Divyesh and his partners were tired of spending so much time scheduling and showing rentals to potential tenants. If you’re in the same position, you should definitely tune in to hear his story. His product can help EVERY landlord create more time. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Divyesh Panchal Real Estate Background:
-Co-Founder & CEO at Key Please-,real estate investor for 10 years
-KEY BOT is a smart lock installed by landlords to automate marketing, showing and leasing rental properties
-Renters can self-qualify, tour on-demand & negotiate a lease from a smartphone
-Based in Saint Louis, Missouri
-Say hi to him at www.KeyPls.com
-Best Ever Book: What Got You Here Won’t Get You There
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Joe Fairless: Best Ever listeners, 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. We only talk about the best advice ever, we don’t get into any of that fluff. With us today we’ve got the founders from Key Please, one of them – Divyesh Panchal. How are you doing, my friend?
Divyesh Panchal: I’m doing great, Joe. How are you?
Joe Fairless: I’m doing really well. Who are the co-founders that you have with you?
Divyesh Panchal: Yeah, I have Adam Lorentzen, who is our chief product officer, and Daniel Dawson, who is our chief operating officer.
Joe Fairless: Sweet. Well, nice to have the whole crew here. Just for sanity’s sake, since we can’t see you all, we’ll let Divyesh – you take the lead on this, and then for anyone else who wants to chime in on certain responses, feel free to do so.
A little bit about Divyesh – he is the co-founder and CEO at Key Please. He’s also been a real estate investor for 10 years. Their product is called Key Bot, which is a smart lock installed by landlords to automate marketing and showings and leasing of rental properties. They’re based in St. Louis, Missouri. With that being said, Divyesh, do you wanna give the Best Ever listeners a little bit more about your background and perhaps your team’s background and your current focus?
Divyesh Panchal: Absolutely. I’ve been a real estate investor ten years and I have invested from single family to multifamily, and I own hundreds of rentals in the St. Louis area. I ran into this idea just randomly – my wife had to leave country for a couple of weeks to see her family back home, and now I changed my role from investor to actually operator; that was really a nightmare, as you already know how hard leasing is.
Then I ran across the little problems of leasing, and the endless texting and scheduling… I invited Adam to help me out. Him and I had worked together in the past, and we both saw that this is a huge problem not just for me, but the fellow landlords like me all over the U.S. So we talked to Daniel as well, who’d been running a full suite tenant placement company, and I used to be his customer, actually.
We asked Daniel, “Daniel, this leasing is killing me” and he’s like “Tell me about it, man. I see this every day. So many hours spent on just scheduling; half of the scheduled showings don’t show up…” So we got together and we said “You know what, how do we solve this problem?” That’s how Key Please was born, and one thing lead to the next and here we have a fully functional and ready to go product.
Joe Fairless: Looking at your website, Key Bot is basically a lock that your potential residents can gain access to the property, who are pre-approved or screened. So you know who’s gonna be at the property… I imagine the code will likely be unique to that person, and then it expires after a certain point in time. It allows you to be remote, while still showing the property to people who have been approved through some sort of filter. Is that about it?
Divyesh Panchal: That’s exactly what it is. When Adam got on board, one of the first things we started focusing on was “What can we do to off-load work from property owners?” Because most of the property owners like myself has a full-time job, they have a life to live, and the next thing you know is they are running around and chasing around all these prospective renters. So we came up with this idea about putting a lock and let the lock and they key do most of the hard work. Let the ventures come in, self-qualify them – they can upload their ID, they can upload the picture of their ID and a selfie. Our algorithms can make sure they’re a real human, not a fake person, and they can take a tour of their own.
We’ve found this was a huge deal for people who have a job and they have a life to live as well. We have had tours happen all the way from six in the morning on the New Year’s Eve and on Thanksgiving days, and we were like “Wow, people are really doing this!” and that’s when we actually decided to put the full product together.
Joe Fairless: That makes sense. So when did you all launch it?
