Losing Control Of A Million Dollar Deal | Nightmare Deals - Episode 21
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Welcome a real talk, real state, the show where we cover how to build well, the real state with no fluff, no B S and no sales pitches. I'm David Green, and i've been doing this for over ten years. I've seen the ups, the doubts and everything in between. This is the show where we pulled back the curtain and show IT to youtube. So if you want to build wealthy real state, or you just love learning about IT, you found your home.

Welcome to the David Green show real talk, real estate, the show where we pull back the curtain and exposed the good, the bad and the ugly of woes on in the world of real state. Today, we are continuing in my nightmare deal series, and I am joined by investor soka is IT in golf? No, no, thank you.

Should have us that first, who has an awesome story to tell us today of a terrible deal was an awesome for her. But he has a big hard and he wants to help other people avoid falling into the same traps, as well as sharing what he learned from the situation, how SHE pivoted and how he was knocked down. But not not out.

I would ask you, before we get into the show, to take a quick minute to leave me a five star review, whatever you listen to this podcast, because that helps a time. And if you like the show, comment wherever you are listening. If it's on youtube, if it's on spotify, let us know what you think. So got welcome to the show.

Thank you, David, and expected beyond d. Nice chatting with you.

Yeah, we had a really good talk about capitalism and things that go well and things that don't go well before we record this. And speaking of things that don't go well, let's start off by having you explain to me how this deal that we're about to talk about today. First, cross your path what you thought when you saw what you were feeling.

okay. So this deal actually came across my path march of two thousand and twenty three. So last year, and I was in an investment group, I won't say with one because IT has nothing to do specifically with the group, but there are some guys who are part of the group who reached out to me looking for our private money one and I had done a couple of private money loans in the past um had no problem.

So that had been great experience. So I thought, okay, so let's do another one, right? I had some cash sitting um IT was supposed to be a quick like fixing flip, and I was essentially the gap thunder on the deal.

So my job was to just put in the twenty percent down and collect funds in a few months. But um it's kind of interesting because um everything just happens s so quick. I think I was really excited when I saw the numbers. I obviously I had to do my own do dilling gts. I ve had my own numbers want to just take you know who ever work is for IT um obviously everyone has a different set of uh eyes and with a little bit of experience I figured, you know I can probably add some value to this deal right um so they wish out to me text they had mass texted everyone on this investor list and whoever responded those were the ones that they were pitching um you know and I just first wall gathered more information on the home and um just kind of there I was excited you know I never done A A deal like that um where I partner up with somebody else and I thought, you know what it's time for some growth in my life and investing let's let's give a shot.

Let's describe how did this partnership start off like who was responsible for what? How are you going to be split up the profits?

Yeah yeah. So IT was their first partnership too. So I feel like that was my first mistake going in with somebody who didn't have experience and I knew Better.

I thought, you know what I have um a little bit of experience. We can work this out. We are in part of a mentorship program. Um so we got a jv agreement put together and I was supposed to be just the funds, just the private money, maybe give some input on design and that was IT.

Um they were supposed to boots on the ground, the one who was managing the construction, making sure everything was going um you know on time, on track and ordering the supplies and stuff. C that and um that's how we kind of split IT up because I was putting in the fans, I accepted a fifty percent cut of the deal and they were doing all the work, right? Or supposedly I just leave that that wow IT .

sounds good when someone else says they're going to be doing all the work, when the assumption is they're gona do good work, which is always how you think when you get into IT, when you find out the quality of the work actually matters. There maybe a point where you wish that you had done the work and sure, that's going to come up in the story.

So the deal was you're getting fifty percent of the profits and you're putting up one hundred percent of the money and they're going to go execute Operation, right? okay. So where was the property and what was the plane that give me some numbers? What you pay the rehabilitation thought you.

So yeah. So the property was out in eager mental, which is a nice little area. You you've got like tom living in that neighbor. Od, at some point in the past and some other president effort ate which one IT was, but it's a really nice prestigious little neighbor. Od, um you've got segmental state university nearby, so everyone keeps up the yard even with an age way.

Um with that being said, I picked up the property at five hundred thousand from a whole seller and you so they're connected with other whole sellers and that that's how they came across the deal. And um all in I would say it's about five twenty with closing costs. Um the projection that they had was like nine hundred to a million, right, is what it'd be worth after the flip.

Um I thought that was a little bit hi, so I around my numbers I said, hey and best we're probably looking at seven fifty hundred. But I figured, you know worst case in era, the deal part of the deal was that I would get the listing afterwards. So I thought you know works in all we break even.

I make a little bit of money just from listings, the whole and selling IT, right? And best case energy, best, best scenario would be like making a profit of two hundred thousand. And I thought, well, with the numbers that we're looking at, we've probably make a hundred K A piece.

