Biggest issues with self managing a rental property in Chicago

Self-managing a rental property in Chicago can be challenging, especially with the city’s specific laws, property maintenance requirements, and tenant relations issues. Below are the biggest challenges, with details on potential costs involved:

1. Tenant and Lease Laws

• Issue: Chicago has a complex set of tenant laws under the Chicago Residential Landlord and Tenant Ordinance (RLTO), which gives tenants substantial protections. These laws include rules on rent increases, security deposits, eviction, and maintenance responsibilities.

• Potential Costs:

  • Legal Fees: If you're involved in a legal dispute, like a tenant not paying rent or violating the lease, you may incur legal fees. Attorneys in Chicago can charge anywhere from $200 to $500 per hour, depending on the complexity of the issue.

  • Court Costs: Evictions or other legal actions may also involve court filing fees, which range from $100 to $400, plus additional fees for processing and serving notices.

2. Evictions

• Issue: Chicago’s eviction process is slower compared to other cities. Landlords can face delays and must follow strict procedures. For example, the "Just Cause" eviction ordinance requires a valid reason for eviction, and tenants can often delay the process.

• Potential Costs:

  • Attorney Fees: Eviction cases can involve significant legal costs, often between $500 and $1,500 depending on whether the case is contested or uncontested.

  • Court Filing Fees: As mentioned above, the cost of filing for eviction can range from $100 to $400.

  • Lost Rent: The longer an eviction takes, the more rent you lose. For example, if the process takes 2-3 months, that could result in $2,000 to $3,000 in lost income (for a $1,000 per month rent).

  • Tenant Damage: If the tenant leaves the property in poor condition or damages it, you may need to repair or replace items, which could cost $500 to $10,000 depending on the extent of the damage.

3. Property Maintenance and Repairs

• Issue: Chicago’s extreme weather can put a lot of stress on properties. Winters require snow removal, and summer humidity can cause mold or pest issues. Additionally, the city requires certain maintenance standards to ensure tenant safety.

• Potential Costs:

  • Snow Removal: By law, landlords are responsible for snow removal. Depending on the size of the property, this can cost $200 to $1,000 per season for snow plowing and salting.

  • Repairs: Common repairs like plumbing issues, HVAC maintenance, or roof leaks can range from $100 for a minor fix to several thousand dollars for major repairs (e.g., $2,000 for a new roof or $1,500 for an HVAC system replacement).

  • Maintenance Staff: If you hire contractors or maintenance personnel, their hourly rates in Chicago can range from $50 to $150 per hour, depending on the service required (plumber, electrician, HVAC technician).

4. Security Concerns

• Issue: Some Chicago neighborhoods have higher crime rates, which may necessitate additional security measures to protect your property and tenants.

• Potential Costs:

  • Security Systems: Installing a security system can cost between $200 to $1,500 for basic systems, or more if you include cameras, motion detectors, or 24/7 monitoring.

  • Lighting: Additional outdoor lighting to deter crime may cost $50 to $200 per light installation.

  • Security Personnel: Hiring security guards for regular patrols or events can cost between $20 to $50 per hour.

5. Rent Collection and Delinquencies

• Issue: Collecting rent on time can be a hassle. Late payments or missed payments may require follow-up, which takes time and can lead to lost income.

• Potential Costs:

  • Collection Fees: If you hire a collection agency, their fees typically range from 25% to 50% of the collected amount.

  • Late Fees: While you can charge late fees (usually $25-$50 in Chicago), tenants may dispute these charges, leading to potential legal or administrative costs.

  • Lost Rent: If tenants are consistently late or miss payments, you may lose a significant amount of income. For example, a month of unpaid rent can be $1,000 or more.

6. Marketing and Tenant Placement

• Issue: Advertising for new tenants, conducting showings, and screening applicants all take time and effort.

• Potential Costs:

  • Advertising: Listing fees on popular rental websites like Zillow or Apartments.com can range from $30 to $200 per listing. If you decide to use social media ads or print materials, these costs will increase.

  • Tenant Screening: Screening tenants (criminal background, credit checks, rental history) often costs $25 to $50 per applicant, and you may have multiple applicants.

  • Vacancy Costs: If you can't fill a vacancy quickly, you're losing rental income, which can range from $1,000 to $3,000+ per month, depending on the rent price.

7. Building Inspections and Code Compliance

• Issue: Chicago has strict building codes that landlords must comply with. Regular inspections and code enforcement can result in fines if things are not up to standard.

• Potential Costs:

  • Inspection Fees: Inspections by the city can be required when renting out a unit, and failure to comply can result in fines ranging from $250 to $5,000, depending on the violation.

  • Code Violations: If a property fails an inspection, you may have to make repairs or improvements to meet the code, which could range from $500 to $10,000 for structural fixes, electrical updates, or safety improvements.

8. Tenant Relations and Disputes

• Issue: Handling tenant complaints, disputes, or potential legal actions requires a professional approach. Poor communication or mishandling of tenant issues can lead to costly disputes.

• Potential Costs:

  • Legal Fees: If a tenant decides to take legal action for issues like discrimination or safety violations, attorney fees can range from $200 to $500 per hour.

  • Mediation or Arbitration: Mediation services can cost anywhere from $100 to $500 per session, depending on the mediator’s expertise.

9. Time Commitment

• Issue: Self-management is a full-time job. Managing emergencies, coordinating repairs, and dealing with tenant issues can quickly become time-consuming.

• Potential Costs:

  • Opportunity Cost: The time you spend managing your property could be used for other income-generating activities or personal pursuits. If you’re spending 10 hours a week on property management, you might be losing out on $500 to $1,000+ in potential income (based on an hourly rate of $50 to $100).

10. Legal and Liability Risks

• Issue: Managing a property comes with inherent risks, especially when it comes to tenant safety or property damage.

• Potential Costs:

  • Insurance: Landlord insurance typically costs between $500 and $2,000 per year, depending on the coverage level and property type.

  • Legal Fees and Settlements: If you're sued (e.g., a tenant sues for injury or illegal eviction), legal fees can easily range from $1,000 to $10,000 or more, depending on the case complexity.

Conclusion

Self-managing a property in Chicago can be financially rewarding if done correctly but comes with significant costs and risks. It's important to weigh the time commitment and potential financial burden against the benefits of having more control over your property. If you prefer to avoid these issues, hiring a property management company may be a good option, although it typically costs around 8% to 12% of the monthly rent, plus additional fees for services like leasing or maintenance coordination.