According to the United State Census Bureau, the population of Chicago is approximately 2.7 million, which means one thing for rental property owners in the Windy City: there are a lot of people who need housing. For this reason, many investors have begun favoring leasing properties as opposed to placing them on the market for sale.
If you’re an experienced rental property owner, you know what a daunting series of tasks it is to screen tenants, schedule various services (lawn care, pest control, pool cleaning, et cetera), collect rent, conduct routine inspections and deal with nuisances tenants, just to name a few. Whether you own a single unit, an apartment building, a strip mall, an office building or a collection of properties scattered about Chicago, the time and expense of direct care can mount quickly.
This is why so many veteran rental-property owners seek out the services of a Chicago property management company to take over the heavy lifting involved with leasing real estate. Chicago property managers are usually realtors who have experience maintaining and renting properties. They charge a negotiated fee either, usually based on the monthly rental income.
Six Things You Should Remember as a Landlord
Oftentimes, a real estate-investor will decide to rent out a piece of property to take advantage of Chicago’s relatively high rental rates or to hold their unit(s) in anticipation of them appreciating over time in a more favorable market. This is an attractive idea to investors, as few things lose money quicker than an empty piece of property sitting on a soft real estate market. But relatively inexperienced investors might be unaware of their legal obligations under the laws of the state of Illinois and can fall into legal pitfalls. And while there are many resources available to landlords, established property management companies in Chicago make legal compliance a cornerstone of their services.
To summarize some of the legal concerns of Illinois property renters we’ve compiled a list of some of the state’s requirements:
- Housing must be safe and habitable – Electrical wiring must be safe and dependable. Heating and air conditioning units must be repaired as soon as practical. In other words, anything in the unit that is determined to be unsafe needs to be repaired or replaced, and that falls under the responsibility of you as the landlord.
- Landlords must comply with Illinois rental and late fee laws – Since 1997, there has been no rent control in Illinois, but that doesn’t mean that there aren’t rules governing the collection of rent. As a landlord, you need to know your rights and limitations with regard to rent collection and collecting late fees. It’s also important to know how long you must wait after delinquent payment before you can file eviction paperwork.
- Landlords must follow security deposit rules – Unlike other parts of the state, the city of Chicago requires landlords to pay interest on security deposits. The rates are set by the city and the interest must be added before taking out deductions for damage. Additionally, to avoid conflicts over the amount of deductions, landlords or property managers should use an itemized checklist of the property’s features and make sure that the tenant agrees with it upon moving in. Chicago is extremely litigious when it comes to security deposits and is the reason most veteran landlords take nonrefundable administrative fees in lieu of deposits.
- Both parties should sign a valid, legally enforceable lease – Whether it’s for a commercial property or a residential rental, most landlords and Chicago property management companies use some form of a standard lease to avoid legal entanglements and to ensure that both parties know exactly what to expect from the other with regard to maintenance, when rent is due, late fees, grounds for eviction, et cetera. Generally, if there’s a conflict, the law will supersede any provision in the lease, and the lease will supersede any verbal agreement that you and the tenant may have. So, protect yourself by knowing the law and signing an enforceable document.
- Landlords must avoid fair-housing law violations – It’s legal to prescreen applicants based on credit ratings, prior rental histories, low income and other behavioral factors that might make them a bad risk as tenants. You cannot screen applicants based on any of the protected classes, and while you may have no intention of doing so, it’s possible to inadvertently give that impression on applicant questionnaires or in interviews. Trained property management professionals know how to avoid accidentally giving the impression that they are interested in anything other than whether or not the applicant will be a responsible tenant.
- Property owners must follow proper eviction procedures – In Cook County, an eviction can take a staggering 85 – 122 days from the service of the five-day notice (day one) to the time when the Cook County Sheriff’s department removes them from the property. With that amount of time, many landlords look for quicker, but often illegal, shortcuts. Unfortunately, the lengthy eviction process is part of renting property in the Windy City. When landlords ask, “Is a property management company worth it?” they probably haven’t been through an eviction yet.
These are just some of the considerations that Chicago residential and commercial property owners have to consider. When it comes to certain businesses, there may be a number of other federal, state and local laws that affect the suitability of a tenant or property. Being a landlord requires time, experience and a significant amount of research, which is why so many people turn those burdens over to property managers.
Should I Hire a Property Management Company? Six Factors to Consider
As we’ve previously mentioned, the tendency for new or inexperienced landlords is to underestimate the amount of work, as well as the potential liability, involved in property management. More than one Chicago real estate owners have assumed that the fiscally conservative move was to manage a property without a property manager, only to end up with losses that could have been avoided. Partial rent, late rent, damaged property, tenant property neglect, legal fees, non-payment due to eviction and legal settlements can combine to erode the bottom.
Protecting landlords from losses due to unreliable tenants and legal processes is one of the most important functions of a property manager, but a competent property manager should also provide a number of services to alleviate the burden of owning residential and commercial real estate while maximizing the profitability.
When determining whether or not you should hire a property manager, you should weigh some of the following considerations:
- Geography – If you have a property that’s more than fifty miles away, it may be difficult to get to it often. If you have more than one property, and they’re not close to one another, it may be impossible to visit all of them on a regular basis.
- Number – The more units you own, the thinner your resources will be spread.
