Start With A Win - What would an investor do? Interview with Real Estate fund manager Steven Pesavento

Episode Date: May 24, 2023

What would an investor do?  An interview with Steven Pesavento Host of The Investor Mindset Podcast and active investor who curates Commercial Real Estate Investments for clients at VonFinchCapital. He has raised $10’s of Millions dollars, which hassuccessfully cycled through multiple assets. Beginning inSingle Family as an operator he flipped over 200houses in under 3 years, prior to expanding intoCommercial to focus on building a business aroundworking with his ideal client - successful high incomeearners like himself who are investing to create flexibilityand independence.Steven and Adam uncover where investors are looking today and some thoughts on how to strategize for yourself.  Should you max out your 401k?  Or, what should you do to grow your assets.  This episode is about business growth, financial growth and health, and family security.   Main Topics04:44 Big opportunity in Multi-Family07:30 Is it better to become a partner with the investor?10:13 Private Equity is an asset class!13:10 Don’t invest until you understand13:48 Not, where should I invest but what do I want from life?15:44 Three biggest mistakes in wealth18:45 Biggest impact to change your life!21:22 Four Ms to SWAWConnect with Steven Pesavento:[e-mail] on Instagram and Linkedin Connect with Adam: http://www.startwithawin.comhttps://www.facebook.com/AdamContosCEOhttps://www.linkedin.com/in/adamcontos/https://www.instagram.com/adamcontosceo/https://www.youtube.com/@LeadershipFactoryhttp://twitter.com/AdamContosCEO Listen, rate, and subscribe!Apple PodcastsSpotifyGoogle PodcastsConnect with Adam:https://www.startwithawin.com/https://www.facebook.com/AdamContosCEOhttps://twitter.com/AdamContosCEOhttps://www.instagram.com/adamcontosceo/Please Like and subscribe!

What are most people looking for in their investments? And how are they growing wealth in this day and age with all the economic, interesting articles and fear coming at you? Well, today we have an expert in investments, flipping houses, growing wealth, working with PE funds. We've got a great guest with us here today. Let's get started. Welcome to Start With a Win. Welcome to Start With A Win, where we talk franchising, leadership, and business growth. Let's go. Hey, it's Adam Kantos here. Welcome to Start With A Win. Today, I have Steven Pesavento,

host of the Investor Mindset podcast, and an active investor who curates commercial real estate investments for clients at Von Finch Capital. He's raised tens of millions of dollars, which he successfully cycled through multiple assets. Beginning in single family as an operator, he flipped over 200 houses in under three years. Oh my gosh, he's been busy. Prior to expanding into commercial to focus on building a business around working with his ideal client, successful high income earners like

himself who are investing to create flexibility and independence through his top rated podcast and private investor community. Stephen brings together real estate investors to not only learn, but also how to put these strategies to work in their lives. And most importantly, Stephen's really, really interesting to talk about when it comes to growing your personal wealth. He's got a great deal of experience and is super insightful. And frankly, you can understand this guy. He's not going to throw a whole bunch of curveballs at you and make you go, what just happened? So Stephen, welcome to Start With A Win. It's great to see you. Adam, I'm super grateful to be here. I love what you're doing and excited for the show.

Thanks, my friend. Okay, so I want to get into, first of all, Von Finch Capital. That's your investment organization. Tell us a little bit about that real quick. Yeah, so I started Von Finch in 2016, so I've been operating for over a decade or for almost a decade. And it's been a fun path. It's been a journey. Love real estate in particular because it's full of so many people who are growth-minded, who really believe in living that dream life. And it's been the biggest driver of wealth creation for myself and honestly for most of my clients as well. And so Von Finch is focused on

going out and finding private equity real estate investment opportunities for our clients. We put together those syndications and funds and whether it be investing in redevelopment multifamily or multifamily that's focused on cash flow or debt or some other opportunities in other sectors. We're really focused on helping people create both passive income as well as be able to grow their wealth and put them in a position to take back control of their life financially. Right. So you started in single family investments, right? So for our listeners, that's a house, single family residence. What year did you start doing that? Well, before I started Von Finch,

I actually started doing Airbnb back in 2014. I'd never owned a home, but I ended up acquiring three properties that I had leases on up in Boulder, Colorado. And I was renting those out for, you know, usually I'm paying about a thousand bucks a month for rent. And I was renting those on Airbnb on average, making about forty five hundred bucks a month over 12 months. And so it was a big, big moneymaker, but it was super active and they changed all the rules and the laws. And that ended up leading me towards getting into flipping houses because I thought, hey, well, that's the most direct, direct path and easiest place to get started. But it's also the most work. And so that's really why I left flipping houses behind and moved into large scale commercial multifamily. Because after you flip, you know, you renovate 100 houses, you buy 200.

