The School Of Cash Flow

Want to know the secret to achieve explosive growth for your business? While the world shut down, today’s guest managed to scale his real estate business and went on to triple his income year after year. Here to share how he did it is Abbas Mohammed, the CEO of Model Equity. Abbas decided to pursue real estate at 18, and in less than five years, he became one of the top 50 agents nationwide. In this episode with host Dale Corpus, he shares the strategies and methods he used to achieve massive success in such a short time. Abbas is a master of building teams and systems. He also discusses the secret to finding and closing quality deals and tips on how to sell and what to look for when investing. Plus, he discusses why he made the move into multifamily along with more insights on how to read the market. There’s a lot to learn from Abbas’s journey, so stay tuned and gain wisdom to help you on the path to financial freedom.

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How To Scale Your Real Estate Business And Achieve Explosive Growth With Abbas Mohammed

I have a great guest for you on this episode. He is also a Bay Area realtor and an investor similar to me. He’s got a tremendous backstory. His name is Abbas Mohammed. I met him through my friend, Matt Cavanaugh, who I’ve met through GoBundance. Thanks, Matt, for the intro. Abbas is born and raised in Iraq. Growing up, Abbas recalls sleeping on concrete floors because his family couldn’t afford to buy beds. He came to the US at eleven years of age, and decided to get into real estate at the age of eighteen paying for the startup costs of getting real estate on his credit card for $5,000.

Fast forward a few years later in real estate, Abbas became one of the Top 50 agents nationwide for RE/MAX in less than five years of being in the business. He wanted to invest his cashflow and decided to invest in multi-family apartments. Even within a year of doing that, he invested in over 1,500 apartments. He exited his real estate sales business and went full-time into running Model Equity. He has a goal of reaching $1 billion in assets under management in the next five years alongside investors. Let’s do this. Welcome to the show, Abbas.

Thank you, Dale. I appreciate it. Thank you for the intro.

For my guests that don’t know you yet, where are you based geographically?

I live in San Jose California.

I’ve lived in San Jose at one point. I went to Santa Clara, which is right there. By way of introduction, everybody knows everybody in real estate. You were introduced to me by my buddy, Matt Cavanaugh, who I know through GoBundance. I did a loan for him early on. I’m both a realtor and mortgage broker. How did you know Matt, out of curiosity?

What happened is he and his partner reached out through Facebook because they saw my profile. They wanted me to get on the podcast. I went on the podcast and we did a three-hour episode. It was the longest podcast I’ve spoken on. After we were done with the podcast, they were great. They’re very good at asking questions. After we were done with the podcast, I had an event coming up so I’m like, “You’d be perfect to speak at this event. Let’s talk about real estate investing.” He came up. It was a two-hour drive for him and he knocked it out of the park. We’ve been friends ever since. He’s a great guy.

What’s your story of how you got into real estate and being a realtor? You were eighteen. You got into that business. Most people don’t think, especially in the Bay Area, “I’m going to be a realtor at eighteen,” but you did it. How did that come about?

Like you said in my bio, I grew up poor. We didn’t have money. We slept on concrete. I always hated the fact that we couldn’t afford to do anything. When I was eleven, that’s when I came to the US back in 2009. We were on food stamps and on housing assistance. I’m like, “The minute I could change this, I will do everything in my power as a person to get us out of this situation.” I was eighteen years old. I was selling cars. I was a used car salesman and I was going to college. I’m like, “I’m making money, but I know this is not the path to financial freedom.”

If I wanted to get my family out of the situation we were in, I had to do something bigger. I looked at different opportunities and one of the things I noticed and was very interesting. Most millionaires are made in real estate. In fact, 90% of millionaires are made through real estate. I looked at that and I said, “Most millionaires are made in real estate. Some of the richest people in the world are made through real estate. I could either go and think about what is the right path for me, or I can just do what other people that are successful that have what I want already are doing.”

I decided to get into real estate. I didn’t know in what capacity, but I looked at different options like flipping, wholesaling and being a real estate agent. At that time, I only had a $5,000 credit card and I’m like, “The thing I could afford to start immediately would be getting my real estate license.” I put it on a credit card and I decided to go all-in when I was eighteen years old.

What was your first year of real estate like for you?

When I got in, I immediately quit college and my car sales job, which was dumb, but I was an eighteen-year-old kid. I didn’t know any better. I thought I’m going to go in. I’m going to sell houses every week and make $30,000 a week, but I was quickly proven wrong. I went out. I knocked on hundreds of doors a day from 8:00 in the morning to 5:00 in the evening. I had a full suit on. I had the tie and all that stuff. I did that for three months. I didn’t get a single transaction. I’m like, “There has to be a faster way,” but I also ran out of money, by the way. My credit card tapped out. I went back to my car sales job to pay the bills.

