#121: Data, Measurement & Coronavirus

Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast. 

Josh:  So, hey, guys, welcome back to Accelerated Investor. I’m so excited to be you could be with me and I’m excited that things are starting to unpack. In the past the last couple months, you probably listened to our podcast at home. Now, I hope you’re listening to us on a walk in the gym, in your car, driving to a multi-family property or residential property, raising money. You’re maybe still social distancing. But still now interacting with people in social settings instead of being at home. So I just want to tell you how excited I am to be with you today and sharing with you. My guest today is Neal Bawa. Neal is an amazing, amazing multi-family investor. He is widely known as the mad scientist of multifamily. He has a 250-million-dollar portfolio, over a dozen properties in multiple markets. And what I love about Neil. We’re going to jump into it today is his two main mantras, which is really around measuring. 


Josh:  Right. If you’re gonna do something, you’ve got to be able to measure it. You know, it doesn’t matter if you’re gonna run a business and this goes into all of our entrepreneurial world. If you’re gonna do something, you gotta be able to measure it. To see what kind of results are getting is hugely, hugely important. And secondly, data beats gut all day. We’re gonna talk about that. We’re gonna talk about the coronavirus. Neil, thanks so much for joining us today on Accelerated Investor. 


Neal:  I’m thrilled to be here. Thanks for having me on the show, Josh. 


Josh:  You bought Neal, so let’s jump in. We started before this podcast talking about this recent Forbes article that talked about different markets. They’re going to be impacted by coronavirus in markets are going to be least impacted. We were talking about how you’re already invested in multiple markets are going to be least impacted. This is driven by the data. The data that you had months and years ago. So just talk about for a second the data around multi-family, the things that you perceive. What is the most important data? What data do you look at? And why are you such a fanatic for data? 


Neal:  You know, I want to start off with a quote, the only decent quote that I’ve ever come up with. And the quote says, The Bible got it wrong by one letter. The Bible got it wrong by one letter. It is not the meek that shall inherit the earth. And my friend. It is the geek. Media geek. Right. Richest man in the world. Geek. Second richest geek. Third richest geek. Do you see a pattern developing, Josh? Do you see a pattern there, right? I do. And that pattern is consistent across the world that the people that are measuring are the ones that are winning. And I can tell you this. People think Amazon is an e-commerce company. No. There’s a million e-commerce companies. Amazon is a data analytics company. They are a data science company. And they’re studying everything that you do to a degree that you would be freaked out if I told you. To the degree that they study your patterns, the way you move your mouse, how long you stay on a picture, what part of the page you like the most, what part of the page you like the least? How many days after you make a purchase should you be told about that purchase and encouraged to make another purchase? They’re a data science company. 


Neal:  And so when we look at the way the world is changing, this is a world of huge winners and huge losers. And the people that are doing the measurement are the ones that are winning. And we’ve been measuring cities. And from a demographic’s perspective, there’s 10 different, you know, methodologies that we use and we publish these on the Web. And each year, 10000 real estate investors take courses, they’re completely free, and they’re not even on our Web site. So we didn’t want people to think, oh, you have to go to Neal’s website to take this course. So we just stuck them on Udemy dot com where there’s a guarantee saying we will not share your email address with Neal. Right. Because we want people to know these methodologies. So these methodologies, we’ve been using them to say, OK, these are great cities that people should be investing in for a long time. And some, and people have been telling us, no, no, no, I am in this other city and like Detroit or Louis, and I’m making lots of money. And my my argument is yes, but those are momentum plays. Have you ever invested in the stock market crash, even a single dollar? 


Josh:  I used to be a financial adviser when I was right, only in my early 20s for about five or seven years. 


Neal:  Perfect. So now you know what? I’m about to, the example I’m about to give you in the stock market, there’s two kinds of stocks. There’s the Warren Buffett kind of stock, which is called a fundamental stock. Right. So you buy stocks when you’d be looking at some very strong fundamentals. And he says, OK, this is cheap. I’m going to buy it and it’s gonna go up at some point. I’m not really worried about when it goes up, but the vast majority, the people that are buying stocks today buy what is known as a momentum stock. Right. So it has a huge amount of momentum, technical momentum and technical momentum says if it’s going up, it’s probably going to keep going up. Why don’t you ride that train up? Right. And that’s what the vast majority of people that speculate or do day trading. And so on the real estate side, something like that exists. There are cities that are momentums cities. But the fundamentals are weak. And when you look at a corona virus world, think of the corona virus attacking the fundamental. So this city. Right. 

Neal: So cities that have weak fundamentals, coronaviruses actually cutting the leg out from under them. Right. Because they were weak to begin with. And the momentum was carrying them. There was money coming in. That money was creating more money, which is creating more money. But underlying there was a weakness. It was a strong weakness. And so Forbes did a study on that. And guess what they found is that the metrics that we’ve been talking about for five years with our community, we have about 50000 people that are seen and use these metrics. Those are the same metrics. And what are those metrics? And I’ll give you the list of cities. But the metrics are common sense metrics, right? It’s like, what’s about the money? And you look at things you got to say, you know, yeah, this is common sense. So the first metric is population growth. 


