Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast.
Josh: So, hey, everybody, welcome back to Accelerated Investor. I am really excited to be hanging out with you today and hanging out with a new friend of mine. Jorge Abreu has been partnered up with me on an apartment deal. And I’m excited to be talking with him today. We’re also excited to just be, you know, kind of sharing obviously in the middle of this coronavirus business. And we’re operating a bunch of apartment buildings that he has and that we have and we have one together. And we’ll talk a little bit about, you know, due diligence and cap acts, kind of some of the stuff that we’re seeing happening with the virus. And also talk a little bit about Jorge’s, you know, his entrepreneurial journey. What’s brought him in? What got him excited about multi-family in apartments to give an idea?
Josh: He owns over seventeen hundred units on the general partnership side, an additional fourteen hundred units on the LP side of his apartment business. His goal is to own over 10000 units of apartments as a general partner and also owns a commercial construction company. And they do all kinds of different commercial construction work, a lot on multifamily and industrial buildings, commercial buildings and things like that, which is kind of led him into wanting to own a lot of his own buildings, which he does now, which is amazing. He’s also got a free e-book that he’s going to tell us about at the end of this podcast. And so thanks again to all of us, all of you who’ve been joining me with Accelerated Investor. And Jorge, welcome to the call, my friend. How you doing, brother?
Jorge: I’m doing good. Josh, thanks for having me, man. I know we’ve been trying to set this up for a couple of months now and finally made it happen.
Josh: Yeah. Absolutely, man. So, you know, I always like to ask our guests, like, what are they working on right now? Like literally today or this week? We can always go back and do the whole background thing and talk about your transition and your entrepreneurial journey. But what are you working on right now?
Jorge: So, you know, right now with the Corona virus and everything, we’ve been focusing a lot on managing our existing properties, pushing some of the Capex that makes sense to do. Right now we’ve got 1275 unit portfolio we closed on in end of November. So been working a lot on the CapEx for those properties. It’s five properties. And then we’re actually wrapping up the CapEx on the property we own together. The one in Oklahoma. Yeah. So mainly that and still looking at some acquisitions and really looking for sellers that need to so and have a specific issue. But yeah, we’ve got one that we’ve got on a contract right now that we’re working on getting closed.
Josh: OK, fantastic. So for some of our audience that might not know what’s CapEx, maybe this is their first podcast I’ve ever listened to you, obviously a commercial construction background. I’ve seen a lot of your pictures and video on Facebook, all of our audience. You should look up George and, you know, friend him on Facebook to see a lot of his stuff, has a lot of good content. He pushes out on his Facebook page. But just talk about CapEx, talk about your construction background. What does that mean and what are some of the things that you guys are working on CapEx wise on that Houston portfolio and then Crosby Park as well?
Jorge: For sure. So, you know, CapEx is when somebody goes to purchase a building, it’s pretty much the budget you’re going to use to fix any of the deferred maintenance. And then also any upgrades that you’re gonna make. So it’s a very important piece to the whole puzzle. You know, it’s how you execute your business plan. So the more detailed you are during your due diligence, before you purchase the property, you know, the better. That way, you don’t run into a situation where you run out of the CapEx budget and you still have more upgrades you need to do. Nobody wants to be in that situation. And then you can’t fully execute your business plan. You know, when I started doing this, well, I guess I’ll take you back to it. So I started in single family residential investments over 13 years ago.
Jorge: In that as we continue to do more flips. So we start doing a lot of flip properties. I realized that there’s not a lot of good contractors out there. So I decided to open my own construction company. And since then, you know, we focus on investors, we focus on business owners. So a lot of commercial and multifamily work and it goes hand-in-hand with my own investments. So. That’s my way of knowing that the CapEx is gonna get done and it’s gonna get done correctly. Yeah, super hands on. Yeah. I’m not saying everyone needs to go open a construction company, but at least hire a professional that has a track record. Yeah.
Josh: Yeah. And so what advice, George, would you give to an apartment investor or maybe somebody that buys a portfolio of SFR? Maybe a large SFR portfolio. What advice would you give them about vetting out a good contractor? That’s you know, it’s definitely 80, 20 or even 90, 10. You know, 10 percent or 20 percent of the contractors are decent and really 5 percent are probably really good and 80 to 95 percent of them suck. So what kind of advice would you pass along or our audience that you’ve learned both for resi and for commercial about vetting out a good contractor and who to pick?
