Episode 656-Vineet Dutta

Gabe Petersen (00:01.441)
All right, we are back with another episode of the real estate investing club. I hope you guys are having a great day, great week wherever you are and whatever day it is for you. As always, it is Friday on the podcast. We’re bringing that good Friday energy to you. It is nice and cloudy here in sunny Seattle. And as I mentioned on the last episode, I’m really excited for spring. The trees outside my daughter’s window are starting to bud and it’s like February. didn’t feel like.

that started until April, these trees are confused, but got me excited. So I hope you guys are equally excited for spring around the corner. It’s a good day for a second reason though, cause we got Vinit Dutta with us, Vinny from Hive NY. He deals in rental arbitrage. So any of you guys out there, you’re looking to get into real estate. You don’t have a lot of capital to deploy. You want to know a good, relatively inexpensive way to get started. This is the episode to listen to. It’s a really interesting strategy.

that works in kind of the more expensive markets. Vinny will go into it deeper. But Vinny, yeah, I’m excited to jump into this. Thanks for often on the show.

Vineet Dutta (01:05.333)
Yeah, thanks for having me. Looking forward to it.

Gabe Petersen (01:07.809)
Absolutely. 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 to the beginning of your story in real estate and tell us how you got here.

Vineet Dutta (01:19.319)
Yeah, so just like a New Yorker used to work in finance and then one day had a realization I hate my bosses and just wanted to leave that W-2 trap and was sitting on an idea of this rental arbitrage business for a while. I really got into it because I was actually renting to a friend that became a friend over the course of 10 years. I sublet my apartment in New York while I was doing consulting work.

so just to kind of save on money, right? Like in your early twenties, found someone to sublet my room while I was traveling to San Francisco for work. And, that individual decided to stay in my apartment for 10 years. and I just kept renewing my lease and we just, you know, and he would just pay me rent and just made a little off the top. you know, like all my family members, friends, family said, why are you leaving banking? Why are you leaving your W2? Don’t do it. So listen to the voices.

never went down that entrepreneurial journey. Then eventually, fast forward to 2022, started working at a bank here in New York, I’d rather not say the name just because. And just was kind of like just throwing up before going into work and just stressed. like, what am I doing? This isn’t fun. Like, you know, like I shouldn’t be throwing up before going into work working, you know, like I’m gonna spend.

Gabe Petersen (02:45.413)
That’s a good litmus test. If throwing up going into work, you should probably change something.

Vineet Dutta (02:50.57)
Right? So then I, since I was like, Hey, you know, I’ve been renting to this guy for 10 years. Why don’t I just try scaling this concept? Right? And fast forward started reaching out to landlords. I’m trying to sign my master leases. New York is pretty competitive. So targeting some of the smaller landlords was the main focal point and primarily a little outside of Manhattan initially.

and then started expanding back into Manhattan and then now back outside of Manhattan.

Gabe Petersen (03:24.05)
Awesome. So I’m going to pause you there because you’ve kind of you use some terms that people who aren’t familiar with the strategy, I don’t think they’ll understand. So why don’t you why don’t you first kind of give us an overlay and overview of what rental arbitrage is? What is the strategy? How does it work?

Vineet Dutta (03:42.611)
Yeah, so I guess my business model is right rental arbitrage with a corporate co-living component, right? I’m not just moving one tenant in. My concept is rent by the room because it’s New York City, right? People need roommates. Everyone has a roommate in the New York City market. So pretty much I reach out to landlords, give them the pitch. I sign a master lease with them and then I convert the space into

I’ll take maybe a one bedroom and convert it into two additional bedrooms. So I’ll become a three bedroom flex as they call it here in New York. So I’ll then I’ll make

Gabe Petersen (04:15.326)
Wait, So you take a one bedroom apartment and you turn it into a three bedroom

Vineet Dutta (04:23.11)
Yeah, just like I said, right, like some of it and it’s not like all formats kind of can fit this is depending on the size of the living room and things like that. And the spaces are decent size, right? They can fill a full size mattress, a desk. There’s just no living room, technically sometimes, or the living room, dining room is relatively small. And, you know, like New York City is great for this because

Gabe Petersen (04:28.894)
Yeah.

