← The David Greene Show
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- [00:01]
David Green
Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no BS and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you too. So if you want to build wealth through real estate or you just love learning about it, you found your home. Welcome to the David Green Show, Real Talk Real Estate, the show where we pull back the curtain and expose the good, the bad and the ugly of what goes on in the world of real estate today. We are continuing in my Nightmare Deal series and I am joined by investor soca. Is it Ngove?
- [00:41]
Soca Ngove
No.
- [00:42]
David Green
Nov. Thank you. I should have asked that first. Who has an awesome story to tell us today of a terrible deal. Wasn't awesome for her, but she has a big heart and she wants to help other people avoid falling into the same traps. As well as sharing what she learned from the situation, how she pivoted, and how she was knocked down but not knocked out. I would ask you before we get into the show to take a quick minute to leave me a five star review wherever you're listening to this podcast because that helps a ton. And if you like the show, comment wherever you're listening, if it's on YouTube, if it's on Spotify, let us know what you think. Soka, welcome to the show.
- [01:16]
Soca Ngove
Thank you, David. I'm excited to be on. Nice chatting with you.
- [01:20]
David Green
Yeah, we had a really good talk about capitalism and things that go well and things that don't go well before we recorded this. And speaking of things that don't go well, let's start off by having you explain some how this deal that we're about to talk about today first crossed your path, what you thought when you saw it and what you were feeling.
- [01:37]
Soca Ngove
Okay, so this deal actually came across my path March of 2023. So last year I was in an investment group, I won't say which one because it has nothing to do specifically with the group, but there are some guys who are part of the group who reached out to me looking for a private money loan and I had done a couple of private money loans in the past, had no problem. So that great experience. So I thought ok, let's, let's do another one. Right? I had some cash sitting, it was supposed to be a quick like fix and flip and I was essentially the gap funder on the deal. So my job was to just put in the 20% down and collect funds in a few months. But it's kind of interesting because everything just happened so quick. I think I was really excited when I saw the numbers. Obviously, I had to do my own due diligence. I ran my own numbers because I didn't want to just take whoever's word is for it. Obviously, everyone has a different set of eyes, and with a little bit of experience, I figured I can probably add some value to this deal. So they reached out to me via text. They had mass texted everyone on this investor list, and whoever responded, those were the ones that they were pitching. I just first of all gathered more information on the home and just kind of took it from there. I was excited. You know, I've never done a deal like that where I partnered up with somebody else. And I thought, you know what, it's time for some growth in my life and investing. Let's give it a shot.
- [03:09]
David Green
All right, let's describe how did this partnership start off? Like, who was responsible for what, and how are you going to be splitting up the profits?
- [03:16]
Soca Ngove
Yeah, yeah. So it was their first partnership, too. So I feel like that was my first mistake, Going in with somebody who didn't have experience, and I knew better. But I thought, you know what, I have a little bit of experience. We can work this out. We're in part of a mentorship program. So we got a JV agreement put together, and I was supposed to be just the funds, just the private money, maybe give some input on design, and that was it. They were supposed to be boots on the ground, the one who was managing the construction, making sure everything was going, you know, on time, on track, and ordering the supplies and stuff like that. And that's how we kind of split it up, because I was putting in the funds, I accepted a 15, 50% cut of the deal, and they were doing all the work, right. Or supposedly I'll just leave it at that.
- [04:06]
David Green
Well, it sounds good when someone else says they're going to be doing all the work, when the assumption is they're going to do good work, which is always how you think when you get into it, when you find out the quality of the work actually matters. There may be a point where you wish that you had done the work, and I'm sure that's going to come up in the story. So the deal was you're getting 50% of the profits and you're putting up 100% of the money, and they're going to go execute the operation right okay, so where was the property and what was the plan like? Give me some numbers. What you paid the rehab and what you thought you'd sell for.
- [04:39]
Soca Ngove
Yeah, so the property was out in East Sacramento, which is a nice little area. You know, you've got like Tom Hanks living in that neighborhood at some point in the past and some other president. I forget which one it was, but it's a really nice, prestigious little neighborhood. You've got Sacramento State University nearby. So everyone keeps up their yards even without an hoa. With that being said, I picked up the property at 500,000 from a wholesaler and they're, you know, so they're connected with other wholesalers and that, that's how they came across the deal. And all in, I would say it's about 520 with closing costs. The projection that they had was like 900 to a million. Right. Is what it would be worth after the flip. I thought that was a little bit high. So I ran my numbers. I said, hey, at best we're probably looking at 750, 800. But I figured, you know, worst case scenario, the deal part of the deal was that I would get the listing afterwards. So I thought, you know, worst case scenario, we break even. I make a little bit of money just from listing the home and selling it, right? And best case scenario, best, best case scenario would be like making a profit of 200,000. And I thought, well, you know, with the numbers that we're looking at, we'll probably make 100k a piece. So that was good. I was like, that was good. The projection as far as the rehab was supposed to be about 60,000. And I told them, hey, you know what? For a home that age, it's a little bit low. You know, there's always incidentals that you need to account for. So you need to have a little bit of a buffer. I said, you need to put in a buffer. So I told them, you know, sometimes people use 5, 10%, whatever. But I said, in our case, since you guys are super new, like, let's throw in a buffer of like 20 grand, right? We ended up asking for, I would say the rehab budget of about 90,000 instead. And they blew right through it. They blew right through it. And for what they spent on the home, we did not achieve my idea of what the rehab should look like, which is a high end rehab. It looked more like a low end lipstick on a pig rehab afterwards. And I was really disappointed with that. I don't know if I'm maybe jumping too far ahead with it. But essentially the home didn't sell for what they anticipated. You know, it's selling for. And I was asking them, like, hey, because I again, this is in northern California. I'm out in Southern California. So I don't get to see the project. Right. I'm relying on pictures, and, you know, all the details don't always come out in pictures. I'm relying on them to be honest and be like myself. And so I thought we had a great relationship, and it started off great, but then, you know, things just started to kind of unravel along the way, and I started getting, like, weird little signals. But again, I'm really hopeful as my first JV deal. I'm ignoring all these little signs, and I really shouldn't have in hindsight.
