Chicago Landlord

More on the CRLTO

2012-01-04T12:53:00.000-06:00

I know I have discussed this before but it is important to follow the Chicago Residential Landlord Tenant Ordinance, CRLTO, if you own rental property in Chicago. The only property owners that are exempt from the ordinance are owner occupants of buildings with four or less units. That means if you are just renting your house, condo, or town home you are still subject to the ordinance. Even if you are in an owner occupied building I recommend trying to follow most of the rules in the ordinance especially regarding access to your rental units, property notification on lease renewals and month to month lease. The only part you don’t have to worry about is the security deposit interest.

Which brings me to my next point; there are several class action lawsuits against property management companies for not following the ordinance when it comes to the return and interest on security deposits. I just saw the posting of one such lawsuit in the Chicago Reader. New West Realty Assoc. is being sued for alleged violations on failing to properly pay interest, failing to provide the proper security deposit receipts and failing to give the tenants the CRLTO summary. It is unlikely that a small landlord will be involved in a class action lawsuit, buy you can still be subject to fines as great as double the deposit if you don’t follow the rules in the CRLTO. Also if you have a dispute or eviction case the CRLTO can be used against you, if you can’t prove you provided the proper receipts or notifications. No matter how small or temporary a landlord you might be please read and implement the rules in the CRLTO. Here is a link to the summary that you need to provide your tenants with, and make sure you have a signature or initials that they got a copy of it on the lease agreement.

http://chicagorealtor.com/associations/6001/files/RLTOS2011.pdf

TIF Vacant Building Ordinace

2011-11-16T13:26:00.001-06:00

Here is some more information about the TIF Vacant Building Ordinance. Still a work in progress but I will try and keep update information on this blog.

http://www.chicagohomeless.org/programs-campaigns/advocacy-public-policy/sweet-home-chicago/

Radon Disclosures for Rental

2011-10-14T08:55:00.002-05:00

A new section was add to the Illinois Radon Awareness Act that will become effective January first of 2012. Landlords will be required to provide radon disclosures when you have gotten a written result of a radon test that shows a hazard from a pervious tenant or on your own. If you mitigate the radon hazard and new tests reveal no radon then you do not need the disclosure.

Bed Bugs

2011-09-08T11:58:00.004-05:00

Bed bugs are one of my might mares as a landlord. Something you have no control over that could be expensive to mitigate. Illinois passed new bed bug legislation at the beginning of the year but it really only created a bed bug task force that is due to report back any day now.

For now the best practice is to try and stay ahead of the problem. The Chicago building code says that landlords are responsible for pest infestations in two or more apartments. If you find out you have bed bugs in one apartment you need to get on top of it with that tenant before it spread to other apartments. I would even recommend treating the problem and arguing about who is going to pay for it afterwards. It is very possible that your tenant might be responsible for there furniture and other items that could be destroyed by the bugs, but you as the property owner will be responsible for the building and the cost of cleaning out the bugs. You can try and add specific clauses to your lease that don't allow tenants to bring in used or found furniture but those are going to be hard to enforce.

For now we are all waiting on the specific recommendations of the task force on who and how the bugs are to be dealt with. I will try and keep everyone updated on this issue.

Rental Rates

2011-08-11T12:14:00.002-05:00

It looks like rising rents will be the silver lining of this economy. This article describes how more Americans are going to be renting over the next few years than buying.
http://www.housingwire.com/2011/08/09/fannie-mae-survey-shows-more-americans-consider-renting?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29

Tenants and Foreclosure

2011-06-23T08:37:00.003-05:00

Some one asked me the other day if a bank had to honor a lease agreement in a foreclosure. I was not sure what the answer was, but I know they don't want to. A recent report from the Lawyers' Committee for Better Housing stated that in 2010 there were 5,940 buildings with 17,467 rental units foreclosed on in the city. That is a lot of tenants getting displaced. The answer is that banks do need to honor the lease agreements or if there is no written agreement they need to give at least 90 days notice. Instead banks are giving tenants 7-14 days notice of eviction or trying to buy them out with only $200 and no notice. Tenants do have rights in a foreclosure situation. I know for sure banks don't want to be landlords and truthfully you may not want them to be your landlord, look at the mess they have made of the housing market, do you really trust them to fix your leaky toilet. It is probably best to comprimse and find a new apartment, but there is no need to rush and I think tenants should negotiate better buy-outs. If you have a year lease the bank should be paying you atleast a few months rent to buy you out of the agreement and to cover your cost of moving.

Frist Time Buyer Programs in Illinois

2011-06-07T16:56:00.002-05:00

IHDA or the Illinois Housing Development Authority has re-started one of its programs for assisting first-time home buyers – the MCC Tax Credit Program. Unfortunately their website has very little useful information. A lender I often work with (and highly recommend) Tom McGrath from Wintrust (TMcGrath@wintrustmortgage.com) said calling IHDA is not any better. You can contact Mr. McGrath directly if you want more information about qualifying for the loan program.

Here is what I have been able to find out: The program allows you to receive a tax credit of approximately 20% of the interest you pay on your mortgage each year for the 30-year life of the loan. The idea is that you might be able to borrow more money with this program that you can without. The tax credit amount will increase the amount of income you have for the loan process and allow you to buy a slightly more expensive property, or you can just enjoy the money saved and use it to improve your new home. The links below give a little more information on the loan program.

There are income limitations: $75,100 for a household of 1-2 people; if you are buying in a target area then your income can go up to $90,102. You might be surprised at what neighborhoods are considered target neighborhoods. I know parts of Humboldt Park qualify for example. If you want to find out more about target neighborhoods you will have to contact your lender or mine above. The purchase price for one unit is capped at $349,020 and for two units (yes that means a two-flat) is capped at $446,800 unless you are in a target neighborhood and then once again it is higher.

http://www.ihda.org/admin/Upload/Files//b9b13984-8b09-40d2-bf0f-b57dd053ba8f.pdf

http://www.ihda.org/admin/Upload/Files/lender/programs/mccprogramdescription.pdf

Goond News for Small Landlords

2011-06-02T16:53:00.002-05:00

In January I reported that the Small Business Jobs Act was going to require Mom & Pop landlords to track and report repairs of over $600 to the IRS, form 1099. Becuase of the National Association of Realtors and other organizations the law has been repealed, now only professional landlords and property managers have to track and report repairs. Small landlords that are not in the business of real estate do not have to track these repairs.

Rents are on the Rise

2011-05-24T11:38:00.002-05:00

Some of you may have already noticed but rents are going up this year. So far Chicago’s rental market seems to be absorbing all of the homes and apartments that have not sold and rents are still going up. I have read a few theories on why (but do you even really care why?). One is that young people are finally moving out of their parents houses and leaving their roommates to find a place of their own. I think a lot of would-be buyers who could not afford to sell and/or to purchase are renting instead. I know of at least two clients, one who did sell and one who did not, that are both renting their new homes this year. There are forecast for double digit rental increases in some of the tighter markets like Boston and San Francisco. The market is not that tight here in Chicago but it is good enough that you should be able to seek 5-10% increase depending on your location and apartment size.

Please don’t forget the golden rule of landlords: it is cheaper to keep’em. Don’t drive your good tenants off with crazy increases. If you are going to have to paint the apartment, advertise, and change locks you might end up just breaking even. If you have tenants you like or tolerate give them a moderate increase, if they leave any way that is when you can drive up your rent.

Chicago Vacant TIF Purchase and Rehabilitation Ordinance

2011-05-16T12:45:00.002-05:00

Some of you who read my blog may know that I am not a huge fan of the TIF program but when in Rome...

