The Deal Scout: From MD to Entrepreneur with Dr. Pranay Parikh

by | Nov 5, 2022 | Media Feature | 0 comments

Recently ,Dr. Pranay Parikh was featured in The Deal Scout. Here is the summary of the podcast episode.

On this episode of the Deal Scout we chat with an MD who invests in Multifamily Apartment 150+ units in business friendly states with steady cash flow and conservative debt.

Our guest is a medical doctor that also does real estate syndications and has bought over 200 million of real estate in the past 16 months

Why start in real estate?

How do you balance medicine and real estate?

Do you still practice medicine?

Why is real estate a good investment for doctors?

What unique challenges have you faced with working with other doctor.

 

LISTEN TO THE FULL EPISODE >>

 

FULL TRANSCRIPT

Josh
Welcome to the deal. Scout. On today’s show, we’re going to have a conversation from someone who went from MD from a doctor to entrepreneur, investor, and now helping other doctors team chat game. Dr. Perne, welcome to the show.

Dr Pranay
Hey, Josh. Thanks for having me.

Josh
Absolutely. Where do you call home?

Dr Pranay
Los Angeles, California.

Josh
Super cool. All right, so you guys are 3 hours behind us. It’s 03:00 every morning, it’s your lunchtime, and you’re taking the time to talk deals. I appreciate that. So, Dr. PR Day, why don’t you tell us about who you are?

Dr Pranay
Yeah, so I am a medical doctor. As you mentioned, the physician still practice, which a lot of people are surprised. But, I love medicine, but what I wanted and what I’ve thought about is freedom and flexibility. Unfortunately, regardless of the paycheck, right now I’m trading my time for money, and I wanted to detach that when I realized that either business or real estate would be able to help me do that. I started with real estate and eventually turned that into a real estate business. You know. That’s different than just investing in real estate. Which I’m happy to talk about. Now I realize that it’s a lot of work and I kind of wish someone else would do it all for me. There wasn’t with someone doing it in a way that I wanted to do with kind of the same integrity that I practiced medicine with.

Dr Pranay
Really a bespoke experience. We decided to create that, and fortunately, we bought about $200 million worth of real estate in the past 16 months. We’ve been fortunate that other people have believed in what we’re doing and help us grow.

Josh
Awesome work, man. Really great job. Now, this might just be like this something that I’ve heard from my own doctor friends. They’re typically really good at making money, right? Live, they go to school and they make all this money, and then they’re paying off their debts and then they bought some cars and they’re paying off the cars and maybe a divorce or two, and they’re paying that off, and they’re doing this, and they look at the end of the day and they make great money and they go, where did it all go? And where can I invest? Because, like one of my neighbors, I have no time. All right, so being a doctor yourself, have you experienced that from your peers in the industry?

Dr Pranay
Yes. What happens to a lot of people is they get overwhelmed. Right. And you’ve heard this in analysis, paralysis. Right. What our goal was really to have one deal available at the time. It’s vetted by us. We partner with best in class, so it’s not a bunch of doctors that are doing real estate. We partner with people who are best in class. Most importantly, we negotiate, we vet the deal. Most importantly, and this is what separates us from other groups, is that we have a full asset management team. That means we’re looking at the property every week. We’re visiting the property as much as often as every two weeks. We’re talking property management. We’re looking at the financials. Actually, some of the partners that we partnered with, they’re like, we don’t even do all this. And we’re like, we don’t care. We want to do this.

Dr Pranay
Because we’re not looking at the day to day, I’m not calling maintenance, I’m not dealing with toilets and stuff, we’re really able to maximize profit and really look at the big picture.

Josh
Awesome. Before we go any further, because I just don’t want to forget you’re a fellow podcaster. Why don’t you give a shout out to your podcast?

Dr Pranay
Yeah. I have a podcast called From MD to Entrepreneur. I’ve realized that a lot of times, that flexibility, that freedom that people want, it’s created by business. Your podcast is very successful in multiple podcasts that you have, and you’ve created businesses from that, and it’s kind of a chicken and egg thing. Regardless of what you want to do, I think entrepreneurship and starting your business really gives you that freedom, even if that freedom is to talk to interesting people like Josh or go to events or get asked to talk on stage. You need a platform and you need someone that can act as an inspiration. I’ve had a ton of mentors and people really pulling me by the shoulders, not dragging me along the way. I created the podcast so that I can interview people in my circle and really ask how they did it and what skills that they have for someone that’s a physician entrepreneur.

Dr Pranay
Because most of the things about entrepreneurship are all about bootstrapping. I believe in working lean, but we doctors have some resources, but the biggest issue is we have no time. Right. How do you fit some entrepreneurship in when you’re working 80 hours a week? That’s kind of what we talk about, how to get that high yield and move the needle as much as you can without sacrificing your health, without sacrificing your time with your family. Because in the end, if you sacrifice all that, it doesn’t matter what kind of successes you get.

Josh
Yeah, man, so great. You talk about this on your show. What inspired you to start the show?

