August 26, 2022

JF2913: Establishing an Edge Against Institutions ft. Bikran Sandhu

Bikran Sandhu is a CPA who began his career as an auditor for PricewaterhouseCoopers. He caught the real estate bug in 2018; by April 2021, it became his full-time career. 

Today, Bikran is CFO, COO, and co-founder of Rise48 Equity, a real estate investment services firm that focuses on multifamily syndication. In this episode, he discusses how he and his partners began working together, the growing pains they faced early on, why they choose to invest in the Phoenix MSA despite the competition, and how they establish an edge against big institutions when competing for properties. 


Bikran Sandhu | Real Estate Background

  • CFO, COO, and co-founder of Rise48 Equity, a real estate investment services firm that focuses on multifamily syndication.
  • Portfolio:
    • GP and LP of 4,826 units across 26 properties
  • Based in: Scottsdale, AZ
  • Say hi to him at:
  • Greatest lesson: Perseverance is key. Buying large multifamily apartments, raising capital, and building a company is a very complex and challenging career. It's not for the faint of heart. But with the right partners, a positive attitude, and a persevering mentality, you can learn from the best and apply the skillsets to your own success.



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Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel, and I'm with today's guest, Bikran Sandhu. Bikran is joining us from Scottsdale Arizona. He is the CFO, COO and co-founder of Rise48 Equity multifamily syndication company. Bikran is a GP and LP on almost 5,000 units across 26 properties. Bikran, thank you for joining us today, and how are you?

Bikran Sandhu: Hey, Ash. I'm doing well, thanks. Happy to be here.

Ash Patel: It's our pleasure to have you. Bikran, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?

Bikran Sandhu: Yeah, of course. So my background, Ash - I'm a CPA, I started my career as an auditor working at PwC, which is one of the big four accounting consulting firms, audited Fortune 100 companies, and helped take a company public here and there. After about four years of doing that, I moved into management consulting, so helping other companies go public, issue debt, place equity, buy other companies, sell to subsidiaries... I really kind of cut my teeth on proformas and figuring out how businesses are evaluated. And then around 2018 I started looking into real estate and multifamily in general, and wanted to kind of move into doing something myself when it comes to like acquiring businesses and selling businesses. So I caught the real estate bug at that time, read some books and started pursuing the whole real estate dream.

Ash Patel: And you were getting burned out probably, right?

Bikran Sandhu: A little bit, yeah.

Ash Patel: Those companies churn and burn people.

Bikran Sandhu: That's right. Yeah.

Ash Patel: If you can stand the heat for so many years, you can get rewarded way down the road. Good for you. Okay, so you realize you were just working a lot; you were probably learning a lot, but you were making other people a lot of money.

Bikran Sandhu: That's correct. Yeah. That was a big pain, yeah.

Ash Patel: Yeah. So you decided real estate looks appealing. What was your first step?

Bikran Sandhu: At the very beginning, I didn't know anything about real estate. I had a condo of my own, my mom had her own house, and she was actually just moving to a new house and she was going to rent out or current home, so she was almost like forced into being a landlord. And she just had the worst experience. She lives in Fresno, California, not very landlord friendly, so every time a tenant would move out, they would essentially just destroy the house pretty much, so all her profits for the year just went away at the end of the year. So I never wanted to get into single family rentals. I thought that's too much risk with just one asset, especially when that asset costs more than a million dollars, built in the '70s, and you're essentially giving it to a tenant and hoping to God nothing bad happens.

So I started doing some analysis here and there, read some books, Multifamily Millions, Rich Dad, Poor Dad... You know, the basics, and started putting together essentially our forecast for my wife and I, like "Okay, well if we want to get into real estate, how do we do it, and where do we want to scale up to?"
So we established goals, we established timelines for ourselves, and ultimately, we met Zach Haptonstall and Robert Szewczyk, who are the co-founders of Rise48 Equity alongside myself, and just kind of went to town. Quit our day jobs. I was doing multifamily alongside just being a W-2 worker at another firm for a while, but then by April of 2021 decided "We're young. We need to make mistakes, and we can make them now" and then just went full-time into real estate and just started working full-time into buying deals.

Ash Patel: Bikran, explain to me what it means when you said "I was doing multifamily as a W-2."

