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It a Deal or a Trap

A developer friend of mine has what he call the third owner syndrome. He is very experienced and has turned projects around that his team purchase after the original developer went belly up. He says that many developers get carried away by the project and try to build a monument.  Or that they get caught in a changing market. They may have allowed a bit of wishful thinking to flavor their due diligence.  Several years ago before the market tanked, some “lenders” were more interested in the fees generated by a project than in its viability.  The project was going to be sold to Wall Street anyway. I remember back during the Saving and Loan Debacle looking at a project, We called it Camp Swampie. The project was a Second Home Golf Course Resort Community located in rural Louisiana. It was probably a hundred miles from anything. You had to travel miles on marginal secondary roads to get there.  They had a golf course, a nice clubhouse with all the upscale amenities, state of the art kitchen, golf carts in the garage (NEVER USED) and condos as well as developed Golf Course lots. Unfortunately, they had not sold one unit.  The RTC wound up with this puppy.
My friend says that after the project has been foreclosed several times many projects can be turned around because the numbers are finally realistic. I do not think Camp Swampie fell in that category. On a smaller scale there are a number of builder houses , small subdivisions and condos that are lying fallow . Many of these were started by reputable builders who got caught in a changing economy. They were unable to sell other units leaving them without the funds to finish other projects.  They were caught short when the lender who was funding their project was taken over. There have been many bank failures, leaving builders/developers stranded. Other projects were caught in changing demands.  Mac Mansions are much less desirable now. How about non conforming properties?  A contempory house in a traditional subdivision is certainly hard to sell.
Other properties were built either by inexperienced or fraudulent builder/developers. There are several subdivisions in my market that were built specifically to sell to unwary investors and have code violations, shot tie workmanship  and other issues.
There are opportunities in taking on an unfinished project but it is critical that you do your due diligence. Review the documentation, check for code and zoning restrictions. Check the construction. Some things may be covered up. A good inspector is money well spent on these types of projects. Be certain to get an owners title policy and read the title exceptions.  Do your due diligence very thoroughly. Be sure that your experience level matches the project or that you have access to the experience level necessary for this type of project.  Is this the best use of your resources?  There are lots of houses out there.

Some of the most successful folks I know have a secret. They have figured out how to get ahead of the pack. They are doing what 80% of the population won’t do. They seem to go from one success to another while their peers are struggling just to get on first base. What do they know that you don’t know? They realize that this is a competitive world and they position themselves to compete successfully. They invest in themselves. They continue to learn and hone their skills. One of the saddest moments of a persons life is when he realizes that he has allowed himself to be bypassed because he did not stay current in his profession.

There is an old curse that says “let you live in interesting times”. That can be either a curse or a blessing, depending on how you react to circumstances.

America is going through a huge reset. Populations are shifting, the job market is in disarray, real estate values are dropping and continue to drop. Many folks have seen their retirement plans destroyed from chaos in the economic/financial sector. We have an ageing population, many of which have not adequately planned for retirement. The national debt is at an all time high and continuing to grow.

Out of this crucible is coming opportunities for those willing to reinvent themselves. A number of small businesses have been started. I spoke recently to an individual who when his company downsized, left and started a hamburger stand. He now has 6 locations in two states and is growing. A mortgage broker purchased a restaurant that was not doing well and has turned it around. It looks like he and his partners have sold it at a profit and are in the middle of another venture. A number of individuals are going back to “school” for career resets. Accounting, Medical, and Service Industries are just a few of the careers that individuals are gravitating to. Some individuals have chosen to stay in their chosen jobs/careers and are honing their skills. I know several real estate brokers who have become involved in the debt industry in “short sales” and liquidating bank owned properties (REO’s). A number of Real Estate Attorneys have transitioned their practices to become bankruptcy specialist. Other folks are continuing in their chosen professions but are working to become more efficient.

A young man I am acquainted with was unable to find employment in his chosen field, after studying for and receiving a license. He took a part time job at minimum wage. He continued to look for an opportunity. A friend introduced him to an employer who had an opening to fill. He now works in distribution in a company that is rapidly expanding. His future prospects look good. We hear that Detroit is in horrible shape with people leaving in droves. While many see disaster others see opportunity. There is a rapidly growing immigrant population. Whole blocks are transitioning from foreclosure alleys to thriving family neighborhoods.

The point : You can let circumstances dictate your future or you can take control and choose your own destiny. Invest 5 to 10 percent of your focus on your future in funds and focus. Even if you cannot see the end result clearly the effort will lead to the next step.

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