While I was doing that, I’m like, “I’m noticing there’s a lot of downtimes where I just talk to people and drink some water. What if I could use it more productively? What if I start reaching out to people through the phone and cold calls? I had two headsets on and I would cold call thousands of people a day through my computer while I was not working with a customer. I did that for twelve hours a day and I had to do it for pretty much a full year before I finally got one transaction. I was calling from the bathroom sometimes. I was calling from the rooftop of the car dealership to avoid seeing people. I did that for a full year. I got my first transaction. I paid off all my debt at the time.

Getting the second transaction was easier and then easier and easier but throughout that first year, I wanted to quit so bad, but I got to the point mentally where I would like to wake up in the morning shaking out of fear of failure. I’m like, “Should I be quitting? Should I go back to college? Should I follow the normal route?”

It got so bad mentally to the point where I’m like, “I want to quit on something, but if I’m going to quit on something, I’m going to quit on the idea of quitting and not leave myself that option anymore.” I made a commitment to quit quitting and I was like, “I’m going to be doing this until it works. There is no option B.” I stuck with it. It took me a year. I got my first transaction. I sucked. I saw other agents would get in and they’re doing transactions in a week or two weeks. I’m like, “What the hell am I doing wrong?”

You’ve mastered the art of cold calling, it sounds like.

I did.

Scale Real Estate Business: That’s the thing in business, you have to be adaptive. If you’re not adaptive to the environment, you’re going to get washed out. That’s why businesses fail all the time.

Who did you call?

I called everybody that had a cell phone that had a house. It didn’t matter.

A lot of real estate folks are reading this too. Did you call FSBOs or For Sell By Owners?

I tried FSBOs and expires, and I hated that to be honest with you. I feel like I was begging for their business, and I knew it wasn’t something I wanted to scale up long-term. Instead, I called random people. I asked if they wanted to sell their homes and kept the database going. People that were saying, “I’m going to sell in three years.” I’m like, “Sure, no problem. Let me write your name down.” I’m thinking I’m going to be in business in two or three years. It didn’t matter. I kept building those relationships with these people until it was time to sell, and then they started calling me back and saying, “You’re the guy that calls me every month about selling my house. I’m ready to go. Can you come over and take a look?” That’s what I did.

The goal is in the follow-up. It’s a lot of follow-ups. Any tips on folks or the people here who are on sales who are reading, even realtors and stuff? Is there a magic follow-up system? Is there a CRM that helps follow up?

I will tell you this. I’ve looked at a lot of businesses and a lot of agents. Most people don’t follow up nearly as much as they should. People think that they’re doing a good job with follow-up, but most of the time they’re very weak. I’ll tell you this. I would rather lose customers because I follow up too much rather than follow up not enough. We had a system where and by the way, we need systems for everything. I need to make sure that there are proper procedures that are followed. I don’t want to be following up on Dale because there’s a specific scenario here and there’s a specific scenario there where people have different treatments because when you have thousands of leads, it’s not scalable. I wanted something scalable.

I would remember calling people. If somebody said, “I’m moving in a year,” I’ll call in three months. I’ll cut it in fourth. We would send out weekly postcards. We sent out weekly letters. We left voicemails. We did text messages. I lost people because they’re like, “That’s too much,” but I’d rather lose those people. By the time someone’s ready and wants to sell their home, they knew us so well it was almost like a layup because they’ve known me for years. They see how we followed up with them. That’s how I scaled the team later on through that.

Especially for folks who are reading here that are in sales and whatnot, where did you get your sales training from to be very effective on cold calling?

Most of it was experience. Just sucking on the phone until you stop sucking. When you make thousands of phone calls a day, at some point you’re going to have so much experience with what doesn’t work to the point where you’re accidentally going to figure out the things that work. Unless you’re not even paying attention, you will figure things out. That’s kind of it. The same thing with presentations and everything else I’ve done. I learned from other people a lot, but nothing beats experience.

How did you have that explosive growth and just being in real estate for a relatively short period of time? Can you elaborate on how that happened?

After my first transaction, getting the 2nd, 3rd and 4th transactions became much easier. I got in at late eighteen. By the time I was twenty years old, I was making $350,000 to $400,000 a year. This was right before COVID in 2019 because I got it in 2017. In 2019 at the end of the year, I’m like, “I’m making more money than I thought I would make by now, but at the same time, I’m working fifteen hours a day nonstop and I’m not seeing my family anymore. I’m not seeing anybody.” I have to change that. I also saw other people that were way more successful than me that were working way less hours and what I realized is that successful people and businesses have three things in common.

