2020 is my year - How do I start househacking in Chicago?

Question

Hello!

I have no debt to pay off, 20k saved in the bank, and want to begin househacking as my intro to REI in Chicago.

Really short term goals: 1. Read Rich Dad Poor Dad, 2. Join Bigger Pockets

Short term goals (3-5 months): 1. learn essential steps before buying my first property 2. Buy a multi-family that needs less than 10k in renovations 3. rent out units so I can live in one of the units rent-free

Long term goals (5-1 years): 1. Continue renting out the units 2. buy another property, rinse, repeat. My questions: Who do I need on my team to get started, where in Chicago/chicagoland should I be looking, and what loans should I be looking at?

Thank you for any and all help!

Hailey

Rj D. · Answer

Hey @Hailey Padgett! Great to meet you and awesome post! @Joseph Coppus had almost the exact question and you both are looking in the same areas, you two should network!

My wife and I found our first house hack in 2017 and love the flexibility. We had amazing success with the first and its allowed us to build a real estate portfolio. We now own multiple buildings.

There are many factors that go into finding your first owner occupy. These things should be top of mind when starting your search:

• Study the market and be realistic about your expectations. Deal flow is slim right now and many people are trying to get into the same space. Study underwriting or analysis and figure out what an ideal investment is for yourself and financial situation. Then STAY TRUE TO YOUR NUMBERS.
• Explore options outside of your comfort zone. The neighborhoods you mentioned are very saturated and it's very difficult to find deals. Competition is going to be FIERCE looking for a building that makes sense while searching for "light lifts" or cosmetic rehabs. Explore neighborhoods outside your comfort zone. Ask yourself exactly why you want to be in those areas. Those are areas we originally looked in and no properties made sense with our underwriting. We currently House Hack in Bronzeville and our entire portfolio is on the South Side. WE LOVE IT. Our building's cash flow, have seen amazing equity appreciation, the neighborhood amazing, and Nicky's (my wife's) train ride to the loop is 20 minutes. Way less than a commute from the North Side.
• Build relationships - WITH EVERYONE - lenders, brokers, investors. Make your intentions known, just like this post. There are many great people (and bad people! Watch out for those!) that are willing to help you along the way. A GREAT Broker and Lender are key. Do not work with just anyone. Make sure they have experience with multi-family building and always go with your gut feeling. You have to vibe with someone that's going to help you make the largest purchase you'll be making in your life (to date).
• Join a Real Estate Meetup Group - Everyone at these groups have similar mindsets. You'll find a lot of great mentors as well as people in the same shoes. It really helps if you build that support system.

I could talk about this topic for hours so feel free to reach out if you want to discuss some of your goals!

Best of luck to you!

Connor O'Brien · Answer

HUD203K loan allows you to wrap your rehab into an FHA loan.

The process can be long and frustrating but I think its perfect for a 10k rehab.

if you ask for 20k but stick to your original budget you can cash out at the end and pay your closing costs.  (Wish I had known that when I did mine)

My fiance and I live in back of the yards (definitely out of our comfort zones)- but all our neighbors are amazing and we've both come to love it!

Good luck!

Chace Fraser · Answer

Hi @Hailey Padgett and welcome to BP! You are in the right place to get help along your investing journey. And congrats on being debt-free and having $20K in the bank... that is no small accomplishment and you're (probably) better off and have a higher net worth than the majority of people you know!

There are many people that you will need to surround yourself with. To ensure success you will definitely want to associate with like-minded people, people with experience and who are already doing what it is you want to do, and people who inspire you… not naysayers, negative people, nor critics. BP is a great place to find these people, both virtually and in real life. You can find local meetups in your area by going to Network>Events up in the menu bar. I’ve found that people on BP are incredibly friendly and willing to help.

Besides surrounding yourself with the right people, the two initial and essential members of your professional team will be a lender and a realtor. You need to make sure you find quality, experienced professionals. These two members of your team can make the process great or terrible. They can make a deal happen when it looks like it’s going to fall apart or they can kill a deal that is on track to close. These two team members will help you fill out your team by leveraging their professional networks (inspectors, lawyers, escrow officers, CPA’s, etc).

When it comes to Realtors, they will help you identify which areas of town are good to invest in and what to expect in rents, quality of tenants, how to analyze deals, provide you with investing opportunities (both on market and off market).

When it comes to selecting a realtor to work with some may ask you to sign an agreement that you work with them exclusively. This is nice for the agent because it's really frustrating to work with and educate someone for an extended period of time, show them a bunch of properties, and then find out they used another agent to purchase the property. It's not bad to just ask a realtor questions. However, it is courtious if you are going to ask them questions, you let them know you're just educating yourself before you purchase (and if you are speaking with other agents) and to offer to buy them coffee/lunch/a beer. If you like them, and they seem competent, then use them. If you're comfortable signing an exclusive agreement with them then do so. If you do sign such an agreement you can usually terminate the agreement at anytime simply by notifying them in writing (email works).

It’s also important to know that they probably won’t show you properties until you are pre approved. There are a few reasons for this.

First and foremost it protects their time. A buyer who has gone through the process of getting pre approved is serious about buying and not just kicking tires. The agent probably has a number of other qualified buyers ready to go. Why would they show homes to someone who isn’t yet qualified when they have buyers who are qualified and ready to go look at homes and make offers?

Second, and in the same vein, is to protect their current clients. Imagine this: you have been pre approved, you tell the agent you want to go look at a property tonight, and they say they can’t because they’re showing another client properties tonight. Now imagine the property you wanted to go see received an offer and that the offer was accepted. How would you feel if the buyer the agent was touring the night before wasn’t ready, willing, and able to purchase (pre qualified) and you missed out on the property you wanted to see and/or buy?

Lastly, a lot of times SELLERS won’t allow agents to show their properties to buyers who aren’t pre approved. The reason for this is because the seller doesn’t want to go through the hassle of cleaning a property up, leaving the house, or notifying tenants that there will be someone walking through the house, if the buyer isn’t able to buy. It’s just not worth the headache for the seller to go through all of that when there are a lot of pre qualified buyers out there.

Besides figuring out what your goals are, how you want to get started, and meeting like-minded people, the first action item would be to talk to a lender. In my experience working with house hackers, the majority of the questions center around financing the deal.

When it comes to finding the right lender there are a few things you’ll want to keep in mind. Lenders, like realtors, are not all created equal. In order of importance, here’s what I think is important to look for in a lender. You want to make sure your lender:

• Has worked with house hackers before; the rules change depending on what loan type you use and how many units you purchase. There are A LOT OF TRAPS along the way that can/will make the deal fall through (and cause you to lose your earnest money). You want to be sure the lender you choose has navigated them before.
• Can help you strategize the lending piece for this purchase AND purchases in the future
• Is an investor themselves

If you’d like a recommendation for a lender DM me. I have one that I have closed many house hacking sales with (my own house hack included), and checks off all of the boxes above as well. Not to mention she’s licensed in all 50 states.

Hailey Padgett · Answer

Hi James, nice to meet you -

I am open to other areas, but I am currently looking on the north side of Chicago: Uptown, Rogers Park & Edgewater areas.

James Kim · Answer

Hi Hailey,

I'm in a similar situation as you are although maybe 1 step ahead of you.  Currently looking for my first flip as opposed to a multi-family to rent.  I think it would be interesting to see our both of our journey's pan out from here.  Just curious, what area of Chicago are you looking for?  I currently reside in the north suburbs but am looking in the west and south suburbs for flips.

2020 is my year - How do I start househacking in Chicago?

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