Tales of a Seattle Real Estate Investor: Epilogue

Seattle EricIn the months since the unexplained disappearance of the Tales of a Seattle Real Estate Investor blog, and the complete radio silence of its author Seattle Eric, many have wondered what ever happened to the one-time Rain City Guide contributor. Since he was arguably Seattle’s most public real estate flipper, openly discussing the ups and downs of his wild ride on the equity spaceship, it was rather strange for him to just up and disappear like he did.

Well, it would seem that my most recent mention of him was finally enough to bring him out of the shadows. Eric emailed me shortly after that post, and gave me the rest of the story. Here it is in his own words, reprinted with permission (with identifying details removed and with silly doctored versions of his avatar added for amusing effect).


After a couple of successful flips in the first half of last year, I quit my job (partially to do real estate, but mostly because after nine years, I felt that I ran out of opportunities to grow) at [anonymous small tech company] where I joined as the 6th employee back in 1998. For the second half of last year, I dabbled in residential real estate sales, and put the last two flips on the market. Here’s what happened:

1) I realized that I’m not a sales person, and I really didn’t like the real estate agent culture. There was lots of back stabbing and lots of uneducated idiots looking for a quick buck. Hey, I admit that all of that save for being uneducated and a back stabber described me.

we lost a combined $80K on them2) Our last two flips (if you remember, West Seattle 2 and Seaview) took six miserable months to sell, and we lost a combined $80K on them. Blah. Though we learned from those mistakes, we decided not to continue doing flips. Too much stress, and too much of a need to be detail oriented… I’m a big picture guy, not a details guy.

At a party in December, I met a former boss who’s a bigwig at [anonymous large tech company]. At this point, I was over real estate (I think I had retired my blog at this point), and gave her the rundown on it (see points 1 & 2 above). She thought my skills and experience would be very useful. I applied, and started there in January.

This year, we’ve been selling off our rental properties in the Puget Sound. We have two left on the market, and hope to be rid of them soon. I also dropped my real estate license, and no longer have access to the MLS.

There you have it. The long and short of it. I’ve been away long enough to take a very objective look at our experience. After buying and holding and/or selling twelve homes in the Puget Sound, we’ll have realized a net profit of around $100K. Would we have done this again? Probably not. Did this kill us on real estate investing? Nope, but I did come to realize that I don’t want the stress of managing the details. Currently, we are investing in syndicates that are buying up apartment complexes (mostly in Texas). This provides cash flow (average is 10%) and an estimated appreciation of 70% over two and five years (two different projects).

Also, we still have four houses in Tulsa, which continue to be a nightmare. The property managers turned out to be downright criminals – stealing our rent money and tenants deposits. I’m working with a new PM company, trying to get traction and tenants. I’ve had to make $1,250 mortgage payments three times with no rental income (that’s $1,250 for all four houses… real estate is cheap there). Once income is stabilized, I’ll have a healthy cash flow (16%). Still, hard to do from so far away.

I had a ton of stock I held ontoThe biggest unexpected boon by far has been the acquisition by [anonymous big tech company] of my old company, [anonymous small tech company]. The purchase price is in the billions. Since I had a ton of stock I held onto (much of it purchased pre-IPO with option prices < 1$), we finally have the financial security that we always wanted, and was one of the reasons we got involved in real estate in the first place.

Now that I’m spending my working time learning about credit card payment fraud and click fraud as part of my new role, I don’t find myself drawn to the local real estate world (i.e. blogs, news, etc.). However, having just returned from a week in Chelan, I am researching possible income producing real estate investments over there.

Regardless of position, I always enjoyed the viewpoints of those looking at the real estate world. The Tim and the bubble folks (non-pejorative) have made some keen observations and backed it with good data. On the flip side, Ardell’s opinions are backed by her lengthy experience and intuition.

Both sides are probably correct in chalking up my (financially) successful experience in real estate to luck. I like this definition of luck, that fits my experience well: Luck is probability taken personally. I was in the right place at the right time, and had the dollars to weather the lengthy holding periods before selling my last two flips. When I started flipping the market was still strong, and the probability of success followed. As the market dipped in areas, my results reflected that.

All in all, a great experience.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

29 comments:

  1. 1
    Peckhammer says:

    “After buying and holding and/or selling twelve homes in the Puget Sound, we’ll have realized a net profit of around $100K.”

    For real? $100K on twelve houses. That’s a horrible return on your investment when you consider your time.

  2. 2
    Joel says:

    So why did you decide to publish the exciting conclusion of your flipping escapades on the Bubble and not on Rain City?

  3. 3
    Lake Hills Renter says:

    Good luck to you, Eric. I’m glad everything is working out.