Gabe Petersen (04:40.338)
Interesting. Yeah, okay.

Yeah.

Vineet Dutta (04:50.3)
You’re not spending time in your apartment, right? You’re going to work, then you’re going to go be social or the gym, whatever it is, right? The only time you’re entering your apartment typically, and this is probably pre-COVID, like, you know, obviously work from home is pretty prevalent, but, you know, a lot of the banks have now started requiring people to come back to work five days a week. So you’re not really spending time in your apartment in New York City.

you’re always out and about. the room is just there to sleep and these are young 20 year olds, early 30 year olds that are just trying to save on a high cost of living. So that’s why it kind of works. The other concept to this is that it’s kind of month to month flexible leasing. So you get a lot of people that are from out of town that are here on a project basis. There’s Fashion Week, there’s

Hey, I’m here for an engineering conference or engineering project. So I just need something in the midterm to longterm. I’ve had tenants stay four years or three years in my places. You know, they, they want to land in a place that’s turnkey ready. and then they’re like, my God, it’s cost a lot of money to move in New York. I got to pay a broker fee. I got to put up a security deposit. I got to make 40 times rent, right? Like if you think about New York rent prices.

You’re talking about like $160,000 minimum starting to sign a lease. And then you got to put up at least 20,000 to move in, right? Between a broker fee, security deposit, first month’s rent, furnishings. You know, that’s a lot of money for, you know, young 20 year olds just starting out of college or just anybody for that matter, right? Just to move into a place. So then we make these apartments turn key ready.

and people just kind of bring their bags and that’s it.

Gabe Petersen (06:47.998)
Nice. So I want to I want to just put a little cap on the whole strategy in itself. So you you go to a landlord, somebody who’s renting a long term rental. So they have a one bed, one bath, whatever. And you sign a lease with them. You sign a master lease, like you said, and then you sublet that that rent that rental. If it’s a one bath, it’s crazy that you get three, but you sublet it to other people for a markup. So you rent it at

Vineet Dutta (07:07.203)
Mm-hmm.

Gabe Petersen (07:14.592)
I’m just gonna use round numbers here. know it’s not a thousand, but I’m gonna use a thousand as the, as the, what you’re renting from the owner for. You rent your master lease as a thousand and then you rent to those three people who are coming into that one bedroom. You rent each for, I don’t know, 500, 750, whatever it is. And you take the spread.

Vineet Dutta (07:16.365)
Yep.

Vineet Dutta (07:32.152)
Yep. Exactly.

Gabe Petersen (07:35.592)
Awesome. Yeah. And I, so I love this strategy. I’ve never done it myself, but I love the strategy in, in concept because it is a great way for somebody who wants to get into real estate, who wants to see that cashflow. it’s a great way to do it inexpensively real estate itself. You know, you guys have, if you’ve been listening to this show, you know that we’re talking about hundreds, hundreds of thousands, millions of dollars. You don’t need that for this type of strategy in order to get started. And there’s a ton of cashflow that can be had.

Vineet Dutta (07:53.304)
Yeah.

Gabe Petersen (08:04.097)
So break down the numbers for us when you know a typical deal I know I’m sure they all differ but break down a one deal for us the numbers what you rented it for what you furnished it for and what you’re renting it out for.

Vineet Dutta (08:18.923)
Yeah, sure. So we’ll just, I’ll use like round numbers just for the conversation. So let’s say, you you rent a one bedroom apartment for $5,000. Then you put up the flex walls. The flex walls are depending on the type, right? Some buildings don’t allow.

Gabe Petersen (08:33.793)
And sorry, are you is that really is that a real in New York? it five thousand to rent a one bed? Is that like a real number?

Vineet Dutta (08:40.444)
yeah, this is like a very real number.

Gabe Petersen (08:43.489)
New York’s expensive. That’s crazy.

Vineet Dutta (08:45.058)
Yeah, yeah, no, that’s not a joke. And I think it’s gone up slightly more because they got rid of broker fees. So now the apartment buildings have to pay the broker. So that has increased rent as well. This was last year or last two years. They kind of implemented this new regulation. Yeah, so pretty much let’s say you rent a one bedroom for five thousand and then I convert that into a three bedroom. Depending on right, I’ll have

Gabe Petersen (09:01.894)
interesting.

