Self-made Mogul And His Tips With The Gift Of Failure

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In today s episode of How To Scale Commercial Real Estate Podcasts we are joined by Ari Rastegar Ari is the founder and CEO of Rastegar Commercial an Austin-based real estate investment and management company discusses how his company has succeeded in investing and exiting in 38 cities across 12 states by leveraging deep value and high return investment strategies Rastegar also discusses how their health and wellness focus has helped them to create a profitable venture Ari s advice is that when it comes to scaling your business you should scale yourself Highlights 00 00 – 06 10 Rastegar Real Estate Ventures Adds In-House Architecture and Civil Engineering Ari Rastegar a self-made mogul and commercial observer founded Rastegar in 2000 with a 3 000 loan and has since invested and exited in 38 cities across 12 states In 2013 Google chose Austin as their beta city to lay a billion dollars of hardware to bring Google fiber to the city which was indicative of the city s potential Rastegar is currently developing a property in Austin with in-house architecture and civil engineering capabilities 06 10 – 11 51 Austin s Top Real Estate Investor Says Vertical Multi-Family is the Most Accretive Asset Class Right Now The key to success in the real estate market is being able to pivot and adjust quickly when opportunities arise The real estate market is always difficult but when you focus on creating value for your investors it makes the process easier Mortgages are often bundled and sold as bonds so it is important to stay up to date on the bond market in order to make the most profitable investments 11 51 – 17 37 How to Scale Your Business Fail Forward The market for multifamily housing is softening and this is causing people to make bad investment decisions To make informed decisions you need to look at the market on a city-by-city basis as well as the micro corridors within each city One way to scale your business is to scale yourself This means that you should focus on growing your team and expanding your operations Failure is part of the process 17 39 – 19 21 Closing Segment Reach out to Ari See links below Final words Resources Mentioned The Gift of Failure Turn My Missteps Into Your Epic Success Tweetable Quote When you add in any of these health components it needs to be a value add to the end user tenant not just being done for show or trying to check an ESG box And when you do something that s actually creating value for the end user tenant whether through health and wellness through the architectural design the interior designs et cetera it tends to be absorbed in the market much more quickly than trying to force it down their throat – Ari Rastegar —————————————————————————– Connect with Ari Rastegar through LinkedIn Instagram Twitter or visit Rastegar Property Facebook rastegarproperty com The Gift of Failure Podcasts 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 Ari Rastegar So when you look at the overall averages of the United States and you look at these things they re being bastardized by the numbers out of Los Angeles San Francisco New York city Chicago and it skews the average to a place that you can t make appropriate investment decisions within pocket economies 00 00 16 Ari Rastegar So you need to underwrite deals Not only on a city by city basis by almost by a block by block basis 00 00 24 00 00 36 Sam Wilson Ari Rastagar has been dubbed the Oracle of Austin by Forbes enlisted as one of the commercial observers 100 most powerful people in real 00 00 42 Sam Wilson estate The self-made mogul built an empire boasting hundreds of millions in assets across 38 cities Ari Welcome to 00 00 49 Ari Rastegar the show Hey thanks for having me The 00 00 51 Sam Wilson pleasure is mine All right There are three questions I ask every guest who comes on the show in 90 seconds or last can you tell me where did you start 00 00 57 Sam Wilson Where are you now And how did you get 00 00 59 Ari Rastegar there Sure 90 seconds will be tough but I started the firm with a 3 000 loan when I was back in law school And kind of after two community colleges and delivering pizzas and flipping burgers through high school was kind of a run moved to New York city spent several years on wall street and then came back to my hometown in Austin to really launch the firm 00 01 21 Ari Rastegar And as you mentioned we ve now successfully invested and exited in 38 cities 12 states and seven different asset classes 00 01 29 Sam Wilson That is a lot of momentum to build from a 3 000 loan What year was 00 01 34 Ari Rastegar That you graduated That was 2000 That was 2005 And I was running that initial firm for a couple years and then 2008 happened and that that