BiggerPockets Real Estate Podcast - Don’t Do What I Did On Your Next Property…w/Craig Curelop

Episode Date: September 18, 2024

Can your mistakes make you a millionaire? If you’re like Craig Curelop and learn from what went wrong, then yes! Craig is now financially free, with millions of dollars in equity, thousands in monthly cash flow, and a thriving business. But, back when he was starting, he made a few mistakes that cost him a sizable amount of money, took years of time away, and put serious stress on his shoulders while trying to grow his real estate portfolio. Thankfully, you can take his lessons to heart, so YOU don’t have to make them yourself. Today, we’re talking about one of Craig’s real estate deals that went wrong. What was supposed to be a profitable out-of-state BRRRR (buy rehab rent refinance repeat) investment quickly turned into contractor scams, danger, theft, and even…love. Yes, love is part of it, too. Craig lost a significant sum on this deal, but if you follow his advice, you don’t have to repeat the same mistakes. Even though this was a property from hell, Craig still kept investing, eventually reaching financial freedom and living his dream life. Something WILL go wrong when you start investing in real estate—just make sure it wasn’t what Craig went through. In This Episode We Cover: Real estate investing mistakes that lost Craig money on his first out-of-state investment  Interviewing agents and why it isn’t enough to work with someone based on a good feeling The easy way to avoid a contractor taking your money WITHOUT doing work Why a cheap deal doesn’t mean it’s a good deal (be really careful) Cutting your losses early and when you should give up on a project that’s going south Why you MUST check references on everyone you work with on a real estate deal And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Grab Craig’s Book, “The House Hacking Strategy” Find an Investor-Friendly Agent in Your Area See Dave at BPCON2024 in Cancun!  Contractor Nightmares: 5 Red Flags to Watch For and How to Escape a Bad Hire Connect with Craig Connect with Dave (00:00) Intro (02:04) House Hacking 8 Times! (05:28) One Really Bad BRRRR (14:41) Worst Contractor Ever? (25:59) Finally Selling It (27:54) The Good Ending (30:10) Failing Fast (34:45) Should I Fire My Property Manager? Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1019 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Mistakes and failures are part of every entrepreneurial pursuit, and the same thing goes for real estate investing businesses. Of course, we strive to have a flawless track record, but if you make enough deals, you're going to have some setbacks. Even if you have the best team in the world, the best processes and systems, it's just inevitable. But the good thing is that in all of our failures, there's usually a silver lining, and that's that you can learn a lot from them. Often, you learn more from your failures than you do from your successes. So today, we're, we're talking about mistakes, ones that I've made, ones our guests have made, and we're going to talk about how to use these setbacks to set you up for future success.

What's up, everyone? It's Dave. Welcome to this week's deep dish. Every Wednesday, we drill down on a specific topic that we think is going to help all of you from rookies to seasoned investors more tactically on the day-to-day of your real estate investing portfolio. And on today's deep dish, we have Craig Curlop. Craig's a real estate investor who achieved his dream of financial independence through house hacking. Now he leads a team of agents. He also worked full time at Bigger Pockets. We used to be on the same team so I know Craig really well. And know that on his way to success, he has some pretty epic failure stories. And unlike a lot of people in this industry, Craig is very willing to talk about his failures and setbacks so that we all get to learn from it.

In today's episode, Craig's going to tell us why if a deal looks too good to be true or is really cheap compared to everything around it, it might be too good to be true. He'll also tell us why he now always visits an area before investing and how he learned the hard way to vet every single person he works with on a deal. At the end, we're also going to do something fun. Craig's going to give some advice to a BP community member who's dealing with a difficult property manager situation of her own. So let's bring on Craig. Craig, welcome back to the Bigger Pockets podcast. Thanks for joining us today. Dave, thanks so much for having me on, man. It's an honor. Love coming on and love chat with you and the BP team. Yeah, this is a lot of fun for those of you who don't know. Craig has been on the show a couple times. He's written a book for Bigger

pockets. But he also used to be a bigger pocket employee. We worked together in Denver back in 2018, 2019. It's been a while. But Craig was one of the OG Bigger Pockets employees, so it's great to see you. But for those of our audience who haven't been introduced to you yet, Craig, can you just give us a brief intro? Yeah. So my name is Craig Curlop, the FI guy on Instagram. And my whole thing in the way I kind of got into real estate investing was through house hacking. And And so I had house hacked six times over the course of six years. If you include my now wife's house hacking endeavors, it's been eight times over the course of six years. And that really allowed us to achieve what most people like to call financial independence.

