The Real Estate Recession And Lessons Learned

In this episode, we are talking about when Jill and I were poor. This is our story of getting caught in the real estate recession without a property acquisition pipeline and a lot more. This was not that long ago.

Do you know what’s interesting? I never worried. I don’t know if that’s nature, nurture, or what. I don’t think you have that same feeling.

I want to cover that topic because it’s important for people. The recession is here. It’s going to get much worse from a real estate standpoint way before it gets better. In the next years, we’re going to go through this.

It’s going to be interesting.

You have a bunch of choices. There are a lot of things you can do before it gets bad. I want you to learn from my mistakes. That’s my point.

That’s why you’re here.

Each week on the show, we answer a question from our Land Academy member Discord forum and take a deep dive into a land-related topic by popular request from our Land Academy community. Let’s take one question, Jill.

Success With A Land Deal: Jenny’s Question

Jenny wrote, “I talked to a seller about a piece of land that I want to sell for my offer price of $11,752. It’s 2.65 acres with a house, chicken coop, and a workshop on it. There’s no septic or any sewage. In the area, it’s about $20,000 per acre without anything on it in Pennsylvania. It’s right off a main road. I asked why they were selling it, and they said they couldn’t keep it anymore and the kids didn’t want it. They need the cash fast. They sounded emotional. No back taxes.”

“I’m sending someone out there to take a look at it and take a lot of pictures, but I’m also pinching myself a little bit and wondering what I’m missing. I’ve flipped derelict houses before, but they said this is in livable condition. At this price, I don’t see how I can go wrong. Is this just the model working? My question to the group is, what could go wrong here? How can I lose?”

Nothing. The Land Academy is working for you, or you’re making it work for you. It’s interesting because I have the same reaction. It taps into a topic. I have the same doom-and-gloom reaction. “What am I missing?” Everything worked. I followed what I was supposed to do in Land Academy, worked through the education, and reached out to people in Discord like you’re doing, and it worked. I must be missing something. Jill would be jumping up and down, saying, “Let’s get this thing closed.”

That’s right. “Done deal. Let’s go.”

“Let’s get on to the next one.” That’s my advice to you. You are not missing a thing. Make sure you get an inspection. It’s all the regular stuff. Make sure you get an inspection before you close. It sounds like you’ve done flipped house deals before. Make sure it meets your approval. There’s going to be some stuff in there. I’m sure you’re not going to renegotiate the price. You’re probably going to sell this for $50,000, $60,000, $80,000, or $100,000.

Do you know what’s interesting about this? People see a less-than-perfect structure, whether it’s a falling-down mobile home or a house that’s old or not hooked up to everything. “We have running water, but we don’t have this.” Sometimes, people see those as problems, and that could be what’s going on in the seller’s mind. It’s not a perfectly beautiful, mowed tree piece of land. It’s got the structure on it. In reality, we both know that it’s all positive because if it was just rural, vacant, nothing on it, not even mowed, it’s worth $20,000 an acre, and you’re getting 2.5 acres with a structure on it.

The big picture is, when you get to these situations and you’re concerned about the condition, you’re doing everything right, Jenny. Sit back and say, “If it was just vacant land, would I still buy it for $11,000?” If the answer is yes, power through because no matter what, anything on it is a little asset. A falling-down shed, a couple of rusty parked cars, somebody’s going to want them.

I agree.

Were you going to add something to this? Is that what you’re doing?

What I’m doing is looking up the name of the person who wrote this because I’m not sure who it was. My bad. I apologize.

We’re calling you Jenny. Sorry, we didn’t have time to find the exact name. It’s all good.

Finding Hidden Opportunities In Data

Here’s the thing. What Jill and I are famous for in our personal lives is complicating things and over-talking things with each other. It doesn’t happen in business for some reason. We’re just like, “Let’s buy it or not and get it done.” Don’t ever overthink it. I would personally get this thing under contract, go through the motions of buying the piece of property, and resell it, which sounds like it’s going to happen fast, especially in this economic environment. This is cheap and affordable housing. I would sit down with myself and figure out what I did right and try to duplicate it because you did it right. Maybe you seek out properties with structures on them instead of just vacant land.

What was the percentage? Did a percentage of improvement sneak into your mailer that you didn’t know about? Look how you won.

I’d take a look around Pennsylvania.

Maybe go get those.

