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Real Estate Investing School Podcast
259. Agent v. Investor Insights with Scott Durham
00:50:55
In this episode of the Real Estate Investing School podcast, host Joe Jensen sits down with Scott Durham, a 20-year veteran real estate agent based in Reno, Nevada, who made the pivot into investing in 2019. Scott shares how he transitioned from a...
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- [00:00]
Scott Durham
YouTube is great. Watching podcasts are great. I encourage you to do that. But at some point, and I would say that point is today, we need to stop just consuming and actually take action. We've got to put into place what we're learning. Otherwise it's just entertainment.
- [00:19]
Joe Jensen
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. Our guest today is Scott Durham. Now, Scott's a 20, 20 year real estate agent vet. Okay. He's been in it a long time. He started investing for himself though, just back in 2019. So he got into flips and short term rentals. His goal is to keep it simple. Not a huge operation in his words, but still 10 to 12 flips a year and then add a rental or two to his private portfolio with a little debt, he still remains a real estate agent doing that business with a small team. So I'm excited to hear your story and get into the details this Scott, but welcome to the show.
- [01:00]
Scott Durham
Hey Joel, thanks so much for having me. I appreciate it.
- [01:03]
Joe Jensen
Yeah. So you're based out of Reno, Nevada, right?
- [01:06]
Scott Durham
Yes, yes, here in Reno for the last 20 years or so.
- [01:09]
Joe Jensen
Okay, so the whole time. That's cool, man. And so it's always interesting, you know, when people don't know anything about real estate, there's like they, they don't know a difference between a real estate investor and a real estate agent, right? Oh, you do real estate. It's all like kind of the same thing in their mind. I remember thinking the same thing. But there's a big difference, isn't there?
- [01:28]
Scott Durham
Big time difference. Yeah, they're both great, but, but both we've been blessed with. But there is a big difference.
- [01:35]
Joe Jensen
What would you say? Because you've been in both roles, you're in both roles currently and you obviously your day to day is different depending on which one you're focusing on. But for the listener, what would you say is some of those major differences between a real estate agent and a real estate investor?
- [01:52]
Scott Durham
Yeah, so the real difference is that as an investor, more working for yourself rather than working for other people. I mean, as a real estate agent, you're classified as being an independent contractor, even though you work under a brokerage, and that's certainly true, but you have clients that you have to answer to. So as a, as an investor, it's like you're looking at, yes, you're helping people, yes, you're working with motivated sellers, but you really don't have any clients per se, except for yourself. I'd say that's.
- [02:17]
Joe Jensen
That's the biggest difference, really answering to yourself. Yeah, I think that's a huge part for me. I think the biggest part I look at is the difference between the hamster will.
- [02:32]
Scott Durham
Yes.
- [02:32]
Joe Jensen
And what I call infinite returns or residual income or passive income. But you do the work one time and then it will continue to pay you indefinitely. And when you're an agent, and I have some great, really good agent friends, I mean, selling big ticket items, you know, my one buddy just sold like a $9 million home.
- [02:53]
Scott Durham
Nice.
- [02:53]
Joe Jensen
That's a nice commission check.
- [02:55]
Scott Durham
Great commission.
- [02:56]
Joe Jensen
Look at multiple six figures. Yeah, that's awesome. But when that closes and that paycheck's in, that's it. There's no appreciation, there's no cash flow. That's not, you're not leaving that to your kids when you're old. It's, it's done. It's, it's all there is.
- [03:14]
Scott Durham
Yep.
- [03:14]
Joe Jensen
Yeah. You gotta pay taxes. Right. And you know, that might be a really nice hamster wheel that you're running on, but it's still, soon as you stop, it's, it stops, you know? Yeah.
- [03:24]
Scott Durham
And I think any smart real estate agent or any business person at all really should. I mean, to get off that hamster was. You've gotta start investing in something. It doesn't have to be real estate, but it should be something where you've got that passive income coming. You couldn't. I couldn't have said any better, Joe.
- [03:39]
Joe Jensen
Yeah. And it's interesting cause you know, as business owners, you can kind of get your business maybe self sufficient and running as a portfolio manager, you can kind of delegate a lot of those tasks and you can make it pretty passive. But as a real estate agent, you know, you really, if you're the agent, you gotta show up and you be an agent, you know, you're doing the work.
- [03:57]
Scott Durham
That's just it. And when you're on vacation, I mean, there's memes all over the Internet of agents that are on, supposedly on vacation. They're on their phone 24 7. And if you take that time off your business, you get off that hamster wheel for any amount of time and you come back and it is noticeably different. It will, it will suffer for sure.
- [04:15]
Joe Jensen
Yeah. It's funny, I just started dating this new girl and she's a, she's an, a loan officer, so really good loan officer. And it's that same thing. It's like always constantly on the phone. I record these little videos everywhere, just in Hawaii. And it's just like everywhere. We're at. She's answering a phone call, you know, doing these little things.
- [04:33]
Scott Durham
Right.
- [04:33]
Joe Jensen
And it's, it's just funny because it's, it's a big part of that lifestyle style, you know, but a lot of flexibility too, because you, again, you don't have a boss necessarily or the same hours and some all brokerages are run differently. But yes, you know, you kind of have a lot more flexibility than the 9 to 5. And I think being an agent or a loan officer, any of these like high commissioned sales jobs, you can, you can, they're a really good tool to get capital.
- [05:02]
Scott Durham
Yeah.
- [05:03]
Joe Jensen
Go build something of your own. But it can be, they can be so lucrative that it can be distracting and you forget to build your own portfolio, your own asset collection, which is what really can give you, you know, freedom and security in the long run.
- [05:17]
Scott Durham
Yeah, absolutely. And quite honestly, it's the same thing with flipping houses too. I mean, we flip 10 to 12 houses a year. But essentially, I mean, one of the reasons I transitioned from being just an agent to investing is because I can make five or ten times the amount of money on a regular flip doing the same deal. And I could as a commission. But even so, once you get that income, you still have the same tax problem, you still have that same hamster wheel problem. So you've got to get it invested into other assets where you can, it's at least semi passive and you can just keep collecting money as it comes in and as we, as we get older, don't want to be working quite as much.
- [05:52]
Joe Jensen
100%. Yeah. Whether you're the flipping houses or if you're a wholesaler or you're an agent or a loan officer, it's all the same thing. Working to execute that deal, get that paycheck and then start all over again.
