Transcription
Hello and welcome back to another episode of the Collective Clicks podcast. This is your host, Brandon Baitman, and today I'm joined by Pete Reese. Pete is a friend and client of mine who specializes in land investing. We talk a lot about what land investing is, how it compares to single-family houses, how he's grown his company tremendously in the past few years and produced impressive numbers, and marketing—specifically the advantages of direct mail versus pay-per-click marketing in that industry.
Hi Pete, how are you doing today?
I am doing great, Brandon. Good to be here.
Yes, I'm excited to have you here as well. Nothing like a Friday afternoon podcast.
That's right. That's right, everybody. Time flies.
I sometimes wonder if anything gets done on Friday afternoons.
Something I don't think much about, honestly. I don't think much gets done if it's anything like my own work habits on a Friday afternoon. They really fall off a cliff after lunch. It's like, might as well not even try at some point.
We should just move to a 4-day work week.
Yeah, yeah. Someday, maybe.
I am super excited to have you here. I think you have a unique perspective for the podcast. But for those listening who might not know you and your background, tell me more about you—what you do now, and what your real estate journey has been like.
Yeah, well, my real estate journey has taken a long and winding road. I've been in real estate in some form since the early 2000s, when we bought our first home here in California with an FHA loan—3.5% down for about $200,000. We sold it about two years later, netting about $50,000. I thought I was a real estate mogul at that point, because I’d done some very shoddy improvements myself on the home. Amazing in hindsight, not so much. But anyhow, that got me exposed to real estate and its power. We actually started buying and flipping homes in the early 2000s. It wasn't as mainstream then as it is today, but there were still shows on HGTV and everything, just not as much information out there on how to do it right. So we did pretty well until the market crashed in about 2008. A little late before that, I got my broker's license here in California to get more access to deals. I was buying everything on the market through the MLS, figuring I could show myself the homes and write my own offers. I thought that would be great. But not long after that, the market crashed, and it was like, well, flipping homes really isn't the best thing to be in right now. Buying homes would have been the best thing to do then, but I needed income, so I started representing banks on their bank-owned properties. I became a REO broker and took it from that side of things, not even in the investing world. In hindsight, I should have been buying everything I could, or finding a way to do it, but there really weren't a lot of people out there with a lot of excess cash at that point.
I did that for a number of years, working on the REO side of things. I started working with a lot of investment companies that were buying and flipping homes and also buying for rentals. It was easy for me because I understood what they were looking for; I had access to deals that they didn't, and it worked out pretty well. I got a little sidetracked into a business with my wife—an education business related to blogging and travel blogging. We did a bunch of traveling as a family for quite some time; it was a really fun business. But I got that itch to get back into real estate investing. I stumbled onto land investing. I didn't really want to get back into home flipping because, for me, it was too cumbersome—too many moving pieces. So I was looking for something else. I stumbled into land investing, and I just kind of went down the rabbit hole. This was in late 2020. I identified that it matched what I felt I was good at. In 2021, we did our first land deal. We did about $1.2 million in revenue that year at about a 50% gross profit margin. Then in 2022, we did about $3.4 million at a little over 40% gross profit margin. In 2023, we did $8.2 million at about 40%, and we're trying to do $20 million this year, just buying and selling land. That's what I do now.
Wow, that's wild. Those are impressive numbers for the land investment space.
Yeah, you know, just buy some houses, buy some land, sell some stuff. Inspiring for me, though.
No, that's fair. That's super cool. I didn't know a lot about that from your journey. Obviously, most people listening know the real estate space, maybe a little bit less the land space. So I'm super curious to hear: let's say I came to you right now, and I fully expect a biased answer, and I asked you, "Should I get into a real estate acquisitions company—wholesale or flip, or whatever you want to call it—for houses right now, or for land?" What would you say?
