GI145: Developing Your Mindset to Become a Successful Investor with Steven Pesavento

Steven Pesavento is a successful real estate investor who has completed over 200 transactions, flipped over 100 homes and raised over $10 million from passive investors. He has been a full-time real estate investor since 2016 and decided to begin his real estate investing career by flipping homes. Buying and flipping became a great business but Steven wanted more. Steven realized that he was not developing a long-term relationship with the customers and they were unlikely to repeat business. People were buying the homes but they often do not sell them for many years, if at all. In the real estate market, there were other opportunities to work with customers and receive repeat business. Commercial real estate including; retail stores and apartments allows the chance to work with these people and build a relationship. A strong team is needed to look for opportunities, purchase them and then ultimately reposition and sell them. Steven points out how important location is. The building needs to be in an ideal location so that people will want to rent it. This will allow income to be generated for years to come. As long as the building is standing, in a good location and in good shape, it will generate income.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Steven Pesavento. He has been a fulltime real estate investor since 2016 and has completed over 200 transactions, renovated nearly 100 houses, raised over $10 million from passive investors and transacted over $70 million in investment real estate. So thank you so much for being on the show, Steven.

Steven:
Hey, super excited to be here. Thanks for having me.

Charles:
So you have a very interesting background. Can you give us your background personally and professionally and prior to getting involved in real estate investing?

Steven:
Yeah, so funny thing I when I was a, yet I wanted to be one of two things. I either wanted to be a chef like Emer Lagosi or I wanted to renovate houses like Bob Vela. And I ended up going directly into management consulting out of school, got the dream job as a business grad and was working fortune 500 companies. But somewhere along the line, I realized that this did didn’t have the passion that people weren’t really in this belief that they could live a better life. Everyone was really living for the weekend. So I went on this journey to start finding really a better way, started working in technology and then eventually made my way to real estate. And what’s so interesting about is I guess, all that HGTV really did finally pay off as I got into real estate and started flipping a, quite a few homes before we eventually moved into commercial and do what we do today.

Charles:
Nice. So let’s let’s know, how did you choose real estate after going through all those different fields? How did you really as you know, choose as your investment vehicle?

Steven:
Yeah, well, I was 17 when I had rich dad port ad. So that idea got put into my head really early. But somewhere along the line, I, I really had some limiting beliefs. I had some things that were holding me back from doing the things that I wanted to do and, and some things that were really preventing me from taking that action, you know, from going out and being able to find that property and create the opportunity to really get started. And so, you know, after really hitting this point of clarity, this point of decision, I decided that it was time to move into real estate. And that was really my, my sole goal at the time was I’m gonna go and create this real estate company, and we’re gonna be able to create great income. And that’s what we did. And through that process, you know, we flipped, you know, over 200 houses.

Steven:
It was a, you know, significant business where we were doing high volume, you know, house buying and flipping. But what I realized along the way was that I was missing from one of those core key goals that I originally set out to, which was to create passive income, to create the ability, to be able to step away from the business and travel the ability to build a, a great team and work with great partners who could execute on our behalf. And although we had a great team of 15 people, I realized that we were serving the wrong customer. We were serving a customer who we only could do one transaction with. We didn’t have an opportunity to build a long term relationship because people only sell their house for 60 to 70 cents on the dollar once. It’s not a continuous repeated transaction.

Steven:
And so I started looking around at real estate at our business at other businesses, and wanna understand how can we evolve, how we grow into something where we’re working with the, the same type of people that we get excited to work with. People who are driven, people who are creating great businesses and people who believe that real estate can do something even more powerful for them to be able to go and live a better life. And that’s what really attracted me to commercial real estate multifamily specifically, but is by actually focusing on this as an investment vehicle, instead of an income vehicle, I was able to completely change the way that our business operates and therefore who we serve. And so today V Finch capital, we work with, you know, high income, high performing you know, professionals who are working in their w two or own a business. And they’re looking to invest in real estate, but they’re looking to do so hands off, they got sick of owning duplexes, or they realized very early on this wasn’t the direction they wanted to go. And we work with investors so they can invest passively and we manage all of the operations and really execute that business plan. And so it’s been a great transition for us. And we talk a lot about this on our show called the investor mindset which everyone can definitely check out if they like what we’re talking about here today.

