Andy McMullen runs a fund that backs other operators, and after 20 years and 1,000 plus units he trusts the jockey over the horse. On this episode, host Abel Pacheco and Andy get into how to vet an operator and stress test the assumptions behind a deal.
In this episode:
- The question that frames it: "Would you rather have a mediocre deal with a great operator or a great deal with a mediocre operator?" Abel picked the operator every time.
- Why he studies the process before the deal: "winning is a great deodorant," and a long bull run hides who cannot underwrite.
- The stress test: a deal underwritten to a 59% breakeven that still pays every bill if occupancy falls from 97% to 59%.
- The one dial that swings everything: "you make one little dial at the end, reversion entry cap rate, and everything changes."
- Why he underwrites the opposite of what he hopes for, having lived through 2000, 9/11, and 2008.
Abel Pacheco is a San Antonio real estate operator who went from 8 single family houses to a share of roughly 1,500 apartment doors, and now works as a fractional Chief AI Officer helping small and mid sized businesses put the back office on autopilot.
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