WS1233: Syndication: Key To Grow Your Wealth | #Highlights

EPISODE 1233

[INTRODUCTION]

0:00:00.0

Whitney Sewell (WS): This is your Daily Real Estate Syndication Show and I’m your host, Whitney Sewell. Today is a Highlights show that’s packed with value from different guests around a specific topic.

Don’t forget to like and subscribe but also go to LifeBridgeCapital.com where you can sign up to start investing in real estate today. I hope you enjoy the show!

[INTERVIEW 1]

0:00:24

WS: Our guest is Abel Pacheco. Thanks for being on the show, Abel.

0:00:27

Abel Pacheco (AP): Hey, thank you for having me, Whitney. Appreciate the invitation and appreciate all the time and effort you put into putting education out there for others. I think it’s awesome so I’m back into the network there.

0:00:38

WS: Thank you for that. I’m grateful for your time as well and you being willing to give back and share your expertise and experience with the listeners and myself. But little about Abel in case you haven’t heard of him before. He began real estate investing in 2008. Invested in 800 doors of multifamily. 400 passively as an LP and then also 400 in the GP side as an active partner as well. While working full-time, I want to add. While working full time as an IT sales leader.

20 years of corporate and entrepreneurial experience including your verifiable 10X track record of sales from five million dollars in 2010 to 57-million acquisitions in 2016. Been married for 12 years with two beautiful children, a two-year-old and an eight-month-old. Wow, congratulations on many fronts there Abel, and grateful again to have you on the show.

I want to jump in and highlight your superpower, but I want you to tell the listeners a little bit more about maybe where you’re from and your focus right now in this industry.

0:01:35

AP: Yeah, absolutely. Thank you again for having me on. Yeah, from Corpus Christi, Texas originally, I grew up there and I moved after high school to San Antonio, Texas. Pretty much half of my life in Corpus and half of my life in San Antonio Texas. And yup, we just celebrated the 12 years as you mentioned, actually yesterday so we were super excited and two under two. It’s been a good run. My wife is one of my biggest advocates and best partner that I have and she’s been there alongside as we’ve been real estate investing since we were younger and yeah, just enjoyed the time.

We started investing in 2008. We were probably like, a lot of investors, we were investors in single-family houses and slowly but surely, just every couple of years would squirrel away as much as we could and it’s enough to put a down payment on the new house and we would slowly just stack properties and we were buying and hold investors. We buy them, make sure that they were nice, clean, comfortable, safe, rent them out and throughout the year as you mentioned, full-time was working in IT sales, sales leader. Started as a sales rep, sales erector, sales leader throughout a couple of different companies, (inaudible) sales was one. Rackspace, IT Hosting was another.

And throughout that career, full-time, W-2 job, we would just try to buy properties. The goal was always to retire with real estate and have enough passive income that we could become financially free, have our payments being taken care of by renters, and then be able to retire and do full-time real estate. That was always the goal and enjoyed the process.

And 2008, as I said, we bought our first property and it turned into 10 years later, we bought eight, we had a portfolio, we were still managing all of these properties. At the same time I had a W-2, the kids came and it made a little more difficult to keep going on this trajectory and found some education at that time, my sister dragged me into like a three-day course, a three-day seminar over the weekend, and just opened my mind to all of the things that people were doing and signed up for some education, signed up for some course to then went on our run from eight to 800 doors. And just like you said, just invested passively first to kind of see, feel my way through this process, and then now a general partner in a couple of larger deals as well. We focus on B and C value-add properties, hundred unit plus.

So far, we’ve done only syndication as general partners are active partners and we’ve enjoyed the run so far. That’s a little bit about me. Maybe I’ll pause it here for you.

0:04:13

WS: No, you mentioned it, and correct me if I’m wrong but it took 10 years to get to eight doors, right? But then after that, it’s like, something changed, right? I mean, then you’re at 800 doors in the next how long was that? I missed it.