Neal:  And we give you a specific number for population growth because you know what, saying invest in a city that has population growth is nonsensical. The U.S. has you know more than two babies per family, which means that almost every place grows. So just saying, you know, population growth means nothing, right? It’s a total waste time. What we tell you is between this year and this year, these seven over this 17-year time, you want this much growth. So I’ll give you an example and I’ll tell you where to kind of dig deep into it later. But between the year 2000 and the year 2017, if our city’s population grew by twenty-one point two five percent, there’s a very high likelihood that that city will make you real estate profits, twenty one point five percent, twenty one point two five percent between those 17 years. And we can go into a very nerdy story on the statistical analysis that I had to do to come up with that number. But trust me, you know, you can watch podcasts on that. Just take the numbers and use them. Sure. I think that’s what matters. Not everybody has to go and crunched the numbers. So number one is population growth. 


Neal:  Number two is income growth. You know, there are cities where income growth is much lower than other cities that are 100 miles away. But both of them have the same real estate prices. So why would you want to go to a city that has lower income growth? You want to go to a city that has higher income growth. So and you want typically in the last fifteen years for there to be a little over 30 percent income growth. Right. So you’re above the level of inflation. That’s very, very important. You must stay above the level of inflation, but there to be real tangible real estate profits. So stay above 30 percent in the last 15 to 17 years. And then the third one, which is tied back to those other two, is home price growth. Right. So people you know, I think Detroit is a great American city and there’s lots of people that have made money in Detroit and are continuing to make money, especially in the suburbs. But one thing I want to point out is that did you know, Josh, that the average home in Detroit was sixty-two thousand dollars, the whole home in the year 2000? And you’re like, wow, that’s cheap. Do you know that today the average home in in Detroit is forty-two thousand dollars? 


Josh:  I did not know that. Thank God I’m not in Detroit. 


Neal: So when you look at that, though. Why are so many people investing in Detroit? Well, because it’s had great momentum. It has had tremendous momentum because there’s so much money that has come in. The question is when people are saying, I’m making that money. The question I ask you is, so did use exit? No, I haven’t exited yet. But look, my property is up. The question is, we’ll see what happens twelve months from corona today, with the pandemic attacking the fundamentals of the city because the fundamentals of Detroit are extraordinarily weak. In fact, of all the cities that I surveyed, over 3000 in the U.S. fundamentals for Detroit are the weakest. 


Neal:  Why? The second largest city in America in 1959, one point seven million people. Today there are four hundred and seventy-three thousand people in Detroit. What happened to those million people worth of dwellings? What happened? They’re still there. How can there be demand when there’s a million people’s worth of dwellings inside of that city? Yes, they’ve you know, they’ve bulldozed about 100000 units, but that still leaves hundreds of thousands of empty houses. 


Josh:  Cleveland, Neal is very much the same. I mean, Cleveland was the fourth largest city in the country at the turn of the century. Rockefeller, Standard Oil, LTV Steel. And now you’ve got 350,000 or 400,000 people that live in the city of Cleveland proper. And downtown, It’s like the urban core is doing well. People are moving in and there’s a lot of county and city tax credits. But then then you have this weird ring just outside of that, where property values are just gone. And then you have the traditional suburbs. Right. 


Neal:  So exactly. And I have a story to tell you regarding Cleveland that anyone that’s listening to this podcast can do this. So what I want you to do is to go to Google dot com and type in the words population space, Columbus, Ohio. Not Cleveland. Columbus, Ohio. Now, the moment you do that, Google is going to give you a chart and that chart is going to have three lines in it. There’s going to be a blue line and orange line and a green line. And you notice that the blue line is Columbus. And it’s like skyrocketing, like massive population growth. Very consistent. Right. And then the line in the middle, I think it’s the orange line is Cleveland. Right, because it’s showing you other cities in Ohio. And here’s what I want you to notice in that line. You do not want to be investing in cities where every time a recession starts, there’s a sharp blip. You want to be investing in cities where every time a recession starts, there’s a sharp spike. 


Neal:  Now, what you’ll notice is on this line, it’s very easy to look at graph and it’s just Google dot com, right? It’s right there. You talking about the click on links. You’ll notice that the decline in Cleveland every time a recession starts is the exact same as the spike in Columbus. And they happen at the same time. So guess what happens when the recession starts? People don’t have faith in Cleveland’s ability to weather it until they run towards Columbus because they know that that city is fundamentally stronger. People know this in their gut. Sure, they know that Columbus has more fundamentally stronger growth. So they run in that direction. Now, below the line, the last line is, is Cincinnati. And you’ll notice that Cincinnati has no growth. But people who, like, live in Cincinnati, like living in Cincinnati, because in 2001, 2008, that line shows no change. Nobody leaves Cincinnati. People love Cincinnati. They live there. They die there. So there. That’s a city that they like. So you know what? Yeah. I mean, we don’t know why, but as real estate investors, we have to understand people’s psyche. Right. But anyone who talks about Chicago says Chicago is a great city. People know that you can’t sell them out of it. 