And since then, we've stopped house hacking. It was never the goal to house hack forever. But just to get you to the place of where you can achieve financial independence and then do bigger and better things. So that's me in 30 seconds. Great. Well, thank you. tell us a little bit about the early years of your investing. What year did you get started and you mentioned you did a house hack? Why was that the right approach for you in the beginning? Yeah,

so I got started in June of 2017, is when I bought my first one. And it was just painstakingly obvious, the best way to invest because I could do so with a low percent down. So I got a duplex with a three and a half percent down FHA loan. And I bought a $385,000 property for less than $20,000. I was able to live for free. It was, you know, a mile and a half from work, bigger pockets at the time. And it was just, it was a no-brainer to get started. And you look at the numbers, the return on investment numbers. And they're like 100, 200, 300 percent year over year. It's nuts. And is a big factor of that is because you're putting such a little amount down. So the first deal sounds like when pretty well. It sounds like you sold that. Did another house hack? Did that deal also go well?

Yep. So the second one is when we started to get a little bit more creative with things, because prices were going up. And actually interest rates at the time were kind of high. It was at like 5.125%. I don't know if you guys remember that slight increase in 2018. Yeah. You know, that was the end of the world almost. But so I bought that property, the next one for $343,000. And this one was a five-bed two bath home in the suburbs of Denver in a in a, in a, called Thornton. And it didn't make sense to me because Thornton, where my property that I bought, was about 10, 15 minutes away from downtown Denver. But in that whole area, I could still buy a property for $343,000. If you went 10 minutes south of downtown Denver, you're talking, you know,

double that in price, easy. Oh, easily. Yeah, for sure. It just didn't add up to me as to why, like, why is North someone, and it's not like Thornton was super sketchy, maybe slightly more sketchy, but not like you're going to get killed. No. And so that's, so I decided to kind of focused my investing on the north side of Denver, lived in one room. This time I actually, you know, had some privacy and all that and rented out the other rooms. And I was cash flowing, you know, probably like $1,500 a month or something like that. Wow. Okay. Well, first two deals went well, but we're here to talk about mistakes. So we have to, we let you brag a little bit about your first couple. So at what point in your portfolio building did you make your first

big mistake, would you say? Okay. Yeah. This is going to be a fun. episode. So there's two big mistakes. Two like disaster literally could be a movie type deals that I've done. Oh, I didn't know. It was that dramatic. I'm excited. Well, maybe it just feels more dramatic because it was me and I was in it. But maybe to other people, not as much. So I started getting confident after deal number two because as you just learned it, they went well. And at the time, I think David Green's book on out-of-state investing, long-distance real estate investing, or whatever it's called, it came out. And I read that book, and I was like, okay, maybe what I need to do is house hack in Denver,

buy the more expensive properties, and then once a year or twice a year, start buying these other properties and burring outside of Denver and cheaper markets. And so I was talking to Scott, Scott Trench, and he seemed to like the market of Jacksonville. And so I just went to Jacksonville. And I went and I found a real estate agent, found a contractor, found a property manager, did all the things step by step from David Green's book. And that turned out to be a complete disaster. Okay.

Well, let's just start with just the thinking about house hacking in Denver and then buying something a little bit cheaper. Where you're just trying to look for ways to stretch your money a little bit further? Yeah, well, so there's a limit, right? With house hacking, the downside of that is you can only do it once a year. Part of the loan stipulation that allows you to purchase the property for three to five percent down is that you need to live there for one year. And so you can't keep buying these properties after three or four months because the bank will say, well, you bought this property four months ago and you have to live there for a year. Now you're buying the second property and you need to live there within 60 days.

So it doesn't add up. Right. So you have to wait pretty much at least 10 months before closing on your next property. And so I was kind of getting bored after the rooms were filled and all that, you know, in the first month. And I was like, okay, well, I want to like keep this puppy rolling. So, you know, I looked at a bunch of different. different markets, right? And ultimately, I was in that place if I just can't decide. And that's when I talked to Scott. And he was just like, you know, Jacksonville seems like a really good market.

