Welcome to today's episode. I have a really cool guest today. His name is Scott Innocente. He worked full time at a government job. Then he became a multi property investor.
Scott Dillingham:Now he's a full time real estate agent. So welcome to the show, Scott.
Scott Innocente:Yeah. Thanks, Scott. I really appreciate you having me on.
Scott Dillingham:Yeah. No worries. First time I've had another Scott on the show. So it'll be fun.
Scott Innocente:Hopefully the last time too. I wanna be the only one.
Scott Dillingham:There you go. No. That's awesome. Scott, I'm very curious about how you got started. Like, what gave you the idea to go from a full time government job to an investor?
Scott Innocente:Yeah. I hear this story a lot, so I think this is gonna resonate with a lot of people. But basically I was at a job that I just felt unfulfilled at and ten or eleven years in the same position where it just feels like a dead end. It had me thinking for five, six, seven years, I was thinking of ways to escape. Just, all that ever came to mind was another job.
Scott Innocente:So it was like, well, I'm just, I'm going to trade this job for another job. It's going be the same problem. And somewhere along the way, I had a friend of mine, a colleague at my old job who kept talking to me about real estate investing. And I just the light bulb didn't go off for me for probably a couple years. And then one day it clicked.
Scott Innocente:Wow, real estate is really powerful. It's more powerful than I thought. It really is the ticket to financial freedom. And once that click happened, I basically just became obsessed with real estate investing. And I started the process of getting my real estate license, and then in the meantime, my first couple properties.
Scott Innocente:And the rest is history, but it started with a light bulb moment, if I had to say.
Scott Dillingham:No. That's awesome. I know for me, it could too. I was working full time. It was really tough.
Scott Dillingham:I read rich dad, poor dad.
Scott Innocente:Yep. Me too. Me too.
Scott Dillingham:Yeah. And then that opened my eyes to investing. And the one thing that I tell everybody that's a new investor is once you get that first rent check, it becomes the easiest money that you've made. Oh, just sit on your couch at home and the rent checks come in. So to me, it's the most addicting type of income to me because it's you do the least for.
Scott Dillingham:Mhmm. So you find that too. So that's awesome. Now, so obviously you're you're a multi property investor. What was the motivation to become a realtor?
Scott Innocente:Yeah. Originally, I didn't actually want to be a real estate agent. I got my license so that I could buy my own properties, access to the MLS, show properties to myself anytime I wanted. It's just a tool as an investor. Nice.
Scott Innocente:And along the way, I just happened to the real estate agent I was using before I was licensed, Paul Germanys. He was starting a team up, AW four U. Along the way, I told him I was getting licensed. And he said, Hey, come join my team. And I was like, I don't really want be a real estate agent.
Scott Innocente:But I knew he's a really successful agent. The team seems really cool. We get along great. Maybe I should give this thing a shot. And also would fast track me quitting my job, because now I'd have a source of income.
Scott Innocente:So anyways, I took the leap. I joined the team all while I'm still buying real estate. Okay. And I found along the way, as I'm starting to help other people, because I know where I came from, I came from a government job. And I started hearing the same story from clients and customers over and over again, they're thinking the exact same thing as I was thinking.
Scott Innocente:And they're looking up to me because I actually did it. I actually left my eleven year government job with a pension and a 100 ks salary and the golden handcuffs, as we sometimes call it. So I really resonated with other people, and they resonated with me. And helping people do what I did has now become a passion of mine. And That's awesome.
Scott Innocente:Very fulfilling, very rewarding.
Scott Dillingham:No. That's awesome. So is there anything mindsets related that you had to go through to make that transition, or you just instantly knew I want to be an investor?
Scott Innocente:That's a very good question. So a couple of mindsets come to mind. Number one is fear. And I want to let people know that fear can be packaged in a lot of different forms. It can be packaged in the market's going to crash.
