ve had it, I just simply said, “If the market won’t permit me to grow at the speed that I want, I will basically create my own product. Right? And so, no, I go all the way from buying the land, then going through the zoning process, yelling at the city, being beaten up by neighbors, going through the process of owning the land, and then basically improving the land on the horizontal side and then going vertical on it.

Neal Bawa (00:40:15):

And then, at the end of that process, either I hold the property or I sell it. Right. So, that’s one way. The second question, I think, is one that you’re going to be more interested in. So, I looked at this, and I said, “Okay, well, the big cities.” I am like you. I’m very focused on underwriting needs to work. And clearly, when I focus on underwriting needs to work, I’m not buying enough properties, right? You’ve had the same problem.

Neal Bawa (00:40:38):

The question is, there must be a solution out of that, and the solution is move down from that market to the next year market, where the underwriting works. And now, that has always been a bad thing. It’s a bad thing to say in our industry because people are very tied to this concept of the primary and secondary markets are safer, right? And the truth is this. If I look at the data for older recessions, older US recessions, it’s always been true.

Neal Bawa (00:41:05):

So, if you look at recessions in the ’40s, ’50s, ’60s, ’70s, ’80s, and even the ’90s, the tertiary markets got hit a lot harder than the primary markets. But here’s the problem. When you look at data, the most dangerous thing you can do is look at incomplete data. Right? You better not to look at it at all. So, what most people know in the syndication industry is tertiary markets got hit harder during recessions than primaries and secondaries, and they’re right.

Neal Bawa (00:41:32):

The question that they shouldn’t be asking, though, is, over a five-year time frame, before recession, during recession, after a recession, if you held the tertiary property, which one created more profits? The answer is over 95% of the time, that tertiary market created more profits. So, you always need to hold a tertiary product through a recession suffer because you’re going to suffer. But when you finish the suffering, you’re going to beat the returns of the secondary and primary markets.

Neal Bawa (00:42:04):

Now post-COVID obviously, that’s not even true anymore, because the tertiaries are actually seeing massive, massive population growth, and they’re incredible. Like Idaho Falls, Logan, Utah, Dalton, Georgia, these are places nobody’s heard of. They’re seeing enormous growth. But pre-COVID, those markets were more profitable.

Chris Rising (00:42:25):

I really want to get into your 10 trends. But before we jump into that, you have sounded like a man who is quite driven for excellence in what you do. You have built something from scratch that I think is admirable, and something that I know my listeners are all going to be like, “Chris, you should have Neal much sooner.” But how do you do all that? And with technology dominating so much in life, and have a life and be a husband, and do your life, how do you live in this world that seems very focused on constantly producing?

Neal Bawa (00:43:04):

So, I think that my greatest achievement in the last five years has been that I have a very balanced life, right? And I know that word gets overused a lot, but I truly can say that for myself. So, for example, if you look at the last 10 days, I’ve been on vacation in Santa Ana, Miami, and Breckenridge, Denver, right. So, I’ve come back from a 10-day vacation, and I’m going on a 30-day vacation to two European cities and African city, Morocco, London, and Paris in early June as soon as my kids are done. I obsess over this as much as I obsess over everything else.

Neal Bawa (00:43:41):

So, my greatest obsession was, how can I build a company that doubles or triples in size when I’m only working 30 hours a week at most? I do not want to go over 30 hours a week. And there’s weeks I go over but an average. And the answer was systems, empowering employees, and an army in the Philippines. I think all of these were needed. But I work the least of anybody, any of my contemporaries in the industry, because I’ve created amazing systems where people do the work for me.

Neal Bawa (00:44:12):

Whether those are technology-driven systems, whether those are employee-driven systems, compensation-driven systems, I’ve made seven, eight people, partners in my projects, based on the performance of those and I change those performance criteria all the time, which my partners hate, by the way, but I change them all the time because there’s no way to keep them constant, right? You’re either over or under compensating people. So, I do that.

Neal Bawa (00:44:37):

But I don’t make them partners in my company, that logo in behind. I’m the only person that owns any shares, right? But I make them partners in my projects. That way, the construction people are only partnered in the construction projects. And the value-added people are only partnered in their projects. So, compensation is a very key driver of good behavior. So, I’m focused on those. So, what I hate doing is any daily work.

Neal Bawa (00:45:03):

What I like doing is every day saying, “What do I do today that reduces the burden on me?” And if you ask that question and obsess over it every day, you end up with amazing, amazing systems. And I have staff, for example, there’s four people in the Philippines that plan to my 20th anniversary. There were people that figured out where we were going. And there are people who I created 20 gifts for my wife. And all of that was done basically by an army of people.

