New investor needing help/advice.. I got scammed :(

Detroit, Michigan
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New investor needing help/advice.. I got scammed :(

Kwan Suh
Member since 2022 · 20 posts · 2 votes

So I bought a 4plex in Michigan back in September and hired a handyman who only had positive reviews on Google, Yelp, Facebook, etc.

He seemed pretty trustworthy at first and I hired him to get all 4 units rent ready where he quoted me $8000 to paint and cleanup all 4 units.. He requested I pay upfront and I was naïve (dumb) enough at the time to do this. He also asked I move in his girlfriend to one of the units where I found out she had numerous eviction histories later on (luckily I was able to collect rent up to this point).

So, after receiving my $8000, the handyman painted 2 of the units where I moved my inherited tenant to the newly painted unit for extra $50 more in rent ($800), and allowed his girlfriend to start her lease on the nicest unit that was just painted.

So this left him with 2 more units to paint & clean and have it ready for rent.

It is now December and when I visited the property from California 2 weeks ago, only 1 of 2 was partially painted.

Furthermore, back in October my property was inspected by the city and they wanted me to fix a list of violations. The handy man quoted me $5K where I paid it upfront being a dummy that I am L.

This violation list was also never even corrected, and now the handyman has ran away with my money at this point.

I’ve also found out through my inherited tenant as well as his girlfriend (when she got pissed at him for him cheating on her) that he was renting out one of the unit as a flop house for people to do drugs in all this time since September.  

But anyway, this is total of 8K + 5K I paid to this guy to make all units rent ready and resolve all city violations.

I was speaking to a lawyer in the area to sue him, and she mentioned that he is well known by the police and the prosecutors for having bunch of misdemeanors and other legal related issues. She mentioned I probably wont be able to collect anything from him and told me to move on with the loss. now I am just depressed that I am out of 13k by this SOB..

I want to see if I can get some advice here.. It really sucks that people like him can get away with taking advantage of new investors like me..  

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Taylor L.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
3y

Will the property cash flow when he's out? That could be your light at the end of the tunnel

I believe the thing that separates super successful investors from those who stall or fail, is the super successful investors learn from these mistakes, take the expensive lumps, and move forward. The fact of the matter is that everyone has a deal go wrong eventually. The keys are to mitigate the damages, learn from your mistakes, and move forward.

It sucks to lose money, but do you still want to be hung up on this issue 5 years from now? Or would you rather learn, grow, and move on?

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  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    3y

    Will the property cash flow when he's out? That could be your light at the end of the tunnel

    I believe the thing that separates super successful investors from those who stall or fail, is the super successful investors learn from these mistakes, take the expensive lumps, and move forward. The fact of the matter is that everyone has a deal go wrong eventually. The keys are to mitigate the damages, learn from your mistakes, and move forward.

    It sucks to lose money, but do you still want to be hung up on this issue 5 years from now? Or would you rather learn, grow, and move on?

    10Reply
  • Kwan Suh
    OP
    Member since 2022 · 20 posts · 2 votes
    3y

    Thank you.. I am going to learn from this but its still damn gut wrenching lol..

    1Reply
  • Allan Smith
    Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    PSA - do not pay contractors up front. 

    also, always do extensive screening of tenants.

    a lot of timeless "rules" broken here. Very painful lesson but don't let it go to waste -- take your growing knowledge and keep investing.

    4Reply
  • Ruchit Patel
    Bay area, CA · Member since 2021 · 383 posts · 306 votes
    3y

    Oh man, absolutely sucks. I would be scared to death to invest out of state again, for my whole life if that happened to me. 

    Can I ask, if you were using any turnkey provider or service from any other reputed companies, or do you have a network of trustworthy people in that particular place before you invested? 

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Kwan Suh

    1. Hire a property manager

    2. Educate yourself on how to run a business. Business is not about being nice or hiring cheapest person .

    Based on your short post you decided to go cheap with your business. That is a huge mistake.

    7e investments53 Reviews
    WebsiteView Page
    4Reply
  • Jon A.
    Investor · Brooklyn, NY · Member since 2022 · 158 posts · 118 votes
    3y

    This experience sucks. Sorry you had to go through it. The only way to view it imo is that $13k we'd the cost of your education. In my experience, it's rarely beneficial to sue in situations like this, unless he has a w-2 job. You get a judgment and then what? Based on your description of him, I'm guessing he has many many creditors.

    I think the first two lessons are obvious - don't pay contractors up front, carefully screen all tenants and don't rent to people you otherwise do business with. One perhaps less obvious lesson - install video cameras on your property so your know next time someone turns it into a flop house.

    3Reply
  • Allan C.
    Rental Property Investor · Member since 2018 · 827 posts · 810 votes
    3y

    @Kwan Suh I’m going to flip perspective on you. I think you got an amazing education for $13k, and this is a very cheap price to pay for lessons that will strengthen your investment fortitude. Many people spend more than this on coaches and classes that have less value.

