[Calc Review] Chicago Triplex - Help me analyze this deal

[Lewis Yuan]

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Hey BiggerPockets,

I have found a potential deal on a multi-family in Chicago that may cash flow but unfortunately is in a C-neighborhood (and also right next to a major metro airport so maybe noise factor will be bad).  However, the building is relatively good condition (constructed in 1983) and could attract local airport workers that don't want to commute. Rent prices for each of the units are above the average for this area for that reason, but maybe that's too idealistic for this C-neighborhood. Any thoughts?

Thanks for the help,
Lewis

[Bob Floss II]

@Lewis Yuan Not to be nosy, but I did a search and found the building. I still had a concern with the expenses and it was easier to pull up the property so I could look at the information.

Property taxes are determined by using the Assessed Value given by the county assessor.  The assessed value is 10% of the assessor's opinion on the market value of the property. So a property worth $369,900 will state an assessed value of 36,690. The property taxes on this building seem far to low for what properties typically pay in Cook County.  Sure enough, when I pulled it up, the assessed value of the building is 25,145, meaning they think the building is worth $251,450.  Now, the assessed value is very rarely correct (which is why you should always appeal taxes), so this doesn't mean the building is actually worth that amount. However, it does mean if you buy the building for $369,900, you should expect a spike in your tax bill the year after you buy it. Based on buildings in the area, I would expect your taxes to be between $7,000 and $8,000. I also noticed the seller lives in the building because they are getting a homeowner's exemption.  Last year the seller had their tax bill reduced $503 for this exemption. When you buy the building, this will also be added to the tax bill the following year. So estimate being in the mid 7's for taxes. 

I also noticed you are missing a few expenses. The heat/gas for the building is $1,500 a year and the electric is about $750 a year. If you put those in the expenses, the building has a NOI of about $3,000 a year.

In my opinion, the building is great for an owner occupant that wants to rent out the other two units to offset their mortgage. For an investor that wants to rent out all three units, the numbers don't look great. You can try to low ball them or find a better property.