All Forum Posts by: Sean McKee

@Jason Albasha, @Alejandro Calixto, @John Warren  it definitely seems like move in fees might increase your cashflow. However personally, I like giving a people a chance to get their money back. 

The additional security deposit (double the normal), I would do during the winter months when demand shrinks.  Before COVID I gave some people who were borderline a chance. It mostly worked out, but I had an instance in which someone did more damage than a normal security deposit would cover.  The additional security deposit prevented me from losing money. But those days are long gone, I won't take the additional risk on tenants due to the new laws and the moratoriums put in place. I'll see how move in fees work out my building in Chicago. I'm in the class C market and even my best tenants who pay on time, are very clean, somehow still manage to break stuff. 

But, I agree that tenant screening will eliminate the need for full security deposits, especially as you move out of class C rental market. 

@Jason Albasha I agree with security deposits only doing so much and it won't protect you against severe losses. But I prefer the incentives it gives tenants to be careful in their units and to comply with the rules. I'm using move in fees in Chicago still, we will see what happens in the broader Cook County. It very well could turn into a situation where I move from security deposits to move in fees for all units.

@Neil Martin some of this will depend on your own personal levels of comfort. You can spend too little time educating yourself or too much. I think I spent the 6 to 8 months before buying my first property. I read all the books I could find, attending seminars, talking with people, and eventually searching/viewing properties on the MLS. You want to make sure you have a solid foundation so you don't make irreversible mistakes, but you also don't want to fall into the paralysis by analysis trap. So I wouldn't spend more than a year before finally making a move.

@Robin Krieb I'll definitely still invest in Chicago/Cook County, but the deal will have to be the right one.  If I'm going to have deal with all the additional regulations and headaches that have come out of COVID, I will demand a higher rate of return.  The Chicagoland is still a pretty strong rental market with opportunities to find deals. I have however, put Indiana on my radar. The landlord/tenant laws appear to be much more favorable.

@Adah N. it's definitely can be a difficult situation when doing large rent increases.  I've only dealt with properties that are in rough shape, so it makes it a little easier when having to ask people to leave.  The buildings had some problem tenants (one had drug dealers), and they were the easiest to deal with.  I paid them to leave and they were gone in weeks. They were happy to get paid and I was happy to have them gone. This created vacant units that I could work on almost immediately. The other tenants I explained as empathetically as I could the units were in very bad shape and presented health/safety issues. Problems like rats in subfloor, mold everywhere in bathroom, rotted subfloors that you could stick your foot through with enough pressure, etc.  The units would need to be made uninhabitable for weeks if not longer to bring up to standard.  The old owner had allowed these issues to occur and they now needed to be fixed.  I said they can take a few months to find alternative housing , offered to pay for some of the moving costs, and I'd fixed any immediate safety issues.

The bottom line is that units were in terrible shape, some had code violations, furnaces giving off excess carbon monoxide, and that these issues could not be addressed with them living in the units. I tried doing renovations with one tenant in the unit.  Their unit wasn't that bad, but needed some plumbing work.  Needless to say they complained the whole time, even though they specifically requested the work to be done. So I would not recommend it.

This approach won't work for everyone and frankly your situation seems different than mine.  If the units are in decent shape, they might not take the increase as well. They will see it as price gauging and unnecessary.  I agree with Nathan G. that doing gradual increase might just insult them more. You might want to just give them notice about the large increase.  I'd personally give them at least 3 months to find other housing, but that's up to you.

@Adah N. I actually just purchased a building like that.  It needed a lot of TLC.  Which explained the low rents.  I don't see why not, as long as your market analysis confirms the rent increase, you've taken account the repairs, and your willing deal with the current tenants. You'd be surprised how far some people allow rents to lag the market. The owners usually don't want to make the repairs and are willing to accept significantly below market rents.

@David Levin that's Chicago.  Cook County is now 10 dollar late fee for the first 1,000.  It's definitely ridiculously low.  

Thanks everyone for their input. I was curious to know what others might be doing.  It is definitely a tough decision on my part. The rental market is pretty strong in my market and I have some units that are a little under market. Normally I would prefer to go up gradually, but COVID definitely gave me a slightly different perspective. However it could end up costing me more with turnover expenses.  So I will have to make sure the increases offset the losses from turnover.

Hello BP,

Who here plans to raise rents more than they normally would due to losses caused by either the national eviction ban or local ones?  

I've been fortunate to have kept my losses relatively low given the circumstances, however they were probably more than if it were normal times. I do plan on increasing more than I normally. This obviously will depend on market conditions.

I am curious to know what others are doing.

You probably need to get a different lender. Up to 4 units is considered fine for conventional financing. I've bought two 4 unit buildings using conventional financing, and used conventional to refinance a seller note on another 4 unit.

Are you using a local bank?