Ep513: Mark Fidelman – Seek Advice to Avoid Real Estate Mistakes

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 in investing, you must take risks, but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives to reduce risk in your life, go to my worst investment ever.com today and take the risk reduction assessment I've created from a lessons I've learned from all of my guests. It's time you start building wealth the easy way by reducing risk. Fellow risk takers, this is your worst podcast host Andrew Stotz from a Stotz Academy, and I'm here with featured guests, Mark Fidelma. And, Mark, are you ready to join our mission?

Mark Fidelman 00:47
Well, if the mission is improving my investment advice, yes, for sure.

Andrew Stotz 00:53
Well, I think I think I think by you proving you're going to help a lot of people with your story I know. And that's going to be exciting. And you'll also what I find too, after listening to almost 500 stories is that by the time we get to the end of it, it's like we've improved ourselves by going through that story. And so that's, you know, part of what I really enjoy, but let me introduce you to the audience. So, Mark has been named a 2017, top 20 influencers of CMOS by Forbes magazine, a top 25 Social media keynote speaker by Inc. Magazine, and a Huffington Post's top 50, most social CEO, Mark was a columnist for Forbes for four years. And as the author of the book socialized, he also hosts a popular marketing, YouTube channel@youtube.com, fanatics, media mark, take a minute, and tell us about the value that you bring to the world.

Mark Fidelman 01:54
Well, I'd say my value is primarily in helping e commerce and crypto companies improve their marketing and awareness, lead generation and ultimately sales across the board. So that's what I do in a nutshell,

Andrew Stotz 02:09
huh? Yeah, it's, uh, I mean, I guess the pandemic time must have been a boon for that, or is it? A struggle for that? I mean, I know what's happening kind of here in Thailand. But how about with your clients? How has it been over the last year? So with trying to achieve those goals? Well,

Mark Fidelman 02:27
the ones that have moved to e commerce quickly, and you know, hire somebody like me to help them have improved dramatically, because there are proven best practices with E commerce, if they weren't an E commerce company, and tried to become one on their own. Wow. I mean, we've all gone through those painful lessons, I don't know how, if any of them fared well, I'd like to know about it.

Andrew Stotz 02:52
You know, it's, it's interesting. One other thing, I was just talking with a friend about the other day, and we were just talking about how, you know, it's the new age, and it's high tech, and we got mobile devices, we got websites, we got blogs, we go, Google, we got all this stuff. And my friend, a few different friends have conveyed the same exact thing. I'm trying to design an app, and it's so hard to find developers that can make this great app, it's taking two or three different developers, I've had to hire them to restart. I've heard that story. So many times, I've got another friend. I try to do a website, you know, but it just gets more and more difficult to It's hard enough to create the content, but then to try to figure out how to manage that, right? And then, you know, you just go through all of these things, do you think it's getting easier or harder in the tech space? And I'm just curious, your experience with that. And also the value you bring when you get involved with, you know, a company,

Mark Fidelman 03:49
it's definitely getting harder for a couple of reasons. One, that you've already pointed out the resource issue, you know, finding good people to do the right thing, not just people that claim they can, you know, but people that have actually done it and have done it for a long time. And then secondly, because there's more and more people getting into the space, you can expect it to be a lot more competitive. So what are you doing to differentiate yourself? You know, some people outspend the competition, some people do branded branding, some people just do the growth hacks, some people do all of them. And so that it comes down to two things resource issues is if you're looking to reduce risk, and differentiating yourself to your target customer base.

Andrew Stotz 04:36
Yeah, that's that's great points, because you'd think that it gets easier, but actually, it probably gets harder because everybody's getting in the space. It's like the gold. I lived in Los Angeles and I lived in Oakland for a while when I was younger. And I loved reading the story. Actually, the memoirs of William Tecumseh Sherman is fascinating because before he was in the civil war in 19 1860s You know, one, he was in California, in San Francisco, with the army. And he was surveying and he was around the gold rush in 1849. And so he tells the story of what he's observing. And yet, there's just a mad rush. And all of a sudden, what seemed like it was like, easy money super profitable, all of a sudden, he's super competitive. Well, yeah. Now it's time to share your worst investment ever. And since no one goes into their worst investment, thinking it will be. Tell us a bit about the circumstances leading up to then tell us your story.

