- October 31, 2019
- Posted by: august19
- Category: Podcast
In this Halloween episode, Chris Seveney & Gail Anthony Greenberg terrify us with real estate and note investment horror stories that would make us rethink about investing in specific areas such as Deerfield Beach, Florida. With foreigners opting to invest more in the USA, the real estate market is also reaping some benefits from it. However, dealing with documents and some other requirements make transactions scarier. Chris and Gail talk about the scary part with foreigners renting condos. They continue their discussion listening to details about real estate fright nights from Sylvia and Cody who asks about due diligence for condo investors and evicting squatters respectively.
Listen to the podcast here:
Open Mic Night: Real Estate Horror Stories
Welcome everybody to another contemplation of the note business.
Gail, how are you?
I’m very well, Chris. We were talking about Halloween. People always read these at different times. I love to anchor it in reality once in a while by saying what the day actually is. It’s my anniversary but I’m here with you, guys, because you are my special people.
Thank you. Rudy Willis is with us. I had dinner with him and Steve Lindstrom. It was fun. I explained that I rarely leave my house to be out somewhere with such charming gentlemen. It was great talking about notes. That’s something I could not do if I was out with my husband for my anniversary. It’s become very hard to date because I don’t talk about anything but notes.
I was going to start with a quick public service announcement for people because this caught me off guard. Most people probably haven’t heard this yet. I was attempting to board some loans with Madison Management. They are no longer accepting any new loans in the following states: Arkansas, California, Iowa, Idaho, Kentucky, Maine, Montana, Nebraska, New Hampshire, New Mexico, Oklahoma, Oregon, South Dakota, Washington, DC and West Virginia. If anyone has anything in that state, most of those, a lot of people don’t invest in it. The ones that caught me off guard were Oklahoma and Iowa. People are asking what and why. I don’t know. I asked Shante Duffy. I got a response that it is due to back licensing issues. The way I found out about it, I was trying to board loans with them. The seller sent me an email with the comments from Madison. I replied back with three letters. I won’t say right now. They said, “I was interested.” They replied back, “I was curious if you were aware of that.”
I figured out the three-letter thing. Is it the WTF three letters? You’re going to be too polite to say. That’s what I’m here for.
Someone asked me questions about it. I don’t know.
You guys already knew that there were states that they would not service loans.
Their response was, “It is a licensing issue.” That’s all I got. I don’t have anything else for you. With that, I took those two loans. For many people that know, I’ve always pretty much used Madison, for the most part. I used a loan server early on. I am testing the waters with Allied. We’ll see how it goes.
I’m already in the Allied pool. Come on in, the water is fine. They’re not as staffed-up as Madison, but Madison might not be that staffed-up either pretty soon. They seem to trickle over to Nevada from New Jersey. It’s not clear what’s happening there but they seem to be in some upheaval. To be clear, they’re not deboarding. They’re not going to throw to David City, Nebraska.
If you have loans with them, they’re still there. That’s my understanding. It just said new loans so that’s any loans you acquire going forward. That’s my plan.
There’s no buying in Dakota or Kentucky anyway.
Somebody mentioned that they’re told Madison moved on paper, but not physically. No, they physically moved all their accounting. They still had a New Jersey office but they moved. Kevin moved to Nevada. You have to have your headquarters wherever is the licensed individual within a company, which is Kevin. That’s where your headquarters has to be. They are in Nevada. All new payments now have to be sent to Nevada. They’re still doing some of the servicing aspects of it. Some of the accounting is still done out of New Jersey, but they’re in Nevada.
How many people are devastated to hear this and it’s going to feel it’s going to complicate your life a lot? Everyone’s getting a drink right now. I don’t think I have anything affected. I stick to that little glob of states, Michigan, Indiana and Ohio. It is not on purpose, but it’s because we keep buying pools with Ohio, South Carolina and Mississippi.
Gail, are you going to let me vent about my Florida asset?
Yes. I would like to do a little something, but please go ahead and terrify us with the horrors of your Florida condo.
