What I Learned From My WORST Real Estate Deal

Worst real estate deal

I had a terrible turnkey rental experience the last 3 years.

The property manager let his son live in the home, he never paid rent, the manager charged me for many expenses I shouldn’t have paid, and I let this linger for a really long time. Too long.

And that’s on me.

Listen to today’s episode and hear my experience and what I learned from this recent and unfortunate experience. Spoiler, it’s not all bad!

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Speaker 1 (00:00):

Hello, my fellow Ripples. This is Chris Miles, your cashflow expert and anti financianal advisor.

Speaker 2 (00:07):

Chris Miles was able to retire twice by the time he was 39 years old, but he’s not content to just enjoy his own financial freedom and peace of mind. Chris wants you to have your own ripple effect so you can live free today. He’s not the financial advisor you expected. He’s the non-financial advisor you deserve. He’s jumping behind the mic right now, ready to make waves. Here’s Chris Miles

Speaker 1 (00:38):

Schultz show. It’s for you. Those of you that work so hard for your money and you’re now ready for your money to start working harder for you today. You want that freedom. You want that cashflow. You want that passive income now, not 30 or 40 years from now, but today. So you can live that life that you love with those you love. But most importantly, guys, I know you’re not just here to get rich, but you’re here to live a rich life, to create a legacy because as you are blessed financially, you have a greater capacity to bless the lives of those around you. That is the reason why I’m here to be with you today. Thank you for tuning in, binging sharing, and making it worth for my ripple effect to go through your lives, especially as you apply these things that you learned today.

If you have not done so already, go check out our website, money ripples.com. Lots of great education, whether it’s about infinite banking or even about passive income. In fact, you can try our passive income calculator to find out how much passive income you could create in the next 12 months. Check that out right now. Okay, guys, so I was thinking about the 2023 a little bit my year-end review, and many times on the show we talk about good deals. I talk about the success stories, and I’ll talk about my failures as well, especially if you’ve heard me talk about going broke in 2008 and even just going over a million dollars in debt and even just having rough roads along the way as I’ve learned these lessons. And the truth is we all do. We all have lessons to learn, but the real question is what are some of the worst things I’ve dealt with?

Now, I want to talk about my worst real estate deal that’s been for the last year. Not so much the ones, I mean, I’ve shared about ones from the last recession, and that’s fine too, but I want to talk about my worst real estate deal because maybe people will say, well, what’s happened? It doesn’t mean I haven’t lost money. Obviously I’ve lost plenty of money along the way, but this is one that although I lost, I still gained. And let me explain what I mean. Here’s the thing. I just told my own VIP clients, those that hire us as consultants. I just had a call with them recently and I said, guys, in as much as you’re progressing, you’re prospering. Even if you’re just inching along, making littley, itsy bitsy spider, if you’re making these little itsy bitsy moves along the way, but you’re progressing, in my mind, you are prospering.

It’s the people that don’t progress, the people that are actually starting to slip back, not so much just back financially, but back in their growth and their progress. Those are the people that I find that are impoverished. So you can be prosperous. You can be abundant no matter what the situation, especially if you do it right. Lemme share you a story. What I mean, I just shared this with my group as well just about now, it’s been 15 years. I had a family member that they invested with, the guy that I knew that was in the real estate space, he’d been doing it for 25 years, done a great job. In fact, the guy had been investing since the 1980s and has never lost on a real estate deal. So they put their money with him, they lent him the money, he paid them the return, gave him all their money back with the interest, and they were happy.

They said, this is awesome. This is way better than what we’re getting sitting in our 4 0 1 kss and in the stock market. So they did it again, but the next time around when they did it where before they were the first one in line to get paid back this next deal, they didn’t look at the fine print, found out they were not the first one in line, not even the second position or second lien position as they call it. They were in third position. They were in third. They were third in the lineup of getting paid back. If you put it this way, it’s like you having a first mortgage, then getting a home equity line of credit, and then some bank being crazy and dumb enough to go give you a different line of credit that then they get paid back at the very end with the last little bit of equity you might have.

