Monthly Archives: April 2012

Tortoise vs Hare Revisited: A parable for Chicago landlords

Title Card from 1941 Bugs Bunny short "Tortoise Beats Hare"

Any other Bugs Bunny fans out there?

We all know the story of the Tortoise and the Hare, right? The two of them race. The hare spends all of his energy at the beginning, and runs out of steam. The tortoise plods along and wins. The well-worn moral is that “slow and steady wins the race.”

Now that it’s all over, I’d like to tell you a story about how “slow and steady” led to a landlord losing not one but TWO very good tenants.

The weekend of April 21 was very busy for me, with four rental tours. It was the last real weekend before May 1, which is (as many of you know) the busiest moving month in the year in the Chicago apartment market. A few poor souls may be looking next weekend, but for the most part anything not rented by April 23 will sit empty until June 1.

One couple in particular notified me on the 18th that they were getting transferred to Chicago effective May 1. They had a day and a half in Chicago to find an apartment from April 21 to April 22 for themselves, their children, and their dog. They had to leave by 6p on Sunday to drive back to Michigan.

I set them up for a tour of 10 rentals. By the time we’d seen 4, they’d found 3 where they’d be perfectly happy, so we curtailed the search. Two of their local friends were touring with them to make sure I didn’t put them in the ghetto – no worries there.

My clients and their local friends agreed – the top choice was a high end condo close to the lake. In fact I think it was pure altruism that kept the local friends from snagging the apartment for themselves! It was owned by the listing agent, so I called him and said my clients would be interested in taking the place immediately, as-is, for $100 under list. (It was in good shape but obviously hadn’t been cleaned yet from the prior tenants.) I got his voice mail. It was 12:30pm.

I went to grab a bite to eat with my clients and given that the market is tight we started discussing backup plans. Their second choice was also a high end condo for rent close to the lake. It had one less bathroom, and was a conversion instead of new construction, but was in the same neighborhood, the same price, had better appliances, and had more amenities included. We agreed that if their top choice wouldn’t negotiate we would move on and make the same offer – $100 as is for immediate move in – to the second choice apartment.

We parted ways at 1:30pm. I got back to the office at 2pm and left another message with the first choice agent explaining my clients’ situation and that they had to have an answer before they left the city at 6pm.

By 3:30pm (3 hours after my initial call), I had also contacted the agent for the 2nd apartment just in case. I had made our offer. He bounced the offer off of his clients and got back to me immediately with an “all clear.” He even waived his requirement of using his office’s application so that we could use the paperwork I already had on file and get the process started more quickly.

I contacted my clients to let them know we had not heard from agent-landlord #1 yet. This sent us into a discussion about what would happen if this had been a situation with broken plumbing or broken heat, and the landlord didn’t respond for 3 hours. It made their second choice apartment suddenly seem a lot more attractive. You guys can guess what happened next. They moved into their former second choice this past Saturday. Their first choice is still sitting on the market, unrented.

At 10:50pm the slowpoke agent-landlord finally returned my call and left me a message as I’d already turned in for the night. “Sure,” he said, “turn in an application. Oh, and I also have an identical unit coming up in the same building on the 1st floor for July.” If he’d only called back earlier I probably could have rented both of those units. Instead, he’s created a bad first impression of himself with four people by doing nothing at all.

Landlords, even though it’s your game right now, tenants still don’t want to rent from shady, unresponsive lumps. The fast market stats pertain only to the good units that make a great impression. Tenants are judging not only the property but whether or not they can stand to have a year long business relationship with you. Your choice of agent says a lot about your landlording style. Regardless of who you have representing the property, make sure they are providing the same level of service that you would provide yourself. And agent-owners, if someone is showing your listing, keep your phone on, ok?

Bugs Bunny image property of Warner Brothers, courtesy of av-geek.com.

 

Chicago Real Estate Statistics: Extra Bedroom vs Extra Bathroom in Apartments

Photo of a Chicago Bathroom (via Apartmenttherapy.com/Bungalowtile.com)

The most expensive room in the house?

One of the awesome things about writing a real estate blog is that I have an excuse to look up all kinds of awesome statistics and play around with charting software. You guys seem to like it too – my surveys of Bedroom sizes in Chicago Apartments and Pet Rent Rates in Chicago Apartments  are the most popular posts in this blog to date.

Towards the end of last year I was getting a lot of questions from landlords about how to best renovate their rental properties to maximize their income. So I did a bunch of research. (They didn’t have to twist my arm too hard.) I’ve expanded the results for you here.

The difference in price when you add a bedroom was – pretty much as expected – rent went up at a consistent rate for each additional bedroom.

It was when I went to investigate the difference in price for extra bathrooms that my jaw hit the floor. (more…)

Tenant Hacks: How to background check your landlord

Magnifying glass looking at a house

Time to turn the tables.

Chicago Renters, I have to confess something – landlords these days hire as much for my skill in background checking as they do for my ability to market their apartments. Renters have this crazy reputation of being uniformly unemployed former sex offenders with bad credit who skipped out on their last lease. If you’re applying for an apartment chances are good that you will be subjected to a security check more thorough than those they apply to new police officers. I encourage this behavior – it helps to keep neighborhoods clean.

