BiggerPockets

I think that is an excellent idea. What better way to learn than from mistakes!

Sounds like a good idea to me!!

I always get a kick out of this topic. This topic actually just came up at another investment forum, here is what I wrote there. I will share some additional stories when I have more time to post.

Years ago we purchased a property that at the time was great. We bought it at a steal, it had 100% occupancy, strong operations and above market rents. It was substantially nicer than surrounding buildings.

The tenants were great, most had been in the property for years.

Then the local manufacturing company went bust. Needless to say, almost all of our tenants worked for the company and soon our occupancy plummitted. After the plant shut, the property could never break free of 20-30% vacancy.

We learned some great lessons. 1) Be wary of a property that is dependent on a industry (this is very hard but good due diligence can uncover a lot). 2) Have a contingency plan for every situation. This is just common sense 3)In drastic situations, respond accordingly. We probably should have completely dropped our rents and started to target a new tenant profile but we were stubborn and believed that we'd still attract the highest rents around. The truth was that most of the people in the area couldn't afford the rents. The manufacturing company was by far the best gig in town. The drop off was huge.

Wow Harrison! This sounds like a similar scenario I'm living right now over my first rehab. Its been several years since I did it and I have been determined to hang onto it because it was my "first" lol! But I swear this house is eating me alive. Between taxes, insurance, renters trashing it and the mortgage company from hell with its alternating payment amount it has become very painful. I've named her Audrey, after the Venus Fly Ttap plant in "Little Shop of Horrors". I was just on the phone with someone discussing the "S" word :0

Dan,
That is a great lesson. ( Did you read this, all you GM Plants towns property owners?) I guess the seller knew something that you didn't.
It is really tempting to invest where the industries are, but that the flip side of it. I do own two SFH in Round Rock, TX where Dell and Samsung have plants but I know it is risky.

Originally posted by Eddie Ziv

I do have a story similar to that of Harrison which almost cost me my marriage ..

My former husband now lives in Ocala and he's still forking out money because of that house
:rock:

Section 8 tenants can be a very different / difficult animal indeed.

A interesting (aka terrible) experience was when we launched a small distressed debt fund. We picked up some section 8 housing at pennies on the dollar. We went out of our way to treat many of the tenants far better than we needed to, making repairs and drastically improving living conditions. We thought many of the tenants would be greatful and take better care of the property. Instead we got more complaints as the tenants soon took complete advantage of our improvements. One tenant decided that we needed to upgrade the entire bathroom with new fixtures. Since the fixtures were in very good condition and only a few years old, we decided not to. The tenant ended up destroying the bathroom and upon leaving the property decided it would be a great parting gift to leave behind urine & other presents. We had to have a professional cleaning company come in 5 times to get rid of the smell.

Another tenant in the same building asked us if we would allow a cat (we had no pet policy). At first we said no. We just put in new carpet & always avoided having pets in our properties. The tenant made such a genuine plea that we eventually ok'd the cat. It was an older couple and the wife told us on several occassions that the cat helped her cope with all sorts of troubles and that she would go out of her way to make sure the unit would be spotless. Long story short, what we thought was a single cat turned out to be 3 cats & a evil small dog. There was no cat box and I doubt she ever walked the dog since there was not a single square foot that was not destroyed. When we discovered the mess due to other tenants complaining, she made a huge fuss, stopped paying rent and left. She called weeks later demanding her deposit back. When we told her about how much damage the animals caused, she replied that all the damage was there when she moved in and that she would sue us for the deposit. never a dull moment.

We shortly stopped making any improvement that was not completely necessary and we noticed the tenants complained far less and were more appreciative of having something fixed rather than improved beyond normal functionality. I still don't get it but the new strategy has been far more effective and the tenants are taking better care of the place. We decided to just donate to the community versus wasting money on the property. Wish it would have worked out differently.

Originally posted by Dan McGehee

Section 8 tenants can be a very different / difficult animal indeed.

We shortly stopped making any improvement that was not completely necessary and we noticed the tenants complained far less and were more appreciative of having something fixed rather than improved beyond normal functionality. I still don't get it but the new strategy has been far more effective and the tenants are taking better care of the place. We decided to just donate to the community versus wasting money on the property. Wish it would have worked out differently.

That's a very interesting spin on how to deal with tenant relations. I like your donation strategy too. And it's very true! I was told that some tenants, whether Section 8 or market rate, are "professional" tenants and have a remarkable sense of entitlement. When my tenant threatened to call Section 8 a few times, I called the caseworker myself, who had never gotten a call from her. The caseworker was sympathetic and told me my rights. She said their inspection of my house was more thorough than the city's, and since it passed, I didn't need to do anything further. Both properties were rehabbed before the tenants moved in.

When I told the tenant about it, and gave her the option of releasing her from the Section 8 contract in 30 days, she decided to put up and shut up. I haven't heard a peep from her since February. My other Section 8 tenant hasn't complained or asked for anything. You just never know. But I do know that unless it's heat/water/leak related, nothing additional will be done to the properties until the annual Section 8 inspection.

Originally posted by Sharon Bartmasser

Let's see- great subject for all of us who dream romantic dreams of owning rental homes...

* Had a murder in one of my homes

* One tenant left urine and feces in the refriderator, finding that only after walking the path of boxes and newspapers pile to the ceiling

* bought two homes that would have been great three blocks over, instead had looky-loos steal the air conditioner and neighbors who greeted any new potential tenant with beer, fists and verbal abuse..

Just to name a few

Sharon, it seems like Eugene, OR would be such a peaceful place...you could be describing Trenton, NJ, where my rentals are!

Thankfully I haven't had these experiences - knock on wood :) Has it discouraged you from pursuing additional rental properties?

Originally posted by Sam N

If there is one thing I have learned in this business, "Never bite off more than you can chew"

Over leveraging yourself is financial suicide. Been there and done that, especially when I was starting out. I took on 12 properties at the same time,as a rank newbie. Some Major rehabs,a few of them were with hard money. A few of them were funded from my IRA(which was wiped out as a result). Every single house had issues. A lot wiser now, albeit a head full of grey hairs.lol.

This raises the age old issue of how to get started in REI. Leverage is how almost all of big time investors I know today got started. A good number of them have been bankrupt before as well.

Leverage is certainly a two faced beast. Leverage will multiply returns during the good times but like we are seeing today, it will aslo multiply the ugly.