Use Data Like A Pro in Real Estate Investing | Find renters in 4 hours

Neal Bawa is CEO / Founder at Grocapitus and Mission 10K, two commercial real estate investment companies. Neal’s companies use cutting-edge real estate analytics technology to source and acquire OR build large Commercial properties across the U.S., for over 1,000 investors. Current portfolio over 4,400 units, with an AUM value of $660M

[00:00-19:30] Data-Driven Real Estate Investments

[19:31-21:28] Types of Real Estate Investors

[21:29-23:31] Ranking Cities for REI

[23:32-29:03] The Case of Austin

[29:04-36:09] AI in Real Estate Investment

[36:10-38:43] Access to good RE data

[38:44-41:52] Final Investor Q&A

Special Mention: Thomas Edison, Elon Musk, Tesla, SpaceX

Find Neal at https://grocapitus.com/neal-bawa/

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Transcript

Neal: [00:00:00] Bunch of them for us. At, at one point we owned all homes in Truman Street in Madera. All of the homes in that street were basically part of our group. And so it was fascinating. We, we were making crazy amounts of money and so we'd come back to our meetup group and we'd show the results and people go crazy and, and eventually somebody came back to me actually and said.

Neal: This algorithm clearly works. 

Axel: Welcome to the Ideal Investor Show. This is the podcast where we help you challenge your mindset and discover where you are. Let's go. Hey, hello, and welcome to another episode of The Ideal Investor Show. And as you guys all know, once a week we bring you a great guest, and every so often we bring back a guest, uh, which is the case here with Neil.

Axel: So today we have Neil Baba. Welcome to the show, Neil. 

Neal: Thanks for having me back on Axel. It's great to be on the show again. 

Axel: Yeah. Awesome. I'm very glad, especially since you've done so much. Uh, it's been a while, um, and we kind of, it's occurring more and more [00:01:00] than people that have been on the show quite a while ago coming back, so I appreciate that.

Axel: For those people who didn't catch your last episode, um, and haven't gone to the website or anything like that, tell us a little bit, how did Nia get to where you are today? 

Neal: Sure. Um, I'm a, um, technologist, uh, data scientist, computer science degree. Um, had a full and successful career in technology. Sold a tech company in 2013 and, uh, got into real estate by accident, uh, because my CEO, who was the senior partner of the company, asked for my help in building a technology campus in 2003.

Neal: No investors, no bank. Just our money. And that gots me into real estate backwards. You know, most people start in real estate axel with, you know, fix and flip or maybe, uh, you know, single family rental. And in my case, I was lucky enough to start with a [00:02:00] 27,000 square foot built from scratch campus. Made hundreds of mistakes, but I didn't have to answer to anybody.

Neal: You know, it was our own money. No bank. So we made the mistakes, but we also learned a lot. And after I finished the campus and we ended up building, you know, many more campuses, I noticed that my. Take home income was increasing rapidly because of this thing called depreciation or paper losses. And so I was able to basically gather more and more money at that campus was built in 2004, so by 2008 I had, you know, multimillion dollars in the bank and I didn't know what to do with them.

Neal: Um, my taxes were down and so my timing was incredibly good to start buying single family real estate. And I ended up buying dozens and dozens of homes in the, in the crash. So, did you buy him out of foreclosure or how did you buy him? So, um, you know, as a data scientist, I look at everything through the lens of numbers.

Neal: To me, every single thing in the world is about numbers. And so, uh, I realized I [00:03:00] wanted to buy single family homes, but I was, you know, I wanted to answer two questions. Is this a good time to buy? And where do I buy in the United States? I'm not particularly tied to buying near my home because I'd read.

Neal: Very useful data from people saying, you know, buying your, your home is just a comfort blanket. It doesn't, it isn't necessarily a good decision. So I wanted to make good decisions, but I wanted to know if this is a good time to buy. So what I did was I, um, I. Spidered, massive amounts of datas, terabytes of data from the Bureau of Labor Statistics website, which has demographics data for every city in the United States.

Neal: And then I, you know, spider data from Zillow and Trulia and Redfin and realtor.com and a whole bunch of other sites. And I put that terabytes of data into a statistical analysis software called R. Just the name of the software is r and r, helps you find correlations. And the correlations that I was trying to find was, how does this time correlate to the last 50 years?

Neal: And the answer that I received was bizarre. My software [00:04:00] was basically telling me that this was the best time to buy real estate in a hundred years, right? And I was stupid enough, moronic enough to go and tell other people that that got me banned from my family parties because they thought I would infect the family with my stupid ideas.

Neal: And that made me furious. Um, so I said, okay, well I'm a data scientist. This is based on data. Um, why don't I go tell my story to other people that want to listen to me that are not my family? Um, and so I started a meetup group inside of my technology company. I had large conference rooms. I said, you know, I'm just gonna, basically, I'm not gonna fight through San Francisco Bay Area traffic.

