Real Estate Investments Made Simple: Insights From Zihao Wang

Real estate investments are a powerful tool for building generational wealth. But it takes strategy, patience, and a deep understanding of the market. Derek Dombeck is joined by 21-year-old real estate leader Zihao Wang, CEO of Motiva Holdings, who shares insights about managing a multifamily real estate portfolio and expanding into diverse markets. From the importance of patient capital to balancing personal and professional aspirations, he reveals what it takes to grow a family office and create lasting real estate wealth despite the worsening housing crisis. Whether you are an aspiring investor or a seasoned pro, this episode offers valuable perspectives to elevate your entire investing approach.

—

Watch the episode here

Listen to the podcast here

Real Estate Investments Made Simple: Insights From Zihao Wang

Welcome To The Generations Of Wealth Show

Welcome to the Generations Of Wealth show. The word of the day is Patient Capital. It’s very important in this show because we are talking about how to build long-term wealth through different asset classes but for the most part, multifamily and residential. Zihao Wang is an incredible young man. He’s 21 years old, born and raised in California with parents who wanted him to have the generational mindset of wealth. Before we get to bringing him on, I want to thank you all for following the show and if you’re one of our regulars. Please, anything you can do to spread the knowledge and the Generations Of Wealth message. Help us with reviews. We appreciate it. Without any further ado, let’s bring on our guest.

‐‐‐

I am super jack I get to bring on Zihao Wang. Thank you so much for joining us. Tell the audience a little bit about yourself and let’s dive right into what you’re an expert at.

Thank you so much for having me, Derek. I run my family’s real estate division. We’re a second-generation family office based in LA. For the real estate side of the business, we do a lot of multifamily investing nationwide, primarily in Southern California but have assets across the country. We do a lot of value-added investing, as well as grown-up development. In total, we’ve done around 37 projects. We have been around since the early 2000s when my parents originally started and trying to grow our portfolio and bring our AUM up.

We got to talk about the generational side of this. This was something that your parents had started years ago and brought you in but you’ve got a hell of a background yourself. It’s not like they just handed you this thing to take care of. You’ve got some MIT education in your background. Start at the beginning a little bit. You were coming up. You’ve got this influence of real estate around you. This is important to me because my kids are at that age where they’re starting to decide if they want to or don’t want to be involved in real estate. What did that look like for you as you’re growing up?

My parents got started in real estate back in the early 2000s. Around the time of 2013 to 2012-ish when I was around 13 or 14 years old, they brought me into the real estate world with the hopes that one day, I’ll be able to take over the assets that they’ve accumulated for a very long time. I started on the property management side. They believe that to be a good real estate fund manager, you need to know how to operate first.

I followed my property manager around and learned everything there is about revenue collection, tenant delinquencies, repairs and maintenance, CapEx, and stuff like that. I started more on the boots-on-the-ground side of things. After about two years, they then pulled me back and started teaching me how to do acquisitions, Excel modeling, and stuff like that.

Growing up, I did a lot of mathy stuff. I did math and science competitions. I’d always had a good grasp of numbers. I was able to catch that pretty quickly and started building relationships with brokers and then other investors as well during my time in high school and then also in college. I went to MIT for computer science. It was the path that everybody took at the school. Seventy percent of people at MIT study computer science, either as a major or minor.

It felt like it was following the herd and pack. It was in the back of my mind knowing that maybe real estate is the path of least resistance when it comes to building a career. After my freshman year, I reconnected with a Japanese fund-to-fund investor who wanted to partner with our family and do more real estate investing. That gave me the conviction to take some time off from MIT, do real estate full-time, and go back to what I was doing pre-college. That was when I started doing things more seriously at a full-time level and when the company took off.

Feeling The Pressure To Perform At 21 Years Old

Did you feel a lot of pressure to perform? How old are you now

I will turn 21 at the end of the month.

You turned 21 and you are helping manage a very sizable portfolio, much of which is in Southern California. At what point is the pressure to perform? Is it motivating or scary? Does it make you want to push harder? I don’t know how that feels. My oldest daughter is 18. This is very near and dear to me, to be honest with you. I don’t want to push her in a way that pushes her away but I want to push her so that she wants to be successful.

