Hemal spent two decades traveling between three continents as he provided management consulting services to several fortune 100 companies. Several years ago he decided to hang up his traveling boots and join the financial world, which led him to real estate. He was both a passive and active investor, and now his portfolio consists of close to 600 apartments. His focus was multifamily syndication, and now he’s expanding to other classes as well. Thanks to his diverse background in business and management, Hemal was able to scale his company into a billion dollar business very quickly.
Hemal Badiani Real Estate Background:
- Sr. Vice President in the Financial Space
- 8 Years of real estate investing experience
- Portfolio consist of actively sponsoring or managing close to 600 apartments
- Based in Charlotte, NC
- Say hi to him at: www.exponential-equity.com
- Best Ever Book: Indestructible
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Best Ever Tweet:
“A vision for a million-dollar company is different from a vision for a billion-dollar company ” – Hemal Badiani.
TRANSCRIPTION
Theo Hicks: Hello Best Ever listeners and welcome to The Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking with Hemal Badiani. Hemal, how are you doing today?
Hemal Badiani: I’m doing phenomenal and I’m super excited to be here. Thank you, Theo, for hosting me.
Theo Hicks: No problem. Thank you for joining us. Let’s go over Hemal’s background. He is the senior vice president in the financial space and has eight years of real estate investing experience. His portfolio consists of close to 600 apartments that he is actively sponsoring or managing. He is based in Charlotte, North Carolina, and his website is exponential-equity.com. Hemal, do you mind telling us some more about your background and what you’re focused on today?
Hemal Badiani: Yeah, absolutely. I grew up back in India and came here to the United States to study a couple of decades back. That organically led me, after studies, to join a management consulting firm. For close to two decades, I was on the plane across three continents, helping a lot of CEOs build their firms, change direction, bring scale, bring efficiency, bring growth to Fortune 100 firms. Everybody that you could think of, from Disney theme parks to the Vatican, I worked with them.
So a lot of smart people, a lot of competencies and learning from that experience, I decided to hang up my traveling boots and join the financial world local to Charlotte. Charlotte is a great hub for the financial and banking industry. That led me to the real estate side of things, first passively for the first six years or so, and then actively, first in single-family, and then in 2020 I went into the commercial space.
What I’m focused on now, since COVID started, is really building and scaling my business, bringing all those competencies and experiences from a wonderful set of leaders that I’ve learned, and to build my own billion-dollar business in the commercial real estate realm, starting with multifamily syndications – it’s what we focused on in 2020. Now we’ll be expanding into other asset classes, along with construction and property management on the horizon as well.
Theo Hicks: Thank you so much for sharing that. So lots of very interesting, diverse backgrounds, and lots to dive into there. Let’s first focus on – you mentioned that you were a passive investor for six years. What were you passively investing in?
Hemal Badiani: It was mainly my own portfolio of single-family townhomes, a bunch of land that I bought and hold… It was a classic busy professional scenario there. I was traveling every week and didn’t have anything to think about from an underwriting or active standpoint, so any new stuff, timing the right market cycle, and the right city in the Carolinas. So we just bought stuff as we stashed away cash and savings.
Theo Hicks: So you did that for six years before you transitioned into actively buying single-family homes. Why did you decide to transition to active? Why not just stay passive forever?
Hemal Badiani: Yeah, the whole transition from jumping on the plane and working 80 to 100 hour weeks to where I am with my job right now – it created a lot of space in terms of my week. That allowed me to introspect on what I want to be, how do I build my life, and my lifestyle on my terms. Real estate seemed like a natural choice.
As I was looking at local players in Charlotte and who to partner with and learn from, I found a lot of folks who were doing some creative flipping, creative financing, lending in the real estate single-family space. That’s how I got on that train. The amazing thing was, most of them are solo operators, but my competency and superpower being that I can scale businesses pretty quickly and help people scale businesses pretty quickly.
So in 2019 when I started my real estate single-family business, by the end of 2019 I had 10 employees, five in the United States and five in the Philippines, and we were doing a lot of high-volume transactional stuff, along with some buy and hold and creative finance stuff. That was a wonderful, wonderful confidence in the power of real estate.
