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Show Summary
In this episode of the Real Estate Pros podcast, Lillian Chen, founder of Proptimal, discusses her journey from financial analyst to entrepreneur, focusing on providing institutional resources to everyday real estate investors. She highlights the gaps in knowledge and tools available to small and medium-sized developers and shares insights on the importance of understanding market dynamics, risk management, and the role of AI in real estate. Lillian also reflects on her experiences scaling her business and the common mistakes investors make.
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Investor Fuel Show Transcript:
Lilian Chen (00:00)
yeah, absolutely. I have a couple of common mistakes that I’ve seen people make over and over and over. Would you like me to go into those? Okay, cool. So let’s do it. So I think the first thing that I see, and this is more common with people who are entrepreneurs beforehand, is that they think real estate investments work exactly like businesses. And that’s completely wrong.Kristen Knapp (00:07)
Yeah, definitely.Mmm.
Lilian Chen (00:24)
Because in businesses, you have a limited upside potential and you can turn something out of nothing. Whereas in real estate, by the time that you pay for something and buy the property, your deal has already been decided.Kristen Knapp (02:10)
Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Lilian Chen, who is the founder of Proptimal. They’re giving institutional resources to everyday real estate investors. So we have a lot to get into. Thank you for being here, Lilian.Lilian Chen (02:21)
Thank you so much for having me, Kristen.Kristen Knapp (02:23)
I would love for you to talk about your very impressive background.Lilian Chen (02:26)
Yeah, absolutely. And what I did was I am trying to provide these institutional knowledge and tools and resources to the everyday developer because I got the formal financial training at Berkeley and Oxford. And then on top of that, the institutional level company job training as well. And so I started off as a financial analyst. And when I became an independent consultant,At first, we’re serving large companies with billion dollars of asset under management. But then as I continue to gain clients, I realized that, wow, the majority of the real estate market is just small and medium sized developers and brokers and service providers that didn’t get all the resources that I have, but they were so impressive that they managed to achieve so much with so few people and resources as well.
What I also realized is there is a huge gap in what I can provide them to make their lives a little bit easier. And that’s why Proptimal was born.
Kristen Knapp (03:27)
That’s incredible. Yeah, you definitely have that very formal experience going to Oxford and going to Berkeley. It’s really impressive. At what point did you really make the leap and start developing this?Lilian Chen (03:39)
for a proptimal.Kristen Knapp (03:40)
Yes.Lilian Chen (03:41)
So I would say that was my second year of being an analyst. And the turning point was that I realized that I already had everything that I ever wanted. A dream job, a decent salary, meaningful work, working on a couple of master plans and developments. That’s super exciting. But part of me still felt like something was missing and I wanted to venture out and start my own thing.So that’s how Profdimal was started. In the midst of COVID in 2020, I took the leap of faith and started Profdimal at first just as a freelance consultant and the rest is history.
Kristen Knapp (04:21)
Amazing. Well, I think it’s really interesting because real estate in general, but specifically investing, it’s one of those industries where everybody’s an entrepreneur, everyone’s kind of doing it themselves, and there’s not really like a formal corporate ladder to learn from. So I agree with you that there’s a lot of gaps where people probably don’t have the formal training for things. Like what are some things that you see come up over and over that you wish more real estate investors knew?Lilian Chen (05:35)
Yeah, I think some of the things is that I realize business owners have a completely different mindset from institutional investors. Business owners and real estate developers are a lot better at taking risks and sometimes they shut off the part of the brain that says, this probably isn’t a good idea and you could lose all your money, but they go ahead and do it anyway. And I think in some sense, that’s what makes them so successful because they’re not.afraid of taking the risks that other people shy away from.
Kristen Knapp (06:05)
Definitely. Yeah, and like as far as you know this practical knowledge, give us some examples of the things that you know you guys provide that you think a lot of people miss out on.Lilian Chen (06:15)
Yeah, so let’s talk about what we provide first. What we provide is three different things. So as I talked about the knowledge, the tools and the resources. So the knowledge is where I really want to put education as a huge focus on teaching people not just, hey, here’s how you get rich and make money. Or on the flip side, here’s how to run a DCF and here’s how you write your Excel formulas. I want to build something that’s kind of in the middle.where people get the technical knowledge through practical examples. So they’re not just learning things from a textbook, they’re also able to apply it as well. The second part is the resource, the tools. So with the tools, we’re building 10x Analyst, which is a software that allows anyone to build financial models, even if they have no modeling experience at all. And then the third would be our services that we provide because at the end of the day,
When people are working on deals, they still want a real person to be able to verify what they’re doing and ensure that they’re in the right direction.