And so if the market tanks, that person in that third position loses everything, that third mortgage, they don’t get paid a dime. Well, this is what happened with one of my family members. And so they were pretty bitter about it. They were very upset, primarily, they didn’t really diversify. They put almost all of their money in that one deal because of course, the first time worked, so why not the second time? And they just took ’em on a handshake deal. They didn’t do what I recommend, which is the Ronald Reagan mantra, which is trust but verify. They didn’t verify, and they found out that they’re pretty much at the end of the pecking order. They didn’t get paid a dime. They lost 150 grand. And so they decided to come in the office. And this is a time where I was in my previous company with Garrett Gunderson, and at the time, about a year into our company, we hired a guy, brought him on a guy by the name of Garrett White.

Some of you might know him as Garrett J White, who is Wake up Warrior, warrior Code. He’s the guy that trained Sean Whalen. If you’ve ever followed Sean Whalen, he’s the guy that Sean Whalen was one of his trainers in his company. So anyways, Garrett came on into our company after he had his mortgage company. This is before he talked about all of his nightmarish stuff going on in his life that he talks about now in Wake Up Warrior. So he was working with us, and he pretty much was for a guy that’s only a year older than me, man, he had some cajones, I’ll tell you, because he would not even let us even see any of the meetings he was doing, even though I was doing my own meetings already. But he’s like, Hey, if you want to see how I train people and how I help people and coach people, you got to pay to play, right?

Well, I decided to bring him some people, and I have been to have ’em sit down with these family members, this couple and this couple, they’re both in their early seventies. At the time, Garrett and I were in our early thirties, so these people were more than twice our age. And Garrett starts asking about what’s going on with these investment? And they said, and one of them, the husband said, oh, it was horrible. And Garrett asked a powerful question. He said, what did you learn from it? And the husband replied and said, I’m never going to invest money with that person again, though that crook again. And the next thing that came out of Garrett White’s mouth just floored me. In fact, it got me scared to ever show up to Thanksgiving again. He said, shame on you, shame on you. That’s all you got out of it, not to invest with that person again.

How dare you come with that lame excuse, shame on you. At this point, I was pretty nervous, and I thought, oh my goodness, this now just made Thanksgiving uncomfortable. Well, then Garrett follows up with this. He said, listen, if all you learned was to not invest with somebody, you didn’t learn the lesson, you didn’t learn at all, you didn’t learn anything from this method, and you’re just going to repeat the same mistake again. You need to go deeper and learn what really happened here. And of course, looking back, I could tell, yeah, they didn’t read the paperwork. They didn’t know what they were getting into. They just did it on trust. If they would’ve known what they were signing, they probably wouldn’t have signed the second time. They probably wouldn’t have lost that money. But hindsight, 2020. But that’s the key, guys. What did you learn?

Well, I had my own real estate deal. Now, you’ve heard me talk about various investing options. Occasionally we talk about turnkey real estate investing, right? So you buy the rental property, but you don’t manage it. You don’t properly manage it. Somebody else manages the property for you. Now, here’s what happened. We bought a couple properties in Alabama just at the beginning of 2021, and eventually we find out coming in 2023, we kind of took our eye off the prize. We stopped watching what was going on. Well, as we started to realize, wait a minute, there’s not as much money going into our account as we thought there should be in cashflow. Why not? Well, we started to audit what was going on with the property manager. We hadn’t looked at the numbers for really the last two years. Prior to that, started looking at the numbers, found out they were charging us for things they shouldn’t have charged us for many repairs that the tenant should have paid, not the owner.

Long story short, we found out that the person in charge of our property at the property management company rented it to their son and didn’t charge them a dime hardly. They barely even paid rent on time for that matter, and we were getting billed all these different things. Well, at that point, we decided, you know what? We’re just going to sell these properties. They’ve appreciated a little bit. Let’s just get rid of ’em. So we sold one property, sold quickly. That second property though, that one that the sun was in, they kind of dragged their feet and getting out of the property, and then the next thing you know, we’re going to fall. Where of course it slowed down and in the market. And so we were having a hard time trying to sell it and try to make anything off of it. We almost sold it.

