February 5, 2022
Joe Fairless

JF2713: 1,800 Units as GP: His Multifamily Portfolio Growth Strategy ft. Chandra Mishra


 
 

Chandra Mishra has amassed a portfolio of over 4,800 units as both GP and LP while working full-time as a physician and anesthesiologist. To add to his work, Chander has also honed in on the competitive Dallas-Fort Worth market. In this episode, he shares how he balances his full-time job with commercial real estate investing, his strategy for underwriting deals in a competitive market, and how he grew his portfolio.

Dr. Chander Mishra | Real Estate Background

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TRANSCRIPTION

Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed. This is the world’s longest-running daily real estate investing podcast. Today we have Chander Mishra with us. How are you doing, Chander?

Chander Mishra: I am doing great. How are you, Slocomb?

Slocomb Reed: I’m doing great, excited for this interview. We were just chatting about our traveling experiences before the recording. Chander is the founder and CEO of Blue Ocean Capital, which invests in value-add multifamily assets in primary markets currently concentrating in Dallas-Fort Worth. He’s the GP of over 1,800 units and LP of another 3,000 units. He works full-time as a physician, an anesthesiologist specializing in cardiac and transplant anesthesia. He’s based in Colleyville, Texas there in the DFW area. Cardiac transplant anesthesia just isn’t stressful enough already, is it? You need to be doing these large real estate deals too, don’t you, Chander?

Chander Mishra: Yes. They are the fun part.

Slocomb Reed:  How long have you been involved in multifamily real estate?

Chander Mishra: I’ve been involved in multifamily real estate since 2015, actively.

Slocomb Reed:  Actively since 2015. Gotcha. When you say actively, do you mean that that’s when you started being a general partner and putting together your own deals?

Chander Mishra: Actively means that’s when I started learning this, engaging, networking doing it, so on and so forth, and started investing, signing on loans as a KP, and becoming an LP on other deals.

Slocomb Reed:  Got you. So you started being a key partner, as well as doing other things, in 2015. Nice. You said you focus on primary markets, currently Dallas Fort Worth. Tell me about the property you most recently bought.

Chander Mishra: So I live in Colleyville, and it’s right next to North Richland Hills. I have been wanting to buy a smaller property, because when I started into this, the first syndication I did was 170 units; so I always wanted to buy this small boutique property. I got the opportunity to buy the 68-unit, which was like 15 minutes from my home, and to use it as my like experiment ground in a way to kind of do certain renovation, see its impact, and have a lot of that kind of control on it, so we can use that as a prototype on the rest of the portfolio. That was kind of like one of the most exciting recent acquisitions which we closed recently, end of December… December 20th.

Slocomb Reed:  Nice. Tell me more about your plans for that property.

Chander Mishra: In fact, I was glad to get on this call, we were having PM call on it. Rents in Dallas, Fort Worth are kind of going crazy. This certain area is seeing like 21% rent growth, so — we cannot keep up with the rent growth, because there’s a time of implementation of that rent growth. Our projections of whatever the rent growth we had projected are already kind of implemented. And now we are looking to improve the common areas, all those bits are in, we’re deciding on the paint colors, and so on and so forth, which is always exciting. We only have two units available, which has already kind of renovated and leased out. So it’s basically off the bat, you have a 100% leased property. So the only opportunity we have right now is to complete our exterior renovations and amenities add which we have planned in the business plan. That’s what is going into action right now.

Slocomb Reed:  Got you. You focused on primary markets like Dallas Fort Worth; where else are you investing?

Chander Mishra: I am invested in Houston and we also have properties in El Paso. But the advantage of me focusing in Dallas, Fort Worth has been that we have a little bit more of a cohesive team. Some of the challenges which COVID puts us through, like somebody getting sick, or the team member not being available, or someone leaving the job, or even just accessing contractors and the base of people who make you kind of successful, in general – you need a whole team of people. I think that work has become a lot easier by being focused in a more concentrated area.

