While they share some things in common, the commercial side of real estate can be a wholly different animal than residential real estate. What do you need to know about commercial real estate before you jump in? Join Scott Carson as he discusses this with the President and CEO of 5T Commercial Real Estate and the host of the 5 Talents Podcast, Abel Pacheco. In addition to tackling the basics of commercial real estate investing, Abel also shares how he got into investing, how he transitioned from part-time to full-time investor, the sacrifices he made along the way, and how he transitioned from residential to commercial real estate. Learn the importance of networking in the business and learn how to know, like, and trust in order to raise capital.

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Watch the episode here

 

Listen to the podcast here

 

5 Talents: The Fundamentals Of Commercial Real Estate Investing With Abel Pacheco

Abel Pacheco here, the host of the 5 Talents Podcast and President of 5 Talents Commercial Real Estate. I’m super excited because we had an amazing conversation with Mr. Scott Carson. We talked about raising capital. We talked about going from single-family to commercial multifamily, going passive investing to active investing and a lot of the things that we do to get out there. Hopefully, you can check it out. You’re going to learn a lot of insight from Scott and me. We hope you enjoy the time. Thank you very much.

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I’m honored to have a buddy of mine down I-35, that little city called San Antonio, who’s an amazing real estate investor not only on the residential side of his past and current stuff but also on the commercial side. If you’re a fan of podcasts, you’re going to want to check out his 5 Talents of Commercial Real Estate podcast out there. He does a great job. I’m talking about the one and only, the man, the myth, the legend, Mr. Abel Pacheco. What’s going on, Abel? How are you doing?

I’m doing great. Thank you very much for having me on your show. As your readers and guests know, you have a ton of fun. We had a great conversation on our podcast. I’m super excited to jump on here.

It’s always good to get people that aren’t Lone Star State if we can. I always love having people come on that have made the transition from one type of career into the real estate facet of things. With it being early 2021, many people are setting New Year resolutions. I’m an anti-resolution. I want revolutions. If we can do mental revolutions and change things. Let’s talk a little about where you’re at and how you left high-tech to get to what you’re doing now.

I live here in San Antonio, Texas. I grew up in Corpus Christi, Texas. I grew up near the beach. I’m in the Alamo City.

I lived in Corpus Christi for years. I graduated from Ingleside High School across the bay. It was by Spohn Hospital back in the day when I lived in Corpus.

I know where Spohn Hospital is and I know Ingleside. Little small towns we’re all talking about right there. That’s where I grew up. We went to the beach. We’d go to Port A and go to the little spots right out over the JFK Causeway. My dad took me fishing under the bridge all the time.

What high school did you go to?

Corpus Christi Carroll. We had fun over there. We scrimmaged with the ALS team. Football is what I played when I was younger. I threw a little shot put and disc in track. I’m married with two kids. I did IT tech. I was a salesman for years. I sold Cutco knives when I was younger. I did that through college. I ran an office with them. I sold cell phones when they first came out. I did furniture. I sold BMWs and Porsches. I did that and landed in IT sales. I did that for several years.

The gist of my sales career was I had a lot of fun. I met a lot of great people. I never said I was a salesman. I was always the consultant, the adviser, that person that tries to emulate some of my dad’s favorites. My dad gave me a bunch of books, Dale Carnegie, Stephen Covey, AL Williams. One of the things I picked up from Zig Ziglar was you can have everything in life you want if you help enough people get what they want. That was what I did. I had a great time over all the years. One trend that I realized was my quota kept going up. The time and effort that I put in never stopped. If I ever stopped then the commissions, quotas and pay would stop. That’s what led me to commercial real estate, in general.

 

I led a full-time career, 2008 until 2021. In 2020 was when I stopped working full-time W-2. I tried to keep both of those things together for as long as I could, to make sure I had a good jumping point to finally say, “I need to do this real estate thing full-time.” That’s how we jumped in. I started in single-family and now on commercial real estate. I’m a fund manager. I have a fund going and a few different things. Whatever we can jump in on, I’m happy to start there.

I heard Primerica in there when you said AL Williams. Is that correct?

That’s who it was. I never did that. My dad was doing that. I heard those, they were cassette tapes. That’s the motivational speaker and his name was AL Williams. If you go to Google, you can find his YouTube. He’s a motivational leader. It transcended that brand. He became bigger. That’s what I grew up on.

The Rule of 72 and all that good financial education and you talk about sales training. I worked for some major companies, which focus on sales training whether it was Enterprise or Cutco as well in high school or college. Using that to where you’re at makes you understand the language of people. When you can put a need or find a person to even fill that need on what they’re looking for whether it’s in residential, commercial real estate or they’re looking to invest. Identify find those needs.

