#32 Corporate World to Apartment Investing with Prashant Kumar
Prashant Kumar, the CEO and President of My Realty Gains. Prashant is doing some great things in the multifamily and assisted living space. He is passionate about helping others earn passively in real estate. If you wish to be making money while you are asleep, you need to hear this!
More about him – https://myrealtygains.com/
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Itunes – www.TonyJavier.com/itunes
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Show Transcription:
Tony (00:03):
Welcome to today’s episode today, we have Prashant Kumar on the line. Prashant is doing some great things in the multifamily and assisted living space. He’s raising money, doing deals, putting some great deals together. So I’m excited to have him on the line to talk investing. So as you guys know, I’m a single family guy. Typically I get single family people on the podcast, but recently I’ve had a lot of great multifamily and commercial people come on the podcast, which is great because a lot of real estate residential real estate guys want to get into commercial and learn a little bit more about that. So thanks for coming on Prashant and adding value to our community.
Prashant (00:41):
Tony, thank you so much for inviting me. I hope I would be able to add some value to your listeners.
Tony (00:47):
Absolutely. So you’ve got hundreds and hundreds of units all across the country it sounds like. So tell us a little bit about your background. You come from the corporate world, you’d use what you use, what you learned in the corporate world to transition into entrepreneurship and putting your own deals together. So tell us about that transition kind of your struggles, your wins, and in kind of that progression to where you where you are now.
Prashant (01:14):
Sounds good. Sounds good. So, yeah, as I said, Tony as you said, basically I come from corporate world, you know, I, I have spent like 15, 20 years in corporate America, worked with all sorts of companies in a big pharmaceutical companies in IT world and management roles. And my job paid me very well. That was my, like a golden handcuff, so to say. And at some point I realized listen, when I stopped working, I’m not going to get any money. There won’t be anything. You know, when I stop, when I don’t work, I don’t get paid. So I had to have something which could work for me even when I’m sleeping. Right. And real estate is the best vehicle. I mean, of course, you know, everybody is invested in stock market. I jumped into real estate. I did not jump into stock market.
Prashant (02:08):
I never, I’ve never done stocks because the fundamental benefits that I get out of real estate, you know, I started buying few single families. I still hold them. In year one I hired a mentor, you know, and just because of that, because I paid money, I had to get something out of that thing. And I ended up buying few small single families, and it was a good journey. But the overall time that it takes to close a single family home transaction, two to three months for a freaking hundred thousand dollars loan that kind of killed me. I said, listen, I cannot replace my income with this kind of a buy and hold kind of you know, business. I had to scale it. And the next thing I did in month nine, I bought a 24 unit apartment complex, which took me 18 days to close from the day I saw the property and I closed. It took me 18 days. I said, wow, that was like, man, commercially, it took me 15 minutes to sign my PFS – personal financial statement – and the schedule of my real estate own to write that up, send it to the bank, bank approved my loan and boom. So long story short, you know, within 10 months I had three single family homes and a 24 unit apartment complex, but like everybody else, you don’t have unlimited amount of money. How much can you continue to buy? Right. So I ended up getting involved into the syndication world. I started you know, going to these seminars of these multifamily investors. So I learned the fundamentals of why people go into multi family. One is they can scale themselves, second they own real estate is not that you know, basic, it’s not that they give money to a syndicator or a sponsor.
Prashant (04:05):
They own real estate. And, and the biggest advantage, you know, you have the cashflow going on and then you have the upside like single family, you have the upside too. So you have the cashflow, you have the, you have the upside and the asset is managed by professionals. That’s the biggest advantage. You have. I mean, I manage the asset, my property managers, which are much more capable than I am. I manage the asset, but they manage the property. Lenders are, having higher stakes. So they are watching our progress on a day-to-day basis. And then we have SSC involved in it and SSC is watching it. So, those are the fundamental benefits. And on top of it, we have tax advantage in multifamily and single family. You know, you know, that, he can depreciate our single family over a period of 30 years or 27 years or whatever, but in multifamily or in commercial real estate, we can do the cost segregation and depreciate the assets in our, in our property much faster than twenty seven years.
