J Scott

TLP01: Creating a Strong GP-LP Relationship with J Scott

general partnership gp how to invest passively limited partner limited partners lp passive investing May 02, 2022

TLP01: Creating a Strong GP-LP Relationship with J Scott

This week show can be found here.  

Episode 01: Show Notes.

 

We are honored to have J Scott as our first guest in The Limited Partner Podcast! J is a tech and business guy who left his job and comfort zone to venture into a new career in a new location. He and his wife discovered real estate and began their journey flipping houses. Now, J has syndicated and held over $70M in residential property and currently owns several hundred units.

 

J is a GP at Bar Down Investments LLC, specializing in purchasing and repositioning large multifamily real estate assets. In this episode, he speaks with us about creating a strong GP-LP relationship. What should you look for in a syndicator? Is it okay to ask a lot of questions? Why is communication and transparency important to investors? What is the best way and when is the best time to communicate bad news to your investors? Listen now to this great episode!



Key Points from This Episode:

 

  • J Scott is a tech and business guy by education and trade.
  • His real estate story began when he and his wife bought and flipped two houses.
  • Now, after 13 years, they have flipped about 400 houses and three years ago, moved into the multifamily space doing large multifamily deals.
  • J shares how he transitioned from flipping houses to multifamily space.
  • Why does J liken passive investing or investing in syndications to being in a relationship?
  • Which is the right time to ask questions to the operator – before or after you invest?
  • What are two of the biggest mistakes that J sees on the LP side?
  • As an operator, how does J maintain transparency to his investors?
  • J believes that as an operator, it’s good to invest alongside your investors or at least take some economic risk.
  • LPs want to see that the operator shares the risk and the incentives are aligned.

 

Tweetables:

 

“And I liken kind of investing in syndications anything passively to being in a relationship, too often we jump in with both feet. And later, we look back and we say that was a mistake. Why did I do that. And so, what I like to tell everybody that's starting to look at passive investing is don't be scared to build relationships. Don't be scared to take your time. Don't be scared to ask lots of questions.” [00:13:55]

 

“Find those syndicators who have the same personality that you have and that are willing to provide you whatever it takes for you to be comfortable.” [00:15:21]

 

“For me, communication is the key to a good investing partnership as an LP.” [00:16:57]

 

“Had I been a little bit better versed in real estate investing, I probably never would have started in 2008. But luckily, I was naive. And so, I did jump in. And it turns out that it was actually a very good time to start.”   00:03:27

 

“So, 2008 was really just the opposite of what we're seeing here in 2020-2021, where one part of the transaction cycle is really tough and one part of the transaction cycle was really easy. And so, it forced me to get really good at the sales and marketing side. Because the purchase side was easy.”  00:03:27

 

“I started investing in multi-family back in 2017. I was really burned out from flipping. We flipped about 400 houses and I was done with it. It was getting tedious and stressful. And the market was getting tougher, harder to find deals, harder to actually renovate them because contractors are getting difficult.”  00:08:01

 

“Look, I really want to learn multifamily, you've got a great reputation, you seem to know what you're doing, I will volunteer a year of my time to your business, if you'll teach me the business, and you can have access to my networking and have access to me, I'll work, I'll scrub the floors, I'll do spreadsheets, I'll do whatever you want me to do, just let me follow you on the deals you're doing and kind of teach me along the way.”  00:08:01

 

“We get investors all the time that come to us and say, hey, I'd love to learn more about your deal. I don't want to ask too much, because I'm probably not ready to invest. And I'm like, no, now's the time to ask all the questions. You don't want to start asking questions after you invest.”  00:13:52

 

“I would encourage anybody looking to start investing passively, don't be scared to date around and do your due diligence and ask lots of questions and talk to the syndicators. If they won't jump on a zoom call with you for a half-hour, an hour to answer questions and basically get to know you, well, they may not be the right fit for you unless you're not looking for the relationship.”  00:13:52

 

“I know this is a snarky comment, but when you get divorced, you're probably gonna lose half your money, you get into a bad syndication, you can easily lose all of your money. So, in a way, it's financially it's probably more risky than a marriage.” 00:16:11

“That's one of the nice things about transparency is that a little bit of transparency is going to force you to have more transparency, which is going to force you to have more transparency. So, one of the things we do is, and I know a lot of operators do this, but a lot of them don't is every quarter we make the full financials for our properties available to our investors.”  00:18:56






Links Mentioned in Today's Episode:

J Scott on LinkedIn

ConnectWithJScott.com 

J Scott on Instagram

J Scott on Facebook 

J Scott on Linkedin

J Scott on Twitter

J Scott on Youtube



About J Scott

J Scott (he goes by "J") is an entrepreneur, investor, advisor and the co-host of The BiggerPockets Business Podcast.

 

He has bought, built, rehabbed, sold, syndicated and held over $70M in residential property and currently owns several hundred units.

 

J is the author of four best-selling books on real estate investing, with sales of over 300,000 copies.




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