Seize Your Business: Investing In Real Estate (Scott Mathis)

In this SeizeYourBusiness.com entrepreneur video, jointly hosted by MakingRealEstateFun.com, our guest Scott Mathis discusses ROI (Return on Investment), Cash-flow, Long-term Goals and Strategy, Balance between location and Finance, Mapping out a business plan and tailoring your finish to the current market. 

Scott Mathis

Mathis Contractors

6623120746

Scott Mathis

real estate investing

In this SeizeYourBusiness.com entrepreneur video, jointly hosted by MakingRealEstateFun.com, our guest Scott Mathis discusses ROI (Return on Investment), Cash-flow, Long-term Goals and Strategy, Balance between location and Finance, Mapping out a business plan and tailoring your finish to the current market. 

KEVIN O’FLAHERTY: Our guest today is Scott Mathis from Mathis Contractor.  Did I get the company name right?

SCOTT MATHIS: You did.  You did. ​

KEVIN O’FLAHERTY: He’s a good friend of all of ours.  We’re filming from The Organization, which is a social club in downtown Downers Grove, and Scott’s the president of The Organization, and today what we’re going to talk about is real estate investing, which Scott has a little bit experience in. So, thanks for being here, Scott. 

SCOTT MATHIS: Thank you, Kevin.

KEVIN O’FLAHERTY: So tell us about The Organization where we’re filming here.  What is it?

SCOTT MATHIS: The Organization is a place where you can get together with a bunch of guys and try to do more together.

KEVIN O’FLAHERTY: Okay.

SCOTT MATHIS: That’s what we try to say. So, if you have a business and other guys in there have a business, we try to help each other out -- and our short fallings. And try to just make a better day of it figuring out -- mottling through what we’re doing and life.  And trying to figure out better ways to do business together.

KEVIN O’FLAHERTY: So Taji is also a member of The Organization.  I’d say if -- You can’t really see it here, but there’s a -- It’s divided into two rooms: a business center and a little bar in the back.  And private membership club, right? 

SCOTT MATHIS: Correct.

KEVIN O’FLAHERTY: So, people join -- They can host events here and just kind of collaborate with each other, right?

SCOTT MATHIS: Right.  That’s a great way to put it, yeah.

KEVIN O’FLAHERTY: It’s been around for how long now? 

SCOTT MATHIS: Two years.  Two years.

KEVIN O’FLAHERTY: Okay.  So, tell us about your contracting business.

SCOTT MATHIS: With the contracting, we can help you build whatever your dream is -- anything you want:  kitchens, beds, or commercial spaces. Or we just got done with an escape room with Brian.  You know Brian, right?

KEVIN O’FLAHERTY: Yep. 

SCOTT MATHIS: So, and we can put a plug in for that?  What’s that Clued In?  He’s opening up in -- Is that La Grange?

KEVIN O’FLAHERTY: I’m not sure where he’s opening. 

KEVIN O’FLAHERTY: I think we did the 

--KEITH HOFFMAN: We’ll get back to you with details. 

SCOTT MATHIS: Exactly.  But so, we had a fun time with doing his build-out, which was some secret compartments and bookcases and different stuff, so when he does his thing -- Not to give anything away, but Brian Summers is doing the Escape Room. So that’s one of the fun things we did.  But we can build anything you need.

KEVIN O’FLAHERTY: You’ve done everything for me from putting in wood floors to putting in French doors, and breaking out a wall of mine, putting in French doors instead, clearing out my fire place, and stopping my house from smelling like smoke.  So Scott’s done a lot of good things for me.  And a lot of good stuff for folks.

SCOTT MATHIS: Did that work out?

KEVIN O’FLAHERTY: It did.

SCOTT MATHIS: It’s better?

