BiggerPockets Money Podcast - 285: The Difficult Path to Wealth: Losing Money on Your First Real Estate Deal w/ JL Collins

Episode Date: March 21, 2022

When most people think of JL Collins, they think of smart stock and index fund investing. In his classic, The Simple Path to Wealth, JL lays out the foundational path that investors can follow to secure financial freedom simply, easily, and without a ton of stress. So it may come to many FI chasers’ surprise that JL has written a new book on real estate investing, and not index funds, the stock market, or our current state of high inflation. In, How I Lost Money in Real Estate Before It Was Fashionable, JL lays out, quite candidly, how not to invest in real estate. And before you get mad about that type of advice on a BiggerPockets Podcast, please note that JL isn’t saying to NOT invest in real estate, but to invest in real estate in a smarter way than he did.  JL is the first to admit that real estate is a phenomenal way to build wealth, create passive income, and retire early. But, if you haven’t fulfilled your 250+ hours of real estate investing education, you probably shouldn’t be purchasing income properties. In today’s show, you’ll hear JL explicitly list out all the mistakes he made when investing, and how you can mitigate these risks and come out profitable instead!  In This Episode We Cover “Stagflation” and how 2022 is looking more and more like 1979’s burdensome economy  How following the herd mentality to buy real estate may cost you time and money The biggest home renovation mistakes and how to manage contractors correctly  Staying cautious when buying in a hot housing market and making an offer based on the fundamentals of real estate investing  Capital gains taxes and preparing for depreciation recapture when selling a property  The biggest real estate mistakes rookie investors can avoid when getting started  And So Much More! Check the full show notes here: https://www.biggerpockets.com/blog/money-285 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 285, where we interviewed J.L. Collins and talk about losing money in real estate. My lawyer Wayne pointed out that there was no real practical way to enforce that because of the costs of litigation that it would take. So when YP said, you don't like it, sue me, he knew my hands were tied. Well, when Wayne was saying to me, you know, J.L. you have to close. I mean, the loss, says that when essentially it's done and you're just down to a checklist, you have to close. You can't keep canceling these, these closings like you're doing. And you can imagine what I said to Wayne. And so let him sue me.

Hello, hello, hello. My name is Mindy Jensen. And with me as always is my smart cookie co-host, Scott Trench. Well, I'll take that. That's a pretty crummy introduction. But I guess it'll work for today. Scott and I are here to make financial independence less scary. less just for somebody else to introduce you to every money story, even the ones that cause you to lose money in real estate, because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting, or what kind of mistakes you make in the beginning.

That's right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, avoid losing money in real estate by making smart decisions or start your own business will help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Today we have three-time guest J.L. Collins joining us again. And he is going to talk not about the stock market, which is what he is known for, but he's going to instead talk about real estate. And his success is, Scott? Well, well, the success is he got an education in real estate investing based on this. No, what we're going to hear today is, you know, we're going back to 1979 when inflation. is looming. The economy is looking fairly bleak and the outlook is eerily similar to what I think a lot of folks are worried about in today's economy here in 2022 and about how a tremendous amount of money was lost on a condo purchase that was intended to be a home in investment. And, you know, there's losses at every step of the journey all the way through a long hold period. And I think there's a lot of information to learn from this. It was a really fun time. J.L. Collins is

really great to talk about it with a sense of humor looking back, but you can imagine how scary and terrible that was going back. I think there's a lot of lessons that are really important to learn from. Yeah, absolutely. This is a great retelling of a story that is actually, I'm sure, much worse to have lived through. And, you know, 40 years of hindsight makes it a lot easier to retell the story. The story we talk about today is, uh, fully documented in J.L. Collins' new book titled How I Lost Money in Real Estate before it was fashionable, a cautionary tale. I had a chance to pre-read this book. I thought it was phenomenal. It's a short, quick read. It's very well illustrated. It's a very powerful

message, and it gives all the details and the specific numbers and the timeline behind some of the things we'll talk about today. You can buy that book on Amazon on his website, which we'll link to in the show notes. And in those show notes, again, will be found at biggerpocket.com slash Money Show 285. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch.

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making up now 1% of our guests that we have had. Jim Collins, J.L. Collins from the Simple Path to Wealth from Jail Collins, NH. What else do you do? From Chautauqua, what else do you do, Jim? Welcome back to the show, Jim. Tell us all your things. Give us your resume. We only have an hour, so don't give us like the whole thing. Oh, okay. Well, I mean, JL. Collins, NH.com is the, is the, the blog. You can go there, and from there I'm on Twitter and Facebook, and I've got two books out, The Simple Path to Wealth, which was the first one that I published in 2016. And then last fall,

I just brought out the second one, which is how I lost money in real estate before it was fashionable. And yeah, and then Shathe's a hard path to wealth. Yeah, Chautauqua, you mentioned, you've been to Chautauqua. And that's our annual event where we take small groups. of people out to some cool place for cool conversations in a cool environment. And that is finally returning for 2022 after two years of COVID-related hiatus, I guess, is the word. Yeah. So you're all over the board. Where are you right now? Because it looks like you're in a hotel room, Jim. You're just tracing around the world. Yeah, I'm almost always in hotel rooms. We're nomadic. So this particular hotel room is St. George, Utah, which is in the southwest corner of Utah,

beautiful area. Awesome. Well, today I think we were hoping to learn more about how you did lose money in real estate and the full details behind that. And I think that's... Wait, wait, wait. This is bigger pockets. We talk about making money in real estate. You can't lose money in real estate, right, Jim? Oh, I did. And in my experience, it's surprisingly easy. All it takes is being naive and unaware, which, by the way, I applaud you at bigger pockets for trying to correct in investors, but you were not around when I was making this series

of tragic errors. Yeah, thanks, Josh Dorkin, for not foreseeing the future and being there when Jim needed you. I know. Okay. So let's set the stage. What year are we talking about? So we would be talking about 1979. Oh, is this the beginning of...

Tough year. Yeah, very tough year. And isn't this the beginning of really crazy interest rates? Well, wasn't the beginning of crazy interest rates. It was kind of the middle of crazy interest rates. It was towards the end of a decade's worth of... stagflation, which was the hallmark of the 1970s. I think we finally broke the back of that in around 1982, if my memory serves me.

By the way, that's one of the reasons that this particular inflationary environment that we're entering has me nervous. It just seems very familiar somehow. Yeah, I just typed that into the notes that Scott and I have. I'm like, stagflation, hmm, that sounds very familiar over the last 20 years. Yeah, well, I don't think you've had anything like it over the last 20 years, but stagflation was a period of a stagnant economy, which so far, fortunately, we don't have, and high inflation, which at the moment we do have. Oh, oh, I thought stagnant, like there was no inflation. Like, we have had such low interest rates and slow, okay, okay.

