Understanding Slow Flips: A Path to Wealth in Real Estate | Ep. 308
In this episode of Money Talk with Tiff, we dive into the world of slow flips with guest Scott Jelinek. Tiffany Grant sits down with Scott to unravel the concept of slow flips, a unique strategy for flipping properties for the fastest path to wealth.
Scott shares his journey into slow flips, the pitfalls he experienced with conventional rentals, and his innovative approach to creating wealth through real estate. He breaks down the process, addresses questions about vetting potential buyers, and offers invaluable tips for anyone interested in getting started with slow flips.
Tune in to explore this fascinating approach to real estate investing and gain insight into a strategy that’s turning heads in the industry.
About Our Guest
Scott Jelinek is a successful entrepreneur and real estate investor with over 30 years of experience in the industry. His passion for entrepreneurship started at a young age, and he started his first business venture at just fifteen years old. After serving in the army, he turned to real estate and has since completed over 800 deals, establishing himself as a leader in the field.
Scott’s “slow flip” investment strategy has allowed him to own 158 houses and generate a steady monthly income without the typical landlord headaches. He is a creative investor who buys houses without money or credit and turns them into long-term investments. He has shared his knowledge and expertise through teaching seminars and classes, helping others achieve their financial goals through real estate investing.
As a full-time real estate investor, Scott has gained extensive knowledge and experience in the industry, which he uses to coach and mentor other investors. He is passionate about helping others succeed in this lucrative field. He is trying to empower as many people as possible to set themselves free through real estate investing.
Connect with Scott
Website: slowflip.com
Twitter (X): @scottjelinek123
Instagram: @scott_jelinek
Facebook: Scott Jelinek Coach
Connect with Tiffany
Website: https://www.moneytalkwitht.com
Facebook: Money Talk With Tiff
Twitter: @moneytalkwitht
Instagram: @moneytalkwitht
LinkedIn: Tiffany Grant
YouTube: Money Talk With Tiff
Pinterest: @moneytalkwitht
TikTok: @moneytalkwitht
Timestamps
[00:00] Introduction to Slow Flips with Scott Jelinek
[02:15] The mechanics of Slow Flips: buying and selling properties
[05:30] Scott’s transition from traditional investing to Slow Flips
[09:45] The pitfalls of leveraging and the power of owning free and clear
[12:20] How to handle defaults and protect your investments
[15:00] Top tips for getting started in Slow Flips
[18:10] Vetting buyers and understanding lending discrimination laws
[20:50] How to access Scott’s free book and connect with him online
Key Themes
- Slow Flips: Property investment strategy for wealth building.
- Financial Resilience: Recovering from real estate market failure.
- Mortgage Strategy: Short-term buy, long-term sell approach.
- Risk Management: Balancing leverage and paying off mortgages.
- Seller Financing: Operating like a bank, not a landlord.
- Property Vetting: First come, first serve approach, minimal criteria.
Additional Links & Resources
- Making Money Through Real Estate With Andray And Maisha Stroud | Ep. 74
- Zillow
- FHA Loans | HUD.gov / U.S. Department of Housing and Urban Development (HUD)
- VA Home Loans
- Using Hard Money Lenders As A Real Estate Investor
Copyright 2024 Tiffany Grant
Transcript
You know what it is. That's right. It's time to talk money with your
Speaker:money nerd and financial coach. Now, tighten those purse
Speaker:strings and open those ears. It's the money talk with Tiff
Speaker:podcast. Hey, everyone. I'm
Speaker:so excited because I have Scott Jelenick on the line now. Scott is here to
Speaker:talk to us about a concept that I've never heard before. And so I was
Speaker:curious to have him on. And that is slow flips. So, hey,
Speaker:Scott, how are you today? I'm doing fantastic, Tiffany. Thank you for
Speaker:having me on. Yeah, thank you for coming on. So, let's just
Speaker:hop right into it. What is a slow flip, and how did we get
Speaker:here? So, we only have 2 hours for this podcast,
Speaker:so I'm going to give you a short version. But slow flips are
Speaker:basically, it's flipping a property as slowly as possible for the
Speaker:fastest path to wealth. What it actually is, is
Speaker:we buy low end properties with short term
Speaker:mortgages and we sell them. So there's two sides, a buy side and a sell
Speaker:side. Then we sell them immediately on long term
Speaker:mortgages. So we don't operate like a landlord, we operate like a bank.
