John Collins, business developer for GetRichEducation.com, entered his first investment in his mid-thirties, after attending an investing summit on a cruise ship.
In the span of just one year, he spread himself far too thin and had to offload just about everything he’d taken on.
Here’s how it happened.
Green Flag: Cruising Along
My story begins about 10 years ago, when I bought my first real estate. It took me about five years of education to get over my fear of taking action. At about age 35, I decided to go on this investor-summit-at-sea cruise. I was excited, and I wanted to catch up on the time I thought I’d lost.
It was definitely an education experience, but it was also a way to get in the same room with a lot of people who could influence my success. It was expensive, but I saw it as a chance to get on the fast track.
It was amazing. I’ve been on it twice: there’s no other event like it.
Me being a hardcore student, I went to every single class and breakout session. I learned about cash-out refinance, gold and silver, single-family turnkey investments, multifamily, international raw land . . . everything.
I took copious notes, not having much of a real estate portfolio. I’m a big Tony Robbins fan, and he talks about not taking action. I didn’t want to do that anymore.
Within a month of returning from the cruise, I signed up for an event put on by the same people. It was a market field trip into Dallas-Fort Worth. I went there, learned everything about that market, and bought my first single-family turnkey deal there.
Red Flag: Spread Too Thin
Trouble didn’t rear its head until about a year later.
I got involved in so many different things and spread myself too thin. There’s no such thing as the deal that doesn’t have hair on it, so I was dealing with nickel-and-dime stuff constantly. I had a roof with hail damage and a fence that needed repairing. From there, things just started compounding.
Back in Anchorage, I tapped into my 401(k) to get into duplexes and oil and gas, bought some raw land internationally, bought some gold and silver . . . I did everything. I grew my portfolio from a single-family home I lived in to four units, multiple oil and gas projects, the starting of my own bank using life insurance, and raw land lots internationally.
I clearly didn’t have a focus on a niche. That ended up being my downfall.
Black Flag: How Did I Miss It?
I happened to notice on my bank account that I was less than $100 away from being completely wiped out. That snuck up on me, as it can when you have cash flow leaks from multiple sources.
Cash flow fluctuates for everyone; this was my lowest point though. I didn’t notice. This speaks to the amount of distraction I had going on at the time.
It’s almost embarrassing to have this conversation publicly after all the education I went through, to not notice something like this. I learned that cash flow is the lifeblood of any business or investment, but I had so much cash flowing in and out that I wasn’t paying attention to it, and even if I did it was difficult to pinpoint where it was at. I kept saying I would get around to looking into it later.
When you’re young and you’re funding your own bank, you’re an oil and gas tycoon, and you’re giving Donald and Warren a run for their money, you’re not worried about things going south.
White Flag: Starting Over
I tried to recover from this as gently and surgically as possible for six to eight months. Basically, about a year ago, I decided I had to offload stuff and start over. I was too close to imploding.
What’s interesting is that I started out on this real estate journey 10 years ago to get out of the rat race. I realized that all this action I took made me even more reliant on my job, because that was my only reliable source of income after I’d messed everything else up on my balance sheet.
There was a mixture of pain and regret, and relief later. The relief didn’t come right away, because real estate isn’t easy to get out of. It took about 10 months to offload the real estate I wanted to get rid of.
Even with my raw land, I had to walk away from that completely. That was extremely painful, but I didn’t have any other choice without digging myself a deeper hole.
Checkered Flag: The Cost
I think the damage was somewhere around 140k, which for me was a significant amount of income. Earning that back with a regular J-O-B isn’t easy.
The other significant loss was at least two years of time and energy spent, and it was all a burden the whole time.
Fortunately, I’m a single man so I didn’t drag a wife or children through this. If anything, I probably helped people by sharing my story with fellow investors.
In each episode of How to Lose Money, we ask our guests to answer a few questions about failure. Here’s what came out of this episode:
- Why did this failure experience happen to you?
I was over-eager and naive. I had a lack of emotional intelligence and clarity in investment philosophy.
- What is the single most important lesson you learned in this?
Be crystal clear on how you take action as a person. If you’re not familiar with the Kolbe test, check it out to understand who you are as a person and investor. It was almost scary how spot-on it was for me.
- How do you protect yourself from failing in this way again?
Continuous personal development and self-critique. Try to surround yourself with others who have complementary strengths and weaknesses.
- Who do you turn to when you need help?
My best friend and Get Rich Education show host: Keith Weinhold. His and my Kolbe scores are almost opposites. He’s got the ability to think about the big picture and tiny details simultaneously.
- What advice would you give to somebody in the same position as you were in?
Admit that things are a little shaky. Don’t be hesitant to reach out to a trusted person or team. It also might not be a quick fix; it may be a process.
If you don’t use iTunes, you can listen to every episode here.