Nightmare Deals - The Black Hole Property - Episode 11

Summary

Summary of "Nightmare Deals - The Black Hole Property - Episode 11" on The David Greene Show

Release Date: October 8, 2024

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Introduction

In Episode 11 of The David Greene Show, titled "Nightmare Deals - The Black Hole Property," host David Greene delves deep into the tumultuous real estate journey of his guest, Christopher Lane. This episode is part of a series that explores disastrous real estate investments—stories rarely shared but profoundly instructive for both novice and seasoned investors.

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Buying the Property

Christopher Lane recounts his initial foray into real estate investment with the purchase of a duplex on Ferguson Street in Detroit. Leveraging a trusted relationship with a local realtor, he acquired the property for $70,000 in November 2021, believing it to be a lucrative cash flow investment.

• Purchase Details:
  • Asking Price: $70,000
  • Down Payment: 25%
  • Interest Rate: 6.25%
  • Mortgage Payment: Approximately $600/month
  • Projected Rent: $850 - $950 per unit

Christopher anticipated an After Repair Value (ARV) of $80,000 to $85,000, based on comparable properties. His strategy involved minor renovations—painting, installing hardwood floors, updating kitchens, and replacing old appliances—to enhance the property's appeal and rental income.

"Aim small was my strategy going in just because I didn't have a lot of money to be able to throw at a house."
—Christopher Lane [03:37]

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Issues After Purchase

Shortly after acquisition, Christopher faced a cascade of unforeseen challenges:

1. Mechanical Theft and Vandalism:

   • The property remained vacant for an extended period, leading to burglaries where mechanical components and appliances were stolen.
   • Cost of Repairs: Approximately $12,000, covering mechanical replacements, window repairs, door locks, and extensive cleaning.

2. Trouble with Tenants:

   • The first tenant occupied the lower unit, which was purportedly supposed to generate sufficient rent to cover the mortgage.
   • Unexpectedly, animals—six pit bulls—were discovered in the lower unit, leading to severe property damage and the voiding of the lease agreement.

"There was a lot of chaos, mentally and emotionally, you know, and it was pretty low, man."
—Christopher Lane [11:57]

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Property Management Problems

Christopher's difficulties were compounded by his experiences with two different property management companies:

1. First Property Manager:
   • Found through the Bigger Pockets forum, initially appeared trustworthy and capable.
   • Failures:
     • Mishandled repairs and replacements, costing an additional $7,500.
     • Charged exorbitant fees and lacked transparency, leading to financial strain when the security deposit ($1,350) was insufficient to cover damages.

"It was mind-boggling that anybody, first of all, would do that and still somehow be able to attract clients if that's their standard operating procedures."
—Christopher Lane [18:57]

2. Second Property Manager (National Company):
   • Offered a fresh start with better systems for managing properties in challenging neighborhoods.
   • Initially successful in tenant placement, but the relationship deteriorated when a tenant defaulted during the COVID-19 pandemic.
   • Eviction processes were sluggish, reflecting systemic issues within the management company.

"At this point, I have a really good opportunity to either double down or cut my losses and find something else."
—Christopher Lane [11:29]

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Emotional and Personal Impact

The relentless setbacks took a severe toll on Christopher's mental and emotional well-being:

• Financial Strain: Accumulated losses exceeding $20,000 due to theft, property damage, and mismanaged funds.
• Personal Stress: Balancing a full-time job, impending fatherhood, and the financial burdens of real estate investments led to near-depression.
• Family Strain: His wife, pregnant and undergoing IVF treatments, viewed his investments as reckless, adding familial pressure.

"I just felt like a Punching bag. Like a human punching bag every single day."
—Christopher Lane [23:35]

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Recovery and Lessons Learned

Despite the adversity, Christopher demonstrated remarkable resilience:

1. Switching Property Managers:

   • Transitioned to a reputable national company with robust systems for tenant management and contractor oversight.
   • Initially saw improvement with a reliable tenant paying $900/month, though subsequent defaults during COVID-19 posed new challenges.

2. Personal Initiative:

   • Took control by independently marketing the property on platforms like Facebook Marketplace and Craigslist.
   • Successfully secured a dependable veteran tenant, stabilizing the property's cash flow.

3. Financial Adjustments:

   • Utilized a $100,000 HELOC from his Oceanside, California property to cover repairs and invest in additional properties in better neighborhoods.

4. Philosophical Growth:

   • Embraced the "win or learn" mentality, deriving strength from challenges and viewing each setback as a learning opportunity.
   • Adopted insights from his Jiu Jitsu training, applying principles of resilience and adaptability to his investment strategies.

"You need to learn to be comfortable being uncomfortable. That's the only way that you can grow."
—Christopher Lane [42:51]

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Conclusion

"Nightmare Deals - The Black Hole Property" serves as a cautionary tale underscoring the unpredictable nature of real estate investing. Christopher Lane's journey from hopeful investor to financial distress and eventual recovery highlights the critical importance of:

• Due Diligence: Thoroughly researching property locations and management companies.
• Risk Management: Maintaining substantial reserves to weather unforeseen challenges.
• Resilience: Persisting through setbacks with a steadfast commitment to personal and financial goals.
• Ethical Partnerships: Aligning with trustworthy professionals to safeguard investments.

David Greene commends Christopher for his transparency and perseverance, emphasizing that such stories, though harrowing, are invaluable for educating the real estate community about the potential pitfalls and the strength required to overcome them.

"If you're listening to this right now and you feel like you're going through this like it does get better. I promise."
—Christopher Lane [43:39]

Listeners are encouraged to reflect on Christopher's experiences, drawing lessons on managing adversity, selecting reliable partners, and maintaining emotional fortitude in the high-stakes world of real estate investing.

