In today’s episode, Theo Hicks introduces a new host of the Best Real Estate Investing Advice Ever podcast show, Ash Patel. His background is in IT, and he stumbled upon the world of real estate because of the tax advantages.
In 2011, he purchased his first property, a mixed-use building. Pretty quickly he noticed that the commercial part of the building required way less involvement on his side, while the residential apartments always needed additional investment of time and money. From then on, his biggest focus was on acquiring more commercial properties.
Ash has a wide span of qualifications. He does his own property management, chases his deals, and invests in bigger projects with Joe. He is a great addition to the podcast, so be sure to check the interviews he’ll be doing!
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Theo Hicks: Hello Best Ever listeners and welcome to another episode of the Syndication School Series, a free resource focused on the how-to’s of apartment syndication. As always, I’m your host, Theo Hicks. Well, today we’re doing something a little bit different. We are going to be officially introducing our new host on The Best Real Estate Investing Advice Ever Show, and that is Ash Patel who is joining me today. Ash, how’s it going?
Ash Patel: Theo, great. Thanks for the welcome.
Theo Hicks: No problem. So moving forward, a few changes to the podcast. I’ll be focused on Syndication School, Actively Passive with Travis, and then we’ll be doing a new series. It’ll be a wrap-up series where we go back through some of the older commercial real estate investing-focused podcasts and extract some of the Best Ever advice from those. Then, as the title implies, mashing them all up into one episode with a theme.
Then for the actual interviews where we talk to guests, that will be exclusively Ash moving forward. So we wanted to have a conversation with Ash, bring him on Syndication School, just to get to know a little bit more about him and his background, and why he is the right person for the job. So Ash, maybe start off by giving us a quick bio on who you are and how you’re involved in real estate investing.
Ash Patel: First, big shoes to fill, following in your footsteps. I am not unlike a lot of our Best Ever listeners, where I started out in the corporate world, did the nine to five. I had a 15-year career in IT, and I accidentally found real estate because somebody told me it’s a great way to get some tax advantages. So back then – this is 2011 or 2012, I don’t even think Joe Fairless was putting out content back then, and Bigger Pockets may have started, I’m not sure. So there weren’t all these resources out there where I could educate myself first, and then get into real estate. So I ended up buying a mixed-use building, just kind of dove in, didn’t know what I was doing, had no systems in place… The building that I bought just needed a ton of work. It had a commercial tenant and retail apartments above it, and I thought “What a home run”, because my mentality back then, Theo, was when the commercial store lease was up, I can get additional income by running the store. So I wasn’t even really focused on real estate, it was just I guess, adding income with a little bit of real estate mentor.
There was a pivotal moment at that location where I was unclogging a tenant’s sink or toilet and I saw the commercial tenant was replacing their entire HVAC system. So at that point, I had an epiphany, “Wait a minute, the residential tenants add wear and tear and destroy your place, while the commercial people improve it on their dime.” That blew me away. I didn’t understand why everybody didn’t do commercial real estate. So from then on, my path was just acquiring more and more commercial properties.
Theo Hicks: What does your current portfolio look like now? Anyone who attended the Best Ever conference heard your amazing presentation. Hopefully, we can get that on the show at some point. But what is the snapshot of what you currently own right now?
Ash Patel: So what I currently own is a mixture of an office building, medical center, still a few single-family homes, mixed-use buildings, I’ve done joint ventures with mobile home parks, some industrial buildings, some shopping centers… A mix of everything; restaurants… So long story, but I’m opening two restaurants and an event center as well. And just like I accidentally got led into this real estate world, I accidentally stumbled into the restaurant business as well. So over the years, I’ve done a bit of everything – ground-up development, flips on commercial, buy and holds, triple nets… But most of my focus has been on value-add. So I don’t want to buy the fully rented shopping center or the fully leased Starbucks on a 10-year corporate guaranteed lease, I want to buy the vacant stuff or the half vacant shopping center where I can go in, add value and maximize returns. I’m a hands-on landlord; I’ve never used a property management company, and don’t think I ever will. My philosophy on that is my tenants deserve my attention, so if there’s a problem, that is an opportunity for me to make a positive impression. So in a nutshell, that’s my experience.
