From Nightmare to Opportunity

Real estate investing can be and is a great way to reach your financial goals and outcomes much quicker than any other investment vehicle but it is not without its pitfalls and problems. Although our property management company thoroughly screens each tenant, there are times when things happen. The best tenants become the worst and when they move out they can leave behind complete destruction. This is exactly what happened to us but I am going to show how we turned a negative into a major positive.

This involves our 8 unit complex in Mt. Vernon IL. It was the last unit we had remaining open (when we acquired the property it was 100% vacant). The gentleman passed the screening process and paid his security deposit and the first month's rent. He was on time with rent for 2-3 months and then he fell behind and we heard nothing from him. The PM company would stop by and he was never home so eventually after we posted a notice on the door he made contact. Apparently he lost his job and was not able to afford rent. Thankfully he agreed to move out on his own after falling behind on one month's rent. That is where our good fortune ended. This is the trail of destruction he left behind:

Adding insult to injury he acquired a cat which was not allowed by the lease and the whole apartment was infested with fleas.

This was a major blow psychologically and financially to our business. We were prepared to make some updates to the property as the units needed it but this definitely forced us to address improvements on an accelerated time schedule.

Our management company was great. After a discussion we came up with a rehab plan that would maximize rents while keeping some of the original features of the apartment that would help keep costs down (we refinished the tub and cabinets instead of installing new ones)

After two pest control treatments for the fleas (shout out to my dad at Haertling Exterminating), we were ready to start on the rehab process. The timeline, budget, scope of the project was set and the whole rehab was completed in 2 weeks.

We were able to increase rent in that unit by $100 per month and we also installed water efficient fixtures (we are responsible for water and sewer costs) to help cut down on our operating costs. With the improvements to the unit we were also able to attract a better quality tenant which has equated to on time payments and less headaches.

After pictures:

This negative experience has given us the knowledge to continue to grow our portfolio and the experience to handle any hiccups that come our way. We have established a relationship with the contractor and he is aware of our expectations when it comes to what the finished project should look like. This will pay dividends in the future when comes to rehabbing the other units as they need it.

Overall it was a very gut wrenching initially when we received the pictures of the apartment after he moved out. In the end we were able to flip that negative to a positive and now we have the systems and abilities to handle any additional rehab needed in the future.