Since quitting his healthcare job after 8+ years, Jaspreet Baveja has been helping others achieve the dream of passive income through private lending. Jaspreet is the CEO of JGB, LLC and has built a business that allows him to pursue his passions of travel and spending time with his family while generating income on his terms. Today, he chats with Keith Baker to explain his process, lending methods, and habits and how he's able to lend on properties over 2000 miles away from his home.
[smart_track_player url="" title="PLP 112 - Lending On Properties 2,000 Miles Away With Jaspreet Baveja" ]
Lender Nation, greetings from the energy capital of the world, the last time I checked, it’s Houston, Texas. I'd like to thank you for sharing your time with me. If you're looking for practical tips and advice on private lending and how to build and maintain wealth without banks or Wall Street, then you're in the right place. If you want to learn from my mistakes so that you can avoid them, well then pull up a chair and pour yourself a stiff drink because this show is for you. This is dedicated to giving people just like you and me, the knowledge and confidence to participate in the most passive form of real estate investing known to man, private lending.
If you're looking for the easy button or a shortcut to beginning your private lending, then head over to PrivateLenderPodcast.com/ink to learn how you can put your money to work for you by investing in private and hard money loans in and around the Houston area. In case you haven't heard me say it before, Texas is a very lender friendly state with a relatively short foreclosure period. That's why we private lenders like lending here so much. As this episode is being released, it is Labor Day in the United States. To be specific, this episode is dropping on Monday, September 7th, in this dreadful year of our Lord, 2020.
I'm going to go off the ranch here, but I noticed earlier that the acorns had started the fall from an oak tree in my backyard and the squirrels are beginning to hoard their stash for the winter. It was quite fun to watch them not fight but scurry around. They were very excited about the fresh acorns that had fallen. Given the year it has been thus far and not knowing what the next four months are going to bring, not that January 1 is going to suddenly make our lives any better, but I’ve adopted a mantra and motto which is a very determined and emphatic plea to you, dear reader, and that is this. Three simple words. Prepare for winter. It's coming. The squirrels know it. If you haven't seen like something's coming, I don't know how much crazier things can get, but I don't want to ask.
I think it's a good time to prepare for winter. Start putting those acorns back, start not spending so much. Maybe get a little more conservative in the fiscal side of things. I'm trying to do that. At the same time, I'm trying to also become more liberal on the giving and the tithing and whatnot. As they say, the more you give, the more you get back. I'm trying that myself. I'm not suggesting you necessarily do that, but just saying that's where I'm at. We've had a hell of a nice long run on this bull market. We'll see what happens, but okay. Our topic is one for which I receive quite a few questions, and that is how to lend beyond your own backyard. I always say people tell people to start in their backyard before they move out and lend out of town or even across state lines.
It's something that I don't do myself because I don't need to leave Texas. It's fairly secure and safe for me and I can go still see the properties. However, I have the privilege of speaking with Jaspreet Baveja, a private lender in the San Francisco Bay area who's going to talk about how he generates positive ROI through private lending on properties that are over 2,000 miles away. In fact, I owe him a big, huge debt of gratitude because I was trying to wholesale some properties, some land in central Texas. It’s my guest Jaspreet who suggested I take down the deal myself and then that he would be a private lender.
Unfortunately, the deal fell through, but I'm really looking forward to the next one, knowing that I have a lender who's willing to finance development deals in a very hot spot of Texas. All he did was ask me one simple question and it got me out of a mental rut and it got me out of my own way. It gave me another option that had been kept hidden by my own limiting beliefs. I'm very grateful he made the suggestion. I want to say thanks, but let's go ahead and get down to the brass tacks and into the interview with Jaspreet Baveja.
Lender Nation, I'm honored to have with us on the show, Jaspreet Baveja. Jaspreet, welcome to the show.
Thank you very much.
Give us a quick background. I know you live in the San Francisco area, but where did your family come from?
We came from India. I was born and raised in India for almost fifteen years. We moved to New York for a couple of years down to Florida, Miami for ten years. I’ve been in the Bay Area now for over ten years as well. I met my wife here and she was also born and raised in India, New Delhi, like me. We've been married for several years. We have two girls. My parents live in Florida but are here at my house visiting in this COVID insanity. They said, “We waited long enough. We want to see our grandkids.” They came out and my youngest one had her birthday and the older one's going to have a birthday soon, so they're spending the time.
That's one of the things that most Americans, or certainly my American family didn't understand was the concept of family is a lot different from Indians. It's not better, not worse, but an old Indian grandmother trying to feed you when you're full and don't want to eat is the same as my grandmother was trying to feed me. It’s the same thing. The reason I wanted to bring Jaspreet on for you, Lender Nation, is I always say I only talk about things that I do. I lend in Texas and in my backyard, but Jaspreet goes across state lines.
I wanted to bring him on and turn the show over to you, Jaspreet, and say, how did you get into this private lending thing? You do it more for cashflow whereas I do it for my retirement. I found your story very intriguing. Obviously, we've spoken a few times and you were graciously kind enough to come on the show. I'm going to shut up and start taking notes here in a minute. If you could, how did you become a private lender? Were you a wholesaler or rehabber? Walk us through how you got to that?
I was working a full-time job at a healthcare company. I had been at that healthcare company at least six years when I got started in real estate. I had a rental property out here that became a rental because we moved out of a condo and we said, “We can rent it out for the same amount of money that we have to pay our lender.” That's all that mattered. A net-zero was all I was looking for because I was not an investor. I was not in that mindset at all. It was, “I can have two properties for the price of one and leave there and it will pay for itself and that'd be great.” It never works out that easily. It sounded great on paper, but luckily enough, it appreciated enough that we were able to get out of it for net-zero at the end, even after six-plus months of no rent from a tenant in California. It was normal. The eviction process is 6 to 9 months. Nobody even blinks an eye on that one. It's insane.
