Latest / The Academy Presents podcast / Cap Rates, Risk, and Real Estate War Stories with Charles LeMaire

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Cap Rates, Risk, and Real Estate War Stories with Charles LeMaire · The Academy Presents podcast

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You're already taking the first step. just by
1:00
joining us here today. So what is this cap rate
1:04
thing? You know, there's a lot of different ways
1:05
to explain it. The first way, which I like the
1:07
best, is that how many people are bidding on
1:09
it. That's how you set the price. Whatever. The
1:12
second way I like talking about it is there is
1:14
one that's pretty much prevailing. It is a published.
1:17
It is determined by how much people pay for properties.
1:20
And there are companies out there that log these
1:22
things. You can go out and look. Once you've
1:24
done that, you can find out what you think the
1:26
property is worth. Okay, but there's also some
1:28
other factors that come into the thing. The class
1:31
of the property is a piece of this thing. You
1:33
know, if you're in a property where they won't
1:35
deliver pizzas, you're probably going to not
1:37
want to pay as much, which means the cap rate
1:39
goes up. If you're in an A class property, you're
1:42
probably going to think, oh, there's no risk
1:45
whatsoever. These people pay their bills and
1:47
the cap rate is going to drop. So you're going
1:49
to pay more for that particular property. So
1:51
it has a little to do with the class and the
1:53
risk that's involved. We talk about Class A through
1:58
Class D. Class A is the really fancy places.
2:00
They're typically new. Class B are the somewhat
2:03
fancy places. They could be new, but they're
2:06
probably several years old at this point. And
2:08
the Class Cs are the workforce housing. And it
2:11
sort of goes like that. Then the Class Ds are
2:13
where the drug dealers and the other people of
2:15
ill repute live. And I would say that if you're
2:18
thinking about doing this DDT, there's a drug
2:21
in the old days, or a pesticide called DDT. It
2:25
really stands today for don't do that. And I
2:27
would say that the class Ds are DDT, don't do
2:29
that. So you really have to have some expertise
2:32
to get into that area. You're playing with this
2:35
thing. Today loans are really interesting. One
2:40
of the dumb things, if you're buying a house,
2:42
And it's a very different thing when you're buying
2:45
a house versus a multi -family place because
2:49
you're getting a different kind of loan. Commercial
2:50
loans have payback penalties. Residential loans
2:54
do not have payback penalties. They're illegal
2:56
in Texas. And you can look up your own state.
2:58
I'm not sure where you're living at the point
2:59
when you listen to this. But here in Texas, for
3:02
instance, you cannot have a prepayment penalty.
3:05
It's illegal. So you look for the best loan.
3:09
Well, in multi -family commercial, we have this
3:12
thing called yield management. There's another
3:15
name for the similar but different way, but you
3:17
can end up with a very large prepayment penalty
3:20
and it has to do with the loans drop. So we started,
3:24
my wife and I started investing in 2011. So through
3:28
14, the interest rates kicked up a little bit.
3:30
We got some properties, they had yield management
3:33
on it. They were agency loans, time passes, the
3:37
interest rates drop and the yield management.
3:39
kicks up. So we ended up having to, if we sold
3:41
it, and when I say we, I mean, when I sit back
3:44
and let somebody else do all the work, let's
3:47
be very clear on that. I do nothing. But, you
3:50
know, if they're sold, we would have a ton of
3:53
money. There's property, I guess this goes into
3:55
the war stories, but we had a property up in
3:57
Columbus, Ohio. We held it an extra couple of
4:00
years because the prepayment penalty was so large,
4:02
we wanted it to burn off for a period of time
4:04
before we sold the place. It did very, very well,
4:06
but we would have probably sold it a little sooner
4:08
and had more money to shift into a different
4:10
thing, but it just didn't make any economic sense.
4:13
Well, the problem with this is that GPs will,
4:17
and they did this recently, they will go for
4:22
bridge loans. Bridge loans have no prepayment
4:24
penalty. And so they got floating loans and interest
4:28
rates are near nothing and they're buying floating
4:30
loans. I mean, this is like the... The epitome
4:33
or epitome, as I like to say, of stupidity if
4:36
you're talking about residential, but it made
4:38
sense for multifamily. Sadly, today it makes
4:42
less sense, but then you can't tell the future.
4:44
There always lies the problem on that one. All
4:47
right, so more stories. Let's see. I mentioned
4:51
the 2011. When we first did this in 2011, we
4:55
got into three deals. One was in May. I believe
4:57
the next one was August and then November. The
5:00
first deal I got into was a thing called Rock
5:02
Island. At about the 18 -month period, these
5:06
are war stories, the fun ones and the bad ones.
