From House Flipping to Commercial Real Estate Development | Arvind Cheruku

Issa Hanna (00:00)
it’s always about supply and demand, So that’s the basics of any business, So if there is no demand, putting in supply is not going to make sense. So you need to identify the need, then satisfy the need, that’s business 101. And that’s essentially what we do in commercial real estate. We go into areas where there is already some residential development. There’s like 500 rooftops or 1,000 rooftops.

Issa Hanna (00:55)
Welcome back to another episode of the Real Estate Pros Show. I’m your host, Issa Hanna, and today we have Arvind Cheruku with us. Arvind, welcome to the show.

Arvind Cheruku (01:02)
Thank you Issa for being here.

Issa Hanna (01:04)
Super excited to have you, man. A wealth of knowledge. you’ve made some major waves in the commercial real estate game. and with that, can you kind of give us a rundown first of a day-to-day in your life?

Arvind Cheruku (01:15)
So we’re into commercial real estate development here in Houston. We’ve been in business for about 10 years. So my day to day primarily is dealing with lot of brokers, a lot of investors. We have about 600 investors in our database. So we deal with them quite a bit. Dealing with general contractors, dealing with vendors. So banks, know, the banks are a big part of it. So we end up working with banks a lot for all of our loans. That’s my day to day, I’m with banks, vendors, and general public.

Issa Hanna (01:42)
100%. truly in real estate, when you’re at the top, you’re the controller. So you’re you’re on the phone with the financing, you’re on the phone with the investors, you’re on the phone with the contractors, you’re making sure everything runs smoothly. so I love I love that that’s your day to day. It just shows that you’re on top of your game, you’re ready to go. and I want to rewind the clock a little bit. You told me a cool story when we were talking off camera. about how you got into real estate, right? you come from an IT background and in five, you got into the real estate game. So I’m gonna let you take the floor and tell our viewers that story.

Arvind Cheruku (02:15)
Great, so when I first thought of making an investment, like a true investment outside of the primary home, the first option was either to buy a town hall or invest somewhere or try to see where is the right place for the money to grow. A lot of my friends being from an Indian background, a lot of my friends, their first choice of investment back then was moving all of that money to India and investing there because there was twofold, threefold growth. back then in India. So a lot of my friends moved money there and I followed suit and I went in with them and said, okay, let me do this thing. But I got my hands burned because a lot of times what happens is we don’t worry about the external factors that are beyond our control like conversion rates, tax issues, cross-border tax issues and stuff like that. So that’s where I got my hands burned because we were not factoring in all of that. So my 2X growth that I saw in my capital evaporated and ended up being 1.3x. So that’s when I realized that there is no reason for us to be going out of the country or taking our hard-earned money, US dollars out of the country. If you look hard enough, there’s enough opportunities in our country where we can make 2-3x kind of growth within a 3-5 year span. So that’s when I started getting into multifamily. So the first project that I did in the US and never looked beyond after that was a multifamily apartment complex of 20 units in town in Dallas. So it was a Class C apartment complex built in the 1970s. We did some value add. So these were a lot of entirely paid assets in Dallas back then where you needed a lot of private capital to go in and improve those facilities. then people were able to pay higher rents. Go ahead and make up better facilities. So that’s what we did and that’s how I got into commercial real estate and back in 2011, 2012. After working in the commercial real estate sector, primarily multifamily and repositioning those class-based family properties, those are nothing but flips at the end of the day. It’s flips at a larger scale. You’re not doing house flips, you’re doing a hundred unit apartment flips. So what I realized is I’m not building a company by doing that. I’m just doing a flip and my job ends when the last flip ends. So I didn’t want to be in that situation. I wanted to build a company, have a staff, make sure I have the right legacy built in. So that’s when I switched to commercial real estate development. So that’s how I got started with the commercial real estate development space.

Issa Hanna (04:49)
And I love that story. It’s the natural progression, right? every investor, real estate investor, you start at that single family level, class C, you get you get your foot in the door, you keep climbing, you get into the multifamilies. Now you have a hundred doors under one building, a hundred doors equals a hundred toilets. Eventually that light bulb goes off and you say, hold on. I I can be a commercial guy, do the same stuff, but be a lot more secure in the money and then I did want to bring up something that you said before. One of your strengths, your consistency, which you touched on in your day-to-day, your persuasion, but you also understand what a community needs. So as a commercial real estate developer, why is it important? Can you tell our viewers why it’s so important to have that understanding of what the community needs?

