All Forum Posts by: John Warren

@Asim Purses this question comes up pretty regularly in the forums. There is an added risk layer if your basement unit is not legal and you know about it. Most of these are sort of a giant greay area. Check your zoning cert from when you bought the property to see if it is included. 

If it IS a legal unit, you can always add another electrical or gas meter to service the unit. If it is not legal, you will struggle to have the tenants pay their own utilities and will likely need to offer this as an all utilities included deal. 

Airbnb is a whole separate animal. If your unit is not legal, this is probably the "best" way to monetize the unit since you are just renting out part of your house. It is short term. 

The duplex up/down strategy can also work, but it rarely pays off if you need to do the construction. 

@James Wise we follow our process religiously. We do payment plans with tenants who have financial issues for the first 30 days, but after that we file right away. This is where most folks go wrong. Once we file, our attorney has a high success rate of working out evictions with folks and getting earlier resolutions or rental aid if they are willing to do their part. The collaborative, but firm approach is what I have learned works. 

Trust but file. We don't go past he 30 days anymore. 

@Kristin Vegas leasing can be so challenging in the winter. It is also very hard to do a good enough job staying in communication with owners when leasing is a time-consuming job. A lot of times, you think you have the right person and then they ghost you right when you think you are locking them in. The worst!

Where is the property located? Is the manager recommending good rental prices that drive traffic to the property? Ask them what type of lead flow they are getting. We typically find we need 7-10 physical showings to convert to an application. We often need a few applications to find the right person. The right person.... is gold. 

@Don Aleshire I think the decision to manage remotely should be made within the context of your expected hold period. A lot of "buy and hold" investors do not actually hold for all that long. Many sell within a few years (3-5 years is common). 

Are you coming back to Chicago? Self-managing makes sense. Are you moving and never returning to live here? Self-managing may make sense. Do you think you will hold these until the return on equity isn't that amazing and then you will 1031 exchange them? In that case, maybe... it is worth it, but probably not. 

Ultimately, the cash flow from these buildings is probably not actually driving your lifestyle. You sound like you are growing your equity in real estate as part of an overall strategy. I have a feeling you will self-manage successfully for a while, but the real test comes when those random events happen (heat goes out, major leak, etc). The day to day is easy.... it is the asynchronous events that your random buddy isn't equipped to handle that end up making it hard to manage from out of state. 

@James Wise I love the clickbait headline! This has been a fun thread already!

We manage 400 units and as someone who has been purchasing more and more C (ok C-) class properties we have plenty of evictions. IN total last year, we had exactly 20 evictions that we filed. Of those 20, roughly half went the distance (6 months). Of the other half, we were able to get a lot of them out early through careful, hands-on management. 

Of the 20 evictions we filed, all 20 were legacy (inherited) tenants. We filed zero evictions last year on a tenant we placed. None. 

Also, most of them were in buildings we had purchased that were distressed so that is part of the game. 

@Sarah Hadassah Negrón a lot of what @Drew Sygit mentioned, but mostly it is not a good use of your time and bandwidth. We manage around 400 units in the Chicago area, and we get almost nothing back once a tenant is out. I have been working to solve this issue for a few years. Every attorney and experienced PM or owner operator say the same thing. The tenants have no money, so your judgement isn't worth much. 

Ultimately, the best thing is to get control of your property and find a good, new tenant. 

@Adeel Makda there are a lot of great options in the Chicago area. Where is the property located? I feel like that will determine who is a good fit for you. 

@Ken Almira low money down is not a gimmick. I have had a ton of clients make a lot of money here in the Chicago area over the years. It is a LOT harder now than it was five or six years ago. You might be breaking even or losing a bit of money the first year or two while you stabilize it. It probably is still worth it if you can raise rents, reposition the property, improve the efficiencies of the property and optimize debt when the time is right. 

@Sarah Hadassah Negrón welcome to the forums! 

For the eviction day, you will need someone extremely reliable to be on site. You have to be there early (15-20 minutes before the first possible stop) and you have to approach the sheriff. You also want to have the key if possible so you can slip the lock open... otherwise they bash down the door. Then you are stuck getting someone to secure the unit if they do that.  

In terms of a money judgement, I would be much more focused on getting possession back. We have been chasing money judgements for a few years and haven't gotten anything of substance back. We use the collection service through our PM software, but most of these folks become virtually uncollectable at a certain point. 

@Drew Murtaugh it is going to be very hard for you to do this type of deal on your first go around. Likely the reason it cash flows on paper is due to a very large construction component that you might be underestimating. Foundations actually don't come up that much in Chicago.... so many awesome brick properties. If you have an issue, it gets costly quickly.