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My First Short-Term Rental Tenant!

Picture of Melissa Darling
Wow, it has been a journey. 
 
It all began with a capital raise during a challenging time for the world as the war in Russia and Ukraine broke out and many investors were holding their capital close. Eventually, after many phone calls and deal walkthroughs, the capital was raised and we closed on the 4-unit multifamily in Roatan, Honduras. 
 
It was a challenging month and a half that I lived on the island alone and without my loved ones for support as the closing was delayed and I began creating a scope of work for the first time. 
 
Thereafter came networking with friends and locals to find contractor referrals, scheduling interviews and obtaining bids. And then re-obtaining bids in an organized fashion so that I could affectively compare all the different quotes. I remember it was invigorating and also frustrating at the same time.. See takeaways from that process   here.
 
Once a decision was made, I came home and began the painful leg of the journey forward with this project - the renovation and management.
 
Although I took care to interview 7 contractors and had experience & knowledge passed on from Fortune Builders as well as friends and colleagues in the fix and flip space, it's always more challenging to implement in real time. This is when the real learnings come. And oh they came..
 
This is when the new and inexperienced fix and flip real estate investor becomes project manager in another country.. The plot thickens. 
 
Although my contractor came very highly recommended from my interior designer, whose work is showcased at one of the more popular boutique hotels on the island  The Beach House Hotel (my contractor oversaw this project however was not the project manager), the results of his ability to affectively manage a project site were disappointing and ultimately very taxing on my mental health. 
 
As a first-time flipper, I found myself needing to fill the shoes of an effective project manager without understanding the full order of operations, time for construction, etc all while needing to make sure all necessary materials were on site at the right time so that we did not slow the timeline.
 
Essentially, I became the executive assistant for a very disorganized contractor who struggled to follow up on tasks, even when reminded. I became very good at asking questions and picking my contractor's brain to pull the information I needed from him in order to make a schedule and keep us on timeline. I also became extremely well-versed in task management and follow-up; lots of follow up...
 
The internal struggle begins..
 
As an athlete at heart, I like to be good at things and I don't settle for anything less than almost perfect (good enough in my mind is near perfect for the average individual). And so this brought massive challenges before me as I struggled to manage a contractor that was essentially unmanageable. 
 
It took five months to understand that my challenges and struggles with the project were not my fault. Although I would frequently get frustrated with the inability of my contractor to report on tasks agreed upon in the earlier part of the day, I ultimately was blaming myself inside each time something didn't go as planned or was missed. I would not wish this upon anyone. 
 
It took multiple months to heal the wounds these 5 months created. Releasing blame from myself came first, then releasing resentment I felt towards my contractor. It was a whole process of acceptance that I needed to learn to re-engage with myself and this contractor again. Needless to say, he will not be employed for the remaining segments of this project although I did allow him homage on site while he attended to other business and watched over the property. 
 
The pain didn't stop there.
 
As if that wasn't traumatizing enough, our real estate agent failed in almost every way possible it seemed. At this point I was learning to let go of control and trust others to do their jobs affectively; hire the professionals. Because it worked out so well for me the last time.. 
 
Anyways, after a delayed listing, little effort put into the listing description, mis-marketing information and incorrect listing price, I realized that the learnings were not yet over. 
 
Grappling with the difficult decision of whether to end the relationship prematurely or give him the benefit of the doubt, I sought outside counsel with other real estate agents on the island. With my main contact preoccupied setting up her new brokerage, I was left with all roads pointing towards sticking with my current agent (he is the broker owner of the largest agency on the island, all agents respect him however that does not mean that he handles each listing with care). 
 
As we re-engaged the listing at the correct price, revamp the language and photos to make it more appealing and marketable, we wait. And wait. And wait.. all with very little communication with regards to showings, feedback, marketing tactics, list price, advice, etc.  Essentially all the things that I would expect to receive from an agent listing a property for sale at 9% commission were lacking.. 
 
Luckily, the relationship wasn't working out for him either and he initiated the departure. It worked out that the agent I originally wanted to work with was now available and her brokerage was fully set up and functioning with a whole new staff of motivated and vetted agents. I interviewed as many as I could and then settled on one entrepreneur expat who owns a business on the island herself and showed understanding and compassion for my needs in that moment. 
 
Now the fun part comes in.. 
 
It is now late-April and I'm preparing for a mortgage payment that is due mid-May to the seller who offered up a seller-financing note of $205,000, half the purchase price. A payment in the amount of $110,000 and change is due May 16, 2023 and we have not yet sold a unit.. 
 
The repercussions for missing the payment is foreclosure at my expense. At this point I am worried. Up until now I have been in contact with the seller, have a few potential investor buyers looking at the property, and need to fill in my investors with our situation. 
 
Oh, and I forgot to mention, earlier in March the municipality is widening the road and started construction in front of our property, cutting down mature areca palms along our lot that separated it and provided a buffer for noise and privacy to the road. Essentially, the lot is a dust pit and the curb appeal is now null and unmarketable.. 
 
Oh, and one more juicy detail that I forgot to mention. The seller's bank took 5-6 months to get the mortgage off which in turn, delayed our ability to list the property. So we waiting 8 months from purchase to list until the property was fully registered in our name with no encumbrances.. gotta love foreign processes! 
 
