Carrie, ideally you can freeze fondant for months but I'm concerned in this case that the condensation process during the thawing will ruin some of the stampings in the fondant. It may not be as defined as when you make it. I suggest you do a few and freeze them for a day or two. Then see what effect it has on the fondant once thawed. If it works you have your answer. Hope this helps.
Darin: A little background on Veena Jetti before we start the show. Veena lives in the Dallas area, studied finance as an undergrad student and then became a corporate real estate attorney. She was raised by an entrepreneurial mom that gave her the confidence to go out on her own. Veena left her corporate career back in 2012 and started investing in real estate. Her first multifamily deal was over $15 million and now she is focused on much larger deals. Their current focus are deals north of $100 million.
Veena Deal to Remember
So, just a little bit on how I know Veena. You probably remember the night, but Dan Handford had a dinner in Dallas. He basically went out on Facebook or somewhere and said, "I'm going to auction off. There's one spot left and you're going to be with all these heavy hitters." He named off all these names and you were one of them. That was the first time I was introduced to her. I was like, "Who is this Veena?"
Then I've seen her on social media and she's partners with Ellie Perlman. They're doing deals all over the place. I tried to get into that dinner and I think it was Nic Espanet (episode 72) who ended up getting it. And so I would've met you that night, but I didn't. But, here we are several years later.
Darin: That's the thing, some of it is just the knowledge that they don't know. Some of it is they've been told, but they're like, "That's for somebody else and I'm going to let other people deal with that." For me, I didn't know any better. I was putting my money in the stock market. Four years ago, somebody pointed me to the book by Tom Wheelwright, Tax-Free Wealth, and it opened my eyes.
Darin: At one point, you probably were doing it for the money and for the wealth. I think that you're a listener that you haven't even done your first deal yet, you're just thinking about you getting your first deal done. But then, you can't see what happens a year, two, or three years down the road.
Veena: I don't think I'm there still. I think every deal we do even now, I'm like, "Can we really do this size of deal?" Literally, every time Ellie and I talk about putting in hard money or an LOI on a deal, if it's bigger than any deal we've done before, I'm like, "Ellie, do you think we can do this deal?" Then we both start laughing, because literally every single time we do a deal, we have the same conversation. She's like, "I'm just going to record this conversation so that you can listen to it. We don't have to have it, we know that we're going to."
That really helps guide us in what we should be doing or how we should be doing this. We focus on our LPs and obsess over them and that really is the lifeblood of what we do. Yes, we have done bigger and bigger deals and it's easier to scale.
Veena: We really stay strict with our buy criteria, so much so that I have a whole brochure on what our buying criteria is. When I have someone who comes to me and says, "I know a lot of people with off-market deals." "Great. Feel free to send them to us. Here are our buy criteria. If they don't fit those, you don't need to send it to us."
Darin: That buying criteria has changed over time, obviously, based on your expertise and your objectives. I talked about fear. You actually don't even come across as fearful at all. You seem very confident. I've had people that have thousands of units and they said in that first deal or two, "Yes, I was scared." I'm like, "How'd you push past it?"
Veena: I know that it's easy for me to talk about it now because it's so far behind me. But, the first raise I ever did was so hard. I cried myself to sleep for six weeks because I thought we weren't going to close the deal.
I was like, "This is the situation," and I told him what was happening. "I'm short of money to close and we need to liquidate so that I can afford to close this deal." I actually didn't care about losing the money. What I really cared about was the reputation with the brokers and the reputation with our investors. Even if we had left hard money in the deal or whatever, that was fine. But, not closing that deal, I knew was going to put me on the wrong path with the broker, with the lender, with title, with our investors.
Darin: You said earlier that your focus on the LPs is so important to you. I think that there can be a disconnect between the way LPs think that syndicators think about them and the way they do think about them. Some passives, especially the ones that are just getting started and they're in just one or two or three deals. The ones that have been doing it for a long time, understand that there are ups and downs.
