I like to always learn from the mistakes of others and my own, so I thought I would ask the community to talk about a time you dug yourself out a hole?

No replies?

Probably because people are still digging ;o)

I bought 3 properties a couple of years ago - I thought I had backing from the bank - I was wrong.
Cost a lot of money and creativity to getting alternative financing. Still not finished refinancing 

The lesson is - write things down and get a signature on the paper first :o)

Originally posted by @James Luciano :

I like to always learn from the mistakes of others and my own, so I thought I would ask the community to talk about a time you dug yourself out a hole?

Right when covid hit, I was re-purposing a large SFR into a sober living home. Adding 3 bedrooms, a kitchenette, half bath and hobby room. All stopped at city permitting, subs, etc.

I was stuck with a house down to the studs with new framing. Couldn't place new residents even if I had finished. But at least I had a nice $1850/mo outflow of debt service and fixed expenses. Thankfully I have a 5 yr private momey mortgage and not a HML.

I stopped digging when I found out a contractor friend needed a house for himself.  I offered it to him as a lease with option to buy at a fair price if he finished the work.  He has the basement rented out now and is at least paying the $1850/mo.

I'm out my dp, rehab costs, time and indigestion ($58k and 3 months) for now.  I will get it back we he buys, but the work and bleeding has for now stopped and I am outta the hole👍

Originally posted by @James Luciano :

I like to always learn from the mistakes of others and my own, so I thought I would ask the community to talk about a time you dug yourself out a hole?

This morning I was called back to an old thread worth reviving.  Mistake recovery is worth exploring. 

After a recent BP RE podcast completely glossed over the guest stating 'I was stupid and lost everything' as the full explanation, I think more could benefit from additional stories of recovery.  

A lot of us didn't throw in the towel and claim Trumprutcy during the recession 'because we were stupid'.  We gritted through, took our lumps and rose again.  I have a personal friend that lost $17.5M in 90 days on wall street. He did not claim BK and is doing great today.  He took the hit so his investors didn't have to.  Like @Brian Burke has in the past.  

Some colleagues that sucked it up and took their lumps vs the easy way out that come to mind are @JD Martin , @Joe Splitrock  @Jay Hinrichs @Jim K.   @Jerry W.    @Joe Villeneuve    @Mike Dymski      Basically friends with character that were investing pre-2008.  Please share a story of a deal gone wrong and how you survived it or turned it around.

Originally posted by @Steve Vaughan :

Originally posted by @James Luciano:

I like to always learn from the mistakes of others and my own, so I thought I would ask the community to talk about a time you dug yourself out a hole?

This morning I was called back to an old thread worth reviving.  Mistake recovery is worth exploring. 

After a recent BP RE podcast completely glossed over the guest stating 'I was stupid and lost everything' as the full explanation, I think more could benefit from additional stories of recovery.  

A lot of us didn't throw in the towel and claim Trumprutcy during the recession 'because we were stupid'.  We gritted through, took our lumps and rose again.  I have a personal friend that lost $17.5M in 90 days on wall street. He did not claim BK and is doing great today.  He took the hit so his investors didn't have to.  Like @Brian Burke has in the past.  

Some colleagues that sucked it up and took their lumps vs the easy way out that come to mind are @JD Martin , @Joe Splitrock  @Jay Hinrichs @Jim K.   @Jerry W.    @Joe Villeneuve    @Mike Dymski       Basically friends with character that were investing pre-2008.  Please share a story of a deal gone wrong and how you survived it or turned it around.

 

real estate if your doing lots of deals or a lot of years  with above average risk return is rarely a linear line straight up.  WE all have our bummers and will continue to have our bummers if your doing any kind of transactional volume.. 

This is my first inlaid polished marble tile floor.

I'm not going to pretend I could really explain the pain I went through to lay this floor. I had never done polished marble tile before, never even read about doing work this fine. I had no clue what this level of craftsmanship involved, beyond marveling at the floors of the Vatican Museum like everyone else.

I'm Greek. I wish I could say there's some kind of deep racial memory in my blood that took me back thousands of years to the skills of the classical builders. There isn't. Nope, total, total BS.

I was, however, willing to fail. And so I did. Over and over and over again. The frustration was overwhelming. I had the love and understanding of my wife, I have pretty good hands, and using a combination of my little cheap torpedo levels, I could get pretty close to a guess at what was really level.

You've heard the expression "good enough for government work"? That's a useful saying for some people on some projects. It's not to an apprentice tilesetter on something like this. You make a mistake, you pay for it, and you keep paying.

My takeaway: don't take yourself seriously. Never, ever, ever. You are a speck of dust in a sunbeam, a nobody, a nothing, a never-will-be. A loser, a failure, a useless fart in the wind. And it's OK. BECAUSE THE WORK DOESN'T CARE. You can feel sorry for yourself all you want -- the work will just sit there as long as it doesn't get done. And if by some miracle it gets done, it doesn't celebrate. It doesn't preen. It still just sits there. You have to be able to put yourself aside, abandon any conception of yourself as a personal success, to address it properly. You just can't tell a a square of rock how great you are and expect it to be impressed with your wonderful self-confidence and positive attitude.

Originally posted by @Jim K. :This is my first inlaid polished marble tile floor.

I'm not going to pretend I could really explain the pain I went through to lay this floor. I had never done polished marble tile before, never even read about doing work this fine. I had no clue what this level of craftsmanship involved, beyond marveling at the floors of the Vatican Museum like everyone else.

I'm Greek. I wish I could say there's some kind of deep racial memory in my blood that took me back thousands of years to the skills of the classical builders. There isn't. Nope, total, total BS.

I was, however, willing to fail. And so I did. Over and over and over again. The frustration was overwhelming. I had the love and understanding of my wife, I have pretty good hands, and using a combination of my little cheap torpedo levels, I could get pretty close to a guess at what was really level.

You've heard the expression "good enough for government work"? That's a useful saying for some people on some projects. It's not to an apprentice tilesetter on something like this. You make a mistake, you pay for it, and you keep paying.

