The Niche of Private Lending in SFR
On this episode of Next Level American Dream, Abigail and Sean are joined by Jaspreet Baveja. Jaspreet is the CEO of JGB LLC, which allowed him to have the freedom to spend time with his family and generate income on his own terms. During the episode, Jaspreet touches on his path to private lending in SFR, what his transition looked like, and how he structures his business.
- Private Lending
- Jaspreet's Career Path
How to contact Jaspreet:
Transcript available below if you would like to follow along with the episode:
money, deal, asset, real estate, american dream, people, loan, investors, capital, private lending, business, flip, liability, market, months, borrower, multifamily, investing, space, talking
Sean Thomson, Abigail Thomson, Jaspreet Baveja
Abigail Thomson 00:01
Welcome to the Next Level American Dream Podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail and Sean, will discuss how you can take your American Dream to the next level through real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish our goal of financial freedom. We hope you learn more about how to define and achieve your American Dream. Here's another episode of Next Level American Dream. Welcome to the Next Level American Dream Podcast. We have a wonderful guest for you today, but first, please make sure you have subscribed if you have not already. We also love getting your feedback through likes, comments, ratings, and reviews. Today, Sean has a conversation with Jaspreet Baveja. Jaspreet is the CEO of JGB LLC, which allowed him to have the freedom to spend his time with his family and generate income on his own terms. During the episode, Jaspreet briefly touches on his path to private lending and single family real estate, what his transition looked like, and how he structures his business. If you found any value from today's episode, then please share it with a friend and help us grow. If you want more information on our sponsor, then visit: thomsonmultifamilygroup.com to start taking your American Dream to the next level through passive investing.
Sean Thomson 01:21
Hi Jaspreet, how you doing? Welcome to the Next Level American Dream Podcast!
Jaspreet Baveja 01:25
Thanks, man! I'm doing well. How are you?
Sean Thomson 01:27
Good, good! Let's start with just telling the listeners a little bit about what your background is and where you come from, and where you're where you're landing today.
Jaspreet Baveja 01:35
All right, well, I was born and raised in India, actually. And then I've been in the U.S. for about 25 years. Now, I live in the Northern California Bay Area region, beautiful sunshine. I primarily invest out of state 100%, basically out of state, I don't really own or control anything in real estate in California. And that was something that I came to after years of working in WTO. I was working at banks before and then I worked at a healthcare company for the past eight years up until 2019. When I quit my job, I had a pension plan in place, I had full retirement benefits, health care, all that and just said, You know what, it's just not worth it. And like we talked about the American Dream, sort of get there, I just couldn't see myself attaining that by staying in that position. So now I invest in real estate through a special niche, which is private lending, specifically in the Indianapolis market around the smaller loan balances that none of these big banks want to look at. And I'm helping investors that are lenders or want to be lenders connect with investors who are already out there being active deals, whether it be flips, burgers, short term rentals, wholesaling, wholesaling, any of these real estate businesses that they're actively running. And they would love to get capital to scale their businesses and grow the number of years of doing per month or per year. And so people who've done one deal, or people who've done 3865 now, I think, deals and I'm helping them across the table. So it's just it's an amazing feeling to be able to help people that are on both sides of the coin people who are looking to deploy the capital and people who are looking for more capital to do their deals that they're already successful in and connecting the dots and making everyone was a winner at the end.
Sean Thomson 03:21
Yeah, that's good. So if you don't mind, I'm just gonna back up a little bit. And you see you you're you're born in India, and you came to this country with your family, I guess, right? Yes. And you did you you kind of went down the traditional went to school starting a W two job and you were in your job? What was it that kind of made you start to think hey, I need to carve my own path here. What was it that sort of catalyzed that for you?
