152: Can You Really Make Millions Flipping Land? Ask Pete Reese, Who Did it in One Year!
The post 152: Can You Really Make Millions Flipping Land? Ask Pete Reese, Who Did it in One Year! appeared first on REtipster.
We recently sat down with Pete Reese, a land flipper who made $4 million last year alone.
Even more surprising is that Pete hasn't been in the land investing business for long, having only started in 2020.
Despite his relative newness to the industry, he has achieved remarkable growth and success, which we'll discuss in this conversation with him.
Before his venture into land flipping, Pete had a lot of experience in real estate as a broker, which also played a role in his success. Tune in to this episode as we explore Pete's journey and learn from his valuable insights.
Links and Resources
- 139: The Simple Land Investing “Hacks” That Won Ajay His Absolute Freedom
- How Land Specialized Real Estate Agents Can Change the Game for Real Estate Investors
- Text Marketing 101 for Land Investors w/ Callan Faulkner
- PRYCD Review: Is This the Best Way to Value and Price Vacant Land?
- PRYCD (REtipster Affiliate Link)
- 10 DataTree Hacks Every Real Estate Investor Should Know
- DataTree (REtipster Affiliate Link)
- PATLive Review: How Helpful is a Virtual Receptionist for Busy Entrepreneurs?
- PATLive (REtipster Affiliate Link)
- The AI Revolution Is Here: How Real Estate Investors Can Harness the Power of Chat GPT
- HighLevel CRM
- Alex Hormozi on YouTube
Seth: Hey, everybody, how's it going? This is Seth Williams and Ajay Sharma and you're listening to the REtipster podcast.
Today we're talking with a guy named Pete Reese. Pete reached out to me late last year because he said he wanted to come on the show and share how he's done about $4 million this past year in land flips. As anybody in the land-flipping business can probably relay, 4 million bucks is a pretty big number by most of our standards.
Something I found even more interesting about Pete after learning a little bit more about him is that even though he's making a lot of money from this, he hasn't actually been doing it that long, relatively speaking. This is not a guy who's been doing this for a decade. However, he has been in the real estate business for quite a while as a broker and an investor before he got into land, which I'm sure we're going to get into in this conversation.
In this episode, we're going to talk to Pete, learn a little bit more about his story, figure out how he entered the business, and how he's able to do the kinds of volume and deals that he's doing to make this kind of money. I think it'll be pretty interesting.
So Pete, welcome to the show. How you doing?
Pete: Well, great. Thanks for having me and it's great to be here.
Seth: So, let's just start this off the way we normally do. How did you get your start in real estate investing and at what point did you discover land and decide to get into this business?
Pete: Yeah. Well, I've been in real estate since, I guess, the time when we bought our first house. That's my wife and I, which was the year 2000 in California. And at the time the house was $195,000. We bought it with an FHA loan and two years later we sold it for I think $250,000, something like that. And I thought it was a real estate mogul at the time because that was like a huge chunk of money for me.
Then we bought another house, which was kind of a fixer, fixed that up. We did some fix-ups on it. I did a lot of the renovations myself on the first house as well, kind of questionable quality, very questionable quality. But then we started kind of dipping our toe into flipping homes. So, that became kind of our main focus for a while. We were flipping homes until the market crashed in 2007/2008-ish.
Then we got out of flipping and investing for ourselves completely. I had gotten my broker's license here in California before that luckily, and then for a number of years just focused on listing REO bank properties. So, that was kind of my main focus. That was really the only class of properties that were selling at that time. But I learned a ton and it was nice that I had gotten my license before that so I was able to focus on that and actually bring in income at a time that a lot of people in real estate were really, really struggling. So, I was happy for that.
I got connected with a bunch of different larger investment companies. And for a while after I sort of focused on the REO stuff, I was pretty much just focused on finding deals for those other investors. And I thought, “Well, this is kind of a great way to stay in the investment side of things.” I've always liked that side of real estate because there are less emotions involved. It's not about the house, the direction of where the front door is or anything. It's simply just the numbers of the deal.
I was doing well with that just because I'd made a lot of connections there and just finding them deals. I knew what they wanted because I was an investor myself previously. Then I got side-tracked out of real estate completely. I did business with my wife. It was online education business for bloggers, blogger training, and travel blogger training. So, that was kind of like our main focus for a number of years. We did a ton of traveling. Traveled about 150 days out of each year as a family of five, kind of all over the place. And that was a great time, a lot of fun, and an interesting chapter in our lives. But I knew I really wanted to get back into real estate. That was kind of my real passion.
And I was just doing some reading online, and probably stumbled onto your blog and your video and stuff. But I remember looking for a new niche kind of in real estate investing, something that would align well with my skills. And I saw some stuff about land flipping and kind of went down the whole rabbit hole on that. And just dove in, and sent out our first batch of mail in, it was December 2020.
I sent out a batch of 10,000 letters. I'm the type that I'd like to go big on stuff. So, I sent out 10,000 letters. And I got responses and everything like that, but I made a couple of really big mistakes on that, that we can get into then if you want. But actually, we bought our first property, I think, in February of 2021 and resold that property in March of 2021. So, that's when our first deal was.
We ended up that first year at about $1.2 million in revenue and almost 50% profit margin. That was in 2021. And then 2022, we did about $3.5 million and a little shy of the 50% gross profit margin. And I want to triple that for 2023. So, we'll see if we can do it.
Seth: Man, a couple of things there. When I hear 10,000 on your first direct mail campaign, when most of us don't even know what we're doing. I don't know if you had done direct mail before, but, yeah, that sounds super intimidating. And then how many million your first year did you say?
Pete: We did $1.25 million or somewhere right around there. First year.
Seth: Yeah. A lot of land investors still haven't gotten there after a decade of doing this. Nothing wrong with that. What I'm pointing out is just that these are big numbers. It sounds like you're not afraid of stuff, you can just pull the trigger and take the leap and it's worked out pretty well from it. Have you always been like that, or is that one of your unique gifts?
Pete: I'm pretty aggressive with that kind of stuff. Actually, I wanted to go bigger than that, but I've got the voice of reason on the other side of my relationship with my wife. She kind of keeps me in check a little bit. I'm always pretty aggressive. I wouldn't say I'm a gambler by any means. In fact, I hate gambling because I never win. But when I feel confident about something, when I feel confident that something is going to work, I just want to go all in on it. So, I guess this is my personality type.
Seth: Yeah. Do you think having previous experience in real estate was a big contributor to that? If you had zero real estate experience, could you have pulled that off, do you think?
Pete: It would've been a lot harder. I definitely think it helped me. It definitely gave me a head start, especially in areas like negotiating when deals came in and communicating with the agents. Because we sell everything, almost everything, through real estate agents, local agents. So, that's part of our process. I know from their perspective what they need to see in order to make it worthwhile for them. I took that experience and yeah, I definitely think it helped me.
We did 32 deals the first year and it was 69 in the second year. So, we're over 100 now. But having that head start and lots of different transactions and contracts and things like that, definitely, it was a good head start.
Seth: Yeah. 32 deals, that's not like a massive number of deals per se, so I'm assuming these are higher-end properties, they're not cheap lots.
Pete: I think our average profit margin on the first year was about $20,000 per deal when you average it out between all those. And the second year was $22,000. So, bumping that up slightly. But I think probably on the low-end purchases were $5,000. On the high end, I did a partner deal where it was a $315,000 purchase price, but most of them were probably $10,000 to $50,000 range in this first year.
Seth: That kind of covers the value range sort of. Are these certain sizes or something, or is there a specific profile that you're looking for when you're like, “Okay, that's a good property because of X, Y, and Z?”
Pete: Yeah. Well, the ones I like the best are now… I've kind of refined this over time. Initially, we were doing all the mail I was sending out, I set criteria of two acres plus. Now I don't send out anything below five acres and most of the time, it's 10 acres plus because I like those properties where there's more than one exit plan. If it's a 10-acre property in most areas, it's at least good for recreational property and a potential building site if the property's buildable.