0:04:26

AP: Yeah, it’s been about two years. So, I did my first – or a little under my first limited partner, passive investor, and investment was 128 units, we’ve invested passively from our 401(k), we left one job, we left a W-2 so I was able to transition that to an IRA and then self-directed that into the deal and that was October of 2018. That was my first one and you know –

0:04:51

WS: What changed? I would imagine, there are numerous things that had to change but I’d love to know, what change had to take place for you to not just take the action to do it but like, just have the mindset that it was even possible as well? I know that had to happen for me, I know, what about yourself?

0:05:09

AP: For me, it was really a job, it was my W-2, it was my day job, right? I had a fantastic run as you kind of saw there, some numbers, led a pretty large sales team of about 50 to 60 sales reps. I had about six or seven sales managers all under me and we had an amazing 10x run, 57 million dollars in acquisitions. And every time, every year, my quota would be reevaluated and I realized, “Man, this is not going to end any time soon.” I look back on the 20-year sales history of my career and I pretty much been for the first five to seven years, maybe 100% commission, never had a stable salary until I was an IT professional, an IT sales professional, I had a 50% of my commissions were at risk and 50% of them were my base pay, right?

Always at risk, every year, you put 50% off and I realized, “Man, as I keep continuing to perform, no matter how many sales I made, my quota actually went up.”  I was rewarded every year with great success with a bare quota which means, we had to sell more, produce more, and actually get paid less for the same amount. I was very blessed to have this opportunity for 10 years run with this company called Rackspace, the founders were awesome, the leadership was awesome, my direct leaders were awesome so I stayed there for so long.

But I just realized, “Man, there’s never going to be a time where I’m creating this return, this profit, this wealth, it’s never going to be mine unless I actually put it into something that’s going to create some income generation for me and an asset that would produce when I was asleep.” That was kind of the mindset and it was a slow transition to commercial multifamily real estate but since 2008, that was the goal.

I just didn’t realize back then that I could actually go buy an apartment complex. It did not click in my mind to later I had a friend and partner and somebody locally that I’d worked with and he’s done a lot of business and I looked and I go, “Man, he’s just like me, he’s a normal guy, how are people doing this?” And I started taking education and classes to feed that so you have that doubt, that fear, that worry, that anxiety of actually moving forward on a big commercial project.

What allowed me to overcome that was added education. With more competence, it basically gives you confidence and it removes some of that fear and anxiety. And then you just keep taking one action after another.

0:07:45

WS: Love that, added education gave you confidence. No doubt about it. When you don’t’ know, I mean, you’re fearful, right? You don’t know what to expect or what’s going to happen or how to do something. How did you educate yourself, give us a couple of tips there before we move on? That gave you that level of confidence?

0:08:00

AP: Well, I’ve done – let me see, first was the action to go do deal on my own. And I think that was the one benefit from single-family was I could save more dollars, hard-earned money for a couple of years, but 25 or 30 grand into a deal, paperwork, education was back then talking to my mortgage broker, getting a good team behind me, having a good property, was it the realtor who was helping me and actually going through like education on how to pick the property.

I applied that same mindset for 10 years. My single-family team to my multifamily team and I said, “Well, that’s got to be something to that.” And I realized the team has a lot, it feels like a lot more expertise, there are a lot more people but basically did the same process. What do I need for a lawyer? Who is going to help me analyze the numbers, who is going to help me underwrite, who is going to help me make sure the asset was good? That education came from asking people that I knew were successful, they were doing the same thing that I wanted to do, I asked them for their referrals. And then I also signed up for –

I probably signed up for about four to five educational courses. I did spend a good chunk of money four courses later. I probably traveled to 13 to 14 cities, many multiple weekends, I did this while my wife was pregnant and we made that decision said that if I’m going to do it, you’re going to be alone on the weekends because I had the full-time job, I have to go travel every Fridays and return Monday, that was a grind, probably for my first year, really educating myself hard.

I went to multifamily seminars, multifamily conferences, I went to commercial classes, specifically on commercial, the overall world, not just multifamily, some underwriting classes and I just kind of, I signed up for and paid for as many courses as I could throughout the year. That was a fun year.

