Pete Reese, Founder of Reelvest Properties, joins us to discuss land investing. We discuss the types of deals they look at, his team, business process, and much more.
Connect with Pete at https://turningprofit.com/
To join the DJE Investor list visit https://www.djetexas.com/access
For multifamily mentoring visit https://www.ApartmentEducators.com
Welcome to the DJE podcast where you will learn about real estate investing from real life examples. Here’s your host, Devin Elder.
Hello. Hello. Welcome to the show. Thanks for joining us today on the DJE Podcast. Hope you’re having a wonderful day. My guest today is Pete Reese in California. Him and his wife have a company called Turning Profit, but we spent the majority of the podcast talking about land stuff and land investing, which is a subject near and dear to my heart because we started investing in land a number of years ago in Texas, and we do it a little different than Pete does.
We’re buying bigger stuff. We buy 500 to 1,000 acre ranches, usually, sometimes a little smaller than that, and Pete and his wife are buying stuff from 20K to 500K. They have this whole kind of elaborate system around where they find it because they’re buying this stuff nationwide. They’ll go in, buy it and use local agents to sell it. It kind of walks through the whole business model. How they set it up with the team looks like.
A lot of parallels to say, like house flipping where you’re kind of partnering up maybe with somebody for the capital and somebody else is doing the work, but really good margins and they’ve been able to grow the business a lot. I always just love talking to entrepreneurs, people that are full-time real estate investors and figuring out what makes him tick and pizza, great guy, high energy guy.
He’s got a really cool podcast set up too if you’re inclined to go look at this on YouTube, he’s got a really nice setup and kind of has done it. The video aspect of it there was really cool too, but we dig in on the whole thing. The team, he’s a podcast host. Him and his wife host a podcast as well called Turning Profit, and they kind of walk through the whole business model.
He started a community as well. They’ve got a community of folks they’re doing land deals and I had a lot of fun, a lot of fun talking with Pete. I think you’re going to enjoy it. Cool dude, entrepreneur, and that’s who I like to talk to. Pick their brain, find out what makes them tick, and I always learn something along the way. Hope you do too. We’ll get into the show with Pete. First, a note from our sponsors and as always, if you’re inclined to leave a five star review, huge help. Thank you so much. Thank you in advance and well, let’s get into the episode with Pete afterward from our sponsors. Thanks guys.
This episode is brought to you by DJE Texas Management Group, a San Antonio, Texas-based real estate investment firm with a track record of transacting on several hundred million of multifamily land and industrial deals throughout Texas. DJE’s been in business for over a decade and is approaching 100 team members in San Antonio.
To learn more about DJE, visit djetexas.com or the link in the show notes of this episode. This episode’s also brought to you by apartment educators.com, a complete ecosystem for professionals to learn how to find finance and operate large multifamily properties for profit. You can get started with a free mini course and learn more at apartmenteducators.com or visit the link in the notes. Pete, Welcome. How are you, my man?
I’m doing great, Devin. Thanks for having me here. Really appreciate it.
Glad to have you on. We were talking earlier, love your video setup. If you guys are listening on the iTunes or whatever, go check out the YouTube too. I just appreciate it as a fellow kind of audio and video gear geek, definitely appreciate your setup, man, so love it.
Thanks. I appreciate it. Someday, I’m going to change the color. I keep the colors the same, but maybe someday day I’ll spice it up a little bit. Change it up.
Yeah, that’s an easy swap out, right? I mean…
Yeah, yeah.
… buy some new lights. Well, cool man. Well, thanks for coming on the show. How about just some background for folks that don’t know you. What are you guys into? What are you guys up to with real estate and I always like to figure out how’d you get to the real estate game?
Well, it’s been kind of a long journey to get to where I’m at right now. I started with real estate like a lot of other people, buying their first home. Myself and my wife, we bought our first home in year 2000 in San Diego here, and it was FHA loan, standard, three bedroom, two bath home, three and a half percent down. We held it for two years, made about 50,000 on it, and I thought it was a real estate mogul.
A hundred percent.