Scott Innocente:It can be packaged in I'm not gonna get good tenants. It can be packaged in trying to time the market or predicting black swan events, or I know that this is gonna happen in the next year. They're gonna raise interest rates and then I'll buy. But it's really fear putting itself into a form that makes you feel good about yourself for not doing anything. That's a big one.
Scott Innocente:And then number two would be analysis paralysis, which is something that I suffered from when I started, which is thinking that I needed to learn more and watch more of YouTube videos and listen to more podcasts and go on more forums and read more books, learn more strategies. And I actually wasted a good year and a half to two years doing that. And in that time, I actually made no moves. Okay. So I wanna tell people, especially beginners out there, Michael Jordan didn't become a good basketball player by reading books.
Scott Innocente:K? He became a good basketball player by getting it in the game over and over again and taking those shots, those big shots over and over against fiction. Oh, you only need a very baseline level of knowledge for really anything in life, and the real knowledge is gonna come from doing. And stop. Don't waste a year or two like I did.
Scott Innocente:And maybe you're the same way, Scott. I don't know. But Yeah. With the analysis paralysis.
Scott Dillingham:I didn't. I was forced into it. I did I took a rich dad, poor dad course. There was two of them. I did wholesaling and I did rent to own.
Scott Dillingham:What I did was I found a wholesaler and what I was gonna do is I was just gonna find the properties and sell it to this guy. And he said he would buy it. So for me, I was like, great. So I went out, I found a home. He told me to put in a cash offer because if there's conditions, you're not gonna get it, whatever.
Scott Dillingham:So I put in a cash offer, then I gave him the offer like I assigned it to him or tried to anyways, and he was gone. He totally ran away. So it actually like, I knew I wanted to invest in real estate, but that forced me to do it. And it was a crappy property. Like, it needed everything, but I'm so thankful because I learned all my mistakes and everything were on that house.
Scott Dillingham:Awesome. And we renovated. We had to do everything on it. Like roof, we had one of those octopus furnace things, knob and tube wiring, kitchen, bathroom. So I was forced into it.
Scott Dillingham:So for me, I didn't have that problem. But after going through everything, I realized there was nothing to be fearful of.
Scott Innocente:Yeah. And that's why there's the old saying. Right? When you burn the ships or where there's no turning back, you put your back against the wall. That's when people are typically most successful, I find is because you have no other choice.
Scott Innocente:And that's why I quit my like, I was doing real estate for about six months. Yeah. And I ended up quitting relatively way quicker than I thought. I thought I was gonna be at my job for five more years. And I say, you know what?
Scott Innocente:It's time to burn the ships. I'm gonna put my back against the wall. And that's when you work the hardest. That's when you figure things out the most. That's when you have to start making moves.
Scott Innocente:You have no choice. So Yep. It's a blessing.
Scott Dillingham:Absolutely. Yeah. And to touch on the other fears, I think a lot of people, like it's fully self imagined. It's not even a real fear because when you learn and you, like, you get a property manager, then you don't have those bad tenants. When you run the numbers, you don't need to make a thousand, 2,000 a month profit, but even if you make a couple 100 off the cash flow, you're good.
Scott Dillingham:So I agree with you. I think fears, a lot of people, even today, well, what's going on in the world. There's a lot of fear out there.
Scott Innocente:The only way to get over the fear is by doing it. And like you said, as I was afraid on my first buy, my first couple buys, but then you realize, like you said, man, there are actually good tenants out here. Oh, man. I just buy a good property. I'm gonna get good people.
Scott Innocente:If I buy a good location, okay, I know the city pretty well. I can do this. Yeah. And then all of sudden after property two or three, my fear is gone. I don't have any fear anymore.
Scott Innocente:Yep. Because I know what I'm doing. But the only reason I got over that fear is because I did it despite the fear. Yep. And then you'll get over it.
Scott Innocente:But the fear will probably be there for most people to start. And that's fine.