The newly passed Vacant TIF Purchase and Rehabilitation Ordinance could be a great deal for those of you thinking of a purchase rehab of a vacant/foreclosed property. If you are not a developer (I will get back to them), you cannot have owned a home in the last three years and you need to make less than the median income $75,000 for a family of four. If you qualify for the program you can buy and rehab a vacant property in one of the city's many TIF districts http://news.medill.northwestern.edu/chicago/news.aspx?id=92881&print=1.

The property must need at least $25,000 repairs, and I am hoping it can be a single-family or a two-flat but all of the detail have yet to be presented. Buyers can get up to 25% of the cost of purchase and rehab from the TIF fund. Once again it is not clear if you will be reimbursed or if you get the money up front. The property must be the primary residence of the buyer for a certain period of time but that is also not yet determined. I am really interested in this program so check back for more information in the coming months.

For developers looking at six or more units there is an option in this ordinance too. Developers can get between 30-50% of the cost of purchase and rehab for a vacant property if they make 30-50% of the units, respectively, affordable housing. There is more to come for this aspect of the ordinance too.

Advertising

2011-05-01T16:46:00.003-05:00

I am a little overwhelmed at all the new rental web sites and once the information gets out it is hard to remember what web sites you posted your rental on and how to take the information down. Still most of these sites are free or almost free so it is worth it to get the information out there. The rental market is hot this year and there are thousands or tenants sifting through thousands of rental listings trying to find the right match so make sure you give a lot of useful information about your apartment. Let people know how big the apartment is, what it costs, where it is located and what amenities there are. I find tenants are most interested in parking, laundry, pets and air conditioning. If you have outside space that is a huge plus this time of year. Make sure you also highlight the location if it is good. Let people know about public transportation, grocery stores and restaurants that might be near by.

One of the landlords I work with really likes hotpads.com and said it is great because you can transfer the information to craigslist with the photos. Yes please have photos of the apartment! I have not tired it myself yet. Also remember that you can farm your apartment out to lots of listing companies. You usually don't have to pay them unless they find you a tenants and most of the time the listings are non-exclusive, so you can use different companies and also try and rent it yourself. Just make sure you check the application out yourself to make sure the tenant is qualified. I do sometimes feel like they pressure both the tenant and the landlord to take what/who they get, but you do have choices.

US Small Busin. Admin. refi

2011-04-24T16:11:00.003-05:00

If you own a mixed use or commercial building the Small Business Administration is accepting refinance application. Unfortunately they will not refinance buildings that are all residential, the building needs to be at least 50% commercial use. I have heard they can be a little flexible on the 50% and can even count parking or basement space if it is used commercially. If you can qualify this is a great program with fixed rate, long term loans. The SBA 504 loan usually pairs with a traditional bank where the SBA loans up to 40% of the value and the traditional bank lends on the other 50%. The terms from the traditional lender may not be as agreeable but this is still a good option as there are so few choices if you own commercial or mixed use properties. The SBA 504 program in Chicago is administered by SomerCor. You can check them out at somercor.com

Rental Services

2011-03-22T11:02:00.000-05:00

It seems like there are 100 new companies or services helping landlords rent their properties today. Over all I think it is a good thing. There are so many apartments and so many tenants looking for them it might help to have someone sifting through all the information and making the right match. For example I have a new service for live/work space, ArtHouse Chicago that matches artist and entrepreneurs with the right properties. I can tell you I spend a lot of time looking through rental listing trying to find the right fit. In fact I get some satisfaction from matching a person with the rental space they want. From what I am hearing from tenants seeking space it is really hard these days.

Still if you are going to hire a Realtor or rental service to help you make sure you are getting a good service. Most of these place will charge a full months rent for helping you out. If you are paying that, then the service should be listing the property with good color photos and lots of detailed information. They should be prompt about returning your phone calls and those of prospective tenants. The service should also do a through check of your future tenant. A credit check and landlord verification is a must. I like employment verification too and they should be able to share all of this with you. It is likely that the service will charge an additional fee for this, that is usually passed on to the tenant. This fee should be between $20-50 which is not unreasonable.

If you are looking to save money you can do some of this yourself. Some services will charge less if you do the showings or verification yourself. If you are going to list the property on your own make sure you take good photographs of the space and have a detailed listing as well. Let people know in advance what pets you accept, who pays utilities and if you have parking or not. Trust me you are not going to trick anyone into renting an apartment they don’t want. There are too many choices these days.

Vacant Building Ordinance

2011-01-31T11:31:00.002-06:00

Not sure if anyone reading this blog has a vacant building, but if you do you need to be aware of a new proposed ordinance in city council. Alderman Balcer has proposed an ordinance that will give property owners jail time if they do not properly secure their vacant buildings, see the article link above. The city wants to crack down on derelict and unsecured buildings after the south side vacant building fire that killed two fireman. This ordinance would cover all properties including vacant land, two flats and commercial buildings. The city of Chicago does offer a vacant building registry, for $250 dollars you can get notified of 311 calls and code violations. It is hard to know if that is in a property owners best interest or not. I think if you do not live near a vacant property that you own, or at least have dependable neighbors to keep you updated, I would register the building so you know what is going on. You will be help responsible.
Here is a link the city registry: https://ipiweb.cityofchicago.org/VBR/

Small Business Jobs Act

2011-01-13T15:52:00.002-06:00

Landlords are effected by the new Small Business Jobs Act. The new law requires landlords to track information about contractors that have been hired to perform services to rental property that exceeds $600 a year. The new law takes effect January 1st 2011. This law includes mom and pop landlords of both residential and commercial properties. If the landlord fails to provide the 1099 form and the contract information it is expected that they will not receive the deduction on the taxes. Landlord will be required to provide 1099 to all contracts that meet the new criteria of the legislation. Contractors can include but are not limited to landscapers, accountants, painters, plumbers, etc.
The new law will help the government accurately track contractor income and discourage landlords from make false deductions for services and repairs. It is expected to increase federal tax revenue over 2.5 billions dollars in the next 10 years.

Some of this information was provided by AllBusiness.com

WiFi and Tenants

2010-12-07T10:57:00.002-06:00

A friend of mine that has a small apartment building told me that she was sued for copy right infringement because one of her tenants used the common building wifi to download illegal bootlegged videos. She was able to settle the case and one of her tenants is paying her back for the wrong doing. Still it was an expensive lesson.
Sometimes it feels that in our litigious society being sued is just normal for most landlords. It is in your best interest to minimize your exposure if possible. Sharing Wifi might not be in your best interest. I also recommend forming an LLC or some other legal entity to own the property to shelter you from being sued personally. This does cost a little more money but could end up helping you out in the long run. If you have an LLC and get sued then it is the LLC that is the plaintiff not you. The property itself would be the only assets that can be taken, all of your own money or other properties would not be subject to the lawsuit. This is really important if you own more than one property. Keep your house separate from other properties too.

Lead Based Paint

2010-09-30T14:22:00.002-05:00

The federal government has new laws about lead based paint that went in to effect April 22nd of this year. The new rules govern who and how repairs are made to older homes that might have lead based paint present. If you have an apartment building built before 1978 then this rules effect all renovation work that you will do and some painting. You must use lead based paint certified contractors to do this work. The following web site have more information on why the law was passed and how it is to be implemented.
http://www.nyarm.com/march99/0112.html
http://www.epa.gov/opptintr/lead/pubs/renovation.html
http://www.realtor.org/government_affairs/lead_paint_property_managers_faq

Personally I don't think it is fair that property owners have to cover the cost of lead based paint instead of the paint companies that new it was dangerous and continued to sell it anyway. Europe stopped selling lead based years before the US. My feeling aside this is something to pay attention to especially if you have small children of your own or rent to families with small children as they are the most susceptible to lead poisoning.