Slocomb Reed:  Do you hire third-party property managers, or do you manage in-house?

Chander Mishra: We do hire third-party property managers. The key in my experience is having a relationship. If you can have a relationship with the PM company and the stakeholders of the PM company, you can have a conversation. No relationship is perfect, but you can have a conversation, that helps move the properties forward much quicker.

Slocomb Reed: That makes a lot of sense. GP on 1,800 doors… What is the average property size in your portfolio?

Chander Mishra: On average, the property size will be above 120. I think our lowest property is 150-some-odd units, but we do have two properties like the one I told you about, the 68 units we just purchased. There was another one, we had like 87 units… But mostly, I think our lowest count will be 159.

Slocomb Reed: Outside of those two. Gotcha. Your portfolio by door count is larger than most of the people that I interview, and you are focused on markets that are pretty competitive. There are a lot of syndicators who are, for lack of a better term, pushed out of markets like DFW, because the competition is so hot to get those properties. Within areas like Dallas-Fort Worth where you’re concentrated, Chander, what size property are you focused on acquiring now? And what other aspects of the property do you target? What is it that you specialize in?

Chander Mishra: I’m mostly looking for value-add, B plus, C plus assets. Right now, we are under contract for a 273-unit portfolio which will be closing end of this month, or with an extension sometime in February. That’s the focus, mostly being a little opportunistic and digging deeper. That’s the advantage of keeping the market small, because I can kind of leverage the knowledge base of those particular markets, and use that to my strength, like “Okay, this is where the rents are in this market, this is where we can push it, this is where the population is.” This is what it has done over a period of time. I think that helps a lot in deciding and paying a fair price to the seller… Because that’s the key. The competition is there, but at the same time, there’s value in relationships, and so on and so forth. So you build those relationships, and then it’s not about competition, but more about execution and making it easier for the seller to sell the property to you. It goes a long way.

Slocomb Reed: You specialize in your partnerships; are you actively involved in the offer and LOI process?

Chander Mishra: Yes, that’s where we roll. Yeah.

Slocomb Reed: Okay. Chander, I’m asking you a couple of questions to build up to something that I hope will add a lot of value to our Best Ever listeners… For the number of LOIs that you get accepted, how many LOIs do you end up writing, on a ratio?

Chander Mishra: I think people look at it differently. The best ratio will be — I would say, if I’m going after a property, I try to do my homework, and talk to the broker. Not a lot of LOIs are written that would just go into like a waste. There’s no fun in just unnecessarily bidding on something. I would say we have a one to three or a one to four ratio. But we go in, we have a pricing, we want to overbid on the property – those are the properties we will lose. But if there is a kind of like an understanding with the seller, trying to get into that understanding with the broker and the seller that this is where you want to sell the property, “Hey, I’m going to send you this offer. If this is something you’re interested in, I’ll send it. If not, there is no use of going and wasting the time over it.” I think it’s just being very discreet in your approach – it makes a bigger difference – rather than just sending LOIs and underwriting deals like crazy.

Slocomb Reed: Focusing on your relationships with brokers is not only helping you get the right deals, but it’s also helping you save time and not writing on the wrong deals, not having to analyze the wrong deals, and not spending a lot of time on deals where you know that you wouldn’t have the winning bid based on your relationship with the broker. Is that what you’re saying?

Chander Mishra: Yes. And also the expectations. The broker may be a friend, but on the other hand, if the seller has an expectation that he’s going to capture 50% of what he will end up making over the hold of the property in his sale price, then most probably that’s something we will not go for, because then that puts me at very high risk.

Slocomb Reed:  Gotcha. Explain that further to me.

