Don’t Buy Real Estate This Way (Our Story: Part 1)

The making of a real
estate investing team. It’s our story. That’s today’s show. Let’s get into it. Hey, everyone. I’m Clayton Morris. I’m Natali Morris. And together, we are a real
estate investing family. Welcome to the show. If you’re new to
the show, we thought this is a great time to kick
off the brand new year to talk about our journey and
how we got where we are. If you’re listening to this
show; if you’re just starting; or if you have many
episodes under your belt, but you really don’t
know where we came from, what makes us an authority
on real estate investing; we thought we’re
going to take you through a series of
episodes that really catalog our failures, the things that
we’ve overcome in the past, and how we ultimately
got where we are. And we’re going to do,
I think, five episodes. Is that right? That is correct, that’s right. And so happy new
year, everybody. We figured that we
may get some people– I know for my own
website,, I’ve had a lot of
newsletter sign ups. So I feel like there
are a lot of people who are getting serious
about their finances in 2018 and are ready to rock. And Clayton and I had decided
that in 2018, we really want to inspire other
people to figure out how to get to financial freedom. Because 2017 was
a big year for us. We hit financial freedom. Clayton stuck it to the
man and left his day job. It was an amazing time,
and so we thought, how can we help other
families do what we’re doing? So we always share
information on how we’re investing this
way or that way, how we’re getting
different deals. We do that all the
time, week after week. But we thought,
well, maybe we’ll get some new people who
will come to our channel and think, why do I
trust these people? Who are they? What’s their story? So we felt like it’d be
a good time to refer you, even if maybe later
down the year, people say, who
are these people, do I really think these
people are worth listening to, to give you our
story so that you know why you’re following
us, where we’ve been, how we got here. Because again, like I
said, we are a family that has hit financial freedom. Now neither of us has to work
because we have invested so wisely in passive income through
buy and hold real estate. We now own about 50
properties we cash flow around $40,000 a month. And so, we’ve made
it our aim to share this success with other people
so that other people can do this too. Isn’t that right,
my loving darling? That’s right. And she’s turning
over a new leaf. She’s not going to be as bossy
this year, which is great. I’m super excited about that. I’m super excited. We’re hunkered down. It’s actually like
negative eight degrees out right now in a lot
of parts of the country. We’ve got some hot tea. So I’m excited to
talk about this. And right before
the holidays, I was very lucky to spend some time– I spent about three days
with the great author of Rich Dad, Poor
Dad, Robert Kiyosaki, and had dinner at his home,
spent a lot of time with him. And one of the things he
talked about, he kept saying, is that Clayton, you’re an
educator, you’re a teacher. The things that you and
your wife have accomplished, that is what separates you
from posers, from fakers, that you are really doing it. You and Natali have really
built this passive income. Posers. Well really, I
mean, there’s a lot of people in all kinds
of businesses who– for instance, he was joking. He’s like, you know,
there are accountants that teach accounting
at colleges that have never been an accountant. So do you want to get
instruction as a student from someone who’s never
been an accountant? Do you want to learn
law from a person who’s never been a lawyer? This happens at colleges. This happens in schools. And so what he said
was, because we’ve been through it, because we’re
actively buying properties, that we are continuing
to build this portfolio. This isn’t something
we’ve done five years ago. Natali and I are constantly
analyzing deals and deciding what’s going to be
our next purchase, and we want to
help you get there. But we thought it be
helpful to kind of go back to the beginning and kind of
start with our challenges. So over the next– we’re
going to do five episodes around this, and these five
episodes will look like this. We’ll talk about our
failures, our challenges, the things that we didn’t know,
the things I wish we did now. Episode two, we’re going to
talk about our turning points, losing jobs, all that
kind of craziness. Number three, we’re going
to talk about a plan, one of the most
important episodes I think will probably
help you tremendously, and what that plan
looks like to help you grow in your real
estate investing journey. Number four, start
buying properties. That’s going to be episode four. We’ll talk to you about
all the different mechanics and the things we use
to buy properties. There’s a lot of
different tools, and we’ll take you through them. In episode five, we get
all of our ducks in a row. That is really the
advanced ninja strategies that we want to talk about,
namely your legal team, taxes, and those extra really
advanced things, holding companies and
trusts and captive insurance and all kinds of
other stuff that we’ll go in on that episode. OK, yes. So let’s start with
our challenges. We will hope that
throughout this journey you like us, for one. What if people don’t like us? Well, that’s possible. There are plenty of
people that don’t like us. I guess that’s all right. That’s all right, too. Howard Stern has made a career
out of people not liking him. I think people– well, OK. I don’t want to go on a
tangent about Howard Stern. But yes, and then hopefully find
this to be something relatable, because I’m sure in
our story, you’ll find some kind of commonality,
somewhere that you’ve been. So Clayton and I met on
Fox and Friends in 2008. It was March of 2008,
so almost 10 years ago. Yeah, I used to
be in television. If you didn’t know
that, I used to be a news anchor in television
at the number one network in the world,
if you can believe that. Oh, were you really? Because I was on television too. On the number one
show in the world. That’s so impressive. We have really
impressive careers. No, if someone’s new to the
channel and they’re like, oh, I didn’t know
you worked in TV. Who are you clowns? So anyway, yes,
worked in television. And you were a
guest on the show, and that’s how we met in
this crazy, crazy journey. We could drop a clip
in here, but we won’t, because it’s embarrassing. It’s 10 years ago. So yes, we do have
it on video though. We showed it to our kids. We said, that’s what
mommy and daddy met. But OK, that is a tangent. So we both had jobs. He was a news anchor on Fox. I was a host what at the
time was CNET TV, later on became CBS Interactive. So he had a show, I had a show. We both hosted news shows. And we did really well
in terms of paychecks. We both made six figures. We both had finally
made it to New York. We both got to New York
in January of 2008. So right at the same
time, separately, we had made it to the number
one market in the country. We’re there. Everything should
have been great. Now both of us, though,
unbeknownst to each other, had some experience as
real estate investors. Clayton, talk about how
you sort of knocked around as a real estate investor
early in your career. And this is– I feel like that’s a really
good term for what you did. Knock around? Let me this. Knocked around, like– Yeah. –as opposed to knocked
up, but knocked around. No, that happened later. You didn’t knock up any real
estate as far as I know. No, I didn’t knock
up any real estate. That might have been more But you’re just kind of
like a, OK, I’ll try this, I’ll try this. And Clayton got burned a lot. It was brutal. Let’s be honest, it was brutal. All right, tell the
story from soup to nuts. OK, so from soup to nuts,
and not knocking up. Starting in Florida. Yeah. So when I started in Florida,
I got my first house. I bought my first single-family
residence in 2005, I guess, well before the crash. And it was back then when you
can get like 100% financing and have closing costs
rolled into the closing. So you were really getting like
103% financing, because you didn’t pay a dime really. So I bought a one-bedroom
condo on in a condo complex. Again, a great lesson. I’ll never buy an investment
property in a condo complex again because of the
Homeowners’ Association. In fact, I’ve got a
great video right here on the channel about– on our YouTube channel,
specifically– on HOAs and why to avoid them. So check that out. However, so I bought
this one-bedroom condo. It was like a 1970s-style deal. I paid like $74,000
for it at the time. And it was on a golf
course in Orlando. And I started doing
all the work myself. I was ripping out dry wall. I was pulling out
old light boxes, like 1970s light boxes
that were sort of recessed lighting in the kitchen. I painted cabinets. So I was doing spackling myself. I remember churning the
spackle in cement with a stick, and oh, that was
brutal, mudding it as they call it, mixing the mud. Did the bathroom myself, paint,
