October 11, 2017

JF1135: An Easier Way To Track Each Property’s P&L In Real Time with Raj Bhaskar

After serving as CEO of a financial software company that was bought by Yardi, Raj co-founded and is CEO of a mobile tax app made for real estate investors and freelancers. Hurdlr can help investors keep track of how their properties are performing in real time. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Raj Bhaskar Background:
-Co-founder and CEO of Hurdlr, a mobile tax app designed for freelancers
-Prior to Hurdlr, he was CEO of VisualHOMES, a leading provider of financial software for real estate owners
-VisualHOMES was acquired by Yardi Systems in 2010
-Raj graduated, with honors, from The George Washington University.
-Based in Washington, D.C. Say hi to him inside the Hurdlr app
-Best Ever Book: The One Thing

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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, Raj Bhaskar. How are you doing, Raj?

Raj Bhaskar: Doing great, Joe. Thanks for having me on board today.

Joe Fairless: My pleasure, nice to have you on the show. A little bit more about Raj – he is the co-founder and CEO of Hurdlr, which is a mobile tax app designed for people like us, who have a business, and we need some tax help and need some financing tracking help. Prior to Hurdlr, he was the CEO of VisualHOMES, which is a leading provider of financial software for real estate owners. That company was actually acquired by Yardi in 2010. He is based in Washington, D.C. – with that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Raj Bhaskar: Sure, happy to, Joe. Thanks again for having me on board. Yes, I started with VisualHOMES back in the year 2000, so I did that for 10 years and two months. Basically, it was a real estate management platform focused on affordable housing and public housing, so subsidized housing like section 8 units, for example. So we did the property management [unintelligible [00:02:16].23] of all the financials, mostly for affordable housing agencies and public housing authorities all around the country; we were in about 35 different states. We built that up to about half a million units under management, a couple million residents; we were processing around 200 million monthly rental payments.

Joe Fairless: Wow.

Raj Bhaskar: And then, yeah, it was acquired by Yardi. 1st August, 2010, Yardi has half of all U.S. apartment buildings, a great fit… All of my clients and the employees are still there, and this is about seven years ago now.

Joe Fairless: That’s impressive. That’s really impressive. Was it your idea?

Raj Bhaskar: No, it definitely was not.

Joe Fairless: [laughs] With VisualHOMES you were the CEO though, right?

Raj Bhaskar: Correct.

Joe Fairless: Okay, so when did you join and when was it founded? I think you said 2000, when you joined, right?

Raj Bhaskar: Yeah, we had acquired a very small company that had a DOS product for housing agencies. They were focused on small agencies, and my strategy was basically to focus on medium to large agencies – I called it the Housing 500 – so we built a brand new platform from scratch and built in all the housing regulations and compliance… Which kind of ties into my new venture, because taxes are not that different; it’s basically regulations and calculations and compliance, just in a different market.

That’s where I have a solid team who likes to do that kind of very tedious work. And automating that is one part, and then the second part is “How do you stay up to date?” I’ve always tried to help folks with those things, so they don’t have to go through that painful stuff.

Joe Fairless: So how do real estate investors work with Hurdlr now?

Raj Bhaskar: They use our Hurdlr app to track all the finances around their real estate investments, or if they’re landlords, to track the rents and expenses. We have a real-time income tax calculation engine built in; we built an engine that supports all 50 states and D.C., so they can see their real — I call it “true profits”, and that’s revenue or income minus expenses, minus taxes. That’s what you keep at the end of the day.

So we allow folks to do that, and you can track your P&L at the property level. So you can have multiple properties, each with their own P&L, in a mobile app, on the go, in real time.

Joe Fairless: That is necessary, especially if we don’t have our own bookkeeper/accountant who’s helping us, but even then it’s usually not real-time, at least from my experience. What are some challenges that you’ve come across?

Raj Bhaskar: It’s interesting that you point out real-time, because that was one of my pet peeves in my prior venture. I got it growing nicely, and then there’s a time in the second five years, after we built up everything, where we were doubling our financials every year, and I wanted to see indicators along the way, and I got it to where my internal controller got me the financials a week after the month closed, and that was considered pretty good. I didn’t like that; I went around for indicators during the month, so I could make sure we hit our goals. That was one of the challenges that we’ve been building our app, is “How do you get all of those things in real time?”

