We had 2 investment properties which were in beyond disarray and to top it off one with squatters. We had found a contractor in the area who was confident that he could get both rehabbed and rent ready ASAP. We met with him and his partners and toured the properties (stepped through trash is more like it). The squatters had not, in fact, left as they said they would. Between he and I, some words were exchanged and that weekend they were finally gone (one hurdle over)! The contractor gave us a quote for the work that would have to be done and said to write the check to his partner so we could get it started. Again, the naïve, trusting newbie investors we were thanked him and handed over a check. A day later a large amount of the trash in "squatter house" was gone and demo on the other property was underway. Another hurdle came as we started sorting through the mail that had been overflowing from the mailboxes. We found bill after bill and realized that taxes, water, sewer, etc had not been paid in almost a YEAR. Okay... several thousand dollars and MANY phone calls later we were in the clear (another lesson learned). Meanwhile Michael and I were already searching for our next deal. The one and only property we have ever bought on the MLS was found down the street in the same town. We negotiated the duplex down to $20k (did a walk-through w/the realtor this time) and set up a closing date. Meanwhile things with house #1 and #2 seemed to be going slowly. The contractor was finding new problems and asking for more money daily. We told him we had already given him plenty for little progress. That's when the calls from us started going to voicemail.
We were on our way to closing on property #3 and #4 and had just met with a banker to establish a hopefully relationship. The high of finding a local bank who was investor friendly came crashing down when the contractor's partner called us saying that the partner hadn't been reached in days and had left town. The gut wrenching realization that we had just lost THOUSANDS of dollars to someone who stole our money and skipped town sunk in. And here we were closing on #3 and #4 that same day (pic below). Another make or break moment.
4 properties needing rehab, losing money holding each day...
Lesson of the day: This seems obvious when typed in black & white, but from others I have spoke to, we are not the only ones who were burned by being the naïve, trusting investors. Do NOT pay contractors up front! We have since given small amounts up front to people we now have worked with several times as they need to buy things like permits up front, but never large amounts. We have a HomeDepot Pro account now & know exactly what is spent daily on our projects which have to be approved of during check out. Know your business!