Episode 12: Conclusion: The Epic Case Study of an Incredible Real Estate Acquisition

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In this episode, host Jeff shares the conclusion of an case study story of how he recently completed an epic, complex acquisition of an incredible, rare commercial building. The story highlights many of the key elements of the Thoughtful Real Estate Entrepreneurship approach, the skills and art of Seller Relations, and the mechanics of creative, off-market real estate acquisitions. Make yourself a batch of popcorn and join us for the conclusion to this epic story!

Free PDF Guide: 5 Critical Mistakes That Make Most Real Estate Investors Accidentally Lowbrow

We’ve created a free PDF guide just for listeners of the Sleaze-Free Real Estate Investing Podcast, called “5 Critical Mistakes That Make Most Real Estate Investors Accidentally Lowbrow.”

For instant access to the PDF, just go to http://Pod.thoughtfulRE.com

Music Credits

The theme song is an excerpt of “No More” off the album “Golden Era” by Forest For The Trees.  You can check them out on Amazon, iTunes, and Spotify.

Meet Elizabeth

This is “Elizabeth,” the building we discuss in today’s episode!

Full Episode Transcript

This is Jeff from the Thoughtful Real Estate Entrepreneur, welcome to episode number 12 of Sleaze Free Real Estate Investing, a show for those of us who never really felt at home and that we buy houses crowd. In this show we take a stand against what we call the lowbrow approach the mainstream guru seminar distress seller approach that ends up giving real estate investors with slimy reputation. Instead we discuss the strategies tactics and philosophies we call the thoughtful way. And enlightened approach to real estate entrepreneurship that focuses on constantly sharpening the sophisticated real estate entrepreneurs, three most critical capabilities number one seller relations skills. number two deal architecture skills and number three. Opportunity vision. When all three of these capabilities are successfully in motion. You can make an excellent living today, and be building long term wealth while creating value for everyone that you touch along the way. Show Notes for today’s episode, are at www.thoughtfulre.com/e12. Please do yourself and do us a big favor by hitting the subscribe button in your podcast app. And if you would be so kind as to rate and review the podcast in the Apple iTunes podcast store that would be absolutely fantastic as well. In the last episode we discussed the first part of the story, an epic story of an acquisition, and an equally epic negotiation. And so we’re going to continue that today but if you haven’t listened to that first episode go back and take a listen to that one now, as it will just perfectly set the stage for what we’re going to talk about today. But first a little bit of food for thought. As always, because after all this thoughtful real estate entrepreneurs we like to feed our minds with things to think about. And here’s what we’re thinking on today. This is the idea of pinching, and zooming. That’s right, just like you do on your phone while back I was meeting with a friend and my friend was going through a rough patch. And as he described it to me he said you know I just feel like my life is on this downward trajectory and he kind of took his hand and drew a line going down in the air. And it occurred to me because of course it’s always easier to see other people’s situations easier than it is to see your own. It occurred to me that he was just so zoomed in on that particular point in his life that he wasn’t seeing the bigger picture and I said, you know, if you take your fingers here just like you would do on your phone and I want you to pinch this life trajectory graph that you’ve got in your mind and you’re going to zoom out when you pitch, and you’re going to see that overall your life has been, up, up, up, up, up, and it’s only when you zoom in, super close Do you see any, you know downward moments, even at all, but the upward trend overall is absolutely the trend there is it’s just been you’ve been up into the right the whole time. And so just keep in mind that while things might be tough right now. You’re going to rebound from that and you’re going to continue on this trend that you’ve been on your whole life and that thought helped him a lot in the moment he, it helped him get some perspective and zoom out, himself, and be able to see things from a bigger perspective like I was able to by looking at his situation. So I think about this a lot for myself and I realized that. Well I have clarity on his situation, sometimes it’s difficult for me to have clarity on my own situation. So I’m constantly now encouraging myself and trying to remind myself to just zoom out more often because when I zoom out I see that overall I’ve come a long ways. Overall, I’ve seen incredible growth as a person and as an entrepreneur. And while something might be frustrating to me in the moment or am I feel like I’m down in that moment. Overall, I’m up into the right all the time so pinching and zooming and I encourage you to do this in your own life, to find a way to to pinch the screen of that trajectory and zoom out and be able to see that you indeed are making huge progress, and that you are going up into the right. That is today’s food for thought. Hey everybody, just a quick interruption to tell you about something we’ve put together for you. I don’t know if you’ve ever heard this funny expression, but a powerful one that says you can’t read the label, when you’re inside the bottle. Well, real estate investing is kind of like that when I got started, I was just reading and listening and studying everything I possibly could and taking massive action based on that, which was fantastic. But it took a long time, like a long time for me to realize that so much of what I was learning was actually pretty low brow I just didn’t have that perspective, and you know you might be in the same kind of position right now. It’s very difficult to know and to see your own situation clearly when you’re right in the middle of it. So we’ve created a free PDF guide available for download. It’s just for you guys as listeners to sleep free real estate investing, not available to anybody else. And it’s called Five critical mistakes that make most real estate