My Tenant Horror Story.

What's up you guys, it's Graham here.

So chances are, if you ask any real estate investor about their experience as a landlord, it's pretty much inevitable that a large percentage of them will open up and tell you about at least one of their tenant horror stories. In fact, I believe hearing these stories has become so ingrained in the whole real estate investing experience that it's not so much a matter of if it'll happen to you; it's when it will happen. And it's unsettlingly common.

Unfortunately, though, most landlords only go through a terrible experience like this once or twice, and then they learn their lesson. They become drastically more careful about their tenant selection to avoid making the same mistakes again. That is the entire point of the video. I say all of this as a full-time real estate agent since 2002, whose leased well over a hundred homes throughout Los Angeles, and also as a landlord since 2011. So I think it's safe to say that since 2008, I have seen some.

Like, even witnessing people who do not smash the like button for the YouTube algorithm—you have not done that already because it does help other videos a lot. Had to throw that in there in the beginning. So with that said, let's get into the video now.

The first one happened to a landlord I knew in Hollywood who put up his home for rent at $5,500 a month. Within a short time afterwards, a tenant named Colvin expressed his interest in renting the home. When he pulled up to see the home, he wore expensive designer clothing, pulled up in like a brand new S-Class AMG, and otherwise looked the part of someone who was going to be spending $5,500 a month on rent.

Now, the tenant immediately wanted the home and wanted to move in as soon as possible. He explained that the only reason he was leaving was because his current landlord was moving back into the home that he was renting now, and he had to get out and leave. So he went and filled out an application, gave his photo ID, and ran a credit report. Everything seemed to have checked out, so the landlord went ahead with the lease and decided to have the tenant move in pretty much within just a few days.

However, on the day the tenant was supposed to move in and pick up the key and then give the first month's rent and security deposit, the tenant just kind of disappeared. He wasn't being as responsive; he wasn't picking up the phone anymore, and that should have been the first red flag. But later that day, the tenant got back to him and said, "I'm so sorry. I've just been in busy meetings all day. We're gonna have to meet later to pick up the key and deposit the rent check."

But, of course, by the time later came around, all the banks were closed. “Well, now we just gotta meet tomorrow instead. All the banks are closed, but we'll just do it tomorrow.” The next day comes around, and the exact same thing happens. The tenant starts becoming more unresponsive, wasn't getting back, and was otherwise just acting very strange and very shady.

But, by the end of that second day, the tenant did actually show up and pay the rent and security deposit, picks up the key, and then moves in. Now, here’s where things start getting messy. Because as soon as the tenant moves in, the tenant immediately starts complaining about roach infestations, rodent infestations, and mold.

Now, the landlord heard this and was really surprised because he had lived in that home for the last ten years himself and had never once had an issue. But regardless, he sent the appropriate professionals over to address all of these concerns. And when the professionals came there, they didn’t see any evidence of anything. But regardless, he got the home treated for insects, and that was it. But after all of that was taken care of, the complaints still continued on. The tenant started complaining of getting headaches from the mildew and moisture in the property, then seeing more insects. Then the heating system stopped working, and everything just suddenly started breaking and going wrong.

But then, after about a month from when the tenant moved in and the first month of rent was supposed to be due, the tenant started making excuses of why the rent wasn't paid. At first, it was mistakenly routed to the wrong bank, and he had to wait a few business days for the money to come back for them to then reroute it to the right account. But then, a few days after that, when the money was supposed to be reissued back to the right account, his bank account was mysteriously and mistakenly frozen, so he didn't have access to it for a few days and had to wait for that to clear up for him to send more money.

Now, those types of excuses continued on for six months. Yes, that's right! This tenant made those excuses without paying any rent for six months. This landlord, unfortunately, just took the tenant's words at face value without ever looking into it or without ever giving an eviction notice. Now, it turns out the landlord was afraid of upsetting the tenant and really believed that if he was nice to the tenant, the tenant was more likely to just want to pay their rent than if they issued an eviction notice—and then the tenant just leaves without paying anything.

But after six months of dealing with this and not receiving any rent whatsoever and beginning to go through financial difficulty, the landlord finally hired an attorney to go forward with the eviction of the tenant. Then, several months after that, the tenant was finally evicted, but not before the landlord had lost over sixty thousand dollars in lost rent, damages, and attorney's fees to evict the tenant.

Now, as it turns out, the tenant lied about everything on his application; he used a false name, a fake ID, fake bank statements, and even had his friend pretend to be a landlord of the home he never even actually lived at. It turns out, if you look up this guy's real name, he has been doing this scam for years, and when you just type his name in Google, you would see that he's been convicted before for grand theft, insurance fraud, conspiracy, and money laundering.

This type of tenant has been doing this scam over and over again just to live rent-free for years by taking advantage of the generosity of inexperienced landlords. This is why it's so important to verify every single item a tenant writes down on their application independently from what they say in claims, and any red flags of not paying rent as soon as it's due should be attended to immediately and taken very seriously.

