Chicago investment properties have great character and bones, but there is more to a successful rental property than character and bones. Creating a unit that is easy to maintain and durable will put money in your pockets. For instance, yesterday I was walking through a unit in a building that we bought a number of years ago. The tenant just moved out at the beginning of the week and my partner and I were creating a list of repairs for the turnover of the unit. The tenant moved in prior to us buying the property, so we never got a chance to tenant proof the property but it had been updated in 2010 when the tenant moved in. Here are a couple of items that we decided to change to reduce costs down the road and maximize our profits.
The unit had carpeting in the living areas and bedrooms. After 5 years, the carpet was stained and looked terrible. They had a pet and the smell of dog permeated the unit. In the kitchen, they used vinyl peel and stick tiles. The tile was in ok shape. There were spots where there are gouges the tile was no longer sticking. In the bathroom there was ceramic tile that was in good shape.
We decided to tear out all of the carpet and install new laminate flooring everywhere except the bathroom. It is better to just get rid of the carpet completely. Carpet has a short life in a rental unit, especially in Chicago investment properties. The Chicago winters, with the snow and the salt, will destroy a carpet in no time. Laminate flooring will provide a clean look and last for years. It will be easy for a tenant to clean and will not stain or absorb smells. Some laminate flooring now on the market has a projected 25 year life. We also decided to install laminate flooring in the kitchen over the old vinyl flooring. While the vinyl flooring was in OK shape, it only adds another 200 sq. ft. of flooring to the project and it will really make the unit look more modern and clean. We decided to leave the ceramic in the bathroom because it looks good and will last for many years to come.
Most Chicago investment properties have old water boilers that the landlord paid the utilities for. This property was no different. We decided to remove the boiler for a few reasons.
First, in a building with landlord controlled heat, tenants are always trying to make adjustments to their radiators to control how hot or how cold it is in the unit. Since we don’t have HVAC repairmen living in all of our units, the tenants end up breaking the radiators because they don’t know how to use the radiators properly. After a radiator gets broken, the tenant calls in an emergency work order about how they have no heat or how there is water/steam spraying out of the radiator or even worse that there is a small leak that they didn’t notice and water is leaking down the walls for three or four floors. The cost from these emergency maintenance calls or unit repairs can be quiet high. Boiler removal is one of the first things we do in a rental property.
Second, we don’t pay for heat any longer. This cost in the cold winters can be quite high in Chicago investment properties. The gas bill for a landlord paid heat building can be as high as 10% of gross, depending on the winter. The cost of replacing a functioning furnace is made back in the first few years. It also makes the building more profitable when you plan to sell it.
Finally, the landlord is no longer controlling the heat. Landlord paid heat creates an adversarial relationship between ownership and their tenant. Ownership wants to minimize their expenses and keep the temperature as low as possible according to law. The tenant wants to control the temperature in their unit. We have had many calls to the city made by one of our tenants claiming they had no heat because they were unhappy with the temperature. In Chicago, they take no heat calls very seriously, so the property manager has to meet a city inspector out at our property to show him around. The city requires the unit to be 68 degrees and the inspector finds the unit to be 71 degrees. The problem is the tenant wants it to be 75. Therefore, instead of dealing with those types of headaches, it is easier to just get rid of it all together.
Garbage disposal, Dishwasher, Ceiling Fans
We remove them with only one caveat. If the property is an A class area, we leave them. Class A properties have class A tenants that will take care of things better and we don’t want to put ourselves at a disadvantage while marketing the property.
Garbage disposals don’t hold up under tenant use. Tenants seem to think that they can put anything into a garbage disposal. Eliminating the garbage disposal gets rid of the work order costs and replacement costs.
Dishwashers frequently break and they can leak. Eliminating this saves you the money of replacing it and the possible damage of having water spilled out all over the floor. Our experience has shown that dishwashers are mostly run at night or right before tenants leave the unit. We have found that in the past when we had some dishwashers, it was usually the downstairs tenant that alerted us to the leak. Replace a dishwasher with a matching kitchen cabinet.
Ceiling fans break all the time. Tenants use them as clothes lines to dry their clothes or as an additional closet in the middle of the room. Replace ceiling fans with a flush mount light fixture.
Chicago Investment Properties Success
These are just a few ways that we can tenant proof a property. There are many more. Our goal with tenant proofing is to minimize the amount of work orders that our Chicago investment properties have and to maximize the profits for our owners. This is how you create success in Chicago investment properties.