- Real-estate investor Aaron Amuchastegui has pivoted his strategy in the wake of financial crises.
- He’s utilizing a new long-term investment strategy focused on new developments and duplexes.
- He shared how he added 168 income-producing properties to his portfolio in just a few months time.
In 2013, Aaron Amuchastegui knew his real estate investment strategy needed an overhaul. He was losing money.
At that point he had built a lucrative career flipping houses in California. But since big hedge funds got in on the California auction action and started snatching up deals, Amuchastegui told Insider that he knew he needed to pivot.
So in 2015 he went to Texas, where he focused on investing in foreclosures, picking them up at auction and turning them into long-term single-family rentals. After all, it was the strategy he’d used from 2009 to 2013, when he’d purchase California real-estate at auction and flip properties for short-term profits.
But by the time he’d acquired about 300 units at the start of 2021, he hit another wall. Auction block deals were not to be had, given the national eviction moratorium, and Amuchastegui’s momentum came to a near halt.
Rather than quit, he decided to pivot again. Since the start of the year, he’s grown his portfolio to 463 units from 295 utilizing a new strategy that added 168 income-producing properties to his portfolio in just a few months time — ranging from duplexes to single family rentals, mostly in Texas. Of the 463, 450 are currently rented to tenants. And his portfolio averages $140,000 in value per unit, with some properties owned personally, some with investors, and some via loan.
No stranger to shifting ways in trying times, Amuchastegui, 41, seems to have mastered the art of real-estate investing. So he’s unpacked the methodology he’s using to ramp up deals with Insider.
The old way
From 2015 through 2020, Amuchastegui built a 300-unit portfolio of almost all single-family homes, 90% of which are in Texas.
His aim was to pick up at least two to three houses a month, with some higher volume months mixed in. Some months he’d buy between five and 10, others as much as 20, all at auction—where homes in foreclosure sell at steep discounts to the highest bidder. Rather than quick flips, he focused on long-term rentals.
Pre-pandemic, he and his team of three were acquiring up to 20 homes a month at auction.
But since March 2020, given the national eviction moratorium, he said that level of acquisition has slowed to about four or five deals a month. In 2019, he said he did more than 200 deals, but in 2020, that number was closer to 60.
Through 2021, the strategy just didn’t prove to be as fruitful as it once was. “The eviction moratorium isn’t quite over yet,” he said. “Lenders are still very iffy even though evictions can technically start again.”
Despite a lower number of 2020 transactions, Amuchastegui said his long-term rental strategy was his saving grace through the pandemic. So now he’s channeled it into a new kind of property.
How he does business now
Long-term rentals are still the goal. Amuchastegui’s leases start at 12 months, with the average resident staying a few years.
But now he’s focused on buying new development, and has a portfolio fairly split between single-family rentals and duplexes.
Newly developed duplexes are a new, favorable investment because they offer multiple income-producing units, he said, and he’s no longer searching the auction block for old, foreclosed-on properties that usually need significant work before someone can live in them.
Essentially, he told Insider he’s using the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method, but with new homes instead of old ones. That way, he saves a lot of cash by avoiding significant renovations and doesn’t have to worry about the maintenance problems that come alongside old homes.
Instead, he’s buying 20 to 30 homes at a time, largely thanks to refinancing, and scooping up entire neighborhoods.
His acquisition strategy uses a combination of refinancing, short- and long-term investments from investor partners, and mid-rate loans (between 8-10%). But “refinancing is a huge part of the strategy,” he said.
Given today’s low rates and increasing prices, there is ample opportunity to refinance out most if not all of an initial property investment, Amuchastegui said. “The rates we get for commercial loans are using one or two percentage points higher than an individual gets for a house loan, but still at historic lows.”
Before, his auction-block strategy meant he would pick up homes in different areas, sometimes getting maybe six or seven houses on the same street. Today, buying new development means he can acquire entire subdivision communities with a few dozen homes all in the same place.
Last year, the average house in his portfolio was about 10 years old, but in 2021 that average is about 2 years old, he said.
New development is a “low-risk, high-reward gamble on the housing market,” Amuchastegui said. He does deals with builders who sign contracts months in advance. And by the time homes are ready and livable six to eight months later, they’ve often appreciated $50,000 in value.
For instance, he bought 30 duplexes (60 units) from around five different builders earlier this year. When they went into contract, Amuchastegui paid about $300,000 per property, and today they’d be worth around $350,000.
With strong returns on rents and high occupancy rates, Amuchastegui is excited about the increasing property values, and sees new development and duplex acquisition as a winning strategy moving forward.
“The new home construction opportunity out there is much bigger than you would’ve thought,” he said. “It’s been a much busier year than we thought. If you asked me in January if we were going to have a busy year, I would’ve said no.”