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Just Had To Walk Away From 2 Houses

 
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Old 03-19-2009, 06:11 PM   #1
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Just Had To Walk Away From 2 Houses


I'm 28 years old and have honestly, carried a passion for real estate since I was in 5th grade. I started working for a landlord then, and I learned how cheap they were then too. I was always a hard worker, I made $1.50 an hour and I loved getting $50 come payday!

I went to college after high school, perusing a degree in accounting and had intentions of furthering my education with a MBA. 3 years into college, I woke up, and discovered I was not even following my dream.

I finished that semester of college, 3 classes short of an accounting degree. I made some phone calls, met with some people and I negotiated terms to buy a 4 unit complex that month.

I was managing a restaurant while going to school, managed to save up about 6k in a short period of time. The apartment was a dump, but it had 4 units. The location...bad. The price.....68k, no so bad. The terms...10% land contract, normal when trying to establish a business relationship with a property investor.

I bought another property from the same person, a year later, a 2 unit complex.

A few years pass.

I start a roofing company up, and buy a few more houses, some foreclosures, some from different property investors. I accumulate 5 house (10 units) over a coarse of 4 years.

My Roofing company takes off really well. My sales are among the highest at my suppliers. I was actually 2nd last year, behind only one other company. After only 2 years, competing against guys in business for 40+ years and with businesses handed down through generations.

While trying to balance, low income housing and my company....I had problems. I have so many hours in the day. When dealing with my tenants...you were chasing them for dollars. When dealing with my company clients....you were making thousands. It's easy to see what took priority.

Soon, I started paying mortgages out of my company accounts, insurance payments, water bills, property taxes. Mean while, with the housing market like it is, I can't re-sell and come out ahead after paying broker fee's and closing cost. The homes did not appreciate over the course of time either.

I finally decided last month, I have to walk away from these 2 properties. I cannot manage low income properties. I can pay for them...but I'm paying so people can rent for free. I paid one over half way off, the other about 35%.

It's hard to walk away, it's hard to feel like you failed, like you had to abort mission. But I feel so much better walking away. Last year I wrote 15k in checks out of my company account, to keep bills caught up on these homes. I hate investing that much....and walking away with nothing....but a lesson learned!

The new plan? Continue with the company, chase more work, be more aggressive. I'll buy a single family home a year, fix it up new....rent it to a moderate income FAMILY instead of a single mother/father. Maybe offer to sell it on a land contract if they rent for a few years good. That's the 401k.

I do feel the a big burden off my back doing this. I always feel I can take on the world, that I can carry the weight of the world and you know what.... I CAN. But I don't have too
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Old 03-19-2009, 07:12 PM   #2
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Re: Just Had To Walk Away From 2 Houses


Second behind only one other company thanks for clarifying I was confused.

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Old 03-19-2009, 07:23 PM   #3
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Re: Just Had To Walk Away From 2 Houses


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Second behind only one other company thanks for clarifying I was confused.
As opposed to second to none
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Old 03-19-2009, 07:31 PM   #4
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Re: Just Had To Walk Away From 2 Houses


I can identitfy with all you wrote. I thought I was doing it all the right way in 05 when I bought a house on the eastern shore of MD. It was ok until last year when the econ went south and my renters lost their job. That house cost me about $15k altogether and I reached a point where I said not one more cent! Its for sale now but I don't think it will sell. You're right though- it does feel great to know that I won't have the proverbial monkey on my back and can devote all my time in my construction business. From now on I will "invest" in my business. All the best. Mike in Annapolis, MD
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Old 03-19-2009, 07:36 PM   #5
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Re: Just Had To Walk Away From 2 Houses


Man you started way late. I wanted to be a framer in third grade. That's the problem with kid's nowadays. Fourth grade, they don't even have a clue where they're going.
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Old 03-19-2009, 07:51 PM   #6
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Re: Just Had To Walk Away From 2 Houses


You are not alone. I walked away from my final 4 rentals a year ago and filed bankruptcy. I felt shame and went into a mourning period. I worked really hard to earn my buildings. I was a single mom who never saw a dime of child support. I was so proud to build my little empire. At one time I had a total of 8 units.

After 9-11 interest rates dropped and I lost all of my good tenants who all purchased homes of their own. I had the best of mentors and did everything right. Poor tenant pool, 13 hour work days , evictions, repairs, and run away debt. Finally I had to say enough.

There are streets in my neighborhood that I won't drive down because I can't stand to look at the property I lost.