Number one is they have people. Number two is they have systems and number three is that they have data. What I started doing is I started setting up systems for my business and I started hiring people. When I first started hiring, I wanted to duplicate what I was doing. I wanted to make multiple Abbas’ but years later, I discovered I don’t want multiple Abbas.’ I want multiple Abbas, but I also want other people that bring in other skillsets that I don’t even have, but that took much longer to figure out for me.

The point is I started hiring ritual assistants from the Philippines and other countries. I started teaching them what I did to have them on the phone. By the time COVID hit, I had three employees. They were producing as many leads as I was. When everybody shut down and people were reducing their marketing, I’m like, “This has to be the best opportunity for me to grow.” I hired a hiring manager. We went from 4 employees to 12 by the end of that year. I tripled my profits in the business.

In 2021, I took a more passive approach. I started paying less attention to the business because I had other interests, which is building a multi-family world, but I still did the same thing. We went from 12 people to 25 people by the end of the year and I tripled my income again. I tripled it year over year by hiring more people and getting them into the machine that I had already built.

You had up to 25 employees and pretty much all of them were virtual, is that correct?

Correct, and I tried hiring in person versus virtual. I noticed that the production was the same and so I decided it wasn’t something I wanted to do. My first hire was a hiring manager. When I say hire, I mean key hires. I had called callers, but my key hires, the first one was a hiring manager. I said, “We’re hiring so many people now. I’m spending all my time training. I hired a training manager.” I’m like, “We’re training people. We’re hiring people. We’re getting a lot of fleet flow. What’s the next step?” That was I hired salespeople. The salespeople started following up on our leads. By the end of the year, my job was to just go on listing appointments. I would go on listing appointments and get listings. I put them on the market and then I had people take care of that stuff too, for me. I was a listing appointment machine.

Did you have a big team of agents? Was it just yourself?

No. I was the only agent. I was cranking out listing appointments.

Scale Real Estate Business: If you do it alone, you’re just going to make way less money than you would if you had more people on board.

For all the staff that you had, how were you able to keep them all on board and motivated to work hard for you? That’s a lot of staff.

We did. We had KPIs and numbers. We wanted people to hit and if they didn’t hit those numbers, we had a conversation. I didn’t have the conversations. I had a general manager who would fire them if they didn’t. We had an understanding of what the expectations were. I have a very high expectation of what I’m supposed to be doing. I want the people with me to have the same expectations of themselves. What I realized too, is that people that are good at work don’t want to work with lazy people. We kept that mentality and people loved it.

Knowing that you’d built that out and it worked, if you were to rebuild it again, would you do any of that differently for a real estate sales business?

Yes, I would do it differently and what I mean by that is that times have changed. I’ve noticed that cold calls are less effective and part of it is because of the changing rules and regulations. That’s the thing in business. You have to be adaptive. If you’re not adaptive to the environment, you’re going to get washed out. You might figure something out that works for a year or two years and if things change, then you end up being washed out. That’s why businesses fail all the time.

What happened was at the end of last year, Congress passed an act. They made it way harder for cold callers to call. We noticed lead flow started dropping. I knew that in 2022, I wanted to exit the business completely at some point. I’m like, “There has to be a way out of this. I need to figure something out that’s easier.” At the end of February 2022, we started transitioning from cold calling to online ads and I figured out a system on how to do that. From there on, we ramped up the online ads space instead.

Now, our business is exclusively pretty much from online lead gen. That’s been working out well for us. I reinvented the whole business. It’s not based on listings anymore. My entire business was based on listings. Now, it’s based on buyers and all that stuff. The nice thing about it is that it requires less skill. I was able to hire agents to take my job, and now it’s completely passive. It’s doing its thing on its own, which is nice to see.

You’ve found a way to still keep the business still going where you’re not necessarily operating it in it but it sounds like you’re getting leads and working with a team of agents to help them with those buyer leads that you are consistently receiving.

I have staff that follow up on the leads and that do the marketing. One of them is the manager for all the other ISAs. The same one that was managing salespeople. They pass the leads on to the agents once the leads are ready to go. It’s all about building the right systems and having the right people in place. One of the things I’ve realized is that you can’t do it alone. If you do it alone, you’re going to make way less money than you would if you had more people on board. I’m okay paying people and I’m okay trusting other people. I think another big problem that most business owners have is that they don’t trust that other people are also capable. That creates issues in scaling.