I said, “I’ll never do that again.” Lo and behold, two years later, I did that again. This time the rent was like time and a half of what it was before, but amazing tenants. They were making more in retirement than I was making with my wife's income combined as active employees. I was like, “I can trust these guys. They are pretty savvy.” It worked out well and it appreciated again. That one appreciated probably almost 50% in the 3 to 5 years that we held it. That was one of the biggest boosts for the cash influx to our family. It gives us a little bit of a nest egg to go ahead and do what I did. I quit my job.
[caption id="attachment_3002" align="aligncenter" width="600"] Private Money Lending: It’s a lot easier to lend to an established entity at a term of six to twelve months at double-digit returns with a first position lien guarantee, knowing that your money is secure in that asset.[/caption]
In 2017, I got started in real estate. My friend said, “You already got this one rental property in the Bay Area. Forget all that. That's not cashflowing at all. Let's look at cashflowing markets.” They dragged me over to Indianapolis from the Bay Area. Sight unseen and without flying out there ever, I bought two duplexes and relied on a network that my friends and investor buddies had already built. I got the broker, handyman, GCs, electrician guy and a flooring guy and slowly started building the network and a property manager. Soon enough, it went to crap. I fired the property manager and I got another one. Soon thereafter, it went to crap and I fired them.
You mean you have to manage the property manager?
You get the property out of state. You give it to a property manager. They hire everybody they need to. You make 8%, 10%, 12% a year and everything goes happy, go lucky. What are you talking about? Nothing ever goes wrong. You get a check in the mail, mailbox money. That’s ideal. It doesn't always work that way, unfortunately.
You’ve got to manage the managers and you get the easy mailbox money. You had bumps and bruises. Your friend, was he on the ground there in Indianapolis?
No. He was here and he has probably still had about 60-plus units out of there in Indy. They're powering through. The scale matters. The more invested you are and the more scale you have, the easier it is to handle those bumps and bruises. Let's say if even 50% of your portfolio goes away and you still got 40 paying tenants, it's a lot easier to manage those other 20, 30, 40 that are not, and get them rented and get them managed and all that stuff. That's where scale comes in, but I was barely at 2 or 4 duplexes. During this process of building my portfolio up is when I started networking with wholesalers and property managers like I said, and other flippers, other out-of-state investors that were investing in the out of California, whether SoCal or NorCal or whatever and talking to people.
One of the investors said, “Would you mind lending me money to buy this property in Indy? I’ll pay you X percent interest rate and you'll be the first position in the lien.” I said, “I heard that percentage return when I first was buying properties. I haven't seen it in the last eighteen months that I’ve been holding them. Maybe this will work out better.” That's how I started the process. I did some research, talked to a lawyer, looked at the contracts, and note and mortgage. I understood this is pretty similar to what my bank gave me when I was buying the property. They were giving me the loan and the documents look pretty similar. I figured out what it takes to get them. I don't think I spent months and trying to figure that out.
It was more like two weeks in to from when they asked me, I went and said, “Yes, let's go ahead and get started.” On the third weekend, I'd already funded the deal and it was close to $250,000. It was still something that I was comfortable taking the risk on because of that first position lien equity in the deal. The property was probably worth $500,000 and they were buying it for $290,000 or $300,000. I said, “There's enough equity that if everything goes south, I should be able to recoup my investment and still be able to make money.” I took that risk and it paid off pretty well. That was probably in June 2018. By the end of 2018, I'd done six more. It’s not even with that same guy but different people. Just word of mouth. I literally never advertised, never said to anything and talked about how I’ve done it. People came up and asked. I vetted them and off it went.
I want to unpack a few things there, if you don't mind. First off, you said you had a house in California that appreciate 50%. God bless the California real estate market because when it's good for people, it's good. When it sucks, it sucks. That's great that you were able to take advantage of that. I also love the fact that I wouldn't call it speculation per se, but for an outsider looking in California would probably consider speculation. You're able to profit and then put it into something very conservative like private lending, which is great. You should always have some spec money. You always have a little blackjack money, little roulette money. Some for the craps table, just to have a little fun, or for the stock market, if that's your casino, whatever. I do like that. The other thing I wanted to ask is what was the term of that first note that within three weeks that you had funded $250,000?
It was a 6 or 12-month loan. It was going to be personal guarantee to an LLC that had existed for a while and they were going to buy it. They were going to wholesale this one. They were going to buy it at a discount and then put maybe $1,000 to $5,000 in to clean it up. Not do a full-blown flip, but presentable and then market it. They have their own brokerage too. There's a pretty well-established team of investors. They got wholesaling, flipping, buy and hold and all that under their umbrella. They've got all these different components of their business that they utilize. It was pretty easy to figure out. They've done a lot of deals. They are open to the market. They have a huge podcast following. They have a huge investor following. It was a lot easier to lend to an established entity in terms of 6 to 12 months at double-digit returns with a first position lien guarantee, knowing that your money is secure in that asset.
You touched on one of my favorite things. When lending to people I say, “Who do I lend to?” I always tell people to be extremely discriminatory in this case. That's not for me to do the protected classes. I want to see a lot of gray hair. I like to see age when I lend to people, people that have been through it. This reminds me of the savings and loan crash of ‘88, or when this turned. I love that. The other thing I like is I always required people to have skin in the game, which usually means the money in the deal, but there's also reputational risk. I’ve turned a lot of newbies and first-timers away. However, if they have a coach or a mentor that is earning or had their shingles out and they have students and they have a reputation risk. If there's reputational risk, I like those too. It sounds like with this team, they've been around long enough. It wasn't like your friend's cousin Jimmy found a flip. This is a business deal.
