Where can I get good deals for Multi Units in the N. side of CHI

Question

Where can I get good deals for Multi Units in the N. side of Chicago?  I looked everywhere, MLS auction.com and wholesalers and cant find any good deals below 250k. I was wondering how can people buy rental properties that are above 300k and still have good cash flow?

Lets say a multi units with 3 floors, and properties on the Northside of Chicago that needs work runs around 320k an up and need close to 50 - 90k  above to renovate, after repair will cost around $400k.  How can this be a good passive income property? I know others will suggest to go toward the southside and you will get better deals. The reason I searching on the northside is that its easier to get to my rental property when is needed.  Any strategies or advise will be greatly appreciated?

Lumi Ispas · Answer

@Sonny H. here and there you can still find 3 legal units, most will be siding exterior or not the most beautiful buildings. As long as your focus is on the income and not how the buildings look like, you can buy buildings. Also, the units have to have at least 2bed units, preferrable 3-bed units, so the rental income is high enough to cover the expenses for the building.

When you look for income, you have to look at every building individually. Also, as you are looking for the cheapest building in these neighborhoods, you have to understand that there will be a chance of getting in multiple offers and look for few months before finding something.

Words of advice: buy before Feb 2017, as the moment the spring market starts, your chances of getting something will decrease, plus with the interest rates on the rise, your purchase power will go down!

Frank S. · Answer

You are all over the place.  Those areas are very different from each other. You need to focus and do more research.  Keep trucking, keep looking at buildings, keep on working hard.

Now, there is no cash flow at 2 flats in the northside. There are many posts regarding this, read a little more. You need to go to 3 flats with non conforming units or 4 flats.

Recall there are four ways to make money in REI, cash flow is only one.

Best wishes,

Jaclyn McClellan · Answer

I'll second what @Dorothy Wulf said, I am closing on a two flat in Jefferson Park within the next couple weeks. $300k. There are some good deals in Irving Park too. Some need basic renovations, but from what I've seen nothing "crazy."

Brie Schmidt · Answer

@Sonny H. - I think you need to adjust your expectations.  Cheaper is not always better.

In the last 60 days I had 5 clients buy cash flowing 2-4 units on the north side.  For anonymity I am just going to use averages here.

Average Purchase Price: $518k

Average Gross Rents: $4,850

Average Down payment: $26,000 (5% down conventional loan program)

Average Net monthly income: $3,400 (includes vacancy, repair, capex, tax, insurance, utilities ect)

Average P&I payment: $2,700

Average profit after all expenses: $700

Average Cash on cash return: 32%

If you want better than this, you are going to need to go to the southside.  I run numbers on every single listing on the north side for my clients, these numbers are what I would consider good and worthy of an offer.

Also note that most of these units are rent ready with condo quality finishes.  My clients focus on putting as little money down as possible for their first so that they can save enough to buy their second property within the first year and maximize their cash flow.

Mark Hafeli · Answer

If you are comfortable with renovation projects you will be able to achieve a higher return. These value-add deals are still hard to come by and are competitive so in general it's a strong sellers market still. Any finished product out there on the north or northwest side will be sold for top dollar so stay away unless you don't want to lift a finger.

Brie Schmidt · Answer

@Lumi Ispas - It has been too long since I have seen you!  We have to get together sometime soon!

Usually our market is like a bell curve, Halloween to St. Patrick's day is pretty much dead, then it starts heating up in April... June - August it is gangbusters, and then it starts dying down.  But has year that did not happen, at least from what I saw.

I had three clients go under contract for great properties between 12/25 and 12/31 - usually I don't go on a single showing all December.  Then it was dead till March, we got a trickle of good properties and then the spring market hit and nothing!  Our 2-4 unit inventory in April was worse than our worst December in the past 10 years, and May and June got even worse.  I had nothing good from April - August and had only one client go under contract.  Then August/September were gangbusters (finally) and it has been pretty dead since.  So I don't know if we are going to go back to the way it used to be where 80% of my sales were from April - Aug or if it is going to be like last year where you will get a burst of good properties and then it does for a few months. It will be interesting to see.

Brian Morrison · Answer

@Sonny H. If you have a theoretical building with three 2-BR units renting for 1000 each ($3000 total, and we're not even counting other income from the garage or coin laundry), that's $300k. Do those exist? Sure.

Sonny H. · Answer

@Lumi Ispas

With 3 units with 2-3 beds will it meet the 1% rule? 2 beds runs around 1000 - 1300, 3 bedrooms 1200-1500.  If you are buying a 3 units with 2 bedrooms , rent is 1200, total is 2600, and bought property 300k , plus repair $50 thats below 1 %.

Please advise how do you calculate  income? What is a good deal with rental property, $600 to 1k after PITI for a 3 unit?

Brian Morrison · Answer

@Sonny H. You certainly can get 3- or 4-flats that don't need a lot work, for less than you're thinking. If you want some ideas, message me.

Where can I get good deals for Multi Units in the N. side of CHI

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