As Associate Director of EquityMultiple’s Investor Relations Team, I enjoy connecting with investors and learning about their unique stories, experiences, and strategies. Earlier this year I visited a number of investors across the Western U.S. This is an interview with Vinodh Rajagopalan, a 10-time EquityMultiple investor who lives in the San Francisco Bay Area…
- Continuing to adapt and learn is critical, both in the software testing and development industry and as an investor.
- Research is critical to passive real estate investing. EquityMultiple facilitates Vinodh’s own diligence.
- “EquityMultiple fits within my investment strategy perfectly in between the REITS and other equity positions I am participating in”
Tell us a bit about yourself… outside of work, what do you like to do? What freedoms do you make possible through investing?
Outside of work, I play a few sports – specifically cricket every weekend and volleyball occasionally. I am a huge foodie and love trying out fancy cuisines & restaurants on the weekends. The Bay Area has a phenomenal food scene that we enjoy exploring. I also enjoy spending time with my wife & daughter, and answering all her curious questions.
I also enjoy talking about finance in general and earned an MBA in Finance with a concentration in Capital Markets.
The cash flow from my investments gives a huge peace of mind financially during uncertain times like the current pandemic. The experience from my past investments has given me enough confidence that now I have started helping my friends with financial planning.
Tell us about your journey to “accredited investor”… how did your career progress such that you are now able to establish income streams through passive investments?
I came to the US about a decade back and started investing in the stock market since it was the only asset class I knew to invest in at that time. Luckily for me it was one of the best times to invest in the US stock market as the economy was recovering from the recession. As my career progressed, income grew and I started investing more in the stock market. At one point I realized, I was overexposed to the stock market and needed to find another asset class that could provide returns less correlated to the public markets. That’s when I ventured into real estate and bought a single-family home for investment 6 years back. Then, in 2017, I learnt about the “JOBS Act” which opened up alternative investments to accredited investors and started exploring online alternative investing platforms. Since then I have been an active investor through multiple platforms, including EquityMultiple.
You have had a lengthy career in software testing and development. How did you land on software engineering as a career path, and do you see any similarities between your work and how you manage your portfolio and evaluate new investment opportunities?
I landed in a software job during the final year of my college in India. One similarity I find between my career & investing is the constant need to learn and adapt to new concepts and technology. A lot of the technology I used at the start of my career has now become obsolete and I was lucky enough to get the opportunities to learn new technologies and adapt to them throughout my career. Similarly, investment opportunities have evolved quite a bit in the last decade with changing tax laws and the advent of new fintech companies like EquityMultiple which has brought hard-to-find investment opportunities closer to average investors through technology. Also, companies like EquityMultiple are doing a very good job of educating investors. In both the software field and investing, it is very important to remain adaptable and continue to learn. EquityMultiple helps me in this regard.
When did you first become interested in real estate investing, and why?
I got interested in real estate about 6 years back after reading Rich Dad Poor Dad by Robert Kiyosaki. I was so impressed with the book that I ended up creating a 15 year plan to achieve financial retirement by investing in real estate. The following are some of the main reasons why I became interested in real estate.
- My portfolio was over-exposed to the stock market and needed another asset class for diversification.
- Unlike the stock market, there are multiple avenues of profit in real estate, namely: cash flow, loan paydown, appreciation, and tax benefits.
- The tax benefits in real estate – like depreciation, cost segregation, and 1031 exchange – are huge, resulting in lowering my tax liability compared to investing only in the stock market in my experience.
- There are so many different ways to diversify in real estate like single family homes, multi-family units, commercial properties (like office, retail, etc.,) syndications, note investing, etc.
Are there any particular resources… books, podcasts, blogs… that were/are helpful in understanding real estate investing?
I like to take in investing advice from various sources….
- Books – Rich Dad Poor Dad, Long Distance Real Estate Investing, The Millionaire Real Estate Investor
- Blogs/Podcasts – Bigger Pockets blogs & podcasts helped me learn a lot about real estate investing
- Like I said EquityMultiple provides good educational resources, both through their Investor Relations Team and their Resource Center
Is tax strategy a consideration for direct investments in real estate?
Yes definitely, tax strategy is a very important aspect of real estate investing. In general, depreciation offsets income tax I would otherwise owe on a lot of the cash flow, and similarly a 1031 exchange can help defer and time my capital gains with potential tax losses on other investments. A cash-out refinance is another option to realize profit from a real estate asset without triggering a tax event.
What specific kinds of real estate do you like investing in (property types, specific markets, types of business plan, or positions in the capital stack)?
I currently buy single family homes in the midwest, REITs through platforms like Fundrise, and commercial real estate through EquityMultiple and a few other platforms. With commercial real estate I use each platform for specific positions in capital stack and property types. I use EquityMultiple for debt and preferred equity positions in office buildings, retail, car wash, condos & hospitality.
What has your experience with EquityMultiple been? What does EquityMultiple add to your portfolio and how do these investments complement your overall investing strategy?
My experience with EquityMultiple has been great so far. I have invested in 6 different alternative investing platforms so far and one area EquityMultiple has been exceptional is with customer service. Every single person I have interacted with at EquityMultiple has gone out of their way to answer my questions and concerns, and the response time has been really quick.
EquityMultiple fits within my investment strategy perfectly in between the REITS and other equity positions I am participating in. There are very few platforms currently which offer second lien/debt and preferred equity positions that provide solid target returns of 10% to 15% per annum in 1 to 3-year time frames. So EquityMultiple complements my overall investment strategy by providing the necessary diversification in terms of the capital stack.
Since you are software engineering yourself, are there any particular aspects of the EquityMultiple platform and technology that you appreciate? Anything new features you would look forward to in the future?
EquityMultiple’s platform is pretty easy to use and very intuitive for investors to find what they are looking for. I like the fact that we can get to whatever we want in a couple of clicks after logging in. I am looking forward to further improvements to the ‘My Portfolio’ page. There are so many ways to visualize performance of a portfolio and I am always eager to see the data presented in new ways.
Given the recent volatility in the public equity market, have you maintained the same investment philosophy, or have you recalibrated your allocation?
Something I have learned from the prior recession is that ‘a downturn is the best time to invest’, so I am sticking to my plan and continuing to invest with the same philosophy. If the market corrects, I would be deploying more capital in equity positions to get the potential benefit of appreciation when the market recovers.