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what to do when your tenant stops paying

What to Do When a Tenant Stops Paying Rent or Wants to Break Their Lease

By | Property Management

As a landlord, you can do everything in your power to make a situation agreeable for a tenant, but the unfortunate reality is that sooner or later, you may find yourself facing a tenant who has stopped paying rent for some reason, or who is asking to get out of their lease early. Both of these situations are problematic for a variety of reasons, and the eviction process can be a nightmare for everyone involved, so it’s best to try and resolve problems if you can. If you can’t come to a compromise that works for everyone, though, you do have rights as the landlord. If you’re dealing with unpaid rent or an unhappy tenant who wants to leave before their lease is up, we’re here with some helpful advice.

What to Do When Your Tenant Stops Paying

It can be disheartening if, after all of your screening processes, you wind up with a tenant who stops turning in rent checks. Of course, a day or two late is understandable—we’re all human, after all—but when weeks or even months drag on with no payment coming your way, it’s time to take action.

Most tenants will be open to having a conversation about why they aren’t paying on time. Perhaps they were hit with an unexpected medical emergency and the accompanying bills, or they got into a car accident and have had to cover those expenses. Maybe they lost their job or are going through a divorce. There is usually a reason that people stop paying rent—most tenants aren’t simply neglecting their responsibilities and going out partying every night.

However, whatever the reason, the bottom line is that your bottom line is suffering. Have a sit down talk with your tenant and find out what’s really going on. Once you’ve heard their side of the story, you can make a decision about what to do.

 

Should You Evict or Negotiate?

Eviction processes can be complicated, expensive, and drawn out. If you haven’t been through the process before, you’ll want to be aware of what you’re getting into before you start down that road.

The Eviction Process in Chicago

If you decide to evict a tenant for non-payment, you must first notify them that you plan on starting the eviction process if they do not pay within a certain amount of days. If they don’t pay, you can then begin the eviction process. Eviction lawsuits must be filed in the same county that the property is located in. Once you do, the tenant will then receive a court summons and a court date. If they intend to fight the eviction, they will have to appear. If they appear in court, they’ll have to detail why they are fighting the eviction. There are a number of reasons that a tenant can fight their eviction, and if the case is over unpaid rent, they may choose to bring up issues of damage or lack of maintenance as a reason for the nonpayment—you will want to have any communications between the tenant and yourself on hand to prove that lack of maintenance is not the issue.

Due to the length of time that these proceedings can take—anywhere from five weeks to three months, assuming there are no delays—many landlords choose alternative methods for dealing with nonpayment. The most common alternative is negotiating with the tenant to figure out a smoother transition.

Common Negotiation Options  

Instead of evicting tenants, some landlords choose to work out a solution that involves paying the tenant to move out so that the apartment can be re-leased sooner. Often, the reason a tenant isn’t paying and won’t vacate is because they can’t afford movers. While it’s understandable to sympathize with this plight, the reality is you aren’t obligated to provide charity to non-paying tenants. If you’d prefer avoiding a court case and want the unit vacated, you can consider working out a deal to pay for the tenant’s moving fees so that they can leave sooner. This is sometimes the best case scenario—while you are paying a tenant to leave, a flat fee can work out to be less expensive than taking them to court and evicting them over months of unpaid rent.

You can also work out a payment plan if the tenant thinks they can get back on track relatively soon—whether you want to explore this option has to do with the reliability of the tenant and whether you can trust that they will actually catch up, and how they can prove to you that they can be trusted—documentation of a new job, for instance. This can be a risky choice, because if they turn out to be untrustworthy, you’re back at square one with unpaid rent and a tenant who needs to go.

Talk with your property management company about the best option for what to do when your tenant stops paying. They likely have a lot of experience dealing with all kinds of tenants, and will be able to offer you sound, realistic advice based on the specifics of your property and the current rental market.

 

What About a Tenant Who Wants to Break Their Lease?

Another issue that you may have to deal with as a landlord is a tenant who wants to leave before their lease is up. Breaking a lease is generally unadvisable for tenants, but from time to time, someone may have a legitimate reason that they need to leave: job relocation, family emergency, loss of income, etc. Other times, tenants simply want out of their responsibility– perhaps they want to move in with a significant other, or maybe they don’t like their roommates, but whatever the case may be, you need to find a way to deal with their dissatisfaction.

As a landlord, it’s in your best interest to try and come to a compromise on the tenant’s requests; resistance may lead to them stopping paying rent, and then you have to deal with that, in addition to an unhappy tenant.

If a tenant leaves, you are not allowed to simply do nothing, wait out their lease, then sue them for the months they weren’t there/were not paying. You are obligated by law to try and fill the vacancy in a timely manner. Even if you have a full plate of other responsibilities, you have to start showing the unit as soon as possible. You can charge costs of advertising the unit to the tenant breaking the lease, but thankfully, you aren’t required to list it at a below-market price just to fill the vacancy faster.

Whatever reason the tenant gives for wanting out of their lease, it is often easier to try and work with them to get the situation resolved sooner, rather than argue with them and force them to stay or sue them for unpaid rent.

If the tenant who wants to break the lease is not the only person on the lease, it should be reiterated to the remaining roommates that they are still responsible for the total amount of the rent payment. Recouping unpaid rent from a departed tenant will usually involve suing the tenant, and your leases should have a clause that informs roommates of the potential of having to cover the total cost of the rent in case someone leaves. The remaining tenants may not know that they will be held responsible if one person leaves, and that can cause a domino effect of more unpaid rent. In other words, it’s best to communicate with everyone what the terms of their lease are, even in the event of one person breaking the lease.  Try and get the departing tenant to find a sublet, but if they can’t, and you let them out of the lease, it’s up to you to fill the vacancy.

 

Don’t Get Overwhelmed

If all of this information makes you stressed out just reading it, that’s fair—dealing with unpaid rent, unhappy tenants, and broken leases can be nightmarish. Property management companies know that these issues pop up from time to time, and due to the volume of their businesses, have often dealt with these situations at least once or twice. They can help you track down tenants who aren’t paying on time (or at all), and they’ll be able to help you re-list vacant units, screen tenants, and take care of everything related to possible legal battles.

Here at Lofty, we want everyone who owns investment property to enjoy doing so, and we help facilitate that by managing every aspect of your property’s needs. We handle the difficult situations as well as the everyday minutiae of being a landlord, so that you can live the life you deserve.