- [07:30]
David Green
All right, so let's talk about the actual rehab of the property when we're getting started here.
- [07:35]
Soca Ngove
Yeah.
- [07:35]
David Green
What issues came up when you had the rehab going on that your partners are supposed to be overseeing?
- [07:42]
Soca Ngove
Okay, so the rehab, they were really, really just aggressive with the timeframe. They thought they're going to be done in four to six weeks and be on the market within two months. One of the first issues that they ran into was contractor who was not honest or reliable. So, you know, sometimes people show up when they aren't supposed to or just don't show up at all. Well, that happened. I think everything that could have gone wrong with a real have went wrong. So they had to switch out contractors because I guess one contractor was trying to pull that bait and switch. They gave their initial bid really low, and then when it came time to do the work, they would always ask for more money upfront, even prior to, like, starting the work. And we're like, well, where's the money going? And I said, no, no, no, this is not how I do things. You know, you do the work first, then we'll pay you for completion. We'll pay for some materials. We'll pay maybe like a 10% dep it one or the other. But you can't be asking for half.
- [08:48]
David Green
The whole drop budget.
- [08:50]
Soca Ngove
Yeah, yeah. And so it was kind of getting out of control. And I said, look, guys, this is something weird about this. We got to find somebody else. He told me that the contractor stole some money from the project essentially because I was like, where is the money going? If you spent this much, why isn't X, Y and Z done? So that was the hard part. And they were going to try. They were going to try and pursue, like, a lawsuit against that contractor. But Then some other things happened. Then down the road, as we were getting towards the completion, someone from the city drove by, city of Sacramento, and they red tagged the house, they slapped a sticker on it and says, you got to cease all construction because you guys do not have a permit for this. And I'm back here in shock because I'm thinking, hey, we hired a licensed contractor, what the heck, right? They should have got that factored in. We talked about permits. Why weren't permits pulled? I was under the assumption that while they were doing all this work, the permits were complete, were pulled from the city. And so, so then we had to put a pause on that. It took like a week or two for the guys up there, the boots on the ground, my JV partners to navigate going to the city and pulling the permit. Right. So now instead of having the contractor pull the permit, we're doing an owner remodel. Right. So it's the liability is now on the owners, which is not something that I want, especially when you're already paying a contractor, that should be on them. So that's one of the things I'd like to share with people. You know, you're doing any type of construction and you're hiring a licensed contractor. Never like pull a permit yourself, have the contractor pull it, because otherwise, even if they're licensed, the liability is still going to fall on you at the end.
- [10:28]
David Green
So let's get some details about how much money went to the contractor. What were they supposed to do with that money and then what did they actually do?
- [10:34]
Soca Ngove
Yeah, so this is a little hard because the person who is helping me track the bookkeeping, he passed away. So there was three partners total. I was one of three. And I don't have full details on that. With that being said, I know that we spent basically $90,000 on the home. And as far as the scope, we were supposed to have, like had, you know, new high end stair rails. We're supposed to fix like the 6 inch gap, make it into 4, so that way it's not like a health and safety issue. Kids don't fall through. You know, we were supposed to fix the balcony and put like the nice glass through there, make it look really posh, repaint the exterior, the interior, clear out all the trash and debris in the home, fix any broken windows, replace all the flooring, baseboards, the appliances, all the fixtures. What else do we have to do with that home? All those little things like the vanity mirror. We even had to put in an island because that house had a unique Floor plan, it's old school, like where, you know, they had a big bar, like, in the living room area. And so we're trying to honor the original architecture of the home and just modernize it so to replace the bar as well. But there was just a lot of little things that weren't. That just weren't done well, not at least to my standards. And I didn't know that till much later.
- [12:02]
David Green
So you had told the contractor, here's what I want done. I want this type of materials. This is the design I want. They said, great, it'll be this much money. You sent them the money. They did not do what you asked. They did something that was cheaper and they pocketed the difference.
