For our first returning guest, we’ve invited Praveen Varshney to share his experience with real estate investing. Praveen is a CPA by trade, an entrepreneur, and works in his family business of investors and financial advisors, with a primary focus on ESG investing. Today’s blog article includes excerpts of some questions he answered from our podcast interview.
How did you get into Real Estate?
Real estate is one of the things I remember my immigrant parents (and I was born in India so I’m an immigrant too) dabbling in. They would dabble by buying maybe another house or a condo and renting it out. That is a way to potentially invest in real estate, but we had to get more serious about this because all the richest families on the planet have real estate investments.
Especially in Europe, there are assets going for generations, so it’s a great intergenerational asset. So we’ve learned by doing and both lost and made some money along the way, so I feel quite qualified now to share about it from years of doing this.
What are the best real estate investments?
There are lots of different types of real estate investing, and the one I usually advise people to do is cash flow real estate.
In my career, I bought hotels, I bought apartments, warehouses, RV parks, and retirement homes. In small commercial real estate, there are so many different asset classes, and the ones that I’m focusing on now are warehouses. Amazon online and e-commerce were already going crazy pre-pandemic. The last year and a half it’s just been nuts, like every day there’s somebody coming to my house to drop off a package. So I think that’s a great asset class.
Apartment buildings or multi-residence are other great ones. In tough times our priority is food and shelter so multi-unit buildings is a really safe asset class. It’s safe because you don’t just have one home that you’re renting out to somebody, and if there’s a vacancy you’d have to wait for it to be filled.
The investors that have been investing with us are professionals like lawyers, doctors, accountants, engineers, and so on. So I explain to them that on the scale of labor, the minimum wage is at one end, and you’re just at the higher end, charging a fee for service, trading time for dollars.
Your concern later in your career will then be how to maintain this nice lifestyle that you’re used to. The best way to do that is cash flow real estate, especially the type of properties where we’re adding value to the real estate, then it’s called refinance. We’re basically getting a higher mortgage feeling. We use that to take our money back out that we used to buy the building. At that point, we’ve basically de-risked it because we’ve taken all our investment capital out of the building.
How does someone without a lot of cash get started?
It’s the power of putting the crowd together. Getting people who think the same way and want to do this. The problem is a lot of our investors are like you and your audience who have day jobs.
So the trick is to find smart operators that have some experience and a track record of doing this successfully. A little promotional plug; I have a couple of real estate companies that I’ve been running for a while, where we will do this, and the term is called syndication.
You take a bunch of investors and put them together as a group, and buy a building. One of the things that have been on my mind for a while too, is how do we democratize?
A couple of these asset classes that use just credit, or credit investors, that basically rich people have access to. In Vancouver, there’s a company (that is not active yet in the States) called Addy. They’re allowing for the average person to invest in something like what I just described, for as little as $50.
To me, that’s really exciting because I want to see more people participate in real estate investing and create cash flow. Here’s the other thing, experts are saying with longevity the average age is going to be 108.
So even if you’re a doctor, a dentist, or another professional making a really good income, everybody in society is gonna have to figure out how to make some cash flow.
What’s a good way to create cash flow?
This concept of cash flow is what I’ve been working on for a while; how to create multiple sources of passive income. I’ll just give you one specific example.
The very first warehouse I bought was a number of years ago. We did this with two investors, my business partner I, as part of my learning. We were able to take out a hundred percent of our money within four years, so it’s fairly quick.
We’ve owned it long enough, so even just the mortgage pay down, we’ve been able to take our original money out a second time. So I’ve actually gained back 200% of my money. And every quarter, I get a $50,000 check, so that’s just one building.
How do you assess the risk when you’re getting started?
As I said earlier, I’m not the biggest fan of going all-in on one property. Because putting all the capital in one, and it’s probably a house or condo, is risky. We do advise a portfolio approach.
So if you think cash flow value real estate is something you’re interested in, just think about it in terms of financial circumstances. Consider how much money you want to allocate towards it, and then find someone to invest with and parse up that money so you’re in a bunch of projects.
That way, you’re not in just one project with the operator because often they do fundraising on a project-by-project basis. It’s best to put money in different projects and spread out the risk.
How can we learn more?
If people are interested to learn more, Sarmaya Capital is the website. Or 3H Properties is actually a development company, we’re building affordable homes because there’s growing homelessness everywhere. With these companies, we have fun and are making a lot of money to invest in ourselves and change lives.
Looking for more information about the stock market, value investing, and more? Please check out the Stocks4Docs Podcast.
Praveen has been a principal of Varshney Capital Corp., a Vancouver based merchant banking, venture capital and corporate advisory services firm since 1991. He’s also a Founding Director of Pyfera Growth Capital & a Founding Director of Humanitas Smart Planet Fund, both with a social impact focus. Mr. Varshney obtained a Bachelor of Commerce degree from the University of British Columbia in 1987 and is a FCPA, FCA.
He has been a Director or Officer of many publicly traded companies over the years including one of Canada’s largest fintech companies, Mogo Inc. (NASDAQ: MOGO & TSX: MOGO) (Co-Founder). He is also a Co-Founder of NEXE Innovations (TSX.V : NEXE) and of Little Kitchen Academy, and former CFO of Carmanah Technologies which became Canada’s largest solar company, and of The Plastic Bank. He was also Co-Founder of a predecessor of Mountain Province Diamonds (TSX : MPVD) who’s Gahcho Kue project in September 2016 became the world’s largest new diamond mine since 2003 & De Beers’ (MPVD’s partner) second-largest producer behind its Jwaneng mine in Botswana.
Praveen is a member of the Vancouver Chapter of EO since 1996, Toniic, TiE Vancouver (Founding Director) & Silicon Valley Blockchain Society – Vancouver Chapter (Founding Director). He’s also on a number of non-profit boards such as the Varshney Family Foundation, Dalai Lama Center for Peace + Education, the Vancouver Foundation & a Founding Member of Instruments Beyond Borders. He’s also an SVP Vancouver Partner, a Director of Foundations for Change, and on the Advisory Boards of Room to Read Vancouver and The Thomas Edison Innovation Foundation in New Jersey. He also Co-Founded with his daughter, Jaiya, Down to the Last Straw, a global movement to reduce plastic waste with a major focus on single-use plastic straws.
Praveen is also a past recipient of Business in Vancouver’s 40 Under 40 Awards and the 2020 Greater Vancouver Board of Trade Wendy McDonald Diversity Awards Outstanding Mentor recipient.