Anybody else having issues with Mack Companies in Chicago?

147 Replies

I have a turn-key rental with Mack Companies in suburban Chicago that has been vacant for FOUR MONTHS!

A small sample of my issues with the management:

Finding out a tenant has moved out weeks after the fact. When the monthly statement came it showed a big fat 0 for rent. No communication. How hard is it to send a one sentence email that the tenant moved out?

Rent lowered by hundreds of dollars on a re-lease without a discussion or heads up.

Two months into vacancy I still don't have a tenant due to things like "it's a busy time of year". Really? You didn't factor in summer as a busy time of year in Chicago? Like this is different than any other summer? 

Two months into vacancy I'm then told the unit needs a refresh. Really? It took two months to figure that out? Shouldn't I have a list of needed repairs within a week of tenant moving out? I'm told the reason for the delay is the property "fell in a crack". In other words mis-managed.

Three months into vacancy I'm told "The timeliness of placing a tenant is affected by the change in market demand compounded with the specific location and property style. Well I'm pretty sure the location and property style hasn't changed.

Getting nowhere with the manager, At 3 1/2 months vacant I ask for a higher up manager who says my unit "has had a series of bad luck and unfortunately that may be the case with some real estate - remember, it is an investment not an annuity." Also he is "hoping to have a solution by Friday." I'm not holding my breath.

6 grand in lost rent and counting....

I've lost all faith in Mack Companies, buyer beware.

That length of a vacancy is too long.  Is your property a single family or a condo? 

Have you been looking for alternative management companies yet? 

You should ask to speak with Mr Mack himself as on their homepage he quotes as saying " we care deeply for each other and it shows every day ".  

Medium buymemphisnow stacksCurt Davis, Buy Memphis Now | [email protected] | 605‑310‑7929 | http://www.BuyMemphisNow.com | TN Agent # 00321765

Hey Jim! I have no experience with Mack, but as a fellow(ette) turnkey buyer and working in the industry quite a bit.... I hate to hear about this kind of experience from any turnkey buyer! Sorry you are having to deal with that, and I wish you the best in getting it sorted out. Trust me....been there, done that! So I know how frustrating it can be.

Medium hipsterinvestment logo black300dpiAli Boone, Hipster Investments | [email protected] | 310‑957‑2101 | https://goo.gl/x52ZKJ | CA Agent # 01911993

Be sure to leave you review on turnkey-reviews.com!

@ Jim Tiernan

So glad i found your post as I was considering Mack and their products. I get their weekly news letter, the proformas are great and they also have very good reviews on turkey reviews.

i am really sorry to hear about your experience. I've posted in other posts but I am dealing with a nightmare-ish semi turnkey management team right now as well, and the kind of response and carelessness in your post completely reflect in the attitude I get from this said PM company. I am really sorry you are going through this, and wish you the best of luck. Hopefully things will smooth over in no time.

@Jim Tiernan

 First I am sorry to hear of your very difficult experience.  As a turnkey investor myself, I did consider investing with Mack last year.  I spoke to a sales rep there, and evaluated the properties and the rents.  I came away with a concern that their rents were not in line with market, which seems to be the issue in your case. Sometimes, turnkey companies will get an initial tenant in at an inflated rate to make their proforma numbers look good, but then when it comes time to renew the lease, or re-rent the property, the price doesn't hold.

Now their horrible communication with you, and generally bad PM is good to know about it. I've had good luck with PM with my properties so far, but have suffered some other painful lessons in REI, so I feel your pain.

I wish you all the best, and hope you property gets cash flowing again soon.

Medium dgi logo rgbLarry Fried, Do Good Investing, LLC | [email protected] | http://DoGoodInvesting.net | OR Agent # 201211636

I talked to John Gutman on the phone. He acknowledged the poor communication. They actually served the tenant an eviction notice in 2014 but Illinois law makes it hard to evict in winter. I had no idea this was going on. They are instituting a investor portal 4Q2015-1Q2016 so the investor knows what's going on at all times. They will also credit me two months rent. Im hoping that things will get better going forward. My unit is still "For Rent", 4 months and counting...

With turn key you have to:

1. Question the rents.

2. Question the PM company.

3. Question the location.

4. Question the rehab.

5. Question the purchase price.

Anyone of these items and more can sink the investment with no chance of recovery. I have come across very, very few turn key companies that present a pro-forma that I believe in. A lot of it is hyperbole. By nature it would be hard for a turn key provider to sell a quality product and still hit the profit margins.

Often these properties are older in nature. Newly rehabbed is marketed as turn key when just carpet, paint, knobs etc. have been changed. With an old property unless it is was a gut stud job replacing everything then you will get hit with big repairs down line that can take away years of positive cash flow.

Inexperienced buyers say "What can go wrong? These numbers they are showing me must be right." Experienced investors know what the real numbers are over the life they hold the asset. I have never heard of this company so couldn't comment about PM quality there.

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

This is why people need to know the negative factors buying in tenant friendly states versus a landlord.

I wouldn't buy into turn key companies saying for instance rents are going up, up, up. They show top market rents on rentals so that they can try to extract the highest purchase price. Developers try this stuff in commercial all the time. A buyer needs to project middle market rents on the purchase so that they are somewhat insulated against flattening of rents.

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

@Jim Tiernan -- Four months is not only unacceptable, but borderline unbelievable!!

@Joel Owens made a very good point regarding investing in a "tenant friendly state".  They can be difficult to work with as a landlord.  For example, if you're unlucky you can get stuck with a "professional" tenant that stays forever rent free at your expense.