My takeaway: don't take yourself seriously. Never, ever, ever. You are a speck of dust in a sunbeam, a nobody, a nothing, a never-will-be. A loser, a failure, a useless fart in the wind. And it's OK. BECAUSE THE WORK DOESN'T CARE. You can feel sorry for yourself all you want -- the work will just sit there as long as it doesn't get done. And if by some miracle it gets done, it doesn't celebrate. It doesn't preen. It still just sits there. You have to be able to put yourself aside, abandon any conception of yourself as a personal success, to address it properly. You just can't tell a a square of rock how great you are and expect it to be impressed with your wonderful self-confidence and positive attitude.

 As a bad handyman and Jack of all trades but master of none, I have been over my head on many higher end projects.  You're right, Jim.  The property doesn't care that you are struggling.   The carrying costs and extended  timeline don't either.  We need to keep perspective and not take ourselves too seriously.

Your floor turned out great. Fit for a king.  Thank you for sharing this👍

@Steve Vaughan   You are of course familiar with the saying, "Be careful what you ask for", right?  Well, here's my story of "survival".

Pre- 1980, I bought my first property, and boy was I proud.  It was a duplex...separated by 4 houses.  I say that because I bought them from the same seller, at the same closing, and the houses were on the same block...separated by 4 houses. I got a great deal on price and financing. The seller was a widower, and a Red Hat Society member that didn't want anything to do with REI, so she was selling off her late Husband's properties as quickly as she could.

Like I said, I got a great deal...and they both cash flowed ($110 and 60/month)...wow, I thought I was King S___ of T___ Island (looking back, I was...but not in a good way).  Then, within 2 months, the "island" started hitting me in the face.  Between the "No Pays" and eventual evictions...then vacancies, I lost both to foreclosures.

What did I learn from all of this?

1 - How to evict a tenant, and how to prepare for it.
2 - What Real Cash flow was...and 110/m or less isn't it.  Now I would call that negative cash flow just waiting to happen, and negative CF is a death wish.
3 - The importance of, and how to, do a better job of vetting existing tenants...before buying.
4 - Saving money from CF to cover a "cash reserve" is a foolish illusion (I cleaned up what I wanted to say there). The much better solution, as in one that works from the very beginning, is getting a LOC...and only using it as a cash reserve.
5 - Investing without a long range plan, is a waste of time and money.
6 - How to analyze markets is more important than analyzing individual properties.
7 - I needed to develop strategies other than "Buy low, rehab, and flip high" if I wanted to make money...and have control.
8 - Profit isn't made when you buy, or sell, it's made in between the two on the spread.
9 - Basing the  quality of a deal on future events I have no control over, isn't investing...it's speculating.
10 - I survived it, learned a lot from it, and moved ahead because I realized I could always get my money back as long as I stayed in the game, and holding onto the side of a sinking ship, just because I have money invested in it, is stupid.  The longer you hold on, the closer you are to drowning. The property isn't the asset, the equity and cash flow is.  Don't fall in love with the property.  If the property becomes a "dog", get your ***(et) out of it, even if it is less than what you put in, and move forward.

Originally posted by @Joe Villeneuve :

@Steve Vaughan  You are of course familiar with the saying, "Be careful what you ask for", right?  Well, here's my story of "survival".

Pre- 1980, I bought my first property, and boy was I proud.  It was a duplex...separated by 4 houses.  I say that because I bought them from the same seller, at the same closing, and the houses were on the same block...separated by 4 houses. I got a great deal on price and financing. The seller was a widower, and a Red Hat Society member that didn't want anything to do with REI, so she was selling off her late Husband's properties as quickly as she could.

Like I said, I got a great deal...and they both cash flowed ($110 and 60/month)...wow, I thought I was King S___ of T___ Island (looking back, I was...but not in a good way).  Then, within 2 months, the "island" started hitting me in the face.  Between the "No Pays" and eventual evictions...then vacancies, I lost both to foreclosures.

What did I learn from all of this?

1 - How to evict a tenant, and how to prepare for it.
2 - What Real Cash flow was...and 110/m or less isn't it.  Now I would call that negative cash flow just waiting to happen, and negative CF is a death wish.
3 - The importance of, and how to, do a better job of vetting existing tenants...before buying.
4 - Saving money from CF to cover a "cash reserve" is a foolish illusion (I cleaned up what I wanted to say there). The much better solution, as in one that works from the very beginning, is getting a LOC...and only using it as a cash reserve.
5 - Investing without a long range plan, is a waste of time and money.
6 - How to analyze markets is more important than analyzing individual properties.
7 - I needed to develop strategies other than "Buy low, rehab, and flip high" if I wanted to make money...and have control.
8 - Profit isn't made when you buy, or sell, it's made in between the two on the spread.
9 - Basing the  quality of a deal on future events I have no control over, isn't investing...it's speculating.
10 - I survived it, learned a lot from it, and moved ahead because I realized I could always get my money back as long as I stayed in the game, and holding onto the side of a sinking ship, just because I have money invested in it, is stupid.  The longer you hold on, the closer you are to drowning. The property isn't the asset, the equity and cash flow is.  Don't fall in love with the property.  If the property becomes a "dog", get your ***(et) out of it, even if it is less than what you put in, and move forward.

Joe, you gave so many massively valuable nuggets here.  I wish I could up vote this 10 times.

I have seen you say many of these before, one of my recent favorites being it's the equity and cash-flow that is the asset, not the property. Don't fall in love with a property. The holding onto the side of a sinking ship analogy is priceless.

$110 per month cash-flow is just negative cash-flow waiting to happen. Love it.  I for one am glad you stayed in the game.  You've obviously learned from all hiccups and we benefit when you share your experience.  

I'll leave you with one of mine.  Some say I was in the right place at the right time when I landed some of my better purchases.  I say of course I was, because I was in the market ALL the time. Probably like you were when you landed that duplex deal pre-1980.  That's pre Nothing Down by Robert Allen.  Holy sh*t! 

Originally posted by @Jim K. :

This is my first inlaid polished marble tile floor.

I'm not going to pretend I could really explain the pain I went through to lay this floor. I had never done polished marble tile before, never even read about doing work this fine. I had no clue what this level of craftsmanship involved, beyond marveling at the floors of the Vatican Museum like everyone else.

