Invest internationally. We’re incredibly domestically focused because we’ve lived during times of American dominance and growth. If you look at history, nations take turns growing and stagnating, and so diversifying across international markets is the only way to ensure you’re hedged against global growth dynamics.
As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Shri Ganeshram.
Shri is a serial entrepreneur who previously founded FlightCar and Eaze, and was named to Forbes’ 30 under 30 in 2019. He founded Awning as a tech platform and a brokerage that uses machine learning and data analytics to identify the best single family rental properties on the market for investors, with estimations of their financial returns.
Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?
As the CEO and founder of Awning, I work closely at the intersection of real estate and technology, however I spent many years of my career running my own micro-venture fund, Fresh VC, where I invested in nearly 20 startups. I really got into the real estate industry over the last 5 years, during which I connected with my business partner and learned how archaic real estate investing is. We wanted to develop a solution that lowered the barrier-to-entry for those looking to invest in real estate or provide a simpler, more straight-forward solution for serial investors, which is how Awning originated.
Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take-away you took out of that story?
When I founded FlightCar with my co-founders, we spent a good 6 months after building the product trying to raise capital to launch. We were persistent and probably denied by 300 VCs, without a single one offering us capital. We had basically no money — I was crashing on friends’ couches on Stanford’s campus and spending as little as possible on food. I lost about 40 pounds in 3 months. Finally, we applied to Y Combinator and were miraculously accepted. We asked Paul Graham why they accepted us into the prestigious startup accelerator, he said that it was because “we were like cockroaches,” comparing us to the Airbnb founders who were similarly insanely persistent in moving their business forward with little traction from the venture industry. By the end of the 3 month accelerator program, we had raised a seed round and a series A round, raising over 6M dollars in capital, which was a ton for a company at our stage at that time. There were quite a few lessons embedded in the story. The first was that hard work & persistence do eventually pay off. The second was that the impressions you make with investors, partners in the industry, employees, etc are lasting and we were successful in our raise as in those first conversations we said things they didn’t believe we could do, teeing us up for success in our second conversations when we actually achieved those things. The third lesson was that growth cures all woes — launching the business and showing progress seriously changed the dynamics of our conversations with investors.
Are you working on any exciting new projects now? How do you think that will help people?
At Awning we feel like we have built a really great platform to help individuals through the entire process of investing remotely in a Single Family rental home, but one of the biggest challenges we’ve found with remote real estate investing is helping people get comfortable with markets they’ve never explored or been to. That being said, one of the areas of focus for us over the next quarter is how we can use technology, storytelling and content to help people better understand the communities they are investing in. We want to help investors build perspective around the places we recommend.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
I wouldn’t be where I am today without the help of my parents. Their love and support my whole life has been so strong that they were able to indoctrinate in me as a child the belief that I can do anything I put my mind to. Even today, if I’m having a tough day, I can give my mom or dad a call and they’ll pick me up with kind words, anticipating my success in whatever I pursue. They’ll say something along the lines of “never give up, you’re meant to do great things” or “just keep trying and fortune will turn your way.” Albeit cliche, these words are powerful because they’re representative of the genuine support, love, and belief they have in me, giving me a renewed sense of confidence during my most challenging moments.
Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?
It’s difficult to console anyone who has lost a family member during these tragic times. It’s unfortunate that life is unfair and this pandemic was brought upon us, so, for those experiencing loss, I think the best remedy is time to process and support & care from their friends and families, which is difficult to receive during an isolating pandemic. Make sure to make time for your loved ones. I think this anxiety is also causing a larger rift in our politics and people in the United States. It’s easy to alienate one another during heated moments, like today, but we’ve always done our best as a country when we stand together. Working through these times as a country means maintaining respect for one another and finding common ground in the challenges we’re all facing to work on mutually agreeable solutions.
Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing 500 dollars every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?
Dollar cost averaging into the market is a great idea. Right now, it is amazing how many people in our country are taking control of their own financial future and investing on behalf of themselves. With that, however, there is a scary side, which is that a lot of these technologies and apps have made it really easy for a novice to sway from the buy and hold investment strategy. Once you start trading on a regular basis, you can get into a position where you don’t end up actually reaping the benefits of investing and experience more losses.
That being said, I’m a lot more bullish about the real-estate market in today’s environment than I am about the stock market. When you look at the stock market and its fundamentals, the price-to-earnings ratio is at an all time high and, as a result, the investing community’s consensus is that the market might be over-valued. It’s impossible to predict whether there will be a correction or if there will be a smoothing out, or a long period without much growth. While we’ve seen a lot of home-price appreciation, if you look back at previous housing bubbles the price of housing was a lot less affordable — meaning the amount of house you could get vs. the amount of income you had vs. the interest rates in the country made the real housing cost (their mortgage payments) to the person much more expensive than it is now.
