Ash Patel interviews Kranti Ponnam, a tech entrepreneur and real estate syndicator with a unique perspective on commercial real estate investing. Kranti shares insights on the intersection of technology and real estate, emphasizing the importance of treating real estate investments as businesses.
Key Takeaways:
- Business Mindset in Real Estate: Kranti stresses the significance of approaching real estate investments with a business mindset. Just like running a company, treating your real estate investments with respect, creating systems, and analyzing data can significantly enhance your success.
- The Power of Taking Action: Kranti encourages aspiring real estate investors to take action rather than waiting on the sidelines. Getting involved in a deal, whether as a limited partner or general partner, sets in motion a momentum that propels your real estate journey forward.
- Balancing Technology and Personal Touch: While technology is a powerful tool, Kranti emphasizes the importance of maintaining a personal touch in real estate. He discusses the value of authentic content creation, ensuring that your communication resonates with your investor audience.
Kranti Ponnam | Real Estate Background
- Director of Capital, Four Oaks Capital
- Based in: San Diego, CA
- Say hi to at:
- Best Ever Book: Atomic Habits by James Clear
- Greatest Lesson: You can be on the sidelines trying to figure things out forever. But the best thing you can do is to get on a deal in some way, and actually do it!
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Transcript
Ash Patel:
Best Ever listeners, welcome to the best real estate investing advice ever show. I'm your host Ash Patel. Today's episode is brought to you by Presario Ventures, a private equity real estate firm based in the booming Austin, Texas market. To learn how you can invest in the future of Texas with Presario Ventures, please visit info.presarioventures.com forward slash best ever or click on the show notes below.
Today's guest, Kranti Ponnam. He's joining us from San Diego, California. Kranti is a tech entrepreneur and a real estate syndicator. He focuses heavily on capital raising. Kranti, thank you for joining us and how are you today?
Kranti Ponnam:
Good. Thank you, Ash. And thanks for having me on the show. I'm doing real good. I hope the same thing with you.
Ash Patel:
I am. Thank you. Let's dive into how you became a capital raiser.
Kranti Ponnam:
Sure. A little background about myself. I started my career after my master's working in the technology space, basically implementing software systems for big corporations. I predominantly worked in SAP, which is a ERP system that most big corporations use. I went on to create my own services business that supported clients. And after a few iterations of building companies and then selling them, I figured I have to take my money that I'm making in my businesses to basically work for me. Then I actually focus on business and that's how real estate obviously came into the picture. It was second nature for me for real estate because most of my family comes from a real estate background. I'm originally from India. So we did real estate
businesses, both my dad and my father-in-law, both sides come from real estate. So obviously that was a natural inclination, not the stock market to actually go and invest in real estate. Started with office, bought retail. I know you do a lot with those two asset classes and then morphed into investing into multifamily. It was actually an accident where a friend of mine said, do you want to invest in a deal?
This is a syndication company that I usually work with and got bought into a deal as an LP and figured out that this is an asset class that is pretty recession resistant. Most of my stuff that I had in my portfolio was mostly retail and office, which is great. It's really good cashflow, but you have to keep in mind that, you know, I also wanted to build a little more on the equity side because I has having cash flow coming in from the office and retail sector.
And as I learned a lot more, multifamily was the area to be. I started investing with my current partners, started investing with them as an LP. And then over the next few deals, got to know them very well. And over the next few deals, one of the deals they came up to me and said, we need a KP or basically a person with higher net worth than all of us for a bigger deal. Would you like to come in? And then I said, I'm going to jump right in. And it basically helped me learn the business a lot more over that duration of time from an underwriting standpoint and I had already bought a few multifamily properties by then. And as times evolved, all our roles started evolving and I started working with them on every deal. At one point it was like, it doesn't make sense for you not to be part of the business. So I came on as one of the three partners in Four Oaks Capital, that is a firm, and well, my role predominantly is on the capital stack, taking care of both equity and on the debt side of things. So that's how I came into this role as a capital raiser for Foroaks Capital.