I'm Greek. I wish I could say there's some kind of deep racial memory in my blood that took me back thousands of years to the skills of the classical builders. There isn't. Nope, total, total BS.

I was, however, willing to fail. And so I did. Over and over and over again. The frustration was overwhelming. I had the love and understanding of my wife, I have pretty good hands, and using a combination of my little cheap torpedo levels, I could get pretty close to a guess at what was really level.

You've heard the expression "good enough for government work"? That's a useful saying for some people on some projects. It's not to an apprentice tilesetter on something like this. You make a mistake, you pay for it, and you keep paying.

My takeaway: don't take yourself seriously. Never, ever, ever. You are a speck of dust in a sunbeam, a nobody, a nothing, a never-will-be. A loser, a failure, a useless fart in the wind. And it's OK. BECAUSE THE WORK DOESN'T CARE. You can feel sorry for yourself all you want -- the work will just sit there as long as it doesn't get done. And if by some miracle it gets done, it doesn't celebrate. It doesn't preen. It still just sits there. You have to be able to put yourself aside, abandon any conception of yourself as a personal success, to address it properly. You just can't tell a a square of rock how great you are and expect it to be impressed with your wonderful self-confidence and positive attitude.

Reminds me of Roman ruins in Pompeii  or on Delos   all you need is some paintings of the good times on the walls.. 

Originally posted by @Steve Vaughan :

Originally posted by @James Luciano:

I like to always learn from the mistakes of others and my own, so I thought I would ask the community to talk about a time you dug yourself out a hole?

This morning I was called back to an old thread worth reviving.  Mistake recovery is worth exploring. 

After a recent BP RE podcast completely glossed over the guest stating 'I was stupid and lost everything' as the full explanation, I think more could benefit from additional stories of recovery.  

A lot of us didn't throw in the towel and claim Trumprutcy during the recession 'because we were stupid'.  We gritted through, took our lumps and rose again.  I have a personal friend that lost $17.5M in 90 days on wall street. He did not claim BK and is doing great today.  He took the hit so his investors didn't have to.  Like @Brian Burke has in the past.  

Some colleagues that sucked it up and took their lumps vs the easy way out that come to mind are @JD Martin , @Joe Splitrock  @Jay Hinrichs @Jim K.   @Jerry W.    @Joe Villeneuve    @Mike Dymski       Basically friends with character that were investing pre-2008.  Please share a story of a deal gone wrong and how you survived it or turned it around.

 

Thanks for the shout-out Steve, I am in esteemed company there. 

My biggest hole is fairly well documented on the podcast (in signature, below), but for those who haven't heard it: In 1999 I built my own home. The original plan was to build the home I wanted and sell the one I was in to make some money. So I bought a couple of acres, went to the bank and got a construction loan, and away I went. Virtually nothing went right. I GC'd it myself, and my lack of experience made everything take longer than it should have. The bank's construction loan draw process was a huge drag and didn't always pay for the work that was done, leaving me digging out of my pocket to continue to fund construction. A soft market meant that my house - the one I was living in - just languished on the market without any offers. Even the property I bought I found later had been a dumping ground for all the stumps and bushes in the neighboring subdivision and I spent a fortune getting all the old material cleared and hauled out before we could start footers. When I finally realized that I was going to go bankrupt if I kept two houses, I decided to try to sell the new construction at the same time as I had my house on the market. But by then I had put a lot of money into things that I personally wanted - heavy-duty locking subfloors; 2x6 walls for more insulation; downdraft custom Jenn-Aire stove; etc - that no one wanted to pay extra for. To make it worse, the farm across the street from me was sold and a local developer started dropping houses on them like sprinkling grass seeds, and these houses were cheaply built but had basements. When I was just about out of money I had to take over most of the rest of the build myself. I finally got a ridiculous low-ball offer when I was almost done and had to take it, as I was completely broke by then. All told I lost over $100k just on the build process. When I factor in the value of the house today, my real loss is about $250k, and that doesn't take into account the opportunity loss on all that money.

Whenever I'm in need of a dose of reality or humble pie, I drive down to that house which is 20 minutes from where I live now (in the same house that I lived in then) and look at what I built. Back then, no one told me that it might be smart to just rent out the house I was in, or even rent the new construction, and wait for things to turn around. There wasn't any BP and no one in my family knew anything about investments, let alone real estate. 

BUT: Here's how I look at it today, given the value of 20 years of looking back:

1. It was a great educational process. I already knew a lot of basic stuff (I was a plumber when I was going to college, and I worked electrical work in the military), but I learned how to: put up insulation; wire an entire house; plumb an entire house; hang kitchen cabinets; put down tile floors; install underground electrical service (yes, I pulled my own underground electrical feed 150 feet by hand through conduit); run a trencher and a mini-excavator to do final grading and install a plumbing service line; and probably other stuff. I ended up with some tools that I still use today on rentals. I got up close and personal in virtually all aspects of a house. 

2. I made a decent amount of money by not selling the house that I was living in, that I still live in today. Eventually I was able to access some of that equity to continue to build up my rental portfolio.

3. The 10 years it took me to get back to where I was forced me to examine my own role in that failure, own it, vow not to do it again, and learn how to do things the right way (i.e. the "making money" way). 

4. Every single contractor, supplier, credit card company, bank, and servicer got paid on that project. No one lost 5 cents working for me. I ate a lot of Ramen Noodles for sure and got down to single digits in the checkbook but I paid everyone. 

5 (My favorite part). When we were clearing for the foundation, there was a tiny pin oak tree in the front yard that had just grown there as a sapling, 2 feet tall and scrawny as nothing. I looked at it and thought it was a pretty good place for a tree in the front yard - not too close to the house but close enough for some shade and to look nice. So I tied ribbon to it and I made all of the contractors go around this tiny sapling. Let me tell you these guys thought I was crazy because this thing looked like a stick. Today, 20 years later, it is a gorgeous tree and it's about 25 feet tall with perfect proportions. When I see that tree it reminds me of the importance of having patience and what can happen if you put the right things into place and give it some time. 