Took that money and put it into a bigger house that needed more work, did some fix up on that. We ended up getting into house flipping way back then. We were doing really well with that. Then, the market crashed. Well, actually right before the market crashed, I had actually gotten my broker’s license because I was getting all my deals on the market on the MLS, and I thought, “Well, if I had my license, I can show myself the property, I can have access to the deals right away.” That’s why I did it.
When the market crashed, flipping really wasn’t the best business to be in at that time because the buyers write up. Cash buyers were there, but not, your standard retail buyers because financing really was what dried up. Then, I was like, “Well, what to do now?” I had this license and I thought, “Well, I can sell foreclosure property.”
I focused on selling REO properties for banks. That was being a listing broker for them. That was my 100% my focus for a number of years and that worked out well. I mean, I was actually doing well at a time when a lot of other people were struggling in real estate. I felt fortunate for that, but I got a lot of good connections doing that as well, a lot of larger investment companies were buying in San Diego. I was, for a while there, I was just finding them deals for a number of years and that was great that they would buy everything I could find them that was a deal. That was great.
Then, got out of real estate altogether for a number of years doing a business with my wife, blogger and travel blogger, training business, like an online education business. That was great. That was very fulfilling and successful business, but I got the itch to get back into real estate because I felt like that was all always my calling and investing specifically.
I was looking around for different models to do and I stumbled into some stuff about land flipping and kind of just went down this rabbit hole on and I would see people posting stuff online about, “Hey, I bought this property for 10,000 and I sold it for 30,000.” I thought to myself, “Well, that’s pretty cool. I’d love to be able to triple my money on those type of numbers.” That’s what kind of got me hooked on it. We resold our first land flip in March of 2021 and then 2021, which was a partial year, ended up doing about 1.2 million in some change in revenue and about 50% gross profit margin.
Love it.
On average, we’re trying to double our money on every deal, and that’s short term holds, 60-day hold time on average. Then, 2022 ended up doing almost three and a half million in revenue and just shy of the 50% profit margin, but still pretty close to that. Then, 2023 looking to do 10 million plus. Trying to scale it as quick as we can.
Man, that’s awesome. Love it. Well, congratulations on that. I love land deals.
Thanks.
There’s fewer moving parts I guess. There’s a lot of [inaudible 00:07:45].
Yeah, easy.
I mean, real estate is, it’s funny people say real estate this, real estate that. Real estate is a million different things, right? It’s not-
Yeah. Endless.
It’s commercial, residential, office, multifamily land. It’s all so different. Man, that’s really cool. I love the trajectory and I have so many questions on how you guys are approaching it, but what type of deals, what’s a buy box for you? What is it? Is it infill stuff? Is it rural? What kind of size? Is it super specific what you guys are looking for or how do you look at deals and know if it’s a deal?
Good questions. We look at pretty much rural properties and the whole gamut. Most of the stuff now and most of the areas that’s 10 acres plus all the way up to biggest property we bought was 650 acres, but…
Nice.
… I’m not restricted by that. I would go way larger if a deal fell, if I was able to generate a deal, but in a lot of these areas, 10 acres is kind of the minimum. Some areas that are more populated but are still pretty active for us, we’ll go down to five acres, but I try not to do the infill lots. I like to do properties that at least can be used for recreational purposes and in a lot of areas that’s kind of 10 acres plus is what people are looking for, but also the potential for a home site as well. We try to buy those ones that we think are buildable as well.
That’s kind of what we’re looking at, but as far as purchase prices go, at this point, I’m trying to stay at, this is not a hard and fast rule, whenever there’s a deal I’ll buy it pretty much, but 20,000 is kind of the minimum deal is we’re kind of doing now, and then purchase price. The highest is 500,000, 600,000 somewhere in that range, just depends, but a lot of the stuff ends up being 20,000 to 150,000 purchase price, somewhere in there.
You guys just coming in cash or you got some more sophisticated financing mechanism? How do you attack that?
At this point, we’ve been doing everything cash except for a couple larger deals which we partnered on. In this business, the way the partner situation works is that you’ve got the investor that finds the deals and gets the deal locked up, and then you get the money partner, which basically brings the money to the deal and then you partner on it and you split the profits 50/50.
It’s [inaudible 00:10:24] model.