I’ll start first by being comfortable talking to people. Most people that know me well know that I’m loud. I’m comfortable talking to people. I like introducing myself to big groups and in the middle saying hello. When I was 16, 17, it was not that way. That first sales job, telemarketing, I landed that and then went to do Cutco later. When I was working at Cutco, I did in-home presentations. I’d go set up something over the phone and schedule my time out because you didn’t have a clock to punch. You had to motivate yourself to go do it.

When I was in college, there were motivating factors when you’re 18, 19, 21, away from the house for the first time. You have to motivate yourself to go do it, set up a call, go make that appointment, get out there. I was talking to married couples with kids aged 30 to 50 and I was this eighteen-year-old college kid. That experience of having a ton of appointments helped me get more comfortable talking to somebody that was outside of my age group, peer group and building rapport, having conversations.

There was so much value in the discipline, the time management, blocking your schedule that aligns with the sales side. That’s what I taught to a bunch of my sales guys and gals over the years. They were successful. I realized that the more I helped them perform highly, the better our teams did and we made more money. All these things lead to that entrepreneurial like, “This is good. I’m going to do this for myself.” Even at Cutco, I was a sales guy. They asked me to run an office and I ran my own office. I owned that business for 5, 6 years. It was fun.

What you said there is something that we hone in on a lot here too is that you have to own your schedule. If you don’t respect your schedule, nobody will respect it for you. I’m thinking of my entrepreneurial journey. When I first became an entrepreneur and I left my full-time corporate job originally, I failed because I didn’t control my schedule. I slept until noon. I had the banker’s hours at 3:00, happy hour. I couldn’t come fast enough because I’d get away from talking to people. Those things become more and more relevant now to the point that I’ve got a dedicated schedule as you do. Things pop up all the time. I know that you control your schedule, you have time blocks and those are probably some of the most important things that are successful. Especially for those that are successful out there, those two things control their schedule and they time block to get things to be the most productive.

Our podcast, talking to new investors, going to look at properties, figuring out how to underwrite new deals. You’ve got to stay there. Family time, you’ve got to make sure it’s all there.

Happy wife, happy life.

I still learn that mistake. Every time that I think I’m right or every time I’m disagreeing for the right reasons, I’m like, “You get to learn that lesson.”

Even when you’re right, you’re wrong a lot of times. Let’s talk about the 5 Talents Commercial Real Estate. What do you mean when you talk about 5 Talents?

For those who are reading, I’m big on faith. This comes from Matthew 25:14-30, which is essentially The Parable of the Five Talents. It stems from there. Most people go, “What are the five talents?” I’m like, “It’s a little Bible scripture.” That’s a lot of who I am and where I grew up. In that parable, Five Talents, there were a few servants that were watching over this master’s plot of land. Presumably, he’s gone for years. He gives them all some talents to their abilities. One of them is five talents. One of them is two talents. One of them is one talent. Back then, they thought talent was about $10,000. It was $50,000, $20,000, and $10,000.

He comes back, takes account and he said to the guy he gave five, “How did you do?” He said, “I doubled your money.” “Well done, my good and faithful servant.” The guy with two, “I doubled your money as well.” “Well done, my good and faithful servant.” He asked the guy with one talent, “What did you do?” He goes, “I was scared. I didn’t want to lose your money. I don’t want to lose it so I buried it. Here’s your one talent back.” He gave him that money and he goes, “You wicked and lazy servant. You could have at least given it to the moneylender. They would have at least given me some interest on it.” I think about that as I never wanted to be the wicked and lazy servant. I always want to hear, “My good and faithful servant.”

My grandfather’s father, all of my family are Christ-followers. Motivated by that, the faith-driven, that’s the ultimate bottom line of what drives me, hence family. I got to be a good steward of people’s money. I’m raising capital to go buy big deals. I don’t have millions of dollars to go buy million-dollars of commercial real estate. I’ve got to put somebody’s money and figure out how to double it or be a good steward of their money. That’s five talents.

I knew that’s where it was from. My dad was an ordained minister and a deacon in the church as well. I had to live with that idea. I didn’t think it was going to be five tools of baseball. He can hit, run and slide. Somebody asked me that and I was like, “It’s not what it is. It has to do with the five talents from the Bible in Matthew.” You were talking about how you started on the residential side, the fix and flip side. By doing that, you have transitioned to the commercial side. Let’s talk about that immersion into it because you started passively and then now you’re actively leading the deal flow for commercial investments.

I invested passively into my first apartment complex, which is 128 doors. It was the biggest deal that I had ever done at this point and the most money that I’ve put in a deal. I didn’t have to do anything other than my due diligence. I knew the market because I live here. I invested in my backyard so I knew the market there. I vetted the team. I knew who was running it, a little bit about them and I vetted the deal. I looked at the property on paper and probably their offering memorandum and go, “This is pretty cool. Let’s do it.” That was my due diligence property. I did that and I realized it was a $50,000 minimum investment. I didn’t have $50,000 cash.

