Retail buy & hold investment.
Purchase price: $116,000
Cash invested: $35,000
Sale price: $69,000
This was a bad deal yet a good lesson. I was the only one who showed up at the auction. The seller owned a failing mattress business. There was only 1 parking spot. My gut told me not to buy it. I rented it out to a variety of businesses who struggled there. Eventually I sold it at a loss.
What made you interested in investing in this type of deal?
I had a mentor who wasn't a good mentor. He was an auctioneer trying to auction off the building. He convinced me to buy it even though I was the only one at the auction. I was new to investing and naive. I didn't perform any due diligence.
How did you finance this deal?
I did an installment contract (owner financing) for one year. After 12 consecutive payments, I did a cash-out refinance. I did pull out a lot of cash.
How did you add value to the deal?
I helped three different tenants try to grow their business here. In the end, it wasn't a high traffic location and we all struggled.
What was the outcome?
I sold the property via a short sale to someone who could improve it and make it better.
Lessons learned? Challenges?
I should never had bought a commercial property with only one parking space. Also, I should have performed due diligence. When I was the only one at the auction, I should have walked out the door and let them chase after me. I trusted the auctioneer to represent my best interests, which was foolish on my part. I should have purchased a building much closer to where I lived, as this was 60 miles away. I'm actually glad I learned these lessons.
Thank you for sharing your experience! The hard lessons and the bad deals are the ones we want to discuss the least. It sounds like a tough loss to go through.
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