Bikran Sandhu: Yeah. So when I was at my management consulting firm, during the day I was doing work for my company that was helping other companies go public, or buy other companies, or sell divisions, and then at 5pm, every day, I would come home and open up my real estate computer and then just go in and start analyzing deals, or underwriting them... And then I would probably work until like midnight, maybe even 1 AM, just trying to get stuff done. So I think I did that for about 12-13 months, and I figured -- I had enough savings at the time where I'm like, "Okay, well, if I'm gonna dive into real estate, I might as well do it full time", so that's where we kind of established Rise48 Equity. I'm an employee under Rise48 Equity, as well as a co-founder, as an S-corp, so I handle all of the operational and financial duties in the company. So I'm a W-2 under the company, but I'm also a company owner as well. So I have a vested interest in making sure the company does really well.

Ash Patel: COO and CFO. So you handle all the operations and all the finances. What do your partners do?

Bikran Sandhu: Zach, he is the CEO of the company; he is primarily involved with capital formation and then deal sourcing. So he has built a good rapport with all of the major brokers in the Phoenix MSA, so whenever we have a deal that either kind of comes to market, or is gonna get traded off market, I can pretty much guarantee you we're going to be one of the first groups to see it, and we essentially get a leg up against other buyers, because Zach constantly stays in front of these brokers. So Zach is focused on deal sourcing and on the capital formation side, he ensures we're partnering with the right people to buy these deals at the right LPs, the right broker-dealers if we work with them... So I help out a little bit on that end, but I'm mostly underwriting, making sure that deals are gonna hit our investor metrics that we're aiming for, but he's primarily kind of guiding the ship, so to speak.

And then Robert Szewczyk, he's the chief construction officer; he's making sure that our large cap-ex projects like exterior paint or rebranding or putting in amenities, and even the interior cap-ex, the unit interior renovations, everything is on site, getting done on budget, on time. So he's kind of overseeing asset management from a construction point of view when we buy these deals.

Ash Patel: Bikran, did you guys put together this partnership and this company preemptively, or did you start doing deals together and then it just naturally came together?

Bikran Sandhu: Yeah, it was the latter there. So we bought about, I think, six deals before we actually formed Rise48 Equity. And, you know, in real estate, especially in multifamily, it's not a single man show. I could not do everything I do alongside Zach and Robert, and try to take it all in-house. We would not be where we are today if I was just trying to do it myself. But we met Zach and Robert in early 2019, and we bought our first deal together. We didn't have any LPs in it, it was all our cash, and we really just kind of learned from the ground up on how to do value-add multifamily. We did a couple more deals after that together and kind of figured out our roles and responsibilities, and Zach, Robert and I complement each other perfectly. Zach is great being out there in the field and getting our name out there. I suck at that. I'm an introvert, so I like sitting in front of the computer and getting stuff done there...

And then Robert is great at going on-sites and knowing what needs to be done from an actual operations perspective, as opposed to a financial perspective. So we fill each other out very well. And I think in early 2020 we decided to just formally partner up together and found Rise48 Equity, primarily because we didn't want to send out like different branding messages every single time. Zach had his own [unintelligible 00:09:22.28] and then Robert had his own company as well. So we just decided, "Hey, let's just come together, we're gonna buy deals together, we're gonna do great. Let's just make it easy for the investors as well."

Ash Patel: Where did the name come from? 48 is because Arizona is the 48th state in the nation, formally inducted in as the 48th state. And I think there's a thing about state 48 that kind of goes along in Arizona, so we just said "You know, Rise48" it goes along really well.

Ash Patel: Got it. Bikran, so in forming your company, it just naturally came together because you had experience working with your partners on a number of deals. I've done both, where I've sat down, had people lay out a company formation, and it never takes off, right? Or I've just naturally started working with people, and all of a sudden we form an entity and do more deals, and oh my God, it's incredible. What are your thoughts on that overall? Should people sit down in front of a whiteboard and determine their company, and the structure, and the roles? Or should they just start doing deals together and working together?

