A Methodical Way To Real Estate Success

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Learn how to create a passive income stream and achieve financial freedom with our guest Vasu Kakarlapudi M D Vasu is a board-certified ENT surgeon and successful real estate investor In this episode he tells us how he uses a meticulous and methodical approach both to surgery and real estate He also discusses how he and his team at Apta Properties were able to build a track record of over 700 million worth of multifamily investments With over 16 years of experience in investing managing and developing successful commercial real estate Vasu is passionate about helping fellow medical professionals and high-wage earners make their money work for them 00 01 – 08 45 Slow Methodical and One Step at a Time Vasu on his medical background Realizing that even though they have a lot of income they don t have a lot of freedom Deploying your income in a meaningful way How time blocking to help him prioritize Transitioning from single-family to commercial real estate 08 46 – 15 43 Making the Least Amount of Mistakes Building a world-class team What they are doing to prepare for the future The importance of demographic trends How they deleverage but still remain competitive Sacrificing yield but preserving capital 15 44 – 18 05 The Rewards of Real Estate Real estate allows you to be better at everything else you want to do in life 18 06 – 19 55 Closing Segment Reach out to Vasu Links Below Final Words Tweetable Quotes One step at a time The way you climb a mountain is one step at a time right I made it a mission to just get better every day and knowing that it would take time – Vasu Kakarlapudi M D If you re not methodical about how you do things you can get yourself in trouble really quick And the same thing goes with real estate investing – Vasu Kakarlapudi M D Just have goals 30-day goals and make two-millimeter shifts in your mindset Take action but take action in a guarded way – Vasu Kakarlapudi M D —————————————————————————– Connect with Vasu Follow him on LinkedIn and visit the Apta Properties website Resources Mentioned Jim Collins Ken McElroy Connect with me I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns Facebook LinkedIn Like subscribe and leave us a review on Apple Podcasts Spotify Google Podcasts or whatever platform you listen on Thank you for tuning in Email me sam brickeninvestmentgroup com Want to read the full show notes of the episode Check it out below 00 00 00 Vasu Kakarlapudi M D Real estate allows you to be better at everything else you want to do in life And especially for surgeons there s a lot of negativity right now in medicine about a lot of negative secular trends in medicine with you know declining reimbursements increased expenses and corporatization of medicine suits getting in medicine and et cetera et cetera And if you don t need your medicine income because you ve got passive income to cover your monthly expenses all of those things become less painful for you You become a better clinician better surgeon and better doctor at which I think is better for the community 00 00 43 Sam Wilson Vasu Kakarlapudi is an experienced ear nose and throat surgeon who applies his meticulous surgical precision to his real estate entrepreneurial endeavors Welcome to the show 00 00 52 Vasu Kakarlapudi M D You re welcome Thank you Sam 00 00 55 Sam Wilson Hey the pleasure s mine Same three questions I ask every guest who comes on the show in 90 seconds or less can you tell me where did you start Where are you now And how did you get there 00 01 03 Vasu Kakarlapudi M D Yeah So sam I grew up in Kansas City a son of Indian immigrant parents and like a lot of other young boys at that time in the mid-eighties the Kansas City Royals were big So I wanted to be a professional baseball player Tried out for the high school team and quickly realized my talent wasn t going to support my dream So I had to switch to textbooks and like a lot of other good Indian kids who did good in school went into medicine and got into a combined program six year program with the University of Missouri Kansas city 00 01 28 Vasu Kakarlapudi M D There I really kind of fell in love with meticulous nature of head neck ear nose and throat surgery Went to residency at the University of Maryland And so subsequently my wife and I started our careers together in Louisville Kentucky in the greater Southern Indiana new Albany Indiana a suburb of Louisville Kentucky 00 01 45 Vasu Kakarlapudi M D And we quickly realized my wife s a dentist and we quickly realized that although we had a lot of income we didn t have a lot of freedom And so I looked around to kind of see who were the guys that were actually happy in medicine and who were practicing medicine for the fun of medicine And most of them had passive income 00 02 01 Vasu Kakarlapudi M D And a lot of them receive their passive income from real estate So being the curious guy that I am I investigated and found people who were doing real estate and figured out kind of how they did things and figured out how I could apply those principles to my