All Forum Posts by: Kenneth Dai

Thank you for adding this information and starting the conversation.  I can tell you from first hand experience that what you state has been true for me (unfortunately, I am one of those learning the hard way).

I think, if possible, one should question what the first-time CHA inspection pass rate is for a particular PM, % of units that are under abatement, policies and abilities to collect the tenant portion of rents, costs of an annual inspection (from what I've learned, there are always costs after each inspection), plus what vendors they use for things like exterminators.  If anything, the whole abatement issue seems like as big/critical of a cost as vacancy, since either way, you aren't receiving rent.  In fact, abatement might be even worse, since that means there are active costs to address an inspection issue, on top of not receiving rent.

@Dumitru Anton good clarification - water + sewer together makes sense.  I saw the information about garbage, and was trying to figure out how I know if my property is part of the city garbage runs.  Trash is being picked up, so far as I know, and I couldn't tell from the bill if my property was covered by the city of Chicago.  Should there be a separate line item showing charges for garbage pick up?

@Michael Rossier for Chicago in particular, you can go to thecha.org and check in the 'landlord' section.

@Ante Vujic and @Mark Ainley thank you for your expertise.  These BiggerPockets forums really are such a great way to both give and receive information.

I'll post what I figure out.  I think, based on the size of Letts Property Management, I will not be able to get the login/password for the vendor account, but I might be able to get the inspection ID and tenant info that Ante mentioned.

@Mark Ainley Thanks for the tip on the water meter.  I do see that the bill is on metered water, rather than estimated water usage.

I'm not getting much response to my e-mails from Letts Property Management.  I'm going to give them the benefit of the doubt for now, and figure that they are busy making sure all the properties are in tip-top shape rather than replying to e-mails all day.

I did get to chat with my property manager a few weeks ago, and he asserted that the current tenants have re-signed new leases.  I've requested copies of those leases, just so I can verify.  I think it would be nice if leases or other documentation could be uploaded and made visible to owners through the web portal.

Another question I'm hoping to find the answer to: do owners who use property managers have access to the CHA portal for checking on inspection results and inspection schedules?

@Gary Miller I have worked with Memphis Invest, and I think that the company does actually represent what an excellent turnkey provider can do.  I've had two properties with them since November of last year, and plan to purchase some more this year.  With the properties we got from Memphis Invest, I've had no issues, and it has been more passive than I had initially anticipated.

You are welcome to PM me, if you would like further details about my experience.

@Ante Vujic Thanks for the information.  I did receive a list of various fees, up front, from Letts.  I was mostly wondering about how standard the utilties costs were.

Also, with respect to property management fees, I appreciate your advice on asking about how CHA issues could be accounted for, so that it's clear how that can affect cashflow.  I did not expect multiple inspections for each unit, along with such large maintenance expenses after one year of occupancy.  On the maintenance side, seems that units will possibly need full re-painting during each year (not just during tenant turnover), based on how the last CHA inspection went for my units.

I'm starting to learn more about how the property management charges work, at least with Letts PM.  Yes, the PM fee is 8% of gross rent.  The fee gets assessed even when the property is under abatement, which makes sense to me, since it is still occupied and (if under abatement) probably has several issues that require PM attention.

Lease up fees include a $500 move in fee, and from what I hear from others, Letts charges an additional fee for advertising.  I'll have to look through my contract to see what that fee comes to.

Those fees were what I expected, but there have been additional fees that surprised.  There's also an annual web portal fee ($95).  Also, for each inspection that a property manager sits, there's an additional $100 or so fee.  If property fails, then there is the additional fee for sitting the second inspection.  Looking back through the history of the units I own, it doesn't appear that either has passed during the first inspection.  Also, if the tenants complain to CHA of a life and safety issue (loss of heat, sewer gas smells, rodents) then there is the additional fee for another inspection, pus the costs of addressing the issue, plus the cost to sit another inspection.

In short, I changed my original estimates for maintenance from 5% to 10%.  In reality, I didn't actually expect the units to require maintenance right off the bat, but that appears to have been an incorrect assumption.

In terms of other costs, the water/sewer bill (owner responsibilty is standard for Chicago multifamilies) came to $300 for the last two months.  There's also a small electrical bill, but i haven't been able to see what that would come to, yet, as the meter was just installed to account for the common areas.

I'll sum up the costs versus the rent in another month or two, assuming both units pass inspection and are receiving rent.

Hope this is helping to answer the various unasked questions that folks might have - I certainly wished someone had posted this information before I had purchased, more so that I could figure in these costs and ask more questions than because it would have changed my mind.

If there are more experienced Chicago investors out there - maybe you could baseline if these are the usual charges to expect from property management in Chicago?

After looking at the guide on what should be posted in the 'Investor Deal Diaries', I realized that this was probably not the spot for an already closed set of deals with a turnkey provider.  Alas, I probably should have read over the posting guide before posting here.

So, I'll just close out this thread with a few more facts.

Property management fees are 10% of gross rent.  Lease up fee is first months rent.  Those are the only charges I have seen in the last several months.

The PM software Memphis Invest uses is pretty nice, in my opinion.  I can see documents stored there (like leases, scope of work documents, etc.) so I don't have to ask for those documents when I need to submit them for a loan.  Also, I receive a message whenever rent is posted to the account, which is also nice.  The other software I have experieneced is Rentmanager, and I have yet to figure out how to be notified when rent is posted.

Oh, and I highly recommend a visit to Memphis, to both meet the team, as well as seeing the area and neighborhoods (plus enjoying some fried chicken and waffles or ribs).  My favorite part of seeing the Memphis Invest offices (I just can't shorten it to 'MI'... makes me think Mission Impossible) was seeing the various slogans they had around the office, especially 'you can have excuses, or you can have results'.

@Fred Sams That's mostly why I've posted this experience.  Maybe it will all turn out fine, maybe this will turn out to be a loss (hope not).  In the end, though, I hope that I can provide a balanced view - I'll own my own lack of due diligence, while also pointing out the parts that could improve from property management.

@Gautam Venkatesan Yes, you are correct in that I bought into the story too much... I heard that the original owner wanted out in order to move into multi-family investing.  Was probably more correct that he did not enjoy owning this property anymore.