Contact us anytime to learn more about how property management can make your life easier.

Speak with Lofty’s expert and managing broker Anthony Zammitt.

 

where and how to store security deposits

Everything You Need to Know About Security Deposits

By | Leasing, Property Management

You bought investment property, fixed it up to be market ready, posted an ad, screened tenants, and now you’re ready to sign a tenant to a lease. Congratulations! Now that you’ve got almost everything sorted out, it’s time to collect the security deposit from your prospective renter. If you haven’t gotten everything in line for your security deposits, though, it’s not too late. Not sure where to start? Follow this guide to learn everything you need to know about security deposits, from how much to charge to how to return them (or keep them) and everything in between.

How Much Should You Charge?

Unfurnished apartments in Chicago—as well as in most other cities and states—have a set limit for security deposits that cannot exceed the equivalent of two months’ rent (for furnished apartments, the limit is three times’ the monthly rent). For instance, if the rent is $1,500 per month, your security deposit cannot exceed $3,000; the payment due upon move-in would be the first month’s rent plus the security deposit. So, how much should you charge?

It’s advisable to charge around the equivalent to one month’s rent as the security deposit. This amount can cover a reasonable amount of damage should you need to do any repairs once the tenant moves out, and it can also discourage and weed out tenants who may be stretching their budget and savings to live in your property. One month’s rent is usually a manageable amount for most tenants, and it’s a very common amount for landlords to charge, so there won’t be any “sticker shock” with that rate. If you’re worried about turning some tenants off by charging a security deposit, you can consider charging a non-refundable fee instead. This is becoming more and more common, and it’s up to you to decide which is the best option for your properties.

When you receive a deposit from a tenant, be sure to issue a receipt including the date of payment, and keep a copy for your own records. When dealing with investment properties, the best thing you can do is keep detailed records and accurate books.

Where and How to Store Security Deposits

In most states, it’s required by law to keep your security deposits in separate bank accounts. Even if it’s not required by law where your properties are, it’s a good idea to keep deposits separate for a number of reasons:

  • They’re easier to keep track of when they’re not sharing an account with standard rent income.
  • It’s easier to manage interest earned; some states allow landlords to keep accrued interest on security deposits, while other states require anything earned plus the initial deposit back to the tenant at the end of the lease. In separate accounts, it’s far easier to track how much interest is earned on a deposit. Maintaining separate bank accounts for each property you own is advisable for optimal organization. You can have a master rental operations checking account, but security deposits for each property should be kept in separate, individual accounts (ideally also checking accounts, so that you can quickly pay them back or use them for repairs at the end of the lease).
  • It prevents accidentally spending the security deposit on maintenance or other expenses. If you do this and find yourself lacking the deposit at the end of the lease, this can be big trouble. That leads us to the next point–what you can use the deposit for.

What Can You Use the Security Deposit For?

Trick question! You can’t use the security deposit for any of your expenses, and it can only be used to cover the tenant’s last month of rent if you agree to those terms. Otherwise, it has to stay in its account, untouched, until the lease is up. Then, you can decide whether to give back the entire deposit, keep a portion of it for repairs, or keep the entire deposit (for major repairs, unpaid rent, etc.).

What to Do If You Sell the Property While Tenants’ Leases Are Still Active

There may come a time when you want to sell your property while existing leases are still in effect. In this event, you have two options: you can return the security deposit to the tenant at the time of sale, or you can transfer it to the new owner. You can’t keep the deposit (you’d think this would be common knowledge, but it’s always good to cover all the bases!). If, for whatever reason, an owner does walk off with the deposits when selling the property, the new owner cannot demand a second deposit from the tenants—the new owner will have to come up with that money on their own. But we don’t need to worry about that, do we? You know you can’t keep the deposit. Let’s move on!

The Lease Is Up: Now What?

When your tenant’s lease is up, there’s a set time frame you have to return the deposit. Since you kept the deposit in it’s own account (you kept the deposit in it’s own account, right?) returning it or keeping it is a pretty easy endeavor. If you’re returning the entire deposit (the tenant screening process worked!), you simply write your tenant a check for the whole amount (plus the interest, if applicable), along with a receipt, and you’re all done. This should be done within 14 to 60 days of the tenant’s moving out, but check your state’s laws on when security deposits need to be returned to be safe. Be sure to date the receipt—a simple mistake of omitting the date can cause a lot of problems, and can cost you money if a tenant later claims you didn’t pay their deposit back. Without a date on the receipt, you don’t have adequate proof of giving the deposit back, so we can’t stress it enough—you need to date the receipt.

If you’re keeping any of the deposit, it’s best to give your tenant an itemized list of charges as well as a receipt for the amount issued. You can’t keep any of the deposit to cover normal wear and tear, but you can keep part of the deposit for repairs or extensive cleaning.  

If you’re keeping the entire deposit, it’s beneficial to notify the tenant as such as well as provide them with an itemized list of expenses that were covered with the deposit. All of this paperwork should be dated, and it’s important to notify the tenant of this in a timely manner. Sometimes, tenants will try to fight your keeping of the deposit, and that’s where detailed documentation of the apartment’s condition upon move-in and move-out as well as any repairs or maintenance done will come in handy. You can fight the tenant for what’s rightly yours, and provided your reasons for keeping the deposit are reasonable, you’ll be ready to re-rent the apartment in no time.

 

You Don’t Have to Do Everything On Your Own

An important note about all of this is that when it comes to managing security deposits or any other part of the property ownership or landlord responsibilities, you don’t have to do everything by yourself. In fact, if you are doing everything yourself, it can be easy to miss certain details or get so bogged down by busywork that you aren’t able to do what you really want to be doing. You didn’t get involved with investment properties so that you could screen tenants and deal with writing up maintenance checklists after leases end—you got into investment property to, naturally, see a return on that investment.

Here at Lofty, we understand that your time is valuable, and we think you should be enjoying owning investment property, not spending all your time dealing with leases, security deposits, and other paperwork. We work hard to make sure our clients and landlords have an easy time with their investment properties, and we do so by taking care of every aspect of property management, from advertising your apartments in Chicago to screening tenants, scheduling maintenance and repairs, collecting rent and distributing security deposits, and so much more. With the help of a property management company, you can spend your time how you want to spend it—not doing work for your properties.

