A wild story on real estate investing, stock picking, and pushing through life’s occasional chaos

by J. Money -

1888 house flip

Here’s a great tale of the trials and tribulations real estate investing can bring, particularly when you’re overly ambitious ;)

Big ups to long time reader of the blog, Doug, here for spilling it all out for us today…

You live a wild and exciting life, my man! I admire the boldness! Haha…

*******

I bought my first house right after graduating from college. I was fortunate that my parents helped me out by lending me the almost $20K down payment, which turned out to be their best investment in me by making my life more independent and getting me started in real estate investing so young.

I did save them some college bucks by getting a 2/3rds scholarship by becoming the business manager of “The Hustler” – the school newspaper before Larry Flynt started his version, who by chance is from my hometown and I kinda know his daughter Teresa, but that is another story.

To date myself, I graduated in 1987 and paid $97K with owner financing for the house that I lived in my senior year. I had roommates throughout the years in the house. The best part was that I got to pick who they were and they paid my mortgage and I became lifetime friends with most of them… although not all of them and their sometimes live-in girlfriends.

I ended up moving back to Ohio after mom got breast cancer, rented the house to college students and was a landlord. Later moved to Malibu and got my MBA at Pepperdine, continued to rent the house (now houses as I bought two more using the equity from the first one for down payments). Worked a corporate gig in Los Angeles as a property manager with CBRE managing large office and retail spaces which was cool but not much money. I remember starting out at $30K/year and after a month we lost a project, so I got bumped down, not up, to $27,500.

This was in 1993 and the economy was not that great in lala land. It was fun though, as I got to surf and snowboard in the same day and would sometimes sleep at my buildings, as the drive was almost an hour away from my Malibu pad with roommates. I paid under $500/month and lived next to Johnny Carson and Cher. My landlord bought his land on Point Dume in 1965 for $15K and built his house and guesthouse in back where we all split a 3BR/3BA guesthouse for around $1,500/month. The landlord was a fireman and luckily thanks to Proposition 13 which limited property tax increases, he was able to keep the house and guesthouse and his son still lives in it today with his family.

Mom’s cancer remission ended in 1997 and so I took a leave of absence from my corporate job and moved back to Ohio to move into the parents’ house and take care of her. Mom died in 1999 and I took care of the estate and designing the tombstone for her as my dad and grandma passed when I was a kid. My mom never could get around to getting a tombstone as she didn’t want to pick one out for herself, and I don’t blame her.

While taking care of mom I bought 7 properties in my hometown of Dayton, Ohio, which turned out to be my life’s biggest challenge. At one point I owned 72 units, so that’s 72 refrigerators, 72 stoves, multiple washer and dryers, and multiple tenants. I also bought what I thought was a cool old fire station and rented it out to a church for over 15 years.

I had $3Mil plus net worth on paper… all in real estate. Robert Allen, author of “Nothing Down“, flew me out to Burbank to do an infomercial for him… Things were going well. Like the beginning of The Grateful Dead song “Uncle John’s Band:”

“Well the first days are the hardest days, don’t you worry any more,
Cause when life looks like easy street, there is danger at your door.”

I bet you can guess what happened next. 2008/2009 came along and real estate prices dropped, but my property taxes didn’t and life took a turn.

In short, although it took forever emotionally and in real-time, I lost almost all my properties to the banks through deed in lieu, short sales, and foreclosures.

During all my time as a landlord, I pretty much put my tenants first and unfortunately most still did not seem to care. I was in their eyes “the rich greedy landlord” even though the banks owned me.

Their problems became mine, and apparently I didn’t have any. So late rent was always a problem, as well as no rent, nightly move-outs, three-day notices, tenant fights, police breaking down doors and me fixing them at my cost, legal battles, shootings, meth labs, drugs, pit bulls, homeless people living in basements using my electricity as heat, roof leaks, mold, flooding, lawsuits with insurance companies…

You name it, I had it.

