The majority of veteran real estate investors are quick to share the good but rarely share the bad and or mistakes that comes with investing in real estate. When things are going great you will feel like you can do no wrong. You’re purchasing the majority of your leads, all the renovations are coming in on budget and/or your homes are selling with very few days on market. The truth is, if you invest long enough you will encounter some of the bad experiences all investors before you and after you will experience.
My most recent mistake could have been avoided but I gave one of the sellers a bit too much trust. This one particular property took an entire year to close. There were about 33 heirs that needed to sign off on the sale of the property. Most of the heirs were cooperative but there were a few that refused to sign until the other 29 people signed, claiming they did not want to waste their time. While there were 33 heirs only one person lived in the home. He seemed like a good guy who was just down on his luck so I agreed to let him stay in the home past closing so he could use his profits to relocate.
As you may have already guessed, he received the funds but did not leave. He spent all the money from closing on who knows what. I stopped by the property many times and he agreed to move out in a week and every time I was fortunate enough to catch him at the property he would agree to move out in a week. This went on for about three weeks until I finally sent the notice to vacate. When he received the notice he contacted me to let me know that he had nowhere to go and would wait until he was removed by the constables to leave. This was the last straw.
I contacted a lawyer to find out my options and the news got worse. I was under the impression that a seller that stayed after the sale of a property should be evicted the same way a tenant would be but that was not the case. When evicting a tenant the notice to vacate only needs to be 3 days in Texas but for a holdover seller the buyer needs to give a 30 day notice to vacate before filing a suit. This was not acceptable
I called the tenant and offered him cash for keys. After negotiating the amount, we set a time to meet for him to move out. As you can imagine, we scheduled and rescheduled many times and he flaked a few more times before we finally met. Eventually, we met and he was paid to leave.
If I would have followed my procedure I would have had the seller occupying the property sign a seller lease back and held back a significant amount of money that would only be released if the seller moved out on time. While the seller would still have to be given a notice, it would have only needed to be a 3 day notice to vacate instead of 30. In addition, the funds held back would have paid for the cash for keys or the suit if it went that far. You want to see the best in people and give them the benefit of the doubt but as they say, “No good deed goes unpunished.”
While I always promote win-win situations you must always be set up for what-if. What if the seller vandalizes the home before leaving? What if the title company dropped the ball and there was an heir that they missed? There will always be what if situations in all transactions. The best you can do is be prepared for them. If something comes along that you were not prepared to handle do not panic. Pick up the phone and reach out to your network and find out who is the right person you need to contact to assist you. Bad things happen to even the most experienced investors. The best thing to do is learn from the situation and be prepared next time. Keep in mind that if investing in real estate was really easy and hassle free everyone would do it and anyone would be able to do it.
Source: Take the Bad with the Good