BiggerPockets

Due the high property taxes in Cook County, my carrying cost is around $2175. By collecting $1800 from my tenants my losses are around $400 a month.

Assuming that $2200/mo. is at or a little bit below the market rent for the property and not overpriced, then $400 sounds like a steep drop in rent. I think many people on this forum would go ahead and evict rather than drop the rent that much. On the other hand, it's all about numbers and how long it takes to get it re-rented. If the tenants aren't causing any other problems, it may be worth it to keep them there at $1800 if it's going to take months to get the place re-rented at $2200.

I'm in a similar situation where one roommate is moving out (unexpectedly) of my rental. I'm debating whether to offer the remaining people a $50 drop in their rent if it can get them through the rest of their lease. I think I will lose more money if it has to sit vacant for one or two months.

You're set to shed $5,000 a year in discounted rent. That's a big chunk. If in your shoes, I'd try and weather the storm through the winter and then get them out or evict when the weather is warmer and when it's easier to re-rent the unit. If they are so much as a day late paying the deeply discounted rent, I'd begin an eviction. I worry about the way these tenants are acting tho. I hope you're able to get money out of them through the winter.
Her son will also work again. Is her son getting unemployment? The upside of all of this is that there's 2 people to pursue when they don't pay. Does the mom work? How much does she make?
If in your shoes, I'd consult with an attorney to find out how you can accept $1800 a month with the possibility of pursuing them for the difference later.
As it pertains to future tenant screening, a general rule is 3Xrent for income. I'd also take a look at credit and bank statements. Sometimes bank statements may indicate gambling problems or other traits you might not like in a tenant. Best of luck. As a fellow long distance landlord, I feel your pain.

James, I've been in your shoes when I started renting my first home when I moved out of state. I'm just assuming, but you prob didn't run their credit or background check. If you do this beforehand you will catch 90% of problems before they happen. Also if you see they have a 530 credit score they don't care if you evict them or hit them with a judgment. The quickest way to get out of this jam is hire an experienced property manager which normally cost 7-10% of your monthly rent and let them handle the legal garbage. Also if they are an experienced PM they will have lawyer's fees billed to the tenants. It's all about your personal finances and the condition of the home to set it up to put back on the market. If it's in good condition with minimal work to get back on the market do it. You're in a major city yes it may be getting into the slow months but there is a hundreds of thousands of people someone will bite if priced correctly.

Thanks everyone for your advice. Vic. L. Yes, I did get the basement fully restored two weeks ago. I made a mistake of going with a contractor that my tenant recommended who was a helper for the DEMO. He told me he could restore the basement at 1/2 the cost I was receiving quotes for. I had to baby sit him from Atlanta by calling him every single day to see when he is coming to work. The work he did was poor and I fired him (looking back was the best decision) when he was no where near completing the basement and hired a more expensive reliable contractor to finish the job in 6 days. This was also a valuable lesson learned.

The mother seems to be the only one somewhat responsible. She was on the lease contract with me with her son. Her credit is in the 500s and I don't think she cares much about her credit, but her son has a credit of 750. When they were paying games with me by not returning my calls in September, I emailed her that i will proceed with the eviction process and this can damage your son's credit score. That is when I got a response from her.

Her W2 showed $90k and her son just got a job that paid him $45k. She is divorced with 3 adult children living with her. The children were causing a lot of problems for me early on as they were trying to claim that the contract can be void as the basement was not finished fast enough. The son sent me an me an email 3 days before the September rent was due stating that their rent should be $1500 since the basement is not finished.

The daughter said she saw a cock roach in her room and tried to say this made the home a hazardous place to live. This was the type of crap that was going on in late August and early September.

I flew out to chicago to see the progress of the basement and speak with my tenants. It appeared that they wanted to move out and look for a cheaper rental. I don't think the tenants are bad people, but they can't afford the rent. The mother told me that she can pay me $1800/month without her son't help.

I wrote an addendum contract that I will agree to a $1800 rent if they agreed that I can list my property to bring in a new qualified tenant.

When her son recently lost his job, the mother called me that she is now at my mercy, and please don't throw her family out in the street and she will cooperate to pay me $1800 a month on time while i look for a new tenant. I asked her where she would go, and she told me she has family in the area.