Dr Pranay
Yeah, I realized that I wanted to help people to make an impact, and right now this might change in the future, but there’s no monetization meaning. I don’t make any money from it, and I don’t see that happening in the near future. On a couple of goals. One, I wanted to talk to interesting people, and this gives me an avenue to be able to do that. Right. If I reached out to Josh and just say, hey, could I pick your brain? He’d want to do that, but he wouldn’t be able to because probably a million people a day has to take up his time. Right. If I say, hey, you want to get on my podcast? I’ll get on your podcast, all of a sudden we’re providing value to each other, and we become friends and so on. So number one. Two, I realized I just didn’t have the time to talk to as many doctors as reach out to me.

Dr Pranay
I make my calendar available to everyone, and I made a special page for your guests if they want to reach out to me. For those people, I just wasn’t able to impact as many lives as I wanted. I created the podcast so they can hear me talking to other people in real time, and then if they have any questions, they can email me or reach out.

Josh
Yeah. Now, what kind of physician are you? You’re an MD, but is there a specific area that you focus in?

Dr Pranay
Yeah. So I’m a hospitalist. My specialty is internal medicine, and it’s a relatively new profession. What that means is if you go to the hospital, say you break a leg or something else, and they say, hey, Josh, you got to stay tonight. Someone is going to take care of you, then I would be the doctor that sees you for that stay.

Josh
Super cool. Super cool. How long have you been doing that? I’m trying to get a gauge for how old you are. Dr. Pernez.

Dr Pranay
Yeah, I’ve been doing that for five years.

Josh
Cool.

Dr Pranay
It’s kind of fairly young.

Josh
You age really well.

Dr Pranay
Thank you.

Josh
Yeah, absolutely.

Dr Pranay
It’s because we’re hidden in an underground library for most of our life. In medicine.

Josh
Exactly. Awesome. All right, let’s go back to when you were middle school, high school. Did you always want to be a doctor, or what did you want to be when you were younger?

Dr Pranay
Yeah, so one of the few that always wanted to be a doctor, since really as early as I can remember. Just as importantly, I wanted to do a lot of other stuff, so I wanted to do medicine, but I didn’t want that to be my only identity. I did a lot of art shows. I really enjoyed art and curating art shows. I did art shows for charity. I wanted the podcast like you heard real estate and in the starting in medicine, it’s funny because in the starting, they say they want you to be nice and well rounded, but as soon as you get in, they’re like, yeah, all those hobbies you had? Forget about them because you’re not going to do them for the next ten years, right. Fortunately, after I graduated, I was able to pick them up. That’s why real estate is kind of a hobby in a business.

Dr Pranay
And the podcast is fun. It’s nice to be able to use other sides of my brain because I feel like now that I take that information and all those skills, I can take it back into medicine and it makes me a better doctor.

Josh
Yeah, I must warn you, doctor, that podcasting is addictive. You’re going to get in and you’re going to be driving down the road and you’re like, oh, I could interview that person. I could talk about this subject and it takes over, man. What has been one of your most memorable experiences while starting a podcast and growing it and doing what you’re doing?

Dr Pranay
Yeah, one of the most memorable things is how difficult it is. All the technical stuff is easy, but putting yourself out there, and that’s scary. What a lot of times, what a lot of people do. I actually interviewed a trauma expert recently, a mental trauma, emotional trauma, and she says our trauma leads us to playing small. That was profound to me because what I noticed in my life is that I would get these guests that are amazing, but maybe I wouldn’t promote it or I wouldn’t tell my friends to download it. And, I thought I was just being lazy, but no, it was because I was scared. I was scared of imposter syndrome. I was scared of putting myself out there. Really you have to do that and you’re doing the people that could be impacted by a disservice, by not putting it out there and making it easy for them to find.

Josh
Yeah, I tell you that the imposter syndrome kicks me in the face all the time because I’m interviewing you and all these people that are a lot smarter and more successful. I’m like, oh my gosh, what questions am I going to ask? And then we start a conversation. I’m like, wow, this is a human being who cares about other people. In most podcasters, this is my experience. Have a desire to give. We’re giving all this stuff for free. We’re putting ourselves out there, we’re hitting recording, and it’s a lot of work to do. So kudos to you. And it’s from MD to entrepreneur. So fellow Deal Scout listeners, live. Pause this, go over from MD to entrepreneur. Subscribe to that. Listen to this after this episode and then give an amazing five star review about Dr. Peter and all the things that he’s doing. All right, so back to you when you’re doing the podcast and now you’re tapping into different sides of your brain, the creative, the arts, the real estate, the analytical side, the MD side where it’s super scientific and there’s an art form in there live.

Josh
You’re tapping all sorts of side of your brain. Let’s start with art. What kind of art do you participate in your content creating here, but what other art do you do?

