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Land Investment and Project Development with Andy Laikin

SHOW SUMMARY:

In today's special episode, Larry sat down and had a chat with his guru, mentor, and father-in-law, Andy Laikin. They talked about Andy's experiences in real estate and the best deals he’s had.

SHOW HIGHLIGHTS:

  • Andy's background
  • Getting into real estate
  • His deals
  • His favorite investment
  • Formula for land
  • Selling condominium units
  • Hiring a general contractor
  • His best deal
  • Developing townhouses
  • Oceanfront deals
  • Developing mini storage units
  • What he did when he cannot sell the units
  • Auctioning units
  • What RTC (Resolution Trust Corporation) is
  • His advice to those who are still starting

Quotes:

  • "If you buy it right, you'll be able to sell it."
  • "Quality is more important than quantity."

SHOW TRANSCRIPT:

Larry: Welcome to this episode’s Brain-Pick-A-Pro Show. Guys I got to tell you I’m so excited today. This is going to be a little bit different. Normally we have somebody Skyped in maybe somebody on my team or one of my friends or whatever. But I have the man, the legend and the myth here. You guys call me a guru, this is my guru. This is the guru’s guru, the mentor.

I’m so excited today. I call him dad, this my father-in-law. Many of you know a little bit about my backstory about my first wife passed away from breast cancer when she was 31 years old when my daughter was four years old. And we’re still very close and so a lot of business together. And he’s up here visiting from Florida.

So I asked him while he was here I said, “Would you let me interview you?” because I know you guys have heard me talk about him in my books and mentioned some Andyisms all the time. So please give a warm welcome to Andy Laikin. Thanks for being here.

Andy: My pleasure Larry.

Larry: That’s awesome I’m so excited. Let’s start out and tell everybody a little bit about your background.

Andy: Well I was raised in Florida mainly in Miami. And I was in the army and after I got out of the army I wanted to get started in real estate. So my first job was an apartment manager and I was only 23 years old, 24 years old.

Larry: So you got a late start.

Andy: Well the army slowed me down. But it was a 400 unit apartment complex on Kendell Drive which was one of the main streets in Miami and the owners were just having a heck of a time. So they said, “Okay we’ll take a shot with you and not turn it around. But man I was looking for something more and while I was working there I was trying to do deals at least trying to make something happen.

During that I went to see a real estate broker and her name is Jonell and she was a commercial broker. She really was good at it. But her secretary at the time was her daughter who was right there at the office. And I met her and her name Lynn.

So I asked her out and eventually we were married and Jonell who was still in real estate was always there and was always giving me advice if I needed some. About this time we decided meaning Lynn and I decided to move to Melbourne which is well halfway between Jacksonville and Miami.

Larry: Yes there well Patrick Air force Base?

Andy: Yes. And it’s really across from Orlando but it’s on the ocean. And the reason I’d gone up was that trying to get into real estate we had bought a couple of parcels of land. And we were thinking we’ll develop them or do something. And both of the pieces were commercial. One thing that I did, I should really tell you this, is that one of the parcels which was a shopping center site.

Larry: Right.

Andy: Now this is back in the 70s but we bought is for $250,000, same day we bought it we sold it for $500,000.

Larry: The same day.

Andy: It’s known as a simultaneous close.

Larry: Wow now that’s real estate day trading on a large scale right.

Andy: Yeah. And since we were able to sell it right there we used some of the funds that we received to buy the other piece of property which was a 14 acre multifamily piece of property.

Larry: Yeah.

Andy: And the real estate was so down back then, the terms were I think we put okay one piece, now this was for teenagers some 35 units of the acre. We put 10% down, we got interest only for three years.

Larry: Wow.

Andy: We didn’t have to make any principal payments. And then after that I think it was a five year term.

Larry: Right.

Andy: So anyway during the course of I don’t know so we owned it probably for two or three years. We wound up selling it for $800,000.

Larry: Wow. So you parlayed the two and the five into eight.

Andy: Yes.

Larry: Now the $200,000 deal that you did a simultaneous close that was your first deal?

Andy: Oh it was my first big deal.

Larry: Okay.

Andy: I sensed that even maybe it’s better that’s like if you don’t know you can’t do something you do it that way because my mother-in-law who’d been in real estate for 50 years.

Larry: Jonell.

Andy: I mentioned Jonell.

Larry: And she was a sweetheart I loved her.

Andy: Oh yeah.

Larry: This woman I got to tell you. You remember her how she was, she was so flamboyant and so expressive. I mean you used to tell people instead of going on vacation you’d rather send her and have her come back and tell you about it right.

Andy: Exactly. She had so many watches, she’s wear a watch that matched her outfit every day. So that’s how she was but she was good at what she did, she was really good especially for being a woman in the commercial side. She had the greatest venture.

Larry: Yeah in that day and time.