Neal: I'm just gonna basically, you know, bring everybody in here. So big, you know, classrooms and projectors and everything else. I had everything I needed for a meetup, so I basically would invite people that were holding their own meetups. And then I also started my own meetup, and back then it was, right now it's a multi-family meetup, but back then it was a single family meetup.

Neal: And so we started presenting the [00:05:00] data that was coming out, the terabytes of data that was coming out, and we gradually migrated from the first question, which clearly was, you know, is this a good time to buy? The answer was, hell yeah. Uh, to a second question, which was much more fascinating to the people that were attending the meetup, and that was, what is the best city in America to invest in right now?

Neal: And how do you know the answer to that question? Right? So the first one is, what is the best city? The second one is, well, how the heck did you figure that out? Right? What does that mean? And so. We being in Silicon Valley, I mean there, you know, you throw a rock, you're gonna hit a nerd. The people that were initially coming into my group were very nerdy people, data scientists, you know, people writing code.

Neal: And so we'd sit down and basically discuss all this data and say, you know, how do we use this data? How do we slice it, dice it, you know, what is it? What is it going to tell us? And how do we know that we are right? And you know, those sorts of questions were very interesting and over time. The answers the were that there is no, there is no best city in America to invest in.

Neal: There's only a best city at any given [00:06:00] point of time. And that changes and it can often change even inside of a year. Right? So, um, for example, I would say that in 20 18, 20 19, the best city to invest in America was Austin, Texas. Today it's actually. Possibly one of the worst. Not the worst, but you know, one of the worst.

Neal: Uh, for the same reason actually, because you know, it got over flooded, massively over flooded with both single family construction and multifamily construction. So even though it has absolutely astonishing over the top numbers for job growth, income growth, home, and um, population growth. It has terrible numbers for home price growth and terrible numbers for multifamily.

Neal: Um, you know, rent growth negative for both because it got over flooded. So you can have an incredible market with all of the demographics numbers that are phenomenal and still be at the bottom of the barrel and, and be at the top of the barrel two years before that, right? So this is what we learned.

Neal: This is what the numbers taught us. And so back then, uh, of the [00:07:00] 1016 cities that were in our software. Madera, California kept coming up and, um, you know, the, the reasons why these cities come up at any given point, point of time do change over time. But back then, the reason was Madera prices had dropped the most from 2005 peaks to 2009 troughs, and back then the price drop was the single biggest factor.

Neal: Today, the factor for single family and multifamily, that's the largest is incoming supply. Incoming, you know, single family plus multifamily supply taken together in a market basically is, is is the ruling factor in 2009, because there were such massive price drops, the biggest single factor that appeared to be affecting our profits was was price drops.

Neal: And so we basically figured out the, the price drops of every single city by mining data from Zillow and Trulia and Redfin and realtor.com or their predecessors. Back then, these sites were called something different. Um, and, uh. [00:08:00] Madera was stunning in that it had dropped 71% from peak. No other city in America had dropped 71%.

Neal: There were lots of cities in the sixties and fifties. Um, you know, places like Phoenix and parts of Florida had dropped in the fifties. But no city had dropped 71%. So I was curious, why the heck would a Californian city drop 71% from peak? That's gotta be a reason. So I jumped in my car, drove 144 miles from the San Francisco Bay area, and entered Madera.

Neal: And I go and basically meet a realtor. And I say, you know, most cities are seeing price drops, 20%, 30%, 40%. Your city's at 71. There's gotta be a reason. Tell me why. The broker had a very simple explanation, very simple. He said, Kaufman and Broad. Was building thousands and thousands of homes here. And what they would do is they would sort of round up these farm people from Mexico and they would say, come buy these homes.

Neal: They can only go up. Um, and um, and, uh, you know, no stated income necessary. So these were farm [00:09:00] workers, right? And Kaufman wasn't necessarily doing that, but there were brokers that were, you know, sort of fronting Kaufman that were doing that. And so, 5,000 brand new homes in this. Then this, uh, city of a small city of, you know, 60,000 people ended up belonging to farm workers.

Neal: By 2009, all those farm workers had realized that these homes were worth very little, and so they had disappeared. Um, so now you had 5,000 brand new homes that nobody had ever lived in that were completely empty entire streets. Right. Entire, you know, subdivisions completely empty. And when you have this kind of problem, the price doesn't crash.

Neal: It just completely, you know, goes through the floor. And so we had prices that were 71% down. And so I asked the broker, can you find out from a construction guy, what is the cost to build these homes? He said, over 200,000. So I said, what, what, what does it cost to buy them? Well, 90,000. I said, well, I mean, shouldn't there be a line out the door looking to buy these homes for 90,000 if they cost $200,000 to build?

