Listen to Neal’s most recent podcast guesting, an interview with Jonathan Twombly of Real Estate Launchpad

Ways To Increase Revenue From Your Multifamily Leases, with Neal Bawa

by Neal Bawa | Real Estate Launchpad

Neal:  My secret sauce is a vast education network. I’m looking for people that are truly abundant. If you look long enough, you’re going to build a terrific community. What’s even nice, is your investors, and all the members of your community, feel the same way.

[Music begins.]

Jonathan:  Today’s guest is Neal Bawa, founder of Grocapitus Investments, which owns more than 1800 units of multifamily property across nine states. Neal is also a founder of MultifamilyU, which gives multifamily investment bootcamps across the country. Neal is a master of adding value to an apartment community by optimizing the leasing revenue through his special LASAL process, which he explains in this episode. And the show is literally full of value that you can take and start applying to your multifamily investments today.

Without further ado, here’s Neal Bawa.

Neal, welcome to the show.

Neal:  Thank you, Jonathan. I am delighted to finally chat with you and happy to be on the show.

Jonathan:  Yeah, we have been told by so many people, apparently, both of us, that hey, “You have to meet Neal Bawa,” or “You’ve got to meet Jonathan Twombly,” so I’m really glad that we’re finally connecting.

But for those folks who don’t know who you are, would you please tell them who you are and what it is that you do?

Neal:  I am a technologist, successful technology career, successful technology exit. Started investing in single family and multifamily basically for tax benefits and then it sort of snowballed into a career from there. Current portfolio is $150 million, both multifamily and student housing. Also, some hospitality, hotel-type syndications. About $150 million. I have a thousand accredited investors that have signed up with me and about 400 of them are currently invested. The company is based in the San Francisco Bay Area, but the properties are in nine different states, none of them called California.

Jonathan:  What’s the name of your company?

Neal:  Grocapitus, without a W at the end of the “Gro,” so G-R-O and C-A-P-I-T-U-S, which is Latin for capital.

 Jonathan:  And so, this is primarily a syndication business? You don’t own assets outright yourself? You do this as part of a syndication?

Neal:  I have my own assets but they’re under 100 units, so the vast majority of those 1,800 are syndication assets, yes.

Jonathan:  Let’s talk a bit about your background. Before you got into real estate, you said you were in technology. Tell me a bit about what you’re doing.

Neal:  I was running a brick and mortar technology company, not a startup. We grew it from when I joined as a staff member at nine employees. Within three years, I was promoted to the Chief Operations Officer, so I was the senior-most executive in the company. The CEO was the owner of the company. Then we ran it for about 14 years, exited very successfully at the industry leading multiples in 2013.

I learned a huge amount of internet marketing and technology, basically process and implementation to grow it from 9 people to 400. All of those skills have actually been used in my real estate career as well.

During that time, I did a huge amount of real estate for that business because I built campuses from scratch. Oddly enough, unlike just about anybody you’ve ever interviewed, I started my real estate career in reverse. My first project was not a single-family rental, it was a $6 million, 27,000-square-foot campus that I built in 2003 from scratch. That was drinking from a firehose, Jonathan.

Jonathan:  Well, I really want to get into that. Just to set the context, I’d like to know, what kind of technology company was this? What was the company selling?

Neal:  It was a technology education company, so we were doing about 4,000 people from basically every technology company in the U.S. that was coming to us, taking short-term bootcamps that were 5 to 14 days long, 12 hours a day.

Jonathan:  And what were you teaching them?

Neal:  Everything from network engineering to software programming to building the back end infrastructure of the internet. So, Cisco, NetApp, Microsoft technologies.

Jonathan:  Tell me about this experience of building out these campuses. When this was first presented to you, like, “Hey, Neal, you’ve got to go take care of this project and building out this new campus for our company,” what was your first reaction to that? Were you like—gulp—oh my god, what am I supposed to do now?

Neal:  Yeah, my CEO comes to me one day and says, “You know what? We have money. We’re not going to be renting because landlords typically don’t like education businesses. There’s a lot of students coming in and out every week.” So, he said, “I’m going to go find a building.” I said, “That’s great, Paul.” And off he goes, and he comes back like 20 days later and said, “Hey, I put an offer on a building.” I’m like, “Great, let’s go see it.” We drive over to the building and from the outside looks really nice. When I walk in, it’s empty. It’s a shell. The ceiling is 22-feet high and it’s one big box. Think of something that looks like a Best Buy, exactly like that. I’m like, “Paul, where is the building?” He’s like, “This is the building.” I’m like, “Paul, we have nine months left on our lease. Are you shitting me? This can’t be a building.” He’s like, “No, no, no. I’m going to find you a retired general contractor and you’re going to help me build it out.”

You cannot imagine, Jonathan, I never peed in my pants but if there was a time when I came close, it was that day. It was like, this is unbelievable. I know nothing about real estate. He’s like, “No, no, no, you’ll figure it out. It’s no different from anything else.” And we did figure it out. But I learned crazy amounts of stuff about egress and fire codes and loads and air conditioning systems and heating systems. I mean, it was crazy because it was a regulated business and there were up to 40 students in each room so that the fire department really hated us and so this was much harder than building a multifamily because you don’t have the kind of density in a multifamily that you do in a student campus. I had all kinds of problems.