I was done with Ohio so I moved back into that very first house I had bought in Nashville. I lived in it for just over two years, sold it for $340K in June 2002, and was able to keep most of the money tax-free as it was my primary residence. It’s now worth over $800K, but oh well… Can’t keep everything.

I then moved into another house, sold it and kept most of that profit too. Then moved into another house, sold it and kept its profit. Moved into another, sold it, and so on and so on… Basically getting used to moving a lot.

After selling my last property, I rented a very small one-bedroom apartment for $700/month and was real estate-free for about five years.

By random chance in Los Angeles in 2010, I reconnected with a former person I used to date a decade earlier. We moved to Venice, CA and I sub-leased my furnished 1BR apartment in Nashville with small positive cash flow. Then I got my CA real estate license and sold real estate in the West LA area.

Much different than Ohio!

I connected with a wonderful down to earth real estate lady name Denise Fast who when she first met Florence Henderson she asked what she did for a living and Florence said “I’m in a show called ‘The Brady Bunch’ and Denise responded with “I have not heard of it.”

(Denise later would give her eulogy and sell her house. I met Florence at an open house at Kareem Abdul-Jabbar’s house with Denise and she was soo nice! Before selling real estate, Denise was a single mother who worked doing nails and pedicures, so she didn’t have time to watch TV.)

Fast forward more years, I got married to my re-connected partner barefoot on the beach in Venice in August 2013. We were able to use my loss carryforwards on my taxes of almost half a million to offset our incomes for the next several years. We made offers on crazy expensive dinky houses in Venice beach using my spouse’s credit and income as mine was shot, and then we decided we could buy three houses in Nashville for the price of one in California. So we moved to Nashville full time in February 2017 and now own four houses, two of which are free and clear.

It makes me sick to my stomach how much time and energy I gave to my properties in Ohio. Had I followed my heart and not my head I would be very wealthy. I loved Nashville and would have bought there instead of Ohio, but because I had family there I thought at the time “it was the right thing to do” NOT!!! I sold my last property there last year for about the same price I paid 22 years ago if you can believe that.

On a side note from real estate, I am embarrassed to share another one of my BIG mistakes over my lifetime. I tried to pick and trade stocks and did some options trading and lost a fortune! Probably in the range of half a million to $700,000 or more. What’s weird is I don’t even like to gamble or play the lottery, but basically that is what I did.

What is also ironic is that I was told by Robert Allen years before to NOT DO this personally when I was at another event with him. He said “Only less than 3% of all the money managers can beat the S&P, so don’t try, just buy the S&P and forget it”.

Instead, because I’m an overachiever, I would later spend several thousand to also go to Tony Robbins’ “Wealth Mastery” gathering which should have been called “Lose Your Ass and Pay Me to Do It” conference. I learned how to trade options and buy dot com stocks, of course right before the dot com bubble.

It was held at a beautiful hotel in Carmel, California and I remember how bummed I was that instead of having time to enjoy the surroundings I was learning how to lose my money from 7am to 11pm every day. To add insult to injury, Tony Robbins had his own stock called “Dream Life” that I invested in as well, which would later go down to zero. Good with names, not with investments!

I have since seen the light, like you, and now keep it simple with Vanguard S&P index funds. Less is more!

******
PS: The pic up top is of the second house I bought in 1988 for $68K. It had 9 fireplaces and was built in 1888. I later sold it for $420K in Jan of 2008, and it’s now worth $1.5M.

Here’s one of the fireplaces, and another shot of me getting down and dirty:

19th century fireplace

working on old house

* Link to Robert Allen’s book above is an Amazon affiliate link…

{ 12 comments… read them below or add one }

1 Josh November 15, 2019 at 6:12 am

That’s an awesome house. It’s nuts how the Nashville metro area has grown. I’ve been appreciating the value of simplicity as my own family grows when it comes to investing too.

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2 J. Money November 15, 2019 at 11:49 am

Only been out there once and it was sooooo beautiful!!

