All Forum Posts by: Scott Trench

All I know is that, as CEO of this company, it was really hard watching influencers and 20-somethings race past me, buying dozens or hundreds of units from 2019-2022. Some of my colleagues and friends bought millions, others tens of millions, and some hundreds of millions (or Billions) during that period.

Real estate is a funny game - it tends to go up, yes, but it does not always go up, and it can go nowhere for a decade or more, as a lot of apartment complex purchasers from 2021 are about to find out. 

Aside from basic maintenance which is simple work, but hard and monotonous work, and keeping the asset positioned to fulfill it's highest and best use, there's nothing you have to do past a certain point to benefit from market appreciation. You just hold it, keep it occupied and well maintained, and let the years roll by. 

The reverse is also true. You can claim to be the best guy in the world at finding and analyzing deals, but when the market turns against you, and you just went all-in, even on the best relative opportunities that market had available at the time, there is nothing you can do to prevent losses, especially if your debt has a maturity date that will force your hand.

Timing the market is an interesting concept. 

Despite what I wrote above, I admit, that I am tempted to go as big as I can, using extremely long-term debt or just by buying real estate with 100% cash, in 2025 and into 2026. Something tells me that the pendulum just flipped, and that just as all these guys who went all in and bragged about their unit count have all seemingly shut up and disappeared, that now is buy time. I'm under contract on a quadplex, fully renovated, at the highest cap rate for a small multifamily that I've purchased in my career, right now. I am buying it for 20% less than the original list price a year ago. 

I see stocks at all time highs, and interest in real estate investing at decade long lows, and I admit, I start to salivate. I sold about half my stock portfolio to purchase real estate here in January.

If it's not time to buy right now, when is buy time? It's certainly a better time to buy than 2021, at least in multifamily!

I am sure I will be very publicly wrong, and you all can make fun of me in two years, when stocks double and real estate prices crash 20% from here, but I just don't know how you can watch this industry, this closely, for this long, and not be raring to go in the current environment. 

Buying a turn key rental, in an area you know or knew well, with a property manager you've met and trust, in an area that is large enough for you to have other options to find contractors and property managers? 

This is fine. You'll have a slight disadvantage compared to the local population, but nothing that should crush you. Plenty of people invest remotely, and as long as you have modest expectations (not chasing the highest possible yield), and are using light leverage, and don't get suckered into buying in a part of town that you wouldn't feel comfortable visiting in broad daylight, plenty of people do this and do... fine. Not incredible, but fine.

An out of state flip or flipping business, handled completely remotely? I'd just as soon donate to the local contractor union's retirement fund. 

@Bruce D. Kowal I sold a bunch of index funds in January 2025 and will have a six figure capital gain. I am under contract to purchase a Quadplex. Will a Cost-Seg offset the LTCG on these index funds? 

On a related note: I am looking for someone who meets the following: 

- Is an up and coming investor without a large current portfolio. 

- Has accumulated tens or hundreds of thousands of dollars

- Has a thesis to purchase extremely distressed office buildings in urban locations, get them re-occupied, self-manage and work in and on the buildings to get them re-rented, preferably Denver. Will make this pursuit their full-time job for the next several years, and commit whatever they have, aside from a suitable personal emergency fund, to the thesis. 

I guess yes, the jockey is the starting point for me. 

"Character" is also contextual. There are a lot of high character folks who get sucked into garbage Co-GP style guru programs. They have the best intentions in the world, but they are seduced by the cult of these mentorship programs. There are also a lot of high character folks who are 26 and seem to do everything right, but never seem to accumulate cash. The person I want to invest with is able to accumulate cash, in their personal life, on a regular basis, and is not, over the course of many years, blocked by one barrier or another from this accumulation. I don't really need to know much else about someone - if they can't pass this test, why should I believe that they will be able to run a business that will generate cash?

I also like the sponsor, generally speaking, who is going all in with at least a third, and preferably half, of their net worth on the deal or fund. (And no, the "acquisition fee" or carried interest at the end of the investment are ******** answers to "most of my net worth is in the deal").

When the investor, whether it's a 27 year old putting their first $50K or $100K into something, or a 45 year old worth $15M putting $9M into their business idea, goes all-in, that's when my ears perk up. 

I guess that's my answer - it's less about "Experience" and more about: 

1) "Are you a generally responsible person, capable of building wealth and worth taking a shot on?" (With invested capital, this matters, plenty of people are worth "taking a shot on" in other capacities, just not with respect to managing my money).

2) "Is this investment where I'm giving you money the top priority in your professional life?" 

3) Do I agree with the thesis underlying whatever I'm being asked to invest in?

Many "experienced" investors fail the second test. When you have 25 different funds or deals going on, my deal simply can't be the top priority in your work life. I'd personally never take capital that I am paid to manage without committing my full-time effort to the situation and putting a majority (I reserve the right in the future to make this 1/3rd of my position) of my wealth into the situation. 

The people who share my mentality are few and far between. And that's ok - I am totally fine to weed through hundreds or thousands of pitches to find the small handful of like minds out there, and I am perfectly capable of investing my own capital in the meantime. 

