Strategic Multifamily Real Estate Investing with Neal Bawa

Sep 28, 2022

Neal Bawa
This podcast guesting of Neal Bawa is hosted by Jessica Galley of the Strategic Multifamily Real Estate Investing with Neal Bawa.
Neal Bawa is CEO / Founder at UGro and Grocapitus, two commercial real estate investment companies. Neal’s companies use cutting-edge real estate analytics technology to source and acquire OR build large Commercial properties across the U.S., for over 800 investors. Their current portfolio has over 4800 units, with an AUM value (upon completion) of over $1 Billion.

In this episode we talked about:
– Neal’s Bio & Background
– Team Evolution
– Neal’s view on today’s Real Estate Market
– Real Estate Risk
– Lesson Learned for Real Estate Investors
– Syndication
– Signs of recession ahead

Jesse (0s): Welcome to the Working Capital Real Estate Podcast. My name’s Jessica Galley, and on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund, join me, and let’s build that portfolio one square foot at a time. Ladies and gentlemen, my name’s Jessica Galley, and my guest today on Working Capital is Neil Bawa. Neil is a returning guest. He is the CEO and founder of Grow Capus, a commercial real estate investment company in the US with a billion-dollar portfolio.

The Grow Grow Capus team acquires and builds multifamily and commercial properties across the US spanning over 10 states. How are you doing Neil?

Neal (43s): Fantastic, Jesse. Good to be back on.

Jesse (45s): Yeah, it’s great to see you. It’s, it’s been some time, I thought, you know, I thought we’d have you back on and, you know, we could talk about the last year or year and a half, I guess, since we last spoke, and we were just kind of joking around. Not much, not much of note has happened, so maybe it’ll be a short podcast.

Neal (1m 3s): Oh, whoa. I I think we should break it up into 16 sections if you wanna discuss a year and a half, but we’ll, we’ll make it, we’ll make it short and sweet.

Jesse (1m 11s): Yeah, no, fair enough. And that was all tongue in cheek. I know we’ve had quite a bit of change since then, the last time we spoke. Not just, you know, in the economic environment, but in a lot of different ways with the dis different asset classes being affected differently in real estate. Perhaps what we could do is, for those that haven’t heard, the first podcast that we had you on, I recommend checking that out. We talked a lot about analytics, about different areas, in the states where you invest, and how you look at properties a little bit more on the acquisition side, so I encourage everybody to check that episode out.

But for those that have not, have not heard that one yet, why don’t you give a, just a little bit of a background as to, you know, who you are and, and how you got into this industry?

Neal (1m 56s): Sounds good. So, I’m a technologist, geek, or nerd, and I’m just trying to apply technology analytics and data science to real estate. And today it happens to be multi-family and build the rent that I’m applying it to. Who knows, two years from now, it might be something completely different. So I’m, I’m a fan of Big Data and how it can point you in the right direction and how few people actually use big data. People use Excel spreadsheets all the time to make decisions and that’s really great, but Big data is something completely different.

Doing monthly analytics is completely different. So that’s something that I’m known for. I started investing in real estate just to, for my own, you know, portfolio. The first seven years of all of my real estate investments did not have any other investors’ money. It was just my money. And I started seeing some very interesting trends and started doing some number crunching. This was back in 2009, and 2010, and invented a system called Location Magic that I started showing off at meetups in the San Francisco Bay.

The first time I showed it off, I had four people. By the time, the 10th time I showed it off, I had over a hundred people, you know, nerds and geeks at Silicon Valley, after all. And they were very interested in what I had to say because I was pointing to the fact that there are cities, unknown cities in the US that have incredible ridiculously large amounts of profit and low prices, and that’s what the location page system points them to. And that is available for free. There’s no purchase, no subscription, no upscale, you know, up, you know, nobody’s gonna buy, sell you anything in the future as well.