- [12:18]
Soca Ngove
Yeah, yeah, Essentially something that's. That's definitely part of it. And then there's other incidentals that came up, you know, too. I really don't have the full details on that because I didn't come into the scene until I would say about six months in. Six to. Yeah, about six months in. And at that point I was like, okay, I need to take over this project because. And in hindsight, I should have never partnered up. I should have just done the project myself.
- [12:46]
David Green
Oh, for sure. We're going to get into that because I hear that happen a lot.
- [12:50]
Soca Ngove
Yeah.
- [12:50]
David Green
Okay. So how much money had you spent at this point with these contractors before you finally had to fire them?
- [12:55]
Soca Ngove
Oh, I wrote that number down somewhere. Yeah. Again, David, I really don't know because that portion, I would say is probably about 15, 30,000 before that first contractor was fired. And then the second contractor, he got the project through all the way towards the end. And supposedly he was better, but even then he was someone who should have been fired, too. But I think just because of this whole situation. So the guys that brought me the deal, they're obviously not only working on just one deal, they were trying to dispo a bunch of other deals as well. Right. They're trying to wholesale a few other deals. They're trying to lock up other investments. And so I think at that point their focus wasn't entirely on this home anymore. They were just kind of trying to balance their time with other homes. Although they didn't say it, but I felt that was the case because when we had gotten slapped with the stop work order, they could have gotten those minor things done and rectified really quickly, but they didn't. I had to constantly ask, and they're like, oh, well, you know, they said that it doesn't expire until a few months down the road. And I was like, well listen, what if they change their mind? What if they find something new? Like let's, let's get this done, let's get that permit closed. You know, why are we waiting a few months when it's just strapping the water heater and moving some pipes? So there's just some weird stuff. I think at that point it wasn't just a contractor pocketing the difference. I think it was the partners as well because they were in charge of doing the draws with the lender, the hard money lender that we had. And so they might have even over projected some expenses and then just taken the money and said that they paid the contractor. But they didn't because I think that they might have been using that money to fund other deals.
- [14:47]
David Green
Other deals?
- [14:48]
Soca Ngove
Yeah, yeah, yeah, that's, that's really like what I'm thinking happened because there's just, it's just kind of strange everything that went on. I don't want to jump around too much and confuse people because this, this was like a year and a half long project and it's supposed to originally have only been two.
- [15:06]
David Green
Well, we've got a pretty good foundation of what the project looked like here and how it you got ripped off. So did you fire the contractor or did you have your partners fire him?
- [15:16]
Soca Ngove
I had to have my partners fire them. They're the ones, like I said, who had the communication with everybody down there. I really tried to be as hands off on that stuff as possible because again, to our JV agreement, I was supposed to be just the silent money in and then that's it. They were supposed to do the rest of the work. And my only input should have been just the design concept of it.
- [15:38]
David Green
Were they apologetic to you? Did they take any responsibility for how bad it was?
- [15:43]
Soca Ngove
Oh yeah, absolutely. And that's what drives me nuts. I felt like I was extremely hopeful going into this. I was too bright eyed. And they told me everything that an investor would want to hear. And they knew it. It was a lot of lip service. And they were just like, hey, you know what, I'm so sorry. This is, you know, I wouldn't want this to happen to you. I know you've got a family too. You've sunk in, you know, a lot of money. And at the time I've already put in initially about $110,000 into the home. Right. You know, hard money loans. Typically you put down 20%. We could have probably put down less, but because of the partnership that I had and the Rate and stuff that they had already pre negotiated. It wasn't as favorable because they didn't have the experience and the credit, but they definitely said everything you wanted to hear. They knew how to keep it flowing. For sure. For sure.
- [16:38]
David Green
Okay, so what was the emotional state like for you as you're recognizing this is kind of frustrating. Man, are these guys idiots.
- [16:46]
Soca Ngove
Yeah.
- [16:47]
David Green
Do I have to do everything myself? It's sort of escalating as you move into oh my God. I have to talk to the city myself and get owner permits because my name is on the title because I put the money into here. What are your thoughts and your feelings as this is slowly just spiraling into worse and worse and worse and you realize there's a line in the sand that you're going to have to jump in and take over this whole project that you had no intention in the beginning of doing?
- [17:09]
Soca Ngove
Yeah, well, David, I, at that point I was still in denial. I was still so hopeful that everything was just going to continue on as it should. Maybe we just had a little setback with the city and then, you know, once we fix that, we're just going to go and market. Right. So at this point they came up, they reached out to me in March, we closed the deal in April. And this is about July, ish, August at this point. And then we were supposed to start taking photos of the home and then list it at right after. We're very close to the tail end of everything. And then at that point, one partner passed away tragically. It was like just some weird incident that happened on the freeway, a shooting. So yeah, I was just stunned. I didn't know what to do. But at the same token, I'm a business person and I have to keep moving forward. Right. We can't drop the project because that's going to be detrimental to everybody. At that point. It's like, what do you do if you don't move forward? Then you still owe the hard money lender, their money, they want their money no matter what. They don't care what the issues are. And so we had to just figure out like what was going to happen with his share of the home. And so because he didn't have any type of succession agreement or succession plan in his corporate docs, the corporation or the LLC actually went into probate. And so with probate, I've dealt with that before, but not like in an investment. So I know that it has to go through a process. You have to go to get either court approval or some type of paperwork from Court saying that the home can be sold by their heirs. Right. Or the successor. And we didn't know how long that was going to take. It could take six months, it could take a year. And at this point, I'm just thinking like, okay, well, I've only got six months left before my note is due, and I'm starting to sweat. I'm getting really, really stressed, and I've gotten little kids, and I'm still trying to manage all other aspects of my life, and I just. I'm just stressed every dang day. Every dang day. I don't. I. I'm still hoping for the best, though.
