Mayor’s Award for Excellence in Property Improvement

In 1988, when I began my ascent as a mini-mogul, I purchased a six-unit building about a mile west of the Fox River in Illinois. The property was a dumpy-looking gray building with four one-bedroom apartments and two two-bedroom ones.  I estimated the square footage of the one-bedrooms at 450 each and the two-bedrooms at 650.  The rents were $225 for the smaller units and $275 for the larger ones.  All utilities except water and sewer were the tenants'  responsibility.  The units were equipped with space heaters.

So I Bought The Property, Hired A Management Company – Now What?

Since I was busy with my job, I hired a management company to manage the property. I eagerly awaited what I anticipated would be a $500 per month positive cash flow.  My anticipatory mood was short-lived.  I soon received a call from the management company that one of the tenants in the smaller apartments had abandoned the apartment without paying the rent.  It was February,  a tough rental period because people don't like to move in the winter.  Nevertheless, we were able to rent the apartment to a family of four within a few days.

All went well for about two weeks.  Then the manager mailed me a list of building-code violations.  Unbeknownst to me, the city of Aurora, IL held mandatory annual inspections of all apartment buildings with more than two units.  Most of the items on the list were minor, but two items stood out.  My new tenants had multiplied rapidly.  I got cited for housing ten people in the 450 square-foot unit, instead of the four I originally rented it to.  The extra people exceeded the occupancy limit.  In addition, the city wanted certification from an approved heating and ventilation contractor that the space heaters were in good condition.

The Eviction & Repairs

The following Saturday, I drove to Aurora to see for myself how ten human beings could fit into 450 square feet.   The kitchen contained two double bunk beds, as did the living room.  I could only imagine what the water bills were going to look like at that time.  The management company began the eviction process.  My hope was that this would proceed more quickly than the one eviction I'd had in Chicago, where the tenant filed under Chapter 13 bankruptcy protection and got free use of my apartment for six months.

An approved heating contractor inspected all the space heaters and informed my manager that all of them were defective.  Three of them had cracked heat exchangers and were emitting carbon monoxide into the units.  The contractor commented that one of the units had two of the space heaters with cracked exchangers, and the only thing that was saving my tenant from serious if not deadly carbon monoxide poisoning was the poor insulation in the unit, which allowed air drafts to come in and carbon monoxide to escape through the walls.

His report indicated that the unit should be vacated immediately because it was a health hazard.  Or, for about $2500 he could remove the space heaters and put in a new, efficient forced-air unit and a chimney liner.  I wasn't happy, but I  authorized the work.  There went five months of positive cash flow.

I had time to bid out the other five units.  I found a competent heating contractor desperate for work who did the other units for $4100.  There went another eight months of positive cash flow.

City RE-Inspection Results in An Award

Upon the completion of the work, the city inspector approved all the units, and even though I was a decent landlord. I eventually put a total of $40,000 into that building to upgrade it and raised the rents substantially.  In 1993, the city of Aurora awarded me its annual “Mayor’s Award for Excellence in Property Improvement”.  This was an honor, as the city gave out only one award per year from the several hundred buildings in that size category.

The point is, this was part of my journey and can easily be yours. Don't ever give up on becoming a mini-apartment mogul.