And you can go check that, that’s multifamily, followed by And I think now it’s called the webinars called Real Estate Secrets or something like that. But you can, you can check it out there. And I, more than 50,000 people have watched it. If you go to you to, you’ll see it. It’s an older version, by the way. So it’s better to, but you’ll notice that there’s 10,000 people taking it with over 1,005 star reviews. So it’s analytics, it’s data, it’s it’s step by step instructions on how you can improve your acquisitions process.

And that’s what we are known for. And you know, around 2014, I needed more capital, so I sent out an email to all the people that were following me, and I was really surprised that I was able to buy a 237 unit, with their money. So unlike, you know, most people that sort of step up to it, I, I was able to get in pretty quickly. And since then, 31 projects, 830 current investors, and about a billion-dollar portfolio, all of which is really an a, an application of data science and data analytics.

So, you know, be cruel.

Jesse (4m 38s): So we didn’t talk about this as much last time on the podcast, but, the team itself, because you’re obviously doing, you know, pretty substantial deals in terms of the size. How has the team evolved from, you know, when you were kind of building this company to now, you know, the size that it’s at right now, because we, you know, we all start with, you know, the accountant, the lawyer, and then it kind of grows into acquisitions, grows into, you know, so how, how did that team evolve in, in terms of the footprint?

Neal (5m 9s): So it evolved completely differently from everyone else’s because I have some rather crazy beliefs. I am known as the mad scientist of multifamily. And the biggest belief that I have when it comes to teams is that it makes absolutely no sense for all team members to be in us. So what we do is, for every team member that we add in the United States, we add two team members in the Philippines. So there are 19 full-time employees in the Philippines now. They all work Pacific Hours eight to five. They have their own managers and their own directors and their own recruiters and their own HR all in the Philippines.

We don’t use third-party companies. We basically, you know, hire them directly and they all work from home. And so by adding them to US employees, we’ve been able to scale. So our acquisition team, for example, is a senior director and a junior manager, and two people in the Philippines. And those Philippines people have thousands of tasks that they do to make our acquisitions process more efficient. Our marketing team has four people in the United States and nine people full-time in the US in, in the Philippines.

So essentially the team’s gotten pretty big. We now have 29 employees that either work with us full time or there’s a couple that work, you know, four or five hours a day with us. And that has allowed us to scale. So once again, I believe this is the use of technology because outsourcing is an established use of technology, and the fact that everyone doesn’t do it is a complete mystery to me. I have no idea why, you know, people don’t do it. I mean, I keep them so busy that I have two executive assistants. One of ’em called you half an hour ago to confirm this, this, you know, podcast.

So I have two of ’em because one of ’em just can’t take the load.

Jesse (6m 49s): Yeah, I find that more and more we’re starting to see this, the use of, of people overseas, I find it’s really, it comes down to being able to train them. You know, if you just hire people overseas and you just think that they’re gonna magically know your business and understand it, then yeah, you’re gonna realize that it’s not that useful. But if you train them properly and you integrate them into what you’re doing, and, and I find that you gotta stay up, up to date with them or, or you have to have touch points that are fairly fairly com or fairly consistent in terms of how much you communicate.

But it sounds like, sounds like you guys are firing on all cylinders right now. So in terms of the, you know, compared to last year, obviously, you know, we we’re in an environment right now with interest rates we haven’t seen in some time inflation numbers that we haven’t seen in some time. You’re a contrarian by nature, you know, from our conversations. Why don’t you talk about what your thoughts are, you know, over the last year or even less, what, whichever timeframe you want and, and how you are looking at the market in real estate right now.

Neal (7m 52s): Absolutely. Well, my first thought is don’t buy anything. Simply buy nothing today. Makes no sense. Wait six months, you’ll get much better deals, You’ll get the same deals that you’re getting now because those deals are going to basically go get into contract and then whoever’s doing the underwriting will discover that they cannot make the deals work and they’ll come back to the market and you’ll probably pick them up for, let’s call it five to 10% less. So they nothing beil right now. I wouldn’t say nothing. I mean we are buying one property, so there are exceptions to that rule, but with that property, you know, we were lucky with that one because it was a bounceback from before.