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Notable Quotes:

• "It just feels like one after the other, man."
  —Christopher Lane [21:22]

• "The apple doesn't fall far from the tree."
  —Christopher Lane [31:02]

• "Never let it lose your faith in God, but you can lose faith in the framework with which you've looked at the world through."
  —David Green [34:45]

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Final Thoughts

This episode not only sheds light on the darker side of real estate investing but also offers a narrative of hope and redemption. Christopher Lane's story is a testament to the resilience required to navigate and survive the inevitable challenges in real estate, making it an essential listen for anyone vested in the industry.

Transcript

[David Green]

Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no BS and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you too. So if you want to build wealth through real estate or you just love learning about it, you found your home. Welcome everybody, to the David Green Show, Real Talk Real Estate. We are continuing with our series of deals gone terrible that most other podcasts aren't going to talk about. But this is a very real part of real estate investing. Part of the pun. Nobody wants to come on a podcast and talk about an l they took or a disaster they encountered and so nobody hears about it. But I have a brave guest today. I'm joined by Christopher Lane, who did have a deal that went bad, just like I've had and just like every other investor has had that they're not talking about. And he's different because he is going to talk about it. So, Chris, welcome to the show.

[Christopher Lane]

Thank you. I'm happy to be here.

[David Green]

Yeah. Now, fun fact. I believe that your wife's family lives close to me in Walnut Creek, California. I'm heading out there today for a real estate meetup when we get done recording.

[Christopher Lane]

Oh, that's awesome. Yeah. My wife was born and raised in San Francisco and they moved out to the East Bay after they had all their kids.

[David Green]

Sweet, man. I'm glad to hear that you got some family up this way. Maybe I'll bump into them at some point. I'd say if I go work out at a gym in the East Bay 24 for our fitness or something, I probably have a 70 to 80% chance of some bigger pockets fan recognizing me while I'm working out and coming to say hi.

[Christopher Lane]

I can imagine that. Yeah. I'm still waiting for you to get on the mats with me.

[David Green]

Oh, God. Let's just say you've tapped me before we even get on the mats. Unless you want to give me a private lesson or something. I might be down for that.

[Christopher Lane]

Oh, man, I'm super new. I just, I love the adversity.

[David Green]

Yeah. Where are you living now and where are you training?

[Christopher Lane]

Right now I live in Beverly, Massachusetts and I train at Gracie Baja Peabody.

[David Green]

Oh, sweet. Do I know the instructor there by chance?

[Christopher Lane]

Professor Pato. Also Professor Mario is one of the co owners, but he works, he runs the school in Portland, Maine.

[David Green]

Gotcha. Okay. Not familiar with them, but we still may end up having some. Some people in common. Let's hear about this deal that you've got.

[Christopher Lane]

Sure.

[David Green]

Tell me about when you first found it and how it was supposed to look when you were analyzing it and bought it.

[Christopher Lane]

So I first found this on Redfin. I had already made a relationship with a really good realtor in the Detroit area. He's an Air Force veteran, someone really trustworthy, knows the area. He was born and raised there. This property that I was looking at is on Ferguson Street. It's a duplex. And I was able to get it for $70,000 at the time. It's all I could afford for a down payment to be able to put towards that and if the rents would have justified the mortgage from just one of the units. So I ended up going through and purchasing it in November of 2021. And ever since then there have been a litany of problems from people stealing the mechanicals to squatters. Somebody actually used the first floor unit to house six pit bulls. We had to get those removed. And quite a few damages and a lot of cleaning. Just the cost of tuition.

[David Green]

All right, so what were the numbers of this deal that you were looking at buying?

[Christopher Lane]

So the asking price was $70,000. I was able to put down 25%. I locked in at a six and a quarter percent interest rate. My mortgage payment was about 600 and some odd dollars. Each unit on Rentometer was going for between 850 and 950. Each unit was a two bed, one bath with a shared basement with laundry.

[David Green]

Okay, and what was the purchase price you were looking at? What do you think the ARV was?

[Christopher Lane]

The purchase price was $70,000 and I thought the ARV was about 80 to 85 based on some comps and comparisons.

[David Green]

Okay, so this was obviously a cash flow deal that you were looking at because it had a high cash on cash return.

[Christopher Lane]

Yes, exactly. That was the intent for sure.

[David Green]

All right, in my framework, I've got a new book that's going to be coming out about the 10 ways you make money in real estate. I refer to what you're talking about as natur. Cash flow, like the cash flow you get when you first buy a property. Did you have any value add component to this thing? Was there a plan to improve it and make it perform better?

[Christopher Lane]

Yeah, actually both of the units were painted hardwood floors. They had pretty rundown kitchens, very old appliances, old windows. And these were some of the things that I had saved up some capital to be able to reinvest and boost the revenue, make it a little bit of a nicer place and try to provide a good place for someone to live.

[David Green]

Okay, so you go in, you pay 70,000. Does it appraise for 70 or does it appraise for the 85?

[Christopher Lane]

I believe it appraised for 79.

[David Green]

Okay, so you walked into a little bit of equity. That's about 10 grand. But still, when it's only a $70,000 house, that's like probably 12% equity. It's a good number.

[Christopher Lane]

Yeah. Aim small, Ms. Small was my strategy going in just because I didn't have a lot of money to be able to throw at a house. Quarter million or more.

[David Green]

Okay, so you buy it. It's a cash flow play. What was your experience like once you got it?

[Christopher Lane]

Once I got it, it sat vacant until I found a suitable property manager. They struggled to find anybody to rent either of the units. And during that time it was vacant. It was actually burglarized. The mechanicals were stolen out of the basement, all the appliances were stolen, and I had to replace all those just to get it back to where it was and rentable. Eventually they did get it rented to somebody who turned out wasn't even living there. And that was the person that was using the bottom unit to store all their pit bulls. Yeah.

[David Green]

So that was one of the things that I teach is you could change anything about a property other than the location. Do you feel like this was not the best location?

[Christopher Lane]

One of the bigger podcast podcasts, someone that was interviewed said the grass is always greener over the septic tank, and that couldn't be more true. I thought it would be a cash flowing deal. I walked in with equity. There's a lot of people in that market that are looking for solid housing, so I thought it would be a lot easier. But yeah, looking back, I would my next acquisitions after that. We're still in Detroit because the price is low, but I worked with my realtor, I paid a little bit more, and I found much nicer neighborhoods and I haven't had as bad of issues.