It’s a good deal. If you’re buying things at the discount, you should be buying at in this business, then it’s a real win-win.
Yeah, 100%. We do land stuff a little bit different. We do rural land stuff and we force appreciation by changing the size. Buy 500 acres and we’ll sell five 100 acre tracks and it’s like a wholesale retail thing. We’re taking it from a small buyer pool, somebody wants to buy 500 acres and taking it to a larger buyer pool of somebody that wants to buy 100 acres and we can force some appreciation because of that. Are you guys forcing appreciation another way? Are you just buying right, because people don’t know what it’s worth? How do you create your spread in a situation like that?
It’s a combination of things. Some properties, it’s simply that we’re the convenience buyer, we’re the cash quick close, we’re there when they need us. They don’t have to list it with an agent, go through this whole marketing period or…
Sure.
… do anything to their property in any way. I mean, we’ll pay all the closing costs, everything like that. Then, in some properties we do minor value add stuff. We might do something as minor as getting some paths cleared, some brush cleared on the property. We might get it surveyed.
Then, we do some more extensive value add stuff. Sometimes we’ll do the lot splits like you’re talking about. We’ll take a large property subdivided into numerous parcels, maybe get some perk test done on those, and then we can sell them off individually for a higher amount. It kind of depends on the area, if there’s that upside. Depends on the property too.
If we can get away with subdividing something with a lot of road frontage, it’s a lot easier rather than subdividing something where we’ve got to put in a long road, which we just got done with by the way. I had to put in a half mile road and I didn’t realize how expensive it was going to be. It would’ve been better for me to just resell that property as one parcel, but after all the work I had to put into it, I probably made about the same amount, but live and learn.
I mean, if the project ends up profit profitable, yeah.
I can’t complain.
Live and learn. What kind of roads do you guys have to do? Is it you just clear it or do you do it?
In that area, it was clearing through the forest really for a half mile long and then have it graded and then gravel.
I got you. Are you guys looking nationwide or just in your backyard or how you, where you [inaudible 00:12:54]?
Nationwide. Nationwide.
Cool.
We rarely do anything in California. If deals come up, we would do that, but a lot of other states are easier to transact business. I’ve got a broker’s license here, so I know everything there is to know about California real estate, but no, I don’t know everything. I should take that back. I don’t, but I know how to do deals in California for sure, but it’s easier in a lot of other states.
Got you. On the exit, I totally get it, in some ways, it’s kind of parallels like a cash buyer for a house or flipping business, right?
Yup. Oh yeah.
It’s like the money part thing, the cash offer, “Hey, just don’t worry about the repairs.” It’s just going to be the easy buyer. I like [inaudible 00:13:35] that. I love all that. Super simple. You’re not really dealing with a ton of contractors or a lot of construction risk like you are with flipping houses. I mean, super difficult to go in there and take a old beat up house and restore it in a super tight timeframe that you need to. Land is just a different animal. On the exit, is your end buyer typically just that person looking for some recreational dirt or they’re getting a bank loan on it, or what do you see for your end user?
We list all of our properties with a local real estate agents and brokers. We’ve got actually a limited kind of direct access with the buyers, but from what I can tell, most of the time, they’re either buying it for recreational property or a potential home site or maybe thinking recreation now with the potential down the road. That’s kind of most of the buyers I think. A lot of them are actually cash, but sometimes they get land loans more frequently. They’re probably tapping into some home equity or something like that in order to become a cash buyer.
Nobody wants to mess with the bank if they can avoid it.
Yeah.
Are you guys doing any owner financing on these or are you just all always selling them outright cash?
I don’t do any owner financing personally. I did recently hook up with a note buyer, basically the note buying company, and basically what they’ll do is they kind of let me know exactly what the terms need to be. I can offer owner financing and then sell the note right at closing to them.
I like that.
It’s a great situation. Great way to move certain properties.
Right. It just gives you optionality, right?
Yeah.
Are they wanting to buy it at 60% of the mortgage value or how do they like to operate?