Also, it's more than just questioning everything --- you must verify.

Good luck.

Medium norada real estate investmentsMarco Santarelli, Norada Real Estate Investments | (800) 611‑3060 | http://www.NoradaRealEstate.com

@Joel Owens @Jim Tiernan

Joel, I'm evaluating the company now and agree with all of your points. They claim to manage 1200+ rentals, so I don't get the sense that they're a fly-by-night company; they just don't seem to have the same highly visible presence on BP that some of the other big turnkey operators do. Their strategy and approach are pretty clearly documented, but there are still some questions...

1. Question the rents.

They claim that their pro forma rents for each property are the lowest they've received in that specific neighborhood over the last 6 months. Using Rentometer to check on a few of their currently available properties, they seem to be priced ~20-30% over market averages, but their rentals do seem to have premium amenities.

2. Question the PM company.

The PM company seems experienced and well run. I'm a little confused / concerned about how cheap it is though: a flat $100 / mo. It's "not a profit center," but a flat property management fee combined with first-year rent and maintenance guarantees makes me a little suspicious about years 2-10...

3. Question the rents.

I haven't vetted enough of their properties yet to say for certain, but if the few I've looked at are representative, I'm not surprised that vacancies are a problem in some cases.

4. Question the rehab.

The standard scope of work they've shared seems thorough. They use reasonable life expectancy to decide whether to replace mechanicals and bring all up to code. They generally replace countertops & flooring. 

5. Question the purchase price.

From my research so far, their homes don't seem to be marked up quite as seriously as others I've been looking at, and there aren't any red flags around financing/appraisal. It seems to me that they're buying right and leaving a bit of equity for their turnkey buyers, or at least pricing right about at market value with a thorough rehab.

Anyway, I'm interested to hear from Jim how this works out, as well as any others that have invested with them. I'm touring with them next month and will be happy to report back impressions.

thanks @Joel Owens I

@Keith Anderson and @Marco Santarelli

Marco, I've been listening to your podcasts recently.

I have no plans to buy more in Ilinois. The state is broke with lots of unfunded liabilities. This will mean higher taxes down the line. I will have to wait for the inevitable bankruptcy/crash and move to a right-to-work state. I think the state will flat line for years as people and compaines are moving due to high taxes and regulations. Indiana, Michigan and Wisconsin have recently become right-to-work state which will pull jobs and people from Illinois.

From what I understand (and perhaps I misread/misunderstood) you're happy with the home and the rehab, just not the management of it (and understandably - too little communication and lots of vacancy is not a great state to be in).

Can you switch management companies to try and alleviate that challenge, or, are you in a contract with this provider for a fixed period of time to have them manage it, or?

yes, switching management companies is always an option.

@Jim Tiernan Would you mind sharing what neighborhood these properties were in? I'm doing a lot of diligence on Chicago right now and it would be helpful to know where this problem property was.

the problem property is in Lansing, IL 60438

The other is South Holland, IL 60473

Keith Anderson did you ever do a tour of Mack?
I recently had a call with them and learned many of the similar things you mentioned. They sounded good.
They quoted me PM of flat $95. They said they manage 1800 rentals not 1200 and like you said PM not a profit center. Also heard same on how they derive rent. They also say that tenants stay average 3.8 years. That sounds great but I am skeptical.
However, looking at pro formas there is 0% vacancy and 0% maintence and cap ex. Basically this is a first year pro forma. And of course it looks great. I am on the fence with Chicago. The taxes on one property I looked at were over $400 for the month.

Keith Anderson did you ever do a tour of Mack?
I recently had a call with them and learned many of the similar things you mentioned. They sounded good.
They quoted me PM of flat $95. They said they manage 1800 rentals not 1200 and like you said PM not a profit center. Also heard same on how they derive rent. They also say that tenants stay average 3.8 years. That sounds great but I am skeptical.
However, looking at pro formas there is 0% vacancy and 0% maintence and cap ex. Basically this is a first year pro forma. And of course it looks great. I am on the fence with Chicago. The taxes on one property I looked at were over $400 for the month.

@Patrick Young

I did tour their neighborhoods and their operations, and I'm actually closing on 2 properties with them today (just completed paperwork actually).

You definitely have to do your own analysis -- their pro formas are junk because of the $0 allowances for maintenance and vacancies. 

But for my goals, they are still a good fit. Properties will cash flow $150-$250/mo. using my conservative assumptions, and they're in primarily owner-occupied neighborhoods, where I want to own. 

I can't give you any feedback on the properties' performance, but I've been pleased with the process so far. 

Turn key has always scared me especially from such a geographical distance. I have always been a big fan of being able to drive and hug my investment if needed. 

Just like a manager at say a fast food place, if the employees are falling behind, you step up to the register and fill in. Hard to do that so remotely.

I have a group of people I work with right across the Indiana border from South Holland and Lansing. We just have 2 vacancies that were recent, (one an eviction that only took 5 weeks total). But most all of our new tenants are coming from Illinois due to the massive taxes, lower rent, better job market, etc. 

I have heard some questionable stories about Mack properties and corners being cut when they did rehabs, so the issues usually show up about year 2-3 in the property.  Be sure to check  them on Yelp, and what you have to do on Yelp these days is look for the reviews that Yelp says aren't currently recommended (Yelp is now turning into a scam because of these).  http://www.yelp.com/biz/mack-companies-tinley-park-3