[David Green]

All right, so let's get back to this deal. How did you find the property manager that you ended up finding to try to find tenants to put in there?

[Christopher Lane]

I found them through the Bigger Pockets forum, actually. They owned a company in the area. They reached out to some of the surrounding cities and they appeared like they had some systems in place that were able to deal with the issues of the local area.

[David Green]

Okay. And it took them a while to find a tenant. You said and during that time, stuff was stolen and things went wrong.

[Christopher Lane]

Yeah, unfortunately, it was broken into and all the mechanicals were stolen. That cost about $12,000 after all was said and done for cleaning and window repair, as well as door locks and new mechanicals.

[David Green]

All right, so this is the first set of adversity. It sounds like. It sounds like it was a relatively smooth escrow. You found a property manager pretty quick.

[Christopher Lane]

Yeah, that was pretty smoot smooth. I closed inside of, I think, 24 days. It was pretty quick. Very happy with the process.

[David Green]

Now, what are you feeling when you're like, holy cow, someone just broke in and stole stuff out of my house?

[Christopher Lane]

First of all, I was worried that this would be something that would ruin my journey in real estate. It would tap me out financially. It would tap me out emotionally. But I found a way to make it work. And I think the resilience in facing L after L with this property has been difficult, but I think it's part of the journey.

[David Green]

All right, so the stuff is stolen. You have to go replace it. Who's the contractor that's going to go do this work? And how'd you find them?

[Christopher Lane]

So I had the property manager find a contractor to do this. They supervised the project, and they got everything repaired, cleaned, and replaced.

[David Green]

Property manager helped you out with them. Were you pretty happy with their services in this originally?

[Christopher Lane]

I was until I shopped around a little bit after the fact, after I'd already agreed on a price with them, and I realized it was significantly higher than most of the local vendors around the area, especially if I had managed the project myself.

[David Green]

Gotcha. Okay, so the plot thickens a little bit. All right, so how long did it take before you got tenants in this property?

[Christopher Lane]

I believe it took between four and six months. I can't remember exactly, but it was a significant amount of time. Yeah.

[David Green]

Okay, so that's. Yeah, that's not a small period of time at all. Four to six months, trying to get tenants in there. What happened when you. And how many units are you trying to rent out total?

[Christopher Lane]

This was two. It was a duplex. Both units were rent ready at this point.

[David Green]

I was told, there we go. So upper unit and a lower unit. What were the rents when you finally got people in there?

[Christopher Lane]

The rent when I finally got somebody in the upper unit was eight and fifty dollars a month.

[David Green]

All right, and then you took a while before you got someone in the lower unit?

[Christopher Lane]

Yeah, quite a long time. A year and a half.

[David Green]

So what happened once you finally got somebody in that upper unit? Geez, that's so long. That sucks.

[Christopher Lane]

Yeah. Once we finally got somebody in the upper unit, things were going well. They were paying their rent on time. I was paying a reasonable water bill for that area. Wasn't any red flags initially. My property manager went by just to do a six month inspection and they found that nobody was living in there. There was no furniture. But upon walking up the stairs, they heard six pit bulls in the bottom floor, barking and scratching and biting and walking and trying to get out.

[David Green]

Okay, so you thought you had a tenant and you had someone that rented your house to keep their pit bull?

[Christopher Lane]

Yes, there were six of them, I'm told.

[David Green]

And what were they doing with these pit bulls?

[Christopher Lane]

Unfortunately, obviously they weren't taking good care of them, which kind of hurts my heart. I'm a dog lover, but one can only speculate. I don't know, but they certainly weren't.

[David Green]

What do you think? You think it was like a dog breeding operation? Were they fighting dogs and they just need a place to keep them? You think that they were selling to other people or they literally was like someone that couldn't keep dogs in their own house, so they found a cheap duplex to rent to keep their dogs in and someone went by to feed them.

[Christopher Lane]

The way I see it is if they were fighting dogs, they would have fought each other quite a bit. So I feel like they were probably more tailored towards breeding. They're pit bulls. I feel like a lot of people want those. They could have made quite a bit of money from that.

[David Green]

Okay, so what did you do when you found six pit bulls inside your unit, nobody living in it?

[Christopher Lane]

I really didn't know what to do. I reached out to my realtor, reached out to my property manager, reached out to one of my mentors, and I just said, what would you guys do? The property manager had already called animal control and gotten them removed. We evicted the renters that weren't really even there, but we nullified the contract due to breach of contract and it was over pretty quickly. But that brought me back to square one, where I have a duplex with nobody living in it. And I have a lot more repairs and cleaning that I need to do.

[David Green]

Now I want to ask about that. How much did it cost to get that place cleaned up and the dog smell removed and the damage fixed.

[Christopher Lane]

So the repairs from the dogs was about 6,500, and the cleaner for both the top and the bottom was about $1,000, $500 per unit.

[David Green]

Okay. And I'm assuming the tenant gave you none of that Money that just comes right out of your reserves.

[Christopher Lane]

That came out of the reserves as well as the security deposit that they did.

[David Green]

But I don't think your deposit was in close to 6500 on a property was like, what, 1500 or two grand or so?

[Christopher Lane]

No. So it was the first month plus 500. That was their policy with the property management company at the time. So it was 1350.

[David Green]

Okay, yeah. So that's not covering your 6500. Let's see, you go into this thing thinking you gained $10,000 of equity. You put about, what, $10,000 into getting it ready to occupy. Then it costs about seven grand to replace the mechanicals that are stolen. So you feel like you're 17 in the hole. Add another five grand or so onto that for this issue with the dog. So you're about 22 grand in the hole, and you've still got two vacant units in the same property that took months before you could get someone to rent it out at all. What are you thinking?

