Hey, everybody, it’s Jordan Samuel Fleming here with another episode of That Real Estate Tech Guy. And I am delighted to say that my co-pilot for today’s episode is Pete Reese from Reelvest. Pete, welcome to the podcast. Introduce yourself and tell us a bit about what you do.
Our business is land flipping. So we buy properties directly from landowners, and then we’ll sometimes do some improvements to these properties, and then we will resell them quickly. So that’s our whole business model. We generate our business through direct mail. We send out direct offers to these people with an actual offer amount. And it gets the phone ringing, the texts coming in, and the emails coming in. And then we see if we can work out a deal with those particular people who responded. And then we move forward with purchasing the property. Our average hold time is about 60 days.
When it comes to land, I’ve noticed that direct mail does seem to play for you. What do you think is the reason?
Direct mail has worked for us from the beginning, I was taught that way. It seems like it’s generally an older demographic. I guess that responds to the direct mail better. And it seems like those are most of the landowners who are interested in selling anyhow. So it’s a good match right now. And it’s interesting because it allows us to do that direct offer like that, and do it in a way that’s generally not going to really upset the majority of people. And then, when you look at the numbers, it’s costing us about $3,000 per deal that we do. And on average, we’re making about $22,000 in profit.
How did you decide to get into the land flipping side of things? And how critical has the technology aspect been to being able to manage the process you have?
I stumbled into the land flipping space in a way. I mean, we were running another business that my wife and I owned, and that was our focus for a number of years. I’ve been a real estate broker since 2006. And I was flipping homes even before that. We’d gotten out of investing in ourselves for quite some time. We had another business that was 100% of our focus for a bunch of years. But I had that itch to get back into investing and doing that stuff on our own because I always loved that, and real estate’s in my blood.
So I was just doing some research and trying to decide what I wanted to do. I want to get the end of flipping homes again, and I stumbled into some people talking about land flipping. Some anecdotes are pretty much about buying a property for 10,000 and selling it for 30,000. And I thought that’s pretty cool. I’d like to do those types of deals that really sound like a great return on my investment. And I just felt like it would line up well with my skill set. So I purchased a course on it, learn everything I could about how to evaluate these properties, and then I just dove in. So that’s how I got started.
And then, from the very beginning, the deal started working like our first year in the land flipping business was in 2021. It was just a little under two years ago at this point. And we resold our first property using this model in March of 2021 and did about $1.2 million in revenue that year at about a 50% gross profit margin. So basically, on average, we’re buying a property, and we’re trying to double our investment after all the fees and commissions and all that stuff. So if we buy a property for 10,000, we’re trying to sell it for $20,000, and so on. So we were able to hit those numbers that first year, and the second year, which was our first full year in the business, we did about 3.5 million in revenue. And we’re pretty close on that gross profit as well. It’s going well, and I want to hit 10 million this upcoming year, which ties into the next part of your question where you were asking about how the technology all comes into play.
In any business, really, it’s the same thing. If you’re going to start and scale something and put systems in place and everything, there’s just no way you can do it without the help of technology, I guess you can do it, you could put manual systems in place and have lots of team members and things to do a lot of these things, manually, but it’s still not going to be as organized, and you’re not going to run a good operation unless you have some really good tech behind it. So I realized that early on, in the beginning, we were managing all of our leads on a Google Sheet. And it just became, unworkable after a little bit of time. And that’s when we shifted to building out our CRM, customized to our business.
That’s an impressive growth curve you’re on. 10 million, that’s a shift in terms of volume and people moving. Let’s break it down to some basic principles of maybe the things you’re thinking the most about in terms of your business, as you’re thinking about the 10 million scale.
We had to build out a business system, which is the CRM solution that we’ve got. We had to build out a business system that allowed all the team members that we were bringing on to be able to collaborate on these properties. And do so by having one central spot for all the files and all these kinds of things. So it was a matter of bringing on the right team members, having them work within a system, and then having clearly defined ways that we operate within that system.
The system itself is obviously driving a lot of the stuff and automating as many things as possible. But it’s really a big, big crutch for us to take things to the next level, and going forward, it’s only going to get crazier and crazier because there will be more team members. And it’ll have more properties and just a lot more moving pieces, and without the technology side of things really having that base established, it would really be unworkable after a certain amount of time. Like you said, that 1 million that first year, I was doing a lot of stuff on my own, with some team members, but not many. And then, as soon as we started really building out the team, it just becomes super essential.