came to a screeching halt 00 01 45 Ari Rastegar Luckily I got my Got my 3 000 back and my scholarship money And I spent a few years on wall street working for some of the greatest minds in the world And started this brand Rastagar about seven years ago 00 01 57 Sam Wilson When did you know you were onto something that s there s a lot of moving pieces there but at what point did you say man I ve got a viable business plan and I m going along 00 02 06 Sam Wilson Whatever that was when was that 00 02 08 Ari Rastegar Well the impetus for Austin which is obviously a big part of our business or the Austin MSA I should say was in 2013 when Google chose Austin as their beta city to lay a billion dollars of hardware to bring Google fiber to the city And when the 00 02 27 Ari Rastegar Ability of financial service companies technology 00 02 30 companies to utilize Austin became viable It became became pretty indicative that the city was gonna do something special and the city s gorgeous right It s we have more public parks than any top 10 city in the United States 00 02 43 Ari Rastegar City s built on lakes the hill country full of trees And I guess the the cheeky way of saying it is It s really easy to get to Texas from Austin It only takes about 15 20 minutes 00 02 55 Sam Wilson That s awesome That s awesome So you saw these improvements happening in the city You saw Google fiber coming to town and you said Hey we re gonna go long in Austin but yet you re in 38 cities 00 03 06 Ari Rastegar Yeah And so when we were starting the firm it was really important from a risk mitigation standpoint to not try to do too many things at once In-house meaning it was only probably year four of the company till we started doing our own in-house property management 00 03 21 Ari Rastegar Our in-house own in-house acquisitions equity stacks debt financing So before we started as in a co-investment structure of working some of the best operators of the country and investing alongside them in LP structures originating debt but really piggybacking alongside their acquisition methodologies their ability to execute 00 03 41 Ari Rastegar And so we were able to cast a very wide net early on to be able to show show the market that we had fuel flow The market we could create alpha in several different asset classes we ve always been agnostic to the to the asset class We re very much deep value and IRR driven 00 03 59 Ari Rastegar And once we were able to execute it made sense for us then to start bringing more of it more of the methodologies in house and that s what we ve done And so today we have a 24 000 square foot office building under construction at the hard corner of east eight and I 35 which is dead heart in the middle of the the most robust part of Austin which will end up being our global headquarters 00 04 22 Ari Rastegar As well so it s pretty cool because we have in-house architecture competencies in-house civil engineering competencies that we actually acquired the land In-house we were able to go through the zoning practices We designed the building and brought on Corgan one of the best architecture firms in the world to be our architect of record 00 04 42 Ari Rastegar And now we are developing the property ourselves So it s a really exciting time to kind of go soup to nuts and be able to be responsive to the environment cuz it s very much a post COVID structure having staircases on the outside Windows that O that open and close and a variety of health mechanisms on the 00 05 00 inside were even 00 05 01 Ari Rastegar Conceptualizing using a a product that has these specialty lighting that replace LEDs that actually enhance cognitive function and helps your brain stay in line with circadian rhythms and just bringing wellness health and wellness to the forefront through the practice of real 00 05 19 Sam Wilson That s really cool And I think that s that s something that s lacking in the marketplace is bringing that health and wellness We agree tell me about that How did you how I mean obviously you see the need but then monetizing that need in making it a profitable venture is can be two separate things 00 05 37 Sam Wilson How have you found a viable business plan Both of 00 05 40 Ari Rastegar those Sure I mean it s look you gotta sharpen your pencils No question But for us it s about staying in line with the core values of the firm and anybody that knows me knows I m a health fanatic to say to stay the least And so these things are very much are a an extension of what we believe is a firm 00 05 58 Ari Rastegar building in these different methodologies whether it s touchless entry whether it s specialty HEPA filters and L E D lighting won t affect the budget as dramatically as some of these other changes will So I think the key is not trying to do everything all at