And I was like, all right, sweet. I'm just going to pick Jacksonville. This was before, I think, Bigger Pockets, uh, agent finder and all that still came out. So I literally just like went on the forums and tried to find some real estate agents in Jacksonville. And I found the wrong one, who also gave me the wrong contractor, who gave me the wrong property manager, who gave, you know, all this stuff just, totally, yeah, blew up. All right. So I want to get a the details, but let's actually start with the end a little bit. What was the big loss here? Like, tell us, did you take a big financial loss? Was it just a pain in the butt? What actually happened? All of the above. So I bought the property in 2018. I didn't sell it until over two

years later in 2020 in the middle of a pandemic. I brought in my partner who was a cousin, as he was a cousin, still was a cousin. And he lost $30,000 and I lost $30,000 on this deal. And this is not an expensive deal. So $30,000 in the grand scheme of things was quite a lot of money, given the amount of the deal. And yeah, then a whole lot of time, a whole lot of energy, a whole lot of like mental power just gone away. So the end result is you and your partner each lost $30,000 and spent, it sounds like two years of your life dealing with this. So let's just try and break down where this. went wrong and all the different steps where maybe you can share with us some wisdom, things that

you've learned to help our audience avoid some of the mistakes that you made. So Jacksonville, from what I understand, was a good market at the time. Was that a mistake? Or did you feel like Jacksonville was a good place to invest? No, nothing against Jacksonville whatsoever. However, there are areas of Jacksonville that are pretty bad and pretty sketchy and other areas that are probably a little bit better to invest in. And I didn't know. I didn't go there. I just, you know, totally just was dependent on my realtor. And she had a property manager that she worked with who had a, who owned a property in kind of a sketchy area.

And I didn't realize it was sketchy. And so I went ahead and bought that property because it was a really, really good price. How much? Like $35,000 or something like that. Oh, so now the losing of $60,000 total put in context is pretty dramatic. That's what I'm saying. Yeah. So $35,000 was the purchase price of this thing. And the guy bought it like two years before for $8,000. And so this thing was absolutely in a state of disrepair. Like it was unlivable for sure. The roof, there was hardly a roof on it. It was horrible. And but it was so cheap. And I wanted a big project. And so a lesson learned here is that just because a property is cheap does not mean it is a good deal. And I had heard that before.

Brandon said it when he was the host of the Bigger Pockets podcast. Like he would say that quite a bit. But sometimes you've got to touch a fire to make sure it's hot, you know? Like, you just can't learn from other people sometimes. So, so yeah, so that was kind of the start. Yeah, I totally understand that. And that is true. Real estate's generally a pretty efficient market.

Like things are usually cheap for a reason. You can get a deal maybe by a couple percentage points. But if something is extremely cheap and way cheaper than everything else in the There's probably a pretty good reason for that. And I do want to just call out that, you know, I'm laughing and we're having a good time here. Craig has obviously landed on his feet. And Craig and I've known each other for a long time. So I don't want to make it seem like this is funny or fun for Craig.

But I've known in retrospect that luckily you're, you've done very well for yourself ever since. And that's why you're here sharing this story with us with a very good nature and being very honest with us. So we appreciate that. For sure. We've got to take a quick break, but just a reminder that if you're finding Craig's advice helpful, you may want to check out the BiggerPockets forums. You can post questions about your own deals and get personalized advice and feedback from a community with more than 3 million members.

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Welcome back to the Deep Dish with Craig Curlap. So let me ask you, Craig, you know, interviewing an 80s, is a really important part of investing long distance. Did you just go with the first person that you met? I think so. Yes. I went with the first person that I met. And it was because she was really quick to answer me on bigger pockets. She was really thorough in answering all of my questions. We did have a phone call and things felt really well. And at the time, I didn't realize this. But a big personality trait of me is just like, I just want to go. I just want to go, go, go, go, go. And sometimes I leave behind some of the details and some of the the diligence needed. And so I've recognized that now. That's a big thing I've learned in the last six years. But that was a big issue for me. Right. And so it seemed great. She had investment properties. She had property managers. She had contractors. She had everything needed. I was like, oh, this woman seems awesome. Let's go ahead. All right. Cool. So just some lessons learned already from Craig is one.

Did look into the market a little bit, but didn't probably do enough research into the specific neighborhood that you were buying in. Meeting with an agent and probably, correct me if I'm wrong here, but not asking the right questions or at least doing enough comparison shopping to be able to tell which agent that you should be going with. And maybe I dare say getting a little, I don't know if greedy is the right word, but just overambitious with seeing a property for 30 grand and just thinking that that's a steal of a deal. So already three red flags with this deal at the point of purchase.