My painting business is doing good. And I'm happy with life. It's easier to fail when you can say that "I tried".
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Old 03-19-2009, 09:07 PM   #7
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Re: Just Had To Walk Away From 2 Houses


Sounds like a few of you had more on your plate than you could eat. Investing your time wisely is as important as investing your money wisely. I receive a couple offers a month to buy rental units. I would rather dedicate my time to my business. I know what my business and employees do daily, I couldnt say the same for renters. I do know a lady who runs a very profitable international business and has a dozen or so rental units. She has a part-time person who manages that part of her business for her.
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Old 03-19-2009, 09:24 PM   #8
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Re: Just Had To Walk Away From 2 Houses


I did the rental thing too. Nice property, good neighborhood, one bad tenant, all the other tenants complain, had to hire a lawyer, eviction, then do repairs and the bum ends up pleading life ain't fair and everyone is prejudiced.
Man, some people make being a loser a career. Made a little money, but not worth it, its a whole different business you have to learn.
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Old 03-20-2009, 08:10 AM   #9
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Re: Just Had To Walk Away From 2 Houses


Just like anything else 50% you make it, 50% you don't... there is no guarantees in business, especially real estate. To invest in real estate you have to have balls, because you laying out all your money, or the bank owns your Ass and by the time you see a penny back, it could take a month if you lucky or it could take years, or you can just walk away like some here did, because it becomes a financial burden especially when you taped out. Always think ahead of time -What if this happens" Can I make it? Can I carry it for 2 years? If the answer is no... then its a BIG NO.... Never try to jump higher then your balls, because you can't and if you do, you be on your ass, it is a proven fact, don't try it at home
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Old 03-20-2009, 09:33 AM   #10
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Re: Just Had To Walk Away From 2 Houses


Great feedback guys/gals.

There is a lot of money to be made in real estate, and it's not going anywhere. There are good buys, and bad buys. I made a mistake, with 2 bad buys and should have walked away a long time ago.

There is no point in trying to stick around or follow through with a bad plan. You can always start over.

I know, it sounds childish, but doing things the 2nd time, you are ALWAYS better. Ever have a video game get erased and have to start over? You get back to where you were....very fast.

It's a lesson learned, I'll be more carful with investing, invest in properties that require less time. NO MORE multiunits. When you go to sell multiunits....who is your market? Landlords only. And who are the cheapest SOB hacks in the world? Yah, landlords.

I'm buying single family homes, I can market those when they sell to EVERYONE not just a select market.

I'm not depressed, I'm not down, I'm relived. I can save and invest money now, in good projects and properties. I always find a way to make it and find a way to make money. My passion has always been my work and hobby.
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Old 03-20-2009, 11:00 AM   #11
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Re: Just Had To Walk Away From 2 Houses


takes balls to do any of this stuff - everyone here gets a pat on the shoulder at least.


but it takes a good businessman to run a successful business.

takes a great businessman to know when to close one
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Old 03-20-2009, 11:14 AM   #12
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Re: Just Had To Walk Away From 2 Houses


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Originally Posted by dirt diggler View Post
takes balls to do any of this stuff - everyone here gets a pat on the shoulder at least.


but it takes a good businessman to run a successful business.

takes a great businessman to know when to close one
You 100% right...
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Old 03-20-2009, 11:25 AM   #13
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Re: Just Had To Walk Away From 2 Houses


I know exactly how you feel.

In the fall of 2002, I didn't owe a dime to anyone. We had a low 6 figure savings and retireent, the house was paid, kids in school, great income, nice cars.
I bought a 12 plex apratment building. Everyone told me it was a great idea becuase the stock market had tanked. We did our due diligence, checked all the paperwork, met every tenant.

The day we closed, 5 tenants had moved out the day before. Of course, the vendor didn't tell me.

I sold the building 4 years later. I lost more than $150,000 on it, even though I sold it for what I paid.
The landlordand tenant act in Ontario is onerous, and is slanted so far towards the tenant it's pretty much a joke.
On top of that, I left my partner and started up on my own, from scratch, so now I'm in debt up to my eyeballs. However, we're survivor types, so we're working on it.

Just don't be a residential landlord.
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Old 03-20-2009, 11:40 AM   #14
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Re: Just Had To Walk Away From 2 Houses


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Originally Posted by Stone Mountain View Post
I know exactly how you feel.

In the fall of 2002, I didn't owe a dime to anyone. We had a low 6 figure savings and retireent, the house was paid, kids in school, great income, nice cars.
I bought a 12 plex apratment building. Everyone told me it was a great idea becuase the stock market had tanked. We did our due diligence, checked all the paperwork, met every tenant.

The day we closed, 5 tenants had moved out the day before. Of course, the vendor didn't tell me.

I sold the building 4 years later. I lost more than $150,000 on it, even though I sold it for what I paid.
The landlordand tenant act in Ontario is onerous, and is slanted so far towards the tenant it's pretty much a joke.
On top of that, I left my partner and started up on my own, from scratch, so now I'm in debt up to my eyeballs. However, we're survivor types, so we're working on it.

Just don't be a residential landlord.
Hey best of luck to you!

In my experince, when you deal with Multi Unit complexes....you are dealing with head aches and high turn over rates. Money can be made, but you are WORKING hard for it.

