Today’s interview went so well and lasted so long that I decided to break it up into two episodes. The interview is great, but it’s a little too long to digest in one sitting, so make sure to tune in next Monday for Part 2!
My guests today are Scott and Jessica Holwick, a husband and wife team. They’re new investors; they’ve sold one property, are getting ready to sell their second property, and are working on their next acquisitions. This show is all about helping new investors, so I truly believe this kind of interview is most informative and helpful. I hope to do more interviews like this in the future, because talking to hugely successful, experienced investors is useful, but isn’t relatable for a new investor; it’s like taking financial advice from a billionaire. But hearing someone who is starting out, taking massive action, and making all those first decisions (and even mistakes) that you have to make in this industry is one of the most valuable things I can provide for you.
Scott and Jessica are a great team. They’ve already sold one property, they have more in the pipeline, they’re creating systems, and they have a great system in place in terms of how they divide the work. They’re very open and candid about everything, and that’s going to be hugely beneficial for you.
Scott comes from an extensive background in graphic design and illustration, and Jessica is a stay-at-home mom who has been very active in her children’s home education. They both have always had an interest in real estate, but it wasn’t until recently that they were compelled to jump into investing. Scott recently formed Roof Over Head LLC with a friend from his church. He is the managing partner, and Jessica works on strategy, acquisitions, design, and staging. They recently sold their first flip, their second flip is under contract, they’re in the process of acquiring two more properties. These guys are really going after it and plan to keep growing.
Scott talked about his past in design and mentioned getting frustrated with the sedentary nature of his work and the fact that he had to be away from his family for most of the day. He still works for his design company part-time, but business had been dwindling, and he eventually realized that he needed to find another source of income. He had been doing home renovations for friends and family for a while and really enjoyed doing that, so when a friend was looking to invest in something, Scott suggested investing in real estate. Jessica was on board from the start and Scott’s friend trusted them with his money and gave them the opportunity to get started in real estate.
I asked Scott and Jessica to go into more detail about how their husband and wife team works. Jessica explained that they both got excited about real estate at the same time, so one of them never had to convince the other. They felt confident that their business would work out, especially given Scott’s home renovating experience. Once Scott got the LLC set up, Jessica was able to focus entirely on their real estate business while Scott still worked full-time. She did an incredible amount of research and educated herself about the do’s and don’ts of the industry.
They joked about watching home renovation shows on television, and I remember watching those shows with my wife before we started investing, but we eventually stopped because they were too stressful and dramatic. On these television shows, everything that can go wrong goes wrong, but real estate investing in real life–if it’s done well–is not that exciting. If a television show were to follow an actual, successful, professional real estate investor, there would be no show!
Scott and Jessica talked in detail about how they were able to do their first deal. The property, which they found on the MLS, was listed for $89,000, but they made a low offer of $40,000 because it needed a lot of work, and their offer was accepted. The house was in a good, sought-after neighborhood near a college, and they knew that if they did the work on it, they would be able to sell it. At the time, they had calculated an After Repair Value of about $165,000-$170,000, but it actually ended up being even higher, which worked out because they had also underestimated the rehab costs. They had estimated the rehab to be around $63,000, but ended up hiring more contractors than they had expected to work on the basement and foundation and spent about $85,000. Scott explained that knowing how to do a lot of the renovations himself actually helped keep costs a lot lower than they could have been, considering what they did to the house. Scott and Jessica calculated their maximum allowable offer by subtracting the repair costs, fixed and holding costs, and their desired profit from the ARV. They had already spent a few months looking for a property and had gotten some offers rejected, so they were very eager to get something accepted. Looking back, Jessica said that they could have allowed for more room for profit, but things still worked out really well. The house is currently under agreement to sell for $189,000, which is a great deal.
Scott mentioned that they have a great relationship with a realtor, who does a great job with marketing. He had been showing the buyers properties in the area, but they hadn’t found anything they liked yet, so the realtor called Scott and suggested he show them their property even though they were still putting in finishing touches. The buyers were immediately blown away, and they were able to sell this property without even listing it.
I found Scott and Jessica on the Bigger Pockets forum, where they talked about their second deal, which was technically sold first. That deal sounded really interesting, so I wanted to make sure we talked about that as well. They found that property through their realtor on the MLS and used the same formula they had used before to calculate their maximum allowable offer. Their realtor had given them an ARV of about $220,000, they estimated repairs at about $25,000 and holding costs at about $25,000. Their desired profit was $20,000-$30,000. They gave full asking price for this one, and Scott underlined the importance of how the offer was written. They researched the seller’s situation and desires, and presented themselves as a solution to their problems.
I am very surprised at all the things Scott and Jessica have been doing right so far. Jessica explained that she found J. Scott’s website very useful, and that led her to Bigger Pockets as well as to Just Start Real Estate. Jessica would do all the research and study the material, and then she and Scott would go over all the information together. They were careful not to get caught up in analysis paralysis; once they knew that they were going to invest in real estate, it was just a matter of figuring out the right way to go about it. That really goes along with the spirit of my podcast, and I couldn’t agree more that you’re not in real estate until you actually dive in and do it, and you learn more by doing it than by reading about it.
Scott said that his friend who funds their deals trusts them because they run everything past him and give him some of the research they do on their market. They were lucky that they had a friend who was willing and able to finance their deals, but Scott mentioned that, in any case, you will have to convince someone to trust you with their money. Scott and Jessica split their profits with their partner fifty-fifty, and plan to eventually have him be more involved by finding financial acquisitions to bring into the company.
Scott and Jessica spent some time going over what they’ve learned from their second deal:
- They bought the property when things were covered with snow, and when the snow melted they realized that the entire roof needed to be redone They urge new investors to take the extra steps necessary to make sure all the information is accurate, and to never presume.
- They ended up having to put in a gas-burning furnace in the basement, because they had been told there was one but it turned out that wasn’t true. You can’t just trust what’s written up about the property.
I cut off the interview here for this week, and as you can hear Scott and Jessica are doing a great job as new real estate investors, and they’re generous enough to share everything with the listeners of Just Start Real Estate.
Tune in next week for the second half of this interview–I know you are dying to hear it! Trust me, it’s worth waiting for.