Kranti Ponnam:
Kranti, just to clear up, KP is a key partner. They needed you to be one of the signers on the loan. Is that correct?
Kranti Ponnam:
Correct.
Ash Patel:
And over time, I would imagine you just continued to add a lot of value to them that they saw a good fit as you as a partner. What were some of those things that you did to add value?
Kranti Ponnam:
Great question. And I think that's where this whole partnership concept does come very well. And I've always had businesses, ran businesses, had partnerships. And I think the most important thing in any partnership is you actually bring a lot of value. And that's where, when I first started investing as an LP, there was no incentive for me to start bringing more people in, referring and telling them more about Four Oaks Capital and all that. So through my role as LP, I did a lot of work in helping other people invest in deals because I've seen 401ks, I've seen IRAs and all that. And I've seen how employees work for let's say 30 years, save all their money. And then at the end, they're basically work off 30 years. I don't think the 401k really last them for the next 30 years. If someone wants to retire at 60, that nest egg, which basically is at five, six percent, do anything. So my inspiration basically came from the fact that I wanted to help other people, mostly friends, family, employees, that had a lot of their money in the stock to diversify. And that's where I bought a lot of investors to Foroaks. And as part of that, we started recognizing that areas that I could work in deals, even if I was not a partner.
So that's how the whole relationship came. I never got paid. I didn't ask to get paid. It was more so, hey, these guys are good guys. I want you guys to know and work with them. And that's how I became a partner.
Ash Patel:
And what were those specific things that you did to add value to those two partners?
Kranti Ponnam:
In specific, I'm going to give you an example where, even if my role was not part of the Foroaks team, a lot of my experience working with businesses
Both my partners were really good with identifying assets, really good with managing. I helped them build the systems internally that would help marketing, that would help lead generally, that would basically bring new investors on and help also with investor onboarding process, even before becoming a partner, really making it seamless, integrating all of that into one particular application and really implementing the process flows automating some of these practices related to onboarding and related to capital raising, which basically helped the company tremendously to grow from a smaller shop into someone that can handle a couple thousand units today with over a quarter billion dollars of assets that are under management.
Ash Patel:
I figured you were going there. So you added systems and processes. Being a tech guy, you added automation.
I'm also assuming you've done a lot of that automation and systemizing towards capital raising as well. Correct. Can you share some of that? What have you done to bring your entrepreneurial tech background into real estate capital raising?
Kranti Ponnam:
Sure. This is a classic that I've learned over the years related to capital raising. We're going to depend on a few investors that I refer to, friends, family, just my network. We're always going to fail.
This needs to be a consistent process where we actually add automation, content creation, and we're consistently in front of our current investors too, in terms of either weekly updates from our properties or newsletters and things like that. So to do that, we needed a good system that basically manages, for a lack of a better word, a good CRM system, having the background of Salesforce and coming in with system integration related to ERPs and CRM. My job first was to really look at simplifying our tech stack which had Excel spreadsheets and we use AppFolio, some of the functions within AppFolio, some of the functions within ActiveCampaign. So basically create a tech stack that is simplistic to basically simplify our processes. And you can implement multiple systems.
It doesn't matter. You run your business however you want, but you really need to have a consistent flow of information coming out from your organization so that people can be engaged. And one of the things that I learned is to keep capital raising going on. We needed to be engaged and for us to be engaged, we needed content that was relevant for investors. And there's like a billion companies out there today in the syndication world that are trying to raise capital. They're trying to do deals we really needed to differentiate ourselves from the fact that this content that we push out is just not the same thing that everyone else has given out, but actually is adding value to what our investors are looking. Most of our investor base is technology people who have regular W-2 jobs, but are very focused from a tech standpoint, who don't understand real estate terminology. So if I'm gonna push content that's basically gonna talk about NOIs or cap rates, most of them would not be interested in it. What is in it for me is very, very important for everyone who gets a communication for us. So actually building that content and making that as much automated as possible. And we're still on that journey right now. We're still going through the process of always seeing how many investor calls we've had tagging them either as friends, family, or employees. Or what I really want to see is our network really growing out just from this particular segment. Because I think the number one sure way of failing a capital raise, we're actually always in the capital raise mode, is just to depend on friends, family, and your network. You want to be able to be in a situation that expands that. And that comes from marketing and lead gen and all of that.