So that was good like that's good. The projection as far as the rehab was supposed to be about sixty thousand and I told him him for a home that age is a little bit low. Um you know there's always incidentals that you need to account for.

So you need to have a little bit of a buffer and said you need to put in a buffer. So um I told them, you know sometimes keep use five ten percent what. But I said in our case, since you guys are super new, like we threw out the buff er like twenty grand, right we ended up asking for, I would say, the rehab budget of about ninety thousand instead and they blew right through IT.

They blew right through IT. And for what they spent on the home, we do not achieve my idea of what the we have should look like, which is a high and rehab IT looked more like a low and you know lipstick on a pig rehab afterwards and I was really disappointed with that. Uh I don't know what maybe jumping too far ahead with IT, but um essentially the home himself for what they are satin pated you is selling for and I was asking them like he because I again, this is in north california I california so I don't get to see the project right? I'm relying on pictures and you know all the details don't always come out on pictures. I'm relying on them to be honest and be like myself and so I thought I we had a great relationship um and I started off great but then you know things just started to kind of unravel along the way and I started getting like weird little ick notes um but again, i'm really hopeful as my first jv deal, I am ignoring all these little signs and I really 还在 right。

So let's talk about the actual rehab of the property when we're getting started here. What issues came up when you have the rehab going on that your partner's, of course.

we overseen? okay. So the rehab there are really just aggressive with the timeframe that they thought there would would be done in four to six weeks and be on the market within two months.

The one of the first issues that they ran into was a contractor who was not honest, reliable. So you know how sometimes people show up when they aren't supposed to or just don't show up at all. Will that happened? Um I think everything that could have gone wrong with a rehab went wrong.

So um they had to switch out contractors because I guess one contractor was was trying to pull that beat and switch the um gave their initial bid really low. And then when I came time to do the work, they would always ask for more money up front even prior to like starting the work. And we're like, well worth the money going.

And I said, no, no, no. This is not how I do things. You know, you do the work first, then we'll pay completion. We will pay for some materials, will pay maybe like a ten percent of closet, one of the other but you can't be asking for help at the whole job.

But yeah.

yeah. And so I was kind of getting out control and I said, look, guys, you, this is is something weird about this. We ve got to find something else.

He told me that the contractor stole some money from the essentially because I like, where is the money going if you spent this much? Why isn't X, Y, N, Z done? So that was the hard part. Um and they are going to try they we're gona try and pursue like a lawsuit against that contractor. But then some other things happened then down the road as we are getting towards the completion, someone from the city drove by city of segmental and they retook the house they slapped to stick on.

IT says, know you to cease all construction because as you guys do not have a permitted for this and i'm back here and shock, i'm thinking, hey, we hired a license contractor with the heck crime they should have acted in. You know, you know, we talked about permits, why I weren't permits pulled. I was under the assumption that while they're doing all this work, the permits were completed, were pull from the city um and so then we had to put a pause on that IT took like a week or two for the guys out there, the boots on the ground, my J V.

Partners to um navigate going to the city and pulling the permit, right. So now instead of having a trr pull the permit, we're doing an owner um remodel, right. So it's the liability is now on the owners, which is not something that I want.

Especially when you already paying a contractor that, that should be on them. So that's one of the things i'd like to share with people. You know you're doing any type of construction in your hiring a licence contract or never like paul a permit yourself have the contract to pull IT because others SE even if they're license, the liability is still gonna a follow you at end.

So let's get some details about how much money went to the contractor. What were they supposed to do with that money and then what did they actually do?

Yeah so this is a little hard because the person who is helping me track the book keeping um he passed away so there was three partner's total. I was one of three and um I don't have full details on that. With that thing said, I know that we spent basically ninety thousand dollars on the home.

And as far as the scope we were supposed to have, like that you know new high and steel because of fix, like the six and gap make into four. So that is not like a health and safety issue. Kids don't fall through, you know, we are possible。

Fixed the balcony and put like the nice glass through there, make IT look really posh. Repaint the exterior, the interior, clear out all the trash and debris in the home um fix any you know broken windows, replace all the flooring being towards the appliances of the fixtures. What else do we have to do that home? All those little things like the vanity mirror we even had to put in an island because that house had a unique floor plan.

Is old school like where you know they had a big bar like in the living room area. And um so we're trying to honor the original architecture of the home and just modernize IT, so to replace the bar as well. But there is just a lot of little things that weren't that just weren't done well, not not at least to my standards. And I didn't know that so much later.

So you had told the contractor, here's what I want done. I want this type of materials. This is the design I want.

They said, great. It'll be this much money. You send them the money they did not do with you ask they did something that was cheaper and they poked .