Andy: But I was crazy I guess because I was coming up with these deals and she was looking at me with her mouth, can we really do this? And we did but it was sort of like the stepping stone onto the next step because.

Larry: Yeah.

Andy: Yeah land is one of my favorite investments because if you buy it right, you sell it right and that’s an Andyism too. You make your deal when you buy because if you buy it right, you’re going to be able to sell.

Larry: Now you’ve told me your formula many times.

Andy: On land?

Larry: Yeah on land. Tell everybody your formula.

Andy: Well my formula for land is the land’s got to be worth twice as much as I’m paying for it. Now that doesn’t mean when I sign the contract it is but usually that’s what I would want. It could mean that well there was this piece of property that I can put a contract in on, subject to getting lease on just like multifamily or commercial.

Larry: Right.

Andy: Which would then increase the value. But usually because that’s a lot of work and usually it depends on the market. I mean I don’t buy in say a hot market I’m kind of looking for when the market gets a little down or people are looking to sell. And when I was developing yes I would buy property like this and then have it resold and that would make it happen.

Larry: That builds the value.

Andy: That builds the value and in the beginning I would go ahead and develop it. But in the end I would say I was going to develop it but then I’d wind up selling it to somebody else.

Larry: Yeah.

Andy: Cashing out.

Larry: Because in other words you like took the package together. So here’s a ready-to-develop piece of property, right isn’t that what you did?

Andy: Well after I was developing per se but I guess what I’m saying there is that and maybe it’s because the project was so large but yeah it was fun and I made money. But no, the development part you got to deal with subs and sometimes it was just easier for me just to.

Larry: It’s a job.

Andy: Yeah oh it’s more than a job. And yes when I was actually building things I had a-when I say a general contractor he worked for me.

Larry: Right.

Andy: I had a general contractor, secretary and a salesman. And everybody else was subs. My contractor and me build a project my salesman would sell it, sometimes Jonell would help. And usually they were successful. So when we got to Melbourne I still needed a job. So now this was when the real estate market was down so bad you had to look up to look down.

This was when I used to- this was before Reagan in the 70s but there was a lot of problems in the early 70s. So when I got to Melbourne I saw an ad on the paper they wanted a condominium salesman for this project called The 19th Hole which was on a city golf course. It was 72 units, that were almost completed there was some work still to be done.

And the guy that was doing it, he worked for Tennessee Bank who own the property now. And he was a real developer from Denver who lost everything and was now really an indentions servant to First Tennessee because he owed them so much money.

Larry: Right.

Andy: So they said, “We want you to go down in Florida to sell this project. And his name was Joe and he was really a wild man. So anyway I came in to interview and he said, “I’ll give you a try.” So like I said so we had made a deal on the commissions and the deal was that on a monthly basis and now the units were back then. Now these were nice two bedroom one bath, two bedroom two bath condos.

Larry: Right.

Andy: And we were selling them for like between $25900 and $31900. So he tell me, “Okay here’s how we’ll do it on a monthly basis. The first one you sell you get $400, second one you sell you get $500, third $600 up to $1000. And then after that it’s just $1000 every unit.

Larry: Right.

Andy: So I said okay. So we finally got it all finished. So the first month I sold 42 units.

Larry: 42 units?

Andy: He had to bargain down.

Larry: [Inaudible] [10:01] he was willing to renegotiate.

Andy: Oh they did. Well I wouldn’t let them. I said, “What do you mean, this was our deal.” So he stopped buying in all fairness. And when I say he it was really the bank I mean they were paying everybody. They were paying him. So and then the next month I sold the rest, the 30.

Larry: So then you were out of a job again.

Andy: Well no because he had churned $70,000. But also I realized that Joe really knew what he was doing.

Larry: Yeah.

Andy: So at that time we realized that we found two other pieces on that same golf course.

Larry: Right. Is this the Joe I know?

Andy: No.

Larry: Okay.

Andy: His name is, no we’ll call him Joe A. So we wound up and like I said he was experienced. So we wound up buying two other pieces on that golf course which would give us another like 125 units. And because this is the time when there were these mortgage RITs and they all collapsed. So there was one RIT in Atlanta called Great American. And they had this parcel on the ocean and in Norborne Beach. And it was 1650ft of ocean ground.

Larry: Wow.

Andy: And it was already site planned for 96 units that would be eight buildings for 12 units each. And they actually had the foundations in on four of them.

Larry: Right.

Andy: So I was just a young kid back then. But he and I went up to Atlanta and we negotiated with them and because we sold this so fast and the real estate market was churning around, we developed a relationship which was more me because I just happened to know them- with a local savings and loan.

And they saw what we were doing and they felt pretty confident. So they loaned us the money to do the first deal was 32 units on the golf course. And then we closed the loan on a Friday we sold out on a Saturday. We were taking a waiting list on Sunday.

Larry: Of reservations right because you hadn’t even built it yet, right.

Andy: Well I say sold out, no, right but were writing contracts.