Well, like you said, I am pretty biased. I know all the different investment models, and I choose to do land because, relatively, it's the easiest. In some ways, I mean there are a lot of challenges and nuances, but there are things you don't have to deal with that you do have to deal with when dealing with houses. First of all, there aren't a lot of occupants, tenants, evictions, or any of that kind of stuff when we're talking about land. Every once in a while, you have a squatter on the property you may have to deal with, but that's it. So it's easy from that perspective. Even simple stuff like arranging a time to see the property—you just go. You don't have to coordinate anything. The thing that always challenged me—and I know there are people a lot better at this than me—was the construction side of things: getting everything coordinated with contractors, running into unknown issues. You try to determine all those things upfront when doing a land purchase. It's not like you're opening a wall and finding something out after you bought the property. Those things always seemed to come up when I was flipping homes, and I didn't enjoy that aspect. While there's competition in land investing, there's also a lot of opportunity. I don't think it's nearly as competitive as the single-family home market, for sure. So, for those reasons, and the profit margins are great. A lot of times our goal is to double our money on our deals. We fall short of that as an average. If we're doubling our money on our deals, that would be a 50% gross profit margin, but we pretty much average, at scale, about 40% gross profit. We're still making a really good return on investment on our money, and we're trying to move on from these properties, on average, every many days. That starts to accelerate really quickly if you're able to get that kind of return on your money that quickly.
Yeah, that's wild. Let's talk marketing. Obviously, my passion is marketing, and I know you do, too. What's it like compared to houses?
Are you talking about the acquisition side?
Yeah.
So we use two methods at this point. Obviously, we're working with you on the pay-per-click side of things. We also use direct mail. We send out actual offer letters to landowners. We pull lists of landowners that have a certain criteria of land that they own in areas that we like, and we send them offer letters based on average pricing in a particular area. Now, those offer letters end up being just the first shot to see if we can get them to call back and see if there's interest. Sometimes we're right on those offer values; sometimes it's off, either too high or too low. But when they call, when they contact us back, we're able to fine-tune that and see if we can come up with a deal. So that's primarily our marketing. We're doing a lot of direct mail, and we're doing the pay-per-click advertising with you.
I understand. Direct mail is like the staple for land. Most land investors seem to be doing direct mail. It's the classic; it's kind of how it was for houses for a little bit until things started to get really competitive. Nowadays, direct mail isn't nearly as easy as it once was for houses, at least. I'm curious from your standpoint: what are the benefits to that tried-and-true channel versus PPC being a little bit more experimental?
Well, it's interesting to me because we can define the type of properties that we want in the areas that we want. For instance, we buy and sell properties all over the country. That's one thing you can do with land; it's tougher to do with single-family homes, for sure. But it allows us to target particular areas where we know land sells fast, where we've built good infrastructure and a good team—a good broker, a good title company, all that kind of stuff. So it allows us to focus on properties in those particular areas. We like to buy a lot of larger, rural properties—10 acres or so. We're able to target those specific types of properties. Obviously, we can filter our lists by things like absentee owners or tax delinquents, but we don't do a lot of filtering. We send out a lot of mail and kind of have a shotgun approach with my mail strategy, at least. We send out a lot of mail and get kind of random sellers, but overall the numbers work out well. On average, we're probably averaging about $3,500 in mail costs per deal, and last year our average gross profit per deal was about $30,000. It's a really good return on ad spend, or ROAS, you could say. Pay-per-click is different. The motivation is there, for sure—these are motivated sellers—it's just the property type is random. So we get properties from all over the country in random spots. Like today, we're advertising for land, and we got someone who wants to sell a school they bought that they're in the middle of renovating. So we get all kinds of random stuff like that, even though we're putting out ads for land. You never know what's going to show up.
The school, that's…
Yeah, they probably searched for "sell my school for cash."
That's right. Yeah. If nobody has already, you should go snag that domain.
Doing that. It's crazy because I'm looking at the satellite images, and I'm like, "Oh my God, I always thought it would be cool to buy one of those old schools and redo it." I know there's a lot involved, but I'm looking at the satellite images; it's in a great spot, near a big shopping mall, and there's a huge football field there still, and all this stuff. So I'm like, "What would you do with that?" I don't know.
I have absolutely no idea. That's crazy.
Yeah. And, as I understand, you've been doing direct mail for a long time, and PPC for about five or six months.
Yeah, I don't know the exact timeframe, but we're pretty close to that.
My understanding is that you guys have also learned some things internally about how you need to change your processes and systems to deal with a different kind of lead.
