How Real Estate Wealth Is Built: The Operator’s Mindset Behind Successful Investing

Host: How do you compare that market and this market? Do you see any similarities, or anything different now?

Ali: What do they say? History doesn’t repeat itself, but it often rhymes. That’s what we’re seeing right now. We’re seeing another war crisis. We’re seeing stagflation. You see inflation, and dare I say you might see hyperinflation before this is over, which is causing interest rates to go through the roof, and you see limited growth in our GDP. That’s essentially stagflation, and we’re in the thick of it. I have a feeling a downturn in the economy is around the corner. I think most of us are feeling that way. That’s good news in some ways. It’s not great as a consumer, because I don’t want to pay $17 for a latte, but as an investor I’m excited, because that’s when you really can stand aside from the herd. For those listening, you should be ready.

Host: Everyone loves talking about finding the next great real estate deal. But what if the deal isn’t where most of the wealth is actually created? Buying an asset is one thing. Operating it well, creating sustainable cash flow, protecting the downside and knowing when to scale is where the real work begins. And sometimes the best opportunities aren’t in the markets everyone is chasing. They are hiding in places most investors aren’t even looking. Today we are going behind the numbers to understand how experienced operators actually build lasting wealth in real estate. Joining me today is my good friend Ali. Ali is the founder and managing director of Rise 360 Ventures. He brings more than four decades of real estate experience, with an estimated 2,400 units acquired across 20 full-cycle projects. His investment philosophy is centered on cash flow, disciplined operations and finding opportunities beyond the markets attracting the most attention. Ali, welcome to the Wealth Vibe Show.

Ali: Thank you so much. It’s so nice to be back with you and be here on this podcast.

Host: Our topic is the operator’s playbook: how real wealth is built in real estate. Investors spend an enormous amount of time trying to find the right deal. After more than four decades in this business, where have you found real estate wealth is actually created? At acquisition, through financing, during operations or at exit?

Ali: The short answer would be at the tail end. The true wealth you’ll see is at the end of the life cycle of a deal. However, you don’t get to the end without everything being done, especially up front before even acquiring. I came up with a term recently, “overwriting,” which I don’t think is a proper English word. What I mean is the mistakes you could make in underwriting. Everyone understands underwriting, but if you’re not underwriting properly, meaning have you really taken into consideration all of the conditions on the ground, the value at play, the environmental, the due diligence about the property itself, then if you have overwritten in your underwriting process, that will impact the whole deal like a domino effect. It has to be underwritten and bought right, so to speak. To me, 90% of the wealth creation is buying it. That also includes selecting the right value-add strategy and using the right playbook. Are you following somebody else’s playbook? Are you doing what everybody else is doing because you think that’s the playbook? Or are you looking at the deal individually and understanding which value-add strategies to use in that particular case? Every deal has its own DNA as far as I’m concerned. That’s all up front. Then it’s a matter of execution. First the underwriting, then identifying the right value-add strategies, then executing, and only then can you get to that tail-end stage.

Host: So there are multiple moving parts, and everything has to fit together to make it a success. Which part of that wealth creation process do investors consistently underestimate?

Ali: What a great question. I think they’re all misunderstood, but if I had to choose one, it’s the operator and the actual execution. You’re going to come up with a set of numbers one way or another, and hopefully they’re correct. But those months and years of actually operating and executing are not everyone’s cup of tea. There are always surprises in the deal and in the journey, and being able to stay on course and execute is probably the most difficult part.

Host: Can you share a good or bad deal experience that fundamentally changed the way you evaluate every deal that comes your way?

Ali: Let me share a positive one first. This applies to many of the deals we did. In my asset class, manufactured housing communities, we typically use infill as a strategy, meaning we buy homes and place them in our communities, all under a separate dealer arm as part of being vertically integrated. We buy homes wholesale and sell them retail. We do that to accelerate, and I hate to use the word manipulate, but I’m going to use it, the process of going from, say, a half-full community to 100% full. We control the whole process: buying the homes, transporting them, setting them up, making them available and making sure relatively easy financing is available for the home buyer. We go from 50% or 60% occupancy when we’re buying, and hence buying at 50% or 60% of the value. If it’s worth $10 million and only 50% occupied, I’m probably going to buy it around $5 million, just for simple math. Managing that journey to 95% or 100% occupancy and getting to that $10 million value as quickly as possible is the strategy.

