Break Your Golden Handcuffs
Capitalizing on Real Estate for Lifelong Wealth with Ex-Googler Sridhar Sannidhi
Ever wonder what it takes to pivot from a high-tech Google career into the world of bricks and mortar?
Sridhar Sannidhi did just that, leaving the digital giant to carve out a niche in real estate investment.
In our latest episode, Sridhar narrates his bold transition, shedding light on the initial hurdles of the single-family home market and his strategic shift to multifamily units, amassing a significant portfolio.
His insights are more than just a tale of career change; they're a blueprint for anyone daring to chase their entrepreneurial dreams over the security of a regular paycheck.
As we peel back the layers of real estate's complex terrain, Sridhar's prowess becomes evident. He walks us through the intricate dance of market trends, revealing how school calendars, seasonal jobs, and the allure of local amenities can sway rental traffic and property management decisions.
This episode is a treasure trove of strategies for both the seasoned investor and the curious novice, emphasizing the need for patience, diversification, and recognizing the enduring power of real estate in wealth creation. Don't miss this enriching dialogue that could very well spark your next big leap towards financial mastery.
More info @ http://.www.growwealth2retire.com
Follow David McIlwaine's Socials
YouTube | LinkedIn | Instagram | Facebook
Join my newsletter @ MAC Assets
Ever wonder what it takes to pivot from a high-tech Google career into the world of bricks and mortar?
Sridhar Sannidhi did just that, leaving the digital giant to carve out a niche in real estate investment.
In our latest episode, Sridhar narrates his bold transition, shedding light on the initial hurdles of the single-family home market and his strategic shift to multifamily units, amassing a significant portfolio.
His insights are more than just a tale of career change; they're a blueprint for anyone daring to chase their entrepreneurial dreams over the security of a regular paycheck.
As we peel back the layers of real estate's complex terrain, Sridhar's prowess becomes evident. He walks us through the intricate dance of market trends, revealing how school calendars, seasonal jobs, and the allure of local amenities can sway rental traffic and property management decisions.
This episode is a treasure trove of strategies for both the seasoned investor and the curious novice, emphasizing the need for patience, diversification, and recognizing the enduring power of real estate in wealth creation. Don't miss this enriching dialogue that could very well spark your next big leap towards financial mastery.
More info @ http://.www.growwealth2retire.com
Follow David McIlwaine's Socials
YouTube | LinkedIn | Instagram | Facebook
Join my newsletter @ MAC Assets
Hey everybody, David McElwain, with another episode of Brick your Golden Handcuffs. Today I'm proud to talk with Sridhar Saneeti and I feel like I just butchered your name. I apologize and he comes to us from Frisco, Texas, aka Dallas, and he is a great example of someone who's broken his golden handcuffs. He's a master's of science in information management and computer science. He worked for multiple Fortune 500 companies. He's an accredited deal syndicator, passive investor in both commercial as well as residential. He's co-sponsored approximately 3,700 units and 15 multifamily complexes in the T's, Texas and Tennessee, with over $400 million in acquisition value, Three of which completed full cycles in less than four years. Congrats on that. That's awesome. You know he comes to us from a very unique background, having worked at Google and talk about golden handcuffs Google cloud tech guys have handcuffs. Sridhar, welcome to the show.
Speaker 2:Thank you, thanks, david, for having me on the show.
Speaker 1:Yeah. So tell me, am I right that you feel like you had golden handcuffs at Google?
Speaker 2:Yes. So you know, in the IT field you are in such a spot that you cannot leave, you cannot continue. So you know, day by day, the technology changes at a so much rapid pace and you need to compete with the youngsters every day. Right, you need to be on top of things. Either you perform or perish.
Speaker 1:Instead of publish or perish, it's perform or perish. And how does someone not perform in the belly of one of the biggest corporate beats there are? What's that look like to not perform?
