Nightmare property. What would you do?

Nightmare property. What would you do?

Rental Property Investor · Hopewell Junction, NY · Member since 2019 · 81 posts · 38 votes

I have a property that has been an absolute nightmare and I’m not sure how I want to move forward.  The property is located in the 72209 zip.

I am trying to get to the root of the issue and I’m worried it could be multiple things.

I purchased the property at the end of 2019 and we will start with tenants.

Tenant 1 was fine until she lost her job and her replacement job didn’t pay nearly as much.  She left on her own after 5 months and I was only out a months rent. 2 month turnover until the next tenants are in.

Tenant 2 was a couple and they were great, but they weren’t reporting issues with the house which came to be quite a disaster.  The toilet was running and they never reported it they were also having issues with the sewer drain plugging up and sometimes backing up into the tub which they were able to fix on their own most of time but obviously the issue was never resolved because it kept coming back.  Long story not so long the two issues joined forces when they were out for 12 hours and sewer had been flooding the house nearly the entire time.  Massive insurance claim to the tune of almost 40k which included hot water heater, furnace and pretty much everything else inside the house.  They then got mad at me,  stopped paying and then moved out leaving me a few months short.

Tenant 3 was in within a few weeks but in the time of them moving in to having to pay 2nd months rent all their assets had been frozen and the previously cleared rent check had been clawed back by their bank.  They moved out leaving me out a months rent.

The newest tenant took almost 4 months to place and now we have tenant 4.  This long turnover period was SUPPOSED to be so we could finally get someone decent in this house.  As they were moving in someone did something to the electric meter killing the power to the house and then they stole the AC condenser with the tenants in the property.  These guys moved in at the end of March and the excuses started IMMEDIATELY.  They then got current and even paid Most of June early, but that’s been it.  They have bounced every check since and one of the neighbors reported that the husband moved out months ago.  So now she is full on nasty and making all sorts of allegations against my property manager.  So she is on her way out and I’m out some of June and all of July/August.

I’ll add that I’m an out of state investor and I’m relying 100% on my property manager.  I was well aware that this zip code can be sketchy in areas and thought that I was in the halfway decent part.  I spoke with a few managers and they all seemed comfortable with the area and no one expressed any concerns in that regard. 

What would you do?

Should I cut my losses and sell this house?  I know this is the emotional choice, but my wife has been over it for over a year and I’m right with her.

Is property management the issue?  The other houses I have with him are mostly doing okay.


Has it just been a string of bad luck and should I stick with it considering the house is brand new?

Thank you for sticking with this long and rambling post.

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Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
4y

Dump it. People make it sound like cheap out of state cashflow properties work on here but real life I have had a few clients buy them and all of them dumped the properties (various states) as they flopped. You need huge margins for the deals to work well with managers and be able to afford denials on a lot of the potential tenants. 

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    It could be a combination of the house and the PM.  With a PM, you often have a 1 month vacancy at turnover.  If the house is brand new, you shouldn't have had so many problems. You also should have been attracting better tenants.  Either try a new PM or look at selling it.

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    With 4 bad tenants in a row, that pretty much puts it on the PM. You have to decide if this is a nice house that will rise in value and is worth keeping, or is it time to just move on? Will you make good $$ selling this?

    I'd definitely talk to another PM, they might make you more money with your other houses too.....

  • Rental Property Investor · Hopewell Junction, NY · Member since 2019 · 81 posts · 38 votes
    4y
    Quote from @Bruce Woodruff:

    With 4 bad tenants in a row, that pretty much puts it on the PM. You have to decide if this is a nice house that will rise in value and is worth keeping, or is it time to just move on? Will you make good $$ selling this?

    I'd definitely talk to another PM, they might make you more money with your other houses too.....

    It’s looking like the best case scenario is that the house has appreciated about 22k since purchase and after updates.  I was close to handing a few properties over to another PM a year or two ago and then my current PM pulled a rabbit out of a hat and did okay for a bit.  I don’t anticipate this neighborhood appreciating much more over the short term as it is rather economically depressed.

    I purchased the house for cash flow, but if isn’t going to cash flow I have no use for it.  It’s just hard to offload it without at least giving someone else a shot.
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    @Kris Mead If that's the case, then I would try a new PM for a while, if it doesn't improve vastly, then just move on and lick your wounds.

    There are always other houses out there...!

  • Financial Advisor · France & Luxembourg · Member since 2019 · 12 posts · 7 votes
    4y

    Things you may take a look at:

    What is your PM's policy to screen prospective tenants? 

