Turning Home Equity Into Cash Flow | Duplex to Syndications with Scott Florida

Scott Florida (00:00)
In 2013 or so, we adopted another couple of children. And then we had another child as well. So we had eight children in 2013 going into 2017. And by the time we got to 2017, I was kind of like, ah, this is a lot. I don’t know how to provide for them, you know? And there’s a lot more story to it. But ultimately, what we realized is that we had equity trapped.

that we could use to purchase additional properties and then increase our cash flow, but then ultimately long-term increase our net worth as well. ⁓ And so we started doing that. And in the process of doing that, we were like, hey, this is working well. We found some turnkey providers that are fantastic. We still recommend people to them today. And ⁓ the result was we were starting to help other people to get invested in single-family homes.

Dylan Silver (02:27)
folks, welcome back to the show. Today’s guest is a Michigan based real estate investor active across multiple asset classes who also focuses on bringing missionaries and pastors into real estate investing. Please welcome Scott Florida. Scott, welcome to the show.

Scott Florida (02:44)
Hey Dylan, thanks for having me man. So excited to be here with you.

Dylan Silver (02:47)
It’s great to have you on the show here, Scott. I think what you’re doing is great. We were talking a little bit before hopping onto the show here. You’re really active across a ⁓ wide range of asset classes in the real estate. I wanna touch on that. But before we get into that, how did you get into the real estate space?

Scott Florida (03:06)
Yeah, that’s a great question, man. Always want to know where the origin story is, right? How did this all begin? And for us, it was my wife and I coming into a new community. We took a job at a church here in our area and needing to find a home. And we were looking and couldn’t find anything that really fit our buy box, which was, you know, a nice enough home for us to grow our family. But then also in a nice enough neighborhood to where we felt comfortable with the kids running around and building relationships and being out.

Dylan Silver (03:11)
Right.

Scott Florida (03:35)
at night and so we were just trying to find that balance and it was just difficult and interest rates were over 8 % at the time. This is like the late 90s and so we were trying to figure that all out and ultimately we were invited over to a missionary friend’s house who owned a duplex and so he had us over for dinner and we had just a blast being with them and then we’re thinking looking at this duplex going this is so nice it’s nicer than any of the homes we’re looking at and there’s three bedrooms and it’s got a garage and

Ultimately, he’s like, yeah, well, and you’ve got somebody helping you pay the mortgage. ⁓ And so for us, it was kind of a light bulb moment. And we ended up buying a duplex that’s literally two doors down from them. And so we ended up being neighbors as well. And so it was just an incredible opportunity for us. And then from there, ⁓ we actually bought another one a couple of years later that was farther down. We started to see how it worked. Like, OK, people are helping you pay the mortgage. This is really a potentially productive.

way to move forward. we bought another duplex. That was about the year 2000. And lived in that for seven years. It was supposed to be a two year plan, but you know how things go. And so that was only a two bedroom though. So we ended up with five kids and a two bedroom duplex. And you know, was kind of like what my kids start asking for a door for Christmas because they’re in a section of the basement. It was a finished basement. It was nice, but it was like, they just had an area instead of a room, you know? And so like, we get a door?

So that was a moment for us. And so we were like, okay. And then we ended up moving into a rental for a short period of time, which was the perfect time to be looking for a house. Cause we moved into the rental in 2007 and we bought a house in 2009. So that was another just, you know, gift from God, opportunity, timing, once in a lifetime type timing. And so we started realizing that, Hey, this, this is working.

Dylan Silver (05:19)
Yeah.

I want to ask you about ⁓ regionality here. I know you’re a Michigan based investor. ⁓ And at that point in time, was it Michigan that 2009 timeframe?

Scott Florida (06:31)
Yes, yep, we were in Michigan. And so we were on the west side of the state though. ⁓ You know, our east side with all the auto industry just took a beating, but the west side wasn’t as bad. ⁓ So we actually did pretty well during that time period with our rentals. Matter of fact, our rents went up actually during that time because yeah, when you buy workforce housing and you buy it in the right areas, people can earn their way up into them, but then they can also lose their way down into.

Dylan Silver (06:40)
down.

No kidding.

Scott Florida (07:00)
and you provide this niche ⁓ market that really consistently ⁓ has demand. And so that was how it worked for us during that time period. So it was really helpful. Obviously, we lost value, right? The ⁓ equity was disappearing, but we were able to actually increase our cash flow.

Dylan Silver (07:22)
So you’ve got cash flow, you’ve got the greater landscape of the financial crisis in 2008, but you’ve got multiple duplexes, Michigan-based. At what point in time did you start thinking, okay, we’re gonna start bringing on some other investors and we’re gonna start taking a look at some other asset classes?

