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Tough Pill to Swallow: Walking Away from a $50k EMD

August 5, 2020

Since COVID-19 began shutting down business around the country, Rockstar Capital has walked away from two different new deals. One of those deals was even under contract, meaning that when we chose not to pursue it any longer, it meant walking away from $50,000 of my own hard-earned cash. The thing is, I haven’t lost any sleep over it, because I know it was the right choice. Here’s why.

First, I couldn’t possibly walk into a deal knowing that collections industry-wide were showing a downward trend. We also couldn’t reasonably purchase a deal that we knew would end up depreciating in value due to COVID-19 shortly after buying it. Buying a multifamily apartment complex isn’t like buying a car, where it depreciates as soon as you drive it off of the lot. The whole point is to take a new community into your portfolio and build its value. Buying the deal which we were in contract with felt like the antithesis of that.

When you invest with me, I’m putting my money right alongside yours. That means protecting it will always be my primary imperative. If I’m not comfortable putting my money down, I’ll never ask you to. Now that we know why we didn’t pursue the deal, we can talk about exactly why I’ve stayed confidant in a decision that cost me so much of my own hard-earned money.

Protecting What We Have

COVID-19 provided a perfect opportunity to “press pause” on our business and place each aspect under a microscope. If you’re going to operate throughout a crisis, you’d better be running a tight ship. By choosing not to pursue new deals, we were able to place our focus on guarding the money our investors have already entrusted us with. Budgets, processes, and personnel assignments were all improved in some capacity and the Rockstar Capital portfolio is running stronger than ever.

Knowing When to Strike

When we exited the deal which we had under contract, we didn’t say goodbye to it completely. In fact, we retained the first right to refusal. If it’s likely that the community will decrease in value as nation-wide shutdowns run their course, why not wait for the better price? When we come out on the other side of COVID-19, there’s no telling what kind of opportunity will present itself. “You gotta know when to hold 'em,” and now is one of those times. Even a few weeks later, we are vetting new deals made much more promising by recent opportunities.

Choosing to lose 50k wasn’t a mistake, it was a 50k investment in Rockstar Capital’s future. It was an investment that I’m confident will return in spades.