Theo is interviewing Prady today on his real estate investing experience. Prady has a little bit of a unique story in that he got his start in college and began his real estate investing journey in a time where a lot of people are strictly focused on getting through school. Now he has a thriving condo development business in the Boston area. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“I don’t even do calls, I just knock on doors” – Prady Tewarie
Prady Tewarie Real Estate Background:
- Started as a buy and hold investor in college and became a real estate developer focusing on condo conversions
- Has over $100M in real estate assets
- Based in Boston, MA
- Say hi to him at www.thetewariegroup.com or Instagram @iampradyuman
- Best Ever Book: Built To Sell
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TRANSCRIPTION
Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Prady Tewarie. Prady, how are you doing today?
Prady Tewarie: Hey man, I’m doing fantastic. Thanks for having me on.
Theo Hicks: Absolutely, thanks for coming on. I’m looking forward to our conversation and learning more about your real estate business. A little bit about Prady – he started as a buy and hold investor in college, and then transitioned into becoming a real estate developer, focusing on condo conversions. Currently, he has over 100 million dollars in real estate assets. He is based out of Boston, Massachusetts, and you can say hi to him at www.thetewariegroup.com. We’ll have that link in the show notes.
Prady, before we get started, can you tell us a little bit more about your background and what you’re focused on now?
Prady Tewarie: Absolutely, man. I think you did a good job with the intro. My background actually started in entrepreneurship, mostly focused on acquiring and selling under-performing small businesses, so basically anything from barber shops, to small restaurants, to cafes. I got into that while I was in college, helping out old friends of mine; I just kind of got sucked into that. From that, I started getting into real estate and buy and holds, and mostly focusing on multifamily properties around the Boston area. As many people know, it’s a huge college town, so focusing quite a bit on the college areas, multifamily properties… And I kind of phased from that into becoming a real estate developer, developing apartment buildings right now. So it’s kind of this up and down trajectory and scale that I’ve definitely seen, but I’m gonna talk about this a little bit today… But they’re all pretty much inter-connected, and using pretty much not real formal education in the space, or a lot of experience in figuring ways how to leverage my background in small business into this space.
Theo Hicks: Great. I’m looking forward to diving into that. But before we get into that, a lot of people when they first hear about real estate, they wanna jump right in, right away; and for some of them – they’re in college, and I’ sure a lot of people listening, at least me in particular, when I was in college, I had no right investing in real estate based off of how I was in college. I’m just curious, how were you able to balance going to school full-time, and you mentioned it sounds like you were also doing some other investing businesses… How were you able to balance all that while you were in school?
Prady Tewarie: Yeah, that’s a fantastic question. I think the hardest part with the balance was I didn’t know where I’m gonna find capital to do all this stuff, but also the time to manage all this. I went to college, I went to law school, and I was building all this stuff in real estate, and the biggest thing for me was to build a killer team that I could rely on. I think that if you have a killer team that you can rely on, that can propel you to do things that you can’t do by yourself.
I was at a point where I was like a workhorse. I’m gonna put hundreds of hours a week, and I’m gonna go all-in… And I recognized that at the end of the day there’s only one of me, and there’s only 24 hours. I can’t stretch out the day more. So at that point I changed my mindset a little bit and I started leveraging other people that really knew what they were doing, and really working together with them and creating an incentive structure (which I’ll get to in a bit). That was a big game-changer for me, that allowed me to go to school, keep my academics going, but also really focus a lot on real estate, where I was like “Look, these are my skillsets, this is what I have, but I also don’t know everything.”
I think the hard part for a lot of young people – they’re like “Man, I feel super-underskilled, I feel like I’m kind of an outsider, I feel like I don’t know what I’m doing”, but I think where they go wrong is they let that consume them. I think if you take another approach, which is “You know what, I’m gonna own up to it. I don’t know everything, and that’s fine”, instead of waiting until you get all the experience. Like any college student, I was a little impatient, so I had this philosophy, I was like “Look, there’s not enough time for me to get all the experience. It will take me forever.” So I was able to tap into a network of people – whether it’s brokers, whether it’s contractors, whether it’s architects now – that were just able to help me out. That alone propelled me to grow at a really rapid level. But you have to be humble about it and you have to admit you won’t know everything, and that’s okay, and then you have to be okay with asking for help. I think many of us are sometimes super-hesitant to do that, for a variety of reasons.
