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Flipping Real Estate with The Bigger Pockets Business Podcast’s J Scott

March 3, 2020

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J. Scott is the Host of “The BiggerPockets Business Podcast.”

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Welcome to The Thoughtful Entrepreneur Show. I'm Josh Elledge, Founder and CEO of UpMyInfluence.com. We turn entrepreneurs into media celebrities, grow their authority, and help them build partnerships with top influencers. We believe that every person has a unique message that can positively impact the world. stick around to the end of the show, where I'll reveal how you can be our next guest on one of the fastest growing daily inspiration podcasts on the planet in 15 to 20 minutes. Let's go.

With us right now we have the one the only J Scott from The BiggerPockets Business Podcast. And J, of course you have a lot of notoriety as well with your company. ScottBuilt, thank you so much for joining us on the thoughtful

entrepreneur. Oh, my pleasure. So glad to be here. Thanks, Josh.

First off, I have to say thank you so much. It was truly one of the greatest honors of my my History of doing what I do in being invited to be on the bigger pockets business podcast. And so that was a couple of few months ago if you go back and subscribe right now because I can tell you that listening to Jay and Carol guys are like professional broadcasters you know, we are very very well

thank you we're only about 25 episodes in so we have a whole lot to learn but it's great. It was great interviewing you. I mean yeah, when you interview somebody that makes it easy for us. Yeah, we look good because because you guys make us look good.

Ah, I you know, I have one of those strings on my back with little ring and you basically could pull it and then I've done you know, I just go right through it.

I've noticed that people that are used to being on the other side of the microphone that are used to hosting a podcast make the best guests because they just make it so easy. accent Yeah, for sure.

Well, alright, so there you go. There's there's the standard you need to hit so So, J, kind of starting off, talk about how you got into starting ScottBuilt, you're Partner and Co-Founder of ScottBuilt.

Yeah, so my wife and I are co founders partners. We've been partners in the real estate business and all of our investments for about 11 years now. We met back in 2006. And Silicon Valley, we were both in the tech world. I was working at Microsoft. She was at eBay. We were both doing the the working 80 hours a week she was traveling literally three and a half weeks a month. I was traveling two weeks a month. And so we realized that once we decided to get married, it's just there was no way that was going to be sustainable. We couldn't start a family and raise a family with both of us working the way we were. So in 2008, spring of 2008, we decided to get married. It was a five minute conversation where we decided, hey, we need to just leave our jobs. We need to go start something else where we can put family first lifestyle first. So we picked up we moved to Atlanta in summer of 2008 Which those that were paying attention back then was the the height or the bottom of the the the big recession, real estate market had gotten absolutely crushed, we moved to Atlanta, which is probably one of the worst hit cities in the country. But somehow and and now it's a long story, that doesn't really matter. But somehow we fell into real estate, we ended up deciding to flip a couple houses. While we were waiting to figure out what we wanted that next business to be. And after flipping couple houses, we realize what we say we're pretty good at this. And we've actually figured out how to navigate this tough market. So after three or four or five houses, we said, well, maybe this is going to be our next venture. So we kind of devoted our lives full time or a bit our professional lives full time to real estate starting in 2008. And here we are 11 years later, we've done about 500 transactions done about three. What we've done about 300 flips we've done rentals multifamily notes, mobile homes, lending syndications, a little bit of everything.

That's amazing. So how did you not screw it up? And those first, that very first one that you did or second one or third one did you? Did you spend a lot of time just being a student and just studying and analyzing everything? Obviously you took action at some point.

So that's a big presumption that we didn't screw up.


didn't screw up bad enough, they get stopped. It was a that way.

Yeah. And so what was your business plan at the beginning? Like, how are you going to grow this thing?

Well, I always have joke and it's actually there's probably more it's more serious than joking. We were very lucky that we bought our first three houses in the first two weeks that we started. Because had we not done that had we bought our first house and waited to see how that went before we bought any more. We'd likely never would have bought number two or three or 50 or 100. Because that first house was a big learning experience for us. We we made essentially every mistake in the book we overpaid for the property. we underestimated the repair costs. we underestimated the amount of time it would take to sell the house We overestimated the amount we could sell the property for. At the end of the day, we listed the property too high, it didn't sell. We ended up renting it, we put it in the lease purchase buyer, two and a half years later, they left the place in the middle of the night trashed. So we did a second rehab two and a half years later. And finally, after three years, we eventually sold that first property. Now, luckily, we had done about 50 6070 properties in the meantime. So we knew what we were doing. By the time we did that second rehab, the market helped us a little bit things were a little bit better. But the fact that we had always been tremendously conservative, I'm a very conservative person when it comes to investments in numbers. The fact that we were tremendously conservative, we were able to make all of those mistakes pretty much every mistake you can imagine on that first deal, and we walked away with a profit a very small profit was about 1200 dollars, but profit nonetheless.