Bikran Sandhu: That's a great question. And I think if you look at like the startup landscape, look at all these tech companies that start up and look at all these other companies that go on, you don't see the CEO and the CFO come together, put together a company chart, and then launch a company; it's almost always like, "Okay, we're gonna build a great product or provide a great service, and we'll build a company along the way." So I read this book called The E-Myth, and in there, once you have a company starting to get going, you're gonna go through a lot of growing pains; you're gonna have to figure out that, hey, you actually now need an HR manager, because you have 30+ employees [unintelligible 00:11:03.05] benefits information and all that. So what Zach, Robert and I did was we looked at the company after we had started it, and after we started getting some admin tasks put on us, we put together a board chart where we just kind of filled out like, "Hey, we need a CFO. Who is great for that? That's Bikran. We need a CEO. Who's good at that? Who's a good Chief Investment Officer? That's Zach." So we started putting our names everywhere, and after that org chart was built out, we started hiring for that org chart. So we needed an acquisitions manager, we hired our acquisitions manager. So Zach and I kind of got out of that role and started doing more revenue generating-activities, as opposed to company-building activities.

But back to your question, it's more of - you're gonna have to experiment with who you have chemistry with I feel like, before you come together and incorporate a business and start working together, because everyone's gonna say, "Oh, yeah, we're a perfect match. There's nothing that could go wrong" and then two months later you can't stand that person. So it's a dating game for partnership. So once you are working together, I think that's when you start building the company is probably the better way to go.

Ash Patel: Yeah, that is great advice. Thank you for that. What were some of the growing pains that you guys had to overcome early on?

Bikran Sandhu: I think one of the biggest things was - we're all local in Phoenix, so we're about 40 minutes to 45 minutes away from all our assets, so we can easily travel out there. So the first thing that we had done was we hired our director of asset management, who's our VP of Operations, Kaylie Criss. Kaylie was our regional, with our third party property management company when we used to work with them, and we could keep tabs on it day to day, but driving everywhere, making sure that construction was happening, making sure our budgets were being met was just taking too much time out of our own time to find new deals... So that's the first person that we hired, was someone to oversee our operations. So Kaylie - she does a great job meeting with the vendors, getting our DD done, making sure we have bids ready to go the day we close escrow, so that we have a timeline established on how we need to renovate, what we need to renovate... And then the second person that we hired was Brady, who was our transactions associate at the time and now acquisitions manager. And as you know, Ash, there's a ton of paperwork that goes into buying a deal. It's not just like a simple signature, and you're good to go, and a PSA. There's a lot of lender requirements, escrow requirements, and you need to make sure you do your due diligence... So having someone to kind of do the backend acquisition activity really kind of freed up Zach as well. So we were able to kind of focus more on buying more deals.

So I think those are the first key hires that we had that really kind of helped us out to grow substantially. But now we're just gonna focus on building out the team, building out the back office and making sure no one's over capacity and burning out essentially.

Ash Patel: And how much pain do you undergo before you hire somebody? So when you hire your acquisitions person, were you guys just inundated and overwhelmed? Or was it one of those things where, "Hey, listen, I don't like doing that. Let's just hire that out."

Bikran Sandhu: No. Our philosophy is we want to be experts in every aspect of the business, whether it's Zach being an expert in getting the DD done, or me being an expert in the underwriting phase. But we're not going to just hire someone out and expect them to do something that we don't know how to do, so we want to make sure we're experts, and then when we hire someone out, that person has appropriate training to do what we do naturally. So it was a point where, say, Zach was working to like 1 or 2 AM getting lender docs out and getting all the deals closed, essentially, and at that point, we decided, "Okay, well, Zach, you need to focus more on finding more deals, not so much closing the current ones, because it's just now paperwork." So that's where we hired our transactions associate at the time, where his responsibility was to make sure the paperwork or the admin on the back end is getting done. But it wasn't so much Zach doesn't want to do it and we're just going to hire somebody, it was more of "Okay, Zach knows how to do it, he's an expert in it, he's trained a person, and now he can comfortably trust the transaction associate to do his job and focus more on other activities."

Ash Patel: That's a great philosophy. Alright, 5000 units across 26 properties. Geographically, where are those?

Bikran Sandhu: They're all in the Phoenix MSA. So we're focused there primarily.

Ash Patel: Alright, wait a minute. So Phoenix is overheated. It's hard to find deals and Phoenix; there's no good deals, the cap rates are too low. Help me overcome a lot of these objections that people have.

Bikran Sandhu: Yeah, of course. A lot of people don't know this, but Phoenix is the fifth largest MSA in the nation, and there's over 4 million people in here. There's over 400,000 multifamily units in the Phoenix MSA; as you mentioned, we've acquired about 5000 units in total, so we're barely over 1% there in terms of total absorption on the Rise48 Equity side. It is definitely very competitive, I'll tell you that as well.

