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SHOW NOTES FOR EPISODE 503: RE-THINKING POST-COVID REI THROUGH TECHNOLOGY AND INNOVATION
The pandemic changed our world in profound ways and real estate is no exception. In today’s podcast, real estate empire builder Ari Rastegar shares how he went from flipping burgers at Johnnie Rockets to building a billion dollar real estate portfolio and how he has creatively adapted his business and their properties for the post-Covid world.
What You Will Learn
- Why real estate is the best investment for
- What types of adaptations can be made to today’s commercial properties specifically for a post-Covid world?
- Where the key growth cities are in U.S. for the best yield
- Why investors need to take health and safety serious in 2021 and beyond
- How to create “Vintage Multifamily” buildings for maximum health and safety
- Why mistakes are a gift
- What two asset classes are the best investments for 2021
About Our Guest
Ari Rastegar
Ari Rastegar, Founder and CEO of Rastegar Property Company, has established a reputation as a thought-leader in real estate with his innovative, technology-driven investment approach and strategies. Ari’s real estate investments span 38 cities across 12 states, 2 countries, and 7 asset classes, which include vintage multifamily units, mixed-use complexes, storage facilities and more.
More About Ari
- His father was an Iranian immigrant
- He’s from a family of over-achievers – PhDs, doctors, lawyers, etc.
- His uncle is the director of the National Science Foundation
- His uncles and aunts came to Austin, Texas before the revolution to go to school
- The revolution broke out while they were in the U.S.
- Grandfather was a very famous psychiatrist in Iran
- Was able to escape when the new regime took overcities in the U.S. with the most
- All his family started over in Austin
- When Ari was in high school, he got a job flipping burgers at Johnny Rockets
Inspired by His Grandfather
- Since he was a young child, Ari was very inspired by his grandfather
- His grandfather was a true Renaissance man
- Ari’s father and his grandfather were his heroes
- He won 7 gold medals in the Iranian National Olympics
- He was a medical doctor
- He spoke fluent French
- He believed in investing real estate and land
- Ari wanted to be a doctor just like him and he told his grandfather
- His grandfather told him to NOT be a doctor but to invest in real estate and that America is the country to do that
- Ari got to spend a lot of time with him before he passed away
- He literally died in Ari’s arms
- Ari knew he wanted to invest in real estate early on
- He didn’t even want to go to college
- But his father had other plans – be a doctor, lawyer or engineer
Off to College
- He delivered pizzas in college
- He went to 2 community colleges
- Accepted to Texas A&M
- English major
- Graduated top of his class
- His dad wanted him to be a lawyer (even though Ari did not want to be a lawyer)
- He attended law school at St. Mary’s University School of Law in San Antonio
- His dad said, “After you become a lawyer, you can become an exotic dancer for all I care.”
Realizing His Real Estate Dream
- Ari had always just wanted to become a real estate investor
- While he was attending law school, he borrowed $3,000 from a friend’s father (who’s still a dear friend to this day)
- He also used some of his scholarship money
- In 2005, while attending law school, he partnered with a local developer to build single family homes
- Every morning, he was on the build side, pouring concrete, tying rebar, putting up sheet rock and then rushing (in work boots) off to law school
- He would study until 2am in the morning and would repeat the process each day
- They built a pretty sizable portfolio of homes
- $80,000 interim construction loans
- Selling houses for $110-115,000 north of San Antonio
- When 2008 hit, “the world came to an end”
- His partner had good liquidity and told him, “Look, I’ll give you all your money back, (you can) pay back your investor, you’ll have good credit. I’ll assume all the loans and I’ll be able to hold them all on my balance sheet.
- His partner ended up selling the homes years later and made a lot of money
Moving to Wall Street
- Ari eventually ended up moving to Wall Street
- Worked for some of the greatest minds in real estate
- One of his best friends from high school (they were on the wrestling team together) did real well in wrestling
- And their wrestling coach’s Italian cousin was the head of all conduit lending at Credit Suisse
- Were doing over $450 billion in lending
- They moved him to NYC to give him a shot at the big time finance
- Introduced him to all his industry leading friends
- While there he got married and had a child
Moving Back Home
- After 5-6 years on Wall Street, he “saw the writing on the wall” down in Austin – his home town
- Austin, at the time, was selected by Google for their $1 billion beta test for Google’s high speed fiber network
- This provided an excellent infrastructure for the tech-driven, innovative real estate company he wanted to set up
- They use data analytics
- Have a number of tech-driven verticals
Rastegar Property Company
- He started Rastegar Property Company in 2015
- Rastegar is an Austin, Texas-based vertically-integrated real estate investment firm focused on value-add and development in all asset classes.
- The company’s mission is to deliver passive income and capital appreciation through tax-efficient strategies and transparent policies.
- To help control costs, the company also provides comprehensive property management services and uses the latest data and technology to better research opportunities, manage risk, and control costs.