So we did get a significant discount there. But we have shut down our acquisitions department. So we are, you know, we have, we have a lot of development projects going, 17 of them. So we are luckily able to move our acquisitions people to the development side for the next six months, but we have no intention of buying anything for the next six months because it makes no sense to do that. So let me, you know, and this is not an easy explanation, so it’ll take me a little bit of time, Jesse, to explain it. So, you know, if you look at the rate hikes that have happened, the first rate hike that the Fed made only happened in March and it was a very gentle one.

It was 25 basis points, and then the Fed went in for 50 basis points in May, then they went in for 75 in June, and then they did another 75. So, and now you know this, this is being recorded in, in mid-September and there is a fed meeting this week and almost a hundred percent of people believe that the Fed will raise by 75 basis points. So in other words, the Fed has basically raised interest rates by two and a quarter percent or 225 basis points since May, May, June, July, August, September.

So in five months, five months interest rates or the Fed funds rate have gone up by 2.25. And there is absolutely no way that prices could have adjusted that fast because let’s look at 2015 to 2018, the Fed increased interest rates by the same amount that they have increased them now, but they did it over three years. Three years to do what we just did in five months. So the market all along had a chance to adjust to that, that process.

The banking, the lending, the hard money people, they all had times to adjust. No one has at any time to adjust to this. And here’s the worst part of that news. If the Fed were to have stopped at, you know, at where they are today, the fed funds rate is at 2.25, if they would’ve stopped, I wouldn’t be saying what I’m saying today, but last week’s inflation report was so awful and you saw what it did to the stock market that now the Fed has to go way above a 3% fed funds rate.

There are two, 2.25, now they have to go to maybe 3.5, 3.754, right? So that much is now clear to the marketplace. And it wasn’t last week. So I was singing a different tune two weeks ago because I, I felt very strongly that inflation would come down when we saw the November, the September numbers, I was wrong, everyone else was wrong too. And so now we are going in for a fed rate that is potentially 75 to a hundred basis points above what everybody else said. For those of you that don’t know what that basis point stuff is, essentially that means is interest rates will be 1% higher than we thought they would be.

So, and, and that increase in interest rates will happen in the next six or seven weeks, which is why I think properties will not pencil because if you’re paying four and a half cap today, you’re paying too much. You should be paying five cap for properties. So five cap is the new four and a half cap, and four and a half cap was the new four cap because in January everything was selling for four cap or under four cap, right? So January was this, this crazy bubble. So it, you know, Q4 of last year, Q1 of this year was this crazy bubble where you could sell, you know, old properties in the seventies built in seventies and eighties and you could sell them for under four cap, right?

So then the market adjusted to about four and a half cap by let’s say September. And now it has to adjust to closer to five cap by February. And so that’s what I’m saying today, it makes no sense to buy a multifamily property because I’m not aware of anybody doing five cab deals and everyone should be doing five cab deals. Cap rates go up when interest rates go down now that it’s not a one to one. So if you, you know, interest rate goes up by a hundred basis points, your cap rates will go up by 0.4 or 0.5, right?

But that 0.4, that 0.5, it hasn’t happened because we just got this inflation report. And so now it’s, this is the first time this week, last week when people could have possibly known that the fed’s gonna go up another a hundred basis points. So how could there be an adjustment?

Jesse (12m 49s): Yeah, the, so the, the spread itself, it we’re saying we’re seeing some wonky stuff happen with the, with yields right now cap rates and your interest rates. But if you’re looking at deals right now or you’re looking at your current portfolio, let’s start there. You know, the number one piece here is don’t buy anything right now. So we’re, we’re trying to let the dust settle for a little bit in terms of current, current real estate holdings is the, what are your thoughts there? Is it something akin to de-risking figuring out a different structure, structure not, not to having variable debt.

Is there anything on the front of current assets that you recommend for investors or that you’re doing yourself?

