Trump grew his wealth to $4 billion… but along the way, there were a lot of Donald Trump real estate failures! Learn what mistakes to avoid in this Donald Trump Series: Part #2.
Welcome back!
In our first article on the Donald Trump Real Estate Investment Strategy, you saw how he built his immense fortune using various fair and unfair (but legal!) over the past 40 years.
He relied on his father to deal out heavy loans for him… and used his business and political connections.
But above all, he used ‘exaggeration’ to make himself a BRAND!
Now, he sure did make a lot of money, but the four Atlantic City bankruptcy cases in his closet will haunt him to the grave.
When asked, he says the bankruptcies didn’t ‘hit him hard,’ and he got out just in the nick of time.
But if it was us, these real estate failures would have hit us hard…
And you?
Read on to learn all about the Donald Trump real estate failures to make up your mind, and learn how to avoid them yourself!
Trump’s Biggest Real Estate Fails
Yes, as you just learned, even the best in the game have their grand failures, so without further ado, let’s have a look at Trump’s…
In chronological order!
1) Trump Taj Mahal (TTM), 1991
Just as gambling was made legal in Atlantic City, New Jersey, in the 1980s, Trump snapped the opportunity and began building his 1 billion dollar casino: Trump Taj Mahal.
It was planned to be the biggest casino in Atlantic City and Trump hyped it into something Out Of This World.
TTM opened in 1990.
Guess what? Within a year, the casino was $3 billion in the red.
Hence came Trump’s first bankruptcy in 1991.
He was forced to give up half of his holdings in the property after filing for chapter 11.
2) Trump Plaza Hotel, 1992
The following year in 1992, Trump Plaza Hotel, which Donald Trump bought in 1988 for $390 million, was about $550 million in debt!
Trump went to court and filed for bankruptcy protection once again…
This time, he gave up 49% of his stake in the company and handed over the Trump Shuttle to his creditors, narrowly escaping going broke personally.
Eventually, Trump disposed of the Plaza Hotel in 1995.
3) Trump Hotel and Casino Resorts, 2004
Mr. Trump rushed back to the courts in 2004 to file protection against bankruptcy for the company that held his three Atlantic City casinos and a riverboat.
The company had run up $1.8 billion in debt.
Again, the company was restructured, shed debts (about $500 million) on court orders, and Trump gave up part of his stake.
But still… he retained control over the casinos.
4) Trump Entertainment, 2009
The last nail in the coffin of Trump’s casino holdings was the 2008 financial crisis – the Great Recession.
Trump’s casino chain, now running collectively under the name of Trump Entertainment, was clearly struggling to meet interest payments.
So, when over a $53 million payment was missed in 2009, Trump took another trip through chapter 11…
This time, he was made to resign as chairman, and his partner Carl Icahn took over.
That was Donald Trump’s last bankruptcy filing. After that, his career in the casino business pretty much winded down.
And, that’s the story of the dramatic downfall of the Trump casino empire!
Now, let’s go through the REASONS why the embarrassing (he’s not embarrassed, though) Donald Trump real estate failures came about.
And hopefully learn some lessons so we can avoid his epic mistakes!
What Caused Donald Trump’s Downfall?
Though an amazing businessman, it is a fact that Trump’s failures could be avoided if he took some precautions.
And yes, that means even millionaires have character flaws that cost them a hefty sum!
Let’s look at Mr. Trump’s:
1) Trump’s Inability to Focus
At numerous times, Donald Trump has admitted that he has a hard time focusing on a business’s growth once he has acquired it.
In his own words, you buy it, and “… then you tend to take your eye off the ball.”
So ‘lack of focus’ has been his problem.
He loves the deal-making part of real estate investing, but not the day-to-day management that is necessary after the deal is done.
What he enjoys the most is the run to get his hands on a property or company.
Once he has it, he lacks the determination to push his investment to grow.
Take that as a cautionary tale!
