← Real Estate Rookie
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- [00:00]
A
What happens when a 29 year old Instacart driver signs a million dollar mixed use deal with zero flips under his belt? Today we're unpacking how Jordan Scroggins went from mounting TVs for Geek Squad to owning 7 units that could pull in 30k a month.
- [00:17]
B
And stick around because Jordan's hard won. Lessons on bad contractors, blown budgets and a 13% hard money loan might save you six figures.
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A
This is Real Estate Rookie Podcast. I'm Ashley Kerr.
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B
And I'm Tony J. Robinson. Let's give a big warm welcome to Jordan. Jordan, thanks so much for joining us on the show today, brother.
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C
Yeah, thanks for having me y'. All. It's an absolute pleasure. I learned a lot from y'.
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B
All.
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C
So happy to share my story.
- [00:45]
A
So Jordan, take us back to the Geek Squad van. What was missing for your from your life that actually pushed you towards real estate investing?
- [00:53]
C
I think that. So right before the Geek Squad van, I was living in Woodbridge, Virginia, so Northern Virginia. And my girlfriend, now wife, went down to vcu, so it's a university in Richmond. So I came down, I came down here and I didn't know what to do. I was a waiter in Woodbridge. I was probably in the restaurants for still longer than real estate, about six years. And driving around in the van, it was, it was an experience. It was like a $17, $18 an hour thing. You know, my wife was in college so it was easy, you know, I was about 23, no real pressure. You're just stepping from the, you know, living at parents house to that next level. So there wasn't too much going on. And then I'm like, wait, this can't be like forever. We have to figure something out. Like I want to level up. So I started doing some, some research because the van was hot, sweaty days. Mounting TVs was actually on the back end and on the front end I was actually installing washers, dryers, refrigerators almost got squashed a couple times. So that was a lot of fun. But yeah, just 1750 an hour to lift refrigerators and mount TVs. It wasn't really the move anymore. I wanted to figure out something different and I wanted a family and a life and I felt like that wasn't going to cut it.
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A
When was the moment that you found out about real estate investing and that this actually could be the piece that you needed to level up?
- [02:20]
C
I think that. So I was doing some research on real estate investing. My mom had owned a property, she had, we'd moved to another house, and she rented out the house that we were in before. So I had kind of, I had kind of seen it. So I randomly just looked up real estate investing because I was like, investors make money. So the first thing I actually came across was actually being a real estate agent. So I kind of dived into that. But while doing that and figuring out how to be a real estate agent, I was listening to, I was actually went all the way back in the OG podcast and listened to like, Brandon Turner. And I went back, I was listening to all of those, just trying to learn as much as I, as I could. And luckily enough, I actually, when doing that research, there was someone local who's an investor and he had some YouTube videos out about opportunity zones. And it was kind of familiar because I knew the streets and the Richmond map where I could go online. So, yeah, I just, I just started looking up real estate investing. I found kind of a couple opportunities, and it seemed like the best way to start was being a realtor. And then after the 20th episode of BiggerPockets, I was like, wait, maybe I didn't need to become a realtor. But, but that's, that's, that's kind of how it went. So, yeah, I was just, I would say the moment. So to answer, actually answer the question, the moment when I was like, something needs to change. I was going upstairs shortly after this. I'm out of TVs, but have you all ever seen someone bring in like a fridge to your house and like carry it up on the straps? It was crazy. So my manager actually had to come out and I'm downstairs and he's like, hold it, hold it. And like, I'm about to get crushed by this refrigerator. And I'm like, no, something, something different needs to happen. Manual labor. I don't think it's for me too.
- [04:08]
A
You do that for a long time. That takes a big wear and tear on your body too.
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B
But Jordan, you end up landing a job that gives you a 30% pay increase, which is a life changing amount of money for someone who is just earning 18 bucks an hour. But I guess before we get to the big pay increase, describe that lowest point. Right before that job came, you. You told us that you say you felt like you had hit rock bottom. What did that look and feel like for you?
- [04:35]
C
When I was shortly after Geek Squad, when I moved over to Instacart, you know, there would be some days where I would feel really low and I wouldn't really feel as, as motivated. And I kind of just felt lost. So I say I felt rock bottom. Because when you feel like you have no options or if you feel like there are too many options, you can kind of get lost in the wind. So I feel like that's kind of what happened to me. And I have my girlfriend looking at me like, what are you going to do? You know? And I'm talking to my mom and I'm talking to my stepmom and my dad, and they're like, instacart. Like, is that really. You know, it was kind of questionable to everybody, so it kind of made me question it myself, but it also kind of showed me, like, no, I can make something happen. So I just kind of went with it and made it work. But definitely sitting there trying to work on Friday to make sure the rent is paid on Monday is very stressful. And when you have a, you know, a partner in a relationship and another person and you all are working together and they're kind of looking at you and you don't have it figured out, you know, I think that was the biggest thing for me is because I'm a big family guy, so that's kind of what I wanted. And I felt like I wasn't really doing everything I could or I could have been doing more.
