GI227: Active and Passive Investing with Rama Krishna Chunchu

GI227 Active and Passive Investing with Rama Krishna Chunchu

Rama Krishna Chunchu has more than 15 years of experience as an IT professional, and has been investing in real estate since 2015.

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Announcer:
Welcome to the Global Investor Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host Charles Carillo combines decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now, here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Rama Krishna Chunchu. He has more than 15 years of experience as an IT professional, and has been investing in real estate since 2015. So thank you so much for being on the show today, Rama.

Rama:
Thank you very much, Charlie. Thank you for this opportunity. Really

Charles:
Appreciate it. Yeah, yeah. It’s great to have you on and to hear about your story and also your whole you know, your whole progression from going from IT into single family, into multifamily and and beyond. So please tell us a little bit about your background, both personally and professionally prior to getting involved with real estate investing.

Rama:
Yeah, sure. Absolutely. Thank you. So I’m basically born and brought up in India, and I studied in India and worked a couple of years there in IT field and came to around around 2007. So started working IT side, you know, worked in IT field 15 plus years and started investing and real estate around 2014, 15, you know. Mm-Hmm. <Affirmative> started with single families and invested couple of years, then shifted was multifamily with the different reasons like, you know, that we can deep deep, deep later. So that’s how I started. Yeah.

Charles:
Awesome. And so tell us about all the different real estate or all the different investment opportunities and routes out there to make, to run a side hustle, let’s say why did you choose real estate as your investment vehicle? I’m always interested by how people answer.

Rama:
Yeah. So I didn’t take I invested a couple of stuff like outside of real estate, like, you know, stocks and those stuff, but somehow I’m not interested. There is main thing is like no control or what what went well, what, you know, going inside of that, but from real estate point of view, you know, so there are multiple advantages like, you know, tax benefits and also you get cashflow and also appreciation, you know, all these factors I considered in investing in real estate.

Charles:
So tell us how you started in single family. Were these turnkey properties, were you flipping properties? Were you, you know, what were you doing and then kind of how that went into multifamily?

Rama:
Sure. Absolutely. I, I started with, you know, is kind of renovation project and also purchased, you know, completely new town home. And also I did a few flips. So if you talk about, you know, single family side, first one is like, you know, renovations I purchased in North Carolina. It’s a, it’s a low price but you know, in not, not so good location. So <laugh> and I did complete renovations for that, that project, like, you know, replacing carpets, painting and, you know, all kinds of stuff, electrical stuff, you know, all the stuff on that project. And also, like initially I start, I tried to manage myself, but I faced some challenges. Like, you know, I didn’t do proper, you know, screening of tenant and then that tenant, like, you know, it paid first couple of months. Then, you know, I faced some challenges, you know, foreign collections. So then I gave it to third party property management, you know, other stuff. Yeah. I learned a lot from that experience. You know, lot of things went bad and, you know so when you face so many challenges, you learned a lot from that. You know, like, you know, from that, like I learned, I, it is better to, you know, hide third party property management to manage the property and stuff. You involve me and taking care of all the stress, all this stuff, you know?

Charles:
Yeah. So it’s interesting that because the amount of information and experience that you generate from self-managing a property and as you described the classic of your property, but it’s definitely a thankless job, but it’s one of the most, if not the most important part of the whole real estate investing journey. The whole part of it is really property management. Did you, how did you find that property manager, and did you ever have to change them?

Rama:
Part of that one, that single family I purchased I mean, I, I find the PA property manager through, you know local market or local knowledge. They have brokerage company also. They have real, real estate realtor Mm-Hmm. <Affirmative> that, so that know, I found that property management company, they are like very good in that, that location, that market. They’re very good. So I didn’t, I didn’t change them, you know? Yeah. They managed my property for one or two years, then I sold that property. Yeah.

Charles:
Nice. Yeah, that’s the whole thing is finding the manager that is well-versed in the type of property that you own and in the area, and that is, that gives you so much of an upside, and it’s such a benefit more than just them handling the actual management event that you can do a much better process and pro when they’re, when they just know the area and they know everything about it. So tell us about your transition. You held that for a little bit. How did you transition? Why did you transition from single family into multifamily investing, and about what year did you do this and then we’ll get into your first deal?

