JF1869: Apartment Syndication Leads To Quitting Full Time Job with Pancham Gupta
Pancham was in a similar situation as a lot of real estate investors, or people that want to invest in real estate, working full time and looking for a way out. He started apartment syndications just a couple of years ago and has already been able to leave his full time job. We’ll hear how he was able to put together his first couple of deals and grow to the level he is at now. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“A constant effort of being in touch with them” – Pancham Gupta
Pancham Gupta Real Estate Background:
- A Principal of Mesos Capital
- Has bought and invested in properties in 5 different states and internationally, recently quit his high paying job in Fintech to do syndications full time
- Has successfully built a portfolio which is cash-flowing in double digits, manages and controls over $32M in real estate
- Based in NYC, NY
- Say hi to him at:
- Podcast Website: https://thegoldcollarinvestor.com/
- Email: pancham.guptaATmesoscapital.com
- Best Ever Book: Turning Pro
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Pancham Gupta. How are you doing, Pancham?
Pancham Gupta: I’m doing great, Joe. How are you doing?
Joe Fairless: I am doing great as well. Looking forward to our conversation. A little bit about Pancham – he is the principal of Mesos Capital. He has bought and invested in properties in five different states, and internationally. He recently quit his high-paying job in fintech to do syndications full-time. He has successfully built a portfolio which is cash-flowing in double digits. Manages and controls over 32 million in real estate. Based in New York City, New York. With that being said, Pancham, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Pancham Gupta: Sure. Thanks, Joe, for having me on. I came to the U.S. in 2003 for my masters in computer science, and it was not until 2012 when I decided to invest in real estate here in the U.S. I bought my few investment properties here in New York because I actually bought my own house, and they were all single-family homes. Over the next few years I ended up buying properties in five different states. Again, these were single-family homes, duplexes, triplexes, and I was doing all this part-time; my main focus was the job, and I was spending more time managing these rental properties.
Slowly I realized that this strategy was not scalable at all, and I started looking into bigger multifamily deals. Syndication seemed like the way to go, and it was not until 2017 when we bought our first syndicated property. Since then we have done four syndications, all the way from two million to 19 million dollars.
Joe Fairless: Did you say 90 or 9?
Pancham Gupta: 19 million dollars. So two million and 19.
Joe Fairless: 19, okay. None of the above, Joe. 19… [laughter] Two million to 19 million, got it. Okay.
Pancham Gupta: Right. And now I’ve quit my full-time job, like you mentioned, and I’m focusing full-time on the syndication business, and also doing a podcast to educate high-paid and juniors about personal finance.
Joe Fairless: You bought in five different states… Why is that?
Pancham Gupta: There is a story behind that. I live in New York, and it’s not the cheapest city in New York. Every house here, if it’s in a decent location, was somewhere half a million dollars to a million dollars. They were cash-flowing nicely when I bought them in 2013, but after that, they were not really cash-flowing that well. So I started looking out of state for investing opportunities in the areas which were still growing and the price point was not that high. Slowly, from one state to the second state, to the third state… So it kind of mushroomed into five states.
Since then, I’ve sold most of my portfolio and focusing full-time just on the syndications and bigger deals.
Joe Fairless: Your first syndication was a two-million-dollar property, correct?
Pancham Gupta: That is right, and it was in Charlotte. It was a 44-unit deal.
Joe Fairless: Okay. And how much money did you raise for that?
Pancham Gupta: For that we raised exactly $781,000, from friends and family.
Joe Fairless: And who’s “we”? I think you said “we”.
Pancham Gupta: It’s me and my partner – one of my partners who we bought together and have Mesos Capital. We both raised from our friends and family.
Joe Fairless: Okay, so friends and family, $781,000. How much did the investor who invested the most bring, of the 781k?
Pancham Gupta: Our highest investor was one individual – he invested 100k. [unintelligible [00:05:11].29]
Joe Fairless: We don’t need to know his name. He would get a lot of emails and phone calls if you did that. Okay, 100k… So it was pretty spread out, I imagine, then. There wasn’t a 300k, 400k, 500k investor in it.
Pancham Gupta: No, it was that guy, and both of us invested close to 100k as well.
Joe Fairless: Each?
