143. Don't Wait... Elevate with Jorge Abreau

Hey, welcome back to the Average Joe Finances podcast, everybody. I'm your host, Mike Cavaggioni, and today's guest is Jorge Abreu. So Jorge, I am super excited to have you on the show. We had a chance to talk a little bit at the Hawaii Millionaires Mindset Conference. But again, Thank you for joining me.

Thank you for having me, Mike.

Yeah, absolutely. The first question I want to ask you right off the bat is the same question we ask everybody that comes on the show, and we wanna know more about you. So if you could share a little bit about yourself, tell us your story. Who is Jorge?

Sure, real estate investor, been doing it for full time for about 15 years. Started in the single family space. Did My whole thing was scaling and with the single family I ran into several brick walls, let's say. One of the first ones was finding good contractors and being able to keep up with the renovations at a, at the volume that I wanted to get at. So I did start a construction company. That was about 11 years ago that really helped to scale and start renovating at high volumes. That kind of spun into, we started doing additions to the homes and then finally just scraping them and building a new, then did some small multifamily, did some fourplexes, apexes. Started, rental portfolio. I actually did not love the management part of it and collecting the rents and all that stuff. And it wasn't quite big enough or didn't make sense to hire a management company back then. So ended up selling all that. And about five years ago when I was doing quite a bit, we were probably averaging maybe, 50 to 60 fix and flips, and then another a hundred wholesale per year. I got introduced to multi-family syndications. Now I had no idea you can syndicate these deals. And what I mean by that is, bring investors together and purchase these apartments. I thought you had to have millions and millions of dollars to go in and buy these apartments yourself. So when I got introduced to that, I was really excited. I wanted to, it's completely different from single family as far as how you evaluate the deals. When it comes to large multifamily you're pretty much buying a business, right? Everything is off of your income statement and the more you can get the property to produce income, the higher the value of the property. With single family, at least with the fix and flips, it was very much just based on the comps and in and out. So I took in all that education and knowledge. The number part of it came somewhat simple to me. I am electrical engineer before I started, doing a real estate full time. And man, I loved it and stopped doing single family altogether. Started doing multi-family. Since then, we've acquired over 7,000 units exited 1500 or so, and we've got some more in the pipeline and just looking to keep growing.

Oh, wow, Jorge. That's awesome, man. What a story. Started off in the single family space as I think most people in the multifamily space, it's usually the same thing, right? They started single family. And as you were scaling, you realized, man, I can scale so much faster on the multifamily side. And, you come to that realization and then get rid of that limiting belief that you don't need millions of dollars to, to go in and do that. That's a thing that a lot of people face. So I definitely appreciate that side. Now I do wanna kinda rewind back because you said before you started investing in real estate or before you went full-time in real estate, you were an electrical engineer. What was it that made you decide to start investing in real estate in general? Not just multifamily, but when you started investing in single family assets. What was it like when you were doing your nine to five that you said, I need to go buy some real estate?

Yeah, so I guess it, it's not fair of me saying I was an electrical engineer, so I had a degree in electrical engineering. And it was During that journey of getting my degree in college that I knew I didn't wanna do it, I didn't want to do corporate America and, work in a cubicle nine to five. That's when I started seeking, what else is there, right? And that's when I came upon real estate investing and eventually got a coach. I hired a coach. I think around the same time I finished college, so I was doing real estate on the side while I went and worked for UPS in their engineering department. It was more of not really engineering. I was like a glorified GC for UPS really. And did enough on the side to where finally I, quit my W-2 and started doing it full time. But I went in knowing that's not what I was gonna be doing.

So you were in college when you made that decision that I'm gonna do real estate. But you needed to start somewhere, right? So you got that job at UPS and the whole time you're there, you're like, okay I'm gonna make this push. My goal is to get the heck outta here as fast as possible which you did. So congratulations. That's awesome.

Thanks.

Now you said, you hired a coach before you even got your first deal.

Yeah.

Right on. Yeah. So I see a lot of people, like when they decide to hire a coach, it's usually they've after they've done a deal or two before they say, you know what? I need to figure out something. You, because they get a lot of those bumps and scrapes and bruises after the first couple deals, and they're like, man, I'm tired of getting punched in the face. So they'll either go take like a course or they'll hire a coach. So you right off the bat, hired a coach. What made you wanna hire a coach? Just from the very beginning.

Look I wanted to learn from somebody else's mistakes. I didn't want to have to make my own mistakes and I wanted to move quick. I knew I could probably figure it out on my own, but it was gonna take me a little bit longer.