Prashant (05:15):
And that gives a huge amount of, huge amount of ability to reduce taxes that we pay. So I learned all that basically. And I said, wow, man, this is good. So I jumped into syndication business. You know, the first syndication that I did and believe it or not, it was 500 units. It was bigger than what I could have done. But I did it anyway. I probably should have gone to a hundred units, maybe 200 units, even though I do only one or two projects in a year, my overall portfolio grows at a much faster rate than I would have done my single families. I’m not against single families. I mean, it’s good. It makes a lot of money. For me, it was not good because I was not in flipping. I was not a full-time guy at that time. I could not have spent full time because for me to, you know, I needed to have something where I can get some cashflow. I started investing passively with other syndicators, and that return was anonymous, you know, without touching, without lifting the hammer, without even picking up a phone, I was getting quarterly cash flows. I still do that. You know, and I love it. And that’s what I, I tell my investors also, that’s what I educate my investors. I give them the fundamental benefits of investing into multifamily real estate.
Tony (06:41):
Yep. Absolutely good stuff. Good stuff. So obviously going from one unit to 500 units is a big jump or 1 to 20, I think you said 24 to 500 was a big jump. What gave you the mindset? Cause some people’s mindset just isn’t there to save 500 units. That’s just above and beyond anybody’s mindset of putting something like that together. So what got you through that? Was it, was it, was it sure mindset? Was it you already had a team together? Was it you partnered with somebody? Was it, you already had someone that had money lined up to give you money for that deal? Like, tell us about that.
Prashant (07:19):
Very, very very good question. And this is the real crux of this business. This is not a one-person business. I cannot do, you know, let, let alone 500, I cannot do probably a hundred unit myself if I have to do it, if I had to do it at that time. So this is a team business, you know, when I was going from one webinar to another seminar and what not, I was able to partner with with little bit more experienced guys. I said, guys, I’m going to work for you for free for six months or whatever. I mean, I I’ll just work for you. And I ended up, you know, putting myself into it for a couple of months, helping them out. And we had 500 unit deal and we were, you know, they were a little bit more experienced, not too, they’re a little bit more experienced than me. So, and plus, because of my, my job, I had the network where I could find the investors and they had that network too. Of course. So we ended up partnering together and we ended up, you know, basically we utilize their knowledge, my skills and my network, and we were able to pull it together, you know? So it is more of a, you know, the limiting belief was not there in my mind that I can not do it. I said, I’m jumping into it. Yes. Maybe I ended up losing some money. By the way, I had $250,000 hard on the contract and I would have lost it. If I, if the deal, you know, something would have happened.
Tony (08:52):
You were all in.
Prashant (08:52):
I was all in, you know. I mean maybe it was stupid. I never told my wife that. So, jokes apart, but you know, my mind was listen, I have to do it. You know, I just have to do it. So,we just put ourselves into it and, and I want, you know, and every time you meet somebody, you end up building a relationship and that those relationships go a long way in this business. So mindset, team building and partnering, maybe I had only a smaller portion in that 500 unit. I’m not saying I own a hundred percent. I have some portion in that, but nevertheless, it’s mine. So, that’s it.
Tony (09:35):
Yeah. And a small portion in 500 units is a lot more than a hundred percent of one unit, right? I mean, that’s, you just got to do the math and figure out how to scale it and diversify the risk and you know, that kind of thing. So there’s a lot, a lot of cool benefits to multifamily over single family. What, I guess, what does it look like now to you? Like, are you constantly looking for properties or properties brought to you? Do you have investors lined up to do deals once you get them under contract? I guess just tell us how you’re flowing now and how you’re getting deals and just kind of the evolution of where you are now compared to doing your first deal.
Prashant (10:16):
Yeah. So like everything, everything, every of the business, you know, we have two components in this business. One is deal, and second is investors, right? So we always keep on looking for deals. We always keep on looking for investors. And the third component I say is relationship building, you know, connecting with the right people. You know, like I’m connecting with you right now and hopefully connecting with few more people through your podcast. So we are always doing all the three things all the time. And, and many times trust me deal comes to me, not from a broker not from cold calling. It comes due to my relationships. There are folks out there who find a deal and they’re unable to do that deal themselves. They say Prashant, I have a deal. Would you partner with me? So I say, yes, I will partner with you. And then you look at the deal. It makes sense. You work, you just, you just do the deal with them basically. So many times deal come through the relationships only.