Theo Hicks: That’s super-fascinating, because when you talk to the people on the show, a lot of people’s Best Ever advice is to focus on one thing, find that one asset class, and then within that asset class, find that one particular business plan, that one small niche that you become an expert on. It sounds like you’re kind of the opposite, where you’re doing a little bit of everything. So is there a common thread between all those that allows you to be successful by investing in all the different types of commercial real estate mentor? Is that something you’ve naturally had, or did it take some work to acquire that skill?
Ash Patel: While I could take that as a compliment, it’s really not. I have a short attention span, so I get bored quickly… And I don’t have systems in place. I can’t do what a lot of you guys do, with taking down 20 single-family homes in a month, or buying 100-unit apartment buildings. I don’t have those systems in place and I don’t have the patience for that, so I shoot from the hip a lot. The commonality is I chase cash on cash returns. So most of my deals at entry are 40% cash on cash, and with the value-add are upwards of 70%. So the commonality is just adding value and being able to maximize returns.
Theo Hicks: So I mentioned earlier you gave a really good talk during the Best Ever conference about how you actually chase down these deals. It’s not something that, as you mentioned, is like a quick thing where you can just rinse and repeat. It sounds like with a lot of proactive effort you have going out and continuously contacting people. Can you maybe walk us through one example of that, of you chasing down one of these really high cash on cash return deals?
Ash Patel: Yes. So I will look at every commercial property that comes online in a 100-mile radius several times per day. I’ll scour a bunch of different sources to find that. And a lot of times I win these deals by having the first-mover advantage.
A great example of that, Theo, is there was a Friday night where for the last time that evening I looked one last time to see what new deals popped up. I found a shopping center up for sale; it was listed as a triple net with $117,000 NOI. The listing price on that was $650,000. Now, those numbers don’t add up. Back then, to show you my mindset, I didn’t even know to use cap rate to evaluate the health of the deal. So I just did my simple cursory numbers, and again, it just didn’t add up. The numbers were too skewed. So I didn’t sleep that night; I came downstairs in my office and I researched the property, the neighborhood, the owners, the previous owners, the businesses, their social media profiles… A full eight-hour CSI episode that night.
At about [7:30] the next morning, I figured it was time to wake up this listing realtor and start calling. I didn’t call the night before because it was too late. So I start tracking this guy down and I can’t get a hold of him. So I call his colleagues, I call his boss at his brokerage. Finally, three or four hours later, I get a hold of him. I asked him a few basic questions, and I found out that yes, this was a triple net lease; all of these are long-term tenants, and they’re all on leases that extend out two, three, four years. Perfect, I’ll buy it. I bought that building for $625,000. On Sunday night, we had an executed contract. Monday morning, he received cash offers for $200,000 above list, and my price was $25,000 below list, because I didn’t wait until Monday morning. I chased him down right away. So that first-mover advantage is very important. It’s a combination of finding the deals and doing whatever it takes to take them down. I’ve spoken to a lot of people, and they’ll come to me and say “Ash, I’ve found this great deal.” “What have you done to acquire it or take it down?” “Well, I left a couple of voicemails for the realtor.” “No. No, no, no. That’s your only mission in life at that point, is to chase that guy down, find out about the property and execute that deal. That’s it. You don’t wait. If this is a good deal, whatever it takes to acquire it.”
Theo Hicks: Thank you for sharing that. Something else you mentioned too is that — and obviously, we talked about you chasing down deals, constantly looking at the MLS, and now you’re going to be hosting the podcast, and you don’t have your own property management company, you’re self-managing… How do you have time to do all these things? What’s your tip on how to maximize your time and being very efficient with your time?
Ash Patel: Great question. And thinking out loud, I look at my tenants as partners. So in an office building that I have, I’ve got a tenant who will clean up around the parking lot. I’ll take half of the rent off because she cleans the common areas, the bathrooms, the hallways… And that’s my boots on the ground. That’s essentially my property management company, and you cannot get better than that. Having an actual tenant that’s there, your eyes and ears, your boots on the ground… Because they’re going to take care of your place better than a property management company would. It behooves them to communicate with you and let you know what needs to get done.
So in all of my properties, I’ve got a great relationship with my tenants. As a matter of fact, once a quarter, I host a happy hour, either at my house or out somewhere… And that happy hour is a combination of a team-building, networking session, and then just a have a good time session. So I’ll usually have an agenda where I want my tenants to learn from each other. Maybe you share your ideas about social media marketing; learn from all of these other businesses that are all under one roof or under one landlord, so to speak. That helps build teams as well.