We typically buy deals between 50 to 150 million, and we're primarily competing against hedge funds, private equity, Institutional Equity, like Blackrock, or [unintelligible 00:15:55.16] KKR, etc. But it's definitely very competitive. So kind of staying in front of the broker, kind of showcasing your ability to close these deals is extremely important. So every deal we've ever gotten under contract, we've closed it, we've never had any issues, we've never retreated any of the sellers... So we have a very good rapport with the broker, so whenever a deal comes online, that relationship aspect really kind of kicks into gear, because when a deal is available for sale, we're essentially one of the first ones to see it. And it takes time.

I think the first deal that we syndicated, I had underwritten about 70 deals before that first one actually came across, and a lot of the deals are just gonna be like way off, you're never gonna get close to the purchase price... And someone's gonna buy it for that purchase price, and you're gonna look at yourself and like, "Wait, am I doing something wrong?"

So whenever those key moments come up, where we can get to a reasonable purchase price and we can deploy the equity for it, we pursue it hard. So we'll go hard day one for earnest money that we need to put up, we'll make sure we do our due diligence on the front end, so we'll contact our trusted vendors for HVACs, the exterior plumbing, the refinishing... Just kind of get our budget in order before we actually go on site. So when we go on site, it's more of just a [unintelligible 00:17:11.21] up of our budget for the contingencies. It's not so much we go into a deal and then figure out "Oh no, we didn't budget for this. What happened?" So it takes a lot of due diligence on the front end, and it takes a lot of relationship building to make sure you can take a deal down.

Break: [00:17:27.24] to [00:19:13.23]

Ash Patel: Bikran, competing against institutions - are they just more difficult to deal with as a seller? And I love what you said, you've never retreated a deal... Which, Best Ever listeners, just basically means you never went in at one price and tried to get it lower later. And you've never not closed on a deal that you had under contract. Two amazing attributes that I think very few people can hold. So is that what gives you the edge against these big institutions that have unlimited capital?

Bikran Sandhu: Yeah, definitely. I think our track record really speaks for us when we go in and offer... Because you have to understand, these institutional capital - they're gonna write a check for $40-$50 million and buy a deal. There's just one check, and no one has to worry about anything else. The problem is there's a lot of processes in place that they have to go through to write that check. It's not so simple as one person touring the deal and that person's a decision-maker.

So the edge that we have is we are syndicating everything, so our investors are investing with us, and we're going out and deploying that capital... But with that comes the control that we have. So Zach, Robert and I are essentially the people that need to sign off on the deal... Whereas for institutional or private equity, they'll have an acquisition manager come out, tour the deal, underwrite it, say it works, go offer on it, but then someone else from that institutional side needs to come out and look at the deal as well; the decision-maker needs to come out.

So when we have the seller interviews that we have to go on, we essentially tell them "Yeah, we are syndicators. We're raising money from retail investors, high W-2 earners, high net worth investors. We do not have private equity", which kind of goes against us, because they want someone who's has 100% surety of close, not so much, "Okay, you need to go raise your money... Are you going to close or not?" But that really helps us out, the track record. But the thing that really kind of sells them is "Hey, we underwrote the deal, we are the decision makers, and we're going to move forward, and we've never not closed a deal. So you don't have to worry about some New York hedge fund guy coming out and looking at the deal after they get under contract. We're gonna go hard day one with our earnest money, so you know we're gonna close." That really kind of sells our company to the sellers.

Ash Patel: What kind of information do you have access to before you put your earnest money down?

Bikran Sandhu: That's a great question. So from a deal perspective, we're looking at all the financials that the brokers are providing. We do a rental comp study for all the deals as well. So our asset management team - they essentially go out there... We'll tell them like, "Hey, we're looking at this deal. What type of proforma rents do you think we can get?" So they'll run a CoStar report and a RealPage report for all the comparable properties in that area. And we're primarily looking at properties that have renovated units, because that's really where our business plan kind of aims at.