Larry: Yeah.

Andy: Yeah but we couldn’t close until we of course built it but anyway we were sold out when we started construction. And then there was another piece of land which was for 100 units that was like an island. In other words every unit would have a golf course view because it was completely on the golf course. So anyway we started that one and we were working on the Breakers. So about this time now during that time also because I guess we’re good at it, the bank was having us go off to Tennessee, we did two jobs in Memphis.

Larry: You were their bailout guys.

Andy: Oh yeah we would go in and hire everybody and do a couple of models. And this might be a 100, 200 of the project and now it wouldn’t sell out like it did but we would actually get them out of trouble.

Larry: Right.

Andy: So when we go to Memphis, we wind up on the top floor where the chairman of the board was, everybody was bowing down there. But Joe was a little too crazy for Melbourne in the sense that he drank a lot and he had a mistress that he would take to meetings.

Larry: Oh wow.

Andy: And that wasn’t going over good. Finally one day he and I sat down and I said, “Look Joe why don’t we split up? I’ll give you Fairways Four- it was the 100 units and it was already halfway done and the sales were good. “I’ll give you Fairways Four.” And we had another piece of land and he bought me out of which was fine. “I’ll give you Fairways Four and I’ll take the Breakers which really hadn’t even started construction yet or anything. So eventually he agreed and I-

Larry: Now the Breakers, that’s the ocean front property?

Andy: Yes the Breakers was the 1650ft of ocean.

Larry: I remember that, spent many a night there.

Andy: Yeah.

Larry: In one of the units yeah.

Andy: So in a way I was free of Joe and I’m not saying that like he was terrible, I’m just saying it that we weren’t that compatible or it wasn’t good with the mistress and everything else.

Larry: Right.

Andy: So he wasn’t helping that much. So of course I got out alright. So now this 96 units on the ocean so I got Jonell involved. And they required a presale requirement which we made. So we did the first phase was 48 units and the other problem was when they were building it the first time, they were going to build this out of wood and it’s on the ocean.

Like but no because all the units had this one fireplace, a couple of them had two fireplaces. So I said no. so I redid the plans for everything, the concrete the floors. We tore the concrete in the walls so I felt a lot better about that. But anyway so the units were really nice I mean we’re not talking 1200sqft boxes, we’re talking like there was a townhouse unit with two fireplaces. The master bedroom took the whole top floor.

Larry: Yeah.

Andy: We’re talking anywhere from 2300 to 2500sqft.

Larry: Right.

Andy: So it was a class project. And I had Jonell in my corner there helping me sail and then of course I had salesmen. And on this project the bank of course I mean wouldn’t let me to build it because I was still pretty young. So they made me hire a general contractor a bonded contract which I was glad I did.

And they were the contractor and so we started building. And the Breakers was a very successful project we pretty much sold out before. And I know one of your questions was well what the best deal as far as making money was. And I would say probably the Breakers. I probably made about I mean working with 100 condos, I probably made a couple million dollars on the deal.

At the same time and maybe I’m going on too long.

Larry: No, no that great I love it.

Andy: So at the same time I found one of my engineers called me up one day and he said, “Andy I got this 850ft project on the ocean, it’s old townhouses, 32 townhouses. And I got these two crazy Cubans from Miami and they’re fighting and they want out of the deal. So I wrote a contract for that. Now I think oh yeah I paid.

This is important, these numbers because I paid $525,000 for the property.

Larry: To buy them out.

Andy: Part of that $25,000 was the commission to the engineer who got me the deal.

Larry: Right.

Andy: Which was only fair. But it was done in stages. So like I said there was 32 townhouses so there was four building of eight units each.

Larry: Right.

Andy: So I was able to even negotiate where I gave them a down payment I think it was like $150,000. And this is if you’re a developer doing it, so for that $150,000 I got them to release the first phase so that I could get a mortgage and build it.

Larry: So explain what the release is so everybody is sure.

Andy: So it was already site planned. Site planning had already been done to prove I was just buying the whole package. So the first building, if you divided 850 by four so the first building was about 210ft or whatever. So when I gave them money they had truly known that of course they had the mortgage. But because of the $150,000 they released me free and clear from the mortgage the first phase.

So then for example so when I finished that phase I would give them say another $125,000 and they would release the second phase. And normally these are done like at 110 or 120% more even of say the whole value. So for example if the whole piece was five and a quarter so that would mean in round numbers let’s say that each phase is about 135,000.

So now I guess I was at 110 but so at 120% so you’d pay 135 down plus another say 25 so for $160,000 they feel comfortable because they still have the rest of the land under the mortgage. But yet you’re able to start your development.

Larry: Right. You’re paying them a little bit ahead, they’re going to get paid off in full before the whole thing is done.

Andy: Yeah.

Larry: Plus you’re able to release that parcel, say go to the bank get a mortgage to build the building.