So you say you're fairly conservative yet I think that there's some people wouldn't When they hear that you did three properties in two weeks, that sounds like okay, I can't even identify with that kind of activity.

That was probably the biggest risk we've taken in this business. Starting out with three properties before we really had a business model before we really knew what we were doing. But when I say conservative, I mean, I, I spent a long time figuring out how to analyze deals, how to look at the numbers. I've always been somebody I've managed businesses back in the corporate world. So for me the the numbers and understanding the business model and understanding the analysis of the investment. That was that's what I'm good at. So luckily, we we were, we were more accurate on our numbers for the second and third property. But again, we weren't so far off on the first property that even though it took a long time, we were able to make all those mistakes and we still walked away with a small profit. So so I kind of I tell anybody that's getting into any type of investing, but especially real estate. It's hard Hard to lose a lot of money, you have to make a lot of mistakes to lose a lot of money. And as long as you're fairly conservative, you should be able to walk away from that first project, even if you make a lot of mistakes with a little bit of a profit or worst case, breakeven. So there's not as much risk in real estate as a lot of people think.

So flipping real estate, how accessible Do you think that this is to the average person?

Certainly, things have gotten tougher over the last 10 years. We're at the point in the economic cycle here, this interview for anybody that might be watching it months or years in the future, we're in the fall of 2019. The economic cycle is certainly we're nearing a peak or we're at a peak. Some would say we might even be a little bit over the peak. But things are a lot tougher than they were a few years ago. But what I always like to say is when it comes to real estate, there's never a perfect time to buy. It's either going to be easy to buy and difficult to sell, or it's going to be difficult to buy an easy to sell back when we started in 2000 Nate, it was easy to buy, we could literally throw a dart at the MLS, and whatever it hit was probably going to be a really, really cheap deal, it's probably gonna be a great deal. But the difficulty was on reselling it, there weren't a lot of buyers out there, the buyers couldn't get financing. So selling was the difficult port part. Here we are in 2019, and sellings. Easy. Basically, you put it out there, and you're going to have 10 offers in the first weekend, but the buying parts difficult. So at any point in the in the market cycle, you're going to find it's either going to be difficult to buy, or it's going to be difficult to sell. So you just have to get really good at both sides of the equation, you have to get really good at the marketing on the sale on the on the purchase side, finding deals, being able to market for deals, and you have to get really good at the marketing and sales on the backend. And if you can do both of those things, wherever we are in the market cycle, you should be okay.

What if we're just kind of, as you say, kind of over the precipice, and what if we start going into crashing down, but it's a process that might take 612 18 months, you know, for, you know, the market continue to fall like that is it kinda was like, well, this is where we can maybe take a little time off because if you buy something now, you're going to lose money on it. If you don't hustle on that deal and get that out the door. What would you do in in that kind of an economic situation?

Yeah, I have a lot of these discussions today. That's, that's the big question. And what I would suggest for anybody that isn't experienced in flipping houses, sitting on the sidelines, taking the next couple months, couple years, however long it takes before we actually see that downturn in the correction. Take that time and use it as an opportunity to learn uses an opportunity to read to study to follow other investors, and be prepared when the market is more cooperative for flipping houses. Now, for those that have flipped houses in the past that may have a little bit more experience. There are certainly things that we can be doing at this point in the market cycle. So the things that we're doing in our business and we're still flipping some of the things that we're doing one we're keeping projects quick like You said it can take 369 12 months to complete a deal. We're not doing any of the projects that would typically take six, nine or 12 months anymore. We're not doing any new construction or new developments. We're not doing any projects that require long lead times for permits, we're not doing things that are like adding square footage or adding a second floor. We're basically focused on those deals that we can be in and out of in three months. So that way, if the market does start to turn, hopefully, it's not a crash in a short period of time. Hopefully it's a more linear or more gradated downturn. And so by the time we're out of deal or ready to get out of a deal, we haven't lost all of our profit. Yeah, yeah. And then the other thing I tell people is 2008 was probably the worst market we're likely to see for a while. Certainly could be worse, but I like to use 2008 as kind of a benchmark for Worst case scenario. So what I tell people is look at what happened in your area back in 2008. And assume that your worst case scenario in 2019, or 2020. So in we've done a lot of flips in Maryland, and in Maryland, on average, market dropped about 16%, the real estate market in the areas where we're flipping in Maryland dropped about 16% back in 2008. So what I like to tell people is if you're flipping in that market, make sure that your profit margins are at least 16%. Now you go through that if we see the worst case scenario, that the 2008 scenario, we basically wipe away all our profit, but we don't necessarily go negative on our deals.