So they'll put together a rental comp study, kind of determine what the proforma rents are, we'll secret shop these comps, like we're visiting them, we're looking at what type of amenities they have, what type of other kind of income that they might charge, like washer/dryer charge, or pet fees, etc. and we'll build that all into our model. So we know going in, from a financial perspective, these other ones we can achieve, and this is the total cost it's going to take us to upgrade the interiors and renovate the asset. And then from a contingency perspective, we talk to our vendors, we say, "Hey, we're buying this deal. It was built in the '80s, the broker told us around 40% of the HVACs are replaced, 60% have not. In your estimate, how much do you think it's going to cost to essentially, over the next five years, replace these HVACs and get us in a good place?" And they'll give us bids, just kind of like a verbal bid, and then we'll underwrite that into our deal, so that we know going in if our cap-ex budget is, say, $5 million for a deal, after DD it'll range between four and a half to five and a half. So we're never going into a deal with a cap-ex budget of say 2 million, and then coming out at 10 million. We have it very well down, because we'll lose it essentially, if we can't perform.

Ash Patel: So you have access to a tremendous amount of information before your offer is put in and your earnest money is hard. Are there any kickouts where you can get your earnest money back?

Bikran Sandhu: Yeah, there are. There's standard language if the phase one comes back not clean, or if there's some sort of a zoning issue where a title can't put an exception around it; we'll get our earnest money back for those reasons. But when it comes to due diligence, we have to make sure that we're comfortable going in. We can't kick out [unintelligible 00:23:40.02] is gonna go down. We have to make sure we ask our questions on the front end, instead of waiting until DD comes back before we do that.

Ash Patel: Interesting. So I am a non-residential commercial investor, and in our world, we just make offers and then we get access to a lot of the information. And all the due diligence is in the back end. There's never, ever hard earnest money on day one. It's usually 45-60 days out. So thank you for explaining that to me. Mow I understand that you have a tremendous amount of information to make an educated offer.

Bikran Sandhu: Yeah, of course.

Ash Patel: Right now, there's a lot of institutions buying. When you're buying 50-100 million dollar apartment buildings, are you buying from individuals or institutions right now?

Bikran Sandhu: That's a great question as well. So it's kind of a mix, right? So when we buy from institutional companies like [unintelligible 00:24:30.24] we have to really sell ourselves, because we're not institutional, and they need to get comfortable with us. We do buy from individuals who bought the assets back in 2000-2005. They're not really aware of where the markets is at, so we'd have to sell as hard to them. But we're buying from a mix of institutional, private equity, mom and pop, and then we're also buying from syndicators as well, who are essentially doing what we're doing; then we can make the deal work better under our model versus them.

Ash Patel: Is it hard to get a good price from an institutional seller?

Bikran Sandhu: Sometimes it is, yes. You almost have to make sure you're offering the right price. And we have our underwriting model that I've developed internally, looking at other models and kind of back-testing it... And I don't deviate from the model very significantly. If we need to push up the purchase price a little bit here and there, there's some wiggle room, levers I can pull to make a move... But if you're asking for like a 10% or 20% increase in purchase price, that's not going to happen. So we've lost, I would say, like 90%, 95% of the deals we pursue, and some of them we've lost by only like $100,000, or $200,000, on a $20, $30, $40 million purchase price. And it's just -- you can't make the number work, so it's not going to happen.

Ash Patel: Interesting. And you know that you're $100,000 away from getting the deal done.

Bikran Sandhu: Yeah, we find out on the back end, because... So Arizona--

Ash Patel: So you don't have an opportunity to come back to the table with an extra 100k. You find out much later.

Bikran Sandhu: Yeah. Sometimes the broker would tell us that, "Hey, they're going to sell it for C amount." Arizona is an open disclosure state, so when the deals do close, we know exactly what it sold for, so we can compare it to our underwriting and where we got ,to essentially. So we'll find out, one way or another.

Ash Patel: And your value-add prospect is basically getting rents closer to market, because you look for already renovated units, is that correct?

Bikran Sandhu: Sometimes. So we'll make sure that the properties we're going after already have some units that are renovated, so that we know that that market rent is achievable. Sometimes the units are 100%, classic, the owner has owned it for 20, 30, 40 years, hasn't done anything major to it, so those require a significant bump in rents, and we make sure we get them. We've renovated over 565 units to date, and we've other achieved or exceeded our proforma rents on every single one of those units. So we have a very thorough understanding of where the rents need to go, so they're either already being achieved, but we essentially have to do the renovations or continue renovations at the site to get the market rents.