I think for real estate investors — we also have a few thousand Airbnb hosts who also use our app to track for their rental units that they’re hosting, and the challenge is really staying on top of that… So we try to do that in the app, to help entrepreneurs stay on top of that. It was born out of the landlord related features and real estate investors because when I was building this current venture I was married and we were living in our condo, and then we eventually wanted to settle down a bit and get a house, and then I started renting out my condo.

The first time it came for tax filing, that’s when I had to provide all this info; I hadn’t done that before, and it was pretty tedious to get everything together, find all the info, especially all the expenses you have to track along the way.

Joe Fairless: With the app, you’ve seen it from beginning to now… What are some of the main differences that you’ve implemented based on feedback from either your team or the consumer?

Raj Bhaskar: From our users, and specifically in real estate, the number one thing was doing the P&L at the property level. So if you have multiple investments, how do you show the P&L per investment, in addition to a roll-up P&L. And that’s something we had planned early on in our system, because we built a project-based accounting system at the core so you’d be able to do that, but we didn’t release it with that; we released it with just tracking your P&L, regardless of whether you had multiple properties. It was nice to see folks requesting that, so we added that in. That was the biggest thing.

The second thing I think that we’re headed into is really can we get into folks with mortgages and loans, and tracking the financials around that at a more granular level. We haven’t done that yet, but we’re getting requests for that.

Joe Fairless: What’s your exit plan for this? Is it to get bought by a large company again?

Raj Bhaskar: My approach to building ventures in general — I’m only on my second one. I don’t consider myself a serial entrepreneur, because I’ve only had one other venture. It’s only to just build value at every step of the way, an ongoing business. If you look at my last venture, the team is there, it’s still operating, all the clients are there; that’s a solid ROI for Yardi after seven years. So I like to build things that last. I couldn’t say that there’s an actual exit strategy; it’s not to say that we won’t, at some point in the future, but generally you wanna do it where it grows the value even further.

Joe Fairless: Based on your experience as an entrepreneur and someone who’s been in the real estate space for over ten years, and then most recently worked with real estate investors, what is your best advice ever for real estate investors?

Raj Bhaskar: My best advice ever for your Best Ever listeners who are real estate investors is to know your financials in real time, to know your numbers, and kind of drilling down on that. As I’ve given my background, tracking your expenses is key. It can be tedious, but there are all kinds of tools out there to make it simple. It’s something you need to do, and there are three reasons why. One is that if you don’t, you’re leaving thousands on the table, and that’s for really any size property; the bigger, the more valuable it is, you’re gonna be leaving a lot more on the table.
The second is to save time. If you value your time, and I imagine that the Best Ever listeners value their time, then you’ll be saving time, but not having to set aside a day or two when it comes to tax time to get all that stuff together.

Third reason – and these aren’t necessarily in ranking order… You’ll be able to make much better decisions when you know your numbers. That’s something that I think a lot of times when I see in real investing, a lot of it is just focused on cashflow, because you have the payment on the loan and the mortgage going out, and then your rent coming in, in certain forms. Expenses are another big bucket to not overlook.

Joe Fairless: Can you give specific examples for each of those three, just to bring it to life a little bit?

Raj Bhaskar: Sure. So I have a condo that I’m renting out, and one of the biggest expenses I have are the monthly condo fees. That’s a simple one, that you would think that everyone’s tracking and noting, but often if you’re filing your own taxes, you’re not using a professional, sometimes folks kind of skip that. It’s not the time to get lazy with that stuff, because it directly impacts your profits. When you know these things, it’s reducing your taxable income.

So condo fees are one, and then the other big one which is harder to track are ongoing repairs/maintenance. For example, my condo is about ten years old now, and the HVAC system that it came with wasn’t that great, so it didn’t last that long. I had to replace that recently. That’s something that I’m absolutely tracking and reporting on my taxes. That’s   a pretty big expense. The harder ones I think to track are the one-off that come here and there. The ongoing ones you can automate with any number of tools out there; you can link it to your bank account or credit card.

I’ve seen folks that are doing this stuff really well. I know people who have opened a separate credit card for each of their properties; they may end up having a lot of cards, but they only charge expenses to that card. That’s another system you could put in place, so you know all the expenses for that particular property. But all those expenses add up quite a bit.

In terms of time, for any new Best Ever listeners that are investors or are thinking about getting into it, I can’t tell you enough to start now, put that system in place. You’ll see at the end of the year, when it comes time for prepping for taxes that it’ll make it so much more painless. For us humans, it’s hard to establish new habits, but that’s one that’s particularly important, because you save a lot of money.

