April 20th The humble young man

 Last week I was working on some townhomes I have been building.  I knew that I needed some extra labor to put in some landscaping. One of the contractors had a son that was strong and hard working.  I approached him and offered him $10 an hour to come work for me that weekend.  To my surprise he said that he would rather me teach him to be successful then pay him to work.  He said he wanted to trade.  I assured him that if he came and worked with me this Saturday I would teach him what I know and I would still pay him the $10 an hour.

As soon as the young man arrived, we started to work putting weed barrier down.  I began by telling him a parable of the 3 contractors.  It goes like this:

There once was an investor that wanted to build a large rental complex of 18 units.  He gathered the plans and started getting bids.  He was a wise investor so he got 3 different bids from 3 different general contractors.  Once he received all the bids he was very disappointed.  He figured the entire project would cost 1 million dollars, however, the lowest bid came in at 1.5 million dollars.  So he called all the contractors and let them know he can not accept their bids.  

The first contractor sadly went home and told his wife.  She was very upset.  She explained that they had bills that must be paid soon and instructed her husband to reduce his bid from the usual 20% of cost to 10% of cost.  Reducing his fees to just $150,000 down from $300,000 and bringing the overall cost of the project down to 1.35 million.  However, when he called the investor all excited to let him know the good knews the investor let him know that it was still more than he could afford.  Upset the first contractor gave up.

When the second contractor received the news, he was upset. How could he waste my time bidding this project.  I am the best contractor in the valley.  I don't have time to waste on guys like this he thought, and gave up on the project.

When the investor called the third contractor, the contractor listened contently.  Then the contractor said: "Can I ask you why you chose not to build this complex?"

"Sure" replied the investor, "the bank requires 20% down and I was expecting the bids to come in at 1 million dollars".  "I have the $200,000 for the million dollar complex but I don't have the $300,000 to cover a 1.5 million dollar project."

The contractor thought for a moment. "What if I can find a bank that will use my 20% fees as the down payment?" "Would you be willing to give me 30% ownership in this complex?"  There was a pause on the phone. "You won't even have to come out of pocket and you will own 70% of the complex."

"Ok deal", said the investor, "but you have to find the bank."

The contractor went to bank after bank and when he was about to give up he finally found a bank willing to do the deal.  Then to cover his personal expenses over the construction period he did some of the work on the complex that he would normally hire out.  

After 8 months the complex was finally finished. Within 12 months the entire complex was rented out and the contractor was receiving $3,000 a month for his 30%.  The contractor and investor continued to use this bank and teamed up to build and develop millions and millions of dollars worth in real estate.

I looked at the young man and asked him what he had learned from this story.