Pre-Screening Tenants

2010-06-17T16:02:00.002-05:00

In this tight economy now is the time to make your screening process harder not easier. One of the quickest ways to ruin the landlord experience is to take in a bad tenant. It can be very expensive and time consuming to evict a tenant, so just avoid it at all costs. You may feel desperate at some point when you have had a vacant apartment for a while. I recommend that you find a neutral third party and have them review the application to make sure you are not wearing blinders.
It is always best to be clear about what the pre-screening process is and how long it will take. Make sure you implement the process the same for everyone. It is not a good idea to only run the credit for some tenants but not all. Don't check only one person on the national sexual offenders and criminal date base because he looks creepy. Or if you suddenly feel like you really have to run someone through a new process make sure that that becomes a new policy for all of your future tenants. This is the best way to avoid being accused of discrimination.
Also understand that professional dead-beat tenants exist and they are usually very charming and in a big hurry. I am always suspicious of a tenant that has to move so quickly that they do not have time for my pre-screening process. If they are in such a hurry throw it back at them. Tell them to get you the information faster. If a previous landlord is not returning your calls tell your future tenant to call the landlord and encourage them to respond quickly. If they were a good tenant the landlord will do that.
No information is often worse than bad information. Everyone is afraid of litigation these days so if a landlord referral does not want to talk to you that is a bad sign. They don't want to be forced to say anything bad so they are going to say nothing. Avoid tenants that can not supply references.

Keys!

2010-05-05T16:50:00.003-05:00

Keys are the bane of a landlord's existence. Actually they are pretty bad for Realtors too. A few years ago I added a clause to my lease rider that stated that checking to make sure you have all the proper keys to all the necessary doors is the responsibility of the tenants. The tenants have 48 hours to contact me about missing or bad keys. Over the years I can't tell you how many times I have received calls from tenants months to years after they have moved in saying I never got that key. How on earth am I supposed to check up on a transaction that occurred 10 months ago? Everyone always calls after the expensive locksmith has gotten them in the apartment and they want me to reimburse them for the cost. I always ask why did they not call me first if they want me to pay for it.
My favorite story is a girl who locked herself out while moving in and did not have a key she needed for the door. I told I would come let her in but it was going to take me an hour to get there. She waited patiently. When I got there I asked to see her keys. I knew right away which key opened the door and I asked why she had not tried it. She said she did not think that was the right key!! I figured she got her just desserts since she had to wait an hour to get in but I can't understand what is going through their heads.

2310 E. 75th Chicago

2010-04-29T15:22:00.000-05:00

Rental Coupons?

2010-03-21T16:27:00.002-05:00

A friend of mine who still works in property management told me she is doing rental coupons for all of her lease renewals. This is turning out to be a paper work nightmare for her, but she has hundreds of apartments and is offer several different coupons. I think on a smaller scale this could be a good idea.
Basically she is sending out coupons for $100 off a months rent, no late fee, $250 off a months rent, etc. The coupons are only valid if the tenant renews their lease within a certain time frame. The coupons can be used only once and during a certain time span as well.
Personally I like the idea of one coupon per tenant so there is less to keep track of. One thing to be think about is can you afford it if all of your tenants were to use their coupon at the same time? I am fortunate that my tenants have been paying on time recently, but if you have a chronic late payer you could offer them two late payments without a penalty. Just make sure that they tell you in advance when they are going to be late, in order to use the offer, and still set a deadline for the late payment like the 15th of the month.
I think this is the year when landlords are going to have to be creative and flexible when it comes to tenant relations and retention.

Commercial Real Estate

2010-03-10T10:34:00.002-06:00

Many rental buildings would not be considered commercial real estate. If it is 2-4 unit and you live in one then the building would actually qualify for residential loan status and if you don't live there is would still be considered residential investment property. If you own a building with 5 or more units or the building has a storefront then it is considered commercial and you would need commercial financing.
Commercial values have dropped on average 43% since their peak in 2007 and will continue to fall for at least a while longer (according to Moody's Investor Service). Moody's also predicts that multi-family building will hit bottom in late 2010 or early 2011. There are also predictions that rental rates will continue to stall until 2011 because of unemployment. When employment numbers start to improve so will rental rates. Watch the employments numbers and then you will know when you can start increasing rents again.

Boomerang Kids

2010-02-15T14:34:00.003-06:00

I am sure you have heard this term over the last few years. Even before the economy tanked a lot of 20 somethings were moving back in with mom and dad. Now the Pew Research Center has found that 1 in 10 adults between 18-35 are moving back in with their parents because of the weak economy. All this is causing the vacancy rate in apartment buildings to be at its highest level in 23 years. Census data also shows that less young adults are living alone so even if they are not moving in with mom and dad they are moving in with roommates. This is also causing a disproportionately higher level of vacant one bedrooms.

Don't raise your rent this year. It is very important in this economy to retain the tenants you have, it is the cheapest way for you to do business. Take good care of your tenants especially the good ones. You might even consider a rent reduction for a really good tenant or up-grading their apartment if possible.

Statistics

2010-02-08T19:23:00.003-06:00

I am actually not that into statistic, probably should be in my line of work. Still I enjoy this site, City-Data.com, and some of the stats it has to offer. I decided to check out Logan Square where I live and have my rental buildings. Here are some of the interesting stats that I will think of in the future when renting. The media age is 28, the average household is 2.9 people, 69% of the households are renters (that one was a surprise). There are a few more men renting in Logan Square than women, that could be interesting if you are 28 and single. A little over 30% of the residents are near or below the poverty level (I wish this was a surprise).
Check out your zip code and see how it compares. I think it could be useful when targeting tenants to understand who the average tenant in your community will be.

Utility Disclosure Act

2009-12-27T14:05:00.002-06:00

If you have a master meter for a building but still want your tenant to pay a portion of the utility that you need to review the Tenant Utility Disclosure Act. You have to have a written agreement that explain the formula you are using to determine what share of the bill you pay and what share of the bill your tenants pays. That has to be agreed to in writing as part of the lease. Just like in my last post failing to follow these rules will make it easy for your tenant to break all or some of the lease terms.
I was reading an article where the landlord lost an eviction case and had to pay for all the utilities because he was not clear with the formula he was using for the gas bill. This landlord also got in trouble for not serving a five day notice directly to the tenant. Instead he posted it on the door. That is not considered proper notice. If you have a tenant that is just late all the time and you serve them five day notices as a warning then you can probably keep posting it on the door, but if you are trying to evict a tenant you are going to need to serve them in person and have them sign the notice for it to count as service. Please review you lease agreement with an attorney if you have a master meter that is shared by more than two users.

Residential Landlord Tenant Ordinance

2009-12-01T17:04:00.004-06:00

I know I keep beating this drum but in this difficult rental market tenants are using the Residential Landlord Tenant Ordinance (RLTO) to break their leases. I have heard from two landlords and one tenant who are dealing with this issue. If you have a rental property in Chicago, including a condo you are renting, you must follow the RLTO. You need to give a copy of the summary to all of your tenants. You must follow the rules when it comes to security deposits. If you don't and you end up in court you will lose and the tenant can usually recover twice their security deposit in damages.

The newest twist I am hearing about is tenants breaking their lease because they were not given a copy of the RLTO when the lease was signed. If you have not given your tenants copies at this point make sure you do. Make sure them sign something stating that they received it or make a note on the lease agreement when it was delivered. For future leases you can buy lease agreements that have the RLTO attached or make a note on the lease agreement that the tenant has received a copy of the RLTO and make sure they initial that spot. It is a little overkill but I always send a copy of the RLTO with the lease renewals too.