KEVIN O’FLAHERTY: Until I left the flue closed.  Now my whole house kind of smells like smoke, but I highly recommend his services. And now I’m going to leave it to my cohosts here to do most of the questioning, because you guys know a little bit more about this end than I do.  But one of the other things, Scott’s a man of many talents.  One of the other things Scott has done over the years is finding properties to invest in and hopefully rent out and make some money that way.  So why don’t you guys take it from here. 

TAJI CLARK: All right. So, I don’t want anybody to get bored about my advice in real estate, so I want to ask you from a strictly an investor’s standpoint -- What are some things that you look for in a potential investment, and how do you go about finding that?

SCOTT MATHIS: I suppose if you’re looking for an investment, you’re looking for ROI, which is return on investment.  But you look for it in a couple of ways.  Some people sit and try and do a long term investment, and they try to buy a property and hope it goes up in value and sell it for a big ticket later in hopes that it will afford itself.  And some people buy investments and try to make it cash flow, which cash flow is king, and it always has been.  So if you’re doing cash flow, it’s a completely different ticket than it is if you do a hold on properties.

TAJI CLARK: Sure.

SCOTT MATHIS:  So if you’ve got any specific questions, feel free to jump in.  But I’ve got some properties that are in a holding pattern that I’ve had for 15 years plus that some are paid off; some are in various states of nearly paid off.  And at the end of the day, you hope to pay them off, then you get the cash flow and the long term return on that. And then some properties you buy, and then hope that they’ll go up in value.

TAJI CLARK: So I work with a lot of investors.  Every investor different as far as how they go about researching an investment and how they go through their whole process and some of their location, location, location.  When you’re investing, how important is it to you to have prime location or something of that nature?

SCOTT MATHIS: I would say location is relevant.  If you have a great location, but you can’t make the cash flow because the prices are so high or you can’t even make the payment, then you’re going to struggle financially.  The biggest thing is to have a good realtor like Taji and a good finance guy like Keith. With a realtor, they can look at all the sales comps and everything, and you can balance out the difference in a high return at the end on a property and being able to cash flow it while you hold it or at least hold even if you’re looking for 

--TAJI CLARK: Sure.

KEITH HOFFMAN: So the one question I have, and I think this is pretty important is how do you finance all that?

SCOTT MATHIS: That would be the number one question in the last -- Taji and I were talking about this on the deck earlier.  It’s interesting in the last 15 years how 15 years ago I bought property, and they were looking for the deal.  And they’d look at everything.  They’d go, “Well, it’s worth this. This is what you make in rent, and this is what the end product is.”  Then if you fast forward seven years, which is roughly seven years ago, if you had a credit score, and you breathed, and you were standing upright, they said “Well, how much you want?”And then now no one wants to lend anything, so it’s a struggle.  I just closed on a property in Mississippi that I’m hoping to do as a flip and a short term investment.  And it’s a fix and flip.  It’s not the best location.  It’s not the premium location, but it’s not a bad location. And so, it’s somewhere in between, so I should be able to make some money on it. But financing -- I just had to write a check for it.  And nobody wanted to -- I think you do better with W-2 guys that are coming in -- They’re like, I’m going to live in this property, and I’m going to own this property

KEITH HOFFMAN: Well, it’s difficult.  It really is difficult.  I know that from our standpoint as a lender, we have to follow Fannie Mae and Freddie Mac guidelines.

SCOTT MATHIS: Right. 

KEITH HOFFMAN: So we still need the W-2s and pay stubs and so forth that will make sure the ratios are okay.  We can still do the investment properties.

SCOTT MATHIS: Right. 

KEITH HOFFMAN: But the question is how difficult is that property, you know?  What shape is it in versus how we can get it done.  So I understand you -- probably private money sometimes. 

SCOTT MATHIS: See, I’ve had a hard time.  It’s out there.  It’s like a unicorn.  You know it’s out there.  People say it exists.  But I’ve never seen the one horn horse because, you know? So the private money is really difficult to get a grasp on?  So…

KEVIN O’FLAHERTY: What do you do from a business perspective?  From a business perspective, how do you go about mapping out a business plan for this saying here’s how much I can charge in rent, here’s how much I’m going to have to put into it to fix it up?  And how much time do you end up putting into these business plans when they might not even go anywhere?