A legitimate business that has been operating for years. Even on my website, I did the same thing. I put a link to one of the biggest counties in Indiana, which is Marion County. I put Marion County’s online website on my website that says, “Click here.” You put in any entities name or a person's name and you will see a release of mortgage. You see those deeds going in their name or the entity's name going back years. When you see 100-plus of those transactions, you know that they're active in the market and how long are they active. You can see the addresses and you can see dollar amounts. It's a free, simple resource to do a background check and you know you can't go wrong. This is literally the county's website. This is a recorded deed that they can't lie about. You go straight to the horse's mouth to hear, “Yes, they've done this deal.” You go down the list and it’s 100-plus of them.
How quick is that comfort level? That warm and fuzzy?
It overtakes you. You're like, “This is pretty good.” You get their LLC. You can go and save the information on the website, the state’s registrar website and you go take a look and say, “They've been there. They've registered 8 or 10 years ago or whatever. They've done hundreds of deals and they've got all these people investing.” Clearly, they're doing something right.
You also touched on something that is a deal-breaker. A lot of people want to have the loan to the LLC so if it goes tits up, they can walk away. They close down the LLC and there's no personal liability. Not in my world and it doesn't sound like that happens in your world either. You get the personal guarantee for everybody listed on that LLC. I know a couple of lawyers that insist not for LLCs because that's a whole different thing together, but a loan to an individual, especially in Texas. They put the name of their wife as well because we're community property. They could make the argument. “No, only half that loan.” If I loan out $100,000, only $50,000 of it is tied to him.
I have never lent to a person's name ever. I have been involved with at least 60 of my own loans so far, and I have helped get about 40 or more other people's loans into place to help connect the dots, and not once has it been in a person’s name. It's always been an entity name and the entity has to have existed for a while, seasoned guys, and that's it.
[bctt tweet="You can protect yourself in so many other ways than just worrying about entity creation." username=""]
That's how you stay safe. Your background is not in money or finance, is it? You said you've worked for a healthcare company.
I was doing healthcare regulatory compliance. I was doing documentation for physicians and surgeons and matching the dots for state regulations and doing data analytics, but it was never around finance and dollars and liens and figuring out mortgages. None of that. The only time I'd ever dealt with a mortgage, it was when I was buying my own primary residences. That's it. That speculative money that you're talking about, it was a primary residence that I got from my family. We moved in and a couple of years later we said, “The family is growing. This is too small. Let's go to a different house and we’ll rent this one out.” That's how it happened. Luckily enough, we stayed in it for at least 2 out of the 5 years. It’s tax-free. We take that money and run.
This is also another interesting point is that this is not in your retirement account. This is cash money out upfront. Is it taxed as ordinary income for you?
Yes. I’ve switched over to having an S corp election. We'll see dividends and salary and self-employment tax and all that stuff. We'll see how that works out, but I did it out of my own name for the first twenty deals at least. That was my name lending to an LLC. I eventually set up the LLC and then I said, “Maybe the LLCs hit its quota. Let's go over to an S corp. You grow, there's no need to have everything ready and everything figured out day one. A lot of people get held back in this scenario of, “I want to have all my ducks in a row.” You should focus on the deal and the stability and the verification of that asset, the person, the entity, whoever your borrowers, or even if you're doing a flip.
Focus on the market and the analysis of that and worry about your entities when you have enough experience to justify and warrant spending the money and figuring out and adding that headache to yourself. If you can at least do one deal on your own, you'll know what expenses you had, you’ll know what timeline it took. You'll know what people you have on the ground. If you spent too much time worrying about the entities, you're never going to move forward and do the deal and learn what you need to keep your money safe versus anticipating somebody suing you in the future, asset protection and tax efficiencies that you may gain. Figure out how to earn the money first and then you'll figure out the tax efficiencies later.
I'm following that very path myself right now. Larry Goins said it once. I took one of his boot camps. I still have the three-ring binder with the first real estate course I ever bought from him. In one of his boot camps when he came to Houston, this lady stood up and said, “When should I start to make my project file?” This is obviously several years ago when we had Manila envelopes, file folders and everything. Larry goes, “Have you closed on the deal?” She's like, “No.” He's like, “Find the property, find a seller and then worry about creating your file.”
Someone's like, “When should I create my LLC?” He’s like, “If you do your due diligence, if you do all your paperwork and you disclose everything, personally, you're not going to have any more liability.” You start getting rental properties, you start doing five wholesale deals, five flips. You've got moving parts now. Now's the time to start looking at that umbrella in the liability and asset protection and everything else. Go make some money before you figure it out. It's like saying, “What tax accountant should I get? I want to pay the fewer taxes.” Go make some money.
We’ll figure out the taxes later. It baffles me the number of people I hear talk about, “Before I get started on my deal,” and right then, all of a sudden I'm like, “Why?” Figure out how to make the money first. Get that process started, get that wheel churning and then take money out of that deal and go get an LLC set up. You can always do a quitclaim deed later. You can always set up land contracts later. Sure, you may lose a little bit of that anonymity and you may have a little bit of exposure for maybe months or weeks or even a year plus, but get property insurance, get umbrella insurance. You can protect yourself in so many other ways than just worrying about entity creation and figuring out what the right accountant and the right strategies. It's all about get the experience under your belt, figure out some way to make money and then use that money from that cashflowing business you're setting up and go get everything set up.
You had a nightmare deal. Everyone's had at least one nightmare deal. Tell me one that you're willing to admit because you're going to close the door so your wife can’t hear.
