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How To Beat The Rigged Financial Game with Neal Bawa

by Neal Bawa | Real Estate Money School

This podcast interview of Neal Bawa is hosted by Chris Naugle of Real Estate Money School Podcast

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Our guest for this episode, Neal Bawa, has a portfolio valued at over $150 million along with over 800 investors and teaches nearly 5,000 students annually about real estate.

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Voice over:  Welcome to real estate money school, where up and coming investors go to tackle their biggest challenge. Where’s the money? Hosted by Chris Naugle. Pro snowboarder turned real estate investor, speaker, and trainer and host of HGTVs risky buildings. Remember, investing isn’t about resources. It’s about being resourceful, ready to master money in real estate. Then it’s time to become a rebel banker. It’s time for real estate money, school.

Chris Naugle: Hey rebel bankers. This is your host, Chris Naugle, and welcome back to the real estate money school. I’m joined here with Neal Bawa and here here’s, I’m going to read a little thing. He gave me this and I think it’s fantastic. He is known as the mad scientist of multifamily.

If that doesn’t get you guys excited, like, I don’t know what else does, he’s got so many things we could talk about in his background. You know, one of the most in demand speakers in the commercial real estate space, Neal’s a data guru and believe me, when you hear about what he’s doing with data, you’re going to, you’re going to literally just be like, Oh yeah, he’s the guru.

 Process freak and an outsourcing expert. So think about that, right? He’s not only the mad scientist in the multifamily world, but he’s also known as the guru in this space of data. Data’s important because there’s a lot you can do with that process freak and an outsourcing expert. This is somebody you all need to learn from.

So we’re going to dive into what he does and what he does in his companies Grocapitus and MultifamilyU. But we’re really going to talk a lot today about the markets right now, when you’re watching this, or whenever you’re watching this, we are in the middle of the coronavirus pandemic epidemic, recession, depression, whatever you want to call it. That’s where we’re at right now. So there is just so much for us to talk about.

 Neal and I met on a, another webinar we were doing, and it was kind of funny. I heard Neal talk. I’m like, this gentleman knows what he’s talking about. Neal heard me talk. And I think he thought the same thing. And we were just like money’s our space and that’s kind of how this happens. So this is going to be, this is going to be a great podcast folks. So before we get into Neal ‘s story and kind of what we’re going to get into with today’s economy and today’s markets, let me just talk a little bit about you and your journey to becoming a rebel banker. There are a couple things you need to do.

Number one, you’re here. That’s step number one, you’re taking action and you’re seeking knowledge in the space of what you want to do. But the most important thing is not just getting knowledge and seeking knowledge. It’s applying knowledge. You actually have to take that leap. You actually have to go out there and apply this knowledge in your space, in your business and in your journey because if you don’t apply knowledge, you’re not going to get anywhere.

Application can start at anywhere. It can start with grabbing a copy of my book. Mapping out the millionaire mystery, or if you’re seeking money for your real estate deals, a lot of what Neal and I are going to talk about. You can grab a copy of this book, the private money guide, both of them are free. You just pay the shipping.

So to get a copy of these books for free, you just go to moneyschoolrei.com/book, and that’s the private money guide or the same thing, moneyschoolrei.com/newbook, and that will get you mapping out the millionaire mystery. So get on that journey to becoming a rebel banker, but let’s dive in Neal. Thanks again for joining me today.

Neal Bawa: Thanks for having me on the show, Chris, this is just going to be a hoot. I’m really looking forward to this.

Chris Naugle: I was to it and when I saw it last week on the calendar, I’m like he asked, we get to go round two on this. This is going to be so much fun. So we’re where should we start? I mean, well first actually meal. Just cause there’s a lot of people that are going to join us that didn’t see the first one. So they don’t know your background. Can you just do a real quick, explanation of your background and kind of what your business does today?

Neal Bawa: Absolutely. I am a geek. I’m a technologist, a data scientist and an a geek techie by profession. I’m here in Silicon Valley and what I’ve done, I’m doing what I’ve done all of my life. I experiment relentlessly. I break things and somewhere along the way, it seems to create money for myself and for my investors. So, at the moment that happens to be multifamily. I don’t know if that’s going to be the case five years or 10 years from now, but right now I’m having fun with, with buying large apartment complexes, about 500 active investors that are investing with me today.

The portfolio is about 270 million. It’s in nine states and half of it is new construction projects and the other half are value add multifamily. There’s some student housing and some public stories that sprinkled in there. Because I like those asset classes and my investors want the diversification, but for the most part, it’s a multifamily and, yeah, just enjoying an endless series of experiments there so I, that will be at some point dimension, my latest experiment and how that worked out and maybe kind of, you know, give you a feel for what I mean when, I mean, relentless experimentation.

Chris Naugle: Relentless experimentation. So, you know, there was one thing that I remember when we did the last one we talked about, and it was about that you did something with data, you figured something out almost by accident and what you figured out turned out to be one of,I don’t know if it’s your greatest, you know, thing, but it, to me, when you told me that I’m like, Oh my gosh, I can’t believe somebody else’s doing this.

I couldn’t believe I hadn’t thought of that. But can you just give us a quick background of what that one data find was in, in how you were locating properties in a way that nobody else had really thought to do.

Neal Bawa: Absolutely. I, I, you know what, in technology, we’re always looking for how to guides, right? So we’re always looking for the next Wikipedia, the next Google and so when I started getting interested in real estate, and this is more than a decade ago, I was looking for, okay, there must be some kind of methodology that people follow to figure out the best properties in the United States. Right? What, what is that magic? algorithm, right? What is that? E equals MC squared.

It has to exist. And when I started looking for it, I found, well, either you’re going to pay $25,000 a month and get a subscription to something like CoStar or you’re on your own. There was really nothing in between. There were a bunch of people selling what seemed to me like snake. Well, it was just, you know, stuff that they thought up and they thought it was great because they thought, but there was nothing that was actually data-driven analytics driven there.