Divyesh Panchal: Our product was launched in November 2016. That was version one, and we are launching a new version with our proprietary lock, which will have a unique code for each renter.
Joe Fairless: Cool, congratulations on that. How much business do you have and where is it concentrated?
Divyesh Panchal: It’s been really interesting, because we started off — we weren’t sure how well will it reside with people… We started from St. Louis and we’ve had several customers all over the U.S., East Coast as well as West Coast. We are already at 10+ customers, and we’ve just signed a couple of [unintelligible [00:06:32].13] property firms with 1,000+ doors, so we are really excited about it.
Joe Fairless: Yeah, that’s the holy grail for you all, the property management companies – working with them, going straight to the large distributions channels. As an entrepreneurial team, you’ve got three people. What’s been the biggest challenge from an organizational standpoint?
Divyesh Panchal: I would say the biggest challenge was “How can we be more efficient?”, because we bootstrapped this whole thing ourselves, so we wanted to make sure whatever work we do really provides some value. Many times we are putting things together and waiting for people to go try it out. That sometimes takes a little longer than you anticipate. I think that anticipation was the hardest part for our team. But I would say — each member on our team has been an entrepreneur, they had built a product, built companies before, so it wasn’t something that they are doing this for the first time. But every time you start a new venture, there’s always that anticipation and anxiety. That has been an interesting part on our side.
Joe Fairless: Yeah, I have a lot of respect for people who start something from scratch based on a need and hustle and launch the thing… You said you bootstrapped the whole thing yourselves – how much did it cost?
Divyesh Panchal: Oh man, we originally put in about $25,000 into the venture, but honestly, we found innovating ways to solve the problem, rather than putting money at it. That’s one thing about entrepreneurship that I have a lot of respect for my team on that.
For example, the way we tested our hardware prototype – we did not go out and build the hardware first. As a matter of fact, our first prototype took me 45 minutes to build in that form, and Adam said “What if people can just walk in the door without having to talk to anybody? Let’s not have anybody reach out to them? Let’s just let them walk in and see what happens.”
So our first prototype was just a web form. People put their information, and when they wanted to take a tour, instead of putting an expensive lock over there, I just let my maintenance guys know saying “Hey, somebody’s coming. Just unlock the door” and we pretended everything was automated. You should have seen the expression on their face. They were like “What?! This is so cool. This is super clean.” We were like, “That’s great! Do you see value in it?” and people were like “Yeah, totally. I do see value.”
We did hundreds of tours like this. [unintelligible [00:08:46].19] and I was like “If I cannot use it in my own property, how can I go out and sell this to other people?” So we started from doing things that were very, very inexpensive. Then we got to a point where we had serious investors that were interested. The first guy who wrote a check to us on this venture was real estate flipper who flips hundreds of properties in the St. Louis area. We had investors outside of St. Louis, like Memphis and Dallas, who were also putting money in our venture. So we bootstrapped initially, but we got a lot of good interest from investors.
Joe Fairless: How did you value your company with that first investor?
Divyesh Panchal: That’s a tricky question. We had a little bit of luxury on that piece, because what happened was we had one offer from an accelerator for us to participate in the acceleration program. They had already put a valuation at that point, so that was simple – we just took that, because it was an external validation, an external valuation put together on our company. But we also had some [unintelligible [00:09:48].08] we had the hardware, we had things… So it came together with a valuation that both we, as well as investors, were comfortable with.
Joe Fairless: For someone who is doing a startup and has a similar approach – not the same product, but just coming up with maybe a product that is a sister product or something similar to a venture that you all are doing, how would you recommend they quantify their intellectual property and what they have in order to come up with a valuation if they wanna bring in an outside investor?
Divyesh Panchal: I would say don’t put a lot of effort and energy on getting the valuation right, rather focus on the value you’re bringing to the table. I think many times entrepreneurs get fascinated with “Hey, my company is valued at one million dollars and I’m only gonna give you 10%.” I think entrepreneurs should be more focused on what value are they bringing and how big of [unintelligible [00:10:47].06] they are gonna make. So if we are at 5 customers, how can we go to 500 customers or 5,000 customers and continue to make those customers happy… Rather than get hung up on “My company is valued at… And that’s how much I’m willing to offer.”