Neal: So for some reason, people are more emotionally attached to the city of Cincinnati than to the city of Cleveland. Real estate investors need to understand things like that because the data show it shows you emotion and emotion is what drives your profit. 


Josh:  You have all these tens of thousands of people, fifty thousand people who have followed you, gone through your courses. Why do so many people initially just revert to I’m going to invest in my backyard? Right. Everyone says, oh, I’m just going to invest in my backyard. So many people are maybe scared or unsure of investing outside of their markets. So we own buildings in Mobile, Alabama. Lawton, Oklahoma. Tifton, Georgia. Hilton Head one and one in Shaker Heights, Ohio. Cleveland. And a lot of stuff out in Albany, Georgia. So that does kind of spread around. But we invested in the markets that we knew. Guys, that we knew that were there. Boots on the ground. We didn’t do the type of research, really that you’re talking about. Those deals have worked out for sure. But I would like to be a better investor. I would like to be and I tend in a lot of people to invest in. Hey, I’ve got a joint venture partner in this market. Someone invest there or I’ve got boots on the ground in this market. I’m going to invest there or I live in this market. I’m an investor. There are travel to this market. I got to go there. None of it has any data to support it for the most part. Most people do that versus what you’re talking about. So why not? Why aren’t many people looking more at the data like you do? 


Neal:  I think that over time, people have begun to realize that the real estate market is becoming riskier. It’s becoming, you know, a market that tends to more resemble the stock market than what it used to be like. There’s this awareness that data actually gives you very significant advantages, almost like a cheating level advantage. There’s also the awareness that people are disenchanted from the stock market because 80 percent of all its transactions in the stock market now are high frequency algorithms. Right. So human beings are only 20 percent of stock market transactions at this point. And we believe that in 10 years, that number is going to fall to two percent. Right. So because humans can’t transact in that market anymore. The algorithms are a million times faster than you. They’re consuming information in real time. So they’re beating you. Well, real estate is just 20 years behind that curve on the stock market. 


Neal:  We’re going in the same direction. So a lot of people are beginning to realize that if I don’t use metrics, what I did 10 years ago work what I did 20 years ago, work, that is not a guarantee that what I do today or 10 years from now will work because things are changing. The use of data is changing the way real estate is done. So there’s a lot of people that feel that and they’re looking for this kind of information that come get it. And I’m happy to report that a lot of those people then go out and invest in these nuggets, these places like Dalton, Georgia, that nobody’s ever heard of, that you can go and create, you know, astonishing profits. And so I get I get e-mails from people all the time about that. But also I see a lot of people falling back into the same bad habits that you’re talking about. Right. 


Neal:  But before I talk about why they do that, I want to I want to pick on something that you said, Josh. Sure. None of the metrics change the fact that if you have strong, reliable, experienced boots on the ground, that’s a factor. Now, that is not a metric because there’s no real way of measuring it. And that’s where a human experience comes in. When you go out to, you know, that Oklahoma City that you just mention when you see a property manager, then you said, you know what? I’ve talked to 20 property managers. This guy is on the ball. Yeah, right. You have to give that made pitch. Right. And I don’t have a way in my system to tell you, you know, given give me 10 points or 20 points, because that’s qualitative. But it really matters. And I tell people that what I don’t want you to do, let’s say I give you a metrics-based system in one city gets 40 points, OK? And another city gets 60 points in city one, number one, city one is physically closer to you. Well, give it give it some points because that matters. 


Neal:  Number two, that city has people that you trust that have had outstanding continuous results. I would always go with a city with a lower ranking. The key, of course, is to become a better investor by the use of numbers, but don’t only invest on the basis of numbers, they are the boots on the ground matters. The partners that you have matters. The past experience matters. All of those things matter. All I’m asking is that you add that data and metrics to that you can do to both. Correct. This is not a substitute. I tell people that there’s people with send me these e-mails saying I don’t even have to visit the property anymore. Neal, you’ve given me this magic. You know, no one. And it’s like it is not like that. You completely ignored the portion of my course where I warned you that this is not a substitute for, you know, boots on the ground. 


Neal:  There’s people who are sending me e-mails saying now I can buy properties through during Corona virus and not go there. And I said, no, that’s not what I told you. Remember the example I gave you? I told you even in the middle of Corona virus, you need boots on the ground. And here’s a five-minute tutorial. Josh, I’m going to say this because I think this is very powerful on how in the middle of Corona virus, you can visit your property. Now, all you have to do is go on Craigslist, OK, for that particular city, go on Craigslist and post the following item. Say I want somebody that is local and has a phone that is very recent and has an. Optically stabilized camera. Very important, optically stabilized camera. That is close to this address. I’m going to give you this address. OK, that is close to this address. I’m going to pay you by PayPal. I’ll pay you twenty-five dollars before and I’ll pay you fifty dollars later. OK, I need you to take a video and the video will take you about 15 minutes, OK? And I want you to follow the instructions on this page to make that video. OK. And so here’s the pieces of the video. 