  4. 4
    rose-colored-coolaid says:

    It seems to me like after one makes a killing on stock options from a small company going public then getting bought out, that one is then able to write off relatively costly experiences as being no big deal. But then, if that were your plan…why go through all the work for an 8k profit per house in real-estate flipping?

  5. 5
    Ubersalad says:

    For real? $100K on twelve houses. That’s a horrible return on your investment when you consider your time.

    um…that’s roughly two years of medium income in Washington state…and that’s “horrible return”?

  6. 6
    MisterBubble says:

    Yes, but how many pink ponies does he have?

  7. 7
    JohnnyBigSpenda says:

    dude. if you were the selling agent on those deals, you would have made more than $100K on 12 houses…

  8. 8
    Peckhammer says:

    “um…that’s roughly two years of medium income in Washington state…and that’s “horrible return”?”

    I wouldn’t get out of bed for two years of medium income in Washington State. It’s roughly equivalent to one year’s passive income in my mutual fund portfolio (up until a couple weeks ago anyway).

    I did “flip” one house in Florida. Had it built in 2000 for $100K, rented it for 5 years with positive cash flow, and sold it in 2005 for a $100K net gain. One house was a handful. Dealing with 12 of ’em for the same profit would be about as pleasant as crapping thumb-tacks.

  9. 9
    Chris says:

    Great mental image there Peckhammer.

  10. 10
    redmondjp says:

    Eric,

    Thanks for providing the final chapter in your online RE investing story. Hopefully others can learn from your experience. I know that I’ve said it before, but thank you for your transparency and honesty which is so refreshing.

    As for rental property, I can understand your frustrations. My dad owned several duplexes while I was growing up, but they were mostly within one block of our home, so we could walk over to them to take care of the invariable issues which came up. I lost track of how many times I ‘got’ to go fix leaky toilets, clogged drains, and so on. But the rental income paid for my college so I’m not complaining!

    During college while living in Central Indiana, I lived in an apartment complex having 47 units and one manager’s office for the full-time manager. There was also a part-time maintenance person. The owner lived in Florida year-round and never had to deal with any of the day-to-day issues, and got a nice check in the mail every month. I always thought that was a pretty good way to be invested in RE, as the cash flow was very good and the hassles were minimized (the manager and maint. person were both long-term employees and great people, which of course is key).

    And congratulations on winning the employment lottery (having a job where your stock options pay out big)! If only I had gotten a job at [anonymous big tech company] back in 1990, I would certainly have retired by now!

  11. 11
    kpom says:

    One of my acquaintances was one of the first hundred employees at [anonymous big tech company].

    Lucky guy.

  12. 12
    Roger says:

    The worst thing about blogs like this (which I otherwise like a lot) is listening to blowhards talk about how much money they make. Me thinks that people who actually make that much money don’t spend time bragging on blogs about how rich they are. Just sayin’.

  13. 13
    peckhammer says:

    “people who actually make that much money don’t spend time bragging on blogs about how rich they are.”

    IMO, if you are in your 40s, have a college education and aren’t handicapped, there are very few excuses for not being a millionaire(1). It doesn’t take brains or ambition. It only takes a simple formula that consists of spending less than you earn and not living beyond your means.

    Having $1M means that you should easily be making $100K a year in passive income. That doesn’t make you rich; it makes you average.

    (1) A health emergency would be an exception to this general rule of thumb, of course.

  14. 14
    TJ_98370 says:

    Peckhammer,

    Just curious – What kind of mutual funds do you own that provide a 10% return? The best I’ve done is a consistant 6% to 8% the last few years. Maybe I’ve been too conservative.

    Of course it’s a whole new ball game right now.

  15. 15
    peckhammer says:

    “What kind of mutual funds do you own that provide a 10% return?”

    All Vanguard, unless noted otherwise. The mix, expressed as percentages, looks something like this:

    Capital Opportunity 18%
    Selected Value 21%
    Emerging Mkts Index, Intl Value, 14%
    Global Equity 13%
    Health Care 9%
    Growth Index, Midcap growth Index, Midcap Value Index 8%
    Fidelity Small Cap Opportunity 8%
    Windsor II 5%
    Short-Term Investment-Grade 4%

    The last few weeks have eroded this years earnings, but I expect to make it back. Over the past ten years I’ve gotten close to a 15% average yearly return. A more conservative portfolio should handily get 10%.

  16. 16
    TJ_98370 says:

    Buy Vanguard because of the low management fees.

    Invest for the long term.

    Thanx for the response peckhammer.

  17. 17

    PECKHAMMER, YOU ACT LIKE $100K PER YEAR IS PEANUTS FOR AVERAGE SEATTLE HOUSEHOLDS

    It isn’t peanuts, its out of reach, way out of reach for the average household incomes in Seattle. Its getting far worse with time too.