However, landlords have an equally unsavory reputation for being layabout shady shysters from foreign countries who are just a single late payment away from foreclosure and/or running off with your security deposit. It’s only fair that you should be able to do some background checking of your own, and fortunately a lot of the information is available free of charge.

When I’m representing renters I normally perform all of the following background checks as part of the service, but if you’re renting without representation in Chicago (or you’re working with an apartment locator instead of a real agent) you’ll have to do it yourself.

A quick disclaimer before we begin: this info pertains to Chicago renters only. Much of it works anywhere in Cook County, but if you’re renting elsewhere I’m afraid your situation is beyond my expertise. However, you’re welcome to try the techniques below and let me know if they successfully transferred to your state or city!

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Video Tutorials: How to change a lock

key entering lock cylinderWith the new Illinois lock change legislation effective January 1, 2012, many Chicago landlords are now required to change locks between each tenant and display proof of doing so to the new tenant. If they do not do so, they become liable for any losses incurred by their new tenants if the loss occurs due to someone having an old copy of the key.

Meanwhile, many small private landlords will allow tenants to change their own locks so long as the landlord gets copies of the keys. (Tenants, check your lease first before changing locks, and if the lease says nothing, ASK YOUR LANDLORD FIRST.)

As for homeowners, changing the locks after you buy a new home should happen before you put any of your personal belongings into the property.  Think about how many people might have copies of an old housekey – relatives, housekeepers, babysitters, maintenance folk – do you want them having access once the property changes hands?

There’s two versions of lock changes – one is voluntary, when you have access to both sides of the door. The other is involuntary, where you only have access from the outside. Involuntary lock changes could be required if, for example, a tenant moves out without returning keys to their landlord, or a homeowner completely locks him or herself out of their own home.

Let’s start with a basic, voluntary replacement of a deadbolt and doorknob.

And here’s an involuntary one. Landlords, don’t do this unless you’re absolutely sure that your tenant is no longer living in the property, or they have asked you to do it. However, do take note of the methods used by this guy for documenting the lock change process. (more…)

Chicago Real Estate Stats: Dorm vs Buy for Chicago Colleges & Universities

A friend of my mother’s has a son who will be attending Lake Forest College in the fall. (Congrats!) She asked via my mother’s Facebook profile whether it would be better for her to board her son in the dorms, with the mandatory bundled meal plan, or to rent an apartment or buy a condo nearby for the duration of his 4 year stay. It seemed like a question that lots of parents would have so I’ve done an analysis not only for Lake Forest College but for 9 other Chicago area colleges and universities as well. (more…)

Dear Piggy: Does a Chicago Landlord always have to pay for water?

Hand drawn graphic of water pouring into a piggy bank

Is it wise (or even legal) to make your tenants pay for water in Chicago?

I received the following question from a reader:

Dear Piggy,

I am a Chicago landlord. The new tenants in one of my two-flats have two small children and one more on the way. I recently received my water bill and see that the water usage is much higher than it was with the prior tenants. I know that nearly every apartment in Chicago comes with water included in the rent. I’m wondering, am I allowed to bill my tenants for water and sewer usage?
– Sincerely,
My Sink Runneth Over

The short answer is yes, a landlord in Chicago can technically bill a tenant for water and sewer usage. However, they can only do so in very specific circumstances, and only if the rental unit is metered individually. It is not a good idea though, due to a combination of risk and market expectations.

The long answer is, as you would guess, far more complex. (more…)

The 2-week “Do I Really Need an iPad” Test

Warning sign: "Caution: contains math. Mature Readers only."

Relax, just use the calculator on your phone.

I frequently have a conversation with buyers and renters about looking for a place that works with their life right now, as opposed to the life they want to live. Many people think that buying a new home (or car, or frying pan, or self-help book) will be the magic turning point that changes their life for the better. Sometimes the change they want is very specific, although regular readers will know my thoughts on why using a major purchase to solve a short-term problem can be a bad idea. Unfortunately, psychological studies show us that it takes us several months at the least to form or break new habits, unless those habits involve addictive substances. So, it’s generally far more practical to expect change to occur slowly and only through deliberate focus on the element of your life that needs to change.

Meanwhile, iPads are really shiny and very expensive, and people will come up with all kinds of excuses to justify buying them, most of them involving something along the lines of “it will make me more productive.” Some type-A people will definitely hold true to those self-made promises. Most of us will wind up with a very expensive toy that we use for playing “Words with Friends” and mucking about with Instagram. If you’re trying to save for a down payment or just barely making your monthly mortgage, you cannot afford to be wasting money on toys, especially if you’re already pretty close to your peak of productivity as things are now.

Studies show that new technologies must penetrate at least half of the population before they make us noticeably more efficient. (Source: [1])

In my other life as a tech support consultant, I explain gadgets like tablets and smartphones to my clients as pseudo-computers. They cannot run all software. They often cannot run more than one piece of software simultaneously. In most cases, you cannot expand the storage capacity, install your own programs that you made yourself, or even take them to a new wireless provider without a major amount of hassle. That being said, for a small subset of the population they can be very useful. If you think you’re in that subset who should purchase an iPad, here’s a 2-week test to see if you might be right.

