- Profit Strategy: Rehab and short-term hold
- Number of Units: 8
- Personal Money Invested: $0
- Amount Earned: $110k
- Prior Experience: Rafael had prior experience investing in real estate on his own dating back to the 1970s
Rafael’s tale is full of trials and tribulations — lessons learned the hard way.
He is familiar with financial loss. As he describes, “I have lost my wealth three times now.”
He characterized himself as a “jack of all trades.” He’s done many things in his life and knows “a little bit about everything and nothing about anything.” He’s worked in financial planning, tax advising, and emergency planning, to name a few.
Many of these occupations have given him experience that he has applied to real estate investing. For example, in 1989, he was a lead emergency planner for San Francisco when the earthquake destroyed good parts of the city. However, because of his risk planning for Wells Fargo Bank, they were the only operational bank in the area after the crisis.
Understanding risk has given him a unique perspective on investments. When he looks for property, he avoids flood zones, for example. He had a rough time dealing with an insurance company (that story later), so investing in areas less apt to fall prey to natural hazards is crucial to him.
In 1978, Rafael read a book about real estate. The book described the “big four” (the Vanderbilt family and others) and the source of their wealth. He learned, “they became wealthy because they owned real estate that made them a lot of money. I said to myself, ‘if those guys can do it, why can’t I?’ So I started. I got my first little rental property in 1980 and another one about two years later. I would have kept those forever, but I married and had kids, and my wife thought real estate was too risky. To keep the peace at home, I sold both properties.” But he’d already been bitten by the real estate bug.
By 2008, he’d accumulated wealth in the stock exchange. But we all know what happened in 2008. He lost everything, including his wife.
After his wife left him and took the kids with her, he remembered how his mother always taught him not to wallow but to do something. He decided to revisit real estate investing.
For Round Two, he pursued syndication. His first syndication was 244 units. It was purchased for $4.8 million and sold for $11.2 million. He quickly did five similar syndications with financial success.
But this part of the story was not without challenges. During the purchase of a 46-unit property, all hell broke loose.
The deal occurred in 2010 during the upheaval of the banking industry. When Rafael went to sign the closing documents, he was informed that the FDIC had just taken over the lending bank. He had to “scramble.” The seller gave him 30 days to find another lender. However, every bank he turned to was being taken over. He finally found a lender who would do the loan at 15% with 5 points.
Sadly, the story doesn’t end here and doesn’t get better. Four days after closing (which also happened to fall on Rafael’s birthday), he was advised that someone had thrown a Molotov cocktail into the building. Sixteen of the 46 units burned down.
Now he had to turn to his insurance company. That process wasn’t smooth either.
Fortunately, the story does have a happy ending. Rafael had hired a competent property manager who knew how to manage fire insurance claims. The day after the property was fully repaired and he received the certificate of occupancy, a person drove by and loved the new-looking building. That investor offered Rafael $1.4 million to purchase it.
However, Rafael wasn’t anxious to sell it. He was now able to charge higher rent because of the rebuilt units. Rafael was going to make a significant profit every month. He told the investor he wouldn’t take less than $1.65 million. The investor agreed!
He declares, “that’s why I went back to real estate, even though the obstacles were momentous. After a year of frustration, I went from being broke to earning more than $200K.”
His real estate hurdles weren’t over. He had several successful deals with cooperative partners. But his last two deals were the ones that caused his distrust. He partnered with some people he “thought were friends,” but they proved not to be. His unfortunate lessons with them caused him not to trust people.
He stopped investing once again and went down a rabbit hole of depression.
Four years passed.
It took a while, but ultimately he shifted his mindset to learn from the bad experiences and not let them stand in his way. He explains, “what happened in the past were simply bad experiences. I learned from them and moved on.” He decided to revisit real estate.
He found Lance’s book and loved it. COVID was rampant, so he attended the virtual course.
From his previous investments, he had learned how to crunch the numbers. In fact, he could do it in his head — no pen and paper required.
While Lance’s training provided ample deal evaluation training, Rafael credits him with something even more extraordinary.
Lance was instrumental in helping him move beyond his depression.
Rafael discovered tools to enhance relationships. He learned how to evaluate if someone was trustworthy and re-learned how to connect with others. His perspective on helping people through real estate manifested as he put Lance’s education into play.
He revealed a beautiful story that aligns with Lance’s Operation True Potential™ mission. Rafael purchased a property that was such a mess that “the dump looked cleaner than it did.” He began renovations. Once the residents realized he cared about the property, the “riff-raff” left. The residents could see out their windows. They could sit outdoors and fully enjoy where they lived. This renovation only took him two months to accomplish.