Neal: He said, yes. But the challenge is, is, is [00:10:00] renters. Madera is a small city. All the jobs are in Fresno, 22 miles away. Right. And so how are you gonna find, get people to come here? Um, and that's really the, the key. Otherwise this is the greatest, you know, buy in the world. So I, I was like, okay, we, we, we need to find a solution to that, right?

Neal: So me and, and some of my buddies, we jump back into our car. We drive 22 miles to Fresno. You know, Fresno's a booming city, you know, metro of half a million people. So we go in there, there's no job issues really. I mean, Fresno is doing fine. So we basically walk into a broker's, um, you know, uh, building a broker's, uh, office, and we say we wanna buy one.

Neal: Older property in Fresno. He said like, no, no, no, I can sell you a new one. I said, no, no, we want to buy an older property. So he was like, okay, these are, you know, typical idiots from the San Francisco Bay Area. I'm gonna sell them an older property. So he sells me a property on, uh, Summerfield Drive in Fresno for $91,000.

Neal: Uh, and this was a 20-year-old property, so I. Immediately go back to my Ukrainian hackers, 'cause [00:11:00] they're the ones that are spidering all these websites from me. And I say to my Ukrainian hacker, you, I have this one property I want. Thousands and thousands of rental leads. He says, you have a single property, you need 20 leads, not a thousand.

Neal: I said, trust me, I know what I'm doing. Can you please gimme a thousand leads? So he's like, oh, I have to write all kinds of scrapers and do this on apartments.com and do this on rent.com, but you're gonna get too many leads and you know it's gonna be a waste of your time. And I'm like, just do it. So the guy, I pay him, he does it and we start getting this.

Neal: Axel, we get get this avalanche of leads for this property and so I assign it to, you know, a Philip, a person in the Philippines. I have about 25 of them that work for me full time. Back then it was only one, so I assign it to the Philippines. She picks up the phone, talks to people and says, Hey, this Fresno property, it's gone.

Neal: It's not available, but I have 10 brand new properties in Madera, 22 miles away. And we'll give you a $50 Starbucks card or Amazon card. If you jump in a car and go check out [00:12:00] those brand new properties, the rent is a thousand dollars. So it's $600 lower than this older, you know, Fresno property we were, we were listing that one for 1600.

Neal: So you'll save 600 bucks and just to go check it out, you'll get $50 gas card, Amazon card, nine outta 10. People thought that we were trying some kind of scheme. Right. Yeah. And so they would just hang up on us or, or abuse us, but the 10th person would be like, yeah, I don't mind. I'm gonna, you know, I wanna check out these brand new homes.

Neal: We would send them very nice pictures, and these are gorgeous Kaufman and broad properties, you know, granite, brick, all sorts of gorgeous stuff. Four bedrooms, five bedrooms. And so the 10th person would jump into their car and go to Madera and get hooked because we were, we were listing a five bedroom property, brand new, never lived in.

Neal: For a thousand dollars. Right. And we figured we could get a lot more, but we didn't care about that. We, we just wanted to lease these out. So the agreement that we had with the listing broker was that we would be [00:13:00] allowed to show tenants without buying the property or without putting it in contract. And the moment we had a, uh, a rent contract, then the same day we had to walk in and close all cash.

Neal: So we would basically have somebody, well, 90,000, 

Axel: you know, I mean that's, if you had the means, like you said, you had the money in the bank, you could 90,000 not a big deal. 

Neal: Exactly. So what we would do is basically a renter would come in, we'd sign the contract. And, and there was a clause in the contract saying, you know, we have to purchase the property.

Neal: It's gonna take us 15 days to do that. So we weren't doing anything shady. And then we would basically walk over to the broker and put down the $90,000. And then immediately an hour later, we would start a refinance process on that property, right? So it would take us a month and a half to get the tenant in and a month and a half to get the refinance, and we'd basically refinance about $70,000 back.

Neal: So our, you know, now we have $20,000 left in the property with a thousand dollars a month in rent. Today. Those rents are 3000. Right. So, you know, back then bucks 

Axel: and now it's 3000. Yeah, right. In that location, better than 1%. Everybody [00:14:00] would say that it's not possible, you know? Yeah. I 

Neal: mean, at this, this time we are getting $36,000 in rent for a property where our total equity, you know, that we put in 10 years ago was 20 rent.

Axel: Yeah. 

Neal: So, you know, infinite returns sort of comes to mind. Uh, and, and most of these properties we've refinanced and taken all equity out. I mean, you know, many of these properties have $300,000 loans now. Uh, so we've basically taken our 20 grand and $280,000 out, and we have that money invested in some multifamily somewhere else.

Neal: So the, the, so how many, if I may 

Axel: ask. Sorry for interrupting you, Nia, but how many of those, many, many that were sitting there basically empty, were you able to get, for somebody to drive 20 miles extra to work or 20 miles extra? All of 'em. I 

Neal: mean, we, I, I made the stupidest mistake of my life in that I stopped at 15 because my, I.