- [19:28]
David Green
Are you feeling anger? Are you feeling helplessness? Are you reaching out to people for help? Are you thinking, I never should have invested in real estate? Like, what kind of thoughts are going through your head?
- [19:37]
Soca Ngove
You know, surprisingly, I did not feel anger. I just knew things can go wrong. That's just how it is with investing. Like, let's be realistic. You know, if you go in there thinking that nothing can go wrong, then that's just asinine. The biggest thing was just frustration. Like, it. Because I knew it didn't have to be like this. So it's like all these things that came up, it could have been avoided. I felt. And biggest feeling for me was just feeling of regret, right? Thinking, you know, with everything that I'm starting to have to do, I should have just done it myself. I shouldn't have brought partners into this. I, you know, now I'm having to wait for the other 50% owners to make any type of decision, right? Because it's not just me. So I have to move at a little bit of a slower pace. And I also have to tread carefully. I don't want to ruin any type of relationship we have because we're still in ownership of this home together. What if they get upset? What if they trash the house? What if they decide, hey, I'm just not going to communicate with you anymore. Forget it. You do the work. I'm just going to sit back. I'm just still trying to massage this whole thing along, make everyone just not necessarily happy. But just like, hey, stay in communication. We're still partners. Let's work through this together. That was my biggest mentality.
- [20:53]
David Green
Well, I'm asking you to speculate right now. I realize that, but I am curious. Do you think that the partner that passed away on the freeway from a shooting could have been related to owing money to someone else, to a deal gone wrong? I'm sure everyone that hears is wondering, was this something that these people that you got into this deal with may have been screwing over other people, too, and they screwed over the wrong person.
- [21:16]
Soca Ngove
Yeah. You know, I had all sorts of thoughts in my mind. It was just like, oh, my God, what happened? Like, this is. First of all, I didn't even know what happened. And then once I found out what happened, that it was like a. There was a shooting on the freeway and so he was trying to get away. I thought, oh, my God, that just kind of speaks volumes about, like, maybe their history or maybe things that you thought was their history, but they're still doing right, so. And then I even had like, a even crazier theory where I thought maybe the other partner wanted to take his ownership, you know, his shares, and thought, well, if I got rid of him, I'd get a bigger share of the pie. And I know that was a little out there, but, yeah, those certainly did cross my mind. You just never know.
- [21:59]
David Green
I mean, well, you have to wonder, because if they're pulling money from your project to pay for others, which we don't know, but that's very likely what was happening. Happens a lot of the time. People get in these situations where they're stressed. They also don't want to acknowledge that they're in over their head or they've screwed up. So they just rob peter to the PayPal kind of becomes a form of a Ponzi scheme where you're sending money. The contractor's keeping some, they're keeping some. It's going to pay off their other people to keep those people happy. And they keep thinking, well, if we can sell these homes, I can pay everyone back. If I can just execute, I can save face and I won't. My reputation won't take a hit, and I can keep going to these real estate groups and preying on the members, which total side note here, this is not soca's opinion. This is pure David. I have seen people like this that I'm going to call predators bounce around from real estate group to real estate group. I'm in a group called GoBundance. It happens there just like everywhere else. Knowing that there's wealthy people wanting to make money in real estate, offering passive returns, claiming that they have experience getting your money, Sometimes it works out good. Oftentimes they shit the bed. And the people who gave the money are somewhat trusting this person because they're in a group that is a community that they feel safe with. That's very inspirational.
- [23:13]
Soca Ngove
Yeah.
- [23:14]
David Green
And the predators know that. They know that this place is full of people that are bright eyed and bushy tailed and they listen to bigger pockets and they're so excited and they love it and they're in this community of happy people. And so the wolves come in and sheep clothing looking just like the people that are legit. And you can't tell the difference when you're in the group. I just wanted to take a minute because we're about pulling back the curtain and sharing what happens. And I do see this happen in more cases than just your soca.
