Smart Real Estate Syndication Strategies for Long-Term Success

Vaibhav Puranik (00:00)
So I think the key here, right, that people don’t understand there is a relationship between risk and reward.

And when you went into these syndications, there’s a you are assuming certain kind of risk and hence you’re also assuming certain kind of reward. Now, if you were lower to if you were, let’s say, to lower the risk, what will happen to the reward? Potentially, reward may also lower. And investors need to understand that. And if investors are willing to take if they want less risk,

They’re also willing to understand, take less reward for him. So syndicators like us, we promise a modest return to investors.

But we structure our deals,

at the same time, people don’t lose money

Dylan Silver (02:20)
Hey folks, welcome back to the show. Today’s guest, Vaibhav Puranik is a real estate investor and general partner focused on multifamily syndications. He started investing in 2008, building and managing his own rental portfolio across Los Angeles and Texas. In 2021, he moved into syndications and has since led a full cycle exit and participated in multiple deals. He works with a team of partners and uses his technology background to improve how deals are run and scaled.

Vaibhav, thanks for taking the time today.

Vaibhav Puranik (02:51)
Thank you very much, Dylan.

Dylan Silver (02:53)
Now, we were talking in the green room over the past couple of years, we’ve seen a lot of syndications struggle. How do you structure deals so that they don’t fail?

Vaibhav Puranik (03:05)
That’s a very good question. ⁓ We have seen a lot of people losing money and in last three, four years, especially the syndications that went into effect about 2022, 2021, where the interest rates were 3%. And suddenly 2025 comes, they have three year interest rate lock, that lock expires and the interest rate zoom from three to 6%. Their mortgage payment doubles.

And they have a little bit room, but not as much room, right, to accommodate a double payment. And these properties are struggling, the returns are struggling, there is no cash flow from these properties. And some people even lost money because they were forced to sell, because they simply couldn’t afford the mortgage payment.

So I think the key here, right, that people don’t understand there is a relationship between risk and reward.

Right. And when you went into these syndications, there’s a you are assuming certain kind of risk and hence you’re also assuming certain kind of reward. Now, if you were lower to if you were, let’s say, to lower the risk, what will happen to the reward? Potentially, reward may also lower. It doesn’t have to definitely lower, but it may also lower. And investors need to understand that. And if investors are willing to take if they want less risk,

They’re also willing to understand, take less reward for him. So syndicators like us, right, we have our own niche where we don’t actually go and promise 20 and 25 % returns to investors. What we do is we promise a modest 15 % return to investors. But at the same time, we structure our deals, our loan to value ratio is not too high. It’s about 60 to 65%.

As a result, we have a lot of route for interest rates to go up. Our NOI is much bigger. The buffer that we have over mortgage payment is much higher than these people. Also, our interest rate locks are usually five to seven years. And that means we can withstand an economic cycle for a longer period. These people are taking interest rate locks of just three years. And a lot can go wrong in three years.

Dylan Silver (05:25)
Right.

Vaibhav Puranik (05:28)
versus if we are going with five years. But of course, as a result of that, when you actually lower the LTV, your return also suffers. And that’s why we promise less returns. But at the same time, people don’t lose money with it.

So I think the key here, right, that people don’t understand there is a relationship between risk and reward.

Right. And when you went into these syndications, there’s a you are assuming certain kind of risk and hence you’re also assuming certain kind of reward. Now, if you were lower to if you were, let’s say, to lower the risk, what will happen to the reward? Potentially, reward may also lower. It doesn’t have to definitely lower, but it may also lower. And investors need to understand that. And if investors are willing to take if they want less risk,

They’re also willing to understand, take less reward for him. So syndicators like us, right, we have our own niche where we don’t actually go and promise 20 and 25 % returns to investors. What we do is we promise a modest 15 % return to investors. But at the same time, we structure our deals, our loan to value ratio is not too high. It’s about 60 to 65%.

As a result, we have a lot of route for interest rates to go up. Our NOI is much bigger. The buffer that we have over mortgage payment is much higher than these people. Also, our interest rate locks are usually five to seven years. And that means we can withstand an economic cycle for a longer period. These people are taking interest rate locks of just three years. And a lot can go wrong in three years.

Dylan Silver (08:03)
Right.

Vaibhav Puranik (08:06)
versus if we are going with five years. But of course, as a result of that, when you actually lower the LTV, your return also suffers. And that’s why we promise less returns. But at the same time, people don’t lose money with it.

Not a single person has lost money. Even the properties that we bought in 2021, 2022, they’re all fine. And they’re still producing cash flow because we just have a rate lock for a much longer time.

Dylan Silver (08:33)
Now, the folks who took out these variable rate loans over a three year period, they had come into the game having seen people make money hand over fist from like 2014 until 2020. And that gave them a false sense of security. Your strategy with the five and seven year locks, that’s typically the timeframe, the holding timeframe for a multifamily deal.

Vaibhav Puranik (08:48)
Right.

Absolutely.

Dylan Silver (09:02)
So I’m imagining that that works out quite well for you.