Of the 100-plus transactions that I’ve been involved with, not one has gone into default even once. One came close and that was one of the only two transactions I’ve done in California. One is still going strong. The other one was this one. You and I have talked about this one before where, “Set up a secondary lien on the property and secure your investment that way versus putting everything into a note and having it signed.” It was where I had a personal guarantee from not only the entity principals, but also a third party that had brought the deal to me. I had them sign a personal guarantee with their wife's name on it that said, “If this deal goes south for whatever reason on this date, they will pay me my principal plus interest due and fees and whatever else. I will assign the note to them and they can do whatever they want with it.”
That day came and I said, “I'm not seeing the money coming from these guys. I'm not hearing anything from them. That gives me the confidence. I need to invoke this right here.” Twenty-one days later, the check was in my hand, certified check cashed and out the deal I went. I said, “It's not like the deal went south because the deal was a package to me.” It was a transaction where I had multiple layers of protection and I invoked the protection layer. Within three weeks, I was good to go and I walked away. It's all about protecting yourself and anticipating what could possibly go wrong and do the best you can in setting up your terms the right way.
My money, my terms, and if they want that money, they're going to agree to my terms. They sure did. Lo and behold, I walked away scot-free. Be it a couple of weeks later, but I don't have to worry about the hassle of them putting the property on the market and dealing with inspections and delays in closing and all that. Fine, you go handle that all day, whatever you need, but I’ve got this third party. I secured my money, the return of investment, plus return on investment was achieved through the proper channels of setting up your terms.
This was a private loan to somebody. Was it a rehab or a rental in California?
It was a commercial warehouse property here in California on one of the huge crossroads in California, which was for interstate transport and they were going to do warehouse and set up those gates for the trucks and all that ramps and all that stuff. It was a great property. If they fix it upright, it's worth a lot. They bought it super cheap for literally 50% or 48% of the value of the ARB. It was an amazing deal and an amazing amount of equity. I had equity backup. I had personal guarantees. I had the loan, the note, the mortgage, the deed, the lien. I went down and said, “What boxes can I check in California to protect myself? I checked all. “Let's do it.”
[caption id="attachment_3003" align="aligncenter" width="600"] Private Money Lending: When you spend too much time worrying about the entities, you will never move forward and do the deal and learn what you need to keep your money safe.[/caption]
Deed of trust, property insurance, and it had good equity. Where did they run into trouble? Did the borrower or the operator communicate that with you in real-time?
Not so well. I was trying my best to give them the benefit of the doubt. I even went to go see them a couple of times and they were making some progress, but not enough. This was one of the only times I’ve done 100% of the purchase price, plus some rehab money because even then I was barely touching 50% of ARV and I had all this production built-in and the rate of return was going to be amazing. It was their lack of skin in the game that led to this complacency. It’s like, “It's all right. It's all his money anyway. What would he do? We'll get to that property when we get to it.” That's why everybody says having skin in the game is super important, but luckily enough, and I will say that I was lucky that I was able to not have them put enough skin in the game yet still walk away scot-free by leveraging the levels of security that I had in there.
It’s so easy to walk away. When it doesn't hurt them, it's easy for them to walk away. In fact, I submitted an article for a newsletter. I hope it gets published. Basically, there are two ways that I like to protect money. I hit 30,000 because they only had 300 words. Processes, do your due diligence. How you do all that, those things and your paperwork. The personal guarantee for all principals in an LLC, for example. You have the insurance policies. You have the title policy. The hazard policy. I always ensure that. Usually in Texas, hazard and liability go together on a property, but I do require flood insurance, which is separate because if $500 is going to kill a deal, they don't need my money. That’s the way I look at it. That's what I love about private lending. I jumped in, in March 2020 in the stock market and I'm like, “This is like going down the river rapidly in the tube. This is fun.” I know a lot of people lost and swallowed, but there were no insurance policies for COVID or pandemic insurance or anything like that on the market. You had to know how to play it. I'm no genius, I'm no timer, but so far so good. The more I make, the more I can lend out. That's the way I look at it.
That's what my dad was going over while he’s here. He's like, “On March 19th, I opened a trading account.” I'm like, “There was no better day to start than not one literally right there.” He's like, “I'm doing exceptionally.” I'm like, “It’s once in a lifetime opportunity. I'm glad you're availing it.” I'm not in the stock market at all. I have one IRA account that’s stuck in Merrill Lynch that has a couple of thousand bucks, and that's all I play with. That's my play money.
When I left the W-2, my last job, it was funny because I got a contribution in the 401(k) from 2019 but I got it in April 2020. I was mad because I thought I emptied the account because I hadn't transferred it over to my self-directed IRA yet. The diamond signature, it's a whole pain. I was keeping it there until a deal came along, then I'd roll it over or whatever. A buddy of mine texted me. His financial advisor is a guy we went to high school with. He texted me and he's like, “Look at this.” He took a photo of his email and he's like, “All the stocks.” It was Boeing, United, everything was taking a hit. I jumped in with some Amazon. I'm proud of that one. That was lucky. To me, it was speculation and it was more than I would normally push in.
However, I got that warm and fuzzy started coming up a little bit. Nothing was truly wrong with the economy before February 2020 outside of normal cycles. There was no impending housing crisis or mortgage crisis. It’s not like in ‘08. We can make arguments for it. It's not on the horizon like it was in ‘07 or ‘08. I was like, “Why not? I’ll put it in.” I interviewed a guy. I was in a multifamily apartment investing. He went straight to trading the S&P options. When I was up 30%, he was up 5x. He's playing options. I feel horrible. I was in there thinking, “I did all great. I did good with my speculation.” He's like, “I'm up 5x.” I'm like, “Okay.” I'm getting off-topic a little bit. How is COVID in the Bay Area?