Break: [00:05:14] – [00:07:16]
Theo Hicks: I want to go back to what you just mentioned about scaling, as you said that’s your superpower, but something else I thought of, too… You said you were working a lot of hours, then you transitioned into the job you’re doing now, so you had time to think about what you wanted to do and went into the single-family space… For people who are listening out there, do you recommend that people start by passively investing first? Or would you much rather, looking back in hindsight, wish you had gone straight to active investing? Like, is there any benefit to passive investing first, or is it something that you kind of just did because of the situation you were in?
Hemal Badiani: I would say do what makes you happy, and what your true calling is, and what you’re passionate about. It may not be real estate. For the season that I was in, with my kids very young, I was on a corporate ladder, institutionalized to be the next CEO – that was the vision I had. For that, nothing else mattered, except earning predictable returns that real estate provided. So the passive investments are my vehicle.
But when I wanted to change, and when I was in the next season of my life, where I really consciously thought off and got the time to think about what kind of life and lifestyle I want to live, real Estate became one of those things that just was my calling. I knew I could build a business around it, and I could scale, and bring my competency, culture, values, ethics to the table as I’m building this business. That’s why I went into the active space. It wasn’t that one earned more money than the other, or one had more work than the other. It was just where I was in my point of life, and that’s what determined where I wanted to be in terms of my investments.
Theo Hicks: Let’s move to 2019 now. You said that you started the active single family investing in 2019. It started off as just you, and then at the end of the year, you had 10 employees. So as you mentioned, your superpower is scaling, so I’ll kind of leave it up to you how you want to answer this question, but what are some of the top tips or top tactics or things that people need to think about when it comes to scaling their real estate business? Maybe you can answer this question from the perspective of someone who’s maybe just a one-man show right now, but they want to grow their business to a billion-dollar business. What are some tips you have for them?
Hemal Badiani: That’s a fantastic question. I can say these things, from my experience, I worked across the board, it doesn’t matter what business. In 2019 I had my single-family business, which I exited. In 2020 I built my commercial business and we have now five employees and partners, and we going to go to 10 or 12 this year. The same principles work, whatever business you’re in.
But the first thing I believe is to have a clarity of vision. What do you want to be? Most people, when they think about real estate, they think about financial freedom, two or three transactions, or a handful of transactions could get them there. And “Do you really want to build something as a business?” is a question you need to answer. What kind of business? How big? Because that would determine, not only where you make daily decisions, but people who aspire to join your team and join you because of that commitment to that vision, they understand and are aligned to what sort of culture and what sort of end goal you’re building towards… Because the vision for a million-dollar company is different from our vision for a billion-dollar company. The brand, the way you approach things systematically, the systems and processes you institute – all of that is different. So that’s one, and people need to aspire to that.
The second is you really have to carve out what things you do and know your strengths. Figure out how to build complementary competencies around you through the teams that you build, that allow you to focus on what you’re good at, and then start chipping away at what you’re not good at.
For me, I am good at building the business, being the brand, building forward-looking thinking; that allows me to continue to think about “Okay, what’s the next step? Do we need a marketing person? Do we need an accounting person? Do we need HR? Do we need payroll as we build teams? If we go into a new competency, how do we first partner up with someone, learn the ropes, and then go into it?” Those kinds of things – I wouldn’t be allowed to do that, or I wouldn’t have the bandwidth to do that if I’m in the day-to-day activities. I am also underwriting all the things, I’m also looking at lending quotes and all the nuances that go along to make any transaction in the real estate world happen, happen successfully, and execute on a business plan.
So slowly and slowly, as I looked at each role, I said, “Do I have an operational competency and partnership?” That came in first. And then we built an acquisitions team. Now we’re building an investor relations organization that allows us to speak with private equity. Then slowly we’ll go into the marketing etc. So knowing your strengths, really answering very honestly and authentically to yourself what you’re good at, and then complementing that with the right partners is the second piece.
