I find it amazing how life works. One second you think you have everything figured out, and the next everything has changed and you don't even know where your going to live. I still have a place to live, but I'm ready to move out. Over the past 3 months, some friends and I have been investing much of our time to a business venture that we hoped would flourish. We found a building in downtown Wichita that seemed to be exactly what we were looking for. It's 3 levels at 5,000 square feet per level. Our plan was to convert two of the levels into apartments and live in it as this was going on. Looking at the building, we had a great foundation to start with and a great location to boot. We ended up signing a contract to buy the building and gave ourselves 55 days to close. Within this 55 days, we needed to obtain a Certificate & Release for environmental concerns, obtain financing, have the place inspected, and come up with an estimate for the renovations we would need to do.
First we started with the inspections. The structural guy thought the building was very sturdy and would support the loads we would subject it to. The plumbing guy thought everything was very feasible, but did find a cracked main sewer line that would have to be replaced. The lack of smell coming from this pipe points towards the pipe being crushed somewhere in front of the building, so this would cost extra money. The electrical guy thought everything was feasible and the environmental guy decided we didn't have lead paint, asbestos, or radon. The roof guy was a bearer of bad news. He said the roof was in very poor condition and needed to be replaced soon. We figured we may be able to negotiate for some of this to be paid for by the seller, or have the buying price knocked down. As this was going on, we had a general contractor working up an estimate for the renovations. In the mean time, I got the Certificate & Release on course and we were in contact with the bank. I got a letter yesterday stating we had been approved for the Certificate & Release, and the processes to get it to us would be in place.
Last Friday we got the estimate from the general contractor, and I must say, WOW!!! The bid came in over double what I thought it would be. Being the analytical guy that I am, I started crunching numbers to see if this building could actually turn a profit. My numbers led me to believe that close to the best case scenario, the building would break even and pay for itself. You may think this is a good think, but I'm a firm believer that a good business should pay for itself and have a return. My partners did not agree with this and were still gung-ho. We had a five hour meeting last night going over the numbers and basically came to the same conclusion. They are a go, and I'm a no go. Today I officially gave them the word that I am out of this deal and wish them the best of luck. Right now they are trying to find a person to fill my spot in the LLC and move forward with the renovations.
I have a put in more hours on this project than both of them combined and probably have more vested in this than they do, yet I'm the only sensible one that can distinguish an okay business deal from a good and walk away. The other two won't even run the numbers for themselves. I don't want to be that guy that says, "I told you so" a few years down the line, but I've tried to warn them of what they are getting themselves into. I believe this building can make money doing something other than apartments. I told them that I would still buy the building provided we found something that would provide a return. They are stuck on this apartment deal and so be it.
I do have to say that I have learned so much from this experience. I don't consider any of this wasted time and I do feel it will help me in the future. I'm not real sure what I'm going to do next. Maybe I'll buy a house, or maybe I'll try another business deal. I would like to find a business deal that is pretty small scale and something that I could fund myself and not have to rely on partners. Who knows what the future will bring?
