JF2222: Active Investor & Podcast Host Steven Pesavento

Steven Pesavento is the Host of “The Investor Mindset Podcast” and an active investor himself who has flipped over 200 homes within his first 3 years in business. Steven started out in AirBnB before focusing on flipping homes, house hacking, rentals, and now is working on his first commercial deal. 

Steven Pesavento  Real Estate Background:

Best Ever Tweet:

“I look for a partner who is good at something that I am weak in” – Steven Pesavento

TRANSCRIPTION

Theo Hicks: Hello, best ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks and today I’m speaking with Steven Pesavento. Steven, how are you doing today?

Steven Pesavento: Theo, I am doing phenomenal. How are you doing today, my friend?

Theo Hicks: I’m doing phenomenal as well. I like the energy, looking forward to our conversation. Before we dive into that though, let’s go over Steven’s background. He is the host of The Investor Mindset Podcast, as well as an active full-time real estate investor for six years, with the first two focusing on AirBnB, as well as flipping over 200 homes within his first three years in business. He is based in Denver, Colorado, and you can say hi to him at his website, which is https://theinvestormindset.com/.

Steven, do you mind telling us a little bit more about your background and what you’re focused on today?

Steven Pesavento: Absolutely. I got into real estate mentor just like so many others, kind of fell in through Rich Dad Poor Dad, but it took me about 10 years before I finally got into my first deal. I read that book when I was 17. But I actually started in AirBnB land, and I had no idea at the time that I was investing until years after I was already doing it. But I was essentially renting out my personal home and two other homes that I had leased from another owner, and then I had furnished those, and I was renting them on Airbnb. I started making money that way.

When I finally got into real estate full-time, and I really actually saw myself as a real estate investor, I started flipping houses, and in those first three years I had flipped over 200 houses. A portion of those were wholesale deals, but over 50% were full-blown flips, or new construction projects or land development.

And then I kind of shifted gears and I’ve focused on multifamily. I’m working on a 220 unit apartment building right now in Columbus, Ohio, so I’m excited to get that closed and over the finish line. Real estate has just been an amazing vehicle to create wealth, but it’s also been an amazing community, because I’m a real big believer in personal development and mindset and growth. Being surrounded by so many people who really believe that it’s possible to live a life different than what the norm is and that we can go out and create what we want, it’s been amazing to be surrounded by those kind of folks in this community.

Theo Hicks: Awesome. Thanks for sharing that. I want to ask one quick follow up question on your AirBnB, kind of how you started. You mentioned that you went out and rented out someone else’s house, and then re-rented that out to other people. What made you get into that, and then why did you stop doing that?

Steven Pesavento: What I was doing essentially was doing a master lease. I had the right to sign a lease with the landlord and I had the right to re-lease it to somebody else. Why I started doing that was I actually was dating somebody who lived out of state, and I was traveling to go visit quite often. I had heard about this thing, AirBnB, and it was right when it was just beginning back in 2014/2015. I rented my house one weekend, and actually, I made money after travel costs, after everything by going out of town that weekend. It was this “A-ha!” moment of, “Wow, Holy smokes, I can make money doing this.” It ended up being a vehicle. I used the money I made from AirBnB to fund a startup with a few friends that had just graduated from Stanford, on this on-demand storage startup.

That ended up not working out, but the experience of being able to rent out my home and know that no matter what, I knew that it was possible for me to make a pretty big chunk of money… I was making seven times rent during the busy season, about an average of four times rent on average over the year.

But what shifted or what changed for me was that in the state of Colorado, and specifically in the city of Boulder, they changed the laws, and a lot of cities across the country have made sweeping legislation that stops people from doing AirBnB for this specific type of strategy that I was doing. I just didn’t want to really play in that gray area. After about a year after the regulations changed, and things were becoming more clear, I made the decision to shift gears.

