Pete Reese Shares His Model to Make Money and Build Wealth

Hey, it's Mark Podolski, the land geek with favorite niche real estate website thelangeek.com and on this week's Art of Pasadena podcast, I'm really excited to introduce you to Pete Reese, who is the president of Realvest Properties, a land development and investment company with 20 years, over 20 years of real estate experience as a broker and investor, Pete has successfully purchased and sold hundreds of pieces of real estate for a profit over the years for himself and on behalf of his clients. He did three and a half million in revenue in 2022 with his landslipping and development business. He's pushing to do 10 million this year. Pete's always looking for his next deal, including his longtime dream of his own private island. Pete Reese, welcome.

Well, thanks for having me, Mark. I really appreciate it.

Yeah, yeah. So let's just rewind the tape. And how did you get into real estate?

Well, I, I got into real estate kind of way back when, you know, we bought our first home in 2000 myself and my wife bought it with an FHA loan. Three and a half percent down. Home needed a little bit of work. So that was kind of our first experience with doing a little elbow grease on a property to kind of improve the value. I did a lot of the renovations myself, all of the renovations myself. They weren't so great, but they actually did improve the value of the property a little bit. And I think we sold it for 250. That gave us a little bit of money to then step up and buy a bigger home that needed more work. So that kind of led us down this road of flipping homes and we started flipping homes. That was a kind of our main business for a while. Got my broker's license here in California and then the market crashed. So when the market crashed, home flipping really wasn't the best business to be in at that time. So I kind of shifted my focus and I thought, well, what's selling right now? And those were the bank owned properties.

So I kind of positioned myself as a broker, a listing broker for the banks, REO listing broker.

And did that for a number of years. And that, you know, we were super busy. And that was a good business for the time. Not a great business overall because there's a lot of challenges in that particular business. But I ended up getting hooked up with a lot of large investment companies that were buying flip home flip properties. So I was just exclusively working for them for a while, finding them deals. That was fun. Got out of real estate altogether for a number of years, doing A business with my wife about blogging and blogger training. So that was our main focus for a number of years. And doing a lot of traveling, fun business. But I had the itch to get back into real estate and real estate investing specifically. Started doing some research about land flipping. And then I, you know, would read anecdotes of people doing these deals of like, buying a property for 10,000, selling it for 30,000, you know, and those kind of things appealed to me. So I went down this road of learning everything I could about land flipping and I just kind of went all in now. Wow.

Yeah.

So before we get into the land flipping piece of it. So what was the, the headaches in the REO business?

Well, it's. It's almost an emotional business in a way, at least at the time. There was a lot of, A lot of tough human situations that were going on. People losing their homes, a lot of.

People really struggling financially.

And that's the part I didn't like because I was, you know, I get.

An email and I'm, I'm the listing broker. The bank would assign me a property and my first job was to go out to these homes and knock on their door and see if it's occupied.

And if it's occupied, then I'm instantly the representative of the bank that just foreclose on their home. And then, you know, it's about having.

A conversation, cash for keys or something like that.

But, you know, there was just a lot of emotions and tough times for.

People, and I just didn't like that aspect of it.

Sure, sure. And so if we look at it and juxtapose the REO business and the house flipping business into land flipping, what would you say are the biggest differences for you and what are the advantages and disadvantages of land flipping?

Yeah, land flipping is a lot easier in my opinion. There's just, you know, as they say, no tenants and toilet or toilets, no renovations. I mean, obviously we do some value add stuff here and there, but they're.

Generally not that extensive.

And generally you're not dealing with, with any tenants or any sort of occupancy situations.

I understand that sometimes, you know, people.

Squatters can be on a property or something, but. But it's pretty rare to have some.

Sort of occupancy situation.

So you're dealing less with the human aspect and a lot less moving pieces.

So I'm a big fan of the land flipping thing. I think it's a lot more scalable than something like that.

No, people have, people have scaled those.

Those house flipping businesses and, and done well with it, but there's just a lot of logistics involved.

