To be successful in aggressive markets and generate more profits, you need to focus and have thick skin. Take it from our guest this episode, Marcelo Valdez, an engineer based in San Diego, California who decided to shift into doing wholesaling full-time. Now, he has made more in the first 4 months of this year than he made the entire year when COVID hit!
In today’s episode, Marcelo joins Brent Daniels on the show to walk us through his journey into real estate investing and how his business got through rough patches. He also shares insights about an amazing deal that helped turn this year into his most profitable one yet. Buckle up and learn more from our guests and be prepared to generate your own profits.
How To Generate MORE Profits Doing LESS DEALS In A Hyper Competitive Market With Marcelo Valdez
To be successful in aggressive markets, you need to really focus and have thick skin. Take it from Marcelo Valdez. He’s an engineer based in San Diego, California who decided to shift into doing wholesaling full-time. Now, he has made more in the first 4 months of this year than he made the entire year when COVID hit!
This is exciting because there is a lot of talk and opinions on whether or not you can be successful in the hottest markets in the country. The interview that I’m going to have on the show is going to shake up what you’re thinking about going into some of these bigger markets and making an impact, but it comes with a caution warning. You need to have extremely thick skin, be focused and be able to get through the time where things are a little bit rough to get to that beautiful and productive spot in your business. It is my pleasure to bring from San Diego, California, Marcelo Valdez, to the show.
Brent, how are you doing?
This is a long time coming. You and I have had a relationship for years. I have seen the evolution of your business, some of the successes that you’ve had putting together big deals and some of the, “Is this going to work in this market? Should I think about going somewhere else?” All of these natural things that you and I have had a conversation about, but you stuck it out. Marcelo has already made more in the first four months of 2021 than he made the entire 2020. He is off and running. He is on a rocket ship. Marcelo, how do you do business in these aggressive markets like San Diego?
Thick skin is a big part of it. It becomes cliché, but every day, hammering it out and consistency like you hear about. I know I went to school. There was a lacrosse team. They had some cool sayings on their shirts. I like one of them that said, “Navy Lax,” and then on the back, it said, “Consistency is the key.” That’s a lot of it. You guys talk about and hear it all the time. It’s doing that and being willing to grind through some tough times. It is a tough market.
Things don’t happen quickly, but stay with it every single day.
The bad news is you’re not going to do 100 deals in a year. That’s not going to happen in this market, but if you do it right, you’re going to have solid paydays. Which do you want, go out and get the bigger deals or a bunch of smaller deals? I’ve decided I’m going, as they say, grow where I’ve been planted. I’m going to do San Diego and learn how to make the market work. We might only do when we’re going crazy 2 or 3 deals a month, but at $50,000 a deal, then we’re going to do well.
$70,000 a deal is your average, right?
Yeah. There was a couple of deals that blew it out on the one extreme and then it had one day it was a lot smaller. I expect that we’ll probably end up trending more towards that $50,000 number as volume goes on during the year. So far, just because of a couple of big numbers, it’s small volume, but it ends up making a real impact.
I like small volume. You know as well as I do because we’ve had this conversation so many times over the years. It’s what you’re netting on these deals, how much does it cost per deal, how do you bring down that cost so that you can keep more of that spread and how do you do it so that it’s consistent. With my business here in Phoenix, we’re averaging $42,000 a deal, but we’re doing one a week. When people go, “How do you do ten deals a month?” I’m like, “I don’t care about ten deals a month. I care about the bottom line income that I’m getting from this business.” That’s what I’m looking at. We’re going to go into your team here, Marcelo. You don’t need a huge team, a ton of overhead and to have this elaborate business that has a lot of slippages when it comes to costs. You can run this efficiently. Tell us about your business. Is it 3 or 4 people? What have you got?
It’s myself and my wife here in San Diego so far still. In 2020, I was going to hire an acquisitions manager and then COVID hit. Around February 2020, we were doing well, it seemed like, and then the shutdowns came. The following six months were tough and I said, “Forget about that.” I run a home office. I’m not going to have another person coming to my house. I was going to get an office away. That all blew up. I said, “I’m going to tighten my belt. I’m going to do it. I’m just going to continue being an acquisitions manager,” and I’m even doing it in 2021. I have three phone prospectors and one of them I’ve converted into an elite manager.