Neal (13m 32s): Oh no, I, I’m, I’m not recommending to anyone that you get fixed rate debt because simply because rates are going up doesn’t mean that they won’t come down. My analysis over the last 61 year suggests that when the Fed goes up sharp, they put the economy into a recession. 100% of the time they’ve done this nine times six of those were pretty sharp, all six were recessions. And then what people forget is the Fed is not trying to punish the economy. The Fed is trying to prevent hyperinflation and it, they’re, they’re doing exactly the right thing.

I wouldn’t change a thing that the Fed is doing awesome. I mean all of our political, you know, institutions are paralyzed and useless. The Fed is actually a well functioning organization. They’re not perfect. They make mistakes. They waited too long in this instance they shouldn’t have, but they are a data driven organization and so they’re doing their job and because they’re doing their job, you have to understand that they will also do their job once the economy is in a recession. Once the economy is in a recession, the fed’s job is not to raise rates, it’s not to hold rates, it’s to cut them.

If you are not sure about this, go back. And this is easy to find data on the web, you know, look at how quickly the fed cuts, cuts rates once we are in a recession. So the short answer is, I believe that one year from today the Fed will be cutting rates. I don’t know if they would’ve just started cutting them. I don’t know if they would’ve finished their cutting cycle, who knows, But they would be somewhere in a cutting cycle a year from now. So I want, I’m only interested at this point in, in floating debt because I’m just gonna go through a year worth of pain.

But if I fix the rate, if I go in for a fixed rate and those fixed rates are high, then I get no benefit from the down the downward, you know, leg. I, I’m, I’m getting hurt by the upward leg cuz my fixed rates are pretty high right now, but I don’t get the benefit of the downward leg one year or 18 months from now. So it makes, to me it makes zero sense to get fixed rate debt on anything.

Jesse (15m 32s): So I guess the, in that case it would really be, you should hopefully you bought right prior to this and you’re not, you’re not on the knife’s edge when it comes to the investment properties that you have or acquired prior to this because we’re now in a place that sounds like the only way you can really prepare for the increase in borrowing costs is to have debt that is variable, but that you gave yourself enough of a sensitivity or enough of a buffer that if we had experienced stuff like this, you, you know, you can actually be able to maintain the investment and get to the other side of it.

Are you finding that investors had not been doing that the last couple years in terms of the underwriting?

Neal (16m 12s): Some have, some haven’t. I mean, let’s, let’s slice and dice what you just said, right? Yeah. So number one, your borrowing costs are going up because you are, you are, you know, every time the fed increases rates, you’re borrowing costs go up the following week, right? So number one, you should have purchased a rate cap, right? So, you know, my rate caps are five and a half or six. So the while there is enormous pain, it’s not unbelievable pain because there’s a rate cap that takes effect number two, in addition to the rate cap, you should have raised more equity.

So I even on properties that I bought seven months ago in the last month, I’ve gone and raised an extra a hundred thousand dollars. That person gets a higher irr, good for them. I’m keeping that a hundred grand. I have no use for it. I’m just leaving that a hundred grand there in case I need it. Every property that is 20 million, it’s a hundred grand. If it’s a 40 million property is 200 grand and that’s just insurance money. Yes, it lowers IRS of the project. My investors are smart enough to understand that they should be thanking me for doing that as opposed to, you know, beating me up for it.

And sometimes I’ll raise 200 K for a property if it’s not doing particularly well or, or if it’s rate cap is high. So I think those are things that we need to do. The number third, the third thing is be honest with your investors and do what I’m doing, which is cut off distributions. Right now the properties are still in a good place because rent have been increasing. Cash flow is, you know, in many of them is higher than you projected. Stop giving your investors distributions. Tell ’em I’ll be happy to give you all this money, but I’m gonna leave it in my bank for the next six months while I see what happens with the economy.

So you’ve got three levers to pull your rate cap raising extra equity and stop doing distributions. Before you think about refinancing.