You must return security deposits within 30 days after the tenant lease is over and they have moved out. If there are deductions they should be itemized and when possible copies of receipts should be included. All moneys should be held in a separate account and you must return the security deposit with interest. In fact the interest is due at the end of each lease term. I know a landlord that lost an eviction case because she did not pay interest every year. You can send a check for the interest, I prefer this method as there is a paper trail, or tenants can deduct the interest from their rent but make sure you get something in writing.

READ THE RESIDENTIAL LANDLORD TENANT ORDINANCE!!!!!!
see the link by clicking on the title of this post.

Energy Efficiency Tax Credits

2009-11-16T10:05:00.002-06:00

Most rental buildings will not be eligible for the federal energy efficiency tax credits, if you live in your rental property you may be able to write-off a portion of the cost. You will need to check with your accountant to see what portion of the improvement will pertain to the your personal tax return. There are many thing to consider. How much of the rental property is considered investment vs personal use. What improvement you made and how it effects the building vs you personally. For example if each unit has it own furnace then you may be able to take the full credit amount for replacing your own personal furnace. The link above has a lot of use full information about the EE tax credit and how to apply for it. Also keep in mind that only the most energy efficient appliances qualify. You may be able to purchase a much more efficient furnace but it may not meet the standards for the credit, so do your research before buying anything. Also the total credit you can take for any and all improvements is $1500.

Rental Market

2009-10-11T15:45:00.002-05:00

The bottom seems to have fallen out of the rental market this fall. Things were moving a long nicely this spring and summer, but if you did not have your place rented by October 1st that was it. People will still be moving the rest of this year but you do have a lot of competition out there. I think the shadow market of condos has finally hit. A lot of sellers are giving up and putting their condos on the rental market before winter comes. High unemployment is not helping either. There may not be to much you can do now accept keep trying. My advice for next year is to shift your leases so they all end on or before the 31st of August. October first seems to be the end of the strong rental season in Chicago and having several lease us for that date can be a problem if you can't get them rented. Then you have to wait out the long hard winter and no one wants to do that. If you shift to a spring/summer rental season it is more likely you will only lose one or two months of rent in the worse cases.
Please never get desperate and take just anyone. It almost always end badly and costs a lot more money. Get the word out and use rental companies. You only pay them if they rent the apartment and you can keep looking for someone on your own too.

Investing in Real Estate

2009-09-15T15:02:00.003-05:00

I know it is hard to believe but now may be a good time to consider investing in real estate. Prices and interest rates are so low and the residential rental market is still strong. If you are considering investing in commercial real estate there are still opportunities but the rental market for commercial real estate is weak right now. Her are a few terms you should know. There are many ways to structure a purchase and many different types of investments to consider.
You can buy into a REIT or Real Estate Investment Trusts. A company whose primary business is managing groups of income-producing properties. The company offers common shares to the public similar to a stock.
You can purchase your own property alone or with other investors and form an entity that will be the owner. Currently the most popular choice is an LLC agreement or a limited liability corporation. The name says it all, an LLC protects its members from liability, you can only be responsible for the value of the asset in the LLC. You can also form a TIC or tenant-in-common (you do need more than one person for this). This vehicle was more popular before 2000 and does allow for 1031 transfers, something you cannot do with an LLC. A 1031 exchange lets you sell an investment property for a profit and avoid pauing capital gains taxes by transferring the profits to another investment property.
The last term I am going to give you is a Delaware Statutory Trust or DST. This vehicle is popular in the downturn because you only need one name on the loan, the trustee. Having one name will make it easier to burrow in the current market.
Many of these transactions are complicated and it is best to work with a real estate professional who has experience in this type of transaction. In some case you will want your Realtor also to have a securities license because some of the above methods, like a REIT, are considered securities by the SEC.

Oops, I hate my new tenant!!

2009-07-22T15:46:00.002-05:00

It happens to the best of us. A few days after you finalize the lease agreement you start to get an uneasy feeling. Is my new tenant crazy? We all make mistakes sooner or later.
The question is: what do you do now? I am afraid the answer is not much. Most of the time the best thing to do is just wait them out. When the lease ends you can decline to renew the lease agreement. Having said that, there are still some things you need to think about. First you can not refuse to renew the lease if you are being vindictive. Say for example your tenant reported you for a building code violation; you can then be forced to renew the lease agreement if they still wish to stay. The best thing to do is to keep a written log for any problem tenant you have. If they are too noisy make sure you give them noise violation notices and keep copies. If they are breaking other rules of the lease agreement, like having too many people staying there, send them a written notice clearly stating that they must conform to the agreement or their lease will not be renewed.
The best way to avoid these problems is to check tenant references thoroughly before you let them move in. Call current landlords and ask lots of questions. If you are not satisfied with the information you are getting put it back on your future tenant. Tell them it is their duty to furnish you with the information you need and if they can't get it they will be free to move on. Make sure your application process and rules are equally applied to all of your future tenants, another way to avoid fair housing issues.

Landlords and the Law

2009-05-29T14:52:00.003-05:00

Here are a few things you should know when dealing with tenants/landlord issues. First as the landlord you always have the right to enter the apartment. In Chicago you have to give 48hrs written notice to enter the apartment unless it is an emergency. An emergency would be a hot water tank that is leaking on the apartment below, a fire, or maybe if you truly had a reason to be concerned for the health of your tenant. Most of your tenants won't need 48 hrs written notice to make a repair or check in on something, a simple phone call will do. Still it is good to be aware if you are having a dispute that you need to give ample notice. Send a certified letter and post a notice on the tenants door. They do not need to be present. It is the tenants responsibility to make arrangements to be there. I would say if you can work it out that the are present it would probably be best for all the parties. Try and get it in writing from your tenants when they will agree to give you access, that way if they are not there when you come you will be covered.
The other thing I wanted to talk about was renting illegal apartments, mostly basements, I never recommend doing this. If you have a dispute with the tenant the lease will be invalid and if there is an injury or some type of damage your insurance will not cover it. Don't rent illegal apartments. Go through the process of making them legal or keep the space for personal use.
If you are ever unclear about your rights as a landlord you should always seek legal advice before you take action.

Hold-over Tenants

2009-04-29T16:43:00.002-05:00

I was just watching Peoples Court and it turns out that if you are a hold-over tenant in Manhattan (only) you don't need to give your landlord any notice.

What is a hold-over tenant? If you have a year lease agreement and at the end of the year the tenant stay and keeps paying rent but no new agreement is signed then that is a hold over tenant. Now they are considered month-to-month tenants. In Chicago both parties would be required to give 30 days notice that they want to end the lease agreement. I don't recommend hold-over tenancy. I always prefer to have a written lease agreement even if it is only for a few months. Even for month-to-month tenancy I prefer a lease agreement. You should always have everything in writing. That way there will be no misunderstanding down the line. Courts usually favor the tenants over the landlord so you want to have a written agreement on your side.

Community

2009-03-09T13:55:00.002-05:00

The rental market is going to be tough this year. Now might be the time to think about creating a sense of community for your building, after all your rental building is a tiny community. If your tenants feel like they belong to a group they will be more likely to stay and more likely to encourage their friends or like-minded colleges to rent in the building too. For example I have seen properties where almost all of the tenants are bikers/bike messengers. I heard of another example where the tenants were mostly deaf, this one was also near the El. If you can get a group of like-minded residents in your property then they will encourage others like them to move there too. This may be a hard to situation to create, but if you have one tenant who seems inspiring towards a certain group then that is the person to work with. You can offer referral fees to tenants who refer a qualified new applicant. The amount of money should be reasonable but should not exceed a month's rent total for the year. You can try marketing the property more directly to one group but be careful as this can sometimes get you in trouble with fair housing laws.

