JF1057: Wholesaling $4,000,000 a Year, Learn how to Wholesale Development Deals! With Raphael Vargas
After being robbed when he first started at the age of 21, he put his head down and kept working. His hard work paid off with a $30,000 first time wholesale fee! Raphael is not slowing or stopping, his company is doing four to five million dollars in revenue this year, oh and he’s only 25 right now!! Plus Joe and Raphael do some cold call role playing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Raphael Vargas Real Estate Background:
-CEO of Ace Equity Pros, a Collaborative Real Estate Investment and Brokerage Company
-Has produced Millions in revenue and operates in 3 Major Markets.
-DC / Baltimore, MD / Tampa, FL.
-Began real estate investing at age 21 and by age 24 created a $7 figure real estate business
-They have bought and sold over $35 Million Worth of Real Estate in the past 3 years
-Based in Washington, D.C.
-Say hi to him at aceequitypros.com
-Best Ever Book: Traction
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff. With us today, Raphael Vargas. How are you doing, my friend?
Raphael Vargas: Phenomenal, my friend. How are you?
Joe Fairless: I am doing well, nice to have you on the show. A little bit more about Raphael – he is the CEO of Ace Equity Pros. He has produced millions in revenue and operates in three major markets: DC, Baltimore and Tampa, Florida. He began investing at the age of 21 and by the age of 24 created a seven-figure real estate business. His company has bought and sold over 35 million dollars worth of real estate in the past three years. He’s based in Washington DC. You can say hi to him at his company’s website, which is in the show notes. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Raphael Vargas: I am an entrepreneur by trade. Like you said, I started when I was 21, really from just kind of a starting point of literally ground zero, with a heavy background in sales and communications. I’ve been in sales for pretty much my entire life. But as far as real estate, I had no experience whatsoever.
I got introduced to real estate by an individual that just literally told me “Hey, you can flip properties with no money.” I didn’t believe him, so he actually showed me some documentation, some paperwork, and then I believed him. I paid him my entire net worth, which at the time was about $3,000, and he took it and robbed me. But the blessing is — which, by the way, for all the listeners out there, make sure you’re hiring the right individuals and listening to the right individuals that know what they’re talking about.
But the lesson that I learned was just 1) to obviously choose the right individuals to learn from in coaching, and 2) he just implanted that in my mind, and that’s really all I needed to just jump into it. I had no other coaching besides that to get to where I’m at today, other than just the YouTube videos, free podcasts, free information… There’s so much ridiculous free information online out there… It’s crazy to see people in America not striving for success and actually obtaining it… Because this is America, this is the land of the free. We literally have every opportunity to be successful here – financially, spiritually, mentally and physically. It’s really a blessing to live just here in America, first of all.
That’s pretty much my background, that’s how I started – I learned about real estate, and then three and a half, four years later now, I’m 25 years old and we run a pretty successful real estate brokerage [unintelligible [00:04:56].04] in multiple markets, and we are also doing a lot of wholesaling, flipping of contracts, flipping of properties in multiple markets as well, and we have a pretty substantial team that’s dedicated to our success as a company and as a company vision.
Joe Fairless: And I completely agree with you – so many free resources out there… We have access to pretty much everything that we need in order to be successful; you just have to actually put in the work and do some stuff. I was gonna ask you how old you are, because the 21 to 24 year old thing – I was like “I don’t know if he’ll remember back then”, but I think you’re gonna remember… [laughs]
So 21 to 24 years old, you created a seven figure real estate business. Is that a million, five million? What is that figure, and tell us the specifics on what you were doing to generate that.
Raphael Vargas: Sure. This year we’ll probably do close to around 4, 5 million; close to around the end of this year we’re projected to do that. But as far as what I did to actually get to that – it’s just a ridiculous amount of failure. I mean, a ridiculous, ridiculous amount of failure. From when I started and I was 21, I was doing everything from running around knocking on a bunch of doors from homeowners… I didn’t know what I was doing, I didn’t know how to portray myself; I looked like I was 16 when I was 21 still, but regardless, I was just doing everything, and I was just a massive guerilla marketing kind of guy – knocking on doors, cold calling… I got my first deal from cold-calling and it was actually a 1.1 million dollar acquisition, a condo development in DC.
