For today’s episode, we will be discussing a not-so-sexy topic, the lows of real estate investing.
Simple does not always equal easy. We will be going negative this time by sharing some personal horror stories.
New book LIVE! Passive Investing Made Simple: How to Create Wealth and Passive Income through Apartment Syndications.
[00:01 – 08:10] Opening Segment
- Bad investing tips
- Starting off with the good
[08:11 – 23:23] Dan’s Horror Story
- Deal from a year and a half ago
- Wild cards
- Planning for the worst
- Cash for Keys
[23:24 – 30:50] Anthony’s Horror Story
- Hard punch on the first property
- Small turnover time window
- Having systems
[30:51 – 37:21] Closing Segment
- Sticking to your systems
- Verify, Verify, and Verify
“At the end of the day, you can take some value out of these really stressful, anxiety-ridden events and be prepared, be better prepared for the future.” – Dan Kreuger
“a lot of these horror stories revolve around the most chaotic element of real estate, which is the people“ – Anthony Vicino
“It’s only it was only a horror story because I was new. I didn’t have systems.” – Anthony Vicino
“I remember coming into this I realized really quickly after the first property that you can’t assume that other people are reasonable.” – Dan Kreuger
LEAVE A REVIEW if you liked this episode!!
Keep up with the podcast! Follow us on Apple, Stitcher, Google, and other podcast streaming platforms.
To learn more, visit us at https://invictusmultifamily.com/
**Want to learn more about investing with us?**
We’d love to learn more about you and your investment goals. Please fill out this form and let’s schedule a call: https://invictusmultifamily.com/contact/
**Let’s Connect On Social Media!**
LinkedIn: https://www.linkedin.com/company/11681388/admin/
Facebook: https://www.facebook.com/invictuscapitalventures/
YouTube: https://bit.ly/2Lc0ctX
Horror Stories of Investing Made Simple
Anthony Vicino: [00:00:14] Hello and welcome to Mobile Family Investing News podcast, it’s all about taking the complexity out of real estate investments that you can take action. Today, I am your host, Anthony Ticino of Invictus Capital. Join me, as per usual, by Dan. I’m sipping on my coffee, Kruger, and I don’t spit on your coffee. So things are going well.
Dan Krueger: [00:00:36] Yeah, and it’s an early morning session we’re doing here. Cloudy, kind of rainy day. So massive amounts of warm caffeinated beverages are needed.
Anthony Vicino: [00:00:48] Delicious. Delicious. I mean, it’s Minnesota in the summer in August, it’s like 190 million degrees with 20 percent humidity. And you’re just over there with your coffee. I’m sitting here with my big energy drink because I’m a delinquent. That’s what we drink. I guess liquid
Dan Krueger: [00:01:03] Meth. I think that’s what I did
Anthony Vicino: [00:01:04] Already have my coffee for the morning. OK, if if you’re watching this from home, I want you to look at this mug that my friend’s mom made for me. It’s so cool, handcrafted.
Dan Krueger: [00:01:15] I like the texture.
Anthony Vicino: [00:01:17] It’s beautiful. I love it has nothing to do with real estate. But Danz, why don’t you let’s take a second and reflect on highs and lows because we’ve never done that before on the show. People are like, oh, this segment. So. What what’s been good, what’s been bad? Give me your top three goods and maybe your top one bad.
Dan Krueger: [00:01:43] Well, the top good is probably this little guy right here. Real quick, real quick, shameless plug. This bad boy is out and lives past unless he made it simple. So that’s a really good thing. That’s exciting. What’s happening this week. We’re going to our launch this week. And then so it’s going to be a really good week. Really excited to close on two deals recently. That was good, although we would have preferred to have those spread out a little bit more, not within two weeks of each other. But, hey, we got them done. And we deal with things as they come and we make it happen this year with real estate guys. Do they suck it up and they deal with how things add up because real estate things don’t always go as planned. And this was a little bit of a hectic close. And then three, I think we’ve made a lot of headway with finding some really talented team members that are becoming onboard one starting in September here. And I think we identified another rock star or another superstar to add to the team some here sometime here in the next three or four weeks, which is really going to help ramp up the quality of this content. We’re going to take it to another level. So a lot of good things. I’m not excited about that. Lozado doesn’t know. I don’t have those.
