From $17.50/Hour to Buying 7-Figure Commercial Properties

Ashley:
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 seven units that could pull in 30 KA month

Tony:
And stick around because Jordan’s hard won lessons on bad contractors, loan budgets, and a 13% hard money loan might save you six figures.

Ashley:
This is the Real Estate Rookie podcast. I’m Ashley Kehr,

Tony:
And I am Tony j Robinson. Let’s give a big warm welcome to Jordan. Jordan, thanks so much for joining us on the show today, brother.

Jordan:
Yeah, thanks for having me, y’all. It’s an absolute pleasure. I learned a lot from you all, so happy to share my story.

Ashley:
So Jordan, take us back to the Geek Squad of Van. What was missing from your life that actually pushed you towards real estate investing?

Jordan:
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 BCU, so it’s a university in Richmond. So 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 an experience. It was like a 17, $18 an hour thing. My wife was in college, so it was easy. I was about 23. No real pressure. You’re just stepping from the 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 forever. We have to figure something out. I want to level up. So I started doing 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. I felt like that wasn’t going to cut it.

Ashley:
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?

Jordan:
I think that, so I was doing some research on real estate investing. My mom had owned a property. We’d moved to another house and she rented out the house that we were in before. So I had kind of seen it. So I randomly just looked up real estate investing. 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 actually went all the way back in the OG podcast and listened to Brandon Turner and I went back and was listening to all of those, just trying to learn as much, much 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.

Jordan:
I knew the streets and the Richmond map where I could go online. So yeah, I just started looking up for the 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 did need to become a realtor, but that’s kind of how it went. So yeah, I would say the moment, so to actually answer the question, the moment when I was like, something needs to change. I was going upstairs shortly after this time on TVs, but have y’all ever seen someone bring in a fridge to your house and 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 I’m about to get crushed by this refrigerator. And I’m like, no, something different needs to happen. Manual labor, I don’t think it’s for me.

Ashley:
Yeah, too, you do that for a long time. That takes a big wear tear on your body too.

Tony:
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 was 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 told us that you said you felt like you had hit rock bottom. What did that look and feel like for you?

Jordan:
Shortly after Geek Squad? When I moved over to Instacart, there would be some days where I would feel really low and I wouldn’t really feel 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, what are you going to do? And I’m talking to my mom and I’m talking to my stepmom and my dad and they’re like, Instacart, is that really? It was kind of questionable to everybody. So it kind of made me question it myself, but it also showed me, 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 partner in a relationship and another person and you’re all working together and they’re kind of looking at you and you don’t have it figured out, 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.

Tony:
Jordan, I appreciate the candidness in your response, and I think it’s interesting that we’re talking about real estate, but we haven’t even started talking about real estate yet. We’re just talking about 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 why’s are too superficial, when our why’s are just like, I want freedom of time or 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. 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?

Jordan:
So that was from just digging in doing research. I found BiggerPockets and I wasn’t as into the forums at the time, I was thinking that I needed to watch videos. 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 Daniel k Clayman, 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, I applied to the job. Maybe some months went by, I saw it again, I applied, and 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, I made the connection and I’m like, okay, I see this company.

Jordan:
So I started doing some research and I’m like, wait, I think this is him. 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, you know how when you have a job and you can send money to different places? So I was sending money to my girlfriend before the money went to me just because of 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, what they say to do 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 maybe you can’t afford to buy a house. So it was a huge relief for me and my family.

Tony:
And Jordan, just to clarify, I mean you said you were making 17, 18 bucks an hour at Gig Squad. You ended up getting a job with a local investor who was doing the thing you wanted to do, which is a great way to kind of build your knowledge base and build your network, but what did you end up making at that job?

Jordan:
The job. So you start at 65,000 and then everybody was telling me at the end of the year, 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 awesome. So yeah, just hearing that and that’s why I applied the third time, 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.

Tony:
But I think that’s the lesson for everyone that’s listening, Jordan is, dude, 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. 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?

Ashley:
Yep. Real quick, Jordan, before we get into that, I just want to explain what a subject two is. And that’s basically when somebody owns a property and you are going to purchase the property from them, but they’re going to keep their existing mortgage. And there’s a lot of controversy over doing subject two deals, if they’re ethical, if they’re legal, whatever. But there are legal ways to do a subject two 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, you have the deed in your name, but the property mortgage actually stays in the seller’s name. So 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.