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B
Jordan, I appreciate the. The candidness in your response. And I. I think it's. It's. It's interesting that we're. We're talking about real estate, but we haven't even started talking about real estate yet.
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C
Right?
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B
Like, we're just talking about the. The motivation and the why behind it. But I think it's so important that we start there. And we've said this so many times in the podcast, but the stronger your why and the stronger your conviction, the more likely it is that you'll find success as a real estate investor. And I think when our whys are too superficial, when our whys are just like, I want freedom of time, right? Or, you know, I want to make more money, those are surface level. They're not really going to hold up when the going gets tough. But what you just said, I've got a partner looking at me saying, hey, we got to get on with this next phase of our life. What's going on? I'm working on Friday to try and pay rent for Monday. Like, this isn't sustainable. Those are motivations that are really kind of kick you into high gear to make sure you make things happen. And obviously that's what happened for you, because I guess, take us back to that next point. Now, again, you get this job, big pay increase. What was that? How did that come about?
- [06:57]
C
So that was from just digging in, doing research. I found bigger pockets and I wasn't as into the forums at the time. I was. I was thinking that I needed to watch videos. I'm a. I'm a. I'm good with visual and hearing, so I like to do both at the same time if I can. So coming across the opportunity zones, which is not where you should start, but coming across the opportunity zones, I saw that he was. That he. Daniel Klayman, he's a local investor in Richmond. I actually came, I applied to that job three times. So during the whole instacart phase, Geek Squad, like, I applied to the job, maybe some months went by, I saw it again, I applied, and the third time, the second time, I made it to the phase where I actually did at least an online interview, and then they said that they were going to go with somebody else. So the third time I applied it, I made the connection and I'm like, okay, I see this company. Like, so I started doing some research and I'm like, wait, I think this is him. Like, I have to get this job. I'm applying the third time. So I applied. The job was more so towards real estate software. So it's to analyze deals, do projections, performance, things like that. So when I found that, it was such a relief because. And actually what I did is once I got that job, because of everything that had happened, I actually went ahead and some of my check, like my. You know how when you have a job and you can send money to different places? So I, I was sending money to my girlfriend before the money went to me, just because of every. Everything she had done to help us out. I'm like, I owe this to her. So we worked it out that way. So the job was a huge relief. And it was really cool to get involved in real estate because that's what they say to do, right? Like, if you want to get into real estate, there are other ways to make money. You don't have to necessarily go out and raise money and do a flip or, you know, maybe you can't afford to buy a house. So it was, it was, it was a huge relief for. For me and my family and Jordan.
- [08:58]
B
Just to clarify, I mean, you said you're making, you know, 17, 18 bucks an hour at Geek Squad, you end up getting a job with a local investor who is doing the thing you wanted to do, which is a great way to kind of build your, your knowledge base and build your network. But what did you end up making at that job?
- [09:13]
C
The job. So you start at 65,000. And then everybody was telling me at the end of the year, you'll get, we get $10,000 bonuses. Maybe I shouldn't have said that. He's going to maybe see the part. I was like. But it was, it was, it was awesome. So, yeah, just hearing that and you know, that's why I applied the third time because I'm like, no matter what, I hope they see that I'm going to be relentless. I'm going to keep going and I'm going to get in here. So.
- [09:38]
B
But I think that's the lesson for everyone that's listening, Jordan, is do like you stayed consistent. You found a job that not only paid you more, but also taught you real estate, which is what your goal was like. You executed that plan flawlessly. But I want to jump because I know after you got this gig, it introduced you into your first attempt at real estate, which was kind of a messy subject to deal with a bunch of sellers and a judgment lien. Quickly walk us through that deal and I guess more importantly, why start with something so complicated?
- [10:09]
A
Yep. Real quick, Jordan, before we get into that, I just want to explain what a subject to is. And that's basically when somebody owns a property and you're going to purchase the property from them, but they are going to keep their existing mortgage. And there's a lot of controversy over doing subject to deals if they're ethical, if they're legal, whatever. But there are legal ways to do a subject to deal where the existing mortgage stays on the property. So as an investor, this is attractive if they have a low interest rate, low payment, and then maybe you're giving the sellers some cash, maybe you're not. Maybe they're just walking away from the deal to get out of it. And you take the property over. There's a, you know, you have the deed in your name, but the property mortgage actually stays in the seller's name. So if this is, there's a lot to understand and learn before doing this kind of deal as to how to do it legally and how to make sure that it's going to work for you. And then a judgment lien can be several different things, but basically someone sued you and you couldn't pay. So the lien is on the property. So you can often see this as like a mechanics lien. Sometimes they call it where a contractor did work on the property and they didn't get paid, so they put the lien on the property. Maybe someone took you to small claims court and there's a judgment against that property. So there's different things, but basically there's another person that needs to be paid on top of the mortgage payment.
