In this Q&A blog post interview, you will learn about Vivek Arza’s thoughts on real estate market trends, potential real estate asset classes, and some tips/strategies based from his experiences. If you are planning to make your first real estate investment, this blog post will be helpful for you!
Vivek Arza is a computer engineer based out of San Fransisco Bay Area. He is a passionate real estate investor and has a keen eye for noticing market trends and predicting real estate market movements. His strengths include team building, real estate networking, market analysis, and most important of all – taking action.
On Background – As a Real Estate Investor Who Understands Real Estate Market Trends
1. Please tell us a bit about your personal story, growing up, education and professional background.
- My name is Vivek Arza and I’m a technologist and a real estate investor based in San Jose, CA.
- On the professional side, I have a masters in Electrical Engineering. I currently work at a Fortune 500 company and the journey has been great so far.
2. What made you develop interest in real estate investing? What motivated you to shift your interest/career path from engineering to real estate? Currently, as a real estate investor and entrepreneur, what do you do on a day-to-day basis?
- About 4 years ago, I started developing an interest in finance and investing. During that process, I came across this book that shifted my mindset about wealth – Rich Dad Poor Dad. That book introduced the concepts of passive income and to buy assets, not liabilities
- Fast forward a couple of years, I started networking and learning about real estate as being one of the best vehicles to build generational wealth while making passive income.
- Over the last two years, I built a portfolio of rental properties out of state focused on passive income. My strategy has been to acquire distressed properties, add value, and hold them for cash-flow.
- My current focus is to invest in commercial real estate both for income and appreciation. I look for opportunities that need value-add in growing markets that have good fundamentals.
3. Did you pursue any formal education/training to further understand real estate market trends? If so, what was it?
- I’ve been a data-driven person given the line of work I am in always let the numbers tell me the story. Last year, I had the opportunity of attending a multi-family investing bootcamp by Neal Bawa who is an expert at identifying market trends when it comes to real estate. That helped me understand trends and approach real estate with a data-driven mindset.
Real Estate Investments and Real Estate Market Trends
4. Could you give us an overview of the nature of real estate projects you are looking at currently (multifamily vs. strip mall vs. storage vs. single family etc.)? How are the current real estate market trends impacting your investment decisions?
- Multifamily is the primary focus since the demand for apartments has been steadily increasing over the last decade. There are two main reasons for this. Firstly, more people are choosing to rent than buy as a lifestyle choice. The burden of home ownership is too high for them. The second reason is affordability. With home prices increasing, they are getting beyond the reach of the average household. With the recent economic situation causing record unemployment, this trend will likely continue and eventually increase demand for apartments.
5. Generally, what are the key factors you consider when looking into real estate market trends?
- As an investor, it is critical that you make sure the area that you invest meets a few criteria. You want to invest in a place where there is increasing demand for real estate.
- Check the population growth in the area. Make sure that the area is attracting more jobs and the overall income of residents is increasing. Are major companies moving in there? Last thing you want to check is job diversity. There needs to be a good mix of companies in the area and not be a single large employer which puts the market in a vulnerable position.
- On the supply side, you want to make sure that there is not a glut of new rentals in the area which will have a downward pressure on rents.
Challenges and Milestones in Your Journey as a Real Estate Investor
6. What are some of the mistakes you made when you were still starting out as a real estate investor? If you had to redo the whole journey, what would you do differently?
- In any new journey, there will be mistakes. I prefer to call them lessons since every mistake teaches you something if you look carefully. The first mistake was spreading myself too thin. In the beginning, like most investors, I started looking for investments all over. Once you do that, you quickly get overwhelmed and lose focus. The reality is that real estate is hyper-local. You have got to understand the dynamics of your market. Once you dig deep, your efforts start to bear results.
- The second mistake is trusting all information that you hear. There is a principle in real estate – Trust, but verify. Most investors get into deals with promised returns and do not verify the numbers and the strength of a deal. Peel the onion, understand the deal, ask questions, and you will quickly begin to understand who to trust and who you want to stay away from.
7. Please share with us a few special milestones you achieved in your real estate investing journey.
- Acquired my first property in June 2018 at a foreclosure sale. Renovated and rented it out two months after that. Refinanced out most of my initial investment and it still cash-flows to this day.
- Using the same process, I invested in a portfolio of rentals in Kansas City with very little of my initial capital still present in the deals.
- Since late last year, have been focusing on scaling into multifamily investments.
