GI249: Raising Private Money with Mustafa Ladha

GI249 Raising Private Money with Mustafa Ladha

Mustafa Ladha is a multifamily investor, and his firm specializes in leveraging secondary and tertiary real estate markets to seek an attractive risk and return profile for an array of investors. They offer a multifamily debt fund, a multifamily equity fund, and single property syndications.

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Transcript:

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 Mustafa Ladha. He is a multifamily investor, and his firm specializes in leveraging secondary and tertiary real estate markets to seek an attractive risk and return profile for an array of investors. They offer a multifamily debt fund, a multifamily equity fund, and single property syndications. So thank you so much for being on the show today.

Mustafa:
Thank You so much, Charles. I really appreciate it.

Charles:
So, can you give us a little background of yourself, both personally and professionally prior to getting involved with real estate investing?

Mustafa:
Yeah, sure. Originally I studied genetics with a minor in religion. I went to med school. I decided it wasn’t for me. And then like a lot of people, I was trying to figure out, you know, what the next step is. And that ultimately led me to, to real estate. I was really searching for, you know, passive income stream, different, you know, options and strategies to ideally retire before 65 to be in a position where, you know, I don’t have to like rely on my 401k or social security or anything like that. So for me, it really fundamentally came down to, you know, there’s so many different ways to make money, but fundamentally making money boils down to adding value for people. And that’s really how I started my journey. I looked at how do I add value and what’s the most strategic way to add value and what’s the most scalable way to add value?

Mustafa:
And for me, a lot of that came down to who do I know in my network, what are they doing, what are they successful at, and how can I add value for them to really shorten my learning curve and really position myself where I’m adding value to somebody. And then ultimately they’re, they’re adding value to me as well. Kind of what, what we would say today is like finding a mentor very simply. Right? Right. And the people in my space happen to be in real estate. They happen to be doing deals, they happen to be raising capital. So that’s really what I focused on. I said, okay, let me understand the business. Let me understand the deal flow. Let me understand how they’re making money and how other people can make money and how I can make it a win-win for everyone. And that’s really what I’ve gone about doing. You know, more or less my whole professional life

Charles:
When you started out in real estate ’cause you went over a couple of the reasons why you did that. But can you go over kind of what your first real estate investment was, how you got really involved on your first deal?

Mustafa:
Sure, sure. So very simply, I, you know, came in, I was excited. It was around 2018. You had a lot of crowdfunding platforms that were, you know, starting and then failing. And every year the crowdfunding space was different, especially in real estate in terms of, you know, the titans of industry. So for me, I felt like there was a, a huge opportunity to really leverage technology and really leverage, you know, the regulations and reg a and things of that nature to raise capital online. At the same time, I recognized it costs a lot of money to do that. So I came out, you know, with a strategy, you know, to, to my mentor to say, Hey, listen, you know, you gimme x I’ll be able to raise y and this is what it’ll look like. And very simply, the conversation is, why would I do that when I can just invest this money in real estate and have a more streamlined way to make money?

Mustafa:
So I’m like, okay, that makes sense. Let me circle back. Let me build an MVPA minimum viable product and lemme prove out this, you know, this theory. So that’s more or less what I did. I took those deals that he was gonna fund him himself. He was deploying, you know, 820 K across three properties. I said, okay, I’m gonna raise some money for this. You know, what are you projecting that you’re, you can pay investors? So he said, anywhere from three to 4.5% in three months. So a short timeline, you know, decent ROI. And it was really a value add strategy. So I raised, you know, 200 5K for that project. Investors made 4.5% in three months. And then I scaled from there. And, you know, the cost of acquiring that capital was zero, right? I mean, my time obviously, but, but zero in terms of like a marketing spend and things of that nature.

Mustafa:
So then I, you know, within three months I raised a million from that same group of investors. Obviously the first time around they made their 200 k back and profit. They, you know, invested a million. And then over the next, you know, five years, I really scaled that out, you know, again, with, you know, zero ad spend, things of that nature. And really creating a structure where people can invest passively, creating a structure that, you know, makes sense to investors and enabling them to feel comfortable from investing 1 million to now over 20 million primarily on WhatsApp.

Charles:
Nice. Yeah, and I want, I want to get into that in a little bit. One of the things I want to get into, dig into more is about your individual investment philosophy, because it’s what I was looking over, you had different markets and everybody has a different way of how they run business, how they raise funds, and how they’ve you know, really curate their business. Can you go into a little bit more about the strategies and of how you, how you work with your investors and why you do this?