Whether you’re in real estate or any other business model, moving towards the 10-million mark is just a different game. There are these sorts of changes in what it means to run a business. What’s your deal size, an average of $30k?
At the beginning of the year, we were doing a lot of smaller deals. And as the year progressed, we really tried to step up the average. So it’s a good way to scale the numbers and the profit. But there is a limit in the land business because you don’t want to go too big by sitting on these properties for too long. And the bigger they are, the longer they take to sell, even if they’re priced right. So that’s one consideration. But I think most of our buyers right now are between $20,000 on the buy side, $20,000 on the low side, and few 100,000 on the upper end. Some of them, we’ve got some actually under the contract that is actually more, but those are the outliers.
It does make me curious as to how you’re managing that volume and the different parts. So can you give us a sense of how the system works, or what type of system you have cobbled together to go through that process?
The main business system that we’ve built everything around is our CRM, and it’s built on top of the HighLevel platform, but it’s obviously completely customized to the land business. HighLevel is a platform that basically gives you all these different tools and things that you can customize to fit your own business. And it’s more than just a CRM, managing the leads and everything that comes in.It also manages the different processes within our business.
For instance, we’ve got an acquisition process. And that’s everything that deals with all the leads and communication with the property owners, up until the point where we get a signed contract for that property. From there, we’ve got another process that’s built out for the due diligence side of things, like after we get a property under contract, and it sets up this whole chain reaction of events, like ordering a photographer to go out to the property and walk the property and get drone shots and all this stuff. We’ve got another team that then goes and starts calling through this, doing this whole checklist of due diligence stuff, like they’ll call the city, they’ll call the county, they’ll find out about the zoning, they’ll call the utility companies, and they’ll find out exactly all this standard information that we collect on each one of these properties. And then we’ve got team members that review things at different stages. We review the title report and everything else. We’ve got a whole process for them that works concurrently, that’s the transactional purchase side of things. So that’s a whole set of processes that our transaction manager deals with. When they’re communicating with the title company or escrow company and sending out certain paperwork to them and getting things notarized and all these things that go into that side, reviewing the title, reporting everything, and then we’ve got another process, which is for the resale side of things, like the transaction, so once we get a property under contract, there are all these different communication milestones and things like that.
When we buy a property, there’s a whole listing process that we go through, like communicating with the agents and all these things. So all these processes have been built out. Without them, things would really become unworkable really quickly, and things would be completely chaotic. But it allows us to use everything, it allows us to really systematize all these processes, which are essentially the same on every single deal. There are always variances and things that we have to look at manually and things like that, but a lot of these things are the same on every single deal. And it really helps us do that on the scale that we need to. And then all the team members can access all the data and information within the system, whenever they want it. And then, that’s our main business system.
For internal team communications, we use Slack. So that’s the communication hub that we use. And then we’ll get on Zoom calls, but a lot of the communication actually happens on Slack between team members and everything else on there. It’s great for quick communication. We also use different apps and things like that to help us evaluate the properties. We use Google Apps for things like our Google Drive, Sheets, Docs, and all that stuff on there. But that’s our main guest tech stack, I guess you could say.
Land flipping is so processed-heavy and it always struck me that it was way more similar to project property management. How do I have the right structure in place so that these rigorous processes can be very clear to everybody about what needs to be done and what to do next? Is my take on the process and how you’re trying to form it in your business similar to property management?
I do think that there are a lot of correlations. A good property management company is very systematized. There are crappy ones out there that fly by the seat of their pants, but they’ve really got to have their systems down if they’re gonna manage all these people and all these moving parts. So it is similar in that way, I think. I think there are a lot of investors that are probably all over the place, and they’re never really able to hit that scale. And they’re always wondering why they can’t get to that next stage.
It’s probably because they don’t put the effort into getting their foundation, their tech foundation, where it needs to be. It’s got to be built well so people can actually see clearly what’s next. The system is not hiding things from them in any way. It’s like front and center, and we do that by using the visual pipelines. Every process is in these Kanban-type pipelines. So it’s essentially like a property card here. And in this column, this work has to be done. So, normally, a particular team member is responsible for certain pipelines, so they know that if something’s there, they need to do that to move it to the next stage.
Do you create buckets of things that anybody can reach in that part of your process? Or as you look to your next five, 6 million growth, do you see yourself having to change some of the mindsets that got you to three?