Ash Patel: Got it. And I want to ask you a question, but I want any Best Every listener out there that's driving to kind of brace yourself for this... Bikran, what kind of cap rates are you buying right now?

Bikran Sandhu: [laughs] If you asked me about this six months ago, it was around two and a half to three cap. It has come up a little bit, so between three to three and a half cap; it really kind of depends how much value-add there is. From a stabilized perspective, I can tell you that in year one we'll get to around five and a half to six cap after we essentially implement a better operational strategy. But going in caps are a little tough...

Ash Patel: Two and a half percent cap rate. Your loan is that three, three and a half, I'm assuming...

Bikran Sandhu: Yeah.

Ash Patel: And how soon can you start paying investors?

Bikran Sandhu: That's a great question. So in our underwriting, we don't leverage deals up to 80% LTC. We'll pare back the leverage because we know we're in [unintelligible 00:27:58.25] Our deals are primarily between 60% to 70% leverage, more closer to 60% sometimes, and we'll raise up some reserves on the front end as well. So when we start going out to investors, we'll tell them "On the front end, we want to make sure that the asset is onboarded correctly, we haven't identified any operational issues that will need some reserves." But if we don't need anything, we'll start paying out investors within 90 days of takeover. And most of that distribution is sometimes made up of operational reserves that we're letting go of because we don't need it, but we want to make sure the property is cashflow-positive and there's no major issues before we start doing that. We've never had those issues though.

Ash Patel: And what are the typical returns to your investors?

Bikran Sandhu: We tell every investor we underwrite on a five-year horizon; you should not have an expectation that we're going to sell within the next 12 to 18 months. And in that five-year horizon, we want to try to get you at least to a 2x equity multiple. You'll have lower cash flow, because these are value-add deals. So the first couple of years you'll have maybe three and a half to four and a half percent cash flow, on average, but as we stabilize the asset, that cash flow increases, and overall, we want to get out of the deal as fast as possible.

Of the 34 assets that we've acquired, we've sold ten of those assets, and all of them have exceeded our expectations. from an investor level. I think our average hold period is about 18 months, and we've essentially doubled or more all the investor capital at that point, in those 18 months. But we tell investors "Past performance is not indicative of future performance, so temper expectations... Five-year holds."

Ash Patel: And then do you have an issue where investors are saying, "Hey, look, I'm getting a 7%, 8% pref over there. How are you guys only going to give me 4% for a couple years?"

Bikran Sandhu: We have investors who ask that question, and it depends on which market you're in. So if you're in the Midwest, where you don't have as much explosive growth as you might have in Phoenix, which I think last year was the fifth largest MSA in terms of growth; I think it had more than 80,000 people move here." I think that was the fourth-largest or fastest-growing [unintelligible 00:30:02.07]. In those Midwest markets you are going to have higher cash flow, because there's not a huge bump on the backend when you sell the deal. In Phoenix, it's more of a value-add strategy, because when you do add value, your taxes are not increasing, you're staying in line with an increase on your revenue side. So when we sell, we can actually get a bigger pop when we sell the deal. So our operational expense ratio is closer to 35%, 40%, and then in three years down the road it might be closer to 30%, because our revenue is just significantly outpacing our expenses. Whereas in the Midwest, you'll have taxes that get revalued, so your income goes up by 20%, your taxes might go up by 20%. So it keeps that OpEx ratio around the same level, so you can't get that huge growth on the backend, when you sell the deal.

Ash Patel: Alright. Bikran, I'm gonna play devil's advocate here for a second. Now, Phoenix - I've forgotten how many thousands of people move there every day, how many new jobs there is, and everything's in its favor... What happens if that spigot turns off? Have you done any modeling to where if rents don't go up anymore, interest rates climb significantly, there are significant job losses - what does that do, when you're on razor thin margins initially?

Bikran Sandhu: That's a great question. So on the rental growth... So Phoenix in the past decade has grown about 5% to 6% per year in rental growth. That's annual 6% growth in rental income, or the market rents, I should say. And that's from RealPage, that's data that we pulled and analyzed. And then over the past couple years, rents have gone up by around 20% to 26% for both years, essentially. So on a T-12 basis we've seen significant rental growth.