5:10
The lead was, shall we say, losing focus. I got
5:17
a letter from the bank. I was a KP on the deal.
5:18
Oh, what's a KP? A KP is a guy who signs the
5:21
loan, puts his wealth up to cover the loan, because
5:26
you must have enough wealth in the signatories
5:29
of the loan to cover the value of the loan. So
5:33
they loaned us, I'm going to say it was a...
5:36
seven million or something like that. And I was,
5:39
I covered a portion of it. No, I'm not filthy
5:40
rich. I certainly wasn't filthy rich at the time
5:42
we started this, but I had worked for many years,
5:45
as you could tell gray hair and I'd saved up
5:48
some point. And so I came into this thing with
5:50
a little bit of money. And that's where I ended
5:53
up doing that piece of it. Anyway, I get a letter
5:56
from the bank and it says, Hey, we're in default.
5:58
Now this was informational default, not money
6:01
default. Although it turned out we were a lot
6:02
closer than we had realized at that point. But
6:05
at that moment, I called the other KP's. One
6:09
of the other investors and I formed a cabal and
6:12
we tossed the lead out on that one. He took over
6:15
the deal because I'm just not motivated to be
6:17
a GP. He's very rich today. I'm just sort of
6:21
rich, but be that as it may, we pushed the guy
6:25
out and he saved the deal or we saved the deal
6:27
depending on what you want to do. He wrote a
6:29
book, didn't mention my name. I'm still mad at
6:30
him. So let's see. So that was one that was really
6:33
fun. I learned a tremendous amount. First of
6:37
all, I learned that you just worked the problem.
6:39
I had taken those classes very seriously. I sort
6:42
of knew what I was doing. And so we went through
6:45
all the problems, worked them one by one, not
6:48
a big deal. But I ended up on the bad boy list
6:51
for a year. I still have my letter that says
6:53
I'm off the bad boy list, and I'm very proud
6:55
of that. OK, so that was deal number one. Oh,
6:59
I did have one more thing to say about that.
7:01
One of the problems with that one was the fellow
7:03
who was the GP, and in those days it was sort
7:06
of the Texas Ranger style, one deal, one GP,
7:10
he was also his own management company. I'm not
7:14
terribly fond about that. I've done it in a few
7:16
other deals, but by and large when you've got
7:18
two people wearing different hats and they're
7:20
watching each other, I find it a little safer.
7:22
than having one person switching hats between
7:25
the two, where one guy is saying, I'll write
7:27
the checks, and the same guy says, OK, and I'll
7:30
approve the check. It's just not as much fun
7:31
for me. And there is a story about that one later
7:34
on that I'll get to near the end. All right,
7:37
let's see. The second deal we had had a couple
7:41
of fires, and the insurance shot up a little
7:44
bit. Honestly, I think the GP on that deal really
7:51
enjoyed the kill, i .e. buying the property,
7:54
but did not enjoy managing the property. So he
7:57
didn't like eating it. He just liked killing
7:58
it. Didn't like, I can't do hunting. I don't
8:02
hunt. Anyway, he didn't enjoy it that much. And
8:05
so it didn't work terribly well. And we got a
8:08
small return, a really small return. He sold
8:12
it. far too soon. And the price is skyrocketed
8:15
within a year after that. And I've always thought
8:17
that he screwed that one up sort of bad, but
8:20
you know, you take what you can get. And if the
8:22
guy's not going to work the deal very well, it's
8:24
probably not going to work out very well if you
8:25
make him hold it longer either. So we moved on.
8:28
So you can see out of the first two deals, you
8:30
know, it's like, Hey, I'm doing really well at
8:32
this. And by the way, I always like to say, you
8:35
know, I'll tell you all these horror stories,
8:37
but I'm still doing this. So it can't be that
8:39
bad. all right so you know of all every horror
8:42
story i've got a really good story too the third
8:45
deal was a 16 uh yes was a 16 unit deal actually
8:51
i think that was the fourth property but the
8:52
third story it's a 16 unit a class property down
8:55
in uh south of the dallas uh not south of dallas
8:59
but south of the highland parks area in dallas
9:01
it's a really nice place and i guess it would
9:03
be an a minus because we didn't have a pool or
9:05
anything it's a very small sort of a uh boutique
9:08
property I owned 38%. He owned 62%. We were the
9:13
only investors in it. Gala was out on a road
9:17
trip, as I think what we called them in those
9:18
days, but every Friday. the lifestyles, people
9:21
would gather a bunch of people and they would
9:23
carpool out to see these properties drive around.
