Wednesday, September 26, 2007

Looks Nice, Doesn't It?

Doesn't this apartment complex in Ohio look nice?

It did to us. It was almost new. We performed our due diligence. Reviewed the performance history with a fine-tooth comb. Looked at the business tax records of the owner. We even hired a forensic inspector from Kentucky to give it a thorough go over. There were two assumable two loans on it---one at 5.5% and the other at 5.9%. Everything looked good. The owner was asking $3.2M, reduced it to $3.1M and we bought it for $2.95M. The owner insisted that we leave the husband and wife "management" team in place because they had been keeping it 100% occupied, so we did--against our better judgement. They were not professionals. Yet, we were excited and this was supposed to give us a small income ($4,000/month) while we partially rehabbed the other complex we bought (that's another post), which we expected would give us a much larger return.

Then the first month after we closed, management collected only about 75% of the rent from the existing tenants. Wait a dog-gone minute! "What's going on?" we asked. They said that we should understand that not everyone is able to pay their rent every month and that we should just cut them a break. Uh--NOT!!

After three months, we fired them. That's when the woman told us that the prior owner only required them to collect enough to pay the mortgage. Well, we wondered, then where did those fantastic numbers disclosed in the due diligence come from? Hmmm.

We hired a new professional management company, which came with glowing references. The man who runs the company is very nice and knows the rental market. We worked with him for one year and nine months--and the experience of having this complex was a nightmare. Again, all details in future posts. I'm sorry to do that, but, if I tell you everything now 1) I'll have to type for 48 hours straight and 2) it'll be a case of too much information and no one will learn anything.

Anyway, I tell you all of this because, after we sold the apartment complex on August 31, 2007, for $2,670,000 (yes, do the math by subtracting this number from the one above, then get the tissue out and start bawling---that's only the loss on the sale and doesn't include the tons of money that we threw into it trying to make it work), our now ex-PM sent us this shirt:

You can imagine our joy at receiving this shirt! It's easy for the PM to laugh in relief at getting rid of our property. After all, it wasn't his children's college funds that were lost. He didn't face the financial strain and stress from having a property manager who spent money like it was growing on trees and couldn't seem to place tenants who could actually pay. By the way, did you know that Ohio has a law that prohibits evictions in December? Oh, you didn't? Well, they must have a universal class in Ohio that is required to be taken prior to renting an apartment because all of our tenants knew. Do I detect some bitterness? No, not me--never.

Well, as much as we love this shirt and hate to part with it--and we do, really--we are going to have to auction it off to try to compensate for some of the money that was lost to us under this PM's watch. So, as soon as I can figure out how to do it, I'm slapping this puppy on E-bay. I don't want all of you to bid at once because I don't want E-bay's system to crash, so just one at a time, please.

Believe it or not, this shirt has never been worn. No, not once. I wouldn't let anyone in the house wear it because it is such a precious possession of ours. However, noticing the cheap, itchy material of which it is made, I did throw it in the wash once to soften it up. Hence, the faded, wrinkled look.

Ok, you eager beavers, I will post a link to the E-bay auction as soon as I have it up and running. I plan to model the shirt myself to give you something to really laugh at.