I've had a number of properties where I got stuck a little bit like it failed a perc test or something like that, and it's a two-acre property and then you're like, “Well, what do you do with that?” It could be a potential farm stand or something, I don't know but I always got worried by those. We do a whole due diligence process and everything, but it always just worries me on the smaller properties when you run into something like that, and then you're kind of like, “Well, now I just want to get my money out and make sure I don't lose money.”
Seth: You alluded earlier, it sounded like maybe there were some mistakes or something that happened on that first campaign or that first few deals. Were there any mishaps or lessons learned from that?
Pete: Big lesson I learned was, I thought it was all about mailing the hottest areas. And I mailed the hottest markets I could find. I had certain states, I think one of them was Washington State, and at the time, it was really hot. I know it's still pretty hot, but there were some areas in there that were super-hot.
Seth: When you say hot, do you just mean like a high number of transactions or dollar amounts?
Pete: Yeah, yeah. Lots of transactions, very little inventory. Anything that went on the market sold right away. And I knew that if I could get stuff there that it'd sell it right away. And I think I priced it at 25%, if my memory serves, of what I thought retail is. So, I was mailing into the very hottest market offering 25% on the dollar, 25 cents on the dollar. And I got responses and stuff. Most of the responses were on junk properties I didn't want anyhow. I didn't end up putting together any deals from that first 10,000 mailer, which in hindsight it's $5,000 wasted or whatever it was. But I did learn from it and at any time I make a mistake, I try to learn from it and not repeat the same mistake.
I sent the second batch maybe three weeks after the first one and I think it was another batch of 10,000. But even then, I was kind of like, well, I think I may have done this wrong because I was just reading comments from people and stuff and it just wasn't getting the response I thought I should get. But in hindsight, it was only three weeks, so it really wasn't enough time anyhow. But I was just starting to figure it out a little bit, so I priced it a little higher. I think it went up to 35% on the next one. And I stepped into some other counties that were good activity but they weren't craziness. And then things started hitting.
Seth: Did you start out pretty well capitalized? Did you start doing massive campaigns like this? Massive by a lot of people's standards. It sounds like you're not one of these guys that started out with $5,000 total and that was all the money to your name. Did you have a good slush fund to cash to work with?
Pete: Yeah, yeah. We had a good slush fund to start with and that definitely helped as well. Our other business that I was talking about with the blogger trading and everything, that was a very successful business. So, we were happy with that. It was just a situation where we were a little bit burned on that side of things, but we had some capital saved up and it allowed us to get into this side of things a lot easier.
We've only done two partner deals at this point. Everything else was self-funded. And we recently just bought another larger property with the partners. So, having that initial slush fund to start with definitely helped and it allowed us to accelerate faster.
Ajay: I think that's so interesting, Pete, that your first mailer bombed the way that it did. It sounds like, given your past experience, you had the wherewithal to say, “All right, well, I probably made a mistake here.” Because I think a lot of people as they jump into a new business would say either, “Ugh, this land business doesn't work. Direct mail doesn't work.” It's always everybody else's fault. Something else is wrong here. But it looks like and sounds like you had the ownership to say, “Yeah, well, we sent out 10,000 mailers, it didn't work out. How do we pivot to make this better? Do we offer more money? Do we target a different area?” I just want to highlight, though, that that's so valuable and not something a lot of investors do. And also that you've kind of glossed over the whole yeah, it's $5,000, it's whatever. Because I know a lot of people don't view it that way.
A really good mental shift that I've made in my own land business over the past year or so is that any time we spend money on marketing, I look at it as an investment rather than an expense. Now, obviously, on my P&L I'm going to write it off as an expense, right? But truly, every single time we've sent out a large amount of marketing or tried a new technique or whatever it is, there's so much learning that comes from that about yourself, about your team, about your process. And so, I just want to highlight, I think it was so cool that you took that experience, learned from it, and then went out and bought, what was it, 32 properties your first year?
Pete: Yeah, 32. Well, I think we bought probably 45, maybe the first year, but we had sold 32. Well, I appreciate that. And that's just kind of the way. I knew it was going to be a little bit of a rocky road. And anytime you start anything, it's always a rocky road unless you're some sort of natural in something, it's always going to be a learning curve and it's going to be uncomfortable until you get through some of that.
And that's why when we sold our first property, I already knew it worked. I already knew the business model worked. It's just validation and it's great to prove it to yourself and prove it to my wife in my case. Because she gives me some rope to do some of these things, but I still have to make sure that she's on board with it as well.
Ajay: Are you one of these guys with 20 new ideas a week and she helps you kind of filter through those then?
Pete: I used to be, I used to be. The shiny object thing. And I always get ideas and she does too, but I've realized over a time that jumping from thing to thing is not the path to success. You have to really, really focus. And while we could still come up with ideas, it's just a matter of you need to really just focus on certain things in order to achieve what you want to achieve.
Seth: Was it that first deal where you proved it to her? It's funny because I have a very similar story with my wife. In general, whenever I have new cool ideas like this, the answer is no. She's kind of like the breaks and I'm the gas. And to her credit, she saved me from so many errors because I just don't think about this stuff that she does. But it was really cool when I did prove it to her and she was like, “Wow, that's amazing.” Did you have a similar experience, or how long did it take for your wife to understand?
Pete: Yeah. She believes in me definitely. And at least she says she believes in me. No, I think she does. I think maybe after the first few deals I think she was starting to get really comfortable with it. It's one of those things. It's a great relationship because we've got that yin and yang I guess you could say. And she's way more conservative than I am. Yeah, if it was just me left to my own devices, who knows? I'd just kind of blow up, maybe. I don't know. But it's good stuff. The first deal was great. The second deal was even greater and then the third deal was like, “Yes, I got this now,” even though I had a lot to learn at that point.
Ajay: Absolutely. I think it's worth highlighting just how valuable a partner can be in your life and make sure you pump the brakes when it's appropriate. I know in my own life there's been countless, countless times that my fiancé has stopped me from making some poor choices, we'll call it. But it's funny to see how she continuously encourages me in the right ways. That's a good sign of a healthy partner.
I'm not sure if I've told this story before, but, Seth, I know, way back when, when I was interviewed on here, I told the story about my first deal. And for some context and reminder, the seller on that property was super difficult. Didn't trust title companies. Wouldn't accept payment in any form except cash. And so, it ended up being this really wonky thing where I drove up to the middle of nowhere Wisconsin, ordered a mobile notary to this man's trailer.
I brought $2,000 in cash to buy his property. It was not wise, but I was 22 and had wide eyes, and just wanted to make the business work. But I was this close to giving up on that deal. And my fiancé, then girlfriend at the time, had said, “It's your first deal, just keep pushing.” Which I think is so interesting because there have definitely been other times where she has pumped the brakes and probably very similar to you, Pete, in a wise fashion and like you had said, Seth, has the ability to see some risks that we don't always see.
Pete: That's crazy.
Seth: You mentioned earlier, Pete, that you have done a couple of deals with money partners and you're working on a third one now. I'm just curious, what triggers the need for you to get a money partner, and what does that arrangement look like? Is it a 50-50 split? What are they bringing to the table? What do you bring to the table? Just help us understand the dynamic of that relationship.
Pete: I think the first one, it was kind of a cash flow thing. I was buying a bunch of properties in that certain month and I was like, we had additional funds and everything, but I don't want to ever get down to the point where we're low on funds or anything like that. So in that situation, I figured, well, at some point, I'm going to need to get money partners involved or whatever. I figured I'd try one.
We did the first deal with a money partner and that one was really great for both sides. I think we bought it for $40,000 and sold it for $120,000, and the whole holding time was like 32 days or something like that. So, it was a perfect one for both sides. Everyone was happy.
And the next one was a larger purchase price, $315,000, and that was like 650-acre property. That at the time was like a big chunk and I was like, well, I think this is a good property to find a partner on. Because even though the projected resale price was over $600,000, it is a big chunk of money to just throw into one property. And I was like, well, maybe it'll take a little bit longer to sell or something like that.