Also, the Midwest and see if there are a lot of properties like this. Maybe the assessor knows there are improvements, or they don’t. Maybe it’s showing up in the data, and it’s not. Dig in and duplicate it.

Before we get to the topic, I want to ask, are you just trying to be Joe Cool wearing your Ray-Bans?

No. What if I had Ray-Bans on this whole time?

You’re all hip.

I learned a long time ago that it takes way too much energy to try to be cool. You’re either cool or you’re not, and I’m not. I don’t have to spend energy on that.

Being cool is not trying to be cool. That makes it cool, so you are cool. That was an accident. I’m going to vote that I was also cool because I gave you those Ray-Bans. I didn’t necessarily put them on you. Wouldn’t it be funny if I dressed you up and put little accessories on you?

If you ever meet Jill, don’t encourage her. Don’t tell her she’s cool or anything like that. She loves that stuff. Our topic is about when Jill and I were poor. It’s our story of getting caught in a real estate recession without a property acquisition pipeline.

I want to say two things. Number one, the topic is not cool, but it’s real. That’s one of the things about us and Land Academy and why you’re here. We are not brand new. I’m not done with my first 100 deals and have been at it for a while, thinking I’m the best. No. We’ve been at this for many years. When we talk about when we were poor, we’re talking about the darkest one because we’ve both been through recessions.

You’ve been through more. I’ve been through one major one. In this recession, you have more under your belt. That’s the whole point, and I hope this is why you’re reading. You want to be ready. You don’t want to be stuck in a pickle. We’re going to talk about all the different things. I know you have a whole speech here stuck with a bunch of property that you financed. That’s the last thing you want. Go right ahead.

You want to be prepared—not caught in a tough spot. Being stuck with a bunch of financed property is the last thing you want. Share on X

In the early ‘90s, I casually bought and sold real estate in all different types of forms, like houses and commercial property. I started selling land a little bit later in the ‘90s and realized, “This is it.” From the late ‘90s to around 2007 and 2008, we did tens of millions of dollars before I met Jill. Everything was going great. We were the lead seller on eBay. It was about the only place we sold property because it was so efficient. We would post a 30-day auction, it would sell, and we would double or triple our money. My whole life was focused for that decade on being a land acquisition expert. We’re great at it, probably the best in the business. We were invited to meet the executives of eBay on more than one occasion in Washington, DC.

You had auctions closing hourly. Back then, I didn’t think it was a percentage. I think it was a flat fee for closing costs. You were helping make them rich, which is nothing to sneeze at. I want to brag for a second.

This episode is not about how we were cool. It’s about when we were poor.

I want to talk about the peak and the valley. You’re getting to the valley. I’m going to say the peak was pretty high. You had auctions closing. You were doubling and tripling and more your money on these things. It was just a machine. We didn’t have eBay issues back then. Everybody’s all excited, I’m sure.

The Illusion Of Immunity: How The 2008 Recession Exposed A Single Point Of Failure

I lived on a yacht in San Diego. I was very successful financially. It was a machine. We had no real competition. What we had was a very serious single point of failure. That single point of failure was our sales channel, which was eBay. This recession started in 2007. The same things that are happening in 2024 were happening in early 2007.

Houses started to foreclose based on what we’ll call irresponsible lending. We’ll leave it at that. All kinds of things happened. Ultimately, banks started foreclosing. It was serious based on those irresponsible mortgages that they were lending on and backing. It didn’t affect us. I had the greatest false sense of security ever. We sailed through 2007. 2006 was our best year. 2007 was almost our best year. 2008 rolled around. I was beating my chest, sometimes saying, “We are immune from all the terrible things that are happening in the real estate industry.”

I figured it out. Nobody else has ever just purchased land and sold it on eBay, auctioned it off like that at breakneck speed. I’m going to go through this. That’s not what happened. What happened is that the recession got so bad. People didn’t have any extra money to purchase what I realize are unnecessary assets. When you buy a piece of land, it’s not necessary. It’s a luxury. It’s some kind of thing. You’re buying it to build a house out of the future or as an investment to resell or lease recreation. It caught up, and people stopped bidding and buying real estate altogether. For whatever reason, Jill and I met each other around this time. I don’t know why. I still think about this.

It is funny. The yachts were going away. I remember being in San Diego. You were like, “If I had my yacht, you would be on it.” I’m like, “Thanks.”

