Rookie Mistakes: Renting to a Sex Offender While 7000 Miles Away

It’s now been over 7 months since I acquired my first 4plex. While on paper it’s performed better than expected (so far), in reality it’s been far from smooth sailing. I figured I’d come here to share one of my more headache-inducing mistakes (and lessons learned) to hopefully save someone else from ending up in the same situation! I’ll start with a little story...

Two months after I purchased my 4plex I received orders to deploy to the Middle East. One unit’s lease was expiring a month after I was set to deploy, which meant I had a vacancy to fill and wouldn’t be around to fill it. I received an application from a family on the other side of the country who was willing to lease up an apartment sight unseen (red flag #1). They were very straightforward about the fact that the husband had a sex offense on his record (red-flag #2). After hearing the details of the offense (it being over 15 years ago) and giving consideration to their well-qualified income and exceptional references, I decided to give them a shot and leased them up, provided they paid the first month’s rent and security deposit before move-in.

As move-in approached (I was already overseas at this point), the wife began emailing me pages-long emails on a daily basis, requesting immediate responses about the most trivial details. While I responded as promptly as my schedule allowed with answers to the best of my knowledge, it slowly became clear to me that what I mistook for conscientiousness in the application process was actually an extreme sense of entitlement and compulsive need for control (red-flag #3). I would remind them about getting their security deposit to me prior to move-in, but the wife was now insistent that she would pay rent and the security deposit when they were moved in, but not before (red-flag #4). She claimed – with a lengthy sob story – that she was scammed out of her deposit by a previous craigslist landlord who took her deposit and disappeared. Having no other prospective tenants and being far too optimistic about the possible ways this could end, I obliged to let them move in before paying.

On move-in day, I had arranged for the door to be unlocked and the keys to be waiting for them on the counter. Due to the time difference, I was sleeping when they made it to the apartment. I woke up to no less than 5 wall-of-text emails listing dozens of complaints, ranging from broken AC (there isn’t even AC installed, it’s common not to have it in CO) to the door not being large enough to fit their sectional through. In her mind, these constituted not only reason to withhold all rents and deposits, but she actively proclaimed that if I didn’t fix things immediately (to include install AC/pay for a rental unit to house her couch), she was going to take legal action against me.

For three weeks, we went back and forth through email (I didn’t even have access to a phone this entire process), which largely consisted of her threatening to sue me/withhold rent for whatever was her complaint du jour, followed by me attempting every placation strategy I could think of. To make things even worse, she roused up a number of my other tenants to join her in withholding rent. Thankfully, however, the others backed down after I reminded them that they had deposits at stake.

Through my greatest feat of negotiation that I hope I never have to match, I convinced her to actually pay the first month’s rent, minus $100, and move her family out peacefully at the end of the month. Even in retrospect I’m still not sure if the wife was intentionally the greatest con I’ve ever encountered or just a truly horrible, entitled person. On paper, it looks like I only came up short $100 for the month. But for me, it served as a powerful lesson in how on-paper returns never tell the full story: real estate investing is just as much about the people as it is the numbers.

My Top 4 Lessons Learned:

1. Don’t ignore the red flags. There’s a certain irony in taking a chance on a former sex offender only to find out that he was as peaceful as they come but his wife was the real liability. During screening, I focused too much on the husband’s glaring red flag that I failed to notice the multiple red flags raised by his wife. Thoroughly consider everyone you will be living with and don’t be afraid to pass on questionable applicants. A vacancy is much, much better than getting stuck with a crazy tenant.
2. Don’t back yourself into a corner. Before I deployed, I approached the impending vacancy as a problem that I needed to solve before I left the country. While I was right that I had a problem, I failed to fully conceptualize what my problem was. It wasn’t the upcoming vacancy that was the problem. My real problem was that I didn’t have an effective system in place to deal with vacancies. I felt like I HAD to fill the unit no matter what, and loosening my screening procedures to expedite the process only set me up for failure. The day that my sociopathic tenants moved out I was back to square one with my vacancy problem. Fortunately I was smart enough to not burn myself twice: this time, I reached out to my network and found a property manager who came highly recommended. I took him on immediately and he since has proven to be an excellent solution.
3. Never give up your leverage. If my biggest mistake was failing to properly screen my tenants, then my second biggest mistake was letting them move in before paying rent and their security deposit. If I had drawn a hard line requiring rent and deposit before move-in, I would be able to remain financially secure while I addressed their concerns (or allowed them to move out on my terms vs theirs). I thought it would make everyone’s lives easier by being flexible and understanding. Instead, I gave up all control of the situation and it degraded into a battle of wits and legal chicken. I count myself lucky it didn’t end worse than it did.
4. Stay professional. Through the entire process, she threatened to sue me probably a dozen or more times for the most frivolous and unfounded reasons imaginable. Though I have never in my life been so upset at another human being as I was with her at times, I always remained as calm, positive, and reasonable as possible. I could tell she was baiting me for some sort of negative response the entire time, either to use as legal leverage or for her own twisted satisfaction. It was both exceptionally challenging and ultimately my utmost pleasure to never give her anything to work with.

While reading this, it’s easy to think you’d never make the same mistakes to end up in this position (and if you’re wise, you won’t!). But real life is significantly more complex than can be boiled down into a few paragraphs online. As a real estate rookie, you’re going to have a lot of people appealing to your good nature and looking for second chances. While it’s ultimately up to you to decide to whom, if anyone, you’re going to give a second chance, it’s important to not compromise the good business practices that are going to keep you afloat.

Investors, what would you consider your worst rookie mistake? How did it shake out in the end? Feel free to share your story below, and don't forget to follow for more updates and lessons learned!