Arvind Cheruku (06:16)
So it’s always about supply and demand, right? So that’s the basics of any business, right? So if there is no demand, putting in supply is not going to make sense. So you need to identify the need, right? I then satisfy the need, right? that’s business 101. And that’s essentially what we do in commercial real estate. We go into areas where there is already some residential development. There’s like 500 rooftops or 1,000 rooftops. There’s enough. density and the one-mile, three-mile, five-mile radius that can support our shopping center, for instance, or our office complex. That’s when you go and build. Because once there’s enough people or enough residences in an area, that’s when they’ll start needing services. They don’t want to drive five miles down the road for their basic services, like a hair salon, or a nail salon, or a grocery store. So that’s how we make sure that we shield ourselves from the market cycles. Because we are looking at a customer base that’s already established. So going in, if you’re doing that, that’s the advantage with being in commercial real estate. You’re always following the development. You’re not trade-blazing at any given time. mean, there are trade-blazers in the sense that if it’s a gas station business. Now, if you look at any new area being developed, the first thing that pops up is the gas station. But those guys are trade-blazing, but not us. Like shopping centers, office complexes, those are the primary products that we develop. And for that, you can be followers and that’s huge, huge impact.

Issa Hanna (07:39)
I love that. so to my to my single family guys, just like you speculate on the home, you run your numbers, you project this, you see what the population density is in the in the area, with commercial, you’re running literally your demographics, you’re you’re saying, okay, what fits in this community of five, ten thousand people, what does this community need? Then you go and you build that. So like you said, it could be either a shopping center, right? You might need a whole bunch of shopping center. the area it needs it. So you would build that. It might have shopping centers. It might not have office condos. It needs office space, right? And one thing I wanna I wanna have you educate our viewers on is you’re not building just offices for rental space also. You’re selling office condos, which is very, very lucrative because you get A nice return on your money. So I’m gonna let you take the floor and explain why that’s so lucrative.

Arvind Cheruku (08:31)
So the office corners that we’re talking about are typically 1200 to 1500 square foot in size. And they’re usually very close to highways and very accessible and in dense neighborhoods. What happens is, especially coming out of COVID, a lot of people build home-based businesses or garage-based businesses. Now they want to grow. They want to grow, but they also want to grow carefully. They don’t want to go and rent 5,000 square foot in the high-rise or mid-rise. They want to be growing slowly. So first thing that they looked at is, can I stay close to my home where I live, but also have the office space when I bring in a customer or a vendor? And can I have a receptionist of some sort so I can start small? So these offices are perfect for those kinds of businesses that are slowly expanding, they’re slowly growing in there and they’re providing services in their neighborhood. And they also need a taxpayer. This is a great avenue for a taxpayer. You can buy a small office as a small business and ride it off. there are some bonus depreciation and other benefits that you can obviously, a tax advisor is the right person to talk to about that. I’m not going to give you advice on that, but this is, it’s a great opportunity for you to consider for tax purposes also. So that’s the reason why a lot of these businesses go for these kind of.

Issa Hanna (09:42)
One hundred percent. If you have an established business and you’re just renting, buying this office condo can definitely get you so many taxes. You get the benefits of owning a property and writing off interest taxes, the whole nine yards. it’s a lot more beneficial. And as a former agent in Chicagoland who sold over 250 transactions, a lot of those transactions weren’t residential. I sold a lot of office space just like that. To doctors, right. So when you go to a doctor’s office, they might own that particular condo in the park. it’s a genius idea. He’s not just building up office space to rent. He’s he’s literally selling it condo by condo. unbelievable, unbelievable knowledge you’re bringing to our game. We usually get single family guys on the show. So I’m loving the commercial knowledge you’re bringing to us right now.

