I will be talking about a project that I have been working on and that closed about a month ago. I’ll be sharing as many details as possible that I can share publicly with you so you can learn how it was done from the beginning, as well as what is going on up until now.
In this part I will cover the loan, LLC formation, hiring, as well as dealing with challenges.
The next part that I want to touch on is the loan. We asked for recommendations from the real estate agent to local lenders and credit unions, and started applying. Because I have zero experience with car washes, I got denied with some lenders, however, not with others. The first lender that gave us a loan approval initially gave us a loan approval with an extremely unreasonable request, which was to basically tie up cash until we pay out the loan, this gave us no reason to get a loan.
What I did when I got that news was that I asked to set up a call right away with the loan agent. We got on a call, I explained everything, not only from the property side, but also from my experience side and how, we have a ton of mentors, how I have access to hundreds of people, and all of that. You really need to show them that you are resourceful, that you are a professional and also a lot of times that you were successful in your previous career. It was a quick call, it was I think, a 15 minute call. After that, the loan officer scheduled a call with the president of the bank, and I told him the exact same thing. I asked them if they had any questions, etc. Shortly after that, we got the approval, that was probably the next day or two.
I want to highlight that it was not as simple as I am making this sound. It took a while to get done. And it took a lot of effort in terms of, No, I don't like what you told me. Let's talk. No, I cannot do this. But let's figure out a way that we can do this, you should never just take an answer and say, okay, that's my destiny, you take an answer and you say, let's have a conversation, what are your concerns, so getting the approval after that call was really great news. In the end, they still wanted to tie a little bit of money, and that was okay because they said that after a couple of years, if everything is going well, they're going to release that money, which is perfectly fine. And I still had full control of what I was doing with that money. So that was a good compromise. We got approved for a rate of four and a quarter fixed for five years on a 20 year loan. Commercial loans are typically 20 year loans.
And the fascinating thing that happened was that a week before we were closing, I got another call from another lender saying, Oh, we just need the title company's information because we need to prepare the loan documents. I said, What do you mean? And they said that I was approved for a 4.25 rate, seven year loan, we did not have to lock any money with them at all, and also almost no points. That was a much better proposition proposition from another local lender. However, I made the executive decision that we were going to go ahead with the initial bank. Why? Because I know that a lot of times you really need to have a good relationship with your lender. When the economy takes a turn, they can literally make you, or break you up. If you do not have a good relationship with your lender, they can call the loan, they will not rearrange things. And if you do, anything is possible.
I made sure to tell the other loan officer that we got approved for the exact rate but much better terms with another bank. And we are still going to go with you guys, because you guys have worked with us since the beginning, I also took the chance to ask for a decrease in the loan closing costs, so they decreased it to $500 for the loan. So that was my decision. In hindsight, I don't know if it was the right decision. But I know that, again, if something does end up happening, these lenders can help you out a lot. So it's not always about the price.
As far as the LLC formation, because I am in California and the properties are in another state, we had to form a few LLC's. First I decided to break it down into two LLC's, one for the car washes and one for the Self Storage. This is purely for liability reasons. And with this decision, we had to change our closing date by about seven to 10 days. Because the lender had to rewrite all of the loan documents, the title company had to rewrite everything and divide into two entities. So that took a little bit longer. Ideally, in the future, you need to make that decision in the beginning, because we also had to sign another offer, breaking it down into two entities, even though when I signed the offer, it was under our name and/or assignee, which means we can assign this to anybody. In this case, it could be an LLC. So even though this is how we signed the initial offer, we still had to create a whole new offer with both entity names, and also sign two separate offers for the properties. As far as how the LLC was structured, we already covered that in another episode, there are ways that you can protect yourself and your property, and that is 100% related to the LLC, how that is formed. And also there are other ways to do that as well if you have a trust, so you should consult with your lawyer and figure out what is the best approach for you.