- [06:06]
Scott Durham
Start over again. Yep.
- [06:08]
Joe Jensen
Um, and there's, there's one level different is if you decide to make that a business. You know, now if you can get a turnkey running, flipping business, where you have acquisition managers and you have, you know, contractors that you know and you just kind of like oversee a few hours, run it as a business. But now you're not a house flipper, you're not a loan officer, you're not an agent, you are running a brokerage, you are running a house flipping bit. You're run, you're a business owner, investor.
- [06:36]
Scott Durham
Right, right.
- [06:37]
Joe Jensen
And that's a different ball game.
- [06:39]
Scott Durham
Indeed, indeed.
- [06:40]
Joe Jensen
And in my mind, an investor is kind of like the opposite of all those where it's just like you have an asset that increases in value and brings you in money. And as long as you make, keep that from like imploding or dying, you know, you kind of can do what you want very different.
- [06:55]
Scott Durham
And we've had incredible success kind of combining the two. Right. Because to have a good rental portfolio, it all starts with buying the right property. So by employing some of the, the value add and flip techniques that we have, we're able to buy them at tremendous discounts, put up some money and rehab, and then we're doing them as short term rentals. We've got a lot of that automated through Airbnb. So we're rich. And we're pulling out a lot of our money out oftentimes on these properties. So we're getting like 60, 80% cash on cash returns because we have almost all of our money that pulled out of the home that we put in now. We're getting the tax benefits, we're getting the appreciation. So that's one thing that we've kind of combined the two together that's worked well for us.
- [07:36]
Joe Jensen
And that's what I love about, because we could say same thing for any high commission sales jobs, but with real estate, it's like, say it's uniquely positioned. When you're the agent, you're seeing these deals first, you're seeing them before they're on mls. You kind of get to be like verbally integrated in the space where you're like, hey, you know, I can sell this, but I can hold this and I can flip this and I can short term reel this. And you get to choose it all along the way. Absolutely. Really good. I always tell people, if they're like looking for a job or they want to become a real estate investor, I'm like, go be a real estate agent or a property manager or a loan officer. Get in the space. So now you're going to have an unfair advantage compared to the random person who's just an investor.
- [08:18]
Scott Durham
A thousand percent. If you're doing, if you're doing real estate sales or management at any sort of volume whatsoever, you absolutely will have deals that come across your desk just by accident without even trying for it. I mean, most of the people that you work with, they'll have those properties that are, are ready to, ready to go, you know, great condition, but once or twice a year you're going to get one. If somebody that really wants to sell it fast or it's in bad condition or they inherit it and they just want it done. And if you can offer them the service of you actually purchasing the home yourself without having to go to the market, you're offering a much better service and option to that seller and you're going to make five or 10 commissions in one for buying and flipping the house. And you wouldn't be if you were just to go and list it or represent a buyer on a transaction. Yeah.
- [09:02]
Joe Jensen
And when I look at the people who seem to be doing the best with it is that you say they can have all these different options, you know, because even as an investor, there's so many deals. I'm like, this doesn't work as a cash flowing investment, long hold deal for me, so I just have to pass on it. But it might work as a wholesale, you know, it might work as just a real estate, you know, just a normal on the market, just sell it. You know, there's lots of deals that will work in a different scenario, but not necessarily the one you're doing. And so the more diversified you can get into options that you have, then you, you don't have to leave anything on the table, you know.
- [09:35]
Scott Durham
Absolutely. And then ethically too, you can go to your clients and still be representing them. Because we have a fiduciary agreement with our, our clients. Right. We always want to do what's best for them. And then so when I go out and when we spend money on, on a distressed seller marketing, we go out and talk to a seller, I just present them both options, say, hey, listen, you know, we, what we may do may not be the best fit for you. You can get, you can absolutely get more money if you were to put it on the market. And it's a way for us to pay for our marketing and get, you know, it's all about what's best for the best for the client.
- [10:07]
Joe Jensen
Yeah, I love that because then you're not trying to slant them one way because that's the only thing you can do. You're like, yeah, you want to put on the market, let's put on the market. You want to wholesale it, let's host it. You want to flip it, you know, let's flip it. You know, I think that's really powerful. It's funny, I'm actually finally getting my real estate agents.
- [10:25]
Scott Durham
Yeah, good, nice. So long.
- [10:27]
Joe Jensen
I resisted it because my mind, so I came from doing high commission sales outside of the real estate world and I was like, I'm not good. The whole hamster wheel, you know, everything I was talking about. Yeah, no, no, no, no. And then finally, you know, after a couple years of Hundreds of interviews, I'm like, wait a second, let's go.
- [10:47]
Scott Durham
Yeah.
- [10:47]
Joe Jensen
You know, and what I like about it, you can do it at your own pace. Right. Like as an investor I always say it's so flexible, you know, you can make it look like whatever you want. That's true as a real estate agent too, some people go in hard work, you know, you know, 60, 80 hours a week. People sell four homes a year and just do referral. Like you can do whatever fits your lifestyle, which is what it's all about.
- [11:09]
Scott Durham
Exactly. And at a minimum when you go and if you buy a property that happens to be on the market, it means you can take that commission, whatever it is, or when you sell it, you don't have to charge yourself a commission if you don't want to. So you immediately have a 4 or 5, 6% savings. And in the competitive markets that it's gotten to be a much, many parts of the country that can be the difference of a deal making sense or not.
- [11:31]
Joe Jensen
Not to mention just knowing more of your field. You know, it's funny because I'm going to, you know, it's 120 hour course or whatever and you know, I have a couple buddies and people. Oh, you know, there's these ways to kind of like get it to play through and just kind of get through it. I've heard. Oh, you hire someone at Upwork to just watch it for you. And I'm like, no, like I want to do, I'm interested in knowing the nuances. Yeah, Contract law and like how deeds are titled and like I think that stuff so interesting because one, it gives you credibility when you do show up to help, you know, any like say whether you're doing it as an agent or just as a buyer, as an investor, like when you know what's going on, you can find better deals for you and make it a win win for everybody and avoid, you know, sketchy stuff, you know, and if all you're doing is an agent, I can see why a lot of them actually don't care because like I'm just going to sell this to a new family. Everything's so cookie cut in that world. But when you get into creative finance and investing stuff and like I've done stuff without title companies, I've done stuff with them, I've written my own warranty. These, like I've done so many things. Most agents would be like, this is crazy. You know, I like to know all the details. But yeah, you learn a lot being in, in multiple sides. You Know what I mean? Next thing I just need to go is get my, become a loan officer. Then I'll, then I'll really know it.
