Epic Real Estate Investing - $0 to $22 Million in His First 2 Years! - Steven Pesavento | 881

Episode Date: December 29, 2019

This weekend, Matt interviews Steven Pesavento, a real estate investor, a founder of The Investor Mindset, and a host of the same called podcast. Steven is a real ace as he bought 150 houses in his first two years and made over $22 Million in real estate transactions. Stay tuned as Steven shares a plethora of golden nuggets that he has collected on his investor’s journey! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit REI.

iAase.com. Here's Matt. Okay, welcome to the epic real estate investing show. I got a great one for you today. Our guest is an investor and entrepreneur who has built his investing business from the ground up. He went from zero to buying and flipping

over $22 million in real estate within his first two years in the business. It's over 150 individual deals. And I invite him to come on the show because I want to know about it. I want to talk about it and I want to share it with you. And his company has grown through discovering the investor mindset, which is also the name of his podcast.

Focused and he's focused on rapid growth and modeling success. And modeling is what he gives all the credit to have his success too, just copying what works for others and doing it. No need to recreate the wheel. So please help me welcome to the show, Mr. Stephen Pesavento. Stephen, welcome to the epic real estate investing show. Matt, super excited to be here, grateful to be talking with you today or somebody I've looked up to.

So it's fun to jump into things. Sweet. It's always nice to have someone on. the show that tells me that nice stuff. It always starts off and makes me feel so warm. Anyway, Stephen, so you haven't been doing this very long, right? No, I haven't been doing it very long. Just going on three years now. Just three years. Okay. So what were you doing just before you started real estate? Well, I was hanging out on the beach in Southern California. I actually in Huntington Beach, on a little beach called Sunset.

But, yeah, work-wise, what I've been doing, I was in managing consulting, that I moved my way into project management of, in the startup scene, managing software development projects, and was working in the digital marketing space. And I was kept moving from role to roll, looking for that passion, looking for that thing that you can really put everything into,

and to kind of create that lifestyle design that we always hear about. And I wasn't finding it elsewhere. and the one thing that I couldn't get off my mind, the one thing I couldn't get rid of was this thought that, man, real estate could be a vehicle. Real estate could be the thing that could get me there. And finally I decided to take the leap. Sweet. You know, you said, Sunset Beach. You know what's so crazy about Sunset Beach. When I first became a real estate agent, my first day on the job was an open house on sunset beach right on the sand. No kidding. I live on.

the water tower right across from the sand. Oh, yeah, the water tower, exactly. Have you ever been up in it? I have not. I didn't have that fortune. I've been up there. It's been for sale a couple times, and I've been able to get up there and take a look. It's pretty interesting. But yeah, I was right on the sand side, and that was my very first open house and ended up selling a house on my very first day on the job, right in Sunset Beach. So it's near and dear to my heart.

Sweet. So you decided to get involved in real estate. So what is that, once you've made that decision and you know you use this modeling idea which is a very smart way to go about things regardless of what it is you want to do and you got very quick success so what does that beginning look like yeah so it felt like it took a long time to get success but in reality compared to some people's paths it was pretty quick um you know i made that decision i decided that i was going to go all in that i was going to go forth in real estate and at that time i fired all my web development clients. I was making money, managing web projects, just doing, it was in between the corporate positions. I was really creating that space to figure out what is next. What is that

thing that I want to do? But I decided I needed to cut myself off. So I burned the boats. I sent an email that day to all my clients transitioning them to another service provider that I knew could take care of them. And I cut myself off from all their options. And about a week later, I went to my first real estate investing event. And I went to that event. And I went to that event. with a super clear intent in mind. I was set on getting surrounded by some other people who were already on this path, who are already doing these amazing things.

And the speaker that was speaking that day, she was somebody who had been flipping houses for quite a while. She had already been on this, you know, this journey. She had all this experience. And I thought to myself, well, how can I add value to her life? What can I do to get connected to her, to get close to her,

to be able to learn what she knows, is that how can I give her something so that she'll offer that as an option in return. And so I obviously had this web experience background and I offered to build her this website. In return, I got to follow her around for months and, you know, get my feet wet in the real estate game. That's awesome. A few big points there. First of all, the first event, what type of an event was this? It was a four investors, via investors, a real estate meet up there in Southern California.

you got it, which one? It was the Long Beach one with Matt Owens. Iris Veneration was the one who was speaking, the woman I'm talking about. That's crazy. All right, so we have Sunset Beach in common, and my very first wholesale deal was wholesaling turnkey properties for Matt Owens. Oh my God, what a small world. Matt is an amazing guy, Matt, if you ever listen. I love everybody.

