Episode 620 – Venkat Avasarala

Gabriel Petersen (00:01.774)
All right. We are back with another episode of the real Satan investing club. I hope you guys are having a great week, great day, whatever day it is for you and whatever, whatever, whatever that intro that I usually say is, I hope you’re having a good day. It’s going to be a good day for a second reason on the show here because we got Venkat. A boss or Allah. Hope I said that right on the show with us from DFW era. He’s with striker properties. They do multifamily 5,470 apartment units.

Venkat Avasarala (00:15.191)
Thank you.

Venkat Avasarala (00:21.695)
That’s right.

Gabriel Petersen (00:31.618)
in their portfolio and so they are doing ground up development today but they used to be doing value add multifamily so if you guys are interested in either of those subjects if you’re interested in multifamily if you’re interested in development this is the episode to hop on to. Venkat I think thanks for hopping on I’m excited to jump into it.

Venkat Avasarala (00:50.943)
All right.

Gabriel Petersen (00:53.526)
All right, I told you before we got on here, we always like to start with stories. We like to hear how people got to where they are. So why don’t you take us back to the beginning of your story in real estate and tell us how you got here.

Venkat Avasarala (01:05.471)
So, you know, was buying in 2007, I was buying single family homes from foreclosures. What about 20 of those and held in my portfolio. And then by 2014, it stopped making sense. So I switched to multifamily, but then quickly realized that if you want to buy even a smaller property, you need millions of dollars. And if you use all your money, you do one and done. So that is when I moved on to syndication, basically.

So starting 2016 onwards, I invested passively on a few other deals, signed as a guarantor on a of Fannie Freddi deals, and that’s how I built my resume. And by 2016, I was ready to start doing my own deals. I started with 100 units, 1960s property in Norman, Oklahoma. That was my very first property. I live in Dallas, but nobody would trust me to give me a deal.

So I had to go outside my town and Dallas is pretty hard. It’s still hard, right? So I had to my stripes. So demonstrated my ability to raise money, to put together a deal, arrange loan, operate it and everything, right? My ability to do rehabs and everything. And then I did another 120 unit deal in Phoenix. And then Dallas brokers felt comfortable and they gave me a 306 units.

Gabriel Petersen (02:26.636)
Nice.

Venkat Avasarala (02:26.694)
Otherwise they wouldn’t give me 60 units. this was what? June 2016 to February 2017. Seven months passed from my first, second and third deal. Third deal is my Dallas deal. Seven months ago I was shopliver. Seven months after I was good enough to buy a $15 million deal. Today $15 million is nothing, but back in 2017 $15 million is a lot of money.

Gabriel Petersen (02:29.262)
You

Gabriel Petersen (02:36.001)
wow.

Gabriel Petersen (02:40.28)
Nice.

Gabriel Petersen (02:45.88)
Well, it’s funny how that works.

Gabriel Petersen (02:52.483)
Yeah.

Venkat Avasarala (02:52.765)
Anyway, and then I didn’t look back and put together a portfolio of 3,500 units, mostly in Dallas, but a few in Denver and a in Phoenix. But 90 % of the, because I live here and it was a good market. Then around until COVID arrived, everything was good. And then we saw the reality of the classy properties.

Right the crime the non-payment of rent and then we had this blizzard in February of 2021 and that kind of sealed the deal for me It’s like because our properties are not equipped to deal with that kind of weather Not that it would come again and again, but it was hard to deal with the aftermath of that but winter storm, so

pretty much 95 % of my portfolio. don’t own anything in Texas anymore in the C class and B class space. I sold everything as a portfolio sale in September, 2021, just before the rates increased, right? So that was a great timing. So got out, decent money and then moved on to development. Why development? Because I wanted to buy class A properties. I didn’t want to do any development. I want to buy something existing and just, you know, operate it. And

But they were all trading at two, three, four cap. Believe it or not. Two caps.

Gabriel Petersen (04:13.174)
Yeah. Yeah. When people were projecting, they were projecting those rent growths and the cap rates were insane. It’s like it didn’t, you couldn’t do it responsibly, get a deal done.

Venkat Avasarala (04:19.263)
Yeah, it’s just insane. Exactly. And there’s no money for anybody. It’s just a lot of hopium, right? So that is when I decided, you know what? I need to build a class property if I need it. But then what happened is like, we saw that during building, we can easily make that 20 IRR, right? I mean, because we are adding value to the land here, right? So, and then once you build it and hold it in your portfolio,

Gabriel Petersen (04:27.596)
Thank

Venkat Avasarala (04:47.359)
the IRRs get watered down because what will you do? It’s a brand new property. Of course, you’ll increase rents and burn off concessions, but there is no value add component. I said, you know what? I’ll do something between somebody who just build and sell it empty building or somebody who builds and holds something in middle. So we will build it. We’ll fully ease it up, stabilize it.

and then sell it when the price arrives. Around three to five years is the horizon that we set ourselves. And my very first property I built in Princeton, Texas, just north of Dallas. It was 156 units. Built it during COVID time. We broke ground two weeks before COVID broke out. And nobody said anything. We continued to build. So that one we got out April, 2022. We sold it at 35 % occupancy.

Gabriel Petersen (05:31.703)
oof

Venkat Avasarala (05:40.267)
at 4 cap as if the property is 95 % occupied. Those were the days, right? mean, anything goes, everything goes. And we didn’t complain. The buyer didn’t want to wait because they started jacking up the rates and they just want to get it done. We said, oh yeah, take it. Agreed upon price though. So we got out of it. And then the next project is 338 units in Kyle, Texas, just south of Austin, right on highway 35. It’s a $75 million deal.

