Dave:
This investor bought his first property less than 10 years ago. Now he makes $12,000 per month in net cashflow, even though he lives in a high cost of living area. This could be you if you just go out there and take that first leap. Today we’re going to hear his basic, repeatable real estate investing formula that almost anyone can follow to take control of their financial future. Hey everyone. I’m Dave Meyer. I’m the head of real estate investing here at BiggerPockets, and on the show we teach you how to achieve financial freedom through real estate. Our guest on the show today is Pratik Shaw. He’s an investor based in New Jersey, and Pratik discovered real estate investing and bought his first property in 2017 when he wanted a way to use the earnings that he got from his W2 to generate additional wealth and some passive income, and that is still his philosophy.

Dave:
Eight years later, work a day job, save money, and buy a new property when the time is right. That approach has helped him grow to almost 20 units in eight years, spread between three different markets. And today we’re going to hear the lessons critique learned from overcoming a very difficult tenant situation with his first property, how he got comfortable investing outside the expensive market, where he lives and why keeping his day job has allowed him to scale even more quickly, let’s bring on Pratik Pratik, welcome to the BiggerPockets podcast. Thanks so much for being here.

Pratik:
Thanks for having me,

Dave:
Dave. Yes, it going to be a good time. Let’s just jump right into it. Tell us a little bit about yourself and your background, how you first got into real estate.

Pratik:
Sure. So I’m a pharmacist by training live in Jersey. I got into real estate. I was actually on vacation with my wife in Italy and we met an investor on a boat to Capri and we’re just talking to people that are on the boat and he’s like, oh, I’m from Jersey as well. I’m like, look that same here. And he told me about what he did and he’s a real estate investor. So I got intrigued. We came back home, I connected with him. We had dinner, and long story short, fast forward there. I actually bought my first deal off of him. How big was this place? It was three bedrooms, two baths. So on each unit it was top down and I inherited Section eight tenants, so that’s a story in itself. But yeah, it was in a rough area. This was in 2017, so the market was going high, but it was still climbing a ladder. So I got in at a great point and honestly I learned a ton off that house itself, whether it’s managing tenants, managing toilets, you hear the toilet story, it’s always toilets. I never knew what a flapper was until I actually had to.

Dave:
When you were looking at these deals, did you have multiple options or was this kind of like, this is the deal you should buy, or how did you pick this one?

Pratik:
So when I met him and I got intrigued about real estate investing, I started listening and do my own homework. So I was listening to BiggerPockets, I was reading books, just understanding how to analyze deals. And then when we met for dinner and he brought his opportunity for me, he was getting to a bigger commercial space, and so I was curious. He’s like, he was 10 30 wanting some houses and I was like, oh, okay, these numbers pencil in, and why not buy a unit from someone that I could get experience from that could kind of hold my hand through the first deal in a sense, since I do have a W2 job, this wasn’t my full-time gig and it kind of helped me along the way with the goods, the bads and the uglies, but it really got me a great, I guess a dive into the pool of real estate investing.

Dave:
That’s the best way to do it, man. The number one goal for your first deal should just be to learn. It’s not to hit a home run.

Pratik:
Yeah,

Dave:
Ideally you do both, but yeah, absolutely. Just to learn. How did you finance it?

Pratik:
Well, I mean, good question. After our vacation to Capri in Italy, I did have to build up those funds back, but I, no, I had enough saved and luckily with 25% down, we were able to finance enough to

Dave:
Purchase

Pratik:
That house.

Dave:
That makes total sense. I think it’s a great way to do it. As I talk about it on the show a lot, having a W2 job does have some of its benefits and I assume being a pharmacist is pretty solid, paycheck comes in. So that’s a great way to start getting into real estate investing. So you did this first deal here, Pratik, what did you do after that?

Pratik:
So after that I was playing basketball with the same investor that I bought the first deal from.

Dave:
You guys do a lot of fun stuff. It sounds like a good guy to hang out

Pratik:
With. It’s all by chance. So we’re playing basketball and we’re sitting on the side and he’s telling me about another house that he’s offloading for a 10 31 exchange. And I’m like, Hey, first one went, all right, let me hear it. And we talked offline and I bought a second property off the same investor as well that I met in Capri, another multifamily around the block from the first one.

Dave:
Okay, very nice. Was it similar situation with inherent tenants? Was it Section eight?

Pratik:
Section eight tenants both up and down, both units and these tenants were a little bit more challenging than the first unit that I bought.

Dave:
Okay. What was going on here? Was it non-payment or just personalities?

Pratik:
Yeah, personalities more so section eight, you’re pretty much guaranteed payment from the government, so that part was always covered. It was getting entry into the unit, the upkeep of the unit. I was constantly getting summons from the township for litter outside the house, so they weren’t keeping up the unit as much as I would like them too.