IT at the difference. Yeah yeah. Essentially something that's that's definitely part of IT. And then there's other incidentals that came up you to I really don't have the full details on that because I didn't come into seen and all I would say about six months in six yeah about six months in. And at that point else, okay, I need to take over this project because and in hindsight, I should have .

never part for sure we're to get into because I had that a lot. Yes, OK much money had you spent at this point with these contractors before you .

finally had a fire? Me, who? I dropped that number down somewhere? yeah. Again, David, I really no. Because that portion, I would say, is probably about fifteen thirty thousand before the first contractor was fired and then the second contractor, he got the project through all the way towards the end and suppose he was Better, but even then, he was someone who should have been fired too. But I think for just because of this whole situation. Um so the guys that brought me the deal, they are obviously not only working on just one deal there, trying to um display .

a bunch .

of other deals as well, right? They're ying to hold sell few other deals. They're trying to lock up other investments. And so I think at that point, their focus wasn't entirely on this home anymore. They were just kind of trying to baLance the time with other homes, although they didn't say IT.

But I felt that was the case because when we have gotten slapped with the stop work order, they could have gotten those minor things done and rectified really quickly, but they did to constantly ask, and they're like, a, well, you know, they said that IT doesn't expire until a few months down the road. And I like, we'll listen. What if they changed their mind? What do they find something new? Let's let's get this done.

Let's get that permit closed. And why are we're waiting a few when it's just dropped the water heater and moving some pipes? So there is just some weird stuff. I think at that point, um IT wasn't just a contractor pocketing the difference. I think IT was the partners as well because they were in charge of doing the draws with the lender, a hard money lender that we had. And so they might have even over projected some expenses and then just taking the money instead that they paid the you, but they didn't because I think that they might have been using that money to fund other deals.

other deals. Yeah.

yeah, yeah. That's that's really like what i'm thinking happened because there's just it's just kind of strange everything that went on. I don't want to around too much and confuse people because this this was like a year and a half long project and it's supposed to originally have only been to well.

we've got got a pretty good foundation of what the project look like here and how you got ripped off. So did you fire the contractor? Did you have your partners fire room?

I had to my partner's fire. And there the ones, like I said, who had the communication with everybody down there? Um I really try to be as hands off on that stuff as possible because again, back or java agreement, I was supposed be just silent money in and then that's IT there is going to do the rest of the work. And my only input sh have been just the design concept of .

IT where they apologize to do they take any responsibility for how bad I was.

Oh yeah, absolutely. And that's what drives me that I felt like, yeah, I was extremely hopeful going into this. I was too bright eyes and they told me everything that an investor would want to hear.

And they knew IT is a lot of lip service. And they were just like, hey, you know, i'm so sorry, this is, you know, I wouldn't this that happened to you. I know you've got a family too. You've sunk, you know, a lot of money.

And at the time, I have already put in initially about one hundred and ten thousand dollars into the home right you know hard money loans, typically you put down twenty percent um we could have probably put down less. But because of the partnership that I had and the ratten soft that they had already been negotiated, IT wasn't as favorite able because they didn't have the experience in the credit. But they definitely said everything you wanted to hear. They knew how to keep IT flowing, for sure, for sure.

okay. So what was the emotional state like for you as you're recognizing this is kind of frustrating these guys? idiots. Yeah, I have to do everything myself is sort of escalating as you move into, oh my god, I have to talk to the city myself and get owner permits because my name is on the title, because I put the money into here. What are your thoughts on your feelings as this is slowly just spiring into worse and worse and worse, and you realized there's a line in the same that you're going to have to jump in and take over this whole project that you had no intention the beginning of doing.

Well, David, at that point, I was still in denial. I was still so hopeful that everything was just gone to continue on as I should. Maybe we just had a little set back of the city and then you once we fix that, we're just going to go in market, right? So at this point, um they came up, they reach out to me in march.

We close the deal in April and this is about july, August at this point. And then we were supposed to start taking photos of the home and then list IT at right after were very close to tail end of everything. And then at that point one partner passed away tragically IT was like just some weird incident that happened on the freeway um shooting uh so yeah I was just stand.

I didn't know what to do but at the same again um am a business person and I have to keep moving forward, right? We can draw the project because that's gonna detrimental everybody at that point. It's like, what do you do if you don't move forward, then you know you still owe the hard money, lender their money.

They want their money no matter what. They don't care what the issues there are. And um so we had to just figure out like what was going to happen with his share of the home.

And so because he didn't have any type of succession agreement um uh or succession plan in his corporate dox um the corporation or the L C. Actually went into profit. And so with profit and I doubt with that before, but not like in an investment.

