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

Dave:
What’s up everyone? It’s Dave. Welcome to this week’s deep dish. Every Wednesday we drill down on a specific topic that we think is gonna help all of you from rookies to seasoned investors, more tactically on the day-to-day of your real estate investing portfolio. And on today’s deep dish, we have Craig Curelop. Craig’s a real estate investor who achieved his dream of financial independence through house hacking. Now he leads a team of agents. He also worked full-time at BiggerPockets. We used to be on the same team, so I know Craig really well and know that on his way to success, he has some pretty epic failure stories. And unlike a lot of people in this industry, Craig is very willing to talk about his failures and setbacks so that we all get to learn from it. In today’s episode, Craig’s gonna tell us why. If a deal looks too good to be true or is really cheap compared to everything around it, it might be too good to be true. He’ll also tell us why he now always visits an area before investing, and how he learned the hard way to vet every single person he works with on a deal. At the end, we’re also gonna do something fun. Craig’s going to give some advice to a BP community member who’s dealing with a difficult property manager situation of her own. So let’s bring on Craig. Craig, welcome back to the BiggerPockets podcast. Thanks for joining us today,

Craig:
Dave. Thanks so much for, for having me on, man. It’s an honor. Love coming on and love chatting with you and, and the BP team.

Dave:
Yeah, this is a lot of fun. For those of you who don’t know, Craig has been on the show a couple times. He’s written a book for BiggerPockets, but he also used to be a BiggerPockets employee. We worked together in Denver back in, I don’t know, 20 18, 20 19. It’s been a while, but, uh, Craig was one of the OG BiggerPockets employees, so it’s great to see you. But for those of our audience who haven’t been introduced to you yet, Craig, can you just give us a brief intro?

Craig:
Yeah. So, uh, my name is Craig Curelop, The Fi guy on Instagram. And, um, my whole thing in the way I kind of got into real estate investing was through house hacking. And so I had house hacked, you know, six times over the course of six years if you include my now wife’s house hacking endeavors. It’s been eight times over the course of six years, and that really allowed us to achieve what most people like to call financial independence. And, you know, since then we, we’ve stopped house hacking. It was never the goal to house hack forever, but just to get you to the place of where you can achieve financial independence and then do bigger and better things. So that’s, that’s me in 30 seconds.

Dave:
Great. Well, thank you. Tell us a little bit about the early years of your investing. What year did you get started? And you’d mentioned you did a house hack. Why was that the right approach for you in the beginning?

Craig:
Yeah, so I got started in June of 2017, is when I bought my first one. And it was just painstakingly obvious, the best way to invest because I could do so with a low percent down. So I got a duplex with a three and a half percent down FHA loan, and I bought a $385,000 property for less than $20,000. I was able to live for free. I was, it was, you know, a mile and a half from work BiggerPockets at the time, <laugh>. And it was just, it was a no brainer to get started. And you look at the numbers that return on investment numbers and they’re like a hundred, 200, 300% year over year. It’s nuts. And, and is a big factor of that is ’cause you’re putting such a little amount down.

Dave:
So the first deal sounds like went pretty well. It sounds like you sold that. Did another house hack, did that deal also go well?

Craig:
Yep. So the second one is when we started to get a little bit more creative with things, uh, but ’cause prices were going up and actually interest rates at the time were kind of high. It was at like 5.12, 5%. I don’t know if you guys remember that slight increase in 2018.

Speaker 3:
Yeah.

Craig:
You know, that was, it was the end of the world almost, but <laugh>, so I, I bought that property, uh, the next one for $343,000. And this one was a five bed, two bath home in the suburbs of Denver in a, in a town called Thornton. And I, it didn’t make sense to me because Thornton, where I, my property that I bought was about 10, 15 minutes away from downtown Denver. But I could, but in that whole area, I could still buy a property for $343,000. If you went 10 minutes south of downtown Denver, you are talking, you know, double that in price easy.

Dave:
Oh, easily. Yeah, for sure.

Craig:
Which just didn’t add up to me as to why, like why is north so much, and it’s not like Thornton was super sketchy. Maybe slightly more sketchy, but not, not like you’re gonna get killed.

Dave:
No. Yeah.

Craig:
And so that’s, so I decided to kind of focus my investing on the north side of Denver. Lived in one room this time. I actually, you know, had some privacy and all that and rented out the other rooms and I was cash flowing, you know, probably like 1500 bucks a month or something like that.