Ali: We’ve done that in many deals, but let me talk about one we did in Orosi, California. To your point earlier, it’s a small town nobody would think of. It’s not a hot market. Not only did we apply the strategy, we bought it under a lease with an option to purchase. I didn’t have to pay updated property tax values, and the seller didn’t have to incur the capital gains consequences he was trying to avoid. It was like a triple net lease: I paid the property taxes and the insurance and operated the whole community, on a 10-year lease with a fixed price up front. So I was executing that value-add strategy without technically owning the property, increasing the income and therefore the asset value. Before the option expired 10 years later, we exercised the option to purchase. When we wrote the deal, it looked like an extremely high, overpriced number, and the seller was really happy with it. Ten years later it paled in comparison to the market value at that time. It was a drop in the bucket. So that’s not only the value-add strategy but also a creative way to structure a deal, and it’s one of many we did in small towns up and down the state.

Ali: On the negative side, the biggest challenge I’ve faced, and that most people in our asset class would face, is underground utilities. Oftentimes in these mobile home parks and manufactured housing communities, the property owns the well, the septic tanks, the leach lines and so on. If it’s an older community built in the ’50s or ’60s, you really need to do your homework. Don’t be frugal about getting the inspections done and making sure those things check out. We generally avoid these parks, because I’ve been through a couple of bloodbaths where not understanding the underground utilities became super expensive. In fact, we have one situation now where, even though it’s city water and city sewer, the connections and pipelines in an older park have some issues, and it’s going to be an expense. That comes with the territory.

Ali: As a tangent, for the audience who might say, “Ali, 23 deals and 2,400 units is not a lot compared to all these large assets-under-management numbers we hear about”: hats off to those groups. I’m looking at a different criteria. For the deals we’re talking about, 23 deals and 2,400 units, this wasn’t conventional capital raising through syndications, funds or private equity. It was our own equity as a family and some debt. And it started with a modest down payment on a first deal. Humble beginnings. We didn’t come in with a lot of wealth. We used the 1031 exchange to keep rolling and trading upward. Having 2,400 units in California at anywhere from $75,000 to $150,000 per pad versus having 10,000 or 50,000 units in Alabama at $5,000 a pad through syndication or funds is apples and oranges. I gave you a long-winded answer and got off on a tangent.

Host: That’s really good. What did these experiences, the good deal, the bad deal, starting with your own money and now moving to syndication, teach you that a spreadsheet won’t?

Ali: It’s a whole different mindset when you start. This is where I think we’re set apart at Rise 360 Ventures from a lot of other funds. When you start as an operator and it’s your time, entirely your investment and your risk, you’re really learning how to operate. We did that heads-down and focused for 45 years before we opened it up to anybody else to join us in passive investment. Now the family office is retired, and Rise 360 is opening it up to passive investors. That’s the difference: having the mindset of an operator versus the mindset of a sponsor or fund that’s now trying to operate. I come from the reverse mentality, and we treat every deal the way I did before.

Host: Let’s go back to the very beginning of your journey. How did you get into manufactured homes, and what made you think you’d be successful in this field?

Ali: I wish I could take all the credit. We’re both Indian and share our culture. We’ve been in commercial real estate for at least eight generations that I can trace back, to the bartering days in Gujarat, India. The people from Gujarat are generally known as merchants.

Host: Very entrepreneurial.

Ali: Yes. It’s in my DNA and in my blood. We have at least eight generations I’ve been able to document, and I’m second generation in this asset class of manufactured housing in this country, by choice. What other asset class within CRE gives you all the upside, the appreciation, the cash flow, the tax benefits, the cost seg, but without the typical landlord headaches? You don’t own the toilets. You don’t deal with the termites. It’s not your home, so you don’t have all the painting, electrical and plumbing issues you manage in multifamily or any other asset class where you own the physical improvements. We knew early on we’d rather do that, even at the risk of a lower rate of return, which in fact it hasn’t been. It’s been a higher rate of return.

Ali: It’s interesting that today we’re dealing with an Iran crisis overseas that’s impacting inflation, and we have stagflation again like we did in the late ’70s. The reason we got into this asset class was the original Iran crisis in the late ’70s, when we had stagflation and mortgage rates went to 18% to 20%. I think 20.5% was the height. I don’t think people can imagine that today, when we think of 6% or 7% as high rates. Inflation was through the roof. You could only get gas every other day of the week, standing in long lines. My father had a portfolio of about 120 single-family homes in Orange County, California, and they came crashing down like a house of cards. Everything collapsed because people couldn’t borrow, couldn’t sell, couldn’t leverage, couldn’t rent. We just weren’t getting cash flow. My father was able to salvage enough to put a down payment on an RV park, a KOA campground in the Central Valley. I was 12 years old at the time.

Ali: Much like the Patel story people know with motels, it was the same concept. We bought a property that provided shelter, employment for the whole family, and stability and a source of income. We realized quickly that an RV park has seasonality issues. It was great in the summertime but pretty lean in the winter, and we needed to eat in the winter too. Long story short, we expanded the park and put in what are now called tiny homes and ADUs. Back in ’81, when this wasn’t such a thing, we started buying trailers and putting them on lots, and we doubled the size of the community. We had long-term residents staying in that RV park over the 10 years. That 10-year experience is where I paid my dues and really learned the business, first-hand, operating.

