All Forum Posts by: Steve K.

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Quote from @Steve K.:

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Quote from @Steve K.:

Quote from @Account Closed:

Quote from @Steve K.:

Quote from @Account Closed:

I assume when you say cash flow that all opex and capex are already factored in. In the scenario I described I’m making $1000/month while my cash flow is -$100. Im waiting 2 years to break even cash flow wise, but I’m clearing $1000/month in principle paydown from day 1. That’s $12k for the year. $12k+ on $25k every year is absolutely in my wheel house. My original investment is paid back entirely in just over 2 years. 

 Even using your best-possible-case scenario, there are many better ways to invest $25k IMO. And there is a lot that can go wrong here (opex and capex not accurately accounted for, property value or rents go down, tenant issues, seller files for bankruptcy, issues with loan servicer (I've experienced this one), insurance issues, mortgage company exercises their right to call the loan due on sale, title issues, judgements etc. there is a lot that can wrong with subto). I look at real estate through a risk vs. reward lens and would much rather put $25k elsewhere and make more money faster with less risk personally. 

Most of those same risks outside of the DOSC apply to every other transaction. There are risks and there are rewards. They are asymmetrical IMHO. Don’t kid yourself though, deals where you can make your money back in 2 years without any sweat equity…well they don’t just grow on trees…otherwise everyone would do it. 

 A seller filing bankruptcy post-sale would not be an issue in a normal transaction whereas it could be a real nightmare with subto, and everything else I mentioned would be greatly exacerbated in a subto structured deal. That's the risk with subto: if you have insurance issues, loan servicer issues, title issues, etc. it gets a lot more complicated because the bank owns the property and the "buyer" is not on the loan. The bigger risk is to the seller and their credit of course, but there is also risk on the buy side that's often glossed over by gurus. Whenever risks are higher, returns should be as well that's my point. In this case the buyer should have $600k sitting liquid (or have very reliable financing available that they can fall back on and close in a few weeks) if the loan is called. That's an additional opportunity cost to cover the additional risk related to going subto. 

If everything needs to go perfectly for the deal to make sense, you've got to create a matrix of paperwork and hope your contracts are really bulletproof, and pray the loan never gets called and nothing ever goes wrong and do mental gymnastics to justify it, then it's not a deal IMO. 

Most people either refinance or move every 5-7 years so it would be rare to find someone in year 16, and even more rare for that person to choose to sell subto when in most cases they'd be better off selling retail. You're talking about a unicorn among unicorns IME. 

Sure, but there are ways to mitigate all those risks as well. Bulletproof paperwork should be the standard, not the exception. I’m not advertising this strategy as being the safest, or the easiest. It’s simply not. The reward is proportionate to the risk as I mentioned. But is for sure one of the few where if properly structured, you can achieve 100% return within 2 years as I laid out without forcing appreciation or sweat equity.

If you’re going to call these unicorns, then I want my ribbon for being pretty good at catching unicorns. There is an entire generation of 60-80 who don’t move every 5-7 years. That same generation is keen on selling subto because that risk of the buyer destroying their credit significantly deteriorates when their credit is not longer critical to them. 

Just curious how would you mitigate against a seller filing bankruptcy post sale, just to pick one example? Or a loan servicer randomly messing up the payments to pick another (I’ve seen this happen with a sub to deal, the loan servicer kept switching the payments back to the seller’s info, and the buyer ended up missing a few payments because of it, causing a lot of credit issues, stress and animosity for everyone, luckily the loan didn’t get called but this could happen). I don’t believe you can actually mitigate all the risks with sub to as you say, in my experience anyway. There’s always increased risk with sub to, is there not? 

 You were right about this btw.... Sub to blew up on him last we heard :(

https://www.biggerpockets.com/forums/50/topics/1225630-due-o...

 Garrett, it's really exhausting being so right all of the time ;) 

Looks like what happened was exactly what I warned him about too: an insurance/ escrow/ loan servicing company/ communication breakdown issue. Like he says in the post "Everything was smooth until it wasn’t". 