Neal:  Firstly, if you have a like a selfie stick, use it because it will stabilize your phone. Secondly, you have to take somebody with you because I don’t want you driving and crashing and killing yourself. You know, while you’re doing something for me, I want you to take something with you, take you know, you’re your friend, girlfriend, boyfriend, whoever it is with you, so that you have time to stabilize the phone. So here’s the steps. Here’s the address. I want you to go to this address and I want you to park across the street. Don’t park close by. I need to see a white view park across the street. And then show me the house that I’m looking about. OK. God, for God’s sake, don’t go into the house. Right. That there’s tenants there. So don’t mess with them. Go. Show me the house. And then one by one. Show me all the cars that are parked on the street. I want to see what those cars look like. OK. Then I want you to pan to the left and pan to the right. OK, do it very slowly. And then if you see a cross street that has a lot of cars, I want you to go to words that Cross Street, because at Cross Street tells me the quality of the area. Right. And if you see anything weird happening. Zoom in on it. If you see somebody selling drugs. Zoom in on it. If you see somebody that looks like they may be a prostitute. Zoom in on it. I want you to do that. Tell me, is this a quiet street, right? Or is this a street where there’s loud music blinks where there’s people with, you know, black leather jacket standing like four of them clustered together? I want to know that in the middle in summer. Exactly. 


Neal:  When you come that I’m going to send to you once we’ve agreed, I’m going to send you a Google map. And that Google map is going to have a pin, which is the property. And you’ll notice that in in using a red pen, I’ve drawn all the streets that I want you to go around. And as you can imagine, the pins in the middle, the streets are basically rectangular, going projecting outwards from that pin for about three blocks. I want to see what’s around you. Right. And so I want you to drive this. And in my little Google drawing that I’ve done, I’ve put arrows in. So you know which direction you’re going in. I want to drive outwards from this unit until you eventually come back to the unit. So when you finish my video, my 10 minute video, you’re going to be back at the unit itself. So you you’re going out one way and you’re coming back in a slightly different way. Right. All of this is done on Google. It takes five minutes to do this, guys. OK. You open Google, you find the pen. You take a picture with your phone. And then on your phone, using your finger, you can draw the path. And then you text that path to this person’s name. And when you get this 10-minute video, you tell him to upload it to your Google Drive. Right. You’ve spent seventy-five dollars. And guess what? 


Josh:  You’ve learned something that you wouldn’t do yourself because ninety nine percent of time if you went there, you wouldn’t have the discipline to do this, drive you if you wouldn’t do the drive or you would kind of maybe get caught up doing something else and you wouldn’t do those exact streets. Right. This is a much more methodical approach for seventy-five dollars. Big deal. But you also have people, other people’s view of the building or the house that you might ignore or not someone else’s views. 


Neal:  Right. So I tell him, you know, give me commentary. Just keep talking about stuff. You know, I want to listen to what you what you have to say. You see something bad. Tell me you see something. Go tell me. Right. And interestingly enough, they find stuff. So there was this one property that I did this on and I can’t remember what state it was on it. It was in Georgia. And guess what? The guy pointed out I was like, this property seems too good to be true, but I can’t really figure it out on Google. Everything looks OK. Guess what had happened? There was a large industrial building to the left of the property that in the Google Street view seemed to have just regular furniture businesses. Nothing wrong there. But what did happen is Google had taken that video two or three years ago. 


Neal:  And in the interim, the entire building was then switched over its switch business models, and there were six marijuana dispensaries there. So that has created lots and lots of problems in the evening. There was a lot of issues with that area because of the marijuana dispensaries. And it just is a bad field. People don’t want to live in the area where the smell is so strong, may have six dispensaries. You going to have a lot of smell outside on the street. And so this person actually told me this. You know, by just easily he could smell. I couldn’t on the video. I can just see what he could smell. He’s like, dude, it smells like, you know, doping. And so all that taking advantage of the marijuana thing. And they were selling actual drugs, not marijuana. I mean, LSD and other stuff was being sold directly outside. 


Josh:  Well, it’s a great strategy, too, Neal, because if you have a project manager that you think is maybe slipping or not telling you everything or you just want to get a third-party view. What the project manager is saying, and you say, you know, I just want to do a site check. I want to show up. So no surprise, unannounced. Yeah, but I can’t go because a corona virus. I can’t go because the building is far away from where I live. I can’t fit my schedule for any reason. It’s a great strategy for that. I mean, have a person walk in, walk into the as a prospective tenant, walk into the leasing office that you see available. 


Neal:  Definitely do a walk through into the property. Sometimes, you know what the property you’re buying have unit people in them already. Right now, I found that if you have walk into tenants, they get pissed off. They had no idea because of the coronavirus. So there’s some restrictions to this method that obviously don’t apply once we get beyond the vaccine stage. But what I’m trying to say is you need the boots on the mind. You have big boots on the ground. You need the local partner. I’m just asking you to add the data piece to that because you will not even consider some areas because of that. 