Dave:
Sorry to hear that, man. I mean I know there there’s risk and reward, I think with inheriting tenants, it’s not always bad, but these things definitely can happen. So what did you do about it? Did you hold onto the property?

Pratik:
No, this is too much of a headache. Like I said, I’m a W2, don’t have the time to manage bad tenants, bad properties. So I actually went and tried to sell the property and had it listed to sell in 2019.

Dave:
Honestly, I love it. I think I rant about this all the time on the show, but people say buy real estate and never sell. I just completely disagree. If there’s a deal that’s just not working for you, get rid of it and go do something else before you burn out or lose your money on a bad investment. It’s better to recognize that this isn’t working for you, whether it’s financial or lifestyle wise. If it’s not working for you, just go sell it. That’s a better thing to do. So what was your plan? You went to go sell it, were you going to just 10 31 or move it into something else?

Pratik:
Yeah, I had started going to meetups in different markets. Pennsylvania is not too far, so I started hopping into Pennsylvania as well, but to be able to do that, I wanted to offload this property.

Dave:
Yeah, okay. That’s a pretty good solution. Did it work out?

Pratik:
It would’ve. We were set to close on July 31st, 2019. I’ll never forget the date. And on July 27th, three, four days prior, I get a call late night and it’s the fire inspector of the city calling me to let me know my house is on fire. Everyone’s safe, but the entire unit is damaged. Fire water everywhere. Firefighters are breaking in through every window. Yeah, that’s the call I got three days before closing. Obviously the deal fell through and so it was not able to sell a burnt down property and that started my journey from just being a new investor to essentially a flipper in a sense, because I do have to learn construction in that sense at that point.

Dave:
Alright, well clearly that’s a very different business being a buy and hold investor and having to rebuild a property from scratch. Sorry, you had to go through that, but I think there’s probably a lot of lessons that our audience can learn from given that you had to do this. So let’s dig into that. But we do have to take a quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with investor Pratik Shaw talking about how Pratik had a really pretty tough start to your vested career with it sounds like difficult tenant situation that moved into a unfortunate catastrophe where you had a fire burn down your entire property. So help us understand this. How did you go from not having any experience to rebuilding a multifamily property? Where did you even start? What are the steps that you had to go through?

Pratik:
Well first though, obviously it was the insurance company, so I worked at the insurance company to line up just claims, et cetera, started interviewing contractors. Had never done that before in my life, but understanding what to ask the right questions. The biggest stories you hear now are just the trustworthiness of contractors to really getting references from other people through forums like BiggerPockets itself. That’s how I started that process. And once I locked down a contractor working with the insurance company to make sure their systems match for of course payments and stuff, and from there it was just selecting material from scratch. I mean, when I say material, I mean your handles that you want in your kitchen cabinets, what type of towel holder do you want in the bathrooms, what type of flooring, et cetera that meets the insurance company’s needs as well from a financial standpoint, but then something aesthetically pleasing you want for your own unit as well.

Pratik:
So it’s kind of marrying the both and learning how to work within a budget of insurance company, but within the style of the current state. Right, because the unit was about 20 years old, so you wanted to kind of transform it since you now have the ability to For sure. Yeah, so I spent a year until we got it completely rehabbed and updated. I had the house listed and to sell July of 2019. A year from that is the summer of COVID and that was when the market was just starting to take off. And so fast forwarding a year when that unit is ready to be sold, I had it listed and at a six figure increase from what I had initially listed the year before.

Dave:
Oh damn. That’s awesome. I know it’s hard to say because there’s probably a big pain in the butt, but all told financially, did it actually work out better that the fire existed

Pratik:
Financially? Yes. I mean I would wish this upon nobody.

Dave:
It took several years off your life, I’m sure. Oh my

Pratik:
God.

Dave:
Got a bigger check at the end of the day.

Pratik:
Yes, yes. It worked out for all intents and purposes and I learned a lot quite honestly. I mean, this is not a lesson I would want to learn, but in hindsight I learned so much. It made me so much more comfortable continuing my investing journey through other markets just from the experience I gained from just tenant management to construction, to selling properties and working with insurance companies. I just learned so much just within this one deal itself.

Dave:
Yeah, man. I mean sometimes the forcing function is actually beneficial to you long-term in your investing career. You’re never going to set out and set a goal for yourself to have to renovate a property like this when you’re that early in your investing career under these exact conditions. But there is a way to spin these things that sometimes happen in real estate if you have the right perspective. It sounds like you do critique, you figure out a way to make this work for you and to help you sort of build your portfolio. So once you got through, this sounds like it took a full year, but once you were almost back to square one where you wanted to be in the summer of 2019, what did you do from there?

