How I lost money in real estate before it was fashionable, Part III: The Battle is Joined.

Part II:  The Limits of the Law

Part III:  The Battle is Joined

Major Mistake #3

In the comments section of Part II you may have noticed a couple that celebrated my ultimate success in the completion of my unit.  At the time, me too.

Things looked pretty good and I was feeling thrill of victory. But I had lost sight of the bigger picture.  I had no idea how a condo actually operated or how expensive getting it operational would prove to be.

Major Mistake #1 was buying with no due diligence.

Major Mistake #2 was not accepting the refund when offered.

Signing the papers and actually buying the place was Major Mistake #3.

No going back now.  I owned it.  With all the rights, privileges and, ahem, obligations that entailed.

I should have walked away.

I should have never signed.  I should have abandoned the 5 grand and chalked it up as lesson learned.  I should have returned to my beloved rental. But no. I signed and in the process signed on for still more grief.

So now I owned this 45k condo and a 40k mortgage.  Principle and interest came to about $370 per month.  The condo fee added another $100.  This would shortly double, bringing my total monthly tab to $570.  My apartment had been costing me $165.  Granted, it was smaller and it certainly wasn’t providing the hard core education I was now enduring.  But it would have saved me $405 each and every month.  Real money in those days.  Not to mention the time and grief.

His turnover game done, YP was now relentlessly focused on getting the the individual units finished.  This was not just due to the pressure from me and my fellow owners.  He needed the cash that now only closings could offer. Contractors wanted to be paid.  The bank wanted its money.  For everybody on team YP, that became job 1.

In the push to get the apartments finished and closed, all work to the common areas ground to a halt.  Those of us who had moved in were living in a construction site.  Naturally, we turned to pushing for this work to be done.  And naturally YP resisted doing it.  He needed all his skimpy resources focused on the units so they could close.  There was zero benefit to turning his attention to the common areas.

The state of the transition of ownership further complicated things.  Since we owners were still so few, the terms of the condo agreement meant we couldn’t yet form an association and board to operate the place.  That privilege went to the developer, YP, along with our monthly assessment fees.  He was desperate for cash and these promptly disappeared into his general funds.  None went to the operation or betterment of the building.  That, of course, was critically important to us.

As a young guy with a blossoming career the last thing I wanted were the chores of homeownership.  I’d had a belly full of those taking care of my parents place while emphysema slowly killed my father.  When he died and mom moved to Florida, painting, patching, mowing, raking, shoveling and the like became things of my past and I intended to keep them there.  Hence, the appeal of the chore-free condo life.

No more of this….

That proved true. Not a mower, brush, rake or shovel did I touch during my entire condo-owning experience.  Instead, I became part of a guerrilla movement.  A freedom  fighter on a legal battle field.

….but plenty of this

We fought for fiscal accountability of our condo fees.  For the completion of work to the common areas.  For basic services.  For control of the association. And, like many guerrillas, just for the sake of fighting in the end.

These battles were ceaseless and devoured countless hours. We held endless meetings and formed countless strategies.  We were all young and clueless.

But with each closing our numbers grew.  We were a tight, battle scared little group by the end.  It dragged on for months.  I began to long for the simplicity of just mowing a lawn.

By the middle of 1980 the condo market had utterly collapsed.  Like a nightmare musical chairs, YPs sell-refund-resell game had left him standing.  The once sold out building was now a half empty and half finished fiscal disaster and legal war zone.  A completely unappealing prospect for additional buyers, if there had been any additional buyers to be had.

One fine October day YP disappeared into the night.  He left the bank holding its unpaid and un-payable notes.  He left us with the unfinished building, unpaid contractors, empty units and a looted association fund.  Last we heard he had fled to his home country.  Rumors that he is bricked up behind a basement wall are, I believe, unfounded.  Although this would be in keeping with a fine Chicago tradition.

This is probably not YP

The war was over.  Our enemy had fled the field of battle.  All that was left was the rebuilding, and the taste of ashes in our mouths.

Our hardy little band of owners promptly formed an association and elected our first condo board.  As a first order of business, we opened a bank account and began directing the monthly dues into it.  Second, we doubled those dues. My $100 monthly assessment jumped to $200.  There was much to be done and no way around raising the funds to do it.

In the summer of 1981 the bank gave up and held an auction for the remaining 29 (of 58) units.  Those like mine went for 20k to 24k depending on condition and precent completed.  After two years of strife, labor and anger the building was sold out and on the mend.  The common areas were done and looking spiffy.  Finally I could reclaim my free-time and enjoy my new home.

and then there were none

I just had to forget it was worth half of what I had paid and costing me twice the association fees I’d signed on for.

The financial hemorrhaging, of course, had just begun.

To be continued….

Part IV:  I become a Landlord

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