Chander Mishra: Let’s suppose there’s a property at $10 million, based on the NOI and stuff. There are a lot of products selling at a cap rate of 3.1%. A few days ago, I got a call, “Hey, I’ve got an off-market deal.” I’m like, “Okay, tell me more about it.” I started looking at it in detail and I’m like, “Hey, this is not even penciling in at 3.16% of cap rate on a Class B property which is ’80s built.” We [unintelligible [00:13:57].12] contract on it on 20% of the asset. This broker is a good friend of mine and we started having this conversation. I’m like, “Yes. I would like this property. But on the other hand, I cannot do justice at this pricing, because that’s the seller’s expectation to get their pricing.” And I didn’t proceed with it.

Slocomb Reed: Did you say that your seller’s expectation on the pricing was based on a percentage of how much you all would make after you bought it?

Chander Mishra: Yeah, because everything is on the proforma. If the proforma is unrealistic… Because they will be looking at the proforma, and the proforma is based upon you implementing those things there, at that particular property, and not taking… If you don’t take your implementation time into those criteria, that becomes very difficult. If the proforma is assuming that you’re going to get a $120 rent bump on the first day, you are not including the rehab time. That becomes a very complicated issue.

Break: [00:14:53][00:17:03]

Slocomb Reed: You’re using your relationship with brokers to make sure you’re not wasting your time pursuing the wrong opportunities or spending too much time on the wrong properties. I imagine the deals that you win, the contracts that you win, are still competitive. As highly analytical of a space as you operate in, Chander, with properties in that 200+ unit space, is there a particular aspect of your underwriting, your analysis? Is there something that you’re seeing that other operators and GPs in that space are not seeing, that is allowing you to write the offer that gets accepted?

Chander Mishra: That’s a very good question. The big portion would be just looking at a deal more closely. Walking the deal, understanding the deal, going to the comps, seeing what’s around it, seeing what’s driving it, looking at all the data sources that are available to you in that particular market. Understanding the tapestry of that, the population which lives there, and what drives that. That kind of thing, which if you focus on it, there’s a lot of data available nowadays. CCIM has a site to do business, and there are other data sources all across the market. If you get into the data and look at where the data should be — CoStar nowadays, the recent changes, they have property-level data, because of their access to the CMBS database. That can allow you to look at “Okay, this is where the property is performing and this is where it can be compared to other properties.” That’s where the leverage is.

Slocomb Reed: Gotcha. That makes a lot of sense. That’s very helpful to think about. The level of analysis that you’re doing gives you the opportunity to write more competitive offers on the right properties that you know you’ll be able to execute on. Chander, you’re a general partner in almost 2,000 doors, while also keeping a profession outside of the real estate industry. I know a lot of people who get into this are doing it so they can leave their careers. You and I were talking before the recording about some mission work I believe that you were doing around your profession as a cardiac anesthesiologist. I know that it’s something you’re passionate about, and I know that there are a lot of listeners who want to be able to balance their real estate business as it grows to be like yours, while keeping their career. What advice do you have to people with regards to maintaining that balance, so that they can continue to do something they love outside of real estate, while still building a portfolio?

Chander Mishra: I think the best, Slocomb, is to know yourself. Whether you do real estate or you do any other job, it’s no different. Getting into real estate asset management thinking that you’re going to have an easy job is kind of like a misnomer. Real estate asset management, especially the multifamily space, is a very time-consuming and very resource intensive. It’s just like any other job, sometimes more stressful than any other job, because you’re responsible for so many other people’s investments, there’s always dealing with so many lives, whether they are living in your community, or they’re part of your PM group, or they’re part of your team. I think you can do anything based on what kind of teams you structure and what you’re passionate about. It does take a certain amount of dedication, it does take a certain amount of support, creating the teams, having the right partners, having an appropriate VA or virtual assistant, or somebody else which you can hire as your team grows… I think it’s very useful in making things work over a period of time.

