I took over managing the second apartment building I bought promptly upon closing. My attorney promptly informed me that the tenant in the lower front apartment had unexpectedly moved. Now I had to fill a vacancy in the heart of a Chicago winter. This did not bode well.
I think it is important to know that this was a neighborhood in the beginning stages of gentrification. I learned later that I was “pioneering” with my new acquisition. Let's navigate through my Income Producing Property woes:
Rent Collection – Need To Borrow Armored Truck
January was rent collection time. The tenants were very different from those in my first building. None had checking accounts. They all paid their rent in cash, but at least they paid. Fearing I'd be clubbed over the head on my way out, I'd always conceal the money in my sock and run to the nearby bus stop as soon as the collections were complete.
The tellers at the bank would gaze in wonder at me when I took off my shoe and sock to make the deposit. At least I offered a diversion from their standard customer deposit.
As I had feared, management of the building initially went poorly, though I did get the vacant apartment rented to three self-proclaimed communists.
Code Inspector Means Business
In March, an attorney from the bank telephoned, inquiring why I had not moved into the building (conditions of my loan was that it would be an owner occupant) and more importantly, what I was planning to do to correct all the building-code violations.
Apparently the Department of Buildings had mailed me notices about these at the property. When the notices came back saying “no such person at this address”, they contacted the mortgage lender.
The code violations had been cited before my acquisition. I'll never know why the clerk at the Department of Buildings couldn't find them when I checked before buying the property.
While I could certainly go after the seller legally for nondisclosure, my immediate concern was my pending court date for non-compliance. I didn't know what to do.
And Then There Were The Tenants
As I had suspected, my tenants turned out to be real gems. Early one Sunday morning, I got a call from the police, asking what kind of people I had in my building. They had just arrested one of the tenants running down Southport Avenue, wearing nothing but a negligee. When they caught her, she was wielding a huge machete, and was chasing a young man clad only in his underpants.
Then there was a murder in a park about an eighth of a mile from the property. Within a day the police had a suspect – the tenant in the second-floor unit. They carted him off for interrogation, while the other tenants complained that I was harboring murderers. Fortunately, he turned out to be innocent, or I would have lost more tenants.
Repairs, Repairs, Repairs
The lowest point in my quest to become a real estate mogul occurred one pleasant spring day in April. I got a call from my communist tenants that there was a puddle of water on the basement floor and they didn't have any hot water.
Being unemployed and soon to become homeless, I went over myself to check on the hot water heater. While I am a mechanical dunce, it didn't take much to figure out that the tenants needed a new hot water heater.
I drove to the local plumbing supply place and purchased a thirty-gallon hot water heater. One of the other “customers” overheard my dilemma and offered to install the new heater, with my help, for cheap. The deal was made.
My installer did not look like your typical plumber. He was about sixty-five years old and had long, straggly, unkempt white hair. His smile was memorable, as his front teeth were missing. But he told me he was a handyman and had installed numerous hot water heaters. It sounded good to me – especially the price.
The first task was to drain the now kaput old hot water heater. This is when I discovered that the previous owner had cemented over the only drain in the basement in order to make a bedroom down there. I found a little pail outside and emptied the water one pail at a time in the back-yard. It took an hour and a half to empty the tank. We then unhooked it and dragged it out of the way. I never knew how heavy hot water heaters were.
We eventually installed the new heater and ignited it. Fortunately it worked. The handyman did know what he was doing. I paid him and then proceeded to lug the old heater to the alley for garbage pick-up. It took me an hour to get it out there.
Hitting Rock Bottom
I sat down upon the hot water heater to reflect on the day and on my situation in general. I was jobless and soon to be homeless – I couldn't get an apartment because I had no job or predictable source of income. I couldn't live in one of my own units because I couldn't afford my own rent.
Well, at least I had my health. Or, as it turned out, I had it for about the next five minutes.
As I got up to leave, a stray dog that had been menacing my tenants and other neighbors wandered over. The animal had no ownership tags. “Rover” was medium-sized with filthy, matted, light brown hair. The dog attacked me unrestrainedly. It went straight for my ankle, biting me and drawing blood.
Now I had a moral dilemma: as a vegetarian who chose vegetarianism as an expression of compassion towards animals, do I let the dog do its thing, or as a human being under attack, do I defend myself? I chose the latter.
I picked up a rake that was lying nearby and whacked the animal several times. After about ten whacks the dog stared at me and I stared right back into its eyes. It ran away, and my tenants were never bothered by it again.
Since I didn't have medical insurance, I hoped the dog did not have rabies. I'd gotten a tetanus shot a little over ten years before; I thought I'd push my luck, figuring that maybe tetanus shots were good for a little more than ten years.
As I walked to my car, I was feeling dejected. If self-esteem was measurable on a scale of one (low) to ten (high), mine was in the negative numbers. I felt I was a total fool, and that I had been stupid enough to buy a real lemon of an income producing property.
Never Give Up – Keep Working on Real Esate Investing
In this difficult period of unemployment, I found myself with little choice – I could either sit in a morass of anguish and give up, or I could look for a way to bring in income.
I didn't have nearly enough property to count on real estate income. I never gave up, though. I continued to look for income-generating possibilities, including a regular (ugh!) job. Eventually I found a job, bought more properties and ended up quitting my job.
You should never give up on your dreams no matter how rough the road, lemon of a deal or dealing with the tenant from hell.
Because I never gave up, I ended up becoming a Mini-Mogul.