ripped out old wallpaper, like 1970s textured
wallpaper, did all that. Wallpaper’s back, by the way. You needn’t have done that. I should have just kept it. You should have just waited. Yeah, because it’s
now back in fashion. We just did some wallpaper
here in our primary residence. I’m about to– that’s
why this room looks like this, because I’m
about to wallpaper these two walls as accent walls. So if you’re like, why does
that girl work in a basement? Oh, you just wait. By episode five, this is
going to look amazing. I can’t wait, because going into
her office is like a nightmare. All right, and so I bought
that one-bedroom condo. But then next door, a
woman had passed away. She lived there for
like 30 years, and I– I think you said that a
little too enthusiastically. It was so exciting. She passed away. No, she was there for like
30 years, she smoked heavily, and she passed away. I never met her. I’d never even seen her. And she lived in a two-bedroom
condo next door, same setup, ’70s-style, she’d never upgraded
it at all, same rigmarole. Well, this was my first entrance
into real estate investing. And I realized then to find
an off-market property, sort of a wholesale deal that
I could add value to. I didn’t know it at the
time, but that’s really what happened. And I bought this
property from the family. They inherited this thing. They lived thousands
of miles away. Their grandmother passes away. They don’t know what
to do with this thing. She smoked for 30 years. The walls are
covered in nicotine. I mean, literally, it took
me like 5 coats of primer even to get the stuff gone. I had to clean out– this furnace was just
filled with tobacco. It was just nasty. All new carpet I had to put in,
cabinets, I did it all myself. So meanwhile, I’m working
in morning television down there in Florida. I was up at 2:30 in the morning. And I would come home around
noon, try to catch a nap, and then I’d work all night. I be over there until
midnight sometimes with music on in the background
and just trying to work on this thing
to try to sell it. I was going to flip it. Now, I didn’t know any better. Right. And I got 100% financing
on this thing too. And literally– So two lessons we’re
going to learn later is, one, the inefficiency
of not being an expert and not having a team and trying
to do this yourself, and two, investing to flip. We’ll get there. Yeah. Right, OK. Being a flipper when you
don’t know what you’re doing– and that’s a paycheck. Again, flipping is a paycheck. So if you’re thinking about
getting into the flipping game and you’re going to spend
eight months on a rehab and then the market
takes a dump, suddenly you’re left holding
a property that you’ve got financing on,
and then you’re going to try to flip it to
some FHA buyer with kids. Woof. So be careful. And I don’t do that anymore,
but it’s a lesson I learned. So what I did was I sold that
property and the other one literally within the same week. I got two offers, but I was
going like a month and a half without any offers, and
I was starting to panic. Wait, I thought you
lived in the first one. I did, but then
I just was moving to a house around the corner,
an actual three-bedroom house that I ended up going
through a foreclosure on. Just keeps getting better. It was great. So anyway, these two
properties I sell at right before the crash happened. And I got– I was panicking. I wasn’t having any offers. And then suddenly, within
two days, the same afternoon, my realtor calls me and says
we’ve got an offer on both. I said from the same person? He said no, two
different buyers. I was like, on the same day? I said, yes, I’ll take it. So on the first one, I sold
it for like 110, I think. 74,000, I sold it for
like 110 or something. And then the other one,
I had bought it for 110, and I think I sold
it for like 130. So what was that? I made like 40,000 or
50,000, something like that. For how many months work? Yeah, for a number
of months work. I lived in the one for
about for about a year. No, two years. So that one, actually, I
didn’t have to pay any capital gains on, the whole nine yards. So anyway, two
properties I sold, I made a little
profit, $50,000, great. Then I took that money
and I invested it in some speculative land
project in North Carolina. And it was, again, why I
never buy speculative crap. I buy real properties that exist
that I know I can add value to and that will cash flow. So lesson learned, I invested in
some Phil Mickelson golf course community BS in North Carolina,
because a buddy of mine had done real estate before. He was a realtor
out in California. He was like, hey,
we should do this. OK, all right. So– But it was a friend
of yours, right, that brought you this opportunity. “Opportunity.” Right. He had gone– he was
friends with the guy that brought him the opportunity. This guy had gone in on
this construc– new build. They were building these
log cabins in the woods with a Phil Mickelson
golf course and a lodge at the center of
it, and they were going to build it in
like three phases. But these are things you
never intended to live in? You intended to buy, and they
were A-class properties, right? They were more than A-class. They were supposed to be huge. They were going
to be luxury, yes. And here’s the key. I was going to flip them. So I was buying it with
a construction loan from the builder for like– I had to put down 30. It was in the 270s,
because this was something we still had to
deal with when we got married. I remember exactly
how much it was, yeah. So I put down 30, and then I
financed like the rest of it. And then, I was going to sell
it for like 370 or something. Like, that sounded great. And guess what? The market collapsed and
the builder pulled out. Phil Mickelson pulled out. The golf course never got built. Damn you, Phil Mickelson! It was just his name
associated with the thing, and I think he was going to
design the course from what I remember. But they had a
really snazzy website and had like
trickling water falls through this North Carolina
forest and all this stuff. And it was all speculative. It didn’t exist. It was on the backs of all
these investors ponying up tons of money in these three phases. So I was in phase one. That never got built. I think
I owned the piece of land that I overpaid $30,000 for. The land was probably worth
$1,000 or $5,000 or something. Right. I ended up going through a
foreclosure on the whole thing, or judgment. We ended up working with
a lawyer to pay it down. So I ended up being saddled
with this big, big amount that I had to pay
off on this thing, and it was just terrible. I mean, it was like
lesson learned. It was because of
that deal that I– oh, no. I also invested in a
thing in Fort Myers. I bought a piece of land. Now, this was not going
to be as A-class as this. It was a B-class. I bought a piece of land
and construction loan. They were going to build a whole
new subdivision in Fort Myers. So my same friend brought
me this deal as well through his same friend. We both went– he bought
like three of them. I bought one, thank god. And that also went belly-up. And the builders backed out. These homes that
I was going to– I was buying them for
like 110, and they were going to be sold for 170. Guess what? It didn’t happen. It went belly-up. But guess who was stuck holding
a loan on this big property that didn’t exist? It was a construction loan,
and the banks want their money. And the builder’s gone
there’s no recoup. So what did I do? I had to go through a
deficiency judgment. And I woke up one morning when
I was at Fox, came into work, and my bank account was frozen. I went downstairs to
buy a cup of coffee, and I couldn’t buy coffee. My debit card didn’t even work. And I came upstairs
to my office desk. Now, here I am in Manhattan
at the number one network in the world, and I couldn’t– Making six figures. And I couldn’t even buy coffee. And I went up to the
computer, and I was shaking. I was like something’s
wrong with my account. I don’t know what’s going on. And I log in, and my
bank account was negative and it was red. I’ve never seen it red before,
but like the numbers were red and it was frozen. Oh yeah, that happens. That happens. So it was frozen. I couldn’t buy coffee
and I panicked. But then, I took a deep breath,
I closed my eyes at my desk and I said, you know what? It can’t get any
worse than this. And that was a
huge moment for me, because I realized
now I’m going to have to get creative with whatever
and claw my way out of this. But this was around the time
not long after we had met. And so, I knew about
the North Carolina stuff that was crumbling to bits. I knew about the Fort Myers. But also, the home that
you had lived in was also– you thought that
you could sell that, or you thought that you
could rent that out, and then the market– this was 2008-2009,
so no home in Florida was worth anything, basically. I mean, that’s an
exaggeration, but these are two homes in
Florida, one that you had tried to sell so
that you could move up to a different job. You had moved up markets, and
you couldn’t sell that one. And so that one was also– you never considered