Pratik:
Yeah, so during this whole time I wasn’t just sitting and managing and crying. I was networking on BiggerPockets looking for meetups, and I found a meetup in the Lehigh Valley of Pennsylvania, which is only an hour away from me. So it wasn’t too far, even though it’s a different state, great market, great market. And I started going there networking with investors. That’s one thing I love to do, just talk real estate. And I met an investor there and rinse and repeat of my first story. I networked with him and I bought a deal off of him, which is my first deal in the Lehigh Valley new market, new area, whole new clientele. And it was great because I was able to in a sense, just like the first time transition to a new space,

Speaker 3:
But

Pratik:
With the comfort of just having someone there to be kind of like a mentor or coach if need be. And that was my first unit in that space, built my comfort for the area. I inherited tenants, they were great tenants this time around.

Dave:
Wow, you went back to it.

Pratik:
Okay. I went back to it,

Dave:
Touched the fire once. You’re like, I’m just

Pratik:
Going to do it again. So my wife would say, I don’t learn, but I like to say that I’m just more comfortable.

Dave:
So Well, you learned how to deal with it. You knew that you could probably deal with the worst case scenario if it happened again.

Pratik:
But it was the best case where I took on and I learned the intricacies of the area. Every market, it has its own specifics. Lehigh Valley has a lot of inspections from townships, but I learned how to network with the inspectors, et cetera. And lo and behold, from there I ended up buying 11 more units. So now I have 12 units in the Lehigh Valley.

Dave:
Let’s talk about this because I think a lot of people in today’s market live in areas where finding cashflow or the type of deal that they want to buy is inaccessible either because it’s too expensive or there’s just not that kind of inventory on the market. So you basically said you chose Lehigh Valley, but was there other markets that you were looking at as well?

Pratik:
I was looking at Indianapolis at the time and Cleveland, which are all great markets still to this date. But I think I liked the aspect of still being able to self-manage a degree. I was still smaller at the time.

Pratik:
Where I take 10% typically is property management costs sometimes 8%. And that was a big chunk of change. So I was able to place my own tenants and what I’ve identified by placing my own tenants in that area is if I do the legwork early on and really identify the best tenant for that unit, that will make my real estate investing journey so much easier because I’m not just putting someone in there that meets credit score, a background check, et cetera. I’m talking to the people, I’m getting a feel for why they need the unit. And I think that speaks so much more in the long run because they treat your house better, they pay on time. There’s so many less issues down the road where I don’t really need a property manager for that area itself.

Dave:
And it creates mutual benefit, right? It’s good for you, obviously you’re probably going to have less turnover, less wear and tear on your property,

Dave:
But you’re also finding someone who’s going to be really happy in the unit that you’re offering, which is just a win-win situation. This is, I think a really important pivot point for a lot of investors is really getting people in the fastest and at the highest rate is not always the best situation. If you find people who are going to truly love living in your house and who are going to take care of it, that’s like a mutual benefit that will make your life easier, but it also will improve your returns. You’ll have fewer vacancies, you’ll have less wear and tear, less maintenance costs, and that’s just a benefit for everyone.

Pratik:
And I’ll share a quick story. One of my tenants in one of the houses in the Lehigh Valley that I placed, and it’s a high rental market, so once I’ve never had a vacancy in that area amongst all 12 homes, you have people wanting to rent the next day. And so I had a unit open, I had a bunch of applications and I went there, I’ll do phone screens from my house and I’ll narrow it down to maybe five or 10 folks. I really want to move forward and I’ll have them see the unit. And I found this guy that wanted to rent the place and I did a background check and it came up with some red flags. And the red flags were from prior drug use and selling, et cetera. But when I talked to him, I really found a sense of genuine nature and authenticity from speaking with him. So I confronted him, I’m like, Hey David, I like you and I really want you to use rent this unit. However, I saw that there’s some red flags and he explained it to me. He was like, Hey, this was in the past, full disclosure, I’m a better person. I’ve changed my ways, I just can’t get a house. This comes up and no one will rent to me.

Pratik:
And some of it’s just through a conversation, that’s where I mean where I’m able to do it myself and physically see the person I was sold on a sense of genuineness and I rented it out to him and he’s one of my best tenants. That’s awesome. He’s put a backsplash in the kitchens, he’s redone some of the flooring, painted the walls, pays on time every month. He’s been there for five years if not longer. And he’s one of my favorite tenants and all because I gave him a chance.

Dave:
That’s fantastic.

Pratik:
And that’s something you’re not going to get from a credit score, check a background check, et cetera when you’re checking boxes because you would’ve never met those.