Dave:
Wow. Okay. Well first two deals went well, but we’re here to talk about mistakes. So we have to, uh, we let you brag a little bit about your first couple <laugh>. So at what point in your portfolio building did you make your first big mistake? Would you say,

Craig:
Okay, yeah, this is gonna be a fun episode. So there’s two big mistakes that two, two, like disaster literally could be a movie type deals that I’ve, that I’ve done.

Dave:
Oh, I didn’t know it was that dramatic. I’m excited.

Craig:
Well, uh, maybe it just feels more dramatic. ’cause was me and I was in it, but, um, maybe to other people not as much. So I started getting confident after deal number two because as you just learned it, they went well. And at the time, I think David Greene’s book on Outta State investing, long Distance Real Estate investing or whatever it’s called, it came out and I read that book and I was like, okay, maybe what I need to do is house hack in Denver, buy the more expensive properties, and then once a year or twice a year start buying these other properties in Buring outside of Denver and cheaper markets. And so I was talking to Scott, Scott Trench, and he seemed to like the market of Jacksonville. And so I just went to Jacksonville and I went and I found a real estate agent, found a contractor, found a property manager, did all the things step by step from David Gru’s book. And that turned out to be a complete disaster.

Dave:
Okay. Well, let’s just start with just the, the thinking about house hacking in Denver and then buying something a little bit cheaper. Were you just trying to look for ways to make your, stretch your money a little bit further?

Craig:
Yeah. Well, so there’s a limit, right? With house hacking. The downside of that is you can only do it once a year. Part of the loan stipulation that allows you to purchase the property for three to 5% down is that you need to live there for one year. And so you can’t keep buying these properties after three or four months because the bank will say, well, you bought this property four months ago and you have to live there for a year. Now you’re buying the second property and you need to live there within 60 days so it doesn’t add up, right? So you have to wait pretty much at least 10 months before closing on your next property. And so I was kind of getting bored after the rooms were filled and all that, you know, in the first month. And I was like, okay, well I wanna like keep this, keep this puppy rolling.

Craig:
So I, you know, I looked at a bunch of different markets, right? And ultimately I was in that place of, I just can’t decide. And that’s when I talked to Scott and he was just like, you know, Jacksonville seems like a really good market. And I was like, all right, sweet. I’m just gonna pick Jacksonville. This was before I think BiggerPockets, uh, agent binder and all that stuff came out. Mm-Hmm. <affirmative>. So I literally just like went on the forums and tried to find some real estate agents in Jacksonville, and I found the wrong one. Okay. Who also gave me the wrong contractor who gave me the wrong property manager who gave, you know, all this stuff. Just totally

Dave:
Oh, okay.

Craig:
Yeah. Blew up.

Dave:
All right. So I wanna get into the details, but let’s actually start with the end a little bit. What, what was the, the big loss here? Like, tell us, did you take a big financial loss? Was it just a pain in the butt? What actually happened?

Craig:
All of the above. So, so <laugh>, I bought the property in 2018. I didn’t sell it until over two years later in 2020, in the middle of a pandemic, I brought in my partner who was a cousin of who was a cousin, still is a cousin. Um, and he lost $30,000 and I lost $30,000 on this deal. And this was not an expensive deal. So $30,000 in the grand scheme of things was quite a lot of money given the, the amount of the deal. And yeah, then a whole lot of time, a whole lot of energy, whole lot of like mental power just gone, gone away.

Dave:
So the end result is you, you and your partner each lost $30,000 and spent it sounds like two years of your life dealing with this. So let’s just try and break down where, where this went wrong and all the different steps where maybe you can share with us some wisdom, things that you’ve learned to help our audience, uh, avoid some of the mistakes that you made. So, Jacksonville, from what I understand, was a good market at the time. Was that a mistake or did you feel like Jacksonville was a good place to invest?

Craig:
No, nothing against Jacksonville whatsoever. However, there are areas of Jacksonville that are pretty bad and pretty sketchy. Mm-Hmm. <affirmative> and other areas that are probably a little bit better to invest in. And I didn’t know I didn’t go there. I I just, you know, totally just was, was dependent on my realtor. And she had a property manager that she worked with who had a, who owned a property in kind of a sketchy area. And I didn’t realize it was sketchy.

Speaker 3:
Mm-Hmm.

Craig:
<affirmative>. And so I went ahead and bought that property because it was a really, really good price.

Dave:
How

Craig:
Much? Like $35,000 or something like that.

Dave:
Oh. So now, now the losing of 60 grand total put in context is, is pretty dramatic.

Craig:
That’s what I’m saying. Yeah. So $35,000 was, was the purchase price of this thing. And the guy bought it like two years before for $8,000. And so this thing was absolutely in a state of disrepair. Like it was unlivable for sure. The roof, there was hardly a roof on it. It was, it was horrible. And, but it was so cheap and I wanted a big project.