- [12:51]
Scott Durham
I'll have that effect. Oh my God. One stop shop.
- [12:55]
Joe Jensen
Yeah, I'll just date one for now. We'll just.
- [12:57]
Scott Durham
There we go. That's a lot easier. Yeah, yeah.
- [13:00]
Joe Jensen
But so tell us about your story then. So you, you were an agent for years and years and years before you got into the investment side. What held you out and then what finally got you in?
- [13:10]
Scott Durham
Well, honestly, so I got started when I was very young. I got started in 2004, so I've been doing this for over 20 years now and as an agent. So I got started slowly and then I started. I eventually became a top, a top producing agent where we were selling between 50 and 70 houses a year, just working six, seven days a week, working non stop. And it was great. We made great money, incredibly blessed and, and just someone that I looked to, a mentor of mine said, hey Scott, just like you were just saying, Joe, you're making all this money, but what are you doing with it? What are you doing to utilize the expertise that you've spent years building up to benefit yourself? So why aren't you buying these and holding them as rentals or flipping them? And for a while, quite honestly, fear held, held me back because I was like, well hey, you know, I know how to sell homes, but I don't know what a rehab cost. I'm afraid I'm gonna buy this and the foundation's gonna crumble the next day and then I'm just gonna lose all my money. So it was fear. But after a while, you know, the first house that I flipped, I started doing some marketing for motivated sellers. The first house I flipped was I made $50,000 on it. And it really wasn't even that difficult. I went in and talked to the seller. I just kind of shrugged my soul and said, hey, how much do you want for the house? They gave me a price. I said, okay, that works. I didn't even have to negotiate. It was the simplest deal ever. And it was like a fifty thousand dollar profit. And you know, at that time our price were a little bit lower. So our average commission was 7 or 8,000 bucks. So that's, you know, that's quite a few sales. I'm like, wow. So if I could do a few of these a year and, and I don't have to work with as many clients, I can have more free time. I can, you know, be kind of more control of my own portfolio and destiny and start building up rentals. You know, this is the way to go. So do I wish I had started way earlier? Yes, absolutely. But you know, it kind of is what it is.
- [14:56]
Joe Jensen
That's awesome. So. So you just kind of had a mentor finally kind of push you and be like, hey, let, let get on the other side. What are you doing in this space then as an investor?
- [15:07]
Scott Durham
He's an investor, not specifically in real estate, but he's a genius. I mean he made his money on Wall street and he's had real estate products. He's had all sorts of different ventures. This is someone that I've always looked up to and I've been blessed to have in my life. And he says, hey Scott, you better. You got to really, you know, time to grow up and, and start. Start taking this seriously.
- [15:26]
Joe Jensen
That's cool. So, so. But even then, you know, and again, everybody can shoot me if they want. I don't consider flippers as investors.
- [15:34]
Scott Durham
Yeah.
- [15:34]
Joe Jensen
Personally because of everything we discussed at the beginning. Right. So your first stepping into getting out of just the agent role was in flipping, it sounds like, which was kind of the same thing as you're. You're selling it, you just made it nicer first, you know.
- [15:48]
Scott Durham
Right.
- [15:49]
Joe Jensen
You get a little higher commission, which is cool.
- [15:51]
Scott Durham
Right.
- [15:51]
Joe Jensen
Is that how long did you do the flipping before you decide to start buying long hold stuff you retain in a portfolio?
- [15:59]
Scott Durham
Yeah. So it was a couple years. Because it was a couple years where we're doing just flips. And before we started buying the rentals, we bought some short term rentals. We've had more actually we spot some long term rentals. We've had more success with the short term rentals, but it just depends on the market and all that. It's just everywhere is different. But we've kind of got the short term stuff down to a science where Most of it's automated. 99 of our guests. It's like no headache, no hassle whatsoever. Just like every once in a while we get a little bit of a headache. But because we're getting such good cash on cash, you know, returns, at least at this point, it's. It's worth it for us until maybe eventually down the road we get tired of. We get 1031 into to something else.
- [16:41]
Joe Jensen
Yeah. And is. Is your whole portfolio in Reno?
- [16:44]
Scott Durham
It's all in Reno, yes. Oh yeah.
- [16:46]
Joe Jensen
That's awesome. So what, what's your thought on. Because we talked about like the velocity of money, if you've heard that phrase. Velocity of money. And it's like, you know, some people would say, well why would you buy and hold and make, you know, three or four hundred bucks of cash flow or you know, whatever, when they're like, you could go make 50,000 or 60,000, you know, that's a lot more money. And if you can keep that going, then the velocity of money, you can actually get a lot more than long hold. So why hold as opposed to keep things moving and hustling? What's your thoughts on that?
- [17:23]
Scott Durham
Well, long term wealth, I mean one, we talked about the flipping is still like being on a hamster wheel. So I've got to be actively involved in the business in order to get those, get those deals. So and so. Two, it's not just a couple hundred dollar a month cash flow. The way we're doing short term rentals either after paying off our debt, we're netting 1500 to $2000 a month each, each property. Three, the big thing was at the time we were making so much money between the commission side and the flipping side I needed, I was getting annihilated on, on taxes. And through cost segregation and bonus depreciation, we're able to reduce, you know, that tax bill significantly. And even if you look at the average appreciation of a real estate, you know, house is 3% a year, well, if that's, if that's leverage, you've got any kind of leverage on that whatsoever. And compounded over a 10 year period, you've got this money that's just sitting there. You're getting cash flow, you're getting tax benefits and you're getting long term appreciation that you know, 10, 20 years from now, the houses that we own that are now worth 500,000 could very well be worth a million dollars or more. And then now, you know, now you're really in a position where you can, can really do, do what you want.
- [18:35]
Joe Jensen
Yeah, no, I love that. And again, not every home is going to be good for one or the other. You know, I mean it's like the one that's a great killer flip is like, yeah, maybe don't hold that one, you roll that in the flip another one that's, it's not going to be a great flip, but it'd be an awesome short term rental then, you know, because your cash flow numbers like it might not even, you might not even be able to sell it. You might, you might be underwater in a property you literally own more than it's worth if you were to sell it. But you could be cash Only a thousand dollars a month off it.