You have to do a discount. In this case, it’s a 20% discount. Basically, 80% they’ll pay you, but you kind of know your number’s going in. You can figure out if the deal works for you to do it in that way. The buyers, they even have the criteria for the buyer. Basically, the buyer just needs, I think it’s a 640 credit score. That’s the only thing they look at. Just pull that. As long as they get 640 and they put 20 and the buyer has to put 20% down as well.
Sure. Sure.
Then, they’ll do the deal.
That’s interesting. I like the owner finance stuff because the way I think about it is they’re basically paying me to let it appreciate and if they default in three years, and it might have appreciated…
Get it back.
… and it’s dirt, I mean, maybe they burned all the trees down, but more than likely, they probably built a house on it or something.
Put up some fencing, did something else.
[inaudible 00:16:23] improvements. We haven’t had any default yet. I was talking to, and not that I expect any to, but it’s been great. These guys are paying. We have a note servicer out of Louisiana Southern Loan Servicing. They handle all of it. They bill the borrower, 40 bucks a month or something. They literally just direct deposit our stuff. I have enjoyed that and hadn’t had any defaults.
I was talking to a one note buyer was saying, “Hey man, if you could show me a 12-month payment history, that’s really attractive for us.” We might explore some of that where we’ve got some notes we’ve had for a couple of years. They’re all performing and maybe offload some of those and kind of cash it in, but definitely cool business and being in multifamily, I just really appreciate the simplicity of these land deals and these [inaudible 00:17:21].
I know, seriously.
What am I missing? This is too easy because the multi [inaudible 00:17:25] super hard by complex.
Well, that’s the thing. I come from the home flipping thing as we talked about and there’s so many moving pieces. I mean, with the renovations and lots of unknowns.
Oh yeah.
You think you know, but you really don’t until you really get into it.
You start ripping walls down.
Yeah. You’re dealing with other parties, contractors and supply issues and things like that. It’s just a lot of things to manage and you hope everything goes perfectly. Not to say that everything always goes perfectly on land because…
Sure.
… some deals, knock on wood, I haven’t lost any money on any deals yet.
Awesome.
There was a couple, I came pretty close, meaning I made 500 or $1,000, but I consider those wins considering I got out of them without losing any money.
Sometimes that’s absolutely a win. Yeah.
That’s right.
Cool. How are you guys, how’s the family involved in all this? Are you still doing other types of brokerage activity or is the whole family all in on the land biz or how do y’all set that up?
I don’t do any sort of other broker activity. I keep my license because always looking for homes and things around here, just for that purpose, but as far as the family goes, my wife, Heather, she’s a co-host on our podcast that we just started not too long ago and she does kind of the back end of the business, meaning bookkeeping, paying bills, all that kind of stuff, basically handling the money side of things.
Sure.
Then, I’m kind of the front end. I’ve got a large team build out to handle pretty much all the different roles within the business now and just overseeing that and approving deals and things. My kids actually, they took an interest into what I was doing with the land flipping and they came to me and they said, “Hey dad, we think we could do this too. Could you teach us me how to do it, teach us how to do it?”
Nice.
My two older ones that is, the 20 and 22-year-old girls, they had $8,000 that they pulled together between them, $4,000 each, and they had a corporation that they had started for some other purpose that didn’t do anything with it. What they did, I just started giving them some of the smaller deals that were 5, $7,000 purchase price that I really wasn’t that interested in. Over the course of six deals, they took that $8,000 and they parlayed into $84,000.
Awesome.
Just flipping land and they haven’t had it.
[inaudible 00:19:56] hooked, right?
Yeah. Now, they love it.
That’s so cool, man. That is so cool. At what ages? I’ve got kids too, my oldest 13 and they see me doing stuff, but they’re still so young. What ages did your daughters start actually kind of pushing money around on this stuff?
They’re 22 and 20 now, and it was really about a year and a half ago.
Cool.
They’ve always taken an interest. They always know what we’re doing and their interest involved in some way in their businesses. We try to teach them as much as we can about that stuff and we have them on the payroll, but I have them doing other jobs and at the beginning, before they really even thought about doing it themselves, I was just having them evaluate properties, day after day after day, evaluating properties and learning how to do that part of it.
