339: Using Data Analytics for More Effective Real Estate Investing

SHOW NOTES FOR EPISODE 339: USING DATA ANALYTICS FOR MORE EFFECTIVE REAL ESTATE INVESTING

Good data drives successful real estate investing.  And with today’s technology, it is possible to crunch more data than ever before to make the best investment decisions.  In today’s podcast episode, entrepreneur, engineer, real estate investor and syndicator Raj Tekchandani shares his success secrets on how he leverages comprehensive due diligence utilizing data analytics for a competitive edge.

What You Will Learn

• How to utilize data analytics for more comprehensive due diligence
• What key due diligence points are critical when assessing a property
• How to “learn syndication” while being an investor
• Why you can never do enough due diligence
• How Raj discovered the efficiencies of applying technology to in-depth property analysis
• Great free online sites and resources that can help you “dig deep” into your property analysis
• How Raj realized that syndication was the best form of real estate investing for himself

About Our Guest

Raj Tekchandani

Raj Tekchandani founder and managing principal of Smart Capital, is a seasoned Technology entrepreneur and Product Marketeer who is now a full time Real Estate Investor.  Prior to starting Smart Capital, he spent over 3 decades with tech start-ups in the field of Business Intelligence and Data Analytics.

He started investing in Real Estate in 2012 with the purchase of single condo in Orlando, Florida.  In 2018, after 5 years with a tech start up in the Big Data Analytics field, he left his W2 job to pursue his full-time interests in Real Estate.  With his background in business, tech and data analytics, he was able to leverage software tools to analyze and identify markets and deals in order to maximize returns while minimizing risks.  In his pursuit of real estate investing, he stumbled upon the world of Syndication and larger Multifamily Investing and started building the processes and systems of his company Smart Capital.

He remains passionate about the use of Data and Technology in Real Estate and also about educating others in Passive Investing.  He is also an angel investor in early-stage tech startups and advises on product development to a couple of startups in Real Estate.

More About Raj

• Undergrad in computer science in India
• Wanted to build the next big tech company
• Came to America
• Has always been passionate about start-ups
• Did well working with some companies – Not so good with others
• He also was very interested in real estate because of his parents
• In India, his parents owned and lived in a multifamily property
  • They rented out two of the three floors – sort of like house hacking
  • Ended up being their source of income into their retirement
• Got a job in Boston area with a big data analytics start-up that worked with pharmaceutical and financial companies

His First Rental Property Investments

• Raj wanted to invest in real estate so he bought a single family condo in Orlando in 2012
• Then, bought 8 more condos in the same complex, managed by the same property manager
• Enjoyed the passive income and appreciation
• But saw the drawback with individual properties and HOA fees
• Started looking at multifamily properties
• In 2016, was reading about multifamily investing and the benefits

His First Multifamily Purchase

• A multifamily property became available in a nearby town to his home in Boston, only a 15 minute drive away
• 12 residential units and 3 storage units, three stories (some were low income housing)
• C class
• Built in the early 1900s
• It was in a bordering town, not as affluent as the town he lived in, but he knew the demographics and the gentrification taking place
• He went and looked at it, made an offer, and closed the deal
• He saw this as an “education seminar” for him to learn about multifamily investing
• He was hoping that the current property manager would stay on but, after the sale, found out the property manager was the previous owner’s son
• He scrambled to find a new property manager
• The property had a 30 something % expense ratio
• There were no charges on the expenses when he did the T-12 analysis
• Tenants were not used to paying their rent on time
• Had to do some evictions
• Knowing what he knows now, he’s not sure he would have purchased that property today

Decision to go Full-Time as a Real Estate Investor

• The start-up he worked for in Boston  worked on developing Data-Driven Decision Making, defined as “If you have a lot of data and you can harness the data and put intelligent algorithms on top you can come to a lot of good decisions based on that data”
• He saw how that application could work for real estate investing
• He worked for the Boston start-up for 5 years and was fully-vested
• He thought he could either go to work for another start-up or go full-time into real estate investing
• He thought, if he bought another 25 unit that, with his other investments, it would generate about the same income as the meager income of a salary at most start-ups
• His wife was very supportive and also had a full-time job to help cover expenses
• So, “he took the plunge!”
• However, cap rates in Boston area were very compressed and he started to explore out-of-state opportunities

Syndication

• He learned about syndication from a friend who presented a deal to Raj three years prior
• His friend had a deal in Georgia three years before that Raj choose not to partake in because he did not know enough about syndication and the deal
• Over time he read a lot of books, attended seminars and listened to a ton of podcasts to learn more about syndication
• Three years later, after he learned more, he approached his friend and asked, “What is going on with syndication?”
  • His friend shared how well the properties he didn’t invest in did
  • It was too late to invest in the old opportunities but he had some other opportunities in Georgia
  • Raj invested this time as a passive investor LP (Limited Partner)
    • He saw it as another “education seminar” to learn more about syndication
    • He was more involved than typical LPs because he wanted to learn
  • He said, on the next deal, he wanted to come in as a Key Principle and learn about due diligence, analysis, and have a more active role
  • This is where he started becoming a GP

