Working Past Worries, Fears, & Excuses to Achieve True Scale.
I can recall conversations between my parents over the years about buying a building for my dad to relocate his auto-repair business. They even discussed buying the building that he was renting. There were so many worries, fears and excuses not to take that leap:
- Imagine the exorbitant personal property taxes!
- What if the business fails and we are stuck with this building?
- What happens if the roof caves in?
- Someone could get hurt and sue us and then we would lose everything! (We really didn’t have much to lose.)
- How would we get it financed without any equity or money down?
- We can’t afford closing costs and the other fees to purchase this!
- Imagine the monthly payments and if he gets sick. A bank will not forgive the debt as the current landlord will!
Worries. Fears. Excuses. All preventing my father’s business and our family from reaching full potential.
My father opened that auto repair business when I was a child. He rented a two-bay shop with a car lift, air compressor, storage room, office and restroom, on the corner of a busy highway in Kansas City, Kansas. He paid $750 a month for 35 years! That is a grand total of $315,000.
A couple of years ago Dad’s health began to deteriorate. He struggled with the notion of closing his business. After that long in a small, family-owned business, there is an emotional attachment that makes it hard to let go. The owner of the building had always treated my father very well (notice the rent stayed the same from day one). When my father had his first heart attack and was in the hospital worried about his business, the landlord forgave his rent for that month. In return, Dad has been the most loyal of tenants. Once he recovered from that heart attack, he returned to the shop renting from a solid landlord, dutifully paying his rent each month.
After his third heart attack, however, my dad felt compelled to close the business. It was an agonizing decision, but he was working alone much of the time and it was becoming just too dangerous for him to be at work every day by himself. He was irritable and sad about the looming change. In fact, he barely mentioned in passing that the landlord had offered to sell him the building many times. My eyes widened. I said, “Call him now and buy that building!” My parents were nervous, but I knew it was the right thing to do.
The results could not have been better.
Imagine my parents’ surprise when we bought the building together and the process could not have been easier. The current landlord financed it for us at a very low interest rate; the closing costs were less than two months’ rent, and the sale price of the building was less than 10 percent of the total amount my dad had paid in rent for 35 years.
The whole thing will be paid off in five years at a monthly rate of 30 percent less than the original rent! I am sure Mom and Dad felt sick when they realized how many times they could have purchased this building with the rent money they paid all of those years. What lessens the pain immensely is how deserving the landlord was. I know that man is also happy to see the building stay in our family.
Now, just a few years later, my dad can finally go into a full retirement and tinker with cars in his basement at home with Mom upstairs keeping an eye on him. The building is occupied by a renter about the age my dad was when he started his business, and that man has a daughter about the age I was at that time, too. It is great to see the cycle of life roll on and thanks to the grace of the former owner of the building, I know what kind of landlord(s) we want to be for this man as he begins his first foray into entrepreneurship.
A personal note: In the few short years we have become owners of the building we have had numerous offers to sell the building at three times what we paid for it. Absolutely not: I believe in this property and its potential to continue to grow in value in our family.
As Always, Real Estate Rewards Relationships
Because of my dad’s years of hard work and the relationship he built with his landlord, we were able to reap a grand reward with this first commercial real estate purchase. It’s true not everyone can “inherit” this specific opportunity. What everyone can learn from our story, however, is the power of renting vs. owning:
At present, I am renting a 5,000 square foot race shop in North Carolina (see image on opposite page). It feels like every other month there is some sort of a struggle with the landlord and the rent is constantly rising. Recently, I noticed two parcels of land popped up for sale in the same neighborhood. I reacted instinctively: “I’m surely not in a position to purchase this land and own my own race shop. Sure would be nice, though.”
But wait…is that right? I have been paying $2,500 a month for more than seven years on the current facility, and I am starting to think that the payment is one that could be leveraged in other ways – like buying some land for a race shop of my own! As much as I want to shake my head at my parents’ former fears, I am repeating the cycle.
- Land? I’d have to have a building put on it!
- But surely it’s difficult and expensive to get sewage, electricity and other utilities run!
- I’d have to have someone clear the land of the trees and lay all the asphalt for the lot!
- What if my business fails and I can’t make my mortgage?
Worries. Fears. Excuses.
I know because I’m living with them: Worries, fears and excuses are real. My solution is to put one foot in front of the other, meaning it’s time to take some steps into researching what it would cost me to make my own race shop happen. Maybe, just maybe, I can build a 10,000-square-foot building and rent part of it out to a small team just getting started, like I once was, that would help pay for the mortgage. I’m never going to know if I don’t take that next step.
Time to get moving.
Think Realty Racing is a collaboration between Think Realty, Jennifer Jo Cobb, and Jennifer Jo Cobb Racing LLC (JJCR). The partnership offers opportunities to create brand awareness and engage real estate investors nationwide using the NASCAR Camping World Truck Series as the platform and Cobb as the spokesperson. Learn more about Think Realty Racing opportunities by emailing email@example.com.