Gabriel Petersen (05:47.269)
Ha

Gabriel Petersen (05:54.03)
Hold the trigger, yeah. Yeah, that makes sense. Yeah.

Venkat Avasarala (06:09.707)
So that one is already built leased up ready to sell as soon as that rents turn last three years was really horrible, right because they’ve been increasing interest rates quantitative tightening and Then we have this Russia war people dumping our bonds our bonds Bond yield spiked and then there is tariff war and then there is Immigration enforcement we survived all these things and still standing, you know

Gabriel Petersen (06:35.374)
There’s a lot going on right now, that’s for sure.

Venkat Avasarala (06:36.499)
Yeah, a lot going on and all of these have effect on people and housing and stuff.

Gabriel Petersen (06:41.196)
Yeah, so on the development side, know, I’ve never done ground up. you know, I’ve had deals brought to me and I’ve considered it, but I’ve never actually pulled the trigger. So I’m always interested. What is, in your opinion, what is the hardest part about doing ground up?

Venkat Avasarala (06:55.403)
Hmm. So the first thing is like I mean, are you starting with the raw land or are you starting with a zone piece of land? Right 10 years ago you buy like let’s say 10 acres piece you take it to your city They’ll zone it for you. No problem spot zone, right? But now all the cities have comprehensive plans. So they already decided that okay this area I’m gonna put industrial this is where hotels go. This is where this go So now you have to fit in otherwise, it will be an uphill task

You may like a 10 acre parcel, but they put in their comprehensive plan, like 50 year plan, they envision that to be industrial area. They’re not going to live with you. So you need to know all these things. That is the hardest part, if you will. And then there is this NIMBY aspect, right? All my projects that I’m building right now are in very affluent areas. That’s what made sense. It’s not just classy because it’s new building.

Gabriel Petersen (07:23.19)
Mmm, yeah.

Gabriel Petersen (07:33.422)
They’re not going to give you the apper- yeah, that makes sense.

Venkat Avasarala (07:50.407)
It’s classy because it’s in the areas where housing is freaking unaffordable million dollar homes. If I’m $80,000 wage earner and if I want to send my kid to the school where that millionaire is sending, I can’t get in unless you get into apartments. So that is the angle I chose. So then the NIMBY aspect sets in. So that’s why I usually try not to. If I am doing land projects and zoning and all that, I did a few of those.

I don’t mix these two because it becomes too long. So I do a land project and then sell the parcels off. then my ground of development projects, I start with a piece of land which is already zoned and entitled and ready to

Gabriel Petersen (08:24.236)
Yeah.

Gabriel Petersen (08:35.084)
Got it. Okay. So your, your process is basically you have two separate processes. have an entitlement and then you have development. I’ve actually, we had somebody else on that said the entire thing is development. I just, it screws my brain to think of it all as development, but

Venkat Avasarala (08:46.891)
You can, you can. No, no, you can. But if the landowner allows to keep the property under contract and give you a couple of years to do all that or any year to do all that, then of course we can do it. But I’m building in areas where they don’t play that. If you go out of the town, sure. But if you want to build in prime areas, why would the landowner give you all that kind of time? mean, time is money, right?

So it didn’t work out for me. yeah, less than, let’s say 60K income area, 70K income area, you can go and do that. Do it entire one project because you’re not bringing in investors until you’re ready to break ground. So all this time you put a token amount and then you just go with the city and do all that while the landowner is carrying the land.

Gabriel Petersen (09:16.195)
Yeah.

Gabriel Petersen (09:19.598)
you the next one.

Gabriel Petersen (09:39.946)
So you guys are looking at their comprehensive plans and that’s how you’re of deciding where you’re gonna be buying. And so you look at the plan and you find that the parcels in that area and you go to those owners and you’re like, hey, we wanna buy this, can we make a deal? So once you have, well actually before that, how do you decide, how are you deciding where, like what municipalities you’re gonna be going to? Are you looking for, you know, median household income, property value, what specifically?

Venkat Avasarala (09:45.523)
Right. Yeah.

Venkat Avasarala (09:50.021)
Yes, absolutely.

Gabriel Petersen (10:08.843)
Are you looking forward to to

Venkat Avasarala (10:09.771)
So first thing is like in 20 minutes, you should be able to get to a high paying job. When I say high paying, anything not $80,000, right? So look at all my projects. I have a couple of them in Salina, which is very, very affluent area. But in 20 minutes, 15 minutes, you can get to Frisco where all the high paying jobs are. And then I have one in Frisco downtown, one in Round Rock Highway, literally on the Highway 35, which connects Mexico to Canada, very high throughput.

High-income area and I have one in Kyle and Hays County again high-income area. yeah income is non-negotiable. The reason is Construction you cannot build it like for the cost you were able to ten years ago, right? It’s expensive the garden style deal cost you two hundred fifty thousand dollars So in order to produce the rent to make that kind of deal make sense. You need to be in high-income area Right. So that is that is what actually tries. So two dollars per foot in Dallas

is kind of the benchmark that we go by. Where are we getting $2 rents? that is, yeah, $2 per month. Yeah.

Gabriel Petersen (11:13.837)
Oh rents, $2 rent per square foot.

got it. That makes sense. So what I mean, I guess on that topic, what do you feel? I mean, there are no developments happening in the lower income areas generally. But that is where a lot of people need the the supply.