[Christopher Lane]

At this point, I have a really good opportunity to either double down or cut my losses and find something else. But the thought of working from 9am to 5pm every day and not getting to see my kids is scarier than anything that's happened to me on the real estate journey so far.

[David Green]

Okay, so are you having thoughts of doubt? Are you wondering why you did this? Are you wishing you could get out of it? Have you thought about selling the house? What's your thought process here?

[Christopher Lane]

So I was. I thought I was crazy. I was certainly doubting my decisions. My wife thought I was just farting away money in the wind as a hobby because this would just be something that, you know, I would chalk up to an experience that never turned into anything beneficial. My family thought I was crazy. My mentor told me that it takes time, but you're learning valuable lessons. But I'd probably think about starting over. And it was just a lot of. Just chaos, mentally and emotionally, you know, and it was. It was pretty low, man. I was really close to just walking away from everything. And to be honest, I did list that house for sale to try to get out of it. But that brought a whole other bunch of problems. The offers wanted new windows, they wanted new flooring. They wanted all kinds of repairs to be made that I just didn't have the money for. At that point.

[David Green]

When you bought this property, had you ever thought this could happen? Had you heard stories of real estate investors dealing with this? Were you thinking, you're the only person that's Ever had something go this bad.

[Christopher Lane]

I naturally, I knew that there was a certain amount of risk that I would incur by doing this, especially in Detroit. Now, at the time, my risk appetite was much more than it is now. I was handsomely employed with the military, and I was able to really come up with the capital I needed to make these initial investments to be able to see some revenue in return. It was just quite a journey. For sure. Yeah.

[David Green]

All right, so you're blindsided.

[Christopher Lane]

Question.

[David Green]

Sorry. This is a tough thing, right? You're dealing with a property that you bought. It goes bad. You didn't expect it to go bad. You're probably blaming yourself, thinking you're a bad investor. You're probably struggling with thoughts of, like, doubt. And am I really meant for this? All the people that I hear on the other podcast are doing great. I'd have to imagine that's what you're feeling.

[Christopher Lane]

It was nothing but doubt, worry, fear, and frankly, questioning whether or not everything I had learned up to this point was being done and implemented correctly by my processes and my decisions.

[David Green]

And so you're going to blame yourself. And with my experience, I'm hearing this story, and I'm like, you planted a tree in bad soil. You just bought in a bad location. You didn't recognize it. All the fruit that tree produces is going to be corrupted. And every issue you're talking about is a symptom of buying in the wrong location, which a new investor. It's super easy to do that. But I'm sure you're not looking at it that way. You're thinking, there's something wrong with you. And I just wanted to highlight that these emotions that you're going through, so many people listening are thinking, I thought I was the only one. I thought it was just me. I thought I was the one that sucked. I thought everybody else was good. But as a real estate broker, as a person that sits in my position, I see this literally every single day, all the time, and nobody wants to come out and talk about it. And here's what's crazy. This deal gets even worse. So you are told you need to put appliances into the downstairs unit in order to get that thing rented out, correct?

[Christopher Lane]

Yes. Yes. Because at the time, I was focusing on just one single unit, which was the downstairs unit because I couldn't afford to refit both units. So we focused on the bottom unit.

[David Green]

Okay. So you need to put new appliances, but the fear is they're going to go steal those two. Because if you have a property that's vacant, it invites theft, like you've already had with the mechanicals that got stolen out of the bottom unit. So you order these and the property manager tells you, we're going to keep them in storage so that they're not stolen. But you want these to be in the photos that are going to be advertising for rent, correct?

[Christopher Lane]

Yeah. I figured it would probably be a little bit more prudent to show a fully outfitted kitchen with a refrigerator, a stove, things like that would probably attract more inquiries and people wanting to come and view the apartment.

[David Green]

Okay, so what happen happens when you pay for these appliances and they don't get put in the unit.

[Christopher Lane]

Yeah. So for about two, two weeks to a month, I was told that these appliances were all in storage. They had gotten used appliances to save me a little bit of money. I paid to be able to acquire them in the first place. At the very beginning of this conversation, and it had been two weeks, I started asking, hey, can we get some pictures with the appliances in the property? I'll happily pay for the, you know, moving them there, taking the photos, and then moving them out back to storage. They said they don't recommend that. And then it was, well, we can't find somebody that's available today or this week. And then I insisted that they do that. And then it came to, we actually didn't buy them yet. We have the money. We know what we want to buy. We just haven't done that. And we don't think you should until you have somebody with a signed lease.

[David Green]

Yeah. Oh, this. I have been in a situation like this myself, and it's not good. All right, so they're telling you, we have the money, don't worry, we're going to buy them when we get a signed lease, which sounds logical. You want to see the invoices for what they spent the money on or you want them to send the money back, Is that right?

[Christopher Lane]

Yeah. Originally they had told me that they had purchased them. So it was at that point I was like, let me see the invoice. I want to see what you guys are using this money on. I had to make a very big contribution to them to do it. And I wanted to meet. I wanted to supervise and make sure that my money was being spent wisely. And after about a week of it not getting produced, that's when I insisted that they be put in, calling their bluff. I don't know if you guys really have them. And that's when they told me that we have the money, but we haven't. We Know what we're going to get? We just won't yet until we have a lease.

[David Green]

All right, so that's not cool. Did you ask for them to send the money back until they actually were going to be purchased?

[Christopher Lane]

No, I asked them to purchase the appliances and I told them that I would take ownership if they got stolen, but I would like them purchased, I would like them installed, and I would like new marketing photos to be published online by the end of the week.

[David Green]

All right, so what was their response when you told them very clearly, very directly, here's what I want.

[Christopher Lane]

They said, if you're comfortable with that, we'll do that.

[David Green]

Okay. And what happened?

[Christopher Lane]

Got done. Didn't hear from them after that.

[David Green]

So they ghosted you?

[Christopher Lane]

Yeah, I was ghosted pretty bad too. I. Via email, text. And I tried calling their office a couple of times, too, and didn't even get their secretary.