The landlord basically had signed a contract with us that was $10,000 for every extra day that we stayed. The contract ended on July 3, 2004; we stayed one extra day, so I paid $10,000 extra. But to get it done in nine-and-a-half months, I was sleeping at the property in sleeping bags.

Jonathan:  Yeah, so how did you do it? Like what were the forces that you had to marshal together to get this project done in nine months?

Neal:  The key thing was that we had to get all the contractors in, make them sign contracts that were time specific, which meant that we had to pay quite a bit extra. But it was okay. The company was doing really well, we had the money, and then I was using a general contractor and then on the side, I was using a retired general contractor to basically look at everything that the general contractor was doing. This retired guy was basically like, “No, no, no, Neal. What he’s doing here, the fire code will not work. You got to move this wall back 2 feet. And you look at this hallway, this is only 34 inches. This doesn’t work. You’re going to have to knock this damn thing down. Move it over 2 inches.” That sort of stuff. Or, “This air conditioning system doesn’t really work. It’s going to heat up this room too much. You need a variable air flow control sort of air conditioning system.”

Imagine every day being like this, with a new fire and the whole thing having to be done from scratch in nine months.

Jonathan:  I’m sure that was a hellish experience.

Neal:  It was both hellish and incredibly fun. I know that sounds weird, but it was also incredibly fun because I was building something from scratch. I’m the kind of guy that has played with Lego blocks all my life. Now I was building a $6 million Lego block.

Jonathan:  I think there’s two kinds of exhaustion that you can have from a job. One is the exhaustion that I suffered as a lawyer, which was being bored out of my mind for 14 or 15 hours a day and just struggling to get through the day and then there’s the kind of exhaustion where you’ve worked really hard on something that’s really exciting and may be somewhat stressful, but at the end of the day, you’re like, “Wow, I like really did something today.” That’s like a completely different and better kind of exhaustion. It sounds like that’s what you were dealing with.

Neal:  It was exactly like that. I mean, imagine this:  You’re a classroom business. It’s like an airline business, so with an airline business what are you trying to do? You don’t want to have all your planes be the same size. You want different sizes and different routes and different lens. I got to actually look at five years of history of my business and actually create a classroom environment where the classrooms were all just the right sizes for my business. Small ones, big ones, really big ones, ones where there was a divider in the middle so I could double the size.

That led to millions of dollars of net operating income in the future because firstly, it was extremely efficient. I was filling every class to the maximum and then if that class filled above that, I could switch it out with a different class. The mathematics of that is crazy and I’m actually applying that math in my apartment business all the time.

Jonathan:  One of the questions I want to ask you in a little bit is what translated between your previous career and what you do now, but I would like to ask you before that, how you got into real estate in the first place? Is this what led you into it, or were you already doing investing on the side? What was the relationship?

Neal:  No. This first one didn’t do it for me. I loved doing it. It was phenomenal, but I got very busy with my business. The business was growing. It was the second time. We moved in in July 2004. In two years, I had maxed the entire campus out. It was just packed to the max and my business couldn’t grow anymore. There was a building behind us, and it was now available for six-and-a-half-million bucks, thanks to us going in there, the value of that building had gone up. The building was larger, construction costs had gone up, we could no longer afford to do it all.

I go back to my boss and we come up with this crazy idea, which was we are going to condominiumize this building in offices. We’re going to chop it up into offices of 2,000 square feet each and we’re going to convince doctors in Fremont to buy those 2,000-square-feet suites, as we buy the building, and then we’re going to rent it back from them.

We go through this whole process. We do it, it works beautifully. The doctors loved the fact that we did all the work without ever charging an acquisition fee or a development fee, which I realized should have been $400,000, we didn’t charge a cent. And then we did all the work, and then not only did we do the work and build the building, we also rented it back from them. Now, 12 years later, they’ve still got a tenant. They haven’t had a day of vacancy for 12 years.

This was like an insane win/win/win/win. I bought one of the suites myself, so I was personally involved in it. I built the whole thing. My business benefited, my students benefited, and all those lawyers benefited.

What I ended up doing, Jonathan, is a syndication. I probably broke every syndication rule in existence because I didn’t even know that a thing called syndication existed, but that’s exactly what I did. I brought in investors and sold pieces of the business to them. We did it, it was crazy successful. By the time the building was all said and done, we’d already rented half the suites back and we rented the remaining back over the next year.

This time, the bug bit me. Because I was like, “Wow, I’m making so much money as one of the landlords that owns this 2,000-square-foot suite. Look at what that K1 looks like! Man, which depreciation is crazy. I’m paying 54% a year in taxes, this is what I’ve got to do.”

At that point, I made a mistake. I should’ve jumped into multifamily, because I’m a scale guy. I’m all about how do I manage 400 people or how do I manage 2,000 units, that’s today. Back then, I really understood scale. I should’ve gone to multifamily, but I didn’t. I chickened out and went the single family route. Timing was great. Started in 2008, bought 10 single families in California. I still own 9 of them. Then ran out of loans, refinanced, got my wife’s name off. Went to Chicago, bought 10 triplexes. Loved the scale of the triplexes, hated the location, so started teaching classes about how to pick the best cities and neighborhoods in the U.S.

I’m a data scientist, not by profession, but by nature. I look at everything as numbers. I’m one of those crazy people that will look at a grid of numbers and see 17 different patterns and start writing about them. I could see patterns almost immediately in demographic trends and how they were related to real estate success.