Gabe Petersen (09:06.571)
Hmm, okay.

Vineet Dutta (09:14.306)
different tiers of the bedrooms, right? The primary, secondary, and the third bedroom. And the third bedroom typically tends to be a home office, you know, so people don’t necessarily have windows, so they have a home office, let’s say, not necessarily a bedroom. And you, the flex walls are around 1500 to 2000, depending on the material you use. Go ahead.

Gabe Petersen (09:31.147)
Mm-hmm.

Gabe Petersen (09:37.921)
And a flex wall is, I’m assuming, I mean, in my mind, I’m thinking like that Japanese style, like paper wall or something you’d see in an office with those.

Vineet Dutta (09:47.402)
No, no, it’s like sheetrock. It’s just, it’s considered pressurized walls. So they don’t put any nails into the floors or the ceiling. They just have metal studs and then they just nail it to the two sides walls. That’s it. Yeah, yeah. And there’s some buildings have different requirements, right? Some want a 12 inch gap, which kind of makes it tricky, which will lower your margins. Some people want bookshelves.

Gabe Petersen (10:03.677)
interesting. Okay.

Vineet Dutta (10:16.662)
So you got to kind of really understand what the landlord wants. And then when you’re pricing your units to really understand like, Hey, if my wall has a 12 inch gap for this landlord, I’m not going to be able to get full market rent, right? Like I have a freaking hole in my ceiling and there’s two people sharing that wall. So, you know, that’s going to lower your margins a bit. So the sweet spot is to find landlords that allow, full walls, full flex walls and some

don’t even allow flex walls. So you have to put a bookshelf, which costs a little bit more money. So let’s say a flex wall is 1500, a bookshelf is 2000. And then sometimes they don’t allow swing doors.

Gabe Petersen (10:57.465)
and the bookshelf acts as the wall. If you were to put a bookshelf in. Interesting, okay.

Vineet Dutta (11:00.851)
Correct. Yeah, yeah. And it’s not like a bookshelf. You go to like, you know, like Ikea and buy a bookshelf. These are like custom made bookshelves that the same people that build the walls are the same people that build the bookshelves. It’s a company called Wall to Wall. They have like a monopoly on these walls in New York. And then some buildings don’t even allow like swing doors. So you have to put sliding doors that are attached to the bookshelf. So it’s just kind of, you know, little uniqueness.

to each build. let’s say the rent is, yeah, yeah. So let’s say the rent is 5,000, the flex wall is 1,500. You’re furnishing the full apartment with what? Just a full size bed and you’re not putting like TVs. I’m not putting couches because like that living room space has been converted into a bedroom. Just your bare bones for people to come put their head down.

Gabe Petersen (11:33.321)
Interesting, interesting.

Vineet Dutta (11:59.858)
desk, dresser, full size bed, lamp, that’s pretty much it. Which costs around $3,000 between the three different rooms in total. And then you probably get around a, from the rent, you probably get around anywhere from a 25 to 30 % markup off of the rent as your gross margins.

Gabe Petersen (12:24.481)
So if you’re running it for 5,000 each, oops, each, I’m doing math in my head here. Each unit is gonna rent for 2,000, something like that.

Vineet Dutta (12:36.509)
Well, you’re going to charge like around, I’m just sorry, I’m just looking, you’re going to charge 1250 over the 5,000. So it’ll come to 6,000, 550 for the whole unit.

Gabe Petersen (12:48.725)
Right, so each person renting, I mean, in this scenario, you got one.

Vineet Dutta (12:51.344)
Well, no, like each each each room is priced differently. It’s not that because you have a primary bedroom, right? The home office bedroom and then the secondary bedroom. So each room is priced differently.

Gabe Petersen (12:56.597)
Got it, got it, got it. Yeah, okay.

Gabe Petersen (13:03.809)
Yeah, so it’ll range from, you know, one’s 3000, one’s, you know, 1000, one of them’s four. I don’t know if that math makes math up, but you get the idea.

Vineet Dutta (13:12.987)
Yeah, yeah. So my pricing is typically like $2,250, $2,150, and then $1,600.