What happens after you close on this thing? So we buy the property. Obviously, it's cash, right? Because no lender's going to lend on that low of an amount. So we buy the property and work starts. And the guy goes over there and I, and this is the guy that she recommended. The contractor was someone that used to work for a really well-known company, started going off on his own. So, you know, his prices were pretty decent because he was kind of just starting out,

but he had the experience of a, you know, of an experienced contractor. So I thought, like, oh, this is amazing. Let's go forward with it. And I talked to that guy on the phone and he was well-spoken, seemed pretty solid. And so he goes over there, starts doing some work. And, you know, he requires a 25% upfront payment. We had a contract and everything. And it said that, hey, if you're late by this much, you're going to have to overpay this much.

So just to clarify, so if you basically put some provisions in there, that said, hey, contractor, if you don't meet X deadline, you know, there's going to be a penalty in the contract, which is a good idea to structure a contract that way. But based on the way this story is developing, I'm guessing there's a butt in what comes next. Yeah. So what I'm saying is like, I didn't go into this like totally blindsided, right? Like I was listening to Bigger Pock's and I was trying to implement the things that that you said. I just didn't do it correctly. And so there's definitely a piece of do the things and do them correctly. Don't just do the things to do the things.

And so I had this contract in place. I don't know if it was enforceable by any lawyer whatsoever, but I had it in place. And so I gave this guy the 25% and he started to work. And he went ahead and he did some stuff or whatever, but essentially had paid him 75% of the contract. And I had somebody go there just to check on the property for me. And everything was just not done correctly. And then he started not showing up.

And then, you know, I would call him and call him and call him and call him and call him and call him and call him. And all these things just, he just everything, like the contractor was just totally going away. And he had 75% of the total, the total rehab. And it was probably 10% done, maybe. And so a big lesson is do not, you know, sometimes you do have to give that 25% up front, especially if you're new and you don't have like a reputation with the contractor. but before you give that next 25%, you need to have a third party, go out there, get videos, and confirm that the work has actually been done.

And so that was a massive mistake. So that was a contractor. That was like the general contractor. Then there was the roofer. Craig, can I ask you something about the contractor first? Yeah. So, because I think this is a really important lesson. You put down 25%, which like you said, sometimes you just, that's just part of the game.

You know, that's how this works a lot of the time. So you didn't go, did you have a call with him at least to say like, hey, we're at this milestone, 25%, you're supposed to have X, Y, and Z done? And he said yes, and you basically took him at his word that it was completed in the proper fashion. Yeah, I did. Yep. And he took pictures and sent up to me.

And, you know, the pictures looked good. They looked fine, right? But that's hard, you know, but you can easily kind of manufacture pictures. I don't think he photoshopped them. but he just, you know, didn't have anything in reference. So, for example, the cabinets, for example, were, like, towards the top of the ceiling. So, like, even you, Dave, you're, like, what, six feet tall or something?

Like, you would... I wish. No. I don't know. Let's say you're six feet tall. Like, you or I, for sure, would have to stand on our tip-y-toes to, like, get into the cabinet. Yeah. Okay.

And we're not giants, but we're also not short people by any means, right? No. But that, when there's no reference, right, he didn't show. show the ceiling. Yeah, you could, there's no way to. Yeah. So that was just one of the many things that he totally, that totally got messed up. Yeah, and there's so many, like, functional things you don't know either, you know, if the, if the drawers don't open correctly, or I've been to a house where I, like, pulled out the dishwasher a little bit after a contractor, and they just, like, had failed to put subflooring in. There was just, like, sitting on the joists to the basement.

You know, there's just, like, just extreme examples, but these things happen where, you know, not always intentional, but a lot of times people are cutting corners, especially if they know that you're not going to go and do this sort of diligent checklist. So, okay, that was what would have with contractor. You were talking earlier, sorry, about the roofer and I cut you off. What happened there? Yeah. So the roofer was actually good, right? But I thought the roof was going to be like 10 grand. Turns out there was a bunch of dry rot in the rafters. There was a termite infestation. I mean, like you name it. The whole thing was swollen apart. So this $10,000. roof turned into a $30,000 roof. And so now you can see where money starts getting lost.

