BiggerPockets Money Podcast 43: Using the Power of Goal-Setting to Fundamentally Alter Your Financial Path with J Scott

by | BiggerPockets.com

You’ve probably heard J Scott’s real estate story (spoiler alert—he’s killing it!). But he’s never really told his money story that led up to this massive real estate success.

Today, we talk to J and discover that in his 20s, he knew nothing about money, investing, or real estate. He started off $35,000 in debt, with no plan and no goals. An investing discussion with friends led to the creation of a spreadsheet to display his financial position in terms he could not ignore.

The spreadsheet spawned a goal of $0 debt, a second job as a bartender, and J paying off all his debt in two years. He discovered he liked owning assets. At the suggestion of his wife, they bought a house to flip and promptly made every single flipping mistake you can make.

Hear how J turned mistakes into successes many times over—and how having a goal to work towards keeps him focused on moving forward.

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

This is the Bigger Pockets Money podcast show number 43 where we you may know him as interview J Scott from 123Flip.com or you might know him as J Scott author of The Book on Flipping Houses.

I had the second job. I had my job. I was spending less money instead of going out to dinner I was bringing in dinner, which I guess at the time I thought was saving money because I wasn’t paying a tip, but I was getting there. I was moving in the right direction and then one day I decided I was bored. I like I love the fact that I was saving money, but I needed to see more than just like a thing going up on a spreadsheet so I said, “I want to buy something. I want to buy an investment.”

It’s time for a new American dream. One that doesn’t involve working in a cubicle for 40 years barely scraping by. Whether you’re looking to get your financial house in order, invest the money you already have or discover new paths for wealth creation. You’re in the right place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money podcast.

Scott: How’s it going everybody? This is Scott Trench. I’m here with my cohost, Miss Mindy Jensen. How are you doing today Mindy?

Mindy: I am doing fantastic today Scott. I am so excited for today’s interview. J Scott has been interviewed on the Bigger Pockets podcast twice and is extremely well known on Bigger Pockets for his frank and solid advice about house flipping. As you may know flipping is kind of my thing.

You’d think that working here and being a flipper and J is like probably the most well-known flipper on our site I would have had an opportunity to chat with him, but this is actually the very first time I’ve ever had a conversation with him so I’m really excited for today.

Scott: Yes, I just think J Scott is so smart and you can tell from like this interview like he has a relentless pursuit of knowledge. He relentlessly tracks his progress so it’s not like he’s just making this up and saying, “Oh that worked that you know whatever.” No, this is 20 years this guy has tracked his net worth meticulously. Right, 20 years and he’s tracked all of his investments.

His learned to become an expert at valuing investments because his daily valued investments. At one point in the show he talks about how he his race, he owns a race horse or owns several racehorses and if they have a good training session marked the value up because he thinks that they’re valuable. I’m like this kind of relentless pursuit of accuracy and acquisition of knowledge and then just sharing that in the community and getting feedback from smart people. I mean what a privilege, what a wealth of information to learn from J here.

Mindy: You know what that’s a really good word privilege. It was an absolute privilege and delight I’ll go you one further. It was a privilege and delight to talk to J today. Before we bring him in let’s hear a note from today’s show sponsor.

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Scott: Alright big thanks to today’s sponsor. J Scott got welcome to the Bigger Pockets Money podcast. How’s it going?

J: Great how are you guys doing?

Scott: Fantastic.

Mindy: Fantastic. Today is a beautiful day.

Scott: Okay.

J: Oh it must be nice to be where you are because it turned into winter overnight where I am.

Mindy: Oh.

Scott: Oh man.

J: From 98° two days ago to 65 and rain today.

Scott: That’s Maryland.

Mindy: Oh.

Scott: J actually lives right where I grew up and your kids will go to high school right where right next to the one.

J: Yes.

Scott: Where I went to so.

J: Absolutely.

Scott: Kind of small world there. Let’s go ahead and start the story. Where do you kind of consider your financial journey to have begun?

J: Yes so actually this is weird for me because anybody that knows me knows I’ve been in the real estate world for the past 10 years and I’ve done hundreds of podcasts and interviews and speaking things where I tell my story and my story always starts with 2008. I quit my corporate job. I get into real estate, but thinking about this. Last night up before going to bed I was thinking about coming on this morning and talking to you guys and it made me realize that that’s my real estate story. It’s not my money story. My money story starts a good bit earlier than that and it’s a story that I really haven’t thought about in wow probably two decades so I’m going to be going back to my money story probably for the first time in a long time so I’ll be sharing it with you and your viewers and your listeners, but this is kind of a new thing for me because I haven’t thought about this in such a long time.

My money story starts back in the late ‘90s. I’m in my mid-40s now. I was in my mid to late 20s back then and sometime around 27- 28 years old I was hanging out with my group of friends from college. Same friends I’d always hung out with and the discussion came up of hey how are you guys investing your money? Again, I was 27- 28 years old. We all had pretty good jobs.

We came out of engineering school so I was making $32 or $33,000 a year, which back then was a lot of money. My friends are talking about how are you investing your money? What are you doing? They’re talking about yes, we’re diversifying stocks and bonds and this and that and I’m just sitting there quietly listening and I don’t say anything and conversation ends and I’m driving home and I had this really horrible feeling because while my friends are talking about investing their money I’m sitting here thinking I’m in a lot of debt.

I was embarrassed because I hadn’t talked to people about money before. I came up in a household where we didn’t really talk about money. My parents lived paycheck to paycheck. Sometimes not quite paycheck to paycheck.

We were never really good with money and so for me debt was just a natural thing. Looking back I was in debt probably I think it was somewhere in the $35-$38,000 range, which was more money than I was making in a year. Now a lot of that was school debt, but also a lot of that was credit card debt after school. I had been out of school for five years at that point so there was really no excuse other than I just wasn’t managing my money well.

I’m 27-28 years old. I have upper $30,000 worth of debt, which was more money than I was making in a year and I was just starting to freak out a little bit because my friends for the first time were talking about how they were saving and investing their money. It made me realize that I am behind the curve. In reality, we know now and this was before the Internet for the most part we know now that I probably wasn’t behind the curve. There’s a lot of people in their mid to late 20s who are in debt whether it be a little or a lot, but at the time I felt because my friends were not in debt I felt that I was way behind the curb so I went home that night and I did what I do best.

I opened up a spreadsheet and I decided I’m going to figure this out. I’m going to see where things are going and see if I can get things under control because it was the first time I had started thinking about money and when I think about things I use spreadsheets. I open up a spreadsheet and I must have sat there for 4-5-6-10 hours. I remember my girlfriend at the time like, “What are you doing? What are you doing? What are you?” “I just need to do this. I just need to do this.”

I finish up and what I finish up with is probably a tiny little spreadsheet, but it’s essentially a net worth statement and on the left-hand side are all of my assets, which was one line. It was a bank account and on the right-hand side it was all of my liabilities, which at the time was a bunch of credit cards. It was also my school loan. It was my car loan.

I probably at the time had my rent on there and so I see this like tiny little number on the left and this big number on the right and I created a graph at the bottom so I could see just how negative I was just to make myself feel even worse. While I was sitting there I was like okay well now that I’ve kind of gotten a handle on the problem, which I had a handle on the problem. I knew I was $38,000 in debt and now I know I’m $38,000 in debt with a picture. I decided okay. What am I going to do about this? I started thinking okay I created like a in the spreadsheet I said, “If I payoff this much every month how long will it take me to get out of debt. If I pay off this much how long will it take me to get out of debt.”

I decided my timeline was one year. I was going to get out of debt. I was going to go from $-38,000, making $33,000 a year to out of debt in one year. I said, “Okay in the next month I have to pay off X amount and the month after that X amount. The month after that X amount.” I knew how much I had to pay off.

It was a ridiculous number. It’s something I knew I couldn’t achieve, but I was determined to achieve it so I said, “Okay, if I stop spending on this and this and this and all that. I’ll have this much more and hey I’m going to go get another job.” I actually did.