Venkat Avasarala (11:31.211)
They are, they are, but that is where light tech comes in, right? Low income tax credit properties, like where you get a free property, you go to federal government, you win the 4 % 9 % deals, and then you go sell those tax credit to bank, take the money. And if you’re short money, approach your city, they’ll help you sell bonds or something. So there’s no investors per se, right? I mean, you basically get a free apartment, but you have to operate it for 15 years.

Gabriel Petersen (11:35.565)
Hmm.

Gabriel Petersen (11:51.725)
Hmm.

Venkat Avasarala (12:00.395)
and they won’t pay you a developer fee upfront, they’ll pay you over the time. It has pros and cons too, but I chose not to go with that area because that needs a totally different mindset, temperament and all that because those are the income, those are the places where stuff happens even in a new building, low income.

Gabriel Petersen (12:19.213)
Yeah, yeah, that makes sense. Are you guys completely, are you completely through with value add? Are you guys aren’t even looking at new, you know, existing deals?

Venkat Avasarala (12:28.171)
What I am looking for is like, know, the conditions for value add is again coming back. At the moment, everything is standstill, right? Because rents are dropping. Because look, 2021 and 2022, we were literally creating 600 to 800,000 jobs every single month and a lot higher before that. Now we barely create any jobs. And this is all planned.

Right. So as the Federal Reserve increase interest rates and do the quantitative tightening, which is removing money out of the economy. Well, there’s no money. There’s no businesses. There’s no jobs, especially small businesses. They create have the jobs in the country. So when the jobs go down run from creation, that is 60000 per month to almost zero over the last three years period, rents followed that because 21 and 22, they looked at those job numbers and they

And the industry started all these projects. They all got delivered in 23 and 24. And there are no jobs to be found like before. So we had a glut. So now we have to digest that. We’re almost done. By summer next year, rents will start growing again. And that is a great time to look at serious, have a serious look at value add again, but newer product, only newer product. Because it’s hard to even insure these older ones anymore.

Gabriel Petersen (13:51.573)
Yeah, and by newer you mean what 90s in

Venkat Avasarala (13:53.515)
2010 and later would be perfect but anything with a to and friend

Gabriel Petersen (14:00.07)
Anything with the tune for that’s a good litmus test right there. like it. So we’re gonna I’m gonna bounce us around here a little bit and talk about your let’s go back to that first deal that you mentioned. It was 100 units you think you said it was in Oklahoma. You know raise that sounds like that was the first deal that you raised money. And a lot of people that listen to this podcast that’s where they’re at they’re at that deal that they need to start raising money. So let’s talk about that process. How was it for you on that first deal where you raised capital?

Venkat Avasarala (14:07.723)
Okay.

Gabriel Petersen (14:28.705)
How’d you do it and how has it kind of evolved since then?

Venkat Avasarala (14:32.468)
So that was my very first raise, $1.2 million. It took about three weeks, four weeks maybe to close it. Didn’t make much difference. Again, because my background is IT. Most of my investors are IT people. IT people stay at laptop all the time. They get paid well. They don’t have time to do shit. mean, they’re just on the laptop. I that’s the nature. It’s always deadlines, high stress, and all that.

So whenever they get a chance, they talk about they play with stocks, but that’s about it. don’t have time to do. And even good old days, people used to keep rentals, but now rentals are losing money every month. So they need some diversification. So that’s why they invest with me. I raised $160 million since 2016. No advertising, nothing. So only word of mouth, either people I know or the people I know or know. So what one degree separation.

So that is how I raised all my money. But yeah, it was $1.2 million and I don’t call them individually. What I strongly believe is to put together a really, really good convincing deck and share not just the deal, but to start with why I am doing. If you sell them on why, everything else sells themselves, right? People directly jump into, oh, you know, it’s 160 unit. It’s like, no, I said, no, I’m not gonna start with it. I’m gonna start with it.

What are our options we can do in stock market? can lend money to somebody or that that that and why this has to be part of your portfolio that Resonates to them and this is the way to achieve the why right? one you have to focus on why first right and and when you do that and then the Tax advantages and all that comes all the way at the end

Gabriel Petersen (16:06.742)
Hmm.

Venkat Avasarala (16:21.307)
A lot of people start to trust, right? bonus depreciation. Yeah, if you lose, there is no profit, no issue of paying back that bonus depreciation, right? So that is how I approached. in my IT career, I mean, I use a lot of management and all that. So pitch decks and all that. mean, I did quite a bit of it. So you need to hone in on how to influence people by telling them exactly what they’re interested in. Then fluff and all that.

Gabriel Petersen (16:49.419)
Yeah, that makes sense.

Venkat Avasarala (16:50.827)
So that is how I was done. And also my very first deal, had a partner who has already done few deals. So I wouldn’t risk going into the deal saying that, you know what, I’ll jump and then figure it out. No, I need somebody, even on my development deals, right? I mean, I always have, even all the deals I’m doing right now, I have a very, very senior partner. So he comes in, manages day to day. And if they have to deal with CT, he will do it.

Gabriel Petersen (16:57.441)
Mmm.

Gabriel Petersen (17:13.515)
Mm.

Venkat Avasarala (17:19.231)
But everything else, they’re all for purpose my projects, but I won’t go in without somebody who has at least 30 years of experience in exactly what I’m trying to do. Because there’s no replacement for that, right? I how will you replace experience? I need to live 30 years and have all the war wounds to replicate that person, which it’s not practical.

