re: bad investments

re: bad investments

Real Estate Agent · Santa Clarita · Member since 2015 · 57 posts · 11 votes

Hi Friends,

My husband and I have been working with a company to invest out of state in Indy. The process has been horrible and arduous. The property has a great cash flow and a good cap rate, but the company keeps changing information on us. First, their agent says the owner will put in sump pumps to deal with the large puddle in the basement. Later the owner says no, she put in drains. Then they say they will fix windows and then decide that no, they will not fix windows. Finally they say they will take care of any mold issues and later come back and say they will "help remediate" mold issues if they are found. We don't know if there are mold issues because even after this now 45 day escrow, their Contractor somehow forget to turn in the sample. I keep telling my husband that this is a nightmare property, but he likes the cap and cash flow. I am looking for feedback from some experienced investors. I have bought two houses I lived in (and didn't have these issues), but this is our first investment property. Would you invest in this? With the constantly changing guarantees and possible mold? Thank you, Laurence

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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
10y
Originally posted by @Ryan Mullin:
You are entirely to "nit picky" to be investing in real estate.  From what I can gather your husband "gets it" and you are nervous and scared. 

....

Our contractor failed to send the test in...  guess what he's busy doing actual contracting.  Welcome to dealing with contractors. Guess what...  we lost money too.  We lost time.  Still losing time as I type this.  

I'm not jumping into the he-said/she-said and taking sides here (I don't know any of the parties), but after reading this post, I'll throw in an unsolicited opinion and a piece of business advice...

As a business owner, this is the WRONG way to be dealing with customer issues.  Badmouthing a potential customer -- who's biggest mistake is likely just being new, naive and paranoid -- in a public forum is not good business practice.  Especially given that many of your customers will be new, naive and paranoid.

As for your second statement above, it sounds like you agreed to get a mold test done and your contractor dropped the ball.  Sorry, but this isn't something you just chalk up to, "Welcome to dealing with contractors."  You told your customer you would do something; then you didn't do it. 

I've purchased hundreds of houses (i.e., I'm not new, naive or paranoid), but if I were told by a representative of mine that they would handle something for me, didn't handle it, and then just blamed it on a bad contractor, I'd be pretty pissed too.

The fact that you can blow off the fact that you didn't follow-through on the mold test you supposedly agreed to makes me wonder if you weren't just as nonchalant about agreements you made with the sump pump and the windows.  You may think these things are minor, but it's understandable that a customer wouldn't find them to be minor.  

This all goes right to the heart of your role as a turnkey seller -- you need to be TRUSTWORTHY.  And your comment above about the mold test doesn't instill much trust from me.

Again, I don't know you (or the OP) and it sounds like others here have had good experiences with your business, so maybe you're just having a bad day.  But, my suggestion is that, in the future, when you have to "fire a customer," you do it without the name calling and perhaps an apology for when your contractors may have dropped the ball.  If it weren't for your post above, I would have walked away from this thread with a relatively positive opinion of your company (based on others' comments and your other posts); but after this, I'm walking away thinking just the opposite.  

My opinion probably doesn't matter to you, but just think of all your potential future customers who may read this thread and walk away with the same impression I have...

See this reply in the discussion

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  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y

    When I read this thread I agreed with everyone.  The deal is cancelled.  Mutually released. 

    I know how this forum works and people will be private messaging each other and I want everything about our company out in the open.  This is my response to the thread.  And please don't take this the wrong way.  

    If you think a little confusion over sump pumps vs. drains in the basement is a "nightmare" then you are not ready for this. We catered to your requests and let you waste valuable time on due diligence, but you are treating this like you are moving in.  This is a rental property.  Its not perfect and we never guaranteed anything.  You just said that you don't want this deal and your husband does.  So it seems that you created an issue when one doesn't exist. If mold did exist we said that we would help get rid of it...  1. There is no mold.  2. If there was mold we said we would help get rid of it...  3. If there is any sign of mold the tenants will tell us trust me they will.  The tenants on both sides have excellent credit scores, they are picky as hell. They would let us know.   

    Furthermore, we never said that we would "fix the windows"   1. The windows are fine.  2. If the windows were an issue, again our tenants would let us know. Trust me. 3. I have emails where I explain exactly the thought process.  Its a house that is well over 100 years old. The windows they made back then are different from the ones you can buy at home depot for 200 bucks today.  To restore the windows back to there former glory would be an additional 10k or more and would take a ton of time.. and you couldn't do it in the winter time with out putting the tenants in a bad situation.  Considering we have roughly a 7k mark up on this property restoring the windows doesn't make sense.  Especially since the tenants are happy with the place.  

