Don't Forget To Check the Utilities During Due Diligence

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This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for panties on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now here's your host CEO of We Close Nodes, Scott Carson.

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Welcome to this episode of the Note Closed Show. As always, Scott Carson. Excited to be here today Today's episode. I want to share something. I think we as note investors, or if you're looking to be a nut investor, it's an extra tool or an actual really badass thing that you have access to being a known investor than you would a traditional property investor. And this goes back into the due diligence side of things. One of the things that we are able to do being the note investor or becoming the bank is when we're performing due diligence on a variety of properties across the country. If the spreadsheet or the tape that we get from sellers will often say occupancy or non owner occupied or stuff like that. One of the things that we like to do is make sure it's still occupied because that is will definitely adjust and change your exit strategy. If it's occupied, you've got a lot more chance to get, you know, performing back on track. Modification of some sort, deed and loom. If it isn't occupied and it's vacant, then you've got the route of going potentially de. Tracking that person down or foreclosing. Especially as we're in the colder months, you know, winter, you don't want the frozen tundra wherever you're located for the power to be off or the water be off because then you'll have frozen pipes and other things. Maybe an indoor ice skating rink in some cases. So one thing that we have the right is to call the utility departments of these individual assets and, and say hey, I'm trying, I'm represent the bank or calling to find out if water is on or power is on or is gas is in is on at this property. If there's an outstanding balance, if the name matches up with blank. These are important things to ask. And most of the time when you say that magic word, I represent the lender, the bank. We're getting ready to foreclose. Just want to know what's owed to the city. You will get somebody on the other line that goes, oh hey, yeah, I'll give you some more information. Now they may not, they may just confirm things. They may not be able to give you the information. I'll give you a great example. We were calling on a, a property in Florida, the Bard and paid in a couple years and I so I was calling check on, say hey, can you verify, look, I know you may not be able to tell me exactly the thing, but can you verify that the electric is on? They're like, yes, we can verify the electric is on. Is there a outstanding balance? No. Okay, great. Can you verify, can you give me a date range of when the. The borrower started service? So it starts. Service was started back in 2018. Great. Is it this individual? Yes, we can verify. Great. That's all I need to know. Well, that tells me that the same person's still living in there. It's occupied right now for the most part. Now, occasionally you come across like I. You came across an asset in Flint, Michigan a few years ago when I called. Oh, power was on. Yes, power was still on the property, but still had a hole in the, in the roof. Okay. Snow was trickling through into the kitchen before, but power is on, people are paying it. So it's still most of the time if utilities are being paid, somebody is living in the property, taking care, maintaining. It's never been more important than it is during the winter months to make sure, hey. That you don't end up with just a frozen block of ice in some cases because we've had that happen before. You know, it's also important to know a. If water is on what the balance. If it's a huge balance, that could also be a red flag that, hey, somebody has stolen the copper or stolen the water here. We've had that happen before. I got a phone call from the city utility department and like, hey, you've got a running water out the front door of this property in Chicago. I was like, oh, great. And the kids were actually ice, you know, sliding down the driveway on cardboard because it become an ice, basically slide. So that's an important thing. But that's one of the things is you when you say, hey, I represent the bank, I represent the lender. Can you give me some information about gas power? I've had. I called the city of Indianapolis one time and we were going through four or five properties up there at the same time and they're probably not going to do more than three at a time for you. And that's okay. But this lady, she got on the horn and told me, it's like, oh, yeah, I was in here. You say when they showed up, they got an argument in our lobby. They started fighting. We had to call the cops on them. You know, that was kind of a funny thing. We've had another one where it was like, oh yeah, they're on a payment plan. They've had three notices to turn off, but they're on time or they're on a payment plan. And that's a beautiful thing. Now I would also highly recommend if you're going to call the city, well, somebody May be asking me here. Well, how do you find out the utility numbers? Well, first call the city because usually gas and water is handled by the city of some