Gabriel Petersen (17:30.668)
So long.

Gabriel Petersen (17:41.726)
So you specifically partner with people who have extensive experience in specifically what you’re trying to do. I think that’s a really smart way to do it. And especially, I always say this on the podcast for people who want to get into real estate. They want to get into a specific type of real estate, multifamily, industrial, mobile home RV, whatever. Always go out there. You can invest in somebody’s deals as a limited partner. That’ll get you exposure, or you can partner with people who are already doing it and get on their team somehow. So how do you go about

Venkat Avasarala (17:47.435)
It’s a

Gabriel Petersen (18:09.613)
creating these partnerships? What is your process to find them? And then

Venkat Avasarala (18:12.807)
My process is I see, I chop it up into that, OK, deal identification, right, and then development activity, of course, construction management, money raising, arranging loan, and all that. I can do all of them. But when it comes to entitling and all that, I need help. I know the process. It’s just that you have to say the right things. When you go into these meetings with the city and all that, you cannot just say whatever, right? It has to align with their plan.

then it becomes easy. If you say anything which get their spidey sense up, mostly what problem is, cities are worried where you’ll build a pigsty over there. They cannot ask, right? I mean, they cannot ask those questions. So you need to read their mind and tell them what they need to know. So this comes from experience, right? So that is why I bring somebody like that. otherwise, I arrange the loan.

I raise the money, I do the investor management, I do the asset management like lease up and all that. And in the construction activity, that is where I only get involved when decisions have to be made. Big decisions have to be made. The minutiae, I don’t have time for that. I mean, that is better left for my… I trust my partner. There you go. yeah, we need to do a select fill on this land. I we can buy the…

Gabriel Petersen (19:28.589)
choose which faucet’s going to go into each unit.

Venkat Avasarala (19:37.439)
dirt from there, I don’t care. mean, just whatever is, you know, gets the job done and we’d use your experience.

Gabriel Petersen (19:39.671)
Yeah.

Gabriel Petersen (19:45.452)
Nice. Right on, man. Well, hey, we have already run down the clock before we move on. I always like to ask people, you know, from your experience, if somebody wanted to get involved exactly in the type of thing that you’re doing, ground up development or value add multifamily, what is the one piece of advice you would give them to get started?

Venkat Avasarala (20:03.307)
So what happens is everything is very daunting. It makes you question yourself, man, am I cut out to do this? I had no idea I will be able to raise $160 million without any advertising. Nothing. Like nothing. I’m very laid back. I do a webinar. I don’t call anybody. And I said, look, if you want to get into this deal, you’ve got to be on the webinar. There’s no other way. And people show up, and they invest with me. And then brokers gave me deals. I’m able to.

you know, do all this stuff. So how do you beat that? Right. How do you feed the self doubt? The first one is the toughest one, obviously. Right. How do you gain confidence on yourself and how do you give other people confidence that you are trustworthy and they should award you a deal, work with you and all that. That is being in a circle. Right. You need to find yourself in an ecosystem. You need to see success enough times where it should become mundane to you.

I mean like, yeah, that guy did it, that guy did it, that guy did it. I mean, I don’t have two horns, I can do that too. It’s the mindset mostly. And once you have that mindset, you speak differently. I’m not just talking about jargon or lingo. It’s just you speak with confidence, you speak with knowledge. And the second thing I would say is just drill down. Know everything about that small, the mind that you want to master in. Know everything and anything about it. And talk to old people. I’m telling you.

Gabriel Petersen (21:30.839)
Yeah.

Venkat Avasarala (21:31.019)
It’s not on internet. You need to talk to the old people like for suppose in 2008 what happened in 70s auto-c 80s auto CDs what happened? Like how was the distress? How did you guys navigate it old people man? Just take them to lunch and just take two hours of their time and eat that chew their brain out, right? That is where the wisdom is knowledge we can get from books and talking to people and all that but Wisdom is something that you have to make that guy go relive that moment and tell you

the gist so that you don’t have to live that. You can see things. And that’s how I got out in September 2021. Everybody thought I was a fool. When I’m selling everything in September 21, people are trapling on each other to buy those C-class properties at four caps. I got out. And some of my investors are pissed. It’s like, look, you’re leaving money on the table. I may not invest with you again. It’s like, that’s totally fine. This is scary. I need to get out. Right? So I got out.

So that happens because you need to know when the music stops.

Gabriel Petersen (22:34.443)
Yeah. Yeah. I mean, I like what you said, how you need to surround yourself with people who are doing what you want to be doing. and that’s why we always, you know, whenever anybody says something like that, I always like to stress, if you guys want to get involved in real estate, find some kind of mentorship program, find some kind of, you know, group, anything where people are getting deals done. They’re not talking about it. They are actually out there getting deals done because you, learn by osmosis. learn by just sitting there, you know, taking everything in.

Venkat Avasarala (22:50.261)
Absolutely.

Venkat Avasarala (23:01.845)
Yeah.

Gabriel Petersen (23:03.361)
that, that you’re hearing and, and it somehow, don’t know how it works, but somehow you just, becomes part of you and you kind of, go into conversations with sellers stronger, more confident, like you were saying.

Venkat Avasarala (23:08.148)
It does.