Theo Hicks: Sure, perfect. Okay. So then for your first three years, you focused on flipping after doing the AirBnBs; you did 200 flips. When did you transition into multifamily? Is this 220-unit your first deal?

Steven Pesavento: The 220-unit that I’m working on right now is my first commercial deal. I’ve bought plenty of residential multifamilies over the years and raised tens and tens of millions of dollars for that business. But this is the first deal that I’m working on where I am a managing partner and raising capital. I’m working with some extremely experienced operational partners that have experienced 25,000 plus units of management, they typically own 3,000 units at any given time.

One of the things for me that was really important, and it was the same way that I got started in the single-family space, was going out and finding operational partners that had a track record existing.

My first partner in flipping, he had built hundreds of houses, he had flipped hundreds of houses, and he had lost tens of millions of dollars back in 2008. Having that kind of experience ends up allowing us to move much faster forward and skip a lot of the challenges along the way, which is why we were able to flip so many houses so early on in my career, was because I was able to bring skills that he didn’t have; how do you go find the deals? How do you go raise the capital? How do you go and build the structure to make that a machine? And he knew how to manage the operational side of the business. I’ve essentially done the same in multifamily; I’ve been working at becoming educated for about a year, and about six months ago I made the hard switch to really ramp down my single family business almost completely out of the single family business at this point, and focused 100% of my effort on the commercial side.

Theo Hicks: Before we talk about the 220 deal, I wanted to focus on what you mentioned about finding partners with experience. You’ve already mentioned one characteristic you want to find in an experienced [unintelligible [00:08:52].14] experience, and number two would be complementary skill sets. Is there anything else that people should be looking for when it comes to finding a partner? And then also, what did you do to actually find these people? And then, I guess maybe on that same track, how specifically do you go to Google and look up experienced partners? How do we literally find them? But also, how did you make yourself, or what about you, was attractive to these people?

Steven Pesavento: Love the question. This is phenomenal. I actually just answered a lot of this in Episode 129 on The Investor Mindset, so I highly encourage you guys, head over there, check it out. If you like what I’m talking about here, you’ll probably like that episode where we dive deeper. But essentially, what I was looking for in a partner was somebody who had the track record and was good at what I wasn’t good at, who their unique ability was not the same as mine.

Where I looked was I went to networking events. I went out into the community and I was coming from a place of giving value, of always offering something without asking for something in return. One of my first mentors – I ended up making a deal to create a $10,000 website to allow me to follow her around. It’s a very, very good value delivery ratio there.

The same thing was true here. I built this relationship with this partner at some local events, and I think what really did it for him was that I had the background experience on marketing, about how to communicate and handle sales directly with homeowners, with investors, with people on that front, as well as the hustle, wanting to go out and grind and put this together, and the energy to go and do it.

When you meet somebody, and you get that feeling that you know they’re going to be successful, it’s just a matter of time – it creates this kind of energy. I feel it whenever I go to events with big players there as well, that are on their way up, it’s that feeling of knowing that you can either work with them, or potentially they’re going to be a competitor. Or it’s that feeling of, “Okay, I see this person coming to this event, and they’re continuously growing, they’re making progress.”

When you can bring that kind of energy to a conversation, when you can bring that energy to a relationship, to a partnership, people are attracted to wanting to work with you. That’s what I did to find these partners. Over time, you build those relationships and you start to understand, who do you trust, who trusts you, who do you connect with? You want to find someone that has the same core values as you. I think all of these things are super critical when it comes to partnership.

Theo Hicks: Thank you for sharing that. Something else you mentioned as well was that you raised tens of millions of dollars for your flips. I’m assuming that you’re responsible, or at least partially responsible for raising money for this 220-unit deal. If that’s the case, I’m just curious, how did you find that transition with your investors? They were used to investing passively in fix and flips, which is obviously a different structure than investing in large apartment deals. Were they on board? Did you have to do some convincing? Maybe walk us through that process.

