I have made extensive mistakes over the last few years and I hope that by admitting that and sharing some of them that I may help one of you avoid the same or others. I am also looking for input and suggestions though we may be too late, perhaps my biggest mistake is that I worked so hard on our problems that I became an “island” and lost touch with others who might have helped me along the way. At very least I hope this will spark a valuable discussion based on real life and real mistakes.
The short story is that a partner and I bought a 100+ unit apartment building in 2007 at the height of the market and paid too much. Though we questioned their numbers and thus value, we moved forward anyways.
We hired management from 1200 miles away and looked forward to cashing monthly checks. We rarely visited and didn’t look closely enough when we did. Real Estate is not a passive investment. I do have others. I should known better.
We suffered hurricane damage a couple of years ago and what should have been a huge opportunity to make improvements was wasted. We were still trusting others to do what was best for our business.
A year or so ago we finally wised up and parted ways with our management but the damage was extensive.
I have spent the better part of the year there and we have made significant strides.
We have increased our occupancy from about 50% to 80%. Our tenants are being taken care of after years of neglect. We have finally found an onsite manager who may be better and the market itself is quickly improving. I recently read that rents are up in the market 100-200 a door and the market is the best it has been in 40 years.
Unfortunately after “bleeding” on and off for years we are out of funds. We originally purchased the property for 3.4 and have put in another 500k. We also have about 150k (=6500/month in assorted payments) in other unsecured debt for the property that makes it nearly impossible to cash flow.
My partner is “done” and ready to walk away. The broker who sold it to us is anxious to sell it for the debt. The loan is assumable (2.54M) and he is certain he can find someone to assume it and bring enough to the table to cover our closing costs. That would not cover the unsecured debt (150K). So we are out everything and still have outstanding debt all personally secured.
If we could hang on until collections and occupancy hit 90%, restructure the unsecured debt and get stabilized the property would be worth at least close to what we paid for it and we could get out with something or possibly even hold for even greater value? Again, the market is improving. Also, I am willing to take my losses but there are a few investors who trusted us to take care of their money and I am horrified at losing that.
I hate to give up. It really just wasn’t ever an option for me. Maybe that’s another lesson? Sometimes you must cut your losses?
Hope I have given enough info?
Any ideas, suggestions or is it time to just walk? Your thoughts?