Venkat Avasarala (23:14.569)
and brokers will sniff it out because it’s their job to make sure pick the right horse and put it in front of seller so that they can earn their keep, right? But if they are wrong, they won’t get a second chance. The word gets out and nobody will hire them. So they’re reading everything you’re saying, your body language, everything. So you gotta be super careful and that comes from confidence of knowing it, right? Just not.

I didn’t read a book or anything. I lived through that. I saw that guy do it, you know, and then you talk totally different.

Gabriel Petersen (23:46.926)
Yep. There you go. All right. Well, with that, I’m going to push us into the quick question. Ronda, you’re ready? All right. It starts with education. could be any form could be a mentorship program you’ve been a part of a conference you’ve gone to book you’ve read anything. I just need two recommendations, one for general life wisdom, and then one for real estate.

Venkat Avasarala (24:06.091)
Um, so I didn’t take it on the live wisdom, you know, real estate, especially is a people’s game. You know what, how Donald Trump is stopping all kinds of wars and stuff like that. Where do think he got it from? Why does he send Witkoff to Putin? Because real estate people are good at it. Otherwise we cannot get anything done. We build consensus. We are born to bring people together, solve problems.

swallow ego, that’s who we are. That’s why we are in this business, right? So how do you do that, right? So you need to know how to talk to people, right? So there’s this book by Dale Carnegie, you know, How to Win Friends and Influence People written back in 20s, very much relevant right now. People just sometimes come off, you know, wrong and, you know, relationships get ruined and deals get broken and all that. So that is from the life standpoint. Read that book three times because it’s…

You cannot absorb everything and every inch of it is very valuable. But coming to mentorship, back then 10 years ago, I joined a guy called Brad Somrock. He was in Dallas, not sure where he is right now, but I spent about a couple of years there. And that’s where I saw so many people getting deals done. that’s what I saw success being mundane, like I said, right? that guy, this guy did it, No mentorship is perfect.

They’re all for profit. They’re for their profit, not yours. So you may have to try a few tests, test drive a few, but I’m telling you, if somebody wants to give their knowledge for money, give it, give them the money. Not like, within reason, of course, right? But if you can buy somebody’s 20, 30 years experience for, for dollars, I mean, that, that’s a great deal. That’s a great deal. A lot of people just stuck up and like, look, I’ll do a free program and all that, but you’re burning daylight.

Gabriel Petersen (25:47.767)
For no reason.

Venkat Avasarala (26:02.123)
How many years we have on this planet and you want to save 3, 4, 5, 6, 10, 20,000 dollars and give up years and cycle my dand. People are getting ahead of you. So time is money. Don’t be afraid to pay people but pick the right one of course reviews and all that do your due diligence but do not be afraid. It’s a good deal to pay for mentorship. Just pay them, absorb everything they have learned. Energy fee like that.

So that’s what I would say, but yeah, it doesn’t have to be Brad Somerhock, anybody in, but look, look, I mean, in this day and age, it’s easy to find.

Gabriel Petersen (26:37.677)
Yeah, could not agree more. And I like the suggestion for how to win friends and influence people. I never liked the title of that book, but the book itself is just killer. It’s the best book for how to communicate with people correctly, or not correctly, but just in the way that creates the best result for everybody involved. really,

Venkat Avasarala (26:46.565)
my god,

Venkat Avasarala (26:51.999)
Yeah, you’re clear.

Venkat Avasarala (26:57.291)
I once had a boss, an Australian boss when I was working at Pepsi. He used to say, may I request you? He’s my boss. And I stole it. And that is how I talk to people, even my employees. And that humility and humbleness, I’m telling you, man, it defuse any situation request. I only request, I order nobody. That’s just like a tidbit, right? And that goes, yeah.

Gabriel Petersen (27:10.583)
Yeah.

Gabriel Petersen (27:20.717)
Yep. One of the things that stood out in that, in that book for me was, um, always re what was the, can’t remember how he actually phrased it, but it was like a person’s name is the most important thing to them or something like that. And ever since I read that book, I remember everyone’s name. Like I’ll meet them. Their name is in my memory and every time I’ll use their name and it’s, uh, it’s amazing. You know, you gotta all the, all the recommendations that they have in that book are killer, but, you know, a certain one stood out to me.

Venkat Avasarala (27:33.727)
yeah, you have to use the name.

Venkat Avasarala (27:46.112)
Yeah.

Venkat Avasarala (27:50.411)
There you go.

Gabriel Petersen (27:50.862)
All right, I’m moving us on to the next question. This is for your younger self. Let’s go back to the Venkat who was just starting out in single family back in 2007. Go back to him, look him in the eye, give him one piece of advice moving forward.

Venkat Avasarala (28:05.845)
Skip the single family, go to multi family. You wasted 10 years, golden years. You would have put a zero, extra zero next to my network that I’d done that.

Gabriel Petersen (28:09.897)
Easy. Yep.

Gabriel Petersen (28:17.429)
I’m gonna put that in the bucket of I wish I got started sooner. So anytime somebody comes on, 90 % of the guys that come on the show, I ask that question, they say, I wish I got started sooner. I always pointed back to you, the listener, if you have not got started yet, just go out there, get a deal done. Doesn’t matter what it is. could be a shack. Just get something done, make sure the numbers work, but get it done. You’re gonna get that ball rolling 10 years down the line. You’re gonna be thankful that you started today where you’re sitting right now.

And that brings us to the next question. This is about the US. It is a big place. There is a ton of opportunity out there. Give me the single Metro you’re most excited about investing in today.