And on that one, we ultimately held it for about five months and we sold it for $595,000. We each did very well in the deal. And both of those transactions, they were just 50-50 splits. And then we also just bought one in December, I believe, that was another larger property. This one was a $360,000 purchase price and we did that with partners as well. I threw in a little bit of money but just a little bit and then they threw in the rest and then we're going to split it 50-50 when it sells.
Seth: Has this been the same partner on all three of those deals?
Pete: Three different partners.
Seth: You've kind of gotten to see maybe how different money partners underwrite these kinds of deals and decide yes or no. Has it been a very different process for all three of them, or do they all kind of look at the same stuff?
Pete: I think they've been all very similar in the fact that they're looking at the same thing I am, the comps and agent opinions and things like that. Yeah, similar in the way they review the deal. A little bit different procedurally in how they want to handle the logistics of the transaction and the title and things like that. But all pretty similar.
Seth: Is it a similar arrangement in terms of the 50-50 split? Just expectations about how that's supposed to work?
Pete: Yeah, I've done, 50-50 split on all of them. I think that's fair, especially when we're talking bigger dollar properties and things that may take a little bit longer than the average property to sell. I think that's fair. And that's one of my things in all my dealings. I mentioned that we'd always do all of our deals through real estate agents, local brokers. And one of my big things is I pay 10% commission on pretty much all of these deals. And I know that I could probably negotiate down farther and that type of thing.
But I really feel strongly that it has to really be a good incentive to work for both parties. I know in a deal partner situation, there are probably opportunities to negotiate a better split. But I just try to look at things as, are they fair? And what's going to be a win-win for both sides. I'm definitely comfortable with a split like that. That’s kind of the way I try to run my business.
Seth: In terms of the markets that you've worked in, are you focusing on just a few key markets again and again, or are you always exploring the horizon and going someplace new? And wherever you do work, what is your decision-making process to decide “Let's go there because of this?”
Pete: We're pretty much in four or five main states right now where all of our business is. But I know in order to scale further, we really need to expand beyond those areas and get into other states, other markets. And it's kind of been almost maybe a little bit of dumb walk in a way. We explore different markets, sending out some mail to a couple of different counties. And then see if anything hits. And if it hits, are we able to find good local brokers and agents to help us on the ground to evaluate these properties? And that's kind of been what is a main factor in whether we continue into a certain area or not.
And if the properties sell pretty quickly it feels like if it's a pretty good market there, then we'll really try to double down and keep mailing those areas. If we find an area that we like, we'll mail it every three months. And I know other investors have different philosophies on that, but that seems to work pretty well for us. And a big thing is just finding those local agents and brokers that we trust, that can give us kind of secondary opinions on the value of the properties and anything to watch out for.
Ajay: Pete, are you having your agents walk these properties or look at them before you buy them? You keep mentioning agents you trust that you work with on a repeat basis. Tell us about your screening process to find an agent and also their responsibilities in that handoff there.
Pete: Yeah, yeah, good question. Normally I'll try to find one of the best land brokers or agents in a particular area. And a lot of times, we'll just look on LandWatch. See who's got a bunch of listings and see who does a good job of their descriptions and their marketing. And maybe it's a premium spot on there. And then I'll just call them up and kind of say, “Hey, here's what we do, here's the commission we pay. We need your help in looking at and evaluating these properties and then we'll obviously give you the listing as soon as we purchase the property.”
I kind of lay it out from the beginning and I let them know that we're looking for a long-term situation, not a short-term one-off property that we're going to sell. We want to establish an ongoing relationship. That's kind of how I find the agents. I don't ask them to walk the properties generally before we purchase. As part of our due diligence, as soon as we get a property under contract, one of the first things we do is we hire a photographer to go out and walk the property. Normally on drones, if we don't have someone in that area, droners.io.
And then take some drone photos, walk the property, write up a little bit of a report. We'll obviously then send that over to the agent, have them review it as well as part of our due diligence process. But unless it's a bigger property, a bigger purchase, I generally don't say, “Hey, can you go check out and walk this property?” Because a lot of them are dealing with big areas, and I know it's kind of tough.
Obviously, it'd be great to have them do that as well, but I know it's not realistic. So, it's a little bit of a trade-off. I used to kind of see if these agents would take the pictures for us. And a lot of them offered and they'd be like, “Hey, I'll go out to the property and take the pictures and stuff.” But a lot of times, there would be big delays from the time that they would commit to doing that by the time we actually received it. And I'd just like to have the process move a lot quicker.
I know sometimes some of the photographs and things can be redundant, but I just feel a lot better sending out a photographer as soon as we can get someone out there. That way if we do run into some sort of issues with the property, and they do come up, then we can put the brakes on the process so we're not having the title company go down this long road with the title. All these different pieces of the puzzle like working on something that's ultimately not going to happen. So, I'd like to get that out of the way and I know it's going to cost an extra $200, $250, or whatever it is. But yeah, it just makes our process run so much smoother.
Ajay: Yeah, that makes sense. And thank goodness for drone photographers.
Pete: Oh, yeah. Seriously.
Ajay: I had a situation with a 40-acre in Alamosa County, Colorado. I remember we had bought this property wholesale from another investor. And he had shared with us that he had basically sold this property on owner financing. The story is a little graphic so I'm going to spare some details, but basically, the seller was conducting some illicit activities. May have done some bad things, but we'll leave it there. There may or may not have been a trailer with some illicit activities left on this property.
And I asked if the trailer was still there and the investor who was wholesaling it to me said, “I think the sheriff took it, but I'm not sure.” And so, I was like, “Well, man, what are we supposed to do?” So I hired a photographer on droners.io and it's like, “Hey, let me know if you see anything on the property.” And it was so funny in these messages because he was like, "Should I be looking for anything?” I'm like, “No, no. Just let me know if there's anything on there.”
Pete: Most satellite images, maybe it looked like a trailer, if you could just peek in there, that'd be great.
Ajay: If there's anyone in there, stay away.
Pete: Yeah. It sounds like a Walter White situation.
Ajay: Yeah. Right. Maybe, maybe not. I don't want to get into the details here but thankfully, it was clear by the time the photographer had taken pictures. We have now sold the property so all is well.
Pete: That's good.
Ajay: Seth, I hope that was okay and appropriate to share here.
Seth: I guess that's the nice thing about land is that as long as you can clean whatever it is off the land, it doesn't necessarily taint the land. Whereas if it was a house where somebody got murdered in there, there's this spooky factor to it.
Pete: Yeah, unless it's a toxic waste dump or something. I'm always worried about something when I see these 55-gallon drums rusted and on a property. I kind of back away from those zones.
Ajay: Actually, I know a guy that he does some hard money loan zones of fund where he does hard money loans, but he's got some partners that seek out properties that used to have gas stations on them, and no longer do. And there's some environmental hazardous waste type stuff that happens when you have a gas station on there that is involved in clean-up. So, they look for gas stations that have burned down or something and buy the property for pennies on the dollar.
Go back into the title, figure out who the insurance company was at the time of the fire. Have the insurance company cash them out for the property or pay for all of the clean-up. And then get money back and then sell this property as if it's good as new. It's extremely labor- and time-intensive but the numbers I've heard is they'll buy a property for about $100,000 and sell it between $1.5 and $2 million pretty consistently. So they've got this group of guys and they've called me because they know I do land and they're like, “Hey, if you ever find anything with an old gas station on it, you let us know.” And I'm like, “Okay, I may keep this to myself.”
But no, I'm just kidding. There are all kinds of ways to make money in this niche. It's crazy.
Pete: Yeah, seriously.
Seth: That's really interesting. I get it. And it all makes sense. I wonder if we could ever get them on the podcast. That's kind of an interesting approach where you're seeking out the problems. With most vacant land properties, there's not a whole lot of that going on, but that's a perfect example of where it can be a disaster and it's almost worse than a bombed-out house. So, wow, fascinating.