The third piece is finding the people that have two elements. Everything else can be taught. Two elements, to me, are very important – ethics and drive. You cannot teach these. People who can make good tough decisions on behalf of the brand that you’re trying to create, that could sustain itself 20 years from now, 40 years from now, outlast you… And people who are driven; so you’re not just putting incentives and processes, but people who can work and go that extra mile, knowing that you’ve got their back, and then ultimately they’ve got the companies back. Those are things that come a little bit from experiences. Sometimes you can hire good companies that allow you to find employees or partners that allow you to do that… But those three things in my mind – having the right vision, knowing your strengths, complementing with team members, and then finding people who have ethics and drive, are super-important.
Theo Hicks: So right now you’re still working a full-time job in addition to your real estate investing?
Hemal Badiani: That is correct. I believe my first passive commercial investment was April of 2020, just when COVID hit. My intention, I think by the time this podcast will go live, my intention is to quit my job in exactly a year from there and go full time into commercial real estate investing. But for now, I’m a senior vice president for the bank.
Theo Hicks: So how are you able to work your full-time W2 job –or if it’s not a W2 job, just work a full-time job for someone else– while at the same time building up your own syndication business? To someone listening to this who has a full-time job and wants to get into syndication, maybe they’re saying “I need to quit my job today in order to focus on this full-time.” Well, you didn’t do that; you’re obviously doing it part-time or in your spare time, so what does that look like? What tips have you found that allowed you to be successful and build a portfolio of around 600 units while still working full time?
Hemal Badiani: It’s deep work and time management. Every Sunday evening, I sit down and plan two weeks out. Not just next day or next week. Every conversation with an investor that I have, it’s planned at least two weeks out. That’s how they get the calendar invites. I get a little bit of control of any fire drills from a job or business perspective that is going on during the week. Just time management hacks that over a period of time that I’ve been able to do, that allowed me to focus and compartmentalize job meetings versus business conversations that I might be having.
COVID has accelerated that, and I’m hoping everyone takes advantage of that, especially people who work from home. They have a lot of flexibility, they don’t have to travel anymore, most of the meetings are audio-only, some are zoom invites… But you can have certain conversations in the middle of the day while you’re eating your sandwich and can talk to investors. So you really have to work hard and plan for it.
The second thing was deep work. It’s easy to get distracted, overwhelmed with webinars, with conversations on the internet, phone, etc. For me, when I carve out my hour to do anything with regards to the business, the phone, all the channels, everything goes off. It’s one hour of solid productive work, and you’d be surprised if you do that for an hour straight, how many emails, how many responses, how much work you can actually achieve, which seems like a very short period of time, as opposed to doing multitasking… I find multitasking is just sub-optimal for your brain and the work that you’re trying to do.
Theo Hicks: All right, what is your best real estate investing advice ever?
Hemal Badiani: Have a bias for action. As I said, don’t get overwhelmed with a lot of webinars and information. There are 25 different ways of making money in the real estate space. There are different ways of building your business. You possess a different competency and you come from a different season of your life. You’ve got to just start where you are and not worry about all the information that’s going on. Find a good mentor or two, jump on it wherever it leads you. Once you get good at one thing, you can expand and that’s how you grow.
Theo Hicks: Expand that mentorship advice a little bit. You mentioned that when you first got started, you went out and wanted to find the people who are already doing it. What advice do you have? Any hacks you found at finding the right mentor?
Hemal Badiani: The hacks are two, again. Someone who has alignment with your vision and values. If you’re trying to build a billion-dollar business, finding a person who’s not doing that, at least halfway through there, is a no-go. You cannot take advice from someone who’s doing half a million-dollar business, because you’re not going to get as fast as where you want to be. The second thing is to find the doers. It’s hard to decipher, again, from webinars and calls, who is actually doing the work. So you have to dig deep, talk to people, referrals, etc. Understand who could be a good person, who’s actually getting that elbow grease, rolling up their sleeves and actually doing the work, or managing a team that does the work which you want to do. That’s how you really, really learn from them.
Then the third thing is beyond paid mentorship, etc. you’ve got to find that way of providing value to these mentors that is just priceless, that nobody else could provide. That way you forge a good relationship, where it’s not just transactional, and you’re learning from them, and you’re done.
Theo Hicks: Alright, Hemal, are you ready for the Best Ever lightning round?