9:25
And this fellow, Jim and my wife both see the
9:28
property and go, we're going to buy the property.
9:30
And so they, they teamed up. They called me up
9:32
and says, Hey, we're buying the property. And
9:33
they told me we're paying for it. It was only
9:35
95 a door. And in those days, 95 a door was enough
9:38
to drop my jaw on the floor. Cause we were, we
9:40
had been paying. Now it was a minus. I guess
9:43
at that point we'd been paying about 30 ,000
9:45
a door for the seas. And I'm like, trying to
9:49
breathe hard and catch my breath on that one.
9:51
Anyway, the thing worked out pretty good for
9:55
the longest time. We held it for a very long
9:56
time because it was more of a toy than anything
9:58
else. It wasn't a terrible amount of money total,
10:00
but you know, it was fun. Jim enjoyed driving
10:03
the thing and I enjoyed getting the checks every
10:04
once in a while and being around it. And the
10:06
guy who ran the property is sort of a sweetheart
10:08
management deal. By the way, the problem with
10:11
a property like that is management. So if you
10:14
get into a small deal, figure out which one of
10:17
your partners is going to quit their job and
10:18
go manage the property unless you got some other
10:21
special deal. In this particular case, it is
10:23
sweetheart. A pair of realtors had their office
10:27
in the building. They owned the building. They
10:29
built the building and they sold us the building
10:31
because they just wanted the money out of it.
10:33
And they stayed in the building and they used
10:36
one of the front apartments and they continued
10:38
to manage the building. And they knew the attendance
10:39
better than we did, which is fine. We just asset
10:42
manage it and let them do all the real work anyway.
10:45
So it worked out wonderfully. Let's see, did
10:49
I have something? Oh, and I guess what I was
10:54
going to say about that one is, sadly, Jim passed
10:56
away. I can't remember which year it was now.
11:00
And so I got to take over the property. And there's
11:03
a lot of interesting things. I look at life as
11:06
a series of learning experiences. And Jim was
11:09
a nice guy, but you can't fix that. But I ended
11:12
up having to call the mortgage company, learn
11:15
from the first deal that you call the broker
11:17
or call the money people right away, tell them
11:18
what's going on. And we worked through it. I
11:21
did love the statement. They said, well, we've
11:22
never done this before. I don't know what we
11:24
do. Anyway, we worked it out. It was some legal
11:27
papers. I think some money changed hands. And
11:30
I became the lead. Luckily, I was a little bit
11:32
more wealthy at that point. So I could, in fact,
11:35
guarantee the loan. Had I not been able to guarantee
11:37
the loan, that would have been a real issue with
11:40
the thing. Oh, and the other pain in the butt,
11:45
Jim had the bank accounts. They were at Chase.
11:49
They were a royal pain in the popo to get my
11:52
money out of Chase on that point. Anyway, so
11:55
there was a couple of things. Don't let your
11:57
partner die. No, I guess you can't control that.
12:00
And then get co -signing on the loans. And dealing
12:05
with his family was very interesting. They were
12:07
very nice folks. You know, they didn't beat me
12:08
over the head, but they would prefer to have
12:09
the money over the apartment. We probably would
12:13
have made more money if we'd held it, but that's
12:14
beside the point. Hey guys, it's Angel. In case
12:20
you didn't know, I put on a three -day virtual
12:22
summit twice a year. It's the Real Estate Investing
12:25
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12:27
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12:31
25th, 26th and 27th. Three full days, no cost
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supported me at every single summit since I started.
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Joe Fairless, Kathy Fedke, a Tony Award winner,
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another friend who's raised literal millions
12:47
from people met on LinkedIn, and the list goes
12:50
on. You have to join our Mighty Networks community
12:53
to gain access, and that link, it's in the show
12:56
notes. Oh, let's see. A deal in East Dallas.
13:05
It's a 26 unit. Again, we thought we had the
13:08
same sweetheart deal because the same two guys
13:10
that were in the first one, earlier one, they
13:13
own that building and sold it to us. And as we
13:16
were closing the deal, the fellow says, no, we
13:18
don't want to manage that. And we're just going,
13:20
oh. So we had a manager. Did you say something?