Mustafa:
Yeah, sure. I think it’s a great question. So at a very basic level, when when I introduce the firm or when I say, when I talk about what we do, I say, Hey, we finance ground up construction. And then, you know, sometimes people will ask follow up questions based on, you know, their, how comfortable they are with real estate. So it can be anywhere from, you know, six unit development to, you know, 288 unit development. So for a lot of people, that’s a huge space and it doesn’t necessarily make sense and it’s a byproduct of the market we invest in. We’re not in the sunbelt where there’s a lot of land and there’s like a lot of people doing big complexes. We’re in the northeast where land is, you know, more quote unquote more valuable, harder to come by, et cetera. And we invest in opportunity zones, right?

Mustafa:
So the areas we invest in their pro rezoning, there’s huge tax benefits to rezoning. So if we can at scale, do multiple six unit projects, we’re gonna do them if we can. If those six units are next to each other, we’re gonna rezone and do a 40 unit. It just depends on where, where those lots are located, where those single family houses are located that we’re rezoning, and then that kind of scales up and says, Hey, we can do bigger projects, or we can do a lot of small projects at scale all around the city. And that’s really what we’ve been doing as, as a firm for over a decade now.

Charles:
Yeah, I love that strategy because it’s I’m originally from Connecticut, so from the Northeast as well. And so we, we know exactly the tri-state, so know exactly that there’s a lack of property and nothing like the complexes we have down here where I am down in Florida now, and the southeast in general, south Atlantic. So going further into that, you mentioned the opportunity zone, which is a very interesting investment strategy we haven’t spoken about in a while. And can you go over this, as I understand there’s like 8,000 plus of these these zones in the United States, and can you go over what the benefits are for you and investors to invest in really you know, really revitalize these areas?

Mustafa:
Yeah, so there’s so many different ways to tackle the question. Like when I think of the average investor, I just think about how much money they probably wanna make. ’cause You’re investing with the intention of making profit. So from that angle, when you’re investing in an opportunity zone, and there’s a difference between a qualified opportunity zone fund, mm-hmm, <affirmative>, and that investing in an opportunity zone, right? So opportunity zone is at the most basic level, the actual property. So when you’re investing in an opportunity zone, that means that the land that you’re investing in is in an area that needs to be revitalized at the federal and local level. What that means in English, in fifth grade level English is you’re investing in a not nice area and you’re trying to make it nice. And in that there’s risk. And in that there’s opportunity. The government has decided that there is too much risk.

Mustafa:
So there’s not enough opportunity, not enough developers coming in and investing capital. So they’re gonna de-risk the investment for you by way of reducing your tax liability, right? ’cause They can’t just throw you money, right? So they need to figure out a situation to make it make sense for you to readjust your risk profile. So now for some investors, they’ll say, oh, hey, you’re gentrifying the area and that’s bad. And I say, yeah, that’s a valid perspective. I’m also hiring locally and putting money into the economy and creating jobs. So that’s why like I, I typically focus on the numbers, but you know, just a couple days ago I had a question on a, on a different podcast or a different, you know, show the more interactive where I was talking about gentrification. And so I wanted to just touch on that as well.

Mustafa:
Like, you know, fundamentally all opportunity zones are in bad areas. If no one ever invests in a bad area, it never becomes a good area. And so you have to have a certain type of investor who takes that initiative to say, Hey, I’m gonna be that lead investor. I foresee in 10 years this market that’s 30 to 45 minutes from New York City will be a gold mine and it’ll be printing money. How do I bridge that today? The risk profile doesn’t make sense. Then an opportunity zone comes along and says, Hey, normally if you had a multifamily apartment complex, you’d be paying, let’s say 60 K in taxes a year. Instead, you’re gonna pay three K in taxes a year. So what happens to that 57 K? It goes to your net operating income, that’s money in your pocket each year, which means your asset is now worth more ’cause it appraises at a higher value.