Venkat Avasarala (28:56.479)
I would say it depends by asset class because whenever we talk about real estate, there is property taxes involved and depends on who pays it, it differs. I love Dallas, man. mean, Dallas has so much ahead of it, but it’s becoming a little bit expensive, right? It’s not like the Dallas 10 years before. So now you have to cater to the people who have money, right? I mean, that’s true for most of the thing, most of the metros, right?

Gabriel Petersen (29:05.246)
Mm. Yeah.

Venkat Avasarala (29:26.411)
10%, top 10 % is doing like 80 % of the spending in this country. They’re keeping us afloat. It’s a K-shaped economy. Everything changed in 2008, when we started from bank reserves, there was zero back then before 2008. But now we had an abundant reserve regime that the federal reserve has to print a lot of money. So when the printing happens, there is something called Cantilian effect. And what it does is when the money gets printed, the people close to the printer

Gabriel Petersen (29:33.633)
Well, that’s crazy. Yeah.

Venkat Avasarala (29:57.132)
will benefit the most. And the printer sought our banks, Chase Bank, Bank of America, your credit union, they print money, not Federal Reserve. They print money by issuing the debt, that’s all. Money gets created. Money gets lent into existence, right? So who are they’re close to them? Us, right? Or anybody who can take advantage of it, right? So, but the bottom end, people who are working steps, you know, working for 15 or $15 an hour, they’re barely getting by.

$20 $30 $40 it’s it’s just not enough right so it wasn’t like that before You know previously if you have a million dollars, how do I make money? Okay? I’m gonna start a shop or this that now just stick it in the best stock market you I mean there is obviously risk, but I mean the things are getting doubled and tripled in months in two three months, right

Gabriel Petersen (30:47.735)
Yeah. And I feel like with AI, that’s only, it’s only going to continue.

Venkat Avasarala (30:50.635)
Yeah, we’re financialized. The country is becoming financialized. Right. So what is government telling us? They’ve reduced the pattern day trade limit from 25,000 where you cannot day trade if you have 25,000 unless you have 25,000. They dropped it to 2000. What is the message? They’re saying that, look, live on your computer, make money there, trade and all that. Right. So in this world, it’s a case-shaped world. Right. So you have to cater to the people who have money.

so whatever you do, do that. I mean, you want to build a hotel, build upscale, everything upscale, upscale, upscale, upscale, because that they’re the only ones who have money. Everybody else is trying to, you know, living. They always load paycheck to paycheck, but now they’re paycheck to the paycheck after paycheck. That is how they’re.

Gabriel Petersen (31:37.902)
It reminds me of Alex Hermosy. I mean, I’m sure you’ve heard of him. He has that same message where, you know, if he gave himself advice starting out, he would say, just focus on, you know, focus on the rich people, focus on the people with money and only give services to them. Yeah, it is. It’s unfortunate, but it’s the it’s it makes sense because people with without money, you know, we do mobile home parks, RV parks, and those are actually the people that

Venkat Avasarala (31:42.185)
Yeah, yeah.

Venkat Avasarala (31:50.123)
Yeah, that’s it. It’s so sad. I can say that. It’s so sad, but that’s the reality. Yeah.

Gabriel Petersen (32:06.455)
tend to not have as much money. so there’s definitely a way to make

Venkat Avasarala (32:09.664)
No, but then again, you own that land. They’re renting the land. mean, if not, I mean, you’ll keep the house or something like that, right? But if you go buy a C-Class apartment right now, let’s say if you go to South Dallas and buy a C-Class, good luck collecting rent, right? It’s so hard. And the cities are all pro tenants and forget about all that. They don’t have money. Inflation has taken off.

Gabriel Petersen (32:25.003)
Hmm. Yeah.

Venkat Avasarala (32:36.204)
I don’t believe 3 % 4 % inflation. Inflation is a lot more than that. Their paycheck didn’t keep up with it because they were not close to the printer.

Gabriel Petersen (32:44.619)
Yeah, yeah, it is. It’s pretty crazy. All right, but move us on to the next one. This is about finding deals. It all starts with getting in contact with the seller and pending that purchase agreement. So what is your favorite way to generate leads and find new deals?

Venkat Avasarala (32:57.964)
So I haven’t made a habit of reaching out to sellers and all that. Again, look, it may work if it’s a single family home or a 10 unit, 20 unit, perfect, right? I of course, they are not very savvy. But if you try to reach an owner who owns, like let’s say I own 300 unit apartment, if somebody reached out to me and says that, you know what, I want to buy your property, let’s not pay the brokers, I say, you know what, I want to sell it through brokers. How do I know that you are giving me that? So we are very savvy, right? We don’t entertain those kinds of things and we…

After the first time you won’t even appreciate that right so I didn’t make a habit of doing that I started with hundred units 120 units 300 units and up and up all my projects are like 85 to 100 million each even development projects right so since I played in this league I Focused instead in building good rapport and relationships with the brokers They are the ones who bring you off-market deals right they build you once they all they want to know is like

Gabriel Petersen (33:50.665)
Mm, yeah.

Venkat Avasarala (33:56.203)
Man, once we bring this deal, make a fair offer, I’ll get it awarded. And now you do exactly what you said you would do. Don’t come and retrade me. I’ll lose my face in front of them and close it. Don’t give me excuses and all that. I know it’s hard. I know everybody cannot do it, but I picked you thinking that you can get it done. Now get it done. And if you do that, your phone keeps ringing. Right. Not from just this one guy, everybody, every other broker. So execution, right. So impress, win that first deal from broker.

