What has been your SCARIEST land-lording or investing moment?

51 Replies

In keeping with the spirit of Halloween, what has been your scariest moment as a landlord or investor?

6 month vacancy. Will NEVER buy in a mining town. EVER!

My self and 3 other guys had gone in together and bought an old refinery property.  We eventually bought out 2 of the guys.  There were some threats of lawsuits from one guy because he had a competitor try to buy his share out to gain an edge against us, but we were in the right and kept pushing and everyone backed off.  Things seemed great then about 2 years later we get a call.  It's the environmental protection agency.  They want to evaluate the property for asbestos, lead, mercury and many other noxious items.  At my insistence we give them free rein, they test, and dig, and look through all our old papaers.  Eventually they say they are going to do a brown field cleanup.  They have tons of brand new equipment, they plastic wrap entire loads of dirt, etc.  My partner ends up getting into a screaming match with the head person in charge and they are threatening each other.  Pretty ugly.  We wait and answer questions for several years always waiting for them to send us a bill for some part of the several million they spent "cleaning up the property".  They actually did an extremely bad job, that is why my partner was so mad.  The letter never came.  We hear later that supposedly they got Ohio oil to pay for the cleanup the ones who owned the refinery when it was torn down.  We never have heard from the EPA since they left, but we waited on pins and needles for several years.  We watched the corporate formalities pretty hard.  We kept the bank balances very low and documented everything we could.  Hopefully we could have just closed the corporation if it was a massive bill they demanded, but they just never said anything.  Hopefully it is all passed, but it was scary for awhile.  We worked and held that property for well over 15 years before EPA showed up and would have hated to lose all the work we did on it for those 15 years.  It is a pretty piece of property, but it may never be developed in my lifetime due to the possible liability issues.

I did some consulting for a friend on a property that was bought from a huge online auction company.  It was a bank foreclosure.  Yes, everyone on this forum has heard of the auction company.  We inspected the property with an agent.  They had keys to all the doors.  My friend won the auction.  He started using the property for a VERY HEAVY INDUSTRIAL purpose.  As part of the state permitting process, I figured out the auction company screwed up.  The bank had only had a mortgage on one of two properties the owner had side by side.  The auction company had broken into both of the properties.  Then they changed the locks and had an onsite auction.

The same day I figured it out, things turned from bad to worse.  The legal owner showed up.  My friend's employees were doing the stuff they do, which by the way requires gas masks and other safety equipment.  The owner is of course irate.  Tries to force himself past the guard that works for my friend's company.  The guard does physically stop him explaining he is there for his safety.  Then the owner calls the cops.  

The cops show up.  They assume organized crime has squatted on an industrial site to make methamphetamines.  Here comes the fire department , they see certain chemicals and they call the bomb squad.

Of course by this point, I have a panicked friend on the phone.  After I panic I think to tell him to show the police the website that shows the auction information on his phone.  Because one of the cops had bought a property from the same website before he knew it was legit.  The owner was still about to have a stroke.

It took about six hours of the police department being there with the owner and my friend while everything was shut down and moved.   Once I got to the site I was able to explain to the owner that he should expect a major settlement from the auction company he was much happier.  Everyone got a big laugh out of how the property line ran right down the middle of the largest room in the place.

My friend and the owner both got paid off by the auction company.

This was stressful for me but it would have been much worse if I was the person that had broken into the wrong property or the person that had done the auction.  It was amazing how fast they went from "we don't make mistakes" to "how much is it going to take?"

By the way, in Texas there is a long history of not requiring environmental permits until after the activity has started.  That is why I did not find the issue until after they had started working.

@Dan Wickland Vacancy can be very scary. Watching a bank account go down in value over time that should be going up can be very scary.

@Jerry W.  Reading your story was like reading scary book. I hate it when government agencies get involved. They seem to move very slowly and they have the funding to bankrupt an individual investor in court fees and other types of fees. I don’t know what I would’ve done had that have happened to me. I’m glad that not a lot has come about because of it. I hope it stays that way.

@Michael Biggs Your story was more like an action adventure/comedy. That would have been hilarious as long as I got to watch it from the sidelines. I’m glad that both your friend and the owner were made whole by the auction company. What a crazy story.

I have experienced many scary things as an investor. Most of them occurred early on and I was scared because  I didn’t have a clue what to do with the situation. 