Then I sold it for 1.13, and I made 30k on my first deal. That’s when the light bulb went off, it was interesting. That was my first closed deal. It’s when the light bulb went off and I was like “Wait, I can wholesale houses – why can’t I wholesale development properties? Why can’t I wholesale land acquisitions? Why can’t we wholesale condo conversion projects?” That’s what we started doing here in Washington DC, where we’ve done really large [unintelligible [00:07:04].06] where we just get a contract with a homeowner that doesn’t understand the full potential of their property to its full maximum use.
After studying development in Washington DC, I was able to really target those properties and then acquire those properties from the homeowners for a contract and then resell that to a developer for a high profit margin.
Joe Fairless: Was it just land, in some cases? Or was it someone’s property and then selling it to a developer so they can probably tear it down and then build something much bigger and newer?
Raphael Vargas: Yeah, land and/or properties. In DC specifically there’s almost no land, it’s all property, because it’s a very small and very congested city. But it’d be a row house sitting on a longer lot, where you can bump it back significantly and bump it up, where you can do four condos, three condos, luxury kind of area, that kind of thing.
Joe Fairless: That’s really interesting, because that is taking the typical wholesaling approach and adding an artistic spin to it, because you’re not just doing the wholesaling of a single-family house, but you’re looking at what type of development opportunities are there. You’re looking at it from the developer’s perspective, and you’re seeking out the opportunities that they would be interested in, and then you’re flipping the properties to them.
Raphael Vargas: That’s exactly right.
Joe Fairless: So you mentioned that first deal, the wholesale where you made 30k on it… How did you come up with the idea to look at it from a developer’s standpoint and flip properties to developers?
Raphael Vargas: It was from that very first deal – I analyzed it and then I was really pushing the deal, because I knew financially it made sense. I didn’t have many buyers, but I did have one great buyer relationship from a gentleman, and he was a developer in Dubai; a very wealthy individual, he’s actually the vice-president of Climate Control for the United States, and he’s really close with Richard Branson, things like that. He just really inspired me, and he kind of taught me how to put on my developer lens and hat.
After understanding it from him and selling the first deal to him and successfully closing on that, that’s what made me kind of understand their perspective. Then I just wanted to learn more, and after I closed that deal and a few more single-family deals, I paid one of my developer buddies to spend a day with me and teach me the zoning restrictions, zoning codes, setbacks, frontage on specific condo zoning, FARs – understanding all of that so that I can start teaching our acquisitions team on exactly how to analyze the property once they come across it to its maximum ability. That’s what we did.
Joe Fairless: That’s fascinating. I’m really glad we went this direction on the conversation. What’s FAR stand for?
Raphael Vargas: FAR is floor area ratio, and there’s always an FAR, depending on where you are. For example, if your FAR is three in a specific zoning code, and let’s say your lot size is 1,000 square feet, that means that you can build buildable square footage of 3,000 square feet. So you would multiply your FAR by your lot area, and that’s what you would get for your buildable square footage.
So we would understand that, but before, we’d look at a property and just say “Hey, this property is a single-family asset”, and we’d look at it as a single-family asset and offer a homeowner way lower than what it’s actually worth. Then we’d analyze it and say “Hold on, this is in C2a zoning, where the FAR is 3.5 potentially, where if it’s not a single-family, we can actually develop this where the height restriction is 90 feet, and we can build 10,000 square feet on this, so it’s way more valuable.” That’s how we learned that.
Joe Fairless: How did you get in contact with the Dubai gentleman?
