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Show Summary
In this conversation, Lukas Swid discusses the essential strategies for attracting investment in startups. He emphasizes the importance of not appearing desperate for funds, showcasing a strong product, and building credibility with potential investors. Lukas outlines the need for thorough preparation and presentation to demonstrate demand and capability, as well as the significance of location in attracting investment.
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Investor Fuel Show Transcript:
Lukas Swid (00:00)
So I always show them and I disclose my finances, even tax return if necessary, that I have what it takes. I have money allocated to finish that project no matter what. Okay?So you are safe and then I show also contingencies. I show what it goes wrong. Okay, so before I accept any dime from anybody I want to make sure that I have already at least 40 % of the units sold at least that because the 40 % of the units Will cover the entire cost of the building You cover everything so
Dylan Silver (00:29)
Hmm.Wow.
Yeah.
Lukas Swid (00:40)
If itis already have contracts for 40%, it will cover because the rest goes into taxes, marketing, real estate commission, permits, legal. About 20 % of the entire expenses for a building goes into those little things that you don’t think about.
Dylan Silver (02:31)
Hey folks, welcome back to the show. Today’s guest is an investor based in New York investing internationally in Brazilian real estate in really large villas, condos, and housing and really addressing the shortage of housing out in Brazil. Please welcome Lukas Swid. Lukas, welcome to the show.Lukas Swid (02:53)
Thank you, Dylan. Pleasure to be here.Dylan Silver (02:55)
I always like to start off at the top of the show by asking folks how they got into real estate, but you’re in a particular niche that probably not a whole lot of US-based real estate investors will venture into, which is international real estate, and then addressing housing shortages internationally. How did you get into that space?Lukas Swid (03:15)
Yeah, I’m a serial entrepreneur. I’ve founded a lot of businesses and I’ve done businesses in 29 countries and counting. And I was driven by a demand that was unmet.And even though it was met somehow, it was not really nicely done. The products being offered weren’t great. So I moved by demand. I tried to identify a market where there is a demand for something and that’s where I go laser focused on.
Dylan Silver (03:45)
You mentioned before hopping onto the podcast here that there’s really a range of asset classes that you will be looking at building and have built in Brazil from larger homes to condos, townhomes. When you were doing your first project out in Brazil, what was the first deal like?Lukas Swid (04:04)
Yeah, I didn’t want to go into real estate by flipping homes. I wanted to be a real estate developer, even though I didn’t know anything at all about real estate. I didn’t know anything at all about construction. I didn’t know anything at all about the whole process, but I knew that there was a demand for housing.And that’s where I started and did a little research. I validated the information that I was given. And then I decided to go slow and small. I picked a small land lot and I built a small 10 unit condo.
small apartment building and I figured if it goes badly it’s not too much to lose and it’s an experience. I learned something. It was a good way to validate what I was told but also if I was able to do it the right way, correctly, if I was able to manage that risk. So I did that. It was a small, small place. I did six months of studying, researching, making sure that I knew what I didn’t know and I hired
hired people to fulfill those roles. My experience has been in managing people, managing P &Ls, not in construction or real estate development. So I hired a part-time engineer, a part-time architect, an interior designer, a site manager, and we went for it. Very small, but I was surprised because within about two months within construction, it was sold out.
completely sold out.
Dylan Silver (06:24)
So what was the timeline for, let’s say from hiring the contractors to completion of the project? I’m imagining it wasn’t two months. What was the total timeline to complete that first deal?Lukas Swid (06:34)
Yeah,to hire everybody, a lot of vetting. When you go into a place like Brazil or India or Indonesia and a lot of places that things are a bit different. They’re very bureaucratic and whatever that is bureaucracy, there is corruption. Everybody claims to know everything there is to know about everything. So you gotta make sure you hire the right people. Between hiring hiring process, selecting the right team and completing construction was 18 months.
Dylan Silver (07:01)
You know, this is interesting. I live in a Latin country. I live in the Dominican Republic. And one of the things I’ve noticed about real estate out here that doesn’t exist as much in the states, and I believe you can attest to this as well, Lukas, is there will be apartment complexes, condos that may take an 18-month, two-year time frame to build, but they’ll sell out very quickly. And it’s very common.In the US, I think people have maybe a level of trepidation, of concern about buying a apartment before it’s built. But it’s so commonplace out here that I’ve even spoken with some locals who are involved in the space and they tell me it’s very common for bills to sell out before completion. Now, when you went about this, were you shocked to find that that was the case or?
Lukas Swid (07:39)
ThankDylan Silver (07:52)
were you prepared that it would sell out very quickly?Lukas Swid (07:55)
I was expecting the worst and I was ready for it. I was ready for the worst. Let’s say it takes a couple of years to sell, you know, it’s not a good deal, but it’s something that can at very least recover what I invested. So I was surprised, but I knew it validated the information.I did a lot of research. I advise everybody, if you’re going to any market, do your research first. You don’t have to know everything about that market, but you have to do your research first. So I validated it. I was very happily surprised that it sold so fast. It took a little longer almost to get the permits than to sell the units.
Dylan Silver (08:35)
I believe it. We’re all of those units in that first deal. We’re all of those to sell. Were any of them rented out? Are they all to sell?Lukas Swid (08:43)
All to sell. I like to turn things around quickly. I like to rotate inventory very quickly. And also Brazil is a very risky country.right? So you have to a hedge. You have to make sure that your exposure is manageable. Having something to rent, I didn’t want to do it because for you to get somebody out of the house is very difficult. It’s almost impossible. So once you rent something and if they don’t pay you, you have to go to courts and courts and courts and it can take years for them to leave your house. So there was a risk I was not
Dylan Silver (08:53)
Yeah.Mm.
