Here is a little recap of 2008.
I am a small business owner. I make my living helping people make good financial decisions. That's painfully ironic considering where I'm at right now.
I left corporate world to form my own company in 2007. I do not regret that decision in any way. I do wish I'd avoided some of the potholes I created along the way. My accounting/legal pro's I had used and worked closely with for quite some time made some mistakes in setting up my corp. They advised, and I said "do it", so I hold the blame for all that followed. The mistakes in setting up the corp resulted in the company paying taxes in a manner for which it didn't qualify. Fast forward to the accounting/legal partnership dissolving which led me to a new team who immediately realized there were problems. Effectively I had paid taxes for a year as a corp, had filed as a corp, but really because of the screwups i owed as an individual. There are some other twists and turns in there, but that sums it up. The solution was rather expensive. I paid additional taxes, penalties, and fees to uncle sam. I also had to pay the new team to fix things. Those costs were pretty large and wiped out my business and personal reserves with a few strokes of the pen.
But done is done, right? Not so fast. A few years ago, while separated, I bought a house for Lil Lookout and me. Nothing outlandish, but certainly overpriced as all houses were at the time. Mrs L and I reconciled so LL and I moved back. I put the house on the market, knowing I would take losses on my improvements and have to lay out cash to payoff the mortgage if I sold, as the market had already dropped dramatically. I listed the house with a realtor who had a client going through a divorce willing to look at RTO or a month to month lease which was a perfect fit. She was someone I also knew from an extended aquaintance so felt secure. I was in negative cashflow, but that was just the way it was. My renter had my fully furnished house at a screaming deal but I had the security of knowing my renter was out if I found a buyer. No problem.
No problem at all, until my reserves were wiped out because of my company problems. With no reserves I wasn't in a position to pay off the short in the mortgage if I had a buyer so I pulled the house from the market and decided to keep it as a rental. The current renter wanted to stay on with a new long term, higher rent lease. She moved all utilities to her name. Still negative cashflow, but more acceptable.
I've worked strictly referral for years without much thought. My clients, while not thrilled with their recent returns understood they were beating the market and I had been prepping them for this year for some time so I haven't lost any clients. BUT because of the way my business is structured my fees have dropped dramatically. No big deal, the business is cyclical. Except my referrals dried up too. Again, predictable. I ramped up some programs to bring in new clients and have some successes there, but all said and done, my income for 2008 was 1/4 of my income from 2006. That's a kick in the teeth.
But that is life as a small biz owner. We cut expenses dramatically and stayed positive knowing we'll come through the other side as one of the survivors. I expect about 40% of advisors to wash out of business during this recession but I won't be one of them. That means I'll have access to a larger slice of the pie as clients seek advisors they can trust.
Then October came. My renter called to say the hot water heater wasn't working. I thought that strange because I knew it was a new heater, but went over after work to check it out with a plumber. The heater was fine, so no problem there. When I walked in the house it sounded like a hose spraying against aluminum siding. I checked all the appliances, showers, sinks, and found them all off. I knew then I had a pretty significant leak. I was surprised I didn't have sheetrock floating across the tile. As I tried to track the leak down, I knelt down to listen in front of my kitchen cabinets and my heart sank when my hands touched the floor. The tile was hot to the touch - clear indication of a slab leak. We don't have basements or cellars so the pipes are all underneath concrete slabs. When there is a leak, you drill up the slab, fix the leak and put in new flooring. Pretty damn expensive.
My renter had already given notice she was moving for work a week later. I spoke with her and explained the house was unliveable for 2-3 weeks while work was going on and she agreed to move earlier. I would refund the unearned rent and security deposit at moveout. With that I felt confident there would be no issues as she certainly needed the $2,000+ I would be returning to her. I was predictably wrong. She completely fucked the house and the furniture on the way out. I knew she wouldn't clean it, but I didn't expect dog (I hope) shit ground in the carpet, walls gouged, fixtures broken, furniture ruined. The water was shut off so they left me presents in each of the toilets. We aren't talking about some young dumbass here - this is a 40ish professional woman who runs in some pretty nice circles. Absolutely vile.
The carpet in every room is unsalvageable even though it was less than a year old. Apparently she didn't care about her money, or didn't believe me when I said I'd be giving it back to her.
I was pretty depressed not just about the money to repair the place, but also because I put countless hours of work into that house while going through my divorce and to see all my work destroyed was pretty hard.
But I got the calculator out and started crunching numbers. I ordered the plumbers out for the next week so I could get a new renter asap.
What else could possibly go wrong, right? The plumber answered that question. He ran tests so he'd know where to dig. The ground was too saturated to really do things right. There was no logical explanation for that level of saturation until I got my mail that day. The renter hadn't paid the water bill from the month before. Normally the bill should be $30-40. It was $294. Ironically she left me a vmail that same day asking for her deposit refund and telling me she got another water bill in excess of $300 which was too high for her to pay so she felt I should pay all but $30 of it. Uh huh.
All said and done what started as a small slab leak which would have resulted in noticeably reduced water pressure had been growing worse for more than two months. She had previously called me to tighten sprinkler heads so I know she would have called unless she just didn't give a shit anymore. She didn't call me until ALL the water was gone. The house is a total loss at this point. The trenches under the slab run all over the house and are filled in with sand before the the concrete is poured. The water ran for so long it oversaturated all the sand causing it to expand and push the slab outward. With the water shut off the sand dried and the slab is sinking back into the trenches. Tiles are snapped in half across the front. They are just randomly popping up in the back. The entire slab is ruined.
Good thing I have insurance, right? Yeaaaah, no. Because it is a maintenance issue (a leak) discovered before any damage to the house appeared(cracks, sheetrock, etc) it isn't covered. There is a lot of legal jargon that goes in here but my lawyer says there isn't much hope of getting them to pay up. Their lawyers are paid to make sure they don't have to pay stuff like this and all that jazz.
So where does that leave me? In a big fucking hole. The house will go back to the bank. I am out $90,000+ in real cash losses, the bank will be about out the same - actually you the taxpayers will be. I'm sorry. Seriously.
My credit is thrashed. My accounts are empty and there is seriously nothing left for me to do. I've played this one so close to the bone I'm actually accepting pay for coaching - something I'd always done for free before.
So is this thread just a bitch session so you'll feel sorry for me? Nah. Well, it's a bitch session but I'm not in need of pity. I made the decisions to put me here so I don't get to point and cry much. As bad as things look from my side of the fence I know others are in worse shape than I am. This thread is my official shoutout (mainly to myself but thanks for playing along) that 2008 sucked to the hilt but 2009 will be filled with complete awesomeness.
In short, my plan for the current economic disruption is this: put my head down and keep pulling. There are only two options. This too shall pass or I will. Either way, problem solved.
I still have a skilled trade and an operational company so I haven't lost my job. I just have to dig deep and be better at what I do. My wife and I are doing well. My kids are healthy. We still have our home. I've got some good friends who seem to like having me around. I love playing and coaching soccer. 2009 sounds like a year of opportunity to me - what more could I ask for?