I don't take pleasure in being right in this situation, I feel bad for the OP. But this is a lesson that anyone looking into getting into sub2 can learn vicariously, thanks to this forum and thanks to the OP following up with what happened. Risk increases as control decreases and there is always going to be a certain lack of control when title is in one name and the loan is in a different one.   

If you did all of the work up to current code with licensed contractors, and all of it was something you could have had permitted, and you cooperate with the powers that be, then you will probably be okay. But you will have to get retro-active permits, and you may have to pay some fines, and you may have to open some walls for them to inspect what was done, and they may require some changes to what was done. That’s best case scenario. 

If what you did isn’t up to current code and wasn’t done with licensed contractors, and can’t be permitted, and you’re not going to cooperate. Then you could be f’d. 

Converting a garage to living space while complying with permitting requirements can be a lot trickier than some people think because garages are designed for parking cars in not for people to sleep in. The slab may be insufficient so sometimes you will have to tear it up and add insulation, rebar, make it level, etc. You’ll need the walls to have an adequate fire rating usually double thick sheetrock. The bedrooms need to be a minimum square footage, have a dedicated source of heat, minimum number of electrical outlets, lighting fixtures, a closet and an egress route, etc. all according to your local code requirements. You may need to add covered parking or may be limited to number of bedrooms at the property. So it could be easy or impossible to get the required permits retroactively depending on a lot of these factors. Now that you’re on their radar, there’s probably no choice but to comply with the rules, so the sooner you start cooperating the sooner you will be able to come to a resolution. Good luck!  

Quote from @Jay Hinrichs:

Quote from @Steve K.:

 Congrats on being able to look on the bright side because most people would be panicking in your situation (losing their job with 5 young kids and only 3 properties/ not much income). 

I was in your position at around your age but with only one kid. We travelled for around 9 months doing the van life thing then I got bored and starting working again simply in order to have more of a sense of purpose. I also realized that life was a lot more expensive than I had budgeted for, and some big capex issues came up with our properties that would have been too expensive to deal with remotely, and traveling with even just one kid dirt-bag style was not nearly as much fun as it was when I had done it for a few years after college before kids. 

 A wise relative told me I should have at least $10M in the bank if I really wanted to fully retire that early (with one kid). I laughed at the time because that sounds like a lot of money to a young person who is frugal. But he was serious, and he was right. 

 Are you accounting for capex in your calculations? I see maintenance but no capex. Also don’t see any vacancy/ loss. These numbers look very optimistic honestly. Even if everything goes well, some years you will still be negative due to capex issues or vacancy/ loss issues that always seem to strike all at once. Budget accordingly! Money will not always flow out of these properties, sometimes it will have to flow in and you will need to draw on your cash reserves. 

Also not sure how you’ll be able to live off of $120k/ yr. with a family of 7, especially while traveling. We are a family of 5, we take a few big trips a year but definitely not trying to travel full time, and our annual budget is A LOT more. Not just a little bit. A LOT.

Kids get more and more expensive as they get older, so do properties, and people tend to enjoy a higher-end lifestyle as they get older as well. You may not want to live as frugally as you are now forever. According to my math, you need to be budgeting around $2M bare minimum to get these kids to 18, then 5 college tuitions on top of that. That’s not including your own living expenses, or saving for retirement. 

Honestly I wouldn’t quit working in your position unless you have about $10M bare minimum in the bank in a high-interest savings account or invested very conservatively in blue chip stocks/ bonds. $30M would be much more comfortable! 

10k a month is my wife CC bill :) no way is 10k a month sustainable in my mind for 7 people long term its a nice base but I would think one would need quite a bit more  and cap ex is going to sneak up on you.. now if you were netting 10k a month of interest income with no debt thats a little different and no property to maintain long term. Just sayin.. I mean health insurance kids stuff  collage etc etc. 