I've got a lot of problems with the Mayor, but this, I feel was a great move. Looking forward to this park. Neither that course, nor City Park are really all that great, using that space for a true park is, in my view, a great move for the city. 

I'm sure many people will disagree strongly. 

@Armani Pimentel Yes, I believe that wholesaling is generally not the way to go, because it is getting banned, there are people who try to take advantage of aspiring entrepreneurs like you, and it is extremely low probability. 

Why do you want to try it? What is drawing you to it?

It's really hard to gauge this question. 

I think that the attempt to scale super quickly is more dangerous than whatever the first raise is. 

A young investor with just 1-2 properties, 3 years into their journey could potentially be a great partner for friends and family. If this person raises $400K from friends and family to purchase a $1M 6-unit apartment complex, they might be a great potential partner. Especially if they put in $35K, or what amounts to most of the then total of their liquid wealth.

On the other hand, we saw experienced investors with really strong reputations scale from a few million to a hundred million, or, in some cases, literally billions of dollars, in AUM at the worst possible time between 2019 and 2021. 

I'd rather invest with the local 26 year old who lives in their second house-hack, drives their 10 year old car, and is raising their first small apartment syndication that they will self-manage, putting their own money into the deal, than some 45-year old guru who is great at social media, with their ability to charm on TikTok, but really, their "secret" as an investor is their ability to (on a part-time, "passive" - for them, and remote basis) transform $300M in real estate into $215M between 2021 and 2025. 

Wholesaling real estate is among the hardest possible ways to start out your professional career. 

I'd estimate that there are less than 1,000 legitimate, or "professional" wholesalers, in the United States of America, as defined by individuals who make $100K flipping contracts, and collecting assignment fees, in any form, and who have made that amount of income more than 3 years in a row. That's fewer individuals than active players on NFL rosters. I'd love to be proven wrong. 

Of these professional wholesalers, nearly all of them will be well capitalized professional real estate investors or large businesses doing hundreds of deals annually with many years in and around every part of the real estate investment journey. Most will be licensed (as agents/brokers) in their states. Most will have large scale marketing engines where they spend thousands or tens of thousands a month, and operate or license time in call centers. They will see a large pipeline of local deals, and they will buy some as rentals, flip others, and flip the contract (wholesale) a handful where it makes sense. Wholesaling, for these professionals, is the byproduct of a successful real estate deal finding business, not usually the business. I have, however, met exceptions. 

I have met a large number of aspiring wholesalers who join flashy facebook groups. Many of them are posers - I smile and nod, knowing that their posing will make an impression on many who dream of quick wealth, and that their incredibly transparent bullsh** will eventually blow up in their face, leading to no lasting wealth and potentially major problems for themselves and everyone associated with them.

Many of these students receive referral fees if they are able to sign up other people to the expensive ($5K+) coaching programs, masterminds, mentorships, or tribes. The referral fees, which operate similar to a multi-level marketing models, often incent these students to post the rare assignment fee check that does get done to every social platform they can and make it seem like they have an "in' with the guru leading the program. 

Few of the people who "invest" fees in a mastermind like this will ever do a deal. The masterminds often encourage students to finance the new-car like entrance fees on a credit card, on the promise of just a single deal covering all the entrance costs. 

The programs that claim high success, over and over again, are the ones that appear on these forums a few years later with students making claims about misrepresentation by the programs. 

In the unlikely event that you are the exception that proves the rule, the rare 18 year old who can actually generate a serious income by wholesaling real estate, your day to day will look like the following: 

- You will door knock, cold call, send mailers, and otherwise create lists of people who are in the most desperate moments of their lives. The guru of that particular year will create some secret variation to a time-tested list of tactics that is the flavor of the weak and pretend like this is some new secret invention, perhaps inventing new language to describe tactics that have been around for years. 

- In the unlikely event that you get a lead, A "motivated seller" who will work with an 18 year old to sell their home, is likely someone dealing with death, disease, divorce, or disaster. Your "clients" will disproportionately be elderly people who you will be taught to "help" - somehow you convincing them not to take market value by listing their home, or selling it subject-to, is "help".

- In between finding these "clients" you "help solve a problem for" (in the language of the gurus), you will be angrily dismissed by hundreds or thousands of people, if you are able to get into contact with them. 

- In the extremely unlikely event that you get a property under contract, your assignment fee, in many locations, and probably on average, will be less than the commission a licensed broker would have received for selling the property. 

- You will be at risk of breaking the law, as many states are creating laws that effectively ban wholesaling, and while wholesaling gurus claim that this is not the case, they are either lying or deluded. Every passing year, this practice will get harder and harder, on average, across the country. 

- In the event that you do get a deal, that you do not violate the intent or letter of an increasing number of anti-wholesaling laws, and that you actually receive an assignment fee, you will walk away thinking that your role is over. In fact, many real estate wholesale deals are done "subject-to". A first time wholesaler doing a "subject-to" deal is highly likely to be working with a novice real estate investor who doesn't know what they are doing, and a highly irresponsible, highly desperate, likely elderly seller, who doesn't know what they are doing. Either one of these people - the buyer, or the seller, can screw you, intentionally or unintentionally in years to come. 

