Ep284: Pete Alexander – If the Real Estate Deal Sounds Too Good to Be True, It Is

Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community. We know that to win an investing you must take risk but to win big, you've got to reduce it. This episode is sponsored by a stance Academy which offers online courses that help investors, aspiring professionals, business leaders and even beginners to improve the finances of their lives and their businesses. Go to my worst investment ever.com right now to claim your discount on the course that excites you the most fellow risk takers. This is your worst podcast host Andrew Stotz and I'm here with featured guests, Professor Pete Alexander, Professor Pete, are you ready to rock?

Pete Alexander 00:46
I am Andrew and I'm happy to be here. Thank you.

Andrew Stotz 00:50
I am happy to have you. Let me introduce you to the audience. A recovering hard driving leader with over 35 years of sales, marketing, educational and entrepreneurial experience, Professor Pete successfully battled the negative effects of stress, head on and develop the lighten stress management model that will motivate you and your team take action in only a few minutes per day. After learning the stress management techniques participants can become leaders teams want to follow rather than hide from Professor beat as an Amazon best selling book titled lighten your day and hosts a popular seven minute podcast on LinkedIn titled winning business and life Professor Pete take a moment and filling for the tidbits about your life. Well, I

Pete Alexander 01:43
mean, it's the other thing that I would say is, is that I'm a proud father of three kids. My oldest is in the Air Force. My middle one is studying to be a nurse practitioner. And my youngest one is working in the car industry. So I'm proud to be a father as well as a good and a bad investor.

Andrew Stotz 02:13
Yeah, we're gonna learn about that, and, and all the stress that goes with it. But before we do, I'd love it if you just would share a little tidbit about what you've learned and what you teach about stress. Because as we were talking before the show, it's a very stressful time, where people are being pushed to the limits of the money that they have, of the jobs that they have of the relationships that they have. And stress is a real killer. Maybe you could just take a minute or two to tell us a little bit about your system, your book, and the best way for people to learn more about it.

Pete Alexander 02:46
Sure. Well, thank you for that. What happened for me is that stress and I had our first round go around, I guess back in 2008. It was a perfect storm of stressful activities that culminated in my diagnosis with stress induced diabetes, yes, you can get diabetes, you can get heart disease, from that chronic diseases from this problem. And the challenge for me was I didn't listen to my body about what stress is doing to it. So I went ahead and burnt the candle at both ends for another 10 years, until I ended up in the emergency room with a severe case of diabetic ketoacidosis. And for your listeners who don't know, my body was eating itself alive because of my stress. So that was an epiphany moment for me. And I decided that I needed to do things differently. Otherwise, I probably wouldn't be around much longer so and you know, the stress that happens to all of us, you know, our bodies will be letting us know. And so the thing that I've learned, and I try and stress to everyone is that don't trade, your mental and physical health, for your career for your other responsibilities. That is a really bad trade. Because if you lose your health, nothing else matters. And if your listeners don't believe me, haven't think about the last time you were really sick could be the flu, whatever it happens to be when you were really sick. Did you feel like doing anything other than lying in bed? Probably. Yep, exactly. And so if you think about that, Andrew, you're lying in bed. You're no good to your company. You're no good to your spouse, your kids, family, friends. You just are lying there with no energy. Don't take your health for granted.

Andrew Stotz 04:52
It Gray's it with ice. Great advice. Remember, there was a time in my career. I mean, I've always been a busy guy. There was a time in my career when people would come to me and they would say, how is things and I'm like, I'm so stressed. And pressures on, I'm so stressed so much stuff, you know, going and all that. And then I started to realize one of the things that I realized was the way I was coming off to people, was not really the way I wanted to come off to people. I didn't want people to see me as that and then walk away and go, Well, sorry for him. And then I, you know, read a lot and learn about stress and all that. And then I decided on that day to remove stress from my life. And you know how I did it. I just stopped using the word stress. And I replaced the word stress with pressure, you see, because for me, stress was the feeling like, I can't do this. I'm not good enough. I this isn't gonna work. And I mean, like, stress has so many different meanings, so many different nuances to it. But pressure is just, you know, it's time. And you know, I got to get this done by then, you know, Yeah, yep, time pressure. And just by doing that, it took a lot of relief off of me. And that's the first thing. The second thing is a lot of people see my life where I work, I work, you know, long days and all that. But I also tell people, you know, a couple of things that, that, that they don't know, one of the things that most of them do know is that well, I've sacrificed family in the sense that I never got married. So there's a lot of my time of my day that would have been consumed with that, that I decided to fill up with work and other activities. The second thing is, though, I wake up really early, a lot of young people come in, they go, I gotta learn how to sleep less. I was like, never do that. And I moved to Thailand in 1992. And when I did, I had a ceremonial, you know, smashing of my alarm clock in California, before I got on the plane. And I've never used an alarm clock since. And so every single morning, though I wake up early, I wake up when my body tells me to wake up. And I never tried to steal from sleep, to try to get time because I know that that will actually come back to hurt me. So those are some of my experiences with it. Now you're an expert on any other advice?