Yeah. Now Orlando, on the other hand, I believe a little bit more than 16%

We are very conservative in Florida, Florida. The biggest thing to get hit during a downturn is tourists tourism. So any tourism areas if you're in San Diego or Las Vegas, or Orlando or other parts of Florida, you're very susceptible to to getting hit hard during a downturn. So I tell people in those areas, be Much, much more conservative or now's a good time to be sitting on the sidelines.

Nice, nice. Okay. So you and Carol are doing a lot of properties and then at some point, you decide you know, maybe we should help others with this maybe we should educate other people with this maybe we should put our learnings into a book that sort of thing. Explain what gave you the audacity to think that you could now become an expert.

Yeah, so I it's funny, I I don't think of myself as an expert, or at least I did. But I've always loved teaching. And I in back in 2008, about three months before we bought our first property, maybe six months before we bought our first property. I started a blog called 123 flip comm where I decided I was going to chronicle my first project or my first projects, basically the nitty gritty details like down to the penny videos, pictures, architecture. drawings so that people that were interested in potentially flipping houses could learn from all the mistakes we were making learn from the hopefully the some of the successes we're having could follow along was basically an accountability item. For me, it was something that, hey, people are seeing me say, I'm going to go flip a house. And it forces me to actually do it because I'm writing a blog every day and people are relying on me to keep the forward momentum going. So I ended up chronicling over the next couple years, my first 50 deals. And each of these deals literally down to the penny, pictures, videos, successes, failures. Every day, I would write one or two blog posts and it was quite an undertaking, but I love it because it was an opportunity for me to analyze my business to analyze my deals to figure out what we were doing right what we were doing wrong. And what I found was between 2008 and 2012, I got a very large readership for that blog, and people were very appreciative of all the information we're sharing because back then a lot of house flippers didn't want to go into their nitty gritty fine. Actual details. They just kind of want to gloss over things. And so we weren't scared to share our mistakes. And you know, and and all the things we were doing wrong and all the things we were learning. So I was getting a ridiculous amount of email, phone calls, requests to go to lunch to grab coffee. I'm a tremendous introvert. And people hear me on the podcast or meet me in places and I do a good job of trying to hide that. But it's really hard for me to take phone calls and do lunches and I my wife is great at that Carol's fantastic at that. But it's hard for me to talk to strangers. So in 2012, Carol suggested so you have all this information. People want all this information in nice organized fashion. Instead of going to lunch and talk to people on the phone. Why don't you write a book and so you can tell people here's the information and it was never a money making opportunity for me. It was never Hey, I can I'm an expert. I want to be an author. I want to be a recognized expert in this field. It was really I just want people to stop calling me and asking me to go to lunch. So in 2012, I wrote a book, one of the chapters ended up being really, really long. So that ended up being a second book. So in 2012, I wrote two books, I released that at the beginning of 2013. And things just kind of blew up. And people love the books. And I'm now on my fifth book, we've sold over 200,000 copies. Three of them had been bestsellers on Amazon. And so it was, it really was it was accidental. I never intended to try and be an authority or an expert. But one of the things I found is, is that just by sharing information, just by trying to give back as much as I can, I've had a lot of attention come to me as well. So it's been a good one way street.

So for someone who's got Amazon open right now, what are the titles of those books?

Yeah, so the book one flipping houses was my I guess, seminal work if you want to call it that. It sounds funny to call it that, but the book on flipping houses is probably what I'm best known for. The book on estimating rehab costs the book on negotiating real estate which I wrote with my wife Carol and my most recent book which is all about economic cycles and how to invest in throughout the the economic cycle called recession proof real estate investing.

And I would imagine on your website you've got an index to all of those. What is that website

yeah JScott.com. So I finally splurged earlier this year and I've been trying to negotiate the purchase of JScott.com just the letter JScott.com for about two years now. And finally, I just splurged and bought it so you can find out more about me in the books there.

Yeah, well, congratulations on owning your name. Thank you. With the process of writing a book, did that come easy for you?

I'm an engineer by trade and by education and by mindset. So I write very much like an engineer and I think that's one of the things that a lot of people appreciate. And again, I don't take credit for it because I couldn't Do it differently if I wanted to. But I think a lot of people appreciate that a lot of real estate books out there written as as more narratives, their stories, their motivational. I have trouble writing in that style with stories and making things motivational. I write like an engineer, so I write like a textbook. And I think that there was a gap in the real estate education market in the book market for textbook type pieces of work. And so, for me, I literally sat down and I mapped it out like a textbook. There's 20 chapters in my flipping book. And each step each chapter is the next step of the process. There's basically 20 steps in getting to your first flip deal and getting through your first flip deal. And so the book is written as essentially as a step by step how to guide I've had some people who said, Yeah, you need more stories, you need more motivation. And but for the most part, people have been like, this is exactly what I want. This Is this right? Uh, no fluff step by step. So that that's what I'm good at. And so I kind of found found my niche and writing real estate textbook type? Yeah, things.