renting that one? Oh, no. So I tried– so you’re right. So I sold those two condos. I upgraded. I moved to this
three-bedroom that was a brand new construction. It was just built, so it was the
best house in the neighborhood. Right. And the builder– But that’s the problem
with those markets is that they’re so saturated
with new construction. Those sort of Phoenix,
Las Vegas, Florida, there’s new buildings,
new complexes, everywhere. Well, that’s what happened
in downtown Orlando, which is they built all of these
to sell, these condos, and right as the
collapse happened they had to turn them into
apartments because no one– they were way overpriced
condos in downtown Orlando, and they couldn’t sell them. Right. But this particular neighborhood
was built in the 1970s. So this was like the best
house now in this neighborhood. It was a vacant piece of land. The builder actually built
it for his best friend. So he did a fantastic job
on it, and then the friend had a heart attack
and couldn’t move. He was incapacitated and
then couldn’t buy it. And so, we swept in, and
he said, yeah, I’m happy. I’d like to close it quickly. And so we negotiated,
I ended up getting what I thought was a good deal. But it wasn’t subdivision
like an HOA-type? No, no. It was just a normal
house in a subdivision. It wasn’t in a condo complex. Right, OK. So it was home. It was an actual physical
home, a single-family home with a yard and sprinklers
and everything else. And so I paid whatever
it was, like 270 for it, or 264 and then
closing costs and all that. Yeah. So it was like 270. I got a loan, another 100%
financed loan, of course, back then. So you were underwater. I remember, actually, you
had just started at Fox, and you were
underwater with this. And at the time, Donald
Trump was coming in and doing real estate
there, just sort of business-type
segments in Fox. He had no political
ambitions back then. And you were talking to
him about how you were underwater with this house. You still had the mortgage. And remember, he gave
you advice on this. His advice was to walk away,
was to foreclose on it, stop paying the mortgage. Isn’t that– didn’t
he say that to you? He did. You said that, yeah. He said that to
me in the hallway. Isn’t that amazing? Yeah. He told me, he goes, walk away. He goes, it’s just business,
don’t get emotional about it. And you’re like, what about
my credit and all that? He was like, that can be fixed. That can be fixed
later, basically. Like, that was sort
of his thing is like– Right. You walk away from it. So I don’t know how I
feel about that advice. I never actually really
sat down and reflected on that piece of advice. Well, I can tell you
how I feel about that. OK, tell me how you feel. I’m curious of your take,
because then I ended up– let me paint the rest
of this picture, which is I went through, then,
a foreclosure on it. Now, I was going to work
with the bank on a short sale on this property. Now, I did try to rent it. I moved to Philadelphia,
and I was having my realtor down there try to rent it. Now, my mortgage was
like $2,500 a month. This is why you don’t buy
A-class properties, folks, for investment properties. We have a whole series
of podcasts and videos talking about C and
B-class properties. We’re going to get there. We’re going to get there. I promise, honey. But when a property like
this in a market like that goes via the people that lose
their jobs or have to move live in A-class neighborhoods. And so suddenly, this thing that
I was paying a $2,500 a month mortgage on, now the renter
who was going to rent it– we actually got a client or a
tenant who was interested in it through the realtor,
but they had it listed for $1,300 a month for rent. Well, how does that look now? I’m paying or $2,500
a month mortgage and renting it for
$1,300 a month. Does that make any sense? No. So that’s bad business. So I just said, no, I
can’t rent that, I’ve got to try to sell it. We had it on the market
listed, but now, that house wasn’t going to be worth 260. Now it was worth like
maybe 200, maybe 190. So no one’s going to pay
260, but that’s still what I owed on it. So Donald Trump’s
advice then was– So in this Donald
Trump way of thinking, I kind of understand, and
part of me is horrified. That you agree with him? No, no, no. And I don’t want to alienate
people who are fans of his, but that advice cost us a lot. And there was– and
you were completely– already you felt like– you were in this stage. You were– like, Clayton
is a boy scout-type person. Like, he’s a pleaser. He tries really hard to
fulfill his obligations. So this was something
that gave you permission to do something that I don’t
think you otherwise would have done, but you were drowning. And so, you were kind of like,
well, I can maybe take a loss. I can maybe wait. But life in New York
was too expensive. You weren’t sure how
to make it all work. You still had to
pay this mortgage for this property that was
getting– it was certainly not a performing asset. And so, you decided,
because you were already struggling in these
other ways, that you had to just sort of like, well,
I’ll just walk away from this. And I remember you telling
the story to your parents, to me, to other people
around you, saying, Donald Trump told
me that this was OK. Because he was someone
respectable in the real estate investment business. And so, it gave you
permission to sort of– It gave authority. I mean, look– Right. –here was like the
real estate magnate. And I don’t think we would
ever tell somebody this. Because then we went– when we
wanted to move out of Manhattan and stop renting our
apartment, but actually buy a house because
we had children, we couldn’t qualify
for a loan because you had this foreclosure and
I had just left my job. We’ll get around
to my story later. But then it caused us all of
these kinds of pain points for us personally. For all these things that
we wanted for ourselves, for a house, for a car, for
all of these types of things, your credit was destroyed. And people would always
come with this mortgage. The investments you were able
to come to settlements with, but this sort of stick
your head in the sand and walk away from
a deal, I can’t imagine we would ever tell
somebody this on this podcast. Like, I have a
non-performing asset and I’d like to otherwise invest
and buy things for myself, and we would say, walk
away from that one. We’d get sued if we did that. I mean, we’d get– I can’t imagine that
we would do that. And so, I don’t blame Donald
Trump for it, but I don’t– I don’t really blame you for it. Like, you did it. You didn’t know any better. You were in a bad
place in your life. And it’s easy to Monday
morning quarterback and say, you should have done
this, that, or the other. But I’m saying right
now, how we feel as authoritative real
estate investors, I don’t think that
was good advice. That’s what I’m going to say. Right. And it’s very easy in
a commercial break, standing in a hallway, if
you’re Donald Trump, to just be like, yeah, just
walk away from it, don’t get emotional about
it, it’s just business. And what are the
ramifications of that? Well, the ramifications
are, then guess what? My– I was trying to work
with the bank on a short sale. So I didn’t fully
take his advice. I actually tried to work with
the bank on a short sale. And it was at a time when we
found out that banks didn’t– one hand at the bank didn’t know
what the other hand was doing. Yeah, that was a huge problem. Right. And we know this to be a fact. 60 Minutes has
done pieces on it. And so what happened is– and
I don’t remember the bank even at the time– I don’t remember. But anyway, I was
working with them to just get this
thing as a short sale to try to lower its value
so that I could at least get the mortgage realigned, maybe
sell it short, whatever. I’d take the hit on my
credit, but at least I wouldn’t have to foreclose
on it, the whole nine yards. And then it got sold
at share of sale. But let’s pretend that we
had viewers who came to us and said, what should I do? I have this issue. Well, number one,
we would say you need to reach out to the
law firms that we recommend. You need to talk with
your accountants. We are not financial advisors. OK, but let’s pretend
it’s a friend. OK, friend. So a friend comes to us– Who’s not going to sue us. Right. Or my sister, or your
sister, or whatever. But in hindsight,
what would have been– What would we have said? Or, what would we have done
with this amount of experience? And I do want to say
that I am exceedingly grateful for that experience. Because Clayton couldn’t get a
loan, we never went to a bank to begin real estate investment,
and that was great for us. That ended up being
great, because if we had good credit
and great jobs, we would have learned what I think
would have been the wrong way. And so, these challenges that
forced us to learn what I think is the right way
to learn all kinds of alternative creative
investment strategies, which I’m so thankful for. But if we could have
done that separately, yes, we would have
worked with the bank. We might have invited
