Strategy for tenant damaged rental. What would you do?

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Strategy for tenant damaged rental. What would you do?

Michael C.
North Hollywood, CA · Member since 2016 · 50 posts · 20 votes

I have a SFH that has had a tenant(crackhead) squatting since last june. The marshalls FINALLY came to execute the eviction last week. The house is bad. Trash every where, all appliances destroyed, cabinets destroyed, bathtub tiled over?(really), ETC. Prop mgr thinks 30k at least to bring back to livable.(I'm in california) If you're wondering, original tenant was vetted and great for a couple years, got on drugs and his boyfriend stayed and squatted.

So my question is should I:

A. Repair out of pocket and sell. I would parlay the equity into a nicer place/ neighborhood.

B. Use some kind of financing to repair and if so what is a good option? I would then rent at a higher price. (I can only repair out of pocket if I'm going to sell as I need the money back relatively soon)

C. Don't repair and sell as is. 

I bought in 2017 so I have a lot of equity. In decent condition could probably get low to mid 200k's in current condition probably mid to high 100ks I would say this is a C neighborhood.I save all income from this property so I have some money put up for cap ex stuff but this will burn through that.  I'm not a super rich baller so I can't just pay whatever and let it ride. I'm honestly really mad someone would just destroy my house like this.  It comes with the territory but it's messed up.

So.... Any advice?

I'm happy to answer any questions.

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Charles Carillo
Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
3y

@Michael C.

I would say repair and sell. Then buy again in a better area. 

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  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    @Michael C.

    I would say repair and sell. Then buy again in a better area. 

    3Reply
  • Ramzi Nuseibeh
    Real Estate Agent · Newport, KY · Member since 2016 · 24 posts · 0 votes
    3y

    With the info given, I'd vote for repair and sell. Seems like a better return, and I sure wouldn't hold long term in this neighborhood from what you've said. 

    0Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Ramzi Nuseibeh:

    With the info given, I'd vote for repair and sell. Seems like a better return, and I sure wouldn't hold long term in this neighborhood from what you've said. 


     Yea I don't think I can raise rent enough to recoup the repair cost quickly. The value has gone up but not the rents

    0Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Charles Carillo:

    @Michael C.

    I would say repair and sell. Then buy again in a better area. 


     Right on, this is how I'm leaning

    0Reply
  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    3y

    You're likely to net more if you fix up the place and sell it, rather than sell it in trashed condition. There is a reason why flippers make money buying trashed places. 

    So your original tenant was good, but they left and left you with a squatter. Why aren't you going after the original tenant for the damage and lost rent? 

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    I'd also vote for fix and sell.

    0Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Greg M.:

    You're likely to net more if you fix up the place and sell it, rather than sell it in trashed condition. There is a reason why flippers make money buying trashed places. 

    So your original tenant was good, but they left and left you with a squatter. Why aren't you going after the original tenant for the damage and lost rent? 


     Original tenant is either in a mental institution or on the street. His mother cosigned though and we are going after her. It's really sad actually the tenant used to be regular and really nice but drugs and mental health wiped him out. His boyfriend was the one squatting.  ( also a crack head)

    I doubt I'll get anything but I'm going to try. 

    0Reply
  • Richard F.
    Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
    3y
    Aloha,

    Repair and freshen up cosmetics; sell using 1031; invest in better location; tighten up your screening process AND your processing of delinquent rents.
    1Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    3y

    Tiled over the bathtub--WOW....

    That kind of behavior makes me wonder what other (hidden) goodies have been done to the place.

    Removed the furnace heat exchanger for who knows what reason.

    Rewired all of the electrical outlets backwards for the same reason.

    That tub thing might just be the tip of the iceberg, and (seriously) maybe there is a (decedent) under there?

    Not meaning to be morose but tiling over a tub is very strange behavior.

    You might want to pop up into the attic and have a look around too.

    Good Luck!

    1Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Scott Mac:

    Tiled over the bathtub--WOW....

    That kind of behavior makes me wonder what other (hidden) goodies have been done to the place.

    Removed the furnace heat exchanger for who knows what reason.

    Rewired all of the electrical outlets backwards for the same reason.

    That tub thing might just be the tip of the iceberg, and (seriously) maybe there is a (decedent) under there?

    Not meaning to be morose but tiling over a tub is very strange behavior.