As far as hiring someone to take care of the property, I also mentioned on the previous episode that we had someone in mind, but that person didn't even return my call when I left him a message, and the real estate agent had to remind him to call me back. So that was the very first red flag for me. And then after that, he showed up late for our very first meeting on site. And that was my second and last red flag. Some of you may know this, but there is a saying that says "hire slow, fire fast". You should take your time in finding the right person for the job, and do a really good job with the interview. And there are great resources out there. One of the books that I love is called "Hired", highlight everything that you can in that book, it is super helpful for hiring. And then on the firing fast side, people do not change. And I have seen that over and over again. And because this guy wasn't returning my very first call after we had agreed on him managing the property, and he was also late for our very first meeting, those were huge red flags for me. I decided not to work with that person.
When we closed on the property, the previous owner said, My son is currently out of a job, he could help with the transition. And I said, Sure, why not? And because I was not local, and I also felt like helping them out, they were really nice people. Plus we needed help with the transition, and I felt like it could have been a good idea to have the son of the owner help during the transition. In hindsight, I'm still not sure if that was the right idea. But he did end up helping with a few things. However, you really want to make sure that it's someone that has experience with the asset class that you invested in, and also that they are competent, and that they will do what they say that they will do. If you just let things go, things will start going, you really need to be on top of things, having daily calls, sending To Do lists for them to do daily and get back to you at the end of the day with what action items were taken, what do they need to succeed, etc. You really need to be hands on, especially during the transition period.
Now I'm going to talk a little bit about what happened after we closed. There I was closing on my first portfolio of properties in a city that I have never been to, I was super excited. We had someone come by during closing, to check out the properties. He said he had never seen such a great car wash that was so well maintained. So it was a great week, I got a ton of accomplished over there. But what happened after is the most fascinating part. Nine days after we close, I had come back to California, I got a phone call from the previous owner. He says, I have some bad news for you, one of the roofs in one of the car washes caved and that was because of snow. Honestly, I was not scared when he told me that. I said, Okay, this is part of the game. Nine days, whoo. I'm thrown in the wringer. I made a claim with the insurance company right away. And I cannot talk much yet about the insurance because the project has not being completed. But all I can say is that I am very pleased with Nationwide, they really are by your side. This company has been phenomenal with the claim that we made literally nine days after closing. I've been recommending Nationwide to every single investor that I know. It has been a very pleasant experience with an insurance company. Having the roof cave in your property, let's check that off my investor experience.
About 20 days later, the main maintenance guy that has been taking care of the properties for years, and was great, he would go to the properties every single day. I made sure that he was very happy. I said if you want more hours, you can get more hours. If you want less hours, you can get less hours, just let me know. And then one day, out of the blue, I get a text from him saying that he quit, with zero notice. And that was another fascinating day. First I told him, Let's talk, you don't have to work these many hours. I didn't get a response. He was basically exhausted because he had a full time job and he wasn't able to keep up with managing these properties. Anyway, he did not respond to my request to speak with him. What did I do that day? I immediately started searching for staffing agencies in the city, only the highest rated staffing agencies. I also posted an ad on Craigslist with every single thing that this person would have to do for the car washes. Looking for someone to manage and maintain three car washes, and these 25 items are what you're going to be doing. I started getting applications that same day, had people come by the very next day to interview with someone on site that I trust. This person really liked one of them. We hired that person the very next day that I got that notice. And then he started the very next day. I got the quitting notice on Wednesday, and had someone start working on Friday. This was a blessing in disguise because we found someone who is wonderful. And he is taking on a lot more responsibilities. He is just phenomenal.
Over the last month and a half, what I can tell you is that challenges can really be winnings for you later and you're not going to know until after you walk through that hurdle. A few days after that, someone stole some money from us. I do not know who that is yet, but because it's a cash business, money was missing. And before this happened, I made sure that the credit card person installs a coin counter in every single machine so we know exactly what is coming in, that way there are no discrepancies. And we changed every single lock.
All I can say is that no challenge comes for no reason they come to make you stronger. And it has been a wonderful experience so far.