It's like this is a very transactional business. And look, you can make a lot of money in transactional businesses. But really wanted to focus my life on something that was more relationship-based, more long-term, more of a long-term wealth and income-generating asset. Yeah, it's interesting. Myself coming from the real estate space, real estate franchising, you kind of look at it and you go, all right, you're broke every day until you go get another customer. So it's a fascinating way of thinking about it. But you've gone into larger scale, more replicable, replicable, however you want to say that, investments. What are you focused on heavily right now at Von Finch and in your business? Yeah, our primary asset class and

strategy that we see the most opportunity in right now is redevelopment of existing multifamily properties. So multifamily, commercial multifamily, anything bigger than five units is commercial. In particular, we're typically buying two to 300 unit buildings in markets like Denver, Dallas, Jacksonville, Phoenix, some smaller markets like Aub Denver, Dallas, Jacksonville, Phoenix, some smaller markets like Auburn, Alabama, and Des Moines, Iowa. But right now, because of where the market's at, because of this change in interest rate, we're actually finding 2015 to 2019 pricing on deals that are in the 20 to 100 unit range in Denver. So it's much more work for us to buy smaller buildings, but because we're getting them at such a good price, we feel really secure in making that decision that if something should go wrong in the market, we've built in a big enough buffer, both from being able to do the

renovations as well as where we're buying these things at. Plus, when you're buying from smaller mom and pop owners, we're seeing financing terms from them at 2% to 4%. So that's kind of our big focus right now. We shift that focus every three to six months based on where the market's at. But big opportunity in multifamily. And the reason we like multifamily is because people need a place to live and there's not enough housing in the United States, but in particular in the markets that we're investing. When you're buying a B-class type property and you're buying something that working class people live in, it's impossible to build something today that is at the same price of what we're buying it at. So we're buying well below replacement value. And we don't get hit with competition

from these luxury builders who are building kind of all across Denver and other markets. Awesome. And I get a lot of questions from people asking me, oh, should I be investing in real estate? Obviously, housing, single family prices have peaked. Or they're near a high limit right now. And that market is rather interesting. Granted, there are still millions and millions of single family transactions going

on out there. So there's still a lot of money to be made in it. But you guys are focusing on that B class multifamily, midsize building. And obviously, none of this is construed to be investment advice from either Steven or myself or anybody that we are affiliated with for that matter. But is that what you're seeing as far as a good asset class to invest in right now? Is that the 20 to 100 units or 20-ish units? And how do people get into that? Because a lot of people are like, well, I was going to flip a house, but how do I get into this type of thing? Well, the big reason, look, we'll buy a 200 or 300 or 500 or 1,000 unit portfolio if we can find it and the price is right. But the reason that this time in the market makes

so much sense going on what we call the middle market. In Denver, buying a 20-unit building, you're talking about $5 to $10 million, right? 20 to 40-unit building. Just closed on a 10-unit, which is, again, smaller than we're targeting, but ended up paying $3 million for it. So it's like, these are expensive properties that mom and pop owners, somebody who's maybe just a listener or wants to kind of get started in real estate. They don't have the money to buy. But the big institutional firms like the Blackstones and the name brands that you don't know about, they only run or write checks that are in the $30 to $50 million range. So by going after those kind of properties, working that middle market, we're essentially

able to name our price and terms. And by packaging up a couple hundred units of these types of properties, it puts us in a position where then we can sell to those big funds on the back end. And if somebody is looking to do it themselves, I think you need to have really good relationships. A lot of your listeners are probably in the real estate market. So if you've got those relationships and insider knowledge to know what's a good deal and where are the pucks moving, great, do it yourself. But if you're not or you don't want to do all the work, then you need to find experts like Von Finch, like others in the market who are out there, who have the insider knowledge, know where those insider deals are, and you can invest in those funds or syndications, you become a partner.