Ashley:
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 a mechanic’s 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. Today’s show, it’s sponsored by Base Lane. They say Real estate investing is passive, but let’s get real chasing rents, drowning in receipts and getting buried in spreadsheets feels anything but passive. If you’re tired of valuable hours on financial busy work, I’ve found a solution that will transform your business. It’s Base Lane, a trusted BP Pro partner Base Lane is an all-in-one platform that can help you automate the day-to-day.

Ashley:
It automates your rent collection and uses AI powered bookkeeping to auto tag transactions for instant cashflow visibility and reporting. Plus, they have tons of other features like recurring payments, multi-user access and free wires to save you more time and money, spend less managing your money and more time growing your portfolio. Ready to automate the busy work and get back to Investing Baseline is giving BiggerPockets listeners an exclusive $100 bonus when you sign up at base lane.com/biggerpockets. Welcome back from our short break. We’re here with Jordan who’s going to tell us about his first deal, and it was a subject to deal that also had a judgment lien. So Jordan, break down this deal for us.

Jordan:
So this deal was actually on the MLS and it was a attached townhouse in a neighborhood called Church Hill here in Richmond, Virginia, and it was huge. So I think it was 2,400 square feet, there was five bedrooms, three bathrooms. So I’m looking at it and I’m like, medium term rental. 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, 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 two 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 of deals, just regular residential sales.

Jordan:
So I called my attorney and I’m like, Hey, the subject two thing, 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 two was saying, you keep the mortgage in place. So the property had been on the market for 95 days and average days on market in Richmond, even after everything is going on 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’s subject to? And so I explained it to her and she was like, yeah, I think they’ll be fine with that. 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.

Jordan:
So I was like, okay, great. So we start getting through everything 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 1500 a month. 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 nine 50 furnished utilities, everything included with five bedrooms. So we were looking somewhere around 1500 a month in cashflow 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 $800 from 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 two is already so confusing, the lien hit us and we’re like, no. We just immediately were like, yeah, the lien, we don’t want to deal with all this. So we just passed on the deal, but luckily we did it. It led to some other stuff that we never even thought we would get. So

Tony:
Let me ask, knowing what you now know, would you still have walked away from that deal? Because your numbers sound amazing, 1500 bucks in cashflow, would you still back out of the deal?

Jordan:
I would not have backed out of the deal. We would’ve paid that 800 so fast and it kept it moving. Yeah, I think the interest rate on it was like 2.8. It was something ridiculously low. And yeah, the value of that house, the neighboring property now is, I think it’s still in the market now, and it was listed for 600,000 and we were going to get this thing for four 80, so it would’ve been awesome.

Tony:
I think that’s an important lesson because 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 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 ’em, Hey, I’ve got a killer deal, 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. Ashton, you shared stories before, right? About bringing in partners when you felt that you didn’t have the expertise there?

Ashley:
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 learn from you as to what goes on in a rehab project and do it. And 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.

Tony:
But Jordan, after this sub two 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 in a seven figure deal on two side-by-side buildings. Give us the 30,000 foot view of this deal, the price, the size, how you found it.

Jordan:
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 1,000,090 thousand. 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 3,400 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. Yeah, so that was the plan. The plan was a million $90,000 purchase, 155,000 on the rehab, and we would end somewhere with $1.6 million after we were done with renovations.

Ashley:
So during this process, what was maybe one of the lessons you learned jumping to this large of a deal?

Jordan:
Lessons go to deport. I’m not sure if it’s the same for everybody, but deport basically where your license is regulated. So where I even have my license, and I guess I think it’s the 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. I think referrals is the best way to get people, but at the same time, you always want to make sure you’re the one that takes the full responsibility, so you want to make sure what’s going on

Ashley:
And along those lines of being licensed, but also insured too, asking for the certificate of insurance too to show something happens that they have insurance, that they can cover it.

Tony:
Jordan, I want to talk more about the challenges with 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? Why was the $800 judgment lien scary for you, but the seven figure price tag on this one not be scary for you?

Jordan:
Yeah, I think just because of what we were talking about earlier is just the why. So this deal, actually it’s on Kerry 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, 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. We are like, this is awesome. So this one was more kind of like 50 50 passion project and the numbers seemed to make sense, so we thought, but yeah, it was just really that deli and be able to have 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.

