And doubly suspicious because the obvious gap fillers are
* Corruption.
* Nepotism or family help.
* Some special circumstance they don't want to share because it is either critical or embarrassing.
* Very hard work.
* Corruption.
* Nepotism or family help.
* Some special circumstance they don't want to share because it is either critical or embarrassing.
* Very hard work.
“During this period, Bhargava moved back and forth between the US and India and worked a variety of middle-class office and construction jobs. Bhargava returned to the US and joined his parents' plastic injection manufacturing company, Bhar Incorporated, located in New Haven, Indiana.”
Wait…what?
Anyway he owns and does long term rental of maybe 20-30 apartments mostly in Munich (not airbnb or similar). No problem for him buying additional apartments and houses in very expensive places across Europe on spur (or recently Egypt). Also some old sports cars etc. Yet often a penny pincher when it comes to investing into relationship.
The weird part is, when asked what he was doing before becoming a rentier, 'he had some manager job', in Germany. Now I haven't lived there specifically but I know net salaries don't go that high if you work for somebody else, and taxes and social deductions are brutal. This ain't US where 10x performance can give you 10x salary if you do it right and are lucky. And he ain't a C-suite material.
He keeps claiming its all just his own effort but I just can't calculate a realistic path where even a highly capable person can get in their early 40s such vast net worth from 0 (I could grok some lucky exponential path via airbnbs but thats not what he does).
This is a very conservative investment path of ending up with maybe 2-3 apartments if you really push it hard and do all the right choices at the right time. So he is either laundering money for some mafia/gang (but certainly doesn't seem like so) or got a small help from family initially and refuses to admit that.
Nobody thought about that until I came along and just wondered about those numbers a bit.
Good luck with that at a German bank.
The mortgage is likely interest only so the landlord can make approximately £10k/year from rent from that one property. The next year they buy another, their earnings are now £120k. It now only takes them a few months to save another £50k to buy their next property, and the more properties they own the faster it is to acquire the next one. After a few years of this let's say they have 10 properties in total. They are now earning £200k, which makes the bank's decision to lend them more money an easier one, even though they have £1.5m in mortgage debt already.
If they already have 10 properties then it's not that much of a relative leap to get to 20, then 30. With 30 properties they're earning £400k a year and can finance a new property every 2 months. They do have £4.5m in mortgage debt that is not being paid off though, but they're making a bet on the value of those properties exceeding the purchase price by the time the balance of the mortgages becomes due 20 years from now. In the past that was a pretty safe bet.
The risk of doing all of this is that the property market can slow down, rates can go up, values can fall, property maintenance can become a significant cost, bad tenants can ruin a property and wipe out several years earnings and the government can change tax rules that makes all of this far less profitable (as happened in the UK quite recently). But it's absolutely not impossible.
About a decade ago I worked with a perfectly normal guy in his mid 50s who worked as an accountant in a small software company, he had 200 BTL mortgages! He just kept reinvesting the profits and buying more each month.
No German bank is going to give you 100% mortgage (in fact 110-120% for taxes/fees/additional reconstruction) when you already have 10 properties mortgaged in exactly same way. You also don't build any cash reserve like that, owning properties is always more costly than financial projections make it so.
At the end it doesn't matter, good for him (apart from everything that makes a man the man) but his vague background story as told simply ain't true, and folks were eating all that till I came along and thought about numbers for few seconds.
Purchasing any property is a many-month endeavour with solicitors/banks etc
There are specialized firms w/ private capital that are happy to fund these midsize deal flow guys and finance them. Once you get a working relationship with a few such vendors it seems rather easy to get marginal deals done others would find impossible.
I don't know if this simply doesn't exist in the UK at all - but I'd bet money that it does in some form. Since bankers and finance make their money off the points on deployed capital, especially the loan officer making commission on the deal flow, the incentives are aligned to make more loans vs. less.
I think the hardest part of getting something like this going is the first 2 to 3 properties. After that and a few years of proven ability to manage cashflow here in the US your lending options open up exponentially both in number of lenders and the creative/exotic means of financing now available.
Real estate is one of those things where if you have a certain personality that likes to gamble and don't mind operating in a shady manner you are rewarded handsomely for it until a wider economic shift happens. It's the only socially acceptable gambling anyone can do where a bank will give an average joe 5x or more leverage and we see it as totally socially acceptable. Change that to the same guy trying to operate the same strategy in the stock market and he would be laughed out of the room by the bankers he requested the loan from.
When you find banks willing to finance 90-70% of a building on an interest only loan, it doesn't take a very long time to roll that into your next building. It then snowballs as you use the cashflow from those buildings to leverage into new buildings. It works great until it doesn't. So long as rent gets paid and buildings continue to increase in value everything works out fine. Once you get the first half dozen or so buildings set up, it appears to me it's harder finding new deals than it is finding the financing for them. I did the napkin math once and after around half a dozen to a dozen properties (depending on size) you start having enough cash to roll into a similar sized building every quarter.
Pretty much all the "real estate guys" I know own absolutely nothing of their buildings other than appreciated value, as they operate on interest only loans leveraging their monthly cashflow.
tldr; Leverage is a hell of a drug.
It’s still depressing thinking about it. Because sadly in so many ways, it seems he is correct. I could replicate his business model save for the fact my morals won’t let me.
His entire business operates off the premise that if he can make good on the 5% of people that complain, that it makes the fortune he makes from the rest that dont viable. Because most people it seems are just too lazy to care about a lot of these activities, even if they do get burned.
Because the business runs purely off google adds (and he has an exceptional return rate) it doesnt matter if any of the above customers come back, its already built into his margins.
A site goes down or gets impacted by a consumer affairs complaint or whatever, he just reboots with another domain in under half a day, starts all over again. He aint tied to his brands, customers, any of it. It's all in the magic of his maniuplation of the ad market.
"In a country with this many people and the modern ads market there is literally always another sucker around the corner."
He can be literally as shitty as he wants, and as long as he manages the fallout (which he has) he prints money. I found out through working with him that there are large numbers of these individuals all following the same model, and all respectively making more than they deserve.
It's literally one of the most depressing things i've ever encountered.
You might say "He couldnt do this forever but" yeah well, twelve years and counting and he lives in the multi million dollar house and I assure you, I do not.
As for your last point, I think if you amass a certain amount of money then you can eventually just get out of that and into something more "legit", it's like buying your way out of morality. I do wonder deep deep down what these people are like in their minds when they're not riding the highs.
> As for your last point, I think if you amass a certain amount of money then you can eventually just get out of that and into something more "legit"
I queried this and I got the answer that "the business probably literally wouldnt be profitable, much more profitable this way."
> I do wonder deep deep down what these people are like in their minds when they're not riding the highs.
"Fuck em, if they are dumb enough to fall for it, they deserve it. Ill take a pensioners every last dollar if they give it to me."
I "can't fuck" like that indeed. I simple do not have even one tenth within me of what it would require to be able to live and operate like that.
I saw government organisations, Google, payment processors, paypal, all have dealt with him, and somehow the scheme just keeps on working. Probably because everybody involved is making boatloads of money and none of them actually truely give a shit.