Chicago Duplexes Costing Models

[Matt Michaels]

Hello BP community!

Quick background to provide context. I am a multi-family real estate investor currently living in the Pittsburgh area. I bought my first duplex in 2018 and house hacked it, and then moved to my second duplex in 2019 and am currently house hacking that.

However, my situation is changing as my long-time GF is from the Chicago area and we are moving back to the Chicago-land area in the future. With that being said I would like to continue my multi-family investing career but was looking for advice going into a new market (Chicago).

If you are a multi-family investor in the Chicagoland area, can you provide advice on unplanned expenses or different ways to think about multi-family deals and deal structuring in the Chicagoland area? Further and if you would feel comfortable, sharing your costing sheet/analysts model when analyzing multi-family deals in Chicagoland?

Thank you in advance for your time, and I look forward to hearing back from you!

Matt

[Mike B.]

What type of neighborhoods are ideal for you to invest in? Is your goal to cashflow or are you shooting for appreciation down the line?

[Joseph Konney]

Hi @Matt Michaels - For the Cook County area, be ware that evictions can take a long time. 2-3 months for court and 2-3 months for waiting patiently for the sheriff to do their job.

If counting on unit income to qualify for financing, be ware that many homes are not accurately zoned to their current use. If buying a 3-flat and that property needed to be rebuilt, the zoning may limit it to a 2-flat so your lender will not count the income from that 3rd unit.

Like Mike said, are you going for cash flow or appreciation? I like to invest in C+ areas that cash flow well as is and which I speculate will appreciate as the city expands and stabilizes it's outer rim. You also have to factor in commute to work and amenities as this first area investment you will be occupying.

I currently have 24 multifamily units in the area. Feel free to reach out directly if you'd like to chat. 

[Brie Schmidt]

Originally posted by @Matt Michaels:

Hello BP community!

Quick background to provide context. I am a multi-family real estate investor currently living in the Pittsburgh area. I bought my first duplex in 2018 and house hacked it, and then moved to my second duplex in 2019 and am currently house hacking that.

However, my situation is changing as my long-time GF is from the Chicago area and we are moving back to the Chicago-land area in the future. With that being said I would like to continue my multi-family investing career but was looking for advice going into a new market (Chicago).

If you are a multi-family investor in the Chicagoland area, can you provide advice on unplanned expenses or different ways to think about multi-family deals and deal structuring in the Chicagoland area? Further and if you would feel comfortable, sharing your costing sheet/analysts model when analyzing multi-family deals in Chicagoland?

Thank you in advance for your time, and I look forward to hearing back from you!

Matt

It is hard to share data without knowing what areas you are looking in.  A class is going to be a lot different than C Class.  Do you have areas and a budget in mind?

[Rj D.]

@Matt Michaels

Everyone brings up great points. 

• What areas are you interested in
• What type of returns do you need to see
• What's your timeline
• What's your pricepoint / What can you afford

Chicagoland is difficult and the microeconomic and block/block nuances make a huge difference. You are doing the right thing by asking questions and preparing yourself before the move. 

My advice is:

• Find a broker with Multifamily experience and has investments themselves
• Make sure your broker is educated in the areas you are looking in
• Build your team BEFORE you are ready (i.e. Broker, Lender, Contractors, Attorney)
• Join / Attend meetup groups in Chicago ANY chance you get
• Network with as many people that are successful in the asset class and unit count range you are looking for

Good luck with your search!

[Matt Michaels]

@Mike B. I prioritize cash flow over appreciation. As always, would be nice to get both but the aforementioned would be the prioritization list.

[Matt Michaels]

@Joseph Konney I appreciate your openness to discuss further and will look to start an individual chat with you!

[Matt Michaels]

@Brie Schmidt The two areas of interest are either northwest of the city (Wicker Park up through Logan Square and around that area) which would allow us to be closer to the city or more of a suburban feel (Villa Park to around the Elmhurst area).

[Matt Michaels]

@Rj De Leon Awesome “food for thought” you bring up and greatly appreciate the advice as I begin my real estate journey in the Chicagoland area!

