Luis Vilar-Carrasquillo is a mechanical engineer who joined a group focused on acquiring apartment buildings through syndications and joint ventures. In this episode, he discusses how persistence and market knowledge have helped him get great deals, the importance of developing and sticking to your own criteria, and his top networking tips.
Luis Vilar-Carrasquillo| Real Estate Background
- Mechanical engineer who joined a group focused on acquiring apartment buildings through syndications and joint ventures.
- GP of 176 doors
- Based in: West Palm Beach, FL
- Say hi to him at:
- Greatest Lesson: Stick to your criteria. It is super important to establish your criteria and stick to them from the beginning.
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Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel, and I'm with today's guest, Luis Vilar-Carrasquillo. Luis is joining us from West Palm Beach, Florida. Luis is a mechanical engineer who joined a group focused on acquiring apartment buildings through syndications and joint ventures. His current portfolio consists of being a GP on six properties, that also has 176 doors. Luis, thank you so much for joining us today, and how are you?
Luis Vilar: Thank you so much for the invite. I'm fantastic. How are you doing?
Ash Patel: I'm very well, thanks for asking. Before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Luis Vilar: Sure. So first of all, like I said, thank you for having me. Yeah, my background - like you said, I have mechanical engineering background. I am Puerto Rican, so I went to school in Puerto Rico. I did my bachelor there, moved to United States in 2014 to start my career as an engineer, and a few years after I came across the term house hacking, and that's what put the idea of real estate in my head. And I just rolled with it, and here I am, five years after.
Ash Patel: Luis, in my experience, engineers make some of the best real estate investors, because you apply processes to everything. Let's go back to your first house hack. What was that? Like? What did you learn? And what processes did you apply? And did you end up scaling that and doing numerous house hacks?
Luis Vilar: So that's very interesting that you just said that engineers make great investors, because that's what I learned during those house hacks, was basically the importance of having systems in place for your business. Because if not, things can get difficult. And to be honest, being the first investment, I had no systems, basically nothing in place. I was just scrambling all the time. But from there, I felt that I was spinning my wheels, not finding anything; being in South Florida, super-competitive market... So from there, I realized I wanted to actually go bigger in multifamily, and decided to join a couple of groups... I met my partners, and just went from there. After I met my partners, we bought 14 units a year after.
Ash Patel: Man, you make that sound easy.
Luis Vilar: It was not easy at all.
Ash Patel: Tell me. Tell me the struggles. Tell me the story. How did you meet your partners?
Luis Vilar: So my partners - I met them through a mastermind. And actually, it's very interesting, because just networking; networking with people from the mastermind. I remember having a conversation with one of my partners, and he mentioned that he was interested in mobile home parks. I told him that I had an audio course for mobile home parks, I sent it to him at value, for free, nothing in exchange. So I sent that to him, he introduced me to his other partner, which was Puerto Rican as well, and we just clicked from there. They asked me to do an underwriting for them. They liked the way [unintelligible 00:03:56.26] and yeah, like I said, we went from there.
Ash Patel: What are their strong suits or the backgrounds of your partners?
Luis Vilar: Interestingly, they're engineers as well. But particularly, we have different sets of skills. One of my partners, Myron MacNeill, he is in charge of all the finances of the company. He deals with all the distributions. My other partner [unintelligible 00:04:24.09] he is in charge of making all the contacts with brokers, with owners, negotiations... My other partner, Shadi, is in charge of all the construction management, and I do all the KPIs, I do all the market analysis, underwriting, property analysis and all that fun stuff with numbers.
Ash Patel: Luis, a lot of times partnerships are born out of necessity. Somebody gets inundated, and they just need help, they need partners. Did you get your partners that way? Or did you set out from the beginning saying "Okay, I want to scale this company. I can't do it alone. I want partners"?
Luis Vilar: Actually, it was out of necessity in the first place, because I was just looking for deals. Like I said, I was just spinning my wheels trying to find deals here in South Florida, and I was just not finding anything. And they had the deals, but needed an underwriter. So it was a mutually beneficial relationship.
Ash Patel: And today, do you raise capital?