There was nothing that statistical analysis had been done on. That really surprised me because real estate is one of the largest industries in the world. And you can, you know, when you are playing the stock market, you can get software like Robin hood, where they’re tweaking their algorithm every single day to try and improve it.

There’s lots of things that you can get, right. But for real estate, it wasn’t there. So what I did was basically I spidered or, or grabbed from a website named Zillow information about 3,300 cities in the United States. And I used a Ukrainian hacker. To do that and paid him. And he basically spidered the entire website and gave it to me.

And I was terrified that the FBI would come arrest me, but nothing happened. Right. So he gave this information to me. And then what I did was I took that information, which told me where home prices were going up and how fast they were going up. And how much money were people making? How much, how much were they making in rental?

So give me that information. And then I did, and I cross-referenced, it against a whole bunch of demographics, which I thought might have something to do with why prices were going up so fast and why real estate investors are making so much money. And I went through dozens and dozens of demographic, statistics, addicts, so home price increase, population growth, rent road, I threw in, Poverty levels I threw in. Let’s see, what else? Crime and crime reduction. I threw in schools. So as I threw in a lots and lots of statistics added using a statistical analysis software called R, a pattern began to merge. And what was interesting was you think that schools are one of the biggest things, you know, that that predicted success for real estate investors, it actually turned out it wasn’t.

What was more important was crime. What was more important was income growth. What was more important was job growth. So when those numbers were added into the mix, I could see that the cities that they job growth and income growth was very strong and crime was coming down. There was an acceleration of real estate profits.

People are making more profits consistently where everyone was just saying, it’s me. I knew what I was doing it, you know, I’m awesome, I’m a great real estate investor. What was really happening was 99% of your success was actually being driven by these, these huge gorillas in the background that were either pushing you up or pushing you down.

And so I ended up running that on pretty much the whole US, took about a year, year and a half to refine it. And I created a system called real focuses. And then I published it on the web for free. And that last part that people tell me everyday was just crazy. It’s like, so you spend a year doing this.

You came up with a system that tells you exactly what city in the U S and what neighborhood in the U S to go to, and then you gave it away for free. And I’m like, yes. And they’re like, so why would you do that? And I said, because it allowed me to make a great deal of money because it branded me with investors.

So imagine the mad scientist she’s out there. My reach is tiny. And I publish this thing for free on a website called Udemy U D EM Y this website has 50 to a hundred million visitors a month. Right. And I published this course there and all of a sudden 10,000 people are taking this course. And people are like believing comments.

They’re going God out where their mind is just exploding that somebody basically gave this away for free. And so it actually became my biggest win because to me, the concept of charging for it never really entered into my mind. It was like, this is when I’m in line. I need to get it out there. And now every day, if somebody takes that course on you to me, and they’re like, I love what you’re doing.

I see exactly how you do it. Cause you gave me a system wide process, but I don’t have the time to do it for 3,300 cities. Could I just invest with you. And so we ended up with more than three and a half thousand accredited investors, which people in our database and every day, there’s more of these leaks that come up. So, you know, I’m a geek that’s attracting other geeks. And so that one thing made a huge change to my life.

Chris Naugle: Well, you know, the best part about that. And that’s, you know, I heard that story before, but everybody listening, I’m sure what you understood and what you followed there. He found this unique pattern.

We’re going to talk a lot about patterns on today’s show, but the other thing you heard him say, and just like everybody else said he was crazy. He gave it away for free. Okay. He put it on udemy and he gave it away for free, but you know what? It makes all the sense in the world. Why that worked. If you really think about the universe and you think about why certain things happen and I’ve read books upon books about this.

And one of my mentors told me all you need to do to get success is just give your best stuff away for free. Well, that’s what you did. You gave your best stuff away for free. And because of that, you attracted more people than you probably ever could have attracted. And then as they came, they were seeking out what you had created, but then they realized, yeah, this is great, but I really don’t want to do that.

Can I just jump on with you? And now you have built an entire empire off of this, an empire of geeks as you call it, but it’s been very profitable and profitable, not just for you, but for so many other people. And like there’s a lot to be lots of you learn about that. You know, Zig Ziglar said, if you help enough people get what they want, you’ll get what you want.

That’s what you did. So there’s still secret as to why that worked. It was genius. You just did it because that’s, you just felt like people needed this. And, and given that there’s so much that I could say about that, but I really don’t want to go too deep down that rabbit hole. So I want to talk about what’s happening today, you know, and, and the patterns.

One thing that I didn’t, you know, Neal, I know we spoke about this a lot. You know, I spent a lot of my life, 16 years of my life on wall street, doing investment management, managing people’s money, managing institutions’ money. And, and one of the things at the tail end of my career, I got to really fine tune is patterns, patterns of the markets.

So once you started, once I learned this and I saw these very rhythmatic, very predictable patterns in the markets, I started to ask myself, well, how come everybody doesn’t know this? Like yeah. You know, everybody should just be able to understand that the market works in a seven to 10 year pattern. So we’re 11 years in the market’s gonna fall.

I don’t know if it’s going to be a virus, a pandemic, a world war, a political play. But it it’s 11 years in and we got an election. So that pattern was so easy to see. And you can’t predict the market. You can’t predict it and time mark but you certainly could see these patterns. And then when you get down into the stock market, you can see very rhythmatic patterns inside of each individual stock index, ETF, whatever you’re trading, they all trade within rhythmatic patterns.

So right now, here we are, we just had Coronavirus hit us hard in February, the whole country shut down the market tanked in March. It didn’t really tank, actually, it just had a big pullback. A lot of people think, Oh my God, it tank, no, that’s not a tank that was just a pull back down to 19,000 on the Dow.

And then it creeped back up. And then now a lot of people think because they watch the news too much. They think the markets just keep going up. The markets haven’t really gone up. Since the end of may. And they’re probably not going up much at all, because what they’re doing is they’re going completely sideways.

