Moving On – New Beginnings (Good Riddance to Junk Properties)!

by FI Fighter on July 18, 2018

in Real Estate Updates

As I’ve shared with readers in previous posts (albeit very vaguely), I’ve gone through some very trying and difficult times this year. More specifically (and succinctly) — My junk properties in South Chicago were losing me money hand over fist, driving me insane, and causing endless grief/frustration. In other words, I saw the writing CLEARLY on the wall, which told me that these “assets” liabilities just had to go…

Early FI is all about peace of mind, and that’s something I knew I would most definitely never have in my life if I continued owning these junk rental properties.

So, I bit the bullet, and ended up selling off both of my South Chicago properties (Rental Property #3 and Rental Property #5) at MASSIVE losses. When all was said and done, I basically “wrote off” over $200,000.

That’s right…

$200,000.

In the BLOODY RED!

That’s NOT a misprint!

***Adios!***

***Gone with the wind!***

***VAPORIZED!***

At first glance, you might be surprised and wondering, “Just how on earth did things get so bad, so quickly?

Wow, I don’t even know where to begin, really…

What can I say? When it rains, it pours… and when you don’t buy right (i.e. Class A/Tier 1), a sticky situation can go from bad to disastrous in the blink of an eye…

In my own case, I was dealing with a multitude of problems, the most difficult being city violations that seemingly popped up out of nowhere, mandating a bunch of repairs that never should have needed repairing to begin with (after all, I purchased both properties as “turnkey investments”)… ***MAJOR FACEPALM***

So, I was at a crossroads, and had to make some tough/important decisions…

A) Bite the bullet, sink in let’s say $60k in repair bills to get both properties back up to code, and continue holding for the long haul, hoping and praying things turned around for the better and I could slowly but surely recoup my losses over time…

B) Say, “Screw this shit, I’m getting the fuck outta here! I’ll take a HUGE loss, firesale the properties to local investors (who actually know what they are doing and can be enticed to take on my sinking ship with a slew of problems, naturally on the condition they buy from me for “pennies on the dollar”), instead… I’m obviously in way over-my-head here, drowning, and I accept that there’s no way I’ll ever be able to manage these properties efficiently from out-of-state to make holding them worthwhile…

I went with the latter, and Option B.

Option A, I really didn’t believe had a snowball’s chance in… of ever working out long-term. Had I gone the repair route, it would have likely only been a temporary “band aid” approach, in my eyes, akin to resetting a ticking time bomb momentarily… only delaying the inevitable, but unable to stop it completely.

All things considered, this was ultimately an easy “no brainer” decision, as I really only ever had one viable option — Get out of dodge immediately!

Yes, losing a ton of money sucks azz, but at the end of the day, this whole ordeal taught me a very important lesson — Peace of mind means EVERYTHING!

And you cannot put a price tag on mental health!!!

When all was said and done, this Chicago fiasco took about 1 full year to resolve (from initial shitstorm to closing of both properties), I lost boatloads of $$$, and even more damaging, I’m certain I rekt’d my health tremendously during the process (many sleepless nights/agonizing frustration that ate away at my soul).

In spite of everything though, I just want to say “THANK YOU” to all the loyal readers of this blog, who have supported me all the way through… These were some very dark times, for sure, and I’m honestly just so grateful and happy to be alive right now… Words can’t describe.

It’s true, sometimes you really don’t know how good you have it until you have something so absolutely terrible happen to compare it to…

They say things happen for a reason… I’m starting to really believe that!

At this point in time, it’s too premature for me to know just how exactly I will be able to use this experience as a stepping stone/platform to catapult me to accomplishing greater things in life… but I’ll continue to work on it, believe me.

I am very sorry for being away from the blog so much this year, and this whole situation really has derailed things… particularly my mood.

But what’s done is done…

Now, it’s time to flip the script and move on to bigger and better things!

I’m very excited to now have the opportunity to move on with my life, and I look forward to sharing all the nasty details with readers, soon enough… Knowledge is power, and nobody should ever have to repeat the fuck ups that I made!

At this time, I hope you can respect that there are other people close to me (in my own personal circle), who are still struggling with some of the same things that I went through and who themselves are trying to (desperately) get out of South Chicago ASAP…

For example: From a buddy…

 

So yeah, I’m already probably saying way more than I should…

There are so so so many things that go on behind the scenes that most people who haven’t been “deep in the trenches” know absolutely nothing about…

Quite frankly, I truly believe that when most people blow themselves up and step on a landmine of this magnitude, they are too embarrassed to acknowledge it in public, and would prefer to just fade to black, dismissing such an event ever even took place…

But that’s NOT how I roll… As readers should know by now, I prefer to magnify and focus on my losses, since there’s usually a lot more that can be learned from them!

Only “experts” claim to average 4,000% plus returns every single year and boast about never having made a single bad investment in their lives…

Sorry to disappoint you all, but I’m simply a mere mortal who is dumb as fuck and who doesn’t know jack shit about anything…

Mistakes happen, and I’m proud of owning up to them!