In terms of direct mail, is direct mail the main thing you're doing at this point, Pete? Or is there any other kind of marketing medium that you're employing to find deals?
Pete: Yeah. Direct mail is 100% of our business. Our lead flow at this point. I've looked into texting and I probably will bring that on at some point, but that's kind of a whole other process to kind of integrate into our business. And I've been happy with the direct mail to this point. I think the scale will come from better areas. I've given a lot of thought too that I probably should be putting more effort into actually building and scrubbing our lists.
I was thinking about actually doing a post in your Facebook group and saying, “Hey, any of you data people that just love to do this stuff, I'll pay you to teach me how to really refine my list,” because we're doing all the basic scrubbing and stuff. But I think that there are people that probably take that to a much higher level than I do.
I'm kind of happy with the return on investment that I've got, but I know it could be better. For instance, on average, for each deal we do, it's about $3,000 in mail costs. So, 6,000 letters, I guess. And I've heard numbers from other people and they're like, “Wow. I sent up 5,000 letters, I got five deals.” I'm like, “Wow, that's way better than me.”
Seth: Yeah. But I wonder what the size of those deals were and how much money they're making from each one and how much time it took them to filter all that stuff. It is kind of tricky to find that right balance because it can almost never end. There's so much stuff you can do and it's like, “When is it enough?” And you don't actually ever really know until you just send the mail out and see what happens.
So, there's a bit of speculation in there about how well your time is spent doing that. I guess maybe on that note I heard from your interview with Joe McCall, it sounds like you do strictly blind offers, right?
Pete: That's everything we're doing at this point. Actually, when I was on the podcast with Joe, he was encouraging me that I should experiment with neutral letters. And I think that there's a lot of merit to that. I just haven't implemented it yet.
Seth: So, how are you filtering your list? And when you think about blind offers in general, a lot of people do that. A lot of people send those out and they all use the same couple templates out there and it just makes you wonder in terms of pricing stuff out and getting certain people off your list in the way that your template is worded and all this stuff, are you doing anything unique? Or is it kind of just the same stuff, the kind of bare-bones basic things and then you blast it out? What I'm getting at is do you ever get lost in the weeds on anything, or is it kind of just massive action and then the results come?
Pete: It's mostly the massive action side of things. I started with the basic template that a lot of people are using and I refined it and I customized it to us and simplified it is the main thing that I did on it. But I think that most of the results that we get are just from sending out tons of mail. At this point I send out 50,000 letters a month like clockwork. And that's one of my big things. I know that consistent mailing is the key, the engine that drives the whole business, the gasoline, whatever you want to say.
But if I send out that mail consistently, then good stuff is going to happen. If I skip mailing or something like that, then I know it's going to cause problems down the line. Nothing really unique about the letter or anything that I do. And maybe that means that there's an opportunity for me to decrease my cost per acquisition.
Seth: Yeah, maybe, but look where you are. It might not be perfectly dialed in but it's like something's working. I know people who spend a whole lot more time sorting stuff out and they're not where you're at right now. Maybe their expenses are lower in some way. But on that 50,000 units a month, that's a lot. Let's just acknowledge that. What is that? $20,000 - $25,000 a month just in direct mail?
Pete: Yeah, $25,000, I guess, with everything, the data, and everything. I know that that's a lot. And obviously, out of the gate, you probably don't want to send 50,000 letters a month. You got to figure out what works a little bit and kind of ramp up to that. And actually, last year, there were a couple of months where I got close to 100,000 so I was actually trying to crank it up further. But then I dialed it back and I did some more refining on our list. So, I'm trying to find that balance.
I'm not opposed to sending more mail, especially as we get into more areas. And I've been trying to build my team to set us up for doing bigger and bigger numbers. So, I probably will be sending more mail in the future, but I just want to get my processes down a little bit more and maybe hire someone to consult with me on what is that happy medium to build that list. Just experimenting over time, I guess, and just trying to get better and better all the time.
Seth: Are you offering amounts? Is it kind of in line with what most people are doing? I don't know, 30%, 40% of market value, something like that?
Pete: Yeah, yeah, probably close. If it's a hotter area, I'll push it a little further. But in hotter areas, I'm probably doing like 40%. If it's a slower area, I might be doing closer to 30%. But I do some PRYCD, I do some through there and I do some kind of manually, especially some of the rural counties where I know the values pretty well. Then I don't need to do PRYCD or anything. I could just figure it out manually like, okay, it's 4,000 acres retail in this area.
But then the thing about that is, it really comes down to the actual property itself a lot of times because it could be one county. But you don't really know until the property comes back as a lead. If the property that's all wetlands or if it's a property that's all farmland, or if it's a property that's all woodland. They could be all in that same area but all have completely different values. So, it's kind of a crapshoot anyhow, even if you're really good with the data and the pricing. And it just comes back to when that comes in, starting up a conversation to see what kind of deal you can work out with the people.
Ajay: Yeah. I'm curious here, Pete. First question, I think you kind of alluded to it, but you'll say, okay, in this county the acreage might trade at $4,000 an acre. So are you just pricing this county-wide, or how are you actually pricing your mailers? You've got your list of 50,000 records queued up here, what tools are you using? How do you dig into that? Is that actually you that's doing the work, or is that somebody on your team? Just walk us through that.
Pete: I've got someone on my team that actually pulls the list. We use DataTree for a lot of our data. We got an ongoing contract with them. So, we pull tons and tons of data. And then we scrub it for certain stuff and everything, all the standard stuff that people take out of these lists. And then as far as the pricing goes, I've done PRYCD and I just did that again this last mailer. And I've also done the other side where it's just county-wide pricing.
And when it's the county-wide pricing, it's just me that goes in there and say we're mailing 20 counties. I'll just go county by county and most of the time, I'm on Zillow. And I'm just looking at the comps and trying to get a feel for here's the retail price per acre and then I back off the percentage from there. On the spreadsheet, I'll just say, for this county, price it at this amount, this county price at this amount. And then they'll go in and build the spreadsheet for me and stuff. So, I'm not actually doing that part anymore, but then I send it off to the mailing house.
And then some of the areas, I'm doing with PRYCD, especially the areas I don't know as well or maybe they're areas where there's a lot of variation from one part of the county to another, but they're rural and everything's kind of consistent and I get a variation from one end of the county to the other. Then I'm fine just doing those comps myself.
I probably should spend more time on the pricing to get it more dialed in and I'm definitely not the be-all-end-all-person on that stuff, but I just figure a lot of times it's kind of a start of the conversation. It's kind of rare to hit the nail on the head with the pricing unless all the stars align. A lot of times, someone will come back and show some interest in the letter we sent, but it doesn't end up being the price that was on the letter, it could be less. Maybe we overshot it, it could be more. Maybe they're calling in to say, “Hey, I want to sell, but here's what it would take.” We're looking at the property when it comes in and trying to decide, “Okay, what actually could we do on this after we had a real chance to really look into it?”
Seth: Do you ever do any follow-up with these people, or is it kind of just one-and-done, you move on?
Pete: After they're a lead? Or you mean just when they're on the list?
Seth: I'll clarify that a bit. If you send out a mail campaign and a person just simply doesn't respond, do you send them anything else? Or are you sort of just done?
Pete: Yeah. Normally, if it's in an area I like, an area where we're starting to pick up good momentum and doing a little business, I'll resend it every three months. So, they're probably sick of hearing from me.
Seth: When you were doing houses, did you ever deal with direct mail at all?
Pete: When we were doing the house flipping, when we were buying them for ourselves, I was just getting all of our deals off of the MLS. And that's why I got my broker's license because I was like, “Well, I can get access to these deals as soon as they hit and I can go show it to myself and save a little commission when I write the offer and that type of thing.
But after I got my broker's license and I was doing that side of things, I was doing direct mail to get some listings, especially for a while their short sales were really big so I was sending out a lot of marketing about short sales and I can list their short sale property and handle that process for them.
I did have experience with direct mail, but not like this. It was more of a smaller list size, but I was trying to go big at the time. These were not all letters I actually sent myself, but I hired someone on my team that could handwrite the letters and send out something like that. Put an actual stamp on it. But not letters like this, though.