Failure Lesson 1: Don’t tap out the second you find a great deal, assuming it will grow itself.
Real estate success is about finding great investments… but the day-to-day activities of running them are just as important!
2) Over-the-Top Debt Financing
As we talked about in our first article on Trump’s real estate strategy, one of the keys to his success was his use of OPM (Other People’s Money).
This was his greatest strength…
But when overused, eventually it because a weakness.
The Trump empire was destined to meet disaster since its very base was debt.
Lucky Trump always got away with so much debt on his shoulders, sometimes with the help of his father and sometimes by ‘using’ the law – which he brags about publicly.
With his power of exceptional speaking skills…
Trump was able to convince the banks and his small-scale investors to finance his ideas again and again (FOUR times – Gosh! how blind were they?).
With so many debts to pay, one missing payment could send the whole thing crumbling down… and that’s exactly what happened!
Since his businesses had so little of his own money though, Trump never ended up being broke himself!
How’s that for a good real estate investment strategy?
But still, when using OPM, be careful not to overextend yourself like Trump.
3) A Self-Centered Approach
Trump self-praises that he got out of Atlantic City at just the right time and that his excellent timing allowed him to bag riches for himself.
He has never apologized to the thousands of his unpaid employees, financers, and creditors who wrote off losses for him year after year…
Handing out and losing more money each time.
So, it’s pretty evident that Trump’s business journey wasn’t a team effort at all.
He was there for himself ONLY.
He ditched his partners and got out when it was time for the Great Recession bomb to explode.
With this self-centered mindset, Trump was never in it for the long haul. He was never going to make long-term success – and he kind of knew it.
After all, his never-ending grifts and blarney ever bear lasting fruits – could they?
Hmm… Let’s fast-forward and see.
Fast-forward to the Present
Recently, for the first time in 25 years, Trump couldn’t find a spot in the Forbes list of 400 wealthiest Americans.
And that’s mainly due to Covid-19, plus Trump’s fall as the US President.
Also, there are reports that the Ex. President’s millions of dollars worth of debts are falling due soon!
Will he be able to get away this time?
With all the record financial losses, loss of the presidency, loss of creditworthiness, and public trust combined, this time, Trump seems to be landing in hot water.
But you can’t be sure, really. Only time will tell!
But while it’s too soon to judge the full effect of this debt on Trump, I’m sure you wouldn’t want to find yourself in the same situation… right?
Takeaway!
So, what’s the takeaway for you from the Donald Trump real estate failures?
Let us know in the comments!
And visit our AQRE Home blog if you want to learn more tips about real estate investing from our team of experts.
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Sources:
https://money.cnn.com/2015/08/31/news/companies/donald-trump-bankruptcy/
https://finance.yahoo.com/news/were-watching-trumps-7th-bankruptcy-unfold-171903858.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAJiRFrjk0HAr7Z7-UA43Vm4hJ5XTxfOAF3Un4-_jyeAK1Z6PsGMDRDeCeDPO905W8t06ViE_nonR0IjwIe2vwfzaLmeisdV2oJYqs08yRocPBrytgtpdtsAFi2pPjVelXYDGt3oB3kirHe-0qymlR1XP-QZAc2px9syTzgAR-AMl
https://www.newyorker.com/news/our-columnists/donald-trumps-business-failures-were-very-real
https://www.forbes.com/sites/debtwire/2015/08/18/a-trip-down-donald-trumps-bankruptcy-memory-lane/
https://www.cheatsheet.com/entertainment/donald-trump-business-failures-complete-guide.html/
https://time.com/3988970/donald-trump-business/
https://news.sky.com/story/donald-trump-falls-off-forbes-400-rich-list-for-first-time-in-25-years-12426985
https://www.washingtonpost.com/news/wonk/wp/2016/02/29/the-myth-and-the-reality-of-donald-trumps-business-empire/ https://www.politico.com/story/2016/09/donald-trump-other-peoples-money-228434