That’s the truth, and I’m not gonna shy away from that…

Anyway…

I almost feel like I’ve been given a second chance at life… and I feel more blessed than ever before.

And when the time is right, I will have many, many, many stories to share with you all.

 

I feel most fortunate to finally be able to put this ordeal behind me… To be perfectly sincere, I genuinely hope that nobody else out there ever has to go through the shit that I went though. Out-of-state/turnkey investing is all the hype these days… and unfortunately too many newbies are venturing in with reckless abandon, getting duped along the way…

 

It’s not all sunshine and lollipops…

You better know what you’re doing, if you’re going to attempt such a bold move…

Looking back, I totally underestimated the difficulty and challenges of out-of-state real estate investing… especially by trying my hand at Class C rental properties (never again!) and relying so heavily on other people to take care of my properties.

 

With all that said, again, I am comfortable enough in my own skin to admit my defeats… I have made a ton of mistakes along the way to early FI, and none were greater than this one right here!

 

My decision to go to South Chicago to invest in out-of-state Class C turnkey turkey properties was the worst decision (financial or otherwise) that I have ever made in my entire life!

 

But please don’t feel sorry for me… because I sure don’t.

 

If anything, I’m going to use this disaster as motivation to get better and to keep pushing forward… and to spread the word!

 

I’ve got a ton of people to help on their own journey to early FI… and about $200,000 I need to earn back, to restore balance to the force!

 

Eventually, I’m confident I’ll be able to achieve my goals.

 

Saying good riddance to junk properties, man, it was a looooooong time coming, but that’s gotta be the most liberating feeling I’ve ever experienced in my entire life!

 

Fight On!

 

Photo: “Victory meal” (vegan shrimp) after closing, celebrating with my best bud.

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{ 20 comments… read them below or add one }

1 LeighNo Gravatar July 18, 2018 at 4:08 pm

Thanks for sharing as you can. I always wondered how those properties were going to go. It sounded somewhat too good to be true, especially to never see them yourself. I got burned too much on the first property I tried to buy simply not closing, so I guess I’m even warier of real estate you don’t actually see! I’m sorry these properties ended up sucking so much stress! Your health is worth so much more than the money you lost. Here’s to class A properties!

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2 FI FighterNo Gravatar July 18, 2018 at 4:32 pm

Leigh,

Yes, definitely it was way “too good to be true”.

Thanks for all the support! Lesson learned. In the future, it’s Class A all the way for me. No ifs, ands, or buts about it.

I want the best of the best. Not gonna settle for junk properties. Never again.

All the best!

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3 ChenNo Gravatar July 18, 2018 at 4:39 pm

I remember talking to you 4-5 years back as I was looking into turnkey properties(that’s how I found your blog). I weighed the pros & cons and decided after a year that I wasn’t going to invest after seeing some of the neighborhoods that the properties were in. I went the route of syndicated real estate deals and that has worked out pretty well for me. Really sorry to hear about the huge loss…. next beer is on me whenever we meetup.

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4 FI FighterNo Gravatar July 18, 2018 at 4:47 pm

Chen,

Smart move on your part. Yeah, I got sucked into the whole concept of turnkey investing and unfortunately didn’t do a good job of filtering out the “noise”… So many investors were singing the praises of cash flow and there was even a brief moment in time I started to question owning Bay Area rentals… YIKES!

Properties that go up in value are a BLESSING! You would have to be delusional to want to own cheap properties where the land is worthless… One major repair bill needed, and your resale value gets cut up by over 50% overnight in these Class C pockets… In contrast, a dilapidated shack in Palo Alto will fetch $1 million easily, maybe $2 million…

Location, location, location!

So many things I underestimated and took for granted… I had a wonderful thing going in the Bay Area, and in hindsight, I should have kept right on investing here, buying Class A properties.

Again, live and learn.

Looking forward to meeting up again, someday soon. 🙂

All the best!

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5 JohnNo Gravatar July 18, 2018 at 8:45 pm

Chen,
By syndicated real estate deals do you mean the lending platforms or you pooled money with a syndicate to do your own deals? Curious on how you got started if it was the later and how it turned out

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6 Income SurferNo Gravatar July 18, 2018 at 5:07 pm

Good luck and good riddance buddy. You live and learn….
-Bryan

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7 FI FighterNo Gravatar July 18, 2018 at 7:54 pm

Bryan,

Thanks buddy! It was painful but live and learn, indeed.

Cheers!

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8 WheatmanNo Gravatar July 18, 2018 at 6:19 pm

I have always appreciated your candidness in the blog entries. Glad to hear that the nightmare is over for you. Yes, 200k is a large chunk for tuition, but just as you mentioned, we all make mistakes. Live and learn…

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9 FI FighterNo Gravatar July 18, 2018 at 7:56 pm

Wheatman,

Thanks so much for the support! Yes, $200k tuition on real estate investing is a hefty bill to have to fork over, but hey, it happened and it is what it is…

On the brightside, if readers and anyone reading this can learn from my mistakes, perhaps they can dodge a bullet and help prevent themselves from having to step on a potential landmine.