Neal: My, um, lenders kept telling me that you can get 10 in your name and four in your wife's name, and so, you know, and you can't get any more than that. So, you know, I [00:15:00] tried to get 10 in her name, but she had, she was a school teacher. The income wasn't there. I had a big income, so I got 10. She got four, and then they said it's.

Neal: Not legal to get more, and I listened to them. I was stupid. You didn't try to get a portfolio 

Axel: loan or anything 

Neal: as I didn't even know what a portfolio loan was. Axel. I was a technologist running a company with 400 employees. I don't know what a portfolio loan means. Yeah. And so the biggest mistake of my line was life, was that I didn't ask the question.

Neal: W why do some people have hundreds of homes? Right, right. The answer is a portfolio loan. And, and if I'd known that, I would've kept buying, but I stopped at 14 and then I started buying for my family. So mother-in-law, sister-in-law, a whole bunch of people. Then I started buying for friends and, you know, bay Area based friends from Apple and Google and LinkedIn, you know, bought a bunch of bunch of them for us.

Neal: At, at one point we owned all homes in Truman Street in Madera. All of the homes in that street were basically part of our group. And so it was fascinating. We, we were making crazy amounts of money and so we'd come back to our meetup group and we'd show the results and people would go crazy and, [00:16:00] and eventually somebody came back to me actually and said, I.

Neal: This algorithm clearly works, right? So why don't you publish it on the web? And because we were teaching it on the meetup and we said, you know, I said, I don't know how to do that. And he said, don't worry about it. You know, I'll just basically bring in a webcam and I'll record you and, you know, we'll turn that into a course on udemy.com.

Neal: So he did that. And, um, we put the course on there. It's at udemy.com/real focus. Or you can just type in, you know, into Google Udemy space. Neil Bauer. We thought, you know, maybe a hundred, 200 people a year will take the course. And if you go to that URL right now, you'll notice over 14,000 people are taking the course.

Neal: And it is the most popular real estate course on Udemy, which has hundreds of thousands of courses, and it is the best review course. So everyone gives it a five star review because there is no pitch because. Back when I created the course, I wasn't a real estate guy. I was a technology guy saying, I, I came up with something cool that works.

Neal: [00:17:00] Here's my, here's how I did it, and that's it. There was no offer, there was no ebook, there was no, you know, invest with me call because I was a tech guy. Well, how would they invest with me? Um, so the course became extremely popular. Sort of blew up. Before I knew it, there were conferences all over the US calling me to present.

Neal: And I would keep saying to them, you realize I'm not a real estate guy. I don't have a large portfolio that's billions of dollars. These other people at your conference are, you know, they have a billion dollar portfolio. I'm a tech guy. And they're like, yeah, we like the fact that you're this nerdy guy that comes in and tells this interesting story and doesn't have any ax to grind.

Neal: Everyone needs a token nerd and you're it. And so. I was getting free conference tickets, free airfare, free hotel, and I, I was having a blast and all while I was doing it, I was building this massive database of people that I didn't know what to do with until 2013. I sell my company, end up with a gigantic [00:18:00] tax bill, and I go to my CPA and he says, buy multifamily.

Neal: And I said, okay. So if I take all the money that I've made from the sale of the company and I buy multifamily, will my tax bill go down to zero from the millions? And he says, no. And I said, so how do I do that? He says, well, you have to syndicate. What that means is 20, 30%, maybe 10% is your money, and then the remaining 80% is other people's money.

Neal: And by doing that, you can buy enough buildings to take your tax bill down to zero. I said, okay. I go Google syndication. I understand it. I send an email out to this database that I've been building for five years, and in four and a half hours we have sold out our first syndication. And before I knew it, I was a real estate professional.

Neal: Right. Um, 

Axel: so for 

Neal: that I completely accidentally. 

Axel: Yeah. Yeah. It's a cool, cool story. Um, couple of questions that immediately come to mind, and I really appreciate that you open it the way you did because you mentioned, you know, like two years ago, Austin was the place to be. Now it's another [00:19:00] place. Um, because the circumstances change and I'm suspecting Madeira is probably not the, the place either anymore.

Axel: So when somebody takes your course, it's just one of multiple questions. But if somebody takes the course, is there any access to, to whoever bought the company and is running that algorithm to figure out where the good places are? 

Neal: Yes. And the, the people who bought the company didn't buy my algorithm.

Neal: That was a tech company that was completely unrelated to Oh, okay. Real estate. It was just a technology company. Right. So what we realized over time is there's two kinds of people. There's a. Kind of people that wanna understand the process and wanna do it themselves, right? And there's the kind of people who simply want a list of cities knowing our process.