Dave:
Yeah. Well good for you for doing the work of being a landlord and actually meeting people, talking to people, doing the networking. We talk about it all the time, but it’s a relationship business, it’s a people business and you were able to find a great tenant who likes your properties taking care of it. That’s the type of mutual benefit that we are always trying to promote here. Alright, so that was what, 2021 you saying?

Pratik:
2018 all the way to current. We’re still going.

Dave:
Okay.

Pratik:
And like I said, I was just throwing darts out of a map, honestly, looking for other markets. So I did dive into another market too. And 2020 was my first year. And this is a complete left field. This is not near my backyard. It was not drivable. I still have never been to this area really? But it was in, yeah, North Carolina. There’s a big army base in North Carolina and Fayetteville. Fayetteville.

Dave:
Fayetteville, okay. Yeah,

Pratik:
Fort Brag. Fort Bragg.

Dave:
Nice.

Pratik:
And so I had a buddy shout out to Travis, he was a buddy of mine and he’s like, he lives in Raleigh. And he’s like, it’s an hour away.

Dave:
Did you meet him somewhere? Super cool. Like paragliding

Pratik:
Or

Dave:
Back country skiing.

Pratik:
I wish this is more boring as than we worked together. It’s complete opposite. But it’s funny you say that where we were listening, we both had mutual interests, not only from work but from real estate investing as well, at least intrigued about it. And we heard there was this lady on BiggerPockets and she was from Fayetteville and he’s like, Hey, that’s like an hour away from me. Let’s look in this market. I’m like, sure. And we dove in there and have a bunch of units in Fayetteville as well. Now

Dave:
I want to talk to you about this though too, because when we talk about out-of-state investing, I think it’s intimidating for people just to do one market that they are not intimately familiar with. But you’re doing two and I’m curious the pros and cons and how that’s working out for you. But we got to take one more quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with investor Pratik Shaw talking about how he scaled his portfolio first by pivoting to the Lehigh Valley in Pennsylvania. Then you just picked a market in North Carolina that you’d never been to have a second out of state market. So tell me first why you wanted to find another market where there’s just not enough deals in the Lehigh Valley or did you want to diversify? What led to that decision? It can be a lot of

Pratik:
Work. It was honestly both. I think just increasing the deal funnel and as the years progressed it was getting harder and harder. Numbers were getting shorter and shorter in terms of cash. On cash returns. You have more investors that are more interested in the market as well. So you have a lot of competition through other investors that are trying to get in. So I figured if I look for multiple markets, I have a better chance of getting some deals and increasing my deal flow.

Dave:
Did you have some certain amount of units you were trying to build towards per year or were you just basically trying to take any opportunity you saw?

Pratik:
Any opportunity. I didn’t care much for the numbers or how many doors I had. It was more so just trying to increase the passive income. Like I mentioned, I have a W2 that I love. I enjoy, I have no desire to give it up, but I feel like I’m a real estate junkie. I just love crunching numbers and when it makes sense, just why not pull the trigger. So it’s been working out so far,

Dave:
Man, this is the kind of investing I love. It’s like we’re talking about keeping your W2 job and being really analytical about investing. We share a lot of philosophy around real estate investing. So what was it like? I actually always advocate for people to go to these places before they do long distance investing. How did you get comfortable with a place you’d literally never been?

Pratik:
It was quite a bit of anxiety at the first where not being able to see walk the unit and having trusting an agent to do that. But once you build out the team and get a good rapport with the people that you’re working with, you have that sense of comfort. And so we did a trial deal and it worked out and that kind of was a proof of concept to purchase more and out of state as well.

Dave:
In my experience, the calling of contractors and maintenance thing is probably the first thing that gives people anxiety about investing long state. But the thing I have a hard time with not having been somewhere is knowing what neighborhood to buy within a market. You can do a ton of analytics and look at all the numbers and all that and say, I know Fayetteville, I mentioned it because it’s traditionally been a really strong market, but within every market there’s good neighborhoods you want to buy in. There’s ones you probably want to stay away from, whether it’s because it’s just not the kinds of assets, there’s not the right housing stock, it’s not in the path of progress. So how did you figure that out without ever having gone,

Pratik:
Dave? I dunno if this speaks to you, but I’m sure it speaks to some people. I printed out a Google map of Fayetteville.

Dave:
Okay, I like this.