Jaspreet Baveja 03:44
I had friends who were even more successful than I are in the WTO space and they were always talking about man I gotta quit this rat race I gotta get out of this thing and I put an offer in my whole life as a kid but never thought about the whole well, having assets and the difference between assets and liabilities you know, I was talking about oh man I'm going to buy this and I did I bought this $800,000 house $900,000 house in California and we're going oh my god yeah, we're you know $685,000 in debt Yay, this is awesome. And I can afford to pay that but then I said oh my god that's just look at all the debt that I have. And and can go from that, you know, Rich Dad Poor Dad of assets versus liabilities and to see how I could succeed in life. That's what changed the mindset and these guys telling you look, you got to get into investing, you got to get into getting assets under control. And so my friends just sort of pushed me towards that Indianapolis market and said look, let's help you buy a 40,000 bucks. You got $80,000 sitting in your bank doing nothing but let's just put it to work. And so that's what I did. I bought a $40,000 duplex in Indianapolis in 2017. And it was renting for $600 aside I was like oh actually no bad $40,000.04 $100 aside and rent or sorry total and rent this is this is awesome. No debt. I think that's what got my mindset shifting and That's what diverted me away from the WTO. And started focusing on business and real estate, and getting equity and getting assets under control, versus just working for someone else on their time on their demands on their schedules, and not having any control.
Sean Thomson 05:16
So you had friends that we're in that investment space, and that they could guide you through, they could guide you through the startup of getting that first property. And they were encouraging you to kind of try it. And that's what that's what opened your eyes to Hey, this is possible. And this is this is something I like doing right?
Jaspreet Baveja 05:33
Yeah, exactly. I bought my first house in the Bay Area in Northern California in 2013. We moved out of that into a much bigger home in 2016. And we rented it out. And between the time of 2016 to 2018. By the time I sold that the rent that I was getting was literally almost to the dollar, the exact amount of expenses I had, including reserves, by h back repairs, or yard maintenance, loan tipi, all that included, I was literally just breaking even for those two years that I held it for my property gained value about $150,000 in those two years that I held it. And so getting that much equity in hand, but when I sold it, and that too, because I lived in it before and sold it so it was all tax free gains. And it just blew my mind, I bought it for 700,000 and sold it for a million in 2018. Right so that that dollar amount gain of that 300,000 was just amazing to me to see the power of real estate. And so that was just around the time that I just getting into investing in 2017 at the end of 2017. So it just it all sort of, you know, came together and led me down the path of let's let's quit this job and get into real estate full time.
Sean Thomson 06:44
Yeah, let's go do you have those friends, I could show you kind of the path to get into those things. I encourage you to do those things. You weren't looking at Real Estate really other than your personal house before that where you know, exactly, yeah. And so let's let's move on one back to your into first duplex you bought you bought the duplex, and that sort of ran its course how did you kind of go from that first property as an investment property to placing the debt in for other people that are that are flipping houses.
Jaspreet Baveja 07:12
So, as I was buying properties in 2017, I was getting in touch with wholesalers, I was getting in touch with more brokers to get more deal flow to get more evaluations done. And through that process, one of the wholesalers reached out in 27 2018. and said, Hey, I would like to borrow X amount of money to go buy this deal. And I'm going to list it on the open market and sell it within three months, I'll still pay you at least this much interest no matter what. And if it goes beyond that, I'll continue to pay at this percentage. And I said all right, I mean, it's $1 amount seems high. I've never put that much money in there anything in my life. Let's talk about it. It took me about two weeks to learn the things ins and outs of at least what I needed to feel comfortable to do that one deal. And the asset was worth 300,000. And he wanted to borrow 225. And I said you know what, that just just makes perfect sense. There's enough equity to do that. I'll be safe. Let's go ahead and do it. And three months later, lo and behold and sold for 425. And he made amazing a lot of money, I made a great return. So Wow. I mean 12% return on something that I held for barely three months, and I had no liability. It just it just made sense. So I ramped up like six deals six loans within six months after that. So that's how I got started. It was just someone reaching out and said, Hey, I need money. Do you have it? Sure. Let's do it.
Sean Thomson 08:26
What is your biggest concern you have with doing that business? I understand the business a little bit. But when you're is it just working with operators that you know, like interest? Is it analyzing the deals that you're looking at? What is it that that you sort of have to overcome to be successful in placing that capital?
