How Real Estate Investors Can Diversify Beyond Multifamily with Suja Shyam

Suja Shyam (00:00)
So when we think about an

investment portfolio, ⁓ I like to think about having a bucket that has your fixed income opportunities. So where you’re just getting a payment, a straight payment. Okay. And then you’ve got your kind of like growth opportunities where you’re looking at, you know, that might be like a real estate syndication, common equity position, or even like a stock investment. You’re looking for growth opportunities and having some kind of balance within that bucket is important.

Cody Crabb (02:02)
Welcome back to the Real Estate Pros Podcast. I’m Cody Crabb with Investor Fuel. Today we’ve got Suja Shyam with Luxe Capital. Now she started underwriting multifamily deals for institutional buyers, built her own real estate for…

portfolio and now she’s helping investors diversify beyond real estate into cash flow and to private equity opportunities. So we’re going to break down kind of where real estate investors should be putting money right now, ⁓ why real estate alone might not be enough and maybe some of the reverse as well. Like what should you be doing within the real estate world? So Suja, thanks so much for joining us today.

Suja Shyam (02:35)
Thank you, Cody, it’s really great to be here.

Cody Crabb (02:37)
So how did you go from underwriting institutional stuff to building your own portfolio? That’s I’d be interested to know.

Suja Shyam (02:44)
Yeah, great question. So out of business school, I knew I wanted to do some kind of real estate and I ended up working as an underwriter for institutional buyers or banks, syndicators who were purchasing apartment buildings. And I was their underwriter and so I was one of their underwriters. And so we’d write these large packages, 80 page packages, and ⁓ it was really good training, but it also was not an entrepreneurial environment. And I knew that I wanted to be an entrepreneur.

Bye.

with underwriting. so I eventually had just a major life reset, which is a story for another time probably, but it allowed me to kind of unlock those golden handcuffs and just take some reflective time for myself and decide, well, where is it that I really want to take my life? know, and what I realized I didn’t want to go back to a just job. And it took kind of a separation from my work to be able to realize that I actually don’t want the golden handcuffs. I want to build my own business.

⁓

I had learned to live kind of frugally during that time off. I went and I traveled and I was able to ⁓ That gave me a much longer runway So I still had savings and I had already house hacked and done some of those foundational things. I flipped a house ⁓ And then I started uncovering limiting beliefs and realizing that like okay I just want to focus on building my own real estate portfolio I became what I call an accidental Airbnb host So I got back from my travels and I started putting my basement

on to Airbnb and it was a good time to do that. It was 2013 at the time, 2014, 2015 and you know was like instant money so an instant success and I just had to keep iterating so I bootstrapped that business, my Airbnb business and I grew it from one to seven units. During that process I decided I needed to go back to work because I wanted to be able to buy more real estate. I was listening to like bigger pockets and looking at my financial position and realizing that if I wanted to get a home equity line of credit, if I wanted to buy

another piece of real estate, but it would be helpful to have a W-2. So I went back to underwriting for a very short and sweet period of time, ⁓ purchased my next building, and at that point I was ready to replace my income from ⁓ underwriting.

one of my most, you know, one of the biggest things I needed to overcome was kind of the barriers I had in my mind about what was possible, right? And so doing kind of the mindset work surrounding myself with entrepreneurs and really just deciding if not now, when, you know, when was I going to make this happen? And then just keep putting one foot in front of another, solving problems, building on past success, solving, you know, bouncing back from mistakes and just continuing the journey of learning.

Cody Crabb (05:52)
Mm.

Suja Shyam (06:12)
So essentially I was able to go from zero income to income replacement within three year period. And it came from simply building this Airbnb portfolio. ⁓

At that point, you know, I was very strategic. decided this is working. I want to double down here. And so when I looked for a building to buy, I looked for a building that had this proper zoning so that I would be able to convert it to an Airbnb. I built, you know, a cottage in the back of one of my properties. So that was able to be an Airbnb and I was very doing it all with all the regulations in mind. So this could be a long-term success, not just a short-term cash solution. So I would say that this was one of the biggest steps.

because it allowed me to replace my income and then I could decide well where I want to go from here.

Cody Crabb (06:58)
Yeah, yeah. So ⁓ what did working on the institutional side first, like what insights did that give you that you maybe wouldn’t have had once you got into real estate?