Jesse (18m 0s): When it comes to the, the piece of stopping distribu, or actually, sorry, on the equity front, I, I’m just curious how you typically organize that with your investors. Is that something that you’re doing as a capital call when you, when you start seeing some headwinds or is that just at the outset?

Neal (18m 19s): No, I’m, we’re just raising it from one investor, right? So like a lot of folks, we have full-time managers and we basically, you know, most times we have nothing to sell. There’s no raise that’s open. So they’ve got, they’re talking with 20 investors a week, so in a month they’re talking with 80 of them. And so when we have to raise a hundred or 200 grand, we send an email out to those 80 and somebody takes that share, they’re actually lucky because nothing’s really changed with the property.

The premise hasn’t changed. We think that we will exit those properties well, but there’s a short term cash crunch, which hasn’t occurred yet, but we have a hundred percent believe that it’s going to occur in the next six months. And so we’re selling another share. We, we, we always make sure that we give ourselves some headroom. We don’t always raise to the max level that’s allowed by the ppm. So there’s always room there to, to go a little bit further.

Jesse (19m 13s): Now, when you say a capital crunch, are you talking generally in the, as a result of the economy or in in inve the investment specifically?

Neal (19m 21s): I think I’m just talking about it in terms of interest rates increasing my mortgage and you know, that takes me to the point where the property itself may not be cash flowing, right? It might be breaking even or something like that. Well if it’s breaking even then I wanna have extra equity just in case it gets worse.

Jesse (19m 39s): What do you think the takeaway from the last year is going to be for investors that had at least, you know, in our market, I, I’m not sure if you saw yours, we saw a lot of operators that kind of came outta the woodwork. It seemed like everybody was either, especially with industrial and multifamily, but in general, you saw a lot of people coming out the woodwork, never raised capital before, got into a very hockey stick-like graph, and kind of rode the wave. What do you think the lessons learned, you know, when the dust settles here are going to be, for investors in the investor community in general?

Neal (20m 11s): Well, I, real estate’s slow moving. I don’t think that any lessons that are have been learned yet. I think they’ll all be learned over the next 18 months. But I think that the taxi driver syndicator and the IT professional syndicator, I think we’re gonna see less of them 18 months from today because they realized that they were on this amazing hockey stick. And when, you know, when, when it got to the point where it was tough, a lot of these people are just gonna go back to their jogs jobs, whether it’s the taxi driving or the IT professional.

And so we’re gonna see a shake-up in the industry in the next 18 months as we start seeing projects either fail or not do well. Failing is, is very unlikely. I’m not predicting a crash, but I think that you’re gonna see a pretty large percentage of projects that were purchased in the last two years not hit double-digit IRS if the Fed raises by another a hundred basis points. Now a lot of it also depends on how long the Fed stays, where the, you know, at that level I’m not, I don’t worry about the Fed raising interest rates, I worry about the Fed raising interest rates and then inflation not going down.

So the Fed stays at the top because when the Fed is staying at the top for more than three months, they’re really hurting the US economy, but they have no choice because inflation’s still high. So if inflation comes under control even at 4%, I don’t think that there’s any lasting damage to the economy. There’s not any lasting damage to the multifamily industry. So people just simply have to hold, find a way to hold for the next 18 months. And then I think that their original IRR, they should still be able to get close to it.

So a lot of lessons really here are, are, and for me, I mean this is a big lesson is I didn’t pay enough attention to inflation. I thought inflation was transitory because the Fed was saying. So I think the big lesson is even the Fed cannot compute black swan events like Covid and the money that we plugged into the market, they don’t have the ability to do that. So you’ve gotta be very careful in the future that you can get into a highly inflationary environment. And so that’s the big lesson to learn here. I don’t know if there are more lessons to learn for, you know, all these syndicators,

Jesse (22m 24s): Would you, what would you say for, for those that had gone into an investment raise capital and now we’re in this environment and not that they are underwater, but they had not projected these, you know, the interest rates where they are today or a lot of the syndicators that were doing value add and now they’re, they’re in the middle of that value add and in a very shaky place. Are there any tools in the tool belt at that point now that you know, you’re underway with the investment to be able to hold, you know, hold it till, till hopefully, you know, we come outta this and, and you know, and then we’re past this environment?