8. How do you see the real estate market trends evolving over the next 5-10 years? (Types of real estate asset classes that might perform well, ability to withstand a market downturn, chances for higher cash flow and appreciation, etc.)
- Real estate valuations were starting to become frothy before the pandemic and the shutdowns that followed. The pandemic has created some shift in preference and demands for a few asset classes.
- Let’s start with the sectors which are struggling now.
- Hotels, entertainment centers, and mall retail are seeing a massive dip in demand. Recovery in these sectors will potentially take a few years depending on geography.
- What we’re also seeing is a slight migration away from large expensive cities (like NY, Los Angeles, San Francisco, Chicago) to more affordable suburbs towards the Midwest and South of the nation. Remote working has enabled you to work from anywhere these days.
- Some of the sectors I’m bullish about are Multifamily, Industrial, and Self-storage, and mobile home parks. All these are seeing increased demand due to families downsizing to save money and increased e-commerce spending.
Real Estate Market Trends in the Midst of a Global Crisis (Real Estate Market Crash & Real Estate Market Predictions)
9. Given the current real estate market trends in the midst of a global crisis, what asset classes are you currently investing in?
- Multifamily and self-storage
10. Considering the massive job cuts, and enormous losses in several business sectors, why does the stock market continue to do well?
- Since the stimulus started, a lot of money has gone into the stock market and it seems like the overall stock market is overvalued from an earnings perspective. The trillions of dollars worth of money printing has definitely contributed to it along with an insurance that the Fed will do whatever it takes to save the economy.
11. For anyone who is a logical thinker, it seems that the real estate market would undergo some sort of correction, however, we are not seeing much of a price drop in property values – why is that so?
- Real estate is broad and if you talk specifically about multifamily there has been a small impact to rent collections nationwide. Another reason prices are high are due to the interest rates being at record low levels plus more investors wanting to get into quality assets like multifamily.
12. Do you think there will be a real estate market crash? If so, in your opinion, what will determine its timing, and when will it correct?
- Given the situation that we have now, we will not see a real estate crash anywhere close to what we saw in the last recession. The fundamentals in real estate are much stronger. Some sectors will feel the pain more than others.
- Speaking of multifamily, there might be some pain in the lower rent apartments once the stimulus ends. Valuations might show some softening in the months following the stoppage of the stimulus checks. However, there are quite a bit of investors wanting to get into this strong asset class for a while now that the price drop will not be significant.
13. Favorite book that talks about real estate market trends in the US
- Some of the books that have had the biggest impact on my mindset are ‘ Rich Dad, Poor Dad’, ‘The Millionaire Next Door’, and ‘Think and Grow Rich’.
- For Real estate basics – I got started with ‘ABCs of Real Estate Investing’
14. As a real estate investor, what are your favorite resources to learn about real estate market trends?
- There is a ton of free information out there that enables us to be ahead of the curve when it comes to trends.
- City-data.com and Deptofnumbers.com for city level population and job data. Justicemap.org for neighborhood data.
15. Favorite bloggers that focus on real estate market trends in the US
- Bigger pockets is a community of real estate investors who blog about current market trends. For commercial real estate, brokerage houses like Marcus & Millichap, Berkadia, and CBRE put up regular updates for each market.
16. Favorite real estate quote
- “If you don’t find a way to make money while you sleep, you will work until you die.” –Warren Buffett
Tips for Physicians Who Are Planning to Make their Own Investment
17. Many physicians are highly considering investing their hard earned money in real estate, however, their lack of intricate knowledge with real estate topics (e.g. real estate market trends, process, etc.) holds them back. As someone who’s been in the real estate industry for quite some time now, what do you think are the key topics they should first focus on? Any tips and/or strategies you highly recommend when looking into real estate market trends?
- First of all, a big thank you to each and every one of the physicians who dedicate their lives for the sake of others. Both my parents had their careers in healthcare.
- When you’re starting out, it is important to educate yourself about what you’re going to be investing in. Take the time to understand different asset classes and who in your network can help you.
- Next think about the level to which you want to involve yourself. If you have a full-time career which you’re passionate about, then partner with someone who has the time and the skills. If you have the gift of time, then you could take a more active role.
- Regardless of which path you take, educate yourself with books, podcasts, and going to meetups which are nowadays online.
18. This is an open ended question. Please feel free to share your closing thoughts.
- Real estate investing is a journey that you’ll enjoy if you connect with like-minded people. Connect with folks and learn alongside them. It is the relationships that matter in the long term.
19. For physicians who are looking for great resources on real estate market trends – What is the best way for them to get in touch with you?
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