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Selling the Deal by Selling the Stock
   by Ray Como   

There were really no hard feelings, but after eighteen months of "partner-ing" I said "Buy me out or I'll buy you out." As you might have guessed; I don't work well with partners. I'm your basic emperor/dictator and basically, I need autonomy. Obviously, I just don't do well with those voting-type deals, where the majority rules.

Anyway, my solution to establish the fairest price and terms was, in fact elegant and simple. I designed it like the solution you must use when two young kids are fighting over a single piece of chocolate cakeóOne cuts the cake and the other chooses the first piece!

"So" I said, "Here's the deal: You name the price and the terms of a deal you'd take and I'll accept either side" (i.e. I'll buy or sell.)

One (1/3) partner reflected a moment and said "Hmmmm....twenty five." The other (1/3) partner nodded. I nodded, grinned broadly inside, danced a quick and dirty mental jig and thought "Hell, I'd take $25,000 for my third in a heart beat!" Here's why, and note the shear brilliance of the strategy:

My total investment in this deal...is the deal! I conceptualized it. I Created it. From scratch, I drafted and edited: the 6-page lease, the 5-page option, the 4-page escrow instructions and the mortgage to secure the option. I drafted, then I executed the paperwork; scheduled then conducted the closing and finally I recorded the whole shibang. I named and formed the corporation; then I capitalized it with my deal, this deal. Then I advertised for, and brought in two partners who paid for, and "general contracted" the entire rehab part of this..."Deal Beyond the Deal." Then we acted as property managers throughout the rehab.

Can you see how, as Transaction Engineer, I literally created value where there was none? Consider this: The building was deteriorating, and at 80% vacancy it had been losing money every single month for seven years!

And now, less than twenty four months after I first got involved, contributing only ideas, intellect and experience (no cash), my partners had established the worth of my 1/3 of this deal at $25,000! Our final deal was that they would buy me out for $25,000 cash on or before the next thirty days. I was very pleased.

In the spirit of making for a smooth transition, I went to work like a beaver. I made sure every single file was in meticulous order.

First, I made sure every check had a clear explanation. I made sure every accounting entry was in place. I had every lease, every application, every relevant scrap of paper in a specific and calculated place. All together I packaged:

  1. The Corporation Minute Book and corporate seal.
  2. The Permanent Property File includes all the paperwork it took to structure this deal; all the correspondence; the occupancy permits and tenant information.
  3. The 1991/92 Checkbook File including bank statements, cancelled checks, deposits.
  4. The 1993 Checkbook File including the current year's checkbook, bank statements and related information.
  5. Cash Receipts including every single cash receipt since the very first day; reconciled, categorized summarized and totalled.
  6. A Complete Spreadsheet Analysis of the demolition and construction work to date.
  7. State and Federal Taxes all neatly tucked into one manila file folder.
  8. Letters drafted, ready to sign informing the tenants where to mail their rent and who to call if something goes wrong.
  9. My Resignation as a director and as President of the company.
  10. Signature cards neatly typed and ready to submit to the bank removing mine as an authorized signature.
Since this property (actually this leasehold interest in it, coupled with the option to buy it) is the only asset of this corporation, the most logical and easiest way to sell my interest is to assign my stock to my partners. "Assigning" stock is as simple as getting my stock certificate, turning it over and signing it where it says assignor. So that's what I did and voila...a Transaction Engineers dream.

© MMI By Ray Como. All Rights Reserved

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Ray Como has created, produced, copyrighted and self-published 15 audio cassette programs and lots of other forms and tools for business, real estate, corporations, selling, marketing, finance, management and Entrepreneurship.
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E-mail HouseBuyingKing@aol.com
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