Looking back, our purchase of a prime Main Street property was a little crazy. It was a crazy idea because we had no money. We had less than no money. We were an architecture firm that had barely survived 5 years of the toughest times in the design and construction industry. In addition to that, we had just agreed to take on the financial obligations of another firm who was arguably on shakier ground that we were.
So we had less than no money. How do you buy a prime property with no money? Well, you ask, I guess. I have a coworker who’s mantra is: “the worst they can say is no.” It’s true. It never hurts to ask. So we asked. We offered to buy the property with 100% seller financing. We asked them to hand us the keys. And the answer was not no.
You have to remember the times. This was 2013. Real estate was still suffering. It was a buyers market. Many did not know if real estate would ever rebound, those who thought it would struggled to obtain financing. Additionally, the seller was a company that was out of business and on default on their loan with the bank, although we did not know this at the time.
There was a problem, though. The seller had a note with a local bank. Our offer was higher than the note, but he could not sell the building without the banks permission. The real estate brokers suggested we do a wrap, where we made payments to the seller and the seller still guaranteed the primary note to the bank and made those payments.
For the bank to accept this, they had to view us as a better credit risk than the seller. And they did! Even though we would have never got a loan if we walked into a bank. In fact, the bank hounded us until we refinanced with them so they could get the seller out of the picture. And we leveraged this further to get funds for our renovation.
Sometimes I think there are more opportunities in a recession than in a good market.
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