The Ugly Side of Investing: When everything goes wrong!

[Anna Buffkin]

Long post warning!!

While there are plenty of success stories, everyone likes to hear about the struggles especially when its not them.  Here is my tale

It begins pleasantly enough August 3rd.  My husband's aunt had contacted me in June about buying his grandmother's rental unit. I had originally told her that I appreciated the offer, but would not want to offend grandma buy low balling the offer.  The house is in great shape, but the market is really hot and she could get more for it than I  couple pay and make the rental numbers work.  My aunt calls me back and says Grandmother is aware of what the house is worth as she has talked to a realtor and had paid for an appraisal when grandpa died.  She wants to sell it to you at a $40k discount.  At this point the numbers work and we go under contract on 8/3.  This is the same week the bond yield curve inverted.

I submit my loan documents to my lender.  I have used this lender on 5 separate occasions and have a good relationship with my lender (which will be important as this story continues).  Oddly I didn't hear from him for a few days.  He finally calls me up and says we have a problem.  With some market uncertainty the bank is getting nervous and told me to stop lending on a few loan groups including non-owner occupied single family.  Uh oh.  He says he will see what he can do, but no promises.  I begin calling around to another lender I have used as well as a few I have heard about.  I got a few no and a few yeses, but none offered as good a product as my usual lender.  Just before I was ready to move on, my lender calls me up, her got the bank manager to approve the loan based on a strong current business relationship.  

Meanwhile, I am evicting my first tenant in about a year and a half.  They are not paying rent, i want them to move, we are in South Carolina, so this is generally no big deal.  Well this tenant got the notice and moved out on August 18th prior to the court appointed date.  Generally this is great, but they trashed the house.  According to the neighbor, they got a dog about a month before  they moved out despite having no money for rent.  In that short period, the dog totally destroyed my carpet, marked all over the walls, and crewed through a door.  I have a no pet policy by the way.   Oh and the bugs.  I pretty sure I committed some form of bug genocide in my efforts to kill all the bugs.  This was the worst anyone had every left one of my units.   My husband is a high school football coach and all this started the day before the season began.  I told him don't worry, I got this.  If it takes a month to get everyone out here and the place fixed so be it.   

Ok.  Things are back on track until Aug 25th.  I get a call from the tenant of one of my condos in tears.  The building is on fire.  No one is hurt thankfully, but the building is partially destroyed and my unit is a total loss.  The red cross steps in and provide my tenant with temporary shelter.  She asked if I have anything available.  I tell her I have a unit that I am working on which is about 2 miles from her current place.  She is interested in the aforementioned evicted unit.  She had temporary housing until the 15th and would like to move in then.  Now I have to kick it into high gear as I have just promised a home to someone by a certain date.  My go to maintenance men tell me they are both booked until Sept 24 and Oct 3 respectively.  I have a great contractor, but don't want to pay his prices to fix a small duplex.  I call my mom and arrange for her to watch my boys (twin 3 year olds) over labor day weekend while my husband and I get the place cleaned out, painted, and carpet out and ready for the flooring.  This was a great plan except, my mom lives in Myrtle Beach.  I dropped them off Friday and on Saturday she called to let me know Hurricane Dorian's projected path has changed and the governor has declared a state of emergency.  My husband and I decide to work Saturday and Sunday but Monday I would have to go get the boys as they were now in an evacuation zone.  There is still work to be done, but at least the flooring guys can put in the flooring... or not.  Long story short, I went and picked up the flooring I had already paid for in my Prius (my husband had the truck in Greenwood) and unloaded all of it into the house (31 boxes at 23 pounds a box) by myself in Columbia, SC heat (that's hotter than regular SC heat as any South Carolinian can attest).  I still had no one to lay it.  Enter Joe.  Joe's a retired guy who does small odd jobs for me.  He is also a retired maintenance manager.  I asked him if he had ever laid flooring. He said yes, but at his age he would need an additional body to help him.   That person ended up being me.  We got it done with just hours to spare and Joe did such a good job, I gave him more than we initially agreed upon.

A random note to newbies: Crying and screaming will not undo damage to a unit.  All the owners present at the fire were quite calm.  We were all veterans.  Our tenants were fine and the fire department was working it.  The only thing we could do was watch and call the insurance company.  Meanwhile in another condo, a small pipe leak created very minor damage in the unit below.  The owner was a first time landlord.  She treated me like I had broken a pipe on purpose.  She even cussed at my tenant and threatened to sue her.  My tenant an older single woman called me in tears.  This tale of overblown reactions could be its own tale, but was too small to add any more to this tell of crazy.

I'm now done with the initial condo fire insurance claim information, my trashed unit is now renovated and a new tenant is in place.  Everything feels like its falling into place.  Then comes the call from my lender again.  The underwriter has finished the loan and their is a problem.  I am a remote bookkeeper.  Prior to this year, my largest client paid me on a W-2.  Now all my income including income from them is on a 1099.  This has skewed our debt to income ratio.  This is a commercial loan in our LL's name so it is not as important as for a conventional loan, but the underwriter does not want to approve me as the guarantor.  Stacy says he is taking it to the bank manager for an override (2nd time for the same loan).  The only problem is that she is on vacation and won't be back until the following week (8 days before close).  Monday comes and after sweating it out, we got the approval with my husband as the main guarantor.  

Now it's the Thursday before close and my husband tells me he can't make the closing due to a school testing obligation.  I get a power of attorney and fill out a corporate resolution letting me sign for my husband.  I send it to my lawyer's paralegal who says I need approval from the bank to sign the loan with a power of attorney.  I am nervous calling, but get a no problem as soon as I ask.  

Closing comes Tuesday morning, I had planned on having a friend watch my kids (again twin 3 year olds), but I woke up sick and she has an infant who no go. I end up taking my boys solo without my husband 2 hours to Columbia to the attorney's office. On the ride there, a fellow owner of the condo building that burned let me know he and others were planning on being at the HOA meeting tonight (which slipped my mind) and was I coming. So I went with tired boys in tow to an HOA meeting before driving 2 hours back home.

Many details were left out to keep this brief(briefer), but it has been a long and wild 2 months.  Just thought I would share a far less fair weathered account of real estate.  But with out tears, screaming, or any overblown dramatics, my insurance is taking care of the fire damage, I now own a new unit, I have an upgraded unit with a good tenant making more rent, and my newbie landlord acquaintance is no longer cussing me out (at least to my face)