The way I would run the numbers on these properties accounting conservatively for capex and vacancy/ loss, the monthly budget to live off is more like $5-6k. That’s probably well below the poverty line for a family of 7 in most places. Even in the best-case scenario of $10k a month if everything goes perfectly, that’s barely scraping by. Rental income as you know is very inconsistent, not at all guaranteed, and sometimes properties require big chunks of capital infusion. Not sure where that is going to come from here with no budget for black swan events and really not much actual income spinning off these properties with all expenses factored in. Values have gone up a lot recently and as we seem to be entering a recession they could soon go down. Rents can also go down. It’s a risky setup trying to live off of only 3 properties even for a couple with no kids. Add 5 kids to the mix and it’s straight-up reckless in my opinion. 

There probably won’t be any money for these kids to play sports or participate in extracurricular activities or chase their college and career dreams or have any of the basic opportunities that their peers will have, or for a tutor if they get behind or a counselor or a therapist if they have any special needs or for their parents to buy a new car or a bigger house or anything like that as those needs arise, or a major health event or disability that insurance doesn’t completely cover god forbid. My family has had plenty of those expensive life events happen unfortunately and I love being able to get the best possible care for them. Also love buying my kids the nicest gear so they can hang with me on the mountain bike trails, rock climbing, backpacking, river running, travelling, martial arts, hunting/ target shooting, circus classes, music and Spanish and German lessons, etc. Doing those fun things together isn’t cheap but is worth it. 

It baffles me that most people on here are overlooking the grave financial risk the OP is taking, and are cheerleading this. The post has 58 votes. Americans used to value hard work and providing for your family. Now a 34 year old quitting their perfectly fine career and putting their family in financial risk by choice is applauded. Makes me scratch my head a bit.

Also don’t think it’s a good example to set to not work a job even though they are not set-up financially to be secure yet. Heck even my friends with big trust funds (plenty of them in Boulder these days and nothing wrong with that, good for them) they still work in order to have something to get up and go do every day and also to set an example for their kids that they need to do something productive with their lives, and not just quit. The happiest people I know have multiple foundations that they work hard at and give back a lot to society. Having a rewarding career and good work/life balance should be the goal in my opinion, for mental health and for financial security, not simply quitting and rationalizing it as “financial freedom”. It’s a weird goal that has somehow gone mainstream. When I briefly “retired” I actually got really depressed pretty quickly.

But I’m being too judgmental now so I will stop. To each their own. Hope this works out for OP and their fam. 

I'll send you a DM with contact info for 3 great lenders who I believe can lend on your condo in a moment. There are several condo complexes here in Boulder County that are going through similar issues to yours that make them non-warrantable right now, by the way. It's not a big deal if the listing agent gets in front of it by sending potential buyers to lenders that can lend on the specific product they're selling. So you shouldn't have these issues. Perhaps your agent can reach out to the buyer who just bailed and have them switch to one of these lenders. When I am selling a property that needs a specific lender for the deal to work, I write that in the brokers notes in the MLS and insist that any offers that aren't using cash to use one of my lenders who I have pre-vetted and who I know will get the deal to the closing table without any issues. Good luck!   

That’s a shame that the buyers backed out already without fully exploring their options. I know two local lenders here that they could have switched to. They both offer competitive rates (one of them will match whatever rate the buyers had actually) and these lenders keep their loans in-house so they can lend on non-warrantable condos. Are you working with a real estate agent to sell this property? Do the buyers have an agent helping them? 

Quote from @Sunny Burns:

Quote from @Steve K.:

Quote from @Sunny Burns:

Quote from @Steve K.:

 Congrats on being able to look on the bright side because most people would be panicking in your situation (losing their job with 5 young kids and only 3 properties/ not much income). 

