264 – Zain Jaffer – Proptech VC vs Real Estate Investing

Synopsis

Zain is a former founder who had a big exit when he sold his company to Blackstone in 2019 for over $700 million.

In this episode, he’ll talk about how technology is becoming a crucial component of the real estate industry and the similarities and differences between starting up a business and investing in real estate.

Key points

How He Started

He began his career in their family office, where they worked on construction loans, short-term rentals, warehouses, multifamily apartments, and other projects.

He recently partnered up with Blue Field Capital, where he spends most of his time. Blue Field Capital, according to Zain, has billions of dollars invested in real estate, focused primarily on multifamily, with a large portion on industrial hospitality and some eldercare facilities. They’re also actively experimenting with new asset classes.

His Former Company

When apps became popular, he had the idea of pushing ads beyond traditional media like the web and television to mobile phones. It didn’t take long for his company to skyrocket because of their video advertisements. Throughout that period, his net worth was solely reliant on his business, which was risky since startups have a reputation for being unstable.

Also, during this time, he observed many people flourishing in other sectors like real estate– generating cash flow, leveraging up, and reaping all the tax advantages. Because of his curiosity, he decided to look more into various success stories, and he discovered that the real estate sector had a lot of them. When it comes to wealthy individuals, there is one thing they all have in common: they all have real estate in their portfolios. He dedicated a lot of his time studying more about the real estate market, which piqued his interest even more, prompting him to drop everything and devote his time to real estate investment.

Startup vs. Real Estate Investing

When you invest in startups, you are investing because you’re passionate; you believe in the founder. However, you don’t want to adopt that approach when it comes to real estate, where you’re expected to do a lot of due diligence, such as going through financial accounts.

On the other hand, they are comparable in the sense that both a startup and real estate investing offer services to their clients and employ people to carry out processes. They also both need active participation to grow.

Investing in Real Estate

Blue Field Capital specializes in hotel, industrial, and multifamily properties, as well as senior care deals. Currently, they are also expanding into new markets such as townhouse construction and short-term rentals.

As per Zain’s experience, the pandemic provided significant opportunities for the real estate market. Regrettably, the fantastic bargains only lasted six months to a year. Buying stable assets after this period has been very challenging. Recognizing the pattern, he believes that the market moves in cycles.

Construction Industry

At present, construction seems to be an avenue to generate higher returns. Their company is now dealing with a large number of townhouses in both secondary and tertiary markets. They’ve been to North Carolina, Montana, Idaho, and Utah, among other locations.

The PropTech VC Podcast

PropTech VC is Zain’s podcast that is centered on the application of cutting-edge technology to the real estate market. When asked about current trends, he said that today’s market feeds on information asymmetry, where there is a whole industry of middlemen. Most of the time, information advantage is being used to acquire a good deal. Technology, on the other hand, is likely to alter this by driving commissions down.

He also observed that the real estate sector is relatively old-fashioned, with many companies handling their whole real estate operations using primitive software or spreadsheets. Zain feels that the whole procedure should be automated by now. He believes that artificial intelligence (AI) will someday power the real estate industry.

In his podcast, he invites entrepreneurs and real estate professionals to offer insights into how technology is affecting their respective fields.

Zain said that he had a guest named David, the founder of Deep Sentinel. He created this camera with two-way audio that connects to a control center. They employ AI to distinguish between someone opening the door and entering the apartment and someone loitering and stealing packages. When the camera detects anything unusual, the AI alerts a call center, and the call center quickly investigates and communicates via webcam.

Final Advice

To summarize the key takeaways, Zain encourages all investors to diversify their wealth. Also, if you’re looking for startup exposure, you should realize that it’s significantly different from real estate, yet they complement one another.

More from our guest

For more information about Zain, you can visit his website at www.proptechvc.com. The website contains his podcast where you’ll learn a lot of useful information about the influence of technology on various areas of society.