- Profit Margin – We’ve encountered many landlords that feel they cannot afford a property manager because their margins are so thin. If this is the case, have an experienced property manager do a free evaluation of your property. Many times, we can do minor upgrades or simply market the units more effectively to push rental rates. Thereby, the property is worth more and property management services actually pay for themselves.
- Personal Time – If you work a full-time job, raise a family or have other obligations, you may not have the time to properly manage a property.
- Vacancies – This may seem counterintuitive, but if you have a high vacancy rate, you may want to consider hiring a property manager to assist you in filling them.
- Tenant Relations – Some landlords enjoy interacting with their tenants. Others have a difficult time with face-to-face interactions.
Half a Dozen Services a Property Manager Provides
What are the Benefits of Hiring a Chicago Property Management Company? Imagine going into business with a person that you don’t know. At least a part of your financial wellbeing would be linked to a person who you know very little about. Being a landlord is exactly that: one or more business relationships that last for the length of the leases that you sign. There are legal remedies if things go awry, but those are time-consuming and expensive. Property managers ensure that your business relationships are profitable and run smoothly. This is how:
- Ensure Legal Compliance – As we’ve previously mentioned, your properties and leases must be in compliance with the law. A property manager should know those legal requirements and make certain that your properties and leasing documents are in compliance with all areas of the law. In addition, the property manager will ensure that evictions conform to Illinois law.
- Marketing Properties – The laws of supply and demand dictate that the more potential renters you have interested in your property, the higher you can charge for rent. But maybe more importantly, you can also pick the best fit for your space. A property management company can arrange for your property to be cleaned, painted, landscaped, refitted with new appliances or fixtures and anything else necessary to fetch you the maximum rent for the market. Because property managers are also realtors, they know how to market your space to get multiple offers.
- Vetting Tenants – There may be no single factor as important to maximizing rent revenues and minimizing the obsolescence of your property than picking the right tenants. A reliable property manager can identify reliable tenants, and while there are no guarantees when it comes to prospective tenants, experience is a great teacher. A professional Chicago property manager for residential buildings can identify the red flags that accompany poor prospects. When it comes to commercial properties, it’s also important to have the right type of business occupying your spaces. A commercial property manager should be able to pair the right type of business for your space, creating a mutually beneficial situation for you and your tenant.
- Building and Ground Maintenance – The bigger the building, the more complicated the maintenance issues are, but even a smaller unit can have a plethora of maintenance concerns. In most buildings, the landlord is responsible for the integrity of the structure, plumbing, electrical, pest control, pool maintenance (if there is one), heating and air, appliance repairs and replacement, exterior paint and a security system (if one is installed). In an apartment building or commercial space, the landlord is usually responsible for all common areas, including elevator maintenance, common restrooms, reception areas, building security, parking areas, plants, common-area light fixtures and custodial services.
- Rent Collection – As a landlord, you need to create a system for collecting rent and pursuing delinquencies. Most landlords don’t want to move straight to eviction when an otherwise reliable tenant is late on one or two occasions. For that reason, property managers use a system of reminder notices that encourage timely payment.
- Commercial Space Build Out – It’s not uncommon for commercial renters to negotiate a space build out as part of their initial lease. If you’ve decided to custom build a space for a tenant, you’ll need reliable contractors who perform the work affordably and reliably. A Chicago property manager for commercial buildings can make the build-out arrangements on your behalf.
Very few real estate investors are versed in all of these areas of property management. Hiring a property management company frees you to pursue other endeavors while giving you the confidence of knowing that your property is being well maintained and making you a profit.
What Should I Look for in a Property Management Company? Five Essential Qualifications
For most individuals and companies that own commercial and residential real estate, hiring a company with knowledge of how to manage a Chicago rental property is a practical and cost-effective solution. But how do you choose the right property management company for you? We’ve assembled a few tips for finding an experienced Chicago property manager for your rental property.
- Look for experience – This might seem too obvious to list, but your property management company shouldn’t only have experience, it needs to have the right kind of experience for your property. If you own an apartment building, a company that focuses on warehouse rentals isn’t a good fit for you. If you need your property manager to market your property for rent, you’ll want a company whose staff is familiar with the sector of the Chicago real estate market that matches your unit.
- Knowledge of Real Estate – It’s no accident that some of the best property management companies are also real estate firms. That’s because the state sees property management as a function of real estate and requires property managers to have realtor’s licenses. Additionally, realtors tend to know the values of properties, rental prices, et cetera. They can often give you an estimate as to how much you can expect to profit from your rentals.
- Price – Property management isn’t free, but the price should be reasonable and commensurate with industry standards. Some companies charge one month’s rent (about 8 percent). Others charge anywhere from 4 – 12 percent of the monthly rent. If a property management company charges more than the standard market fees, ask what additional services that they’ll provide to justify the increase.
- Credentials – In Illinois, you must be a licensed real estate broker or possess a leasing agent license to be a property manager.
- References – Satisfied clients are a good indicator of how a property manager will perform for you and your rental properties. Ask to see a list of references and contact them.
If you own commercial or residential property in the greater Chicago area and you want to enjoy maximum, sustainable revenues with minimal direct interaction, you may want to consider retaining the services of an experienced property management company. Contact us if we can answer any questions about residential and commercial property rental you have.