Execute the hack out of it and everybody your phone will be and you don’t have to

Gabriel Petersen (34:29.057)
Yeah. Yeah. Brokers are, I mean, you can think of them as the, the cold callers that are on your team, just out there out there pounding the pavement. They’re having the conversations already. And so you might as well just step into that flow and, and have the conversations with them. makes it a lot easier. That’s for sure. all right. Next question is about lessons learned. Not every deal we get into goes the way we expect it. In fact, pretty much every single time something is going to go wrong and that’s when we get to learn a lesson. So

Venkat Avasarala (34:57.868)
yeah. So there is a deal in Full Share, Texas, just in Houston Metro, right next to KD, $145,000 income. And we wanted to build a 100,000 square feet retail complex. So we acquired the land December of 2029. Everything is done, right? We pre-leased it even before we break ground, right? And arranged bank loan and everything.

Gabriel Petersen (34:57.889)
What was the deal that went a little sideways for you and what was the lesson you pulled from it?

Venkat Avasarala (35:26.684)
and we are supposed to break down in April of 2020. And then in March 2020, COVID came out and then banks said that, wait, go get all your leases re-endorsed. The world has changed. How do we know that they’re going to occupy them? Right? So when we went there, they said that, are you crazy? I don’t know if I’m going to have a business. Right? So we got stuck and then we still salvaged it. I mean, we drastically, and then the inflation went.

Gabriel Petersen (35:39.647)
Mm-hmm.

Gabriel Petersen (35:47.981)
Yeah.

Venkat Avasarala (35:55.935)
What we were under contract with our GC for $105 a foot or something. And that number went to like 180. Right. And that guy fired. And even for me to go after him, he went out of business. Right. So when these kinds of things happen, OK, now you have to pay it. But we still built it. We only built 25,000 square feet. We kind of sold a of parcels of the land.

Gabriel Petersen (36:04.033)
Jesus Christ. That sucks.

Venkat Avasarala (36:21.428)
We sold everything except just one piece left. Not piece, it’s actually a building. It’s a daycare. There’s no loan or anything. That’s one thing that we have to sell and then that project will be done. But we’re not going to lose money. I was afraid where we were going to lose money on that. we’re going to actually, we’re not going to be a killing, but we will do decent double digit return.

Gabriel Petersen (36:38.925)
And the lesson.

Gabriel Petersen (36:43.713)
The lesson there, guess, is, I mean, you never know what can happen. COVID is not something you can predict. It’s not something you can prepare for. So just expect the unexpected to happen. And when it does happen, just roll the punches.

Venkat Avasarala (36:47.924)
Yeah. Yeah.

Venkat Avasarala (36:57.516)
Absolutely. And now we are putting these things in the offering documents. Like, look, there can be a war. There can be over kind of thing. There can be shutdowns. There can be anything. Right. So the thing is, if you set the right expectation, people will understand that. I mean, most pressure comes from your investors. Right. So they would understand. But then again, who would have imagined covid? Right. I mean, last time something like that happened is 150 years ago or something. Right. But now we have to put it in there.

Gabriel Petersen (37:24.525)
Yeah, it was like 1918 or something like that.

Venkat Avasarala (37:27.36)
right, something like that happens, then just manage expectations and all that. Because some people just don’t, once they’re passive investors, man, they’re busy. That’s why they trusted you and gave you money. And some people don’t even read the updates that we send and all that. They said that, didn’t you say it was a three year project? Why is it taking five years?

Gabriel Petersen (37:40.333)
PPM.

Venkat Avasarala (37:47.582)
they’ve been increasing interest rates and spell so that that’s the challenge so the more you can think of these kind of things and not just to cyf basis but person to person right you want them to know this getting in so that they don’t worry too much yeah

Gabriel Petersen (37:48.141)
Three, two, five years. Come on, guys.

Gabriel Petersen (38:07.755)
Yeah, yeah. Be communication is absolutely key in pretty much every area of your business, but especially with investors. They just want to know they want to be kept in the loop. And if you keep them in the loop, even the bad news, you know, it’s not going to be, it’s not going to be good, but they won’t freak out so long as they’re kept in the loop. All right. So that was lessons learned. Let’s talk about your highlight reel. Sometimes things go right and their deals that kind of stick in our mind is one of our favorites. So

Venkat Avasarala (38:16.885)
have some good.

yeah.

Pfft.

Gabriel Petersen (38:35.607)
Go back to that deal for you. What was it? And tell us a little bit about it.

Venkat Avasarala (38:39.085)
So all my multifamily value adds I sold, I made money, some more, some less. There are a couple of properties we just bought before COVID, so not so much on them. But for the most part, we did really well. There was properties where we used to send 12 % cash flow. Those were the days, 2018, 19, and all that. But the one I’m really, really happy was that 156 unit, my very first development project. My god, man, I wish everything is like that.

We broke down, COVID broke out, nobody stopped us, we continue building it and these guys don’t have any other work, right? Everybody stopped. So now we have plenty of material, plenty of cheap material. mean, we actually, when COVID broke out, you remember, oil price went to zero. That is the climate. Yeah, no, no, no, it didn’t go to zero. It goes to negative $35 a barrel, meaning I have to pay you to take off this oil from me because I don’t have anywhere to keep it.

Gabriel Petersen (39:26.77)
shit, guess nobody is driving.