To learn more about how Lofty can help you start living the life you deserve, contact Lofty’s managing broker Anthony Zammitt to chat!

when to clean dryer vents

What You Need to Know About Duct & Dryer Vent Care in Your Properties

By | Property Management

When you own investment properties, making sure you schedule regular maintenance can save you a lot of hassle from having to do costly emergency repairs. If you’re a first time landlord or just want to know more about how to best maintain your properties’ ducts and dryer vents, this is the guide for you. Learning about what you can expect, how often maintenance is required, and how much you’ll be paying for duct and dryer vent services can ensure that your properties stay in tip top shape for the duration of your ownership.

What Kind of Maintenance is Required?

Dryer vents and ducts need to be kept clean in order to ensure that your properties are safe. Dryer vents can become clogged over time, and in order to prevent house fires, you’ll need to make sure they’re not blocked. Ducts should also be cleaned to improve the air quality in your properties. Dust, mold, and other contaminants can build up in ducts and may cause health problems for you or your tenants. As a landlord, you’re responsible for providing a safe and healthy environment for your tenants, and duct and dryer vent cleanings need to be a part of your maintenance checklist.

How Often Do You Have to Do It?

Dryer vents should be cleaned about once a year, though you can schedule regular checks for blockages every six months to be extra careful. As for duct cleanings, those can be done less frequently. Duct cleaning is suggested every three to five years, but that time frame may vary depending on what part of the country your property is in, how often the heating and cooling system is used, or if anyone living in the space has health problems related to air quality.

How can you tell when it’s time to schedule a cleaning? Contact your property management company and have them schedule duct cleaning services if any of these apply to your situation:

  • You suspect mold is in the ducts.
  • You can see visible puffs of dust leave the air vents when the system is turned on.
  • If there is/was a pest infestation in the property (such as before you took ownership).
  • Your air filters are heavily coated with dust when you replace them—this can be a sign you’re overdue for a cleaning.
  • You’ve done heavy renovations in a property. Drywall dust and other contaminants can build up in the ducts during construction, and prior to tenant move-in, the ducts should be cleaned.
  • There are a lot of pets in the building. Ducts will need more frequent cleaning if there is pet hair and dander in them.

 

How Much Will It Cost?

Cleaning your dryer vents generally runs from $60-$150, depending on who you work with. Duct cleanings can be more costly, depending on the size of the property and how much work needs to be done. In order to get the best deal, be sure that the company you choose for the service offers full service cleaning, which should include a full cleaning of the heating and cooling unit. Get written estimates by a few HVAC cleaning companies—reputable companies should provide a free inspection and estimate. Don’t fall for “all-inclusive” deals that are extremely low-cost, because they can be very cursory jobs that will just have you calling another company to do the work the first company missed. High quality duct and dryer vent cleaning can take a few hours and may involve sophisticated equipment—not just a half an hour with a Shop-Vac. If you’re not sure how to find the most reputable HVAC and duct cleaner in Chicago, your property management company can help. They should have a list of qualified, reliable contractors that you can trust.

What Happens If You Don’t Do It?

Dryer vent fires are a very real threat if you don’t do routine cleanings. According to the National Fire Protection Association, dryers were the cause of more than 15,500 home fires in 2010, so taking the chance simply isn’t worth it. Less serious issues can include longer dry cycles (which range from being merely inconvenient to downright problematic, if your tenants threaten to withhold rent until maintenance is performed), or a clogged vent system. If the vent system is clogged and not exhausting properly, it can wear out your appliances much faster due to the higher heat. Wait too long and you may need to completely replace the vent system, which can be a costly procedure—you’ll be wishing you had paid those smaller fees to clean the vents!

Neglecting duct cleaning can also lead to dust and other contaminants building up over time. Beyond improving the quality of the air in your properties, cleaning the ducts will help improve the efficiency of the building’s heating and cooling units. When it comes to winter property maintenance and ensuring your tenants stay safe and warm through the cold spells, duct cleaning can play a big part.

Want to know more about duct cleaning and dryer vent maintenance? At Lofty, we’re committed to helping landlords and property owners live the life they deserve to be living, and that includes helping you take care of building maintenance and repairs. Contact us anytime and let us take some of the responsibility off your hands, so that you can spend your time doing things you want to be doing.

Speak with one of our experts to find out how we can supercharge your investment.

how property management companies can help you

Landlord Responsibilities Between Tenant Occupancies in Chicago

By | Property Management

When you’re a landlord and have regular turnover in your units, the work that you need to get done between occupancies can start to feel like it’s taking up all of your time—partially because if you have enough properties, it actually is taking up all of your time. Tenant turnover procedures and responsibilities can take up a lot of time, but another reason you may feel like you’re running around all over the place can be chalked up to doing tasks that are unnecessary. In order to ensure you’re making the most of your time, you need to be aware of what’s truly required of you as a landlord or property owner when one tenant moves out. Finding out what your responsibilities are between tenant occupancies can not only save you a lot of time, but it can save you some money, too.

Don’t Expect Your Tenants to Leave the Place Move-In Ready

The first step with this process is to go into the situation with reasonable and realistic expectations. In other words, while in a perfect world all of your tenants would patch holes in walls, scrub the floors til they’re sparkling, and do everything else necessary to bring the apartment back to life, that will almost never be the case. Tenants can generally be expected to clean the apartment before they move out, but they’ll be busy focusing on getting their moving plans and their new apartment in order, not making sure that their old place is in perfect condition and prepped for new tenants. Keep in mind that the responsibility for making the apartment ready for your next tenant will largely fall on you and your property management company.

 

What Needs to Be Done Between Tenant Occupancies?

Think about what you would expect an apartment to look like when you moved into it for the first time—that can be a starting guideline to knowing what you need to do for your tenants. For instance, if the paint and walls are dirty, scuffed, or scratched, you need to repaint them so that the apartment looks its best. Your new tenants are paying to live in a comfortable, habitable space, so it’s up to you to make sure their new home is livable and inviting.

Appearance, Security, and Safety of Chicago Rentals

Beyond aesthetic work like repainting, you need to make sure your new tenant is aware that they need to set up the utilities in their own name. This is usually outlined in tenant leases, but it can’t hurt to remind new occupants of that responsibility.

