From Rental to Self Finance/From Bad to Worse

The strange thing about the Feds busting my rental property was that I never heard anything further except for a phone message saying "We'll be out by midnight" from the tenant and a visit to the local police station where the dispatcher had no record of any disturbance.  Shrugging, he said "Sometimes the Feds don't fill us in."  I asked the dispatcher to have a car patrol the area.  He said ok and I went to see what kind of mess I had left over.  But these people seemed to be fairly neat drug dealers so a few garbage bags of trash, switch over the utitlies and I was back in business.

The casual reader is probably saying "Didn't this idiot check these people out?"  Yes, but not completely, obviously, and, as I have found out, I am a sucker for a sob story--not very typical for an ex-finance guy but true just the same.  I had checked out the tenant through her employer (probably in on the deal) and she had paid her deposit of two months rent in cash (and now I know where that came from.)

Anyway, back in business, or actually wanting to get out of the business.  I decided to sell the property and reverted to MBA ways--clean up, call four realtors, interview the realtors, pick one and put the property on the market.  So I interviewed the realtors and picked one on the basis of his attention to what properties in the area SOLD for, not what they were LISTED for.  No dream prices or promises.

And the property sat.  In retrospect I don't think the guy did a very good marketing job and after about two months he called and said "How about owner finance?"  Hmmm.  The deal was get full price in return for no downpayment (alarm bells should be going off right about now) and carry the mortgage at 8% for 20 years.  The appeal here is three fold.  One, you get full price.  Two, you get, or think you will get, a regular income stream.  Three, this is, at least the way I read the tax code, an installment sale so the gain is spread over the life of the loan.  Pretty sweet deal. 

And I would be helping out a young, struggling couple.  Freddie and Celia were second generation Hispanics with two young daughters.  And they had references, or so I thought.  Freddie's father had worked for the realtor doing painting for the last twenty years and Freddie was following in old dad's footsteps.  My place in heaven was assured.

At this point you have to remember the part about being a sucker for sob stories plus the monthly 8% payments and the tax deferral.  I bit.

As they say on Wall Street, bears and bulls make money but pigs get eaten.  Next--Life with Freddie and Celia.