Deal Diary 1st House hack in Logan Square Chicago, Oct 2022!

[Tj Floros]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Chicago.

Purchase price: $922,000
Cash invested: $40,000

This was my first house hack back in 2022 in Logan Square. I was able to use my VA loan and bring 0% down on almost a million-dollar property, not even closing costs!

The building is large on an oversized lot here in Chicago. 1st and 2nd floor are roughly 1500 sqft, while the garden is smaller but with great ceiling height. This being my first deal, I ran into some problems after closing. About 2 months after closing, I got hit with a property tax bill that doubled, from about $12k a year to $23k a year. Like many things in real estate and in life, you get presented with a problem and have to figure out a solution.

The problem: I pay more in expenses than I make in income and my property is negative cash flow.

Solution:
Step 1: Hire a tax attorney and start the process of arguing the taxes to bring them back down to something more manageable.
Step 2: remodel the unit I occupy, unit 2, in time for the Chicago rental season and increase the rent by $500 a month for the remodeled unit
Step 3: Move out of the remodeled unit 2 and move into non-remodeled unit 1 and repeat the process. Increasing the rent $700 a month post remodel and post move out.
Step 4. Move out of the building entirely and into another deal.

Although it seemed very easy on paper, this solution definitely had its drawbacks and setbacks. For starters, to save money, I decided to do all the work myself, all while working a full-time 40-hour-a-week job. I spent about 2 years remodeling the 2 units. I was able to turn a half bathroom into a full bathroom in one unit and I was able to wall off a dining room and turn into another bedroom in another unit.

I turned a negative cash flow deal into a positive cash flow deal and was able to force appreciation. Everything I learned from this deal I was able to put into my second deal which was an off-market BRRRR deal!

Although investing in Chicago can have it challenges at times, Chicago is a great market to invest in when you're either familiar with the market or you work with someone who is familiar with the area you want to invest in.

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

I wanted to get my investing journey started ASAP after spending years sitting on the sidelines, educating myself, analyzing deals, and being over afraid to jump into the game

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

I found this deal on market with and agent

How did you finance this deal?

I used a VA loan which has its own challenges in a very hot market, especially like Chicago. Before I closed on this property I had probably been to over 20+ showings, submitted 4-5 offers, and fell out of contract 1 time before hand.

How did you add value to the deal?

I remodeled 2 units by turning a half bath into a full bathroom, updating 3 other bathrooms, building a bedroom, new paint, fixtures, etc.

What was the outcome?

I turned a negative cash flow deal into a cash flowing deal post-move-out and started to build wealth by force appreciation.

Lessons learned? Challenges?

In Chicago also have a good property tax attorney underwrite your deals at the current property tax bill and at YOUR purchase price. If the deal looks good after running your numbers you should probably pull the trigger!

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

Yes! I worked with my agent Sarita Scherpereel who is now my Team lead on the Sarita Sells Team!