Abiel is the Vice President and Founder of SAR Apartment Capital, a Miami-based real estate investment and asset management firm specializing in multifamily apartment syndication. He is also the Principal Broker for United Dream Real Estate, a full-service real estate brokerage in Florida with over $150 million in sales. He focuses on sourcing, acquiring, and managing multi-family assets with low risk and high ROI potential for our investors. The key to his excellence is his competence and dedication in helping his investors gain financial freedom and build sustainable wealth. In this episode, Abiel takes us through the importance of strong relationships and partnerships and why it became the foundation of their success.
Abiel Ballesteros Real Estate Background:
- Full-time real estate investor
- 16 years of real estate investing experience
- Portfolio consist of 845 units
- Based in Miami, FL
- Say hi to him at: www.abielballesteros.com
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Best Ever Tweet:
“Having partnerships allows you to see the things that you don’t see.” – Abiel Ballesteros
TRANSCRIPTION
Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here today with our guest, Abiel Ballesteros. Abiel is joining us from Miami, Florida. He’s a full-time real estate investor with 16 years of experience and his portfolio consists of 845 units. Before we get started, Abiel, can you tell us a little bit more about your background and what you’re focused on now?
Abiel Ballesteros: Thank you for having me on the show. I got into real estate in 2005. I was drawn to the business by that boom that was going on in real estate back in the day [unintelligible [00:01:26].28] doing residential appraisals sold me on it. As a young kid, my dad did a lot of rehabs, maintenance work, and things like that, so I was always around the construction business at a very early age… So it drew me to the business. I would have to say at that [unintelligible [01:45] about 25 years old, I was kind of lost in my life. I chose the path of workforce coming out of high school instead of going to college, and did a lot of numerous types of jobs. I think the only one that kept records of how many jobs I had was my mother.
I started the workforce very early. At the age of 16 I was already out there working. So school was not an option for me; not because I didn’t grow up in a family that had education, it’s just I didn’t connect well in school. I struggled in school with education, and the way the school was didn’t fit me at that stage in my life. I won’t preach that to my kid now, to my son now; I would love for him to go to school. But back then just working for me and making money was the option that I want it to go through.
Going through a lot of jobs, I fell into real estate and it just hit me, I just loved the industry immediately. But it evolved from different things; it evolved from a residential appraisal to start flipping properties with my father, with his background in construction. That led me to appraisails, to doing a lot of flips between 2005 and 2008. Then the crash hit, I was very fortunate that I had some strong and older mentors that were flagging me down, “Hey, you’ve got to slow down. Something’s going to happen. Something’s going to happen.” I was able to exit a lot of my flips in time in 2008, so I didn’t get to experience that hit that a lot of them took, but I did lose all my business, in the sense that I had no cash flow, nothing going on that had an income. The appraisals dropped, they changed the regulations, it was hard to do business.
Gradually I dwelled off into other businesses like restaurants and marketing. That led me back into going full-time into real estate and flipping houses, beacuse in 2010 the properties were just amazing and the prices were cheap. I saw the amount of all these hedge funds gobbling up properties in South Florida.
That’s how I lived from then on. Slowly I started watching how syndicators and multifamily guys were buying the properties. I got myself really educated through shows like this, through podcasts, through YouTube videos, trying to learn how do investors buy these big large apartments? It always intrigued me. Slowly but surely I got into duplexes and fourplexes; that was extremely hard to scale. I was living a life of a roller coaster, flipping houses. One day I was balling, the next day I was fully invested in four or five houses, and that was extremely stressful. That’s when I started saying I need to commit to a certain amount of cash flow to cove — I started first covering my expenses.
I think that a lot of multifamily investors go down that path. I just want to cover my expenses and do my thing on the side with real estate. Then I just got hooked with the multi-families, man. Now I am a full-time syndicator, buying large apartments, and actually not touching any single-family flips at the moment. Actually, I’m so focused that if you send me a house I wouldn’t even open the email, because I just don’t want to go down that rabbit hole right now. I just want to get big apartments.
Ash Patel: Tell me about your first syndication, please.