I’ve been doing this for long enough now. We have about 500 leads in our database. Even a whole chunk that I set aside for realtor referrals in the future, I was like, “Holy cow.” Prices have gone up so much. Whatever was crazy in 2020 is completely a great deal now. We’re using that as well, going back through that. There’s my wife and myself here. Over COVID, we were doing both. In the military, they call it a hot rack, where one person sleeps in a bunk and then the other person gets down. We were down to one car. I was driving in the mornings and she was driving in the afternoon. We were doing 6, 7 or 8 hours a day of driving for dollars. She’s still doing driving for dollars and worked our disposition side.
It’s a small team. It’s a good group of prospectors and ourselves. We’ve added one prospect or I’m going to add another. Everything is logical and methodical. We’re not going to go crazy. We’re going to keep leading with revenue and adding onto our team throughout the year and our marketing spends little by little but in a manageable way. The volume towards the beginning of 2021, I had three open escrows and life was a little bit crazy. I wasn’t used to it. It doesn’t sound like it’s a lot. For me, I’ve never had more than two open at any time. With three escrows, I was going nuts.
Why is it that people shy away or stay away from these bigger markets? Is it because there are bigger companies that can outspend you and there’s a ton of marketing? Is it overall, property owners understand that they can ask whatever they want for the properties? Is it competition from people that are out there door knocking or calling in the market? What is it that makes it a brawl to get deals in San Diego?
It’s all of it. I sent out postcards. I was looking for my own house, so I sent it out to a couple of zip codes around looking. I hadn’t gotten enough from my prospecting. The amount of people that you get are calling you back and cursing you out. The comments are, “I get five of these a week. What is it about you, people?” There’s a lot of competition out there. You’re not going to do as much volume. I’ve gone two whole months without doing a deal. There’s only a certain kind of personality that can go that long without income. You have to be able to ride out those moments. It can be stressful.
You wrote those out. I remember having that conversation. I was driving in a neighborhood. I pulled over and we talked for a good half hour about it. Cleaning up the process a little bit, making sure that your leads are coming in and everything was squeezed and then finally, that big one hit. You were able to outlast it and then it kept going and building. Now, you’re off to the best year of your business. That’s phenomenal. You’ve got $430,000 closed already, things cooking and 500 leads in your pipeline. Let’s crack open this egg and find out more about you and your story. Why did you get into real estate investing and wholesaling?
I have always been fascinated by real estate. I have an Engineering degree by background. I love building. I even went out and got my contractor’s license, which was a whole other story. I built some big $4 million or $5 million homes in La Jolla. That is ten times more stressful than real estate investing. I got out of that quickly. I had worked many years at a very large corporation here in San Diego. I didn’t want to travel anymore. The way I was traveling, I earned over 3 million miles. It was great while it happened, but my daughter was born and I said, “I’m done with this.” I already had properties and have been doing some stuff. I had some investments. I said, “I’m going to do this full-time.”
Years ago, it was easier to do, but as time went on, I was like, “I’m going to have to go off-market to find properties,” because I could see the way things were going, but I hadn’t heard of wholesaling. One day, I heard Todd Toback and Tom Krol in that podcast and I was like, “What is this stuff?” I learned more about it and eased my way into it. I wished I had not eased my way into it and gone the whole hog. I did do that. I don’t consider myself a wholesaler. I consider myself very much a real estate investor. Some things are going to be assigned. Other things, we’ll decide to purchase and fix and flip.
The goal is you always talk about the buy and hold. I have several properties here in San Diego. I do want to buy more, but they’re expensive. You got to be creative and find owner financing or seller financing. You have to be on a real A-game in this market. It took me a while. I joined TTP. Like you say, “Do 1,000 conversations,” and I spent three months calling and almost nothing. One day, I got a voicemail. The name matches the name on Mojo. I went ahead and left a voicemail. The lady called me back and said, “I can’t believe you know that I’m selling. How did you know?”