Are there, is there anything that the investor or she can do?

Neal (23m 3s): Raise equity now don’t worry about your IRS, worry about your investment capital raise money now You can still raise it. I think you’d have trouble raising it in January.

Jesse (23m 15s): So if it was part of a current investment, it would be the possibility of going back to the, the investors and say,

Neal (23m 22s): I’m not suggesting cash call. Just add in another investor or two, give yourself a couple hundred thousand dollars of room. Right? I have more room than that simply because I’ve never hesitated to put my money in. I’m sitting on a large amount of cash in my banks. I’m very liquid because I have a predatory approach to the marketplace. I believe that in April, you know, April, May next year there’ll be lots of cheap land and there will also be properties that we will be able to pick up at 10 or 15% off of today’s prices.

It’s not gonna last for a long time, but April may up next year is I think where we will get some, some bargains. So I’m basically sitting on a bunch of money and I don’t hesitate to put that money into my properties if it goes upside down. But not everybody has that advantage. So raise capital, my friends, don’t worry about the irr.

Jesse (24m 12s): So I guess in that case, depending on the PPM and the agreement with your investors there, you know, there’s gonna be dilution to the, to the other investors if you’re gonna be adding in additional investors,

Neal (24m 24s): Let’s, let’s just say this and, and I think that people will beat me for saying this $100,000 or $200,000 is not, is such a small amount on a five or 10 million raise. Yeah, that it doesn’t move the needle. You know, if you think that you projected 16 IRR and you are actually going to come in exactly at 60 irr, that’s never happened. I’ve never had a single property that came in at projections. They either came in above or they came in below. So, you know, a projection is simply a projection and there are dozens of factors that’ll control your actual IRS between now and the exit of your property.

And this is, this 200,000 of capital is just one of those many factors.

Jesse (25m 4s): Yeah, that’s a good point. Neil, we talked a little bit before the show of, you know, the last podcast we did and you know, we talked about at that time a lot of the analytics that we look at when we’re investing population growth, income growth, you know, jobs, pricing, and you commented that, you know, this is an environment where that stuff is, seems like it means less if you know, if anything at all. Could you kind of expand on, on what you were talking about there?

Neal (25m 30s): Sure. So I mean, so we internally use about 19 different factors, but I can tell you the highest weightage comes to five factors that are all publicly available that are part of that location magic course. That’s, that’s in, you know, on our website, So you can go, you know, find that information there. So there’s, you know, five indicators that we use, you know, income growth, home price growth, job growth, prime reduction, and let me see what I missed.

Population growth. So those five factors should be able to point you to the right cities to purchase, right? But my point today is the reason you’re not purchasing is because every major market in the United States is losing steam and all of them are for the moment overpriced. I don’t think that their long term overly, there’s a lot of people that believe that our market is in a bubble. I’m not one of those people. But in the short term, given what happened with the inflation reading a few weeks ago, the Fed is going to raise interest rates and we haven’t factored those in to our underwriting yet.

If you factor them into your underwriting, you simply cannot buy anything because somebody else is going to outbid you by a million dollars or $2 million. So if you factor in the Fed, you’re not buying anything. If you don’t factor in the Fed, you’re over overpaying even in a good market. And show me a good market that isn’t reactive reacting negatively right now. Right. So I’ve, I’ve talked about over a hundred markets in the us that’s what I’m known for. You can, you know, Google my name and you’ll see how many hundreds of markets I’ve talked about, but I’m not aware of any market in the United States today, mid-September 2022 that is not seeing downward momentum.

