How I Lost Money in Real Estate Before It Was Fashionable, Part I: Impossibly Naive

House on fire

Up In Smoke

Nowadays, everybody has a tale of money lost in real estate. Dreams and cash evaporated. It has become all the rage.

Hard perhaps to believe now, but time was not so long ago, real estate was a can’t lose proposition. People said things like, “Buy land. It can only go up. They’re not making anymore of it. Houses can only go up in value. You can’t lose.” And other people didn’t laugh at them. No, really. They laughed at me.

That’s because, all through the 1980s, 1990s and well into the 2000s I was saying, “Oh yes you can.” And I had the sad tale to back it up.

In January 1979 I had returned from a trip to Florida. No sooner had I walked in the door than my phone began to ring with an especially insistent tone. It was my pal and old college roommate Steve.

“Where the hell have you been?” he said. “I’ve been trying to reach you all week.” These were the days before cell phones. Before answering machines, even.

A few months earlier we had been having breakfast together in a local cafe. Steve had the idea that we should partner and buy a 2-flat. He’d take one apartment and I the other. Seemed like a good idea. Everybody was touting the soundness of investing in real estate. The tax advantages. Not the least, his father who was a banker. As such, he could also pave the way for financing for us. No small thing at the time.

very much like a 2-flat I did eventually buy

After eating we walked across the street to a local broker’s office. We told the agent what we had in mind. We told him our budget was 100k, a significant sum at the time. He asked if we were willing and able to take on a rehabbing project. We said no on both counts. He said in that case there was no possibility. We thanked him and left.

A couple of points at this juncture. What the hell was he thinking? Looking back, the market in that Chicago neighborhood in that price range should have been brimming with options. And, what the hell were we thinking just taking one guy’s word for it and letting it drop? A 2-flat would have been, in hindsight, a far sounder investment than the debacle to come.

Now, personally I didn’t much care. Out of school a few years, my career was humming along nicely. I was making good money, single and enjoying the carefree life of a renter, although I didn’t fully appreciate that at the time.

Steve, however, was motivated. That’s why he called. He’d kept looking. He found his Shangra La. He had just put money down on a condo and wanted to be sure I had a shot at one before they were all gone. Condos were hot. They could only go up in value.

This one was an old 1920s era courtyard building right on the lake. The developer was gutting the apartments. Each would have its own heating and AC systems. Everything would be new inside the units while maintaining the stately exterior. I went to check it out. I looked at a 1-bedroom on the top floor for $40,000.

It was an empty shell, demolished to the studs. I took all the options adding another 5k to the price. Wrote a check for 5k and signed the papers. The developer, YP, and I shook hands. Smiles all around. It was February. It was scheduled to be completed August 1st. My lease ended September 31st giving me a couple of month’s cushion for the unexpected. What could possibly go wrong?

what Steve found

No, I didn’t look at anything else. No, I didn’t check out the developer. No, I didn’t run any numbers. I figured Steve and his banker dad had done all that pesky legwork.

Yes. I was impossibly naive.

Over the next several months, as I shared the good news with friends and colleagues, I received wise and consistent advice. Visit the work site often. Monitor the progress. Stay on top of it. This, of course, I failed to do. I didn’t have time. I didn’t have the expertise. I didn’t have the inclination. They were the experts. I had effectively hired them to do a job, why would I want to get in the way? Why indeed.

Along about mid-August I decided to go have a look. With two weeks past the finish date and two weeks till my planned move, only the final touches should be remaining. I was eager to see my new home. I was horrified. It was completely untouched. Two weeks past the due date and not a spec of broken plaster had been disturbed.

it looked like this

In a passion I stormed down to YP’s office. Moments later, fists on his desk, looming over his shrinking form I inquired, perhaps not entirely politely, what the hell was going on. He assured me all was well. Two weeks was plenty of time. Moreover, if I was unhappy (if??) he would cheerfully refund my money. That calmed me a bit.

I sat back. Thought a moment. I knew it wasn’t going to happen in two weeks, but my lease ran through September. I had six. YP seemed sincere. I wanted the apartment. I made the second big mistake.

“No,” I said. “I don’t want the money back. I want the apartment. Just get it done.” And I left.

Now finally I began to follow that earlier and excellent advice. Every few days I showed up. I encouraged. I bullied. I ranted. I praised, although finding reasons for this was vanishingly hard. More than once, YP again offered me my money back. More than once, I said no.

This dragged on for weeks.

I went to my landlords. I had been renting for several years from three Croatian brothers. They did a great job running the building and I was a great tenant. They were delighted to let me continue on a month-to-month basis. It pays to pay your rent early and not trash the place.

Slowly the condo apartment began to take shape. But each step forward, meant another back. Other owners were discovering the same problems. They, too, began to apply pressure. YP’s work crew was woefully inexperienced and far too small to get it all done. But few of my fellow owners were as willing to be as demanding as I and none were more intimidating to have scowling in his office. Progress was made, but not enough.

Fall leaves

August turned to September. September to October. The leaves colored and fell. The wind off the lake turned chill. I reached the end of my patience. The apartment was about 80% done, but I was finished.

One day in his office I said, “YP, I’m going to accept your offer. I’ll take my money back now.”

“No,” he said, “I can’t do that.” Looking back I realize now he meant literally, there was no way he could.

“Here in our contract,” I said, “it clearly states if the apartment is not finished within six weeks of the original move in date, I have the right to demand my deposit back. I am exercising that right.”

“No,” he said.

“You have to,” I said, “It’s in the contract.”

“So sue me,” he said.


The conversation went downhill from there.

A few days later, in Wayne’s office, I was raving. Wayne was my lawyer and I was in for an education.

To be continued….

Part II:  The Limits of the Law

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Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
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  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.


  1. Ashley says

    Hey Mr. Collins, do you have an artist credit for your “Shangri La” picture? I’m writing a fantasy novel and its perfect for my island setting. I’d love to get more inspiration from the artist. Also, I’m listening to your book right now! It’s kick ass!!! And kicking my ass into gear! Thank you for addressing the emotional preparedness so thoroughly! <3

    • jlcollinsnh says

      Hi Ashley…

      That post is from so long ago I just don’t remember the source, but I agree it is an awesome image.

      Check out the images in these posts:

      These are done by my pal Alex in Guatemala. If you like, I’ll put you in touch with him.

      Glad you are enjoying the book! If you want to do me a solid, give it a 5-star review on Amazon. 🙂

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