In terms of what’s driving me, there is a motivation to grow the firm and build wealth in the family. My parents gave me a very good foundation but I have the aspirations to grow on top of that foundation into an empire. There’s a motivation in terms of growth but at the same time, sprinkled within that there are times of fear. Things never go as planned.

During those times, always the hesitancy is maybe the opportunity cost of taking time off from a prestigious school isn’t worth it. Over time, the things that go wrong always tend to work out if you think hard and work hard enough at it. Eventually, that fear resolves and maybe comes back a little bit again a few days later, and then you resolve it again. It’s always back and forth.

This wasn’t a direction I was going to go but now I wanted to. At your age, do you think about the vision that you want for your life? I don’t mean your business life. I mean your personal life. This was something I never discovered in the first 2/3 of my career. The reason that I’m passionate about it is because so many people I’ve seen have built this large financial business that takes up their entire lives and eats up their personal time and family time. They end up being maybe wealthy on paper but extremely miserable in their life. Have you spent much time even thinking about what you want your ultimate life to look like?

People’s wants and desires change as they grow and have different experiences. For me, it’s been very career and work-focused. I haven’t thought about how much time I want to spend with my kids given my age and stuff like that. It’s been much like drilling down, focusing on what you’re supposed to be doing, and making sure that what you’re doing is scalable and growing at a fast pace.

It’s very career-oriented but I don’t believe that’s going to be the case if you talk to me twenty years later when I have kids. They’re very valuable to me. I want to spend as much time as I can with them. That conversation becomes, “Is it right to be working as hard and spending as much time doing real estate?” Maybe not so much. The lucky thing for me though is I started early. By the time I get to 40 or 50 years old, I’ll probably have a better wealth foundation than others who started a little bit later. From that perspective, I would say I’m very fortunate to have the flexibility.

If you get to 40 to 50 years old and you start at 21 as a second generation, I would expect you to have a very incredible foundation but that’s also an expectation. I shouldn’t have even said that. It’s not fair to you to say you should have that by then. You may not. I’ve seen at least 2 to 3 different market cycles in my career and as have your parents.

A lot of people, especially your age and through their 20s and 30 who are getting started, don’t necessarily understand the market cycles because they haven’t seen them. You are also in California. I’d love to know some of your experiences. You’re operating in a state that has a lot of restrictions compared to a lot of other states. That can affect it as well. We probably should go there. I will mention that the fires that are devastating California are not affecting you directly so far. It seems like you’re safe so that’s a good thing.

Thank you. I live in Pasadena but more on the South 210 side of things. It’s a little bit away from the mountains and the forests but I’ve seen the distress that it caused other people. I feel sad for them, especially the renters. Renting in California is difficult. You add to this distress. I feel very sorry for them.

California’s Housing Crisis: Fires, Restrictions, And The Olympics

Let’s talk about California specifically. You’ve got all these restrictions. I’m seeing things. I don’t know how much is true or false. It’s all posts on social media. There are fire trucks that they’re not allowed to come in and help because they have to pass emissions tests. I don’t know if this is fact or fiction but you’re looking at an entire area of your state that is going to be in a housing crisis for a very long time.

As devastating as that is to many people, that’s also an opportunity for entrepreneurs. It’s going to hit this supply and demand chain very quickly because all these people are displaced. They have to have somewhere to live. How do you see that knowing the restrictions and your government in the state of California? How do you see that playing out?

In terms of new development, the state’s going to get a little bit more flexible with developers simply because they have to. If we think about the trajectory of where we’re headed, supply and demand issues have always existed in California even before this fire. It’s gotten worse with this fire, given the amount of buildings that were burnt down.

The 2028 Olympics will also held in Los Angeles. From that perspective, the streets have to be clean. A lot of infrastructure has to come up. There have to be a lot of changes in terms of traffic and airport expansion maybe even. From that perspective, the state will get more flexible with developers because of the need that we’re seeing.