Real estate gone wrong unfortunately happens to way too many well-intentioned folks out there, and the story never gets out.

Well, here’s a real-life story of how UGLY things really can get!

Best wishes!

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10 Financial SamuraiNo Gravatar July 18, 2018 at 7:04 pm

Good stuff getting rid of those cancers! At the end of day, your monetary loss isn’t that bad because you made over $1 million in your trading portfolio! And you’ve lost way more than 20% before, so although painful, these properties or just another part of the abs and flows of your portfolio no?

Financial independence really is about keeping things simple and free. I really hate dealing with rental property. I’m seriously considering selling my rental condo in San Francisco with my tenants move out. But then again, I feel I’ll regret it 20 years from now.

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11 FI FighterNo Gravatar July 18, 2018 at 8:00 pm

Sam,

Thanks for all the support and for helping me look at things from a glass is half full view. You’re right, as miserable as this entire experience was, I have a lot to be thankful for, and fortunately, I made a fortune with mining stocks, which can help offset this disaster.

And you’re absolutely spot on, much of investing is going with the flow, and there’s always going to be ups and downs… Hopefully, we learn from our mistakes and over time, we get better and can mitigate/avoid a lot of those painful lulls.

For myself, I no longer feel the need to ever take on such insane high-risk gambles again… I was curious about Class C rentals, got tricked into believing in a false narrative (drank way too much kool aid that was being routinely offered over at the REI forums), and paid the price dearly.

Live and learn.

And I totally hear you on being burnt out with rentals, in general… I’ve still got 4 atm, and that’s more than plenty.

All the best!

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12 Gwen @ Fiery MillennialsNo Gravatar July 18, 2018 at 7:07 pm

Oh man, I feel your pain. My losses on my Class C property are “only” about $40k. I can’t imagine 5x that loss. When I close in a month, I’ll walk away with about $4-5k in my pocket and I feel blessed. The property needs almost $50k of work done in the next 18 months and ain’t nobody got time for that.

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13 FI FighterNo Gravatar July 18, 2018 at 8:02 pm

Gwen,

I’m sorry to hear about your unfortunate rental situation, and it’s a shame you’re kind of going through the same ordeal as me…

I’m rooting for you, and hopefully you can close in a month and move on with your life! Losing $40k sucks, but like you said, with all the headaches and repairs needed, ain’t nobody got time for that shit!

Best wishes!

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14 JerryNo Gravatar July 19, 2018 at 6:17 am

Ouch! I didn’t realize your situation got that bad. Ultimately you’ll get stronger from this. My similar experience tought me key life lessons that I’m glad I realized sooner rather than later. Namely, chasing returns just to diversify income and make money isn’t always worth it. Peace of mind and your health is WAY more important. Looking forward to sharing war stories with you.

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15 Evan @ MyJourneytoMillionsNo Gravatar July 19, 2018 at 7:58 am

I have been approached recently about hands off real estate deals and they all just seem so fishy to me. Specifically, they were about joining a group and they’ll handle everything – then why do they need my low five figures? Just doesn’t sit right to me. Thanks for sharing!

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16 EntrepreneurNo Gravatar July 19, 2018 at 9:12 am

I would not be too hard on yourself. I ended up losing a similar amount (probably a lot more, if I’m being honest with myself) by trusting a contractor who was a liar and a thief. I find it helpful to step back and look at the big picture and say “Even after this loss, I’m still doing well… 99.9% of people around the world would trade places with me in a heartbeat… so don’t insult them by moping!” Plus, if you never took risks, you never would have earned those substantially bigger gains – you can’t isolate the bets that paid off and say you only should have taken those.

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17 JimNo Gravatar July 19, 2018 at 3:39 pm

Thanks for sharing and being honest about the ordeal Jay. While it’s a tough pill to swallow, there are successes and learning opportunities. Unfortunately, this one was a pretty big learning opportunity, but I have no doubt you’ll bounce back and make back that $200k and then some quickly.

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18 Dividend DiplomatsNo Gravatar July 19, 2018 at 4:35 pm

My mom has always told me that mistakes can be expensive. But whats important is what you learn and takeaway from the experience. You’re going to come out better from this.

Also – getting rid of stress and misery is priceless. You need to make sure you are as healthy and happy. If there is something in your life causing misery, then get rid of it!

Bert

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19 JoeNo Gravatar July 19, 2018 at 10:58 pm

Hi Jay, I thought your losses were going to be worse than 200k. While it’s still a substantial number, you have far far more gains overall than this loss so that’s a good thing. I have missed out on many huge gains over the years, and am currently looking at around 300k of probable losses, but I’ve also made millions. It’s just all part of a bigger picture, can’t win them all, right?

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20 No Nonsense LandlordNo Gravatar July 31, 2018 at 1:52 pm

You are 100% correct. Take your losses and get out.

I just sold a property in St Paul to do a 1031 exchange in FL. The inner cities are a mess. Hard to get good renters, and it’s hard to please the city who wants affordable housing and landlords that go broke supplying it.

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