They think, "They just want my money." That's not it. Especially on the first deal or two, the reputation and actually delivering and over-delivering is so important to the syndicator that they're going to do everything possible to try to make that deal a success, otherwise, you get blackballed in the industry, from all the different avenues.
Veena: That is something I don't take lightly. I take that responsibility very seriously. I'm going to make sure that they're comfortable along the way. Now, we're also at a point where I have more money than I have deals. So, I don't need to work with any one investor. I actually will not work with investors that I think are a bad fit for us at this point.
But, in the beginning, you don't necessarily have that same leverage. When you first start, you're basically like, "Please, just actually follow through. You said you're going to invest. Please actually invest this time with me. I don't know if this deal is going to work." But, as time goes on, as you prove out the track record, as you build that relationship with your investors, you focus on your current investors, because they're the ones that actually trusted you.
Darin: For the listeners' benefit, so many people in real estate will tell you, "If you're surrounded by people that are not in real estate, and you want to invest in real estate, then get out there and start networking. Surround yourself with like-minded people, because the other people are going to tell you, you're crazy." But then you talk to Veena and she's like, "$50-million deals too small for me." She didn't get there overnight.
Darin: It's one step after the other and then one growth after the other. Listeners, Veena, myself, every other person that's been on this show, and every other real estate investor started with none. Everybody started with zero. At some point, you got to get off the fence and actually buy something. Talk about we're in a weird time. The fed just raised rates by 75 basis points. I was at a multifamily event two nights ago and a ton of syndicators and everybody's talking about the debt on these deals.
Veena: It's very painful to see. The problem is, I want to buy anything 75 million and up. Nothing is pricing out for where we are comfortable transacting on the deal. That's because the interest rates are decreasing our sales proceeds. Actually, it's not even the IRR that's hurting us. It's the cash flow during the hold period that's really tough. It'll be interesting to see if LP investors will tolerate a lower cash-on-cash, to be more IRR-driven. I will say our family offices, they don't care about cash-on-cash. They care about IRR.
Darin: But, I do want to get your take on this. They say that real estate is a great hedge for inflation. The way I look at multifamily is, "If you have wage inflation, then people have more money and should be able to pay higher rent. The top line in multifamily deals should go up." Now, the debt service, expenses is less than half of the rent.
Darin: Everything is relative value. If you can buy a 10-year treasury at same yield as a multifamily deal, that doesn't make sense. Cap rates should go up. Now, that's a negative impact to valuations.
You can take all of these things into consideration in your underwriting on acquisition. Like cap rate's expanding. I'm not upset about it. I want them to expand, so we can buy things. We can't buy anything right now, because cap rates are so low. If we can find deals that now pencil out and make sense, great. I'm happy about that. We'll underwrite to a cap-rate expansion to hedge against the risk.
Darin: People appreciate that. I'm in a lot of passive deals and they were all 7-8% cash-on-cash. I have some that are no distributions, some that are delayed distributions, and some that are exceeding distributions. It's like all over the map. To have an operator that really is focused on hitting that and setting a benchmark where people can trust that, "I'm in five of their deals and four of them they've hit every time."
Darin: It's not tax-efficient, either. So, talk to the listeners who are trying to get into the space. It can take nine months, a year, a year-and-a-half to get that first deal. Talk about perseverance, determination, grit, staying power, all of that, to give some inspiration to somebody that's just trying to break in now.
Veena: I'm doing my first deal in July of 2022 for this year. For seven months, I have not had a single deal that makes sense. It's not for lack of effort. We're trying. Last year, we did two. The year before that I did one. It is just a tough market to compete in.
Veena: No. But, even a fourplex, that's the most competitive. The smaller the deal, the more competitive it is because more people can buy it. I'll tell you, even at the 75 million and up mark, we've been competing against 50 offers, 40 offers, 35 offers. It's just crazy up and down the board, no matter how you slice it. I actually bought a single family home recently in my neighborhood. It was an emotional purchase because it's for my in-laws to live there. It's across the street from my parents' house, so all three of us will be in the same neighborhood. 2ff7e9595c
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