Jaspreet Baveja 08:44
I think for me, it's about the assets more than it is the operators. Because when I do private loans, I don't look at W twos. I don't look at tax returns, I don't look at debt to income ratios. I look at the overall person that's doing the deal to see how they handle their money. I see their credit scores, I see their credit histories, but I'm not using that number to determine if I'm leaving them alone. That's just to help me understand how do I then adjust my risk? Or how do I just want to return for that additional risk? If they have a low credit score and bad debt? Then how do I adjust my returns or my interest rates or points or fees that I charge them or the amount of money that I give them as a loan to cost to then get to make sure that I'm safe in the deal? So to me, the person is important enough to say alright, if I'm going to do the deal or not, but the asset is way more important. So I look at how much is the asset worth right now as it is, what is it going to take to get to the ARV that they're talking about what is it actually going to be in the end? And God forbid if I could take over the asset is it in a location that I'll be okay holding it. Can I flip it does the number makes sense. So I'm evaluating the deals as if I was doing the deal myself. And then based on that I can help us to capital.
Sean Thomson 09:56
You mitigate some of that risk as well by staying with the market that you want. Stand You're so you do exclusively the Indianapolis market. So that's another way for you to kind of secure your, I guess, comfort level with with with placing those loans. Right?
Jaspreet Baveja 10:10
Exactly. Because if I can have a team that I have done deals with before, whether it be the legal team, the title companies, the broker, the GC, the handyman, the short term rental operator that I have, or the property managers that I have for long term rentals, it just knowing that I have a team in place that can handle any situation that may come up with a loan going bad. It gives me the warm and fuzzy factor that I need to be able to stay comfortable and keep continue to place money. Or in that location.
Sean Thomson 10:40
Right. You know, so the other thing I, there's a limit to what you can do I mean, you're obviously going to have his certain amount of money that you have that you can place, right. So you I guess what you figured out is that you can there's there's other people, one of the things I realized in my business was there's people out there that have capital, and they're trying to deploy it. But they they don't have they don't have the time to learn it. Real Estate, they don't they don't know how to learn real estate, they just haven't, you know, or they don't they don't know where to put it. Right. They just they haven't educated themselves. They've been busy being excellent doctors or, you know, computer programmers or whatever they do. Yeah. And that's what they focus on. And they're worried about being good at that they haven't had, you know, they don't have time to go out and be an expert in real estate. Right?
Jaspreet Baveja 11:25
Exactly, and then they turn around, they just go Alright, well, here's my 401k. Here's my IRA, here's my investment fund or something and stocks and All right, let's just let's just go with whatever my advisor is telling me, based on the traditional options that we have, and the alternative assets are just not something that they're aware of, or comfortable with.
Sean Thomson 11:45
Yeah, and they and I know a ton of my investors, they they've been looking for ways to get out of those traditional investments, you know, they, the volatility in markets, make them nervous, you know, they like more security. And so what you I guess what my point is that you've been able to find a few of those people interested in placing their capital in real estate, and you've been able to help them kind of do that with your experience and with what you have going on. So they don't have to be the expert, they can just rely on you. And so you've been able to expand your business from where you were just with your capital to other people's capital and still placing more and more capital in that market. Right?
