I got a lead through one of my property managers. I had become friendly with the owner. He had mentioned at lunch one day that he was tired of dealing with the building inspectors and the city government, and was selling all his properties. He wanted $85,000 for this building.
My analysis of the numbers showed that it should be profitable, and the seller and I agreed on a price of $75,000. I pulled $30,000 out of one of my other buildings in Chicago and used it for a down payment.
I purchased a three-unit building that was half brick and half frame. Each apartment had two bedrooms and measured 1500 square feet. Beautifully crafted woodwork punctuated all the units.
Rental Vacancy High
In general, this purchase was a disappointment. The tenants on the third floor unexpectedly moved out a week before the closing. After that, there always seemed to be a vacant apartment in the building, usually on the third floor. Without the $525 in monthly rent from the apartment, the property lost money. I was not happy.
One day I got a phone call from the second-floor tenant. She was a very good tenant who kept her apartment immaculate, paid her rent on time, and was invariably reasonable. She told me she’d had an argument with her live-in boyfriend and had gone upstairs to the third-floor apartment to get away from the situation. As usual, the third-floor apartment was vacant. While she was up there resting, she claimed a ghost appeared and told her to get out of the apartment immediately. She gave me a physical description of the ghost.
She said she’d felt scared, and so-called me. This woman was a very religious person and quite honest, so I didn’t want to make a judgment as to the veracity of the ghost story. I simply suggested that she not use that apartment as a place to rest, since in any case, it was not her apartment.
About two weeks later, I received a call from the first-floor tenants. It seemed they had decided to use the empty third-floor apartment as a neat spot to cap off their work week and have a few beers. After they’d had a few drinks, they said the ghost appeared to them and scared them into leaving. Their description of the ghost matched the other tenant's. I told them to stay off the third floor, too.
I knew none of the tenants was trying to use the ghost as a ploy to move out since they had no intention of leaving and always paid the rent on time. I don't know whether the various tenants talked about it with each other. I was beginning to wonder if I had bought a haunted apartment building.
Concerned, I called the seller and reported the ghost sightings. To my shock, he confessed that he too had seen the ghost. He explained that it was the spirit of a former tenant who had lived in that apartment. The woman had committed a felony and been sent to prison, where she died in a fight. I imagine she liked the apartment and wanted it to be her home forever.
I decided I wasn't about to give the ghost an eternal estate in the apartment, however, and rented it out again. Once more, the renters bogeyed on me, and I had to re-rent the place.
The coup de grace came one cold Saturday morning in December 1993. The tenant on the second floor called me at 7:15 and informed me that the building had burned down. While I knew her to be honest, I could not believe the building had actually burned without anyone calling me about it.
I sped off to Aurora – about an hour's drive – and, to my shock, saw that the building had indeed burned down. The roof had collapsed into the structure, and the place had major water damage from the firefighters' hoses. The tenants were all waiting for me to get their security deposits back. Fortunately, the Red Cross was able to find them temporary housing and no one was seriously injured, although two firefighters suffered minor smoke inhalation.
It happened around midnight. After questioning me thoroughly about the fire, the police, fire department, and insurance company figured out that I had had nothing to do with it. The arsonist never was caught. Could it have been the ghost?
Disclosures, Inspections and Questions
Looking back, there were tons of things we would all have done differently. Inspecting the rent rolls would have revealed high rental turnover. Pointedly asking about any anomalies might have breached the ghost threshold, and during an inspection, the ghost might have revealed itself. It is a great practice to demand Seller Disclosures, perform an Inspection, Interview prospective new tenants and ask questions. Due Diligence will always serve you well.