So the roof costs the same amount as the house. Yes. When you put it that way, yeah. I never thought of that like that until you just mentioned it right now. But yeah, yeah, that's an expensive roof. So because they had to rebuild a lot of the wood, right, to pass inspection. And then there was, you know, the termite remediation due, which was a couple grand, but I mean, still something. You know, couple grand on a $30,000 house is still like 10% of the purchase price of the house, right? It's a lot. And so all these things kind of started adding up. So finally, you know, we're probably about, by the time the contractor and I have had

some choice words with each other, we're at like probably a year, a little over a year into the project, and it's still not even anywhere close to being done. So we're sitting probably like early to mid-2019 and like nowhere to be done. And so I ended up calling, you know, I'm in touch with the real estate. agent who referred me. And I was just like, what the heck? Like, you referred me to this person, like, she's horrible. And then I started calling other people that this real estate agent had worked with. And this, another guy who I was in touch with for a long time, the same exact thing happened. And I learned that this real estate agent was a little bit of a, a little bit of a predator

to new investors wanting to come into Jacksonville, that she would basically sell these super cheap properties to these, you know, these newbie investor type people, she would refer this crappy contractor to him. He said he would promise everybody the world and then obviously wouldn't follow through. And so there was another guy actually in the same exact situation as me. And I don't know how I would have caught that honestly because she, like in the initial interview, she seemed really solid. So this is why you need to interview multiple people. But even if I did interview multiple people, I may have still gone with her because in the beginning she was really good. And she never stopped answering my calls or anything like that. Like she did, she did actually like try to help see me through it.

But then I just realized like this lady is just a total gibrony. Oh man. Yeah. Wow. So that's tough. So how far are you into this now? Like how over what time period did this take place? So yeah. So like mid mid 2019 or so is when I just kind of had enough with this contractor. And I just, I fired him. I said, okay, you're going to have to go. And I just took my losses. And I hired this other guy. and so this definitely isn't the end of the story. So this other guy comes in and this guy's awesome. And I can tell you a whole story about this guy, still friends and still love this guy to this day.

He comes in and he's like, okay, this is a massive mess. I will take care of this for you. And I don't know why to this day that he did it. Like he just totally took me under his wing and helped me out. Wow. Oh, my mom actually found him. Sorry, I'm like remembering these details. My mom, I was so stressed at the time, right?

My mom was like, I'm just going to call contractors. and until I find one that feels right, I'm going to find you the right one. And so my mom found this contractor for me. That is very sweet of your mom to help you like that. My mom is the best, for sure. She's always my support when I'm in the worst situations. And so the other guy comes in, and he starts work, right? He's got his tools in and all that.

And then someone, like a week after this guy starts, breaks into the house, steals all his tools. No. Steels all of the copper and stuff with the AC. No. breaks the custom window. So now he's scared. Wait, okay.

This is, all right. I see why you're calling this a movie. Now, I was not expecting this. I thought your mom finding the great contractor is like the end of this story. But I want to point out, because people are listening to this, you went someone and you did the little air quotes there. Does that mean you think it was the original contractor? Yeah. Oh, man.

I mean, it's not proven in any way. No, but this is where the drama and the movie comes from. We don't know. but we suspect. We suspect. Yeah, it's like a mystery. And the new contractor's name, I'm going to say his name because he's awesome.

His name is Ali. Yeah. And he saw someone like in the neighbor's house, in a truck, like sitting there in their car waiting for like a weirdly long time the day before, like after the incident happened and he was trying to recall

if there was anything suspicious. And so, and he's described the truck and it was, you know, I mean, again, I don't have like evidence video evidence of it, but if it smells like a duck, it cracks like a duck. Yeah. Okay. Wow. Kind of thing. So yeah, he comes in, takes all the stuff and then he destroys the cabinets. He destroys the counters. Everything gets like all messed up. And so Ali, the new guy, is now scared, right? Because he's in like an unfamiliar neighborhood to him. Someone just broken and did some violent

things to the home. Like, what if he was in there, right? Yeah. And it sounds like the person was being deliberately destructive. It wasn't like they were stealing something in particular. It feels spiteful the way you're describing it. Right. Exactly. So then that was the last we've heard of this guy, of the old contractor. And then Ali comes in and he kind of just like, he fixes pretty much everything. Now, there were still extensive amounts of expenses and stuff that tallied up to this, that almost like those details, which probably on any other deal would really stand out. I honestly can't remember them because they were so small in the grand scheme of things. But pretty much everything that's gone wrong with this property had gone wrong with it to the