other investors in on our deal to wait out. There’s all kinds
of creative ways to approach your deals
without losing your integrity. You didn’t have to do that
without wrecking your credit, without all these things. Now we’re seven years past it. So we’re in a place
where we can build now. But that was really
scary, and it was– we didn’t know any better. There was a lot
of naivete there. So yeah. And from a perspective of,
oh, I’m marrying this guy, his credit’s in the
toilet, I feel like I was pretty good about it. Like, I wasn’t overly
scared, because I had good credit and
a six figure job too, and I felt like we could fix it. I felt like, OK,
we’ll build from here. We’ll take anything on. No. And I remember feeling that the
level of confidence from you was incredibly empowering,
because it was like, OK, we can get through this. And that also tells you
about where we came from. I came from the real
poor dad philosophy on wealth building, which is,
your job is how you make money, you get a raise, that’s
how you build wealth, and if you lose a job,
man, you’re out of luck. Holy smokes, you better
hide under the table, because you’re scared now. And I grew up with that. You, on the other hand,
came from at least parents who had real
estate investments. Yeah. You saw your
grandparents living off of their real estate
investments, that were able to spend time
with you as grandparents because their real
estate investments paid for their living. So we kind of came from
these two different worlds. And so, it was
incredibly empowering that we sort of met in that way. And I was able to see
through this cloud of defeat. It was like the lowest point of
my life watching this unfold. Like, oh my God. So we had to buy our first
primary home in my name because Clayton’s
credit was wrecked, and I was the one who had
the credit and the job. Even though he made
twice as much as I did, we couldn’t count his salary. Yeah. I think I even made
like three times as much and we couldn’t
count the salary. Isn’t that crazy? Why are you going to hurt
my feelings like that? No, I’m just saying
it was absurd that the bank was like,
you’re actually a liability. It was not three times as much. It was like 2.5, 2.6. It was twice. OK. Nevertheless, they saw me as a
liability was what my point is. That even with the
additional salary, which was more than enough
to even almost like pay for the house– Can’t you just let me have that? Have that little victory? Just let me have that. OK. It was twice. So yeah, I mean, it’s sad. And it was incredibly
emasculating, and as a man, you feel like, I’ve
got to be the provider, and yet, I can’t even get a loan
because my credit is wrecked. And man, I’ve been
through the wringer. And really, it’s hard to
even see your way out of it. That’s the hard part. You’re trying to really see your
way out of this whole thing, and that’s the
hardest part of it. So yeah, it was a really
difficult, dark time. But the good news is, to your
point, I couldn’t get a loan. We had to be creative. We had to learn. Yeah. And that’s what we
can really talk about in an upcoming episode. I feel like one of the things
we talk about a lot on this show is that any kind of challenge
is usually your opportunity, but we didn’t know
that back then. It felt really exceedingly
challenging and hard. So I’m sure plenty of
people can relate to that. And hopefully you can see
past this sort of failure as a capitalist
or an entrepreneur and not take it
quite so personally, because you can be failing
in one area of your life and be a great person in others. So I feel like our
plan to tell my story is a little too much to
take on in one episode. So maybe we should take
that on in part two, and then just move some of
the talking points down. So we promised you one
sort of plan of action, and we’re going to
change a little bit. You will still get the– We didn’t realize how painful– We didn’t realize how
messed up you were. God, there’s a lot of crap here. You’re a trainwreck. It’s like going through
a therapy session. Right. I didn’t really intend
for this to be this way, but I just do feel like
it’s important to be honest with our audience so
that they can see that they can come out of anything. We don’t hold anything back. I mean, that’s the thing. We’ll talk about
our failures here. We’ll talk about our successes. We’ll talk about our deals. We’ll talk about why
we didn’t do this deal or did do that deal. Because ultimately, we want
you to go out and take action, and on your own terms become
a real estate investor. I totally, totally forgot
about that Donald Trump thing until you– Me too. I forgot about it also. It’s kind crazy. We’ve been through two
crazy years of Donald Trump in the political
news, and we never once thought about this story. Yeah. 10 years ago, it was like 10
years ago that he told me that. It’s crazy. And I have to
reflect more on it. I’m going to think more,
and it might be worth even doing a whole episode
on it, because what would we have done? Like, if someone
came to us and asked us advice on that
particular nugget, how would we have fixed it? How would we have
played that game? I don’t know. Well, Susan
Lassiter-Lyons, who I’ve talked about several
times on this show, she wrote the book
Getting the Money. She’s a very successful
real estate investor. She has about 500 doors. And she talks a lot about
how if you can’t make right with your lenders, then
you go back to them with some kind of
creative solution, and you tell them first. She talks a lot about how your
integrity is your number one currency as an investor. And if people stop trusting
you, then you’re screwed. Right, because she’s raised– I mean, she’s raised over
a billion dollars now. Billions of dollars. And she says, lot of
times, I come to someone, I say, this deal, we’ll do
this and I will pay you back in this amount of time. And then this property
has a main break, or something goes
wrong and it’s not cash flowing the way I
think, and it turns out I’m not going to able to
pay this investor back in this amount of time. So I go back to them and
I let them know first. I don’t want them to come to me. I want to come to them. And I’ll say, this
is what happened. I’m going to extend the amount
of your loan by this much. And you’re going to actually
make more because I’m going to pay you for longer,
because this didn’t– She comes up with some kind
of way to make it right, and she goes in first. And so, if I am
going to choose who– if I’m going to choose my
guru in this situation, I’m going to choose
her over that advice. Yeah. And look, I tried to do that. I went to the bank and I
said, here’s the situation. But you didn’t have the chops. Now I would have
got in their face. I would have showed
up and say, look, you’ve made this much
on me in interest over this amount
of years, and I’m going to change
the terms of this. You’re then going to make this
much instead, which is more, but I need the documentation
right now to say, we’re changing this,
because these are the– It just didn’t happen back then. I mean, this is what
happened with the collapse. The banks were
just a total mess. They didn’t even have
copies of mortgages because they were
robo-signing these things. So I mean, talk about a– But you were a scared
little kid though. I didn’t know the game at all. Right. I didn’t know how you do it. And would have been
the exact same way. I would have like been
on hold for four days. Yeah. I can’t get a hold of anyone. I don’t know who to talk to. Who do I go to? And now, I would have been
like, oh, I’m going to show up and I’m going to make
this right, because I’m a different person
and you are too. Yeah. And so, you would have handled
that completely different, right? Look, yeah. And you’ve read several books. You’ve had a lot of experience,
but the experienced of us just kind of like– I don’t know. We don’t have the right
people on the phone. I don’t know who to talk to. All right. So that’s enough of my pain. It’s like a therapy
session that’s been– I need to put an end to that. So that’s part one of our
story and how painful– all the mistakes that I made
when I first started out in real estate and flipping. So don’t flip, and don’t buy
in speculative land projects. Buy real assets that
actually can cash flow. That’s a huge lesson. That’s one big
bottom line takeaway. And also, don’t be scared
is another big takeaway. Look, I hit rock bottom. I had nothing. I had to be creative
about how I got financing. And I was able to do it. Then, if I can do
it, you can do it. So that should be some
encouraging signs and some news for you in all of this. But we’re going to get back
here on another episode, and we’re going to
talk about, in part two of our story
and our journey, Natalie’s big failures
with real estate investing. It’ll be a much shorter episode. Yeah, much shorter, just
like her salary was. All right. Shut up. We’ll see you next time,
everyone, on the Investing in Real Estate Show. That dig was so unnecessary. But so perfect. Now go out there, take action,
become a real estate investor, and we’ll see you back here
next time on another episode.