Host: So you lost everything around 1979 and 1980. You mentioned the war during that time. How do you compare that market and this market? Do you see any similarities or differences?

Ali: History doesn’t repeat itself, but it often rhymes. That’s what we’re seeing right now: another war crisis and stagflation. You see inflation, and dare I say you might see hyperinflation before this is over, which is causing interest rates to go through the roof, and you see limited growth in our GDP. That’s essentially stagflation, and we’re in the thick of it. I have a feeling a downturn in the economy is around the corner, and I think most of us are feeling that way. That’s good news in some ways. It’s not great as a consumer, because I don’t want to pay $17 for a latte, but as an investor I’m excited, because that’s when you can stand aside from the herd. For those listening, you should be ready, just like we were back then. That’s the correlation: in these downturn economies, are you ready to act, acquire and take the risk?

Host: I agree this market is good for investors, and sitting on the sidelines, you’re going to miss the opportunity. But business plans that worked in the past might not work now. What should syndicators and operators be doing differently so they can hold a property for the next five to seven years and make it a success, not another failure?

Ali: I’m so glad you brought that up. I could go deep into this for hours, but I’ll try to be brief. It comes back to whether you’re following somebody else’s playbook. I believe we were one of the pioneers of the playbook being used across the country, which was set in the ’80s and ’90s. We were part of that era. You may not be able to execute exactly the same playbook today. Infill is still a solid strategy, but what other value-add plays can you do, and do they all have to be tangible? You’ve got CapEx renovations and infill, but what about intangible value-add strategies? Can you appeal property taxes? Can you arbitrage financing? For example, can you buy with seller financing at 3%, then exit by providing new wraparound financing at 7% or 8% on a shorter term? You’ve got a 30-year amortization schedule and you sold it on a 15-year amortization schedule with a 4% delta in the interest rate. Can that arbitrage be your strategy? Think outside the box.

Ali: We have a situation where we’re trying to leverage a rent control ordinance in favor of the landlord, believe it or not. There is at least one city we’ve identified where there’s one little phrase in a long rent control ordinance that’s otherwise all favored toward the tenant. It says an owner should be able to enjoy a cap rate of 8% on their investment. That one phrase was leveraged successfully by another community owner. These are examples of intangible strategies not to overlook. And while the traditional mobile home park and manufactured housing community is still a great place to look for deals, I wouldn’t rule out RV parks with permanent or long-term living in mind. I wouldn’t rule out marinas, or other adjacent asset classes where you can execute the same business model.

Host: A question on scaling. What has to change when someone moves from doing individual deals to building an actual investing business that delivers profitable deals for investors, versus positioning themselves on scale alone, representing themselves by how many properties they have in the asset class?

Ali: That’s a great question. If you fall into the trap of assets under management as your target, and of needing or wanting acquisition fees and other up-front fees, you get away from what needs to be done. As a syndicator or fund, you still need to do what I was doing under the family office: operating as a real operator and acquiring deals the same way. As a side note, I’ve had assets under management of over a couple of billion dollars, where I did valuations for the Kingdom of Saudi Arabia. So I understand assets under management and managing a portfolio like that. But that doesn’t translate to real wealth for your investors as much as focusing on acquiring solid deals with value-add plays and accumulating wealth. To clarify, even though I’ve touched probably thousands, if not tens of thousands, of pads and have owned over 2,400, I don’t own all of them today, because part of the strategy has been to acquire distressed properties, stabilize them and often exit. I want to be clear and transparent about that. It’s not about the count.

Ali: What I care about is generating wealth for investors and for myself. It’s not about the unit count.

Host: Well said. You said something really important: real wealth. What is real wealth?

Ali: Now you’re getting to something that is sacred to me. Actual liquidity or capital is a small component of real wealth, if at all, and I’ve heard you talk about this very wisely as well. I said I’m the eighth generation in this real estate business. That doesn’t mean I have eight generations of capital, because I don’t. You have unforeseen circumstances that can take your liquidity, including wars, partitions, migrations, great recessions and things like what happened in the late ’70s. All of these caused us to lose our wealth over the generations. The reason I’m wealthy today is not liquidity that was handed down. It’s the transfer of knowledge: the principles of business, how to do business, the business models and strategies to employ. It’s the ambition and tenacity passed on generation to generation, and the family values and morals of thinking generationally for your own family and for the extended family of investors. Those are the things I think are real wealth.

Host: I agree 100%. Family offices really need all of that to survive, because we see wealth that lasts one or two generations and then it’s gone. You had a family office too. Tell us about that.

