From House Hacking to Real Estate Fund Manager – Bobby Sharma’s Journey

Bobby (00:00)

the challenges I see are still the interest rates are too high and it’s really hard to cash flow these properties.

Now, the opportunities that I see is that since 2000,

21 onwards, there was a lot of operators that brought properties with floating rate, interest rates, and it’s starting to hurt them. And so I see a lot of distressed assets that are coming to the market.

if the syndicator or the operator knows where to go find them, then there’s an opportunity to pick up some assets, get a loan on it, maybe and hope that in, know, three to five years, the interest rates will drop and maybe do a refinance at that time.

Erika (02:27)

Hey everyone, welcome to the Real Estate Pro Show. I’m your host, Erika, and today I’m thrilled to be joined by Bobby Sharma. He’s making serious moves in the real estate world. Bobby, it’s awesome to have you on the show today.

Bobby (02:42)

What a pleasure, Erika. So nice to be on your podcast. I appreciate you reaching out and here we are.

Erika (02:50)

Yeah, so let’s jump on in for our listeners who don’t know your world yet. Tell us about your journey. How did you get started in real estate?

Bobby (03:00)

Absolutely. So a quick tour of my life ⁓ came to the United States as a student to I was studying computer science. ⁓ So when I graduated, I got a job in Los Angeles area and I was renting a room. Los Angeles is expensive, so I couldn’t afford a full apartment, but I found I was renting a room. that person at that time, this is late 1980s, was

What’s well known now, back then it was not well known. The term was house hacking, right? He was house hacking and I, and so what happened was I was happy. was, there was nothing wrong with it. Everything was cool. But one day I came home and there was a, had put a little wooden curtain in the living room and he was renting out the living room.

And I’m like, wait a minute, you got a couple, ⁓ a two students, ⁓ a couple that were also, so was like, ⁓ you know, it was a little bit too much. So that weekend, I happened to see a for sale sign. I walked into the house, not knowing whether I could buy house or not, but ⁓ I talked to the realtor. said, listen, I’m here.

Of course I’m here legally, I’m on a work permit, ⁓ but I have a job, but I don’t have a green card, I’m not a citizen. ⁓ So she goes, you know, I don’t know if you can buy, but let me check with my broker, I’ll get back to you tomorrow. She, like literally 24 hours, 22 hours later, she called me, she goes, you know what, I talked to my broker, as long as you are here legally,

and you have ⁓ a ⁓ pay stub and you have some credit score, ⁓ you can buy a house. I’m like, okay, okay, let me, so I was 24.

So I ended up ⁓ copying what this gentleman was doing, except I did not put people in the living room. I got two, I stayed in the master bedroom ⁓ and then I got two roommates. One was a plumber, the other guy was an x-ray technician.

and their rent covered my mortgage. So I was almost living for free. So that happened, ended up selling that house, moving up to Northern California and then ending up buying a house that happened to have an in-law unit that was built not very nicely, so I hired a handyman and a contractor. They fixed it up, made it really nice, a little kitchenette. I think it was all

probably done without permits, but I ended up renting out the in-law. And again, there was a little bit of a housing crisis back then. So it was easy. You put an ad on Craigslist on Friday and by Saturday it’s rented out. It was very, very easy to rent out. A little different nowadays. So that in-law unit,

also helped me kind of subsidize my mortgage and so on. But by that time I was kind of hooked on real estate. I was always looking for other deals, but yeah, that’s kind of my real estate start.

Erika (07:14)

Then I know that you’re also in the lending space now. So talk about that journey and how you ended up there too.

Bobby (07:23)

Yeah, so I did. I did. ⁓ So ⁓ I did partner with a GC ⁓ in Oakland ⁓ to do a flip and I put up all the capital and he he did all the labor and we we flipped a Victorian near Lake Merritt. And ⁓ in the end, the profit was nowhere near.

what I was thinking it was going to be because of the usual overruns in rehabs and so on. And I went back, I said, listen, you know, ⁓ I don’t want to do flips anymore. It’s a lot of stress and the profit, the market was not like what it was later now, or, you know, it was a little bit softer. So, and then ⁓

in the San Francisco Bay area, my only other sort of claim to fame is that I do run the largest real estate meetup in the San Francisco Bay area. I’ve got about 5,000 members. And back then it was only a couple of hundred members. ⁓ One of the members came to me said, hey, I’m about to flip a house. Do you know anybody who can be a private money lender? And I said, what kind of house? He explained, you know, and

So I reached out to a friend of mine who was an active private money lender and I talked to him and he goes, yeah, this sounds like a reasonable property you can lend to him. So I started doing small private money loans and then long story short ended up forming a fund where we do private money loans for rehabbers but we also invest in apartments, office space.