[David Green]

Okay, so now you sent these people money. They have the right to lease your property. You have a contract with them, and they're not spending your money like they're supposed to be. And I understand that the story gets a little more nefarious. What did you find out that the money you had given them had been spent for?

[Christopher Lane]

So I have a business advisor who has investment properties and they worked with this particular property manager and that they advise but also personally experience that this company will take money from you, use it for a different property for a different owner that they are in arrears with. And then once someone else gives them money to do some kind of repair or purchase or whatever, then they'll be able to use it. They're one step behind or two steps behind just about every one of their owners.

[David Green]

All right, so they're robbing Peter to pay. Paul, you're in a bit of a property management Ponzi scheme right now, as you're paying them money and they're using that money to the repairs of other properties that they're managing because those people gave them money and they don't have that money anymore either.

[Christopher Lane]

It was mind boggling that anybody, first of all, would do that and still somehow be able to attract clients if that's their standard operating procedures.

[David Green]

All right, so what do you do? I can't trust these people anymore. I got to cut ties.

[Christopher Lane]

Yeah, I gave them the 30 day notice to release them from their management duties. It was difficult for me. I'm not really a confrontational person. I have a fiduciary responsibility to my family that, hey, this is our money that we're going to be using for something that's hopefully going to be beneficial for our family. I want it to be done. When I just leveled with them, I'm like, look, I don't trust you guys. I don't see any return at all. In fact, I'm in the hole at this point well over $20,000 because of your lack of management. I need to go. So I left. And this is actually something I completely forgot to tell you in the email that I wrote you is that while I was switching property managers, somebody had stolen and taken screenshots of the picture of the listing listing and posted it. So that way they had the Zillow and Redfin and Apartments.com address under them. So when I did finally change property managers, I couldn't even list that property for rent because somebody else had already claimed it as they were the owner.

[David Green]

Okay. I had the scam happen to me too. So if I understand you correctly, somebody took the pictures that were being advertised, listed it for rent, fictitiously collected rent from someone that thought they were paying to move into that property, and they move someone into your house even though they had no lease agreement and you were never getting the rent for it?

[Christopher Lane]

Yeah, that's correct. Thankfully, nobody had ever moved in. But this scammer had collected application fees, had even collected a. Had also collected a security deposit, I'm told as well by the investigators.

[David Green]

Okay, this is just getting better. You're getting kicked in the balls every way you turn around. Like, what's going through mind when you're at this stage of the process?

[Christopher Lane]

At this point, I am. I just. It's really hard to verbalize how terrible I felt. My wife at this point is pregnant and we're about to have our first kid. Like, daycare is not cheap. She's going to be out of work for who knows how many months. It was at this point, like I had a. I. I was teetering on medical grade depression and borderline insanity. Like to the point where I'm like, I don't even care anymore. Just here, fix it. I can't deal with this right now.

[David Green]

You got to be just checking out mentally. Like, the amount of anxiety that's going to create a lot of pain, that's going to put you in the amount of doubt you're going to feel about yourself and your ability to make smart decisions. And maybe even more than anything, Chris, the lack of control that you feel at this point that you can't turn this thing around.

[Christopher Lane]

You're right. I have been taken advantage of. I've Been lied to. It was a very bleak outlook. I remember logging on the computer and just getting halfway through an email before I realized I was just staring off into the distance, not even reading, because it was just bad news after bad news, bill after bill. And I'm just right. Like, this is supposed to be worth it. Somewhere along the line, maybe I'll get there.

[David Green]

Well, that's what you're being told by all of the people you hear talking about it.

[Christopher Lane]

Yeah, it's.

[David Green]

And it can relate to you, man. Yeah, I know exactly what those feelings are like. And when you, especially as a man but anybody isn't going to this feeling, feel like you don't have control over your own destiny, that you're being betrayed by people, that nobody cares, that there's no one you can reach out to for help. You'd have to try to sell the property to get up underneath it. Then that's locking in all these losses that you've already had. So part of you wants to fight to try to make some of that money back. If you're like, I'll just hold it for a long time because your mind's going to tell you stuff like that because it wants to get you out of that pain, I got to have some kind of hope. There's got to be a bright light somewhere. If I wait long enough, maybe it'll appreciate and I'll get some of that money back. Well, you can't collect any rent on it. And now the person that's supposed to be your advocate, your property management company is literally stealing from you, and then they ghost you. Another person that's taking advantage of this is like, mentally, this can be so debilitating. And you still got to go to work every day, make a living doing your responsibilities. Normally, it's.

[Christopher Lane]

To say that I was distracted at work would be an understatement.

[David Green]

And probably at the house, too. Probably with your kids, probably in your relationship, you don't feel like the best version of yourself showing up for your family. You're going to feel like, I can't do this now. I'm stressed here. I don't want to dump all my problems on them. But I'm definitely not feeling like super dad right now. I feel like I'm just crawled in the house from getting kicked over and over.

[Christopher Lane]

Yeah. Yeah. There are days that I felt like I got put into a burlap sack or a barrel and thrown off Niagara Falls. It was terrible. It's just one after the other, man.

[David Green]

I.

[Christopher Lane]

It just. I felt like a Punching bag. Like a human punching bag every single day.

[David Green]

Okay. So you're in the freaking depths of despair here with this property. That's an anchor that's just pulling you underneath. And you got rid of the property management company that was stealing from you, basically, what's your next step?

[Christopher Lane]

So that's when I ended up finding a new property manager. This property manager had a pretty good reputation. They're also a national company, so they have, I don't know, 15 to 20 different cities in many different states, coast to coast. So my assumption and my thought process was, you can't build something that big by being as bad as my last property manager. So I decided to contract them to represent me.

[David Green]

All right, and how did that relationship start off?