Luis Vilar: Yes. We do everything, from sourcing, we raise capital... We are actually transitioning to vertically integrate so we're managing our properties, so we're doing everything right now.
Ash Patel: Alright, so back to the beginning... You said Florida is very competitive. How did you overcome the competition?
Luis Vilar: So right now, we are actually investing outside Florida, for the most part in Georgia; and specifically, in secondary and tertiary markets. And that's how we are taking advantage of those markets, and going around the competition.
Ash Patel: I'm with you. So instead of fighting the competition, you escaped it.
Luis Vilar: Correct.
Ash Patel: Some of the suburbs of Atlanta, the secondary/tertiary markets are on fire; underrated. So Best Ever listeners, start looking at those markets that have not had their boom yet, right? So Austin, Phoenix area, Miami... They've boomed, man. How much is left on the bone there, right? So let's start looking at those overlooked markets. I love that.
A total side question, Luis, is Puerto Rico is on fire, with real estate, tech companies crypto... Did you ever think about investing in real estate there?
Luis Vilar: Oh, for sure. Yeah, definitely. Every time I go to visit my family, I drive around and see so many opportunities. But right now we're focused on those markets that I mentioned. But eventually, yes; eventually, the idea is to expand to Puerto Rico. And like you said, it's on fire with short-term rentals, mid-term, long-term... Everything.
Ash Patel: Even car rentals. It's cheaper to buy a car and leave it there than it is to rent it for a few weeks.
Luis Vilar: Yep. 100%.
Ash Patel: It's crazy. So Luis, let's go back to the evolution of your deals. After you started house-hacking, what was your first multifamily purchase?
Luis Vilar: So my first won't have family purchase came three years after. And we bought a mixed-use property 45 minutes North from Orlando, with four commercial spaces and ten apartment units. And that was a joint venture.
Ash Patel: Okay, so that is way outside of normal comfort zone for people that do fix and flips. So ten apartments and four commercial units. Was it fully occupied?
Luis Vilar: Yes. From the very beginning, it was fully occupied.
Ash Patel: What attracted you to that building?
Luis Vilar: So what attracted us to that building was the stability of the city itself. It's a very quiet city, very stable, not a huge influx in population, but not a huge decrease in population either. Very stable. And the fact that those businesses have been there for a very long time, it was an indication that it was a stable asset. So that's what we liked about that one.
Ash Patel: Luis, how old was that building?
Luis Vilar: Oh, man... That building, if I'm not wrong, it's 1970... If I'm not wrong.
Ash Patel: Yeah, there's a lot of great deals on mixed use buildings... Because the commercial people don't want them, the residential people don't want them... They fall between the cracks. Was it hard to get financing for that?
Luis Vilar: It was not that hard. It was local community banks.
Ash Patel: Yeah. Those are the only ones that finance them, typically. Most lenders hate mixed-use buildings, because they don't fall under any category. What types of businesses were in there?
Luis Vilar: We have a restaurant, a barber shop, and one cleaning company.
Ash Patel: And you said there were four commercial spots. [unintelligible 00:09:15.04]
Ash Patel: Yeah, so cleaning company used two spots.
Ash Patel: Okay. And is it a residential cleaning company?
Luis Vilar: Yes. Residential and commercial, yes.
Ash Patel: Okay. And this is probably in like a dense neighborhood type area?
Luis Vilar: So yes, it's in the heart of the city. Like I said, it's a very small city, not a huge population... But yes, it's in downtown.
Ash Patel: Do you remember the numbers on that deal? Purchase price?
Luis Vilar: Purchase price was 765k, if I'm not wrong.
Ash Patel: And did you have to renovate anything?
Luis Vilar: Barely. We barely renovated anything on the residential units. So light renovations and straight to market rents.
Ash Patel: What was the rent per apartment when you bought it?
Luis Vilar: If I'm not wrong, they were around $555, around that number. So right now we're around $760 something.
Ash Patel: So $200 per apartment times 10... That's $2,000 a month in increased NOI.
Luis Vilar: Yes.
Ash Patel: That's a big deal. Were there commercial rents at market, or were they below, too?
