Listen to the Podcast Here: It’s natural to be nervous when changing your focus as a real estate investor, but often the greatest risks can reap the greatest rewards. Our guest knows this from personal experience. On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith sits down with a man he calls “one of the smartest investors I know,” Scott Meyers. In his case, transitioning out of single-family homes and apartment complexes in the wake of the tech bubble bursting was the smartest choice he ever made. The Best Deal he is here to discuss was his first commercial purchase, and he has stuck with industrial and self-storage properties to the point he would never dream of going back. Listen to the podcast now to hear the two Scotts discuss Scott Meyers’ office building win, how the deal played out, what challenges Scott faced and the ways he overcame them, and how his mindset, focus, and integrity have contributed to a successful mentoring and investing career. Description Useful Resources References Scott Meyers’ Industrial Property Win Scott Smith welcomes Scott Meyers and asks about his early days in real estate. [1:00] Scott Meyers has been in real estate for 25 years, first starting out in 1993. He began buying houses, then apartments, and eventually graduated to industrial and self-storage. The best deal he is here to talk about his an industrial deal that he affectionately calls “The Boomerang Property,” because he has already bought it and sold it once, and is now preparing to sell it again. [2:15] Scott Meyers explains that this deal came up for him in 2005. He was recovering from the 1999 recession following the burst of the tech bubble. He owned approximately 400 apartment complexes and 100 houses at the time, and found his tenants were leaving in dramatic numbers. So he decided to sell of these properties as quickly as possible. During this time, he was eyeballing commercial and self-storage investments to step up to the next level of his investing career. [3:30] After selling the last complex (which was also his personal office space), Scott and his assistant began searching for a 15-20,000 square foot building with multi-tenant capacities. One goal of the investment was to use part of it as his office, so his tenants would essentially be paying for his office space. He eventually found a seller-financed property with the cost per square foot he was looking for. The only problem was that the property was 200,000 square feet–ten times what Scott actually needed. [4:30] Because the property checked all of Scott’s other needs, he decided to check it out anyway. His reaction was pleasant surprise: “It was way bigger than anything I’d ever imagined. It was a cool old industrial building originally built in 1929.” [4:55] Scott elaborates on his attraction to the property: “I was tired of tenants and toilets…I wanted to do something that was fun and challenging.” He also saw this as his second chance to prove himself in the real estate world. At this point in his life it was either try something new, or get a job–not an option for Scott Meyers. [6:00] Scott shares how he was able to get a 200,000 square foot building valued at $1.5 Million for no money down. He also shares some of the early challenges he faced with the unit. The property was made up of coworking space, inexpensive office space, and industrial mix. It had previously been a business incubator, and the 80-year old owner wanted to maintain that aspect of the business. Scott did so successfully: “We became the largest business incubator in the state, and I was the Executive Director.” [8:00] Although Scott was buying other self-storage properties, this one was his main priority. He was able to maximize cash flow easily by adding additional office space, leasing out all units, and managed to substantially force appreciation. While he didn’t predict the recession, he sold the property just in time in 2008 at $3.9 milllion: “That was the largest payday I had ever seen.” [9:54] The man who bought the property at $3.9 million went bankrupt as a result of the recession. This ended up costing Scott, who warns listeners: “If you’re going to sell something with seller-financing, be prepared to lose it. You better be happy with what you get at the closing table, because there’s no assurance that you’re getting anything on top of that.” Yet Scott was able to turn the buyer’s misfortune into opportunity. [11:10] Scott ended up buying the property back for $500,000, or $3.98 per square foot. He felt he couldn’t pass on that opportunity. This time, he made the purchase with the help of 14 investors. But it wasn’t all sunshine–Scott also had to pay the debts incurred by the buyer, who had already stiffed him for $390,000. To add insult to injury, he also had to pay the legal fees to the very attorney who put him through bankruptcy to skate on his debt to Scott. The Mental Pieces of Scott Meyers’ Success: Integrity and Rationality Scott Smith and Scott Meyers continue analyzing this Best Deal, but also touch on the lessons learned from the aspects that didn’t go so well. Listeners can find out how Scott’s worldview, ability to separate business from emotion, and commitment to integrity above all else served him then and now. [13:00] Scott Smith recognizes that this must have been harsh to deal with emotionally for Scott Meyers. The two investors discuss the importance of not letting emotion overwhelm good judgment or get in the way of an otherwise good deal. Scott Meyers’ unique knowledge of the building made it a great chance to take, even during a recession. The two Scotts agree that anger wouldn’t have been useful to harp on. [16:00] Scott has also applied his worldview of not taking business decisions too personally to his network. He tells about how the 80-year-old original seller of the property became a mentor to Scott over the years. Scott recalls how he missed a detail in closing that allowed the seller to get over on him. The seller knew exactly what he was doing, as well. But because Scott was able to realize that it was all business rather than personal, he was able to let this incident and the emotion involved go and benefit profoundly from this relationship. In fact, Scott views this gentleman as having taught him a lesson. [18:00] Nowadays, Scott does business mostly as a General Partner or Limited Partner, but prefers the former because it allows him to call the shots in his deals. His ability to view business deals rationally has been a lesson learned, and Scott Smith agrees about its importance: “Life is too short to cry over spilled milk, and it helps if you can compartmentalize and understand that this is a game. There are rules that you play by. And it helps to understand those rules.” [20:00] The two Scotts discuss the importance of operating with integrity. Scott