I bought these two condos in March of 2018. This one, in particular, had an unpaid balance of $30,000 on it and the BPO was $40,000. At the time, I paid $17,000. I had about $1,500 in back taxes. That’s 18.5% out of $30,000 which is roughly about $0.57 on the dollar. That’s a little higher than I wanted to do, but I thought, “It wasn’t too bad,” because I was using an attorney who I was using prior to Pennsylvania. They’re licensed in both states. He had told me if we’re close in Florida, it’s going to cost you about $5,000 to $6,000. With it being a foreclosure, you’re only responsible for 1% of the HOA fees of the costs. When I ran all the numbers, I envisioned I would be in the full deal, after taxes and everything, for about $27,000 to $28,000 with the $40,000 value. With the area appreciating a little bit, I envisioned that I’d probably get close to $35,000 to $44,000. I was looking at a 30% return.
I have some clarifying questions. Are there two in the same building?
You’re only describing one.
I’m only talking about one.
Where in Florida was this?
It is in Deerfield Beach, Florida.
Are they nonperforming vacant?
They are nonperforming vacant and the borrower was deceased.
It is a big HOA potential lien, but you don’t have to worry about that because it is safe.
The borrower was deceased, so I knew I wasn’t going to get a fright. I did have a borrower who was deceased, attempt to show up at court for a hearing. I’m digressing right now, but the email was like, “I can’t wait to see this borrower show up to court because he’s deceased.”
Do you know your biblical references? That’s a Lazarus when they rise from the grave to come to fight with you in court. These are not contract for deeds.
These are notes.
Deerfield Beach, for those of us who know nothing about, is a vibrant, ghost town on the East Coast of Florida. It is not a good one. It is no Miami.
It’s in North Miami. The interesting thing is I had some pictures that are not from the inside, but you can peek through the windows and see. The place, at the time I’ll get to it, is fully renovated ones were selling for about $75,000 to $90,000. When I was looking at $40,000, I was thinking, “I’ll put $20,000 into it.” In my head, it was 800 square feet so to give you an idea. $20,000 on 800 square foot unit is a good amount of money to renovate. I’ve done units that size up in the DC area for $20,000 or less. It gets boarded. The attorney I was using starts the foreclosure process. While this was going on, another investor who had a JV with me wanted to buy their own notes. I hooked him up with two notes. We bought six assets. I hooked them up with two assets in Florida, as well. He had one where the borrower’s deceased as well in it. He was going through the foreclosure. We’re going simultaneous foreclosures on these things.
This was in early 2018. After the demand letter expires, I asked about the foreclosure and about the case being filed. They said, “The case is being cut-filed. The case is filed.” I go online and you can see if it’s filed in Broward County. I don’t see anything. They said, “It is filed.” I said, “Give me the case number.” They sent me a case number. It’s for the other condo that I had. They didn’t file for both. They’re like, “We’re waiting for you to sign this document.” I was like, “I signed that document. It was FedEx-ed to you. Here’s the FedEx number. Here is a scanned copy of it. Here’s an email from whoever this person is that works for you that acknowledge receipt.” They said, “They’re not here with us anymore.” This costs about a month and a half. Finally, it gets submitted. I asked for a copy of the complaint. I recommend that after your attorney submits a complaint, please ask them for a copy. They should probably give you one before they submit it, but get a copy because lo and behold, he has my entity wrong. He has the wrong borrower on it. The property address numbers were transposed. Everything that could be wrong was wrong.
With the time dimension, is this a well-known and highly regarded attorney?
He’s not. He’s like the other one attorney.
I know he’s on our wall of shame but people out in the world accept them.
They have a servicer who uses these firms, specifically.
People used them. You are proving my point that they are accepted in the world, not by you, but others.
He’s not a divorce attorney like your Pennsylvania attorney.
That’s a plus in one of the columns.
Finally, after about six months, things get squared away. During this time, the other individual I was working with was already getting his dates for closure. I’m still piddling along. I’m emailing him and calling him and no response. The only time I would ever get a response is when they would send you an invoice. They would send an invoice with a comment where something stands. That is the only time they would ever respond. After the second invoice, they tried to charge for refiling a complaint and everything else. I was like, “I’m not paying for that.” I was playing their game where I’d be like, “If you want me to pay, you need to reply to my email because the only time you reply is when you send me a bill.” This is how the game works. I can get pretty nasty in that way and people ticked me off.