Scott Florida (07:45)
Yeah, that’s great. So

in 2013 or so, we adopted another couple of children. And then we had another child as well. So we had eight children in 2013 going into 2017. And by the time we got to 2017, I was kind of like, ah, this is a lot. I don’t know how to provide for them, you know? And there’s a lot more story to it. But ultimately, what we realized is that we had equity trapped.

that we could use to purchase additional properties and then increase our cash flow, but then ultimately long-term increase our net worth as well. ⁓ And so we started doing that. And in the process of doing that, we were like, hey, this is working well. We found some turnkey providers that are fantastic. We still recommend people to them today. And ⁓ the result was we were starting to help other people to get invested in single-family homes.

That was the moment when we were like, ⁓ this is really helpful. We were able to teach people, train them how to do it. But for some people, that’s a big jump. How do you come up with 30 grand or 40 grand or whatever for a down payment and to get established in buying a turnkey property where somebody else is managing it? again, because my goal was to come alongside pastors and missionaries particularly, but people in general, frontline workers, ⁓ firefighters, teachers, anybody that’s

Dylan Silver (08:56)
Right.

Scott Florida (09:12)
doing that frontline work that probably doesn’t get paid what they’re worth, right? And so how do we help them do what they need to do? And that’s when I stumbled on syndication. know, when I was trying to figure out what to do and how to use the equity and all that kind of stuff, that was when I went into this deep dive of education. I found the real estate guys, Keith Weinhold, some of those guys that, you know, really were instrumental in teaching me through their podcasts, just through their podcasts, what I needed to know to start making some changes.

Dylan Silver (09:16)
Right?

Scott Florida (09:42)
And then that process led me to understanding and realizing ⁓ and learning about syndication. And then here I am sitting here realizing, you know, I’ve been a landlord for 20 years. I’m now I have property managers. I have property out of state. I think I could do this from the standpoint of take on the responsibility of the work and allow other people to come in passively and, you know, build out a company that really for us allows people.

that are ministering to be in the places that need them, not just the places we can afford them, right?

Dylan Silver (10:50)
Yeah.

I want to ask you, Scott, about raising capital. And this is a question that I have personally. I’ve had a lot of guests who are in the capital raising space, a lot of people that have come from Wall Street to into real estate, but then a lot of folks who, you know, self-taught and I get a wide range of advice and experience as someone who’s done it yourself. ⁓

What has been your experience, especially getting started raising capital?

Scott Florida (11:21)
Well, it’s a slow process. ⁓ You’re asking someone to trust you. That’s the bottom line. they want, rightly so, ⁓ to see a track record. They want to know that you’ve done the due diligence on the deal. ⁓ Again, the root of it all is they want to be able to know that they can count on you to deliver on the deal.

And they also understand if you’re, if you’re, so if you’re doing your job right as a capital raiser or as a, investment advisor in the way that you would function that way in a fiduciary role, ⁓ there’s multiple things that you’re trying to do. And it all starts with understanding the investor. What does the investor need? Because what you have may not be what they need and you’ve got to have the, the willingness and the discipline.

to encourage someone to not do your deal because it’s not good for them. It’s not a good time maybe, or it’s not the right project, or what your deal provides may not be what they need. And so there’s this, the most significant part for me is, and again, I’ve been taught this with my mentors, ⁓ which is, hey, you gotta know what they need. When you start with that, then you’re in the best position to potentially help them if you have something that meets that need.

Does that make sense?

Dylan Silver (12:46)
100 % I think what’s interesting for a lot of folks when it comes to raising capital you mentioned trust you mentioned track record people just starting out will say well you know I know what I’m doing is solid but if I’m just meeting someone brand new I don’t have this extensive track record you know how do I start where do I start I’ve had guests tell me you really got to start by asking really everybody or not asking but telling everybody what you’re doing and that you you do ⁓ raise capital

and that’ll pique their interest. Who is this person? And I’m interested in real estate, but I’m a frontline worker, or I’m a doctor, or I’m a nurse, or a pastor, right? And I may not have the educational background, or even the time bandwidth to be looking at this, but if I can outsource that or delegate it, that can be a tremendous value adder for a lot of people. I do wanna pivot a bit here, Scott, and ask you about some of the…

asset classes that you’re involved in, you’re exploring. I heard a couple of ⁓ different asset classes before we were hopping on here. Everything from oil and resources to ⁓ multi-family ⁓ and I’m sure I’m missing out on a couple and I don’t want to incorrectly state, but how did you start looking at some of these other asset classes?

Scott Florida (13:55)
Mm-hmm.

Sure.

Yeah, so part of it had to do with listening to investors. know, as you sit down and you talk through with your investors, and again, it’s all relationship-based, just sales or investing, it’s all relationship-based. And so for me, the big task was getting in the rooms, meeting those people, and getting to know what their needs are. And my deals needed to provide for my investors.

And so some people are like, hey, this is what I’m good at. This is my niche. Here’s what I’m doing for us. We’re more ⁓ agnostic as far as what the deal is. We’re looking for the right partners. Maybe you’re familiar with that book, who not how by Benjamin Hardy and Dan Sullivan, hugely helpful. And like you were talking about earlier, you know, who can help me with this? ⁓ That’s that’s kind of where we started. And so in having conversations with our investors, we started realizing, well,

Dylan Silver (15:02)
Yeah.