Pancham Gupta: Each, yes. So 300k was just like that, and 481k we raised from other individuals, anywhere ranging from 50k, 75k and 100k each, from these guys.
Joe Fairless: How many of the individuals are family, compared to friends?
Pancham Gupta: I would say one is family, and all the rest are friends who are like family.
Joe Fairless: Yup. And how do you know those friends who are like family? Tracing back to — what’s the origin of how you met?
Pancham Gupta: So either they’re my former classmates, or former colleagues, at this point. I met them in school, and at my full-time job… And the same thing for my partner as well.
Joe Fairless: Okay, got it. So you either went to college with them, or you worked with them at your full-time job. And you were making approximately how much at your full-time job? Just to get an idea of the type of people you were working with?
Pancham Gupta: All of these are high net worth individuals, north of half a million dollars.
Joe Fairless: A year?
Pancham Gupta: Yes.
Joe Fairless: Okay, so they were making a lot of money a year, and you were talking to them about it… So people who hear that might think “Well, no wonder Pancham had such an easy job raising the money. He’s around people who are making 500k+ a year.” What is your response to that?
Pancham Gupta: My response would be that you can meet high net worth individuals anywhere. First of all, I’m very grateful having friends and family making high incomes, and I would kind of agree to part of that question, where it is easier knowing those people… But for a person to write a check of $100,000 or $50,000 or $75,000 to you in order to invest in your deal, you need to add value into their portfolio in some way or another. They need to first trust you, and then they need to see the value that you’re bringing to the table, and how you’re actually solving their problem, which is they have too much money to invest, but not have either time, energy or motivation to learn about investing outside of Wall Street, into different products… And you’re bringing that to the table and you have to educate them, spend time with them, to really make them understand the value that they will get out of investing in these deals. So you have to do all that upfront and really make them understand.
So yes, it is easier than talking to a person who’s making, let’s say, $50,000/year versus that person who’s making $500,000/year. They definitely have more spare cash than the other person… So that’s what I would say – regardless of how much money they were making, you still have to go through the process of educating them and really creating that trust with those guys.
Joe Fairless: And I would even argue that it’s gonna be just as challenging, if not more challenging, speaking to someone who has earned over half a million a year, about a new investment opportunity that they might not have invested in before, because they’re constantly being pulled in different directions to invest in certain stuff. So their guard is up a lot more than someone who isn’t at that level of income. Maybe they’re at $250,000 or $300,000, and they don’t have a job on Wall Street, so the perception isn’t that they have buckets of money, so they’re not bombarded with a bunch of opportunities.
So what are some tips for people that you can share who are speaking to individuals who are the half a million plus earners, when communicating to them about the opportunities, or even your business?
Pancham Gupta: I would say — you hit on this a little bit. These guys are constantly getting bombarded by different kinds of opportunities. So if I have to give advice to someone who is starting off, I would say first creating trust between that individual who’s making half a million dollars and what you bring to the table. They have to hear from you more, they have to really understand the asset class that they’re investing in, and also what kind of risk and reward profile they would have to bear with this asset class.
So this is a constant effort of being in touch with them and making them understand the asset class, and having trust in what you do. The way we have done this is by constant one-on-one conversations with these guys. Meeting them for a coffee, telling them about what we are doing on a constant basis; they are investors who I’ve spoken to for the last at least three years, and it’s only now they want to invest in our next deal; they have not even invested yet.
So it has taken us three years for some of these guys to actually finally realize what we bring to the table, and trust us that they can rely on that we’re not gonna just run away with the money, and actually really give a return and do what we promise.
Joe Fairless: And what about the thought that, okay, it’s having the time with these individuals, sitting down with them… But that’s not scalable. What’s your response to that thought process?
Pancham Gupta: I would say that is absolutely correct, in a way. My response is that it takes time. And for us, what we’ve done is now we’ve created a newsletter that we’re trying to send out on a constant basis… And we get a lot of word of mouth business where people recommend their friends, and they talk to us, and we like it that way as well.
And then we also partner up with other people who have these connections across the board, and with high net worth individuals, and they bring on their network to bring on to our deals to invest.