Speaker 3:
Mm-Hmm.

Craig:
<affirmative>. And so a lesson learned here is that just because a property is cheap does not mean it is a good deal. And I had heard that before Brandon said it when he was a host of BiggerPockets podcast. Mm-Hmm. Like, he would say that quite a bit, but sometimes you gotta touch a fire to make sure it’s hot, you know, like <laugh>. Yes. You just can’t learn from other people sometimes. So, so yeah. So that was kind of the

Dave:
Start. Yeah, I, I totally understand that. And that is true. Real estate’s generally a pretty efficient market. Like things are usually cheap for a reason. You can get a deal maybe by a couple percentage points, but if, if something is extremely cheap and way cheaper than everything else in the area, there’s probably a pretty good reason for that. Uh, and I do wanna just call out that, you know, I, I’m laughing and we’re having a good time here. Craig has obviously landed on his feet, and Craig and I have known each other for a long time. So I, I don’t wanna make it seem like this is funny or fun for Craig, it, but I’ve known in retrospect that luckily you are, uh, you, you’ve, uh, done very well for yourself ever since. And that’s why you’re here sharing this story with us, with a very good nature of being very honest with us. So we appreciate that

Craig:
For sure.

Dave:
We gotta take a quick break, but just a reminder that if you’re finding Craig’s advice helpful, you may wanna check out the BiggerPockets forums. You can post questions about your own deals and get personalized advice and feedback, a community with more than 3 million members. So take your investing to the next level at biggerpockets.com/forums. Welcome back to the Deep Dish with Craig Curelop. So let me ask you, Craig, you know, interviewing an agent is a really important part of, of investing long distance. Did you just go with the first person that you met?

Craig:
I think so, yes. I went with the first person that I met, and it was because she was really quick to answer me on BiggerPockets. She was really thorough in answering all of my questions. We did have a phone call when things felt really well, and at the time, I didn’t realize this, but a big personality trait of me is just like, I just wanna go. I just wanna go, go, go, go, go. And sometimes I leave behind some of the details and some of the, the diligence needed. And so I, I’ve recognized that now. That’s a big thing I’ve learned in the last six years, but that was a big issue for me. Right. And so, seemed great. She had investment properties, she had property managers, she had contractors, she had everything we needed. I was like, oh, this, this woman seems awesome. Let’s go ahead.

Dave:
All right, cool. So just some lessons learned already from Craig is one did look into the market a little bit, but didn’t probably do enough research into the specific neighborhood that you were buying and meeting with an agent. And probably, you know, correct me if I’m wrong here, but not asking the right questions, or at least doing enough comparison shopping to be able to tell which agent that you should be going with. And maybe, uh, I dare say getting a little, I don’t know if greedy is the right word, but just over ambitious with seeing a property for 30 grand and just thinking that that’s a steal of a deal. So already three, three red flags with this deal, uh, at the point of purchase. What happens after you close on this thing?

Craig:
So we buy the property, obviously it, it, it’s cash, right? ’cause no lender’s gonna lend on that low of an amount. So we buy the property and work starts, and the guy goes over there, and I, and this is the guy that she recommended, the contractor was someone that used to work for a really well known company, started going off on his own. So, you know, his, his prices were, were, were pretty decent because he was kinda just starting out, but he had the experience of a, you know, of an experienced contractor. So I thought, I was like, oh, this is amazing. Let’s, let’s go forward with it. And I talked to that guy on the phone and he was well spoken, seemed, seemed pretty solid. And so he goes over there, starts doing some work, and, you know, he requires a 25% upfront payment. We had a contract and everything, and it said that, Hey, if you’re late by this much, you’re gonna have to overpay this much.

Dave:
So just to clarify, so if you, you basically put some provisions in there that said, Hey, contractor, if you don’t meet X deadline, you know there’s gonna be a penalty in the contract, which is a good idea to structure a contract that way. But based on the way this story is developing, I’m guessing there’s a but in, in what comes next, <laugh>.

Craig:
Yeah. So what I’m saying is like, I didn’t go into this like totally blindsided, right? Like I was listening to bigger box and I was trying to implement the things that, that you said, I just didn’t do it correctly. And so there’s definitely a, a piece of do the things and do them correctly, don’t just do the things to do the things. And so I had this contract in place, I don’t know if it was enforceable by any lawyer whatsoever. Um, but I had it in place. And so I gave this guy the 25%, and he started to work and he went ahead and, and he did some stuff or whatever, but I essentially had to paid him 75% of the contract. And I had somebody go there just to check on the property for me. And everything was just not done correctly. Then he started not showing up.