Jorge: Yeah, it’s funny you mentioned that. So I noticed when I first started with construction company that. A lot of investors don’t take the time like that, they just want the cheapest price and they don’t take the time to actually vet the contractors. And they end up getting burned a lot of times. So one would be don’t just go by price. And then, too, would be, you know, take the time to one, look them up. You know, if they don’t have a business adders, if they don’t have an online presence nowadays, I mean, that’s a red flag. The more reviews you can find online, the more you ask for some references. You’d be surprised if you call some of the references and they tell you bad things. I mean, that’s pretty bad. Yeah.
Josh: Kind of common sense. Right. I mean, one to one, like you’re gonna be hiring an employee, probably do reference checks or pass to, you know, employment checks. And if you’re gonna spend a million dollars like Crosby part in over a million bucks and improvements and you’re hiring a separate contractor, obviously you guys are doing a lot of the work and overseeing it. But man, it’s a million bucks in the line. And if that thing even gets 10 or 20 percent out of whack, it really screws up your numbers big time just to have to bring the next one hundred or twenty thousand dollars. So simple reference check sounds like, wow, that’s really stupid. Simple. Yeah, it is. But the problem is most people won’t do it right. They just they won’t make the extra effort. Show me your portfolio. Let me talk to some owners, some previous people that you’ve worked with in the past. Show me some of your work that you’ve done. Let me talk to them. Was it on time and on budget? Basic kind of questions that you can get verification from a third party, correct? Yeah, that’s great. So you decide to start your own construction company to move while you’re in single family. Tell us about that. Let’s go to now through your entrepreneurial journey and kind of your transition from single family to the construction company and then ultimately jumping into multis.
Jorge: Yeah. So the plan was always to scale. So the construction company was a piece that I placed in there to be a bit of scale, the fix and flips. But at some point, I kind of, this is probably about four years ago now. Kind of looked back at everything and I realized that everything I was doing was very transactional. You know, I hadn’t we had a couple of rentals and we had done some smaller multi-family but hadn’t built that wealth, you know. It was, like I said, very transactional. And there was only so much I could scale with a single family on the fix and flips. So that’s when I start looking more to larger multifamily. I got introduced into what a syndication is and how, you know, before that, I just it never crossed my mind that I can own a 200 unit multifamily property. So, you know, once I found out that was possible, I really started digging into that. And then. I tried doing both for a little bit. The single family and multifamily and I quickly noticed that, you know, just like Tony Robbins says, where you put your focus is where the energy goes. So I decided to drop the single family and just go all in on multi-family.
Josh: What was that transition like? You know, a lot of people, I think, are, you know, afraid, scared, fearful of that. They’re like, well, you know, the fix and flips are paying my bills and I’m making some good money. But as we all know, it’s like you said, it’s on a wealth builder. That’s that comes from owning assets. I’ve been saying for years funding equals freedom. And what I mean by that is funding, whether it’s equity investors and debt and finding the right assets allows you to buy cash flowing assets, which provides freedom. Funding equals freedom. Right. So you obviously felt that a couple years ago. Many people would like to make that change. I think many, many. But I have the same kind of fears that you did. So how did you overcome that? What were some actual things that you did? Did you just say, hey, forget it, screw it. I’m just gonna go buy some or. How did that go for you?
Jorge: No. I mean, you know, the first step was stopping the inflow of the single family. So, you know, we had the deals we were working on. So we kind of had to stop the incoming leads and kind of just work on what we had and then I think I think that having the construction company probably helped me know because it wasn’t the thing with multi-family is it does take time to build up and get started. So, you know, not getting paid for that amount of time could be difficult. I had the construction company, so that helped as far as cash flow and getting money from there. So maybe what I did is a little different. I would suggest, you know, starting to put some focus towards multifamily, if that’s what you want to do and not completely stop. The money that’s coming in and then just continue to build it up and build it up to where you finally can.
Josh: Yeah. Gotta have some way to pay the bills now, right? I think for a lot of people it’s I don’t you know, when you’re making a lot of money doing fixing flips or transactional work, whatever, that transactional work is wholesaling, whether it’s even single-family rentals or even construction. You kind of get used to a certain lifestyle, right? And I think it’s about taking the long approach to long game to say if I even take a step back in the next year or two with my income, that’s OK because a now building something that’s going to pay me for the rest of my life. And would you take a step back in income to end up building something that’s true long-term permanent wealth. It’s going to pay you forever.