Applying Technology

• He started looking first at the criteria to invest
• Then, he looked at what data sources were available out there
• He then sat down and compiled those data sources and figured out some basic level of analytics to see what can be done
• He also looked to see if there were other tools already developed out there that could accomplish what he wanted to do
• He found some companies that were doing similar things and partnered with these companies
  • Enodo – automated underwriting
    • Type in zip code
    • Draw from T-12’s and rent rolls
    • Access value
    • Area rent comps
    • They’re building on AI to improve their own systems
• There is a lot of FREE public data available that can be accessed
  • Census.gov
  • JusticeMap.org
  • GreatSchools.org
  • Wikipedia.org
  • RentCafe.com
  • Bureau of Labor Statistics
  • US HomeTown Locator (pretty current on its data)
• There is also great data that is available for a fee
  • Costar
  • Neighborhood Scout
  • Industry Reports
    • CBRE
    • Marcus & Millichap (quarterly reports on multifamily in various cities and towns)
• There is also online data on the “landlord friendly” states
• He uses online data to find locations where there is:
  • Less crime
  • Better schools
  • Population of greater than 200,000
  • MSAs that have grown in population over the last few years
  • Data on price-to-own vs. price-to-rent – if cost of home ownership is high, people are more likely to rent
  • Median income data (don’t want to get below $30,000)
• He then matches the market criteria with the property criteria
  • C, C+, B-, B class properties
  • Must have a minimum number of units to make sense with the numbers (between 75-300 units)
  • Under $20,000,000 purchase price
  • Pitched roof
  • Garden style
  • In the path of progress?
  • What kind of “anchors” do they have? (Hospital, School, Military Base)
  • A place that has a diversified economy (not dependent on won or just a few industries)
• Set your criteria right, run the data sources, and validate the data sources on your own (some could be outdated) with your “boots on the ground” and/or by visiting the areas yourself

Finding Lesser Known Markets with Data Analytics

• Using data analytics, they are able to find good markets that many people don’t know of yet:
  • Thomasville, GA
  • Dalton, GA
  • But they need to be near (40 minute drive from) bigger MSAs with 200,000 plus populations like:
    • Amarillo, TX
    • Kansas City, MO

Biggest Mistake

• Due diligence is a key aspect of successful investing – you can never do enough!
• For his first property (the 15 unit), if he had all the due diligence tools he has today, he might not have purchased the property
• He would have done things differently
• He learned, however, in the process which helped him for future investments

Biggest Success

• He went to a lot of networking events early on but the topics mostly seem to focus on flipping, wholesaling and other things that didn’t pertain to his interests
• So he started his own meet-up in the Boston area called AIMS (Apartment Investing in Multifamily Syndication) focused on:
  • Technologies
  • Processes
  • Data Analysis
  • For apartment investing
• He had acquired a fair amount of information and wanted to share and learn from others
• Is considering taking the meetings online

Advice for Old Dawgs Interested in Real Estate Investing

• Get educated!
  • Lots of free information on
    • YouTube
    • Podcasts
    • Meet-ups
    • Also, books, etc
• Choose your niche based on your profile (commercial, multifamily, single family homes, etc.)
• Learn as much as you can
• Coaching and mentors
  • Be careful – can be expensive

His Company – Smart Capital

• Is in the syndication business – a real estate investment company
• Along the way, found partners who were, for example, very good in construction management, asset management, analysis or have retail customers/investors
• May, in the future, expand into other asset classes
• Always wants to have an educational aspect
  • To inform investors on how to best assess what they are investing in
    • Build better systems and tool to share that knowledge
      • syndicators to interact with passive investors in a good user experience
      • build better user experience for investors
• His goal: to make investor, one at a time, happy in their investor experience

Rap-It-Up

• Favorite real estate book: Rich Dad Poor Dad by Robert Kiyosaki
• Favorite business book: The One Thing by Gary Keller
• Most valuable web site for success (other than your own): BiggerPockets.com
• Favorite apps: Insight Timer and Wunderlist
• Favorite quote: “If you want to achieve your goals, help others to achieve theirs” – Zig Ziglar
• 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? Part of the money would go into education. Then, he would figure out how he could add value to others. Spend the rest on finding those other people

How to Reach Raj

• Website: Smart Capital
• eMail: raj@smartcapitalmgmt.com

This show was sponsored by SMARTMOVE

SmartMove is part of Transunion, a trusted consumer reporting agency with more than 4 decades of experience.  They built an online screening service for independent landlords that delivers critical credit and background reports to you in minutes. It is a really valuable tool to have when you are trying to decide who to put into your rental property.

And they can help you find your next great tenant.

• Only SmartMove has a credit score built specifically for rental screening called ResidentScore, which can identify eviction risk 15% better than a traditional score.
• With the SmartMove report you’ll also get a criminal background check, eviction history report, as well as a full credit report.
• And, only SmartMove has Income Insights, a report enabling you to analyze renter income to determine if further verification is needed.

See why 9 out of 10 users recommend SmartMove and more than 4 million landlords have used SmartMove to make better leasing decisions.

SmartMove has a special offer just for Old Dawg listeners.  Go to tenantscreening.com, enter code “OLDDAWG25” and you’ll get 25% off your next screening.

SmartMove.  Reduce your risk of Non-Payment and Evictions.

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast.  This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.

Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com