Suja Shyam (07:08)
Yeah, so working for the institutional side, underwriting for banks is a very, very tedious process. takes us months to underwrite a ⁓ deal. ⁓

depending on the type, if it was an equity, either between two and 10 months, depending on the type alone. ⁓ And it was painstaking. And so what it taught me was how to be really conservative, which is a good thing. It’s good to know how to uncover every single stone and how to be really thorough in how to look at things with a super critical eye rather than rose colored glasses. ⁓

So I think that was really good training, but banks are very risk averse, right? And so actually doing deals and making things happen is a totally different skillset that I did not learn in the banks.

Cody Crabb (07:57)
Yeah, think getting into it, ⁓ getting into things, feel like you learn so much more just being in it for a few seconds, you know, ⁓ and having that background knowledge too of how the process works, I’m sure is like super valuable as well. So, ⁓ okay, about just kind of because we’re talking to real estate investors specifically, you know, what sort of… ⁓

What are people taking, where are people taking on risk without even knowing it? Like they’re starting to do their deals, they find something, they maybe find ⁓ on paper to them what looks like a perfect deal and what might they not spot that is risky?

Suja Shyam (08:40)
For sure, I think it depends on where we are in the market cycle, right? And so I think at one point people were not ⁓ accurately assessing market risk. And that’s hard because no one knows when things are gonna shift in a really dramatic way. Like for example, when interest rates went up in 2022, know, a lot of people didn’t see that coming. A lot of deals suffered as a result. And so now we’re in a place where…

we, it’s actually, you know, we’re kind of like at a place where things are actually looking up in a lot of ways. And so that’s a good place to be. But I think that in general with underwriting, there’s this idea, DK, DK, you don’t know what you don’t know. And so really always trying to look at a deal with…

out the rose colored glasses on is a skill that I think I learned in the banks. And I think a lot of investors, because they’re trying to just make something happen, it’s easy to kind of overlook things that you might not be considering, whether it’s related to, you know, anything from expenses to ⁓ looking at the rent roll properly to actually doing your environmental due diligence properly to, you know, what the actual building looks like and what your costs are going to be associated with that. There’s just

There’s just a lot to actually look at and I would say it is a challenge to strike that balance between ⁓ optimism and ⁓ realism.

Cody Crabb (10:04)
Yeah,

totally. I mean, even just in life, that’s sometimes kind of tricky. So, all right, we’ve got some background on your insights on real estate investing and kind of what you do. ⁓ Now, tell us a little bit about, ⁓ you mentioned before we were on the podcast, you mentioned one of the things you do is you help people who are investing in real estate kind of diversify and move into other realms. Can you give us a little more information on that?

Suja Shyam (11:05)
Yeah, absolutely. So.

I started investing in real estate syndications in the late teens. And that was a time when things were going really, really, really well in real estate. And we were all kind of waiting for something big to happen. Well, something big did finally happen in 2022, but not before interest rates went to zero and commercial real estate went kind of crazy. Pricing was really high. Things were selling for a very high price, of course. And then we hit the brakes in a major way. And after going through

that process, know, that was we learned a lot in our portfolio and we learned a lot about ⁓ how to make a resilient portfolio because what’s working today isn’t necessarily what’s going to be working tomorrow.

Cody Crabb (11:47)
Yeah.

Suja Shyam (11:47)
One thing I would say is that debt investors tend to be do well throughout the cycles, as long as they’re protecting their downside well. And so we started adding more debt like positions into our investment. So for example, when a lot of people start investing passively into real estate, they’re usually investing into the common equity position. The common equity has the most to gain, but it also has the most to lose. So when things are going well, it’s obviously a very great, it’s a great place to be. But if there’s ever any bumps in the road,

⁓ then that’s where you stand to have the most issues as well. So we started adding positions like first position loans and second position loans into our capital stack or into our investment offerings so that people could have ⁓ maybe lower possible returns but also much more certainty in terms of distributions, right? So if you’re in a first position, as long as the wheels are still on the bus, you’re gonna get paid.

⁓ That’s one thing that we learned. Another thing that we learned is that real estate generally, ⁓ there’s periods of time when it’s doing very well and there’s ways to kind of protect against that by, for example, being in different types of deals. So we also have not just multifamily, but we’ve got ⁓ different industrial, we’ve got self storage, we’ve got short-term rentals, we’ve got ⁓ land investing and… ⁓

just a robust commercial real estate investment portfolio, not just focused all on real estate or all on one market. So there’s lots of ways to diversify within your real estate portfolio. And then on top of that, it’s also important to have a resilient portfolio to diversify outside of real estate because there’s certain headwinds and tailwinds that do just generally trend with real estate. And so we started looking at different types of business investing opportunities that have either steady cashflow or high growth, right?