    You might want to pop up into the attic and have a look around too.

    Good Luck!

    Yes we are giving the whole place a deep inspection. I hope theres no bodies in there haha. They basically did a mosaic tile over the edges of the tub. Super weird.I think the pandemic messed them up mentally.
    3Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Richard F.:
    Aloha,

    Repair and freshen up cosmetics; sell using 1031; invest in better location; tighten up your screening process AND your processing of delinquent rents.
    Sounds like a plan, Mahalo.
    0Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    3y

    @Michael C. Small claims

    0Reply
  • Todd Jones
    Member since 2023 · 243 posts · 199 votes
    3y

    There are a few variables to consider.

    You spend 30k and fix up the place. Then what?

    Could you rent to another tenant? How is the street (a neighborhood can be great but the street the house is on could be bad). Can you find a decent tenant? If so, I say rent.

    Sounds like you did your due diligence on screening. You couldn’t have predicted all of this.

    ok, you fix and sell. With the $$$ could you get a house in a much better location AND get cash flow from the rent-mortgage-other expenses?

    Recommend looking around to see if the deals are there for a cash flow. But regardless, fix up the place. Once it’s done, it will be a story to tell.

    0Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Todd Jones:

    There are a few variables to consider.

    You spend 30k and fix up the place. Then what?

    Could you rent to another tenant? How is the street (a neighborhood can be great but the street the house is on could be bad). Can you find a decent tenant? If so, I say rent.

    Sounds like you did your due diligence on screening. You couldn’t have predicted all of this.

    ok, you fix and sell. With the $$$ could you get a house in a much better location AND get cash flow from the rent-mortgage-other expenses?

    Recommend looking around to see if the deals are there for a cash flow. But regardless, fix up the place. Once it’s done, it will be a story to tell.

    This is a great response. I have been wrestling with all of this since last week.  It's not the most Ideal time to be getting into a different property but I do have significant equity so that helps.  I guess finding  the cash flowing deal is gonne be the make or break of it. The neighborhood is ok but the block definitely has some issues.  If I was rich I would buy them out and the street would be great and 
    I would for sure continue to rent it. But it is what it is.
    0Reply
  • Ray Hage
    Investor · Fort Lauderdale, FL · Member since 2020 · 1k+ posts · 755 votes
    3y
    Quote from @Michael C.:

    I have a SFH that has had a tenant(crackhead) squatting since last june. The marshalls FINALLY came to execute the eviction last week. The house is bad. Trash every where, all appliances destroyed, cabinets destroyed, bathtub tiled over?(really), ETC. Prop mgr thinks 30k at least to bring back to livable.(I'm in california) If you're wondering, original tenant was vetted and great for a couple years, got on drugs and his boyfriend stayed and squatted.

    From one investor and landlord to another, I am sorry what happened to your apartment and can sympathize. I had a similar problem with a tenant who was amazing at first (6 figure job and super nice guy) totally wreck my place but it was a small studio but I still had to spend 15k out of pocket to make it nice again. I am going to be able to recoup the losses thankfully. 

    In your case, from what info you provided I think the best move would be to fix it up without overspending on things that won't increase the sales value and then sell it and  1031 into a better income-producing property. You'll have less headache and better tenants. Of course, this process is going to suck but you'll do great in the long term. 

    3Reply
  • Todd Jones
    Member since 2023 · 243 posts · 199 votes
    3y

    You mentioned going after the mother that co-signed on the home. Morally, that is tricky area.

    The mother may had nothing to do with what happened to the unit. She just wanted to help her son get a home. She may be suffering big time dealing with him, wonder where his is, and then get a summons indicating she’s being sued. Now she has to find a lawyer…all because of him.

    Or…

    The mom may have been the one that put the mosaic on the tub and added to his mental instability.

    Of course, I do 100% get it. It is cut-n-dry: “You co-signed. The place is trashed. I’m not going to use my hard earned savings, go into debt, or force to sell something I worked for just because of someone else’s “don’t care”/irresponsibility. See you in court.”

    You know all the details to make that call.

    I’m not going to give any legal advice so I say talk to an attorney. Some may give 30 min free advise.

    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y

    You aren't cut out for being a California Landlord. Find a good REALTOR and follow their advice of either selling fast and easy or going through renovations and then selling. It shouldn't be hard to get a personal loan to cover expenses until it sells.