Dr Pranay
Yeah, so I’ve never been very artistic. I have difficulty with stick figures sometimes and when I’m trying to make a point to my patients so what I did earlier in life is I made friends with a lot of artists and kind of live vicariously through them. I thought, I know enough of these people and a lot of times they want to be able to give back, they want to give to charity, but they’re starving artists in the literal sense of the word. I thought, hey, let me make an art show, curate it, and half of the money goes to the artist so they can buy lunch and dinner and have a house to live in, but the other half goes to charity and I don’t take a personal cut, which I had no problem with. Everyone wins and the people who buy it get this great art and get this tax deduction.

Dr Pranay
I tried to just get people around and I really believe if you do the right thing for long enough, then this are going to work out.

Josh
Yeah. You mentioned our trauma leads us to playing small. What areas do you feel that you’re being called to or pulled to? To play at a bigger level.

Dr Pranay
Yeah. I’ve been fortunate that people believed in me at a time when I didn’t really have much to offer. My business partner offered me a chance to come into his brand that he had built up from scratch and he had tens of thousands of followers on social media across it. I was able to come in with some real estate knowledge and kind of take over the real estate part. I don’t think I could have started my own thing. I don’t think I could have done the podcast at all back then because I didn’t believe in myself and I didn’t have someone else’s faith. Now that I was able to kind of have someone in front of me. Kind of protect me from a lot of the imposter syndrome and believe in me. That now. Even though it’s still difficult. I’m able to come out with the podcast and help as many people and I hope that my message kind of resonates with someone else because it’s different than what a lot of people say in medicine.

Dr Pranay
A lot of people think as medicine. It is and it kind of is sometimes where it’s the end goal, right. You become an attendee and you have a good salary. For a lot of us, we’re just so used to having something to chase for, it’s like the coyote that gets the Road Runner, right? What do you do after that?

Josh
Yeah, man. What is your Road Runner? What are you chasing?

Dr Pranay
So I am chasing impact and legacy. I don’t need my name on the side of a wall or anything, but it’s about helping people. I thought, like we all do, how am I going to leave a lasting impact on this world? For a lot of people in medicine, it’s taking care of patients, which I do, but for other people, it’s doing research, right? Creating new medicines, new procedures, it just didn’t appeal to me. I did it, but it was like claws on a chalkboard. Instead, if I help other doctors that are really interested, really passionate about that, or I help them start their own business, and we’ve seen over the past couple of years, physician led businesses are really necessary in life and where we are. If I help them become successful, not worry about their life, be financially free, have the freedom to do what they want, that’s how I’m going to leave an impact.

Josh
Awesome work, ma’am. Awesome work. You graduated from medical school, you got practicing, you’re doing internal, and then what made you just go, what, I like this thing called freedom. I like doing medicine and I’m going to keep doing that, but I want this thing called Freedom Live. What sparked that thought to go, maybe I should look at doing something on the side or something else.

Dr Pranay
It started right away where I knew that it was really important what I did with my money and wanted it to grow so that I wasn’t dependent on my income. And I wanted Optionality. I was working a lot in the beginning. Normal shifts for a hospital is just 14 shifts, 12 hours a day. Over full time because we do twelve hour shifts. I was working about 20, so more than ten and a half. I told myself that every six months I would cut down two shifts. I had to figure out a way to do that. And in the starting it sucked, right? But I was living by myself. My girlfriend was long distance, so, I didn’t have anything better to do, so I just worked. Now I’m down to ten shifts, so I’m actually even under full time. Nice. And it’s probably still too much.

Dr Pranay
I probably will cut down to about seven to eight by the end of the year. At that point, medicine is going to be optional. People joke when I talk to them on the phone, our investors, they’re like, yeah, is medicine your side gig? It’s almost a little bit.

Josh
You’re doing real estate over here, which taps into a certain type of brain. You’re doing art and medicine for a guy like me. I love doing right. I love doing different things because it keeps me excited, it keeps me interested in life. I feel that the things that I learn over here, I’m plugging into different aspects of my business life. Right. With that, I’m going to ask this kind of both sides of the coin. How has real estate and you’re investing over here helped you to become a better doctor?

Dr Pranay
Yeah. One of those things that they don’t really explain in medical school, and it’s not to say anything wrong about them. It’s just they don’t have time. There’s just so much scientific knowledge. They’re saying it doubles every ten years, which isn’t that long of a time. There’s already a humongous amount of medical knowledge that you need to know, and to know that half of it is going to be obsolete in ten years, that’s kind of scary.

Josh
It’s scary.

Dr Pranay
But stuff like negotiation, right? We have to negotiate our dial, talking to people, and that’s really the art of medicine. That’s kind of the stuff that your patients remember. They don’t really remember the medications you give them, but they remember how you made them feel. We do them a disservice by not focusing on how we’re able to talk to them hand in hand about how and why to take their medications. A lot of times people will just say, hey, Josh, you got to take this blood pressure medication twice a day. Like, you know, blood pressure is important. I know blood pressure is important. You want to do it, but you probably don’t want to take it because the pills too big and probably tastes like crap, and that hurts both of us. Right. Live. I really want your blood pressure under control, and so do you.