So for me, I would say it’s one-on-one conversations and meeting people physically – it would create the most trust. And that’s how I would go about investing my own money, and that’s how I’ve gone about finding everyone who has invested in our deals, to create that relationship and trust.
Joe Fairless: Let’s talk about the next deal… The first one was a 44-unit in Charlotte. What about the next one?
Pancham Gupta: The next one was a 76-unit, again in Charlotte. That was a ’99 build, class B property, 4.56 million dollar deal. Again, very close to this first deal that we had. And by the way, the first deal that we bought, we’ve just sold it a few days ago.
Joe Fairless: Oh, congratulations!
Pancham Gupta: Thank you.
Joe Fairless: You bought it for two… What did you sell it for?
Pancham Gupta: We sold it for three million dollars.
Joe Fairless: Three. How much did you put into it?
Pancham Gupta: So our 781k was equity, and we put in about 250k. We redid the roofs, we did a lot of structure work; there were issues with the structure. We built out trenches… There was a lot of infrastructure work that was bad with this property, that we fixed, and also some units that we upgraded. And we sold it for three.
Joe Fairless: Excellent. So you bought it for two, and — sorry, how much money did you put into it about? I’m just trying to figure out the profit.
Pancham Gupta: Yeah, $250,000.
Joe Fairless: Okay, so $750,000 profit in just two years.
Pancham Gupta: Yeah, it’s about 23 months. Less than two years. And $750,000 actually includes broker commissions and some of the closing costs… So I would say $650,000.
Joe Fairless: Wow, congratulations on that. So the second deal – how much was the purchase price?
Pancham Gupta: 4.56 million.
Joe Fairless: And where was that?
Pancham Gupta: That was in Charlotte MSA as well, but it was a class B property. The previous property was a class C, this was a class B.
Joe Fairless: How many units?
Pancham Gupta: 76.
Joe Fairless: What about the third property?
Pancham Gupta: Our third property was 28 units. That again was in Charlotte, very close to our 44-unit property.
Joe Fairless: Okay. And purchase price?
Pancham Gupta: About two million as well.
Joe Fairless: Okay. And what about the fourth? I’m guessing that’s the 19-million…
Pancham Gupta: Yes, that’s the 19-million one.
Joe Fairless: Unit size?
Pancham Gupta: 242, in Jacksonville, Florida.
Joe Fairless: Okay, in Jacksonville. So I think we all notice a trend, except for the fourth. You went to Jacksonville, from Charlotte, NC. So why Jacksonville?
Pancham Gupta: Like I mentioned before, I’ve recently quit my job… So we were very focused on Charlotte before because we’re not able to spend enough time, and wanted a market which was very close to New York City, and Charlotte was one of them. So since I wanted to quit my job, I wanted to expand into more markets, and we had Jacksonville as one of the markets that we wanted to expand to, because it met all the criteria that we were looking for in a city to invest in… And it just happens to be that we came across this deal, and one of our partners on this deal brought this deal to us. She actually is part of our mastermind here in New York City [unintelligible [00:15:11].05] and that’s how we got connected. We partnered together on this deal, and we simply closed on it a month and a half ago.
Joe Fairless: On 28-unit – you bought 44 units, then you bought 76 units… What made you want to go down in unit size to 28 units?
Pancham Gupta: That was mainly more of a strategic decision, because that was only a mile from a 44-unit property, and we wanted to kind of scale the operations with this 28. But it did not pan out that way. We actually sold that property as well to one of our partners, who bought it off market from us… And since we were planning on selling our 44-unit as well – so we kind of sold both of them. So at this point, we don’t wanna go anything below 75 or so units for any of our acquisition. But it’s a good question; we probably wouldn’t do that small of a deal if it wasn’t close to our 44-unit property.
Joe Fairless: And what are some disadvantages of doing, as you say, that small of a deal?
Pancham Gupta: Our biggest disadvantage is the economies of scale. If you have a smaller property, you still need a leasing agent on-site, especially if you’re not local. And if you have a 28-unit versus a 44-unit versus a 76-unit or a 100-unit, you probably need one leasing agent per 90 or 100 units… So the overall expenses, fixed expenses that you have kind of go much higher on a smaller-unit property, as compared to a bigger property. We’ve realized that over time, and that’s why we have gone towards a higher and higher number of units, and that’s the trend that everyone follows once they start investing, from a single-family to duplexes to triplexes to bigger properties.