Raphael Vargas: It was actually off of Craigslist. I was doing everything by the book when I first got into real estate. I didn’t close a deal for eight months, but I was the hardest working man I think ever in America. Days I would go not sleeping and not even eating, and I would just be like cold-calling homeowners, reading books, obsessing over this, [unintelligible [00:11:24].08] my brother, who was mentally disabled. I had a special place in my heart for my brother, because he was just really struggling… Just seeing him consistently walking around in circles… I wanted financially to take care of my family to a whole other level, which I’m still striving to do, and what inspires me every day, and my relationship with God, which also inspires me every day as well.
In the beginning, I was just doing everything by the book, and again, it said “Post on Craigslist and look for buyers”, and that’s what I did. He reached out to me, and little did I know, he’s like building hotels in Dubai, and he’s a ridiculously wealthy individual. He was just looking for some houses in DC to place his money, and that’s how I found him. We built a really good relationship to this day.
Joe Fairless: Walk us through the initial interaction and then the subsequent conversations or interactions… He responded to your Craigslist ad, then what happened?
Raphael Vargas: He responded to my Craigslist ad; very nice, humble individual. He just said, “Hey, I’m looking for investment properties. If you have anything, let me know.” It was a very simple e-mail, simple conversation. Then I told him about all of these deals, and he would say “Yeah, that doesn’t work for me. This doesn’t work for me. I’m looking for something bigger, or smaller”, whatever it is. Then we finally came across this deal, and we met and we consistently worked together on this deal, because there were a lot of issues with closing it – tenant issues, condo conversion issues… I was there helping him with those issues as well, trying to get them closed to make sure he felt comfortable. He saw my effort, and we ended up closing the deal. So it was pretty simple, and that’s pretty much how it went.
Joe Fairless: You said your company is doing between 4-5 million this year… What is that? Is that revenue, is that profit, is that something else?
Raphael Vargas: That’s revenue. Revenue as far as wholesale assignment revenue. We don’t do any fix and flips; it’s just too tedious and our goal is to expand and scale this company to closer to around a 100 million dollar company, and it’s very scalable with the model that we have. And not only is it scalable, it’s also very profitable, and at the same time it really serves all kinds of homeowners.
The way that we do so is we have an investment fund – I learned this at the beginning of this year… I started realizing how many leads we’re throwing away consistently; I was just throwing away leads, homeowners that say “Hey, I want 250k” and their property is worth 300k. Us as investors, we can’t do anything with that, but I started realizing — me and my partner Joe, who has helped me throughout this entire process and has been my journey buddy essentially through this… We started realizing and saying “How can we stop throwing these away?” What we did was we started building out a brokerage, an agent model, where we say “Okay, let’s [unintelligible [00:14:20].00] We get these leads and these kinds of people that want this price and need to sell fast; we’re gonna wholesale it, or buy it and resell it on the market, and we’re gonna close and move quickly. That will be the investment model.” And you know what? If that homeowner wants 300k and the ARV is 325k, but it’s in great condition, we’re gonna give that to the agents.
So we custom-built a CRM based upon that, and we wanted to find out ways on how we can actually expand into multiple markets and still be effective, still not lose that touch and still build culture with our people in every single market that we’re in. Because of that, we’ve built a merged business where it was the agent and the investment model. And like I said, the investment model is strictly the one that’s doing between 4-5 million (that we said), but the agent model… Right now under listings we have close to around 32 million since the beginning of this year – 30 million in listings. That’s a whole other side of business that I was throwing away, and we as investors consistently throw away.
My partner and I just became really diligent on building that agent brokerage business out, and leveraging our real estate agents as our outside sales people… And then having a call center team in our offices here in Washington DC that qualifies those leads, sets those appointments, speaks to the homeowners and says “Look, we have options for you. We’re not just some regular company that’s here to lowball you. We’re here to give you options, and depending on what you want, that’s how we serve you”, and that’s exactly what we’ve done.
Now the game is “No lead left behind. No homeowner left behind.” We have an opportunity for every homeowner.
Joe Fairless: I like that. Do you do any lease options?
Raphael Vargas: We don’t, unfortunately.
Joe Fairless: How come? Why do you say “unfortunately”?