Dr Pranay
It’s up to me to try to convince you to do that. Right. Because it’s difficult. It’s just like exercise, diet and all that stuff is difficult. If it was easy, anyone could do it. Right. We’d all have six packs if you walk around. Right. Negotiation is a big thing, like people skills and trying to help people. Another thing about podcast is asking good questions, sitting in silence. Right. Being able to get all this the correct information, that’s half my job. One of the reasons why AI isn’t going to replace us anytime soon. Yeah. If I feed every correct answer to the computer, yeah, they’re going to figure it out, but so could probably a five year old. Me asking you the right questions and inferring depending on what you’re saying and what I think live, that’s going to take a long time to do. That’s on the medicine side, what makes me better on everything else is that I’m a lifelong learner.

Dr Pranay
I’ve basically been studying my whole life and it hasn’t stopped in medicine. I’m still looking at new medications all the time, new procedures lately. This is awesome that chronic diseases like heart failure and diabetes have changed dramatically over the past five years. It’s changed more than the past 20 years, and that is great, but it’s also a ton more that we have to learn and teach ourselves. If you are a lifelong learner and you’re able to simulate information well, then you can really be good at everything eventually in enough time. That’s why I tell doctors, you guys are going to make great entrepreneurs because you’re able to pick up a new skill relatively quickly. The only issue is that a lot of times we don’t think that. We think that because we’re only in one lane, we have to stay in that lane. All the really successful people are in multiple label.

Dr Pranay
Look at Elon Musk, look at the virgin guy. They’re focusing one thing at a time, but they have a lot of things that they’re working on.

Josh
Yeah, I think that this is so awesome and I’m glad you’re doing this. When you find that you wanted to explore real estate, you said you’ve invested in real estate, you’ve invested in businesses, live. Where do you choose where to put your own money? Because you’re making good money now. How do you choose business versus real estate?

Dr Pranay
What I’ve been doing is my money is going into real estate, but my other and probably my biggest asset in my time is going into building businesses. So cool. That’s how I split it up. Because I’m dedicating so much sweat equity right time into business, I really want my investments to be as little work as possible. That’s why I invest in syndications, because someone else does the work for me. Unfortunately, that’s someone else’s me, because most of my investments are in my own deals. I know it’s in good hands between my partners and I explain for.

Josh
Fellow deal makers, maybe another doctor listening in. And you’re saying I invest in syndications? What the heck is that?

Dr Pranay
Yeah, fortunately, syndications have been a lot more popular these days. Basically what it is just a group of people coming together, putting in money and partnering with a real estate expert or a team of real estate experts. Our business is a little bit different. What we do is we split that up into two. We partner with the real estate expert and we tell them, hey, we want you to focus 100% on the real estate, and we will focus on bringing people together because we know a lot of doctors and dentists, and we will take care of the money because it’s two different skills. One is a lot of customer service, marketing on the raising money side. While the real estate is the real estate. There are definitely people that are good at both. Just like in medicine, a heart doctor is a lot better at controlling blood pressure or heart things than a brain doctor.

Dr Pranay
Right. They can do it, but it’s just better to specialize. So that’s what we do. Got it. Most importantly, we have a team that can if something happens, we can pick up the pieces and run the property, but because someone else is doing it, we’re really able to focus on maximizing profit.

Josh
You focus on bringing the people together who could fund projects, who could run a deal. Right. Allowing your experience in real estate, but operating vicariously through a real estate pro in that area. It sounds like that’s your specialty. You’re doing that in art, right? Live, you find these artists and you help raise money for charity, and you’re doing that in real estate. It seems like that at your core is who you are, putting people together.

Dr Pranay
Yeah, putting people together. The word I really like is leveraging. We really like to leverage people’s strengths and bring people together. We also have an location platform where we bring in experts and they are able to talk about self storage or something like that. On the podcast, it’s all about leveraging other people skills and what they’ve been through. To help people and kind of take them to the next level, what.

Josh
Would you say is your greatest strength in business?

Dr Pranay
I think my greatest strength is trying to take stuff that’s very complicated and make it easy to digest. And that’s what I try to do. It in the podcast. And, we have a course that teaches people all about syndication, from zero not knowing anything about real estate, never being a landlord, to being able to confidently invest, to vet, find vet and invest in deals. We created this years ago, back before syndications were really popular and I had to read a ton of books and it was painful. Put it in bite size chunks so that a normal person and a busy person could understand it and go through it, very cool.

Josh
So we know your strengths. What would you say is your greatest weakness that you have to depend on others for?

Dr Pranay
I think every strength really has a corresponding weakness. A lot of times I focus on big picture. I’m very creative and able to come up with all these solutions. One issue that I have is with implementation. I have problems getting some of the details in and that’s why we have a lot of virtual assistants. We have a project manager, we have a COO that really focuses on making sure the stuff gets done and it gets done properly. I’m in meetings to make sure that the plan is kind of followed.