And this sideways pattern is the most predictable thing. I think I’ve ever seen. It’s the craziest thing I’ve ever seen because it’s just algorithms running mathematical equations every single day. And it’s tightening up that, that pattern. And then it’s widening it out, but people only see the green or the red.

So. How, how do we take these patterns? You found patterns in data. I find patterns in the markets, and now I’m trying to figure out what’s the next plate, because if all we can control is what’s happening now, but we still need to get a read on what the next play is. You don’t, what are, what are you anticipating is going to happen in the economy, in the markets and specifically in real estate, single family multifamily and, large commercial projects. Let’s talk about that.

Neal Bawa: Yeah. what you just said is so fascinating, you know, the first thing that occurs to me to say, Chris, is this. The last three months have been so insanely bizarre that there is this completely understandable tendency to say, you know, yeah, this, these three months are kind of sorta like the mud three months before there’s a pandemic, but otherwise it’s, it’s, it’s like the three or four months before it’s not.

The last four months have been the most unique four months in the history of the world that I can ever remember. Okay. And I include the 1929 depression in that, and it doesn’t even come close to what we’ve seen in the last 120 days. At no point ever in modern history has the entire world shut down at no point in modern history, have every single economy in the world being in a recession at the same time, never happened.

1929 was not even closed. There were hundred over a hundred countries that were doing really, really well during that time. What they are seeing today is beyond the bizarre, and that’s why I brain, but the big, the first pattern is that our brain refuses to adjust to living in a place where amazing stuff good and bad is happening every single day.

So we are living in truly extraordinary times. That’s the first pattern that I see the second pattern, which has been visible for a while. And I know this is visible to you, Chris, but it’s now more visible to people. Is this. The stock market no longer represents main street. It does not represent America at all.

What has happened is over the last 15 years and read about this, I urge you. You have to understand and read about this. The wealth in the stock market has become concentrated very highly concentrated in less than 5% of people that live in America. So the vast majority of what’s in the stock market, the total number of dollars are concentrated now amongst 5% of Americans.

Right. And there’s, there’s other people. Yeah. You know, I’ve got 10,000 or 50,000. Yes. But you don’t compare to the guy that has, you know, 500 million. So look at it from that perspective and say, it’s the vast majority of the wealth belonging to Americans? No, it’s belonging to a very small subset of Americans and the biggest benefit that you can give that 5%.

Is ever lower interest rates is basically destruction of currency and interest rates that are going as close to zero as you can. And then you S they haven’t gotten negative yet, but Hey, we’re early days, right? I’m absolutely predicting negative interest rates in the U S. Within months, if not, if not weeks.

And we we’re going to see what happens when, when in July we take off this unemployment fee that we would be put everybody. So th the key is that if you are looking at the Dow Jones every day and trying to understand what is going on in your country, you are looking in the wrong place. In fact, you’re looking in the worst imaginable place.

Because what you’re doing is you’re looking at what’s going on with the top 5% of this country, because not only do they is the vast majority of the stock market belonging to those 5%, that 5% have twisted the system to the point where what happens in the stock market is actually based on what’s good for them.

Not good for the rest of us. So things have gotten perverted to that point where looking at the stock market and saying, why doesn’t this match the real economy? Why doesn’t this match real estate? Why does this match what everything else is happening? Is no longer something that should be a question in your mind, simply because the stock market has nothing to do with the real economy. And that’s what we’re seeing. I mean, it’s absolutely bizarre. 

Chris Naugle: It is. And, and you know, the biggest thing I say a lot and I speak on multiple podcasts and webinars and all that, as much as I can, I try to tell the story, what you’re witnessing right now is one of the, so you might let, let’s go back to 2008, 2008 is when people.

I think the recession started, the recession started in 2007. It happened in Oh seven. We just didn’t see it because of manipulation. And then it really came to light in 2008. So it would almost be likely if you really dug into that to figure out, did it actually start in 2007 or did it start in 2006? So the whole thing that’s happening right now, if you just look at the past.

Try to figure this out, which is very difficult because this is unlike anything else. But one thing you can certainly tell is what is happening right now. I love what you said about the 5% representing the stock market. You’re absolutely correct. I know people that trade the dark bulls, which is where hedge funds do their block trades and lots of other stuff.

And just. Just to kind of put this in perspective, hedge funds are trading at half the volume they normally do. Why would hedge funds the people, you know, hedge funds have the ability to move the market. So you and I do not, unless in large sums masses, but hedge funds can hedge funds are only trading at half their value or half the volume that they normally do.

Do you think they know what’s going on? Of course they do. They’re run by the top 5%. So what you’re actually witnessing happen right now with the markets where they appear to be going up is one of the largest and biggest illusions you’ve ever seen. Pitcher the biggest magic show you could ever go to in your entire life.

That is what you’re witnessing. Literally look, this isn’t just a rabbit being pulled out of a hat. You’re seeing things that are happening that should never happen, but they are, and they will continue. And not only that you got an election, right. With the craziest two sides here, like not, and I don’t even know what to expect, but all I can tell you is the one thing you should be planning for.

And everyone watching this is you should not fall into this trap. You need to be ready for what will come, because it will come. And I don’t know when, when the 5% decide they want, they want it to happen is when it’s going to happen. This whole thing will crash and burn and the wealthy will get even wealthier because they understand how to play that game. The average person does not main street doesn’t even understand what’s happening main street. Like you said, fails to want to even realize what’s going on. They just want to go about their lives. Almost, almost like the matrix. Right? You remember the movie, the matrix, like I had those two pills and there was just all the people live in like your just fantasy world, but it wasn’t even real.

It was a computer. almost a computer program running their lives. And then, you know, he took that pill and he saw what was real well. Unfortunately, when you peel the onion, a couple of times, you see what’s real and it’s a scary, scary thing, but we can be scared. We can talk about the negatives or we can just kind of try to figure it out.

