Buy to rent investment problem!!!!

[RonEarwaker]

In August last year I purchased a tenanted buy to rent property in Detroit from a company whos business it is to supply renovated properties specifically for investment. In the beginning the house was rented out and I received rental payments ok. After two months I received an email to say that the tenant had disappeared and that they would soon find a suitable person to take over the property as it was in good condition. In January I had an email to say that a prospective tenant had been found. In February I had an email to say that the prospective tenant had had a death in the family and would not be taking up the tenancy. In response to an email I sent in March I was then told that this tenant had “proved not to be qualified”!! In March I reduced the rental by $100 in an effort to facilitate a new tenant. In April I had an email to say that they had found a tenant but the property required €2500 of repair work before the tenant could be accepted. The work was carried out but the prospective tenant disappeared. A few days ago I had an email to say they had another prospective tenant but needless to say they haven’t materialised.
I feel that somewhere along the line something is not quite right and that I have been taken advantage of. Unfortunately I am a long distance landlord living in Spain. I don’t know the law in the USA as I am a UK expat but in England there is a law that says something must be "fit for purpose" and after 7 months of excuses I believe that this property is definitely not fit for the purpose of an investment. So far it has been a liability. Is there anything that I can do to rectify this situation?

[AFFA]

I wish to inform you that if false statement has been made to you then you can declare the contract as void and demand your money back. In this you have been assured of rent but if property has not been given on rent without your fault then you can claim that there has been a misrepresentation made to you and therefore now you must be compensated for your losses. You can first gie a notice and if other party refuses then you can file a suit in court and clam damages.

AFF

[Friend In Court]

Originally Posted by RonEarwaker In August last year I purchased a tenanted buy to rent property in Detroit from a company whos business it is to supply renovated properties specifically for investment. In the beginning the house was rented out and I received rental payments ok. After two months I received an email to say that the tenant had disappeared and that they would soon find a suitable person to take over the property as it was in good condition. In January I had an email to say that a prospective tenant had been found. In February I had an email to say that the prospective tenant had had a death in the family and would not be taking up the tenancy. In response to an email I sent in March I was then told that this tenant had “proved not to be qualified”!! In March I reduced the rental by $100 in an effort to facilitate a new tenant. In April I had an email to say that they had found a tenant but the property required €2500 of repair work before the tenant could be accepted. The work was carried out but the prospective tenant disappeared. A few days ago I had an email to say they had another prospective tenant but needless to say they haven’t materialised. I feel that somewhere along the line something is not quite right and that I have been taken advantage of. Unfortunately I am a long distance landlord living in Spain. I don’t know the law in the USA as I am a UK expat but in England there is a law that says something must be "fit for purpose" and after 7 months of excuses I believe that this property is definitely not fit for the purpose of an investment. So far it has been a liability. Is there anything that I can do to rectify this situation?

If the property manager is licensed under the real estate laws of the state where they are operating (which they should be by law), you can file an inquiry with the state department of licenses for real estate brokers. They can conduct an audit of the agent's trust account to see if they received deposits (which they should have) and just pocketed those deposits from the 'disappeared' tenants instead of sending them to you.

Whether they took deposits and pocketed them or not, it is obvious this is a poor property management company and you should seek another out. It is part of an agent's due diligence to check a prospective tenant out, order credit report, background check, etc. before agreeing to commit the landlord to a tenancy agreement.

You are quite correct in suspecting that something is amiss. I would contact an established, reputable real estate firm in the area to inspect the property and get to me if I were in your shoes. But do not fail to contact that state's real estate licensing board to file a complaint. An audit of their books, which is routine for state licensing agencies should turn up the facts on these rentals allegedly gone bad.