Jaspreet Baveja 12:18
Correct. Yeah, it just it allows me the ability to help people place their funds and allows me to help the investors grow their business. So just these people are coming to me and saying, look, I got 50,000 in my account, or I can borrow 50,000 from my HELOC, or I can borrow 150,000 from my HELOC, but I just don't know where I can put that money. Or I know that I can get it back and do it again, in a short term enough timeframe. And so the the ability to get loans that are, let's say, three to six months, which is the average duration of loans that I have place for whether it be a bird deal, or a quick flip, or a whole tail that might even take less than two months to get the asset under control paint clean up a little bit, put 2000 in and then listed on the market and sell it, those things allow the investors to have quick access to their capital. And as they are learning the real estate space, or they have a crypto deal that they wanted to put money in, or they weren't a backhoe, racecar driver out of their self directed IRA or they wanted to put money in a multifamily syndication, or they wanted to do their own flips. It just allows people to have quick turnaround of their capital, while still getting an amazing double digit return. And staying safe as a first position mean against a physical asset that has a net worth of something, they know that there's value in the land in the building, and they can stay secure in that deal, knowing that it's not just a paper of a company that may have a operator go bad, and now the company is worth nothing well, and they have no assets, they're gonna liquidate, and they have so many other liens in place, before you ever get paid back as an investor in an unsecured position. So they love the comfort level of knowing that, okay, if we are putting money through just read in one of these deals, if the deal goes sour, God forbid, which I will tell you of the 200 PLUS loans that I have now either place my own money in or other people's money into, not one has gone into late payment default foreclosure, none of that scenario just yet. And and that's the power of private lending, you're able to negotiate things you have direct contact with the lender, person to person, there's a network, there's a relationship there that you can leverage. And you can adjust things as needed. And so people are able to say, all right, well, let's just we put this money here and the deal goes out, God forbid the borrower is unable to pay and he vanishes. Well, you can take control of the asset. If the asset that when you then say I just read I got the foreclosure process done through your lawyer, let's get your GC team and your realtor involved. And they do the rehab and they listed and now you're let's say you're still $20,000 short, well, now you can take that and go get a judgment against the entity that that was borrowed. And if the entity doesn't have assets, you can then go get a personal guarantee which I always Make sure that every borrower puts on their deals as a personal guarantee. So now you can go after them personally garnish wages go after their personal assets depending on where they're at, and then recoup your money. So it's just there are multiple layers of security built into a private loan that are just not available and even alternate asset classes, whether it be crypto or syndications or bars and flips up your own. You just don't have that ability to go after someone else. And let the liability stay with them while still generating a double digit return on your investment.
Sean Thomson 15:33
Yeah, it's it's just risk mitigation on several layers there. It does, it does add quite a bit of safety to well, as safe as this stuff gets, right. I mean, there's all the exact risk and all of it, but so you sort of that when did that happen? Sort of organically, that you found other people that want to invest? How did that how did that transition happen? You were investing yourself? And then how did it start to transition where if someone came to you and said, Hey, I want to do this, too.
Jaspreet Baveja 15:58
I think it was more just a organic growth was me reaching out to my dad and saying, hey, perhaps I've run out of the hundreds of 1000s that I want to invest, I've still got another deal that just came to my desk, they need six grand, you got the money, it's like, Yeah, but I wouldn't want to give it to them. And then sort of helping him understand that. Alright, let's do it. And now I think my father alone is probably done 4560 deals through me, or he's placed his money through me. And then as we're doing that, then the investors that I was helping, they wanted to start expanding. So they were telling other investors, like, hey, just Reed's got some money, or you can help you get some great terms and help you expand and so they will reach out and Alright, well, now I don't have the money. Dad doesn't have the money, what do I do? So I started reaching out to friends and other family and saying, Alright, hey, look, I've got this amazing investment vehicle. Let's help you put the money. And then I got invited a few different podcasts that have a website. And that just sort of helped drive a lot of traffic to people saying, All right, we'll just be where do you talk, we've heard your story. And we'd love your track record. And we'd love the fact that you're hyper focused on this one market and you're not, you know, evaluating 17 different markets nationwide, and dealing with judicial versus non judicial states personal guarantee versus non personal guarantee states, and just, you know what you're talking about, clearly, based on your track record, let's just see if we can work together. And that's how it goes organically without and I'm not out there, you know, running ads, or doing any marketing, besides just talking about what I do and how I'm investing money. And I've been able to now create a business where I'm living my life on my terms, literally. And you know, able to travel nine countries in three months, or just do nothing. In 2020, I did not a single deal that we made through October because I chose not to. I said alright, well, I did one flip in 2020, I made enough money that I needed to for the year and I just stopped looking at. And that's a choice that I could have never had had, I've been sticking to that w two income, or done something which is just pure, you know, oh, my God, it's only just because if I if I don't do this, I'm not going to survive. So it's just finding a way to show the value in a secure deal in a secure investment. allows other people to then trust you and come in and say help us place the money. And let's see if it's really working the way you say. And people have gone from one deal to 20 deals within six months through me just because of the way this this lifecycle of the loan works. Right there. They're getting their money back in weeks, two months at a time. And they're like, Oh, my God, it worked exactly like you thought it would. Let's try it again.