Anthony Vicino: [00:02:58] Ok, how about this? I’ve got last week we had an awesome investor party on the rooftop of a restaurant called Manolo’s. Not YOLO. No, no lows, no lows, you have to sell those to my mother. That’s my little.
Dan Krueger: [00:03:17] Yeah, but, yeah, today, I think we’re
Anthony Vicino: [00:03:18] All set up for that one joke
Dan Krueger: [00:03:22] That was a lot of setup for a lot of those, OK,
Anthony Vicino: [00:03:27] Marginal payoff ads. It’s OK. It’s our investment.
Dan Krueger: [00:03:31] Yeah, well, we’ll move on because today we’re going to talk about negative things. Yeah. Let’s say we’re going to take it way down spot we’re going to be fun sponges or golf stories and we’re going to soak it right up horror stories
Anthony Vicino: [00:03:46] And squeeze all that fun into a bucket and then pour it down the drain. It’s gone. No more fun. That’s horrible.
Dan Krueger: [00:03:52] No one’s going to listen to this all day because.
Anthony Vicino: [00:03:56] Because they’re going to be we’re going to share a couple of horror stories. I think it’s really common in real estate to be to hear about how it’s always great, how it’s always sunshine. It’s a great way to make billions of dollars and real estate’s made more millionaires than any other investment vehicle. All these things and how it’s so simple like we’re guilty of this. We have a podcast and a book called Talking about how simple it is but pull
Dan Krueger: [00:04:17] The passive role as
Anthony Vicino: [00:04:19] Well. The harsh reality is that simple does not equal easy. And it’s game that we’re playing is very, very hard and sometimes it’s harder than others. And so today we’re going to share just a couple of horror stories from our personal investing careers where it’s like, wow, this didn’t sign up for this, but you did. This is what you signed up for, specifically when you’re on an active investor side. But before we get to that, let’s not jump the shark. Let’s not get too far ahead of our skis here. Let’s talk about our bad investing advice for the week.
Dan Krueger: [00:04:54] Yes, you forgot about that, didn’t I did, I did. So, yes, we’ve been doing our ten minutes episodes we’ve had we’ve started having some guests on again recently and I’ve been off the hook for the bad investing advice. So let’s try to I’m going to try to tie this in with our topics today, if possible, so my bad investing advice or my bad investing tip of the week is. Don’t ever deviate from your initial plan. So if you are looking at a property or any kind of investment and you say, OK, here’s my hypothesis, here’s my thesis, if anything changes from this during my investment home period, then I’m going to cut my losses and get out.
Anthony Vicino: [00:05:44] That’s not good. You don’t want to run away at the first sign of trouble.
Dan Krueger: [00:05:46] Yeah, I mean, it sounds halfway decent because I say all the time to people that, you know, you’ve got to cut losses quick, more specifically, talking about public markets and trading stocks and really volatile types of instruments. You don’t want to get stuck in the middle come back up mentality. Well, things just keep spiraling down out of control. So you do it when you’re investing. There is something to that. You want to be able to cut your losses quickly, be mechanical about things and take the loss and move on to the next thing. However, in real estate is, like we kind of said in the intro there, it’s nothing ever goes to plan, really. So you’ve got to have in your budget having your proforma, having your business plan that things are probably going to change and you’ve got to have a cushion and you’ve got to be able to pivot and be solving problems on, you know, on a dime. Basically, you’ve got to be prepared to deal with things that you’re not prepared for. And that’s just part of the game. We’re going to dive into some examples of that today of
Anthony Vicino: [00:06:46] The great philosopher Mike Tyson said everybody has a plan until they get punched in the mouth and you’re going to get punched that much. A lot in real estate are going to be punched almost every single day. I think Eisenhower said something to the effect that plans are useless, planning is essential. And so it’s in the planning that you come up with the plan A, Plan B, Plan C, scenarios that you can pivot between so that when things start going wrong, you’re not just grasping for straws. For the first time, it’s helpful to have thought through the landscape of what could happen. Now, one of the interesting things is a lot of times when you start to think about what could go wrong, those are the things that never end up going wrong, and the things that do, in fact, go wrong are things that you couldn’t have really seen or predicted. And they go wrong in ways that you couldn’t have predicted. Like a case in point today we’re going to talk about some horror stories. And I’m just going to jump to the end here and let you know that a lot of these horror stories revolve around the most chaotic element of real estate, which is the people people are chaotic variables that you can’t predict how they’re going to behave. You can know that tenants are always going or residents are always going to be the potentially stickiest bit in a deal. But you don’t know how they’re going to be the stickiest bit. So you just kind of discover that and adapt in the moments. And so why don’t you why don’t you lead us into the scary forest? That is your horror story for them for today?