investors accidentally lowbrow. So you can go get this right now if you’d like it. this free PDF guide at http://pod.thoughtfulre.com. Go grab it and see if you are making any of these five critical mistakes. Alright, moving on to the main course for today’s episode we’re going to continue and wrap up the story of an epic acquisition, that I was recently a part of. So, I would absolutely encourage you to go back and listen to episode number 11. And make sure you know the whole story but here’s a quick recap of where we’ve been with the story so far. I found a beautiful historic building, about a year and a half ago, and a great part of my town, and it’s it’s physical setup is really interesting actually it’s physical setup is very standard but it’s legal entitlements situation is kind of unique it’s one physical building one physical structure, but with a lot line drawn down the middle of the building, and it created about two ends of the building one’s about 60% of the overall size and the other one’s about 40% of the overall size. And so these two different sides of the building were owned by two completely separate and unrelated owners. And that creates a really unique type of situation. So, the smaller side of the building was owned by Cindy, and her brother Stan. And then the larger side of the building was owned by Larry, and his wife Mona. And I originally came into this opportunity because Cindy and Stan wanted to sell me their side of the building. And I also spoke with Larry and Mona but they weren’t ready they weren’t feeling accepting an offer. At that time, so I proceeded to just work with Cindy and Stan and I put their side of the building and contract, and the due diligence process just took a very long time. And I had the property in escrow for six months and during most of that time, Cindy who was the main point of contact was really kind of Mia. I had long stretches of periods where I couldn’t even get ahold of her at all, and ultimately the deal, died and I had to terminate my, my purchase transaction because I couldn’t reach her anymore. And by $10,000 earnest money was about to become at risk. And I didn’t feel like we had properly finished negotiating the deal and in a way that will allow me to really move forward. So how it ended was at the last episode, I was feeling frustrated. I had this beautiful building. Very rare and unique. I’ve been in escrow for months, I’d spent dozens and dozens of hours on it. I had probably spent about $1,000 of due diligence costs. And here I have these kind of uncommunicative unreasonable people. Larry and Mona, on the other end of the building won’t cooperate and and just kind of feeling defeated. But then, part two. The story begins. So as I mentioned in part one. As a last ditch effort before I terminated my purchase agreement. I decided to pass the deal around to a few of my friends and peers. And so I just put together a nice, maybe two page write up about this deal and I said here’s why I think this is special. I’m not going to be able to close on it but I’d love to see this deal getting, you know get closed in good hands. And I send it out to several people, and several people do right back and so, you know, this is really cool. It would be cooler if you could buy the whole building but timings not right for me and ultimately no one was able to do that. Well, about three months later, after I terminated. My transaction. One day. On the same day, two friends two different friends who I had previously shared this deal with forwarded me an email and the email was of a listing with a commercial real estate brokerage, and it looks to me from looking at this that Cindy and Stan had decided to go ahead and list their side of the building. With these commercial real estate agents. So, I thought about it for a little bit and I called the listing broker and I introduced myself and I said hey you know I am I, you may have heard of me I was in contract to buy this building, before, and I still really like it. I’m kind of a unique buyer in the sense that I’ve already done my due diligence and, you know, wouldn’t need to be starting over with that and if you don’t have other buyers beating down your door, I’d love to take another run at this. So the broker goes and talks to Sydney and Stan his clients, and he comes back and says okay they they

say they’d be willing to entertain a new offer from you but it would have to have substantial hard earnest money because they feel like they were burned the first time that they work with you, you know, six months went by and then you didn’t close. And I of course saw it from a slightly different perspective that they were difficult for me to work with but that was their perspective and I said, Okay, I think I understand that the broker sort of casually says you know this building. You know, the feedback we’re getting from all potential buyers is that they’d like it a lot more if they could get the other end of the building to, but you know those other people they might be willing I’m not really sure. But I think those people may be willing to sell their side of the building. So of course he’s referring to Larry and Mona, and I just kind of note this to myself I go Okay, interesting, the broker thinks these people would be willing to sell their side of the building. And he says, if you wanted, I would submit an unsolicited offer on your behalf to them, to see if they would sell. And I said, Okay, great. Let me think about all of this, and then I’ll get back to you. Okay, well, a little bit of time passes, as I’m thinking about if and how I want to pursue this because I too don’t want to spend a bunch more time and money, pursuing a deal that might not go anywhere wanted to go anywhere, the first time. And so, meanwhile, by coach Greg comes to town uh we’ve scheduled a day to be together, and out in the streets of Portland and seeing what’s going on and taking a look at some projects taking a look at some deals. And so one of the things I decided to show him. His this particular building. And so we pull up to the building in the middle of the day, and he goes, Oh my gosh, you have to find a way to buy this This is unbelievable it’s rare. There’s not a bunch of other buildings like this anywhere in the city. This is special. This is well located, and there’s just nothing else like it. And when