    What are the reviews on this PM?

    Are they better PMs around?

    Is your property located in a bad neighborhood? (which may explain that it attracts only bad tenants)

    I understand that you may want to sell the property as it has been a nightmare for you - I sold an apartment once (at a slight profit) because of several bad experiences with it so I can understand you are getting emotional with this one.

    Also, make sure to have a framework about your investing strategy highlighting the type of properties you are looking after and a reputable local team in place.

  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    @Kris Mead logically, there are only 3 possibilities:


    1) Your property is in a bad area, so you'll only get bad tenants

    2) You have a bad PMC, so find a better one

    3) Insanely bad luck

  • Rental Property Investor · Hopewell Junction, NY · Member since 2019 · 81 posts · 38 votes
    4y
    Quote from @Drew Sygit:

    @Kris Mead logically, there are only 3 possibilities:


    1) Your property is in a bad area, so you'll only get bad tenants

    2) You have a bad PMC, so find a better one

    3) Insanely bad luck


    What’s crazy is I think all 3 are a factor.

    1) We knew the area would be a risk, but we did a lot of research in the zip code and this particular neighborhood is SUPPOSED to be better.  I have two houses in it and they are both issues.

    2) I personally like my PM and he has bailed me out of some crummy situations before.  He’s also very fair on pricing and helping us out.  The issue with him is that he is a control freak and handles everything on his own which leads to delays all across the board.  I’ve told him an assistant would solve the majority of his problems, but he doesn’t seem for it.

    3) This might be the biggest factor.  If I boil this down enough.  Tenant 1 was fine until she lost her job.  Tenant 2 was fantastic until they flooded the house out of not trying to be a bother.  Tenants 3 and 4 have been the issues, but even still they have all had some sort of significant event happen.


    I am trying to not just be emotional about it and bail, but I also have the opportunity to potentially get rid of it while the market is still okay.  This also depends on the current tenant leaving the house in good shape.

  • Rental Property Investor · Hopewell Junction, NY · Member since 2019 · 81 posts · 38 votes
    4y
    Quote from @Cyril Soigneux:

    Things you may take a look at:

    What is your PM's policy to screen prospective tenants? 

    What are the reviews on this PM?

    Are they better PMs around?

    Is your property located in a bad neighborhood? (which may explain that it attracts only bad tenants)

    I understand that you may want to sell the property as it has been a nightmare for you - I sold an apartment once (at a slight profit) because of several bad experiences with it so I can understand you are getting emotional with this one.

    Also, make sure to have a framework about your investing strategy highlighting the type of properties you are looking after and a reputable local team in place.

    I have interviewed PM’s in the past and a few of them fell off the face of the earth.  One of them seemed fantastic but was VERY eager to spend my money on rehabs and take a cut of what I was going to spend as well as charge hefty fees.  I’m sure there are others but I like to meet people personally and I don’t have a trip out planned for a while.

    as far as his screening process goes, he takes his sweet time to fill the vacancies under the guise that he’s placing good tenants.  I was under the impression that he was very strict, but i can’t remember exactly how he screens as I got all that information 3 years ago when I interviewed him.  As far as reviews go, I haven’t found any that aren’t bitter tenants complaining.

    It’s also entirely possible the neighborhood just isn’t as great as I was hoping for.  My wife seems sold on this and she may be right.

    my investing strategy starting off was to spread out to a few b-c zip codes to see what would work.  This is the only one I doubled up on and both properties are issues.  So I went into this knowing I had the potential to need to bail on an area.
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Quote from @Kris Mead:

    This is probably your best option as I read these posts....but you need to move RIGHT NOW. The market is starting to level off and even slide in some areas.....

  • Rental Property Investor · Hopewell Junction, NY · Member since 2019 · 81 posts · 38 votes
    4y
    Quote from @Bruce Woodruff:
    Quote from @Kris Mead:

    This is probably your best option as I read these posts....but you need to move RIGHT NOW. The market is starting to level off and even slide in some areas.....


     I agree.  Worst case is that we list it for sale and still try and rent it.  See if some miracle tenant shows up while also testing the market.

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Quote from @Kris Mead:
    Quote from @Bruce Woodruff:
    Quote from @Kris Mead:

    This is probably your best option as I read these posts....but you need to move RIGHT NOW. The market is starting to level off and even slide in some areas.....


