Ep 67 - Integrity First Why We Pulled Out Of An 89-Unit Senior Housing Facility

Hey everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies. And welcome to another episode of our.

Podcast called Freedom through Passive Income.

That's right. Now today's episode is called. It's actually one of our case studies. So this one is their case study which is called why we pulled out of an 89 unit senior housing opportunity.

Yes.

Now this is a one before I get into this, this is a little different. Multifamily is a little different than single family houses. And I was just thinking about this before we started recording. I can, somebody can call me at 8 o' clock in the morning. I can be out there by 9 o' clock with, with my project manager and have it under contract and under. In 10 o' clock and have it sold, you know, and bought it in two weeks. Not with multifamily.

No.

There's so many variables and there's so many. At any point in time, just one little thing, we're done.

Yes.

You know, and so now this little bit about this. So senior housing is hot. And now this was not only senior housing, but this was an assisted living care plus a memory care.

Yes.

So it was, this one was like the creme de la creme. It was at the top.

The memory care is like for dementia patients or Alzheimer patients, things like that. And the value add and the income coming in from a place like that is, it's a, it's a step above.

Yes. And it was an A class building. So there was very little to do and it was luxury amenities essentially for this, for the senior housing.

Yeah. So we were really excited about getting into this deal. In fact, I actually put on my seven figure flipping hat because our partner on this deal is Steven and I met him through.

That's where we met him.

So sometimes I like dress appropriately and sometimes I go, I should have done this anyways.

What did I wear? Oh yeah. Bulldog.

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So in this particular deal, Stephen brought it to us and we were helping, you know, raise the capital in order to close on the deal. And this was a seller that was in a situation where they had a construction loan on the building and the COVID hit during that construction loan. So there was a certain amount of time that they were going to be able to accomplish their business plan and be able to refinance. Because of COVID the facility got shut down. Not for the people that were there, but no new people. So their lease up strategy was delayed because they weren't allowed to let new people in because of, you know, the situation in the COVID environment. Therefore, it put them very behind on their strategy and business plan to be able to refinance on time. And they were getting close to the time where they had to refinance. They did not have the financials in place to be able to successfully refinance. So they are very quickly talking to brokers and figuring out how they could sell the property. And then I'll let you talk about the senior management piece.

Yeah. So one of the, one of the things that really sold us on this deal in helping us sell it to our investors was this property was being run by Life Care services. Now Life Care Services, what is one of the top ranking senior living management companies?

Yes.

And so because they were running it, that was a key selling point because we knew that this investment, they were going to take care of it. Yes, it was going to be taken care of. And so that was a very important part. When we were talking to our investors.

And they already had the track record there. Right. They had been managing this facility for the entire time since it was constructed. So it was just, it ties into why we pulled out. So I'll tell you why we pulled out. So the operator is also in senior care. They are managing senior housing in different areas of the country. The reason they weren't going to take on this opportunity, going to help us with the operations and finishing any cap ups, the little stuff that we had to do, they were still a part of that piece. But the reason they weren't taking over the management is because they didn't have a footprint in this particular geographical area. And so they were going to allow LCs, who is already, like Flip said, a top premier senior housing management company. They were just going to let them stay in place. Well, as we got closer to closing, they decided, hey, I think that we can take this on and they're very successful in this space. But as they told us that it just, it changed for us because our due diligence and how we evaluated the property in order to say yes to it was based on leaving LCs in place, who already had proven that they are successfully managing this facility, especially with the memory care unit there, and having the operator say we're going to go ahead and take it over, it gave us a little bit of pause. Are they going to be successful? How much foundation building are they going to need to do in this particular geographical area? How much of a learning curve is there with memory care units that they're going to have to learn? So there's a lot of questions in our heads. So there's sometimes where Flip and I, Steven as well, I'm sure, are going to go ahead and put our money into a deal like that because we trust the people that we're working with. And like us, most of the people that we work with, if not all have grit. And it doesn't matter what they're doing, they will see it through and they will see it through to success no matter what it takes, no matter all the obstacles. So even though we might have continued to put our money into that deal, we had other investors along with us who trust us to do the right due diligence and do right by them and to pick the correct opportunity opportunities for them. And we just decided because of the shift in this change and that there was some unknowns behind it, I'm sure this deal is still going to be a great success. But for the reasons of our investors and their trust in us, we decided that for integrity's sake. It wasn't the same deal that we said yes to when we did the due diligence and we learned about what we were doing and so we were going to go ahead and pull out. Fortunately, we had another opportunity that all we said was, hey, we're not going to do this one and here's why. And we're just trying to protect you guys because we just don't know how what's going to happen. And we'd rather just continue to put you into things that we feel are more conservative and there's not a lot of surprises. So we just went from here. We're going to leave you from here. We're going to put you right over here. So that's why we did it. And I still wish them the best success and I can't wait to watch how that turns out.

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Live happy. Bye, everybody. Hey, everybody. Flipping Danny here from.

You haven't done very many of those.

I know.

Thank you. Take two.

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