Need advice on my first investment in Dunning area

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Need advice on my first investment in Dunning area

Raj Chris
Member since 2020 · 4 posts · 0 votes

Hi BP Gurus / Seniors,

I am new to the REI and placed an offer for my first multi-unit property.

Here are the details.

Area: Near by Shabbona Park, Dunning

Number of Units: Legal 3

Built: 1950

Price: $455,000 ($450k (purchase) + $5k (Minor repairs: Nice to fix but not an immediate need))

Loan Type: Conventional (20% down & 2.5% interest rate)

Annual Gross Rent: $38,400 (Tenants pays Electricity + Gas)

Annual Expenses (Property Tax + Insurance + City utility): $10,000

Parking Space: 3 (Garage – 2 & Side Pad – 1)

Other details: Exterior Brick, free laundry in basement, all units occupied and it is a turnkey property.

Pros: Steps away to CTA Bus Stop; Good Elementary school (PK-8); Walkable to Shabbona Park Recreation, Restaurants and Grocery Stores; 10 mins drive to Schiller Woods; 15 mins drive to Airport & low crime to visit the property any time confidently.

Cons: Below average High School & 20 mins CTA Bus to Blue Line.

My Situation: I will be in Chicago area until next Summer and relocate to Texas. Meanwhile my plan is to setup the team and stabilize the property (its already in running condition, I just need to catchup). And if it goes well, will add another 3+ units down the line in near by area. So, it will be good if I need to hire Property Management for both properties together.

Why am I investing in Chicago if I will be moving to Texas: is that I couldn’t find any multi-unit (3+) property less than $500k in other large metro cities in east coast, west coast & south (in good & decent neighborhoods).

Now, my question: Is this wise investment based on the numbers above, selection of area (NW Chicago) and my situation of moving to other state?

Please advise.

Thank you

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Jake FugmanBusiness Member
Real Estate Broker · Chicago, IL · Member since 2016 · 256 posts · 250 votes
5y

@Raj Chris It sounds like a very stable purchase based on location and rough NOI. Being w/in the city limits of Chicago will save you A LOT on taxes VS being a short distance away in Elmwood Park or Norridge. Assuming the units are at least 2 bedroom / 1 bath, you likely will be able to raise rents up from the $1066/mo average over time. 2 bed/1ba units in the area should get about $1200-1300/mo with rental grade finishes.

Whether or not its a "wise" purchase is subjective to your personal investment goals.  As long as you have a source to build up more capital for the next purchase I would say you have chose a good way to get started.  A lot of newbie investors dont have the luxury of locking up $100,000 in equity on their first multi unit.  

Good luck!

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  • Jake FugmanBusiness Member
    Real Estate Broker · Chicago, IL · Member since 2016 · 256 posts · 250 votes
    5y

    @Raj Chris It sounds like a very stable purchase based on location and rough NOI. Being w/in the city limits of Chicago will save you A LOT on taxes VS being a short distance away in Elmwood Park or Norridge. Assuming the units are at least 2 bedroom / 1 bath, you likely will be able to raise rents up from the $1066/mo average over time. 2 bed/1ba units in the area should get about $1200-1300/mo with rental grade finishes.

    Whether or not its a "wise" purchase is subjective to your personal investment goals.  As long as you have a source to build up more capital for the next purchase I would say you have chose a good way to get started.  A lot of newbie investors dont have the luxury of locking up $100,000 in equity on their first multi unit.  

    Good luck!

    The Axon Group4.981 Reviews
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  • Raj Chris
    OP
    Member since 2020 · 4 posts · 0 votes
    5y

    Hi @Jake Fugman

    It is two (3bed/1bath) and one (2bed/1bath).

    Thank you very much for sharing your inputs. Have a nice weekend!

    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Raj Chris I would actually start with your property management team since you are planning to leave town. This is the single most important piece of the puzzle as a great PM can make an average deal work. A bad PM can turn a home run into a strike out. Try connecting with @Mark Ainley from GC realty as his team does a great job. 

    The numbers on your deal are a bit slim, although there is probably some upside in those rent. Is this a boiler building or is heat separated out? Who pays for hot water? Did you include vacancy, CapEx or Maintenance into your numbers?

    1Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    for this one

    0Reply
  • Raj Chris
    OP
    Member since 2020 · 4 posts · 0 votes
    5y

    Thank you @John Warren   

    I agree with your point on Property Management. I will be in town one more year. So, I am not in urgency for a PM at this moment. However, I will reach out GC Realty to get an idea on their services and fee.