     I agree.  Worst case is that we list it for sale and still try and rent it.  See if some miracle tenant shows up while also testing the market.


    I wouldn't. If you really want to move on, just sell it and go. If you 'accidentally' rent it again, then you're just right back in the same old boat.....

  • Rental Property Investor · Hopewell Junction, NY · Member since 2019 · 81 posts · 38 votes
    4y
    Quote from @Bruce Woodruff:
    Quote from @Kris Mead:
    Quote from @Bruce Woodruff:
    Quote from @Kris Mead:

    This is probably your best option as I read these posts....but you need to move RIGHT NOW. The market is starting to level off and even slide in some areas.....


     I agree.  Worst case is that we list it for sale and still try and rent it.  See if some miracle tenant shows up while also testing the market.


    I wouldn't. If you really want to move on, just sell it and go. If you 'accidentally' rent it again, then you're just right back in the same old boat.....

    Thanks for calling that out!  I’ll get my realtor in as soon as these tenants are out.  I still have another very similar house right around the block that is perfectly capable of giving me problems 🤣
  • Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    4y

    Dump it. People make it sound like cheap out of state cashflow properties work on here but real life I have had a few clients buy them and all of them dumped the properties (various states) as they flopped. You need huge margins for the deals to work well with managers and be able to afford denials on a lot of the potential tenants. 

  • Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    Sell while you have equity. You can never change the location. PM failed on vetting tenants credit and job type to match the zip code. PM failed to check on tenant 2 and you have not been an active owner. Buying at a distance is a huge risk, margins need to be fabulous to make up for the risks.

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y
    You should never expect anyone or anything to be able to fix a house in a bad location. Location makes up for a lot of other sins when it comes to properties, but generally not the other way around. That's why there are still mansions in the Detroit area filled with junkies and trees growing out of the roofs. It's probably *not* your PM and frankly I'm surprised you even have a PM since most don't want to be bothered working D areas.

    I ran a quick zip report and the median household income is $29k. Almost 60% of the housing is vacant or renter occupied. Only 33% of the homes are family occupied. 60% of the zip code is either part time or unemployed. Those are some seriously bad numbers.
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  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    4y

    @JD Martin That's a tough location. 

    On a positive note I just discovered the power of the US Census Bureau website. The "maps" tab is amazing! I didn't realize this data was so easy to access. Not sure if you gather census data from that site but it's quite useful. 

    https://data.census.gov/cedsci...

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y
    Quote from @Jaron Walling:

    @JD Martin That's a tough location. 

    On a positive note I just discovered the power of the US Census Bureau website. The "maps" tab is amazing! I didn't realize this data was so easy to access. Not sure if you gather census data from that site but it's quite useful. 

    https://data.census.gov/cedsci...

    I usually just use a quick commercial site because they already have the algorithm built and pull the info from the census data, but yes you can get a ridiculous amount of incredibly useful data from the US census. I used the census pretty heavily when I wrote my doctoral dissertation on crime and police budgets in the largest US cities.
    Skyline Properties
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  • Investor · Los Angeles, CA · Member since 2017 · 4 posts · 8 votes
    4y

    I'm out of state and I have a rental in that zip. The tenant pays and has been very tolerant of a bad management company. So from my point of view I'd say try new management. But if you're looking to sell, let me know. 

  • Rental Property Investor · Hopewell Junction, NY · Member since 2019 · 81 posts · 38 votes
    4y
    Quote from @JD Martin:
    You should never expect anyone or anything to be able to fix a house in a bad location. Location makes up for a lot of other sins when it comes to properties, but generally not the other way around. That's why there are still mansions in the Detroit area filled with junkies and trees growing out of the roofs. It's probably *not* your PM and frankly I'm surprised you even have a PM since most don't want to be bothered working D areas.

    I ran a quick zip report and the median household income is $29k. Almost 60% of the housing is vacant or renter occupied. Only 33% of the homes are family occupied. 60% of the zip code is either part time or unemployed. Those are some seriously bad numbers.

     This is some solid information!  I never purchase anything without a blessing from multiple PM’s and I have been steered away from plenty of potential purchases in the past.  This particular neighborhood in the zip was supposedly a great rental area for years.  However, my PM said that the majority of owner occupants have sold off and he’s mentioned that it might be heading in the wrong direction which seems to be verified by the statistics.  I told him we could bail if he thought the area was too bad but he’s adamant that he can make it work.  Obviously that risk is all on me.

    We are going to list it once the latest tenants are out and I’m sure the next guy will find great success renting it out 🤣.

