Posted on: November 12, 2018

Today’s guest started his real estate journey just like most people—he started out totally clueless. Fast-forward 14 years and he’s now one of the most successful real estate investors in the country.

If there’s one real estate story many people can relate to, it’s Steve Cavanaugh’s. Steve once worked in a job he didn’t like, worked more hours than he’s supposed to, and was living pay check to pay check.

When he realised he wanted to be financially free and real estate is the avenue that can help him achieve said objective, he started totally clueless. However, what he lacked in knowledge he made up for in grit, resourcefulness, and determination.

If you need motivation, inspiration, and a little nudge to start your real estate journey, this episode is exactly what you need to hear!

The Deal:

  • Following the advice of his mentor, Steve sent mails to a particular neighbourhood.
  • A seller called him and told him about 2 lots he’d like to sell.
  • With the help and guidance of his mentor, he walked away with more than $100K for the service and value he provided. Definitely a huge compensation for someone who’s still trying to find his way around!

RESOURCES:

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Episode Transcription

Tom Krol: Guys, welcome to another amazing episode of Wholesaling Inc. I’m your host, Tom Krol, America’s number one wholesaling real estate coach. If you don’t know what wholesaling is, wholesaling real estate is the fastest way to make a fortune in a short amount of time with no experience, no nothing, it is grit, determination, perseverance, and you can do it. I’ve got an excellent guest on the phone today, someone who has done just that, who started off with a 36K annual salary, and is now doing phenomenally well. You’re going to hear all about it. So without further ado, Steve Cavanaugh. Steve, are you there?

Steve C.: I’m here Tom. Thanks for having me.

Tom Krol: Absolutely. Thank you for coming on the show. You guys have been a big fantasy for a long time. He’s well known throughout the real estate industry. Everybody talks about him, and I finally got a chance to meet him locally at a South Florida event with Lex Levinrad we had a blast. And then I got to talk to him a few more times after that and I begged him to come on the show and he said yes. So he’s going to give us some really good insight today and I’m really, really looking forward to it. He’s an expert and somebody who came from not really knowing anything at all about real estate and then just crushing it. So I’m excited to pick his brain. You know we’re going to hold his feet to the fire, and gets some details and stuff that you can use today to implement today to take action today and let’s get a deal. So let’s get started. Steve, how are you doing?

Steve C.: Man! I’m great Tom, thank you so much for having me on your show.

Tom Krol: Absolutely. Thank you for being here, man. It’s such an honor and a pleasure. I’m so excited. I love this business, and I love talking to people like you who are good and honest and genuine and wholesome and know what they’re doing. So tell us, first of all, before we deep dive the details here on what you do, tell us how did you get started, because I know a lot of listeners they’re interested, they’re going to want to get started in real estate. Tell us a little bit more about your journey.

Steve C.: Sure, man. Sure. So I went to college as a communication arts and a music performance major, which has nothing to do with business or real estate, right?

Tom Krol: Do you play any instrument?

Steve C.: I do man, I play the guitar like crazy man. I did end up minoring in jazz guitar performance, so I still play it to this day, I love it.

Tom Krol: That’s pretty awesome.

Steve C.: Yeah man yeah, do you?

Tom Krol: No, nothing? Not at all. Don’t ask me to sing cause I can’t.

Steve C.: All right.

Tom Krol: That’s good.