own real estate investing career 00 02 16 Vasu Kakarlapudi M D So so fast forward I m now 47 and practiced medicine on my own terms due to the financial freedom that real estate has afforded And so through various real estate endeavors over the period of time I ve had friends and family that have joined us and now I help other colleagues across the country to get involved in real estate 00 02 33 Sam Wilson Right And that s such a big void is in the you know high-income earning professional space It s amazing How few have that that understanding of passive income I mean I hear on this show all the time just like oh yeah that was a thought that came to us you know 10 years out of school They re like wait we gotta figure out another way to do this Cause we re burning out here The two things you ve mentioned there that you saw in the colleagues that you looked up to or that were maybe ahead of you in their real estate investing journey was they had income and freedom It takes a lot of dry powder to develop a meaningful cash flow stream is my it would be my assumption or analysis in you know a meaningful income off of passive real estate investing Can you walk us through the journey for you Maybe where because I mean once we get to things in this in this business right we get income and then we also get the appreciation play What s been kind of your strategy on that front for handling the income side of that 00 03 28 Vasu Kakarlapudi M D Well I mean the first thing is you have to have income And so fortunately as physicians we re blessed with a relatively high income And so then the question is how do you deploy that in a meaningful way A lot of your listeners probably know real estate is a really a way to grow wealth slowly but it s kinda like a you know Jim Collins I like to read and I m sure a lot of your readers probably read a lot of Jim Collins works and he talks about the flywheel 00 03 51 Vasu Kakarlapudi M D And it takes some momentum for you to start building the flywheel but after a period of time once that flywheel starts going it s hard to stop What if you leverage your income initially and then continue to scale that and let your appreciation you mentioned appreciation and let your appreciation generate even more income for you 00 04 08 Vasu Kakarlapudi M D It s time where you know you re essentially your passive income can exceed your monthly expenses And therefore that s kind of our definition of freedom is is you know passive income greater than your monthly expenses So it doesn t happen overnight like most good things in life But if persistence and patience and humility and always wanting to learn it s kind of a surefire path to to get to financial freedom 00 04 33 Sam Wilson Right Yeah I liked the idea that this is a slow a get rich slowly game cause it it certainly is And there there are some big licks that you can get along the way but it s certainly not the ones that produce that predictability inside the space that I think so many of us are looking for 00 04 48 Sam Wilson How have you scaled your business You re still a full-time ENT or a part-time ENT I don t know how that quite works out in your field but how have you scaled those two at the same time 00 05 00 Vasu Kakarlapudi M D Yeah Fortunately we re in a big group so I ve got 14 partners that help me leverage my time a little bit better so I can spend more time on some real estate endeavors 00 05 09 Vasu Kakarlapudi M D It s really a matter of just prioritization and you know you can do a lot of things if you really just prioritize your time So it s you know as physicians we re used to working long hard hours and it s part of the training It s part of the process to get to be a ear nose and throat surgeon 00 05 24 Vasu Kakarlapudi M D So so really it s just a matter of you know when you have blocked time for being a physician you re a physician And when you have blocked time for doing real estate you do real estate and you don t intermix And so like today is a is a real estate day for me So I m working working from home and working on real estate 00 05 39 Vasu Kakarlapudi M D And I don t have any clinical responsibilities yesterday I was a physician I didn t have any real estate responsibility So it s really about blocking time 00 05 46 Sam Wilson Right yeah I think that s a great I mean that s something we all struggle with is where to focus But you know being able to do one and the next certainly is key 00 05 54 Sam Wilson What s it been like You know you started off as a passive investor is that right 00 05 57 Vasu Kakarlapudi M D Well I actually start off as an active investor and in single-family like most people 17 years ago and quickly realized that couldn t scale that way and had a lot of you know toilets and termites and 2 00 AM phone calls 00 06 09 Vasu Kakarlapudi M D And we were we realized that I could scale a lot easier with commercial real estate You know I was fortunate enough to have some significant amount of mentors that helped me And I ve you know basically followed them get my real-life PhD and how they vet deals how they finance deals how they put deals together