Slocomb Reed: Having a team gives you the opportunity to delegate the tasks that don’t have to be done by you. Thinking about you balancing your medical career with other endeavors and thinking back to Brandon Turner’s talk at the 2021 Best Ever Conference… He talks about the Dr. Oz cut, meaning that – I don’t have all the details, Brandon did, and I’m just going off of his talk. But Dr. Oz was a heart surgeon, right? And there was one particular incision that he was particularly capable of doing, that he was just focused on doing that one cut. Do you know him personally, Chander?

Chander Mishra: No, I don’t. [laughs]

Slocomb Reed: Okay. But people in professions like yours are doing everything they possibly can to prepare Dr. Oz to do the one cut that he can do. And having a team in real estate and being able to delegate the tasks that you don’t do yourself, or that don’t need to be done by yourself, is critical to that. It’s also critical to living a balanced life. You’re obviously doing that in your real estate profession when it comes to building a team and delegating all the tasks that don’t need to be done by you, or that don’t bring you joy. Are you finding opportunities to do that as well in your medical career?

Chander Mishra: That’s a little bit tougher, because a medical career is based upon one-on-one interactions largely. A lot of the time, anesthesia — these are kind of like the services which are delivered to one person at one time. That’s kind of like always that. Most of the time the services which are built by that particular physician are based upon the services you personally provided. I do run a bigger team, I’m in charge of a larger hospital, and we have over 10 physicians and 30 nurse anesthetists who work with me in that division. The way you get that leverage and team approach is about looking at a larger perspective; not just on the anesthesia purposes, but looking at the larger perspective delivery of care. Ultimately, you’re delivering care to a human being who is going to be there in any care setting. It’s just like delivering a kind of like an experience, a person who lives in your apartment homes. Similarly, you have different facets of the team. There is a larger role which I play in the hospital arena, and there is also a specific role I play that I am providing that one-on-one care to the patients. Some aspects of it get implemented when I’m providing care at a larger level, so that’s when I’m looking at a global delivery of something. How do we improve this process? How do we take care of these quality metrics? How do we deliver safer care? And so on and so forth. So it’s just like delivering that similar operational excellence in real estate.

Slocomb Reed: Awesome. That’s really helpful. Chander, are you ready for our Best Ever lightning round?

Chander Mishra: Oh, yeah. Tell me about it.

Slocomb Reed: Chander, what is your Best Ever way to give back?

Chander Mishra: To talk to a person one on one.

Slocomb Reed: What is the Best Ever book you recently read?

Chander Mishra: I read so many books. Shawn Achor’s book about happiness.

Slocomb Reed: The title is About Happiness?

Chander Mishra: No. It had to do with something with your happiness. I don’t remember the title.

Slocomb Reed: That happens to me with audiobooks as well.

Chander Mishra: It just disappears, because I listen to so many of them.

Slocomb Reed: Chander, what is your Best Ever advice?

Chander Mishra: My best advice is to know yourself. It’s called The Happiness Advantage.

Slocomb Reed: The Best Ever book is The Happiness Advantage by Shawn Achor. The Best Ever advice is to know yourself. Do you want to expound on that?

Chander Mishra: Spend some time with yourself. Our mind is so active; it’s like having two iPhones with us, one outside and one inside your brain. When both of those are going, the person who has those gets lost somewhere. Sometimes when we are running after different things, whether it is a career, a business, or everything else, you have to kind of stop and see who is running, who that is, and what they want ultimately.

Slocomb Reed: Chander, where can people get in touch with you?

Chander Mishra: They can reach me on my Facebook and on my email. My website is www.bluoceancap.com You have all my social media and everything there; of course, my email, and my phone number, everything is on that.

Slocomb Reed: Best Ever listeners, thank you for tuning in. If you enjoyed our conversation, please follow and subscribe to the podcast, leave us a five-star review, and share this with someone who you think could benefit from what Chander has shared with us about his apartment investing, about balancing his career in the medical profession with his real estate investing, and his day-to-day life. Thank you and have a Best Ever day.

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