Andy: Exactly. So I went and got a construction loan and we started the first phase. These were really nice townhouses, nobody’s ever seen these.

Larry: And what was it called?

Andy: Las Brisas.

Larry: Las Brisas.

Andy: The Breezes. And these were really nice. So they had a garage in the front and you need a garage on the ocean because or else your car rusts out in three months or three years. But anyway so it had a garage in the front, and then it had like the patio that like before you walk into the townhouse. And what we did there was we put in these huge Jacuzzi tubs. And it was that nice a patio. And then you go into the unit. Now the units were three storeys.

Larry: Is that where Jonell lived?

Andy: No.

Larry: It wasn’t where she lived.

Andy: We lived there for a while when we came back from North Carolina, in one of the units I had kept.

Larry: Yeah.

Andy: But these were all like California style all the ceilings were cedar.

Larry: Oh wow.

Andy: Yeah they were really nice. So we started the first phase. But we’re talking ocean front here and the property was actually zoned even though they only did a site plan for 32 units. The property was actually zoned for 76 units. So now we finished the first phase and we’re starting the second. So I go down to the planning and zoning, they love me down there for some reason because I always what I said I was going to do.

So I never jerked them around.

Larry: That’s very important.

Andy: Well yeah and not that Joe did either but that’s part of my reputation and I try to keep that. And this was in the county as opposed to say one of the cities which the county is always easy to work with because they’re more professional. So I walked in one day and I said to Bill who is the head of planning and zoning, I said, “Hey Bill this piece of property I’m putting up these townhouses but it’s zoned for 76 units.”

Could I change the last two buildings into condos?” “Sure.” So while I was doing the second phase of the townhouses we redid the last two buildings and we converted them into two 30 unit condominiums. I think it was five, six storeys in it. And that was my business I mean I really specialized on the ocean.

So I finally get everything done as far as it took a little while but that’s normal when you’re developing. And especially on the ocean it’s even worse because they have so many more restrictions. So we went ahead and got the site plan approved and the market was starting to turn and it’d been very good for quite a while.

So I started I guess advertising these 60 units. And this broker calls me one day he says, “I’ve got somebody in Monte Carlo who’s looking for an oceanfront deal.” I said, “Well I got these 60 units.” So now back then the price let’s say for oceanfront and they didn’t sell it by the foot back then, they sold it by the unit, in other words it’d be how many units could you put on it?

Larry: Even the land price was based on how many units you could get on it.

Andy: That’s what I’m saying. Normally oceanfront would sell by the front foot, this other whole like-

Larry: Like road frontage or something.

Andy: Yeah. And like I said this was 850ft. Now don’t forget I’ve used 425 of those to build the two buildings.

Larry: Right.

Andy: So now I’ve only got half of it left and I paid five and a quarter for the whole thing. So the 60 units, the market value or what they were selling for then was $20,000 a unit which would be $1,200,000.

Larry: Just for the land that’s left.

Andy: Just for the land and of course the package.

Larry: Right.

Andy: Meaning-

Larry: Improved package, ready to build.

Andy: And this brokers show up and we write a contract. I wanted $1,200,000 and we write a contract for I think $1,350,000 cash.

Larry: $1,350,000 cash.

Andy: Cash, and which they should have but I jumped through 18,000 hoops to make it happen. In other words they wanted to make sure that they could build the project and everything was right. And eventually we closed. So that was probably the best deal I ever did because if you think about it so what I did was I bought a piece of land 525.

Let’s say I used half of it so that was 250. And then I sold the other half which I had 250 left in for a million two.

Larry: So you made a million on the land plus all the money you made on the townhouses.

Andy: I made a million on the land and I made some money on the townhouses.

Larry: Right.

Andy: But I kept the townhouse for several years and all and then I eventually sold that of course. But that would probably be when I say my most profitable deal on a percentage basis there’s no doubt about it. I mean my attorney couldn’t believe it, and he was a real estate attorney. So but anyway and these were early in my career. I mean I was 32 with the Breakers.

Larry: Wow, yeah.

Andy: When I finished the Breakers.

Larry: Wow. You were young doing big projects like that. That’s awesome.

Andy: Well I mean nobody ever told me I couldn’t so.

Larry: Yeah you started out big. You didn’t start out with single family houses and stuff like that you started out big.

Andy: Well I tried to explain that to my mother one time. She said to me one day, “The problem with you is you always want to start at the top.” And I tried to explain to her, “Well the higher you start at the less you have to go to get to the top.” So anyway those were probably back then my two known doing developing. But developing kind of lost its allure for me and then I really would start I was buying like mini-storages or land and speculating and stuff like that.

Larry: I remember years ago about you buying a mini storage and then working it for a while and then turning around and selling it.

Andy: Sure.

Larry: It had like there were some office condos or something there with it you had and sold with a lot of war stories.