Rama:
Yeah, so that time, like I was managing, you know, multiple properties. I have properties scattered multiple locations, and at the same time I was, I was working full-time, you know, it field and working full time and, you know, managing these properties scattered across multiple locations with challenging. So, mm-hmm.

Charles:
<Affirmative>,

Rama:
I felt like that stress, you know, handing like so many calls and, you know, all the stuff. But that’s how I, you know, I thought of, you know, shifting towards some other area. So some, some lucky, like, got some commercial real estate book by Peter Harris and, you know, I read that and like the concept of, you know, scaling up and and leveraging property management company, you know, and also scalability and also, you know, management both point of is better option. I thought it’s a better option. So that, that’s how I explore a little bit more into multifamily space. You know, reading a lot of books and, you know, articles, all this stuff, you know, bigger explore a lot in BiggerPockets. Also reading lot, read a lot of books and listen podcasts. That’s how I started into multifamily space. So

Charles:
When I went into my first larger syndication, my first syndication, which was my largest property I’ve ever invested into, I had a number of limiting beliefs that I had to overcome with it, right? Raising money, raising millions of dollars, working with a team that I wasn’t used to working with. And what kind of limiting beliefs did you have when you started multifamily, and how did you ultimately overcome them? Yeah,

Rama:
Yeah, that’s a a great point. You know, not only in our first product properties, that limiting belief is always, you know, it’ll continue in, in multiple properties of life. So during first stage, like, you know, I don’t have traffic out of managing, you know, bigger properties. That is one limiting belief, you know, I don’t know how to manage this property. Another limiting belief. So through education and through, you know networking with an experienced operator. So understand about to process like underwriting deals, underwriting bigger properties, and also, you know, how to raising capital and also, you know, how to leverage experience operators for managing properties. Multifamily is a team game, not a single family. Like where you can manage <inaudible>, you know, it’s a single person’s game. Multifamily is like a team game. So you no need to be perfect in all areas like, you know, underwriting or analyzing market or sourcing deals or capitalizing or managing property or asset management. All these, you don’t need to be perfect in all these areas. So if you’re good at one or two areas, that is more than enough. So that kind of, you know, knowledge I gained by networking or by, you know, pro listing podcast or reading books. So that’s how I overcome my, you know, eliminating deliveries.

Charles:
So tell us about this first deal. How did you find the deal?

Rama:
So it’s through broker relations and it’s on market deal. So that’s how I find that deal.

Charles:
And so, as you were just saying, you, you were working with some partners on this deal, and how did you find your partners and, you know, how did you actually vet them? I mean, obviously you’re, you’re vetting process probably a lot different now than it was then, but how did you ultimately vet them to know that they were the right partners to work with on this property?

Rama:
Yeah, yeah. So I was like a leading podcast, and also I started my own podcast, you know, after, you know, around 2000, I think 2020 or 2020 when I started my own podcast. Mm-Hmm.

Charles:
<Affirmative>.

Rama:
So, and also I was attending various virtual conferences and listening various podcasts. That’s how, you know, I reached out various operators and also met various new operators or new new investors and experienced investors. That’s how I find my partners, you know, podcasts and also virtual conference. Through that, I find the partners, again, like, you know, at investors, past investors, I followed like, no, like trust. That is the principle I followed. I like them. I know first of all, we need to know the, you know, that operator Mm-hmm. Then we, we need to light that operator. So then you need to trust that operator. That’s how I did the, my waiting process, you know? Mm-Hmm. So, yeah.

Charles:
So on your first deal, you know, I think most operators find it difficult to raise all the money and to, to make sure that it, it’s usually a process because it’s your first time doing it. How did you capitalize the property? I mean, how much did you guys raise approximately? What did you guys get in debt? Stuff like that.

Rama:
Okay, sure. Absolutely. So for this, my first deal, I really, I involved, like on acquisition side, I source the deal and also on the right, and I did the property to solve this stuff. So I, I did raise a little bit capital overall, it’s like purchase price there, 5.5, 5.1 millions. So we raised close to, you know, 1.9 to two millions mm-hmm. <Affirmative>. So we, we got, it’s a bridge step and we, we leveraged experienced operators in this space to raise capital. I also raised a little bit capital, but mainly we leverage experience operate are good at rising capital. So utilize that, you know, we leverage, basically leverage experience of others, you know, a rising capital. Yeah.

