My Personal Investment Nightmare, Part 2 of 3

My Personal Investment Nightmare, Part 2 of 3


At one time, I was the investor others pitched to invest in their business. I got into a deal that looked good up front. I knew Ed. I trusted Ed. I knew his character. I knew his family. I had every reason to trust that he was good man.

What I didn’t fully understand at that time was how much of a disconnect you could have between character and competence.

Ed had been running things for a month. I figured he’d need some start-up time. I also made sure he had all the supplies he might need. I also left him with an adequate budget to keep things going for the first month while he got his first clients in there.

I finally started getting good news. I was advised of residents who were moving in and told that things were really looking up. I have to admit that I was pleased that things were finally moving forward.

Then in one of the discussions, an odd snippet of information came up. There was a mother and son moving in. I was a bit taken aback. A mother and son both had dementia?

Actually, no.

“The plan has been altered,” I was told.


Altered? By who? On whose authority? What about that business plan I had signed off on? What about the contacts he said he had? What about the resources he said he could tap?

He had excuses and explanations for everything.

Ultimately, I tried to nail him down on what the actual plan was now. He said he was setting it up to be a low-cost housing facility, and that it was only a temporary measure. He said he could fill it fast and get it to break-even in no time, and that would give us plenty of time to build the dementia-care business.

I asked him for specifics on the dementia-care. He said a lot of words, but in his rather lengthy discussion, once again, there were few specifics. He did not have a specific dementia-care expert in mind, did not have a specific plan for staffing or marketing, and did not have an intake-plan.

At least the short-term plan would stop the money-bleed. The problem was that the location would have to be nearly full just to pay for itself. I wanted to see the operation for myself and see first hand what was being done. I was tiring of repeated assurances and optimistic reports.

I got there and the first thing I noticed was that there was no sign. As I walked in, my first question was “Why isn’t there a sign out front?”

“Oh,” he said, “I guess that escaped my consciousness.”

The rest of the meeting went down hill from there.


I would have fired him on the spot if I didn’t also have problems going on with the second property. We had brokered a deal for a home-care facility, but we had been having some licensing challenges. The licensing challenges created financial challenges because the lender did not want to authorize the loan until the license was in place. I was trouble-shooting that one with the buyer.

Eventually, the licensing issue was not resolved. We worked out an exit deal with the buyer, but without another buyer the property was going to do in default. There was no income to support the property. I negotiated with the lender and they indicated they would rather do a short sale than take a foreclosure, so we started that process.

I recruited Carl, a professional colleague with expertise in short sales and he went to work on that project. After what had happened with Ed, I told Carl that I would want copies of everything and I wanted him to email me updates every time something happened. I didn’t want to have to call him to find out what was going on. He agreed.

Then I turned my attention back to Ed.

I personally saw to the signage, and I talked to him about how he was marketing to new potential residents. Basically he had put word out at his church and a few other ministries he had contacts at. He had eight residents. That was just enough to pay the utilities.

The deal he had set up included meals, so he needed food. Fortunately, he knew how to get set up with the food bank and was able to get food inexpensively. While he seemed proud that his modest residential successes was now “paying the bills,” I reminded him that the maintenance on the mortgage and the annual tax bill required several thousand dollars a month that he was not generating. He’d need 12 more residents for the property to actually be “paying the bills.”

He still did not have a concrete plan to transition over to a dementia-care facility. He still had no particular people in mind that he had actually spoken with. It was all talk.

I told him that I would invest in a month of advertising to generate leads. I set up a radio campaign that would run for four weeks. We’d get to see our results and work from there. I gave Ed a procedure to follow to track the leads. My campaign generated 19 calls of people in need of low-cost housing.

I also told Ed that at the end of 30 days, I wanted a concrete transition plan. If the property could not pay for itself and if we did not have a plan, I would not continue with the project.

Ed assured me that he would have it all together by the end of the month.