Investing in real estate is often considered a surefire path to wealth and financial freedom. However, looks can be deceiving.
Real estate investors could fill volumes with tales of deals gone wrong, remodeling woes, and appalling tenants leaving a trail of destruction in their wake. To get the real dirt, we asked investors and financial advisors for true stories about real estate investing gone wrong.
Grab your popcorn and cringe at these 15 real-life real estate horror stories – and be glad it wasn’t you!
15 Shocking Real Estate Horror Stories
Destructive Tenants Destroy Everything They Touch
Tomas Satas, Founder and CEO at Windy City Home Buyers, has first-hand experience with awful tenants. Although the couple appeared perfect on paper and paid the rent on time, their home life left a wave of destruction.
Satas describes the day he visited the property after they moved out:
“I went into the property to find cigarette burns in the carpet, holes in the walls, and trash everywhere. The neighbors told me they fought like cats and dogs and that the cops were there monthly. Wild how some people are perfectly put together in their professional lives, but not in their personal lives.
“Learned a valuable lesson from this. Even if Mother Teresa referred a tenant to me, I would still do background checks.”
Needy Tenants Exhaust Everyone (and Everything!)
Mark Motes, CEO and Chief Real Estate Investor at Mark Buys Houses has a similar experience with horrific tenants, though his didn’t even have the decency to pay rent on time.
Motes’ story serves as another lesson in extensively researching tenants.
“I found some tenants who seemed like they would be a fit, signed a contract with them, and they moved in. It wasn’t too long before I realized how terrible of a situation this was going to be.
“They broke things, called me all the time, were a hassle to get to pay their rent, and eventually, I forced them to move out. When I went to the property after they left, they had just wrecked it. There was animal waste everywhere, and it was a complete disaster.
“I had to end up just selling the property because it was way too much work to bring it back up to standards. We still do a lot of real estate work in the area, but I will never forget that experience!”
Flood Damage without Flood Insurance
Floods cause devastating damage, and investors are often even more devastated to discover that they weren’t protected against floods.
Stephen Keighery, CEO and Founder of Home Buyer Louisiana, got caught in the unlucky trap of flooding without the right insurance.
“My property flooded, resulting in a lot of damage to the property and its foundation. Not to mention the financial loss, the compensation was also hard to acquire because we did not apply for the right insurance.
“People should be aware that the standard homeowner insurance that you believe covers most of the untoward accidents that damage your home will not cover flood damage. So if you are living in a flood-prone area, it is best to buy flood insurance.”
Squatters Rights Suck New Owners Into Costly Legal Battle
Erik Wright, owner of New Horizon Home Buyers, learned about squatters’ rights the hard way.
After purchasing a destitute and seemingly abandoned house, Wright was shocked to discover someone had lived on the property for 12 years. Most states only require a 7-year tenancy for squatter’s rights, so the squatter did have legal standing for ownership of the property.
Wright fought for his ownership stake in court. In a lucky break, lawyers discovered that the squatter had vacated the property for a few months before filing a claim, resetting the 7-year clock. Wright ultimately won the court case and full property ownership, but not before sinking thousands of dollars into the legal battle. Ultimately, he lost money on the deal, as his legal fees cost far more than the profits he made on the house.
The Bloody Showing
Andrew Karpiak isn’t an investor but has experience in the industry as a real estate agent. However, his worst experience came from selling his own home.
“In all my years as a real estate agent, I have never witnessed a situation as terrible as the one that happened during a showing while selling my own house.
“A realtor representing a buyer showed my home, and in my local market, the seller’s realtor is not present during showings. The realtor allowed their client to walk all through my home with an open wound on their foot, leaving a trail of blood inside and outside.
“The realtor did not contact me about this after the showing; he simply left my wife and I to discover the bloody trail when we returned home. I have seen a lot of terrible things in my 16 years as a realtor, but this is hands down the worst.
Contractor Fails Double Costs of Renovation
Ben Gold, Founder of Recommended Home Buyers, had a horrifying experience with contractors that doubled his renovation budget.