You’ll also need to rekey the locks for the apartment. This is a security measure that will prevent former tenants from having access to the unit, and thus, it keeps your new tenants optimally safe. Be sure to get the keys back from the old tenant, as well. Even with rekeying individual units, many buildings have master keys for the main entryway doors that may not be rekeyed every time someone moves. If a tenant doesn’t return keys, you may want to charge a fee to cover costs (and, when this is noted in the lease, it can incentivize them to return the keys!). If the tenant still doesn’t return keys, you’ll have to rekey everything their set had access to and take the costs from their security deposit.

You’ll want to do a walk through before you schedule any maintenance, so that you can make note of any repairs or other damages you’ll need to take out of the departing tenant’s security deposit (if there is one). Take photos of the unit and any damages and write down detailed descriptions of what was left for you to take care of. Having a detailed list of what you’ll be retaining a portion of the deposit for can help you down the road, particularly if the tenant fights you on the withholding of any or all of the deposit.

However, it’s best to do this walk through without the departing tenant there—their presence can not only put a lot of pressure on you to give them answers about their deposit on the spot, but they can also mask problems that won’t show up until a few days later, like stains that have been scrubbed from the carpet, only to reappear when the cleaner dries, or lingering pet odors.

Make sure that everything is still in proper working order before a new tenant comes in. Check that the shower, toilet, and sink in the bathroom all function as they should, that the refrigerator and freezer are still working, and that electrical appliances and lights in the unit are still safe—there should not be any loose wires or broken bulbs when a new tenant moves in. You may not be required by law to provide new tenants with working light bulbs, but that small cost can be a good start to the tenant-landlord relationship, and should be considered.

Once all of these tasks have been taken care of, it’s advisable to bring in a cleaning crew for a deep cleaning of the unit. A professional cleaning company will make the place move-in ready, something that your new tenants will appreciate.

As far as painting, unless the paint is peeling or overly damaged, you may not be required to paint. Many landlords allow their tenants to paint for them, provided they repaint it back to a neutral shade upon move-out. It’s up to you how you want to manage painting. Some landlords dislike the prospect and work involved in painting, and offer their tenants the option to choose paint and do it themselves, taking the cost out of their rent. How you deal with painting in apartments between tenants is mostly personal preference, though you should make sure there are no state laws requiring painting every certain amount of years.

 

Using Your Time Efficiently When Transitioning Tenants

All of these tasks may seem like they won’t take up too much time, but when you have multiple units across multiple buildings, with tenant leases ending at different times, the amount of time you spend preparing your properties for new tenants can really add up. You shouldn’t be spending all of your free time doing apartment upkeep and maintenance; getting involved with investment property was supposed to be beneficial to you, not take up all your time, after all.
You could hire out contractors to do the work for you, of course, but even that requires you to show up to the property to let cleaners, painters, and other maintenance workers in and return to the property when they’re finished to ensure the building is secured. Though it’s less time consuming than doing everything yourself, it’s still a lot of wasted time that you could be spending doing something more productive or enjoyable.

 

How Property Management Companies Can Help You

If you’ve never worked with a property management company for your properties, you may be surprised at how much they can help with move-out and move-in procedures, as well as other aspects of being a landlord. They’ll be able to contract out the necessary work, meet workers at the property, ensure that the units are ready to go for the next tenant, and work with departing tenants to get everything squared away for you. You can literally hand off all of those pesky jobs to someone else and really reap the benefits of owning investment properties.

Here at Lofty, we believe that owning investment properties shouldn’t be a headache. We take care of everything our clients need, from screening tenants to doing the work between occupancies. Stop wasting time checking whether lights are working and sweeping baseboards and start enjoying being a landlord and property owner.

For more information about how we can help you live the life you deserve, contact us today.

Speak with one of our experts to find out how we can supercharge your investment.

 

what to do if tenants wont pay rent

When to Raise Rent in Your Chicago Apartments

By | Leasing

As a property owner or landlord, getting a good return on your investment is part of why you do what you do. While you want to keep your tenants happy while they are renting from you, the inevitable truth is that sooner or later, you’re going to have to raise rent. There are ways to do so that can keep tenants satisfied while also boosting your income and profits. One of the trickiest parts of being a landlord or investment property owner, though, is knowing when it’s time to raise rent and by how much. If you don’t have a property management company advising you, that can certainly help, but in the meantime, here are our tips for knowing when to increase rent.

When (and How Often) Should You Raise Rent?

Raising rent can be a contentious subject. You and your tenants both know that it’s something that will eventually need to be done, but when and how often you do it are two things you need to consider. If you give your tenant a great deal on their Chicago apartment when they first sign the lease, then don’t increase rent for a few years, you may find that by the time you decide to increase it you’re getting far below market rate for the unit and may need to raise it by a significant amount. Increasing the price all at once can be a big burden on your tenants, and after developing a good working relationship with them, it can cause a lot of conflict. The worst case scenario is that they can’t handle the increase financially and they’ll move out of your property, leaving you with an unexpected vacancy, but that can be prevented with a little foresight.

In order to avoid finding out that your tenants are paying a few hundred dollars under market rate and increasing by that amount all at once, it’s best to increase rent little by little for each year of their occupancy. Even if you increase the price by just $25 per month, that’s an extra $300 per year–for every tenant you have. Steeper increases, of course, add up to even more profits.

If you don’t want to raise rent every year—for instance, if you want to reward an especially trustworthy and timely-paying tenant—that’s okay, too. Rent increases are a very subjective topic, and when you decide to increase rent should correlate both with market fluctuations and inflation as well as your personal preference and relationship with the tenants. Just keep in mind that eventually, you will need to increase the rate to keep up with your own expenses.

If a tenant moves out, however, you have the perfect opportunity to reassess the worth of your property and increase the rent accordingly. When your units are vacant, that’s the perfect time to capitalize on the market’s fluctuations and change what you’re charging for your apartments and homes.

How Much Should You Increase Rent By?

How much you raise rent should be influenced by a few different factors. While it can seem tempting to raise the rent a lot to keep in time with the market, such as when a neighborhood  becomes the “hot” place to live, this can lead to your apartments sitting vacant for longer than you’d like. You should weigh the benefits and drawbacks of raising rent by a lot—will your current tenant move, leaving you to find a new renter? You need to consider if the potential for vacancy is worth the additional income from a significant rate hike.