Andy: Well the mini-storage was interesting only because it’s whatever endeavor you are in, in real estate, you’re always looking for the boni or that’s what I call the bonus. For example on the 850ft of oceanfront, when I bought it I knew right then I knew it was zoned for 76 units. To me that was a bonus.

Larry: Right.

Andy: I wasn’t paying for it but yet it could happen if I wanted to make it happen. So when I do a deal I always try to look for like maybe not an edge against the seller per se but maybe he doesn’t realize something that I do.

Larry: Some other way to increase the value.

Andy: Exactly. And rarely will I tell them unless of course I’m not interested at all and then I would tell them.

Larry: Right.

Andy: But so anyway what was nice about the mini-storage was it was on the ocean first of all, you couldn’t get a mini-storage on the ocean. Meaning when I say on the ocean in Norborne there’s the mainland and then there’s the island which is where the rich people live let’s say. But what I’m getting at is that they wouldn’t allow like minis but sure enough they built this one within a warehouse.

So I bought it and I got a really good price on it, it was owned by a dentist who thought he was in real estate but really didn’t know what he was doing. So what was nice about that was it turned out it happened I had owned the unit, I’d owned the building when Hurricane Andrew hit Miami.

Larry: Right.

Andy: And it wiped out Homestead Airforce Base in fact they never rebuild it. But just down the street from where my mini storage was, was Patrick Airforce Space. And they were getting all the people coming up so what happened was the federal government and the unit I had empty at the mini-storage, they’d rent it.

Larry: They would take it.

Andy: Yeah and they’d send me a huge cheque every month and I was full for like a year.

Larry: Wow.

Andy: And eventually that deal I bought it for 450, and probably two years later I sold it for 750.

Larry: 450 to 750.

Andy: Yeah. And I don’t remember I think I might have even held the mortgage for a while it.

Larry: Right.

Andy: And then I lived in the Carolinas for a while, I bought a strip center of Denver.

Larry: Denver North Carolina?

Andy: Denver North Carolina. And because we lived up that way and then one of the local people had developed a sub division, so I bought it from him. And then we started building houses. Now this was with the other Joe. Joe he moved to North Carolina too and he’d come to where we lived for the week boarding.

Larry: The Joe I know.

Andy: Yeah. And then go home for the weekends.

Larry: Yeah.

Andy: In fact I finally bought a townhouse project so he and my son could live there during the week.

Larry: That’s funny, I will buy a townhouse project to give my son.

Andy: Yeah. But Joe was mad because David kept drinking all his beer. But anyway North Carolina was good but I really wanted to go back to Florida. So we were up here for about I don’t know three years, four years.

Larry: But you were planning on moving back whenever I met Dawn right?

Andy: That’s right.

Larry: You had already rented her an apartment and got her job in Florida when we met.

Andy: No, in North Carolina.

Larry: No she was ready to move back to Florida like the following week or two.

Andy: Oh but what happened is I wound up-

Larry: And then I threw a wrench in that.

Andy: Well I wound up getting her a job at MCMV.

Larry: Yeah eventually yeah that’s right.

Andy: Yeah. And she stayed up here and we moved back and the rest is history as it goes with Larry. But anyway after that I would do deals but I’m very selective and some people think I’m a wild man but actually I’m very conservative.

Larry: And you’ve got a saying about this quantity versus the quality [Inaudible] [30:23] you’ve always told me.

Andy: Well if you’re doing a hard money loan, yeah I understand that hard money loan means that you’re looking at the asset. But you don’t really want the grief of having it foreclosed blah, blah, blah. So my saying there is this, to me quality is more important than quantity. I’d rather do a smaller loan where I know I’m safe or I got the right LTV.

Larry: Right.

Andy: Than to step out for no reason even though oh yeah you’re going to get the asset. Well yeah I got to sell it, I got to foreclose. It’s a pain where actually it’s so much better, so much easier when you just make whatever the interest rate or whatever the deal was to its conclusion. So yeah I’m a big believer in that.

Larry: And we’ve done a lot of hard money loans together over the years.

Andy: Yes.

Larry: A lot.

Andy: And the other thing is and Larry another Andyism so to speak as Larry calls them, is trees don’t grow to the sky. And now that’s really more of a stock market saying. But what it means is that you’re going to have a correction whether it’s in real estate, whether it’s in the stock market. Things turn around. Sometimes they turn around so quick you don’t even realize it.

So you always have to be aware of that but there’s also when things are bad to me, that’s where the opportunities really are. At one time I would tell people I’m really the undertaker. In other words the deals have got to be so down before I even get interested. And who knows when it happens. But usually the site was run seven 10 years from the up to the down between the interest rates starting to rise and then they get too high.

Even when I did the Breakers, well not really the Breakers, Breakers West. So when I bought the Breakers that 1650ft of property, the boni on that deal was that across the street, 818 is the main drag for the ocean. Across the street there was another I don’t remember how many acres but enough for another 44 condos.