Lukas Swid (09:21)
to get involved with very messy so I figure I’m gonna just build cell build and sellDylan Silver (10:02)
I want to ask you some granular questions. Maybe give away some of the gold here Lukas, but not all of it. Which city or cities are you building in Brazil?Lukas Swid (10:10)
I’m building in two states, one is Pernambuco, Recife is called, and the other is in Minas, close to Belo Horizonte. So two states, they’re very, very different states culturally, financially. Recife, Pernambuco is more, it’s a low income state. Minas is a high income state. So in Pernambuco, there is a high demand for lower income housing. So we focus on lower income housing, butVery high quality product great finishes great design Sometimes a great design doesn’t have to cost too much
Okay, just tastes, it just tastes sometimes. It’s picking the right colors, the right finishes, you spend maybe a couple of bucks more on a tile, but it looks better and it’s not, it doesn’t make a big difference in your pocket. So in that stage, we do more low income housing and in Minas, we do higher income housing. We built a mansion, 7,000 square feet mansion.
Dylan Silver (10:45)
Right.Lukas Swid (11:08)
three years ago and we sold it in about three months and it was an amazing ROI like 50%.Dylan Silver (11:14)
Wow. I want to ask you a follow up question based on that, which is a lot of folks, even in the US, may have difficulty investing across state lines, let alone international borders. You mentioned these two different areas of Brazil. Have you personally been to both areas and how did you scout out these areas? Or if you haven’t been there, what’s your process for identifying the area?Lukas Swid (11:23)
Thanks.Yeah, you have to really rely on local people for those things and you have to try to find somebody who you can trust.
trust but verify it. So in minutes I knew somebody who lived there and who had been looking for a house and couldn’t find a house and the houses that he found they were not to his liking. He wanted to build something from scratch. So I said you know what I’ll build it for you okay this is the price. So and then he changed his mind after I had already started the project but I kept I pushed forward
And in about three months later, the house was sold, right? But I try to always listen. I listen to people, what they say, if they know I’m in real estate and somebody’s always, always prone to telling you something that’s related to real estate. So as they say, well, there is this place in Brazil that is a big demand, there’s not enough houses or whatever. I try to validate that information. I try to verify it, that I wish to do that. You call people, you hire people to do.
a little survey locally to make sure that the information is correct. So I always try to rely on people, local people who know that specific market, but I find ways to verify the information. You have to lean on people who know better than you, but you have to verify it.
Dylan Silver (12:54)
Yeah.I want to I want to pivot on that point about trusting and verifying really and ask you about the other side of the business, which is, you know, the capital portion of it. I think for folks who are looking at these projects of this scale, it’s difficult to do on your own. I know you have investor capital. We were talking about that before the show here. Raising capital in the real estate space is an interesting endeavor. And sometimes people feel like it’s
Lukas Swid (12:57)
youDylan Silver (13:22)
both an art form and a skill and a little bit of both. What’s been your approach to capital raising for these ⁓ deals in Brazil?Lukas Swid (13:30)
Well, I think if you wanna try to get people’s money, first of all, you can’t be desperate for it. If you’re desperate, if I sense that you’re desperate, I don’t wanna do any business with you. So I think people are the same way. And I think if you’re gonna try to get somebody’s money into your company, your venture, your startup, you have to show, first of all, it’s a great product.there is a lot of demand for it. You have the capability to deliver, but that you also have a lot of scanning again. So I have to do my homework and a little presentation and show people that there is a demand here. You can verify this, this, and that. I show them that we have a great product. The LendLot is in a great location. It’s a desirable location. It’s a place where people want to live.
Okay, and then I show them that I have the funds to fund most of the project. So ⁓ you can’t expect to get somebody from overseas to invest into a company in a foreign country or even across the state line. They don’t see that you have what it takes to finish that product. Okay, what if I invest my money and you don’t have the money to finish it?
Dylan Silver (15:10)
Yeah.Lukas Swid (15:19)
Right? You hear a lot of things, you know, you can do this or that without any money at all out of pocket. You can’t. It’s very difficult and very risky for yourself and for the people who are going to invest in your ideas, in your promise.So I always show them and I disclose my finances, even tax return if necessary, that I have what it takes. I have money allocated to finish that project no matter what. Okay?
So you are safe and then I show also contingencies. I show what it goes wrong. Okay, so before I accept any dime from anybody I want to make sure that I have already at least 40 % of the units sold at least that because the 40 % of the units Will cover the entire cost of the building You cover everything so
Dylan Silver (16:03)
Hmm.Wow.
Yeah.
Lukas Swid (16:15)
If itis already have contracts for 40%, it will cover because the rest goes into taxes, marketing, real estate commission, permits, legal. About 20 % of the entire expenses for a building goes into those little things that you don’t think about.
So 40 % is construction, is hard work, is the land lot, all of that. And 20 % is typically those types of variables. And then 40 % is ROI.
Dylan Silver (16:42)
Lukas, we are coming up on time here. Where can folks go if maybe they’re interested in looking at some of the deals you have going on or they’d like to reach out to you and connect with you about Brazilian real estate?Lukas Swid (16:56)
Great, they can go into 1212, like Manhattan error code, 1212capitalpartners.com and enlist my portfolio of companies in there.Dylan Silver (17:07)
Lukas, thank you so much for coming on the show here today.Lukas Swid (17:10)
Thanks talking to you. Great talking to you. Take care.