If you want to keep your current, reliable tenants, the safest way to do so is by raising rent somewhere between two and six percent, after assessing the state of the market as well as local demand. This amount is usually manageable for tenants and won’t typically cause them to need to find a new place to live, but the increase, even though it’s seemingly small, is more than enough to make a difference in your bottom line.

If you’re not sure how much you can safely raise rent by in order to keep your current tenants, or you want advice on how much you should raise the rates to get a better return on your investment properties, asking your property management company can be a great help—they’ll have a lot of information about competing properties and what the average rentals are going for in the area your property is.   

Should You Ever Avoid Increasing Rent?

Sometimes, such as if your property tax doesn’t increase (what luck!), you may be tempted to avoid increasing rent at all. While you’re well within your rights to do that, it’s generally recommended to increase rent by at least a little bit each year so that you won’t have to increase rent by a very large amount at a later time.

What to Do If a Tenant Pushes Back

Unfortunately, one result of raising rent can be your tenant choosing to move. Again, this is something you’ll want to weigh before you raise rent, but ultimately, if a tenant doesn’t want to or can’t pay the increase, they’ll have to move. If you do want to help accommodate your tenants’ needs, though, you can work with your property management company to determine whether you can raise rent a bit less or not.

 

Feeling Stuck or Confused?

Dealing with rent increases can be a complicated subject, and if you own a lot of properties in different areas in Chicago, doing it all yourself can be a big headache—it can seem like all you’re doing sometimes is analyzing the market and adjusting numbers.

At Lofty, we believe that being an investment property owner or landlord shouldn’t have to be a full-time job, and we do everything we can to ensure that you get to live the life you deserve. To learn more about the best ways to manage rent increases, contact us anytime—we’re ready to help you.

Speak with one of our experts to find out how we can supercharge your investment.

what you need to know about keeping deposits

Returning or Keeping a Security Deposit?

By | Property Management

Lofty Real Estate saves you money
If you’ve been a property owner or landlord in Chicago for any significant amount of time, you probably know all about security deposits: how to store them properly, when you need to give them back (if you plan on giving them back), what constitutes normal wear and tear and what constitutes damage that should be paid for with the security deposit, and how to deal with tenants who fight your decision to withhold the deposit.

But if you’re just dipping your toes into being a landlord or owning investment properties, learning about all of it can make your head swim. At Lofty, our goal is to make your job easier, and that means teaching you everything you need to know about returning (or not) the security deposits for your properties.

Returning It? Here’s How

Generally speaking, in Illinois, security deposits must be returned to the tenant within 30 to 45 days of the lease ending. Though some states require landlords to give tenants a move-in statement that details the condition of the property, Illinois is not one of them, so it’s in your best interest to keep accurate records of the condition your properties are in when tenants move in. That way, when they vacate the unit, you can cross-check against your old notes and see if there are repairs that need to be made.

If you’re returning the deposit, be sure to make receipts for both your own records and the tenant’s, so that the tenant can’t claim you never returned it. When you return the deposit, be sure to date the receipt—though it seems like a simple detail, leaving it out on accident can come back to haunt you. Without a date on receipt, you could find yourself paying out more in fees and court costs if tenants take you to court over deposit-related conflict. If it sounds confusing, don’t worry—it kind of is. If you’re taking matters into your own hands, security deposits can be a real headache. Working with a property management company can help take away some of the stress associated with security deposit issues.

What You Need to Know About Keeping Deposits

Returning a security deposit is easy. It’s when you decide to keep some or all of it that things can get really messy. Here’s what you should know about keeping deposits.

First Things First: What Constitutes “Normal Wear and Tear”?  

Security deposits are typically kept by landlords in Chicago (and elsewhere) to cover the cost of damages and repairs. A lot of times, this is fought by tenants who claim that the damage is consistent with “normal wear and tear” on the unit. Normal wear and tear is a real thing, but in order to know whether or not something falls under that category, it’s helpful to know what’s generally considered normal wear and tear in a rental unit.

    • Flooring: Carpet gets dirty and hardwood floors can get scratched, but if a tenant leaves behind pet stains or multiple cracked tiles, or floorboards that are excessively damaged, that’s not considered normal use.
    • Walls: This is a big issue between landlords and tenants—whether holes from nails used to hang artwork or other decorations are considered normal wear and tear. And the answer tends to differ from landlord to landlord. Use your best judgment here; splitting hairs over two or three nail holes might not be worth the potential hassle of a tenant trying to take you to court for the security deposit. Holes in the wall, however, are a completely different story and should be fixed with security deposit funds.
    • Pet Damage: Things like chewed-on cabinet doors, scratches on the walls, and stains are all out of the realm of normal wear and tear in a rental. In order to plan for problems like these, many landlords choose to charge non-refundable deposits or additional pet rent.
  • Overall Cleanliness: While you might want to reconsider charging a cleaning fee for unswept floors and some light tidying, if a tenant leaves behind the remnants of a last-minute party, food in the refrigerator, and general filth, it’s more than acceptable to charge for cleaning.

The Most Common Reasons Deposits Are Kept

There are a handful of reasons that a security deposit might be withheld. They include:

  • Early termination of the lease
  • Unpaid rent
  • Money owed to the landlord for utility bills
  • Cleaning fees for dirty or un-cleaned apartments
  • Damage to property (or furniture in furnished units)

 

What Do You Have to Provide to the Tenant if You’re Keeping the Deposit?

Laws vary from state to state regarding what you need to give your tenant if you are keeping any or all of their deposit, but generally, it’s good form to provide a list of services performed or things that needed fixing/replaced and the costs associated with them. This lets the tenant know that you actually used the money for what you said you did, and that you didn’t just charge $200 to dust the baseboards.

What to Do If a Tenant Contests Your Decision

If a tenant feels that you are wrongfully withholding any or all of their deposit, they may choose to file in small claims court or even hire a personal attorney to handle the case. However, you have rights—if you are justified in keeping the deposit, you can counter-sue the tenant to ensure you don’t end up underwater with fees and costs. Going to court can be a huge pain and can cost a lot of money for all parties, though, so if it’s a minor quabble—say, over a $50 invoice for cleaning, it may be best to try and settle with the tenant to avoid a costly court case.

Getting Help When You Need It

You got into investment property ownership to make money, not to make your full-time job dealing with tenant hassles. Here at Lofty, we want to help you with every aspect of being a landlord, from finding the best tenants to answering your security deposit questions and everything in between, so that you can save time and frustration and do things you actually want to do. Contact us anytime to learn how working with a property management company can help you start living the life you deserve to live.