I should have just said nothing.

You came in a little too late.

I was thinking about buying you some flowers. Maybe I’ll do that tomorrow. Try that on your girl and see how that goes.

I would have bought you a diamond necklace, but you know.

I had no commercial debt that was associated with the business and a ton of land, but I had multiple houses, a yacht, and two office buildings. All of those had responsible types of loans, but we couldn’t service them anymore. Also, a huge payroll. We had a lot of people working for us managing these auctions. It imploded on itself. I had to manage all of that.

There were a couple of times when I thought I might have to file for personal bankruptcy. We were poor. That was it. Enter Jill, and she says, “Wait a minute. Look at all these assets that you have.” I couldn’t see the forest through the trees there. I thought my life was over. We sat down after we got to know each other for a while, probably a year or maybe close to it. Either way, it doesn’t matter.

We worked out how to liquidate these assets through Jill’s sales talent. She got out my Rolodex or my whole contact list of people that are in the business that were still trying to make it on eBay, none of whom were doing it well. She started negotiating deals to sell this property that we had so that we could breathe and live, and it worked. What we ended up doing was changing the process of how we sold property, not how we bought it. That’s always worked.

Buying real estate the way that we buy it works in the worst of times and the best of times, but you do have to change how you’re selling property and the types of real estate that you’re buying and selling based on the economy. Together, we looked at these lists and lists of asset types that we had. She liquidated them, some of them at a loss, and I didn’t care. I just figured they were valuable assets.

You need to adjust how you sell property and the types of real estate you buy and sell based on the economy. Share on X

The Initial Struggle And Setup

I’m going to tell my recollection here first. You were not happy. Let’s just say that. You were busy with other things and keeping personal wheels on the bus. My recollection is you had this whole extra computer that you sat me down and logged me into. You built this whole system, acquisition engineering sales, into this computer system. It was beautiful what you designed. It was almost a knock yourself out. It was like, “Here’s what I did in the past. Here’s what worked. This is what good photos look like.”

You gave me all the framework and the instructions and then walked away because you were mad, and I don’t blame you. You’re like, “Let’s see if anything happens.” There were hundreds of properties in there that you had just written off. You’re like, “That’s over. That ship has sailed. The county’s going to get them back. Who cares?” I was off putting things together and figuring it out, making postings and selling things, calling people, talking to them, and working out deals.

I remember you coming to me after 1 month or 2 or something. We had a separate little bank account. I was putting all the money in a separate little bank account under your direction. I’m sure you thought there’d be $100 in there, but you came along like, “How’s it going?” There were a lot more than $100 in there. You’re like, “What just happened?”

I do remember this.

The Unexpected Success

I remember saying, “I did exactly what you told me to do. That’s all that I did.” That’s one of the things that still stands the test of time with Land Academy. Forget what you think, what you know, or what your gut is telling you. Put your head down and follow his steps. I did. Guess what? It paid off. It worked. It was great. I was good for whatever reason in life. I don’t necessarily always follow all your directions.

She slides these little one-liners in there, and then she moves on quickly.

The things that you are an expert on, I will follow all your directions, and I still do that. This is one of the things that you know very well how to buy and sell land. I did what you said, and it worked out great. There was a light at the end of the tunnel. Maybe you bought something you wanted to sell for $10,000, and we’re selling it for $6,000. Big deal. We were still keeping food on the table and moving things forward. That’s what happened. I don’t remember having any big losses. I just remember not making as much money as we hoped we would, but who cared? They were all paid for years ago. It didn’t matter. We sold them and never had to go to some of the drastic measures that you were preparing for.

Economic Environment And Parallels To Today

Here’s what happened. Jill described the low point. She helped us crawl out of the cash-crunch hole. What was happening in the economic environment back then is very similar, if not almost exact, to what’s happening now. Back then, people were encouraged to sign sub what were called subprime mortgages. It was a variable rate mortgage that had a very low introductory rate below prime. That’s the subprime. It pretty quickly caught up to whatever the primary rate was.

It was variable and never planned out. It was easy to get people to sign these loans because the payments were so low, below regular interest rates. Guess what? They’re called adjustable rate mortgages, 3 to 1 and 5 to 1. They are fixed. All the laws changed because of what they called predatory lending back then. It doesn’t matter what it was.

We all saw the movie.