point of by the time it was all finished up, drywall was covered, like it looked almost like a finished product. We went to turn on the lights for the photos and half the lights didn't work in the house. Oh my God. And so I was just like, I thought we were there, right? And so we start doing some, you know, we bring an electrician out. We start doing, and he just like can't figure out the problem. And so what seemed to have happened is that the old contractor and some of the drywall that he put on,

he pierced one of the wires in the wall with a drywall nail. Oh, God. Essentially, it destroyed the entire circuit that that wire was on. And so they had to take back down the drywall. They had to basically rerun that whole circuit. And it was just like, you know, an additional expense. So now that problem is fixed, right? So at this time, like by the time it's all done, we're talking like February 2020.

Okay. Wow. You guys can kind of see where this, see where this timing is headed, right? And so it's time now to basically finalize all the permits that were pulled, you know, close all this stuff out. And, well, COVID happens, right? Like, I can't catch a break. And so the whole government was closed. And so getting someone out there to do the inspection, to finalize all the permits and all that kind of stuff, it was insanely hard to get somebody out there.

And finally, like they did. But the crazy thing is, is that like the inspector and the contractor, sometimes like the inspector would say, yeah, I'm going to show up at 8 a.m. Then he just wouldn't show up. And so the contractor is sitting there all day waiting for the inspector. And then he doesn't show. Right. And so like this is just continuously happening probably for like three, four months at a time. And I was kind of like, okay, you know what?

We're just going to put this in on the market and we're going to go under contract. I'm just going to pray that these permits are just closed, but that's how we actually close. Extreme circumstances call for some extreme actions. And did that at least work out for you? So I interviewed another realtor and she was really good. We went under contract in like two or three weeks. And this buyer, thankfully, needed a couple months to close. So, holy crap, a break, right?

And yeah, we ended up selling that house in, I think, was like August of 2020. So it was like pretty much two years on the money. Yeah. And obviously, lots of stress. And I was very happy to be done with that deal. Yeah, I can imagine, man. Well, I thank you for sharing all of this with us because, you know, a lot of people are unwilling to share horror stories like this. And I do see, I do see the potential for maybe the first bigger pockets productions, bigger pockets pictures. Yeah, bigger pockets. Yeah. Yeah. Yeah. But I want to ask you a little bit about, you know, we've gone over some of the numbers. Obviously, it didn't go well.

But I think the sort of emotional piece of this is something that gets glossed over because this must have just been miserable. Just having it dragged out for so long. Did it ever make you want to quit real estate altogether or just give up or tell us, like, how you got through this elongated disaster? you know, I, like, no, it didn't. Like, because I knew, I kept saying, like, you got to lose, like, everyone's got to lose money. It's like the initiation dues. Like, any real, every real estate investor has probably lost money on at least one deal at some time. And, you know, I was just in over my head. And I saw how successful my other properties were. I saw how successful other people were. And I was like, oh, if I did this better, this probably wouldn't have happened. If I did this

better, it wouldn't have gotten this deal in the first place. It was way, I was in way over my head. And, you know, it was definitely, it was a piece of humble pie for sure. But, you know, some of the pros that came out of this, obviously, like, the lessons learned, that's the cliche answer. But the contractor that saved me, we became so close in that time period that he actually moved out to Denver, became my main contractor out in Denver. What? He met his, so the story continues, right? I'm telling you, like, it could be a movie. Oh, the ending of this movie.

Is it a happy ending? Yeah, he comes to there. He does this other big project with me and get this too. He finds a girl. He meets his wife. And now they're happily married. And he's now house hacking. He's got three investment properties himself.

Okay. Yes. I don't know who we got to get on bigger pockets pictures. Who's playing you in this movie, Craig? Are you playing yourself? I'll play myself. Okay. I have no acting skills.

I don't need to act because it was me, right? It's like a memoir. So you're just reliving your horror situation. Well, I'm glad to hear that. Obviously, the lessons learned are valuable. You wish you could, you know, do it less expensively. But that is a very cool story. All right. Time for a break, but we'll be back in a minute.

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Thanks for sticking with us. Back to Craig. There's this concept in business, You hear it a lot in tech, the idea of like failing fast. And I think that that's what sort of stood out for me. It's like, and if you haven't heard of this concept, it's like everyone fails. Mistakes always happen. That's reality.

