CrowdStreet’s Brent Hieggelke is joined by Vinodh Rajagopalan, a CrowdStreet investor, to discuss why he moved from residential to commercial real estate investing, how COVID-19 has shifted his investing strategy, and what kinds of investments he’s keeping an eye on.
Brent Hieggelke, Chief Marketing Officer
CrowdStreet
CrowdStreet
Brent is a high-growth tech marketing executive focused on start-up and early category innovators and disrupters. He is a seasoned evangelist, and public speaker across a wide-range of topics.
He is a former CMO of several leading SaaS companies such as Urban Airship (mobile), Brandlive (video), Webtrends (data and analytics) and Touch Clarity (AI, machine learning), which sold to Omniture. In 2009, Brent co-founded a real estate start-up, Second Porch, which built the first sharing vacation rental site and ultimately exited to HomeAway, now Expedia. Brent has keynoted and led panels at global events like SXSW, Mobile World Congress, Cannes Lions, Advertising Week, Adtech, and hundreds of other conferences. Brent has been featured or quoted in The Wall Street Journal, Forbes, Advertising Age, and hundreds of other publications.
Brent holds a BA in Economics with honors from the University of Chicago.
00:00:04 Hello. Welcome back to another segment of StreetBeats our effort to keep our entire community connected, uh, in these times. And I'm Brent Hieggelke, chief Marketing officer of CrowdStreet, and very excited to welcome one of our investors, Vinodh Rajagopalan, welcome. Thank you for taking time. And, uh, I'd love to just hear kind of your story about how you first discovered CrowdStreet and what your experience has been like so far.
00:00:32 Thanks, Brent. Uh, uh, thanks for having me here today. Uh, my name is Ben and, uh, I'm a software engineer by profession. Uh, I live in the Bay Area with my wife and a five-year-old daughter. Um, uh, all of my background has been on the tech side. Uh, I have a lot of interest in finance and, uh, I love investing in different asset classes. Uh, I've been with CrowdStreet for close to three years now, and, uh, I started my, uh, um, journey in the real estate about six years back. Uh, I started, uh, buying single family rental homes in the Midwest, and after I bought my third property, I kind of realized, uh, it's not something I could scale up in the long run and kinda build my overall portfolio. Uh, that's when I stumbled upon CrowdStreet. And, uh, to be honest, I was surprised to start with, um, initially I was always under the impression that, um, uh, commercial real estate space is, uh, meant for big players dealing in millions of dollars. Um, but, uh, Cal State completely changed that perception, uh, of mine, um, giving us access, uh, investors like me access to, uh, uh, assets that are, uh, in the range of like 25 k to 50 K range. And, uh, since then, uh, I've, uh, invested across multiple different platforms in commercial real estate space, and I have like about, uh, 30 deals, um, done so far in the last three
00:01:51 Years. Oh, that's fantastic. That's great. Are you, uh, you know, obviously in the midst of kind of all the, um, uh, uncertain uncertainty we're living in right now, are you continuing to evaluate the new deals we're launching? What's your perspective on, uh, on investing today?
00:02:10 Yes, I am definitely, uh, uh, actively looking at the new offerings in the CrowdStreet. And I should say I'm pretty impressed with the deal flow, uh, compared to the other platforms I'm investing in. The deal flow has been steady. In fact, it's much higher compared to the other platforms. Uh, in terms of the assets I'm looking at, I'm primarily doing two kinds of, uh, investments or looking at two kinds of investments. Uh, one is mostly on the, uh, asset classes that are mostly decision proof, uh, things like mobile, home park, self storage, and, uh, even medical homes. Um, I'm, um, my, uh, uh, theory is that, uh, these are gonna be more, uh, stable constrain if there is a prolonged downtown in the near future. Uh, at the same time, uh, there are other asset classes that are kinda beaten down, uh, due to the pandemic, especially, uh, the hotel sector and the retail.
00:02:59 And there are quite a few distressed opportunities in the, in those areas. And I'm seeing that the valuations are coming at a discount of about 10 to 20 percents in a lot of those asset classes. Uh, so I'm also, uh, actively looking at, uh, those asset classes trying to, um, get in now as a saying goes by when there's blood in the market, this is probably the right time to get into those deals. Eventually, I'm, and I'm pretty, uh, confident we'll be outta this pandemic in another couple years, and these asset classes should, uh, kinda perform really well, uh, constrain we get in at a this evaluation right now.
00:03:33 That's great. So it sounds like you're really evaluating most the asset classes, really.
00:03:38 Yeah.
00:03:39 Yeah. Being opportunistic, obviously, of course, in some of those segments.
00:03:44 Yeah. Yeah, definitely. Yeah, I mean that's, uh, that's, uh, something I would say kind of shifted this year compared to the last couple years. I was mostly investing in value add deals in the last couple years, uh, primarily because the valuations were at the peak and there wasn't a lot of discounts available. Um, but things have changed quite a bit, especially in the, in certain sectors, uh, with the pandemic coming in and I'm seeing there's a lot of opportunistic op, um, uh, deals that that'll do well in the next few years.