Steve C.: So, so yeah, so I did that and then I graduated. No idea what I wanted to do. I’m sure many of your listeners can relate, you graduate college, got the world in front of you, but just no idea what you’re going to end up doing. So I just took the first opportunity that came along, which was an IT job, a database engineer.
And then I also had some customer service that I did with that job as well. All of which ended up being beneficial for me, but took that right out of college and I immediately fell into that nine to five, which really ultimately was more like eight to six or seven, you know, because they always want you to work longer and all that stuff. I wore a pager, I was on call, you know, all that stuff. And I was commuting into work one hour in the morning and back home one hour in the evening and just really just got to just into that grind, started to live paycheck to paycheck, all that sort of thing. And did that for four years. And during sometime in the middle of all of that, I came to a realization and I’m just so blessed that this realization was put on my heart, put on my mind that, I am dying behind the wheel of this car, commuting into this job.
Like I am wasting my life, that I’ve been given commuting to this job, that I really don’t like working for people that I, you know, quite frankly, didn’t really want to work for doing something that I didn’t want to do, supporting a mission that I didn’t really believe. So I’m really thankful that I came up with the realization that if I was going to be free, then it was going to be up to me to make my own income and the capitalist society that we live in.

Tom Krol: Right. Beautiful. Such a good realization. I love that. I wish it would’ve happened to me earlier than 33 but I’m glad it happened. God bless the broken road, right?

Steve C.: Yeah man.

Tom Krol: Good stuff.

Steve C.: So thankfully it kind of occurred to me at the time. So one of the things that I was doing is I was interested, I became interested almost immediately in business and one of the blessings with an IT job, especially in the industry that I was in, was there was some downtime every now and then and you had a computer in front of you.
So you know, if you had an extra five or 10 minutes throughout the workday, you could kind of pop on websites and stuff like that. Now, this was back in the early 2000s so the internet was still coming of age and one of the top websites at the time was flippinghomes.com, which no longer exists, but at the time was one of the biggest websites that’s out there. And I went on the website and I started just devouring everything that was on the forum, which was the heart of that website.

Tom Krol: What year is this?

Steve C.: So long story short, yes. So this was in early 2000 sometimes I would probably say around 2002 or so.

Tom Krol: Okay.

Steve C.: And at that time, that website was owned by a guy named Steve Cook. Of course, he since sold the website that he had there, but he happened to live in Baltimore. Now I was working in Southern Maryland, which is where I was born and raised, and ultimately took this job starting out.
And I didn’t realize that he was so close. So I took this as an opportunity to go to one of his boot camps. Now I want to stop there and just illustrate a point here. I was nervous to spend some money to go on that first event. Okay. And quite frankly, I didn’t have it. I was living paycheck to paycheck. I did all the things you’re not supposed to do. I was putting car payments on credit cards, everything, just no financial education, no where with all whatsoever.
So I didn’t have the money to go to this first seminar, but just by some stroke of luck, I was able to scrounge into the cushions and pick up the change and pull together enough, which probably at the time Tom was probably like 1300 bucks or something like that, that I was able to pull together to go to the seminar and I let fear hold me back and all that stuff, you know? But I finally went, and I finally did it and I’ll fast forward a very long story short. I went, I studied everything and then I just went home, and I just applied it just like he taught. I didn’t change stuff, I didn’t do anything like that. I just did exactly what he taught. And I was able to crank out my first deal as a result. And then fast forward a year or so, I ended up doing my first big deal, which was a deal that we could talk about if you’d like, where I wholesaled two lots to a local builder and made over $100,000 on one of those first few deals I did.

Tom Krol: So that is phenomenal. I love the whole story. It’s everyone’s story, right? It’s full of fear, and being resourceful, right? And getting things done and going onto that first meeting. First of all, by the way, just a shout out to Steve Cook, phenomenal individual. If anyone on this phone is not familiar with Life on Air, certainly a organization worth checking out. He’s just a good, decent human being that you can count on for really sound advice. So phenomenal, phenomenal and certainly sounds like he changed your life. I know he has for many and, and that’s, that’s really good to hear.
So, but I do want to ask you that first deal, the first first deal that you did. Can you tell us a little bit about that and how you did it? Because I know for a lot of people on this phone, they want to do their first deal, but they don’t have the resources. They don’t have the knowledge. How important was the mentorship? Tell me, if there were two or three things that you could take away from that, all of that exposure you got in that initial deal, what are some of the takeaways from that?

