THE WIDE WEIRD WORLD OF REAL ESTATE INVESTING

Good day faithful readers. I hope each of you enjoyed a wonderful Thanksgiving holiday. I know my online bookie is thankful that I bet on Detroit and Las Vegas. He would have been even more thankful had I bet on New Orleans, but c’mon, did I honestly think the Bills couldn’t cover a four and a half point spread against the Saints? This year I had the privilege/challenge of cooking my first ever Thanksgiving turkey, something I have managed to avoid for 63 years. Neither my wife nor I have much in the way of an extended family so Thanksgiving is usually just the two of us. One of our many good friends usually invites us to spend Thanksgiving with them and their families. I don’t know if that is out of pity or a genuine desire to share the holiday, but in either case, I’ll take it. It makes for a nice day with friends, which is what I am always thankful for. Of course, we bring something to contribute to the feast, but we don’t have to worry about what to do with 5 pounds of leftover turkey, an entire casserole dish filled with candied yams with a crunchy marshmallow crust, half a bowl of hard mashed potatoes, a bowl of gravy with a skin on it so thick you could walk across it, and a platter containing jellied cranberry sauce that is now becoming cranberry soup. I honestly don’t remember the last time it was just the two of us for Thanksgiving dinner. Of course, my wife does most of the cooking, even if it is just our small contribution to the feast. I might provide an appetizer or my famous chocolate bourbon pecan pie. But my main job on Thanksgiving Day is to start pulling out all the Christmas decorations. This year, not only did we not get the usual invitation, but my wife had to work that day. She’s a nurse. Shit happens! Shit doesn’t stop happening because it’s a holiday! Now I don’t want to brag, but I’m a pretty good cook. I make a mean prime rib and people love my deep pit ribs. And if you like your chili hot, my house is the place to be. How hard could it be to cook a turkey? Evidently, not very. I decided to do it a little bit different this year and found a recipe to cook it on my Traeger. Watched a YouTube video and just followed the steps. For a first attempt, the turkey was surprisingly good. Of course, it’s just the two of us and it is very difficult to cook a major meal for just two people. The smallest turkey I could find was 13 pounds. We also had stuffing, candied yams, mashed potatoes, gravy, steamed broccoli and string beans, biscuits, corn, cranberry sauce, applesauce, blueberry pie, bread pudding, and a whoooole lot of leftovers. Being an adult means you can watch TV WHILE you eat Thanksgiving dinner. So, we watched Miracle on 34th St. while we ate and let the tryptophan do its worst. I hope your Thanksgiving was just as rewarding.

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On to business. Weird things happen when you own real estate. One week you’re doing a drive by of a rental property you own, and everything looks fine. Two weeks later you’re doing a drive by of the same property and suddenly it is sporting solar panels. Now where did they come from?

Kevin and I own a couple of group homes. They provide housing for mentally impaired individuals and people coming out of rehab. Nothing major, mind you. These guys have problems like ADD or OCD, a veritable alphabet of mental disorders, but they are mostly harmless and simply need a place to stay with supervision. We have set it up where we are strictly the landlords collecting rent. We work with a husband and wife who are licensed and work with the county and the mental health department placing these individuals. The county provides money for their room and a food allowance. That’s good news for us as the rent was continually being paid in spite of this whole COVID boondoggle. At least it was in theory. There were a few months last summer where they were coming up short on the rent. This, in spite of the fact they had nearly full occupancy. We went over the books with (not her real name) Anita and she should have easily been able to cover the rent. We just could not figure out what was happening to the money. These homes are pretty profitable so we told them we would work with them on it.

That’s when the excrement hit the oscillating air conditioner. It started with Anita’s husband, Dick Wadd (not his real name but a close approximation), leaving her for a hooker he had met. How exactly does one just meet a hooker anyway? I mean, I know where they hang out. If I want to meet a hooker I would have to hang out in a part of town where I have no business hanging out. Perhaps the phrase, hanging out, is the wrong one to use in this context. Whatever! DW thought this hooker had more to offer him than did Anita. As for the hooker, apparently, DW was the man of her dreams who was going to take her away from this sordid life of prostitution. Mind you, she’s putting her faith in the hands of a guy who has spent most of his adult life in prison, primarily on drug charges. So, neither of these people had all the chocolate chips on their cookie. Good hearted Anita was helping DW to get his life straightened out, and it seemed to be working. For a while anyway. Trusting the management of these group homes to them was our way of helping both Anita and DW forge their own destiny. If you read my blogs, you know that there is no such thing as a free lunch. But this was pretty darn close.

