Looking for a Chicago Team!

[Aja Devaney]

Looking to revitalize the poor neighborhoods in Chicago without pushing out old tenants. I’m brand new to real estate investing but extremely determined to make an impact in my community.

With Covid-19, we’re soon to be looking at a market that was similar to what occurred in 2008. I think this will be a prime time to purchase properties (both commercial and residential) at a lower cost.

Let me know your thoughts and any suggestions you may have to help me make this happen!

[Eric M.]

Originally posted by @Aja Devaney:

@Eric M. With the unemployment rate being so high, a lot of people are deferring their mortgage payments. Some without knowing that when their deferment period has ended, they will now owe multiple months upfront. I predict that the 4th quarter of this year is when we’ll see the foreclosure rate increase-which will be a great time for investors to buy in.

As far as numbers go, I want to use crowdfunding for this project, which is one of the reasons why I’m on this app. I want to purchase vacant commercial properties to supply more jobs eventually. I want to create a program for non violent offenders that were recently incarcerated so they can use their trades/skills to physically help rebuild their neighborhoods. In doing that, the people that have moved out of the neighborhoods they grew up in would be able to move back due to the growth and appreciation of the neighborhood. We would be able to modestly raise rents if needed without having to push people out.

This is an idea that I believe could be executed if done correctly. We need to rewrite the definition of gentrification.

Well, I think you are going to find that the mortgage lenders will be prevented or deincentivized from foreclosing as you expect. First of all, Trump wants to get re-elected to stay out of jail. The economy rebounding is his only hope of that.

He does not care how much money he has to borrow or print....he will do anything possible to keep the economy appear to be afloat. He will give money to lenders to not foreclose...he will threaten them if they do begin mass foreclosures....he will sue them if they begin mass foreclosure. I can't imagine there is anything he will not do to prevent things from happening which would make him look bad before the election in Q4. And even without the obstacle of Trump, the FC process is much slower than you think and has been slowed more and backlogged by the courts being closed. I am a FC purchaser at auction and also went through 2008 and I have some insight on how the system works. 

If a borrower started missing payments in March 2020, that home does not go to FC auction in Q4 2020. I would be surprised if any FC action would even be initiated by Q4. It wouldn't generally even be initiated be until at least Q2 2021 and very probably later....sometimes much later. The last 2 properties I bought at FC auction were in early Feb 2020. One had FC initiated in Feb 2017 (loan unpaid beginning Jan 2016) and the other in June 2017 (loan unpaid back to June 2016). So that is 3-4 years from missing the first payment until actual auction. That is a 2023 auction date for buildings thrown into FC by COVID. It takes a very long time to go through FC and again, the courts have been closed so things will be slower and pressure will be on banks to not foreclose, but give modification and forebearance.  I think you will be waiting a long long while if you are waiting to purchase these buildings in FC.

When I asked how do you make the numbers work, you answered crowdfunding...but I was not asking where you plan to get financing. I was literally asking how do your numbers add up to  make a profit?

What might be an example of a deal where you would buy the building, borrow money/pay investors, invest in rehab, and then keep the rents the same.....and have it be a profitable investment?  Actual numbers.  I don't see how that equation adds up. You can try to redefine gentrification all you want, but you can't change the numbers unless you are getting free grant money from someplace or don't intend to make profit. Maybe that is your plan, who knows?

Think about it. Your stated plan is to buy a building that is in foreclosure....and therefore undervalued.... great. I do the same. But if the landlord is not paying the mortgage, then that building is likely not collecting anywhere close to full rent. Either the units are vacant or the tenants are not paying, or some combination. So once you buy the building, why do you want to keep the same tenants? How does that lead to success for you to keep non paying tenants? I get the desire to want to keep them and there are times when you are required to keep them, but how do you get them to pay when they weren't paying the previous owner?

And let's say you do want to keep them and they can magically pay their rent now. Exactly how do you even keep those actual same tenants while "revitalizing" the property? Do you move them out and then back in? That's very expensive. Do you rehab around them? How does that work? How do you revitalize while keeping the same tenants? It doesn't make sense to me. I get that you WANT to. I just don't get how you can.

And it certainly doesn't have to make sense to me. You are under no obligation to have a plan that makes sense to me. Feel free to ignore my questions if you don't like them. Again, I am just trying to maybe bring up some legitimate questions and maybe get you to consider that there may be issues you are overlooking.