Mustafa:
‘Cause The cap rates stay the same, the net operating income increased. So now your asset is worth more, which means you can either cash flow more or leverage the asset more. So ultimately it’s a defensive feature for investors. And depending on the opportunity zone, and depending on the laws, it’s either a 20 year tax abatement or a 30 year tax abatement. Typically it’s 10 years where the taxes are only on the value of the land. And then, you know, years 11 through 20, it’s 5% of improvements. So now what happens over that 20 year period is rent also goes up, presumably let’s say at a 3%, you know, rise based on the national average. So you have rent going up, you have your taxes staying the same for first 10 years, and then ultimately year 11 to 20 taxes are going up. But because you’ve benefited so much from the first 10 years and rent has gone up so much, et cetera, you’re in a good position. And that’s just like looking at the numbers, we didn’t talk about the market appreciating, whereas maybe a C class market and now it’s like a B class market. And over there there’s also massive appreciation for your asset and cap rates and asset values. So at, at a, at a medium level, Charles, that’s kind of how it breaks down.

Charles:
Yeah, no, thank you very much for that for that explanation. Yeah. What I’ve found is, when I speak to operators that have successfully done this is that it’s finding the oppor opportunity zones that are really on that line between right, on a neighborhood that let’s just say is more ideal for an investor. And that’s really the game of getting into, and I understand the gentrification argument on both sides, but also, yes, you’re gonna go into these areas that would never get capital and there is gonna be capital going into ’em. And that doesn’t mean the whole area is gonna be, you know gonna be renovated and changed in a class apartment complexes everywhere. It’s just, you’re, you’re little by little kind of pushing that line back out to make it you know, you’re making a city nicer than it was before. And so, but of course, whatever you do, somebody’s gonna be mad with it, right?

Mustafa:
No, I think I a hundred percent agree with you, Charles. And it’s, and it’s interesting because these conversations like context is so important in the market where in the average inventory is 1955, that’s after we’ve done 1000 units ground up. So 1000 units between let’s say 2018 and 2024, and still the average is 1955. So we have like 70% of inventory that is pre 1940s. When we entered the market over a decade ago, it was a de class neighborhood. Now it’s like a CCC plus class neighborhood. So for us, you know, we experience a lot of demand because we market our units at the same cost as those 1940s inventory. So people aren’t paying more, but they’re getting a better product. What that means for us is the timeline for stabilization is so much quicker. So we have situations where we can stabilize, or we have stabilized, you know, 24 unit complexes in three months with 22 of, sorry, 23 of the first 24 units being stabilized in the first month because we keep demand so high intentionally because we, you know, we look at it from both perspectives. Fundamentally, if we’re doing good and creating value for the community, we’re able to monetize off that value as well. There’s no need to necessarily aggressively raise rent or anything like that. So that’s the thing with sometimes with that gentrification conversation, it’s like, let’s take a step back and let’s look at the actual numbers, let’s look at what’s actually happening, and then we can talk about whether it’s good or bad for, for the individual.

Charles:
Right? And what I’ve seen in these areas when opportunity zones and there’s been development there to in these areas, it’s just that you’ve seen a decrease in crime. So even if you’re not living in the property, if you’re near to the property, no one’s gonna complain about a decrease in crime. So it’s something that, or they shouldn’t, I mean, probably will, but it’s something that it it’s something that it’s, it’s gonna be a it’s a huge benefit if you’re in the property, you’re near the property or you’re in the city at whole. I mean, it just makes it I think it’s a win-win for everybody that’s involved in that area.

Mustafa:
A hundred percent agree.

Charles:
So you, you spoke about before about how you guys raise money for deals and you mentioned a couple a couple phrases, regulation reg A and then also Reg D. And can you go into a little bit more a little bit of an overview of exactly what a reg A offering is and rather Reg D offering is and why you would utilize one or the other?

Mustafa:
Sure, sure. So at a very basic level, everyone’s familiarity with, with real estate, private placement investments is different. So a lot of times when I’m talking to somebody, you know, new or through a referral, et cetera, the conversation kind of comes down to like, how do you wanna make money? Do you want a short term structure that’s kind of like a cross between a high yield savings account and a dividend stock where you can make money monthly? If so that’s our Reg D debt fund, right? I’m not gonna talk about performance because legally I don’t want it to be that I’m advertising anything. So this is just educational only. But ultimately a Reg D debt fund is a highly liquid vehicle. It’s a minimum one year term. You can choose to make money monthly, quarterly, semi-annual or annually. So the way I look at it is, hey, like we’re dating type situation.

