Managing investment properties on the South Side of Chicago is something that even many of the top property management companies do not venture into, and it is with good reason. There are tons of challenges to rental properties on the South Side, which is why I want to break down some keys to managing rental properties in this area. Before I go into the details of the key differences between rental homes on the South Side and in other areas, I want to make a note that I am specifically speaking about the C and D class properties that Chicago Style Management specializes in managing. These areas include Englewood, South Shore, Roseland, South Deering, and the southeast Chicago suburbs such as Harvey, Calumet Park, and Chicago Heights. These tips don't apply to the A and B class areas on the south sides of Chicago, such as Hyde Park, Bronzeville, Mount Greenwood and Beverly.
I'll break this article down into 3 key parts: Rehabbing and maintenance requests, finding tenants and tenant screening, and keeping a good landlord-resident relationship. The Chicago market has a ton of upsides if you understand the ins and outs of the neighborhoods and dealing with the older rental properties. While managing on your own, when you know these tips it is definitely doable for a savvy property owner; but hiring a quality property management company that knows the South Side of Chicago always cuts the learning curve in half.
Part 1: Rehabbing and Maintenance
Our best practices when it comes to turning a unit for rental include understanding the competition in your local real estate market. Far too often, we see a new investor either under rehab thinking that the property is in an area with a more affordable price for renters, or that the property owner doesn't have to worry about having things such as granite counters or working outlets. The other mistake many real estate investors make on the south side of Chicago is over-rehabbing the unit. There is a balance that is needed to maximize your return when both turning a unit over and making repairs.
When making repairs we preach using materials and doing fixes in a way that they will not have to be done again for a very long time. If you have the option to replace only a small part inside a bathroom wall, or to replace all of the main components and the other components are 50 years old, its better to only have to tear down the wall once and get the major work done the first time you have an issue causing you to break into a wall. You don't want to have to break into the same wall over and over.
The first part to consider when rehabbing is that you are likely to be involved with Chicago's South Side Section 8 tenants, which means whatever you do should at the very least qualify your apartment to be rented by a Section 8 tenant. This includes making sure GFCI outlets are installed where necessary, the units are correctly labeled, and all appliances and fixtures work as intended. If you install something, you are required to fix it or replace it with the same type of quality. So let's take a look at what we would install and what we would uninstall/never install in a rental in C and D class areas.
What you need to install to attract the most money and the best tenants to your rental property:
1. Granite counters
2. GFCI outlets by any water source
3. New drywall to make sure all walls are smooth
4. New LVP flooring if your floors are in rough condition or you have carpet.
5. New light bulbs
6. Fresh coat of paint
7. Keep up with the exterior landscaping and building-wise
Things that you can add if space allows:
1. Dishwasher
2. Sliding mirror closet doors instead of bifold doors
Things we would not install in our rentals, and things we might take out to save a headache:
1. Marble or above counters
2. Ceiling fans
3. Ice makers
4. Garbage disposals
5. Jacuzzi tubs
Part 2: Finding Quality Tenants
Now that your investment property is ready to list, we can talk about finding you a quality tenant. The biggest issue with the south side of Chicago is not having local market expertise. There may be a huge difference between 59th and x block, and 62nd and x block even though they are only a few blocks away from each other. If you're not hiring a property manager that knows the area and can get you the proper comps, than you need to make sure you research on your own. You can use resources like spotcrime.com to see what blocks are quote un quote safer, look at what school a block goes to, and fairly access your own property compared to other properties in the the area to come up with the proper pricing strategy for your home. The new renter does not care what you paid for the rental property or your turnover costs; they only care if it is a good deal compared to their other options.
Now once you have it priced, it's time to find good tenants and start earning some rental income. We suggest making sure your home is posted on several sites, including zillow.com, apartments.com, and craigslist. It still has some good quality renters poking around, however, not as many as it used to. Once you get a tenant to apply we want to make sure to do our credit checks in a timely manner so that we don't lose a tenant that may be applying to several apartments at once. Now here is where one of the key differences in a C and D class area comes in when reading the credit report we can't look for a super high credit score, the reason being if a tenant has a 650 or even a 600 credit score there is a good chance they could buy the home next store and pay less monthly than what you would charge for to rent your investment property. So we are looking to accept tenants with a lower credit score however we do want to make sure beyond credit there are a few things we look for to make sure they are quality tenants
1. No utility bills in collections: if a tenant isn't paying there bills to keep the lights on the odds of them paying your rent is very low
2. Bad recommendation from previous landlords: If a landlord says they destroyed their property, odds are they will not take care of your property, so make sure to call landlords they have previously dealt with to your current landlord.
3. No prior evictions with out a good excuse: so new fair housing rules makes it illegal to not give tenants a chance to show why their eviction happened in the past, however if it wasn't something that makes sense to you as something that would cause you to not pay your bills its probably not a good reason for them to not pay their bills
4. A really big jump in rent with out a big jump in pay if a tenant was paying 800 a month and still has the same job and now wants to pay 1900 for your rental property it may not be a good sign that they will be good tenants for you.
5. Make sure you are doing employment verification, as up to 40% of applications we have have fake paystubs. google the job and a phone number don't trust what they put on the application.
Our last bit of advice for you on renting out your property is be weary of a tenant from a real estate broker that is not going to be your property manager, to often brokers main goal is to find you a tenant in the shortest time and get paid with out worrying about the future residents ability to pay rent once they move into your apartment—not saying that all tenants brought by a real estate broker will be bad but to make sure that you are running and viewing there credit checks and history.
Part 3: Keeping a Good Relationship
Lets talk about your relationship with your tenant. Moving is not only hard work but it is expensive meaning when not obligated too move often times when we get a good tenant that feels at home we can keep them for many years. here is our keys to running your day-to-day operations once your tenants move into your rental property.
1. Understand that people who live in these areas live pay check to paycheck so don't always expect the rent on the 1st, make sure you are charging a late fee and holding them accountable for being late but often times you will have a tenant pay a week or two late this does not mean you should threaten eviction etc until they get past 30 days late it is all apart of being a property investor in the south side.
2. Make sure you do home visits but not to many: There is a fine line between protecting your investment and being intrusive. If your tenant feels at home they will stay for several years if they feel like there mother is inspecting every few weeks and judging the way they live the odds of them moving out early is higher. we recommend once a year but also to have your service providers give you an idea of what the home looks like when they make repairs.
3. Take care of the property for them. If they have a broken toilet, fix it within 24 hours. If there are any significant concerns, don't make them wait months hating their home while you decide the cheapest way to fix the home. Get the property to full working condition for your tenants as fast as you can.
4. Have ways for them to pay rent with out you showing up at there door: Not only is this intrusive but also unsafe for you as a landlord set up a way for them to pay in a mobile app (but don't use zelle or venmo) have drop boxes for your multi-family unit and an address they can mail checks to, you want to give as many options for rent payment as you can.
Whether you are renting out single-family homes or a huge apartment complex on the south side these things will make all the difference in our years of experience this is just a small sample of what we have learned, as one of Chicago's premier Property management companies.
For more great info check out myself on GC Realty's podcast straight up Chicago investor podcast.