So I know that he has to go through a process. You have to go to get you know either core approval or some type of people were from courts saying that the whole can be sold by their ears, right for the successor. And we didn't know how long I can take.

You could take you know six months. I could take a year um and at this point i'm just thinking like, okay, well, i've only got six months left before my note is due um and i'm starting to sweat. I'm getting really, really stressed and i've got your kid. I'm still trying to manage all other aspects of my life and I just I am just stressed every day day, every day day. I, I am still hoping for the best though.

Are you feeling anger? Are you feeling helpless? ssz? Are you reaching out to people for help? Are you thinking I never should have invested in real say, like, what kind thoughts are going to your head?

You know, surprisingly, I do not feel anger um I just new things can go wrong. That's just how IT is with investing like let's be realistic. You know if you go in there thinking that nothing can go wrong and that's just asi um the biggest thing was just frustration like because I knew I didn't have to be like this.

So it's like all these things that came up IT could have been avoided, I felt. And the biggest feeling for me was just feeling of regret, right? Thinking you know what everything that i'm starting to have to do, I should have just done IT myself.

I shouldn't have brought partners into this. You know, now i'm having to wait for the other fifty percent owners to make any type of decision, right, because it's not just me. And so I have to move a little bit of a slower pace, and I also have the tread carefully.

I don't want to ruin any type of relationship we have because where we're still in owners of this home together, what if. They get upset. What if they trashed the house?

What if um they decide, hey, i'm just not going to communicate with you anymore, you know forget that you do the work like i'm just going to sit back so i'm just still trying to like the sage this whole thing along right, make everyone just not necessary happy but just like, hey, stay in communication, we're still partners. Let's work through this together. That was my biggest mentality.

Well, I asked you to speculate right now. I realized that. But I am curious, do you think that the partner that passed away on the freeway from the shooting could have been related to owing money to someone else to a deal gone wrong? I'm sure everyone that hears is wondering, was this something that these people that you got into this deal with may have been screwing over other people too, and they screwed over the wrong person?

Yeah, you know, I I had all sorts of thought of my mind, and he was just cycle. Oh my god. What happened like this is I first why I didn't even know what happened.

And then once I found out what happened, that he was like a there was a shooting on the freeway, so he was trying to get away. I thought, oh my god, just kind of speaks. Volume was about like maybe there are history or maybe things that you thought was their history, but they're still doing right. So and then I even had like a even crazier er theory where I thought maybe the other partner wanted to take his ownership, you know his shares and thought well, if I got rid of him, i'd get a bigger share of the pie and I I know that was a little out there, but yeah, those certain to cross my mind, you just never know. I mean.

we have to wonder because if they're pulling money from your projects to pay for others, which we don't know, but that's very likely what was happening happens a lot of the time. People get any situations with their stressed. They also don't want to acknowledge that they're in over their head or theyve screwed up.

So they just rap into the papal going to become the form of a posy scheme where you're sending money, the contractors keeping some, they're keep in some, it's going to pay up the other people to keep those people happy and they keep taking well, if we can sell these homes, I can pay everyone back. If I can just execute, I can save face. And I won, my reputation will take a hit, and I can keep going to these real state groups and praying on the members.

Which total side note here. This is not socks s opinion. This is pure David. I have seen people like this that i'm going to call predators bounce around from real state group to real estate group.

I'm in a group called to go abundance that happens there, just like everyone else, knowing that there's wealthy people wanting to make money in real state, offering passive returns, claiming that they have experience giving your money. Sometimes that works out good, often times they hit the bed. And the people who gave the money are somewhat trusting this person because they're in a group that is a community that they feel safe with.

Its very inspirational yeah and the predators know that, they know that this places full of people that are bright, light and bushy tailed and they listen to bigger pockets and they're so excited and they love IT and they're in this community of happy people. And so the wolves come in and sheep clothing looking just like the people at legit. And you can tell the difference when you're in the group. I just wanted to take a minute because we're about pulling back the current and sharing what happens. And I do see this happen in more cases and just your soca yeah.

it's unfortunate. It's unfortunate. And I really did my best to get them, and they were honest with me when I initially have to deal to cross my lap.

I talk to them and they are like, hey, know, we've never done a flip before. We're ego to learn. You know, you can help mentorians through this. And so I can appreciate that honesty and I know everyone starts somewhere and I was that one person before, right, that started somewhere. So that's why I agree to jv with them.

You know I thought, okay, they're so um eager to learn and they're so receptive to, you know, things i'm telling them that they need to do that this is gonna fine um but afterwards, what was strange is that they would try to use me as a reference and I like, hey, guys, I don't really don't think i'm a great reference for at this time. We're still working on this project together and IT hasn't come to formation yet. IT were still like in the midst of things.