DW takes up with this hooker, leaving Anita in the lurch. Anita responds by broadcasting all over social media what her husband has done to her and to pray for him. Probably not the best way to handle it, but the woman was hurting so the judges will allow it. Under the circumstances, being shamed on social media by the woman you dumped was probably the least of DW’s worries. It seems that DW felt the need to prove to this new life partner that he would be able to provide for her. So, on the way out of town, he robbed not one, not two, but three banks. If that doesn’t say, I love you, then I don’t know what does! And the one positive about COVID, for the criminal element, nobody is suspicious when you walk into a bank wearing a mask. DW decided now would be a good time to leave the state, so the two of them proceeded to drive north. When they arrived at the Oregon border the authorities were waiting for them with a new wardrobe and a snappy pair of bracelets.

Back to the group home. This is a story with its roots in real estate, not about some Bonnie and Clyde wannabes, as interesting as that little divergence was. Some people just like a lot of drama in their lives. When we originally bought the property Kevin and I had discussed installing solar. We had even contacted a Rep with Fusion Energy to get some quotes. Eventually, I got an upgrade on the solar system at my house through them. But, as for the group homes, we decided to not install solar.

This is old news. We bought the house in the fall of 2019 and by early 2020 we had decided to pass on the solar. We have been running the house as a group home for a little over two years now. There are pluses and minuses to the group home concept. Among the pluses is the fact that we can get 10% to 15% more in rent than we could were it a straight rental. Since the rent money comes through the county, our rental income each month is practically guaranteed, even when there is a COVID pandemic. On the minus side, with eight or nine people living in the house, there’s a lot more wear and tear. We can hold Anita responsible for most of the minor repair cost, especially if one of her charges willfully breaks stuff. Like the guy who intentionally broke the window in the laundry room. And the good news here is the county will take responsibility and reimburse her for willful damage. Still, with so many people using the plumbing, we had to expand the septic system by adding a second leech line. That set us back $7,000. We also have to replace the carpeting more frequently. Except next time, we will install vinyl wood flooring. It’s a bit more expensive in the short term, but we won’t have to replace it two or three years down the road. We own this property outright so, with Anita staying on top of the minor things, our only expenses each month are insurance and a little money set aside for property taxes.

I try to drive by each of the properties a couple times a month just to make sure everything is still nailed down. I’ll usually check in with Anita’s on-site manager to see if there is anything that needs to be repaired or replaced. A couple of months ago I was doing my usual drive by. This was shortly after DW was fitted for his new fall wardrobe. I hear orange is very IN this year. I was parked in my truck, engine idling, next to the garage when Kevin called me. As we were talking, I leaned back in my seat, my gaze naturally wandering upward. That’s when I noticed something slanting down from the roof of the garage. Curious as to what it was, I put my truck into gear and let it roll forward as I was talking to Kevin. When I did this the main house came into view and I noted there are solar panels mounted on the roof. Additional panels were mounted on the garage, and this is what I had noticed sloping down off the roof in the first place.

“Hey Kevin, did we change our mind and get solar at Terrace Way?”

“No! Not that I am aware of.”

“Well, I’m here at Terrace Way now and I’m looking at the roof of the house and it has at least 15 solar panels mounted on it.”

“What! Are you sure?”

“They sure look like solar panels to me.” I took a couple of quick pictures and texted them over to him.

“I didn’t OK this. Did you?” he said.

“No! That’s why I’m asking you. Now, an even bigger question is, how did somebody install solar panels onto our rental house without getting consent from either of the owners?”

“Í DON’T KNOW HOW THEY DID THAT!”

“Calm down Kevin. The question was rhetorical. I know you are as much in the dark as I am. I’ll call Anita and see if she knows anything about this.”

All I got from Anita was this was something DW had cooked up. She wasn’t clear on the details and, while the solar had been installed, it had not been turned on. I talked to one of the guys at the house. These guys are there all day long so I figured they must know something. The story I got was that DW had set this up through PG&E. I have a good friend who used to be a sales Rep for solar and he told me that this is a half-truth. It was one of the techniques he was taught (but never used because of his personal convictions…he didn’t like to mislead a client) when he was learning to sell solar. Tell the client that the solar installation is done in accordance with or is a PG&E program. It lends a certain amount of validity and It’s kind of true, since PG&E does have to sign off on any solar installation. But there are no solar programs where PG&E is directly involved.

At this point we have solar panels installed on the roof, but it seems that no one knows who did the installation. The thing about solar is, in order to install it legally, it has to be permitted. Kevin went down to the building department and had the permits pulled. From that we got the name of the solar company that did the installation. Next Kevin calls this outfit to find out what is going on. They told him that they were given the name and number of a person they should contact when the system was ready to be turned on. Trouble is, they had not been able to reach this person. To make things even more mysterious, nobody on our side has ever heard of this person. As far as we can tell this is a persona non grata. He didn’t exist except as a name on a piece of paper. And the Rep that negotiated the original deal is no longer with the company. Curiouser and curiouser. Kevin explained that these panels had been installed without the consent of either of the owners. He was told they would hand this over to their legal department who would get back to Kevin in a few days. Two weeks later and he still hadn’t heard from them.

