All Forum Posts by: Rance Smith

Quote from @Rene Hosman:

Quote from @Rance Smith:

Quote from @Rene Hosman:

@Rance Smith WOW! First of all, what a story! Second of all, you're a great writer this was so clear and informative. Thank you so much for sharing your story, I'm glad to see you chose the Success Stories thread because this is truly a success story and here's why 

•You had enough in reserves or in an emergency fund or the ability to get enough money somehow to fix these issues and that is HUGE in itself. So many folks are out here touting making millions with $0 down and you proved that even with all the due diligence and good investing sense, you have to be prepared and take risks that are proportioned to what you can withstand. I'm sure this was not comfortable or fun to spend this money for the fixes but the fact that you were able to find a way to do so and stay in the game is really a feat so kudos there!

•You persevered and did what it took to get the job(s) done. Real Estate is not a passive investment as so many say, you demonstrated you're in it for the long haul and willing to do the work

• You learned from the experiences - you took the info from your first eviction and made the second potential eviction easier. You noticed a pattern in the fraudulent tenant applications and you moved on from a PM who wasn't paying enough attention to notice that themselves

Truly a masterclass in landlording 101, thank you so much for sharing this with everyone!

I'm curious if you can share a little bit more about if you have cost estimates in how much going through the eviction process was in terms of your time, legal fees, lost rent? Did any insurance cover any of this or was it all out of pocket? I've never been through this process and it's my biggest fear because it seems to be SO costly!

Thank you Rene, 
As far as the eviction cost, with lost rent and legal fees I'd say it was close to 18k. The lost rent was the biggest expense at 14, 400. The legal fees were around 4k. Insurance helped with the first flood. The covered majority of the lost rent. They did not cover anything for the eviction. 

 I had no idea that insurance could cover part of lost rent when there are eviction proceedings.   

Is this because you had a PM with insurance for this kind of thing or was this a clause in your individual building insurance policy? Did they only cover this cost once the eviction process was complete and the final loss was assessed? 

Hey Rene, 

Insurance did not help with the eviction costs at all. 

Insurance only helped cover the costs of lost rent when we had to move the tenant out of the garden unit that flooded due to the sewer backup. 

I apologize for any confusion. 

Quote from @Eudith Vacio:

@Rance Smith WOW, this is wild 😩 -you're a great writer BTW, definitely had me on my toes with the storytelling. Sewer issues in Chicago are very common which is why I ALWAYS recommend / almost require my clients to get them done + if there's trees in front or in the back of a property, there will almost always be plumbing issues + needed rodding. 

I live & invest in Chicago but recently have turned my head towards Northwest Indiana because of the landlord friendly laws, it's ridiculously costly in Chicago if you have to evict! 

But section 8 is the way to go, higher rents + more security. It doesn't sound like any of this discouraged you, and I trust that things will get better!

Thank you Eudith, 
We definitely know better now! Yes, I believe it will be better from here on. 

Quote from @Rene Hosman:

@Rance Smith WOW! First of all, what a story! Second of all, you're a great writer this was so clear and informative. Thank you so much for sharing your story, I'm glad to see you chose the Success Stories thread because this is truly a success story and here's why 

•You had enough in reserves or in an emergency fund or the ability to get enough money somehow to fix these issues and that is HUGE in itself. So many folks are out here touting making millions with $0 down and you proved that even with all the due diligence and good investing sense, you have to be prepared and take risks that are proportioned to what you can withstand. I'm sure this was not comfortable or fun to spend this money for the fixes but the fact that you were able to find a way to do so and stay in the game is really a feat so kudos there!

•You persevered and did what it took to get the job(s) done. Real Estate is not a passive investment as so many say, you demonstrated you're in it for the long haul and willing to do the work

• You learned from the experiences - you took the info from your first eviction and made the second potential eviction easier. You noticed a pattern in the fraudulent tenant applications and you moved on from a PM who wasn't paying enough attention to notice that themselves

Truly a masterclass in landlording 101, thank you so much for sharing this with everyone!

I'm curious if you can share a little bit more about if you have cost estimates in how much going through the eviction process was in terms of your time, legal fees, lost rent? Did any insurance cover any of this or was it all out of pocket? I've never been through this process and it's my biggest fear because it seems to be SO costly!

Thank you Rene, 
As far as the eviction cost, with lost rent and legal fees I'd say it was close to 18k. The lost rent was the biggest expense at 14, 400. The legal fees were around 4k. Insurance helped with the first flood. The covered majority of the lost rent. They did not cover anything for the eviction. 

Quote from @Jonathan Klemm:

Wow @Rance Smith - Thank you SOO much for sharing your journey.  I can honestly say I've had a similar situation with the flooding...one of our garden units in our Cicero property flooded twice as well, one of the times due to city back-up.  Also, I have dealt with 6+ Chicago evictions in one building lol

I have learned that if I take all these rough experiences as a badge of honor and share them like you are, each one only makes me more equipped to be a better investor.

The education & experience received in 1.5 years takes some investors 10 years!  Keep at and good things are coming your way! 

I appreciate the words of encouragement. It's crazy how much we both have had to deal with. 

Quote from @Paul De Luca:

@Rance Smith

Wow, that's nightmare situation you went through...

Just curious, did you do a sewer scope inspection prior to closing on the building? It's a simple way to gauge the condition of the building's main sewer line.

Unfortunately fraudulent rental applications are more common than one would think so good on you for catching that. I have some experience with that too.

Hey Paul, 

our closing was actually delayed a few weeks due to a plumbing inspection not being completed. They even had to dig into the street to fix some things and get the city to sign off. We did not know that the plumbing inspection and city approval did not include the sewer. 

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.