Josh
Yeah. Awesome. Yeah. You’re a visionary, you’re visionary, you’re creative. I get it. 100% me too. All right, so you decided to get into real estate, right? You found a group that they’re like, hey, instead of go create it on your own, we’ve got some traction over here. We’ve got courses, we’ve got training programs, we’ve got syndication deals, and we’ve got opportunities. Why don’t you just come on over here? Why did you choose to go there versus just start your own from zero?

Dr Pranay
This is a question that we battle with often, and we’re creating the systems just in case that we want to do it. We believe that we only want to do something if we can be the best at it. We believe that a couple of years ago when we started, we couldn’t have been the best. There were people that just so much better in them and we’ve really jumped and leapfrogged over where were. We believed at the time the best thing we could do was partner with people and learn everything that they know. And, now we’re so much ahead. We’ve done coaching, we’ve done all this stuff and we have systems in place now that even they don’t have. And so we’re pretty proud of it. Potentially maybe in the future we do our own deals, but we have all the infrastructure in place that we could really best in class and best in class transparency, communication, and asset management.

Dr Pranay
Now we can really say that we’re going to bring something new to the table. And some people ask us that. We do multifamily value add, meaning we buy big apartment complex, we do some renovations and then we sell it. It’s relatively simple. I tell people it’s fix and flip in a much larger scale, right?

Josh
Yeah.

Dr Pranay
People will want to want us to do hotels or want us to do self storage. We tell Team Chat there are great people doing it and I wouldn’t feel right charging you our fees and taking some of your cut because I wouldn’t have anything to add. There has to be at least ten extra value that we add for us to want to get into a deal.

Josh
Yeah. How did you choose multifamily rather than self storage? Mobile home parks, fill in the blank. Why did you choose that?

Dr Pranay
Yeah, we look at what is a necessity and we want there to be something recession resistant. We started in about two and a half years ago and things were great. Things were great until a couple of months ago, but we knew that it’s not going to be gravy all the time. Right. We want something that is in the middle. We picked class B, so apartments that are maybe 1015 years old that need some renovations. Nice thing about that is called the goldilocks class. Meaning when there’s a recession, people from class A think, downtown ton of amenities they have live a concierge and. All that stuff. People that live there, they might downgrade realize that it’s a recession, they don’t need a concierge and all this other stuff. Or maybe people are priced out of houses. Mortgage rates have doubled in the past six months and people realize, I’ll wait another year to buy a house.

Dr Pranay
So they go down to Class B. Over the past five years, when the economy has been booming, people from class C, which is 30, 40 years old, maybe they don’t really have many amenities, no gym, no pool, stuff like that. Maybe the location isn’t great. They say, hey, we’ve been doing pretty well, let’s upgrade to a class B. It works well when there’s a recession and then when things are going well. And so we live that. And you called it the goldilocks class. Goldilocks class, just right.

Josh
The three little bears. As you’re doing this, you’re doing syndicated deals. Now, how do you guys structure the deal? Are you guys creating an SPV for every single deal? Do you guys have a fund? What does that look like?

Dr Pranay
We create an LLC for every single deal, which is nice for our investors because that means all the liabilities on us and the way we work. I mentioned earlier that we partner, we do a special structure called joint ventures. That means that we are the only money in the deal. That kind of lets us throw our weight around. It’s kind of the same way, the same structure that Goldman Sachs would do. Blackstone they’re not the ones that are boots on the ground that run the day to day of the property. No, they invest their money and they say in their contract, just like our contract, that you have something called a major decision rights. That means you get to decide pretty much everything. Most of the time we don’t, but it’s nice having that power and ability to decide when do they sell the property, what kind of debt do they use?

Dr Pranay
And things of importance. You know, what is the budget? We really care about the budget. What happens when there’s a capital call, meaning that the property needs more money, who has to put it in? So we’re able to decide all that. That’s a special structure that not everyone can do. If you’re just raising a million, 2 million, 3 million, even 5 million, and you’re part of a deal, they’re not going to give you major decision rights. They’re going to give you major decision rights because you’re all the money for the deal. On the flip side, people will come to us and bring us deals because they know we can close quickly and they don’t need to talk to five people. We give them one check and we take care of everything, including investor solutions, communication and all that good stuff.

Josh
Yeah, so they come to you and you help bring the deal across the plate. Afterwards, if there’s renovation needed, if there’s a capital call needed, they’re dealing with one group, one person who handles the raise of additional capital or all these other things. Right now you guys do class B, ten to 15 years old, needs value added renovation, the goldilocks class. Where do you guys focus this? You’re in California. I’m in Florida. Is it global, is it national? Where do you invest?

Dr Pranay
Like you mentioned, I’m in California. I’m used to paying California taxes, but most people outside aren’t. So to care. We focus on low tax place or no tax place. So we’ve invested in the Sun Belt. We’ve done Orlando. We’ve done a lot of Texas, Arizona. We are very tax conscious because most of our investors are doctors and dentists, and they’re at the top of the tax bracket. We really try to be conscious of where we invest in.

Josh
Yeah. So, sunbelt, Texas. You mentioned Orlando. We used to live in Orlando. We’re about an hour away.