Pratik:
I went with my agent that I was working with and I told him, alright, I printed out for myself just to circle neighborhoods and I got on the phone with them and we went to neighborhood to neighborhood because everyone knows every city in itself, no matter how small it is, has different neighborhoods, different school districts. So I circled what’s a good area for school districts, what streets? He was like, I’m not going to say the street, I don’t know if anyone lives on this street, but he’s like this street, this road stay

Dave:
Away from,

Pratik:
Do not go anywhere near that. That is just rough. So I would have Xs on my printed out Google maps, I would put Xs on the map and I pretty much had essentially a treasure map in a sense of where I circled and where I xed and I went on Zillow or go on realtor.com, wherever. And I would just look for properties within my buy box of three beds, four beds, et cetera, in those circled markets on my map. And that’s kind of how I went by block, by block because like you mentioned, there’s some areas that you just don’t know that they’re near manufacturing sites, so people don’t want to live there and you can’t tell that always from just a Google map. So that’s where doing your homework is very important and also having a good relationship with your agent that is boots on the ground that has that intricate information of the street by street knowledge is very, very important and critical.

Dave:
Okay, but why have you still not gone?

Pratik:
Why would I have North Carolina? I don’t know. I dunno. It’s worked out. I would love to go one day if the stars align, but I’ve learned

Dave:
You’re braver than me.

Pratik:
I’ve learned it’s not needed. Honestly. If you have trust in a team, and like I said, if you do the work ahead of time before you pull the trigger and if get the right team behind you, you don’t really have to be there physically.

Dave:
Do you notice a difference between the performance of your deals in the Lehigh Valley and Fayetteville? Are they both doing well?

Pratik:
Yes. And you have actually mentioned this before, so I laughed to myself when you asked me that question because you’ve mentioned Fayetteville before and I’ve noticed that the appreciation has stalled somewhat to a point where Fayetteville is historically a cash flowing market. And with most markets over the past five, six years, they’ve all appreciated pretty much across the radar. I don’t think the rents have kept up as much. So I’ve noticed that the rents aren’t as keeping as much as the appreciation. So that’s an analysis I need to do. I still have those units doing well for me, for what I bought in with, but my IRR on my equity, I got to go back and do those equations.

Dave:
Yeah, yeah, that makes sense. I mean it doesn’t mean you can’t buy there, but probably means you have to pay less, right? You need to just be a little more disciplined about what you’re offering.

Pratik:
Exactly.

Dave:
So it sounds like you’re sort of going through that exercise of trying to figure out should I hold onto this or is there a better deal? So have you done that analysis and is there something else you’re going to try and pivot to?

Pratik:
I have started transitioning into flipping side of things. So I’ve looked into another market, so sorry Dave, I’m going to add a third market on your plate.

Dave:
You’re just like, okay. I work at W2 job, I got into this to be a rental property investor. Now I have properties in three different markets and started flipping. It’s, it’s an unusual track, but I like it. Honestly. I say it’s unusual, but honestly I’m doing the exact same thing. My portfolio looks pretty similar, so maybe we’re more similar. So first tell me why, what about the analysis led you to think flipping might be the better way for you to go? Right now?

Pratik:
Quite honestly, it’s like I mentioned, I have a W2, so I have this capital. It’s harder to find long-term deals that pencil and I’ve traditionally stayed to single family and small and with just residential buyers, I’m getting beat out. I’m still putting in offers, but I’m getting beat out to the point where it doesn’t make sense to invest. But when you have someone emotionally invested into the porch or into the house and the location that they’re going to spend the extra money that they want to, which rightfully so where it kind of beats you out as an investor. So I started working in New Market, Pittsburgh specifically, and I know you guys have mentioned this before on the podcast, and I started doing flips in the Pittsburgh, greater Pittsburgh and suburban market there.

Dave:
Okay, nice. And what was the analysis there? You just did the math and that made the most sense to you?

Pratik:
It’s a balance between passive income that’s coming in from the properties that I have in the other two markets and coupling that with just maybe some, just a different space of higher returns, even though obviously they’re shorter timeframe, you have capital gains taxes that are different from short-term gains versus long-term gains of course. But in a sense of just doing construction, I got maybe that bug was put in with that Elizabeth House,

Pratik:
But I just enjoy it. Being able to look at a house and seeing what type of flooring, what type of paint do you want? And to be completely honest with you, and I hate, if this is a secret, it’s going to get out. It’s so much easier. I mean, once you find a deal that pencils and you find a trustworthy contractor, which is hard in itself, but once that’s done, I mean the hardest step is really figuring out what color combinations and paint palettes you want to match the flooring really. And it’s quite easy in that sense where three, four months, if it’s a typical cosmetic rehab, you could make great returns just in the short timeframe.