    See the proof:

    http://www.msnbc.msn.com/id/18868904/

    Note, the article states if it wasn’t for more double household incomes we wouldn’t have even kept stable at $40K per household. But the probability of one of the double incomes getting axed is twice that of a single income household, albeit if the single household income gets axed, it could quickly lead to homelessness.

    I’d add again [I’ve brought this up in blogs before], most of the older workers or “baby boomers” who make more income simply aren’t into real estate. They’re on a retirement mode and if they save enough to retire, a lot of them will be cashing in their homes, likely buying down too or selling it right off for nursing home costs to the guess who…..far poorer household income X/Y/Z generations.

    Seattle’s longterm real estate outlook is grim indeed, based on household incomes, isn’t it. Its kind of like today’s stock market. Tweedle Dee and Tweedle Dum.

    Also, I’d add a caveat that most Seattle home owners, especially with older kids long out of the house, can’t understand at all. This rapidly happenned, approximately in the last 9 years:

    1. The grim no experience job market for our degreed Seattle youth [outside of nuses].
    2. Our kids inability to get in to the University of Washington (i.e.) with a “B” average anymore.
    3. Our public high schools that don’t basically grade on testing anymore (its called communal grading with homework cheats instead of English tests).
    4. Our ghost domestic manufacturing base (besides the extinct dinosaur glueboard home) in Seattle.
    5. I’d couple this with mass Microsoft/Boeing type Outsourcing and with local wage mitigation guest workers replacing a higher paid Middle Class domestic labor base possibility.

    You get the gist, no wonder the the horrifying subprime loans to a lot of this new lower income overpopulation brainlessly added to Seattle the last 9 years is causing a possible horrifying Depression.

    I know, the economy in Seattle is independently rosy and I’m all wet.

  18. 18
    happy renter says:

    Dealing with 12 of ‘em for the same profit would be about as pleasant as crapping thumb-tacks.

    Quote of the day.

  19. 19
    Joel says:

    PECKHAMMER, YOU ACT LIKE $100K PER YEAR IS PEANUTS FOR AVERAGE SEATTLE HOUSEHOLDS

    It’s $100k every 2 years. Meaning $50k a year.

  20. 20
    Ubersalad says:

    All I am saying is, 100k net profit in less than a year is hardly considered “horrible”.

  21. 21
    betamax says:

    lucky for Eric that he had lots of money to piss away in bad investments; for most everyone else, it’s going to hurt. A lot.

  22. 22
    Matthew says:

    At least Eric was smart enough to get out when he did… The two fly by night flippers I work with still own 4 houses each.

  23. 23
    Seattle Eric says:

    Fun to read the comments. Many of you focused on the $100K and missed the major point that I’d probably not repeat the experience. LOL.

    I’ve got my final two rentals under contract, so I’ll be completely divested out of the Puget Sound. More over, I own no stocks currently (wink), and will sit on this cash to see where the stock market is headed.

    In hindsight, there was no need to point out the windfall I got; however, I didn’t want any of you to worry about little ol’ Seattle Eric. I see already many are pouncing on my corpse. LOL.

    Fare thee well bubble community. May you find wealth and health in life…and if you can’t have either, or both, just bitch about it online. :)

    I’ve just started lurking every few days, so you may hear from me…but probably not as Seattle Eric.

    P.S. Looks like Tim had fun with photoshop! :)

  24. 24
    Kevin says:

    No way I would flip 12 houses for that kind of money.
    Many of you don’t seem to realize that there are a lot of people that live in Seattle but work elsewhere. Seattle is a huge telecommuter city full of people under 40 whose incomes ($100K+) are not tied to any local economy. I don’t know how that counts in the “median income” statistics but none (literally, not one) of my friends makes less than the median income and we’re mostly all state school grads around 30.

  25. 25
    mike2 says:

    I’m always amazed at how many of the local flips don’t seem to be returning much of a profit. I always thought that the money was made at the purchase (ie buying 20%+ under market) yet so many of the resales currently listed were bought at market rate.

    Why are so many investors choosing to handicap themselves from the outset?

  26. 26
    Ubersalad says:

    Medium income applies to your residence.

  27. 27
    synthetik says:

    >Why are so many investors choosing to handicap themselves from the outset?

    Greed and failure to see a bubble in real estate.

  28. 28
    jason dennis says:

    i would like to find out if you take an individual and show them the ropes?

  29. 29

    […] value, and sell for some amount more than what you put into it. Even that version of flipping was a bust as the housing market peaked, but lately it seems to have been making a […]

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