Such a great music scene too! :)

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3 Joe November 15, 2019 at 10:21 am

Oh wow, thank you for sharing your story. Every real estate investor should read this. It’s easy to think you’re a real estate mogul during the good times. LA changed a lot over the years.

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4 abails November 15, 2019 at 10:45 am

Thank you for sharing your story! That’s the story of a lot of us that started in real estate and stock options investing – we were running towards something with everyone else when we should all have been running away! Especially in 2000-2001 and 2008. Nashville is amazing, though, and a great place to be for sure. Congrats on getting married as well! Again, thanks for your inspirational story!

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5 J November 15, 2019 at 11:19 am

(Dayton, OH)
“I sold my last property there last year for about the same price I paid 22 years ago if you can believe that.”

Yes. Yes, I can. My maternal grandparents bought their home in Dayton in the early 60’s (Watervelit St). When my grandmother died not too long after my grandfather in 2005 the executor/lawyer sat on it for a few years. It finally went on the market in the 2009/2010 period and took forever to sell. When it finally did it sold for what my grandparents paid for it back in the early 60’s. The family basically got nothing when all was said and done. My Mom tried to get me to move to Dayton and buy a giant home down the street for $150K. A similar home in Charlotte would go for 3x that price without even being near center city. But I STILL wouldn’t have bought that home for that price in that town. Dayton does look like a better area now than it did back in the 80’s when I lived there and in the 2000’s when my grandparents died, but I still feel like the city is always one slip away from a return to the “bad old days.”

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6 J. Money November 15, 2019 at 2:44 pm

Scary :(

Did their executor hold off on it on purpose thinking it would rise, or just took his/her own time?

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7 Amelia @ TheUsefulRoot November 15, 2019 at 12:40 pm

Wow. What a great story. Thanks for sharing it Doug and J$!

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8 jim November 15, 2019 at 1:01 pm

There is a typo or something out of whack in the chronology.
Theres the bit ” 2008/2009 came along … ” followed by :
“I was done with Ohio so I moved back into that very first house I had bought in Nashville. I lived in it for just over two years, sold it for $340K in June 2002,”
Then … ” in Los Angeles in 2010,”

So thats 2008/2009 then 2002 then 2010

So the 2002 is likely a typo or out of place.

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9 J. Money November 15, 2019 at 2:48 pm

Ahhh could be! I know he was just dumping it all out of his brain when he sent it to me as it wasn’t meant to be a blog article at all (I just convinced him to let me share it ;)). I also had to merge a note from further correspondence and could have jacked something up myself…

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10 Chris November 16, 2019 at 11:14 am

Everyone talks about index funds on the FIRE websites. I would like to start investing in them. We have invested in retirement funds and the stock market (primarily my husband’s workplace). We would like to invest ethically though, as we are very conservative Christians. We have heard of the Timothy Fund, which is definitely ethical. (I may not be using the correct words?) My question is are index funds ethical or can you pick some that are and how do they work? If this is too involved for the guest or the owner of this blog, I don’t mind if my question is not answered. (For instance, if this is more the type of information that you pay people for, in a consultation). I don’t know too much about investing. We are debt free and mortgage free and live on a low percentage of our income. Thank you.

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11 J. Money November 18, 2019 at 7:34 am

Nicely done being completely debt-free like that, wow!!

I think you need to have a $$ blog up in here! ;)

Index funds – they are a bit trickier to mold to your desires since they encompass so much of a particular area, however more and more “socially responsible” funds are starting to pop up due to demand which is nice (although they do tend to cost more, fee-wise).

Google “socially responsible” or even “biblically responsible” funds and you’ll get a good idea of what’s out there. Just really depends on what exactly you’re looking to invest in, or rather, *not* invest in. Index funds don’t work perfectly for everyone so don’t feel pressured if it’s not for you! :)

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12 Chris November 18, 2019 at 7:54 pm

Thank you so much! And for the compliment about a blog! :)

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