I think that’s kind of what really got them interested in it. They realized it’s not really rocket science and they really thought that they could do it themselves, which I thought was great. That would be, I would’ve love to see them continue with it and turn it into some huge thing where they don’t have to really work for anyone ever.
Right. I mean, they’ve got the framework, the skillset, and then the mentorship. It’s kind of their thing to lose, right?
Right. That’s right.
I worry about my kids like, “Oh man, you all don’t have any perspective?” This is all very hard one knowledge for me that looks easy because of everything I’ve been through building the companies. You guys are just the direct beneficiaries of that, but the kids don’t have any context for that. They’re like, “Oh, it’s [inaudible 00:21:38].”
Yeah, they don’t. It’s interesting. It’s one of those things you can’t really force, I don’t think.
No. Yup.
You can’t say, “Oh, you’re going to learn this. You’re going to do that.”
Nope.
Either they take a liking to it or not. Maybe they go off and do something completely unrelated. I don’t know, but I guess it’s their life.
You can lead a horse to water. I think about that a lot because I don’t want to tell my kids about it too much because then they’re going to be like, “That’s dad’s thing. That’s not cool. We don’t do that.” I’m like, “Should I tell you guys to not do it and then maybe you’ll want to do it?” I don’t know. Who knows?
Yeah, that’s right.
All I can do is I think just kind of hopefully show them, you just never know what’s going to spark them. My middle son really got into golf in the last year, which was a dream come true for me because we had exposed him to it and didn’t take for my boys.
One day, he just wanted to play golf and he’s really getting after it. I asked him, “Why the sudden an interest in golf?” He goes, “Well, I saw you went on that trip with your buddies to Scottsdale to play golf and I want to do that with you.” I was like, “That was the thing, huh? I know it.” I just went on a trip with some buddies and that was for some, so it’s almost like random to see what sparks their interest.
That’s funny.
Hopefully, they’re hanging around the hoop enough, seeing dad do deals that they get to bug or maybe they go work for a job and realize like, “All right. [inaudible 00:23:02] at my alternative here.”
This sucks.
My alternatives. Are you working a ton? I guess, let’s get it down to lifestyle design. As entrepreneur, you kind of get this freedom. You got a team. Do you show up 9:00 to 5:00 and work on deals or do you travel? How do you structure that? I’m always curious for the people that have the option to do that and have a freedom of schedule, how you choose to put that together for you guys?
Right now, I’m working a ton. Well, I get up at 4:50 every morning. I go work out, but after I go work out, I come back and I just get right into work and I’m working until normally late afternoon. Then, at that point, go for a walk with Heather, my wife, and we normally go for three to five mile walks somewhere in that range. That takes a while and then that brings us up to dinner. Then, after dinner, I’m up on my computer working again until 9:00 or something like that.
I’d love to say I’m at the point where I don’t have to do any of that stuff. I’m continuously trying to get to the point where I don’t have to do everything, but I haven’t reached that point yet. Plus I’m putting in a lot of effort into the podcast and I’m building a training program around…
Cool.
… land flipping. It’s going to be free, but…
Wow.
… I’m building a community and stuff around it too, but…
Okay, cool.
… you know about that.
Let’s hear about that. What’s that looking like? How are you building that out?
The beginning of January, I started a community for people that are interested in land flipping and it’s really kind of taking off for me. It’s people that are both brand new and interested in land flipping. Also, some really experienced land flipping investors in there, some that are making over a million dollars net a year.
Awesome.
The whole gamut, I’ve got deal partners in there looking for people to partner with on deals. It’s been kind of really fun. My role is to just bring everyone together and bring awareness to the community to get more people in it and also obviously, educate people that are interested in learning about land flipping, which all of that kind of stuff I’d love to do. It’s really, really kind of fun. That’s been building that and it’s been a real good time.
I’m working on this training program that I said, which is it’s going to be completely free and it’s pretty much everything that’s up here about land flipping. Trying to do my best that I could possibly do on it, putting it together. I know as part of that, I’ll benefit because I’ll be able to partner on a lot of deals with people and we’ve got some things down the road. We’ll probably do a higher end mentorship program if there’s interest for it.
Sure.
