December 16, 2018

JF1566: Banker Leaves Job To Help Investors Save Money On Energy Bills with Harsh Patel

Harsh jumped industries from banking to energy and hasn’t looked back. He specializes in helping entrepreneurs save money on their energy bills. As real estate investors, we’re constantly bombarded with bills, especially energy bills. Hear how Harsh can help alleviate some of that burden and possible even increase the value on your property. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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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. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Harsh Patel. How are you doing, Harsh?

Harsh Patel: Good. How are you doing, Joe?

Joe Fairless: I am doing well, and nice to have you on the show. A little bit about Harsh – he is an independent business owner of Xoom Energy. He quit banking four years ago and built a multimillion dollar a year business in telecom and energy. He’s based in Dallas, Texas. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Harsh Patel: Absolutely, Joe. I appreciate you having me on the call and I appreciate taking time out and listening to me and what I have to say. The background on me – I was in the banking industry four years ago. I’m originally from New Jersey, I moved down to Dallas for one reason and one reason only, because of the energy market down here. They say out of about 600 billion dollars that are spent in the energy space, 60 billion comes from Texas alone… So when I saw gold, I pretty much ran to it.

I’ve been doing this for four years, and I’m just literally helping a lot of investors, a lot of real estate brokers, a lot of small business/big business owners save their money on their bills, and kind of just increase their revenue at the end of the day, and I just love what I do.

Joe Fairless: And specifically what do you do?

Harsh Patel: Pretty much I show entrepreneurs, small business owners, from multifamily owners, single-family owners, apartment complex owners, to auto body shops – just people that own a traditional business, anything in business, I show them how they can save money on their bills that they currently have right now, and then also make a kickback on the bills they pay anyways.

For example, I helped a multifamily owner here in a year save about $1,000/month on his energy cost, but also he makes 5% back on it; but by me saving him $1,000/month, his property value increased for sale over 160k, on just a 4-cap. So that’s just helping entrepreneurs pretty much lower their overhead, but turning their liabilities into assets.

Joe Fairless: Okay, maybe with that example let’s talk a little more granularly… How did you help him save $1,000/month in energy costs?

Harsh Patel: Very simple. He was with another company called Frontier Energy, and pretty much looked at his bills and pretty much sent it into my company called Xoom Energy. They were very aggressive and they beat the rate that he had by a couple cents, but obviously at the grand scheme of things that adds up on a small to big business. In the summertime he was able to save about $1,400/month, but in the winter time it was close to a $700-$800/month, so the average came out to about $1,000/month in savings, just by lowering his bill, meaning at the end of the day just lowering his kilowatt/hour cost.

Then some of the fees that other companies charge, we don’t charge; we just pretty much charge what you use in terms of kilowatts. We’re very aggressive, because last year we’ve been the number one retail energy provider of the year, so we actually won the accolade for that, and Inc. 500 actually ranked us as the fast-growing energy company in the United States.

NRG is now merged with our company, which is a big producer. So we’re about to go directly to the producer now, versus going to a lot of middlemen, which we no longer have to do.

Joe Fairless: So you essentially looked at the energy bills and you gave that to your team, and the team says “We can beat that”, so then he switched companies, which then lowered his bill $1,000/month, right?

Harsh Patel: Yeah, average.

Joe Fairless: On average, right. And then what’s the +5% money thing?

Harsh Patel: Our program, what we do is whatever you spend on your bill, we give you 5% of the bill. Either way you look at it, it’s 10% of supply portion, or 5% of the total bill. Because usually on a bill 50% is usually supply, and 50% is usually delivery. Delivery – no brokerage company can touch, no energy company can touch, because that’s a monopoly, but everybody can touch the supply portion… So at the end of the day we give you 10% of supply, or for people to make it easier, our program is 5% of the total bill; what they’re paying anyways. So it’s pretty much found money, if that makes sense.

For example, with the gentleman Michael [unintelligible [00:06:20].13] he was paying about $7,000/month. We pretty much brought it down to $6,000, but now he makes 5% back of $6,000, month-after-month, year-after-year, so he’s getting a $300 check from my company every single month for doing nothing different, on top of the $1,000 savings.

Joe Fairless: And is it that the previous company he was with had such large margins in it, or is there something else that would allow your provider to not only save money, but then also pay money back to him?

Harsh Patel: The majority of these companies — everybody pretty much buys obviously from the stock market, but since we’ve partnered up with a producer… So there’s pretty much only about four producers in the world for energy brokers, for just producing energy, if that makes sense. NRG, which we all know is one of the biggest ones in the world. NRG acquired Xoom Energy, so now we’re just pretty much a sister company of NRG.

We’re going right to the producer, so all the middlemen costs, all the overhead and stuff like that is no longer there. We’re now going right to the producer, and a lot of companies have to go through two or three people to get to the rate that we’re getting; they charge their little tack on fees and stuff like that, which we don’t do, because we’re literally getting it directly from the source, if that makes sense.

Joe Fairless: Yeah, that does make sense. And have the benefits to the customer been this way since you’ve been doing this, for the last four years?