And then every time I was back home, call it Monday through Friday, if I wasn’t at work, during lunch, washing dishes, outside in the backyard, just podcasts, I don’t even know how to count, how many hours of the podcast I’ve consumed.

You know, then after that, it was well, the voice I kept hearing and I know somebody said I didn’t come up with this, I won’t take credit but they said, “Hey, education without action is just entertainment. “Unless you take action, none of that education can actually help you. They say knowledge is power but implemented knowledge, that will change your life. And so that is the kind of those mindsets that I said, “I’ve got to apply and I’ve got to go do something. I got to invest in a deal, I got to learn from it and so that was kind of my education.”

Obviously now, I’m still learning every single deal, every single opportunity, every podcast, you know, we haven’t been to a conference in a while, I don’t know how often these are going to come back during our time where a thousand of us are going to be shaking hands but I’m trying to do these Zoom events now and started a meetup, that’s helped me through my education, people ask me questions, started that one locally and now we’re on to webinars and doing these live webinars every couple of weeks so all of that has kind of forced me.

Well, I’m going to be given an education, I better learn it myself. That was kind of the progression of education where I still feel myself – I’m going to still continue learning as much as I can and every day every week, every month.

[INTERVIEW 2]

0:11:18

WS: Our guest is Axel Ragnarsson, thanks for being on the show Axel.

0:11:22

Axel Ragnarsson (AR): Absolutely, I really appreciate the invite, looking forward to our conversation.

0:11:25

WS: Yeah, I am as well, you have a very impressive bio and I’m very interested to hear more about your story. I know the listeners are going to learn a lot from you and hopefully be motivated and encouraged as well just by what you’ve accomplished but a little about Axel, he built a four-million-dollar portfolio by 25 using other people’s money. He’s the host of the Multi-Family Wealth podcast and founder of his real estate investment firm, Brickleaf Properties.

Axel, give us a little more about – I want to hear more about your background and how you got into real estate that quick and be that successful that earl, right? Being that young and there are all kinds of issues there people have when they’re younger in the business. I experienced some of that, you know, initially as well but would love to hear more about your story and just this path to success that you’ve had?

0:12:12

AR: Absolutely. I appreciate the kind words and I’ll try and keep It short and quick but back when I was in high school and early college, I would buy and sell cars, that was a little business I run on the side — and got to the point where I was in college and I was thinking about what’s bigger than this? What can I buy and sell that’s more money and has more upside than maybe cars do.

So, I started just googling things, I watched HGTV so I saw the house flipping shows and you know, I thought, hey, maybe real estate is an interesting business to get into. So, I got into real estate through the lens of, I want to flip houses, and then as I started doing more and more research into the real estate itself, and specifically real estate investing — I found rental real estate investing and I said, that’s probably a better model, you know, you do the work once and get paid in perpetuity, that sounds like a pretty good deal.

So, I started learning a lot about multifamily real estate specifically and how to actually buy it, especially when you have little cash in the bank or just less cash in the bank than what you think you’d need — which is where I was at. This is in my early 20s. And then through probably after around 18 months of just pure research and networking, I found small multifamily on craigslist and a three-unit –

0:13:21

WS: How long were you searching?

0:13:23

AR: Probably 18 months or so, a year and a half, a good maybe even more than that. Just listening to podcasts and reading articles, doing everything I could to learn the business  — and an opportunity presented itself, my finance did with the private lender that I’d met through a college internship and that was kind of the start of my real estate career I guess. Since then, I’ve been using what’s popularized as the BRRRR strategy, buying, smaller multi-families to grow the portfolio over the last few years and now, started raising capital from equity investors, primarily in the joint venture structure to actually scale the portfolio, buy some larger buildings and pour some gas in the fire. That pretty much brings us to today.

0:14:04

WS: Awesome. That’s’ an incredible story but it’s neat that you had that entrepreneurial fire in high school and buying and selling cars and you know, were you making any money doing that while you were doing it then?

0:14:14

AR: I was making some money. I look back, I thought I was making a ton of money at the time and then you look back and you think, you know, I was doing a lot of work to make five, six, 700 bucks here and there but I just didn’t want to work for someone else so I was like you know, what can I do on the side that makes some money and that’s what it was.