I’m not aware of any, there’s actually rust belt markets that didn’t boom over the last two years that are okay. But every booming market in Texas, Florida, North Carolina, Arizona, everything seeing downward momentum and in a downward momentum market, overpaying is a crime

Jesse (27m 40s): In terms of getting to the end of whatever we’re currently in right now. Are there, are there indicators that you prefer to use or you like to use that I will, you know, be just an indication that we are going to be moving in the right direction and and that might be after that we come potentially into a recession or, Yeah, you know, or if we do avoid one completely, which I think most economists are now, you know, thinking that that’s not gonna happen. That we are gon we are going for recessions one way or the other.

Neal (28m 11s): I, I didn’t ever think that there was a chance that we would avoid a recession. So you can avoid recessions when you rate raise rates slowly. So the Fed raised interest rates from 2015 to 20 18, 9 raises all quarter point each. Right now we’re raising 0.75, so that’s three times faster, but they took three years for nine raises, right? We, we’ve done that many in, in five months. When you do it this sharp, there’s just no way to prevent a recession. And the Fed knows that. So, but the fed’s job right now is to put the economy into a recession.

That’s the only way they can achieve their goals of slowing inflation down. So it’ll happen. So let’s go back to the question because I think the question’s a really good one, and my answer is very simple, but I think it’s very powerful. The turn in the economy, and especially in the lending comes during a recession when the Fed starts talking about potential interest rate cuts to come into the future. Mortgage rates are not based on the Fed funds rate.

They are based on the market’s future looking projection of what the Fed will do. Mortgage rates in the US are guesswork, the market guesses that the Fed is going to raise rates. So it, they raise their own and the market guesses that the Fed’s gonna drop rates so they drop their own. It’s guesswork. So where does that guesswork come from? Well, it’s based on what the Fed is saying. So sometime during the recession, and I’m gonna currently guess that it will happen in May next year, the Fed will actually start talking about the potential of dropping interest rates that is that light at the end of the tunnel because then mortgage rates start to move downwards.

They don’t move down all the way, but they start to move downwards because people are thinking, Oh, going forward, there’s really no chance that the fed’s gonna raise rates. They might drop them, and then you wait for the sec for the time when the Fed finally cuts interest rates and usually they start with a 0.25% or quarter point cut. That’s a very strong indicator that you are now beginning the next cycle. And I expect that would happen at the end of next year or maybe a little bit before that.

Jesse (30m 19s): Okay. Well, you hear, heard it here. Neil, always appreciate you coming on the podcast. I know that we’ve done through the final questions with you in the past, so I will just ask you this for listeners. In terms of resources, books you’re reading right now or courses you have, where can, where can people, where can you send people to or recommend to listeners?

Neal (30m 40s): Well, I think that right now is an incredibly important time to know what’s happening in the macro market, right? The macro market has having enormous effects on multifamily. And so check out our website where we share this data. It’s and I think it’s critical at this point to know all, all about what’s happening in the marketplace. We did a webinar in May called the Impact of Inflation and Interest Rates on Real Estate. It’s a very powerful webinar.

I suggest you go watch it and then next month we’ll invite you to an update on it because it’s already some parts of the webinar already outdated because inflation didn’t drop. We estimated that by this time inflation would start to drop. We haven’t seen that happen. So now we’re gonna talk about, okay, well it didn’t drop, so what does a fed do next? And how does that affect us? Because the, the small impact on real estate is what you’ve seen so far. The big impact on real estate is because the Fed is now forced to keep raising. So I think it’s critical, absolutely critical for anyone that’s a multi-family syndicator to really look at the macro environment today.

Normally it’s not such a big deal.

Jesse (31m 50s): My guest today has been Neil Bawa. Neil, thanks for being part of Working Capital.

Neal (31m 55s): Thanks Jesse.

Jesse (32m 5s): Thank you so much for listening to Working Capital, the Real Estate podcast. I’m your host, Jesse for Galley. If you like the episode, head on to iTunes and leave us a five star review and share on social media. It really helps us out. If you have any questions, feel free to reach out to me on Instagram. Jesse for galley, F R A G A L E. Have a good one. Take care.