I started talking about that. I started teaching about that. Then I invested a million dollars of my money into other people’s passive syndications and then I started helping those people to lease up their properties because I’m an internet marketing expert. This was 2010, ’11, the properties were doing poorly. I helped them. They loved my help because the properties went completely insane and I started getting crazy cash flow from them. So, then they came back to me and said, “How can we help you?” I said, “I want to learn multifamily because in a couple years, I’m going to sell my business and I want to buy large apartment buildings for myself. Not for my investors, but just for myself,” and they helped me.

I learn an incredible amount from them, but the problem, Jonathan, was I was still two years away from selling my business and I knew that the stuff that they were teaching me was in no course and no podcast, it wasn’t in any book. It was the nitty-gritty of managing properties, eight different companies. I was sitting in their property management calls and learning crazy stuff and I said, “I’m going to forget all this stuff.”

I opened a Meetup inside of my college campus and started teaching all that stuff. People loved it, because I had nothing to sell. I had nothing to sell. I told people, I’m the Chief Operations Officer of the business that you’re standing in right now. I have nothing to sell, but this is what I’m learning, it’s pretty incredible. Here’s what I’m learning from my single family portfolio of 35 units. Here’s how I’m applying the scaled stuff that I’m learning from people that have 10,000 units. And here’s how it’s working.

I would basically just do this every month and the audience just sort of mushroomed and I became sort of a micro-celebrity and before I knew it, I was on podcasts and I was being asked to present at conferences. I started inventing techniques, including revenue management techniques and sharing that at the Meetup. It sort of just snowballed from there and the timing was perfect. By the time all this stuff was happening, my company was ready from sale, so boom, I transitioned into real estate.

Jonathan:  I really want to know, backing up, you said you were helping these people to help fill their properties back at a time where they were having some trouble with this.

I want you to talk about that. What were the problems they were having and how did you solve them?

Neal:  Imagine 2010, 2011, obviously at that point in time, there was significant delinquency, but operators were afraid to let people go because the occupancy was a record low.

Jonathan:  Now, where was this?

Neal:  These properties are mostly in the southeast, Dallas and Florida and so on and so forth. So, I went in there and I said, “I did a survey. I’m one of your investors, I gave you $100,000. I did a survey and your property is not as visible on the internet.” Some of these techniques are now known to people in 2019, but they weren’t known to people in 2010. These are very friendly syndicators.

I interviewed their marketing staff. They were basically paying for expensive color laser printers and printing stuff out in color and then taking them to Starbucks. I was like, this is nonsense. “You guys, your visibility on the internet is zero. There’s no use of Facebook. There’s no use of RentLinx. What about Zillow Rental Manager?” Some of these people didn’t even know that these tools existed. I knew them because I was at 100% occupancy on my 35 personal units and I was getting 4 times as many leads that I could deal with, so I was raising rents all the time. So, I was puzzled.

I went in there and said, “Look, I would like to help you do digital marketing. It’s not just marketing for tenants. I’d like to help you track the process of these people, the prospective tenants, as they come into your ecosystem. How many of those leads turn into appointments? How many of the appointments turn into shows or tours? How many of those turn into applications and how many of those turn into leases? I want to help you track this whole system, because I believe that you’re very inefficient.”

A lot of them said, “Yeah, I think so. I think this is great.” I came in. The early focus was on lead flow and we generated thousands and thousands of leads for them. Then after that, I started looking at basically the other pieces. Once you get the leads, what do you do with those leads? Today, that system, I teach it all over the U.S. is called LASAL. It is a very powerful revenue management system that’s in use in all of my properties.

Jonathan:  Just so I understand, is this like a software system that you sell or is this a technique that you teach people? Explain it a little bit more, your LASAL system.

Neal:  The LASAL system is free. It is not a software system. It is a set of best practices and metrics. The word LASAL is five letters, L-A-S-A-L. Each one of those represents a metric. Between those five letters, there are four ratios. LASAL is a system that basically manages those five metrics and the four ratios in between them.

LASAL stands for L for leads, A for appointments, S for shows, A for applications, and L for leases. This is the ecosystem of leasing.

What I have found, Jonathan, and very few syndicators know this, the most important thing that an asset manager can do to improve the performance of their property is not to cut expenses. I am an experimenter and I can tell you, it is to drive top line revenue. How do you drive top line revenue? By doing revenue management and very, very few asset managers do revenue management.

The LASAL system is a set of best practices and metrics that teaches you how to do revenue management. What should the ratios be? If you get 100 leads, how many of those should turn into appointments? If you get 30 appointments, how many of those should turn into shows? If you get 10 shows, how many of those should turn into applications? If you get 5 applications, how many of those should turn into leases? Those numbers vary, depending upon a number of factors. So, you have to answer questions like, how many units do I have available or how attractive is my property or how old is my property and are my units clean when I’m showing them? All of that is part of the LASAL system.

But if you implement the system and implement it correctly, you can double your leasing velocity. I challenge you to show me—you have these amazing underwriting spreadsheets, Jonathan—take those spreadsheets, double your leasing velocity on them, and you will notice not only is this better than anything else you could do for that property, it’s 10 times better.

Jonathan:  Well, explain that a little bit.

Neal:  Let’s say you have a property and it’s receiving 100 leads. These are tenant leads. They’re coming in over the phone, they’re coming in over the internet.