You will be fine, like you said, you are a survior type....you know you can do it, and you will find a way. I love that about some people, chin is always up, even when the worse strikes. It's the only way to do good in business, we'll all stumble, but we don't have to fall.
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Old 03-20-2009, 11:51 AM   #15
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Re: Just Had To Walk Away From 2 Houses


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Originally Posted by dirt diggler View Post
takes balls to do any of this stuff - everyone here gets a pat on the shoulder at least.


but it takes a good businessman to run a successful business.

takes a great businessman to know when to close one
I betcha' Poster #6 with disagree with this statement. Just saying...

DustyroseYou are not alone. I walked away from my final 4 rentals a year ago and filed bankruptcy. I felt shame and went into a mourning period. I worked really hard to earn my buildings. I was a single mom who never saw a dime of child support. I was so proud to build my little empire. At one time I had a total of 8 units.
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Old 03-20-2009, 01:07 PM   #16
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Re: Just Had To Walk Away From 2 Houses


Maybe I am just a glutten for punishment, but I just bought my first. I am currently about $14k into the $25k projected cost of the rehab. It is a single family and very small. I wanted to get everything back up to code and in perfect working order before the tenants get in. My dad has been in it for a LONG time and I know how aggrivating the middle of the night calls can be. They are never convinient and have to be addressed immediately.

He has been on me for years about buying my own. My wife and I really wanted to have our personal home paid off before we hit the ripe old age of 30 and were well on our way. Until I finally gave into Dad. Everyone has their plan and we all hope they work out. Wish me luck as I venture our savings and our children's college fund on the line.
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Old 03-20-2009, 04:41 PM   #17
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Re: Just Had To Walk Away From 2 Houses


i think the only time i would rent out to anyone, is if the house was a) mine, and i was renting out the basement, for example --- or b) if it was a second home


everytime I've gone to crunch the numbers on this ... it just never seems like there is a desirable margin with just the mortgage and anticipated rent. Throw in some Murphy's Law --- and I can see how some landlords might pray to break even.

and that's before the bad tenants. I dunno, I've thought about it alot --- it just doesn't seem like the profit margin is there. Not to justify the risk at least.



If someone disagrees, let me know --- the numbers just don't work out to my liking
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Old 03-20-2009, 05:01 PM   #18
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Re: Just Had To Walk Away From 2 Houses


The average millionaire will file bankruptcy twice in their life
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Old 03-20-2009, 06:02 PM   #19
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Re: Just Had To Walk Away From 2 Houses


Quote:
Originally Posted by greg24k View Post
Just like anything else 50% you make it, 50% you don't... there is no guarantees in business, especially real estate. To invest in real estate you have to have balls, because you laying out all your money, or the bank owns your Ass and by the time you see a penny back, it could take a month if you lucky or it could take years, or you can just walk away like some here did, because it becomes a financial burden especially when you taped out. Always think ahead of time -What if this happens" Can I make it? Can I carry it for 2 years? If the answer is no... then its a BIG NO.... Never try to jump higher then your balls, because you can't and if you do, you be on your ass, it is a proven fact, don't try it at home
I have to agree and disagree with this.

I totally disagree that real estate is some coin flip.

Peffers mistake is like many in that the initial process was flawed.

Real estate that easily in reach financially to most is easily in reach financially because the property is flawed.

When something is so affordable it isn't because you are a genius and got a great deal, it's so affordable because those who know what they are doing don't want anything to do with it.

That property was so low priced because of what it is a total nightmare. It will only rent to problem tenants and as said won't appreciate because of it's location.

A high quality property will appreciate and rent to quality tenants, BUT -- it won't be financially easily affordable. You will have to have much deeper pockets and therefore be more highly qualified to purchase those.

This situation is no different then buying a car.

Here is car A - it's a brand new $35,000 car with zero miles on it.

You can buy it and drive it with relatively no problems, it will be reliable and your costs will be pretty much fixed.

Here is car B - it's a piece of crap with 300,000 miles on it, but it's only $1500. It's going to be a total nightmare, need constant attention, be totally unreliable and keep making you reach in your pocket.

Car be is affordable to many more people then car A, however car A and B are totally different.

That piece of real estate was car B.

Realestate is no different at all, each property is a product and it's worth what it is worth for a reason for where it is and what it is. Because it's affordable (ie - worth less) doesn't necessarily mean it's worth purchasing.

I've seen this happen year after year. Investors who shouldn't really be investors get into the market and they can't afford the right properties, so they end up with these properties that are losers right from the start cause those are the only ones they can afford.

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Old 03-20-2009, 06:22 PM   #20
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Re: Just Had To Walk Away From 2 Houses


Mike is correct. I own 15 rentals, all relatively new, I built them all, and built them bombproof (almost). Buying old units is buying high maintenance. Buying tract homes is buying high maintenance. That's fine if you buy really cheap and consider yourself a professional maintenance man, then you get paid for your constant maintenance work.

You've got to be willing to be an assh*le to be a LL. You've got to be willing to kick out that single mom with 3 kids, in January, because she's a month behind. Once behind, she cannot and will not catch up.

You've got to know your local law re: Landlording. If you don't it will bite your *ss.

Doesn't sound a whole lot different than being a contractor now, does it?

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