It’s pretty horrible. California is like the number 1 or 2 state with the most number of cases in the US overall.
I thought that was trending down. I thought Texas and Florida were taking that over.
Florida is the one that I heard that is flattening out. California is still number one and this is July 31st, 2020 that were talking. It's pretty bad. We go out for grocery shopping and there are masks sanitizing every two minutes if we can and making sure everything is safe and keep the kids home pretty much all the time. I’ve got two elementary school kids, so it's quite hard, but we're trying to do the best we can.
Our school is starting and it's going to start online.
It’s the same here. We'll be online 100%. Not in Indy, though. Indianapolis is going to be full in school.
They didn't have the infiltration or the infection rate, did they?
Not the insane rate that we have now.
I did some travel for the day job and I had to fly connect. There were no direct flights. I get to Pittsburgh and I wake up in the morning. I call Robin Meade my travel mistress. She's always there with me when I'm on the road. I put it on CNN Headline News because she could tell me the world is ending and be like, “That's nice.” I’ll say, “That's okay. That's fine.” She's in Texas and the first thing they do is show a bar in Houston and it's packed with people. They go over to the Hill Country and then there's a bunch of rivers with people going in the tube and it's full-on packed bumper to bumper with people. It's comical to me because nobody knows. At this point, I'm like, “Let's go through it. I want my kids back in schools,” more for their sanity than mine. Kids are resilient for the most part, but when my little one, she said she misses her friends. Some of her friends, they come over and hang out here and there. Their other friends were like, “No, we're shutting down.” I respect that. That's fine. I didn't mean to make this a whole COVID thing, but I'd figured you're on the West Coast. I'm on the Gulf Coast. What's it like? San Francisco is my favorite American city hands down. I haven't spent a whole lot of time there.
A lot of people are dying to get out of here and/or are getting out of here.
We're seeing a lot of them come to Hill Country of Texas. I heard Joe Rogan is moving to Texas. It was on his podcast. He didn't put it out where exactly, but I know I have a lot of realtor friends that their parents are realtors in like rural areas of Texas. Business is booming right now. Even a small house with some acreage is going up. I imagine it's a lot like that around anywhere there's a major metropolis, which is good for us though as well. In all seriousness, as an investor and an insurance adjuster, I'm a vulture. If a lot of people moved out of San Francisco and it became reasonable to purchase property there, which I don't think it ever will, but if it dropped 25%, I'd be in a heartbeat. I’d get in.
[bctt tweet="Return on investment can be achieved through the proper channels of setting up your terms." username=""]
It has done that in certain spots before.
You're my boots on the ground now. You've heard it now here first.
As long as I'm here, I will be your boots on the ground. No problem.
I want a place near Haight-Ashbury. I'm a big hippie lover. The Grateful Dead, The Warlocks. I love me some City Lights. In fact, that's my favorite bookstore in the world. Me and Larry Ferlinghetti went way back in the ‘50s. Let me ask you this. If I want to get into lending out of state, your friend had already set up that network and had that team built. Once you got into it, you've had to churn your team, as anybody would have to. Are you strictly lending? Are you also purchasing other rental properties?
I sold all four of my duplexes in 2019. I flipped them all is what I ended up doing. All of them were delivered vacant. I enjoy that appreciation game and made out on all of them. In 2019, I tried to flip in Austin, of all places, and that went horribly wrong, but that's all about the team. I didn't have a team as good as I have in Indy out in Austin or anywhere near it. That speaks volumes to having the right team, but doing that churn in Indy, I went through a few handymen, a couple of GCs, but the one constant I always had is my broker. I can't express how important it is to have the right broker on your team.
If you're not worried about getting appraisals done on every deal, I’ve never done a single appraisal on any of these 100-plus transactions. I rely on BPOs because those BPOs are an unbiased third party who gets a look at the exact photos and videos. They can even do a tour for you if you want. That broker's opinion is reliant on the property as is whereas in this market. They give you actual property value. That is super key because if you're not getting a full-blown appraisal and I'm paying $400, $500 for each one of those, which I don't, then having that BPO for whatever price you pay for it is way cheaper. You keep that broker busy and rapport is building. You use them to sometimes buy properties off the MLS while they're working for you. I’ve done flips.
I started three flips in 2020 in Indy and sold one of them. I had massive returns. I don't even want to say the numbers out loud because it's unreplicable for me. The second one came about and I said, “If I want to be a full-time real estate professional for the IRS, I need to have properties in my name, don't I? This flip that I'm doing is now our rental. It’s perfect.” I found my GC through a network of mine. We were talking about the churn of the team. As part of this private lending stuff, I helped set up a loan for a new guy. I talked to him then talked to somebody else I knew. I connected the dots and it went well.
The lender ended up making more money than they thought because of the way the terms were set up and they prepaid a little bit. It was exceptional returns for them. Through that process, that guy talks to me and I said, “I’ve got this one property that can't get anybody to go out and finish this work.” He's like, “I do like 30 properties a year, at least. I’ve got a couple of guys that are not doing anything. Let me go put them on your property.” They sent a couple of guys over. Two weeks later, the work was finished and the property was listed. I said, “This is amazing.” You leverage your network. That's why I don't approach anyone with a predatory sense. You never want to approach your borrowers with this, “I'm going to juice you for everything you’ve got. I'm going to make sure that I put every little penny-pinching thing in there and make you pay for every little thing. I’ll make sure you pay me off early fees and extension fees and this penalty and that fees.”