100 thoughts on “Don’t Buy Real Estate This Way (Our Story: Part 1)

  1. How do you handle debt properly? I am 30 married with 1 kid. We own a home witch we are paying every month and we are thinking about start a rental business. I have 50k to invest on a rental property but I am afraid of a big debt and not be able to pay it if we are to run out of funds in our vacancy fund that will allocate for that property in case we cant find tenants. I live in Pensacola FL where the houses in a b- class zone range from from 120k to 200k. We do not have much debt besides car payment and few credit cards witch we can pay off if necessary. Also I am considering in becoming a realtor to understand the business better. Thanks for your advice!

  2. I lost my job in Nov of '08 and got my next job after my 2nd phone interview, 10 MONTHS later. I lost my house to foreclosure and it really crashed my credit. I ended up filing bankruptcy in '09 because of corrupt law enforcement (another LONG story), but it certainly killed my ability to work in real estate for many years. I am FINALLY (mostly) past that. I have almost $200k equity in my current house and that bankruptcy falls off my record next year. I found an AWESOME RE opportunity in Arizona that I think is going to completely change my life. It's taken almost 12 years, but I think I'm going to finally be able to break into the real estate investment business. The key is to NEVER GIVE UP, if you keep getting kicked down, just keep working on figuring out a way to get around the obstacles. As we Marines say, adapt and overcome.