On my side, the fire effect is a little too early to be felt or evidence. I am seeing a pickup in leasing velocity because of the amount of people who were displaced but they’re typically on shorter-term leases. For example, instead of a 12-month lease, they want a 6-month lease so that they can stay and check things out before making a longer-term commitment. It’s less certain of the impact of the fire that has been on the multifamily side of things.

As we head more into 2025, we’ll see more evidence of this but in terms of development, the housing shortage isn’t news to California. It’s something that the state has to be more flexible with developers but also at a macro level something that maybe we need to get more creative with how we’re building houses. There are a lot of talks about modular construction to try to lower construction costs. Vantum is one of the leading companies in doing that. They’re already starting to build 3-story or 4-story multifamily housing using modular methods. It’s proven to be faster and also lower costs. Many things have to play right for the housing crisis to be solved in a state and this country.

I met with somebody who runs a business building panelized walls, trusses, floor truss systems, and all of these things in an effort to lower costs and make building faster. There are certainly plenty of companies out there that do that but it’s not the main way of building yet. That is the way of the future. I don’t know how that works with California, earthquakes, and all those different types of codes. If that’s feasible or not, that’s not the scope of our conversation but it’s the curiosity. You deal with a lot of different codes that the rest of the country doesn’t have to deal with because of earthquakes.

Geographically where we’re located, there are challenges there but where I was more getting at is there are multiple methods that have to fit right for the housing crisis to get resolved. One is the state cooperating more with developers but then also developers figuring out creative strategies to minimize their costs.

Finding The Right Renters In A Rent-Controlled Market

That’s where the modular side comes in. With what you have across your portfolio and you’re in multiple different areas and states but you do have a fair amount in California across the board, are you seeing a leveling off of rents, increases in vacancy, or just the opposite?

It depends on the area. Our properties in Orange County and along the I 605 corridor have been doing very well. Our entire portfolio leverages at around 99% occupancy typically year-round. There might be certain properties like smaller ones, a ten-unit. One vacancy is 10%. There might be some of those but across the portfolio, Orange County has been doing very well. The issue isn’t renting. It’s more about finding the right renters because there’s rent control and impossible to evict the tenant.

Most of our focus is on that tenant screening portion of the process and figuring out whether this tenant is a reliable tenant with a trustworthy background and a stable job that can pay rent on time. We typically have higher standards when it comes to picking renters, typically 2.5X to 3X of rent for their income and then closer to at least 700 plus in credit. It depends on the location of the building and the demographics in that area but that’s average across our portfolio. That’s helped us a lot in terms of tenant laws and generating profit for the property.

What is your family’s strategic vision for growing things in the future? Is it a straight-up multifamily? This is your niche and what you want to grow. What is the overall vision?

We want to try to tap into all the asset classes. We do have some triple net retail. We also have mobile home parks, commercial buildings, and stuff like that. Multifamily has been where the main focus is given that it’s the most easy to understand. Everybody needs a place to live. Self-storage might be harder to understand and envision. That’s why we landed with multifamily first and have grown that side of the business the fastest.

We feel that as our wealth grows, there is a need to diversify into other asset classes but our diversification is more focused on geographical location rather than asset class. Two-thirds of our portfolio is in Southern California. The rest is in Florida and North Carolina. For 2025, one of our biggest goals is to expand into Texas. We see the concentration of SoCal properties and are aware of that. We’re trying to diversify into other geographical locations.

What has led your family to North Carolina and Florida? Is it strictly financial or regional because of the weather? Also the same question with Texas. Texas does have better laws and weather. What would prevent you all from wanting to go into the Midwest? I was going to say the Northeast but nobody wants to go into the Northeast. You can’t cashflow in the Northeast.

It’s mainly based on our connections there. When we were thinking about geographical expansion, we were thinking we have to find a place where we have people and local boots-on-the-ground operators who we trust and we can somewhat rely on. We’re the asset managers for those or our property managers for our stuff in SoCal because we’re local but for the other state ones, we’re asset managers one level up.