- [11:41]
D
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- [12:19]
E
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- [13:23]
A
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- [14:32]
C
Yeah, so this deal was actually on the MLS and it was attached townhouse in a neighborhood called Churchill here in Richmond, Virginia. And it was huge. So it was like, I think it was like 2400 square feet. There was five bedrooms, three bathrooms. So I'm looking at it and I'm like medium term rental, like this seems perfect. It's actually right next to a hospital. So vcu, Virginia Commonwealth University out here has a they're medical as well. They're really big in Virginia. So I was like, we can put a couple of nurses in here, you know, it'll work out great. And only one problem, I have no money. So I was like we got to figure out a way in. So I did a lot of looking into subject too and I heard all the controversy and stuff and I was like, well, maybe I should at least. I was already a realtor now and I had already closed a couple deals, just regular residential sales. So I called my attorney and I'm like, hey, the subject to thing, like is it legal? Can we do it? He's like, of course, we do it all the time. So I'm like, okay. And then he basically explained to me what subject to was saying, you know, you keep the mortgage in place. So the property had been on the market for like 95 days and average days on market in Richmond, even after everything is going on is hasn't really gone over 10 days. So I was like, okay, this looks like a perfect opportunity. Maybe they'll be willing to wiggle a little bit. So I called the realtor, she's like what subject to? And so I explained it, I explained it to her and she was like, yeah, I think they'll be fine with that. Like they just want to get out of it. There's four families Living here, and only one of them has been paying the mortgage. The other three aren't paying. So I was like, okay, great. So we start getting through everything. You know, we're doing the title work. I actually did an inspection and everything. There's a little bit of work that needed to be done, but nonetheless, this deal was going to make us about 1500amonth if we could rent out each room. In Richmond, you can probably get between more like 700 if it's not great quality. But this was a newer home, so you could probably get closer to like 950. Furnished utilities, everything included with five bedrooms. So we were looking somewhere around 1500amonth in cash flow. And for our first deal, it seemed like, okay, this is just all going to work out. And then we got the title work back, and there was the judgment lien, and it was only like, $800 for. From, like, a bank. So I guess one of them hadn't paid and the bank put a lien on the house. And I think, honestly, just because subject to. Is already so confusing, I. The lean hit us, and we're like, no. Like, we just immediately are like, yeah, the lean. We don't want to deal with all this. So we just passed on the deal, but luckily we did because it led to some other stuff that we never even thought we would get.
- [17:31]
B
So let me ask, like, knowing what you now know, would you still have walked away from that deal? Because, I mean, your. Your numbers sound amazing. You know, 1500 bucks in cash flow. Would you still back out of the. Back out of the deal?
- [17:44]
C
I would not have backed out of the deal. We would have paid that 800 so fast and kept it. It kept it moving. Yeah, I think the interest rate on. On it was like. Was like 2.8. Like, it was something ridiculously low. And yeah, the value of that house, the neighboring property now is. I think it's still on the market now, and it was listed for like 600,000. And we were going to get this thing for like, 480. So it would have been awesome.
- [18:11]
B
But I think that's an important lesson, right? Because for. For a lot of our rookies that are listening, sometimes you will come across deals that are just maybe too far out of your comfort zone as a new investor, where even if the numbers are amazing, if it's too much of a stretch and just, like, emotionally, you don't feel that you can handle it. I mean, maybe it is the best idea to walk away from that deal or maybe partner with someone else who has more Experience dealing with those types of things and tell them, hey, I've got a killer deal with, but I don't know how to do X. And I've seen you do X time and time again. Do you want to come in on this deal with me? Ash, you know you shared stories before, right? About like bringing in partners when you felt that you didn't have the expertise there.
- [18:51]
A
Yeah, when I did my first commercial building, it was a four unit, two commercial units, two residential units and it was really my first ever full gut rehab that would need to be done. And I said to my partner, I said, I've got the deal, I'm buying the deal, I've got the cash for it, I'll fund it and I'll give you 40% equity on the deal if you come in. And we ended up splitting the rehab cost, but if you come and do the labor and do the work and let me kind of learn from you as to what goes on in a rehab project and kind of do it and you know, I think that I became pretty handy in this experience and he thinks that I didn't and I wasn't much help. But we'll let you guys decide.