Speaker 2:Not perform is like you do your part, but the technology changes so rapidly and each customer uses different set of technologies. One has to be a bridge of all technologies. The role I was in is like a cloud solution architect, basically cloudifying all the complex IT platforms and giving the solution to senior executives. So when you do that, you need to know many, many aspects, not only the ones from Google. I mean, we need to know all our competitive products and we need to know what's the best way to integrate them, how best we can solve it at the cheapest possible price. That is the most common thing nowadays.
Speaker 1:You know that sounds really familiar to multifamily.
Speaker 2:Yes, so that is the role. I worked in the IT field for 30 years and I thought that I should start something new on my own.
Speaker 1:Yeah, that makes a lot of sense to me. So tell me, I want to dive into your company. Grow Wealth to Retire, and clearly you've done a lot of deals. Grow wealth to retire and clearly you've done a lot of deals. I didn't finish reading your CV, but you've got over $1.6 billion in past investments in multifamily with over 11,500 units, so you've done a deal or two. And what made you decide to take the leap from a very safe endeavor with a very major employer to becoming an entrepreneur? How did you get from A to B?
Speaker 2:That's a very good question. I always had a passion to start something on my own with a bunch of friends, so I started in a collaboration. I in fact attempted a couple of endeavors and in the middle they dropped All my partners dropped, but I felt really bad. Later on, all those businesses became multi-billion dollar businesses. Example we wanted to do peer-to-peer lending in 1997, when nobody was talking about peer-to-peer lending on IT platforms, and now you see, the peer-to-peer lending is multi-billion dollars.
Speaker 2:We wrote a project plan, we spoke to banks, to underwriters and all that, and finally people got busy with their day-to-day activities and dropped off. So from that point onwards, I always wanted to do so. I always wanted to do something, and I was in wall street for 18 years working on it site only, and then I felt that I'm not finding enough time, so I relocated to Texas. And then, after relocating to Texas, my first goal was like, I need to have some financial freedom so that I can start venturing into all these IT projects and all. So in that process, I initially thought of building a single family portfolio and, to my luck, I could not buy a single one on a single family portfolio. And do my luck, I could not buy a single one on a single family.
Speaker 1:Hang on, hang on. Time time out. Through your luck, you couldn't buy a single, a single one single family rental property based in Frisco. Were you trying to buy in Dallas proper or were you trying to buy somewhere else?
Speaker 2:So when I relocated first, I was looking for the safest places where most high-end jobs are, which means that those are high-end houses, and there was a lot of demand. A lot of people were moving to those places, people were outbidding everybody, people were outbidding everybody. So I could maybe, if I go and expand my search, definitely I would buy it, but I wanted to be very safe in the neighborhoods where I am familiar with.
Speaker 1:So you couldn't buy it because you were being too conservative. Is that right? Yeah, okay, so you said it was fortunate. So tell me, why was it fortunate that you couldn't buy any single-family homes?
Speaker 2:Okay. So you said it was fortunate. So tell me, why was it fortunate that you couldn't buy any single-family homes? So had I gone to that path, I would have accumulated maybe four or five houses since then. Right, because each house finding, buying, bringing into operations takes time, which is almost the same amount of time to buy a multifamily apartment complex, right, the same amount of time to buy a multi-family apartment complex, right. So when I was not able to buy the single family, then I got upset and I said I should not go for small, I should go for big. So let me attempt a bigger one. And then I started looking for hotels, motels and then retail spaces, and then bumped into multifamily when I went to an event at a trust company and I felt very comfortable starting multifamily endeavor from that point onwards, so the marketplace kind of drove you to scale.
Speaker 1:Yeah, and talk to me a little bit about this, having left the corporate world. People say that multifamily requires many hats. You've got to have the guy that spots the deal and bird dogs the deal, and then there's the underwriter. They're usually very different personalities, because the guy spotting the deal is usually working with the brokers and it's more of a relational person, and the underwriter is usually more of an analytic and a quant. And then you've got the asset manager, who can be one of those, or there's 50 different ways you can be an asset manager. And then you've got the day-to-day people and the fundraisers, and there's a big category in there. So where do you hang your hat in that ecosystem?