Josh: And many people get trapped into, hey, you know, I’m going to keep doing these fix and flips and hopefully eventually get a new apartment office. And it’s 20 years later and they’re still doing single family. It’s like got to have that kind of awakening moment right now. No, it’s cool. It’s okay. And again, if you have a family, if you have a spouse, if you know, if you have kids, that’s something you’ve got to kind of agree on as a family like a week. Okay. With taking sort of a sidestep here, even a backstep to really focus on forever income. And, you know, you’re not giving up that income forever. It might take six months, a year, even two or three years to stabilize a building until it starts to throw off massive cash flow. So was that a conversation that you had with your with your family? How did you guys kind of reconcile that, that you might have to take a step back in order to build for there for the long term?
Jorge: Yeah, I mean, my wife, as she’s always worked with me from day one. So we’re always aligned. But it was a conversation, you know, and it was gonna be conversation was more of I was not going to be around as much. So when I when I started doing the multi-family, I decided to go all in. I mean, I was traveling every month. I was doing a ton of networking. What did you go to?
Josh: Like every event there is when there were events like I saw your profile, like,you had all those lanyards? Like thousands of it seemed like you went to every event there was. It’s nuts. It was great. But you were like you said, you went all in. You went to every that you could. You were hosting your own events. It was really like you could tell it was very purposeful what you were doing. I’m going to go to every event. I’m going to speak at every event and meet lots of people. Again, you’re building relationships, taking the long approach. But yeah, that had to be very heavy with all those lanyards around your neck. Yes. Yeah. But so you started traveling more. Right. And because, you know, not every multi-family deal is going to be in your own backyard. Right. It’s not like they’re all within an hour drive.
Jorge: That’s exactly a huge…. That helped with the growth was once I realized. So when I first started it, I live in Dallas. I was just looking at properties in DFW. I mean, we underwrote maybe hundred-plus deals and couldn’t find anything that penciled until we finally said, you know, start looking on the outskirts of Dallas or Oklahoma. And that’s when things started to pencil and make sense. But there was that mindset, you know, where you need. You need to get over the fact that, OK, it’s not going to be my own backyard.
Josh: Yeah, yeah. So when you find Crosby Park. Right. And it’s in Oklahoma in 16 units, it pencils. Tell us what. Tell us what’s going through your mind as far as now. Okay. Now, it’s not it’s not close to home. I might need general partner, a limited partners capital. You know, you can do the construction. Let’s just talk about that deal, because we’re partners in that deal. Let’s talk about when you found it like you start get excited, right? Because you’re like all this deal pencil’s man, this is gonna work. But oh, crap, this is not like next door. It’s not an hour drive. It’s the next state over. So tell us about your mindset there.
Jorge: I mean, the first thing is. Putting the pieces together to make the deal to get the deal to close. So first thing is, OK, where can we raise this equity internally? Do we need a partner that’s good at raising equity? Can do we qualify for the loan? Do we need a partner to help us qualify for the loan? You know, how am I going to do the CapEx, my construction company is never done a project in Oklahoma. Can we do this? You know, all those things are going through my mind. And then it’s just kind of plugging, plug and play, you know? As you know, we brought you in as a partner and we brought Tim in as a partner. And. We just put everything together and got a close and that’s any deal. You know, that’s how we look at every deal. We’re always open to partner with others and just. As long as we get the deal closed and everybody complements each other.
Josh: Yeah, I mean, any multifamily deal like large apartment you’re going to have against somebody is going to kind of be the boots on the ground to run the project, find the project. You have to have somebody who can qualify for the loan or multiple people that can qualify the loan that is basically a sponsor. And somebody that’s, you know, can sign the p.g, the personal guarantee. Then you’ve got potentially other general partners. You do other things like underwriting, raising money, etc. Then you’ve got the equity investors that bring in the down payment. And hey, look who showed up. You wanna say hi, Dom. I’ve invited Dom just crash all my webinars, all my podcasts. You know, that’s just how it was where we’re at with this. So I told Dom, it’s all right.
Josh: You pop in and say hi to the people on the podcast and say to George, Hey, you wannago? Dom’s been hanging out. Right. So when Don was born, he’s 8, almost 9. At my other house you have. He would just. I didn’t have a lock on my office. He would just crash all the time. So like six years ago, when he could walk, he was like to get down the stairs and things. He started crashing podcasts and webinars. And I just have always had an open policy, like I could get really mad. Like, do we got we’re recording. What are you doing? And then like, what example would I be setting as a father, not only to my own kids, but our audience. So my audience knows we won’t even cut that part out. We’ll just roll with it and let them hang out? It’s cool, man.
