Misfit Entrepreneur February 2024 - 391: Unleashing Financial Freedom Through Land Flipping with Pete Reese

Subscribe and Listen Today!

Inspiring and Actionable Content Weekly from Misfit Entpreneurs

Subscribe on Itunes

Subscribe on Stitcher

Subscribe on RSS

Dave Lukas Chats with Pete Reese

391: Unleashing Financial Freedom Through Land Flipping with Pete Reese

This week’s Misfit Entrepreneur is Pete Reese. Pete is the President of Reelvest Properties, a land development and investment company. With nearly two decades 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 $3.5 Million in Revenue in 2022 with his land flipping and development business, and did over $10 Million in 2023.

When I learned about what Pete was doing, I had to have him on. He has found a niche in “land flipping.” It is a fascinating way to create income and earn a living that Pete has been teaching others to do for years. I wanted to have him on to explain the concept and how it works compared to other types of real estate investing.

Land Conquest Community

Social Media: @partnerwithpete

Don't Miss Even More Resources to Help You Each Week. Click Here and Subscribe to the Misfit Minute!

Show Notes

It all started when Pete and his wife purchased their first home in San Diego County in 2001. It was a fixer-upper, and they profited $50,000 in just two years. This initial success ignited Pete's passion for real estate. He continued buying, fixing, and selling homes until 2008 when the market crashed. During this downturn, he transitioned into becoming an REO listing broker, working with banks to sell their properties. Later, he expanded into helping large investment companies identify properties for flips or rentals and briefly entered the luxury real estate market. In 2021, he flipped his first piece of land and generated $1.2 million in revenue. The business model and short hold times attracted him, and he went all-in on land flipping.

What is land flipping?

Land flipping involves marketing directly to property owners, often using methods like direct mail, pay-per-click ads, or cold calling.
Many times, deals are off-market, and a buyer can evaluate the property's potential for improvements, and resell it quickly. This strategy focuses on short hold times, typically around 90 days.

Can you walk us through the elements of a land flipping deal and what makes your approach successful?

Pete starts by compiling a list of property owners in a specific area, often rural locations with larger properties. He calculates an offer price based on average values in the area and sends out offer letters via direct mail. These letters generate responses from property owners.
After receiving responses, Pete's team evaluates each property in detail, looking for red flags and unexpected issues. Due diligence is extensive and includes on-site photography, broker opinions, title investigations, calls to local authorities, and more.
They aim to close all transactions through an escrow/title attorney and may perform value-added tasks like brush clearing before or after closing. Once ready, the property is listed at an attractive price, often below retail, to ensure a quick sale.
The goal is to complete deals within 90 days, creating a rinse-and-repeat process for land flipping.

You send 50,000 letters a month. What's the ratio? How many letters does it take to get to an opportunity? How many opportunities does it take to get to a contract? How many contracts does it take to get to an actual closed deal? What's that look like?

Pete primarily tracks the cost per deal, which they consider the most crucial metric. Historically, they've been averaging about $3,500 in mail costs per deal.
Postage prices recently increased to about 55 cents per letter, and they use standard mail with number 10 envelopes for their mailings.
While they don't specify the exact number of letters required, the $3,500 in postage costs per deal gives an idea of their expenses.

The number of letters works out to around 7,000 based on the postage cost.

In Pete’s first year, the average gross profit per deal was around $21,000. In 2022, it increased to about $23,000, and in 2023 it was about $28,000 to $29,000.

What's the average purchase price for a deal at this point?

The average purchase price for a deal ranges from $50,000 to $100,000.
Pete mentions that he's done deals as low as $3,000 and as high as $450,000 to $500,000.

And what do you attribute to creating essentially the value? Is it just that you're buying off-market, so it's not listed, and so you don't have those expenses of a listing and that sort of thing, and you just basically make that difference or is it something else?

Pete says that they position themselves as convenience buyers, offering a quick, cash sale to property owners. While they may not offer top dollar, they make the process easy and convenient, similar to trading in a car at a dealership.
He acknowledges that their approach isn't for everyone, and some sellers prefer the traditional retail route with real estate agents.
He also mentions that some properties are challenging for real estate agents to sell, especially lower-priced land, and this is where their business model shines.

What is the typical use case for the properties that you're buying

Many properties are a hybrid between recreational and potential home sites.
They often deal with larger acreage properties, generally ranging from 5 to 10 acres or more.
Potential buyers may consider using the land for various purposes, such as building a home, putting a mobile or manufactured home, or using it recreationally, like for cabins or future development.
Other types of buyers include neighbors, land collectors, and investors, so the use cases vary.
Pet and his team aim to ensure that properties are buildable during their due diligence process, and sometimes they buy non-buildable properties as well for recreational purposes.

