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Michael D. Callaghan
Michael D. Callaghan

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My Disastrous 3-Year Programming Hiatus

Ten years into an otherwise successful software development career, I experienced significant burnout and walked away from a 6-figure salary. I quit my job, sold my house, moved to a remote part of New Hampshire, and did not work again in software development for almost three years.

In mid-2005 I threw a temper tantrum and quit my high paid software development job at HP. Sure, I blamed it on factors other than myself, but looking back it was all on me. Not only did I quit my job, I walked away from my entire career in software development.

Real Estate

I decided to switch gears entirely and chase real estate deals full-time. Why did I think I had a “snowball’s chance” in this endeavor. It was mostly due to some early successes some friends and I had over the prior year.

Two friends and I partnered on some real estate deals during the mini boom of 2004. We bought and resold some foreclosed properties in Southern New Hampshire. Later that year, I successfully managed two very lucrative “flips” on my own and saved up a decent little nest egg. In early 2005 I took some of my profits and bought myself a Mustang Convertible. I was convinced that this was a better way to make a living than working for a huge corporation like HP. So when the opportunity presented itself, I gave my notice and walked away from a promising career.

Time to Move

Once I left HP and decided I was leaving software development for good, I used some of my cash to buy a brand new home in Central New Hampshire, and then sold the home in Southern New Hampshire where I had been living.

Once the move was complete and the other house sold, it was time to rev up the real estate machine I had been slowly building. Over the next few months I found a couple of new people to help with the tasks. One was a local real estate appraiser who was good with tools. The other was an unemployed friend from church. Both men were willing to work at no charge until after the sale of any house we bought. That alleviated any immediate cashflow issues. I still had to pay for materials, but labor was free until closing.

Reduced Success

Unfortunately, unbeknownst to me at the time, the real estate market in New Hampshire was beginning to cool. Properties were just as easy to find and acquire but they were becoming harder to sell. Those that did sell quickly were at much lower profit margins. There were some I had to hold for months, often at burn rates of $1000 or more per month, not counting material costs. Deals profiting $20,000 or more were vanishing quickly.

My next two deals netted me less than $10,000 total. Given that real estate flips can take a month or more to complete, this was not enough money to pay my expenses. We started dipping into savings.

Rent for Cash Flow?

For my next purchase, the thought occurred to me that I could make more money keeping it for a few years and putting a tenant in it. Against the advice of everyone I knew, that is what I did. A few months went by just fine, and then the rent checks stopped. Attempts to reach the tenants were in vain.

After two months of being unable to reach them, they finally sent me a letter saying they had moved out and that I could keep their security deposit. I immediately got my Realtor friend over to the house for a damage assessment. She called with the good news that the house was still in good shape, but that the tenants had left the 2-car garage/barn full of their stuff.

We put the house on the market immediately, but I had to deal with the barn. New Hampshire law requires that landlords keep their tenants’ property safe and secure for a minimum of 30 days after they move out. You cannot simply throw it all away. It would take longer than a month to sell, so I was not too concerned.

After the month elapsed, we still did not have an offer on the house. Neither did the tenant come back to claim the contents of the barn. We decided to lower the asking price of the house and have a garage/barn sale. It was the first time we really took inventory of what had been left. We found a really nice snowblower and grill, along with lots of clothes and housewares. Most everything sold in one weekend. What did not we donated.

Eventually, the house did sell. After paying my crew, the real estate fees, etc., the profit was less than $4000 for about eight months of work. You would expect that I had just learned a valuable lesson, but the harder lessons were still to come.

Renovation Profits?

Perhaps I could renovate the properties for a slightly better profit than a quick flip?

A Realtor friend helped me find a house in a small town on the southwest corner of the state, bordering both Massachusetts and Vermont. The house was in serious need of work, but she was confident she could sell it once the current tenant moved out. I made the purchase sight-unseen. Over the next month, some friends and I made the 200-mile roundtrip drive to the house each weekday. We had to rebuild the kitchen and the downstairs bathroom; replace the roof over the dining room and repair water damage in the dining room ceiling; and repair fire damage in the garage. The entire house was in desperate need of new carpet, so it was all replaced.

Once the work was complete, it did sell quickly. By this time, however, the real estate market was in a noticeable downturn. After factoring in all of the time, effort, and cash needed to sell the house, I netted $1500 on the sale.

Disasters Begin

My track record since leaving HP was not turning into the success story I had envisioned. I had not yet lost money but was quickly burning through my savings. I was simply not earning enough money fast enough to pay my bills. And then I was hit with two complete disasters in rapid succession.

I found a tiny but clean manufactured home on a huge, gorgeous lot with mountain views. I agreed to purchase it from the landlord and arrange a sale to the tenants. Once I took possession of the property, it became quickly apparent that tenants had no ability to buy it. After a few months of promises, I politely told them they would need to leave, so I could get it sold. I was happy letting them stay while they were trying to buy it, but I was not looking to be a long-term landlord. They agreed to go without a legal battle.