Jorge: Have you seen the video of somebody being interviewed on a news broadcast?
Josh: Yeah, it’s great. Baby rolls in and like one of those little strollers. The second kid comes in. That’s great. So we were just talking about the whole partnership. Right. So so let’s talk about Crosby Park for a minute. So we found Crosby. Let’s talk through this deal. I’ve actually got it up on my screen. The rental income at acquisition was about 1.5 million. About twelve percent vacancy expenses were about eight hundred thousand dollars and net operating income was about five hundred thousand, five hundred forty thousand. And the goal was, was to again modernize the building, make the capital improvements.
Josh: We were going to do about a million two in improvements, renovation, budget for unit terms as well as CapEx and stuff like that. And so the goal was put the renovations in, modernize the building, improve the units, increase the rent, and then ultimately refinance within about 18 to 24 months, refinance and refi the bridge loan out and refi the equity investors out and then have stabilized building with stabilized financing. And so we bought this deal was back in June of twenty nineteen. So we’re coming up on almost a year, about 10 months or so. So just describe the last 10 months George, since we close on it, we’re through a pretty significant portion of the renovations. About seven or eight thousand dollars of the CapEx is done about a little bit is still kind of ongoing. So just just talk through where we are today for audience that doesn’t know that deal.
Jorge: So today we we’ve completed all the a.o grades that we’re gonna do. There was a chunk of vacant units when we first closed on it. So that was our main focus was working on the interior units and getting that caught up so that we had upgraded units that we could lease. Once we get a good portion of those going, then we started working on the exteriors and getting everything looking good there. We’re about done with the exteriors minus a couple. I think we got the parking lots are getting done on Monday and then exterior paint is also getting done next week. So we’re about, can’t remember exactly off the, right about 90 percent, I believe, on the occupancy. So. You know, under a year and we’re getting pretty close to being stabilized and ready for that refi.
Josh: Yeah, yeah. The plan was really the two levers to pull, you know, to. And we’ve talked about this on other podcasts. We don’t need to talk about it again. But most apartment deals are long term syndication, right, and you’ve done plenty. You’ve done those like your Houston portfolio was a long term. This is more of a quick 24 to 18 months kind of in and out. And again, we bought it. It was in about eighty seven percent occupied. And the goal was to turn the units, make them nicer. Improve those, then charge more for rent. And now, like George said, we’re at 90, 90 percent occupied and with nicer units and increased rents.
Josh: And out of the 1.2 million of CapEx that we were gonna spend, spend about 90 percent of that’s done. So you’ve got, you know, three hundred thousand, give or take left to finish. And then the goal is, is, you know, in kind of Q3, Q4 finalize building that occupancy up even higher. Really pushing the income as high as we can and getting ready to refinance, you know, hopefully by the end of the year. George, tell us about the virus for this building, your Houston portfolio, other things. How is the how was the virus impacted your ability to do cap acts or do unit turns and leasing? You tell us about what’s going on kind of in real time with the virus impact.
Jorge: Yeah. As far as the CapEx items, we really haven’t had any major hiccups. Here in Texas, the construction was deemed essential. So for the most part, I mean, the only thing we’ve had issues with is maybe some that’s not even with our multifamily renovations. That’s what a new development ground up. Some specialty items have been hard to get, but so that part’s gone, gone pretty smooth. We’ve actually gotten a ton done in the past six, seven weeks. And then with the leasing, you know, that’s become a little more difficult. And I don’t want to say difficult because, I mean, we are leasing units. We’ve just had to adapt. You know, the leasing offices are open, but the deployment only trying to push everything to be or as much as we can as far as online, you know, doing virtual tours.
Jorge: And if as far as work orders on the properties, you know, just sticking to the emergency work orders and then making sure to keep our staff safe. You know, there’s guidelines that we’ve put out there as far as masks and gloves. I know in Houston. No one’s able to enter the office without having a mask or glove and. Same thing with maintenance. If they come in, they need to have their masks and gloves.
Josh: Yeah. What were your thoughts on where we’re at today? Like just do you feel like things are on thawing? Do you think they’re getting a little easier? Do you think some of the fear is gone or what do you think we’re adding kind of to the cycle? I know everybody’s kind of experience with this is very personal and regional. I guess I just kind of. What are your thoughts on where you guys are at?
