Sidney Torres | Crain's

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Sidney Torres

Background:  

"The Deed" is CNBC's new primetime show, which follows Sidney Torres as he rescues real estate investors before they lose all their money flipping houses. Torres is a serial entrepreneur who has developed more than $100 million in commercial and residential real estate. After losing a job in his 20s as Lenny Kravitz's personal assistant, Torres got into the construction business, which eventually led to flipping houses. In addition to renovating houses in his native New Orleans, Torres has created an app to fight crime and a new waste removal system there. "The Deed" premieres Wednesday, March 1, at 10 p.m. ET/PT on CNBC. 

The Mistake: 

My biggest mistake is just getting over leveraged with debt. Basically, as my career started to take off, I started going into bigger deals and more toward the hotel business, instead of the flipping business. It put stress on me because of cash flow.  

I started flipping houses in 1997. As I was selling and flipping I had an opportunity to buy an apartment complex to convert into a condominium development. So I started [converting] apartment buildings into condominiums and selling them. Then I used the profit to buy the hotels.

The hotels didn't generate the kind of cash that a condo development or a renovation flip development would. A hotel is more of a long-term play, just like if you buy big apartment buildings to keep and rent apartments. It's a totally different deal. People think, "Oh, it's just real estate." But it's not the same. 

It puts strain on your overall business because it takes a lot of cash to keep those properties running and when you have a little downturn in the market it can really hurt you overall. So I overextended myself on hotel properties and that really could have caused a bad situation for me. I was able to pull out and cut the costs of the expenses to make it work, but it is something that you have to watch for.   

Make sure you don't take your eye off the bottom line...

The Lesson: 

When you have success, you think, "Oh, I can just keep doing this. I can just keep moving forward." You start to think you can pretty much take on anything. It's good in some ways and it can be bad in some ways too. It is because you really have to think about how you got to where you [are].  

Make sure you don't take your eye off the bottom line and the business plan you originally set forth to put you in the position where you are growing and becoming successful.   

If you are a flipper, you should focus on buying, renovating and flipping. That's what I always tell my investees when I invest my money. You don't want to get over-leveraged, you want to make sure you have a rainy day fund, always have cash reserve on the side and don't over-invest in long-term debt. You want to get in and get out. Get your profits and move to the next one.  

Follow Sidney Torres on Twitter at @SidneyDTorresIV 

Photo courtesy of Sidney Torres 

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