Ash Patel:
Do you find a lot of people pushing back when you share that? Meaning a lot of people probably believe that it's their relationship that's causing capital to come in.
Kranti Ponnam:
A big portion of capital does come in from relationship. And what most successful companies that we've noticed over the years and studying what other bigger syndicators have been doing is really building a whole list that is not that network. And that's what mentioned earlier, there is going to be pushback from the newer investors rather than you're my friend and you want to invest. It's an easy sell to you rather than to someone who does not know me or does not understand how successful I've been or does not trust me. There's always a pushback.
Ash Patel:
What do you say to somebody that pushes back and says, no, it's all about relationships. My investors trust me. They rely on me. What's your answer to that?
Kranti Ponnam:
There's only a limited pot of money on the reliability, trust and relationship. And I 100% respect that. That is true for you to raise a limited amount of capital for one deal, two deals. How many times are you gonna go back to the same investor to raise money? Two times, three times, four times? And most people that invest as LPs in deals always try to diversify. They're looking for, hey, I wanna do a deal in retail, I want to do a deal in multifamily, I want to put some money in stocks, that sort of stuff. So you cannot go always to the same person. Typically, after two or three deals, they're not going to be able to invest because obviously these people have other options.
Ash Patel:
Yeah, that's a great answer. Thank you for that. How often do you communicate with your potential investor pool?
Kranti Ponnam:
Our vision to do is to basically communicate, at least be in front of them every week at and that could be through multiple avenues that really add value. But for me, the bigger thing is, are we really giving them content that's relevant? What is their click rates? Are they opening anything? How long are they reading stuff? We send out a video. How long is the play time really going into that level of data and analysis to understand? Is it effective to send communications out or get on calls or really do webinars monthly, weekly, bi-weekly, semi-monthly, really coming down to that sweet spot of really getting that attention is going to be important. There's a lot of competition in the market. So you want to be the most optimal in terms of your performance.
Ash Patel:
I love that. How else do you communicate other than newsletters?
Kranti Ponnam:
We have obviously our investor newsletter that goes out. There's multiple avenues for us to talk to people. It could be as small as a birthday or basically really getting on an investor call to actually proactively reach out to people. There's an instance that everyone probably reached out to their investor base, a $250 million Houston fiasco that happened a couple of months ago. Really getting on being proactive and talking to our investors about it
because a ton of our investors are from the Texas market too, and most of them heard about it that there was a syndicated transaction. So really using every opportunity to alleviate fear or help them understand what we're doing in this market with high interest rates, where occupancies are falling, rents are falling, evictions are moving slow, and how we explain that situation.
Ash Patel:
I love your approach to that. Giving your audience valuable education on what they want to see and hear. Where does that content come from?
Kranti Ponnam:
It comes from multiple sources. It starts basically with the economic conditions in today's market. It also goes down to our portfolio performance and then the individual asset performance and goes down to what each individual's goals are in terms of some people are saying for retirement, some of these investors are not the right investors for us. Really understanding within our CRM and using technology or tags and understanding for this particular investor base, they're looking for actually distributions to go out monthly. Some of our deals are value add and we don't give out distributions as much. Most of the money is made at the back end of it where they don't care about monthly income and really understanding each individual's aspirations and tailoring stuff to their liking is what we're learning to do.
Ash Patel:
Do you use any AI and content creation?
Kranti Ponnam:
We've used AI not now, but from two, three years. ChatGPT has come out now, but they've been AI content creators for two, three years. So it's not something new for us in that space, but I'm not a big fan of using AI content because most people really don't value that when you send it out. You want to send AI content if you analyze the amount of feedback that you get back from that particular marketing campaign or from that particular campaign that you used AI content to the one that you actually created and put the effort in. Not just talking about emails, but if you create a webinar that you actually drew all your information from just AI and not add data and numbers and metrics, you're never going to get that kind of engagement.