Variable Rate Mortgages

What it’s called now is variable rate mortgages,3 to 1 and 5 to 1. You have a locked-in rate. We had amazing interest rates for the last several years. For three years, you have a 3% mortgage, then it catches up to the rate, which is 7% or 8%. If you signed a mortgage 3 years ago or 5 years ago, your mortgage is going to double. This is going to happen again. Do I think there’s going to be massive foreclosures across the board? No. That’s what there was back then.

We got our cash balance up to where it should be. We bought and sold a few houses. We renovated them and made some dough. The last one we did, we moved into it. We didn’t have any debt. We had no debt personally at all. I renegotiated everything and liquidated the assets with the lenders. I was working on that, and she was working on generating cash.

When she generated the cash and I got rid of these other loans, office building loans, and things like that, we started to buy foreclosed houses for $40,000 and $60,000 and sell them for $60,000 to $80,000 to $100,000. Those houses are worth $300,000 now. They were worth $200,000 or $300,000 before we started this. We knew these assets. This is the same thing that’s about to happen over the next years. We made very good money doing this, and we will again.

Jill and I wrote House Academy. HouseAcademy.com is about how to buy these houses using data. You can check it all out. I’ll tell you, land is last. It’s not first. Land is last in line to see the horror. We bought tons of land way below value. People were foreclosing on houses. They didn’t care if they had land. If you send them an offer and say, “I’d like to buy your land for $5,000,” and it’s worth $180,000, they’re going to sign it.

Get it out of here.

They might be filing personal bankruptcy at that time and signing your offer saying, “Can you pay in cash?” We were poor, and we dug ourselves out of it. For me, I met Jill. She brought something to the table that nobody in my life had, including me.

Key Takeaways And Lessons Learned

I want to talk about the big takeaways here on how to prepare yourself. Number one, pay cash for stuff. What are the things we did that saved us? One, they were all paid-for assets. We had no loans on anything, not personal.

You don’t want institutional debt. If you have institutional debt, you have about 12 to 24 months to get rid of it. If you don’t have a fixed-rate mortgage, attempt to solve that somehow. Take a look at your mortgage, read it, and see if it’s going to change. Plan for that day. One month, your mortgage will be a couple of grand, and the next month, it’s going to be $4,000. Find out when that is. There are all kinds of stuff you can do with your bank or a different lender by interest-only refinancing, the big takeaways.

You wrote an email. This is something to think about. I’m going to end it on this one about that email title you had. We paid cash. You have to be flexible and roll with things. If I had to pick three things, one, everything was paid for, and two, we cut our expenses down to very reasonable. I don’t care if you’re living in a townhouse or whatever it is. We look poor. We’re living in an RV. We’re in a van down by the river.

It's important to stay flexible and go with the flow. Share on X

It’s not a super cheap van.

We could be full-time in here if we have to.

It’s paid for.

Have everything paid for. Knock it off with what you think you need to have. You don’t. The third thing is to get your cash together and be ready to buy some stuff. We weren’t taking this money and putting it into something stupid. We’re slowly and methodically building up more inventory to be in a better position for the next time.

Test yourself and the things in your life for a single point of failure. If you are in the real estate business and you’re selling, let’s say you’re a property management company and representing one client. I see this happen all the time with management companies because it’s easier. That client says, “We’re done. It’s not working anymore.” It’s any type of business. If you have a lot of customer concentration, make those changes. Assume that you’re going to lose that customer. Another great example of a single point of failure is a W-2 job. If you get laid off, plan for that. Don’t be shocked like the rest of the world when they get laid off. The economic outlook for W-2 positions is dire.

Do you remember the number of people in Land Academy pre-COVID? There were a number of people I could think of. People that did well came to Land Academy, probably because they didn’t want the W-2. It was pre-COVID. They were in the Land Academy learning how to do this. They were like, “This is great. I have more options.” COVID came, and they got laid off. They were saying, “Thank goodness I had this. You guys taught me how to keep food on the table.” The same thing still applies.

Think about who’s in your life and whether or not they can handle that professionally and socially. I had people in my life when everything hit the fan who were not capable. It’s not in their makeup to manage negative cashflow and tragedy. For whatever reason, Jill is hardwired to change gears at any given time and repair stuff or completely try something new.

Thank you. I want to give you credit, too. One of the things about you, and this will help everybody, is that you come up with amazing ideas. You’re good at building out a business plan and putting solid numbers to it. We just do it. You’re great at that.