Like, how do you, yeah. Play this to have, cause this is going to create the, the, one of the biggest opportunities. I think in my lifetime, you know, some of you are younger. I think this will be the largest opportunity of my life. Cause I’ll be, I’ll be gone well before the next opportunity to ever happens like this.

But. If this is that big of an opportunity, how do you play this opportunity? How do you prepare for this opportunity? What are the things we should be anticipating and getting ready for? And that, that still is something I have not figured out now. Number one, I fully understand that cash is King and we need to be, we need to be liquid and ready to take action on this.

But how do you take action with cash when the government just prints money and decreases the value of your dollars at the rate of 2 trillion, 3 trillion, 4 trillion, and that 4 trillion or whatever dollars that they’re printing, we don’t even know how much they printed it. At this point, we know of the $2 trillion.

If they print $2 trillion, your dollar just became worth. Lots less because that $2 trillion needed to derive value from somewhere. It didn’t just happen. So it steals value from your current dollars. It’s called inflation. We haven’t even seen that really happen, but we will. And, and you’re, you’re going to see it in a big way.

So how do we. What do we do? Like, where is the opportunity in real estate? Where’s it going to be? I think a lot of people, you know, here’s something and I don’t mean to keep going on a tangent with this, but one of the things I’m seeing and it’s, it’s, I’m trying to help people, people feel right now, like they’re missing out on an opportunity.

They think that the opportunity is coming done because in March, like, Oh my God, I should have, I should have been ready. I should have bought I didn’t, I’m missing this opportunity. I gotta get, I gotta get back in this or that I’m going to miss it. And I’m hearing that with real estate, I did a cost. Today.

And it was a young guy and he’s like, yeah, you know, I want to start buying real estate. I’m trying to get everything ready. I’m like, what’s the rush. Why I feel like I’m missing an opportunity. You believe me, if you, if you get into that right now, you’re probably in your, you missed the opportunity because you’re already at the top. So what do we do? What, like, what would be your opinion, you know, on how we, we play this thing.

Neal Bawa: If you want to learn how to play this game, you have to learn how to drink. Like rich people. So one of the things that we’ve seen is that since we started seeing mass manipulation of the fed by the federal reserve system into monetary and fiscal policy, is that every recession that happens, the rich come out a lot richer.

Why? Because the system is being used. To, to, to, to protect them during recessions, to protect their assets, to protect their businesses. And so they come out, Richard. So if you want to understand how you’re going to make money, because it’s not that hard to make money, you simply have to the follow what benefits the rich.

And if you understand that you have a really, really good foundation, right? If you’re reading the books that tell you about how the rich are being protected today, you, you align yourself with them. You align because it’s what, from what I’m seeing is that political will is very easy to buy today.

Political capital political will votes are easy to buy, and the people that are in charge are the lobbies, the lobbies of different kinds Democrats have the, you know, the nursing lobby and they’ve got the truckers lobby. They’ve got all of the unions. And then the, the, the, the Republicans they’ve had, they’ve got the business lobbies.

Either way, what is happening in America is that political will has almost rendered away to nothing. I mean, there’s, there’s no real point political will. What, the only thing that’s there is this strong protection of the rich protection of the lobbies. And if you align yourself to that, you will see a path going forward.

There’s a lot of fog right now, but as that fog clears, one thing I can tell you is. That those people will be protected. Their assets are going to be protected. And where are their assets? What their assets are in the stock market. Their assets are in real estate and wages will be found over the next, you know, six months, 12 months, 18 months, 24 months.

However long this massive mess takes ways will be found to protect their assets. And you can immediately also guarantee the reverse of that. That ways will be found so that things, that main street needs, the things that, that you need a low level of inflation will not be protected. you know, social security will not be protected.

Pensions will not be protected. Anything that basically was, was something that millions of people need rather than the small number of, you know, the rich will not be protected because whenever bad things happen, money has to come from somewhere. And it has to go to work somewhere. And it is going to come from main street.

It’s going to come from, you know, the, these kinds of pension funds and social securities and all of the other, you know, money that was being spent on main street. And it is going to flow towards wall street. We saw that last time we saw that in 2008, 2009, 2010. And we’re going to, we are going to see an acceleration of it.

You will not going to see as much as we saw last time, we’re going to see two X, two, three X, or 10 X. That number because what’s happening is that the elites are beginning to understand how to take the us into recession. They didn’t do that at this point. Obviously coronavirus did, when that recession happens, they, they realized, Hmm.

There’s a lot of political will for interesting things to happen here. Right now, the economy is doing really badly. People are screaming, they need something done. Let’s manipulate the system and benefit from it. So you will see a higher level of manipulation because it’s so much easier to manipulate the economy in the name of protecting main street.

And so you’re going to see a series of manipulations happen there, and you’re already seeing some of those manipulations happen and boost up the stock market. Right? You’ve seen interest rates cut to zero. The rest of the world has gone negative, and that is a theft. When interest rates dropped to zero 7 billion people get poor.

Right. And most people don’t realize that. And because nobody realizes that it’s the greatest stuff that in history, you can simultaneously steal money from 7 billion people and deposit it into the, into the bank accounts of those that have assets that are cash flowing like real estate, right? There’s other assets that cashflow as well, but you’re, you’re literally taking money out from everybody and depositing it because those assets are not losing real value.

It’s currency. That’s losing real value when interest rates go down to zero and we are, so that’s the first thing that we’re seeing, but we’re seeing that, that every time we do this, these, these federal bankers get more and more bold to go out and say, y’all, we’re going to cut it to zero. Right? Janet Yellen was the previous chairman of the federal reserve is saying.

If there was a way to go negative, I’d be voting for that. Our current president has said that I don’t like the fact that our interest rates are not negative. Why is Germany able to borrow money at, at negative rates while we have to pay money? So th this is the president, this is the chairman of the federal reserve.

So things are leaning in that direction. You have to look at what assets benefit from ultra low interest rates for a very long time. What happens when you’re in an environment, a perverted environment like that. And, and, and how do I get to that point? How do I grab those assets? Because they’re going to benefit.

