Jun 30, 2010
Housing Bulletin
Before and After in the South Suburbs
Before: Jim McClelland, Sr., and Jim Jr. in a gutted basement, where water rot had ruined the walls.
Jim McClelland, the CEO of the Tinley Park–based Mack Industries, is helping some hard-hit south suburbs recover from the foreclosure crisis by creating some well-equipped and well-managed rental housing for residents of those towns.
A longtime builder, McClelland began the project about five years ago, and this year he expects to buy 200 foreclosed homes in Country Club Hills, South Holland, Riverdale, and other suburbs. After a comprehensive 90-day rehab, each home gets rented out at a reasonable price—and typically, each home is rented before the rehab has been completed, says McClelland’s son (also named Jim), the firm’s COO and vice president.
Walking through a “before” and “after” property in Dolton with father and son last week, I could see why there are 50 potential renters on the waiting list. Mack bought the “before” house—a brick tri-level on South Cottage Grove Avenue—in May for about $45,000. “This one had been boarded up for a year,” says Jim Sr. “How do you think the neighbors like looking at that?” He installed (temporarily) some inexpensive white blinds in the front windows, and what Jim Jr. calls “our SWAT team”—a staff of 86 tradesmen and laborers—mowed down chest-high weeds and hauled away many bags of trash. Then the serious work began.
“The roof, the gutters, and the garage door are all crum-bum,” says Jim Sr., “and inside was a disaster.” While the home had been standing vacant, its utilities had all been shut off, and with no operational sump pump, mold proliferated in the drywall on the lower level. When we walked through, all that drywall had been ripped out. Other mold remediation work has been done, the McClellands say, and a Mack Industries crew will soon hang new drywall.
Also on the way are new kitchen cabinets, a new furnace and air conditioning unit, copper plumbing, and low-maintenance vinyl wrap for exterior elements that are now painted plywood. The total rehab cost will be about $50,000, says Jim Jr. “We spend a lot going in and it pays off, because we spend less later on maintenance and repairs,” he says. His father adds that they will hold on to each of these properties as a rental for at least 15 years. “This is a long-term investment,” he says, “so why cut corners?”
A family is due to move in on August 1st, renting the place for $1,500 a month. “We’ll have it ready for them,” Jim Jr. promises.
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At the “after” property I saw (on South Sanderson Avenue), there are four residential units—a house in front and a building with three apartments out back—that Mack bought for $25,000 in January. Prior to Mack’s involvement, the two buildings had been marked for demolition by the village. “It looked scary,” Jim Sr. says. Mack tuck pointed the exterior, put on a new roof, and took the mold-infested interior walls down to the studs and rebuilt. As at all Mack properties, the ventilation system was vacuumed, and the sewer lines were rodded out. In the rear of the building, father and son proudly show off the mechanical room, where there are three new furnaces and three new water heaters, all fed by shiny new copper plumbing.
The rehabbed house has a tenant, who is paying $1,200 a month; the rear building is finishing up now, and there are already new flooring, cabinets, bathroom fixtures, and windows in the three apartments. Each apartment has a renter lined up, who will pay between $650 and $1,000 a month.
Mack has a strict business plan: It won’t take on a property that will need to be rented at more than $1,500 a month to carry its own weight financially. “That’s the sweet spot,” Jim Sr. says, since “renters can’t afford more than $1,500” in the moderate-income areas where his properties are situated.
The numbers appear to work. In Dolton alone, Mack has about 50 rentals, all filled with tenants except for those that aren’t yet finished. In all, Mack’s south suburban rental portfolio is worth about $50 million, both men say. “The dollar value is not what gets me excited,” says Jim Sr. “It’s when my tenants move into a nice house. I think that’s important.”
Posted at 09:54 AM in Housing Bulletin | Permalink
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Reader Comments:
Had no idea what an asset this firm is to the community. It takes guts to do what they are doing and they are capable of turning around a neighborhood. Plus the fact that their commitment to this business means they have faith in the community.
Wow, what an inspirational and positive story about somebody FINALLY doing something to truly stabilize our south suburban communities and property values.
Looks like the next best thing to ownership. Thank goodness for someone who cares and wants to make a positive impact.
It is so nice to see this firm helping these communities to stem the tide of disrepair and save their neighborhoods. The residents surely are inspired by Mack's commitment to join with Mack in the stabilization of their own communities.
After the billions, dare I say trillions, the government has wasted trying to stem the foreclosure crisis, isn't it ironic that it takes private business to actually succeed. Imagine if we had a dozen Macks in every major city, buying up foreclosures, turning them around and putting families back into them. Foreclosures are a blight on any block. They rot. They sit empty, or worse, become occupied with drug dealers and gangs using them as "offices". They are monuments to heartbreak. It is great to see a company doing good while making a real difference.