There’s a Prostitute in My Rental Property!
You’ve probably heard the saying… “Pimpin’ aint easy”… And after my recent experience I can verify that this is 100% true. Especially when you don’t even know you’ve been pimpin’ to begin with!
I’ve been a real estate investor (please note this is just a fancy name for “slumlord”) for a while now. I’ve seen my fair share of bad tenants. Late rent, evictions, trashed houses, squatters, police reports, etc. etc.. But this latest tenant experience tops my list.
Today I’d like to share a story with you about the time I discovered that one of my rental properties was being run as a brothel.
Now, I know what you’re thinking, so let’s just get all the jokes out of the way upfront…
- Does this story have a “happy ending”?. Ha ha, very funny. But, yes it actually does.
- This really sounds like a “sticky situation”… That’s gross. I don’t even want to imagine what went on inside that house.
- Did the tenant ever “rub you the wrong way”?… No.
- This is why you don’t rent your place out to family members… That’s not funny.
- Wow man, your tenants really suck. Literally… OK are we done with all the jokes now?
Some Background Info:
I owned this specific property for nearly 10 years. It’s a corner apartment located within an upscale, high-rise building with 24/7 onsite private security. The area is in fairly high-demand, located in a major metropolitan city, and this specific building caters to business professionals who pay premium rents.
For the past 5 years I’ve hired a professional property management company to take care of tenant screening, leasing, rent collecting, and general problem solving. This company was doing an excellent job. In fact, I barely ever heard from them and the rent just showed up in my bank account on the 1st of every month. Never a day late.
“Sometimes the biggest red flag is when everything is running perfectly”
I Own A Brothel?
Then one day I was just hanging out, minding my own business, when I received a phone call out of the blue.
“Hello Mr. 5amJoel, are you the current owner of 123 Rental Street in Springfield?”
Phone calls starting like this are never a good thing. What came next was something I thought I’d never hear in my life:
“We’ve been investigating some illegal activities conducted in your apartment. Specifically, unlicensed massage services and prostitution.”
To be honest my first reaction was to laugh. I mean, it had to be a joke right?
Nope. This was no joke. After our conversation ended the helpful detective emailed me his detailed evidence including links to Craigslist ads* that were used to attract clients. It turned out some private investigators had been tracking the ‘Madam’ for many years but thus far failed to nail her. (That pun was intended :))
*Craigslist has since removed the personal ads section completely from their website to help fight online sex trafficking.
Fault vs. Responsibility
I got pretty angry when I first found out. My initial response was to start pointing fingers and try to figure out who was to blame. Who’s fault do you think it is that there was a brothel running in my apartment for nearly 2 years?
Is it the property managers fault for not screening tenants thoroughly? It’s certainly what I pay them to do!
Is it the police or authorities’ fault for not knowing about, investigating, or properly enforcing the law? It’s what they are paid to do!
Is it the building security’s fault for not noticing or turning a blind eye to suspicious activity? I pay premium HOA fees for security services. It’s a fancy building with private keys needed to operate the elevators – how can Security miss all the ‘guests’ that visited over the years!!?
Is it the Madam’s fault for running the illegal business in the first place? Blame must be laid on her… She is a professional criminal, afterall.
Maybe it’s MY fault for being so ignorant and not knowing any of this was happening?
Is it all of the above?
Ultimately, I came to the realization that it doesn’t matter who’s at fault. We can play the blame game all day long and it doesn’t help the situation at all. I was more concerned with who is responsible. And I’ve come to the realization that I am. I take 100% responsibility for what happens within the properties that I own.
This happened under my watch. I’m embarrassed, and it will NEVER happen again.
“You can outsource tasks. But you can’t outsource ultimate responsibility.”
Great. So What Do I Do Now?
I’ve written before about managing stress when shit hits the fan. My experience has taught me to tackle problems immediately, and head on.
The work was cut out for me, and I made a simple list of things to do:
- EVICT TENANT
- FORGIVE & FORGET
- MOVE ON WITH LIFE
The first phone call I made was to the CEO of my property management company. He apologized profusely and had no idea this was all going on. I let him know my expectations for a swift and ruthless resolution.
Within a few weeks the apartment was empty, clean, got new paint, new floors, new fixtures, and could pass a black light test. It’s as if nothing happened in the first place.
Bad experiences like this aren’t going to stop me from being a successful investor. On the contrary! As I rack up more and more bad experiences, the lessons I learn from them actually strengthen me.
A couple of takeaways I will never forget:
- When you least expect it; expect it! When things are all running smoothly and it’s almost too good to be true, that’s probably a good time to check up on your affairs and be suspicious.
- You can outsource management, insure against risk, and offload specific tasks. But you can’t hide from the ultimate responsibility you have as a property owner.
- Follow the process, not your emotions. Once I got over the initial shock, fixing the problem was actually quite easy. I’m getting much better at leaving my emotions at the door when solving problems in real estate. Make a list of steps → then follow them. Sometimes it’s that simple.
For those of you looking to own and operate rental properties, remember it’s not a matter of if, it’s a matter of when something bad will happen with tenants. But I hope this doesn’t scare you away from playing the game.
For every nightmare story, I have a hundred happy stories. The slight embarrassment that I feel about this prostitute situation pales in comparison to the pride I feel as an overall investor.
Thanks for reading. More stories to come!
Please leave your jokes in the comment section below.