    Furthermore, it is certainly not worth the mental distraction or time to pursue recovering your loss on this scenario. Make sure you put in systems to avoid this risk in the future and move on. Sorry you went through this situation, but when you look back in hindsight 5 years from now you’ll count this as a blessing.

    5Reply
  • Kwan Suh
    OP
    Member since 2022 · 20 posts · 2 votes
    3y
    Quote from @Allan Smith:

    PSA - do not pay contractors up front. 

    also, always do extensive screening of tenants.

    a lot of timeless "rules" broken here. Very painful lesson but don't let it go to waste -- take your growing knowledge and keep investing.


    I learned so much in the first 3 months of being a landlord. I listened to all the advices of starting out as a landlord, read books, etc.. but actually doing it is a different story…

    0Reply
  • Kwan Suh
    OP
    Member since 2022 · 20 posts · 2 votes
    3y
    Quote from @Chris Seveney:

    @Kwan Suh

    1. Hire a property manager

    2. Educate yourself on how to run a business. Business is not about being nice or hiring cheapest person .

    Based on your short post you decided to go cheap with your business. That is a huge mistake.


     This particular town, PM is very hard to find.. (small town 20-30k population), and if its a good one, they're all booked. yes agreed on education.. I guess I found out applying what I learned wasn't as smooth for me haha

    0Reply
  • Kwan Suh
    OP
    Member since 2022 · 20 posts · 2 votes
    3y

    @Ruchit Patel, I bought via MLS through RE agent. I dont really trust turnkey companies, hows your experience with them?

    0Reply
  • Kwan Suh
    OP
    Member since 2022 · 20 posts · 2 votes
    3y

    @Allan C. agreed! very wise perspective

    0Reply
  • Ruchit Patel
    Bay area, CA · Member since 2021 · 383 posts · 306 votes
    3y
    Quote from @Kwan Suh:

    @Ruchit Patel, I bought via MLS through RE agent. I dont really trust turnkey companies, hows your experience with them?


    For out-of-state investment, my philosophy is, if all of the unknowns in my mind are not answered, I don't go. So, the only option I had was turnkey. Otherwise, I am forced to trust the random person every time something new comes up. Besides, turnkey providers have their own reputation to maintain. So, I guess, they have to give good customer service!!

    So things are good for now. I am so strict with the investing criteria that I try to minimize potential adverse situations. 

    What's your reason to jump into investment completely on your own and exposing yourself to potential scams? 

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y

    This mostly all on you. There are bad people everywhere and you need to expect this type of behavior.

    The first mistake was not checking (or ignoring?) state law. Michigan requires work >$600 to be performed by a licensed Contractor. Using a Handyman is just asking for trouble usually anyway (of course there are exceptions).

    Second, as was mentioned above, never pay for work that has not been completed, let alone paying in advance..

    And the girlfriend moving in w/o a background check, well I'll just leave that alone.....

    Hopefully this will be a learning moment for you :-)

    4Reply
  • Wendy Man
    Member since 2019 · 104 posts · 35 votes
    3y
    I am sorry that this happened to you, Kwan.  That absolutely sucks.  And it shows a really bad side of some human natures.  Perhaps not being outright scammed, but being taken advantage of, seems to happen to every remote investor.  So, don't lose your confidence!

    Meanwhile, it sounds like you may have purchased in an area that may be C or D (drugs, etc.)?  If so, it may be worth reviewing if you want to continue holding property in that area.  C and D are really hard to manage remotely, I am told.

    In the unlikely case he is licensed, you may be able to see if you can recover something from his bond.  I hope you have a written contract of some sort.  Google says you can search for MI licensees here: https://aca-prod.accela.com/LA... for him and for future use.

    Google says you can also search for MI cases here: https://www.courts.michigan.go....  

    As you move forward, maybe also check references, licenses and court records, and reviews on other sites.  You can also use buildzoom to see if a contractor has a permit record that buildzoom has record of (they only have some).  And if so, search for that permit in the relevant city record (many are online) to see how the permit and inspections went.  sometimes the permits will also have a dollar value (which may or may not be the actual value of the work done) that may be useful.

    Good luck out there.
    1Reply
  • Bailey A.
    Investor · Fort Worth · Member since 2019 · 57 posts · 16 votes
    3y

    @Kwan Suh

    Don’t give up! I’m going through my first series of learning lessons now with investing in my second home. $13k is a hard pill to swallow but the sooner you can recognize what you did wrong and move on the quicker you can make some money. From your post, it sounds like your first investment. Mistakes are bound to happen. As my favorite comedian Tom Segura says “Some people suck”. Keep your head up.

    1Reply
  • Kwan Suh
    OP
    Member since 2022 · 20 posts · 2 votes
    3y
    Quote from @Bailey A.:

    @Kwan Suh

    Don’t give up! I’m going through my first series of learning lessons now with investing in my second home. $13k is a hard pill to swallow but the sooner you can recognize what you did wrong and move on the quicker you can make some money. From your post, it sounds like your first investment. Mistakes are bound to happen. As my favorite comedian Tom Segura says “Some people suck”. Keep your head up.