I was in your position at around your age but with only one kid. We travelled for around 9 months doing the van life thing then I got bored and starting working again simply in order to have more of a sense of purpose. I also realized that life was a lot more expensive than I had budgeted for, and some big capex issues came up with our properties that would have been too expensive to deal with remotely, and traveling with even just one kid dirt-bag style was not nearly as much fun as it was when I had done it for a few years after college before kids. 

 A wise relative told me I should have at least $10M in the bank if I really wanted to fully retire that early (with one kid). I laughed at the time because that sounds like a lot of money to a young person who is frugal. But he was serious, and he was right. 

 Are you accounting for capex in your calculations? I see maintenance but no capex. Also don’t see any vacancy/ loss. These numbers look very optimistic honestly. Even if everything goes well, some years you will still be negative due to capex issues or vacancy/ loss issues that always seem to strike all at once. Budget accordingly! Money will not always flow out of these properties, sometimes it will have to flow in and you will need to draw on your cash reserves. 

Also not sure how you’ll be able to live off of $120k/ yr. with a family of 7, especially while traveling. We are a family of 5, we take a few big trips a year but definitely not trying to travel full time, and our annual budget is A LOT more. Not just a little bit. A LOT.

Kids get more and more expensive as they get older, so do properties, and people tend to enjoy a higher-end lifestyle as they get older as well. You may not want to live as frugally as you are now forever. According to my math, you need to be budgeting around $2M bare minimum to get these kids to 18, then 5 college tuitions on top of that. That’s not including your own living expenses, or saving for retirement. 

Honestly I wouldn’t quit working in your position unless you have about $10M bare minimum in the bank in a high-interest savings account or invested very conservatively in blue chip stocks/ bonds. $30M would be much more comfortable! 

So we've done basically full renovations on each of the units over the last 10 years. Thats why my maintenance which includes capex is a little on the lower side. But I figure $280k over the next 10 years sounds reasonable.

I am not assuming my kids go to college, if they want to go, they can... but I am not doing 529's for them. They each have Roth-IRAs.

As we get older rents will increase, mortgages will start to go away one by one, and we will have access to better cash-flows.

No need to save for retirement, as we essentially are retired at this point, and living off the rental income without having to touch the retirement accounts, as was the point of this post... and we maxed out IRAs and 401k early on, so those have enough basis in them that they don't really need any future contributions to balloon into awesome assets by traditional retirement age.

I don't necessarily want to Die with Zero... but to keep the Golden Handcuffs of my W2 on till I reach $10M sounds like a very unnecessary waste of my life based on fear.

I appreciate your point of view, and I know there are risks involved, just yesterday I met with a roofer to put a new roof on one of my units, but I've checked my historic repair costs, future potential capex projects, and done my best due diligence to move forward towards a life of freedom on my terms.

Here is a closer look at our personal finances if anyone is curious, also we have access to $300k in HELOCs that are unused:

$285 per year for kids activities for 5 kids?

That’s really messed up.  Where is food and clothing? Where are birthday presents and birthday parties and Christmas and family vacations? This budget is not even close to being realistic. Not even in the ballpark for raising 5 kids. Dude you are nowhere near being ready to retire. Not even close!

Sure you can afford to take a little time off but retiring means never needing to work again by having your expenses covered for the rest of your life and ideally having some left over to leave to your heirs. You are one capex event like a sewer line replacement, or one bad eviction with vacancy loss and property damage or one medical event in your family away from financial ruin. Am I the only one on here who is going to call this out for what it is? This is total BS. Retiring with 5 kids and only 3 properties that will be lucky to break even over time is not “financial freedom” it’s financial recklessness and borderline child neglect. Sorry, the math just isn’t mathing for you to retire anytime soon. Like not at all. 

Steve K why are you so quick to make assumptions and be dismissive? What I've shared is such a small fragment of who we are as a family.

So Kids expenses we have certain weekly, monthly and annual expenses... total is $2,277 for the year, you have to add up the different columns.

That red upper-right box is just our Bills & recurring expenses, separate from our budget...