Speak with one of our experts to find out how we can supercharge your investment.

Furnished or Unfurnished Apartments in Chicago: Which Should You Offer?

By | Leasing

 

The Case for Furnished Units

Furnished apartments are sought after for a number of reasons. People who are looking for shorter term rentals (such as a summer sublease, or a one-year stay in a city) or who don’t want to bother with decorating their own spaces will often seek out furnished apartments. Additionally, college students who don’t yet need their own sets of furniture will make up some of your interested tenants. Furnished apartments in Chicago are beneficial for landlords whose rental pool includes these demographics, but beyond simply meeting a demand and having a predictable market, there are other reasons why a property owner or landlord might offer their apartments as furnished units.

Increased Rent and Security Deposits or Fees

When you have furnished rental units, you can charge more for them, because you’re offering your tenants the convenience of not having to supply their own furniture. Even with the increased cost, though, renters who want furnished units tend to agree that the added cost is worth not having to buy furniture. You’ll also be able to set higher move-in fees or security deposits to cover the costs of supplying and maintaining furniture.

Quicker Tenant Turnover

When you rent out unfurnished apartments, the move-in/move-out processes can be somewhat complicated—coordinating walk-throughs to check for damage can be time-consuming, since you need to wait for all of the furniture to be out of the unit prior to checking. With furnished units, you just have to clean the unit and the next tenant can move in right away.

 

Ease of Finding Renters

Renters who need furnished units in Chicago know that they have fewer options to choose from, and know they can’t be as choosy as they might be if they were looking for an unfurnished apartment. Even though renters who want furnished apartments are scarcer than those who want unfurnished apartments, finding tenants for your units is still relatively easy, simply because there aren’t as many furnished apartments on the market. Since supply is limited, it’s usually not difficult to find renters for furnished apartments in Chicago.

Potential Pitfalls of Furnished Units

On the other side of the coin, offering furnished units can have some drawbacks. First, you’ll have to source furniture that is durable and reasonably attractive, which can be a tall order. The upkeep in these apartments can be more labor-intensive as well, including replacing or repairing furniture as it endures natural wear and tear.

There is also higher turnover in furnished apartments, simply because those renters are usually staying for shorter periods of time than renters in unfurnished apartments.

Perhaps the biggest potential downside of offering furnished units, though, is the possibility that tenants will cause more damage than they would in an unfurnished unit. That can be attributed to the thought that because the furniture is not theirs, they don’t need to take good care of it—after all, if anything breaks, their landlord can just replace it! In order to protect yourself from destructive tenants, it’s helpful to work with a property management company in Chicago to screen tenants and find the most trustworthy renters.

Benefits of Renting Unfurnished Apartments

Furnished apartments are much more common to find listings for, and for that reason, tenants have a lot more to choose from. This makes your job a bit tougher, but offering unfurnished apartments in Chicago offers a lot of great benefits as well.

A Larger Tenant Market Means Shorter Vacancy Periods

Unfurnished apartments are generally pretty easy to rent because they’re what most tenants are looking for when they’re hunting for a place to live. For that reason, your vacancy periods may be shorter than they would be if you were renting furnished units. Additionally, since more people are looking for unfurnished apartments in Chicago, you’ll have more flexibility in choosing renters, and can be a bit pickier when it comes to tenant screenings.

Since more people want unfurnished apartments, it’s usually easier to get them rented. You can show the units either with furniture in them or without—or, you can feature photos of the apartment in both states, so that people can visualize what they can do with the space.

People may be interested in a certain location, but if your unit is offered as being furnished and they have their own furniture, they’ll pass on yours. Marketing unfurnished apartments means you may have better luck keeping your apartments in Chicago rented.

Less Upkeep and Responsibility

Unfurnished apartments are also a bit less responsibility to take care of than furnished ones. Furnished units need to be kept looking their best, and that can mean replacing the furniture pretty frequently—over the lifespan of your property, that can add up to a lot of money spent on furniture. Similarly, when one tenant moves out and you need to prep it for the next renter, you don’t have to move furniture to paint or refinish floors, for instance. Generally speaking, you’ll have less to do with unfurnished units in the realm of cosmetic updates.

Possible Problems Associated with Unfurnished Rentals

Thankfully, there aren’t too many issues related to renting unfurnished apartments. Perhaps the biggest one you’ll have to deal with is damage caused by your tenants moving their furniture in and out of the building, or people leaving behind furniture that you then have to dispose of yourself.

 

Which Is Best For Your Property?

Although there are benefits and disadvantages to both options, the more common choice for property owners in Chicago is to rent their units as unfurnished apartments. If you’re still not sure which is best for your specific property, working with a property management company can be very helpful. They’ll be able to help you make an informed decision about your apartments, and they’ll also be able to take care of all the maintenance, bookkeeping, and other responsibilities of being a landlord, so that you can live the life you deserve. Here at Lofty, we want to help you make the most of your investment properties—call us anytime to learn more about how we can make owning rental property a lot easier for you.

Speak with one of our experts to find out how we can supercharge your investment.

how to move out tenants chicago

How Property Management Can Make Move-In and Move-Out Easier for You

By | Property Management

When one lease ends and another begins, there’s a lot of work that needs to be done. Security deposits need to be sorted and returned to departing tenants, the first month’s rent needs to be collected from new renters, and in between, maintenance may need to be done on the property. And if you’ve got one tenant moving out without having one lined up to move in, that’s even more work—creating an ad and marketing the property, booking showings, and screening tenants. Altogether, it’s a lot of time that you could be using to do virtually anything else. Owning and managing investment properties shouldn’t be a mess of paperwork and endless busywork. If you’re tired of spending all of your time on what you thought would be a relatively easy way to earn extra money, you’ll be relieved to know that you’re not stuck—learn more about how property managers can make the move-in and move-out processes easier for Chicago landlords and property owners.