    "With the constantly changing guarantees and possible mold? Thank you"  

    We are experienced with rental properties.  Nothing is guaranteed in this business and every house has "possible" mold.   

    At the end of the day we WANT to make everyone happy but its not possible.  Glad we could end this now before managing the property came into play.  

    Good luck.  

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y
    Originally posted by :

    what are you paying that is the real question.. is this a 125k home that is in a great area and few things fixed and it has chance at appreciation or is this a 40k rental that will always be a 40k rental it does make a difference. 

    90k duplex (1300 sq ft each side) in area that ARV is roughly 125 - 150k for fully rehabbed single family 2000 sq ft. Mapleton Fall Creek. Heavy potential for appreciation. Great cash flow. Tenants have 700+ scores.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Ryan Mullin  the Joys of BP  inexperienced buyers with their version of  events then the soap box starts.

    Its why I posted that ( the way she posted this there is only one conclusion to be made) 

    Keep up the good work... 

    And as we all know that in 95% of the cases the Mrs. makes the yes no decision so in this case the Mrs does not want to go so this one will not go !!! I learned that within 6 months of selling RE.. be respectful to hubby but listen to wife   LOL

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Nada Mohamed  I totally disagree with your position on Mold very few if any houses have never had mold somewhere sometime... and clorox cleans it.

    We deal with it in virtually every property here in Oregon which is mold central.

     The only time mold has been a real issue is when a tenant uses it as an excuse to try to break a lease or get their way on something.  Actual mold is a non issue.  You clean it up, thats it. Mold is caused by moisture, so if you get rid of the moisture your problem is solved.  

    The property in question has a brand new roof, brand new HVAC, plumbing, electrical, it even has brand new sewer and water lines ran underground. Everything is brand new expect the foundation, walls, trim, windows and the hardwoods. We keep the old character of an 1890 home and replace the moving parts.   

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Ryan Mullin  the Joys of BP  inexperienced buyers with their version of  events then the soap box starts.

    Its why I posted that ( the way she posted this there is only one conclusion to be made) 

    Keep up the good work... 

    And as we all know that in 95% of the cases the Mrs. makes the yes no decision so in this case the Mrs does not want to go so this one will not go !!! I learned that within 6 months of selling RE.. be respectful to hubby but listen to wife   LOL

     Thank you Jay.  

  • Residential Real Estate Broker · Indianapolis, IN · Member since 2010 · 1k+ posts · 557 votes
    10y

    Ahhh, now we know the "other side of the story"...

    Now that we know what the subject property is and who is handling it - I'm going to have to support FS Houses & @Ryan Mullin.

    @Laurence Walsh-Hodson I know first hand that they run a honest operation - I would suggest you have another discussion with them to try to salvage this.  The area is great and their team is as well.

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y
    Originally posted by @Shawn Holsapple:

    Ahhh, now we know the "other side of the story"...

    Now that we know what the subject property is and who is handling it - I'm going to have to support FS Houses & @Ryan Mullin.

    @Laurence Walsh-Hodson I know first hand that they run a honest operation - I would suggest you have another discussion with them to try to salvage this.  The area is great and their team is as well.

     Thank you Shawn! 

  • Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    10y

    @Ryan Mullin I appreciate you being out front with your side of this.  What is the rent you are getting on this duplex (each side) and is it currently fully occupied?

  • Real Estate Agent · Santa Clarita · Member since 2015 · 57 posts · 11 votes
    10y
    Originally posted by @Ryan Mullin:
    Originally posted by :

    what are you paying that is the real question.. is this a 125k home that is in a great area and few things fixed and it has chance at appreciation or is this a 40k rental that will always be a 40k rental it does make a difference. 

    90k duplex (1300 sq ft each side) in area that ARV is roughly 125 - 150k for fully rehabbed single family 2000 sq ft. Mapleton Fall Creek. Heavy potential for appreciation. Great cash flow. Tenants have 700+ scores.