So I really don't even know what to say other than like you guys are keeping in consider communication with me but that's about IT and have had to uh two instants where somebody has reached the second time. The the guy. I J, well, just one guy at this point because other one has passed. He sent her on an email with all the deals that he's done, suppose sely.

And so I was curious as, like, you know, you gotta bet these people, uh, and you look at the deal yourself, I said, I can't person ly analyze the deal for you because maybe my numbers don't work for you, right? And I said, I don't want to be the one who says, yeah, this is a great deal. You do IT maybe you don't do IT to the way I think you should do IT.

And then you don't make them the money you should make. And then you get mad at me. So I was letting her know all this stuff.

And SHE sent me an email showing me what he had received from its like those investor um in full packets. So I look through IT and tractive they to really do all these deals. So like it's impossible for them to do all these deals. They just started a business.

This is the first flip they have you finished IT yet and despite you know um all these inconsistencies that I saw and I shared with her SHE still um apparently did the deal of them because I I have the as a reuter you have the ability kind of look up properties and see who bought IT and whose name is on IT so as able to see that they ended up doing the deal together um so hopefully there is went well but uh I I just couldn't do a deal with someone who lie to me IT doesn't make any sense like even if it's a great deal, I would buy IT maybe paid them a whole sell deal but that's IT but yeah and form there is a lot of predators out there and they continue to be out there because like you said, you know, people are bright and bush tail. They want to ignore all the negative things just kind of like how I went into IT. Um but in a different circumstance, like if somebody said, hey, this person isn't a good character, let's not work with them, that would be different.

I I ouldn't work with them so you're in this thing deep. You have to go to the city and get permits in your own name. That's a problem. You're on the phone with these, but the city yourself trying to work through the red tags that came in.

No, no. So at that time, all partners were still alive and well um and they went to the city and they took care those things. So because we are all entitled, so they have the ability to do that IT wasn't me and so I didn't have to deal with that, but we did have to know. I just was more uh, the one who just had to follow up on everybody and make sure they are doing all the right things like a just kind of project management at that point.

okay. So you get the permits owner permits here. You're still having to put your money into this thing. How much did you sink total into this?

We have as well over a hundred k on top of that, I would say one hundred and eighty five thousand dollars is what went into IT. IT was and now not all of IT is rehab, David. Part of IT is um the monthly overhead as well, which is the mortgage um the utilities. So those two things OK. And what about .

the downpayment for the house?

The downpayment was with the closing coffee was a hundred and ten thousand. Yeah no I did include IT in the hundred and eighty five thousand sub total. So I would say seventy five thousand came out of pocket for all the other stuff. Does that make sense?

Yeah, totally. okay. So how much did you spend on the real portion of this house and how much you have to put .

down to buy IT? So the rehab portion was between ninety and one hundred thousand with the lender. okay. Because now I don't think I was clear on this earlier, but we with the hard money loan, we also did get a rehab budget with that, right? So um that debuts factor in there.

But as far as my bottom line number is how much went into the house so far about one hundred and eighty five, one hundred and eighty six thousand. So that means that there's another seventy five thousand dollars that went into the home. Um that was in part of the original rehab budget.

okay? It's a lot of money that you're in on this thing for. That represents a lot of years of saving and good financial decisions and delay gratification. That's maginnis that you've now got these people that are throwing your money away because they're not in a anyway well, i'm sure they get there, come up and at some point in life. So what happens is a read actually get finished and you're happy with result.

Now well, the rehab eventually did get finished but not by the partners. So um after we figured out the whole project situation, we got letters from the court saying that we can go hand sell the home. I went ahead and try to list the home for a one some we are not getting offers or at least anything that I thought I was reasonable to where we could break even.

A lot of IT was just other investors who wanted to pick up the home, give you another rehab and then flip IT, right? And they wanted to buy IT at pretty much the Price that we paid for IT originally. So I wasn't about to let go the home.

I'd rather just hang onto at that point. Um with that being said, we eventually got to the point where it's like month live in and on the twelve month the hard money loan is due. And so I have been talking to the remaining partners said like we need to figure things out, right? So he's been trying to get a um alone.

In order to take me off of this a title because I at the point I didn't want anything to do with anymore, you know it's a shit job in the house. I don't want to be stuck with the shit house. But h know he wanted the home because he still felt like was a million dollars in his eyes and despite everything that went on on you know he just that's that's what he felt anyway. He had a bad credit. He couldn't get alone.