What to Do When Tenants Move Out

When tenants’ leases end and they move out, there are a few things that property owners or landlords have to do, including:

These three tasks alone can be be very time consuming—finding vendors and contractors to take care of repairs, maintenance, and any updates you want to make can feel like you’re on a wild goose chase. Once you find contractors, you’ll have to fit them in your schedule during a time when you can be at the property. To say that it’s inconvenient is an understatement. Getting keys back from the tenant can also prove frustrating. If you’re working with a property manager, though, they can take the time to track down the tenant, so that you don’t have to deal with calling over and over again, getting their voicemail every time. Likewise, the best property management companies in Chicago will have a list of trusted, vetted vendors and contractors that they can schedule for any property maintenance you need, and you won’t have to be there for any of it if you don’t want to.

 

Managing Vacancy Periods in Chicago Rentals

After one tenant moves out, one of two things will happen: there will be a vacancy period, or the next tenant will move right in. For now, let’s focus on the former.

If your property is vacant, you need to place ads, market the property, field phone calls from interested renters, schedule bookings, and show your property. If you’re trying to do this on your own, you can end up spending almost all of your extra time dealing with the property—which can feel like more work than it’s worth. After all, you got into investment properties to make money, not to take on a second full-time job, right? Property management companies in Chicago have written hundreds of apartment, condo, and home ads, and in addition to knowing the best places to market your property, they can often work out better deals with publications than individual landlords or property owners can, simply due to the higher volume of ads they place.

You want your vacancy period to be as short as possible so that you aren’t losing money, and property managers will be able to set your rental price according to current trends and market demands. You won’t have to worry if you’re charging too much or not enough for your rental, and people will be more interested in the property when it’s priced well—too high and people will balk, but too low, and some people may wonder what’s wrong with the place (are the walls so thin that they’ll be able to hear their neighbors debate about who should win The Bachelor, for instance?).

Once the property managers have shown your property and have some potential tenants lined up, they’ll be able to screen them, too. You won’t have to deal with background checks or conducting interviews. Property management companies have tried-and-true methods for ensuring they’re getting reliable tenants into properties, too, so you won’t have to worry about whether the tenants are the type of people who pay rent late every month or host loud, late-night parties in their studio apartments every weekend.
Imagine not having to deal with any of the headache-inducing frustration that is the vacancy period. You’ll have so much more time on your hands—time you could use to, say, catch up on The Bachelor (or do anything else!). Working with a property manager means you won’t have treat owning investment property like a second full-time job.

Helping Tenants and Landlords with the Move-In Process

Now that you’ve got a tenant who is ready to move into your property (whether or not you had a vacancy period), you’ll have to do even more work. It can feel like it’s never-ending, can’t it? Some property owners and landlords like to be onsite when new tenants move in, for helping with anything that might come up, and if you own a lot of properties, that can mean busy days for you every time a new lease starts. You’ll also need to make sure that the new tenant has paid their first month of rent, which can, like getting the keys back at the end of a lease, sometimes be a frustrating process. New tenants may not know where to send rent at first, too, which can lead to a late payment or two. You shouldn’t have to worry about tracking down your payments, and when you work with a property management company in Chicago, you won’t have to. Property managers take care of everything related to the tenant move-in process. They can be onsite during the move, they can track down your rent checks, and if anything happens during the move-in process, they can quickly schedule maintenance or repairs. It’s a level of convenience that’ll have you wondering why you didn’t start up with a property management company sooner.

Enjoy Your Time and Your Property

Here at Lofty, we understand that your time is your most valuable commodity, and we work hard to ensure you won’t have to waste it doing busy work for your rentals. We can take care of everything during the move-in and move-out processes for your properties, and we can also manage vacancies so that you can earn more money. To start living the life you deserve to live, give us a call anytime—we’d love to work with you and help make your life easier.

Speak with one of our experts to find out how we can supercharge your investment.

 

where to rent chicago

Why Some Chicago Neighborhoods Are More Expensive to Buy and Rent In

By | Property Management

When you think about real estate in Chicago to rent or buy in, you’ve probably got a pretty good picture of what the more expensive neighborhoods look like: high-end boutiques, unique, trendy restaurants, and sharp looking homes, condos, and apartments. You’re not wrong—these highly sought after lifestyle amenities are what make some neighborhoods so hot. But when it comes to buying and renting, there are some other reasons why certain areas of Chicago cost what they do. Learning what tenants are looking for (hint: it’s not only stainless steel appliances and marble countertops) will help you make the best decisions about where to purchase investment property or rental units.

Neighborhood Growth

Over time, the vibe of different neighborhoods changes, causing fluctuation in things like how much homes are valued at. As a property owner or landlord, it’s natural to want to get the most return on your investment, so purchasing properties in up-and-coming neighborhoods is generally a great plan. An increase in the cost to rent or own in a neighborhood can often be attributed to the amount of—and the type of—development happening in an area. If more restaurants, newer apartment buildings or homes, and other interesting hotspots are being built up in a certain area, it’s safe to assume that those neighborhoods will soon cost more to live in, and in turn, will cost more to rent or own property in.

Location, Location, Location

Of course, where an apartment, condo, or home is located in Chicago will also dictate how much it will cost. Property owners and landlords know that the closer a home is to L stops, the more sought after it will be—Chicago is a city full of commuters young and old, and getting to school or work conveniently is a priority that a lot of renters and owners have when choosing where they live. For instance, though neighborhoods like Rogers Park have a lot to offer, they’re further away from the center of the city, and it can take longer to get places from there. The same can be said for most any neighborhood on the outskirts of the city—the longer it takes to get somewhere, the less popular the area is, generally speaking.

What’s Happening?

Aside from simple proximity to transportation, people will be looking for what they can do in their neighborhood without getting on a train or bus. In other words, what Chicago events take place? For example, in neighborhoods like Bucktown and Wicker Park, the Do Division and Wicker Park Fests are a popular fixture every summer, and for those who already live in the area, it’s a convenient way to spend a weekend. In River North, plenty of nightlife options are attractive to people who love checking out the latest bar, nightclub, or restaurant. When considering where to purchase investment property, property owners and landlords should consider what their potential future tenants will be looking for and make decisions accordingly. In order to get the best return on an investment, you’ll want to be able to offer your potential renters something they find value in.

How to Stay Ahead of the Curve

Naturally, purchasing property that is in a popular neighborhood will mean that you’ll likely have no trouble renting it. But as a landlord or property owner, it’s only natural to want to get a great deal on property as well as be able to make the most of your investment. Paying a high cost upfront can mean spending a lot of time trying to keep up with the competition—working very hard for marginal returns. Earning more on your investment means looking at up-and-coming neighborhoods that don’t yet have the numbers you’re looking for, but will very shortly.