  3. He's very quiet and she's loud. Good story, I feel more at ease about investing. Looking forward to listening to more. Thank you.

  4. $40,000 per month cash flow on 50 houses? This makes no sense. They talk about owning lower tier properties that probably average $1200/month rent and they're telling me they pull on average $750 per month from each house? What's the overhead with mortgages, repairs, insurance, etc… I'm smelling BS. The math doesn't add up.

  5. Thanks for mentioning that you were a newscaster. I was going crazy trying to figure out why you seemed so familiar

  6. Really enjoying your videos! Thank you for taking the time to make them. Have an offer in on a 3-plex and duplex. Fingers crossed.

  7. HA!! I thought I saw Clayton on Gutfeld's show before. Didn't put 2 and 2 together. You guys are a great couple, you have that familiar humor that all great couples have.

  8. Foreclosure is just a tool. While people feel bad about doing it, the banksters are the ones that put you in that position.

  9. As a tax preparer with a diverse clientele its hard to find all tax benefits in every area for my clients. You helped me a lot for my clients who invest in real estate. Here are two words I use when I am explaining IRS tax law. Avoidance & Evasion.
    Tax avoidance is Legal. Tax evasion is not. (it is illegal). Keep teaching tax avoidance.

  10. I appreciate your story, but I agree with Donald Trump's advice at the time. I was also an investor at the time and had a house with about $200K in equity. However, in the crash it went down in value at a rate of over $60K per month. I was also a mortgage broker and I can tell you the bank's were not working with anybody.

  11. Admittedly I only have watched a little more than 20 minutes of this so far, but I have to say one thing. You don't need a FICO score at all to get a Mortgage loan. You can go to a company that knows how to do and is willing to do business the old way with Manual Underwriting. Credit scores can be "trashed" and still potentially qualify for a Mortgage from what I've been told.

  12. You talked about speculative investing and how much of a gamble it is. I would say the banks during that time were just as guilty of speculative lending practices, which cost us, the tax payers in the long run. As you said there was more then the one house involved in your debt issues at the time. If it was just the one house and your making six figures, you could have done a short sale and just paid the difference, which would be the correct thing to do given your moral statements. However, I think it sounds like Trump gave you the correct advice at the time based on what he knew.

  13. 🤔He is so cautious for saying wrong thing, legally, so he pauses and ends up fu…g the whole story and advice, so frustrating 😡 or maybe a way to prolong the video for next time, they keep Interrupting each other at crucial moments of advice 😡 uuukhkhkhkh😡😱

  14. Any advice for a guy headed to Detroit this weekend scouting potential properties for long term hold. Good credit but want to pay cash. I'm all ears…….go!

  15. Hey guys great video but if you haven't started doing so already in later videos you really need to normalize your volume – one of you is coming in super quiet then the other one talks over and its crazy loud.

  16. At what point do you consider cash flow? 800dollars a month cashflow per property sounds at least 4x too high. I typically hear of 100 to 200 dollars a month cashflow per door after all expenses. Are you excluding costs such as saving for capital expenditures and maintenance?

  17. It has been our pleasure to come across your videos.
    As of today my wife and I enjoy the way you explain
    your investing success. By the way you guys sound like
    us, I'll explain later. I would like if you could be our mentor. Our bank mortgage is about 80% paid, we've saved enough and can pay off mortgage today with money to spare. We want to do what you guys do but we don't want to make anymore mistakes. Would you be interested ?
    Sincerely, Rocky & Maimi
    Ps. I am a 6 year army veteran and worked as an anesthesia assistant in the OR of three hospitals. Retired.
    Wife is a seasoned travel ICU nurse in US hospitals.

  18. You two are awesome. Thanks for the background. Yes, I did go who are these two and why should I listen? I am in the beginner stage of real estate investing and just trying to learn as much as I can before I jump in. I just started watching this channel and your guys rock. Thanks for you story Clayton. Looking forward to hearing from you up next Natalie!

  19. This is great, however, how do you start when you don't have any money? Where do you get the funds to start? I have always wanted to do this, but I have no income.

  20. I’m a pharmacist! I’m pulling my 401k and buying a few 40k homes. I rebuilt homes as a kid and thought becoming a doctor would be prestigious 🙄I’m not scared of knocking down load walls, putting up headers, anything. Pharmacy is a dead career and mindless as reality tv. Can’t wait! Thank you guys!!

  21. It's the real estate throw down low down! Interesting stuff. I was also affected by the financial meltdown. Fortunately for me, I was not leveraged at all, having bought my first property for cash. It produces 3% of the cost of the property in revenue each month, but the expenses are high because of utilities. The financial meltdown wiped out my job, so it turned out to be my only property. I still have it, and it is performing, so that's a good thing. The rest of my money is now tied up in municipal bonds, but maybe someday I will be "putting some more of my money on the street" (as they would say on he Sopranos).