Abiel Ballesteros: My first syndication was in Cape Coral, Florida. It was a 16-unit syndication with a friend of mine, a partner, which actually we own a lot more units now. We bought that deal together; he put in the capital, I found the deal, I did the operational, I increased the rents, and once we stabilized it, we refinanced the property with Fannie Mae. We had the vision of a long-term hold and we got an offer. It was an off-market offer, it was a local broker that sent us an offer, and we were like, “How much are they going to give us for this?” We just couldn’t believe it. We told them, “Well, have a loan” and we explained to them the loan is assignable. What’s crazy was I wasn’t that educated. I knew I needed to get an assignable mortgage just in case, but I didn’t know how desirable that was. It was actually very desirable to this buyer that we already had the mortgage locked in.
We ended up exiting within four months after we got the mortgage. My mentality now is a little different. Now, I would probably not have accept that offer, because now we have a longer-term hold. But that was my first syndication multifamily deal, it was the 16-unit one.
Ash Patel: Did you have syndicators on that or just your one capital partner?
Abiel Ballesteros: It was two capital partners. So it was actually a joint venture.
Ash Patel: Okay. You found the deal, they fully funded the entire deal, rehab, everything?
Abiel Ballesteros: Correct. 100%.
Ash Patel: Abiel, do you remember the numbers on that property?
Abiel Ballesteros: They were townhouses. There were 16 townhouses; we bought them at $70,000 a door, we spent an average of between 10 to $12,000 a unit, I know that we hit a target rent of between $1,250 and $1,300 a unit, and we exited at $118,000 a unit. It was a nice little flip.
Ash Patel: How many years did you hold that?
Abiel Ballesteros: It wasn’t even a year.
Ash Patel: So now you’re riding this market wave up.
Abiel Ballesteros: I made more money on that small multifamily flip than I was making in residentials, because in residential we use sometimes bridge loans to buy these properties. There’s paying a mortgage out of my pocket to pay the bridge. This multifamily had income flowing in since day one, so it just offset that overhead of paying a bridge loan or private loan on a single-family. It just made so much sense, it was just like “Oh my god, this is sweet, man.”
Break: [00:06:51] – [00:07:57]
Ash Patel: Were you a 1/3 partner in this deal?
Abiel Ballesteros: That deal was a sweet deal. It’s hard to close those types of deals, so it was 50/50. It was a 50/50 and it’s hard to close 50/50s now. Now that you’re scaling it, it’s not like that anymore.
Ash Patel: What was your next deal?
Abiel Ballesteros: The next deal was another small apartment with 14 units in Fort Myers. That one was very similar, not with the same investor, but with a different investor. Very similar. That deal actually went a little longer; than one went almost two years. But same exact model, same structure. From that one, I jumped into a 32-unit in Crystal River, Florida. Then from there, I scaled it to 100 units in Miami, and now we are only looking at deals that are above 80 units. They just make more sense for our business model.
Ash Patel: Abiel, your first two capital partners hit a home run on the first deal. Why didn’t they invest with you on the second and subsequent deals?
Abiel Ballesteros: They did; the first one, he did the Cape Coral one, bought with me on the 100 units that we bought. The one that did the 14 units, to this day he’s still also my equity partner on deals.
Ash Patel: With cap rates compressing, what is your target cash on cash or IRR number that you want to hit on each of these properties?
Abiel Ballesteros: We need to be above 10% cash on cash. Our IRR has to be at least 18% and above. Traditionally, in most of the deals that we’re looking at, IRRs are above 20%. Realistic, conservative numbers; we want to be realistic. Our business model is distressed properties. We don’t buy stabilized products. Most of our deals have 20% to 30% vacancy, they’re just in poor shape. That’s our criteria. They usually come off-market. We buy properties that are completely empty, [unintelligible [00:09:37].23] deal not as completely empty. That’s what we like to get – we like to get into the heavy lifts.
Ash Patel: There’s your strong background work ethic wanting to take these distressed properties and completely turned them around. How do you find these deals?
Abiel Ballesteros: Strategically, what I did was, when I created — I always say “I”… When we created SAR Apartment Capital – I have my two partners, Rene Sanchez and Sam Jazayri… I saw that we shared the same values, principles, and love for distressed properties. What I mean is that I will show investors a vacant multifamily building and they will just get terrified. They’re like, “Oh, this is too risky.” I will show it to these two guys and they’ll get so excited. I’m like, “Yes, this is exciting. We’ve just got to get it at the right price.” They weren’t scared of the heavy lifting. In fact, they wanted those types of deals.