Dan Krueger: [00:08:11] Yes. I will say that you know, the story I want to talk about today happened on the deal from about a year and a half ago or so. So we were in, you know, fully in the business. We’ve done many deals before and we’ve seen a lot of things right. We were at this point experienced, so to speak. And this was very close to Anthony. I just started kind of working together. So we’ve done a lot of deals independently. We were just coming together and starting to do deals together. And usually, it’s that first deal that that’s got. Most of the learning experiences in it, I think was at Radcliffe likes to call them seminars. I think something like that. It’s more of a positive way of looking at it. They are learning experiences. At the end of the day, you can take some value out of these really stressful, anxiety-ridden events and be prepared, be better prepared for the future. So there was plenty of stuff that happened on my first deal, which was fine. And every deal is going to have little hiccups here and there. As they said, it’s usually that the people component and that turns on routinely. So even if you’ve got a really great property, really great, really great residents said that at some point, just statistically speaking, there’s going to be a wild card that the works the way in there and you’re just going to have to deal with that as it pops up.
Dan Krueger: [00:09:28] But our philosophy with deals after that first one, I learned really quick that no matter what we plan for the worst, we are going to go into every deal, assuming everything is going to go wrong. And if that deal still pencils out and there’s still enough cushion there for us to do all right, even when everything’s going wrong, those are the deals we move forward with. So we always kind of assume we don’t know specifically what the hiccups are going to be in any given deal, but we know there’s going to be plenty of them. And so we really take a pessimistic perspective when we’re underwriting deals. And so that’s why this horror story didn’t really negatively impact the returns on this deal. And this deal was closed in January of twenty. And so we we we were executing this business plan and dealing with this horror story in the middle of it and the pandemic. And we actually hit our pro forma numbers in twenty with this situation included. It was a thirty-two-unit building. So, you know, this one guy wasn’t going to make or break anything, you know, maybe my and my manager, my property manager’s mental stability might break that. But as far as the performance of the deal, it’s not going to really negatively impact that. So all that to say if you plan for the worst when the worst actually does have. And hashtag twenty, you should still be able to be OK, but if you go into DLs thinking that, OK, here’s my best-case scenario that we’re aiming for, we forget to really look at the downside.
Dan Krueger: [00:10:54] You might be setting yourself up for trouble, but yeah. So we you know, we’ve had some interesting experiences over the years, but this one was probably one of the most involved and I would say most enthusiastic individuals that we’ve ever, ever dealt with. He was really passionate about causing drama. He thrived on it. So I think a lot of people could relate to this type of personality. There are those people that just want to create drama for the sake of creating drama. There’s something going on back, you know, whether it’s subconscious or conscious. There’s something that makes them just want to make other people’s lives hard. I don’t know what it is. It’s unfortunate, but there’s plenty of people like that. And this guy was one of those individuals. And it was very interesting because he started off so normal the first few months that he was on the property. He was on our list of bad eggs, necessarily. Like the owner that we took this property over from was a very mom-and-pop landlord. And there are some really good opportunities there. But with that comes the assumption that they probably don’t do a really great job of vetting residents on the way in. And so we knew this going into it.