- [19:04]
Scott Durham
Nothing wrong with that.
- [19:05]
Joe Jensen
You know what I mean? And it's like, that's what's cool, is finding what's gonna make the most sense for your situation.
- [19:12]
Scott Durham
Exactly.
- [19:12]
Joe Jensen
The asset itself.
- [19:14]
Scott Durham
And I think our income is our, one of our most powerful tools to build our wealth. Right. So you can't just keep buying rental properties unless you have some sort of income to put the, to, to put into it. Right. So I kind of view the flipping as the raising the money to, to buy the long term assets that we can eventually that, that will build the long term. Well, so you know, do a number of flips and buy a couple of rentals, do a few flips, buy a rental or two. And if, if you just do that and you don't even have to drive yourself crazy, if you do that as fast or as slow as you want over the next 1, 2, 3, 5, 10 years, you can be in an incredible, you know, position for the rest of your life.
- [19:51]
Joe Jensen
Yeah, I love that. Is it, is it hard doing it all though? You know, is the bandwidth so spread out? It's like, man, I'm an agent, I'm representing clients, but then I'm also trying to flip this host and host and overseeing general contractors, but I'm also trying to like manage my portfolio of my children. Do you get spread too thin or how does someone, you know that might sound so intimidating? Someone? What's the answer?
- [20:13]
Scott Durham
Well, the truth is I don't have to work as hard as I do like, so for the most part, I'm only taking on real estate clients as a, as an agent, if they're a past client or if they come as a referral. And it's at a price point that I want to work.
- [20:25]
Joe Jensen
You're not out cold contacting and driving business.
- [20:29]
Scott Durham
I've been there, done that, and I'm, I'm happy to say, God willing, those days are over. So I've got another, I've got a team member that I refer the deals to it even like Joe, when you get your license, it doesn't mean you have to go sell a house. Just if through the marketing, whatever that you do. If you just, you could take these referral fees from passing these clients along and that, that's, it's a great income in and of itself. So I'm a person that likes to work, but I like to take time off too. So if I just want to step off the gas a little bit, I'll just start referring more deals, more deals out so it doesn't have to be. No one has to do it just like me. They can do it any way that they, that they want. That they want to.
- [21:07]
Joe Jensen
Yeah. Well, it's funny, I was on a trail run this morning with a friend of mine, and we were talking about how if, if you make yourself do more, it kind of forces you sometimes to be more effective and you actually end up with more free time. Like, he's doing this 75 hard challenge.
- [21:25]
Scott Durham
Oh, boy.
- [21:26]
Joe Jensen
He's like, he's like. The funny thing is he's like, I'm so much more intentional and effective with my time to make sure I get all the, the tasks on the 75 hard challenge in. He's like, I've actually found I have more time because I'm not there. There's no wasted time in my schedule now.
- [21:41]
Scott Durham
Right.
- [21:42]
Joe Jensen
And. And I was like, I feel like that's how it can be with this. You know, it's like if you're flipping, but you're also wholesaling, you're doing all these different things, you can be so effective that there's no, like, just show up to the office and spend all day sitting there. No spinning your wheels slowly, right? No, I'm gonna execute, execute, execute. I have more free time even though I'm doing more.
- [22:01]
Scott Durham
Absolutely. I think it's amazing. I think all of us, myself included, have so much more free time than we think. If you eliminate the time scrolling on Instagram, if you eliminate the check in your email every time the little dinger goes off, like this morning, I did it. I, I wanted to. I'm dedicating the first four hours a day to just, like, actively getting new business, whether, whether it's all, all of the stuff, what we have doing combined. And like, I literally, I shut the door, I, I turned off my email, I turned the phone over and I just said, hey, listen, I'm focusing on doing what I need to do. And I was amazed an hour into it how much you can actually get done if you're just laser focused on what it is that you're trying to, to accomplish.
- [22:42]
Joe Jensen
Yeah. And it's funny because it, it's so true. In today's day and age, we have so many resources with technology and automation.
- [22:49]
Scott Durham
Yeah.
- [22:49]
Joe Jensen
AI and all these things that, like, say, your biggest. What do they call it? Like, bottleneck is your attention. Yeah. That is really the biggest, hardest part of our world is, is the attention span. Because there's, you know, for every option there is to make our life simpler, there's an option to distract us and suck us in. And it's not all bad. St. I used to think like, oh, everything on social media is just trash and TVs, you know, you know, what do they call, like boob tube, which is going to melt your brain, you know, the truth is there's so much good. It's incredible good content out there.
- [23:26]
Scott Durham
It's incredible.
- [23:27]
Joe Jensen
Yeah, I curated my social media really well. I only follow stuff that I think is beneficial. But like, guess what? It's still a distraction for me actually doing what needs to be done. But it feels it's more justifiable because I'm like, oh, this is so beneficial. This is so beneficial. It's so beneficial. Was like, but it's not going to help me, you know, sell the next house or find a new tenant, you know, even if I'm learning about VO2 Max and how to be healthier and like, oh, this is cool. You know what I mean?
- [23:53]
Scott Durham
I get that dopamine rush. Yeah.
- [23:55]
Joe Jensen
There's a time and a place, you know what I mean? And so attention's powerful.
- [23:59]
Scott Durham
Yeah, absolutely.
- [24:01]
Joe Jensen
That's cool, man. So you made that transition. So would you. Where do you spend the majority of your time now? Flipping, finding. Like, what do you personally and do you have a team and a structure? Like, how. How does it, the big picture look for you now?
- [24:18]
Scott Durham
Yeah, so the vast majority of my time is spent on looking for deals to either flip or for. For purchase acquisitions, whether it be flips or rentals. So I spend very little time on the real estate side unless I have a specific client set up that I'm working with or a deal, deals that are closing. Most of the time is spent on the, on the investing side of it. And I do. As far as our team, I have my wife that helps me. She does all the transaction management, she does all the QuickBooks, the compliance, all this stuff, all the paperwork, all the stuff that I do. Yeah, I'm so grateful to have her doing that. And then I've got the agent on the, on the real estate boat side. So he takes all the clients that I'm not able to take or don't want to take is out showing them, showing properties. So most of my time, honestly is just spent looking for and analyzing underwriting deals. And that's stuff that I love to do. So there's nothing like the feeling of getting that, getting that good deal. So, yeah, we don't have a big infrastructure, but we're blessed. We've got a great income and it. And it Works. We're going to be actually traveling. We're going to be spending five, six months next year. So we're going to miss the winter up here in Reno. We're going to be spending it in Arizona. So super excited about that. So, you know, being a real estate agent really wouldn't have that flexibility to do that as much. You've got to be there to show the house or the open house list, you know, whatever. But as an investor would be flipping or rentals, it's afford us a lot more flexibility.