Yeah, he never misses an episode, so he just heard you say that out. He's been on the show several times. And yeah, he didn't even know that I got my start by selling his properties. It was kind of how it did my first deal. That was in Long Beach. And then it was about, and I got that done really, really quickly. Then it was about seven or eight months before I got my second deal. And that's when I started selling Matt's properties.

But cool. So that wasn't even expecting that. So Phoebe, great organization, great friends of the show. And so I know Iris, very. very, very well. But the one thing that I wanted you to point out right here, if anyone is looking to follow in your footsteps and model what you did to get started, I think probably the most impactful thing was you asked yourself, how can I add value to them? Right. And I think that's so key. And having been doing this for about 10 years, I mean, just the amount of emails that come through

are, it's pretty extraordinary. Like, once, after 10 years of doing a podcast. So, but a lot of stuff, like how can I, you know, can I follow you around? What can I do for you? What do you need? You get a lot of those types of questions and it's so refreshing when someone just says, here, I'll do this for you. And I have two people that work for me to this day and that's exactly how they got in. One person came up to me and says, hey, your show notes suck. Let me do them for you if you show me how to do real estate. And so she still works for us. And then the next dude said, hey, I just want to hang out. live right down the street. I'll work for free and you can just pay me whenever you needed to pay me. And he works for me to this day and he's probably one of the highest paid people at my office.

So that's great, Stephen. You got a good head on your shoulders and you did it right. So you followed Iris around. You did a lot, you did a lot of production in the first two years. Did you do those with Iris or did you do them on your own? How did that work? I didn't do that. So I started my game by going out and or started in this game by going out and learning. from some other folks. But I attempted in the real estate market in Southern California, pretty, I attempted to get my first deal. I followed some of the systems she was talking about. I put, you know, 80 offers in six weeks down on properties on the MLS. I ended up going and looking at a bunch of properties. I ended in that process. I learned how to run the numbers, how to talk to agents, how to do all these things. But I didn't get a good deal out of any of that work. I got two deals that are under contract, two of them that I

attempted to wholesale to other people, and they were junk deals because the reason I got them under contract was because I didn't know that they had foundation issues or this or that, or my comps were off, or it was hard to value that price. But when I actually really got started was about four months after that, I had been going with this bigger, and I was, I had this realization that after sending 3,000 mailers in Southern California and I only got 12 phone calls, I realized, wow, my money's not going to go very far. And I don't have. have a lot of it. So I need to figure out, well, where can it go the farthest? And I opted to go out of state. And at that point in time, I decided I was looking at some markets in the Midwest and in

the southeast. And I started doing some business in Raleigh, North Carolina. And that's one of the markets that I'm still in today. And we started doing some marketing, started modeling what some other people were doing on the high volume marketing side. And even from that point of view, I was spending a lot of money. It still took three months, four months before I got that first deal. I had to have the confidence in the faith that I was going to succeed, that I was doing the right thing and that it takes a little bit of time before people decide that they want to sell and that they're going to actually sell to you. And when I finally got that first check, it was only like $4,200. It was a grind to get it sold. It was a crappy property and a crappy neighbor.

and I took forever to find a buyer. And when I first got that money, but what it did for me is it said, hey, you can do this. This is real. This is people really make money. And look, they're making money and you're making money. And soon after that, we started hitting the volume that I, that I, you know, to get to that 75 deals the first year. But it all started with one.

Yep. It always does. Nice. Yeah. So you're sharing it with your Southern California experience. the 80 offers in six weeks and what was the other thing you'd said? Oh, the mailers and very little response rate. So that's kind of typical of Southern California. Do you know how Iris was actually finding her deals, the ones that she was doing? Most of the deals that she was finding was through

her network. So she had built a giant network. She was running a club. She was teaching some people through a program she ran twice a year called the 60-day challenge. And most of the deals came in through relationships. And I think that can be a great way to do it, but it takes longer. It takes more time and, you know, for her, she had that time on her side and she had those relationships ready to go, but that could work for anybody. And it's a way that doesn't really cost a lot of money. It just takes your time and effort to do. Amen to that. Yeah, it's a, you can market to go fast. You can do relationships to go far, is what I always say. And having my start in Southern California as well, that's where my deals came from, too. It's from through the

relationships. So you went out of state. So you were living in Southern California. Did you move to Raleigh? Or how did you pick Raleigh? I did not. Raleigh was one of the fastest growing third-tier markets at the time. It was on a lot of lists. I ended up partnering with an experienced flipper who was moving out to Raleigh. I'd already picked it as my market. He decided he was going to move there and do some development in the area. And Mike Foley, you probably know him as well. And he moved out to the area and he was managing and running the flips while I was managing and running the sales team and the marketing and kind of the operation that took to get the deals. And so over those first two years, we flipped about half of those 150 properties.