once 00 06 15 Ari Rastegar It s trying to kind of pick a little bit of a corner that stays in line with that core value and letting that grow organically So in this particular instance putting staircases on the outside of a two-story building wasn t a dramatic change to what the overall Find out a budget was but for prospective tenants that would want to be a part of this building being in this post COVID environment it s a huge value add 00 06 38 Ari Rastegar So the key is when you add in any of these health components it needs to be a value add to the end user tenant not just being done For for show or trying to check an ESG box And when you do something that s actually creating value for the end user tenant whether through health and wellness through the architectural design the interior designs et cetera it tends to be absorbed in the market much more quickly than trying to force it down their throat 00 07 03 Sam Wilson Absolutely No I love that One of the things you said here a few minutes ago was that you ve been asset class agnostic Is that still the case today 00 07 11 Ari Rastegar It is so we our predominant focus we ve been in self storage student housing office industrial retail you name it And when the time was right back in 2016 17 we exited a lot of our retail positions that exited a lot of our self storage positions 00 07 30 before the market changed So we still have a very good taste in our mouth about those asset classes in the past but that s clearly not gonna be the bulk of where we re focused now Nora s office quite frankly if this wasn t going to be our headquarters and wasn t a smaller 00 07 44 Ari Rastegar Smaller footprint type strategy It wouldn t be in line with what we believed the location is second to none in Austin it s a boutique building And so we had a lot of risk mitigation strategies in place And because of that the demand has been has been off the charts Our core focus is around multi-family acquisition namely value add 00 08 03 Ari Rastegar vintage multifamily 1960s 1970s product that we can go in and renovate and bring to a Class A interior and charge charge outsized rents from what the product was originally along with industrial development We have six 600 000 square feet of industrial that we re build building on 50 acres close to the Austin airport and just a hop skip and a jump from Tesla s Gigafactory 00 08 29 Ari Rastegar So if you look at cities that are growing namely in the Sunbelt whether you take the Austins the Dallas Nashville Tennessee Phoenix Raleigh North Carolina Tampa Orlando Florida a any of these any of cities that share a similar ethos to Austin they re gonna need apartments because the people coming are transient 00 08 48 Ari Rastegar And so when you come in transient for a new job you re not necessarily looking to buy a house day one you wanna get your feet wet understand what schools you want to be in If you have a family So the need for apartments is is dramatic One two is supply chain logistics industrial 00 09 04 Ari Rastegar So those are the main things that we re really focused on in addition to building industrial and building multifamily So that s our core focus for this foreseeable future within the Sunbelt geography But I m never I m never scared of a good deal I joke with people all the time that I m always a buyer and always the seller 00 09 21 Ari Rastegar You might not like my price as a buyer or a seller but I m always a buyer and I m always a seller I m happy to pay 20 million for the Plaza hotel That s worth probably a billion No one s gonna sell it to me but I would buy it 00 09 33 Sam Wilson I love that I love that Was it hard when you had fast 00 09 38 Ari Rastegar What s that 00 09 38 Ari Rastegar Yes If it was if you re asking if anything was hard the answer is yes You can end the question 00 09 43 Sam Wilson into the question Yes It s all hard That s a fact and 00 09 46 Ari Rastegar that s it s all hard and expect it to be hard Don t expect it to be easy if you do your there it is folks there it is straight from the horse s mouth question for you is this you built these verticals you built self 00 10 00 storage you built whatever else you were invested in office and X Y Z 00 10 03 Sam Wilson Was it hard pairing those off or slowing those operations down saying Hey look we re no longer buying self storage We re no longer 00 10 11 Ari Rastegar Nah no it s not it s No it you look at the end of the day this is all about your investors and all about creating value for your clients And it s also about following the debt mechanism 00 10 23 Ari Rastegar as we kind of joke you have to when the bond gods speak you need to listen And at the end of the day all mortgages or the vast majority of mortgages are then bundled and so sold off as bonds So watching the bond