Dan Krueger: [00:12:04] That was the Value-Add component of the deal. We were getting this thing for twenty-five percent under market value. And so this thing had a home run written all over it, but it did require us to go and effectively revamp the building and really. Flip it on its head, right? Take it from the problem child on the street to a really great property because it was a mismanaged property in a great neighborhood. So we knew we’re getting into it. But this guy just got caught us off guard. So pure, perfectly normal for a couple of months. And then one day something flipped. My manager, my property manager was outside, just kind of doing his rounds around the property, picking up trash and keeping an eye on things. And this individual walks up and starts talking to him about normal stuff, questions about something not noteworthy. He didn’t think anything was strange at the time until he got a call from the police later. It turns out as soon as this resident turned around and walked away from my property manager, perfectly normal conversation. There was nothing negative about it. He went back to his car and allegedly someone had stuck a knife in his tire. And so he calls the police and tells them that my property manager just hired, which I think goes without saying didn’t actually happen. And so right off the bat, we’re thinking, wow, what the heck? Why? What do you feel like doing this? And why get the police involved for something so silly, the police effectively kind of laughed it off and said, you know, they talk to everybody there and it’s quite clear what was going on.
Dan Krueger: [00:13:48] Something happened to this guy’s tire. Maybe it was him that did it. Maybe it wasn’t. But everyone was really confident that my property manager did not slash tires. So they wrote up a report. They went on their way. And so we now we realize, OK, this guy’s a little bit unstable, sometimes a little bit off upstairs. So we kind of go on our merry way. We’ve identified this individual is probably not the best fit for the community. Now, this is the type of behavior he’s going to be exhibiting and he starts sending in maintenance requests perfectly fine. We try to go fix his the things he complained about. I think there was he said there was some mold in his living room, a small, nondescript, small, just an odor that was a problem. And I think at least one other thing, something with a sink or something maybe. But our maintenance guys try to show up and repair these things and he won’t let them in. Kind of tough to get in there and repair things if you can’t get into a unit, so then we kind of realized that, OK, this guy is he doesn’t. It doesn’t seem to have a legitimate problem here, but he does seem to be trying to create some sort of paper trail, right? He’s very intentional about what’s going on here.
Dan Krueger: [00:15:02] He’s got a police report for a tire. He’s got maintenance requests that he’s got made in paper or through our portal. So there’s a record of them being there and he’s not letting us get them. And a couple of weeks pass. He does this several times. No one is able to get in there and repair these things that he says need to be repaired. And he filed a complaint with the city complaining that we are not keeping up the building and we are not repairing the things that need to be repaired. So we’ve got a city inspector that comes out. They go in there and find anything that needs to be fixed. And they didn’t see any mold, but they did see something, something minor, like a clogged sink. And then maybe there was a smoke detector that was missing some pretty minor things that could be fixed really easily. But he’s not trying to fix things here. He’s trying to create chaos. This is his goal. So we again try to follow up and repair these things after the inspection. Not able to do it because he will not let us in the building a little bit more. Time goes by and we get a notice from the county that he is pressing charges on us for a whole laundry list of things, including not fixing the repairs. I think he had the whole tire situation on there and he threw some other random stuff.
Dan Krueger: [00:16:15] And I’m pretty sure there was a little list of things that were just all over the place. And on top of that, he’s also starting to kind of rally the troops. Right. He’s going around to his neighbor’s doors. He’s knocking on them, telling them that we’re going to be slumlords, we’re going to kick everybody out this, that or the other. And I think part of this was he didn’t like the fact that this completely absentee management had sold the building to somebody who was actually trying to make it a nice place. He was able to get away with whatever he was doing with the prior owners because they did not pay attention to this property at all and he could do whatever he wanted. And now there’s a new sheriff in town. So I think he’s digging in his heels. This is during the eviction moratorium. And so he’s like, OK, I’ve got the power now. They can’t evict me. So I can just for whatever reason, just create massive chaos and drama because one of those people thrives off it. So we go to court, he lays it, lays out his case, and he’s actually got a lawyer that was oppressed. He actually did that. This is a very organized, mentally unstable individual. So even though he’s a little bit off his rocker, he’s actually doing all the right steps that you would want to do.