Our Budget is down below in the bottom right red box.

 Sorry for sounding harsh. I bet we would get along well in person, we actually have a lot in common. I took two long breaks from the drudgery of the daily grind in my life: the first was when I lived in a school bus when I was 23-25. It ran off of used vegetable oil that I got for free from restaurants. I lived within a budget of ~$2,500/yr (no health insurance, no alcohol or eating out, rock climbing sponsorships for clothing and gear, dumpster-diving for food and using recycled vegetable oil for fuel and being a total dirtbag and all of that fun stuff). Frankly I was lucky I didn't get hurt or anything and was able to come back from those "wilderness years" and end up being successful. 

The second time was when I was your age and had one kid and about 20 rental units or so. We were set up just like you but with one kid and many more properties. I got started by house-hacking like you, expanded into value-add multifamily, did most of the work myself and boot-strapped my way up like you. 

So from having a similar background, I just know you are not budgeting enough for these kids and are not even close to being ready to retire on these 3 properties alone. The properties will possibly break even some years but other years you will have to replace big expensive things like roofs, siding, windows, sewer lines, furnaces, water heaters, other mechanicals, appliances, carpets, blinds, flooring, driveways, sidewalks, decks, porches, soffits, bed bugs, tree work, etc. etc. etc. I have had a lot of big expenses that I didn't see coming and so will you. Some of the units you just updated will need that same work all over again sooner than you'd like, so you have to budget for that. Cap ex averages $500/mo per unit in my experience (over time obviously not every month but when I break it down to a monthly budget this is what capex comes to). I don't see where you have accounted for that. There will other black swan events like a tenant issues, vacancy/loss etc, and things like that which can be expensive and I don't see where you have budgeted for that. I think anyone who has owned rentals will look at your numbers and agree they are optimistic. This is my experience, being 10 years past where you are now so I hope you take it as helpful advice from a 10 year older version of yourself, and not just me being a Downer. 

Sorry again for the tough love, it's just not wise to think you can retire with 5 kids with no income and only 3 properties that may be cash flow negative certain years and other years will spin off some positive cash flow but nowhere near enough to live on with a family. You can take some time off but you are nowhere near ready to retire permanently and "retiring" now will just set you back IMHO. You need to add some zeros at the end of your budget for example you should be budgeting at least $20k per year per child. I would keep working until you have enough money in the bank to have longterm financial security for your family. Take some time off though! You can afford that and you've earned it. 

Quote from @Sunny Burns:

Quote from @Steve K.:

 Congrats on being able to look on the bright side because most people would be panicking in your situation (losing their job with 5 young kids and only 3 properties/ not much income). 

I was in your position at around your age but with only one kid. We travelled for around 9 months doing the van life thing then I got bored and starting working again simply in order to have more of a sense of purpose. I also realized that life was a lot more expensive than I had budgeted for, and some big capex issues came up with our properties that would have been too expensive to deal with remotely, and traveling with even just one kid dirt-bag style was not nearly as much fun as it was when I had done it for a few years after college before kids. 

 A wise relative told me I should have at least $10M in the bank if I really wanted to fully retire that early (with one kid). I laughed at the time because that sounds like a lot of money to a young person who is frugal. But he was serious, and he was right. 

 Are you accounting for capex in your calculations? I see maintenance but no capex. Also don’t see any vacancy/ loss. These numbers look very optimistic honestly. Even if everything goes well, some years you will still be negative due to capex issues or vacancy/ loss issues that always seem to strike all at once. Budget accordingly! Money will not always flow out of these properties, sometimes it will have to flow in and you will need to draw on your cash reserves. 

Also not sure how you’ll be able to live off of $120k/ yr. with a family of 7, especially while traveling. We are a family of 5, we take a few big trips a year but definitely not trying to travel full time, and our annual budget is A LOT more. Not just a little bit. A LOT.