You’re an apartment asset manager, so you’re running this property. The question I would ask you is:  Jonathan, how many of these 100 leads that you get every week for your property—let’s say it’s a 250-unit property, everything that I do, all the examples are based on 250 units. Jonathan, how many of these people actually turn into appointments? The answer is, “Oh, well, our property manager shows us this dashboard,” and let’s say Jonathan says, “35 of these people turn into appointments.”

Is that a good number, Jonathan? Is that a bad number? Why is it a good number? Why is it a bad number? What is your property manager doing to turn these leads into appointments.

At our properties, we experiment with the ratios and we track them for every single property. What we find is, that the L to A ratio, the first of the four ratios, is very highly dependent upon when the property manager called them back. If it’s an incoming phone call, obviously, it’s a 9 to 5 and you picked up the phone, well, that’s immediate, right? Because they called you, you talked with them, that’s great. But 95% of the leads delivered today are not like that. Either they’re leads where they called and you weren’t available, so they left a voicemail, or they didn’t leave a voicemail so all you have is a phone number, or it was an internet lead, in which case you have to call them back to schedule an appointment.

Here’s what we found, Jonathan, this is years of experiments:  The leads from the internet are gold leads in the first five minutes. They are silver leads in the next 55  minutes. They are bronze leads for the rest of the day, and then they’re iron. My property managers call them shit leads. The next day, they’re not even worth calling. Why? Because nobody on the internet fills out one form. The average person fills out between 5 and 10 forms. By the next day, he’s already got 2 or 3 appointments. As far as he’s concerned, you calling him now is an annoyance.

When we start to track that and we start to tell our leasing agents to reduce the amount of time from incoming lead to outbound call to the customer, we notice our L to A ratio steadily climbing.

Jonathan:  How did you get them to decrease the time between the lead coming in and then making that call?

Neal:  Well, firstly, the short answer is, we track it and we provide a dashboard to our property managers and to the leasing agent and we ask them to improve. Then we also provide monetary incentives. At some of our properties, a leasing agent receives a $1 benefit every time they call in the golden five minutes. They get a buck. Which may not be a lot, but some kind of a carrot works really well with a stick. It’s primarily a stick of talking to the leasing agent through the property manager and saying, “Please understand that we want you to call these people back.”

At our properties, if someone fills out an internet form, it is no different from a person that just walked in through that door. You see that door in the front of your leasing office? This person has just walked in through your door. Answer this question:  If somebody walked in through that door right now and you were talking with me, wouldn’t you break off, get up and go greet them? Yes. Well, why wouldn’t you do that for an internet lead? It is not any different. In fact, it’s more important, much more important, to call the internet lead than to talk to the person that walked in through your door. Because the guy that walked in through your door is not filling out 12 more forms to your competitors. He’s here. You have his full attention. But the person that’s filling out a form, if you call him back right now, he’s going to stop filling out forms for your competitor and start listening to you. It’s critical that you get out and talk with them. It’s about training, it’s about expectations, and yes, it is about carrot and stick.

Jonathan:  How did you measure this? Did you get people, like your leasing agents, to be filling out forms or did you have some kind of electronic way of capturing this information?

Neal:  The leasing agents wouldn’t do it, so it’s all electronic. Essentially, the way the system is designed is, we have implemented processes. They’re very complicated, Jonathan, they’re not simple, so that every incoming lead is first coming to us and then going to the property manager. In case of incoming phone calls and outbound phone calls, we use a digital call system at the property which has a call log, which is visible on the internet.

One of my army of virtual assistants goes in there, grabs the call logs, grabs all of those leads, looks at them, and then creates a dashboard that says, okay, on average, this particular property, the outbound call is 1 hour and 12 minutes on average from inbound leads. While this other property, they’re getting to it in 23 minutes. This other property, they’re taking four hours to get back to people.

That gives me the data that I need to provide feedback.

Jonathan:  Then tell me, how does this trickle down through the funnel to revenue? You were talking about leasing velocity. Explain how the increase in leasing velocity adds to your top line, you said, is what’s important for making more than the bottom line. How does this increase in velocity lead to your top line? If you need to walk through the rest of the LASAL system, that’s great.

Neal:  Let me give you the answer and we’ll walk through it as well. Here’s a real example, the numbers are rounded. I opened it up on my screen. Here’s a real example, real property. 100 leads was leading to 30 appointments. That’s the 30% L to A ratio. Those 30 appointments were leading to 9 people showing up at the property. Once again, roughly 30%. Those 9 shows were leading to 3 applications and those 3 applications were leading to 1-1/2 lease.

This is a tough property. We needed a lot of leads. Not all properties are like that. Usually you get more leads than that, but this was a tough property so I’m giving you an example of not a great, easy-to-lease property. I’m giving you one that was a pain in the ass to lease. 100 leads led to 1.5 lease.

Now, after implementation of the LASAL system, 100 leads, instead of 30 appointments, led to 40 appointments. Now, those 30 appointments were leading to 9 shows, when now the 40 are leading to 16. Now our shows have gone up from 9 to 16 per week. Those 16 shows are now leading to 6 apps. Before, the 9 shows were leading to 3 apps. And those 6 apps have now led to 3.5 leases a week, where the 3 applications before were leading to 1.5.

