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Show Summary
In this episode of the Investor Fuel podcast, host Michelle Kesil interviews Scott Cooper, a seasoned professional in the construction and renovation industry. Scott shares insights into his business model, which includes property investments, renovations, and a restoration company. He discusses the importance of partnerships, navigating challenges in the market, and the lessons learned from past experiences, particularly during the 2008 financial crisis. Scott emphasizes the need for flexibility in business, the significance of building a strong team, and the value of customer relationships. He also outlines his future goals for scaling his renovation company and expanding into new markets.
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Investor Fuel Show Transcript:
Scott Cooper (00:00)
think that there’s probably a lot of people that were around in the 2008 space and when 2008 hit I was doing fix and flips and you know when the market crashed and you know there just wasn’t ⁓ lenders lending money you couldn’t flip anything. So here we were you know you can still buy you could acquire it.However, offloading it became a little tricky. So that’s really kind of where the whole opportunity became. at the time, talk about kind of a huge kick in the gut, right? You’re just like, you’re looking at all these assets you’re accumulating, and it’s a slow road to get back through monthly rent. But looking at it now, I mean, I think we have, well, at one time we had over 50 rental homes.
dialed it back, I’ve gotten older and time has become more valuable, but we’re still sitting at about 20 of our rental houses and it became a blessing, but at the time it was quite a scramble to figure out how to facilitate getting renters into them and obviously paying the bills. You have a $30,000 to $50,000 upfront cost of renovations, but you can only get that back at a few hundred dollars a month.
Michelle Kesil (02:46)
everyone, welcome to the Investor Fuel podcast. I’m your host, Michelle Kesil Today I’m joined by someone I’ve been looking forward to chatting with, Scott Cooper, who’s been making serious moves in the construction and renovation space. So excited to have you here on the show today, Scott.Scott Cooper (03:05)
Thanks Michelle, excited to be here.Michelle Kesil (03:06)
Awesome. I think the listeners are really going to take something away from how you’re approaching your construction and restoration business. So yeah, let’s dive in.Scott Cooper (03:17)
Absolutely.Michelle Kesil (03:17)
Awesome. First off, for those who are not familiar with you and your world, can you give a short version of what your main focus is?Scott Cooper (03:25)
So we do property investments with some new construction, some renovation type properties. But we also have a restoration company that complements that. So it allows us to do more of our property repairs in house.Michelle Kesil (03:39)
Awesome. And what markets do you operate in?Scott Cooper (03:41)
We’re in the Des Moines market, we’re central Iowa.Michelle Kesil (03:45)
Awesome. Yeah, and can you share a little bit about like some specific services that you provide and what kind of people do you help and the projects that you offer?Scott Cooper (03:54)
Absolutely. So we have kind of two sections to our business. One is on the property side where we have realtors and trust attorneys, stuff like that, that’ll give us leads and we get to reach out and try to acquire different properties. And in that business, of course, some properties we hold and ⁓ rent or some of the properties we actually fix and flip. Then on the other side is our restoration company whereWe have a variety of ⁓ clients that are not just from our in-house projects, but are seeking construction services. So it gives our team a lot of opportunity to stay busy so we can feed some of our own work in. But also in those months where projects are in between, we have a nice client base that keeps the guys busy.
Michelle Kesil (05:27)
And what’s been the key to keeping your business running smoothly?Scott Cooper (05:32)
I would say partnerships, whether it’s partnerships with other vendors, partnerships with different lead sources and stuff like that. There really is that old saying, that givers gain kind of thing. Help somebody out and they’ll help you out. So that’s really been key for us.We don’t spend a lot on advertising. We definitely do a lot of referral based type services.
Michelle Kesil (05:53)
Awesome. And what got you started in this business?Scott Cooper (05:58)
You know, that’s a great question. So, I take you back almost 24 years ago. You know, I was doing construction work. And I really loved it. But I’ve always had a passion for getting into the homeowner space. So I bought my first home and went ahead and took out a home equity line of credit and bought my first investment property.doing a few of them and I learned kind of the struggles of you know working with contractors and getting them to show up and everything else. I just knew one day I wanted to be able to have you know another company to complement the real estate investment. So eventually I kept plugging away and plugging away and you know we were able to put one together. It was great. My son is a partner in that company and ⁓ so you another exciting part of it is getting to work with family.
Michelle Kesil (06:43)
Yeah, absolutely. I love that. So let me ask you this. Everyone has a moment in their business where things got more real. Maybe a deal went sideways or you had to make a fast pivot. Would you mind sharing one of those moments that you’ve experienced?Scott Cooper (07:01)
Absolutely. So I will tell you ⁓ andthink that there’s probably a lot of people that were around in the 2008 space and when 2008 hit I was doing fix and flips and you know when the market crashed and you know there just wasn’t ⁓ lenders lending money you couldn’t flip anything. So here we were you know you can still buy you could acquire it.
