Data Beats Dreams: How Smart Real Estate Investors Avoid Costly Deal Mistakes

Stacy Patel (00:00)
And when we go to build a project or let’s say look at a flip, we have reverse engineered our process to go find a buyer first. We have partnered with realtors in the area and we are constantly having conversations and talking to them about what is their buyer pool looking for. And that are the projects that we go after. So we

⁓ work with them in consort to meet their buyer’s needs before we pick up a project. So whenever we have a ground up construction or a fix and flip, we pretty much have a contract almost before that we acquire it to make sure that we have a really strong exit.

Scott Bursey (02:10)
Welcome back to the Real Estate Pros podcast. I’m your host, Scott Bursey. And on this show, we focus on the actionable strategies required to move beyond single deals and build a truly scalable real estate enterprise. Today, we have an expert joining us to deep dive into that discipline. Stacy Patel of Prospera, a firm dedicated to helping successful investors structure their businesses for lasting success and wealth. Stacy, welcome to the show.

Stacy Patel (02:41)
Hi Scott, thanks so much for having me. really excited to add value to your listeners and see what magic we can cook up together.

Scott Bursey (02:48)
It is a pleasure

to have you here. And before we dive into the market dynamics, please give our audience the story of your journey. How did you first get into real estate?

Stacy Patel (03:01)
Yeah, so it was actually by accident when I was around 20 or 21 years old. I learned from life experience that you could actually buy land and sell it for more than you bought it for. And it really opened my eyes up. I didn’t have any formal training at that time. And this was in Arizona in the ⁓ mid 90s. So quite a long time ago when that market was just starting to really stretch, stretch beyond its little town and kind of just went from there.

and did some fix and flips and owned some properties after that and then learned about the world of private money lending. And that journey has led me here where I have a partner and we are our own investors and also own a construction company. So long journey, but fraught with a lot of amazing experiences.

Scott Bursey (03:52)
Yes, and

a fruitful journey to say the least. Stacy, I’ve heard you referred to as the dream killer, as that’s a huge compliment to your underwriting. So I’m curious, I gotta ask you, what is the one red flag you’re seeing in real estate deals right now that most investors are completely overlooking?

Stacy Patel (04:21)
I think that…

As investors, we can caught up on the idea of a dream and instead of data. And if you focus on data, you focus on numbers, you focus on market pivots and build in conservative valuation for your future, then you will be less likely to make a costly mistake. If you use your ideology to focus on hopes and dreams and wants and the best outcomes, I think that unfortunately that is not a strategy that’s going to be long, long

successful. It might last a deal or two, but inevitably the market shifts and if you build in conservative numbers then I think that you’ll be able to to make it on top. And sometimes I tell people if you make it out alive and ⁓ don’t lose money and lose you know learn a lot then the University of Real Estate you did pretty good.

Scott Bursey (06:01)
You most certainly did. So you’re playing the long game and I can appreciate that. That makes total sense. It seems like the market right now is shifting from rewarding hope and appreciation to strictly rewarding execution and discipline. I’ve noticed that the safety net of low interest rates is gone. It’s vanishing. So if underwriting doesn’t account for, you know, 10 to 15 % margin,

of air in the rehab or the carry cost, it’s not really a deal. It’s just a gamble. Interesting to know. How are you advising your capital partners to structure their exit from these tighter deals if the first plan hits ⁓ a snag, Stacy?

Stacy Patel (06:53)
Yeah, I mean, I think that the way that I’ve always been approaching this and taught by people that are way smarter and way, way ahead of me is you make money on the purchase. The purchase is how you create positive execution for your project. So step one, have multiple exits. That’s a really important strategy to make sure that your numbers can fit this. So if you are looking for a flip and the market shifts 20 % down or 20 points down,

What is your margin ⁓ of at least holding this property to make your mortgage? Can you rent it? Can you midterm rent it? Can you pivot it? Can you rent it to ⁓ an institution, nonprofit? What can you do with this property to make sure that you can hold it? It might be long term appreciation. You might use a tax strategy to do a cost segregation. It’s really important to have a complete picture of all of your exits ⁓ and make sure that you can actually eat more than ramen noodles while you’re going

this journey. I think it’s really important to acknowledge that sometimes we do make mistakes in our numbers and it’s not the mistake that’s the problem, it’s the how do we recover and not go into panic mode. And I think as capital partners presenting all of the options to them really well thought out plans and numbers, plan for the worst and hope for neutrality and I think for the best it’s a long-term play just like you were saying.

