Kathy is also the author of the #1 best seller, ‘Retire Rich with Rentals’, and a frequent guest expert on such media as CNN, CNBC, Fox News, NPR and CBS MarketWatch. Learn from her story how easy it is to be business savvy and still land yourself in trouble if you have not vetted the people and situation thoroughly enough.
GREEN FLAG: WATERFRONT DREAM
In 2010 there were some scary situations in the world with the Great Recession and so forth. The government was bribing people into buying into real estate, which was only a temporary fix. I had taken some hard hits financially during the previous 2 yrs. and the state of the country in general was not looking good. Frankly I was terrified and did not know how I (and my family) we were going to financially survive in real estate in the US.
When a colleague of mine (who I thought was trustworthy) told me about a waterfront property project in Nicaragua, I was interested. In California, you would pay a couple of million dollars for a similar 3 BR waterfront condo set-up, even during recession. But the one they were building in Nicaragua was only about $150,000. It sounded like a good deal and I thought that if things in the US completely failed, my family would have somewhere to go abroad. We could go live in Nicaragua waiting for the US to recover from collapse.
The Company wanted to sell us on the place, so they invited us to Nicaragua all expenses paid. Since it was also our wedding anniversary, it seemed like a great time for my husband Rich and I to take a little vacation and check things out. They put us in a fancy hotel, wined and dined us and even took us on a helicopter ride to the gorgeous waterfront site where they planned to build the condominiums. There was nothing but dirt there at that point, but we were actually very impressed with the whole thing. Wyndham Hotels and Jack Nicklaus (golf courses) had both signed on and everything was looking fantastic. On the 3rd night they had a big party with dinner and dancing and plenty of alcohol flowing and when they brought out the contracts we toasted and signed for ours. No money was exchanged at the time.
RED FLAG: IGNORING MY GUT
We went back home and had some time to think about it before actually sending the money to complete the transaction. During that period everything still looked good, but I felt in my gut that there was something not totally right. It seemed a little odd to me that they brought the contracts out only after everyone had plenty to drink at the party, and I was also a little uncomfortable with the way the owner/builder flirted with me. The builder had not actually built in Nicaragua before (not a country known for stability) and I did not know how to pull apart titles in that country to verify certain details so there were important facts left undetermined.
But I was not thinking right, so I ignored all of that and moved forward on trust (never a good idea in business). I was worried about my family and I needed a back-up plan in case we were not able to cope in the US anymore. I thought this property in Nicaragua would be our place of safety.
I did finally decide to investigate the builder a little further. We did a google search on the guy and more Red Flags popped up. We found out that there was a dispute with some other investors regarding a property in Nicaragua and they were calling him a fraud. We confronted him about that situation, but he was very charming and believable. He knew all the right things to say to make us believe that the guy on the internet was playing dirty and trying to take his clients.
I called the colleague who had initially hooked us up with this Nicaragua deal to see if he had more info. I was very disappointed to learn that he had neglected to tell us that not only was he on commission for this project, but that he had never seen an actual commission check from this builder on previous deals with him. That seemed like a significant issue. At the same time the builder was pressuring us a little and saying he had other offers for our condo. It was hard to let go of the attachment we already had for this vision of beauty and refuge and so I decided to hold onto my plan and we went ahead and sent them the money.
BLACK FLAG: DISASTER STRIKES
It was only supposed to be 6 months till the condo was finished. It was only about a week after we had sent the money that disaster hit. We got word that Wyndham and Jack Nicklaus had both learned about some problems and had pulled out of the deal. The builder could not pay the property taxes; could not get another construction loan; was out of money. He lacked experience, had gotten into a project that was too big for him to handle and was now floundering.
WHITE FLAG: LIVE AND LEARN
My husband was incredibly supportive during these times. He voiced no negativity or criticism, he just focused on the future and moving on. He told me we would be fine; this was a lesson learned. He had been through a recent bout with cancer and had an incredible attitude about life and challenges. He was peaceful and brought no stress into our home or marriage. He was an awesome support to our whole family through this whole situation.
I was not quite ready to move on however. I got in touch with the other investors, some of whom had put all they had into this investment, and then lost it all. It was tragic. They decided to sue the developer for the land and I joined in the efforts. Five years later we are still in litigation and have no idea if we will win. We later found out the developer is still marketing this same property in order to get people’s money and we cannot even warn people about it because the lawsuit is not closed.
CHECKERED FLAG: MOVING ON
Some people will lose money because they won’t take risks; some will lose because they take too much risk. I have decided that the way to go is to take risks, but ONLY under the guidance of others who have been there a hundred time before and know how to do it. I lost about $100.000 and worse I lost the dream of escape and safe haven. I had imagined it all in my mind and now it was gone.
Why did this failure experience happen to you?
What’s the single most important lesson you’ve learned from this?
How do you protect yourself from failing in this way again?
Who do you turn to when you need help?
What advice would you give to someone in a similar position to yours?
Everyone who has succeeded has lost a lot along the way. I won’t work with anyone who hasn’t learned how to handle failure. Just keep in mind that every experience you have is making you more of an expert.