Ali: Look at the Rockefeller model versus the Vanderbilt model. One was incredibly successful and still is to this day, and the other failed miserably. I’d like to think my family office has followed more of the Rockefeller model. Our goal is to create an organization within the family that carries on beyond generations. It may look different for every family, but that’s our goal. My kids are now 16, 18 and 20, so I’m looking forward to the ninth generation carrying this on.

Host: Congratulations. Early in the conversation you said a few times that you’ve got to have the mindset. How did you build such a strong mindset despite all the ups and downs, and still stand firm in your values and belief system?

Ali: My standing strong in front of you pales in comparison to the mentor I’ve had all my life, and that’s my father. I’m so blessed to have a man who was one in a billion, a serial entrepreneur. He heard of gold bars stored in bunkers, ancestral lands and bazaars we had in India, but he grew up in poverty. I’ve never shared this before, but he would be picked on because he only had one school uniform, which had to be washed every day. He didn’t have proper shoes, so at times he would wear a bandage on his big toe just to justify why he was coming in sandals. He studied by the lamp post to get light. Even as a young man in India, he was reading Dale Carnegie. He had the values and principles the Dale Carnegie Institute teaches ingrained in his mindset early: a positive approach, being genuine and authentic, and learning how to interact with people. He built that into his model and bestowed it on us as kids. To this day he’s my mentor. If you’re seeing any level of passion, enthusiasm or persistence, it’s from him.

Host: I agree. I’ve been through the same with my grandparents and parents. The tenacity and resilience that generation had filters through the generations. One golden question before our rapid-fire round: if you had to rebuild your real estate wealth today from zero, but keep everything you’ve learned over the last 45 years, what would you do differently, and what would you refuse to do again?

Ali: What I would do differently is go more with my gut, my instincts, my intuition, as opposed to letting outside influences impact my decisions. This might sound arrogant, but in hindsight I did fewer transactions and didn’t scale as much because of the noise I was hearing. If I had followed my intuition more, I think I’d be even more successful. What was the second part?

Host: What would you refuse to do again?

Ali: That’s interesting. You’ve made me stumble. I think the answer lies in refusing to stay small. We as a family chose to do fewer deals and do them ourselves, so we weren’t risking anybody else’s investments along the way. But ultimately it’s almost a disservice to other people and to residents when you’re not applying your skills and resources. So the one thing I wouldn’t do again is limit myself. The answer is to be open to working with others and providing this opportunity to more people, whether residents, investors or operators.

Host: That brings us to the rapid-fire round. Five questions, one word or one sentence only. Are you ready?

Ali: I think so. Let’s go.

Host: What book has influenced the way you think about business, investing or life?

Ali: How to Win Friends and Influence People, by Dale Carnegie.

Host: I love that book too. What is one daily habit that has helped you stay consistent over the years?

Ali: Me time. I’m a cigar enthusiast, so I spend time enjoying a cigar, relaxing and evaluating everything.

Host: If you could give your younger self one piece of advice about building wealth, what would it be?

Ali: Follow your gut and your instinct. Use reasoning, and don’t be emotionally based, but do not ignore your instincts.

Host: I think I know the answer to the next one, but I’ll ask anyway. What is one thing outside of real estate that brings you the most joy?

Ali: If I have to reduce everything down to one word, I’m going with love, in every sense. It transcends to generational thinking, to sharing with the community, to how you view yourself and your partner. When I was a kid, my father held weekly family meetings every Friday night over modest ice cream. It was our time to tell him what he or my mother was doing wrong and what they were doing right. One week he asked us what we wanted to do when we grew up. Everybody said doctor, engineer, lawyer, businessman. I think I was last, and my answer was, “I want to love and be loved.” I was 12 or 13. If you asked me that question today, that’s the answer I would give you. That’s the most important thing.

Host: One last question. What is your wealth vibe?

Ali: The vibe is love. I don’t mean to be redundant, but loving yourself and loving others is the core of it all. It may sound corny and overused, but I’m 57 years old, and looking back, I’m still a victim of consumerism like most of us. I want the latest gadgets or the car sometimes. But at the end of the day I’m caring less and less about material things. The happiness comes from this vibe of love, so I’m going to stick with that.

Host: Thank you so much, Ali. I loved the conversation today. Buying real estate isn’t the whole strategy. One perfect strategy won’t make you a wealth builder. You need discipline, your values, to listen to your inner self, the right mindset and the right mentors to walk this path. If somebody wants to connect with you further, how can they do that?

Ali: The best way to learn more about the asset class and connect with me is our website, rise360ventures.com. There’s a complimentary guide there of roughly 80 pages with information about the asset class. Rise360Ventures is also our handle on social media, so you can find us on LinkedIn, YouTube, Facebook and everywhere else.

Host: Thank you once again, Ali, for sharing your experience and perspective and joining me on the Wealth Vibe Show. Everybody listening, stay inspired, stay intentional and keep building your wealth vibes.