The more you tack on, the more negative you make it for them. Even if they do that one deal with you because there's enough meat on the bones, it doesn't mean that they're going to come back to you for the second and the third or the fourth. Building a good relationship is super key. Through that relationship, I found a GC that he said, “I’ve got another GC team if you want to do another one.” He's good and brought them on. I said, “This guy delivered,” on the pricing, the timeline, the quality, it was all great and ended up doing well. I keep putting them to work, but I’ve got one property that I rented out. The tenant's going to move in. My first tenant and over 1.5 years. Let's see how that goes.
I'm going to self-manage it, but I’ve got my broker boots on the ground. I’ve got handyman, GC, whatever it needs. I’ve got a brand-new AC, brand-new electrical, brand-new furnace. If everything is done right from the get-go, it's a lot easier to bring that in and start them right. Start the process and hopefully it goes well. To your point, I’ve got flips and lending. I am a limited partner in at least six syndications and those are multifamily in Texas. I got an office space for Northrop Grumman right next to the Air Force base in Colorado, right next to where they're making the Space Force. That can’t go wrong hopefully.
I’ve got a property in Northern California. I’ve got a deal in Southern California and this store self-storage conversion from a warehouse up in Ohio. I’ve got my money in all these different places using all these different platforms like CrowdStreet, personal networks and lending. I'm trying to leverage all the cash that I built up into creating multiple passive income streams so that I can focus on what I love doing best, which is spending time with my family and traveling, which whenever that opens up again.
You're getting lots of one and not so much of the other.
It's hard to get all this family time and not be able to expend energy that they have cooped up in the home. In 2019 alone, we traveled to nine countries. I quit my job in May and by the second week of June, we were in England and picked up a car and drove down from England straight across the ferry and into France. We took a turn and went into Belgium, Luxembourg, Switzerland, back into France. We did the whole French Riviera, Nice, Monte Carlo, Monaco. We went into Spain, did all the Alicante, the whole Spanish coastline. We went to Portugal and then did that whole boat rides into caves and beaches and then went up back into Spain in Madrid and went to see some amazing architecture everywhere, Barcelona, Madrid, you name it. It was amazing.
Centuries-old buildings and architecture and all that stuff. It was amazing. Driving through seven countries in Europe with your kids and a vast majority of that was back roads and not once did I have to think about work. I did not have to think about doing some crazy stuff. I still had a deal in Austin going. I sold that property while I was international. I did two private loans. I remember I was flipping a property in Indy at the same time and getting electrical set up from scratch, but I could do all that on WhatsApp or wiring money is as easy as an app anywhere in the world. It's that flexibility is so worth it to say, “Yes, I'm going to give up that job. I had all this stuff going on. This is the one thing that's going to go as a job that I'm not satisfied in and not happy with and not want to do for the rest of my life and took this on. It's been bliss, truly.
You're doing it right. That's one way to say it. Winner, winner, chicken dinner. That's it right there. Thank you for reaching out and connecting with me. Our conversations, I enjoyed hearing it and especially hearing about the limited partnerships and moving on and some of the crowdfunding platforms. I want to circle back before I forget, because I do have adult ADD or ADHD, whatever it is. Your broker is your keystone, your linchpin of your operation in Indianapolis. That's where you're doing all your lending. In your other deals, like your syndications and whatnot, that's a different episode. I participated in my first LP here and we closed the end of May 2020. We call it a trophy property. It's very iconic here in Houston for those of us who grew up here. If you move here, it's another building and who cares, but it was a piano store for many years.
[caption id="attachment_3004" align="aligncenter" width="600"] Private Money Lending: It's all about protecting yourself and anticipating what could go wrong, and just doing the best you can to set up your terms the right way.[/caption]
I agreed and then COVID hit and I was like, “It's not office space. It's a high-end retail. It’s $5,000 for a decent piano or so. It was funny because they were like, “We're not going to close yet because the seller is amenable. It's fine. This and that.” I started getting concerned, but then they came back and said, “The bank thinks that our rents per square foot are low. We got another year of interest only. We got a whole point shaved down off the interest rate.” I'm totally passive. I know the horse and I'm putting all my money on the jockey.
That's the whole benefit of the LPs position.
I can't control anything, but I don't want to either.
That's the whole point. It’s supposed to be passive. You put the money in the right place and it does what it needs to do.
The sponsor, he put up a substantial amount of his own cash. We're talking two commas and he's got tons of skin in the game. Steven Kaufman, if you will go back and read. I thanked him and he's like, “This is my art. This is what I do.” He stays SEC-compliant. He's like, “It brings people in. This is how we do it.” He'll teach you. He'll tell you, “Do you want to buy a building? This is how you do it.” We've got a big value add, we're doing the outside. They got a whole bunch of architecture plans. I’ve seen enough of, like you said, when you were vetting those guys in Indianapolis, you go back and look at what the Zeus Group has done on their commercial buildings in Houston, in Dallas. I didn't even read the full memorandum. I was like, “Done. Give me a piece.”
I liked the fact that real estate agents and brokers, I feel for them because he got these robo Redfin’s and everything and Zillow coming through. You ask most real estate investors, “I don't want to pay realtor fees.” I was like, “Who else is going to drive people around to look at your house? Who else is going to have that open house?” I have no problems. They get abused a lot. Give me a CMA or ask me $25, a BPO or whatever, but you give them business like you have. They know that you're not fluff. Please give me money or business. It's going to suck. It's a connection it's going to lead. Those boots on the ground aren't boots on the ground, but they're looking out for you. They know that more money is going to come through the feeding trough that you're putting in front of them.