New Reality

2009-02-06T16:24:00.002-06:00

I feel the need to reiterate what I said last post. All the landlords I know are fearful that 2009 is going to be a rocky year. Keep the good tenants you have. Don't give any rent increase if you don't have to. Remember it is always cheaper to keep the tenant that you have as long as they are paying and are not disruptive to other tenants. If tenants what repairs and upgrades that are reasonable that agree. You will get your money back over the long run. If a tenant does decide to move out that you will have to take the pulse of your local rental market and see if you can increase the rent slightly. This will be a tough year but try and remain calm and work with the good tenants you have.

The Shadow Market

2008-12-09T15:27:00.003-06:00

The shadow market refers to condos, developments and even houses that were intended to be sold, but because of the depressed real estate market may end up being rentals instead. At this point no one knows how many units are going to get dumped on the rental market or when. That is why it is called the shadow market. It is an unknown.

If you are currently a landlord there is some reason for concern. The competition could end up being steep. Brand new condos with in-unit washer/dryers, central air, and other amenities are going to be hard to compete with. The only silver lining for landlords, not the owners, is that the unit owners need to cover all or most of their expenses to make rental work. Most of the condos that become rental will be more expensive that current rental units are. Still, the next year or two is a good time to hold your rents stable. Only give moderate increases or none at all until you have a better idea of how the economy and the shadow market will affect the rentals. Don't lose good paying tenants just to make a few extra bucks. If you don't like a tenant or they are moving anyway you could try and get a little bit higher rent, but try and keep the people you have. That is the cheapest and easiest way to move forward for the next few years.

Repairs

2008-10-28T15:17:00.002-05:00

Ah the joys of repair work. I decided to install new mail boxes in my building, the current ones were from the early 1900's. The new mail boxes cost $100 and it was supposed to cost approx. $100 more to install them. Almost $1000 later my mail boxes were in, my front entry and all the doors had been repainted and all but one of the door buzzers is working.

That is often the way it goes when you start a repair job, especially in an older building. You cant anticipate all the hidden repairs or problems you are going to find. In my case, old mail boxes were one problem and an old door buzzer system was another. Also the new mail boxes were much larger then the old mail boxes. The necessary remodeling is what got the painting started.

Don't loose heart. These things will happen. All you can do is hope that they don't happen to often and that when they do that the fix is not to much more then the original cost. When you are looking at starting a repair or improvement job try and budget some extra money and time to get the work done. Not only did the job cost more then I expect but it took over two months to finish everything.

The good news is that my entry way does look nice and I shouldn't need to change mail boxes again for about 100 years.

Tax Credit

2008-09-10T15:21:00.003-05:00

There is a first time home buyer tax credit available until the end of the tax year in April 2009. If you are looking at buying a small apartment building 2-4 units you would probably be eligible for the credit on a portion of the purchase, as long as you plan to live there. You can check out the link to see if you qualify, and I would also recommend consulting with a tax professional. If you have been on the fence lately now might be the time to think about buying. Interest rates just went a little lower thanks to the Fed's bailout of FannieMae and FreddieMac. Prices are also down and will probably go lower before things pick up again. I would wait until closer to November to make a final decision as the election could have an impact of interest rates and housing prices. That still gives you several months to find something before the tax credit is gone. Please don't schedule a closing for the last possible moment because closings often get moved around and you don't want to miss out by just a few days.

Serial Evictees

2008-08-20T14:57:00.004-05:00

I just read an article about serial evictees in San Francisco. The laws there are very favorable for tenants' rights, so a savvy renter who knows how to take advantage of the system can live rent-free for months to a year while the landlord is trying to evict them. Chicago laws favor tenants too. I have only heard of a few serial evictees in Chicago. The company I used to work for actually rented to the same serial evictee twice. She was using aliases. One serial evictee can make your life pretty miserable, still it is not all that common here or in San Francisco.

Serial evictees are usually pretty charming, probably give you too much information about their life and will play on your sympathies. The easiest way to avoid them is to always check references, run a credit check, and ask for ID. If you are concerned, ask for a higher security deposit and make sure it clears before they move in. I did hear of a particularly savvy guy who bounced the security deposit and never paid rent. He supposedly conned a bank and a furniture company too. There are ways to drag out an eviction in court for several months based on improper service or condition of apartment. Usually there is little you can do after the fact to regain your money or even punish the tenant who de-frauded you.

I would certainly recommend not falling victim to charm or pressure. Don't let a tenant who wants to move quickly pressure you into making a quick decision. If you are not hearing back from their references, put the onus back on them. Tell them they have to get their current landlord to contact you or you will find someone else to rent the apartment.

It always sets off bells in my head when someone tells me way more information than I need or have asked for. Let's say you ask a prospective tenant where they lived before and they start telling you a long compelling story about how they moved from out of state and there was a fire and someone got killed in the fire and it was in the news and so on, but they don't really answer the question. Why are they sharing all this with you? A simple "from St. Louis" would do. In my experience the con is just around the corner. Move on, it is not worth it.

Advice for Tenants

2008-05-30T13:26:00.003-05:00

I don't usually give advice to tenants on this blog, but I was really impressed with some free brochures I picked up at the Metropolitan Tenants Organization at 1180 N. Milwaukee. They cover many important issues for both tenants and landlords about evictions, security deposits and leases, just to name a few. They also have a tenant hotline at 773-292-4988.
The Metropolitan Tenants Organization (MTO) will not help landlords, but you can always pick up some of the free brochures for advice for yourself. I recommend the one on security deposits. The laws in Illinois/Chicago are really tough when it comes to security deposits and how they are held and returned. Improper handling of a security deposit is the easiest way for a landlord to lose in court, and you will end up paying an additional penalty as well. MTO does list an Apartment Dispute Resolution Mediation Service 312-922-6464. If you are having problems with a tenant over rent you could try this service. It will probably be cheaper and faster than hiring a lawyer and going to court.

Tips for Successful and Legal Landlording

2008-04-26T15:33:00.006-05:00

The national association of Realtors just came out with a list of 7 sercrets to successful and legal landlording. #1 is my favorite: Run Renting Like a Business. This is so important whether you are renting your condo to your friend or a 15 unit building professionally. Make sure there are rules and policys that are clear and in writing. This will help you avoid misunderstanding and confusion if and when things go wrong. Even friends and family with the best intentions can fall on hard times. If they can't pay their rent you are going to have problems and fights no matter what, but if you have some rules and policys it will help you out of a hard situation gracefully. Remember if you are ever in a dispute with a tenant (no matter who they are) you should make sure all of your correspondence is in writing.
The other 6 tips are:
#2 Treat everyone equally, espcially important when if comes to fair housing laws.
#3 Use the right forms, Chicago has pre-printed lease that are easy to get.
#4 Make your lease as specific as possible, all of my leases have a ride with specific rules for my properites.
#5 Write out a policy for defaults, you have to have written rules about when rent is due, what the late fee is, and when you will began eviction. Remember in Chicago rent is late after the 5th or later, and you can only charge a certain amount in late fees ($10 for the first $500 in rent and 5% of anything over that).
#6 Don't treat secuirty deposits as potentail for profit, this is important you must keep security deposit money in a separete account. Security deposits can be applied to un-paid rent but only after the lease has expired or the tenant moves out, not before.
#7 Don't be fooled by appearances, always check out tenants carefully. Con artist are succesfull because they are good at it, don't be fooled by good looks and charm. Make sure to check out employment and past references. Run their credit is you can, you can also charge your prospective tenant a fee for the credit check.