and the entire sales cycle and how they optimize and liquidate those deals 00 06 29 Sam Wilson So you worked alongside mentors that were bringing deals to the table and they said Hey help us take this down You know you guys can kind of do the Co-GP model And then you went out and said Hey I m gonna do this on your own This is not a game I m calling it a game This is not an industry where it s easy to break into I don t think I mean it s something where especially if you re doing large multifamily projects or whatever asset class which we ll ask that next but that you guys are into 00 06 55 Sam Wilson I mean it takes time to build a team to build momentum to find the right assets to underwrite them to to kind of get all those skillsets How did you do that 00 07 02 Vasu Kakarlapudi M D One step at a time the way you climb a mountain is one step at a time right I made it a mission to just get better every day and knowing that it would take time So you know I ve been at this for again 17 years so this didn t happen overnight You know the first thing I did was I read listen to podcasts and found mentors and followed them on deals I you know did a lot of work before I dip my toes into the real estate world because I think the surgeons you know we re we re pretty risk-averse We re used to following a pattern That s the way we were trained is we go from one landmark to another landmark And you do that in a very methodical risk-averse way to protect our patients You know you were mentioning just before that you if you don t mind me saying that you just had some surgery and that s what I do 00 07 45 Vasu Kakarlapudi M D And sinus surgery is very very delicate It s you know you re right in between the brain the eye the smell centers You ve got a lot of very important structures So if you re not methodical about how you do things you can get yourself in trouble really quick And the same thing goes with real estate investing 00 08 00 Vasu Kakarlapudi M D If you re not very methodical and scientific about how you approach things So this is not a place where you just you d listened to a podcast from Sam and then the next thing you know you you go take down a multifamily unit complex It just doesn t happen that way So slow and methodical one step at a time and just have goals 30 day goals and make two millimeter shifts in your mindset And take action but take action in a guarded way where you can you know work with a team of people who have done what you have done And if you re humble and curious and a lot of times those folks want to help you And that certainly the case in my situation where mentors wanted to help me 00 08 36 Vasu Kakarlapudi M D And so I took advantage of that and really you know was was humble and curious and learned along the way and was able to finally take some action one step at a time 00 08 45 Sam Wilson What does finding opportunity look like for you today 00 08 49 Vasu Kakarlapudi M D Well finding opportunity is really building a team You mentioned plenty of times in your podcast about you know real estate is a team sport 00 08 56 Vasu Kakarlapudi M D And I couldn t agree with that more so on our team You know it s not just me because I knew that if I was again I really kind of just started off with trying to invest my own capital And friends and family wanted to invest along with us because we ve had success And so in order for me to really kind of continue to raise capital for my friends and family s investments I knew I had to build a world-class team 00 09 16 Vasu Kakarlapudi M D So we have a team of you know world-class underwriters you know property managers asset managers and acquisitions folks and disposition folks that really help us do this in the most effective way So we got domain experts in each of the areas of the real estate cycle 00 09 32 Sam Wilson Now each of these individual kinds of seats on the bus are they all specific to your team or is it this kind of shifting team framework that we kind of see in some of these deals where it s like okay Hey I m going to work with Vasu on this And then the next time you might see that same person working with somebody else on another deal or is it Hey this is all your guys s in-house team 00 09 50 Vasu Kakarlapudi M D No I m teamed up with one group We are Co-GPs So our entity is called Apta Properties and Apta Properties is teamed with 37 parallel properties out of Richmond Virginia They ve established shop that s been friends and business partners of mine for many many years And you know combined we ve done over 800 million worth of acquisitions that s been successful in the 08 07 crisis the European debt crisis COVID pandemic So we ve got a very seasoned established team that has you know we follow very very very conservative I know it s used a lot but conservative underwriting that has stood various economic cycles and still been profitable 00 10 26 Sam Wilson Yeah If you if you ve made it through 08 you know with your shirt s still on and you know you look you said you mentioned a few other calamities that that we ve endured If you ve made it through those cycles and you came out