- [25:47]
Joe Jensen
Yeah. Especially when as an agent, if it's your primary income, you got to show up, you know what I mean? Supplement. It's like, so you just don't make money those five months and then you go back and start doing it again, you know, it's not.
- [25:58]
Scott Durham
There you go. Or refer it out.
- [25:59]
Joe Jensen
Like to refer it out. It's not as detrimental, you know what I mean? And so it's interesting for my mind, like, finally getting in that space of like getting my license and finding a way where I can integrate it into balance with my lifestyle as opposed to doing it how someone else does it, you know, because the most successful guys I know that I'm friends with, they're very man. I mean, they work very hard. They're very artic, you know, calculated. And I was just like, I'm not doing that. Like, these guys are killing it.
- [26:29]
Scott Durham
Right.
- [26:29]
Joe Jensen
I'm not going to do that lifestyle. I like my freedom. And I was like, oh, I don't have to be them. I do it my way. You know what I mean?
- [26:37]
Scott Durham
Good for you. Yeah, great.
- [26:39]
Joe Jensen
That's cool that you're going to be traveling for five months. That's super exciting. Do you have kids or is it just you guys?
- [26:45]
Scott Durham
We have kids, but they're older and it's actually, they're. They're down there at asu, so it'd be closer to. To them. So they're out of the house or empty. Empty nester. So it's another reason we're able to have a little bit more. A little bit more freedom.
- [26:56]
Joe Jensen
That's cool. That's cool. Yeah. Get a little closer to them.
- [26:59]
Scott Durham
Yeah.
- [27:00]
Joe Jensen
So you say you spend a lot of your time finding deals, analyzing deals to see which ones you want to like, add to your portfolio or move for some capital. What. How do you find those? Like, what's your, what's your procedure? Because you don't have a big team. It's you, you got a broker agent buddy and your wife and, you know, running a Big team. How do you find deals?
- [27:20]
Scott Durham
So as of late, so historically, I found most of my deals off market actually using online methods, Google pay per click and pay per lead and whatnot. But honestly, as of late, there's been a bit of a shift and I'm actually finding a lot more deals either through wholesalers that I built relationships with here locally and purchasing right off the mls. And it helps again, big me to be able to get that commission. I, you know, it's kind of thought by many people for years that there aren't any deals on mls, and that is absolutely not true. We closed one. We just made $100,000 profit on a $500,000 ARV house that was just purchased directly off the off the mls. And as far as wholesalers, good, there's good wholesalers, there's not so good wholesalers. You have to run the analysis yourself on the numbers, not just take their word for it. But yeah, you get in connected with the right ones, they can keep you with a heavy dose of volume and you could develop those relationships and you're able to bring you the deals. Which again, goes back to your, your point of lifestyle, Joe, is you don't have to spend all your time going out and meeting with the sellers and negotiating the deals and, and you know, so yeah, you might give up a little bit of the spread or the margin on the, on the flip or on the pay a little bit more for the acquisition, but you're not having to spend time marketing and you're not having to spend money marketing either. So it's been really, it's been really a blessing for us.
- [28:47]
Joe Jensen
That's cool. That's cool. So you, you find a lot of them just on, on the market and then, and then through wholesalers and, and then you spend your time kind of analyzing it.
- [28:56]
Scott Durham
Yeah.
- [28:57]
Joe Jensen
Running the numbers. Do you have like an asset analyzer that you developed or do you. Where do you. What do you use to asset?
- [29:03]
Scott Durham
Just a simple old Google sheet, I guess. Not. You know, now a Google sheet that I just developed myself. I just plug in the square footage and it calculates the vast majority of it for me. And I'll just adjust it based on the house, depending on what level of upgrades or what needs to get done. So it really doesn't take that long at all.
- [29:24]
Joe Jensen
That's cool. And do you use that for flipping then? You also use it if you're gonna decide to long hold and see what kind of cash flow it has. You have different calculators for each one.
- [29:33]
Scott Durham
It's all really the same calculator because honestly like we don't like the cash flow unless you're doing a short term rental out here. Like the cash flow just isn't all that great. Especially now with the interest rates, our prior art median sales price at $600,000 in our area. So the, the cash flow doesn't always add up unless you know. So I'm kind of spoiled unless I'm buying that property at a discount. I've, I've got to buy it at a discount in order for it to make sense for us.
- [30:00]
Joe Jensen
And then you run it as short term rental to be able to make the numbers work.
- [30:04]
Scott Durham
To make the numbers work. Exactly.
- [30:06]
Joe Jensen
How many short term rentals do you have running up there?
- [30:10]
Scott Durham
So we have a total of seven properties going right now. We have three short term rentals active right now. We had, we had a few more long term rentals which we sold recently because they, again, the cash flow wasn't there. They were in homeowners association condos. So we're saying our plan is to purchase some more short term rentals this year either here or, or in Arizona or some of both.
- [30:34]
Joe Jensen
That's cool. That's cool. You, you mentioned they're in condos or like hoas or whatnot. Let's just dig into that. I've got some.
- [30:42]
Scott Durham
Oh, do we have to. No.
- [30:43]
Joe Jensen
Personal wounds I'm going through right now and I'm like, hey, we might as well because, because for a long time I would actually tell me, I'm like, yeah, I don't care if there's an hoa. If they provide enough value that the rent, the cash flow and actually can make my life less of a headache because they're maintaining the yard and this and that. I'm like, I like my HOAs.
- [31:02]
Scott Durham
Yeah.
- [31:03]
Joe Jensen
So that's one perspective. But you live long enough, you get burned a couple times. Let's talk about some of the eye roll when you mentioned that.