I’ve been in the business for quite some time and knowing what I know now, one of the things that were holding me back from growth is that I don’t trust as many people to do the job as well as I can do it type of deal. That may be true, but the thing is in terms of scalability and whatnot, you can’t scale that. As you scale, you’re going to lose some of the profits, but the thing is, your business is not going to grow if it’s not expanding in general. It took me a while to grasp that mindset shift and it’s great hearing your story and the fact that you figured it out when you were very young to be able to do that.

I know there are three levels of business. There is the me business and people are stuck in that. They do everything themselves and when they start adding a staff, then it’s a we business and you’re still in and operating it. You are still stuck in the grind, which some people still love and there’s nothing wrong with it. It looks like you’ve figured it out at an early age and you’ve designed it to be a they business so that you could step out of it. I love it because it runs itself.

It does. At this point, I check in about once every two weeks. I’m trying to figure out, “What are the big things you guys are working on to continue to grow the business and to continue scaling it? We might set some goals, but besides that, I might be spending 1 hour or 2 hours meeting some of the key people in it, which is great. One of the things I later on realized is that even building the sales business to what it is right now, I’ve realized I’ve always been the smartest person in the business. I was the guy that had the most skills and now that I’m building a multi-family business, I’ve realized that that’s not the right way to build a business.

For me to continue to scale, I need to bring in other people that have skills and knowledge that I don’t have myself that I don’t want to acquire myself because otherwise, I would slow myself and the business down too much. There’s always going to be growth in how I do things and what we’re capable of. I don’t think I’m where I could be yet but having said it, that’s one of the things I’ve realized now this year is there are so many other people that are way more skilled than I am. They’re just not business owners and they want to work in other businesses. I got to acquire the right talent that brings in more information that I don’t have myself because it takes a lot of time to acquire a skill and be good at something. I don’t want to keep having to acquire those skills and then teach them to other people in order to continue us growing. Do you know what I mean?

I could tell that one of your unique skill sets is you’re an amazing systems architect. You build this stuff and you implement it. You don’t want to fail so you won’t give up.

Unless I die, there’s no quitting.

I want to switch topics. Let’s talk about real estate investing. Did you go directly to multifamily as your first investment? What was your first investment?

I don’t know if you count buying your own house as an investment. I don’t think that’s an investment necessarily. If you don’t own a house yourself, I do think owning your first house is probably a good idea because you don’t deal with tenants and you live comfortably doing what you want in your own house. However, beyond that, I ended up switching directly to multi-family and here’s why. What happened is in early 2021, my business was producing cash and I’m like, “What did I do with all this money?” I’m not a flashy guy. You won’t see me driving an expensive car or you go to parties or any of that stuff. I’m like, “What do I do with all this cash sitting around?” I looked at different avenues like stocks, single-family homes, crypto, NFTs and all that stuff.

What I wanted is I knew that I wanted to invest for the long-term for the next 50 years or 60 years, whatever. Looking at it that way in a long-term perspective, what I wanted to avoid is I wanted to avoid risk as much as possible. Obviously, there’s risk in every investment, but some are way riskier than others. Over a long enough time horizon, if you take on the high risk over and over again, at some point you’re going to go down. I wanted something that can go up in value with as little risk as possible. I wanted it to be scalable. I wanted to get cashflow. I wanted to get appreciation. I also wanted to get tax deductions. After looking at many other asset classes, I saw that multi-family was the best.

I started actively investing in multi-family. I invested in 1,300 apartments passively with other people. A few months later, I noticed that a lot of my clients want the same things. They want cashflow. They want appreciation. They want tax deductions because they want to build wealth for their kids and their family. I’m like, “I’m doing that for myself. Why don’t I help other people do that as well?” I started buying deals myself actively.

Scale Real Estate Business: The best way to get deals is to build relationships with brokers.

My first one was $6.5 million. We needed to raise $2 million. I reached out to my network and I raised money from my network. I raised money from friends and past clients who wanted to be a part of it. S It’s been a few years since we bought that first deal and it’s doing so well. We went up in net operating income by 38%. On a massive scale, I could help way more people invest cash that they otherwise would just toss in stocks, which I don’t believe in or in single-family houses, which I don’t believe in. I went all in. When we bought that first deal and a few months later, I bought a much bigger deal. It was $30 million. In 2022, I switched my focus from selling houses and building the sales business to building a multi-family business that helps other people invest.

Now that I know that your first investment was basically limited partners, an LP investment. How did you even get into that? How did you even know about this space? I’m asking that because we’re both realtors, and even a lot of my realtor friends don’t even know what that stuff is. How did you get it?