We wanted to pick states with high growth and stuff like that. We wouldn’t go into New York, for example. We had our select number of States that we wanted to go into. From that, we drill even further based on our connections, specifically in Texas. We’ve been building connections in the Dallas and Houston area. We know a lot of local operators there. We also started to see a lot of deals in the past 6 to 8 months. To be honest, most of them weren’t penciling. We underwrote a lot of deals so we got more used to the markets there. That’s the ideology for going to Texas.

What do you think the metrics are? You don’t have to know exactly but off the top of your head, how many deals do you think you have to underwrite to get one?

It depends on the time of the market as well. In 2023, we bought nothing and underwrote a lot. That ratio is undefined. In 2024, we bought 5 and probably underwrote closer to 100 deals. In a year, we typically underwrite between 100 and 300 deals, depending on the velocity. California is easier to underwrite during this specific time because it’s less market-driven.

You’ll find more properties with higher upside and more value-added than Texas because it’s more market-driven over there. As the ten-year start shooting, it’s still pretty elevated and that slows down velocity. In California with how many long-term owners there are, there’s a higher chance of getting deals in our economic situation.

What do you look for within the family office? You got a value add but is there a certain cap rate that you’re buying at? I hate cap rates. It’s a terrible metric but it’s one that everybody understands. When you underwrite a deal, what are you looking for? Are you trying to be able to value-add it to a certain percentage or take it to a certain cap rate?

For California deals, for example, I like the cap rate but I also couple the cap rate with a vacancy factor and expense ratio. If I can lock in those and then say a cap rate, then I’m pretty comfortable with that cap rate. For California deals, we typically underwrite 5% vacancy and 40% expenses. If I can get something at around a 5.5% cap, that deal would pencil in around maybe 16 to 18 hours over 5 years.

It goes to a 2X equity multiple. It’s just the time of 5 years is a little bit longer, which is why the IRR isn’t to the 20 mark but it’s typically 2X. You double your money in five years. That’s typically the metrics that I underwrite. I do stay away from the strict rent control areas. For example, the city of LA and the city of Santa Monica. I stay away from those. I go more towards what I would call secondary markets for California. They’re probably primary markets for other states.

Places like Glendale, Downey, Whittier, and the Orange County side, those areas typically help me get to that higher cap rate and also have enough rental upside where I can go in at 5.5%, pushing to a low 7% or something like that. I can exit back down at 5.5%. The rental upside still gets me into very comfortable projections. From that perspective, it makes me more comfortable in getting that 16% to 18% IRR.

Benefits Of The “Boring” Midwest Markets

I don’t understand a lot about California real estate because it’s not the market I’ve ever dabbled in nor do I have a desire to but it’s like anything. When you know your numbers and it’s your backyard, you can find deals. You guys have proven that over the years. I don’t want everybody coming to the upper Midwest because we’re an untold secret. I can go and buy cashflow here. I can buy properties. Honestly, I’ve got one under contract with good seller financing terms and we can still cashflow. They’re getting what they want. Most of what I do is residential.

I don’t have a lot of commercials yet. It is something that we’re working towards. We don’t have a lot of the peaks and valleys in the upper Midwest, which makes us boring but boring is good and consistent. I like that because the peaks and valleys are fun to talk about, especially when people want to talk about when they made a whole bunch of money because everything was going up and up. When they lose it all, they quiet down pretty quickly. I like the even keel.

You are the spotlight of 2024 and maybe even 2023. Sun Belt will be the spotlight in 2021 and 2022. When they started feeling supply pressures and also rate pressures, you guys became the untold secret. All of a sudden, rent growth in your places seems to make a lot of sense. It seems to be penciling there. You have been in the spotlight for the past few years.

I don’t know if you know him but I was talking to Slocomb Reed. He does a lot of podcasts and also probably management. He likes the Midwest a lot. We were in a sense discussing the differences between the Sunbelt and also Midwest. From that, we were also talking about how the Midwest is seen as boring but during a time when interest rates are elevated and there’s high market risk, boring becomes keen. That’s also your stand-out in the Midwest.

What we don’t have is a lot of natural disasters. We have tornadoes but a limited number. They do take out a smaller path of devastation. You’re in the markets of North Carolina and Florida. Your insurance costs are astronomically high. You’ve got hurricanes that can shut you down for weeks. There are a lot of those things. We don’t get that.

