Im lost and don't know what to do

17 Replies

I have made a big mistake and i think my mentor is trying to take advantage of my situation. I am new very small with only 3 units and only one unit occupied and the and nother 1 occupied but has not paid since July and i was told i cant evict them till March when the weather gets warmer by the Judge. I was remdeling the upstairs of the one unit and i didnt j=know that my sity has a building code that all investment properties remodels have to have licensed contractors to do all work even the simple stuff like hanging drywall and insulation and other stuff. I did not know im new an ive seen other landlords do this stuff no problem. but i cant get enough funds to fix it because contractors that are licensed and bonded are 300% more then then a handy man. now i think i have to sell but all the investors wont touch it because they said that it is tagged and will be to much for them to work with the city and it seems like will be stuck with a duplex with one tenant not paying and the upstairs not livable because the wals are out. I need some hope.

Sorry to hear.  How is your mentor taking advantage of you? I hope your not paying him.   

it sounds like you needed to do more due dillegence.  But you are here now, so you may have to pay the extra for the licensed contractor and see this as a learning experience.

Did you just buy this property? The seller should have disclosed that a tenant is not paying.

Hey Matthew, 

Sorry to hear you are in this situation. Here are a few recommendations I can make:

Take out a personal loan: Maybe you can take out a personal loan to get the repairs completed on the second unit and pay it back over time. Luckily you are only talking about one unit that needs the work and not 10 of them. Assuming you work a fulltime job, maybe you can support the mortgage payments while getting this work done. I would take time to do the math and see what rent you would get for a rehabbed unit. 

* Sell: If you are not looking to rehab the unit due to the costs being too high and not worth it, maybe sell it at a discount and take the loss. I would try to avoid this option if possible. Again, if you can support the mortgage for a little while, while getting things worked out, that may be a better option. 

* Speak With Other Investors: Have you tried talking with other investors in your area about your situation and asking them for guidance? Maybe attend a local meetup and openly speak about your situation, you may find someone who is willing to help you out. The worst thing you can do is work in solitude and try to figure out everything yourself. 

I know it is a tough situation to be in but you must hold yourself accountable for everything and find a solution. Keep looking for a solution and do not get down on yourself, it is what it is. 

Good luck on your journey and do not let this speed bump stop you, many of us have had some crappy experiences when first starting out. We will all be tested at some point in our REI journey to see if we really want it. Do you?

IM reading some of your old post. I see you paid someone 41K to learn about real estate investing.   Is that the same mentor that lead you into this situation?

1. I did not pay for a mentor 41K i figured why pay that much for someone when i could use that to invest so i did

2 the mentor did take me under i did some work for him and he taught me what he could i figured heck he 1800 units so he must know something

4 now that im in this situation i feel like he is trying to force me to sell him a property that i fixed up and it is my only income producing unit.

5. my situation is a little more complicated i accidentally got caught doing unpermited work and the downstairs tenant called the city as she was not paying i think it was a way for them to get more time living for free due t a retaliation law in our state and city. now before i get lambasted i did not do the major stuff without incensed individuals like the electric and plumbing and HVAC. i got caught in a getting removed from a grandfather claus which is fire blocking because the house was built pre 1900 so it had balloon framing so i was like ok.  Well that opened up a bag of worms because now the city is stating that th permits that i did get are now null and void because i don't live in the house which i never said that i did.  now they want me to use a licensed bonded insured for every task such as putting a door in a closet or putting a new bathtub in and hanging drywall and i got the estimates for all the different trade and the cost will put me over 80000 more then i will ever get out of the property if i were to sell it.  and if i do keep it i will be under water for a very long time for that property but all the investors say that they can not touch because they don't want to have the city down there throats. so i really do not know what to do 

@Matthew Utt I don't know your local laws but, if you have the city involved and they want to bring it up to fire code you have a long, expensive road ahead of you.  Locally, we have to use two layers of 5/8 drywall or a sprinkler system.  Both are very expensive with materials and labor.

If you need to un-due some of the work you did, then bring it up to fire code, then pass a Certificate of Occupancy inspection... you are going to need the unit you are working in to pass, and you are going to need the entire building to pass.

Not only do you need licensed contractors but, you need permits every step of the way.  From the sounds of it, assuming there is a ton of code involved, you need to back track to having an architect as well.  