To make a long story short, we finally did get that deal done. She hired an agent and I thought, “Oh no, an agent,” but I worked through him. They hadn’t listed it yet and it was a $50,000 deal. After that, it was off to the races. It was up and down for a while, even still. They weren’t coming every week or even every month, but they kept coming and we stayed tough through it all. Now, we have a much more predictable business. I know what my numbers are, what an actual real seller sounds like and somebody who is a tire kicker. It takes a while to get there.
You’re going to see it and I’m sure that you’re already doing it. Going back into your database and any of these markets experiencing a high explosive appreciation, old or dead leads, the ones that they wanted too much or a Zillow price at that time, we’re doing a lot of those deals. It’s exciting. You go back in and you’re refreshing them. These are free. All of a sudden, you’re netting so much because you’ve already paid for these. Some of these are getting resurrected. It is a beautiful and wonderful way to get some extra deals.
The bad news is you’re not going to do 100 deals in a year, but if you do it right, you’re going to have a solid payday.
Anybody out there that has been doing it for a little while in these high appreciation markets, you need to go in and aggressively attack those dead leads and see what happens there. I had the best month ever because of dead leads. Somebody wanted a retail value from years ago and now it’s so much different. We were able to give them what they wanted and it worked out. You touched on driving for dollars. Is that the only thing you go after? If somebody is living in a city like Seattle, Chicago, Austin, Miami, New York or some of these other big-time cities, where should they be targeting so that they’re not wasting their time? It’s much different than most markets.
I’m going to throw something a little different than some people have heard. I would look much more towards opportunities for value-add because that’s where you can get the big numbers from.
You’re a contractor. What does a value-add mean to a ten-year-old?
It’s any property where you can either add square footage or units. For my own house, I have very specific criteria and I want to be able to put an income-producing unit on my property. You can do that here in California. A lot of these markets are desperate to get additional units and housing. If you can find a way to meet that need, you’re going to have to find a different buyer pool too. You got to do little extra work. There are people out there that are going to pay more money for properties where you can add value like that, either adding square footage to your 2-bedroom, 1-bath, which people typically want at least a 3:2 or even more importantly, where you can find some way to put extra units on the property.
How do you discover if that’s an opportunity? Are you looking for bigger lots with smaller properties on them? Are you looking in specific areas that you see that it’s already happening that people are starting to do that and getting ridiculous prices for it? How do you know if it’s a value-add potential?
I’m looking more into what I call the Metro San Diego. In San Diego, there is San Diego County. There are different parts to it. We’ve done driving for dollars. That’s an important one, too. I’m focusing a lot on Metro San Diego, which is super expensive. This is not a cheap area, but you can sell something out that sells for $700,000, $800,000 or $900,000 a square foot, and construction is $200 a square foot or rehab is $90 a square foot. It makes a lot of sense for a lot of buyers. Anybody might be wholesaling too, but end-user buyers as well. That’s one for people to look for, but it’s not as easy. You got to learn, get up a learning curve and know your market.
If you want to do a fix-and-flip in San Diego, you’re getting these properties at retail value or a little bit less. The real move is you want to make the real money and the six figures in those markets. You got to add value. It costs you $200 to do it. You got to go through permitting. It’s going to take you 6 to 9 months, but on the flip side, you’re selling that thing for $7,000 or $8,000 a square foot. That’s bananas. I remember you showing me a property that I looked at and I was like, “That is the deal of the century.” It was right by the water. It was a teeny house on a teeny lot. I don’t know how much you made on it, but I was like, “I wanted to buy it.”
That was when I called you on. I was like, “Should I push this out to more buyers?” I already had one buyer who made $113,000 on it. The funny thing is that guy closed on it, cleaned it up, put it on MLS and made another $100,000.