On my first flip that I did by myself we purchased a house at the auction. After we were finished with the rehab we got a letter from the city saying that the enclosed carport that had been converted into living space was never permitted and that we would have to convert it back to a carport. By doing that we would have lost about 150 ft.² of living space and our ARV would have dropped considerably. After working out a deal with the city they let us keep the enclosed carport and add covered parking in the backyard Which was part of the updated city ordinances to have covered parking on the property. We ended up losing $5000 on the deal but we could have lost a lot more if we had had to convert the living space back to a carport. That was a really scary experience for me at the time.

This happened in my condo - Few months back i got a call from my tenant saying the HVAC was leaking and water was pouring into the lower unit and the unit below it.

I was out of the country and was doing my own PM.... had no handymen on call and my tenants didn’t know what to do.

Luckily my tenants boyfriend saw the problem and quickly fixed the leak and put a bowl under it just in case.

I’m freaking out.... "pouring into the 2 units below me" I don’t get back to Chicago till the next day....

I show up thinking this is going to blow past my high deductible and I’m going to get lawsuits....

I knocked on the 1st floor and ask to see the damage, they have no clue what I’m talking about... I knocked and the second floor, walked in a see a little tiny line of water damage like 6 inches long by 1/2 an inch wide. The guy looks at me and says "I hand to use a bucket, water was pouring out..." it was bone dry, I fix it in an hour and I’m on my way.

The next day I started building contacts just in case I’m out of the City/Country and something happens...

@Phillip Faries It seems like water can be a very scary thing. In 2016 we had two water leaks in two of our flips that cost us a couple of thousand dollars each for flooring repairs and plumbing work.  The two water issues were both freak incidences that couldn’t be planned for. But now I have a list of a few plumbers in case of an emergency and we walk through the properties with each of our tenants and show them how to turn off the water in case of an emergency. 

This has to be the stupidest experience I have ever had. So, I bought a house in East coast. I rent the house within 2 days of acquiring. I have absolutely no insurance on the property, nothing at all. Two months go by, and the tenant stops paying rent. PM sends her notices and she ignores. We go to the court and fike for eviction. The case goes on for a month and nothing happens. A few weeks after, the tenant was given a 15 day notice or something to vacate the property. My PM says that I get insurance ASAP. I get insurance, and the next day, the tenant burns the place down to ashes. She walks away clean and clear. I submitted a claim for total loss. Insurance gets on my behind. They keep telling me that how bad arson is and how illegal that stuff is. Anyhow, the fire reports and the insurance guys take 4 whole months before they even release the funds. I got the funds and started looking to get the demo done, and get the cleaned. The city wanted asbestos clearance before they could give me a green light for demo. We get asbestos done; turned out that the asbestos removal itself would be 40k. I bought the house for 35k (distressed). I got 72k from insurance, spent fifty something on cleaning the place. The land wasn't worth much, gave it to the city. The worst experience of my life. I'll get asbestos done before I even buy a house. Learned the hard way. Thank God, and great thanks to the PM who anticipated that the tenant might do something. Insurance saved me 90k. It gave me something in return. Totally worth the $250 I paid for the four months of coverage...

@Jaudat S.  after reading your story I Will make sure that I always have insurance on every property. You are blessed to have had a property manager who was wise enough to encourage you to get the insurance. What a crazy story.

Finding out that the owner of the property that you are managing has no property insurance. Yikes... The implications to the tenants and the owners could be huge in the event of a catastrophe.

Broken sewer pipe under the basement slab. FUN TIMES fixing that, cutting cement, reconnecting and back filling dirt and pea stones under the pipe. Then after sealing it up the pipe was not tilted correct...had to reopen and redo all over again

@Federico Gutierrez I hear you on plumbing issues.  This year alone we have spent 40k on unexpected plumbing issues.  That can really eat into profits.

Originally posted by @Shiloh Lundahl :

In keeping with the spirit of Halloween, what has been your scariest moment as a landlord or investor?

 I had one where tenant was robbed at gunpoint with bullet holes. I bailed (spooked me) that one so fast wholesale style it would make your head spin. 

Yep... Going through it right now... Have a HML on a home that was going to be a flip. But, the rehab ended up being a bit too high for a flip. It is a decent BRRRR, though.

Cannot rent the home under the terms of the HML.

We went to refinance and were told after 3 weeks of messing around that we could not because the home was purchased under a LLC and residential loans have to be in our personal names. So, we would have to sell the home from the LLC to ourselves, personally. (Sale vs refi).

After 6 more weeks of a paperwork and foot dragging, we were finally told today that we have to have funds in our personal accounts to "close" even though the transaction will be a cash back transaction.  The amount of liquid funds required is 20% of the appraised value.  We are about $5000 short.  Gifts will not work.  And $30K in another LLC account will not work because the other LLC's name is too similar to the name of the LLC that owns the home.  (Series LLC.)