Raphael Vargas: Actually, not unfortunately… I did lease options when I first got into real estate, because I was trying to do everything and I hated it; it’s just not for me at the moment. Maybe I haven’t really learned enough about it to see its profitability, and it could definitely be something that’s amazing and profitable, but it just hasn’t been for me just yet.
Joe Fairless: What’s been the biggest challenge creating the brokerage and having the “no lead left behind” business now?
Raphael Vargas: People. You’re only as good as your people are. And leadership. Leadership and people. Everything surrounds around leadership, and I truly believe that to a T. Every day I’m consistently trying to focus on how I can develop myself as a better leader… And my partner Joe – we’re consistently focusing on how we can be better leaders, and not just leaders in business, but spiritual leaders, physical leaders, mental leaders for our people. The more we can develop our people, the more they can be really in tune to the company culture, in to the company vision, the longer terms they’re gonna stay with us and the harder work they’re gonna put forth every single day, day in, day out. That’s been the biggest issue – people.
Now, after taking a lot of different courses… Joe and I have been to courses like Scaling Up, which is a great course for business people, and there’s things like traction coaches, and we have a scaling up coach right now… But the people are everything, and I think that was originally the first biggest issue. We had the wrong people, but that’s changed since then.
Joe Fairless: You said it’s changed since then, so how are you now qualifying people in a way that you weren’t before?
Raphael Vargas: Joe, who handles a lot of the HR stuff, he created a job scorecard, and what we do is just for every position that we’re looking to hire, we really hone in on specifically — there’s two things for somebody to be qualified for a position: are they culturally the right fit? That means “Do they fit those core values in the company?” and then performance-wise, “Are they a high performer? Are they competent skill-wise for the position?” You need to know what are those competencies and skills for each one of those positions, and then again “What is your company culture? What are your core values?” and really understand those, so that you can interpret and understand whether or not the people that you’re interviewing/sitting in front of match core value, match that culture, and also have the competency and skills needed for the position. I hope that makes sense.
Joe Fairless: It does make sense, that’s a great tip. And with “culturally the right fit for the company”, what that forces us to do is self-reflect on “What is our company culture?”, because we have to know that before we can see if someone’s a fit, and it makes us be aware of what we currently have as a culture, and “Is that what we want? and what we wanna bring people into?”
Raphael Vargas: Yes.
Joe Fairless: What is your best real estate investing advice ever?
Raphael Vargas: Wow…
Joe Fairless: You knew it was coming… You knew it was coming at the end of the show, baby! [laughs]
Raphael Vargas: Yeah, yeah… [laughs] Oh, man… I don’t wanna say, because it really is the best advice ever that I’ve ever received; I don’t wanna say it because it’s so effective, but do more cold-calling. That’s my best advice ever. Do more cold-calling, step out in front of homeowners and be different… And do more cold-calling. Contact more homeowners via cold-calling. It’s a way that a lot of investors are not doing, and we significantly scale that in our company to be ridiculously effective.
We still do a lot of different marketing techniques – direct mail, online, things like that, but the best advice I got, which is from Todd Toback (California) was “Do more cold-calling.” That’s what we’re starting to do a lot more of.
Joe Fairless: And where does your team get the phone numbers?
Raphael Vargas: I can’t say exactly who it’s from, but we do skiptrace them. We skiptrace a lot of the data.
Joe Fairless: Okay… And remind me again – what’s Skiptrace?
Raphael Vargas: Skiptrace is like an investigative service where you can input information of who somebody is and their address, and then that company retrieves that information on their best contact information, their best addresses, where that person is located currently if they can’t be found.
Joe Fairless: So do you just do it like by the zip code? Because certainly I don’t think you would do by individual people and then get their information, because that would take forever.
Raphael Vargas: Of course, yeah. By zip code, that’s exactly right. We target the hottest zip codes in all of our markets, whether that’s Baltimore, Tampa and DC, and that’s how we target these people.
Joe Fairless: I just answered the phone, it’s from someone at your call center. What do they say to me?
