Over many years I considered investing in real estate. Having lived in the northeast most of my life, investing in real estate would have been prohibitively expensive. When I moved to Florida in 1994, this changed. Real estate in the Gainesville area was far less expensive than real estate anywhere I had lived earlier.
Before buying my first investment property I made a point of befriending a fellow who owned hundreds of houses and apartments. We met at the local Habitat for Humanity thrift store and recycling center. He was a frequent customer because he was able to buy materials he needed at a fraction of the prices of new materials. He was an almost daily customer, and I was a frequent volunteer. After a few weeks I told him that I was thinking about buying an investment property and asked him if I could tag along on his travels.
Over a period of several weeks, I rode shotgun as he went about his day. Sometimes he was meeting a prospective tenant or collecting rent from a tenant. Almost every day involved fixing a leaking or backed up toilet or replacing a faulty electrical switch or outlet.
All of these experiences were enlightening for me. I had some very biased opinions of landlords and actually seeing a landlord as responsive as he was, was eye opening.
Buying My First Property
My first go at buying an investment property was a failure. I was going to buy a two family house from my friend. The house was one of about twenty houses, that my friend had purchased because the new owner of the land the houses were on, was going to be developed into one of the largest apartment developments in the area. As such, he had only a few weeks left to remove the houses. All of the duplexes were in very rough shape. The one I was buying was the best of the lot but the plumbing and electrical systems both needed work, though the house was certainly structurally sound.
We agreed on a purchase price including the cost of delivering the duplex to a piece of property I owned that was about 20 miles away. The sale agreement was contingent on my being able to obtain permission from the city officials. I didn’t anticipate a problem since there were a lot of distressed properties from where the house was. I was going to pay $5,000, most of which my friend would cover in return for a mortgage on my property and the duplex. I anticipated that I could do the repairs for only a few thousand more.
Not Buying My First Property
The first meeting with the City code enforcement official went very well. I told him what I wanted to do and he said he didn’t see any problem with my doing it. A couple of days later he called me and told me that I would have to show proof that the property repairs would actually be completed. That was just the beginning. Unfortunately, my next door neighbor was the Mayor and the real problem was not the code enforcement official. As I later found out the Mayor apparently told the code enforcement person that he was not to issue the needed permits under any condition.
Not knowing that, I proceeded with my plans, facing one delay after another. The code enforcement official even traveled the 20 miles to look at the duplex one day. He finally said that he was concerned that the repairs would not be completed and wanted a surety bond, before he would issue the necessary permits. My friend even said he would personally guarantee that the project was completed in a timely manner. Finally, the code enforcement official stated that he could not issue a permit without a clear indication of when the restoration would be completed and the presentation of a surety bond.
Fortunately, this all took place over about 10 days and my friend let me out of the contract, though I did incur a few hundred dollars in costs for fees for some boilerplate architectural drawings for putting the house on my lot. The architectural plans were the same for all the duplexes because they all had the same footprint. But I was so relieved not to get stuck with the duplex with no place to move it that the cost of the architectural plans was a relief.
What I learned And What I Did Next
The experience took a fair amount of time and energy, a few hundred dollars in expenses and a little injured pride, but it was a valuable lesson. For one thing, I learned not to assume that I would be allowed to do what I wanted with my own property. I also learned that politicians can be very manipulative. The most important thing I learned was that it was possible to buy a house from someone who would finance it for you. I had, of course, heard stories of people who did that.
Less than a year later I bought a house from a different person, and it went very smoothly. I was able to negotiate a deal where I would pay 10% down and the owner gave me a mortgage for the balance. I was surprised at how easy it was to negotiate that deal, and a year later I made a deal to buy three houses with the same person. I would not have been able to do that except for the things I learned during the first failed attempt.