Originally, I’ve followed syndicators before that, people like Grant Cardone. He’s done it at a very large scale. Although he is focused on a slightly different type of asset. He goes after newer stuff and lower returns, but that’s whatever. I found out about it back in January or February of 2021. I started investing. I wanted to get that experience. I wanted to see what it feels like to invest in those indications and I wanted to see the results for myself first. I started investing passively with other people and after doing that a few times, I’m like, “Now I could start doing my own deal. I felt comfortable enough to know what I’m looking for, what I want to avoid and the type of communication I want to have. That’s how I started doing it actively.

Tell me more about it right now. Your group is focusing on mainly multifamily. Is there a specific area or is it multiple areas? Tell me more about that.

Our selection process is very specific. What I want is I want to be investing in and states that have positive population growth. Population growth is my number one criteria because if you look historically at the areas that have had the best appreciation, it’s always the areas that have had the most people coming in because when people come in, they don’t build houses fast enough. They don’t build rentals fast enough. Rent and housing prices go up. That’s my number one criteria is I want to see population growth.

The second criteria I have is I want to see a state that is landlord and business-friendly. I would never invest in California as an investment vehicle, especially in multi-family. I would not be in Oregon or in Washington. I avoid states like that. I want landlord-friendly. The third is I want to see high projected rent growth and that’s related to population growth. The fourth thing is I want to be in areas that have had proven historical appreciation which means if I think Dallas meets all of my criteria, have they also had historical appreciation? Have they also had historical rent growth because I don’t want to work on future projections? I want to work on past projections.

If things stay the way that they have been in the past few years, are we still going to be good with these investments? That’s how I choose a state. Then comes choosing the MSA and the neighborhood. My criteria on that are very similar to the state because what happens is sometimes you might choose Texas as a state to invest in, but not all of Texas is a good place to invest. Some pockets are good and some pockets are bad. I want to see population growth in the MSA that I want to invest in, whether that’s Dallas, San Antonio or Austin, or any of these other places. These are all great places to invest.

When I get down to the neighborhood, I want to choose neighborhoods that have a high median income. I don’t want to invest in low-income areas mainly because you tend to have more problematic tenants and you get less rent. If you want to increase rent, you have more problems. I want to be in well-established areas. There are two types of people. People that invest in established areas and you have people that invest in areas that are up and coming, as they say. I don’t like up and coming because it’s like, what if I put all my money and my bet on this area growing and then it ends up not growing? It ends up being the same way it has been. I like to be in established neighborhoods.

Whenever I see a property that I like, I like to go visit it in person and look at it. I’m like, “Would I feel comfortable being in this neighborhood as a person? Would I live here? Would I live at this property? Would I live in this neighborhood?” That’s how we choose a property. If you go on my social media, you’d see I’m flying all the time to different states.

What are your favorite states right now in the areas that you’re buying in?

We’ve been buying in Dallas. That’s my number one market, hands down. No question about it. My second favorite market, I would say is Nashville. Nashville has had tremendous growth. Lots of people moving there and rent growth. Nashville is my second favorite. I like Phoenix and Tucson although, one thing to note is that Phoenix tends not to do very well during recessionary times, historically speaking. That’s one thing that I keep in mind. I like Florida as well. Florida has been tremendous, Tampa, Jacksonville and Orlando. These are all great markets. I would stay out Miami and markets that are like that because they’re a little overpriced, but the rest of Florida is doing well. Those are my top states.

I also thought about investing in Georgia and Atlanta and whatnot because the numbers make sense. Everything makes sense on paper, but then I visited and I started talking to normal people about what they feel like living there. A lot of people were complaining about crime. The state is anti-police for the most part so there was a lot of high crime, so I decided to stay out of that. That’s been about eight months now and we’re starting to see rent growth and population growth go down because people are feeling the exact same way where it’s like, “There’s too much crime. They don’t want to live there anymore.” That’s another thing to keep in mind is you want to invest in areas with low crime, higher income, high population growth, landlords and business-friendly. Those states tend to usually be right-wing states for whatever reason, but that’s the way it is.

When you started off, how did you start deal flow? What did you do to break into these areas?

The best way to get deals, especially as you move on to larger units. When I say larger units, I mean 50 units plus, which are, in my opinion, the best types of investments to make because then you get better management, vendors and all that sort of stuff. Fifty-unit plus is what I focus on. It sounds scary to some people because it’s like, “I don’t have the money to invest in a 50-plus unit department.” It’s like, “No, you can invest as little as $50,000 or $75,000, whatever the amount is. You can just become a small owner in a larger property.”

The way I started getting these deals is by building relationships with brokers because brokers have the best deal flow. You don’t see these deals online by the way. You know how we have the MLS. They don’t have that in the commercial. They have some websites, but they’re not active that much. The best way to get these deals is to build relationships with brokers. When you continue to establish those relationships and they trust you, they trust that you could close on these deals and you could reform, then they start sending you off-market deals.