In our model, we assume a stabilized rental growth of about 4% in the model. So coming from 20%, down to 4% is a significant downturn in and of itself, and it's much less than inflation. Inflation I think last month was around 8.6%, so we're assuming a rental growth of less than half that in our model, which is really not feasible, but that's how we go out and stabilize the rents.

Interest rate side - there's a lot of talk about rates going up, and we've seen it go up significantly. We're typically modeling in about 100-250 basis point increase in interest rates in the first couple of years of us holding the deal. So if we're going into a deal with, say, a 4% interest rate, we're assuming by the end of year two our interest rate is now at five and a half percent. So we're making sure that we're building that into our model. And then we also buy interest rate caps. So if it does go above what we expect, we have that backend protection, and we've paid significantly for some of these caps. So we make sure we build on that surety on the back end.

And let's say there are job losses tomorrow, or the population increases are declining - well, you need to understand the Phoenix landscape as well... So Phoenix has more than 80,000 to 100,000 people moving here every single year for the past five years. This is the first year where they're building a lot of units, and they're building around 33,000 units this year. And you can imagine, with all these households moving here, that there's just not enough supply to go around, to kind of absorb all these new people moving out here. With the house pricing going where it's going, it's just getting harder and harder to buy a house, so we're becoming essentially a renter nation in this country, with just not enough supply. I think we're very well insulated against a significant downturn.

I don't see rents declining over time. We might have places we have to do concessions in rougher areas, just to get tenants to move in... But I think rental growth is gonna slow down; it has to. You can't have a 20% increase every year. You're gonna run into an affordability crisis. But from a downturn perspective, I think Phoenix is very well insulated. There's a diversity of job growth here. It's not all focused on, say, construction, which got hit really hard in '07-'08. I think at that time, Phoenix was 20% in construction; now it's close to 5% to 10%. So it's a diverse job economy, and it really helps.

Ash Patel: Yeah. Even with all the positives, you're still underwriting quite conservatively. Bikran, what is your best real estate investing advice ever?

Bikran Sandhu: I would say perseverance is key. We don't live in the '80s anymore, where we can just offer on a deal and it's a 10-cap and you're gonna buy it and it's gonna be great, no issues. You're gonna underwrite a lot of deals, you're gonna find the deals that really work, and you have to pursue those aggressively. And you're gonna lose a lot of those deals. So just persevering, and making sure that you're sticking to your guns, and making sure you're underwriting conservatively... You're gonna win the right deal. You just have to persevere and make sure you get through that.

Ash Patel: Bikran, are you ready for the Best Ever lightning round?

Bikran Sandhu: Yeah, hit me.

Ash Patel: Alright, what's the Best Ever book you've recently read?

Bikran Sandhu: I would say the E-Myth is really good. That really helps us kind of build our company. The other one that I really liked was Atomic Habits by James Clear. He talks a lot about putting habits in place, but not trying to go from A to Z, but taking little steps, and then watching over the next 6 to 12 months how you can get to A to Z slowly.

Ash Patel: What's the Best Ever way you'd like to give back?

Bikran Sandhu: We donate to a lot of charities on our end; we want to make sure we support Phoenix as a whole, and as well as the country as a whole. One thing that I do personally is we do try to empower our staff a lot, so we're hiring employees... Some of them are very young, they're kind of starting their career, so we want to make sure that they're being empowered and they're growing professionally... So we tried to let them make some key decisions, kind of help them understand the rights and wrongs... So we're trying to build up our company very efficiently, and we're trying to do it so that we're not micromanaging everybody; we're more just kind of letting people make their mistakes and learn from those mistakes on their end.

Ash Patel: And Bikran, how can the Best Ever listeners reach out to you?

Bikran Sandhu: They can visit us at, that's our company website, to learn more about us. My email is, so feel free to reach out, set up a call. I'm happy to talk about our journey and how you can partner with us.

Ash Patel: Bikran, I've gotta thank you for sharing your time with us today, telling us about your journey from going from a CPA working for Price Waterhouse, probably working hundreds of hours, and then finding real estate, growing an incredible company, and giving us a lot of insights into the institutional quality multifamily assets. So again, thank you for your time today.

Bikran Sandhu: Yeah, of course. Thanks, Ash. Thanks for having me. I really appreciate it.

Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five star review. Share the podcast with someone you think can benefit from it. Also follow, subscribe and have a Best Ever day!

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