For example, the buyer, if they find problems with the property or stop making payments, can blow up the seller's credit. If someone made $50K assigning my elderly parents or grandparents home to an investor in a subject-to deal, and that investor ruined their credit by not making payments, I would do everything in my power to go after that investor, AND the wholesaler, and I would make both their lives a living hell to the best of my abilities. I promise. I would make you rue the day you collected that $50K assignment fee, which rightfully belonged to my family member, and I probably have a good shot at figuring out some place where you screwed up, or misled. 

Second, the seller can ALSO blow up the deal and create problems for you decades down the road. Remember, the seller is someone so desperate that they are allowing an 18 year old kid to flip the contract to sell their home. This means, on average, that this person is facing foreclosure or bankruptcy, and has no other reasonable options. This person likely has a 30-year fixed rate mortage financed at less than 4.5%. And they are still desperate. This is not a person who is making good life decisions. When this person goes bankrupt in the next recession, this loan will be part of bankruptcy proceedings. This is a huge problem for the buyer. The buyer will, if they get screwed, attempt to get whatever they can from the seller, and from YOU, as the wholesaler. 

...

In sum - if the above sounds appealing to you, go for it! 

If not, here's what I'd suggest instead:

1) Get your real estate broker's license as soon as you turn 18. A licensed agent can do all the things a wholesaler can do, and is a proven business model where the same hustle that any successful wholesaler brings to the table can be rewarded 10-fold more, with little in the way of legal obstacles. In the event that you want to wholesale, it won't hurt you, unless you have a problem being legally bound to do right by your clients. This will cost you $3-$4K, depending on your state, and will allow you access to the MLS. Being able to look one of these sellers in the eye and tell them that you can, as a licensed agent, either list their property or attempt to assign the contract, assuming wholesaling is legal in your state, is a huge credibility booster.

2) Get an entry-level job, hustle, save as much as possible and plan to house-hack when you turn 18-21. Research ways to use your education to help you qualify for a loan (did you know that some lenders allow college credits that translate directly to the line of work the graduate pursues to count towards work experience, accelerating the borrower's opportunity to get approved for a mortgage?). 

I bought a duplex for $240K 10 years ago. It's now worth $600K. Between appreciation, loan amortization, and rental income, this property has easily created $400K in wealth. I do not expect to meet more than 25 people in my entire life and career here on BiggerPockets who will make $400K in wholesaling fees. Wealth in real estate is usually, though not always, made by buying and holding properties, and the passage of time. 

3) Consider working for a property manager or real estate investor in the summers as an intern. Can you do contracting work on properties and learn valuable skills that will help you remodel properties, flip them, or otherwise learn as much as possible about the construction trade? That, more than anything will help you answer the question "how much do I need to estimate for repairs"? 

@Edreco Amos I think that Tampa, FL is not the worst, but will be among the worst, hit markets in the country. Everything is going wrong. 

Prices a few years ago were based on expectations of (in addition to interest rates staying low): 

- Then current operating cost assumptions (like insurance cost expectations being flat)

- A seeming disregard for record levels of new inventory / supply hitting the market

- Extremely high inbound migration expectations which are likely to not be met, due to both natural disasters and the boomerang effect when people from California or the Northeast move to the American South and hate every minute of the humidity, the large and relentless swarm of insects, and the occasional hurricane. 

While it pains me to say it, I think that if you are patient, and watch that market over the next 12-18 months, you will find yourself in one of the greatest buying opportunities in America. 

Just as expectations were too high for Tampa a few years ago, I believe that as supply and weather continue to pummel prices in Tampa, that the pendulum will swing too far the other way. I believe that while it is a buyers market and renters market right now, these conditions will change within 5 years, because: 

- The long-term fundamentals that drive people to migrate to Florida remain unchanged, and a steady influx is a reasonable expectation. 

- Supply will abate. 2026 and 2027 will see less than half the deliveries nationwide of of 2024 and 2025, respectively, and I bet that is even more extreme in a market like Tampa. I bet that essentially no one is starting new construction projects, which bodes extremely well for owners 2-4 years from now.

- Prices for insurance policies will never go back down, but it is not unreasonable to expect costs to rise at a more predictable pace from here. Things have to get much worse for insurance rates to continue to grow at 10-15% annually in perpetuity. 

 I don't see any reason why you would go to Miami, where the above problems are likely very similar, but there is even less cash flow to de-risk most investments, and it is not your backyard. 

If you are apprehensive of the market, and believe it will get worse before it gets better, you might consider going to cash, doing a private loan to a flipper on a project where it would be a screaming deal if you had to foreclose, and taking a look in 9 or 18 months. 

I suspect there are already excellent deals, and that there is reason to believe that buying will be rewarded handsomely over the next 10 years, but that the "bottom" may still be 12-18 months away in a market like Tampa.