Scott Bursey (08:21)
Execution over hope. I love it. Where do you see the biggest market opportunity right now for investors looking to double down on growth perhaps?

Stacy Patel (08:35)
I mean, I think that that’s kind of a question in terms of scalability, that it’s not necessarily a market shift. I think that the most important thing when we’re looking for be able to have growth is ⁓ to really acknowledge the shiny object syndrome. Shiny object syndrome is, I can make money in this or this or this. Focusing on one or two strategies is really going to be the key to be able to conquer your own backyard, to make sure you have very, very strong operations and also that you can

and out of the box thinker. Like I was saying, if you have a project in which is not looking like your initial outcome is going to be the most optimal, how do you think outside of the box? How do you reach into your network for help? I think that instead of actually looking at market shifts, we have to look at mindset shifts and that’s more important for growth and strategy. And then also ⁓ scalability. If you’re trying to scale the idea that I was always told was, and that I try to practice as much as I can is if you can’t

scale it as a process, you shouldn’t be doing it right now. So if your time is worth $500 an hour, what are you doing right now? That’s worth that $500 an hour. And if you are not in that mindset, then the idea to scale is gonna be really difficult.

Scott Bursey (09:50)
Absolutely, being in the right mindset. That’s powerful insight right there. Curious, Stacy, what’s a current business weakness or challenge that maybe you’re still trying to figure out?

Stacy Patel (10:39)
Yeah, I mean, I think that there’s a lot of those, vulnerable speaking. For us right now, it’s team members, onboarding the correct team members. We are scaling, so we are adding people to help us grow together. So it’s having them bring in the correct mindset in our mission. We are a faith-based company. We’re a family company to make sure that people are aligning with that. So it’s a good long-term fit, what we can offer them and also what they can offer us and making sure that we

are onboarding with people that are willing to grow with us and understand our mission. Right now, is where we are in terms of a challenge that we’re having. I always say butts in seats. I need butts in seats ⁓ just as much as they need me. So we’re trying to really fill the holes in our system and process to make sure that we have the right scalability model. We have a bookkeeper. We have an accountant. We have a tax strategist. We have an operations manager. We have an executioner, we call them.

on the ground. So all of these roles definitely takes money and time. How are you going to get there? That’s the challenge.

Scott Bursey (11:47)
That mission concept I find fascinating. How big is your team?

Stacy Patel (11:55)
Yeah, well, we have an in-house crew of about 10 people that work on our construction side. We have a project manager and then my business partner. He is the boots on the ground. And on my side, I think on the financial admin side, we have a bookkeeper, we have a CPA and I have an operations manager and me. So we are definitely in that growth period where we need to add more team members. But I also have to make sure that I feel really confident that I can meet their expectations. Our goals and our

in our company is that as the owners of the company, we eat last. So we make sure that we feed the people that help support us. And like I said, if we eat ramen noodles and they eat steak, that’s okay with me. That’s just the way it is. We are asking them to take a risk to believe in us as our leadership and they get the benefits first. That’s just the way that we roll.

Scott Bursey (12:46)
And I

think our audience can really appreciate that stance. Stacy, there’s something that’s been on my mind. With the recent volatility in the energy sector and the shifting headlines out of the Middle East, I’m curious, from the seat at Prospero, what major market risk or threat are you watching most closely?