Speaker 2:So the very first deal, the same dilemma came in. I was not sure where I would fit in, so I started with fundraise as the main motive, like join the deal, learn it and then raise the funds for the deal and then, from the next deal onwards, to lead on it. That was the thought process. In fact, that's how we started. But after acquisition, immediately I changed my hands and I started doing asset management. I started doing other aspects of the lifecycle.
Speaker 1:And what did you see was the difference in your learning, from deal acquisition and capital raising to asset management. What kind of changes did you experience?
Speaker 2:So deal. Acquisition requires different skillset, as you mentioned mentioned. You need to understand the demographics and the dynamics in that area and the locality and then you need to understand the job growth rate, population growth and access to local markets. That is a different skill set. You need to have a bigger picture and the way you need to locate the property is also it should be unique. A lot of people are trying to find the property, so you need to come up with a unique way to see the potential in that particular property, whereas the asset management is mostly like a project management. I would say Keep checking whether you will have a script of things to do and based on the business plan and see how well you are doing against the business plan. If you are not doing well, then correct it and move on. So that was similar to the project management we do in the IT side too, so it's not a major difference. In fact, it is less complex than IT projects because the dependencies are not there that much.
Speaker 1:Well, that's fascinating. So let's talk dependencies, Because you know, I fancy myself a systems thinker sometimes and I bet you have better systems thinking than I do, just kind of spit in the wind because I haven't been trained in and I just learned it from the seat of my pants. What system dependencies does asset management really boil down to? If you're going to boil system dependencies down on asset management, what are going to be the things you pay attention to?
Speaker 2:So that's a good question. And from the systematically, if you want to think, you need to see your operations streamlined with the standard set of operations procedures, for which, again, you need to see what are the things that make you unique to attract new clients and to get the funding from the investors and to get the full cycle of the project. With the business plan, you execute so in a systematic way of thinking. With the business plan, you execute right, right. So in a systematic way of thinking, it's like okay, you need to upgrade the units. How best you will upgrade the units right? What are your sources? How do you optimize it? How do you make the project plan efficient in such a way that your cash flow stream starts boosting up?
Speaker 2:Mm-hmm, so like that cash flow stream starts boosting up. Like that, you think in a different tone. Rather than saying okay, I need to do 100 unit upgrades, let me do one after another, whichever comes first. I like that. Instead of that, instead of thinking and see okay, what is the best season to upgrade the units and then when do you get the max top dollar type of analysis.
Speaker 1:So it sounds like you're almost working from the end in the beginning.
Speaker 2:Yep.
Speaker 1:So, if I hear you correctly, one of the optimization points, one of the systems and tell me if I'm way off base here is that you want the property that's been renovated to come online at the peak rental season. Is that correct? Did I hear this right? Yep, because you're saying hypothetically, let's say, that I don't know in Dallas, is it March or is it April, or is it July?
Speaker 2:Yep, so usually it's the summer season just before the school starts, Uh-huh. August it's the peak season. August it's the peak season. Just to give an example, if you upgrade a unit in September, November, December, you may get $100 premium.
Speaker 1:Whereas if you do the upgrades in summer, you get $200 premium. So my read on this is that you would push people to month-to-month tenancies and start to change their rents in April, to get them out in May, to do the renovation in June and July and have it on market in August.
Speaker 2:Yes, now the way we do is we don't force any tenant to go out, but every month you will have some vacancies, right? People move out, so we try to get the maximum number of leases in summer months so that the cycle will automatically be in the summer. So as soon as people leave it, we will upgrade the units in summer months.
Speaker 1:So that's kind of a contrarian point of view to some operators who say I want the units vacancies and I want the tenancies to change like a given one twelfth every month, and what you're saying is you want more turnover opportunity in the second quarter, if I'm hearing this correctly.
Speaker 2:Yes.
Speaker 1:And I assume that you had analytics to prove out this process right.
Speaker 2:Yes.
Speaker 1:How did you go about creating them? I?
Speaker 2:used that, for example, in one of the deals I have. In summer months, when we upgraded, we pitched as high as $450 to $500.
