The Only Reason to Work is to Buy Real Estate

Hey, I'd like to welcome you to another episode of Mission Matters.

My name is.

My name is Adam Torres, and if you'd like to apply to be a guest on the show, just head on over to Mission Matters.com and click on PR Guest to apply. All right, so today's a very special episode. We're welcoming back to the stage Pete Schnepp. Pete is a newly released author in our most Recent Business Leaders Volume 11 edition of Mission Matters. For those of you that have been following for a long time, it's a best selling business leaders book series. And proud to add Pete to the lineup of authors. And first off, Pete, Matt, welcome to the show. So good to see you.

Good to see you too. Thanks for having me back, Adam.

All right, so first thing first, we're gonna start with what we always start with what we call our.

You there. You froze for a sec. All right.

Oh, did that cut off? It sure did, didn't it? Hold on. Well, we'll get that one edited. Don't worry. Let me ask the question again just in case it didn't come through. So. So, Pete, at Mission Matters, our aim and our goal is to amplify stories for entrepreneurs, executives, and experts. That's our mission. Pete, what Mission Matters to you?

The mission that matters to me is, is chasing your dreams and creating a life of freedom and really pursuing a life that you want with intention.

Yeah, Pete, and I've. And I followed your work and I've seen the way you've built your business from what you've told on the show. And we've done multiple interviews with each other now, and I don't want to. I don't want to assume that maybe some of our newer audience caught some of our previous work. So I guess just start with a little bit more about how you got into real estate and really your philosophy behind, like, how you invest.

Yeah, sure. Well, it goes back. I've been in real estate and construction for many, many years. But, you know, I started off as a salary guy building houses for home builders, and then I started my own company as a contractor, as a painting contractor. And, you know, 15, 17 years now, I still own that business, but I had set a goal to really start buying some income property because I came to this realization that even as a contractor, although I was self employed, you know, I could make a decent living for myself, but I was never going to truly get wealthy. And wealthy people that I encountered as my clients, they all owned a bunch of real estate and none of them got their Painting houses. None of them got there with a regular job. And so over the years, my mission became to work my tail off as a contractor in order to buy real estate. So, yeah, that's kind of the. The backstory.

And. And I think that is a great transition to the book. And so especially your book title, right? The Only Reason to. To Work Is To Buy Real Estate. So you're obviously practicing what you preach. But first thing first, how do you feel, man? You're a new, newly minted author. How does it feel?

It's always good. You know, it's been a bucket list thing, really, to just get some of my thoughts and beliefs down in writing. One, to just solidify the stuff that's in my head, but two, to really have something to pass on to my kids as well. You know, it's kind of when you. When you've got a book or something in writing, it just means a little bit more than when. When you're just telling your kids what you believe. And then it also allows me to share my beliefs with other people that want to really deep dive into my thinking.

So I'm a big fan of your title. Like, how did you come up with the title, the angle, A lot of different things you could have written about, like, talk about why this specific angle was, and also the title, the Only Reason to Work is to Buy Real Estate. When I read it, I'm like, yeah, that's good.

Yeah. Well, yeah, I'm happy to share a little bit about that. I'll ask you a quick question first into that. So when you're at home and you're with your family, your wife, kids, pets, and somebody knocks on the door, what do you think is. Or what do you think is happening?

I get worried. I'm like, what's going on? Somebody's trying to sell me something, or I don't know. Like, that's the first thing I'm thinking about. Am I expecting any guests? Did anybody invite anybody over?

Yeah, right. So it's like, okay, is it somebody selling pest control or solar? But several years ago, I got a knock on the door that really just changed. Changed things for me. And I went through a period of time for about a year or so where every time I felt like somebody was outside coming to knock on the door, my stomach just churned and I just wanted to throw up. I get the same feeling every time I went to the mailbox to check the mail, which normally should be a good feeling as a contractor because I would go to pick up checks to.

Take yeah, get some checks.

So for a year, every time somebody came to the door or I go to the mailbox, I really just got this turning feeling in my stomach like I was gonna puke. And it all started because one day I got served legal papers. So.

We had.

All of a sudden I was being sued because, well, it was kind of. I would call it frivolous. Like one of our clients was suing us because they felt like we did something wrong. The reality was that we didn't, but they didn't have anybody else to blame it on. And so, long story short, we went through the process, and what I had was this moment of realization that everything that I had been working my tail off, building, working 10 or 12 hours a day for grinding away to provide this life for my family of comfort, could be gone in an instant. The big lawsuit. And so I was facing this lawsuit that could have put me out of business. And really, it was not our fault. You know, and you tried everything you can to do to justify it to the judge, but it comes down to contractual mumbo jumbo, right? It's out of my control. Luckily, the worst case scenario did not happen. But it was that moment of truth for me, realizing that, okay, I thought I had done everything that I should to be a good husband and a good father for my kids, to provide this a decent life. But it could all be gone in an instant. Before that, when I was an employee in the home building business, building homes, I had a, you know, a salary job. I was comfortable. There was a good culture in place. I rode the boom and bust of 2007 and 2008, and you know what? I saw? Everybody around me getting laid off. They show up Friday and they get a pink slip and boom. Everything that they had been working for, gone. These are people that have been corporate guys working there for 10, 15 or more years, 20 years, and it's just gone. So when I think about real estate and what that's done for me, it started as a backup plan because I realized that everything that I'm building right now could be gone. How am I going to provide for my family if something like that happens? And so it started off as well. I need to have a second stream of income that comes in to where I don't even need to work for it. You know, there's a lot of ways people can get wealthy out there and create those income streams. But to me, owning income property is really the least risk with the highest potential reward that requires the least amount of time because you can Outsource management, so on and so forth. And so for me, working as a contractor, even after that, it really just became a means to an end in order to buy real estate. Because I knew that once I acquired enough real estate that would put me in a position to where I was no longer reliant on my source of income. And to me it was that the way the path to no longer be reliant on the primary source of income. That help you understand where the title came from?