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Chicago Real Estate Statistics: Probability and Property Taxes

I have personally never appealed my property taxes although after writing this article I intend to give it a try at my next opportunity. You’ve got really good odds of saving a chunk of change. The average Cook County appeal lowers property taxes by about $395. But there’s so few people taking advantage of it! I know – it sounds like an annoying and scary thing to do with lots of red tape. That’s why I haven’t appealed either.  I will hopefully remember to write up my experiences as I do so. If you’ve ever done it yourself please let me know in the comments about how it went for you!

In the meantime, it’s Friday, which means it’s stats day here at StrawStickStone. I’m a big fan of Harper’s Index so here’s a little Harper’s style breakdown for you to ponder.

Property Tax Appeals

  • Chances of a successful individual property tax appeal, 2007-2010: 75%
  • Approximate percentage of Cook County homeowners who appealed: 5%

Illinois Lottery Scratch Tickets

  • Percentage of players who break even on a $2 ticket… 22.6%
  • Percentage of Americans who think scratch tickets are a practical way to get rich…. (more…)

The Accidental Landlord’s Guide to Lease Renewals

If you are like many of the landlords I’ve worked with in the past 12 months, you’re pretty new to this whole rental thing. You found yourself unable to sell your home for a price that was worth the effort, so instead you are offering it to tenants for the time being. Meanwhile, if you’re a regular reader you’ve seen what’s happened to Chicago rent rates over the past year and are wondering what to do to maximize your return on investment. As you approach the end of your first lease term with your first tenants, here’s a timeline you can use to handle the renewal offer, and if necessary, the re-renting of the property. It will give you plenty of time to make plans if your tenants decide to leave, while staying within the bounds of the Chicago Residential Landlord Tenant Ordinance. This guide assumes that you are a private landlord, not living in the same building with your tenants, that your tenants have been on a lease for over 6 months, and you want to keep them on a lease rather than going month-to-month. (more…)

10 Things That People Used to Own, but Now Rent

Logo from "RENT" the musical

This image was totally borrowed from the creators of "RENT."

Following up on “Occupy Everything” from last week, here’s a list of 10 things that have seen a shift from owning to arrangements that are a lot more like renting.

10. People
Yup, I went there. For the greater part of history it was considered okay for people to own other people. In fact, slavery was not abolished worldwide until 1981, when Mauritania finally got with the program.

And let me say right here: I do not think it is a good idea for people to be able to own other people. I do not endorse slavery at all.

We have, globally, become a culture where “renting” people is the only acceptable option. We pay them in wages or in trade for their skill and labor. While the system of working for pay is hated by many, it is certainly better than the alternative.

This is a case where owning has been orphaned from all of the good feelings and thoughts that normally come with it. The mental image of the slave owner in many of our minds is still unfortunately that of someone with power and wealth, but the impression we get is very negative, especially when compared to our more cheery views of a home owner, a business owner or a patent owner.

So, not every transition from owner culture to renter culture is bad. No matter how crazy it may seem for society to discard an entire type of ownership, it has happened before and therefore could certainly happen again.

9. Empty space
Rented self-storage came about in the 1960’s, and really took off starting in the year 2000 or so. Before that time, people simply did not have as much stuff. People stored items in attics, barns, warehouses, sheds and cellars across a landscape predominantly occupied by single family homes and apartments or tenements. These days, states have written entire new sections of legal code to deal with this new kind of rental, which now serves one in ten American households. (Source) (more…)

Rent Bacon: February 2012

Average change in Rent rates & Market times, Feb 2011 vs Feb 2012, Chicago (corrected July 2012)

Details for February 2012

Average RentAverage Market TimeTotal Rented
Zone 1
February 2011$220270 days135
February 2012$236245 days156
Zone 2
February 2011$174765 days49
February 2012$181446 days73
Zone 3
February 2011$124264 days13
February 2012$138958 days23

Stats reflect pricing and activity for 2 bedroom, 2 bathroom apartments rented by Realtors and listed in ConnectMLS.

What is Rent Bacon?

Rent Bacon is a quick visual summary of what’s happening in the rental market this month compared with this time last year. It breaks the city down into three zones. For each zone, it takes the change in average rent rates and the change in average market times as percentages, and then averages the two percentages together.

Zone 1 covers central Chicago from South Loop through Lincoln Park. (Actual coordinates: 2000 South to 2000 North, from Western Ave to the Lake).

Zone 2 covers the near North side of Chicago, including Lakeview, Bucktown, Uptown, Lincoln Square, Roscoe Village and NorthCenter. (Actual coordinates: 2000 North to 5200 North, from Western Ave to the Lake.)

Zone 3 covers the Far North and Near South side of Chicago, including Edgewater, Andersonville, Rogers Park, West Ridge, Chinatown, Bridgeport and Douglas. (Actual coordinates: 5200-7600 North plus 2000-4500 South, from Western Ave to the Lake.)

Want more Bacon? Here’s last month’s update.