And typically, investors who are partnering are getting 60% to 80% of the profit. So most of the money is going to the investors in those deals. But what's great about it is you don't have to be the one who does the work. You write the check, and then you sit back, and you wait for the result. Do you see this as a growing space right now? I mean, is it pretty popular or is it just kind of one of those hidden gems in the investment marketplace? It's been a hidden gem for a long time. It's become more popular in the last two to five years. There's been some changes in the legal structure back in 2012, but it took kind of a while for that to become more public. What we're seeing

is that a lot of these newer syndicators or fund managers are starting to really like dwindle down and the people like Von Finch and other firms that have a good track record are able to really weather this storm and take advantage of what's going to happen in the real estate market. I love real estate. Real estate's our primary focus, but real estate's not the only game in town. Any kind of private equity,

which is something that isn't publicly traded, you're essentially investing into a business, is a great place to be because when you have that insider knowledge and you can get access to deals, you can create much bigger returns with a lower risk profile and be in a position where you can really drive some big value. So we love debt. We love businesses investing in. We actually really love oil and gas because there's some great tax benefits and there's great cash flow that comes off of it. So the biggest thing that I would tell folks is start becoming

aware that this is an asset class, that there's opportunities out there, and then start building the skills, knowledge, so you can have the confidence to actually start getting involved. Cool. So I have a question for you here. People are trying to scale their wealth, and they're concerned about what's going on in the economy today. What are you seeing out there? And later on in this, we'll talk about kind of your vision of a magic wand for the investment process. But directionally, you have a lot of people who are like, okay, is it worth putting in my 401k? You know, you do get a match. Obviously, you know, everybody's like just max out your match if you can and punch in your investments in other diversified places is kind of what I've always been told.

But what are you seeing happen when it comes to the amateur investor that is catching on? Yeah, well, I think a lot more people are starting to realize that they need to take back financial control of their portfolio, which means they, again, have to gain the skills, knowledge in order to have the confidence to know who are the right people to trust, who are those right experts to bring onto their team to be able to go and find these kind of opportunities. And so when it comes down to where you're putting your money, obviously focus on creating as much active income

as you can in your job or your business, funnel as much of that into your 401k to get that maximum on that match, and then start putting money into what I call a wealth account, which is a fancy term for a savings account that is exclusively only going to be used for making investments. And if you're investing in a 401k and it's with your company, you probably can't move that money outside of the traditional market. But if you left a job and you don't roll over your 401k, it's possible for you to roll that in to a self-directed

IRA or self-directed 401k, solo 401k type structure, where then you can actually invest into private assets outside of the traditional markets and start taking advantage of these kind of opportunities with those dollars. But the dollars that you have in cash or in other types of savings accounts, you absolutely can invest in these types of things. And I think the most important thing is don't start investing in something until you really have an understanding of what you're doing when it comes to making those investments. I think that's where people make the biggest mistake. They get excited. They rush out. They hear about it. They want to start taking advantage of it. But it really comes down to having the knowledge to know who are the right people to work with. Because when you're investing passively, it all comes down to who's the manager,

who's the operator, what's their track record? Have they done this exact same thing before? And if not, who on the team has to make sure that it can be successful? Those are some of the ways that you can get started no matter where you're at. What's the most common question you're getting about investing these days? Well, I think the most common question is, hey, I have money. Where should I invest? And that actually leads me to something. Don't we all want to know that, right? We talk about this on the Investor Mindset podcast, a show that I've been hosting for four years, a million plus downloads. And what's interesting is that when you start to answer a different question, instead of

answering, where should I invest? We need to ask ourselves, what do you want from life? What do you want and why do you want it? And if you sit down and get clear on your dream life vision, like what kind of life you're looking to create and you're intentional about that. Do you want to be working twice as hard? Do you want to be working on your mission? Do you want to be making an impact? What emotions do you want to feel? What do you want to be able to do with this money? Why is it important? And you iterate through that process to start getting clear on really what you're going after in your life. And then from there, you ask the question, well, what are the types of investments that are going to help me live that life?

And from that place, you start understanding your risk tolerance and your timing. Because if you're looking to make money the fastest path and you have very little money and you have a lot of time, then you might end up going one direction. If you've got a lot of money and you don't have a lot of time, then you're probably going to go another direction. But the truth is when you look at things from a long-term perspective and you're intentional about it, you can really take advantage of the compound effect, which is going to allow that money to really grow very quickly over a long period of time. So in the end, you're sitting in a position where you're truly financially free and you've decided to double up the money in wealth, growing opportunities, and then being able to pivot over to opportunities that actually start

paying you if that's part of your plan. Gotcha. And what's the biggest mistake you see people making in their wealth? I mean, obviously, a lot of people, they'll get a raise and then they increase their cost of living to the point that they're now making that amount of money. That's probably one of the big ones. Lack of financial education, things of that nature where they just don't know. And it's dangerous to have, you know, to be making money and not know. Are those some of the directionally correct things, problems that you're seeing? Or what do you see in most is the biggest problem that people are having in the investment cycle? There's really three very big ones that I'll touch quickly. The first is that people are still, they're looking to