So when we think about an

investment portfolio, ⁓ I like to think about having a bucket that has your fixed income opportunities. So where you’re just getting a payment, a straight payment. Okay. And then you’ve got your kind of like growth opportunities where you’re looking at, you know, that might be like a real estate syndication, common equity position, or even like a stock investment. You’re looking for growth opportunities and having some kind of balance within that bucket is important.

And obviously some of those investments are going to you tax benefits, some are not, some ⁓ are going to give you more downside protection than others. And then at some point in every investor’s career, it’s important to add in…

high growth opportunities because those high growth opportunities can really move the needle as well. But it has to be the right position size. So that’s another concept that we look at whenever we’re looking at someone’s overall investments and investors should look at well what if they’re looking at investment, what’s the appropriate position size for this investment given my overall portfolio currently and what my overall goals are.

Cody Crabb (14:40)
Yeah, think ⁓ that that’s super important to think about for sure. I mean, we talk about real estate investing, but I mean, if you’re all in in one specific area, that can be kind of risky. I mean, that’s the first thing they teach you when you start investing. So I’d be curious, like, who is the ideal person that should start looking at stuff like this? Like, what situation could would someone find themselves in? And then you would go, ⁓ yeah, we need to talk. I need to I need to help you out here.

Suja Shyam (15:06)
Yeah, you mean in terms of investing outside of real estate? Yeah, for sure. So, well, let me just back up one second. So whenever someone, I meet someone for the first time and ⁓ depending on where they are in their career, if they’re kind of new to the private investment space, the first thing I would direct them to is something like our income fund, which just delivers a straight 10 % return. It can deliver 11 or 12 if you invest a larger amount, but it’s just a straight 10 % return. ⁓

Cody Crabb (15:09)
Yeah.

Suja Shyam (15:34)
It’s important to have something like this as your first investment, believe, because it’s nice to have that consistency. you’re just every quarter, you’re getting, you know, 2.5%. That’s 10 divided by four. And we’re in first position in that.

in that deal. that means that it’s very well protected. It also has liquidity after a year. And so that means that if you need the liquidity after one year, you can take that money out. And so that’s usually what I ask people to invest in something like that. It doesn’t have to necessarily be with me, but have some type of investment like that before you start getting into some of the more, ⁓ you know, maybe more exciting investments, so to speak. ⁓ But I would say, again, it’s going to be different for every investor because it’s going to depend on your portfolio.

what your current income looks like, how stable that is, and what your current portfolio design is. But I think once you have like a handful of real estate investments, it is probably time to start looking and saying like, how else do I want my private investment portfolio to look? ⁓ How can I gain some knowledge and feel comfortable, invest with people that we trust ⁓ in order to, you know, start just building a more resilient portfolio overall? Because again,

with real estate when things are going great everybody is really happy but you just never know when things are going to shift and ⁓ usually it’s it’s good to try to shift before ⁓ things go you know take a turn for the worse.

Cody Crabb (17:43)
Yeah, maybe you don’t have to ride the wave downward if you can help it. That’d be good. Yeah, so kind of being able to forecast things a little bit, and that seems super important, but a lot of people get kind of overwhelmed, and they’re like, how do I even interpret all this information I’m getting? So given where we’re at right now, if we took a snapshot of where things are at right now, interest rates and uncertainty things, how are you thinking about this based on like,

where we’re at right now. Like what should people think of when they’re thinking of the future?

Suja Shyam (18:14)
sure. ⁓ So I think that we are in an optimistic position when it comes to real estate in general, ⁓ meaning that it seems like housing supplies getting absorbed. ⁓ So there’s going to be some upward pressure on rents. Increasingly, we’re already starting to see some of that. So that’s that’s positive news, at least in the multifamily space. And oftentimes some of these

⁓ asset classes can track together. So what I would say though is that like we’re still primarily focused on ⁓ adding some of those first and second position opportunities in to our real estate portfolio. Because I think that ⁓ it’s just we’re more focused on first and second position real estate deals and ⁓

than higher growth opportunities outside of real estate investing. We will still possibly do some ⁓ land investing when it comes to real estate, but it’s just, we’re very, very targeted when it comes to those common equity positions.

