Episode Transcript
[00:00:00] Speaker A: Hey, everybody, you're kicking it with, kicking it with, kicking it with the home.
[00:00:10] Speaker B: Hey everybody, you're kicking it with the Homeboys and the Homeboys podcast. And today we are bringing you a very spooky Halloween version of horror stories.
We're going to let you know some crazy things that have happened to us in the world of real estate investing. But first and foremost, I'm here with the scariest guy I know, Mr. Scott Adams. What's up, brother?
[00:00:35] Speaker C: It's the best compliment I've ever had.
[00:00:37] Speaker B: Happy Halloween to you.
[00:00:38] Speaker C: Happy Halloween. Yeah, I'm excited to talk about some of these horror stories that we've been through, but we're also going to share how we overcame them, because in real estate, it's all about overcoming those bumps. And these are some spooky bumps that we have been through.
[00:00:52] Speaker B: Well, let me tell you first something that's not very scary.
You know, I've got seven and ten year old princesses and we are going to go out trick or treating and we've already been to one Halloween event. We went to Pumpkin Town. It's a thing that's here locally.
And we are dressing up as a family. We've already dressed up as a family, but we are going as Dancing with the Stars.
[00:01:17] Speaker C: What does that mean?
[00:01:19] Speaker B: So my wife and both my daughters have matching dresses and they're like dresses that you would see, you know, these professionals on Dancing with the Stars. Like a
[00:01:32] Speaker C: formal gown.
[00:01:33] Speaker B: Correct. You know, and I mean, they, all, the three of them look beautiful in them. And then I'm dressed up as kind of like one of like the, the guy dancers.
[00:01:42] Speaker C: What
[00:01:43] Speaker B: is that?
[00:01:43] Speaker C: I don't know. I've never seen the show.
[00:01:44] Speaker B: So I've got like a pair of like black, you know, dress pants and, you know, dress shoes that kind of look like dancing shoes. And then just a short sleeve, you know, button up, shirt unbuttoned, way down. Because all these dudes are like ripped and chiseled, which I'm not. Which kind of makes it funny, I think, you know, to have some, you know, fat, lumpy, you know, guy.
[00:02:08] Speaker C: Yeah.
[00:02:08] Speaker B: You know, with his shirt unbuttoned. But then I'm carrying around a paddle that's. That says 10, you know, on it because, you know, they always, you know, are, you know.
[00:02:17] Speaker C: Well, it's better than picturing you in a leotard, so.
[00:02:21] Speaker B: Well, I don't know. I mean, I,
[00:02:23] Speaker C: that's scary.
[00:02:24] Speaker B: We'll have to throw some pictures out there. It'll, it'll, it'll, it will Be very scary, you
[00:02:29] Speaker C: guys. Do you guys dress up as a family and it's always, it's great. Each year it'll
[00:02:33] Speaker B: break my heart because I, whenever we stop doing it because I know that that's coming. And we've done Toy Story in years past, we've done Star wars, we've done Beauty and the Beast, Cinderella, you know, all that stuff. So yeah, I dig it. I'm not really into the scary side of Halloween nor my, my 10 year old is scared to death of anything kind of spooky. I never liked, you know, scary movies and you know, all that stuff. So we try to keep it pretty light hearted with sweet tarts, Sour Patch Kids, Reese cups and
[00:03:06] Speaker C: light
[00:03:06] Speaker B: hearted outfits. That's
[00:03:07] Speaker C: candy and fun.
[00:03:08] Speaker B: That's it.
[00:03:08] Speaker C: Well, speaking of fun, you have one of my favorite horror stories of all time. When it comes to real estate, it is literally one of my favorite stories and it is a nightmare. It is what you hope that never happens to you as a owner of investment real estate.
And I love this story because it's entertaining and the world seems to love this story because we've gotten millions of views when we've talked about it before on social media.
[00:03:36] Speaker B: Yeah, it's a story of a tenant, you know, seeking revenge, you know, on a landlord and trying to get into the landlord's pocket, you know, unjustly.
It's amazing, you know, if tenants don't pay their rent, you know how vindictive they can get if there's collection efforts going on, you know, on, you know, from a property management side. But yeah, I had a duplex in downtown Indianapolis that, you know, I started getting water bills and there's only one water meter at this duplex.
And I was in charge of paying the water, but I was getting.
[00:04:16] Speaker C: You can't pass that on to the tenant because each tenant doesn't have their own water meter. So the landlord has to cover it in that case.
[00:04:23] Speaker B: Correct.
So anyhow, I started getting water bills and mind you, this is going back 15 to 20 years ago.
I started getting water bills of 900, 1100, upwards of 12, $1300. And of course I'm in shock.
