“Things fall apart. The center cannot hold.” ~ William Butler Yeats
The economic downturn of 2008 through 2010 hit many people hard. I would like to share with you a story of one way I was hurt through the downturn.
I have worked closely with real estate investors since 2005. One of the tools real estate investors use frequently is private money, where one investor or pool of investors lends to others for the purpose of acquiring or fix up a new property. Instead of going to a bank, these private loans are very useful in jumping on opportunities quickly. In 2006 and 2007, I made three such loans. For two of these loans I took advances from credit lines to increase my gains to partially fund the loans. The third loan came from my individual retirement account. All told, I lent a total of $56,000 of my and other people’s money. Each of these investments are no longer performing. The interest in one loan was exchange for property interest which may never pay me back any part of my investment. The second loan was put into a business property. A few months after the loan was made, the business owner started having difficulty and eventually turned over operation of the business to our investment group. Unfortunately, the owner had eroded much of the value of the business prior to turning it over. The business no longer has the necessary earnings to make loan payments to me. It is unknown when this investment may ever start paying dividends. Today, I learned that my third loan will be lost when the investor declares bankruptcy.
In each of these cases, I had chosen to lend to individuals with great reputations and in deals which looked to be fantastic based on reasonable assumptions. Unfortunately, this downturn has been exceptional. Each of these individuals has been either ruined or are treading water. Each individual has broken a promise to me. I have lost over $56,000 in principal, several thousands of dollars more in lost interest, and have been left with over $30,000 in debts that became my responsibility.
I cannot blame the others for the debts I had to assume. I knew the risks involved. But I am a man who knows statistics. What are the odds that all of the investments go belly up? The problem is that when the world goes upside down, chances are, all of them will go belly up and they do.
An unpaid debt is a broken promise. Whenever such a promise is broken it often leads to the breaking of further promises. When the income that was promised to me did not pan out, I was no longer able to keep the promises I made. I have to live with that. For a person who values integrity, few things hurt more than breaking your word. It caused me untold amounts of personal pain and problems in my personal relationships.
Learning the lessons of financial responsibility too late put me in a position that I felt I had to put myself in a vulnerable position in order for me to get out from the mountain of debt and obligation that I had built for myself. My poor decisions early in life set me up for unjustified financial risk taking later in life. It took losing everything to give me a chance to start over. I will do it right this time. I have dedicated myself to help others avoid the challenges I made for myself. As you read and follow my comments, know that the comments have been fashioned by hard times and difficult experiences.