So that's my story. Even today I've got a lot of experience and I still get things wrong. Scheduling doesn't work out right on some of the rehabs. I forget things or get them out of order. Sometimes I fail to budget for something properly. So I try to keep all of that in mind whenever I start thinking I'm so damned smart and remember that in any success there's always a little bit of luck and you can easily be on the wrong side of it. 

@JD Martin cool story about the tree!

Originally posted by @JD Martin :the mistakes of others and my own, so I thought I would ask the community to talk about a time you dug yourself out a hole?

This morning I was called back to an old thread worth reviving.  Mistake recovery is worth exploring. 

After a recent BP RE podcast completely glossed over the guest stating 'I was stupid and lost everything' as the full explanation, I think more could benefit from additional stories of recovery.  

A lot of us didn't throw in the towel and con 'because we were stupid'.  We gritted through, took our lumps and rose again.  I have a personal friend that lost $17.5M in 90 days on wall street. He did not claim BK and is doing great today.  He took the hit so his investors didn't have to.  Like @Brian Burke has in the past.  

Some colleagues that sucked it up and took their lumps vs the easy way out that come     Basically friends with character that were investing pre-2008.  Please share a story of a deal gone wrturned it around.

 

Thanks for the shout-out Steve, I am in esteemed company there. 

My biggest hole is fairly well documented on the podcast (in signature, below), but for those who haven't heard it: In 1999 I built my own home. The original plan was to build the home I wanted and sell the one I was in to make some money. So I bought a couple of acres, went to the bank and got a construction loan, and away I went. Virtually nothing went right. I GC'd it myself, and my lack of experience made everything take longer than it should have. The bank's construction loan draw process was a huge drag and didn't always pay for the work that was done, leaving me digging out of my pocket to continue to fund construction. A soft market meant that my house - the one I was living in - just languished on the market without any offers. Even the property I bought I found later had been a dumping ground for all the stumps and bushes in the neighboring subdivision and I spent a fortune getting all the old material cleared and hauled out before we could start footers. When I finally realized that I was going to go bankrupt if I kept two houses, I decided to try to sell the new construction at the same time as I had my house on the market. But by then I had put a lot of money into things that I personally wanted - heavy-duty locking subfloors; 2x6 walls for more insulation; downdraft custom Jenn-Aire stove; etc - that no one wanted to pay extra for. To make it worse, the farm across the street from me was sold and a local developer started dropping houses on them like sprinkling grass seeds, and these houses were cheaply built but had basements. When I was just about out of money I had to take over most of the rest of the build myself. I finally got a ridiculous low-ball offer when I was almost done and had to take it, as I was completely broke by then. All told I lost over $100k just on the build process. When I factor in the value of the house today, my real loss is about $250k, and that doesn't take into account the opportunity loss on all that money.

Whenever I'm in need of a dose of reality or humble pie, I drive down to that house which is 20 minutes from where I live now (in the same house that I lived in then) and look at what I built. Back then, no one told me that it might be smart to just rent out the house I was in, or even rent the new construction, and wait for things to turn around. There wasn't any BP and no one in my family knew anything about investments, let alone real estate. 

BUT: Here's how I look at it today, given the value of 20 years of looking back:

1. It was a great educational process. I already knew a lot of basic stuff (I was a plumber when I was going to college, and I worked electrical work in the military), but I learned how to: put up insulation; wire an entire house; plumb an entire house; hang kitchen cabinets; put down tile floors; install underground electrical service (yes, I pulled my own underground electrical feed 150 feet by hand through conduit); run a trencher and a mini-excavator to do final grading and install a plumbing service line; and probably other stuff. I ended up with some tools that I still use today on rentals. I got up close and personal in virtually all aspects of a house. 

2. I made a decent amount of money by not selling the house that I was living in, that I still live in today. Eventually I was able to access some of that equity to continue to build up my rental portfolio.

3. The 10 years it took me to get back to where I was forced me to examine my own role in that failure, own it, vow not to do it again, and learn how to do things the right way (i.e. the "making money" way). 

4. Every single contractor, supplier, credit card company, bank, and servicer got paid on that project. No one lost 5 cents working for me. I ate a lot of Ramen Noodles for sure and got down to single digits in the checkbook but I paid everyone. 

5 (My favorite part). When we were clearing for the foundation, there was a tiny pin oak tree in the front yard that had just grown there as a sapling, 2 feet tall and scrawny as nothing. I looked at it and thought it was a pretty good place for a tree in the front yard - not too close to the house but close enough for some shade and to look nice. So I tied ribbon to it and I made all of the contractors go around this tiny sapling. Let me tell you these guys thought I was crazy because this thing looked like a stick. Today, 20 years later, it is a gorgeous tree and it's about 25 feet tall with perfect proportions. When I see that tree it reminds me of the importance of having patience and what can happen if you put the right things into place and give it some time. 

So that's my story. Even today I've got a lot of experience and I still get hings wrong. Scheduling doesn't work out right on some of the rehabs. I forget things or get them out of order. Sometimes I fail to budget for something properly. So I try to keep all of that in mind whenever I start thinking I'm so damned smart and remember that in any success there's always a little bit of luck and you can easily be on the wrong side of it.  

That little stick of an oak sappling you saved 20 years ago grew mighty.  I love that.  It was fed vicariously through your character (paying your people while you lived on Ramen), your sweat and tears. 

We should all plant (or leave) a tree at our duds so we can come back years later to remind us something good came of it other than great lessons. 

Thank you for re-sharing this, JD.  I'm glad you stuck with it and made a successful portfolio.  You received a blow many never recover from. 

Speaking 9f s9ft markets. I finished a flip fall 2007 and got greedy.  Saying no to an offer $4000 less than asking costed me 10 years of rental headaches.  When I finally sold in 2017, I got less than the '07 offer.   

I learned to not be greedy. Also learned that time heals just about all in RE, so get by any way you can to get through a soft market👍

@JD Martin

Scheduling. How many time have I been bitten by that vampire...

Originally posted by @Steve Vaughan :

Originally posted by @Joe Villeneuve:

@Steve Vaughan  You are of course familiar with the saying, "Be careful what you ask for", right?  Well, here's my story of "survival".