Awesome. Okay. Yeah, so I'm writing this stuff down because that's great stuff. So you decided right off the bet. I wanna get in this, I wanna go fast, I wanna go hard, and I wanna make this happen. And you hired a coach right away so you can learn from their mistakes. Which is great. It's one of the reasons why I do this podcast the way that I do it. I want people to share what they've done, what helped make them successful in whatever aspect of investing that they went into, right? Cause I've had, people outside of real estate on this podcast as well. And one of the things that I find that's very common is they either learn a lot from their own mistakes, and a lot, and it's either an expensive education or they got hit that first time and then they go and hire a coach because they're like, okay, if I'm gonna pay for this, I wanna pay because I'm gonna learn something. Not because I'm going get old through it and be forced force fed to learn it. Because I'm making mistakes. I think that's really awesome that you did that. For me, like right off the bat, like when I retired from the Navy, which was recently right away since I knew I was going full-time as a realtor as a real estate agent, I hired a coach right away. Cause I knew that I wanted to come out the gates swinging yeah. That's awesome men. I definitely am a firm supporter of hiring a coach or, paying for a course and actually learning the material. So you can learn from other people's mistakes. I think that's huge.

Yes, if you're confident in yourself to take that information and take action, then it's what worth it when it's not worth it is when those people that pay for it and then don't take action. But I you're gonna pay for it one way or another. If you're gonna, if you're gonna do it on your own, you're gonna pay for it on the mistakes and might as well just get the coaching.

Yeah, that's right. You're gonna pay for it one way or another. One way or another. Like I said before, if you make those mistakes, we call that in real estate, we call that an expensive education, right? That's awesome man. Now as you've gone through, you made that shift, right? You started off in the single family space and you were, managing a bunch of, smaller transactions, right? You said about 55 a year, something like that, right? Fix and flips.

The fix and flips, and then we had the whole sailing on top of that.

So were you like wholesaling the stuff that's you were looking for the fix and flips for yourself and then the stuff that you didn't want looking to wholesale this? That's awesome man. That's a good model to follow. Okay. And then so how long did you do that before you decided to get into multifamily?

Oh man, about 10 years.

Oh wow. Okay.

Yeah.

So you did that for 10 years. Okay. And then you started I guess just taking on a couple smaller transactions of four plexes, eight plexes. You said like the smaller multifamily space. And then you said, okay, it's time to go into an apartment building or start doing syndications. How did you learn about syndications?

It was, I wanna say it originally came about from a client on the construction company. So actually we ended up, started doing some more commercial deals and multifamily renovations for other investors. And then talking to those investors on the multifamily and them telling me how they acquired the property is what kind of got me, peaked my interest. And then I started digging in from there.

Okay. Yeah. It's amazing what a conversation can spark up when you're just talking to people. That's why I love going to conferences. I love going to meetups cause you never know. What type of opportunity might present itself just from having a conversation with somebody. So that's awesome, man. Jorge, as you got into the multi-family space and you decided to syndicate, did you do anything first, like maybe a JV with some partners before you decided to take on investors? Or how did that look, how did that process look for you when you first made that transition?

Yeah, so our first deal I felt like that was our weakest link was, we had never raised equity from investors. The single family stuff we had done, we had a couple private lenders that had been letting us money forever and then, our own funds on some deals. So never had to go and raise equity. So on our first deal we brought somebody in that had that experience. So we didn't have to worry about that on that one either. And then on the second deal that I had the same plan, but in the middle of it, pretty much the person that I brought in our Co-GP on the deal told us that they were overextended and they couldn't get the equity or not all of it. Got pushed into raising the equity on that deal. We were successful in doing it and I had started planting those seeds. I just hadn't done it yet.

Okay. It's a good thing you planted those seeds because they sprouted and they were forced to grow right away. Yeah. So again it's nice when you have a it's nice and stressful at the same time. When you have a forcing function like that kind of pushes you, okay, we thought we were good, but hey, I don't have the capital for us to go in and close on this deal. We need to raise the money. Under pressure you're gonna figure it out, right? You're either gonna figure it out or you're gonna. So I'm glad you figured it out. cause that's turned into, what you have now, right? With with Elevate. Which is awesome and I love your shirt man, by the way. For those of you that aren't watching this his shirt says, don't wait. Elevate. Absolutely love that. Okay, cool, man. Now, as you as you got further into this, obviously you've you've built your structure around what your KPI's are, what you're looking for what markets do you invest?