We almost sold it off. But then we did what I just talked about earlier, podcast about the right timing of the market. Well, as interest rates dropped, all of a sudden more buyers came into the market. We ended up selling it for pretty much what we asked for, what we had wanted. At the end of the day, that was a $40,000 down payment, right? Again, this is our worst investment, a $40,000 down payment. But yet, despite all that that went on, we still made about 16, 17,000. You do the math, that means we made over 40% in less than three years. That’s pretty dang good, isn’t it? I mean, that’s pretty good. But for us emotionally, definitely by far the worst investment because we took our eye off the prize. So what did I learn from that experience? It wasn’t, was it the property manager’s fault?

Sure, they have some responsibility, but ultimately it came down to us. We took our eye off the prize. We weren’t wise stewards watching it. How many times you heard me say on this podcast, if you’ve watched enough videos, whatever you put your attention towards will expand and grow. Yet on the other side, whatever you ignore, we’ll leave you. If you heard me say many times, you ignore your teeth, you’ll lose them. You ignore your family, you’ll lose ’em. If you ignore your money, you’ll lose it too. Same thing happens in investing. When you start to take your off the prize. See, it’s so nice to talk about passive income, but at the end of the day, passive income, right? Is it really passive? No. It doesn’t mean that you don’t do jack squat. You set it and forget it. That’s what mutual fund companies and financial advisors tell you to do so that you won’t fire them so that they’ll keep making money off you, and you lose money in the process.

They, they make money because you set it and forget it. You cannot do that. If you’re really a wise steward of your money, you cannot just set and forget your money. It needs to be, you need to watch it. You need to manage it. It doesn’t mean you have to do all the work, right? I mean, again, all these investments we talk about are very, in comparison, very passive. I mean, even the turnkey company, even having to deal with that mess, that took some time out of our hands, but we spent the previous two years or so doing nothing, spending no time on it, which was part of the problem. We created a bigger mess. It was easy, hard. We did the easy thing in the moment to create a harder situation. Later on, if we had done a little bit harder, meaning that we actually watched each month what was actually being charged, if there was any charges beyond the typical property management fees, we’d watch that.

We would’ve said, Hey, why are we paying for that? And we’d be able nip it in the bud right away, but we didn’t, right? We kind of overlooked that. We kind of said, Hey, money’s coming in who caress, and the only time you do care especially is when money stops coming in. And I’m not saying that money stopped coming in, but there was a few times you said, wait, we owed that month. There shouldn’t be any money owed. We’re so much positive cashflow in these things. We should be always paid at each and every month. So my lesson to you is this, guys is what are you learning? What lessons do you learn? And at the same time, I have to say this, man, that was awesome. Still 40% return. The stock market didn’t even do that from the beginning of 2021 until 2020. End of 2023, the stock market from 2022 to 2023, or really 2024 was flat.

It was not even breaking even. That’s ridiculous. You’d be better off in a cd. Heck, you’d be better off in a horrible, low yielding savings account than having your money in the market the last two years. Yet, how many people still did it right? Now, if something goes wrong, what do they blame? They don’t blame themselves. They blame the stock market, right? Oh, the stock market’s fault, or it’s my financial advisor’s fault. Yeah, they’re the villain here. No financial advisors just an order taker. They’re just salesmen in suits. You are responsible for your money. You should care more about your money than anybody else in your life. You should be the most wisest steward of your own resources. I know. It is so nice to just sit back and do nothing and just sit on a beach somewhere and just enjoy your pina colada. But at the end of the day, reality sets in and you’re going to realize the best people, the best investors, even passive investors, still watch and manage.