There's no way that a duplex, two units could be going through this water usage. So I called the utility company and the utility company had asked if, you know, there was a leak, you know, at the property, which I had already confirmed. I'd already sent out a plumber to check for leaks at the property and there, you know, there were none. And you know, they kept insisting that it must be a leak. And I did a quick, quick Google math and I said, well, you know, if it was a leak at the property, this house would be floating down the road because the water usage was the equivalent of filling up 13 residential swimming pools.
So I'm like, there's no way this could be a leak. And they were adamant about it and I was getting nowhere.
So I did a site visit.
Mind you, there's one tenant in there that's paying the rent on time. There's another tenant in there that is behind and we've already started some pretty serious collection efforts on
[00:05:54] Speaker C: how dare you.
[00:05:55] Speaker B: And I was just walking around the property because I thought, I don't know, maybe there's a outdoor spigot, you know, is, is leaking or you know, something is going on. At this point I'm desperate.
And as I'm walking around the property there was a common area.
I could hear the water running inside the apartment of this woman that, you know, that owed, owed me money for rent.
Well, I sat there and I waited for hours and she finally came home and I caught her red handed because she was leaving for work and then turning on the kitchen sink and the bathroom sink and the shower and letting it run while she wasn't there all day, know, every day. And it was just in order to get, to get back, to get back at me, you know, who was just wanting my rent payment that she signed up for, that she agreed to.
And yeah, we've, we've talked about this story a few times and it's always fascinating to me to see, you know, how sometimes the general public's like, oh yeah, good for her, good for getting it over. Well, you know, she went, had to answer to that in court, which there again I had a hard time collecting any money out of her. But you know, it's one of the biggest horror stories that you could have is just losing thousands of dollars when you don't have to.
[00:07:27] Speaker C: Yeah, well, if you're listening to this, the lesson is to, when you buy a duplex, make sure you have meters for each unit. You always want as much of the utilities in the tenant's name as possible so they can't take advantage of you. So that's, that's the hard lesson that we learned the hard way, which is unduplexes, triplexes or anytime you have multifamily man, you got to have it metered. You got to have every unit metered separately. And
[00:07:54] Speaker B: they also make an apparatus that, that you can attach to one water meter that Will alert you if there is drastic, you know, water usage going on. So if it's not separately metered, there, there are ways of being able to monitor it a little bit, little bit more closely.
[00:08:12] Speaker C: Yeah, I've seen that technology where in a duplex they'll put a. Within the valve going to each of the units, a separate meter that isn't part of the water company's meter, but your own private meter. So you could then bill back the tenant in a sense that way. So there's some workarounds with it, but these are some of those things that you want to avoid. And I had a really bad horror story in my day that. Well, I've had a few, but
[00:08:41] Speaker B: I've had hundreds.
[00:08:43] Speaker C: Yeah, we
[00:08:45] Speaker B: could turn this into more of a documentary or miniseries if we want to.
[00:08:50] Speaker C: That is the truth.
And part of real estate is overcoming these things.
And my worst horror story overcoming it was simply collecting insurance and moving on, which is the worst case scenario you can end with. But again, you gotta have good insurance. So I bought this house in a really bad area. I mean, at the time, 3028 North Gale was the house. It was the worst of the worst. Worst areas. Oh, I know the
[00:09:19] Speaker B: area well.
[00:09:20] Speaker C: Worst of the worst.
[00:09:21] Speaker B: He ain't lying.
[00:09:22] Speaker C: And it was a great little house. It was one of those shotgun Sears catalog houses that's just perfect for a landlord because they're really simply built. They're a shotgun layout, three bedroom, two bath. They're everything you want as a landlord. Simply built, low deferred maintenance, but in a terrible, terrible area.
So I bought this house and I thought, well, right away I need to get this thing airtight. So I went and had my contractors throw a roof, new windows and doors on it right away just to get the exterior done.
And the day that they finished with all these new doors and windows, the next morning I went out there to check their work and someone in the night had come and sawzalled out every single door and every single brand new window. They didn't unscrew the windows and remove them? No. They sawzawed through the frame of the home. They totaled the home. The home was totaled. Not only did I lose all my doors and windows, but they totaled the frame of the house.
The repair. I still to this day don't even know what the repair would be. You remove all the siding, all the drywall, and rebuild the structure.
[00:10:31] Speaker B: Oh yeah. And there's gonna be people saying, oh yeah, you're full of crap. It totaled the home.
[00:10:34] Speaker C: No,
[00:10:35] Speaker B: you know, people have to understand, you know, we're going back a certain amount of time, and there were a lot of really, really bad houses available at this time. You know, that house was probably worth 20,
[00:10:47] Speaker C: right?
[00:10:47] Speaker B: You know, it wasn't worth that much.
[00:10:49] Speaker C: I actually remember how much my insurance check was. It was 80% of the appraised value that they appraised, and my check was 58,000. I was shocked. I got an 80,000 doll appraisal.
[00:11:00] Speaker B: Oh, I'm shocked that you did, too.