Charles:
Nice. before we get into passive investing in your current your current business, I wanna kind of, you went around and you just said that you had 15 people that you were flipping these houses. And I guess as I read, you’d flipped over 200 houses, renovated a hundred houses and UN about two and a half years under three years. So tell us about this team you’d put in place because most people that are getting the real estate that are gonna do a flip here, a flip there it’s, part-time, they’re never gonna be able to do the scale, the volume of anywhere near what you’ve done in just two and a half years. So tell us about, like, what kind of systems and teams you set up there, even though it wasn’t passive fully, as you said I mean, obviously you had something in place there to do all those transactions.

Steven:
Yeah. I mean, when you, in order to do that many deals, you’re gonna have to have a team in place. You’re gonna have to have a team that’s going to allow you to focus on each area of the business. And so our main focus, the thing that we were the best at was going out and finding really great deals. And so we had set up a team to market directly to sellers. We had a team for answering phone calls for processing those opportunities, a sales team for going out and meeting and contracting those deals, and then a team for actually going out and renovating. Right, right. We had third party contractors that would do the, the work we had real estate agents that we’d work with all of those third party folks were separate from our core internal team. Wow. However the, the big thing there is really building a system.

Steven:
So we started understanding what are those roles? What are the responsibilities of those roles? How do we manage them? What are the KPIs? And we built this team that was operating in two different states in Minnesota and Raleigh, North Carolina. Nice. So two different partners in two different cities that were executing together under the same V Finch umbrella. And, you know, in that time we were able to grow a pretty significant householding portfolio and we had return great returns to investors, but the thing is, is very limited in its nature. And what’s one of the challenges with flipping houses is that there’s actually some significant risk if there is a change in the economy. Yeah. Specifically because the term of your financing is short term. Now, one of the things we really like about more cash flow investing or longer term investing is that you have a, a longer term if something should change.

Steven:
So rather than a six month or 12 month loan you’re looking at something that’s three years, five years, 10 years, 30 years. And what that does is it gives you the ability to be able to be flexible. And so I remember back in 2018, there was a little shift in interest rates. They went up for the first time in a very long I’m right around Thanksgiving. And I remember a huge freeze in the market. And my business partner had been through 2008 and I had fire walked. His experience, asked him deep questions, felt those emotions, what it was like to go through that. And so I immediately noticed the same thing that he felt, and we quickly sold off a lot of our properties. We, he went the direction that he should have gone in 2008. And it was a big lesson. It was a big reminder that the market can shift and we have to be able to be in a position to be conservative and to really protect that principle, to protect the capital. And that’s one of the things that we really like about these long term investments is when you’re investing for a five year period, if something should happen where the economy changes for one or two years, you still have time to be able to pay that debt. And you still have time to be able to continue to execute that business plan. And so it’s one of the things we like. And one of the reasons we got away from what we were doing,

Charles:
Yeah. I feel within real estate, the longer you own a property the longest longer your business plan and is the less risk you’re gonna have. And especially with longer term debt, but also it it also comes out when you’re acquiring the property, too. If you wanna pay a little bit more for a property, if you’re gonna hold it for longer term, it’s a better property in a better area at the end of the, at five, 10 years down the road, it doesn’t matter if you paid, you know 82 or 86 at the end of the day, it matters that you, you know, you saw the vision of the property, but let’s talk about you making that change into multifamily, into commercial multifamily. How was, what was your first investment? Was it, were you guys active or were you passive in it?

Steven:
Yeah, so our first major investment was in a property located in Denver. Colorado is a about a four, 4.14 and a half million dollar deal. It was a 40 unit deal that we were able to purchase directly from the seller. We have a great operating partner on it. Somebody with, you know, seven plus years of experience in the space, they had the ability to execute over and over again, and we had a long-term relationship. And so we really believe in the idea of diversification and investing with experts. So by investing with this expert, by partnering with them to execute together with us, we were able to go out and, you know, raise all the capital in that syndication and purchase this property. And then this property was a an equity lay. So it was a play focused on how can we grow the equity and the property in the shortest amount of time.

Steven:
It was a three year project. We’re about 12 months into that project. Now when we first got into multifamily, it took quite a long time to find that first deal. We had another deal that we got all the way to the finish line and the seller ended up pulling out. So, you know, eight months worth of work all falling through. But with this property in Denver, what was great about it was that the property hadn’t been renovated in 20 years. And so we were able to go in renovate all of the units and take it from 450 to $500 a month in rent to a proforma of 10, 50 or $1,100 in rent. Now what’s amazing is, you know, a year later rents are much, much higher than that. We’re between 12 and 1400. So needless to say, it’s been a great project. Our investors are really excited about the amount of upside we’ve be able to build, and we may end up exiting that property early. But the thing that, again, back to my early, your point that we really like about is we have the option to be able to hold onto it long term, if we, if we want to.