Steve C.: Well, I will tell you about the very first deal that I did because you’re asking, but it’s not the sexy one. I mean, the fun one to talk about is the lot flip that I did that made over $100,000.

Tom Krol: Oh yeah.

Steve C.: But if you want, the very first deal I did, we can very quickly go over it. It was very simple. I just came home, I did some marketing direct mail to a neighborhood I knew I wanted to buy in. I thought at the time, Tom, and I’m not saying there’s anything wrong with the strategy, if folks want to do [inaudible 00:08:46] for me and, and what I advise folks starting out, I don’t recommend go on this path, but I thought I wanted to buy rental property starting out. So I did some direct mail to this neighborhood. Long story short, I did get a gentleman who called me and wanted to sell his house.
I went ahead, I put it under contract, I did buy it and you know, my cashflow on the thing was like 200 bucks a month or something. Now looking back, it wasn’t a great deal. I paid pretty much top of the market at that point in time. But I really didn’t know any better and I was just willing to fail forward into it. I eventually sold that property, made some money on it, and I did rent that property out for seven or eight years and my cashflow grew as the rents grew in the neighborhood. But I would not recommend that as a strategy starting out.

Tom Krol: I love it that you did that. I think that shows that it’s all about getting results, right? So the guys and girls who get the most results win, and that may not have been where you wanted to be, but I mean phenomenal. Phenomenal. Well let me ask you a question, cause you said that things were a little bit tough, right? How did you actually buy that deal if you didn’t have the money? Was it just because the creditors were really loose at that time or was it loose lending practices or did you borrow money from someone or how did that work?

Steve C.: Yeah, it was a little bit of all of the above, but really ultimately at that time you were able to do what was the 80/20 loan, which is 80% first mortgage and then a 20% second mortgage all put together by the broker who brokered that loan to that transaction. So I didn’t really have to bring anything, but I mean maybe I brought some closing costs in and I had known that that was coming, so maybe I had saved some of that up. I actually don’t recall. It was, that was many years ago now.

Tom Krol: I love it. I think that’s cool. Right? So that’s a good first deal brother. You certainly know. I’m impressed with it. So let’s talk about the sexy deal on the lots. Now, this was vacant land?

Steve C.: Yeah. This was actually two lots that were in an existing subdivision. So they had already been subdivided. However, what they did not have is they did not have what’s called a perk test that had been done on the properties. And perk test is very simple. All it is is where they dig a hole in the ground and pour some water down it. And then they set a timer to see how fast the water percolates down the soil. And what that ultimately determines is whether or not you’re going to be able to put a septic system on the property, which ultimately determines whether or not you’re actually going to be able to build a house on that property. And so we had done some direct mail marketing again to this neighborhood, on the advice of a local mentor that I had linked up with, and she knew that builders, this is as things were ramping up. So this was around 2004, 2005 things were really hot.

Tom Krol: So let me just ask you, first of all, I just want to know just cause there might be people listening who want to do what you did. First of all, where did you find the list? And it’s specifically not only where did you find the list, but how did you get the direct mail? Because mostly a lot of mentors are out there saying take vacant land and commercial off of your..So did you just accidentally come across the vacant land or were you mailing to it specifically?

Steve C.: No, but again, this is, I had a local mentor who was a friend of a friend who, she was older woman. She happened to own a loan broker and a real estate brokerage and she had been in this part of the County her entire life. Knew everybody, knew everything. She had had her hand in everything. If it was real estate and it moved, she touched it. So her name is Irene, and again friend of a friend and older woman willing to impart her kind of mentorship onto a younger group of us.
It was three of us actually. It started out going to her for lunch. We were just meeting at her place for 15 minutes on our lunch break. So that’s really all you need to get started. And so she said, “Look guys, the builders are going into this neighborhood. So what I would recommend is that you do a direct mail campaign into this neighborhood for the owners of these lots. Because they are going up in value and the builders can’t buy enough of them right now. It would be a great opportunity for you to flip some of those to these builders that know what they’re doing in there”.
I just, I didn’t know any better. So she sat us down and this was really before they had all the tax rolls, the records and everything on the internet. Sat us down with the actual tax assessor map and book, and we had magnifying glasses and everything to go through line by line, baby. Oh yes.