We went from 1.5 leases a week to 3.5 leases a week. 2 leases a week is 100 leases a year.

Jonathan:  How much were you cutting your vacancy by that increase?

Neal:  Obviously, you can’t do this endlessly, right? Because if the property was already at 95%, you can only really go up to about 97, 98, because that’s really the practical limit of occupancy.

Jonathan:  Right. You get to a point of just frictional occupant vacancy, where people are just moving in and out and you can’t cut your turn time any further.

Neal:  Exactly. This property was at 84% and we took it to 97. We had a 13% increase in occupancy.

Let me give you a number. On a 250-unit property, if you average 84% for 5 years, versus if you average 97%, it’s about $3 million of investor equity. That difference, just that difference, is $3 million, assuming investors put in $5 million.

Jonathan:  That’s incredible. Further digging down into the LASAL system, going to the next ratio then, I mean, you talked about the improvement at this particular property, are these other ratios improving simply because when people get called back quickly, they feel better about the whole process or are you then doing something else at the next step to increase in between the A and the S?

Neal:  There’s things that we’re doing at every single step.

Jonathan:  Tell me some of the things that you’re doing.

Neal:  Let me answer that first part of your question. You don’t call people back quickly, so they feel good about themselves. You call them back quickly so that they stop filling out more forms for your competitors. That’s the key. Regardless of whether they fill out 5 forms or 50, they are only going to set 2 appointments. I’ve done experimentation on it, people only set 2 appointments.

After the first 2 appointments, they will simply ignore all incoming calls from a property. You want to be one of those first two calls. Does that make sense?

Jonathan:  Yeah.

Neal:  That’s what’s really increasing your appointment rate. That’s the lead piece.

On the appointment side, the appointment ratio depends on what I just told you about, but also income requirements. You’re going to have to set a lower ratio if you’re doing 3X income. If you’re doing 2.5X income at your property, then you can set a higher ratio.

Also, unit availability. If you advertise a studio and that studio is now gone, or you only have a 1-bed available, well, that’s going to affect it.

But most importantly, sales ability. The L to A ratio, when you’re talking with them on the phone, the expectation as an asset manager that you have to set with your leasing agent its, you’re a salesperson. So many of them think they’re customer service. They’re not. If they keep thinking that, fire them and get somebody else that thinks that they’re a salesperson because that really drives up your L to A ratios.

The other thing that drives it up? Longer hours. Saturday open. At a lot of our properties that are having trouble getting leased up, one of the best things that you can do is, don’t open at 9:00 in the morning, open at 8:00. Don’t close at 5:00, close at 6:30. Because peak hours are early in the morning and late in the evening, when you’re typically not open. Bring in people on Saturday. Saturday is a very crowded day.

Once again, the focus is on getting to the customer very quickly. You can also do monetary incentives, like the dollar that we give out. That one basically boosts your appointments. Your shows are boosted by reminder calls.

Let me ask you this, Jonathan, how many people do you know, how many syndicators do you know that ask this question from their property manager:  Can you show me proof that if you scheduled 30 appointments this week, that your leasing agent made 30 phone calls and 30 texts to those people, phone calls the day before, text messages 90 minutes before the visit. Show me proof that all 30 of those people received a reminder call and text. As far as I know, no one in the U.S. will be able to give you that proof.

But understand that the moment you do this, your show rate is going to jump by 20-25%. And these numbers, 20-25%, is a very huge amount of profit. Maybe your property manager doesn’t care about it, but at 6-cap, you care about these things a lot.

Jonathan:  What’s the next step, going further down the line?

Neal:  When you go from the show to the app, the show to app is dependent upon the cleanliness of the unit. So many units are shown when they are complete, but the definition of complete at most properties is well, you don’t have basically pieces of marble lying around or granite or whatever it is. The appliances are all in there.

My definition of the unit is, “It’s completely wiped down and clean.” This is very uncommon. Most of the time, those units are shown dirty. Why? Because the property manager says, “Well, until somebody actually signs an app, I’m not going to wipe it down, it’s a lot of work.” The answer should always be, “Yes, but that is going to reduce my leasing velocity. Do not show a unit that’s not completely clean.” That is the first thing that boosts my S to A ratio.

The second thing? Sales ability. Once again, the leasing agent is selling, but now they’re not selling on the phone, they’re selling in person. You need to ensure that they have the right techniques, they have the right questions. There are some wonderful apartment sales courses. I can’t remember for the moment what company it is, but it’s the same company that everybody uses, and all of your leasing agents should be going through it if you’re having trouble.

Then the last piece of it is, whoever made that initial phone call to the person to invite him to the property, did they pre-filter them correctly? If they didn’t filter them, if they didn’t talk about income requirements, if they didn’t talk about your pet requirements, didn’t talk about the bankruptcy or eviction requirements that you’ve got. Hopefully no bankruptcy and eviction, then your S to A ratio is going to be really low. Because once they get to the property and talk with you again, they realize, “Oh my god, I have an eviction, these people are not going to do this.”

You didn’t pre-filter this person. You allowed him to get to this point, waste your time, waste their time, and your S to A dropped. This ratio, if you track it, shows you whether the person that made the initial call is doing their job properly.

We also boost S to A ratio, the show to appointment ratio, the show to application ratio, by mandating callbacks for qualified prospects. You had 20 people that visited the property, 5 signed apps. Of the remaining 15, 5 were qualified but chose not to fill out an app. Probably because they were going to go see another unit that same day.