That – just asking people for help, and building a team around me and what I wanted to do, that alone was a big game-changer. That allowed me to really go from just managing one income-producing property that was taking all my time, to really scaling it, because I recognized that I needed the help.
Theo Hicks: Did you face any challenges when you were reaching out to these people that you wanted to bring on your team, since you were a young guy, still in college, didn’t really have much experience? And if so, how did you overcome that challenge?
Prady Tewarie: Yeah, it’s super-difficult, but it’s also not super-difficult. Here’s the thing about networking… I recognized early on a lot of people don’t even try. We think things are super-difficult; why is that broker gonna respond, why is that contractor gonna respond? And the truth is they might not. But you should still try. I noticed if I was sending out messages or DMs or e-mails to people, a lot of them would actually respond. As crazy as it may sound, a lot of them would give me time in their day to actually meet with them and to speak with them. And the biggest thing that you have to do is you have to convey interest in your passion, but you also need to make sure that there’s an incentive structure tied for them in the process.
This is another thing I see quite a bit now – people think of networking like “I need something. Let me network right now.” But networking is a process, it’s an ongoing thing. It will rarely work “I need A, so I’m gonna look for people who have A and they’ll give it to me right away.” It’s like “I don’t need anything. I’m gonna network with people, and when I need it, maybe in 2, 3, 4 years from now, I can call to them because we have built that relationship.”
One of the things that I was doing when I was an entrepreneur in college – I built relationships with a couple of brokers, with people in the area that were in real estate, so when I started getting into that space, it was a little bit easier because I’d built those connections. But yes, it was difficult to get a foot in the door… But the biggest thing was just trying and going for it, and understanding “Look, if they don’t respond, it’s not the end of the world.” But you have to try. Most people don’t.
Theo Hicks: Tell us a little bit about this incentive structure. You’ve mentioned it a few times… What is this incentive structure that you offered to these team members?
Prady Tewarie: There’s a couple of ways, and I’ll take it right now, like what I do even now, in development. I was in the buy and hold; a lot of people are doing it using the cash-out refi strategy, and I really wanted to scale. At one time, my broker was like “Prady, you should start developing stuff.” And I was like, “Man, I don’t know what that is.” He was like “Don’t worry about it, you’ll figure it out.” And I knew going in that I didn’t know — it’s a whole different ball game. You’re not managing people, like day-to-day calls about “Plumbing isn’t working.” Real estate development means a plot of land, you go for permitting… It’s this whole process.
So what I did was that I always asked for referrals from people that I know from each other. So I never bring anyone from my own team. What that basically means is my broker said “Okay, I think you can do real estate development.” I was like “Alright.” I had a couple architects that I knew, but I didn’t go to them. I went to my broker and I was like “Okay, do you know an architect that can help me?” He was like, “Yes, I do.” So he connected me to the architect, and I asked the architect, “Do you have a GC who can help me?” He connected me to the GC.
So what I’m doing is I set up a whole system that everyone’s tied to each other. So if my GC – which happens all the time in real estate development – they don’t show up, or they don’t do a good job, or if he runs away, well guess who’s gonna feel the heat? It’s my architect. And if my architect isn’t responding, guess who’s gonna feel the heat? It’s the broker. So because everyone’s tied to each other, the progress that I’m making on my projects – everyone else is winning along the way.
What I never do is I’ll never be like “I’m gonna bring my architect. I’m gonna bring my GC”, and they’re not tied to each other. Because in real estate you’re dealing with subs. Everyone’s subbed out. But all the subs are related or tied to each other in one or the other ways, where their jobs and their job security is tied to doing a good job. And I look at it from a futuristic standpoint, where it’s like “If this job doesn’t go well, there’s gonna be no more other jobs coming.” My broker knows that “Hey, if we don’t do a good job and we don’t make money in this project, Prady is not gonna work with me”, so he wants the architect to do well, and the architect wants the GC to do well. So setting up this incentive structure helped me tremendously, because that was the first thing I heard so many people speak about “Hey, I’m doing a fix and flip, I’m doing a development, and my property manager kind of screwed me over, my GC screwed me over”, and I wanted to avoid that all.