Arvind Cheruku (10:30)
It’s not that hard to transition, right? mean, to transition from single family to multi-family or to office spaces or shopping centers, you only have the right experience in terms of being there on the mortgage, rather than the commercial lending and all of that. It’s a little challenging if you’re starting from scratch, but if you’ve already had enough experience on the single family side, it’s not that hard. The banks see that as experience. It’s all experience in a related field. So it’s not hard for you to transition. A lot of the brokers that sell for us, those office condos, those are all home realtors that have been selling residential. So you’re not trying to deal with a commercial real estate broker that doesn’t want to talk to you or that doesn’t think that you’re big enough for them to waste their time on. You’re not dealing with any of that. You’re still dealing with home brokers that you probably already have contacts or you’re one. So it’s not that hard. At the end of the day, where are we selling? We’re selling on Pepsi. We’re selling on LoopNet. It’s all the same, the usual suspects. Some of them are in Realtor.com and all the other websites as well. So you’re not that far off from your home base, but you’re trying to explore a new product. mean, when the market gets challenging and tough, there’s nothing wrong with exploring other avenues. And this is one of those avenues where you’re actually, I spend a lot of time educating my customers in terms of what tax benefits they can get and what is bonus decision. I have a lot of these long sessions. to explain to them what are the benefits they can get. And a lot of times people come in thinking, I’m not going to buy anything from this guy. And by the time our one hour session is done, they’re like, is there any other place I’m buying this? But is there any other location that you’re building at? So a lot of times the onus is on you as the person that decided to sell the product to educate your customer. And at end of that education, educated session, if they’re not buying it, that’s fine. You cannot expect 50 or more than 50 % of the people to buy. But at least you’ve tried, right? And then you’re honing your skills too, in terms of selling and sales. So there’s nothing wrong with transitioning from your residential and home sales to office, because that’s a good transition product to eventually end up in commercial real estate. This is a great stepping stone.

Issa Hanna (12:40)
Definitely. And you’re opening yourself up to multiple avenues, multiple avatars to come rent from you or buy from you as opposed to the house flip is one lane, right? if you’re flipping the house, it’s going to go to a home buyer, a family, buy and hold, it’s one lane. You’ve got residential people, tenants, they’re going to come rent from you. So you might be able to do the short-term rental, midterm rental. But the upside of this commercial is you’re opening up to multiple kinds of businesses. that have the money to come in and rent. so unbelievable to get into the commercial real estate. The pivot is not that far off like like you said, Arvind, unbelievable knowledge you’re bringing to our investors. I hope some of the guys that are watching this right now are going to get some inspiration and say, what, I’m gonna build my first commercial unit. I want to pivot a little bit. You’ve told me some exciting news. You got something major cooking up. So Can you give our viewers about this huge thing that you’ve got cooking up?

Arvind Cheruku (13:35)
So we acquired a 23 acre piece of land here in Houston. It’s in a town called Fulshear, which is about 20 minutes from west of downtown Houston. We are on what’s called West Park Tollway. We are building a 125,000 square foot commercial lifestyle center. We have a five acre pond and surrounding the pond is 44 offices, office condos. Out of the 44 office condos, we are yet to deliver the first phase, but we’ve already sold 24 of those 44 offices. And we’re delivering the first set of offices this December. And that pond that I’m talking about, the five-acre pond, surrounded by a half-mile walking trail. And in that pond, we are doing a one-of-a-kind feature. We are building what’s called a water screen. So it’s going to be a screen of water, like a G-shaped water screen. And on that water screen, we’re projecting a movie or a video clip, kind of like what you saw in W in Vegas or, Bellagio found a of a feature. So it’s going to be played for five minutes every half hour in the evenings. And that’s going to be the first of its time in the US. So we are proud to be bringing that to the US. We are looking to launch that sometime in the first or second quarter of next year. So we will be sharing the details with Vitesa and his followers as well so you guys can see what kind of a unique feature that they’re bringing to the Midwest.

Issa Hanna (14:53)
Man, how exciting, how revolutionary, right? So everybody knows stress, right? Office workers are stressed out. He’s building a lifestyle park for these for these office workers that hey, you want to take a break, you have something beautiful to look at. You have walking trails while you’re at work, people that come to you if they’re waiting, if it’s a doctor’s office, for example, and you’re waiting. You’ve got just such a beautiful space to do it at. And that’s why you’ve already sold. almost fifty percent of them before you even launched it. truly, truly revolutionary, unbelievable. I’m based out of Austin, Texas. So Texas is on the forefront of these type of projects. We’re talking to one of the guys that’s bringing this revolutionary stuff to this stage. So unbelievable. and now if people wanted to get a hold of you, if I’m gonna give you the floor, if they wanted to get a hold of you, get involved with you. How could they reach you?

Arvind Cheruku (15:42)
So our website is www.fulshearcentral.com. F-U-L-S-H-E-A-R, central C-E-N-T-R-A-L.com. You can reach me at [email protected]. anything that you need in terms of advice or mentorship. Whatever you guys need, I’m open to it. I’m known to be supporting the community. I would love to throw that option open to all of your listeners as well. You run a great podcast here and I’m so excited and blessed to be part of your podcast and I’m looking forward to listening to whatever we achieve.