I think from my tenant’s perspective, they realize that I have a vested interest in their success. Part of that is me not wanting them to leave and deal with the turnover, but it’s just a win-win all the way around. So my best property managers are my tenants.
Theo Hicks: That’s a very interesting approach. You passively invest too, right?
Ash Patel: I do. I’ve been investing solely with Joe since 2015. I’ve been in several of his deals.
Theo Hicks: How do you decide how much of your capital to allocate towards passive investing versus your own active business?
Ash Patel: That’s a great question. I think I asked myself that recently and didn’t come up with a good answer. What I’ll tell you is that when you invest in somebody who just has apartment investing down to a science, you maximize your returns, both on cash flow and taxable write-offs. So when I invest with Joe and Ashcroft, at the end of every year I get these huge negative K1s that I get to write off other income against. So I think when people look at passive returns, they often fail to look at the tax benefits of that. So these massive negative K1s can offset other income, and that can be a huge plus to your bottom line.
Theo Hicks: Make sense. What do you do for fun when you’re not doing real estate? What are some of your other hobbies outside of chasing deals, passive investing, hosting the podcast, and all the other businesses you’re going to do?
Ash Patel: So chasing the deals is probably 90% of it. Other things – we’ve got a little house on a lake, not far from here. I’ve got young kids that are eight and 11; I’m spending time with them, we got them into skiing this year… I sound old, but having those kids keeps me active. I get out, ride bikes with them, wiffle ball tournaments, and just really spend time with family. A lot of my friends are also real estate investors as well. So we’ve got a great community here in Cincinnati. Tomorrow I’m hosting a poker game for a bunch of real estate investors. So really just spending time with family and friends.
Theo Hicks: That’s great. So this wouldn’t be The Best Real Estate Investing Advice Ever Show if I didn’t ask you the money question. So Ash, what is your best real estate investing advice ever?
Ash Patel: I should know this… I think there are so many different pieces of advice. For experienced investors, figure out how to scale your business and continue to grow. Because it’s easy to become complacent when you have a decent amount of cash flow coming in. But always keep your eyes on the next deal. How do you grow?
For me, I’ve realized that I need to do more joint ventures and partnerships to help offset some of the management of these assets. So that helps me to continue to grow. But always keep your eyes on your three, four, or five-year plan and figure out how you’re going to continue to grow. Just don’t become complacent.
Theo Hicks: More tactically, what do you do to make sure your three to five-year goal is always top of mind? Is it like a vision board? Is there a written plan? Do you just have it in your head?
Ash Patel: It’s written down goals. But more importantly, it’s defining the tasks that will get you to those goals. I realized that the problem with me is, I’ve been doing this for almost 10 years and I’m only accountable to me. I’m in my office many hours throughout the day, and it’s easy for me to get sidetracked or go down a rabbit hole and lose hours at a time. So for me to hold myself accountable, I’ve actually just engaged with a business coach. It’s Trevor McGregor. I think a lot of our Best Ever listeners have heard of him or know of him. So that’s me being introspective and realizing that I’ve got a lot of habits that I need to fix. I’m very inefficient at times, and I need to work on that. That alone should help reach a lot of these goals.
Theo Hicks: Ash, should we do a Best Ever lightning round?
Ash Patel: Let’s do it. Again, I should have been prepared for this, but let’s do it. We’ll wing it.
Break: [00:18:28] – [00:18:51]
Theo Hicks: Ash, what is the Best Ever book you’ve recently read?
Ash Patel: There’s a book called Rocket Fuel. The reason I like that book is because it reinforces that a lot of what I thought were my flaws are not really flaws. In that book, it talks about every great company has a visionary and then an integrator. The visionaries are not taskmasters. I realized I’m by no means a taskmaster. So I need systems or partners to help me with the integration, which is why I got the business coach.
All these years, I thought it was just a flaw that I’ve got a short attention span. I’m not good with backend bookkeeping. In reality, this book just taught me that I’m a visionary, I need to focus on that, and supplement the integration somehow.
Theo Hicks: Yeah, a lot of people when they talk about finding business partners and team members, they’ve talked about that – don’t attempt to force a square peg in a round hole, in a sense. Just figure out what you’re really good at and what you like to do, and then just find a business partner to do the really big thing that needs to be done, or find a virtual assistant, or another team member to do something if it’s a kind of lower dollar per hour activity. So that’s interesting that you said that.
