Hollis' Adventures in SubPrimeLand (or, Through the Looking-Glass)

I own, as an investment, a 2 bedroom, 1 bath condominium in Citrus Heights, which abuts Sacramento. I bought it right after 9/11, when no one else was buying, and so I got a great deal (about 2/3 of what it was worth on a cash flow basis), and it cash flows, at least when it's rented, which is the vast majority of the time.

It's nothing fancy, an 800sf front ground floor unit in one of those McKeon four-plexes that sprung up all over CA in the 70's. (McKeon was the builder who figured out how to do condominia.) The neighborhood is nothing fancy, either, a neighborhood of small working class families, the elderly and the disabled, mostly owner-occupied units, but some rentals, too.

My unit is cute, in a cottage-y sort of way, looking out on a front lawn, and it only has one wall in common with any other units. The drawback to it, however, is that the windows of both bedrooms, one at the right of the unit, and one at the left, each look out on the front entrance to a side unit in the building. This means that your neighbor's ingress and egress habits may affect your sleep. This is the genesis of my adventures in SubPrimeLand.

The neighbors in the unit to the right of mine are the neighbors from hell (NFH). The single mom and her son were Section 8 tenants (more on that later). The mom, a white woman in her early 30’s, was on disability for brain damage due to a car accident 10 or so years ago. But somehow, she managed to do all sorts of jobs for her landlord, cleaning and painting vacant apartments to get them on the market -- for cash, of course. Her mother was living with her, along with a series of unsavory boyfriends, at least one of whom went to prison as a drug dealer. (Of course, none of these 'guests' were allowed by the Section 8 rules.) She managed to store so much stuff in her half of our shared garage that my tenants complained of being unable to use their half. When I personally moved some of the stuff, after repeated requests fell on deaf ears, she called the cops on me! Her vicious dog attacked her (better her than anyone else) and tore her arm up so badly that she spent the night in the hospital, with hundreds of stitches, and the cops had to shoot the dog. Of course, she immediately got a new dog.

The owner was a good friend of mine. He maintained the unit, but never fixed it up, so it had ratty carpet, worn linoleum and old appliances. But it was good enough for Section 8. My pleas to him to get rid of the NFH fell on deaf ears – the Section 8 money kept coming, and he used her to do those other apartment clean outs. But he did have a good rapport with her, and could manage her somewhat.

He sold the unit in the spring of ’07 (smart man!) to another investor. He told me who it was, and I called her to warn her about the tenant, and to see if we could work together, checking on each other’s units if we were in the neighborhood (she lives in San Jose), etc. I never did hear from her, though.

Comes the Spring of ’08, and my last tenant moved out for personal reasons. It was 2 middle-aged sisters, tough old birds, one of whom managed rentals for a living, and so they could deal with the NFH okay. These ladies told me that the NFH had received a 30 day notice to quit, and would be leaving a couple of days after them.

Unfortunately, that’s not what happened.

My new tenants are quite nice and very reliable. They are a mother, who is a retired public health nurse, and her adult daughter, who is back in college full time after a divorce. After a couple of months, they began to complain about the behavior of the now teenaged son next door (remember, the TFH was a single mom) and his friends. The kids were smoking on my tenants’ front steps, making noise at all hours of the day and night. To make matters worse, the mom had moved out of the unit, and into the fourth unit of the fourplex, the one at the back, over the garage, with her new boyfriend (having broken up his former relationship), leaving her son alone in the side unit.

I told them to call the cops, which they did – repeatedly. But nothing happened.

When my tenants told me that the mom and her boyfriend had been evicted from the back unit, departing for parts unknown, leaving the son in the side unit, I called my attorney to tell him. He said, tell the cops that there is an unsupervised minor in there, and they’ll do something. So I did, and I called Child Protective Services, too, for good measure. The police did do a welfare check, finding that the minor had a 21 year old male with him! Not a good sign. And with an adult in there, the police could do nothing. This brought the TFH back, to harrass my tenants.

Meanwhile, I’d been calling and emailing the owner, to no avail. She wouldn’t answer my calls or my emails. I do know she got the emails, though, because they didn’t bounce.

Now my tenants were threatening to break their lease. I can’t afford to have my unit vacant. And now, I’ve created so much animosity with the TFH that I’m afraid that if it’s vacant for even a day, my unit will be vandalized.