Take a look at a neighborhood like Logan Square. A decade ago, tenants shied away due to lack of development. Five years ago, renting in Logan Square was a popular choice with younger, “artsy-type” tenants who were looking for a great deal after being priced out of Wicker Park. Now, it’s one of the hottest and fastest-growing areas in the city. Rents have gone up—the average price of a studio apartment is now between $800 and $900, with larger apartments costing more—a lot of new businesses are thriving, and the overall feel of the neighborhood is much more fun and exciting than it used to be. As a landlord or property owner, finding properties in neighborhoods that are growing but not yet fully built-up—such as Humboldt Park or Avondale—can mean a high return on your investment. In a similar vein, purchasing apartments, condos, and homes in popular Chicago neighborhoods like Hyde Park, Lakeview, and West Loop can mean you’ll always have people interested in your property.

Taking advantage of growing areas means keeping a close eye on where developers are heading and where tenants are moving from. This will give you a good idea of where to buy or rent next—property owners benefit a great deal from getting into a certain real estate market early. As an area heats up, you can adjust rent accordingly and watch your profit margin rise. You’ll also want to look at properties that are closer to the L stops and bus lines—as we previously mentioned, ease of getting around is a major reason people pick to live in one place over another. That means that cost of properties will be different even from block to block. Choosing location wisely can have a huge impact on your property’s success.

Start Taking Advantage of Opportunity

When you’re ready to start capitalizing on new rental properties or want to learn more about why some neighborhoods cost more to rent and own in than others, property management companies can offer a lot of insight. At Lofty, we’re ready to help you get the most out of your investment so that you can live the life you deserve. Contact us anytime to find out more about investment properties in Chicago and how you can make them work harder for you.

Speak with one of our experts to find out how we can supercharge your investment.

tenant screening chicago

Credit Checks And What To Look For When Screening Potential Tenants

By | Leasing

When you’re trying to fill your property vacancies on your own, finding new tenants can almost become a full-time job. Credit and background checks are a good place to start, but in order to choose the best, most reliable and trustworthy tenants, you should be looking for certain things that can mean problems for you down the line. Making the best choice the first time is a perfect goal to aspire to, and the best way to find the best tenants for your properties is to pore over background checks and credit checks with a fine-toothed comb, weeding out the applicants who might cause you headaches later on.

What to Know Before the Background and Credit Checks

Ask most any landlord or property manager how they find the best tenants for vacant properties, and you’ll likely hear that they start the tenant screening process the first time they make contact with an interested applicant. By asking potential tenants a few key questions, owners and landlords in Chicago can get a better feel of what they might be getting into if they rent to that a person. For example, if you ask someone looking at your property when they need to move in, and they say in just a few days, it can be an indication that this tenant hasn’t planned ahead enough (will rent be late, too?). However, if the person answers that they don’t need a new place for four months, you can count on them not being ready to commit to signing a lease, simply because they have a lot of time to look at plenty of properties and won’t feel any time crunch. Both of these situations can cause potential snags in your rental process. As a property owner, you should ask potential tenants a few questions to get a feel for what kind of renters they’d be, such as:

  • Income What their monthly income is, and whether they can show proof of it. If they’re reluctant to provide proof of income, they may not be telling the truth about the amount of rent they can cover every month.
  • References If you can, get a reference or two from former landlords. Current landlord references can help in a pinch, but if the tenant is bad, that landlord might say just about anything to get rid of them. Instead, check with former landlords, who have no reason to lie about a tenant who regularly hosted loud parties late into the night, left cigarette burns on the hardwood floors, and smashed holes into the walls before moving out (some of those “worst tenant ever” stories will give you nightmares!)
  • Motivation Why they’re moving. This sounds pretty basic and perhaps a bit personal of a question, but while most tenants will say that they need more space or want a change of scenery, some will mention problems with their landlord or an eviction. These are obvious problems you’ll want to avoid.

 

Conducting Background Checks and Credit Checks in Chicago

Nowadays, potential tenants are used to being asked to submit to a credit and background check as part of the approval for a new rental. If an applicant resists this step, it could be because they are hiding something—felonies, evictions, collections, or a host of other issues—and you may want to reconsider the offer.

Once you’ve run the background check and credit check, there are a number of things to look into when deciding which applicants will be the best tenants for your apartments or condos in Chicago.

Evictions

Obviously, if you see that a tenant has been evicted from properties before, you may want to do some investigating. These may not always mean that the prospective tenant should be disqualified—ask the tenant and previous landlord the details, and make an informed decision from there. One instance of a wrongful eviction might be something like a landlord refusing to make repairs, and evicting the tenant in retaliation. Illegal? Absolutely! That’s why it might be in your best interest to work with applicants on a case-by-case basis if an eviction is the only red flag on their background or credit check.

Public Records/Lawsuits

Another thing you’ll want to look out for is whether your applicant has ever been sued for things like unpaid rent or unpaid child support. These can be a pretty clear sign that the applicant has trouble paying for things on time. Do you want to roll the dice and cross your fingers that you won’t be the next person chasing down payment? Probably not, especially when you can likely find other renters in Chicago who are better suited for your property.Make sure that the applicant’s credit score is healthy, too—multiple collections and a high debt-to-income/limit ratio can mean a tenant has problems managing money.

Run-Ins With the Law

If your applicant has some minor things on their record, you may not need to worry about them being an unsuitable tenant—plenty of people did stupid things when they were young that they now regret as responsible adults, and these infractions may not be grounds enough to discount them from your applicant pool. However, some criminal charges could mean putting yourself and your other tenants at risk. Use your best judgement in these cases, or confer with your property management company for a second opinion. Felonies can indicate a disregard for following the rules (obviously), and renting to these applicants can mean allowing someone that is potentially dangerous into your property—seriously, those “worst tenant ever” stories are no joke. Don’t let your property make a Buzzfeed list for the wrong reasons.

Need Help With Tenant Screenings?

Screening applicants doesn’t have to be your full-time job. Property management companies can be a great asset when you want to spend your time as a landlord or property owner doing something different. Here at Lofty, we know that your time is your most valuable commodity and we’ll help you manage anything you need. Give us a call today and find out how we can help you enjoy owning your properties even more than you already do, and start living the life you deserve.

Speak with one of our experts to find out how we can supercharge your investment.

 

 

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