Gold bought a distressed property that needed a lot of work. He hired a contractor that came highly recommended.
Gold shares how the seemingly simple transaction turned into an investor’s nightmare.
“I gave him a deposit, and he started the work. In the first few days, he was on time and, completed a lot, sent me pictures of everything that was accomplished. I went to visit him, and it sounded exciting. But not so much after, the excuses started coming. First, he has a funeral in Florida and has to travel by bus.
“What can I do? Emergencies happen, and for such a nice contractor that accomplished so much in the first few days, I thought it would be worth the wait.
“Then started money issues. The contractor used the deposit money earmarked for labor and material for his own expenses, claiming it was because the materials were higher than expected, but he tells me that he is fully ready to work; he just needs a little more money to put gas in his truck. After the work has been started, it is not easy to find a decent contractor to come take over someone else’s job, that’s why I figured, let me give him only a small amount of work, and control more of the money.
“We made new goals because the goals from the contract were mixed up at that point. I tried giving tips for good fast work and tried other ways to motivate the guy to do the work, but nothing happened. It wasn’t worth taking him to court, paying lawyers, and waiting months, so it was a never-ending cycle back and forth. Meanwhile, I am paying taxes, utilities, and mortgage payments that are eating up my money.
“It got to the point that I had no other choice and needed to hire a different contractor, and of course, with a half-remodeled home and with so much money into it already, I needed to squeeze the numbers to make it work for this new contractor.”
City Ordinances Cost More than You Know
Leonard Ang, CEO of IProperty Management, has a real estate horror story involving city ordinances and local laws. Ang purchased a 50-unit complex in a relatively high-crime area. Though he expected to encounter problems with maintenance and vacancies, he was shocked by surprise bills from the city.
“I was completely unprepared for a new city ordinance which billed landlords for frequent calls to emergency services,” Ang recounts. “I was blindsided, and it completely threw off my business model. I was forced to raise rents enough to not only cover these emergency services bills but also to invest more money into security features to cut them down.”
“The higher rents pushed several tenants to move out, which only exacerbated my problems. I considered a complete renovation to appeal to higher-end clientele, but market research showed they would be scared off by the high crime rates. I eventually ended up selling the property at a loss.”
Lying Sellers, Confused Tenants, and a Tense Encounter
Jonathan Couch, real estate investor and owner of a home buying company in Dallas, Texas, had a confusing and emotionally draining experience when attempting to purchase his first investment property.
As a first-time investor, Couch opted to use a local wholesale home buyer in the Dallas market to learn about the process and understand how to professionally manage a real estate transaction. Unfortunately, things didn’t go according to plan.
“This home buying company presented me with a tenant-occupied home that appeared to be a good deal. The house needed a lot of work, but the price was right, so I decided to pull the trigger. My plan was to conduct a fix and flip, so the tenants needed to be out at closing. The representative from the wholesaler assured me the tenants were aware of the sale and that they were given $1000 cash for keys to vacate the property within two weeks of closing.
“That sounded great, so I closed and patiently waited. After the two weeks, I showed up to the house with my contractor, ready to get started on my very first renovation. I nervously opened the front door, and as I took my first steps into the house, I heard a woman scream, ‘WHO ARE YOU AND WHAT THE HELL ARE YOU DOING IN MY HOUSE!’
“I turned to see a man with a baseball bat running towards me from a back room. He was disheveled and in his underwear, looking even more confused than I was!
“I did my best to calm them down, explaining that I was the new owner. Although the tense situation was diffused, everyone was still very confused. The tenants revealed they were never informed that the house was sold, and no one told them they needed to move out. They didn’t receive any money for the keys.
“It was then that I noticed the small children peeking around the corner to investigate the commotion. When I saw those little faces, I realized I couldn’t evict this family. My first renovation immediately turned into my first rental property.
Although it worked out for Couch and the family in the end, he has one simple piece of advice for anyone looking to invest in real estate: trust but verify.
Subcontractors Cut and Run
Melanie Hartmann, owner of Creo Home Buyers in Maryland, has a real estate horror story involving unscrupulous contractors.