Dr Pranay
Awesome.

Josh
Florida is booming. Holy moly.

Dr Pranay
It’s doing really yeah, that deal we closed in February and we bought it for 49 million, and it appraised for 57 right off the bat without us doing a thing on it.

Josh
Yes. Congratulations. Now, a part of your model, you guys buy, renovate and then sell or do you guys do any holding or no.

Dr Pranay
We hold for just as long as it takes to renovate and find a buyer. We’re in and out relatively quickly, about three to five years, and we’ll try to 1.8 to two extra money in that time. So that’s kind of our goal.

Josh
Got it. Awesome. Awesome.

Dr Pranay
That’s after all fees and everything. So it’s a net.

Josh
If the interest rates continue to rise and there’s a market shift or something like that, how are you guys going to respond to that with the properties? I’ll shut my mouth. How are you guys going to respond to that?

Dr Pranay
Yeah, I’ll give you two answers. So existing proverbs and future properties. We are pretty conservative when it comes to our proverbs. We do relatively low leverage. What we also do is we buy rate caps, meaning that before we buy the property, we pay money to our debt. It’s points on a home mortgage, but we tell them, hey, we want the interest rate not to go above this. We buy that on all our properties and so that prevents some of the risk. Last couple of years, the adjustable rate mortgages have been so cheap, everyone has been using them, and now that’s going to change. For future deals, what we’re looking at is we’re looking at long term fixed debt or long term debt with a long rate cap. Three to five year rate cap, we’re willing to pay money for that. The really important thing is the length of the loan over the past, let’s say five to ten years, everyone’s been getting three plus one.

Dr Pranay
Plus one loans, meaning it’s a three year loan. At the end of three years, you either sell your property, obviously earlier than that, you can do it, or you have two plus one extensions. If you don’t have a buyer at the end of three years, you could potentially be screwed. That’s why we’re looking at ten year loans where we don’t have to pay back for ten years and then either a fixed debt or a rate cap so that we don’t have to worry. That is on the debt side, but we’re also putting down a much larger down payment, so that means we’re raising more money. The deal that is going to open next week, we’re putting down 40%. So the leverage is only 60%. Yeah. We’re doing that because we really care about downside protection. That’s super important to us, super important to most doctors.

Dr Pranay
People say, hey, just don’t lose my money. Here it is, don’t lose it. And we’re very conscious of that. It’s very important that we don’t lose their money. My dad invests with us. His friends invest with us. Obviously. I told you, we all invest in our own deals. Very important that we don’t lose money. The way you do that is by making sure that interest payment is very low and that you have enough revenue to cover it. Our debt service coverage ratio, meaning how much we make versus how much our expense, is like 1.7, which most banks require 120. Live so we’re way above that, and we’re happy with that.

Josh
Team Chat Way if anything happens, if you needed to pull money out of the deal or if you needed to refinance or whatever the case may be, there’s room for error, there’s room for market changes, there’s room for unforeseen things. Nice work. When it comes to the deals, doing syndication deals, florida, Texas live does someone from the team walk the properties or what’s that look like? You guys bought $200 million in real estate in the last 18 months. Is that what you said? 1616. Okay, sorry. What does that look like on the syndicator side, right? You guys are bringing the money to the tablet. Live how do you guys look at because the real estate professional, they’re going to make their money when the real estate closes, right? Live that’s their jam. So they’re incentivized to make deals happen. You’re incentivized to make the projects work well financially.

Josh
So how do you balance that? Like, do you guys walk in the property? Talk to us about that process.

Dr Pranay
Yeah, so we walk all of our properties and not just and a lot of people do or try to do what we do, but they only walk the property once. We walk the properties at least once a quarter and up to actually most of them right now is twice a quarter. Some of the ones that are just in the beginning, we walk it twice a month, every two weeks so that’s after we buy it and remember that we have a partner that’s doing all the same. We are very hands on, even though we’re on the capital raising side. In the beginning, we’re fortunate that people that we trust that have billions of dollars has to send to management that they’ve had average IRR over 20, that they’ve had been through a ton of recession. They bring us deals because we’re able to close quickly and bring so much money into the table.

Dr Pranay
We’re able to kind of cherry pick of the deals that we like. The one that we just closed in August 22, you’re not going to believe this, the interest rate was 2.9% fixed for nine years. When did you get that? August 22 is when it closed.

Josh
Holy moly. What is it that now live? If you were to get that same exact loan, what would it be now?

Dr Pranay
Probably five and a half.

Josh
It’s crazy.

Dr Pranay
And it would be adjustable?

Josh
Yeah. Wow. You got a nine year fixed.

Dr Pranay
Nine year fixed, 2.9%.

Josh
Oh.

Dr Pranay
Four years of interest only on top of that.

Josh
Holy moly. Okay.

Dr Pranay
Yeah.

Josh
You guys are planning to sell that? That one that you’re planning on selling three, four years or something like that?

Dr Pranay
Exactly. Yeah. Business model is about four years, and so if we could sell it in the interest only period, we’re going to be doing great. The debt service coverage ratio on that is like 2.1.