Cody Crabb (19:19)
Yeah, I think I really like the idea of the buckets. Like that’s being intentional about where you’re positioning yourself. I think it’s something that a lot of investors overlook, like diversifying, but like, how are you diversifying? And I think that’s really important. ⁓ So, all right, ⁓ let’s say someone is listening to this and they’re realizing, like, I probably need some help with this. They’re all kind of all in on one lane. What’s the first move that they should make?

Suja Shyam (19:47)
Yeah, I mean, think trying to learn about ⁓ adjacent.

opportunities that are sort of adjacent to what you’re currently doing, but maybe a little bit different, right? Because just diving into something totally new can be intimidating and you might feel like you don’t know enough in order to invest. But if you’re investing in something like slightly adjacent, for example, like our land investing deal, ⁓ that’s still real estate adjacent, we’re still working towards eventually building multifamily. most people who are investing in real estate can probably understand the general thesis behind that. ⁓

but it is different and it has a different risk profiles and say, ⁓ just investing into a regular multifamily deal and a common equity position. So I think that’s how I’ve kind of approached it as like, I’m like, I’ve built out my network and I’ve started looking at adjacent opportunities. And then over time you start to work with people. There’s always going to be risk when you’re working with different types of investors, but you know, we’ve got to look at investing in terms of the long-term. This is a marathon, not a sprint.

So looking to build those long-term partnerships over the last, you know decade that I’ve been doing this I’ve

sort of worked with a lot of different people and decided who it is that I want to keep doing deals with based on how business has gone. know, ⁓ who do I have a good relationship with on how do they handle problems? How is communication? ⁓ Are they delivering? And if not, like, what is the reason for that? And is it market based? Is it sponsor based? And do I agree with their thesis? Are they reliable? ⁓

So it takes time to really build up these relationships in my opinion. ⁓ I’m very, very careful before investing with others. And I think that there is a need to just get started. But once you get started, it’s also important to kind of really try to build up those relationships and just not put all your eggs in, invest slowly over time, right? So.

Cody Crabb (21:40)
Hmm.

Suja Shyam (21:41)
I would say that if someone’s wanting to diversify, it’s still important to try to keep some money.

Like keep some money in a relatively liquid place ⁓ and then just invest it slowly or in smaller amounts because you know some of these deals have higher minimums but it can be good to just keep diversifying. So ⁓ you’ve got to strike that balance between is this a deal I really want to invest in? What’s the minimum? Is that an appropriate position size for my portfolio? Looking for adjacent opportunities adjacent to what you already understand and have experience in and then

really like trying to build those relationships with people where you can trust, you can work towards building up that trust. It doesn’t just happen overnight. One of the things that people come to for me is they feel like I can give them a bit of a cornucopia of offerings. And it’s just one person, right? They’re just working with me. So they have a certain degree of trust, which we’ve built up over the years after, you know, doing several investments, having them deliver and…

Cody Crabb (22:20)
Yeah.

Suja Shyam (22:40)
⁓ They built up a certain trust so they can kind of know that I’ve started to explore ⁓ these different avenues in a very careful and methodical way. ⁓ But it’s giving them an opportunity to diversify.

Cody Crabb (22:55)
Yeah,

well, Suja, this has all been really, really helpful. I love how you break down risk versus growth and why this is so important. ⁓ So if people wanna work with you or find out more about you or anything, where can they go online to learn about you?

Suja Shyam (23:09)
Yeah, the best way to learn about me is to sign up for our investor group on the Luxe Capital website and it’ll prompt you to book a call with me. So that’s luxe-cap.com. And I just want to put this out there for anybody who is interested and just wants to give me a call. ⁓ Feel free to just send me a text message to 650-804-8043.

and you can just tell me that, say that you heard me on the Investor Fuel podcast and you want to just book a call and we’ll get something going so we can talk about what might be a good next step for you.

Cody Crabb (23:49)
Yeah, that’s awesome. And not too many people will give you their phone number. So that’s a good offer. I would take that if I were you. ⁓ Well, thank you so much for joining us today. I really appreciate your time. And to our listeners, thanks so much for joining us. And if you liked what you heard today, go ahead and hit subscribe, like, comment, all the things so you don’t miss a single episode. And Suja, thanks one more time. We really appreciate it. Have a good one. And listeners, we’ll see you later.

Suja Shyam (24:16)
Thank you, Cody. Thank you, everyone.