things are rare they’re tend to be worth more and more valuable and more special. And plus the fact that this is two separate ownerships made it even more rare because, not just anybody could come along and actually get control of this whole building, they would at best be able to buy the one part of it that Cindy and Stan are willing to sell at this moment. So we started talking about it a little bit more, and kind of created a vision for the highest and best use of this building. And I started to have vision and beautifully renovated property or that really continued to highlight all of the historic charm of the, of the building with a beautiful restaurant fine dining in a high end cocktail bar, maybe even hotel suites above at some point. And so a couple days after my in person day with Greg, I decided to call the brokers back and I called the brokers back. And I said, Okay, I’d like to write an offer on Cindy and stand side, please. And I know it’s listed at 900,000, but I previously had the property in contract for $810,000. And so I’m going to actually offer 825, because I realize that now they’re paying you brokerage fees, and, you know, I wasn’t able to close the first time so I realized there’s a bit of a penalty to me so I’m willing to pay 825. I’ll give you $10,000 earnest money hard. And by the way, hard earned us money is very unique. For me, this is not something I do very often so $10,000 be offering $10,000 harder and as funding non refundable was scary. And it was a first time experience for me. And I said I will also take you up on your offer to write and deliver an unsolicited offer for Larry and bonus site as well at $1.3 million. So the brokers go, and they write up both offers, and submit them they submit Cindy and stand side to Cindy and stand because they are the representing Simeon stand. And then they on an unsolicited basis, submit the offer from the other side to Larry and Mona. So Cindy and Stan, come back and they counter my offer and they say, we need a higher price. And we need more harder in this money than you’ve offered. So ultimately we land on $840,000 as the purchase price. This is still $30,000 more than I could have bought it for just a few months earlier, which might not make sense to you, but keep, keep listening and $15,000 hard non refundable earnest money. That’s what they demanded and that’s what ultimately I agreed to. and they. I asked for a 90 day clothes which they felt was reasonable, and my offer had no contingencies whatsoever. So I’m writing a check for $15,000, and there is no way that I’m getting that money back, because there’s no contingency to the deal at all. Again this for me is pretty darn unique. Now as an aside, meanwhile I can kind of tell that these brokers are getting a little bit tired of Cindy being so difficult to reach, just like I had experienced several months before. I think they’re also realizing that they’ve got on their hands here a little bit of an odd duck of a property, since it’s just part of the building about the whole thing. And most buyers and what would want the whole thing rather than just this 40% of the building. And also this deal is kind of a lower price point than these commercial real estate brokers are normally used to working with. And so I sense that they’re kind of regretting taking it all seems like probably for them, a lot of work, a smaller reward and a whole bunch of headaches and client hassles. So I’m actually just about at this point to take a two week camping trip to Yellowstone National Park. So one thing I negotiate with him, is that our effective date, we’re going to sign it today but our effective date won’t be for two weeks until now, because I can’t do anything while I’m out of town on this trip. And so I’d like this start date day one effectively of my closing timeline to be two weeks from now Not today, and then my earnest money will be due, a couple days after that five days after the effective date. So I negotiate for delayed effective date. And my earnest money is going to be due five days after that effective date. So they accept this, and we put the deal back in escrow I’m in contract on the same property again now with more harder and as money no contingencies, and $30,000 more than I could have paid for it. Just a few months early. And by the way, I have absolutely no idea how I’m going to pay for this building, but I know that I’ve been in that position before, and I know I figured it out. So I think I’m going to get to figure it out again. Now Larry and Mona also received an offer. Through these brokers the unsolicited offer at the same time. And guess what they did, they just flat out declined it immediately. And they basically told the broker to jump in a lake that they didn’t want to hear from them again, the broker calls me back and now and he says, These people are so unreasonable they will never sell their property. Okay. Duly noted, yet again I’m, I’m noticing the opinions that the people around me the parties of these transactions have I’m noticing their opinions and their beliefs, and I’m just filing them away in a little file folder, in my mind, okay. Duly noted broker thinks, Larry and Mona will never sell. But I’m pretty sure because I’ve spoken with Larry and Mona before that, there’s probably a couple reasons why they said no. I’m guessing Reason number one is brokerage fees, I know that they want 1.3 million for this property, but that they don’t want to have to pay brokerage fees to get it. So I’m sure that that was one of the huge returns of this offer that we just submitted through the brokers. And secondly, I also know that they wanted to attend 31 exchange, and they want to make sure they have the flexibility to get their 1031 exchange done on their timeline. And at this moment they don’t know what they would exchange into and they don’t want to be in a race against the clock to find something so they ideally want to find something in advance of even selling this property or agreeing to sell it. So I head off and I take my camping trip to Yellowstone National Park. And the second I get back. I call Larry and Mona, and I asked if I may come back and present them with a new offer one that I think that they will like better than what I had spoken with them about the previous year, and better than what the brokers had submitted to them. Recently, I