Josh
It’s crazy. One of the deals, by the time you hit the tablet and you guys did the deal, ink the deal, you were already up six or $7 million. Right. Your model dependent on, you guys could do some value adds? You’re buying class B and renovation needed, right. You come in and add some value, which I want to talk to you about. Value add. Is your model dependent on appreciation.

Dr Pranay
What is going to be very important and I want your listeners to keep this in mind is over the past, I want to say one to two years, maybe three years, you have been able to coast. You just close your eyes, take a property, buy it, increase NOI, which is how much you make per year, per month, and then per year, 4%, and you’ll get double your money. Everyone is winning. You’ve been able to do that because there’s cheap money, right. Cheap money when you buy the property, cheap money when someone else buys the property. You’ve seen a lot of my partner calls a hot potato, where you’ll see someone buy it and then someone else sell it, and then they buy it again and they sell it and they’re like, yeah, this person sucks. They’ll sell to that person and then they’ll say, oh yeah, that person sucks as well.

Dr Pranay
You’ve been able to coast and you’ve been able to coast by renovating ten units, 20 units out of 200, when the business plan is 200 and those days are gone. Now you’re going to actually have to have a real business plan and really implement it. And it’s going to be important. So, for example, the broker that sold us the deal that we’re about to sign a contract for, they sold us really nice PDF, pretty. They’re like, yeah, you should put in stainless steel and here’s how much rent you’re going to get. We looked at it and we’re like, no way. Live there’s no way people are going to pay stainless for stainless steel appliances in this market. There’s no way we’re going to spend all this money. We saw hidden value in the property and were one of the few that bid on it. We got a great deal on it.

Dr Pranay
The standard, we’re going to put granite counters, stainless steel, put five to 10,000 per unit, that’s gone. Now you’ve got to really find hidden value. The hidden value for the specific deal is we’re going to add a bathroom and that’s more difficult to do. People kind of go away from that. But adding a bathroom is huge. Think about it. A lot of the older stuff has one bathroom. You could have a three, one or worse, a four one, four bedrooms, one bathroom. I guess people didn’t have to pee as much in the 70s.

Josh
Yeah, they just did not hydrate very well back then.

Dr Pranay
Yeah. Adding a half bathroom, it’s a game changer. We are able to do that for 3000, $4,000, that’s like the cost of a stainless steel fridge and some granite counters. But that makes a material difference. That’s something I would pay for another bathroom. I would pay a significant amount for that. You’ve got to really have boots underground and have a plan that makes sense. I don’t want to hear, this is what we always do, this is our standard boilerplate. But how is this different? How have you changed over the past couple of months? Or are you just still doing the same stuff as always?

Josh
The Hidrent value, you gave an example, right? Live one person is like, well, the way we’ve always done it is this bob right? They talk about stainless steel and granite and we’re going to jack up the rates. You’re like, well, we’re in a different market. I don’t know if people are actually going to value that as much or care about it this much. Another bathroom, that’s a game changer for some people. Because when a family’s looking at this apartment versus this apartment, and they got kids or something like that. Or multiple adults in the house, or grown kids, they’re going for an extra bathroom. Screw the granite counter tops, right? It’s just not a need. Super cool. What other hidden values do you mind giving us? Maybe one or two more things that you guys look for that I might miss?

Dr Pranay
In this specific property, just because it’s on top of my mind, we’re looking at covered parking spots. It’s in a submarine of Phoenix and it gets hot, and it sucks when you got to turn on your car and wait for live five minutes for it to get inhabitable. Covered parking costs about 1500 per spot, and you could charge anywhere from twenty dollars to fifty dollars per month for that. You don’t do all your parking spots, you do one per unit. It’s something that increases their quality of life. It increases the length of how well their car is going to survive. Right. And things that are quality of life. Another thing is security is a huge one. Adding a fence, adding one of those kind of fences that go in and out, right. They’re a little annoying, but it makes you feel secure. Adding strobe lighting, the ones that they have in baseballs, adding cameras, adding a walking patrol at nighttime where you feel like it’s a home and not just a place you are.

Dr Pranay
Small things like that, they don’t cost a ton. Really, in the end, we want our tenants to be happy and feel safe and secure and in a home. If you do that, retention will stay up. They’ll be happy. One thing we haven’t looked into yet, but we’re looking at it because we’ve done it to other properties, is some type of afterschool program. In Texas, we do English as a second language. We’ll bring in people that will teach about finance, how to create a checking account, how to create a stuff that’s just unfortunately, our school system doesn’t teach you the basics of economics and personal finance. How could we enrich people’s live and provide value for something that doesn’t cost us a ton of money?

Josh
Yeah. Dr. Perne. You travel, right? You’re driving especially like in La. Holy moly. It takes you forever to go from point A to point B. What’s your favorite song? If I looked at your phone, what’s your favorite song for the past 20 years?