13:25
Yeah, no. What did y 'all do? oh well we hired
13:28
another manager that worked out terribly and
13:30
everybody thought they were stealing from us
13:31
but after I did a lot of math I determined that
13:33
we weren't making any money for them to steal
13:34
so it really wasn't that problem but they were
13:38
they were crummy because it's really hard to
13:40
get a reasonably priced management for less than
13:44
30 or 40 doors so you know we were struggling
13:47
well time passes and we had some roofing problems
13:52
we had four it was a We had four big apartments
13:56
up on the top floor and the rain damage had hurt
13:59
them and put them out of service. So we're running
14:01
around 70 % occupancy. And, you know, we've got
14:05
the normal problems of people skipping out on
14:07
us occasionally, not very often on that property,
14:09
but occasionally, and, you know, rental issues
14:12
and collection issues and all this other stuff.
14:13
So we were not making any money. We did finally
14:17
hire a new manager at about the same time. And
14:20
in fact, this was Jim before he passed away.
14:23
His wife got sick, health family. Anyway, there
14:28
were five other investors other than Jim and
14:30
I. I was the KP on this one again. Jim was the
14:33
GP. And these other five families all go, Charles,
14:36
tag, you're it. Jim's taking time off. And so
14:39
I operated the property for six months. So I
14:42
arranged to walk the property with the new um
14:45
property manager and I was trying to remember
14:47
her name I found it and then I've lost it in
14:49
my head but she was really nice uh we were about
14:53
to do it we had a nice storm so we put it off
14:55
a week came back and walked the property and
14:58
you know made a big list of all these things
15:00
she said I got no money and I said well what's
15:02
it going to take to get the four big units back
15:04
online she said well probably around five thousand
15:07
I wrote her a check that's called you know fronting
15:09
the money again the GP often does this. And so
15:14
they deserve a lot of what they do just to be
15:16
aware of that. Well, you know, a little while
15:19
later, I did the math after she got those properties
15:22
up. And by the way, we were at from 70 to 100
15:24
% occupancy in about seven weeks. So we did really
15:28
well. And I'm a darn good manager, as it turns
15:31
out. But I don't want to work. So I did all the,
15:36
I worked through all the numbers and everything.
15:37
And I called up the other guys and said, okay,
15:39
dudes, we are so far in the hole and our property
15:42
manager is fronting us her fees. This is not
15:45
right. We got to pay this woman. She's got us
15:47
out of the, out of the dog house already. We've
15:50
got to get her paid. Everybody's going to pony
15:51
up 8%. So that is the one and only cash call.
15:54
Cash call. What's a cash call? Well, that's when
15:56
the guys read your PPM, read your OA. When the
16:01
thing runs short of money, they can, they typically
16:03
don't, but they can call all the investors and
16:05
say, hey, send us 10%, send us 20%, send us 5%,
16:09
whatever. So keep a few bucks in the bank for
16:12
that purpose. But essentially, it's the backup
16:15
emergency plan. Normally, they don't like doing
16:18
that. The GPs don't like doing that. They will
16:21
front the money from themselves. If they're really
16:24
good GPs, they will either do it free or at a
16:27
very low interest rate. If they're really crummy
16:30
GPs, they will do it at a high interest rate,
16:32
dirt bags. And so, you know, but, and on the
16:36
dirt bag ones, you know, they don't earn their
16:37
money, but on the other two, they do earn their
16:39
money. So, you know, it's good, but essentially
16:42
it is the one and only cash call that I have
16:44
been associated with. I have heard of one more
16:46
cash call, maybe two since then, but everyone
16:49
goes, oh, it's a cash call. I said, well, I did
16:52
one. So. You know, but I got no reputation anyway,
16:54
it doesn't matter. Anyway, it worked out. We
16:56
did end up selling the place and we made a 45
17:00
% IRR. That means that about two years of holding,
17:04
we double our money, a little bit less than that.
17:06
Anyway, we did really well on the property. Off
17:09
the top of my head, I put in 100 and got back
17:11
330 or something in that neighborhood. So it's
17:14
nice to have those kinds of things. And then
17:17
we have our liquidity story. Let's see. Oh, this
17:26
was up in the Lakeside Village property. It's
17:30
Wiley, Texas. We had 10 or 12 investors, as I
17:35
recall. I was not a KP on this deal. It's just
17:38
a good friend of mine had done the deal. It was
17:39
his first actual GP. And it was a real sweetheart
17:43
deal for me because I've made just a ton of money
17:46
in this thing. But we had one person who wanted
17:49
to get out. He lived over in Shreveport, Louisiana,
17:52
as I recall the story, and he wanted to start
17:54
a business. So here again, the illiquidity concept.