Dave:
That makes sense to me. Actually, I, well knock on wood, I’m supposed to close on my first flip that I’m going to be actively involved in on Friday. So I’m also trying to do the thing because I’ve done some passive flipping deals before, but I’m going to try this out. How are you managing that with your time? Because you work full-time, so how much time does this take and is it getting to the point where you’re sort of reaching a limit in terms of how much you can contribute timewise to your portfolio

Pratik:
In terms of the deal flow? That’s the agent. The agent brings me deals and within a few you could kind of pencil in to see if it makes sense to dive in a little bit deeper or doesn’t make sense for your returns at all. And you always want to be cautious, even if you’re a trust agent, you want to do your due diligence and look at comps and analyze them and get a real comfort for if you trust those comps. But once that’s done, once you lock in a deal and you actually get it, of course after running the numbers, I have a contracting team out there that I’ve built a relationship with that’s very trustworthy and the communication’s on point. And so I’ve been working with them, which I really enjoy. So then it’s really just picking the material and the specs of what you want. And like I mentioned, I have a W2 job. I’m working throughout the day. I travel quite a bit for work as well, but in the evenings I’m able to just ahead of time, if you give the contractor, this is what I want ahead of time, it helps you out. It saves the back and forth with them. If you give them all that stuff in a spreadsheet in advance, they could review it. And then it’s just more of an execution timeline where you’re more of just a project manager, that’s all.

Dave:
Would you do multiple at one time?

Pratik:
I haven’t yet, but I would love to. I mean, Dave.

Dave:
Okay, you’re just going for it.

Pratik:
I’m just going for it. My philosophy is just jump in. You could always figure it out in the backend, but if you have the means to it, of course, if you’re not completely stretching yourself, and quite honestly, I enjoy this. I mean, I actually enjoy just running numbers, running deals, seeing them come through. It’s fun for me. And I think that’s partly why I’ve been able to jump in quite a bit where I am thoroughly having a good time doing so.

Dave:
I mean, if you’re enjoying this and you’re making money, I mean just keep going for it. That’s awesome. So before we get out of here, Pratik, just tell us what’s the state of your portfolio today?

Pratik:
Sure. So I have just under 20 units that are split between the Eastern Pennsylvania markets and North Carolina market. I dive into anything that’s single family and small multi families of course. And so that’s been steady rolling, cash flowing just around 12,000 a month net after expenses for those units. And like I mentioned, I’m moving into flipping. I’m just trying to increase that business and that side of things. Always looking at new markets. And one thing I haven’t explored yet, which I’m super interested in, it’s private lending. I love private

Dave:
Luxury.

Pratik:
Like I mentioned, I’m a W2, so that does afford me the luxury of doing that. And I love real estate and I love crunching numbers. So if I’m able to lend to somebody to do the work where I physically may not be able to, since I have a full-time job. But at the same point, understanding the risks associated with that, knowing that I understand how to crunch numbers gives me a good opportunity where something that I’ve really been intrigued in but haven’t really jumped in just yet.

Dave:
Very cool. Well, are you working towards a unit goal or a passive income goal? Are you just going to sort of do this for as long as you can because you enjoy it?

Pratik:
I would love to have one unit and getting to get 12,000 trash, Dave, I would love that. That’s

Dave:
Everyone’s dream. But

Pratik:
No, I don’t mind having a number of doors. I think it’s more, I would have an unofficial goal of like 25,000 and there’s no reason behind that number, but I would like 25,000 a month in cashflow. That would be nice, but that doesn’t mean I’d quit my job. I truly enjoy what I do. So at the end of the day, just want to keep growing. I want to keep having fun. Right. It’s a

Dave:
Great attitude.

Pratik:
I’ve understood the market of just renting and purchasing long-term investments, which has been going well. I’m trying to learn of course, about just the flipping business. And of course at the same time, I would love to privately lend as well.

Dave:
Sweet. Well, good luck to you PR fatigue. We’d love to hear from you in the future as you update and continue on this path. Maybe we’ll have you back to hear how you’ve been growing in the next couple of years.

Pratik:
I appreciate it. Thanks for having me, Dave.

Dave:
Thank you all so much for listening to this episode of the BiggerPockets podcast. I’m Dave Meyer. See you next time.

Here’s what nobody tells you about real estate investing: Finding great deals is only half the battle.

The other half? Building operational systems that turn those deals into lasting wealth. Yet, most investors spend 90% of their time hunting for the next property and barely 10% thinking about the processes that will make or break their long-term success.

Walk into any real estate meetup, and you’ll hear endless conversations about cap rates, cash-on-cash returns, and market analysis. What you won’t hear much about is tenant screening workflows, maintenance request systems, or quarterly portfolio reviews. That’s the operational complexity that separates investors who build lasting wealth from those who get overwhelmed and eventually quit.

The challenge isn’t just managing one property. It’s maintaining consistent performance across multiple properties, in different markets, while juggling day jobs and family obligations. Without systematic processes, even the best deals can turn into operational nightmares.