Speaker 1:Okay.
Speaker 2:In winter months $100 to $150.
Speaker 1:So if you have a 3x jump, $150 to $450 is a 3x jump right. So if you have a 3x jump is part of that supply and demand or is it pure quality, or do you think it's pure timing of the market, because that's a massive delta?
Speaker 2:Yes, it is the timing of the market, I would say, because everybody wants to change the apartment in summer months, before the school starts. Right, it's a limited supply, as you said. Most of the apartments go $112, $112, $112. But if you somehow trick it to have more vacancies in summer, then you can lease it at a higher rent in summer.
Speaker 1:So I'm kind of pushing back because it makes perfect sense to me from an academic point of view and from an executional point of view. You own both in Tennessee and Texas. Did you see the same phenomena at the timeframe on both of those, or were they different by market?
Speaker 2:I see a similar phenomenon, but the price variation is not that much in Tennessee.
Speaker 1:Right, it can't be. The market's not as robust, yep, just from a population size point of view, right. So I have a property in the Midwest where by the end of July, the upcoming rentals for the school year are done and we would flounder if we had people moving in in August.
Speaker 2:Yep.
Speaker 1:And have you been able to correlate a difference in? Does that correlation fall back to school enrollment deadlines?
Speaker 2:I think to some extent it is school deadlines, and in some extent there are other factors too. What I have seen is, in some markets it's the seasonality of job employment.
Speaker 1:Okay, that makes a lot of sense.
Speaker 2:There is a sudden spudge in the jobs and then we see a lot of traffic coming in. So some annual jobs will be there from, I would say, early spring onwards. There's some seasonality. If you're closer to some beaches or if you're closer to something, At that point you will see that different dynamic.
Speaker 1:So you're saying then you'd see a different dynamic in Galveston than you would in Frisco because of the seasonal workers coming in.
Speaker 2:Yep.
Speaker 1:Okay, okay, and my next forecast and tell me if I'm right or wrong is that you're talking about two and three-bedroom units, not one-bedroom and studios, because they're not as seasonal if there's not kids involved or roommates. Am I right? Am I way off base?
Speaker 2:Again, it depends on the location. If you are closer to beach, your single bedrooms are most demanding. Mostly youngsters will be closer to the beach. Families will go there but they may not stay there for six months because mostly they will be closer to the beach. Families would go there but they may not stay there for six months because mostly they would be busy with the work. But the youngsters, they can stay there and work. Nowadays, to the remote possibility, I see more and more youngsters renting closer to beaches and public parks, et cetera.
Speaker 1:Gotcha, and so really what you're saying is that the product demand, whether it's size or product offering, is very germane to the marketplace you're in and what that employment base is, yes, so how do you take all that learning and build your KPIs across the portfolio? Because you've got a large portfolio and I'm sure that if you're going to go into systemization, you want KPIs that are across the board systematized.
Speaker 2:Yep. So when we do the business planning, we try to see the maximum number of unit upgrades. In summer months, like in winter months, we become lean Means like we do, let's say, one or two unit upgrades in summer months, like in winter months, we become lean Means like we do, let's say, one or two unit upgrades per month, whereas when it comes to summer we bump it up to six, seven units.
Speaker 1:Okay, so you go 3x on that.
Speaker 2:Yeah.
Speaker 1:Right, what other KPIs do you do that sit across the whole portfolio?
Speaker 2:So another aspect is the occupancy. So what we do is like during slower months we give better promotions. So if we are not getting the traffic, we give more promotions. In summer months we cut down on promotions because demand is there, so we don't need to give promotions in summer.
Speaker 1:Do you see your occupancy numbers vary drastically from Q4 to Q2 and Q3, mid-Q2, mid-Q3?.
Speaker 2:In Q4, if units become vacant, it is difficult to fill them in at the best place. So if they are like again, if it is a small percentage, you can fill it back by any chance. If it becomes a double-digit drop right, double-digit vacant, like 200 units, suddenly, if you have 20 vacant units in November, right, it's difficult to fill 20 units in November.