For them, it was actually less risky, because that’s the way I saw it. If we get it so cheap, it’s actually less risky, because we know what we’re walking into; we have a plain canvas to underwrite a deal. We’ve got access to all the units, we’re seeing the condition, and we know it’s going to cost this much… So for us, it was easier than looking at stabilized products where you have so many hidden things; properties are fully furnished, tenants are living in it, you don’t get to see too much of all the units, sometimes you don’t get access to all the units… So this is just, like I said, an open canvas just for you, to see everything that it has.
Ash Patel: So if you think back to when you were doing all of this yourself, and then you took on the initial partners, what advice would you give somebody that has always done their own deals and now they’re looking to take on capital partners or do a raise? What advice would you give them?
Abiel Ballesteros: Yeah, the best thing I ever did was joint ventures with my partners. It’s a dynamic that we needed. One of my partners, he’s been in the business for 40 years, very successful in real estate. Renee has also been in business for a very long time in multi-families. So I don’t have to make a decision on my own anymore. That stress of having partnerships allows you to see the things that you don’t see. Sometimes we’re so stuck in our vision, and we’re so gung-ho on what we want and what we want to see. Sometimes we’re blinded because we’re so eager to do a deal. Having other partners underwrite a deal with you, sit down with you, “Is this for us?” When you start seeing how they see the deal and their concerns, you’re like “Whoa, whoa, I did not see that coming.” Especially when you have a partner with that much experience.
So that to me was the best decision I made. It’s like going back to a board meeting and bring to your board a deal that you feel confident about, and then they just start chopping it down. It’s a necessity. This is not a one-man game; you need a team around you, you need a strong support team. What we did also to bring in this team is that we join-ventured with [unintelligible [00:12:17].00] with a contractor that’s highly experienced. He comes in before we get out of our DD, our inspection period, he gives us his advice on what maybe we might be missing. That is just three great minds giving you advice on a deal. It just makes it so much better, man. And for the investors.
Ash Patel: That is great advice. Is your contractor a part of this deal as well?
Abiel Ballesteros: He does come in in some of the deals with us.
Ash Patel: What are the challenges with that?
Abiel Ballesteros: Well, it’s not really a challenge. We have contractors actually putting some capital up into the deal. We actually embrace that.
Ash Patel: Are there any conflicts of interest when that happens?
Abiel Ballesteros: That is always the concern, is a conflict of interest. The way we go around the conflict of interest is we have our underwriting, we’re very specific of what a cost to a knob installed in a unit is. We have our own construction detailed list of what each item should cost, and what each item should cost in labor and material. So we would walk and underwrite the units just like we underwrite an Excel sheet. We would do the same thing on a per unit basis. So we kind of have an exact specific cost of what we know the units are going to cost, and then we give it to them – “Can you do it for this amount?” Once we show them that amount, he says, “Yeah, we’re not seeing this, and that.” But we already know ourselves. We shouldn’t be too off on what we think it’s going to cost.
Ash Patel: Got it. So you’ve mentioned deals with joint venture partners. Do you also do deals with syndicators that are passive investors?
Abiel Ballesteros: That is correct. We just closed on a deal that we did with a group in Ohio.
Ash Patel: And how did you go about finding your investors in the passive deals?
Abiel Ballesteros: The passive deals were word of mouth, relationships, talking to a lot of people in my circle in Miami. Once you do a couple of deals in multifamily — sometimes you’ve just got to get in with the small deals first to get some experience under your belt. I definitely get that advice. Once you’re able to do a couple of small multi-families, some people are fortunate and they could just go into bigger deals. I started the small route; I started with duplex, and triplex, fourplex, to the 16, to the 14. That’s the way I built my relationship and my experience.
Once you have a few of those you become more attractive to investors. There’s a lot of investors that are at the point of their lives that they’re educated in multifamily, they know the business world, they’ve had success in that business, but they don’t want to be the operator. They want to find a partnership with someone that is a strong operator, that is knowledgeable, and I found that niche. I saw that there are investors that know the business very well, probably better than I do, but they just don’t want to be the boots on the ground anymore. But they do want to invest with an operator that will.