Data-driven investors understand something crucial: Long-term success isn’t just about buying low and selling high. It’s about consistency, process, and clarity across every touchpoint in your operations. The investors who master this operational excellence don’t just survive market cycles—they thrive during them.

So what exactly do top-performing portfolios have in common? The answer might surprise you.

The Five Operational Pillars of Elite Investors

The most successful real estate investors don’t just stumble into operational excellence. They follow a systematic approach that borrows from proven methodologies used by top-performing businesses worldwide.

These five pillars form the operational backbone of every elite portfolio:

1. Sort: Eliminate the nonessential

Top investors ruthlessly eliminate activities that don’t drive profit. They stop chasing every “deal of the century” and instead focus on their proven acquisition criteria. They quit managing properties that consistently underperform. And they delegate or automate routine tasks that eat up valuable time.

The sorting process means saying no to distractions and yes to activities that directly impact cash flow, appreciation, and portfolio growth.

2. Set in order: Standardize your core processes

Elite investors create standardized systems for everything that matters. Their tenant screening follows identical checklists every time. Maintenance requests flow through the same workflow, whether it’s property one or property 50. Financial tracking uses consistent categories and reporting schedules.

This isn’t about bureaucracy, it’s about ensuring quality and consistency, regardless of market conditions or personal circumstances.

3. Shine: Regular portfolio audits and reviews

Successful investors schedule regular portfolio “cleaning” sessions. They review each property’s performance quarterly, identify maintenance issues before they become expensive problems, and analyze tenant satisfaction to prevent turnover.

These audits catch small problems before they become big expenses and reveal optimization opportunities that boost returns.

4. Standardize: Create repeatable workflows

The best investors build workflows that work in any market condition. Their processes don’t fall apart during busy periods or market volatility. New team members can step in and execute consistently because everything is documented and systematic.

5. Sustain: Maintain excellence over time

Elite portfolios have built-in mechanisms to maintain high standards. They schedule regular process reviews, train team members on best practices, and continuously refine their systems based on performance data.

This systematic approach isn’t just theory—it’s how elite investors scale from small portfolios to substantial wealth-building machines.

Workflow Standardization That Actually Works

Here’s where most investors go wrong: They treat every situation as unique. New tenant inquiry? They wing it. Maintenance request? They figure it out on the spot. Rent collection issue? They handle it differently each time.

Elite investors take the opposite approach: They systematize everything that happens repeatedly.

Tenant communications: The template advantage

Top-performing investors use standardized communication templates for every common scenario. New applicant inquiries get the same professional response, with clear next steps. Lease renewal discussions follow proven scripts that maximize retention while protecting profitability.

The result? Consistent tenant experience, reduced response time, and fewer miscommunications that lead to problems down the road.

Maintenance workflows: From chaos to clarity

Elite investors never let maintenance requests fall through the cracks. They use systematic workflows that automatically assign priority levels, track response times, and document completion. Whether it’s a leaky faucet or a broken HVAC system, the process remains consistent.

Smart investors also maintain standardized vendor lists with prenegotiated rates, ensuring quality work at predictable costs, regardless of which property needs attention.

Financial tracking: Numbers that tell the story

Successful investors track the same metrics across every property. These include monthly cash flow, maintenance costs per unit, tenant turnover rates, and time-to-lease vacant units. This standardized reporting reveals patterns that would otherwise stay hidden.

The technology stack that scales

The best investors leverage technology to maintain oversight without micromanagement. Property management software handles routine tasks like rent collection and maintenance scheduling. Automated reporting provides consistent performance updates. Digital communication platforms keep tenant interactions documented and professional.

But here’s the key insight: Technology amplifies good processes, but it can’t fix bad ones. Elite investors first perfect their workflows, then use technology to execute them consistently across growing portfolios.

This systematic approach allows investors to scale confidently, knowing that property 50 will perform just as well as property five.

Portfolio Auditing and Continuous Improvement

Most investors only look at their numbers when something goes wrong. Elite investors do the opposite: They schedule regular portfolio audits to catch problems before they surface and identify optimization opportunities while they’re still profitable to pursue.

The quarterly performance review that actually matters

Top-performing investors focus on five critical metrics every quarter: 

1. Cash flow per unit
2. Maintenance costs as a percentage of rent
3. Tenant turnover rates
4. Average days to lease vacant units
5. Net operating income trends

These aren’t just numbers on a spreadsheet. They’re early warning signals. Rising maintenance costs might indicate aging systems that need proactive replacement. Increasing tenant turnover could signal management issues or market shifts requiring attention.