I’ve always delivered. At least I'd like to think so. If it's not my own property, it's the referrals. If it's not me, it's insurance referrals or people to other agents or whatever the case may be. This guy has property management experience. He had his own property management team back in the day. He's been a realtor broker for a while and he has his own investment properties and he's on the same or if not more wholesaler's lists than I am. He knows the neighborhoods well. Having someone who's in the game and is super active, who is very friendly and down to earth and is there to help you out and you have that rapport. Everybody says it and I can't say it enough, real estate and private lending all tied together is all a relationship game.
If you can't trust the people, you'll never get started. If you can't have an understanding and a bond, you'll never repeat that same business. If you don't treat someone right, they'll never come back. You won't go back. If you do what you say you're going to do no matter the cost and make things right, people like I have heard you say it multiple times. You've said, “If they have to scrape their couch to pay me back and they're going to do it, I’ll do a deal again, even if it failed once or twice.” It's the same thing. It's all about relationship. As long as you build that relationship and you show your commitment and you're able to lift each other up, that's the way to go.
Let me know. Don't wait until two weeks before the loan is due to say, “I haven't sold the property yet or I’m going to need an extension.” People get in trouble. Deals hit bumps and speed bumps and things. I get it. Not all stocks always go up. Things are going to happen, but let me know because I might have, like you said, to your point, someone in my network who can get you out of a jam. Your carpenter walked off, your trim guy walked off? Sure, we can do it. Done. If you freaked out, stick your head in the sand, don't tell your lender. Real estate is not about properties and numbers. It's about people and the relationships and connections. I hope this world and all the tumult that we're going through right now, more of us learn it not just individually, but on the evening news as well. It would help things a lot. Jaspreet, thank you so much for coming on and sharing your story with us. I’m going to start lending in Indianapolis. If you ever need some help, let me know.
A lot of people that I talked to, and I’ve got my website out there, so a lot of people find me. They call me and they talk to me and it's not some moneymaking thing. It's giving back, like you're doing this. It’s my way of giving back and talking to people and coaching them or not even coaching. It's talking to them. If they want to leverage my network, I’ll connect you and connect the dots. If you want to do a deal together, we'll get into something. We'll talk about it. It's a way of moving things forward. As part of this call and talking stuff, a lot of people are like, “What's the interest rate going to be? How many points is it going to be? What are the fees going to be?” I understand that anticipation and asking those questions, but sometimes they forget that the dollar amount matters. If you're doing a $25,000 loan, whether it's 8% or 12%, you're talking about $100 over the course of the year. What difference does it make? Focus on the dollar. If you're doing a $250,000 deal and you're talking about a 12% to 18% rate difference, which is the same 6% between let's say 6% and 12%, that makes a much bigger difference than if you're doing a $25,000 deal. People can't seem to get their head past that. They’re like, “No, I don't want to do a 9% loan. I only want to do 12%.”
Let's work out the math. What is the dollar amount difference going to be? Is it worth you not putting your money into a deal over $86 in the next twelve months? No. It's the other way around too. Don't chase the percentage amount. Look at the dollar value. People seem to say, “That sounds like a great deal. I'm going to walk away with 15% return on my money after all the fees and points.” I'm like, “Yes, but it's going to be $1,500 in those points in fees and interest put together and combined across the whole thing. Is it worth you taking the risk, evaluating the deal, evaluating the borrower, go into the lawyer, getting the paperwork, doing the filing, dealing with the title company and back and forth and making sure insurances are good?”
Whatever amount of money you're putting in, the return you get has to be worth the level of effort you put into the deal as well because it's not like a robocall. You don't automatically approve deals and you keep going forward. You’ve got to put sweat equity, even as a lender in evaluating the deal. Whether it's getting a BPO, whether it's getting an inspection, whether it's reviewing the paperwork, talking to the borrower or talking to the title lawyer, and all that stuff. Everything takes time. It's stress because you're putting your heart and money into it. Make sure the dollar amount is worth it too. Don't look at percentages. People sometimes get stuck up in that percentage number and forget the actual dollar amount impact.
It's the ultimate scoreboard at the end of the day. Most of the gray-headed people that I know here in Houston that lend, they'll haggle with me because they've all read don't split the difference from Voss. They're real estate investors. They're cheap. They're going to haggle. They're going to do it. At the same time, I’ve told them I’ve done one loan at 8% and then the next one I said, “I'm going to need 10%.” They balked at it. I'm like, “That's fine.” They’ll figure that's what the money costs. “Let's do it.” At the end of the day, it wasn't much. It wasn't a whole lot. All I wanted to do was cover. I wanted to hit 10%. Side story, I did chase yield and got burned, but I won't do that again. At the time, it's how I was doing it little by little. He's like, “I'm going to flip eight houses this year. I want to buy four rentals.”
He used my money, purchased the property, season it, get it over on some commercial paper and then do owner finance. It was easy. I didn't even have to do it. There were no draws. He’s like, “It’s purchase price. Done.” He’s like, “I want you to make money too. I want you to loan to me.” I'm like, “I want you to borrow from me.” What makes you happy? Does 10% make you happy? He's like, “I’ll tell you what, what if we did the 8%, but I’ll give you two points on the backend?” “We can do that.” He gets the close with less money out of pocket. I get that. I closed the deal. The loan is paid back with more money in mine. I like that, chasing percentages.
[bctt tweet="It cannot be expressed enough how important it is to have the right broker on your team. " username=""]
The other thing is the terms. A lot of people are like, “No, I need monthly on a monthly income. I don't care what they do. I don't want to get paid monthly.” Sometimes giving up that monthly payment but asking for a couple of points on the back end makes it easier for them to get into the deal and for you to make more money at the end. Think about what the most balanced approach can be so that you get your money, the return to that you want, like you said. They get to do the deal because the more deals they do and the more money they make, the more they're going to come back to you and do it all over again. That's going to be a safer place for you to place your money is a repeat customer or a repeat client. Somebody you've already vetted or you've already established them as a vetted borrower. Now you have to look at the deal. You don't have to vet them every single time. The easier you make it for yourself.
