10 Lessons Learned
SOLD! $1,200,000! My first million dollar property!
Nightmare property story ahead.
If anyone wants to learn how to avoid some mistakes that almost collapsed a small empire, read on. **Especially #4 & #9**
I am reminded of the quote that goes way back to my roots...
"Success is going from failure to failure without a loss of enthusiasm."
This million dollar property is also the property I've made the least amount of money on... and the only property I've ever almost lost everything on.
Truth is, that seven figure number barely covered what I had into it! This building has crippled me for the last 12 months. I had an almost $9,000/month interest payment that I really struggled to make each month.
“This was called paying school fee” It was a learning experience.
You think you've had a bad year? Humor me. Here is everything that went wrong (and how you could have avoided it.)
1. I went into this property starry eyed. It was a near condemned building, and the largest project I had ever taken on. I was so sure it would make my career, that not only did I purchase it without any real due diligence, but I didn't check to make sure I had the correct licensing. (Bring a third party with you to make sure you aren't doing something stupid. Call your dad.)
2. Right after I purchased the building, I learned that the city had plans to tear this building down... and this made the process of obtaining my permits near impossible. They held my permits for 3 months. Even going as far as having city attorneys try to compel me to sell the building to the city at a massive loss. I embraced the city and worked to make everyone happy. (Take a building inspector through each major project with you before you buy it. The city is a massive head ache to fight with.)
3. After purchasing the property, and against the advice of my mentor, I purchased $180,000 in materials, instead of keeping the money in my bank account, leaving me essentially broke when I couldn't get my building permits. This also cause a massive storage and security issue. (Listen to your mentors. Materials and equipment is worthless when you have no money in the bank.)
4. My business partner and soon to be general contractor I was using on this project, was one morning arrested and charged with forcible sex abuse of a minor. This de facto collapsed my company mid project, and forced me to lay off every single one of my employees. I've never cried so much. (BE CAREFUL WHO YOU DO BUSINESS WITH)
5. After collapsing my company, and stalling my project, I hired a new construction company and general contractor. They used another company's General Contractors license number, that was expired, and proceeded to steal approximately of $100,000 from me. (Verify License Numbers. Call References. NEVER PAY ANYTHING UP FRONT.)
6. Bailed my business partner out to try to save all of our employees. He returned the favor by taking every single one of our company's tools, and our truck without permission. My business partner refused to return them. (When there is a criminal investigation involved, stay out of it.)
7. FOR NEWBIE INVESTORS, PLEASE LEARN FROM THIS.
Never borrow money from someone so wealthy that they don't need it back. It’s a different mindset. Its not wrong but difficult to plan around. When I was on my knees, and was struggling to make payments, any other traditional lender would have worked with me. Especially when I had a plan, and proof that I was being tampered with by outside influences. This lender was actually kind to me in the end, but I could have used the help sooner. We would likely have made $200,000 plus more. It was not the case with this lender but it made be reflect on this very important point: (Find someone who needs their money back, and don't do business with people who loan to own.)
8. In desperation to make my payments, I took on a partner with my buildings. I structured it all wrong. I entitled him to half my gains, but none of my losses, and gave him the ability to block the sale of the property. The partner did not have to do capital calls. We ended up working it out, but this was a major headache, and disaster waiting to happen. (HAVE AN ATTORNEY DRAFT YOUR DOCS.)
“School Fees; at this rate I have a graduate degree”
9. When the building was under contract to be sold, a sub contractor I had been working with heard I was out of town and got greedy. They allegedly forged documents that said I had been served papers even though I was in Asia, and then proceeded to record liens against the property that were false. Essentially hoping to be paid before I could contest. (Don't yell at your girlfriend while you're in Asia just because someone else is trying to steal from you. She won't like it. Secondly, stay in contact with your title company. That's the only reason this didn't fly.)
10. Don't give your buyer a key to the building, even if it makes sense. I woke up to find my units listed for rents, people I did not know going in and out at all hours of the day and night, and people working on the building without my consent. This is major liability! (Don't give your buyer a key.)
This year was ridiculously hard. I learned so much as an investor, as a business owner, and as a person.
This was the most intensive 12 month training course I ever could have taken. I am happy it is sold, and I am happy to be back to operating at 100% capacity.
Currently taking all these lessons, and crushing as 24 unit building I purchased. Way ahead of schedule!
I hope there's at least one person who read this and learned from my mistakes!
Please! Leave me a comment and leave me a lesson you've learned.
"A smart man learns from his own mistakes. A wise man learns from the mistakes of others.