- [19:39]
B
But Jordan, after this sub to deal that you walk away from, obviously you continue to move forward. It doesn't stop you from becoming a real estate investor but you move on to ink a seven figure deal on two side by side buildings. Give us a 30,000 foot view of this deal. The price, the size, how you found it.
- [19:58]
C
Yeah, so we found it on market. Everything that we've done has been on market. Luckily, I feel like it's actually the easiest and most straightforward, especially with being a realtor. So we bought it for 1,090,000. It's about the. So there's two of the units like we were talking about. There's a fourplex with two commercial and two residential above and then there's the triplex with the commercial below. It actually has an apartment above and one behind, but it's about. One of them is 3400 square feet and the other one's about 1700 square feet. The triplex was a little bit smaller, but yeah. So the deal, we thought we were going to pay 155,000 for the rehab and yeah, so that was the plan. The plan was $1,090,000 purchase 155,000 on the rehab and we would end somewhere with like $1.6 million after we were done with renovations.
- [20:53]
A
So during this process, what was maybe one of the lessons you learned? Jumping to this large of a deal.
- [21:00]
C
Lessons go to Depor. I'm not sure if it's the same for everybody, but deepor, basically where your license is regulated. So where I even have my license and I guess I think it's a department of professional office regulation, I believe, don't quote me on that. But always check to see if the contractor has a license because for some reason, because I'm a realtor and I know I could look it up, I'm like, I'm pretty sure I've done this. But the contractor did not have a license. I got another contractor that also did not have a license. And I was just kind of being told and both were actually referrals. So I was just running with it. So I think one is contractors, make sure you check the license, license insured, all that good stuff. And then I also think, number two, don't just blindly believe a referral. Go in and still do some due diligence because I think referrals is the best way to get people. But at the same time, you always want to make sure you know you're the one and that takes the full responsibility. So you want to make sure you know what's going on.
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A
And along those lines of being licensed but also insured, to asking for the certificate of insurance to, to show like something happens that they have insurance that they can cover.
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B
Jordan, I want to talk more about the challenges for the contractors, but I think before we even get there, you had just walked away from a deal because of an $800 judgment lien. What was going through your mind signing a multimillion dollar deal with almost no track record, like why, why was the $800 judgment lien scary for you? But the, you know, seven figure price tag on this one not be scary for you?
- [22:46]
C
Yeah, I think just because of kind of what you. What we were talking about earlier is just the why. So this deal actually is. It's on Cary street, which is a very prominent street in Richmond, and it's right next to the university. There was a corner store that already had an oven, a 10 foot hood and everything in the back so you could cook and everything. And when my friend and our families got together, we're like, we're going to start a corner store, we're going to start a deli. You know, we got like, this is awesome. So this one was more kind of like 50, 50 passion project and the numbers seem to make sense. So we thought. But yeah, it was just really that deli and be able to have like a Staple in Richmond and be able to open a store in Richmond. Just like in a lot of cities, we love food and businesses that aren't chains. So we were really excited to start that. Be near the university, be able to give some student housing. You can get out of class on your way home. You can grab a chicken sandwich on your way up to your apartment. And we were like, that's going to be awesome.
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A
So did you do that? Did you open a deli?
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B
Yeah, that's what I was going to ask. Right. Jumping into a project of this size, I'm sure, Jordan, this size of a project, there were a lot of assumptions that. That you all made going into it. Did those assumptions hold it to be true? Which ones are validated? Which ones were way off? Like, walk us through what went right or what went wrong with this deal.
- [24:15]
C
Yeah. So we thought that. So some of the assumptions. We assumed that upstairs we were just going to. So the apartment units, we were like, oh, we're just going to be able to go through. We'll take. We'll put in some new cabinets, some countertops, some new appliances, put in some new floors, paint. We're good to go. And for the most part, that was true until we got to the triplex, and my contractor was like, Jordan, you need to get here, like, now. The initial plan was just to take down cabinets and put up new cabinets, but when they took the cabinets down out of the triplex, the wall, the drywall came down. So they were like, hey, there's something going on here. Get here immediately. And on my way there, I get sent a video, and my contractor is grabbing the studs and shaking the entire top, and it's just swaying back and forth, and I'm like, oh, we have a major problem. So that, you know, I'm not a person that gets too hyped up. So, like, in my face, I kind of was just looking flat, but in my body, I'm like, I don't know what's about to happen or what we're about to do, but just, I guess, tell me what to do next. So we kind of just started working out that way. So we assumed it was going to be a quick cosmetic, and it quickly turned into restructuring half of the building, essentially.
- [25:36]
B
So, Jordan, as you guys put your initial budget together, how much did you allocate for contingency? Could you said the budget was like 150 or 160k? How much of that was just contingency?