Chris Naugle: Well, I mean, one of the things that you’re going to have to figure out is either you’re gonna figure out how to figure out how to get a whole bunch of cash all upfront, or I think the easier play is do what we’ve done really well and find out ways to solve other people’s problems that don’t know how to solve their own problem.

And in doing that. We raised a whole lot of other people’s money. So then just follow what the wealthy do and what are the wealthy do? Well, real estate is a really good start. The wealthy invest in real estate. And I know when I was an advisor, not in the beginning of my career, but toward the middle and the end of my career, I noticed, okay.

A lot of my wealthiest clients, they were all in real estate. Now I don’t mean directly in real estate. Some of them were just had real estate holdings. Some of them were developers, some of them had businesses, but there was an ancillary business in real estate. There was always some tie back to some form of real estate.

I noticed this, but the thing I hated about real estate investors as a financial advisor, it was, they never gave me any money. They had ways to make more money doing what they do we’re doing. So the money that I got was just a little bit that they were putting into the IRAs. The steps, maybe they had, you know, a solo K or a 401k to get tax deductions.

They didn’t care about that. They didn’t care about that. They literally could have got, gave two craps about what they were giving me. It was just, I’m either going to give it to you or I’m going to give it to the government, but they already knew how to play this game. So that’s all I got and I could never understand why.

Okay. He got millions and millions over here and hook come. I’m wanting to get in this little, I’m not even getting table scraps and it will always frustrating, but you know what? Then when I retired and when I got to the end, I started seeing unique patterns with what wealthy did. And when I say wealthy, I don’t mean somebody.

That’s got a million bucks. I’m talking about somebody that’s got, you know, 20. 50 a hundred million or, you know, I didn’t have billion dollar clients then, but I do now. And the way they do things, Holy crap, it totally redefines everything. They go after things that we don’t even look at as average public.

I mean, I literally wrote an entire book with Brent Kessler about one of the biggest patterns I saw the mapping out, the millionaire mystery. This book was because I saw all these wealthy people and I mean the mega wealthy right. Putting their money in these mutually owned insurance companies that never even understood it.

I couldn’t make any logical sense why they would do this. I’m like, why would you do that? That’s stupid. But they understood the fundamentals of banking and they understood that they needed a method to move money. They needed a place to put money, make money on their money, not even a lot. And then take that money back out without ever losing their interest, earning people.

Buildings. And that’s what the insurance companies enabled them to do. So I started seeing this and I just started being in, I was fascinated kind of like, you know, how you, you sometimes geek out on some of the, the data stuff I geek out on the money stuff. And I was just like, this there’s something more to this.

Then I started figuring out banks for the number one users, Apple Genworth, and everybody else was using that, but they weren’t just putting it there and leaving it. See, that’s what we do. The average public has been taught to do one thing, and that is give up control of money. They’ve been taught to give up the control of their money, put it somewhere in someone else’s control and then wait to someday in the future with, and then they can take that money back.

But as we already discuss, when they take it back, it’s weaker dollars. Because they’ve lost all the value to inflation. They’ve lost value to taxes, but they th that’s just all that they know is to give up that control. We do the same thing with the banks. I think it’s hilarious that we literally get excited about going to the bank and depositing money and getting paid zero, zero.

And, and we, we build up these bank accounts. Oh, I’ve got a couple of hundred thousand. I’ve got a million sitting in the bank. I’m great. No, you know what you are, you’re broke. If you’re not broke today, you’re going to be, if that’s the strategy you use, because you’re not moving your money, your money is sitting there.

The bank is making 400 and 1300% on your money and you’re making less than 1%. How in the world did we all get so brainwashed that that’s what we do. And then, then what, we’ve even on a whole nother layer who owns the credit cards, who owns the banks, who owns all the institutions that lend us money, the 5%.

So what they’ve done is they’ve taught us to give we’ve. They’ve taught us to give them our money. You’re like just deposit our money over there. Cause they taught us to believe in this thing called compound interest where our money will just sit and grow. Then they use our money and they make a ton.

But then they’ve taught us that when we need money, not to go take our money and use it. But no, no, no, no. Use this credit card. Oh, use this interest rate or this loan over here. Oh, use this financing company, right. They own all those. So we then borrow money from these things. Let’s call it credit cards. We pay 10 to 20% on credit cards and our money’s over here making one.

And we still haven’t connected the dots that we should take this money. Find a way to move that money without losing interest on it, pay the credit cards off and then take what we were given the credit cards and put it back in the account. Right. You just right there, whatever you’re paying your credit card, you just made 15 to 20%.

But then what if you did that same cycle and you did that with real estate. What if you took the money from over here and you started buying it and using it to buy real estate and you just kept repeating that you’d build wealth very quickly. You’d become a multimillionaire in a very short period of time, but they don’t teach that I’ve never seen one school that teaches it.

Never seen one college, never even seen trade schools that teach any of this stuff. And that bog, that boggles my mind. Why is it that there’s nowhere out there that this knowledge is taught on an institutional?

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Neal Bawa: Yeah, I feel very, very deliberate. I feel that knowledge of understanding what money does and how money works and you, you, by the way, that was a fantastic snapshot of how the financial system works.

Like the last five minutes that Chris has been talking. That’s how the world works, but as he said, no one has ever bothered to teach that in a college course. No one’s ever bothered to tease out in a trade course. And so I tell my kids that the most important things in life are really how to be good at your marriage and how to be good at managing money.

Those two things are never going to be taught to you. You have to go out and get that information. You have to do your own research and you have to go out and get better at it. And yeah, it’s amazing how we’re seeing the system. That’s exactly like when Chris said that is every single word made sense.

Every single word resonated. Yeah. Well, yeah. I do pay a lot more of my credit cards than I, then I get in the bank. But then how many people are actually taking action about that? So the beautiful thing is that the, our, our system is designed and all of us have been brainwashed to the extent that even when you hear this, it makes an impact for a second, but you’ve been brainwashed so long that you have to fight really hard to come out of that and say, no, I’m going to do something different.