Yeah, see, I'm dating myself, and thank you for pointing that out. But just for our audience, stagflation was a term coined in the 1970s. to describe the economic environment, which is, I say, lasted for about a decade where you had very high inflation rates in a very stagnant economy. And as you point out, for the last 20, actually probably closer to 40 years now, we've had very low inflation and declining interest rates. So a totally different kind of environment. Right now, we have high inflation, which is kind of sprung on the scene in the last year or so.

and fortunately we have a robust economy still. Awesome. So what were your kind of, I think that's great setting the stage from an economic point of view, but how do we set the stage from a personal point of view? What got you into this first investment and what were your life circumstances at the time? Yeah, so I was obviously a much younger man at the time. I was in the first few years of my professional career and I was doing pretty well. And I had a nice little apartment where the,

the rent was cheap and I was perfectly happy. But everybody in the world at the time was saying you have to buy real estate, you have to buy real estate, you have to buy real estate. And because I was young and naive, I thought, well, I don't particularly want to buy real estate, but I guess I'd better buy real estate. And because I had zero interest in actually doing this, what it took was my old college roommate who lived in Chicago at the time, who was very eager to buy himself. And he was out diligently looking, and he found this building. There was an old courtyard building built in probably

the early 1900s, 1910, 1920, something like that. And the concept was they were gutting this building, this three-story building, and you were going to have this charming old building with brand new apartments in it. And that kind of appealed to me. And that appealed to my buddy, Steve. And So my first mistake was, I figured, well, you know, Steve's done all the legwork. Why should I go and do any due diligence on this? I'll just follow in his footsteps and buy a condo in the same building. So, so how, what happens next? It'll work out?

Yes, from episode 285. Everything was great. Yeah. If it had worked out, then I wouldn't have been a bunk in it for me. which is the silver lining I had to wait about 40 years for, by the way. Yeah, no, it really didn't work out very well. And, you know, Steve's father was a banker, and he was also investing in real estate at the time and eager to see his son.

And my extension, his son's buddy benefit from real estate, which, of course, as we all know, can only go up. but, you know, what none of us knew at the time was the Chicago real estate market was about to collapse. So your plan going in was, hey, this building's going to get fixed up. My buddy's kind of interested in it and telling me all these great things. I'm going to buy it. Things are going to go up and I'm going to make my, do you have a timeline? Did you have any expectations around it or really anything beyond I'm going to buy it and that's going to go up?

Or what was the framework you're approaching the problem from? Well, the framework was, again, the advice that went unchecked on my part, and again, first mistake was you should definitely own real estate. Renting is not a good thing to do. And if anybody who reads the book and looks at the math in it, we'll see that at least in this case, running was absolutely the thing I should have continued to do. But in the, it would have been in January, February, and it's testing my memory, both from the time I wrote the book, last year and of course 40 years ago. But early in 1979, my buddy Steve had actually put in a contract to buy his condo. And I followed suit and put in a contract to buy one in the same building.

The idea was because the building was being gutted, it would take about six months for these things to be finished. So we'd be closing and moving in sometime around theoretically as sometime around August 1st. I could go into a monologue and describe the sequence if you want me to, but I'm not, I'm not sure that's best for the interview, but I'll leave that up to you as we, if you want me to do that or just go step by step. I'm going to look into my crystal ball and say they didn't meet the August 1st deadline, did they, Jim?

Well, your crystal ball is flawless, as it turns out. You might have even read the book, which might have given your crystal ball a little polish. Not only have I read the book, I've lived this story too. Well, there you go. So, yes, you're correct. They didn't meet the August 1st deadline. And silly me, I had heard at that point the advice that if you're involved in building something or doing a major renovation, you spend a lot of time going to the site and checking it out.

But again, I was impossibly naive, which by the way, is the title of one of the chapters. I was impossibly naive. And I figured, why am I going to go to the site? I don't know anything about doing, renovating a condo. You know, I'm a busy guy. So I didn't go to the site. I figured these are competent people. They would get it done.

Yeah, right? Bad thing to figure out at the time. I'm sorry. I'm not laughing at you. I'm laughing at, I've been there. You're laughing with me, are you? I'm laughing with you. Well, I certainly deserve to be laughed at.

I mean, there's no. No, it was the phrase, these are competent people. Yeah, right. Well, yeah, right, which is a laughable thing to say. And it was an even more laughable thing to believe. But anyway, that's what, that was the assumption that I made. So there's another mistake up front. And along about the.

middle of July, I finally occurred to me, oh, you know, this condo that I bought should be about done. And maybe I, maybe I should go over and see how wonderful it looks. And so I did. And it looked exactly the same as it did in February. I mean, not, not, it hadn't been touched. Not a, not a motive dust had been moved. And it, it, it was gutted. I mean, it was, as it had been when I had first seen it. It was gutted to the, what do you call it, the laugh in the old buildings, right? And I mean, I was horrified because, of course,

I'd given notice at my apartment that I was, and I thought I was being so clever because instead of saying I'm moving out on August 1st, which, you know, would have been really silly, I said September 1st. I thought giving myself that extra month was very clever. Well, now I'm looking at a place that is, in two weeks from when theoretically it's done and I'm moving in and closing, and it hasn't even been started. And so I was more than a little outraged.

And I was down in, I used his initials to protect his amenity, although why I do that, I don't know. but YP or his initials. I was down in his office with my fists on his desk leaking over and threatening to climb down his throat. And he was assuring me, of course, that everything would be done by August 1st, which even I wasn't naive enough to believe. But what's interesting is what he had been doing. And you have to understand at the time, the real estate market in Chicago had been red hot. And kind of like we're seeing in the real estate market today, I would say, and the prices of properties were going up dramatically, even within month over month.

So what YP was doing is he wasn't even trying to finish these apartments that he'd sold. And there were 52, I think, at the building. So he'd sell them. He'd collect the down payments, right? And then he'd just sit on them. And when the outraged owners would come storming into his office like I did, what he would say is, well, you know, why don't I just give you your money back? And a lot of people were smarter than me, said, yes, I want my money back. And then he'd refund the deposit.