Speaker 3:
Mm.

Craig:
And then, um, you know, I would call him and call him and call him and call him and call him and call him and all these things just, he just, everything. Like the contractor was just totally going away. And he had 75% of 75% of the total, the total rehab. And it was probably 10% done, maybe. And so a big lesson is do not, you know, sometimes you do have to give that 25% upfront, especially if you’re new and you don’t, you don’t have like a rep reputation with the contractor. Mm-Hmm. <affirmative>. But before you give that next 25%, you need to have a third party go out there, get videos and confirm that the work has actually been done. And so that was a massive mistake. So, so that was the contractor that was like the, the general contractor. Then there was the roofer.

Dave:
Craig, can I ask you something about the contractor first? Yeah. So, because I think this is a really important lesson, you put down 25%, which, like you said, sometimes you just, that’s just part of the game. You know, that that’s how, how this works a lot of the time. So you didn’t go, you did you have a call with him at least to say like, Hey, we’re at this milestone, 25%, you’re supposed to have X, y, and z done. And he, he said, yes. And you basically took him at his word that it was completed in the proper

Craig:
Fashion. Yeah, I did. Yep. And he took, and he took pictures and sent ’em to me. And, you know, the pictures looked, looked good, they looked fine, right. But that’s hard, you know, but you can easily kind of manufacture pictures. I don’t think he photoshopped them, but he just, you know, didn’t have anything in reference. So for example, the, the cabinets, for example, were like towards the top of the ceiling. So like, even you Dave, you’re like, what, six feet tall or something? Like you would I wish <laugh> No, I dunno. Let’s say you’re six feet tall. Like you, like you and I, you or I for sure would have to stand on our tippy toes to like get into the cabinet. Yeah. Okay. And we’re not giants, but we’re also not short people by any means. Right? No, but that when there’s no reference, right. He didn’t show the ceiling.

Dave:
Yeah, you could, there’s no way to

Craig:
Know. Yeah. So, uh, that was just one of the many things that he totally, that totally got messed up.

Dave:
Yeah. And there’s so many, like, functional things you don’t know either. You know, if the, if the drawers don’t open correctly, or I’ve been in a house where I like pulled out the dishwasher a little bit after a contractor and they just like had failed to put subflooring in. There’s just like, sitting on the joists to the basement. You know, there’s just like, just extreme examples. But these things happen where, you know, not always intentional, but a lot of times people are cutting corners, especially if they know that you’re not gonna go and, and do this sort of diligent checklist. So Okay. That was what would happen with contractor. You were talking earlier, sorry about the roofer, and I cut you off. What happened there?

Craig:
Yeah, so the roofer was actually, was actually good, right? But I, I thought the roof was gonna be like 10 grand. Turns out there was a bunch of dry rot in the rafters. There was a termite infestation. Um, I mean, like, you name it, the whole thing was falling apart. So this $10,000 roof turned into a $30,000 roof. Ooh. And so now you can see where money starts getting lost.

Dave:
So the roof costs the same amount as the house.

Craig:
Yes. <laugh>, when you put it that way. I, I, I, I

Dave:
Never thought of that like that

Craig:
Until you just mentioned it right now, but

Dave:
Yeah. Yeah. That’s, that’s an expensive roof.

Craig:
Yeah. So, uh, because they had to rebuild, uh, a lot of the wood right. To, to pass inspection. And then there was, you know, the termite remediation due, which was a couple grand, but I mean, still something, you know, couple grand on a $30,000 house is still like 10% of the purchase price of the house. Right. It’s a lot. And so, uh, all these things kind of started adding up. So finally, you know, we’re probably about, by the time, uh, the contractor and I have had some choice words with each other, we’re, we’re at like probably a year, a little over a year into the project. And it’s still not even anywhere close to being done. So we’re sitting probably like early to mid 2019 and like, no, nowhere to be done. And so I ended up calling, you know, I’m in touch with the real estate agent who, who referred me. And I was just like, what the heck? Like, you, you, you referred me to this person. Like, she’s horrible. And then I, I started calling other people that this real estate agent had worked with. And this, uh, another guy who I, like I was in touch with for a long time, the same exact thing happened.

Speaker 3:
Mm.

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

Dave:
Oh man.

Craig:
Yeah.

Dave:
Wow. So that’s tough. So how, how far are you into this now? Like how, over what time period did this take place?