- [23:37]
Soca Ngove
Yeah, it's unfortunate. It's unfortunate. And I really did my best to vet them and they were honest with me. When I initially had the deal across my lap, I talked to them and they were like, hey, you know, we've never done a flip before. We're eager to learn, you know, you can help mentor us through this. And so I can appreciate that honesty. And I know everyone starts somewhere and I was that one person before, right, that started somewhere. So that's why I agreed to JV with them. You know, I thought, okay, they're so eager to learn and they're so receptive to, you know, things. I'm telling them that they need to do that this is going to be fine. But afterwards, what was strange is that they would try to use me as a reference and I was like, hey guys, I really don't think I'm a great reference for you at this time. We're still working on this project together and it hasn't come to fruition yet. We're still like in the midst of things. So I really don't even know what to say other than like, you guys are keeping in constant communication with me, but that's about it. And I've had two instances where somebody has reached out. The second time, the guys at J, well, just one guy at this point because the other one has passed. He sent her an email with all the deals that he's done supposedly. And so I was curious, I was like, you got to vet these people and you got to look at the deal yourself. I said, I can't personally analyze the deal for you because maybe my numbers don't work for you. I said, I don't want to be the one who says, yeah, this is a great deal. You do it. Maybe you don't do it the way I think you should do it and then you don't make them the money you should make and then you get mad at me. So I was letting her know all this stuff and she sent me an Email showing me what she had received from. It's like those investor info packets. So I looked through it and she's like, did they really do all these deals? I was like, it's impossible for them to do all these deals. They just started the business. This is their first flip. They haven't even finished it yet. And despite all these inconsistencies that I saw and I shared with her, she still apparently did the deal with them. Because I have the. As a realtor, you have the ability to kind of look up properties and see who bought it and whose name is on it. So I was able to see that they ended up doing the deal together. So hopefully theirs went well. But I just couldn't do a deal with someone who lied to me. It doesn't make any sense. Even if it's a great deal, I would buy it, maybe pay them a wholesale deal, but that's it. But yeah, unfortunately there's a lot of predators out there and they continue to be out there because like you said, people are bright eyed and bushy tail. They want to ignore all the negative things. Just kind of like how I went into it, but in a different circumstance. Like if somebody said, hey, this person isn't of good character, let's not work with them, that'd be different. I wouldn't work with them.
- [26:21]
David Green
So you're in this thing deep. You have to go to the city and get permits in your own name. That's a problem. You're on the phone with these. But the city yourself trying to work through the red tags that came in.
- [26:32]
Soca Ngove
No, no. So at that time, all partners were still alive and well and they went to the city and they took care of those things. So because we are all on title, so they have the ability to do that. It wasn't me, so I didn't have to deal with that, but we did have to. You know, I just was more the one who just had to follow up on everybody and make sure they were doing all the right things like, hey, just kind of project management at that point.
- [26:58]
David Green
Okay, so you get the permits, owner permits here, you're still having to put, put your money into this thing. How much did you sink total into this rehab?
- [27:08]
Soca Ngove
It's well over 100k. On top of that, I would say $185,000 is what went into it. It was. And now not all of it is rehab, David. Part of it is the monthly overhead as well, which is the mortgage, the utilities. So those two things.
- [27:34]
David Green
Okay, and what about the down payment.
- [27:35]
Soca Ngove
For the house the down payment was with the closing cost. It was 110,000. Yeah. No, I did include it in the 185,000 subtotal. So I would say 75,000 came out of pocket for all the other stuff. Does that make sense?
- [27:54]
David Green
Yeah, totally. Okay, so how much did you spend on the rehab portion of this house and how much did you have to put down to buy it?
- [28:02]
Soca Ngove
So the rehab portion was between 90 and 100,000 with the lender. Okay. Because now, I don't think I was clear on this earlier, but we. With the hard money loan, we also did get a rehab budget with that. Right. So that was factored in there. But as far as my bottom line number is how much went into the house. So far, it's about 185, 186,000. So that means that there's another $75,000 that went into the home that wasn't part of the original rehab budget.
- [28:39]
David Green
Okay. It's a lot of money that you're in on this thing for. That represents a lot of years of saving and good financial decisions and delayed gratifications. That's maddening that you've now got these people that are throwing your money away because they're not in anyway. Well, I'm sure they get their comeuppance at some point in life. So what happens? Does the rehab actually get finished and you're happy with the result?
- [29:01]
Soca Ngove
No. Well, the rehab eventually did get finished, but not by the partners. So after we figured out the whole probate situation, we got letters from the court saying that we can go ahead and sell the home. I went ahead and tried to list the home for a few months. We're not getting offers, or at least anything that I felt was reasonable to where we could break even. A lot of it was just other investors who wanted to pick up the home, give it another rehab, and then flip it. Right. And they wanted to buy it at pretty much the price that we paid for it originally. So I wasn't about to let go of the home. I'd rather just hang onto it at that point. With that being said, we eventually got to the point where it's like month 11, and on the 12th month, the hard money loan is due. And so I, you know, I've been talking to the remaining partner. I said, like, we need to figure things out, Right. So he's been trying to get a loan in order to take me off of this title because I, at that point, I didn't want anything to do with it anymore. You know, it's a shitty job in the house. I don't want to be stuck with a shitty house. But he wanted the home because he still felt like it was a million dollar home in his eyes. And despite everything that went on, that's what he felt anyway. He had the bad credit, he couldn't get the loan, he didn't have any funds to put down for the loan. And he tried to convince the estate administrator for the deceased partner to co sign with him, but. And he, I'm pretty sure he was trying to trick him because he was like, oh, this isn't a personal guarantee, you know, you could you sign on behalf of the corporation or the LLC and do it that way? But with my knowledge, I knew that that wasn't possible, at least not that I know of. But there was a faint chance that there might be a loan like that out there. So I was again, still hopeful. Turns out there's no such loan. And so it's fair to say that the administrator didn't want to move forward and personally guarantee this deal that he has nothing to do with. He knew nothing about real estate. Right. And then the other partner couldn't refinance. And I was like, okay, well, at this point I'm the only one who has a good probability of doing the refinance. But I said if I do it, I wouldn't want them to be a part of it. I said our partnership would essentially have to end because it makes no sense for me to have to keep asking other people for permission on what to do with the home when I've been paying for it, you know, 100%. And so he's like. I said, he told me everything I wanted to hear and was agreeable. But at this point in time I'm like shitting myself in the back of my head and thinking they're not going to sign over the quitclaim deed so that way I can have full ownership of the home and I do not want to keep, keep them on title and carry the whole thing forward. Right. If I'm going to have the home, I'm just going to sit on it for however long it takes until I can break even again and sell it in the future. So that was my backup exit strategy. It wasn't like the original strategy with this deal, but I thought if I held onto it for another five, 10 years, we should be okay, right? I'd rather do that than let it foreclose, go back to the lender, lose $185,000. So that's, that's my thoughts.