Tom Krol: Oh brother, I love it. That is great. I love it. Very cool.

Steve C.: So that’s what we did and we just, we created our own spreadsheet basically of the folks that we were going to mail to and then we printed out the letters, signed them all, and the hand addressed our own envelopes and sent them out. I mean it was very manual that time.

Tom Krol: That is so awesome. Okay. Cool. Very, very cool. The mail went out, I guess it directly went to your cell phone at that time. Right? Or did you go to voicemail?

Steve C.: That’s right. Directly to my cell phone. I didn’t have anything set up. This was back in 2004 timeframe, 2005 timeframe. So it wasn’t as slick and automated as we can kind of have everything now. And again, I wasn’t sophisticated. I was a brand new investor. I didn’t know anything about any of that stuff. Nobody was doing that stuff back then. So at least not that I knew of anyway. So finally, fast forward a number of months and an older gentleman called and said, “Hey, I kept this letter that you had sent out and I have a couple lots that I’d like to sell”.
At that time it was, this was back of my mind. I was still looking for my first real good rehab deal cause that’s what I had figured that I really wanted to do was rehab a home. I had kind of forgotten about it, as in back of my mind, we only did that one mailing Tom, we didn’t follow up and do subsequent mailings and all that stuff that we can do nowadays. Total stroke of luck, right? So I said, “Okay, you know, you’ve got two lots there. What did you want to get for them basically?” And he said, “Well I’d like to get $32,500 for them”. Now I had done research or I kind of had a general feeling in that area and I knew that those lots in that area were going for around $100,000 a piece. One, one hundred five kind of somewhere in there. Right? So when he told me that he would take $32,500 for them, I almost dropped the phone, right.

Tom Krol: I want it. Yes, exactly.

Steve C.: [crosstalk 00:14:30] So I tried to compose myself as best as I could and I said, “Okay, let me please take down your information and I’ll call you right back”. And I tried to catch my breath. So I immediately called my mentor Irene, and I told her, “Hey, you know, this guy wants to sell me his lots for a $32,500 a piece”. And she just says, she goes like this Tom, she goes, “You better buy them!”

Tom Krol: Oh man, that’s awesome!

Steve C.: She is like yelling at me through the phone, you know?

Tom Krol: Right.

Steve C.: And so immediately, all the fear, everything comes to the forefront. And I’m like, “But with what? I’ve got like $3,000 in a checking account, I’m living paycheck to paycheck…” And she cut me off. She said, “Stop”. She just told me, she said, “Just get them under contract and we’ll figure out the rest”. So I said, “Well, I don’t have paperwork. I don’t have a contract. I don’t know how to do it”. She said, “Stop”. She said, “Can you call the seller back and can you call a meeting at my office where the three parties will meet? I will have the paperwork prepared. We will sit down and we’ll work it out”. I said, “Yes, I can do that”.

Tom Krol: Awesome.

Steve C.: So that’s what we did. We met there on a Saturday and we wrote up the contracts contingent, which means it’s subject to, the passing of a perk test and it just so happened that we were in the right time. You have to be the right time of year to do the perk test when the ground’s real wet, like around like March or so every year and so just happen man, that that was like coming up.
We were able to get on the schedule and, because I didn’t have any money, at that time, I pulled one of my friends into the deal and had him put down the money to be able to afford the perk tests. He put up the money for that. I gave him a cut of the deal. Anyway. Long story short, my woman Irene, my mentor Irene, she picked up the phone. She called one of her builders that she knew and she was able to get them, we were able to negotiate a price of $95,000 per lot to sell to them contingent on the passing perks. Four months later we closed that deal. The perks pass. We closed that deal. At that time we could do what was known as a dry closing, which is where we didn’t have to bring the A to B funds to buy the property. So we were able to buy the lots using the end buyer’s money and a check dropped out in between those closings for one $101,363.50.

