Episode #40 – Murphy’s Law Just Said Hello to This Landlord
Welcome to another episode of EarlToms podcast.
Today, unfortunately, I’m gonna have to eat some some humble pie, I’m going to give an update on two previous episodes that basically tie in to, to what I’m about to talk about. And it’s pretty much what investors are going through right now. So for the background of it, a couple episodes before, I was talking about a wholesaler that basically told me how things were going to go, what we were going to do this and that, basically threatened me wanted to come find me this and that, whatever. And we wound up not buying these houses. He was asking at the time $99,000 for three houses. Two of the three were rented. But we went and didn’t buy them because of just a lot that was that was involved with him at the time. And then we wound up having them come back around, another wholesaler got him under contract, and found us somehow I don’t know if skip tracing what I don’t know exactly how they found us. But they found us and knew that we had already had them under contract before. So they offered him to us at $75,000. So there was a $24,000 savings, you know, to be had just right off the right off the bat. So that in itself is you know, an even better deal. And, you know, like I’ve said before, never force it don’t get the fever, you know, always have always have the ability to sell those houses whenever you get them under contract. Because that’s really the only thing that determines whether or not you you actually have a deal and you make money is the saleability of these houses. So the last episode I did, we had, where I put in there that you know, you always need Plan B for real estate, because there is not a single thing in real estate that is ever going to go the way it is supposed to go. It just does not happen. It’s part of the business, you sign up for it when you get into this business. So anyone that’s been in this business long enough, knows that I’m telling you the truth on that summer, some are easier to deal with than others. But some of them really kind of stain. So to get into what happened with these houses, we went ahead and bought them for $75,000 was basically $25,000 for each house. So like I said before, right off the top, we already knew we had $24,000 that we had saved, you know, Barney’s houses, two of them were rented, one of them was vacant. So we already had two on the same street as well. So this was gonna make five on the same street and you could actually see all of them standing on the front porch of every house. So we had a cluster right there together, which, that’s why it made sense for us to borrow. But when we get get these houses bought one of the houses that was already on the street cold and said, Hey, the ceiling in the bedroom fail.
Well, as a landlord, that’s typically not good. Your first question is okay, is everybody okay? And luckily, everybody was okay. This girl was paying $725 a month. It was a two bedroom. We had already done the renovation. But what we didn’t realize is the person that either built the house or renovated it before. had put quarter inch drywall in the ceiling, and then put insulation on top of it. Well, quarter inch and quarter inch drywall is not going to hold a decent amount of weight. So what we wound up doing with her was saying, Hey, you know, we’re gonna have to pull all the savings down. Because if we just replaced this one, then next time, you know your baby’s room, we don’t want to draw a wall falling in their room or we don’t want to, you know, it was just it was the right thing to do. So she said, Okay, well, I can go stay at my boyfriend’s for a little while. And we just told her we said Look, why don’t we just give you $5,000 dollars, let you go move on, find another place, live with the boyfriend, whatever you want to do. And see what’s happy about that, because she had just lost her job. So she needed, she needed money. So that actually wound up working very well for everyone involved. She was not difficult, fully understood, didn’t blame us, because we didn’t really even know, there was quarter inch drywall sitting up there that, you know, was basically about to fall. Well, two days later, after her sailing fail, one of the houses that’s down the street that we had just bought, we hadn’t even owned this a full week, we get a phone call from that tenant. Say, Hey, the drywall in the living room on the ceiling just fell while we were watching TV, and they send a picture and there’s insulation all over their counts, and everything else hits him on the head, we’re going this is this is just not happening. You have two houses on the same street, oh, you know, basically the, you know, within a week of each other, falling down. So we’re thinking, Okay, well with the other girl, she didn’t mom, she was happy to, you know, we paid her. So we made the same offer to these. But they didn’t necessarily have anywhere to go. So for two weeks, we put them in a hotel, pay for their hotel, you know, this and that. And along the way, it was difficult to get them to agree to move. And one of the reasons it was difficult to get them to move was because they were paying $500 a month on a house that should have been rented above $800, somewhere in the $850 range, which is one of the reasons that we bought them because we knew we were getting them cheap, we could raise the rent, and you know, actually get a very good return on him. But this day in time to find a house that’s rented that you can rent for $500, it’s just not gonna happen. So they were difficult, they knew they were going to have to wind up paying more money wherever they went. So it was just one of those things to where we are. And where I’m where I live. The law basically says if you don’t assign the lease, and you don’t assign the rent in your contract, then you don’t have to actually honor that lease. So we gave them basically an ultimatum. So you know, hey, we’ve done everything that we can. We did, we haven’t even owned these a week. So what we need you to do is stop playing games come to terms with the fact that we’re not going to allow you to back in that house because it’s not safe. So you can take the $5,000 find another place, or we will just evict you. It’s it’s to that point, because what we have found out through this process is is you are a difficult tenant to begin with. So no matter what, we don’t want you in this house. Some of those things, we told them, some of them we didn’t, for obvious reasons. But as time went on, they kept dragging it dragging it out, okay, well, you know, my husband’s sick, and he winds up being sick on the exact same day that they tell us that they gotten days off of work to be able to go move out this and that.
