I have an ETHICAL DILEMMA!

50 Replies

Recently, I purchased a duplex in Warwick, Rhode Island for well well below fair market value.  The property has all of the heavy lifting done, windows, mechanicals, roof, electrical, etc.  The interiors are sound, but dated.  The property is fully occupied, and is performing well. 

We threw the property on the MLS just in case we got an offer that we couldn't refuse. That offer did in fact come in, but with conditions. This is a 203k buyer, and they want the building completely empty at the time of the closing. One of the tenants is an 83 year old man who has been living there for 15 years. He offered us 40k below the offer we received on the MLS.

I certainly want to get the most for this property, but at what cost?  I certainly have no intention of booting a nice old man onto the street as winter approaches.  It is just not an option for me.  I was going to see if he wanted to match the offer as an alternative, or offer to pay to have him move into a building that we are finishing up renovations on for the same rent he is paying now.  

Other than these two options, what other alternatives do I have?  I am kind of stuck between a rock and a hard place if he isn't open to the two alternatives that I have already considered. (It should be noted, the sellers are adamant about the property being vacant.  I already tried to negotiate one side bing empty and keeping the elderly man in the unit).

Tough one for sure. Here is my take. Now I don't mean to sound cold......

This is a business right? You have a responsibility to that business to do the right thing...for it. It's like your baby, your child, You must protect that business and of course, just like a real child, you want it to flourish and prosper. So from a business mind set, sell it for as much as you can. You can ask him to come as close as possible on his offer but tell him it is a business decision.

Now I wouldn't leave the guy homeless obviously. I like your idea of setting him up somewhere. I wouldn't do it any other way. You stand to make a nice profit from this flip right? So definitely do the right thing and secure a nice place for him. Even help with the moving expenses I say.

As far as charity, I absolutely believe that giving back should be a part of EVERYONE'S mind set. I just keep it separate from business. I never mix the two. You are either running a business or you are running a charity. You decide. Maybe at the end of the year you pick a new cause and give a little more this year because you are grateful for what you have received.

@Brandon Ingegneri ,

I know I am going to get chewed up on this, however I see it completely different. The 83 year old man wanted to purchase the property. This means he has the means to secure the cash to buy it, so it's not like he is going to be out on the street. If he was a she and was 34 would it make a difference? If he was 41 years old would it make a difference? If he was a vet or of Asian decent would it matter? If your answer is "no, it would not matter I just won't remove tenants regardless". Then make sure you start putting that in your MLS listings (Seller will not remove any tenants prior to closing)

If your other property is comparable and the rent is normally the same as what he pays and you have a vacancy sure. If you are cutting a break on rent then you are setting yourself up for failure. Think about standing up explaining why you let the "old white dude" stay there for cheap rent but the "insert protected class" pays full rent.

Just my 2 cents and good luck in whatever you decide.

@Brandon Ingegneri Any stipulation in an offer can be negotiated.  You could counter his offer with a provision that the 83 year old tenant stays for X period of time under certain conditions, which would include paying rent on time, maintaining the unit, etc.

You could also approach the tenant and tell him that you have an offer of $XXX,XXX.  Ask him if he would like to match the pricing and terms.  You never know - he may have the ability to borrow money from his family to make up the difference.  Or he might have the cash stuffed into his mattress!

If it's worth $40k to you to help the old guy out, by all means go for it. If not he's got to go. 

Seems to me offering to help him move to another space at same rent was the only option to help him & still sell. If he doesn't want to take that don't let the door hit ya where the good Lord split ya!

I've said it many many times over Real Estate Investing is not for the faint of ❤. It is a brutal business that puts the investor in all types of emotionally tense situations. You have to be ice cold to make it in this game sometimes.

I like the note idea, he could also fight you about leaving. Idk the the landlord tenant laws there, but if he can delaying being tossed out for a couple of months you could be looking at the deal falling through if the buyer doesn’t want to wait.

Really tough decision. 

Good thing I am not you or I would have the old mans socks and underwear in a box on the front porch and a taxi waiting to take him away.

Thankfully, for me, when it comes to making money I have no moral or ethical dilemmas.

What I would do is sit down and have a conversation with him. Explain that you purchased the property with the intention of selling it. By all means offer to help him find a new place and offer him whatever financial assistance you deem appropriate. Tenants expect changes when a new owner takes over and this won't likely be a surprise. Frame it in a way that he is most likely going to have to move when you do sell it and he is much better off accepting your assistance now than rolling the dice on the new owner who may not work with him at all.

Have you asked the potential buyer why they are determined to have the unit vacant? If you ask the open-ended question you may find out more information on their motivation that could help you create a win-win.

You may also do the same with the old man who is your renter. What is his motivation to stay? You may think you know the answers but until you ask you can't be sure. 

These 2 questions and any follow up they provide may give you alternative options that you don't realize exist.    

The tenant should be treated like any other. If given proper notice he will have time to find a new place to live and he clearly isn't someone in a financially precarious situation. I don't see an ethical dilemma.

You don't have an ethical issue, you have a personal feelings issue. Tell the 83 year old that he can pay full price for the house and stay otherwise he will need to move out. If you want to be nice (which I would do), you could pay for his moving costs and give his deposit back the day he moves. I would not move him into my other building unless he can pay market or close to market rent or it's just a short term stay until spring. 

@Brandon Ingegneri

Someone once told me the best way to make ethical decisions is imagine your actions became tomorrows headline:

Entrepreneur Throws 83 Year Old Man out of Home of 15 Years

Next imagine that all your friends and family read the story. Would they be proud of you? Would you feel good?