Sean Thomson 18:36
Yeah, it sounds like it sounds like almost the demand side drove yourself drove your business to where it caused you to say, hey, you have these these operators in your market that you know, that you've worked with. And they're saying, Hey, we need more, we need more. So you went out and found more for those people that needed it. And it just sort of drove your business to growth. And now you have a several investors you're working with and you're placing more and more capital all the time. So is it in your business? Now? Is it more important for you? I guess it does. I don't know if this is what you thought of when you were doing these things. But is it more important to you now to sort of have a business that drives your lifestyle? Or what is it that what is it that you're hoping to do next with your business?
Jaspreet Baveja 19:17
Oh, man, I think you know, I love the one on one that exists in this private lending space, because I'm dealing with one on one of the lenders, and I'm dealing one on one with the borrowers. And that to me is the most important thing is I love being social. I love talking to people and educating them and helping them understand the business or talking to their business plan and making sure it sounds I can get them the funds that they need because I can then sell that business plan to others. And so for now, that's that's working out really well. My kids are quite young, six and eight years old, and I'm still taking them to their gymnastics and ballet and hip hop and soccer you name it. I'm there every single practice every single class and and i I think eventually I want to get to a space where I can get the scale. You know, whether it be a fund that I can help raise, whether it be syndications that I can be part of that I can help raise capital for where I can be part of that GP team in a syndication for multifamily, and say, Alright, you know what I have control that I can tell you that I can I can vouch for the team, and I know, I have control over the asset, I know what I'm talking about, based on my history, let's put some capital here, and then grow the scale so that I can take a back step and say, Alright, well I can, I can maybe get a couple of people on my team to help do the investor relations, or I can get a couple of people to help bring the deal flow, and then take a step back and have even more time for my family while still generating enough or more returns than now. So that's, that's, of course, the end goal is where you can operate a business and then get to the business, but get the business to the point where you can just step yourself out you can and get other people to manage it for you. And and be in control without having to spend the time and energy every day on keeping it going.
Sean Thomson 21:08
Yeah, for right now you're successful with the single family loans you're giving out, but you're hoping to expand into other asset classes and other I guess, equity placement types and things like that. So that's that's your growth plan of at the moment, right? Yes, exactly. Yeah. Well, so just, you're you, you're unique in that you come from India, from your you're born in India, you've been in America. And so the name of the podcast, Next Level American Dream. It sounds like you're living out the American Dream pretty clearly. So what is what is the American Dream mean to you?
Jaspreet Baveja 21:40
I think just that I think living on your own terms, determining how you want your life to be, is I think, the key than the American Dream for me. The opportunities are abundant, the way you can, whether it be a business, whether it be the job you do, whether it be the investment strategies you choose, whether it be the way you want your lifestyle to be. It's just the opportunities are abundant. And leveraging those opportunities, seeing, identifying it, figuring out a way to make sure that you can get into that and leverage that opportunity. And then making your lifestyle be exactly what you wanted it to be. That's what is I think key and the true American Dream. It doesn't have to be the white picket fence, it doesn't have to be that you have this amazing huge house, 4000 square feet and all that. It's not, I've downsized, I was in a 3000 square foot home. And now I'm living in a 1300 square foot home, and even not, I'm living in a 400 square foot studio right now the in law unit on the side of that house, while I can get the rest of the house built. And you know, it's not about size, it's about what your lifestyle is, to me, I want to travel more than I want to do anything else. And so if I can have a home that's big enough that I can live comfortably with my family, and where the mortgage is small enough in an area, a neighborhood that I love, and my kids will grow up in. But I can take six months off, and not worry about anything and go live in South America for six months or live in Europe for six months and not care. That's what is the true American Dream, to me is living the lifestyle that you choose that you want to have, and leveraging the opportunities that are available to make that happen.
Sean Thomson 23:17
So what do you think are maybe one or two things that if you were to tell somebody, hey, this is what is making me successful? Whether it be like a book or practice that you have every day or something like that? What do you think, is is something that's allowing you to be successful in achieving this American Dream?