Speaker 1:Yeah, really difficult.
Speaker 2:So, whereas the 20 units in summer month is not sufficient, you need to see 30, 40 units, also depending on the location of the property.
Speaker 1:Awesome. So, in this process of evolution and wearing the asset management, the deal acquisition hats, the capital racing hats, what are some big takeaways that our listeners can learn about investing in multifamily versus, say, the stock market? Because I say a lot that you don't want to go all into just multifamily and you don't want to go all into the stock market, and everyone I talk to says people are often one or the other and nothing in between. And I wonder what do you think?
Speaker 2:I think you need to diversify your risk, right? One should diversify their risk and they should be present in both locations, but the diversification should be to such a level where risk tolerance is right. Historically, more millionaires are billionaires are made in real estate than stock market, say that one more time.
Speaker 1:I think that's a really big headline.
Speaker 2:Yeah. Say it again Most of the millionaires and billionaires are made. Most of them are from real estate Right.
Speaker 1:Most of the wealthy are real estate, not stock market. There's the occasional guy that wins a lottery that falls in there too, but it wasn't me.
Speaker 2:Yeah, me too. Yeah, I never won a lottery, but I've been following with so many. I mean, I listen to podcasts and all.
Speaker 1:Right.
Speaker 2:Similar in real estate too.
Speaker 1:So I hear you say slow buy, slow be patient, build wealth Nice and easy.
Speaker 2:Yeah, and then it will slowly show the result Exactly.
Speaker 1:So what other advice do you want to share with our listeners around real estate?
Speaker 2:do you want to share with our listeners around real estate? So in real estate one has to be more what you call patient under outcomes, rather than rushing out and coming to a conclusion quickly and saying, oh okay, I bought this property, it's already six months, I'm not seeing the progression of outcome completely. Those kind of things are different than the stock market. In stock market the market is going up a trend. Whether that company does it well or not, it goes with the bunch right In the sector. If others are doing well, then the stock may also go. Here it may not be like that in commercial real estate particularly Single family values may go up. But commercial mostly it goes by the income of the property. If the dynamics are not good on that particular property, even though the economy is good still, the property may not perform well, property even though the economy is good, still the property may not perform well.
Speaker 1:So what I'm hearing is that this is very much commercial real estate, and multifamily in particular, are very value-driven based on the operations at that unit, not just a market.
Speaker 2:Yes.
Speaker 1:Not just a market, yes, and so back to the dependency, but more than the market. The property performance is the key factor. Yeah, and so that goes back to the dependency part, right? Yeah? So what are the dependencies?
Speaker 2:Do you feel like it can really impact, and affect as an owner on these units? Yeah, you can force the appreciation in the multi-family market commercially listed right, whereas in other places you may or may not be able to force it. When I say force appreciation it means if you do a real good job in renovating the unit, you can ask a few more dollars on the rent right, whereas a similar thing may not be doable in the business.
Speaker 2:You want to put a higher price and then your competitor is not letting you put it. Then you're challenged there.
Speaker 1:Yeah, and so it's a very different world than in the commercial world of just corporate America. When I was selling advertising for Viacom and CBS, I could set my rates, but I couldn't force rate growth more than two or three percentage above my competition because the money would move. It was a commodity in a lot of ways, and what you're saying is you can force growth greater through operational efficiencies.
Speaker 2:Yes, I can give an example. In one of our properties it's a 1980s property we underwrote the property to go at 3% rent hike but we ended up 19% rent hike. Wow up 19% rent.
Speaker 1:Wow.
Speaker 2:So a 6x variable. Yes, we did not do any major upgrades on the units.
Speaker 1:Then how did you justify it? Because people are going to say, well, you just caught a rising market and you just jumped in the bandwagon. Fight that obsession.
Speaker 2:Last year also, when the things are tough, jumped in the bandwagon. Fight that obsession Last year also. When the things are tough even in the last year market also we increased the rents to 11%. So that's when what I could relate is the service matters. The way the property manager handles tenants or prospects, that matters a lot. The service matters. The way the property manager handles tenants, their prospects, that matters a lot.