Kids get more and more expensive as they get older, so do properties, and people tend to enjoy a higher-end lifestyle as they get older as well. You may not want to live as frugally as you are now forever. According to my math, you need to be budgeting around $2M bare minimum to get these kids to 18, then 5 college tuitions on top of that. That’s not including your own living expenses, or saving for retirement. 

Honestly I wouldn’t quit working in your position unless you have about $10M bare minimum in the bank in a high-interest savings account or invested very conservatively in blue chip stocks/ bonds. $30M would be much more comfortable! 

So we've done basically full renovations on each of the units over the last 10 years. Thats why my maintenance which includes capex is a little on the lower side. But I figure $280k over the next 10 years sounds reasonable.

I am not assuming my kids go to college, if they want to go, they can... but I am not doing 529's for them. They each have Roth-IRAs.

As we get older rents will increase, mortgages will start to go away one by one, and we will have access to better cash-flows.

No need to save for retirement, as we essentially are retired at this point, and living off the rental income without having to touch the retirement accounts, as was the point of this post... and we maxed out IRAs and 401k early on, so those have enough basis in them that they don't really need any future contributions to balloon into awesome assets by traditional retirement age.

I don't necessarily want to Die with Zero... but to keep the Golden Handcuffs of my W2 on till I reach $10M sounds like a very unnecessary waste of my life based on fear.

I appreciate your point of view, and I know there are risks involved, just yesterday I met with a roofer to put a new roof on one of my units, but I've checked my historic repair costs, future potential capex projects, and done my best due diligence to move forward towards a life of freedom on my terms.

Here is a closer look at our personal finances if anyone is curious, also we have access to $300k in HELOCs that are unused:

$285 per year for kids activities for 5 kids?

That’s really messed up.  Where is food and clothing? Where are birthday presents and birthday parties and Christmas and family vacations? This budget is not even close to being realistic. Not even in the ballpark for raising 5 kids. Dude you are nowhere near being ready to retire. Not even close!

Sure you can afford to take a little time off but retiring means never needing to work again by having your expenses covered for the rest of your life and ideally having some left over to leave to your heirs. You are one capex event like a sewer line replacement, or one bad eviction with vacancy loss and property damage or one medical event in your family away from financial ruin. Am I the only one on here who is going to call this out for what it is? This is total BS. Retiring with 5 kids and only 3 properties that will be lucky to break even over time is not “financial freedom” it’s financial recklessness and borderline child neglect. Sorry, the math just isn’t mathing for you to retire anytime soon. Like not at all. 

 Congrats on being able to look on the bright side because most people would be panicking in your situation (losing their job with 5 young kids and only 3 properties/ not much income). 

I was in your position at around your age but with only one kid. We travelled for around 9 months doing the van life thing then I got bored and starting working again simply in order to have more of a sense of purpose. I also realized that life was a lot more expensive than I had budgeted for, and some big capex issues came up with our properties that would have been too expensive to deal with remotely, and traveling with even just one kid dirt-bag style was not nearly as much fun as it was when I had done it for a few years after college before kids. 

 A wise relative told me I should have at least $10M in the bank if I really wanted to fully retire that early (with one kid). I laughed at the time because that sounds like a lot of money to a young person who is frugal. But he was serious, and he was right. 

 Are you accounting for capex in your calculations? I see maintenance but no capex. Also don’t see any vacancy/ loss. These numbers look very optimistic honestly. Even if everything goes well, some years you will still be negative due to capex issues or vacancy/ loss issues that always seem to strike all at once. Budget accordingly! Money will not always flow out of these properties, sometimes it will have to flow in and you will need to draw on your cash reserves. 

Also not sure how you’ll be able to live off of $120k/ yr. with a family of 7, especially while traveling. We are a family of 5, we take a few big trips a year but definitely not trying to travel full time, and our annual budget is A LOT more. Not just a little bit. A LOT.