Scott Dillingham:And what I tell people too is it's all in your team. So they could call up any real estate agent, or they could call someone that specializes in working with investors like yourself. So when you work with someone who's strong that understands real estate, you can throw those fears out the window because you're gonna help. I'm sure you help guide your clients and show them what's right and what to do.
Scott Innocente:A 100%. Nobody's gonna know the market. The average person's not gonna know the market better than me. Not gonna know the location. This is what I do every day.
Scott Innocente:Basically, yeah, if you that's a good point. If you work with somebody that's not an investor agent, there's a risk that they're gonna put you in something that's not right. It's not cash flow positive or it's not the right location to get good tenants. Yep. They haven't been through enough investment experience to guide you properly.
Scott Innocente:Really good point.
Scott Dillingham:Yep. No, I agree. So we have to take a quick pause here, but as soon as we come back, I want to go into some issues that I've experienced and you've experienced with investors with buying properties and how they overcame them. And we'll go from there.
Scott Innocente:I'm looking forward to it.
Scott Dillingham:Alright. We'll be right back. Okay. Welcome back. Over the quick pause there, Scott and I were talking, and he had a really great story.
Scott Dillingham:So one of his clients went to a real estate agent to buy an investment property, and it was a terrible scenario. Then they met you. So why don't you tell us about that?
Scott Innocente:Yeah. It comes down to again, working with an agent that doesn't specialize in investment properties, they haven't seen enough bad stuff to know what to avoid. So essentially, client, my now client ended up buying a duplex with a third illegal basement apartment in what I would classify as a D minus West Windsor location close to a strip club. And the big thing with real estate people have to understand is that if you're gonna make a lot of money in real estate, it's gonna be over a long period of time. A property will generate you a lot of wealth, but you have to hold it.
Scott Innocente:You have to hold that asset. So what happens when you buy a crappy property is you don't want to hold it because you're having too many headaches, and you end up selling the asset and not partaking in the long term gains. As day he he somehow got ahold of me. I don't know if he followed me somewhere or whatever, told me his story, and ended up basically working with me to sell the property to sell the asset. He maybe made a little bit of money, but $510 or something like that.
Scott Innocente:Because it's hard to lose money in real estate. Even when you buy wrong, it's really hard to lose, honestly. So he ended up making a little bit of money. But now that asset is nowhere to be found. He's back at square one with zero assets.
Scott Innocente:It's the agent put him in a bad situation. And I don't even blame the agent. Honestly, I just think the agent didn't know any better. He didn't know what kind of tenants that property would attract. And they were social assistance to tenants, low income, headache after headache, misread payments, etcetera.
Scott Dillingham:Yeah. No. And I fully agree. It probably wasn't the agent's fault. It's just lack of knowledge.
Scott Dillingham:You don't know what you don't know. Exactly. Just like with lenders. Right? If the client goes to one specific lender, but you don't know if they're brand new, if they work with investors, because every lender will say, oh yeah, we do rental properties.
Scott Innocente:I've seen a lot of my clients go to inexperienced mortgage lenders or banks like the 21 year old kid that just started as a mortgage lender at one of the big banks. They don't have the psychology to guide you property. They don't know. It's not their fault. Yep.
Scott Innocente:They're not investors. They don't understand the game and they're going to end up hindering your future growth because they're not going to put you in the right product. They're going to put you in a fixed five year fixed mortgage. Yep. When really you want to refinance that property next year.
Scott Innocente:There's a lot of things that are going to limit your growth. And the biggest thing, Scott, in my opinion, is they're not going to help you psychologically. Sure. They're not going to give you the right advice and say, yeah, do this and this and we can help grow your portfolio. They're gonna, they don't understand enough to my biggest job is not necessarily finding somebody a good property.
Scott Innocente:That's a big part of it, but it's really the psychology. I've seen the barriers over and over again, and I know how to break them down because I've done it for myself.
