A bad deal yet a good lesson

[Tai DeSa]

Investment Info:

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.