Finding a way to leave behind the stressors of the rat race and to enjoy life on your own terms is a primary goal for many people. While many continue to dream, Pancham Gupta has found a way to make that dream his reality through apartment syndication. Gupta had the opportunity to speak with Joe Fairless about how rapidly he executed his transition to commercial real estate investing on a full-time basis.
Starting with Single-Family
Pancham Gupta immigrated to the United States in 2003 to complete his college education, and he focused exclusively on his professional career until 2012. At this time, he purchased his first single-family home in New York. This expanded to include other single-family homes as well as a few duplexes and triplexes. As he grew his portfolio of residential real estate investments over the next few years, he continued to work full-time in his financial technology job. However, managing real estate was consuming an increasing amount of time.
Scaling with Apartment Syndication
Gupta continued on this path of pulling double duty as a full-time worker and a part-time real estate investor for several years. As he purchased more properties, the amount of time and energy required to manage those properties increased as well. With a limited amount of time and energy available, he realized that scalability was a serious factor that required consideration. By 2017, Pancham Gupta had decided to move forward with his first apartment syndication investment. Between 2017 and 2019, Gupta has been involved in four syndication projects that are valued between $2 million and $19 million. Through his work on these multifamily projects, he has been able to quit his full-time job and focuses exclusively on commercial real estate investments.
In fact, his portfolio of real estate investments has double-digit cash flow and is valued at more than $32 million today. This portfolio is rooted in five different states. He initially invested in smaller residential properties in New York because that is where he lives and works. Those properties produced a healthy stream of income when he purchased them, but their profitability waned over the years as market conditions in the area changed. Gradually, he branched into other states with more lucrative real estate investment opportunities.
In 2017, Gupta joined together with his current partner at Mesos Capital. Together, they pulled together $781,000 from family and friends, and they invested in a 44-unit apartment complex. Specifically, the two partners and one other investor contributed $100,000 each.
The other funds came from family, former colleagues, classmates, and others with who they developed strong relationships over the years. The 44-unit multifamily property was in Charlotte. They originally purchased it for $2 million, and they recently sold it for $3 million. After considering upgrades and closing costs, their profit was approximately $650,000.
Raising Funds by Earning Trust
When Gupta was asked about how easy it was to raise the money, he mentioned that having established relationships with high-income individuals was a benefit to him. However, he also mentioned that you can meet such individuals in a wide range of locations. Because of this, the possibility for apartment syndication is open to anyone.
Gupta also mentioned that earning their trust was important. Individuals must trust that you will add value to their portfolio before they write a large check for a real estate investment. More than that, you must spend time talking to them about the value of the deal.
While Gupta says it is easier to get investment capital from those who have more cash to spare, he says that you still have to put in the same amount of time and effort to get them to sign on. However, individuals with deep pockets may also have access to more investment opportunities. With this in mind, there is a need to convince them that your investment opportunity is the right one for them. In some cases, it takes years to get them to sign on.
Building Up to Bigger Investments
The second multifamily property that the partners purchased was a 76-unit property in Charlotte with a sales price of $4.56 million. The third property was a 28-unit apartment complex in Charlotte, and they locked in that investment at $2 million. The fourth property was by far their largest commercial real estate investment. It is a 242-unit apartment complex in Jacksonville that they purchased for $19 million.
The first three syndicated deals were purchased in Charlotte in large part because Gupta and his partner were familiar with that particular market. The smallest project was located down the street from the 44-unit property, so its strategic location brought the potential benefit of scaling operations. After Gupta quit his job and was able to spend more time researching markets, he and his partner had the confidence to invest in the larger property in Jacksonville.
Today, the partners are focused on investments with at least 75 units simply because of economies of scale. Generally, Gupta sees that one leasing agent is needed for every 90 to 100 units. By focusing on a larger number of units, they can optimize operations on the ground.
When Gupta discussed lessons learned through his syndication efforts to date, he brought up the need to raise more capital than you think you will need. Specifically, one of his properties had a major repair issue that cost more than twice what they anticipated. They had to go back and raise that extra money before the repair work could be completed.
Today, Pancham Gupta is principal at Mesos Capital, and he runs a podcast that focuses on personal finance education for high-income individuals. As he looks forward to future investments, he and his partner are looking for opportunities in high-growth areas. These are areas with population growth, job growth, and growth in the real estate market.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.