Vendor Portal
Author: Mark Ainely | Partner GC Realty & Development & Co-Host Straight Up Chicago Investor Podcast
That 30 second countdown music always reminds me of waiting in line at the zoo, or Space Mountain at Disney. It’s got a good beat, it’s all electronic, and I’m still convinced I can sneak a sip of water before it ends. Tim caught me on camera doing it, so that plan failed.
This week on Chicago Landlord Secrets, Tim and I got into a mix of real investor stuff and real property management stuff. We talked about how to actually evaluate an investment beyond the cash flow fantasy, why return on equity matters as you build wealth, how depreciation and cost segregation can be a bigger win than most people realize, what happened with a pipe break in a vacant unit, when I do and do not use a public adjuster, how I handle annoying city violations, and why squatters are still a real mess across Cook County.
How I think about “good” vs “lemon” properties
When someone asks me if a property is a lemon, I usually know it when I see it. It’s the unholy amount of work that never stops because the building was built poorly, or the last owner did a whole bunch of bad stuff that now becomes your problem. I call those dog properties.
But outside of that obvious category, I’ve learned that people invest for completely different reasons, and I’ve watched my own reasons change over time. Early in my career, I was all about cash flow. That’s part of how I ended up on the South Side, because those paper returns look sexy. Years later, the reality was single digit results, and it taught me that the story is always bigger than the spreadsheet.
Now I look at things more like a slow stable hold, growth, and tax strategy. And I’m also honest with myself: if I’m my own property manager or I’m hiring a property manager, the cash flow might not look that great month to month. Keeping maintenance under control and keeping residents longer is a huge part of how I grade a property.
ROI vs ROE and why I care more about equity as time passes
Tim brought up a question I think more investors should ask: how do you grade an investment when everyone uses ROI, but not everyone looks at return on equity?
A lot of people compare cash flow without considering how different their starting point is. If I buy a million dollar building with a million dollars cash, I’m going to cash flow a lot better than someone who put two hundred grand down. Comparing those two investors like they’re playing the same game is how people fool themselves.
The first big thing I want investors to remember is mortgage paydown. The principal being paid down is pure profit. The interest is not. But the principal is.
The second big thing is return on equity. If I sold the building right now, how much money would I walk away with that I could use to buy something else? That’s the equity number. And when that equity grows, it can change the conversation completely.
There’s a point where a property becomes “safe and stable,” but the return on equity gets smaller because the building is paid down, the market growth slows to normal annual increases, and you’re not getting the big jumps anymore. That’s fine for a lot of people. But if you’re chasing bigger numbers, that’s when people start asking whether it’s time to reallocate equity into a bigger opportunity.
The cash flow myth and why it can mess up new investors
I get nervous when I hear someone say, I just want cash flow, I need cash flow, I want to replace my nine to five with cash flow.
That idea is tough to play out in reality, especially early.
I’ll give you a real example I shared. We bought a property recently with a partner in the suburbs. We probably have twenty to thirty grand into it. Next year, with cost segregation, we’ll have about sixty thousand in write offs. We also have about one hundred eighty thousand in equity between the two of us.
And my cash flow is only a few hundred bucks a month.
That’s not sexy cash flow, but it’s a very real wealth move.
The danger with the cash flow only mindset is that it isn’t linear. On paper you might “make” a certain number each month, but real life includes roofs, floods, furnaces, and surprise bills. You’ll have good years and you’ll have bad years, and the bad years can put people into a tailspin if they were counting on the spreadsheet to behave perfectly.
Depreciation, write offs, and why real estate is a wealth builder
One of my favorite lines from this conversation was Tim’s point that real estate is the greatest wealth builder out there, but it’s an okay wealth creator.
I agree with that. The people I see do best tend to have some income and stability, then they use real estate as the long road to build wealth.
Tim and I also talked about why depreciation and write offs matter so much. If you can write off sixty grand, depending on your tax situation, that can translate to a meaningful number that’s bigger than what most people are cash flowing.
Then add the equity being built and the principal paydown, and all of a sudden a deal that looks “meh” month to month can still be a strong move when you look at the full picture.
Tim also made a point I like: people check the value of stocks and Bitcoin constantly, but they don’t check the value of their real estate enough. When you actually look at what your property was worth five years ago versus today, and you account for that equity growth, you realize the money is often made in equity, not in cash flow.
And I’ll admit it, I don’t do a personal financial statement as often as I should. I usually do it when the bank asks me for it. But every time I do it, it’s a huge motivator. It’s a simple exercise that reminds you the long road is working, even when your bank account is telling you the opposite after you just paid thirty grand for a roof.
