It's been almost 18 years since my father passed away. Even now he is a larger than life figure to me who did so many amazing things and there were so many stories to tell about him.
Now, I didn't actually live with him very long as my mother and father divorced when I was only 6 years old. Still, those times that I did spend with him were memorable.
When I graduated from University
When I graduated from University I went to visit my father. I was pretty proud of myself as I was in the top 10% of my class graduating with honors as a pharmacist.
What were my Dad's words to me?
It's not what you know, it is WHO you know
That kind of stung because I worked so hard to do well in University and I was very proud of my degree.
However, we proceeded to head out for lunch and he told me a story of a business deal. Now I'm not sure if he was bragging because he got a pretty good deal and made a lot of money or whether he was trying to teach me something. Whatever the reason was, I DID learn a few important lessons from his story.
Making a million dollars
My Dad started his story with a statement.
Son. Don't be afraid of nothing
Of course I replied "If it is nothing why would I be afraid?".
Son... What is this number "0"
"It's a ZERO of course.
Son...What is its value?
"Well...nothing".
Exactly. Don't be afraid of nothing. Of course I still didn't get it. So then he said "What is this number 1,000,000?"
Well....That's a Million. An awful lot!
Son...."It's just a ONE and a bunch of nothings".
at this point I really didn't get where he was going with the story
Son.
A couple of months ago there was a property for sale for $1,000,000. It was 1000 acres of nicely trees forest (400 hectares). I told my friend you should really look into buying the property!
Of course my friend looked at me incredulously. Why would I ever consider that piece of property? I don't need 1,000 acres of land and I don't have a million dollars. Your crazy.
To which my Dad responded.
"What if you could get the property for free?"
Now, a million dollars is too much money, but FREE? There had to be a catch. However, a little bit of greed and my Dad's friend said "Go ahead, I'll listen".
My Dad then outlined his plan.
Well, I have looked at the land. The trees are worth a fair amount of money on the property. Maybe even worth the million dollars that the seller is asking for. Let's place an offer to purchase the property subject to a timber evaluation and subject to financing. IF it is as valuable as I think it is and IF we can find financing then we go ahead. IF NOT well, we let the offer drop and no harm.
They then placed an offer to purchase the property with those two subjects in place. First was the timber evaluation: It came back to be worth 1.2 million dollars. Then had my Dad and his friend excited. That was a lot of valuable timber! However, there was still financing. The Dad's friend said "even if it is worth so much money there is no way I can finance a million dollars" no bank will ever loan me that much money!
To which my Dad said "You have an offer on the property. No-one else can buy it until your date to remove subjects comes due". Let's talk to the local sawmill. You may not be able to get a loan for a million dollars but the sawmill easily can. If they cosign the loan for you then you can get the million dollars.
They then went together to the Sawmill. My father happened to know the people who ran it. They sat down and showed the mill the timber survey. As there was a shortage of logs the mill was excited to get a large amount of quality timber! They said they would happily cosign the loan IF my Dad's friend agreed to sell the timber to them for 1.2 million dollars. My dad interjected, 1 Million dollars, we want to keep 20% of the logs so it doesn't appear stripped.
The deal was signed. My Dad's friend got a loan. He sold off 80% of the logs and got paid 1 million dollars with which he immediately paid off the loan.
- My Dad was happy because he got 10% comission on the property
- My Dad's friend was happy because he got 1,000 acres of land for almost nothing
- The logging/sawmill company was happy because they got a source of good wood.
The Story--Part 2
Now my Dad's friend was asking my Dad, "How much should I sell the property for?" He was very excited to take his profit! My Dad shook his head and said "no, no, there is more money to be made here. You could sell all 1,000 acres but it will take a long time to sell. Much better if you divide the property into 25 x 40 acre pieces". "If you have a lot of small parcels each parcel will sell for a much smaller amount but still be a good sized piece of land". "Also, you can keep one for yourself and make a lot of money!".
"But how do you subdivide property?" My Dad's friend had no idea. My Dad knew who to talk to. Land titles, the city of 100 Mile House, and surveyors were all friends of his. In short order (and for a fairly sizeable amount of money) there were 25 x 40 acre pieces of land for sale. Each one priced at roughly $100,000 each. When they were all sold that was over $2 million dollars in sales.
Again, my Dad took a 10% comission on every sale (he was a realtor) and my Dad's friend made well over a million dollars! (probably closer to 2 million). He also got to keep 40 acres of land. Plus each piece of property had enough trees left that it didn't look barren but not so many trees that you couldn't see the property you had.
For that transaction my father made over $500,000 in comissions and his friend a huge pile of money.
What did I learn from that story?
From that story I learned a lot of lessons.
First: It's important to know the right people. If my father didn't know who to talk to the deal would never have happened
Second: Don't be afraid of nothing's. In this case a lot of Zero's after the price tag. Sometimes a more expensive deal is the better deal.
Third: Look at all the opportunities. Sometimes there is more than meets the eye in the details.
Fourth: Pay your taxes. My father collected the comissions on the deal but never actually paid tax on the transation. Two years later revenue Canada came looking for their money (which he had already spent). They were going to garnish his wages, take him to court, sell his property and more to get their unpaid taxes.
However, it was at that time that my Dad developed cancer. Being unable to work and make money revenue Canada couldn't garnish his wages. He died without ever paying his debt and is about the only person I know who "cheated" the tax man and won.
My Dad's life was full of many stories.
This one is true to the best of my knowledge and I hope you enjoyed it.
Thanks for reading,
Feel free to leave comments :)