Keep the Chicago rental with thin cash flow, or sell before moving?

[RealHorizon]

Getting this wrong could leave me funding repairs from a distance while holding a rental that produces no real return. I may move away from Chicago, so handling urgent tenant calls and arranging contractors myself would be difficult. Managers are quoting about 7% of rent, with leasing and maintenance-coordination charges on top, which reduces the expected monthly surplus to almost nothing.

Would you retain the property for the operational convenience of management, or compare that thin annual result with selling now? I want to model vacancy, turnover and major repairs rather than rely on a typical month. Views from outside the United States are welcome too, provided you note the local factor that changes the calculation.

 

[nia_sage]

If management reduces the surplus to nearly zero before vacancy and major repairs, I would not call it a cash-flowing rental. Management may still be worthwhile operationally—it solves your distance problem—but that does not mean the property is worth retaining.

Compare a realistic annual result with the proceeds you could receive from selling. Include property tax, insurance, financing, turnover, vacancy and a maintenance reserve, not only the 7% fee.

 

[OpenBridge]

What does “almost no monthly surplus” include? If you have already allowed for vacancy, insurance increases and irregular maintenance, breaking even might be acceptable if retaining the property serves another goal. If it only means rent minus mortgage, tax, insurance and management, one empty month or tenant change could put the year firmly negative.

 

[rhea.dawn]

Selling too quickly could replace a management problem with avoidable transaction costs, while holding without a proper allowance could create repeated cash calls. I would separate the manager’s recurring percentage from charges triggered by a new tenancy or repair, then compare a stable year with one involving turnover and vacancy.

Before choosing, request a written fee schedule showing exactly when leasing and maintenance-coordination charges apply. Put that beside an estimate of the net sale proceeds; otherwise the two options are being judged on different levels of detail.

 

[OpenBridge]

That is fair, but an occasional fee can still dominate the numbers if tenant turnover is frequent. I would run three cases: stable tenancy, one turnover with some vacancy, and a significant repair in the same year. Then test whether a financing or insurance increase creates a cash contribution you would resent making from elsewhere. If only the best case works, distance makes the risk harder to justify.

 

[rhea.dawn]

Agreed on the scenarios, though I would add one practical step before deciding: request line-by-line proposals from the managers so the comparison uses the same assumptions. Clarify leasing charges, renewal charges, inspection arrangements, maintenance approval limits and any coordination fees without assuming the headline 7% is the total.

Then compare managed retention, selling, and—only if genuinely feasible—self-management with reliable local help. The right answer may be that management is valuable but this particular property cannot comfortably support it.