SCOTT MATHIS: Right.  Well, I’ve spent years working on a spreadsheet that I put it in now:  It’s an excel spreadsheet.  If you punch in all the parameters.  It dumps out a yes or a no.  It’s like a green light or a red light, and I like to work on systems and stuff like that. This particular property I just bought in Mississippi to use -- It’s not going to be a rental; it’s going to be a flip.  And so, I looked at what’s the least -- or what’s the most I can pay for it and still turn profit and how much profit do I want to do.  And the numbers -- I don’t mind saying it. So I brought it for $20,000. The realtors, and everything that I use -- I’ve got great realtors there too.  My mother-in-law is actually the realtor at Crye-Leike in Tupelo.  But the property, I bought it for 20. The end product will be for 90 to 110.  So now what I’ve got to do is come up with a formula of how much do I want to spend on fixtures and furniture, because it has to fit in the 90 to 110.  If I put gold faucets in a $100,000 house, and I spent 120 on it, I’m still going to get 100,000 on it. So I try to make decisions based on the area, and there are some areas that if you put granite counter tops, you’ll get a return on that.  But then there’s some areas that if you put granite counter tops, you’ll never get it back.

KEVIN O’FLAHERTY: How do you make that estimate of if I do this work, here’s what the property is going to be worth, or is it just your years of experience?

SCOTT MATHIS: Go for it.  I defer to the realtors, which do know in that area what everybody wants, and then you base the purchase price on what these guys say.

TAJI CLARK: Yeah, for something like that, you’d want to really look at in this area what’s selling, what are the predominate features that you see in most of the homes that are selling in that area and the price range that you’re hoping to be at.  And so you kind of tailor your final product to what is selling in the market or what has sold in the market for the last three to six months. So you want your finishes to make sense numbers-wise unless there is a huge spread.  You want to make the fixtures make sense number-wise to be competitive with what else is selling in that area. 

KEITH HOFFMAN: So let me ask you before Kevin wraps this up, where do you like to buy.  Is it Illinois?  Is it different states?  Is it -- what’s your niche?

SCOTT MATHIS: I buy anywhere that I can make money or hope to make money.  Because, I mean, people look at real estate, and they go -- the people that are making money -- all they got to do is invest, and you’ll make money.  Well, that’s not true, because you can lose just as much or more than you invest.  But I like to find places that the return is at I can double my money if that makes sense.  So this one, 20 

--KEITH HOFFMAN: Everybody loves to double their money.

SCOTT MATHIS: They do. And if you can double bigger money, it’s even better, but if I could double it, I’m happy, then I’ll make a decision before that.  But if you can -- Like this one for 20, I’ll end up having 45 in it hoping to sell it for 90 or 110.  But if I dump it for 80, then I’ve still nearly doubled my money, so that’s okay. So I’m looking for the deal.  I don’t care if it’s in Texas or Florida or Mississippi.  People need to live.  Real estate’s the best income thing in the planet.  Because people have to live somewhere. If they have a business, they have to have it somewhere.  Even with the Internet. You have to have warehouses; you have to have stuff like that.  So…

TAJI CLARK: One of my former mentors used to say, “Mama said -- She used to say, ‘everybody needs a crib,’ but the way she would say it was, ‘everybody need a crib.’

SCOTT MATHIS: You got to somewhere to lay your head down at night. ​

TAJI CLARK: Everybody needs a place to live. ​

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In our weekly business podcast & videocast Bryan McDonald of On Purpose Growth and Kevin O"Flaherty of O’Flaherty Law delve into the mind of a successful business owner to discuss lessons that he or she has learned in the course of business so that our viewers and listeners can gain from his or hear experience. 
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