Tom Krol: Wow. That, hold on, hold on, hold on (bell ringing). You know, I mean, it’s incredible because people over-complicate. I don’t know if you find this as a coach and a mentor yourself. I mean, but people over complicate this brother. They overcomplicated it. I think that you are more likely to do a deal when you know nothing. The less, you know, you know, the saying that says, “The more you know…”. I want to change it, I want our new logo to be “The less, you know…”

Steve C.: Man, that is so true.

Tom Krol: Yeah, it’s, I’m telling you brother, it’s so key you guys, I mean, that story is so prevalent. It’s so poignant because it’s exactly what happens. That is exactly the origin of, I don’t know anything. I don’t have a contract. I don’t know what I’m doing. I don’t have a plan for follow-up and I’m just going to go out there and in my spare time with grit and determination and perseverance, I’m going to go and do a deal and that is phenomenal. And vacant land, I’ll tell you, I learned a lot from Jack Bosch on vacant land because vacant land is where it’s at. Sometimes there are some great, great deals. I love doing houses, but you know, I know some people who do, Joe McCall just started doing something. He’s doing well, Jack and Mark, the other guy there from the land course, but I think of Mark’s last name right now. But yeah, that’s, that’s awesome. Man. I love it. I love it. That’s really, really, really cool. So that’s a great story. That’s a lot of money.

Steve C.: Yeah, man. Well it was, and you know what I did is I took that money and I invested in my first rehab deal and that deal netted over $60,000 on that first rehab deal. So I just basically took it as a sign from God that this is the business that I need to be involved in. And I set the plans in place to leave that job and transition out of that job into a full time real estate investor. And you know, that’s what I’ve been doing now for the past 14 years.

Tom Krol: Yeah, that’s awesome. So what are you doing these days? I mean, tell us a little bit more about, I know you have, first of all, a local group in Baltimore.

Steve C.: Southern Maryland.

Tom Krol: Southern Maryland, I’m sorry. Okay. So first of all, the people who are in Maryland who are listening, I know we have a ton of rhinos, Tim [inaudible 00:18:38] and Josh Nicodemus, and there’s a whole bunch of people out in your area, Nielsen, Martine Jackson, how can they join and, and spend time with you and is that like a REIA or how does that work?

Steve C.: Yeah, it is. It’s the Southern Maryland Real Estate Investors Group and we primarily cater to Charles, St. Mary’s and Calvert counties in Maryland, which is again in the Southern part of Maryland, but they could certainly link up with us. We are on the web at S. O. M. B. R. E. I. G, which is an acronym for Southern Maryland Real Estate Investors Group. But really the easiest thing to do is just look me up on Facebook and I can point them in the right direction.

Tom Krol: And that’s Steve Cavanaugh. Okay. Can you spell your last name for us?

Steve C.: Sure, my last name is C. a. v. a. n. a. u. g. h.

Tom Krol: That’s awesome. Now do you have a business up there where you do real estate in Maryland still?

Steve C.: Yeah man, absolutely.

Tom Krol: And you are in Florida, right?

Steve C.: That’s right. I live full time. I’m in West Palm beach area in South Florida.

Tom Krol: So, first of all I’m going to definitely, we are definitely going to have a lunch. There’s no doubt about it cause I will leave 45 minutes North of you. But you know the ultimate destination that all of our listeners want to get to is where you’re at, where you have a business that truly runs without you. I mean you’re not even physically in the location.

Steve C.: That’s correct.

Tom Krol: Can you give the listeners who are kind of, they’re already making $50,000, $80,000 a month or more and they want to now take it to the next level. What would you say to those people? What are the like to one, two, three, four big things that you could say, “Hey, this is how I was able to automate scale”. Is there a resource, is there a tactic, a strategy? How do you live in Florida and have a business that runs without you in Maryland?

