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I didn’t do enough due diligence. I didn’t focus on the details.
My wife and I decided to get into real estate. I bought a mobile home park. And the day that I closed on it the water went out in the whole park. And they got my home phone number. And it ends up that I didn’t do enough due diligence. It wound up being low-income, weekly rentals.
And here I am: I close [the deal] on a Friday, and Friday night [residents] are all drunk and calling me, telling me they’re going to come over to my house and shower and everything else. They were calling me all night, and my wife was scared. And on top of that, I’d just cleared out my account to buy this mobile home park, but now on my first day, I have a $2,500 pump replacement. And I have to dig up that money to get the water back. And I’m like, “What did I just do?”
So I go over the next day and find the ones who were calling me, and at 6 o’clock in the morning, I start pounding on their doors. “You want to talk about the water now?”
And it turned out that the treatment plant wasn’t big enough for the park, and there were drain field issues – I just constantly had issues. I had a woman who wasn’t paying her rent. And I’m like, “Then you got to go.” And she says, “I’m not allowed to go,” and she points to her ankle and [explains] the judge says she can’t leave this place.
But I stayed with it. I had the place for four years, and I had to deal with all these weekly rentals. ... It was a mess.
Now, I put myself in the owner’s shoes, way before I ever buy it.
Here’s what I would tell my sons: The devil is in the details.
That style of park is what I didn’t want – that constant, intensive management. What I wanted was a mobile home park where they own the trailers and they just pay you lot rental. When you just collect lot rental, they take care of their own homes and they own their own homes. But when [I learned] they were weekly, I was like, “Oh this is a good area. It’ll be no big deal.”
Now, I put myself in the owner’s shoes, way before I ever buy it, because I want to see what it’s going to be like. How management-intensive is it going to be? Once my inspector does an inspection, I do it again and again. I cross every "t" and dot every "i" because I just don’t want to be back in that position again.
So the properties that I have bought since then, I have them inspected. I’ve interviewed the tenants, made sure I go through it with the maintenance people, with the management company, with everyone, and with everything. To try and limit surprises.
I’ve done renovations since then and you expect surprises then. I always budget using a "surprise factor." And that’s one of the lessons, too. You have to be prepared for surprises and then adjust accordingly.
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Photo courtesy of John Hussey