So we're highly concentrated in Texas, obviously that's, I'm out of Dallas, Texas, and then we own quite a bit in Dallas, Houston, some of the smaller submarkets around those. We also kind of the sunbelt, I'll look at any landlord friendly state pretty much and just dive into the numbers and see. What's happening, we just got a deal in northwest Arkansas under contract. The fundamentals looked great for the area, so we dove right in. We've got a bunch in Oklahoma closing on some in Florida here soon. And Georgia, South Carolina. So pretty open.

Right on. Yeah, so that's a popular the Sunbelt's very popular right now. It goes with the fact that they are, more landlord friendly states. And there's nothing wrong with that because, as a landlord you wanna make sure that, you're not put yourself in a situation with more risk that you don't have to put yourself into.

The way I see it, man, there's so many variables in multifamily real estate that the last thing I need is. Something that I have no control over at all.

Exactly. But the good thing too, like with you being in Dallas and having a large majority of your investments in Texas as well you're close to the quote unquote problem, right? If there's something that comes up me living in Hawaii makes it very difficult when I have something going on because all of my assets are back on the mainland, right? So now what I'm doing right now is I invest as a limited partner because it's just easier for me at this time with how busy everything's been. And. I kinda like it because it's, outta sight outta mind for me. I just, here's my capital and go forth and conquer and conquer they do. So it's absolutely awesome. That's why I love syndications. I love real estate. Syndications, multifamily. It's just a great asset class, and it's it's something that's pretty recession resistant. I wouldn't say it's a hundred percent foolproof. You have to do your due diligence, right? There's some bad deals out there. There's some bad syndications out there. You see it all the time. If you find some good operators here like Jorge you don't have to worry about going belly up. You get your return and you could be a happy investor. It's good stuff, man.

It's like you said, it's you look historically, the way multifamily has performed during your down cycles and even during covid, it's pretty solid, but like you said, definitely do your homework and vet your sponsors, your deal sponsors. Very important for sure.

Yeah, absolutely. Okay. I wanna talk about that a little bit, right? cause now that I'm thinking about the timeline here, you had mentioned that, when you were doing the single family stuff you had done that for 10 years before you got into multifamily. When did you start single family investing? Was it after 2008?

No, it was '05 or '06 around.

Okay. So you went through that pain on the single family side, right? So you felt that, how was that compared to 2020?

Very different. I guess you're talking about Covid, right? The fundamentals were great. The economy was great, right? It was the country just put a pause on everything. So I mean it was definitely different going, looking back at 08, was felt like a pause, but it was literally I always say this, like somebody just turned the lights off and. They did not come back on for a while. With 2020 I think once things shoot towards the end of 2020 it started heating up quite a bit. And then 2021 was just ridiculous. The fundamentals were still there. The economy was still wanting to thrive and as soon as things opened up, it was back at it. Look at what they're doing now to calm it down.

Yeah. No that's great. So it's good though because you've been able to experience what a true downturn, recession looks versus what we've experienced recently and what we're going through right now, cause now we're starting to see a, like a lull here in 2022. And, they haven't officially called it a recession even though we've had two back to back negative GDP quarters, right? Or negative GDP on two quarters but again, hasn't been called a recession because, we're not the ones who make those decisions. Other people. And, it's different than any other time that I've seen it like this, right? There has been some job loss, but nothing significant, nothing crazy, right? Because there's still a lot of people getting hired. So you don't really see the financial extraness that you saw in the past where you have to worry about whether or not people can be able to pay rent or whether or not, the actual real estate value will hold its worth. And it just is and that's one of the things that I think is is quite amazing. And one of the reasons why, especially in multifamily, cause even, if the market does tank right and you see the single family homes go down in value multifamily, it's based off of that NOI, right? So as long as you're doing what you gotta do as a good operator, you're gonna keep that value of that property up. You know I think some of the things you're looking for in those areas are, the population growth, job growth and things like that kind of really give you a safe bet when you get into multifamily, right? If you're in a area that's growing and booming, it's gonna continue to do that. And I remember talking about this at the conference. Everybody that's in the real estate space really talks about this as well is you wanna look 5, 10, 15 years down the road, right? It's, this is not a. Get rich quick thing. This is a build wealth over time thing, So I just wanna touch on that a little bit because of the fact that, there's so much fear out there right now. There's, and a lot of fear mongering, right? A lot of people kind of playing on that. And it just drives me bananas because I don't see a lot of this end of the world apocalypse that people are calling for. I did a poll in my group recently about, Hey, do you think now's a good time to buy real estate? Why or why not? And right now I think it's 92%. Yes, now's a great time to buy real estate, where 8% eh, you know? So I don't know. What's your thoughts on that right now?

