How I hit it out of the park on one of my biggest deals to date

This story starts in March 2020, right as humanity was being introduced to a little virus known as Covid-19. I remember telling my wife, “The world as we know it is about to change.” (I still like to remind her of my psychic abilities.)

Fast forward a few months: I’m in my depressing, suburban office suite, hand sanitizer and mask in pocket, trying to figure out how the hell I’m going to dig myself out this hole.

I had just turned 40 and was going through a bit of a midlife crisis. I had given up a good career as a finance pro to try my hand as a real estate syndicator. The problem was the real estate market, already overheated, was starting to go bananas, and my two cold callers had just given notice because we hadn’t closed a deal in over 12 months.

But I refused to give up. I refused to fail.

An opportunity arises

Frustrated, I remember opening my laptop, logging onto my CRM, and desperately scrolling through my leads. I randomly called a mobile home park owner outside of Minneapolis to ask if he’d be interested in selling. “I’m already under contract,” he told me. “But call these guys who own the park across town. They’re having some issues and might be interested.”

I dialed immediately, and the story I got was straight out of a soap opera. The dude I connected with, let’s call him Bob, was a ditch digger. Bob and his father built a couple of gorgeous, 5-star manufactured home communities in Florida decades ago. Following the Great Recession, one of Bob’s colleagues called — he had a hot lead on a 2-pack portfolio of parks in Minnesota.

Bob’s friend said he would raise the capital, but he needed someone to operate the properties. He suggested they joint venture on the deal. What should’ve been a slam dunk turned into a colossal nightmare: accusations of fraud, gross negligence, you name it. Bob and his partner ended up in litigation for years and they eventually lost the property to foreclosure, simply because they couldn’t agree on whether to sell or refinance the asset when their loan matured.

Part therapist, part vulture

In my previous life, I, was a mortgage banker — which helped me come up with a solution to Bob’s problem. Minnesota Law allows for a 6-month redemption period, which means if you lose a properly to foreclosure, you still have time to fix the problem. Pay the outstanding mortgage balance and all costs incurred during the foreclosure process and you can reclaim title to the property.

So, I suggested Bob hire me to secure the capital to refinance one of the parks they owned. I would purchase the other one (at a discount to market value of course). The combination of the refi and sale would generate enough proceeds to enable Bob to redeem the properties and buy out his partner’s interest.

The pitch worked. The problem was my last couple deals were tiny compared to this. Where was I going to come up with $7.3 million to purchase this property? I already had a good relationship with a lender who financed my previous acquisitions, so the debt piece was circled. Now I just needed to find $3 million of cash to close, but that wasn’t just lying around the house.

Show me the money

I contacted everyone I knew and peppered them with all the relevant stats and highlights. “I’ve been hunting for something like this for over a year.” “There is a dearth of affordable housing in this market.” “Nearby starter homes are selling for $250k+” “I’m telling you, this is a can’t miss deal!”

I worked my tail off to raise most of the money from friends & family, but then I tapped out. Still, I couldn’t afford to let this opportunity pass me by. It was now or never. And so I wrote a check for a sizeable chunk of my net worth at the time to close out the funding. I was all in.

Turns out, it was a wise move. You can read more about the project in the tweet below.

Back to the present

Since purchasing the park in December 2020, my team and I made significant improvements to the property and our efforts resulted in an increased net operating income (NOI) of 63%.

This achievement allowed us to close on a supplemental loan with Fannie Mae last week. Because we increased the appraised value from $7.3 million to $11.7 million, the agency lender was willing to lend us an additional $2 million of loan proceeds collateralized by the property (essentially a 2nd mortgage).

The financing provided my partners and me with funds for future capital improvements (namely filling vacant lots) and, more importantly, enabled me to return 48% of our investors’ capital less than three years after purchasing the property.

Conclusion

I definitely haven’t figured it out all out yet, but I’m making progress. I’m rooted in the belief that I have an absolute fiduciary responsibility to my investors, that you’re often best served waiting for the fat pitches, and that no one is going to bet on you like you need to be willing to bet on yourself.

If you know of others who might be interested in stories like this, please forward them this newsletter so they can subscribe and follow along. I have some other recent exciting news I plan to share soon!

Finally, if you’re an Accredited Investor and interested in potentially partnering with me on future opportunities similar to the one described above, please click here to register for my company’s investor portal.