The rest were wholesales. But the wholesaling really, that brought in the money to keep the operation going, but we actually made a profit on the flips because it was so expensive for us to go out and find these deals and to do things at this kind of a high volume. The real key was how can we maximize the profit? per deal, but flipping 150 properties would have been a little bit too much. I mean, 75 was frankly a little bit over the top aggressive. But, you know, in that process, you learn a lot about what works and what doesn't. And, you know, after spending a million dollars in marketing over the last

two and a half years, you know, I definitely can see how quickly different channels can change and how important it is to be tracking exactly what you're doing and to be able to keep that baby going. Yeah. So let's start with the marketing part. So you had boots on the ground that was going to do all the work for you, right? So you had boots on the ground. You had somebody on location. You did the marketing from here. So what did that marketing program or system, what that setup looked like? Well, so I hired boots on the ground, salespeople in particular, and I partnered with somebody to do the flips. But the marketing to get when I got started and it still works today, but it doesn't work at the same level that it did.

It was direct mail. And I was doing high volume postcards, mostly to high equity, going for reaching a lot more people versus being more targeted. You know, over time, we've had to go more targeted because of how competitive things have gotten in our area. But we started out doing a lot of direct mail. We started adding in some pay-per-click, which was really profitable for a while,

and isn't quite as profitable at the same volume that we were doing before. and pretty much for those first two years, those were our two channels. We focused in on, hey, what's working and how can we do more of it? And then started figuring out, well,

how can we do more of it more cost effectively instead of just spending more to get more deals? Got it. Okay, so you send out the direct mail. You send out postcards and you're going really broad, right? The phone is ringing.

Who's answering the phone? So my team was set up from a position If I had a lead manager who would answer the phone, when I got started, I answered it because I was out of state. I was in a position where I didn't have money to hire other people until we closed some deals. So one of the second roles that we hired for was a lead manager. Most of the time, I would have said that's the first role that you hire. But because I was out of state, it gave me an opportunity to really work these leads to know exactly what's going on.

So when I passed them to my sales guy who wasn't as good as me at sales, because when you're starting out, you work with the people, can get, I knew what was a deal or not. And when he would go and work the lead and go and get the sale, I was directly connected. So I had a good feeling for what channel's working because I'm hearing what these people are saying. And so as the team grew, we hired more acquisition managers. People went out and bought the properties. We had disposition manager.

People would sell the properties. But a transaction coordinator, people would coordinate the transaction, make sure that everyone is where they're supposed to be. then while we were doing high volume flipping, we had a project manager who'd go and check on all the properties and make sure the contractors are where they're supposed to be. Got it. Super. So how did you find or what was your resource for finding your acquisition guys?

Yeah. So I've got to figure out a pretty good process for this over time. The biggest thing is that finding good salespeople is the most important piece of building a wholesaling or flipping company. when you're going and talking about getting deals. If you're not going to be the one doing the sales, I mean, a good salesperson is 10x, a mediocre or medium salesperson.

So what I would do is I'd post multiple different job postings for different role levels. I'd post job postings for brand new, low-level salespeople. I'd post job postings that describe the position in detail. I'd post job postings that were really short. and I'd post job postings for ones that were more of a sales manager type role. And I thought of this more of like a funnel for these different people were going to come in. And then through that process, I had them take personality profiling, profile tests, such as the disk or culture index or some of these others.

We use disk and culture index, but I'll explain it from a disc perspective, which is available for free. It's a personality profile test you can take. You can use a service like WiseHire to put up some of these posts. But through that, I was able to kind of see what are the different personality profiles of these people and start filtering them down. And then from there, I started doing phone interviews where it would be very quick phone screens, where I'm just connecting with the person. I've only got seven minutes to talk to them. I'm upfront and clear about that. And I'm scheduling like 10 or 15 phone interviews.

is within an hour. And the point of that is that I'm going to let the phone conversations go longer if it's somebody I really like, and I'm going to cut the phone conversation immediately as soon as I realize this person is definitely not a fit. And so through that process, I'm able to screen a lot of people, connect with a lot of people, feel out if they've got that rapport building skill, if they're asking me questions, if they're, they've got the background that could fit. And then, you know, from there we'll dive deeper into some more one-to-one video interviews and personal interviews and job shadowing. So yeah, there's a lot of work to build a team then, is what you're saying? It's a lot of work. It's a full-time gig.

Then you got to manage them, right? Then you got to manage them. Okay, so you said that your PPC and your postcard direct mail not working as well as it used to and you've been looking for the more cost-effective improvements and stuff like that. What are some of the things you've stumbled upon that are more cost-effective? I mean, direct mail still works. It just doesn't work at the same volume. Totally. Same with PPC.