Prashant (11:16):
Actually most of my deals have come to me through my relationships only. Wherever I have spent time being genuine and talked to anybody, genuinely, heart to heart. People have understood that this guy can do something. And they have brought me the deals. That has worked with me all the time. And of course we do look at the deals from brokers, for sure. And, and we continue to educate our investors. I mean, we’re not going in asking for money from anybody, right? I mean, you never do that. You continue to educate investors and investors out there. I mean, nowadays, you know, not to brag myself, there are situations where people just call me Prashant, do you have a deal? And the moment I say yes. Okay. Tell me the name. I’ll send you the check without knowing anything about the deal without knowing any specific, you know, you build that level of trust. Yes. If I have given, if I’m putting the money in a deal with Prashant, I’m going to get my money’s will not be lost. I’m going to make some money out of it. Right. So there are situations like that all the time. I mean, people say, I want to, I want to deploy my money. Do you have a deal? Instead of me telling them I have a deal, do we want to deploy? They are coming from front because they are my long-term investors.
Tony (12:33):
Yeah. And when you take care of your investors and you do what you say you’re going to do it amplifies the relationship. I have this thing where, you know, I, I pay my investors each month and, and new investors that I bring on. Once they get that second or third check, that’s usually the magic. The first one they’re like, okay, this is cool. I’m earning a good return. The second, second or third check is like, when they start going, Hey, Tony, you got any more deals? I’ve got some more money or, Hey, I’ve got a friend that wants to invest, you know, you know, will you talk to them? And you know, it’s the same way I’ve got investors that I can send an email about this long with the details about the property. They’re don’t ask for pictures, they don’t drive by it. They don’t go inside of it. They don’t ask for contracts. They just, they just send me the money. They just I’ve done enough deals with them that they trust that I’m running my numbers well and doing what I say I’m going to do, which I’ve done for 20 years with my investors. So you know, people that are listening to this need to understand that raising money takes some work, but if you take care of your investors, they will invest more money with you. And they will send their friends. If they, if they are investors with money typically they’re hanging out with people with money, you know, people hang out with like people. So a lot of the investors that I’ve gotten over the years have been referrals which has been the easiest as, as you know, in business, when you get a referral, not only is that cheap business, you don’t have to spend money on, but it’s also easier to close those deals because they’ve already been referred to someone or to you by someone that they know
Prashant (14:07):
I have. I have, you know, like, I mean, I totally agree with you. I mean, when you get a referral, you know, then on one phone call, you can, you are able to close those deals. You know, I have had, you know, investors whom, I spent discussing deals for months. And even after a month, they did not invest with me. I had investors the first time – referral – guys who said, Prashant I like your deal. I’m going to send you the check because they were referred to me by trusted source. So that’s like man, it’s like in the middle of nowhere I got another 50,000 or a 100,000 dollar check for my deals. So that happens all the time.
Tony (14:46):
Yep. And when I get referrals sent to me, I mean, I should be better at betting them, but like, if someone sends me an attorney, I’ve got a couple of deals I’m doing with attorneys that, you know, people send me the attorney’s name and they said, I’ve done deals with these people. And I just hire them to do stuff for me. And didn’t really even check them out, to be honest with you, I’m just really busy. And I trust that if they use them and like them and knew them that I would trust them, like them and know them. Right. so good stuff. So what’s your next thing? So you’re doing assisted living, you’re doing apartments. Is there an end game to you? Do you have a goal? Do you have something that like, you’re wanting to transition to something else eventually, what are your, what are your future plans?
Prashant (15:27):
So very, very, very good question. You know, I know we had plans in 2020, and obviously, you know, they did not work out. 2021 we have goals, you know, we want to add you know, we are doing assisted living and we want to add a lot of assisted living and going to that space because it has a little bit higher cash flowing asset class for, you know, because our rents are a little bit higher there, even though you are a small property, your rents are much higher. Your cap rates are much higher and not from just from business standpoint, we come from a very humble attitude in our heart, to be able to serve our residents properly, you know, that smile, you know, right now we have only small residential assisted livings and the smile that we get from the residents, you know, when we help them or treat them well, it’s just priceless, you know?