I will offer another consideration. Why not just keep the property. Increase the rents a little so it makes you more money. Hold the property a few years and then sell it. There are two reasons this is the smart decision:

1. You refer to recently purchasing it, which means the sale is subject to short term capital gains.

2. What if you throw the tenants out and the 203K buyer backs out of the sale? Then you are left with a vacant property in winter. I would never force tenants to leave due to this risk alone.

Help him relocate. If he won't match then explain the situation and be nice about it, maybe even pay his moving costs. He should understand what is going on considering he is in good health. He is 83 years old after all. Not his first rodeo. It is not your fault that he won't match. 


@Gregory B. @Mike Cumbie @Todd Dexheimer @James Dickens @KEVIN FLYNN @Alexander Felice @Jason G. @Brandon Ingegneri @Michael Knaus @Charlie MacPherson @Thomas S. @Joe Splitrock @Calvin Strain @Nicholas W.

Here is a question I have for everyone that hasn't been brought up yet. 

Why is it that we would need to go out of our way for this man? Just because he is 83 years old? Would we care if he were 43? Doesn't sound like anyone cares that the house was purchased for $40,000 less than what it's worth. Why don't we care about this seller who got shorted $40,000 b/c they didn't know any better? Do we only get mushy mushy when the person involved reminds us our our grandpa?

On top of that the guy is 83 years old & doesn't own a home. That's not the new buyers fault. The man had his entire life to appropriately plan & handle his finances in a way that would keep him from being in his current situation. For whatever reason he chose not to do that. That isn't the fault of the new buyer.

Originally posted by @James Wise :

@Gregory B. @Mike Cumbie @Todd Dexheimer @James Dickens @KEVIN FLYNN @Alexander Felice @Jason G. @Brandon Ingegneri @Michael Knaus @Charlie MacPherson @Thomas S. @Joe Splitrock @Calvin Strain @Nicholas W.

Here is a question I have for everyone that hasn't been brought up yet. 

Why is it that we would need to go out of our way for this man? Just because he is 83 years old? Would we care if he were 43? Doesn't sound like anyone cares that the house was purchased for $40,000 less than what it's worth. Why don't we care about this seller who got shorted $40,000 b/c they didn't know any better? Do we only get mushy mushy when the person involved reminds us our our grandpa?

On top of that the guy is 83 years old & doesn't own a home. That's not the new buyers fault. The man had his entire life to appropriately plan & handle his finances in a way that would keep him from being in his current situation. For whatever reason he chose not to do that. That isn't the fault of the new buyer.

 James I don't appreciate being treated as though I'm heartfelt. I always prefer to be ruthless and without compassion, I was simply giving some middle of the road advice to help OP out.

;)

fact is, OP doesn't have an ethical dilemma, he has a self-guilt problem, and it's his own. That said, I have no self-guilt kicking people out on Christmas but then high-roading them on the internet.

What if the sale follows through?  What if the buyer's financing doesn't fly?  It is not a real deal until closing.

If you are considering this PA, I would ask for a NON-REFUNDABLE $5000 deposit, regardless of financing being rejected on closing day or any other scenario.  It would be a shame to throw out an old man just to have the sale fall through!

I would not ask anyone else to decide what I should do. I have my values and they are not up for discussion.

If I felt it is wrong to sell. I do not sell. I do not care what anyone says.

Well, if you do decide he has to go, just remember that if it is a 203k property, there is no reason for you to care about the condition of the unit. So refund any deposit immediately.

@James Wise you as cold as ice!

Ok, joke but...I see your perspective. I just feel that helping the old guy find a place and maybe even help with the moving expenses is the right thing to do. He was there for 15 years and has to move through no fault of his own. 83 as opposed to 43 makes moving a little more challenging I would think, so yeah his age does matter, at least to me. He may have made poor choices but I am not going to cast stones. 

Now that being said.....I would personally NEVER sell at a loss for the reasons mentioned. I would sell to the highest and best offer....even if he were 103, he would have to pony up and match or beat the offer.  I suppose a token offering to help is my way to sleep better at night.

Originally posted by @Michael Knaus :

@James Wise you as cold as ice!

Ok, joke but...I see your perspective. I just feel that helping the old guy find a place and maybe even help with the moving expenses is the right thing to do. He was there for 15 years and has to move through no fault of his own. 83 as opposed to 43 makes moving a little more challenging I would think, so yeah his age does matter, at least to me. He may have made poor choices but I am not going to cast stones. 

Now that being said.....I would personally NEVER sell at a loss for the reasons mentioned. I would sell to the highest and best offer....even if he were 103, he would have to pony up and match or beat the offer.  I suppose a token offering to help is my way to sleep better at night.

Agree. I'm incredibly cold when looking at this business. Your points are valid but I try to operate in this space without letting feelings cloud my judgement. There is of course nothing wrong with helping others & I am glad that you are a caring person. That is admirable. 

I like to help others but don't mix that with this business. Real Estate & Rental Property Investing/ Property Management is a BRUTAL business. In my opinion the landlords that work off of their feelings get eaten alive.

Daymond John (SharkTank, FUBU creator) said "you have to make it before you matter." 

To me the idea that you need to focus on building a profitable business & you will end up being in a position to make a much bigger difference then you could have had you not ended up in a position of power makes a lot of sense.

I do disagree with the idea that he was being forced to move through no fault of his own. It is his fault. He chose not to buy a home. That is a risk you take on when deciding that you want to rent someone else's home as opposed to buying your own.