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Updated almost 5 years ago, 12/16/2019
:) NEWBIE LOOKING FOR FIRST BRRRR GREATER LITTLE VILLAGE AREA!
Hi everyone! This is my first post just like the title says I am looking for my first BRRRR multi family deal 2-4 units. I work in the RE industry although I am licensed agent I do not close deals. I am in B2B sales for a brokerage. Going to be investing in my first deal once I can find the right property. Focusing on the Little Village to Berwyn area. Maybe even a bit up north into the west side like Humboldt Park/Forest Park. Born and raised in Chicago so I know the neighborhoods well.
Want to connect with other investors in the area. Also trying to build my team in regards to contractor possibly a PM as well as I may self manage to begin with but will eventually get a PM once I have a few properties under my belt. Being in sales and working from home I do have some flexibility with my time currently.
My main question is is there still opportunity for BRRRR deals in the areas I am looking for to buy a multi for 150k or less initial acquisition cost? Or am I aiming too low?
Any advice I am thankful for in advance!
ii'm also looking to invest in chicago market. it will be tough to buy multi units with your current budget but not impossible. i've come across a couple in your budget, but i'm looking for better quality properties. check the 60624 area. two flats are right around 80k to 120k. back of the yards is also a good area to buy and hold. 60609.
Come to back of the yards!
gotta be careful not to over rehab because ARV is gonna be a lot lower but you can definitely find good properties for under $100k. I just did my first house hack in 2018 by 49th pl and Racine- I'm super happy with the neighborhood and the deal would have worked as a BRRR.
Check out back of the yards coffee shop by 47th st and Ashland. I swear this neighborhood is a gem
you know what they say about great minds..
@Connor O'Brien and @Jimmy Rivera Thanks very much for the advice! Going to look in the back of the yards area as well now. Touring a property in the Humboldt park area this weekend hopefully. Have a buddy who did fairly well with a 2 flat rented section 8. So keeping my search area open to find good deals.
Looked at a property in Little Village yesterday at 95k but it needed a full gut rehab and a lot of deferred maintenance exterior wise. Main thing I did not like is that the units were very small 2 bed 1 bath but maybe 700 sq ft.
@Aaron Belt Thanks for the welcome! Wish you luck on your deals as well!
@Connor O'Brien I took a look at your profile and the house hack looks great! Just out of curiosity did you do the remodel yourself or did you use a contractor? I'm currently building up my contacts in the city so always on the look out for good contractors. Depending on how much work a property needs if simple I can do some of the work I remodeled my private residence on my own.
I live/invest in Little Village and you have to be 100% sure on your numbers if you want to BRRRR right now. People are cashing in on Pilsen's popularity, especially near Cermak between California and Western, and the prices are drastically higher than they were even a year ago, but rents haven't caught up. It's not uncommon to see listing with 500-700/month rent.
While you can kick everyone out and try to jack up the rent there are still units keeping the prices down for everyone.
That said, I absolutely love the neighborhood, both for living and investing. There are a lot of recent problems in the area so do your research if you decide to start here.
@Lucas Hammer Appreciate the info on Little Village this is very valuable since I'm in the search phase right now. I agree with you 100% looking at the market the rents just aren't there yet and the prices to purchase are rising quite fast like you said. That's the main reason I passed on the property I looked at the numbers just didn't make sense with the amount of work it needed and the asking price. Especially since it was a 2 flat. Great neighborhood though with the Pink Line.
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@J Polanco looking forward to connecting in person at some point. The Berwyn and Forest Park markets are a bit more expensive, so unless you are doing a gut rehab you will probably not be in the 150k range. Even cash deals for 2 units Berwyn are up to the low 200's now. Most of my investors have had to be very opportunistic, and most of my clients have looked for three and four unit properties where they can add some value.
The true "BRRR" is getting harder and harder to find anywhere as everyone here on BP has been talking about, and the strategy is honestly a bit played out. I personally am looking for properties I can hold for the long term. If I can trade up using a 1031 exchange or if I can cash out refinance I am looking at that as icing on the cake.
@John Warren Looking forward to meeting as well! You make some good points with the prices currently it's looking really tight on finding the right deal to try and BRRRR. I am also looking to hold on to properties long term. So I may be better suited to use the cash and find a property in a stronger area with some room to add value. Even though the entry price may be higher.
That may be a smarter way to go and not end up with several 2 flats. Just to try and trade up at a later point.
Running the numbers even on lower priced neighborhoods with full gut rehabs the margins are not huge. Since the ARV does not grow a huge amount. Also a lot more property management intense. Which is another factor to consider. Self manageable properties to begin with versus having a PM.
Lots to think about and strategize...
I have noticed the margins on rehab projects getting tighter and tighter, to the point where expectations are almost unrealistic. I had one investor give me their budget for a full gut rehab of an SFR I was bidding, and they were expecting the GC to do things like rough & finish plumbing (3 bathrooms & 1 kitchen, plus fixtures) for $2000 (more like $15K), a tear off roof, new addition roof, soffit, fascia, gutters & siding for $5000 (more like $20K), etc. What really concerned me was that it was reviewed and approved by their lender.
I am seeing more rehab projects crash and burn due to lack of funding than ever before. There are a few here in my area that are just sitting because the developers ran out of money. I am also getting calls from owners that I did bids for earlier this year who opted to hire the lowest bidders--things didn't work out, and now they are looking for contractor #2 to come in and "fix" what the cheap guys did. It spells opportunity for some but not the kind you would necessarily want to see.
My main advice would be to budget realistically. If you hire the cheapest bidder you will likely end up paying twice for it, so may as well just go with someone qualified. Rehabs in particular are challenging because you can't see a lot of the systems you have to tie into until the walls are open like framing, plumbing, electrical etc.
@Steven Lowe This is great advice thanks! I agree with you that some people have unrealistic expectations. That's why I am being very conservative with my numbers and leaving room for any issues that come up. Since they most likely will in a project with a 100 yr old property.
Originally posted by @J Polanco:
@Steven Lowe This is great advice thanks! I agree with you that some people have unrealistic expectations. That's why I am being very conservative with my numbers and leaving room for any issues that come up. Since they most likely will in a project with a 100 yr old property.
Thanks! I have found that the unrealistic expectations are typically based on lack of experience/knowledge by the owners, sometimes just them being a little too greedy, and the lenders approving budgets that don't make sense.