     Thank you so much! honestly very encouraging! 

    0Reply
  • Kwan Suh
    OP
    Member since 2022 · 20 posts · 2 votes
    3y
    Quote from @Wendy Man:
    I am sorry that this happened to you, Kwan.  That absolutely sucks.  And it shows a really bad side of some human natures.  Perhaps not being outright scammed, but being taken advantage of, seems to happen to every remote investor.  So, don't lose your confidence!

    Meanwhile, it sounds like you may have purchased in an area that may be C or D (drugs, etc.)?  If so, it may be worth reviewing if you want to continue holding property in that area.  C and D are really hard to manage remotely, I am told.

    In the unlikely case he is licensed, you may be able to see if you can recover something from his bond.  I hope you have a written contract of some sort.  Google says you can search for MI licensees here: https://aca-prod.accela.com/LA... for him and for future use.

    Google says you can also search for MI cases here: https://www.courts.michigan.go....  

    As you move forward, maybe also check references, licenses and court records, and reviews on other sites.  You can also use buildzoom to see if a contractor has a permit record that buildzoom has record of (they only have some).  And if so, search for that permit in the relevant city record (many are online) to see how the permit and inspections went.  sometimes the permits will also have a dollar value (which may or may not be the actual value of the work done) that may be useful.

    Good luck out there.

     Yes its definitely a C/D area.. high risk high margin.. agree on being very hard to manage lol. And thank you so much for sharing such useful links!! :) 

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y
    Quote from @Taylor L.:

    Will the property cash flow when he's out? That could be your light at the end of the tunnel

    I believe the thing that separates super successful investors from those who stall or fail, is the super successful investors learn from these mistakes, take the expensive lumps, and move forward. The fact of the matter is that everyone has a deal go wrong eventually. The keys are to mitigate the damages, learn from your mistakes, and move forward.

    It sucks to lose money, but do you still want to be hung up on this issue 5 years from now? Or would you rather learn, grow, and move on?

    He's out 13k and you're asking if it'll cash flow? He's in the whole for years.

     @Kwan Suh trust no one. Nobody gets to do work for you without a contract, a warranty, liability insurance, identification, licensed, and great reviews. Great reviews isn't good enough. Ideally, they need to accept payment after or if they need upfront it's done through an intermediate like a credit card. No one gets paid before any work is done. Even if they do excellent work, you don't trust them to project #2 without any of the above. And in regards to word of mouth references, if anyone suggests you take their friend or colleague for something, you skip that idea. There's always other options, or in your case tenants. Never feel indebted to one person.

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @V.G Jason:
    This^^ And you can ignore references...do you think anyone would give you a bad reference? I always thought it was funny that people would treat references like they mattered....
    4Reply
  • Jim WellingtonBusiness Member
    Real Estate Agent · Saint Clair Shores, MI · Member since 2022 · 73 posts · 51 votes
    3y

    @Kwan Suh sorry for your experience. As others stated take it as a learning experience and understand done the road that hopefully this will be a small mishap in an otherwise profitable property. 

    [email protected]586-204-2010
    1Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @V.G Jason:
    This^^ And you can ignore references...do you think anyone would give you a bad reference? I always thought it was funny that people would treat references like they mattered....

     They only matter to the person giving them. They usually get some form of kickback. Affiliation is one of the most dangerous things.

    1Reply
  • Lamont Jones
    Member since 2020 · 2 posts · 2 votes
    3y

    Hi, I am very sorry that this happen to you. I am a local realtor & investor in the Detroit & metro area. I would love to connect with you & see if there may be away to help you. I currently have 7 rentals and may be able to send some of my guys to get your units finished & rented. 

    1Reply
  • Josie Brown
    Detroit, MI · Member since 2022 · 118 posts · 49 votes
    3y

    Hi Kwan! It may be a good idea to find a property manager. They typically can make the process much easier for investors, especially when they live out of state. Moving forward, it may be helpful to understand how you can maximize your rental income with this property while working with a trusted property manager to ensure you receive that.

    1Reply
  • Orkun Tan
    Member since 2022 · 3 posts · 0 votes
    3y

    Hi everyone. does any one know a licensed reliable general contractor in Houston (or Pearland) TX area?  i bought a house and needs some repairs with floor and kitchen upgrade?

    thank you and good luck everyone with your investment goals

    Orkun Tan

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y

    Don't be depressed.

    You made a mistake, learned from it, and you won't go through something in the future.

    Do not sue the person, suing the person will not give your depression problem and likely won't get you your money back.

    Spend some money, visit the property, and find a trust worthy management company to manage the property.

    best of luck!

    [email protected]917-280-8544
    Basit Siddiqi CPA4.880 Reviews
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    2Reply
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