Neal: So they take our course, but they don't wanna repeat that process by themselves. They just want to have a list, right? So we, we serve both of those groups and we serve them for free, where there's no. There's no education package, there's no upsell, there's no subscription. It's completely free. And every year about 14,000 people use, uh, 15,000 [00:20:00] people take our webinars and use this data.

Neal: So there's two ways of doing it. One is you go to Udemy, you take the course, right? I. The course basically teaches you in an hour how to take any set of cities that you have come up with, right? Maybe water cooler conversation. You, you, you had a conversation, somebody mentioned Grand Rapids, Michigan, or somebody else mentioned Idaho Falls, Idaho.

Neal: And you're like, okay, so these people, this guy thinks Idaho Falls is great. This guy thinks Grand Rapids is good. I'm gonna use Neil Bauer's course and apply his metrics. It takes about 30 minutes. And compare the two and very clearly at the end of it, I'll be able to tell which one's better and I never have to talk to Neil Bawa about it.

Neal: Right. Yeah. I just basically use the metrics. So those groups of people have done all kinds of fascinating things. They've taken our system, we call it location magic. They've expanded it. Some people are using it for senior housing, some people are using it for storage, and I don't even know what those metrics are, but people seem to have taken the ideas and, and, you know, moved them forward in those areas.

Neal: Um, [00:21:00] the, the system that I've designed, location magic works for single family and multifamily. It's not, not designed for anything else. Um, and I tell people, Hey, please, if, if you're using this for hotels or self storage, please understand, I never created it for this. It could just blow up in your face. And so I.

Neal: W what happened there is that then I started getting a second set of people that were like, okay, this is all very nice, but there's a thousand cities in the us. How do I pick 3, 5, 10 cities to compare? And so that was the, the, the people that wanted some spoonfeeding. So essentially what we do is that on a quarterly basis, we rank cities and, and we don't have the time to rank.

Neal: 1,016 cities. So what we do is we do some initial filtering and that gets us a list of about a hundred. And then we rank them on a quarterly basis for our internal use. And we use a lot of metrics that other people don't have access to, paid the software that we pay about $50,000 a year for. And then what we do is we, uh, publish this ranking.

Neal: In January each year, so we do a presentation [00:22:00] called Real Estate Trends, and the second half of this presentation is. Both the public rankings. So in January each year, lots and lots of people rank cities for various purposes. Zillow does a ranking. realtor.com does one, Milken Institute does one. And, uh, there's a few other places that rank cities.

Neal: So what we do is in the second half, we basically show them all of the rankings from all of the different groups, like 6, 7, 8 different groups. And we, we pick cities on. About, Hey, we like this one and here's why we like that one. Here's why. Maybe the city appears every single year, or maybe there's just a flash in the pan.

Neal: A city appears once. In that case we don't discuss it. And then at the end of the presentation, based on our internal data and research, we pick two cities best up and coming and best city in America to invest in. And we tell people. This is just for this year. You cannot use this next year, but you're welcome back in January to come back and watch the webinar.

Neal: It's a free webinar. There's no subscription or upsell, right? So come back, watch it every [00:23:00] year, and now you've got a list of cities or six list of cities, and then you've got our two recommendations. And maybe that's enough for you. So we get about, you know, as I mentioned, about 14,000 people a year that sign up for our webinars and about 14,000 that are currently taking the course on Udemy.

Neal: So two different ways of looking at it. You know, do it yourself versus get a list. And that's what we're famous for. Yeah. 

Axel: And that's, that's pretty cool. And I mean, I think you should be very proud of that. Um, two things before we close. Um, you mentioned Austin and you mentioned that. Locations change as far as how favorable from an investor perspective they should be looked at.

Axel: I'm just curious, and I know you keep saying you're not a, not a, or we're not a real estate guy. I wonder if you, why analyzing the data, find any indications why, for example, permitting departments. Is it just they have [00:24:00] no economic look? Are they blinded by, by the job growth numbers or, or how is it that even under the, I would say for the last five years at least, it may be longer for Austin, all the economic indicators were probably the best you could imagine.

Axel: But somebody per, per still permitted such a flood that you ultimately destroy the market. Is there anything in the data that you would say that would help other jurisdictions, maybe even Austin itself or places like it? To avoid something like that because I think it destroys a lot of, well, it depe if you're, if you are affected, right, it can destroy lives.

Axel: Um, because especially in larger multifamily, I know of, of a couple in the Austin area, like 250, 350 unit developments where they had the best of intentions, really modern, really serving the public. They can't, they just can't come to an end, or at least not in a reasonable time or with [00:25:00] a reasonable, uh, outcome.

Axel: So these people are basically, you know, and I don't know how you see it, but in my experience, especially if people haven't done it many times over, but even some of the ones who are doing it and have done it for quite a few years. They're now kind of disillusioned and they're basically saying, I don't want to touch this place ever again, which I don't think is a really desirable outcome.