The interesting story about this whole note is it’s not about the borrower. That’s the whole thing, we are talking about these fright nights. This has nothing to do with the borrower. The borrower is dead. That’s the lowest maintenance type of borrowing you can have. Finally, this spring, let’s fast forward, after about $9,000 in legal bills, this attorney kept saying, “It’s Florida.” They are trying to get it down and everything else, we finally get to foreclosure. Somebody bid it for foreclosure. They want it for foreclosure but they didn’t close. What the attorney does is slap me with another bill on the foreclosure for $2,000, which didn’t go over well but should say the least. I fired them.HOA has their own qualification limits for what borrowers should and shouldn't be qualified to pay for their mortgage. Click To Tweet
What was the $2,000 for?
It is for them because we had to redo the foreclosure. They had to redo the sale. He had to republish it and everything else. They’re putting their own fees in it. I was like, “I am done.” I called up Beth Cruikshank and she’s like, “There is nothing that needs to be done with this.” I was like, “Exactly. I’m firing them and hiring you.” Beth ended up redoing the foreclosure. I ended up getting the property back, finally. We had gone in there because the borrower had been deceased. In the kitchen, there was some damage, the drywall was cut out. The cabinets were original and about $12,000 is what I budgeted for. Every number I got from people was $40,000 plus. I was laughing. This is literally insane. They’re like, “It’s because of the HOA.” Not that there’s one HOA, there were three HOAs. There’s an HOA for the building. There are separate communities. There was a community one. There is also amenities HOA. We’ll get to that.
I have an agent who was awesome. Her name is Wendi Davis. We had already gone and sold the first one. That one went well. On this one, I get a full price offer. I listed it for $39,000. This is what we ended up listing it for because I wanted to dump them. That time, I was in it for $31,000. I’m not making money on this. That’s a given at this point in time because between the closing fees, the realtor and the HOA, which is the 1% rule. We’re arguing whether it’s a total for each HOA. They were fighting it. It’s not worth fighting it. At the end of the day, for an extra $600, it will cost me more in legal fees. We put it on the market. We get a cash offer pretty much full price. It may have been $500,000 under full price. I’m like, “This is awesome. It’s good. Let’s get rid of it. Let’s sell it.” The buyer is in the UK but she had a family member here.
That’s why she was willing to buy one in Deerfield Beach. It is in Florida. How bad could it be?
She fills out all the paperwork. I’m getting ready to go into closing. My agent goes, “She needs to get approved by the HOA.” I’m like, “It’s not a big deal with the cash buyer stuff.” The HOA decides that they make up their rules as they go. These are not written rules. They’re making them up as they go. Their new rule was that you have to have a 700 credit score because they’re concerned that a borrower will default like the ones that in the past and they have no recourse.
Is it default or did he just die?
She died. If they’re paying cash, there is no lien on the property.
What does a credit score matter?
Yes. The United States is the only country that has credit scores. We have the guy phone in and say, “When did it come in?” I was like, “They wouldn’t give us some rules and regs. They wouldn’t give us anything in writing.” I get them on the phone and I take the Merrill Chandler thing. I started asking them, “Is it a FICO 3B or 3A?” I start rolling out all these FICO numbers. The guy is like, “I don’t know what you’re talking about.” I was like, “Exactly. You come up with a number of 700. It’s arbitrary. Do you have a 700 credit score?” He admitted that he didn’t.
He has missed a few payments on something as well.
It gets better. The woman is part of it. You have to do some in a financial statement. The woman has €300,000 sitting in the bank. I was like, “This woman is paying cash. She has this much money sitting aside. What is the problem?” They were like, “Nope, we’re not approving her.” They refused to approve her. I’m going berserk because you can’t make them crap as you go who you want and not want.
Let’s face it, all over America, foreigners buy real estate. Florida is a real hotspot for them. I can’t imagine this is the first time.
