Fishtown Flip Diary with Cash for Keys drama to kick it off!!!

[Troy Sheets]

We're kicking off a new project in the next week or so and it's been pretty crazy just getting to this point. The house is a 3-story, 1550 sq ft row and it's currently 3br and 1 bath. We've owned it for almost 2 months to the day and, until this weekend, had only been inside it once, maybe twice if you count getting into the living room. 

My realtor brought this one to our attention roughly 5 months ago; it was her listing, but she couldn't put it on the MLS due to aggressive and uncooperative tenants. No one could get in to see the place. She got in once to take a few pictures and took one investor through with her at that time. The investor was interested and wanted to go back through with his contractor. No dice. The tenants wouldn't let anyone else in and the landlord wouldn't evict the tenants as she wanted their rent payment each month. I'd estimate she cost herself ~$20k on the sale price by not losing $700/month for a few months plus the cost of an eviction. Lunacy, but it worked in our favor.

I was able to sweet talk my way in and check the place out after my realtor told me about it. They wouldn't let her in but they would let me in. OOOOK. These tenants were all the "un"-adjectives you could think of. Uncooperative was the start and it gets worse from there. Asking price was $150k and we negotiated to $135k without too much trouble. We put in the contract that the property was to be vacant at closing; I knew we didn't want to deal with the tenants if we could help it. They had their heads in the sand and thought if they didn't accept certified mail and didn't let anyone in, as long as they paid their rent, they could stay indefinitely. 

I knew the landlord, who lived out of state, didn't want to deal with the tenants and she wouldn't go for delivering vacant. We didn't want to deal with them either but I knew she'd never evict and the deal would likely die. We decided to bite the bullet to move the project forward; we got the price down to $112.5k and we'd deal with the tenants. We immediately had the landlord serve them a 60 day notice terminating their lease per their existing lease requirements. That was mid-April. We closed mid-May and still hadn't been inside other than that one time I got in. They wouldn't let the appraiser through so we ended up buying in cash. They had until mid-June to be out so I waited until the first week in June to call and stop by. It went over like a fart in church.

I was hoping they'd seen the light and were packing. The opposite was true. They were more irate and indignant than ever. The matriarch claimed she'd had some serious health complications and had been hospitalized due to the stress she was under from us making her move, they had talked to public defenders and social workers and we couldn't evict them...and on and on. You get the picture. The last thing I wanted to do was end up in court with this crew. We had budgeted for cash for keys and, once I mentioned I could give them some cash for moving expenses, they were slightly more interested in talking to me.

We finally came to an agreement a week before they're supposed to be out. Part of the agreement was for more time. At this point, with the amount of stuff they had in the house and considering they had nowhere lined up to go and no transportation, I felt it was prudent to allow a couple more weeks so I gave them till the end of June. The agreement was no rent due in June (they hadn't paid last months rent when they initially rented the place, only security), return of security deposit, 6 months rent paid up front on a 10' x 20' storage unit, movers to move their stuff and $2200 upon receipt of keys. All told we spent a little over $4k to get them out. If you consider holding costs, legal costs, opportunity costs, and the unknown of taking wily tenants to court, I'm happy with the end results. Don't forget, we got a $22k discount for dealing with the tenants so, if you subtract the ~$4k it cost us, we made $18k for dealing with the problem the landlord didn't want to handle.

Does it hurt my pride a bit that we didn't "stick it to them" and evict? Nah. I actually have more pride in the way we handled it. Eviction would've been messy, cost us the same (or more) and devastated these people's lives. The best part is, by the end of the ordeal this weekend, if I saw them at the grocery store or passed them on the street after this, we'd stop and have a nice chat. I know the saying is overused but it's a true win-win. 

Up next, some photos of the as-is conditions and some projected numbers...stay tuned!