The real estate entrepreneur has many options when it comes to investing strategies. Some strategies call for the home to be repaired or renovated, while other strategies call for homes to be bought and flipped. Other techniques fall in between these two.
Throughout many of my years as an investor, I have utilized the buy and hold strategy. In my early days of investing, I would look for properties that only needed minor repairs. Once I found a house that fit my criteria, I negotiated the purchase. After the repairs were made, I would rent the house out.
My exit strategy was to hold the property for long term growth. Over the years as a landlord, I learned what it takes to manage property effectively. Running a real estate business and dealing with tenants takes knowledge, skill, determination and guts. I learned quickly that some tenants will test you to the limit. Staying focused on what you are about in your business is critical.
A New Technique
After about 7 years renting out the houses, I learned about the lease with option to purchase technique. I was at a real estate conference listening to a speaker who revealed this technique to the attendees. It didn’t take me long to realize that I needed to change the way I was doing business.
Once the presentation was over, I went to the back of the room and purchased the materials that were offered in teaching this strategy. This was the beginning of a whole new world of investing. I soon realized that the strategy of renting to tenants needed to be replaced by selling to tenant/buyers. As my properties became vacant and new ones were purchased, I began looking for tenant/buyers rather than tenants. This has been one of the best discoveries I have made as an investor.
My duties as a landlord have become less troublesome and the financial picture of each property has improved. This better positioning however as good as it is, has not solved all the problems of holding property. The lease with option to purchase technique as good as it is still requires some hands on management.
This brings me to the heart of this article. I have a property that I have been managing for the past 2 years. The lease will be up at the end of this month. The tenant/buyer has decided not to exercise the option to purchase the property. Even though this technique is a great strategy to get houses sold, some tenant/buyers do not buy.
After the tenant/buyer let me know her intentions, I sent a letter letting her know what the agreements called for as she was getting ready to move. I also told her that I would follow-up with a phone call to discuss the final details of her move.
Some Initial Concerns
I had some business near the house last week so I decided to stop by and talk to the tenant/buyer about some concerns I had. As I drove into the driveway, I immediately noticed that the grass had not been cut for some time. There had also been a storm recently and there were branches and other debris on the lawn.
My experience has taught me that when I see these signs the house is usually empty and the tenant/buyer has moved. I looked thru the windows and could see some of the tenant’s personal items. I went to the back yard and discovered 2 dogs that had been left there. The back screen door was broken and the solid door behind it had some damage as well. I could see thru the back window that the room was full of boxes and other items all over the floor.
At this point, I decided to call the tenant and find out what was going on. She told me that she had moved about 3 weeks earlier, but was still moving things from the house. She also said that she was taking care of the dogs while she was moving. She reminded me that she was paid up until the end of the month and that she would be out then.
I asked her if there was anything in the house that needed to be repaired. She mentioned a couple of minor things, and then she asked if she could get any of her deposit back. I reminded her that the option deposit was non-refundable. She told me that she would have her brother cut the grass and the dogs would be picked-up by the end of the month.
As I was leaving the property, she called me back to tell me that there was one other item that I should know about. She said that the large wagon wheel light fixture in the family room fell from the ceiling. She said it simply fell on its own and that she was glad that none of her children had been under it. I asked her when did this happen and she said that it fell about a year ago.
I asked her why did she not call me and report it. She said she had not called because she had not been using the room, so the light was not necessary. I knew that this light fixture was placed in the ceiling securely. It would not have fallen down on its own. It seems more likely that someone had pulled on it and dislodged it.
From Tenant/Buyers to Tenants
This tenant/buyer was always quick to call or write me when anything needed to be repaired, so not calling when the light fixture “fell” was odd. Things can change over time during the lease term. When we signed the agreements 2 years ago, she was excited about the house and intended to buy it. She was always on time with the rent payment, which is always a good sign.
A few days later I received a call from a neighbor who noticed the dogs in the back yard. He was not sure if they were mine or they had wondered in the enclosed fence area and could not get out. I let him know what the tenant’s intensions were and that I was monitoring the situation.
This will be an on-going post as the story develops. I just want you to know what is involved when you own or control property. The details of this article are not meant to discourage or scare you away from Real Estate investing. I want you to know and understand what to expect from some tenants. When you are prepared for any situation, you will be able to handle it effectively. To be continued.
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