By: Dan Gorman, Author of The $7 Million Dollar Lunch

My father was in the US Air Force, and we moved a lot.  We never stayed in one place longer than 18 months.  It was an interesting way to grow up, as everyone in the neighborhoods that I lived in on the Air Force bases made approximately the same amount of money and lived in the same type of housing.  When he left the service when I was twelve, we really didn’t have a lot of money saved up so we bought the least expensive house we could find in the best school district in Cincinnati, Ohio.  It was a wreck, and we spent the next ten years renovating it and doubling the size.

It just so happens that the Catholic elementary school that I attended near my house sat between two neighborhoods.  Madeira, where I lived, which was middle class, and Indian Hill, where some of the wealthiest people in Ohio lived.  The average lot size in Indian Hill is five acres and the average current home value is $1.5 million.  It was quite eye opening when I spent the night at my Indian Hill friend’s home for the first time, who lived in a mansion and had a small yacht parked on the side of his home.   At twelve years old, it was the first time I’d been exposed to such extreme wealth and differences between the “haves” and the “have-nots.”

I received a full academic scholarship to the University of Dayton, and graduated with an electrical engineering degree.  After co-oping multiple semesters while in school, I discovered that I hated engineering – a lot.  I had been earning spending money working at a jewelry store since high school, so I started managing that store for a man in his mid 20’s.  Dave Wanstrath, the owner, had made a lot of money selling wholesale jewelry in his early 20’s and used those earnings to open a store, and to buy a vintage four door James Bond-style Ferrari.  I was mesmerized by sales, and by the entrepreneur mindset of Dave and his family.  It worked its way into me, and I started trying to figure out ways to open my own jewelry business.  When Dave found out about my plans, he fired me, and there I was…26 years old, married with a one-year-old daughter, two big car payments, a mortgage, and no savings (but plenty of credit card debt).  It was terrifying.  I quickly found that jobs for former retail jewelry store managers with electrical engineering degrees weren’t falling out of the sky.

After a few months of looking for employment with no success, I decided to try opening up my own business.  I maxed out my credit cards and purchased a traveling diamond lab, complete with a microscope, tweezers, scales, diamond papers, etc.  Using items I could get on “memorandum” (loose stones and jewelry I could pay for after the sale was made), I started a jewelry brokerage business called United Diamond Brokers.  Since I worked out of a small office, as opposed to a retail store, and I didn’t have to purchase the items before I sold them, I could work much closer to cost than a store could afford to.  I quickly built up a client list of insurance companies who used me to replace lost and stolen jewelry, and traveled to their clients’ homes as many times as it took to complete the replacement.  My prices to the insurance companies were quite a bit less than retail prices, and their clients loved my service, and UDB flourished.  It offered me a lot of flexibility and I could work as much as I wanted, which became very important to me as my marriage was ending and I was desperate to spend as much time with my daughter as I could.  I’d often take her on my appointments, and the clients loved it! 

Within a couple of years, I was doing about a half a million dollars in business.  I was working close to cost, so the profits weren’t huge, but I was making a comfortable living.  As a night owl during those days, I loved late-night infomercials, and dreamed of investing in real estate with “no money down” because my income with my jewelry business was pretty unpredictable.  I was deeply in debt from my divorce but listened to the Carleton Sheets “No Down Payment” audio book over and over as I was driving to my jewelry appointments.  After many months of searching, I found a kind man through a mutual friend who would sell me a 25 unit complex near the University of Cincinnati for $650,000.  I got a mortgage for 80% of the price, and he gave me a second mortgage for the rest, so I had my first “No Down Payment” deal!  Soon after I purchased another 19 unit building using the same techniques.  Both of these properties were located in pretty challenging areas, and I learned the truth of the old real estate adage – “Good properties are hard to buy but easy to sell, bad properties are easy to buy but hard to sell!”  These buildings were older and there were a lot of maintenance issues, and it didn’t really matter how hard I tried – I just couldn’t find good tenants.  I was spending a lot of time trying to run this new real estate business, and my diamond business started to suffer.  I loved property investing, but I wasn’t making any money and was working a ton of hours trying to hold it all together, and needed to change something.