If you don't have the money to get yourself through this you need to cut your losses and sell.  

@Matthew Utt there is a price where someone will inherit your issues, its probably just not one you are going to like.  Almost every area has a couple cash investors who are legitimate.  You can find them easily because they spend a lot of money marketing.  Start using some key words on Google or FB like "sell my home fast" or "sell for cash" and they will pop up.  Get some cash buyers in there and hope and pray you get a decent sale price.  

Even if the city is in there it can still be fixed unless they want you to condemn the home, there is just going to be a price to pay.

Why don't you explore selling to your mentor if you are that far up a creek?  Or ask him to find a buyer?

Originally posted by @Matthew Utt :

@Matthew Irish-Jones do you have any idea how to sell a property that now has the city on its radAR as the investors in my area has stated that it is tagged so they will be bearing down on them and they dont want the attention.

Yes I do 
call a the real estate agent who you see with for sale signs in your neighborhood 

list your properties at

The price they recommend 

Get it sold 

Lean from your experience 

Do not now rather than incurring more expenses on top of what you already incurred 
 

Originally posted by @Matthew Irish-Jones :

@Matthew Utt I don't know your local laws but, if you have the city involved and they want to bring it up to fire code you have a long, expensive road ahead of you.  Locally, we have to use two layers of 5/8 drywall or a sprinkler system.  Both are very expensive with materials and labor.

If you need to un-due some of the work you did, then bring it up to fire code, then pass a Certificate of Occupancy inspection... you are going to need the unit you are working in to pass, and you are going to need the entire building to pass.

Not only do you need licensed contractors but, you need permits every step of the way.  From the sounds of it, assuming there is a ton of code involved, you need to back track to having an architect as well.  

If you don't have the money to get yourself through this you need to cut your losses and sell.  

 not sure about having to hire licensed contractors for things other than electrical and plumbing.. Owners can in most all jurisdictions I am aware of do their own work .. and of course you can have an assistant help you.. 

It sounds like you're in pretty deep doo doo on this situation. You've paid your tuition. I'd try to find a contractor to buy the property from you. They can pull the permits, do the work and probably come out ok on this. What kind of money have you invested into this situation? (ie, what would you have to net to break even?)

@Matthew Utt you should reach out to wholesalers and sell it "As is". I think if you talk to a wholesaler they can help you. But do it very soon.

I haven't read all the reports carefully but if you haven't, you should forgive yourself. We all make mistakes. Some are more expensive than others but you will get through this.

You have gotten some good advice in the replies to your post.  Sometimes you have to stand back, assess the situation and realize that cutting your losses is the best option.  You have learned a lot from the situation and those lessons can carry you through your next project without the financial lessons you learned here.  They include:

  • Make use of BP as you did here but hit us up before you sign on the dotted line so to speak.  There are a lot of great contributors here that can help guide you to avoid getting into a bad situation
  • Find out how the permitting system in the area(s) you are interested in investing in operate.  Some a sticklers and others are easier to get things done.  We did several flips in a small Michigan town and we were forever getting called out by the city code people for nit picky issues and paying for permits for everything.  We moved about 2 miles away into the township and their code enforcement staff was very supportive especially in that we were improving the properties.  So do some homework and you might be surprised at the difference a few miles makes.
  • See if you can connect with fellow investors in your area - look for any Real Estate Investment groups and make some friends through that avenue.  There are plenty of deals to go around and most are willing to help you get through the wickets on the way to the sale and payday
  • Have you met with the code people in your town that you feel have you on their radar?  It sounds like there is more to the story or as the late Paul Harvey said "the rest of the story".  I would meet with them and see what their beef might be and see if they have a solution that might work for you.  Make an appointment with the head guy and not one of the enforcement people.  I have seen where they are flat wrong but would not admit it and had to go to their boss.  Pull up the codes online and see where they are coming from in advance so they know you have done some homework.

As far as a wholesaler goes, they will buy your property (or get it under contract) and then hope to resell the contract to an investor.  If you can find the investor directly, you cut out the middle man and put a few dollars back in your pocket ($5,000+).  Try posting on one of the Facebook groups that serve your area or even on the Find Deals section here.

Good luck and remember, you have a support family here that can help avoid some of the mines out there.