     Hi Ryan,

    Actually, It's a 100k property and we were trying to move through this process with you. Ashely cancelled the deal not us causing John to lose over $1000 in inspection costs. Jennifer Roberts told me that Ashly was going to put in sump pumps and then later denied it. Our contract says the "seller" will fix mold issues and then JR emails us that you will "help"? We waited one month for a mold report that your people forgot to submit. JR told us in writing that we would be able to open one window per room and then later FS decided that no, you wouldn't. I haven't misrepresented anything. I wanted an outside opinion since we are new to investing. From my perspective FS made mistake after mistake and lost my trust. John was ready to complete the transaction, but FS decided to end it (which wouldn't even be legal if we'd had a proper real estate agent to begin with.) Laurence

  • Real Estate Broker and Attorney · Durham, NC · Member since 2015 · 74 posts · 73 votes
    10y

    I don't know, from the original post I got the vibe that this was a serious mold problem not just some mold that can wiped with Clorox wipes - they were testing. Not sure. I have had minor mold issues in properties that can be cleared out with an effective mold cleaner/deterrent and Clorox. Every house of course has trace mold spores, but it can be a real problem in basements if it is on more than wall and extensive. I steer clear of mold personally, in Ohio, it scares away tenants and buyers.  Nada

  • Real Estate Agent · Santa Clarita · Member since 2015 · 57 posts · 11 votes
    10y
    Originally posted by @Shawn Holsapple:

    Ahhh, now we know the "other side of the story"...

    Now that we know what the subject property is and who is handling it - I'm going to have to support FS Houses & @Ryan Mullin.

    @Laurence Walsh-Hodson I know first hand that they run a honest operation - I would suggest you have another discussion with them to try to salvage this.  The area is great and their team is as well.

     Thanks Shawn, I appreciate your opinion. I was trying to see the other side of things. I'm glad you feel they are honest. We went into the deal with the best intentions. We are inexperienced and real estate in CA is different than in Indy. But they made mistake after mistake and didn't offer to solve the issues. 

    Here is my response to Ryan. Hi Ryan,

    Actually, It's a 100k property and we were trying to move through this process with you. Ashely cancelled the deal not us causing John to lose over $1000 in inspection costs. Jennifer Roberts told me that Ashly was going to put in sump pumps and then later denied it. Our contract says the "seller" will fix mold issues and then JR emails us that you will "help"? We waited one month for a mold report that your people forgot to submit. JR told us in writing that we would be able to open one window per room and then later FS decided that no, you wouldn't. I haven't misrepresented anything. I wanted an outside opinion since we are new to investing. From my perspective FS made mistake after mistake and lost my trust. John was ready to complete the transaction, but FS decided to end it (which wouldn't even be legal if we'd had a proper real estate agent to begin with.) Laurence

  • Real Estate Agent · Santa Clarita · Member since 2015 · 57 posts · 11 votes
    10y
    Originally posted by @Nada Mohamed:

    I don't know, from the original post I got the vibe that this was a serious mold problem not just some mold that can wiped with Clorox wipes. Every house of course has trace mold spores, but it can be a real problem in basements if it is on more than wall and extensive. I steer clear of mold personally, in Ohio, it scares away tenants and buyers.

    Nada

     Thanks Nada, we didn't know what kind of issue it was because the contractor never turned in the report. We were waiting and waiting for a response for 3 weeks before our agent told us they forgot to turn it in.

  • Rental Property Investor · Fishers, IN · Member since 2013 · 381 posts · 69 votes
    10y

    @Ryan Mullin I've never seen someone being attacked on here without their name being mentioned come straight out with it and let everyone know it's them the poster is talking about. Kudos!

    @Laurence Walsh-Hodson I will tell you this. I have purchased 3 properties through FS Houses and have them manage those properties as well. I couldn't be happier with the purchases and the management they have provided. Nothing is going to be perfect in real estate investing. One of the houses I bought had the basement flood because we had the most rain in the history of Indy Julys, and it flooded the furnace. Big expense in the first year, no fun. But it happens. I now shouldn't have to worry about that cost for several years, so it's out of the way hopefully.

    I can tell you that FS Houses and Ryan and @Ashley Mullin are as knowledgeable, honest, hard-working, and trustworthy as anyone I've met in this business. Take this post how you will, I don't know the exact emails/conversations, but I FS Houses to do what they know is right and what they say they will do.

    Lastly, no matter what company you go with, rental properties will have issues at some point. Nothing is going to be perfect. It took me awhile to realize that, but once you do realize that you'll be better off. Good luck!

  • Real Estate Agent · Santa Clarita · Member since 2015 · 57 posts · 11 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Laurence Walsh-Hodson   the way you posted your question there is only one answer.

    and you have gotten that answer.

    From my point of view it depends.. if this is a low end rental,  then I don't like basements at all for those. to many things to worry about. 