I’m going to be on the other side. But what’s interesting is once you make that change, once you make that mental switch to be on the other side, It’s just amazing how everything looks like you can make money at it. It’s just, it’s, it’s dramatic. Right? It’s, it’s phenomenal. And other people are beginning to realize that Chris, so, you know, there’s, you know, people allocate whether you’re rich people or your pension funds or your insurance company, you allocate a certain percentage of the money that you have to real estate, right.

As opposed to stock markets. I think everybody understands this, that the percentage of money being allocated to real estate has been going up every single year, 2013, 14, 15, 16, 17, 18, 1920. It goes up every single year, right? So people are getting that real estate is a better place to invest in them, whatever it is that they were investing in before.

That’s good. But did you know what the top two, groups are that is actually aggressively increasing their allocation for the first one? You’d be surprised to find out is you. Public pensions have increased their visibility to real estate by 30% in just the last five years, 30%. And these are supposed to be the most risk averse people have.

All right. Public pensions are the number one, most risk averse thing. So you’re, you’re getting into real estate, whether you like it or not. As long as you have any kind of pension, if you’re a teacher, if you know, if you, if you’re a government employee, they’re now buying real estate. Because they realize that most pension funds will be bankrupt within the next five to 10 years, if they don’t change and move towards higher deal because interest rates keep dropping every year.

And the yield from bonds keep dropping every single year. So then in the end, if that’s going to happen, you’re not going to be able to make the amount of money that you need to pay out as a pension fund. And so pension funds and here’s the second group insurance companies are massive amounts of real estate.

I mean, you go, insurance companies are buying real estate. Yes. They’re buying hundreds of billions of dollars of real estate worldwide. And once again, you’re like, but, but aren’t public pensions and insurance companies supposed to be the most risk averse. Yes. They now understand that the system is rigged on the non real estate side.

So real estate, even with its risks, which by the way, have not decreased real estate is as risky as ever, even when it’s risk, it looks the better. You know, it real estate may be a pig, but it’s the best looking pig and the pig stack because the other pig are getting uglier and they’re getting uglier really, really fast.

Right? So that’s, what’s changed. I don’t think real estate has gotten any better at all. I just think that the other avenues have gotten a lot worse and a lot more manipulated. It’s so much easier to manipulate. Digital currency is so much easier to manipulate stocks that are being bought and sold in real time than an apartment complex, which takes six to nine months just to get ready for sale.

Because it’s not because it’s a non-digital currency, it is harder to manipulate it. So we have a lower level of manipulation and public pensions understand that insurance companies understand that, private pensions are getting into it. I mean, just remarkable to see this change happen. Go ahead.

Chris Naugle: Oh, no, I just, I love that because I have literally over the last, I’m going to say six years and even more than that, but gone deep, deep, deep, deep geeked out if you will, on insurance companies in the stock market and yeah.

What you just said is something everybody should know, but nobody does. Everybody thinks insurance companies have a lot in stocks, insurance companies in mutually owned insurance companies. If you look at their balance sheet, it’s public, go look at it. Look at MassMutual’s balance. You will see that they probably have less than 6% in stocks of their entire portfolio.

Hundreds of billions of dollars. And if you look at their holdings in real estate, it’s substantial, absolutely substantial. Only trumped by us treasuries because they still have the ability to do something neither you, nor me, nor anyone we really know can do. And they can look a hundred years out. They can not invest four.

Today for next year, for 10 years from now, they can look a hundred years into the future without any question. And they can invest for that. No one, no other company can do that. They can. And they do. And they have been for hundreds of years. Therefore what happened, you know, 30 years ago, they’re still getting paid up.

We’re not, I mean, how would you like to still be getting interest rates from 1980s? We would salivate over that, but we can’t, but they do. That’s how they do it. And that’s so when, when you look at mutually owned insurance companies and you look at why pensions and, and, you know, Insurance companies and everything are investing in real estate.

They understand that they absolutely understand it. And not only do they understand that they have lots of cash and when they have lots of cash and recessionary periods happen like 2008 or like this right here, they actually make more money. They have the ability to deploy their capital and take advantage of the opportunities that we talk about that we are going to take advantage of at.

That was in time levels of what we can do. I was going to say 10 X or a hundred X, but like thousands of times, you know, that’s what they do. So when things get bad, they’re sitting back like Warren buffet is right now. He’s just sitting there drinking his Coca-Cola waiting for something to buy. He isn’t buying anything, but when it happens, you’ll see, he’ll start buying the pensions.

We’ll start buying the insurance companies will start buying hundreds of billions of dollars worth of real estate. And these assets that you and I are talking about right now.

Neal Bawa: Well, and I mean, it comes, takes me back to that question that you asked at the beginning of this podcast. Remember your example about this one guy that’s like, are we too late?

And my, my answer is each the exact opposite we are too early. So the key there is to understand. That the reason why the market doesn’t have a lot of transaction volume happening is that the people that are in the know are looking forward to what is going to happen in the next 18 months, they’re going to get an opportunity that they haven’t had for the last four or five years, the ability to buy distressed assets.

You know, Chris and I are talking about real estate being a great asset class that doesn’t change the fact that there’s going to be deals to pick up in real estate in single family in multi-family there’s going to be deals in hotels, Boyle, boy, are there going to be deals in hotels there, you know, I’m a little behind the guy, but there’s a greedy side of me that says this is the greatest time in history to create a fund, to buy distress hotels.

Right. and, and asset classes like that, maybe retail might even be better. I don’t know anything about retail, so I can’t do that. But boy, What a magnificent time to buy these kinds of assets. Right? And, and there were people in 2009 who understood that, you know what multi-family is on sale, everything’s on a fire sale.

And they went out and bought more family, not even knowing anything and made a huge amount of money because as the market recover, they just did nothing. They just sat on the asset, collected the rents, paid the mortgages. And then they just waited for the price to go up. And I think that’s going to happen for a number of assets may, might not happen for single family.