Gabe Petersen (13:20.605)
Interesting. Okay, cool. Man, that is a really interesting strategy. at this point, you’re making about $2,000, one to $2,000 a month. And you have put in, so you have $5,000 rent, which will be covered, and then you’ve put about $4,500 into it between the wall and then the furnishings. Is there any other expenses that are kind of unseen here that people would have to pay?

Vineet Dutta (13:47.886)
No, that’s pretty much it to get a room up and running and then you’re pretty much cashflow positive after like I mean if you have to if there’s a broker that finds a unit for you versus you finding it through know, Streets, Zillow, whatever Then you have to factor that in and brokers fees in New York are one month rents. know imagine putting up 5,000

Gabe Petersen (14:05.578)
Yeah, yeah, yeah.

Gabe Petersen (14:11.048)
Yeah, makes sense. Interesting. mean, but you’re yeah, you’re you’re positive in a couple months max. So it’s a really interesting strategy. What what do you run into? I mean, here in Seattle, I’m sure that you’d get shut down instantly because of zoning laws and you know, people having a fit with with nonconforming use that kind of thing. What do you run into those issues there in New York? Or what is

Vineet Dutta (14:17.666)
Yeah, yeah.

Vineet Dutta (14:37.389)
Well, it’s certain buildings allow these, right? And depending on whatever they’ve gotten approval from the building department allows for it. Not all buildings allow for flex walls. Maybe their landlord base doesn’t allow for flex walls, but it’s pretty common practice here in the New York City area.

Gabe Petersen (14:57.408)
Okay, that makes sense. Let’s talk about the pitch. So I feel like that would be one of the hard parts about this. mean, finding a unit that will actually accept this type of strategy, you know, has to be a difficult process. How do you pitch the landlords and how do you find them in the first place?

Vineet Dutta (15:14.942)
Just like through broker networks, I’ve built up a pretty good broker network, so I’ll reach out to them. And if they have units that they’re looking to rent, I’ll say, hey, Benny from Hive, here’s my use case. We’d love to partner with you. And then I of go into the benefits of why partner with us, right? They get reliable long-term cash flow at full market rent. We eliminate their vacancies. We guarantee full rental income, right?

They don’t have to and we we underwrite our own tenants so they don’t have to worry about, do I have a bad time and do I have to take on those legal fees to evict them? We we take on that risk for them. We also just reduce some of their operational costs, right, from turnovers to maintenance to marketing. We kind of handle all of that. Maintenance is kind of shared, right? Well, some some maintenance, right, like like plumbing and electrical, the

Gabe Petersen (16:05.714)
Okay. So you do cover maintenance. Okay.

Vineet Dutta (16:12.734)
that we expect the landlord to do, but like small little maintenance issues within the apartment will handle.

Gabe Petersen (16:20.53)
Interesting. Okay. And so with that, let’s talk about management that you know, this almost sounds I mean, I’m sure you have higher turnover than a long term rental. So it sounds you know, you’re in the midterm almost short term space, which is management intensive. How is the management for this kind of this kind of deal?

Vineet Dutta (16:39.219)
You have to be on top of your game. Because it’s not like you’re running on like an Airbnb platform, right? Where everything is kind of done for you, let’s say, right? This is kind of like in-house. So you just have to make sure your I’s are dotted, T’s are crossed, and you’re just on top of everything. And making sure you have, you know, your assistance, your back office support, like aligned with, you know, posting your listings, managing the inboxes, and hitting any…

channel that you know where rentals might be at right because you’re really trying to find rentals every month because you know your units are kind of turning over a little bit quicker than a one year. With that being said though like we probably get around five new or four turnovers a month so it’s not too much just because there is a value to our units for tenants right like the broker fees the fully furnished they don’t have to put up the flex wall themselves.

The roommate matching, right? A lot of people are moving into a lot of the tenants that we find.

Gabe Petersen (17:43.929)
That’s actually what I was going to say is you guys, I mean, you’re getting three strangers together. So I’m sure that is part of your process is identifying people who won’t, you know, rip each other’s hair out. Uh, is that, is, do you have a lot of deal with a lot of roommate issues or how does that work?

