The Magnolia Story(44)

Right from the start, I’d been rolling the profits from one flip into the next. We wouldn’t even see the money before it was gone, invested in the next one and the next. And every single time I did that, I made money. Anyone I borrowed from, whether it was my dad, a good friend, or an investor, made their money back plus interest every time. It seemed as though we had the Midas touch.

I’d learned so much by that point that I’d decided it was time to do what the big boys do. When my dad and I had sold the eleven acres to that big development firm, the guy I shook hands with wore a $50,000 Rolex. I didn’t covet that watch, but I did envy his success. Now I was sure I, too, could handle that kind of big endeavor.

Doing a few houses at a time spread out all over town meant that a lot of money was being spent on separate crews and trucks and hauling things all over the place. The way to make money was to put a large development together with multiple homes all at once, all in one place.

So that’s what I set my sights on. We basically stopped buying new flip homes and instead poured all of our money into developing this piece of land we’d been sitting on. The plan was to create a neighborhood called Magnolia Villas—thirty-eight comfortable, affordable little first-rate homes all designed by Jo. We’d even gone and opened up a real-estate arm of our company so that all the sales and sales commissions on this whole deal would come our way.

It was a good plan. It really was. But it takes a lot of money to put a plan like that together, and that meant putting all of our eggs into the proverbial basket and taking out a massive line of credit from the bank.

I’m not going to talk about the exact numbers here, but it was a huge line of credit that we’d budgeted every dollar for permits, roads, water and sewer lines, electric hookups, estimated building materials, and contracts with additional crews—all so we could get those houses built quickly and sell them in time to start paying back that line of credit from the profits. We had to do it quickly because, basically, every day that line of credit remained open, it represented a large amount of interest.

I trusted Chip completely with this. His instincts had been right every time we’d jumped into something new. Plus, I was excited about the homes themselves. With this newfound sense of purpose in my mission when it came to design, I drew up plans for the most adorable, functional, livable spaces I’d ever imagined. These were smaller homes, but I had plenty of firsthand experience with that. I knew how to design a small home that I could love, one that would be filled with open spaces and hideaway spaces and the kinds of textures and surfaces and little touches that would make a person feel welcome before he or she even opened the attractive solid-wood front door.

The problem is, there weren’t going to be any doors or anything else. We got the plans all approved. We had the road crews come in to lay out and pave the streets. We had the sidewalks and gutters in place and all the proper drainage we needed in order to start building the actual houses.

And that’s when our banker called with the bad news.

The tidal wave of economic despair that had swept through the rest of the country, that had already crippled housing developers in far-off places like Miami and Las Vegas, had finally reached Waco, Texas. The federal government had come in and told the banks they had no choice but to pull back on any pending loans and lines of credits. And not just pull back a little, but pull back by half.

“We don’t have a choice about this,” my banker told me.

The line of credit we needed to get the project completed had been suddenly cut in half. And if we couldn’t complete the project, we would have no way to repay that loan.

And here’s the thing: We had already received nearly half of that line of credit. We’d already used it to make nonrefundable down payments on everything we needed to get started. We had materials on site. There was no way out.

I’m sitting there going, “Jo, we’re into this thing for a ton of money, and I’ve got most of the invoices sitting on my desk that are due to be paid—some in thirty days, some in forty-five days. What are we gonna do?”

Everyone we’d worked with up until that moment had been paid on time. So they had no idea we were standing on the edge of this cliff. No one had any idea that there was anything wrong. If we called them now, they’d all be hit just as hard and shockingly as we’d been hit by the bank’s news.

My banker insisted he would help us get through it, and he did. We came up with a plan. We had managed to save some money that we had tied up in a CD, so we cashed that in. Our banker friend even waived the penalty so we wouldn’t lose the little bit of interest we’d earned. Jo had some cash she’d been saving up on the side, too, just as she had way back when the shop was open. The banker was able to open us up a couple of smaller lines of credit so we could pay some bills while we tried to pull the rest together.

All of this took a lot of finagling and creative thinking. Those big developers in Miami or Las Vegas would have just wiped their hands of it, walked away, declared bankruptcy, and said “adios.” In fact, many of them did. But Jo and I couldn’t do that. We wouldn’t do that. There was no way we were going to let anybody we’d made promises to not get paid.

After all of the scrambling, after everything was said and done, after we literally poured everything we had into trying to fix this thing, we were still $100,000 short of the finish line.

Chip and I prayed together. A lot. We were doing well in our new house. The kids were happy, and we did our best to hide our problems from them, even as our stomachs clenched at the breakfast table and we felt like breaking every time the mailman brought another stack of bills that we had absolutely no money left to pay.