They call you. They tell you about it. You're like, “I'm principal? I'm in. Send me the numbers.” You do due diligence. You make sure they're not BS-ing you. Done.
What's the quickest you've ever funded a deal from them making a phone call or sending you an email to you delivering the money?
I'm pretty close.
I want to say it was with my partner, Landon, so there's a trust factor there. The beautiful thing about having a partner and lending to partners, I know those little tweaks in the voice and when to ask additional questions. He will put it out there like, “That sounds good.”
“What's that one thing that's bothering you? I could hear it.”
He's like, “Half of the garage is on the other side of the property line.” I'm like, “The garage that's falling down?” He's like, “Yes.” I'm like, “Okay.”
“That sounds good. You're going to haul it away anyway, so who cares?”
“It's going to be a skid stick knocking it down.” I was like, “I don't care.” It's about six hours from the time I got it because I was at the office. I got it early in the morning. I got a text and then a call and then at lunch I pulled up some numbers and I looked at it. I don't do a whole lot of appraisals of myself because I lend to people I know, but I do call for appraisals. If it’s the first time, I'm definitely going to get an appraisal to because I'm still going to get my BPO and do my due diligence and my comps that I pull because I’ve learned never to trust. I don't even trust over the appraiser's comps when they come through or the BPO.
I’ve seen some BPOs that I'm like, “This house is 7 miles away. This is not comparable at all.” I look at all that myself and so I got appraisals. I get scared because I always tell people, “If you're starting off, get appraisals. It helps keep you safe until you can get that comfort factor of, ‘I’ve done a few loans now.’” It doesn't even have to be a loan. It could be a flip. It could be a wholesale deal. Go through the machinations of the deal and get into it. Jaspreet, I appreciate it. This has been a lot of fun and hopefully, let's swing back and do a follow-up, see where you're at, see how you're doing.
Hopefully, I’m a proud owner of some huge multiplex multifamily doing a GP side, which is what I want to do next because I want to get into the GP side of multifamily stuff. I had already put an LOI and that got accepted on an 85-unit building. I'm chugging along and looking for the next thing. I’m not getting too comfortable. I’m just looking for growth organically. Slowly but surely, looking to keep going and looking at investing in car dealerships next. Who knows what's next?
The business that do the dealership or the land that it's on?
Both. A note on the land and equity in the business.
Tesla's moving to Austin. We're all excited about that. I always say Austin is the California of Texas. That's where all the weird ones hang out. I love Austin.
[caption id="attachment_3005" align="aligncenter" width="600"] Private Money Lending: If you can't trust the people and have an understanding and a bond, you'll never get started or repeat that same business.[/caption]
That's the only place I would ever move to Austin. I'm a vegan myself. My whole family is and we've been vegan for years and we loved it. It was amazing for the kids, the family, the food, the culture, and the overall vibe. It was awesome.
Let's definitely get together. How do people get ahold of you? What's your website?
Are you on social or anything or do you keep it to the website?
The website is the easiest because right there, I’ve got a link to my Calendly. You can book a time to talk to me. I'm on Facebook. You can find me at Jaspreet Baveja. JGB LLC is the company's name. Once you got to the website, it's all easy enough. My direct cell phone number is on the website. WhatsApp, text, all works. I’m a low-key guy. I talk to people and see if I can help them in any way and that's it.
Thanks for talking to me about lending across state lines because I don't do it, so I don't talk about it. I appreciate it.
It’s not a problem at all. It was a pleasure and an honor to be here.
You've done a lot more than I have in the real estate space and more loans. You've seen a lot of different things and I appreciate you sharing the experience and the perspective. Take care. Stay safe. I will see you soon.
It sounds good.
There you have it. I'd like to thank Jaspreet Baveja for reaching out to me and explaining how he does what he does, especially for coming on the show and to explain his process and his lending methods and his habits, how he's able to lend on properties over 2,000 miles away from his home. I hope you absorbed some of the knowledge and the wisdom that Jaspreet gave away. If not, go back and make sure you don't overlook any of the nuggets of wisdom that were given. I want to thank you for your time. I don't charge money to produce the show, but I would be extremely grateful if you would help me get the word out and increase awareness for it by leaving an honest rating and review over at iTunes, Google Podcasts, Spotify, or whatever platform you're using. It's a small but quick request that will pay us both dividends. To be honest, I believe it's a small price to pay for the value that I try to produce here. I don't always deliver, but at least my heart's in the right place.
In addition, if you're trying to wrangle up your own stable of private lenders, give them this free resource and say, “Here you go, listen to Keith. He'll help you stay safe.” If you're already reading, you know what I'm going to teach them. Perhaps flips, rentals, whatever they want to do, send them over there to help build The Private Lender Nation so we don't need banks anymore. It's one of the goals and one of the missions. If you are looking to get started the easy button or the quick way to start private lending, head over to PrivateLenderPodcast.com/ink to learn more about how you can begin private lending in the Houston area with some friends of the show. That's going to do it for this episode. I want to thank you again for reading. Thank you for your time. I wish everyone safe and successful private lending and I’ll catch you on the next episode.
"Jaspreet Baveja is the CEO of JGB LLC, where he is helping others achieve the dream of Passive Income through Private Lending since quitting his job in Healthcare after 8+ years! He has built a business that lets him follow his passions of travel and spending time with his family, while generating income from anywhere, on his time and on his terms (literally)!
He is well experienced in Private Money Lending, Fix & Flips across multiple states, and investing through various platforms into equity-based, cash-flow producing syndications across different asset classes!"
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