Pete Alexander 07:11
Well, first of all, a kudos to you. You're a case study of how to do it. Right. You were you know, and listening to your body. The only thing I would add to what you said is, and it's a really good point there for your listeners there. It's not all stress is bad. So there's good stress, which is called us stress. And there is negative stress, the US stress is similar to what you were saying about pressure. If you're happy at work, if you're happy in your relationship, and you're you're there's something that you've got to do that's pressing, that's okay. Because we need you stress in order to get things done. It's what keeps the light or you know, the fire under so important. That's the kind of stress that absolutely we all need. What we want to avoid is negative stress, such as rumination, which is thinking about things in the past that you regret, you have guilt over, and you keep beating yourself up about it, because you can't change it. So why do you keep beating yourself up about it? That's one. And the other one is anxiety over future events. You know, if I, you know, when you think about something that's in the future, that you may or may not be stressful. The problem is, we're usually going to think worst case scenario. And that all comes from fear. And truly the acronym fear stands for fictional evidence appearing real, we do it. Because almost all of this the negative stress we create is self induced. Nobody else does it to us, we do it to ourselves. So yeah, that's additional great add to a

Andrew Stotz 08:53
discussion. So and ladies and gentlemen, you can learn more by going to the show notes and clicking on the links that will connect you with Professor Pete. And now it's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be tell us a bit about the circumstances leading up to it and then tell us your story. Well,

Pete Alexander 09:13
I had a friend who said, I have a buddy who's got some awesome real estate opportunities and it's a once in a lifetime thing. And so I heard oh my gosh, real estate you can't lose on real estate right? So let me know when you want to know.

Andrew Stotz 09:41
Oh man real estate. So tell us how it went. Okay.

Pete Alexander 09:46
So basically, the deal was that my friend had this guy for so I was living in California, similar to I guess dealer and this is back in 2001 One. So my buddy coordinates for all of his friends who are interested in investing in real estate to have this guy who ran a property management company out of Arizona. And he came in and he talked to us about, okay, there's this really great deal. The federal government is offering houses for 1% down, because these houses were mortgage to military personnel who got moved. And so now the houses were open and vacant, and they had inventory and they had to get rid of them. This is great. And so they had these different brochures on the different houses and how, you know, you have to invest this much down and you'd be able to make this kind of cash flow because in addition to being a real estate agent, they were a property manager and they'd be able to get renters for you and and what a great deal because you don't have to put much money down and then you'll have the renter, pay your mortgage for you No problem, it's going to be a cat Miss kind of opportunity. So my wife and I go ahead and take a mortgage out second mortgage out on the house invest 100 grand into this opportunity. And lo and behold, we ended up with three houses in the Phoenix area, and two houses in the Las Vegas area, because there was a mixup in what the property manager said they thought we wanted and what they bid on for us. So now we had five houses. And we believe or not, we only physically saw one of those five houses before that up with it. And that one house was the only one that we didn't lose money on. The other four, were an absolute disaster. The so three of the four of them, we had almost impossible to rent, because the property manager, their office for both Las Vegas and Phoenix, relative to these houses, was so far away, that people who wanted to go look at it, they weren't gonna drive to a property manager and then go to the house, etc. So logistically, it didn't work. And then the other thing was the property managers would not respond, if even we had an opportunity to have a renter in there, they wouldn't even respond to any issues, anything like that. So people would get fed up and actually leave the house and then leave the house in a mess. And guess what you're on the hook for all the damage to the house and, and the cost to to get it rented again. So here we were, with five mortgages. And these were full price mortgages. It wasn't super deals on the houses, the whole deal was you could get into the house for a low money down. But guess what that means it's a full Frage mortgage on each one. And so this was a cash flow nightmare. And it just it was a disaster from the start. And it took us years to recover from that disaster. And it just Ignite. I still own other real estate. But it taught me some great lessons.

Andrew Stotz 13:58
Why don't we go into those? I think that would be so fascinating to learn, because definitely can help people who are in that type of situation.