Well, have you ever checked to see if your property manager is mandating that the leasing agent call them back the next day? These are called callbacks. They are set in AppFolio, they are set in Yardi. Nobody checks. All of this is just money that we’re wasting because we think that the property manager is doing it, but I’ve never found a property manager to actually be doing it.

That’s where your S to A ratio is boosted.

Then the last piece is your applications that turn into leases. We call it A to L. The short answer, the only way to fix that one, there’s only one way, but it’s super powerful. The A to L ratio is influenced by processing time. The amount of time you took to process the application greatly influences the number of people that will lease. Why? Because of something known as buyer’s remorse. The moment they fill out an application and pay $35, they start feeling a remorse. Is this the right place? Should I be going? Should I even be leaving my existing place? Or, will these people like me? What will the landlord say about me when they call to check? What will the employer say when they call to check my employment level? People start doubting themselves.

The faster you go through this process, the less likely that they’re going to jump out. Also, it gives them less time to go and look at other properties. If you can speed up the processing time, your A to L ratio goes up.

Jonathan:  What are your golden times then—you talked about that on the turnaround from the intake at this final stage, what have you found are kind of like the golden time to be processing?

Neal:  48 hours. You want to process within 48 hours.

Jonathan:  Well, this is really amazing. I mean, we just learned an incredible amount just by this part of the conversation. I know that you have other things to share as well, because before we got onto the recording part of this call, we were talking a bit about your view of the market, which I think we share, but you have a different take on things, which is that you can really focus on the top line and be adding more revenue to your property, and thereby increasing returns and making pretty solid deals out of ones that are just “overpaying from the market.”

What are the other things that you’re doing once you take over a property to add more value and get more revenue out of them?

Neal:  Basic things, like measuring. I’m benchmarking my properties against each other. I find that not enough people are benchmarking.

One of the things that I do that not enough people do is pay for the best photographer in your market. A lot of people are like, “Yeah, I brought in a pro.” No, I mean, find an exquisitely good photographer. This is something that I’ve looked at before and I want to emphasize this. You bought a property for $10 million, maybe $20 million. Now you’re basically bringing in the photographer that’s basically lowest cost. Somebody who is going to come in and take pictures of the property for $200. It’s a very, very stupid thing to do.

The guy that basically charges $600, that’s a real estate expert, that guy knows something known as exposure. Exposure allows you to bring in more light into the camera. The same picture taken by two different photographers can look remarkably different. This person also is going to boost the contrast ratio and boost the saturation.

The difference between a $200 photographer and a $600 photographer over 5 years, in terms of the total number of leads you get and the total number of leases you sign, is ridiculous.

Jonathan:  Have you measured this, too?

Neal:  Yes, we have. We had a new property, a brand-new property called Art City Center. What we did with Art City Center, was we were using a lead generation system that we were paying for and what we did was, the property manager there was insistent that photographs don’t make a difference insofar as he said, “Well, as long as you have good pictures, you have good pictures. We’ve got good pictures. There’s no difference. There’s absolutely no difference if I go out and spend another $500 on a photographer, it’s going to be the same.”

And I was like, “No, there is a difference.” He challenged me and said, “How can you possibly measure the difference?” And I said, “What I’m going to do is, buy six different ads and I’m going to use the pictures that your $100 photographer put on the first ads. Then I’m going to pay personally for a $600 photographer. He’s going to come in, he’s going to take the pictures and I’m going to put those pictures on the next three ads.”

These ads are all running simultaneously. At the end of the month, the property had received an additional run-rate of 32 additional leads simply from the better pictures. Got it?

If the old ones, if I’d gone basically—there were six different ads running. Three were running with the old pictures, three were running with the new pictures. Let’s say I took the newer pictures and stuck them on the three that were running old pictures, I’d get 32 more leads.

Based on the LASAL system I know, that if I get 32 additional leads, I’m going to get 1 to 2 more leases. Now, this property wasn’t hard to lease up, but every property is hard to lease up, Jonathan, if you just keep increasing rent.

People tell me, “If the property is great, your system is not really useful.” I laugh at that. It’s useful all the time. If the property is at 97%, your job as an agent manager is to raise rents until you’re back at 92. Then use the LASAL system to get to 95. Now you’re making a lot more money. That is what you’re supposed to be doing. That’s your job. You’re an asset manager. Investors paid you to do this.

There’s no point at which it doesn’t work. What I found was, just taking phenomenally good pictures makes a very, very significant difference.

Jonathan:  Using those pictures, is this Facebook ads or Google ads or what are the ads you’re using?

Neal:  I think that one was Zillow Rental Manger, but I suppose that the concept applies to everything.

Jonathan:  But primarily sort of real-estate focused?

Neal:  Yeah.

Jonathan:  Anything else? Anything other things that you’re doing to boost your top line?

Neal:  No. These are primarily the sort of things that we’re doing on the top line piece. The bottom line, we do delinquency management, reputation management, and we’re not letting the property manager do those. They just fine that they’re not good at it.

Jonathan:  That reminds me of a question I did have. What are you doing on the screening end of things? One of the things that I’ve had trouble with at some of the properties we owned is you get people in there, but then they’re not the right people because they’re not qualified or even if they appear to be qualified, based on sort of income to metrics and stuff, they still wind up not paying on time.