And he simply turned the unit around and resell it for another 15%. Well, this was wonderful as long as the real. estate market kept cranking its way up. But on that July day, what YP, neither YP or I realized, is the Chicago real estate market, particularly the condo market. And condos seemed to get hit hardest first when the market turned sour, was in the process of plummeting. And so he said, well, why don't I give you your money back? And I said, another mistake I made. No, I don't want my money. I want the condo, right? I want to live in this place. And I, you know, I so wish I'd said, yeah, give me my money back because within a month or maybe six weeks, all those

apartments that he'd been able to successfully turn over and resell over and over again, suddenly that merry-go-round stopped. And he wound up with a building that was half empty. And at that point, unsellable. And of course, there's no way he's giving me my money back at that point. And a month, six weeks later, I was demanding my money back. And he was not only refusing, but he simply didn't have the capability to pay it back. And then things got really ugly because now he can't meet his commitments to the bank. And now he has to try to actually finish these units so he can close on them and get the balance of the money to satisfy the bank. And, and of course, as you pointed out to me, and I should have recognized, I'm not dealing with

somebody competent. So getting the apartments finished was a whole other nightmare that didn't go well. So you're supposed to move in on August 1st. When did you actually end up moving in? So as memory serves probably October 1st. And in my defense, I probably moved in to the nicest department in the building because, while I didn't pay any attention in the beginning, as I should have, after July 15th, I was paying intense attention. And I don't want to say, threaten the man, but I was an intimidating presence in his office on a regular basis. So I think my place got more attention than most. But the other thing is that he made a critical mistake. I made a lot of mistakes in this journey.

But YP made a critical mistake at one point. I think out of his desperation to get these things closed so he could get that money from the bank, he let me move in before we closed and before the apartment was fully done. So now I'm living in this place. And it was, you know, it was. It was essentially done. I had a checklist of things that needed to be finished and fine-tuned, but it was perfectly livable.

Now I'm in it. I don't actually own it because we haven't closed. I'm not paying any rents, so I'm living rent and mortgage-free. So I am suddenly went from being in a very bad position, being in a very good position, and I would refuse to close until they completed this checklist that I had. And YP would keep saying, well, I've come, you know, we'll complete it. And let's set up a closing day. And I'd say, okay, let's do that.

And they'd finish a couple things on my list. Closing day would come and I'd cancel it because the list wasn't completed. And, of course, that made him crazy. That made his lawyer crazy. That actually made my lawyer, who I didn't know crazy. But my lawyer, Wayne, it said to me, when I was so outraged and trying to get out of this deal because the contract had said if it wasn't finished by a certain time that he was obligated to refund my money. And of course, he just refused to honor the contract. And my

lawyer Wayne pointed out that there was no real practical way to enforce that because of the costs of litigation that it would take. So when YP said, you don't like it, sue me, he knew my hands were tied. Well, when Wayne was saying to me, you know, J.L., you have to close. I mean, the law says that when essentially it's done and you're just down to a checklist, you have to close. You can't keep canceling these, these closings like you're doing. And you can imagine what I said to Wayne. And so let him sue me. Okay. So I am listening to this and I'm thinking a lot of things. First of all, I, poor Wayne, I can completely understand what Wayne is thinking.

And YP, I don't feel at all bad for him because I've dealt with YP many times. And, you know, sorry, you should have honored your obligations in the beginning. Back to the beginning when you said you weren't checking in on things. I don't know if anybody else's condo units were getting worked on at all, but the squeaky wheel gets the grease. And if you're not there checking on your stuff, they're not going to work on it at all. Were they working on anybody else's unit? I think they were, but probably not as diligently as on mine because I was the squeaky, the squeakiest possible wheel. But again, he had a very small crew to do the work because he never intended to do the work.

That wasn't his strategy. He was just going to keep reselling these things, I guess, forever, because he, like everybody at the time, believed that real estate could only go up and that they would only be more valuable. six months from now than they were at that particular point. By the way, I absolutely agree with you. I have no sympathy for YP. He eventually fled the country, actually. He went back to his home country, and he just left the bag cold in the bag, and they auctioned off the remaining apartments, which, by the way, went for about half what I paid for mine. And to give you an idea of, that's just kind of the beginning of the disaster that this what what did you pay for years so i put down

five thousand dollars and you you have to inflation and justice to make it to make it significant of course uh and in the book i do that my memory's not good enough to to do it for you in our interview here but i put five thousand dollars down on a 45 000 condo the base condo was 40 grand and i took all the options which added 5 000 to it so Yeah, and then when they went at auction, and of course, they didn't have the options because they weren't the condos that got auctioned off were not finished. They were in various states of progress, right? So some of them were just shells. Some of them were, I guess, pretty far along.

But they went for $20, $24,000 at auction, and there were about half the building. And was this, were these luxury condos, like really like pretty nice? nice, a pretty nice place? You know, I wouldn't, I don't know that I would, I guess today and with the, with the hype around everything's luxury, right? So I guess, I guess somebody selling it today would have called it a luxury condo. It was, mine was actually, when it was finally done, it was a very nice, nice place, a nice space.

It was a one bedroom, one bath that wasn't, I don't remember how big it was, wasn't terribly big, probably 700, 800, 800 square feet, something like that. But yeah, it was very, it was nicely finished. And as I say, I took all the options. And it did turn out to be a new, basically a new apartment in a charming old building. So the project had the potential to be a really nice. And I think ultimately it became a nice building as the owners themselves took over and finished their apartments. And then, of course, the common areas of the building were not finished when,

when he fled and left everybody holding the bag. So that required special assessments on all the owners to raise the money to finish the common areas. Okay, I want to jump in here again and say to those of you who are listening, who are thinking, oh, I want to get into real estate. Listen to Jim's story. He said condos were going up month after month. Prices were just continuing to go up. That's where we are right now in much of the world.

I'm sorry, much of the United States. There are some markets where this isn't the case, but in most markets, we are seeing exponential growth month over month. What are we in Denver? It's been like 27 percent growth over the last, or price increase over the last 18 months or 12 months or something like that. And we just had a fire that has taken out a thousand houses in two cities just south of me that is going to affect the real estate market for years to come.

because that was a thousand single family homes. Like the market is marching north, but that doesn't mean that it will always go up. I mean, listen to Jim's story. The market is, you know, real estate only goes up. May I remind you 2008, 2009, 10, 11, 12. The market can go down. And this, I wanted to have you on the show to share your story about how you don't always make money in real estate because bigger pockets can be really, really good. at encouraging you to do these things.

But we also try to encourage you to run your numbers and, you know, invest or buy like you're buying an investment. And it sounds like you bought because Steve told you to, which is, you know, I bought because I wanted to and Scott bought because Brandon told him to. And, you know, you don't just buy a house because you feel like you should get into real estate. You buy a house to. I was going to say you buy a house because it's a good investment, but it's not an investment.

And it could be an investment. I mean, my houses are investments, but that's because I buy the worst dump on the planet. I bought those condos that were not done. And I forced the appreciation. But I don't know where I was going with this. There's a lot of parallels with this market that you were in and the market that we're in right now. Yeah, it feels that way. Now, of course, we don't know for sure where the market we're in right now is going.