Vaibhav Puranik (09:05)
Yeah, it’s exactly it aligns with the exit in most cases. And as a result of that, ⁓ there is no period in which we actually have to go through that reset. ⁓ So it works really well. And of course, the properties that were acquired recently, that’s not even an issue because ⁓ now it’s almost like a peak of interest rate right now. So anybody who is entering right now won’t have that issue because most likely interest rates will go down.

Even if they go up a little bit in future because of the war and all that situation, eventually in a year or two, they will come down. They’ll have to come down because employment will get affected. And hence, I think people are going to be fine. to answer your question, it’s just that, that you just have to be a little bit more conservative.

Dylan Silver (09:59)
Now, when you’re approaching acquisitions and value add, what’s your biggest area of improvement when you’re making these acquisitions in these properties? Is it the property management? Is it the property itself? How do you approach value add?

Vaibhav Puranik (10:50)
So there’s two interesting thing we do, right? One is very simple, which is we’re not doing anything different. We’re simply upgrading units, right? So that, it’s a standard value. I think is like just improve the property so that you can get more rent from it. The second thing that we do is we do what we call it a mix management, a property management in which there is a property management company in place, but we take a very active role in management as well.

So every critical problem that comes in, we actually have a person in one of us, one of our partners or one of our employees, actually live closer to the properties that we have in our portfolio. This person visits every single month to the property. That is a requirement. One of us have to visit the property every single month. They spot all the problems in the property. They create what’s known as site visit report.

and this site visit report is then relayed back to the property manager. Now, we make sure that all of those items are addressed. In some cases, we have a direct communication line with ⁓ the onsite manager for the property as well. Having this firsthand information really empowers us to watch our asset really closely and make sure it’s constantly improving.

And because sometimes what happens is like, let’s say there’s a graffiti somewhere. ⁓ Now the property manager may not take this seriously because graffiti is not a functional problem. Correct. It doesn’t do anything wrong with the people, right? People might not even complain about it, right? We take that seriously because we know that this could affect the long-term value of the property. This could deter some of the good tenants to actually come by, come and ⁓ rent units here. Right. So,

We look for different things than the property manager is looking for. And having this constant visual, having on-site visits really helps us in monitoring property well.

Dylan Silver (12:57)
You’re a tech guy. There seems to be a huge opportunity for improvement in property management as a whole. And going beyond that, in the way that multifamily properties operate, even outside of property management, the way that folks are able to pay rents and communicate with the property managers and even learn more information about prospective properties and maybe apply online and this type of thing.

What innovations are you seeing currently happening in the multifamily space?

Vaibhav Puranik (13:32)
So some of them we are doing ourselves. ⁓ Now, the minor level of innovation that everybody’s doing is like crafting good descriptions for your rental units ⁓ using ⁓ a chat GPT and stuff. That’s the really, really low end. Everybody’s doing that. There’s nothing great about it. But the crux lies in using AI in some of the things that we have not used before.

So for example, you get data from Coastal, right? And you analyze the data using AI, and then you try to find out interesting insights from that data, right? So for example, we were analyzing stuff like that, and we discovered that our neighboring apartments are set at like $100 lower, the same configuration. So we were able to then reset our, we know that if we just set

The same features are there and we said $100 more and there is literally a next door apartment that’s available $100. It’s not gonna work. So we are able to adjust our price as a result of that. For acquisition, we can analyze data using AI in a big way. We can take the data and spreadsheets, put it to cloud, and then it can tell us a lot more interesting things about it. So we can do that for the ongoing maintenance stuff. With the rent increase and all that stuff, even reconciliation,

of the property accounts. The software that are there, currently, Buildium or PropertyWare, whatever the software are, they’re not caught up yet to the AI revolution. So what we do is we import data from this software into Excel, and then we run our AI magic on this Excel, and then we are able to get much more interesting insights. And we plug in all the information, background information about a particular renter and all, and then it’s able to give us like,

⁓ So no personal data is input, but more like, is this printer paying properly or not over last year or so? And what is the market situation? So how much rent should we increase? ⁓ So that kind of stuff can be easily automated now. ⁓ So alerts can come to you saying that, hey, rent needs to be increased for these people.

Dylan Silver (16:34)
what I’m seeing is, and I can’t say that this would necessarily be true carte blanche across the board, but let’s say if you’re looking at smaller multifamily, let’s say under 50 units, sometimes these may be run by mom and pop and the books might not be as good as you would like them to be. Going back and doing like a forensic accounting of their books can be challenging and it halts.

Vaibhav Puranik (16:49)
Correct, correct.

Dylan Silver (16:58)
from doing other real estate activities. So having a system like that go in and dive into that, like an agentic AI saves you all of that effort.

Vaibhav Puranik (17:07)
Yeah, there is another thing that we do, of course, is that we all outsource our operations to India. And ⁓ in fact, I’m leaving today in a few hours for India to meet with my employees in India. So we have employees in India and they’re running a lot of our back office stuff. And that reduces cost and we add AI on the top of it. For example, it’s funny, I’ll tell you what happened. One of our account in India, right?