I had left one of my longest stretches at an IT company called Rackspace. We had a great run there. We did $57 million of business a year is what my organization led through the sales side of it. A big team, a lot of success. I put in as much money as I could in there and when I left, I went, “I can direct it somewhere else.” I put in a self-directed IRA and looked over this 120-page document that’s called a private placement memorandum.

I’m looking at this thing and I go, “We may need a lawyer for the lawyer. I don’t even know how this stuff works.” My wife goes, “What are they going to tell us? Are they going to tell us that there are a few things and some risks?” This document had every single risk you could imagine that said, “You could lose your money. You know that.” We’re like, “If we never risk it, it’s not going to grow. This is a great one, let’s try it.” That was my experience. That’s all I needed to get into a 128-unit apartment complex. Once I did it, where your money is, you also tend to focus on.

I started educating myself and learning more. As a passive investor, you get some reports. I looked at the P&L. I looked at the business plan. I found out what they were doing. I found out the strategy and all of the stuff started clicking and making a lot of sense. I paid for education. I joined 4 or 5 programs on commercial real estate. We went on a tear. My wife was pregnant on our first little one. We waited a long time before we had kids and were finally pregnant. I’m like, “This is amazing. We’ve got to do this.” She goes, “I agree.” I go, “I can sign up for these programs but I’m going to have to go every weekend for a year and a half to consume all this stuff.” She goes, “Now is the best time. If you’re going to go, go now because once the kids are born, you’re going to have less time. Go after it.”

We had one of those heart-to-heart conversations. She supported me all the way through. She’s an amazing and beautiful wife that’s supportive. That’s what we did. I went and took education every weekend. I would take off work on a Friday and either call in sick or take a day. I’d go there and be back at regular work on Monday. That education helped a bunch. I felt comfortable jumping on a second deal, 282 doors. I go, “This is twice as big. This is going to be twice as hard.” As a passive investor, I realized, “It’s the same thing. 128 doors.” You met the team, you’ve met the market and the deal. We moved our money from 401(k) to a self-directed IRA. I invested passively into both of those deals. That was my first 400 doors.

I started social marketing like Facebook and a little bit of Twitter. I worked in tech. I was never a social marketer but I was working with a bunch of tech people with their Facebook and LinkedIn and stuff. I would put my posts, “I invested in a 120-unit deal.” My post blows up like, “What in the world? Congratulations. This is amazing.” I put in some money and directed it. I did that again and again and people started asking me. As I started educating others, I realized that all these people, my friends, co-workers, people that I work with wanted to know more about making money too passively. That was the start of commercial real estate.

You and I both, we’re teaching. We’re helping other investors out there. That’s always one of the biggest things, people are scared, “What if my boss finds out what I’m doing on the side?” I’m like, “What if they invest with you?”

I’ve had my former CRO, my former sales guys, some VPS and directors, people at a high level, people at a lower level, people in other organizations. They knew me. Everyone you work with, W-2, they’ve got hard work, integrity and character. All of those things that people know you as and know of you, you spent so much time accumulating all these traits that people will describe great things about each one of you reading. That’s the thing that helped me realize, “They do know, like and trust you from work.” Now you’re doing something else and they’re still going to know, like and trust you as long as you’re educated and can help them with their thing. They’re going to be interested in potentially investing with you.

 

On those first 128 or 400 doors, you weren’t funding the whole deal yourself. You were doing it passively but you had a piece of the pie. You had the opportunity. I’m sure you’ll share some of your single-family stuff that we’re doing on the side too, “I bought this property here to fix and flip too.” You’re sharing the day in day out stuff. Is that correct, Abel?

Yes. That day in day out, people would ask me, “Where are you going for lunch?” I go, “I’m going to go check on my property.” They would ask me that and I tell them. They go, “Can I come with you?” Somebody would say, “You’re buying another house?” “I’m going to close on another house now. I can’t drink beers with you at 4:00.” My sales guys and people I worked with around me knew that I had multiple houses and they would always ask me for advice. I would share my friend advice and my sales manager advice. I might as well share with our readers too.

As a sales manager, my job was to get as many people selling as much as possible to make big commissions because we got to meet them. My friend-advice was always, save all your money. Take every single extra dollar of commission. You want to create your active cap or your seed money. Once you have enough seed money, that’s what you want to go invest and buy some real estate. Buy a second house, rent it out and you’ll get a little passive income. You’ve got to save it. Don’t buy a big car. Don’t buy a big house.

