BIO: Mathew Frederick specializes in finding and securing under-contract, off-market multi-family, and office buildings for conversion to their highest best use.
STORY: Mathew bought a building without knowing that it had underground storage tanks of fuel that were polluting the environment. It cost him $400,000 to clean up the mess. The mess further reduced the property’s value to $1.7 million from $2.1 million.
LEARNING: Make a minor adjustment to your ego and humility. Do your due diligence. Know the fights to walk away from.
“I realized I had to make a minor adjustment to my ego and my humility.”
Mathew Frederick
Guest profile
Mathew Frederick specializes in finding and securing under-contract, off-market multi-family and office buildings for conversion to their highest best use. He did not plan to be an investor; his police officer brother convinced him under gunpoint, so he decided to say yes. With 34 years of experience in residential, commercial, and new development, Mathew has seen much chaos in the industry and would like to guide others through the land mines. He loves the lifestyle that investing affords him but is excited to help others reach their financial freedom also.
Worst investment ever
In 2005, after much success in residential property, Mathew decided to go commercial. He carried the attitude that he was good at what he was doing. However, Mathew’s first commercial property taught him that he wasn’t so bright.
Mathew would drive by the building daily. It was vacant and abandoned. He talked to the owners and convinced them to sell the property to him for $680,000, down from the $800,000 they were asking for. Mathew got a vendor take-back mortgage (VTB) where the seller would hold the mortgage. He put down $180,000, and the sellers held a mortgage for half a million dollars. No bank was involved in the deal. Mathew felt very proud of himself for convincing the sellers to hold a mortgage for seven years at a reasonable interest rate and got property worth $800,000 for $680,000.
Mathew immediately started renovating the property. He wanted it to be the head office of his real estate company. He also wanted to put a restaurant there.
Things went great. Seven years later, the property went from $680,000 to about 1.6 million dollars. Mathew decided to refinance it. He would pull his money out, pay off the VTB, and still be sitting on a lot of money.
There was one problem, though, that affected this plan. When Mathew bought the property, he didn’t get a phase one environmental. His lawyer had asked him about it, but Mathew insisted the stormwater management assessment was enough. When he went to refinance the building and get a bank mortgage, the bank required a phase one environmental and a phase two environmental because it was discovered that 50 years before Mathew was born, there were gas stations at the property that caused lots of pollution. Mathew spent about $400,000 cleaning up the mess on that property. Had he gone to a bank during the initial sale, they would have demanded the environmental check immediately, and the sellers knew it. That’s why they gave Mathew the VTV. It wasn’t because of his genius negotiation.
Everything that could go wrong went wrong. The underground storage tanks of fuel were found under the property. At the same time, the property backed onto a ravine that went down to a stream. The Conservation Authority was upset that the property could pollute the ravine. At this point, the property had been appraised to about $2.1 million. But all this mess reduced the value to $1.7 million.
Lessons learned
- Have a mentor, join a coaching program, or a community to work with so you can learn about investing.
- Make a minor adjustment to your ego and humility.
Andrew’sAndrew’s takeaways
- Due diligence is a necessary process that makes up for the lack of full disclosure when doing any deal.
- When buying a piece of land, look beyond just the surface.
- We do not need to be in some fights, so we know the battles to walk away from.
- Eventually, you can win.
Actionable advice
Listen to your lawyer.
Mathew’s recommendations
- An online video library with 100 videos (75 hours), 80 audios (15 hours), and 100 documents to help teach investors how to start, run and maintain a successful real estate investing business.
No.1 goal for the next 12 months
Mathew’s number one goal for the next 12 months is to bring water to North America and use it for some purpose.
Parting words
“I am honored and humbled to have you accept me as that person on your 600th episode. I think it’ll make a difference for folks out there.”
Mathew Frederick
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