- [31:11]
Scott Durham
Well, I, I think there's so many. I could talk about one case in particular, but there's so many HOAs when looking around that are running into major cash flow problems because inflation, everything is costing so much more than it used to when they set their budget, you know, so long ago. But everything is, is costing more than it used to, period. So they're having to come back and significantly raising their monthly fees. They're having to do special assessments to get their reserves in order to. And it's just, it's just a mess. I tell you, I had a condo that we held as a, as a long term rental for a while decided to sell it because we weren't getting that great of a return. And right as we were going to sell it the they came out and there was doubling, literally doubling. The HOA was already about 400amonth and they doubled it to 800 something dollars a month because they were having problems with all the balconies and they needed to fix it and they're ready with special assessment. So. So we're running into HOA issues all over the place, particularly with the common interest communities like the condos of whatnot.
- [32:18]
Joe Jensen
And listen guys, any of all the listeners like that's going to happen because here's the thing. The way these HOAs are run is insane. It is not intelligent. It is not like there's one, there's an HOA manager, the management company that runs it. You know where you get on the portal and you pay your HOA fee. Like they don't, they don't care at all. They're just showing up. They're just a property manager. They have no skin in the game. Then the actual HOA that's overseeing this is typically un, they're unpaid.
- [32:50]
Scott Durham
Right.
- [32:50]
Joe Jensen
Unqualified. And, and it's, it gets messy. You know, when I look at how I run my numbers on an asset, I'm like, hey, I need to have X amount reserves because I'm going to have capex. I'm going to have to replace a roof, a furnace, this and that. So I need to put this much aside. So when those items come, I've already calculated in my returns are going to be same. I have the reserve set aside. That is not what these HOAs are doing. Even though they should be.
- [33:16]
Scott Durham
They're a business person. Yes.
- [33:17]
Joe Jensen
You know, they don't have enough reserves. They're not calculating the true capex. They don't keep going to happen. What they do is they throw in huge assessments. And this is happening to me, I just had one and is a condo tell. But they just threw in a $15,000 assessment and up the HOA from 300 to 566.
- [33:40]
Scott Durham
Oh my.
- [33:42]
Joe Jensen
It's not like, ooh, someone's trying to come in and gouge us. It's like we're screwed if we don't. Yeah, they don't have the reserves, the place is falling apart and like I said, the cost of everything is doubled and so they can't keep it at the same time, you know, HOA fee. And so it's like if you understand enough you're like, you agree all that has to happen but it also destroys your asset. Now it doesn't cash flow and it costs all this money so it makes it pointless to own it. And that's a really. And I have another one that just they wanted a $6,000 assessment to replace piping. I'm like why wasn't this in a capex reserve? What are we doing? And you don't even understand the numbers. And then the HOA board changes every five years because no one wants to deal with it. And so it's just, it's man down.
- [34:25]
Scott Durham
The road and God forbid if you want to sell it then, then people see that the, the state of affairs with the, the budget is off and then, then the values will plummet or they'll get suppressed because they won't go up with the rest of the market because the HOA fee is outrageous. And like, well for an extra $800,000 a month I could go get a big beautiful house on top of what my mortgage payment was. So what do I want to deal with this condo for?
- [34:48]
Joe Jensen
Yeah, it's funny because my dad always hated hoas but I thought it's just because he didn't like being told what to do. I'm like I don't care. Like I don't need to paint my door green. Exactly. Yeah, I like HOAs. They make communities nicer. Dad like you know, but my dad was like I want to park my tractor in the front yard, you know, okay. But now being on the other side of it I'm like oh man, they are messy. It's a, it's an under regulated system. It's a bad, they're some ran good but I would say by far they're not managed correctly for a million reasons that we get into.
- [35:27]
Scott Durham
But yeah, I really don't think, I mean my wife and I really like the idea of condo living high rise and that is for us personally. So if we got hit with an assessment we may just shrug our shoulders say okay well we live here, we like it, we'll deal with it. But as far as an investment goes, I don't know, it had to be a really screaming deal for me to take a serious look at a condo again. Yeah.
- [35:49]
Joe Jensen
And anybody who is looking at them because they could be some good deals, I would say do your own. Really?
- [35:55]
Scott Durham
Yeah.
- [35:56]
Joe Jensen
I used to do my capex less on hoa. So I'm like hey, they're supposed to replace the roof when this happens. That's why I'm paying this HOA fee and this extra town home fee and like so I started calculating my capex less.
- [36:10]
Scott Durham
Yeah.
- [36:10]
Joe Jensen
But now I would do the opposite because they're going to take all that money, they're going to blow it and then you're still going to have to come, you're going to get slapped with.
- [36:17]
Scott Durham
The rope assessment for sure. Yeah. Whatever it is they have to do. Yeah.
- [36:23]
Joe Jensen
So if you calculate enough reserves that you know there's going to be a 5, 10, $15,000 assessment at some point in the next 10 years and you are assuming the HOA will double within the next 5 to 10 years and the numbers still work.
- [36:37]
Scott Durham
Go for it.
- [36:38]
Joe Jensen
That's probably going to happen. You know what I mean? And even some of these really nice communities, you know, definitely with these condos as they get old and you know, delayed, you know, repairs and stuff, but even these master planned really nice communities, once they're filled up and they're not trying to sell these anymore, they're gone. You watch these HOAs double and triple because why not as soon as it.
- [37:03]
Scott Durham
Goes from the developer to the, to the homeowners. Right. So you're absolutely right.
- [37:08]
Joe Jensen
Yep. There's a community down here that anyway, I don't want to blast anything, but I, I could see these things happen. Wait till that's filled. It's not going to be as pretty as it looks now.
- [37:19]
Scott Durham
You know, is your condo tell either locally or is it somewhere else?
- [37:23]
Joe Jensen
It's not, it's not down here.
- [37:25]
Scott Durham
Yeah.
- [37:25]
Joe Jensen
But you know, I, I do have a condo down here though and they have the six thousand dollar assessment to replace some old piping and. Yeah, and it's still, the numbers still work and it's still worth it because I bought it in 2011.
- [37:37]
Scott Durham
So it's like, oh, there you go. Yeah.
- [37:39]
Joe Jensen
You know, I bought it for dirt compared to what it's worth now.
- [37:42]
Scott Durham
You know.
