Electrical Panel Upgrade

Today was an important day for my new apartment building. As I discussed a couple of days ago, one of the apartments in this building had an old fuse box that was incorrectly wired and had a broken fuse. It was clearly a fire hazard that needed immediate attention. Today, I removed that old fuse box and replaced it with a brand new 100 amp electrical panel. In the old fuse box, someone had wired three circuits to a single 30 amp fuse, even though each of these circuits should have had a separate 15 amp circuit (based on the wire size). All of that has been corrected and I can sleep better at night knowing that this apartment is correctly wired.

I also wanted to tell the story of my closing last Friday. I closed on 11 units, 7 of which were in one apartment building. Based on the cash flow, the retail value of this property was $230,000 and I had a contract to buy it for $30,000. This property had been owned by the seller since 1958. It was a great deal and I was anxious to get it closed.

About an hour before the closing, I received a call from the seller. He stated that he discovered that he would be required to pay "back taxes" and that his intention was to receive a net of $30,000 from the sale. I asked him if he owed back taxes and he said no, but that he had been told by a banker the day before that taxes were paid in arrears and that he would owe these at the closing. I wasn't buying this story for a moment because I was well aware that he owned about 15 rentals. He knew that the buyer was responsible for pro-rated taxes and that fact was also plainly explained in the contract he signed. At any rate, I played along and I told him that this was correct (that he owed the pro-rated taxes). He stated that he was selling the property to me at a very good price and that he hadn't expected to pay the taxes. He sounded like he was trying to back out of the deal. Of course, I had a signed contract and I could always sue him for specific performance, but that was NOT a good plan if I REALLY wanted to close this deal. So, instead of allowing a confrontation, I simply told him that I would take care of the taxes and for him to come to the closing on time and we would get the deal done to his satisfaction. In the end, I wrote him a check for an additional $780 and the building was mine.

Ordinarily, I would have had a lot of heart burn over this tactic by a seller. In fact, normally, I would threaten the seller with a lawsuit if they didn't follow through on the original terms. However, with this much equity and cash flow at stake, I wasn't about to let this deal slip through my fingers for $780. It was still an outstanding deal at $30,780! In fact, I would have paid three times that much and still gotten a great deal.