  22. I was going to start a business. Which meant i was going to be working after work and on my days off.

    Read think and grow rich almost twice.
    Halfway through rich dad poor dad i read how Mr. Kiyosaki mentioned how much work it is to start a business. He's right. I was already dreading it. So…I stopped moving forward on a business I'd been putting together for 2 months.
    Took another serious look at real estate investing. Yes, another.
    Theres something about these Morris folks. I like them. Came across Clayton talking about how to find cheap houses and here I am still 4 days later. Thank you for all the content you post. Makes a nobody feel like can do this. Thank you.

  23. Holy crap… "YOU STOLE MY STORY"…LOL. thats exactly what happened to me, NC golf course community, and property in Fl, defiency judgement, foreclosure, credit loss. wow.. Morris, Im sold.. your story is my story, thank you for this.. it reenergizes me..

  24. Work with the BANK??? Lets keep things in perspective… at the time, the BANKS were not working with anyone.. it wasnt "naivte", it was being reasonable, and the banks werent trying to throw a lifeline. My deal in Florida, I had a cash offer on a shortsale, the bank turned it down… Clayton, you made the right call.. again, Clayton… thanks for sharing.. its empowering…

  25. She keeps cutting him off, reminds me of my wife and I 🙂
    Great couple and real estate educators! One of the best on YouTube

  26. the Trump advice says loads, but reflects how important it is to personally SELECT those advisors you WANT to trust and hold close as journey and navigate through business decisions. Thanks for sharing the story.

  27. I think that women have a different perspective on problem solving. which has a overpowering will to fix something, anything. .Women refuse to admit defeat which can be a major fault. or a major asset. Women will try an fix character flaw in man if they think it fits a long term plan.. ie domestic abusers…drug addicts…con men bad with money..unhireables..immature personalities IE. relationship marriage long or short term. Where men will cut their losses and not commit to fixing a relationship with the same faults. I think you lay too much weight on TRUMPS advise since Clayton was already in a couple of forecloses and while with FOX NEWS had been undergoing a running battle with a failing property/residence. Remember Clayton was surviving solely on his own salary up until his relationship with you. So yes he may have heavily leaned on TRUMPS advise as a life saver in a sea of debt.. But he heavily depended on property advise of his real estate partners. TRUMP properties were vast but were spinning dishes some fall and break. Rockefeller, Blumberg , etc etc when dealing with Bil$ of dollars forecloses happen all the time and it is normal course of business. Who has millions of dollars IE TRUMP Casino NJ to pump into a dying business. This happens in the real world its called life. You cant let it crush you … you get up and rebuild ..Men will cut their losses and live to fight another day. Women refuse financial defeat because of a moral responsibility to family or peer shaming.
    I am following you guys because of the trek you are on and the persistence and lessons learned together .. I can see that Clayton still has painful memories of these times and I appreciate your sharing it.. we can all learn from it but you as his wife seem to blame some obscure advise from TRUMP but not Clayton for making bad financial choices
    But if the economy crashed in 2019 I think that you and Clayton would certainly think of foreclose as a viable option for your self …not as a reflection on your moral character but as a viable financial resolution to a situation that you had no control off. I dont mean to be mean but 50 properties in a crashed economy will force anyone to make drastic steps that should part of any business plan. If I am of base I apologize in advance

  28. I would like to take action but….. and also we live in Hawaii. Property here is like crazy!!! I know you like single family home. But here it is a no way. Do you think I should get a studio instead??

  29. Please don’t put the blame on Trump to make yourself seem like your on some special higher moral ground. Business is business. You borrowed money and it didn’t work out so you defaulted. Big deal move on. Because what you did was continued borrowing money for your future investments. Our government design this business environment that promotes entrepreneurs and investors to take risk and invest. We would not be the country we are today if it wasn’t so. Hence there are laws that allow us legally get out of bad business situations and start over.

  30. I call em wankers, not posers. Sooo true. Had pharmacy professors tell us how it is in in the “real world,” even though they haven’t worked in retail in 30 years, or ever. Love you two!!!!

  31. Trump was right though. It is what it is. You now have good credit and are in good shape. He didn’t say that it would be painless. he said that was an option. Obviously there wasn’t a lot of other options or you wouldn’t have done that. Everything is for a reason and a learning process. It’s always easy to look back and see a better way years later but I don’t know what else you could have done. Looks like it’s been fixed and if you wouldn’t have done that it would have cost a lot of money that you wouldn’t have had to invest. Most real estate investors I’ve heard say they don’t recommend buying your primary residence in most cases. So, the fact that your credit was ruined shouldn’t keep someone who saves and buys buy and hold c class rentals from prospering.

  32. If you want to avoid story time, fast forward to 32:00 ….

    Brief synopsis:

    -Don’t buy flips and try to do all the work yourself. AKA “Sweat equity”
    -Don’t underestimate the value of a team.
    -Condos don’t have the value of a REAL HOME.
    -Invest in REAL properties.
    -New Developments and prime time, Grade A properties carry financial risk. Developers and builders can pull out last minute and leave you with an undeveloped piece of property that you paid too much for.
    -If YOU don’t have credit, team up with someone who DOES.
    -If you get a financial investor for a project that isn’t giving the return you initially planned on… be a stand up gal or guy and humbly go confess the situation to them right away. Be creative with a way to correct the wrong. $$$ Always talks. Period.

    Hope that helps anyone that doesn’t want to listen to the whole thing.

    I personally felt a little frustrated at the end of the video… only because I didn’t learn anything I didn’t already know. I’m hungry to learn more and grow!!! On that note, I think the practical advice could have easily been condensed to “facts” and visuals (bullet points typed out and faded in) with less “story time.”

    Regardless, Blessings to you guys and thank you for taking the time to post and share!

  33. Dave Ramsey's honesty in how he's "been stupid with zeros on the end" is why I listen to him. This video is why I finally hit subscribe for y'all.

    BTW, Trump voter (as opposed to Trump fan… there's a big difference), and I'm still opposed to the advice he gave.