reiterated my sincerity about wanting to be the buyer of the building and remind them that they had told me actually the previous year, that they thought it would be great if I was the next person to own the building. So here was my plan. My plan was this. My earnest money on the property with Cindy and Stan was going to be going hard becoming non refundable on Friday. So I went to meet with Larry and Mona. On Wednesday, and tried my best to get it under contract. Then if I was able to do that. I would feel comfortable, releasing my earnest money, and making a truly non refundable on Friday, So if I could get it under contract on Wednesday. I’d feel okay releasing the earnest money to Cindy and Stan on Friday. Larry and Mona would know that I was buying Cindy and stands aside, but Cindy and Stan, and their brokers would not know that I was buying Larry and bonus site. In fact, they would think it was impossible to buy Larry and bonus site. Now why does that matter. Will it matter because any negotiating power, that I wanted to maintain with Cindy and Stan would evaporate. If they their brokers knew that I was buying the other side from Larry and Bona to, and that if I had hard earned his money with Larry and Mona, then the brokers in Sydney and Stan would not believe me if I threatened to not close on their side. So that was my plan. So I went to Larry and Mona on Wednesday, as I promised. And I did my very best pitch that I possibly could. I hit the emotional side of things I hit the rational side of things. And what I propose to them was that we agreed for me to buy the building now, but that we kept our closing timeline, flexible, and what I proposed was a closing date, but a closing formula. In other words, So I said, Why don’t you agree to sell me your building now, and we won’t set a specific closing date that you go out and you begin searching for your 1031 exchange property that you want to buy with the proceeds of your sale of this building. And when you feel like you found it, you come back to me and give me 60 days notice and when you give me 60 days notice that will start the clock ticking and I’ll have exactly two months for myself to finalize my financing and get the deal closed, and that would give you the ultimate flexibility than to dictate the timing in the way that would work best for your 1031 exchange. I emphasized that there were no brokerage fees so $1.3 million was $1.3 million. I emphasize that I was not making my offer contingent upon anything not financing inspections nothing. I offered to give them $15,000 earnest money, non refundable right there on the spot. And I offered to give him another $15,000 earnest money, non refundable at the 60 day Mark whenever they gave me their notice, I was going to give them earnest money the first installment of earnest money today. In fact, I had a pre written check with me that I showed them and I waved in front of them, I said, Look, I’ve already written the check. That’s how serious I am about wanting to buy your building. And I will give this check straight to you if you sign this purchase agreement and agreed to sell the property to me. So then they would ultimately have $30,000 of earnest money, 15 that I would have given to them directly and then 15 more that would be deposited in escrow at the time they gave me their 60 days notice. I had all the paperwork completed ready for them to sign. And I had it with me in my notebook. My pre written earnest money check. And it was made out to them personally and not to escrow now why is this important. I don’t want to gloss over this point because it will become extra important later in the story. In order for a contract to be binding legally, there has to be consideration given and receive meaning, you have to give something of value to the other person and they have to receive it in the form, or in the case of real estate that’s generally earnest money. So it was very important to me that they personally took my check and deposited into their bank account, because then they would really very much make it official that they had received consideration Mona’s biggest concern with my proposal was wanting to know how I was going to finance it. And I told her I had multiple options, some private lenders, some bank bank lenders, even other private notes I already had at my disposal. And as we got closer and as the 60 day Mark was triggered by them. That I would be able to select one of those choices but that I was going to have multiple irons in the fire so they’d have lots of options and ways to make it happen. She still seemed unhappy with that answer. However, but then Larry kind of jumps to my aid and he says, Mona, you know, he’s got $15,000 of hard earned money on the line and when you give him 60 days notice it’ll go to $30,000 so he’s got skin in the game and he’s motivated to make sure that he can close so you should worry about where his financing is coming from, which was great that he was jumping up to help me, and actually be on my side of that argument. But truthfully, just like the other side of the building was Cindy and stand. I had no idea how I was going to pay for that building, but I’ve been in that spot before, and I knew I’d get it figured out. Now, a side note is just a funny story, I had a coaching call scheduled with my coach that day. At that time, and when the time came, I could feel the phone buzzing in my pocket but I was so close, sitting at their dining room table getting them to say yes so close that I got up and I excuse myself and asked myself, asked if I could use the restroom. So I went to the restroom and pretended to use it was actually just texting Greg back frantically saying I think I’ve almost got this deal done I’ve almost got it done I’ll call you soon as I leave. So I went back out to their dining room table. And they were signing the agreement. I gave him the $15,000 earnest money check. And I calmly left pretending to not be excited but it was just an act I was so excited. I got in the car I called Greg immediately and I was so unbelievably pumped. So here’s where I was. I had gotten Cindy and standard contract for $840,000 with $15,000 of hard earnest money, and a good nice long timeline to close. I had gotten Larry and Mona side of the building and contract for $1.3 million with hardware and as money $15,000 so I’m out $30,000 total right now. And a very long timeline to close but I didn’t know exactly how long because they were going to be the ones determine when that 60 day clock started ticking. So about $30,000 hard and non refundable earnest money. And it’s going to go to $45,000. When I get that call from Mona and Larry. I’ve never been in this position before I’ve never had $1 hard earned money out before and now I’ve got 30 soon to be 45,000. That was scary for me, but I’m the first person to ever have control of both sides of this building and Cindy and Stan and their brokers, they don’t know. They don’t even know that I’ve got the other side under control, and they’re not going to know. Alright so here is my plan of attack. I’m going to first tackle Cindy and stand side because it’s likely that it’s going to be the first one to close. Even though I don’t know exactly the timing of Larry and bonus closing it looks like Cindy and standards are going to be first. So, how am I going to finance this thing so what I decided to do is to sell a five Plex that I own, and the fireplace has got a private lender on it, and the private lender does not really want to be paid off. And if I were to sell that property they wouldn’t require me to pay them off they will actually allow their low and just to be moved to the new property so that’s my plan. So I go ahead and I list my five Plex, but the risk is I just don’t know how long it’s going to take to sell, I don’t know if it’s going to close on time it’s, it’s kind of a leap of faith. Explore backup plans. Privately financing with another individual or a bank, but selling the five plex is still very much my plan A by a long shot. So I list the five Plex and it goes pending immediately, I get all excited. And then the buyer bows out during the inspection contingency. And then it goes back on the market and same thing happens buyer terminates again. And so I’m starting to get worried now. And the third time the five Plex goes pending. and this time it seems to stick. And it looks like we found just the right buyer, and I’m feeling more optimistic but there’s still a lot riding on this. And here’s the problem the closing date is set for one week after my scheduled closing day was singing standpoint, so I’ve got myself a little bit of a problem. And I realized what I’m going to need to do is to renegotiate the closing date with Cindy and Stan. And so the question is that, if or how I’m going to renegotiate it But, when do I try and I decided that after thinking about it that I’m going to have a lot more leverage in this conversation, adjusting the closing date, if I wait till the last minute. Because if I call them a month, early, a month in advance. Then, they might not be quite as motivated but nobody likes to get to the one yard line and then not score to use a football metaphor. So, I’m also thinking about the brokers because their motivation to get this thing closed is already high but it’s only going to get higher as the closing date approaches, again, they’ve probably are frustrated with their seller they’re probably frustrated with me as a buyer, their property is a bit of an odd, can they certainly don’t want to start over. I also know that Cindy is trying to buy her beach house and standalone needs the money so I feel like the closer we get to their payday, the more likely they’re going to be to work with me to change the closing date a little bit because they’re not going to want to come that far and then turn back. So about a week before closing I call the broker. And I tell them, minute need an extension. And I emphasize that I only need this extension because I have another property that’s that’s selling, it’s closing, and we’re through the inspection period, and it looks very much like it’s coming together and this is the funding I’m going to be using for my purchase. And so the broker says well I think that’s probably pretty reasonable, let me get back to Cindy because I know Cindy is probably scheduled to close on her purchase of her 1031 exchange property right after this building closes here. So, she says back to the broker. Well, I will extend. But there’s going to have to be a fee. And I’m proceeding this as her just posturing and her just being obstinate because I don’t think she really has any choice. And so I actually go back to the broker and I say to Cindy really have a choice. I mean, is she gonna walk away from her deal and her harder and less money. And so this is where I have to play a little bit of chicken, have to do a little bit of bluffing. Because if these brokers and Cindy knew that I had hard earnest money down to buy Larry and Botha’s side of the building. And I’d have no leverage because they know that there’s no way I’d be backing out of buying both sides of this building but they don’t know that, and it’s so important to me to make sure they don’t find that out. So I pushed back and I said, Look, we’re going to extend and I’m not going to pay a fee. And so we keep going back and forth and conversations a little bit tense it’s right around Thanksgiving my wife and I are on a road trip to meet family. But when I’m silently doing is making them feel the risk of this deal falling apart because my, my only leverage here is my ability to just walk away now yes i’d be walking away from $15,000 in earnest money, but I’m putting the pressure on them to that for them to feel the risk of this deal falling apart, yet again. And Sam, not getting this thing closed when they needed to get closed. So eventually we agree to a small fee of about $700 that I will pay in additional purchase price, which will compensate them for some extra interest that they will accrue on their own loan from the change of the closing date. And meanwhile though in my head I’m thinking to myself, I cannot wait for these brokers to find out that I had Larry and Mona’s property under contract, all along. I can’t wait for them to find out that I totally outwitted them and played them. And that was the emotion going through my head at that point, which was a very competitive and kind of a negative emotion really, so we’ll circle back to that later in the story. So about a week before my closing with Cindy and stand on their side of the building. I get a call from Mona, and Mona says that the 60 day timeline thing that we had designed for their benefit was