Yeah, yeah. The big thing was speed to lead. We weren't putting as much emphasis on that with our direct mail, because a lot of times with direct mail, it's crazy—they'll either call into our call answering service, or sometimes they'll just send back the signed offer in the mail. Obviously, there's a big lag time. Speed to lead is important because they're not in a hurry. It's a lot of older people who may not be into texting and stuff like that. But with the leads from pay-per-click, those people are online, obviously. The sooner you can get them a response, the higher the likelihood that you're going to be able to convert that to a potential deal. I think if you don't respond right away, they'll just reach out to another investor and fill out their form. So we learned internally that it makes a huge difference for us to put some speed-to-lead stuff in place—basically an AI chatbot that drums up a conversation as soon as the lead comes into our CRM. The lead comes into our CRM, and we have our chatbot qualify them. We're trying to understand what their property is about, make a connection, and potentially book an appointment with one of my acquisition managers on my team. That's made a huge difference because when we didn't have that in place, we weren't able to get in touch with a lot of these people. Again, they come in as a lead, and my acquisition manager may be busy, and by the time they call a couple hours later, they can't get a hold of them anymore. But with an instant text from my AI chatbot, you're making that connection right away. And the next step, which we're working on, is AI voice—having an AI assistant give them a call and qualify that way. The new voices coming out are amazing, so in no time we'll have that implemented as well.
It's close. I mean, it's not perfect, but neither are humans.
We have to get our call center a little more training.
No, that totally makes sense. That's really fascinating how you guys go about building that.
It's all built from the HighLevel platform, if you're familiar with it. What's interesting about it is that there are infinite ways you can customize the platform to whatever business you're running. We took everything we were doing over the last two years, customized it for our own purposes, and kept building our own stuff, hiring a bunch of people to build more stuff and make it more refined for what we do in the land investing space. We built out all our processes—not just on the acquisition side, but marketing, value-add, the transaction on the buy side, the transaction on the resale side, due diligence—all this stuff is automated and built into the system, which is cool. And then we also offer it to our students as well, with the AI chatbot and everything. It's turned into something impressive because I know exactly what we need because we're actually using it in our business every single day. We've been refining it for a couple of years now.
That's pretty cool. You and I were talking the other day about how, if you get the voice AI and text AI figured out and automate your marketing, there's so little left.
Crazy, because I was talking to a friend of mine the other day, and I was telling him how, in my opinion, this is basically a marketing and sales business—that's it. There's not much in terms of operations. And they disagreed with me; they said it's only a sales business because you can outsource marketing; sales is the only thing you can't outsource. And I thought, "Well, that's a great point, I think that's true, but not true anymore."
Wild.
It's crazy. And you have to think, we're at a certain spot right now with the technology; it's only going to get infinitely better over the coming years—an accelerating pace. Things are changing rapidly, and there are limitations with some of the technology right now, but in no time those will be gone.
No, I mean, it makes sense. It's easy to say why it's not going to work right now, but it's hard to say why it wouldn't in five or ten years.
Yeah, so that's super cool. And you mentioned your students. I don't think we've even talked about your real estate coaching…what do you call this education side of your business?
Yeah, so basically, I've got a community I started building a little over a year and a half ago on the Skol platform, if you're familiar with that. This community is called Land Conquest. Basically, I offer a bunch of free training. I just did a Zoom call yesterday with the community—two hours of me sharing my screen, evaluating pieces of land that students submit that they got under contract to buy. I look through it, check comps, and discuss what I think it's worth and what they could resell it for. We've been doing that the whole time. I've got a bunch of free training, but I also have a paid thing for students looking for more individualized support. I do a weekly Q&A call with that community, and we provide what we call the Land Conquest business system—essentially software—that allows them to plug their business right in and not have to recreate all the stuff we had to do over the past two years. So we've got that for them. It's been a fun thing. The other thing I've got is what I call Partner with Pete—partnerwithpete.com. Essentially, students can bring their deals—they get a deal under contract, and they submit it to Partner with Pete. If it's a deal, I'll agree to fund the deal for them. I use my money to purchase the piece of land, and then we plug it into my team's processes. We do all the due diligence, value-add—brush clearing, surveys, perk tests, lot splits—we take care of all that. Then when we resell the property, we split the profits 50/50. It removes that bottleneck in land because there aren't a lot of hard-money lenders out there for just land. It allows my students to focus on getting the deal; I'll worry about the money stuff and due diligence. They get to sit back, and we take care of the rest, and we split the profit. We've had some students—one student brought us a deal, and they ended up getting a $180,000 wire for their portion of the profit. So there's definitely money to be made out there with land.
I completely agree. That's really cool. It's hard for anyone listening to know—is this the ultimate shiny object, or is it a smart pivot with your business? You already have something working in single-family houses, but if you're chasing a pretty good-looking shiny object, that certainly seems like a good direction to go.