Neal:  I mean, and you can see the stark difference. Right. So I issue a real estate trends toolkit. It’s a very large tool kit with hundreds of pieces of videos and documents and information, and we change it every quarter. So right now, it’s extraordinarily up to date because all of it had to be changed because, of course, the corona virus. And so in 2016, we named Provo, Utah, as the best city in America to invest it. Right. And then in 2017, we came back and doubled down on Provo.


Josh:  Yeah, I see you have a building 210 unit there. 


Neal:  Yeah, that’s right. So that we you know, we I’m actually exiting this month, my first new construction project, which we built in 2016 and Provo and then 2018 and 19, we said Boise, Idaho was the best city in America to invest in. And guess what? Forbes list just came out. And here’s the list. So these are the top ten least affected cities in America. And you’ll notice that they’re almost all high, low density. So that density is kind of part of that. So Boise City, Idaho, Denver, Colorado, and Denver is now becoming a little more high density. Durham, North Carolina, Raleigh, North Carolina. And with Research Triangle Park sandwiched in between, can you imagine the positive impact on a massive RTP area where thousands and thousands of people were already trying to figure out solutions to drugs? Right. It’s the largest research park in the U.S. It’s right between Durham and Raleigh, Durham and Raleigh, about 20 miles apart. 


Neal:  So obviously, those are the two cities that are closest to each other that are on this list. Madison, Wisconsin, a low-density city. Provo, Utah, Salt Lake City, Utah. Provo’s low-density Salt Lake City is mid density, but those areas have been doing well. San Jose, California, not because of density, but because it is technology that is not affected. We are right now talking because of Zoom. Then Zoom has become like this. This word that everybody knows. All right. Nice, right? Tucson. Why? Because Phoenix is now high density and that money has to go somewhere from Phoenix and Tucson’s close by. And then Washington, D.C. whenever we see a crisis of any kind that is healthcare related. There are going to be jobs created in your nation’s capital. Right here, though, because, I mean, there’s so much legislation that has to change now. We have to do infection control in a completely different way. And so because of that, our nation’s capital is going to win jobs. Those are 10 cities that are on this list. And what’s lovely is five of them are cities we invest in. And we’ve been investing in these cities for five years or more because fundamentals were strong in the last five years. Right. Some of these had momentum as well, but not as much as other momentum cities. I mean, there’s been cities that have had more momentum than these. That we haven’t invested in because we’re looking at the fundamental saying, you know, the fundamentals are OK. 


Neal:  Right. Modest prices are going up like crazy, I think. You know, we’re coming into the second half of a bubble. Let’s just not go there. And then you have these cities that are the worst, as you can imagine, the worst of the worst cities. And this is not me. This is Forbes. Right. So don’t beat me up. One of the top of the list is Detroit, Michigan. Right. So, I mean, you look at the fundamentals. No. Yeah, that makes sense. And then you have superstar cities that have a huge amount of tourism influx. A lot of people are like when they think tourism, they think Hawaii. And by the way, Hawaii is second on the list, you know, harsh, right. Tourism. But did you know that Los Angeles gets 30 million people a year? Did you know that San Francisco, the city, not the area, gets 24 million people a year that visit? These are rich people because that’s an expensive city. San Francisco is not on the list, but Los Angeles is on the list. And then there’s cities like New York that are on the list. Then there are cities that have had weak fundamentals, great American cities with weak fundamentals like Philly. Philly’s on the list because, I mean, Philly has hundreds of thousands of empty housing units. And this is it. 


Neal:  We’re talking about real estate here. Right. So, you know, this this is relevant. And then we have Miami, which is like this huge bubble city building all these skyscrapers with millions of condos. It’s like, who’s going to buy these things, right? I mean, all the everyone buying, like I read this and I might be off on the percentages, but 40 to 60 percent of condos were being purchased by Cubans, Brazilians. You know, people from Europe. I don’t think they’re coming anymore, at least for the next year or two by the time they start coming again. There were already been a collapse of that kind of money. We know. Right. So you start looking at this new realizing, look at these numbers make a lot of sense. I mean, Honolulu is going to get hit incredibly hard, right? They’re not even allowing flights in. Forget about, I mean, that their airport is closed. Right. So bottom line is, you’ve got to look at the fundamentals and some of the cities that had great fundamentals. We’ve invested in Durham before because we felt like it was even better than Raleigh. We looked at Raleigh instead, like it’s good market. But you know what? Durham, 20 miles away, looks a lot better and not enough people are talking about Durham. North Carolina in general is a terrific market to invest in. So we feel very validated about this. Yeah, I agree. Somebody is saying, you know, these are the things that matter. So it’s really it comes down to the fundamentals.  