Two days later I went out and I got a job. I had gone to bartending school right after college so I could because I always wanted to be a bartender, but I never did anything with it so I got a job as a bartender making a few extra bucks there and the first month I actually got pretty close to paying the amount of money that I needed to pay to be on track to be out of debt in a year. Sadly after that first month things slowed down, but I realized after that first or second or third month I’m looking at this spreadsheet. I’m looking at that chart and this negative number is kind of approaching zero and we’re still in probably like the mid 30s or low 30s.

I mean I still owe a lot of money, but I’m actually seeing progress. I’m visually seeing progress and for me that was really exciting and so I said to myself, “Hey if it doesn’t take a year, it takes two years, if it takes three years, or if it takes four years that’s fine because I’m seeing progress.” I was really excited about the progress. I had the second job. I had my job.

I was spending less money. I was like instead of going out to dinner I was bringing in dinner, which I guess at the time I thought was saving money because I wasn’t paying a tip. I was getting there. I was moving in the right direction and then one day I decided I was bored. I like I loved the fact that I was saving money, but I needed to see more than just like a thing going up on the spreadsheet so I said I want to buy something. I want to buy investment because my friends are talking about the stocks and the bonds they’re buying and so I opened up an account.

It was either a Fidelity or a Schwab, one of those big brokerages at the time and I bought some stocks and I don’t remember what it was or how much it was. It was a little bit, but then I had something to add to my asset side of my spreadsheet and for me that was really motivating. Now I owned assets. I was still in debt, but I had some assets and so I kept paying down my debt and I would buy a few more stocks and pay down my debt. I remember buying some like what I thought were rare coins like collectible things because hey more assets, diversification.

I need to get stuff that was worth stuff and it took about two years. In about two years, I found that I was at zero. I had paid off $38,000 worth of debt in two years and I was excited about it. I didn’t feel like I missed out on anything. I didn’t feel like I mean I was tired. I was working two jobs. I was getting home from my bartending job at like 2 AM and I had to be at my engineering job at like 9 AM.

I wasn’t getting a lot of sleep, but it was okay because I was so excited about money. I had never really thought about money except to something that was holding me back and making my life difficult, but for the first time money was something that was exciting me and looking at the spreadsheet was exciting me and seeing the progress I was making was exciting me and after two years I get to zero and I’ve got some assets in the asset column. I probably had a little bit of debt if I was at zero and I had some assets, but I was at zero for total net worth and that was kind of the moment in my life that I realized hey I’m not stuck in what I grew up with. I’m not stuck in the where had been for the first 27 or 28 years of my life. I can actually get to a point of and I didn’t know these terms at the time, but I can get to the point of financial independence and financial freedom and I can get to the point where I’m not living everyday paycheck to paycheck and that was kind of the eye-opening and I know that was a long story, but that’s kind of the eye-opener for me. That was the start of my relationship with money and I didn’t realize at the time, but looking back that was the start of all of this.

Mindy: I’m impressed that your friends were talking about investing at all. You’re like oh I feel like I’m behind the curve. I think you’re hanging out with really great people when you’re 27 and 28 who are talking about this because I can tell you my 27-28-year-old self was not talking about investing with my friends.

J: Well I’ll tell you these were three friends that I went to college with and to this day they’re my three best friends. One of them literally lives next door when I moved back to Maryland I bought the house next door to him and one of them is still in California one of them is now living in Spain with his family basically retired. I found that of the four of us I’ve always kind of been I don’t want to say least successful, but they’ve kind of taught me we all have different strengths. I’m the only entrepreneur of the group, but we all have our strengths when it comes to money and investing and part of the reason I think we’ve all been successful to some degree financial independence is because we have each other to kind of bounce ideas off of and to keep each other motivated.

It took a long time before I was able to admit to them that I was in debt and the reason I wasn’t participating in those conversations wasn’t because I didn’t know anything and that was part of it, but part of it was I didn’t have any money. Once I realized that it was safe to talk to them and have these discussions it was amazing. Having people around you that you can have these honest and open discussions with about money really makes things easier because a lot of people go through that struggle of being in debt and not knowing how to get started and not knowing how to get educated and when you can’t talk about it with anybody it’s not going to change. You’re not going to ever feel like you’re in a position where you’re comfortable enough to go out and make a change because you’re scared to tell people what’s going on. You have to be comfortable and so I was very lucky to have some friends that allowed me to be comfortable and to learn from them and we learned from each other.

Mindy:m Okay I’ve got like a thousand comments. First of all I want to explain my laughter when you said you’re the least successful because people who are listening to the show may not know who J Scott is. He’s a pretty successful flipper. I don’t know if you know this J, but you wrote what like the number one book on flipping or something like that. We sell 86 million copies a minute or something like that. The Book on Flipping Houses, you literally wrote the book and I believe you are now a little more successful than you were when you were 27?

J: I am, but it’s all relative and here’s the thing. The most important thing I have learned in this time is that net worth number isn’t what makes you successful. You want to have enough money that you can do the things that you consider priorities, but above and beyond that it’s what you do with your life and your time and your family and giving back that makes you successful. While for me that number was the most important thing, that spreadsheet was the most important thing for a long time. Luckily, after several years I realized that the number isn’t the important thing. It’s what you can do with that number that’s really the important thing.

Scott: You’re going through this phase about two years where you basically are being really frugal and working two jobs really tired and going there. You get back to that kind of zero you’re in the black now on a net worth basis. Does your lifestyle begin to improve at that point? Do you begin reaping the benefits of building wealth or what’s kind of next for you after that point?

J: This is interesting and it’s funny again I hadn’t thought about this in probably two decades until last night I came out coming on in talking to you guys, but something really really interesting happens when I got to zero. The reason I know this by the way is that spreadsheet that I was talking about I still have that spreadsheet. That spreadsheet is a lot bigger. It’s probably morphed several times, but I can track my net worth back to like 1998 and if I went I could see the exact month that I started tracking my net worth and so I can see what my net worth has done over the past two decades and I went from doing it literally daily back then because that was my motivator to now I look at things quarterly.

I actually look at the spreadsheet every day. My wife calls it the spreadsheet and so she’ll say when are you getting off the spreadsheet? Come to bed. Yes so I can track and I can see what happened after I got out of debt and it’s something I’ve noticed before, but I’ve never really thought about it again until last night, but if I look at my spreadsheet between the time I got out of debt and about two years after that I flat lined.

I basically stated about zero for two years and I look back and I now know what happened, but at the time it hadn’t occurred to me, but there was kind of several things that all kind of happened at the same time when I got to zero. The first was I felt like I hit a goal. After I felt like I hit that goal I didn’t set any new goals for myself and most of us know that when you’re tracking a goal, when you’re trying to achieve a goal you’re going to think differently than if you’re just kind of moving through time and space without having a goal. For me, that getting to zero goal was the motivator every day to take action and see what was going on and to do the right thing.

After that I didn’t have the goal so it was like okay well if I’m spending more today, if I’m not getting past zero I don’t have a goal to get past zero so I’m still achieving the goal that I don’t have. Number two and this is something that’s taken me two decades to realize, but it gets really really powerful and I still struggle with this today is we are programmed to believe that we are worth something or not worth something. When we grow up I truly believe that people are ingrained with an idea of self worth. I know plenty of people who should be great with money, but are not good with money because they’ve never been good with money and they don’t think of themselves as good with money and they don’t think of themselves as having the ability to get wealthy or to attain financial freedom or financial independence. Then I know other people who are probably way too cocky and they don’t particularly have the financial skills or the business skills, but they think they are the greatest thing when it comes to money and those people tend to succeed.

I’ve noticed this correlation between mindset and your beliefs and how much you could be worth or should be worth and how much you achieve and it’s really really consistent and back then I don’t think I ever thought that I was somebody who could do anything, but live paycheck to paycheck. I think it was always ingrained in me through my family that if you’re paying all your bills and you’re not in debt, but you don’t have extra money you’re doing what you’re supposed to be doing. I think I always expected that getting to zero was kind of my maximum achievement in life. That’s what I’m supposed to be and it wasn’t until I realized no, I am good enough.