Craig:
So, yeah, so like mid, mid 2019 or so is when I just kind of had enough with this contractor and I just, I fired him. I said, okay, you’re, you’re gonna have to go. And I, I just took my losses and I, I hired this other guy. And so this isn’t, this definitely isn’t the end of the story. So this other guy comes in and this guy’s awesome. And I can tell you the whole story about this guy still friends and still love this guy to, to this day. He comes in and he’s like, okay, this is a massive mess. I will take care of this for you. And I don’t know why to this day that he did it. Like, he just totally took me under his wing and, and helped me out.

Dave:
Wow.

Craig:
Oh, my, my mom actually found him. Sorry, I’m, I’m like remembering these details. My mom, I was so stressed at the time. Right. Um, my mom was like, I’m gonna just gonna call contractors and until I find one that feels right, I’m gonna find you the right one. And so my mom found this contractor for me

Dave:
That is very sweet of your mom to help you

Craig:
Like that. My mom is the best for sure. She’s always my support when I’m in the worst, in the worst situations. And so, so so guy comes in and he starts work, right? He’s, he’s got his tools in all that. And then someone, like a week after this guy starts, breaks into the house, oh, steals all his tools, no, steals all of the copper and stuff with the ac no breaks the custom window. So now he’s scared.

Dave:
Wait, wait. Okay. This is all right. I see why you’re calling this a movie. Now, I was not expecting this. I thought that your mom, finding the great contractor is like the end of this story. But I wanna point out, ’cause people are listening to this. You went someone and you did the little air quotes there. Does that mean you think it was the original contractor?

Craig:
Yeah.

Dave:
Oh man. I mean,

Craig:
It’s not, it’s not proven in any way,

Dave:
But No, but this is where the drama in the movie comes from. We don’t know, but we suspect.

Craig:
We suspect. Yeah. It’s like a mystery <laugh>, uh, and, uh, the, the new contractor’s name, I’m gonna say his name ’cause he’s awesome. Yeah. His name is Ali.

Dave:
Yeah.

Craig:
And he, he saw someone like in the neighbor’s house, in a truck, like sitting there in their car waiting for like a weirdly long time the day before, like, after, after the incident happened. And he was trying to recall if there was anything suspicious. And so, and he’s, and he’s described the truck and it was, you know, I mean, again, I don’t have like a evidence, video evidence of it, but if it smells like a duck of quacks, like a duck, it’s a duck. Yeah. Okay. Wow. Kind of thing. So yeah, he comes in, takes all his stuff, and he destroys the cabinets, he destroys the counters. Like he, he, everything gets like all messed up. And so Ali, the new guy is now scared.

Speaker 3:
Mm-Hmm. <affirmative>,

Craig:
Right? Because he’s in like a, a, a unfamiliar neighborhood to him. Someone just broke and did some violent things to the home. Like what if he was in there? Right?

Dave:
Yeah. And it sounds like the, the person was being deliberately destructive. It wasn’t like they were stealing something in particular. It feels spiteful the way you’re describing it.

Craig:
Right? Exactly. So then that was the last, uh, we’ve heard of this guy, uh, of the old contractor. And then Ali comes in and he kind of just like, he fixes pretty much everything. Um, now there were still extensive amounts of expenses and stuff that, that tallied up to this, that almost like those details, which probably on any other deal would really stand out. I, I honestly can’t remember them ’cause they were so small in the grand scheme of things. But pretty much everything that’s gone wrong with this property, um, had gone wrong with it to the point of, by the time it was all finished up, drywall was covered. Like, it, it looked almost like a finished product. We went to turn on the lights for the photos, and half the lights didn’t work in the house. Oh my god. <laugh>. And so I was just like, I thought we were there.

Craig:
Right? And so we start doing some, you know, we bring an electrician out, we start doing, and he just like can’t figure out the problem. And so what seemed to have happened is that the old contractor and some of the drywall that he put on, he pierced one of the wires in the wall with a drywall nail. Oh God. And essentially it destroyed the entire circuit that that wire was on. And so they had to take back down the drywall. They had to basically rerun that whole circuit. And it was just like a, you know, an additional expense. So now that problem is fixed, right? So at this time, like when, by the time it’s all done, we’re talking like February, 2020.

Dave:
Okay. Wow.

Craig:
Right? You guys can kind of see where this, see where this timing is headed, right? And so it’s time now to basically finalize all the permits that were pulled, um, you know, close all this stuff out and well, covid happens, right? Like, I can’t catch a break. And so the whole government was closed. And so getting someone out there to do the inspection, to finalize all the permits and all that kind of stuff, it was, it was insanely hard to get somebody out there. And finally like they did. But the crazy thing is, is that like the inspector and the contractor sometimes, like the inspector would say, yeah, I’m gonna show up at 8:00 AM Then he just wouldn’t show up. And so the contractor’s sitting there all day waiting for the inspector and then he doesn’t show.