I’ve always built my businesses around “What can go wrong?”, and having plan B’s around it all the time. I knew that this could go wrong, so the way I set it up is “I don’t know much about this stuff, but other people do. But if they go, I’m screwed”, because there’s asymmetry; they have all the information I don’t. So I need to make sure they’re tied to the long-term plan for the project and for my long-term success. I did that by tying everyone together, and that’s always been my strategy. I’ve always used the same guys and I’ve always used the same brokers, so it’s been many deals now. That’s worked wonderfully for me.
Theo Hicks: That’s a very interesting and powerful strategy, that I’m definitely gonna take advantage of in my business. It’s a good idea. Transitioning a little bit, you said you started off real estate-wise doing the buy and holds, and then you transitioned into the developing, specifically condo conversions… Why did you decide to make that transition?
Prady Tewarie: Honestly, it was a new challenge. I came into this space knowing the buy and holds; I was an outsider in this space. This goes back to, again, a lot of people say “Well, I’m an outsider, I don’t know anything”, but I think being an outsider you have an advantage. You can see things other people don’t. I came in this space and a lot of people were like “How can we increase rents?” They would fix up the kitchens, they would fix up the floors… But I realized that my customer – they were college students; and the college students that I was talking to didn’t really care about which countertops they were using, or how everything was looking… And I was like “You know what they care about? They care about technology.” So I bought iPads, and I bought a lot of automation equipment. It wasn’t very expensive, and I put it in all the homes. I didn’t fix anything in the home, and the rents went up, because that’s what my customer cared about.
So building your product for what your customer wants and what you think the market thinks is important, is vitally important. So I did that, and it was a super-success. All the projects that I had around college campuses – the only thing I ever did was install technology, and the rents went up.
So I did that for a bit, and after that I was like “I need the next challenge”, because everything was automated and systemized, and that’s when my broker was like “Prady, I think we’re ready for the next challenge. Let’s start developing stuff.” It’s a whole different strategy, it’s super hands-on, it’s definitely not passive – you have to be at your project site pretty much all the time – but it was really for a different challenge, because business is, I believe, about setting up systems and being able to automate a lot of things, and I felt that I was able to accomplish that to a large degree in my area where I wanted to be.
Then this whole condo conversion developing was a whole new challenge that I wanted to take on. It’s very different. There’s no cashflow; you make everything at the end, so you will go long periods of time where there’s just cash outflows. You have to be very good with numbers, very organized. I’m very glad though I didn’t do it right off the bat. I did buy and holds and I grew slowly with that, because it’s laid the foundations for me to do other bigger projects, which I’m doing right now, but… It’s all purely for the challenge.
Theo Hicks: Nice. How are you finding your condo conversion deals?
Prady Tewarie: Most of the time right now the way I find it – there’s a couple of neighborhoods here in Boston that are really up and coming, and most of the time where I go is I do the things that most people don’t wanna do, which is I knock on people’s doors and I talk to the owners, and I just have a conversation and I let them know “Hey, I’d be interested in buying your property down the line. If you’d ever be interested, let me know.” I do that, and my team does that all the time, so it’s more than just finding stuff on the MLS, or sending out fliers, because they get so many. It’s all the human interaction, the human touch.
I don’t even do calls, I’ll just knock on the doors, and do that on several hundreds of doors. Now and then, every few months, once a year, people wanna sell their properties. That’s always been a winning strategy. But also looking at the properties from the inside for a condo conversion, which is turning a multifamily into a condominium – it needs to have certain characteristics for it to be able to be a condo conversion.
What I always do if there is an open house, or if I can inspect the property – I never go there by myself, because for me it’s pointless. I’m a developer, I know some stuff, but I always go there with my entire crew. When I used to go to open houses in the beginning I’d have my architect, my engineer, my GC, my broker and me. It was a five-person crew that would go in there to all the open houses. That way it was very efficient.