I am smart enough. I have the ability and the motivation and the drive and the skills and everything to get to having $10,000 in the bank. Get to having $50,000 in the bank. Getting to buy a house, to be able to by a car outright. To become a millionaire, to become a hundred millionaire and I’m not a hundred millionaire, but I now know and again I still struggle with this. I don’t think of myself as a hundred millionaire. I’ll probably never become a hundred millionaire because in my mind I can’t think of myself in that space.

When I say I’ll never do it I won’t do it until I can get myself in that space where I can imagine myself. I feel like I’m worthy enough to have $50 or a hundred million dollars, but the day that I realize that hey there is no reason I can’t buy a house. There’s no reason I can’t buy a car for cash. There is no reason I can’t live without a mortgage. There’s no reason I can’t get to be a millionaire.

The day I realize those things I saw myself acting differently. I saw myself doing things differently and I saw my net worth growing. For those two years after I hit zero I honestly believed that the reason I kind of stated zero was because I didn’t feel like I deserve to be above zero and it was only after I’ve realized and I gave myself permission to make money and make more money and get to the point of financial independence that I actually started to achieve that.

Scott: What triggered that for you? What was that trigger that got you going into hey I’m ready to go beyond just living paycheck to paycheck and a zero net worth?

J: There was one particular thing. This was back in I think 2000. It was during the height of the Internet boom. As I mentioned I liked collecting assets so I was buying stocks. I was buying bonds and I remember buying little bars of gold and silver because I liked having things and saying I have all these different assets. I bought a tech stock and it was a start up Internet company that was selling books online, Books a Million.

Mindy: Oh Books a million.

J: I actually have a brick and mortar Books a Million down the street from me. Anyway they were getting ready to go IPO to release on the NASDAQ I assume and they released on whatever day they released on and that morning I took like a thousand dollars. I said, “Okay all these stocks are going IPO and they’re shooting up in value.” I took a thousand bucks and I put it on Books a Million.

By the end of the day it was worth $7,000. The stock literally went up seven times that day. I cashed out. I had $7,000, I made $7,000 in the day. I don’t think I had made more than whatever my paycheck was in the day, but I had made $7,000 in a day and so first thing I did was I ran home and I put it on the spreadsheet.

I saw that I liked my number was up here at $7-$8-$9,000- $10,000 at that point. I’m like holy crap I can have money. Here’s the realization that I look back on now as I’m saying this. For years I understood or I had gotten my head around the idea of saving. I hadn’t gotten my head around the idea of investing.

This was the first time that I had really and betting on a tech stock that goes up seven times in a day is not really investing. It’s gambling, but at the time it was wow I can put my money and stuff that actually grows and makes me money as opposed I can just spend less or I can get a second job. For me that idea of putting my money in something, the value of that something growing and impacting my net worth was kind of revolutionary and so I started investing in more things that I thought hey this can make money for me. As opposed to hey this will allow me to save more.

That for me was a big thing so I saw my net worth jump in a day to close $10,000. I remember I set a goal again. Setting that next goal and I think the goal was $50,000. I’m pretty sure it was $50,000, but after two years of not having a new goal that motivated me to set another goal. I set that goal and I don’t remember how long it was, but I achieved that goal and then I set another goal and another goal. Historically when I have a goal when I’m trying to reach something specific I get there. When I don’t have a specific goal in mind I just kind of float. That’s what precipitated that next phase.

Scott: It sounds like you also track your progress daily or weekly like very regularly as you going towards these goals right.

J: I do and again my wife gets angry at me because the spreadsheet. I’m on literally every day. If all my accounts aren’t reconciled to the penny. If all my asset values like I do my own appraisals of all the assets I own every day it’s like one of the things I do these days is our own racehorses. I love horses and every day a horse oh he had a good training today so the value of this horse just went up $300. I have to put that in the spreadsheet. Oh he had a bad run today. Okay the asset, the value of this horse went down a thousand dollars so every day I’m kind of tracking my net worth and it’s to the point where the changes are so small compared to the total that it doesn’t matter, but it’s what motivates me. That’s what I love doing.

Mindy: Okay until you said I have racehorses I was thinking to myself are you my husband? He does this. He wakes up in the morning and checks the bank accounts. He checks the mint and personal capital spreadsheets or displays or whatever just to double check. You checked it last night before you went to bed why are you checking it this morning? He does every morning and actually that was a very good idea for him to do because he discovered some sort of credit card fraud like the next day. We were able to nip that in the bud and that was great, but yes I don’t check it every day.

J: Yes.

Mindy: We don’t own racehorses.

Scott: I check mine every day.

Mindy: Yes.

Scott: Mint right now performs a similar function to what your spreadsheet does did for you at that point and does for you and so I use this online app, but same thing I check it every single day.

J: There is something to be said and it’s not everybody’s personal, there’s something to be said about being a little bit neurotic when it comes to money. I think for me and again everybody’s different for my wife, she’s one of those people and she was very successful in the corporate world, but she is one of those people that should be happy like every year or two to go back and say okay how much money do I have in the bank? Again it’s not for everybody, but I think for those of us who are comfortable with being that neurotic and obsessive I think there’s some value there.

Mindy: Well and I think you make a really good point with having a goal to work towards makes you work towards that goal when you’ve reached the goal you’re not doing anything anymore it’s easy to be like oh okay I got there now I can take a break.

J: Yes.

Mindy: Well how long is your break? If your break is two years you’re not doing anything for two whole years not that I’m saying you wasted your life for two years. You could have had more goals then, but you paid attention to it. This is the thing that I think of. It’s really really important to focus on is that hiding or not looking at your finances. You know ignoring the problem doesn’t make it go away.

Scott: Yes.

Mindy: Once you start paying attention to it it doesn’t have to consume your life. You don’t have to be focused on it. Oh I’m $30,000 in debt. Oh my stomach hurts because I can’t eat and oh this is so awful. You just I am $30,000 in debt. What am I going today to get closer to the goal of zero dollars in debt? You know what sometimes you don’t do smart things or sometimes life just throws oh look I got $1,000 car repair bill. That’s what you have to deal with today and now you tack that on to the 30 and you continue moving forward, but sticking your head in the sand doesn’t change that problem at all.

J: If anything it nags you behind the scenes and everything you do you just feel a little bit uncomfortable and you don’t know why and when you think about it, when you really let yourself be upset about it or frustrated about it and but then you put together a plan you no longer have that nagging feeling about oh there’s this bad thing in my life that I’m putting off and not thinking about. Instead it becomes there’s this bad thing in my life that I have a plan for and it’s just it’s part of your life. Everybody has bad stuff that happens to them in their lives and money is just another thing and you go around. Scott and I have colds right now so I walk around coughing and I don’t ignore the cough. I make sure that I have a plan for getting better or going to the doctor if it doesn’t go away. Having money issues it’s very much like having a cold. It’s a temporary thing and as long as you take care of yourself and you don’t ignore it it will get better.

Mindy: That’s a really great way to put it.

Scott: Over the course you know you have this one day where you made $6,000 or $7,000.

J: $7,000.

Scott: Yes.

J: I remember it vividly.

Scott: Yes so you make a lot of money in one day and then you set a goal to go $50,000 and I assume that earning more and saving is a part.

J: Yes.

Scott: Also your investment philosophy is a part of that. What was your investment philosophy as you were working towards that goal?

J: At the time and this is before I got into entrepreneurship and business and more and more esoteric type investments. I was really big on portfolio management and portfolio optimization through diversification. I would sit down and say okay I want to have 36.2% of my net worth in bonds and I want to have 18.6% of my net worth in emerging markets and I want 13% in gold and silver whatever was. I made up some I’m sure I probably hit that point I was talking to friends or reading online something that I thought was some optimal asset allocation and then again every day I would go through and I’d say oh boy. Okay my large cap stocks are supposed to be 21%, but it’s only 20%.