Kristen Knapp (07:18)
Yeah, and with your services that you provide, what are you exactly analyzing? What are you helping people accomplish with their deals?Lilian Chen (07:27)
Yeah, so my background is in acquisitions. And I think when it comes to real estate underwriting and the entire deal cycle, the acquisition is the most important part because if you misunderstand a deal and overpay for the deal, there’s very little that you can do to turn a bad deal into a good deal. So we come in earlier in the process and then help people understand.whether or not they should even buy the deal, and if so, how much to pay for it. And that was our service for the past couple of years, and now we’re transitioning that into a more holistic system on a platform.
Kristen Knapp (08:04)
That’s incredible. And I imagine like each market is different. How do you kind of adapt to people’s markets?Lilian Chen (08:12)
That’sa really good question. think when it comes to real estate, the differentiating factor that makes somebody good is definitely how well they understand their market. And it wouldn’t work for us to be able to claim that we’re the experts of every market. So instead, our value proposition is very different. It’s that we’re giving you the frameworks and knowledge to position you in a place where you can understand how to think.
We’re not just giving you knowledge, we’re teaching you how to think like an institutional investor. We’re teaching you how to think like somebody who understands finance and all the numbers and moving parts behind the deal. So then you can go and adapt those kinds of knowledge into whatever situation that you come across and understand the deals that you’re making and how that impacts your deal.
Kristen Knapp (08:56)
Definitely. And I would love for you to talk about, so you kind of developed this in the middle of the AI boom. And I would love for you to just talk about in general how that affected your business plan and AI, how it’s being utilized in the real estate market.Lilian Chen (09:03)
What?That’s such a good question. I would say AI played such a crucial role in helping us develop this software because when I first started, I didn’t have as much idea of what I wanted to build. I had a vague idea of what an analyst does and I have a strong desire to automate a lot of that and effectively clone myself so I can help more people, but I didn’t understand where the available options out there.
especially that the AI landscape is changing on a week by week basis, right? So with AI, the most powerful thing that I did was I use AI not just as a automation tool, but a learning partner where I used AI to learn everything I needed to know about technology. And then fast forward, now I’m coding the entire backend on what the real estate export is going to look like. And what that does is
Kristen Knapp (10:18)
Yeah.Lilian Chen (10:41)
It allows somebody who has really good real estate experience to step in and start developing software. Whereas in the past, it wouldn’t have been possible because most of the software were developed by people who work in tech who know nothing about real estate.Kristen Knapp (10:56)
Totally. how, what are you seeing just in general with the real estate market? Like, do you think people are utilizing these tools enough?Lilian Chen (11:03)
That’s another really good question. I am actually going to be giving a presentation on real estate and AI. But the main takeaway for that is that I think most people are fine. They are not going to get left behind and not adopting AI is not going to kill their business. Because at the end of the day, what makes somebody a good real estate developer isn’t how much they use AI. Right? Like if you have 20 years of track record and 20 years of relationship.Just because you’re using AI to automate 80 % of your business doesn’t do anything. And on the flip side, if you’re a real estate developer who is completely new, no track record, no experience, and no idea on how the business works, it doesn’t matter that you’re using AI to automate your entire business. People are still not going to trust you. So I think the panic is a little bit overhyped. Now, what I would say is that
Kristen Knapp (11:57)
Right.Lilian Chen (11:59)
If you’re a new investor or if you’re still early on in your career and you want to establish that credibility and become somebody who will succeed regardless, use AI to learn as much as possible. Because if you think about it, in the past, we have to go to a library and we have to go through those index stores and find the right book and read every single book to find the resources that we need.Today it’s at our fingertips in a way that’s so digestible that there really is no excuse for anyone to not know anything.
Kristen Knapp (12:31)
Totally. Yeah. No, I think you, you phrase it really well. Cause I think there’s also a lot of people who are very adamant about people are going to get left behind, but you’re right. The skills needed to develop are, it’s a little bit different. and then I would love to just talk to you about in general, scaling this business. mean, it’s so impressive building this from scratch and being able to scale. What is, what have been some of like the learning lessons through building this platform? What is like maybe something that went wrong and you’velearned from.