Dave:
Oh my

Craig:
God. Right? And so, like, this is just continuously happening probably for like three, four months at a time. And I was kinda like, okay, you know what? We’re just gonna put this thing on the market and we’re gonna go under contract. I’m just gonna pray that these permits are just closed by the time we actually close

Dave:
E extreme, uh, circumstances call for, uh, some extreme actions. And did that at least work out for you?

Craig:
So I, I, I interviewed another realtor and she was really good. We went on our contract in like two or three weeks. And this buyer, thankfully needed a couple months to close. So holy crap. A break, right? And, uh, yeah, we ended up selling that house in, I think it was like August of 2020. So it was like pretty much two years on the money.

Speaker 3:
Yeah.

Craig:
And obviously lots of stress. And I was very happy to be done with that deal.

Dave:
Yeah. I I can imagine, man. Well, I, I thank you for sharing all of this with us. ’cause you know, a lot of people are unwilling to share horror stories like this. And I do see, I do see, uh, the, the potential for maybe the first BiggerPockets productions, <laugh>, BiggerPockets pictures, <laugh>, yeah. Bigger. Now we’re gonna have, uh, yeah, yeah. Um, but, uh, I, I wanna ask you a little bit about, you know, we’ve gone over some of the numbers. Obviously it didn’t go well, but I think the sort of emotional piece of this is something that gets glossed over because this must have just been miserable to just having it dragged out for so long. Did it ever make you want to quit real estate altogether? Or just give up? Or how, tell us like how you got through this elongated disaster.

Craig:
Uh, you know, I, like, I, no, it didn’t like, because I knew, I kept saying like, you gotta lose, like, everyone’s gotta lose money. It’s like the initiation dues, like Mm-Hmm. <affirmative>, any real, every real estate investor has probably lost money on at least one deal at some time. And, you know, I was just in over my head and I saw how successful my other properties were. I saw how successful other people were, and I was like, oh, if I did this better, this probably wouldn’t have happened. If I did this better, it wouldn’t have happened. I shouldn’t have got this deal in the first place. It was way, it was in way over my head. And, you know, it was definitely, it was a piece of humble pie for sure.

Speaker 3:
Mm-Hmm. <affirmative>.

Craig:
But, you know, some of the, the pros that came out of this, obviously, like the lessons learned, that’s the cliche answer. But the contractor that, that saved me, we became so close in that time period that he actually moved out to Denver, became my main contractor out in Denver. What he Yeah, he he met his, he, so the story continues, right? I’m telling you. Like it could be a movie. Oh, the ending of this is a happy ending. Yeah. He comes to Denver. He, he, he does this other big project with me and get this too. He finds a girl, he meets his wife, and now they’re happily married and he’s now house hacking. My god. He’s got three investment properties himself.

Dave:
Yes. Okay. Yes. <laugh>, I don’t know who we gotta get on BiggerPockets pictures. Yeah. Who’s playing you in this movie? Craig? Are you playing

Craig:
Yourself? I’ll play myself. Okay. <laugh>. I have no acting skills, but I don’t need to act ’cause it was me. Right. So <laugh>. Yeah.

Dave:
Yeah. It’s like a memoir. So you’re just reliving your, your horror situation. Yeah. Well, I’m glad to hear that. Obviously the lessons learned are valuable. You wish you could, uh, you know, do it less expensively, but that, that is a very cool story. All right. Time for a break, but we’ll be back in a minute. Thanks for sticking with us. Back to Craig. There’s this concept in business. You hear it a lot in tech. Uh, the idea of like failing fast. And I think that that’s what sort of stood out for me is like, and if you haven’t heard of this concept, it’s like everyone fails, mistakes always happen. That’s reality. The goal for anyone, real estate investor, any entrepreneur, is to fail quickly so that it’s not this long drawn out thing and recognizing that you’re in over your head or something’s gone wrong quickly so that you can hopefully minimize your losses. Were there any points in retrospect that you think you have just said, you know, this deal’s not working well and maybe you should have done something differently to sort of stop the bleeding a little bit more, if you will?

Craig:
There was a time in between contractors where I thought I would just sell the project. Half done.

Speaker 3:
Mm-Hmm. <affirmative>.

Craig:
And I think I got an offer for like 60 or 90,000 or so. I know that’s a big difference, but whatever that number was, it wasn’t enough. ’cause that was like, I still thought at that time that we’d make money.

Speaker 3:
Mm-Hmm.

