Here at AAOL we’re real estate investors and landlords ourselves, so I’d like to tell you about a
personal nightmare tenant that I had in an upscale suburban property a few years back when the rules, regulations and downright Federal interference in our rental businesses were not even as bad as they are now.
This tenant was from a wealthy middle class family and the parents were expats who lived and worked in Hong Kong.
As is the case in many families, amongst the kids, there was a black sheep.
In this family it was a woman, we’ll call her Cristina – and she was about to become my own personal nightmare tenant from hell.
Over the years, Cristina had been in prison, she had gotten into trouble with the police. She’d had issues with drugs; she had had various children with different fathers – many of whom were also serving time for serious criminal offenses.
Now, you may be asking what landlord in their right mind would take on such a tenant… And normally, I’d be right there with you shouting “No! Don’t do it!”
But this is just one example where even those of us with a finely tuned radar for trouble tenants can get bitten in the behind even if we are super careful.
The reason I had this tenant was simple, and entirely out of my control: they came with the house.
Don’t understand? Let me explain.
I was contacted directly by the tenant’s brother telling me that his family owned a house in a great neighborhood that had been bought for his younger sister and her kids, two of whom had learning difficulties, but for which she was receiving state assistance to help with the rent and costs of looking after the house and kids.
Their father had died overseas and the house had been in probate. It needed to be sold in
order to split the inheritance between the remaining family members, spread out around the
globe.
With this in mind the family needed to sell, but there was a problem.
The sister, Cristina, that was living in the house would not let any real estate agents into the house, nor any potential buyers.
This is common when you’re an investor and buying a tenanted property, as you probably know.
You buy a property with a tenant and if necessary you calculate the cost to evict the tenant along with the time it may take in that particular jurisdiction.
At the end of the day we can buy houses at a discount from the MLS values based on things like this.
Plus, eventually an eviction will take place, you can get your rehab crew in and sell the house for a profit.
So I made a business decision based on the discount they were offering me to take the property off their hands so the brothers and sisters could split the inheritance.
All I needed to do was to take on Cristina and her kids and carry out the eviction process because the family felt they could not do this to their own sister.
I guess when it came to the money they were fine if they left it to me to be the villain, but that’s another story.
So I bought the house, I did get a great discount and from the property preservation drive by
inspection I knew I’d bought a great family home in a suburban neighborhood that would be an
easy fix and flip.
I just had to go through the process of eviction.
Now, bear in mind that this woman had been receiving welfare payments but had stopped paying the rent to the family – but for me, I knew it was just a cost of holding until I could get my guys in and get the house listed and sold.
Fast forward eighteen long months and the day had finally come to go before the judge and make the case for eviction.
The house had been sold with the sister in it, but she had not allowed access and paid no rent in several years.
The attorney who was there to represent me was highly experienced. She’d been in foreclosure court and evictions for years.
“There’s nothing I haven’t seen,” she assured me confidently while we waited our turn for the judge.
“This case is a slam dunk.”
I shouldn’t have believed her.
We went in to sit before the judge. We know that courts don’t like wholesalers, flippers and even landlords, but the law is the law, right? So we were confident it was just a rubber stamp exercise…
Especially when the judge asked if anyone from the other side was representing, and there was
silence and two empty chairs.
The judge said it was a formality as no one had turned up to defend.
He ran through the papers, the attorney nodding at me sagely, almost saying, “We’re about to win.”
The judge had his court stamp in his hand ready to seal the order, and…
Suddenly the door to the courtroom burst open and in stepped a woman who of course had to be the sister along with an attorney from some anti-eviction charity (that I will not name so as not to give them credence here or tip off other tenants that they exist!).
“Just a minute Your Honor,” said the attorney. “I am here to represent the defense in this
eviction.”
The judge said he was about to pass judgment and asked if they had any evidence to suggest
otherwise?
“Yes, Your Honor, my client is not a tenant. My client is the owner of this property.”
Of course I was there with a copy of the title report, the HUD and proof of the sale.
However, the tenant was claiming now that she was a part owner prior to the sale, despite no
evidence on the County Records. She also insisted she had been defrauded from her inheritance by a
conspiracy between her siblings and me!
The judge looked at Cristina and her charity lawyer and sighed. “This is an eviction court. We do
not have time to consider other matters such as ownership. Please take your clients and go and
sort this out outside.”
For ‘outside’ the judge clearly meant anywhere but his Court.
And so began a process that took almost two full years until the final eviction and $60,000 in
lawyer fees to prove that this woman was not in fact the owner of this property.
This is how I came to have a tenant from hell.
Even though I knew to expect trouble, the trouble came from so far left field – the claim of ownership – that it threw my investment model out the window.
Of course the woman was never an owner, she had no proof that she was.
But the lesson is this: all it took was that this woman claimed something to be true, and I had to fight, spending a slew of time and money, to prove her statement was false.
What happened to her? Absolutely nothing happened to her. Yes she was finally evicted but not before she literally demolished the interior of the house, including removing the stairwell and stripping out all the wiring.
After ages of having a roof over her head for absolutely free.
But as for making false statements or for over $50,000 damage to property, let alone the years of unpaid rent – nothing came of it. Not at all
And yet – I was lucky, for one simple reason.
The value of the house soared due to price inflation and so eventually I was able to sell again at a profit.
But imagine this scenario happened at a point where you were at the top of a market, right before a crash? Disaster.
These days I never buy a property with an incumbent tenant, nor take any new tenants without some kind of liability insurance in place where I know that whatever happens I’m covered for losses.
Remember, in America, the system is so skewed against property owners that your tenants don’t have to tell the truth to get someone to listen to them. They can tell a lie, and even that statement with no evidence on their part is enough to force your hand to prove otherwise.