Kids get more and more expensive as they get older, so do properties, and people tend to enjoy a higher-end lifestyle as they get older as well. You may not want to live as frugally as you are now forever. According to my math, you need to be budgeting around $2M bare minimum to get these kids to 18, then 5 college tuitions on top of that. That’s not including your own living expenses, or saving for retirement. 

Honestly I wouldn’t quit working in your position unless you have about $10M bare minimum in the bank in a high-interest savings account or invested very conservatively in blue chip stocks/ bonds. $30M would be much more comfortable! 

Calvin’s template sums it up nicely. I might just add a line like this about the existing lease transferring: “You can be assured that all of the terms of your existing lease, including rent amount for the duration of the lease, will remain in place even once the property is under new ownership, as the new owner will be obligated to honor all of the terms of your existing lease.” I find this helps calm some of the anxiety that tenants may have about the property being sold. I also try to minimize the impact on tenants by stacking showings all at once during a “showing window” on a Saturday or Sunday so they aren’t bothered by a bunch of individual showings. I also like to do a pre-inspection and fix most of the stuff on the inspection so I can give that to potential buyers and ask them to write their offer considering the current condition and with as much “as-is” language/ contingencies as they feel comfortable with. I also price the property such that I usually get multiple offers and at least one that is “as-is” so that the transaction is clean. Nothing is worse than having multiple cycles of flaky buyers with a bunch of contingencies in their contracts having multiple inspections at an occupied MF, buyers coming through talking to tenants and talking about stuff that is wrong with the property and mentioning mold tests, etc. There is a huge benefit to setting it up so you get a clean offer and limit the impact on the tenants as much as possible. A great listing agent who specializes in this property type will help you with all of this, and can possibly even get the property sold to a buyer they already know with little fuss so you don’t even have to tell the tenants until after the sale, which is ideal. 

Quote from @Rodney Lorenzo:

Quote from @Calvin Thomas:

Quote from @Rodney Lorenzo:

When I acquired a 6 unit property in Hartford, CT in 2022, the neighborhood appeared as just working class. Soon after, the neighborhood went from class C to class F. I stuck with the same PM, owned by Tom Kopchick, because they knew the building and neighborhood quite well. Unfortunately, things went South really fast. I thought, let me evict the non-paying tenants and replace them with paying ones. Well this was like pulling teeth. Units were not flipped because the PM blamed it on the bad neighborhood and said that govt programs were the way to go if I wanted a consistent rent roll. He never told me that it would take several months to get funds from these entities. I ended up with 4 empty units and 2 paying tenants, then only 1 paying tenant. I still paid the mortgage on time, but was a struggle at times borrowing money from friends and family just to do so. A veteran was finally put in one of the units (the one paying tenant), however, the PM failed to tell him to open his own electricity acct and after 6 months, ended up with over $2000 of charges under my LLC. When I went by the building one day, they refused to let me into another vacant unit because they said once a govt program takes over while they find a tenant, I as the owner cannot have access to it. This unit ended up costing my LLC over $1800 in electricity charges when it was supposed to be vacant. The electricity shot up to over 3000 kw over the winter prompting me to think they had a grow house in there or a squatter the PM was collecting rent from himself.

In a neighborhood like this, you need a very competent PM. Instead, I ended up with the worst and most incompetent in the state, if not the whole country. They never got back to me on anything. It was, "yeah I'll take care of it" and I'd never hear from them again. Some of the problems were not taken care of at all. Homeless people were shacking up in the basement and breaking windows on the ground level trying to get inside one of the units. The PM had a manager who stuck her "friend" in one of the units prior to my acquisition and because they had a fall out, she stopped paying rent so I got no revenue from that unit for 7 months. The PM was horrible at trying to evict her and she finally abandoned the place, costing me over $9000 in lost revenue. When I attempted to replace them with another PM, Tom begged me to keep him on. Like an idiot and a firm believer that everybody deserves a second chance, I proceeded to continue on with them. Huge mistake. Things got much worse. He deliberately used a plow to destroy my driveway when there was snow, prompting my insurance company to come after me. In the two estimates I got to repave the driveway which were around $7000, Tom wanted 15K for it. It seemed to me that things were broken so they can make money off of the repairs. A PM could easily get away with this. There was a leak in the skylight above the inside hallway and they implied that I needed to redo the entire roof because of that one leak. That would've cost me over 20K. 

