Becoming a Mad Scientist of Multifamily Investing with Neal Bawa

Neal Bawa is known as the Mad Scientist of Multifamily and one of the most well most in-demand speakers in Commercial Real Estate. He is a data-driven guru, a process freak, and an outsourcing expert. He treats his 300 plus $45 million dollar multifamily portfolio as an ongoing experiment in efficiency and optimization. The Mad Scientist lives by two mantras. His first mantra is that we can only manage what we can measure. And number two is that data beats gut feel by a million miles. These monitors and a dozen other disruptive beliefs drive his profits for himself and his 400 plus investors.

Neal Bawa considers himself a geek, a nerd, or a dork. He is from Silicon Valley, a Technologist Data Scientist. He had a successful Tech career and later on dabbled into real estate. He’s been in the industry for 17 years. His story is similar to that of many other technologists that work 70-80 hours a week, then burn out. Neal was looking for financial freedom and the path to a very low tax level both came through real estate.

Watch the episode here:

Brett:

I’m excited about our next guest. He is known as the Mad Scientist of Multifamily and besides being one of the most well most in-demand speakers in Commercial Real Estate, he is a data-driven guru, a process freak, and an outsourcing expert. He treats his 300 plus $45 million dollar multifamily portfolio as an ongoing experiment in efficiency and optimization. The Mad Scientist lives by two mantras. His first mantra is that we can only manage what we can measure. And number two is that data beats gut feel by a million miles. These monitors and a dozen other disruptive beliefs drive his profits for himself and his 400 plus investors. Please welcome to the show with me, Neal Bawa. Neal, how you doing today?

Neal:

Fantastic, Brett. Thanks for having me on the show. Very excited to be here.

Brett:

Absolutely. Well, let’s dive right in. For our listeners to get to know you for the first time, would you give us a little bit more about your background and your current focus?

Neal:

Sure. I am a geek, a nerd, a dork. I’m from Silicon Valley, a technologist data scientist, had a successful tech career, had a successful tech exit, dabbled in real estate since 2003. So I’ve been doing it now for 17 years. And the story is similar to that of many other technologists in that we work 70-80 hours a week, we burn out. And we’re all looking for financial freedom. And for me, the path to financial freedom and the path to a very low tax level both came through real estate.

Brett:

Beautiful. So, I’m originally from the Bay Area, Silicon Valley as well. What’s the number one secret for those who are transitioning from the Tech World into Real Estate, and was the hardest for you to learn?

Neal:

I think the secret is really not much of a secret at all. I think for some reason, a significant portion of the tech industry believes that technology jobs are going to help them retire. And it is not true. It’s not true for the guy that makes 100,000 it’s not true for the gal that makes 200 it’s not true for the guy that makes 300. Because as your income goes up, you’re in California is the highly progressive, very progressive tax system. And as time goes on, more and more of your money is actually getting funneled into the state of California and also into the Federal coffers. I am yet to see any technologist regardless of how much money they make really plan effectively for retirement through the use of technology. I think it’s always other venues with real estate just being one of those menus. So the secret really is, technology is a phenomenal way to plan your retirement and to build a foundation for your retirement. But by itself, it’s terrible.

Brett:

Excellent. We’re gonna dive in that too, here in a minute. And that’s going to kind of be the premise of our show, learning how to become a mad scientist and multifamily investing. But before we go there, Neal, I want you to go back to perhaps your university days or even your high school days. And you know, I believe we’ve all been given certain gifts in this life and these gifts have been given to us to be a blessing to others. Some people call them superpowers, some people call them strengths. I believe they’ve been their God-given gifts, and they’re given to us to be a blessing. So I’m curious, what’s the one or two gifts that you believe you were given? And how does that help how you help bless people today?

Neal:

My gift was very specific, Brett. I’m glad you asked that. So unlike most people that have certain areas that they’re good at, I was extremely good at one area. So when I was 9 or 10, they diagnosed me as Borderline Autistic. I was very quiet and I have a very kind of effusive outgoing personality. I was very quiet. And so they diagnosed me with Borderline Autism. And I went to my dad, who used to be in the Air Force, there was an Air Force hospital and there was a psychiatrist. They spend time with me and they fixed me. So that issue went away. But as they were doing it, they discovered that I had a talent for numbers. So I would see patterns in numbers. And I would talk to the psychiatrists initially they were taken aback by it and then they realized that was actually a gift. And so they helped me develop that gift. They initially, I was afraid of it and I wouldn’t discuss it with anybody. But then they said no, this is a real gift, Neal, you can actually look at a bunch of numbers and tell the patterns amongst them, you have to develop this. So, so I’m, I’m really glad that that autism thing happened because if it hadn’t, that gift would never have developed. So till today, I can look at a spreadsheet and see patterns. It’s almost like Neal reading the matrix. And you know, that’s the best way to describe it, you see the numbers, the green numbers falling in the ears actually reading the matrix. And you can see what’s happening, the same sort of thing happens with me I can, I can tell patterns. So I look at a large amount of data. And I can tell patterns. And as I look at more and more data in the same area, the patterns become more and more discrete. And that’s really been my gift to the real estate industry. I am not a real estate guy, even though I’ve been in real estate full time now for seven-plus years. And part-time for 10 years before that. I’m a technologist applying my technology and data science. That’s why they call me the mad scientist in this area of real estate and there are about 50,000 people following the data science that I publish, it’s all real estate, data science, and really came out of my ability to read numbers and read a very large amount of data and figure out patterns that may not be obvious to others.