Dan Krueger: [00:17:22] If you actually do want to press charges on somebody’s only problem is it’s very clear that all the things he’s saying are nonsensical. There’s a lot of records, text messages, emails, even videos. He would even take videos of our property managers trying to enter his unit to fix things. And he’s got himself on video, not letting them in. So he’s effectively creating evidence against him the more stuff he tracks because he seems to be pretty detached from reality. And so he presents his case to the judge and the judge says, OK, there’s really no grounds for us to do anything here. You’re saying X? They’re saying, why? Why don’t you guys just come to some kind of settlement, OK? Which is what we want to do. We just wanted him to leave the property because he was creating a negative experience for everybody else in the building. It’s like we just got to get this guy out. We can evict cash. Ricky’s right. That’s what we wanted to do. But he kept saying no throughout the entire process. So after the court appearance, we drive over to his unit myself, my property manager, the individual, and his lawyer. And we walk around and he shows us exactly what needs to be done with the intent of having his lawyer draft up a settlement agreement to send over where we can just pay him X, Y, and Z and he can leave or we can make these necessary repairs.
Dan Krueger: [00:18:37] And he could say our goal is to get this guy as far away from the properties as we can because he is creating a really negative environment. And so we go through the unknowns and he’s pointing at the spot on his wall where there’s allegedly mold and we can’t see anything. We brought our maintenance guy with us. He kind of scrapes the paint off to see if there’s anything underneath. Nothing’s there. The lawyer looks, she says, OK, I don’t really see anything that could even be fixed because it’s there’s nothing there. This odor, he just had a smell because he didn’t even clean. There’s garbage in the smell unit because he’s got a bunch of stuff in there that’s old and dirty. So we couldn’t really find anything that we could actually fix to make him happy. So the settlement was effectively cash for keys thing. And so for those of you that don’t know, cash for keys is effectively just giving somebody money to leave the property. If you don’t want to evict them or can’t we prefer not to evict people. Honestly, it’s a win-win. If we could do cash for keys, it’s cheaper than eviction. It’s quicker than an eviction. And then for the resident, they don’t get their credit dinged and they actually get money in their hand. So it’s a win-win for everybody. And we were trying to get that done for months, but you just wouldn’t let us do it.
Dan Krueger: [00:19:46] So they end up drafting up a fairly substantial settlement agreement that included cash for him to leave the unit. And even though we really try to push back on this, we paid for his deposit at his next place of residence for a long time, we were kind of pushing back on that. We wanted to see a lease, want to make sure that he actually needed these funds, which he didn’t because it was already paid. We were reimbursing them. So this at the end of the day, the value he was sucking out of the property by being there was far greater than the cash to get him to leave. So it was well worth every penny to get this guy as far away from the property as soon as possible. So we did sign the settlement agreement, gave him his cash, and after three months of just craziness, he finally leaves. But that was probably one of the most drawn-out, just nonsensical issues that we’ve run into in real estate, where every time something happened, we just said, wow, I’m surprised. Again, we thought the last thing this guy did was the most extreme. And every time there was an interaction, it got more and more impressed with how off the wall and just insane this individual was. And I still can’t wrap my head around it to the States. It’s probably going to be the one that is remembered for the longest because of his unique personality.
Anthony Vicino: [00:21:11] Yeah, it’s hard to deal with people who are, I think, detached from reality is a good way of putting it or just prone to sowing seeds of chaos. And they may not even be doing it intentionally. They may not realize that what they’re doing is just pure bonkers.
Dan Krueger: [00:21:29] But in his head, it might all make sense. You never know.
Anthony Vicino: [00:21:32] Yeah, exactly. Exactly.
Dan Krueger: [00:21:34] And rationalize with the irrational or, you know, try to use logic with a logical person. It’s just it got infinitely more frustrated the more you try.
Anthony Vicino: [00:21:45] Yeah. Twenty is an interesting time period in the eviction moratorium. Is interesting because part of the argument is, you know, we want to protect tenants from being evicted. If they’re in financial hardship, then we don’t want people just being kicked out and onto the street because they can’t pay. And that makes a lot of sense to me. One of the downside effects of that, unfortunately, is that then communities are a lot more compromised or a lot less safe because there’s there are tenants and a lot of cases. We can’t do anything like this guy. He doesn’t sound like he was a danger to anybody, but it’s not uncommon to have a dangerous situation or dangerous tenant who’s like that person can’t really be here safely.