Neal Bawa (00:45:31):

So, I don’t believe you can ever have enough executive assistants. I have three. And they’re all very, very busy. They’re all working 55 hours a week. And I’m not.

Chris Rising (00:45:41):

That’s terrific. Switching over to talking about the content. I think one of the keys that I heard earlier in our discussion was that you mentioned many, many different ways that you can connect with investors and potential investors through producing your own content. Can you talk a little bit about how you’ve created this community around yourself and Grocapitus that is, I think a pretty… it’s outstanding. Some of the stats that I saw in preparing for this. You’ve really created a community of real estate investors that are actively engaged with you. How have you done it? What are some of the keys to it?

Neal Bawa (00:46:20):

Experimentation. I think I tried lots of different things. I tried writing long blogs. But what happens is that people write these long blogs, and very proud of them, because investors come up to you and say, “Hey, I read the blog.” And so, they think they should continue to move in that direction. Because I’m mostly interested in Delta in growth. I don’t care if 100 people read my long, long blog, and I got five investors out of it.

Neal Bawa (00:46:44):

My focus is I want to write the same amount of content the following year and get more people, more people, right. So, 100 this year is good. One-hundred next year is crap. It has to be 130, or 200, or 300. So, when you have this growth-based mentality, which clearly comes out of Silicon Valley. You can tell I’m very schooled in Silicon Valley thought, exponential growth, blah, blah, blah. It also comes from a math background. Yeah, as you can tell, I do math in my head constantly.

Neal Bawa (00:47:10):

So, I’m looking for anything that looks like a linear curve, I absolutely hate. It has to have exponential curve capability. So, I’ve experimented with maybe 15, 16 different channels, right? And what I found was, the greatest channel of all kind was not the one that gave you the most eyeballs. The greatest channel was the one that gave you the most branding. So, for example, you might think, why doesn’t this guy have his own podcast? And my answer is I do.

Neal Bawa (00:47:37):

It’s called everyone else’s podcast. My data prove to me that when I go out and talk about my approach, which is systems and data and automation-driven, people like that, so I never created my own podcast, right? Because I was finding exponential curves with everyone else’s podcast. But with other things, I found that the opposite was happening. So, the amount of time that people are spending on podcasts, I’m spending that time. I’m not goofing off.

Neal Bawa (00:48:05):

But I’m spending that time creating the best content in the industry. And I found that that really worked well. So, I hired a content team of three people. And every time I hear about something happening in the industry, right now, the hardest thing in the industry is this obscene increase in interest rates in the last 35 days, right? It’s been shocking. It’s the greatest in history. It’s obviously going to affect us. It hasn’t affected us yet.

Neal Bawa (00:48:29):

Well, it’s affected the industry. But none of the investors are aware of what happened in the last 35, 40 days. They haven’t figured it out yet, right? All the articles on my Flipboard are still about insane increases in home prices. Well, they’re abruptly going to come to a stop in the next 60 days, right? So, I stay on top of the content using Flipboard by using thumb up, thumb down, right?

Neal Bawa (00:48:50):

And then, what happens is my team logs into Flipboard from a different computer, and they’re looking at what I’m constantly thumbing up and down. And they come back to me and say, “Should we do a webinar about this? Should we do content on this?” So, I often will do hour-long deep dive webinars, and I do about 25 of them a year. They take an enormous amount of time to build because 100% of the content is custom.

Neal Bawa (00:49:15):

But the credibility that creates with the people that show up is incredible. We’ve had 173,000 registrations for our in-house webinars, which is by far the largest in the industry. I know that there’s people out there that have had more people register for webinars, but a lot of those are just like webinars about investing. I get that. That’s useful.

Neal Bawa (00:49:38):

My webinars have nothing to do with investing at all. They have everything to do with informing people about the world out there. I’m only interested in creating credibility in webinars. I pitched nothing. So, it’s just a brand process.

Chris Rising (00:49:54):

And I loved it. Not many people know a Flipboard anymore, thanks to Apple News and the way Apple has constructed the iPad today or the Google News has. But what is it about your going into Flipboard? That must mean you spend a lot of time reading and liking or not liking for your people to then decipher through it and say, “Should we do a webinar?” Do you count that as part of your 30 hours that you only want to work in a week? Or is this just through downtime already?

Neal Bawa (00:50:25):

Yeah, yeah. It’s two or three hours out of that 30 hours is doing this research. The goal there is to not just inform them about what I’m interested in. The goal is for them to use all of those thumbs-ups as the content for the webinar. Right? So, I’m building the content library for a webinar by thumbing it up. So, if I thumb up 20 articles about increases in interest rates, then they know, Okay, well, he’s clearly very interested in interest rates right now, we should start building a webinar. But they also have 20 articles to take content from. So, I’m building the webinar at the same time as showing my interest.