For basic number purposes, we had to restart our lives entirely in 2010. We did all these deals. All those statistics are true, but the fact is that we had nothing in 2010.

We have a big staff again to manage all the Land Academy parts, but there was a time when we were the staff. Staff of two.

I say this to our staff all the time. “I’ve had every single one of these jobs and failed at every single one of them. That’s why you guys are here. You do it better than I do.”

This has been a great conversation. My ending on this is do what you have to look forward to. You’ve heard what we’ve been through. We’ve given you our experience and tips we learned along the way. You can be reading, preparing, and making changes, but there is a silver lining when this happens. You titled an email to some investors that we worked with, “Fortunes are made during economic downturns.”

Some of the greatest fortunes ever were made out of necessity. You need to eat. “That thing I’ve been thinking about doing for fifteen years, it’s the time. I’m going to do it and have to make sure it works.” We had to make it work, and we did.

Think about what you can do. Think ahead. What property type, what else is on the horizon, and what partner you could bring in. Bring in that money guy.

That’s why you’re part of Land Academy. There are tons of people in this group, Jill and I included, that have a lot of money.

I want to place it.

We are waiting for this to start to tank where there are amazing real estate deals out there. Our checkbook’s wide open for that stuff. Please incorporate buying and selling other property types, specifically freestanding houses in predetermined markets, and add them to buying and selling land when you go through this. That wasn’t inspirational enough, Jill. Do you have something other than that?

I was thinking about how important it is to be a united front. That’s it. This happens in good times and bad times. You have to be a united front, whether it’s your business partner, your spouse, or whoever you’re paired up with.

See how she sneaks it in?

You’re paired up with this. It’s so important. You need to pause and have those discussions. As you’re heading into stuff, you need to have temperature checks while you’re in the middle of it and on the way out. Make sure as you’re coming back out of it and have some positive stuff happening that you’re on the same page with what you’re going to do going forward and how you’re going to spend or reinvest. Not being on the same page will sink the ship right there, too.

It’s like one of these rowing one way and another rowing the other. It’s never going to work. That was a critical thing for us. We still have regular partners’ meetings. We still call them that. Make sure what we’re doing and our goals are the same. He’s never going to send out a mailer and surprise me. I know what’s going on if we’re pivoting to a new property type or acquisition type. I’m going to know because I’m going to be ready for it, and vice versa. When things come in, and I’m dumping a lot of money on something, I’m not going to surprise him. There will be meetings, and we will talk about it. That’s my inspirational thing. Do whatever you have to do to make that other person feel comfortable, understand, and rally with you.

We got cut down to our knees in 2009 and 2010. The consequence or result of that for me was telling myself several times during that, “If I ever get out of this, I’m going to do stuff differently.” Several years later, we have seen the result of making those changes. One of them is stockpiling cash and never having any debt unless it makes sense from a locked-in perspective, spending 20% down on a $10 million asset. You write a $2 million check, and the asset is now worth $20 million. You know it was.

I put this question in here for a reason because it’s very pertinent to the topic. This guy, not Jenny, let’s call him, sent out a bunch of mail. Somebody signed it, sent it back, and said, “We don’t want the asset anymore. Neither does my family. We’ll take $11,000 for what will probably end up being, let’s call it, $60,000 to $80,000.” Those are the kinds of deals Jill and I do.

If we did all the deals where we knew we could make a 20% return, we would have way more money than we do now, but that’s not what we do. We only do surefire deals. That’s one of the results of going through that recession. We are stockpiling a certain percentage of the money we make on every deal. It goes away because this is happening. We’ve stockpiled a bunch of money because of that. With the recession, we are actively buying and selling houses, mobile homes, and things like that.

It’s all the stuff we talk about in Land Academy and will discuss in a little while on our member call. Not that that wasn’t informational enough, but do you have any other nuggets you want to share with us?

This was a ton of nuggets. What other nuggets?

I didn’t know if you had any other informational things you wanted to add.

That was it. Stockpile cash. That’s my inspiration.

Don’t spend it. Love it.

Don’t take on any debt. Do you need a yacht? No. I don’t need a yacht, so we don’t have a yacht.

There you go.

We have a souped-up van. Join us next time for another interesting episode. You are not alone in your real estate ambition. Information and inspiration to buy undervalued property.