Mark Fidelman 05:35
Yeah, so I'm going to take you all back to like 2006 2005, when the real estate boom here in the United States was just off the charts. And there's a couple of states, Florida, California, in particular, that were just increasing in value tremendously. And so I decided, because California is too expensive to try the west coast of Florida, in the Naples, for let's see Tampa area, St. Petersburg area. So I started investing there in real estate, and it starts to get real cocky, because everything you touched turned to gold during that period, you know, from 2000, it was 2004 to 2007. And so I'm getting I'm like, I'm thinking I'm the greatest investor ever, because no matter what I touched, turned around and flipped, I made a ton of money on. And so even with warning signs in 2007, that the market was going to change. And boy did it ever, I could continue to plow ahead thinking I'll figure out a way out of it. So and because of the laws, the real estate tax laws, I was doing what's called, I think, a 1061 exchange. And I had to take the profits from the previous projects into the new project, or I was gonna get taxed at a really high tax rate. So that's the stage for my worst investment ever.

Andrew Stotz 07:06
And that's interesting, because, you know, sometimes we do things for tax purposes. And we get kind of misguided thinking our objective is, you know, you know, minimizing taxes, but in this case, so you're getting rolled over, you're rolling over into the next and the next, where did it end? As far as like, what was the final property or properties that you had? And kind of how did it go from there?

Mark Fidelman 07:30
Well, back then, you know, there was a shortage of people that are shortage of housing. And this is specifically in the Tampa area. And so I bought an old apartment building and was going to kind of convert it. And the signs of the market turning are already with us. But I decided to plow ahead anyway, because the numbers were so good. And not understanding buildings built in, I think, the 19 nose thinkers 1890s, I really didn't know what I was getting myself into.

Andrew Stotz 08:06
And, and that type of conversion, I'm assuming is a capital intensive, like, all of a sudden, you're gonna have to put in a lot in addition to what you paid to buy the property or how did that go?

Mark Fidelman 08:16
That's exactly right. So I partnered with a bank that was going to provide the Capital One. And then initially, they started to provide the capital. But when the market had fully turned a year later, and I hadn't met some of the milestones, they cut me off. And so here, I was stuck midway through a kind of conversion project, still having to pay the mortgage, still having tenants in there, but I was about to kick them out. And so at that point, the bank had frozen, you know, its line of credit to help me, you know, continue and fix the conical version. And that just threw everything into disarray. Now, I will note, the reason why things were late was because the city was still backed up from other condo conversion projects. It's not like I had anything to do with it. We were just waiting for the city to approve it. I mean, everything we had done with had been timely. But you know, with market changing in a smaller bank that we were partnered with, they got scared.

Andrew Stotz 09:13
Mm hmm. And, and what was kind of the final, like the moment the worst moment or that worst day that you really were like, I can't keep this going. Something's got to give.

Mark Fidelman 09:26
Well, you know, I put in a request pretty big line of credit request, and they denied it is still within the year, which isn't the timeframe. And you know, then it got pretty nasty. You know, I decided, well, the only way I'm going to get money out of these guys is to sue them because they're not following their own contract. And so I let them know that they were going to be sued. And they basically told me to pound sand. And then the fun began.

Andrew Stotz 09:57
And how did it end? What was the final Don't result.

Mark Fidelman 10:01
Well, we spent two years litigating it. And in the end, the market hadn't turned had the bank only waited a couple more years, it would have turned and they would have been handsomely rewarded. But, so we negotiated a way out of it, I lost a ton of money in the bank lost a ton of money. And it just ended up being a very big failed project.

Andrew Stotz 10:24
And I'm just curious, like, Where were you at, in your own stage of your life? How did this affect, I don't know, confidence, or, you know, like, kind of the direction you thought you were going and that type of Dan, just curious, like, how did that how did that affect it?

Mark Fidelman 10:38
Well, fortunately, we had different investments, like in California versus Florida, but we had pulled out a lot of money. But still, it was a significant impact on our financial situation. And, obviously, when you get into those, your, your relationships tend to suffer, you know, whenever you lose a lot of money. So that was a big impact. I mean, I was young. So you know, I knew I was going to bounce back. But you know, it's, it's never, it never feels good to lose that kind of money. Especially when, you know, it wasn't your necessarily your fault. The two dynamics going on when the market was turning into, you know, the bank got cold feet and didn't execute on what the contract stated they needed to execute on.

Andrew Stotz 11:23
Right, right. So tell us what lessons did you learn from this experience?