I mean, it could continue to go up. And as you mentioned in Colorado, where you are, and I happened to be in Colorado when that fire took place, I was in Golden, which is just south of there. What a tragedy. And so, I mean, there are factors like that that are driving up the prices, at least in Colorado. And as we travel around the country, I mean, I hear it everywhere we've gone. how prices are going up. And we are in an inflationary economy. So I don't know where this market is going.

The same thing I say when I talk about the stock market, I have no idea what the stock market's going to do next. I do know that the stock market plunges periodically. That's a natural part of it. And real estate plunges periodically. That's a natural part of the process. You mentioned 2008, the time I'm describing, which was in the beginning of the 1980s,

are both cases of that happening. I wouldn't, by the way, lay all the blame of my tragic story at the feet of my buddy Steve, although he was the one who alerted me in this particular building. But everybody at the time, and I mean everybody was saying you have to buy real estate, especially if you're young and single and you were renting and, you know, renting is throwing you all the same stuff that I hear today. And so it was an environment that I let myself get swept up in. And I was young and naive.

And I didn't step back and say, wait a second, is this right for me? Setting aside anything macro, because I don't think anybody, much less, much less I could have predicted that the market was about to plunge in 1979. But what I could have done is step back and said, wait a second, is this really the right thing for me to do? Does it really make economic sense to give up an apartment that I liked that I was enjoying that I was paying $160 a month for? And again, remember you got to adjust the stuff for inflation and move into a condo that was going to cost me $270 a month in mortgage and assessments and everything. And by the way, of course, I had no way of knowing this at the time. it wound up being $570 a month, with all the special assessments and everything that came later. But so clearly, is that a good economic decision?

Setting aside the fact there was no appreciation, in fact, as we talked about earlier, they went an auction at half what I paid. But it doesn't make any economic sense to give up $160 a month, a month apartment that you like, that you enjoy, right, to go into a condo that is going to cost you for sure $370 and actually turned out to be $570. Clearly, the answer to that is, no, that's not a good economic decision to have made. And then I would have set back and said, well, does the condo offer me a lifestyle that is

worth all that extra money to me? And the answer there would, yeah, it was nicer than my apartment, but I didn't care about that. It wasn't that much nicer. I much would have preferred to have that extra money each month to invest. So I think those are the kinds of mistakes I made, just some of them. The book is filled with money more. Those are the kinds of things I would suggest that anybody looking in this environment asks themselves, you know, and yeah, go ahead. Yeah. So we're in this spot now where you've got this condo, you've got this condo, you've already given us a sneak peek that there's special assessments that are coming down the road, in addition to it being worth half what you paid

for shortly after you close in the deal. What's the next phase of the journey? Is our story over at this point? I want to jump in here before Jim answers and say, I have never owned a condo that didn't have a special assessment. Never. In my whole life that I've owned condos, I've never not had a special assessment. Okay, Jim, what's your next story? Well, let me, let me address that first, Mindy, and then I'll go back to, if I can remember Scott's question, I'll go back to it. But, you know, I've owned, at the same time, I bought a condo from my mother in Florida. And the only condos that don't have special assessments that I'm aware of are ones that have very large, regular assessments. And then they create a pool of money for when those big things happen.

and the condo that I had bought from my mother was, you know, she was retired and it was filled with retired people, and they tend to have cash on hand. So they wanted the smallest possible assessment monthly to cover their basic expenses. And then every now and again, if they needed a new roof or they wanted to repave the parking lot or something like that, I'd get a notice saying, oh, we're going to repave the parking lot. And there's a special assessment of $5,000. and dollars and it's due in two weeks. Well, you know, when you're old and retired, then maybe that's not a big deal when you're young like I was at the time. Coming up with five grand

and the spur of the moment was all another frame of reference. I'm sorry, Scott, real briefly, your question was. Well, well, I was just going to ask you to continue the story and tell us what happens next. No, you've got this place and it's worth that for you're getting special assessments? Like, let's keep, like, what happens next? Yeah, well, so what happens in the immediate future is now I'm living in this thing. And in pretty short order, I'm paying $570 a month for the privilege of living in this thing. And, uh, and I'm just licking my wounds. And as long as I don't sell it, you know, I've got a $40,000 mortgage. So if I can only sell it for, say, $25,000, I've, I mean, I've got to come up with $15,000. I mean, I've got to come up with $15,

thousand just to get out from under it. And in the meantime, I'm dating the woman who is about to become my wife, and we decide that we're going to need a bigger place than this when we get married. So I went off and bought a two-flat in Chicago. Two-flats a term for a, what do you call it out in Colorado? It's a two-family house, basically. And which, by the way, I did much better on, because at least as painful as this first purchase was, it did teach me. It was a very expensive education, but I did learn. So the two-flat wound up pretty good. But when we moved to that, then I'm left with the conundrum of what to do with this condo.

And as I say, to sell it would mean taking not only a huge loss, but coming up with 15 grand to satisfy the bank, which I didn't want to do. So I wound up renting it. And I wound up renting it to a wonderful woman. I actually forget how we found each other, but she was a terrific tenant. She paid her rent on time. She took impeccable care of the place. And then when she left after a couple of years, she actually found the next tenant for me,

who was equally wonderful. But the problem with that was I could only rent it for $375. And meanwhile, it's costing me $570. So it's hemorrhaging about $200 a month just to hang on to it. So that's the second part of the incredible loss that this thing represented. And how long does that continue for? How long are you losing money on this property from a rental perspective? Well, so that continues for about five or six years.

Oh, my gosh. But it gets worse because, as I say, my first tenant was kind enough to find my second tenant. And my second, she was the second tenant, was kind enough to find me a third tenant. It was also, so I was, the one bright spot in this thing is I was very lucky with the ease of finding tenants and the caliber of tenants that they were. You know, they all took great care of the place. They paid their rent. He's exactly what you want in the tenant. Well, my third tenant, at what a terrible woman she was, didn't find me the fourth tenant.

Now, of course, anybody who has rental real estate realizes that your tenant has no obligation to do this, and she certainly didn't have any obligation. And then it was unrentable. I began to realize how terribly lucky I'd been in not only finding good tenants, but finding tenants at all. So suddenly, and now, by the way, I have since moved away from Chicago, so I'm doing this long distance. And now I'm not hemorrhaging $200 a month. I'm hemorrhaging $570 a month. And that went on for about 18 months.

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We've also lost $200 a month for three to five years. And now we're losing $570. So we're in the $20, $30, $40, $50,000 loss range at this point. Well, that's before you account for inflation. So it's actually, if you look at it at today's dollars, it's much, much worse. And again, my memory isn't good enough to do that calculation. But in today's dollars, the total loss was well into six figures. And then I also do a calculation in the book where what if I just taken this money and invested it in the S&P 500?