- [32:30]
David Green
So you didn't want to keep it as a rental. You were like, I'll let the lender have it back and just wash my hands of this thing.
- [32:36]
Soca Ngove
No, no, that's not what I meant. So I originally was trying to let the other partner refinance and take me off title. So I that way.
- [32:44]
David Green
But he couldn't get credit, Right?
- [32:46]
Soca Ngove
Correct. And then ultimately I did have to refinance in my name or under my corporation and then rent it out. So now I do have it as a long term rental, but that wasn't the original plan.
- [32:58]
David Green
I see. Okay, I misunderstood what you were saying earlier. Okay, so you keep it as a short term rental. Now I gotta ask. California is not very friendly with short term rentals. What's it been like trying to have a short term rental in a Sacramento residential market?
- [33:11]
Soca Ngove
Yeah, so Sacramento is really interesting. I feel like it's very diverse as far as like income and the values of property is like you have these expensive properties, but you also have a very small pool of people who can actually afford to live there and pay that kind of price. So it was difficult to find a renter for the property. For me after refinancing, to even break even on the mortgage alone, it would have had to rent out for about 4,300amonth. And that rental market in that area just. You just couldn't get $4,300 a month for it. You know, it's possible, but the home would have to be very well upgraded and offer a lot of amenity. And this home like we were talking about, the rehab was just a basic lipstick on the pig rehab. So it was just not going to get that amount. And then one of the things that I toyed around with was maybe trying to put it on Section 8. Right. Everyone has talked about like Section 8 maybe being a great idea for long term rental. And you know, you could see in the charts that they would pay up to about 4200, 4300 for a home that size. And I thought, okay, well maybe this is worth exploring. But that was very new to me. I've never rented to anyone who's been on Section 8 before, so I didn't really know how the process went and what to expect. So as I was going through the process, I learned that, you know, there's a lot of hoops you have to jump through. You have to have the house up to a certain level of readiness for the renter, which I thought it was not knowing the true condition at the time. And then they also go on comps based on comps, so just like, you know, regular real estate. Right. And I didn't know that. I just thought that they would pay automatically up to the amount that was on their list. And so that was the other challenge. So the other partner who was like, hey, we'll just put on section 8 for this amount, no problem. He had no idea either. He was just one of those people just, again, a bunch of lip service, you know, tried to make everything sound easy. And as I was going through the process myself, it just didn't work out that way. So ended up renting it out for about 3,232,50amonth. So $1,000 less than what the mortgage is. But it's to a group of students that go to SAC State University. Hopefully they're taking great care of the home. But yeah, every month I'm paying and subsidizing that mortgage, which sucks. So I'm not even getting like, you know, the 1% rule or 5% cap rate, whatever that people are going for. California, unless you're house hacking, that's just. Just not likely. Unless you bought the house a long time ago for a much lower price. It's. You're just not likely to cash flow.
- [35:58]
David Green
So what happened when you tried to go the short term rental route? I'm sorry if I missed. I heard you mentioned all the other things we tried.
- [36:04]
Soca Ngove
Yeah, I don't think I mentioned the short term rental route, but I did think about that for a quick bit and I tried to even do midterm rental. And surprisingly, I had a lot of inquiries for midterm rentals out in Sacramento. I think there's just a lot of old homes out there. So there's quite a need for people, right? Like plumbing burst or something, you know. Now they gotta get inside the home and live somewhere for six months until their home's completed, repaired. But the problem is these, the people doing the midterm rentals, they take a long time to get back to you. So I wasn't gonna keep waiting, you know, for a new inquiry and then for them two weeks later to tell me no. It just, it was just eating away every month at my. My budget.