Jorge: Yeah, I mean, I think it’s going to be very area specific, but he. As far as the areas we’re in, I’m feeling pretty good about it. Both Texas and Oklahoma are have opened back up. They’re going to keep opening back up, you know. I believe it’s Friday. Texas is opening salons and other things. So I think we’re doing good on that end. I’m curious to see what happens with, you know, hopefully we don’t have another peak or a second wave like they’re saying that everybody continues to be smart about this. Right. That’s really my only fear. And then it’s how long does the economy take to get back? You know. There’s gonna be. Some businesses that are not going to survive, you know. And how’s that going to affect everything? As far as collections today, we’ve done we did pretty well in April, better than we thought, honestly. We did jump ahead of it and get in front of it, but May’s starting to come in. It seems so far it’s been a little bit less than April. So. I’m really curious to see how we do in May and then come June as well.
Josh: Yeah. Yeah. Again, referencing back to Crosby Park it for our audience to kind of understand what the goal is. You know, we’re all into that building. It was 6.1 million dollar purchase, 1.2 of renovation, all in for basically 7.7 million. Got a bridge loan for five point nine and then private investors for 1.8 million. And the goal was, again, through those. The reason why I’m asking, why this is important is because what George and I and Tim and all of our partners, what we’re looking at is, is stabilization. And a bank is going to look at the numbers to see, well, how many units did you have, how many units were occupied and how many units were actually collected? How many people actually paid, not just occupied, but paid. And you really got to be at that 90 percent occupancy or better to turn around and qualify for an agency loan with Fannie and Freddie. So that’s always been our goal.
Josh: And we anticipate based on these increased rents with this particular project to be at a value of about 10 and a half to 11 million dollars in order to refinance. So it’s important for us now as to kind of manage what’s going on with May, what’s going on with June, what’s going on July. And that’s going to be important. But that might be a short-term hiccup, right, Georges, at the end of the year, where we really need to see is like in Q4 or Q1 of twenty one, we need to see three months of 90 percent occupancy or better to qualify for a new agency loan. And at that time, we’ve got to be, you know, increase rents, 90 percent occupancy for 90 days and then you kind of qualify for that. And the good news there is the Fannie Freddie money is so cheap right now, it’s ridiculous.
Josh: So even if we have a short-term hiccup or some sort of short-term challenges, that’s why I really give more to long term. Right. What’s going to happen really by the end of Q3? Beginning of Q4, because we’ve got a position that that building and your other buildings for these refinances that are going to take place around the end of the year. And really, nobody has a crystal ball, right? Nobody knows. We can all say we think. But really, what’s going to happen with May and then what’s going to happen with June, July housing be very, very important? April was very strong. A matter of fact, I do want to put a plug in and we’ll put a note in the show notes. Jorge wrote a great article on LinkedIn. I just read it the other day. It was published on April 21st, about a month ago. By the time this is published, talking about the coronavirus effects on multi-family investors, the good, the bad and the ugly. I found this to be very, very, very well written. Lots of good bullet points, lots of things to consider.
Josh: And again, I think the point of this is nobody has a crystal ball, but we’re doing everything we can to be proactive. So we’ll put that in the show notes and make sure people take a look at that’s really good. Matter of fact, this is really good to even turn into like a little bit of a white paper or some sort of e-book. Nice, because there’s sort of. Yeah, it’s really good. By the way, Jorge does have an e-book on his website, Elevate CIG, Elevate Commercial Investment Group, Elevate CIG dot com. He’s got a great e-book. Everything You Need to know as a passive investor in multi-family syndication, you guys should all go grab that e-book and also, you know, jump on Jorge’s e-mail marketing list. You can get his content and his information.
Josh: So, Jorge, let’s talk about kind of last piece here of this interview. Let’s talk a little bit about tactics and specifics. You mentioned earlier you looked at 100 deals in Dallas that didn’t pencil and then feels outside of DFW, started the pencil when you were on the outskirts. Walk us through some of your specific bullet points that you do during your due diligence and your evaluation of CapEx. What are some of the numbers, some of the things that you’re looking at when you’re looking at proforma or actuals and you’re looking at penciling this thing out? What are some of the major things you look at tactically to say wow this deal does pencil out. This is something I’ve got to do more looking at. This is something that could go tell us about your process there.