Josh:  Neal, when you’re teaching your course and you put people through all of this extra information, all this extra data, this research, that they’re not really going to get a lot of other places. And then they identify some cities or you help them identify cities. And there is a city that’s 500 miles away. Somebody wants to invest in that city. What’s the next step that you teach some of your members about acquiring properties in that city? Are they primarily going to brokers, making relationships with brokers who have off market deals that are pre Emmel, pre LoopNet, pre MLS type deals that are, you know, off market they’re looking for and how to help? What tips do you have to help people understand? How do I make relationships with the people who are the agents that control the inventory? Because a lot of the best deals are going to be off market. They’re going to be controlled by somebody from a Marcus and Millichap office or a Calories International office. You’re investing in your backyard. A lot of people will do that, even if the fundamentals are weak, because it’s easier because I live there. I’m the boots on the ground. I don’t trust anybody else. If they use your approach and they’re going to another market, and they’re gonna invest virtually the next step is finding that the finding the right deal. You’ve got to have relationships with brokers that control a lot of that stuff. 


Neal: So it depends on what they want to do. I give them a tool kit, which I think is very valuable. The next steps are up to them. If they’re doing single family. If they’re doing multi-family, then I teach a boot camp where people come in and then I tell them the ways to get those off market properties. I, for example, that for a long time there used to be this concept of sending mailers to landlords. So I teach people not to do that. I give them two software. One costs ninety-nine dollars a month once. One ninety-nine a month. 


Neal:  And I show them exactly how to extract the sellers text messages. Sorry. Their cell phone numbers. And then I ask them to send a drip campaign. That is a text-based drip campaign with pictures. Then the second thing, I tell them is I teach them a methodology that that’s data driven on sending a series of voice mail blasts. These are ring less voicemail blast. So you’re extracting their phone number, right. So you’ve hit them on the text messages already. Now you’re going to hit them by leaving them ring less voicemails where the person actually the phone doesn’t ring on their end. It goes straight to voicemail and you record this voicemail once and you send it out 5000 times. Right. And this cost you. Believe it or not, a hundred dollars to do. One hundred dollars to send out 5000 ring less voicemails. And we don’t tell them to do on ringless voicemail. We show them to do three or four. By the time you’re done, you’ve spent four hundred dollars. Five thousand people have been touched. And that yield is so much higher than sending out these fliers. And by the way, fliers still work. I just believe that what we are doing is more scalable. So we do it that way. 


Josh:  We are using technology as a weapon. Right. It’s a weapon in your business, something that you can deploy that nobody else is doing or is not familiar with. And you’re using it and people they want to know if I want to invest in software technology. Well, at the end of the day, a hundred bucks a month, 200 bucks is nothing if you land a five million or ten million or twenty-five-million-dollar apartment deal. It’s meaningless. It’s meaningless money. And I love the idea of, you know, whether you’re getting the data from Costar, pulling those the cell phone numbers in, or wherever the data comes from. But text messaging and I mean, look how often and how easy it is now to use zoom and text messaging. When we send all of our reminders through text message. I communicate with all my private lenders and investors via text message. They don’t really open their emails. They never answer my phone call anymore. So we’ve got over 200 investors will manage about 40 million bucks and they all respond to text. 


Neal:  Oh, it’s phenomenal, right? I mean, the power of that system is incredible. And then, by the way. But there’s three elements, right? So one is you need to approach sellers by text. The second is you need to approach them by ringless voicemails. The third one is you need to know which of the best brokers in the market. So the people tell, you know, folks go on LoopNet and look at properties. We tell people no, LoopNet is the best and the worst place in America to look at properties. It’s the graveyard of properties, but it’s phenomenally beneficial where if you go to the home page of LoopNet, instead of looking at the properties on the top left, there is an option to find a broker. Click on that. Go through that, filter the brokers and count how many listings each of the brokers have. Right. And then there’s this process that’s fairly long. We teach them how to find the old original listing broker. The problem is the brokers allow other people to list their listings. And we teach people how to find the source broker because the source broker will always prefer to sell the building to you because he gets two-sided commission. Right. So he gets commission on both sides. 


Neal:  And so we show them a technologically MLS driven process to find the source broker. And when you find the source broker, your productivity goes up 2X or 3x. So you’re always, always only going to the source broker in every single market. We also show them a free way to use costar data. Costars, you know, twenty-five thousand dollars a year. Costar has a Web site that’s free. That shows you the most powerful brokers in America. We show them how to go to that Web site and build relationships with those brokers. What to say to those brokers? What not to say to those brokers? What are the power words that brokers use? So when I teach my bootcamp, I randomly have my students pick a property on a loop net that, you know, is an appropriate property. And then we call that broker that. And I don’t tell that broker that I have a 250-million-dollar portfolio. I control the conversation while I’m holding the phone to the mike so that all the students in the room can hear it. Right. And so I’m about to do this for the first time in my e-bootcamp, right where I’m holding the phone so they can actually hear this. And I show them how I control the conversation. And usually their question is, who are you and what do you want to do? And basically, my answer always is, well, I’m happy to tell you that. But let me ask you this one thing first, and that one thing is always a direct attack on the broker’s credibility. And I have three different attacks. 