Scott Florida (15:50)
Some single-family homes would be good. So we did a syndication where we purchased single-family homes in Arizona. So that project’s completed and cash flowing and doing what needs to do. ⁓ We started hearing that some of our investors were looking for kind of a, hey, I just want a fixed return, something I can count on, something in the double digits. And so ⁓ we are doing a project in Austin, Texas right now. We’re using modular construction to build single-family homes in the city.

and the returns on that for investors, we have a preferred return structure. In other words, investors get paid first, the general partners get paid after the investors get paid, and that’s a 14 % preferred return for a 50K investor and a 17.5 % preferred return for a 100K investor. We actually even have a 500K tier on that one as well. But again, it’s modular construction, so.

We feel like we’ve dialed in enough margin to where this ends up being a great opportunity for investors where they can come in passively and be a part of building homes and solving some of the housing crisis that we see. So that’s what.

Dylan Silver (17:02)
big

fan of the modular space, huge, huge fan, especially you mentioned Austin, Texas, especially being a ⁓ realtor and having lived in Texas for about five years. It’s one of these things where I see exactly what you’re saying with it solving the housing crisis. You have everything from ⁓ modular homes that I believe you can find for around the $60,000 range brand new to super high end, I would say,

Scott Florida (17:06)
Yeah. ⁓

Dylan Silver (17:32)
⁓ indistinguishable. Yeah, I mean, they look they look just like a stick built home that you would find. ⁓ I’ve seen I’ve seen I want to say I’ve seen them with garages and with porches and even possibly multi multi level. I think it’s incredible what modular is doing off site, you know, stick built. I’ve even seen them steal construction so that they can weather, you know, potentially disaster prone areas. I think it’s incredible what’s going on in that space.

Scott Florida (17:33)
luxury.

Absolutely.

Yeah, Yeah, it’s fantastic.

Dylan Silver (18:03)
I do want to ask you about investing across states. You’re in Michigan, you’re looking at deals in Texas, I’m sure in other areas as well. What’s your approach to looking at deals and how do you decide where to invest?

Scott Florida (18:17)
Yeah, starts again. I keep saying this, but it starts with people. You want to start with people where you have relationships. But again, another key factor there is going to be the market. What is the market doing? One of my mentors is Robert Helms. He always says, live where you want to live, but invest where the numbers make sense. You’re looking for those two things, I think. You’re looking for the right market, so it’s got the tailwinds, it’s got jobs, it’s not ⁓

⁓ It’s diversified. So it doesn’t have just one. It’s not a one-trick pony as far as the ⁓ Drivers for their economy, but then you’re also looking for those people in those ⁓ metros and in those, you know greater MSA’s who there can help me and again What is the game plan? What’s the need in that community? You know, it might be a three-bedroom might be a four-bedroom. It might need to be rehabs It might need to be you know, it could whatever the need is

I think that can drive as well. again, if your approach is dependent, most of us are not gonna come in and know all those different asset classes in all those different ways of ⁓ doing business with real estate. And so for us at Congress Capitol, one of the things that we do is we look for those people that we have relationships with. So I may not do a multifamily deal unless I have a multifamily partner.

that we trust that has a track record that is aligned with us in purpose that we enjoy working with, that we have a relationship with. That’s how you find, from my perspective, how you find those good opportunities. It’s ultimately, obviously the market, but then second of all, finding the right people to partner with.

Dylan Silver (20:05)
It’s huge. It’s huge. mean, one relationship can make you certainly in real estate, it could certainly do the opposite as well. ⁓ Scott, we are we are coming up on time here, though. Where can folks go if maybe they’re in the Michigan area, they’d like to reach out to you, get in touch with you, or maybe they’re outside, but would like to present a deal to you or maybe invest in one of your invest in one of your deals.

Scott Florida (20:13)
So true.

Yeah, that would be great. We didn’t talk about the oil and gas. I just want to mention we do have a very narrow window of opportunity there. And the projected returns on that are pretty amazing. And it’s a very ⁓ de-risked type of oil and gas investment. It’s different than, I’m going to invest in three wells and hope it works well. ⁓ This is a much different structure. So if you’re interested in that space, and again, that’s one of those things where you diversify, that might be an option.

That’s an option. the way you could reach out to us is through our email, my email address. You could reach me at scott at common grace capital.com. ⁓ And then if you want to just get to our website, you could see what we’re actively doing there ⁓ at common grace capital.com. And you can go to our deal page and see what’s active. Also, if, you say, Hey, I’m not a credited investor, but I’d like to build that relationship and know what’s going on. You know, you can join our investor club and we send out information.

just kind of educational purposes, then also keep people informed about where the opportunities we see are and what opportunities are coming our way.

Dylan Silver (21:34)
Scott, thank you so much for coming on the show here today.

Scott Florida (21:37)
Dylan, it’s been a pleasure. Thanks for having me,