Gabriel Petersen (39:33.197)
He says.

Gabriel Petersen (39:37.655)
That’s funny.

Venkat Avasarala (39:38.19)
right and take the oil for free and for taking they gave you $35. So those were the conditions. I know I’m not wishing another covid or all that but that really went well because we had surplus care you know and surplus material, surplus labor and all that nobody stopped us we built it it leased up quick and then we sold it at 35 % occupancy at four cap as if it’s 95 % it’s not happening again so that was a dream come

Gabriel Petersen (40:08.493)
That sounds like a good one. All right, second to last question. This is a new question we’ve been asking. It is about AI. I try to implement AI in as many places I responsibly can in my business. I’m a huge proponent of it. So are you using AI in your business? And if so, how are you doing it?

Venkat Avasarala (40:24.119)
So yes, of course, right? So first thing is, you, right now I don’t type anything starting. I turn on the word, turn on the dictation, and then just speak my, whatever I wanted to say without breaking a flow, right? And then I take it and give it to Chattu Pt and says that, look, and I give it the tone, right? This is for my investors, right? This is the tone. Make it very easy, right? Lame in terms and all that.

If I’m using any acronyms, put them like that. And then it nicely creates that. So investor communications is one of them. That’s something we do every day. But then when you contracts, previously, we don’t use to understand what the hell that is. And we have to get hold of a lawyer and he was busy in the evening. I had to wait until the evening and all that. Right. So now.

Gabriel Petersen (41:08.461)
Yeah.

Venkat Avasarala (41:18.209)
I still do that. It’s not like I’m going to do without lawyer, but I’m not going to bother them. So the less times I call them, the less billing they do. And then I get everything from ChatGPD. I keep it interactive so that I know what I’m getting into. I have a lot more awareness now than what I had before ChatGPD. So that’s one other way. And then the property management started to bring AI into different, different aspects on how to look for fraud.

Gabriel Petersen (41:48.269)
Hmm.

Venkat Avasarala (41:48.302)
my god, I mean that became a huge problem because people will do whatever to survive So there are some services if you give them hundred dollars, they’re gonna give you pay stubs fake ID and all these things atlanta apparently is is very big on this for some reason and It’s a disaster the class a property if you let somebody in like that I mean if you cannot catch it, it’s a problem. So we started using AI tools to you know catch these people

at application. And we ask them to upload everything. Don’t bring anything. Just upload everything. So it becomes it flows into this app and it spits out. Yep, that’s fraud. So those are some places that we are using.

Gabriel Petersen (42:28.214)
Interesting,

Yeah. Yeah. That’s a, that’s interesting. I haven’t heard it used in that specific instance, but it makes a lot of sense. The fraud one and then contractor view. We, I, I absolutely love, I, I do perplexity for contractor view, but like just recently we got a, cell tower lease. Somebody wants to put a cell tower on one of our RV parks. And I had never like ever even considered cell tower leases, what they look like. I didn’t know anything about them. And so I put the thing in the chat. GBT. I said, what do I need to care about in this contract?

Venkat Avasarala (42:40.49)
yeah.

Venkat Avasarala (42:47.822)
That’s a great one

Gabriel Petersen (43:00.245)
And it spit it out. was like, you know, this is, this is where they’re trying to get you. This is what, you know, all these things we still had, you know, people look at it, but it, at least it prepared me and, and gave me a context for this type of contract that I had never dealt with before. So yeah, I love that. All right. Well, that brings us to the very last question. This is for the listeners. You’ve given us a lot to think about. I’m sure people want to reach out, get in contact with you. This is a two-parter. Where can they find you? And then what can they expect when they reach out?

Venkat Avasarala (43:13.336)
Absolutely.

Venkat Avasarala (43:27.086)
So they can visit my website, strikerproperties.com. So Striker is that, it’s like a tank on wheels. It’s in our US Army. It does most of the tank things, right? But it’s on wheels, it’s quick, agile, cheap. So that’s what inspiration I have on real estate business.

I don’t have a huge office, a lot of people, mouths to feed and all that. You know what will happen if you get into that? Now you’re forced to do the deals even when things are, when you shouldn’t be doing, because you need to pay all those bills, right? But I want to do big stuff. I’m building 185 to a hundred million. I’m building one in Frisco downtown. It’s a hundred million dollar deal right in Frisco downtown. So I want to do tank stuff with Striker profile. That’s what it is.

Gabriel Petersen (44:04.865)
Hmm. Yeah.

Gabriel Petersen (44:20.429)
I like it. I like it. Cool.

Venkat Avasarala (44:23.082)
It’s strikerproperties.com. yeah, if they ever want any advice or anyway, just get in touch. Absolutely. And there’s a form to fill and we can open a call.

Gabriel Petersen (44:32.333)
or invest in one of your deals.

day.

There you go. All right, I will put that link in the show notes. So if y’all want to reach out to Venkat, all you got to do is click the little more in the description. It’s going to pull down that full description and in there you can find his links. All right, man, that wraps it up. Thank you very much for up on the show.

Venkat Avasarala (44:54.413)
Right?

Gabriel Petersen (44:56.301)
And for everybody who is with us today, thank you guys for showing up. You are the reason we do this. So if you guys have any questions, reach out to me, Gabe, with the real estate investing club.com. If you guys want to support the show, just leave us a review or a comment or anything like that. Other than that, I hope you guys have a great week. Keep rocking real estate and I look forward to seeing you on the next episode.