Methods for Sourcing First-Time Multi-Family Property - Advice?

[Kevin Scanlan Jr.]

I'm in the process of trying to acquire my first multi-family property in Chicago. I wanted to receive a few opinions or suggestions on how I should be sourcing potential properties. I feel that I'm competing amongst many others for the same properties and there's a ton of competition currently in the market. Most of the multi-families on the MLS don't seem to work for the financial side and are not close to the 1% rule. Within three months of searching, only one property has worked out for my criteria to put an offer in, but ended up going above asking price. I know real estate is a numbers game, but I want to make sure I'm not missing out on any good methods for finding good deals (a good deal for me would be a mulit-family that breaks even with me living in one of the units or bedrooms). I'm currently using a couple MLS searches setup for me, Zillow and Redfin searches with daily updates, looking on craigslist, and Loopnet.

Are there any other resources I should be using? Are there any unconventional methods for a first time home buyer or other ideas that I should look into, such as driving for dollars, reaching out to multi-family properties for rent on craigslist, direct mail marketing, or reaching out to be placed on any wholesaler email list I can find? What has your experience been? What would you recommend?

Basically should I look into every possible way to find a property or should I remain patient and wait till something pops up on the MLS and jump over it?

I'm mostly looking for a 3-4 unit multi-family property for $500k or less in Old Iriving Park, Kimble, Alabany Park, Ravenswood, Avondale or Hermosa. I'm interested in buying a property that needs cosmetics updates and that I can add value to. The property would be owner occupied and I'm looking to do a conventional loan with a 5% down payment. I'd also consider the south and southwest side of the city, such as Pislen, Heart of Chicago, Little Village, Bridgeport, or Illinois Medical district if it was a good deal.

[Henry Lazerow]

Have your broker set you up on auto alerts for each day at 12:00 noon. When you see a good deal offer aggressively and jump on it! There is also something called TAN where brokers post listings a few weeks before market.

I closed 10 mil last year off MLS/TAN and all the deals were cashflow positive on north side. Only small percent of deals in mls work but if you look every day you will easily find the ones that work. Forget 1% rule though that rule is made for lower price properties where cap/ex is a higher percentage of gross rents. A $500k property at .8% in a good area is more true net profit then a $100k property at 1% in some rural C class area. Factor in total yield not just COC.

In Hermosa you can find 1% easy there is one up right now at 1%. In Pilsen/Heart of Chicago there is one that hits almost 1% up right now also. Little Village has gotten super hot and the likely appreciation is kind of priced in right now but some cashflow deals here and there. Tri Taylor there is a deal almost 1% up right now. Lots of deals out there. 

Make sure you are running analysis using market rate rents with quality photography/marketing and not the mom and pop decade old month to month style rents you often see listed in the MLS.