For this part, I’m doing something completely free that other providers out there charge a lot of money for.
Cool. I love it, man. Then, you created a community and then you get people to partner with, people to bring deals, split deals with, fund them. I mean, if you’re going, you’re looking at dirt nationwide, you’re not going to run out.
No.
I’m a pilot. I fly a helicopter and a lot of times…
Awesome.
… I’m flying around Texas and I’m like, “We are never going to run out of deals.” I’m just looking around. It’s just hundreds of thousands of acres of dirt everywhere and all these county roads connecting them. I need a little sliver with some county road and some other stuff in our due diligence, but we’re just not going to run out of deals. That’s just one state.
Oh yeah, [inaudible 00:26:46].
There’s talk of overpopulation and stuff, and it might feel like that if you live in a highrise, you live in a dense city, but you get up in the air and it takes you five minutes to get out of the city, and then you’re looking at the little blip of a city over there and you’re like, “Yeah, it’s populated over there, but I mean, most of America’s rural land, the overwhelming majority of it.” There’s just like, so anyway, my point is community, you connect with people around the country and you’re doing, you’re not trying to buy a hundred thousand acres, you’re trying to buy 20K deals. I imagine there’s a lot to go around there, right?
Yeah, there definitely is. People ask me about that all the time. Aren’t you scared you’re going to teach all these people to do it and they’re going to take all your deals? I’m like, “No.” I mean, honestly, I say that same thing that you just went into. It’s flying from say, California to Florida or California New York or something like that, you just fly over the country and you’re like, “Oh my God, there’s just so much emptiness,” and especially…
Exactly.
… if you’re driving across the country too, which we did a couple years ago, and it’s just like.
It’s all dirt.
Yeah. I mean, there’s plenty of opportunity for everyone, and I always feel that way. I don’t have that mindset. I’m more of the abundance side of things, I think.
That seems to be a real thread among successful entrepreneurs that it is an abundance mindset. I don’t know. I adopted that a long time ago, or maybe I’ve got to just innately or born with some of it, but seems to be a real common thread among successful entrepreneurs. There’s plenty of deals and then you’re going to…
[inaudible 00:28:25].
… meet a million new partners through the program and everything else. Well, how about the podcast, man? You mentioned earlier that you’re publishing weekly, but what is it, how did you get into it? How’s that going?
It’s been great. We just launched that at the beginning of January as well. It’s been something we’ve been wanting to do for a while, but I didn’t realize how much actually work is involved with it. We’ve got a company helping us with the production and all that kind of stuff behind the scenes, but just the planning and getting it off the ground took way longer than we thought.
My wife was probably on me for five years to get it done. It’s called Turning Profit and it’s essentially, it’s about real estate investing with the real heavy focus on land flipping…
Cool.
… and land investing, which is what we do. It’s been a lot of fun and it’s been a great experience so far. I’m a very consistent person. I know that’s where a lot of podcasts kind of fall off. They can’t get that consistency down or they go real hard for a while and drop off. That’s not a concern for me at all. It was getting it started, getting it set up right. That was my concern, but now that we’ve got it going, we’re kind of like clockwork.
Every week, we film a new one, and just trying to put out the best stuff we can and learn from each episode and what went well, what didn’t go well, and try to get better each time, but it is been a lot of fun.
It is fun. You guys having guests or is it just you and your wife?
Yeah, some guests and some just us talking about different topics related to land.
Cool. Is it pretty much all land? I mean, that’s what you guys do?
Yeah, when it’s just us, we’re generally talking about land flipping. When we have guests, we’ll talk about other topics within real estate investing as well.
Yeah.
We’ll cover it all. As long as it’s something to do with real estate investing or something to do with helping real estate investors, that’s the kind of stuff we’ll talk about on there.
Yeah, love it. Podcast is great. I think about it as kind of a forced networking. If I didn’t have my podcast, I published weekly as well, and that was my goal was I’m just going to be consistent. It’s been several years now and there’s probably a million things we could do better in terms of marketing it, but we are consistent. We publish every Thursday no matter what, hell or high water but it’s forced me to meet, just shoot man, I’m meeting at least 52 new people a year.
That’s awesome.