Chris Rising (00:51:06):

That’s interesting. Well, I really want to get into the top disruptive trends. But right before we do, you’ve brought up the use of offshore workers and using the Philippines. Number one, what is it about the Philippines as opposed to say, Costa Rica or India, or some of the other places that you’ve really liked? And secondly, is what type of people are you hiring? Because I think a lot of people tend to only think of hiring offshore as hiring account. So, why the Philippines? And what are those employees really doing?

Neal Bawa (00:51:42):

They’re doing everything. The challenge is finding a way for the Filipinos to do everything. Because if you mentally pigeonhole them, they’re not going to be forced multipliers I’m very interested in, how do I get two Filipinos to have at least the same productivity as an American employee? I’ve never tried to do a one-on-one. I think Americans are amazing with their productivity. It’s a very advanced culture, that’s a very technologically advanced culture. So, I’ve never tried to make one Filipino as good as one American. I think that’s a fool’s errand.

Neal Bawa (00:52:17):

But I can make two Filipinos be better than one American simply because they have twice the number of hours. So, the challenge has been, how do I get the Filipinos to do everything that an American does? And I haven’t succeeded at that challenge. But I’ve succeeded with 100s of things that most people would not consider to be something that you would do in the Philippines. Right? So, for example, investor management is something that most people would say, no, don’t introduce your Filipino folks to the investors. That’s not true.

Neal Bawa (00:52:47):

We have spokes in the Philippines, that their managers and directors that train them on every word to say, and they’re vastly superior to US based investor relations manager. They’re not direct selling, but their sales support in ways, 100s of different ways. So, to go back to why Philippines, right? So, the first thing is, where’s the talent pool? There’s basically three very large volume talent pools when it comes to outsourcing. One is Mexico, the second one is India. And the third one is the Philippines.

Neal Bawa (00:53:19):

You could say Ukraine, but there’s just not enough Ukrainians. I want to have access to 100s of 1000s of people that already worked nights, already worked nights and have worked nights for years, right? I do not want to teach somebody how to work at night because it’s a very different thing from working during the day. So, my talent pools are limited. Mexicans don’t work during the night because they have another time zones.

Neal Bawa (00:53:44):

But otherwise, that tool is available, right? So, when I studied the three markets, overall, the Filipinos came out ahead of the Indians. Number one, accent, number two, ethics. Indians are also very ethical. And again, I’m typecasting so I apologize to anyone that’s listening. But I am a data scientist. I will rank people for everything. And what I found was, in terms of pure ethics, the Indians were the strongest than the Filipinos, then the Mexicans in terms of stealing time. I’m not talking about stealing money. I’m talking about stealing time. Right?

Neal Bawa (00:54:16):

So, I started ranking the different things then I rank the accents. Accents matter a lot, because all of my Filipinos are on the phone, and the Philippines is far ahead of everybody else. And what I also found was, the Philippines is not ahead if I used men, so I only hire women because their voices are thinner. They’re much easier to understand than Filipino men. Right? So, by ranking these, what I found was overall, it would definitely made sense for the Philippines to be the base.

Neal Bawa (00:54:44):

You could say why not Indians? The answer is build one base, hire a bunch of managers and directors that are constantly coaching and training and hiring and firing the people. Why build two bases? It’s a very large country. The Philippines I think is seventh or eighth largest country in the world. They love the money that I can offer them. I pay more than anybody else does.

Neal Bawa (00:55:06):

Because I’m very obsessed with I will train you, I will expect performance, I will monitor you in 32 different ways. And you will work for me constantly at a very high productivity rate, and I will pay you more than anybody else ever can.

Chris Rising (00:55:22):

Wow. And when you first got a foothold in the Philippines, did you approach a firm there that helped you? Did you get on an airplane and you went there and you met people? How did you do it?

Neal Bawa (00:55:35):

All of the above, all failures. So, I did the airplane thing to the Philippines that was a total waste of my time. I did the hire from other companies, also a total waste of my time. Because every time I would hire people from other companies just as they got good, they took them away and replace them with bad people. And now I ended up being the one that trained all of these people to make them good only so that they could be moved to somebody else. So, eventually, I realized the only thing that works is to have my own team.

Neal Bawa (00:56:01):

So, I use a website called Upwork. I use it much better than most people use it because most people think Upwork is just a job engine. And it is. It obviously is a job engine to get through to the Filipinos. But if you Google Neal Bawa virtual assistants, I have a 15-minute podcast that show you 25 different things to turn on in Upwork. Because I’m obsessed with what are the top 0.01% of Filipinos, right? And so, those are all switches, software switches, you can turn on the Upwork website.

