If you’ve watched HGTV any time in the past 7 years, chances are you know who Scott McGillivray is. Spanning 120+ episodes over 9 seasons, his long-running show Income Property helps homeowners plan and execute renovations to add income suites to offset mortgage payments.
His program has introduced many to the concept of income property, but Scott isn’t just a television host — in fact, his real estate journey began back in college, when he began scooping up college housing for rental purposes.
Over 15 years later, he’s built himself an empire of not only residential rentals, but also large development projects, including retirement communities, vacation properties and more.
How did he build a scalable real estate business and a well-known brand for himself? Today, we sit down with Scott to chat about house-hacking (to translate his strategy into BiggerPockets lingo), BRRRR (yes, another BiggerPockets-ism), multiplexing, how to best add value to a property, and more!
How to Analyze a Real Estate Deal
Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.
13 Tips Learned By Building a Real Estate Empire
1. Start small, where you are, with what you have.
Scott got started in real estate “by accident” back in university, when he focused a midterm project on the opportunity to own local student rental property. Spending time getting to know the market, he realized that there was a weak supply and a great demand for quality housing. He noticed a lack of good landlords in the area, and with this information, he began to chat with mortgage advisors and real estate agents.
Needing a place to live, he eventually settled on a property where he could rent out three rooms to his friends, with the total rent fully covering his monthly expenses (what we call here on BiggerPockets “house hacking”).
Living in the small basement apartment himself, Scott says, “Everyone told me I was nuts.” But the next year, because of his first rental’s success, he acquired his second property, which he quickly filled with tenants. Within two years of graduation, he was pulling in good money from 8 properties he continued to rent out to students: “It was sort of proof of concept of the first one.”
2. Learn how to scale up in a sustainable way.
By now, Scott has owned hundreds of properties in the US and Canada. So how did he build an 8-property portfolio into a real estate empire? He began to scale up using the buy-rehab-rent-refinance-repeat (BRRRR) strategy.
“When I talk about refinancing or rehabs or value-add renovations, those allow you to grow your business quickly because you pull your equity and your construction costs out of your asset, and then you buy another one,” he explains. “I’m buy and hold so I keep them, and I continue to cash flow on my properties, while still being able to pull my equity out and purchasing more.”
After staying in the student rental game for several years, he expanded into multifamily investing and worked on acquiring properties with potential — those that were undervalued and needed a lot of work.
Says Scott, “It was a balance of getting money out of rehabs along with keeping good, cash-flowing properties so we could continue to qualify for more financing. It’s kind of a tricky game, but once you get good at it and have a good scheme in place, it works.”
3. Don’t underestimate the sacrifices (& rewards) of being an entrepreneur.
Scott still hosts his long-running show Income Property, as well as appearing on HGTV’s Flipping the Block, Canada’s Handyman Challenge and All-American Handyman — all while continuing to invest in real estate and raising two children with his wife Sabrina. While being an entrepreneur isn’t as easy as having a 9 to 5 gig, he believes it’s much more rewarding.
“The best thing about real estate,” says Scott, “is that you can continue to do what you do while taking care of your financial future.”
Scott views real estate as uniquely advantageous because it allows for flexibility and can be as passive or active as you make it — you can be a real estate investor AND keep a full-time career, have a family, and pursue other passions. The beauty is that you can increase or reduce your portfolio in accordance with your lifestyle.
4. Get your hands dirty FIRST — so you know how to manage others when the time comes.
When Scott started out in real estate, he did the majority of property management himself — not to mention performing rehabs and repairs largely with his own time and effort. Despite long hours and hard work, he regrets nothing because he earned a firsthand understanding of real estate.
This in turn made the eventual hiring process a breeze since he knew exactly what needed to be done for a smoothly running rental business. Having done the tasks himself, he knew how to gauge a reasonable price and timeframe for services.
He continues to recommend to newbies starting out to “get their hands into it” FIRST and to invest the time before pouring resources into real estate. Scott also points out that many professionals who can help new investors get off the ground won’t cost a thing — a good real estate agent and mortgage advisor’s services are free, but can be invaluable to your business model.
5. If you’re starting out as a rehabber, save yourself money by learning a few basic DIY skills.
What should a newbie rehabber learn how to do? Says Scott, first get these skills down pat:
- Changing door hardware, including locks (tenants usually like locks changed)
- Professional-level painting (you’ll do a lot of it)
- Laying laminate floor
- Trimming out flooring with baseboards
And add these basic tools to your arsenal:
- Paint supplies
- Supplies to repair drywall
- A solid drill
- Chop saw
- Compound miter saw (to trim out doors, windows, baseboards, etc.)
6. If the numbers don’t work, don’t force it — ever.
In real estate, it’s often said that you make your money when you buy. Similarly, Scott stresses that you MUST first get the price point right: “That is the most important imperative thing because if you can’t buy it and fix it up for less than what they’re selling for in the area, it’s like pushing water up a hill. It’s not going to happen.”