17:57
Well, the property was doing very, very well.
18:00
And so the rest of the investors said, sure,
18:02
we'll buy you out. Not a problem. So we did.
18:07
But keep in mind, if the property is doing very,
18:09
very poorly, ain't nobody going to bail you out.
18:12
So this just happened to be really good for this
18:14
fella and really good for us. We did. And the
18:20
way that the PPM and OA was written is that all
18:23
the people who were presently invested could
18:25
buy out the currently invested person. And everybody
18:27
wanted a chunk. So we had to divvy it up percentage
18:29
wise and all this other happy stuff. And it worked
18:32
out very well. Now, how did that one actually
18:34
go? Well, I put in 100 ,000. At the end of the
18:39
three year period, he handed me back 67 ,000.
18:43
Is that right? Two or three years. at the end
18:48
of the year, two and a half years, two and a
18:50
half years, he handed me 67 ,000. So in my little
18:53
beady brain, I got 33 left in the deal. Now I
18:57
separate distributions from capital. There's
19:00
capital events and there's distribution events.
19:02
It's sort of a portfolio concept. I'm a little
19:04
weird compared to most people on this, but essentially
19:06
he had paid me probably... 15 ,000 or so during
19:11
the year, two and a half years, if not more.
19:13
And so we were doing just fine, but I'm down
19:15
to only having 33 in the deal at this point,
19:19
he's still paying. And so my returns went from
19:22
like eight to 9 % up to about 30%. I'm not upset
19:26
about a thing like that because you measure your
19:28
cash on cash by how much cash you got left in
19:30
the deal. Some three years later, he hands me
19:34
another 240 ,000. And I'm like, well, shoot,
19:38
now I can't figure out how to do math. This is
19:40
really inconvenient. You know, how the heck do
19:43
you do it? You know, but I still have a horrible.
19:45
Yeah, it's just it causes me division by zero
19:49
is bad, you know. Anyway, so and I still owned
19:53
my property, my portion of the property is worth
19:56
five or 600 ,000, I suppose at this point, you
19:59
know, but that part illiquid, you know, so I
20:01
get it out until we sell the property. But by
20:03
and large, it's sitting there in the bank for
20:05
my old age too late. So there's one on liquidity,
20:11
both ways. All right let's see other end of the
20:14
spectrum oh San Antonio deal yeah so I had one
20:18
in San Antonio where these these uh five or six
20:20
guys they they were really bad at it. It was
20:23
a a couple of guys who I probably should never
20:26
have invested with and a couple of new guys who
20:28
they were trying to tutor in and it was uh it
20:33
was not helped by we bought it a couple of months
20:36
right before COVID and so through COVID these
20:39
guys had been had people in the place that they
20:42
were trying to fill the beds. It's not a good
20:44
idea to fill beds, but by and large, they had
20:46
filled the beds with these people expecting to
20:49
toss out those that didn't pay. Well, guess what
20:51
happens during COVID? You can't toss anybody
20:53
out. So we got to house several people over the
20:56
two -year period or something like that. We ended
20:59
up finally selling it, made a very small percentage
21:02
gain. And I'm happy to wash my hands on that
21:05
one. And it was a mistake. And I shouldn't have
21:08
dealt with those guys in the first place. So
21:10
there you have it. Oh, liquidity, liquidity.
21:13
What else did I put in my list? Distributions.
21:16
Let's see. Now, that deal up in that we put in
21:20
money and got the distribution, it's sort of
21:21
the same concept. Oh, no distributions. This
21:27
is the no distribution list. So in 2019, late
21:32
2019, we bought a property. Uh, again, when I
21:35
say we, that means I invested some money. Somebody
21:37
else did all the work. So I'm a passive and I'm
21:40
using English very poorly because it's a passive,
21:42
not an active statement. So, uh, the poor, the
21:46
fellow buys his property. This one was in long
21:48
view and COVID hits. And what he was going to
21:52
do is he was going to, you know, buy the property
21:53
and then go out and get loans or fronts to do
21:57
the rehab. Well, he doesn't have any rehab money
21:59
because all the money, all the loans dried up.
22:02
at this point. Charles, he calls me up and says,
22:05
Hey, can what do you think you can do? So I loaned
22:08
him $100 ,000. And we did all the rehab on the
22:11
property. And so once we did the rehab on the
22:14
property, two years later, we sell the property
22:16
and I ended up making 30 or 40 % IRR on the deal.