actually not proving to be a benefit to them at all. it was actually proving to be a hindrance. And she said she was out there trying to make offers to buy a replacement properties and all her offers had 60 day closing timelines, but she felt like that 60 day closing timeline in a competitive seller’s market was making her offers not competitive enough so she was getting turned down on every place that offers. So that is pretty possible. And I can tell that she’s had a lifetime of getting our way and pushing people around and kind of acting like a hold up. So Mona says to me, Jeff, we’re gonna need to make this a 30 day window of closing instead of six. And, and I’m going to need you Jeff to provide pre approval letter or a proof of funds. So I respectfully push back and I let her know that the 30 day window is not what we agreed to a 60 day window is what we agreed to. And then if I can close faster and help her out I would love to do that but I can’t make any promises on that because I’m focused on delivering on the commitment that I actually make. Now she doesn’t like this message. And I again have to tell her respectfully that no, I don’t need to provide you with a pre approval letter or proof of funds, because my purchase of your property is not contingent on financing. I have hard earnest money on deposit with them. And I frankly don’t need to provide proof of funds or a pre approval letter. But I reassure her that I want her to feel comfortable with everything and I’d love to sit back down and just continue to talk about it and continue to get them comfortable with where we are to see if there’s anything else I can do to help. So I asked to come again to their house at the time that’s convenient for them, and just continue to discuss it and Mona declined she doesn’t want me coming to her house anymore, for some reason, so that’s an interesting little turn of events so she says, Well, if I can’t get these things I’m probably going to cancel our contract. Now, this is a big problem for me because I’m just about to spend a week later, 840 grand buying Cindy and Stan side of the building, which I would not do if I wasn’t going to be able to buy Larry and Mona’s side of building. Plus, the contract doesn’t have any provision for them to be able to cancel their sale the property to me. So I decided I need to up the level of the firmness of our conversation a little bit, and I, with the help of my attorney draft a letter that firmly reminds them that we have a binding agreement. I am working to perform to the letter of our agreement and I expect them to do the same. And her attorney, then gets a copy of the letter and apparently clarifies for her that she is indeed wrong. And that I am right. And she actually then sends me an email and apologizes for causing any problem. Now, this again is why it was so important for me to make sure that the first batch of earnest money I gave that went to FEM and not to escrow because they had $15,000 of my earnest money on deposit in their own bank account now for two months at this point. So, it really re emphasizes the legitimacy of the contract because significant consideration was indeed given, and received. So I approach. Closing date for Sunday and stands side of the building. Thankfully the buyers of my five Plex came through. They performed on time and that gave me the funding I needed to close the property. So I closed on that side of the building and I took ownership. And I called Larry and Mona, and I just wanted to keep them up to date, and I wanted them to know that I was not now the guy who was buying the other side of the building but I’m now officially their neighbor. I’m the guy who owns the other end of the building. And I feel like this is going to increase my credibility in their eyes because obviously I found a way to take down the other side of the building. Hopefully this will ease Mona’s mind that I have the ability to pay for her side the building as well. Mona asks asks yet again. Where’s your financing coming from. And I tell her I’m still evaluating all my options, and I’ll be waiting for her to give me that 60 day notice to close. So, more time passes, about two or three weeks. And I get a call from Mona, and she says that their contract to buy their replacement properties. And so I right back. Actually, she’d sent me an email so I wrote back I said just to clarify that. Is this your 60 day notice. And she says, Yes, this is my 60 day notice I want 20,000 more dollars in escrow. I want a 15 day extension on my 60 day notice, and you still need to send me that pre approval letter. So good she continues to, first of all, not really track the details very well but secondly just demonstrate her Bulldog approach to everything she’s used to pushing people around. So I, again, respectfully, clarify that my additional emissary to her our agreement is $15,000 not 20. And I will deposit that with escrow upon receiving her 60 day notice. And I just wanted to confirm that this is indeed that 60 day notice I tell her also a 15 day extension is not currently part of our deal that I would be amenable to discussing that with her, but it’s not currently part of our agreement. And I told her again. No to the pre approval letter. And she continues to push back so again I get my attorney involved. We said yet another firm message, and yet again, her attorney apparently clarifies that she is indeed wrong and does not get to just arbitrarily make changes to the agreement at her will. And that I’m right and then she apologize. Once again. So here we are now two months ago. She’s given me 60 day notice I’ve got two months to get this thing closed. And by the way, I still have no idea how I’m going to be funding this $1.3 million purchase, but I’ve been in this spot before. Now, this is about the middle of December, 2018, two months is going to make this the middle of February, 2019. Well that closing date happens to be smack dab in the middle of a trip that I’m scheduled to take to Australia to celebrate my wife’s 40th birthday. So not only do I have no idea how I’m going to fund this property acquisition, I am going to have to find a way to do it on a short timeline and get it closed from another continent, more drama continues to come up. Before long, I get a phone call from a leasing agent who’s a commercial leasing agent in the