Talking about new ideas. Selfishly, that’s been pretty cool. Then, you never know when you meet an investor or something, you’re like, “We listened to a bunch of the podcast episodes.” You’re like, “Well, you pretty much know me then. I mean, that’s the same on the podcast as I am off podcast.”
Rights. I am who I am.
You’ve already spent a bunch of time with me, that’s really cool. That’s scale, scalable kind of relationship building. That’s fun, but it is some work if you’re thinking of starting one kind of map that process out first before you kind of commit to it, because last thing you want is 10 episodes out there and then that’s it on the podcast world.
Well, you’ve got the community now. I’m kind of curious what you see as stumbling blocks. Somebody comes to you or finds you and they’re like, “Man, I could put together $20,000, do a land deal.” I see this all the time in multifamily, like this common set of misconceptions or common stumbling blocks on the land side. What do you see when somebody’s trying to figure this thing out that they’re just, is there a commonality there that people are not thinking about or common issues that prevent people from getting up and getting one of these deals done?
Well, for us, we generate all of our business with direct mail. It’s all about sending out mail…
Cool.
… sending out, actually offer letters to people. That’s how we generate our deals and that’s how we generate our business. There’s a group of people or a group of investors that are really interested in it, but they never can get that consistency down in sending out mail. They might send out a batch, get really busy…
Yes.
… and then they realize the phone’s not ringing anymore and then they got to send out another batch and they’re constantly on the roller coaster. That’s one common thing I see. Another common thing I see is people that will send out mail, but they can’t seem to really pull the trigger on deals, and that’s pretty much because they don’t have confidence in their deal evaluation. They maybe they don’t really understand how to evaluate properties right. What’s a good property? What’s a crappy property? What’s a good deal? What’s a bad deal?
They’re unsure. They never really get that deal valuation side of things down. I think for that reason, they may struggle or they may buy some deals where it’s not really a deal and then they struggle to sell them because they’re trying to list them for too high and it just doesn’t work. Those types of things are important.
I mean, the second one, the deal valuation things, I think you just really, with anything, you have to put in your reps. You have to really, really focus on that for some amount of time to really get good at that and collaborate with people and try to learn from them in what they’re doing as well and look at the type of deals that are out there, other people are doing and really just focus on that, but if you do spend the time and you really get into it and you really did get into it and really focus on it for a while, then, everything becomes so much easier and the business becomes so much easier and you can hopefully be very profitable with this business model.
I love it. I think, there’s no substitute for the reps on the analysis side. I see that a lot in multifamily too. Just you look at it at first and you’re like, “This looks like Greek.” Anything, I mean, any new endeavor of study, it’s just like, “Oh man, this is a mess.” There’s just no shortcuts for getting the reps. I mean, you just got to look at a million deals and then [inaudible 00:34:32].
When I started doing it, and I’m sure when you started doing it too, it’s like awkward. It’s like…
Oh yeah.
… Am I going to get this? Everyone else seems so far advanced to me and I came from the residential side. I just knew nothing about land, though. I mean, not in the way this business model used it. It was awkward for me too, and I really had to put in that time, but I picked it up and I got it. Anyone can, I think, as long as they really do that stuff, even with my kids, they really understand it now.
It’s interesting, a lot of us, you go to school or maybe even to college, it’s like you put yourself through hell on some stuff just because you kind of, somebody told you to, but you won’t take it upon yourself to put yourself through a little bit of hell for a huge, I mean, you have daughters with a 10x return on their money, right?
Yeah.
It’s like, you think that’d be worth going through a little hell to figure out…
[inaudible 00:35:22].
… how to do that, but sometimes without somebody standing over us in the classroom or whatever, we’re just not going to do that, but that’s definitely a common denominator. Among any successful real estate investors, you looked at a million deals for sure to get to the point where you can look at a deal and know right away, if it makes sense. You guys, man, I like the trajectory a lot. You mentioned that at the beginning and you said your target for this year is, what’s the target?
10 million, 10 million plus.
In revenue?
In revenue, yeah, and gross profit trying to do 50% gross profit.
Solid.