The Dreadful Conversation 
 
On February 22, after having a mindful conversation with the seller regarding my financial situation, the destruction of the marketability of the lot from the road construction, the listing issues, the potential investor buyers I had found and the backup plan to raise the capital if all else failed, we came to an understanding that we are in shaky waters. 
 
He had already committed the capital to another investment project that was funding the construction of schools that were supposed to open that fall and any delays would challenge the ability of these children to receive adequate schooling.. 
 
At this point, we just need to find the money. Whether it's an investor buyer, passive investor, equity investor, bank loan, etc we were in agreement that neither one of us wanted to go through foreclosure. 
 
Thus immediately began the challenging conversations with my investors to notify them of the severity of the situation. After receiving advice from friends and colleagues in the space, all very experienced and well-versed in legal persecution of notes within real estate investments, I began documenting all conversations with care..and fear. 
 
Fear of letting my investors down, of not upholding my promise, of losing their money. Money is a funny thing in the United States. We hold it so deer to our person that some might say we identify ourselves by how much of it we have. Our self-worth can be tied to money. 
 
Bolstering self-worth in others is a strong value of mine. I see real estate as a way to build wealth, not as a way to deteriorate it (ironically without realizing how much this project had deteriorated mine - I'm talking the kind of wealth that one has inside, not the physical wealth that society has deemed as holding large amounts of money). 
 
What happened next? 
 
I won't go into all of the details but there were many phone calls, lots of advice-seeking and a very raw and open Melissa. At this point, any shred of my ego was dismantled and what was left was pure flow. I was on a ride and surrendered to whatever came. 
 
I wondered how does one make decisions in this case? Well, I learned that I don't. I seek advice, accumulate knowledge and resources, come up with potential solutions. Anything at this point was better than foreclosure. Anything was better than losing my investors' capital. 
 
Everything was well-communicated to my investors'. I was as creative as I could be to attract the money to the deal that we needed. The investor buyers were not making any moves and so I had to make moves elsewhere. 
 
Ultimately, it was one of the original investors who doubled-down on his investment in order to save it. He believed in his original investment and in my ability to see it through to the finish line.
 
At this point, he understands that with the shift we saw in the market this year, it's about getting his money back and any interest received on his money is simply a bonus. *This is the kind of investor emotional intelligence I will be seeking in future investors. This project has taught me over and over again the importance of working with people of similar values. 
 
The Whip Lash
 
I thought I had great news to share. The investment was saved, we are not going to get foreclosed, my investors' capital is safe and we bought ourselves more time. How to structure the new capital coming in was still a question in the air. 
 
Again, I defaulted to flowing. I had already made a generous offer to any investor willing to bring in the capital to save the deal, communicated that offering to my investors, and now needed to confirm the logistics. 
 
Well, the first conversation did not go so well.. Maybe they did not view the emails I sent communicating everything or maybe they didn't understand the grasp of the situation, or maybe I simply caught them at the wrong time. 
 
In any case, although I was able to take the content from that conversation and create a solution that required no documentation or changes to my investors' original notes, the conversation left a deep wound that again took a few weeks to understand and then heal. 
 
Leadership
 
No one taught me what it means to be a leader. I've read books, "A leader with not Title", been on sports teams my whole life and showed up as the best version of myself whenever I could. But there was always a disconnect between my expectations of how to show up on a team or within a group of people, and how others acted. 
 
Part of my healing journey after those three weeks of challenging conversations with my investors was accepting what leadership really is. 
 
It's working with other peoples' expectations of you without knowing what they are, and trying to do what is best for the masses while receiving criticism at every turn (either from myself or others). It's bearing the burden to carry the bulk of the stress-load and share only a piece of that burden with the world. It is acting with integrity to my own values amidst push-back, scrutiny and reactivity from others. It is staying true to myself no matter what comes my way. 
 
Think of the ice berg. Most of the berg is underwater. That is the pain, the struggle, the stress that every leader carries with them each day. The burden of making the best decision for everyone while knowing that ultimately, there will be some that are disappointed with the outcome. There will always be those that are ready to fight in stressful situations. There will always be those, ready to blame. That is a burden of a leader. 
 
And now..
 
This experience has taught me so much. It was a painful journey, and now today I..
  • am in the midst of putting in an exterior pool and patio deck (which will inevitably increase the property value as compared to what we are putting in, at least will make it more marketable while the road construction is still ongoing),
  • hired a new contractor who to-date has done a very good job and has proven himself trustworthy (although he speaks 100% Spanish the project is still moving smoother than the first unit reno), have one unit on short-term rental (which we have received our first 3-night stay this past week),
  • have one long-term tenant in place,
  • will be professionally staging another unit at the end of this week to put on vacation rental 
  • am scheduled for a cleaning and staging of the final unit this week to be rented on a month-month lease. 
Things are looking to be on a good track and my energy towards the project has severely improved. Throughout all the challenges that this project has brought, it has taught me more than any college degree or online course ever could..
 
I hope the remainder of this project and future projects to come are smoother on their journeys as compared to the challenges outlined above, however I know that within, I have gained substantial resiliency to work through challenges that comes my way and have resourced the support system to help me through them. 
 
Sending love, acceptance, gratitude and healing. I hope this journey provides clarity to you in some area of your life or in your future life 🙏🏼