Selling out in today’s market
This post is being written for a couple of purposes.
Those of us with any significant amount of real estate need to plan better for what will happen if you suddenly die. Your spouse and kids probably will not enjoy landlording as much as you. Wait, few people “enjoy” landlording, so let’s use the word tolerate instead. You need to have a list of people in the industry that you trust. Keep that list handy for your family so they can get their hands on it if they need to.
My other purpose is to acknowledge real estate broker Graig Goldman who pulled off what many thought would be the impossible. He sold over 100 properties at a good price in less than two months. If you attended the March Apartment Association meeting, Graig was the presenter on buying foreclosures.
The story of Joe
This past November a friend, Attorney Joe Peters, passed away suddenly. He left behind a wife, a teenage daughter and … one hundred and some rental houses on the north side of Milwaukee.
His wife initially was going to run the properties as she had experience managing some properties in the UWM and Bayview areas. The plan was to sell the north side properties in trickles.
She quickly found out lower income rentals are a different animal.
When a tenant would move out the neighbors would steal the plumbing. She found the DNS code enforcement inspectors harsh and unreasonable. But the employees Joe left behind were the final straw.
She called me in December, needing help on the employment taxes. Joe only had a handful of employees so, sure I’d help her file so she did not have to rush out and choose an accountant or payroll service without the time to research her options.
While I was doing the taxes, she was complaining about how much the workers were costing her. The numbers she mentioned did not match the labor market nor the tax forms I had just helped fill out. It seemed the employees all doubled their wage the day Joe died. She decided she would continue to pay the higher wage until she found another solution.
The workers were not productive, even though they were now making twice the industry norm. When Joe’s wife pushed them to do an average amount of work, they gave her a demand letter asking for even more money. When she refused they quit.
Between the copper thieves, the city and the workers she had enough and decided to sell. In the initial process she met a lot of people who claimed to be long time close friend’s of Joe’s. I asked her if Joe ever mentioned them to her. Nope, never heard of them. When she told me their offers, it was clear that they just wanted to be close friends with the equity in Joe’s properties. Some of the offers were all or nearly all paper. One offer was seeking owner financing and 18% of the sale price to be held ‘in case the buyer discovered repairs that were necessary’ within something like a year.
The wife was so distraught over the problems associated with lower income rentals that she almost accepted one of these ripoff offers. I spent many a phone call trying to talk her out of doing so. I also gave her the number of three brokers that I have worked with. One of them Graig Goldman had liquidated a large number of properties that I was a court appointed receiver for. He had gotten a good price for them in this down market a year or two ago.
The properties were listed with Graig Goldman on February 21st. Graig got right on it and started generating legitimate clean, cash offers.
The vultures that had been circling her told her things like the offers were fake. They almost convinced her to accept their lowball offers just to get away from the hassles of running rentals. Again I pleaded with her not to throw away everything Joe had worked his entire life for. She agreed.
By early to mid April Graig had sold all of the properties to something like a dozen owners, all but one for cash and that one went to a church with a sizable downpayment. They closed at double the vultures offered prices. Yes, all sold within less than two months of the listing.
Even though he made a decent commission on the project, Graig deserves to be acknowledged for far and above average efforts required to pull this off in this time frame and in this market
Now if you see this post as an open door to pitch your Russian oilfield, penny stock, gold futures “opportunities” to her, or to offer your hand in marriage … I hate to disappoint you but I waited to write this until she had already addressed the where to put the money question.