That was incredible and a great deal. You got it done and it was good. Now, you’re in a position where you can take those things down, buy those and do something cool with them. Let’s get back to where to target because I know that you’ve done some interesting things with vacant lots as well. A lot of people sleep on vacant lots because they don’t understand the economics behind it and don’t know how to look at the value of these things. You’re locking these things up, putting it out there and it’s working.
I haven’t done as much only because, in this particular market, people have gotten so savvy. I made money where I’ve purchased a house and it had an adjacent lot, but it was all under one assessor’s parcel number. I went to the county and got a separate assessor’s parcel number for the separate lot and sold it. Nowadays, you can’t get away with any of that stuff. Everybody knows. They’re like, “My lot is you can build so many units on it.” It’s a little harder now. We still get them, but it’s a lot tighter. In more emerging markets, that might be a good play. You can still do it. I just have not focused as much as I was, mainly because of the volume. There’s a limited amount of lot. I have so many hours in a day. It’s worth doing, but in a hot market like this, it’s going to be like the dessert on top. You’re going to get 1 or 2 of them a year. You’re not going to do a lot of them.
How aggressive are you going after multifamily in San Diego?
I go after it. It’s a tough one, too. There are ways to add value. We had one that we lost out on. Some of the people that I’ve reached out to called me back later and said, “Is that available?” I said, “No.” It fell through. It was one deal that didn’t work out for me. The thing is, it was multifamily, but they had more space to build onto. I kept telling people, “You can build on here. You can add two more units.” It was two triplexes together in a lot and I said, “You can add more on here.” People weren’t seeing it and then 90 days later, they’re like, “Is that deal still available?” I was like, “No, you blew it.” People are a lot savvier to that now. It seems like everything happens so fast in this market. If you can find that, then that’s another play. Even with multifamily, you got to look for value-add on top of the fact that it’s an income-producing property.
Are you doing driving for dollars because if you can pull a list on a computer, it has been pretty beaten up?
These people have gotten mail since 1953. People have been going after these properties since they were discovered. People have roomfuls of direct mail. I’m sure radio, TV ads and there’s Zillow going after these. Everybody is going after these properties. If you can buy a list by clicking on it and filtering it through something like PropStream, then there are going to be a lot of people going after that. You’re driving out there. Are you using an app for it?
I’m using DealMachine.
If you guys are driving for dollars, DealMachine does all the work for you. Make sure you use the coupon code TTP. It is the biggest discount for the RHINO Tribe that they give. You can check that out. Let’s break down this deal. I want that big one. You know what I’m talking about.
I was going to add one other thing that I’ve learned through all of this is the follow-up and you hear that a lot. The longest one so far is we’re an escrow on a deal. We first contacted her in 2018 when I was still starting. That’s another thing. In this market, I find that it takes a ton of follow-up. You got to be able to survive long enough to get enough in the pipeline so that you can pull those deals 9, 12 or 18 months later.
You got to be able to survive long enough for the timeline of these leads to match up with you and your business and then it all starts coming together. All the ingredients are together and you start putting together, as Marcelo is showing us, an extremely profitable year. Let’s break down that big deal. I’m not going to give any hints as to how big it was. Let’s talk about it.
This was a lead from driving for dollars in a nice neighborhood, one that I would love to find a place in myself. I had called the gentleman. When I first spoke to him, he had another thing. He was working on selling a property out in the Palm Springs area. He said, “Not this year because of taxes, but stay in touch and follow up.” I followed up. He had been using it as a storage facility. It was a 550-square foot, 1-bedroom, 1-bath house. When I finally got in there, you couldn’t walk anywhere. It wasn’t so much that he was a hoarder. It’s that he used it for storage.
He finally came around after about six months. He said, “Now, I’m good. At the beginning of the year, come meet me.” I met with him. It wasn’t much of a process. Sometimes they’re easy. Sometimes it takes a lot of negotiating. We finally reached an agreement on a price. It was $300,890. He agreed. We virtually shook hands. I signed the deal. It was very straight. I knew that it was a good deal, but I didn’t know how good because it was too out of whack. I went to my private money lender and said, “I want to take this one down because I know it’s a good deal.”
