We were lucky to catch up with Erik Egelko recently and have shared our conversation below.

Hi Erik, thanks for joining us today. We’ve love to hear an interesting investment story – what was one of the best or worst investments you’ve made? (Note, these responses are only intended as entertainment and shouldn’t be construed as investment advice)

One of the best real estate investments I have made was a 4 bedroom townhome in La Mesa near Lake Murray.

I was scrolling through new listings on Redfin late one night when I noticed a townhome in a complex around the corner from my house that was filled with old furniture. I have found that big life changes (death, divorce, retirement) make for great opportunities to buy good real estate deals.

I immediately texted my business partner and told him we should buy this house. We didn’t know how we would pay for it but we had a strong feeling it was a great deal. We set up an appointment the next day to meet with the seller’s agent and gave a largely exaggerated presentation on how we were veteran investors who were well-equipped to close on this deal. After a brief back and forth we ended up getting the deal in escrow at $35,000 below the asking price.

Both my partner and I were a bit shocked to have made it this far. Outside of our primary residences, neither of us had purchased an investment property and we now had 30 days to find a way to get the money to close this deal. We met with various banks and were basically laughed out of the building as our credibility was insufficient and the loan terms we proposed were very aggressive for the current market. A slight sense of panic began to set in as days passed and we did not have a clear path on how to get this deal closed. We knew the numbers and the deal made a lot of financial sense however we just need to find a lender who could see that.

In a stroke of major good luck, a retired family member of my business partner reached out with an interest in lending on the deal. We explained the numbers/strategy and promised to provide personal guarantees for the debt to show our commitment to the success of the investment.

We closed the deal expeditiously and quickly went about doing in retrospect what was a very mediocre renovation. Fortunately, our strategy involved leasing the unit to the government through the Section 8 affordable housing program where the unit quality requirements were very reasonable.

We quickly found a tenant and the government agreed to pay a premium rent that provided serious cash flow. We were living on easy street for about 6 months until one day I received a message from a neighbor that I would be receiving a violation from the HOA for harboring a nuisance in the complex.

I had not been to the property for several months, the rent came in like clockwork and I didn’t realize how bad things had deteriorated. I took my dog for a walk over to the property to see what the HOA was so upset about and what I saw when I arrived resembled a scene from Boyz in Da Hood. Low-rider cars, loud rap music, people drinking in the common areas, and heckling neighbors as they entered/exited the complex.

I was put in a difficult situation because at the time San Diego had an eviction moratorium in place meaning this was an issue I would have to solve myself. Fortune for our strategy, the Section 8 program has a 10+ year waiting list, and the tenant was highly motivated to not jeopardize their housing voucher status. In a second stroke of good luck, the tenant was very reasonable and agreed to move out a few weeks later.

When we took the unit back it was in horrible condition (holes in the walls, stains on the floors, broken light fixtures, leaking toilets, and faucets). We were not faced with the decision to either re-rent or sell the unit. Given our less-than-ideal relationship with the HOA board, we figured it best to sell the property and get out of dodge.

We ended up investing all of the cash flow we had made plus about another $10,000 into renovating the unit for the 2nd time in 6 months. We were in a mad dash to get the property on the market as this was the summer of 2022 and home prices had begun a steep drop from their record-breaking prices earlier in the year.

We went on the market and to our surprise received an above-asking offer after the first open house. We accepted and closed about 3 weeks later. Including all of our mishaps with having to renovate the unit twice and deal with the problematic tenant, we made a 265% return on our capital invested in about an 8-month period.

I would say that much of our success was luck more than skill however from a numbers perspective this is the best real estate investment I have made so far.

As always, we appreciate you sharing your insights and we’ve got a few more questions for you, but before we get to all of that can you take a minute to introduce yourself and give our readers some of your back background and context?

I have been in the commercial real estate brokerage business with a specialized focus on retail shopping centers since 2015 and I am currently ranked as one of the top-producing salespeople nationwide.

We’d love to hear about you met your business partner.

My investment partner was a fellow agent who I mentored. We have since gone on to close over 100 deals together.

Are there any books, videos, essays or other resources that have significantly impacted your management and entrepreneurial thinking and philosophy?

The 50th Law by Robert Greene and 50 Cent. The fearless approach described in this book as been a guiding principal in both my brokerage and investment business practices.

Contact Info:

• Website: https://erikegelko.com/
• Linkedin: https://www.linkedin.com/in/erikegelko/