Luis Vilar: They were slightly below. We were not trying to push them too hard. We didn't want to vacate those spaces. So we didn't push those rents too hard.
Ash Patel: Have you done more mixed use since this building?
Luis Vilar: Yes, we've just acquired another property in Georgia. This is a 56-unit with 52 storage units. The storage units are not live yet, but we're working the CapEx to make them available.
Ash Patel: So you bought a multi-unit property... And was it just land for building self-storage?
Luis Vilar: The storage was there already.
Ash Patel: But it's not being rented?
Luis Vilar: It's not functional?
Ash Patel: Why not? Just not completed?
Luis Vilar: The previous owner just unfortunately didn't maintain it. So it was a huge benefit for us, because we bought the property based on the 56, not 56 and 52. So we got a great deal for that property.
Ash Patel: And this - you should be able to add a ton of NOI to this one.
Luis Vilar: Oh, yes.
Ash Patel: Can we dive into the numbers on that?
Luis Vilar: Sure.
Ash Patel: What was the purchase price?
Luis Vilar: 3.65 millions.
Ash Patel: And what were the apartments rented for? Are they below market rent?
Luis Vilar: Oh yeah, they were below market. They were around $765. Right now we're pushing for -- actually, sorry, let me go back a little bit... They were around $625. Right now we're pushing for the one-ones for $795 and the two-ones for $895.
Ash Patel: And then the storage units - what will they average rent for each?
Luis Vilar: The ones that were rented were around $35, and market it's $125.
Ash Patel: So some of them were rented when you bought the property?
Luis Vilar: Some of them, yeah. Maybe 10, if I'm not wrong.
Ash Patel: Okay. So you're going to add another $4,000 of NOI?
Luis Vilar: Yes, we're very excited for the storage units.
Ash Patel: I'm excited for you.
Break: [00:12:31.18] to [00:13:37.13]
Ash Patel: How'd you find this deal?
Luis Vilar: This was found through cold calling, direct to seller.
Ash Patel: Good for you.
Luis Vilar: Yes.
Ash Patel: Was there a particular list, or just apartment owners?
Luis Vilar: I'm not sure on that one. I'll have to go back and get back to you... But yeah, direct to seller.
Ash Patel: Luis, it seems like every apartment owner gets phone calls, text, mailers about selling their apartment... You probably were not the first one to hit this owner up. How did you get the deal done? What was it about you guys?
Luis Vilar: I think what makes the difference with us is the persistence, for once, and two, the knowledge of the market. We've taken that market very seriously. Like you said, not everybody is looking in those markets... And we're just diving in. Actually, we just bought two more properties on that specific market.
Ash Patel: Tell me they're home runs, like these two.
Luis Vilar: Oh, this one... I'm very excited for this one, because one is a JV, 14 units, and we bought it for $55,000 a door; [unintelligible 00:14:43.00] stabilized, of course, to $90,000. So we're super-excited for that one. That's a 14-unit, like I said, and this other one is a 32-unit. That one needs a little bit more work, but it's going to be another great deal.
Ash Patel: 14 units... What are the rents right now?
Luis Vilar: $485.
Ash Patel: And what's market rent?
Luis Vilar: We're benchmarking with the previous property that I mentioned, so we're gonna shoot for $795 the one-bedroom, and $895 the two bedrooms.
Ash Patel: Do you have to do renovations to achieve that?
Luis Vilar: Light renovations, yup.
Ash Patel: And what does light renovations mean?
Luis Vilar: Kitchen and bathroom, for the most part.
Ash Patel: Is just painting cabinets, or replacing them?
Luis Vilar: For the most part, we're just painting cabinets; not replacing them. We don't feel that replacing the cabinets is needed in this market. We're getting great rents with just painting the cabinets.
Ash Patel: Countertops, appliances - they stay as is?
Luis Vilar: Yes. For the most part. Yes.
Ash Patel: Okay. Do you have to do flooring?
Luis Vilar: We do flooring, yes. We do flooring.
Ash Patel: What do you do in the bathrooms?
Luis Vilar: We're doing the vanity, for the most part; just vanity, and resurfacing of the top.