If the transaction went through, we would get $50K back at closing.  Makes not sense.  But, apparently these are Freddie/Fannie rules.


So, it looks like we are stuck putting the home on the market at the WRONG time of the year and selling a nice cash flowing rental for a loss.  We even have a tenant who is waiting...

@James H. That is an awful story. How many banks have you looked into. When a banker says that you can't do something it usually means that they can't do something. To give some perspective, we have purchased 12 properties this year in series LLCs and we have gotten 75% loans on each of them with a small, local bank that does commercial loans. I would highly suggest connecting with other investors in your market that have buy and hold properties in their LLC's name and networking with them to find out which banks work best with investors on these types of loans. I found this bank through a fellow investor.

I hope this story can have a happy ending.

I am cautiously optimistic.  He wrote me earlier about an hour after posting that he can do a rate/term loan -- meaning that he can pay the HML but not do 75%.  Then, in 6 months or so, he can do the rest up to 75%.

We are also scraping around to see if we can show another $5000 somehow.  Maybe a JTROS account or the account we save charity money in... Or the account where property tax money is saved...  Maybe...

:-)

Originally posted by @Shiloh Lundahl :

@James H. That is an awful story. How many banks have you looked into. When a banker says that you can't do something it usually means that they can't do something. To give some perspective, we have purchased 12 properties this year in series LLCs and we have gotten 75% loans on each of them with a small, local bank that does commercial loans. I would highly suggest connecting with other investors in your market that have buy and hold properties in their LLC's name and networking with them to find out which banks work best with investors on these types of loans. I found this bank through a fellow investor.

I hope this story can have a happy ending.

This is actually not the first or second or third time we've used the same banker.  Very happy with rates, etc.  But, the closing process is always a nightmare.  We have been working with him for more than 2 months this time around.

Originally posted by @James H.:
I am cautiously optimistic.  He wrote me earlier about an hour after posting that he can do a rate/term loan -- meaning that he can pay the HML but not do 75%.  Then, in 6 months or so, he can do the rest up to 75%.

We are also scraping around to see if we can show another $5000 somehow.  Maybe a JTROS account or the account we save charity money in... Or the account where property tax money is saved...  Maybe...

:-)

Originally posted by @Shiloh Lundahl:

@James H. That is an awful story. How many banks have you looked into. When a banker says that you can't do something it usually means that they can't do something. To give some perspective, we have purchased 12 properties this year in series LLCs and we have gotten 75% loans on each of them with a small, local bank that does commercial loans. I would highly suggest connecting with other investors in your market that have buy and hold properties in their LLC's name and networking with them to find out which banks work best with investors on these types of loans. I found this bank through a fellow investor.

I hope this story can have a happy ending.

@James H. I hope it all works out for you with the loan.  I would encourage you to look at other banks though.  Different banks have different lending criteria and products.  We work with 7 different banks regularly because some terms are better than others with different properties.

Good luck to you.

Scariest;  first ACCEPTED offer, signing all that paperwork going into escrow (after reading and understanding EXACTLY what it all means), 

Second scariest; @ 2 weeks into rehab (doing most of it myself), looking through where walls and floors had been, wondering what I had gotten myself into.

Funniest with a Halloween theme - one fine early Sunday evening I get a call; "The stove is possessed" my tenants announces.

Turns out the stove had spontaneously gone into clean mode. It locked the door and cranked itself up to 1,000 degrees, cremating the pizza my lovely tenants had planned to have for dinner. Thankfully, after a few minutes of panic they thought to pull the stove out and unplug it. No harm except for some smoke. Who would have thought that a 1987 harvest gold color stove would have a motherboard that could go berzerk. 

@Deanna Opgenort Starting in real estate can be really scary especially on your first deal.  Good for you for jumping in anyway. If you hadn’t, you never would have experienced a possessed stove. Great story!

My Mom likes the idea of making T-shirts for home buyers with Sleeping Beauty's Castle on the front with the title "Before Escrow Closes" and the Haunted Mansion on the back with "After Escrow Closes".

She nixed the idea of "Slumlord" outlined in Rhinestones -- she said too many people wouldn't understand the irony (my house is really nice).

I had a recently evicted tenant send a group of friends to follow me and were instructed to throw me in the back of a van.  He called me the next day to let me know he called it off.  The reason it was scary is because he told me where I was the night before meaning that he did follow me.  

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