Speaker 1:So the tenant touch, the tenant touch points, the customer journey.
Speaker 2:If there is a problem, the property manager is on top of things and then getting it resolved quickly. They will have a positive impact and they don't mind paying extra $20, $30 rent. If you look at the $30, it translates to a big amount, right, Right?
Speaker 1:$30 a unit. Over 200 units is $60,000, right, and then you take that over a cap rate of whatever it is in Dallas these days, or Memphis or Knoxville or wherever, it makes a big difference.
Speaker 2:Yeah, $30,000 and $1,000 is 3%, just like that.
Speaker 1:Right.
Speaker 2:In addition to the non-organic growth.
Speaker 1:Right, exactly so. I really enjoyed chatting with you. I always ask my guests a couple of questions. If there's one thing you know now that you wish you had known, a so in my case, the partnership.
Speaker 2:I told you right, initial entrepreneurships fail because I couldn't find the right partner. So unless all the partners have a similar vision and focus, it is difficult to execute in a partnership or syndication mode.
Speaker 1:Yeah.
Speaker 2:That is one thing I'm going through right now. That is one thing I'm going through right now. So structuring the capital, the way you design the deal financially, that also matters a lot. Even if you do the best job in operating the property, oftentimes you may not become victorious. But if you use the right capital stack also, that can make you victorious, even though the property is doing so-so Great, great lessons.
Speaker 1:If you're not singing from the same song sheet, the choir is going to be out of tune, right? Yep, yeah, okay. So from that I always ask another question what's one piece of advice or common thinking that you wish you had ignored, that you followed?
Speaker 2:so one common thing I would say. The partnership was like when wetting the partners. So oftentimes people say that, uh, don't rush in. Okay, give you enough time to vet the partner and see, and then only get into business. But in a couple of occasions I kind of rushed in and then I saw the difference yeah, yeah, so it sounds like patience, patience, patience, absolutely.
Speaker 1:Sridhar, is there a thought or a quote or something that drives your business or you that you'd like to share with our listeners?
Speaker 2:that kind of is one of your axioms real estate business is most of the stock markets and bond markets. They give very good communication to investors newsletters and all that communications etc. We should do the similar thing to our investors. One thing we need to make sure is the investors put the money in that trust. We should not yeah, so true, yeah, to do that.
Speaker 2:You should well communicate to the investor. Yeah, and you. Sometimes things will be out of our control and investors would be upset. Then, if we keep communicating, that would at least relieve stress up to some level. I would say it won't be that bad if we keep communicating. Things go out of control, beyond our control.
Speaker 1:Yes, so true. I actually had an investor tell me that I went dark. I didn't realize I had gone dark in my mind, but in their mind I had, and that made all the difference.
Speaker 2:Yeah, I can give an example. We underwrote deals at 10% 15% interest insurance rate hike, but in last year in Houston market insurance doubled or more than doubled. Nobody anticipated it. It would result in a different outcome, right? So?
Speaker 2:you need to explain to the investors and everybody thinks how come? You don't know, right, we don't know. But we go with the general trend of how much each year goes up by and we give some buffer on top of it, but this one is an outlier beyond our control. Yeah, very much so, right? So I've really enjoyed talking with you. Some buffer on top of it, but this one is an outlier beyond our control.
Speaker 1:Yeah, very much so right. So I've really enjoyed talking with you and you've got some wealth of knowledge. If people want to learn more about you or they want to learn more about the business, what's the best way to contact you?
Speaker 2:Yeah, they can reach out to me via my website, wwwgrowwealth2retirecom, and then calendly slash Sridhar.
Speaker 1:Sani. Great Well, thank you so much for coming on. You've been listening to another episode of Break your Golden Handcuffs. If you like what you've heard, feel free to hit the like button and the subscribe button, and that way you know when we publish episodes. We publish two times a week. Thanks for listening and have a wonderful day.
Speaker 2:Thank you, David. Thanks for having me on the show.