Seth: Going just back to very square one of getting a list. When you get your list from DataTree, how are you filtering that thing? Is it just super minimal, just like this county and state vacant land go? Or are you saying certain sizes? I'm just trying to get to the bottom of how much time or how particular are you about who ends up on that list in the first place, given that you're not getting lost in the weeds after that step.
Pete: Main criteria that we take out is I'll set a certain county, and then I'll set the acreage range. And most of these counties now that we're doing 10 acres plus. So, we'll do 10 acres plus at a certain county vacant land. And I'll have certain things like an assessed value under $10,000 or something like that. I think I'll scrub those out. I guess it depends on the county because sometimes there's a good correlation between the assessed value and actually what the property's worth. And sometimes, there's less of a correlation.
But most of the time, we scrub out those really low assessed values. From there, we pull the list and then it's a manual scrubbing out the stuff like the railroad company or the city or the county or all those standard ones that you scrub out. But we probably don't do enough there, but I always hate to scrub out too much from the list because I'm worried that those are the good ones that maybe other investors scrub out and I'll send them a letter and they'll respond to me. I don't know.
Seth: Do you have any concrete examples of that where you got a really good deal that you were surprised by? Like other people would've gotten rid of this. Anything come to mind?
Pete: Nothing off the top of my head, no. There've been really good deals that I kind of wonder, why didn't another investor end up with this before me? But I think a lot of it comes down to timing sometimes. My letter was there at the right time or maybe they saw three other letters from me that same year and they like my persistence, I don't know.
But the thing that we always try to impress is, we actually do what we say we're going to do it. If we agree to a contract, unless there's some sort of giant red flag that comes up during the due diligence process, we're moving forward, we're actually buying this. I'm not going to screw around and try to renegotiate with you when we get to the finish line or something like that or assign it to another investor. We are actually buying them. And we try to make it as simple as possible on them. Obviously, we ask them standard due diligence questions, but I'm not asking them to dig up any paperwork or documentation on anything aside from what the title company requires them to send.
Seth: I know earlier on you talked about some of the like mistakes and mishaps you made on those first few deals. Do you ever make mistakes now, or are you just mistake-free? Well, I'm curious as somebody who has done this for a while and is making as much as you are, what kind of mistakes do you still fall prey to?
Pete: Unfortunately, I do still make mistakes. I try to make less of them than before, but I think maybe sometimes being overly optimistic. I run into that sometimes because I'm an optimist by nature. So, maybe on some properties, I kind of estimate a higher potential profit than we actually end up receiving at the end of the day. So, that's probably the main one I make. And sometimes overlooking an issue, a potential issue that's a bigger deal than what I assumed it was.
For instance, this recent property that we just sold in December, it was a property we had in our inventory for a long time, nine months. And on our average hold time last year, at the end of the year, it ended up being 70-something days. A little over two months is the average hold time. So, for much of the year, it was 60 days, but I closed out some really long properties that were in our inventory for a long time, which messed up our numbers.
But on this one property in particular it was a nine-point something acre property in a nice rural area, kind of pretty. It was sloped but not too sloped. The main thing about it was, it was head road frontage, but the road frontage, it was like rocks, all along the road. Like big rocks. Bedrock-type stuff sticking out. And so, there's no way to get a driveway in there.
I was like, “Well, this could be a recreational property or whatever.” And we ended up selling it for way cheaper than I thought it would. Just kept reducing the price over time. And the feedback that I just kept getting was they want to know how they're going to put a driveway in and actually access their property.
I ended up selling. I made a little tiny bit of money, a couple of thousand dollars or something like that, but it was an issue like that, which I should have factored in more than I actually did. So, those types of things. I'm learning over time to really understand those things and maybe pay them more attention if something's staring me in the face like that.
Now, more and more, I try to put myself in the buyer's shoes. If I were walking onto this property and looking at it, is it a good property? Would I want to buy it? Or is it something where I would see this flaw and be like, “No, it's just a dealbreaker. I'm not going to buy this property because of that.” I try to buy properties that I consider good properties now. I stay away from those crappy ones, even if they're really cheap.
Seth: I don't know if there are any hypothetical examples you can think of, but let's say you send out mail and somebody says, yes, I want to sell. You look closer at it and you see something and you're like, no, we're not going to do this. What kind of thing would make you say no to a deal? Is it because you didn't realize what the actual value was when you sent out the blind offer? It's actually a lot lower than you thought? Or is there some problem with the property?
It sounds like, given how fast your property sells and how much you sell them for, you're focusing on the cream of the crowd, the best stuff out there. Correct me if I'm wrong, but given that, do you say no to mediocre deals that are just kind of like, “Eh, it's okay?” How do you think through that?
Pete: Probably, I don't have any exact numbers on this, but if I were to estimate, I'd say probably 90% of the properties that come in as leads, I'm probably turning down for one reason or another at this point. Some of the things that I just don't like are landlocked properties. I did one landlocked property and it was just such a pain. And I know that there are a lot of investors that love landlocked properties. They're able to buy them really cheap and then work through those issues to either establish access or sell it to a neighbor. But I honestly don't want to deal with it. And really slope properties, I don't like those because those always take too long to sell.
Properties where access is terrible, even if there's a dirt road or something, but it's a washed-out dirt road and it's just winding back a mile and a half or something like that. Then those properties I really try to stay away from. I try to stay away from properties that are 100% wetlands. So, things like that. Oh, the other type of properties now that I try to stay away from are ones that are cut over. They were recently harvested all the trees and the property is left a mess with big ruts everywhere. Those are tough to resell. So, things like that. I am kind of looking for the best of the best. Good properties that I can get at the right price because I know if it's a good property and I can price it right, it's going to sell.
Seth: Are you ever willing to make improvements or alter the property? For example, the timber all being cut down and there's just stumps or something, like you wouldn't ever take the time to grind down the stumps or almost like rehab it. Are you just kind of buying stuff as is and not touching it and selling it?
Pete: No, if there's any opportunity really to do some minor value add stuff, I'll definitely do it. A lot of the properties end up being woodlands, but they've just been there for all these years. No one's really done anything with the property. It's just owned by whoever it was owned by and it's just there. So, some of these properties access, it's like a thick brush, you can't even walk onto the property. On stuff like that, I'll always try to look into hiring someone to clear out some paths, getting access because they sell so much better when someone can actually get out of their car, walk onto the property, walk through it, and know what they're buying. Things like that.
Perc tests. I'll do perc tests whenever I can because if we can establish it as a potentially buildable property, then it's going to have a lot more value. And certain areas, I've got good contacts for that type of stuff, like good soil scientists and things that I could call up and I know that they can get out there pretty quickly. So, we try to do that. Those are kind of the main things. In some properties we've bought, we've done minor subdivisions, certain properties we've bought where it's a potential residential subdivision.
I've hired an engineer to drop a sketch plan on it and then market it with a commercial broker. And that's kind of the value add even though there's nothing on site, but it's on paper. Here's potentially what you could do with the property. Those types of things I'd like to do.
I don't foresee myself at this point getting into actually doing a major subdivision, going through all those steps and getting it done on paper. Even though it's probably very lucrative, it's time-consuming. And for me, one of the main things I like about this business model is just how fast you can move the properties and if you can move your money really fast then your returns really compound.
Seth: Have you ever tried to sell stuff yourself? Did you start that way and then move to agents? Or did you just start with land brokers from the very beginning?
Pete: We've done a couple of properties where we put them in the flat fee MLS, but it's mostly because I can't find a good agent to work with in that area. So, it's been out of necessity rather than preference. I love working with the agents because for me, it kind of lops off a whole half of the business that I don't have to worry about. I don't have to worry about the marketing side or a buyer side website or any of that stuff. I just skid that off to the agents.
And the good ones will have a buyer list already. They'll have people looking in that area. They'll do the right marketing stuff. They'll put it on the land website, land.com, they'll put it in MLS. I think the good ones will get back a lot more return than the one I'm paying them in commission.