Stacy Patel (13:13)
I mean…

I think that any real estate investor who’s walking into this market is going to look at, for me at least, I would always look at the price of goods and that’s really going to impact your bottom line. Making sure that you are adding in more contingency when you build your numbers. Now, the issue is that when you’re mid-project and things start to escalate, how do you pivot to make sure that you can still meet these contingency requirements and also be with

your budget and that’s where those multiple exit strategies come into play but also a conservative purchase. The way that you purchase your product and your exit is definitely the way that you’re going to see. So if you do have a market shift in energy resources you still have a large equity play at the end. So if you’re looking for 20 % you still can you know you can drop 10 points you’re still going to come out maybe not as well as you thought but at least you’ll be in you’ll be in the positive. So definitely building the numbers.

Scott Bursey (14:14)
Excellent perspective. And if you could walk us through, where do you see the biggest market opportunity right now for investors that might be looking to double down on growth?

Stacy Patel (14:27)
I see a very large interest recently in pad split and co-living. And I definitely want to bring out a word of exploratory caution, meaning when trends start to really come into play, because the pioneers of these strategies really did a lot of the heavy lifting. When we are really seeing it in the mainstream investor pool really be

I want to say cautious. Do your due diligence. Do your research. Don’t just jump on a trend because you see what other people are doing and that, you know, everybody has a success story. If I have 150 doors, well, they didn’t get there overnight. They got there through grit and through the pioneering of a new process. So regardless of your market shift of what you’re looking for, there’s always going to be room to grow. Right now, a lot of commercial applications in this in this market are definitely a lot of opportunities.

to a lot of five-year notes that are becoming due. A lot of operators had the optimism but they didn’t run their projects correctly so there is a lot of commercial opportunity I see but that takes ⁓ skill, equity and a team. So if you don’t have all three, go get those.

Scott Bursey (16:25)
Absolutely,

that gives us great context and that’s the difference between chasing a deal and building a portfolio Curious what major market risk or threat are you advising your clients to watch most closely right now?

Stacy Patel (16:47)
I think that the softening of the fix and flip model is something definitely to make sure that you build your margins properly.

And when we go to build a project or let’s say look at a flip, we have reverse engineered our process to go find a buyer first. We have partnered with realtors in the area and we are constantly having conversations and talking to them about what is their buyer pool looking for. And that are the projects that we go after. So we

⁓ work with them in consort to meet their buyer’s needs before we pick up a project. So whenever we have a ground up construction or a fix and flip, we pretty much have a contract almost before that we acquire it to make sure that we have a really strong exit.

So I think that’s a really great strategy to kind of reverse engineer instead of putting it on the market and really praying to the real estate gods above that we can sell it, you know, partner with the experts in your area. Realtors are incredible value if you find a team.

and you know, just look for those.

Scott Bursey (17:50)
Solid,

very solid. Stacy, we’ve covered so much about discipline, execution, and navigating risk. If you could leave our audience with a single overarching principle to building a truly lasting, real estate enterprise, what would that principle be?

Stacy Patel (18:13)
I think I have three words that we live by at Prospera. ⁓ Team and collaboration. We were speaking off camera a little bit about how the word competition doesn’t really follow into our mission. And I look at all opportunities with all people in the industry as a collaborative effort. So teamwork and collaboration over competition, I think, will get you very far. Pivot is the other word that we pretty much live and die by, that when we come to

an opportunity that looks different than the outcome. are very pivotable. And then also focus. ⁓ Focus on one strategy, one asset class. Conquer that and be an expert at that wherever you are. And then take on the next asset class. So you have ⁓ an idea and mindset of success. And failure is success as well because it is an amazing teacher.

Scott Bursey (19:08)
That’s an incredible, valuable takeaway. Stacy, thank you for sharing your deep expertise with the Real Estate Pros community. For our listeners who want to follow your work, connect with you or learn more about your insights. What is the best way for them to reach out?

Stacy Patel (19:27)
We don’t actually have a very large social media presence. I am on Facebook and you can look for me just with my name on Prospera as well. And we’re very much more face-lookers than Facebookers. So if you’re in the Richmond community, please reach out to me at [email protected] and we’ll be happy to meet with you anytime.

Scott Bursey (19:48)
Awesome.

Thank you for being on the show, Stacy.