I’m going to have to move stuff around so for me it was really again I was probably two obsessive, but it worked for me because I had written down but I wanted to do. What I thought was optimal and then I was working towards it and so for me at the time it was stocks and bonds. Gold and silver and then my other category, which was like collectibles like baseball cards and coins and stuff like that because again I like having stuff around that I can feel and see. It was really it was diversification it was knowing that if one sector of the market went bad probably another sector of the market was going to do well and understanding the relationships and the correlations between different parts of the market and different assets.

I probably thought it was a lot more scientific what I was doing at the time than it was, but again it gave me that feeling of control and so everybody has different asset classes that they’re comfortable with. I know people that are comfortable with stocks and bonds and that’s where all their money goes and that’s great. I’m not comfortable with stocks and bonds anymore. I like things I can control and controlling a big company is not something I can do by owning a hundred shares or a thousand shares, but again it’s all what you’re comfortable with and it’s all what you like and there’s things I can see and touch and feel. It’s one of the reasons I like racehorses.

I like horses, but it’s also this physical asset that I can say hey my money is not just in the stock market. I actually own this thing. Come see my racehorse. Come play with my horse. Come feed my horse. It’s really cool to be able to say that, but also know that this thing is an investment that’s generating income for me. Everybody needs to figure out what works for them, what is going to motivate them. What type of assets and investments is going to motivate them and keep them going?

Scott: While you’re doing this so you’re trying to you have this optimal portfolio blending and all this stuff. What how are you generating in investable liquidity I guess. Is it your job still? You’re earning a high income in saving it or.

J: Up until probably 2004 or five it was a 100% job, but around 2004-2005 I realized hey and I think it was right after reading Rich Dad, Poor Dad, which I’m sure we’ll talk about at some point and I’m sure you’ve talked about a million times on the show, but I remember reading Rich Dad, Poor Dad in 2002 and three and putting it down and forgetting it back then picking it back up in 2004 or five and I realized hey this idea of generating income through my own means as opposed to just being a W-2 employee maybe there’s something to this. I remember starting a little online basically affiliate marketing company. I worked for eBay back at the time and I remember I worked with a group that worked with outside affiliates. These were companies that drove people to eBay and then got a cut of any sales these people made.

I said, “Hey I can do that.” Some of these people are making like a million dollars a month as eBay affiliates and I’m like I don’t need a million dollars a month. If I can make an extra hundred dollars a month or $500 a month or a thousand dollars a month that would be awesome and so I sat down and I hacked out a couple websites that would basically take keywords off of Google, people get to my website. I’d send them to eBay and if they bought something I get a commission and I started making a hundred dollars, $200, $500 a month.

Not much, but enough that I realized hey I’m now making money. I mean I remember doing my tax returns and I did my own tax returns back in 2004 or ‘05 and thinking this is really cool. I have like income tax stuff that I don’t know how to do. I can’t just fill it in.

I need to like figure out the rules around self-employment tax and all that stuff and at that point I’m like I’m a business guy now. Like this is big time, me making my thousand dollars a year. I did I felt like okay I’m a business guy now. I can make money from something other than my job. I can be self-sufficient here.

That really opened up a whole new world for me and so at that point I got really excited about starting businesses and I probably started five or 10 businesses over the next five years leading into real estate and I don’t remember if any of them made much money, but every time I made a hundred dollars a month I was really excited because I did it on my own. Something I created and that kind of lead into the next chapter, which was really becoming an entrepreneur and quitting the job and all that. It was that one little experience of starting my own little business it made me realize that I don’t have to be tethered to an employer for my financial independence.

Scott: Do you consider those businesses successes or failures then?

J: Everything I have ever done this is a success. I have businesses where I’ve lost six figures and those were a success. Because in every business I’ve ever done I’ve learned enough where I’ve taken away enough that it’s helped me be successful in the future. I look at and there was a business I started a tech business with a friend of mine back in 2013 I think it was and over two and a half years we put in six figures and we ended up closing that business about a year and half ago and a lot of people are like, “Oh I’m so sorry.” I’m like, “No it was great. I started a physical product business. We invented a product. We had a patent.”

We had like something that we created that we were selling that we figured out sales channels and Amazon was selling and we had sales people and it was like we lost a lot of money doing it, but I learned more in that experience than I think I could’ve learned anywhere else and the next time I do a physical product company or I’ve invested in physical product companies I’m easily going to make many many many times the amount of money I spent on the company based on when I learned by starting that company. I think there are too many people that are terrified of failure. They’re scared to tell friends and family I’m going to do something big because they’re scared that they’re going to have to come back and say it didn’t work. For me there’s nothing I like more than talking about my failures.

I’ve had lots of them. To me that’s a badge of honor. My failures are kind of every failure is just a path toward success and if I’d never had a failure anybody that’s never had a failure has never had success. You just can’t have one without the other. When I hear somebody tell me a hunderd failures I know for a fact that they’ve probably also had a hundred successes and so those failures aren’t a bad thing. Those are a good thing.

Mindy: Then what was the product?

J: It was basically a device, the company was called Ready Set Stem and it was a device to help kids learn about programming and electronics.

Mindy: Oh I want my kids to learn about program and electronics. You guys don’t sell these anymore?

J: We don’t sell it anymore. You can go to the website and there’s still a lot of information that will probably help your kids. No, what we realized was we were really bad at selling into the market that we needed to be in, which was public schools and selling into the public school market is really really difficult. We didn’t have that expertise and so at some point we had to decide do we keep trying it or do we cut our losses and we decided to cut our losses.

Again what we learned in that experience I mean about importing, about creating a product, about getting a patent, about sales channels, about operations, about fulfillment, about documentation, customer support, customer management, all of those things, that’s all stuff that we’re going to use. I’m going to use for the next 20 businesses I start. That failure ultimately was probably. I’ll look back and realize that that failure led to a whole bunch of successes in the future.

Scott: Awesome going back a couple of years here in the story so 2004-2005 it sounds like you’re starting to get your groove on, you’re feeling pretty good.

J: Yes.

Scott: You’re starting these businesses, starting to generate some passive income. At the point where you leave your job can you walk us through that? Did you have some cash set aside and maybe some passive income going? What led you to be comfortable?

J: My wife and I were very fortunate and I know a lot of people this is where I’d be telling the story about how I had two dollars in my pocket and I quit my job and I was living on the streets. That’s not the truth. For us we were very fortunate. We had tech jobs.

We were in Silicon Valley. I worked for a company that got bought by Microsoft and so my wife and I had some cash to play with. When we decided to get married we were both working ridiculous hours. She was traveling like three and half weeks a month. I was traveling a couple weeks a month for my job and when we decided to get married we realized that this just wasn’t sustainable if we were going to start a family it just wasn’t the way to start a family.

We said hey we didn’t have enough money to retire, but we had enough that we could take a chance and so we said we’re going to quit our corporate jobs. Were going to move back east where our families were and we were going to figure out how to do this on our own without somebody else being our boss. We were going to be our own boss. We were going to put our family first and we were going to figure out and the word that we now use that I don’t know if it was popular then, but we wanted to start a lifestyle business.

We wanted to start a business that would allow us to put our family first, but it also make money around that so 2008 we quit our jobs. We moved to Atlanta. I don’t know why Atlanta, but we moved to Atlanta. We were going to get married in August.

It was June, I believe. Sitting on the couch in the basement watching TV and one of those flip shows comes on TV and back in 2008 basically every show on TV was a flip show. My wife said, “Hey let’s flip a house.” I’m like, “Well we don’t really have time to flip a house.”

We talked about starting a business and we need to figure out a business to start because we don’t have enough money to live on without working for the rest of our lives and my spreadsheet’s going down as we’re not working. We have a wedding coming up and I said, “We need to figure out this business.” She said, “We’ll figure out the business, but we’re sitting here watching TV in the middle of the summer and that means we’re way too bored. We need to do something so let’s flip a house.”

She was very much into design. She is very much into architecture. She is a branding and marketing person and so I knew she just wanted something where she was watching these shows and she just wanted to be able to go in and say okay let’s put cabinets over here and we can open up this wall and she just wanted to be one of those people and we were getting ready to get married and I was worried that if I said no she would not marry me so I said, “Okay we can flip a house.” That wasn’t really a good thing.

