Be careful in Englewood. Yes it is seeing much improvement but it can still be a tough area to operate in especially for a new investor. Are you in the area and familiar with the area ? It will help a lot if you have local knowledge.
How many units in the building for $140K ? and what condition is it in ?
Have you run comps to see if the price is right ? Are your rental numbers realistic ?
I am an RE agent and I work parts of Englewood. I also own a building in that area. Feel free to PM me if you want me to look at the numbers or run some comps for you. A lot of people have bought properties in that area thinking the deal looked great and it turned out not to be so. Do as much due diligence as you can.
Best of luck.
A lot of the advice you are getting is for folks just trying to protect you and do your part. Ultimately, the decision is yours. You have to run the numbers, you have to do the homework, you have to make the final decision. The key questions laid out so far:
*How is the area?- seems to be doubts on if it is good or not for investment
*Chicago is tough on landlords-- do you want that to be your first go round in RE?
*Are you prepared to take on a real estate investment?- nobody is every 100% ready, but are you in the comfort zone
*The scenario you lay out sure sounds like a motivated seller, why is he/she so motivated?
The good news:
*Looks like cashflow could be really good, especially with you house hacking your own unit with a roommate.
*If you are considering it, you must be OK with living there.
*If your numbers are correct, from a pure numbers standpoint $2750 in rent on a $134,000 mortgage WHILE living there is pretty solid from a summary of numbers... obviously other items come into play.
Ultimately, do your due diligence and decide and move forward one way or another. Lots of great resources out there, but ultimately it is up to you.
Thank you! The area is sketchy, it's not one where many would go to but I have a motor vehicle and it makes it more secure. There are also security cameras around the perimeter of the building. This is a risk that I am willing to take and go for as long as it is valid and within reason.
A property management company will have to come into play. It's be repeated and reiterated by previous answers and think it'll be in my best interest.
I will ask my agent to see about financial filings to make sure those are true numbers. I do appreciate the words of advice, I'm still learning and taking it all in. I am from Saint Louis, Missouri. Therefore I am aware of the type of personalities, backgrounds and tenants that I will have to deal with. I'll make sure to stay on my toes if I do go that route.
Lots of people trying to help you do due diligence on your first deal.
@Nicholas Weckstein is on point about the many different costs you need to include.
It would be more helpful for us giving advice to see an actual breakdown of your numbers. The numbers shouldn't be pro-forma based on your realtor's 'advice' but actual numbers that you can get from the financial statements from the previous seller. Ask for their trailing 12 and base your numbers on that.
In dangerous areas like Englewood, make sure you factor in a MUCH higher vacancy rate than a nice neighborhood. Nice neighborhoods you factor in 5-10% due to turnover. For bad areas like Englewood 20% is not even conservative.
Remember - numbers only work out if you can get tenants that pay, and pay on time.
The taxes and laws in your area are not friendly for landlords.
BTW, even though I'm in San Diego now, I used to live in Chi city before moving here so I'm familiar with your hood.
Correct yes, there are the correct numbers according to the seller. My father also asked me the same questions about sewage, lawn care and etc.
My agent mentioned something about Indiana and I have not pursued the thought of it.
Be wary, I am still new and learning more as I research and read about the real estate industry. If I went for Indiana, where would the best area(s) to look?
@Henry T. I’m not sure what the best area would be but you should consider it and educate yourself a lot more before you go buy anything.
Good luck!
I appreciate your suggestion, however, please do not tell me to look in another area when nothing can be presented. We all start somewhere and I found it to be on bigger pockets. I have taken the steps to educate myself but as all things, it takes time and patience.
I'll take a closer look with the individual who will further explain all factors I should include. Realistically, I will probably lose more than I gain from buying the multi-unit property.
It worries to take a risk on a property and I did not factor in other expenses such as management, roof problems, additional repairs, etc. My excitement may have swooned me over by the numbers and inability to look beyond the "deal". I do respect and admire all the thought and advice you have given.
@Henry T. I told you where I’d buy...Indiana right across the state border. Friendlier landlord laws and lower taxes.
I’m saying you should wait and educate yourself more because a lot of these questions you should know the answer to before buying anything. Is sewer included in water? I don’t know, in some of my rentals it’s not. They’re separate. What’s snow removal cost? How about lawn care?
The seller isn’t going to answer this stuff for you. Neither is BP. How old are the mechanicals? What’s the inspection report say? What’s it worth as-is today? Are you buying below market, at market or above market?
Good luck my friend, landlording can be a tough business, especially in lower income areas which is what it sounds like this could be.
Henry,
I didn't read every single post, but what I did read, no one really addressed property management. Here's the reality about rentals. I don't care where they're located. If you don't have a rock solid, high quality property manager, you might be very sorry. You can have the best deal in the country, but if you have poor property management, you have nothing. Tenants who don't pay and tenants who tear up an apartment, will cause you headaches beyond belief, not to mention a huge loss financially. This goes "double" for the Englewood area. We won't touch anything there with a 10 foot pole. There are low priced deals all over Englewood. Did you every wonder why there are so many properties for sale? You can get those same numbers in Indiana. Plus, taxes are much lower than Illinois, so your return is higher. The biggest reason to look at Indiana is that you can easily evict a tenant in less than 30 days. Believe it or not, Illinois can take well over a year, if a tenant fights it. It is definitely a tenant friendly state. Can you imagine having a tenant living in your building, that doesn't pay you rent for 10 or 12 months? Then when they leave, what if the place is trashed? I'm not being negative. I'm giving you a scenario that could very well be a reality. Best of luck to you.