Who needs a fancy suit? We’re virtual. They only see your face anyways. We’re in tech. You don’t have to have a fancy car to host anybody. Don’t do that. They would say, “That makes a lot of sense, Abel. What’s your sales manager advice?” I’d say, “You need to get your credit card, buy a big watch, a big house and a big car. Overextend yourself so you have some motivation to sell more because you’re going to be in so much debt. You’re going to have to hit this quota. You’re going to have to this commission.” It takes a second and they’re like, “Oh.’” I’m like, “That’s my friend advice and my sales manager advice. You should take my friend advice. If you do take the manager advice, I know what you need to do. Let’s go drive and get some sales.” It was like that. I would tell people, “You need to invest in real estate.” We’ve got 1 house, 2 houses, 3 houses, 4 houses, 5, 6, 7, 8. The most we’ve ever held at one time in a rental portfolio or held is about ten, and then doing a couple of transactions of buy and sell, owner finance or a little creative financing deal here, a couple of wholesale deals a month. It’s a little activity on the side.

You filled in your 7:00 PM to 2:00 AM schedule.

It’s nights and weekends, Monday through Friday. That was the job.

Good thing you brought that up because a lot of people are lazy. They want the fastest and the easiest path to success and it takes work. It always takes work. It takes giving up your weekends. It takes giving up the free happy hour. Rackspace will always have a keg on Friday because I’ve had somebody that works there too.

I was 26 when I started working at this job. Do you remember the field day events in elementary? It was a great field day and we would go out. They did those but with kegs and Margarita machines. It would be during the day and we would go back to work. We were drinking during the day. It was a small startup. That company went from $100 million a year to $2 billion when I left. It was a ton of success. It was those things that sometimes I would say, “I can’t.” They’re like, “We’re going to drink. There’s a keg at work. Where are you going?” I’m like, “I’ve got to go. I can’t hang with you guys for this moment.” I had plenty of fun.

It was always nice to show up after you closed with a check. That’s worth celebrating. That’s the fun of that stuff. You had work ethic. You’re not only building wealth but you’re building success and a whole different path and destiny for you, your wife and your family too doing that stuff.

It’s a time, effort, energy focus. Your focus goes to where you put the most effort. Your focus in intensity. You’re like, “Let’s go do some bigger things.” The muscle of taking the risk and putting in some capital, $10,000, $15,000, $20,000, $30,000 is now a bigger risk where you can say, “We’re going to go sign on this $20-something million deal.” That allowed me to move that muscle a little bit and sign the documents at $20-something million. You’re like, “Let’s go get it.”

I had a friend that likes to use the analogy of a rubber band. We’re all constrained initially. If you stretch that rubber band five times, it never goes back to what it originally was. It always expands that comfort level. That’s what you were doing there. Everybody successful has had that happen. They’ve had a few times where that rubber band snapped back on them. Let’s talk a little about that. Anything along the way in the shins or the teeth?

I’ll talk about this one deal that is my frame of reference for the apartments now, which is you got to make sure the properties are running well. In my job as an apartment complex and commercial real estate investor, there are professional property managers. There are professional teams that are doing the construction and project management. Making sure all of our units are turned and it comes out the way you want to. You’re staying on schedule. You still have to watch the data, watch the numbers and make sure we’re on track to have the successful five-year term that we’re looking for. Buy low, sell high. It’s the same principle except there are a lot more moving parts.

One of the things that motivates me to watch the numbers on bigger numbers now was this 3-bedroom, 2-bathroom house that I bought. That was a tremendous deal. We got a great price on it. I’m looking at all the math and the analysis that I did, which is my Excel sheet and I go, “If I put $25,000 in X amount of years, it can be worth $180,000.” I looked at the appreciation, the rent growth, 2%, 3% a year, the cost, everything was calculated on this pro forma. What I did not do for 4 or 5 years, I never walked this house. I never checked on quarterly or yearly for the renters, “At least yearly, Abel.” I assumed that rent checks came in and there you go.

When I went to do the move out on their house, there was this 30-cubic yard, big old trash container. It looked like something that shouldn’t be at the apartment complex. We’re doing renovation at this little 3, 2-bedroom house. Anytime you walked into or drive up to your house when the renters are pulling out and there’s that commercial-grade trash bin, it’s never going to go good. It was car parts, broken down motorcycle pieces inside the house. There was no carpet anywhere. There was a bunch of terrariums, tarantulas and fish tanks in weird places. Dogs were all over the house. It was rank. Everything was jacked up. That cost me $36,000 to do the renovation.

I realized right then and there you better make sure that you watch your property and the numbers. You can’t let anything go because the money’s coming in. You have to be proactive and set up a system in advance that has a checkmark and say, “Every month, every quarter do X, Y and Z.” We have property management that does a great job at this. I still want to go check it out and look at the numbers. The more proactive you can be, the less opportunity you’re going to have. That single-family lesson helped in what I do now.

