Robber Barons: A Realtor With a Three-Way Conflict
Things get complicated when you add more bosses
For some reason, we decided more would be better.
We knew we could manage another rental, but we weren’t sure what to look for next.
I started scouring the papers for real estate deals. When we saw a listing in our price range (low), the one question we asked was:
‘Does it cash flow?’
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Financing the houses was a bit of a juggling act. We were taking out a loan on one rental house to put as a down payment on the next one.
We were creating our very own pyramid scheme.
The down payment had to be high enough to keep the mortgage low so we could keep the rents low.
We had to pay taxes and insurance and wanted a little bit of money left over each month to build a cushion, just in case. We weren’t trying to live on the income, we just wanted something where the money worked out and people would have a place to live.
Our goal was multiple streams of income
I had a great conversation with an investor friend. He told us to look at multi-unit properties. We could get two places for less than twice the cost of one.
A duplex would give us two sets of renters. “Double the trouble,” I thought.
Thinking in higher numbers took a bit of getting used to, but I could see the logic in the advice.
Expanding on that idea, we found a fourplex that looked interesting. Talk about taking on more risk - it was four times more.
Call us crazy, but we were on a roll.
The fourplex was in a complex that had several for sale. It was going to cost a ton more than a single home so we had to figure out the money first.
The developer had built them and ran them as rentals for the first few years. Then he decided to get out of the landlord business. There were some big-ticket maintenance items coming up for the units, so he wanted to get rid of them.
He’d done the minimum maintenance-wise over the years. All the buildings needed a new roof, but the deal included a large fund to take care of replacing them so we thought it would be ok.
We put in an offer on a building in the back of the complex, I liked it the best because of the location. It was away from the street and backed onto a park.
Then we met the shady realtor
He had a serious conflict of interest. He represented the seller, he represented all of the buyers AND he had put in an offer as well.
Talk about a three way conflict.
Of course, he took the best unit for himself. He changed the deals so he got the fourplex we wanted. Our offer was shifted to another building in the complex and we had to swallow our frustration and accept it or pull the offer entirely. When the deal closed, we had a unit on a busy street because he’d pulled the switcheroo.
We were happy to discover that our tenants were pretty good ones, responsible and they always paid on time. It was a lucky break.
Management by committee
When the developer owned all the units, he made all the decisions himself. Now that there were 4 different owners involved, we had to work together. Easy to say. Harder to actually do.
We were in a new relationship with several strangers.
There was no strata council, so we had to create one from scratch. That meant meetings, maintenance plans, financials, contingency funds, and best of all, management by committee.
I volunteered to be treasurer, mainly because I knew that if I did the books, I could trust that they were right. I didn’t trust the shady realtor guy to take care of the money.
The other members of the strata were:
- an owner who worked hard but was always stressed about everything,
- two absentee landlords who wouldn’t answer emails or who would send emails telling us what we ‘should’ be doing for them, and
- the shady realtor who couldn’t keep his private and client business separate.
When you’re a landlord in a strata complex, sometimes the biggest problems are the other owners in the group.
Then came the mold attack
Someone discovered mold in the attic of one of their units. Sure enough, it was in all of them. It had to be taken care of. Our shady realtor stepped in and hired a family member to fix it on the cheap.
Other problems came up
The quote to do the roofing was higher than the money in the fund. We could see the writing on the wall. The units were going to cost us more than the rents we were getting.
We were tired of being told what to do by the other owners, especially the lazy ones.
And then there was the shady realtor guy. We couldn’t trust him at all.
We held the building for a year and then we decided to sell.
We sold each unit separately
A golden rule in business is when you divide something into smaller pieces and sell them individually, you can charge more. Smaller amounts cost more than larger amounts.
People do it all the time. The fourplex had four separate strata titles so we could split the building up.
It’s the opposite of buying bulk.
We listed and sold all four units separately. There was a profit, so there were taxes to be paid, but all in all, we made a bit of money on it.
The best thing about selling was getting away from the shady realtor guy.
Lesson learned: ‘Management by committee’ was such a frustrating experience I swore to never get involved with a strata council again.
Next up: We ‘accidentally’ become slumlords of a crack house
This is a fictional series that explores the challenges of being a landlord. It also reveals the idiosyncrasies of various tenants. Some of the scenes are based on true experiences.
Paid subscribers can access the entire archive of my stories from the beginning, along with my poetry and every article I’ve ever written here. If you aren’t a paid subscriber, you can access the archive for free with a 7-day trial.