  • New to Real Estate · Queens · Member since 2021 · 5 posts · 5 votes
    4y
    Quote from @Kris Mead:
    Quote from @JD Martin:
    You should never expect anyone or anything to be able to fix a house in a bad location. Location makes up for a lot of other sins when it comes to properties, but generally not the other way around. That's why there are still mansions in the Detroit area filled with junkies and trees growing out of the roofs. It's probably *not* your PM and frankly I'm surprised you even have a PM since most don't want to be bothered working D areas.

    I ran a quick zip report and the median household income is $29k. Almost 60% of the housing is vacant or renter occupied. Only 33% of the homes are family occupied. 60% of the zip code is either part time or unemployed. Those are some seriously bad numbers.

     This is some solid information!  I never purchase anything without a blessing from multiple PM’s and I have been steered away from plenty of potential purchases in the past.  This particular neighborhood in the zip was supposedly a great rental area for years.  However, my PM said that the majority of owner occupants have sold off and he’s mentioned that it might be heading in the wrong direction which seems to be verified by the statistics.  I told him we could bail if he thought the area was too bad but he’s adamant that he can make it work.  Obviously that risk is all on me.

    We are going to list it once the latest tenants are out and I’m sure the next guy will find great success renting it out 🤣.

     Sell or get a new PM. Pm is definitely failing in the screening department. 

  • New to Real Estate · Queens · Member since 2021 · 5 posts · 5 votes
    4y
    Quote from @Kris Mead:
    Quote from @JD Martin:
    You should never expect anyone or anything to be able to fix a house in a bad location. Location makes up for a lot of other sins when it comes to properties, but generally not the other way around. That's why there are still mansions in the Detroit area filled with junkies and trees growing out of the roofs. It's probably *not* your PM and frankly I'm surprised you even have a PM since most don't want to be bothered working D areas.

    I ran a quick zip report and the median household income is $29k. Almost 60% of the housing is vacant or renter occupied. Only 33% of the homes are family occupied. 60% of the zip code is either part time or unemployed. Those are some seriously bad numbers.

     This is some solid information!  I never purchase anything without a blessing from multiple PM’s and I have been steered away from plenty of potential purchases in the past.  This particular neighborhood in the zip was supposedly a great rental area for years.  However, my PM said that the majority of owner occupants have sold off and he’s mentioned that it might be heading in the wrong direction which seems to be verified by the statistics.  I told him we could bail if he thought the area was too bad but he’s adamant that he can make it work.  Obviously that risk is all on me.

    We are going to list it once the latest tenants are out and I’m sure the next guy will find great success renting it out 🤣.

     Sell or get a new PM. Pm is definitely failing in the screening department.  You loss a lot of money and time, I wouldn’t waste any more time. 

  • Investor · Heber Springs, AR · Member since 2019 · 88 posts · 38 votes
    4y

    Kris,

    Sorry to hear that you are having difficulties with this property. I buy in that area, so if you want to reach out to me, I am sure we could work something out that would be a win for both of us. If you decide not to sell, I will be glad to refer you to property managers or other contractors that could get it back to being an effective rental for you. Either way, I would be happy to help. 

  • South Holland, IL · Member since 2017 · 374 posts · 432 votes
    4y

    @Kris Mead

    Just an aside. The fact that the tenants just leave rather than hunkering down and not paying until you get an eviction order of possession is a BLESSING in a D class location. It could have been a lot worse. Trust me!

  • Rental Property Investor · Hopewell Junction, NY · Member since 2019 · 81 posts · 38 votes
    4y
    Quote from @Quincy Lockett:

    @Kris Mead

    Just an aside. The fact that the tenants just leave rather than hunkering down and not paying until you get an eviction order of possession is a BLESSING in a D class location. It could have been a lot worse. Trust me!


     You aren’t kidding!  The most recent tenants have really good jobs and were at their previous address for I think 9 years.  A neighbor mentioned that he saw a moving truck a few months back and we haven’t made contact with the husband in a while so I think he split and she is just in a bad spot.

  • Member since 2019 · 7k+ posts · 4k+ votes
    4y
    Quote from @Quincy Lockett:

    @Kris Mead

    Just an aside. The fact that the tenants just leave rather than hunkering down and not paying until you get an eviction order of possession is a BLESSING in a D class location. It could have been a lot worse. Trust me!


     very true. Sometimes it's better when the house has no tenant esp if it's not winter time.

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