Vineet Dutta (18:01.076)
yeah, that’s like the interesting part. Sometimes you feel like I’m already I’m a father of three right now. And sometimes I feel like I’m somebody else’s father. Some of the is just like so childish. I’m like, what do like guys like, for example, yesterday, my tenant base messaged me because one of the roommates put a hairball dryer on the couch and they were upset that they moved it from the coffee table to the couch. I’m like, what are we arguing about here guys like

Gabe Petersen (18:08.416)
Congratulations.

Vineet Dutta (18:30.375)
Talking about moving hair. Yeah, yeah. And like, you know, I tell these guys that like, first remediate things amongst yourselves. Everyone is a working professional. Everyone’s an adult in the room, supposedly. But yeah, no, like that is one of the, I would say, more frustrating things about this business is just dealing with some of the nonsense that tenants, dependent conflict.

Gabe Petersen (18:31.326)
Why am I involved in this conversation?

Gabe Petersen (18:59.72)
Yeah, yeah, and I’m sure I mean you’ve already talked. Yeah, you’ve already talked a bit about your tenant base. I mean, some people it’s you know, working professionals who are there temporarily, but you mentioned a lot of your tenant base is younger, younger folk who just getting there, getting their feet under there. You know, feet under their whatever that phrase is, but.

Vineet Dutta (19:00.176)
Cause you’re like, why are we having these conversations?

Vineet Dutta (19:19.322)
Yeah, yeah, yeah. And that maturity level is so different.

Gabe Petersen (19:24.372)
Yeah, yeah, I can imagine. Nice, man. Well, hey, we did, we’ve run down the clock. It is time to jump into the quick question round. Are you ready?

Vineet Dutta (19:33.123)
Yeah, let’s go.

Gabe Petersen (19:34.912)
Let’s do it. Starts with education could be any form could be a book you’ve read movie you’ve seen conference you’ve been to. I just need two recommendations one for general life wisdom and one for real estate.

Vineet Dutta (19:46.789)
General Life with CNBC. I enjoy watching CNBC. Real Estate, you know, that’s a good one. I’m still learning myself. I discovered a new AI tool that’s hyper-focused on real estate. It’s called Real AI. And that helps me with a lot of my analysis and just deep diving further into markets as well.

Gabe Petersen (20:09.215)
Nice man. I’m always I’m always down for new AI tools. I use Claude. Well, I haven’t a subscription to pretty much every single one of them, but Claude is the one that I use the most often and then perplexity for research. But something that’s specifically oriented towards AI, I’m definitely down to check out. Alright, next question is for your younger self. Let’s go back to the Vanite who is just getting started. Who is maybe still back at that, you know, working at that bank. Go back to him. Look at me now and give him one piece of advice moving forward.

Vineet Dutta (20:39.364)
Don’t listen to people that just keep saying no to you. Like you know what you’re able to do. You know what you’re capable of doing. Sometimes the people that keep saying no to you have no idea because they’re too afraid.

Gabe Petersen (20:51.541)
Yep. And I would extend that and I would say don’t listen to anybody unless they’ve accomplished what you want to accomplish. Unless they’ve done what you’re trying to do, just don’t listen to them. Most people, the vast majority of people are very well-meaning. It’s just that they bring their own insecurities, their own fears into their conversation with you and it has nothing to do with reality. so if somebody has achieved what you want to achieve, they’ll give you good advice. People who are successful,

Vineet Dutta (20:59.554)
Yeah.

Gabe Petersen (21:20.597)
They don’t want to bring anybody down. want other people to succeed as well. So you can listen to those people, but don’t listen to people who haven’t haven’t been there.

Vineet Dutta (21:28.439)
Yeah, for sure.

Gabe Petersen (21:30.593)
All right, next question. I’m actually going to skip this one. Usually we ask what Metro you’re most excited about investing in today, but you’re in New York and so I’m sure you’re going to say New York City. Actually, let’s dive into that. What area of New York are you most excited about expanding your portfolio?

Vineet Dutta (21:40.492)
Yeah.