Joe Fairless: What’s been the biggest challenge of getting Key Bot in more doors in markets across the US?
Divyesh Panchal: Our previous version that we used was using a [unintelligible [00:11:14].26] and that was relatively straightforward, but now that we are launching on our bigger scale, I think that is something that we need to look forward to, and we will find how to [unintelligible [00:11:25].22] because we have done zero marketing as of now. Actually, we’ve only spent three or four dollars on Facebook just to get initial orders.
So far, because some of the early orders that we had to fulfill — those were local, there was not a big challenge… But in the next round, the one we are launching with the proprietary lock, that’s the one we think the scalability would come into real test for us.
Joe Fairless: Segueing into investing now specifically – are you still buying properties?
Divyesh Panchal: Not actively, because my full-time focus is this, but my wife is… She’s still expanding her business, because I have transitioned full-time into building this [unintelligible [00:12:06].20] But the multifamily market is hot as you already know. I think right now the market — I would like to call it the top, especially multifamily investing… So at this point I would rather stay away than put any more money into multifamily.
Joe Fairless: But you and your wife – assuming you are a team – are buying more properties right now… So how do you reconcile the statement you just made…? Because you said you’d perhaps don’t buy, you’d rather hold, but then you are buying…
Divyesh Panchal: The reason we are buying now is because we have a 1031 exchange.
Joe Fairless: Okay.
Divyesh Panchal: That is why we ended up buying. We are buying 80 units now right here in St. Louis, and the reason we have to buy it is because we sold one property and we don’t wanna write a big check to uncle Sam, and I’m sure a lot of investors who are listening will appreciate that… So that’s the reason we are buying. But after that we are not actively looking for anything in multifamily.
Joe Fairless: Got it. And are the majority of your properties in St. Louis?
Divyesh Panchal: All of my properties are in St. Louis.
Joe Fairless: All of your properties are in St. Louis. And you have hundreds of them… What percentage of hundreds are single-families versus the multifamilies?
Divyesh Panchal: We have only very few that are single-family. Pretty much most of all of our properties are in multifamily, and that’s one of the reasons why our team created Key Bot… Because if you look into single-family to 2-4 unit market, that market is extremely scattered. And what happens is people start investing into two units and they’re trying to go to four units and eight units, and we’re going from that point to where we now have a more concentrated portfolio of 30 units plus. But what we saw is most of the people who are investing are investing into single-family or two-unit or four-unit complexes – how can we help them, how can we make their life easier and let them do a little bit of less work while they get more return on investment.
Joe Fairless: So staying with your real estate investing just for a little bit – what was your first property that you bought and what year was that?
Divyesh Panchal: Yeah, great question. My first property was 2007. I bought a single-family in North St. Louis. For people who are not familiar with the St. Louis market, that’s actually a little rough area, but I learned a lot… I bought it with cash, it was $11,000; I was like “You couldn’t even do the bathroom in that price.” So one thing lead to another, and from there we invested in 2-4 units, and from there we got to 16 and more. But each step of the way I feel that you learn something that helps you to get better at your next investment.
Joe Fairless: What are some specific things that you’ve learned from going either at the first property or from 2-4, to 16 units etc?
Divyesh Panchal: The first few properties – I spent a lot more time in rehabbing and just making the quality of the rehab better; I didn’t spend a lot of time finding the best deal in the banks, creating relationships with banks, creating my network with realtors and other investors… But as I went away from those single-families to two-units, four-units and eight-units, I learned that there’s a lot more money to be made if you can find better deals with the banks, or if you can restructure the deal, if you can change your financing a little differently.
Those are the things that I learned that I wish I had learned sooner than that, but every step of the way it helps me get better every day.