- [37:44]
Joe Jensen
Anyway, just a little funny side note and just, just want to give kind of some heads up and warnings to, to any listeners, you know, and again, it doesn't mean avoid it. I also buy stuff in New York. People are like, you're buying in New York State. You're insane. I'm like, I calculate that insanity into my numbers where I'm like, yeah, I'm gonna have to deal with worse evictions, I have to deal with higher taxes, but I'm also not competing and I'm buying at dirt cheap prices and there's that, you know, so as long as you know what you're doing and know the pros and cons, then you can still make it work. Just don't think that. Just, just see it for what it is. Like I said, whether you're doing a short term or midterm or, you know, you got to know what the pros and the cons are of the asset and then run it accordingly. And you can make any asset class work if you, if you're right.
- [38:36]
Scott Durham
Yeah, yeah, that's good advice.
- [38:38]
Joe Jensen
So what's next for you, Scott? Then you're, you're in this, you're building your portfolio, you're having fun, you're getting some freedom, you know, you've got some flexibility. It sounds like you're enjoying it. What's exciting to you in real estate now and what's kind of the next step for you?
- [38:53]
Scott Durham
Yeah, so a couple things. If you were to ask me, like a dream deal, I mean my wife and I would like to build, build our own custom house. But again, being spoiled of being in the business, like I won't build the house just to build it. I gotta feel like I'm getting a great deal.
- [39:07]
Joe Jensen
Right.
- [39:08]
Scott Durham
So if we could build a house, get a great deal on a piece of land and then have, you know, a significant equity, then a nice place to live in, whether it's here in Arizona, we'd be, we'd be all about that. So that's probably the next thing that we'll look at. That's, that's outside of the scope of our regular day to day operation. I'm also starting a consulting company just kind of getting off the ground. I'm focusing on working with newer investors that are interested in flipping homes. Cool. So that's something that we're just getting off the ground right now. But I'm super excited to help people and really just kind of help, just as I know you do too, Joe, is just shorten that learning curve of from actually starting and implementing and actually turning it into success and checks and real estate. So that's, that's, that's my latest project.
- [39:54]
Joe Jensen
I love it, man. So if people want to like follow you and be aware of when these things here, you know, are available, what's the best way for them to do that?
- [40:02]
Scott Durham
Yeah, the best way to do it is just to hit me up on Instagram. It's. My handle is real.scott durham. That's S C O T T D U R H A M and just follow me there. We're kind of putting out a lot of content each day and just kind of launching this up. So that'd probably be the best way. Or on YouTube. Same. Same handle.
- [40:20]
Joe Jensen
That's awesome. You know, we talked about how, like, money is made when you buy. You know, I want you to go into that a little bit like, how. What does that mean to you? And how does that. How does that play into you, how you strategize and, and pick what properties you buy and not like, you know, most people that, you know, if they know nothing about, like, well, money's spent when you buy, but, like, how do you make money when you're buying?
- [40:45]
Scott Durham
No. Yeah. So we're only buying deals unless day one, I could turn around and sell it in that exact condition for a profit. So of course, we'll do value add to it. So we'll buy a dilapidated house, we'll renovate, we'll put countertops, cabinets, paint, flooring, whatever it is to bring it up to current market value. But you really make your profit on the day that you close escrow from when you on. On the purchase, not. Not when you sell it, because that's when. That's when the value is. Is created, is right when you purchase it and begin to make those. Those improvements. We know what the property is about, what, what it's going to sell for. You get your deal when you actually purchase it.
- [41:27]
Joe Jensen
So buying it for less than it's worth, having equity in it from day one. Day one, really a key strategy for you of how you do it. Because somebody can say, hey, well, if I buy it for a hundred, it's worth a hundred, but I can put in 50,000, make it worth 200,000. That's good. But you're saying, I don't even want to buy it for what it's worth. I want to buy it for less than it's worth and then do the repair on top.
- [41:48]
Scott Durham
Exactly. That's how you get that sweet spot. Because, I mean, on a typical renovation for us, we're making about 15% of the ARV in profit. So if we wind up selling it for 500,000, we're typically having a profit after all expenses paid, about $75,000 or so. So you can't do that unless you buy it. Right. You can't just go off and buy any random house off the MLS or anywhere unless you're getting that deal right up front.
- [42:17]
Joe Jensen
So why would someone sell it to you for less than it's worth, though?
- [42:20]
Scott Durham
Yeah, it's a great question. And, and this was something that I had to get over at first, too, because I would think, well, I would never sell a Property at such a discount. But it's amazing. It's only about 5 to 10% of the population out there, but so many people will value convenience and speed over squeezing every last dollar out of that property. They just want to know that it's done. They don't have the money themselves to put in the repair, so they're facing foreclosure or they inherited the property and they just don't want to deal with it. So they're like, yes, God, I know that you're going to make money. I know I could do it myself, but I don't have the time, the money, or the experience to do what you're going to do. So I'd rather just take that quick money and just move on with my life and. And move forward.
- [43:02]
Joe Jensen
And it's funny because, you know, as like an investor in that mind, you're like, oh, like, that's crazy. I would spend. Do that. But then if you look at how everybody, including us, spends our money, what do we pay for convenience and speed? Right? You pay for doordash or you pay for a restaurant. It gets convenient. They made the food, they clean it up. You have a maid come in or whatever instead of drive.
- [43:25]
Scott Durham
Like, yeah.
- [43:26]
Joe Jensen
All you're doing with that profit that they lost by wanting convenience and speed is spending it on convenience and speed. Like, you know what I mean? So it's kind of funny when you really step back and think about. It's like, oh, I guess we're all kind of doing the same thing in.
- [43:39]
Scott Durham
Different ways, a different scale. Yeah.
- [43:43]
Joe Jensen
Well, that's awesome, man. I'm excited to kind of see where you go with it all and see the things that you come out with. And it's always cool to see all the different ways to do it and seeing another person be successful in their own way of strategizing it. I'm also a geek with deal calculators. I collect them. So I'd love to get a copy of your deal analyzer and I'll send you mine if you like, because I.
- [44:06]
Scott Durham
Yeah, that'd be great.
- [44:07]
Joe Jensen
I keep integrating in more features into my baby.
- [44:11]
Scott Durham
That's very basic, so maybe you'll appreciate that.
- [44:14]
Joe Jensen
That's good. No, I like that, man. Well, this has been super cool. I'm glad we've had you had the time to get together and kind of chat about this. It makes me excited for just getting deeper into real estate and always adding in next chapter, next page of how we approach it. You know, any. Any kind of final thoughts for we're going to go into the final four questions I ask all the guests, but, you know, any just thoughts for the listeners or anybody, you know, wanting to get into real estate in any of the different avenues that you're doing it?