Although he’s pretty much “done it all,” there are some issues he’d rather not mess with, including major structural problems, a complete lack of maintenance, and water damage leading to mold. Still, it’s all about price and whether the numbers work out — some too-good-to-pass-up price points have led him to buy and rehab properties with anything from rat infestations to asbestos to fire damage.
7. Don’t shy away from a good hoarder house.
When Scott was 22 years old, his real estate agent called him with a lead. She let him know that this particular property was one she would only call him about — the client wanted to sell it, but the agent wasn’t interested in taking it on. She would make Scott’s introduction to the homeowner, but that was it.
Walking into the house, he was unprepared for what he found. There was stuff strewn everywhere, but it wasn’t your run-of-the-mill hoarder house. Rats ran rampant through the house, squirrels had taken residence in the closets, and long-neglected, rotting food in the cupboards and fridge permeated the air. The power had been shut off for some time. A group of addicts were holed up, using the corner of the room as a bathroom.
The house was on its way to being condemned. Scott ended up buying it.
While gutting the place, he realized the subfloors were completely saturated with filth — everything smelled like an outhouse. “We were suited up, masked up. I used a power washed inside the house,” he remembers.
In the end, he lived to tell the tale — and owned the property for about 5 years, eventually selling it to one of his tenants for good profit (as he recalls, he bought it for $60k and sold it for $250k, with around $75k in rehab costs).
8. Acquire a marketable skill set.
Scott has been licensed as a contractor for 11 years and has added more than a little sweat equity to his investment properties. “It’s an advantage, but not a necessity” for successful real estate investing, he says.
Still, if you’re looking to turn real estate into a full-time business with multiple employees, it’s nice to have a skill set that applies.
“So maybe you’re a real estate agent, maybe you’re a broker, maybe you’re a contractor, maybe you’re a designer — there’s going to be advantages if you have a specific skill set that can be integrated into your business model,” he advises.
9. Focus on rehabbing the areas of the house with the best ROI.
What are a property’s best areas for maximum ROI? Per Scott, it’s wise to:
- Update bathrooms
- Update the kitchen
- Add square footage by finishing unfinished spaces (attic, basement, addition, etc.)
And speaking of adding square footage…
10. Consider multiplexing.
One of Scott’s favorite ways to create value in a property is by “multiplexing” or turning single family homes into multiple units, thus creating new opportunities for rental income. Some properties are a shoe-in for multiplexing, he says. For example:
“A raised bungalow offers a very simple and massive value add for multiplexing. It’s already got separate entrances, it’s already got good ceiling height, it walks out to the main floor, it usually has the perfect windows for it, and it usually has a large footprint with a basement the same size as the main floor.”
Similarly, some old Victorian homes offer great opportunities, often with 2.5 stories, side entrances or a closed-in front entrance that can act as a common entrance with a staircase up.
If you’re interested in this strategy, be sure to check out your local zoning bylaws first and get to know what your city does and does not allow (not every county allows for basement apartments, converting SFH into multi-units, etc.).
11. Invest where you know best, THEN branch out.
“I always tell investors starting out: ‘Invest where you know best,'” says Scott. He advises trying to find somewhere within an hour of where you live — somewhere you can travel by car and get to know the area, see your property and travel to easily should something go wrong — BEFORE you branch out. Once comfortable, focus on where you can get your best returns.
As for Scott, he waited until he had three years’ investing experience and 15 properties before he started putting his money out of state. Today, he’s active in the Florida market — and loving it. Having bought a handful of deals during the economic downturn (including many retirement properties) when they were selling for a quarter of their initial price point, he says some more than doubled in three short years.
12. Don’t underestimate the power of networking.
Word of mouth, more than anything else, helps Scott find deals today. Yes, people know who he is and what he does (which helps more than a little), but he still stresses the importance of “ground pounding” — find out what’s going on in your market and work with great, investor-friendly agents. Know that there are still deals to be had out there, as long as you’re active in the real estate community.
13. Go after the deals — and don’t stop.
“The best investment properties aren’t found; they’re created. So if you’re not finding anything, it’s because maybe you’re not being creative enough. Usually the best deals are the ones that need a lot of work or need to have a conversion done to them, or maybe it’s just that you’re not looking at the right type of rentals.
“Maybe you need to be thinking short-term executive rentals or longer term vacation properties or retirement living or student rentals. You can’t just say, ‘I want to find a house that rents well,’ and that’s it, right? That’s not good enough. You need to be way more specific with what you’re looking for, you need to crunch the numbers, and you typically need to get your hands a little dirty.”
Bonus: Remember to give back.
Today, busy with television and side projects galore, Scott says he’s happy with the size of his real estate portfolio. He’s become involved in larger development projects and also makes time for his latest passion — spreading the word about financial freedom through investing. At the end of the day, he says, nothing is more rewarding than hearing someone say, “I’ve been watching your show for 8 years, and because of you, I now own 5 rental properties.”
Any questions about Scott’s journey? Want to weigh in about his tips and strategies?
Leave your comments below!