Pre- 1980, I bought my first property, and boy was I proud.  It was a duplex...separated by 4 houses.  I say that because I bought them from the same seller, at the same closing, and the houses were on the same block...separated by 4 houses. I got a great deal on price and financing. The seller was a widower, and a Red Hat Society member that didn't want anything to do with REI, so she was selling off her late Husband's properties as quickly as she could.

Like I said, I got a great deal...and they both cash flowed ($110 and 60/month)...wow, I thought I was King S___ of T___ Island (looking back, I was...but not in a good way).  Then, within 2 months, the "island" started hitting me in the face.  Between the "No Pays" and eventual evictions...then vacancies, I lost both to foreclosures.

What did I learn from all of this?

1 - How to evict a tenant, and how to prepare for it.
2 - What Real Cash flow was...and 110/m or less isn't it.  Now I would call that negative cash flow just waiting to happen, and negative CF is a death wish.
3 - The importance of, and how to, do a better job of vetting existing tenants...before buying.
4 - Saving money from CF to cover a "cash reserve" is a foolish illusion (I cleaned up what I wanted to say there). The much better solution, as in one that works from the very beginning, is getting a LOC...and only using it as a cash reserve.
5 - Investing without a long range plan, is a waste of time and money.
6 - How to analyze markets is more important than analyzing individual properties.
7 - I needed to develop strategies other than "Buy low, rehab, and flip high" if I wanted to make money...and have control.
8 - Profit isn't made when you buy, or sell, it's made in between the two on the spread.
9 - Basing the  quality of a deal on future events I have no control over, isn't investing...it's speculating.
10 - I survived it, learned a lot from it, and moved ahead because I realized I could always get my money back as long as I stayed in the game, and holding onto the side of a sinking ship, just because I have money invested in it, is stupid.  The longer you hold on, the closer you are to drowning. The property isn't the asset, the equity and cash flow is.  Don't fall in love with the property.  If the property becomes a "dog", get your ***(et) out of it, even if it is less than what you put in, and move forward.

Joe, you gave so many massively valuable nuggets here.  I wish I could up vote this 10 times.

I have seen you say many of these before, one of my recent favorites being it's the equity and cash-flow that is the asset, not the property. Don't fall in love with a property. The holding onto the side of a sinking ship analogy is priceless.

$110 per month cash-flow is just negative cash-flow waiting to happen. Love it.  I for one am glad you stayed in the game.  You've obviously learned from all hiccups and we benefit when you share your experience.  

I'll leave you with one of mine.  Some say I was in the right place at the right time when I landed some of my better purchases.  I say of course I was, because I was in the market ALL the time. Probably like you were when you landed that duplex deal pre-1980.  That's pre Nothing Down by Robert Allen.  Holy sh*t! 

 

 Thanks for your kind words.  It's always nice to know when you're appreciated...it keeps you going.  So now everyone knows who to blame for me continuing to be here,...YOU!...LOL.

How about some of my favorites:

1 - It doesn't matter what the total cost is.  All that matters is what it costs you.  Terms baby, terms.

...and my email tagline...

2 - The things that come to those who wait, are the things that are left behind, by those that got there first.

Originally posted by @Steve Vaughan :

Originally posted by @James Luciano:

I like to always learn from the mistakes of others and my own, so I thought I would ask the community to talk about a time you dug yourself out a hole?

This morning I was called back to an old thread worth reviving.  Mistake recovery is worth exploring. 

After a recent BP RE podcast completely glossed over the guest stating 'I was stupid and lost everything' as the full explanation, I think more could benefit from additional stories of recovery.  

A lot of us didn't throw in the towel and claim Trumprutcy during the recession 'because we were stupid'.  We gritted through, took our lumps and rose again.  I have a personal friend that lost $17.5M in 90 days on wall street. He did not claim BK and is doing great today.  He took the hit so his investors didn't have to.  Like @Brian Burke has in the past.  

Some colleagues that sucked it up and took their lumps vs the easy way out that come to mind are @JD Martin , @Joe Splitrock @Jay Hinrichs @Jim K.   @Jerry W.    @Joe Villeneuve    @Mike Dymski       Basically friends with character that were investing pre-2008.  Please share a story of a deal gone wrong and how you survived it or turned it around.

 

 I purchased a run down apartment building with retail spaces back in 2005. The 100 year old building had been neglected for 20 years. The retail space was last used as a steak house and it was frozen in time, minus everything that was falling apart due to age. My mentor suggested the building needed too much work, but in my 20's I knew better than anyone twice my age. There were six apartments, with six bathrooms. Five of six showers leaked. When I say leaked, I mean steel showers that were rusted through and there were garbage cans on the floor below to catch the water. Every kitchen sink had a bucket under it catching water. The previous landlord accepted cleaning in place of security deposits, meaning if you cleaned up the mess from the last tenant, you didn't owe any security deposit. There were meth heads in the property and two people were moving out as I was closing. My insurance was dropped a week after closing and I had trouble finding a company that wanted to insure a mixed use property. We had two fires, hornet infestation, leaking roof, 50MPH straight line winds blew a 20 foot window out and all sorts of other problems I have blocked from my memory. 

We hired a contractor to rehab the first floor, but I did a ton of work myself to save money. In the apartments, I did all the work. I replaced showers, faucets, toilets, flooring, painted, you name it. 

After restoration, we got the property registered on the national historic registry. We sold it for a $20K profit, but if you include my labor it was a total loss. I did get a crash course in everything DIY and property management. In the end, it was way too much work for not enough gain. We did rescue a beautiful building from sure demise and in the process we revived a main street in a small town. 

Really we just started what we finished, even though it was more work than we thought it would be. 

Originally posted by @Joe Villeneuve :

Originally posted by @Steve Vaughan:

Originally posted by @Joe Villeneuve:

@Steve Vaughan  You are of course familiar with the saying, "Be careful what you ask for", right?  Well, here's my story of "survival".