Charles:
So they were experienced partners that you had the experience indicators where your partners on this deal. What were some of the lessons that, let’s say you took away from the deal as being a first time multi-family, syndicator? I mean, what happened and you know, what have you kind of learned and brought into future properties that you’ve invested into?

Rama:
Yeah, definitely. You know I learned a lot from this deal, you know, basically, so things were different, you know, before we closed this deal, interest rates were low, and, you know, then interest increase within, but I feel like within 18 months it increase. Like now mm-Hmm, <affirmative> or almost three points, something, you know, that is one thing, you know, we, we need to plan for some kind of uncertainty. So the best way is we need to keep enough effort resource, cash resource, so that way we can protect, you know, properties, uncertain times, like, you know either higher mortgage pages or uncertain like, you know, repairs or maintenance issues, like those kind of stuff. We can, we can de-risk the stuff, you know, by keeping enough results. Another thing is like, you know, always we need to be more proactive. Mm-Hmm. <Affirmative>, especially from, you know, operations point of view. So more proactive and asking our right questions and, you know, don’t accept, you know, whatever they throw. So, I mean, especially management point of view, you know, we need to be more proactive and find the solution. And, you know, those kind of stuff is very, very key and key lessons I learned from this one.

Charles:
Interesting. Yeah, there was a lot of great lessons. Did you guys keep the same property manager that you’ve had when you started till now?

Rama:
Yes. Yes. So we, we are same to property manager. We are continuing, yes. Okay.

Charles:
I always ask that because as we’re saying before, how important property management is, but the switchover from property management is a huge process and very time consuming. And then also it’s, it’s just a very difficult process. So it’s something that if you have worked with it or if your partners had worked with that manager beforehand, it makes the process so much easier because that’s one thing that you don’t have to worry about changing down the road, and you also know how each other works. So it makes it for a stronger business relationship.

Rama:
Yeah, exactly. I want to add a couple of other points also. Other point is like, we need to do proper, you know, thorough due diligence before bringing in like, you know, right. Property management company. So success in operations side, so bringing right team, right team within know right values, you know, similar kind of values, you know, even not only property management company, even within know other partners also, you know, you need to bring, you know, right. Kind of team. Yeah. That matters.

Charles:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.

Charles:
When you’re buying a property, there’s always, you can do your due diligence, but there’s always what I call, like for the first few months of owning a property is really the initial stabilization period, which is where you really figure out exactly what’s happening in the property. And there’s, there’s always surprises, but you can protect for that. What were some of the surprises that maybe you, you realized after purchasing the property that you weren’t aware of it before?

Rama:
Yeah, so there is, I think one, I think it’s kind of plumbing issue or some kind of issue. Mm-Hmm. So that issue we we uncovered like after, you know, after we took over the property, you know, that is definitely kind of suffice, you know, and also other thing is like, you know, speed of execution. Also, one other thing I learned from this, you know, from this property, you know, managing this property.

Charles:
Yeah, very good. Yeah. Plumbing is, you can check, I mean, usually when you’re doing it, you’re just you’re sneaking lines and stuff like that and making sure it’s, but there’s many times I’ve purchased properties and there’s, there’s plumbing issues with it that you, you find and then you have to rectify. But there’s only so much due diligence you can do when you’re walking a property, you know what I mean? Yeah. So it, it’s, the only way you really protect against that I have found is just like you said before having the reserves. You know what I mean? Yeah.

Rama:
And

Charles:
If you have any unknowns, you have to increase those reserves, and hopefully you don’t need them, but if you do, you, you have ’em, which is great. Yeah.

Rama:
I just want to add another thing is like before purchasing we, we expect, like if things will go like as planned, but sometime it may not Yeah. Go as planned. It’ll take more time than what we expected. You know, we, we need to plan all this stuff, and also we need to keep enough resource, you know, all this stuff. Yeah.

