Real Estate

Friday evening I called one of the tenants living in my Bowers St property to see when I could stop by to pick up rent. When he answered the phone I asked how things were going and he responded by saying “Not good”. When I asked what was wrong he told me that someone came by his apartment earlier that day and gave him a notice telling him that house had been foreclosed on and that he must move out within two weeks. Keep in mind that his wife is due in one week, he has two other kids, and his parents (who are in and out of the hospital) are living with him. Plus he works his ass off to support all of them! It was understandable that he was freaked out.

After explaining to him that the law is on his side and no one can legally make him move out, I called my bank to find out what was going on. They told me they foreclosed on the property on Monday! Five days had passed and I had not received a single call! The same day my realtor received an offer to buy the property. When he called to submit the offer to the bank, they told him it was too late because the property had already been foreclosed on!

So Friday evening I visited all of the tenants on Bowers St and explained to them what had happened. I explained that the letter they were given telling them to move out was meant to scare them into leaving because it would make it easier for the bank to sell the property.

Having been a landlord for the past five years, I’ve learned a thing or two about tenant rights and the local laws protecting them. Unless the landlord has a really good reason to kick the tenant out, it’s very difficult (if not impossible) for the tenant to be legally evicted. Even if the landlord had lots of valid reasons to kick the tenant out (for example if the tenant was doing something illegal in the property), it could still take more than six months before the tenant is forced to leave. That’s just the way the laws are around here and it sucks (for the landlord).

The Bowers St property was the second investment property I purchased and probably the one that has caused me the most trouble. At the same time, it was the best property because all the tenants were excellent and paid their rent on time. The units were also the largest of all the properties with three bedrooms in each of the three units.

It’s now Monday, exactly one week since it was foreclosed on, and I have yet to hear from the bank. They’re probably going to stick me with the $280k that was owed on it, but I will deal with that when the time comes.

On Sunday evening, one of the Bowers St tenants was having trouble with his heating system. He called me. He was aware that I no longer owned the property but he had no one else to call. I felt somewhat obligated to help him out since he had never paid his rent late, he had helped paint the apartment, and was otherwise a great guy. Since I was in the area and didn’t need to be anywhere in a hurry, I helped him out.

It definitely felt weird standing in the basement and realizing that I no longer own that house.

In 2003 I bought my first property, a two-family house in the Centerville area of Lowell, for $213,000. Within six months I put about $75,000 into the property and another $50,000 over the next few years (not to mention endless amounts of my own sweat and time).

This week I accepted an offer to sell the property for $180,000. It just doesn’t seem right, but I know it’s the best thing to do. All three of my rental properties are listed on the market right now for much less than I owe and yet this is the first offer I have received in over 8 months. There are more than 300 houses for sale in Lowell right now. There are houses on the market for $175,000 that only two years ago would have sold for over $300,000! Just one year after purchasing my own first property, it was reappraised for double what I paid for it.

It will be quite some time before I know whether or not the bank will approve the short sale and even if they do approve it, they will almost definitely leave me with the balance: $170,000. My other two properties are in the same situation and I’m not alone.

I have read dozens and dozens of articles in the newspaper about other homeowners who took adjustable rate mortgages so they could have lower monthly payments. They never intended on keeping the mortgage past the two year fixed term but instead planned to refinance the property after its value increased. When the values made a dramatic run in the other direction, owners were stuck with owing more than the value of the house. This meant they couldn’t sell and they couldn’t refinance.

I wish I had the cash to buy properties right now because within 5 years all these houses will probably be selling for upwards of $400,000. Real estate value always increases over time. Thats the thing about real estate: it’s real. But with all investment comes real risk. Regardless of what happens to me financially over the next year, you can be sure I will be taking the lessons I’ve learned and applying them in the future.

Last night I was driving to my parents house when one of my tenants called me. I knew something must have been wrong because we had already agreed on a time for me to pick up the rent, which meant he had no other reason to be calling me. Sure enough, he tells me that his mom just called him and said there was water coming down though the ceiling from the second floor. It’s been very cold (close to 0 degrees) the past few days, so I feared the worst.

Luckily I happened to be very close to Bowers St and drove over there in a hurry. My truck was in the shop and I realized that I did not have the keys to the second floor on me — I hoped someone was there and that I wouldn’t have to break down the door. When I arrived, the second floor door was unlocked. There was 2″ of water on the entire bathroom floor. There were no wet ceiling tiles on the second floor and I quickly ruled out a broken water pipe. When I went back downstairs, three guys from the fire department were there unplugging electrical stuff from around the wet areas. The tenant’s mom called 911 after she called her son, not knowing that I would get there before the fire department did (how’s that for response time!).

I couldn’t figure out exactly what happened, but either the tub or the toilet overflowed. The tub had 3″ of water in it and it wasn’t draining out. The tenant that just moved into the second floor told me he took a shower a few hours earlier and noticed it wasn’t draining. He said he tried using a plunger to unclog it, but when he was unsuccessful, he left it and went to work. Apparently, someone else must have used it after him and let it over flow.

After using a drain snake to try and unclog it, I discovered the problem: the trip lever and linkage system that holds up the plunger was gone. There was nothing holding up the plunger, so it was sitting at the bottom of the drain blocking it! By total luck, the drain snake caught onto part of the plunger and I was able to pull it out of the drain. Now the water drains perfectly.

If you’ve read this far, you’re probably wondering where the “flames shooting out from behind a gas stove” comes in. Well, after cleaning up the water, I went downstairs and talked to the tenant’s mom. She said she was sorry for calling 911 and that she didn’t know I was going to get there so quick. She told me a story about how her previous landlord got angry at her for calling 911 when the old gas stove in her apartment caught on fire due to a gas leak (the landlord told her he would be there in 30 – 40 minutes, when he lived 10 minutes away). He replaced the stove with another used stove and told her he would hook it up himself (he didn’t want to pay a licensed plumber). When he turned it on, the stove leaked gas and he was going to leave it that way. She threatened to sue and then he put a new stove in and had someone else hook it up.

That story made me realize why so many of my tenants appreciate having me as a landlord.