How To Buy A Property For $1 and Still Lose Money | Ep 89

James: In this episode, I'm gonna teach you how to lose money, even if you buy a property for $1 In the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing where we teach people or we equip people to invest wisely, hopefully, so they don't lose a dollar and then some, and so that they can build their wealth while improving housing, which we did accomplish that goal.

So that's good. And I totally like,

Jessi: yeah. Then you lost your train of that. Oh man. Okay. Wait, did you mean to say you're gonna teach people how to lose money?

James: Yes. I'm being sarcastic.

Jessi: Oh.

James: Or dry humor, I guess I didn't get it. I see. That's a thing. Don't worry, don't worry. I don't get stuff like that. Yeah.

So it's the Furlo Capital Real Estate podcast, right? Where we where we you equip people to invest wisely. Yes. In both property and people. Yeah. So that together we can build wealth while improving housing. Sure. Yeah. That's what we're doing. Anyways, that'll work. I'm James, my wife Jessi. I'm here and I feel like this is a good start to what was a bit of a dumpsters fire investment.

Jessi: Oh, okay. I see where you're, I see where you're, that's, that's

James: the meta side.

Jessi: I see where you're going here. See, sometimes I, this wasn't my intro, but. I can be vulnerable right now and let you know that I don't get jokes.

James: Mm.

Jessi: I I, I mean, I get dad jokes. I get really bad, like corny jokes. That's true. But if it's like dry humor or sarcasm, sometimes I'm just like, just tough.

Why would you do that? Yeah. And you're like, it's, I didn't like sarcastic. Yeah. So you have to explain it. Yeah. I, so I'm gonna explain this one.

James: Sorry. I'm talking about an investment where we lost money, which I don't want to talk about wah, but. I feel like I should, but it happens. Happens. It's important.

'cause some people would argue that now I'm a real investor because, oh, I finally lost money on a deal. So did you lose other people's money? No. Okay. I did

Jessi: not. So that makes me feel slightly better.

James: Yes. I just lost my own money.

Jessi: I mean, I. Even if you lost money, you would pay your investors back

James: Correct.

Jessi: What they put in and then Yes. Yes. Before you took any money yourself, so, correct.

James: Yes. And mostly 'cause I personally guarantee all my loans. Sure. So, yeah. So we bought this manufactured home Uhhuh in Lebanon. I,

Jessi: I remember it.

James: Yeah. For. $1. $1

Jessi: killer

James: deal. I remember I had to write a check. It was really weird.

Jessi: That is weird.

James: And for $1 it was for a dollar.

Jessi: Couldn't pay cash.

James: No. 'cause they wanna, they wanna record the transaction. Right. You need to somehow have a paper trail. So a check is how you do it.

Jessi: All right.

James: And so it bought, it can't lose investment. Right. Sure. Because you

Jessi: only spent a dollar. Yeah. I mean, the

James: game plan was to spend some money fixing it up mm-hmm.

And then resell it for more than what we fixed it up for. Sure. And we had one month of of the lot fee paid for. So. The manufacture home is in a park. Mm-hmm. And you pay rent to have the, to have it there. It's kind of the idea how much is rent? I will look it up. What episode? We talked about this originally.

It's like,

Jessi: I mean, it's somewhere in the neighborhood of

James: like $500. Nope. $1,200.

Jessi: What? Okay.

James: Yeah. Wow. Now you can, you can start, get a, for what happened here, it's

Jessi: like

James: $500. That's, that's what it used. Like, that's what rents used to be. Oh, for lots. That is not the case anymore. Wow. Like 500 is like a really cheap list.

$1,200

Jessi: for. Monthly. Monthly rent?

James: Yes. Yeah. Yeah. Okay.

Jessi: So you bought this place for a dollar Uhhuh, you had to keep paying the $1,200 Yep. Every month fee. Yep. For rent or whatever. Mm-hmm. And you put some money into fixing it up. Yes. So you're gonna gimme, gimme like a grand total here. I, oh, like, oh, of course.

I can see where this is leading. Of

James: course. So I was looking at the numbers recently. I know I gotta figure out what my, what my total, total is, but. Essentially we spent like $25,000. Mm-hmm. Maybe a little bit more than that. Okay. Fixing it up. And we did all sorts of stuff. We repainted the inside, we redid the flooring, we redid a bathroom.