We learn more from our mistakes. These mistakes, that’s the tuition.

We paid for that education. It was a good education. I’m thankful that happened on a $150,000 house as opposed to a $10 million building.

Are you investing primarily in the San Antonio market or all across the country with your multifamily stuff?

I started with San Antonio because I live here. Our first 600, 700 doors were here. The passive investments then turned into me jumping into my first active deal which is 120 four-ish units and that was here in San Antonio. We did a 268-unit that was in San Antonio. All of those have been there. I wanted to make sure that I had a good grasp of what I was doing locally before I started going further. Our first jump outside of San Antonio was 120 units right outside of Dallas and Greenville. We did our second deal that was outside of San Antonio. It was in MacAllen. There are about 88 doors there. It’s San Antonio and then I expanded. We’ve got this long project that I have a team that’s boots on the ground. I’m the sole guy that’s out of New Mexico but we’re doing a ground-up new development in New Mexico, about 150-plus doors.

You’ve got your systems down. You’ve got your vendors down. You’ve got everything rocking and rolling. Now you’re able to duplicate that in other markets there for you.

What I duplicated was the ability to build the right team. The team is critical in commercial real estate. I’m sure you know this. Your team is the foundation of the core of being able to scale or do more and build that system and process. I was able to establish an amazing team. I had some people that I worked with here in San Antonio and was able to transition to the New Mexico deal. Some old friends that I know that I worked with established themselves as successful entrepreneurs. I was able to partner with them and they had their local boots on the ground team. We’re like, “That’s great. Let’s merge some of this inside education knowledge and build a great team.” The team is what allowed me to go do this deal in another state. I never had to drive out there once a month or anything.

One of the most requested things I get when people talk about, “Do you have any note signing multifamily stuff?” I’m like, “I wish I did.” I’d be taking them down for the most part. It’s still a desirable asset class. In a lot of cases, a lot of people are overpaying for multifamily. What would you say has been your magic formula or recipe for success in finding stuff that makes sense for you? You’re buying below market. Are you finding some pocket deals?

Yes, it’s my easy button. I don’t want to pretend here that I’ve got all these amazing relationships with brokers that see me as the big guy closer, which you need to get these pocket listings and commercial. The commercial multifamily listings, they’re big deals and commissions. The brokers have these well-established sellers that trust them to sell this property, get the top dollar and figure it out. Not everybody can close that $10 million deal, $7 million deal or $20 million deal. They’re going to talk to the people that they know have done it over and over again. That’s who sees these properties before you see them on an email list and say, “I’ve got this property.” I’m not in that space.

At this point in my career, I was the passive investor for several deals. We’ve done six active deals and I’m still not the guy that somebody would call. The way I’ve been able to find those pocket listings or those properties that the numbers worked was my partners, my team, my other general partner. They were already doing deals. They were already in the market. They were already the person that the brokers trusted. What I did was team up with them. We have to build a team. Any lack or deficiency you have or area of lack on your ability to get a big deal done, you can partner with somebody that already has that bucket filled or has that deal flow. That’s what I did. I partnered with teams that already were in deal flow. I contributed my part. That’s how I found these deals. It’s like, “That’s great.” I thank them all the time.

My buddy, Devin, we do a bunch of deals here in San Antonio. We were on this webinar and somebody asked that question, “How did you guys end up partnering? How did this happen?” I explained it. I was trying to provide value and I brought in investors. I started a meetup with him because I did all of those things. In the end, he goes up “If you know Abel, he’s a nice guy. I worked with him. I grew up with him in the professional world.” He goes “He’s a nice and genuine dude. I wanted to partner with good people.”

For anybody reading, it’s not like, “Abel is the good guy so he’s going to get it.” You have your strengths. You have things that make you desirable and unique even if you’re not a full-time investor in your W-2 world. Some of you are project managers. Some of you are good at systems. Some of you are better in front of large groups, can talk and be this investor-relations person. Some of you are great at Excel, can perform analysis and run numbers. Whatever strengths you have, those things can be applied to any portion of commercial real estate. For me, it was deal flow. How do I find them? Who’s got the deal flow now? I was lucky to have partners that are in deal flow in every one of these markets. That’s what I did, I partnered up.

That’s the thing, you networked. Quite a few of these people, not only in our local market but going out to these workshops, masterminds and things like that, you’ve built a network out there across the country, stayed active and communicated with them.

 

The education that I paid for was sitting in front of a large room, somebody speaking to you. You get these big, thick workbooks and you’re like, “Let me figure out what IRR means.” I was like, “That was a hard one.” Before the education, during lunch, after the event, you’re networking the whole weekend that you’re there, meeting others, doing deals, finding out who’s a capital partner. Who’s an asset manager? Who’s an operator? Who’s an underwriter? Any one of these skills or functions, construction manager, who can help with due diligence and you’re building your teams along the way. That’s a big part of paying for education, being around other people that are already doing what you want to do and then learning from them. They’re already doing it and you want to partner with the right people.