We’ll probably fall a little bit short of that. My averages are probably, as we get into the bigger deals, it’s harder to double our money on each of those deals.
Sure. Sure.
I think we’re going to be north of 40% though, profit margin, which is pretty decent.
No, that’s freaking awesome. Sounds like you’re running a software company or something with those kind of margins. That’s freaking awesome. How do you pick the goals? I always kind of pick a goal that I feel like is maybe slightly impossible and just try to push toward it. I’m often surprised how the pieces come together in a way that sometimes shocks me, but how do you think about your goal setting?
Well, last year, at the beginning of the year, I thought I can do 5 million, ended up at three and a half, but I went from 1.2 million and some change the year before. I almost tripled it. Then, I thought this year, I did almost 3.5, I can triple that. That’s where I came up with the 10.
Cool.
Yeah.
I love it, man. What does the team look like now? Is it all partners? Is it VAs? Is it local? How do you set all that up to run all this?
Well, we’re all across the country. Well, actually all across the world, I’ve got some VAs overseas and I’ve got all the list off the positions I’ve got now. Well, first of all, I have a phone answering service, but they’re just kind of an outside contractor. They answer the phone for us 24/7.
On my team, I’ve actually got a lead manager that inputs all the deals that come in into the system. He’s also kind of the due diligence manager, meaning he orders any of the due diligence stuff we need to order like photographer or due diligence kind of reports with the company that we use for that. Then, I’ve got two acquisition managers that their jobs are to deal with the incoming leads that come in and basically they’re calling or emailing, texting the inbound leads and talking directly with the property owners to see if we can work on a deal.
I’ve got a head of acquisitions. He was previously just property analyst on our team, but looking at deals and just putting a number on them and looking, reviewing all the due diligence. He’s kind of now morphed into being in charge of the whole acquisition side of the thing of things.
Cool.
Got another person that’s a list manager, and basically he pulls together all the lists and does some data stuff for me on that. He also kind of helps with our business system software that we use. I’ve got a transaction manager that handles all the transactions for the buy side and on the resale side.
I also have a asset manager. Her job is to coordinate any value add type stuff that we do on these properties and then also handle the listings with the real estate brokers and agents. Then, I’ve got another kind of assistant that kind of fills in some pieces that does some other related things. I’ve got an executive assistant that kind of keeps all the team together and keeps pushing different projects forward for us.
Cool. I love it. You guys remote?
Yes. All remote. Yeah.
That’s amazing. You can 100% do that now and I think COVID accelerated that for a lot of businesses that weren’t capable, but the tools are all there.
Well, the thing I think is pretty cool about it is that I can source talent from anywhere in the world. I’m not just not limited to people that I have in my area.
Yup, 100%, it’s pretty cool that we can do that. Awesome, man. Well, Pete, really appreciate you sharing the story and I love land deals and I love to kind of peek behind the curtain and see how other people are doing it. Thank you for sharing that. What’s the community called and how can people connect? You mentioned the podcast is Turning Profit. How could people check out the community? How could people connect with you and the team?
Best place to go is turningprofit.com. That’s obviously our website for the podcast, but also on their, I do a monthly income report for a land flipping business.
Cool.
I break down everything going on the business each month, like gross. I do like the revenue, the gross profit, every single deal we did, what we bought it for, what we sold it for, notes on that property, how many days we held it for profit margin, all this kind of stuff. I do-
You do publish that?
The whole thing. Yeah. Every month I do that, and that’s on the site there, but we’ve got links then to the community on the website there. Then, obviously, links to the podcast and on YouTube. We’re on all the other platforms as well, if you just search for Turning Profit.
I love it. We’ll link to it in the show notes. If you’re listening, you can check that out. It’s exciting stuff, man. Congratulations on your success and…
Thank you.
… rooting for you for the 2023 target, man. Maybe we’ll check back in a year and have you on again and see how things are going.
I’d love it. I’d love it. That’d be great.
Awesome.
Well, thanks for having me. I really appreciate it.
Appreciate it, Pete. Catch up soon.
All right, see you.
See you.
Thank you for listening to the DJE podcast. For more information, please go to djetexas.com.
Podcast: Play in new window | Download
Subscribe: Email