Mistakes as a Motivated Property Owner
A mistake I made as a motivated Property Owner. This was several years ago, one of my first properties, actually a property I owned. We were moving out of town, I didn’t want to sell the property, I was interested in being a Real Estate Investor so one of the things I thought is I would rent this place. Now we have been advertising for a while and we were getting ready to move and a week before we were leaving this guy showed up at our place and said he is really interested in renting the place.
Since I was just starting out I really didn’t know how to screen tenants. So he came in looked at the property, talked a good game, told me where he worked and so on. I didn’t do a good job of doing due diligence for tenant selection, which now I am a very good evaluator of tenants. This was years ago so the rent was around $800 a month. So he pulled out his wallet put down $800 cash for first month and another $800 cash for the last month. So I was ecstatic, now I have this property covered, its rented and away we go.
For a while everything was good, but after a while things were not so good. Especially, being an absent landlord it is very difficult so he started missing payments. I would follow up and eventually he would make the payment. Sometimes he wouldn’t so I would carry it forward. My thinking back then was I can’t really afford for this place not to be rented so I will carry a payment or 2.
What a mess!
I came back into town probably about 3 years later and we had no idea what the property was like. First thing I did was I wanted to visit the property. He indicated that he had to be there, or his kids were there. He just came up with different stories. I managed to go in and see the property …What a mess. The deck had fallen off the back, the whole outside of the building was exposed and getting weather damage, the kitchen was destroyed, the stove top was smashed, the bathroom was rotted, the living-room had dust about an inch thick and just a mess. The worst part of this was that this guy was a janitor and he actually cleaned schools for a living.
Long story short, I had to go to the Rentalsman, hired someone to go in and represent me. His argument was that he was living substandard facility and we need to fix it up. He (the tenant) complained to the city. Fortunately, the city understood the situation and their response was “How much damage did you cause” We gave him an eviction notice, the tenant shows up at court saying he will pay back all the rent as long as we let him live there and file this grievance against you. The judge saw all this and we ended up getting him evicted and I had to start repairing the place.
I had to gut the bathroom and put in a brand new bathroom. Same thing with the kitchen I had to put in new appliances, rebuilt the counter top and the rest of it was a lot of cleaning. I figured in those 2-3 months repair I spent about $30,000.00. That is an expensive lesson and the lesson here is, don’t become a motivated property owner.
An empty property is a lot better than a property with a bad tenant. Make sure that you do your due diligence, make sure you evaluate, don’t be too quick to take that rent from someone, make sure you do the property evaluation. Really make sure that you know what you are doing. Again, this is for Renters, it’s a bit different for Rent To Own.