And that's really depressing because that, amounts up over to over a million dollars. So it's not just the actual, it's, it's not just the actual cash lost. It's also the opportunity cost lost. But in any event, so now I'm sitting on this thing that I can't rent. I also can't sell. The market was so bad for condos, I couldn't get a realtor to take the listing. Now, think about that for a second, because, for a realtor to take the listing requires no effort on their part. They can just take the listing, sit on it, and if the thing happens to sell by some magic,

they can collect a commission. I couldn't even get a realtor to do that. That's how bad the market was at the time. So I'm stuck with this thing that I, for whatever reason, can't find a tenant for it. And what year are we in right now? We're in 85, 86. Okay.

Yeah, somewhere in that. that time frame. Keep going. So you're not able to get a listing. What do you do now? Well, so now I just suffer. I mean, for, as I say, for about 18 months of, of no tenant. And of course, I'm trying to find a tenant.

But when you're trying to do this long distance, it's kind of difficult. So finally, what finally brought my pain, are you ready to hear how my pain ends? or at least before the IRS gets involved, how the pain did it burn down and you didn't have any insurance? Yeah, well, no, no, no. There's a whole other thing with the IRS. But finally, out of the blue, one of the good things to come out of this is that when I was still living at it, and YP had fled the scene.

And we were, the owners of this building were brought together in the way that only adversity can bring people together, right? So we knew each other pretty well. We worked hard together to get the common areas finished, for instance, and to come up with these special assessments that, you know, we all imposed upon ourselves to get the building in order. And anyway, so I, we'd become friends. And shamefully, I forget this guy's name, but he had become the president of the Condo Association and a good guy. And one day out of the blue, he calls me up and he says, I have somebody who might be interested in buying your condo. And of course, this is, this is, I can't tell you what wonderful news this is. It's like somebody calling you up and saying,

I have somebody who has a pile of gold, gold bars they don't quite know what to do with and they want to give them to you. I mean, the news could not have any better than that. And he said, no, is she, the woman who's interested, her boyfriend lives in the building. And your apartment actually is adjacent to his apartment. So not only does she want to be in the building, but as it happens, my unit was the most ideal for her purposes. So anyway, I immediately arranged a business trip to Chicago so I could meet with her. And, of course, I was hoping that she was naive and silly and I could take advantage of her. And she wasn't any of those things.

She was sharp and smart and a lawyer, in fact. But she did want the apartment. And so she's looking at it. And at one point, she says, so how much do you want for it? And, of course, I'm mentally doing the calculation. I'm saying, well, you know, I paid $45,000 for it back in 79. And I realize, and talk about understatement, I realize that the condo market hasn't gone up much since then. Yeah, you know, Mindy, she was nicer than you.

she didn't burst out laughing in my face, although he would have been justified. And I said, so, you know, I realize the market hasn't gone up much since then, but, you know, I might be willing to take what I paid for at $45,000. And without batting an eye, she looked at me, she said, I'll give you $30. Now, at this point, 30 is, is, is, like manna from heaven. I mean, at this point, I know that this woman and I are going to do a deal. The only question is, how can I get out from under this?

Of course, I still basically owe the bank 40 grand. The 40 grand I borrowed because, as you know, most of your payments in the early years are interest. It might have been down to 39 grand or something. Anyway, in my mind, I owe the bank 40 grand. And so we go back and forth a little bit, she agrees to buy it for $40,000. So at that point, you say, you say to yourself, oh, you did, you did for the great tragedy this is, you know, you only ultimately lost $5,000. And, of course, that doesn't count all the money that hemorrhaged out over the six years that I held on to it, which I do in the book total up, by the way.

But so that's the deal that we struck, and that allowed me to get out from under it without having to come up with extra money for the bank. But as I say, that's before the IRS and before I had to pay tax on my capital gain. Don't you want to know how you pay tax on a capital gain? The story doesn't end here, huh? All right. Yeah, yeah, wait a second. If you sold it for less than you bought it for, I'm not a tax. expert, but that sounds like a capital law.

Yeah, well, that's what I thought. But the IRS explained to me that both you and I are wrong about that, Mindy. So in those days, I don't think this is true anymore. I know when you own a rental, because, you know, while I bought this thing to deliver it, I converted it to a rental. And I began writing off the expenses involved with. it, including depreciating it. And in those days, you could do something called accelerated depreciation, which basically meant that instead of depreciate it over 30 years or whatever

it was, you could say, this thing's wearing out faster than normal, and therefore I'm going to depreciate it over some shorter period. I forget what that period is. But it allowed you to take a bigger deduction for depreciation. And of course, because I'm hemorrhaging so much cash in this thing, I am grasping at straws, anything to make the pain a little less. But when you take depreciation, as I'm sure you and many of your listeners know, that reduces your cost basis in an equivalent amount for when you ultimately sell it. So the depreciation I'd taken over those five, six years had taken my cost basis from $45,000 down to $25,000.

So the IRS said, yeah, you lost $5,000. You sold it for, you bought it for $45, you sold it for $40, you lost $5,000, but you depreciated it. And therefore, your cost basis is not $45,000 is $25,000, and you sold it for $40,000. So that's a capital gain of $15,000. And we want our cut. So that was the final bit of pain. injury and insult in the process. That's for all.

Yeah, I'm laughing now, but it's taking me 40 years to see the humor. So it doesn't sound like adjusted for inflation, you lost six fingers. It sounds like you lost this figures in the 80s, too. You know, it was, I don't know that was that close. I was probably, you know, 40, 50, 60 grand. in those dollars. And, you know, as I say, I run the numbers in the book, and it's, it's comfortably into six figures when you take inflation into account for today. So I run, in fact, I actually do a chart in the book. I don't have a copy of the book with me or I look it up. I do

a chart taking all the numbers that I mentioned in the book, because I mentioned the numbers as they were at the time. And I calculate what they would be in inflation adjusted numbers. So people, if they're curious, can go and look and say, well, $160 a month for an apartment is stupid cheap. And of course, that was, even then it was, it was a good deal. But you can look at what the equivalent would be today for that apartment. So what would you, if you could go back and kind of think it through, what would you do instead of, of, uh, of this purchase and the whole journey that we just unpacked here in great detail. Scott, I would have gotten, I would have gotten a pack of about a $40,000 bills,

and I would have sat outside and lit them on fire one at the time. And it would have been less painful and more entertaining. No, I think, well, first of all, when YP, when my apartment when I first went to look at it in July, and he offered me my money back, I should have grabbed that with both hands because he didn't realize that the market had turned on him. And I had been an excellent tenant for the apartment where I was renting for a number of years. And my landlords loved me, and I could have easily gone back and said, hey, I want to continue

renting, and they would have been happy to let me stay in my $160 apartment. But moreover, even going back before that, when my buddy Steve was so excited about buying a place for himself and the world around him and around me was all saying, you got to buy real estate, you got to buy real estate. I should have taken a step back and said, well, is this really right for me? Is this really something that I want? And they answered that question even then would have been no. I mean, I was perfectly content in my apartment, even if things had gone swimmingly with the condo, it would have been considerably less expensive to continue to live in the apartment. So, yeah, I wish I had had the wisdom not to get swept up in the mania, you know,

in the common wisdom that you have to buy. What about once you're in the deal, you got it and you got to deal with it, anything you would have to change? following the purchase once you had the property, we're already in a hole. And from that point on. Yeah, you know, I'm not sure that I, that there was anything I could do other than what I did. I mean, I think I made most of my mistakes in the beginning. But once I'd closed on the thing, you know, the die was kind of cast and you have to, you have to live with your decision, right?

