Listen to the Podcast Here:Buy-and-hold investor and podcaster Tyler Sheff tells our host and real estate attorney Scott Smith about one of his worst deals. The property was a Victorian home that Tyler bought during his long-ago house flipping days. Tune into Episode 51 of The Real Estate Nerds Podcast to hear all of the details. Description Useful ResourcesTyler Sheff on the Value of Processes and Sticking With Your TalentsOur host and attorney Scott Smith welcomes “Cashflow Guy” Tyler Sheff to the show. Tyler has chosen to share about one of his worst deals today.[1:00] Scott invites Tyler to share a bit about his background before they dive into his worst deal. Tyler describes himself as a “recovering house flipper” who made a lot of money, and also got hit with a massive tax bill once the money started rolling in in the early-mid 2000s.[2:30] Tyler quips: “Back then I used to think that my charm had an effect on the IRS. Turns out, they don’t really care.” After paying a six-figure tax bill, Tyler resolved to learn more about building wealth and shifted his attention to buy-and-hold investing in 2012.[4:00] Scott asks about the beginnings of Tyler’s worst deal. Tyler opts to introduce it with another side story, pointing out that most of what he does now is teaching others about investing. He negotiated what he thought was a great deal on an off-market fourplex, and had attorneys draft closing paperwork according to a partner’s requests. They closed and began renovations, which essentially doubled the value of the property. Only when he went to sell the building did he realize the other party had never signed their agreement with him. “They literally stole a $400,000 building,” Tyler points out–adding that he did all of the work and saw nothing for it.[7:00] Scott asks Tyler what got him so motivated that he overlooked aspects of due diligence like checking signatures. Tyler points out that, “If you’re smart, you learn your lesson and put systems in place” to avoid repeating mistakes. Tyler believes his biggest failure was ignoring his own systems. Scott agrees that ultimately, a business’s systems are what will allow it to grow.[10:00] Tyler emphasizes the importance of sticking with what you’re good at in investing: “Investors should pick a piece that they’re good at and stick with it.” He and Scott point out that this is partially the role of real estate professionals–to keep investors on the track of looking for new deals or otherwise doing what they do best.[12:00] Tyler points to some of his experience as a licensed real estate agent, and what he does in “realtor mode.” The two investors talk about what a debacle closing becomes when nobody has a good process “checklist.”“Investors should pick a piece that they’re good at and stick with it.” – Tyler SheffA Victorian Dream Home Turned Worst DealScott and Tyler get into the details of the Worst Deal Tyler came onto the show to share today. They go through every twist of what went wrong.[14:00] Scott asks Tyler to set the stage for his worst deal. In 2001, Tyler found a listing that was on the market for $40,000: A 3,000 square foot Victorian home in a nice neighborhood. Tyler believes the property would have been worth roughly $350,000 in “fixed-up condition.” He had one friend front money, while Tyler went out and found opportunities and handled sales. They had a second partner who was a contractor. Together, they were cash-buyers. [16:00] When the young partners arrived on the property the next day, there was a literal crowd. Tyler approached the agent, offered $50,000 and to close in a week, and the deal was as good as done right there. “Deal of the century right? Well, from there it proved otherwise.”[17:30] Tyler had been a police officer in the same town where the property was. One day, he was at the property waiting for a material delivery. Home Depot claimed they had delivered the materials, but provided the wrong address, stating that Tyler’s partner had come in and changed it. Tyler discovered the contracting partner was embezzling from his company. Tyler and the banking partner realized they had been wiped from over $300,000 in the bank down to $10,000. They had the option to sue, but soon realized they couldn’t serve the partner, who had run back to his home country of England.[19:30] The partner who had embezzled from Tyler and his partner attempted to slow actions against him by reporting the pair to to city for his own contracting negligence. However, Tyler and the other partner soon discovered his contracting was part of the con as well. They had never bothered to verify his license because he was a friend.[20:30] The City Inspector comes to the house based on the ex-partner’s report, only for Tyler to realize he knew her from having arrested her son on drug charges. Tyler demanded the City send a new Inspector. However, the first one had already found Termite Damage and the City issued a demolition order.[22:40] Scott recaps Tyler’s story so far which includes: 1. $290,000 literally stolen from him by a partner , 2. A crazed building inspector with a personal vendetta against our dear investor busting up the building in his absence. And all of this took place within about one week.[23:40] Tyler explains how he essentially put every spare dollar into this building for the next few years. It took time, but they solved the property’s problems in small increments, one at a time.[26:20] Scott asks about how Tyler got the City on his side when he wasn’t in a great position and how he developed that relationship. Tyler credit’s brutal honesty–that at no point did he try to lie his way out of his problems–with helping cultivate that relationship. He was also highly respectful in his dealings, albeit blunt that he had a “colossal nightmare” on his hand. [29:30] When Scott expresses amazement at some of the relationships Tyler built under these circumstances, Tyler explains: “I was humble, and I truly believe the best in people.” He also believes most people are generally agreeable face-to-face, and will help you if you’re determined.[31:50] Scott points out that vulnerability and honesty are often the keys to human connection. Tyler makes a parallel to the court system. Scott shares an anecdote that highlights Tyler’s point. What won the case Scott talks about was just reasoning with the judge in a basic, “two guys talking” way.[35:30] Scott wonders if connection is its own kind of revenue. “Absolutely,” Tyler says. “Any time you’re working face-to-face, you’ll be more successful.” [36:30] Tyler’s property ultimately never profited. Proceeds from the sale went towards paying back the partner who acted as the bank. They were proud of the quality of the job they did with the rehab, and he believes the buyers got a great house. “We left it better than we found it,” he says. The Take-Aways: Stick To Your Word and Don’t Make AssumptionsScott and Tyler each share their favorite take-away from Tyler’s Bad Beat story.[38:00] Scott’s take-away is the fact that he credits Tyler’s success with his ability to stick to his word.[38:30] Tyler’s take-away is simple: “Never assume the answers to the questions that you haven’t yet asked.” Scott agrees, and takes it a step further, encouraging investors to hear “no” more times than they think is necessary before accepting it. “I was humble, and I truly believe the best in people.” – Tyler Sheff Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal SolutionsSchedule your personal consultation now.If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at email@example.comAbout Tyler SheffTyler Sheff enjoys life in Tampa Florida, where on top of being a real estate investor and the host of the Cashflow Guys podcast, he is an avid sportsman who loves fishing, hunting, and scuba diving. Tyler enjoys being around people and having great conversations about any subject.Tyler Sheff is a US Army Gulf War Era Veteran, originally earned his Florida real estate license back in year 2000, he concurrently owned and operated a trucking business, worked as a local Police Officer, Charter Captain and Chief Boatswain aboard a US government research ship. In October, 2014 he decided to renew his real estate license in October 2014 in order to supplement his income while helping others learn about real estate investing.Tyler has spent the last few years of his free time learning about investing in real estate and sharing the information he learns with others. Tyler finds that he truly enjoy teaching others and watching them learn.