sort of electricity. It's going to be a little harder to find, especially deregulation, especially here in Texas. You don't know if somebody's using, you know, Reliant Energy or Ambit or some other third party since it's been deregulated. But gas and water is one of the important things. If you're sending out somebody to take pictures of the property, you're driving by the property. I always look for the glass globe on the side of the house and if you can see it, it's usually on the side of the house so that the meter maids or meter peeps can go by and take reading on it. That's for the electricity. Now if it's the backyard over a fence, you probably don't want to go breaking and entering somebody's backyard. You run the risk of getting shot. We, we're looking at, we had a property in St. Louis and we sent a student out there, this guy, he went up the driveway taking photos of the backyard. The guy in the house, the borrower came out, was like, what? Who the hell are you? I'm calling the cops. And I'm like, don't do that. All I need you to do is drive by, take a picture of the property and see if you can get both sides slow drive by. Okay? Now you gotta be careful. In some neighborhoods that drive by, you might get shot at or they might think it is a true drive by. But the important thing here is, like I said, if you represent the bank because you technically are the bank, you're becoming the bank, you're calling on behalf of the lender. Find out what's owed, utilities. This is important, especially in cities like Baltimore, Chicago where water bills will follow the property. They don't follow the borrower. In a lot of cases you got to know if there's an outstanding balance. You know, what's if the water's just running, running, running, running. That's an important thing to know too. You know, calling to check on the taxes, this is important thing to do. You can see if taxes are pretty, I mean it's pretty easy to go to the Metro online and the county tax office to see if taxes are owed or they've been paid. But it's also nice to call and see if, hey, would the borrower be able to, especially as you're working through negotiations, maybe a deed loan or a trial payment plan or future modification of asking the tax office if the bar would qualify for a payment plan. And they probably won't say yes to you because you're the bank. They want to be painful. But the borrower say, hey, would the borrower qualify for a payment plan? What does that look like? They need to bring half it to the table according to the table and pay the other over the remaining amount. There's some things that you can work out and that works in your favor than when you're contacting the borrower and say, hey, you know, you know what's going on here. I know you're behind on taxes besides just behind on me. Let's get you paying the first chunk of the taxes, let's get you paying here on time. Let's work out a payment arrangement of some sort. Because a lot of people will just think that they owe the whole much and fear can intimidate you into making some stupid decisions or not making decisions at all. You just got to pick up the phone and talk to somebody. And like I said, I've gotten so much great information from calling the county offices, utility departments, you know, those are things that really come in handy, you know, when you're doing due diligence and you can do this. Doesn't cost you things with a little bit of time staying on hold for a little bit. You got multiple properties on a tape at the same area. You know, oftentimes they'll let you do three at a time, but they manage more than that. You have to call back, that's fine. And it's funny, if you call and say you're buying the property, that's they're probably going to shut you down and not give you any information. So say you represent the bank, you're calling to find out what's going on, if utilities are on at this address and if this name matches up. Now if the name doesn't match up, then something's happened. Maybe they've deeded the property over to a third party investor or it's already gone to tax foreclosure. That's why you always want to double check taxes first and see what matches up. The names match up there, everything like that for you. But if utilities aren't, that's great. If utilities are off, it doesn't mean a bad thing except that it's probably vacant. You really need to make sure and check, you know, try to get into your access if the power is off. I'll give you a funny story. When I first got started as A note investor. We got this tape in from Wells Fargo Financial back in the day. It had a duplex in, in Phoenix and it was a little small. They were like two bedroom, one bath duplexes. And they were, they weren't attached, they were separate. One was in front, one was in back. And this goes back when there was a lot of foreclosures in Phoenix. Okay, well, this duplex was right off Highway 95. And when I sent my realtor by, take a look at it, we called, we first called and we thought it was gonna be vacant because the utilities weren't on. Well, lo and behold, there was utilities, the property, the squatters, the guy that owned the property actually lived a couple miles away. This was a property that he'd bought to turn an investment property. Then the market crashed and he hadn't done anything with it. And the properties