That's another important lesson, I guess, to come out of this. is that once you close on the property and you own it, you have to live with that decision. And if it turns out to be a good decision and it keeps appreciating, or it's the place you really want to live and you enjoy it, even if it costs more than where you were before, or if it's a rental and you've done your homework and it's positive cash flow and doing well, then those are all good things. But even if you make a colossal blunder like I did, you own it. And at that point, you just have to figure out how to deal with it.

And in my case, I had to keep digging into my own pocket to make up the shortfall between, well, between what I'd been running for initially and what the $570 a month this thing was now costing me, which was more than I had figured on because I didn't count on the special assessments. But I just had to dig deeper in my own pocket. and then when I rented it, I had to keep digging into my own pocket to make up the difference between what I owed the bank in my assessments and what I was able to get in rent. By the way, that's another great lesson that I would caution anybody listening to this who's not familiar. Landlords don't get to set the rent. You know, I hear all the time that, well, of course, of course owning is better than renting because if you're renting, you're, you're paying all of the owner's costs plus a profit to that owner. Well, sometimes if the guy you're renting from,

if the person you're renting from is done their homework and done a good job, that will be true. But that's not always true. There are a lot of people like me that get forced into renting places that back into it where your rent's a screaming bargain compared to what is what it actually costs. So landlord doesn't set the rent. the market sets the rent. If I'd been able to set the rent, I would have set it for $650 a month.

But, you know, I'm not, I don't have that option. The market sets what the rent's going to be. And if you've done your homework as an investor, well, you know what the market is going to set that rent at and what you're considering buying, and you make sure that you buy it in such a fashion that that rent that the market is setting for you is profitable. If you do stupid things like I did, you wind up owning something that is far more expensive than what the market's allowing it to rent for. I think it's super valuable perspective.

And I love that you're like, hey, the answer to all of this is live with the decision once you've made it. And really all of these factors downstream, no matter how good you got eventually at managing that property and making the decisions that you could to optimize from there, there was just really not much you could do to change the situation. It was determined by the market and you had to live with it for as long as it took to get out from under it. Yeah, exactly. And you know, and you also don't get to decide when to get out from under it in all the cases. As I say, I couldn't even get an agent to take the listing. that's how hard it was to sell this thing.

So I had to just kind of suffer through it until finally the right buyer happened to walk in my door. And thankfully, you know, the president of the association who she reached out to, you know, he and I had stayed in touch and he knew that I was, I was going to say, interested in selling. Desperate would probably be the better word. So, yeah, I mean, it pays to sort of keep all your doors open, I suppose. Yeah, you know, so that's, once you, once you own it, you have to live with it for better or worse. And there's the compelling case for not doing what I did. And rather going into it with your eyes wide open and having done your due diligence and your homework before you sign on the dotted line. If you'd held on to it for another 10 years, what do you think would have happened?

You know, I don't think it was so deep underwater that I'm not sure 10 years would have done it. If I'd held on to it until now, maybe it would have turned out okay. And it depends, Scott, on whether I'm holding on to it as an investment property or as something to live in. You know, if it is suited my living needs for a longer period of time, then, you know, it would have just been. an expensive place to live in. And could you have bought another property in in Chicago around that time and done much better on it if you'd been kind of looking at it from an investment mindset? Well, not only could I. I did. That was the two flat that I bought. Okay. So I bought the two flat, I want to say in 81 a couple of years later. And the, you know, the good news such as it is, is that this was a real education. This condo was a real education.

So when I decided that I was going to buy the two-flat, I was a much older and wiser real estate buyer at that point. And I did a whole lot more due diligence. I was a whole lot more savvy in how I approached it. And that deal turned out pretty well. In fact, it turned out very well. The only mistake I made with that one is that. I should have held on to it a little bit longer. But again, by then I had moved out of Chicago,

and I didn't like, I was not comfortable being a long-distance landlord, even though on the two-flat, it was cash flow positive. And in fact, if I look at it holistically, now that I, when I, once I own the two-flat and I own the condo simultaneously, the two-flat was positive enough that it was paying for the losses

on the condo. So I didn't have to dig into my pocket in the same way that I did before that. But of course, that also means that instead of the two flat adding money to my pocket, it was just, you know, making up for the mistake, for the massive mistake the condo represented. Well, what I love about that is that we started off this with the circumstances of the market and how eerily similar they are. And then the disaster that you just went, that that was this condo purchase. But we're hearing that even in a tough market like that, with your kind of savvy purchase on the two-flat, you were able to generate cash flow and achieve value creation over your hold period with that. Yeah. And it was, you know, by then the market had cooled

quite a bit. But as we talked about at the very beginning of our conversation, this was a period of very high inflation. And what's interesting about that, I don't know. I don't know. I don't all the two-flat story in this book, but I actually bought that for no money down. And I did that by getting a mortgage from the bank for, let me testing my memory, I think for 75% of the purchase price. And interest rates in those days, I think my mortgage was like 16, 17%, and then I negotiated a deal with the seller for the other 40,000 or the other 25% or whatever it was, for I want to say 7%. So I wound up with a blended interest rate, if you will, of around 13%, which of course sounds horrific to anybody listening today, but at the time was a very, very attractive interest rate.

And yeah. Now, the mistake I made on that one, by the way, is I had read this book called Nothing down about buying real estate with nothing down. I thought, well, that's a pretty cool idea. And I made that my goal. And I accomplished that goal. And it turned out to be pretty profitable overall. But the mistake there was that's the wrong goal. You know, at least in my opinion, you should never go into buying real estate as an example

with your goal being, I'm going to buy this with nothing down unless you have no money. I had money to put down. And in fact, I could have done a better, more profitable. deal by putting money down. And that should have been, the goal should have been, I want to buy this piece of real estate in the most advantageous possible way for me with the resources I have. And in my case, I had resources to put money down. I had the knowledge to do it without putting money down.