market very closely and understanding what the bond gods are wanting as for for offerings really show you where in the market there is going to be financing opportunity because real estate really doesn t work without accreta financing 00 10 51 Ari Rastegar There s other businesses that have better margins Have lower risk mitigation strategies If you re not using financing if you re not getting quote levered returns when you watch these asset classes start to get hot That s when I pull back a little bit we were buying self storage 00 11 04 Ari Rastegar When people gave me this kind of sideways look of you re buying a shed hold on You re what is that But That s the least sexy thing ever And My response was always that the financial statements is the sexiest thing I ve ever seen so it s really about just being responsive and not getting too emotionally attached to your own strategy your own thing 00 11 23 Ari Rastegar And remember that you re here to create value for your investors And when you have that at the core at the front of mind it s easy to pivot to pivot into other places where there s deep opportunity 00 11 33 Sam Wilson Absolutely What are the bond gods telling you Right now 00 11 36 Ari Rastegar The bond gods are telling me right now that multifamily is probably the most accretive asset class at the moment 00 11 44 Ari Rastegar Fannie Mae and Freddie Mac are as robust they ve ever been The interest rates obviously are starting to go up to counteract inflation A lot of people that s staring the shit out of for us we see as a huge buying opportunity Cause a lot of our competition is sitting on the benches and I ve always looked at it like of a hundred basis points and financing is ruining my deal 00 12 04 Ari Rastegar I have no business doing that deal Yeah 00 12 08 Sam Wilson that s absolutely right and I ve heard that from a lot of people who come on the show this is a daily show and I ve heard this more and more people say there s a softening in the multi-family market Whereas previously there may have been 20 offers on a property 00 12 20 Ari Rastegar look at it this way Look at it this way So when you talk about the market the macro outlook of the United States is not indicative of pocket economies 00 12 30 so when you look at the overall averages of the United States and you look at these things they re being bastardized by the numbers out of Los Angeles San Francisco New York city Chicago and it skews the average to a place that you can t make appropriate investment decisions within pocket economies 00 12 46 Ari Rastegar So you need to underwrite deals Not only on a city by city basis by almost by a block by block basis So you need to not only zoom in to that city but then zoom in on the micro corridors and underwrite risk within the micro corridor So if you look at Austin as an example we re a hundred thousand units short of apartments a hundred thousand 00 13 06 Ari Rastegar Think about that number They say oh multifamily softening not in Austin Texas Right So so you need to look at the market that you are investing in and make educated decisions Based upon those in particular things And I don t wanna say ignore the macro outlook It s always should be under consideration and understanding it but to make investment decisions about Austin based upon what s going on in New York is just idiocy 00 13 30 Sam Wilson Yeah absolutely What are you guys doing about that A hundred thousand units short there building more Tell me about that 00 13 39 Ari Rastegar So we have on a master plan development in Kyle Texas we own 318 acres and we re building a substantial amount of houses build for rent and which is another one of the strategies that we re very keen on for the foreseeable future 00 13 53 Ari Rastegar And then we have about 1400 multi-units that will be developing within that corridor over the next five years In addition to multifamily development project on south Congress which is the most famous street in Austin in addition to continu continuing to make acquisitions rezoning some existing properties existing multi that we have now for more height and more density 00 14 14 Ari Rastegar And just creating opportunities that will be able to house these transient individuals coming into Austin That s 00 14 21 Sam Wilson awesome That s a lot of moving pieces there How have you maintained or gained traction one of the things that you said early on was you guys have been in a lot of different asset classes 00 14 32 Sam Wilson How did you gain traction with a wider 00 14 34 Ari Rastegar focus Yeah again it s look I ve been involved in pretty much every asset class in all parts of the capital stack my entire career and because of that developing very deep relationships from New York on down with the brokerage community with the financing