I said, “Okay we can flip a house.” Summer of 2008 I guess it was June of 2008. Jump on the Internet and I find BiggerPockets and at the time BiggerPockets had probably a thousand-2,000-3,000 members, not very many and it was like wow this is really awesome. Like there was this resource. I want to flip a house and here’s this resource on the Internet where there are other people who are going to tell me how to do it.

It was amazing and so over that summer I’m reading Bigger Pockets. I’m reading some other books. We’re looking for houses and it was probably one of the most exciting summers I’ve had because I felt for the first time oh my god. I’m doing something.

I’m investing. I’m starting a business. I’m taking a big chance. I don’t have an employer.

I’m not getting a paycheck and my wife and I bought our first investment property, our first flip property on August 8th, 2008, which was the day we got married and we realize pretty quickly that hey this is going to become our business. This is the business that we were talking about. Two weeks after that we bought our second property. Three weeks after that we bought two more. We bought 15 flips our first year and we just kept going from there. That ultimately became the business that was our lifestyle business. We’ve been doing that for 10 years and we’ve branched into rentals and multifamily and notes and lending and a whole bunch of other stuff. Ultimately, we realized that real estate was just a great opportunity for us to create that lifestyle business that we really wanted.

Mindy: Okay so you bought a house in 2008. Did you know that you were in the middle of a downturn or in the beginning of a down? I guess nobody knew that it was the beginning of a dying downturn, but.

Scott: Our naïveté was our biggest asset back then. We bought literally our first house was bought in probably the absolute worst time you could buy the house in Atlanta during the downturn and Atlanta was probably one of the top three absolute worst hit markets in the country during the real estate crash. We were in the worst place at the worst time in theory to buy a house. In reality what we found and what I like to tell people today when I talk about flipping houses and I don’t want to get too far off topic, but when you’re flipping houses it’s never a perfect time to both by and sell house.

In the flipping houses world, generally it’s either a good time to buy and a bad time to sell or it’s a good time to sell and a bad time to buy. People when they look at flipping houses they’re like well it’s a really tough market. It’s so hard to sell. Well yes, but it’s really easy to buy back then. Then today you hear well, “It’s impossible to find deals, but if you can find the deal it’s really easy to sell.” That’s what flipping houses is about. It’s about taking advantage of the market and not waiting for the perfect market where it’s both easy to buy and easy to sell.

Because that never happens so in retrospect back then everybody was saying this is the worst time to be investing real estate in buying houses because there’s this big crash and there’s no buyers out there, but in reality if there’s one buyer out there and you’ve got the best house you’re good to go. What I look back on and you’re going to ask me at some point I have a feeling my biggest investing mistake it’s going to relate to a starting out in real estate and not taking more advantage of that market because it was absolutely the best time in history to buy real estate back in 2008 and a lot of people were so scared that they didn’t take advantage of that and I think fear is one of those things that holds people back and it’s just a good example of how if you don’t let fear get in the way you really can do big things and we push forward without being fearful because we were too stupid to be fearful. It worked out for us.

Mindy: It did work out for you I’ve heard your story so I have a little bit of insight into what’s going on, but I didn’t get to ask all these questions when Josh and Brandon interviewed you. I just sat at the I was working on my own flip when I was listening to that show and I’m like well let’s talk about this. My biggest question is you know you bought a house in 2008. It’s probably not top dollar that you paid for it. You’re flipping it so it’s an unattractive house.

What did that first house look like? Was it your like was it the crappiest house in the best neighborhood or you know what were your plans for selling it if it didn’t sell? Were you going to rent it like I also in the middle of 2008 didn’t realize what was going on. I guess you weren’t either. What were your plans for this property if you couldn’t flip it?

J: We made every mistake in the book for this property.

Mindy: Okay.

J: We paid too much. We underestimated the rehab. We overestimated how much we could resell it for. We weren’t able to sell it so we ended up doing a lease option with buyers who trashed the house and left in the middle of the night two years later.

We had to do a second rehab and then ultimately about two and half years after we purchased it we got this thing sold and in the end we made $3,000 in profit on this deal. I look at this is probably one of our least successful and most successful deals ever. Any deal that you can make as many mistakes as we made on this deal and still walk away with a profit is pretty impressive, but we made a lot of mistakes on this deal. You ask what type of house it was it was the ugliest house in a pretty ugly neighborhood.

I mean it was a decent neighborhood, but it just wasn’t very pretty. The house was horrible and we got lucky. The market saved us a little bit when we sold it three years after we brought it at two and a half years after we bought it the market had picked up a little bit so that helped, but luckily before we realized all the mistakes we’ve made with this house. We had bought several others that we had done a better job with.

If this had been the first house we bought and we hadn’t purchased anything else until after these were sold we probably never would have done another deal, but we kind of got in deep quickly buying a lot of houses quickly so by the time we got around to selling this one we had learned a lot from the other ones we had done, but yes every house there’s mistakes and every business there’s mistakes, and every money journey there’s mistakes, and the key is to learn from those mistakes and keep pushing forward and unless you say, “Hey this isn’t going to work. Unless you can sit down and say we have to really cut our losses here and move on.” A mistake is just an opportunity to figure out what went wrong and do it right the next time so yes that first house while we made every mistake it laid the foundation for everything we did for the next 10 years and we’ve never made any of those same mistakes again. We make different mistakes.

Mindy: You make different mistakes now.

J: Yes.

Mindy: Nice.

J: Always different mistakes.

Mindy: Nice you keep learning. Always learning. What would you say is your top take away from this first house?

J: Be conservative. I know a lot of people that want to get into flipping right now and it’s a really tough market right now because it’s hard to find good deals at good prices. I see a lot of investors who are like well I don’t need a big profit. If I can make $5,000 it’s worth it to me just to get my first deal done and then I’ll worry about being more conservative on the next deals and I tell those people yes if you’re focused on making $5,000 all it takes is you overpaying by little bit or underestimating the rehab costs by little bit or the market changing and you not being able to sell it for what you thought you could sell it for or property taxes going up a whole bunch next year and you having to pay more on property taxes before you sell it.

Little things can really eat up your profits quickly. The reason why we were able to make every mistake in the book on our first house and still make a profit is that we were conservative every step of the way. I said, “Hey this is how much we can pay for the property and I bought it for less than that.” It was still too much, but it was less than I thought we needed to buy it for.

When I estimated the rehab costs I doubled the number and I said okay this is how much it’s going to cost so I was really conservative there. It ended up costing even more than that so even being conservative I was wrong, but the fact that I doubled the number in the first place built in some offer and then when I thought about how much I could sell it for I came up with a number and I said, “Okay. I’m going to assume $10,000 less than that just to be conservative, but it ended up being $20,000 less than that.” Ultimately I was conservative in every number that I picked out and I wasn’t conservative it enough in any of those numbers so I didn’t hit my target profit, but I was conservative enough that we didn’t lose money so I attribute a lot of the success that we’ve had in every business that we’ve done to being conservative and not taking great risks, but by the same token and my wife is much more of a risk taker than I am I also look back I think if we took more risks we may have been a lot more successful in certain things so it’s a double edged toward. Risk is good when used intelligently, but also we’ve gotten to where we are by not taking too much risks and being conservative.

Mindy: Well and if you’re over estimating your rehab cost oh I think it’s going to cost $10,000. If it comes in at $18,000 what’s the harm? I really like that idea to be conservative. What I’m thinking though it is you’re saying this is gosh it’s too bad somebody didn’t write a book about estimating rehab costs.

J: Yes so but that was funny because one of my big philosophies when it comes to money and I know a lot of people say that there are things that you love and there are things that can make money and they aren’t generally the same thing. For me that’s not necessarily the case. I’ve always been a big fan of trying to make money doing things that I enjoy doing. There are a whole lot of things I enjoy doing.