The goal for anyone, real estate investor, any entrepreneur is to fail quickly so that it's not this long, drawn out thing. And recognizing that you're in over your head or something's gone wrong quickly so that you can hopefully minimize your losses. Were there any points in retrospect that you think you could have just said, you know, this deal is not working well and maybe you should have done something differently to sort of stop the bleeding a little bit more, if you will? There was a time in between contractors where I thought I would just sell the project half done. And I think I got an offer for like 60 or 90,000 or so. I know that's a big difference, but whatever that number was,

It wasn't enough because it was like, I still thought at that time that we'd make money. And in hindsight, maybe I should have just gotten out of the deal. But because I was working with someone else's money too, I really, really, really wanted to make sure they got a good return. But I ended up just digging myself a bigger hole, I think. It's one of the hardest things in investing or really in entrepreneurship to do is just to look at yourself in the mirror and be like, I messed up. You know, I made a mistake. And this isn't going to go well. And you learn to do that eventually because usually if you can, the sooner you could do that and have that reality check, the better.

Otherwise, I don't know if you play poker at all, but you know, you go on tilt, which is like the idea that you're just like throwing good money after bad to try and make up for previous bad decisions. And obviously you want to avoid that. But it's super, super hard to do. You are far from the first person I've heard who have who have made those types of decisions as you grew. our portfolio. Yeah. The poker analogy is really good. Like, if you know someone's got a better hand than you on the flop, even if you've already put in half your chips, just it's better than losing more than half your chips, right? Like, yeah, totally. All right. Well, we got to hear more happy ending, Craig. Tell us what's happened since this deal. What has your real estate

investing career looked like in the, I guess, four years since this deal was out of your life? Yeah. So funny enough, I ran into another really bad deal, which could be, which could be a, which could be another episode almost. Is this going to be a recurring series for us? Yeah. A whole bunch of different other mistakes I made on this. So, you know, I went and I bought another house hack and the house hack was really good. But my fourth house hack actually was not amazing. And again, it was because I just overlooked some stuff on the inspection report. And honestly, like, this could be a whole other episode. So I'll also. save it. It's a sequel to the movie. Yeah, it's a sequel to the movie. But Ali did, again, he moved to Denver to help me on this next project. And it was kind of like this joke that me and Ali have. Like, Ali just saves me on every situation. But overall, right, we've built a pretty sizable portfolio. We've got probably five figures or so a month of passive income coming in, which is nice,

in the millions of dollars of equity gained from the real estate over the last seven years. And not only that, but I became a real estate agent, an investor-friendly real estate agent, built a team of investor-friendly real estate agents. And so now I'm able to take all of the lessons that I've learned and make sure that our clients and the people that we're helping aren't going to fall into those same mistakes again. And I can't tell you how many times, even on like a deal that I'm literally under contract on right now with a client where he's like, there's some structural issues. And I was like, they need to fix it or we need to walk. There was a time where I was like, it's such a good deal, we'll just figure it out.

Right. But you can't get lost in the big things that can happen. Like you're not invincible. So yeah. And so now, again, so we've got this, we've got a great team. We help, you know, hundreds of investors and house hackers every single year, buy investment properties. At this point, now there's not much we haven't seen in terms of rehab stuff to come up with,

you know, tenant screening, all that kind of stuff. And so we're really able to, you know, not only I can invest well myself, but I can also help others too. Awesome. Well, thank you for sharing this, Craig. And congratulations on bouncing back and all this success. I think this is a very common story. We just don't hear about it as much. Before we get out of here, though, Craig, I ran across a question in the Bigger Pockets forums that I think you have some, you might have some good insights on. So can I read you this question and get your opinion on it? Yeah, let's do it. All right. So this comes from Alex, member of the Bigger Pockets community. I'll just read it.

and then ask you what you would do in her situation. So Alex says, I need help deciding what to do about the property manager of my out-of-state property. It's a duplex in Tennessee. She's owned it for five years and has never actually seen it. Wasn't in awesome shape when I bought it, but nothing major or urgent to fix. The original property manager was a local company, and then they were bought by a larger corporation. Oh, I've dealt with this. I've been telling my new PM for several years now that I was with.