So I’m desperate. Why is no one doing anything?

Here’s why:

• The TFH has not been evicted, despite its Section 8 status being revoked, so that no rent was coming in. Why wouldn’t you evict a tenant for non-payment of rent?
• Here’s why: The owners don’t care because the unit is in foreclosure. A notice of default was filed in the spring of 2008. It only takes 90 days to foreclose, so that should have happened a long time ago. Why didn’t the trustee’s sale happen?
• Here’s why: The lender is in bankruptcy! The loan is for somewhere between 2 and 4 times what the property is worth, and they probably don’t want to acknowledge that.
• (And BTW, the Home Owners’ Association has begun the process of foreclosure for non-payment of HOA dues. I’m guessing no one’s paying the property taxes, either.)

Everyone is either unwilling or legally unable to do anything. I’ve got the flu, but it seems like I’m the only one who cares.

So I haul my flu-ridden butt out of bed on the coldest evening of the year to drive down to San Jose (about an hour each way) to try to find the owner. My husband, Kosta, doesn’t want me to go alone for safety reasons, and I have to agree. Luckily, he's driving — but he's coming down with the flu, too.

We arrive at a solid home in a solid, middle class neighborhood, a neighborhood of 3 and 4 bedroom single family homes, built in the 60’s. The sort of neighborhood where everyone cuts their grass and most put up Christmas lights. The owner’s home fits in perfectly – well-maintained, lots of Christmas lights and other decorations. From the front door, you can see through lace café curtains into a tiled kitchen that looks like it was remodeled in the 80’s. In the family room, I can see a Rottweiler puppy asleep on a pile of blankets.

A 16 or 17 year old boy answered the door. When I introduce myself and ask him for his mom, he says, “She’s not here.”

“When will she be back?” I ask.

“I don’t know.”

“Will she be back this evening?”

“I don’t know.”

We go around like this for a while, me trying to get something out of him, him evading. Wow! He must really be used to bill collectors… too bad, he seems like a nice kid, very polite. Finally, I tell him I was just going to wait outside till his mom got home.

So my husband and I stand at the foot of the short driveway, being careful to stand on public property in case he calls the cops. We debate what to do. Kosta wants to go get dinner, and I say, if we do that, you know she’ll come home while we’re gone, and we’ll miss our one chance to get to her before she shuts the garage door. But what if she's already inside, and he was lying? What good would waiting do then? Would it be better to leave, and come back at 5AM, and wait for her to leave to go to work? Yes, it would mean another trip, but we’d be sure to find her, and more warmly dressed, to boot.

5AM seemed like the surest plan, but I have to try one more time at the door, just in case he was lying, and Mom is home. What if he doesn’t answer the door? Well, there's nothing to lose.

He answers the door, and this time, offers to get his Dad. This, it turns out, is a major stroke of luck!

It turns out that although Mom is the owner of the unit, it was really Dad’s idea – Mom never wanted to buy it in the first place. In fact, Mom is pissed at Dad, because it’s ruining her credit.

Dad, it turns out, is in the real estate business – sales, mortgage lending, and property management. In 2005 and 2006, he brought home $700k each, and bought property all over the country, fairly indiscriminately, figuring the good times would continue to roll, property would continue to appreciate, and he’d be able to service all the negative cash flow out of his earnings.

We all know how that turned out. 2 of Dad’s 3 businesses are down 95% since 2006. (Care to guess which 2?) The property values have plummeted, as well, so now he is under water, with negative cash flow and no way to service he debt on his greatly diminished income. What’s more, when business went south, the first people he let go were the accounting department, so his records are a mess and he can’t find anything. Eventually, he let everyone go, so he is the only person there, trying to unwind the mess, to salvage the properties where the lenders will do the loan modifications, so that he has some cash coming in, and let the rest go.

He actually doesn’t think he still owns the unit! He thinks it has been foreclosed upon. I tell him that we think they are selling drugs out of the unit. As a real estate broker, he knows that once he knows, he’s responsible to do something. When I say to him that now he's on notice, I actually see him wince – and so does my husband.

So we leave it that I'll send him all the information I have, all the contacts, who to call to do the eviction, the cops cell phones, everything, and he’ll keep me in the loop. I’m not sure that’s good enough, but it’s all I can do for now.