Ash Patel: Do you also have novice investors that you have to educate on the passive side?
Abiel Ballesteros: I’ve had those. I do. There are friends and family that had nothing to do with real estate, that put in some capital in our deals. We do have those.
Ash Patel: What challenges are there with trying to educate those folks and get them to see the long-term picture of what you’re doing?
Abiel Ballesteros: I think it’s a personality thing. Some of them are very hands-on and want to know every time you send them a monthly report. Some of them are just okay with just hearing about the property. I know that some of them like to drive around the property, they like to see it, they like to walk it. Some of them don’t ever go to the property. It’s definitely a personality thing.
The only challenge that I find is not with them, it’s more of in-house, making sure that we provide our monthly reporting that it is as detailed as possible. If you do that, and you’re consistent with your monthly reporting to your investors, and you make sure it’s very detailed, there’s no reason for them to give you a call. Unless they have a concern about something that they saw in the report. But if you communicate well on a monthly basis with the investors on that monthly reporting, you should be fine.
Ash Patel: Good. What’s the biggest lesson you’ve learned in doing all of these deals? What’s the hardest lesson you’ve learned?
Abiel Ballesteros: There’s been so many…
Ash Patel: Give me a real tough one that hit you.
Abiel Ballesteros: Attention to detail. My two lessons are attention to detail on your craft. You can’t assume anything; do not assume the contracts that you’re signing are going to be okay, do not assume the agreements that you’re doing are going to be okay, do not assume that everyone is an expert in construction. Those are my experiences, my expensive lessons of life have been those – assuming that someone told me something, I saw their resume, I saw their background, that they knew what they were doing in construction.
Do not assume that someone read this agreement and said, “Oh, everything’s fine.” No. Give me bullet points. What are my warnings on his contract? What should I be aware of? That goes with attorneys, do not assume that your attorney — some attorneys just browse through it. They need to be very detailed in what they read in these contracts.
So the attention to detail is something that I work on every day in my life, especially when you’re trying to grow a business. I stopped assuming that everyone knew what they were doing.
Ash Patel: That’s great advice, and having your partners involved probably helps that attention to detail as well.
Abiel Ballesteros: Oh, yeah.
Ash Patel: Good. What’s your best real estate investing advice ever?
Abiel Ballesteros: Clarity. You need to have clarity of what you want, all the way down to the specific product you want to buy, to the specific city, suburbs, or neighborhood that you want to be in. You’ve got to have that clarity of what exactly you want. The day you discover that, it’s something that would take away so much stress from you. If you want to be the investor that’s doing it all, you’re not going to draw the big bucks. You need to become an expert at one thing, understand it, learn it, be obsessed with it. Understand that city, understand the submarkets, understand the rents in that city. If anyone says “I want to call Ash”, I know that Ash is going to tell me specifically the most confident market he’s in, because you have that clarity. That is the mistake that I see investors and friends of mines make all the time, and it’s a mistake I made for many years. Once you obsess about one thing, you become so good at it that when you talk to someone about it, they’re going to know you know your stuff.
Ash Patel: Are there markets that you focus on, in that if there’s a deal that comes up in a market you’re not familiar with —
Abiel Ballesteros: It happens all the time. It draws you in because you see the numbers are great, but then it goes — you’ve got to stay disciplined, “No, that’s not my sub-market. This is my sub-market. I’m sorry. The numbers look great, but you got to make sure you stick to the sub-market you’re an expert at.” As of right now, we are an expert in Atlanta, we’re an expert in Columbus, Ohio, we’re an expert in South Florida, we’re an expert in Jacksonville, and an expert in Orlando. Not an expert in North Carolina, Texas, all those hot markets; right now we’re not there yet. Right now, these are my markets where I’m confident.
Ash Patel: Let’s take Columbus, Ohio. What’s special about that? Why are you an expert and what makes it a good place to invest?