    Coming to the Property, it has three boilers, three hot water tanks and three separate Gas meters. Tenants are paying the bills. I need to pay "Water+Sewer+Garbage" bill to City around $250 every two months and common Electricity $20 per month.

    Also, Can you please share your thoughts on Dunning area ?

    Thank you again.

    0Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    5y

    Dunning is a solid area where you can find good tenants. I don't like buildings that are on boiler systems and $455k might be a bit high for one still on a boiler unless you meant water boiler for showers not for heat of unit. If on a heating unit boiler system make sure you calculate water costs.

    For management being Dunning is a nice area you can likely find for 5-7% and then 1 months rent for leasing fee with no renewal fees. In Chicago management cost get higher the rougher the area and in nice areas it can be very low compared to the rest of US prices. 

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  • Jason Givens
    Member since 2020 · 11 posts · 3 votes
    5y

    I might add, though I don't currently have any REI, that after looking in the northwest area of Chicago for the past 5-6 months it would be wise to truly ensure that no serious CapEx will be coming your way. 455k seems on the cheaper side a for a full legal 3 unit in Dunning that is turnkey. Everything I've seen in the area ended up in a bidding war topping out around 550k-600k+ and required a ridiculous amount of CapEX up front or over the following 2-3 years. Roofing failures, HVAC being 20+ years old, etc... Most of the people living in those areas have lived/owned there for 20+ years and have not reinvested back into their own property. This would be a serious issue over the next few years if you end up facing those inevitable problems.

    I personally backed down from many 2-3 multifamily units in that area after searching for months because I don't have an additional 100k to sink into the property for CapEx. Nor the expertise do the labor while paying 30-40k for materials. The inspection will tell you everything, but try not waste 400$ on every offer. Hopefully your realtor will be able to give you a solid idea on the status of the unit before you start doing an inspection.

    Or perhaps I am too cautious of an investor.  :D

    Good luck my friend.

    0Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Raj Chris:

    Hi BP Gurus / Seniors,

    I am new to the REI and placed an offer for my first multi-unit property.

    Here are the details.

    Area: Near by Shabbona Park, Dunning

    Number of Units: Legal 3

    Built: 1950

    Price: $455,000 ($450k (purchase) + $5k (Minor repairs: Nice to fix but not an immediate need))

    Loan Type: Conventional (20% down & 2.5% interest rate)

    Annual Gross Rent: $38,400 (Tenants pays Electricity + Gas)

    Annual Expenses (Property Tax + Insurance + City utility): $10,000

    Parking Space: 3 (Garage – 2 & Side Pad – 1)

    Other details: Exterior Brick, free laundry in basement, all units occupied and it is a turnkey property.

    Pros: Steps away to CTA Bus Stop; Good Elementary school (PK-8); Walkable to Shabbona Park Recreation, Restaurants and Grocery Stores; 10 mins drive to Schiller Woods; 15 mins drive to Airport & low crime to visit the property any time confidently.

    Cons: Below average High School & 20 mins CTA Bus to Blue Line.

    My Situation: I will be in Chicago area until next Summer and relocate to Texas. Meanwhile my plan is to setup the team and stabilize the property (its already in running condition, I just need to catchup). And if it goes well, will add another 3+ units down the line in near by area. So, it will be good if I need to hire Property Management for both properties together.

    Why am I investing in Chicago if I will be moving to Texas: is that I couldn’t find any multi-unit (3+) property less than $500k in other large metro cities in east coast, west coast & south (in good & decent neighborhoods).

    Now, my question: Is this wise investment based on the numbers above, selection of area (NW Chicago) and my situation of moving to other state?

    Please advise.

    Thank you

    My opinion: After you add vacany risk number plus cap/maintenance expenses per door per year- you'll net between $200 & $300 per month cash flow.  Not a deal we would do.

    312-681-7487
    0Reply
  • Arturo MatamorosPro Member
    Real Estate Agent · Orlando, FL · Member since 2018 · 40 posts · 39 votes
    5y

    Hi @Raj Chris, it sounds like you've got a good plan for growing a portfolio in Chicago. If you're looking for some expert advice, I would highly recommend reaching out to @Mark Ainley at GC Realty. He's the best PM I know from that area and I know he'd be more than willing to give you some advice on your current situation and PM services for when you relocate. Best of luck on your journey!

    [email protected]407-928-5889
    1Reply
  • Raj Chris
    OP
    Member since 2020 · 4 posts · 0 votes
    5y

    Thank you very much @Henry Lazerow @Jason Givens @Crystal Smith for sharing your thoughts. Have a nice day!

    0Reply
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