One other thing I’ll add, it was a 55-plus community. They made up the new rules that we can’t use them as rentals either. It’s a new rule as well. They’re literally making up rules for people as they go. The one right next to us is a rental.
Does that belong to someone on the board?
It gets better. We have a second offer come in. It’s a husband and wife couple that we’re going to do owner financing. They were going to put $15,000 down and finance $25,000 in a five-year balloon, but they didn’t have a 700 credit score. What they do is they have somebody else they know also added to the loan that has a 702 credit score. I was using Russ the Underwriter to get these people qualified. We’re going through the qualification process and we hit a snag because they were all self-employed. None of them ever provided any ITIN or EIN numbers. We were on the phone with their attorney because they didn’t speak English. We’re trying to get all this information and they provide some.
Where are they from that they don’t speak English?
They spoke Spanish. I’m not sure if what was their home country. They couldn’t provide any documentation. One of them did end up providing their two years of tax statements. At the end of the day, they couldn’t provide any of the information, so this dragged on for a month and a half. There are two reasons why. We are trying to get them approved. Finally, they’re like, “We’re going to pay cash.” That’s after we get pushed in like, “You need to provide us your Social Security number or ITIN.” They wouldn’t provide. During this time, one of the three HOA’s switched management companies. They had gone to an interview with one of the management companies, but they’re no longer with the new management company. They had to go through another interview. They took their sweet old time and they finally get it done. The other thing they did during the first interview is they were telling them, “Your unit has mold and all these other things.” After I’d heard that, my agent was going to ask her to go to a second one too. This one with this new borrower because this HOA is out of control.
Does each of your buyers have to be interviewed individually by all three?
The first cash buyer had a representative there for an interview. They rejected her because she didn’t have the 700 credit score. This group had to go. We told them, “Make sure your attorney is there because they didn’t speak English.” When we’re going through, at that time, we’re still going back and forth whether they were going to get financing or pay cash. If they provide this information, then they meet Dodd-Frank requirements for getting financing. The HOA is like, “We don’t care what Dodd-Frank says. They don’t meet our requirements for getting financing. We don’t think they’re qualified enough.”
They have their own qualification limits for what borrowers should and shouldn’t be qualified to pay for their mortgage. It’s amazing. There were still going back and forth on cash. We are almost forcing them to pay cash on the deal. We went back to the HOA and said, “If they pay cash, will they be approved?” The treasurer comes back and says, “We have some questions on your tax returns. We think there are some issues with their tax returns on how they were. The numbers on their tax returns are like a submitted tax return to the IRS.”
Are they the IRS auditor?
I called another attorney. I love Beth. She is very good at handling certain aspects, but in this instance, I was looking for more of a heavy hitter type attorney, a killer. I reached out to Erin Quinn via Facebook. I get the impression from Erin that she packs a little punch. I’ve never used her before, but I hear comments. I said, “I may need your help.” She’s like, “Let me know if you need me.” I finally got the point where I told my agent, “Call the president and tell him that yes, I’m pretty much almost threatening them.” If this borrower isn’t approved because of something that they say is like, “They meet Dodd-Frank, but not the HOA, something arbitrary, I am going to sue them.” I’m going to sue the HOA. I’m going to sue them personally.
I’m like, “HOA should limit in regard to doing background checks on criminals or whatever pass and stuff. If you took this and somebody tried to do this in a high-minority area, it would be all over the news.” We’re trying to deal with what they’re trying to do, the power. It was unbelievable. To cut the long story short, on Tuesday, on October 22nd, about twenty months later, we sold. I did knock the price down because it is cash. I’d like to get rid of it. We ended up selling it for $36,000. After everything, I netted $29,000, which I had already paid off my JV because they wanted out four months ago and we weren’t making any money. I was like, “I’ll buy out now.” I ended up giving them their money back plus a return. I ended up losing about $3,000 in the deal. It’s one that I’m so glad to get out of. I wanted to use this as an example because we’ve shared stories like Chad. We shared a story about his borrower and the type of condition of the property and things. These fright stories, fright nights can be more than a borrower or property. Chad had it too. He was dealing with local jurisdiction. This one is with an HOA that they can make your life pretty miserable.