Speaker:So we pay them off in five years, and yet we sell them on a
Speaker:30 year mortgage. And I know that's a real short version because
Speaker:I'm trying to make it brief for you, but we buy properties on five year
Speaker:mortgages and we sell them on 30 year mortgages. People always say, we buy them
Speaker:like a car and we sell them like a house. Interesting.
Speaker:So what made you get into slow flips? Like, how did that even come
Speaker:about? So, to give you a short version, once again,
Speaker:I've been real estate investing since 1994, and I know that makes
Speaker:me feel really old every time I say that. And I did conventional
Speaker:rentals, I did the burr method for years and I was all over it and
Speaker:I loved it until the bust. And then I got crushed.
Speaker:And after I got crushed, I had 84 houses going into the bust, and
Speaker:I had 84 mortgages, and I got crushed, and I lost about
Speaker:55 of them to foreclosure. Well, as I was
Speaker:recovering from that, I started seeing there were still people who were doing really
Speaker:well. When everyone else got busted up and went back to their jobs and went
Speaker:back to their previous lives, they were still people doing really well.
Speaker:And I started paying attention to what they were doing different and
Speaker:what they were doing different, which goes against what everybody teaches, and it
Speaker:goes against everything I believed at the time. But they owned everything free and
Speaker:clear and I was wholeheartedly against free
Speaker:and clear. I knew everything. They taught leverage, leverage. Leverage, right. And
Speaker:all of that, and I was all about it. But then I learned they were
Speaker:crushing it, even during the bust, when everyone else went out of business. So we
Speaker:were at an interesting time where houses were at the best price they've ever
Speaker:been. But I had no credit left, I had no money left, and I had
Speaker:no way to buy them. So I had to come up with a plan to
Speaker:be able to buy them with private money, but not hard money because I couldn't
Speaker:pay them off in four or six months. So I had to get amortized
Speaker:loans. And so I basically did the math on what's the quickest I can pay
Speaker:these off and not have a balloon, just actually pay them off. And that's where
Speaker:we came up with the five year plan. But then also in doing
Speaker:rentals, as I'm sure you know, the expense on the maintenance was
Speaker:outrageous. And so I was coming up with a plan on how could we no
Speaker:longer spend that money, which is where we came up with the sales side of
Speaker:the slow flip. We call it kind financing, where we sell it with long
Speaker:term owner financing. So these people can put three to five grand down and
Speaker:have a monthly payment and never have an increase in their payment and never have
Speaker:to move, and they're paying it off just as if they got a loan from
Speaker:a bank. Very interesting. Very interesting. Now, I want to back you up a little
Speaker:bit, because you threw out a lot of jargon, and you probably didn't
Speaker:even notice, because this is your talk, but I want to back it up for
Speaker:the audience just in case we have people listening. That's like, what did
Speaker:he just say? So what is hard money? So
Speaker:the difference between hard money and private money? Hard money is typically people,
Speaker:hard money lenders are typically in the business of lending money. That's what
Speaker:they do. And they will loan it to you if you're, like, flipping a
Speaker:house. Everybody talks about all these books you read and the courses and everything
Speaker:says you can do real estate with no money. And they are correct. They're
Speaker:100% correct. You can do all the deals in the world you want with no
Speaker:money. It doesn't mean no money transfers hands. It just means it's not
Speaker:your money. So typically, you would use a hard money lender, which is an
Speaker:individual who's lending his own money. And it's called hard money because it's
Speaker:expensive. So they'll lend their own money, but it's very short term.
Speaker:Typically, it's for six months. And that gives you enough time to renovate it, put
Speaker:it on the market and sell it, and then pay back your lender. Private
Speaker:money is just individuals, and this is my definition of private money.