There’s a whole lot of things that can make money and the intersection is pretty small, but there is an intersection and so for me teaching and writing is something that I’ve always enjoyed so back in as you alluded to back in 2012 and ‘13 I had this idea that I enjoy writing. I enjoy teaching. Maybe there’s an opportunity to make money by writing a book or two. Actually the main reason I started writing those books wasn’t to make money it was more because I kept getting all these questions over and over again and I figured okay I can break this down and that way I don’t have to keep talking to people. I’m an introvert.

Talking to people is very difficult for me so I figured I’d write it down and maybe I’ll make a little bit of money along the way and so I wrote those two books and what I realized from those two books was not only could I do something I love, which was teaching and writing, but I actually made a decent amount of money from those books and so it was just a good reminder for me that in a lot of cases there is overlap between what you love doing and what you can make money from. If you can find that overlap then you’re never going to work a day in your life and you’re still going to be financially free.

Mindy: Yes, I totally agree a thousand percent. I find it very funny that you say you are an introvert 52 minutes into a conversation where I have asked one question and Scott has said two things.

Scott: This is the hardest thing in the world for me. When I found out that this was going to be video and not just audio. I was like oh no. Yes, I walk into a room of if I’m going to do a speaking engagement, I’ll walk in and the first place I’ll go is I’ll go sit in the bathroom like until two minutes before I have to start speaking because talking to people is just so exhausting for me, but this is fun.

Mindy: Yes, this is a lot of fun and I do thank you for coming out with us today because I’ve learned so much about you. I was saying to J before we started I don’t think I’ve ever actually met him. I have seen him all over BiggerPockets and I’ve of course listened to all of his podcasts and read his books and, but I’ve never actually talked to him in person. I guess this isn’t really in person. This is on Skype, but still.

J: Well this is been fun for me. You guys have gotten me thinking about stuff that I haven’t thought about in two decades, which is great because I have two little kids and I’m always thinking about how best to teach them about money and how to prepare them for their financial journey and started thinking more about what I dealt with after not having thought about it for a long time is going to help me help them. Thank you.

Mindy: Yes.

Scott: You start this flipping business in 2008. It starts to go better and better I presume over the next couple of years and you’re also branching out into other businesses in this time as well. Kind of a serial entrepreneur style is that right?

J: Yes.

Scott: What does your lifestyle look like over this time? Do you begin seeing?

J: Sure.

Scott: The benefits in your life with your family throughout this?

J: Absolutely and I’m a big fan of figuring out the things that you love to do. Figuring out the things that can make money and finding that small section where they overlap and that’s kind of where I focused my time, the things that I love that can also make me money. For our family it’s always been about one family comes first. I made the promise to my wife when we got married that I would never miss a soccer game, I would never miss a piano recital.

I would never miss anything for work. I’ve kept that promise I’m very proud of the fact that I’ve kept that promise and we also made the decision that work in general was going to be a family thing. Starting when our kids were literally like weeks old. They were coming to closings with us.

They were going to houses with us. Our kids have kind of been integral in everything we do in business. We have money conversations in front of our kids very comfortably because they need to know that stuff. The good and the bad and so I need all of these kids that are my kids age so seven-eight and a little bit older 9-10-11 and they have no idea what things cost.

I was having a discussion with my friend and my friend’s son a couple weeks ago and we were talking about houses. He literally had no idea if a house cost a thousand dollars or million dollars. It’s hard when you grow up and you’ve never had these frank discussions about money both again both a good and bad because it puts you in a much worse position when you get into college and after college and you kind of have to learn all of this on your own so we’ve always said for our kids they’re going to be integral in our business. They’re going to be integral in our money discussions and money decisions.

They know when we buy a house we talk about how much it’s going to cost to buy the house and how much it’s going to cost to fix it up and how much we’re going to sell it for. Again we have racehorses so when we go to buy a horse they know how much we’re spending and they know where the money is going to come from and how much it costs to feed them and to train them and all of this. My kids did a lemonade stand. They started doing their own little business at the beginning of the summer and before they started they needed to get materials.

They needed like the lemonade and the cups and the ice and all of that stuff and basically what I said to them is we’re going to treat it like a business so we made them a loan. We loaned them $25 and we made them sign a promissory note, which was just a little thing we wrote out that said they were borrowing money and they promised to pay us back and we went to the store and we figured out how to take this $25 and buy everything they wanted and they couldn’t get like the premium stuff necessarily that they wanted. They couldn’t get like the 18 different size cups so they could make charge for 18 different sizes and the 32 flavors of lemonade that they wanted.

They had $25 and they figured out how to spend it. They did their lemonade stand and when they came back with all their money we sat down and I said, “Okay, I’m going to teach you how to do a PNL, a profit and loss statement and we’re going to talk about how you made this much income and this is how much it costs you in materials to make that and here’s how much you have to pay back mom and dad for lending you the money and here’s your bottom line. That’s how much money you’ve made. They start thinking about things because before this my kids literally couldn’t get the idea of well even if we only charge two cents for lemonade we’re still going to make money.

They didn’t get the idea of well things cost money. They didn’t get the idea of you have to buy stuff before you sell it and so all this kind of crystallized the idea of what it’s like to start and run a business and how money works in a business and they still don’t get a lot of things obviously. They’re seven and eight years old. We can have a discussion in the framework of what you and I know as a PNL and they kind of get most of those concepts now and so hopefully by the time they get into high school or they get into college they’ll kind of be where I am at 45 when they’re 18.

Mindy: Have you bought your kids a house yet or have them buy it and fix it up and then get all the profits?

J: When they were younger they had money that they had gotten from like birthdays and stuff and I told them they could quote on quote invest with us. Basically, you give me that money and I will invest it into the house with our money and whatever percentage return we get you’ll get back as well so they were vested in the investments so we would talk about should we replace the cabinets in this one? It’s going to cost more money, but we’re going to make more money so they did get the idea of well making more money is good because we invested with you so if you make more money we get more back. We have done that.

They’ve not yet bought their own house so kind of waiting for the right time. It will probably a few years before they actually start buying stuff like that. I haven’t quite thought through that, but they do invest with us. My kids took their lemonade stand money last week and I said, “Would you be interested in doing some private lending?” They’re like, “Well what does that mean?”

I said, “Well sometimes you have money and you don’t need it right now. Other people don’t have money, but they do need it right now. You give them the money and then when they don’t need it anymore, they give it back to you, but they give it back to you with more money so that you get some benefit of loaning them your money.” We talked a little bit about risk and we talked about interest and we talked about like the language of loaning money and I typed up a couple of promissory notes and it basically said my son’s name, loans dad this much money and dad promises to pay him this much each month in interest and at the end of two months dad promises to pay back the full amount. We both signed it and we did this for both of our kids and so now both of my kids are private lenders.

This is why I wasn’t sure if like that was going to be fruitful, but we had the discussion at the time. “Are you sure you’re not going to want this money to buy anything or to put in the bank or to donate like any time in the next three months?” We decided three months was our timeline for the loan and both kids said, “No, we don’t need the money for anything.” Well two days after my youngest son loans me the money he comes to me and he said I really want to buy my brother a birthday present. I need that money back. I had to say, “No, you made a commitment. You loaned it to me for three months and I’m using that money for other stuff so I don’t have it to give it back to you.”

He was really upset, but it was an important lesson because it made him realize that he made a financial commitment. He made a contractual commitment and he had to follow through on that and so we got to have the discussion of okay well what can you do to earn more money in the time being? To be able to buy your brother a birthday present? It kind of merges all different aspects of finance and economics and home economics and life altogether and so by bringing them into the fold on everything were doing there are kind of seeing a micro version of what my wife and I deal with every day in our businesses and finances.

Mindy: That is so awesome.

Scott: Yes, that’s the second what a great way to engage Young kids and learn these lessons really early.

J: Yes.

Scott: And all that. Before you move on to the final four. I have one quick question to wrap this up. Of all the things they just talked about in your kind of career with money what are you most proud of?

J: Oh that’s an easy one. I’m just most proud of the fact that my wife can do something that she’s always wanted to do, which is stay home and raise our kids and be there literally every minute of their lives that their home. They’re downstairs. My kids are off school today. They’re downstairs watching a movie and that for the most part I mean I put in a good number of hours of working, but I do that on my own schedule.