This didn’t have an ocean view, they had a view of the condos that has the ocean view. And you could sell them for hundreds of thousands. So anyway after we finished the Breakers I did site planning we did it was I think 43 units with a garage, and they were nice units. They were not as big as the ones for the Breakers they were about 1400sqft.

Larry: Right.

Andy: So now the market was turning around and things were getting bad. Now at the same time I was doing that I was doing another 24unit oceanfront project. Now the difference is that the ocean is more like an insurance policy because everybody wants to live on the ocean.

Larry: Right.

Andy: Even though the prices are less, not so risk say units that aren’t on the ocean. And plus because they thought I could do not go wrong, I just decided how they should sell for which was like $80,000 where really the market was more like 65.

So I did my loan with the bank based on $80,000 so in actuality I made $800,000 when I built it. So but unfortunately after I built it, couldn’t sell. So what happened was we sold I’d say half of them and the market-now this was when Reagan became president. So back then interest rates were up in the15, 16.

Larry: Oh yeah the high teens.

Andy: So I mean this and fact so what I was-and I knew I was in trouble. So what I started doing was I started to go because South Florida was even worse or the West Coast. I mean it was everywhere especially in this part. And to point where they started to hold auctions they would auction off projects. So I started going to some of these auctions.

Larry: This was along the RTC time, Resolution Trust.

Andy: No that was later.

Larry: Oh was that later?

Andy: The RTC I forgot that, that’s a good story too. Okay so the market was turning so I started going to these auctions and watching these auctioneers. And they had maybe a 40 unit project and they’d bang it down and half it out. But the prices were low. So I knew I had to do something. So I went to the savings and loans, so like I said I had about 22 units.

So I told them, “Look why don’t we do this?” and I guess I owed about a million one or maybe a little more because I know I gave them some cash too. So I said, “Let’s put a $50,000-” it wasn’t that 11 and three quarter that was what the- I mean that was under.

Larry: Wow.

Andy: I mean the rate was more than.

Larry: Yeah they were giving you a good rate than others.

Andy: Oh I told them they had to or they were going to-

Larry: They’re going to have it back.

Andy: I would never be that way with them because they were always very good to me. But they got the message. They would work with me too. So I said, “Look let’s put $50,000 mortgages on each unit and we’ll make them one time suitable so that I can sell them with the mortgage intact.” And then what I did was because I couldn’t sell them I started renting the units out.

So I was renting them for about five and a quarter or something and it was enough to pay the $50,000. I was still going down in the hole but at least in this market I was doing good.

Larry: Yeah.

Andy: But I knew that I had to do something. So I approached an auctioneer his name was Jim Gall. His license number in the state of Florida is 1, honest. So I negotiated with him, oh yeah we want 6%. I’m looking at this guy and I’m saying because I’d already been to quite a few auctions I’m saying to myself, “this guy wants 6%, in this market. No but he’s going to work through like four hours.

Larry: Yeah.

Andy: These things trend- so I said, “Look I’m a broker too. So why don’t we do this, I know normally if we did a culver it could be 3%. I’m willing to give you 2% and pay all the other guys and everything, which was probably a couple thousand dollars they do these fliers and all.

Larry: Right.

Andy: So we agreed and I had Emerson who was my salesman there. So we advertised there’s going to be this auction. And he was there every day and showed people we had a model.

Larry: Financing available and all.

Andy: Oh yes, financing available, $7500 down. So everybody knew exactly what they had to bring. It wasn’t like you bring $7500, you give it to us there’s no qualifying. The $7500 was your qualifying.

Larry: Right.

Andy: So I didn’t know how it was going to go I was nervous, so the day of the auction they put up this huge tent. They has to fix the land banner. I mean he did it right and lo and behold couple hundred people showed up.

Larry: Oh wow.

Andy: I mean this was a big tent and they were outside the tent. And one reason is that nobody had ever done an auction of real estate.

Larry: Really?

Andy: Yeah.

Larry: Nobody had ever auctioned real estate in Melbourne?

Andy: No.

Larry: Wow.

Andy: So this was the first one. So anyway to make a long story short, we sold every unit. The first unit banged down for $77,000 but he chickened out so I had to put it back in the pool. But the next one was 70. So how it works is that the bidding starts okay. So when the high bidder, now like I said I had 22 units, the high bidder gets his choice in whatever unit he wants.

Larry: Right.

Andy: Or how many he wants.

Larry: Right.

Andy: So the he gets his pick and then they’ll say, “Alright, anybody else want a unit of this price?”

Larry: Right. So the high bidder determines the price and which unit and then anybody else after he gets first pick anybody else.

Andy: Exactly. So and nobody else fit. And then okay we do it again. Then a unit banged down for 76, 75, maybe 72. So here we are, I’d probably got six left and the bidding ends at 65. And the guy picks this unit and then he says, “If anybody else wants a unit at 65 now’s your turn.” And there was like a mass rush to the stage. I could have sold another 10 units if I had them. So at least I got some cash I got $7500 a unit.