needed some work. But there was two squatters in it, a couple bums, homeless people living. They weren't homeless anymore. But what they were doing is that on one side of the property they'd actually went out, dug underneath the chain link fence, ran an electric wire to an outside outlet because the next door neighbor was elderly, didn't go outside a lot. So they were stealing power from the next door neighbor on one side and on the other side, guess what? They were stealing water. They'd gotten really crafty. They had done a, gone and done a, a split and then buried the line like it was going further back in the house, further along the neighbor's house. Well, actually that line was a water hose that came into their bathroom. So they had running water through the hoe, through the window into their bathroom so they could shower, flush the toilets. It was pretty unique, but they, they literally buried the hose and they had it on and off, switch in there, you know, with the electricity. They actually had a big screen TV in there that we're watching, you know, with all sorts of. It looked like something out of National Lampoons Christmas vacation embryo utility cords and power strips off it. So that's one thing. You know, if you got people squatting, you know, reach out to the police department, let them know if there's an hoa. You really got to let the HOA know because you're going to start amassing some fines if they start throwing trash out or don't take care of the property and stuff like that. And it's important to know that stuff. But call the city, check utilities. It's one of the great things. It's powers on, powers off, waters on, water's off, gas on, gas off. It's also, you gotta realize during this time of year, especially if somebody's elderly, when we're doing our due diligence and when we see that a property has a, a ramp on, you know, a wheelchair ramp, that's usually a quick sign that somebody's elderly. Especially if you're looking at reverse mortgages, it's probably gonna be somebody elderly in the house and you may not know. So if it's elderly. The city often cannot and will not turn power and water off of somebody's is, I won't say incapacitated, but they're very sick or ill. They won't turn the utilities off, but the utilities keep running because they're not going to turn, you know, power off on. Somebody needs to be on an oxygen tank or on a monitor or something like that. It's just, they can't do that. And of course too, if you're in a cold area where you get ice and snow, they're not usually going to turn the power and water off in the middle of winter, especially in the middle of frozen tundra of Michigan or Ohio, the places like that. So keep that in mind. But it's still important. Take a look at things, get out, try to get eyes on the property if you can get it winterized. Especially if you find that you're taking the property back and it's vacant, especially if the power is off, water's off, get somebody out there. Mean if you're going to buy that asset and secure the property, once you fund, change the locks, you're the right to do that as the bank, get in, turn the water off, secure it, winterize the water heater. Those things are very important because the last thing you want to have is burst pipes and issues in a property that's going to cause you a lot more damage because of rehabs and things like that. But seriously, pick up the phone, call the county, check the utilities, check the taxes. I can't stress that as one of the greatest things you can do with just a phone call that actually a lot of investors don't do. They just go off a spreadsheet and say, hello. Taking that extra step helps you determine, hey, there's somebody still living in this property after a couple years or still somebody's taking care of. Allows me to sleep a little bit better at night when I know that somebody's still living it. Because when you have somebody living in a property, they've got the heat on, the power on, the gas, and guess what? That property is usually in better condition than an empty property because any property is going to get vandalized, trashed out, stripped. Something's going to happen to it. Copper goblins will show up, the air conditioner will walk off, stuff like that. But if the utility's on, somebody's living and taking care of it, hey, it allows me to realize I probably have a lot less in rehab costs in that property because somebody's living it. So remember that when you call each other, say, hey, I represent the bank, I'm with the bank. I just need to double check some information as we're getting ready to foreclose and, you know, see what balances are. If we've got to pay that, you guys make sure they're paid in whole. And it changes the conversation immensely because you as the bank, as a lender, you have a vested right in the property. You're not the owner, the vested right being the landlord, not the landlord. So add that to your due diligence checklist, especially this time of year, you'll find out literally will help you determine if you want to accept that bid or go on. If you find it's been vacant, power has been turned off, utilities been turned off for several months. It's, it's usually a sign that, hey, it's a no go for the most part. But go out, take some action, buddy, and we'll see you all the time, everybody. Bye. Sam sat.