Make sure to follow your own rules too.

April 2008 Realtor Magazine

Renting the Right Way

2008-02-18T11:52:00.002-06:00

I just got a copy of Renting the Right Way, written by Chicago Volunteer Legal Services Foundation, and this is a great booklet for all landlords. I recommend that you check it out. It is a very clear and easy booklet that discusses both the practical know-how and the proper and legal way of dealing with your tenants. There are sample eviction notices, letters, leases, and forms. There is advice on going it alone if you can't or won't pay an attorney in an eviction case. I just can't say enough about how great and helpful this booklet is for the seasoned professional to the novice landlord.
You can check out Chicago Volunteer Legal Services Foundation at cvls@cvls.org or call 312-332-1624 for more information.

Great Time To Buy An Apartment Building

2007-08-01T15:50:00.000-05:00

The National Multi Housing Council NMHC spring survey found that consumer demand for apartments grew for the 15th consecutive quarter. The survey's Market Tightness Index was up to 56. A reading over 50 indicates that conditions in occupancy and rent rates are improving. The only index that was below 50 was the Sales Volume Index. That means that the sale of apartment buildings has slowed. Now that condo conversion purchases are down there is less competion for buyers looking for a good apartment building. Not only are there fewer buyers for apartment buildings but there are fewer buyers for all homes. With tightening restrictions on mortgages, more potential buyers are deciding to rent instead of own. Meanwhile there are fewer apartments to rent since a large number of buildings have been converted into condos. In a nutshell rents and occupancy rates are up, sales are slowing down, and interest rates are still at historic lows. Now is the time to consider investing in an apartment building, whether it is a owner-occupied three-flat or a 24-unit investment this is your chance to take advantage of the rising rents in Chicago.

Thinking of Buying Rental?

2007-04-09T19:36:00.000-05:00

Now is a great time to consider buying an apartment building. Buying a 2-4 unit apartment building will still allow you to qualify for a residential loan and it will allow you to buy a building in a neighborhood that you might otherwise not be able to afford. You can apply the rental income to your mortgage payment. This will allow you to qualify for a higher mortgage amount. For example if you are collecting $1000 in rental income each month your mortgage company will consider $750 (or 75%) as extra income that you make each month. The rental market in Chicago has been improving over the last few years. Every building that get converted to condos is one less rental property on the market. The city has had a net reduction in rental units over the last few years. Interest rates are still at an all time low while rents are increasing. That makes this a great time to buy rental property.

Smoke and Carbon Detectors

2007-01-30T16:47:00.000-06:00

I hope you already know that you have to provide a smoke detector in every apartment and the common areas. You may need more then one depending on how large the apartments are. You can check with your local hardware store to see how many smoke detectors per square foot are required. Most lease state that it is the responsibility of the tenant to change the batteries. It is worth reviewing your lease agreement to see who is responsible for the upkeep. I still recommend reminding your tenants once or twice a year to check the batteries.
There is a new law that landlords must also provide carbon monoxide detectors as well. You can buy combo units or you can buy the carbon detectors that plug in and don't need batteries. Make it clear in the lease agreement that if any detectors are missing the tenants will be charged to replace them.
Just remember that it is your building and in the end you are responsible for the safety of your tenants. Also if there is a fire you are the one that will have to deal with the aftermath, regardless of who's fault it is.

Fair Housing Law and Advertising

2006-11-26T13:18:00.000-06:00

I love posting rental ads on Craigslist. It is free and it works. However, it is very important to remember that all advertising for rental is subject to the Fair Housing Law. Unlike print ads where the paper screens the content for you, you are responsible for monitoring your content in online ads. Craigslist won't end up in Federal court but you could. Remember it is illegal to discriminate in rental ads. You can't discriminate on race, religion, gender, marital or familiar status, or disability. In Chicago, sexual orientation is protected too.
What does this mean? You can't use words or terms like: hispanic neighborhood, bachelor pad, near Synagogue, or perfect for a couple. All of these terms are considered discriminatory, whether you mean it or not. Most of the major newspapers are even more cautious and won't allow something like "quiet tree lined street" in an ad.
If you live in a 2-4 unit building (it must be your primary residence) you can be more selective about who moves in. You may not want children living in the building for example. But you cannot advertise that. It is still illegal to discriminate in a print or online ad regardless of who you are. Don't do it.

IRS and Landlords

2006-10-13T14:16:00.000-05:00

I am back to posting. I had a baby in July so I had to take a little break.

My new topic is the federal tax benefits of owning rental properties. Trust me you are going to need to hire an accountant for this, or the cheap will quickly turn expensive. First you have to count the rent you receive as income, but the good news is you get depreciation. The building itself gets depreciated over approximately 30 years, which leads to a nice write-off. Especially if you are self-employed like me. You also get to depreciate improvements to the property. Here is where things can get a little confusing. Improvements like a new kitchen or windows get deprecated over time, similar to the building, but repairs you can take up front. It can be hard to figure out what is a repair and what is an improvement, so once again, hire an accountant! You can also write-off expenses like light bulbs, cleaning supplies and common area utlitiles. If you have to pay for the water for the whole building, common in Chicago, that is also an expense. The end of the year will go smoothly if you keep track of your expenses and income as you go. Don't try to figure it all out at the end of the year, it is a real pain. Buy some computer software or keep track in a log book or ledger. You life will be much better come January.

Real Estate Taxes

2006-06-16T14:44:00.000-05:00

I highly recommend contesting your real estate taxes at least once every few years. It is like fighting a parking ticket, you may not win but what do you have to lose. Most apartment buildings are taxed at a higher rate then residential properties. Here are the things to consider before contesting your taxes. First try to see what similar buildings in the area are paying for their real estate taxes. You can find this information on the cook county assessor's web-site or if you know a real estate agent like me you can contact me with the addresses and I can look them up on the MLS. If your taxes are the same or less than your neighbors there may not be much of an advantage to contesting them, unless you have been doing extensive remodeling or for some reason had a high and long vacancy period. The other thing to check on the assessor's web-site is if your building is describe properly. How many units and baths and square footage etc. I have owned three properties in Chicago and all of the descriptions have been wrong. One time the mistake was in my favor, so I say, let sleeping dogs lie. The other times I let the county know the mistakes they had made.

If you are going to contest you taxes you still have a few choices. You can hire an attorney to do the work for you. They usually tax 50% of what they save you in the first one to two years. You don't have to do any work and the lawyer only gets paid if they reduce your real estate taxes. I have done it myself as well. Mostly it takes time. Going to the county offices downtown and filling out the paper work. Usually you have to come back for a hearing with all of your proof, like the tax bills of similar properties and pictures of your own property. Then you just have to sit back and hope for the best.

The other important things to remember is if you live in the property you can file for the home-owners exemption. You can get this retroactively if you have never applied before and it will reduce your real estate taxes. You have to have lived in the property for the full calendar year to qualify for the exemption. There is also a senior exemption. All this information is at the county building or on the assessors or treasures web-sties.

Good luck and fight those real estate taxes.

Dirty Tenants

2006-06-02T14:11:00.000-05:00

You have probably all heard the story about the tenant in Utah that left 70,000 beer cans in the town house he rented. He seemed like the ideal tenant for 8 years, never complained and paid his rent on time. For pictures you can check out www.ksl.com under local news.
I really can't understand a landlord not checking in once in 8 years. I have to say I always come up with an excuse or reason to see how my tenants are living. You need to get in there sometime in the first few months and see what living conditions your tenant has. Waiting 8 years means a long and expensive cleaning process. Unfortunately, even if you do get the chance to check things out it may be too late. If your tenant has a lease it is difficult or impossible to evict them because they live like pigs, even if other tenants are complaining. You usually have to wait them out. One way to avoid this is a careful screening process, but some landlords just won't be truthful. Another trick is to get larger security deposits. If your area has a tight rental market I recommend at least a year and half security deposit and don't let tenants apply it to the last month's rent.