Joe Fairless: I heard the last part that you said, where you said there’s more money to be made if you change the financing a little bit… What did you say right before that? I was taking notes… As far as if you tweak something, then you can make more money. What are those other things?
Divyesh Panchal: For example, let’s say you are buying a 16-unit building; your typical financing will be five-year balloon at 20-year amortization. Well, if you can find a bank or if you can work with a bank to get you to 25-year amortization, your cash flow is gonna look a lot better… So things like that, especially if you’re not planning to keep that building really long-term. If you’re planning to keep it for 5 years or 10 years. So things like that. There are very specific things you can do.
Another thing in that same regard is make sure you have a really good team of handymen, of people who can get things done for you, because the more you grow, you have to be able to delegate and outsource a lot of tasks, and that’s something I found that has been extremely useful, because when we were rehabbing two units, four units, I was just getting some one-off handymen. But once I got to 30 units, where we were rehabbing the whole building, I had to get a lot bigger contractors involved. Those relationships I built over the course of years became really useful when we got into bigger deals.
Joe Fairless: Given you and your team’s background with Key Please and your product Key Bot, clearly your focus is trying to maximize the amount of time that you have to do your own stuff, not necessarily being focused on certain tasks that you don’t need to be focused on… So I imagine in your real estate investing you have software or certain efficiencies that you’ve used or that you currently use – what are some of those things, either software programs or certain ways that you use to help automate the process?
Divyesh Panchal: That is actually the specific reason why we came up with Key Bot… Because honestly the only software we use is a spreadsheet. [unintelligible [00:17:25].03]
Joe Fairless: To manage your portfolio of a hundred or so units you only use a spreadsheet?
Divyesh Panchal: We just use a spreadsheet. Trust me, I’ve spent 15 years as a tech executive in a tech company; most recently I was director of IT strategy and information… And you have to ask yourself the question – what value do you get out of the software that I’m using? And I’m not saying that the softwares are bad; there is a lot of value. But if you look at it the way we put together Key Please and Key Bot, there’s a lot of manual work that goes into it when I have to market my property.
Let’s say you’re marketing on apartments.com, Zillow… You’re getting a lot of leads from those places. Well, what do you do with those leads? Every single lead you have to qualify, you have to talk to them, you have to say “What’s your background? When are you planning to move?” All those things take real human work. Next you have to go and show your property. You have to then negotiate the lease; you have to go get the lease signed, and even after that, the work keeps on going and going. So that’s exactly what we had in mind, saying “How can we offer all those pieces to a piece of hardware or a piece of software so that I (or people like me) can focus more on getting more and more deals?”
If you’re a real estate investor like me, your goal is to go from two units to four units, to 500 units, to whatever that goal is… And the whole purpose of having Key Please and Key Bot is to make you more efficient, offload your work to a piece of software and hardware so you can drive your business growth.
Joe Fairless: So you don’t use software to track your profit & loss statement? You just input that manually?
Divyesh Panchal: If you use Bank of America, they offer a free service that can even export it into a spreadsheet. Actually, it’s a lot more simple than you think. You really don’t need sophisticated software. I’ve used QuickBooks… I’ve even used some of those sophisticated software, and I spend more time setting those up than actually getting value out of it. It’s not that I don’t recommend it to anybody, but… I used to write software, I know that business really well… The problem is most of the software is built for a lot of big, gianormous tasks, and as a real estate investors, you are pretty much saying “Okay, well I need to market my property, I need to lease my property, I need to manage my property. What tools…?” Now, we do use — for example, we use tools like Zillow, apartments.com and all those things; for payments we use Cozy… Those are things that I think are very useful for small to medium-sized landlords.
Joe Fairless: Based on your experience as a real estate investor and entrepreneur, what is your best real estate investing advice ever?
Divyesh Panchal: I think the best real estate advice is every market is local; stay focused on your local market and know what your goals are, and execute on that.
Joe Fairless: For someone who is not familiar with St. Louis and wants to begin investing there, and perhaps they just moved to St. Louis… So they are local now, but they haven’t been – what are some things that you would tell them based on your experience with St. Louis?