So we basically just wound up having to tell them say, look, on this day, at 12 o’clock, the offer expires, either you’re out by 12 o’clock on this day and receive your $5,000 or that offer will expire and we will kick you out through an eviction. So you make up your mind. But it does not go past this day at 12 o’clock. Because right now the house is dangerous. So we have a couple of avenues that we can take that there is absolutely nothing you can do about it. We can have the house condemned, say it’s unsafe to to occupy right now. And you can go in there, or we can evict you because we didn’t assign the lease or the contract because we didn’t want to honor the terms in the first place being at $500 a month and evict you that way. So legally, we have the higher ground here, and you don’t have a leg to stand on. So we’re trying to be nice here and give you $5,000 because this is a circumstance that we didn’t expect. We were just simply not going to renew your lease when it came due. But we were going to allow you to stay here until your lease expired. Once we said this day, this time and got tough with them, they wound up going ahead, they were, they were out by I think two o’clock that day, but they were, you know, moving. And I got to the point that basically we were down there with the mutual release letters for everybody to sign before we would give them the check. So we got him to sign that. And basically, what wound up happening is, as they say, you know, can I have my money. And worse, we’re basically saying, you don’t get your money until we can take possession of the house, with your things still in there, we cannot take possession of the house. So if you want your check, while we’re standing here, because we had agreed at 12 o’clock on this day, that I need you to get all your stuff. And when they do put it in the front yard, or move it outside somewhere, so that we can change the locks and secure the house take possession, I will give you your $5,000 at that point. They didn’t like that, but they did it. Because I think it just gotten to the point to where they knew, you know, play Tom was was technically over. And we were going to hold to that agreement that they had made, but then just kept dragging their feet to try to extend it and do this, you know, I guess wear us down, so to speak. But at the same time, us giving them $5,000 was basically 10 months of rent that they were paying, and we hadn’t even owned this house for a week. Legally, we didn’t have to give them $1. But at the same time, given the state of the economy and the situation and everything else, it just felt like the right thing to do to make them an offer, similar to the cash for keys, so that they had the means to actually find another place to move and live. And you know, we could give the reference if needed to this event. So they wouldn’t face a difficult challenge being able to move somewhere because they would have an eviction on their, whatever may be. Some people like to damage things. We laughed whenever we actually took possession. Because the lady in this house, our guest, she was gonna show us one of taking the light switch covers, and the outlet covers. And when she left the switches and the outlets, but the plates that go go home, she actually took the time to unscrew them and she took them which you know, if you go to Home Depot, those are like $1 apiece, so we really didn’t care. But we would we all thought that was somewhat amusing. But that’s where that’s that’s what investors right now we’re kind of going through and we had it basically compounded on us that we had a repair that we were not expecting an accident on two houses in the south on the same street, within a week of each other one tenant was very understanding and, you know, moved on and went on about her life. And the other tenant basically sat there and tried to be as difficult as possible.
What’s what’s happening is, is now you have these local cities that people are starting to protest and things like that, about being evicted, and this and that, but at the same time they have taken advantage of the situation that we’re all in to be able to live basically rent free, but they go and buy a new car, a new TV, a new phone, they’re using that money that they should have been paying rent with, you know, for things and it’s leaving the landlords, you know, kind of in a tough and a tough position. Because their bills, they still have to be paid. So even if the house is paid for you still have taxes, insurance, you still have to make repairs on the house even though the tenant didn’t pay him. So what we’re hearing now is that even though the eviction moratorium has been lifted, judges and in the bigger cities are slow walking evictions. They’re they’re not even though they’ve been found. They’re not necessarily in a rush to hear the case to do the eviction, and it still leaving landlords kind of stuck in some ways. Because we’re in a, we’re in a gray area right now, where the where a lot of people are looking for direction. And, you know, you always hear you have the right to a speedy trial, well evictions a trial, the tenant shows up gives their side, the landlord shows up and gives their side that’s it’s a trial. But there’s no actual 30 days, 60 day 90 day, you know, you hear people all the time talking about, you know, I’ve been in jail, or I’ve, you know, I was arrested a year ago. And I’m just now getting getting to go to trial to defend myself. So there’s no actual written, you have to do this in a certain amount of time. So all of these judges now, for some reason in these bigger cities are trying to slow walk it. But at the same time, no one has the foresight in these bigger cities to understand you can slow walk it all you want to, it’s still going to happen.