Here are some of my own experiences with messy tenants:
One tenant had 4 cats, when she moved I had to tear out all the carpet. It smelled like cat pee and there where fleas too. I was lucky that the cat pee did not damage the wood floors underneath the carpet. Cat pee is very destructive and will discolor wood floors. Unfortunately it may take a few weeks for the damage to appear.
Another tenant, I called him the bird man, had left the carpet covered in chicken bones, feathers, newspaper and change. There was probably $100 dollars worth of change on the floor but no one was brave enough to pick through the other stuff to get to the change. I think they just rolled up the carpet as is and threw it away. I didn't stay to watch that clean up. The most amazing part was that I rented it to a young girl who came to see it with her mother! I promised them new everything and lowered the price a little and they said ok.
I had a couple that lived in filth. They moved out a few weeks early, but I still could not show their apartment it was so dirty. I offered to clean it for free just so I could start showing. At first they said no and we actually had an argument about it, but then they finally acquiesced. There apartment still smelled like smoke for months after.

Good luck and remember careful screening is the best way to avoid messy tenants.

Subletting

2006-05-15T11:13:00.000-05:00

In Illinois landlords are required to allow subletting. You can set limits, but you have to let a tenant sublet. Here is what I recommend. If your tenant is just leaving for a few months and wants to sublet short term, let them do it. You have the right to know who the subletter is and to review the application. You may reject people that are not qualified. A good quality subletter is really in the best interest of everyone. The legal definition of a sublet is that the original tenant is still responsible for the apartment and for the actions of the subletter. For example, if the subletter does not pay rent the original tenant is responsible for paying whether they live there or not. You have the right to go after either party for your money. You also get to hold the original tenants security deposit until the lease ends. In reality though you may not have contact information for the original tenant and it is hard to collect money from someone out of state.
If your tenant wants to leave town before the end of the lease I suggest you make alternative arrangements, not a sublet. Here are some choices: you can let them buy out the lease at market rent or less then market if you think it will be easy to re-rent the apartment. You could come out ahead if you are lucky. You can allow them to re-let the apartment. In this situation the original tenant still has to find a replacement tenant and you still get to review and accept a reasonable applicant, but the original tenant is off the hook and gets their deposit back. The new tenant assumes the existing terms of the lease or possibly a longer term if that is agreeable to all parties. If there is a problem, you deal only with the new tenant. I think this choice appeals to most tenants, but you are not allowed to force it on anyone. The original tenant has the right to sublet if they prefer that to other options.
Also in Illinois, you are required to help with the sublet process. I think help is poorly defined. I suggest giving advice on how to re-rent the apartment and showing it when you are available or if you know of a party that is interested. Your original tenant still has to pay for advertising or you can charge them if you advertise on there behalf. You can still charge an application fee to any potential subletters.
The most important thing to remember is that you would rather have someone who wants the apartment and is paying monthly rent then a drawn out battle with someone three states away. Be flexible and try to reach a compromise that works for everyone.

Fix it!

2006-04-28T14:29:00.000-05:00

If you are a landlord you have probably already had this experience. Your tenants call to complain about a small repair job or upgrade they want, and once you get started it turns into a brand new kitchen. Sometimes things that seem like no big deal have a way of blossoming in to a huge ordeal. One of my tenants was complaining about a clogged drain in the tub. No big deal. I sent over the handyman with the router to clear the drain. Well, three weeks later we have cut two pipes in the basement and now it looks like we are going to have to remove a small part of the wall and replace some of the pipe. Who knows what is in there. I had a tenant years ago that kept complaining about a clogged toilet. Eventually it turned out that someone, no one knows who, dropped a cell phone down the toilet where it got stuck. We had to take up the toilet just to find it. Though I have heard of new toilets being necessary if you can't break free whatever is stuck in there.
Unfortunately it is best that you are just prepared for some unexpected complications. The only advice I can give is to be careful when you start a remodeling project. If a tenant wants a new sink or countertop make sure they have renewed their lease preferably with an increase before you get started. That way you won't feel as bad after you have replaced half the kitchen.

Moving Out

2006-04-13T14:59:00.000-05:00

The company I work for sends out a move-out letter to all the tenants that are not renewing. The letter states what needs to be cleaned and what the charges are if the unit is not clean. It pays to be specific. Legally you can only charge for damages. You should state in your lease agreement what condition the unit needs to be returned in and what counts as damage. Remember, if a tenant ruins carpet that is ten years old you cannot charge them for new carpet. You have to take into consideration the depreciation on the old carpet and charge them just a portion of the new carpet cost.
I had two college-age tenants that made several holes in almost all of the doors and I think they were wearing cleats in the apartment too. I was able to charge them for both the cost of new doors and the labor to install the doors as well as the fee for re-sanding the floor. I had another tenant who painted all his white laminate kitchen cabinets red. In that situation I was only able to charge the fee to replace the fronts of all the cabinets as the rest of the cabinet was still in good shape. These cabinets were only a few years old.
Don't forget that you have to pay interest on security deposits in the city, and the rate changes ever year. You can call the city or your local alderman to find out what the rate is.

Late Fees

2006-03-17T15:34:00.000-06:00

Late fees need to be written in the lease agreement. I highly recommend that you charge a late fee. Your late fees have to reasonable to be enforceable. If you live in Chicago, and you are not a live-in landlord of a 2-6 unit building, then your late fee is determined by the Residential Landlord Tenant Ordinance (RLTO). The RLTO allows for a late fee of $10 for the first $500 in rent and 5% of anything over $500. If your rent is $1000 dollars a month you can charge a late fee of $35.
$1000 - $500 = $500, late fee of $10 for the first $500 and the second $500 X 5%= $25, so you add the $10 + $25 = $35 total late fee.
If your monthly rent is only $300 a month you can still charge a late fee of $10. If you are a small live-in landlord not covered by the RLTO you should still be careful to charge a reasonable late fee. I recommend $25.
Most municipalities have rules regarding tenants and landlords. You should check with your local government to see what rules you need to follow. It is your responsibility to know what the local laws are. Remember ignorance of the law is no excuse. Beware, most courts and local governments favor tenants over landlords and if you write the lease and it is unclear or contradictory, a judge will favor the other party.

Bounced Checks

2006-03-10T11:59:00.000-06:00

Regrettably almost everyone has bounced a check. When dealing with tenants and getting your rent I recommend setting a few ground rules and sticking to them. First, your lease should state any bounced check fee that you may charge. I recommend $25, though I have seen higher fees. Your fee should not be outrageous. If rent is $1000 a month you cannot charge a bounce check fee of $500. That really is un-enforceable. However, if you charge a late fee, and the bouncing of the check happens after the late fee is due, you can charge a late fee plus the bouncing fee. One of my tenants bounced recently and ended up paying $50 in fees.
It is very important that you enforce any fees in your lease agreement and that you enforce them in a regular and equal manner with all your tenants. If you do agree to waive a fee make sure that it is clear that this is a onetime exemption and will not be repeated for any reason. If your tenant is covering a bounced rent check you must get the rent in cash or a money order. Do not take another check. The company I worked for had a rule that after you bounced two checks you would never be able to pay with a check again. It always had to be guaranteed funds after that. Unfortunately some people have a pattern of always bouncing checks. Make sure you have rules and limits and that they are written in the lease agreement.