Mm. Because the, the tub just needed it. And it's a non-standard side tub. Yep. We ended up doing a bunch of trimming of the landscape around we cleaned the outside. We were, I know which one this is a, you like

Jessi: take a bush out.

James: Yeah, I remember that. That was one of the things. Okay. We were removed a ramp.

We had a, there was a plumbing issue that we, that we resolved, that I actually crawled into the house and resolved. And those were the big things. Oh. Yeah, we painted, that was a big one. Oh. And we put all new appliances mm-hmm. In there because the old ones were old. Yeah. Yeah. And so the idea was like, fix it up.

In a month because we had that one month free lot rent. Mm-hmm. Free Sure. And then get it on the market and sell it. Yeah. And our initial underwriting was that we could sell this thing for $45,000. So it seems this's a great deal, right? Assuming someone buys it. Yes. Assuming someone buys it, it's great.

Well, first problem that ran into was the repairs took a lot longer than we thought.

Jessi: Oh.

James: Yes. So you, oh, and by the way, 'cause it was a dollar, I was, we were just using our own money for this 'cause Sure. That would be really weird to, to reach out to investors. Well, you gimme a dollar. We could have asked an investor for 25 grand, but we had the cash at the time, so.

Mm-hmm. It was fine. Yeah. So so that was what we did. But because it was a smaller job, the guy who was doing the crew did not prioritize this building. Oh. And he didn't even like, oversee it at all. He just like, just go do it. And, and so it took a lot longer. This was, oh, when did we close on it? I think it was like October, November timeframe.

Mm-hmm. And the place was not ready until March. So

Jessi: four months

James: of

Jessi: Yeah. So you then owed three months. Yeah. Of lot fees. We paid on top of three months. Yeah. Yeah. And on fixes.

James: Yep. Yep. And then and that was just get

Jessi: it to the point to list it.

James: Correct. And I'm trying to think. Yeah, that was just to get to the point, to list it.

And then we listed it for 45. I think we had like one person who was interested and ultimately said no. Interesting. So then it sat and it sat and it sat, and then we decided that interestingly my partner Lawrence, he doesn't have the right license for putting a manufactured home on MLS, and so they, they took it off.

Oh. And so we were like, oh, like, which we didn't fully know right away. That was what happened. Like That's interesting. Yeah. Super weird. We had it on Facebook, had it on Craigslist, that kind of stuff. Mm-hmm. We ended up lowering the price and then we lowered the price and then we lowered the price. Ah, yeah.

So we ended up selling it for $20,000. After it sitting for multiple months. Right. The final total, we lost 14 grand after everything was done.

Jessi: Lame.

James: It was. Which is not super lame.

Jessi: A huge amount, but still

James: wonder. I don't know. Sure. That's a lot of money in my book.

Jessi: I mean, it's not a million dollars, but

James: True.

Jessi: It's lame.

James: But yeah. What started out with a like can't lose Yeah. With all these numbers. So what happened, right?

Jessi: Yeah, well it's two part, like, I wanna know like what happened. To get to that spot, but also like is there anything you would do differently?

James: Yeah, the, the big thing was to start a rv. We totally like, we misjudged that and so interesting.

The other, the other big problem was that it was a 55 plus community, so we actually had people who were interested.

Jessi: Oh, but they didn't, didn't qualify.

James: They didn't qualify and the lot rent was significant. That was the big thing that kept stopping people. We actually had it under contract twice and they were just like, no, this lot rents.

Can't do it. Yeah. We had it under contract at, I think we had it under contract of like 40,000 and then we had it again at like 35,000 I think. Yeah.

Jessi: I mean, which kind of makes sense 'cause it's like at that price you would think your, your mortgage payment would be a lot less.

James: Oh, the other thing is we were offering creative financing as well and interesting.

Which is what got us. 'cause we finally said at 25 and we're like, okay, I wanna lose a little bit of money, but whatever. Mm-hmm. But we're like creative financing. And then someone else came in and said, we'll give you 20 grand cash. I'm like, dang. So 'cause I was, our, our, initially the thought was like, Hey, what if we offer it for 45 mm-hmm.