Dan Krueger: [00:22:23] He wasn’t dangerous, persay, but. You know, now, in retrospect, we know he never did anything physical. There were no weapons or anything directly, but we never knew in real-time. You know, he was like I said, every day, it was like, oh, my gosh, I can’t believe, you know, he took it to the next level. Our assumption was that he’s just going to keep going here and just getting more and more extreme. And at the end of the day, getting rid of this individual, even if he’s evicting people, isn’t a good thing. And that’s not a good way to run a business. It’s all kind of about the greater good. What’s going to benefit the majority of the residents in this building. Doing this for him to him is negative to him, but it’s going to positively impact, you know, 30 other individuals. So that’s kind of our mentality is what’s going to really do the best to keep our community safe and keep our good quality residents happy. And if you have to get rid of one person for that, then that’s usually what you got to do.
Anthony Vicino: [00:23:24] Yeah, and it’s the same with my horror story. It’s always about the tenants. Guys like I mean, you can have it. You could have lightning strike building. It sets on fire. And that’s a pretty horrible situation too. But my story is no different, like the very first property. It’s interesting when you take your hardest punches when you’re very new and all the punches and some of it, just get easier and easier. I was really fortunate like I’ve told a story and it’s in the book Passive Investments Simple Available at All Booksellers, about how the one month after I had closed on my very first property, I was getting calls from bounty hunters in the middle of the night. And that was just the beginning of a two-month saga with this one particular tenant who she was. She was a nice lady. She had a baby that had just been born that month, like at the beginning of the month, like pretty much on the same day that I closed, she had a baby. And it wasn’t until the end of the month that I even really got to really meet her. And she seemed great at first. Her dad was living with her. He was a questionable character. And so the bounty hunters get involved and that story is its own little ball of craziness. But things just keep getting worse and worse with her. And her lease is running up at the end of January. And this was during a winter that was particularly gnarly for us up here in Minnesota.
Anthony Vicino: [00:24:49] We were getting an arctic blast left and right. So that means like we had a two-week period where it was like twenty below every single day and there was the bounty hunter. But then she also went she also claimed that there was black mold that was making her baby sick. And that we take very seriously because I don’t want any babies getting sick. And that ended up completely remodeling the back, the bathroom for her, and never actually finding mold. And they’re like, oh, OK. But the problem was more that there were a lot of drugs and a lot of smoking and things going on in that environment that we’re not good for the baby’s lungs. So there is that component. But all of this is to say at the end of January or Lisa is going to run up. And I told her we’re not renewing the lease and we need you out on this day and I need you out on this day because I have new tenants moving in two days later. So I had effectively done is I new as I’m going to leave myself one day to turn this unit and get the new tenants in, which is a very, very tight timeline. And I knew that. But I had everything organized from contractors to materials to everything that was needed to get that unit done in that single day. So leading up to that day, which was supposedly going to leave, I was a hell of a lot of stress because I was like, I don’t know if she’s actually going to leave.
Anthony Vicino: [00:26:06] Like when you’re dealing with some of these tenants, you just don’t know if they’re actually going to walk out the door on the day they’re supposed to or if they’re just going to be like, I decided I’m not leaving. And as a landlord in those cases, you can’t physically remove that. Right. And so there’s some stress having a new tenant with a signed lease sign, a security deposit in place, and the specter of not knowing if this person actually going to leave. So leading up to this, she kept telling me, nope, nope. Definitely going to leave. Definitely. Where have all the plans until the day before? Suddenly things go off the rail one day before she’s supposed to leave. Suddenly it was, oh, I don’t have a place to go. Like, Oh, you haven’t lined that up. Or it was, oh, we don’t have a car to take everything in. And so I was like, OK, well, let’s find you an alternative. So I worked with her to try and find her a new place to stay. I offered to rent her a truck to pick everything up. And she says, no, no, no, it’s OK. It’s actually OK. My dad’s going to figure that out. Well, that’s a good story. Until the dad gets arrested the day they’re supposed to move out for Grand Theft Auto.