Charles:
Yeah. So, you know, you, you invest a lot as a passive investor, and this is always an interesting thing. ’cause Myself as a passive investor for many years in real estate and in other asset, how do you de-risk your investments as a limited partner? So

Rama:
Yeah, definitely. You know, the other factor I mentioned, like no, like trust, right? There are different levels of no, like trust, right? First thing, always like operators or you need to like, no trust these operators. Finding good operators. It’s always, you know, first and biggest thing as a past investors. Mm-Hmm, <affirmative>. Then next level is like, you know, market level need to do <inaudible> about the market, whether population growth or job growth or you know, landlord friendly. Then submarket level, you know, current trends and project rent trends. What kind of business plan are this operators executing? And the next level is no property level and what, what kind of properties <inaudible> are the class C and track record about this prob this operator about this, this kind of asset classes, you know, and is that properties in good submarket or those kind of stuff. Also, I need to do, we need to do to, to avoid any kind of risks. Yeah.

Charles:
How did you find your operators when you started the process as, as useless say no, like and trust them?

Rama:
Yeah, so I found them through like, you know, through mastermind groups and also through podcasts and also conferences. That’s how I found <inaudible> and always know, I think conferences is the best way to find the operators. Yeah. And then in know podcast and, you know books and some of the ways meet us, you know?

Charles:
Yeah. I have to say, I just, this just reminds me is that a lot of the LPs are a lot of the gps I’ve invested with passively, I’ve met through conferences and whether I met them directly or I met someone that introduced me to them, it’s a lot of face-to-face and it’s, you know, conferences, that’s one of the great things is you’re able to really meet someone, talk to them, even if it’s for a few minutes and you, you understand a little bit more about them than you can virtually.

Rama:
Yeah, yeah. Definitely. You feel like energy and also you feel the, you know, leadership style, you know, all this stuff.

Charles:
Right? So what kind of mistakes have you made as a limited partner or maybe things you didn’t do initially that you do now when you’re reviewing a new passive investment? Because I know for myself, I have a list of things that I never did in my first one, but many years later I check through as before I invest.

Rama:
Yeah. So my first day, like I didn’t do to, to much of due diligence. Like I, I did at only like operator level. Mm-Hmm. <Affirmative>. So I trusted that operator invested. But now if I, if I need to invest, like I will do like all three levels I mentioned like, you know, in a operator level, market level, and also property level. And as I will do a little bit on like landlord all this stuff also, what are the things like I, I didn’t do much mistakes, but maybe I will not take too much time to invest in any passive invest deal. Maybe I will move a little bit speed a little bit faster by investing any good good. If I feel it is good passive opport, I would let invest, you know, without delaying or without wait for another, you know, good opportunity. Yeah.

Charles:
Right, right. Yeah. So make your decisions faster. Don’t drag your fee. It’s a difficult thing. ’cause You don’t know when you’re reviewing, you don’t know exactly what to look at. And now being on the other side of it and buying properties, I really know the things that I’m looking for, not only in my partners that I’m working with, but also like you said, the market, the property level. Right. Yeah. So you can tell a lot. I don’t even have to look at the operator. I can look first of all just at the market and at the neighborhood and at like some of the rental comps and how close they are. So I know, and then, you know, Google Earth it and I see what’s around it. Like these things that can be done in what we’re talking about 20 minutes, you can really move forward and kind of make your sense and then like really dig in, I guess if you are, you know, into a more, in-depth analysis if you’ve, if they, they warrant that.

Rama:
Yeah. Yeah, exactly. You know, more come because of no active sites. So I can see the business plan and the, and the caps, exit caps, all this stuff. Mm-Hmm. You know interest rates, all this stuff. Also, I’m aware of that. So based on that, you know, so by seeing underwritings, the business plan, okay, whether this guy can execute this money, whether this plan is realistic or not, you know? Right. That stuff also there. Yeah.

Charles:
Yeah. That’s the thing, the realistic, ’cause you, you don’t really know. And I think finding the comps and looking at their rental comps, ’cause I’ve seen this before with new syndicators that have brought me deals to invest with ’em many years ago. Doesn’t really happen that much anymore. But it would be something that would say you are, they’re giving you a comp and it’s miles away and you’re just, it just doesn’t hold any water. It might as well be in another state because it just, it doesn’t matter. You know what I mean? Yeah. And these are things that you can, if you’re not looking at these things, very simple metrics that they’re putting in there, it can make it from possibly their numbers are accurate to maybe they’re not accurate at all. So, yeah.