- The company has a number of verticals within their real estate practice
- Their investors are family offices, public pension, high net worth individuals, insurance companies
- It’s a highly institutional shop
- They have a 9 figure balance sheet
- They are raising over a billion dollars of equity this year to invest predominantly in the Sunbelt
- Focused on technology-centered companies
- Capitalizing on the exodus out of the West and East Coasts
- They are focusing on metros like:
- Nashville
- Austin
- Raleigh
- Charlotte
- Tampa
- St. Petersburg
- Phoenix
- Their strategy
- Buy things bigger than local investors can afford but smaller than PE
- And then aggregate them into lump sums
- Then sell to the larger institutions
- Different verticals include:
- Master plan developments just south of Austin
- 1200 homes for single family rentals
- 900 multifamily units
- Slew of other deals
- Partners in development deal with Resmark Equity Partners
- They’ve never sold equity at the corporate level
- Ari still owns 100% of the company
- Should break a billion dollars this year
- Launching a REIT and an Institutional Fund this year
- His real estate investments span 38 cities across 12 states, 2 countries, and 7 asset classes, which include vintage multifamily units, mixed-use complexes, storage facilities and more.
- They are breaking ground on 550,000 square feet of industrial property master plan development very close to Tesla’s 2,000 acres
- Building 104 condos on South First in Austin
- 60 condos in downtown Phoenix
- All are breaking ground within 12 months
Innovative Post-Covid Office Building
- They are building a unique, one-of-its-kind office building in downtown Austin on East 8th St. utilizing the most sophisticated technology
- Post-Covid futurist strategy
- Only two stories
- 26,000 square feet
- Right on I-35
- The windows can open
- HEPA filters
- UV lights
- Lights that never go out
- Touchless entry
- They’ve always taken a contrarian approach
- When others are getting away from office buildings, his company is figuring ways make them work as both an investment and practically
- Taking wellness and safety very seriously
Trans”fair”ency
- One tech innovation he created to improve investor relations
- A mix of being transparent and fair at the same time
- 128-bit encrypted app that his investors can have on their mobile devices
- At any moment you can log into it and see, for example:
- video footage of renovations on a multifamily project in real time, through the uses of nescam and multimedia
- Like a private Instagram or Facebook
- For the very first time, investors can see, in real time, on “their time,”
- How the renovations are coming along
- How the property is being managed
- This was motivated by a staggering statistic he saw that said only 10% of investors were opening up their quarterly reports. And, of the 10% that opened the quarterly reports, they were only spending 5 to 25 seconds reading the quarterly reports
- He was motivated to find a better way to share the information in a way that they could “digest”
- He created something that was more palatable for their investors
- More transparent
- More visible
Vintage Multifamily
- He likes to invest heavily in what he call “Vintage Multifamily” properties
- It’s a term that draws a vine analogy to properties located in “A+ locations outside the urban core”
- $5 Uber ride from where everything is happening – the fun stuff
- The apartment complexes are 2 and 3-story walk-ups so they have inherent social distancing
- At the height of Covid, they had more applications than they had ever had before because everyone saw and desired the safety
- They don’t have gyms, pools or elevators
- They take these 20 to 30 year old properties, strip them down to the studs and replace everything, sheet rock, roofs, etc. to deliver a true “Class A” experience for a cheaper price than new construction
Your Biggest Mistake(s)
- Ari has a book coming out in May or June called “The Gift of Failure”
- In the book he shares many if his failures and tries to look at every one of his failures to find the “seed of success” within each failure
- Early in his career, his ego didn’t let him see those failures with objective eyes
- One way he has tried to avoid mistakes is by looking at all of the scenarios of a deal where they could lose money and really understanding the downside risk
- Becoming a good risk manager is key for him
- His team uses technology and all the resources they have at their disposal, traditional underwriting methods, artificial intelligence, and machine learning to make better investment decisions
Your Biggest Success
- He says his biggest success is his family
- He has three beautiful children and a very supportive wife
- It makes him a better investor
- Before, it was all about him
- As his family grew, his priorities changed, he became more patient and concerned about helping others more
- He considers himself and his company to be conscious capitalists
- He believes in community enhancement
- Making each renovation a means to improve and help the local community
- It’s all about capital preservation
Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years
- His company has a lot of investors in their 80s who just want security and passive income
- They work with a lot of IRA and 401-K rollovers
- Bigger, smarter money are looking for the current yield – and that’s their specialty
- They did 9 deals during Covid
Current Business
- In his world, he’s a risk manager
- In his heart, he’s an artist
- A lot of the buildings they have in-house architecture, are sketching and conceptualizing the buildings
- He’s very excited about their master plan development just south of Austin
- He’s excited about really building futuristic suburbanism and what the future of housing will be
- For example, in the past, everyone had dining rooms – today, everyone eats in the kitchen
- So, they are building larger kitchens and eliminating dining rooms
- The two main asset classes they are focused on are:
- Multifamily
- Industrial
- Repurposing
- They are looking at some office building where they may want to convert portions to multifamily
- They want to deliver a great end-user experience, whether it’s an investor or a tenant
- They don’t call their tenants tenants, they call them “neighbors”
Rap-It-Up
- Favorite real estate book: Rich Dad Poor Dad by Robert Kiyosaki and The Intelligent Investor by Benjamin Graham
- Favorite business book: Think and Grow Rich by Napolean Hill
- Most valuable web site for success (other than your own): YouTube.com
- Favorite app: Slack and Zoom (Ari doesn’t own a computer)
- Favorite quote: “Be at War with Your Vices, at Peace with Your Neighbours, and Let Every New Year Find You a Better Man.” – Benjamin Franklin
- If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to launch your real estate investing business? I would take the $1,000 and make sure my kids had a good place to live. I would take a corner of the room or the closet (which actually used to be my office not many years ago), and get back to work.
How to Reach Ari
- Google: Ari Rastegar or Rastegar Property Company
- Website: https://rastegarproperty.com/
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