I have the ability to say, “Hey we’re going to Hershey Park tomorrow. I’m taking the day off.” Or I have the ability to say, “Hey my kids have a soccer game Thursday night. I’ll be there. I’m not going to be working.” Basically again just being able to build that lifestyle business around the family and put the family first and to always be there for the kids and to allow my wife to do what she wants, which is to be a stay at home mom. That to me is everything we’ve done has been working towards that. That to me is the most important and the biggest accomplishment.

Scott: Awesome. Love it.

Mindy: Awesome. Yes great perspective and have you ever heard that term happy wife happy life?

J: Absolutely. Then one day I’ll get there. Just kidding yes. Yes, and it’s so true and she supports me in everything I do. I support her and everything she does and she’s been instrumental in every success that we’ve had and I think a lot of people don’t realize this.

I ultimately have ended up being kind of the face of our real estate business. I’m the one that’s kind of written books and goes on the podcast and writes on BiggerPockets. The truth is she’s the brains behind everything and she’s done a great job of making us successful so that when I do things like this I can actually talk about our successes.

Mindy: Nice. That’s nice and having a spouse on the exact same page financially is the best thing. It is the most important thing because when you’re trying to save and she’s trying to spend or she’s trying to save and you’re trying to spend you’re just going to fight all the time and that makes for a very unhappy life.

J: Yes, talk about money. That’s key.

Mindy: Yes.

J: Always talk about people are scared to talk about it because they can be a difficult conversation, but when it’s difficult that’s when it’s most important to be talking about it.

Mindy: Yes, and the longer you put it off it doesn’t get easier. It gets harder.

Scott: No.

Mindy: It gets exponentially harder the longer you put off.

J: Yes.

Mindy: Like compound interest. Compound difficulties when you put a dot.

J: Yes.

Mindy: Okay. Well this has been fabulous. We’re going to move on to our famous for questions. These are the same five questions we ask all of our guests. The first one is what is your favorite finance book?

J: What are you saying? I have to ask you a question. You call it your famous four.

Mindy: Yes.

J: But then it’s five questions?

Mindy: Yes. You’re seeing some sort of discrepancy.

J: That’s okay.

Mindy: You’re the one that wants to balance all your numbers.

J: Yes.

Mindy: On your spreadsheets.

J: Yes. Yes. Yes.

Mindy: Wow. You said our famous five or.

J: Okay I don’t have a. I always get asked what’s my favorite book and that’s a hard one. I have probably read less than half of more books than anybody on the planet. I don’t think I’ve ever read a book from beginning to end, but I will read I will start and skim and read the interesting parts of.

I can’t even tell you literally hundreds of books a year. Every book I read I kind of take away as much as I can from it and I try and get little nuggets from it so every book I’ve read has been instrumental to some degree, but the ones that stick out the most and it’s funny because I’m going to name these books and to a large degree I don’t like these books, but they’ve shaped me. Rich Dad, Poor Dad is a perfect example.

There are a lot of things I don’t like about Rich Dad, Poor Dad and I don’t like to tell people read this book as a blueprint. Read this book and go do something. To me what I’ve gotten from that book has been the motivation. Rich Dad, Poor Dad was the thing that actually opened up my mind to the idea of I don’t need to work for somebody else.

I can be an entrepreneur. I can build my own brand. I can build my own company. I can build my own work life and so it wasn’t a blueprint. It didn’t tell me how to do that, but it was certainly the motivation to get me thinking about the fact that that was possible.

That’s a big one for me. 4-Hour Work Week is another one where I tell people read it. Don’t we use it as a blueprint or I didn’t use it as a blueprint, but it opened up my mind to the possibility so for 4-Hour Work Week talks all about building a business and running a business from anywhere in the world essentially. You get a business running and you put it on autopilot and again I don’t think it’s a good blueprint that’s going to teach you how to do that, but it will open your mind to the possibilities there and for me that really opened my mind to possibilities of how I can flip 30-40-50 houses a year in five hours a week, which was my goal and we for the most part achieve that a lot thanks to that book.

The E-Myth, The E-Myth is another great book that I love so the E-Myth as basically if you’ve ever heard the quote work on your business not in your business. E-Myth is kind of what was the founding book behind that idea. Basically, the author talks about if you really want to build a good lifestyle business or any type of business you don’t want to spend a lot of time being an employee in that business and being irreplaceable, but instead bringing in people that can do the work for you so you can focus on the higher level stuff like the strategy and the business plan and the financial plan and the business model. That’s really shaped a lot of what I’ve done. There are so many books that have been instrumental. The millionaire next door was a great one.

Again it’s not a blueprint, but it opens up your mind to what a millionaire is and what somebody who has financial independence and financial freedom what that person looks like. It’s not what a lot of people think it looks like. It’s not the guy driving a Lamborghini or living in the mansion. A lot of times the people that lived in the little house next door that are driving the Honda Accord are the ones that have a whole lot of money and they’re using the money that they have to either better themselves, to advance their family or to make the world out better place so yes, those are some of the ones that have been my favorites, but literally every book I’ve read I think is I try and take something from. Sorry about that long-winded answer.

Mindy: No, no that is awesome. I love all of these books.

Scott: Those four books that you just mentioned Rich Dad, Poor Dad, 4-Hour Work Week, E-Myth, and Millionaire Next Door are actually books that I revisit probably once every 18 months.

J: Yes.

Scott: Just to kind of keep my mind fresh on them and get that motivation back so.

J: Absolutely.

Scott: Yes, I definitely think these are like four excellent choices just around the subjects of wealth and business.

J: Awesome.

Scott: What was your biggest money mistake?

J: My biggest money mistake was a success. My biggest money mistake was 2008 buying a few houses and flipping them and making some money and thinking we’ve got this all figured out and now were going to build our lifestyle business and we’re going to flip five or six or seven or eight houses a year and that was a mistake because looking back in 2008 before we had kids when we had just gotten married and we were really motivated to work really hard I wish we would have sat down and said, “We’re going to buy 50 or a hundred or a thousand houses this year and really go big and be able to build a nest egg so that we were in a whole different category of financial independence.” My biggest money mistake was not going big enough back in 2008 when we had a great opportunity and I don’t know if looking back I don’t know if I was lazy or conservative or scared. I don’t think I was scared.

It was probably just more laziness. It was like we felt like we had found something that worked and we had found a model that was going to generate income for us. I was too lazy to say hey let’s build a really big business before we have kids and while we still have time. That I look back as my biggest mistake. I wish we would have 10 times did back in back in 2008.

Scott: Alright so quick follow-up question with this. Why your thing is I was successful, but I didn’t go big enough and I could have been way more successful with this.

J: Yes.

Scott: A lot of the folks listening to this show have more modest. Hey I just want to get to a modest level of financial independence of financial independence and then have like a kind of be a hedge between my expenses and my income so that I’m very secure. Why do you think you are looking at it so much bigger? Why should other people?

J: For me was I used the analogy. It was like walking down the street and seeing a hundred dollar bill on the ground and thinking ah I don’t need to pick that up. I’m going to get a paycheck at the end of the week. 2008, there was this opportunity and I think I’m new with them, but I didn’t do anything. There was this opportunity to make a lot of money very quickly and easily because there wasn’t a lot of competition.

It was really easy to buy houses. We found a good place to do it and so there was this perfect opportunity that wouldn’t have taken too much time or too much effort. It would have been a year or two out of our lives and I was too lazy to reach down and pick up that big bill. I’m not so much saying that I wish we would have started a big business back in 2008 and kept it going.

I wish we would’ve spent one year back in 2008 and just worked really really hard because there was an opportunity that again I don’t know if I realized it at the time, but there was this unique opportunity in the history of the real estate market back then and I didn’t capitalize on it and so it’s just one of those regrets that I have that I didn’t say okay I’m going to spend the next 365 days work 24 hours a day and make like a whole lot of money very easily, which could kind of change my life in the future. Again, I don’t have regrets about that. I don’t regret any of my mistakes, but there was the one thing that if I look back I probably would have done differently.