Sylvia is asking, what would you do differently next time? Is it just to do due diligence or avoid condos completely?
No, I wouldn’t avoid condos. I don’t know what I would do differently.
That’s the scary part. There isn’t anything though.
At the time that I bought it, there were rentals in the building. The HOA rags had pulled a copy up online. If you got a board that makes up their own rules, it’s like saying, “In buying in a certain jurisdiction, you have an inspector that makes up the rules like Chad.” He had one where they’re making up the rules as they go and they didn’t notify him and writing. They are making him jump through hoops on things. There’s not much you can do from that perspective. Christina asked about HOA has many rights. They don’t. I’m going to stereotype this, which I probably shouldn’t do, but a lot of presidents of HOAs are people who have never been in an authority or power position. They take it to the far extreme. They literally are like the president of the United States who can do whatever they want.
We’ve all met in different aspects of life, people who are drunk with power. Some have a minor position but one where they can interfere with people.
At the end of the day, the funniest part of this whole story was the guy who paid cash isn’t even the guy who was living in it. He barely had a pot to piss in where you got somebody over in Europe with more money than they know what to do with isn’t qualified. It blows my mind.
Weren’t you at one of your most frustrating moments talking about donating it to be a halfway house for drug addicts and they will all live there?
I was getting to the point of calling the Deerfield City if something like that could be happening to get the HOA. I’m rolling that and donate it to low income or affordable housing.
You’ll have them begging you to bring that first buyer back. Was it you or did Erin threaten them? Did it not go that far?
It didn’t have to go that far. I get too passionate sometimes about things. Sometimes, I need to be calmed down, so she was perfect. She would be like, “Chris, calm down. It’s okay. I’ll talk to them.” She smoothed it over, but she also can be stern. She told me that she reached out to them and said, “You need to be careful with what you’re doing or you’re going to start running into some serious problems.”
I barely have the sky under control, congratulations.
That’s my Florida story for you. The first one in there, we didn’t have any problems with that. That was weird. That one was a smooth cash buyer. That one didn’t need any work. That one foreclosed. The other thing with the attorney, I mentioned, I literally put in 40 font in an email to them, “When these go to foreclosure sale, do not sell them on the same date because why would you want two condos in the same complex?” If people wanted one, they’d pick one, pick the other versus bidding against each other. I put it in 40-point font in bold. It was attached to an invoice that I sent back that I put in the heading. I said, “Question about the invoice,” because that’s the only way they’d read it. When the foreclosure sale came, it was two up for sale on the same date.
Let me say congratulations even though you lost $3,000. It was a win.
I ended up breaking even. On the first one, I didn’t make anything because I gave all the money to the JV. We made $1,800 on that one. What would happen if someone bought at an auction? That’s the wonderful thing if they would’ve bought it at auction. They would not have needed that HOA approval. I foreclosed on it. I’m the owner. Cody mentioned squatters are fun. Do we want to see if Cody wants to hop on and tell us their fright night squatter story? If you’re around, we’ll pull you in. I gladly have you tell us that story if you’re interested. I think that’s the one with the dog on the front porch chained up.
I worry about that dog.
He said, “He can do that.” Let’s welcome, Cody.
I have this fun little house in Detroit, Michigan. It’s gotten a lot of twists and turns in it. It is a fright night kind of story. We bought the note quite a while back. We found out that the owner of it was deceased. That was hard for them to reply to our demand letters. I also found later that the son was living on the property. He contacted me one time after the foreclosure and asked if I wanted to buy the redemption rights because it’s in Michigan. I talked with my attorney and I found out that heirs don’t have the redemption rights. They don’t transfer to heirs. He couldn’t make that offer to me. I was trying to get in touch with him to do Cash for Keys, but he never would contact me. In January of 2019, after going through a long drawn out, frozen eviction process, he finally vacated the property, but also took with him the hot water heater, the furnace and even the kitchen sink. It was gone. We didn’t know.