    And if its in Indy it could be a very old house... so its pretty hard to make those Inspection perfect without spending a ton of dough which to a very large extent goes contrary to those that fix and flip homes be them turn key or retail.

    what are you paying that is the real question.. is this a 125k home that is in a great area and few things fixed and it has chance at appreciation or is this a 40k rental that will always be a 40k rental it does make a difference.  Are you buying out of state just because the rentals are cheap ?  There are plenty of markets in the country that offer cash flow you may want to check similar prices in different markets to decide.. at mid west cash flow prices IE low end C class rentals it does not really matter the city they will all just trundle along with little or no up side.. does not matter how good an economy is as your always pulling from the bottom of the rental pool which will always be there.

    IT ALL boils down to the team providing it and the PM so if that is bad up front usually in my limited experience in this space says it won't get better.... Although inspectors do kill deals and inexperienced investors freak out with inspection reports.. Mold is NO issue every house has mold you just take clorox to it  LOL... thats the end of that story. And your tenants will cause the mold usually

     Thanks Jay, it's good to know that mold can be taken care of so easily. I have heard horror stories about people's health destroyed by mold and it was important to me that our future tenants be safe.

  • Real Estate Agent · Santa Clarita · Member since 2015 · 57 posts · 11 votes
    10y
    Originally posted by @Rodney Kuhl:

    @Ryan Mullin I've never seen someone being attacked on here without their name being mentioned come straight out with it and let everyone know it's them the poster is talking about. Kudos!

    @Laurence Walsh-Hodson I will tell you this. I have purchased 3 properties through FS Houses and have them manage those properties as well. I couldn't be happier with the purchases and the management they have provided. Nothing is going to be perfect in real estate investing. One of the houses I bought had the basement flood because we had the most rain in the history of Indy Julys, and it flooded the furnace. Big expense in the first year, no fun. But it happens. I now shouldn't have to worry about that cost for several years, so it's out of the way hopefully.

    I can tell you that FS Houses and Ryan and @Ashley Mullin are as knowledgeable, honest, hard-working, and trustworthy as anyone I've met in this business. Take this post how you will, I don't know the exact emails/conversations, but I FS Houses to do what they know is right and what they say they will do.

    Lastly, no matter what company you go with, rental properties will have issues at some point. Nothing is going to be perfect. It took me awhile to realize that, but once you do realize that you'll be better off. Good luck!

     Thank you for your opinion, Rodney. We really tried to make it work. Not sure why your experience was so different than ours. Who did you work with? The most frustrating thing for me was being told one thing and then that being contradicted later. Glad you had a positive experience. 

  • Investor · West Suffield, CT · Member since 2013 · 106 posts · 42 votes
    10y

    @Laurence Walsh-Hodson It is typically not a great idea to choose long distance for your first investment property.  It's possible that the experience could ruin you as an investor altogether.  Try to find a property somewhat close to home so you can get your feet wet and establish your systems and best practices before jumping to something out of state.

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y
    Originally posted by @Laurence Walsh-Hodson:
    Originally posted by @Ryan Mullin:
    Originally posted by :

    what are you paying that is the real question.. is this a 125k home that is in a great area and few things fixed and it has chance at appreciation or is this a 40k rental that will always be a 40k rental it does make a difference. 

    90k duplex (1300 sq ft each side) in area that ARV is roughly 125 - 150k for fully rehabbed single family 2000 sq ft. Mapleton Fall Creek. Heavy potential for appreciation. Great cash flow. Tenants have 700+ scores.

     Hi Ryan,

    Actually, It's a 100k property and we were trying to move through this process with you. Ashely cancelled the deal not us causing John to lose over $1000 in inspection costs. Jennifer Roberts told me that Ashly was going to put in sump pumps and then later denied it. Our contract says the "seller" will fix mold issues and then JR emails us that you will "help"? We waited one month for a mold report that your people forgot to submit. JR told us in writing that we would be able to open one window per room and then later FS decided that no, you wouldn't. I haven't misrepresented anything. I wanted an outside opinion since we are new to investing. From my perspective FS made mistake after mistake and lost my trust. John was ready to complete the transaction, but FS decided to end it (which wouldn't even be legal if we'd had a proper real estate agent to begin with.) Laurence

     Ok 100k...  

    Ashley and I both decided to cancel the deal.  And we are a brokerage and Jenny is a licensed broker.  You could have decided to not sign the mutual release, and we would have had to honor the contract.  Sure...  buy the house.  But we wouldn't manage the property for you.  You are entirely to "nit picky" to be investing in real estate.  From what I can gather your husband "gets it" and you are nervous and scared. 