Pete Alexander 14:06
Yeah, so the first first thing that I would say and this is for any kind of investing as if it seems too good to be true. It is. That's number one. Number two, the I didn't never realized, you know, the so in the real estate market. If you're planning to have investment properties, where are you going to have people leasing the house. Make sure that if you're going to have a property manager, make sure that property manager has great reviews and is proactive and close to your property. Because you know, I think property managers work great in certain situations. I know for me, I certainly didn't want to get the phone call in the middle of The night that the toilets broken or something. So it's, you know, you really want to have that as long as it's a good company. So don't just assume that now that you have the property that you know that the property location is just as important as the property manager capability. That's clear. Yeah, tiller. Got it. And the other thing that I learned was that really do your research on the markets you're investing in? What's the trends? as well as what is the situation in terms of landlord versus renters? Because in Las Vegas, that was all a horrible place to be a landlord, because guess what, it's a vagabond kind of renters market. And you get these people who come in, destroy your property and take off and you can't do anything about it. Because the state doesn't, if there's no nothing in the state that really does any of that they're not going to hurt landlords. So those things, where are all big lessons that I learned? And, you know, I, you know, I use that moving forward. So I don't have that situation now. Thank goodness.

Andrew Stotz 16:22
Yeah. Well, let me summarize what I took away from your story. And let me know if I missed anything. I mean, there's a few things that I think about. The first one is that, you know, everybody talks about passive income, but real estate's not really passive, there's a lot of work involved. And then you talk about the idea of, you know, getting the right property manager, and, you know, having them close by, and they've got a lot of work to do, you know, so and if you can't find the right one that works is going to come down to you. And that's another thing. And the other, the other aspect that it made me realize is, you know, just to constantly remember, the quiddity, and legality, you know, the benefit of investing in the stock market, as an example is that there's ample liquidity, if you want to get out of something, you can do it. Also, the legal structure is generally in your favor. Companies are required to file certain statements, and they're required to behave in a certain way. And sometimes they don't, and there can be violations and all that, but the legal system is in your favor. And here, you know, what you're mentioning is the fact that, you know, in some ways, you know, as a renter, you could be at a disadvantage. And that that is a major thing. And I think that those are probably the biggest things that I take away from it, and particularly keeping liquid as much as possible. Anything you'd add to that,

Pete Alexander 17:41
I would add one other thing, when you start doing your calculations on how much you know, you're going to get in rent, versus the mortgage cost and taxes. The other thing that you have to factor in is factor in a much higher amount for maintenance. Because there were things that I never expected, I had two houses, believe it or not, that had the air conditioning units stolen. And, you know, you don't expect that to happen. And so I had, I had one house that had a pool, and I paid for a fence to be put around the pool for safety purposes. And I had the renter take that fence down, because he didn't like the look of it. And so, you know, that was that expense, I had to end up putting it back. And that cost almost as much because they cut the base of the fence down. So there you know, there's just crazy things that you just even if you do a background check on you don't know until the persons in that. So if they're going to be a real good renter or not, and you just have to plan for the worst, so that you don't get hit with expenses where it's just crazy. And so those are the things you have to plan as well for the cashflow.

Andrew Stotz 19:14
Yeah, I remember trying to rent out one of the condos I bought here in Thailand. And it was just so much trouble that I realized that I just don't want to do that business. It's just not my business that I want to do. And I sold that condo and I never bought another rental place because I just knew that wasn't for me. So based upon what you've learned from this story and what you continue to learn in your life, what action would you recommend our listeners take to avoid suffering the same fate?

Pete Alexander 19:41
Do your homework, if you have money to invest, consider real estate, consider stocks, whatever it is, but remember that if it sounds too good to be true, it absolutely is.

Andrew Stotz 19:56
All right, last question. What's your number one goal for the next 12 months

Pete Alexander 20:00
Well, I've been asked by many people to do an online course. And so I'll actually be launching a 30 day stress Buster challenge starting next month, and I'll be offering it every couple of months. That's my number one goal to make sure that that is successful over the next 12 months.

Andrew Stotz 20:20
All right, well, that's exciting. And we'll have links to that and everything you need to get in touch with Professor Pete on the show notes so that you can either take advantage of that or other resources that he has. So listeners there you haven't another story of loss to keep you winning. Remember to go to my worst investment ever.com. and claim your discount on the course that excites you the most. And as we conclude, Professor Pete, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience? No, but

Pete Alexander 21:04
I just want to thank you, Andrew, and for your listeners for their time. It's been a great pleasure being on the show.

Andrew Stotz 21:10
Thanks for sharing. We learn a lot. And that's a wrap on another great story to help us create, grow and most importantly, protect our well fellow risk takers. This is your worst podcast host Andrew Stotz saying. I'll see you on the upside.