I am a christian and I do have a big heart. The weather will be cold in Chicago and most likely it will be difficult to get a new tenant in here until next spring. Though $1800 rent is $400 less than was contractly agreed to receive, I would consider myself worse off with the home vacant with a $2200 loss on a monthly basis or going through the eviction process paying a lawyer and my travel expenses to show up to court. Another thing i need to consider is that they are paying for my utility.

About a month ago, the grandmother had flooded the toliet to caused dry wall damage downstairs, but my heart softened up a little when they brought in a contractor to fix the damage which the grandmother paid. At first, I thought they did this intentionally so that i cannot show the unit, but now know that this was an honest accident.

This group sounds like nothing but trouble.

Here is the track record so far with my tenants: They were on contract for 2 years for $2200/month.

Received $2000 rent for August on the 3rd
Received $2000 rent for Sept but came in on Sept 8th - I was ready to sent the 5 day notice.
Received $1800 rent for October on the 1st day - This showed me that the mother was willing to cooperate. She told me that with her single income of $50,000 she can only afford $1800 and I told her that i receive her rent on the 1st of the month I will take the $1800, but it will go up to $2000 after the 1st. She seemed to encourage me to actively seek a new tenant as its seems that the rent commitment is weighing on her. I was a little concerned as she told me that would be going to Asia from Nov 2 - Dec 3. She assured me that I will not need to worry about rent as it will come on time. I guess I will have to wait and see. She requested that I can give her 2 weeks notice if i find a new tenant and wait until she is back from Asia for the new tenants to move in. I had no problems with this request.

Thank you for reading about my situation. I hope at the very least that new landlords can learn from my mistakes. After this experience I want to own all my rental properties close by to where i live and screen tenants very carefully just like I would when hiring an key employee for my small business. The right tenants can be diamonds to your rental business, but the wrong ones can literally make your life miserable.

James-
Now I'm lost. In your last post you said:
"She told me that with her single income of $50,000 she can only afford $1800."

But in an earlier post you said: "Her W2 showed $90k and her son just got a job that paid him $45k."

Which of those numbers is correct?

The fact that she's divorced wouldn't concern me, but the fact that she has 3 adult children and a grandmother living there, with only herself and one son on the lease would. Every person over the age of 18 should be on that lease, I'm thinking.

And if tenants have a concern about the condition of the house, they can't just stop paying rent to you. They must pay it into an escrow account until the situation is resolved, otherwise I would have to believe that they're in breach of contract. The advice everyone else has given you is great, I'm not a buy and hold investor, so I'm not even going to pretend to give you advice on that subject, just wanted to share my initial thoughts on the situation:)

Jamie,

She had told me that her work had cut down on her hours. So the income information i receieved was not representative of the real situation.

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Joel,

what you are saying is correct. The adult children are spoiled and not responsible. The oldest son who has a credit score in the 700s was supposed to pay half the rent. Early on, the mother would complain to me that the her oldest son would not pay her anything to help with the rent. I know the mother is working very hard and working late nights to make ends meet and the oldest son drives a nice new sports car, and doesn't seem to be busting his butt to look for a new job.

Joel, one thing i did before moving to Atlanta was I refinanced and cashed out of the equity of the home at 4.25% 30 year fixed up to 80%. What is killing the cash flow is that Cook County is raising property taxes while properties values dropping. The county is doing this as they are broke.

I would love to sell my townhome in Chicago right now, but I would lose too much in this market. Perhaps the market will be better in 2014-2015 and I break even with the price i paid in 2004. When the home was staged and maintained in mint condition, I was very confident I could get $2200. However since I have tenants living there while showing my property, I listed my property for $2000/month.

I would love to concentrate all my real estate investing in the northern Atlanta metro area from this point forward.

The reason I didn't get a property management company was that my first rental was in nice gated community here in Northern Atlanta that i purchased in 2006 to live in. Unfortunately because of my job situation, I could not relocate to Atlanta at that time.

Luckily, I had a really good tenant for 5 years who never was a day late on his $3000/rent. I guess I had a misconception that being a landlord out-of-state was very easy and property management companies were a waste of money and time. This is the reason why i just took the first person who was interested in renting from me so that property will be rented right before I moved my family to Atlanta.

This experience was very painful learning experience for me, but I count my blessings that I am able to learn this mistake early on as a novice real estate investor with only few properties.