Then, if the tenant is more than one to three days late on the rent, immediately move forward with an eviction with a three-day notice to pay or quit. While the majority of the time that’s not going to be necessary, it is very important to protect yourself in the event you have one of these tenants who doesn't pay and then drags that out for months.

Now, the second story is really none other than my own mistake. I fully owned up to it because I screwed up. I even made a video about this before in a lot of detail—like 37 minutes worth of detail. But I will just summarize what happened right here. All of this really began in 2011 when I bought my first property with the expectation of going in, renovating it, fixing it up, and then being able to rent it out.

But being the first time I ever renovated a property before, it went wildly over budget, and I pretty much sank all the money I had at the time into the property fixing it up. Now, very stupid move on my end, but I ended up renting it out to the first people that called me on the property, said they would take it, and move in immediately. I gotta say, I overlooked every single red flag out there that was flashing in my face because I was just desperate for the money and I was desperate just to get that home rented out.

The couple I rented to had terrible credit. He said he was an auto mechanic who went and just flipped cars on the side for profit, and she was a psychic. Yes, can’t make that up! Their businesses were operated entirely with cash, and he ran all of the cash through her bank account, so she was the one showing all the income and regular cash deposits.

But again, like I said, they were ready to move in immediately. You know, in the very beginning, everything was fine. But then, a few months into it, I got the call that the rent was going to be a little bit late. He said that he was in a car accident and had some medical bills come up, so the rent was just gonna be a little bit late.

Me, trying to be cool at the time and buddy-buddy with the tenant, I was like, "Yeah, you know, no problem, thanks for letting me know. It's cool if you pay rent a little bit late, as long as you pay; that's it." Sure enough, he ended up paying it, and everything was all good.

The second month came around, and the same thing and the same excuses—just like the medical bills are piling up, things are adding up, "I'm gonna be a little bit late on rent this month, but I promise I'm gonna pay it." I said, "No worries, that’s totally fine. As long as you just pay the rent, I'm good." And, of course, that continued until a few months later when he says, "Now that the bills are really starting to add up, I would like to pay half of the rent a week late and then the other half of the rent towards the end of the month."

I thought to myself, as long as you pay the rent, and as long as by the end of the month, you rent this, babe, I'm good with it. Just please pay your rent. But then, shortly after that, things took a big turn for the worst. What I wanted to do was a cash or finance so I could pull equity out of the property and then use that money to go and invest in more real estate.

But when I called them up and told them that an appraiser needed access to the home, he suddenly got very upset and very confrontational. He just told me that under no circumstances was anyone ever allowed to go in the garage. I then very firmly told him that that’s not an option; we need access to the garage. It’s in the lease agreement that you signed. I can have access to the garage if I need to for an appraiser.

That’s pretty much when he told me he was growing weed in the garage. Then he explained that what he was doing was all legal because he has the permits to do it, and it’s legal in California. This and that. I was just like, "What? Who did I get into property with?"

It turns out that that was his business. He was using my garage to grow weed to sell. He was not this auto mechanic who flipped cars; his girlfriend was not a psychic that operated a cash business. They grew weed, and they sold it. So, of course, when I requested that he remove that from the garage so I could go for finance on the property, he just stopped responding to me, and with that, he stopped paying rent.

So after a while, now trying to reach him, he finally got in contact and said that he would move out of the property if I gave him $4,000 and his security deposit back and I forgave him for all of the missed rent. Now, I didn't trust him, obviously, because he’s lied to me in the past, so I went forward with an eviction.

It was really at that time that he began getting very aggressive with me and would start sending me these very threatening text messages about what he was going to do to me if I evicted them and how he was going to "mess me up." He also blamed me as the reason why him and his girlfriend broke up, saying that I was apparently trying to like mess up their relationship by giving them an eviction notice.

The guy was weird during the eviction process; he tried to fight me every step of the way. At first, he said there was mold in the property, and then he said the property was uninhabitable and he didn't have to pay rent for that. Then he said he paid the rent, but I claimed I never received it, and he had no proof of payment. That just went on. No, thankfully I was able to evict him a few months later, but before he left, he just completely trashed the property.

That was easily ten thousand dollars worth of damages, plus lost rent, plus the cost of eviction. That was very tough for me to go through as a young 20-something who's never had this experience before, having to come out of pocket a lot of money and just completely getting burned. But looking back now in hindsight, I have to say that was probably one of the best learning experiences that I had ever been through, and I'm really fortunate that I got that one out of the way on the first property I ever rented versus that happening now.

Also, I fully admit myself that I am responsible for that. I was a total idiot and ignored every single red flag: bad credit, cash income, no consistent job history, accepting late rent, and just every other mistake that I could have possibly made. I just ignored it all. So that for me was definitely a lesson well learned.

Since then, fortunately, I have not had a single negative experience with a tenant after that. Since then, all of my tenants have been absolutely amazing. I love them; I don’t want any of them to leave. If it wasn’t for that first experience, I'm not sure I would have gotten to the point now of being able to pick a tenant who I think would be a great fit for the property for myself and just not only that, but making sure they're happy with where they live.