Repairs

2006-03-06T21:32:00.000-06:00

My experience with tenants is they don't always give reliable information when it comes to repairs in their apartments. I have gotten several calls about no power or water and it turns out the whole neighborhood is down. I ask lots of questions of my tenants. Like, did you look outside first, are there street lights on, have you paid your bill? My other favorite is breakers. Anything that is electric or has some electric power can be affected by breakers. One of my clients went without AC for two weeks last summer before I suggested she try her breakers. That solved the problem. It is surprising but many modern day conveniences like central air and dishwashers have a switch, like a light switch, that provide the power. I had another client last summer who did not have AC because someone accidentally turned off a switch in her ceiling that happened to power the AC, that took a month to figure out. Who knew?
The best thing to do when dealing with a tenant repair is ask all the question you can think of and rule out the simplest solutions first. I also recommend try to check on the problem yourself first, before you call out a professional. Unfortunately most professional repair people have no problem charging $75 to flip a switch or a breaker.

Rental Market

2006-02-21T17:09:00.000-06:00

Well, for most landlords in Chicago the rental season is fast approaching. You should always try and give yourself two months to rent an apartment. If you have leases that are coming up, I recommend contacting current tenants three months ahead of time. You can give them one month to decide if they are going to stay or go. No matter what, you have to give a full months notice to tenants if you are not renewing their lease. If tenants are leaving or just not responding send them written notice that you will start showing their apartment for rent. That letter serves as their notice, but you should still call before coming over. Since Chicago requires 48 hours notice prior to entrance a blanket notice will usually suffice. If you have an angry or particular tenant they can require you to give 48 hours notice every time. In this situation I recommend open houses on the weekends, that makes giving notice easier.
Once you have an apartment to rent you need to start advertising. You can put up a sign, but these days that isn't usually enough. I recommend the Reader which is free or pretty inexpensive, or craigslist (craigslist.com) which is free, but you have to run adds almost daily. If you are having a hard time or you are too busy you can turn to a rental agency, though they tend to focus on the near north side and lake front. Rental agencies like the Apartment People charge a fee equal to one months rent. They do all the work though, including the showings and verification of the application. Many of them will even sign the lease on your behalf. If you have a very expensive or unique property you can pay a real estate agent to list it on the MLS. Personally, as a Realtor, I find this only works for single family homes or expensive condos. Realtors also usually charge a one month fee for their services. Using Realtors is more popular in the suburbs. All of these agencies only get paid if they rent the unit, so you can keep trying on your own in the mean time.
Good luck and don't get desperate. It is better to wait for a good tenant then suffer through a bad tenant.

Great Rental Properties in Chicago

2006-02-03T14:53:00.000-06:00

Stay tuned! In the course of my day-to-day business as a realtor I get to see tons of rental buildings in Chicago. Particularly 2-4 unit buildings on the near north, south and west sides of the city. If I see one I like that I think is in good condition I am always trying to think of pontential buyers. Last spring I saw a two flat on Thomas with some clients. It did not work for their needs, but I called a few people I knew and one of those contacts ended up buying the building. They are, of course, very happy there. This spring I intend to start posting buildings, I like, on my blog. So keep and eye out. If you are looking for anything in particular let me know what it is and I will let you know if I see anything good. Great buildings sell fast so it helps that I am looking on a regular basis.

2006-01-19T16:24:00.000-06:00

Great rental property in Chicago. Contact Melissa for more information

2006-01-19T16:22:00.000-06:00

Melissa Stanley

Chicago Landlord Tenant Ordinance

2006-01-10T15:51:00.000-06:00

Remember if your rental property is in the city of Chicago, whether it is a condo, two flat or a 12 unit building you are subject to the rules of the Chicago Landlord Tenant Ordinance (LTO). The only exemption is for an owner occupied building of 6 units or less. If you have a three flat and you live in one of the units you are exempt from the LTO. If you own a condo that you are renting out and you do not live there, then you must comply with the LTO. You can get a summary of the LTO from your alderman's office or online at cityofchicago.org.
The Landlord Tenant Ordinance favors tenants in most areas, particularly security deposits. There are rules on how and when deposits must be returned and you must pay interest on all security deposits. If you are taken to court over a security deposit you could end up paying double the deposit in damages. The rules you have to follow in the LTO are not that difficult and it will save you a lot of trouble in the future.
There is a landlord hotline you can call too. I find they are pretty helpful, but they have crazy hours so it is not easy to get them on the phone 312-922-3067. There is also a renters rights hotline you can call as well 312-742-7368.
Good luck and follow the LTO!

Lease Agreements

2006-01-02T14:45:00.000-06:00

In Chicago you can buy a standard lease agreement at any office supply store. You can also get copies of the "Landlord Tenant Ordinance" and other interesting documents at your alderman's office. It has been my experience that some alderman's staff are more knowledgeable then others on landlord/tenant issues so don't believe everything you hear.

I have a rider to my lease that clarifies many issues. I have specific rules regarding the condition of the apartment on move-out. It is important to be specific if you anticipate charging tenants for damages and cleaning. The lease is vague and favors the tenants. I also have added specific rules about noise violations and keys (I have had problems in the past with both of these issues). But, my new and favorite rider clause came from my lawyer. Basically it states that I can accept partial payments without waiving my right to collect all of the rent regardless of anything written on the check. I had a tenant, not that long ago, pay less than half of her last month's rent and write on the check paid in full. I did not know this at the time but cashing the check meant I was endorsing the agreement written on the check. I accidentally agreed to take only a partial payment for that last month. This new clause in my lease gives me the ability to accept a partial payment without waiving my right to collect the full amount in the lease. If you are confronted with this type of check without any protection in your lease or rider, it is best to return the check and start legal proceedings for the full amount.

I highly recommend that you consult with a lawyer regarding any riders or changes you might make to a lease. You will have to pay them, but you can reuse the rider forever and it may save you a lot of money down the line.

Tenant references

2005-12-19T11:01:00.000-06:00

Speaking of tenant verification, it is important to remember you can't bad mouth previous tenants. A landlord can get in a lot of legal trouble for defamation. I think many landlord's dream of the chance to get back at a previous tenant who caused problems or still owes money. Truthfully you may never get the chance. A savvy tenant would not use you as a reference. However, I had an old tenant who still owed me money and used me as reference once. I even told him I though it was a bad idea, that there was not much I could say about him that was positive. I guess he was in denial. I was honest on the verification and I only answered the question I was asked and without any embellishment. He, of course, did not get the new apartment and was mad about it. The important thing was that I kept to the facts. If you are in the lucky situation where you get to give a reference for a tenant that treated you poorly it is important that you only answer the questions you are given with factual and precise information. Do not embellishment or give sweeping statements like "they always paid late". Go through your records and give the exact number of late payments. I recommend giving all references in writing if you can.

Tenants

2005-12-14T14:34:00.000-06:00

I can't say this enough. I know we all want to believe that we can sense who are the good people and we want to trust our instincts, but people make careers out of taking advantage. You have your prospective tenants fill out an application and then you do nothing with the information! It is important to verify all the information you ask for. Always call previous landlords and check job references. I am always surprised when a prospective tenant gives me a bad reference. I can only guess that they think I will not call. I recommend that you ask very specific questions. Have they ever paid late? Do they owe any money? Are there any lease violations or noise disturbances?
You need to accept that you will still make a mistake or a good tenant will fall on hard times. It happens to every landlord sooner or later. Checking all the references you have and running credit if you can will help you avoid many bad tenants.