Ashley:
So did you do that? Did you open a deli?

Tony:
Yeah, that’s what I was going to ask. Right. Jumping it into your project of this size, I’m sure Jordan, this size of a project, there were a lot of assumptions that you all made going into it. Did those assumptions hold it to be true? Which ones were validated, which ones were way off? Walk us through what went right or what went wrong with this deal?

Jordan:
Yeah, 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 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 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 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 that I’m not a person that gets too hyped up. So 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.

Tony:
So Jordan, as you guys put your initial budget together, how much did you allocate for contingency? Because you said the budget was like 150 or 160 K, how much of that was just contingency?

Jordan:
Yeah, our budget was 155 and 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 something happens.

Tony:
And was that enough for this big of a wrench in your plan?

Jordan:
No, sir. So basically our budget, by the time we restructured 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, 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 Richmond and the city, A lot of the buildings are like circa like era from 1900, a hundred year old building. Once you start ripping it open, you find some other things. Yeah, our budget, our budget quickly doubled.

Ashley:
And one thing that stinks about doing that structural repairs is usually that money does not affect the appraisal unless it’s a huge noticeable thing when the appraiser comes in. But that’s spending $18,000 on structural repairs versus $18,000 on a brand new high-end kitchen. That’s one of the things that really stinks of that unseen money that is put into the property, but 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 into it, but 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 property, how structurally sound is the property.

Jordan:
I was going to say that’s interesting because that’s one thing I learned also what I did know, 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 cap rate? How much is the property making?

Ashley:
Yeah, yeah, you certainly on the commercial side,

Jordan:
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 pretty. So that was a big thing that we learned through all this.

Ashley:
Yeah, thank you for that call out 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,

Tony:
But Jordan, I think my biggest question is 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 two initially because you didn’t have a ton of excess capital set aside. So how did you get the funds to take this deal down and then to cover the overruns on your renovation budget?

Jordan:
Very good family and friends. So 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 backing us all the way. They were like, you guys do what you do, you guys, we trust you, we believe in you. And I really take that to heart. I don’t mean to segue, but I really take that to heart because it was a lot of money spent and a lot of time, even my stepmom, she is 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 a way through and make sure everybody’s good. So

Ashley:
That’s such a great cheerleader to have in your corner is to have people motivating you and believing in you. That mindset is also a great piece, and it’s just a reminder of if you don’t have somebody that’s motivating you and believes in you, make sure that you’re still cutting out the white noise if they’re doing the opposite and critiquing you or whatever. Have they actually achieved financial success? Like Jordan, you stated your stepmom had saved, she was able to retire early, and that’s showing she was pushing for you and motivating you is 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

Tony:
Jordan. So give us the ending to the story. You go over budget, are you able to refinance or are you able to execute the business plan as you originally thought?

Jordan:
No, no, we got stuck. So essentially we were supposed to get some more funds. So the way that we started it, the friends family, we all got together and that our parents were kind of the putting money in our cheerleaders. And so when we thought we were going to get some money that we didn’t get, it 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 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 unit, and if we combine the lots, we would have 7,000 square feet. And right now we only have four dwellings.

Jordan:
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 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 150,000 at the time. So for 40,000 to 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 the best of it now we tried, 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.

Jordan:
So that’s how that deals ended up. Now we’re about to list it soon, actually.

Tony:
Interesting. While you guys are waiting for it to be listed, are you cashflow positive? Are you losing money? Are you breaking in every month? What does the cashflow look like today?

Jordan:
No. Right now our monthly payment is about 10,000 $1,100 and we’re making like $6,700. So we’re still coming out of pocket, even though it’s not as much as 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 gut 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 TIA or my tenant improvement allowance? And so with that came up, we were thinking, we’ll just run it out to somebody else, no problem. And then we were like, oh, they want $55 a square foot to be able to make the property their own. And that’s a part of how the commercial world works, and we had no idea about that.

Ashley:
Jordan, what will you end up making off of this property when you sell it?

Jordan:
So this property, we actually will end up making, I say nothing but probably around 50 to 70,000, but we’ve put in total. So we were paying monthly payments. We’ve paid at least 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

Ashley:
Those no so much about it now. I mean, you have little things. Oh, I’m learning a lot in this episode.