My pipe break story and why “fake spring” is where problems show up
Tim asked about a video I posted that showed water running hard.
The thermostat batteries ran out in a vacant property. We do weekly checks on vacancies, everything looked fine, then the weekend hit, and the furnace never kicked on. Monday morning we walked in because we were about to start painting and get the unit ready for market, and a pipe between the ceiling started going.
That one is going to be an insurance claim.
It sucks, but it’s also a reminder of something we’ve talked about before. When it warms up, that’s when you find problems. Fake spring shows up, everyone relaxes, and then you discover what the deep cold actually did.
When I use a public adjuster and when I don’t
Tim asked if this claim was too small to use a public adjuster.
Here’s the simple explanation I gave.
A public adjuster represents you against the insurance company, usually for a percentage of the claim, something like six to ten percent. Their job is to make sure you get every dollar you’re entitled to under the policy, especially when the insurance company starts depreciating everything and trying to reduce what they pay.
For bigger claims, especially fires or total loss situations, public adjusters can be incredibly valuable. We’ve seen situations where we can bid the work out to multiple contractors, the public adjuster helps secure a higher payout, and the client ends up in a better position even after paying the adjuster fee.
For smaller claims, like something in the twenty to thirty thousand range, the math can get tight. There’s less wiggle room after you pay the fee, even if you get multiple bids.
City violations, contesting tickets, and how I decide what’s worth fighting
Tim asked how I handle the annoying city violations, the administrative stuff like trash in the yard or small pain in the ass tickets.
We work with an attorney for both big and small ones, and we look at whether we have a real chance to contest. But the decision is often financial. If the fine is six hundred bucks and it costs three hundred to have the attorney involved, even if you “win,” it may not be worth it. Sometimes you pay it because it’s the cost of doing business.
But once you’re talking multiple tickets or a few thousand dollars in fines, we contest it.
I also told one of my favorite stories about how ridiculous the city can be. We got a ticket because a garbage truck was in the alley too long. Not our truck. The City of Chicago garbage truck. We pulled the photos and it was literally the city truck. Our attorney went in, the city attorney looked at it, couldn’t even explain why it was written, and it was over.
Tim asked about whether there’s still an administrative fee if you contest and win. The way we talked through it, the extra fee hits if you get found guilty, not if you win.
The part that drives me crazy about city tickets
Tim also brought up something I agree with: the city takes photos, but you don’t always get them quickly.
Sometimes the issue is that it wasn’t even your property. It was the vacant lot next door, but your address got tagged. If those photos were immediately available and easy to access, you could resolve things faster. Instead, you’re stuck waiting, and sometimes you get the ticket months later.
That’s the worst part. You get a violation for grass being too high in June, and you don’t receive it until October. How am I supposed to go back in time and take a photo of June grass?
A practical tip if you miss court
If you miss court on a city violation, you have up to twenty one days to call it back and get a new date. Tim pointed out it’s free the first time.
And I’ll add this. Mail can be brutal. Our office is in Bridgeport, and our mail situation is so inconsistent that sometimes we don’t get mail for a month after we should. Whether it’s the city being slow, the mail being slow, or both, it happens. So knowing you can call it back matters.
Squatter update and why this is still a Cook County problem
Tim gave an update from last week. They went to the police station with the deed like they were told to do, and the police basically told them to go file eviction.
Unless you can get a major news station to come out and shame someone into action, it feels like enforcement is still a mess. Tim mentioned another story in LaGrange, so it’s not just Chicago. It’s Cook County in general.
And then we got into the bigger frustration. The city makes rules that limit what you can consider in screening, but then you can still end up getting blamed or ticketed for what a resident does at the property. That contradiction is part of what makes Chicago investing so unique.
Why Chicago still has opportunity even with all the nonsense
I said it bluntly. Chicago can be a pain. The city stuff, the rules, the squatters, the tickets, all of it.
But the investment opportunity is real.
You can’t go many places and buy a one hundred fifty thousand dollar house and rent it for three grand. That rent to price relationship is part of why people keep coming here, even with the baked in risk.
Tim said it well too. The market has the risk baked into the price. Taxes, tenant friendly rules, pensions, tickets, squatter issues, the price reflects the risk.
Supply problems, slow building, and why inventory feels tight
We also talked about inventory and new construction.