Divyesh Panchal: You know, St. Louis is a great market in my opinion. Affordability is great, especially if you’re coming from the East Coast or West Coast. One, if you’re a real estate investor and you’re planning to invest, I think investing especially in St. Louis is a great market. Two, it’s also a growing area; there is a lot more movement happening here. Sometimes things like Ferguson or some bad press get in the way of what a great opportunity here is. If you are coming from either coast, I would recommend exploring this market and look at it as a potential investment.
I found some of the margins and some of the return on investment that I’ve seen in St. Louis is way better than what you can see on [unintelligible [00:21:05].14] market. That’s one of the reasons I stay focused in this market. But if you are coming, I would say look past beyond just headlines of Ferguson and things like that, and see what opportunity here is.
Joe Fairless: What is a submarket that is up and coming in St. Louis?
Divyesh Panchal: The Central Corridor has been pretty hard for a while… I would say Grove area is a really up and coming market; that’s a submarket here. There are also pockets within the city area within South St. Louis that are also up and coming. These are very specific markets within St. Louis and I would highly recommend people to look into those markets if you are looking to invest. Some of the mature markets are like West County and [unintelligible [00:21:44].20] I think we are kind of in a [unintelligible [00:21:46].23].
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Divyesh Panchal: Alright, let’s go for it.
Joe Fairless: Alright, let’s go for it! First, a quick word from our Best Ever partners.
Break: [00:21:59].20] to [00:22:56].15]
Joe Fairless: Divyesh, what’s the best ever book?
Divyesh Panchal: What Got You Here Won’t Get You There.
Joe Fairless: Best ever deal you’ve done?
Divyesh Panchal: Flip the building in less than a year.
Joe Fairless: What were the numbers?
Divyesh Panchal: It was actually a 50-unit foreclosed subdivision. We bought it for 1.3, spent about half million on it and sold it for 2.4.
Joe Fairless: Excellent, nice work on that. What’s the key takeaway for that project in particular that you would attribute to getting that profit?
Divyesh Panchal: The key takeaway was you need to know what you’re getting yourself into. I knew it was a rehab work, I did not know what a stress it causes you.
Joe Fairless: Would you do it again if the opportunity was presented to you?
Divyesh Panchal: No, I would do it differently.
Joe Fairless: What would you do?
Divyesh Panchal: I would have built a better team. I would still take the project, but I would build a better team. I would have done a different financing deal… But that’s what I’m doing on my next project.
Joe Fairless: Best ever way you like to give back?
Divyesh Panchal: Well, through my own company… Actually, with Key Please we are partnering with Habitat For Humanity. To me, that’s a really neat way to give back to the community, especially when you’re in real estate. For those who don’t know, Habitat For Humanity – they build homes for people who cannot afford market price homes.
Joe Fairless: What’s a mistake you’ve made on a deal transaction?
Divyesh Panchal: Not doing the due diligence.
Joe Fairless: And where can the Best Ever listeners get in touch with you?
Divyesh Panchal: You can reach me at Divyesh@KeyPls.com. I’m also available on Twitter, @Divyesh_Panchal.
Joe Fairless: Well, Divyesh and team, thank you for being on the show and thanks for talking to us about your entrepreneurial venture Key Please and your product, Key Bot, what inspired it, how you all have bootstrapped this up until this point, then you’ve started bringing in investors… I love the innovative way of solving a problem in an inexpensive manner, for example the prototype that you all did; you just had a maintenance person go unlock the door once they booked it – I love that… Very resourceful.
Then also, Divyesh, you talked about your portfolio and how you choose to manage it, and the approach that you take and the lessons you’ve learned along the way as you’ve scaled up from the single-family for $11,000 to some of the deals that you’re doing now, like the 80-unit that you’re buying and the 50-unit that you referenced earlier… So thanks for being on the show. I hope you all have a best ever day, and we’ll talk to you soon.
Divyesh Panchal: Joe, thank you so much, it was a pleasure.
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