Absolutely. And go a little bit further into, or I should say, let's go into your investment thesis because I know one of the things that you are, you're a long term investor in many things and I just want to get into like, okay, so now you knew you had to acquire real estate and there's a lot of different ways you can get into the real estate game or different methodologies for investing in real estate. Like, like how did you pick your focus? How did you pick your niche, your lane?

Like, well, I knew that real estate is a long game. I knew a lot of people that got burned in 0708 because they were buying properties that didn't have cash flow. The mindset was, well, I'll lose a couple hundred bucks a month on this rental, but I'm going to make 100,000 bucks in a year, you know.

Yeah.

And next, that was the flip game.

In Phoenix for a while, like a lot of people were playing hot potato.

Right, right. And so, you know, I'm a student, I'm a student of the game. I spent many, many years just like following people, experts and stuff. And really the model is that I, you know, my conservative nature is, you know, I buy for cash flow first and appreciation is a secondary thing. And so that's what I look for. But at the same time I understand that most deals, they're never home runs out the gate. And so I'm a singles guy. I like to hit singles, you know, but even, even that in the Phoenix market or any big market, it's tough to find things that pencil, but when you do, you take action on them. And so it was all about how much capital do I have? My goal was to every year to make enough money to where I could pay, you know, reasonable lifestyle, we always live below our means. And I would, whatever that spread was, I would try to put into a property that would, you know, cash flow moderately from day one. So it started with single family homes and then eventually grew to multifamily.

And as you started, like, as you started accumulating these properties as you started now, good thing was you were a contractor, so you, you knew a bit about, about just, you know, the properties in general. You were looking at what leap from when you went from maybe to single to multifamily or like, like, how did, how did that piece of it work for you?

Yeah, so I had, I had a, you know, a handful of single family properties, and it was all good. But I also realized that, you know, one tenant moves out, and now you've got no rent for, you know, a month or two and a big turn. And so I was like, well, how can I make, you know, you know, it. To me, it's all the backup plan and the safety net. How do I make this thing even less risk? Well, you have more tenants, and so the more tenants you have, each move out is less impactful. And so, you know, if I have a four unit, then, you know, one person moves out and I've still got three, three to pay the bills. And so I, I started transitioning. I made a big goal that I wanted to buy a 4 Plex. I think this was in 2017. And I started, you know, I'm also a realtor, so I see what's on the market and stuff, and I started making some offers. But I'm doing it at nights and on the weekends, and it's. It's not easy. You've got to look at a lot of deals. Most of them don't make sense. You're learning the numbers, you're figuring things out, you're making offers, and you. I'm not getting any deals. I'm making an offer. I'm always getting outbid. And so I spent a few months, like, doing this, and. And it's really tough. I had a young family, young kids. I'm staying up late, like, looking at, you know, properties for sale, trying to do this on nights and weekends, and I was getting nowhere. And so finally I decided I needed to take massive action. So one weekend I went out, I looked at every single four plex on the. On the market in the area that I was looking at. And I literally wrote 10 offers on Saturday. And by the end of Sunday, you know, going back and forth, I had four of them under contract.

Whoa.

I took four through due diligence. I got the inspections done and kept, like, kind of looking into them. And then afterwards, I decided to walk away from two of them, and I wound up buying two of them that were next to each other. So that's how I got into multifamily. Figuring it out and taking massive action.

What kept you strong in that really pivotal time when you were like, okay, this is not working because you said. I think you said you were doing it for, like, was it six months or like an extended amount of time, nights and weekends, and nothing's working. Like, what. What kept you going, man?

Well, knowing the end, you know, what kept me going was the end game. You know, it's knowing that I was creating, if I. If I can make this job, that I'm going to create more passive income, which. That's a myth in itself. Is real estate really passive or not? That's a whole other conversation, but it's a lot more passive than running a business. Right. You don't need employees and this and that. So I knew that in order for me to start moving towards that life of freedom that I had envisioned, this had to get done.

Yeah. And so now your next stage is, are you. And by the way, at this time, are you taking on investor capital or is this all your own capital? Or like, talk a little bit more about how the deals are actually getting done.