And we can do like 20,000 down. Mm-hmm. And then we'll take a note for the rest. Yeah. And we're like, that'd be great. Yeah. We'll actually make more money over time. Yeah. Just no one went for it. Because the lot rent was so big, they kept doing the math and they're like, dude, this is gonna be like a $2,000 a month payment.

Jessi: Mm-hmm.

James: I'm just like, go buy a house. Which I'm like, well, good luck buying a house. But

Jessi: yeah.

James: For that amount down and interest rates didn't help either. Just being higher, which we knew that walking into it, but

Jessi: bomber, yeah.

James: Not great. So, but now whenever someone asks me like, Hey, tell me about your worst deal.

Jessi: Oh, I'm

James: like, this is it where I thought I bought something. That was a no-brainer. Yeah, it was

Jessi: a steal.

James: And you were gonna

Jessi: flip it quick and,

James: and it wasn't, we thought about just renting it out. Oh. Was another one. We listed it for rent. But again, like, it would have to be someone who was older. Yeah. And they just, well, and you

Jessi: like the rent is gonna have to be more than the $1,200.

Well, that was our fee. Well,

James: in that area, rents are more than that. They're like for, for a two bed, two bath. Mm-hmm. Essentially a house. Yeah. Like, yeah. No, you could rent it for like, almost like 18 grand. It would've been, which we would've been like, awesome, let's make a a deal. But they

Jessi: would've had to hit the age parameters.

It would've had to

James: have been 55 and above. And there's a slight wrinkle of like, am I even allowed to own it as someone who's under 55? Like it was really weird. Hmm. We were like, let's do a, let's do a lease to own. Yeah. We're like, let's do that. And no one you, yeah.

Jessi: You were willing to be very creative and

James: Yeah.

'cause it was outta the box every single month. I was writing this $1,200 check. I was just like, oh, this is so frustrating. Because I was like, I don't care. Like if someone's paying that, I'll hold onto it for a whole bunch of years. Cool. Whatever. Right?

Jessi: Well, yeah. 'cause if they're making that payment and you're making a even a little bit of profit, that's better than.

Right. Nothing. Yeah. So, yeah. Where did, where do you think you got off on the A RV? You know, did you, I'm guessing you used comparisons of like stuff that was selling Yeah. In that park. Yeah. So strange.

James: Yeah. I think the issue is finding the buyers. That was like our, huh. That was the big thing. So

Jessi: how could you find buyers better?

James: Yeah. It's, I mean, I don't, which honestly, it's a lot of people who are moving out of, from out of the area, moving in are a lot of the, the best buyers. Yeah. That was something we never solved. Interesting. Which I think we were like, oh, we'll just list it and it'll be great. It'll get sold. Just see everything else.

Yeah. And, and there, there was a big slowdown that happened in transaction volume. As well around that springtime, like you could just, you could see it in the data where you're like, oh, something like, something's going on here. Yeah. And so we got caught in the middle of that as well. Bummer. Yeah.

Jessi: Which sometimes you don't know that that's gonna come up.

Right. And that's part of the bed. Sometimes you can, you can, that's the trends that are coming up, but. Other times it's like, well that was weird.

James: Yeah. Yeah. So that okay, there you go. So that happened,

Jessi: you spent a dollar, but you lost 14,000.

James: Yeah. Yeah. Which we had profits from another flip mm-hmm. That we put into it.

Yeah. And so that was essentially, we were just like, well, just a wash undid, half of that. Flip profit. Yeah. You learned though. It happens. I did learn. Yeah. So we got into the future. We were like, okay, whatever we think is the ARV for a manufactured home. Like we essentially like, well, we're gonna cut it in half, which is probably not which, which ultimately has made us so conservative.

No one's wanted to sell to us. Sure. Because when we set at that number Yeah. It doesn't make sense. Like that means our by number is like a quarter.

Jessi: Yeah.

James: Most people aren't that desperate, which is, I'm like, cool. I don't wanna buy it. This was a really bad experience.

Jessi: Which, I mean, if another deal came up for a dollar, you now would adjust your ARV to be lower and maybe it would work out.

Yes.

James: Which actually, there was another one in that park that came out for a dollar that we passed on, and part of it was we now had all the experience of doing the repairs. Sure. And we were like, that one was like. Significant. There was a lot more work that would've to happen. And so we were like, man, this is like at least a 40, $50,000 job.