However, offloading it became a little tricky. So that’s really kind of where the whole opportunity became. at the time, talk about kind of a huge kick in the gut, right? You’re just like, you’re looking at all these assets you’re accumulating, and it’s a slow road to get back through monthly rent. But looking at it now, I mean, I think we have, well, at one time we had over 50 rental homes.
dialed it back, I’ve gotten older and time has become more valuable, but we’re still sitting at about 20 of our rental houses and it became a blessing, but at the time it was quite a scramble to figure out how to facilitate getting renters into them and obviously paying the bills. You have a $30,000 to $50,000 upfront cost of renovations, but you can only get that back at a few hundred dollars a month.
Michelle Kesil (08:18)
Yeah, absolutely. And what did you like learn from this experience?Scott Cooper (08:22)
Always be fluid, you know.You know, I, you know, again, you don’t know what you don’t know, right? But I feel that had we had stayed determined on trying to flip, the outcome would have been a lot more difficult. I think we would have had a lot tougher go at it. But because being flexible and seeing, you know, hey, at least if we get renters in there, you know, the property is occupied, it’s, ⁓ you know, it’s generating revenue. It’s a slow growth model, but it’s generating the revenue to where
we can facilitate selling it later. And that was big. That was a big moment for us.
Michelle Kesil (09:34)
Yeah, absolutely. So what are you most focused on solving or scaling next?Scott Cooper (09:42)
Our renovation company is really what we’re really pushing to scale. We see a kind of a hole in this space that we’re trying to fill. And we feel like it’s got the ability to be a model to duplicate in other markets.Michelle Kesil (10:02)
Can you expand on that? What’s the hole that you see and what’s the model?Scott Cooper (10:06)
Yeah, so what we’ve really taken on a lot in the last, I’d say 24 months has been kitchen and bathroom renovations. although there’s some people in that space, we feel that there’s a lot more volume of work out there that has not been, the needs haven’t been met. And so as we’re pushing through, I mean, we’re…know, our clothes ratio on these, on our kitchen and bathroom designs are 60, 70 % on a lot of them. And the margins are great, of course, as long as nothing goes wrong.
Michelle Kesil (10:39)
Right? Makes sense. So are you mostly like working with investors and new home buyers who are your primarily targeting?Scott Cooper (10:51)
So it’s mostly residential homeowners. although we talked earlier on about interest rates being of most investors’ concern, in the renovation space, although it affects people because they want to borrow money at the lowest rate available, right? But at the same time, they’re also looking at it going, OK, well, we want to move because we’re not in love with our home anymore.However, the cost to move now is more significant than if they just make the home lovable again, right? know, new kitchen, new bathroom, maybe a room addition. And so they’re willing to spend, you know, 75,000 to 125,000 renovating the home that they already have versus…
what they’re gonna lose, especially with people that were locked in at these 3%, 3.5 % interest rates on their first mortgage, they can do a second mortgage at today’s interest rate and essentially make the house as new as possible with update and all these areas. So that’s where we’re starting to see, I think we’re seeing a really big influx on that.
Michelle Kesil (11:53)
Yeah, amazing. And do you support investors in any way through this process or with the construction?Scott Cooper (12:01)
We do, because within our renovation, we also are certified for mold remediation and water damage. And so we do work with a handful of investors that were just blindsided. They pulled down some paneling or they went to demo a flip, right? And they all of sudden run into some mold damage or some significant water damage and sometimes structural. And so yeah, we come in, we compliment those guys and helpthem work through that challenge and it’s been good. It’s always good to have a nice blend of those types.
Michelle Kesil (12:36)
Yeah, absolutely. And the construction side of your business, like what does kind of that process look like?Scott Cooper (12:43)
So I’m assuming you’re referring to the construction on like our flip and our investment property type stuff. Yeah. So again, opportunity, right? And so about five years ago,Michelle Kesil (12:50)
Yeah.Scott Cooper (12:56)
I managed to come across some land in a part of the Des Moines suburb that ⁓ actually has tax abatements. And we started looking at it because, of course, fix and flips were getting little tricky to find. There was just so many people gobbling them up, and we didn’t have the foreclosure rate that we had in previous years.being able to find some of this land that has tax abatement. So we started building some new construction projects and having them as long-term investment. But with that tax abatement, for our area, it’s a five-year. And so even though we have the initial upfront $300,000, $400,000 build cost, the five years with the savings on property tax, it just makes the profit margins much better on that rental.
Michelle Kesil (14:21)
Yeah, amazing. So are these like your own rentals or are these other people’s rentals?Scott Cooper (14:28)
So all the ones that we’re doing builds on, they’re our own personal build. mean, they’re owned by our company, but they’re not, you know, we’re not design build for an outside client. These are all for us to utilize in our, essentially in our portfolio.Michelle Kesil (14:41)
Awesome. So what is the next big goal that you have?Scott Cooper (14:46)
Our next big goal with, you know, on construction side, we’re kind of modest. We’re only wanting to do maybe two or three of our investment properties per year and just kind of keep that as a slow growth model. But on the restoration side, the big thing for us is reaching into a new market, bringing that model into a new market. And that’s what we’re hoping within the next 24 months to be able to do that.Michelle Kesil (15:10)
What is that new market like you mean outside of your current territory?Scott Cooper (15:14)
Yeah, correct. want to get, right now we service within about 30 miles of our town and we really want to expand beyond that. want to, you know, we would love to get a location, you know, 60, 75 miles. We haven’t, we haven’t pinned the map yet to see exactly which direction we’re going to go. But, you know, I think in the next 12 months, we’re really going to look at the research and see, you know, what town, what area.best suited, know, A, with the need in the market presence, but also accessibility, you know, where we can staff it and such.
