Everything was going good until the pandemic hit

[Michelle Martin]

I currently own 7 Class C and D properties (13 units) in two different markets. Everything was fine until the pandemic hit. Tenants were paying on time, and I had minimum issues. For the purpose of this post , I will focus on the two properties I own in Chicago. One of the properties (SFR) I purchased in 2019. The property management company was very strict when choosing tenants, so the process took almost two months. The tenant and co-tenant paid on time until the pandemic hit, then they outright stopped paying. I couldn't file an eviction for awhile due to the eviction moratorium. My property manager encouraged the tenants to get assistance, which they said they were trying. Once the moratorium was lifted, the eviction was filed right away. During the eviction hearing, a rental assistance agency accompanied the tenants and offered to pay their back rent if I agreed to cancel the eviction. Of course I took the money as it was $12k in back rent. The tenants went back to their old ways and chose not to pay rent, so the eviction was filed again. Once they were evicted, the house was left nasty and basically uninhabitable. The cost for rehab is $50k-$70k. I'm definitely getting rid of that as I don't want the headache.

Now to my next property (SFR) that I actually bought for a great price during the pandemic. There was a section 8 tenant in place who operated a daycare out of the home. I thought she would definitely be there for awhile. Well a month after purchase, the tenant decided she wanted to move out to find a bigger home. After she moved out, I had to spend $18k to get the home section 8 ready again. My property manager shopped around for both market and section 8 tenants. She found what appeared to be a great market tenant who worked for the USPS. I approved the tenant. After she moved in, she only paid twice, then stopped paying. So an eviction was filed and is pending. I found her Facebook page and she brags about having a side catering business and now a tax preparer business 🙄. And I don't even think she works at the USPS anymore.

Something I learned these past 2yrs, and I know it's been said plenty of times on here: Never buy in a Class D neighborhood!

[Nathan Gesner]

Quote from @Michelle Martin:

Some markets cashflow on paper, but not in reality. I think a large percentage of problems we hear about on BP fall into this category. People from outside markets purchase a low-class property that looks like strong cashflow, then reality hits them in the face with bad tenants, bad markets, bad laws, bad courts.