still smelling good then yeah you ve seen some things You ve seen some things I guess on that front you know there s a question that I m commonly asking right now what are you guys doing right now to prepare yourself for whatever it is that could be coming next Correction a downturn a bull market whatever it is you guys see What are you doing to prepare for the future 00 10 56 Vasu Kakarlapudi M D So I think it really comes down to studying demographics So we re trained as surgeons to be very very scientific and you d practice you know evidence-based medicine is a buzzword that s used a lot And so in the real estate world it s really studying demographic trends because demographic trends are long-term trends as you know Sam And so we know kind of you know where people are moving in the next 25-30 years You know what age group What their household income might look like What their psychographic preferences might look like And so we can study you know on large scale metropolitan statistical areas that are poised for growth And we break that down to submarkets And so on you know before you even actually look at a deal we spend a lot of time as demographers kind of looking at where we want to go before we actually look at the deal because we certainly don t want to get observation bias into a deal and fall in love with the deal in a bad submarket and a bad MSA 00 11 46 Vasu Kakarlapudi M D And then get caught with our pants down So it starts with that And then you know we dive down deeper into the submarket the asset-specific location And then in terms of underwriting you know we re relatively very low leverage So I think one of the things that a lot of people are doing right now is they re banking on you know 10 15 20 rent growth and they re baking that into their underwriting and and we re not They re over-levering themselves The interest rates are low And so you know you re going to 80 80 loan to value And they re they re getting some supplementals on top of that We re in the sixties in the high fifties or sixties 00 12 19 Vasu Kakarlapudi M D So that does sacrifice our yield a little bit but we want to be the players that are going to be as Ken McElroy says when the tide recedes you ll get to see who s naked And we want to have our shorts on when the tide recedes so our underwriting our assumptions our conservative leverage and picking the right market So I think if you had to pick three things those are the three things that we really try to excel at 00 12 38 Sam Wilson Yeah I love I love that I love the idea of of deleveraging I mean leverage is a beautiful thing but it cuts both ways I mean it really does And that s something that yeah it s exciting when I hear people saying things such as Hey you know what 00 12 53 Sam Wilson We re going to take some risk off the table We re taking we re pulling back leverage and your yield is going to take a hit because of it Sorry but it s just what we re doing And this is this is the way we see the path moving forward How do you guys do it But the key question here is how do you guys deleverage and yet still remain competitive on the buy-side 00 13 11 Vasu Kakarlapudi M D Yeah So I think a lot of that becomes you know who s the biggest player who s the biggest investor in a deal It s the lender And so we have very good relationships with lenders that were able to get money for debt for exceedingly low rates almost an obscene rates With inflation the way it is I almost feel guilty getting you know 60 loan to value on the on the kind of rates that we re getting We re buying rate caps to insulate ourselves as well So it all comes down to the team So you know the lenders our shop as being very very low risk And so they re pricing their lending equivalent to the risk profile And so we re able to you know pay that forward to our investor group of which I should add though that every investment that we raise capital for I m the largest investor in there 00 13 53 Vasu Kakarlapudi M D Their dollars are invested with my dollars and are my partners dollars And our dollars are treated no differently So we ve got so much skin in the game beyond just our reputation We have financial skin in the game as well So to answer your question how are you able to get still get yield is a lot of it s based upon your reputation 00 14 10 Vasu Kakarlapudi M D And we re you know acquiring assets in the you know 50 to 80 million range So there s a little bit less competition in that space and lending is better And the risk is lower because you ve got better economies of scale You get the you know the high quality property managers And so we are still able to get you know reasonable yield and still get overall double-digit returns even if rent gross stabilizes to historical norms 00 14 35 Vasu Kakarlapudi M D And if they continue with the way they ve been done right now we ll we ll do better but we re still gonna make money even if we have a major recession 00 14 42 Sam Wilson The key there that you just to reiterate it is that you re able to get far more favorable terms from your lender just because they say oh wait you re only putting 60 LTV on