Steven Pesavento: You know, it’s such a good question. For anybody who’s listening who wants to connect, just reach out to me, happy to share any advice on this front or if you’re interested in passive investing, put the same thing out there, you can just find me, Steven Pesavento, on LinkedIn or anywhere else.

But what I did was, I really don’t believe in convincing, right? I really believe in educating. I’m a big believer that you put good information out, you put good vibes out into the world and the right people and the right things are going to come back to you; you kind of create this space for greatness to happen in the middle.

What I did was I was working with these folks, delivering for them over and over again. When you flip 200 houses, you’re going to have some that are losses. When you’re able to say to your investor, “Hey, we wrote a check for $70,000 to sell this house, which means we’ve lost that $70,000; there’s good lessons learned. But guess what, here’s a check for you for 30k or 15k, or 20k”, or whatever it might be, and they’re seeing themselves get paid, it builds a huge level of trust. Because when you take care of your investors, they really believe in what you’re doing.

What I really did was when I had this “A-ha!” moment about commercial when I realized how powerful it could be for building my business, as well as building other people’s financial freedom, that I had to share it with them. I started calling my investors, started letting them know, “Hey, we’re going to be going in this direction, it’s going to be a long-term transition, but once we’re focused there, that’s where the sole focus is going to be.” And because I spent a good solid year building relationships, becoming educated, and really laying the foundation, when I essentially brought up that “Hey, we’ve got this deal,” they already were primed, they already knew about what we were doing, we knew why it was valuable to move this direction. For many of them, they were ready to jump at the opportunity because the structure that we have offers them all of the benefits that they were getting on the note side, but with a lot of the equity benefits that come along when you’re investing in a syndication.

It was really just creating the space and educating folks so that they could then opt-in and say “Hey, yeah, I am interested in joining you on this next deal.”

Theo Hicks: Okay, Steven, what is your best real estate investing advice ever?

Steven Pesavento: You know, Theo, as somebody that is a go-getter and go-giver, just going out there and trying to do as much as I possibly can, the best advice ever is to be patient, is to slow down and to realize that you can accomplish more than you think in five years and less than you think in one. Be willing to double down on the things that you know are important and stay focused, but to be patient that some of the best things take time, and it’s worth it to wait for them.

Theo Hicks: Are you ready for the best ever lightning round?

Steven Pesavento: I sure am.

Theo Hicks: Okay.

Break: [00:15:10] to [00:16:08].

Theo Hicks: Alright, Steven, so I saw behind you had Go-giver books. Obviously, it’s probably one of your best ever books. Besides that, what is the best ever book you’ve recently read?

Steven Pesavento: One of the books that I constantly keep going back to—well, actually, there’s two books I keep going back to. It’s the book Never Split the Difference and  The ONE Thing, and I read The ONE Thing every single year because it’s a baseline for me to be reminded about the focus that’s necessary to succeed, and Never Split the Difference because it’s a way about communicating more effectively. And yes, it’s about negotiation, and it just happens to be that I’ve been fortunate enough to be able to interview both of those authors and The Go-Giver, author, Bob Burg on the podcast.

If you guys haven’t read those, I highly recommend them. They’re books that will change your life for sure.

Theo Hicks: If your business were to collapse today, what would you do next?

Steven Pesavento: I would immediately take a deep breath. I would recognize that I have to accept what’s going on in my life right now, and that, “How are we going to move forward?” The way that I move forward is I would go and find a way to add the most amount of value in the quickest amount of time to somebody or an industry that can afford to pay a lot for it. Finding a way to add so much value that I could make a large windfall of return, and would be able to get right back up on my feet pretty quickly.

Theo Hicks: I guess this next question would probably apply to your fix and flips. But tell us about a time that you lost the most money on a deal. How much did you lose and what lesson did you learn?

Steven Pesavento: Well, there’s going to be some bumps and bruises along the way when you’re focused on appreciation in real estate, when you’re just focused on pushing that value of the price up, which is what you’re doing in flipping.

