Closing on My 1st Commercial Rental Property

[Jason Macht]

Investment Info:

Large multi-family (5+ units) buy & hold investment in Chicago.

Purchase price: $1,115,000
Cash invested: $223,000

This is a mixed use building with 5 one bedroom rentals and 1 commercial space, located in the West Town neighborhood of Chicago, IL.

What made you interested in investing in this type of deal?

I've been working to scale up in size. This deal offered me an opportunity to do both 5+ units as well as a commercial space.

How did you find this deal and how did you negotiate it?

This was actually on market, but did not receive a lot of attention. It was listed at $1.3M, which did not pencil out. I reached out directly to the listing agent and managed to negotiate what would typically be paid to the buy side agent as a credit to my purchase. So net-net, I paid $1.115M for the property after negotiating on price and crediting the commission back.

How did you finance this deal?

This was financed with a commercial loan from US Bank. 20% down, 3.25%, 25 year am., 5 year term.

How did you add value to the deal?

Raising rents. Upgrading units with new appliances, painting, and other cosmetic updates.

What was the outcome?

Purchased for $1.115M. Appraisal came in at $1.21M. I'll aim to continue to raise rents and update units. We should be able to refinance most of our money out in 3 months.

Lessons learned? Challenges?

Never give up on an over-priced deal. Always negotiate. Figure out how you can have some leverage or bargaining chips in the deal.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I reached out directly to the listing agent. I do this so that they are incentivized to work with me as they typically can get the full commission, e.g. 5%. In this case, I was able to use that to discount the purchase price.