Easy Safe Money

I orig­i­nally had plans to write about this deal a few years back…but life does have a habit of car­ry­ing on around you, despite your plans.

I once looked at an 7 suite apart­ment com­plex in the small town of Canora Saskatchewan. It was on the “main street”, and even fea­tured a store­front which used to be a laun­dry mart. It had a metal roof, about 4–6 ten­ants (pay­ing some­where around $500-$600/month each) and was listed for about $70,000.

Canora is a small town in the mid­dle of farm­ing. It’s about an hour from the near­est large town called York­ton. When I went to inspect the place, I met with the town hall and found out that they were try­ing to hire a build­ing inspec­tor, unsuc­cess­fully it turns out, and, until they could, no build­ing per­mits could be issued. The town was basi­cally a retire­ment vil­lage for local farm­ers. It had a cou­ple of banks, restau­rants, and gro­cery stores, but you could tell it was a dying town.

From an invest­ment point of view how­ever, every­thing looked great. The build­ing was fairly low main­te­nance, there was a live-in man­ager, and, even half empty, it gen­er­ated a huge cash flow. The build­ing, of course, would be a bit of an alba­tross, mean­ing it would be dif­fi­cult to get rid of if I ever wanted to sell, but on the whole, it gen­er­ated more than a third of it’s cost every year gross. I could prob­a­bly get out of it finan­cially in 5–7 years scott free in the worst case.

I spoke with the owner, and we nego­ti­ated a deal fairly quickly after I had done my inspec­tion to com­plete my due dili­gence. Unfor­tu­nately though, I hadn’t brought along my com­puter, nor my stan­dard real estate con­tract, so I’d have to return home, type it all up and com­plete the deal we’d agreed on.

When I got back and sent them the con­tract how­ever, I got a phone call from the seller. It seems they’d pre­sented my offer to the owner of the build­ing next door who had agreed to pay more. If I were will­ing to offer another $5,000, the build­ing could be mine…

I walked away from the deal immediately.

Even though I could still make good money, even pay­ing more, I don’t do busi­ness like that. We had a deal and, while I don’t blame them for try­ing to get a bet­ter deal for them­selves, I don’t play games like that. I firmly believe it’s vital to pro­tect your rep­u­ta­tion at all costs. We had a deal, the price of the seller’s soul was only $5,000, I val­ued mine more.

I don’t regret walk­ing away from the prop­erty. It was nice as an invest­ment, very low risk and would have given some­one a low cost way to explore remote man­age­ment, man­ag­ing an apart­ment com­plex, and other expe­ri­ences but there are always other prop­er­ties and deals out there.

Les­son: Don’t be afraid to walk away from a deal, espe­cially if you can’t trust the peo­ple your nego­ti­at­ing with.

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