A few weeks later I received a phone call from the Town. The house’s water use had doubled over the past month, which they thought was unusual. They sent an inspector to the house, who heard running water through the door. Not getting an answer when he knocked, he immediately shut off the water and called me.

When I got to the house, I discovered that the tenants had left without telling me. They had also shut off the power, and thus the heat. This being the dead of winter in New Hampshire, the temperature tends to drop well below freezing. I entered the house to a disaster. One of the water supply lines had frozen and burst, and began filling the house with water. By the time I arrived, the water was gone. The water stains, on the other hand, were approximately 18 inches above the floor. The floor itself was gone in many places, having simply collapsed under the weight of so much water. The entire house was rendered uninhabitable.

I ended up selling it at a major loss to a builder who wanted the lot.

They Stole My Kitchen

Around the same time, I bought a tiny fixer-upper on the outskirts of the state capital. It was easily the worst-looking house on its street. It was more than 100 years old and it showed. The yard was pleasant and would make a nice starter home for a young family. We got to work repairing one bathroom and replacing the other. We refinished the hardwood floors, added new kitchen appliances, and rebuilt the front porch.

Once the renovations were complete, I put it on the market at its estimated value of $225,000. By this time, the market had taken a definite turn for the worst. Nothing seemed to be moving. After a few false starts, I reluctantly agreed to rent the house for a year, hoping the market would turn and I could sell. Or perhaps hoping that the tenant would be able to buy it. I was fine either way.

You can probably guess what happened. The rent check bounced. This tenant and I were on pretty good terms, so I emailed her to ask her what was going on. I heard nothing for about a week. Finally, she replied with an apology. She could not afford to stay and had already moved out.

When I got to the house, I found that the locks had been changed. I summoned a locksmith and the local police department to help me enter my own property. What we discovered upon entering was nothing like I would have ever imagined. The kitchen was gone. Every appliance, cabinet, and counter top — gone, stolen. The rest of the house was destroyed. There were holes in the walls, obscene graffiti scrawled everywhere. The pristine hardwood floors were scuffed and scratched. The bathroom we had replaced was trashed. One of the bedroom walls had been used to hang a dartboard. You could see the outline where the board had been and the evidence of how badly they played.

I immediately asked the police officer whether I could file a criminal complaint, for the kitchen theft if not outright vandalism. He replied that because my tenant had done it, it was not a criminal matter and that I would have to file a civil complaint.

I was out of money and my insurance would not cover this type of damage. In desperation, I had my real estate agent put the house on the market as-is, as a “gut job” fixer. She managed to find a buyer willing to pay $80,000 for it. I accepted.

The only thing of value I got from that house was a tennis racket I bought at a yard sale before I bought the house. It is probably the most expensive tennis racket ever sold, and I still play with it to this day.

Recovery Begins

That house was my last real estate deal. Not only were my savings gone, but I was in the hole more than $200,000. I had no idea what I was going to do next. It was 2008 and I had been out of the software development world for three years.

Then I got a call from a friend from high school. We discussed everything that had occurred. It was at that point he asked me something that has stuck with me ever since. “Have you considered that this isn’t your core competency?” He went on to remind me that ever since we met I exhibited a love and talent for computer programming unmatched by anyone else he knew.

He offered me a part-time software development gig with his young firm, working remotely on a 9-1-1 telecom product. I gratefully accepted the contract, which turned into a full-time job a few months later. This led to future opportunities working on telephony projects for other companies, including one in which I was a minority shareholder. The experience I gained there enabled me to get a long-term contract with Dell in Round Rock, Texas, and ultimately my current job at Walt Disney World. These other roles and jobs may become future blog posts.

Lessons Learned

It took me three more years to dig out from under the disaster that was my brief real estate career. Those losses were losses of cash, home equity, and even some retirement savings. I have not speculated in real estate since.

Some of the takeaways from this experience:

  • Never risk more than you can stand to lose. I leveraged one property against another on more than one occasion. This led to a domino effect where a loss on one house led directly to a loss on the next, and so on.
  • You make your money when you buy. Never assume the real estate market is always going up. Though it is true that long time horizons can sometimes bail you out of a mistake, there are still some areas that have not yet recovered.
  • Rental property management is hard. Hire a professional property manager. Let them do their job.

Finally, the most valuable lesson I learned came from my friend: Stick to your core competencies. It is one thing to make the occasional “small bet” where your downside is limited. That is not what I did.

I let my pride and my emotions drive me away from what could have been a long and lucrative career with HP. I lost tens of thousands of dollars, destroyed my personal credit for years, and nearly threw away my career. Three years in the software industry is an eternity. I was fortunate to have been rescued by someone willing to take a chance on me after being away for so long. I will be ever grateful.

Burn out is real. Every software developer I have ever met has felt it at one time or another. Let my experience be a warning to you not to throw away a promising career on a long-shot.

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