The way the city builds is slow and expensive, and the numbers don’t feel like they’re catching up anytime soon. Tim brought up an example in Bellwood where they built a batch of reasonably priced single family homes on vacant lots, and it was a model that actually worked. He also mentioned how some suburbs have done similar things with lots that school districts owned.
But in general, the process is slow, and the supply shortage doesn’t feel like something that’s getting solved quickly.
My final thought for the week: tax refunds can help collections
I ended with one practical reminder because it’s that time of year.
It’s mid February. If you have residents with collection issues or payment plans, this is the window where tax refunds start becoming part of the real plan.
If I have someone on a payment plan, I want to build in their tax refund as a chunk payment. Tim mentioned that March is often their lowest collections month because they can work with residents, get them back on track, and a lot of residents use that season to catch up.
So yes, December, January, and February can be a grind, but this is also the season where you can make ground if you plan for it.
Questions I answer in this episode
Q: How do you grade an investment without getting fooled by cash flow hype?
A: I look beyond the monthly number and account for principal paydown, tax write offs, and equity growth. I also compare based on how the investor bought the deal because cash buyers and leveraged buyers aren’t playing the same game.
Q: What is return on equity and why does it matter?
A: It’s what I could pull out if I sold today. When that equity grows, it can open up new opportunities, and it can also tell me when a stable property is no longer producing the return I want on my capital.
Q: When do you use a public adjuster for an insurance claim?
A: Bigger claims where the adjuster can help maximize payout and protect the owner from insurance depreciation tactics. Smaller claims can be harder to justify because the fee eats into the wiggle room.
Q: Do you contest every city violation?
A: No. If it’s small, sometimes I treat it as the cost of doing business. If it’s multiple tickets or thousands in fines, I’m far more likely to fight it.
Q: What should landlords know about squatters right now?
A: It’s still a problem across Cook County. Even with documentation, enforcement can be inconsistent, and owners often get pushed back toward the eviction process.
Timestamped show notes
- 00:32 That countdown music and me getting caught taking a drink on camera
- 01:07 Why localized Chicagoland advice matters more than national content
- 02:45 Grading investments and what I consider a dog property
- 05:12 Cash flow comparisons and why starting point matters
- 05:44 Mortgage principal paydown as real profit
- 06:03 Return on equity and why investors ignore it
- 07:33 Why the cash flow only mindset is dangerous
- 09:04 Cost segregation, depreciation, and write offs as real value
- 10:22 Why equity often beats cash flow in long term results
- 12:46 Personal financial statements and staying motivated as a newer investor
- 16:04 My pipe break story and why issues show up when it warms up
- 17:25 Insurance claims and when public adjusters make sense
- 21:07 Handling city violations and when it’s worth contesting
- 22:11 The garbage truck ticket story and how ridiculous it got
- 25:39 Missing court and the twenty one day call back window
- 29:50 Squatter update and why police still push owners to file eviction
- 31:34 Chicago investing risk and why opportunity still exists here
- 34:01 Inventory shortages and why building new units is so slow
- 38:21 Valetines Day reminder and why my birthday timing is annoying
- 39:20 Collection strategy and using tax refunds to get residents back on track
Takeaways for Chicago landlords and property managers
- ROI alone can fool you if you ignore mortgage paydown, equity growth, and tax benefits.
- Return on equity matters because it tells you what your capital is really producing today.
- Cash flow is not linear, and bad years can break you if you only bought for monthly profit.
- Cost segregation and depreciation can create real value even when cash flow is not sexy.
- Thermostat failures and fake spring can expose winter damage fast, especially in vacant units.
- Public adjusters are usually most valuable on bigger claims where payout optimization matters.
- Not every city ticket is worth fighting, but high dollar stacks of fines usually are.
- Squatters are still a Cook County issue, and enforcement can be inconsistent.
- Tax refund season is a real opportunity to strengthen collections and reset payment plans.
Guest Information
Mark Ainley
Founder & Partner – GC Realty & Development
Podcast Co-Host – Straight Up Chicago Investor
Tim Harstad
Founder – Chicago Style Management
Because finding good tenants and property management shouldn’t feel like online dating.
Dear Investor,
If you are an investor in either the city or suburbs of Chicago, I would love to speak with you about how we can help you on your real estate journey. At GC Realty & Development LLC, we help hundreds of Chicagoland real estate owners and brokers each year manage their assets with both full service property management and tenant placement services.
We understand that every investor’s goals are unique, and we love learning about each client’s individual needs. If there is an opportunity to help you buy back your time by managing your rental property or finding quality tenants, please check us out.
Best Investing,
Founder, Partner, Podcast Co-Host, and Investor