Um he didn't have any funds to put down for the loan and he tried to convince the um the estate administrator for the deceased partner to cosine with him but and he and pretty sure he was trying to trick him because he was like all this isn't a personal guarantee you know you could could do you sign on behalf of the corporation or the lc and do IT that way but with my knowledge I knew that that wasn't possible least not that I know of but there is a fair chance that there might be alone like that out there so I was still hopeful um turns out there's no such long and so um the fair is fair to say that the administrator didn't want to move forward and personally guarantee this deal that he has nothing to do with. He knew nothing state right um and then the other partner couldn't refinance and then and I like, oh well, at this point i'm the only one who has a good probability of doing the refinance. But I said if I do IT, I wouldn't want them to be a part of IT.

I said our partnership will essentially have to end because IT makes no sense for me to have to keep asking other people for permission on what to do with the home when i've been paying for IT you know hundred percent and so um he's like I said, he told me everything I wanted to hear and was agreeable um but I at this point time I like shaking myself I in the back of my head and thinking they're not going to sign over the quick clam deed so that way I can have full ownership of the home and I do not want to keep them on title and Carry the whole thing. Ford, right? If i'm going to have the home, i'm just going to sit on IT for however, along IT takes until I could break even again and sell IT in the future.

So that was my back of exit strategy. IT wasn't like the original strategy with this deal, but I thought if I held on IT for another five, ten years, you know, we should be OK right? I'd rather do that, then let IT for clothes go back to the lender, lose one hundred and eighty five thousand dollars. So that's that's my thoughts.

So you didn't want to keep IT as a rental. You are like i'll let the lender have that back and just wash my hands of this thing.

No, no, that's not what I meant. Um so I originally was trying to let the other partner refinance and take me off title .

so I that way but he couldn't get .

created create and then ultimately I did have to refinance in my name um or under my corporation and then rented out. So now I do have IT as a long term, but that wasn't the original plan.

I see. Okay, I misunderstood what you are saying. okay. So you keep IT as a short term, tal. Now I got to ask, california is not very friendly with short term tals. What's IT been like trying to have a short tremens in a secrets tal residential market?

Yeah so secret. Ta is really interesting. I feel like it's very diverse as far as like income and the values of property is like you have these expensive properties but you also have a very small pool of people who can actually afford to live there uh and pay that kind of Price.

Um so the IT IT was difficult to find a renter for the property. Um for me, after refinancing to even break even on the mortgage alone, IT would have to rent out for about forty three hundred a month and that rental market in that area, you just couldn't get forty three hundred dollars a month for IT. You know it's possible, but the home would have to be very well upgraded and offer a lot of amenities.

And this home, like we were talking about and the rehab was a basic lipsticks on the pig rehab, so IT was just not going to get the amount. And then one of the things that I toed around with was maybe trying to put on sectioned, right? Everyone has talked about like sectioned maybe being um a great idea for long time.

mental. And um you know you can see in the charts that they would pay up to about forty two hundred, forty three hundred for a home that size and that okay, well, maybe this is worth expLoring, but that was very new to me. I've never wanted to anyone who has been on section eat before, so I didn't really know how the process went and what to expect.

So as I was going through the process, I learnt that you know there is a lot of hopes for um you have to have the house up to certain level of uh retina ss for the renter on which I thought I was not knowing the true condition at the time. And then they also go on comes based on comes so just like you know regular real state, right? And I didn't know that I just thought that they would pay automatically up to the amount that was on their list.

And so that was the other chAllenge. Um so the other partner who was like, hey, we just put on session eat for this amount. No problem. He had no idea either.

He was just one of people just again a viger lip service you know tried to make everything sound easy um and as I was going to the possibility of just didn't work out that way, so ended up renting IT out for about thirty two hundred and thirty to fifty a month so thousand hours less than what the mortgage is. But um it's to a group of students that goes to sex state university. Hopefully they are taking great care of the home.

But yeah every month i'm paying and subsidizing that mortgages which sucks. So i'm not even getting like you know the one percent rule or five percent cap whenever that people are going for california. Unless you're house hacking, that's just not likely. Unless you bought the house a long time ago for a much lower Price, it's you're just not likely to cash flow.

So what happened when you try to go the short term around? I'm sorry if I missed I heard you mention all the other things .

we tried yeah I don't think I mentioned the short term rental out, but I did think about that for a quick bit um and I try to even do the term rental and surprisingly, I had a lot of inquiries for MIT rental out of secrets to I think there's just a lot of old homes out there. So there is quite a need for people right, like plumbing first or something.

You know now they got to get inside the home and lives somewhere for six months until their holmes completed repared. But, uh, the problem is these, the people doing the experimental, they are take a long time to get back to you. So I wasn't gonna keep waiting, you know, for a new inquiry and then for them two weeks later to tell me no IT just IT was just eating away um every month at my bug .

you're not kidding, man. I applied about seven months ago with the state, california. I've been a real say, broker for probably five years now, but I was never the broker of my own team.