Ash Patel: Perfect.
Luis Vilar: Yes. So we're spending around $10,000 per unit on the ones that need a lot, and between $5,000 on the ones that don't need much work.
Ash Patel: Is your plan to sell these once you have the rents increased?
Luis Vilar: So we are planning to refi; hopefully the market stabilizes a little bit... But we're planning to hold them for five to seven years. Some of them are syndications, so we owe to investors.
Ash Patel: Well, if you could sell early and return a lot of capital to investors, why not do that?
Luis Vilar: I agree. Especially in this market, right? If we can continue getting properties, yeah. Why not?
Ash Patel: Okay, so it's up in the air.
Luis Vilar: Yes. At this point, yes.
Ash Patel: Good. Did you find these by going direct to seller as well?
Luis Vilar: Yes. Direct to seller, and actually broker relationships. These last two that I mentioned, the 14 units and the 32 - they were broker relationships.
Ash Patel: Okay. And what type of return to your investors get?
Luis Vilar: So on the syndications we offer 7% pref. It's 70/30 split. And we're expecting between 12% cash-on-cash, and around 15% IRR.
Ash Patel: And how much did you raise for these deals?
Luis Vilar: So we are raising around 3 million for the bigger ones. For the JVs we do it ourselves, but for the syndications around three millions.
Ash Patel: What type of debt do you have on the syndications?
Luis Vilar: We have bridge right now. We are doing bridge debt.
Ash Patel: For how long? How many years is that?
Luis Vilar: Two years, with one year extension as option.
Ash Patel: Is that a paid extension?
Luis Vilar: Yes, correct. Yeah.
Ash Patel: Okay. And then after that, it resets to market rates?
Luis Vilar: Correct. And the idea will be to refi, of course, before year two.
Ash Patel: In your proformas, did you bank on increased interest rates?
Luis Vilar: Oh, definitely. Yes. I like to be conservative on interest rates, and cap rates as well.
Ash Patel: Your exit cap rate, in your proforma - what is that?
Luis Vilar: We are looking at 625-635. We don't want to be too aggressive on those cap rates.
Ash Patel: Good. So back to the mixed use building - do you still try to find those anomaly deals that nobody else really wants?
Luis Vilar: Definitely. Why not? They're hidden gems. That mixed use, it's performing at year three proforma, and we just had it for a year and a half. We've been looking for the entire year trying to refi and just cash out, but unfortunately, we need to season a little bit more.
Ash Patel: Why? Have you tried multiple lenders?
Luis Vilar: Yeah, we've been trying to contact multiple lenders, and nobody wants to refi right now.
Ash Patel: So with mixed use buildings, there's no agency debt. They're typically not sold on secondary markets. So whichever bank you have the loan through is going to hold that note for the life of the loan, which is why it's very important to build partnerships with your lenders, right? So have you approached other lenders, and maybe given them the opportunity to refi other properties as well?
Luis Vilar: No, not specifically other properties. We're just trying to do that one separately.
Ash Patel: Yeah. Or maybe tell them on the next deal you'll give them the primary opportunity to get the loan, if they can refi this mixed-use property. Because the way you guys are on fire, I think a lot of lenders will want to become partners with you.
Luis Vilar: I agree. Yeah.
Ash Patel: So keep trying. Mixed use is very, very difficult. Banks just don't like them. So just keep trying until you find that right lender.
Luis Vilar: Yeah, we will. Like I said, we've been looking, but just no luck yet.
Ash Patel: Back to the engineering... What systems do you have in place to scale?
Luis Vilar: As an engineer? Ha, very interesting question. To be completely honest with you, Ash, I'm using engineering as a stepping stone to continue growing my real estate career.
Ash Patel: So let me rephrase that question.
Luis Vilar: Okay.
Ash Patel: You have an analytical mind, and when you're doing real estate, in the back of your mind you're always thinking processes and systems.
Luis Vilar: Oh, yeah. Yes.
Ash Patel: So in your real estate, what processes have you put in, and what systems have you put in that have helped you?