Abiel Ballesteros: We’ve done a lot of underwriting. We’ve purchased 194 units in Columbus, Ohio, the deal that was brought to our table. We wanted to be in Ohio, Cincinnati, and Columbus. We saw the job growth and an economy that was doing well, so we wanted to spread our investments and that was one of the ones that we identified. Then a deal fell in front of us that we had to buy. It ended up being a home run, and that deal actually was a syndication deal with other syndicators that we had great a relationship with.
Ash Patel: Explain that. You went in on a deal with other syndicators. Can you tell me more about that deal and how that worked?
Abiel Ballesteros: Yeah. We raised 50% with another group, a gentleman called [unintelligible [00:19:44].05] They raised money with a group of friends and family. They’ve done a few of these and they’re very educated in that business. My group, SAR Apartment Capital, came in with the other 50% of the equity. We bought it with a bridge loan. It was a very distressed asset; it had over about 25% to 30% vacancy, really low rents. We bought it at $41,000 a door, which ended up being a home run; average rents were between 800 to 900. It is a heavy lift; we’re actually still in the middle of the rehab.
Ash Patel: So the other syndicator found the deal.
Abiel Ballesteros: We found the deal.
Ash Patel: Oh, you found the deal. Why did you partner with the other syndicator?
Abiel Ballesteros: We had a mutual friend, David. David does all our financing on multi families, and David did a phone call with me and Gwaith on a Zoom call – this was like at the beginning of COVID – and we hit it off, Immediately. I liked what they were offering, their expertise, their knowledge, and the conversation just went well. Then we had a couple of other Zoom calls and we underwrote it a bunch of deals together. I saw the way they underwrite their deals and I just knew there were pros at what they did. Then this deal came up, I proposed the deal to them, they said “Yeah, let’s do it.” I went to my partners, “I want to do more business with this group. I think we could grow with them.” And it just led to that.
Ash Patel: And you guys are equal partners on the deal in terms of managing the asset?
Abiel Ballesteros: No, they handle the asset management side. I handle the construction side of the property. So we spread the responsibilities.
Ash Patel: Would you do another one of those?
Abiel Ballesteros: Yeah, 100%.
Ash Patel: Good. Abiel, are you ready for the lightning round?
Abiel Ballesteros: Let’s do it.
Ash Patel: Alright. First, a quick word from our sponsors.
Break: [00:21:28] – [00:22:05]
Ash Patel: Abiel, what’s the Best Ever book you’ve recently read?
Abiel Ballesteros: Oh, the 50 Cent book.
Ash Patel: What is that? Tell me more.
Abiel Ballesteros: Oh, man, the 50 Cent book just came out. I don’t know how to explain it, man. It was such a great read. He basically explains everything about how he did all his videos, coming from vitamin water all the way to the show with Power. He just gives a different perspective of what you assume. He’s just a rapper, he’s not a very successful businessman. That’s the last book I just read. It was great. I recommend it for anyone that’s interested in business but also into the hip-hop culture.
Ash Patel: Great advice. Abiel, what’s the Best Ever way you like to give back?
Abiel Ballesteros: I like to give back work. I like that we have, right now, 120 people throughout our projects. I like to see that we’re a growing company and we are giving out a lot of employment. We were employing a lot of people during COVID. That brings me a sense of pride that there’s a lot of people that are eating off this multifamily business. It’s not just me and my partners, but this employs a lot of people. These are large apartments; one apartment could bring a lot of money into an economy. So it’s a beautiful thing, man.
Ash Patel: That is a great accomplishment and a great responsibility as well. Abiel, how can the Best Ever listeners reach out to you?
Abiel Ballesteros: They can reach me at my email, abiel@abielballesteros.com, they can shoot me an email there. They can go to my website abielballesteros.com and hit me up if they have any questions or want to do a quick underwriting or anything like that. I’m always open to talk to someone about the business and any ideas that they have. I love this stuff, man.
Ash Patel: That’s great that you’re willing to help. Abiel, thank you again for all of your great advice today. You had an untraditional upbringing; you didn’t go the traditional college route. You had numerous jobs, found the real estate bug, and you had a great trajectory on the way up. The typical single-family, multifamily, graduated to syndications and partnerships… So, thank you again for sharing your story with the Best Ever listeners. I really enjoyed talking to you today. Thank you.
Abiel Ballesteros: Thank you, man. I appreciate the time.
Ash Patel: Have a Best Ever day.
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