[RonEarwaker]

Thanks for the replies. I really am at a loss as to how to proceed. When I bought the property I knew that there were risks involved with this type of investment but I never for one moment expected 7 months with no tenant and a bill for $2500. I bought the property through, as I was constantly being told, a UK partner of the US company and not through an agent (I have emails to say they were not an agent) although now the UK company is saying that they were an “agent seller who had exclusivity with” the US developer. I would assume that “exclusivity” means that they were the only people selling this developer’s properties. This was definitely untrue as I have kept emails from other agents selling the exactly same properties using the exactly the same brochures! Being a non US citizen living on the other side of the Atlantic also poses significant problems, ignorance of the laws in the US and distance being the two main ones. I want to pursue this if possible but I am not sure what order I should do things. Do I get a real estate agent to go take a look first or perhaps get a home inspection report? Would legal advice be the best place to start? These questions all lead to another problem – how do I know that the people that are helping me are honest and reliable. I have heard Angie’s list is as good a place as any to start. I really do appreciate the forum members’ opinions and suggestions.

[Friend In Court]

Start with the State Licensing Board for the state in which this agent is operating. As I replied in my post, agents who represent properties for sale or rent must be licensed. The states have auditors who inspect their books for irregularities and investigators who follow up on complaints of dishonesty.

[RonEarwaker]

Hi. I have checked and they are registered,

[Tyrone]

Originally Posted by Friend In Court Whether they took deposits and pocketed them or not, it is obvious this is a poor property management company and you should seek another out.

I need to agree with you on this. As a property investor, I have many properties throughout the world. It is vital that you make sure of the Property Management company you want to use before you do business with them. Some of them simply cannot do it properly. And since they know that you are not close by, they feel like your property will not be viewed by yourself frequently. This is where the problem comes in - they start to see your property as a lower priority. (This is my personal experience unfortunately)

Make sure of the Property Management Company and try and keep a good relationship with them

[Friend In Court]

Originally Posted by RonEarwaker Hi. I have checked and they are registered,

Then file your complaint with the state licensing board or agency. They will open an investigation and find out if and when they took money, what they did with it and any other elements of your complaint that might be a violation of ethics.

Also file a police report with the city/county law enforcement agency where they are doing business. You should contact them, get a case number and you can mail them a sworn affidavit for them to begin investigation.

[RonEarwaker]

Hi All.
An update.

I have had a property appraisal and a rent schedule done and the results are startling. I bought the property for $51,500 which I thought was reasonable (I am used to European prices that are much higher). The Appraiser has given it a market value of $19,000. That’s $32,500 less!!!!
Then we get to the rental schedule. On the property sales details the rent the tenant was paying was $1000 per month but only paid 2 months before disappearing. The Appraiser has given a fair rent to be $750 pcm. I also note that on the report in capitals it says “THERE IS NO RENTAL HISTORY FOR THE SUBJECT PROPERTY FOR THE PAST 3 YEARS THROUGH THE REALCOMP MLS SYSTEM” Does this mean that the tenant that was supposed to have rented the property was a figment of someone’s imagination?

I am going to speak to the Appraiser later today to get his thoughts.
I have spoken to the Appraiser now and what he has said is very interesting. He says that the property is in "fair overall condition" the condition list being poor, fair, average, good. He said that if this was an appraisal for a mortgage it would have been refused. This is for a property that has been recently updated. The valuation of the property of $19000 is for the current market value and has been judged against other recent equivalent properties sold in the local area (not foreclosures etc) He thinks that this would be the value whether it is tenanted or not. The reason it has not been easy to tenant is because the rent is too high and the area is not very good.
Over all it would seem to me that the property has been misrepresented as an investment. What do you think? Any suggestions on where I go from here would be gratefully received?

Here is a quote from the sales literature

Substantial 4 bedroom 1.5 bathroom brick colonial located in first class (Bagley) area of Northwest Detroit

Property information

Lawn lights and stylish brick homes adorn the streets of Detroit’s Bagley neighborhood. A perfect example would be S**** R*** Street, where you can find this impressive 4 bedroom colonial. A testament to Detroit’s rich architectural past, this home has serious curb appeal. This area has long been home to Detroit’s middle class families because of its small businesses and educational institutions. Mumford High School as well as Marygrove College is within walking distance and the Detroit Public Library is a short drive away. Major roads within the vicinity include McNichols Rd, as well as the Lodge Freeway.

[bojemrythem]

If you want to buy home than you have to first decide place and price which you want to purchase. You have to also get some more information online for purchase any property. It is also very important to solve rent investment problem.