Prashant (16:23):
So on one side, you know, there’s a satisfaction that you are, you are taking care of your seniors, your elders. And on other side, it is basically helping them out. I mean, helping other investors to get, get more return on their money. So that is, we are expanding to that area and we are expanding of course, into multifamily, but, you know, you have seen, heard it, multifamily has become very competitive over the last couple of years. And you know, we are continuing to look for it. We’ll continue to buy more assets. There is no end game as such. You know, once we have mastered one or two asset classes, then adding an asset class is not a big thing. You can have expertise in that asset. Once you establish the process, you can replicate it for any asset class for that matter. You know? So right now I don’t think there is an end game in the mind. I don’t want to say anything. Maybe couple of years down the line, when I come back to your show, I may have something at that time, but right now just
Tony (17:30):
Things change, right? Things change all the time. Like, you know, six months ago there were a couple of businesses that I didn’t have that are, that are already taken off like crazy. And so I’m kind of transitioning in my time into, into some of those businesses. And so yeah, I mean, once you, once you get out there and do some great things you never know what’s going to come along your way. You may, you may have someone that brings like own coworking space. Now someone may bring some coworking space to you and all of a sudden that’s a whole new business you get into. So yeah. Well, great. So what are some tips that you would give the audience for secrets, I guess, secrets to success where you know, things that have led to your success. If there are some things that you could say that you’ve done over the last, you know, 5 to 10 years to get where you are, what are some key points that you would, that you would emphasize?
Prashant (18:19):
Yeah, very good question, Tony. I mean, what I think in my mind is, be open, have a open mindset, try to get rid of your limiting beliefs. You know, that you cannot do it. If you have the positive attitude, I’m sure success will come to, you may not be today, maybe tomorrow, but the important thing is to remain persistent in what you are . As far as really learning and multi family is concerned, what I say is you know, instead of hiring a mentor, upping 30, $40,000, get involved with the syndication team and help them out for free. Trust me, you will learn much more than anybody, you know, anything else, you know, and then you still hire, you know, get involved in a group where you become part of a group also, but the help that you do for somebody else for free, or for whatever, little bit of price or whatever that teaches you a lot about the business.
Prashant (19:26):
So by doing your end up learning a lot, then just by reading or watching the videos and stuff like that. So that’s how I learned it. And I do feel that I do understand the value of becoming a part of a group so that you become part of multiple deals. If you want to go in that direction, if you want to become a syndicator, I can direct, these are tips for them, but if we are passive investors and you’re too busy to do anything, I mean, the sky’s the limit. You can invest passively in multifamily and you can get all the benefits of, you know, professional management, tax benefits, appreciation, depreciation cash flow sky’s the limit, you know, best for passively. You just have to vet out your sponsor and invest with them and enjoy the benefits.
Tony (20:18):
Yeah. That was something key that you said at the beginning, I meant to touch on, you know, when people ask me, what would you do differently getting into this business? I’ve been in the business 20 years now. And the one thing that I tell them especially if they’re, you know, younger and maybe in college, or don’t have a career path set up is go work for someone that is doing what you want to do. You’re going to learn way more from them and use their experience and their mistakes to your benefit. Because the first gosh, first five to 10 years, I made so many mistakes and looking back 10 years into the business, I finally started getting mentors and coaches and going to masterminds and things like that, and learning from other people. And had I done that very beginning, getting immersed with really successful people, learning from their mistakes, getting advice from them, I would have totally flattened a learning curve and gotten gotten results much faster than I did. So that’s, that’s a really good point. So are you from, so what’s in your background? Is that India.
Prashant (21:21):
No, no, no, this is not, I think it’s just a New York city, Brooklyn someplace.
Tony (21:27):
I didn’t know if you put that in there for, on purpose or
Prashant (21:30):
Just like, you know, it’s just the background, you know, it’s just an image, you know.
Tony (21:33):
You just put all the buildings you own in the background there. Well, good stuff. So so what can we do for you? So I guess we can we can start wrapping it up a little bit. It’s been a short conversation, but it’s been good, you know, and actually I’ll touch on again, the benefits of, of multifamily that you touched on. I’ve had a couple of other multi-family guys on the podcast, so I may be reiterating some things, but I just got into commercial real estate about two or three years ago. Like I said, I’m in coworking space. I bought a 17,000 square foot building, completely vacant, gutted out, great location, major highway. We built out a few thousand square feet for my flipping headquarters. And then we had 14,000 square feet that was vacant. And so my crazy entrepreneurial mindset, what can I create to fill that 14,000 square feet instead of waiting for someone to come to us and leasing it out and building it out.
