Season 1,

12: How to Lose Money in Mobile Home Parks with Gino Barbaro

December 28, 2016

As you may have heard, mobile homes are little metal boxes that spit out money.

In today’s story, the mobile home wasn’t the problem. It was the person—Gino Barbaro, investor, entrepreneur, and best-selling co-author of Wheelbarrow Profits.

As Gino told us, “When you’re not educated and you don’t take the appropriate actions, don’t blame the investment—blame the investor.”

Green Flag: A Good Investment

I was about 36 years old, business was good, and I had extra cash. You’ve probably heard the quote: “When a person with money meets a person with experience, the person with the experience gets the money and the person with the money gets the experience.”

I was definitely a candidate for being on the wrong end of that equation.

I wanted to invest, so I asked a friend for ideas. He told me about trailer park investing, something he’d been doing with a guy for a while. Everything was going great.

He made the introduction, and things sounded promising for two reasons:

  1. It was going to be a passive investment. (My restaurant was taking up a lot of my time.)
  2. Mobile parks were and still are a good investment.

I’d had a little experience with real estate before this. Not much, but enough to do due diligence.

But I didn’t.

Red Flag: A Troubling Lack of Paperwork

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We had never drawn up partnership papers, an operating agreement . . . any of that. I was worried, but the friend that got me into the investment kept saying we would do it.

Actually, there was a red flag months before that: I never physically went to look at the property. I should have hopped on a plane and flown down to Florida to see it. I had put too much faith in the investor.

The other issue was, back then Google wasn’t as big as it is now, but I could have googled the property ahead of time and seen that it was in an unsavory neighborhood and researched police reports, but I didn’t do any of that. That was all on me.

I believe it’s important for people to realize that when you make a mistake, you have to take responsibility for yourself. In the beginning, it was difficult for me to come to that conclusion.

I’ve got an Italian mom, so she’s a little domineering, telling me, “I told you you shouldn’t have done it.” My brother was in the investment with me. We were all freaking out, trying to figure out what we could do, whether we should ride it out.

We did ride it out—for a while. Thank God, business was good at the time.

Black Flag: The Draws Stop

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We were getting draws every quarter. When the draws stopped happening and we started getting excuses, I reached out to my friend to find out what was going on.

I don’t remember exactly what happened, but I contacted a lawyer to start forming some type of formal action. I had a lot of money out there and I wasn’t getting paid.

It turned out that the property went into foreclosure and the investor lost the property. But what troubles me about the whole investment was that he had no skin in the game. Most of the money he raised from fellow investors. I didn’t know that ahead of time, but again, I didn’t do my due diligence.

I had no recourse against him, either. He didn’t own anything. Once the property went into foreclosure, it was worth nothing.

White Flag: Bitterness or Education

This was the first time I’d lost a serious amount of capital in an investment. I knew there were two ways I could handle the situation:

  1. Get really pissed at the investor.
  2. Go back to the drawing board and learn something from this.

The only way for me to remove the pain of the loss was to learn the space, to educate myself on the ins and outs of what due diligence actually means. So that’s what I did.

Still, the white flag moment was disheartening. I was paying $20,000 to a lawyer for something I knew I couldn’t win, and my lawyer was incompetent as well.

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In my view, it was theft and fraud, taking money from investors without any type of subscription agreement. He was taking our money, losing it, and we had no recourse against him.

We all share in the blame, but at some point I had to cut my losses. Two months after going to court, I told my lawyer we should walk away. I moved on.

Checkered Flag: Productive Mistakes

I’m actually glad this happened to me, because if it was smooth sailing, I wouldn’t have learned about real estate the right way.

I got coaching afterwards and realized that if I focused on the guy and the money I lost, I would grow bitterness inside of me. I didn’t want that. I wanted to empower myself and avoid the mistake again.

I had invested $172,000. That’s before lawyer fees and my time. It was a hefty sum of money.

Worst of all, my mom still likes to bring up this investment from time to time…

It takes years in your life to become successful because you have to go through losses, suffer setbacks, and let those propel you forward. There are two types of people: those who say that was my fault, let me learn from it, and those who absorb negativity and never move on.

You hear “overnight success” thrown around a lot, but it really doesn’t exist. Unfortunately, in our educational system, making mistakes is tragic. But we shouldn’t frown upon making mistakes. They make us uncomfortable, but that’s a good thing.

The more uncomfortable you are in life, the more you’re going to be able to grow and enjoy life.

Failing Forward

In each episode of How to Lose Money, we’ll be asking 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?

Lack of education and due diligence.

  • What is the single most important lesson you learned from it?

Thought leads to desire, leads to action, leads to results. You have to get out there and educate yourself. Be willing to learn before you do something.

  • How do you protect yourself from failing in this way again?
  1. Completely educate myself.
  2. Surround myself with experts in their field who are smarter than me.
  • Who do you turn to when you need help?

I still turn to my mom, believe it or not.

  • What advice would you give to someone else in a similar position?

When you see things are starting to crumble all around you, it’s not the end of the world. It’s a temporary problem. Try to look through that problem and think about the future.

This episode is based on an interview with Gino Barbaro, co-author of Wheelbarrow Profits. To hear this episode, and many more like it, you can subscribe to How to Lose Money.

If you don’t use iTunes, you can listen to every episode here.

Quotations:

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