[Brie Schmidt]

Originally posted by @Matt Michaels:

@Brie Schmidt The two areas of interest are either northwest of the city (Wicker Park up through Logan Square and around that area) which would allow us to be closer to the city or more of a suburban feel (Villa Park to around the Elmhurst area).

 Wicker you are looking at $800k-$1,000,000 and will need 20% down or more because of the loan limits.  As you go north to Logan you are looking more like $600k-$800k but will still need 20% down because of the loan limits.  I use 3% vacancy, 5% repair, 3% capex as a general ballpark for those areas.  

[Crystal Smith]

Originally posted by @Matt Michaels:

Hello BP community!

Quick background to provide context. I am a multi-family real estate investor currently living in the Pittsburgh area. I bought my first duplex in 2018 and house hacked it, and then moved to my second duplex in 2019 and am currently house hacking that.

However, my situation is changing as my long-time GF is from the Chicago area and we are moving back to the Chicago-land area in the future. With that being said I would like to continue my multi-family investing career but was looking for advice going into a new market (Chicago).

If you are a multi-family investor in the Chicagoland area, can you provide advice on unplanned expenses or different ways to think about multi-family deals and deal structuring in the Chicagoland area? Further and if you would feel comfortable, sharing your costing sheet/analysts model when analyzing multi-family deals in Chicagoland?

Thank you in advance for your time, and I look forward to hearing back from you!

Matt

I'll send you a PM regarding how we analyze deals in Chicago (i.e. expenses we include) It's not much different than other markets. One of the main things that I'll share in public is to expect a capital expense to remove & replace old or new boilers with Forced Air Heating & Cooling. Chicago has a great stock of solid buildings with boiler systems. Whether old or new in our business model we always factor in replacing those systems & the bills for heating/cooling become the tenant's responsibility. 

[Matt Michaels]

@Brie Schmidt Greatly appreciate the additional information and specific figures you utilize when analyzing deals.

Would you be open to a PM to discuss further?

[Matt Michaels]

@Crystal Smith Thank you for taking the time to respond, I appreciate the information, and I look forward to receiving your PM!

[Lee Nestlerode]

I sold my duplex about 3 years ago but still follow the market in hopes of another slowdown. The land values can be crazy, make sure to understand what is driving prices in your micro-market. As stated above really is block by block. My area was completely driven by the price a developer could get for a single family house they would then back into what they could pay for a tear down or rehab which provided a floor on price. They would then go door to door with flyers to acquire houses, so many never hit the MLS. I would suggest looking for a 3 flat if you can find one.

1/watch out for taxes, they are increasing rapidly, so make sure you have the latest info And build increases into the model. This is posted on the county site.

2/ deferred maintenance can be costly, old boilers can go at any moment and flat roofs are expensive.  old windows can really drive up heating costs.  you will be dealing with houses that are 120+ years old.

3/be on the look out for asbestos, there’s a bunch of it used on pipes, fire proofing and tile floors.

I had a great agent and real estate attorney, happy to share there info if you are interested.

[Charlie S.]

Originally posted by @Brie Schmidt:

Originally posted by @Matt Michaels:

[Charlie S.]

Originally posted by @Brie Schmidt:

Originally posted by @Matt Michaels:

@Brie Schmidt

Is it not possible to get a  conventional loan with 5% down in these areas (Wicker / Logan / North Center)? 

[Brie Schmidt]

Originally posted by @Matt Michaels:

@Brie Schmidt Greatly appreciate the additional information and specific figures you utilize when analyzing deals.

Would you be open to a PM to discuss furt

Sure, I uploaded examples in the file place, PM me and I will send the link

[Brie Schmidt]

Originally posted by @Charlie S.:

Originally posted by @Brie Schmidt:

Originally posted by @Matt Michaels:

@Brie Schmidt

Is it not possible to get a  conventional loan with 5% down in these areas (Wicker / Logan / North Center)? 

 No, the 5% down is only for low to moderate income tracts.  Plus in those areas it may require more than 20% down because the property costs is so much higher than the loan limit

[Ben Steelman]

Hey Matt. I live in Kansas City and invest here. Its an awesome market for both single family rentals and flips. I've done many of both but now my focus is in the Multifamily space. Let me know if you'd like to chat about opportunities outside of the Chicagoland Market. Cheers!