Speaker:I know some people say they have a private lending business, and I'm like, well,
Speaker:then you're not really a private lender. You're a business lender.
Speaker:So to me, a private lender is an individual that you
Speaker:cultivated. You met them, you cultivate them into being a
Speaker:lender. They might just have money in their 401K, in their IRA, sitting
Speaker:in their bank account, earning 2%, and you're giving them an opportunity.
Speaker:We pay 12% on our private loans, so we're giving them an
Speaker:opportunity to make a higher return secured by real estate. They're not in
Speaker:the business of lending money. They're just somebody that we cultivated and are giving
Speaker:them a higher rate of return than they were making in their other avenues. Got
Speaker:you. Okay. So we got hard money out the way. Private
Speaker:lenders out the way. What is a balloon? So a
Speaker:balloon would be like, I'll give you, for instance, if it was an interest only
Speaker:payment, say it was a five year interest only. At the end of five
Speaker:years, the full balance is due. That's the balloon. The entire amount
Speaker:that was borrowed, or the entire amount of the balance is due in full
Speaker:at the balloon. The way we do it, we amortize them so that there is
Speaker:no balloon. At the end of our 60 months, it's paid off, it's
Speaker:done. And I kind of came up with that because I started thinking,
Speaker:houses got so cheap at the bust, and houses were 30 grand and 40
Speaker:grand. And then I'm looking for money, and everybody's talking about
Speaker:30 year mortgages, and I'm like, wait, I buy cars for 50, 60, 80
Speaker:grand, and it's a five year note. Why would a house have to be 30?
Speaker:And so that's when I kind of went back and did that math, and I
Speaker:said, you know what? We're going to make it five years and suffer for five
Speaker:years, but then be free for the rest of our lives. That is a really
Speaker:good point. And I'm glad you brought that up, because when you go to social
Speaker:media, there's a ton of people that
Speaker:say, why would you pay off your mortgage? Leverage, leverage,
Speaker:leverage. Use that equity to buy your next property, and so on and so
Speaker:forth. And it sounds like what you learned in your
Speaker:process was that can crumble really quick,
Speaker:depending on how the economy does. And so you're taking
Speaker:this slow flip approach where you're like, you know what? I want to pay it
Speaker:off as fast as possible, then turn around and sell it to someone
Speaker:else and be that bank for them. And then that's how I'm going to make
Speaker:my money. So I think that is really interesting. And go ahead.
Speaker:So it's interesting because they're not wrong. And this is where I try
Speaker:never to have the argument with somebody who still loves leverage and debt because they
Speaker:are not wrong. I have 178 houses now. I have
Speaker:109 of them are paid off. And so, so many times people will be
Speaker:like, you know, if you can just pull that money out, you could buy so
Speaker:many more. And they are not wrong and they're completely right. But it's all
Speaker:predicated on the fact that everything stays going well.
Speaker:And the problem is, if it doesn't, and everybody's like, we're not going to have
Speaker:another crash like 2008. I'm like, well, that's great, but if we do, I'm
Speaker:too old to start over again. So if nothing ever goes wrong,
Speaker:then they are correct. You will make more money going that route. But if
Speaker:something does go wrong, I'm going to be the guy buying all the crap you
Speaker:lose to foreclosure because that's the way it's going to
Speaker:go. And if nothing goes wrong, you're going to laugh at me and say, oh,
Speaker:I could have made so much more if I went that other route. But only
Speaker:time will tell what ends up happening in the future. Yes, and I love
Speaker:that perspective. So with these loans,
Speaker:so you're turning around and you're selling them to
Speaker:people acting as the bank. What happens if someone doesn't
Speaker:pay? How does that work? Or has that even
Speaker:happened to you? Oh, it happens. I mean, that's part of the business, part of
Speaker:any, even a bank. No matter how well you vet anything, people are going to
Speaker:default. So we do them through an agreement for deed. I'm
Speaker:sure you know what that is. Basically, some states call it a land contract,
Speaker:an agreement for deed, a contract for deed. And basically it's an
Speaker:amortized note for 30 years. But the deed does not transfer,
Speaker:the deed stays in our name. And the way I explain it to people, I
Speaker:generally tell them when I sit at the table, I say, the way this works
Speaker:is if you buy a house with the bank, the deed goes in your name
Speaker:and then you pay for 30 years. If you buy a house from me, you
Speaker:pay for 30 years and then the deed goes in your name. It's the exact
Speaker:same end result. So if someone was to default, it's
Speaker:a regular eviction, as if they were a tenant who didn't pay. We
Speaker:only invest in states that allow that. Certain states don't allow that.