I met with my friend Rob who was an investment banker.  Rob loved fine watches and actively traded them as a side hustle.  When he needed diamonds, he’d sometimes call me, and when I needed Rolexes, I’d call him.  At lunch, I explained my predicament to him…I loved real estate, and loved owning my own diamond business, but I wasn’t making much money at either one of them and I was getting burnt out trying to do it all.  I wanted to buy a larger apartment community, one that could provide enough cashflow and critical mass to hire its own staff so I could focus on the jewelry business.  And, oh by the way, Rob, I have no money.  The problem, he explained, is that larger apartment communities cost many millions of dollars and getting the financing for them usually requires a downpayment of hundreds of thousands of dollars.  But he agreed to spend time with me explaining the mechanics of how larger deals get financed, and giving me the criteria of what he would need to see if he were going to try and get me 100% financing with no down payment.

After a few months of looking, I found something very interesting.  I was sitting at the desk of an apartment manager who was running a 168 unit apartment community, and we were talking about another property.  That’s when she said, “Well heck, you ought to buy this place!  We’re 100% full with a 1 year waiting list, and our owner is in jail for fraud.  A receiver’s been running us for over a year.”  Very interesting!  She was kind enough to give me her phone number and I started communicating with her to get as much information about her apartment complex as I could, including, to the extent of her knowledge, income and expense figures.  I put together a report and met with Rob again.  He stared at my pictures and my numbers for a while, and in disbelief said to me, “Wow.  If these numbers are accurate, I can get you this deal with 100% financing.” 

I found a lawyer who filed a motion, arguing it was unfair to hold the property in receivership for over a year.  The judge agreed and set a hearing up for 30 days later.  Rob made the 90-minute drive with me, testified on my behalf about how he could provide my financing, and at the end of the day I was awarded the right to purchase the community for $3 million, but I had to close within 30 days.  Rob found me financing and we closed with one day to spare.  Not only was I able to purchase the apartment complex with no down payment, it also came with $100,000 in the bank in a reserve account!  I went from having no net worth to being a millionaire that day.

And that is when everything changed for me.

I made more money every month with this new apartment community than I had ever made with my diamond business.  I closed United Diamond Brokers and sold my original “no down payment” deals that were not profitable and impossible to run.  I was able to refinance the 168-unit community less than 18 months later and pulled out $1.2 million in cash that I used to expand my real estate holdings.  Over the next few years I ended up with 700 apartment units and mobile home pads from Northern Kentucky to Columbus Ohio as well as a couple small shopping centers and office buildings as well.  I sold that $3 million 168 unit apartment community a few years ago for over $10 million, and used the money to purchase a chain of twelve newly built Dollar General stores in Michigan.   That’s why I call my initial meeting with my investment banker friend, Rob, my $7 Million Dollar Lunch.

 Today, the passive income that my real estate company produces allows me to volunteer on many non-profit boards, to serve on my city’s planning commission, and to be generous in a number of ways with my time and my money.  I have developed a love for economic development and entrepreneurism, and started a company in Rwanda, Africa, (www.upgafrica.com) where we’re trying to crack the code of building high quality affordable homes, quickly, in a third world country. 

I am profoundly thankful every day.  There are so many people that have a great idea and some of them have actually acted on those ideas and are on their way.  But they can’t figure out how to get to the next level.  I know that if I hadn’t met with Rob and shared my crazy dream with him, none of this would have happened.  Digital communication through text messages, social media, and emails has become the new normal, especially with younger people.  But if you don’t proactively seek out face-to-face meetings where you can share your goals and your dreams, you miss out on the amazing opportunities to really get to know people, and you might miss out on the one interaction that can change the course of your life.

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