Craig:
<affirmative>. And in hindsight, maybe I should have just gotten outta the deal. But because I was working with someone else’s money too, I really, really, really wanted to make sure they got a good return. But I ended up just digging myself a bigger hole. I think

Dave:
It’s one of the hardest things in investing, or really in entrepreneurship to do, is just to look at yourself in the mirror and be like, I messed up. You know, I made a mistake. Mm-Hmm. <affirmative>. And this isn’t gonna go well. And you learn to do that eventually. ’cause usually if you can, the sooner you could do that and, and have that reality check, the better. Otherwise, I don’t know if you play poker at all, but you know, you go on tilt, which is like the idea that you’re just like throwing good money after bad to try and make up for previous bad decisions. Uh, and obviously wanna avoid that. But, uh, it’s super, super hard to do. You are far from the first person I’ve heard who have, who have made those types of decisions as you grow a portfolio.

Craig:
Yeah. The poker analogy is really good. Like, if you know someone’s got a better hand than you on the flop, even if you’ve already put in half your chips, just, it’s better than losing more than half your chips, right? Like Yeah, totally.

Dave:
All right, well, we gotta hear more. Happy ending. Craig. Tell us what’s happened since this deal. What has your real estate investing career looked like in the, I guess, four years since this deal was outta your life?

Craig:
Yeah. So funny enough, I ran into another really bad deal, which could be, which could be a, which could be another episode almost. Is this

Dave:
Gonna be a recurring series for us? <laugh>?

Craig:
Yeah. A whole bunch of different other mistakes, uh, I made on this. So, you know, I went and I bought another house hack, and the house hack was really good. Uh, but my fourth house hack actually was not amazing. And again, it was because I, I just overlooked some stuff on the inspection report and honestly, like this could be a whole nother episode, so I’ll save it.

Dave:
It’s a sequel to the movie.

Craig:
Yeah. It’s a sequel to the movie. But Ali did, again, he moved to Denver to help me on this next project. And it was kinda like this joke that me and Ali have, like Ali just saves me on every situation. Um, but overall, right, we’ve built a, a pretty sizable portfolio. We’ve got probably five figures or so a month of, of passive income coming in, which is nice, um, in the millions of dollars of equity gained from the real estate over the last seven years. And not only that, but I became a, a real estate agent and investor-friendly real estate agent. Mm-Hmm. <affirmative> built a team of investor-friendly real estate agents. And so now I’m able to take all of the lessons that I’ve learned and make sure that our clients and the people that we’re helping aren’t going to fall into those same mistakes again. And I can’t tell you how many times, even on like a deal that I’m literally under contract on right now with a client where I’m, where he’s like, there’s some structural issues. And I was like, they need to fix it or we need to walk. There was a time where I was like, Mm-Hmm, <affirmative>, eh, it’s such a good deal. We’ll just figure it out. <laugh>. Right? Right. Yeah. But, but you can’t get lost in, in the big things that can happen. Like, we’re not invincible.

Speaker 3:
Mm-Hmm. <affirmative>.

Craig:
So, yeah. And so now again, so we, we’ve got this, we got, we’ve got a great team. We help, you know, hundreds of investors and house hackers every single year buy investment properties at this point now, there’s not much we haven’t seen in terms of rehab stuff to come up with, you know, tenant screening, all that kind of stuff. And so we’re really able to, um, you know, not only I can invest well myself, but I can also help others

Dave:
Too. Awesome. Well, thank you for, for sharing this Craig, and congratulations on bouncing back and all this success. Uh, I think this is a very common story. We just don’t hear about it as much. Before we get outta here though, Craig, I ran across a question in the BiggerPockets forums that I think you have some, uh, you might have some good insights on. So can I read you this question and get your opinion on it?

Craig:
Yeah, let’s do it.

Dave:
All right. So this comes from Alex, member of the BiggerPockets community. Uh, I’ll just read it and then ask you what you would do in her situation. So Alex says, I need help deciding what to do about the property manager of my out-of-State property. It’s a duplex in Tennessee. She’s owned it for five years and has never actually seen, it wasn’t in awesome shape when I bought it, but nothing major or urgent to fix. The original property manager was a local company, and then they were bought by a larger corporation. Oh, I’ve dealt with this. I’ve been telling my new PM for several years now that I was willing to put money into fixing things up. And the response was always, quote, we don’t really fix things until they’re broken and everything is fine. Alex then asked for an inspection report, but to be honest, she said, this place looks pretty gross at this point, and she’s wondering if she should a move on from the property manager and find someone who’s willing to take on a bit of a fixer upper B, keep the current PM for now. Hire someone myself to do all the work needed, then find a new pm or see is she just re overreacting and pm just leases the property, hold onto deposit and fix things when they’re broken. Is it too much to think that the PM would proactively tell me when the stairs are literally crumbling <laugh> and the gutter is falling off the side of the house? Well, the fact that I’m laughing tells you my opinion, but Craig, what would you recommend Alex do in this situation?