Yeah, I know. I, I had someone on podcast and he's like a little mini Home Depot and just each house renovation was the exact same and he was getting economies of scale in his supplies and he had, you know, several managers managing the subcontractors. I wouldn't want to do it. Yeah, you know, a lot of moving pieces, a lot of headaches where with land, it's, it's so simple. So, so now you like the idea of, of a flip of a land flip. So what, what exactly about the flip appeals to you?

I like the quick cash, I guess you could say. I like the acceleration of the, our invested capital. So I can take, you know, for instance, I take our capital that we've got, I buy a property for 20,000, I sell it for 40,000 in 60 days and then, you know, you've got 100% return on investment in 60 days. You can take that money, reinvest it in another property, do something similar. Obviously 100% in 60 days is not that repeatable, although on average, you know, we're able to do really pretty, pretty well. But it just accelerates your, your funds really quickly.

And that's kind of what's, what's interesting to me.

I've never, I've never been on the other side of it, you know, holding notes and things like that have just for me, the land. I just kind of view the business that we do as more of a.

Short, you know, short term cash type business rather than, than the wealth side of real estate, I guess.

No, and I don't think there's anything wrong with it. It depends on somebody's financial situation and what appeals to them. Just because I like cash flow doesn't mean I'm right. And I'm certainly flexible like a yogi. And I think all the different models and the people that carve out their own niches and land all have their benefits, they all have their drawbacks. So walk me through your exact model. So listener could listen to you and say, okay, I want to flip a piece of land and make 100% of my money. Just like Pete. This is how I could do it.

Yeah, here's exactly what we do. We build a list, you know, off of Datatree or you know, Propstream, any one of these list providers. We send out direct mail and I send out blind offers. It's a two page letter. First page is kind of who we are, what we can do for them. Why we're contacting them. Page two is an actual offer basic, one page purchase agreement with their acreage on there, an actual offer price and some real basic terms. And then, you know, we send those out. We send a lot of those out. Then the phone rings, we get emails, we get text. And some people respond and say, hey.

I'd like to move forward.

Sometimes people respond and say, you're trying to steal the property from me. Your price is too low. Some people are like, well, I want to sell, but your price is too low. Here's what it would take to put a deal together. So regardless, they respond. We then look at the property kind.

Of in detail, figure out what it's going to take in order to put.

A deal together, see if we can get put, get a deal together. Once we get that purchase agreement signed, then we move to the next stage, which is the due diligence. We immediately open up the transaction with an attorney, title, company escrow, depending on the state.

We also send out a photographer to.

Walk the property, take photos, video.

We also do the other due diligence. You know, we're calling the county and the city and finding out the zoning, finding out utilities, all that kind of stuff. Go through a whole checklist of items there.

We then review the title report when that comes in. Another big part of our process is.

That we always work with a local.

Agent or broker in that area because they're going to resell the property for us. So we kind of loop them in on the purchase side and ask them.

For their opinion on what, what they think that they can resell the property for. Given our criteria of being able to sell the property, you know, 60 to 90 days, it's kind of our target.

And then if all looks good, we close on the property with our own cash, and then we generally will put it right back on the market. Sometimes we'll do some minor value add stuff, could be something like a survey, could be getting some paths cleared, could be a perk test, things like that. But generally we'll put it back on the market right away as quick as we can and list it for slightly below market value, you know, depending on what that market is like, if it's really kind of a hot market, things are selling really quickly, you know, we'll press it pretty close to market value, you know, maybe 90%. If it's a slower market with maybe some more inventory, more competitive listings, we'll put it at maybe, you know, 75 to 80% somewhere in that range. So it's kind of by feel. And then if we don't get a contract pretty quickly, then we'll probably reduce it every two to three weeks somewhere in that range slightly till, till we.

Get that property under contract.

Once we do get it under contract, then it obviously goes through another transaction with an escrow attorney title company and we get it closed.

I love it. I love it. So for, for the listener, what advice would you give to someone starting out? How much capital would you recommend that they start with? And what would you say are, if you could start over again, what are some of the things that you would do differently?

Yes. Okay, so as far as capital goes, I mean, you've got two options. The big thing is people always wonder about like, I don't have the money.

To buy these, all these properties that you're talking about. Like that sounds great, but you know, that's a lot of cash to put out.

So you've got an option of obviously doing it yourself and you make the whole amount.

