Investing in real estate is a venture that many dream of, but very few can do right. Just ask Sean Conlon, the Irish-born janitor-turned-millionaire real estate maven who is now the host of CNBC’s “The Deed: Chicago”—a reality TV show in which he helps other investors who are in over their heads. Way over.
Although Conlon is no stranger to struggling rookies, the goofballs he meets in the latest episode, “The Mistake on the Lake,” baffle even him.
“I’ve been involved in more than 5,000 properties, and I’ve never heard of anything like this,” says Conlon, shaking his head.
The problem? Mark Ainsley and Bryan Sonn, the founding partners of GC Realty and Development, have bought a bargain house at auction. But rather than getting the single-family home they’d had their hearts set on, they’d mistakenly bid on, and won, the dilapidated duplex across the street.
Yup, they bought the wrong house.
Making matters worse, renovating this two-person home, with double the originally slated expenses, is threatening to drag down their entire 14-person company.
As hopeless as it seems, Conlon makes them an offer: He’ll loan Ainsley and Sonn $90,000 at 15% interest. Whatever profits are gleaned when they sell—if they sell—Conlon will take 30%. It’s a tough love offer if ever there was one.
Ainsley and Sonn may not be the sharpest knives in the drawer, but they know a lifeline when they see one, and agree to the deal. Here’s how Conlon turns this massive blooper around. Watch and learn, newbie investors!
Always leave a paper (or digital) trail
Conlon sends a home appraiser to the site; the guy waits for 50 minutes, but, amazingly, Ainsley and Sonn never show up. Their excuse when Conlon (gently) tears them a new one? Basically, they didn’t get the memo. Sonn admits he’s old school and prefers to communicate by telephone rather than email or text. Um…
The biggest problem with that, Conlon explains, is phone calls leave no paper trail or reminder that he and others can refer to. Welcome to the 21st century! In fact, Sonn’s old-fashioned approach is likely the very reason they’d ended up buying the wrong house in the first place. Conlon convinces them that they need to always have a paper (or digital) trail to be successful.
Clearly define who does what
The drama continues once Conlon pulls up to the building site, where he finds Ainsley and Sonn loudly arguing, cursing a blue streak at each other like an “old married couple” (their words). The problem isn’t so much their contentious relationship (although that certainly doesn’t help); but in the words of their exasperated employees, there’s “too many chiefs” and confusion or who’s responsible for what.
Conlon encourages the duo to streamline their organization and better define responsibilities. They take his advice to heart, making Sonn, who’s out in the field more, the CEO, and Ainsely the CFO, who will be responsible for managing the office.
Invest more to make more
Although Ainsley and Sonn specialize in low-budget flips, Conlon persuaded them to invest a bit more in this one. Here’s where they spend the money: Remove the wall between the dining and living rooms (since no one wants a formal dining room these days), and switch the location of the bathroom and kitchen so the latter can be part of the light, bright living room. He also persuades them to go with two HVAC systems, so residents of the two units will not be fighting over who’s too hot or cold all the time.
Don’t get greedy if you have an offer in the hole
Ainsley and Sonn get an offer for $225,000 before they even list the property. Rather than rejoicing and closing the deal, they wonder: Might they be able to get more money if they list? Should they hold out?
“There’s an old saying,” Conlon tells them. “Pigs get fat, hogs get slaughtered.” In other words, why risk listing it and adding to your marketing expenses when it might not pan out? If there’s a fine offer on the table, take it!
In the end, they net a cool (and, considering the circumstances, remarkable) $65,000 profit on the project. Sonn and Ainsley come away with $43,250, and Conlon gets $21,750. But probably the bigger success is how much better Ainsley and Sonn are getting along in the end. Peaceful workplace? That’s priceless, even if you do buy the wrong house.