Mustafa:
You’re getting to know me, I’m getting to know you, you’re testing us out, but you’re not married to a 10 year fund where you have no liquidity and you know, you make money in theory at these points in the Reg D debt fund, you make money first, right? So it’s a way of establishing a lot of trust to, to a new potential client. Then we have a Reg D equity fund right there. It’s a 70 30 profit split that’s structured to the Sharia compliant. So some investors don’t wanna invest with any leverage whatsoever. This product is built for them. Then we have a reg, a tier two fund. That fund is structured to be open to anybody. It’s a fund that I can talk about freely. You know, it has a lot of SEC compliance. The minimum is 5K, it’s a minimum two year investment period with annual liquidity and is structured as an 80 22.

Mustafa:
What that means is 80% of profit goes to investors, 20% of profit comes to us, the gp, and there’s a 2% management fee. So fundamentally it comes down to like the person we’re talking to Charles, a lot of times, you know, when you’re on our side of the space, when you’re raising capital, it kind of becomes, hey, we want a 20 5K minimum 50 K, minimum a hundred K minimum. ’cause It’s more manageable for us, for our administrative team to manage the tax, to manage all of the things that are not fun to talk about that go on behind the scenes, right? But then when you lower the barrier of entry, then you can establish proof of concept for investors and then they feel more comfortable scaling. Like I’ve had guys go from, you know, 10 K investing, 10 K to investing 1.7 million. You know, it’s primarily on WhatsApp, right?

Mustafa:
And it’s one of those things that like how do you establish trust? You can, you know, create a podcast and educate people. You can post on LinkedIn, you can post on WhatsApp, but fundamentally, you know, a person has to get started somewhere. And the benefit of the Reg A fund is sometimes people feel like they can only make money if they have money. And that’s inherently not the case. Like a lot of what I specialize in is showing you how you as the investor, you have money, you have some cash, you have your 401k that you could turn into self-directed IRA, you have, you know, life insurance that you can use as cash value life insurance to invest with like a bank on yourself type concept. You have, you know, self-directed HSAs that you can use ’cause you’re young and you don’t need the HSA money anyway. So it’s better that it grows tax free. There’s a lot of different strategies. It just comes down to the individual, their risk tolerance, you know, the education piece and if it aligns with their goals long term.

Charles:
That’s great. Thank you. The, one of the things you mentioned with the Reg A was that $5,000 minimum investment. You don’t have to be accredited. You can be a non-accredited investor. No matter what your status is, you can invest. Now, it, it strikes me with this is that your I’ve always found Reg a’s is really a you’re, you’re competing with like a reit, a real estate investment trust that maybe someone can invest right through their brokerage account, 401k Roth, whatever it might be that they have. What would be, other than building a relationship with you on a smaller level, which is a great way of doing it obviously you’re, you’re trying out a sponsor with a minimal amount of money compared to 50 or a hundred thousand dollars as you mentioned. And other than that, what would be one of the benefits of going in with, I imagine direct ownership via the Reg A versus a reit?

Mustafa:
It’s a great question. I think fundamentally it comes down to an individual’s understanding of, of, you know, financial products to begin with. Like a Reid is typically structured where they’re reinvesting most of their profit and they’re paying out the rest of the profit to you as the investor, right? So typically a re is a more mature company that’s kind of, you know, kind of stabilized, kind of plateaued in terms of their, their growth. And typically they have a well-defined investment strategy a lot of times, you know, like office space, things of that nature, right? And when you go to invest that 5K in the re typically you’re not talking to anybody that, that human element that you mention typically that’s, that’s mentioning, that’s missing in terms of understanding the strategy and understanding like the growth potential and holding that re you know, accountable year to year, right?

Mustafa:
So that’s what you get kind of, you know, investing in a Reg A, whether it’s with me or anyone who has a Reg A is you have a point first that you can kind of talk to and say, okay, fundamentally what is your strategy? How are you gonna protect me on the downside? ’cause With a read, you can look at a chart online and you can get all this information, you can look at a 10 year chart and it’ll give you that data. With a Reg A you can do that as well, but then you can have that conversation to understand the strategy to say, Hey, is this strategy well performed or well positioned to perform in the future? And that’s, you know, a gut assessment as much as a due diligence assessment where sometimes with a reit you can’t necessarily do that, even though the information is available, the average investor doesn’t necessarily have the access to or understanding of that information.

Mustafa:
So I think it comes down to accessibility. A lot of what we do in the private real estate space and what you do as well is about accessibility and educating people and saying, Hey, these are the different strategies, right? Some of the strategies that I mentioned, you’re not going to learn about by investing on char in Charles Schwab’s platform in a reit. ’cause They’re not gonna talk to you about a self-directed HSA, which doesn’t make sense in the short term, but in the long term it’s massive, right? In the short term, it’s so much easier to just say, oh, I have a hundred bucks saved, let me just use it for my deductible. But that a hundred dollars could grow tax free for you for 40 years and then you could use it for your nursing home,

Charles:
Right? Right.