0:14:28

WS: Okay. So, you looked for something that had more upside, more money than you can make from turning something over like that, buying and selling and in came real estate and first, you thought flipping, which a lot of people do, you think, we’ll start there but then it was multi-family so you have more recurring income but I want to hear a little more about that relationship or how you got financing.

I know a lot of people, they get called up there, right? They can’t get started because they can’t get the financing or they can’t get to the next step because they don’t have any capital, they’re on to put in and so, a lot of people will quit there. How did you make that happen?

0:15:01

AR: Sure, so, the quick back story is I did a college internship for a small angel investment group. It was a group of 10, 15 guys that were investing in startup companies and it was a great internship, obviously, great connections were made there. And one of the guys that were in the group also did private money lending. This is really early when I just started thinking about getting into real estate.

So we just had casual conversations, you know, five minutes before, five minutes after the monthly meeting they had where entrepreneurs would come in and pitch — and you know, my role is I basically take notes for the meeting and then distribute it after. And, I started learning more about what he did, what private money lending really was.

So, I just kind of lucked into understanding that piece of the real estate business really early on and you know, the biggest challenge that I faced was you know, despite the fact that I had a relationship with this person, it doesn’t mean that they’re going to lend on a deal that I find, right? There’s a big gap between knowing someone and having them trust you enough to lend you money. So, basically, what I did was, I just you know, kept them apprised of what I was doing for over a year and I was looking at deals, I was evaluating deals.

It wasn’t like I was meddling, I was spending 20, 30 hours a week on top of everything else I was doing just learning real estate and underwriting deals, making connections in the industry, and soon there was some common connections that I had with him — trusted individuals that were well-known in the real estate business in our local market. I was just talking to him about deals all the time. So it got to the point where when I did actually find  this deal, this three-unit property on craigslist and I brought him the numbers and I said “Hey, I’m really confident that this is something that makes sense.”

He said, you know, we’ve been talking about this for so long, you’re ready to actually execute on something. So, the takeaway for me is that you have to share what you’re doing with folks that could potentially be lenders when you’re starting out. You know, the more that people understand that you’re spending time in the business and becoming more and more proficient with real estate as an actual business — then I think they’re going to be more likely to lend you money.

That’s what I prioritized early on was just really documenting what I was doing and sharing it with the folks that I might want to work with.

0:17:05

WS: Interesting, so you’re sharing, I mean, otherwise, people aren’t going to know that you’re pursuing this, right? They may have an interest as well and it’s never even brought up if you don’t talk about it.

0:17:12

AR: Exactly. You have to share, it’s really important, especially when you want to raise money because you need to kind of passively build that trust whether you’re raising money in the form of equity and in syndication as some kind of partnership or it’s a private money lender.

You’re raising money in both situations but they’re just payback in different ways, it’s – you have to develop that authority in the space and it’s hard to do that when you start so you have to be patient and put time into it but make it a focal point of what you do.

0:17:42

WS: Let’s talk a little bit about you know your lead generation strategy and how you networked and just how you started growing and your brand and you know, your business. Whether that started, what you were thinking about lead generation and networking and those things may be even compared to now and how you’ve learned and grown that way.

0:17:59

AR: Absolutely. When I was starting out, right ahead of time, I was a college student, I had time to hustle and you know, pound the pavement and talk to people and look for deals online and underwrite deals and something that I focused on early on was building some lead channels that weren’t the MLS because this is 2016, 2017 — and it was competitive then, it’s competitive now, you’re not going to really find anything that’s publicly listed. So in my space, which at the time was you know, four to 10 unit multifamily properties, there were smaller in size. I really prioritized networking with the owners in the market that owned numerous properties.