Neal Bawa (00:56:38):

For example, most people think that 90% is a good ranking. It’s not. Ninety-nine percent is the lowest acceptable ranking of quality on Upwork, 99. And there’s no 99% button. The only button available is 50%, 70%, 80%, and 90%. So, what you have to do is first, you got to click on the 90 button.

Neal Bawa (00:57:00):

And then, as you’re looking through the list, you need to have a Filipino filter those people that manually say 99% acceptability ratio or ranking ratio, and then get rid of everybody else and make lists of people inside of Upwork so that we can start attacking people. Never go after people that are available, because usually the people that are available are not high quality. So, we only attack people that are already employed.

Chris Rising (00:57:23):

Wow. That is amazing. It’s so far beyond what I know we’ve been doing and what we’re going to strive for our team to reach for. I should have known. I think I could be talking with you to find out.

Neal Bawa (00:57:39):

We can come back and do the trends again. Or maybe we can do one of the trends.

Chris Rising (00:57:42):

No, no. Well, let’s do the treads. There’s another question that has been lingering in my head that I wanted to go back to as well, which is when you were looking at identifying markets and identifying an asset that you want to buy in a market. You mentioned there was four or five sources of data that you would go to and I assume, and that’s always a mistake to assume but I assume that you’re in the general way saying, CoStar or some of the CoStar competitors out there that you’re filtering data from, or did I totally miss that?

Neal Bawa (00:58:17):

I pay for CoStar just like you do, right? So, let’s get that out of the way. CoStar is amazing, right? Totally worth the money. I don’t think that people starting in this industry or people trying to buy their own first single-family rental will be buying CoStar. So, my obsession when I got started with this had nothing to do with CoStar or multifamily. It had to do with simply, how do I rank cities in the US for real estate investment, whether that’s single family or multifamily? Right?

Neal Bawa (00:58:44):

So, remember where I started from. It has nothing to do with syndication. I built this system five years before I became a real estate, anybody. Right? So, I would go to conferences. People would basically call me to conferences, and I would come down the stage and people would say, “How do I invest with you?” And I would say, “I’m running a technology company. You can invest with me.”

Neal Bawa (00:59:04):

Everything I set up on stage was for my personal portfolio, and you can just take it and do whatever you want with it. And people be like, “No, no, there must be a subscription.” It’s like, there’s nothing, I just taught you how to do this on stage. Just use it, man. You never have to talk to me again. So, the concept was to figure out the best cities in America to invest in at the specific time. So, that had nothing to do with syndication.

Neal Bawa (00:59:25):

Therefore, I became obsessed with I must not use paid data. So, if you type in Neal Bawa Udemy, U-D-E-M-Y, you’ll see 10,000 people taking a course. That course basically shows you how to rank every city in the US in five different ways. And then, roll it up and figure out the highest ranking for cities. And you’ll notice that all of the data sources are free on the web. They’re all free on the web.

Neal Bawa (00:59:51):

So, real estate is amazingly lucky and that the stuff we need is available on the web when it comes to either city ranking or neighborhood ranking. All of it is free. Obviously, at a property level, that’s when you need CoStar. Right? It’s really, really difficult to be a successful syndicator without paid data. What I’m telling you though is, Christopher, my brand isn’t based on, I am the best indicator in the US. My brand is based on I’m the best real estate data scientist in the US. And I give you data that you can use without ever giving me any money. Right?

Neal Bawa (01:00:31):

So, after 58,000 highly engaged investors, only 800 have given me money that’s only 1.6%. Right? The others are just simply getting data from me to buy real estate however they want, wherever they want. So, I can’t possibly use real estate tools like CoStar.

Chris Rising (01:00:51):

Interesting. Is there anything else though out there? Is there any other secret sauce?

Neal Bawa (01:00:58):

I do like some that are cheap enough so that I talk about them. One tool that I feel that syndicators tend to ignore is NeighborhoodScout. Because while CoStar has great data from the perspective of the property, and its competitors, and cap rates and things like that, that we all care about. NeighborhoodScout is much better at telling you the story of the neighborhood than CoStar does, right?

Neal Bawa (01:01:24):

And so, what I find is that every single property if you pull a CoStar report and pull a NeighborhoodScout report and create systems that actually look at data on both sides, you’ll catch a bunch of things that most people don’t. And NeighborhoodScout is, it’s really, really cheap compared to CoStar. It’s 100 of the cost.

Chris Rising (01:01:42):

Interesting, interesting. Well, what I was really excited about was to have this conversation. I thought the last hour was going to be just basic, but there’s so much here, and I’m enjoying it so much. But the thing that really caught my attention when I first started doing some research on you, is this real estate top 10 disruptive trends. When I first read it, there was some, yeah, I get that. And there was some others that I’m not sure I get it.