Mustafa:
Would you rather have your nursing home expense paid or some hundred dollars copay, you’d rather have the nursing home. It’s gonna be much more expensive. Yeah. But you know, if you’re investing online with a robo-advisor, all of these things that exist that are cost effective and that are great products, they’re great products. As long as you continue to educate yourself on what’s possible financially. And that’s the thing like a REIT has is a good investment. It has a space in your portfolio, but I think it comes down to what is the REIT investing in? If the REIT is investing in ground up construction in the northeast, in multifamily, then compare my performance with them. And I would argue I’d probably outcompete them. If they’re investing in the Sunbelt in medical medical facilities or in storage or something else, you can compare them to me.

Mustafa:
But it’s like comparing an apple and an orange. They’re two different things. And for the average investor, when they think real estate, they think of it as some homogenous thing. Like it’s all the same. It’s, it’s not. Each ease of real estate has a specific strength that you may or may not want in your portfolio, depending on your goals. And I think that’s the difference, Charles, when we talk about like, oh, just buy VOO, just buy, you know, the vanguard ETF, the track 500 that’ll give you exposure to the whole market. But if you are like a growth investor, it’s not the right play. If you’re an investor that cares about dividends, primarily, it’s not the right play. And that’s the same with REITs as well. It’s, it’s good, but it’s important to understand fundamentally what they’re investing in.

Charles:
Right. And also they’re not tax efficient. I mean, if you have it in a taxable account I mean, you’re paying very high taxes. I think ordinary income speed to your CPA, I don’t know exactly, but it is a, it’s not like what we have going on here when we’re doing our regulations, where we’re having depreciation and everything else. Exactly.

Charles:
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Charles:
You mentioned one thing about your products as we kinda move forward, and I want to get into WhatsApp and how you raise money, but one thing you talked about was the multifamily debt fund. And can you talk more about the type of products, because what I see is that you have, I think you said one year was your minimum on that, is that correct? Or two years? It’s a low min, it’s a low minimum. So I mean, obviously you’re putting debt out for longer periods, most likely. Can you explain what type of properties you’re investing into and how there’s that liquidity for investors to take out a, you know, a distribution and or take out their capital?

Mustafa:
Yeah, so typically in that debt fund, what we’re doing is we’re loaning out to a developer that we’ve worked with for over a decade. We’ve done over a billion dollars in transactions with him, right? So it’s not necessarily a cheap loan for him. At the same time he is doing ground up construction where there’s huge value add. So it makes sense in, in the short term. So it’s a part of our portfolio that we use just like the, the equity fund is, but it’s fundamentally how do we get paid and then how do we pay investors If in the equity fund we’re investing capital and we’ll get paid between nine and 15 months depending on the project, right? A lot of our profit is realized at that event where we’re selling to, to our, to, to this developer, let’s say, right to our cog in that structure.

Mustafa:
Now we make money at the end of that transaction. So that’s why we pay investors on a yearly basis. Now, meanwhile, in the debt fund, we’re loaning out money on a shorter term basis. And there are different projects, right? So it’s not cross collateralized or anything, but there are different projects. And what we’re doing is it’s a short term loan where he’s paying us on a monthly basis. So if he’s paying us on a monthly basis, we have the ability to pay our investors on a monthly basis, right? And that’s really how it’s structured and that’s why it’s important to kind of understand how people wanna make money. That way we can talk to them about the right product. ’cause For you and I, right, it is fun to talk about this for, for, you know, maybe the average real estate investor can be overwhelming or confusing.

Mustafa:
And while like I love writing all the information, I don’t want to intentionally confuse people. So I’d like, I’d, I’d rather just like curate the information on a, on a call and then throw them all the information in an email and say, Hey, based on our conversation, option one is the best, but here are the other like five options you can do. Because I don’t have the, all the information in that person’s goals. So I want to give them all the tools to succeed. And that’s why we’ve built out so many different products, but fundamentally it’s kind of up to them to help me guide them, if that makes sense. Right? It’s, we’re a team and I rely on that feedback to then be able to structure the best products to accomplish, you know, the client’s goals.

