1st Deal - Househacking in Bronzeville, Am I Too Eager?

Question

Hey everyone!

First post here (although I’ve been lurking 👀). I am a newborn baby when it comes to real estate. After the shenanigans of 2020 (dealing with unemployment, uncertainty with jobs, etc.), I realized I couldn’t rely on a 9-5 job, nor did I want to.

So around November 2020, I started doing my research on RI by all of the conventional methods we all read on here.

It was rental property vs. house hacking for me, but I’m leaning towards the latter. I decided I want to explore househacking a duplex in Bronzeville, outside of Chicago. My current lease ends in August.

As mentioned, I’m a newborn and still learning the ins and outs of RI. However, I’m still searching for deals and run across some properties that look interesting. I started a new job last month which brings much needed stability. I’ve paid off all credit card debt, saving all my bonuses and as much as I can from my paychecks, so I want to make something haI’m hoping to use a FHA loan to finance.

I need some advice!

1. Should I wait and learn more about RI before jumping into it (maybe I’m an eager beaver) as well as raise more capital for upfront costs? I go back and forth, but I also think the best teacher is experience, but would like to hear your thoughts.

2. My current lease ends in August, but seems like the market tends to get more competitive in the summertime (am I wrong?). Do you think it’s a viable option on potentially purchase a property needing work, rehab & renovate, then start the hack months down the road (assuming reno will be done, but I know nothing is absolute)? I’m aware that I would have to pay 2 rents, etc., probably not the smartest. Or if I find a deal before my lease ends that is hard to pass, would you recommend going for it?

3. Anyone have experience in the Bronzeville area that can shed some light into that market or would like to connect?

I would love to hear any insight you all have to hear. Trying to soak up as much as I can. I’m not shy to ask any questions, even the most basic or strange, because I believe we all started from somewhere.

Thanks everyone! 😁😁

John Warren · Answer

@Marteki Codjoe first of all, congrats for getting this far. So many Americans could never dream of being in your position. I tend to agree with the idea that experience is the best teacher within reason. As long as you will have some reserves, I can't think of any reason not to house hack. Bronzeville will be tight from an inventory perspective, so just start analyzing properties and get comfortable with the numbers so you can act quickly when the right opportunity pops up.

Marteki Codjoe · Answer

@Eudith Vacio Thanks so much! Your story is great, maybe I'll be like you one day! Yes, I'm learning how to analyze deals and get some more experience in that. The inventory is definitely low, so I'm using this downtime to focus on better educating myself. Thanks for all the advice!

Eudith Vacio · Answer

How did I miss out on this post? lol

@Marteki Codjoe congratulations on your first post and to many many more!

Similar to you, my interest in real estate piqued a few years ago because I did not want to rely on my 9-5 job. I read a bunch of books, bought my first house-hack and then because an agent in wanting to teach others on how to invest and build wealth thru real estate!

You seem like you are very ambitious which is definitely needed in this game. I agree with everyone else on here that you should begin by analyzing deals. It can take anywhere from 3-6 months to find an investment property that meets your criteria and especially now with lower inventory than usual. I work with a lender that is a renovation specialist that can explain the specifications to you in more detail.

If your lease ends in August, then ideally you would want to aim to find something by late June or early July as it can take 30-45 days to close. And knowing that things never really go according to plan, so you might just want to budget in the extra cost of additional rent..

Jonathan Klemm · Answer

@Marteki Codjoe - Congrats on your first post!  Definitely takes some courage to get comfortable being uncomfortable and put yourself out there.

My first thought is why wait?  The faster you start, the quicker you get to your goal.  Time is without a doubt our most limited resource so don't waste any of it.  That said you definitely need to continue to educate but more importantly build yourself a solid team.  You should connect with @Eudith Vacio she's a fellow woman RE investor and works in the Bronzeville area.

I personally love that area!  The market is definitely getting a little more saturated, but nothing like the Northside.  The long-term appreciation in Bronzeville is definitely coming.  People continue to move from the south loop and can pay have the price for the same finishes.

Once you got your property lined up, reach out and let us know how we can help.

Crystal Smith · Answer

Regarding going "back and forth about entertaining a rehab project" even if you don't end up doing a rehab, I submit you'll learn more about real estate by entertaining or exploring the potential for a rehab than you will by just purchasing a turnkey property. While you're still in this stage of learning I recommend you study up on what you can and cannot do with an FHA 203B or FHA 203K loan. While these can be used for renovation, there are still limits on can be done with these loans. Knowing the limits will help as you start to review properties in Bronzeville. I mention this because there are many things done by investors with renovation construction loans that aren't allowed by FHA 203B or 203K loans.

Marteki Codjoe · Answer

@John Warren Thanks for the encouragement. I'm going to continue what I'm doing and learning numbers so I'll be ready when the right deal comes up!

@Crystal Smith Thanks for the advice. I'll start looking into lenders and keep my eye out on properties as them come by. I go back and forth about entertaining a rehab project, but like you said if it's not the right deal, then I need to pass. My current lease is also a factor to consider, but if it makes sense, then definitely something worth considering.Thanks!

@Jonathan Klemm Thanks for the connection, I will reach out to her! You're definitely right about time being a valuable resource. It's nice to have a contractor connection too, so definitely will be saving your info, thanks!

Quincy Lockett · Answer

@Marteki Codjoe

Congratulations on the start of your journey. Any time is a great time to buy as long as the numbers work. My wife and I live in Bronzeville (which is still Chicago 😂) and have 20 plus years experience investing in Real Estate.

If you plan on purchasing something that needs extensive work, Good Luck! It’s extremely difficult to find good contractors at this time. My wife is an investor, property manager and Realtor  for Caldwell Banker. She could help you in your journey. Mallori Lockett 5713379758

Crystal Smith · Answer

There's usually no wiggle room in the DTI (DTI), but if you're working with the right mortgage broker they can guide you in what you need to pay off.  By the way- FHA is not the only product. There is other low down payment products.

Marteki Codjoe · Answer

@Crystal Smith I'm reading more on the FHA loans and the qualifications. Would you say they are pretty strict on these qualifications, specifically, more-so the debt-to-income ratio? I have very good credit score, no credit card debt. However, I went to professional school and acquired a huge debt load. In your experience, have you seen any wiggle room in this area?

1st Deal - Househacking in Bronzeville, Am I Too Eager?

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