Do you use any tools or any software for finding prospects? Also from a diligence standpoint?

Advanced tools and databases like "Land ID" allows them to evaluate properties remotely.
"Land ID" provides various data, including satellite images, lot lines, utilities, contours, wetlands, FEMA flood zones, and more.
They also use tools like "PropStream" to pull marketing lists and data, allowing them to tailor mailing lists to specific property owners.
Pete shares that these tools are essential for the business and mentions that they wouldn't work as effectively without access to this data.

What are the risks? Where can things go wrong? What are the pitfalls to look out for

The biggest risk is not properly evaluating properties.
Evaluating land is more complex than evaluating single-family homes, as every piece of land has unique characteristics.
Misjudging a property's value can lead to significant losses, and comparing properties that aren't similar can be a common mistake.
Pete advises being conservative in projections, as overly optimistic expectations can lead to disappointment.

What are characteristics of a good deal?

Pete looks for deals where he can potentially double his investment after diligence.

Where do you see the real estate markets going over the next two to three?

Pete says the real estate market's direction depends on the specific niche within real estate investing.
Office spaces will continue to struggle.
Multifamily could face challenges but not as severe as office spaces.
Single-family homes may respond positively to interest rate drops, offering potential for growth.
Real estate is local and markets vary by location, with local factors influencing their performance.
Land flipping is a promising niche as more and more people are seeking properties in rural areas with high-speed internet access.
Remote work trends also impacting real estate market dynamics.

You've been an entrepreneur for 20 plus years. What are some of the best lessons you've learned for succeeding as an entrepreneur?

Consistency is critical in an entrepreneurial journey.
Structuring one's workday, setting clear goals, and addressing significant challenges daily makes a big difference in success.
Aligning business with personal passion ensures a fulfilling and sustainable entrepreneurial path.
Being a good person in business interactions leads to more opportunities and positive outcomes.

Anything that you wish you knew sooner as an entrepreneur?

Not getting into land flipping earlier! Especially during market downturns when opportunities arise.
Tough times can provide opportunities to gain market share and acquire assets at a discount.
Entrepreneurship involves seizing opportunities, even during economic challenges.

What advice would you give to someone starting out as an entrepreneur, not just in land flipping but in general?

Consider the alignment of your chosen business with your goals and lifestyle preferences.
Choose a business that matches your income goals and desired lifestyle.
Consistency is a key factor for entrepreneurial success, as it leads to significant results over time.

Best Quote

Being a good person in business interactions leads to more opportunities and positive outcomes.

Be a good person in business interactions to create opportunities and lead a fulfilling life.

Pursue a business aligned with your passion to ensure enjoyment and sustainability.

Embrace consistency in your daily routines and tasks, as it can lead to significant results over time.

Show Sponsors

This is for all you Misfit Entrepreneur Men out there. As entrepreneur and men especially, we sometimes feel like we’re too busy to take care of our health problems. With so much going on, we don’t want to spend our free time waiting around in doctors’ offices and long pharmacy lines. And guess what, now you don’t have to, with Hims.

Hims is changing men’s healthcare by providing simple and convenient access to science backed treatments for hair loss, weight loss, ED and more. Their entire process is 100% online, so you can get a new routine of improving your overall health, faster. Hims offers an array of high-quality options including pills or chews for ED and serums, sprays, or oral options for hair loss. If prescribed, your medication ships directly to you - for free and in discreet packaging. No waiting rooms and no pharmacy visits. No insurance is needed. You pay one low price for your treatments, online visits, ongoing shipments, and provider messaging. You can even manage your plan on the Hims app, track progress, and learn more about your conditions and how to treat them from leading medical experts.

And right now, you can get your FREE online visit today a Hims.com/Misfit

Prescriptions require an online consultation with a healthcare provider who will determine if appropriate. Restrictions apply. See hims.com slash MISFIT for details and important safety information. Subscription required. Price varies based on product and subscription plan.

Misfits,

If you are looking for one of the best tools to help you focus and center yourself daily, the 5 Minute Journal is the best one out there.

This short 5-10 minute daily routine will help you in all aspects of your life and success.

It is one of the simplest and easiest ways I have found to consistently improve myself and my well-being as well as ensure better results and success.

Check it out and get your copy today!

Check it out at www.MisfitEntrepreneur.com/Journal