Pre- 1980, I bought my first property, and boy was I proud.  It was a duplex...separated by 4 houses.  I say that because I bought them from the same seller, at the same closing, and the houses were on the same block...separated by 4 houses. I got a great deal on price and financing. The seller was a widower, and a Red Hat Society member that didn't want anything to do with REI, so she was selling off her late Husband's properties as quickly as she could.

Like I said, I got a great deal...and they both cash flowed ($110 and 60/month)...wow, I thought I was King S___ of T___ Island (looking back, I was...but not in a good way).  Then, within 2 months, the "island" started hitting me in the face.  Between the "No Pays" and eventual evictions...then vacancies, I lost both to foreclosures.

What did I learn from all of this?

1 - How to evict a tenant, and how to prepare for it.
2 - What Real Cash flow was...and 110/m or less isn't it.  Now I would call that negative cash flow just waiting to happen, and negative CF is a death wish.
3 - The importance of, and how to, do a better job of vetting existing tenants...before buying.
4 - Saving money from CF to cover a "cash reserve" is a foolish illusion (I cleaned up what I wanted to say there). The much better solution, as in one that works from the very beginning, is getting a LOC...and only using it as a cash reserve.
5 - Investing without a long range plan, is a waste of time and money.
6 - How to analyze markets is more important than analyzing individual properties.
7 - I needed to develop strategies other than "Buy low, rehab, and flip high" if I wanted to make money...and have control.
8 - Profit isn't made when you buy, or sell, it's made in between the two on the spread.
9 - Basing the  quality of a deal on future events I have no control over, isn't investing...it's speculating.
10 - I survived it, learned a lot from it, and moved ahead because I realized I could always get my money back as long as I stayed in the game, and holding onto the side of a sinking ship, just because I have money invested in it, is stupid.  The longer you hold on, the closer you are to drowning. The property isn't the asset, the equity and cash flow is.  Don't fall in love with the property.  If the property becomes a "dog", get your ***(et) out of it, even if it is less than what you put in, and move forward.

Joe, you gave so many massively valuable nuggets here.  I wish I could up vote this 10 times.

I have seen you say many of these before, one of my recent favorites being it's the equity and cash-flow that is the asset, not the property. Don't fall in love with a property. The holding onto the side of a sinking ship analogy is priceless.

$110 per month cash-flow is just negative cash-flow waiting to happen. Love it.  I for one am glad you stayed in the game.  You've obviously learned from all hiccups and we benefit when you share your experience.  

I'll leave you with one of mine.  Some say I was in the right place at the right time when I landed some of my better purchases.  I say of course I was, because I was in the market ALL the time. Probably like you were when you landed that duplex deal pre-1980.  That's pre Nothing Down by Robert Allen.  Holy sh*t! 

 

 Thanks for your kind words.  It's always nice to know when you're appreciated...it keeps you going.  So now everyone knows who to blame for me continuing to be here,...YOU!...LOL.

How about some of my favorites:

1 - It doesn't matter what the total cost is.  All that matters is what it costs you.  Terms baby, terms.

...and my email tagline...

2 - The things that come to those who wait, are the things that are left behind, by those that got there first.

Of course! Sometimes I get bored of being on here, then someone will reach out and tell me I made a difference. Happy to be blamed for your sticking around!

My most recent buyer of all the apts I'm tired of operates your way.  Terms baby, terms. Doesn't matter the price you ask as long as the terms are agreeable to him.  Because we are working solo without agents to gum it up, we can do what we want. Smart man. Wealthy and very creative.  Makes me feel like a recent seminar graduate. 

Here's to the early bird vs the 2nd mouse.  Leftovers are for others👍

Originally posted by @Steve Vaughan :

Originally posted by @Joe Villeneuve:

Originally posted by @Steve Vaughan:

Originally posted by @Joe Villeneuve:

@Steve Vaughan  You are of course familiar with the saying, "Be careful what you ask for", right?  Well, here's my story of "survival".

Pre- 1980, I bought my first property, and boy was I proud.  It was a duplex...separated by 4 houses.  I say that because I bought them from the same seller, at the same closing, and the houses were on the same block...separated by 4 houses. I got a great deal on price and financing. The seller was a widower, and a Red Hat Society member that didn't want anything to do with REI, so she was selling off her late Husband's properties as quickly as she could.

Like I said, I got a great deal...and they both cash flowed ($110 and 60/month)...wow, I thought I was King S___ of T___ Island (looking back, I was...but not in a good way).  Then, within 2 months, the "island" started hitting me in the face.  Between the "No Pays" and eventual evictions...then vacancies, I lost both to foreclosures.

What did I learn from all of this?

1 - How to evict a tenant, and how to prepare for it.
2 - What Real Cash flow was...and 110/m or less isn't it.  Now I would call that negative cash flow just waiting to happen, and negative CF is a death wish.
3 - The importance of, and how to, do a better job of vetting existing tenants...before buying.
4 - Saving money from CF to cover a "cash reserve" is a foolish illusion (I cleaned up what I wanted to say there). The much better solution, as in one that works from the very beginning, is getting a LOC...and only using it as a cash reserve.
5 - Investing without a long range plan, is a waste of time and money.
6 - How to analyze markets is more important than analyzing individual properties.
7 - I needed to develop strategies other than "Buy low, rehab, and flip high" if I wanted to make money...and have control.
8 - Profit isn't made when you buy, or sell, it's made in between the two on the spread.
9 - Basing the  quality of a deal on future events I have no control over, isn't investing...it's speculating.
10 - I survived it, learned a lot from it, and moved ahead because I realized I could always get my money back as long as I stayed in the game, and holding onto the side of a sinking ship, just because I have money invested in it, is stupid.  The longer you hold on, the closer you are to drowning. The property isn't the asset, the equity and cash flow is.  Don't fall in love with the property.  If the property becomes a "dog", get your ***(et) out of it, even if it is less than what you put in, and move forward.

Joe, you gave so many massively valuable nuggets here.  I wish I could up vote this 10 times.

I have seen you say many of these before, one of my recent favorites being it's the equity and cash-flow that is the asset, not the property. Don't fall in love with a property. The holding onto the side of a sinking ship analogy is priceless.

