Real Estate Investing: Roller Coaster to Success

In 2005, I quit my day job. I had begun to acquire properties with private capital and creative dealings, having gained the knowledge and confidence to do these things through a sequence of expensive “guru seminars” and books. As volume grew, I discerned to take on a partner to help shoulder the burden. This latter implement proved to be salt in a wound.
Because my real estate acquisitions heavily relied on mortgage money, directly or indirectly, within a realm which we now know to have been artificially inflated, superficially supported, and woefully subsidized by our Federal Government (Fannie Mae and Freddie Mac), doom was on my unwitting horizon.
Even when the Titanic hit the iceberg, the band continued playing and passengers continue to mingle and party. Only when the symptoms were forcibly upon them did panic Real Estate Is A Short-Term Investment and chaos set in. For those of us heavily vested in real estate investments in the mid 2000s, the experience was much the same (barring the tragic loss of life).
It is my personal opinion that greed played a key role in the growth of this real estate bubble, on all sides of inclusion. Federal employees reaped insider benefits from the explosive growth of their involvements. Banks borrowed massive amounts of money and lent it out in ill-advised mortgages, earning massive fees in the process. Meanwhile, anyone with a pulse could suddenly realize the American Dream of home ownership – forget the age-old, time-tested and vital prerequisite of having substantial down-payment money and sufficient, reliable income to justify the mortgage loan.
But in any case, mortgage loans, rainbows, and lollipops ruled the American atmosphere for that handful of fateful years. Few were immune from the sway of the apparent economic prosperity, and the “doomsday’ voices were merely a scream in the wilderness. We were on the happy train House Sale Timeline to nowhere, and we didn’t care, so long as the invisible hand continued to support our joy ride. I was on that train, beer in hand, partying my way to Pinocchio’s Pleasure Island. And yes, I was becoming a stupid @ss, or, perhaps more likely, had already sprouted donkey ears.
My partner and I amassed a portfolio of about 70 single family houses within just a couple years. We used all manner of technique – “subject-to” acquisition, borrowed-capital purchases, personal mortgages, seller carry-back notes, note purchases and tax lien purchases made whole, etc. These are all fantastic methods, and I support every one of them as potentially effective. My FAILURE fell upon me gradually in the form of blissful ignorance of the environment in which I acquired – that of the underlying realities with vital effect on the real estate market. All the while, I was confident of the notion that I would soon be a millionaire – something which my partner and I would often express to one another, gleefully, pridefully, immaturely, and IGNORANTLY! Above all, the settling of the fog of bad-mortgage reality was especially damning, as our portfolio book value fell flat overnight. Value existed on paper, based on what people were willing to pay for an asset. As mortgage defaults exploded in volume and national consciousness finally took note, we were upside-down on literally everything. We had already sucked out most of the “equity” existing on paper in nearly all of our homes, taking out second mortgages and equity loans on the collateral for our ever-expanding acquisition base.
It was at a culmination of these fully leveraged assets against the sudden realization of precipitous value decline that I found myself in complete failure. I resented my business partner, and vice-versa. We dissolved, and I took a bath. The whole ordeal was a bloodbath with reverberations even to this day, though only now a distant echo. I had lost everything. I was fallen. Broken. Even despised. My wife resented me. Life was bitter chaos and pain.
The human condition allows for only a couple options under traumatic circumstances. Perhaps most succinct and duly broad in description would be to reference the “fight or flight” response mechanisms. My temptation was to run. Far, far away. I wanted to be on an isolated island away from everyone – especially those affecting and being affected. I wanted to get in my truck and drive without stopping. Reality and responsibility withheld this naughty instinct, in the end, and I resolved to heal and rebuild.
I had no clue what to do next. Truly, though I knew real estate better than any other productive, money-earning skill, I could not justifiably re-enter this unholy arena in the wake of my own implosion. As the dust settled over my failures and the carnage was bulldozed away, I spent much additional time in internal agony (and fervent prayer) discerning my next steps in life. Our third boy was on the way. Responsibility remained an ever-present and growing element of life, and I needed to be financially productive. I was crawling out of my skin with anxiety.
I spent the next few months looking for immediate work – away from anything involving real estate. After a few months, my brother-in-law asked me to run operations for his trucking business, which I accepted most readily. This offered a gratuitous respite from the realm of pain I was hoping to flee, and allowed me to be financially productive at the same time. I was eternally thankful for this God-blessed opportunity to begin my great mend. Healing began and progressed in earnest, on many fronts – spiritually, familially, financially. This was just the fruitful span of time necessary to reset my existence.
After about a year, opportunity presented itself to offer a gracious and profitable re-entry into real estate. Afterall, I was still very much a “real estate guy”. I had learned so much in such a short period of time, and despite my ultimate crash, became notably experienced in the process. I could now take these experiential lessons and apply the knowledge anew – this time without the blinding pride and juvenile megalomania. Now with a wealthy money partner wishing to grow a traditional buy-fix-rent portfolio under my guidance and leadership, I’d been given a new “lease” on life. Pun intended.
Thirty one houses later, and counting, this endeavor has been one of tremendous success. I’ve never since lost sight of my place in this world, always managing to retain clarity through humility when running the business and managing its components.
What’s more, the business paradigm developed into a beautiful model of success, for which I consider myself immensely blessed. It’s clean, and the numbers are outstanding. Ironically, that I fell with the mortgage implosion gave way for a perfect opportunity to rise with low-priced rental purchases. It has been this condition of the market which makes possible a continued growth of our present portfolio success, and for as long as it continues, we shall continue to capitalize. Additionally, my present plan is to incrementally re-integrate some of my prior investing tactics in order to add revenue and profit upon the steady and gratuitous baseline of rental income. Wholesaling, “subject-to” purchasing, and seller carry-back structuring are among those I’m eager to revisit. In any case, the underlining absolutism of investing has become clear to me – move with the flow of market conditions – not AGAINST it. Don’t speculate in a falling or stagnant market. Don’t follow a mortgage-reliant investing paradigm in a market where credit is tight. Etcetera. Instead, take what the market presents and move profitably with the grain for as long as it trends thusly!
In the end, the lessons most beneficial involved an opportunity to replace vice with virtue. Most namely, but for my state of fallenness, I may never have been so keenly presented with the opportunity to replace my pride with humility. A wise priest once told me, “humility is truth”. It took a few moments of reflection to understand this, but when it hit me, I was thankful for the new axiom. We are all lowlier than we know, in fact. We are less worthy and less outstanding that we may think of ourselves at any moment. At a time when the veil of pride has been forcibly stripped from our line of vision, we might look upon our reflection and behold the truth of our dispositions. We are less mighty than the facade of pride would have us know, or remain vigilant to, and this is dangerous. To the young and eager real estate entrepreneur of my past, this false self-image proved a reckless and tragic baseline from which to spring forth. Fortunately, once humility was given due space in my soul, a new beginning was possible. This time, I could see clearly, and it made all the difference in the world.

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