I’ve been writing over the last several months about my neighbors who moved out, rented their house out, evicted their tenants, and now have their house for sale.  They are new to real estate investing, and went into it without any education and a fear of failure. 

One could say that what you focus on expands, and they have had some degree of failure with their first investing experience.  Their tenants trashed their house, stole their refrigerator on their way out, and still owe them thousands of dollars.  They chose a bad property management company without calling references or doing any research.  The company didn’t do them any favors in selecting a screened tenant or in handling the situation once problems began. 

These very tenants moved into the rental house right next door to the house they were evicted from.  I watched them move and saw them take the refrigerator from one house to the next.  This week the tenants are being evicted from the house next door.  I would imagine they simply repeated what they did to my neighbors.  They probably paid their security deposit and first month’s rent in order to get in, and then didn’t pay anything further.  They’ll lose their deposit due to owed rent and so essentially lived in the house for three months for the price of two. 

If you don’t mind moving around every few months, this is a technique to get 30% off of rent for life!  And this is worst case scenario because many investors and property management companies don’t act quickly to get non-paying tenants out (my neighbors and their company waited a while).  Professional tenants could live free for some time before having to move on.

The owners of this second house apparently did not do tenant screening when renting to these pros.  If they would have called the landlord reference, they would have learned what was happening with the eviction and could have saved themselves some money and hassle.  This was an amateur move on their part, and once in a while you can get lucky and come out ok, but they were unfortunately up against professional tenants.  These tenants have perfected their system and can now move on to the next amateur investor, of which there are plenty.

Meanwhile my neighbors’ house sits empty with a for sale sign out front.  They were so disenchanted with their rental experience that they want no part of it anymore.  They want to sell and be done with it.  The only problem is that the market isn’t moving right now.  Not unless you’re having a fire sale.  Their house will sit there for sale for some time.  Money continues to flow out every month as they make their mortgage payment.

So it strikes me as interesting that we have the amateurs vs. the pros here.  You’d think the investors would be the pros.  They would have done their research, eventually they would have plenty of experience, and they would have learned how to prevent and solve issues.  They would be investing as a business activity, with the financial aspect being a key operating component.  The objective is, of course, to make a profit. 

The tenants you would think would be on the amateur side of the continuum.  They presumably would have a limited number of rental experiences under their belt and would not be predisposed to “working the system.”  In this case, as is possible with any combination of investor and tenant at any time, the roles are reversed.  Interesting.