The Call Every Real Estate Investor Will Eventually Get

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I could hear the desperation in her voice.  Diane was nearly hysterical.  She had just found out that she lost her home of 18 years to foreclosure.  An investment group bought her property at the courthouse steps for $70,000.  Then, they promptly posted a notice on her door that read WRITTEN DEMAND AND SURRENDER OF POSSESSION.

Diane had gotten my number from a Realtor that attended a class I teach about working with real estate investors.  This Realtor told her I may be able to help.  Of course, I felt bad for Diane.  She’s a school teacher and is suffering from arthritis.  And if things weren’t difficult enough she’s also the primary caregiver to a stroke patient.  

She sent me an 8 page fax, complete with a letter from her attorney addressed to the foreclosing trustee and a copy of the eviction letter.  It turns out that Diane’s foreclosure had an additional wrinkle to it.  She wasn’t the owner of the home.  Back in 2006, she sold it to an investor for $185,300.  This investor allowed her to stay in the house and rent it back for $1,300 a month.

Less than two months later this investor flipped it to another investor for $265,000.

What amazed me most about all of this is that the investor who purchased the home for $265,000 was able to hang on to the property for 5 years.  He must have had at least $500 a month in negative cash flow.  Plus, he was underwater on the mortgage by over $150,000.  I’m surprised he didn’t stop paying the mortgage much sooner.

In any event, Diane wanted to know if I could buy the house from the investment group that picked it up at the auction.  She would then rent the house from me for $1,300 per month. 

Now if you’ve been investing in real estate for long you’ve probably received a call like this before.   It’s easy to convince yourself that there’s a lot of upside to doing a deal like this too.  You get to help someone out of a bad spot.  More importantly, you get the property for below market value with a built-in tenant.

But if you study history you can see that this deal has lose/lose written all over it. 

Diane has had financial problems in the past.  That’s why she had to sell the house to an investor in 2006.  What happens if she encounters trouble again?  I would have no choice but to evict her from a house that she believes is really hers.  And do you think she would voluntarily leave without a fight after 18 years in the home?

obliviousI explained to Diane that buying the house and renting it back to her was not an option.  She became very distraught.  I was told you could help me, she said.

Yes Diane, I can help you.  I advised her to start packing immediately because a law enforcement officer would be at the door in a few weeks to lock her out.  I also instructed her to find another house to rent as soon as possible.  She said she didn’t have the money to move and didn’t know where to go to find a rental property. 

No problem, I said.  I can get 6-8 guys to your house this weekend that will do it for free – and I’ll call property management company I do business with to find you a house to rent.

Diane said thanks, but no thanks.  She was not going to move.  After all, it’s her house right?

About Author

Marty (G+) is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing.


  1. Hi Marty~
    Great post. Your red flags flew high all the way through.
    This is a person who may have been victimized by her lack of knowledge and unwillingness to recognize that the attachment to this property was purely emotional.

    Kudos for offering assistance!

    • Judi, it is sad that many like Diane give up so much just to stay in their home. I tell people that your home is just a place to keep your stuff. If you have to move the memories, like your favorite chair, are portable. Thanks for reading.

  2. I’m with Judy on this one, Marty. You went above and beyond to help out and should be commended for it. Getting yourself into trouble out of your own generosity is just a formula for disaster. Great story, great lesson, and great article!

    • Joshua, I didn’t have time to get into it in this post but I’ve been burned doing deals like this before. The day I rescued the homeowner I was a white knight. The day I had to evict for non-payment I was the devil. The biggest problem with a deal like this is that the homeowner doesn’t understand the house isn’t theirs anymore, no matter how many disclosures you make them sign.

      • While I haven’t dealt with this situation, I’ve heard the story many times from others here on BiggerPockets. Like you said, it seems like no matter how hard you try, you can’t convince many people in this situation that the home is no longer theirs. It is hard to let go when you’re so emotionally attached.

        • Joshua, Robert C. didn’t find my advice valuable. For some reason he didn’t post this in the comments section. He sent me an email instead. Here it is with my response:

          Subject: What a sweet guy you are (if you are too ignorant, I am being sarcastic)

          Hello Marty,

          I read your small article on
          “The Call Every Real Estate Investor Will Eventually Get”

          You sound like a heartless soul. But it seems like a lot of investors, banks, and wall street all share the same heart. I hope you get what you deserve for being a prick. I wish you to be homeless and broke and that people spit on you also.

          You can make money and still not treat people like shit, shithead.

          Robert C.

          And my reply –


          Tell me what you think is worse – me buying this house from Diane, renting it to her and then evicting her six months later because she can’t pay the rent OR helping her find a more affordable place to live and helping her move there for FREE? I was honest with Diane and I’ve been in her shoes. I wish someone would have given me this same advice. And for what it’s worth, I also recommended to Diane that she seek out help from her church. How many real estate investors do you know that would have done that?

  3. I see this all the time – the last three years have been especially tough on people. People like “Diane” who are life-stylers, rather than life-eventer’s will always blame someone else for their poor choices. Like you I am amazed that someone else continued to subsidize this womans home for five years!

    In the end she really didn’t want the truth or real help, she just wanted someone to tell her that she wouldn’t have to move out of “her” home.

  4. I can’t speak on what type of person Diane is.I can tell you that this strategy by investors was fraudulent.They would tell the owners sell to me at a low price and then I will rent it back to you.Then when you get on your feet I will sell it to you for not much higher than I paid for it.

    What happened is they sold to the investor low and when they missed one rent payment or was late they kick the former owner out and sold it.I would also see investors or their attorneys present an 8 page contract and then after the owner signed add pages or take out pages to it.This is why I always recommend initialing and dating each page in a contract.Make sure to put the signature where it can’t be cut off.

    Diane could have gotten cash for keys but more than likely the bank would have wanted broom swept condition and with decades of junk it would be better to leave the trash and yard sale what you don’t want to take.You will make cash to pay for moving and have less to move.Plus the extra month or so you pay no rent for you can save for a deposit.

    If the bank was foreclosing the bank would have to honor the tenant lease if a written contract was in place that was not month to month.

  5. It isn’t your responsibility to take care of her, yet you went out of your way to attempt to help her. That’s respectable, and you shouldn’t have been sent that email.

    • Mathew, I asked Robert C. to join us here to explain his feelings towards me but he declined. He did send me this email later in the day:


      I am surprised you responded to my e-mail, but thank you.

      I have been on both sides of the poverty/investor environment. I do not want to get in a long discussion, just only want to express that greedy for lack of a better word (Wall Street) is NOT good. Because if this. our economy is shit. We have a larger lower class of people and less middle class. Some people took advantage of this situation and abused it by getting short sales and forclosures at the expense of the homeowners. Banks though given money (B of A twice in the last couple decades) by the government (our money) to survive has little compassion or respect for homeowners.

      All the above actions by the investors, ignorant government, and banks (who are still stunting the economy by restrictive lending) is due to greediness and many people get hurt. When I get back on top like I was, I hope very much not to act like you or the other greedy investors.

      We should care for each other, even in business.

      Robert C.

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