He recalls how this impacted him. “I remember going to collect rents the third month I owned it. The people were so happy. They told me how nice it is to be able to sit in front of their door. It affected me more than I expected. Lance talks about the importance of helping people live in a better place. When it happened to me, it really hit me. I never thought about real estate in that way. I just looked at it as a business. Lance changed my perspective on things — to treat real estate as a means to improve other people’s lives, not just make a lot of money.”
He found an 8-unit building and began working with some investors to acquire it. But nothing is ever easy! When it was time to close, the investors decided the deal was too risky and backed out. He quickly found other investors, but it wasn’t until the fifth one that he was able to finally close. The seller had given him four extensions and refused to give any more.
The results? Two months ago, he sold the building for a net profit of $110,000. The investor received a $50K return on investment for the $10K she contributed.
As a result of Lance’s training, he’s nurtured relationships with three different groups of investors. He’s working on substantial acquisitions with each of them. He’s excited about the future again.
He’s focusing on “big deals” — 200 units or more — to achieve his dreams. His specific financial objective is to earn $30K/month, “doing nothing.” His process will be what Lance teaches — buy three, sell two. At the end of three years, he plans on holding at least 200 doors. At the end of five, the expectation is 400.
When he began working with Lance’s team, his goal was eliminating debt. His next goal was to create a legacy.
He explained why this is so essential to him. He is now older than his parents were when they passed and has a different perspective on life. When his parents died, he inherited their debt. He didn’t want to do that to his children and grandchildren. His dream is to not only leave powerful assets to his children but also the knowledge to continue generating returns to fund his grandkids’ college educations.
His ultimate dream is to buy a couple of Mercedes-Benz buses to travel Europe and Asia with his family. He wants to “camp all over the place.” He further describes his desire, “I won’t have to worry about money coming in because I’ll be getting rents from the apartments. I will have good credit and no debt. That’s what I want to do before I leave this earth.”
Before starting his camping adventures, though, he wants to set up a foundation for young Latinos. His goal is to have a program that encourages and enables immigrant youth to strive for non-labor occupations. A big part of the foundation’s mission will be to change their mindset, so they know they can pursue anything they want.
Rafael elucidates his philosophy, “money is necessary. But it’s not essential to me to have a lot. I’m pretty happy. All I want in a car is a radio that works, AC that works, and an engine that runs. Everything else I can make do with. I just want to be comfortable. What is important to me is to create something that can last and benefit other people.”
Rafael has undoubtedly had to learn things the hard way. He shares that one of the most impactful segments in Lance’s training was the section on relationships. Lance teaches practical ways to deal with people, and Rafael now has the tools to be more selective about the people he brings into his deals.
Through his exhaustive — and exhausting — ups and downs with investing in apartments, he’s learned the value of having a plan and sticking to it. He explains, “real estate is not difficult to do if you take the proper steps in the correct sequence. This results in consistent success. A building is a building, so whether it is two doors or 100 or even 900, it is still a building. The only difference is the number of zeros following the first digit.”
Rafael has some practical guidance, “close on the 28th of the month. This way, you will receive rental payments in your mailbox a few days later. That money can then be used to start renovations immediately.”
Another suggestion, “this is a tip I’ve developed when people make a decision I disagree with. I tell them, ‘I think I’m missing something because I don’t see how you came to this conclusion.’ By saying this, I’m blaming myself. They don’t get defensive because I’m not blaming them. As they explain their logic, they often conclude that they screwed up. That’s a trick I use now that has helped me a lot.”
Rafael has extensive sage advice. Here’s what he offered:
“Follow the process. Don’t shortcut. When you try to shortcut the process, you will mess up. Follow the steps, and it is easy.”
“If you fall down, get up. And when you fail. So what? Just keep doing it and be persistent. If you don’t make an offer, you’ll never be successful. You’ll be told ‘no’ hundreds and hundreds of times, but it doesn’t matter. All you need is one yes every now and then. The world is filled with successful people that have failed many times — singers, actors, wealthy people, realtors. All successful people have fallen down several times and gotten back up. Get used to the word ‘no.’ All that means is there’s another opportunity someplace else.”
He summarizes all of his hard-learned lessons:
“Number one: Expect to hear ‘no.’ But get your butt ready to work when they say ‘yes.’
Number two: Be persistent. Just keep asking because the worst they can say is yes. That’s when you have to perform.
Number three: Make sure you follow the process no matter what. Do not deviate from the process because if you do, mistakes happen.
Number four is the most important one: Expect the unexpected. You have no clue what’s going to happen. You assume many things, and most of your assumptions are incorrect. You will always get curve balls that make you scramble, so don’t panic. Use the process to help you through it or ask for help.
Number five: Just don’t give up. Don’t give up no matter how long it takes to get your first deal.
Number six: The numbers are critical! Do not fall in love with a property — only fall in love with the numbers. This lesson cost me $40,000. The numbers must work. If they don’t work, don’t do it — no matter what.”
Expect. ‘No.’ Expect. Challenges. Persist. Anyway.