Or you can use a deal funding partner and they'll generally, you know, fund the deal for you, but then you'll be splitting the profits.

So that's, that's one decision to make. But if you use a deal funding partner, you can worry less about, you.

Know, your cash flow and everything like.

That, more about, you know, just finding.

More and more deals. So that, that's a very kind of appealing thing about going that route.

But from the other side, I mean, you're going to need some, you're going to need some sort of access to either a line of credit or some sort of cash in order to get your business going. But the big expense is mail. You know, mail depending on what type of volume you're doing. These letters that we're sending out are about 55 to 60 cents per letter. If you do a lot higher volume like we're doing, you probably get that down to about 50 cents total. But yeah, that's your big expense. I mean, we're sending out a lot.

Of mail right now. We're sending out 50,000 letters a month. So that's 25,000amonth.

But you don't have to start there. You can. Our average deal, our average cost per.

Deal is about 3000 in mail.

So that, that equates to 6000 letters.

About 60007000 letters, depending on what price you're paying.

I'm pretty picky in the deals that we move forward with now. I didn't. And I'm trying to do bigger properties. If, if I were to have. Spend some More time, you know, whittling my list down and kind of going for smaller properties, I think I'd be able to get that down considerably.

But, but that's, that's kind of where we're at right now.

So you do have to have money for that and you do have to have, you know, basic business stuff set.

Up LLC and a phone answering service and things like that. I'd recommend.

Sure, sure. And then as far as the due diligence, do you have a due diligence team that you outsource to or are you and your wife doing that yourselves?

No, I've got a, I've got a pretty extensive team built out right now. So I've got, I've got a due diligence manager which basically as soon as that property goes under contract then it.

Kind of sparks a whole chain reactions of things on my team.

So he then orders a photographer, he.

Then orders, we use a company called Landmasters that does the call. Sure, yeah.

So you're familiar with them. So yeah, so he orders that with them and then he tracks both of.

Them, making sure that they come in.

And then I've got someone else on.

My team that then opens up the transaction with the title escrow or attorney.

And then as the photos come back.

As a due diligence comes back, as.

The title report comes in, I've got another member of my team that kind.

Of reviews all the due diligence and just make sure everything is good there. And then at that point too, then we're communicating with the agent, letting them know that here's what we got coming and let us know your thoughts on it.

Yeah. So my friends in this world, the average deal, they'll invest 30,000 to buy the land and they'll typically sell it for 60 and get their 100%. In your world, is that a small deal? Is that a medium sized deal? Is that, how can you define a large deal?

Well, biggest deal we did was 315,000.

Was the purchase price.

That was the biggest completed deal. I actually recently bought one with a.

Partner that was a little bit more than that. 360,000 hasn't, hasn't resold yet, but it's been on the market a couple months.

But I expect it will soon. But yeah, so, but average deals are in that range. You know, 20, 20 to kind of.

150,000 is where, pretty much where most.

Of them lie as far as the purchase prices go. But I'd say the great majority of them are probably 20 to 60, 20s price. And we Always try to double our perk. We always try to double our money too.

Sometimes we hit it, sometimes we don't.

Sometimes we do a little better.

But it just, just depends.

Sure. And then as far as the, the, the deal funding partner, because if I'm just getting started in doing this, wouldn't a deal funding partner want to see that I'm capable first? Or they just. Is it just a deal by deal basis where I just bring them a deal and say, hey, are you interested in funding this deal? And that they have the collateral of the land?

Yeah. Yeah.

I think in most cases. I'm sure every deal funder looks at things maybe a little bit differently, but most of them that know how to evaluate, evaluate the properties are just looking at the deal and they might make some stipulations like, hey, you got to.

You got to list it with the, with the broker, you know, instead of trying to market it yourself or something like that.

But I think a lot of them.

Will be comfortable just if there's a.

Good solid deal, they get their name.

On the deed, you know, after they.

They send in their money to close it.

And then if they were to list with a local agent or broker, that would probably make them comfortable enough to, to do the deal, I would imagine. But each person's different, probably.

Very cool. Very cool. And so is, Is there anything that you like, any lessons learned from your experience that if you could do things over again, you do differently?