Yeah. Look what's the alternative, right? If you're just gonna put your money on the sidelines and then you've got inflation still there, so you're actually losing money. If you look historically at real estate, I mean if you structure the deal and it's cash flowing and you can hold it, you're gonna be okay. More than, okay. So it's finding those locations, like you mentioned, the ones that have the population growth the job growth. We really like the submarkets that we can get in at a lower basis. What we feel is a good low basis and there's still a lot of room for growth there. So yeah, man, I mean I'm a 100%, it's time to buy. That's one thing I did notice Going through a down cycle, that window of opportunity to buy it closes very quickly. Like before, it's gone. Especially in a normal recession. Oh wait, was not really a normal recession either. That was a bit extreme to say the least. If this is gonna be a normal recession, that window of opportunity is not gonna be enough.

Yeah, I would say that '08 was like Avengers endgame. And what we're going through right now is like Secret Wars for you Marvel fans out there. This is like the secret recession that nobody talks about. Keep it under wraps, right? No, that's awesome, man. Now, so I get it, with. The fundamentals right now though still remain the same no matter whether it's an upmarket or a down market. And at least for me, one of the things that I look for is does the asset cash flow. I'm not sitting here looking at stuff for appreciation cause now's not the time to look for appreciation and realistically, Never use that as one of the it's a side benefit when you get appreciation, but you should always be looking for that cash flow, at least in my opinion. You wanna look for the cash flow, because as long as you're getting paid, you're not gonna go underwater. And I think one of the things a lot of people ran into, back in '08 with with the mortgage crisis that we had, is they were like banking on appreciation. They were banking on, hey I can get all these loans and, there's no regulation on it, and I can just go buy all this real estate and it's just gonna go up in value. It's just gonna continue going up and up and up. And when everything tanked, 40 to 60%, they were in a big world of hurt.

Leveraged as well.

If you can't afford to hold it for 10 years, don't buy it. That's the thing. If it's not gonna cash flow and you can't afford to keep it, For at least 10 years it's not worth it. Cause you, you never know when something might happen where there's gonna be a big drop in value. I don't foresee anything like that happening right now, but who knows? A meteor can strike and blow up half the planet and then home values can go up because there's less now. , or go down because we lost half the population. You never know what's gonna happen, right? So I know that's crazy talk, but you never know. And I think that's the whole point is you never know. So just be prepared, like always prepare yourself and buy cash flowing assets. So Jorge, there's this thing that I like to do now called the final round. I wanna kind of transition into that, where I'm gonna ask you three hard hitting questions to kind, this kind of tells us who Jorge is under pressure and gets us, thinking about your critical thinking skills. And then one opinionated question at the end of that. If you're ready, we'll we'll get this party started.

Let's do it.

Okay awesome. So the first question, and this is usually a doozy, right? What's the biggest mistake you've ever made in real estate investing?

Biggest mistake I've ever made. Probably, Not doing multifamily first and going into single family. Maybe just not in the beginning, not calculating holding costs accurately. Those holding costs can creep on you. And then also not taking into account in the single family game, you hear a lot of investors say, oh, yeah, I bought this for 80,000 and sold it for 120,000. I made $40,000. But how much time did you spend doing that? And your time is valuable as well. So taking that into account, I know that's not one large mistake.

No, I that's that's actually a first, I've heard, I wish I went into multifamily first one before, right? But yeah never had somebody talk about holding costs and what that can actually cost you over time. So that's actually really that's really huge and I appreciate that answer and your transparency there because lot of people, they don't think about. The actual time that you're losing when you hold an asset like that, where if you would've just. Moved on and moved on to something else, you could have, maybe done a couple more transactions in that time period. Yeah, so definitely calculating that or at least calculating it to the point where you understand you didn't really make $40,000,

Correct.

You made, Less than that because of the holding time and the loans you were paying during the time you were holding it. Yeah that's huge. Okay, cool. So the very next question I have, and this kind of ties into it, is, what is something that you've learned that you wish you knew when you first started?

Something I've learned that I wish I knew when I first started. Doing multifamily instead of single family. Going straight into multifamily and just skipping over all the single family deals I did.

Yeah, that's fair. Okay, now I'll do a follow on question to that since you did that and why is it that you wish you would've gone into multi-family before? Or just first in general?

I just feel, my goal was to build wealth. And in the single family there was some good money and some good transactions, but it was transaction based from one to the next, one to the next, one day to the next. And I never really got to the point of building that. Generational type wealth that I wanted to with multi-family. I see that path is a lot more attainable. So yeah, that's basically it.