Charles:
Yeah,

Rama:
Normally brokers will share that kind of comp, so maybe they might speak up from that. No.

Charles:
So you gave a lot of great information about you doing, what would be some of them, if someone was coming to you and they wanted to become a passive investor, what would be some of the main advice that you would give them? I know you had your three points, which maybe you can go over again, but is there any other advice that you would give to them, to a new passive investor?

Rama:
I will suggest them to attend, you know, conferences or, you know, meet, you know, operators feel that, you know, maybe topic more experienced passive investors. That is the best way, you know, you can learn about passive investing side.

Charles:
Yeah. It’s interesting when you ask passive investors, and if I get on a call, someone that’s been through many cycles, so they’ve invested, they got their money back, they invested, they got their money back. Hopefully they, their questions are much different from a new investor. And you try to, you know, you’re answering to what they think is important, but you’re also, you wanna make sure they understand the business and, and like really what the business plan is. And so that’s that’s great advice. Yeah.

Rama:
And also they can get references for the good operators and all that. <Inaudible> also you’ll know from, you know, experienced passive investors.

Charles:
Right.

Rama:
Yeah. Yeah.

Charles:
That’s one thing I always like asking is to new people that might be investing with us, potential investors is that what were your past experiences, whether that’s active or passive, how did that work out? And you know, not that any names or anything like this, but you know, just so you have an idea of like what do they really want and what weren’t they getting? And a lot of times it’s communication. Yeah.

Rama:
It’s,

Charles:
They’re just lacking a lot on communication, which I understand it gets busy as a general partner, but it’s one of those things is that you have to put out those updates and you have to get back to your investors right away to answer questions and to really field anything that they might have lacking knowledge on.

Rama:
Yeah, yeah. Absolutely.

Charles:
So you 15 years an IT professional, I think eight years as a real estate investor. What do you think are the main factors that have contributed to your success over the years? Yeah,

Rama:
Definitely. You know, persistent persistence is one of the key aspect that helped me to move forward and get some success. And another thing is, you know, growth mentality, growth mindset. Mm-Hmm. <Affirmative> and also learning new things. These are the things many helping me to success, you know, and never give up. You know it is, there are so many challenges as a general partner finding deals or, you know, getting deals, all this stuff. So never give up attitude also help me to successful.

Charles:
That’s great. What have you found to be your, your biggest challenge, let’s say professionally, whether it’s in your career or whether it’s in real estate?

Rama:
I think at this point, finding good deals is a big challenge. Mm-Hmm. <Affirmative> right now. Yeah. So, yeah.

Charles:
Yeah. It’s always a tough spot, <laugh>.

Rama:
Yeah. Yeah.

Charles:
So how can our listeners learn more about you and your business?

Rama:
So there are multiple ways they can reach out me. So I do organize virtual conferences. It’s called multifamily AP three sixty.com. That is one way they can, you know attend my virtual conference. And there other way, like, you know, if they want to learn more about my investing opportunities, so if they want support on coaching side, they can reach out me through [email protected] s hha capital.com. That’s how they can reach out to me.

Charles:
Yeah, that’s great. I will put that link into the show notes there. And Rama, thank you so much for coming on today. A lot of great information and looking forward to connecting with you here in the near future.

Rama:
Thank you very much, Charles. Thank you. And I thank you for this opportunity.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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About Rama Krishna Chunchu

Rama is Founder of USHA Investment Group LLC. Rama Krishna Chunchu has a B.E in Mechanical Engineering from Osmania University, India, and corporate background in I.T. Investing in Real Estate since 2015 in North Carolina, FL, and MD. Equity partner in 750+ unit’s multifamily assets, in FL, MD, and NC markets. GP in 64 units.

With more than 15 years of experience as an IT professional, Rama Krishna brings his experience in Analyzing markets, underwriting deals, raising capital, and asset management. Rama Krishna is both an active and passive investor in multi-family apartment syndications.

Rama found his passion for multifamily apartments. He started his podcast and virtual conference with the goal of educating passive and active multifamily investors on how to achieve financial freedom and build long term wealth. He is passionate about apartment investing, reading books, cricket, and martial arts.

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