neighborhood, and he says to me, Hey, I heard you just bought the building where this big retail spaces, and I actually had not bought that side of the building yet but I just kept my mouth shut and I kept listening and he said, I’m here your tenant is about to go under. And it’s going to be moving out. I’ve got somebody else who might be interested in the space. Well, this is news to me. This tenant is about 50% of the overall income stream on Larry and Mona’s side of the building. This is, this would be important to know if half the income, each month is about to dry up. So I sent Mona, a message and say Hey, what’s going on with this tenant. And I learned that this tenant hasn’t been paying rent for now about three months. And I’m thinking, oh well it’s nice of you to tell me, because this is now going to make my financing a lot more difficult, and certainly my cash flow, after closing is going to be a lot more difficult as well. And Mona says well you don’t have to tell your lender isn’t paying, I’m thinking, I’m not going to see my lender but I’m also not going to put myself in that kind of a, of a position where there isn’t actually enough income coming in, in order to pay the mortgage. So I go into my transaction now. It’s going to be closing in the middle of my vacation from another continent that I have no idea how I’m going to pay for and half the income is drying up. So I decided that really the reasonable ticket way to get this thing done with all these challenges and circumstances, is to use mostly a hard money loan. So I get a few different proposals for hard money. And I choose one. And yes, it hurts. It’s expensive, and it requires a significant downpayment Of course it is 1,000,003 purchase. And so I borrow $220,000 more privately from individuals who I already work with against other properties I own. In order to put the down payment, together, and it’s now just a couple days before I’m supposed to go to Australia, it looks like everything’s coming together. But I’m not really excited about the financing. All Larry and Mona’s side of the building. And it’s a couple days before I leave for Australia and I kind of start freaking out. I started getting major cold feet and I’m feeling like this is just a bad idea i’m going to be far too stretched. So I called my coach Greg, and he reminds me that this is not an everyday building. This is not something you just stumbled across every day, that this is the kind of thing that may only come up in front of you and give you the opportunity to buy a couple times in a career. And so I decided to continue to keep moving forward. And he also emphasizes you know once you put these two sides of the building together and you own the whole thing, you know have a one plus one equals three, kind of effect because you’ll be the first person in a very long time to own the whole building and it’s worth more as a whole, than it is as two separate parts. So, I know I’m going to immediately create equity, simply through the synergy owning both sides of the building. And I pull myself together, and I decide to keep moving forward, even as I depart on my trip with my wife. So now it’s a week before closing on Larry Mona’s side of the building. I’m in Australia, and my escrow officer back in Portland. Our plan is she’s going to FedEx to me in Australia. All the closing documents that need to be signed, and there’s a lot of them because it’s not only this purchase there’s these other small private loans I’m getting from these other individuals to fund my down payment. And I’m going to have to find a way to make sure I first received this FedEx package in Australia. I’m going to have to find a way to get it notarized and sign all the documents in front of a notary, and then I’m gonna have to get a FedEx back to her. On the right, timeline. So, that turned out to be not an easy task, at all. But that’s not even the exciting part about a week before closing Mona sends me an email, and says, All right, well here’s, here’s the calculations on the deposits that need to be transferred to you at closing. And she calculates them incorrectly by like a long shot. And even though I as soon as I put the property in contract had clearly outlined in writing here’s what I understand the deposits and the prepaid grants, what not to be, and I gave it to her and she approved it. She’s now looking at the same information and coming up with a totally different answer. And she also tells me that, because the main tenant in the building is not paying that she’s not going to be transferring to me prorated rent for this trouble tenant because she hasn’t actually received prorated rent, because, again, our deals closing on the 15th so I need. I’m expecting about two weeks, about half the month of rent. And furthermore, she insists on transferring these deposits outside of closing rather than on the closing statement. So, I’m thinking about this. And first of all, she’s just miscalculated some things but secondly, now she’s insisting that her collections problems with this tenant are now going to be my collections problems, and that I’m not going to get paid for the first half of the February rent. With with the transfer because she hasn’t actually collected it. So I I’m really upset that I wrote back to her in very direct email language telling her that this collection issues are her issues. And if she’s chosen to not be more diligent with collecting rents for months, then that’s her issue but I expect to receive prorated rent for all units through closing, whether she was able to collect those rents, or not. And I create true masters, and all of this, ultimately doubles which she thought she was going to have to pay from $5,000 and change to actually $10,000 and change. And furthermore, I tell her that if we’re going to do this outside of closing. Then, I’m not going to accept a personal cheque. I’m going to take a cashier’s check, and she can deliver that cashier’s check to the escrow office front desk or my staff will pick it up, prior to closing and Mona is so mad she’s so insulted. She is just so used to getting our way and pushing people around to have somebody push back and point out the things that she has done wrong did not really sit well with her. Now, we talk a lot about seller relations here and seller relations are so important to the way we as thoughtful real