I bought this large house, it was outside of Raleigh, North Carolina in a town that should have been able to afford this price point; but it was a unique house, it was in a unique area and it required a very specific type of buyer. We bought it thinking we were going to make 100 to 150 grand on it, we thought it was a home run. It was just a list and we would end up rolling in the cash.

Well, after having it sit on the market for about a year, because of some failures in our own systems while doing that many deals at a time, when we actually sold that property, we wrote a check for about 70 grand. It was one of the best days, because there was a huge realization, not only in the power of having multiple streams of income and not just focusing on appreciation, focusing on cash flow and having a hybrid approach, but it was also that feeling of knowing that once you’re able to close something out, sign that away, I wrote that check and obviously that money was gone… But it was such a relief to know that that was off of our plate, and that we could move forward. That was definitely one of the big lessons learned.

Theo Hicks: What is the best ever way you like to give back?

Steven Pesavento: I love directly working with young people through Junior Achievement. I go into classrooms, teaching mindset and entrepreneurship in schools. I believe it’s a big thing, because I think the school system is broken in so many ways. For some folks, just having the opportunity to hear another way of living or to hear that somebody maybe wasn’t the best student or wasn’t always doing the right thing in my youth, but to be able to then take myself and put myself into a successful position, it creates a really cool level of inspiration for these young kids who maybe were thinking there’s no other option for them, but to take some crappy job… But to really be able to go and see, “Hey, it’s possible for me to maybe create my own thing, go find a mentor and go down that path.”

Theo Hicks: And then lastly, what’s the best ever place to reach you?

Steven Pesavento: You can definitely reach us on social media. You can find me Steven.Pesavento on all the platforms, but I really encourage you, if you found this conversation valuable, to definitely subscribe to the podcast, The Investor Mindset. But if you’re a passive investor and you’re looking for more resources, we’ve put together a phenomenal deep dive guide on passive investing, and you can find that at https://action.theinvestormindset.com/passive.

Theo Hicks: Okay, Steven, I really appreciate you coming on the show today and giving us your best ever advice. I guess the main takeaway that I got, and I’m sure our best ever listeners got, was your advice on partnering up with experienced people. You mentioned how you did that for your flipping business, and you’ve also done this for your commercial apartment business you’re beginning to launch.

And you said, obviously, the main benefit of that is being able to scale faster, as well as skip a lot of the mistakes you would make on your own. And then more specifically, you mentioned that you want to find someone who has a strong track record, and is good at what you aren’t good at, has different unique abilities. You mentioned that you were able to find these people at networking events, and that you were offering value to these experienced individuals without asking for anything in return. You gave the example of creating the $10,000 website in order to basically shadow someone. You mentioned that for your business partner for, I believe, of your multifamily business, they really liked that you had experience in marketing, handling the sales process, investors, as well as the hustle.

And then you talked about how best ever listeners can attract those types of experienced people. It has to do with energy and making sure that whenever you’re going to these events, you’re consistently improving. So each time to go there, you’ve done more than you did before, and that is able to attract people towards you.

And you also mentioned that you also want to find people who have the same core values as you. And you also mentioned some advice in transitioning investors from one asset class or one real estate niche to the other. In your case, it was investing in fix and flips to investing in apartments. And you said you don’t believe in convincing, you believe in education, so you focus on educating and making your investors aware of this transition, and how it will benefit them. And this transition for you was about a year, so by the time you actually had a deal, they were primed and ready to go. They knew that they were getting the same benefits and then some by investing in these apartments.

And then lastly, your best ever advice which is to be patient, to slow down, and then realize that you can accomplish more in five years and because more than you think you can in five years in 10 years, and you’ll probably accomplish less than you think you can in one year. So doubling down on what is important to you, but also realizing that the best things take time.

Again, really appreciate you coming on the show and sharing your advice. Best listeners, as always, thank you for listening, have a best ever day and we’ll talk to you tomorrow.

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