Raphael Vargas: Hey, good afternoon. Is this Mr. Joe?
Joe Fairless: It is.
Raphael Vargas: Hey, Mr. Joe. This is Raphael with Ace Home Offer; just giving you a quick call about your property on 123 Main Street.
Joe Fairless: Oh, cool. Okay.
Raphael Vargas: Yeah, so we just bought a house right there in that neighborhood, and I just wanted to personally reach out to you to see if you might be interested in an offer on your home. We’d love to make you a fair offer on your home.
Joe Fairless: You know what, Raphael, I usually don’t do this, but I like the way you sound, so absolutely, whatever you want, I’m in. [laughter]
Raphael Vargas: That’s, that’s… I wish we had more of those.
Joe Fairless: [laughs] I got the sense of it though, yeah… What if they say “I’m not interested.”
Raphael Vargas: “No worries, we’ll remove you from the call list.” We scrape their data and not call them again.
Joe Fairless: Got it. Okay, cool. That’s great stuff. Thank you for doing that. Are you ready for the Best Ever Lightning Round?
Raphael Vargas: Sure.
Joe Fairless: Let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: What’s the best ever book you’ve read?
Raphael Vargas: Best ever book I’ve read… I’m gonna be cliché and I’m gonna give you two books. One is definitely for me, it’s the Bible. I use that as my guidance tool [unintelligible [00:23:13].27] the decisions that I have to make consistently. I feel like that’s the best book I’ve ever read. But on a business level, it’s gotta be in the beginning Traction changed my life when it came to business. Traction just ridiculously changed my life, changed our business. So it’s Traction on a business level.
Joe Fairless: Best ever deal you’ve done?
Raphael Vargas: A condo conversion project where we netted $300,000 on an assignment fee and we got it done in 30 days.
Joe Fairless: What’s a mistake you made on a transaction?
Raphael Vargas: Not following up enough, or not being bold enough with homeowners or buyers. Not being bold enough.
Joe Fairless: By “bold” what do you mean?
Raphael Vargas: Bold as far as controlling the conversations. I’ve studied a lot on sales, and everyone in our company studies a lot on sales; controlling a conversation and controlling the transaction is an absolutely necessary part if you wanna actually get a deal closed. So not being bold enough to control the conversation, control the conversation, control the transaction and put your foot down in certain circumstances.
Joe Fairless: That condo conversion project where you made 300k in less than two months – did you wholesale that to a developer?
Raphael Vargas: Yes.
Joe Fairless: What’s the best ever way you like to give back?
Raphael Vargas: Best way I like to give back… For myself it’s giving back what I have – the wisdom that God has given me and the knowledge on how to build yourself as a leader. I feel like that’s my gift to the world at the moment, giving that back.
Joe Fairless: How can the Best Ever listeners get in touch with you?
Raphael Vargas: They can get in touch with me on AceHomeOffer.com. They can reach out to me there, or they can also e-mail me directly at Raphael@AceEquityPros.com. Ace Equity Pros is our wholesale site where you can pick up the best deals in the DC, Baltimore and Tampa market. Ace Home Offer is the company that does the acquisitions with the homeowners.
Joe Fairless: Excellent. Well, thank you for being on the show (holy cow!), talking about your 21 to 25 year old experience in real estate, and how you’ve gotten to where you’re at now… The consistent focus on 1) hard work, 2) self-improvement and 3) being savvy. You’re really savvy, especially in terms of adding the artistic approach to wholesaling, where you’re wholesaling to developers. You used that example towards the end of our conversation with making $300,000 on the condo conversion project in less than two months, and how after you got a couple deals under your belt you sat down, paid a developer buddy of yours to teach you zoning codes, setbacks, frontage, FAR (which I now know stands for floor area ratio), and many other things… And then also how you’ve built your business, the “no lead left behind” approach, and the call center has been a major lead generator for you.
Thanks for being on the show, thanks for telling us about your business, it’s an inspiration. I hope you have a best ever day, and we’ll talk to you soon.
Raphael Vargas: Thank you!
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