Tony (22:26):
So I created coworking space. So we spent about a year and a half on the project. It was a big learning process. And we spent a lot of money on that project, but the great thing is that we, like you said, we got to accelerate or I think you may be called bonus depreciation. We got to accelerate our bonus depreciation. A lot of what we did on the building, you know paint concrete a lot of the electrical and plumbing, the flooring, the light fixtures, basically anything that’s 10 years or less of life based on what the IRS says. We were able to deduct in the year that we put it in place. So that saved me hundreds and hundreds and hundreds of thousands of dollars worth of taxes. You know, just in, you know, just in the two years that we did that project.
Tony (23:16):
So I know for a fact that it’s got a lot of great benefits. I plan on doing more of that once I have time to potentially hire the team to, to seek out more of those projects. But and even when you get into it passively, like you get passive investors on board and if they have passive gains, then you can take, I’m guessing a lot of the depreciation on that property and offset a lot of their gains. So really it’s non taxable, passive income. Am I correct by saying that .
Prashant (23:45):
That is a 100 Percent true. I mean, depending upon passive investors tax status whether they are professional real estate person or whether they are you know, just starting in the real state, depending on their category. A lot of the real estate, the gains that they they get from multifamily is deferred for future. Basically, deferred when I said it is written off, so to say. It is depreciated. So I mean, those who are professional real estate investors, nobody pays taxes. And I mean, I don’t want to say law, but that’s the fundamental truth. Why, you know, why all these big, big bosses in real estate they never pay any taxes because they are professional real estate. They are the professional real estate status and all that, you know, they just appreciate the whole thing, all the gains that you get, they’re all depreciated and you know, they just, I mean, last year I didn’t pay any taxes. I mean, and it’s all legal. It’s not nothing illegal. I mean, nobody are not talking about any illegal stuff here. We’re not selling marijuana here or anything like that. It’s government gives $18 trillion in tax rebates to businesses to earn 4 to $5 trillion as income tax. This is the real state is the fundamental commercial real is the fundamental vehicle, where government gives most tax code. That tax code is written in such a way that so much tax rebates is given.
Tony (25:26):
Yeah. And people give, you know, you hear on the, on the news and the press, Donald Trump didn’t pay taxes. And, you know, they give him all kinds of crap about that. And I, it didn’t surprise me. He’s super smart. He knows how to use the tax loopholes. And you know, what, like that building that I, that I put all that money into, I may not have done that building if it weren’t for those tax benefits. So I created jobs, I spent well over a million dollars in the local economy on that building. And then there’s multiple investors doing the same thing. So really it’s to stimulate the economy and promote construction and growth. And people invest in real estate.
Prashant (26:02):
And it is not a loophole by the way, it is the way tax code is written. It is what government wants you to do. So rather than the government is asking you to do, do this, they give you the benefit. They write the tax code in such a way that automatically those who are smart people start doing where they get the tax benefits. So it is not a loop, it’s a written tax code. So we saying, yes, we can pat ourselves and thinking that we are smart to find that global. No, it is what government wants you to do, basically.
Tony (26:38):
Yep, absolutely. Well, good stuff. Well, thanks for coming on Prashant and giving us some great advice, where can people find you if they would like to connect with you?
Prashant (26:46):
So on my website, you know, I have a simple website. I have two websites myrealtygains.com and for my real estate business. So myRealtygains.com is an educational website where I have seven day email course telling what I just told everybody that fundamental benefits of the real estate. And I have a small you know, passionate passive investor club,where I have a bunch of videos where anybody can watch them. And there’s no selling here or anything like that. So, you know, go to myrealtygains.com. You have, you know, that seven day mini course , or PPIC – my Passionate Passive Investor Club. And you know, you want to schedule a call with me on the, you know, you can schedule a call with me directly from my website, you know, I’m on Facebook, LinkedIn, and my email ID is prashant@myrealtygains.Com.
Tony (27:43):
All right, good stuff. Thanks for coming on and sharing, Prashant. Look forward to connecting again soon.
Prashant (27:48):
Tony, thank you so much. I loved talking to you today.
Tony (27:51):
All right. Have a great day.
Prashant (27:52):
You too, my friend. Thank you so much.