this 00 14 52 Sam Wilson You know we re going to give you a great great term sheet on this because it s a risk a very risk not risk-free but a risk reduced play for them 00 15 00 Vasu Kakarlapudi M D Yeah You see a lot of bridge debt now with CapEx and so forth and we don t even we raise all the CapEx on the front end 00 15 06 Vasu Kakarlapudi M D So you know I mentioned our loan to value is 60 Our loan to cost is in the fifties because you know yes we re sacrificing yield but our our primary goal is capital preservation If you follow the science the greatest athletes in the world are not the ones who played the best but the ones who made the least amount of mistakes 00 15 23 Vasu Kakarlapudi M D Yeah So you know we want to make the least amount of mistakes 00 15 25 Sam Wilson That I like that I hadn t I hadn t heard that before but that s a that s certainly true I play I play a sport every Monday night with a group of guys and the only thing that always run through my head is all I got to do is not screw up 00 15 36 Sam Wilson Right And then let the other guys make the mistakes and we will win by default So that s funny certainly that you say That what s it been like What s been the journey like for you in bringing other doctors and other high-income earners along for the journey that have been kind of rewarding in the sense that it s like you just see the light bulb come on for them 00 15 54 Vasu Kakarlapudi M D I can t tell you how rewarding it s been So you know everything I ve done I beta tested on myself before I brought this out to the rest of the world and my friends and family So as I found financial freedom you know I have devoted more time to my family I ve devoted more time to my interest 00 16 11 Vasu Kakarlapudi M D I ve devoted more time to charity I get to do the things that I want to do because of the power that real estate the fruits of real estate And so I feel like I m a much better physician now than I ever was before because I m not playing the volume game I m not under any pressure cause I don t need the paycheck from my day job as a doctor I found that I m much more empathetic and caring to patients which as you know as a as a patient yourself that s as important as the science I always have the science but now I m learning some of the softer sides of how to really connect with patients 00 16 40 Vasu Kakarlapudi M D And so that s the power that real estate has done for me I ve been able to spend time with family More time with my kids I ve got we ve got a 13-year-old and a 10-year-old And right now they still like mom and dad and want to take advantage of that as much as we can and have been able to you know support the charitable causes of you know everyone s got their own charitable cause And for us it s underprivileged kids that don t get a fair shake in life And so we ve been able to use a lot of the real estate earnings and practice earnings to divert that into causes that we d like to So the long story Real estate allows you to be better at everything else you want to do in life 00 17 13 Vasu Kakarlapudi M D And especially for surgeons there s a lot of negativity right now in medicine about a lot of negative secular trends in medicine with you know declining reimbursements increased expenses and corporatization of medicine suits getting in medicine and et cetera et cetera And if you don t need your medicine income because you ve got passive income to cover your monthly expenses all of those things become less painful for you You become a better clinician better surgeon and better doctor at which I think is better for the community You as a patient you know would probably want your doctor who wants to work on you because of their passion for their craft as opposed to having to pay their kids private school tuition you know 00 17 51 Sam Wilson You re exactly right You re exactly right And I hadn t hadn t quite ever thought about that But no you re right If I had to pick I d pick the physician that s in your shoes not not the guy that that has to hustle hustle it out you know getting patients through as fast as he can in order to in order to meet his his income requirements So that s absolutely fascinating Vasu I have really enjoyed our conversation today Thanks for taking the time to break down your business The things that you ve learned along the way what real estate has done for you and of course how you were helping other physicians really learn and follow in your footsteps 00 18 19 Sam Wilson I think it s absolutely cool And also love certainly the way that you have chosen to give back I think that s absolutely fantastic If our listeners want to get in touch with you or learn more about you and what you do what is the best way to do that 00 18 30 Vasu Kakarlapudi M D Yeah it s been my pleasure Sam Our entities called Apta properties We re on the web and my LinkedIn profile is just Vasu Kakarlapudi M D on LinkedIn 00 18 38 Sam Wilson Awesome And we ll be sure to put those links in the show notes Vasu thank you again I certainly appreciate it 00 18 43 Vasu Kakarlapudi M D Thank you Sam Click here to visit this podcast episode