That’s eviction number one. I didn’t know what was going on until I finally got to list it with a real estate agent. They had an offer on it. We accepted the offer. They made a decision they wanted to go do a walk-through after we accepted the offer. They came back wanting to reduce the price by $7,500 because they didn’t have the hot water heater, the furnace, the kitchen sink, some plumbing and a couple of other things. I’ve gone, “I don’t think I want to do that.” We rejected that $7,500. I initiated an insurance claim. Once it is through the insurance claim, it looked like it was going good. After they came back and added up all the depreciation and all the other things, the cost, I got a grand total check of $123 on my insurance.
They told me, “If you replace those items and keep all the receipts and we reinspect, then we’ll reimburse you for that at a later date. We’ll update what the claim was.” I contacted the agent because this is a $25,000 to $27,000 house. I said, “If we go back in and put all this money back into it, are we going to recover that cost?” He said, “No, you’re not going to in this particular neighborhood at this particular price range.” We elected not to do that and marketed it through this spring. We’ve got an offer on that end of June and we accepted the offer. They wanted to do a walk-through before. The agent was going to go through that and check on things. She emailed me and said, “What’s this dog he got in the backyard? It’s a mean-looking dog.” I said, “I have no idea what dog that is.” She says, “We’ll coordinate with the animal group there in Detroit. We’ll get that thing taken out.”All over America, Florida is a real estate hotspot for foreigners. Click To Tweet
They showed up to do that. They determined that the dog belongs to the new resident in the house. I had no idea there was a squatter in the house at that point in time. Apparently, this guy is pretty adamant that he owns the house. I posted on one of the Facebook Michigan Note or Real Estate pages that I need some help getting this guy out of the house. Apparently, in Detroit, they have a squatter’s law that says if somebody shows up to the house, call 911. The police will rapidly respond and help you remove this guy. I just had to make sure I had my proof of ownership to them, which I did. I got one guy and sent him a $100 to do that. He went out to the house probably a half dozen times, called the cops and they never showed up. Finally, he got tired of it. I let him keep the $100. I contacted somebody else who was a property manager there. She had other ways that she could get people out. That was interesting enough. I learned some of those other ways. I can’t repeat it.
It is not your ways, Cody.
She went out there at least a half dozen times, maybe even more and it’s the same thing. Finally, I called in for about the 4th or 5th time to this city of Detroit ninth precinct and talked to the desk sergeant. The first time I talked to him, he said, “This is Detroit. We’ve got murders, robberies and other things going on. We’re not into this eviction thing.” “That’s great.” Then I got a hold of another guy, Sergeant Wade. Sergeant Wade promised me that they would respond if I had somebody out there, but they got out there, made the 911 call and nobody showed up. Finally, the girl that I had hired for the $75 made me an offer that I refused.
She went down to the precinct and talked to somebody directly. They said, “Send all the paperwork.” I sent them all the paperwork of my LLC, the deed that took me in the title, and all the eviction stuff from the first eviction. They said, “We can’t have somebody that isn’t part of your company represent you for one of these types of evictions.” I wasted from June all the way until the end of September following the instructions given to me by the city of Detroit to no avail and another $175 out the window, which wasn’t too bad. I can count that as tuition. Finally, they told me that I had to go through the legal stuff. I had to call up the same attorney that helped me with the first eviction to get this guy out and hopefully they can get his dog out as well.
I’ve got to be thinking this guy’s been in the house probably since May or June or with no water, no heater, no kitchen sink. I shudder to think what inside that house might look like at this point in time. Interesting enough, the guys that have signed the offer to buy the house from me are still interested in the list. Although that purchase agreement is expired, the list agreement has expired. I’m waiting for now. We’re about two weeks into the real court eviction. I’m waiting for them to schedule an eviction date. It goes on and on all for a nice little home, probably one of the nicest little homes on the block. It’s only worth $25,000 to $27,000. I can’t get that thing sold.
Do you know what’s going to happen, Cody? It’s wintertime now so they’re not going to want to evict the person.
There’s no heat on. There isn’t a huge difference between being inside or outside.