But if you have a system that you set aside a week to do your tax prep, if that’s how you like to do it, that’s fine. I just prefer to do seconds a day, basically, as it comes in, because the information is really fresh, you don’t have to remember. I have a great memory, but now I have almost an 18-month old, our first child… And man, the first two weeks… While it was great, actually, I think it affected my memory.

Joe Fairless: Permanently?

Raj Bhaskar: [laughs] I’m definitely noting things a lot more now, because at any particular moment maybe you’re lacking quite a bit of sleep, and you’re perhaps not as sharp… It’s just easier to remember these things as they occur.

Joe Fairless: Yup. That was number two, right? Save time.

Raj Bhaskar: That was number two. And number three, on better decisions, there are real estate investors who I believe think they’re making money, but they’re not actually making money. The basis is that you don’t know your numbers, and if you don’t know your numbers — let’s say you think you’re making money, then chances are you’re spending more money than you should be… It’s a natural thinking process, because you think that you’re making more money, so you’re more open to spending a little more, and that’s a problem.

You need to know where you stand; you should have your objective on what profit margin you’re trying to hit, or at least be conscious of it, and have all the numbers while you’re making these decisions. If you think about it, if you’re not tracking things along the way, now you find out the stuff at the end of the year, when you or your accountant does the filing… This isn’t something where you just make an annual decision; you wanna at least do quarterly, if not monthly, where you’re checking things. You have your ongoing personal balance sheet or your investments, where you’re just making sure everything’s okay, looking for red flags.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Raj Bhaskar: Absolutely.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:13:32].22] to [00:14:30].03]

Joe Fairless: Best ever book you’ve read?

Raj Bhaskar: The One Thing by Gary Keller and Jay Papasan.

Joe Fairless: Best ever transaction you’ve done – business, real estate, or whatever.

Raj Bhaskar: I bought my house on a seven-year ARM; that was fixed for the first seven years at 2.24% jumbo loan, and the monthly is equivalent to the rent I get on my condo that’s one-third the value of the house.

Joe Fairless: Best ever way you like to give back?

Raj Bhaskar: I like to do two things – help entrepreneurs with their businesses, and second, I do charitable giving, but my history with that is through my friends, who are either leading events or organizations.

Joe Fairless: What’s a mistake you’ve made in business?

Raj Bhaskar: I’ve made plenty of mistakes in business. In real estate in particular, with my investment in my condo, for example, one of the best ever mistakes I’ve made was not projecting out my lifestyle changes over several years… Because initially, my investment was to live in that condo, and I bought it when I was 26. I ended up living there for 8 or 9 years, which is a record, I think, for condo living… But that neighborhood is the neighborhood that I loved at the time, I loved to party in at the time, but I didn’t project out over so many years. That location – it was a great location, but that’s not the location to be when you start settling down and not partying like that anymore.

I think that can apply to other aspects of investing, when you’re looking at your long-term goals, is it purely financial or are there other aspects to it?

Joe Fairless: How can the Best Ever listeners get in touch with you?

Raj Bhaskar: I can be reached inside my Hurdlr app – we have live in-app chat; we help our users through an app chat with any of their financial issues, or tracking or tax questions, and I jump on that as well. That’s real-time, during normal working hours, otherwise as quickly as possible in off hours.

Joe Fairless: Raj, thank you for sharing your entrepreneurial journey with us. Thanks for talking about some tax tips, or really our tax approach, and expenses approach that will be best practices. The third thing that you mentioned really resonated with me in terms of making better decisions, because sometimes we think we’re making money, but we’re actually not making money, and I’ve realized that with my single-family homes. I have three houses, and about this time last year I got an accountant to track all that stuff for me.

I get property management reports, but then I wouldn’t necessarily reconcile that with the mortgage I was being paid, so now I get every month a nice, clean spreadsheet of what I’m making or not making, and it is eye-opening. I didn’t necessarily know that — one of my homes, I have a mortgage payment that’s $900; I didn’t think it would be that high. I still make — last month I made $226 on it net of all expenses, but it’s just some things that we need to pay attention to, and it is something that if we’re not doing it, then we need to, as real estate investors.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Raj Bhaskar: Thanks a lot, Joe. I really appreciate it.

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