Jessi: Yeah.

James: And we already knew that it wasn't gonna get, that it wasn't gonna

Jessi: sell for that.

James: Even in our inflated thought of what it was, so we were like, nah, not worth it.

Jessi: Yeah.

James: Ended up selling it to another guy who's doing all the work himself. So it's just a material cost and Sure. Hopefully it's a better, it's got a better yard.

It actually has a private, is he gonna

Jessi: keep it or is he gonna flip it? No, he's gonna,

James: he's gonna flip it. Mm. But it's got actually a private yard area, which is nice. It's a better property overall. I think it's slightly bigger. Maybe, maybe not interesting, but yeah, man, we lost it. Super, super lame, but hasn't stopped me from looking at other places.

Fine. I just, we're getting another place under contract. It's a six unit place. I haven't even told you about it yet. But that's one where we are buying it for like half the market value. Which is, which is good, but it needs

Jessi: What's the, there's a lot of work. There's a quote, the die of a lifetime comes once a week.

James: Yes. You just keep looking at do de ous. Yeah, that's the. Figured, just keep taking shots. But man, it

Jessi: stinks. It is. Yeah. It's so,

James: Yeah, I think those are the rules. I've learned a lot more conservative underwriting for those. I don't even really want 'em. So that's essentially my way of saying no. And those holding costs, man, they, they can add up.

Yeah. Real quick. And you wanna make sure you got your contractors on board too? Yeah. Okay.

Jessi: That, that was like the last thought as you said that I was like. I feel like maybe you, you could have done something different with the contractor to light a fire under 'em and just be like, here's the timeline.

Like you gotta be done by this point.

James: Yeah. We've been good about setting budgets Sure. With our contractors, but yeah, and it's, you kind of get, you get three choices, right? Mm-hmm. You when you're talking with the contractor, you can either talk about the quality of the work, the cost of the work, or the time of the work.

And it's kind of like pick two. Yeah. Is usually how that works. And so we've gone for, we want this quality. And we want this budget. Mm-hmm. Like this is what we want done for this amount. And so we've usually given up on, on the time. Yeah. And honestly, we usually, what we say is like, Hey, we wanna make this as nice as possible for this amount of money.

Sure. What can we do? And we all kinda lock in on that.

Jessi: Well, and if you don't have holding costs, then

James: honestly my real goal is to eventually hire someone. To, to maybe not do all of the projects, but to constantly keep it moving forward. Mm-hmm. There were weeks where there was just nobody there because there were another stuff, and it was super frustrating to drive by and be like, that's super dude.

We're not making any progress. Yeah. And so, and I mean, the thinker, it's not hard like painting lane flooring, it's, it's easy. Yeah. The, the bathroom was legitimately a different thing. Yeah. But but yeah, that's, that's a change that eventually I wanna make. And I think for this other project we're gonna work on that is a change that we will make.

And that's okay. So, yeah. Anyways, there you go. That's how to, that's how to lose $14,000 by investing in a property for a dollar, which I know it wasn't just a dollar. We put 25 grand into it, plus all the holding costs, which obviously is how we end up losing money. Yeah. But yeah, man, that's my, those are my lessons learned.

It stinks. I don't wanna dwell a lot on anymore. So with that, I'm gonna call it. Moving on. Moving on. It's all good, I guess. So yeah, thanks for listening. Hopefully you feel for me. It happens, man. I hate it. But it's all good. What is the what is it, Moneyball Billy Bean, he talks about, like he's talking to the guys who goes.

I hate losing. I hate losing more than I like winning. And there's a difference. I'm like, dude, it's true. Hundred percent. Like I'm just, I've felt that. So that's, that's how I feel about this investment. But anyways, there it is. If you wanna learn more about me and take a chance don't know. Good pitch, feel, pitch.

Like this is,

Jessi: yeah. This, this episode isn't really selling yet. It's

James: all good. Not a manufactured home. It's all good. We got other stuff. Those ARVs are a lot more accurate things move a lot better for that one. You can check us out at furlo.com and just learn more about the other positive projects that we are working on.

Yes, thanks for listening. Have a great day.