Scott Dillingham:Yep. No. I fully agree. And just to touch on that, there is a specific order of lenders that clients should apply for, just to give you an example and touch on that. So I'm just gonna make up one right now.
Scott Dillingham:Not even make it up, but I'm not gonna say the lender, but just the scenario. So there's one bank who will do five properties, and that's it. Doesn't matter if those properties are mortgaged with this lender or not. They'll do five. There's another bank who will do five on top of whatever you own.
Scott Dillingham:So people don't know that. So if you go to that second bank first, because they only do five in total, you just threw out five properties purchased.
Scott Innocente:That's a great point. So, instead of going to 10 very easily, you've limited yourself to five with a big a lender bank at great rates. So you've not gotten and I was aware of that. So I would tell my clients the same thing. Yep.
Scott Innocente:But another investor agent or another mortgage broker would not guide them properly or put them in the.
Scott Dillingham:Yeah. And unless their focus is real estate investing
Scott Innocente:and growing your portfolio past one or two. Piece. Exactly. Yeah. And this is the psychology of the investment game.
Scott Innocente:I understand that it's not about one property. It's not about two. It's about ten, twenty, thirty, forty, 50 a lot of times for a lot of people.
Scott Dillingham:No. It's true. And so one of the biggest issues that I found with clients that go out with a realtor, and you actually did touch on it in your example, so I feel like I'm repeating myself a little bit, but it really is an agent that doesn't understand investing will sell any property. Where an investor focused agent will focus on the location of that property. What's going on?
Scott Dillingham:Is there a school nearby? Do the tenants have kids? Like those things
Scott Innocente:are What are the top three rules of real estate? Location. And the number of people and agents that I see violate this rule because the ROI seems higher on paper or because the property is cheap is astounding to me. Basically, I'll tell my clients straight up if you like, I'm not going to let you buy a bad location. If you want to buy those types of properties, go work with somebody else.
Scott Innocente:It's just not my game. It's just not my game. Now that being said, I'm smart enough to spot the next up and coming neighborhood
Scott Dillingham:Yep.
Scott Innocente:Or that neighborhood that's about to turn. But those really crappy neighborhoods that I know you're gonna have headache Yep. You're not gonna blame me for that. No. Exactly.
Scott Dillingham:For those people that live in the West End as well, I do wanna see if the West End's not a bad area, but for your client right next to
Scott Innocente:your strip club. That's yeah. I'm speaking from an investor angle. Although there's also a lot of student rentals around there. So if you're looking to attract a nice family, you don't buy in the student rental area.
Scott Innocente:Right? So there's a lot of different And also don't buy an extra shiplo as an investment property. Yeah. Yeah. I'm not blanketing the whole West End
Scott Dillingham:of your pimp.
Scott Innocente:Yeah. Exactly. But, yeah, the whole West End, is it not by any means that I more mean, student rental area than certain pockets. There's bad pockets everywhere, by the way.
Scott Dillingham:No. Absolutely. Absolutely. Well, that's great. So on your end, so you're going out with a client.
Scott Dillingham:What are some issues that you see for maybe financing or anything in general?
Scott Innocente:The it comes down to psychology again. A lot of people start with this mindset of I've got they're trying to plan for their tenth property before they bought one. And when you have a goal that's too big for you to digest, a lot of people end up stuck, right? Oh, I can't buy this duplex. This is going take all my money and I'm not going to be able to buy my second property.
Scott Innocente:And I'm like, no, don't worry about that. Buy your first. And they also have this belief that they can only get five properties or two or three properties. So they don't have the, I talked to you plenty of times. I know there's ways to get ten, fifteen, 20 properties with working with somebody like yourself.
Scott Dillingham:And there's three sort of separate types of lenders and what they'll use for rental income. So for an example, let's say you buy a house and it's you can rent it for 2,000 a month. Most of the big banks and big lenders will only use half of that rent. So they'll use a thousand to help you to qualify. But then we've got other lenders with comparable rate.