But, you know, cold calling obviously has gotten pretty popular. And as long as you're willing to put the time in or, again, hire people and build the team to do it. That's an effective model. Texting has become pretty popular as long as you're doing it in the right way. I've heard a lot of people talk about RVM. We haven't done as much of that because we've been touching people through our cold calling campaigns. But it's all the stuff that you'd expect to hear. it's just, it's hard work to go out and find these deals and knock on doors and hear from folks.

Yeah, definitely. You mentioned earlier about you guys have been focused on maximizing your profit per deal. What are some of the ways that you've done that? Well, just as the market starts to tighten, so does your focus on going really for bottom line instead of volume of deals. And so rather than running this big scale team, we've shrunk it down to being the most, the most effective people in each of those roles. So we went from 15 down to 7, down to 5. And we're still producing the same amount of bottom line revenue off of those people because they're working every lead on a really detailed level. It also comes down to going and doing much more targeted marketing, figuring out what are the lists that are.

are working, how can I find people that are on multiple lists, aka list stacking, and then go through the process of making sure that no lead gets left behind. And so it's really just really tightening up those systems, making sure that we're only working with the best of the best, and that those salespeople who are on the front lines are really making sure they don't leave a deal behind. Because what we found is when you're moving really fast and you're growing, you end up, things start falling through the cracks and that stuff that falls through really. goes towards that bottom line. So what does the future look like for you right now?

How are you viewing the market and how is it changing the way you're doing your business? Yeah, well, I think the market's definitely tightening. I mean, it's tightening in the markets that I'm in in Minnesota and North Carolina. What I'm seeing is that it's costing more money to get a deal. There's a lot more people moving in and, you know, wanting to get started in this space. I'm also noticing that the investors are being a little bit more conservative about their buying criteria because the buyers are also being a little bit more conservative. So what I'm doing is I'm making sure that I don't have too much overhead that's too far out.

In this business, it takes a little bit of time for it to catch up. I spend money today that I finally make money two or three months down the line. So I've tightened that up and really focused on, well, what are some other ways that we can really add value to our investors. You know, with the investor mindset podcast, obviously we're talking a lot about how do people think about success and how can they apply some of these strategies in their own business if they're just those people who are coming into the industry and just getting started. And how can you avoid some of these mistakes that people have been in the business like

yourself have been in for so long, you know, I was talking to Rod Kaleef a while back and, you know, he lost $50 million in 2008. And how can we avoid going into this next. recession if we're going to it won't be quite as bad as the last we predict but uh how can we avoid some of those mistakes and start thinking a little bit more conservatively versus kind of getting way ahead over my skis like i had been for those first three years so you are um be a little bit more selective with what you're buying i guess and being a little bit select more selective with how big you go being more selective, being more selective about where I'm spending money.

We're also not flipping any properties right now, not that we wouldn't, but we're being very selective about the properties that we keep. And we're wholesaling a good portion of those. We're looking at a lot of deals from a long-term perspective. So we've partnered or considering partnerships with some experienced syndicators that have been doing different projects from storage to multifamily and I've been doing them for a really long time and figuring out well how can we invest our money in a way that has a longer window than five months maybe five years so that if there's any kind of downturn we know that we're going to be in a position where we can we can weather the storm nice so what's in the future that you're most

excited about what's in the future that I'm most excited about a good question. Well, right now I'm really trying to focus on the present and just enjoying today. But what's coming down the pipe is, you know, with the investor mindset, we've been growing like crazy. It's been so much fun. Our community keeps growing. If people are really focused on personal development, how they can change their thoughts

and beliefs and put those into action. And so I've partnered with a former Tony Robbins coach, Trevor McGregor, who has 25,000 hours of coaching experience. and he has agreed to come and teach our community about how to change some of these thoughts and beliefs and how to put those into action in the real estate business. So I'm excited about this project that we're rolling out in partnership with him and just getting out and connecting with more people one to one. You know, I think this is a great business, but it really comes down to the relationships that you build more so than the money that you make. Amen to that. So many gold nuggets in there,

Steve. It's been a pleasure. If someone wanted to get in touch with you, what would be the best way for them to do that? I would recommend heading to the investor mindset.com slash clarity. And we've got a quick little masterclass we put together to help people get more clear on some of their purpose and how they can do more effective things in their real estate business. It's totally free. Just head to the investor mindset.com slash clarity or go check out the investor mindset on your favorite podcast app. Would love to see you there.

Super. Well, Stephen, like I said, it's been a pleasure. let's do it again. I look forward to it, buddy. All right, take care. All righty, so that's it for today. God bless to your success. I'm Matt Terrio, living the dream.

Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know home for it, we got the cash flow. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com. Thank you.