A lot of times you look at properties — for rentals it’s totally different, because you can kind of make out what you can get for rents. But for condo conversion I need to know, if we tear down X amount of walls, what is it gonna cost? Is there enough space here? Is the ceiling height gonna be big enough? I can’t see all of that, and it goes back to what I was saying earlier – going in there with a team, that’s a much better approach.
I’ve seen this quite a few times, especially in Boston, because the market is super-hot… You go to an open house and you have 2-3 days to make a decision, or it’s gone. I see a lot of developers, a lot of guys, young people that are trying to get in there go there by themselves, and then they have to call their broker, or they have to call someone else and do all the due diligence. I don’t wanna waste time, so I go with a full crew every time that I see it. I never go there by myself, because I don’t know all the technical details.
All of it right now is knocking on doors, building personal relationships in the area, and then also making sure that my entire team vets it before I even go into any depth about financing, or anything like that.
Theo Hicks: You said that the condo conversion projects typically need to be multifamily properties. So are you knocking on the doors at the actual multifamily properties, or are you finding the owner and then going to their house and talking to them?
Prady Tewarie: Yeah, it’s a mix of both. A lot of times we have here in Boston — it’s an older town, so a lot of families that lived there for generations, so usually what you have is the whole family will live in each unit for a multifamily property. That’s very common here. But often times I reach out to the owner and I’m like “Hey, I was just passing across here… I just wanna have a conversation.” But especially for a lot of the areas that are gentrifying, I think where people go wrong is because they approach it super-aggressively. If you go there super-aggressively, people don’t like that. They feel like you’re kind of screwing them over, and then you get all the bad images.
For me, I’m just a young dude, I’m kind of laid back, and I just have a conversation with them. I’m not there to screw them over, kick them out, or any of this crazy stuff. I come from a big family, I totally understand the value of living in a place and growing up in that; I totally understand that, and it’s just a conversation, if they’re interested… And also making sure that I can help them. A lot of them maybe need help with a bunch of random stuff in their place that they need to get cleaned out; maybe they need legal help. A lot of them don’t wanna pay commission to their broker, so I’ll pay for it.
Being creative with it will go a very long way, because at the end of the day in business we can have all the numbers, but you’re dealing with people… So people have to like you. I think a lot of times that gets lost when we’re so numbers-driven. At the end of the day, it’s just another person that you’re talking to. That’s someone’s uncle, father, sister, brother, mother… It’s just another person, so if you’re willing to understand their problems and their situation, if you’re willing to generally help them out with it, I think it’s always a good thing to do. I’ve always found that to be very successful.
Theo Hicks: Do you mind walking us through a deal that you’ve recently completed? How you found it, what the business plan was, and then maybe some of the numbers.
Prady Tewarie: Yeah, I’ll give you a pretty straightforward one. This was a smaller deal that we recently did. This was a deal in East Boston. East Boston is an area right around the airport, that is just kind of abandoned. This whole town was part of the Boston zip code, Boston’s real estate market; East Boston was this immigrant neighborhood that people really weren’t focusing attention on. This past year is it really started to grow… And basically I had a broker who’s a buddy of mine, he said “Hey man, we should probably look at East Boston.” There was a developer who was developing one big building, had two sides; he was trying to sell me one side, completely finished, but we weren’t able to agree on a price, so I kind of let that deal go… And then one of the guys that owned the building right next to it – the family had owned it since early 1900’s.
It’s a fairly decently-sized building. I think it’s about 6,000 square feet. It was about 2-3 units only there, so it’s fairly big, and a small amount of units… And he was just walking outside and we were just having a conversation. He told me about the neighborhood, what’s all going on, and I was like “Hey man, if you’re ever thinking about moving, I’d love to talk to you.” Same thing like I just mentioned. He was like “Yeah, I’ll definitely keep you in mind.” Long story short, two weeks later he ended up calling me. His mom also lived there, and he said “She’s getting really sick, and we’re thinking about leaving.” So me and him started talking and chatting… And I know I went in there with my crew, and I saw an opportunity.
Basically, there were two units in there. I believed because of the size and the space that we could turn that into four. It’s a process in Boston where you have to ask for variants, and work with permitting. Long story short, we were able to close on that property in about a month or two. He needed help with moving his stuff, he needed extra time and buffer. He needed some cash to buy one property… His other property that he was buying in the middle – he needed some buffer, so I helped him with that.