community with the investment community and just listening 00 14 54 Ari Rastegar Really listening to where people want to be where people are comfortable with and really sharpening 00 15 00 our pencils on where value is creates scalability Cause at the end of the day if you can solve a problem for a public pension fund solve a problem for your investors or be in a place with your banks that fit within the box of them to be able to finance you have to be sensitive to all these different positions 00 15 16 Ari Rastegar And once you re sensitive To those positions and you have the outlook of creating value for your clients more so than yourself opportunities present themselves That s 00 15 27 Sam Wilson That s absolutely fantastic I love that Tell me about a time when you got something wrong or you made a mistake 00 15 34 Ari Rastegar I wrote a whole book about it 00 15 36 Ari Rastegar So the gift of failure my book will tell you more than you ever wanted to know Every chapter covers a cataclysmic failure that that I endured in a lesson that was extrapolated from that failure And so I literally spent the better part of 18 months deep diving into those issues 00 15 54 Ari Rastegar And I assure you There was more failures than I d care to admit but now that it s in writing it s there for the world to Do you 00 16 01 Sam Wilson feel like do you feel like is failure just part of the process and 00 16 06 Ari Rastegar It s a great question it s a great question It s something that we talk about on our podcast that that came out last week with some of the greatest minds spiritual leaders celebrities this that exact question 00 16 17 Ari Rastegar And I ve come to think in my mind success and failure kind of two sides to the same coin and to bifurcate them and call them different or put a negative connotation on failure and a positive connotation on success is just inaccurate when you re one or two years old learning to walk you stand up you fall down you stand up you fall down you stand up you fall down and your parents don t say oh my God Billy and Jane will never walk ever again 00 16 40 Ari Rastegar you just keep going through that process And you quote as John Maxwell says you fail forward and so I ve come to realize that failure itself doesn t denote success It s the introspection into failure extrapolating a lesson by putting the onus on yourself and not putting the blame into external factors 00 17 01 Ari Rastegar Using that lesson to then progress is what leads to success 00 17 07 Sam Wilson That s absolutely awesome That s absolutely awesome Tell me I guess when it comes to scaling what s one piece of advice you would give to somebody maybe earlier in their career What s one piece of advice maybe to go back and give yourself earlier on 00 17 19 Sam Wilson If you could and say Hey here s a way to move further 00 17 22 Ari Rastegar faster I ll give you a different answer the best way to scale in your business is to scale 00 17 30 yourself And so your business is a limitation of you It s almost like you re you re the trunk and your business is the branches 00 17 37 Ari Rastegar So in order to scale the business you need to invest in yourself You need to find All the points where you are standing in the way of your own success whether that s the extra 20 pounds you need to lose whether that s kicking some habit of smoking or drinking too much whether that s learning to meditate whether whatever that whatever your issues are and whether we like to admit it at all we all know what the maladies that we suffer from 00 17 59 Ari Rastegar So what I would encourage people to do is find one of the melodies find one of the vices find one of the things that s hindering you And attack it with reckless abandoned And what will happen is that will free up the space and build self-confidence and unlock that that sleeping genius for lack of a better explanation which within your brain and the scaling of the business will be a natural iteration 00 18 22 Sam Wilson That s awesome Absolutely love it Ari thank you for taking the time to come on this show today Thanks for having me If our listeners wanna get in touch with you learn more about you your podcast your book how do they do 00 18 32 Ari Rastegar that Yeah so the podcast is called the gift of failure You can go you can go to the apple store and find it there 00 18 38 Ari Rastegar It s also on Spotify The book releases on September 27th and a simple Google search in my name I m pretty pretty easy to find unfortunately so if you wanna find us the company s RAIC our property and shouldn t be too hard for you 00 18 52 Sam Wilson Fantastic All right Thank you again for coming on the show today 00 18 54 Sam Wilson I certainly 00 18 55 Ari Rastegar appreciate it Thanks buddy Click here to visit this podcast episode