Speaker:On an agreement for deed, they would make you foreclose. And so we do not
Speaker:invest in those states. Okay, got you. So that makes sense.
Speaker:And I can see how that can protect you
Speaker:as you're going through this process because that was one of my concerns. I'm like,
Speaker:oh, gosh, these people, they're probably like, oh, it's not a bank. I can
Speaker:just do whatever I want and it can land
Speaker:you in a lot of trouble. So if someone's listening to this and they're
Speaker:like, I want to get started in slow flips, what are some
Speaker:quick tips that you can give people? Maybe like your top five
Speaker:on getting started into slow flips. So before
Speaker:we even get into the top five, Tiffany, I think I told you, I wrote
Speaker:a book called the Art of the slow flip, which basically goes over every
Speaker:part of the process step by step. And I'm going to give a free copy
Speaker:to all your listeners that want one if they go to slowflip.com
Speaker:slow. And it goes through everything step by
Speaker:step. But what I would say if somebody was interested besides reading
Speaker:the book, because that's the best way to wrap your head around it, is first
Speaker:off to pick your market, because we do lower dollar properties.
Speaker:And sometimes when people hear the numbers I talk, they're like,
Speaker:you're out of your mind. These houses don't exist, right? And when I say lower
Speaker:dollar, I'm talking $30,000 houses, 40,000, $50,000
Speaker:houses. So depending on where you are, a lot of areas that's like, you
Speaker:can't buy a garage for 30 grand, right? But there are entire
Speaker:states where there are thousands and thousands of properties available for
Speaker:17 grand, 25 grand, 30 grand. So my
Speaker:first thing I would tell somebody to do is to pick your market.
Speaker:And by doing that, you can do it right on zillow, just pick a market
Speaker:and then put in a sub 50,000 and see what comes up.
Speaker:Now, some states you're not going to find anything. And some states you're going to
Speaker:find an abundance. And then this is the part people don't like. I
Speaker:always tell people, look at 100 houses before you ever even think about making
Speaker:an offer. Because if you do that, then you know what a good deal looks
Speaker:like. Otherwise you're so used to houses being 300,000, you
Speaker:see one for 30 and you race off thinking it's a good deal and then
Speaker:you find out later on it should have been 20, but you don't know because
Speaker:you only looked at that one. Right? So pick
Speaker:your market. You want to make sure that it's a viable market. And
Speaker:the way we do that is we'll run test ads to see
Speaker:advertising, a similar house, similar price points, and see the response
Speaker:rate just so that we know if there's a demand in that area for
Speaker:what we're offering, and then that's it. Then you close on it, then we market
Speaker:it for sale. We get it sold. Most of my houses I have never seen
Speaker:in my life. The ones in my local market, obviously I've seen
Speaker:those, but I buy them in several states that I've never even been to. And
Speaker:we get them filled. I have zero vacancies. They get them filled typically
Speaker:in hours because there's such a high demand for what we offer. And
Speaker:that's it. I mean, it's not a challenging business because we're not landlords. We
Speaker:operate like a bank. Very interesting. This is so
Speaker:like, first of all, thank you so much for the free books. I'm definitely going
Speaker:to get one because I'm so interested in what this is about and how this
Speaker:works. But you have dropped so many gems. I'm
Speaker:like, where do I even begin?