It was basically trying to solve all his problems that he had, from moving, to timing, totally working with him through the whole process, building a relationship in the beginning. Once he moved away, immediately we were able to successfully get a permit to build four units in there. Basically, we got two units for free. We didn’t pay for those two units, so we got two units for free, which ends up being a big windfall for us. But I knew that we could do that because I had my attorney pull some permits, think about it, look at it before we even closed. So by the time he and I met for the first time, I had my team do a lot of due diligence.
Right now we are still developing that property. It should be done end of July, early August, and there’s gonna be four luxury condos. What we’re doing – something different again, because that’s been my signature – we don’t have parking in the spot, so a lot of people don’t always like that, but what we did is we partnered up with Uber and Lyft, and anyone who lives in our condos gets to use Uber or Lyft for free, as long as they live there, when they leave from the condo… So they don’t need that parking, which is included in the condo fee. So that’s the process that’s been there, but it’s really about building that relationship, which was huge.
Theo Hicks: Thanks for sharing the story, it was very interesting. How much did you buy that for, and how much did you put into it, and how much do you expect to make on that property?
Prady Tewarie: We paid $970,000 for it. It was listed at over a million, but basically even before they put it on the market, I was the first person who called; he said he was thinking about selling it for about 1.1, 1.2. We went back and forth and he agreed on the 970k. We did finance that completely cash, and then I think the total of the construction right now [unintelligible [00:19:17].02] shy of 900k we put in the construction. Then the sell-out, because it’s four units – they’re gonna be luxury units, so anywhere from 800k to 900k each. We’re trying to be shy of 3.4 to 3.5. So the total net on these is anywhere from 1.5 to maybe shy of 2 million dollars. This is, of course, the Boston market, which tends to be pretty lucrative at this time.
Theo Hicks: Yeah, that’s impressive. So almost doubling your money.
Prady Tewarie: Yeah. It comes mostly because you buy a two-family and you make a four, so you get two condos for free. And if you do live in Boston, and you got a condo for free — right now we’re paying about $200-$250/sq.ft. to build. You only have your construction costs, but you’re getting a full two condos for free. I always recommend people when you’re doing condo conversion, seeing if you can get a variance for it to increase the number of units in the building, because that’s gonna be your buffer.
You can make money if it’s three units, but it’s gonna be very tight sometimes, so if you get another condo in there that you didn’t pay for, that’s gonna be your massive buffer. And it works out for everyone. He bought that like a 100+ years ago, it was like 40k or 50k or something. Everyone wins in this project. It’s building that relationship, but also knowing what you’re gonna get into. At the end of the day, it’s a numbers game. And yes, it’s a fantastic deal, but it’s also the market, and it’s also making sure that you can go for a variance, and a lot of people don’t wanna do that because they’re afraid of dealing with the city, and the town hall, and the neighbors’ meetings… But I really enjoy that, because I like talking to people, I like to understand “Hey man, were there issues?” So I was not afraid to talk to the town about getting an extra two units, and it ended up being super-successful as far as we got the permit fairly easily. A lot of people are scared of doing that, but I welcome the challenge.
Theo Hicks: Prady, what is your best real estate investing advice ever?
Prady Tewarie: The best real estate investing advice ever is that it’s okay to not know everything. You don’t have to know every single thing about real estate. I meet quite a few young people that constantly ask me about which books to read, which resources to go to, which courses to take in college… I love all those resources, I love all the podcasts, I love all that, but at the end of the day the people that win in life are the people who take action. All the talent, all the skill – it will always pale in comparison to action. So if you don’t know everything, that’s totally fine, because there’s plenty of people out there in the world that do know the things that you don’t, and your goal is to find a way that they can help you. That should be your obsession, as opposed to trying to learn everything all the time… Because what that’s going to do is that’s going to lead to procrastination.
I’m here on this podcast today, and able to build real estate and financial freedom just because I went for it. I don’t think I have any special gifts, or talents, or business acumen at all. I just took the challenge, like “Yeah, I’ll do it.” And if I don’t think I can do it, I’ll find other people that can help me get there.
