In February of 2022 we purchased a newly renovated 3 unit building in the South Austin neighborhood of Chicago. The price was 500k and we used a DSCR loan for the purchase.

We listed the top 2 (3x1) units for $1800 a piece and the garden unit (2x1) for $1600. There is also a garage in the back we charged $100 per spot for.

We quickly found tenants and were off to a great start!

Flood #1

Within a week, our garden unit tenant let us know that sewage was backing into his unit. Since this was a safety hazard, he had to move out and decided to find another place to live. We refunded his rent and deposit.

Plumbing: The plumber spent hours cleaning out “flushable wipes” from the pipes. We found that the pipes were getting clogged because of tree roots that had spread into our yard. The city came out and determined that the problem was actually on the city property, and not ours (the tree was outside our property line and so were the cracks in the pipes.) However, because the unit had been renovated within 3 years, they refused to fix the issue. Luckily, we were able to fix the problem by adding an additional clean-out closer to the street, at the front of the property, and clearing out the roots in the pipes. In total, this all cost us about $15,000 after cleanup and water remediation.

Flood #2:

We had the unit listed for rent and everything was looking okay. My wife was on the phone with a potential tenant as she was arriving at the building to view the unit. The woman was explaining to my wife how bad the rain had been and about the river flooding. As she opened the door, she explained to my wife that the entire unit was full of water.

We found out that Chicago received the highest amount of rainfall in 100 years. So much so that the river was flooding and the city decided to close off certain areas of the sewer system. That meant that other areas received even more flooding, including our unit. That entire clean up cost another $15,000.

Tenant evictions:

We were finally able to get a good tenant in the garden unit and he’s been there for just under 1 year. As soon as he moved in, our tenants in both upstairs stopped paying their rent. They had excuse after excuse and one of them even stopped communicating completely.

We decided to move forward with evicting one tenant at a time. Chicago is a tenant friendly city and it takes months of court dates to get them officially evicted. After about 5 months of court, it took the city 8 weeks to actually evict once the judge gave the order. They destroyed the unit, trashed it and even put about 30 knife holes in the walls. The turn cost almost $4,000, not to mention court fees, attorney fees, and lost rent.

We served the second tenant shortly afterwards and once they saw how the other situation played out, my wife was able to work with them to get them out without going through an entire eviction process.

Finding tenants:

Our management company at the time was trying to find new occupants for a few months and it was not looking good. There were very few showings and we were starting to get worried. One day, the manager called my wife very excited about an application they’d just reviewed. As my wife and I were reviewing it, we saw a few things in the application and on the credit report that looked funny. After what we had just been through, we were overly cautious. After about 10 minutes of digging, we found out that this applicant was applying with fraudulent information. The SAME fraudulent info our previous tenant used. Needless to say we were more than frustrated with our management company for not catching this.

New Management:

We weren’t satisfied with the way our property manager at the time handled the entire situation. My wife had to hand hold the majority of the interactions with the tenants and attorneys which was unacceptable. We found a new management company that has helped us flip the units, give our current tenant some structure, and has now found us 2 additional tenants. One of which is our first CHA tenant. We are very excited to finally have a fully occupied property after about 1.5 years of issues and huge sums money going towards them.

My wife and I love Chicago but it is not an easy city to invest in. We are looking forward to finally being able to move forward in a positive direction with cash flow and equity.

Chicago, Illinois

6 Votes