22:20
So it's not bad, but I got not one distribution
22:23
the whole time. Sad for me, but you know, am
22:26
I upset about it? No. So like I said, Sometimes
22:29
there's distributions and sometimes they're not.
22:31
Luckily, there has been appreciation so far on
22:34
all the deals I've done. Well, all but a few
22:36
deals I've done. Let's see, distribution number
22:39
two, we bought it in 13, sold it in October of
22:42
20. Oh, this was a good one. A whole time of
22:45
6 .5 years, I invested 125. I really invested
22:49
100 and then he called me up, says, Charles,
22:50
it needs more money. Put in another 25. Let's
22:53
see, at the three -year point, we got a supplemental
22:55
loan. Oh, what's a supplemental loan? Well, this
22:57
says that if you have an agency loan and the
22:59
property has appreciated and they can come out
23:01
and check it and all this stuff and make sure
23:03
it's worth something, they'll loan you some more
23:05
money and they'll loan you up to a certain percentage.
23:08
And at the three -year point, before three years,
23:11
they give you a certain amount. After three years,
23:12
they give you less. So you want to do it at the
23:15
2 .5 to three -year point. You know, and it takes
23:19
a certain wind behind your back in the market
23:21
and everything else to make these things really
23:22
work. But when they work, they work really good.
23:25
So he hands me back out of the 125, 116. So now
23:29
I got 9K in the deal. Am I upset? No. And by
23:33
the way, he'd already paid me 9K in distributions
23:35
at this point. So it wasn't really that I had
23:37
anything in the deal. But again, I keep my buckets
23:39
of capital versus distributions, blah, blah,
23:42
blah. So I wait. for more years, I guess it was
23:47
something in that neighborhood. And we sell the
23:49
place and I'm expecting to get a check for maybe
23:50
a hundred thousand dollars. I was like, yeah,
23:52
okay. $350 ,000. I think it was three, that 358
23:57
check my numbers. And so like, Hey, I'm not upset
23:59
about a thing like that. This thing can be really
24:01
lucrative. Now, please, these numbers are from
24:04
the best of times. I have been a very lucky individual.
24:07
And so you're not going to see the returns unless
24:11
the cap rate is falling as you go. That's where
24:13
the wind is at your back. If the cap rate's really
24:15
flat, you're in the doldrums, the sails are not
24:18
blowing, and you'll just have to work out the
24:20
getting a higher rent and all that. But it is
24:22
the cap rate and that deal where you divide the
24:26
cap rate into the net income to give you the
24:30
value of the property. So if you can increase
24:31
one and the other one's falling, oh, you got
24:33
a multiplier factor there. All right, so that
24:36
was a good one. And now, so that was a good one.
24:38
So let's talk about a bad one. Loss number one,
24:41
Oklahoma deal in Edmond, Oklahoma. This is my
24:44
fault. I put in $100 ,000. And most of these
24:48
deals, I trust the jockey, if you will. But when
24:52
we went up there and we were just closing the
24:54
deal at the time, so I probably should have.
24:56
Google map it, and I do that now. Google map
24:59
your properties, make sure it makes sense where
25:00
it is. Make sure there's multiple ways in, multiple
25:03
ways out, something, whatever makes sense. If
25:06
they've got a wall around the whole place, you're
25:08
not going to get a lot of drive -through. Anyway,
25:09
what was going on was the city had in their infinite
25:13
wisdom decided to turn the street, the main street,
25:16
not in front of our place, but that fed our place
25:18
into a boulevard so that to get to our place,
25:21
if you were turning right from one direction,
25:23
you couldn't. And if you're turning left, out
25:25
of our place you could or whatever from one direction
25:28
or the other. You couldn't get there or you couldn't
25:30
go there. And so it was very, it was very inconvenient.
25:33
So we had very low traffic. Well, it took us
25:36
like two years to get from 72 % occupancy to
25:40
92 % occupancy where we were finally starting
25:43
to make some money. Something went wrong with
25:45
the water. And this is where I blame. I blame
25:47
myself for the first mistake. I'm not recognizing
25:49
that. And I blame the management, the property
25:52
management for not catching the water problem.
25:55
And so they sent out these humongous water bills
25:58
to everybody in the place. And guess what? 20
26:00
people move out the next day. And so we're right
26:03
back to 72%. We ended up selling it at a small
26:06
loss, five grand out of my hundred. And I washed
26:08
my hands of that one. I wish I didn't have that
26:10
one. So I can always say I've never lost a penny,
26:13
but something has to make you humble.