If if you’re actually if you actually care about people, go ahead and rip the band aid right now. Because you’re rash, your irrational thinking is going to put people out of their house around Thanksgiving, around Christmas, go ahead and do them so that they actually have an opportunity to find some other place to put a roof over their head, before the holidays. I mean, you’re sitting there thinking to yourself, okay, we get evicted a week after Thanksgiving, where are we going to be able to put up our Christmas tree for our kids to have a Christmas? Now, you could argue that a lot of that a lot of these people that haven’t been paying are getting what they deserve, if that were to happen. But at the same time, if you have any compassion for humanity at all, yes, bad things do happen to good people. And bad things happen to bad people. But you try to make the best of a bad situation. And you no one is really factoring in the kids that are involved in this because the parents didn’t factor that in when they decided to stop paying rent and just start going and spending money. on other things, the parents didn’t factor in, that the kids are going to have a bad Christmas because they’re going to wind up, you know, being in between moves or in a new house and getting everything together. Judges are not thinking about that. It’s all just a divisive scenario now that that instead of having a society that makes the best out of a bad situation, now it is a situation to where you have two sides going against each other. And there’s only one side that’s going to win. Because you’re going to get to the point to where you’ve already seen some of it, some of these landlords are basically showing up on their own, throwing the stuff on the street, changing the locks. You’re having people that go on TV and say our kids are not gonna have any place to live, and come to find out, that’s not even their mother, that’s the babysitter. So it’s just this play on the sympathy thing, where a lot of people are not actually learning, and doing doing the due diligence on what is actually the impact on the landlords, because every landlord that I know, has already said, every single tenant that I have that hit a hard time, but has worked with me has stayed in communication with me is trying their best to make it whole or at least trying to make it whole. I’m going to work with them. Because no no person asked for this. So I’m going to try to work with them. But every landlord that I know, at the same time tells me that if a tenant just basically fell off the face of the earth decided to stop paying and said, You can’t kick me out and knew it and just tried to game the system. You have a very passionate landlord base right now. That is ready to take their foot to a lot of backsides. It’s just there’s a lot of frustration in this right now. And it’s not just individual owner’s, it’s all the way from individual owners up to hedge funds, these, these people across the board have manipulated the system. And what I’ve always said my entire life is that the minority ruins everything for the majority, because the majority of the people have done the right thing. But you have a minority of people in in this situation that have tried to get over on the canvas that people have tried to show. Because kindness comes to an end, you’re only as Candace is, until it’s time to stop being unkind and when to stop, then it’s time to stop being unkind. There’s a wrath behind that because it turns it goes from calm to frustration to upset to just truly pissed off. And society’s, there’s, there’s portions of society that have just gotten to the point where they don’t care, they think everything is supposed to be handed to them, that nothing can be done to them, this and that. So we were lucky with these houses that we have, that we have one two in it, that had been there for me, she had been there six months.