Axel: Did you see anything in the data why this massive overbuild can happen? 

Neal: Yeah, I think the big reason was that in the last decade and a half, there was no overbuild and so people did not believe that it could happen. So even people that were experienced developers did not believe an overbuilding could happen.

Neal: Um, also. When you talk about Austin, it's easy to get equity. It banks were willing to lend. So it, you know, when, you know, maybe we should have built more in Kansas City. Maybe we should have built more in northwest Arkansas, but it's harder to get equity and harder to [00:26:00] get loans. And that may have been one of the reasons why people were more, you know, focused on Austin.

Neal: Um, it's an institutional. Grade market. And so people wanted to be in an institutional grade market. So there were a number of good reasons for why people did it. Uh, but the market still got flooded. So I think that the industry as a whole is better now than it was in 2022 in really focusing on supply.

Neal: So I see. I. My, uh, you know, fellow syndicators being much more cautious about supply today than they were two years ago. So I think the key is that you have to learn the lessons and I, I think that a lot of those lessons have been learned. Um, the, the other issue is it wasn't just the supply that resulted in those negative outcomes in Austin that you're talking about.

Neal: It was the supply combined with the interest rate hikes. If the interest rate hikes had not happened in this timeframe, I think many of those outcomes would still be very positive. So the interest rate outcome, interest rate hikes were [00:27:00] probably 60% of the problem with the supply only being about 40%. 

Axel: Yeah, I, and that's a great point.

Axel: And I also believe it's not just the relatively rapid increase, it's also that it's still around even to this day, right? I think a lot of the more experienced developers were thinking, okay, a 250 unit development takes three years anyway, maybe four. So by then we are probably in a better space. But really, if you think about it from 22 till now.

Axel: The numbers haven't really changed in, in, in a meaningful way. Right. So, um, yeah, and 

Neal: people, people assumed, I mean, if even the Federal Reserve assumed that by now, if you look at their projections in 2023, yeah. They were cutting rates more than they have cut in 2024. They were cutting rates, rates more than 2025.

Neal: We've cut in 2025. So even if you use the Federal Reserves projection, you would've been much further ahead in that theoretical scenario than you are in reality. 

Axel: Absolutely. I, I always, you [00:28:00] know, a lot of people ask me, are you a nerd? I, I try to, to claim that I'm not, but I am one of those people who take a screenshot of the dot plot, not because I'm really that interested on where the dots are and stuff, but for exactly the reason that you, uh, said, you know, when you put.

Axel: Like a couple of years in a row and you see, okay, this is what they expect in two years to be the case, and how often are they wrong? It's almost always, you know, so 

Neal: they're almost always wrong. Uh, but I, I still think that the dot plot is a useful tool. Yeah. Um, I, I find that the things that the Fed is predicting, there are so many X factors that there, it's very hard for their predictions to be, you know, right.

Neal: Most of the time. The market also makes assumptions based on the dot plot that makes the fed's job harder. Um, but I think then there's, you know, X factors, right? So COVID was an X factor. Tariffs are an X factor. How do you write X factors into a dot plot? 

Axel: Yeah, I, I have no idea and I wouldn't even want to try, but since you are such a data [00:29:00] guy.

Axel: You mentioned a couple of those and there are a few more. I'm kind of curious on the other end, since you mentioned algorithms and data analysis and, and spiders and crawlers and all those kind of things, nowadays a lot of people that are interested in technology speak about ai, HEI and in within that, what I am kind of fascinated by, I want to ask you.

Axel: I've recently heard a couple of presentations that say the new thing that we are now in is reasoning. It's not just searching and finding stuff and combining what we find or large language models, but reasoning when, I'm trying to think, I understand what this is, in which direction it's going to. For example, in the context of finding the top 10 or top 12 cities.

Axel: How much do you think these modern tools will be able to help teams like us to, to use stuff like reasoning to, to come up with even more data to make the results even more solid? [00:30:00]

Neal: I think it'll make it easier, but for paid tools. So I think that for free tools that the, I don't, I don't think that it's gonna be a huge difference, but for example, one of the top tools in the industry is called CoStar.

Neal: And I know that CoStar right now are working on, 'cause they have the most structured high quality data. For, you know, cities around the us, you know, whether it's, you know, population growth, job growth, income growth, schools, you know, crime, they, they have the structured data. They all, obviously, because they own apartments.com, also have all the rent data, one bedroom, two bedroom, three bedroom in every single, you know, area.

Neal: Uh, they also have pricing data in terms of, you know, what buildings are sold for. So they've got all of the data and I know that they're working on a tool that you can query in, in English language. So I could basically query a tool saying, you know. I am more focused on growth stories. What are the best growth stories in the United States right now?