Yeah. So the first 15 years or so, I bought everything with my own money. It's kind of why it was just slow and steady. I never even knew that you could partner with people or raise capital. It was not even in my radar. But, I mean, I guess in hindsight it was good because I really learned how to perfect my craft and my little niche. And then, let's see, two or three years ago, I started doing some joint ventures, bringing in friends and family, and we do some syndications. And so now just depends on the deal. Some of them I'll do JVs, I'll bring in a few people. Some of them I'll do a JV with just one investor. There's a couple people that we just like. I build portfolios with. They're the capital partner and I'm the boots on the ground. And then occasionally I'll do a deal where I'll open it up to new people.

Yeah. Talk about what markets you're looking in.

Mostly I'm in Phoenix because this is really where. Where I know best. All my resources are here. And we just. We just closed on a property, actually.

I thought so. I saw it in your newsletter. I'm on your newsletter. What was it? Tell me more about that deal. I. I remember it was on the top of. I forgot to bring that up. Yeah, it was in your newsletter recently.

So that's in Indiana. It's a 24 unit, northwest Indiana. It's actually Chicago MSA, which is cool. And my partner, actually, he's from this. This town, and he's moving back there, so he'll be the boots on the ground, which is the only reason I would buy a property.

That's what threw me off is I saw it. That's why when I was asking, like, the expansion or this, that I'm like, wait a minute, this isn't pizza in Phoenix.

Yeah, you've got to have trusted resources where you buy, that's for sure. So Mike's a. Mike's a rock star, but we're co managers on that. And also I have been wanting to diversify as well, because all of my assets are in Phoenix. And I love the Phoenix market. But I think at a certain point, you, you know, just for your own, my own peace of mind, like, I'm always coming up with a plan B, just like I did. Real estate was a plan B. So, you know, I want to make sure that I diversify a little bit of my asset base outside, just in case, like, what if, you know, all the what ifs? What if Phoenix just keeps getting too hot and people start moving out? We're then moving in or whatever. What if the market that we're in right now in Indiana, it's really, really solid. More of a linear market. Very low vacancy rates. It's an amazing property. I was really happy with this one.

That's awesome. So, speaking of, I mean, you are my expert in the Phoenix market. Like, talk to me, what's going on in Phoenix?

Well, I'm in all in acquisition mode. I'm trying to scoop up as much as I can. Honestly, like anybody that's trying to sell right now, it's not a good time to sell. And so I would not recommend that. But if you're a buyer and you're not scared, you know, not sitting in the sidelines, I think this is, you know, the second best time to buy real estate since 2009 and 2010, you know, this is it. The market has corrected, you know, and so I'm all in. I'm just. I'm a student of the game. I'm a student of the wealthy. And the wealthy always say, you know, what's the Warren Buffett quote, Adam? You probably know, like, be fearful when others are greedy, and greedy when others are feeling fearful. And so that's what I'm doing. I'm out there hunting. I'm making offers left and right. I'm making deals. I'm getting a lot of seller finance deals. And I'm scooping up some really, really nice properties because I'm not competing against anybody. Wow. Really a beautiful thing.

What kind of properties are you looking at? So you, what size? What like give us a little bit of that piece.

So we just. Right now I have a 44 unit under contract in central Phoenix. We've got a new development, a 30 unit like tear down and redevelopment infield infill project that's coming online. I just put an offer on some land on Central right next to the light rail. I've got pretty good deal flow so I'm always looking. I mean I probably have at least a dozen deals across my desk a week and so I'm always sifting through and it's just a matter of which ones look enticing, who could my potential capital partners be and how do we scoop it up and where do I want to focus my time really, because I've got just a lot of opportunity. When you're, when you're in the game, when you are actively in the game like I am, there's so much opportunity. There really is. And it's just a matter of where is the best use of my time, which property, which project and which partners, you know, it's awesome.

Well Pete, first off, it's great having you back on the show. I'm pumped to like to get out there and we've been talking you, myself, Corey, Corey, Janine, we got a little crew that we got building out there in Phoenix. So we're going to be out there promoting the book, promoting Corey show, Janine show. So for some of the people that do podcasts on our network, so we got a whole lot, I got big plans for the, for the Phoenix market and it's just been so we're so happy to have you part of the community and Corey, Janine, everybody else out there that's part of the community. So we want to make some more noise in Arizona, that's for sure. But that being said, if somebody wants to learn more about asset stream properties or connect with you and your team, whether they got deals, whether they are investors, whether they just want to chop it up about real estate, how do people connect?

Yeah, you can either look me up on LinkedIn or go to our website, assetstreamproperties.com both of them will have a place to book a call or check me out and we'll go from there for sure.

Fantastic. And for everybody listening, just so you know, we'll definitely put the links in the show notes so you can just click on them and head right on over. And speaking of the audience, if this is your first time with Mission Matters and you haven't done it yet, hit that subscribe or follow button. This is a daily show. Each and every day, we're bringing you new content, new ideas, and hopefully new inspiration to help you along the way on your journey as well. So again, hit that subscribe or follow button. And Pete, thanks again for coming on the show.

Thanks, Adam. We'll talk to you soon.