Brett:

Beautiful, an amazing gift. I’ve seen your deals, and I’ve seen your webinars, and I see your level of sophistication and also simplicity with it too. It’s not just taking an understanding of numbers, but it’s able to communicate it in a way that’s digestible. And it’s inspiring and actionable especially as it pertains to multifamily investing. So with that being said, what is the most crucial team members that you’ve built? Because I think it’s one of the most encouraging things that I’ve seen you do is expand and scale in a massive way. So tell us about getting out of your own way and delegating because of how smart you are, and how well you do have done things. Walk us through overcoming perhaps in the beginning, when it was tough to scale on. And by the way, how many employees do you have now? How many team members, I mean?

Neal:

We have 29 full-time employees.

Brett:

So tell us the biggest challenge for overcoming and maybe it wasn’t a challenge, but I am assuming it might have been for someone because I know it’s been for me?

Neal:

It absolutely was. I mean, you hit it on the head, right. So I consider myself a fairly bright person. And for folks like us, it’s very difficult to take something that we’re doing and give it to other people. But I was very lucky that I had a mentor, his name is Paul, he and I were running a company for about 14, 15, 16 years. And Paul used to say, Neal, the biggest challenge you’ll ever have is to learn to delegate because you do so many things well that it becomes very difficult for you to let other people do them. So over the years, I made a very conscious effort to become a better delegator. So there was a time when 50% of the books that I was reading were about building structure and delegating and basically doing company building, not company creation, right, that I felt very comfortable with. But actually, how do you take a company to level up to five levels, right? So that became an obsession, a fixation of mine. And one of the things that I discovered out of it, which certainly wasn’t where I was going with it, right just sort of happened. As I studied the area of the scale, it became obvious to me that, especially for real estate, but also for other areas, the one part of the United States does very poorly, and some parts that some companies in the US do this really well was was that they don’t use virtual assistants. And the ones that do use them in an extremely basic fashion, for example, there’s a virtual assistant that was arranging this podcast, right. And that’s a pretty typical thing that virtual assistants do. What I found was that, in places like India and the Philippines, if you created a system, where you found the top 1% of the virtual assistants there, those were really very high-quality people. So I became obsessed with how do I find the top 1% of virtual assistants in any area and use that to scale my business? Now, to be honest, it never means that you don’t hire people in the US. That’s kind of silly. Because what we do is we use the two to one ratio, we found this over seven or eight years of experimenting, we found that we hire two full-time employees in the Philippines. For every one employee, we hire in the US right now. We’re 10 people in the US, and we’re at 19 in the Philippines. Now, this doesn’t include our 150 employees that are at the property. So we don’t consider them to be part of our company because they’re part of the LLC that we created. They still report to us, right? We can hire them, we can fire them, but they’re not part of our company because they’re part of one of our projects. So there are about 150 people there. So these 29 people, what I found was this, that if there was a methodology that I could invent, and I’m known for constantly inventing things and talking about them on the web, you can google my first name and last name, followed by virtual assistants. And you’ll see that I’m presenting and half a dozen conferences about them are that I become very fixated with the 1% rule, I want to get to the 1% of everything, the 1% of cities in the US that our fastest-growing the 1% of properties in the US that are most unoptimized, the 1% of virtual assistants, and the Philippines actually got very lucky, I was able to use technology to get to the 0.1%. So I was able to get to them so if there were 1000 virtual assistants on a platform, I was able to get to the one person that was better than the other 999. And once I did that, I hired as many of them as I could, at this point 19 of them, obviously, there’s a lot of turnovers. So you’re firing and hiring as you go. Even if they’re very bright, there are lots of reasons why they don’t work out, many of them don’t want to work at night. So one of the things that I learned very early on is that you want them to work your hours. So you know, all of our staff work specific eight to eight to five, we don’t allow any flex time. You know, as far as I’m considered. As far as I’m concerned, all of their jobs are flexible. Why? Because Manila traffic is two hours each way. They’re saving four hours a day, by traveling from their living room to their office to do their job. And that’s their flex, right, but otherwise, they work eight to five, and some of them work at property time. So if it’s an East Coast property, and they’re attached to it, they work the time of that property. But that allowed us to grow our business faster than pretty much any company in our space. We’ve grown 50 to 100% year over year. And I’m simplifying it by saying that these people really accelerated because it is the process that you develop of working with these people to elevate them to that level. Yes, our people do things like Podcast booking. But some of the things that our staff in the Philippines is doing are truly mind-boggling. You’d have trouble finding companies doing it here in the US. And we’re doing it with that kind of staff. Now, obviously, they’re acting as force multiplier or force accelerators for our US staff. And so when you know, there are companies where people are like, I wish I there were three of us. But I know the company can afford it. Well, we’ve solved that problem, because there’s always three of us in every one job.

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