Her tale, in her own words, cost not only money but five months of stress and tears.
“A couple of years ago, I bought a house in Baltimore, MD, that needed a complete renovation. The property had been gutted; even the staircase had been removed prior to us purchasing it. It was one of the first renovations I had taken on of this scale. The numbers seemed to make sense, and I moved forward with a contractor I had vetted over a period of a few months.
“Unfortunately, shortly after I paid him the first installment, which was $10,000.00, he started to run into financial problems. I saw people in our local real estate Facebook groups complain about him not getting work done and not paying subcontractors.
“After about two weeks, I was shocked to discover someone had cut the recently installed electrical wires. I discovered that the person who installed them was afraid they were not going to be paid, so came back and undid all the electrical work. He didn’t even have the decency to contact me first, despite having my information.
“At that point, I lost all confidence in the contractor and fired him. Unfortunately, the contract I signed required that we go through arbitration to resolve any issues, which would cost me more money. After trying to work things out with my lender and looking into hiring new contractors, I decided to simply sell the house as-is and take a loss.
“The contractor and I eventually agreed upon a repayment plan, so I did not file the arbitration. After two years, he eventually paid back 70% of what I had paid him. Before I could pursue the rest, he let his contractor license expire and, as far as I can tell left the USA.
“Eventually, I did get the property sold. Fortunately, the loss wasn’t astronomical in the end, but it was still five months of stress, agony, and tears. This occurred just as the pandemic had hit and I was not in a place to be able to afford to lose that much money or pay another contractor to start the work all over. I had to completely shift our investing plans and have been reluctant to take on a project of that scale again.”
Municipalities Make Life Miserable for Investors
Anonymous Blogger DadisFire shared a story not of horrible tenants or contractors but of municipalities who make life miserable for investors.
“Over the years, friends have asked me if tenants were the hardest thing about being a landlord. I always told them no; my local municipality was. The municipality did not want rental houses, so they made it very difficult for landlords.
“Inspections were the easiest place for them to nitpick because they were so subjective. One time I bought a house, fixed it up and made it move-in ready. The municipality would not pass it. They said there once was a pool in the backyard that was removed but there was no permit for removal. I asked what the issue was and they said if the bottom of the pool isn’t broken up, the hydro-static pressure would cause it to rise.
“My best friend lived in the house 15 years earlier. I called him. His dad put the pool in and said the foundation was packed sawdust. The municipality said I had to dig up the backyard. I asked where and they said the whole backyard. I had neighbors attest that the pool was broken up years ago. It didn’t matter.
“The ground was frozen like a rock. We rented an excavator and dug up the backyard. The inspector came out, laughed, and said, yep, there is no pool. It finally passed inspection.
“I was in my early 20s, making only 25K per year. The financial loss alone was devasting, but the fear that it would continue to drag on caused enormous stress and many nights of feeling I was in over my head. The total cost was a few thousand dollars, but the months it dragged on wreaked havoc on my mental health.”
Bed Bugs in the Walls
Diana Ludwiczak isn’t a real estate investor, but in her work as a certified bed bug and pest inspector, she has seen first-hand the devastating effects pest infestations can have on real estate investments.
Ludwuczak recounts one of the worst bed bug infestations she has ever seen, which affected the entire apartment complex.
“Our company, Doctor Sniffs Bed Bug Dogs, specializes in home inspections all over NYC and helps landlords and real estate investors with bed bug issues.
“One of my clients purchased a building with 20 rental apartments in Brooklyn. The building had five tenants, and the rest were vacant.
“As the new landlord began renovating the vacant apartments, her construction workers reported possible bed bugs.
“She hired us to search the entire building with our bed bug sniffing dogs, and we discovered bed bugs in 17 of the 20 apartments. Bed bugs are notoriously hard to get rid of, especially when they are in the walls. Not knowing any better, the investor initially hired a company that did not specialize in bed bugs.
“After renovations and treatments, the new tenants began reporting “bites.” Sure enough, the brand-new renovated apartment had bed bugs.
“The investor currently has a bed bug specialist helping her solve this difficult and expensive issue. It is an ongoing costly battle.”