Charles:
Yeah, no, that, that’s awesome. The, the main thing is that you have, you have customers, you have investors that are gonna have, like you said, different goals and different timelines for those goals. So having the debt fund is great. I like that because it allows people with a shorter time horizon compared to going into an equity fund where it’s gonna be many years, right? Yeah. And it’s obviously you might have higher returns, but you’re gonna also have higher unknowns, higher risk usually, you know what I mean?

Mustafa:
And and less liquidity, right? Exactly. Like exactly. If you have, you know, if you have that situation where you have a kid going to college in three, four years, you don’t wanna lock it up in a 10 year fund. But maybe if another fund has a refinance projected in year three plus or minus one year, let’s say, and you have a preferred return until that refi, then that makes more sense. ’cause You’re looking at it like, okay, I have this refinance event coming in a projected three year period, it’s gonna give me all my initial investment back plus profit in theory, and I’m not paying taxes on it ’cause it’s a refinance. Now it makes sense for me to hold this asset for let’s say 20 years because I’m getting all my money back in three years plus profit. So now I own that asset for free. And it’s more of an infinite return type conversation.

Charles:
Yeah, no, that, that makes perfect sense. So you, you rephrased tens of millions of dollars from investors, $20 million that you mentioned from a WhatsApp alone. Can you explain how you’ve successfully raised capital and some of the methods and platforms you’ve utilized?

Mustafa:
Yeah, I think it comes down to luck. It comes down to access to, to amazing deal flow. Comes down to having like, you know, high performing partners that, that are able to, you know, help me deliver. Just like anything, Charles, it’s very easy for, you know, one person to be the face of something. But I think the reality is much more intricate. It takes a strong team to, to deliver amazing results. And that’s, you know, what we’re blessed to have. So really with, with WhatsApp, with all of these platforms, it’s, it’s, it comes down to the same formula in my opinion, right? Like you want to establish trust and the best way to establish trust is to be yourself and spend time where it’s natural for you to spend time, right? So like if in the podcast example, you enjoy doing podcasts, right? So then spend that time there to network with people, educate people on that platform, and then people will inherently come to you and say, Hey, I’m looking to invest in real estate, or I’m looking to do X, y, and Z.

Mustafa:
Can you help me now because you’re on these platforms and you’re talking about educational content, you also enjoy it. So you’re happy to help people and you don’t necessarily need them to invest ’cause the deals will get funded with or without them. And I think that mindset is, is important because fundamentally, when we’re talking about, you know, investing, a lot of times these are private off market opportunities that only you have access to, only I have access to, et cetera, right? And, and we know at, at a certain point, whether it’s early on in our profession or later on, we know that there’s a certain type of person that is looking for these opportunities. So we’ll look for the person who’s in need of that opportunity and they’ll look for us. And it, and, and it ends up being a very beneficial relationship for both people.

Mustafa:
So that’s really what I did on, on LinkedIn and on on WhatsApp and all on all these different, you know, platforms is fundamentally look for people who are looking to invest, understand what they’re looking to invest in and understand how I can add value. That value might be me connecting them to Charles. That value might be me connecting them to a self-directed IRA custodian. It might be, you know, talking to them about different strategies outside of my core real estate. And by saying, listen, I’m not a CPA, I’m not a CFA, you know, I’m a person who manages my own money. You can think of me as a money coach. I don’t have any of these, you know, three letter degrees or anything. And all of those are important. But fundamentally what I’m talking about is not necessarily financial advice or tax advice or anything, it’s my own experience because those disclaimers are important.

Mustafa:
But when you don’t wanna talk about real estate, I can talk to you about the experiences, how I’ve made people money, how I’ve, you know, raised capital, all of those things by also disclaiming that, you know, past performance isn’t indicative of future performance, right? Just because in one asset we’re able to raise rents like 13% in one year doesn’t mean this next asset will have the same situation. It might be a 6% raise, you know, in a year. Meanwhile we’re underwriting at 3%, right? So it just depends and each situation is different. Fundamentally it comes down to establishing trust. And, and the best way in my opinion is by being genuine, right? And the easiest way to be genuine is put yourself in positions where you want to be. If you don’t want to be at investor dinners, don’t do those. You know, if you don’t want to be flying around the country, you know, meeting family offices, then don’t do that.