invest, but they're living with the traditional mindset. The first is that people are still, they're looking to invest, but they're living with the traditional mindset. Traditional mindset is go to school, get a job, work for a 401k or a pension and a gold watch and hope that someone else is going to take care of you rather than living with the investor mindset, which is I'm going to get clear on what I want for my life. I'm going to work to earn money, to invest in assets, and those assets are going to pay for the life that I want to live. And so that is number one. When you step into the investor mindset, you start living from that place of thinking like an investor. Every decision you make in your career with money, with everything, all draws back to that way of thinking. From that place, you step into the second thing, which is really people are not

often not clear on how much they actually need to live, right? They haven't named their number. And so when you name your number, the amount that you need to live the life you want to live, and you attach that to how much passive income or active income you need to be earning to be living that life, at that point, once you have enough passive income that really fuels that life you want to live, then you're actually financially free. And so I find that by naming your number specifically the amount that you need to cover your life passively, that's the point that where you have one target that you can track to. Because just like anything, if it's not measured, it's not managed. If it's not managed, you're not making

progress towards it. So it's really easy to get focused on grinding and working hard in your business and getting that next transaction done and your active incomes going up. But if you're not tracking how much or the progress towards that place of being able to say, I can do whatever I want, whenever I want, however I want, and I don't have to work if I don't want to, and I get a double down on working if that's what I want to do, you only get to that place when you have enough assets that pay you forever. Wow. Gold. Everybody, make sure you rewind that and listen to that again. That was some amazing information. Steven, I mentioned earlier, if you had a magic wand that you could

wave over your investments or people listening, our listeners could wave over their wealth, their investments, their direction that they're trying to go with this, what would that be that you would hand them that would make the biggest impact? The magic wand, if I was going to wave it and I'm sitting in front of you and by waving that wand, it's going to completely change your life. I'm going to wave that wand and you're immediately going to start thinking like an investor. You're going to let go of those old beliefs that don't serve you. And since in reality, we can't just wave that magic wand, one of the best ways to start being in that position is actually start surrounding yourself with people who are already living that way. You can listen to the investor mindset. You can listen to this show. relationships so that when you're on that path towards thinking those new thoughts and those new beliefs, when you have one of those challenging moments where you want to go back to the old way

of thinking, you have other people around you who help reinforce that change that's happening. Because from that place, you'll be able to build a phenomenal team. And that team is going to help you get access to the most important thing, which is they have insider knowledge to get access to insider deals which lead to insider returns. And in private equity in particular, it's fully legal to use insider knowledge to create big returns.

When you're running a business, knowing some details or strategies can make a huge difference in the returns you're getting, which you can't get in the public markets because trading on insider knowledge will get you put in a place you don't want to be. Bam. Mic drop there. Folks, listen to that again. Essentially, go find some people that know what the heck they're talking about, people that have done it, people who are in it, and ask questions. Start learning. The Investor Mindset Podcast is a great place to do that. Stephen,

where can we find you online to learn more about these different ideas? So absolutely, go listen to the Investor Mindset, InvestorMindset.com or whatever platform you listen on. If you're interested in learning more about investing, VonFinch.com. We've got some great resources there where you can learn and kind of grow in those skills and those strategies. If you want to get in contact with me directly at steven.pesavento on Instagram or LinkedIn, shoot me a DM after your follow. Let me know you listen to me here. Would love to build that relationship and look forward to a lot of great things ahead. Awesome. Steven Pesavento,

host of the Investor Mindset Podcast, active investor, and a great guy. Easy to talk to. Reach out to him if you have any questions about what you've heard on this today. Steven, I have a question I ask all of our amazing guests on Start With a Win, and that's how do you start your day with a win as a successful person who's hitting the ground running. Yeah. Yeah. I, uh, you know, every single day I wake up and I'm focused on my four M's movement. Got to move every single day. Got to do some mindset, got to do some learning, some lessons. I spend about an hour meditating every day. And, uh, and then I spend a little bit of time mapping my day so actually sitting down and planning what's most important so i can work from those priorities

instead of reacting but i think the most powerful out of all the four m's has really been the meditation it's really diving into joe dispensa style meditation really setting the intent of what i'm gonna feel that day, that week, that year, how I'm going to show up. And then actually starting to attract that into my life and starting attracting it inside of myself as well. Awesome. Stephen, thank you so much for being on Start With A Win. We appreciate all you do for us and thanks for starting with a win. Thank you. Thanks for joining us on Start With A Win. Be sure to like and subscribe to this episode and share it with your friends.

Also, be sure to check out Adam on YouTube at Adam Contos CEO, as well as on all the social media platforms. And don't forget, start with a win.