Considering Owner Occupancy Chicago

[Shaun McPeck]

Hello.

I'm going to load this introduction with details on what brought me here and probably weave tons of questions throughout.

I currently rent, but I've been dreaming a bit lately and looking at 3 flats here in Chicago. Part of this dreaming isn't so crazy. I do expect a decent windfall of assets in 3-5 years when my employer IPOs. I really like the idea of the 3 flat because I think rent would more than pay for the mortgage.

The more I look, however, the more I get excited by certain properties. This makes me start thinking about the possibility of biting the bullet before the windfall comes to be.

Some things to mention and questions:

• I do have a short sale on my record (over 4 years ago)
• If I can end up putting 40-50%, does a 15 year mortgage make any sense?
• With the short sale, how much will I likely have to put down?
• Any comments on the plan of working things as an owner occupied building?
• Would you avoid committing too much of the windfall?
• Would you start things before the windfall and maybe go for a cheaper 2 flat even though rent wouldn't cover the mortgage?
• Should I buy the property as a business entity and rent from myself?

I expect a lot of answers with links to existing posts/resources. That's ok. 😀 I imagine, also, that there may be extra questions about my situation. One item worth mentioning is that I'm not overly concerned about income needs - but, of course, I want to make financially smart/sound decisions. I do have a slight concern about the short sale on my record.

Apologies up front for the big dump of questions as an intro, but I didn't want to risk muddying a different area of the forum with this broad stroke of a post. If I should have directed some of this content elsewhere, please educate me.

 Cheers!

[Brie Schmidt]

Originally posted by @Shaun McPeck:

Hello.

I'm going to load this introduction with details on what brought me here and probably weave tons of questions throughout.

I currently rent, but I've been dreaming a bit lately and looking at 3 flats here in Chicago. Part of this dreaming isn't so crazy. I do expect a decent windfall of assets in 3-5 years when my employer IPOs. I really like the idea of the 3 flat because I think rent would more than pay for the mortgage.

The more I look, however, the more I get excited by certain properties. This makes me start thinking about the possibility of biting the bullet before the windfall comes to be.

Some things to mention and questions:

• I do have a short sale on my record (over 4 years ago)
• If I can end up putting 40-50%, does a 15 year mortgage make any sense?
• With the short sale, how much will I likely have to put down?
• Any comments on the plan of working things as an owner occupied building?
• Would you avoid committing too much of the windfall?
• Would you start things before the windfall and maybe go for a cheaper 2 flat even though rent wouldn't cover the mortgage?
• Should I buy the property as a business entity and rent from myself?

I expect a lot of answers with links to existing posts/resources. That's ok. 😀 I imagine, also, that there may be extra questions about my situation. One item worth mentioning is that I'm not overly concerned about income needs - but, of course, I want to make financially smart/sound decisions. I do have a slight concern about the short sale on my record.

Apologies up front for the big dump of questions as an intro, but I didn't want to risk muddying a different area of the forum with this broad stroke of a post. If I should have directed some of this content elsewhere, please educate me.

 Cheers!

 Welcome to BP!  I can't answer your specific financing questions, but my lender is in the top 15 in the country and if he can't close it, nobody can.  So if you PM me I will send his contact information. 

As far as a 15 year mortgage, I would not do that if this is a long term plan of yours. One of the biggest challenges we face as investors is your DTI ratio (the lender can explain) and having a 15 year mortgage will stunt your future growth.

I would also don't suggest buying a 2 flat just because it is cheaper.  Having 80+ units myself and being an agent for countless investors in Chicago I can tell you that this is not one chess move, you got to think about the next 4-5 moves when making one.  And 2 flats don't cash flow so getting excited now and making the wrong move can lead to negative income on your taxes and less house down the road.  

One thing to consider if you want in now (which I do suggest, prices are increasing) is the 5% down conventional loan program. As long as your DTI is good, you can use the rental income to help you qualify for more house.