That’s have been the biggest way. Not too long ago, I flew down to Dallas to go meet a broker over dinner. We had dinner and then I flew right back. I’m willing to do that to build those relationships. I flew to Tennessee for a few hours just to meet two brokers. I met with them. I built that relationship and flew back. I’m willing to do that because it works on trust. This is a very relationship-heavy business.

When you first started off doing it and you didn’t have a track record, how did you get even the attention? An experienced broker, a lot of times won’t even talk to you.

It’s funny you say that because that was a challenge getting that first deal because it’s like, “You’ve never raised money. You’ve never closed on a deal. How am I going to trust you on this deal?” Thankfully because of my background as a real estate listing broker prior, I knew what they wanted to hear to gain that confidence. Because when I spoke with agents, when I was an agent myself selling houses, I’m still licensed, but I’m not active I knew what I wanted to hear from the buyer’s agent for me to feel comfortable, getting my seller to take their offer. I switched positions. When I spoke with them, like, “I know this is what they want to hear. This is what I’m going to say.” and that’s how people trusted me.

Scale Real Estate Business: There’s three bottlenecks: number one is getting deal flow; number two is raising equity; and number three is man managing these assets.

When I was doing my second deal, that $30 million deal, the broker was like, “It’s much bigger than your last deal. You don’t have a proven track record in this market.” To get that one was very difficult, but after I got it, he’s like, “I’m going to award you this deal. I’m going to put my name behind yours on your offer. If you mess this up and you don’t close, I want you to know you’re going to make me look very bad and you’re going to hurt me financially and my reputation. We will never be doing business again if you don’t close this deal. By the way, I do half of the business in this market. If you mess up, it’s probably not even worth it for you to keep going in this market anymore, but if you do close the deal, then we’re going to do as much business as you want because I have a lot of deal flow.”

It was three months of almost living through hell because it was the most difficult time in business I’ve had at that point but we closed it. We performed. He was super happy. Since then we’ve been getting so much off-market deal flow from the guy. It’s been insane because we’ve built that relationship. Now, when I want to get new deals with other brokers that don’t know who I am, I’m like, “Talk to this guy. He could vouch for us.” That’s how you build it. It’s like a spider web where it’s like, “These people have done business with him. Let me get references,” and then your network continues to grow.

When you’re discussing with brokers and whatnot and what you’re looking for, what are your “buy box,” criteria that you tell them?

The same criteria are shared. We want to be in a higher-income neighborhood. If it’s a low-income neighborhood, I don’t want to be there. Ideally, we want to be in deals that are 1970s-plus, built-in 1970 or higher. We want to be between $10 million to $30 million in terms of price range only because I believe those deals are better to manage. They’re easier to manage and there are better returns. That’s pretty much it. Also, they have to have value-add. I don’t want to buy a deal that I can’t force the value to go up. We want to be able to go in, renovate units, or increase income in some capacity so that I could increase the value of the property.

What does your team structure now look like as you’re running this multi-family investment business?

In this business, there are three bottlenecks that I noticed. Number one is getting deal flow. Number two is raising equity. Number three is man managing these assets. The number one problem I wanted to solve is building relationships and underwriting deals efficiently. My first hire was an underwriter. I hired an underwriter. I started building those relationships myself. We started getting deal flow. The second issue right now that I’m working on is how do we go from raising tens of millions of dollars a year to raising hundreds of millions of dollars a year? Because my target is to get us to $1 billion dollars so I need hundreds of millions a year.

The second thing I’m hiring for is I’m hiring people that could help us with the equity raising. I got off an interview with somebody. We’re hiring people for that role. The third thing that I’m going to start working on in about 1 year or 2 is building a property management company to take all these properties in-house and manage them in-house. In the meantime, I have my partner. He’s been in the business for 35 years and he’s managing these assets and he’s doing well, but we can only extend that for so long before he becomes over-extended. I hired an underwriter and my second focus right now is hiring people to help us with equity raising.

A question on your underwriter. Was the underwriter already experienced in underwriting or was this something that you transferred your skillset to know virtually? I don’t even know if it’s a virtual assistant.

This guy is French. He loves business. He had his own business in the past. He had a lot of complementary skills because when you’re buying multifamily, you’re buying businesses and if you could improve the business, then you make money. He had that skillset because he had a business in the past and the thing I liked about him is he’s very analytical because you have to be very analytical with multifamily. To answer your question, I did train him myself on what we wanted specifically and how I underwrote deals because every company underwrites a little differently. I’m very specific about what we want. I’m very detail-oriented.