Jorge: Sure. So the first thing is, you know, we look at it at a pretty high level to see if it’s even worth digging into. Once we’ve gotten past that, then. I want to think that we dig in a little bit more than others on the CapEx. So the broker or the seller, we’re going to ask them a ton of questions about what they’ve done as far as CapEx. I want to see the last time the roofs were replace. I want to see, you know, any other major CapEx that they’ve completed entire units. I want to know exactly how many of them are upgraded. How many of them are not. If there’s a medium upgrade, you know, how many are those? Then. When I’m actually on site inspecting, I want to make sure myself or if I need a professional to come in, like for the plumbing, you know, I want to make sure we camera all the lines and we know whether we have breaks or not or other issues that we’ve got to deal with.
Jorge: Same thing if you got a boiler or a furnace. I want to get those checked chitter. He doesn’t want to get that checked because that could be a. Twenty thousand forty-thousand-dollar line either. Same thing with the roofs. You know, that could be another big-ticket item. And then the. A lot of times I see. Investors do OK job checking the deferred maintenance. And then they kind of just guess on the upgrades. I mean, the upgrade is a big portion of it. You know, I’d rather know exactly what’s going to cost me or at least pretty close to it. So we dig in pretty deep into the upgrades too. You know, if we’re going to. Something we’ve been doing a lot is wrapping the balconies with cedar. OK. Well, I want to know how many, what it’s going to cost if we’re gonna paint the exterior. I want to know exactly what it’s gonna cost us to paint the exterior. Etc.
Jorge: You know, in that way I have. Okay. It’s gonna cost a million dollars for deferred maintenance, 500000 for upgrades. This project’s going to be plus or minus 5 percent of 1.5 million. But a lot of times I see investors close on a deal, and they’re like, yeah, we guessed one million. And then they actually start digging in and getting numbers and it’s a two-million-dollar project.
Josh: Well, part of it is you and I know is Kevin O’Leary when he spoke at my event and actually was in 2016 and in Dallas at the Renaissance, and we were talking before he went onstage and we spent a lot of time afterwards. He said, look, when you take investors into your business, you realize that even if you’re the CEO, everything you do now is to take care of those investors. They really are the CEO. They’re everything about your business. And your number one objective is to get your investors, their principal back and generate them a great return and then also have them have a great experience. So in that order, get their principal back, generate a return. Have an unbelievable experience.
Josh: And as you and I know, like if you screw up the CapEx budget and all of a sudden you have investors, while you’re half million dollars short, you’ve jeopardized the return of principal, you’ve jeopardized their return and now given them a terrible experience and they’re not going to come back. So everything that we’re really doing is with at least one eye on those limited partner investors, because they’re a big key to make this thing go. You got a great front, a great property. You’ve got to get the financing on the first mortgage debt. But those people that are making that investment in the equity. So, George, just talk about how important that is relative to the cap ex, relative to the business plan, but making sure that you execute on it. You project it right. So that LPO can have a great experience because then they’re going to come back and tell all their friends.
Jorge: Yeah. I mean, it’s all in the execution. I mean, you can find the greatest deal, get it closed. And then if you don’t execute the business plan, what do you have? You know, like you said, you’re going to leave. Your investors are aren’t going to invest with you again. You didn’t deliver on your business plan. So, I mean, a lot of it rides on that. I think asset management and CapEx, you know, that’s you get to execute those two things to get your business plan going. So, yeah, I mean, I think it’s super important. I did want to mention something. I know it has nothing to do with this. Yeah.
Jorge: But as far as the outlook on this on Coronavirus, my long-term outlook is still bullish on multifamily. I’m still all in on multi-family. I’m just curious what’s gonna happen these couple of months, but I don’t see, at least on my deals and probably the same with your deals that we don’t have together. When we purchase ours, we’re looking for true value adds at a wholesale price. There’s been a lot of investors that bought at retail or above retail. And those are the ones that scare me the most. Yeah, cause, you know, if you said I think Crosby was ten millions, something is what we. You know, if we come a couple hundred thousand short of that or. Deal. Things we don’t have to sell right away. So, I mean, it’s more long term. So I have no doubt that we’ll get to that value again. But if somebody bought something above retail and they have to sell coming up, they’re most likely not going to get that.
