I sold my equity too cheap

I sold my equity at a terribly low price. I owned 50% of this project going into November last year. At the time, I was too heavily invested in this project. I also knew that I was the lender of last resort and didn’t have enough capital available if we needed it. 

I decided to sell 20% at $42,500 per 1%. In comparison to the price of our lots, that would mean I sold my shares for $94 per m2.

At the time I decided to sell, I pulled Tanner into the office to look over the potential sales price. I told him that I’ve never sold something with worse timing in my life, but I believe this is the best move to make for my family and the project. I told him this would likely be worth double in 12 months.

It took me four months to receive the final payment on those shares sold, and the value of those shares has already gone up significantly. 

I am now faced again with selling something underpriced. I’ve recently offered a pre sales price to a friend on lots at 173 per m2 if he is willing to pay the whole cost upfront.

I have received some pushback from Seth and Kincaid, as they understand that we are months away from finishing these lots.

In 6 months from now, the value could very well be well over $250 per m2 on these same lots I offered. 

What are some of the advantages of selling early at a lower price?

1. It takes away risk

Everyone close to me knows that I firmly believe that we are about to go through an economic process where our leaders will be forced to use inflation to stabilize our economy's debt. 

For that reason, I am heavily weighted towards hard assets and believe that ‘Cash is Trash.’

I’m also not that smart. I could be very wrong, and we could have an extended time period more similar to 2008, where deflationary forces impact our project. In that case, being in a situation where we can easily handle our debt load is obviously preferable. 

2. I gain loyal investors/customers

I have a short career in raising money, but I have enjoyed giving returns to investors that they are really excited about. I know that it won’t always be like that, but I prefer to give myself the best chance. 

As Warren Buffet always says, you want to ‘delight your customers’. I am a big believer that most transactions occur because people rely on the advice of previous customers. Customers will always feel great if they end up getting good value. 

3. I create mental bandwidth

I have a young team of guys who want to gain more wealth and build a great business. The oldest employee is 25 years old. Development takes a long time and requires decisions to be made today in order to succeed 3-5 years from now. 

If we can remove the risk of liquidity, then we can focus more energy toward ensuring our construction is done right and toward potential future acquisitions, and away from sales and cash management. 

If we can simply get the subdivision finished with a model home and amenities, then the sales will take care of themselves. 

Here are some pics and posts from this week