Issa Hanna (16:27)
Arvind, it’s a true honor to have you on. Like I said, one of the premier professionals in the state of Texas, in the commercial real estate space, has revolutionary stuff going, a great mind for it, personable, holds himself to the utmost integrity. So guys, make sure you check him out. Any questions, any mentorship you may need. This is the guy to talk to. I want to close this out with a piece of advice from you. A lot of our guys are young, they’re just starting out. maybe new agents or may maybe new professionals, investors in the space, right? Our business depends on one of the most important things and that’s your network, right? Building relationships. So if you had to give these young guys one piece of advice on growing their network, what piece of advice would it be?

Arvind Cheruku (17:46)
Don’t hesitate to talk. Don’t hesitate to attend events. If you’re invited to an event or if you’re just bored sitting home, instead of watching a boring football game when you already know the outcome, I just go venture out and don’t waste time in a bar. Go look up ChatGPT or Google, what’s the nearest real estate event happening next to me or close to me, right? And just go hang out. Hang out and you just can hang out and ask people questions. You say, man, you’re driving a Lambo. How did you make your money? Nice car, right? Nobody I’ve known has ever hesitated to answer a question like that to a novice or even a kid. A high school kid comes up and talks to one of my millionaire friends and nobody ever I’ve seen hesitated to answer those kinds of questions. The problem is people don’t ask. I’ve seen so many situations where they’re very hesitant. this guy must be rich. driving this car or wearing this watch. So he must be rich and he might not get two roots for what I’m talking about. So let me just not talk to them, right? Do not hesitate to talk. Only when you talk and open yourself up, that’s when you’ll open up opportunities for yourself. What’s the worst that you can get, right? And you can say no, or just walk away. That’s fine, right? What do you have to lose? But look at how much you can gain if you just listen to one guy who’s successful, at least. who in your perception is successful, right? Some people may not end up being successful, they’re just showing off. That’s okay. At least 50 % of the time you’re going to be successful, you’re going to get something useful out of the combination. So do not hesitate to talk and volunteer your time if you can. Just say, hey man, I saw that you’re working hard and you’re just here at a booth in a real estate convention. You’re working so hard. don’t I don’t see any help. can I stand stand next to you and help? No, just distributing flyers. No one’s going to say no, and then they’ll feel like hey, this kid has helped me and maybe I should do something in return. Then he might say, hey, no, I don’t have a job, but if you’re looking for a job or if you want to do something part time, I know this friend. This guy is who’s looking, hey, maybe I’ll create something for you because now I feel obligated. Hey, this guy was so nice. He came. He wanted you to help me. Let me let me. try to see if I can figure something out for this team. So those are the kinds of things where you need to volunteer your time. You cannot say, I got to go eat my breakfast. It’s time for my breakfast. I’m not going to talk to you because I have my own things going on. You have to prioritize things in life and you have to volunteer. Don’t hesitate to volunteer. Keep working, keep engaging in combinations, keep networking with people, keep talking, open up. It’s not like you’re walking up to a supermodel and asking for a date. It’s just another guy on the street, right? mean, a rich guy, poor guy doesn’t matter. It’s just another guy on the street. Go talk.

Issa Hanna (20:34)
Amazing. golden advice. guys, every person that I bring on the show, I ask them that question, and they echo the same words, verbatim almost. but Arvind just broke it down to you step by step. He explained why you need to do this. Don’t be a wallflower, go out there, ask questions. A lot of times, a successful person they’re flattered when you come up to them and you ask them, Hey, teach me, how did you make your money? And also, it’s not what they can do for you in the beginning, right? It’s what you could do for them. Like Arvind said, help them. stand next to them. They’re gonna see some value in you. They’re gonna see that you’re hungry and they will give you a shot. truly unbelievable. And even if they don’t give you a job, they’re gonna give you knowledge. And knowledge in this game can propel you to millions and generational wealth. truly, truly inspirational. Golden knowledge you brought to the show, Arvind. Thank you so much for coming on. I want to invite you back on when you guys launch, when you’re officially launched with with this new project, if you’ll have us.

Arvind Cheruku (21:33)
So I’d love to have you at the grand opening,

Issa Hanna (21:36)
I would love to be there. I’ll stay in touch. I would love to be there. Like I said, it’s it’s a truly revolutionary project. I would love to see it in person when you guys when you guys launch. Arvind, thank you so much for coming on the show. It was a true honor.

Arvind Cheruku (21:49)
Thank you, pleasure is mine.

Issa Hanna (21:50)
my viewers at home. If you guys enjoyed my conversation and want to see more like it, make sure to hit like and subscribe. I talk to people every day that can bring us different knowledge on every aspect of real estate investing. Until next time. The Real Estate Pros are out.