And I took a really long-term approach to that, just you know, grabbing coffee every three, four, five months and just checking up on their business, letting them know that if they’re interested in selling it that I was a buyer. Doing the same thing with the brokers that typically sold those properties and then I did some more active and paid marketing and prospecting so I did direct mail and I actually did a lot of email marketing and marketing might not be the right word but email prospecting where I find the owners of a building, you know, got their email somehow, Google search, skip trace it, find what the contact email was in their LLC, however you can grab it and I just reached out and start –

I wouldn’t reach out saying “Hey, I want to buy this place, this is what I’m going to offer,” — you know, I reached out with the goal of trying to build a connection. I’d reach out and say “Hey, I’m a local investor, I’m interested in buying more in the Manchester market, if you’re interested in selling, certainly give me a call, if not, great, I’d love to meet and grab a coffee and get to know you since we’re both doing the same thing.”

So, it’s like a really low-pressure approach — I guess is a good way to classify it. A combination of all those things built the lead funnel that basically outgrew the capital connections I had which led for me or led me to even raise some money. But that’s – I placed a conscious focus on those few main areas and in the multifamily space, you’ll find that networking is probably the greatest way to get the deals. Comparatively, it’s the more transactional business of single-family homes where one owner is probably just going to sell you one house in their lifetime whereas in the multi-family space, you might have an owner that’s looking to sell his six-unit building but he’s got another 80 units in his portfolio that he’s looking to sell at some point.

So, I placed my focus on developing the connections with the people to have the buildings in my market, and then they called me when they wanted to sell.

0:20:16

WS: Nice, I think it’s so smart. That’s just another reason we like multifamily as supposed to single-family. It’s so true, the relationship component, especially syndication business, every aspect of it is relationship and team, you know, business. But even that aspect, a lot of people do not see or think about that relationship as much but it is the seller’s, I mean, you’re right, a lot of them have been in the business many years and they have numerous properties and they’re not just going to sell this one.

Eventually, they’re going to sell all of them at some point in time and so, tell me a little more about how you could just create that relationship, what would that look like? I mean, I know you mentioned like an email, maybe going out to coffee or something like that but you know, how do you – it’s like reaching out at once a month, wasn’t reaching out every week or six months or following back up, how did you finally bring up the property or how did you share with them that that’s what you’re into as well.

0:21:09

AR: So, I try to prioritize providing value that as many touchpoints as I could and I’ll try to explain that a little bit further but when initially reached out, something that I would do as I put together a newsletter for the marketplace, that was multifamily focused and it includes, I’m licensed so I have access to the MLS, I go on there and pull a lot of the data for multi-family sales in the area over the last quarter or over the last half a year, six months, whatever timeframe. And I would package that with some maybe key transaction or key events in the market, you know —

Maybe there’s a new 250 unit multifamily development, I think that’s something that anyone who owns a multifamily regardless of the size in that market might want to know about. I started pulling information that I, as an owner might find helpful. So, when I’d initially reach out, I’d attach that newsletter and at least now, it’s not completely sales-y in terms of the message, right? There’s some value being sent, making it known that I want to buy and then making it known that I’m interested in building relationships rather than I’m just rifling out emails or you know, messages to Craigslist for rent ads.

There’s something like that. Basically, every time I reached out, I wanted to bring some value. And then after that, I basically put all the context ahead in the marketplace and there’s CRM and the addresses of the properties that I knew they owned and basically, I’d give myself reminders every three to six months, you know, reach out to this person, they own this property on 123 main street. I try and do some research to see and maybe there’s something that’s sold that’s a similar type of building to the one that they own and you know, maybe they’d be interested in knowing what the new comp was in the area or something like that.

Basically, I did a lot of the things that brokers do. But I basically applied it as a buyer rather than as a broker. I tried to reach out, provide value as much as I can and I think that’s not something that a lot of people do so when I did do that, it’s another reason to just reach out and gives you another reason to stay in touch with people.

That was really the big thing I did in terms of building those relationships, more so than just completely cold outreach — where it’s hard to build something off of that.

[END OF INTERVIEW]

[OUTRO]

0:23:06

Whitney Sewell: Thank you for being a loyal listener of The Real Estate Syndication Show. Please subscribe and like the show. Share with your friends so we can help them as well. Don’t forget to go to LifeBridgeCapital.com where you can sign up and start investing to real estate today. Have a blessed day!

[END]