Additionally, we are going through this one time evolution where single family homes are becoming an investment grade asset class. If you think historically, for the entirety of most of modern human existence there have always been people who invest in real estate, but we haven’t seen the markets invest in single family homes and rental properties. Stemming from the 2008 recession, there was a big buying opportunity that garnered institutional attention for single family real estate investing, and as a result of that, homes are fundamentally being valued in a different way — it’s no longer just what you can pay for a home based on what you can afford, but homes are also being valued on what kind of returns they can generate.
If you look at real estate vs other asset classes in terms of stability and risk and returns, the return to risk ratio is very high. There is a lot of opportunity there, so I suspect prices will continue to increase in the medium term.
Lastly, you have the largest population of families entering the real estate market, the millennial generation. When you couple that with the fact that we are actually in a Single Family home shortage, there are not enough homes for families to rent right now, meaning there is likely going to be massive appreciation in both rent prices and asset values.
Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?
It’s times like these that test the integrity of individual investors’ investment philosophies. I’d recommend anyone to continue to hold, diversify, and dollar cost average, whether the market continues to flourish or falls. Ramping investments or stopping investments are the two ways you can most easily suffer losses during a tumultuous market. With fears of inflation or a rocky market, if you’re not already diversified outside of equities, you should certainly consider rebalancing into real estate and other hard assets so that you’re more protected in a downturn or have a better chance of seeing the upside of a rebound.
Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?
I leave it to professional Wall Street investors to chase volatility and uncertainty. Stick with dollar cost averaging and diversification, and you’re bound to do well on a long time horizon. That being said, Single Family real estate is incredibly interesting due to its stability during these times as an asset class and its fundamentals, with the demand for single family rental homes outpacing supply over the next decade.
Are there alternative investments that you think more people should look more deeply at?
Single Family rental homes!
If a person in their thirties and forties came to you today and said that they have 10,000 dollars that they want to put away today for a long term investment what would you advise them to do with it?
I would tell them to invest in something stable, such as a Vanguard retirement fund, where they are going to be well-diversified and see growth over time. It’s hard for people to look at the 10,000 dollars they have today and see a retirement from there. Everyone starts somewhere and through developing really good habits early-on with your finances and investing responsibly you will eventually get there. That 10,000 dollars can grow to 20,000 dollars pretty quickly, add it on top of whatever else you have saved, and soon enough you might have a down-payment for a Single Family rental property or be able to branch out into other higher-returning assets of that nature.
Ok, thank you! Here is a more general finance question. You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing what would you say? Can you please give a story or an example for each?
- Invest internationally. We’re incredibly domestically focused because we’ve lived during times of American dominance and growth. If you look at history, nations take turns growing and stagnating, and so diversifying across international markets is the only way to ensure you’re hedged against global growth dynamics.
- Don’t invest in individual stocks. It’s hard to balance your portfolio against macro-economic trends, like over valuation or under valuation of certain industries or markets (i.e small cap vs large cap). Investing in broad-based indices is the best way to prevent your exposure to overvalued markets. For example, Michael Burry (the guy who called the CDO crisis in 2008) thinks there’s overvaluation in large cap stocks and undervaluation in small cap stocks — the best strategy is investing in the index so you’re diversified from the risk, whether Burry is very right or very wrong.
- Buy hard assets. We grow up learning about the merits of investing in the stock market, but diversification from equities is important too. Buy real estate, buy commodities, and buy equities — you’ll be in a much better position to weather a storm in any economic environment.
- Use debt to your advantage. In real estate, returns are generated at significant multiples through leverage. If you have an investment that cash-flows with a mortgage, you should be able to weather economic downturns if you’re suitably diversified as rents historically rise, even over short periods of time. Using mortgages is the best way to make money as a real estate investor.
- Invest in yourself. Prioritize learning early on in your career over a salary. Yes, it’s a great idea to invest as much as you can early on, and having a bigger salary helps with that. But the best way to protect yourself during an economic recession is to work hard to absorb as much knowledge as possible during your youth so that you’re incredibly valuable in the workforce in any economic environment.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
This is not necessarily a quote, but a principle that an advisor once shared with me: the 80/20 principle. The principle is that 80% of the value comes with 20% of the work.
I think what has been amazing with keeping this principal top-of-mind is that when you feel paralized with respect to what to prioritize and what to do, it can guide you to clarity. Thinking about your effort from the perspective of how you can achieve at least 80% of what you set out for with 20% of the effort enables you to do a lot more with your time and produce more value in your pursuits. Working at startups, I’ve learned that there are seemingly an infinite number of things to do and that the only way to progress the business and keep things moving forward is to focus on what matters.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂
I’d love to see our education system do a better job of teaching financial literacy. The world would be in a better place if everyone could start their adulthood with a general knowledge base of how loans and interest work, saving vs. investing, and budgeting.
Thank you for the interview. We wish you only continued success!