- [36:50]
David Green
Oh, you're not kidding, man. I applied about seven months ago with the state of California. I've been a real estate broker for probably five years now. But I was never the broker of my own team. I was using someone else's broker's license. Well, I said, hey, I've got a company I want to Be the broker of it. So I can now recruit agents to work under me. It's been seven months and we call every three days and they say it's in review. It's in review. You, we're waiting. Zero progress, zero Fs given. You can't get any support at all from the people that work in these positions. So you take someone like you. That mortgage company still wants their payment, the state's still going to collect those property taxes, that homeowner's insurance is still coming. Everyone else in the world gets their money. But the person in your position who needs the state to get through the red tape and help the person that pays those damn taxes is just stuck waiting and waiting and waiting. And it is one of the worst, most helpless feelings. So you're sitting here like, well, I could sell it and lock in huge losses that I don't want to do. I've already fought tooth and nail with these idiots that I've partnered with to make my life hell. I could try the short term rental route. I have no idea when the state's actually going to get back to me on this. I could try the medium term rental route. That's going to have challenges, or I could make it a traditional rental and bleed money every month. But I'm not taking the huge catastrophic loss and I'm just hoping for the market to go up. All of these are terrible options. Options that can't leave you feeling very good. Right? So seeing that you've now sort of cauterized the wound in a sense, like you've locked in those losses, the money you put into it, you don't have cash flow, you're actually losing money. But you have hope for the future. If you hold on long enough, rents will go up, values will go up, you can probably sell it.
- [38:37]
Soca Ngove
Absolutely.
- [38:38]
David Green
How do you feel today? Like, did this ruin your appetite for real estate investing? Did it ruin your appetite for partnerships? How did you walk away from this?
- [38:45]
Soca Ngove
Absolutely. I definitely don't want to do another DAV deal at this point. And if I do, I'm going to be a lot more cautious about it. I think there's a few things I learned going into this deal. And like my brother in law has said, right. Like anytime you make a mistake, it's just like going and paying for a university. It's just an expensive learning lesson. So think of it that way. It's like I just paid for USC with this deal or something. But I definitely would say to anybody who's looking to enter a JV Agreement in the future, make sure that whoever you're partnering up with, who has an llc, S corp, whatever, to make sure that they have some type of succession plan in their corporate documents, like if they pass away, make sure that their business doesn't go into probate, that there's a way that you can continue moving forward so you don't ever have to worry about hitting the ground. And then on top of that, I talked to my financial advisor about it, and he's like, soka, did you know that you could have bought insurance for your business partner and they could have bought insurance on you? So that way, if something like that did happen, you could have had the first right of refusal to purchase their portion of the business. Right. So you didn't. So that way I could have avoided having to negotiate, you know, buying their 50%. So that's what I had to do. I had to negotiate their 50%. And fortunately they did sign over quick, claim the property over to me. But it did, you know, take a little bit of a deal to get that going. But it was worthwhile at that point. I just wanted to get it done. I would say the last thing is, you know, make sure that people aren't green. Green like, that they have experience. Yeah. I mean, if they're wearing green and they have all the money and they're just dripping money and they want to be like, pre pml, that's great, that's different. But if they don't have any experience at all with what you're trying to do, it's. I mean, I don't know what I was thinking. It definitely wasn't, wasn't, you know, passive.
- [40:45]
David Green
I know what you're thinking, and everyone was thinking the same thing. I don't even blame you for that. Like, in hindsight, of course, we say, oh, you should have known better. It's always the people that don't do anything that are the most critical of the people that do. They point out where someone should have known better that you already know. But at the time you're doing this, the economy's chugging along, real estate values are going up, there's a crazy lack of deals out there, and people have capital. You know, you're a smart woman, you know your experience, you know that you're capable of things. And in your head you're like, well, worst case scenario, I'll just, just take over the project.
- [41:17]
Soca Ngove
Right.
- [41:17]
David Green
You don't realize the city's going to get involved. You don't realize that these people are scam artists. They it's hard to imagine how some people can be that positive on the outside and have that little integrity on the inside. It shocks you when you find how easily some of these sociopaths can walk around projecting this image. And then when you actually get into business with them, don't lose sleep at night taking money from other people.
- [41:42]
Soca Ngove
David, you didn't. How do you even tell you everything? I mean, after taking over the project, like after refinancing, Because I didn't want to put a renter in there until we finished putting everything into title under my name because I didn't want to have issues with the rental contract, right? So I waited. I waited. And after we. We closed the file, I was looking for a renter. I couldn't even get somebody to rent the home. And they're like, you know, it's just not in the condition I'm looking for. And I didn't understand it because the partners were always like, hey, it's. It's a beautiful home. All the neighbors say it's the best home of the block, and they love the finishes. Only one person had the balls to be very honest with me. It was the stager. And he was like, the home is filthy. It's dirty. It looks like somebody's been living here. And turns out somebody was living in the house. So one of the partners stayed in the house and didn't tell me. And that explains why I had one month. I had like a thousand dollar energy utility bill.
- [42:41]
David Green
Bill. Yeah.