Luis Vilar: Oh, okay. I see what you're saying. So we've put systems to, like I said, track the KPIs... We have created, basically, our underwriting tool, just to see what exactly we need... Things like that. Mostly related to excel. Off the top of my head I just can't think of one right now.
Ash Patel: What performance indicators do you track?
Luis Vilar: So we are tracking vacant units, physical occupancy, economic occupancy, we're tracking the NOI, we're tracking costs of maintenance, we're tracking, of course, rental income, and expenses.
Ash Patel: How often do you communicate with investors?
Luis Vilar: On a monthly basis.
Ash Patel: And do you provide financials every month?
Luis Vilar: We do it quarterly.
Ash Patel: Did you share KPIs with them?
Luis Vilar: No, not yet. Because we just got these properties. Once we start sending those quarterly reports, yes. But we got them three, four months ago.
Ash Patel: Luis, what's the hardest lesson you've learned in real estate so far?
Luis Vilar: The hardest lesson... I will say, keep your criteria very close to your heart. Always. When you deviate from your criteria, it's when you start making mistakes. And a story - when I was starting to invest multifamily, I was so eager to get into a deal that we basically waived all our criteria. And unfortunately, we lost money. So that's the lesson I learned - keep my criteria very close to my heart.
Ash Patel: What was the criteria that burned you?
Luis Vilar: We waived all the contingencies - inspection contingencies, financial contingencies... Beginning of COVID, everybody was waiving everything, so we did the same thing. And I learned that it's not worth it. It's better to have no deal than a bad deal.
Ash Patel: Yeah, it just seems with multifamily there's so much money chasing deals... And some of them don't work because the people buying them just need to park money or deploy capital. It's hard to compete against that.
Luis Vilar: And this was in a primary market. This was in Tampa. So beginning of COVID, everybody was going crazy in this market, and it was very hard to compete, because we were trying to get into a property with all those steps, and it burned us.
Ash Patel: And how do you market for investors?
Luis Vilar: So we do friends and family, just picking up the phone, newsletters, sending emails... That's what we do.
Ash Patel: The newsletter, is it all business? Or is it somewhat personal, too?
Luis Vilar: I do a mix of both, as well as my partners. I've seen a lot of people just doing business. But I like to introduce a little bit of the personal touch.
Ash Patel: I agree with you. I think it's very important that you put yourself out there, so people can get to know you and get to like you and get to trust, right?
Luis Vilar: Yeah.
Ash Patel: Good for you, man. Luis, give me your best real estate investing advice ever.
Luis Vilar: Best real estate advice ever. I would say network. You never know who you're talking to. And one of the things that I like about networking is that -- I like to add value to people. I like to just listen and try to figure out what are their needs, and try to connect them with someone that can satisfy that need. So network and listen. It's very important for you to become a successful real estate investor, if you listen and network.
Ash Patel: Great advice. Luis, are you ready for the Best Ever lightning round?
Luis Vilar: Yes, sir. Let's go.
Ash Patel: Alright. Luis, what's the Best Ever book you've recently read?
Luis Vilar: I'm reading right now Limitless, and it's fantastic.
Ash Patel: And that talks about your mind... Tell me more about that book.
Luis Vilar: Correct. So I'm basically just starting, but it talks about how powerful the mind can be. We sometimes have limiting beliefs, and this book is basically here to disrupt all of those.
Ash Patel: Luis, what's the Best Ever way you like to give back?
Luis Vilar: Give back? Oh, man... I have a doggy, so I like to give back by donating either time or money to dog shelters.
Ash Patel: And Luis, how can the Best Ever listeners reach out to you?
Luis Vilar: LinkedIn, Facebook and YouTube. So just look me up... On LinkedIn, Luis Vilar; same on Facebook, and YouTube, Luis Villar, or [unintelligible 00:25:35.07]
Ash Patel: Luis, thank you so much for your time today, talking to us about how you started out as an engineer, started house hacking, now moving up to multifamily syndication, raising capital, building a great company, and finding some great deals. Thank you for sharing all of that with us today.
Luis Vilar: Thank you so much for having me.
Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five star review, share this podcast with someone you think can benefit from it. Also, follow, subscribe and have a Best Ever day.
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