I’ve got one right now up in Wisconsin that people haven’t paid in I don’t know how long. Every week, we keep hearing that because we’ve got to forfeiture that sheriff’s going out to do the walkout. It hasn’t gone out. This one is a little unfortunate in some sense because the borrowers may have got some bad information from one of these housing counselors. The property was originally a Vision Property. Vision got thrown out of Wisconsin. They’re thinking, “Vision owns this all. I get a free house from it.” I think this is what was told to them. You don’t get a free house.
I’m waiting to hear back from the attorney. It’s about time for me to do my weekly follow up with him.
Do you have your order of eviction? Are you waiting for the sheriff?
We’re waiting for it to be scheduled in the court. We don’t have that quite yet.
Who is this person that’s living in the house?
I have no clue. We have no idea.
Have you tried to offer him $200?
We’ve done all that. Apparently, he likes the house. Maybe I should carry it. Sell it on to with seller financing.
Did they qualify?
I read somewhere online that a guy put an offer in on a house. It was listed for $300,000 for $90,000 and it got rejected. He kept putting the offer in. They kept ignoring him. The house was vacant. He went in. He moved in and the neighbors thought he bought it. They’re helping him move and he was renovating the house. Finally, someone’s talked to the owners and noticed it was still for sale. He’s like, “Somebody is like living there.” They end up arresting the guy.
I hope that’s what happens on this one here. I have videos.
He’s done a new bathroom for you, I’m sure.
I hope so. In some ways, I hope so. In some ways, I don’t even want to see it. That’s it, guys. That’s my story. I’m sticking with it. I’ll follow up with you guys when we finally have some success on that so we can close it out.
Cody, a few questions on this one. When did you originally buy the asset?
We foreclosed on it in May of 2018 and had to wait the obligatory six-month redemption period, which expired in October of 2018. That’s when I had to start the eviction process to get the sun out. That’s what the time frame was. It seems like it was February of 2018 is when we bought the note.
It goes back in ways.
Fortunately, I have an investor on this. You talk a lot on this show when you’re working with investors. Even if things are not going the way that you thought it was going to, keep in contact with these guys, tell them what’s going on. Have communication. Even though you may have nothing new to tell them about what you told them a few weeks ago, keep talking with them. Tell them what’s going on. They have an understanding of it. That’s what I’ve been doing with this guy. We talk all the time. He’s even saying, “Let’s get this thing done because I want to do something new with you. That’s refreshing in a lot of ways.
It goes to show when you communicate with people that you’re looking out for their best interest. Also, the fact that you’re handling the situation properly. It’s something that you can’t control, but you’re communicating with somebody and giving them the news, what’s good and bad. I’ve got a partner on a property that’s been overly challenging. She said she was going to sign a Cash for Keys deal and she didn’t. My JV partner has been in steel for so long. He started his own note business. He probably bought ten notes. It’s funny because he asked me, “How do I pay a JV partner? That’s something that you never showed me.”
I’ve never taken JV partners. Stop meddling now, Christopher.
To let you know, on Sunday I’ll leave for the National Mortgage Bankers Association Annual Convention. That’s in Austin. We’ll see how all that goes.
Thank you, Cody.
I also finally was released from the bondage of a terrible property. I’ve talked about this property a lot. It’s my property in Pennsylvania that I bought in my IRA when I was a little baby note investor. I knew it was a horrible note, but I talked myself into it because it’s in a great rental area near me. Plus, I was new. I thought, “This looks like it will be terrible but let me give it a whirl and see how it goes.” That’s the one that I have the divorce attorney doing the foreclosure as you have tackled many times, Chris. This guy, on top of the property being horrible and my attorney being horrible, this was the borrower that declared bankruptcy seven times in six years. There were many things that I didn’t know back then that would have been such gigantic red flags to me now. It finally came to a close. I lost $11,000, which is a personal record for me. I had the option of staying in it to try to do something so I wouldn’t lose the money, try to find a seller-financed buyer and then resell the note and all these things. The situation is that I want the money. I wanted the cash out of it in order to be able to do some rental deals. I don’t know why I said rental deals because there isn’t enough cash to even do one rental deal.