[00:11:01] Speaker C: Yeah, I was shocked, shocked. So I think I only paid $10,000 for the house.
It's. But again, totaled the house.
And one of the many reasons that we get good insurance on all of our properties, we rarely use it. You know, we don't turn in small claims, but we've had. We've had a few that we've had to turn in. That one was my first claim I ever had to turn in. We had one that a pipe broke in the winter, and it turned into. It looked like a winter wonderland. Icicles hanging from the ceilings, a sheet of ice down the driveway into the street.
[00:11:39] Speaker B: Yeah, that's a. That's a. That's a good, quick, you know, horror story lesson that, you know, if you're in an area where you have, you know, really cold temperatures, you got to be really careful, you know, in the wintertime, making sure, you know, your utilities are on.
You know, making sure maybe if the house isn't properly insulated, you know, you have a good drip on the kitchen, you know, sink to keep water running through the house.
But, you know, another lesson I think that you could take from, you know, your windows being saw zawed out is location, location, location,
[00:12:14] Speaker C: for sure. You never, just because something looks great on paper and just because you think it's a good deal, if the property is not a good property in a good area, good area, you're toast. It just doesn't work. And you can get lucky and an area can turn around and you survive the bad times and suddenly that area has become, you know, worth money now, and people want to live there, but it's not worth that risk. We never buy in speculative areas, and you've got to buy good properties in good area.
[00:12:47] Speaker B: I was thinking of something else, and it's not super applicable to most situations, but I think it makes for a good story on Halloween, and we're talking Halloween horror stories.
We rented out to a reality television star, and we actually didn't really know the show, but it was an MTV show. And anyhow, MTV paid the rent initially. And I don't know, when the show was no longer on, then Rent did not come in from MTV anymore, and we were going through collection efforts and ended up having to file eviction. And then this reality star like People magazine and Us Weekly and all of these people picked up on it, you know, after we filed for eviction and we had People, you know, magazine and Us Weekly calling the office, we had to call in a special, you know, meeting for all of our employees to say, hey, look, if People magazine, Us Weekly, or any other publication is contacting you regarding this eviction, you know, do not talk to them.
But then, anyhow, she started, you know, bashing our management company publicly. And I remember we learned about that whenever we were at a speaking event out on the west coast. And when we were in the back of the room, not during a time that we were speaking, we actually pulled up footage on MTV to familiarize ourselves with this show because we didn't really know the show that well.
And we found a clip of a dog in the house that was not on the lease. There were several dogs in this. In this clip.
But anyhow, one dog in particular was peeing on one of the producers during. During the show.
And anyhow, all of this ended up coming out. We had to, you know, really defend ourselves in the court of public opinion.
We found out that not many people really like this reality star. So, like, we were kind of the heroes in it. But I don't know, the, the. The lesson learned is, you know, being out of the public spotlight is a good thing when it comes to real estate investing,
[00:15:17] Speaker C: for sure. And speaking of the spotlight, I've got one last story that is really interesting because I bought what I thought was a beautiful home, heck of a deal that ended up being nothing but a street light. That's right, a genuine streetlight. That's all I owned. Tax sale. I used to buy a lot of properties at the tax sale. And if you do not do your research really, really heavily. There is a lot of ways to be burned, and sometimes parcel IDs don't match up with addresses. And in this case, I got very lucky because the sale got set aside because there was a mistake on the city side or on the. On the government side at the auction with them not matching up the parcel. But I spent, I think it was $75,000 and ended up with only owning a streetlight. It took me about six months to seven months with my attorney having to fight it to get my money back.
But that is a nightmare when you think you buy a house and you end up with nothing but the little street light. And the neighborhood, the way it was built, there wasn't an hoa. So what the developer did at the end was just literally the few common areas, like the street light at the entrance, they had parceled out. And normally those would go into the HOA as common ground. But because they didn't have an hoa, they had snuck that into its own parcel, and it didn't get its own parcel id. It shared a parcel ID with the parcel of the house that was next to it. And the house had nothing to do with it. So it ended up being. Luckily we got to undo it, because the government shouldn't have given two different parcels the same parcel ID when they're not, you know, when they're not the same or connected. So it took a lot of court fighting and months and months.
[00:17:08] Speaker B: Well, I think the lesson, you know, to, To. To everyone out there, always protect your bottom line and always do your due diligence. You know, in the world of real estate investing, we're not talking about Jason and Freddy Krueger and Michael Myers. We're talking about tenants that are out to get you. We're talking about weird processes that you've got to do your due diligence on. You always have to keep your ear down to the ground.
[00:17:37] Speaker C: That's right. Well, that's it for now. We hope that you have a wonderful Halloween out there and
[00:17:43] Speaker B: safe Halloween.
[00:17:44] Speaker C: Safe Halloween. And we hope you don't have any horror stories of your own. Happy investing.
[00:17:50] Speaker B: Happy Halloween.