Chris Rising (01:02:11):

So, maybe we just walked through them real quick. I have them in front of me so if you need some, but I think you probably know. But what are the top 10 disruptive trends? But before we say what they are, why did you feel the need to come up with 10? Are there 50 that you really wanted? Were there really five but you thought 10 was a better list? Why is it 10?

Neal Bawa (01:02:33):

Terrible answer, 10 just sounded cool, right? No other reason. We were ranking about 50 of them. And actually just so you know, that list that is in front of you is out of date, because our rankings change all of the time, right? So, I’m just going to name the ones that right now I’m excited about. It doesn’t really matter. As you said 10 is just a number. It doesn’t mean anything. I’ll give you the ones that I think are truly beneficial. Only some of them apply to syndicator. Some of them basically, I think anyone listening to benefits from, right?

Neal Bawa (01:03:03):

So, the first one, and I’ll go through it the quickest is simply COVID massively accelerated the move away from expensive Democrat tax states to cheaper Republican states that are lower in taxation, lower in property taxes. We’ve been tracking this since 2016. We use a report called The Annual U-Haul Report. So, each year, in January, U-Haul comes out with a report that shows you how many people move from which city to what city.

Neal Bawa (01:03:35):

They use city pairs, they use state pairs. So, they say things like 293,000 people went to Texas from California, and only 142,000 went from Texas to California, right? So, both direction. So, we studied that report. We actually manually have a virtual assistant type it into Excel. And then, we massage the data so that we can see which states and cities are the biggest winners. That was massively accelerated by COVID because of remote work.

Neal Bawa (01:04:04):

Most people think that the most people have gone back, right? So, let me give you an example. Like Austin, for example, was always the lowest in terms of remote work through the pandemic. So, when we’d rank the cities that had the highest number of people working remotely and the lowest, San Jose, California had the most number of people working remotely in the pandemic. And Austin, Texas had the lowest number of people working remotely basically because the culture there was as well just show up for work.

Neal Bawa (01:04:32):

If you get sick, you get sick, but otherwise, you’re showing up for work. That’s the culture there in Austin. And I wouldn’t think that Austin was that culture, but it is. Data is data. But when I look at a company that does key swipes for offices. This is a company that sells key swiping software for offices. Only 43% of the people that were going to the office pre-COVID are back in San Jose. And in Austin, it’s only 63%.

Neal Bawa (01:04:59):

So, today there’s nobody that can talk about COVID. I didn’t wear a mask on a plane last week. What COVID, right? So, only 63% are back. These are huge numbers. In real estate, you can generate massive profits when a trend changes by 10%. Ten percent of anything is enough to create massive profits. This is a one-time opportunity when a trend that affects 330 million people is in the double digits.

Neal Bawa (01:05:30):

You’re not going to find one like this for the next 10 or 20 years. So, stop obsessing about 10. Just focus on this one, that every quarternary markets, and this is a term I’ve invented, because I’ve never found a term. There’s primary markets like Los Angeles or New York, and there’s secondary markets. Arguably, Phoenix could be considered a secondary. I think it’s a little bit too big. But Austin is a good secondary market. Houston could be a secondary market.

Neal Bawa (01:05:58):

And then, there’s tertiary markets, Salt Lake City, right? What is happening is that our data shows us that today, the markets smaller than Salt Lake City are producing intense amounts of profit. It’s a one-time sport. It will never happen again. Once it’s done, it’s done. Right? So, we are finding that Salt Lake City is not interesting to us, even though it’s a tertiary market. You know what’s interesting? Woods Cross, 45 miles away from Salt Lake City.

Neal Bawa (01:06:26):

Logan, Utah, 95 miles away from Salt Lake City, or Ogden, which is about 80 miles away, right? Idaho Falls is 150 miles away from either Boise or Salt Lake City. Those cities are seeing astonishing returns. They are definitely one time. They are definitely things that will stop because nothing can continue growing at these astonishing numbers forever

Neal Bawa (01:06:49):

And we haven’t seen the impact on the interest rates yet, because the rents are rising at the cities twice or three times faster. But cap rates haven’t caught up yet. They haven’t caught up yet. So, you still have more room when you’re buying stuff there.

Neal Bawa (01:07:04):

So, to me, that is the first trend. There’s 1000 cities in the US that you can track today that are seeing astonishing growth because there is a one-time move of people from dense cities to less dense cities. That I think in itself is massive.