Anthony Vicino: [00:27:18] That was their plan. They’re going to steal a car. It’s a good plan now. So now they’re supposed to move out. It is really cold outside. It’s like the coldest day of the year. I like it was horrible. They have no car. This lady has a baby. They have not packed a single thing in their apartment. And they’re supposed to be out by the end of the day. And so I get over there in that morning and I’m like, you guys need to be out by 5:00. And I’m looking at their apartment. Like, there is no chance. And she’s like, I don’t have a car. I don’t know what to do. I don’t know what am I supposed to do. So I was like, OK, well, I need you out of this unit because I need all these people I need we need to turn this unit. So at a minimum, let’s just take all your stuff, move it down to the basement and we’ll store it there until you can figure out how to get it to wherever you’re going and then you’ll be gone. So we spend the next that that day helping them move all of their stuff into the basement, everything. And it takes us all through the night to get everything out because they were hoarders. And that tends to be that tends to correlate pretty well with crazy characters is they also are hoarders. And so it was very, very difficult to clean and move all their stuff out of there.
Anthony Vicino: [00:28:31] And it took us deep into the night. But we eventually got everything there. In time for the contractors to come and do the unit turn, but the story never ended, the story never ended because she never came back for her stuff. And when you don’t, like, take your stuff with you as a landlord, you have to hold on to it. You have to hold on to it for a good long time and document it and take care of it. And I was like just all of this junk. And so finally the time runs up and we can now dispose of this stuff. Like two months have gone by and we can get rid of it all finally. So I get rid of it. And sure enough, after I get rid of it, she reaches out. She’s like, I want my stuff back. And I was like, your stuff’s gone and now she’s starting a lawsuit and I was like, well, thankfully we documented everything meticulously along the path and there was really no leg to stand on. But when you’re new to the game and you’re dealing with crazy tenants and this is not even like that crazy in the grand scheme of things like, there’s far crazier. It’s only it was only a horror story because I was new. I didn’t have systems. I didn’t know I was on Google every night looking up. I’m like, what do I do if they do this? Or What if they do that? Like, because you just don’t know.
Anthony Vicino: [00:29:46] And a lot of the books that they teach you and like how to be a landlord, they don’t prepare you for the contingencies of like, what if this character just refuses to leave? Like, what do you physically do? Like, well, you can evict them and but then what do you do for this other tenant who has is planning on moving in? They haven’t renewed their lease. Like, what do you do for that person? I don’t I don’t really walk you through that. So that was my horror story. It was really stressful because I felt even though I had control, that I didn’t really have control because I never really knew what this lady was going to do. And in the grand scheme, all worked out. But it was also stressful in the sense that that was a triplex. So that represented one-third of my tenants. So right there, that was one-third of our income. And if she doesn’t move out, then suddenly this thing isn’t really cash flowing in the way that we had expected. And so now our numbers are maybe skewed, which is why we made the move to the larger multifamily where, you know, as you mentioned with your crazy tenant, it doesn’t really change things on a three to one guy. And it’s not just a blip on the radar, but it’s less impactful.
Dan Krueger: [00:30:51] Yeah, I think a good way to say it is it’s hugely impactful on the management team and the owners and the people that have to go through all the steps of dealing with it. But as far as the performance, the numbers, the cash flow, you know, the zero impact on the passive investors, you know, they’re obviously was, you know, three, four months they weren’t getting rent from this guy. I think it goes without saying that he wasn’t paying us through the process. And we did have to pay some money to get him out the door. However, that’s part of our capital improvement budget right there. Would have been nice to spend that money on appliances and flooring, but we do always have a cushion for the unexpected expense. And sometimes that’s cash for keys because removing that individual from a building does, in fact, increase its value. So. Right. So we could make some money and put it towards that needed. But you’re right. I mean, it’s kind of a lesson in why size helps in these types of things. You can kind of remove some of those statistical outliers from being hugely impactful on your bottom line. Still impacts immensely. But I remember coming into this I realized really quickly after the first property that you can’t assume that other people are reasonable. I came in with the assumption that people were like me, that they were genuinely nice and didn’t have any ill will towards people, and that if they said something, they were probably telling the truth.