Seth: Yeah, it makes a ton of sense. And that's a common denominator I've been hearing from a lot of people who are doing really well on land. They hire licensed agents to sell their stuff and they just deal with whatever costs they're associated with that. But you're right, it does lop off a huge time waster and a massive frustration that a lot of land investors have to deal with. So, if you can find them, yeah, I would totally say use them.
Pete: Yeah, definitely. I'm just a big fan of that because, obviously, since I've been a licensed broker and everything, I'm in California, so I'm not licensed in any of these other states that we're dealing with. But I just see it from the other perspective. I know that a good agent is going to bring more value to the equation. If you pick a bad agent though, it's going to do nothing for you. It's actually going to be the opposite. So, you have to be really selective in who you work with. I've worked with a couple of agents doing this that turned out to be not so great. They seem great on paper, but they didn't ultimately do a great job.
Ajay: Yeah, I just fired my first agent.
Pete: Live and learn, right?
Ajay: Yeah, it was a very mutual firing, we'll call it. It was a small lot. It was a $12,000 retail vacant lot we bought for $4,000 or $5,000 or something. No great deal but he just wasn't marketing it. He made all these promises about where he was going to post it and literally just put it on MLS. And I don't even mean had gone to all the other MLS sites. I mean, just on their local MLS, no Zillow, no Trulia, no Redfin, none of that.
I kept checking in with him and eventually, he just responded like, “Look, man, I'm burned out.” I'm like, “All right, well, then you're fired.” It was amicable and he sent me a nice agreement to cancel the listing agreement, but how do you just say you're burned out and don't want to do your job? Why'd you take the listing, man? We didn't have to do this.
Seth: That's the best way to handle any employee who's struggling when they come to you and confide to you, it's like, “Oh, you're fired then. Get out of here.”
Ajay: Okay. It was not an in-house employee, for the record.
Seth: I'm joking. You had some kind of a six-month contract with them or something and you got rid of them prior to that expiring?
Ajay: Yeah, we had a six-month listing agreement. And I manage my realtors, not micromanage them by any means, but if it's a new relationship, I would say I follow up pretty frequently. And I'm usually pretty anal about setting expectations of, “Hey, where are you going to list these properties?” And then if I don't see them listed there, I say, “Hey, I'm having trouble finding the Zillow listing, would you mind pointing me toward it?” I just love seeing how many views and likes we have.
Seth: It's not popping up for me.
Ajay: Yeah, right. Exactly. So you can be tactful in how you follow up, of course. But that usually then elicits, “Oh, I made a mistake. Oh, that's so weird. Why isn't it on Zillow?” But anyway, long story short, we had gone through three or four iterations of this. I called him, left voicemails, and eventually, I could tell he was avoiding me at a certain point, which is never a healthy sign for somebody that you've got an agreement like that with. And eventually, he just wrote me this long text message about how he was burned out and he's like, “I could have somebody else on my team handle this if you want to transfer that over.”
I'm like, “Man, you had a ton of experience in land, I wanted to work with you, but if you just don't have the bandwidth for this right now, I'd prefer to list it with another agent that I get to vet. If you wouldn't mind, can you please send over a cancellation for the listing agreement?” It was all very amicable and respectful. I wasn't a jerk or anything to this guy and he did not need the thousand bucks or whatever he was going to make from the listing.
Seth: I find it so irritating when people just don't do what they're supposed to do and it's not hard. And I have to pretend like I'm the idiot. Like, “Hey, maybe I'm wrong. I get it.” And that is the right way to respond the first time or two it happens, but I just can't stand these games we have to play. Just do your job. But that makes me think that's a good use for ChatGPT. Just tell it, “I want to fire them, help me kindly explain this to them, so that they will love me when it's all done.”
Ajay: Oh, my gosh. Yeah. Yeah, it's fantastic. I've been playing a lot with ChatGPT since you posted that video actually, Seth. It's been fantastic. Just for random things I've been copywriting. And I don't know if you've played with it much, Pete, but it'll even write things in tones of people. I can't remember if Seth, you pointed that out or not in the video you posted, but I've had it write this in the tone of Ryan Reynolds and it'll be in this.
Seth: He's got a commercial about that, doesn't he?
Ajay: Yeah. Yeah. I think he does. He does. He posted that after I had seen it.
Pete: Are people using it for listing descriptions? I always struggle with that.
Seth: That's a huge use case for sure. And it does an amazing job of it. I noticed at the time of this recording, it seems to be throttled back a bit. Sometimes I can't get out at all. It's overused or whatever. But either way, I'm sure that kind of technology is here to stay in one form or another. The fact that it exists, I'm sure it will continue to evolve and it's kind of nice that we don't have to use our brains so hard anymore. As long as we are sure to somehow insert originality and personality and do it if it's not already there.
Pete: Yeah, yeah. Have you ever played with the one that does the photos of the art stuff?
Ajay: I've seen that.
Seth: Is that, what is called? Jasper or something? Or DALL-E?
Ajay: Yeah, DALL-E.
Pete: DALL-E. That's it. Yeah. I spent a whole night coming up with…
Seth: That's pretty cool. I told it to come up with a picture of a farmer with a hat and overalls looking out over a field painted in the style of Monet or Van Gogh or something, one of those things. And it did. It wasn't like the most gorgeous thing I'd ever seen, but it understood and it did it. It's crazy.
Pete: I know. Too crazy. Yeah. Who knows where all that stuff's going to lead? I know it's going to change things. I guess I'm just not smart enough to figure out what those changes are going to be, but I'm just trying to keep my finger on the pulse and adapt accordingly.
Seth: Kind of a big overarching question that I think I know the answer to it, but I'll just ask it anyway. Given how much volume you're doing, how much money you're making, it begs the question, what exactly are you doing differently from other land flippers who aren't making this much? What do you think is your unique unfair advantage? What is it that you can do really well that other people can't do that well? My observation and you can maybe chime in and let me know if there's something else that comes to mind, but it seems like you're really good at taking massive action and you don't get lost in the weeds on things.
And maybe that results in some other con in the process. Maybe there are added expenses or something, but overall it seems like a net positive. You come out further ahead than you would have otherwise. It also seems like you're not afraid of making big moves. You don't agonize over decisions. You come out guns blazing and you get somewhere. And if you don't get somewhere, you learn a lot and then you get somewhere after that.
And that's something that I think a lot of people struggle with. And for those people out there, if you can self-identify in that way, maybe there's a lesson here. If you're having a hard time doing these things, check out what Pete has been doing and how far he's been able to get with his approach. That's my observation. But what do you think, Pete, is there anything else that you just know you're naturally really strong in that the average person is not?
Pete: Yeah, yeah, great question. First of all, one of my main strengths I kind of pride myself on is my consistency with everything I do in my life. It's consistency with working out, consistency with my nutrition. Everything is super regimented. My wife makes fun of me for it all the time. I've got all these habits and everything's the same every day. I eat the same. All this stuff.
I kind of translated that to the business itself. And I think this is the most important thing where most land investors fall short is the mail inconsistency. 50,000 pieces of mail each month. I do a batch of 25,000 on the first and a batch of 25,000 on the 15th. And no matter what else is going on in my business or my life, that mail goes out.
It sounds simple, but if you consistently mail like that, whatever your number is, whatever you decide is a comfortable number for you to mail at, you got to keep that out consistently like clockwork. If you're off a few days, that's not going to make a big difference. But that mail has to go out, the certain quantities have to go out. Everything else falls into place if you've got that mail coming out. And certain mailers do better than others, but it's always a little bit of a rollercoaster in that way. But over time, you're going to get the deals coming in that you need.
And you look at the big numbers. I pay on average about $3,000 for every deal that I do. And on average, I make $22,000 per deal. So, the more mail I send out, the more profit I'm going to make because I'm going to be doing more deals. That's really the most important thing. And I think if there was one thing that people could focus on, it would be that. And I think that would have a dramatic impact in their businesses.