We were able to train him in the way that I want things to be done. That’s been extremely helpful. That helped us avoid buying deals when other people were buying deals. In the first 5 months or 6 months, the market was crazy. Everyone was buying deals. I thought it was a bad time so we didn’t buy anything, but he came to the same conclusion because he underwrites the way I would underwrite. We’ve built a good working relationship as a result of that.

Speaking of underwriting, how many deals are you underwriting before you find a deal that looks good to you?

Ideally, we want to be 1 deal out of every 100. When I say 100, these deals take 2 to 6 hours to underwrite excluding the time to fly to them if I’m interested because there are many cases where I fly to the property and I’m like, “I don’t feel this is the right deal now.” This year so far, it’s been 400 before I got one because the market didn’t make sense to me. I literally underwrote 400 deals before we put any offers out. We ended up getting one but it took much longer. In the future, I want us to reduce that number to 1 out of every 100, but it’s going to depend on the market. If the market is overpriced or the deals are overpriced, I’m not going to buy obviously.

One of the bottlenecks you mentioned also was in asset management. What’s the breakdown of that because that’s also property management as well, correct?

That’s correct.

You’re trying to bring that in-house.

Yeah, because it’s easier to hire third-party companies when you have say less than 2,000 units. Once you cross about 2,000 units, it becomes a little more of a headache to deal with a third-party management company, when you could bring it in-house and have direct employees that could report directly to you. That’s what I’ll be bringing in-house, hopefully in the future.

You like working with newer investors that are new to this space to get them comfortable with even investing in syndications. What’s the process like with working with a newer investor that has no idea what syndication even is?

Scale Real Estate Business: We want to make sure that we preserve capital first and then growth of capital is secondary.

First off, we start with lots and lots of education. I host a lot of events in the Bay Area for those that are local, but some of my audience is not local. We do webinars. I do a webinar almost every week or every two weeks. We host a free webinar. I also have a free eBook that people can download. It’s 30-pages where they can read about multifamily indications, the market criteria that we have, and why we have such criteria. How do we find deals? What deals do we look for?

It teaches them about the whole thing from start to finish. Once we find a deal and you invest, what happens next? What’s the process like? There are lots of free education to get people comfortable in understanding what it is that’s happening. I also give them past case studies, “These are the properties we bought. This is the performance. This is what’s going to happen.” People need to feel comfortable with what they’re doing before they take action because if they’re confused, they don’t take action. We provide a lot of free education.

What challenges do you see as the biggest challenges right now in the multi-family space?

I think the biggest challenge right now, in my opinion, and always has been sourcing good quality deals especially right now is that a lot of sellers are becoming afraid of selling right now because the market is way more in favor of buyers. What’s happening is we’re seeing less deal flow on the market. That’s been very challenging. My job is to stay on the phone with brokers and continue to source these deals. That’s what I do all day long now. That’s raising equity. Sometimes, people get a little afraid of the market and whatnot. What I noticed is that sometimes, people are investing when everyone else is investing when they should be doing the opposite.

In the first five months of 2022, people were investing like crazy. I was looking at it and I’m like, “This is not the right time.” Now that the market adjusted when everyone should be investing right now because it’s a great buying opportunity, I see more and more people sit on the sidelines, which is why we do a lot of education to get people to understand how I’m thinking and why I’m doing the things I’m doing. I go all in on these properties. We’re investing just as much, if not even more than our investors in all these deals.

With talks of a looming recession and whatnot, is there anything that you’re doing now in preparation for that, whether it be an underwriting or just in general? Any thoughts on all that stuff?

I do believe we’re going through our recession. I believe interest rates are going to continue to go up. Stocks as a result of that will continue to go down. If you’ve lost money in stocks and you’re hoping that, “I’m going to hold onto it until it goes back up.” You might as well sell and reinvest later on because I can promise you it’s going to continue to go down as interest rates continue to go up. That’s number one.

The second thing is, in my opinion, I would say multifamily is going to continue to go up and rent because what happens is as interest rates go up, people can’t afford to buy homes anymore. We’re seeing this at properties we have where rent growth is off the charts because people are having to rent longer and there’s more competition. There’s more demand.

What we’re doing is we’re being very conservative in what we expect to happen in terms of rent growth and all that stuff. If the market is seeing 25%, we’re underwriting 5%. That’s one thing. The other thing is every deal we buy, we underwrite it. When I say underwrite, that means to evaluate. We evaluate the deal as if the market was going to go down. I might be buying a deal at X evaluation and then I’m like, “If we keep it at the same income, I want the evaluation to go down 15%, 20%.”