estate entrepreneurs do business but when we’re this deep in a transaction. And it’s just been an absolute battle at this point it’s just about getting the deal done and getting Mona out of my life, and into my rearview mirror so we’re really just trying to get business done, get this thing closed. Even though she’s being unreasonable and pouty because her bullying is no longer working. So we get the documents notarized which was, I can assure you, a huge adventure in and of itself. Turns out a notary in Australia is a very different thing than a notary in the United States, a notary and Australia is actually a full fledged lawyer. They’re not easy to find is not cheap I spent about $600, literally got every dollar out of the ATM that the ATM would allow me to get in terms of daily limits to give this person $600 cash, just to notarized a couple documents, found the FedEx place which is not exactly as, as easy as a FedEx store in the United States and got the whole thing shipped back about 10 minutes before the FedEx cut off. And we got the deal, closed. Later when I got back from my trip. I had my team work with the title company to do the title research because I wanted to know. I knew it had been a long time since one party had owned both sides of the building. But I didn’t know how long and I wanted to be able to say, how long it had been. So my team works with the title company, they do their research, and we get the answer back. 101 years. 1918. The building was divided into those two parts. And not a single time over those 101 years didn’t one party own, the whole building, until we got it done. A quick epilogue for you. About a month after I closed on Stan and Marcus, or excuse me, Larry and Mona’s side of the building and I became the owner of the whole thing. The brokers from Cindy and stands outside of the building. Apparently saw in the public records about the real estate transactions that I had bought the other side of the building. And he sent me an email saying hey congratulations I saw that you bought that building that side of the building too. And what I found is that that desire I previously felt just absolutely sticking to them and say hi. I had a contract, all along. If you’d known that and you would have known I was bluffing. When I said I wasn’t gonna close on Sunday and stand side, etc etc. But that whole desire, and just completely waned. And so instead I just simply said thank you. I said yeah we put in contract back in August, which was basically like giving him one and one and letting him do the math and come up with two. So hopefully he still kind of came to the same realization that I actually wasn’t contract, a lot of that time but interesting self observation, my desire to really stick it to those guys totally waned. So, a few lessons we learned that I just want to make sure they don’t get lost on you as you wrap up this story. First of all, gather intel on all the people that you’re working with all the people involved in the transactions, gather into on their attitudes and their perceptions, but just keep it to yourself. It’s really interesting when, when you start to notice that okay the brokers have an opinion that Larry and Mona will never sell. Cindy and Stan have an opinion that Larry and Mona are very difficult to deal with. Those are just interesting insights that you tuck away, you note them, and you tuck them away in your own little file folder in your mind. Number two, when you play your cards, is just as important as what cards you play. So for instance, when I was renegotiating the closing date with Cindy and Stan. I know I needed to play that card, but the timing of when that card got played was very very important and I decided to wait until later because I felt like that card would carry a lot more weight. Later in the transaction. There’s rarely any benefit to giving people more information than they really need to have. So for instance, you know if if Sydney standard the brokers knew that I was buying Larry and Mona side of the building with hard earned this money, which I could have easily just mentioned casually to them, then all my leverage would have been gone in my negotiation with Cindy standard the brokers. And so it’s important to just gather information, but keep it to yourself. When unless you really need to be sharing with others. Follow the letter of the agreement and follow it to the letter and stand up for it. There’s a fine balance that can be struck with directness and rapport, but also maintaining professionalism. And as I look back on my trip my conversations with Larry and Mona, I had to be very firm, but I never, I feel really good that I never stepped out of maintaining a strong sense of professionalism and simply sticking to my guns with firm professionalism. Focus on the bigger picture there were so many times and so I just wanted to actually give up. But I could see the value of the building as a single ownership like, I kept remembering how cool this building would be with the grand vision that I had hatched in my mind. And with the help of others like Greg, I was able to keep focused on that bigger picture. So thank you for listening to these two episodes of Sleaze Free Real Estate Investing. I hope that you enjoyed this story. It’s very much like a long chess match, but I wanted you to be able to see how a long drawn out series of negotiations is really like waging a war over the course of many, many months, and it’s a lot of little moves, not just one big transaction. On the next episode we’re going to be discussing something that I call deal feel deal feel is the intangible gut feeling for a deal that you have when you get into it and the people and all the dynamics and the changing dynamics throughout the whole process. So do you feel is like putting your fingers on the pulse of a deal and all the parties involved and constantly monitoring where things are at and making adjustments accordingly and I can’t wait to talk with you about that. Again, please do yourself to us a big favor by hitting the subscribe button in your podcast app, and you will know the second the next episode is released. And a reminder, today’s show notes, including a transcript, can be found at www.thoughtfulre.com/e12. That’s one two. Until next time this is Jeff from the Thoughtful Real Estate Entrepreneur, and I’m signing off.