Ash Patel: I wish he told me that a few years ago, it could have helped me out a lot.
Theo Hicks: Well, you’re going to learn a lot doing these interviews. You’re going to learn all the secrets and stuff. Whenever you have a conversation with people, “Oh, I remember this guy three weeks ago, and this is what he did. Now he’s a 100 million dollar real estate investor.”
Ash Patel: I’m looking forward to that.
Theo Hicks: There you go. So we talked about a good deal. Let’s talk about a deal where you lost money, how much money you lost, and then what lesson you learned.
Ash Patel: This is a tough one. So several years ago, I had this inflated ego, because I started investing in 2012, and no matter what you bought through those years, you’re going to make money, you’re going to turn it around. The market was on an upswing. So me, with my big head, I found this auction in a small town called Ripley, Ohio. It was an estate auction where there were real estate investors that were divesting all of their properties. I went in there, and a couple of other guys did as well, and our mentality was we’re going to take over this town, revive it and bring life into these buildings that had been vacant for 10, 15, 20 years. It was just a declining town, a lot of the factories in the area closed, a lot of drug problems… So I ended up buying a couple of single-families, mixed-use buildings, commercial buildings, all of which were in need of massive rehab.
So I figured I was just going to apply the same formulas for success that I’ve used in other properties… And man, none of that worked. I couldn’t find contractors in that area, a lot of people were just out to screw people over… And I ended up losing probably a total of 50, 60, $70,000. I was able to exit out but it took several years. That was a nice kick in the pants that I needed.
Not everything that I touch turns to gold, so come back down to reality and realize that all of this takes work. You can’t just cast your rod, find something and make it work. So there are times where you’ve got to be a lot more diligent and actually look at the numbers, which, again, just a great lesson that I needed to learn.
Theo Hicks: Yes, that’s one of my favorite questions that we ask, because it’s not asking them what’s the worst deal you’ve ever done, because if you kind of think about it, it’s not necessarily the worst deal if, as you mentioned, you learned a lesson from it that helped you not do the same thing again in the future.
So it’s not necessarily the worst deal, it’s just what happened, and then what lesson did you learn that you applied moving forward that helped you. Because you mentioned it kind of brought you down a notch in a sense and made you realize that every single thing that you do is good. So moving forward, you paid a lot more attention to the details. I love that question. You always get great responses. Usually, they always start off like, “Oh, man. Not the worst. Not this. I don’t want to remember that.”
Ash Patel: Yeah, and that is a great question. I think I was lucky, because it could have been a lot worse. So I escaped relatively unscathed and learned a great lesson.
Theo Hicks: True. What is the Best Ever way you like to give back?
Ash Patel: Other than charities, over the years I’ve offered to mentor anybody that wants to learn more about commercial real estate. My one rule is I will match my time with your effort. So there’s a lot of people that come up to me, and they don’t really know what it is that I do, but they see that I’m doing something with commercial real estate and I’ve achieved a little bit of success. They interpret that as mailbox money. Everybody wants that mailbox money. So they come to me, “Ash, how do I get this mailbox money?”
I give them some basic homework assignments, and there are a few people that actually follow through. Those people I will give all of my time to to make sure they’re successful. That’s incredibly rewarding, seeing somebody hungry, put the work in, and actually benefit from that.
Theo Hicks: And then lastly, what is the Best Ever place that the Best Ever listeners can reach you?
Ash Patel: Pretty soon you can probably find me all over the Best Ever brands, website, podcasts. I’m on BiggerPockets, pretty active. Facebook, Ash Patel in Cincinnati, LinkedIn, Ash Patel in Cincinnati. I’m pretty good with getting back to anybody that reaches out to me.
Theo Hicks: Yes, as Ash said, he will be all over the brand here soon. I’m not necessarily sure when your interviews will start, I think in the next few months after this airs. So keep a lookout for those, keep a lookout for the new… I think they’re weekday mashups. So those will air on the weekdays. And yeah, reach out to Ash.
I hope you enjoyed this episode, got to know him a little bit more. As always, Best Ever listeners, thanks for tuning in. We’ll be back to the regular Syndication School next week. As I mentioned, we just wanted to introduce Ash to all the Best Ever listeners. So until then, have a Best Ever day and we’ll talk to you tomorrow.
Ash Patel: Thank you.
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