Hi guys. I would like to do a quick introduction:
I was a professional poker player for 11 years and was a very active member of the twoplustwo.com community. I credit a great deal of my success to those forums. One might think I'd find this forum right away, but I guess I fumbled the ball. My friend suggested I listen to some podcasts yesterday and here I am.
Quick REI bio. After online poker was banned in the U.S. I knew that I wanted to get involved in real estate investing. I took my savings moved from Chicago to Michigan with my pregnant wife and dove right in. I bought 4 rentals and 4 land contracts and did a few flips/wholesales - all of which worked perfectly. I was effectively retired at this point, passive income > expenses, but I was pretty bored.
Not one to sit on my hands, I partnered up with a few people and bought 27 non-performing notes. Despite not knowing what we were doing, things went well. A little hustle goes a long way. So, through ties in the poker community and my blog, I raised $600,000 to buy some more notes. The second pool of notes was going okay, so we bought a third pool - our largest pool - 217 notes at .06 UPB - 1.3M more was raised.
We weren't equipped to handle so many assets, so we partnered up with another well-established company to handle half the notes for half the profits. As some of you might realize, these type of deals are logistically complicated and need to be treated with lawyers and extreme scrutiny. Unfortunately, we were running hot and flying by the seat of our pants. We had our partner company's lawyer negotiate the deal with the FNMA and this lawyer handled our contract with us. Like naive children, we assumed that because it was A+B vs C in one dispute, that this lawyer would treat us fairly in the A+B contracts. I later learned that this is a conflict of interest, but that's neither here nor there.
The next 2.5 year was a complete horror story. Before the closing we paid our partner company to check the title on the assets we were buying. A crucial, crucial part of buying notes of any kind. We were told 96% of the assets had clear title. We escrowed 10% of the sale price and proceeded to close. By the time the dust settled, 20% of the assets had clear title.
It took over a year and $100,000 to clear all the title. It's actually a miracle we did clear all the title - something I am still very proud of to this day. With so many assets - being "frozen" for one year cost us about 1M dollars (average of 2k in taxes and the rolling interest, lawyer fee's etc.) This set off a chain reaction that led to more fallouts and disaster.
In order to receive settlements, I signed non-disclosure and non-disparage agreements so I can't get into the gore of what went down, but I effectively went from retired to broke in one deal.
Those were dark days. In poker, I had always prided myself on discipline and expert bankroll management. I started with $40 on my parents credit card at 19 and never came close to going broke (except for the first few sessions of course).
To lose 13 years of work in one deal, was DEVASTATING. There were days where I was catatonic and physically ill from stress. I went from really happy-go-lucky to very depressed. As a father of a 2yr old and a 1 yr old, I didn't even know where to start recovery, how to explain things to my wife, etc, etc.
Two years later, I'm close to paying back every investor and every bit of interest, with only 41 assets of the 217 left to move. My projections show me possibly ending up with a little scratch at the end of it all. It's hard not to get emotional writing that.
I'm getting over the pain and more motivated than ever to avenge my defeat.
A new business emerge through my battle with notes: buying/creating tenanted rentals and selling them to institutions in the U.S. and abroad. The one good thing that came out of the disaster is that it forced me into some crazy places and I met A LOT of people.
I have quite a few stories about squatters, guns at closings, stolen furnaces - some good, some bad, some funny, but this post is too long already.
I look forward to learning from you guys!
Justin