In trying to get another PM to come on board which none would touch with a 10 foot pole and my hemorrhaging money left and right, I decided to put it on the market. Tom the PM got upset because he wanted to sell it for me, but I told him that if he was inept as a PM, what made him think he would be great at selling my building? All reviews of this PM on the internet are all horrible. Goes to show you that before you contemplate hiring a PM, ALWAYS check their reviews first. Most lie through their teeth. Additionally, he never charged me a "percentage" of the rent roll as stated in the agreement. It was always a flat fee of over $600 whether I had 4 tenants or 1. With the appreciation, I didn't lose as much money as I thought, but had I held onto it, I would've gone bankrupt and had the building go into foreclosure, all because of their incompetence. Again, I tried my best to find another PM, but there were no takers. It's PMs like these that ruin the reputation for the others. I truly believe that they can steal from under you and get away with it. Even the REIA in CT was of no help. An entity that supposedly "helps" investors, but said nothing on how to avoid bad PMs. Besides them, I contacted the AG of CT, the mayor and an attorney to see about suing them. I got no help whatsoever. The state literally has enablers that allow rogue PMs to get away with a lot and I'm sure this is like this across the country. The Dept of Consumer Protection was a joke and was of no help either. Everyone assumes landlords have bottomless pockets so they don't really care about them. I sought advice on Biggerpockets, only to get berated and spoken condescendingly by other investors. It's as if I was supposed to have a crystal ball and why didn't I do this or that. Were they successful on their FIRST INVESTMENT? Crickets. It was more like "look at me, everything I touch turns to gold". Yeah right. Now, I'm focused on fixing and flipping. An endeavor I look forward to, as I refuse to get discouraged in my real estate journey.

 1. Reviews on the internet, may be good, may be bad.  I don't trust them 100%

2. Set boundaries for your PM.

3. Install cameras around the building and in the common areas to check and see what's going on.

3. These areas are usually not worth the headache because the quality of the tenant is usually sub-par at best.

4. It can take a couple of months for the County to pay section 8 payments.  This is true, but they will pay.  

5. Your PM is not a licensed salesperson or broker, so they are operating illegally.  (https://www.elicense.ct.gov/Lookup/LicenseLookup.aspx).  You can file a complaint with the DCP, and they will look into and fine.  https://www.elicense.ct.gov/Activities/Complaint.aspx

6. You can try, but I am not sure that one of the attorneys I know in Stratford will file a complaint for you in Hartford (it's far), you can try though.  He's a good guy, Christopher D. Hite, Esq. - 203-870-6700.

Thanks a lot Calvin! Yes, he was illegally operating his business. Another mistake I made by not asking for a license. The govt programs may be worthy, but I was hemorrhaging money while I waited. I just told the PM to get anyone off of the street, because I needed bodies in those units. I couldn't afford to pay the mortgage with my own salary on top of my own expenses. The DCP in CT is a blatant joke. They're a group of corrupt individuals that only serve as enablers of rogue PMs. He's been fined before by other victims, 2 of which I know. I decided to write off the losses, instead of pursue this guy in court. It would've cost me too much in the long run. Initially, the attorney that represented me during the sale, I later found out was a friend of his. Corrupt individuals usually like to defend their own kind and when I saw no reaction from him after I gave him a long list of transgressions he made against me, I fired him and replaced him with another attorney. He was too biased to hang on to.

Even the mayor was protecting crooked contractors there. Corrupticut is just south of Taxachusett's. 

 https://www.nbcconnecticut.com/news/local/ex-mayor-pleads-gu...