Larry: Right. And they could assume the loan.

Andy: They assumed the $50,000 loan and then what I did so because it was more than the 50, so on most of them, I think only two of them wouldn’t do this which was alright. But on most of them I just wrapped it, I didn’t increase them. Actually I was glad they were paying 11 and three quarters so I could increase my wrap. So I would wrap the loans at 11 and three quarters and give them the amount. And then they would pay me and then I would pay the bank.

Larry: Right.

Andy: But two of them were nervous oh yeah what if he doesn’t pay them or maybe the banks. So with them which was fine, I just took a second-

Larry: You just took a second mortgage.

Andy: Right.

Larry: And they made two payments, one to you and one to the bank.

Andy: Exactly. Either way it was fine with me. But the bottom line was I got out of the deal and I had still most of my skin but I didn’t I guess lose money on the deal as far as when I sold them. But I was able to say counter that by when I built them I did make quite a bit of money.

Larry: Right.

Andy: Which is unusual.

Larry: But the market was turning and then the interest rates were so high. I mean listen you did great compared to anybody else.

Andy: Yes right I’m not saying that like I screwed up because in fact I lucked out just for the reason Larry said. But because I already had the money and then yeah if I had to totally back out.

Larry: Right.

Andy: I had to totally back out.

Larry: Wow.

Andy: But you mentioned the RTC and maybe we talk-

Larry: Yeah let’s spend a couple of minutes on that. We’ll wrap up in a few minutes but let’s spend a couple minutes on that.

Andy: So after the interest rates went to the sky.

Larry: Now RTC that was the government-

Andy: Resolution Trust Corporation.

Larry: Resolution Trust Corp, which had to dispose of all the big foreclosures big projects.

Andy: Well because all the savings and loans and all these RITs went broke. So now this was the second time. This wasn’t when I was in my 30s when we did the Breakers. This was in the-

Larry: In the late 80s or something.

Andy: Yeah this was after Reagan of those high interest rates and that caused a lot of problems. So I went to- well let me tell you this one first. I’m sorry I forgot about this. So I play a lot of poker, I play in tournaments I play in the world.

Larry: Yeah you’ve played in the World Series, you’ve played with Tally Silvanus right.

Andy: Yeah I have as a matter of fact. That was a long time ago. So Foxwoods opened in Connecticut which is an Indian casino. And at that time it was probably one of the few casinos on the East Coast. So I would go up there and play poker. Now the problem with me is I’m a stud player not a holding player so now everybody play holding so I don’t really play that much poker.

But back then I did. So anyway I’m up there one time and I see that they were going to be holding this RTC auction. And what do I know about Connecticut. But I saw that they had these three six unit building, so different buildings different places. Well let’s say multifamily. So listen you can’t play poker all day and all night.

So one day I said, “Well let me go look at these.” So I went around, looked at them two were awful. But going to the third one, now it’s not in the greatest neighborhood. The only thing it had going for it was it was literally across the street and I’m quoting what they got on the sign. Across the street from the oldest house in the United States.

Larry: The oldest house in the US.

Andy: Yeah. Now and it wasn’t a great area. So I go into this building and there was a postman who was still living there. He wasn’t paying rent but he was living there and he was a nice guy. So I went in. now the difference there was this, from the outside it really didn’t look good.

Larry: Right.

Andy: But whoever lost the property had fixed up five of the six units, they were beautiful. Now the last unit really needed a lot of work. But the other five you could move people right away.

Larry: They were move-in ready.

Andy: Yeah. So I said, “Wow this is interesting.” So I go to the auction. Mostly it was single family homes and then these three. And the one I was interested in was the last one, in other words they’d been on order. So there was 32, 33 and 34.

Larry: Yeah.

Andy: So the one I was interested in was 34. So here we go and now by this time don’t forget okay after the auction at Breakers West I said to myself, “This is amazing.” So I went to the Harvard of auction schools it’s called Missouri Auction School. I spent two weeks out there and I had an auctioneer’s license. I was licensed in Florida, I was licensed in North Carolina.

I never used it I never did anything but it was a good experience. So I knew a little bit about auctions but most people don’t. So the auction starts and so what they do is if you won you had to leave, you had to go in a line to get processed.

Larry: Right.

Andy: So now they do all the single families they down to these three things. So the first one goes and some guy bids I don’t know $50,000, gets it. Next one is $45,000 gets it. Okay so now the next one comes up and I’m bidding because that was the one.

Larry: The one that you wanted.

Andy: This is the one that I wanted. So I wound up getting it $18,000.

Larry: For how much?

Andy: 18.

Larry: $18,000, it was the best one.

Andy: Yeah it was the best one. But here’s the problem. So I wound up getting in the line too. So the other two guys in front of me who were in that, they said, “We were going to bid on that one too but we couldn’t because we were stuck in the line.”