Speaker:Okay, here's a question I have when you're vetting people
Speaker:for these properties, what does that process look like?
Speaker:So are you checking credit scores and
Speaker:all those different things? What does that look like? So I'm going to tell
Speaker:you two answers. So I train and teach a lot of people, and I always
Speaker:tell them, we're all adults. You can change and do whatever it is that you
Speaker:like, right? But I can tell you what I do is I do first come,
Speaker:first serve. And the reason I do that is, first off, I started buying
Speaker:in 1994, and when I started buying, there was a thing called non
Speaker:qualifying assumptions. They did away with, I don't know if you remember them, they did
Speaker:away with them in 87 for FHA and 89 for VA. But anybody could take
Speaker:over the mortgage with no credit, no job, no anything. They just had to work
Speaker:a deal with the seller and it was like a sub two, but with the
Speaker:bank's blessing. Well, I started my 1st 20 houses were all
Speaker:non qualifying assumptions. And so when I sell, I kind of feel
Speaker:like, well, I got to start that way. Why am I checking someone else's credit
Speaker:when nobody checked mine when I got started, right. And so I don't check
Speaker:anything. I do it 100% 1st come, first serve. And the
Speaker:second reason I do that is so that nobody can ever say
Speaker:anything. There's a lot of laws regulating, obviously, discrimination
Speaker:and stuff like that. And so by doing first come, first serve,
Speaker:you do not have to even think twice and worry about it because you're
Speaker:accepting the first person who comes with the down payment. And
Speaker:it's a challenge. A lot of people don't understand the laws with
Speaker:discrimination laws. People think like, if you made a listing
Speaker:and you had ten applications, you as the owner feel that you can read all
Speaker:ten of them and pick the best person, right? And you feel like, well,
Speaker:I got ten applications, I'm going to read all ten and pick the one who's
Speaker:best qualified. But actually, the way the law works, it says you
Speaker:have to have a minimum acceptable criteria, and then you have to accept the first
Speaker:person to meet that minimal acceptable criteria. And so a lot of people
Speaker:don't realize that, and they take the best qualified person, which technically is
Speaker:discrimination. And so I try to avoid all of that
Speaker:by doing first come, first serve. First person to put the money in my hand
Speaker:is the one who gets it. Got you interesting. And I did not
Speaker:know all of that. You gave us a great historical
Speaker:background of how the lending industry
Speaker:works, and now I'm like, I definitely need to get this
Speaker:book and learn more about this process. So can you give us that
Speaker:website one more time? And also where people can find you
Speaker:if they were interested in connecting with you. So the
Speaker:website where you can get the free book is slowflip.com. That's
Speaker:slowflip.com. And where
Speaker:you can find me is everywhere. I'm on all socials just under my name.
Speaker:So I'm on everything from TikTok to the new threads
Speaker:to everything in between. And it's just under my name. Scott
Speaker:Gelinick. What? You're on TikTok? I'm on
Speaker:everything. That's awesome. Well, I will make
Speaker:sure that I have all of that information in the show notes, so please
Speaker:check it out. And check Scott out because I feel like I've never heard
Speaker:of this before, but it's an, like,
Speaker:I'm over here. Hmm, interesting. So I will check
Speaker:it out as well. Thank you so much, Scott, for dropping so many
Speaker:gems in such a short amount of time. I'm like, my head is
Speaker:spinning with everything that I need to go and look up. But thank you
Speaker:so much for coming on the show today. Thank you for having me, Tiffany. Have
Speaker:a fantastic evening. All right, you as well. Bye bye.
Speaker:Thank you for listening, joining and being a part of the Money Talk with TIFF
Speaker:podcast this week. You can check Tiff out every Thursday for a new
Speaker:money talk podcast. But if you just can't wait until next week, you
Speaker:can listen to previous podcast, past
Speaker:episodes@moneytalkwitht.com or
Speaker:follow TIFF on all social media platforms at
Speaker:moneytalkwitht. Until next time, spend wise
Speaker:by spending less than you make a word to the moneywise is
Speaker:always sufficient.