$110 per month cash-flow is just negative cash-flow waiting to happen. Love it.  I for one am glad you stayed in the game.  You've obviously learned from all hiccups and we benefit when you share your experience.  

I'll leave you with one of mine.  Some say I was in the right place at the right time when I landed some of my better purchases.  I say of course I was, because I was in the market ALL the time. Probably like you were when you landed that duplex deal pre-1980.  That's pre Nothing Down by Robert Allen.  Holy sh*t! 

 

 Thanks for your kind words.  It's always nice to know when you're appreciated...it keeps you going.  So now everyone knows who to blame for me continuing to be here,...YOU!...LOL.

How about some of my favorites:

1 - It doesn't matter what the total cost is.  All that matters is what it costs you.  Terms baby, terms.

...and my email tagline...

2 - The things that come to those who wait, are the things that are left behind, by those that got there first.

Of course! Sometimes I get bored of being on here, then someone will reach out and tell me I made a difference. Happy to be blamed for your sticking around!

My most recent buyer of all the apts I'm tired of operates your way.  Terms baby, terms. Doesn't matter the price you ask as long as the terms are agreeable to him.  Because we are working solo without agents to gum it up, we can do what we want. Smart man. Wealthy and very creative.  Makes me feel like a recent seminar graduate. 

Here's to the early bird vs the 2nd mouse.  Leftovers are for others👍

 

There's also no competition when you are dealing with terms...not asking price. I can make more money, short and long term, and have the property cost me less than the REI paying discount prices, just by focusing on the terms...and just as important, understanding that the total cost of the property, isn't equal to my cost for the property, because of the terms.

It's about the left side of the equal sign, not the right.  If you focus on the left side, you control the deal.  If you focus on the right side, the deal controls you.

Purchased a home in 2018 and did a full renovation.   Was convinced by a reliable vendor to help out his cousin a single dad with 2 boys.   I did do the credit check, and knew going in he had a previous eviction but he claimed it was due the ex wife.  I put him in the home as a seller finance, cutting his housing costs by 500.00 per month.    The first 3 /4 months all went well, then he went to Florida in December of 2019 and the payment problems started.   By March, with the eviction moratoriums he stopped paying at all, I am almost sure he abandoned the property in July, he denied it and whoever was occupying the home started to destroy it.   He had signed a purchase agreement, but because he had failed to make the option payment I held off on filing the deed.   During the 30 days period between eviction moratoriums I filed for eviction.    It became a zoom court case, and he elected to attend while driving his car.   I told the judge it was a rent to own, he told him it was a sale but the judge granted the eviction.    He was more than 5,000 behind in payments and did more than 20,000 in damages.   I sold the note, with the home in as is condition for what I had in it. 

If I would have renovated the home again I could have made a profit, I purchased well in 2018, but my heart was not in it.  Just being inside the carnage left behind made me angry.  My lawyer rightly advised me to walk away, the title issues would have made a damages suit highly problematic.    Whoever, moved out just before the bailiff put them out. The note buyer was an associate that is providing me an additional layer of complexity just in case he hired an attorney.   He did not within the reversion period.   The home should be ready to sell soon.   My take-away is be careful to whom I rent, have better contracts for seller finance and never offer owner finance to anyone that has not been a responsible tenant for at least 3-4 years.    I have been successful in owner finance in the past and quite frankly I relaxed my requirement when someone I trusted vouched for a relative.     NEVER AGAIN. 

Originally posted by @Michelle Fenn :

Purchased a home in 2018 and did a full renovation.   Was convinced by a reliable vendor to help out his cousin a single dad with 2 boys.   I did do the credit check, and knew going in he had a previous eviction but he claimed it was due the ex wife.  I put him in the home as a seller finance, cutting his housing costs by 500.00 per month.    The first 3 /4 months all went well, then he went to Florida in December of 2019 and the payment problems started.   By March, with the eviction moratoriums he stopped paying at all, I am almost sure he abandoned the property in July, he denied it and whoever was occupying the home started to destroy it.   He had signed a purchase agreement, but because he had failed to make the option payment I held off on filing the deed.   During the 30 days period between eviction moratoriums I filed for eviction.    It became a zoom court case, and he elected to attend while driving his car.   I told the judge it was a rent to own, he told him it was a sale but the judge granted the eviction.    He was more than 5,000 behind in payments and did more than 20,000 in damages.   I sold the note, with the home in as is condition for what I had in it. 

If I would have renovated the home again I could have made a profit, I purchased well in 2018, but my heart was not in it.  Just being inside the carnage left behind made me angry.  My lawyer rightly advised me to walk away, the titule issues would have made a damages suit highly problematic.    Whoever, moved out just before the bailiff put them out. The note buyer was an associate that is providing me an additional layer of complexity just in case he hired an attorney.   He did not within the reversion period.   The home should be ready to sell soon.   My take-away is be careful to whom I rent, have better contracts for seller finance and never offer owner finance to anyone that has not been a responsible tenant for at least 3-4 years.    I have been successful in owner finance in the past and quite frankly I relaxed my requirement when someone I trusted vouched for a relative.     NEVER AGAIN. 

Wow, Michelle. Thank you for sharing!

While reading I was nodding my head and saying yep.  Happened to me, too. All of it.  Could you help my cousin out?  Been through hard times and all, just needs a 2nd (3rd, 4th, teenth) chance. 

Glad you got them out and your nightmare is over.  I've had more owed, but a little less damage.  It all causes the same indigestion that only having a home held hostage can. 

No more for me, either.  I used to like offering hand-ups.  Unfortunately my screening is now all business for reasons you outlined plus the moratoriums. Thanks again for sharing👍

Originally posted by @Joe Splitrock :

Originally posted by @Steve Vaughan:

Originally posted by @James Luciano:

I like to always learn from the mistakes of others and my own, so I thought I would ask the community to talk about a time you dug yourself out a hole?

This morning I was called back to an old thread worth reviving.  Mistake recovery is worth exploring. 

After a recent BP RE podcast completely glossed over the guest stating 'I was stupid and lost everything' as the full explanation, I think more could benefit from additional stories of recovery.  