Dan Krueger: [00:32:20] And then really quickly, after you or have become an active investor in a landlord, you realize that you kind of have to just not believe anything anyone says. Right? You know, maybe not say maybe. Maybe we shouldn’t say we don’t believe anything people say. It’s just that you really need to verify, verify, verify and never, ever deviate from your stated from your standard practices. Right. So if someone says they’re going to leave on the next date, assume they’re not going to build a nice cushion in there. Yeah, you might increase your vacancy. But, you know, it’s probably better than having to go back to that incoming tenant and say, hey, I know that you probably already just packed up your place. You’re planning on showing up tomorrow, but we got nothing for you. Luckily, if anything like that ever happens on a bigger scale, you’ll probably have another unit you can kind of shuffle somebody into for an interim period. But you just have one triplex and that’s going on your you so well, you’ve got a good quality resident sitting there waiting to pay you the rent to take good care of your unit. Then you’ve got. If Joe or whatever his name was, sitting there stealing, trying to steal cars and not pay the rent, you get stuck in the situation. You just can’t. You can’t. They said you can’t.
Anthony Vicino: [00:33:35] And the craziest thing and the frustrating thing with that in my situation was the tenants that were going to be moving in. It was this young girl and her boyfriend that were graduate students and they were moving to Minneapolis from South Dakota. And they didn’t know anybody here. They didn’t have any other alternatives. So they were going to be arriving with all of their things on this day. And I was like, if they show up and we don’t have this unit ready for them, I’m going to have to put them up in a hotel or something. So suddenly now we just believe it, because I don’t know. I got to take care of them. Somehow I feel obligated to take care. And but the thing is, you hit it on the head is never make exceptions to your standard operating procedures, never make an exception, because it’s when you start doing that that people start to be treated differently. You’re trying to do something right for somebody, but it’s going to bite you in the end. So you have to create your procedures and stick to them no matter what.
Dan Krueger: [00:34:34] Yeah, it’s really tough to be like a nice guy, quote-unquote, and be a landlord. To be a good landlord. You’ve got to provide good customer service. You’ve got to really, you know, make people feel safe and take care of them. However, when it comes to the system of bringing people into units and moving them out, you’ve got to be like a computer. Things happen on a certain day. Certain forms get filled out. You do the background check. You do all the things. No matter what they say, I’ll pay you to double the deposit. I’ll pay you a full year in advance. Just skip the background check. Right. I’ll pay for the whole year as a new landlord. You might look at that, see dollar signs, but great. I’ll skip the credit check pay for the whole year. Yeah. So first-year might be fine. And then it comes time to. Move them out or you find out they’re selling drugs and it’s also not worth it at all. So I’m worried about the baby in the situation. That’s the one I feel bad, bad about in your stories like that little baby that’s got these crazy people.
Anthony Vicino: [00:35:35] Baby, baby. Was it a really rough situation, too? Because it was born a little bit premature and had some respiratory issues and it was in and out of the hospital because of that. And it was just because they were there was a lot of smoking going on in that unit. And that was another thing where you, like you always have a no smoking policy, but you can’t stop people from actively smoking in the units. It’s like, what are you going to do? So those are the horror stories. If you’re listening to that and you’re like, hey, that sounds great, I want to do some of that, then maybe you are cut out to an active investor, like, go for it, like. But just know that that’s this is not strange. This is par for the course. Everybody’s got a story like this. On the other hand, if you’re like, I don’t want any part of that, but I do want to still invest in real estate. I want to benefit from all the things that make this awesome. Then go check out passive investing made simple as a new book. It’s going to teach you exactly how to be a passive investor such you don’t have to deal with toilets, tenants, and trash. And any of that stuff can put your money in and we’ll do the rest and it’s great. Or find an operator doesn’t have to be an operator to do the rest for you. So go pick up the book, leave a review, if you would. That be great. We’d really appreciate that. And just want to say really big. Thank you for one not being a crazy person and two for joining us this week. And we’ll see you next week.