Jaspreet Baveja 23:35
I think it's stop chasing the money, chase the opportunities, they'll give you the lifestyle that you want. And, you know, I will I don't do every single deal that comes across my desk. I have told no to investor because the deal, the business plan doesn't make sense. I could have made $2,000 Commission on that loan if I did it. But I wouldn't have felt comfortable in, you know, for my lenders who put their money there or for the borrowers because I know that the margin, don't chase the dollars, don't chase the yield. Look at how that opportunity, whether it be a business or a W2 income or job or whatever it is. See how it impacts the lifestyle that you want. Because if you can have less headaches, and spend more time doing what you love, versus just chasing the yield of the dollars, you're going to be a lot more successful because you're going to want to do more better things for you and other people that you're trying to help. And that's going to help you get your dream a lot faster.
Sean Thomson 24:34
Yeah, that's good advice. Well, how can people reach out to you if they wanted to kind of find out more about what you have going on? If they maybe wanted to invest in indie with you or something like that? How, how can people find you?
Jaspreet Baveja 24:45
Well, I think the best place is my website, jgbllc.com. There's a calendly link there. There's a few different podcasts that I've been on. And so it helps you understand where I come from what I'm doing, how I'm helping people and you can then reach out set up with Find a chat. And we'll have a communication talk, we understand what your business goals are, what your investment strategies are, and how we can help each other and grow together.
Sean Thomson 25:09
And are you looking for for new investor connections?
Jaspreet Baveja 25:12
All the time. I mean, if people have money that they want to place, I'm always the demand is still driving the business growth. It's never, it's not that I'm getting more money. And I don't know where to put it. It's always I'm having more requests from amazing qualified borrowers who have done, let's say, 30-40 deals a week, I just don't have the money to give them. And they're just hungry for money to place and get theirs scale grown.
Sean Thomson 25:36
Yeah, that's awesome. Okay. Well, I really appreciate you coming on and talking to us and start sharing that it's a unique space that you operate in. I think it's I think it's pretty interesting. And you know, most people that start in real estate, they start wholesaling, or, you know, fixing and flipping, but that's kind of the default setting for most everybody. And you found this niche, which is really interesting in a way to make money in the single family space without having to do the, you know, the fix and flip and the construction, all that stuff. It's great. So I think that's pretty interesting, where you're at in the in the real estate space. So thanks for coming on, and telling everybody kind of how it works and and how you do it, I appreciate that!
Jaspreet Baveja 26:14
Yeah, I think I'll say one more thing is that it's all about control, you are controlling the asset without having any liability. And you can direct the investment strategy a little bit with your borrower, and you can tell them, what you're looking for what you need out of the deal to make sure that you set the terms up, right, so you're controlling the asset, without having any of the liabilities. If someone trips and falls, and they sue the owner, it's not you. And if God forbid, the deal goes south, you're still the one, the first one to get paid back, even if it's not the investor. Right. So it's just, I think that that control space is amazing in this little niche. And a lot of the big banks or even hedge funds or equity funds, or, you know, fix my fixed our fund my flip comm or all these funds that are out there, they don't operate in the 30 5060 $75,000 loans that I'm doing, because they just don't see the value in it. Whereas I'm able to find ways to make money for both sides. All three sides are making money, the investor who borrowed is making money, and the lenders making money, and all of us are happy in the deals that we're doing, because it's just a quick turnover. So it's just finding a niche and making it work and make sure that you can sort of explain the value of what you're doing to other people.
Sean Thomson 27:25
Yeah, and it's critical. I think some of the things that we went over, like it's critical to know who your borrowers are you have a relationship with them. Know your market very well, like you do. You know, there's some things that you want to make sure you do, I think in your space, and I think if you cover those, it's a great business. Yeah, for sure. Well, thanks again. I really appreciate you coming on. Well, we'll have to have you back when you start to expand and talk about some of your other ventures, okay?
Jaspreet Baveja 27:48
I appreciate it, man. Thank you. It's amazing being here. Thank you!
Sean Thomson 27:51
Thanks. Talk to you soon!
Abigail Thomson 27:53
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact the team directly, or are interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamilygroup.com -- Before you go, please leave a review! Your comments help us create more episodes for you to enjoy.