The Deal From Hell and Why I Would Do It All Over Again

Bad timing. Wrong loan product. A market that turned upside down mid-execution. And somehow, this became Brian Sutton's favorite deal.

In Episode 9 of Lessons the Hard Way, Brian sits down with co-host Sam Chillingworth to break down a Birmingham, Alabama multifamily deal that had everything going against it: bought in 2021 at near-peak pricing, repositioned from student housing to conventional during Covid-era supply chain chaos, sitting on a bridge loan while the Fed raised rates to the moon, and still sold at a profit. Small profit, but a profit.

What made it Brian's favorite was not the return. It was the people who stayed.

In this episode:

• The Birmingham deal: bought in 2021, repositioned student housing near UAB to conventional
• Why student housing just far enough from campus fails and what to do about it
• Bridge loans in a rising rate environment: the mistake and the lesson
• How the Fed rate hikes changed the deal mid-repositioning and why nobody saw it coming
• Fighting through Covid supply chain delays, material shortages, and eviction moratoriums
• What happens when you reset investor expectations mid-deal and do it with integrity
• Everybody got their money back and made a little: what a win looks like in a tough market
• Pride vs. favorite: why the deal you are most proud of is not always the most profitable
• The three types of people in a crisis: those who stick, those who leave, those who make it worse
• Why neighborhood quality was the single factor that separated the deals they lost from the deals they saved
• Strong neighborhoods attract more buyers at exit: the thesis that proved itself under pressure
• The magic carpet ride ahead: why Brian is more bullish now than ever
• Non-negotiables: who to cut out and who to run toward when times get hard

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🔗 Two Waters Capital: 2waterscapital.com

real estate deal autopsy | Birmingham Alabama multifamily | student housing repositioning | bridge loan real estate | how to recover a bad real estate deal | multifamily investing podcast | accredited investor education | real estate partner relationships | deal gone wrong recovery | Lessons the Hard Way podcast

0:00 Cold open

0:35 Show intro

0:57 Welcome back

1:18 What full cycle means: from acquisition to disposition

2:09 The 5 to 7 year hold

3:03 Leave the meat on the bone

3:41 The setup: not my favorite going through it, actually a painful experience

4:04 Birmingham, Alabama: bought in 2021, near-peak pricing, post-Covid skyrocket

5:13 Why Birmingham

5:38 Student housing near two universities

6:32 The thesis: reposition to conventional and attract grad students and families

7:15 Bridge loan in 2021

7:33 The Fed raises rates: what nobody could have predicted happening mid-deal

7:50 The conversion process: Covid delays, materials, staffing, eviction moratorium

8:34 Fought through it: rehab, painting, upgrades, repositioning, and sold within the bridge window

9:02 The right investor partners: who you need when the market stops cooperating

9:30 No investment has zero risk: even money under your mattress has a rat problem

9:54 Investors stayed supportive: hey, we understand the market is not going your way

10:21 Why this is his favorite: struggle and strife can reshape and reform you

10:53 The workout analogy: you only grow muscle when you strain it a little

11:45 Pressure that does not break you: what this deal did to Two Waters as a team

12:14 Resetting investor expectations mid-deal: the honest conversation that saved the relationship

12:58 Everybody got their money back and made a little: what success looks like under pressure

13:19 New OREO deal incoming: the bank came back, same market, new opportunity

13:43 Relationships with banks:

14:26 Buy better properties in better areas

15:14 Neighborhood quality as the key variable

15:37 Better neighborhoods attract more buyers: why it mattered at exit

16:02 Not my favorite deal, but the one I am most proud of: the distinction

16:24 Pride is forged through going through tough things: the real takeaway

17:08 Find partners you can trust: it is always about the people

17:28 The magic carpet ride ahead

18:19 Forged by fire

18:38 Good times vs. tough times: the high fives are easy, the trenches reveal the truth

19:07 Three types of people in a crisis: those who stick, those who leave, those who create more trouble

19:48 Notice all three: the people who stayed are the ones to keep

20:12 Move away from the people who made things worse

21:08 What are your non-negotiables

21:27 Being a yes person: the lesson this downturn taught Brian about saying no

22:05 The right partners make you want to keep going

22:48 Closing

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