No, I've chased shiny objects before. If you've got something that's working for you, there's no reason to recreate the wheel, but maybe it's something you start dabbling in to see if it fits with what you might be good at. The big thing is learning how to evaluate land—it's a lot different than evaluating a single-family home. Comps are easy with a lot of single-family homes; understanding what these properties are worth on the resale side is key to unlocking a lot of things—understanding what you should be researching on a property when you're buying it.
It makes sense, because in land, people are generally buying and then selling, versus in real estate, usually…
Yeah, like with traditional single-family houses. The entry for me as a wholesaler—the good news of wholesaling—is that if you're wrong about what it's worth, it can only be so bad. But that doesn't apply to land, you know. You've got to nail your numbers because you're risking something.
I've got to ask, especially since you've grown your business so quickly over the past few years—this year you're planning on $20 million in revenue. I think that means you're going to have $20 million that you put into land. What's your thing when it comes to financing? Have you found some way to work with banks, raise private money? What's the strategy, and what do you find a lot of people do in the industry?
Yes, that's a great question. The money side of things is definitely something to figure out in this land investing space. There aren't easy options for hard money unless you're experienced and have a track record. For the most part, when investors are getting into this, they have the option of buying all cash, getting friends and family money, getting a loan, or going the partner route, splitting the equity with a partner. There are lots of deal partners and money out there for deals. For me, I started out all cash. We had some money saved from another business, but I didn't start at this scale. I was able to snowball and let that roll and build it up. About a year ago, I started thinking, "I really want to scale this as much as I can, and I don't want to hold back if I see bigger deals." So I started putting feelers out there for private lenders, and I got connected with some great people who believe in what I do and my track record. On larger deals, I still fund the smaller deals with my own cash, but for larger deals, I write up about it and say, "Hey, do you want to lend on this property?" And then we do a private money deal. They send the money directly to title or the closing company; we do a mortgage or note, and all the paperwork directly for that property. Then they get a decent interest rate and get paid off when the property resells.
Cool. What interest rate?
They call it 12%, plus a couple of points upfront as well.
That makes sense.
Yeah, cool.
Sounds like a fantastic business, although it's hard to not build up enough cash to do a lot of the deals yourself if you really can get double what you put into them.
Yes, you really are pushing that 10x return on your marketing. It's crazy how…you know, we're at the point, even when we're doing deals with partners, it's still a great return in a lot of cases, especially if we can move the property fast.
Too bad. That totally makes sense.
Anything else I should have asked you that I didn't?
That's a good question. You didn't ask me about my dog.
No, I'm just…no, I don't know. Nothing I can think of. I guess it's wild. I think to you, everything is so simple. The complicated person…I try to keep things simple. I get in trouble when I think about too many details.
So yeah, I mean, it's fully respectable, and I think it's something that a lot of very intelligent people do because they just see the most important aspects—choosing the right parts of the system. That's pretty cool. I'm grateful for what I learned today about the land investing business. It's cool to hear it's been good to you. For anyone interested, check out the community at skol.com/conquest. I also have a weekly podcast called Turning Profit, and Brandon was actually just on there; we talked about the numbers, cost per lead, everything you're getting me on in the land space. You can find it on all the podcast platforms and on YouTube at Turning Profit. That's the best place to check out all this stuff.
Yeah, yeah. That's pretty cool. That was a good episode. I think we talked for about an hour, going through all the numbers of how it works in your business, which I think is a pretty good place to start for anyone considering a PPC campaign for land—to get some idea of what can be expected.
By the way, we closed on six more properties since we recorded that, about a week and a half ago. Six more pay-per-click ones. They were under contract to buy but we had closed them.
Yeah, because I remember when we recorded that, you guys had a lot of contracts flowing, and you guys had improved your processes quite a bit during our work together. So it's been kind of like…it felt like when we started working together, maybe we were spinning our wheels a little bit, and then the car kind of took off, and it's taking off pretty good.
It started taking off. You still have to wait a minute for the revenue to come full circle. But yeah, when…
School…after we buy that school and resell that one, that'll be pretty good.
We'll see about that. Don't tell me you're buying the school.
No, you know, my wife would kill me if I bought a school.
Fair. But that's crazy. Well, thank you for your time on this podcast episode. For everyone else listening, I'll see you next week.