Craig:
Okay, there’s, there’s two, there’s two things that I would say here. Number one is a, a big mistake that a lot of people make is that they mistake their rental properties for the houses that they live in. And you have to know your demographic of who’s living in the house and the houses that they, they they expect to live in. And so don’t go ahead and just like, fix everything and over rehab everything just in case because you, because it could not matter. Like, um, however, you should go get an inspection report or you have somebody, you, you some boots on the ground person that’s not your property manager. Take a look at the property and go and see if there’s anything with the house that is going to, to, to create bigger issues down the road. Mm-Hmm, <affirmative>. So if there’s a gutter hanging off the house and there’s water dripping down the side of the house into your windows and into your foundation, that is a massive issue that needs to be addressed, right? Uh, if the elect, if there’s safety issues with the electrical or the plumbing and, and there could, like, their tenant could be in danger in one way or the other, like that needs to be addressed if the places messy or the cabinets are falling apart or whatever, like those things, if the, if they’re not complaining about it, who cares?

Dave:
Yeah.

Craig:
So that’s kind of how I would address the situation. And then you go and fix the things again that are, that are health and safety issues and that are gonna cause a much bigger problems with your home. And if your property manager still says no to doing those things, it probably means that they’re lazy and they don’t wanna coordinate a contractor to get out there and do it.

Dave:
Totally

Craig:
Fire ’em and find a new property manager. That’s better.

Dave:
Yeah. That, that’s my instinct is usually when you’re asking these questions, you already know the answer. Like, if you’re asking, should I fire this person? Like in your heart, you probably know that it’s time to move on. But I will just say, I, I think that there are different, there’s almost two different elements of managing a property, especially long distance. And I wrote about this a bit in my book, but I call it like operational management, which is what most people call property management, like leasing properties, you know, handling maintenance requests, you know, dealing with all just the basic stuff. But then there’s a whole other side of owning a property, which would be normally called asset management, which is how do you know, how do you put the property to its highest and best use? And to Craig’s point, that doesn’t mean overinvesting. It’s just like, how do you wanna, what’s the strategy for this property?

Dave:
And I’ve always found that very difficult to outsource. Uh, and I think it’s really difficult to train an, a property manager, especially long distance, to be like, here’s what I want out of this property, and I want you to be proactive in making that happen. For me, I’ve found in my experience, it’s better to, even if it’s long distance, to be the quote unquote asset manager yourself, does that mean going to the property once a year and saying, Hey, this property, it’s not really meeting what my expectations are. And then make clear the expectations to the property manager, what you want and what you’re trying to accomplish. And if they can do it, great. That’s a good partnership where you’re providing the strategy, they’re doing the tactics. But if they’re like, Hey, we don’t really do that, and that’s what you need, then you need to get rid of that person and find someone who can enact the strategy that you’re looking for. So that’s at least my advice. But it sounds sort of congruent with what you’re saying, Craig, but I, I thought this question would be appropriate. ’cause it wa it sounds like, as we all do, sometimes we kind of hang on too long with a contractor or partner that maybe we know isn’t the right fit.

Craig:
Yeah. I mean, you know, you know when it’s time. Right? And then the thing is too is that once a property manager or any contractor or vendor starts doing one thing wrong, you’re, you now you’ve got them under your magnifying glass and every little thing they do wrong, you just have no remorse for. And it just starts to build and build and build and build until finally you explode on something that like, almost doesn’t even matter.

Dave:
Right?

Craig:
And they’re just like, wait, what?

Dave:
Yeah. That’s so true.

Craig:
Yep.

Dave:
All right. Well, Craig, thank you so much for your advice and for being so honest and candid with your story. I, you know, I, I know you well and know that you, you’ve bounced back. So I think hopefully this was a, uh, a good place to share this story. And I’m sure our audience appreciates it because we do talk a lot of success stories around here, but these things are common. They do happen. Everyone takes their lumps, uh, as an investor and entrepreneur in your career, it’s just part of life. Uh, but learning from your mistakes, like we can do here today is super important. So we appreciate it, Craig. And, uh, if you wanna connect with Craig, we’ll of course put his profile for the BiggerPockets website below and his contact information in the show notes. Craig, thanks again man.

Craig:
Thanks for having me, man.