Yeah, I, I would, I would, you know, personally, for. I would, I would steer clear of the really cheap deals. I would also steer clear of the landlocked properties or properties that have a lot of issues. So for me, those are the ones.

That are like, what properties have a lot of issues in your.

It could be something like, like, access is really poor.

Maybe, maybe it's got access, but the access is. It's really hard to get to or it's very steep, you know, very steep. Property that's very limited uses. In some cases, you know, all swamp land or, you know, completely landlocked.

You know, those are the types of.

Things that I kind of stay away from at this point. I've A long landlocked property.

Yeah. So geographically, is there a certain part of the country that you like better than another?

I'm trying to get, I'm trying to expand all over the country, but we've done a lot on the east coast.

All the way from, like, New York.

To New York to Florida, that whole kind of corridor there. But I've also done Pacific Northwest as well done, California. I haven't done a lot kind of in the central part of the country.

But I really, I think there's a.

Lot of opportunity there. But, but you know, we just haven't.

Broken into a lot of those markets yet, so.

Okay, great. And when you're evaluating a market, what are you looking for?

I like markets with activity. Maybe not super crazy activity, but I want to know that things are, are actually being sold. And I don't like markets too much.

Where there's, you know, three or four years worth of inventory, you know, of vacant land there. Those, those kind of scare me because.

You can, you could do it and you could do, you can buy and sell properties there, but you just have.

To get them really cheap just so you can price them really cheap, or.

It'S gotta be a really premium piece.

Of property or both, you know, so it's, it's just tougher.

Yeah, absolutely. And then as far as the, the property itself, are you looking more for large acreage? Are you looking for more farmland? Are you looking for more infill lots? Are you totally opportunistic?

Well, I would, I would buy and sell anything as long as it's made sense and along.

The numbers were clear.

But as far as the stuff that we market for is generally 5 to 10 acres plus and depending on the.

Area, but mostly the rural stuff, the real stuff.

Okay, great. And when you, when you think of rural, how far is that from the nearest town?

You know, there are towns kind of interspersed everywhere, so it could be just outside of a small town, but as far as the big cities, probably most.

Of the time it's an hour plus outside of the bigger cities. But you know, sometimes these smaller towns will get, will pick stuff up in some of these smaller towns or in the suburbs of a smaller town and.

It gets pretty rural pretty quick.

Outside of, you know, the little town center with the one stop light, you know.

Yeah, no, no, absolutely. I, I've been a lot of those towns. You know, they got that one stoplight one. One restaurant, one movie theater.

Yeah.

So do you have a favorite deal?

Favorite deal. Okay.

Yeah, I do have one that came to mind. It's not like my biggest home run or anything like that, but I thought.

It was a very interesting deal in a way.

This was actually a 23 acre, mostly a lake, so probably 7, 16, 17 acres of it was a lake.

And the number of acres, the remainder was some land beside it that was not really that, that usable kind of.

Not really wetlands, but it just was.

Kind of not Not a buildable type piece either.

So the deal was with this is we sent out an offer on this property and I think the offer price, you know, we didn't know. You know, sending out these blind offers.

You just kind of don't know what it is you're sending it out based off of averages for.

So we sent out this offer for this lake and I think the offer.

Price was maybe 40 or 50,000.

And it came back signed. And then I looked it up and I thought, oh, now I know why they signed it. It's just, it was just a lake. But, but the interesting part about it was there was this really cool community that was like developed all around this lake, like this subdivision that was done maybe 20 years ago. And these were all really nice homes, but the lake, you know, you would assume that these homeowners there would be part of some sort of HOA or homeowners association would actually own this lake, but they didn't. Somehow this, this person that I send it to, I think they inherited this property maybe, I think they were maybe related to the original developer who just.

Retained this piece for some reason.

Regardless, he wasn't, he was not interested in maintaining this property anymore because I think these homeowners were like, hey, you got to cut the weeds here. You got to do all this. So he was getting this, you know, outreach from these homeowners, you know, complaining.

To him all the time.

And I'm like, I, you know, I called the guy and I said like, hey, I. I'd love to buy the property.

It's very unique, but you know, I can't pay that much for it. It's pro. I'm probably going to have to pass. And he's like, well, what would you buy it for? And I said, thought to myself, well.