Vineet Dutta (21:47.223)
Well, I would say I’m in, I’m very excited, not really in New York, but outside of New York in Jersey city. I’m not sure if you’re familiar with Jersey city. It’s part of Jersey city journal square just got rezoned. So there’s towers that are going up and supposedly by 2050, 2060, it will look like time square. Which I think is very interesting because for my, business, I’m able to probably possibly partner with these.

Gabe Petersen (22:09.728)
Nice.

Vineet Dutta (22:17.034)
new landlords that need to stabilize their buildings quicker. And since I have flexible lease terms, rent by the room, that I might be able to help them along the way and help myself.

Gabe Petersen (22:27.744)
Cool. Nice. Yeah, that’s interesting. love new developments, new very large scale developments are always interesting because the way that they do the planning is just, you know, it’s so much better than old zoning and old use planning. So it’ll be interesting to see how that works out. All right.

Vineet Dutta (22:47.009)
Yeah, yeah. And these buildings are like 1200 unit buildings.

Gabe Petersen (22:53.062)
geez, that’s crazy. All right, next question is about finding deals. It all starts with getting in contact with the seller, in your case, the landlord. What is your favorite way to generate leads and find new deals?

Vineet Dutta (22:54.816)
Yeah.

Vineet Dutta (23:05.409)
Honestly, just broker relationships. These guys are like tuned into the landlord, their landlord’s needs, and they have a bunch of different landlords that they work with. So, and they kind of do the legwork for you, right? They kind of do the initial pitching, say, but you know, I worked with Vinny on this deal over here and they can kind of use, can use them as a reference as well. Right. So my main, my favorite source is the broker. Sorry.

Gabe Petersen (23:32.085)
Yeah, I feel like that is very unique to New York. Here in Seattle, we do not have brokers for apartments or leasing apartments. And so it’s interesting when you hear somebody from New York, and I know that’s very, very prevalent there, is that you guys have brokers who will place people into multifamily. And so yeah, it’s pretty cool. All right, next question is about lessons learned. Not every deal we get into goes the way we expect it. fact,

Vineet Dutta (23:40.071)
around.

Gabe Petersen (23:58.027)
pretty much every time something goes wrong and that’s when we get to learn a lesson. So what was the deal that went a little bit sideways for you and what was the lesson you pulled from it?

Vineet Dutta (24:07.347)
I would say it was my very first tenant. didn’t screen them. I went by, you know, Hey, they live in New York city. They have to be a working professional. she stated that her employer’s paying her rent. turned out to be the biggest nightmare of my, of this journey. But, as all like learning less, like, you know, that challenge of trying to evict that tenant. and they pretty much started abusing drugs.

and just so I couldn’t even fill the other rooms. So I was just sitting on like 6,000 losses every month, which eats quick. And it was during like at the tail end of COVID. So obviously, you know, the courts are backed up with evictions. So started screening my tenants. I didn’t really just think like, hey, everyone that lives in New York is a working professional.

Gabe Petersen (25:00.34)
Yeah. Yeah. That is a mistake. You only make once. I’ve definitely, I think the first, the first duplex I bought, had, just the nightmare tenant. And, once that happens once you’re not going to let it happen again. That’s for sure. and I do want to kind of highlight in there. that kind of falls into the same bucket as always do your due diligence, always follow your checklist. You know, this has been echoed across so many episodes. I’ve told you guys myself that I’ve made this mistake when you’re

Vineet Dutta (25:14.973)
Yeah, yeah.

Gabe Petersen (25:29.342)
Identifying a property when you’re doing the underwriting when you’re doing your due diligence do every single step make sure you check it off because the one that you don’t do is the one that’s gonna come and bite you in the bite you in the ass so All right moving us on 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?

Vineet Dutta (25:40.057)
Yeah.

Vineet Dutta (25:53.073)
They can just email me. My email is vinitv.dutta.com

Gabe Petersen (26:06.792)
Awesome. I will put that link in the show notes. So if y’all want to reach out, 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 Benny’s links. All right, man, that wraps it up. Thank you very much for out on the show.

Vineet Dutta (26:19.772)
Great. Thanks, Ed. Good talking to you.

Gabe Petersen (26:24.176)
Absolutely. For everybody who’s 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, at the realestateinvestingclub.com. If you guys want to support the show, just leave us a review. 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.