Lilian Chen (13:00)
I can tell you that actually in 2022, which is about two years after I started Proptimal, I had a burnout and I actually closed the business down for an entire year to do my MBA. The reason for that was the service business model doesn’t scale. at first, actually for the first two years of business, we didn’t do any marketing at all and yet we were completely booked. Right. And soThat was the moment where I realized, I think we’re onto something. There’s so much demand for what I do and people are willing to pay for my skillset, even though I was still pretty junior in my career. And then as a result, I was trying to expand my business by hiring other financial analysts. And then I finally got onto the other side of the table where I realized, my goodness, it is so hard to find a good financial analyst. And even if you find someone, you need to spend at least a year.
training them for them to be good enough to not have to be managed constantly. So then I thought about it and thought, if I am somebody who is doing this full time and I run a full time real estate service agency and I can’t find enough good financial analysts, how are other people doing it? Right. So I couldn’t figure it out. ⁓ I didn’t have the knowledge and tech background at that time to understand what is possible. And also,
AI was not as advanced at that time to be able to allow me to do what I’m able to do today. So that was a hard lesson. It’s realizing that the service agency model for financial analysts doesn’t really scale. And if I wanted to scale it, it would have been at the expense of all my customers because I would need to charge them a lot more for services that are performed by someone who was more junior than me.
Kristen Knapp (15:30)
Right. Yeah, I mean, that’s a great reason to get into it. And you’re really helping people. You’re kind of helping even the playing field a little bit. Absolutely. And what are your plans? Yeah. What are your plans to scale this? What are you looking ahead at?Lilian Chen (15:38)
Yeah, completely.So that’s an interesting question because truthfully in startup world, nobody knows. And I think we’re all playing it, you know, playing it one step at a time. And I definitely don’t think I have all the answers. And the moment that I think that I have all the answers, I’m probably done, right? So I think having that humility to know what I don’t know is very important. But what I can say is that we’re launching the first version of these.
Kristen Knapp (15:49)
Right.Lilian Chen (16:12)
platform next week actually, so end of September in 2025. And I’m very excited to see where that goes.Kristen Knapp (16:20)
that’s amazing. That’s really exciting. And I would love for you to just talk about in general in the real estate investing world, just things that you’ve seen being on the financial analyst side, like strengths and weaknesses, things, maybe like practical tips somebody can, you know, go and like readjust what they’re doing.Lilian Chen (16:37)
yeah, absolutely. I have a couple of common mistakes that I’ve seen people make over and over and over. Would you like me to go into those? Okay, cool. So let’s do it. So I think the first thing that I see, and this is more common with people who are entrepreneurs beforehand, is that they think real estate investments work exactly like businesses. And that’s completely wrong.Kristen Knapp (16:45)
Yeah, definitely.Mmm.
Lilian Chen (17:02)
Because in businesses, you have a limited upside potential and you can turn something out of nothing. Whereas in real estate, by the time that you pay for something and buy the property, your deal has already been decided.There’s not much that you can do after that. So that’s the first thing. The second thing is that people don’t understand the concept of risk adjusted returns. They only understand returns, right? So,
Kristen Knapp (17:17)
Right.Lilian Chen (17:27)
From someone on a, let’s say you have a financial background, the way that I think about things is, this return worth it for the amount of risk that I’m taking? So for example, if I tell you, hey, I have an investment and it’s going to be 13%, is that good or bad? Right? We don’t know because are, I getting 13 % from investing in the bonds market or am I getting 13 % for investing in cryptocurrency?Right? So we don’t understand the risk profile that we can’t tell if a return is good or not. And what I’ve realized is people take on excessive risk because they look at the IRR and they go, wow, this is an amazing deal. And then I would come in and remind them, Hey, by the way, you’re taking a lot of risk here. This could go wrong. This could go wrong. This could go wrong. So your expected value of getting that return makes the return lower and you should adjust for that. The third thing that I would say,
⁓ that people get wrong a lot of the times is they don’t think about the market enough. So for example, when the deal goes wrong, they like to credit themselves for their excellent ability to operate the deal. But when the deal doesn’t go right, then they start to blame the market. know, the interest rate rose, the market turned, whatever, whatever. And I think in both cases,
whether their deals go right or go wrong have a lot to do with how the market is doing and a lot of that has to do with chance. So people underestimate that and the people who do understand that it’s more important to protect your downside than to shoot for the upside and that’s how people last in the real estate industry.
Kristen Knapp (19:08)
Totally, well I mean that’s all such great practical advice for people. You obviously have such an expertise in your field. Tell people where to find you and where to find PropTable.Lilian Chen (19:18)
Absolutely. I post regularly on LinkedIn. I write thought leadership articles on commercial real estate, entrepreneurship, and of course technology. And if there’s anything that I can help with, please send me a message or go to proptimal.com and you can find us there.Kristen Knapp (19:35)
Amazing. Well, thank you so much for being here. I think that you taught people a lot just about, you know, maybe what they’re missing and what they need to implement in their business.Lilian Chen (19:44)
Absolutely, it’s been a privilege to be on here and I hope this has been helpful and appreciate you for having me on.Kristen Knapp (19:50)
Awesome. Well, thank you, Lilian. And then thank you everybody else for listening. And we will see you back next time. Bye.