Steve C.: Man, the biggest thing that’s paid the biggest dividends for me has been to work with quality people. You’ve got to identify and work with people that you can trust and that trust you. And then I’ll tell you, man, I am loyal to a fault man. If I like you and you like me, I’m going to be extremely loyal to you. And I’ve just been very loyal to my people throughout the years, man, and it’s just paid dividends for me.

Tom Krol: Steve, I love that answer. I couldn’t agree more. Most of my people who work with me are family and friends who have known before. So I totally agree. I’m a big fan of loyalty and I think you’re spot on, I think that’s the beginning of success and delegation, right? It all comes down to producing. I think that’s the key. What Steve was really saying is you produce a simple process that produces a consistent result and you can delegate it to somebody who you can trust and that’s the key. So I love it. How about a resource on like books, any book that you read that helped or anything like that or a course?

Steve C.: One of the, one of the biggest things you mentioned it earlier is Life and Air. I mean Steve Cook has been, I mean really like an older brother to me. He’s been such a great resource throughout my entire career and I continue to be mentored by Steve. So everybody should read his book, “Life and Air”. I think one of the big unwritten truths in most successful people is that they have a vision, not only for the business, but really in particular for their life. And then they create the business that fits the lifestyle. So for me, I want it to be semi-retired in South Florida on the beach by age 40 and that’s what I did. But I only did it that way because I had a vision in place that allowed me to build a business that allowed me to support that lifestyle and to live that lifestyle first and foremost. So I would say vision is most important. And Tom, that trickles down also to the folks that work for you and with you.

Tom Krol: Right? Right. I love it. You guys check out “Life on Air”, check out Steve Cook, check out Steve Cavenaugh semi-retired in South Florida with a business that runs without him in Maryland. You don’t get much better than that. So Steve, I love it man. What’s next? What’s the next plan here?

Steve C.: Well, I am at the stage of my career right now, Tom, where I’m looking into some larger passive type of investments, particularly, I like self storage. So I have some LOIs out there and I’m currently working with folks on different parts of the country to effectuate that. But that is what I am excited about real estate wise. We still at any point in time have around 16 or so flips going on. Then I have a mentoring group that is still rocking in Southern Maryland and I love all those people as if they’re members of my family. Between all those businesses we do hard money loans also in Southern Maryland, you know and stuff like that. So between all those things, I have plenty going on man. But the blessing is is that I’m employing some really good people and they all love it too.

Tom Krol: Let me say this, when you come out with your self storage course, you call me first. I want to be your first affiliate to launch into this group because I know it will be good and sound and wholesome and genuine, so that’s awesome. And guys, LOI is…

Steve C.: Letter of intent. In the commercial world.

Tom Krol: Letter of intent. There you go. See, I don’t even know. That’s perfect.

Steve C.: In the commercial world, it’s the beginning of a contract.

Tom Krol: I love it. So, so yeah, we have a lot of people. I know self storage is one of those ones. It’s like mobile homes that keeps coming up in our forums all the time. So when you are ready to start teaching that and you’re looking for a few mentees to bring on to learn the business and help expand yours, you should come to this tribe of rhinos and we will give you some really good hearted people all over the country who are ready to go on that adventure with you. For sure.

Steve C.: Hey man, that sounds great. Thank you so much Tom.

Tom Krol: I’m going to hold you to it. Steve. Thank you for being here today. I know you’re busy. Well you’re not that busy yet, but I love it. I love it. You’re partially retired, so I am going to reach out right after this call and we are going to definitely book a lunch. Man, I’m looking forward to spending some time with you.

Steve C.: Sounds great. Likewise. Always a pleasure.

Tom Krol: God bless. Thanks again, Steve.

Steve C.: You too man.

Tom Krol: Pleasure. Talk to you soon.

Steve C.: Take care. Bye. Bye.

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