Mustafa:
If you want to talk to non-accredited investors and you wanna help them build wealth, then build a product like a reggae so that way you can legally do that. And then you can help people scale. So that way they have a path to say, okay, now I have money, now I can comfortably think about retirement and then spend your time on that activity ’cause it’s more, it’s more genuine to you or me. So then we’ll have more passion about it and that’ll be reflected in our voice and how we speak about our products. And then ultimately it reinforces the fact that we’re not here necessarily selling products, we’re here building solutions. And that’s a very important difference. And that’s really how I look to structure all of my conversations. That you don’t have to invest in real estate, you can use that self-directed IRA to angel invest. And that’s a more strategic use of your dollars than using your liquid cash. And so those are the kind of conversation that I have Charles, and that’s really, I think what’s helped me be successful is fundamentally having a good team, having good strategies, and then figuring out who I am and being genuine to that.

Charles:
Yeah, no, that’s that’s a lot of great information. The the interesting thing I think about the Reg A, which is, which I feel is great, is that you have, you’re opening up the door because if there’s many deals out there that are only for accredit investors and whatever stats you’re using, credit non-accredited investors make up 88 or 92% of the United States, right? And we have this like say 10% that are accredited. So now that you’re opening this up to a lot more investors and much lower entry points, which is you can speak to a much wider audience. One thing I’ve had, or one question I’ve had that I’ve heard from one other operator in the Reg a area is that it becomes a little bit more management intensive with onboarding and handling Reg A investors. What is your, it sounds like I mean you do a great job of educating your investors. How have you found that from your company standpoint?

Mustafa:
No, I think it’s a huge administrative burden, but it depends on, like to me the person is the most important thing, right? It’s the most important to help people. But from a capital raising perspective and an administrative perspective and a scalability perspective, it comes down to how much you value your team’s time slash your time, et cetera. Right? Now, the way I look at it is we have a 97% reinvestment rate. People who choose to work with us work with us long term. Typically right now, if that person starts out at 5K and they’re 25 and they’re gonna gonna be with us, let’s say for 20 years, they’re not gonna stay at 25 at 5K. They’re gonna scale at whatever speed make makes sense for them. If inherently my goal is financial freedom, what I talk about is financial freedom. I talk about strategies to help people optimize their money, make more money too, but optimize their money as well, right?

Mustafa:
My belief is that those reg a non-accredited investors within 10 years will be accredited just by virtue of looking at my, what’s LinkedIn posts by trying a couple things and by my performance for their portfolio. So now if that’s the case, not only did I have, did I get the opportunity to work with them for a long period of time, I got the opportunity to deliver value for them outside of real estate performance, which is my strength real estate performance. But I got to help them create financial freedom, which is really important to me on a personal level. Now they’re no longer a non-accredited investor. They’re accredited investor who has quote unquote money, right? Who like would be a target for, you know, syndicators and allocators and things of that nature. And they’re getting pitched deals all the time. That’s great. I’m happy for them.

Mustafa:
They can choose to exit and they can choose to invest somewhere else. But at the same time, from their perspective, I’ve been adding value for 10 years. So the trust curve somebody else has to go through to outcompete me and my double digit returns and all these different things is really difficult because they look at it like, Hey, I’ve worked with Mufa for five years, I’ve worked with Mufa for 10 years and I know when he, when I message him, he’s really responsive. I know when it comes to getting my tax statements, I get them on time when it comes to going on the investor portal, I have the information there and I know when there’s like issues or something or areas where most I can improve, I communicate with them and then over time I see that improvement. So that’s what I would say Charles.

Mustafa:
I think it depends on how, as a capital raiser, it depends on how we look at our relationship slash transactions. If it’s long term, if I’m young, you are young, we’re gonna be raising money for our whole life ’cause that’s what we enjoy doing, we enjoy investing, right? If that’s the case, then accredited can be the way to go while recognizing there might be more administrative work. Because what it is is you’re dealing with a different person. The person who’s non-accredited, who’s looking to invest in real estate at an early point in their career, in my opinion, I don’t have any stats in my opinion. That person is very invested in financial education. They’re very invested in figuring out how to make money. And that’s what separates a lot of people. The, the, the intention to make money and to build that freedom, right? So what ends up happening is, in my opinion, they’re more likely to get to financial freedom.