Mark Fidelman 11:29
Wow, what do I begin, I mean, let's just stick with real estate. So, you know, know, your market, and I didn't know the market. But I didn't know what it really was going to take in order to convert a building from the night 1880s 1890s or something like that. It was a nightmare, and everything had to be upgraded. And there were certain things that you couldn't see, because they're inside the walls that were impacting, you know, what the condo conversion is gonna look like, we had to put central air into the entire unit, there was all sorts of things that we were just, you know, didn't understand are gonna have to have to happen in order to make it a successful project. So that's the beginning. And then if you look at the market, you know, if, if you have a good feeling the markets gonna turn, and you've paid too much for a project because of a bidding war. You know, you might want a quick fire sale that get out of it. Because you're in for the ride of your life, when the markets going down and you can't control it, it's not like you could buy yourself, bring the market back up. So you got to wait it out. Or you got a fire sale out of it right away. And I didn't heed the warning of everybody around me in Florida, a California markets, they go up and down. But they're not like this, you know, if you look forward, it goes down like this and up like this, California, just like a steady climb and steady goes down. Florida man, people get in and out quickly. Cuz a lot of times real estate in Florida, are people second homes, and they're not they're more willing to let go those second homes than they are they're their first homes. And so things just get hammered quicker, right? That's another lesson. The other lesson is, you know, make sure your spouse is on board, your business partners are on board. Because if you're fighting for this project, nobody else wants to do it. And you know, then you make the wrong decision to move forward with it. You're gonna have egg on your face and lose a lot of trust.

Andrew Stotz 13:37
One last question I have about this is that, you know, one of the lessons I've learned from this podcast from interviewing people, is the difference between intuition and feeling. And that intuition is kind of a fleeting moment. Where, you know, you get that moment of clarity, but then we usually overpower it with our logic and reason, or we overpower it with our emotion, like, yeah, we can do this. And what I've learned, and for the listeners out there, you know, I try to share the idea of really listening to your intuition and trying to capture that moment. Did you have any intuition or any of that kind of, it hit you for just a second and then you overrode it? Or how did that go?

Mark Fidelman 14:25
Let me think about this. Cuz you know, 15 years ago. My ego was so strong Back then I thought, yeah, market could get hit, but I'll figure out a way out of it. Yeah. So my intuition was, there was alarm bells going off because what everyone else was seeing. But I knew this project on paper. And there was a huge, huge return on it. Yeah. But I underestimated the expenses and underestimated the time it would take to get this thing done. And I didn't realize a bank can just violate it. contract and an essay sue me, good luck cylinder bank?

Andrew Stotz 15:05
Well, it's an interesting one. And I think for the listeners out there, you know, Mark was describing the point where you are Kind of, in that excitement of the project and in the confidence of who you are. And you can do this and all that. And this is a good lesson to kind of take, take a moment, meditate, Stop, listen, talk to people give just a little moment for some of that to question. So maybe I'll just add in a couple things that I took away from it. I wrote down Midas Touch, you know, when everything's going up, it's like, bam, you got the Midas touch. And you know, the last year, the last 10 years, have been Midas Touch years. So ladies and gentlemen, be warned, it doesn't always go up. That's the first thing I wrote. The second thing I wrote down was about experience, you know, obviously, we've got to try new things, we've got to do things and expand our experience, like going to another state and all that. But ultimately, you know, the ultimate value that we get, particularly as we get older is we gather experience. So as you gather that experience, make sure you're applying it, some people gather it, they never apply it, but experience is valuable. The other one I wrote down was, I always, you know, you were talking about making sure your partners are on board. And you know, it's a lot of money and all that stuff. And I wrote down that, you know, partnerships, there's usually never a problem in business partnerships, except to times when the company's making money making profit, or when the company's making loss. Otherwise, everything's fine. And, of course, that's all the time. And the last thing I just would highlight is, you know, you remind me of kind of the micro versus the macro. So you were talking about the micro understanding the building the conversion, and all the issues that you were dealing with there. And then the macro was this whole other world of, you know, interest rates in and you've got, you know, FHA and and all of these different organizations from the government, pushing buyers into the market, beating them money. And there's just like this macro thing that sometimes you can't, you may not even know, I know, many things I didn't see when I was younger. And so you've got, but you don't get rewarded for not knowing the macro. And so those are some of the takeaways, actually, it's a lot of things I took away, is there anything you would add to that?

Mark Fidelman 17:30
Well, I would assemble in the future and investment committee of people on a major project, not the minor ones, but the major projects and make sure they got a diverse set of skills that are related to the project and listen to them, gather all the input, and make a decision, because it really is true, you're not smarter than the group of people that have knowledge about a particular field. And so for sure, 100% That's the way I would do it in the future if I decided to pack in. And that's a big F. Yeah.