I was using someone else's brokers license. Well, I said, hey, i've got a company. I want to be the broker of IT, so I can now recruit agents to work on me.

It's been seven months and we call every three days and they say it's in review. It's in review. We're waiting zero progress, zero afs given you can't get any support at all from the people that work in this position.

So you take someone like you now org company still wants their payment. The state still gonna click those property taxes that home others insurance is still coming. Everyone else in the world gets their money.

But the person in your position who needs the state to get through the red tape and help the person that pays those damn taxes is just stuck waiting and waiting and waiting. And IT is one of the worst, most helpless feeling. So you're sitting here like, well, I could sell IT and lock in huge losses that I don't want to do.

I've already fought to the nail with these idiots that i've partnering with to make my life hell. I could try the short chairmen's out. I have no idea when the states actually going to get back to me on this.

I could try the medium terminal out that's going to have a chAllenges or I could make IT a traditional rental and bleed money every month. But i'm not taking the huge catastrophic loss, and i'm just hoping for the market to go on. All of these are terrible options that can't leave you feeling very good, right?

So seeing that you've now sort of cot ized the wound in a sense, like you've locked in those losses, the money you put into IT, you don't have cash low, you're actually losing money, but you have hope for the future. If you hold on long enough, rest will go up, values will go up. You can probably sell. How do you feel today like to this ruin your appetite for real city, investing that to ruin your appetite for partnerships? How did you walk away from this?

absolutely. I definitely don't want to do another jv deal at this point. It's and if I do, i'm going to be a lot more cautious about IT. I think there are a few things I learned going into this deal and like my brother in law has said, right, like any time you make a mistake, it's just going like going and paying for a university. It's just an expensive learning lesson so think of that that way.

It's like I just paid for a USA with these dealers um but I definitely would say to anybody who is looking to enter A J V agreement in the future, make sure that whoever you're partners up with as L C S corn, whatever, to make sure that they have some set type of succession plan in the record ate documents like if they pass away, make sure that their business doesn't go into private, that there is a way that you can continue moving forward so you don't ever have to worry about eating the ground. Um and then on top of that, I talk to my financial adviser about IT. He's like soka, did you know that you could have bought insurance for your business partners? And they could have insurance on you.

So that way, if something like that did happen, you could have had the first right of refusal to purchase their portion of the business, right? So you didn't. So that way, I could have avoided having to negotiate you know buying the there fifty percent um so that's what I had to do.

I had to negotiate their fifty percent and fortunately they did signed over quick laim the property over to me. But I did. You take a little bit of a deal to get that going, but he was worthwhile at that plan.

Just want to get IT done. I would say the last thing is, you know, make sure that people aren't Green, Green like that. They have experiences. I mean, if they're wearing Green and they have all the money and they just dripping money and they want to be like prep ml, that's great. That's different. But if they don't have any experience at all with what you're trying to do, if I mean, I don't know what I was thinking, IT definitely wasn't passive.

I know what you're thinking and everyone was think of the same thing. I don't even blame you for that. Like in the inside, of course, we say, oh, you should have know Better.

It's always the people that don't do anything that are the most critical of the people that do. They point out where someone should have known Better that you already know. But at the time you're doing this, the economies chugged along.

Role set eyes are going up. There's a crazy lack of deals out there and people have capital. You know you're smart woman.

You know your experience, you know that you're capable of things and in your head like, well, worst k scenario just just take over the project. You don't realize the cities is going to get involved. You don't realize that these people are sm artists.

Is hard to imagine how some people can be that positive on the outside and have that little you on the inside IT shocks you when you find how easily some of these social pats can walk around projecting this image. And then when you actually get into business with them, don't lose sleep at night. Take the money from other people.

David, you did. How do you tell you everything? I mean, after taking with a project like after refinancing, because I don't want to put a venter in there until we finished putting everything into title under my name because I didn't want to have issues with the rental contract, right? So I waited I waited um and after we we closed the file, I was looking for a renter. Um I couldn't even get some rest of home and they're like, you know just not in the condition i'm looking for. And I didn't understand IT because the partners were always like, hey, it's it's a beautiful home all the neighbors sy of the best home of the block and they love the finishes um only one person had the balls to be very honest with me as the stage and he's like the home is filled as dirty IT looks like something has been living here um and turns out somebody was living in the house uh so one of the partners state in the house and didn't tell me and that explains why I one month I had like a thousand .

dollar energy tilly bill there .

yeah they were like all IT was a real turn they showed the house that they forgot to turn off the ac and I thought, oh so okay that stuff does happen so I kind of like went with IT. But um after my husband went up north to do the repairs, I like at this point I don't trust anyone but you can you please know go help me like fix this and he had nothing to do with the project to begin with.