Dr Pranay
That’s a quick one. Let me think about that. No, actually I don’t listen to music as much because I listen to a ton of podcasts. I listen to probably 30 to 40 hours of podcasts a week. I can tell you my favorite podcast.

Josh
What’s your favorite podcast besides mine and beside yours?

Dr Pranay
Yeah. I really, like, 99% invisible. He talks about how architecture affects our life. For example, he talked about gargoyles and the history behind those. He talked about how we had when you go to on sidewalk and there’s that little indentation or a little ramp for people that have wheelchairs. I’ve recognized that a lot more because now I have a stroller because I have a young child and I realized this place, just life in general must be difficult for people to have wheelchairs. That ramp just became a federal regulation. Live 15 years ago. Right. Think about human history, how long people have been requiring wheelchairs. That’s just something that happened not that long ago.

Josh
Yeah. In a house that’s a couple hundred or 100 something years old in the bathroom door. Some of the doors are like, tiny. There’s no way it’s accessible. Right. Just like that. What a thing that we take for granted, being able to walk step over curbs until you have a stroller and a kid right now you’re like, yeah. Awesome. So 99% invisible.

Dr Pranay
Yeah. By roman mars.

Josh
Real quick, give us a fact about the Gargoyles. I haven’t heard that episode. I haven’t heard the podcast either, but what’s something that’s interesting about Gargoyles?

Dr Pranay
Yeah, so it was based on European architecture back in the day, and they thought that at the top of the buildings that there would be demons, and so it was a way to kind of scare those spirits away and protect a building.

Josh
Now it just scares my kids when they see that. Awesome. So, Dr. Perne, during this interview, there’s probably a question that I should have asked you besides Live, where can people go to find and connect with you? We’ll do that at the end. There’s probably a question that I should have asked you that I did not. What question should I have asked you?

Dr Pranay
One question that I get relatively often is how do I place on spending my time in the future with so many things going on? It’s kind of difficult, and it’s something that I’m grappling with and I haven’t found a good answer. That’s because in medicine, there’s a minimum amount that you need to do to kind of stay sharp. It’s probably somewhere around five to seven shifts a month, which is why I kind of picked that number for what I’m cutting down to. Especially for something like internal medicine where you focus on basically everything on the inside and there’s a lot of stuff in there and the knowledge of that is changing. That’s something I’m going to grapple with how I want to make an impact, because I also want to help as many people as I can. Once I figured out, I’ll let you know.

Josh
Now, is this your first child?

Dr Pranay
First child?

Josh
Yes. All right. Boy or girl?

Dr Pranay
Boy.

Josh
Okay. 15 years later, 15 years down the line, he comes across this cassette player with our interview or whatever, and you get to share a piece of wisdom for your boy 15 years in the future. What piece of advice do you have for your kid in the future.

Dr Pranay
When I was younger, I was always scared to start something, scared to look like a fool. I think about how many things I could have started and failed at when I was younger. I would be so much more successful. I would have gotten the failure out of the way and found things that I enjoyed. So, for example, I had a blog, and I was never very good at writing and lasted a couple of months and sucked in the long run. It made me a much better writer, actually. I did a master’s program and I had forgotten a five page essay. My professor emailed me, hey, where’s your essay? I was like, oh, let me just send it to you. 2 hours later I was able to finish it because I had done all these blog posts. Of course I’d wait till the last minute before it was due, but, I got something out of it regardless.

Dr Pranay
I found out that I just didn’t really like writing. That’s why I started a podcast, actually, because I like to talk and I like to meet people. And because I did that failure. Had I done that failure ten years ago, maybe I would have found podcasting earlier.

Josh
Yeah, dr. PreNet, there’s other doctors out there. There’s other people out there, dentists and chiropractors and all the whole gambit. There’s just people interested in who you are and what you’ve got going on. What’s a good way for them to connect with you and do a deal?

Dr Pranay
Yeah. We made a special landing page for your guests. You can connect with me, LinkedIn, Facebook. There’s a couple of little resources that we’ve given. If people are interested in how they find their own deals, we have our exact little cheat sheet that we’ve created for us and we use all the time. It’s free. Just go on there, download it. We have this little fun quiz. It helps you figure out if active versus passive real estate is fun for you. There’s also a way to jump on the phone with me, which I’m happy to talk to anyone, position or not, that’s DealScout Ascentequitygroup.com.

Josh
Awesome. What we’ll do is we’ll put that in the Show Notes, but it’s DealScout. Say that one more time.

Dr Pranay
DealScout Ascentequitygroup.com.

Josh
Very cool. Hey, I didn’t even ask you to do that. Thank you so much for even thinking about my listeners and putting that together. We’ll put that in the show notes. Dr. Berna, thank you so much for coming on the show. Fellow deal makers, as always, reach out to our guests and find those free resources and find ways to educate yourself and maybe even do a deal. All their contact information will be in the Show Notes below. If you have a deal that you’d like to talk about here on the show, head over to the deal scout.com, fill out a quick form, maybe get you on the show next. Till then, we’ll talk to you all in the next episode. Bye, everybody.

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