And multi-family because if they’re pretty expensive, but I think you do get a dip in the marketplace. So, you know, if there’s anybody thinking that it’s too late to get in, you couldn’t be more wrong. I can’t imagine a better time to get into real estate then right now, you know, it’s just, you have to wait for the next three to six months because we don’t know how quickly things will break. I just know they’re guaranteed to break.

Chris Naugle: Yeah, I love that because it goes back to what I was saying with that, that guy I was talking to, you know, you, haven’t, nobody’s missing an opportunity right now. Matter of fact, the best opportunity is to sit back and just watch the show, do nothing, just watch it and learn and try to figure out an angle as to what you want and you know, what you want to do.

So I think that’s genius about the hotels cause you know, darn well, there’s going to be just massive. Problems in the hotel space because of all these travel restrictions. Now with the second wave of coronavirus home, my gosh, that’s like the nail that, that bed’s driving the nail in the coffin in a big way.

So I think that’s going to be a good, good one. We, we should put together a fund for that next week. That wouldn’t be hard. But th the one thing that’s unique about this time is, you know, I think like what you were saying is. This is the best time to get into real estate. A lot of people though, don’t get into real estate because they think there’s just too big of a barrier of entry.

Here. We are talking about hotels and multi-families and people are like, Oh my God, there’s too much. You got to remember the people that are doing real estate. They are they’re raising money. They’re basically going out there and they’re solving other people’s problems. The people’s problems who don’t know what to do with their money, the people’s problems who don’t want to lose their money in the stock market.

The people’s problems who are making zero or negative interest rates soon. Probably on their, their bank accounts and they need an alternative. They need to make something on their money to keep pace with inflation. Well, guess what? People like Neal people like myself, we create those opportunities. We create those.

Those those solutions to the problems. And you can do the same thing. Like everybody watching this can do the same thing. You can, how money works. You can grab my book, the private money guide and learn all about how private money works. Then go out there and figure it out in a very relatively short period of time.

It takes some time to master it and you got to get good at it. You know, it really kind of learning the rules and the laws behind it. But after you figure that out, you’ve just figured out how most. Real estate investors buy these big buildings. It’s not their own money. Like all these real estate investors that you see, they own thousands of units.

They didn’t start with hundreds of millions of dollars to buy these properties. They started with the ability to go out there and solve somebody’s problem. And in doing that, they were able to raise money. And then that got bigger. And bigger and more assets and more assets and more credibility and more credibility.

And it just perpetuates and that’s how they do it. And every single one of you could do that. If you wanted to learn how to do it, that’s, I mean, that’s how I got started in it. I started using my own money and I learned how that hits a big, big wall very quickly. And then I had to reinvent myself and figure out, wow, well, how are they doing it?

They’re doing it without their own money. Oh, they’re finding other people’s money. And that’s what they do. And that’s, I don’t know. I mean, that’s just a fantastic way.

Neal Bawa: It’s not the fantastic way. It is the greatest way of all time. So understanding the use of other people’s money. Re the ability to raise equity is the greatest skill in the world.

Not the greatest skill in real estate, not the greatest skill in stocks. It’s the greatest skill in the world. I mean, you have guys like my OCI sawn who runs SoftBank and SoftBank just lost 10 or $15 billion on WIWORK. And so you’re like, This guy can never raise money again. No, he just raised $15 billion again, because he also invested in Alibaba.

He also invested in Uber, right? So his great skill is the ability to raise money, $1 billion at a time. And there’s, there’s an never ending line of people looking to get money to my OCI sawn. And he just lost 10 billion bucks. That’s how great the ability to raise money is it is the Uber skill, the alpha skill of the world.

And today actually it’s easier than ever. I mean, I have a little anecdote. I mean, the largest, you know, single set of investors that I have are doctors, right? So doctors, they’re so busy because their doctors are not, you know, they’re not, self-employed, they’re, they’re basically selling their time. They sell it for a high price, 300 bucks an hour, 400 bucks an hour, but they’re really selling their time.

So their employees, even if they’re employees of their own company, And so they desperately need other people to spend the time to invest money. I was having a conversation with a doctor, friend of mine has given me lots of money and you know, he’s done well. And, and he basically says, you know, it’s interesting how you and I are so different.

I had to study for, you know, 2000 hours a year for about seven years, 14,000 hours of study before anybody would let me practice and touch my first patients, 14,000 hours. But you’re telling me that you got started in real estate by going to a weekend seminar where you got a free ticket from somebody else who couldn’t.

who couldn’t attend. So you just, you just had to do his ticket and you went there and that’s, that’s how it all started. And that you were allowed to make mistakes by buying buildings, by doing wrong things, by blowing stuff up that I was never really allowed to do because I couldn’t practice for seven straight years as a lawyer.

It takes maybe five years, but you could actually start practicing. So you, you know, and I said, yeah, you know his name, John? And I said, yes, John, the beautiful thing about real estate is you get experience. By getting experience, no one stops you from buying anything. And this fiction that is in people’s minds, that somehow Neal Bala was more ready.

Somehow. Chris would the baby garden, the real estate was more ready than they are. That is just absolute and utter bull shit. Nobody was more ready than anybody else. They just all got started. And once they got started in their mind, they’re like, I’m a real estate guy, even though I don’t know a bunch of stuff.

That’s when experience comes in, you get, you learn by doing, you make mistakes. You’re probably going to learn 10 times as much from mistakes. So the people that are saying, well, now I can get into real estate. Well, you’ll never learn anything. You can’t get into anything because you’re not willing to make mistakes and you’re not willing to learn from those mistakes because 90% of what I remember today in real estate was based on the mistakes that I’ve made in the last 10 years here, same here.

And that’s awesome because a doctor cannot get that for six to seven years because you can experiment on real patients. And by the way, After that seventh year, they are experimenting on patients, the new doctors they’re doing it all the time. So this fear, this crazy rational fear that you have of making mistakes is nonsensical because that’s exactly what you need to do to learn.