I was just hoping to like say, hey, you know, I did a great job on the slip all of my own and impress him, but here he is coming to say, the day. But when he went up there, he found, like, they're still trashing debris in the home. The windows were shot.

I had to replace all the windows. I had to replace the A, C. The male man and the neighbors all came introduce themselves. They told him what was going on. They saw that the partner had stolen appliances out of the, you know, fixtures, everything out of the house after we had, uh, finished the revenue. So he's scored from the project. Mail man said that there was a guy that was living there um is just a lot of things were like they they kept a lot of stuff from me um for sure just took kind of smooth things along and so that was all costly and um I wish that on nobody and David, let me tell you what got me through this is, uh I happened to listen to some random podcast that you had where you talked about somebody signing or transfering all the title to their name and you have to deal about I think is out in florida ah that is so much worse IT made me feel like this is nothing I knew I can get through .

this that's such a nice bright light in my horse ory that at least I made you feel Better yeah about your own well.

that's really my goal of being here on this podcast with you, David. I don't mind sharing my failures. I just hope that this helps somebody else to avoid you know some of the pitfalls that i've had and hopefully um just you know go into things a little IT Better with ice White open right and just not hopefully that I wish this on nobody. I hope that never ever happens anybody. Well.

that's exactly why we want to talk about IT because when you're in the position that you just joined a real state community joined a group. So I run a group it's called spartan league, and we have people that always say, hey, I want to pitch your members and my answer is no, you cannot do that. I tell the members all the time.

I am not advocating for anybody that pitches you on anything. I have my own mortgage company, have my own real stages, I vet them. I know they're not bad people, and if they do something shady, they're gone.

There's a degree of safety you can have there. I'm not going to a vet. Every single person that brings some apartment complex or syndication or creative financing or wholesale or whatever.

And I don't want you guys blame me when that happened. So if you choose to go offline out of the group and do a deal with someone, i'm taking zero responsibility for that. But I will put everyone on blast if this deal goes bad.

Everyone in the group is going to know this member lost this other person's money and they're going to be shamed to basically like there has to be some kind of consequences. But I know most groups don't do that. And so IT draws the predators to them. And like we said earlier, they don't look like predators. The tenders, when there did not look like a bad guy, he knew how to play this game.

And we are here to spread the message so that when people come into these situations bright and I can't wait to get into investing in, I read the book on partnerships and I read the book on no and no money down, and I feel like i'm educated and how this works, and they're absolutely not. They exercise caution. It's Better to lose out on a potential good deal, then to jump into a deal with somebody else that doesn't have attract record, like you said.

And I can just get out of control so fast, and then you the only person who has integrity in the whole situation is the one forced to deal with that and the one who loses money. So very sorry that happened, but I super appreciate you being here to share what the story was. I promise you, these deals are going on right now as we speak today in real state groups all across the country. And people do not realize how dangerous he could possibly be. Any last words that you want to leave people with or any information about how you're moving forward after you've recovered from this?

No, I I well, actually I would say another thing I can think of that was helpful. The situation was having a good insurance um I thought that after they had stolen all the stuff of the house um you know that second what else can go wrong right? And IT turns out is kind of a blessing in this sky because they let me know the true condition of the home after set my husband up there.

But we were able to like renovate the renovation right, get all those things up to par and make sure the home um is um in a condition that is actually truly rentable. But um that insurance was a big deal because I was able to get coverage for the theft and I never thought I would ever needed. I was thought insurance was A M, but turns out the covered a portion of whatever was missing.

Um and so I got maybe about like fifteen thousand bax, so waiting for the check. But it's it's a likely process, but they did approve IT. So that was helpful. All right.

Well, thank you. If people want to follow you, learn more about you, reach out to offer their condolences and give me some encouragement. Where can I find .

i'm on instagram? That's probably my favorite social media platform. You can find me. I think it's either so can over so ga real state, not sure which one to use as a handle, but you can also search my name as well.

They are going let's S O K H A N G O V if you're listening to this on a podcast and you don't see IT on the screen. Thank you soaking up for shing your story, super appreciate you. Make sure that we stay in touch and let me know about how your next deal goes and hopefully can have you back on to talk .

about a good one sounds good. Thank you that.

Thanks for listening to real talk, real state. And you would like to be featured on the podcast I D love to have you visit David Green twenty four outcome slash, ask a bit your question there. Also please give me a huge favor and share the show with someone that you love that you think would benefit from this message, and make sure you're subscribing and notified to you. If you want to reach out directly, you can also DMi on instagram or social media and check out David Greens twenty four outside.