Mustafa:
They’re more likely to have excess capital to invest, and they’re gonna invest with the people who invested with them, right? You invested your time initially when maybe they invested 5K and honestly maybe the firm lost money in that one transaction, but that person might have introduced you to people who have money. That person himself might grow because of the, the investment that you made in them. They might grow and be in a position later on where they have more capital, right? In that example, the 10 K that I gave earlier on WhatsApp, the 10 K investor, you know, he was early on, he made 4.5% in that first three months. He went to 50 k, he stayed at 50 K for four years. I met him in the first time overseas when I was in Asia. And that’s the first time I met him. He lives 10 minutes away from me.

Mustafa:
The first time I met him was in a different continent. And he said, most of I’m having a massive liquidity event, what do I do? And I said, honestly, I don’t know. What do you, what are your goals? What do you want to do? And then based on that, I can give you advice and you know, try to help you. But my advice wasn’t, you know, self-serving, invest in real estate. It was fundamentally, how do you wanna make money? What is your next career plan look like? Do you think you’ll still be making, you know, 300 k plus type numbers where you’re accredited? Do you think you’ll need monthly cash flow now that you’re having this exit? What do you think you need? So we can build out a strategy that makes your life easier. ’cause You don’t wanna have a massive liquidity event and then allocate it to the wrong strategies and then that money doesn’t perform well.

Mustafa:
‘Cause Getting to that liquidity event wasn’t easy either. So I think that’s the thing, Charles, it, it comes down to how we approach these relationships. Are they transactional where it’s okay a hundred K in check or is it kind of like, hey, you know, no one has infinite time, but to the best of my ability, I’m gonna invest as much time as possible in each relationship to really help that individual scale. And you know, if they refer people to me down the line, great. If they make, you know, money, quote unquote become accredited, great. But fundamentally at the very basic level, I’m helping them. So I feel happy. And then the rest will kind of sort itself out later. And that’s really what’s helped me my whole career is really optimizing to create value and then monetize off that value later on.

Charles:
Yeah, no, that’s great. The, the good thing with the reg A as well is that is that you’re getting people comfortable as well with alternative investing, which yeah, I know for a lot of our investors, first time in the alternative investing space, right? Getting outside of, like you said, Schwab that brokerage and getting into something where relationships matter, right? And learning more about in an investment that you might not be able to read about on a lot of different financial websites. So that’s number one. And I think the other thing that I’ve seen too is that to kind of like validate your point as well about larger investments, we’ve seen typically when on our second reinvestment, it usually goes 50% to a hundred percent higher on that second investment than on the first one. And they’ve, that’s if they’ve gotten, we’ve gone full cycle on it, or if just that is running correctly, you know what I mean, then you’re gonna get that. And so I see that as an easier way of getting people in the door with the reg A. So that’s a, that’s a great strategy. I never heard it explained like that, so thank you.

Mustafa:
No, it’s, it’s, it’s really powerful Charles, and I agree with everything you said, because for us, even we would think, oh, it has to be full cycle to then go and raise more capital. But fundamentally, people just want a good, good experience, right? They, they want to see that you’re doing the basic things right? Things like communication, things like follow up things like are my tax documents coming on time? Right? It’s a very basic thing, but in the private real estate space, you know, sometimes it’s challenging ’cause we’re dealing with so much scale, right?

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

Mustafa:
Yeah, great question. So they can reach out to me via email. That’s ML at veloce, V-E-L-O-C-E, capital C-A-P-I-T-A l.com. They can also, you know, visit our website, veloce capital.com or they can, you know, connect with me on LinkedIn. It’s mufa, M-U-S-T-A-F-A, and the last name is Lada, L-A-D-H-A.

Charles:
Well, perfect. Thank you so much for coming on today. I’ll put all those links into the show notes and hopefully we’ll be able to connect here again in the near future.

Mustafa:
Thank you, Charles. I appreciate it. Have a good one, everyone.

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 Mustafa Ladha

With a firm foundation in the real estate realm and a commitment to ethical investing, Mustafa Ladha stands out as a distinguished Real Estate Fund Manager, emphasizing investing in ground-up construction ventures primarily in the New York City Metro Area. Anchored by a formidable record of raising and deploying capital with expertise, tact, and strategic forethought, Mustafa has become synonymous with adeptly navigating the multifaceted world of real estate investments.

Over the course of his career, Mustafa has become adept at the intricacies of capital raising, raising over $20 million via WhatsApp alone. This achievement is not merely a testament to acumen but also to the skill of understanding prospective clients and leveraging the digital platforms to identify prospective clients in need and add value in novel and effective ways. Moreover, Mustafa has revolutionized his clients 401Ks enabling them to invest in real estate and grow their wealth while differing taxes.

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