[Christopher Lane]

Actually, really good. I was assigned an individual property manager. I don't want to say like a concierge service, but it was really good. Me and this person had a very good rapport. He's very responsive. Personally did monthly walkthroughs at the beginning. And just really attentive to my needs, my desires. I gave my expectations, and they were taking it seriously. I always try to be reasonable. I asked them, hey, this is what I've gone through in the past. These are my expectations going forward. Is that reasonable, or am I the one who's wrong here? And it was told, that is perfectly reasonable. That's what we give to everybody else. You just probably had a bad property management company before, but you're with us now, so we'll write the ship and get on our merry way.

[David Green]

All right. And they find you a tenant that pays 900 bucks. Is that for the upper unit or the lower?

[Christopher Lane]

That was for the lower unit.

[David Green]

Okay, now did that go? Was the tenant making their payments? Are you feeling like, hey, we may be right at the ship here?

[Christopher Lane]

At the time, it felt really good. It was finally getting a win. I wasn't able to pay the mortgage because all that money was going to backed debt from the previous property manager. But I was optimistic for the first time in a while, and then that turned sour, too.

[David Green]

How did that go sour?

[Christopher Lane]

There's always something, I guess. They ended up stopped paying their rent and they had to be evicted, if I remember correctly. And that only took probably three months for that to happen. But that was at the height of COVID It was just the trend. Everybody just stopped paying rent, and it was hard to get an eviction. And they ended up staying for, I think, another three months before we finally got the sheriff's involved. The property manager was basically saying, hey, we can't really help. Checkmate, bro. Like, it's not really much we can do, you know, And I made it pretty clear I can't. That's not an acceptable answer. Like, you guys must have lawyers. You must have resources. Why not do cash for keys? There are options out there. I just think you're not being creative enough now.

[David Green]

Who's telling you that?

[Christopher Lane]

The property managers, basically, that there's really not much that we can do right now. It's the middle of COVID It's incredibly difficult to get evictions, and if you can, they are backlogged for quite some time. It was just. Yeah, it was just a nightmare. Yeah. More of the same, right? Just a different flavor. Yep.

[David Green]

So you get another tenant in there, you get a brief glimpse of hope. You think maybe the pain is going to go away, and you stop the bleeding. Nope. Stitches come out, blood's gushing again everywhere. You're right back to the gory mess that this property has been. Now you take a HELOC on one of your other properties and pull out $100,000 to make some of the repairs you need to do on this one, hoping that might fix your problem and you buy a couple more properties, right?

[Christopher Lane]

Yeah. At the time, I was really blessed. I had quite a bit of equity at my house in Oceanside, California. I took out $100,000 on a home equity line of credit. I was able to make all the repairs that I needed to. I didn't go forward and do the additional repairs, the value add that I had planned on. I was starting to wise up at this point and realize that there might be more of the same and I'd need to have some capitals and capital in reserve. So I did just that. I did, however, use some of that money to go buy two other single family proper properties. Those are the ones in much nicer neighborhoods.

[David Green]

This guy that your tenant goes in, you have to evict them. The property manager companies, basically, hey, it's Covid. There's not a whole lot that we can do here. Turns out that this company ends up going through some maybe internal struggles. You could say you get bounced around from person to person. They probably didn't have a whole lot of solidarity or security within their internal ranks. Is that fair?

[Christopher Lane]

So unbeknownst to me, Detroit was one of their emerging markets, as they call it, where they were starting to grasp a foothold and become a good property manager in that area. After some of the issues that I had experienced with them and some issues that other Clients had experienced with them. They decided to my individual property manager, he ended up telling me, hey, we need you to pay for everything upfront or we can't do any more business with you. And I might lose my job because I'm not collecting from you appropriately. Part of their contract does say that any remaining balances will be subject to a 6% fee, which is fine because I'm optimistic with rose colored glasses and I think that's okay. I'll get somebody in there soon. It never happened, and he ended up getting terminated. I was assigned his boss because they considered me somebody who had multiple properties, multiple doors, and they had only been able to place one person in one unit that turned out to be evicted eventually. So they wanted to make sure that I was treated well. I worked with this person for a couple more months. Nothing happened. More of the same, just vacant units everywhere, to the point where I went on Facebook, Marketplace and Craigslist. I listed this myself. I used the photos from when I tried to sell it as the advertising photos for both units for rent. I found a person within two weeks and we had his background done. We checked his income, and this is all me, by the way. I say we because me and my wife work together on this. And he was a veteran. He was on fixed income. I have a soft spot for that. And he ended up moving in. And I told the company that I was working with at the time, hey, just treat him as an existing tenant. I want you to sign over the lease as if he is one of my tenants that was there. As if. And then just lease him over when you. As if you guys just took over the property. So they did. And to this day, that person is still there, hasn't missed a single payment, and has been very low maintenance.

[David Green]

So you find your own tenant with your own marketing photos. Two weeks in, you find someone that you like when it's been months of letting this company do it, as they continually reassure you over and over, give me more time. I'm working on it. It sounds like you had absolute snake oil salesmen that were just stringing you along. And you being a good person is trusting them, thinking they're the professionals. Give them time. Can definitely relate to this. There's a special place in hell for these people that continually lie to keep their own situation better, not understanding the pain they're causing someone else. You get that person in there, you tell their boss, I found my own tenant. I don't know what's so hard about this for you guys, but it's A better tenant than you've been able to find. It's a veteran that's gonna consistently pay rent. They that you've been talking to. Who knows, Maybe she wasn't doing a good job. Maybe she called them out and was like, you guys are a mess and you need to listen to me and change some of these things. But you're now second relationship with the property management company is in super turmoil. And I think there's a lesson we can pull from this that when you're buying in these crappy areas, it's not only the house is crappy and the tenants are crappy, but the people that you hire to assist you are often going to be just as dysfunctional. Was that your experience here?

[Christopher Lane]

Yeah. The apple doesn't fall far from the tree, right? Where there's bad properties, there's going to be bad property managers. Where there's bad property managers, they're going to find bad contractors. Where there's bad contractors, they're going to find bad subcontractors. And they won't supervise, they won't bill accurately. Usually it's going to be in their favor when they do bill, not necessarily yours. And it's just been that it's a whole ecosystem of just bad place to do business, it seems.