Jordan:
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 get out of this, collect what we can regroup, get our lessons and systems down 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 reset.

Ashley:
Yeah, I sold the property. I had a property for one year and I sold it just to ease the burden on, okay, one less property to take care of. And we had bought that property in cash. I took the cash to give me time to put those systems and processes in place, reevaluate. At the time I was just barely getting into property management software. Everything was pen and paper. So I definitely needed that. And think about paying to go to college, 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 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, 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.

Tony:
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 move forward and to go on to the next deal?

Jordan:
It’s actually listening to, I’ll attribute a lot of it to BiggerPockets and also Alex Hermo, 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 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 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. Terrible things are happening. And then at the same time I’m thinking, well, if I’m the leader and I’m the one who brought us all here, if everybody else is scared, I’m scared too. But 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 will make sense that when we move forward and we do the next deal, that we would learn from those lessons and apply those lessons.

Ashley:
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 alleviated by being transparent and communicating. 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.

Tony:
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 think that all of us should maybe find some motivation where, 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 what rookies need to come away with is 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 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. Alright, so we’re back here with Jordan and coming out of this kind of brutal commercial construction project, Jordan cnet four half Rehabbed town homes. So you find another seven figure deal, and I love that you just keep shooting for these big deals. Give us a quick rundown on this one.

Jordan:
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, well, I guess it was a partnership with the solution, but not for any negative reasons. I think they were all just older gentlemen and they just kind of went it 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 BiggerPockets and it’s like if you can find that 90 day, that 60 day days on market, then that could be a good opportunity. And they also had a couple 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.

Jordan:
And Air DNA was saying that if we made them four bed, three bath properties, that we could make something like a hundred thousand 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, make sure it appraises. So that was kind of funny. But walking these, we thought it was just going to be some cosmetic fix ups. This one, we had a $210,000 rehab budget, so we were looking at 50 k for each town home, and that one actually went a little bit more according to plan. There weren’t any big structural surprises or anything. We did have an HVAC go out that we had to replace. So that was a big expense coming in that was, we were actually able to include into the rehab. So I think that was cool too. Now that we had that relationship with our contractor, we had a couple slip ups with the contractors, and then we actually started working with the subcontractor that worked with one of the contractors.

Jordan:
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

Ashley:
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?

Jordan:
No, it wasn’t any different. We actually, we weren’t thinking as much about putting each property into its own LLC or anything. We just all got together the DBA is, everybody eats, we want everybody to eat friends and family. So yeah, that was the plan. With the partnership, nothing really different as far as roles and responsibilities. I think that’s something we could have set out 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 a rocket lawyer contract online and we just rolled with that, but for the most part, the partnership was the same.

Tony:
So Jordan, as you’ve gone through these different deals, what’s one either debt or maybe partnership mistake that you want every Ricky to avoid?

Jordan:
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’re doing because we were 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 huge mistake just because especially with the friendship or your family, you want to make sure you have those expectations set out. It gets even worse. 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 there 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. I’m like, okay, great. 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? They’re like, yeah, rollover fee, it’s going to be 50 grand. And I’m like, what?

Jordan:
That was on the carry street one, which that’s why I brought our profits, or 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.

Ashley:
That’s crazy. To have that type of unexpected expense to come up not knowing about, I mean, that’s a big chunk of money, and I think it just goes back to the money lessons that you have learned and shared with us throughout this episode is that having reserves or access 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 buying a property turnkey, the HVAC could go out in that too. Not only a big commercial building. And that still is, I have a little tiny duplex that I paid. Let’s see, I think it was like $72,000 for this year. The HVAC system went, it was an $8,000 expense 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?

Jordan:
I’m on Instagram. I’m not very active, but hopefully I will be soon. It’s at estate, so it’s an abbreviation of my last name that a lot of my friends call me. It’s easier, I guess. And then also hopefully I’ll see some people, some rookies at BP Con. I was about to go ahead and get my ticket and everything, so

Ashley:
Yeah, we can’t wait to see you there.

Jordan:
Yeah, yeah. Hopefully we can connect there. And I love, like you said, talking about the losses and the experiences. I think that’s what builds that better connection instead of all I do is win with everything. So thanks.

Ashley:
Well, Jordan, thank you so much. I really appreciate you coming on today. I’m Ashley, he’s Tony, and this has been an episode of Real Estate Rookie.