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SHOW NOTES FOR EPISODE 345: WAZZUP WITH REITS?
At age 16, Minesh Bhindi began negotiating real estate deals. By the time he graduated high school, he was making $100,000 a year. At 22, he owned his own Bentley. But when the recession hit, everything changed and Minesh had to rethink his priorities. Today, safety, low risk and truly passive investments are the foundation of his real estate investing strategies. In today’s podcast, Minesh Bhindi shares how and why REITs have proven to be his favorite and most profitable real estate investments to-date.
What You Will Learn
- What a REIT is
- How you can you buy one
- How to know the difference between a good REIT from a bad REIT
- What a REIT ETF is and why it’s one of the best real estate investments available
- How arrogance can help you win big deals
- Why making money is easy and something else is the hard part
- How to avoid a bad real estate deal
About Our Guest
Minesh Bhindi
Minesh Bhindi is the CEO of Perfect Portfolio, a company that teaches people how to manage their wealth and create portfolios that work for them and their families. He’s been involved in investment education for 12 years and has clients in over 46 countries..
More About Minesh
- Minesh is Indian
- His dad has always been involved in real estate
- At 15 1/2 years old, he walked by his dad’s home office and overheard his dad negotiating a deal
- His dad used to work with new construction and developers who wanted to sell their projects
- Minesh was listening to his dad and he thought, “That doesn’t sound that difficult.”
- When his dad got off the phone, Minesh told his dad, “I could do that!”
- And instead of dismissing him, his dad said, “Show me what you can do.”
Minesh’s Introduction to Real Estate
- Minesh was now being put to the test and he wasn’t sure if he would pass the test
- So he now needed to learn how to deal with lawyers, learn new terminologies and deal with mortgage brokers, all while still trying to complete high school in the UK
- Because he didn’t have any fear of making a deal happen, he thought, “Either we’re going to do this deal or I’m still going to go back to high school.”
- Because he didn’t have the fear of walking away from a deal, he started getting better deals than the rest of the team (his dad’s consortium of investors)
- Negotiating deals became a simple process for him. It was effortless and fun
- His main focus at that time was selling the remaining 12 units of a development. 25% discounts and packaging them up to selling them to the investors in the network
- By the end of high school he is making $100,000 per year
- He admits, he was very arrogant at this time
- He met with university professors, but had very little respect for them because none of them were teaching him about making money and that’s what he wanted to do
- His arrogance gave him the confidence to move forward
- He was raised to go to the University but that’s not what he wanted to do
Expanding His Focus
- When he was doing deals in the UK, it was right before the recession. Terms were good, prices were good, conditions were ideal
- They leveraged the time and situation to make a lot of money
- He had a friend who did seminars and he attended but felt it was a waste of time
- Half way through the seminar he spoke with his friend and said, “I don’t know why I’m here but my dad dragged me here. What is this all about?”
- His friend asked him what he did and, after hearing, his friend said, “You need to be on the stage.”
- Minesh saw it not as a complement but an insult. His friend said he could help lots of people
- But Minesh did not want to help a lot of people. He only wanted to make lots of money
- His friend asked Minesh to stay, watch his talk for 90 minutes and they would talk afterwards
- After the presentation, he saw all these people run over to sign up and pay thousands for his friend’s program
- Minesh thought, “Gee, I could do this and I don’t even have to work a deal… just do a 90 minute talk
- That’s when Minesh knew he wanted to get involved in education
- by 2008, Minesh had a real estate company and an education company
Reality Check
- Prior to 2008, he was heavily involved in the stock market but when the recession hit, it hit him hard
- He had to take a “mental pause” year off just to regroup and figure out what he wanted to do with his life
- Making money was fine but now he really wanted to make a difference in the world
- He wanted to help others to not get in the same mess he got in
- He started putting money in gold and silver 2009 and 2010
- He sought tangible assets
- By 2010, he had figured out how to invest without the great risks
- He shifted his real estate investing from active development projects to REITS
- People want investments that are very tangible
- He now wanted to teach people how to make “safe investing” exciting
- People want security
- People also want financial and time freedom
Investing Freedom
- People want financial freedom but they also don’t want businesses that turn then into slaves
- In 2011, he had one of his tenants call him on a Saturday evening and said, “Hey, the light bulb’s out!”
- Minesh said, “There’s light bulbs in the closet, just change them.”
- But the tenant said, “The lease agreement said I have to call you.”
- So, at 11:30 pm, he was in his car driving 30 minutes to change a light bulb
- On the way there, he was steaming. On the way back, he was plotting how he could do real estate without the headaches
- Real estate is a vital part of an investment portfolio, as long as it’s…
- diversified
- located in the right area
- prime real estate
- managed well
- generating the maximum amount of cash flow
- bought at the right time
- He recommends that real estate be at least 40% of any portfolio
- He looks at REITs that yield at least 8.48% compounded growth since inception, 4.52% dividend yield (net cash flow you are receiving) and they use other vehicles in the marketplace to boost it up another 12% a year. 8% compounded capital gain and another 16% on the cash flow.