Neal:  One is, do you know how many properties do you as a broker, own in this area that we’re talking about? The moment you do that, the broker is on the defensive, and starts trying to explain to you that he’s a good broker. Then he eventually comes back and tries to ask you again and you say, I’m going to give you that information. But let me ask you one more question. And then I have my launch, my second attack on the broker. And this time, again, it is on whether he’s the right kind of broker. I say, do you mostly sell single families or do you know, is this multi-family think like a side gig for you? Oh, no, sir. Let me tell you how many multi families I’ve sold by the time I’ve never actually had to attack a third time. I got it. But no broker has ever asked me who I was because I never allow them to control the conversations. All of these. 


Josh:  I love it. The methodology that you just talked about, like that’s something that we learned as financial advisers when I was in my early 20s as well schooled and well trained to control the conversation by asking questions. And when you ask questions, especially with a broker who’s always gonna kind of puff their chest out and say, well, who are you? You know, why should I pay attention to you? How do I know that you’re going to close instead of allowing them to attack you? You’ve done the exact opposite, spun it around on them and said, well, how many how many properties do you in in this market? Right. I loved that psychological warfare, if you will, because now they’re like, well, he’s asking me questions. He’s putting me on the defensive. And believe it or not, by doing that, they want to work with you even more, ten times more. 


Neal:  I mean, what I find is that’s the kind of broker that call you back, because they are their brains are wired to remember the conversations where the buyer was the alpha male, not them. If they are the alpha male, they want to forget you as soon as possible. So. So the key thing is to be that alpha male. And beyond the initial conversation, though, where do you basically establish that in this relationship, you are the alpha male. Beyond that, I’m very nice to them. I always buy fifty-dollar steaks for them. If they eat steaks, I take them to the most expensive steak place because they love to brag about it to all of their broker friends. So then that it establishes that relationship and that memory because, you know, he’s got two thousand clients. He’s only going to send the off-market deals to 20 or 30. Right. So that’s very key. And then the third thing, the technique is when he sends you an off-market property, let’s say you hate it. Right. It’s still your job to research the property and have a conversation with him about it and ask intelligent questions. Intelligent questions. Right. A lot of people are like, I don’t have to respond to him if I don’t like the property. No, you do. If you want to remain on his off-market list, you need to show interest in every property, regardless of whether you like it or not. 


Josh:  Well, as an investor, don’t we all complain that while the broker never called me back, the broker never responded? And then when the broker does send you a deal and you don’t respond. Aren’t you doing the same exact thing to them? So if you want brokers to respond to you, you have to respond to them and give them feedback. I did this just recently. It was one-hundred-unit property. They were asking over one hundred twenty-five thousand a door in the Greater Cleveland market. It was way overpriced. But I called the guy back, Gary. I walk him through my reasons. It’s a great property. Congratulations on getting the listing. I hope you sell it for a fortune. Here’s the reasons why I’m not interested. And what that did is it framed up for him and said, look, the next time I find a deal now I know Josh’s criteria is and I also know that if I send Josh a deal, he’s going to respond. The last thing people want to do is waste their time. And if they felt like they made a relationship with you and they sent you a deal and you think that deal sucks, I’m not going to bother responding. Now, the guy thinks you’re the jerk because you didn’t respond at all and you wasted his time. Psychological warfare, man, truly is. 


Neal:  It absolutely is. And one of the other tips that I give people is most brokers that you work with will have a newsletter of some sort. Some are monthly. Some are weekly. Right. And so some of those newsletters are pretty good. But let’s say the newsletter is really shitty, OK? You know, you still have to. Every once in a while, send an email to him referring, you know, you kind of reply back to him and type his e-mail address and then say, say something about the newsletter. Right. Because he has to know that you’re in his ecosystem and you have to tell him that. 


Josh:  Yeah, that’s fantastic. So, Neal, as we wrap up here, I’ve got three questions I ask all my guests. I’d like to fire these at you. We call it the Accelerated Investor Trilogy. Final three questions of our podcast. Number one, who is the best mentor that you’ve ever had? And why do you think they had such a big impact on your life? 


Neal:  It was the CEO of the technology company that I was running. And I think that why did they have a huge impact? I think that he taught me to learn constantly to ask questions. What he would say is that one of his techniques was that he would ask questions that he already knew the answer to relentlessly. Right. And what he was trying to do is he wasn’t trying to figure out the answer to that question. Firstly, every once in a while, he actually got an answer that was different and he investigated and realized what he was knew was wrong. But every time he did it to gauge the quality of the person that was answering it because he knew the answer, he wanted to see whether they would be willing to lie. You wanted to see if they were frivolous. And I learned a lot about people by doing that. So I ask a ton of questions in every conversation that I mean, regardless of whether I know the answer or not. It really changes the way you evaluate your business relationships. Yeah. 