- [25:45]
C
Yeah, our budget was 155 and, you know, just 15,000. It was the 15 off the top. We were thinking it's going to cost about 140 and we'll have 15 just in case, you know, something happens.
- [25:56]
B
And was that enough for this, this big of a, of a wrench in your plan?
- [26:01]
C
No, sir. So basically our budget, by the time we restructured, like the restructuring itself was, I think it was $18,000 to restructure two sides. So then the budget was immediately blown. And then on top of that, we had to put on new siding because we had to take everything down. So on top of the structure, we had to put on new siding. And I think we all know what happens in, in Richmond and the city. A lot of the buildings are like circa like era from 1900. So 100 year old building, once you start ripping it open, you find some other things. So yeah, our budget, our budget quickly, quickly doubled.
- [26:42]
A
And like one thing that stinks about doing that structural repairs is usually that money does not affect the, the appraisal unless it's like a huge noticeable thing when the appraiser comes in. But that's, you know, spending $18,000 on structural repairs versus $18,000 on a brand new high end kitchen like that is that, you know, that's like one of the things that really stinks of like that unseen money that, you know, is put into the property. But it's, you know, it's not viewed as adding value from an appraisal. I mean, obviously you can give the appraiser your receipts and say you dumped all this money and into it. But like, when you really look at the breakdown of the appraisal, that's not usually a line item. As to how sturdy is the foundation of the product, property, how structurally sound is the property, I was going to.
- [27:34]
C
Say that's interesting because that's one thing I learned also what I did know because I've mostly done residential stuff in commercial. I'm talking to the appraiser and he was like, we don't care what the siding looks like, what color it is. He was like, what's the, what's the cap rate? What's, how much is the property making?
- [27:49]
A
Yeah, yeah, you're turning out the commercial side. Yeah.
- [27:52]
C
Right. So I went into it with a residential mindset thinking, oh, it needs to be pretty and all these things and you should make it pretty to attract a higher rent, to then get a higher appraisal, not just make it pretty for the sake of making it look, look pretty. So that was a big thing that, that we learned through all this.
- [28:08]
A
Yeah, thank you for that call up because that is a great clarification as to how is your property being appraised. Is it the income based approach or it is. What is it the market value approach, as they call it? The other one. Yeah.
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B
And. But Jordan, I think my biggest question is you. You go over budget, how are you funding these overruns? And I guess maybe even taking it a step further back, how did you fund the acquisition of this deal? Because you had mentioned that you did the sub 2 initially because you didn't have a ton of excess capital set aside. So how did you get the fund to take this deal down and then to cover the overruns on your renovation budget?
- [28:44]
C
Very good. Family and friends. So the. The structure of what we were doing. So I had a couple partners, me and one of my good friends, and then his dad and my stepmom. So they were back at us all the way. They were like, you guys do what you do. You guys, you know, we trust you, we believe in you. And, you know, I really take that to heart. I don't mean to segue, but I really take that to heart because they. It was a lot of money spent and a lot of time. Even my stepmom, you know, she was in. She's basically. She's retired. So she used to work. She used to work for the government and was able to retire, saved up, retired early. So it was really just them family that believed in us and was like, no matter what we know, no matter what happens, y' all are going to figure out, figure out a way through and, you know, make sure everybody's good.
- [29:35]
A
So that's such a great, like, cheerleader. To have in your corner is to, like, have people, you know motivating you and believing in you. Like, that mindset is also a great piece. And it's like just a reminder of, like, if you don't have somebody that's like, motivating you and believes in you, make sure that you're still, like, cutting out the white noise. If they're doing the opposite and critiquing you or whatever. Have they actually achieved financial success? You know, like, Jordan, you stated even your, you know, your stepmom had saved. She was able to retire early. Like, and that's showing she was pushing for you, motivating you as to someone who actually achieved, probably something you're trying to do is to be able to retire early in life. So I think that's a big difference to show Drew.
- [30:22]
B
So give us the ending to the story. You go over budget Are you able to refinance or like are you able to execute the business plan as you originally thought?