Joe Fairless: On the execution of the business plan, what’s been one thing that hasn’t gone according to plan, and how did you resolve it or attempt to resolve it?
Pancham Gupta: We had one major issue with our 44-unit property where we had a structural issue with one of the buildings, where in the crawl spaces, some of the joists were completely rotted out, and one side of the building was also bent. I say that quite lightly, but there was a huge bent in that. We knew this while going in, and we actually raise capital to fix this. We had a $50,000 raise just to fix this problem; we got some estimates before that… And it ended up costing us $102,000, so almost 100% more than what we estimated.
We were okay with this cost, because we had raised a little bit extra upfront anyway, because it was our first syndicated deal… But the lesson was that whenever you have any issue or you’re raising capital, always try to raise a little bit more than what you have anticipated, because there are things that come up. That’s the nature of this business.
We know people who have brought this thing to science, where they know exactly how much they will spend on every single unit and every single issue that they encounter during due diligence, but we have not reached that stage yet, so we raise a little bit of extra capital always, to make sure that we are covered.
Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?
Pancham Gupta: My best advice is to go where the growth is. The areas which are growing in overall jobs, in population job diversity… We look at the areas where millennials are moving in, where builders are developing… Because even if there’s a downturn, that area will be the last one to see the impact and the first one to come out of it.
Joe Fairless: And how do you determine that it qualifies.
Pancham Gupta: There are a lot of free reports and public — census.gov, and different free resources that you can go online and get this data from (and historic data), and also there is local paid research that you can buy, from different agencies, to get this data. We do both, and look at this data and see if it qualifies all the things that we have on our checklist.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Pancham Gupta: Absolutely.
Joe Fairless: Alright, let’s do it. First, a quick word from our best ever partners.
Joe Fairless: Best ever book you’ve recently read?
Pancham Gupta: The recent one that I really liked was Turning Pro by Steven Pressfield. It really taught about what kind of mindset you need to become a professional. Since I was quitting my job, this book really hit home, everything that I thinking through, and helped me quit my job.
Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about already?
Pancham Gupta: It’s not vetting out the PM company beforehand. I had a duplex in Cleveland, Ohio where this PM was charging a lot of money for rehabs, and turnarounds, and I lost a lot of money over there. I changed the company a few times, but it still didn’t work out. I ended up selling that property and made some money on selling it, because the market was going up. But my worst deal and my biggest is not properly vetting the PM company before actually hiring them.
Joe Fairless: What deal have you lost the most amount of money on?
Pancham Gupta: I would say one of the deals in Cleveland also. It’s a single-family house where I lost very little money, but that’s the most I lost.
Joe Fairless: And how much?
Pancham Gupta: About $1,000.
Joe Fairless: Best ever way you like to give back to the community?
Pancham Gupta: It’s two ways. One, I have contributed to LLS, which is Leukemia & Lymphoma Society – money for cancer research. My grandmother and two of my aunts passed away because of cancer, so I do events, and I’ve done events in the past and raised funds for them. So that’s one. And second, I’ve started educating people on personal finance, I’ve started a podcast to educate high-paid professionals, especially the software engineers, on how to convert their high incomes into long-term wealth.
Joe Fairless: And how can the Best Ever listeners learn more about what you’re doing?
Pancham Gupta: They can email me at firstname.lastname@example.org. The Gold Collar Investor is the name of my podcast as well. They can connect with me on LinkedIn, I’m there as well.
Joe Fairless: Pancham, thank you so much for talking about how to speak to accredited investors, how to approach those conversations, how you’re in it for the long game, how you’ve had some conversations with people and it’s been three years and they haven’t invested yet, but they’re starting to show interest, and in the meantime you’re doing your thing, you’re building your business, and again, you’re just focused on the long-term relationships versus the transactional approach where you’re trying to rush things, and getting frustrated because certain relationships aren’t bearing fruit.
Thanks for talking about the pros and cons of the types of deals that you’ve bought… The 28-unit, a smaller deal, and congratulations on the recent sale of your first deal, the 44-unit.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.
Pancham Gupta: Thanks, Joe, for having me on.