Charles:
Yeah. Having multiple exit strategies is just a, it’s a great, it’s a great position to be in, especially when you’re in long term financing and long term investment. So what is your let’s go over like what your company’s current investment strategy and criteria is right now, what your, and obviously you’re doing value, add your like what size properties and what markets are you focused on?

Steven:
Yeah. So at Von Finch capital, what we’re really focused on is two strategies. We’ve got a third, but our main two strategy is about, about 20 to 30% of what we do fall into that equity growth strategy. That’s for people who are really interested in grow, rowing their portfolio in a shorter time period, they’re not as focused on cashflow but they like real estate and they like the, the risk profile of real estate that it’s lower risk. And we’re doing with those we’re going in, we’re adding a lot of value. We renovating units and we’re looking to exit those within three years. And so for those types of projects, we’re looking to hit summer between a 17 to a 23, 20 4% IRR or double your money in three years. On the other side of the coin, we’re looking at much longer term projects, typically five to seven years.

Steven:
They happen to be much larger, 200 plus unit buildings. And we’re looking to kind of create cash flow from day one, kind of a six to 8% or higher cash flow. And then a, you know, a 14 to a 17% IR w money in five years. So the difference between those two is one of them creates income and a distribution kind of from month one or, or from year year one or year two, kind of on that earlier phase, but has that backend growth that’s available? The alternative of course, is just focusing only on what that upside piece is gonna be and seeing that that upside at the end of the term. And so we like about this is a great ability to be able to a mix and match. We have investors yeah.

Charles:
Who

Steven:
Like maybe one strategy or they like both, but they’re heavily invested in one. So they’re looking to diversify. And the other way that we really like diversify is by investing in different markets. So we’re invested in Denver. We’re currently seeking properties in Dallas. We have a property in Jacksonville, we’ve a new project in Phoenix. And we’re looking at some projects in Atlanta as well. And so part of our strategy is the ability to invest in different markets in different assets, in different asset classes. And then of course invest with different managers because we’re bringing on local managers, operators, partners, vendors on the ground who have a long track record of experience, and they help us really execute. So we can have that local advantage on every single project that we do.

Charles:
Yeah, that’s a great strategy. And I love the idea of that. You’re partnering with operators in areas that there’s already a footprint that they have. You know, someone has several properties there. They already have all of the contacts. They have a great management company. They have everything they need and you’re kind of plugging into that and you can bring your expertise, you can bring your investors, you can bring everything else that goes with it with your company to the deal. And it’s a win-win for everyone, which obviously is the best way of of going with it. What do you, what do you focus at what’s your role at your firm? Are you focusing more on sourcing deals? Are you focusing more on sourcing capital and handling some asset management on the deals?

Steven:
Yeah, so we really go out, we find really great deals in great markets. We bring capital, we source capital and work with our investor partners to be able to fund these deals. And then we put together the, the team, the operator, the vendors, the managers, all of these pieces for us to be able to execute together. And so that’s really what VA Finch has been focused on. And so personally, one of the things I love doing is going out and educating and teaching and being able to bring people up to speed so they can understand what they want and why they want it. So it makes it easy for them to make that investment decision. Now about 15 to 20% of my time, I focus on high performance coaching. I work with a number of up and coming real estate entrepreneurs, and, you know, other business owners and W2 professionals who are looking to kind of operate that highest level that keeps me really sharp working with folks, helping them execute and be able to do what they’re looking to do.

Steven:
But majority of my time is spent working with passive investors, other successful people, other high performers, and helping them invest passively into real estate. So, you know, we do a lot of education through the investor mindset platform. And the podcast asked you know, since we’re talking about it, we’re talking about education. I would love to be able to share with the audience, this resource we put together. It’s about a 52 page passive investor playbook. It’s a, a deep dive guide talks about due diligence, talks about finding opportunities and operators and the right people to work with. And you guys can grab that if you just head over to investor mindset.com/passive investor mindset.com/passive, and you can download that playbook and get access to it immediately at no cost. And the reason why we like putting something like that together is it really gives people the ability to get up to speed before we start working together to understand really what they’re going after, because if you don’t know what you’re looking for, it makes it really difficult to invest in the right type of product.

Charles:
Interesting. Yeah. Well, thank you so much for that resource. Going back to passive investing and I find with a lot of our passive investors that they’re also active investors usually not on as large of deals that we’re doing. Why do you think when I imagine you have the same, why do you think active investors should also looking to pass investing maybe to broaden their horizons and to broaden markets? Or is there any other reasons why you feel it’s a great investment strategy?