It has been my experience that if you are having trouble getting someone to respond to you, either by phone or email or snail mail, you can send them a letter with five magic words at the top of the letterhead. Include those words and you will get a response 99.9% of the time. And those five simple words are “From the legal firm of.” So, Kevin decided to escalate the situation. First, he spoke with one of the partners at the legal firm where his wife works. He explained the situation and the attorney said that we definitely have a case. Together they drafted a letter, including the five magic words, and sent it to the company. In the letter, Kevin explained that they had two options. Option one—They could simply turn on the solar system and sign it over to us, free and clear. Option 2—They could remove the solar system AND replace the entire roof on the property since the roof was brand new when they installed the system. And in either case they’re paying for our attorney fees. Wouldn’t you know it! They are part of that 0.1%. Complete ghosting. Haven’t heard a word out of them.

Presently, we are in complete limbo on this. Looks like we will have to go defcon 4 on their asses and take these guys to court. In the meantime, we had been thinking about selling the house early in 2022 but we may have to wait awhile. Until we get this solar situation resolved, we legally can’t sell the house. So, we have a house we own free and clear and are collecting $2350 a month rent. Our debt each month is about $150, which gives us a positive cashflow of $2200 a month. I guess there are worse things to suffer in life.

While all this is going down, we did some further investigating and some speculating. True to his name, we know that DW is not a very nice, nor a very smart person. The house on Terrace Way sits on a double sized lot and one of the scams DW pulled was he allowed some guy to park his fifth wheel on the second lot and charged him $400 a month to park it there. That lasted about two months before we got wind of the situation. This was right after DW realized he could make money a lot faster by robbing banks. DW was also in charge of collecting the rent money. The county supplied each of the men with a check for expenses. The guys would cash the check and then pay DW with a certified check or cash. We strongly suspect, knowing his history and modus operandi, that anytime he got cash it never found its way into the bank account but, instead, went straight to the bottom of the pocket in his jeans. This explains why they were having trouble paying the rent this past summer. Finally, we suspect he and the sales Rep came up with some sort of a scam and got a kickback on the installation. Not quite sure how they did that since nobody put any money up for the installation but there is also that mysterious John Doe that nobody ever heard of. Maybe these guys used John Doe to arrange financing and, by some means, diverted the money to them. There may be a bank out there right now looking for John Doe because he hasn’t made a single payment on his new solar system. Does that mean that, at some point, they attempt to put a lien on the property, further muddying the waters? Perhaps DW somehow convinced this idiot to split his commission if they (illegally) had the solar installed. Right now a lot of questions with precious few answers.

This is one of the more bizarre things that we have seen as property owners. Talk to any long-time property owner and they will have similar, and possibly even more bizarre, stories to tell. It’s really strange to think about how all this could have happened. It starts with DW and his greed. Knowing his background, I’m sure he did this with an angle in mind where he could make some profit. I seriously doubt he would have given it a second thought had there been no money in it for him. The larger question is, was he manipulated by a shady sales Rep or did these two come together and realize they were kindred spirits? They had something in common, namely, a willingness to bend and even break the law in order to make a fast buck. Then, how did they get the installer to sign off on it? This is a pretty big company and I doubt that they intentionally tried to cheat anyone. It’s simply a matter that their system of checks and balances was unable to catch this bit of fraud. Perhaps they should take a closer look at how they vet these various solar projects to make sure this can’t happen again. And if there was financing involved, and I suspect there may have been, how were they able to slide this past the bank? It seems like this proverbial hot potato was dropped at every juncture. In a way, it’s really very sad that this happened. This is just one example of a myriad number and type of fraud going on out there. The amount and complexity of fraud is constantly growing to the point that law enforcement doesn’t have the resources to keep up with it. I am constantly assailed with emails and texts. I have an inheritance from a relative I never heard of! I won a sweepstakes I never entered! I have unclaimed funds from an account I never opened! Somebody just wants to give me money out of the goodness of their hearts! I’ve had people contact me and try to blackmail me…we will tell everyone about that website you logged onto. Cybercrime is real and it is here to stay. Or you can just rob a bank, or three.

Well, I could go on, but this blog is getting a bit wordy. I will close by saying there is one other thing that I am very thankful for. I’m thankful to anybody that is taking the time out of their day to read my blog. I hope you learn something, or you get a chuckle, or it gives you incentive to try something new. I have been doing this for about six months now and I think I have gotten better with time. I am looking forward to some of the content I’m hoping to put out there next year. Stay with me and I think you will be rewarded. As always, hang in there and swing for the fences.

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