The period of my autobiography concluded on December 31, 2009. That was the day I achieved my initial five-year business goal, as planned, which was to accumulate 24 (or more) buy-and-hold, positive-cash-flow rental units. Life continued thereafter, of course, and I began writing the book the next day, January 1, 2010. By the time it was ready to be published two years later in March 2012, a lot had happened with our real-estate holdings. My book’s epilogue, therefore, ended with a dark cloud on the horizon.
In a nutshell, what started out as a no-brainer, cash-flowing properties in Mississippi – post Hurricane Katrina – became a money pit. We were supposed to be receiving net revenues from our properties each month, which we bought from a developer, whose separate company was also our property manager in that state. By the sixth month into these deals, we were requested to send in the payments for the seller-financed wrap-around mortgage loan each month – instead of the original plan, which was for us to simply receive the rental revenues, net of expenses and debt service. That was about the time when we began bleeding an average of $10,000 per month for an entire year. While I was determined to ride out the storm by funding these losses from my retirement accounts (plus David’s consulting revenues), eventually, I concluded that, at that pace, we were headed for an eventual bankruptcy. I faced a moral dilemma that I never thought I would have to face in my life time.
At that point, I initiated an email to the developer / property manager and said, “We need to talk.” I let him know that we no longer could keep making payments without draining my retirement reserves down to nothing.
The developer / property manager understood. Or so I thought. When asked if he could use our rental revenues (which his company was still collecting on our behalf) to apply toward the debt service that we still owed, I replied, “Of course!”
Through our Michigan attorney, we formally proposed a deed-in-lieu of foreclosure. Our attorney was in constant contact with the developer / property manager’s attorney. Because our attorney thought that everything was progressing just fine, I felt relieved. I assumed that the seller had accepted our proposal.
Then, in October 2012, after 19 months of no communication, we were served a notice by the developer / property manager. One of the three multi-units that we had bought from his company had been foreclosed. We were told of the foreclosure notice in the “local” newspaper in Mississippi, about which we never knew until we were served the papers. How were we to know? We live in Michigan. We were being sued for the difference between the amount we owed his company for the first multi-unit and what it sold for at auction. We also owned two additional multi-units that we had bought from him. Since then, for two-and-a-half years, we lived in fear of potential bankruptcy, which our attorney indicated was an option. Easy for him to say! This was as scary as when, in 2000, the stock market crashed and my retirement-account value was cut to less than half the original value.
Having done everything in good faith, pouring money for as long as I could into what had become a lost cause, to say that I was angry was an understatement. I immediately began to chronicle every detail of what had happened when, where, why, who was involved, and how. (Thank goodness for email records.)
Just two weeks later, the first weekend in November 2012, when I was invited to speak at Mississippi Honor Flight Reunion for World War II veterans, we met with a local attorney in Mississippi, David Crane, who was recommended to us by an attorney with whom David (my husband) had worked on a product-liability case when he represented General Motors as an expert witness in that state. Mr. Crane became a god-send for us. He intently listened to our situation as we explained what we did, why we did it, and how we got into the mess that we did. I followed up with the chronological explanation of exactly what had happened when.
Since then, for quite a while, there was little communication about the matter. Then, out of the blue, a global settlement was proposed by the developer / property manager through Mr. Crane in September 2014. The amount was a fraction of the anticipated total amount. We countered the amount, which was accepted without objection. Even at this reduced amount, however, I had little left in my retirement account to pay for it. Without hesitation, David (my husband) came to the rescue to pay for it from his retirement reserves from General Motors.
To remain financially independent – even from my own husband of 42 years – has always been important to me. I am determined to pay back what he needed to pull out of his retirement account as soon as practicable.
For all of the work that Mr. Crane did for us, getting us to the conclusion of our nightmare, he charged us so little that it was more than fair for what he did on our behalf. David and I are eternally grateful for the peace of mind that Mr. Crane brought to our lives.
Thanks to Mr. Crane’s work, in October 2014, a global settlement – for all three multi-units – was signed. After two-and-a-half years of nightmare, the dark cloud was finally lifted. At last, the frightening ordeal was over. We are forever grateful to Mr. Crane.
October 2014 also marked my 10-year anniversary since I left corporate America to devote full time to managing our own investments. I did what I believed was necessary in order for me to NOT depend on income from Social Security and pension. It has been a much rougher ride than I had anticipated. But, believe it or not, I have no regret. I developed the confidence that I have today in making deals happen because of the experiences gained over the last decade. I have learned that real estate is a people business in just about every respect. Through real estate, I have seen the worst of people, the best of people, and a lot of people somewhere in between. Through the worst of people, I learned what not to do. Through the best of people, with whom I have had the privilege of working together, I learned how to be at my best. Through a lot of people who fit somewhere in between the two extremes, I learned that all of us, as human beings, do whatever we need to do to survive.
Despite moments of anger and fear caused by what had happened, I still hold in high regard the developer / property manager from whom we bought these properties. After all, what had happened (and is still happening) in the broader economy – in the real-estate market and in the banking industry – has been far beyond the control of any one of us small-business owners.
As the popular-song lyrics say, “What doesn’t kill you makes you stronger.” I can’t agree more.