One of the great things about commercial real estate is it takes it away from the individual. The commercial is more about the actual property and the team. The team that supports you, the team with experience behind you, that’s what the bank is more worried about more so than anything else.

From the bank perspective, a lot of people don’t know how the financing part works. I’m also a commercial loan broker. If anybody needs help with something, let me know. I can help you find the source for your $10 million or $20 million for your apartment complex. When you look at it, they want three things. They want your net worth equal to the size of the loan. If you need a $10 million loan, all 5 or 6, 3 or 4, however many people it takes to do it, they have to be equal to $10 million in net worth. You also have to have 10% of liquidity. They want you to have 10% of the $10 million loans in cash post-closing liquidity.

You need $1 million between 5 or 6 of you all in your bank account. That stays there. If something happens, they want to know you can write a check. They want the experience. The experience, if it’s local, if it’s their people that have already done deals, that’s the basic component for outside of the capital that we’re raising. It’s four things. To qualify, that’s it. Net worth equal to the size, 10% liquidity, the experience and the 20% downpayment usually on that deal. If you have those, then you can go buy the deal. I can’t qualify for a $10 million loan. I don’t have $1 million liquid cash. It’s not there but between the 5 or 6 of us, now we can. Let’s go. That’s how we team-up.

That’s the thing, sometimes there are capital partners and they’ll come and be that stopgap. They’re involved in the deal. They’re part of the deal because they’ve got the liquidity to help with that. Everybody has different strengths. The most valuable thing about it is you can’t find it by being a secret agent, not getting out networking and talking to people.

That role is a key principle. Their formal title is the Key Principle. The KP, for acronym, is exactly that. They put in their hard work, time, effort and energy. They’ve created their millions. They have capital. They can sign on a loan. They get a piece of the deal. We give them a percentage and that’s their role. They help us with the financing. Sometimes it is one person and that’s what they do. As long as we’re all working together, somebody is asset managing, somebody is construction managing, somebody is raising capital. We’re all doing that together. Whichever team you’re on, everybody has a role.

With 2021, everybody is focused on doing things differently. Goal setting. The biggest thing that holds a lot of people back is that private capital. “I don’t have any capital. I don’t have any of my own money. I can’t qualify for a traditional loan.” Could you give any counsel? Not advice because everybody has one. It doesn’t mean it’s right. Give people some counsel on what you’ve done. Maybe your top 2 or 3 things you’ve done to raise private capital in the last couple of years.

It comes back to the know, like and trust. I’ve said this for years because I was in sales, they got to know, like, and trust you. Trust was probably the biggest one that I’ve always said, “I can’t control the know or the like but I can control the trust.” If I educate myself on the product, the service, the benefit, the value, as a sales guy I could control that. I got to figure that out. If I did that, when I hustle and make my outbound calls, get my leads. That’s the know part. I can’t control like. If I do work hard there, that was going to be the area that I was going to be the most trusted person. I still see that as important. They got to like and trust you.

I thought in raising capital, trust was the most important thing. I realized, no. At this point of my career, one of my advisors in a mastermind told me, “You’re wrong.” He didn’t say it like that but I went, “Trust is the most important.” He goes, “It’s know. They’ve got to know you.” If they don’t know you, they’re never going to be able to like or trust you. I raised money from average everyday people that are like me for the most part. We’re working hard. We do it for the year. We know we got to save money and put it to work. That’s who I attract. If I’m going to do that at $50,000 at a time, it’s going to take a lot of work for people to know me.

In 2020, I started a podcast. We started a Meetup in 2019. That’s probably the biggest one. Make sure people know you and what you’re doing. Get uncomfortable. Get out there. Tell people what you’re doing personally. If they don’t know, they’re never going to even ask you the question. Don’t be afraid to get the message out that this is what you do. If I would say one change, I do have a lot of my everyday average people, my friends, people that are like me. We’ve got a few $100,000. We worked hard. I’ve been putting in my 401(k). I’ve been trying to save my money. Every time I have $20,000, I put it in a house. $30,000, I put it in another house. Not the multimillionaire, those people are hard to meet. We have 30 to 40 partners on a deal at $50,000 a pop. That’s $3 million to $4 million. You’re like, “That’s a lot of hard work.”

The next stage in my career is trying to figure out how to find larger sources of capital. Somebody who can at least put a few $100,000 or $1 million in a deal as opposed to twenty individuals that do $50,000. I still serve. I don’t want to forget about the people that helped me and the people that are like me. I’m like, “I don’t think I’m ever going to say no to a $50,000 investor.” I don’t ever want to get there but I definitely would like to find a single or a couple of big sources of capital that can understand my vision and understand the plan. Those people can help you.