Larry: Right.

Andy: So what I’m getting at is that, they were actually pulled out of the auction so there was nobody really bidding against me.

Larry: Because they weren’t in front there, they were last.

Andy: And there was this one real estate broker that was sitting behind me. And I think-and this is something and I think we were 12. And he goes 13 and I go 14 and then he goes 15 and now you want to show him that you want this property. And then I went 18.

Larry: So you went from 15 to 18 to let him know.

Andy: Exactly and I turned around because he was right behind me, I turned around and I looked at him. And I didn’t say anything but he knew I wanted it.

Larry: Right.

Andy: And he said, “I might get in trouble here I might pay too much.” And he just shut down and I got it for the 18. And then I rented it out, I bought it because it was a good deal but I mean I was going up there what maybe once every three months. So anyway I-

Larry: You didn’t want to be a Florida in Connecticut, right.

Andy: No. so anyway we closed it with this attorney and I rented it out like had some people in the units. And then about six months later he calls me and he wanted to it. So I sold it to him for $95,000.

Larry: $95,000

Andy: I think I took paper too.

Larry: Yeah you carried the paper. I remember that deal I remember exactly when you did that deal because I remember talking about it.

Andy: And that’s something else just in passing I’d like to point out in the sense that and if you can a lot of times you just can’t but you always get more money if you’re able to do the financing. I mean that would be-

Larry: Like my sell [Inaudible] [48:08] model.

Andy: I mean that’s obvious I mean if you’re able to carry the paper for a while, you’re going to get a better price and your money is still working to some degree. I mean it’s not like you’re doing hard money loans in the sense that your focus there is not to see how much interest you can get your focus is to sell property.

So if you can get a little more money by selling it and carrying the paper it’s okay, there’s nothing wrong with it. Plus it’ll help you sell it faster if you have financing.

Larry: That’s awesome, that’s really good.

Andy: Yeah.

Larry: I really appreciate you doing this, this is awesome. So what kind of advice would you give somebody I mean you’ve been doing this for many years. You are my mentor, I don’t ever do a big deal without calling you, asking your advice. And you’re never

Andy: Thank you Larry.

Larry: And you’re never hesitant about giving it. I mean sometimes you bust my chops about doing something.

Andy: Yeah.

Larry: And I know it’s because you love me.

Andy: Exactly.

Larry: But I never do big deal without asking you and asking your advice because you’ve been there done that. Well what advice would you give somebody?

Andy: I remember when Dawn was sick and mummy was up here most of the time.

Larry: Yeah.

Andy: One day she calls me and she says, “Larry is looking at this deal,” and I said, “Oh yeah where is it?” she says, “It’s on 274 it’s a bunch of metal buildings, they want $700,000 for it.” I said, “Oh no.” so anyway finally Larry called me and I said, “Larry are you sure?”

Larry: I said, “Here’s some videos of it.”

Andy: And I said, “$700,000?” so anyway to make a long story short he didn’t buy that which was great.

Larry: And you talked me out of it. I wanted to buy the building.

Andy: I know.

Larry: But luckily I got this one for less money and it’s a 9000sqft building and it’s already set up for opposites.

Andy: And there’s no comparison I mean this is on the main drag. I mean so anyway you just got to be patient and there was another deal that was during the auctions that he almost got but you got to fast too. And if you see a good deal you either got to-

Larry: You can’t steal in slow motion.

Andy: No. I like that, no you can’t steal in slow motion. But anyway yes and I’m always there for you Larry.

Larry: Yeah.

Andy: Okay to answer your question, my best advice starting out would be to get a mentor. And that’s what I did in fact. I mean Joe taught me a lot.

Larry: Joe and Jonell.

Andy: Yeah and Jonell to but Jonell was more of a broker and I really never- yeah I have brokered deals and made quite a bit of money as a broker. But I was always more of a principal borrower.

Larry: Right.

Andy: And if I looked at a deal I could never be a broker because when I looked at a deal it was either that I wanted it or I didn’t want it.

Larry: That makes sense.

Andy: And I was good at it in the sense that even going back to when I was selling those condos, I know how to sell but I prefer more action than matter like being in the middle of it.

Larry: Right but she was a great broker. She was involved in putting together the Disney property.

Andy: Yes. No, she was and even in Miami she was very well known. She was doing a lot of orange ropes throughout this phase with farmlands and commercial.

Larry: Yeah.

Andy: You name it.

Larry: That’s good.

Andy: But yeah so.

Larry: Well I really appreciate dad thank you so much for doing this.

Andy: Oh my pleasure Larry.

Larry: This is awesome I’ve been wanting to do it for a long time.

Andy: I know.

Larry: I really have. And the time came up I was like, “I’m not letting you leave here without doing this.” and I know you guys got a lot out of it. Thanks a lot for watching.

Andy: Thank you sir.

[End of Recording] [52:18]