Scott: Makes perfect sense.

J: I would have reach down and grabbed that bill.

Mindy: Well and I think it’s easy just to hear in 2018 and say that.

J: Yes.

Mindy: I was not cognizant of that in 2008 I either.

J: Again I try not to have any regrets about money or anything and if anything I’ve learned from it and hopefully I can relay that experience onto my kids so that if one day a decade or five decades from now they’re in the same situation. They know what I could have done differently and maybe they can do differently or maybe people listening to the show right now have an opportunity that they can take a lesson from that as well.

Mindy: Awesome. Okay what is your best piece of advice for people who are just starting out?

J: Figure out what motivates you. Have a dream. It doesn’t have to be a big dream. For me the motivator when I first started was getting to zero on my spreadsheet. That was a motivator and that was a huge motivator. People laugh when I tell them that a spreadsheet was a motivator for me, but it still is. Seeing my spreadsheet and seeing my net worth rise on my spreadsheet now it’s still a motivator for me.

It’s an indication that I’m doing something right and I’m living the life I want to live. That was mine. Everybody needs to figure out what their goal is and maybe that goal is to save up enough money to buy a house or maybe that goal is to build a nest egg and save some money and then be able to go out and buy a Ferrari for cash or maybe that goal is to generate passive income and get to a thousand dollars a month and then start tracking that goal. Figure out what the goal is. Figure out the steps that it’s going to take to get to that goal and then track it obsessively. Yes, my biggest piece of advice is what motivated me and what motivates me isn’t necessarily going to motivate other people, but there is something that motivates everybody. Figure out what that thing that motivates you is and grasp it and focus on it obsessively.

Scott: Love it. What is your favorite joke to tell at parties?

J: I have two little kids so all of the jokes that I know these days are little kid jokes.

Mindy: That will be Scott will be so happy.

J: Okay my little kid joke and I’m guessing all the parents out there have heard this one, but this is my favorite in our household. Knock knock.

Scott: Who’s there?

J: The interrupting cow.

Scott: Interrupting cow?

J: Who? Sorry.

Scott: Nice.

J: Sorry again all the parents have already heard that one and if you’re not yet a parent, be prepared.

Scott: Ugh.

Mindy: I actually like that one. We do a lot of knock knock jokes in my car. They’re not always that good.

Scott: Well awesome. Perfect.

Mindy: Yes. Okay J where can people find out more about you?

J: I am on BiggerPockets.com. I think your viewers have probably heard of BiggerPockets.com and my name there is J Scott, which is my name. I’ve been on BiggerPockets for about 10 years so I’ve written a lot and so anybody that wants to find out more about what we’ve done and my thoughts on different things go look up my profile on BiggerPockets. I have a blog that I started in 2008 called 123Flip.com. The numbers 123Flip.com and there I basically went through and I recorded the first 50 flips I ever did in gory detail so you can see pictures and videos. You can just see the financials down to the penny.

You can see all the mistakes we made, all the successes we had basically every last little detail of the first 50 flips we ever did and so I don’t update that blog as much as I used to, but it’s a good historical record of how we got started in the flipping business. For anybody that might be interested in getting into flipping that might be a good place to go and then Facebook, J Scott Investor is my account on Facebook and I don’t use Twitter so those are probably the best places to reach out and find me. If anybody wants to send me an email it’s the letter [email protected]

Scott: Definitely go and check out some of these resources. J has posted 16 and a half thousand times over the last 10 years on BiggerPockets chronicling one of the most prolific careers in real estate investing that I know of on the site in extraordinary detail just so that you can learn it and have better odds at success in your own investing journey so thank you very much for just like embodying what BiggerPockets is all about for so long.

J: BiggerPockets got me started on my investing journey so I’m thrilled to be able to give back to other people that are using it to learn as well.

Mindy: Awesome.

Scott: Thank you.

Mindy: We certainly appreciate when people who have a lot of experience come on and share with those who don’t have so much experience and the way I like to talk about BiggerPockets is in real life nobody cares about real estate. In my everyday life none of my friends care. They don’t want to hear about it. They don’t want to talk about it. They certainly don’t have any stories to share or need any advice, but here’s this whole community where you can go and talk about real estate all day long and it’s really awesome. That’s what I do. Awesome. Thank you so much J this was fantastic. I really enjoyed hearing your money story.

J: Scott and Mindy I really appreciate being on this. This is great and you gave me an opportunity to revisit some stuff I haven’t thought about in a long time, which makes it even better.

Scott: Awesome.

Mindy: I love that you are thinking about us in bed so.

J: I was. I was.

Mindy: Okay so all of these links to all of your sites and your profile on Facebook and BiggerPockets can be found in our show notes at BiggerPockets.com/MoneyShow42. Alright so J thanks again and I hope you have a great rest of your day.

J: Thank you. You guys as well.

Mindy: Bye.

Scott: Alright that was J Scott, author of The Book on Flipping Houses, The book on Estimating Rehab Costs, The Book on Negotiating Real Estate, Serial Entrepreneur and just all around great guy.

Mindy: Yes.

Scott: What did you think today?

Mindy: I think he’s going to write a book called The Book on Winning Life.

Scott: Yes. Yes something like that. Hasn’t he already written that one? I don’t know if he’s written it yet, but he’s certainly living it. I had such a great time talking to J. First of all it’s like kind of an honor to talk to him because he’s J Scott. He’s the flipping guy on BiggerPockets and that’s just really cool for me, but I was blown away by all of the amazing things he had to say today.

Scott: Yes, I mean again I mentioned this in the intro, but it’s relentless pursuit of getting better forever and not only getting better, but meticulously measuring how much better you get it. Right. He has a very diversified portfolio. He has obviously put in years and years of study and is highly efficient with his time and as learns from his failures. He calls them successes.

Mindy: Yes.

Scott: His biggest failure was not going big enough when there was hundred dollar bills on the ground to pick up everywhere.

Mindy: Yes, his biggest failure was not picking up more hundred dollars bills, but still leading the pretty good life. Okay Scott this show ran really really long today so we should give our listeners rest. Awesome.

Mindy: From episode 42 of the Bigger Pockets Money podcast where we interviewed J Scott, the author of how to win life this is Mendy Jensen and Scott Trench and we’re leaving.

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In This Episode We Cover:

  • J Scott’s money story
  • How his friends helped him pay all of his debts when he was 28 years old
  • A discussion on having no goal two years after being debt-free
  • How he gave himself permission to make money and gain financial independence
  • His goal of buying assets and investing in a tech startup called Books-A-Million
  • Why he tracked not just his money but also the progress he made daily
  • His investment philosophy as he works towards his goal
  • How he generates his investable equity
  • How he created a lifestyle business by flipping houses after quitting his job
  • What flipping houses is all about
  • His biggest investment mistake
  • Thoughts on being conservative and taking risks flipping houses
  • The main reason he started writing his books
  • The importance of having a money conversation in front of kids
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “That net worth number isn’t what makes you successful.” (Tweet This!)
  • “The number isn’t the important thing. It is what you can do with that number that’s really the important thing.” (Tweet This!)
  • “Every failure is just a path to success.” (Tweet This!)
  • “Work on your business, not in your business.” (Tweet This!)

Connect with J. Scott

About Author

The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager Mindy Jensen and Director of Operations Scott Trench weekly for the BiggerPockets Money Podcast!
Each week, financial experts Mindy and Scott interview unique and powerful thought leaders about how to earn more, keep more, spend smarter, and grow your wealth.
You’ll get tips for getting your financial house in order and actionable advice from guests who have been in your shoes – and found their way out.

3 Comments

  1. James Masotti

    J – You are probably one of the people I most look forward to listen to and learning from. Your ideas come with such clarity. Your podcasts, books, and presentations have been among the most influential in my life and business. I’m no where near where I want to be or know I’m capable of yet, but everything you do inspires me more. Thank you for all that you have given back to the BiggerPockets community!

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