Michelle Kesil (15:49)
Yeah, amazing. And do you have like a lot of employees? Like kind of what is like your team structure look like?Scott Cooper (15:59)
So we have about five employees at the moment. And we could certainly probably bring on two more when we’re actively recruiting and searching for those people. But it is tough. I’m sure most owners out there would totally relate to the difficulty of recruiting good staff.And so we do utilize contractors to help facilitate some of our services. whenever possible, we love to keep it in-house.
Michelle Kesil (16:26)
So I know a lot of people listening to this show are earlier on in their journey or looking to level up. And when it comes to growing your business and building your network, what do you feel has made the biggest difference for you?Scott Cooper (16:42)
⁓ I feel like there’s two components that have been really great for us. And one is your team, your people. And we don’t just say that as just an exciting topic. We really mean it. we like to bring in people that…Essentially, I in my opinion, I say we only hire people that I would trust at my home by themselves, right? And so we’re selective in that regard. But it’s also, you really do promote that team atmosphere and people that want to be a part of that. And then the other side of it is, and it’s great to have a great team and that all works, but without customers.
you know, they’re not gonna last, right? Because we all have to have a paycheck, right? We all have to pay our bills. you know, the second component of that is good customers. And I had heard somebody, you know, a while back say, you know, there’s no such thing as a bad customer. You know, it was just a, it was a bad business owner or a bad manager that didn’t meet their expectations.
And there is, I would say there’s a lot of truth to that, but there are some people that you just, know, those customers that you just can’t meet that expectation. You know, you’re just incapable of it. And in those, it’s like shark-infested waters, right? You need to steer.
clear of those and sometimes you don’t see the warning signs until it’s too late. But definitely, if any of the listeners out there, when you’re meeting with your customers, especially early on, and when I say customers, whether you’re in the construction field or you’re an investor, not every investment is meant to be yours. And to speak on that, I would tell you I had moments of where I…
I had a great bid. The home was, I was going to lock it up. I was going to have a lot of potential revenue and income from it. And I was trying to force a square peg through a round hole. The more I was in there, I was learning, ⁓ wait a minute. Now an inspection shows the sewer’s bad.
And then I didn’t notice that the electrical and so, but the more I kept going, that’s just 10 grand. that’s just five grand. And then I didn’t walk when I should have. And it come back to bite me, right? And so I had to learn it’s okay to say this is my break point and walk. And that’s for the best.
Michelle Kesil (18:52)
Yeah, I think that’s an important lesson. Are there any other lessons that you’ve learned from this journey that would benefit people to share?Scott Cooper (19:00)
Well, again, it depends on their journey, Whether it’s, they’re specific, whether they’re on the construction side or if they’re in the investment space or they want to become landlord, right? I have a lot of battle scars, so to speak, when it comes to working with tenants. And that’s gonna be really tough for everyone, know, state to state, right? Because your state laws are gonna dictate how.how difficult it can be to work with individual renters. And fortunately for us, we’re kind in the middle of it, know, where, ⁓ you know, our tenant landlord laws aren’t too stringent, but they’re a little more tougher than some. And so I would say that, you know, on that side of it, you
It’s okay to walk away from a potential tenant. Just like a customer, I really. I can tell you time after time where early on I just kept trying to force it going.
I needed that job because I wanted that customer to say yes and I should have taken it. I shouldn’t have approved a tenant to move in. When they go, oh yeah, they call you up on a Thursday and this is a true story, called me up on a Thursday and they were ready to move in, had cash in hand and everything else and they moved in.
Well, when they showed up with cash in hand, they just had the deposit. So then they wrote a check for their first month’s rent. Well, that rent check bounced. you know, I let them move in that next day, but they’re moving in there. And now they have resident rights. So here I’ve got somebody, I’m trying to chase them around for ⁓ a bad check that they don’t have the money for. So again, you know, I know you hear a lot of people talk about
you know what, no one to say no, but, and even I’d hear stories and I’d always look the other way, but yeah, your time will be better spent if you do say no sometimes. chase the customers or chase the projects that you know aren’t gonna be a headache and a hassle.
Michelle Kesil (21:03)
Yeah, that’s a good one. Awesome. So before we wrap up here, if there’s anyone that wants to connect and learn more from you, what’s the best place that they can find you?Scott Cooper (21:14)
Well we have our YouTube channel and you can always check that out. then my email is scott at maxxrestoration.com.Michelle Kesil (21:22)
Perfect. Well, listen, I appreciate your time, your story and perspective. So thank you again for being here.Scott Cooper (21:28)
Absolutely, and thanks for having me. It was a lot of fun.Michelle Kesil (21:31)
Awesome. And for those of you tuning in, if you got value from this, make sure that you’ve subscribed. We have more conversations coming with operators just like Scott, who are building real businesses. And we’ll see you all on our next