to put money into fixing things up. And the response was always, quote, we don't really fix things until they're broken and everything is fine. Alex then asked for an inspection report. But to be honest, she said this place looks pretty gross at this point. And she's wondering if she should, A, move on from the property manager and find someone who's willing to take on a bit of a fixer-upper. B, keep the current PM for now, hire someone myself to do all the work needed, then find a new PM? Or C, is she just overreacting and PM just, leases the property, hold on to deposit and fix things when they're broken. Is it too much to think that the PM would proactively tell me when the stairs are literally crumbling and the gutter is falling off the

side of the house? Well, the fact that I'm laughing tells you my opinion. But Craig, what would you recommend Alex do in this situation? Okay, there's two things that I would say here. Number one is a big mistake that a lot of people make is that they mistake their rental properties for the houses that they live in. and you have to know your demographic of who's living in the house and the houses that they expect to live in. And so don't go ahead and just like fix everything and over rehab everything just in case because it could not matter. Like, um, however, you should go get an inspection report or you have somebody, you, some boots on the ground person, that's not your property manager. Take a look at the property and go and see if there's anything with the house that is going

to, to create bigger issues down the road. So if there's a gutter hanging off the house, and there's water dripping down the side of the house into your windows and into your foundation, that is a massive issue. That needs to be addressed, right? If the, if there's safety issues with the electrical or the plumbing and their tenant could be in danger in one way or the other, like, that needs to be addressed. If the place is messy or the cabinets are followed apart or whatever, like those things, if they're not complaining about it, who cares? Yeah. So that's kind of how I would address the situation. And then you go and fix the things, again, that are, that are health and safety issues and that are going to cause much bigger problems with your home. And if your

property manager still says no to doing those things, it probably means that they're lazy. They don't want to coordinate a contractor to get out there and do it. Totally. Fire them and find a new property manager. That's better. Yeah, that's my instinct. It's usually when you're asking these questions, you already know the answer. Like, if you're asking, should I fire this person, like in your heart, you probably know that it's time to move on. But I will just say, I think that there are different, there's almost two different elements of managing a property, especially long distance. And I wrote about this a bit in my book, but I call it like operational management, which is what most people call property management, like leasing properties, you know,

handling maintenance requests, you know, dealing with all just the basic stuff. But then there's a whole other side of owning a property, which would be normally called asset management, which is how do you put the property to its highest and best use? And to Craig's point, that doesn't mean overinvesting. It's just like, how do you want to, what's the strategy for this property? And I've always found that very difficult to outsource. And I think it's really difficult to train a property manager, especially long distance, to be like, here's what I want out of this property.

and I want you to be proactive in making that happen for me. I've found, in my experience, it's better to, even if it's long distance, to be the quote unquote asset manager yourself. Does that mean going to the property once a year and saying, hey, this property, it's not really meeting what my expectations are and then make clear the expectations to the property manager, what you want and what you're trying to accomplish. And if they can do it, great. that's a good partnership where you're providing the strategy, they're doing the tactics.

But if they're like, hey, we don't really do that and that's what you need, then you need to get rid of that person and find someone who can enact the strategy that you're looking for. So that's at least my advice, but sounds sort of congruent with what you were saying, Craig. But I thought this question would be appropriate because it sounds like, as we all do, sometimes we kind of hang on too long with a contract or a partner that maybe we know isn't the right fit. Yeah. I mean, you know, you know when it's time. Right. And then the thing is, too, is that once a property manager, any contractor, vendor starts doing one thing wrong, you're,

now you've got them under your magnifying glass and every little thing they do wrong. You just have no remorse for. And it just starts to build and build and build and until finally you explode on something that like almost doesn't even matter. Right. And they're just like, wait, what? Yeah. That's so true. Yep. All right. Well, Craig, thank you so much for your advice and for being so honest and candid with your story. I know you well and know that you've bounced back. So I think hopefully this was a good place to share this story. And I'm sure our audience appreciates it because we do talk a lot of success stories around here. But these things are common. They do happen. Everyone takes their lumps as an investor and entrepreneur in your career. It's just part of life. But learning from your

mistakes like we can do here today is super important. So we appreciate it, Craig. And if you want to connect with Craig. We'll, of course, put his profile for the Bigger Pockets website below and his contact information in the show notes. Craig, thanks again, man. Thanks for having me, man. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico content. And editing is by Exodus. media. If you'd like to learn more about real estate investing or to sign up for our free newsletter,

please visit www.w.w.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.