A lot of us didn't throw in the towel and claim Trumprutcy during the recession 'because we were stupid'.  We gritted through, took our lumps and rose again.  I have a personal friend that lost $17.5M in 90 days on wall street. He did not claim BK and is doing great today.  He took the hit so his investors didn't have to.  Like @Brian Burke has in the past.  

Some colleagues that sucked it up and took their lumps vs the easy way out that come to mind are @JD Martin , @Joe Splitrock @Jay Hinrichs @Jim K.   @Jerry W.    @Joe Villeneuve    @Mike Dymski       Basically friends with character that were investing pre-2008.  Please share a story of a deal gone wrong and how you survived it or turned it around.

 

 I purchased a run down apartment building with retail spaces back in 2005. The 100 year old building had been neglected for 20 years. The retail space was last used as a steak house and it was frozen in time, minus everything that was falling apart due to age. My mentor suggested the building needed too much work, but in my 20's I knew better than anyone twice my age. There were six apartments, with six bathrooms. Five of six showers leaked. When I say leaked, I mean steel showers that were rusted through and there were garbage cans on the floor below to catch the water. Every kitchen sink had a bucket under it catching water. The previous landlord accepted cleaning in place of security deposits, meaning if you cleaned up the mess from the last tenant, you didn't owe any security deposit. There were meth heads in the property and two people were moving out as I was closing. My insurance was dropped a week after closing and I had trouble finding a company that wanted to insure a mixed use property. We had two fires, hornet infestation, leaking roof, 50MPH straight line winds blew a 20 foot window out and all sorts of other problems I have blocked from my memory. 

We hired a contractor to rehab the first floor, but I did a ton of work myself to save money. In the apartments, I did all the work. I replaced showers, faucets, toilets, flooring, painted, you name it. 

After restoration, we got the property registered on the national historic registry. We sold it for a $20K profit, but if you include my labor it was a total loss. I did get a crash course in everything DIY and property management. In the end, it was way too much work for not enough gain. We did rescue a beautiful building from sure demise and in the process we revived a main street in a small town. 

Really we just started what we finished, even though it was more work than we thought it would be. 

Joe, this is an awesome story.  Huge property with huge problems.  I learned long ago to not divide my net profit by hours worked.  Had a mobile I 'made' less than $2/hr on. Ugh.  But the lessons paid dividends for years. 

When the wind blew a 20ft window out. "That and other problems I have blocked from my memory." I laughed out loud.  I just sold a 17-year owned old 10 unit mixed-use that had many of those. Thankfully our memories can be selective and I miss that old hulk. 

It's the properties with gravel in them that test and build our character.  Not surprised you were tested early and survived my friend. 👍

@Joe Splitrock

"That and other problems I have blocked from my memory."

So many...so many...this was the starting point after demo of the shower I am currently working on. The window in the picture is in the basement below the floor joists. The existing floor in the picture is a thickbed tile floor mudded in circa 1945.

Originally posted by @Jim K. :

@Joe Splitrock

"That and other problems I have blocked from my memory."

So many...so many...this was the starting point after demo of the shower I am currently working on. The window in the picture is in the basement below the floor joists. The existing floor in the picture is a thickbed tile floor mudded in circa 1945.

 I have seen stuff during demo that you look at the rot and ask yourself, "how is that still even standing". This looks like one of those mysteries. I took out a shower tub to replace it and found out the plumber had cut two of the main supporting joists under the tub for pipes. He didn't add any supports. The old school handyman that was helping me said, "well it has been that way for 30 years so it should be fine". I was like NO, no it is not fine. Every floor that ever collapsed was fine for 30 years up until the day it collapsed, haha.

Originally posted by @Joe Splitrock :

Originally posted by @Jim K.:

@Joe Splitrock

"That and other problems I have blocked from my memory."

So many...so many...this was the starting point after demo of the shower I am currently working on. The window in the picture is in the basement below the floor joists. The existing floor in the picture is a thickbed tile floor mudded in circa 1945.

 I have seen stuff during demo that you look at the rot and ask yourself, "how is that still even standing". This looks like one of those mysteries. I took out a shower tub to replace it and found out the plumber had cut two of the main supporting joists under the tub for pipes. He didn't add any supports. The old school handyman that was helping me said, "well it has been that way for 30 years so it should be fine". I was like NO, no it is not fine. Every floor that ever collapsed was fine for 30 years up until the day it collapsed, haha.

 I redid the support posts on my mother's front porch this summer. I thought the existing porch supports were 4x4 posts wrapped in wood trim. Except I found out it wasn't wood trim but MDF. Oh, and that the MDF *WAS* the support post - that's right, someone built hollow-box mdf posts and decided they would be excellent structural members to hold up an integrated 34' porch roof. Did I mention that these things were sitting directly on top of rotted deck boards? 

I couldn't put up temporary supports fast enough. 

Originally posted by @JD Martin :

Originally posted by @Joe Splitrock :

Originally posted by @Jim K.:

@Joe Splitrock

"That and other problems I have blocked from my memory."

So many...so many...this was the starting point after demo of the shower I am currently working on. The window in the picture is in the basement below the floor joists. The existing floor in the picture is a thickbed tile floor mudded in circa 1945.

 I have seen stuff during demo that you look at the rot and ask yourself, "how is that still even standing". This looks like one of those mysteries. I took out a shower tub to replace it and found out the plumber had cut two of the main supporting joists under the tub for pipes. He didn't add any supports. The old school handyman that was helping me said, "well it has been that way for 30 years so it should be fine". I was like NO, no it is not fine. Every floor that ever collapsed was fine for 30 years up until the day it collapsed, haha.

 I redid the support posts on my mother's front porch this summer. I thought the existing porch supports were 4x4 posts wrapped in wood trim. Except I found out it wasn't wood trim but MDF. Oh, and that the MDF *WAS* the support post - that's right, someone built hollow-box mdf posts and decided they would be excellent structural members to hold up an integrated 34' porch roof. Did I mention that these things were sitting directly on top of rotted deck boards? 

I couldn't put up temporary supports fast enough. 

The warranty on the MDF structural members was good just as long as you could still see the tail lights of the guy's truck gunning it out of your mother's driveway.