Chris Rising (01:07:22):

I’ll give you two data points on that will back that up and things that we’ve seen. Number one, one of my dear friends is a major, major airport parking operator. And he was saying to me that the trend is, it is screaming out that pre-COVID parking lots at airports filled up from noon on Friday, and then emptied out from noon on Sunday back. Now, it is absolutely clear, parking lots are filling up on noon on Thursday, and emptying out about noon on Monday.

Chris Rising (01:07:55):

Meaning that people are using two travel days as workdays and that people coming in the office Monday to Friday is gone out the window. We’re seeing in our Class A office buildings that since California got rid of the mask mandate, we are at 60% to 65% occupancy three days a week, Tuesday, Wednesday, Thursday. So, that has become the new normal.

Chris Rising (01:08:19):

The other point that I thought was interesting. I went to Duke University and I have a lot of friends in North Carolina. I have a friend who is a home builder near Wilmington, North Carolina.

Neal Bawa (01:08:28):

Yeah. I’m in Durham, by the way.

Chris Rising (01:08:30):

Okay, I love Durham. But he was telling me in Wilmington, the amount of people who have moved there and who are full-time employed in other states has gone something like 25% in one year. So, these are people who are-

Neal Bawa (01:08:48):

That’s nuts. You have to imagine the amount of profits to be made when a 25% swing happens in a country that doesn’t even grow at 1% a year.

Chris Rising (01:08:58):

That’s exactly right.

Neal Bawa (01:08:59):

US population growth is 0.7%.

Chris Rising (01:09:02):

Now the question I had for him is, are they moving to Wilmington because there’s job growth there? We haven’t really, outside of the construction issues have job growth there. It’s that there are significant, and there’s industries that have significantly moved away from full-time in the office. Now, I think there’s a lot of debate about that. And we’ll save that for another time about what that means for the role of office and whether it can truly work that way with a distributed workforce. I think there are a lot of positives to it.

Chris Rising (01:09:34):

To circle back to this COVID, if I’m being extraordinarily honest with myself, I wasn’t in the office any more than 60% of the time before COVID because I was traveling for work or our company got rid of paper in 2010, 2011. We did a lot of things that took away what would have brought you to an office. So, that fundamental change, I agree with you it’s been accelerated. As I say all the time, I think what COVID-19 did was democratize the hierarchy in a company. Because now it’s not just the senior execs who can be in the office 60% of the time. It’s more and more.

Chris Rising (01:10:12):

So, I agree. And that change has also had a fundamental impact on how you build apartments and how you build new homes, because now people need a place to work within a home or an apartment. I know your second one, which was close to my heart is the healthy home design. And I was just touching on that.

Chris Rising (01:10:34):

And so, you start to look at what you’re going to check. I’ll just say for our future office investment, one of the things even though we’ve taken 1920 buildings and made them as though they’re brand new with the infrastructure and all. Clearly, if you’re going to own an office building, it’s got to be a newer office building. And it’s got to have every bell and whistle around ESG.

Chris Rising (01:10:54):

So, I think that’s one of your trends, both in the home and the office. But we hit COVID and hybrid work. Is there another one you want to talk about that you think is really significant?

Neal Bawa (01:11:04):

Yeah, because I think the first one applies to everyone listening to this podcast. I think the second one applies to syndicators. So, I feel like that’s a good balance to have, right? Because you have a lot of people listening to you. You’re an experienced well-known syndicator. So, there’s people listening to you. There are interesting syndication. But I can tell you this. In the next three years, all of you, everyone that is looking to syndicate will have to tokenize your assets.

Neal Bawa (01:11:30):

If you do not tokenize, you will be at an enormous massive disadvantage. And you simply will have no choice. It’s just like, people that use Juniper Square or IDR, or the software. Today, you can’t really conceive of running a scale of business without having an investor management software. It’s a necessary evil, right? Tokenization is a necessary evil that has a great business advantage as well. So, there’s advantages there beyond the necessary evil part, but there’s no getting away from the necessary evil. Okay?

Neal Bawa (01:12:05):

So, I’m one of those people that really knows and understands tokenization because I come from a world where I’m an investor, not just in Bitcoin and Ethereum. But I’m an investor in the Blockchain infrastructure, which is much more powerful than Bitcoin. I don’t particularly invest in Bitcoin, simply because it’s a store of value, where Blockchain is a store of systems and processes and democratization of finance, right?

Neal Bawa (01:12:33):

It’s much more powerful than simply people speculating on the value of Bitcoin. So, I’m very interested in that. And I know that that thing is going to disrupt the way that syndicators work, and it’s both good and bad. So, on the good side, three years from now, you cannot possibly be buying a value add property, and not be tokenizing it for your investors, because that’s what gives them liquidity. And you might say, how can one investor, one guy, how can one person create liquidity show where we have a half billion dollar portfolio?