Theo Hicks: Prady, are you ready for the Best Ever Lightning Round?
Prady Tewarie: Sure, man.
Theo Hicks: Alright. First, a quick word from our sponsor.
Break: [00:22:13].09] to [00:22:57].15]
Theo Hicks: Alright, what is the best ever book you’ve recently read?
Prady Tewarie: The best ever book that I’ve recently read is Built to Sell. It’s a book that talks specifically about how to systemize businesses. And I’ll mention another book that [unintelligible [00:23:07].29] which is a very famous book, “Principles”, by Ray Dalio. It talks about systemizing and finding principles in everyday occurrences.
Theo Hicks: If your business were to collapse today, what would you do next?
Prady Tewarie: Start another one.
Theo Hicks: How would you start over today if you had little or no capital?
Prady Tewarie: Build better relationships.
Theo Hicks: What is the worst deal you’ve done?
Prady Tewarie: The worst deal that I have done is where I didn’t do my homework on the tenants. That was a big mistake. I didn’t know the product. It was in a college area, which down the line ended up being profitable; in the beginning it was a nightmare. I remember I had the tenants in there, and it ended up being Section 8 tenants… And while it was great, but it was a huge nightmare. A lot of legal battles. I just didn’t know the product that I was getting into, nor did I understand the tenant pool, so… Big mistake of mine.
Theo Hicks: And then lastly, what is the best ever place to reach you.
Prady Tewarie: The best place to reach me is actually through Instagram. If you’re looking up Prady Tewarie, you can usually reach me through DM. That’s probably the best way to reach me.
Theo Hicks: Alright, Prady, I really appreciate you coming on the show today and speaking with us about your real estate journey. Some very powerful information… Just to summarize what we discussed – we talked about how you were able to start your investment journey while you were in college, and not really knowing how you’d pay for these deals and how you had the time to actually complete these deals, and your solution was to build a great team to rely on.
You talked a lot about your strategy behind building a team. First and foremost, you’re gonna be under-skilled when you’re starting out, but don’t let that be the reason why you don’t do anything. Instead, own that and then focus on how to solve that problem, which is, again, to create this team.
One specific strategy that you talked about is your networking strategy. When you’re ready to, for example, transition into condo conversion, you didn’t go out and try to find individual team members that had no relation to one another. You started off with the broker, and then from then you asked them for a referral, and then from that referral, the architect, you asked a referral from them… That way, everyone is connected, there’s that alignment of interest, and everyone is gonna win along the way and everyone’s in it for the long-term because of that incentive structure and because everyone is connected.
We talked about why you decided to go from the rentals to the condo conversions, and essentially it was just because it was kind of the next challenge for you, and you wanted to try your hand at something else, essentially completely different than the rentals.
You did provide a really strong piece of advice about your rental property strategy when you were doing it, which was focusing on [unintelligible [00:25:43].07] using that to your advantage, and realizing that you had a different point of view, and while everyone was figuring out what types of kitchens, and what types of flooring to put in these homes for college students, you instead knew that college students actually cared about technology, not how nice their kitchen was… So rather than just fixing things, you just bought iPads and some automation. The other example was the Uber and Lyft example.
You talked about how you found your condo conversions, and you are doing that through knocking on doors and actually talking to the owners in person. Sometimes it’s a quick deal, like the example you gave when the [unintelligible [00:26:14].03] was two weeks; other times it might not be for months or for years.
Then you went through a specific example of a deal that you’re currently working on. That was the one that was actually two units, and you were able to convert it into four condos, so you got those two condos for free, and because of that, you’re gonna hopefully net around 1.5 to 2 million dollars on that deal.
One of your value-adds for that deal was figuring out how to solve the problem for the owner. You helped them move their stuff out, then they needed help with cash to buy another property, they needed some flexibility with the closing date.
Then lastly you provided your best ever advice, which was something you live by – you don’t need to know everything to get started. It’s more important to take action. As you said, the people that win in life are the people that take action.
Prady, I really appreciate you coming on the show today and talking with all of us and providing your best ever advice. Thank you to everyone who listened. Have a best ever day, and we’ll talk to you soon.
Prady Tewarie: Hey man, thank you so much. It was a pleasure.
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