[David Green]

I think you hit the nail on the head. Like you're not going to have talented individuals that are in a positive place in life in areas where the tenants are causing headaches and people are stealing stuff and there's not a lot of meat on the bone because the rents aren't very high. Makes sense when you're on the outside looking in or when you're at the end with hindsight, looking back at how you got here. But when you're in the journey, which is what we are talking about today, you don't understand any of that. You're blaming yourself. You think you suck. It feels hopeless. The kind of thoughts you'll have are crazy. You could be thinking about just like ending it all. You could be thinking about ending it all from a financial standpoint, just, I don't want to do this anymore. Part of you just wants to, like, let it go to foreclosure, move, start a whole new thing. And then if anything happens at work, if anything happens with like your partner not happy that you didn't help with the dishes. It could just feel like the straw that broke the camel's back. So are you still just barely hanging on at this point?

[Christopher Lane]

I pride myself in resilience. I've been through a lot in my life served in the military, there's been a lot of shared suffering. And one of the things that I've learned is that you can take two different lenses with which you can look at life. It's either darkest before the dawn or it's always darkest before it's pitch black. And I choose the former. And I'm not going to say it wasn't hard every day to wake up, put my feet on the floor, get out of bed, go take a shower and come down to my email where I know I'm just going to see more bad news. More bills, Somebody broke in, somebody stole this, somebody hurt themselves. God forbid. Every day I was coming down here, it was like the opposite of Christmas morning. It was just bad.

[David Green]

Yeah, absolutely opposite. Christmas morning is a great way to put it. It is the like the dark version of Christmas morning where everything is terrible and you don't see any hope. So we're going to fast forward here in the interest of time because we could do this all day long. It just keeps getting worse. But this property management company keeps some of your money, doesn't pay it back, tries to come up with BS reasons to not pay you, probably because they don't have it. And this is how they run their business. They make up lies to justify keeping their clients money. They give you some peanuts to try to make you go away. You just say whatever. I don't want to fight with these guys. Squatters move into the property that they let in there. You have to get a third person to come in, evict that squatter. Is it, does it get stabilized with this third property manager?

[Christopher Lane]

Yes. So to this day I am with a property manager that is perfectly tailored for C and D class neighborhoods. They have systems in place for squatters. They have systems in place for evict. They have systems and they have ways to deal with contractors. They have layered approach to contractors where they have multiple that are not only on call but that have business contracts with them. So they are prioritized for their their owner's properties. And it's funny, this month over just short of three years, I am able to see my first disbursement this month of $102.84.

[David Green]

Sweetest $102.84 any human being has ever seen in their life.

[Christopher Lane]

It, it only cost me about $200,000 to get it, but I'll take it.

[David Green]

Yes, that's exactly right. That needs to be like a check framed in your office right under the man arena quote from Teddy Roosevelt Yeah.

[Christopher Lane]

It'S funny you say that, because I actually took college class on Teddy Roosevelt, and the man in the arena is one of the most powerful speeches that I use to boast my optimism. I would rather be a loser than a guy who never tried. Hey, there it is. Yeah, that's awesome. Yeah, it's. Because you know what, the way I see it, it's life. Life with money is like life in jiu jitsu, or life in general. Right. You don't lose. You either win or you learn.

[David Green]

When you don't quit, that happens. But I really hope people can take some inspiration from this story because while yours is probably more intense than most people's, this is not uncommon. It is just uncommon to talk about it. Just like a great analogy would be if you looked at someone's Instagram and the type of angles and pictures that they're posting and you compared it to their camera roll is an actual accurate reflection of what their life is like. Not their Instagram, but YouTube shows, podcasts, social media gurus, they're showing you the Instagram reels. They're not showing you the truth. So I commend you from for coming on here. I like the quote that you sent me in this email. You said the only thing that kept me going is when you and Brandon interviewed a literal rocket scientist who said, escape velocity is reached out after about 95% of your fuel is used. I keep thinking of this and I've written it on my whiteboard in my office. I know when I get this down, it will be the most rewarding task I've accomplished in my life.

[Christopher Lane]

Yeah. As a task, it absolutely will be marrying my wife. That takes the cake. But as far as doing something for the family, this is it. This is it. I want to be around for my children and I want to be able to spend time with them. I don't want to have to slave away behind a desk staring at Excel sheets. And that's what I do it for.

[David Green]

Yeah. Now, a few key points to take away from. Because you finally got the thing, rented it stabilized. Is it cash flowing now?

[Christopher Lane]

Yes, I am just able to cover mortgage and insurance.

[David Green]

Okay. And you're probably happy with that right now because the nightmare is over.

[Christopher Lane]

I thank the Lord every day that I'm getting something.

[David Green]

You would have lost the property completely if not for the fact that you are working a full time job and you got paid a decent wage. You would not be getting paid a decent wage if you were not a person that pursued excellence, worked hard and conducted yourself. With integrity. These are values, these are virtues. And they saved your bacon because you went out there and you tried something new, which everyone should commend you for. I think everyone does, and they respect hearing what you've been through. But you would have been killed by that if you had quit your job and said, I got a little bit of cash flow. I'm good. It was the commitment to excellence and hard work and doing your job in this world that kept you alive. You didn't quit when it got hard, which would have left a horrible taste in your mouth, and you wouldn't have figured out some things and you had some faith in God that you were going to get through this. Now, your journey in your relationship with God, how you see him, how he sees you. I know we often throw around the phrase relationship with God very casually. It means different things to different people. How did that change? Going through this experience, I never questioned.

