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Business Rule #5:
Be Your Own Best Financial Advisor
October 7, 2004
(PAGE 2 of 3)
If you haven’t guessed already, I hate consultants and committees and firms that tell me how to run my company. That’s why I started my own company. That way I didn’t have to be told what to do and how to do it.
I'm my own best financial advisor, and it's paid off. I once met with some financiers for a building that I wanted to purchase. It was a class A building: gorgeous. We did lunch and had a discussion on price. My strategy was to buy the building at a lower amount than offered and get the seller to finance it. I could then use the equity I had in the building to get additional financing. With it, I could build premium condos and penthouses on the top ten floors while preserving the lower floors for companies and offices. The condos would sell for at least $1.8 million.
The fact that I only build the best went directly into my negotiation strategy. It helped the owners of the building realize how serious I was about turning the failing property around in a hurry. Besides, I could repay my debt on it from the condo sales alone. Unfortunately, everyone didn’t see it that way. They didn’t know how condo sales would work with this type of property, especially considering we didn’t yet have zoning approval. So, what did all the financiers want to do? They wanted to have a committee research the possibility of selling condos at a magnificent price in an untapped area.
Just as I feared, the long range planning study dragged on for months, long after my purchase price negotiations for the property were over. I convinced the owners of the building that I was the guy to own it and that I could make it work. The consultant firm that the financiers hired was probably the best in the business, but I hate consultants even more than I hate committees. When it comes to making decisions, the most distinguished committee out there, working with the highest priced consultants, doesn’t hold a candle to a group of guys with a reasonable amount of common sense and their own money on the line.
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The study for the condo conversion and its effects on the area took three months and cost an astonishing $700,000. Finally, it came down to what made sense. I asked the highly educated bankers, if they had known how much the study was going to cost. They claimed that they hadn’t had a clue. “I really didn’t know it could get this pricey,” chimed in one investment banker. Now they had to deal with the unexpected cost instead of paying attention to my deal.
I stood up at the formal meeting and announced that I hadn’t waited for them to make up their minds and that The LaVelle Organization had already purchased the property. I actually bought the property during the second month of the study. I also sold eight condo units in the first week of advertising them in the city’s paper, The Chicago Sun-Times. The money that I made from those deals provided me with the financing I needed to complete the other necessary work in the building. Since the owner had agreed to finance the property for me, he made a huge profit in a short amount of time. The building was paid off and I still had 56 units to sell at over $1 million dollars apiece.
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When it comes to making decisions, the most distinguished committee out there, working with the highest priced consultants, doesn’t hold a candle to a group of guys with a reasonable amount of common sense and their own money on the line.