And it’s not related to real estate, no matter what you do. If you want to go out and sell museum paintings, you’re still going to have to buy some paintings that are not worth it. So it’s a crazy nonsensical, irrational fear. Yes. Timing is important, but that’s what Chris and I are telling you. Timing is incredible right now. Absolutely incredible. You will see distress assets in every single asset class in the world. In the next 18 months.

Chris Naugle: And the best thing is, let’s say you knew, like we don’t know when that’s going to happen, but let’s just say you picked 18 months down the line and you’ve never done a real estate deal. You’ve never raised a dollar. You’ve worked a W2 job, your entire life. And now you’re just like, well, how do I get started? Well, the best news is in 18 months, you could get all the knowledge you need to be very, very effective when this thing happens. Just like I was just like, you were right. Every single person watching this right now, that is your biggest opportunity.

But like I said, at the beginning of this podcast to become that rebel banker to become that person, like, like we are whoever you aspire to be, you have to get started. If you don’t actually take that first step, nothing’s going to change in your life. You might as well just bury your head in the sand right now, and you’re going to get run over, but that’s just all, that’s your op.

The only option you have, this is either an opportunity or an obstacle. There’s no two ways about it. So pick and make your choice. They’re going to bury your head or are you going to grab a light and be the light in the darkness and lead some people through this thing? Cause you know what? Everybody has the ability to be that leader.

They just have to make that conscious decision to do that. And this has been fantastic. I mean, the things that we talked about and we had no idea what we’re going to talk about at the beginning, right? This podcast is a structured format on this one, right? Some of the things that came out of this.

Literally, if somebody, if you’re watching this podcast right now, you absolutely need to go back and watch this again. And maybe even again, and take some golden nuggets from this and just take one or two of these things and run with it. And, and Neal, if they want it to learn some of the things you do, you’re, you’re all about giving and you’ve got all sorts of stuff that you give away. Can you tell them a little bit about how they’d find you and find some of your material?

Neal Bawa: Absolutely. So two ways, the first way is really simple. You just Google my name. So N E A L last name Bawa. B A W A and just hit enter on Google. I happen to be, and this is my extreme luck and my extreme misfortune, the only Neal Bawa on the worldwide web.

So you’ll see podcasts, you’ll see webinars interviews, you’ll see live presentations at conferences. All of that stuff is on the internet because the moment I get it, I throw it up there. The second way, if you want to learn in a more structured fashion, but don’t want to pay any money to get started until you’re convinced that it’s the right thing to do.

Go to a website called multifamilyu.com. That’s multifamily followed by u.com and you’ll notice that there’s more than 40 deep dive webinars. and you’ll immediately notice something different. You’ll notice that these webinars get into the business end very, very quickly because we only invite presenters that are willing to do that, that are willing to dive very deep into the content matter and give us something that’s not just one or two nuggets, but an entire presentation filled with nuggets.

So we do these, we had two last week and we had a 2,700 people that signed up for them. And about 75% of those people were repeat folks because they love the webinar series. We do them as a series right now we’re doing a series about the impact of coronavirus on real estate, town hall, six had 1300 people signed up.

So, and so you can imagine we’ve done this five times already and they’re coming back for number six because they they’re learning new things as they go. They’re imbibing that content. Either in real time or by watching recordings on their own kind of like podcast, very similar to Chris’s podcast. and, and I think that’s a phenomenal way to learn, to get comfortable, but I do urge you that you don’t do it to the end degree.

I have some people who basically say I’m learning real estate by listening to podcasts. And my question is when you listen to a podcast or a webinar for an hour at the end, how many action items did you write down? And how many minutes did you spend. On those not hours, minutes. And if the answer is zero, then you actually didn’t learn anything.

Chris Naugle: That’s unique that you just said that. So you don’t know this, but while you were talking, I was taking notes, not only taking notes, circling them and telling myself what I need to do. Every podcast I do. Now, these are podcasts I’m doing, I take notes, do a solo podcast on the perfect investment that like over and over.

So folks, listen, I’m doing this while putting a podcast on while being. The host of a podcast. If you say, Oh, I can’t do that. I don’t have time then how am I doing this? You always can make time. There is never, ever a time where you can’t make time. This is how I do it. If I’m driving in my car, I have a scratch pad on my passenger seat, always because if something comes to my mind, I might pull over and I write, I write notes down because if it comes to your mind and you don’t do something, what is the chance of remembering?

You’ll get to where you’re going. You’re like, Oh, what was that? Darn it. Oh, it’ll come back to me, Noah. Won’t Noah won’t in most cases, it will not. So you have to take action immediately. So folks, we’re going to put this up in the show notes. We’re going to put multifamily u.com go on there and just, just Google his name.

It’s it’s the only one on the worldwide web and Boyle. Boy. I wish Chris Naugle was the only Chris novel on the worldwide web. It’d make life so much easier, but yours is so no, this is fantastic. Thank you so much for your time and for coming on. And I seriously, I hope we. Keep keep doing things like this because people need to hear this.

They need to learn this and they need to apply this. And that will change so many people’s lives. And if there’s one thing I know, this is me and I’m sure you’re the same. It, my one major goal in my life is to change a lot of people’s lives. And if I can succeed on that, I am. Does it money? You know, things doesn’t matter. That is success, and that is what I’m after. So Neal, thank you for being part of that.

Neal Bawa: Thanks so much for having me on the show, Chris, and you’re welcome.

Chris Naugle: You’re welcome. Thank you everybody for joining us for another episode of the real estate money school. See you on the next episode.

Voice over: Ready to master money in real estate. Then it’s time to become a rebel bank. Learn more about our events and other [email protected] If you’re enjoying the show shared with friends, family, and fellow investors, and remember to subscribe on your favorite podcast app so you never miss an episode. See you next time right here on real estate money school.

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