Seeking advice=Neighboring townhouse-Terrible neighbors-cant rent

[Cortie Wetherill III]

Hello all, 

This constitutes my first post on BP despite listening to the awesome podcasts for a few months now. I am seeking some advice regarding a rental property in my portfolio. Here is the scenario, 

The property is a great 3 bed/ 1 bath townhouse rental in suburban Philadelphia with a shared wall to the townhouse next door. The neighboring property is the epitome of deferred maintenance and the tenants are pretty awful. They operate an unofficial mechanical shop out of their driveway which results in a junkyard looking backyard and all sorts of unsettling characters arriving throughout the day. Furthermore, our last tenants requested a lease break because of a bed bug issue. The professional we hired to handle the issue said that the bugs were coming from next door.

We've attempted to purchase the property from the owner, an older gentleman, but the price he placed on the property is roughly 175% more than it's worth. Due to this dilemma, we have been unsuccessful renting the property for the market number we are seeking and are at a loss in terms of options. 

Could anyone offer some advice on next steps? I've considered getting out of the property on a 1031 exchange, but the area is bound for growth with retail coming in the next year, so feel that that might be unwise.  

Thank you in advance for any and all advice,

Cortie 

[Ethan Giller]

@Cortie Wetherill III the best thing to do here is to file a lawsuit in small claims court, claiming economic damages to your business (rental unit) as a result of the neighbors conduct.  Your goal is not necessarily to actually win the suit or have the owner pay damages, but to send a message that you are very serious about the issue.  Take pictures, use correspondence from the tenant and the professional, and calculate a reasonable amount of damages as a result of the situation.  Once the owner gets served with a lawsuit claiming $10,000 in damages that he must defend, he will start to take notice.

This action is guaranteed to get the owner to respond and realize that you aren't just going to go away.  Or, even better, if they don't respond or show up then you have a default judgment and you can start foreclosing on their property, that will make them take notice.  You can also escalate the filings to common pleas court too.  Basically become as much of a nuisance to them in the legal system as those tenants are to you, while reminding the owner the entire time that you are willing to purchase the property from them at a reasonable price and drop the lawsuit, or you are willing to drop the lawsuit if the tenant quality improves.

Yes, it's aggressive, but yes, it works, and sometimes it's the only way.