Careless Tenants Flood the Basement
Max Whiteside, SEO & Content Lead at Breaking Muscle, is also a real estate investor. His horror story involves a problematic tenant who refused to vacate and left a mess.
“I had had a problematic tenant who violated the conditions of the lease and wouldn’t leave the property of their own volition. Fortunately, I got the eviction filed, and the tenant made the decision to vacate a week before the eviction date.
“Excellent news, but the tenant accidentally opened the hot water heater valve on the way out without my knowing. Over three feet of water had gathered in the basement by the time I discovered what had happened.
“The basement wasn’t finished, a small stroke of luck that limited the damage. After a dumpster, three days of shop vacuuming, and a few dehumidifiers, I was finally able to restore the basement to a usable condition. Due to the laws in my area, I was unable to pursue legal action against the tenant.
Professional Tenants and Hidden Damage
Brian Davis, real estate investor and founder of Spark Rental, has had nearly everything go wrong that could go wrong while investing in real estate. He shares two tales of horror involving different aspects of real estate investing.
The first involves an awful tenant who knew the rules all too well.
“I had an eviction take 11 months because the renter was a “professional tenant” and knew every loophole in the book to keep delaying eviction. He would break things like the smoke and carbon monoxide detectors and then report the property to the city for failing to have working detectors. When I did eventually get him out, he punched through every cabinet door and had intentionally ruined the flooring.”
The second horror story showcases the hidden costs unknown damage can inflict.
“In another case, I bought a property to renovate and flip and got quotes from contractors before buying. After buying, when the contractors tore out the walls, they discovered that the framing had rotted and the entire house needed to be reframed. It cost many thousands of dollars more than my initial quotes. When the house was finally complete, I couldn’t sell it for a profit, so I ended up keeping it as a rental. But I had over-improved it as a rental, and it lost me money each year. I didn’t understand how to accurately forecast cash flow or use a rental income calculator properly.”
Losing Wealth in a Big Crash
“You’ve probably heard the saying that your home is your biggest investment. For many of us, our house is not only a place to live but also our biggest source of wealth and security. So when our home’s value goes down, it can feel like we’re losing everything.
“That’s what happened to me once. My company had owned a home for several years, and when the housing market crashed in 2008, we found ourselves owing more on the mortgage than the home was worth. We eventually had to sell the property for a huge loss totaling nearly 130K. It was a painful experience.
“What made it even worse was that we weren’t the only ones going through it. Almost everyone we knew who owned a home was in the same boat. It felt like the whole world was collapsing around us.”
Drug Dealing Den Turns Nightmare for Investor
Tom Brickman, real estate investor and owner of The Frugal Gay, had a genuinely terrifying experience when he bought an investment property on eBay.
“I bought what can best be described as a crack house on Auction.com that I found through eBay. As with most bank foreclosures, the property was sold as-is without any disclosures.
“I knew the zip code, having lived there many years prior. However, I didn’t know the street. Upon closing, I discovered fresh bullet holes in the walls and syringes scattered around the house.
“My contractor was working upstairs in the bathroom, and apparently, a drug deal was going on in the vacant lot next to it. It got ugly, and the guy tried to run. The other drug dealer shot him in my yard. A stray bullet went into my dining room wall while my contractor was upstairs!
“The contractor called the police and ambulance. I finished the house and sold it, but it was a nightmare for the few years I owned it.”
Real Estate Horror Stories Abound
Real estate investing is often described as an easy path to wealth, but the risks often outweigh the rewards. As these real estate horror stories showcase, investors have far more at stake than their initial investments.
These stories shouldn’t dissuade anyone who wants to pursue real estate as an investment. However, removing the rose-colored glasses to give would-be investors a realistic view of what could go wrong is essential.
By all means, invest, but know beforehand what horrors might await you!
Melanie Allen is an American journalist and happiness expert. She has bylines on MSN, the AP News Wire, Wealth of Geeks, Media Decision, and numerous media outlets across the nation. She covers a wide range of topics centered around self-actualization and the quest for a fulfilling life.