Harsh Patel: Yes. NRG was a recent acquisition early on this year, but our pricing comparatively was very aggressive with everybody else that was in the market, but now we’re just able to give them much grander savings, but the 5% kickback was always there, if that makes sense.

Joe Fairless: Got it. So the kickback was always there, but the savings might not have been as strong previously.

Harsh Patel: Exactly. Meaning we were still able to save people $200-$300/month, but now we’re able to do bigger things. A gentleman here a lot of people probably know, Mr. Todd Franks – one of his units, I was able to save him about $700/month on just one of his little complexes, and another unit that he had it was about $300/month savings. So right there alone was about $1,000 right there, plus everything else I’m about to do for him. Plus he’s about to get a 5% kickback… So at the end of the day, everybody’s enjoying it here.

Joe Fairless: Let’s pretend that you’re a property owner and one of your competitors approaches you with this opportunity, where they say “Hey, Harsh, I know you own this 150-unit property… I can help you save money on your energy, and there’s also 5% kickback.” But they’re not coming from your company, they’re coming from a competitor. What questions would you ask them to qualify them to make sure that it’s an opportunity that you wanna pursue?

Harsh Patel: Really simple – what other charges do you tack on? A lot of people charge help fees, which I’ve been noticing on some bills… So they don’t have a base charge, if that makes sense. Their base charge is dependent on the load – the more they use, the bigger the base charge becomes, where I only charge a $4,99 base charge throughout the whole thing. So at the end of the day, I saw a base charge for $170.

So the first question I always ask is “What are your fees associated with what you have currently?” That’s my biggest question to them. And then my second question to them is “Where are you buying the energy from and how are you getting it for the same price that I am, even though you’re not a sister company of a producer?” Because there has to be middlemen costs, so who’s eating that up? …where we don’t have to do that, because like I said, it’s our sister company, so we’re just literally getting it from the producer.

Joe Fairless: And what information would you need — assuming you get the answers you want from that individual, and you decide to not move forward… But what it you did move forward, what information do you need to provide them in order for them to proceed with the account?

Harsh Patel: Pretty simple – all I really have to do is just look at their bills and pretty much take a look at their historical information, send them over to their company, and that’s pretty much it. It’s not much.

Joe Fairless: Okay. And what’s the paperwork involved after that process is done?

Harsh Patel: Nothing, that’s it. Xoom, or whatever the company is, will send them a contract, they sign the contract, on a 1-year, 2-year, 3-year or whatever fixed they wanna do; even 5-year, or whatever it looks like… They sign the contract, they send it to Xoom, they’re a Xoom customer, and that’s pretty much it.

Joe Fairless: Cool. Based on your experience working with real estate investors in this industry, so as it relates to your background and what you do, what’s your best advice ever for real estate investors?

Harsh Patel: Always look at how you can, obviously, lower your fixed costs. At the end of the day, saving money is making money. I own currently 16 units, so I’m always looking for a way to increase my bottom line at the end of the day. And by increasing my bottom line, I’m literally increasing my property values by hundreds of thousands of dollars.

At the end of the day, I always look at some things like — people overlook these small things, but these small things add up to big numbers in a very, very big way. $1,000 is 12k back a year, which if you look at it in just apartment complex terms, that’s a single bedroom rental income you’ve just created, that you didn’t have before.

So these are all a lot of things that I look at. With Todd’s example, that was about a $750 savings right there for him. That’s another one-bedroom, two-bedroom apartment that he just kind of found revenue for. I’m not even including the 5% from the kickback. So small things add up to big deals, if that makes sense, and I’m a big believer in that.

Joe Fairless: With 16 units, what’s the unit mix of those, or the portfolio mix?

Harsh Patel: Oh, they’re just quadplexes, meaning four houses with four units each.

Joe Fairless: Okay. Do the residents pay their own utilities?

Harsh Patel: Yes, but they use my company. When they lease from me or rent from me, whatever you wanna call it, I pretty much “Listen, this is what you have to use, this is what we have, and that’s pretty much part of the agreement of leasing through me.”

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Harsh Patel: Sure.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:12:42].13] to [00:14:06].20]

Joe Fairless: Best ever book you’ve recently read?

Harsh Patel: How to Win Friends and Influence People.

Joe Fairless: What’s the best ever deal you’ve done based on the 16 units that you own?

Harsh Patel: [unintelligible [00:14:12].25] property in Jersey City, and the value has risen by about 90k on that property.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Harsh Patel: Not looking at the comparables the right way, and pretty much [unintelligible [00:14:25].15]

Joe Fairless: And the best ever way you like to give back?

Harsh Patel: Helping hungry children. There are 17 million kids in America, which [unintelligible [00:14:33].23] I just can’t — I don’t like that.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Harsh Patel: Feel free to contact me. The number is 201-238-3806.

Joe Fairless: Well, Harsh, thank you so much for being on the show, talking about your approach, talking about how to assess an opportunity when someone approaches you about saving energy, and then your business model and how you do it when you work with your customers. Things to ask, things that we’ll need to have ready, as well as just things to think about too in the value that it can bring to the bottom line. As you said, saving money is making money.

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

Harsh Patel: I appreciate you having me on the show, sir. Thank you very much.

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