The reason I do that is that I want to underwrite. If the market goes down 15% or 20%, can investors double their money and that’s the expectation I will set for every deal? If the market doesn’t go down 20%, then we will do way better than projected. However, you never want to be too risky. I always like to underwrite deals as if the market is going to go through a recession.

Typically, for financing what kind of loan-to-values are you typically underwriting?

Right now, we’re using 65%. We don’t want to be highly leveraged. Sixty-five percent is what we’re doing. My number one criteria when I’m buying deals is I want to make sure we preserve capital. Obviously, there are never any guarantees, but I’m putting my name and my money into these deals as well alongside everybody else. We want to make sure that we preserve capital first and then the growth of capital is secondary, but obviously, it’s very important that we grow the capital.

I have some final questions for you. What are you excited about in your business right now?

I’m excited to get the message out to more investors, so that way they see the alternatives that they have rather than investing in stocks all the time and 401(k)s, which are going into stocks where people are a lot of times not happy about it, but they don’t see any other options. I like hosting a lot of these free events because it gets people to see the other side of what’s possible.

Some of our investors and the deals that we’ve got are based on the deals that they invested in based on what’s going to happen to the markets, the NOI, and all that stuff. They’re going to make way more money than they ever made in stocks. To see that and to be able to get that out to more and more people excites me and also builds the company. I like the fact that we’re building a much larger company this time than I did in the sales business. There’s more opportunity. It’s a bigger industry. I like the growth aspect of it personally.

Any big goals that you’re working on in the next few months, personal or business?

A few months from now, I want to hire more people. I want our team in the multi-family business directly to be at least five people from the underwriting and the capital raising perspective. My biggest focus when I think about goals is I focus mainly on five-year goals and lifetime goals. My five-year goal is to get us to that billion dollars. Anything that doesn’t help us get into that billion-dollar goal, I cross out any other business opportunities, and I’ve had plenty. Any other ideas, I’m like, “No. This doesn’t serve our target.” I need us to stick to that. My billion-dollar goal is my biggest focus.

You are very laser-focused.

Scale Real Estate Business: You want to make sure that you invest in the things that are right with your long term goals.

I’m very laser-focused. I don’t want to get diluted.

What do you feel is your superpower that’s contributed to your success so far?

I think being laser-focused has been it. I know I’m ever going to be the best at everything, but I know if I stick to the things I’m good at and not get influenced to go a hundred different directions, then I could produce way better results. Our focus right now is on multifamily exclusively as an asset class. My focus personally is to grow the business and not focus on other businesses or other opportunities or other ideas. I think that’s been the biggest thing. I also spent a lot of time learning new skills and I think that helps us a ton as well. I think it’s a combination of those things.

Another thing I would say, and I’ve developed this more when I got into the multifamily business is I’ve been very analytical. Because when I’m reading through hundreds of income and profit and loss statements, literally day in and day out, it helped me become way more numbers-oriented and way more analytical. That helped me make better decisions for both my multifamily business and my other sales business when I was actively in it because I started seeing things through a different lens. That helped us grow much faster.

Lastly, any final words or advice to the audience as we’re wrapping up? How can somebody get ahold of you?

Learn about investing, multifamily, and other asset classes. You want to make sure that you invest in the things that are right with your long-term goals, but education is very important. A lot of times, people invest in whatever is the easiest. What’s the easiest thing to invest in? It’s the stocks. That’s where all the money gets channeled in, but there are way better opportunities out there.

I hope that more people would spend some time because if you get 7%, 8% in stocks, but maybe you could get 20% in real estate passively, think about it from a 20, 30 or 50-year perspective. If you get double what you normally are getting, there’s a compounding effect and you’re going to have a much bigger result as you continue to scale. That’s my biggest piece of advice is to spend more time learning. The easiest way to get ahold of me is to email me at Abbas@ModelEquity.com.

I appreciate having you on my show. Thanks for your time.

I appreciate that. Thank you for having me on.

Thanks for sharing your story and inspiring us with your hustle and drive. Abbas is a young guy, but you can’t tell. He’s got such a hustle, and I love how big you think. You’re very passionate about what you can do and you’re very laser-focused. You are a master at building teams and systems. Talking to you makes me want to improve some of my own systems now.

You worked with virtual systems to a level that I don’t know if I personally know anybody that has. You’ve had twenty-plus virtual assistants at one time. To my readers, feel free to reach out to Abbas directly if you have any questions for him. Also, thanks to you for checking out this episode. Feel free to leave me a review on iTunes as it helps me attract even more great guests just like Abbas. Until next time, live life abundantly.

 Important Links

• Abbas Mohammed
• GoBundance
• Abbas@ModelEquity.com
• iTunes – The School of Cash Flow

About Abbas Mohammed