- [30:32]
C
No, no, we got stuck. So essentially we were supposed to get some more funds. So the way that we started it, the friend, friend's family, we all got together and that our parents were kind of the, you know, put money in our cheerleaders and so when we, we, we thought we were going to get some money that we didn't get. So that kind of, you know, it kind of took us, it kind of took us a little bit left. So we weren't able to execute. We're in a 13 hard money loan. So we were trying to figure out like how to, how to make more value in the deal. So actually what we thought we were going to do probably about six months back is I was looking deeper into the zoning. So we had this whole plan to combine the lots. We need a thousand square feet for each unit and if we combine the lots we would have 7,000 square feet. And right now we only have four dwellings. So I basically reached out to the city and they were going to allow us to build three more. And that was kind of midway. Once we saw okay, we went over budget. How do we rectify this and try to bring some more life back into this deal. So looking into the zoning, it looked like there would be a way to do that. So we started on that, on that trek and then it's just a lot of money. So I reached out to a local company that was going to come out, do a full plan of development and that in and of itself is going to be 40,000. And we were maybe thinking about putting an extra 150000 in at the time. So for 40000 to just be, just to submit plans, it was something we were like yeah, we're not going to be able to do this. So we did end up, we rented out some of the units, we gutted out the corner store since we didn't do the deli. We were planning to but it actually just turned into a situation where we're like, let's make, let's make the best of it now. We tried to, we're bleeding a little bit. Let's go ahead and cut our losses and get out of this thing and show that value that we saw with the zoning and everything to another potential investor. So that's how that deals ended up. Now we're about to list it soon actually.
- [32:40]
B
Interesting. And while you guys are waiting for it to be listed, are you, are you cash Flow positive. Are you losing money? Are you breaking. Breaking in every month? What does the cash flow look like today?
- [32:51]
C
No. So right now, our. Our monthly payment is about $10,1100, and we're making, like, $6700. So we're still coming out of pocket, even though it's not as much as, you know, before we had any tenants and we were paying the full 10,000. We were able to cushion the blow just by getting tenants in there and getting some money going. But unfortunately, another thing I learned is that when you get a commercial building and then you want to put a tenant in there, a lot of times the tenant will say, okay, what's my. What's my TIA or my tenant improvement allowance? And so with that came on, because we were thinking, we'll just run out to somebody else, no problem. And then we were like, oh, they want, you know, $55 a square foot to be able to, you know, make the property their own. And that's a part of how the commercial world works. And we had no idea about that.
- [33:41]
A
Jordan, what will you end up making off of this property when you sell it?
- [33:44]
C
So this property we actually will end up making. I. I say nothing, but probably around like 50 to 70,000. But we've put in total. So we were paying monthly payments. We've been paying. We've paid at least like, 275,000 overall with overages and monthly payments. So it's definitely a monetary loss. And what we're doing is taking those lessons. Oddly enough, now I love commercial even more. But we're taking no, you know, so.
- [34:16]
A
Much about it now. I mean, you have, like, little things like, oh, yeah, I learned. I'm learning a lot in this episode.
- [34:24]
C
No, we're definitely going to take. We're taking a $200,000 loss. And I say we. I'm going to say me, because I feel like I'm really the front runner in this whole thing. So I like to take the burden of the responsibility because I kind of had this dream and kind of brought my family and friends along with me. So it's important to me for us to be able to, you know, get out of this, collect what we can, regroup, get our lessons and systems down and. And move forward. I think I was listening to a podcast. I think you mentioned it, too. Ashley, I think you took that break, right, to kind of reset.
- [34:57]
A
Yeah. Oh, yeah, I sold the property. I had a property for one year, and I sold it just to, like, ease the burden on, like, okay, one less property to take Care of. Like and I, we had bought that property in cash. I took the cash to, like, give me time to, like, put those systems and processes in place, like, reevaluate. Like, at the time, I was just barely getting into property management software. Like, everything was pen and paper. So, like, I definitely needed that. And, like, think about paying to go to college. Like, that's your college education on commercial real estate that you just paid for with this big lesson, this education that you got from doing this deal. And. And Jordan, I am so grateful that you came on today to talk about this deal because most people only come on and talk about the wins that they had, and this ended up, in a way, like, you have turned this into win because you got this education, you have this lesson, and now you know what to do for the next deals going forward.
- [36:00]
B
Ash, you make an incredible point. And, Jordan, I guess my question to you is, when we fail at something, it can oftentimes shake our confidence, and it can make us question whether or not we're going down the right path. And it's just natural human tendency. How have you avoided feeling that way after going through such a big deal that didn't turn out the way you wanted it to? How are you still finding the confidence to. To move forward and to go on to the next deal?
- [36:30]
C
It's actually listening to. I'll attribute a lot of it to bigger pockets and also Alex Hermosi, who I listen to a lot. And so when I go back and think of all the things that happened, and I'm like, okay, so does it make sense that this happened? Instead of, like, getting very emotional about it, okay, I had no experience. I have no idea about commercial. Does it make sense that there would be mistakes? I mean, yes. Okay, does it make sense that I wouldn't know about a tenant improvement allowance? Yes. And so I think at the same time, it's kind of a. Like, it's kind of a balance because I feel a lot of responsibility. And trust me, there have been some nights where I'm like, dang, I hope my family doesn't disown me. Like, this is. You know, terrible things are happening. And then at the same time, I'm thinking, well, if I'm the leader and I'm. I'm the one who brought us all here, if everybody else is scared, I'm scared, too. But, you know, let them know that, and let them know, hey, I'm scared. But I'm with you. We're in this together. As long as we can write down and list out what happened and how we can improve next time, then it would make sense that when we move forward and we do the next deal that, you know, we would, we would learn from those lessons and, and apply.