What are you doing to manage that piece of the puzzle?

Neal:  There’s a few things there that I can’t talk about on a podcast. There are fair housing laws and there’s interpretations of fair housing laws that are legal, legitimate, but could still get me flamed on the internet.

All I’ll say is that as an asset manager, as a property manager, if you truly know and understand the fair housing laws, there are other methods that are not common that I believe are more powerful than the typical income method. I find the income method to be insufficient.

Jonathan:  I think so, too. I mean, I believe it’s an inadequate picture of whether a person can actually afford their rent.

That aside, just on the screening end of things though, are you increasing credit ratings? Are you looking at anything in particular? Any kind of data that says that this person is or is not a good risk? I mean, you mentioned before whether they have bankruptcies and evictions, those are pretty common. But anything else? Any sort of like magical data that you’re looking at that helps you make this decision that again is keeping you on the right side of fair housing laws?

Neal:  I can’t talk about it publicly.

Jonathan:  Anything else that you do, are you implementing—I hear lots of people talking about stuff like adding covered parking or kinds of amenities that you can add to increase your revenue, what about those things that you do?

Neal:  I think that in my mind, I’m trying to give you answers of things that you haven’t heard 100 million times before in your podcast. I think amenities, laundry, those sorts of systems, one of the ones that I’m using at one of my properties which is becoming very powerful, is cameras.

Do you have any properties, Jonathan, with cameras?

Jonathan:  No, we don’t have cameras at the properties.

Neal:  Got it. But people do implement them, right? What do you think they implement the cameras for?

Jonathan:  It’s usually just for security.

Neal:  Great. I hate that. That, to me, is a terrible answer because the camera, if all you really wanted security was, you don’t even have to buy cameras. You can buy fake cameras from eBay.

I don’t use cameras at my properties, or at least the recent ones where I’ve implemented this system for security purposes. I use them to catch people that are not paying pet rent. My cameras are not looking at the driveways and at the parking lots. They are looking at entrances to the property so that I can basically h have assigned virtual assistants to track the people that are going in and have pets with them.

We’re ignoring people that don’t have pets. We’re looking at people that have pets and instead of having cameras just outside the property looking at the parking lot, we also have cameras inside in the hallways. Some of our properties have external hallways, so those are really easy. But the ones that have internal hallways, we’ve got cameras there.

We don’t need a camera to recognize a face. We’re not trying to find a thief. We just need a camera to recognize a person, even from 50 or 100 feet away, just by their general profile. They’re also very, very easy to recognize because the pet is very clearly visible. It’s a cat, it’s a dog, it’s multiple dogs. They’re even visible if the camera is 100 feet away.

Think about this. What I’m about to say is extremely complex, but you can track people to their door and go look in AppFolio to see if there’s a pet rent.

Doing it? The actual implementation was hell. The benefits? Ridiculous. 50% of all pets are unregistered.

Jonathan:  Well, you just solved another mystery for me because I had always wondered how it was that you would enforce your pet rent requirements unless you’re doing some kind of pet census, going door to door and trying to see if anybody has got pets. This seems like a much better system.

Why was the implementation so difficult?

Neal:  Tracking people is not easy. It’s a large property and the cameras are not everywhere. The angles are not everywhere. The process of installing cameras to cover angles so that you can basically cover each person to each door required a great deal of planning.

Then after that, we basically, every month, have to spend money on a very well-trained virtual assistant to basically follow people to their door.

Also, let’s say in a camera you’re seeing a long hallway. There’s 10 doors to the left and 10 doors to the right. The person is stopping two-thirds of the way down and entering that. It’s not easy to track that back to a particular door number because in the camera, you can’t see the door number. There may not even be a number on the door.

The angles of the camera will not allow you to see a door number, so you need a 2D map of the property that is tied back to the video from this particular camera. By taking screen shots of each camera, you have to basically say, “Okay, you see this screen shot? That first door, that’s 114. That second door is 116. The third door is 118. If this person is going into 118, then I want you to go into AppFolio, go into 118, and click on the pet rent to see if there’s somebody there.”

That took a long time.

Jonathan:  And what was the upside of that? In terms of revenue, what did you see as an increase in terms of—once you implemented this system?

Neal:  40% increase in pet rent. Just so you know, that’s hundreds of thousands of dollars.

Jonathan:  That’s amazing. I would like to shift gears a little bit here and talk a bit more about the business of your business, shifting away from the business of the property itself. You mentioned before that you, if I recall correctly, you said you have about 1,000 investors in your platform, 400 of whom have actually invested in deals with you. How did you grow your syndication business to that size?

Neal:  A lot of it is outreach. I teach a very large number of courses, the LASAL system is one of them. I teach courses on how to pick the best cities in the United States using a mathematical value system, a metric system. I teach courses on how to pick the best neighborhoods in cities that you’ve already picked using the city system, and about two dozen other courses.

The vast majority of my courses are not paid. They’re not like a bootcamp. I do teach a bootcamp, but the vast majority of it is outreach. I’m teaching in the San Francisco Bay Area, I’m teaching at conferences throughout the U.S. constantly. About 25 conferences a year and within the San Francisco Bay Area, I’m teaching at least once a week.