All right. Yeah, that's fair. So the next question I have for you is, do you have any tips or tricks that you would recommend to someone that is just getting started today? Besides saying, get into multifamily right away.

Tips and tricks? Yeah. I would say if your goal is to do multi-family and to do that full-time, and I think you alluded to this earlier too but don't quit your job, don't quit where you're getting your main income from. It takes a bit to get going on the multi-family side especially to have consistent income coming in as well. So take that into account and don't just quit and say, okay, I'm gonna be a multi-family investor. You need to set stuff up first and I think work that side hustle before you do that.

Yeah, absolutely. That's great. And I appreciate that answer. That's something that you hear about sometimes, but I don't think it's talked about enough. A lot of people buy into the hype of I saw so and so quit their job and went full time into real estate. I wanna do that too. I'm quitting my job next week and I'm gonna force myself to to succeed. And if not, I fail. And I'm homeless. That you're not putting yourself in a good spot, because, if you do fail, then you'll be in that spot, like you said, you'll be homeless, right? So it's important that, you started off as a side hustle or even start a side hustle to raise capital, to get yourself to the point where you can actually use that money. To get started. It's one of the things that I was always doing, during my last couple years in the Navy was I had a couple side hustles and I started investing in real estate. And now I retired, and now I'm going full-time as a real estate agent and full-time investor. Absolutely love what I'm doing right now. And it took time and it's not a lot of time, but it took time to get that, systems in place and get everything put together. I think that's huge. Okay.

The last thing you want to be is a desperate investor.

Yeah.

When you end up buying

People sniff that out too.

Yeah.

Potential partners that you might have, they're gonna be like, oh, I don't know if I wanna go with this guy because you seem a little too eager to get into something and you might not make the best decisions.

Yep.

And then the thing is like when you're doing that you're a stupider of other people's money at that point when you're a GP on a deal. And the last thing I wanna do is invest with somebody that is just trying to find the first thing that sticks, the first contract that somebody says yes to. cause a lot of times you'll miss stuff in your due diligence phase and you might change some numbers here to make it look better, be like, oh, if we do this. If there's a lot of IF's in what makes the numbers work, then you're not putting yourself in a good spot. All right. Awesome. All right. And the final question of the final round is, do you have a favorite business investing or real estate related book or podcast or both?

Yeah. So specific to real estate investing, I think you said business too. Traction is one my favorite business folks. It's Gino Wickman. Yeah, great book.

Yeah I'm actually halfway through that right now, and it's it's blown my mind and I'm like, it made me realize there's certain things I need to pull my hands out of and I thought I was delegating enough, but I feel like I'm not yeah. That's awesome. It's a great book. So far for me at least, but, all right. Cool. Any podcasts that you listen to?

I did starting out I haven't recently, but I, I did this a lot to Joe Fairless podcast in the beginning. There's so many out there now. I feel bad mentioning I'm gonna hurt somebody's feelings, so I just need.

No that's cool, man. That's cool. Yeah, no, that's great. We got a good book, for people that haven't read traction yet or you've been thinking about it, that's definitely a good one to go check out. And again, I need to actually get off my butt and finish reading it. I could probably finish it this week. So I think that's, I'm gonna do, that's gonna be my nightly reads for the rest of the week. Alright. Anyway, Jorge, this has been absolutely awesome, but I do have one more question for you. Because for those that have been listening right now, they're thinking, okay this conversation was great, really you know how Jorge came up and made this work and got into multi-family syndications and I wanna know more about him. I wanna know more about elevates cause I don't wanna wait. I want to elevate. Jorge, where can people find more information about you? Do you have a website, social media, or anything like that you can share with us.

Yeah, I'm all over social media. It Jorge or Jorge, spelled J, O, R, G, E, Multi-family. You can find me on Instagram, LinkedIn, Facebook and just started TikTok too. But not a lot going on there yet. For me, website is always updated. It's elevatecig.com. I've got a bunch of content on there. So that's elevatecig.com. And if they shoot me an email at Jorge@elevatecig.com, I can send over arsenal of like free content if they mentioned that they heard me on this podcast.

Okay. Awesome. Yeah. So I will make sure I have all those links in your email and the show notes to make it easy for everybody. So for those of you that are listening, you could just click and copy and paste. Just don't do it while you're driving. Okay. So Jorge, this has been absolutely awesome. Thank you so much for joining me today.

Thank you, Mike.

Absolutely. And to my listeners, thank you for joining me and our special guest, Jorge Abreu on the Average Joe Finances Podcast. Go leave us a five star review and tell us what you liked about today's episode with Jorge. Aloha from Hawaii and have a great rest of your day.