Hemal Badiani: Let’s get to it.
Theo Hicks: Alright. First, a quick word from our sponsor.
Break: [00:18:07] – [00:18:43]
Theo Hicks: Okay, Hemal, what is the Best Ever book you’ve recently read?
Hemal Badiani: This one is called Indistractable. Again, it focuses on that deep work and how do you not get distracted with all the social media and some of the things that are being manufactured to get that focus away from your work and into the social media realm.
Theo Hicks: If your business were to collapse today, what would you do next?
Hemal Badiani: I would talk to people about mindset, all day long. When I was in a single-family, I didn’t have the mindset for commercial. I found a coach that helped me with that. I realized my true potential, thinking about building a billion-dollar business, and I think everyone has the potential to be their best in this form of life.
Theo Hicks: Tell us about a time that you lost money on a deal, how much you lost, and what lessons you learned?
Hemal Badiani: It was a direct to seller deal that we found through a lot of labor pain in a pretty hot market of Texas, a tier-one city of Texas. So we were excited, obviously, that none of the big players could have found it, and we found something.
We quickly got under contract, the earnest money deposit, we had to pay a fraction of that, the whole earnest money deposit upfront; it was non-refundable. We lost about $15,000, because we had to walk away from the property once we did our due diligence. That’s a lesson learned. Most sellers will hide away something or the other, and it’s your responsibility and a fiduciary responsibility to your investors to be very thorough in your due diligence process and be prepared to walk away, even if you lose money.
Theo Hicks: On the flip side, tell us about the Best Ever deal you’ve done.
Hemal Badiani: Oh man, we found this unicorn, the first ever deal… In the last 100 days, we’ve closed three acquisitions, which has been fantastic. The first one of them was a 208-unit in Tulsa, Oklahoma. That one was 60% occupied, again, direct to seller, it was just mismanaged, we had found it at a very steeply discounted price, got the owner to finance some of the note, and has outperformed way, way, way beyond our expectation, to the point where we’ll be able to cash all investors out in 18 months, which is just fantastic. Getting your money back plus 20 plus percent IRR in 18 months. We’re outperforming our projections.
Theo Hicks: What is the Best Ever way you like to give back?
Hemal Badiani: Through all things real estate. We are currently running a charity that allows distressed property owners who are tax delinquent or are facing foreclosures – we are helping them out in terms of saving their homes; and eventually, we would be buying — the vision is exponential equity. Our firm would be buying large tracts of land that allows us to plant trees and keep them from getting deforested, and just pay back to the environment and our children and grandchildren.
Theo Hicks: And lastly, what is the Best Ever place to reach you?
Hemal Badiani: I’m pretty active on Facebook and LinkedIn, Hamel Bardiani, and also exponential-equity.com. My email is hemal@exponential-equity.com. I’m pretty active there as well. I look forward to speaking and connecting with a lot of your listeners.
Theo Hicks: Alright, Hemal, thank you so much for joining us today and providing us with your Best Ever advice. I really appreciate the structure of your responses. I asked a question, and you are like “Oh, here are two things, or here are three things.” You got it in like that list form. It is going to make it very easy for people listening to comprehend and then hopefully take action on what you talked about.
We talked about your transition from passive to active, and I like what you said about it kind of comes down to what you’re happy with, what makes you happy, what you’re passionate about, and what chapter of your life you’re in. You said how you really wanted to become the next CEO, so passive investing made sense. Whereas when you wanted to change your lifestyle, then real estate itself became your calling, and you became an active investor.
You talked about the three tips for scaling, which was the vision, knowing what you’re good at, finding people to do what you’re not good at for you, and then making sure you’re finding people with the right ethics and drive, since those are not teachable. We talked about some of your time management and deep work tips for just really in general, but specifically around you having a full-time job while building your portfolio.
And then your best ever advice about taking action, where you’re at right now, and not getting overwhelmed with having to know every single little in and out of everything. Then about finding a good mentor, you gave three tips on that. Someone who would align with your vision, someone who is a doer, and then figuring out how to add value to that person. Thank you so much for joining us. I really appreciate it. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.
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