Steven:
The, the reason why I think investing in real estate is so powerful is because it’s a hard asset, it’s it hedges against inflation. And you have the ability if you invest passively to invest in different markets with different operators and really be able to leverage their experience, their network, their access to capital and their time, so that you can create the same kind of returns you would or better if you were gonna go own and manage your own real estate. The true is most people are not very good at operating real estate most landlords. They might succeed out of luck or out of the market going in the right direction, but it’s a very challenging thing, and it just takes a lot of time. And so for folks that have been through that, they understand the benefit and, and power of past investing.

Steven:
And for those who haven’t most can see that, oh, by investing with this team, as long as they do what they say they’re gonna do, as long as they have that track record, then I’m really gonna be able to benefit from the upside. You know, and, and that’s one of the real big keys, right? So we talk about this with a lot of my high performance clients, but one of the key five success principles is this idea of seeing challenges as opportunities and really good operators. When you have that experience, you’re able to see the challenge in that property as an opportunity. And that challenge is where the profit is really created. It’s where the upside is created. By being able to go look at a project and say, Hey, well, this hasn’t been purchased since 1975, there’s 46 years of, of existing.

Steven:
You know, it hasn’t been renovated in a very long time. Now, some people look at that and say, Hey, well, that’s a lot of work. I’m not interested in that. And other people would say, Hey, well, that is money. That’s actually where we make our, that’s actually how we create the return. And so the best operators will have that view, the highest performers have that view. And so that’s one of the reasons why it’s really beneficial for you to choose the right people to invest with. So they can have that, that outlook to understand, well, Hey, where is the best things gonna be coming from for, for everybody who is gonna be investing in that opportunity?

Charles:
Yeah. Yeah. I definitely agree with that. Especially if you’re trying to do something, you hit a roadblock, there’s always another way of how you can achieve success with that project. You might not just have the right business plan or thinking at that point, but breakdown. Cause I saw those, the five key principles, you mentioned it for successful investing on your website. Can you break down the other four point principles?

Steven:
Yeah. So the there’s five different success principles that we’ve realized after interviewing, you know, hundreds of very successful investors studying some of the top entrepreneurs and really getting down to the depth of where and what is the difference between people who are operating at the highest level. So the other big key piece of these high performers is that they’re very focused, meaning they have that narrow focus on what that strategy is that they’re doing. And so for anyone who’s listening, that’s an active operator or somebody who’s looking to actively manage opportunities. One of the biggest mistakes that I see people make is I’ll meet them at an vent or a conference or a meetup, or I’ll talk with them on a coaching session. And they’ll tell me that they’re interested in flipping houses and that they want to get into multifamily. And eventually they, they wanna invest passively and they’re looking to buy mobile, home parks and storage and they start listing off all of these different options.

Steven:
Options are phenomenal, but the key thing that makes people successful is making a decision. And so when you make that decision to focus in on one strategy on one key area, focus, it ends up leading you to having that best success. And the same is true for passive investors for all y’all who are working in a position where you’re making a great income, understanding what your or goal is, is gonna allow you to focus in on doing the thing that’s gonna get you there. And for many people, what that is, is make great money in your, in your position, in your company and your job, and then invest that passively so that someone else can do all of the work while you get a focus on your family and, and making money, instead of trying to learn a new skill, you’re able to go down that a path, but if you’re not focused, you might try to do everything. And when you do everything, you do nothing really well.

Charles:
I, I see a lot with people that will reach out that wanna be active investors, and they’re in a very lucrative position, lucrative job. And if they stayed in it for another five years how they were for the last five years, they probably could really, you know, double, triple their income. And if you’re just, Hey, invest this money passively as you’re doing it, it’s a much better outcome for you. You’re gonna reinvent the whole wheel again, you’re starting in a whole new profession. Like you’re getting outta college again. It’s crazy. But I mean, some people just, I think the thing is a lot of people dislike their W2 sometimes so much that they’re, they want to do that and they feel it’s the best route. Whereas like you said, investing money from your high income job is is a great route to doing it. So when you’re talking to other investors, what are common mistakes that you you see other real estate investors make?

Steven:
I think of the, the other biggest mistakes that people make is they’re not really clear on what they want and why they want it. Now, it seems really simple to share some of these principles and these ideas and the truth is they’re simple, but most people aren’t doing them. And so if you’re hearing this for the up teeth time, maybe the 10th or 11th or hundred time a just ask yourself, not have I heard this before, but am I doing this actively right now? And could I do it better? And so the answer is usually yes, I could do it better. And what I say, what do you want and why do you want it? The reason that’s so important is because if you get really clear on your goal, if you get really clear on what you’re going after, if you get really clear, clear on why that’s important, it makes it much simpler to be able to make key decisions and to be able to either stay in that challenge that you’re dealing with or to decide to change directions.