  34. Great video. I never thought anyone would not pay what they owe. I would never walk away. Thanks for the video again.

  35. You are both AWESOME!!
    Thank you for your advice. Bottom line, never give up and be creative. Btw, you both seem to be on the same page or folder…lol

  36. I worked for a major bank in the research department back then and it was absolutely insane. We had to bring in over 30 temps just to fax pw for all the mortgages. We were right in the middle of going digital and so many (I think like over 70% of our docs didn't scan into the correct customers file or scan at all). It was mindblowing how unorganized it was. So much was going on in the market, we were completely unprepared for it. I too lost my 1st home (value went down 74%) and it took them almost 5 years to finally settle the foreclosure. What an expensive lesson learned.

  37. I really enjoy your Channel and I want to keep watching and learning. Based on what you said about what Donald Trump told you; to walk away. I just want to say that I don't believe that Donald Trump meant that you should literally just walk away. I think he was simply saying sometimes we win, sometimes we lose and you should just sell the house and count your losses, move on and learn from it. If I'm understanding things right it sounds to me like there were a couple of mistakes that were made before Donald Trump came into the picture and extended his free advice.(My opinion). Not that you didn't know this already because that's what this video is all about. It's just like when Donald Trump was running for president, he told everyone that Mexico was going to pay for the wall. Some people took that to literally mean that they were going to just simply write out a check for the wall and it would be built. I don't have a college degree and I knew that that was not what he was insinuating. He was simply stating that they are going to pay for it one way or another. And that is exactly what is going on right now with the new trade deals.

  38. He said hey baby tryna go into real estate shawty. She said naw I dont need no man. Then he begged to join her on real estate ventures. Then they became a family. The end.

  39. This is really such a moving story/episode. This is why your channel stands out from other "gurus" out there. Many thanks!

  40. Morris, I like you but you keep making snide remarks about Natalie. I know you're trying to be funny, but dude, you should be nice to her online (and offline for that matter). Other than that, I like you guys and have just started listening. I like what you have to say.

  41. I also made real estate investing mistakes by listening to a friend and his recommendation. I was new to it, and didnt do my own research. Lesson learned

  42. Can I ask a stupid question, since I'm new to this? When you mention using a HELoC to purchase a property – Is that on your OWN privately owned home?

  43. So you blame Donald Trump for the advice to walk away from the mortgage. The problem is he messed everything up himself and there was no other way. If the house probably sold later for 120k if he had not done the foreclosure he would still have to pay 150k. With that debt he would not have been able to buy a car or buy a house either.—It was not the advice—it was the dumb investing.

  44. A short sale is basically the same as a foreclosure
    –you are sticking it to the bank. You lost a ton of money with a bad investment. Thanks for full disclosure..

  45. I love your chemistry and the jabs you take at each other all in love lol. Great information and also entertaining at the same time. Newly subscribed and following

  46. These two are funny, like not so fake lovey dovey but like s real couple and took advise from da Trumpster.

  47. To be fair, it was your lack of knowledge and risk taking in Real Estate that caused you to have such hardships, Trump's advice was accurate for your situation, in that you should have declared bankruptcy or found some other way to divorce yourself from those properties… you are blaming Trump for your own lack of knowledge and poor decision making.

  48. So, what do think about building your own apartments?

    I had been looking into building a new home for my family. I was really interested in a dome home. Through my researching I got put on monolithic domes inc. emailing list. I happened to receive an email from them just a few days ago, when I had just started looking into real estate investing. Their email was aimed at real estate investors building apartments, recommending building monolithic dome apartments. I'm guessing something like that is very risky, but I just wanted to get your opinion.

  49. Natalie is amazing 😍! The perfect woman for the perfect man! Love part one and can't wait to listen to part 2

  50. I had this series of your history bookmarked for a while and just watched this first one, thank you both for doing this. You do well as far as laying it out and not getting too defensive about it. None of us like to admit the "stupid" things we do even to friends, but to do it for tens of thousands of viewers and keep it educational and objective is a big thumbs up. I learned years ago that if I say "I F'd Up" and present a solution it makes life so much easier. AND you do it less often haha. To be known as a straight forward person makes business dealings much easier. On to the next vid in this series.

  51. Clayton & Natalie, I’m one of those people who never heard of you but you both are extremely inspiring. You, like Max Maxwell, provide valuable REI information in a digestible manner. I love your candor.❤️ 👏🏾

  52. 40 properties and harping on Donald's advice over 13 years ago. I strongly disagree with his wife. Creditors don't care. Pay your bills for 15 years and lose your job…they don't care. Serve your country and veterans are losing their homes because their disability benefits are held up in "red tape." This morality and ethics towards creditors is for the birds. If you can pay you should. If you can't walk away and start over. This country is built on playing Chess not Checkers

  53. I stopped watching because the lady "cannot shut up interrupting", let the man tell his story then interact. Typical of some who cannot be part of a conversation without interrupting; so, why even have a podcast.

  54. There's nothing wrong with sweat equity.  Just make sure to observe a few things. (1.)  If you are a doctor and can make more money being a doctor, than using your own sweat equity to improve a residence, then by all means be a doctor and hire the handyman or contractor.  (2.)  Remember that everyone must pay their tuition.  You must pay to learn about drywalling, framing, electrical, plumbing, etc.  Just as much as going to college, or learning to trade on the stock market.   If you do not want to pay your tuition for your own education, then hire someone else to do that job.  (3.) Remember that everyone makes their money differently than you.  They may flip, as they are more talented than you in remodeling.   They may buy and hold an depreciate their properties, while renting them out. Every situation is different.  (3.)  High end properties are not the same as low end properties.  The rents, money investment, and cash flow return is different.   High end properties have a lower cash flow to investment because they just cost more to buy.   Regards

  55. Should we buy your Turnkey Properties? I did and trusted you and you stuck me with $38,000. No wonder you have 50 properties; how many did you stick?
    I really trusted you Clayton and you took my money-sad!

  56. I always thought you looked familiar like I've seen you on TV before. I'm excited about starting my journey as an investor

  57. Natalie is really nice and honestly sincere. Listening to Trump's advice is poisonous. Very dishonest human who proudly uses it to win ( until???)…

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