owns two businesses, a private equity business an education business, on top of real estate investing. He holds himself to a high level of integrity for a variety of reasons, including the fact that reputation is everything in the digital age. “Protecting integrity above everything else, including profits, is how we play the game.” [21:15] Scott Smith agrees and operates Royal Legal Solutions in the same manner: “In the modern age, your reputation is everything. It’s widespread, transparent, and easy to find out about…You can’t afford to have crazy people blast you on social media” [22:45] Scott Smith asks how Scott Meyers managed to maintain focus with multiple endeavors. In fact, he actually withdrew from other projects to give this deal and property his complete attention. Scott Meyers shared his own personal strengths that allow him to maintain focus: “I’m not the smartest guy, buy I outwork other folks. Operating from a place of integrity tends to draw other folks to us.” [23:12] He also shares how his ability to work well with others, including the City and wider community, helped the building remain successful. [25:00] Scott shares more about the community aspect around his office building, and how it has contributed to his continued success. It worked: in fact, he spoke to Scott from that very building for this interview. He also shares his tips for succeeding, which rely largely on just trying to do something great: “Just like fishing or marketing, you throw things out there and see what works…When you realize you’ve done something unique, it’s really gratifying.” [27:00] Scott circles back to the fact that this deal went so well because it was both a real estate and business play. Scott Meyer’s highlights that the second purchase was more of a real estate effort. He used the same strategy that worked the first time, but has also built a self-storage business along the way. After exiting the property the first time in 2008, Scott launched a self-storage education business. It grew during that time into a full-blown coaching and education business for serious, top-level investors. Coaching and helping is meaningful to him, but Scott feels his highest and best use of his time is still deal-making. [29:00] Scott shares how he leverages his time effectively with his education and real estate projects: “I get away from the things that don’t make sense, and go towards doing what I love to do, which is teaching people and investing in real estate deals with the most upside and gain.” His students often become long-term partners, as well. Scott spends little time deal-hunting, Instead, his current and former students regularly bring him in on their own good deals. The Takeaways: Focus Your Time Appropriately & Understand That This Good Market Won’t Last Forever The two Scotts conclude this episode by sharing their personal takeaways from Scott Meyers’ story. [31:00] Scott Smith kicks off with his greatest lesson, which is about focus. He cautions listeners against constant multi-tasking. Scott Smith learned that Scott Meyers’ willingness to make this deal his sole focus was a massive factor in its success. He feels that is something that any of us can work on for absolutely free. [32:00] Scott Meyers’ first lesson is about speed and staying on top of priorities and moving parts. But he also feels that time and timing is vital, perhaps even more important than his first point. Understanding the scope of projects and what can happen in the worst case scenario is vital to succeeding in a major project. [34:02] Scott also cautions against overconfidence in the current real estate market: “All you investors that are enjoying the boom going on, and those of you that came in after 2008: You’re not as good as you think you are. You’ve got a large wind in your sail right now of a booming economy. Don’t think you’re as good as you think you are if you’re not preparing for changes.” He gives additional tips for preparing for future recessions, and points out that those who don’t prepare will be the first to fall if a recession strikes. He urges listeners to plan for the worst and begin thinking about their own strategies for an inevitable market change. [36:00] Scott Smith sees a parallel between Scott Meyers’ advice and estate planning. People don’t like to think about hard times, whether that’s death or market reversals, but these things are inevitable. Preparation for either event is vital for real estate investors. Scott Smith sums these simple truths up nicely: “Law favors the proactive. Finances favor the proactive. Being proactive is the only way to live if you want to be successful long term.” Connect with Scott Meyers Connect with Scott Meyers through his website, SelfStorageInvesting.com. The website provides direct information for reaching Scott and a wealth of information about self-storage investing and commercial real estate. Listeners can also learn about Scott’s philanthropic effort that builds and gives away homes to needy families in Latin America. Listener Resources Thank you for joining us on today’s episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook. Don’t forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today’s episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next time for a mind-blowing conversation with real estate investor and motivational speaker Rod Khlief–where we learn about how investing is all in our heads. Thanks for listening and joining us on our journey to become better investors! Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions. Schedule your personal consultation now. If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at [email protected]. About Scott Meyers Scott Meyers is known as the nation’s leading expert in Self-Storage. After becoming a penniless landlord in the single-family rental and apartment business, he changed course to self-storage. Scott ‘saw the light’ and quickly sold all of his single-family rentals and apartments to create a small empire of self-storage facilities nationwide. His companies focus on syndicating self-storage deals and helping others launch their own self-storage businesses to enjoy a lifestyle free from tenants, toilets, and trash. Scott Meyers is the Principal in 16 facilities totaling over 5,000 units and approximately one million square feet of storage. He is also the Founder and President of Self-Storage Profits, Inc., a leading self-storage education company that offers courses, live events, and mentoring/coaching. He founded his company in 2006 for the purpose of acquiring, developing and operating self-storage facilities. He has since raised over $20 Million in syndicates and private equity partnerships to fuel their growth, which allows him to devote more time to educating his fellow investors about this underrated asset class.