At an upscale Palm Springs resort, Carter Hayes (Michael Keaton) is enjoying a passionate evening with his lover, Ann. Suddenly, their intimate moment is shattered as two men burst through the door, brutally beating Carter with baseball bats, leaving Ann mildly injured as she holds him and listens to his haunting thoughts of escape.
Meanwhile, in San Francisco, Drake Goodman (Matthew Modine) and his girlfriend Patty Palmer (Melanie Griffith) embark on a hunt for a house in the upscale Pacific Heights neighborhood. They discover a grand, but rundown Victorian home, comprised of three apartments. This fixer-upper is intended as an investment for them, with the plans to rent out two of the three apartments to cover their mortgage. With enthusiasm, they dive into renovations, eager to modernize the space.
Among the first interested tenants are a lovely Japanese couple, Toshio and Mira Watanabe (Mako, Nobu McCarthy), who gratefully agree to rent the one-bedroom unit. Another potential tenant, Lou Baker (Carl Lumbly), who is reeling from a divorce, is hesitant to fill out a credit application but ultimately obliges. Unfortunately, as luck would have it, his application gets lost when the Watanabe's move in.
Carter enters the picture when he approaches Drake with interest in renting the studio apartment. He exudes confidence, flashing a large amount of cash and promising upfront payments, yet remains evasive about filling out the necessary credit application, raising red flags for Drake. Despite the unease, Drake, convinced by Carter’s charm, reluctantly agrees to let him move in after assuring him the money will arrive shortly.
As time unfolds, Drake grows more distressed over Carter’s presence in the apartment. He becomes increasingly suspicious when he discovers odd signs, like the stacks of out-of-town phone books filling Carter's space, and strange noises emanating from the unit. Drake's frustration escalates to the point of cutting off utilities to try and force Carter out, resulting in police involvement—much to Drake's dismay, as tenant laws protect Carter just as much.
The tension mounts when Patty reveals that she is pregnant, only to suffer a devastating miscarriage shortly after. In a moment of rage and desperation, a confrontation erupts between Drake and Carter, leading to a chaotic scene where Drake ends up behind bars, thanks to Carter's manipulations. Meanwhile, with the court ruled against them, the nightmare of living with a conman only deepens.
After several attempts to evict Carter, which reveal more of his deceptive strategies, Patty learns the truth about his real name—James Danforth and begins a relentless pursuit to expose his schemes. She trails him and discovers he has been fraudulently using Drake's identity, accumulating debts and swindling multiple victims while enjoying a lavish lifestyle supported by deceit.
The plot intensifies as Patty sets a trap, charging extravagant amenities to Carter's room under the guise of being his partner. After numerous harrowing confrontations, the climax reaches its peak when Drake and Patty finally confront Carter in a life-or-death struggle, resulting in Carter's untimely demise.
Months later, with the dark chapter of their lives behind them, Drake and Patty manage to sell the house, albeit with a sense of apprehension lingering in the air. When asked about their reasons for selling, Patty simply states, "it was just an investment," a chilling reminder of the turmoil they endured.