It was 1-bedroom, 1-bath. It’s not a 1,000-square foot lot. There’s no off-street parking and garage. It’s insane how small it was. He said, “We don’t even lend on something like that because it’s a big X factor. We can’t even find comps.” I talked to my wife and said, “We can buy this and rehab it.” She said, “Let’s put it out to our buyers and see what happens.” The wife is always right. We did that and I was shocked. People kept bidding it up. I put it out at $389,000. To get to the end of the story, the highest bid was $454,000.
Give or take some change here, but it’s over $150,000 that you made on that deal. Did you get that from calling him?
We called him. It was one of my prospectors and there was no indication it was a hot deal. He said, “I’m thinking of selling but not until next year. Stay in touch,” and so we did. I knew it was from my driving for dollars list, an amazing neighborhood and the property needed a lot of work, so we stayed in touch.
One call, serious follow-up, $153,000 and some change. That is life-changing for anybody. When you do a deal like that, are you like, “Now, I got to do a $200,000 deal?”
Each time I do a larger deal, I set the bar a little higher. I’m like, “I got to figure out how to beat that one.” The other thing I did was I called up my accountant. My CPA was like, “I think I need to set some money aside.” It’s a good problem to have. It does mentally set you for the next one.
For anybody that is starting out in a big or little market, give them some advice on staying in the saddle and connected to their goals. Maybe they’re in a rut or they haven’t had the success that they expected in their first week or month or three months. Give them some advice on how to get through that.
Being realistic in the beginning is super important. It’s setting yourself up. Some people get a deal quickly. Set a realistic goal of 90 or 120 days or more and saying, “I’m going to stick with this until sometime far off in the future.” Don’t think it’s going to happen quickly, but then stay with it for 1 or 2 hours every single day.
You need to look more towards opportunities for value add, because that’s where you can get the big numbers from.
How do people get a hold of you? How can they reach out if they want to give you a high-five, taking grants or work with you? Maybe they’ve got some deals that they need help selling in San Diego. Do you have an email?
Call or text me on my cell phone, (858) 204-1337.
If you are in the area and you would like to squad up and connect with Marcelo, make sure that you reach out to him. I’m thrilled. We talked for a long time and then you have this success this fast. I’m pumped and excited to cheerlead you and see what turns out in your business. You better push it over seven figures. If you take your foot off the gas, I’m going to be pissed.
We’re not doing that. I also want to say thanks to you and appreciation because there were a couple of times where there’s like, “Am I doing the right thing here?” It’s cool to be able to pick up the phone and call you and you’re like, “You’re doing good. Keep at it, tweak this and do a little bit of that.” Not only the TTP course but the cheerleading I appreciate because that helped during some times of self-doubt.
You are on a rocket ship. It’s exciting to watch it. Keep me posted on that. Anybody out there that’s interested in joining the most proactive group in real estate investing, it is the TTP family and TTP program, go to WholesalingInc.com/TTP. Check out what it’s all about. Check out the testimonials. If it feels good in your gut, sign up for a strategy call. I look forward to working with you personally. Marcelo, thank you so much for being on here. What an incredible inspiration, especially in a difficult market like San Diego. You gave us an incredible blueprint of anybody that’s in those bigger markets. If they want to stay homegrown, there is your blueprint. Get after it. As I sign off, I always encourage you to talk to people. Until next time, guys. I love you.
About Brent Bowers
Brent Bowers, is an investor and coach with a focus on buying and selling vacant land. As an Army Officer with over 8 years of service, Brent was spending a great deal of time away from his family, and he knew he needed to make some changes in order to be more present with his wife and children. In a short period of time, Brent was able to expand his business, hire a team, and (most importantly) spend quality time with his family while still working hard and helping others. While Brent invests in many different types of real estate, his favorite investment strategy deals with buying and selling vacant land, and he enjoys sharing his expertise in this area with his coaching clients. Brent chooses to live his life based on Bob Burg’s quote, “Your influence is determined by how abundantly you place other people’s interests first.” He is passionate about helping other people find success in real estate investing, particularly in land investments.