You Lost How Much???

The time has come!!

Real estate investors who have lost money need support. I'm hoping that this will be the place to get it. Or, at the very least, whine about your experience and feel better.

I'll tell you a little about my situation now. In future posts, you'll get the whole story. What I really want is to hear about you. So, I'll go first and then it's your turn.

My husband and I entered the real estate investment market at the end of 2000 (we are not agents or in any other related fields), when we were 34 years old. At the suggestion of my brother (who didn't enter the market until much later), we used the exploding equity in our house and started buying single family homes in Riverside County of Southern California. We lived in San Diego at the time and couldn't make the numbers work there, so we traveled 45 minutes north up the 15 and landed in Temecula, just over the county line (with houses priced 1/2 of the going rate in San Diego). We didn't know it, but Temecula was on the cusp of booming--and so was our portfolio.

We ended up buying three homes in Temecula initially and two up the 15 a bit more in Lake Elsinore. We bought many others, but I'll get into that another time. We managed all of the homes ourselves--never working with property managers (PM's). This becomes really important later on, as it is one of the reasons for our demise. We later expanded into Texas. That's when we had our first taste of what working with a PM was like.

In 2005, we had millions in assets. By then I was having our sixth baby and couldn't manage the houses myself. Our equity had now doubled, but we had a negative cash flow each month. We decided that my husband would leave his job and manage our investments. The first thing we had to do was generate a cash flow. We looked at everything: TICs, NNN, duplexes, car washes, apartments, worm farms, everything. We decided to 1031 four of the houses into two apartments in other states because the cash flow on Loopnet.com looked so good (OK, as many of you already know, that would be our second mistake).

I'll give all the details in later posts, but the bottom line is that two years later (right about now) we have realized a loss of about $600,000 to $800,000. We are closing on the sale of our second apartment next week, so we won't know the tally until all of the numbers are in. To say the least, it is a humiliating experience, especially when you are totally maxed out and don't know what to do while you're trying to sell off the property and save what little is left. We feel so stupid (hard coming from two people with college degrees) for allowing this to happen even though it seemed that we tried everything to make it work.

Our loss is only indirectly related to the current market, so we can't point our fingers and say that it's not our fault. The worst part is that, from the moment we started buying real estate, we have waited with eager anticipation for the market downturn, so that we could stock up on some great deals. Now that it's here, we have to sit and watch, as we are in no position to make another purchase right now.

The most amazing revelation is that we are not turned off to real estate at all. I still firmly believe that it is the basis to most successful financial portfolios and I plan to be involved in it for a very long time. If you look at the history of the overall performance of the real estate market, it has always gone up--eventually, anyway. You just have to time it right. Repeat after me, "Buy low, sell high. Buy low, sell high. Buy low, sell high."

We have learned from this experience and would like to pass some of that on to you--but I want to hear about what you've been going through in this market and how you're dealing with it. So, please post your comments! And, while you're at it, grab some cheese to go with that whine.

I plan to update daily. I'll catch you tomorrow!