I said, I gave her, this was a tax time, right? So we gave her all the last year’s accounts and said, reconcile it. And she started complaining that it’s too difficult, it’s gonna take me so much time. So I put all of that stuff in Claude and Claude gave me like this 10 things to look at. And then I gave that finding like a report sort of, where should you look for reconciling accounts to her? And then she was able to reconcile everything in two days, right? Because all she has to do is,

Dylan Silver (18:05)
Yeah, that’s you.

Vaibhav Puranik (18:06)
She has to just check those 10 things that did. And then there is everything else after that, then she can use her brain. But we are seeing amazing amount of productivity. So the combination of using AI plus I guess cheaper resources in a country like India is really helping us drive operations more leaner.

Dylan Silver (18:30)
You know, that’s the decision fatigue that a lot of people deal with and that can be eliminated, right? You mentioned your accountant in India, having to go through line by line and reconcile, it’s a strenuous process. But then just that little boost of knowing where to look, that eliminates that decision fatigue and get it done in two days. Like that’s an exemplary position to be in because you would rather be doing that and.

Vaibhav Puranik (18:41)
you

Dylan Silver (18:58)
leaning on AI than having potentially a disgruntled, you know, accountant, right? And then having this take much, much longer, which can hold up. Yeah.

Vaibhav Puranik (19:05)
Well, no, more than that, they make mistakes.

But the bigger problem is that they’ll make mistakes. And if they make a mistake, it could be costly to our investors.

Dylan Silver (19:16)
I do wanna ask you about going from California into Texas, right? Two totally different markets and one has very high regulatory compliance and the other one a little less so, but there’s also a lot of competition specifically in multifamily in Texas. I’m in Texas right now. It seems like there’s multifamily apartment complexes going up everywhere. Compare those two markets for me from an investment standpoint.

Vaibhav Puranik (19:40)
So I actually, let me tell you this, okay? I have investments in Texas, but they are single families mostly. And I have kind of stayed away from Texas purposely. And the reason, I’m sorry, I know you live in Texas. look, it’s not, there’s nothing wrong with it as such, right? It’s just that I tend to become expert in few things and then double down in that niche.

And my niche is California and now we are focusing on Arizona. So we are slowly expanding it. But I do have personal experiences with single families. And Texas and California is a very interesting case to compare. For example, there is no rent control in Texas. So it’s easy to increase rents whenever you want, however want. Although it is a wrong concept that people have that rent control

not having rent controls gives you a lot of freedom. It’s not so. And the reason it’s not so is because the market has to support that rent increase. Right? No matter what you do. If the market, even with my single families, right? I did upgrades on some of the single families and the market doesn’t support, right? If the market doesn’t support, there’s nothing I can do about it. So with California, what California allows you to do in general is 5 % plus inflation. Okay.

So there’s 2 % is the inflation, then they allow you to increase rent 7 % every time. Now, frankly speaking, if 7 % is good enough for me every year, if you can do 7 % increase every year, you’re going to be more than 20 % return, frankly speaking. So it’s not that rent control that’s controlling you. This year, we are not able to do 7 % increases anywhere. Doesn’t matter.

because the market is not doing well. So that gap has no meaning here. Correct? Even though California is allowing me to increase by 7%, the market doesn’t support trend increases this year. So if you are under market, then only you can increase the rent. Otherwise, you can increase it. That’s why sometimes the rent control gets disproportionately ⁓ overblown. That’s number one. Number two is, look, there are pros and cons, right? California has

They don’t increase property tax more than 2 % every year. It’s guaranteed. Texas would adjust property tax based on your market value. There are lot of single-family residents who were living in Texas for early 1990s when they had bought those houses in like $100,000. Their house value right now is $300,000 or $500,000.

Dylan Silver (22:09)
Yeah.

can go up 50 % in one year.

Vaibhav Puranik (22:32)
And these people are taking five times tax and they can’t afford it. And this is a reality. So it’s not silver bullet. Texas has its own strengths and California has its own strengths. So that’s why I don’t think you can do a straight comparison. There are pros and cons in every approach.

Dylan Silver (22:36)
yeah.

We are coming up on time here, Vaibhav any new projects that you’re working on, and then what’s the best way for folks to reach out to you or your team?

Vaibhav Puranik (23:00)
⁓ So I’m actually in the process of writing a book ⁓ on right now the working title is Passive Profit in Apartments. And what I’m doing is this book is not meant for other syndicators, but this book is meant for passive investors. There are a lot of professionals out there who have never heard of syndications and they don’t know how to do due diligence on syndicators, right? So this book is written in a very simple language. It’ll probably come out in like two, three months. ⁓ And this book is meant for ⁓

investors, passive investors to understand, evaluate syndications ⁓ essentially. So that’s one interesting project I’m working on. We’re also of course raising our new fund. So and people can contact us by going to our website oldmoneycapital.com. is a request a call button there. They can click that and schedule a call with one of our partners. Or there’s also a ⁓ contact us form there and they can simply

put their email and ⁓ put their request there and we’ll get an email for that. Of course, we are there on social media as well. Our YouTube channel is Old Money Capital. Our Instagram handle is @OldMoneyCapital123. ⁓ I’m there on LinkedIn as well. They can simply go and try to find me on LinkedIn and message me there. So these are all the ways they can reach out to me.