Neal: What cities have the highest growth stories? Uh, another per query I could ask is I am very [00:31:00] supply focused. What are the markets in the US that are growing fine, not top growth, but growing fine, but are also markets that have insufficient supply. So that rent growth story would be phenomenal. Not necessarily the, the overall growth story, but the rent growth story would be, uh, phenomenal.

Neal: So it would then basically query its database and give you choices. Of course it's a $25,000 tool. I think we are going to see those, that kind of tool at every price point. We're gonna see that tool at 25,000 a year. We're gonna see it at $99 a month. We're gonna see it at $49 a month. So we're gonna get to the point where some of the cheaper tools that are out there, uh, like property radar.

Neal: Are going to basically become AI equipped. So you can have very detailed discussions with these tools and you can basically just share your thoughts, your ideas, and, and refine the discussion and the tool basically come back and say, okay, well here's a list of 10 cities. And then I said, no, no, no. You know, uh, I'm, I'm, you know, I, I'd much rather stick with the northeast of the United States.

Neal: Okay, here's a list of 10 cities. So it, [00:32:00] you're having a conversation with an AI tool, and it's basically refining this information in real time based on your needs and, and likes and, and. Timeframes and I think that's the world that we are going to be in within the next 12 to to 24 months. 

Axel: Okay. Yeah, that makes a lot of sense.

Axel: Now thinking about that, do you think whatever people that can afford or want to afford these tools and the results that they get out of those, do you think they're gonna publish those? Um, who's gonna publish them? If I had a tool like that and I find out, okay, here's a particular location that I wanna actually, you know, take advantage of the data that, that I got out of the tool, you think it's gonna be published or not?

Neal: Oh, absolutely. Because the people that are publishing the tools are after billion dollar valuations. And if you get a billion dollar valuation, if you get, you know, a million people to subscribe at $99, you know, a year that. $99 a year, 99 million a year in revenue, you'd be worth many, many billions of dollars.

Neal: [00:33:00] You're not gonna make that kind of money from real estate. Real estate doesn't scale as well as technology does. So not everyone thinks like, oh, well I should hide this list. So there's, there's gonna be dozens and dozens of different AI tools that are going to use data sets. To in real time, give you recommendations of cities and basically tell you why this city is better than that one.

Neal: Remember, these tools already exist. I think the, what has changed is you, you, you know, open a tool like housing alerts.com, right? You go in there, you see a list of cities and you can sort and filter. And five years ago, I could do that. 10 years ago I could do that with housing alerts, what's changed is the ability to have real conversations with AI and in the background have it sort.

Neal: Change, filter things on the basis of a straightforward conversation. 

Axel: Yeah, absolutely. I'm, I'm totally with you and I was actually thinking, and that's why I asked the question, if it's most likely gonna be published, and I by the way, agree with you that it will, is [00:34:00] like com thinking, you know, like we are right now in Rock three.

Axel: I think very soon we are gonna have the next version. That is basically a real time tool, right? You could literally tell it, okay, I'm looking for the best BTR location, not just straight out best city or something like that. And instead of having to have the whole tool set available, it can just go of all of all the stuff that is basically published today.

Axel: Rather than, yeah. But 

Neal: what I find is that a lot of the tools are not good at it. Like, for example, today I could ask Notebook, lm, or I could ask chat GPT, what are the best BTR markets in the United States? The answers, and I've already tried this, so I can tell you. Yeah, me too. It basically picks some of the top cities in the US so it'll, you know, it'll tell you Dallas, Atlanta, Phoenix, it'll basically pick those cities.

Neal: So it does not have the insight and the reason for that, it, it does not have the in-depth data, like for example. Chat, GPD doesn't know how many BTR units are in construction right now in Phoenix, what their rents are and how [00:35:00] those rents have changed in the last year. What are the prices for the BTR units that are selling?

Neal: It does not have that information, which is why I think the real winners are going to be the companies that have that information. The CoStar, the Yardi Matrixes, the Neighborhood Scouts, the city data, the, these are the folks that may have access to some of this information, especially the first three that I mentioned.

Neal: Those are going to be the real winners because AI is only as good as the data you train it with. So if you don't train it with domain specific real time data, the the recommendations are very meh. Yeah, I, 

Axel: I agree with you on that. What I was getting at, and maybe I'm not totally understanding the technology, not a nerd as I keep claiming, but, uh, it's, it looks to me that when you look at a chat, GPT, it's basically, like you said, trained on data.

Axel: And right now the data is probably end of last year, something like that. And then, and some of the 

Neal: data isn't even there, right. So, right. Yeah. Yeah. 

Axel: Exactly. I mean if it's, it doesn't have 

Neal: rental data on, you know, [00:36:00] you know, 19 and a half million units, CoStar does have data. Yeah, yeah, exactly. So a lot of the data is simply not published anywhere on the web.

Axel: Right. And see now we are coming to the rear point is because it's not tell the people how they get in touch with you so they get the good deal. 