- [37:43]
A
Those lessons that transparency and communication is I think, such a powerful tool when you're in a situation like this where other people are affected and impacted that some of the times a lot of that fear that uneasiness can be kind of alleviated by being transparent and communicating. Like if you go through the biggerpockets forums, you'll see people bash syndicators like to no end. And one of the biggest complaints is that they weren't transparent and they did not communicate what was going on. And all of a sudden there's this huge capital call that nobody expected because their questions weren't being answered. No one was responding all these things. And I think that's a lesson for everyone in any type of relationship, whether it's a vendor, whether it's a tenant, no matter what. That transparency and that communication I think is such a valuable tool and resource to have as a real estate investor.
- [38:44]
B
Ash I also think that leadership is something that really shows itself when times are tough and it's easy to be a leader when things are going great. It's a lot harder to be a leader when things aren't going according to plan. And I, I think that all of us should maybe find some motivation way, Jordan, that you've handled the situation by having that thought to yourself of, well, I need to be the steady hand while everyone else is freaking out to make sure that we can execute to the best of our ability. And I think that's, that's what rookies need to come away with is like things aren't always going to go according to plan, but it's how you respond in those moments that makes all the difference. So Jordan, dude, I appreciate you sharing that man. And obviously keep going because you end up picking up, picking up a package of some townhomes which I want to get into next. But we're going to take one final break to hear a word from today's show sponsors.
- [39:33]
D
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- [41:07]
D
Hey everyone, My favorite event of the year is almost here, the BiggerPockets conference. And we just added two new sessions to the event that you are not going to want to miss. We have Doug Bryan, super bowl champion turned real estate strategist who's going to share the playbook he used after 2008 to scale to 17,000 single family rentals. We also have Andy Gill, full time investor and tech bro who's going to share the exact AI prompts he uses to save hours on contracts, deal analysis and operations. Said it before, but it is worth repeating. The next wave of opportunity in real estate is already forming and I believe that the investors who get ahead of that won't be the luckiest, they'll be the most prepared. And that's why I want to see you at bpcon with over 40 sessions packed with real tactics for today's market. You'll leave ready to act. But the real magic? It happens in the hallways. Connecting with other investors, swapping ideas and building relationships that last long after you leave Vegas. October 5th is right around the corner. So if you've been on the fence, you now's the time. Grab your ticket@biggerpockets.com Vegas that's biggerpockets.com Vegas. This show is sponsored by Airbnb. Later this year, we plan on taking a winter trip to the mountains and we're definitely going to stay in an Airbnb. We're really looking forward to cooking a few of our own meals, seeing a few sites and relaxing comfortably in our own space. We also love the idea of being able to offset some of our vacation costs while on vacation. Have you thought about hosting your home on Airbnb next time you're away? I know I have because it's so simple and now it's even easier than ever. With the co host network, you can hire a high quality local co host to take care of your guests while you're away so you can travel stress free and earn a little extra cash for your next vacation. Co hosts can create your listing, manage reservations, message guests, provide on site support, and they can even do design and styling. Find a co host@airbnb.com host all right.
- [43:04]
B
So we're back here with Jordan and coming out of this kind of brutal commercial construction project. Jordan Saran at four half rehabbed townhomes. So you find another seven figure deal. And I love that you just kind of keep shooting for these big deals. Give us a quick rundown on this one.
- [43:22]
C
Yeah, so this one, another one that was on market and it was, for some reason it was listed in the commercial section. I think just because it was a package and it was a partner, it wasn't a partnership dissolution person. Well, I guess it was a partnership dissolution, but not for any negative reasons. I think they were all just older gentlemen and they just kind of wanted out. So the property had initially been listed for around 1.7 million and it was like 112 days on market. And I've always listened on bigger pockets. And it's like if you can find that 90 day, that 60 day, you know, days on market, then that could be a good opportunity. And they also had a couple of price drops. So we're like, hey, what we're going to do is we're going to get all these properties. It's a package of homes. We're going to get these, we're going to rehab them and we're going to turn them into short term rentals. And Air DNA was saying that, you know, if we made them four bed, three bath properties, that we could make something like 100,000 a year in revenue. So we're like, okay, this is awesome. So we end up getting the deal for 1.25 million and we got a $50,000 seller credit. We ended up using the same hard money lender because we just had that relationship already. So we went with them. One funny story about this is that on appraisal day, the other listing agent was there as he should have been trying to fight to show, like, hey, look, we have this appraisal. This is how much it's worth. This is how much it's worth. Like, make sure it appraises. So. So that was kind of funny. But walking these, we thought it was just going to be some, some cosmetic fix ups. This one, we had a $210,000 rehab budget, so we were looking at like, you know, 50k for each townhome. And that one actually went a little bit more according to plan. There weren't, there weren't any big, you know, structural surprises or anything. We did have an H VAC go out that we had to replace. So that, that was a big expense coming in. That was, we were actually able to include into the rehab. So I think that was, that was cool too. Now that we had that relationship with our contractor, we had a couple, you know, slip ups with the contractors, and then we actually started working with the subcontractor that worked with one of the contractors. So working with them has been. Working with them has been awesome. I realized going into the zoning that I couldn't make it a short term rental, which then kind of changed our plans.