On the downside, we have harsh winters, higher heating costs, snow removal, and those types of expenses that have to be accounted for. It’s boring but it’s still a great place to make a good return. I’m going to lead us down a little bit different path as we wind down here. You’re 21. You’ve had this upbringing incredible family atmosphere with a lot of pressure to perform with the fact that you’ve been through some of the things that you have with MIT and everything else. What do you do for fun?

I play tennis. I’ve been playing tennis since I was six years old. I played it very competitively growing up. I was 90 in the country in my junior year of high school and 20 in the state of California. Most of my friends have been playing tennis as well. My group of friends outside of work is tennis. We always like to hang out on the weekends playing tennis.

We’ve picked up pickleball as well. It’s much easier. For us, it’s a little bit less fun but it’s something new to try. We know how to play tennis. Pickleball becomes less fun for us but it’s addicting. A lot more people know how to play and can make a lot more connections with it. For fun, I play tennis and pickleball and try to stay active outside.

Not married? No kids are coming? Nothing like that yet?

Not yet.

Importance Of Patient Capital In Acquisitions And Dispositions

That’s when it gets fun, depending on what your motivation is. What’s one question I should have asked you that I didn’t? It can pertain to anything.

You should have asked me how my acquisition box has changed in the past few years. The numbers on my model have changed drastically, especially that interest rate. To be honest, I would say the answer is that the financing issues have changed. We’ve put in more equity in a lot of our deals. We try to limit the amount of leverage simply because we have the liquidity on the financing side. We don’t want to take excessive risk. To be honest, there were two deals in California that we bought on floating debt but at super-low rates before the rate hikes.

It started hiking and hiking to a scale that we decided to pay the debt off. As a family, we’re very well-focused on wealth preservation and growing wealth at a steady pace. We’re more trying to take control of a lot of our properties and making sure that we don’t over lever and get exposed to a lot of risk. That has changed on the acquisition box side. We’re looking for stuff that we’ll pencil to a lower leverage. It’s harder to find leverage that helps the returns. That’s why we haven’t bought a crazy amount of deals either. We’re trying to lower the amount of risk while still trying to hit our returns.

I have a very close relationship with a family office here in the Midwest. We have these conversations offline. If you’re in a position where you don’t need to buy anything for all of 2023 and you don’t need to buy anything if you don’t want to for 2025 if you can maintain, what more could you possibly dream of? Be able to cherry-pick the best deals when they come along and fund them with minimal debt if that’s your choice. That’s where most people probably want to get to. However, most of us over-lever and play that peaks and valleys game. A lot of people I’ve known in this business have gone belly up and never came back. I love the fact that you have that mindset.

We focus a lot on the concept of patient capital. That goes for both the acquisition as well as the disposition. On the acquisition side, we don’t have to buy if we don’t want to and we don’t feel comfortable with it. It goes the same for the sale. If we feel like the market’s not that good, it’s not like we’re a fund that has to close in seven years. Maybe we hold it out for another three years and wait for a better market. Patient capital is the family offices’ leverage against the institutional guys.

I can’t tell you how much I enjoy interviewing you. This isn’t going to sound probably politically correct but I don’t get to talk to a lot of people your age that I can relate to. With your upbringing and your experience, it’s been a pleasure. Thank you for that.

Thank you so much for having me on the show.

Connect With Zihao And Closing Words

If anybody wants to try and reach out to you or follow you, is there any social media or anything we can do to help you?

I’m pretty active on LinkedIn so reach out. If there’s a way to partner up and have any synergies, please feel free to reach out on LinkedIn. Check out my website, www.MotivaHoldings.com. You can reach out there as well.

We appreciate your time as always. For everyone else, we’ll catch you on the next episode. Until then. Go out there, find some deals, live your vision, and love your life. See you.

Important Links

• Reicot.com
• Gowvoyage.com
• TheGenerationsOfWealth.com/FbGroups
• TheGenerationsOfWealth.com/YTChannel
• TheGenerationsOfWealth.com/Instagram

About Zihao Wang