Josh:  Yeah. And again, the psychological warfare of being the guy that asks the questions is the guy that’s in control. Question number two, your meal, your favorite book. Course seminar or podcast on any subject that does have to be real estate. Could be on relationships, money, whatever. Favorite course. 


Neal:  And why it’s always been the miracle morning. And the reason for that is not that it’s the greatest book of all time. It isn’t. But if you follow the miracle morning, you get that gift of thousands of other books that maybe better the miracle morning structures you to read. It structures you to listen to podcasts. So it’s not the most important podcast you’ll ever read or the book you’ll ever read, but it gives you the time to find that nugget. 


Josh:  Yeah, that’s great. Yeah. How’s it. How’s a great, great guy. I’ve got several actually investors who are personal friends with whom I’ve never met Al. But I’ve got a couple of couple of investors in our deal that are personal friends of his. They speak very highly of him. Last question, Neal. One tip on self-development. One habit you might have just mentioned it, which is great, but one habit, one mindset, one hack or one thing you personally do that you feel allows you to be your best self. 


Neal:  Sure enough, every time you listen to a podcast if you said this was a great podcast or you went out and watched a YouTube video create a new habit, which is I’m going to go to my calendar and I’m going to schedule something to do with this podcast. Something to do with this podcast. It could be more research. It could be a phone call. It could be a next step that I would take. It could be a, you know, whatever it is scheduled something within five minutes. Because those five minutes after you end a powerful podcast are the five minutes when you are unique. You’re different. You’re amazing. You’re more than yourself. But it only lasts five minutes. So schedule something right then. 


Josh:  I love that, Neal. Also, because now you’ve actually taken action on what you learned or what you did with that podcast. And now you’re a different person. But you’ve also there’s the sense of achievement that I just didn’t listen to this. And it just went into the ether of my life is a sense of achievement that I listen to it. I did something with it. And probably six months or a year from now or five years from now, you look back and say, I did something with that podcast. I actually took action on it. I remember that podcast now because after it was over, I did such and such. 


Neal:  Yeah. And you have a great story to tell people. Right. Because you did. You started it by scheduling something on your calendar, remember, for five minutes after you finish a great podcast, a piece of that great person that is teaching you. Is in you. Yes. A piece of their soul is inside of you. But it goes away over time. So you must take action immediately. And I like the calendar piece. 


Josh:  That is phenomenal. Neal, thank you so much for joining us on Accelerate Investor for our audience. That’s listening. That’s probably absolutely going to love this interview. I’ve loved it. Thank you so much for being on. If they want a joint venture with you, partner with you, come to one of your events. Get your material. Invest passively with you. How can they connect with you? What’s the best place to do that? 


Neal:  Multi-family university, which is multifamily, you dot com. We do a webinar every week. They’re all deep dove. Fifty thousand people a year attend those webinars so they know that there’s about five hundred attendees every week. Different topics, different presenters, all very deep dial, very analytical stuff. So multi-amilyu.com. And my email is Neal@ multifamilyu.com. One other way to connect with me, which is very easy, is I’m the only Neal Bawa on the Internet. Just Google my name. Oh man. You are unique. I love it. Love it by chance. 


Josh:  You are unique. You have a unique name, the only one on Google. That is phenomenal. Guys, check out multifamilyu.com. Neil, this has been an absolute blast. Thank you so much for joining us on Accelerated Investor. 


You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five-star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.

If you’re going to do something, then you have to be able to measure it. Neal Bawa has taken this idea and created a real estate empire, with over $250 million in multi-family properties. He teaches other investors his strategy on his website Multi Family University because, as he says, the people that are doing the measurements are the ones that are winning.

There are two kinds of stocks, a fundamental stock and momentum stocks. A fundamental stock is like a Warren Buffett stock, with strong growth. A momentum stock, on the other hand, is a little more like day trading. It has wild ups and downs, and everyone wants to ride it up.

There are cities that are like this too. There are momentum cities too, with great growth on paper, but their fundamentals are weak. Neal compares the cities of Cincinnati, Cleveland, and Columbus and how the data predicts people’s behavior during a recession in these cities. Coronavirus is cutting the leg out from under these momentum cities, and you need to know which ones are weak.

Measuring true growth is more than just watching the price of homes climb. Neal has the amount of growth required, down to the quarter percentage, of how much growth a city needs to show to be considered a good investment. What is true population growth, when the average American has two kids?

At some point, data has limitations. How do you measure the quality of a great property manager? If you’ve got a great team in place, that can change the outcome of your data, and that’s hard to plug that into an equation. Add the data and metrics about a city into your personal experience with that market before you make your decisions. Stop guessing, and start predicting with data.

What’s Inside:

  • Real estate investors need to understand that emotion drives the data, and your profits.
  • Even in the middle of Coronavirus, you need boots on the ground.
  • Neal’s 5-minute tutorial on how to use Craigslist to look for properties during the pandemic.
  • Why LoopNet is the best and worst place to look at properties.
  • How to make a broker want to work with you ten times more.

Mentioned in this episode​

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