And I should have looked at those two options. And if I'd done that, I would have, for a variety of reasons, I would have put money down. But anyway, both of those options were far better than the cotton. Wow. Well, and we've talked about the money that you lost and the, you know, this has been kind of a lighthearted retelling of this story. But we didn't really get into the stress that you, this was a very stressful time, I'm assuming. It was very stressful for me to, when I first read the book, I was reading through him, like, this is my condo in Chicago.

And I remember just we would have these meetings. And it was so stressful. And you look back at it now and you're like, well, that was, that was like a $10,000 problem. And that's, but at the time, $10,000 was a lot of money. At the time, $40,000 was a lot of money. Losing $150 a month or $300 a month. or $570 a month was a lot of money that you had to come out of your pocket. And you're not thinking at the time, oh, well, my other property is making up for it,

so everything's okay. You're thinking to yourself, I have to write another darn check for $570 to the bank every single month. And this is, you know, I could have been renting for $160. Like, we don't talk about the stress and the sleeplessness and the anxiety that you're feeling for, and this was for six years that you had this. I mean, did you ever think one time? Yay!

Hooray! Real estate's awesome. Yeah, when I sold it. And before I realized, and before I realized what the IRS would have to say about it, I was saying, the IRS sort of took the yay away. Yeah, you know, I'm laughing about this with great. Yeah.

I mean, you know, at this point, you know, with a distance of 40 years, I could see the humor in it, and I've gotten a book out of it. So, you know, there is the upside. But at the time, this was, I would not have been able to chuckle over this as we're doing it at the time. I mean, I would not have been able to see the humor. And it was, I don't remember feeling stressed. I remember feeling extraordinarily aggravated. And it is, you know, the other reason that I was.

I bought a condo is I bought into this concept that, you know, if you buy a condo, it's worry-free. You don't have to mow the lawn. Well, that's true. I never, in the entire time I own the condo, I never once mowed the lawn. What I didn't count on was the endless meetings with lawyers and the endless battles with YP before he fled. And then the endless conversations with the other owners trying to figure out how, how, we were going to fix this, how we were going to finish the common areas that had been left

undone and how we were going to raise the funds for that. And so, you know, I never had to fix the plumbing or mow the lawn or shovel the snow, but there was endless work involved in owning this thing. So endless, I think, I think, I think, I think, I think, it comes down to, there was so much aggravation, I didn't feel the stress. The aggravation just overwhelmed the stress and the work. Yeah, it was an enormous amount of work and effort. And again, as I say, the good news is that that was provided to tremendous education, which probably has benefited me and certainly benefited me with the next real estate purchase. But, yeah, but there was lots of aggravation and probably lots of underlying stress and certainly

no laughs. Well, is there anything else that we should know about this experience before we kind of adjourn here? I think we've covered it pretty thoroughly. I mean, I, you know, I tell the story. in a more coherent fashion in the book. And as I say, the numbers are there. If anybody's curious, not only is the actual numbers and the dollars of the day, but also inflation adjusted if people want to play with that.

But it is a, my subtitle on it is a cautionary tale. And that's what it is. This is not a book telling people don't buy a condo or don't buy a house or don't invest in real estate. Because all those things can be good things. And I have done all of those things and have had them be good things for me as well. It's a cautionary tale into not being impossibly naive in how you approach it and doing your homework. And again, I would applaud you guys on bigger pockets for the educational resource you are to help people not make the kind of mistake that I made. And I like to think that if Bigger Pock has been around the time, I would have been at least smart enough to take a look at it and might have saved myself a whole lot of grief.

On the other hand, I wouldn't have a new book out. Yeah. So I definitely encourage folks to check out the book. The book is called again, How I Lost Money in Real Estate before it was fashionable, subtitle, a cautionary tale, as you mentioned there. And it's a wonderful, fun, quick read. I think you are able to make light of the situation, you know, looking back on it. And I think you learn a lot about the mistakes that can lead to enormous piling up losses in real estate. And for me, for one, coming out reading the book, I felt actually better about my real estate investing and the way I approach it from reading it because it is good to hear that you can lose money from all this stuff.

But, you know, feeling like, hey, okay, I've actually, I'm prepared a little bit more prepared than maybe Jim was going into this purchase. Because this more on JL. I'm not that stupid. Yeah, there's the, there's the, you know, I'm, I got to have these concepts around cash flow. So I think it was really helpful to kind of, to kind of get that view. And it was a fun read and, and, and reinforced a lot of the core beliefs I have around really self-educating around this, knowing the numbers and running them before buying real estate. You know, I'm, I appreciate that take, Scott, because that's, that's exactly how I wrote it. It's, it's a very short book. It's meant to be a very entertaining fun read.

It is meant to have a serious message underlying it that here's a classic example of lots of things that can go wrong if you're not careful. I mean, it almost reads like fiction because so many things go wrong. But everything in it is absolutely true. The other thing I'll throw out is it's filled with wonderful illustrations. And I can call them wonderful because I didn't do them. But I found just a terrific illustrator. who I think is just spot on with the illustrations that go along with the story. So I think it's a feast for the eyes, and hopefully it's a fun read as it was for you.

And then, yeah, it's worth hopefully being a cautionary tale for those who need a cautionary tale. Certainly I would hand it to anybody before they go out and buy something. A feast for the eyes of the reader, but a famine for Jim Collins. Well, I've recovered since, but it was nip and tuck there for a while. Yeah, if you're thinking about buying real estate, you should read this book. And if this book can scare you out of buying real estate, then choose another investment vehicle. Because this book is not even close to the worst thing that can happen to you in real estate. Got that more if I hear that.

You didn't even have a tenant that trashed your whole house, did you? No, you know, and that's actually, that's Mindy's a great point because when I was investing in real estate back in the day, when you're, especially this is before the internet, I don't know if it's still true because I no longer invest in real estate, but back in the day when you invest in real estate, you wound up getting to know other real estate investors because you tend to, you know, and all of this occurred to me that I was the, only real estate investor that I knew who didn't have a tenant horror story, who didn't have a story of a tenant trashing their place. I was the only one, and I knew quite a few at that point in

Chicago. And it suddenly occurred to me that it wasn't that I was smarter than all these other people because clearly I wasn't. It's just that my time in the barrel hadn't come. I'd just been lucky. And in hearing their stories, I thought, you know, I don't want to deal with this. And, And that's why I got out of real estate investing. It actually made me money. This was a bad start to it, but overall it made me money. But it just felt like too much work. And ultimately, with the bad tenant thing, too much risk that I just didn't want to deal with.