Steven:
And so when I’m talking with up and coming passive investors, if they’re not clear on what they’re looking for, why they’re investing, what kind of return profile, what their risk profile is what they’re comfortable with and what they’re not comfortable with, it makes it really difficult for them to be able to make a decision to go down that path. The same is true for anybody in their career. And so what you really want to sit down and, and go over multiple times is continuously get more clear. You know, I was working with one of my clients today, you know, a very successful developer making really great money huge net worth, but just unsatisfied with the direction. And what we were able to discover was one of the key reasons was there is a lack of going through the process of, of actually getting all of the ideas out of your head and then prioritizing them and putting them down onto paper so that, you know, Hey, well, this is actually what’s most important.

Steven:
And so it’s one of the biggest things that I recommend. We talk a little bit more about that in this this great resource we put together called the five success principles of a successful investor. If y’all want that, you can grab that@investormindset.com slash success. And what is really most important is just go through the process of getting clear and then take some action on it. You know, it doesn’t have to be perfect, but each time you go through it, just ask yourself those questions. Like, could I be more clear? Could I be more specific? And I promise you, it’s gonna really unleash a lot of your potential.

Charles:
Oh, all great, great information there. So what do you think are the main factors for you that have contributed to your success?

Steven:
I mean, these are the same, it’s the same things that I’m talking about and that’s, what’s so powerful is, you know, I’ve gone out and got great mentors and great coaches. I put myself in peer groups around other people who are very successful, who are earning great income, who have put themselves into a really powerful, smart position to be able to learn and grow together. And by being surrounded by other people who are succeeding at a high level, what that up doing for me is it allowed me to change my mindset. It allowed me to change my belief and mindset is simply the thoughts and beliefs you have that end up leading to the actions you take and therefore the outcomes you experience. And when we can change those thoughts and belief, we can actually change the way that we show up and we can change the outcomes and what we’re actually experiencing through about our life.

Steven:
So it’s really simple and it’s really powerful. And one of the best ways to do that of course, is working with a coach, is working with somebody who can see what you can’t see, who can ask those hard questions, who can hold you accountable. And it’s great to be able to surround yourself by other people or operating a high level who can also do the same. So these are the things that helped me succeed, and I know each and every one of you who’ve gone down that path. You’ve probably seen some benefit from it. But for those who haven’t, you know, I’d say step into it, step into it and, and leverage some other outside perspectives to allow you to be able to really thrive.

Charles:
Yeah. And I mentor told me years back change your peer group, change your net worth. And it’s I mean, it’s, it’s definitely true. I, it takes a little time obviously, as you’re doing it, but once you do it, and then you look back on where you came from I mean, you can definitely see the difference. So how can our listeners learn more about you and your business, Steven?

Steven:
Yeah. So one of the best places to go is investor mindset.com. You can grab the past investor playbook, you can grab the five success principles you can learn about investing with V Finch capital and working with us on future opportunities in any of those markets we talked about. And if you’re looking on reaching out to me directly, I recommend you. You jump on to your favorite social media, LinkedIn, Facebook Instagram, and shoot me a direct message. And just let me know, Hey, I listen to the show and I wanted to reach out and either, or member of my team will actually reach out to you and put you in touch to be able to share some of the things that would help you move forward in the most effective way.

Charles:
Well, thanks so much for coming on today. Steven, looking forward to connecting with you in the near future and have a great rest of your week.

Steven:
Awesome. Thank you.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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About Steven Pesavento

Steven Pesavento is a real estate entrepreneur and Managing Partner of VonFinch Capital. Investing full time since 2016, he’s completed over 200 transactions, renovated nearly 100 houses and transacted over $70,000,000 in investment real estate. Steven’s investors have entrusted him with over $11 million of investor capital, delivering solid consistent returns.

A former Management Consultant for some of the Fortune 500’s top companies, he brings his years of process improvement, marketing and sales experiences to every project.

Host of the top ranked podcast the Investor Mindset he interviews some of the smartest minds & authors like Chris Voss – Never Split The Difference, Jay Papasan – One Thing, Joe Fairless – Best Ever Podcast, Mark Manson – Subtle Art of Not Giving A F and many others.

When Steven isn’t focused on serving his passive investing or real estate entrepreneur clients, he enjoys running, Snowboarding, Salsa Dancing, Kiteboarding, and taking on new travel adventures.

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