- [42:42]
Soca Ngove
Yeah. And they're like, oh, it was a realtor. They showed the house and they forgot to turn off the ac. And I thought, oh, shoot, okay, that stuff does happen. So I kind of, like went with it. But after my husband went up north to do the repairs, I was like, at this point, I don't trust anyone but you. Can you please, you know, go help me, like, fix this? And he had nothing to do with the project to begin with. I was just hoping to, like, say, hey, you know, I'm. I did a great job on this flip all on my own and impress him, but here he is coming to save the day. But when he went up there, he found, like, there's still trash and debris in the home. The windows were shot. I had to replace all the windows. I had to replace the ac. The mailman and the neighbors all came and introduced themselves. They told him what was going on. They saw that the partner had stolen appliances out of the, you know, fixtures, everything out of the house after we had had finished the refi. So he Stole from the project. Mailman said that there was a guy that was living there. It was just a lot of things where, like they kept a lot of stuff from me for sure, just to kind of smooth things along. And so that was all costly. And I wish that on nobody. And, David, let me tell you what got me through this is I happened to listen to some random podcast that you had where you talked about somebody signing or transferring all the title to their name, and you had to deal with that. I think it was out in Florida. Yeah, that is so much worse. It made me feel like this is nothing. I knew I can get through this.
- [44:13]
David Green
Oh, that's such a nice bright light in my horror story that at least it made you feel better.
- [44:19]
Soca Ngove
Yeah.
- [44:19]
David Green
About your own.
- [44:21]
Soca Ngove
Well, that's. That's really my goal of being here on this podcast with you, David. I don't mind sharing my failures. I just hope that this helps somebody else to avoid, you know, some of the pitfalls that I've had and hopefully just, you know, go into things a little bit better with eyes wide open. Right. And just not hopefully. I wish this on nobody. I hope it never, ever happens to anybody.
- [44:46]
David Green
Well, that's exactly why we want to talk about it, because when you're in the position that you just joined a real estate community, joined a group. So I run a group, it's called Spartan League. And we have people that always say, hey, I want to pitch your members. And my answer is, no, you cannot do that. I tell the members all the time, I am not advocating for anybody that pitches you on anything. I have my own mortgage company. I have my own real estate agents. I vet them. I know that they're not bad people. And if they do something shady, they're gone. There's a degree of safety you can have there. I'm not going to vet every single person that brings some apartment complex or syndication or creative financing or wholesale or whatever. And I don't want you guys blaming me when it's happens. So if you choose to go offline out of the group and do a deal with someone, I'm taking zero responsibility for that. But I will put everyone on blast. If this deal goes bad, everyone in the group is going to know this member lost this other person's money and they're going to be shamed, basically. Like, there has to be some kind of consequences. But I know most groups don't do that. And so it draws the predators to them. And like we said earlier, they don't look like predators. The Tindler swindler did not look like a bad guy. He knew how to play this game. And we're here to spread the message so that when people come into these situations bright eyed and I can't wait to get into investing and I read the book on partnerships and I read the book on no one low money down and I feel like I'm educated in how this works. And they're absolutely not. They exercise caution. It's better to lose out on a potential good deal than to jump into a deal with somebody else that doesn't have a track record, like you said. And it can just get out of control so fast. And then you. The only person who has integrity in the whole situation is the one forced to deal with it and the one who loses money. So I'm very sorry that happened, but I super appreciate you being here to share what the story was. I promise you these deals are going on right now as we speak today in real estate groups all across the country, and people do not realize how dangerous it could possibly be. Any last words that you want to leave people with or any information about how you're moving forward after you've recovered from this?
- [46:55]
Soca Ngove
No, I. Well, actually, I would say another thing I can think of that was helpful in the situation was having a good insurance. I thought that after they had stolen all the stuff out of the house, you know, that, oh my gosh, what else can go wrong, right? It turns out it was kind of a blessing in disguise because it let me know the true condition of the home after I set my husband up there. But we were able to, like renovate the renovation, right? Get all those things up to par and make sure the home is in a condition that is actually truly rentable. But the insurance was a big deal because I was able to get coverage for the theft and I never thought I would ever need it. I always thought insurance was a scam, but turns out they covered a portion of whatever was missing. And so I got maybe about like 15,000 back. Still waiting for the check, but it's a lengthy process. But they did approve it, so that was helpful.
- [47:50]
David Green
All right, well, thank you. If people want to follow you, learn more about you, reach out to offer their condolences and give you some encouragement. Where can they find you?
- [47:58]
Soca Ngove
I'm on Instagram. That's probably my favorite social media platform. You can find me. I think it's either Soca Nova or Soca Real Estate. Not sure which one I use as a handle, but you can also search my name as well.
- [48:09]
David Green
There you go. That's S o k H a n G O V if you're listening to this on a podcast and you don't see it on the screen, thank you SOCA for sharing your story. Super appreciate you. Make sure that we stay in touch and let me know about how your next deal goes and hopefully we can have you back on to talk about a good one.
- [48:25]
Soca Ngove
Sounds good. Thank you David.
- [48:27]
David Green
Thanks for listening to Real Talk Real Estate. If you would like to be featured on the podcast, I'd love to have you visit davidgreen24.com Ask and submit your question there. Also, please do me a huge favor and share the show with someone that you love that you think would benefit from his message. And make sure you're subscribed to get notified for future episodes. If you want to reach out directly, you can also DM me on Instagram or social media and check out davidgreen24.com.