- [45:55]
A
So during this time that you're doing the rehab, things like that, how did you structure the partnership on this deal and was it any different than the last deal that you did?
- [46:04]
C
No, it wasn't any different. We actually, we didn't. We weren't thinking as much about, you know, putting up each property into its own LLC or anything. We just all got together. The DBA is everybody eats because we want everybody to eat, you know, friends and family. So, yeah, that was, that was, that was the plan with the partnership. Nothing, nothing really different as far as roles and responsibilities. I think that's something we could have set out like in the operating agreement, which we really didn't. I was just rolling with it. We're rolling through, we're trying to figure things out. So I kind of just found like Rocket Lawyer contract online and we just, we just rolled with that. But yeah, for the, for the most part, the partnership was the same.
- [46:48]
B
So, Jordan, as you've gone through these different deals, what's one either debts or maybe partnership mistake that you want every.
- [46:56]
C
Rookie to avoid, I would say as far as partnership, just kind of going back to that, the roles and responsibilities and making sure that everybody knows what they are doing. Because we were, you know, friends and family, it was kind of just handshake. We know what's going on. We'll kind of just figure it out and go with the flow. And I think that's a, that's a huge mistake just because especially with a friendship or, you know, your family, you want to make sure you have those expectations set out because it gets even worse. Like you don't want to lose a business partner and a friend or you don't want to lose a business partner and a family member that you can't talk to. So I think they're just making sure everything's ironed out. And then also as far as debt, I would just say make sure you're reading all the terms and the terms of the deal. Because one thing that we came across is I thought when I was looking and they told me, hey, if you need an extension, it's going to be no problem on the hard money loan. So I'm like, okay, great. So we hit our year mark and I go to ask for the extension and they're like, okay, it's just going to be a rollover fee. And I'm like, huh? Like, yeah, rollover fee. It's going to be 50 grand. And I'm like, what? So that, that was on the carry street one, which kind of, you know, that's why I brought our profits or what we. Not even our profits, but being able to recoup some of that money got lowered even more because of this fee that I just assumed I'm talking cool with the lender and they're just going to extend me out.
- [48:25]
A
That's crazy to have that type of like unexpected expense to, to come up not knowing about that. I mean that's, that's a big chunk of money. And I think it just goes back to the many, the many lessons that you have learned and shared with us throughout this episode is that having reserves or access to, to additional capital can really help you in these times when you find these unexpected expenses, especially when you are doing big projects like this or rehabs. And even if you're just doing, you know, buying a property turnkey, the H Vac could go out in that too. Not only, you know, a big commercial building and that still is like, I have a little tiny duplex that I paid. Let's see, I think it was like $72,000 for okay. This year, the H Vac system went. It was an $8,000 expense. Like, just because it's a cheaper, smaller property. These things are still expensive and you need to save for them. But, Jordan, thank you so much for coming on today, sharing your story and your journey with everyone and the lessons that you have learned along the way. Where can people find you? And reach out for more information about your journey.
- [49:38]
C
I'm on Instagram. I'm not very active, but hopefully I will be soon. It's at Real Estate Scroggs. So it's an abbreviation of my last name. A lot of my friends call me Scroggs because it's easier, I guess. And then also, hopefully I'll see some people, you know, some rookies at bpcon. I was about to go ahead and get my ticket and everything, so, yeah.
- [49:58]
A
We can't wait to see you there.
- [49:59]
C
Yeah, yeah. Hopefully we can connect there. And I love, like you said, talking about the losses and the experiences, because I think that's what builds that better. Better connection instead of, you know, all I do is win with everything. So thanks, y'. All.
- [50:13]
A
Well, Jordan, thank you so much. I really appreciate you coming on today. I'm Ashley Hughes. Tony. And this has been an episode of Real Estate Rookie.
- [50:22]
C
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