What is a REIT?
- REIT stands for Real Estate Investment Trust
- A REIT is a company that has a special status to offer REITs
- These companies own and finance income producing real estate in a wide variety of sectors that have to meet certain requirements to qualify as a REIT
- There are hundreds of types of REITS
- He uses REITs ETFs
- According to Investopedia, REIT ETFs are exchange-traded funds that invest the majority of their assets in equity REIT securities and related derivatives. REIT ETFs are passively managed around an index of publicly traded real estate owners. The indexes may vary from provider to provider but two frequently used benchmarks are the MSCI U.S. REIT Index and the Dow Jones U.S. REIT Index. Those two indexes cover about two-thirds of the aggregate value of the domestic, publicly-traded REIT market. REIT ETFs are characterized by their above-average dividend yields.
- Fee: 0.12% per year
- Dividend: 4.52% (without you doing anything else)
- With one REIT ETF purchase, you are diversified into in 8 different real estate sectors and 154 real estate holdings
How to Pick a REIT ETF
- Some ETFs are scary
- Some are leveraged ETFs, meaning
- If it goes down $1, your EFT goes down $3
- Some are negatively leveraged, meaning
- If it goes up $1, your ETF goes down $3
- You really need to know what to look for
- The standard ETF that a lot of people like and use is VNQ (provided by Vangard). They use it for a lot of their clients
- 8.48% compounded growth since inception, 4.52% dividend yield (net cash flow you are receiving) and they use other vehicles in the marketplace to boost it up another 12% a year. 8% compounded capital gain and another 16% on the cash flow.
- When they evaluate ETFs, they look at
- Best track record
- Best providers
- Vangard has excellent overall ETF
- Minimum investment: $10,000
- Most of his clients invest $50-250K
- It’s absolutely liquid, you can pull out at the market price at any time you want
Biggest Mistake
- Making money is easy
- Keeping it is the hard part
- A lot of people work very hard trying to make money. Unfortunately, or fortunately, that came easy to Minesh when he was starting out
- His first deal with three apartments, he invested $1,500 and, on the day of completion, walked away with $85,000 and about $300,000 in equity
- He immediately went to Monte Carlo with his friends
- He bought a Bentley at 23 years of age (you can’t even drive it in London with the narrow roads). He got rid of it in 6 months (and lost a lot of money)
Worst Deal
- A client of his (who was in Minesh’s investment consortium at the time), tried to go behind Minesh’s back to get to the deal
- Minesh lost a lot of money in that deal
- He hasn’t had a lot of bad deals because his mentors always said you make money getting “into the deal” not at the end of the deal
- Minesh is always very cautious to carefully analyze the deal from the very beginning
Biggest Success
- His first deal
- 3 apartments in Canary Wharf
- He invested $1,500 down on the deal and, on the day of completion, walked away with $85,000 and about $300,000 in equity
Advice for Old Dawg’s looking at Real Estate Investing
- Since he stared out a a very young age, he saw people try to create wealth for their retirement
- He’s seen many different situations – good and bad
- He saw their kids grow up and move out
- His advice, based on the mistakes he saw other people commit:
- Avoid any risk that could lose you a large chunk of your net worth
- If you can just stay stable and stay safe and stay secure, your wealth will grow, you’ll have a fantastic life, you’ll leave the legacy you want to leave
- Too often, he’s seen people who have found that one big deal that looks too sweet to be true, and some loses 50% of their net worth!
How to Avoid Bad Real Estate Deals
- Look very carefully at the “worst case scenario”
- That’s why he likes REITS ETF because he is not investing in just one deal but multiple deals. He’s looking more at the cash flow and rate of return
Current Business
- EDUCATION
- He’s just looking forward to working with his 155 new clients a year
- He is going to enjoy seeing their portfolios grow!
- He has no other desire from the education side
- HIS OWN INVESTMENTS
- Continue to structure his own investments so that they continue to grow slowly and stably by the philosophies that his company teaches
- He loves to see what e teaches as it works for him personally and for those they try to educate
Rap-It-Up
- Favorite real estate book: Rich Dad Poor Dad by Robert Kiyosaki
- Favorite business book: Art of the Deal by Donald Trump
- Most valuable web site for success (other than your own): Yahoo Finance
- Favorite app: Charles Schwab and any bank app where he has money
- Favorite quote: “If you don’t stand for something, you will fall for anything.”
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? He wouldn’t do anything with the $1,000. Everything he’s ever done, he’s started without any money. He would put the $1,000 away maybe for Uber to get to meetings with influential investors or to by a MacBook. It’s really about everyone you know – your contacts, friendships and people you can help.
How to Reach Minesh
- His Website: PerfectPortfilio.com
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