Out-of-state with no room for error

[Lanny K.]

I've been a landlord for many years, and for the most part it's been a positive experience.  My style has been to only buy something I would live in, which typically landed good tenants that I can easily relate with.  At least that's been my theory.

As an out-of-state landlord you know things can get expensive if things don't fall into place when you need them to, but I never saw this scenario coming. 

The property was a nice 4/3 SFR in an up and coming community in the NW Valley of Phoenix. Times got tough when the bubble popped, and I remotely purchased the property in 2010 with the help of a local wholesaler and flipper I know and trust. The property was build only a few years prior and it looked like nobody ever lived in it. For all intensive purposes this was a brand-new home with an amazing amount of money spent on front and back yard landscaping, and to my surprise the tags were even still attached to the inside of the dishwasher.

I previously lived about 15 minutes from the property, and knew the area pretty well before moving.  I've successfully placed many tenants and this time I found and screened a very well intended single mother with a special needs child.  She turned out to be an excellent tenant and lived in the home for over three years.  Looking back, she was one of the best tenant I've ever had.

Personally, I was working a full-time job and doing everything in my power to provide for my family while hoping to buy a decent home in Southern California.  If you know the market, then you know just how hard that can be - especially when you're not (yet) financially independent.

After my wife and I had our second child we began to look for a home that would accommodate our family. We looked long and hard for years to find a 4 bedroom home we could afford on a (moderately strong) single income, and one day we found it. It seemed to fit all of our criteria (cost, function, location, etc.). I knew I had to move fast, and felt confident that I could sell the Phoenix rental and get a great 30 year fixed mortgage on my new primary residence. As an investor I knew this was not a tax win, but I just needed a nice place to raise my kids.

Previously, I decided to tell my tenant six months prior to her lease ending that she needed to start looking for a new place to live.  After all, given her situation I did not want her to have to scramble at the last minute.  On my end, I planned to buy a rental closer to me if I didn't find a new home for my family.

At 90 days prior to her lease expiration I reminder her again that I would be selling the property and she needed to find a new home.  She assured me she had been working with a realtor and was going to be fine.  Looking back I truly think I did the best I could have to forewarn her.  Yet, despite my best intensions she was not ready to move due to the complications of finding the right school for her child.

Now things get real.  My wife finds the house we've been dreaming about, and the owner wants to close ASAP (go figure).  Luckily our bid is accepted and we move forward with a loan contingency - only now we need to sell the rental or we don't have a down payment.

The tenant is not ready.  She asks for a couple more months to finalize things with the new school before she can move.  Later that day I call the bank to inform them that I'm unwilling to displace my tenant.  I simply state that I am willing to live without a bigger home, but could not live with myself if I didn't do everything in my power to help a struggling single mother with a special needs child when they needed it most.  In my mind if the new home was meant to be mine, then God will find a way to make it so.

Amazingly, that day the bank was discontinuing a 5 year ARM with 100% financing and I was able to get the loan and the home. Then, over the course of the next year I was able to sell the rental property and refinance my primary residence with 20% down. The best part is knowing that I did the right thing by putting people before profits. I also enjoy knowing that I saved a bundle of money in the long run because rates dropped and my 30 year fixed is at an even lower rate.

I love it when a plan comes together.  #Blessed