Andrew Stotz 18:07
Well, you kind of answered my next question, which is what would we want action that you'd recommend that people would take? And I would say that don't be the best one? Yeah, and it's one of the things that I would also say, too, I was going to ask you the question, like, Are you paying them? Are they free? Well, obviously, we, you know, you got to pay people to get real advice. But truthfully, there's some plenty of people that are pretty knowledgeable that are willing to share a little bit, you know, and so, you know, if you feel like for the listeners out there, if you feel like I don't know, anybody or I don't have money to pay, look, you may build your advisory board, or your advisory group, just out of a few people, and you bring your idea to them. Now make sure of course, they know something about that. But I'm so in the spirit of kind of helping someone who's kind of in yours in your situation where they're looking at a property there, they're getting ready to do it. Would you pay? Would you just ask a couple people that, you know, how would you do that?

Mark Fidelman 19:01
I mean, if it's a big project for sure, you'd pay the other big thing I would warn everybody is to make sure you choose a good funding partner, whether it's a bank or somebody else is not going to bail on you. When the time when the going gets tough. That was hard. That was brutal. So that's another lesson to be learned around that but yeah, I would pay I would have easily paid you know, I would have probably spent $5,000 getting advice on something as large as it was. First of all, we probably would have talked me out of it, which would save me a heck of a lot more money.

Andrew Stotz 19:36
You know, it's it's, it's it's interesting that after interviewing so many people I've learned so much and recently I've had a transaction that I've been involved in and my first inclination was I'll do all this you know, myself and with my assistant and you know, it's a no no, no, no, no, no, no. I've learned enough from this podcast, get that darn lawyer that I know that so great at contracts and negotiating and handling The two parties, I, you know, what would he What would he charge us to handle this transaction from zero to complete? And he came back and said, Okay, it's this and I'm like, I don't see that as a huge expense anymore. Whereas before I started the podcast 500 episodes ago, I would have seen it, as you know, oh, my God, I couldn't spend on that. But that's great, great advice. One other question is, like, what's a resource that you'd recommend for our listeners that helped you in business in life, and what's something that you would recommend,

Mark Fidelman 20:33
I would recommend joining a mastermind. I mean, if you're going into investments in real estate, join a real estate mastermind group. And then you get that ongoing, not only do you get your own committee that you can bounce ideas off of, but they'll bring you ideas that you might want to participate interact on. So, you know, group Knowledge is power. And, and I would continue to advise people to go that direction. That's great.

Andrew Stotz 20:59
And also with that I have a mastermind that I am involved in here in Bangkok in so valuable, so valuable, and really, ultimately that that money you would have spent for the advisors, it's quite possible that just by spending to be in that mastermind, and get you the answers. All right, last question. What's your number one goal for the next 12 months?

Mark Fidelman 21:21
My number one, goal? Number one, hmm, um, my number one goal is probably there's just so many I don't even know where to start. I forgot to put something on the top of lotions that must accomplish this, I would say prepare for high inflationary environment. So that's investing in real estate, or whether it's in crypto. Those are two very good strategies for a highly inflationary environment because it says 6%. Now I think it's gonna get worse. So making sure I'm prepared and ready for that.

Andrew Stotz 22:02
That's a challenge. And I believe that's a challenge that everybody's facing right now. And you're, you're actually in two spaces there. That typically can be, you know, a hedge against inflation. Although one thing about real estate, I looking at the stock market all the time, and I'm looking at different asset classes, when I correlate, you know, what's available in the stock market, what's available in the stock markets REITs. And what you find out is that their correlation with they actually don't protect you as much from inflation, because they're kind of contractual obligations, and you can't just, it's not like a 711 can just increase the price. But property land those types of things, I believe, would be more would that be accurate? You think to say that that would be a better inflation hedge or what

Mark Fidelman 22:47
I think real estate's a great inflationary hedge. The only issue is if real estate, interest rates start going up, then less people can afford it, and then it's multi dimensional, but in general, high inflationary environments, you should be in real estate. And now crypto because crypto is not impacted by that. Might. A lot of crypto isn't somewhere, yeah. You're gonna be impacted by

Andrew Stotz 23:13
fascinating Well, listeners, there you have it another story of loss to keep you winning. If you haven't yet taken the risk reduction assessment, I challenge you to go to my worst investment ever.com right now and start building wealth the easy way by reducing risk. Now, as we conclude, Mark, I want to thank you again for joining our mission 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?

Mark Fidelman 23:42
No, just be vigilant overanalyze things, take risks. But I think like we've said here, make sure you mitigate those risks as best you can.

Andrew Stotz 23:53
Great advice and that's a wrap on another great story to help us create, grow and protect our wealth. Remember, ladies and gentlemen, this podcast is about one guest one story one mission to help 1 million people reduce risk in their lives fellow risk takers. This is your worst podcast host Andrew Stotz saying. I'll see you on the upside.