It’s a diversified fund. ⁓ So we invest in a lot of different real estate assets.

Erika (09:26)

With what’s going on in the market today, what challenges and opportunities do you see in where you’re operating?

Bobby (09:35)

Well,

the challenges I see are still the interest rates are too high and it’s really hard to cash flow these properties. ⁓ And the rent increases are not no other than very specific markets. The rent increases are not really as ⁓ easy as what they’re claiming.

there’s a lot of competition in the market for housing. ⁓ So interest rates are a challenge. ⁓ Lenders are a lot more conservative. ⁓ So as long as there’s that problem, it’s harder to find properties on the retail market that are gonna cashflow.

Now, the opportunities that I see is that since 2000,

21 onwards, there was a lot of operators that brought properties with floating rate, interest rates, and it’s starting to hurt them. And so I see a lot of distressed assets that are coming to the market. It’s not as widespread as like in 2008 or 2009.

but it’s there. And if you know, if the syndicator or the operator knows where to go find them, then there’s an opportunity to pick up some assets, get a loan on it, maybe and hope that in, know, three to five years, the interest rates will drop and maybe do a refinance at that time. The rates should drop.

⁓ I think the feds have been…

very stubborn about keeping the interest rates, but there is also inflation, so I don’t really blame them, but there’s a lot of inflation. All you have to do is go to your favorite restaurant and you know there’s a lot of inflation. But yeah, I think there is opportunity in the market for distressed assets, even in the Sun Belt.

Up in your neck of the woods, lot of distressed assets in Minnesota, Michigan, ⁓ in that area, Ohio, ⁓ people are still picking up some really good properties that are ⁓ from operators that are either in negative cashflow or they’re just not able to operate those properties anymore. So I see that a lot.

Erika (12:57)

with all your years in the game I’m sure you have a story or two you know maybe a deal went sideways or you had to completely pivot what you were doing can you share one of those moments along your real estate journey

Bobby (13:15)

Yeah, there’s a lot of those. ⁓

Erika (13:17)

Yeah.

Bobby (13:18)

The scary ones are…

Section 8 housing, workforce housing, on paper they seem like very attractive. know, you buy a property in St. Louis for $35,000 and you’re getting $800, $900 in rent. Unfortunately, it never really works out that way. It’s very, very hard to manage those properties.

the maintenance and they’re usually older properties. So they need a lot of work. somebody is listening and they wanna be in that workforce housing or section eight type of properties, just be very careful. Just make sure you do your homework on the vouchers and the inspections and how the government works. And then the HUD.

is talking about new regulations in that market as well, which is good for the taxpayers. They’re gonna make it a little bit harder to receive Section 8 vouchers if you’re able-bodied and able to work. You shouldn’t be getting vouchers. So I don’t know what that’s gonna do to that specific niche in the market. As far as, you know,

the lessons that I’ve learned is don’t take if a sponsor is reaching out to you and they have this really slick website and they have a really slick presentation and they dress well, they look good, they smell good, they’re nice people don’t fall for that ⁓ it’s gonna hurt ⁓

If you don’t do your homework on the due diligence and the underwriting of the property, the market, the operator, the loan, it’s gonna be very challenging. So just be careful about that.

Erika (16:08)

with your experience, if you were to start in real estate now, what would you do differently?

Bobby (16:15)

You know, I used to believe in flipping homes a lot and I realized that buy and hold is a much better strategy if you can pull it off. You get rich slowly, whereas flipping your, ⁓ all the homes that I flipped, you know, multiple years ago, I kind of wish I still had them, right? I wish I’d figured out how to keep them and… ⁓

because they have appreciated a lot. ⁓ So yeah, try to do, but sometimes I understand people have to flip to generate some money because they need to live on it or they need to build their bank. So I totally get it. But if I had to start all over again, I would pick really good markets, like really good markets where there’s job growth, there’s high income ⁓ people.

⁓ And that’s where I would buy, even though it’s expensive, would buy in all the desirable areas.

Erika (17:24)

to buying in a desirable area, is there a criteria that you use so you have success with that?