Spotting underperformers before they become problems

Elite investors use systematic reviews to identify properties that need attention. A unit with consistently higher maintenance costs might need strategic improvements. A property with frequent tenant turnover might have pricing or management issues that systematic analysis can resolve.

The key insight: Problems caught early cost far less to fix. A systematic quarterly review might reveal that replacing an aging HVAC system proactively costs $4,000, while waiting for it to fail during peak season could cost $6,000, plus lost rent from an uncomfortable tenant.

The 80/20 rule applied to real estate

Successful investors recognize that 20% of their efforts typically drive 80% of their results. Maybe it’s focusing on specific property types that consistently outperform. Perhaps it’s investing extra attention in tenant retention for their best properties, while divesting underperformers.

Systematic reviews reveal these patterns, allowing smart investors to double down on what works and eliminate what doesn’t.

Emotional decision-making vs. data-driven choices

Market volatility triggers emotional responses, but systematic reviews provide objective clarity. When headlines scream about market crashes or housing bubbles, elite investors consult their performance data rather than panic. Their systematic approach reveals whether their specific portfolio is actually affected, or just caught up in general market noise.

This disciplined, data-driven approach to continuous improvement is what separates temporary success from lasting wealth creation.

Why Most Investors Skip the Systems (and Pay the Price)

Here’s the uncomfortable truth: Systematic operational excellence is boring. It doesn’t generate the same excitement as finding a great deal or closing on a new property. There’s no adrenaline rush in creating tenant screening checklists or scheduling quarterly portfolio reviews.

Shiny object syndrome

Most investors suffer from what psychologists call “shiny object syndrome.” They jump from house hacking to wholesaling to short-term rentals—always chasing the next strategy that promises easier profits. The problem? They never master the operational fundamentals that make any strategy successful.

Without systematic processes, every new property becomes a fresh challenge rather than a repeatable process. Every market shift requires starting from scratch instead of adapting proven systems.

The hidden costs of inconsistent processes

The price of skipping systems shows up in three devastating ways:

1. Time costs: Inconsistent processes mean reinventing the wheel constantly. What should take minutes stretches into hours because there’s no established workflow.
2. Money costs: Reactive management is always more expensive than proactive systems. Emergency repairs cost more than scheduled maintenance. Tenant turnover from poor communication costs more than systematic retention efforts.
3. Opportunity costs: While unsystematic investors struggle with operational chaos, systematic competitors are scaling efficiently and capturing the best deals in the market.

The irony is obvious: The “boring” work of building systems is exactly what creates the freedom and profits that attracted investors to real estate in the first place.

Most investors remain trapped in operational complexity because they never invested the time to build systematic excellence.

When Systematic Development Amplifies These Principles

While individual investors struggle to build systematic processes across their portfolios, some companies have perfected these principles at an institutional level. That’s exactly what Invest 5S has accomplished over three decades of systematic real estate development.

Invest 5S is a family-owned real estate development company that provides investors with passive investment opportunities in Texas duplex and fourplex properties. Founded by Clay Schlinke, who brings over 30 years of systematic development experience, the company has built more than 4,000 units across Texas markets, and currently constructs approximately 500 units annually.

What makes Invest 5S unique is their vertically integrated approach that embodies systematic excellence principles on a professional scale. While individual investors might struggle to standardize processes across a handful of properties, Invest 5S controls every aspect of development, from land acquisition to ongoing management. This vertical integration eliminates third-party dependencies, reduces costs, and ensures consistent quality—exactly what the systematic approach demands.

Their systematic development process amplifies the five operational pillars in ways individual investors simply cannot replicate. They sort opportunities by focusing exclusively on high-growth Texas markets with verified population and job growth. They set processes in order through standardized development workflows refined over thousands of units. 

Not only that, but they shine through continuous market analysis and project oversight. They standardize through repeatable development systems that work regardless of market conditions. And they sustain excellence through decades of proven performance.

For investors, this represents the ultimate systematic solution: professional real estate exposure without operational complexity. Instead of building your own screening processes, maintenance workflows, and portfolio management systems, you access professionally managed real estate development with consistent returns typically delivered within two-to-three-year hold periods.

Invest 5S specifically serves working professionals and investors seeking real estate diversification beyond traditional stocks and bonds while generating monthly cash flow and long-term appreciation, all without the time commitment and expertise requirements of direct property ownership.

Ready to explore systematic real estate development opportunities? Connect with Invest5S today to learn how investors are accessing professional real estate development with proven systematic management.

Take Action: Professional Systems, Passive Returns

Systematic operational excellence separates successful investors from those who struggle with complexity. Whether you build these systems yourself or access them through professional development companies like Invest 5S, the principle remains the same: Consistent processes create consistent results.

Ready to explore professionally managed real estate opportunities? Connect with Invest5S today.