    If the contract said something then we would have honored it.  But you are literally looking for problems.  There was no mold.  Our contractor failed to send the test in...  guess what he's busy doing actual contracting.  Welcome to dealing with contractors. Guess what...  we lost money too.  We lost time.  Still losing time as I type this.  

  • Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    10y

    >>he likes the cash flow and cap rate

    WOW that is the root of most blow ups.

    I hope you walk on this one.  Water problems are reason enough even if the Turnkey shop is great.

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y
    Originally posted by @Larry Fried:

    @Ryan Mullin I appreciate you being out front with your side of this.  What is the rent you are getting on this duplex (each side) and is it currently fully occupied?

     Yes both sides rented to excellent tenants.  I'm pretty sure its 675 on 1 side and 625 on the other...  so 1300/month.  

  • Real Estate Agent · Santa Clarita · Member since 2015 · 57 posts · 11 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Ryan Mullin  the Joys of BP  inexperienced buyers with their version of  events then the soap box starts.

    Its why I posted that ( the way she posted this there is only one conclusion to be made) 

    Keep up the good work... 

    And as we all know that in 95% of the cases the Mrs. makes the yes no decision so in this case the Mrs does not want to go so this one will not go !!! I learned that within 6 months of selling RE.. be respectful to hubby but listen to wife   LOL

     Hi Jay, Yes it was the Mrs that killed the deal. Ashley. Not I. I was trying to work it through with FS. Ashley pulled the plug when we asked them to take responsibility to pay the lender to keep the interest rate when we needed to extend escrow because their contractor never turned in the mold report. Oh and we also asked them to stand by their contract to fix the mold issue if there was one and not just "help" us with it. Mrs. Laurence

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y
    Originally posted by @Laurence Walsh-Hodson:
    Originally posted by @Jay Hinrichs:

    @Ryan Mullin  the Joys of BP  inexperienced buyers with their version of  events then the soap box starts.

    Its why I posted that ( the way she posted this there is only one conclusion to be made) 

    Keep up the good work... 

    And as we all know that in 95% of the cases the Mrs. makes the yes no decision so in this case the Mrs does not want to go so this one will not go !!! I learned that within 6 months of selling RE.. be respectful to hubby but listen to wife   LOL

     Hi Jay, Yes it was the Mrs that killed the deal. Ashley. Not I. I was trying to work it through with FS. Ashley pulled the plug when we asked them to take responsibility to pay the lender to keep the interest rate when we needed to extend escrow because their contractor never turned in the mold report. Oh and we also asked them to stand by their contract to fix the mold issue if there was one and not just "help" us with it. Mrs. Laurence

     We pulled the plug when you made this post.  

  • Real Estate Agent · Santa Clarita · Member since 2015 · 57 posts · 11 votes
    10y
    Originally posted by @Meghan Reed:

    @Laurence Walsh-Hodson It is typically not a great idea to choose long distance for your first investment property.  It's possible that the experience could ruin you as an investor altogether.  Try to find a property somewhat close to home so you can get your feet wet and establish your systems and best practices before jumping to something out of state.

     Thanks Meghan, words of wisdom.

  • Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y
    Originally posted by @Rodney Kuhl:

    @Ryan Mullin I've never seen someone being attacked on here without their name being mentioned come straight out with it and let everyone know it's them the poster is talking about. Kudos!

     Thanks Rodney!  

  • Real Estate Investor · Milford, NE · Member since 2011 · 201 posts · 140 votes
    10y

    In my opinion if you've done all the due diligence on this house, before I'd walk away, I'd raise hell with the sellers, telling them that you don't  trust them or their realtor with the way this deal has been handled, then throwing out an offer to them that would regain your interest in the house. If your going to walk anyway, and you've got time and money in this house, what could it hurt to lowball them on the way out. If its  possible and you raise enough of a stink about the wasted time and money you've invested in this deal, the deal may come your way......It'll be easier to play around with them now that you don't care if you even buy the house. ( I would not let the sellers forget this fact for sure.)  I've gotten a few bought  this way........When you have nothing to lose.......its hard to lose.Do NOT close on this property before satisfied, after closing you'll have to argue your disagreements in front of a judge..not good.  Just my opinion......

  • Investor/Consultant · Minneapolis, MN · Member since 2015 · 29 posts · 6 votes
    10y
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