Scott Dillingham:It's not like you're paying a premium. Comparable rates, and they're gonna use between 80 to 100% of the rental income.
Scott Innocente:Such a big difference.
Scott Dillingham:So right there, your client can qualify for more, which is great.
Scott Innocente:Is that that's gonna your debt service coverage ratio and everything else is gonna keep your ratios in balance. Yes. You have that high income. And because Windsor is an affordable city, your rent is high relative to the purchase price. So that will allow you to scale way easier, especially if you're just working an average job or you don't have a ton of money to start out with.
Scott Dillingham:The one other cool thing, and I don't want this to be too much about us, but the one other cool thing that we try to do is a lot of lenders out there when they're capped out or having financing issue with the a lenders, they'll go to a b lender or a private lender. And we do have those options, but we try to skip that because we have a commercial department and for investors, commercial is similar rates as residential and you don't have all those expensive interest rates and bad terms and stuff. So we shift them to commercial instead of be lending in private. And it's so much better.
Scott Innocente:That's huge. That's huge. People, there's a lot of people out there that don't have a ton of financial capacity to start and talk to somebody like Scott, scale your portfolio double or triple with this type of advice. Yep. Then you would working with the wrong people.
Scott Innocente:Like, it's very simple. That's great. That's a great program. I'd like to hear more about that, actually.
Scott Dillingham:Yeah. For sure. I'll definitely show you more for sure. Now because we don't have too much time left, but if you would say, like, you had one really good piece of advice for investors, and I know we've spoken a lot here, especially mindset, because I do think mindset's one of the biggest things. But is there a tip or strategy that you would give that's quite universal that's really good?
Scott Innocente:Yeah. It's very simple for me. There's basically three rules that I operate under. Number one is location. Gotta be a good location.
Scott Innocente:Doesn't have to be the best, but it just has to be good, better than average. Yep. Even slightly. Good location, good property, which means the property is going to attract good people. Yep.
Scott Innocente:It's not gonna be a money pit. It doesn't have a foundation crumbling. Or if it does, you're aware of it and you get a discount. Yep. And you're gonna fix So good property, good location, and then cash flow positive.
Scott Innocente:If you can find those three, like it's a bind. Yep. Anywhere on the scale. So don't overthink it. You don't need to learn more.
Scott Innocente:You don't need to know more. You don't need to read any more books. I have a few clients right now that are just, they're stuck in learn mode. Yep. Good property, good location, cash flow positive.
Scott Innocente:Go make a move and then build your right, build the right team.
Scott Dillingham:That's right. Because for an example, say there is a property and it needs work and it's not cash flow positive. You can build in renovations into your mortgage by working with the right team. You'll learn that. And then so you can take a property that could be at a loss, improve it with the bank's money, not even your own money, and then your cash flow put up.
Scott Innocente:Love it. Do you now for that? Do you have to front the money upfront for the renovations or can you get funded?
Scott Dillingham:There's a lot of lenders that you do have to now for doing a progress draw. That one, we can fund it in stages.
Scott Innocente:Interesting.
Scott Dillingham:So you do I'm making an example here, but say you did the bathroom and it costs you $5. They'll give you the money for the bathroom. Then you do the kitchen. They give you the money for the kitchen so they can do it in state.
Scott Innocente:This is huge for people with limited capital that wouldn't have the capital to buy a property and fund a renovation. That's right. They only have enough to maybe buy the property and $10 extra or something. Yep. I see it all the time, by the way.
Scott Innocente:So that's a great program. And this is the type of advice that will take you from zero to a 100 way quicker.
Scott Dillingham:Exactly. Absolutely. I really appreciate your time today, Scott. It was a great chat, and I look forward to having you on next Awesome.
Scott Innocente:Thank you.
Scott Dillingham:Thank you. Take care.