​How I lost $16k on my first Syndication, and lived to tell about it.

In 2015, I began to get serious about real estate. I attended a Mobile Home University Bootcamp in Orlando, and subsequently began looking for my first Mobile Home Park. In that process, I met my business partner. We were both looking at the same park, and when I found out that he attended the same real estate investment group I told him not to offer more than me. We also realized that we had the same job (Flight Instructors), went to church together, and lived two blocks from each other. We didn’t end up buying that park (thankfully it wasn’t a great deal), but did get more education on commercial real estate and started looking at other deals together.

That summer, after striking out and losing money on a smaller deal, we found a 74 unit mobile home park in Pensacola, FL. We copied all of the information we had learned, came up with a plan for the deal, put together our paperwork and went to raise money. Our first start didn’t go well. Investors didn’t believe the returns we were offering (+35% annual ROI). So, we decided to take a higher percentage as sponsors and lowered the investor returns to something more believable to them. The same investors thought it looked good and signed on. In all we raised over $300,000. We had a solid plan to sub meter the water back to the tenants and raise lot rent but stay just below market rate. In all we figured we could capture $500k in equity within the first year. We ordered surveys, environmental reports, appraisals, put up the EMD and paid for all the costs of creating the company documents. Our investors wired all the money to our account and all we had left to do was close. Then two days before closing we received a call that the seller had passed away. He had been sick and was selling off his assets, but we weren’t expecting that news. Knowing he was sick we had asked the broker if the park was in a trust, we were told it was. It soon became apparent it was not.

The seller’s estate was opened in probate a few weeks later. The attorney named by the estate immediately resigned, and we came to learn that the seller had huge debts and a very complicated estate. It took another 3 months before a new attorney was appointed by the courts to take over the process, and the waiting continued. At one point, we thought that we had gotten all parties to agree to sell us the park, only to be stifled by not having accounting records since the death. We also learned at this time, something not disclosed earlier, that the park was in the foreclosure process for not paying its mortgage. Our legal bills quickly started climbing, both for our own attorney to track down information and for the bank who had their own attorney following the process. In all after seven months the attorney for the estate did not provide the documentation needed to release the park to be sold and it was given back to the foreclosing bank, voiding our contract. We had been able to hold on to our investors’ money the entire time but now had nothing to show for it. We refunded all the investors and began to count the bills. In all we owed over $45,000. Graciously both attorneys gave us discounts on large legal bills leaving our total outstanding amount left at $32,000, including filing a tax return for a company that never did any business. My partner and I sucked it up and each paid half.

We probably had a case to sue or otherwise keep pursuing the deal, but we could no longer see the light at the end of the tunnel, needed to return the investors’ money, and were ready to move on. The process however did not deter us. While waiting for the outcome we were able to successfully purchase an office building, raising another $200k. At the end of the year we also syndicated a 60-unit apartment complex, and were able to structure an acquisition fee of $17,000 a piece, allowing us to earn back our loss. So, though the first deal was a spectacular failure it proved to us that if we could get through it, we could make it in this business and lived to see another day. Now over two years later I am a full-time investor and my partner is following shortly.