All Forum Posts by: Sean McKee

 I don’t know what your local codes are but I’d be careful with just listening to one contractor. I’ve had similar situations with companies trying to take advantage.

I’d get another opinion from a different contractor and research your local housing codes. It seems a little fishy to have to update the HVAC system if it’s capable of servicing both units.

Like most have said here. 8% vacancy is probably too high.

For capex and maintenance I’m not as big of fan of the percentage method anymore. They are great for quick estimates, however you can sometimes severely underestimate repairs/capex.

Two buildings of similar size and condition can be renting for very different amounts and have similar CAPEX needs. This can become a pretty big issue on some the Class C and below properties.

I would try and cross reference your percentages with the estimated remaining life of some of the major components of the property.

 I’ll just give some general advice(California is pretty tenant friendly).

In my opinion it’s generally better to get rid of tenants the indirect route when it comes to small nuance complaints. It seems like the situation is mostly “contained” and you only have 60 days left. Inflaming the situation with official eviction actions will only cause you more work.

You’ve already done the correct first steps (giving warnings and documentation of violations).

I’d give them proper notice of termination and wait for them to leave.

You can take more aggressive actions after they have left . Hopefully  your lease and local laws allow for fines and damages. You can deduct those from the security deposit and send the balance to a collection agency.

@Account Closed

I can’t speak for the 1965 and newer. However, I have bought several buildings built prior to 1910, so I have some experience with your situation.

I think the first question you should ask the agent/seller is when was the last time the building was sufficiently updated(plumbing, hvac, electric, etc). I live in a building that was built in 1920, but completely gutted to the stud and operates like new. So if that’s the case you would probably have a standard purchase.

Hopefully your building falls somewhere in the middle, where they have done some things, but not quite enough.

Assuming no major structural issues, I would focus very heavily on inspecting the electric and plumbing systems. Those can be an absolute nightmare if you aren’t careful. Check the ages of the HVAC systems. Those three can be major expenses.

I would also get an experienced contractor to do a walkthrough and gather as much details on repairs as humanly possible. You can get caught in the cash bleed of a thousand needles if you aren’t careful on old buildings.

If you can avoid, I would frankly avoid homes that need the major systems extensively updated. A full rewire of a building is not fun.

Lastly, make sure you factor in a large fudge factor for repairs(20 to 30%) and hopefully pay a low price for the building.

Good luck!

This is honestly a very state by state experience for a lot of landlords. While there was a national moratorium for a while, the levels of enforcement and loopholes varied by state. Illinois was unfortunately one of the tougher states to operate in. I assume your family member owned in Illinois?

Your relative might have made some mistakes, but he also frankly got unlucky. Who could have predicted COVID? It's good that you are trying to learn from his mistakes.

To answer some of your questions. Evictions were pretty much nonexistent in Illinois. You could still file, but it would get tossed. Basically, the only reason to file was to go to court for breach of contract. You could get a monetary judgement, but the tenant still would not be removed from property.

I had two tenants stop paying. One accepted a cash for keys deal after 2.5 months. The other fought a lot harder. We ended up filing for an eviction in June of 2021 and she left after a few weeks. I actually faired pretty well. I had sizable reserve and other units to cover during the 5 months of lost rent on those units.

There were programs to support tenants, but not enough money to cover all the rent. I read one statistic (not verified) that out of 64k applications for a second round of funding IHDA, only 27k were approved. If your tenants did not get approved, you were left holding the bag.

Honestly, COVID made me a much better landlord. It was pretty awful if you had tenants not paying, but you learned to handle the stress and adapt to the situation. My takeaways: have ample reserves, tenant screen, report to the credit bureaus (you were still allowed to do that in Illinois) and toughen up. It's not an easy business, no one frankly cares about you as a landlord. Be fair, be understanding, but know when to draw the hardline. And like @Charles Carillosaid, it probably doesn't hurt to be in landlord friendly jurisdictions. 

Hopefully we get 200-year hiatus from this kind of event!

 Funny you mentioned it. Brighton Park is another area I'm actively looking at as well. It looks like a solid area.

 Thanks for the information. Do you know the most stable parts of East Chicago?

 I’m looking for as a potential future investment. I’ve mapped out Hammond pretty well, but would like other options in NWI. My main concern was higher than ~6% vacancy and lack of demand. I’m used to relatively low vacancy markets

Hello BP and NWI investors!

Hopefully my questions will be fairly straightforward and easy to answer.

I’ve done a decent amount of research on Northwest Indiana, however I still have some gaps on East Chicago. Mostly the regarding the rental demand.

How hard is it for you to find tenants? What is your typical vacancy? Can you attract quality tenants?

Thank you for any insights!