I think we’re definitely going to have to do some shifts there. And one of the big shifts is to bring on experts here and there to do different things, but I’m the one driving it. I mean, I’m not the ultimate operations person or something like that. So I know that the next level is that I’ll need to bring someone on just for that role who’s already been there and done that. Their operations are specific experts in those areas, and then let them take the reins and improve it from there. I think I’m good enough to get it to a certain stage, but I probably need to bring on the big guns to get it to the next stage.
In real estate and real estate investing, we’re so locked into that world, like we’re so focused on deals and, generating more business and all those other things, but the real players in the business, are bringing in the unit specialists in all these areas to build something really big. There are people so far above, like, whatever level I’m at right now. And they’ll just be able to come in and do a bang-up job, get it done.
Is there a particular direction that you can see over the next two years, in terms of technology that you’ve never invested in? Or have you been curious about what you start to see as being needed as you scale?
Probably some things related to human resources. Expanding staff, I’m sure there are some tech solutions. They’ve really helped streamline some things. I mean, the more people there are to manage, the crazier and crazier it gets. So I think that’s one area there. I mean, this is completely unrelated, but I think that the AI stuff that is really happening now, the chat GPT and everything related to that, is going to change a lot of areas, and real estate investing, or almost every business, is going to be touched in some way. And I’m probably not smart enough to realize what those changes are going to actually be. But that’s far enough to know that there aren’t going to be changes and to just adapt to them and embrace them as they move forward.
People keep talking about these things. The notion is that their system will be able to do three things or deliver three bits of information to us: perform sentiment analysis to score the conversation as positive, negative, or neutral; summarize the conversation succinctly; and provide accurate transcription.
Yeah, people have to be really creative in order to bring all these tools together and use them in a new way. And there are very creative people out there, and I’m sure they’re going to figure out some cool solutions for a lot of these things. I’m just monitoring things and seeing what comes up.
That Real Estate Tech Guy’s Fast Five
- What technology product has had the biggest impact on your business?
I would say the HighLevel CRM solution that we pulled out.
- What is the biggest mistake you’ve made with technology in your business?
I guess not trying to do everything myself, instead of bringing in vendors that are specifically experts in those areas, I weed through things myself sometimes, when I probably should just hire that out to someone who knows what they’re doing already.
- What is your best advice on how a new investor can integrate technology into their business?
It doesn’t really matter what platform or what type of thing you need to incorporate. But I guess the real thing is that you need to put in some sort of foundation that works with whatever your business model is, something that you can build on as time goes on. You don’t have to build something super complex or anything. You could even start out with something basic, but you need to have something there and don’t think that you’re going to build your business on Google Sheets because it’s not very scalable.
- What’s the one thing you wish you’d known in technology terms when you first started the business?
About the HighLevel platform, because I really hadn’t. I knew about HighLevel platforms, but I didn’t really realize the use cases that I could build out for our particular business.
- If someone was just starting out what are the three bits of technology you would recommend they bring on first?
Some sort of business system that you can build something on, and generally that will have the CRM and something that can deal with the leads and do a lot of the automated processes in order to handle leads. For us, it’s the same thing or business system, and their lead manager or CRM are all the same system. The other thing is that you’ve got to have some sort of tool as a real estate investor that allows you to evaluate these properties and do it in an efficient way. And we use it in the land business.
A lot of us use a program called Map, and that really helps us leverage our time. Instead of calling around and looking on all these different county websites and things like that, it’s all compiled into one area, which really saves a lot of time and allows you to be a lot more efficient.
Data is a big part of real estate investing as well. So for us, we build our list from a company called data tree, it’s the first American company, but you got to have some sort of data solution where you’re compiling lists, and even if you’re building audiences for online ads, or something like that, you’ve got to have some sort of data source where you can try to narrow down your ideal, sellers, in our case,
How to reach Pete Reese
The best place to find me would be our website, which is turningprofit.com. So that’s our business, where we are putting out a bunch of content about land flipping and land investing. And if you’re interested in that side of things at all, we’ve got a podcast associated with that that we just launched as well. And then we’ve also got a community that we just launched for land flipping. And, if that’s an area of real estate investing that interests you, I think you’ll get a lot of interesting information from that.
Pete, have a fantastic day, and it’s been a pleasure having you on the podcast.