Investment Sponsor Spotlight: Grocapitus and Mission10K: A Data Driven Approach to Real Estate Investing
By: Dana Udumulla
Key Points
- Neal Bawa saw the tax advantages his boss was acquiring through property ownership. He applied his own innovative twist to real estate investing by compiling data through the power of analytics.
- Realizing opportunities were on the horizon, Neal formed Grocapitus and Mission 10K. Both companies’ primary objective is to create more affordable living options for the middle class.
- After profitable returns on investment and through word of mouth, Neal’s method and ideology developed a coterie of data-driven investors.
Neal Bawa saw potential and seized it during an unlikely time. Entering the real estate realm amid the 2008 housing market crisis, Neal utilized data analytics to guide his investing decisions. This technique proved to be effective – his dozen investment properties bloomed exponentially during a time when many investors deemed this type of gain unfeasible. Living by the mantra, “the geek will inherit the earth” Neal placed his faith in statistics that had yet to be considered by typical realty enthusiasts. This trust led to the inception of two companies structured to benefit both investors and tenants/desiring homeowners.
Here's how Grocapitus and Mission10K came to fruition and how they serve the community.
The Lightbulb Moment
The journey did not begin with a traditional financial background. In 1997, Neal was working with a technology company and was astounded by the staggering state and federal taxes he owed annually. Upon discussing this matter with his boss, he was introduced to the concept of investing in real estate – particularly, apartments – and the tax benefits that can arise from this alternative asset. Neal decided to onboard real estate ventures with his company, and continued to profitably do so for the next decade.
Following, Neal embarked on solo undertakings. He took another plunge, constructing a campus. This ownership garnered such tremendous returns that he then developed six other buildings. This only added fuel to the fire – he began earning money with the goal of investing in other apartment complexes. Suddenly, the great recession emerged.
Neal refused to let this throw a spanner in the works. He employed the technological resources he was most familiar with to decipher the best angle. He began mining popular online real estate marketing companies in conjunction with the Bureau of Labor Statistics. By inputting these into statistical analytical software and contrasting the current period with the market over the last 100 years, he was able to assemble a list of the 322 metros in the United States and rank them accordingly.
Data concluded that Madera, CA would be the most profitable investment location. Thus, Neal proceeded with his investment purchases in said city. As data analytics predicted, his money was not only returned but resulted in considerable profits. Which led to his next investing question: “How do I do this on a scaled basis?”
Portfolio Growth and Increasing Recognition
Neal’s technology company was being sold. With his colossal triumphs in the real estate industry, Neal decided to pursue realty full time. He did know that he had little interest in being a landlord or owning one single-family home at a time. He began expanding his database with more information and started applying data to multi-family properties. This database expansion had traction – it wasn’t long before a large gathering of data-loving investors circled around him.
Invitations were dulled out to meetings and conferences. Property pundits were interested in this new age perspective and were eager to hear Neal speak about his discoveries. With acknowledgement and reverence in the industry, Neal became consistently backed by newfound investors and experienced ones. Through the force of data analytics, Neal moved forward in purchasing over 30 apartment complexes, the largest containing 320 units and worth over $100 million. This portfolio has existed for over ten years and continues to thrive, having accumulated slightly under a billion in revenue.
Growing with Grocapitus
Grocapitus is a syndication company focusing on real estate investments and developments. Their specialty is identifying, acquiring, and managing income-generating multifamily apartments in addition to student housing and self-storage properties. Grocapitus also executes property development and redevelopment initiatives. They aim to reduce the fiscal pain that renters and buyers carry due to lack of available residential inventory. Their portfolio consists of 25 projects, with nine of them being sold, diversified across 11 states. Furthermore, their projects currently hold a completed value of $660 million.
Aside from these offerings, Grocapitus also assists 1031 exchanges. Since they have extensive experience with remote management, they’re able to present on-site maintenance, leasing agents, and management as well as scaled insurance and scaled property tax solutions. By applying the tenant in common/LLC side by side structure, they can work with a third-party intermediary to provide options for landlords looking to evade extravagant taxes. Naturally, all Grocapitus’s achievements are made possible through their proprietary data-driven process.
An ideal Grocapitus client is generally an accredited investor. (Accredited investors either possess a certain net worth, earn a certain income, are an employee of a private fund, or hold qualified financial security licenses.) Though these investors typically are content with behaving as a passive investor, they also should be capable and willing to perform thorough due diligence. Understanding the level of risk their investment property has is crucial, as well as understanding the general risk affiliated with real estate investments.
Making it to 10,000 with Mission10K
Grocapitus’s sister company – Mission 10k – has a similar quest to its predecessor. It specifically is geared towards building 10,000 rental townhomes in Middle America. These distinctive properties are tailored for the middle-class, particularly families with total incomes under $80,000. With the help of data, Neal has found regions in secondary metros that allow for sensible construction costs and low taxes and therefore, reasonable rents for tenants. Since the cost of living will be within means, families can ultimately decide to live on site for years to come.
The number of available single-family houses are dwindling, and Neal believes the best replacement is townhomes. These give families privacy, while still providing them with preferable amenities such as garages, backyards, and centers to barbeque. While this gives families a better environment to lay their head than smaller apartments, it also presents an incredible opportunity to interested investors. Their exit strategy involves packaging ten projects and selling them at lower cap rates to mission-driven build-to-rent firms, so a substantial return is projected.
Foreseeing the Future
Having accomplished real estate rapture, Neal has taken to spreading the wealth. He teaches a popular real estate data science course, which is available for free on his website. He also offers a course on Udemy and hosts webinars regularly. Neal helps potential investors identify what drives real estate profit. He claims it to be:
- Home price growth
- Population growth
- Job growth
- Income growth
- Crime reduction
If all five of these components are met, it’s likely that the area will also have solid school systems.
“The Bible was wrong by one letter. It’s not the meek that will inherit the earth. It’s the geek.”
Neal mentions that the largest seven companies in the world all utilize data and obtain insights from said data to curate their unique paths to success. Imagine the possibilities when applied to real estate. Currently, Neal finds that real estate tends to still be undervalued because it is illiquid. Wall Street products, including the purchasing of stock can be done through mere clicks on a mouse or taps on a phone. Investing in real estate is an ordeal. It takes months to finalize a real estate investment.
Nevertheless, real estate is the largest global asset class and eventually, Neal foresees investors purchasing shares of real estate as the prominent course for investing. For now, Neal intends to continue to rebuild and renew apartments, in combination with completing Mission10K’s ambition. It seems he’s well on his way.
Ready to Take Your Retirement Savings to Real Estate?
Your Self-Directed IRA (SDIRA) can be applied towards real estate ventures including residential, commercial, industrial, raw land, or even private real estate investment trusts (REITs) and crowdfunding. Our Specialists are rigorously trained in this asset class and are passionate about self-directed education. Schedule a free Self-Directed IRA discovery call today to learn how you can leverage your retirement savings for exciting opportunities.
This content is for educational purposes only and is not an endorsement.