Bobby (17:32)

Yeah, yeah. So ⁓ job growth is very important. ⁓ And median income ⁓ is critical. Low crime rates. People look at school district. I don’t really look at that added that much, but. ⁓ High income. High demand. Those markets have been around forever.

Everybody is going to want to live there. ⁓

Going back, I would never touch workforce housing. If I had the choice, I would stick to, you know, the high quality neighborhoods and high quality homes, even though they may not cash flow as well. ⁓ So, you know, I’ve taken my beating on workforce housing, unfortunately.

Erika (18:29)

on this podcast we really value relationships and as you know that’s you know the backbone of ⁓ real estate for you have there been any relationships or networking groups that have been a game-changer for you when it comes to leveling up?

Bobby (18:46)

Yeah, a lot. You know, I’m a big believer in networking. So, Erika, you know, as we were talking earlier, I did build back when real estate investing was not as much in vogue and in demand as it is now. Back in 2009, 10, there was a lot of, you know, they called them strategic defaults at that time, and it was all doom and gloom.

Luckily, I started a meetup group because I used to go to other people’s meetups, but they were like an hour away. I was living on the East Bay and I would have to go to San Francisco or even further or go down to San Jose, fight the traffic. So I started, there was no meetups in my area. So I started a meetup. It’s fortunately become the largest meetup in San Francisco. I’ve got about five, 6,000 members.

And at any event I used to get about 180 to 200 people to show up. But I was always a big believer in networking at other people’s events as well. And ⁓ I was not as intentional about monetizing it. I was just trying to build a community of like-minded people. But ⁓ going to other people’s masterminds, going to getting some kind of a mentorship.

I did take this one mentorship, which paid off really well. They told me some markets to invest in and I did, and those markets did really well, even though at that time, it’s like, what? Why would you even consider those markets? There are so many foreclosures in that area, but then they pointed out some statistics that…

⁓ So I gambled on that a little bit and, you know, went in and invested, but that was because of being in this mastermind mentorship program where I learned some of these things. I wish I had more time to go to more masterminds and mentorships and do more networking. But networking is critical. ⁓ But here’s what I’ll say, Erika, if you have the time. ⁓

There are good people at those meetups and there are ⁓ not so good people at those meetups. And you can’t tell them apart because like I was saying, they dress well, they talk well, they smell well, you know, and they smell good. But we don’t know their intentions. We don’t know ⁓ or that they are… ⁓

not up to the task. They’re not ⁓ experienced enough. They’re not, they have a desire to become experienced and successful, but at the cost of somebody else. And I learned that the hard way. ⁓ so there’s a lot of people doing OPM. All the gurus teach OPM and somebody is going to be the victim of that OPM mindset.

And now that I know what I know, I’d warn people to be extra cautious about who they do business with in the future.

Erika (22:20)

Yeah, absolutely. Speaking of the future, Bobby, what do you have on the horizon when it comes to real estate or lending?

Bobby (22:30)

Yeah, so I’m getting up there in age, so don’t need to acquire any more real estate. I’m fine with what I have. Just maintaining what I have. 80 % is doing okay, 20 % is not doing okay, so I got to spend my energy, 80 % of my energy on that, 20 % to turn it around. And then…

And then the rest is going to be on, you know, finding people like you and ⁓ that have the same mindset, that have the same goals about protecting their assets and protecting their family’s future. I am worried about AI. The more I read, the more I experience it, the more I play with it. I think there’s a massive disruption that a lot of us are not going to be prepared for.

So I’m looking at maybe forming a mastermind to determine how does all this affect real estate? How do we thrive in this changing market? And what do we need to do to protect what we have in this changing drastic? This is not like the internet. This is much faster. And I think the government’s unprepared. A lot of people are unprepared.

⁓ So those are the things that I’m focusing on building a little ⁓ community around that.

Erika (24:07)

Before we wrap up, Bobby, if someone wants to reach out, connect, whether it has to do with investing, lending, or your network, what’s the best way for them to reach you?

Bobby (24:19)

Yeah, you bet. my best email is bobby at bettercapitalfund.com. So bobby at bettercapitalfund.com. But I’m on social media, not on TikTok, but yeah, but ⁓ I don’t know how to dance, but ⁓ I’m on LinkedIn, I’m on Facebook. I’m on, yeah, yeah. But yeah, those are the two that I’m actively on.

Erika (24:46)

Well, thanks, Bobby, for sharing your time, your story, and all your insights with us today.

Bobby (24:52)

Thank you, Erika a pleasure.