The other thing is I started out at the beginning doing everything myself and I had an assistant that kind of helped me with some of the basic list preparation tasks and things like that. But I've been working to just add on certain team members and take stuff away off of my plate because, at a certain point, it becomes unreasonable to do all the stuff yourself. It's impossible. No matter how organized you are, no matter how good at what you do you are, you really need to start hiring those particular people and try to get the superstars also.
Don't just hire your friends, cousins, nephews, son, or something like that because he needs a job. You need to seek out and hire the best possible people you can find. And you're not always going to hit on that. But if you find really good people, then things start going a lot easier.
At this point, I've built up a pretty large team and some would say I probably have too many team members for the amount of revenue that we're doing, but I always view things, I like that quote by Wayne Gretzky, “Skate to where the puck is going, not to where it's been.” So, I'm trying to prepare things for where I want to go, not to where I'm at right now.
Seth: On that, how many people are on your team, and like, what do they all do, and where do you currently fit into that?
Pete: Sure. Yeah. Okay. So, I've got, I believe nine people on my team right now. At the beginning of it, I've got a list manager and he's more of a lead manager, due diligence manager. Basically what he does is, as the leads come in, he puts them in our CRM and formats them, gets a MapRight link and does some minor due diligence stuff. Put that in our CRM. Also, when we get a property under contract, he will order all the due diligence, the photographer, and with LandMasters, he'll do it and order with them and get that ball rolling and all the due diligence.
Then I've got an acquisition manager and her job is to do all the contact with the leads that come in. We've got PATLive as well, but PATLive during regular business hours will then live transfer to her if it's during those hours, if it's a potential lead that sounds they are interested in actually selling instead of just complaining. So, that's her job. Her job is all communication follow-up, everything to the point we're getting the property under contract.
I've also got a property analyst on my team. His job is to review all these leads that come in, determine if they're properties that we want to buy, at what price makes sense, really kind of looking into those. And then, as we're under contract and when the due diligence is being collected, kind of review all the due diligence, review the title report, dig into some other areas that may need some further research. That's his job.
At this point, we kind of collaborate on these properties we're purchasing. He kind of presents it all to me and I make the call on are we going to go forward or what exact price. But trying to transition more to him, making a lot of those decisions eventually.
And then also I've got a transaction manager. Once we're under contract, she takes over. Everything with the paperwork and the communication with the title companies, the attorneys, she does that on the buy side and then also on the resale side. I've got an executive assistant. His job is to help me manage the whole team, get all the processes that we have in place, refining those over time. Any projects I want to do, he's kind of moving all those things forward. Basically keeping me organized and has been a great addition.
I also just brought on an asset manager I'm calling it, which is basically taking away more work for me because right now, I'm the one doing all the communication with the agents, negotiation on offers, price reduction, staying on top of all that stuff. It's getting unworkable for me. So, I brought her on. She's going to be doing all those things. We've got some other properties that we bought aside from the land clipping stuff that are properties that need some renovations. So, she's also going to be managing those projects as well. And then anytime we're doing value add stuff to properties like some clearing or a survey or perc test or anything like that, she's going to coordinate all that stuff.
We've got another team member. He's doing all the collection of the data from DataTree. He's pulling the list, he's scrubbing them. He also does some other tech stuff for us. And then there's another assistant as well. He does a number of different random things. And then we just brought on a social media manager too, because we just launched a podcast about real estate investing. So, he's working on that side and posting stuff and videos and all that stuff.
Seth: I haven't heard you say personal butler yet.
Ajay: Yeah, right?
Pete: I got to talk my wife into that, but she's not going for it.
Ajay: I was going to make a comment, Pete, I can't wait till we talk again in a year. And we're like, how many are on your team? And then we get to hear the line by line of all those folks. That was extremely detailed. Thank you so much for sharing that.
Pete: Yeah, yeah. Sorry you asked that question.
Ajay: I want to highlight something from just something I heard earlier from you Pete. I noticed how you'd said you have your mail going out on clockwork. And I think you pointed out how valuable it is, but I just want to echo how important the fundamentals are truly in any business. I think what you have done so well that not a lot of other investors either recognize or have the wherewithal to do is just focus on those fundamentals and then just drilling down on them.
When you said you sent out 50,000 mailers a month, that's such a mental shift, I bet, for most people listening to this because I feel like you hear 10,000, 12,000 a month, and you're like, oh, wow, that's kind of a lot of letters for somebody to be sending out. And here you are, you're like, yeah, we send out 25,000 on the first and 25,000, what'd you say on the 15th, was it?
Pete: 1st and 15th. We try to do it. Yeah.
Ajay: Yeah, which is just incredible that you do that. You've drilled down on the fundamentals. I know in my own business, I just struggled in 2022 with some shiny object syndrome, in my actual marketing and in the properties I was targeting. And so, it sounds like you have even the asset class and the dollar amount pretty dialed in your business, it sounds like your exit price more typically is in that 30 to 100 range if I'm reading between the lines correctly.
And then you've got some kind of multi-six figure deals that pop in and you're not going to turn those down when they come across your desk, of course. But the point being, in my own business, I really struggled for a while because we would say, “Okay, we're going to send out texts, we're going to do some cold calls, we're going to send out 8,000 to 10,000 units of direct mail a month. We're also going to target this county in Florida and this county in Georgia.” And we don't actually have a type of asset dialed in and we don't have a price point dialed in.
And so, you've got all these marketing channels coming through, you've got all these different processes that are occurring that are not dialed in. And so, it's a nightmare trying to keep track of everything. I envy how you've been able to dial it in one channel and consistently deliver it over and over and over again.
Pete: I guess maybe it's just I'm simple the way I do things. And most stuff, I've listened to different people talk on this subject, and in most businesses, much of the minutiae and all these things really don't matter. It's like a few big levers, really. If you focus on those few big levers and just make sure those are dialed in, then you're fine. I know in this business it's like sending out the mail. And that's one thing I can definitely control. I can't control what responses come in. I can't control any of this stuff, but I can control how much mail I send out on a consistent basis. And I know that if I send that out, that stuff is going to happen over time.
Seth: Yeah, it's interesting. I think it was the fourth podcast episode I ever did where I was actually rehashing something that I heard from somebody else about three big levers in any business. This applies to everything, where it's all about one of these three things. Either the reach, how many people you're reaching. The conversion rate, or the price, like how much money you're making from each transaction. And all you got to do is push one of those levers harder and you're going to make more money. And if you want to push two of them harder or three, you're going to make even more.
But some people might focus on the conversion rate. I want to send as little as possible, but squeeze as much juice as I can out of that. What do I have to do to make that happen? Or some people might just do the price. How do I just make more money from every deal I do and do fewer deals? There's not really a wrong answer, but just understanding that's really what it boils down to is those three things. And if you can become a specialist in one of those and possibly two of them, you're going to do pretty well.
Pete: Or hire someone to help you out with those areas you're not good at, I guess.
Seth: Yeah, for sure. Pete, I know in passing, I've heard you mention things like DataTree, PATLive, PRYCD. Are there any other specific tools or software that you find just indispensable in your business that you just couldn't live without? Anything come to mind?
Pete: Yeah. Well, there's a couple of things, but the main thing that our whole business is really built around is our CRM business system that we use. And basically, what we did is we took HighLevel, which is a CRM platform that does a bunch of different things.
But then we built a custom solution on top of that and completely customized it to our business. So, not only does it manage all the leads as they come in and there are automations tied to that follow-ups and everything, but it also manages every single process within our business. All the main processes. Like the due diligence process, everything's structured out. Order the photos, review the title report. All these different things are very structured on the transaction side of things. Like we've got a whole transaction process and then on the acquisition side and then also on the resale side.
And it allows us to keep everything at one central point so all the team members can go in there and access all the information that they need, the files for a particular property. And every team member knows exactly what their role is and what they should be doing next.
