This blog and my podcast has taken a little bit of a back seat in the last few months as I’ve been out doing what I teach, investing in real estate. My latest project is a 14-unit multi-family building in Memphis, TN. It’s not my biggest purchase to date, however, it is my biggest project. You might be able to tell from the photos that I have my work cut out for me.
What was a three month escrow that seemingly had one hurdle after another to overcome, finally came to an end on December 28th. Just before the New Year, I took ownership of my first multi-family dwelling. The experience thus far has reminded me that regardless of how much we know, the wisest of us will always remain a student. In the last three months, this project has certainly doled out some lessons.
I thought this would be a good experience for you and I if I were to journal this project from beginning to end. There’s really no kind of education that beats “real world” experience. So, if you want to follow me along this journey… you’re invited.
Today, I’m in Memphis having just met with my contractor and property manager. If you’ve been around this blog for even a second or you’ve listened to just one or two of my podcast episodes, you know that the two most important members of your team are your contractor and property manager. If you have two solid professionals holding down these spots on your team, in my opinion… it’s pretty tough to lose money in real estate. My contractor and property management is solid, as usual.
Now, however, the real fun begins. To acquire this property I had to jump through several City hoops. Apparently, the previous owner had been granted funds from the City to rehab the building. By this building taking up so much street front footage, it had become a bit of an eyesore and it was in the City’s best interest to clean it up. Long story short, the owner who had been given the City funds decided to do other things with the money. So, the building sits un-rehabbed and the City committee that approved the grant sits with egg all over their face.
Along comes one of my business partners, experienced in Memphis multi-family rehabs, who put the property under contract to bail the City out. For one reason or another, the timing turns out to be untimely for my business partner to complete the project, so he wholesales the building to me. Now, I own the building and the project is mine. My team is in place, but as a part of the deal the City has insisted in being involved to assure the property DOES get rehabbed this time. Although, I had nothing to do with the previous owner squandering his government funds, I agreed to take on a bit of the burden to help the City save face in exchange for the smokin’ deal I got [I’ll reveal numbers once I’m further along in the process].
It all seemed pretty straight forward before the deal was complete, however, I overestimated the City’s understanding of construction budgets and how they’re adhered to. The lesson here… don’t assume anything. Everything must be in writing, especially when dealing with an entity such as a bank or a City. I took my eye off the details for a brief moment and it could cost me. Stay tuned!
By the way, I just posted a video “The Only ‘Realistic’ Path to Financial Freedom that No One is Telling You About.” Check it out here…