They still take full responsibility for what’s happening. You may not be able to control external market factors. That’s true even for us. Heck, I’ve even had an investment that is delaying paying me out. We haven’t lost money, but they haven’t paid me interest for almost a year Now, why? Because 2022 was a worse real estate market than even 2008. If you ask almost any real estate investor, they’ll say, if they’ve been in both markets, they’ll say 2022 was harder because things changed so fast with those rising interest rates. That created a lot of confusion, especially for those that were syndicators operators, those that are actually trying to help you invest your money. They got the biggest hit compared to anybody else, even wholesalers with the whole real estate market. It froze up for a time worse than 2020, worse than 2008, at least 2008, there were still options.

In fact, there’s a lot of options to make money in real estate in 2008 if you were educated and you were willing to see it. Same thing is true now. Now there’s a much better opportunity going to 2024. Now, real estate is a really prime for doing great things. And here’s the cool thing, right? In the United States, even if you hear on the news, oh, Tampa, Austin, Texas, Phoenix, Arizona, they’re depreciating right now. They’re losing money. Well, that’s three markets out of hundreds in the United States. The ones that don’t make the news are the ones you probably want to invest in the most. The ones that don’t make the news because they’re either not superb or they’re not losing a lot of money, so they’re not newsworthy. Those are the ones, those are the places you want to invest. That’s why it’s so nice that you can invest in any pocket of the country and not have to live there.

I mean, the internet has made things so much easier, and the way that the world is today, it’s easier and harder to make money than ever. I say easier because you have more access to resources, more access to the internet, and ways to be able to access deals that maybe have never seen otherwise. But it is harder because there are charlatans out there. There are people that aren’t true to their word, and they could be sometimes the best marketers out there. So you got to be careful. You got to still do your due diligence. You got to be a wise steward. You cannot turn a blind eye. Heck, even Warren Buffett, and specifically Charlie Munger, who just passed away recently, Charlie Munger said, right now it’s harder to make money. Basically, they said in their early days of being able to invest in the stock market, they said it was way easier than this today.

They said, really just get used to hard times. Get used to not making money or get used to things being harder in the market. That’s coming from some of the best investors in the stock market right now, but yet many people still keep their money, and as if it were the early years of Buffet and Munger, right? It’s not the same thing anymore. So the big thing is coming back to you. Are you going to take full responsibility for your life? You can never have freedom without responsibility. Let me repeat that. You can never, ever have freedom in your life. True freedom without responsibility, personal responsibility. You need to own up to things in your life. Yes, again, external marketing conditions, we get that. But you at the end of the day, can either learn and grow or you can become a victim and regress, and that’s the person that’s the most broke, the person that doesn’t learn, the person that blames everybody else but themselves.

Those people don’t grow. Those people end up being broke and alone the rest of their lives. You have the opportunity to be an agent in your life, to be as wise steward of your money, and as a result to have control. Take responsibility, ownership of your life, and only then can you truly have freedom. Guys, again, I implore you. Be wise, right? Be wise with what you’re doing. Make sure that if you don’t know what you’re doing, find somebody who does, somebody who helped guide you along the way and walk you step by step to help you do that. If that can be us, great. We would love to serve you in any way in the capacity. You can always reach out to us, somebody ripples.com. If it’s somebody else, you know, somebody that can help guide you along to give you the life that you want to emulate, then do that.

Whatever it is you want in your life, take ownership and then take action. That’s my challenge to you today. Go and make it a wonderful prosperous week. We’ll see you later. You heard me say many times, you ignore your teeth, you’ll lose them. You ignore your family, you’ll lose them. If you ignore your money, you’ll lose it too. See, it’s so nice to talk about passive income, right? But at the end of the day, passive income, right? Is it really passive? No. It doesn’t mean that you don’t do jack squat. You set it and forget it. That’s what mutual fund companies and financial advisors tell you to do so that you won’t fire them so that they’ll keep making money off of you and you lose money in the process. They, they make money because you set it and forget it. You cannot do that if you’re really a wise steward of your money.