That's really, really critical to everything we do. And initially, I'm probably like a lot of other investors who started out with trying to manage things on a Google Sheet. All our needs that would come in. And I quickly found that that was not a good solution for me and it was completely unworkable and lots of things were getting dropped out. I then really started diving into figuring out if I'm going to build a decent-sized business with this, I know it's got to have a foundation that will allow me to scale.
I think a lot of investors sometimes really don't understand that part of it. They think it's mostly just about getting more deals, doing more deals, and everything. And while that's great, there's just so much more that happens within this business, different aspects of it that you've got to take care of and things that have to happen in a certain order that once you get to a certain number of deals, it's just going to be impossible to stay on top of it no matter how good you are. So, you've got to have some sort of technology foundation to whatever you're doing and let it help you get bigger. And if you don't have that then you're really always going to struggle.
Seth: Was that a big job to create this custom CRM thing with HighLevel or did you just find somebody on Upwork and tell them to do it for you? How did that work?
Pete: It was a big job. I went down this whole rabbit hole. I like technology and I like that side of things. We were actually using HighLevel within our other business, so I was pretty familiar with it. But it was a completely different use case. We were using it to host our courses and doing email list management, text list management, things like that. But I knew that it was pretty powerful and I had realized that okay, I think I could build our whole business system on this and make it really, really powerful.
Then I would set up some pretty basic stuff on my own. I kept on getting it more and more dialed in, more and more refined to our business. So then I would hire people to do certain aspects of it. And eventually, it just grew over time. And I'm still improving it continuously and I'm still trying to add things to make it better and everything more seamless. So, it's a work in progress, but I do think it really, really helps considerably. But it didn't just happen overnight, unfortunately. I had to really work at it. I'm really happy with how it's organized our business pretty much.
Seth: Got you. Cool. Well, Pete, as we wrap this up, one thing that I know a lot of people have on their minds, and frankly, it's been this case forever, since I started it. Some people are worried about competition. There's been more people entering the space, it's something that continues to grow in popularity. Do you ever think about that? Do you lose sleep over that? You don't strike me as the kind of person who does, you just do your thing and it works. But I don't know, do you have any thoughts on that? Is it something that you're concerned about in any way? And if so, any ideas on how to deal with it? What are your thoughts on that?
Pete: I'm not concerned about it at all, honestly. I know that there are so many parcels of land in this, and you guys probably know how many parcels there are. But I know that there's a lot of land in this country. If you fly from California to Florida or from the West Coast to the East Coast, you know that there is just so much land in this country.
I'm always looking at things from the kind of abundance side of things rather than the scarcity. I'm never ever concerned about that. Maybe I would think differently if none of my mail was working and my cost per deal went up to $20,000 and I was making $22,000 per deal, then I would be like, “Okay, this is not working anymore.” There's too much competition, or whatever the case may be.
But I think we're so far off from something like that. I talk to people about the land business all the time and people that are in the real estate investment space and they're like, “Oh, I never heard of this business model.” I know, being in our world, it just seems like it's flooded and there are so many investors out there, but in reality, that's not the case. The hot areas are always going to get a lot of mail and they're probably going to be inundated no matter what, but on the house side, they're way more inundated than they are on the landside. I'm pretty confident.
Seth: Yeah. It reminds me of something that Ajay said a while back in one of our previous episodes. I didn't even hear you say this when we were live doing this, Ajay, but I was listening to it as I was doing my little proofing before it actually went live. You said something about how playing to win is a totally different thing than playing to not lose. And man, that hit home, because I feel like so many times in my life I've played to not lose. And you're right, it is a completely different mindset. And you make totally different decisions, massive fundamental differences in thinking.
Pete strikes me as the kind of guy who plays to win and he's not tiptoeing around. I'm sure he's certainly cautious when he needs to be, but look where's brought him. And I think there is definitely a tangible difference when you look at people who are playing to win. It just takes you to a totally different destination.
Ajay: Absolutely. I absolutely agree. And I love that you called that back. I want to say too, I think I was listening to Alex or Mosey recently who's really made a splash on the internet over the past year or two. It was either him or Layla, we’re talking about how when markets become saturated, which I think we're still far, far from, but when they do become saturated, two things really take place. Margins get compressed and the barrier to entry gets a little bit more difficult. But there is still plenty of profit to be made. Because if there's saturation it's because there's a lot of activity in an area, right?
And the U.S. real estate market is what? $33-, $40-trillion industry or something. There's so much wealth to just go around for everybody that's in it. I think the differentiator is being mindful that the barrier to entry just goes up. It means for those of us that have been playing, there's always going to be room for excellence, is what I'll say, in any niche.
Seth, if you woke up one morning and decided you want to sell bread and you were just the best bread salesman, whether it was in your market or in some niche or whatever. My point is though, it just doesn't matter. As long as you're willing to go the extra mile and become excellent, I think there's always room for profit.
Pete: That's so true.
Seth: For sure.
Pete: So true.
Seth: Well, Pete, I appreciate you coming on the show. It's been awesome to talk to you and get to know you a little bit better. If people want to find out more about you, where should they go? What should they do?
Pete: Yeah, the best place to find me is go to turningprofit.com. As I mentioned a little bit earlier, we just launched a new podcast, myself and my wife as the co-host, and we're talking all about real estate investing, talking a lot about land flipping on there as well because that's obviously our business model that we really focus on.
On the site there also, I do my best to add as much transparency to the land investing side of things. I do a monthly income report where I break down the revenue for that month, all the deals that we did, the profit that month, how long we held each of the deals and notes on each of the property deals that we did. And just try to show you exactly what's possible in this business.
When I started I didn't find any of that type of stuff out there. It would've been really powerful for me to actually see that stuff and then I could have showed it to my wife Heather and said, “Hey, look, this is what is actually possible.” It would've really helped out a lot. I'd like to just know that other people are doing it and then you feel more confident that, “Hey, I could do this too.” That's kind of my goal and I don't have any sort of program or anything like that that I sell at this point. So just looking to get awareness for the podcast. If you're interested in that type of thing, I'd love to have you.
Seth: That's a really cool thing. I know I had a dream and that's all it ever was, of trying to do an income report thing like that. Because I know when I first got into blogging, I know Pat Flynn was a huge deal.
Pete: Oh, yeah.
Seth: And that was exactly what he did. And that's part of what made him a big deal because he really just laid it all out, and it was like, “Man, that's amazing.” But I'm sure it takes a ton of time to compile all that stuff, right?
Pete: Yeah, yeah. I set up processes so I don't have to do a lot of that compiling. I do all the writing and I obviously film the video about it, but I've got team members that help do that heavy lifting and then kind of tee it up for me to then just do it.
Seth: Yeah, it's super eye-opening and enlightening just to see examples of that. Yeah, I commend you for doing that. That's a really cool thing. I also haven't seen that anywhere else.
Pete: Oh, okay. Yeah, I also got a thing on there where I did, like our 51st deals, I kind of broke down the 51st deals I did. Another kind of similar thing so you could see what's maybe possible.
Seth: Yeah. I will link to turningprofit.com as well as a ton of other stuff we talked about here in this episode at retipster.com. If you guys are listening to this on your phone, feel free to text the word FREE to the number 33777. You can stay up to date on everything going on with REtipster. And Pete, thanks again for coming on the show. It's awesome to talk to you, and hopefully, we'll talk again soon too.
Pete: That sounds great. Really, really appreciate it, guys. Thank you.
Sign up to receive email updates
Enter your name and email address below and I'll send you periodic updates about the podcast.
Share Your Thoughts
- Leave your thoughts about this episode on the REtipster forum!
- Share this episode on Twitter, Facebook, or LinkedIn (social sharing buttons below!)
Help out the show!
- Leave an honest review on Apple Podcasts. Your ratings and reviews are a huge help (and we read each one)!
- Subscribe on Apple Podcasts
- Subscribe on Spotify
- Subscribe on Stitcher
Thanks again for listening!
The post 152: Can You Really Make Millions Flipping Land? Ask Pete Reese, Who Did it in One Year! appeared first on REtipster.
What's Your Reaction?