We’ve had bigger investors, hundreds of thousands of dollars. They’re across multiple deals. They can help you from the team’s perspective. Instead of being passive, they’re passive but they’re like, “If you ever have any issues, let me know.” They want to make sure their money is secure. You can start to ask them a few questions on the market, their insights and what they’re seeing. They’re eager to help you. I would say that there are two paradigms that I’m going to continue for 2021 to raise a capital, all-out force to get known, podcast, podcast interviews, social marketing.

There’s this new app, Clubhouse. Be careful. If you haven’t been on there, it’s addictive for somebody like me and probably like you, Scott, which is, “I want to go and talk about what I’m doing. I want to meet new people and network.” Get yourself out there. That’s what I plan to do so that more people can know. I’ll let them filter themselves down if they should come to talk to me as opposed to me making an outbound call and asking for money. That’s probably not going to be the best use of my time.

Get a big source or microphone if you would and figure that microphone out. Interested people will be like, “I’d like to set up some time with you,” which is what’s happening now. I probably have anywhere from 6, 8, and some weeks 10 people get on my calendar. I have a calendar link. I put it on my LinkedIn. I put it on my website. My calendar starts to get full with people that are interested in investing, which is cool. That didn’t happen before and I don’t think it would have happened had I not gotten out there. I’m trying to get focused on a few entities that can source these deals at a bigger clip.

You’re not doing cold calling. You’re doing warm content. You’re providing the content with a meetup group and you’ve been doing it virtually and online since COVID hit. You have been active on Clubhouse. I’ve gotten some late-night invites to jump in some rooms from you. I’m like, “Don’t you have kids? I’m going to bed.”

I’m like, “Mickey is going to bed at 8:00.” It’s 11:45 and I’m ready.

The thing is that you’re not afraid to share what you’re passionate about. Anybody who is around you for 10 to 15 minutes knows that you’re passionate about what you’re doing. Passion attracts. Honey attracts flies more than vinegar does. You’ve done a good job of sharing what you’ve built. Looking at your Meetup group, when you started it to where it’s at now, what’s been the big thing in helping you grow that virtual and in-person meetup? Have you been consistent with it?

We started in 2019 before COVID. At our first meetup, we had five people. I was like, “We’ve got people here. It’s not empty.” Our second meetup was twelve people. The third meetup was twenty. It was growing and then it went back to four. I was like, “Oh.” The consistency is what helped a lot in the beginning. There are four people. I wanted 30 for the next one. We didn’t stop. We said, “Let’s do this once a month. We’ll say it’s monthly. We’ll call it monthly. Now we’re committed to doing it.”

Every time we were committed, I had people tell me, “I wanted to go but I wasn’t able to. What did I miss?” I was like, “You’re still interested even though you couldn’t go.” I realized, “We’ll be there in November this date. December that date. January this date.” You tell them and they’re like, “I’m going to catch up to you.” I have investors that have told me, “I’ve seen you. I’ve thought about it. I knew you were doing this. I wanted to see if you were going to continue.” Two years later, they’re investing in their first deal.

It’s the consistency. They want to know that you’re going to do it. It’s their money. It’s exposure and getting it out there. I put it up on Facebook. I put it out there on LinkedIn. My boss asked me, “What are you doing? What’s going on?” I go, “That’s it. 5:30, we’re going to be doing this meetup after hours.” These are the things that I would continue, the in-person side of it. Hopefully, we get back to it sooner than later with vaccines and all this stuff. We had name tags in the front, a system to sign in. We wanted to register upfront. We would get a small sponsor. They’d pay for food. We’d make it a nice, big networking event. We would blast it on every one of our socials. Me, my partners, the team, all of us are doing that together. Maybe I brought 6 people, they brought 5 people, they brought 8 people. Someone else brought more. Collectively, it was that buzz that started.

COVID happened. Making it virtual was the cool decision. One of the good things about COVID is it spurred all this virtual stuff, podcast and virtual meetup. The thought process for the meetup was giveaway education. Tell people exactly how you’re doing it. There’s only so much you’re going to fit in a 30-minute session. You can’t teach somebody to buy an apartment complex in a couple of hours. It’s not going to happen. Keep giving the education, “Here are 30 minutes on how to finance. Here’s how to raise capital. Here’s how to do due diligence. Here’s how to do asset management.” We give that information and that helps.

The consistency of grabbing a name and an email. You’ve got to have somebody’s email. You’ve got to have a list. You’ve got to tell them you’re going again, “Thanks for coming out. Here’s our next event.” Drive that momentum of the existing people that showed up and the new. Now, that’s allowed us to put that list together. That also helps in raising capital. Those things work together. The virtual is the same. Our intensity has picked up. We’re doing them weekly and not monthly. There’s a lot more stuff and activity. There are people every week that say, “Thank you very much for doing this.” Some of our investors are truly passive. I’ve never seen them at any of our meetups.

