Imagine happily going about your day. Sun shining. Birds chirping. Then….you get a call on a deal. It is a real beauty. Seems like the planets lined up in your favor (and better late than never, too!). It is a pleasant 4-unit in a decent area. Definitely a B or B+ building and it is 100% involved. The proprietor needs to sell yesterday because he went on some Howard Hughes type kick and wants cheeseburgers put on a tree outside his lodging in Vegas consistently at 4pm. Bad news for him, uplifting news for you. You get some info emailed to you and go glance at the property. You start drooling a smidgen and maybe start counting the money you’re going to make a tad (sometimes you cannot resist, you’re human!). Then, you get the purchase agreement marked and get the earnest money check sent over. You contact your private investors and inform them of the deal. Several are in based on your phone conversation with them and might want you to email the paperwork over to them so they can begin arranging the assets.
You’re elated and siphoned up. This is a serious exhilarating feeling – your feet are light and your step is certain. You go out for dinner and request the finest wines and the rarest steaks. Monopoly 3D extraordinaire you have become and find this.
In any case, wait…
The following morning comes and you realize that you have a due ingenuity period in your Purchase Agreement (at least you ought to!). This is sometimes called an inspection contingency. You’ve already taken a gander at the property, got into all the units, so you’re quite comfortable. You pass it over, start looking for your next deal and finalize the closing details on this one. Deal closes with no issues. You take over managing the property and all goes well…at least from the start. A couple of months later you get a call from a tenant. Sounds kind of routine from the outset (man, those tenants like to complain, do not they?). Indeed, you listen a smidgen and what they’re telling you sound a bit strange. Too elaborate to be made up. You take a drive out to the building to check it out. You start to glance around in the basement and, to your shock you see it: a mud burrow. Proof of termites!
You immediately call an exterminator, who cites you an insanely high expense to fix the issue. The expense for this is easily worth a couple of months worth of cash flow on the property. In any case, you got take care of the issue. Inquisitive, you ask the tenant how long he’s known about the termites (or amusing cracks as he called it). He says he’s seen them for a long time, told the former proprietor who failed to address it.