[Christopher Lane]

God's love for me. I never questioned my relationship with him. I often questioned whether or not this was the path that he wanted me to go down in life because I know he has a plan for me. Yeah, exactly. You know, you pray for patience. You meet somebody that's super annoying, that you have to learn to be patient. You pray for strength, and you get nothing but adversity, and it makes you stronger. And be careful what you pray for, because you get it. But at the end of the day, this is one of the things that I have on my millionaire checklist, and I have one of these for when I do get cash flowing enough that I can help others, is I want to buy my local church or at least rent out a space for them that's big enough for 100 members. That's been on my heart for a long time. So the church that I came from, they're in a strip mall right now, because that was the only place that they could find that was big enough. And the church that I go to now is a plant from their church. And I personally believe that I'm called to assist in the success of that church. I don't know what it looks like. That's the tough part, Right. I hope I can. And if you want to hear God laugh, tell him your plans, right? I don't know, but. But I know that this is something that I'm interested in. I know that it's something I'm determined to be successful at. And it's something that I think when I do figure it out, I'll be able to bless the church and other people and people that are less fortunate beyond what I could have ever imagined. And I pray that happens sooner rather than later. But you know, just like real estate, your relationship with God is a journey. There is no finish line.

[David Green]

It is your everyday actions something that stands out. About your story here as we wrap this thing up. When you start Jiu Jitsu, let's use an analogy of that. At least when I did, and I imagine everyone else is probably very similar, you have ways of solving problems based on the way you look at the world. And fighting is a problem. It's a pretty high stakes problem. When I was in law enforcement, you would get into conflict with people. And I learned pretty early on from experience and from the, the more experienced officer officers. You don't want to let this turn into a long, slow, dragged out affair where they could get your gun, they could get some of the weapons off of your belt, their friends could come and get involved. If there's going to be some kind of conflict, you want it to end very quickly, as suddenly as possible. And that actually minimizes injury to the suspect and yourself. So if they show, they're going to resist. And I am super hesitant with how I handle that. I'm almost inviting conversation conflict from them. And then it turns into a very long, dangerous thing versus if there's a very quick takedown, if it's a forceful thing that ends the conflict right away, it's actually better for everyone psychologically. It has to change. You, you bring that attitude to Jiu Jitsu and you find out very quickly it does not work, you get incredibly tired. That energy conservation is actually a huge part of this, which is to this day, it's still the hardest part for me. My instructors that are good at this will literally say you gotta learn how to only flex the muscle that you're using right now, as opposed to tensing your entire body. But my habits, everything I've gone through in life, have developed this way of approaching these things where intensity will solve this problem. It doesn't in Jiu Jitsu. So you're almost burning away all of the way that you used to look at problems in life and replacing it with a more efficient system that works better. This experience that you had reminds me of that you had a way of looking at finances, at investing, at what to expect out of buying something, at how to approach a new thing at a business, at how you're trusting people that are going to work for you. And you got absolutely betrayed and demolished by people that you trusted. That will change the way you look at People. Now, I can tell you haven't let it make you bitter, but I do think it's made you wiser. I think you, like, you just recognize crappy areas, draw crappy managers, which draw crappy contractors. You now have wisdom to recognize something else in life where those things could apply. And in our walk with God, oftentimes when he lets me suffer like he let you suffer here, because I have some of these situations going on myself, when I don't lose faith in him and his love for me, it forces me to lose faith in the way I used to look at the world. If I had a hunky dory version of people, if I was easily lied to, if I trusted people too easily, that gets changed from this pain because pain screams at you. C.S. lewis once said, pain is like God's megaphone. He can get your attention. And he's only going to put those efforts towards the people who he's interested in changing the way they think because he has some other plan for them. You're not gonna. You're not gonna get instructions in Jiu Jitsu if you're not being bred for physical conflict. If you're training to be a rocket scientist, you're gonna go through different kinds of training. So I'm excited to see what God has for you and for everyone who's listening, hearing your story here, who's going through something similar and asking, why is this happening? Why is this person cheating on me? Why is my kid going through this situation? Why is my financial situation so hard? Why am I having this health difficulty? Whatever it is, don't let it lose your faith in God, but you can lose faith in the framework with which you've looked at the world through. You can let that burn down and let something else grow in its place. Any final words before I let you get out of here, Chris?

[Christopher Lane]

Yeah. So it's funny, right? I'm by no means. I'm a blue belt with two stripes, so I'm not that good at Jiu Jitsu. But something that Jiu Jitsu has taught me about applicability in life is you need to learn to be comfortable being uncomfortable. That's the only way that you can grow. And in Jiu Jitsu, if you're not, if you're still getting blood to your head, if you're still able to breathe, and if your joint isn't just about to snap out of its socket, you're just uncomfortable, you are not in danger. So how I've applied that to real estate is can I still pay my mortgage? Can I still pay tuition? Can I still put food on the table and gas in our tanks? If I can do all those, whatever else I have left I am going to use to make sure that this real estate journey of mine is successful.

[David Green]

Sweet Kris, if people want to follow you, where can they find out more about you?

[Christopher Lane]

I am on Instagram @Lano2007. That's L A N E O 2007 and I bum around in the BiggerPockets forums from time to time, generally just snooping and learning what I can. But I'm happy to respond and reach out. If you're listening to this right now and you feel like you're going through this like it does get better. I promise. Because every little victory that you find along the way is going to be magnified into the best day you'll have had all month. And it's really reinforcing. I thank God for that every day. I have never prayed as much as the two things that I've got in my life that have given me the most pain. One my wife and I having to go through IVF and second me watching flaming garbage trucks of $100 bills leave my bank account for all of these rental properties. Like it's just like that. That'll wake you up quick, but that's all I got.

[David Green]

Thanks for being here and thanks for sharing. If you would like to be featured on an episode of the David Green show, head over to davidgreen24.com Ask where you can submit your question or your story. And please do go send Chris a DM letting him know what you took from his story, that you appreciate him being here, and any follow up questions that you have. I'll catch you on the next episode of the David Green Show. Good stuff man. Thanks for listening to Real Talk Real Estate. If you would like to be featured on the podcast, I'd love to have you visit davidgreen24.com Ask and submit your question there. Also, please do me a huge favor and share the show with someone that you love that you think would benefit from his message and make sure you're subscribed to get notified for future episodes. If you want to reach out directly, you can also DM me on Instagram or social media and check out David Green 24 combination.