00:04:11 That's great. How about different markets? You mentioned that you had invested or initially in Midwest single-family homes. How are you thinking about the different geographies in markets?
00:04:21 Yeah, I think, uh, in terms of markets, this pandemic has kind of accelerated a few things. I would say, uh, things like a lot of, uh, migration shift that's starting to happen now, primarily because of a lot of, uh, uh, uh, companies, uh, opting into work, uh, remote. Uh, there will be a quite a bit of shift in terms of the, uh, movement from urban to the suburban areas. Uh, and I'm actively looking at those numbers as one of my metrics in terms of, uh, identifying markets, uh, in terms of the population movement. And I'm trying to see, uh, the markets where the population is moving towards. It's more about going to the place where, uh, the future is gonna be then like where, where it's currently. So I'm looking in that perspective as well.
00:05:07 Uh, that's great. So what's next? What are you gonna be watching for kind of how, as you think about, uh, you know, the next kind of phase?
00:05:15 Uh, so in terms of the next phase, uh, there are two kinds of things, or in the short run, I'm primarily, uh, there are certain, uh, uncertainties still going on, and that is still gonna create some more good distressed opportunities. And, uh, the things that I'm looking at in the short term are the, how the cares act is gonna turn out in terms of whether it's gonna be expanded more, um, whether the stimulus checks are gonna expand more, letting more people to pay their rents and mortgages on time, whether there'll be an extension of the whole balance, giving, uh, people some buffer and small businesses, some, um, breather time for them to get back on their feet. Uh, and also the unemployment numbers. Uh, how much of those are currently unemployed are gonna eventually get back into the, uh, working pool. Again, all this is gonna DataMine, uh, the short term thing.
00:06:01 Uh, but in terms of the long term thing, um, uh, I'm, I'm mostly looking at the numbers in terms of, uh, the rental payments that coming in and the multi multifamily occupancies. Uh, the occupancy rates are starting to go up in the hotel sector and even the Airbnb. Uh, and also, like I mentioned earlier, the population migration of, uh, the urban to the suburban cities due to the remote work kicking in. Uh, these are some of the numbers that I'm like primarily looking at, uh, in terms of to get into in terms of long run. Uh, also another factor I'm keen on is the interest rate itself. Uh, with it getting close to zero and the yield of treasury is being really low. Uh, if there is a potential downturn, uh, I feel like there will be a lot of moment that would go from the equity markets to the real estate space this time, unlike the treasury markets that used to be happening before, primarily because of the dividend deal, which is no longer the game changer anymore. So a lot of, uh, uh, uh, money would start flowing into real estate at that time as well. So considering all that, I feel like, uh, the commercial space is gonna get stronger in.
00:07:12 Wow. Well that's certainly impressive. Everything you're considering, uh, the data you're watching, uh, the asset classes you're evaluating, I'm, uh, very impressed with, uh, kind of how deep you're going. So, uh, thenot, it's great to meet you. I really appreciate you taking time and, um, uh, let's stay in touch and have you back on StreetBeats and hear how things are going in the future.
00:07:35 Sure. Then. Thanks for having me.
00:07:36 Okay. Take care. All right, well that concludes another StreetBeats. Uh, you can subscribe to get all the future updates sent to you in email on this page. And in the meantime, uh, thanks for paying attention, thanks for being part of our community, and we'll talk to you soon.
00:00:32 Thanks, Brent. Uh, uh, thanks for having me here today. Uh, my name is Ben and, uh, I'm a software engineer by profession. Uh, I live in the Bay Area with my wife and a five-year-old daughter. Um, uh, all of my background has been on the tech side. Uh, I have a lot of interest in finance and, uh, I love investing in different asset classes. Uh, I've been with CrowdStreet for close to three years now, and, uh, I started my, uh, um, journey in the real estate about six years back. Uh, I started, uh, buying single family rental homes in the Midwest, and after I bought my third property, I kind of realized, uh, it's not something I could scale up in the long run and kinda build my overall portfolio. Uh, that's when I stumbled upon CrowdStreet. And, uh, to be honest, I was surprised to start with, um, initially I was always under the impression that, um, uh, commercial real estate space is, uh, meant for big players dealing in millions of dollars. Um, but, uh, Cal State completely changed that perception, uh, of mine, um, giving us access, uh, investors like me access to, uh, uh, assets that are, uh, in the range of like 25 k to 50 K range. And, uh, since then, uh, I've, uh, invested across multiple different platforms in commercial real estate space, and I have like about, uh, 30 deals, um, done so far in the last three
00:01:51 Years. Oh, that's fantastic. That's great. Are you, uh, you know, obviously in the midst of kind of all the, um, uh, uncertain uncertainty we're living in right now, are you continuing to evaluate the new deals we're launching? What's your perspective on, uh, on investing today?
