Earlier I mentioned receiving a call from a woman in California who was channeling Casey Serin in her desire to become a real estate investor. My client base is primarily real estate investors. I devote a tremendous amount of time studying the market and becoming educated on real estate investments, both good and bad. One of the things I enjoy most about any particular day are the random calls I receive from investors throughout the country.
When my phone rang today with a Texas area code I was a bit surprised. Texas doesn't call Phoenix much.
The caller was a very friendly gentleman with a very sad story to tell. He asked me to share it so I will... for our purposes we will call him Tex...
Tex visited Phoenix in mid-2005. He came to buy some new-builds and make 'a lot of money'. He met with a local real estate agent and started his journey. They visited 6 new home communities. He purchased homes in 4. He purchased properties which were already owned, now being re-sold, in areas where the sub-divisions were still new and still building out. He was enticed by the huge appreciation the current owners had already enjoyed. He figured 'what could go wrong in a market this hot?'.
Tex soon found himself the proud owner of 4 homes. He purchased all for 100% financing. Closed all within the same week. Different title companies, different lenders. He purchased all as owner-occupied properties. There was one consistent individual involved in all 4 transactions...the real estate agent.
According to Tex, the agent promised to find tenants for each property. Tex was assured this would be no problem. Tex was happy. He intended to hold the properties for 2 years and move on.
Fast forward to today...Tex owns 4 homes, all but one have sat vacant since he closed escrow. The real estate agent stopped returning calls from Tex 2 weeks after the purchases. Tex rented the one home to a friend who relocated to the area. Since closing, Tex has liquidated all of his assets and drained all of his savings and today finds himself no longer able to make payments. Tex has his personal primary residence in Texas for sale. When it sells, he will reluctantly move into one of his four properties. He will sell the two vacant properties if he can do so prior to foreclosure.
The agent Tex worked with no longer has an active license. According to the Department of Real Estate he was first licensed in 2004. When he met with Tex he had held his license for less then one year. I have no way of knowing if the 4 fraudulent transactions he did with Tex were the only ones but if I had to guess I would say probably not.
Tex has a lot of regrets...
- Getting sucked into the promise of 'easy money'
- Using 100% financing on all his properties
- Not grasping the reason one needs to be honest about the occupancy status
- Not realizing that using 4 title companies and 4 lenders might be a big fat red flag that you are doing something wrong
- Not researching the amount of non-owner occupied properties in an area before buying
- Not having any understanding of property management
- Not researching if the agent he chose had any understanding of real estate investment
- Not knowing that there is more to real estate investing then just 'buying a house'
- Not knowing when to say 'when' and make the bleeding stop
This is not an all-inclusive list. But for now, it is enough. Tex has learned a very hard lesson. Unlike Casey Serin, Tex knows he needs to fix this and Tex knows he made some critical errors.
I'm deeply bothered by the actions of the agent involved. While Tex is to blame for his situation, the agent had as much to do with getting him into this mess. Sometimes the best thing we can do for our clients is to tell them when to stop.