Neal Bawa (01:13:03):

The answer is you won’t. Groups of syndicators will get together. And I’ll tell you, this is how it will start. The largest airlines in the world are American Airlines like United and American, right? But what these people realized is that they couldn’t possibly create the scale that they wanted on their own. So, American Airlines created the three large alliances in the world. So, there’s Star, there’s Oneworld and SkyTeam, each of them led by one legacy American Airlines, right?

Neal Bawa (01:13:35):

And by doing so, by creating these alliances, they completely changed the airline industry in the way that it functions. Now, very often, I fly on a plane that just says Star Alliance. It doesn’t have airline name on it, because it’s owned by an alliance that basically gives benefits to all of its customers. What will end up happening is that syndicators will join alliances to create a singular token. And they’ll call it real coin or something like that.

Neal Bawa (01:14:02):

And when they do that, that token itself will have value. Because isn’t that what Bitcoin does? Isn’t the value of Bitcoin simply in the fact that people believe it has value? Because otherwise, why would one Bitcoin be $39,000? It will be worth 39 cents. People believe it has value. What if syndicator groups got together in alliances…. by the way, I’m going to form the first one, got together because I know everyone in the industry and everyone in the industry knows me.

Neal Bawa (01:14:28):

So, we’re going to form an alliance of value-added coins, and when we do that coin will become liquid, not Christopher’s property, not Neal’s properties. We’re not big enough. But what if there were 100 syndicators using a single coin, and the moment you do that, nobody wants to invest with anybody that’s not in that alliance. Because now it’s truly liquid and their software coming. Guess what I’m investing in these days?

Neal Bawa (01:14:54):

Software that creates liquidity for real estate. Software creates liquidity for real estate syndication. This is all coming. It’s crazy, right? And people are like, “Oh, yeah, it’s not going to happen for us.” Come on. The Jobs Act already completely changed the real estate industry. We only exist today because of the Jobs Act. And how quickly did it happen? Look at where we are today compared to 2014. Only eight years have passed.

Neal Bawa (01:15:20):

And one could even argue that it was completely baked by 2018. Since then, the number of syndicators has grown. But the… Ops, sorry. The number of syndicators has grown. But I don’t think since 2018, anything fundamentally has changed about the way we do syndications. So, between 2014 and 2018, the syndication industry was completely baked, right?

Neal Bawa (01:15:43):

It got completely baked in for years. Tokenization, when it happens, will completely re-bake the industry. And it’s happening now. Properties of my friends have been tokenized in the last 30 days, right? So, in Texas, and so this is massive. It’s both very good news and very bad news. And luckily, it’s very good news first.

Chris Rising (01:16:06):

Yeah, but there are issues with it. I know Lofty AI and a few others have had some issues in tokenization. I was very proud of myself that I got my .ETH wallet and I’ve owned my Algorand, and I owned friends with benefits and all that stuff. But it’s still so clunky and so hard. And there’s still these fear factor whenever I am interacting with my wallet that somehow it’s going to get hacked. Do you really think it’s just a couple of years away for an alliance token for syndicators to be out? Or are there a few other steps before that can really happen?

Neal Bawa (01:16:46):

I think that the software to make these things safer is on the way. So, there are two different ways that that’s happening. Every single software that you’re used to, like Juniper Square. Do you use Juniper Square?

Chris Rising (01:17:00):

Yeah.

Neal Bawa (01:17:01):

Yeah. So, imagine right now what Juniper Square is doing. They are hiring a team to build the Ethereum component. Bitcoin is not used for this purpose, because it’s not efficient. But Ethereum and Polygon. Polygon is a layer two chain that is basically built on top of Ethereum. It’s much cheaper to use Polygon. It’s much faster. Right now, every one of your favorite investor management software is developing the back end, so that you never have to go out and do any of those things. Right?

Neal Bawa (01:17:34):

There’s already 3 million accredited investors inside about a dozen software. And all of those are developing the tokenization interface to be seamless. So, your investors are always doing what they’re doing, and you’re doing what you’re always doing. And the tokenization is happening in the background. That’s going to take about three years to get that right. And there’s going to be some hacking that’s going on. Here’s the other thing.

Neal Bawa (01:18:02):

If your MetaMask wallet gets hacked, and you had a million dollars of Bitcoin, now you’re a million dollars poor, correct? Because it’s gone. There’s no way to get it back. However, the tokenization that real estate syndicators are doing today, we still have the right to reissue tokens. So, if the hack occurs, it’s a pain in the ass. It’s stress. But we’re going to reissue the tokens once we’ve made sure that the investor actually got hacked.