It is wishful thinking. We spoke on a previous show about taking a loss. There are a lot of things we all hate the idea and it wounds our pride. It puts you in a bad position with an investor to have to tell them that we’re not only not making any profit on it, but we’re taking a little bit of a bet on it as well. I was relieved in this case that it was in my IRA’s so I’m the only one taking the bet. The thing is when you look at a situation that is losing money, in order for me to try to make or even break even on this, I would have either had to find a seller finance buyer or I would have had to renovate the property in order to sell it and break even. This particular township, Norristown, Pennsylvania, everyone beware. There are other places like this on planet earth. Anderson, Indiana is another one. There are always deals in these places, particularly Anderson. Anderson has pretty high rents. If you end up owning property there, it looks like you can’t go wrong. Norristown, Pennsylvania and Anderson, Indiana have one very important thing in common.
They have municipal authorities who are very much like Chris’ HOAs. They are ruthless and difficult. Even though this property was a total blight on the community, at the code enforcement office, they knew this property well. We all had a shared interest in getting it up and running rehabs, occupied and off, and stop being a problem for everybody. Even though we’re all on the same team in that sense, they gave me so much grief about every single thing. Even trying to sell this thing out a loss that I knew there was no way I wanted to renovate with people like that. Anderson, Indiana is the same thing. I sold a house that I took back in Cash for Keys. It was a contract for deed. I sold it to a young military guy who’s buying a lot. I feel bad now. He’s trying to renovate it. I’m seeing what they’re putting him through. This catch classic 22 where you can turn the power on until everything is fixed by a licensed electrician. A licensed electrician isn’t allowed to go in there because of something else. It’s horrible. I feel like this is our next list, Chris. Everyone needs to realize that trouble.
I think it would be worthwhile to start bringing on some agents and people we may have worked with certain communities. Agents can’t speak but property managers maybe.
They can’t trash it.
Property managers, they can because they’re not licensed in a sense like a realtor is. We should bring in certain investors or specialists in certain areas where a lot of us invested potentially. If people have ideas or topics, we’re happy to bring them on. A lot of people out in the Indianapolis area, there are a lot of investors in Indian in general. It is the same thing in Michigan, Detroit, Flint, some of those areas in Jackson, Mississippi, some areas of Missouri and Alabama.
I wanted to make this point about taking a loss. It’s very hard. If this had happened to me earlier in my career, I would have probably gone to bed for a week about it. Given the choice of having to spend a ton of money and time renovating this in order to break even, or having the velocity of money of being able to take what I could get from it, and recycle that money into a new deal that will make me money faster and get me a whole faster. I took the loss. I’m sure everyone’s knee jerk reaction is, “No, I’m not going to take a loss,” but I have now begun to understand the wisdom of it at times.
Usually, I’m the cut the cord guy.
I am scared to death of the misstep that I will take it and Chris will be like, “Gail, I’m sorry. That was your last.”
I got a property right now in Montana, the clean poor guy who did the cleanout. The property as-is is $50,000. It’s a good deal for me. If you put $25,000 into it, you might be able to get another $20,000 something. I’m like, “It’s Montana. We are entering the winter. We’d get this thing finished. I’d rather take the money now and not have to take the risk because it’s a hot area for investors.” A lot of them are looking for places to put their cash at the end of the year. For me, I’d much rather exit the property than trying to renovate from afar because I tried it once and failed miserably.
Don’t remind me.
If you have a question, if Gail did come through. Gail did sell that property.
I did, I sold it. It was glorious. I’m buying rentals now. I’m in the place where I buy them. I can be all-in on a house for $33,000 that will rent for $750 to $800. I took away from that settlement $17,000. I’m working my way up to another rental on that.
We’re not going to be here on Halloween. Please go out and trick or treat safely. Remember, you’re never too old to trick or treat. You’re just running the risk of being arrested for being out there with all the children.
Gail, we’ve answered everyone’s questions. We would like to thank everyone for joining us for the Good Deeds Note Investing show. As always, we recommend you to go out and do some good deeds.
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