Third, this is the worst tenant I have ever seen throughout my entire career in real estate. This one takes it. It happened to one of my clients who ended up leasing their home on their own, and then it turned into a nightmare. Here’s what happened.

This client built a brand new construction in 2007 at the height of the real estate market, with the intention of flipping it for a profit. But by the time the home was finished, the housing market just completely tanked, and he was drastically underwater on the home. We’re talking like he was three million dollars in on a property that was now maybe worth 1.3 to 1.4 million dollars with no buyers in sight, and he just couldn't afford to keep the home.

But the owner had a plan, and that was to rent out the home to help cover the mortgage payments while at the same time asking his bank to do what's called a loan modification. That’s when a borrower can renegotiate the terms of the loan with the lender to avoid foreclosure. That was very common in 2009 and 2010. Back then, banks were inundated with foreclosures and a lot of times, it was better to renegotiate with the current borrower and even take a small loss upfront than to go through with the process of foreclosing on the property—the years it takes to then resell it and the hassle involved with doing so.

So many banks were open to reducing the terms of the loan or knocking off some of the payments to just help the buyer out. But the thing was, to be eligible for a loan modification back then, you had to show that you were in financial distress and were not making the mortgage payments and were in the process of being foreclosed on. Then at that point, the bank would negotiate with you and work out a payment plan that you would be reasonably able to afford without being foreclosed.

So that’s exactly what the owner did: he stopped making the mortgage payments on the property and then rented it out for $9,000 a month to help build up a cushion for whenever the loan modification went through.

But here's where things went terribly wrong because the tenant never made the next month's rent payment, or the month after that, or the month after that, or the month after that—for over two years! It turns out he rented the home to a tenant eviction attorney who specialized in helping tenants not get evicted from their home. This tenant argued that he could not be evicted from a home in which the landlord is collecting rent from without paying the mortgage, which would be fraud.

He also claimed he wasn't able to be evicted from a home that was currently in foreclosure. Sure enough, because of his experience in real estate law and helping tenants not get evicted from homes, he was able to delay the eviction process for over two years without paying a single dollar in rent.

Meanwhile, though, because the landlord wasn't receiving any rent whatsoever, he couldn't make any of the property payments anymore. Despite the efforts of the loan modification, he ended up losing the property back to the bank and losing every single dollar he invested into the property to try to save it.

That same tenant continued living in the property throughout the entire foreclosure process, continued living in there even after it had been foreclosed, and then tried to negotiate with the bank for more free rent after the bank had taken ownership. In total, he was able to live in that home for $9,000 a month for free for over three years before he left and then moved on to try to find someone else to do this to.

The only reason I heard about this is because this guy then tried to rent another associate's home in my office who was going through the same loan modification, and word spreads very quickly about what this guy was doing, leading everyone to basically blacklist this guy from renting any home. Apparently, this is exactly just what this guy does: he looks at people who are behind on their mortgage payment, moves in to rent their home, then stops making the payments altogether and then argues on his own behalf to stay there rent-free.

Unfortunately, my tenant horror stories don't just stop there, but it does become too much to list. This includes tenants lying about the previous residents' history, lying about past evictions, faking bank statements, and putting their friends' phone numbers to pretend to be their landlord.

When you call their landlord, you’re calling their friends and someone. So, for all of the videos—really just this—while stories like this certainly seem extreme, I think they’re way more common than people make them out to be. And the only way to prevent these situations from happening is by extensive tenant screening beforehand and doing your due diligence. Or, as they say, trust but verify.

That includes running your own credit report, getting a photo ID, requesting sources and proof of income, googling and looking up all phone numbers to make sure you’re actually calling the person you think you’re calling, and even doing a drive-by of their previous residences to make sure that that's actually where they’re living.

Even just talking to their previous landlord and making sure that’s actually the right person you’re talking to could easily be the best thing you’d ever do when verifying a tenant. Now, even though I haven’t had a single bad tenant since the first one that I picked, that does not mean I haven’t avoided dozens of bad tenants and scam artists that have tried to fake their way into a lease agreement.

Like, when I had my last vacancy about a year ago, I had to turn down three applications because I found people lying about the previous residents’ history, where they worked, where their income came in, and they even got one person who was being evicted from their home and lied about all the phone numbers on that application—until I actually tracked down the real landlord who told me the full story about how they never paid rent and now they're being evicted. They had been doing this from house to house to house.

So anytime you're investing in real estate with the intention of becoming a landlord and renting out the home, you have to be very careful with who you pick as a tenant. You have to take your time, and you should not rush into these things. But I also really believe that with careful due diligence and planning ahead of time, all of these mistakes are easily avoidable.

And that's the entire point of this video. So with that said, you guys, thank you so much for watching. I really appreciate it. And as always, if you guys enjoy these videos, make sure to smash the like button, destroy the subscribe button, and smash the notification bells so YouTube notifies you any time I post a video, which is three times a week.

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So anyway, with that said, thank you again for watching, and until next time.