Old Victorian in Chicago

[Joe Hermanson]

Investment Info:

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

Purchase price: $135,000
Cash invested: $40,000

Two story (2 Unit) Victorian from 1889 that I moved into and fixed up. I rented top unit and 5 car garage and then moved out and fixed up the first floor for rental. It's currently fully rented, but I may add 3rd unit to basement at some point.

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

After reading Rich Dad Poor Dad I knew I had to do something and after my uncle tried to sell the property for 5 years, I decided it was time to give it a shot.

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

My uncle was having trouble selling it, so I bought it through a land contract.

How did you finance this deal?

I moved in with a land contract (5 yrs to close), and after posting two years of Schedule E's on my taxes, I closed on the house with a conventional fixed rate loan.

How did you add value to the deal?

I did an extensive rehab upstairs and I did an almost full gut on the first floor unit. I Replaced all five garage doors and a new roof on the garage.

What was the outcome?

It's cash flowing over $500 a month, with a ROI and a Cash on Cash return of 16%. The house is worth around $500k now. It still needs some work to get it where I want it though.

Lessons learned? Challenges?

Pay to have the work done instead of doing it yourself. While you can do it, you loose more money in the long run than what you save. Only do the work yourself if you don't have the means to get the full amount of cash/credit. Everything takes longer and more money than you expect.

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

Not at this point.