What'S the, what's so cheap of a.

Price that he's going to pass? And I said, well, 10 grand.

And then he's like, okay, I'll take it. So, yeah, so he took it. And then I thought, well, now I gotta, I. Now I gotta tell my wife that we're buying this 23 acre lake. So she, she wasn't, you know, she was actually open to the idea. I showed her the homes around it and everything, got a broker opinion on.

It, and there's no comps for something like that.

So we were just kind of a shot in the dark. So I think we listed at 49.9. And what happened was exactly what I thought was going to happen is instantly we got calls from people that lived.

On the lake there.

And they were like, hey, you can't sell this or, you know, those type of things. And then we explained to them that we could because we owned it. And then they eventually banded together, created their own association and then bought it from me. So I think it was a win win. I think we sold it for $39,900. They got to retain this lake. So it pretty much secured the interest in their homes and everything should be worth more because of it. And we made a little money in the process. So I thought that was a pretty cool deal. And I saw the other day, just kind of wasting a little time and I saw a property listed around that lake and they were transferring their interest in the, in the lake. You know, there are certain amount, number.

Of shares that came with their home and everything.

So I thought that was pretty cool.

Just all because of this land deal I did.

Very. That's so cool. That's so cool. Pete Reese, your, your mentorship has been phenomenal today. But we're at that point in the podcast where I'm going to ask you for your tip of the week. A website, a resource, a book, something else actionable for the art of passive income listeners to go improve their businesses, improve their lives. But before you do that, I have to give a shout out to our sponsor, which is flight school. Learn how the next 16 weeks can literally transform your life. Go up that mountain of land, investing safely, quickly, efficiently with Scott Todd Azure Sherpa, who has done it thousands of times. Start building that passive income without renters, rehabs, renovations or rodents. Plus, I know what you're thinking. What about the tuition expense? It ain't going to cost you nothing. Guaranteed you're going to make it back 180 days or less. Just show us your work. Learn more. Go to thelandgeek.com training thelangic.com training Pete Reese, what is your tip of the week?

Okay, who, right this is going to come, this is going to sound a little weird. It's going to come out of left field, but it's actually bing and bing, you know, like this Google. Yes. They, they just, they just released, they're running on chat GPT4Now. So what's interesting about that is that you can say, hey, you know, go find me a, go find me a plumber in, you know, in my area. And they're going to, and they're going to like, you know, who's the best.

Plumber to use in this area?

And they're going to come up with all these results. So you could, you could just ask it anything, you know, like, supposedly this chat GPT4 is now quite a bit smarter than the other version of GPT3. I think it, the, the stats were that it, it got on average 90% on the bar exam, you know, so it's, it's obviously accelerating at a really fast pace. So I think there could be some pretty interesting uses when they combine that search engine with the chat GPT4.

I don't know. I don't know what all those uses are yet, but I'm going to check into it.

Yeah, absolutely. I mean, think about it. If you're a realtor and you're writing an ad for the land, you just put it in the chat GPT and it's amazing. Even pictures of the land you can get on ChatGPT, it looks really close. It's, it's going to change everything. It's, it's a really exciting time. Well, my tip of the week is learn more about Pete Reese. Go to turning profit.com turning profit.com and check out. He has his own podcast as well. And so if you are interested in generating cash, he can show you step by step how he does it and you can replicate his success. Pete Reese, are we good?

Yeah, we're great. Well, thank you, Mark. I appreciate it.

Yeah.

Good to be today.

Yeah. I want to thank the listeners and remind them the only way, the only way we get quality of guests like a Pete Reese from turning profit.com is you do three little favors. Follow rate Review the podcast Send a screenshot of your review to support thelandgeek.com I'm going to send you a signed copy of Dirt Rich. But even if you don't want to rich, just do it anyways because you selfishly benefit. So Pete, I always end this way. You want to do it together? One, two, three. Let freedom ring.

Let freedom ring.

Okay.

I love it.

I'm a little slow. Sorry.

No worries.

Thanks for listening to the Art of Passive Income podcast. Are you ready to learn how you can start building a passive income without renters, rehabs, renovations or rodents? Schedule a free consultation@thelandgeek.com training let freedom ring.