So nice to see the familiar and some of the “oldies” coming out to post again. My story is similar to Steve - focus on EXPENSE reduction and manage the income defaults. Four (4) years ago, I made a promise to myself (and family) to spend as much time as possible with my newborn son ~ posting on the internet was the first spare time thing to go. A blink of the eye, a full blown recession later, and next year he goes to school!! Wow does the time go by!
Here are some positives for the collective (in no particular order):
Manage the P/L. Largest line item is debt ~ I managed to catch the tail end of the “good times” and during 2006-2009 paid down $1M in interest only debt (700K seller carry-back and $300K investor investment capital). With good times behind us this reduction is the #1 reason my head is above water today.
Recently took full advantage of all the “talent” on the streets. My “people” team is the best team ever and its because of the hard times. There is no way I could afford (or attract) the people I’m working with today during the “good times”. Same goes for contractor bids and material costs - both of which are a better value today then yesterday. My total expenses in these areas are about the same as before, but the quality and quantity of work product is superior to the “good old days.”
I’ve been consolidating projects: Sold 50% of my holdings in one city and have been repositioning that money back into my largest project.
Take advantage of the buyers market with little deals: I used to sell a Mobile Home subdivision lot (just the lot - no home) for 50K. Lately I’ve been buying back lots WITH the homes for $30K - many times owner financed with no recourse.
Completely eliminate all consumer debt (i.e. - no car loans or cc debt.) and keep liquidity high for those special buys or projects.
Reshuffle older 2002 seller carry-back financing from 10% to 6% interest, all non- recourse AND negotiated early payoff discounts for any principal reductions on my smaller park/subdivision (this particular investor realized our relationship and pay history would be very hard if not impossible to replace. Lower returns for this family are far better then NO returns followed by the uncertainty of any replacement investment).
Looking at this list, it is not a bad list of “good things” that have come out of bad times.
So what I’m working on right now? On my largest project I’m still paying 2005 “investor” terms (second to the mortgage this is the largest line item on the P&L statement). After doubling the investors money from 2006-2009 (that’s no proforma folks, that’s real cash in hand) these folks obviously do not want the good times to end. Unfortunately, they are also not realists and seem to be unimpressed by the magnitude of todays challenges (in fact, they will not even acknowledge the facts I send them like collection and default lawsuits etc.). My stance is straight honesty and simplicity: keep the people who appreciate you and are willing to be a part of the solution, and replace those who don’t. Like employee turnover this is painful and emotional work (and frankly sad). But the project must go on and it is my opinion (supported by my employee turn over and other investor experiences) that in bad times we can all find and become even better investors.
So the time has come to sharpen up the old “syndicating” skills (and network) with the goal of replacing these investors and having enough left over investment capital to buy something new in 2011! Having never missed an obligation, payment, projection or promise it is fun to be back in the private capital arena. I recently started working with a newly retired finance executive in CA (a career man from Boeing with all the higher education degrees a person can earn. Most importantly a man of character, a great father, and a fantastic friend.) on an “investment model” that I’ve been creating, modifying, and kicking around in my brain for the last 5 years. With his corporate credentials and critique, and my street skills, experience and reputation ~ I predict fun times ahead.
By the way, I ventured into building my own website for my big project. Check it out if time permits:
I’ve also rekindled a childhood love of photography. For those who would like to see some pics:
Cheers to all, Karl