So she already knew that we were that we we had a little bit of relationship with this with this girl. But even though she had lost her job, she was still paying her rent she was she was finding a way to keep a roof over her head. And was appreciative of the offer that we made. Because in all my years in real estate, even taking Dayton back to my growing up in the business and watching my dad do it never has anybody in a rental property been offered money to leave never. There’s a calls and every single lease that says, if something weird happens like this, you can’t hold the landlord responsible and this lease is terminated. It’s in every lease ever written. So for us to actually give give them money that we didn’t have to shouldn’t have been appreciated. And with one tenant it was with another tenant, we had to basically force the situation, and say, if you don’t take this and out of this house, by this time, on this day, we’re taking it away, we’re going to court, you’re not gonna like the outcome. And that finally registered to him. That said, You know what, maybe we need to take the money and run because we don’t, we’re gonna be out on the street, we’re not gonna have any extra money to go rent somewhere. Let’s just take the money. So something clicked in them, and we’re glad that it did. But it took almost a month to get them to come to reality with the situation and realize they’re not gonna wear us down. It’s just one of those things. Because even if we wanted to let them back in the house, we couldn’t have done that. Because if you have one ceiling that’s falling, what’s the stop another ceiling because of one’s coming loose, the rest of them are coming loose. It’s just the way it is. So we can’t let you back in that house. And risk of ceiling falling on you hurt and you suing us. It’s just not it’s not good for anyone involved. So we need you completely out. So we can rip all the sealant down, start start all over again, put a new ceiling back up. And then have a safe environment, the safe house for whoever is occupying that house. Now if you want to, if they wouldn’t have pulled the stunt that they did, we would have probably let them come back and rent it from us again, once we got it renovated. But when they started being difficult, we already knew that’s not that’s not the kind of tenant that we won’t. And that’s just a business decision. And it is hard, you know for some to understand, but that has to be the mentality. Whenever you have rental houses because that’s your livelihood. That’s how you make your money. That’s how you pay your bills. That’s how you put food on the table for your family. And these these tenants sometimes lose sight of that. And it goes back to the to the protest and the riots last year. Are you kept hearing on the news was they have insurance. What they what they didn’t understand is because they were doing that we wound up having to raise rent across the board. Because when you go and get a new insurance policy There are portions of the insurance that you can have included. So, with mine, I include vandalism and malicious activity. Well, both of those portions of the policy tripled their premium. When all this was happening last summer. So I go from basically paying $50 to $55 a house every month on an insurance premium, to now I’m between $85 and $90 for every single policy, because those two routers inside those policies went up that much from what happened last summer. And that is being stretched across the board. Now, when you look at the inflation of groceries and gas, cost of building materials, all of these places are having a pass on the extra expense to the consumer. So instead of seeing the bigger picture, a lot of people are just not seeing it, because they want up being the people that think they’re entitled to something, they don’t have to work for something.
But in the end of the day, It only hurts them that much more because they were already struggling. So now they go to the grocery store or go, you know, to the gas station, and now they want up having to pay more for every single thing. Because they did something without the knowledge of consequences. It’s not just a, hey, I’m gonna do this and nothing’s gonna happen. And that is that has never happened a day on this planet. For every action, there’s an equal and opposite reaction. It’s been around since the beginning of time. So whenever you’re out there right now, make sure you’re taking into account that there is a frustration, it is growing, investors are spending more money after you leave than what they used to, whether it be renovation or difficult tenants, or it could be a number of things. But factor that in and your offer prices to your sellers, and realize that we investors are spending that much more money because of actions of other people. It wasn’t you that caused that roof to fall down, it wasn’t the owner that cause that roof to fall down before we bought it. It wasn’t the tenant that caused that that roof to fall down. It just happened. But either way, it still fell down. So now when we go to Home Depot to buy the the drywall to put it in there, what would have cost us between two and $3,000, two years ago to replace is now going to cost us $5,500 for each house. So now we’re over $10,000 for each house because of an action that caused inflation to go up and cause prices to go up. But also as a reaction to some events that have happened in the last couple of years. So I know, I know, this may not may not come across to a lot of people as processing this. But whenever you’re making offers right now, all I’m saying is the better deal that you can give your investors the likely or or you are to get it sold right now because every single investor out there is factoring in a side effect, whether it be inflation, difficult tenant, just crazy things that happen unexpectedly theft of property, you know, they’re they’re factoring in Murphy’s Law, so to speak right now, because it’s happening all over the place. And luckily, we bought these houses where we had still had enough equity in them to where even though we’re spending $10,000 each on these houses right now. We’re still able to put them on the market tomorrow. We would still basically make double our money on both of these houses because of the way we bought them. With that, I’m going to draw it to a close I just wanted everyone to kind of understand the climate that we’re in right now. wholesalers keep doing what you’re doing. But just take it in the back of your mind. The Murphy’s Law is tagging investors right now. And it we’re all hoping it goes away. Because we don’t really know how much longer we can deal with this without losing our minds. Because tenants are just coming up, but they’re losing their minds to weird things are happening all across the board but, but just keep that in the back of your mind and try to help investors out. And when you’re helping these investors out, it’ll come back and find when Murphy’s Law stops and pricing people can pay more for houses again, when we get our sanity back. You’ll you’ll get that money that that you were passing home back in spades, it’s gonna happen.
Like I said, we’re gonna we’re gonna draw to a close if you want some more information to help grow your business, be sure to go over to EarlToms.com. We’re gonna be back in a couple of weeks with with another episode. Hopefully, that episode won’t have any Murphy’s Law associated with it. But right now, we can’t guarantee that the but just wanted to kind of give you a scenario of what landlords and investors are facing right now as far as the current climate, the current market.
We hope you enjoyed this episode.
We’ll see you again in a couple of weeks.
Thanks for listening.