00:02:10 Yes, I am definitely, uh, uh, actively looking at the new offerings in the CrowdStreet. And I should say I'm pretty impressed with the deal flow, uh, compared to the other platforms I'm investing in. The deal flow has been steady. In fact, it's much higher compared to the other platforms. Uh, in terms of the assets I'm looking at, I'm primarily doing two kinds of, uh, investments or looking at two kinds of investments. Uh, one is mostly on the, uh, asset classes that are mostly decision proof, uh, things like mobile, home park, self storage, and, uh, even medical homes. Um, I'm, um, my, uh, uh, theory is that, uh, these are gonna be more, uh, stable constrain if there is a prolonged downtown in the near future. Uh, at the same time, uh, there are other asset classes that are kinda beaten down, uh, due to the pandemic, especially, uh, the hotel sector and the retail.
00:02:59 And there are quite a few distressed opportunities in the, in those areas. And I'm seeing that the valuations are coming at a discount of about 10 to 20 percents in a lot of those asset classes. Uh, so I'm also, uh, actively looking at, uh, those asset classes trying to, um, get in now as a saying goes by when there's blood in the market, this is probably the right time to get into those deals. Eventually, I'm, and I'm pretty, uh, confident we'll be outta this pandemic in another couple years, and these asset classes should, uh, kinda perform really well, uh, constrain we get in at a this evaluation right now.
00:03:33 That's great. So it sounds like you're really evaluating most the asset classes, really.
00:03:38 Yeah.
00:03:39 Yeah. Being opportunistic, obviously, of course, in some of those segments.
00:03:44 Yeah. Yeah, definitely. Yeah, I mean that's, uh, that's, uh, something I would say kind of shifted this year compared to the last couple years. I was mostly investing in value add deals in the last couple years, uh, primarily because the valuations were at the peak and there wasn't a lot of discounts available. Um, but things have changed quite a bit, especially in the, in certain sectors, uh, with the pandemic coming in and I'm seeing there's a lot of opportunistic op, um, uh, deals that that'll do well in the next few years.
00:04:11 That's great. How about different markets? You mentioned that you had invested or initially in Midwest single-family homes. How are you thinking about the different geographies in markets?
00:04:21 Yeah, I think, uh, in terms of markets, this pandemic has kind of accelerated a few things. I would say, uh, things like a lot of, uh, migration shift that's starting to happen now, primarily because of a lot of, uh, uh, uh, companies, uh, opting into work, uh, remote. Uh, there will be a quite a bit of shift in terms of the, uh, movement from urban to the suburban areas. Uh, and I'm actively looking at those numbers as one of my metrics in terms of, uh, identifying markets, uh, in terms of the population movement. And I'm trying to see, uh, the markets where the population is moving towards. It's more about going to the place where, uh, the future is gonna be then like where, where it's currently. So I'm looking in that perspective as well.
00:05:07 Uh, that's great. So what's next? What are you gonna be watching for kind of how, as you think about, uh, you know, the next kind of phase?
00:05:15 Uh, so in terms of the next phase, uh, there are two kinds of things, or in the short run, I'm primarily, uh, there are certain, uh, uncertainties still going on, and that is still gonna create some more good distressed opportunities. And, uh, the things that I'm looking at in the short term are the, how the cares act is gonna turn out in terms of whether it's gonna be expanded more, um, whether the stimulus checks are gonna expand more, letting more people to pay their rents and mortgages on time, whether there'll be an extension of the whole balance, giving, uh, people some buffer and small businesses, some, um, breather time for them to get back on their feet. Uh, and also the unemployment numbers. Uh, how much of those are currently unemployed are gonna eventually get back into the, uh, working pool. Again, all this is gonna DataMine, uh, the short term thing.
00:06:01 Uh, but in terms of the long term thing, um, uh, I'm, I'm mostly looking at the numbers in terms of, uh, the rental payments that coming in and the multi multifamily occupancies. Uh, the occupancy rates are starting to go up in the hotel sector and even the Airbnb. Uh, and also, like I mentioned earlier, the population migration of, uh, the urban to the suburban cities due to the remote work kicking in. Uh, these are some of the numbers that I'm like primarily looking at, uh, in terms of to get into in terms of long run. Uh, also another factor I'm keen on is the interest rate itself. Uh, with it getting close to zero and the yield of treasury is being really low. Uh, if there is a potential downturn, uh, I feel like there will be a lot of moment that would go from the equity markets to the real estate space this time, unlike the treasury markets that used to be happening before, primarily because of the dividend deal, which is no longer the game changer anymore. So a lot of, uh, uh, uh, money would start flowing into real estate at that time as well. So considering all that, I feel like, uh, the commercial space is gonna get stronger in.
00:07:12 Wow. Well that's certainly impressive. Everything you're considering, uh, the data you're watching, uh, the asset classes you're evaluating, I'm, uh, very impressed with, uh, kind of how deep you're going. So, uh, thenot, it's great to meet you. I really appreciate you taking time and, um, uh, let's stay in touch and have you back on StreetBeats and hear how things are going in the future.
00:07:35 Sure. Then. Thanks for having me.
00:07:36 Okay. Take care. All right, well that concludes another StreetBeats. Uh, you can subscribe to get all the future updates sent to you in email on this page. And in the meantime, uh, thanks for paying attention, thanks for being part of our community, and we'll talk to you soon.