But that's me. You know, I mean, people, as you well know, people have made fortunes in real estate. If you go in with your eyes wide open, having done your homework. So there you go. That's the best way to invest by being prepared and doing your homework. And what do you say, Scott, 150 to 250 hours of research before you start investing? I think that's the starting point. That's the minimum, that price to pay before getting into real estate investing.

Where were you in 1979 when I needed you? Why didn't you call me up? It was a tough year for me. Well, Jim, where can people find the book? Well, the easiest way to find it, I suppose, is on Amazon. And the easiest way to get to it on Amazon, actually, is to go to my blog, J.L.Collins, nh.com. And if you click on it, there's a cover of how I lost money in real estate before it was fashionable. And then right below that is the cover for Simple Path to Wealth.

Click on either of those that will take you to Amazon. and you're good to go. Awesome. And we'll also link to all of that at the show notes at biggerpockets.com slash money show 285. For anybody that is interested in checking out any of these books, go to Jim's site, go to Amazon or go to the show notes. We'll link there.

Jim, thank you so much for your time today. Thank you for being 1% of the guests that we have ever had on our show. And thank you for sharing your story of losing money in real estate, because we don't do that enough here. So I appreciate you taking time out of your very busy day of doing nothing all day long to talk to us. Yeah, I could be outsight-seeing. Instead, I'm hanging out with you. Hey, I appreciate the invitation to come back.

It's always a pleasure to hang out with both of you in the real world, but also on the podcast. So anytime you want to have somebody on that you can laugh and mock, regarding my real estate condo. I'm available. We will certainly do that. Okay, thanks, Jim. Say hi to Jane for me, and we'll talk to you soon. We'll do.

Thanks, Jim. Bye, bye, guys. Okay, Scott, that was J.L. Collins. That was a lot of fun. Honestly, when I was reading his book, that was a lot of PTSD because I went through almost the exact same scenario in the same city that J.L. Collins went through. I bought a condo that was supposed to be rehabbed. It wasn't. It wasn't

rehabbed correctly. I think the guy did end up skipping town. Just a whole lot of disasters. I did not lose quite as much money as he did, but this was back in 2001 where the market was starting to like climb up. I think I broke even, but I sold it after a year instead of after seven years of renting it lower. So, but still like all the stress, all the anxiety. all the everything. I like relived it. And it didn't dampen my spirits for real estate, obviously. I love real estate.

But I want one of the key takeaways that I got from that book is if this story freaks you out, let that, like absorb that freak out. Let that freak you out and realize that real estate isn't the right investment vehicle for me at this time. You can explore it again. later, maybe down the road you'll be in a better position to invest in real estate. Maybe the market will be in a better place for you to jump in. But if this story freaks you out, I want you to let that freak you out and kind of take a step back and learn from it. If it doesn't freak you out,

please visit BiggerPockets.com and learn, learn, learn, what do you say, Scott, 250 to 500 hours is the starting point for where you need to be doing your investment research before you buy a property. I mean, buying a property and jumping in with both feet, I know you're trying to answer me, Scott, and I'm just on a roll. Let me keep going. Buying a property and jumping in with both feet is going to be the best education possible. Listen to Jim. He just shared this really great education he got.

But if you can learn those same things without the pain and anxiety, that's better. You don't need to go to school of hard knocks when you can learn from somebody who went there. Yeah, we think we're cheaper at bigger pockets than the education that Jim, Jim or J.L. Collins went through here. And, and probably the same amount of hours at the end of the day. So I think, I think that's it. I think it's, I think it's that 250 to 500 hour mark is really that kind of, that kind of minimum. We mentioned 150, you know, getting getting up there and really committing the mental bandwidth to learning about this and absorbing different perspectives and hearing the horror stories, hearing the success stories and going through it. I think we'll make a huge difference in the odds of success for anybody that wants to get into this. And if you're not willing to pay that price, maybe real estate's not a good investment for you.

One other thing I want to point out is J.L. Collins got lucky in his story. When he was talking about how he had one tenant and that tenant found another tenant for him him and that tenant found another tenant for him, my biggest mistake personally as a landlord was I did something very similar to that. I found I did a really diligent screening process for two tenants. They split up. They were a couple. And she brought in a roommate, who was great.

and not everything went well. And then she left, and I was left with the roommate, she brought in her boyfriend, right? Everything was great. Then she left that person, and I'm now have the boyfriend, and I'm several layers away from my screening process. And this remaining tenant, the boyfriend, several layers removed, caused a tremendous amount of problems and actually ended up getting arrested before I got the property back and was able to rent it and rehab it. And so that could have been even worse from that. So, and I really, I really encourage you, don't let the tenants refer, or if you let the tenant refer another tenant, that's fine, but go through the screening process and check the credit criminal an income check

and get the, do your reference check if you're going to self-manage on that. Because I didn't, and I paid a price for that. So it could have been even worse for him. And he could have got a bad tenant or a tenant that trashed the place. Thankfully, I did not have that problem. Yes, yes, real estate is not the right investment vehicle for everyone. and there are so many different ways to invest your money to grow and generate wealth. You don't have to just be stuck on real estate.

Even though I love real estate, I've had problems too. I've had contractor problems. Oh, my goodness. That's why my husband and I DIY everything, because it's so much easier to just learn how to, you know, roof my house than try and find a roofer. Or that's actually one of the things I don't do. But like, it's way easier to learn how to do a new skill than to try and find somebody to do it for you. One last thing here.

We would love to hear from, I think, a couple of other folks who might have invested in this time period in the late 70s, early 80s in real estate. And maybe he's heard some had some successes in failures, what worked, what didn't. You know, I think there's a lot of, I think there's a lot of, to my mind, overlap between the economic environment that we talked about at the beginning of this podcast and today's economic environment. And I think it would be really valuable to hear a couple of those stories on the show. Ooh, you know, my dad bought a house. My parents bought a house up in Oregon, like the minute before the market crashed. And they ended up owning it for 30 years because they couldn't sell it for the longest time. And that, I don't remember why they ended up eventually selling it. Yeah, I think we'd love to hear stories from investors in particular, you know, who have those success, success or failures in that time period. I think that would be really valuable. as we're thinking about how to navigate the waters ahead. Maybe I'll set my dad up.

Maybe we can do a test recording with my dad. And if it works out great, and if not, then we won't air it. Sounds great. He'll be here in a few months. Okay, cool. Well, I'll set him up. I mean, I would have to. This is, he's not a techie.

Okay. Scott, we get out of here? Let's do it. Okay. Before we do, let's just say, let's use our new phrase. The IRS takes the yay. away. That's their new motto. So I have a friend named Evan who works there and I'm going to share that with him. Hey, do you guys do new motto? Okay, from episode 285 of the Bigger Pockets Money podcast,

he is Scott Trench and I am Mindy Jensen saying give me a shout, chout.