Josh: They’re getting slaughtered. Yeah. Yeah. The thing that sticks out about being bullish on multi-family and what you said is I remember hearing from one of my broker buddies that he called me up, said, hey, Josh, you got a great value add multi-family opportunity. And I’m like, cool, Anthony. What do you got? And he sends it to me and it’s like one hundred twelve thousand a door. And like a five and a half cap. And so the word value add wholesale price is like the most overused. I mean, totally butchered word in the multifamily space.
Josh: You got to find a true value add where there is cap ex opportunities, there is deferred maintenance and the seller is willing to sell at a discounted distressed wholesale price. Not a guy that’s like I did some upgrades fifteen years ago and I still want to get something pretty much at a retail price or over retail. And that’s basically what the broker was selling. But he positioned it as a great distress, multifamily value add opportunity. I’m like, no, Anthony. This is not anything like what I just described. Not even close. But you hear that so often.
Josh: You can’t as an investor, you can’t just. When I hear that, I think, OK, send me the deal, like you said, as a highlight. I’ll take a look at it. But I don’t take any of that to be gospel or, you know, the truth of this is actually how it’s going to go. I mean, if we’re going to put in 10 million bucks and a couple hundred, a couple million of investor equity, you know, it’s got to be. We gotta drag that thing through the mud before we buy it, you know? Well, fantastic, Jorge. Listen, it’s been great visiting with you today. A couple of things people might my listeners have got to check out. One is, again, we’ll put it in a show note. George wrote a great article on LinkedIn. I absolutely love it. I want to share it with you. It was published on April 21st. Thought it was real honest. Bullet points of what’s going on with the market for sure. Check that out. Number two on their Web site, again, commercial. I’m sorry. Elevate, CIG, Elevate Commercial Investment Group. Great e-book on what to look for as a passive investor. Everything that you need to know. And Jorge, if any of our audience wanted to reach out to you personally, whether it was to invest in your deals or our network with you or have questions, what’s the best place for them to reach?
Jorge: You know, they can shoot me an email. It’s Jorge@elevatecig.com.
Josh: Fantastic. We’ll put that in the show notes as well. So, George, any kind of parting shots? Final words of encouragement, words of advice or any kind of final tips before we wrap up.
Jorge: Yeah, I mean, I would say, you know, I do see the light at the end of the tunnel now and I think we just got to keep pushing forward and things are gonna get better for sure.
Josh: Yeah, yeah, I agree. I think it’s a health scare. It’s a major, major health scare. It’s not Armageddon and it’s not the end of the world. I think there’s gonna be some opportunities in the next three to 18 months to buy some stuff at a discount. So there is gonna be some positives out of this. And just like anything else, tell my audience, look, stay safe. Take care yourself and your family, but continue to stay liquid, you know lots of dry powder. There’s gonna be some deals out there for sure. I appreciate all of you jumping on and listening again at Accelerated Investor. Jorge, thanks for being here. Thank you.
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Correctly estimating the CapEx budget is a huge part of executing the business plan. Just eyeballing the work that needs to be done is going to be a huge stress in your life, and in your relationship with your investors.
Jorge Abreu started doing flips over 13 years ago, and he realized that it was really hard to find a solid, reliable construction company. So he opened his own. A lot of his commercial and multi-family construction work goes hand in hand with his own investments, so it was a business decision that made sense. In addition, he’s able to make sure that CapEx is done correctly in his own multi-family deals.
Avoid getting burned by a bad contractor, says Jorge, by looking beyond the price tag of a job. Do some reference checks, look for an online presence, and check out some business reviews. When your CapEx budget is a million dollars, that is a lot of money to put on the line with someone that you haven’t properly vetted.
As one of my partners for Crosby Park, a multi-family unit in Oklahoma, Jorge has been steadily working for the last ten months to remodel and update the property. We talk numbers: how much we spent, how much we budgeted for the capital expenditures, and where the work is at right now.
Stabilization is a huge part of the multi-family unit strategy. When you go to refinance, Fannie Mae is looking for a 90% occupancy rate, and how much of the rent was collected. With COVID-19, that leaves us with some short term challenges. Jorge’s been working with the property to keep his team and the tenants safe as they navigate this health scare.
If you’d like to work with Jorge, or partner with him on some deals, you can contact him at Jorge@elevatecig.com.
- How Jorge bridged the gap from single family to multi-family units.
- The key points for penciling out whether a multi-family deal is worth it.
- The meaning of a true value add wholesale price.
- Jorge’s article on how COVID-19 is affecting multi-family investing.
- Investors need three things from you so that they will keep investing with you.