Neal: Sure. So the, the first thing that you should do is, is, you know, we don't sell data and we are not interested in selling data. We're not interested selling technology or subscriptions to you.

Neal: We are in the business of taking money from high net worth investors these days. Family offices used to be high net worth investors and buying in the markets that we find, and one of the things that we actually have the capability of doing is because we have 80,000. Plus people following our, our data at, at some level, we can actually raise markets.

Neal: We can affect markets in a positive way. So when we find a market, we'll go buy land, buy properties, and then publish the data, and usually we get a five to 10% boost in the market simply. Through [00:37:00] the people that are following us in. So, so we've got our own all ships rising, uh, benefit. So we work with high net worth individuals, especially folks with, you know, $50 million or more in net worth.

Neal: Uh, we have several billionaires. That, you know, use our data and they have their own funds. So we have a, a fund just for one investor. Then we have a fund for another investor, and then we have funds that have hundreds or thousands of investors in them. And that is how we make our money. The data is given away, it's published, so I.

Neal: You go to Multifamily University. So you either go to Google and type in multifamily university, or you type in multifamily u.com into the Google bar, and you go there and all of our data is published. You wanna know about Airbnb. There's a very recent webinar with 70 slides of data you wanna know about.

Neal: Real estate multifamily trends. There's a deck there with 70 slides of data on single family and multifamily. You wanna know about hospitality. There's an upcoming deck that talks about hospitality, industrial, senior [00:38:00] housing. Uh, all the decks are there. They're, they're stored there for you and they're real time presentations.

Neal: A hundred percent of those presentations are done by me, so you're gonna, you know, see me and you're gonna watch the presentation and you just take whatever it is from there. Don't call us and say, I wanna consult with you, because we don't offer any consulting services. Our, our job is to be manage a billion dollar portfolio for, for our investors.

Neal: And we only use the data for that purpose, otherwise we just publish it. 

Axel: Yeah. Very cool. And I think that's a great resource and I want to thank you on behalf of anybody who is interested in, in doing these investments, that you actually do this, even if you, like you said, kind of backed into it and kind of never really Accidentally.

Axel: Accidentally. Yeah, exactly. Okay. Now last question unrelated to, to the data or the real estate is if you could meet anybody dead or alive, who would it be? Your and why? Neil? 

Neal: Um. I think Dad, I would want to meet with Thomas, ed Alva Edison. Right. Because [00:39:00] I, I, I find that the, these people are so incredibly, incredibly bright that you get, you know, just learning from them for an hour or two would be incredible.

Neal: Alive definitely is Elon Musk, I considered him to be the greatest entrepreneur of all time, I think. Uh. I, I wish that he would not be so politically active. Um, you know, somebody who has taken five companies to incredible levels, uh, in my mind beats Steve Jobs. I'd love to spend two hours speaking his brain.

Neal: I hear that in person. He is actually very charming, uh, on Twitter. He may not be. 

Axel: Yeah, I, I agree with you and I would come along for that, um, if I had the opportunity. I also believe, honestly, there is a benefit of people having short memories or having been trained to have relatively short memories. So, you know, I don't know if it takes another three years or maybe just one year, but I think time times will come back to a little bit more reasonable, uh, state if he, well, people 

Neal: will forget in a year.

Neal: I mean, this whole Doge thing is clearly over at [00:40:00] this point of time in a year. Nobody's gonna give a damn. People will just start to follow Elon again if he does great things and they will bash him if he does bad things. But not for the Doge thing. I mean, very, very short memories. Most people have very short memories.

Neal: Elon through Tesla basically was an accelerator. He was a catalyst for something much bigger to happen, which has a much better impact on the world than his own company. 

Axel: Yeah, I'm totally with you and I mean, I. Exactly. Yeah, you're absolutely right. Uh, on the other hand, I would have to say, I mean, we are not, obviously you, neither you nor I are giving any investing advice, I have to kind of say that, you know, no legal advice.

Axel: No, not at all. 

Neal: Yeah. In fact, I'm, I'm bashing Tesla, so you probably won't invest in it, but I, I wouldn't even invest in BYD at this point because you have to understand that. It might get delisted from the US stock Exchange in the next week or two, depending upon Trump's mood. But I personally invest in, in Chinese cars.

Neal: I do not invest in American cars, and I invest essentially based on Elon's thesis, [00:41:00] but applying that thesis to a market that's much more flexible and much more scaled, and much cheaper in, in cost. Those mar those um, players have become so much larger than Tesla or so much larger than the entire EV industry.

Neal: You know, you and I and maybe 

Axel: inviting Tony Siva, we could have a totally new show just about that because there's so much really amazing stuff going on. Neil, I want to thank you absolutely for your time and, um, not everything was necessarily only real estate, but that's why I appreciate you coming on.

Axel: Thank you. Thanks so much for your time. Bye-bye.