Neal Bawa (01:18:31):

So, the beauty of what we are doing is that we are not doing ICO, initial coin offering. That’s dangerous. We’re doing STO, securitized token offering where the securitizers still has control. And that reduces the offering, that reduces the risk tremendously.

Chris Rising (01:18:51):

When do you think states will catch up? Because I know that Lofty AI, which is really an interesting thing to watch really can’t work in California at this point?

Neal Bawa (01:19:01):

The answer is, I mean, Lofty is a wonderful example. I know the folks personally. I’ve advised them. I’ve been in their offices, and I’ve advised them against doing what they’re doing now, which is single-family tokenization. I’ve said, “Look, you build a wonderful platform. Why don’t you tokenize a $50 million property and do it right? Right? But they’re obsessed with this idea of every investor in the planet and $50. I think it’s a terrible, terrible business model even if it was legally in the right which as we both know, it’s very much in the gray. Right?

Neal Bawa (01:19:32):

So, they’re doing stuff that is problematic. Here’s the good news though. You know why I love Lofty and why Christopher should love Lofty? It’s the gray people that create, that force the SEC to create rules. And the first one they just killed him. The second one they beat him down with a quarter million dollar fine. The third one gets a $50,000 fine. By the fourth time, they’re like, “Chuck it, man, they’re going to break the law anyway. Might as well write the rules.”

Neal Bawa (01:20:01):

Rules in the US are written when two, three, four, five, six companies go out of business. And I’m not saying Lofty will be that one. But I’m saying they’ve got a nice little bulls-eye painted on their back. Right? So, the beautiful thing is rules get written this way. Why do you think that accredited investor rules exist in the US today? Because back in the ’80s, a bunch of people screwed over non-accredited investors, and then the SEC had to step in and create rules.

Neal Bawa (01:20:30):

Same thing is going to happen on tokenization the next three years, until three months ago, no one was tokenizing. So, why create rules? But do you know that currently, tokenization for multifamily properties is on a 1000% exponential curve? So, in two years, there will be 10s of 1000s of properties. What choice does the SEC have? They will have to create rules.

Chris Rising (01:20:52):

Yeah, interesting. Neal, I feel like we could go for four hours. I think probably the best thing I can do-

Neal Bawa (01:20:59):

It’s probably the longest podcast you’ve ever had.

Chris Rising (01:21:02):

That’s true. And the most interesting. I know my audience is going to love it. How can they find you? Where can I point them to?

Neal Bawa (01:21:11):

I picked my own name. My name is Navraj, N-A-V-R-A-J, Bawa. That’s an Indian name, right? And so, when I picked my name, I said, “I want to be the easiest person in the world to find.” So, when I picked Neal, the problem was there were more than one Neals with an American spelling, so I use the Iris spelling. As it happens. I’m the only Neal Bawa on the World Wide Web as long as you use N-E-A-L. So, the best way to find me is just simply type my first and last name and hit Enter. You’ll see a bunch of podcasts.

Neal Bawa (01:21:42):

Usually, when I do podcasts, I have a specific topic. You’re the exception because you basically did four different podcasts with me in the last 90 minutes. But there’s Neal Bawa virtual assistant, Neal Bawa outsourcing, Neal Bawa business process automation, or Neal Bawa best cities or location magic. So, if you just type in a word after my name, then you’ll get a bunch of content that’s specific to that idea.

Chris Rising (01:22:05):

That is terrific. Well, I have to have you back on. We’ve got at least eight trends we missed. And I really am engaged on it, so many of the things that you said. So, I want to be able to listen to this and go back. But, Neal, thank you for being on the real market. This has been a terrific podcast.

Neal Bawa (01:22:22):

Thank you, Christopher. Thanks for having me.

Chris Rising (01:22:24):

Thank you.

Chris Rising (01:22:26):

And please don’t forget to follow us. We’d really appreciate it if you subscribe to the podcast. You can do that on Apple iTunes or any of the other podcasting services. It’s The Real Market with Chris Rising. And follow us on Twitter @ChrisRising or @RisingRP, and please follow our blog, chrisrising.com or risingrp.com. Thanks so much.

Speaker 3 (01:22:51):

This episode of The Real Market is brought to you by Rising Investor Platform. The platform provides accredited investors with exclusive real estate investment opportunities on a deal-by-deal basis across various asset classes, including office, industrial, hospitality, multifamily, and data. The platform also provides an inside look at deals in our pipeline while giving investors the chance to indicate interest before it’s too late.

Speaker 3 (01:23:13):

We recently funded our acquisition of 9320 Telstar, a mixed-use office industrial property in El Monte California using our investor platform. To learn more about how accredited investors can join the Rising Investor Platform, please visit risinginvestorplatform.com.