Ash Patel:
And emotion, right? Yeah. Thank you for that perspective, because I cringe when you see these videos where people will in minutes generate a week's worth of content through AI. It goes out on all the social media platforms. And I'm thinking this can't be effective other than repetitively seeing your name out there. How does this add any value? Your personality's not coming through. Your emotion's not coming through. So I applaud you for taking control of your content and not just outsourcing all of it.
Kranti Ponnam:
Yeah, it's gonna be important. I'm gonna play the other side too to that. You have to use technology. There's no way out of it, but you really need to know how much of it needs to be used. You just can't, like you said, do it. There needs to be enough authentic self somewhere within that content that people can connect with.
Ash Patel:
Kranti, I know you have become a master at capital raising and using technology. Right now, we're in a very competitive landscape for multifamily acquisitions. Are you also doing things to get involved in helping your partners with finding deals or managing deals that you have now?
Kranti Ponnam:
Yeah, absolutely. I personally look through the asset management portion for a portion of the portfolio because that's how we split responsibilities too.
And it has been one of the most challenging times in terms of multifamily, specifically value add multifamily. Again, there's challenges all across the board, even from a construction standpoint, but intricately involved in projects where we've built a three to five year plan and we're doing good on the plan. The plan's fine. We're getting the rent bumps that we should have gotten in year three and now being in year one, we're good there. What's really killing us is their insurance rates. We're starting to see that we're having to cut the rental increases that we've done to increase occupancy in the markets that we're in, especially the Atlanta market, we're starting to see there's the negative rent growths coming in the last couple of quarters and we're having to do that too, specials and move-ins, which last couple of years, it's unheard of. We're actually seeing that happen right now. And those are the ideas that I specifically contribute in terms of managing the assets.
Ash Patel:
With your interest rates, were they locked or are you on floating rates with caps?
Kranti Ponnam:
We're very conservative and I think most people use that word conservative. It's used all over the place. All our debt is fixed rate debt. Even on the bridge lenders, we have the loans are all fixed rate debts. We don't have any floating debt. We have a couple of deals on floating rate debt with rate caps that'll go through next year. And we hope to refinance both those deals early next year or later this year. But no, we're in a very good spot from a debt standpoint. And I think that's the saving grace. I'm actually invested in a deal in Houston that the rate cap expired and then to buy a new one, they just don't have the money. They can't refinance a property because it's not performing. So I'm actually part of one of the deals is in very bad shape at this point.
Ash Patel:
I'm going to push back a little bit. So the Atlanta market rents are decreasing now for multifamily. However, for retail and industrial, they're increasing rapidly. Why not pivot into those asset classes?
Kranti Ponnam:
Most of my multifamily is in the Atlanta market. I have retail assets in the Tucson market, which are doing phenomenally well with the current situation and I agree with you of the pivot. We're opportunistic operators in the sense that obviously our big portfolio piece is still in the multifamily area but we're really looking now at an industrial construction deal in the Houston area. We're also looking at doing a small family entertainment center in the North Carolina area just to pivot from where we are today.
One, it addresses the investors that I just said in terms of that need cash flow because this asset class provides that. And also addresses the aspect of I think being heavy on one area is great, but I think a little bit of diversification would be helpful.
Ash Patel:
Great. Question for you. You're a big tech background. Your mind works a little bit differently. What is one consistent thing that you see real estate people doing where you're like, man, I wish they would just implement some technology?
Kranti Ponnam:
One of the things that I've seen consistently, and this is what I've noticed, and this is specific to syndicated real estate, right? I'm not talking about the other portions. One of them that I see is most people that run syndicated real estate businesses don't come from a business background, two or three guys who've been working, have a lot of passion for real estate, come together, put a deal together, do a great job. Most of those guys are successful but don't really run it like a business. To me, when you start something like a company, it's like a living being. It breathes, eats, it acts, there's a culture and all that. Most of them don't actually treat it that way. When you start a business, for me, it's something holy. You have to treat it with the same respect that you would treat your kids. You give it the same amount of attention, time, and most people when they do this part-time, really can't do it.