The point is they know that I’m there. I’m doing the education. I’m doing the content. We record the virtual ones. We put them on our website, 5TCRE.com, education page. I do my newsletter. Here’s all this education that’s out there. Giving that value piece, that’s the value that people can create with this virtual moment in history with the pandemic. That’s how we got started and stay with it. Persistence, dedication, don’t stop, keep going.

 

One person is better than none. If you have one new person and one new person, it all adds up. A lot of the time, people want to see that you’re sticking around. I preach that 80% of sales happen after the fifth contact. You’ve got to be consistent with it. Whether it is monthly or weekly, you’ve got to set that flag. Point that flag and stick with it whether you like it or not and make it a priority. People are watching. You want to be around the 1% or the 5%. The 1% will take action and about 5% to 10%, they’ll write a check to be passive about it for most of the time.

The 90% doesn’t do anything. If you’re reading this and you’ve never taken action, you’ve got this amazing resource in Scott that gives an education. There’s so much time, effort and energy to give at his level and the time and intensity that he does it for all the years. If you’ve been following Scott and you haven’t been able to take action, you’re the 90% that can’t even do it passively. I would encourage you to reach out and go for it. At this point, if you’ve consumed a bunch of it, go for it. Do one. Do a deal, something you’re comfortable with. It’ll benefit you and you’ll be on that list of the passive side. Go for it.

Abel, how many times have you had somebody contact you and say, “I’ve been following you for six months, I’m ready to do something?”

I’ve had more than a few people that say, “I know this is the first time I’ve talked to you but I feel like I know.” For you that are reading, that’s it. You have some education. You’re there. It’s cool. For some of you that wanted to go active, even in this world, go active. Go make a podcast and get it out there. You’re going to benefit way more than anybody that catches a single show because you’re on the front line. You’re asking the questions. You’re getting the information right then and there at the source. It’s hard to get someone’s time for 45 minutes or an hour these days. Now you can pick and choose the best of the best. Thanks for having me on, Scott. That’s why I chose you to come to my show. I appreciate it.

Same here. What’s the best way for our readers out there to follow-up with you and find out more about what you’re doing, Abel?

The best place is our website. There’s the Contact page. There’s education there. We have a free eBook. You can go to our invest page as well and that’s 5TCRE.com. You can go reach out to me and set up some time to talk. My phone number and my email are there if you feel comfortable or if you want to set up a call. If you want to stay passive for a little while, that’s cool too. There’s a bunch of content on our website.

Abel, I know you’ve got big goals for 2021. Before I let you go, what’s your biggest thing for 2021?

I’ve been at the state and commercial real estate where I’ve been a smaller partner on bigger deals. Every time I do a deal, it grows a little bit more. I want a little bit more. At this point, I’m not as focused on the size of the deal. I’m focused on the percentage of ownership in the deal. My biggest goal is to get two deals in 2021. It doesn’t have to be a 200-unit deal. Let’s figure out an 80, 90 or 100-something in that size and be the primary lead sponsor, the lion’s share deal. The reason I say two is I have to make up for 2020. That was my goal for 2020 and I didn’t get it. It’s got to be two. I’ve got to make up for 2020 and get my 2021. That’s the goal.

We wish you continued success. We’re going to have you back here on a later date.

Thank you very much, Scott.

Thank you. Abel gave some great nuggets about consistency in giving more to your audience out there, not being afraid of the noes and the what-ifs. What if you succeed? For those of you who are scared, timid or afraid, start sharing what your passion is. Start finding ways to make it work. Maybe you have to give up the weekends for a few months. Maybe you’ve got to give up some of your hours at night to do it. Talk with your family. Talk with the people that support you because if they’re there, they’re going to be your biggest cheerleaders and support you on your way. It’s always easier when you’ve got the support of your friends and families when you’re moving on to something new. Go out and take some action. We’ll see you at the top.

Important Links:

• 5 Talents Podcast
• 5 Talents Commercial Real Estate
• LinkedIn – Abel Pacheco
• Contact page – 5TCRE

About Abel Pacheco

Abel Pacheco is the President & Principal of 5 Talents Commercial Real Estate, a multifamily investment company acquiring large apartment complexes in San Antonio, Tx, and the surrounding areas.

He has been investing in real estate since 2008 while working a full-time w-2 job as a Tech professional and transitioned from Tech to Commercial Real Estate going from 8 single-family properties to 800+ doors in multifamily.

He left tech and now helps investors just like you invest passively for all the benefits of real estate without having to manage properties.

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