- [44:43]
Scott Durham
Yeah, great question. So, Honestly, you know, YouTube is great. Watching podcasts are great. I encourage you to do that. But at some point, and I would say that point is today, we need to stop just consuming and actually take action. We've got to put into place what we're learning. Otherwise, it's just entertainment. Like, we've got to. We've got to pick a plan, pick a mentor, whether it's Joe, whether it's whoever you want to work with, and just jump. Have somebody help hold you accountable. They can absolutely shorten the learning curve for you and just get started. Even if your first deal, it's not going to be perfect, but you're going to be so much further ahead in the process if you just get one going, rather than just delay and be in research mode forever. Don't do what I did. Just learn from my mistakes. Do it quicker. You're gonna be just fine. That's that. That's my number one piece of advice for people who are venturing into this. Into this world.
- [45:36]
Joe Jensen
I love it. I saw this quote the other day, and it said, you don't learn to swim by reading about water. It's like, you gotta get in time in the water. Yeah. You know, it's. It's so true.
- [45:50]
Scott Durham
Yeah.
- [45:51]
Joe Jensen
So I. And the cool thing, for at least me, when I do study something that I'm actively doing, my brain can just, like, apply it all and actually retain it, and it's meaningful. When I study it before I'm doing it, my brain's like, I don't know what any of this even is. It's all useless information. Me. And it just, like, it bypasses, you know, I don't really retain and really apply it in a meaningful way.
- [46:16]
Scott Durham
Yeah. Yeah. Unfortunately, that's the case with so many people. A lot of the time and energy that they spent researching just gets lost because it doesn't get applied. Don't be one of those people. Go sign up. Go do it. Go purchase.
- [46:28]
Joe Jensen
Exactly. Yeah, exactly. I could give us 100 scenarios where that's happened for me, but. Awesome, Scott, I'm going to go through these final four questions, then we'll let you get on with your day. First question. If you could send a text bomb to the world, everybody's phone's going to go off. They're all Going to check it. Ooh, Scott's got a message for me. What's that message gonna say?
- [46:49]
Scott Durham
Honestly? So I have. This may throw you off off guard a little bit, but I'm a believer in Jesus Christ, so I believe that he is the Lord of our world and without him not much else matters all that much. So I would say he's the most popular person that ever lived. He has the best selling book. He's at least worth investigating to see if that, if that how that resonates with you.
- [47:09]
Joe Jensen
You know, I love that. What I love about that is like people are like, oh, that has nothing to do with real estate or business. It's like, actually it has everything to do with real estate because you're pursuing the things that matter to you in your life and that's why you want freedom. That's why you want the ability to make your decisions, you know, and whether it's religion or a million other things that people might be passionate about, it's like, that is what it's really all about is being able to pursue the things that are truly important, which isn't making another dollar or a higher commission or whatever.
- [47:40]
Scott Durham
Not always. Yeah.
- [47:42]
Joe Jensen
Those are a means to an end, you know?
- [47:43]
Scott Durham
Yep.
- [47:44]
Joe Jensen
So I love that dude. Great, great, great. 1. Okay, second quote or second question. What is a book or podcast recommendation you would have besides anything we're associated with?
- [47:55]
Scott Durham
So honestly, as far as a book goes, it's an old one, but it's a classic. I'd say it's a must for anyone getting involved in, in business or relationships of any kind. And that's how to Win Friends and Influence People by Dale Carnegie. It's a classic. I'm sure Joe's probably read it most. Like most people look at relating to people. It's complete opposite way. Sales is not about talking, it's about listening, being genuinely interested in other people and asking the right questions and being genuinely interested in them. And that book will revolutionize the way that you communicate with, with other people. Yeah.
- [48:30]
Joe Jensen
You know, a great book. Most people, a lot of people probably read it. For anybody that hasn't read it, here's my advice. The title is horrible. It is not about how to win friends and influence and manipulate people. It should be called how to Understand and Show up in the World. Like that is such a better title of what it meant for me. It was like, oh, this is how I show up and how I interact with humans to make their experience better and my experience better and for them to understand me and for me to understand them. It's not about what winning friends. Like that's such a odd phrase into. I mean 100 years ago when it's written that maybe it sounded normal but.
- [49:09]
Scott Durham
Right.
- [49:10]
Joe Jensen
The content is such fire. It's a great book. Everybody should go back and read it again. But yeah, the title is just so cringy to me.
- [49:18]
Scott Durham
It is a little cringe worthy. Yeah.
- [49:20]
Joe Jensen
So I wanna, I wanna buy the rights to it and re reframe it to how that show up and understand the world. But that's a great recommendation.
- [49:29]
Scott Durham
Yeah. Cool.
- [49:30]
Joe Jensen
Okay, next question is what is one of the most expensive or interesting mistakes that you've made in real estate investing?
- [49:39]
Scott Durham
I think I alluded to it earlier is just delaying and then I've. And just not doing deals because the comps weren't perfect or I was, I had a bad gut feeling or you know, just honestly the deals that I haven't done have cost me a ton of money just by letting fear rule in my mind rather than faith and just moving forward and being okay with the outcome.
- [50:02]
Joe Jensen
I love it. What's a one word or short phrase to encapsulate why you love real estate investing?
- [50:10]
Scott Durham
Possibilities.
- [50:13]
Joe Jensen
I like that.
- [50:14]
Scott Durham
Possibilities, one word.
- [50:16]
Joe Jensen
I love that. I always say, you know, you never know. It's like every property you buy is like a. It's like a lottery ticket. You don't know which one's going to take off but if you get enough, there's going to be something. It's like, oh my gosh. Never could have predicted this would happen. You know what I mean?
- [50:30]
Scott Durham
That's right. That's right.
- [50:32]
Joe Jensen
The possibilities that, that hits. I like that.
- [50:34]
Scott Durham
Cool.
- [50:35]
Joe Jensen
That's great. Scott. Well, thanks so much for being on the show. Really appreciate. This has been fun.
- [50:39]
Scott Durham
Joe, thanks so much. Appreciate you man. Have a great, great day. Thanks for having me.
- [50:43]
Joe Jensen
This is Joe Jensen signing off for the Real Estate Investing School School podcast, reminding you to jump in.