    The DIY Landlord Book4.7248 Reviews
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    0Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Nathan Gesner:

    You aren't cut out for being a California Landlord. Find a good REALTOR and follow their advice of either selling fast and easy or going through renovations and then selling. It shouldn't be hard to get a personal loan to cover expenses until it sells.


     I'm not a california landlord(my property is in GA), I actually don't consider myself a landlord at all. Just happen to have a couple investment properties. So you are right. Everybody has their thing.I'm also not cut out to be a bald, overweight, loser who's whole identity revolves around his work either. But you got that covered. Cheers.

    2Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Todd Jones:

    You mentioned going after the mother that co-signed on the home. Morally, that is tricky area.

    The mother may had nothing to do with what happened to the unit. She just wanted to help her son get a home. She may be suffering big time dealing with him, wonder where his is, and then get a summons indicating she’s being sued. Now she has to find a lawyer…all because of him.

    Or…

    The mom may have been the one that put the mosaic on the tub and added to his mental instability.

    Of course, I do 100% get it. It is cut-n-dry: “You co-signed. The place is trashed. I’m not going to use my hard earned savings, go into debt, or force to sell something I worked for just because of someone else’s “don’t care”/irresponsibility. See you in court.”

    You know all the details to make that call.

    I’m not going to give any legal advice so I say talk to an attorney. Some may give 30 min free advise.


     I struggled with being nice to these folks and thats probably what got me into this situation.  I will go after mom but I will be reasonable. I don't want to ruin her but there's no reason I should have to pay  for her son's issues. She really shouldn't have to either but definitely not me. My property management did their best but **** happens.

    0Reply
  • Mark Broadway
    Real Estate Agent · Springfield, MO · Member since 2008 · 10 posts · 3 votes
    3y

    if you fix up and sell, can you purchase with a reasonable price where it still cashflows like this one?  In Cali, I'd think that should be considered very seriously.

    0Reply
  • Michael C.
    OP
    North Hollywood, CA · Member since 2016 · 50 posts · 20 votes
    3y
    Quote from @Mark Broadway:

    if you fix up and sell, can you purchase with a reasonable price where it still cashflows like this one?  In Cali, I'd think that should be considered very seriously.


     My property is in Georgia. I just live in California. So I will be looking in GA if I decide to sell and repurchase

    0Reply
  • Jarred Dukes
    Chesapeake, VA · Member since 2017 · 14 posts · 11 votes
    3y

    I vote to repair and sell as well. As you were saying, I agree.  I would not use my own money.  Find a lender (preferably private so you can structure an interest only payment plan) who will lend to you to do the repairs and put it up for sale. Repay the lender and 1031 up to a better neighborhood. Update your contacts when you do so you're better covered when things like this happen. Hope that helps. 

    1Reply
  • Mark Broadway
    Real Estate Agent · Springfield, MO · Member since 2008 · 10 posts · 3 votes
    3y
    Quote from @Michael C.:
    Quote from @Mark Broadway:

    if you fix up and sell, can you purchase with a reasonable price where it still cashflows like this one?  In Cali, I'd think that should be considered very seriously.


     My property is in Georgia. I just live in California. So I will be looking in GA if I decide to sell and repurchase


     Gotcha.  I'd still need to consider the cashflow of the new opportunity.  In my area, cash on cash returns have gone from 10-12% to 8% with increased prices and increased rents.  It's a crazy time.

    0Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    3y
    0Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    3y
    Quote from @Gary L Wallman:
    Quote from @Michael C.:
    Quote from @Nathan Gesner:

    You aren't cut out for being a California Landlord. Find a good REALTOR and follow their advice of either selling fast and easy or going through renovations and then selling. It shouldn't be hard to get a personal loan to cover expenses until it sells.


     I'm not a california landlord(my property is in GA), I actually don't consider myself a landlord at all. Just happen to have a couple investment properties. So you are right. Everybody has their thing.I'm also not cut out to be a bald, overweight, loser who's whole identity revolves around his work either. But you got that covered. Cheers.


     Guys,

    Way too harsh, IMO no one is cut out to be a California landlord. Laws are way too skewed towards tenants.

    Personal attacks are never appropriate.

    Maybe shake hands on this one.

    Respectfully,

    Gary

    1Reply
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