So you're not doing justice to the game that you're actually playing and you're not able to play it at a very high level. And one step down from there is because you don't do that, you're not even taking the time to create the systems. You create processes for sure, because you need to, to a certain level, but you never think about systems and you're never actually taking time to analyze those systems. That's why I have the podcast of mind your data, which looks at analysis that business owners do on the information that they have. And most business owners don't do any analysis on the data they have.
Ash Patel:
Yeah, that's interesting. I was thinking if somebody had a restaurant where every decision or lack of decision had immediate impacts, they would be working 24-7 on their business. But for whatever reason, these real estate businesses, because the reactions are slow and drawn out and in the future they often don't treat them as a business, even though there's a lot more writing on it probably than a restaurant. So I love that analogy.
Kranti Ponnam:
Thank you.
Ash Patel:
Kranti, what is your best real estate investing advice ever?
Kranti Ponnam:
Best real estate investing advice ever. For me personally, what I've learned is you could be on the sideline trying to figure things out. And that's what I've seen with most people is you could be on the sideline figuring things out forever learning how to underwrite or learning a few things about asset management or learning capital raising. But the best thing that you could do for yourself is either partner, give it someone or get on a deal either as an LP or a GP, doesn't matter, but get involved on a deal because once you start doing deals and I've heard this somewhere and I'm using it, you will see people in this space who can do one deal for a couple of years, learning for ever...
Ash Patel:
And ever and ever.
Kranti Ponnam:
But once you do that one deal, it sets off the spiral, this motion that puts you in and the momentum that gets you. I've not seen people who just do one deal. I've seen people who have not done any deals. I've seen people who've done hundreds of deals. And I think that's the most important thing is getting off and playing some role in a deal and actually building that momentum. I'll take action.
Ash Patel:
Great advice. Kranti, are you ready for the best ever lightning round?
Kranti Ponnam:
Yeah, let's do this.
Ash Patel:
What's the best ever book you recently read?
Kranti Ponnam:
Best ever book that I've recently read, I think is Atomic Habits. And this is one of the books that I just finished reading. And there's a lot of lessons that can be taken from the book. And I'd recommend every kid that's probably graduating school or high school or middle school should start reading the book.
Ash Patel:
Kranti, what is the best ever way you like to give back?
Kranti Ponnam:
The best ever way to give back. And we've done this in our company. We have a lot of employees that are based in India. We have employees based here. So what we figured is people who actually come from areas that are not urban, that are not having a lot of exposure, they're not exposed to technology as much. There's areas within US and areas within India that we actually started opening offices, which is the second tier, third tier cities, and actually taking talent from there and training them in technology and then basically during this period of training, we're basically training them for free and then assisting them to get positions in technology. We're not really training them for them to become our employees because this is a project that we've personally put money into and created a scholarship fund to help people get into technology from when they're tier two, tier three cities because they don't get the exposure of that typical Bay Area would give.
Ash Patel:
And Kranti, how can the best ever listeners reach out to you?
Kranti Ponnam:
The best way to reach out to me would be my website, karanthiponnam.com, my LinkedIn account, Instagram, Facebook, all of those social media channels. And then also look us up on our real estate investment company called fouroakscapital.com, any of those avenues.
Ash Patel:
And one more time, your podcast, is that real estate specific or it's just business specific?
Kranti Ponnam:
It is business specific. It is about how you basically look at and analyze your data. It's called Mind Your Data podcast, mostly for business owners, entrepreneurs, people who either could run teams, whatever it is. I'd love to understand what are their metrics to help them get better.
Ash Patel:
Karanthi, thank you for your time today. What an enlightening conversation, talking about merging tech into real estate, but still keeping that human element to keep it real. Thank you for all the lessons that you shared with us today.
Kranti Ponnam:
Thanks a lot. Actually was my pleasure.
Ash Patel:
Best ever listeners. Thank you for joining us. If you enjoy this podcast, please leave us a five-star review. Share this episode with someone you think can benefit from it. Also follow subscribe and have a best ever day.