So from there, how did you get connected with BiggerPockets?

I actually started with BiggerPockets in 2008. I joined before I ever did my first deal. I use the community the same way most people do, to learn how to flip houses to learn how to do real estate deals, to learn how to analyze deals. And again, I love giving back. I love writing about what I'm doing. I love using my failures and my mistakes to teach other people. So in addition to my blog that I started in 2008, I started documenting a lot of my deals on bigger pockets, I would write basically posts about the mistakes I was making on a daily basis, I would chronicle the deals on bigger pockets. And so I became very, very, very much a part of that community. I became friends with the founder, Josh dorkin, back in 2009. And I was a business guy and so I wasn't a real estate guy. So when Josh found out that I was contributing so much, and I was a business guy, he said, Hey, I'd love to talk to you more about the site. So I helped him with with some of his with with some of the CTO type responsibilities on the site early on. And I just, I was kind of his sounding board for a few years, and we became really good friends. 2012 after I'd written the books, I said to Josh, hey, I have these two books, I'm getting ready to self publish them. How about bigger pockets, publishing them? And and he said, Hmm, interesting. I said, in fact, I don't see why BiggerPockets doesn't publish a whole lot of books. I'll go I'll start reading a lot of books from bigger pockets. And so that was kind of the the incarnation of the BiggerPockets publishing grant.

Oh my gosh. Wow. And then at some point, then the conversation came about that bigger pockets should expand and offer a business podcast and and how did that come about?

Yeah, so BiggerPockets launched the their real estate podcast back in 2013. Maybe. Joshua Dorkin, Brandon Turner. Anybody that's in real estate probably knows those two names. They said they founded a podcast back in 2013, which is the biggest real estate podcast on the planet. It is one of the top 50 most popular of all podcasts on the planet. They've had 65 million downloads over the last six years. It's just absolutely fantastic. Just an amazing resource. In 2018, bigger pockets decided to launch their second podcast, which was bigger pockets money. I think you're probably familiar with that one. Yeah. Mindy Jensen and Scott Trench. And so that was that was a great success and great podcast. And then in 2018, they approached me and asked if I would do a podcast. We talked for a little while, and I didn't really want to do anything that was real estate related. I felt like I had talked a lot about real estate and I was ready to talk about something else. So they asked what I would like to talk about and I said I'd like to talk about business because as real estate investors, we're also business owners. Often we don't think about the business side of real estate investing we think of ourselves as as we do deals. But we don't just do deals, we run a business. And in many ways a real estate business is no different than any other business that has any other type of inventory, restaurants, selling shoes, selling clothes, whatever it is. Basically, it's just that houses and property are our inventory. So I wanted to I said I'd love to do a podcast that talks more about being a business owner being an entrepreneur running a business growing scaling a business. They thought it was a good idea. My wife was really excited about it and and they said we'd love to have her as well. So in April, or may of 2019 this year, Carol and I launched the BiggerPockets business podcast and we basically talked to both entrepreneurs and experts in business and so you were one of our expert guests, obviously and great episode, but we've talked to a whole lot of fantastic entrepreneurs, small on Entrepreneurs big entrepreneurs and just hear their stories and get their actionable tips on how our listeners can build and scale and grow their businesses.

So J aside from The BiggerPockets Podcast obviously you're still doing a lot of work with ScottBuilt. Are you comfortable in sharing your your other project yet or is that still behind the curtain?

No, I'm I think I know what you're talking about. So this is more Carol's project but Carol has been talking for a few years about launching a what's called a concierge concierge brokerage which is basically a traditional real estate brokerage but they also the brokers also help with the design side and the construction side and staging and basically a full service brokerage for somebody that that wants to not just buy or sell a house but also do some work renovate and get top dollar. So she just and with your help as well. She just launched a her concierge brokerage Scott's Silver concierge realty here in Sarasota, Florida just about two weeks ago, and we're just getting that off the ground. But that's a really exciting venture for her and I'm helping her out there.

Well, congratulations on that. Thank you. Well, J Scott, again, Partner, Co-Founder of ScottBuilt with his lovely wife, Carol, by the way, if you ever get the chance to meet J, Carol, you guys are just just magnetic. You know, very, very, very cool couple. I'm so grateful that we that we met in person at Podcast Movement, of course, co-host again with Carol, The BiggerPockets Business Podcast. And and then of course, we'll give a shout out to Carol and with and it was Scott Silver, right.

Yep, console and

what's the website? There is there's a website.

Yep. It's ScottSilverRealty com.

Nice. Nice. All right, J Scott, thank you so much for joining us, Josh. Thanks so much for having me on. This was awesome.

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