I also have a large number of people attending webinars from other people that have similar thought patterns to mind, like people that are driven by the use of data to generate profit and I bring them onto my platform,, that’s Multifamily followed by the letter U dot com. We have 100 free webinars a year. I absolutely do not allow anything that’s a pitch. They have to send it to me, the Power Point deck. We tend to reject the deck about 80% of the time and ask them to fix it and reduce the amount of pitch and increase the amount of educational content.

Sometimes we’ll say, “Okay, all of this stuff is simply telling people what you do and the amazing things you can do, but they’re not learning anything unless they buy something from you.”

We have 100 of those webinars. Actually, this is a very webinar week. On Monday this week, I taught the LASAL system and I had about 500 people registered for that. Then on Tuesday, Anna Myers, my VP, co-hosted a cost segregation company that was telling us about the benefits of cost segregation. A lot of people understand that cost segregation is beneficial, but they don’t quite know how. They don’t know how to explain that to their investors. We had a guy named Yonah that came in and explained that.

Then tonight, I have about 500 people signed up because I’m talking with Yaakov Smart, who is a LinkedIn marketing expert. He basically generates investment leads through LinkedIn. He’s going to spend an hour basically talking about how to use LinkedIn for this purpose.

Essentially, my secret sauce is a vast education network.

Jonathan:  It’s the teach-and-grow-rich model.

Neal:  It is and it’s a pitch-free model. I don’t care whether people come and join me today or come and join me three years from now. We just continue to teach and a certain percentage of them turn into investors each year. It’s a very slow model, so it’s not really for everyone.

If you have a property to close in the next 60 days, it’s the worst model that you can imagine. But if you’ve been doing it for years, there will always be enough people for that next property.

Jonathan:  It’s a slow model, but it seems to me it’s a model in which you are generating a lot of good will and a lot of trust and loyalty, so that the people who do come to you will stick with you for the long haul.

Neal:  That’s what I see.

Jonathan:  You don’t have to overcome their resistance at the trust level, because you’ve already established it. You’ve dug your well before you needed the water.

Neal:  Exactly. I think that in the long run, my yield, as you can tell by now, I’m doing measurements of yield on everything in my life. I can do a podcast telling you and give you pictures on how I measure yield on my tomatoes. I’m a backyard tomato farmer, I use elevated beds, and I track they yield from the ones that are lit with red lights, the ones that are lit with green lights. I’m calculating yield.

I can tell you, my yield on lead to investor is very high, but over an extended period of time. If I measure it over two years, I beat pretty much everyone in the industry. If I measure it over two months, everybody in the industry beats me.

Jonathan:  How did you develop this system? How did you develop this Multifamily University?

Neal:  A lot of it is really experimentation, but a strong desire to teach. The word abundance is thrown out in abundance by people who truly don’t believe in it. I listen to a lot of podcasts and the truth is, that you have to listen to eight, nine podcasts before you find one where there’s true value being provided in the podcast instead of the person just talking about providing value if you join him as an investor or if you sign up for a course.

My feedback has always been, the true abundance is not abundant at all. What I found, is that if you start giving true abundance, you will actually attract other people that are like you and those people, I’ve befriended them, and I’ve made them part of my MultifamilyU platform.

For example, Ingo Winzer is the CEO of Local Market Monitor, which is the best single family predictive analytics tool. If you want to know what cities to buy in, what neighborhoods to buy in, you couldn’t do better than Local Market Monitor. But every time Ingo comes on to my platform, he gives away his list of best 30 cities in the webinar. And he tells you exactly how he calculated it.

I’m looking for people that are truly abundant. If you look long enough, you’re going to build a terrific community. What’s even nice, is your investors, and all the members of your community, feel the same way. Birds of a feather.

Jonathan:  Yeah, you track the people who are like you, don’t you?

Neal:  Yeah.

Jonathan:  Over the long haul, I think. You can fool people in the short term sometimes, but over the long run, you attract the tribe that mirrors who you are.

I could actually go on speaking with you for another hour about this and many other topics and maybe we’ll do this offline sometime, but we have run up against our allotted time for this. Before we go, I just wanted to ask you, we covered a lot of stuff, but is there anything that we didn’t cover that you think is really important for the audience to know before you go?

Neal:  I’d just like to invite them, these hundred-plus webinars a year that we run are all free. There’s no obligation to pay for anything. They’re at I like talking with people that are running experiments. As you can tell, I’m running experiments. What you’re seeing are the 10% or 20% that succeed, not the 80 or 90% that fail. If you’re a syndicator and you’re interested in running other experiments, I have dozens of them lined up, so I’d love to talk with you. My email is Neal, N-E-A-L, that’s the Irish spelling, N-E-A-L, at MultifamilyU dot com. I’d love to chat with you.

Jonathan:  Well, Neal, thank you so much. This has been, honestly, one of the best interviews I’ve conducted in the whole time I’ve been running this podcast. I’m really happy that we finally were able to connect, and I really appreciate the time that you took today.

Neal:  Thank you, Jonathan. Delighted to be here.

Jonathan:  I hope you enjoyed my interview with Neal Bawa. Please check out, where Neal gives 100 free webinars a year on how to invest successfully in multifamily real estate.

You can also email him directly at That’s N-E-A-L for Neal.

We linked all this in the show notes, so be sure to go to to get those links. Remember, that’s dot net. While you’re there, don’t miss out on your three-stage booster. A collection of vital tools just for Real Estate Launchpad listeners, which can be found at Download it today.

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